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 June 30, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 for the transition period from
to
Commission File Number 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 August 13, 1997 4,929,313
Elsinore Corporation and Subsidiaries
Form 10-Q
For the Quarter Ended June 30, 1997
INDEX
PART I. FINANCIAL INFORMATION: PAGE
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at 3-4
June 30, 1997 (Reorganized Company) (Unaudited)
and December 31, 1996 (Predecessor Company)
Condensed Consolidated Statements of Operations 5
for the Three Months Ended June 30, 1997
(Reorganized Company) and Three Months Ended
June 30, 1996 (Predecessor Company)
Condensed Consolidated Statements of Operations 6-7
for the Four Months Ended June 30, 1997
(Reorganized Company); Two Months Ended
February 28, 1997 (Predecessor Company)
and Six Months Ended June 30, 1996 (Predecessor
Company); Combined Reorganized and Predecessor
Company for the Six Months Ended June 30, 1997
(Unaudited)
Condensed Consolidated Statements of Cash Flows 8-9
for the Four Months Ended June 30, 1997
(Reorganized Company); Two Months Ended
February 28, 1997 (Predecessor Company)
and Six Months Ended June 30, 1996
(Predecessor Company); Combined Reorganized
and Predecessor Company for the Six Months
Ended June 30, 1997 (Unaudited)
Notes to Condensed Consolidated Financial Statements 10-14
Item 2. Management's Discussion and Analysis of 14-23
Financial Condition and Results of
Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24-28
SIGNATURES 29
PART 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
<TABLE>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
June 30, 1997 and December 31, 1996
(Dollars in Thousands)
Reorganized Predecessor
Company Company
June 30, December 31,
1997 1996
------------------- --------------------
(Unaudited)
Assets
Current Assets:
<S> <C> <C>
Cash and cash equivalents 10,592 7,208
Accounts receivable, less allowance for
doubtful accounts of $308 and $347,
respectively 334 815
Inventories 256 354
Prepaid expenses 1,708 1,177
------------------- --------------------
Total current assets 12,890 9,554
------------------- --------------------
Cash and cash equivalents, restricted 425 4,445
Property and equipment, net 37,141 25,485
Investment in Fremont Street Experience LLC 2,400
Reorganization value in excess of amounts allocable to 378 -
identifiable assets
Other assets 743 743
------------------- --------------------
Total assets 51,577 42,627
==================== ====================
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
<TABLE>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Balance Sheets (continued)
June 30, 1997 and December 31, 1996
(Dollars in Thousands)
Reorganized Predecessor
Company Company
June 30, December 31,
1997 1996
------------------ --------------------
(Unaudited)
Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
<S> <C> <C>
Accounts payable 1,071 1065
Accrued interest 1,491 2,137
Accrued expenses 5,107 6,176
Current portion of long-term debt 958 50
------------------ --------------------
Total current liabilities 8,627 9,428
------------------ --------------------
Estimated liabilities subject to Chapter 11
proceedings - 73,909
Long-term debt, less current portion 37,762 -
------------------ --------------------
Total liabilities 46,389 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
Retained earnings (accumulated deficit) 188 (110,328)
------------------ --------------------
Total shareholders' equity (deficit) 5,188 (40,710)
------------------ --------------------
Total liabilities and shareholders'
equity (deficit) 51,577 42,627
==================== ====================
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
<TABLE>
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
June 30 June 30
1997 1996
------------------------ --------------------------
Revenues, net:
<S> <C> <C>
Casino 9,051 10,691
Hotel 2,406 2,732
Food and beverage 2,270 3,088
Other 355 130
Promotional allowances (896) (1,525)
------------------------ --------------------------
Total revenues, net 13,186 15,116
Costs and expenses:
Casino 3,576 4,244
Hotel 2,155 2,021
Food and beverage 1,504 1,711
Taxes and licenses 1,381 1,681
Selling, general and
administrative 2,043 2,323
Rents 1,025 1,017
Depreciation and
amortization 551 924
Interest 1,285 251
------------------------ --------------------------
Total costs and
expenses 13,520 14,172
------------------------ --------------------------
Income (loss) before
reorganization items (334) 944
Reorganization items - 604
------------------------ --------------------------
Net income (loss) before
income taxes (334) 340
Income taxes 30 -
------------------------ --------------------------
Net income (loss) (364) 340
======================== ==========================
Income (Loss) Per Share:
Income (loss) per common
share $(.07) $0.02
======================== ==========================
Weighted average number of common shares
outstanding 4,929,313 15,891,793
======================== ==========================
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
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 Six
March 1 January 1 to January 1 to Months
to February 28 June 30 Ended
June 30 1997 1996 June 30
1997 1997
------------------- ------------------- ------------------- --------------------
Revenues, net:
<S> <C> <C> <C> <C>
Casino 12,600 6,922 21,865 19,522
Hotel 3,270 1,736 5,728 5,006
Food and beverage 3,165 1,745 6,589 4,910
Other 517 153 301 670
Promotional allowances (1,216) (760) (3,481) (1,976)
------------------- ------------------- ------------------- --------------------
Total revenues, net 18,336 9,796 31,002 28,132
Costs and expenses:
Casino 4,740 2,710 9,112 7,450
Hotel 2,849 1,410 3,894 4,259
Food and beverage 2,051 1,105 3,466 3,156
Taxes and licenses 1,888 980 3,492 2,868
Selling, general and
administrative 2,832 1,807 4,773 4,639
Rents 1,360 673 2,034 2,033
Depreciation and
amortization 720 529 1,894 1,249
Interest 1,678 772 515 2,450
------------------- ------------------- ------------------- --------------------
Total costs and
expenses 18,118 9,986 29,180 28,104
=================== =================== =================== ====================
Income (loss) before
reorganization items,
extraordinary gain
on elimination of
debt and income taxes 218 (190) 1,822 28
====================
Reorganization items - - 1,138
Extraordinary gain on
elimination of debt - 35,977 -
Income taxes 30 - -
------------------- ------------------- -------------------
Net income (loss) 188 35,787 684
Retained earnings (deficit) at
beginning of period
- (110,328) (108,772)
Fresh start adjustments - 74,541 -
------------------- ------------------- -------------------
Retained earnings
(deficit) at end of period
188 - (108,088)
=================== =================== ===================
</TABLE>
<PAGE>
<TABLE>
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 June 30
June 30 1997 1996
1997
------------------ ------------------ ------------------
Income (Loss) Per Share:
Income (loss) before
extraordinary gain on
<S> <C> <C> <C>
elimination of debt $0.04 $(0.01) $0.04
Extraordinary gain on
elimination of debt - $2.26 -
------------------ ------------------ ------------------
Net income (loss) $0.04 $2.25 $0.04
------------------ ------------------ ------------------
Weighted average number of common
shares outstanding
4,929,313 15,891,793 15,891,793
================== ================== ==================
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
<TABLE>
Elsinore Corporation and Subsidiaries
Condensed Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
Combined
Reorganized
Reorganized Predecessor
Company Predecessor Company Company
---------------------------------------------------------------------------
Period from Period from Period from Six
March 1 January 1 to January 1 to Months
to February 28 June 30 Ended
June 30 1997 1996 June 30
1997 1997
---------------------------------------------------------------------------
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net income (loss) $188 $(190) $684 $(2)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 720 529 1,894 1,249
Accretion of discount on
long-term debt - - 98 -
Change in other assets and
liabilities, net (2,678) 1,328 (141) (1,350)
---------------------------------------------------------------------------
Net cash provided by (used
in) operating activities (1,770) 1,667 2,535 (103)
---------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (1,531) (141) (431) (1,672)
---------------------------------------------------------------------------
Net cash used in investing
activities (1,531) (141) (431) (1,672)
---------------------------------------------------------------------------
Cash flows from financing activities:
Repayment of debt (74) (12) (27) (86)
Incurrence of debt 512 - - 512
Proceeds from issuance of
common stock and
subscription rights - 713 - 713
---------------------------------------------------------------------------
Net cash provided by (used
in) financing activities 438 701 (27) 1,139
---------------------------------------------------------------------------
</TABLE>
<TABLE>
Elsinore Corporation and Subsidiaries
Condensed Statements of Cash Flows (continued)
(Dollars in Thousands)
(Unaudited)
Combined
Reorganized
Reorganized Predecessor
Company Predecessor Company Company
-------------------
--------------------------------------------------------
Period from Period from Period from Six
March 1 January 1 to January 1 to Months
to February 28 June 30 Ended
June 30 1997 1996 June 30
1997 1997
---------------------------------------------------------------------------
Net increase (decrease) in
<S> <C> <C> <C> <C>
cash and cash equivalents (2,863) 2,227 2,077 (636)
---------------------------------------------------------------------------
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 $11,017 $13,880 $5,649 $11,017
============================================================================
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
Elsinore Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 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 statement 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 its financial position as of June 30, 1997
and the results of its operations and its cash flows for the two months
ended February 28, 1997 for the Predecessor Company, four months ended
June 30, 1997 for the Reorganized Company, and the three months and six
months ended June 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.
Earnings per share for the three months ended June 30, 1997 and the
three months ended June 30, 1996 are based upon the weighted average
Elsinore Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 1997
number of shares of common stock outstanding as there were no common
stock equivalents outstanding during the period.
3. Shareholder's Equity
<TABLE>
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
Income(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 Income (Loss) 552 552
------------------- ------------- ---------------- -------------------- ---------------------
Balance,
March 31, 1997 4,929,313 5 4,995 552 5,552
Net Income (Loss) (364) (364)
=================== ============= ================ ==================== =====================
Balance,
June 30, 1997 4,929,313 $5 $4,995 $188 $5,188
=================== ============= ================ ==================== =====================
<FN>
There were no changes in other shareholders' equity for the six months
ended June 30, 1996.
</FN>
</TABLE>
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. 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 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 June 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. Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued SFAS
No.129, "Disclosure of Information about Capital Structure" (SFAS
No. 129). SFAS No. 129 establishes standards for disclosing information
about an entity's capital structure. The company intends to comply with
the disclosure requirements of this statement which is effective for
periods ending after December 15, 1997.
In June 1997, the Financial Accounting Standards Board issued No. 130,
"Reporting Comprehensive Income" (SFAS No. 130). SFAS No. 130 requires
companies to classify items of other comprehensive income by their
nature in a financial statement and display the accumulated balance of
other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of a statement of
financial position, and is effective for financial statements issued
for fiscal years beginning after December 15, 1997. The Company is
currently assessing the impact on the financial statements.
In June 1997, the Financial Accounting Standards Board issued No. 131,
"Disclosure About Segments of an Enterprise and Related Information"
(SFAS No. 131). SFAS No. 131 establishes additional standards for
segment reporting in the financial statements and is effective for
fiscal years beginning after December 15, 1997. The Company is
currently assessing the impact on the financial statements.
6. Proposed Merger
Mr. Allen Paulson has commenced discussions with the Company to acquire
all of the Company's outstanding shares, through a merger of the
Company into a corporation which he controls. The Company and Mr.
Paulson are discussing an acquisition price of $3.16 per share, subject
to adjustment. The price per share and other terms and conditions
of any such transaction are subject to further negotiation. Any such
acquisition would be subject to prior approval by Nevada gaming and
other licensing authorities and various other conditions. There can be
no assurance at this time that the Company and Mr. Paulson will reach
an agreement, the required approvals of licensing authorities will be
obtained, and that the other conditions to consummation of the
acquisition will be satisfied.
7. Finley Lease
Under a 20-year lease, which expires on December 31, 1997, the Company
leases from Finley Company ("Finley") approximately 7,000 square feet
of the Four Queens Casino premises affecting the northeast corner of
that property. The Company and Finley are in negotiations for an
extension of the lease on new terms reflecting current market
conditions. There is no assurance at this time that the Company and
Finley will agree to a lease extension which would enable the Company
to continue to use this space for part of the Four Queens Casino
premises after December 31, 1997. However, an oral agreement in
principle has been reached whereby the rents would be increased to
market rate and a letter of credit for one year's rental payments would
be posted to guaranty payment of the monthly rentals.
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 June 30, 1997 and 1996 and six months ended June 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>
Three Months Ended Three Months Ended
June 30, 1997 June 30, 1996
-------------------------------- ---------------------------------------
(000's) % (000's) %
---------------- ----------- ------------------- ----------------
Revenues, net:
<S> <C> <C> <C> <C>
Casino 9,051 68.6% 10,691 70.7%
Hotel 2,406 18.3% 2,732 18.1%
Food & beverage 2,270 17.2% 3,088 20.4%
Other 355 2.7% 130 .9%
----------------- ------------ ------------------- ----------------
Gross revenue 14,082 106.8% 16,641 110.1%
Less promotional allowances (896) (6.8%) (1,525) (10.1%)
----------------- ------------ ------------------- ----------------
Revenues, net 13,186 100.0% 15,116 100.0%
----------------- ------------ ------------------- ----------------
Costs and expenses:
Casino 3,576 39.5% 4,244 39.7%
Hotel 2,155 89.6% 2,021 74.0%
Food and beverage 1,504 66.3% 1,711 55.4%
Taxes and licenses 1,381 10.5% 1,681 11.1%
Selling, general and
administrative 2,043 15.5% 2,323 15.4%
Rents 1,025 7.7% 1,017 6.7%
----------------- ------------ ------------------- ----------------
Total costs and expenses 11,684 88.6% 12,997 86.0%
-----------------
------------ ------------------- ----------------
Earnings before interest, taxes,
depreciation and amortization
(EBIDTA) 1,502 11.4% 2,119 14.0%
----------------- ------------ ------------------- ----------------
Depreciation and amortization 551 4.2% 924 6.1%
Interest 1,285 9.7% 251 1.7%
----------------- ------------ ------------------- ----------------
Income (loss) before
reorganizational items
and income taxes (334) (2.5%) 944 6.2%
----------------- ------------ ------------------- ----------------
Reorganizational items - - 604 4.0%
Income taxes 30 .2% - -
================= ============ =================== ================
Net income (loss) (364) (2.8%) 340 2.2%
================= ============ =================== ================
</TABLE>
<TABLE>
Six Months Ended Six Months Ended
June 30, 1997 June 30, 1996
-------------------------------- ---------------------------------------
(000's) % (000's) %
---------------- ----------- ------------------- ----------------
Revenues, net:
<S> <C> <C> <C> <C>
Casino 19,522 69.4% 21,865 70.5%
Hotel 5,006 17.8% 5,728 18.5%
Food & beverage 4,910 17.5% 6,589 21.2%
Other 670 2.3% 301 1.0%
----------------- ------------ ------------------- ----------------
Gross revenue 30,108 107.0% 34,483 111.2%
Less promotional allowances (1,976) (7.0%) (3,481) (11.2%)
----------------- ------------ ------------------- ----------------
Revenues, net 28,132 100.0% 31,002 100.0%
----------------- ------------ ------------------- ----------------
Costs and expenses:
Casino 7,450 38.2% 9,112 41.7%
Hotel 4,259 85.1% 3,894 68.0%
Food and beverage 3,156 64.3% 3,466 52.6%
Taxes and licenses 2,868 10.2% 3,492 11.3%
Selling, general and
administrative 4,639 16.5% 4,773 15.4%
Rents 2,033 7.2% 2,034 6.6%
----------------- ------------ ------------------- ----------------
Total costs and expenses 24,405 86.8% 26,771 86.4%
-----------------
------------ ------------------- ----------------
Earnings before interest, taxes,
depreciation and amortization
(EBIDTA) 3,727 13.2% 4,231 13.6%
----------------- ------------ ------------------- ----------------
Depreciation and amortization 1,249 4.4% 1,894 6.0%
Interest 2,450 8.7% 515 1.7%
----------------- ------------ ------------------- ----------------
Income (loss) before
reorganizational items and
income taxes 28 .1% 1,822 5.9%
----------------- ------------ ------------------- ----------------
Reorganizational items - - 1,138 3.7%
Income taxes 30 .1% - -
================= ============ =================== ================
Net income (loss) (2) (.0%) 684 2.2%
================= ============ =================== ================
</TABLE>
THREE MONTHS ENDED JUNE 30, 1997 COMPARED
TO THREE MONTHS ENDED JUNE 30, 1996
- --------------------------------------------------------------------------------
REVENUES
Net revenues decreased by approximately $1,930,000 or 12.8%, from $15,116,000
for the three months ended June 30, 1996 to $13,186,000 for the three months
ended June 30, 1997 due to competition, the construction disruption caused by
the installation of an additional 60 feet of air doors at the Fremont Street
entrance, and the general softness in the Las Vegas market.
Casino revenues decreased by approximately $1,640,000, or 15.3%, from
$10,691,000 during the 1996 period to $9,051,000 during the 1997 period due
primarily to $665,000, or 25.8% decrease in table games revenues and a
$1,636,000, or 21%, decrease in slot revenue. Management has eliminated certain
unprofitable marketing programs which generated significant volume in the second
quarter of 1996. During the second quarter of 1997 table games drop decreased
$7,688,000 or 38.7%. However, the win percentage increased by 2.7% 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
$34,257,000, 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 $326,000, or 11.9% from $2,732,000
during the 1996 period to $2,406,000 during the 1997 period due primarily to a
decrease in complimentary room revenues of $341,000 resulting from the
elimination of the unprofitable 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 $818,000, or 26.5%, from
$3,088,000 during the 1996 period to $2,270,000 during the 1997 period due to a
decrease in complimentary revenues of $365,000 resulting from the elimination of
the unprofitable table games marketing programs and the closure of two
unprofitable food outlets which were replaced by profitable leased Burger King
and Pizza Hut franchises.
Other revenues increased by approximately $225,000, or 173.1%, from $130,000
during the 1996 period to $355,000 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) and a payment received under a settlement agreement with the
Twenty-Nine Palms Band of Mission Indians.
Promotional allowances decreased by approximately $629,000, or 41.3%, from
$1,525,000 during the 1996 period to $896,000 during the 1997 period due to a
decrease in complimentary rooms, 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 $1,041,000, or 10.8%, from $9,657,000 for
the three months ended June 30, 1996 to $8,616,000 for the three months ended
June 30, 1997.
Casino expense decreased by approximately $668,000, or 15.7%, from $4,244,000
during the 1996 period to $3,576,000 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 increased by approximately $134,000, or 6.6%, from $2,021,000
during the 1996 period to $2,155,000 during the 1997 period, and costs as a
percentage of revenues increased from 74% to 89.6%, due to the reduction in cost
of complimentary rooms transferred to the Casino department.
Food and beverage costs and expenses decreased by approximately $207,000, or
12.1%, from $1,711,000 during the 1996 period to $1,504,000 during the 1997
period resulting from a corresponding decrease in revenues.
Tax and license expenses decreased by approximately $300,000, or 17.9%, from
$1,681,000 to $1,381,000 due to the decrease in casino revenues.
OTHER OPERATING EXPENSES
Selling, general and administrative expenses decreased by approximately
$280,000, or 12.1%, from $2,323,000 for the three months ended June 30, 1996 to
$2,043,000 for the three months ended June 30, 1997 due to refunds of listing
fees received from the American Stock Exchange and refunds of deposits on
background investigations from the National Indian Gaming Commission which had
been expensed in prior years. As a percentage of total net revenues, selling,
general and administrative expenses remained constant at approximately 15.5%.
EBITDA
EBITDA decreased by approximately $617,000, or 29.1%, from $2,119,000 during the
three months ended June 30, 1996 to $1,502,000 during the three months ended
June 30, 1997. The decrease was due to lower revenues which were partially
offset by management's elimination of unprofitable marketing expenses.
OTHER EXPENSES
Depreciation and amortization decreased by approximately $373,000, or 40.4%,
from $924,000 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 $1,034,000, from $251,000 during the
three months ended June 30, 1996 to $1,285,000 for the three months ended June
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.
Reorganization items totaling $604,000 in 1996 consisted primarily of accrued
professional fees incurred by the Company as a result of the reorganization
under Chapter 11 of the Bankruptcy Code. During the 1997 period there were no
reorganization items.
INCOME TAXES
Income taxes totaled $30,000 for estimated federal income tax payments resulting
from the alternative minimum tax.
NET INCOME (LOSS)
As a result of the factors discussed above, net income decreased by
approximately $704,000, from $340,000 during the three months ended June 30,
1996 to a loss of $364,000 during the three months ended June 30, 1997.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED
TO SIX MONTHS ENDED JUNE 30, 1996
- --------------------------------------------------------------------------------
REVENUES
Net revenues decreased by approximately $2,870,000 or 9.3%, from $31,002,000 for
the six months ended June 30, 1996 to $28,132,000 for the six months ended June
30, 1997.
Casino revenues decreased by approximately $2,343,000, or 10.7%, from
$21,865,000 during the 1996 period to $19,522,000 during the 1997 period due
primarily to a $1,256,000, or 23.1% decrease in table games revenues and a
$832,000, or 5.4% decrease in net slot revenue. Management has eliminated
certain unprofitable marketing programs which generated significant volume in
the first half of 1996. During the first half of 1997 table games drop decreased
$16,442,000 or 36.9%, and slot coin-in decreased $60,188,000, or 20.6%. The
decrease in table game volume was partially offset by a 2.7% increase in win
percent.
Hotel revenues decreased by approximately $722,000, or 12.6%, from $5,728,000
during the 1996 period to $5,006,000 during the 1997 period due primarily to a
decrease in complimentary room revenues of $880,000 resulting from the
elimination of the unprofitable 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 $1,679,000, or 25.5%, from
$6,589,000 during the 1996 period to $4,910,000 during the 1997 period due to a
decrease in complimentary revenues of $870,000 resulting from the elimination of
the unprofitable table games marketing programs and the closure of two
unprofitable food outlets which were replaced by profitable leased Burger King
and Pizza Hut franchises.
Other revenues increased by approximately $369,000, or 122.6%, from $301,000
during the 1996 period to $670,000 during the 1997 period, due primarily to a
refund of $83,000 from prior year's insurance premiums on the Company's health
and welfare plan, an increase in interest income due to increased cash balances,
and additional rental income as a result of new tenant leases. Additionally, a
payment was received under the settlement agreement reached with the Twenty-Nine
Palms Band of Mission Indians.
Promotional allowances decreased by approximately $1,505,000, or 43.2%, from
$3,481,000 during the 1996 period to $1,976,000 during the 1997 period due to a
decrease in complimentary rooms, 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 $2,231,000, or 11.2%, from $19,964,000 for
the six months ended June 30, 1996 to $17,733,000 for the six months ended June
30, 1997.
Casino expense decreased by approximately $1,662,000, or 18.2%, from $9,112,000
during the 1996 period to $7,450,000 during the 1997 period due to a decrease in
payroll and complimentary expenses. Casino expenses as a percentage of revenues
decreased from 41.7% to 38.2% due to management's redirection of the Company's
marketing efforts from table games to slots.
Hotel expense increased by approximately $365,000, or 9.4%, from $3,894,000
during the 1996 period to $4,259,000 during the 1997 period, and costs as a
percentage of revenues increased from 68.0% to 85.1%, due to the reduction in
cost of comps transferred to the Casino department.
Food and beverage costs and expenses decreased by approximately $310,000, or
9.0%, from $3,466,000 during the 1996 period to $3,156,000 during the 1997
period resulting from a corresponding decrease in revenues.
Tax and license expenses decreased by approximately $624,000, or 17.9%, from
$3,492,000 to $2,868,000 resulting from a corresponding decrease in casino
revenues.
OTHER OPERATING EXPENSES
Selling, general and administrative expenses decreased by approximately
$134,000, or 2.8%, from $4,773,000 for the six months ended June 30, 1996 to
$4,639,000 for the six months ended June 30, 1997 primarily due to refunds of
listing fees received from the American Stock Exchange and refunds of deposits
on background investigations from the National Indian Gaming Commission which
had been expensed on prior years. As a percentage of total net revenues,
selling, general and administrative expenses increased from 15.4% during the
1996 period to 16.5% during the 1997 period.
EBITDA
EBITDA decreased by approximately $504,000, or 13.5%, from $4,231,000 during the
six months ended June 30, 1996 to $3,727,000 during the six months ended June
30, 1997. Management's redirection of the Company's marketing efforts from table
games to slots was responsible for keeping the operation competitive while
revenues were generally down in the Fremont Street market. The reductions in
payroll and complimentaries in table games, allowed the Company to concentrate
its efforts in marketing and advertising slots.
OTHER EXPENSES
Depreciation and amortization decreased by approximately $645,000, or 34.1%,
from $1,894,000 during the 1996 period to $1,249,000 during the 1997 period due
to revaluation of property and equipment as a result of Fresh Start Accounting.
Interest expense increased by approximately $1,935,000, or 375.7%, from $515,000
during the six months ended June 30, 1996 to $2,450,000 for the six months ended
June 30, 1997, due to the restatement of 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 $1,138,000 in 1996 consisted primarily of accrued
professional fees incurred by the Company as a result of the reorganization
under Chapter 11 of the Bankruptcy Code. During the 1997 period there were no
reorganization items.
INCOME TAXES
Income taxes totaled $30,000 for estimated federal income tax payments resulting
from the alternative minimum tax.
NET INCOME (LOSS)
As a result of the factors discussed above, net income decreased by
approximately $686,000, from $684,000 during the six months ended June 30, 1996
to a loss of $2,000 during the six months ended June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents (including restricted amounts of
$425,000) of approximately $11.0 million at June 30, 1997, a decrease of
$636,000 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 as of February
28, 1997.
For the first half of 1997, the Company's net cash used by operating activities
was $(103,000) compared to $2.5 million provided by operating activities in the
first half 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 half 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 $5.4 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 June 30, 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 Mortgage Notes, the principal amount of which is $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 a possible
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 six month period included capital
expenditures of $1,672,000. 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>
Elsinore Corporation and Subsidiaries
Other Information
PART II. OTHER INFORMATION
Item 1. Legal Proceedings:
See Note 4 to Financial Statements in Part I, Item 1
of this report, which is incorporated herein by reference.
Item 5. Other Information:
See Note 6 to Financial Statements in Part I, Item 1
of this report, which is incorporated herein by reference.
See Note 7 to Financial Statements in Part I, Item 1
of this report, which is incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
2.1* First Amended Plan of Reorganization [2.1](5)
2.2* Order Confirming First Amended Plan of Reorganization [2.2](5)
2.3* Bankruptcy Court Order Approving Plan Documentation [2.3](6)
3.1* Amended and Restated Articles of Incorporation of Elsinore
Corporation [3.1](7)
3.2* Amended and Restated Bylaws of Elsinore Corporation [3.2](7)
10.1* Sublease, dated May 26, 1964, by and between A.W. Ham, Jr. and
Four Queens, Inc. [10.1](1)
10.2* Amendment of Sublease, dated June 15, 1964, by and between
A.W. Ham, Jr. and Four Queens, Inc. [10.2](1)
10.3* Amendment of Sublease, dated February 25, 1965, by and between
A.W. Ham Jr. and Four Queens, Inc. [10.3](1)
10.4* Amendment of Sublease, dated January 29, 1973, by and between
A.W. Ham, Jr. and Four Queens, Inc. [10.4](1)
10.5* Supplemental Lease, dated January 29, 1973, by and between
A.W. Ham, Jr. and Four Queens, Inc. [10.5](1)
10.6* Lease Agreement, dated April 25, 1972, by and between Bank of
Nevada and Leon H. Rockwell, Jr., as Trustees of Four Queens,
Inc. [10.6](1)
10.7* Lease, dated January 1, 1978, between Finley Company and
Elsinore Corporation [10.7](1)
10.8* Ground Lease, dated October 25, 1983, between Julia E. Albers,
Otto J. Westlake, Guardian, and Four Queens, Inc. [10.8](1)
10.9* Ground Lease, dated October 25, 1983, between Katherine M.
Purkiss and Four Queens, Inc. [10.9](1)
10.10* Ground Lease, dated October 25, 1983, between Otto J. Westlake
and Four Queens, Inc. [10.10](2)
10.11* Indenture of Lease, dated March 28, 1984, by and between the
City of Las Vegas and Four Queens, Inc. [10.11](1)
10.12* Lease Indenture, dated May 1, 1970, by and between Thomas L.
Carroll, et al. and Four Queens, Inc. [10.12](1)
10.13* Memorandum of Lease, dated January 26, 1973, between President
and Board of Trustees of Santa Clara College and Four Queens,
Inc. [10.13](1)
10.14* Indemnification Agreement, dated August 8, 1996, by and between
Elsinore Corporation and Frank L. Burrell, Jr. [10.14](7)
10.15* Indemnification Agreement, dated August 8, 1996, by and between
Elsinore Corporation and Howard Carlson [10.15](7)
10.16* Indemnification Agreement, dated August 8, 1996, by and between
Elsinore Corporation and Robert A. McKerroll [10.16](7)
10.17* Indemnification Agreement, dated August 8, 1996, by and between
Elsinore Corporation and Thomas E. Martin [10.17](7)
10,18* Agreement, dated April 29, 1992, by and among Four Queens,
Inc., Jeanne Hood, Edward M. Fasulo and Richard A. LeVasseur
[10.28](1)
10.19* Settlement Agreement, dated March 29, 1996, by and between
Palm Springs East Limited Partnership and the 29 Palms Band
of Mission Indians [10.19](7)
10.20* Loan Agreement, dated November 12, 1993, by and between The
Jamestown S'Klallam Tribe and JKT Gaming, Inc. [10.31](3)
10.21* First Amendment to Loan Agreement, dated January 28, 1994, by
and between The Jamestown S'Klallam Tribe and JKT Gaming, Inc.
[10.32](3)
10.22* Form of 13 1/2% Second Mortgage Note Due 2001 [10.22](7)
10.23* Amended and Restated Indenture, dated as of March 3, 1997,
by and among Elsinore Corporation, the Guarantors named
therein and First Trust National Association, as
Trustee [10.23](7)
10.24* Pledge Agreement, dated as of October 8,
1993, from Elsinore Corporation and ELSUB
Management Corporation to First Trust
National Association [10.7](2)
10.25* Amendment of 1993 Pledge Agreement, dated March 3, 1997
[10.25](7)
10.26* Deed of Trust, Assignment of Rents and Security Agreement,
dated as of October 8, 1993, by and among Four Queens, Inc.,
Land Title of Nevada, Inc. and First Trust National Association
[10.8](2)
10.27* Modification of Subordinated Deed of Trust, dated March 3,
1997, by and between Four Queens, Inc. and First Trust National
Association [10.27](7)
10.28* Agreement, dated May 14, 1997, by Elsinore Corporation to
file with the Securities and Exchange Commission copies of
instruments defining the rights of holders of 11.5%
First Mortgage Notes Due 2000 [10.28](7)
10.29* Assignment of Operating Agreements, dated as of October 8,
1993, by Palm Springs East Limited Partnership to First Trust
National Association [10.9](2)
10.30* Assignment of Operating Agreement, dated as of October 8, 1993,
by Olympia Gaming Corporation to First Trust National
Association [10.10](2)
10.31 Common Stock Registration Rights Agreement, dated as of
February 28, 1997, among Elsinore Corporation and the Holders
of Registrable Shares referred to therein (incorporated by
reference herein and filed as (i) Exhibit 10.31 to
Elsinore Corporation's Quarterly Report on Form 10-Q for the
three months ended March 31, 1997 and (ii) Exhibit B to
Schedule 13D, dated March 10, 1997, by Morgens Waterfall Income
Partners, L.P.; Restart Partners, L.P.; Restart Partners II,
L.P.; Restart Partners III, L.P.; Restart Partners IV, L.P.;
Restart Partners V, L.P.; The Common Fund for Non-Profit
Organizations; MWV Employee Retirement Plan Group Trust;
Betje Partners; Phoenix Partners, L.P.; Morgens, Waterfall,
Vintiadis & Company, Inc.; MW Capital, L.L.C.; Prime Group,
L.P.; Prime Group II, L.P.; Prime Group III, L.P.; Prime
Group IV, L.P.; Prime Group V, L.P.; Prime, Inc.;
MW Management, L.L.C.; John C. "Bruce" Waterfall;
and Edwin H. Morgens, with respect to the New Common Stock)
10.32 Description of Compensation Plan or Arrangement for Elsinore
Corporation Directors and Executive Officers
15.1 KPMG Peat Marwick LLP Independent Auditor's Review Report
27.1 Financial Data Schedule
99.1* Voluntary Petition for Bankruptcy Pursuant to Chapter 11 of the
Bankruptcy Code dated October 31, 1995 [99.2](4)
99.2* Olympia Gaming Corporation Voluntary Petition for Bankruptcy
pursuant to Chapter 11 of the Bankruptcy Code dated
October 31, 1995 [99](4)
(b) Reports on Form 8-K:
During the second quarter of 1997, Elsinore Corporation filed
no reports on Form 8-K.
*Previously filed with the Securities and Exchange Commission as an exhibit to
the document shown below under the Exhibit Number indicated in brackets and
incorporated herein by reference and made a part hereof:
(1) Annual Report on Form 10-K for the year ended December 31, 1992
(2) Current Report on Form 8-K dated October 19, 1993
(3) Annual Report on Form 10-K for the year ended December 31, 1993
(4) Current Report on Form 8-K dated November 7, 1995
(5) Current Report on Form 8-K dated August 8, 1996
(6) Current Report on Form 8-K dated March 14, 1997
(7) Quarterly Report on form 10-Q for the three months ended March 31, 1997
<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: August 13, 1997
EXHIBIT 10.32 TO JUNE 30, 1997 FORM 10-Q
DESCRIPTION OF COMPENSATION PLAN OR ARRANGEMENT
Outside directors of Elsinore Corporation (other than John C. "Bruce"
Waterfall, who receives no compensation) each receive annual compensation of
$25,000. The two directors who also hold the positions of (i) President and (ii)
Secretary and Treasurer each receive annual compensation of $35,000.
EXHIBIT 15.1 TO JUNE 30, 1997 FORM 10-Q
INDEPENDENT AUDITORS' REVIEW REPORT
The Board of Directors and Shareholders
Elsinore Corporation:
We have reviewed the condensed consolidated balance sheet of Elsinore
Corporation and subsidiaries (Reorganized Company) as of June 30, 1997, and the
condensed consolidated statements of operations and cash flows for the three
months ended June 30, 1997 and the period from March 1, 1997 through June 30,
1997 and the condensed consolidated statements of operations and cash flows of
Elsinore Corporation and subsidiaries, Debtor-In-Possession (Predecessor
Company) for the period January 1, 1997 through February 28, 1997. These
condensed consolidated financial statements are the responsibility of the
Reorganized and Predecessor Companies' management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
As discussed in Note 1 to the condensed consolidated financial statements, on
February 28, 1997, Elsinore Corporation emerged from bankruptcy. The
consolidated financial statements of the Reorganized Company reflect the impact
of adjustments to reflect the fair value of assets and liabilities under fresh
start reporting. As a result, the financial statements of the Reorganized
Company are presented on a different basis of accounting than those of the
Predecessor Company and, therefore, are not comparable in all respects.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Elsinore Corporation and
subsidiaries, Debtor-In-Possession as of December 31, 1996 and the related
consolidated statements of operations, shareholders' equity (deficit) and cash
flows for the year then ended (not presented herein); and in our report dated
February 19, 1997, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 1996, is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
Our report dated February 19, 1997, on the consolidated financial statements of
Elsinore Corporation and subsidiaries, Debtor-In-Possession as of and for the
year ended December 31, 1996, contains an explanatory paragraph that states that
on October 31, 1995, the Company filed a voluntary petition seeking to
reorganize under Chapter 11 of the United States Bankruptcy code and that the
Company is currently operating as a Debtor-In-Possession under the jurisdiction
of the Bankruptcy Court and this event and circumstances relating to this event
raise substantial doubt about the entity's ability to continue as a going
concern. The consolidated balance sheet as of December 31, 1996, does not
include any adjustments that might result from the outcome of that uncertainty.
Las Vegas, Nevada
August 1, 1997
<TABLE> <S> <C>
<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 11,017,000
<SECURITIES> 0
<RECEIVABLES> 642,000
<ALLOWANCES> (308,000)
<INVENTORY> 256,000
<CURRENT-ASSETS> 12,890,000
<PP&E> 37,852,000
<DEPRECIATION> (711,000)
<TOTAL-ASSETS> 51,577,000
<CURRENT-LIABILITIES> 8,627,000
<BONDS> 33,900,000
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<TOTAL-LIABILITY-AND-EQUITY> 51,577,000
<SALES> 13,186,000
<TOTAL-REVENUES> 14,082,000
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<INCOME-PRETAX> (334,000)
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