<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
{X} Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the period ended June 30, 1996.
OR
{ } Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
Commission file number: 1-8540
BALLY'S PARK PLACE, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3432384
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
Park Place & The Boardwalk
Atlantic City, New Jersey 08401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 340-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
At July 31, 1996, all 100 outstanding shares of the registrant's common stock
were held by Bally's Casino Holdings, Inc., an indirect wholly owned
subsidiary of Bally Entertainment Corporation.
The registrant meets the conditions set forth in General Instruction H (1) (a)
and (b) of Form 10-Q and is therefore filing this form with the reduced
disclosure format.
<PAGE>
BALLY'S PARK PLACE, INC.
(An Indirect Wholly Owned Subsidiary of Bally Entertainment Corporation)
INDEX
Page
Number
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheet (Unaudited)
June 30, 1996 and December 31, 1995 . . . . . . . . . . 1
Consolidated Statement of Income (Unaudited)
Six Months Ended June 30, 1996 and 1995 . . . . . . . . 2
Consolidated Statement of Income (Unaudited)
Three Months Ended June 30, 1996 and 1995 . . . . . . . 3
Consolidated Statement of Cash Flows (Unaudited)
Six Months Ended June 30, 1996 and 1995 . . . . . . . . 4
Notes to Condensed Consolidated Financial
Statements (Unaudited). . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Results of
Operations . . . . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 11
SIGNATURE PAGE . . . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
<TABLE>
BALLY'S PARK PLACE, INC.
(An Indirect Wholly Owned Subsidiary of Bally Entertainment Corporation)
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
<CAPTION>
June 30, December 31,
1996 1995
--------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and equivalents. . . . . . . . . . . . $ 38,934 $ 31,508
Receivables, less allowances
of $1,505 and $1,490. . . . . . . . . . 8,603 6,407
Inventories . . . . . . . . . . . . . . . . 2,260 2,129
Prepaid expenses. . . . . . . . . . . . . . 6,974 1,367
Deferred income taxes . . . . . . . . . . . 8,740 8,655
-------- --------
Total current assets . . . . . . . . . . . 65,511 50,066
Property and equipment, less accumulated
depreciation of $349,433 and $335,787 . . . 461,019 466,887
Deferred finance costs, less accumulated
amortization of $3,376 and $3,021 . . . . . 11,595 11,877
Casino Reinvestment Development Authority
investment obligations. . . . . . . . . . . 12,886 13,108
Other assets. . . . . . . . . . . . . . . . . 8,777 7,836
-------- --------
$559,788 $549,774
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . $ 1,629 $ 3,028
Payable to affiliates . . . . . . . . . . . 1,924 534
Income taxes payable. . . . . . . . . . . . 2,000 5,681
Accrued liabilities . . . . . . . . . . . . 39,415 41,109
Current maturities of long-term debt. . . . 51 49
-------- --------
Total current liabilities. . . . . . . . . 45,019 50,401
Long-term debt, less current maturities . . . 427,495 427,554
Deferred income taxes . . . . . . . . . . . . 38,614 41,912
Other long-term liabilities . . . . . . . . . 9,879 9,671
Stockholder's equity:
Common stock. . . . . . . . . . . . . . . . 1 1
Additional paid-in capital. . . . . . . . . 20,235 20,235
Retained earnings . . . . . . . . . . . . . 18,545 ---
-------- --------
Total stockholder's equity . . . . . . . . 38,781 20,236
-------- --------
$559,788 $549,774
<FN> ======== ========
See accompanying notes.
</TABLE>
<TABLE>
BALLY'S PARK PLACE, INC.
(An Indirect Wholly Owned Subsidiary of Bally Entertainment Corporation)
CONSOLIDATED STATEMENT OF INCOME
(In thousands)
(Unaudited)
<CAPTION>
Six Months Ended June 30,
-------------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues:
Casino . . . . . . . . . . . . . . . . $173,183 $170,707
Rooms. . . . . . . . . . . . . . . . . 9,714 10,380
Food and beverage. . . . . . . . . . . 9,150 9,529
Other. . . . . . . . . . . . . . . . . 6,048 5,687
-------- --------
198,095 196,303
Costs and expenses:
Casino . . . . . . . . . . . . . . . . 73,056 67,977
Rooms. . . . . . . . . . . . . . . . . 4,604 4,757
Food and beverage. . . . . . . . . . . 8,040 8,676
Other operating expenses . . . . . . . 26,579 28,710
Selling, general and administrative. . 16,883 17,300
Depreciation and amortization. . . . . 13,923 13,910
Allocations from Bally Entertainment
Corporation. . . . . . . . . . . . . 2,198 2,442
-------- --------
145,283 143,772
-------- --------
Operating income . . . . . . . . . . . . 52,812 52,531
Interest expense . . . . . . . . . . . . 20,694 20,790
-------- --------
Income before income taxes . . . . . . . 32,118 31,741
Provision for income taxes . . . . . . 13,573 13,620
-------- --------
Net income . . . . . . . . . . . . . . . $ 18,545 $ 18,121
======== ========
<FN>
See accompanying notes./TABLE
<PAGE>
<TABLE>
BALLY'S PARK PLACE, INC.
(An Indirect Wholly Owned Subsidiary of Bally Entertainment Corporation)
CONSOLIDATED STATEMENT OF INCOME
(In thousands)
(Unaudited)
<CAPTION>
Three Months Ended June 30,
---------------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues:
Casino . . . . . . . . . . . . . . . . $ 90,909 $ 90,067
Rooms. . . . . . . . . . . . . . . . . 5,363 5,829
Food and beverage. . . . . . . . . . . 4,831 5,227
Other. . . . . . . . . . . . . . . . . 2,895 2,881
-------- --------
103,998 104,004
Costs and expenses:
Casino . . . . . . . . . . . . . . . . 36,931 34,363
Rooms. . . . . . . . . . . . . . . . . 2,393 2,472
Food and beverage. . . . . . . . . . . 4,157 4,720
Other operating expenses . . . . . . . 11,902 14,619
Selling, general and administrative. . 10,185 9,673
Depreciation and amortization. . . . . 7,026 6,969
Allocations from Bally Entertainment
Corporation. . . . . . . . . . . . . 1,211 957
-------- --------
73,805 73,773
-------- --------
Operating income . . . . . . . . . . . . 30,193 30,231
Interest expense . . . . . . . . . . . . 10,387 10,393
-------- --------
Income before income taxes . . . . . . . 19,806 19,838
Provision for income taxes . . . . . . . 8,274 8,620
-------- --------
Net income . . . . . . . . . . . . . . . $ 11,532 $ 11,218
======== ========
<FN>
See accompanying notes.
</TABLE>
<TABLE>
BALLY'S PARK PLACE, INC.
(An Indirect Wholly Owned Subsidiary of Bally Entertainment Corporation)
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Six Months Ended June 30,
-------------------------
1996 1995
-------- --------
<S> <C> <C>
Operating:
Net income . . . . . . . . . . . . . . . . $ 18,545 $ 18,121
Adjustments to reconcile to cash provided-
Depreciation and amortization. . . . . . 13,923 13,910
Other amortization included in interest
expense. . . . . . . . . . . . . . . . 783 799
Provision for doubtful receivables . . . 183 503
Deferred income taxes. . . . . . . . . . (3,383) (3,569)
Gain on settlement of supplemental
executive retirement plan. . . . . . . --- (1,800)
Change in operating assets and
liabilities. . . . . . . . . . . . . . (14,234) 2,737
-------- --------
Cash provided by operating activities 15,817 30,701
Investing:
Purchases and construction
of property and equipment. . . . . . . . (8,309) (4,377)
Proceeds from disposal of property and
equipment. . . . . . . . . . . . . . . . 254 8
Casino Reinvestment Development Authority
investment obligations, net. . . . . . . 222 (1,013)
-------- --------
Cash used in investing activities. . (7,833) (5,382)
Financing:
Debt transactions -
Repayments of long-term debt . . . . . . (57) (26)
Costs to amend revolving credit agreement (501) ---
-------- --------
Cash used in debt transactions . . . (558) (26)
Equity transactions -
Dividends paid . . . . . . . . . . . . . --- (5,500)
-------- --------
Cash used in financing activities. . (558) (5,526)
-------- --------
Increase in cash and equivalents . . . . . . 7,426 19,793
Cash and equivalents, beginning of period. . 31,508 13,949
-------- --------
Cash and equivalents, end of period. . . . . $ 38,934 $ 33,742
======== ========
<FN>
(Continued)
</TABLE>
<TABLE> BALLY'S PARK PLACE, INC.
(An Indirect Wholly Owned Subsidiary of Bally Entertainment Corporation)
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Six Months Ended June 30,
-------------------------
1996 1995
-------- --------
SUPPLEMENTAL CASH FLOWS INFORMATION
<S> <C> <C>
Changes in operating assets and liabilities:
Increase in receivables. . . . . . . . . . $ (2,379) $ (319)
Decrease in income taxes receivable. . . . --- 1,249
Increase in inventories. . . . . . . . . . (131) (162)
Increase in prepaid expenses
and other assets . . . . . . . . . . . . (6,548) (579)
Increase (decrease) in accounts payable,
payable to affiliates, accrued liabilities
and other long-term liabilities . . . . (1,495) 1,048
Increase (decrease) in income taxes payable (3,681) 1,500
-------- --------
$(14,234) $ 2,737
======== ========
Cash payments for interest and income taxes:
Interest paid. . . . . . . . . . . . . . . $ 19,940 $ 20,260
Interest capitalized . . . . . . . . . . . (157) (21)
Income taxes paid (net of refunds) . . . . 20,637 14,440
Investing activities exclude the following
non-cash activity:
Donation of Casino Reinvestment
Development Authority investment
obligations, net . . . . . . . . . . . $ 442 $ 393
<FN>
See accompanying notes.
</table
Basis of presentation
The accompanying condensed consolidated financial statements include the
accounts of Bally's Park Place, Inc., a Delaware corporation (the "Company"),
which is an indirect wholly owned subsidiary of Bally Entertainment
Corporation ("BEC"), and its subsidiaries. The Company owns and operates the
casino hotel resort in Atlantic City, New Jersey known as "Bally's Park Place
Casino-Resort." The Company operates in one industry segment and all
significant revenues arise from its casino and supporting hotel operations.
Unless otherwise specified in the text, references to the Company include the
Company and its subsidiaries. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
All adjustments have been recorded which are, in the opinion of management,
necessary for a fair presentation of the condensed consolidated balance sheet
of the Company at June 30, 1996, its consolidated statements of income for the
three and six months ended June 30, 1996 and 1995 and its consolidated
statement of cash flows for the six months ended June 30, 1996 and 1995. All
such adjustments were of a normal recurring nature.
The accompanying condensed consolidated financial statements have been
prepared in conformity with generally accepted accounting principles which
require the Company's management to make estimates and assumptions that affect
the amounts reported therein. Actual results could vary from such estimates.
In addition, certain reclassifications have been made to prior period
financial statements to conform with the 1996 presentation.
Acquisition of BEC by Hilton Hotels Corporation
In June 1996, BEC and Hilton Hotels Corporation ("Hilton") entered into an
agreement pursuant to which BEC will merge with and into Hilton. The
transaction, which has been approved by the Board of Directors of BEC and
Hilton, is subject to approval by the companies' shareholders and gaming
regulators of several states, and is expected to close by year-end 1996.
Seasonal factors
The Company's operations are subject to seasonal factors and, therefore, the
results of operations for the three and six months ended June 30, 1996 and
1995 are not necessarily indicative of the results of operations for the full
year.
Allocations from BEC and transactions with related parties
BEC allocates costs to the Company consisting of the Company's allocable share
of BEC's corporate overhead including executive salaries and benefits, public
company reporting costs and other corporate headquarter's costs. While the
Company does not obtain a measurable direct benefit from these allocated
costs, management believes that the Company receives an indirect benefit from
BEC's oversight. BEC's method for allocating costs is designed to apportion
the majority of its operating costs to its subsidiaries and is generally based
upon many subjective factors including various measures of operational size
and extent of BEC's oversight requirements. Management of BEC believes that
the methods used to allocate these costs are reasonable. Because of BEC's
controlling relationship with the Company and the allocation of certain BEC
costs, the operating results of the Company could be significantly different
if the Company operated autonomously. In addition, certain of the Company's
insurance coverage is obtained by BEC pursuant to corporate-wide programs.
In these circumstances, BEC charges the Company its proportionate share of the
respective insurance premiums.
Certain executive officers of the Company function in a similar capacity for
certain other BEC subsidiaries and exercise decision-making and operational
authority over these entities. No allocation of cost is made from the Company
to these BEC subsidiaries for these executive officers as management deems the
direct allocable cost to be immaterial. In addition, certain administrative
and support operations of the Company and GNOC, CORP. (a wholly owned
subsidiary of BEC which owns and operates the casino hotel resort in Atlantic
City known as the "The Grand"), are consolidated, including limousine
services, legal services and purchasing. Costs of these operations are
allocated to or from the Company either directly or using various formulas
based on estimates of utilization of such services. On a net basis,
allocations to The Grand were $107 and $76 for the three months ended June 30,
1996 and 1995, respectively, and $215 and $137 for the six months ended June
30, 1996 and 1995, respectively, which management believes were reasonable.
The Company also leases land to The Grand, and rental income for each of the
three and six month periods ended June 30, 1996 and 1995 was $174 and $348,
respectively.
Long-term debt
The indenture for the 9 1/4% First Mortgage Notes due 2004 (the "Notes") and
the $65,000 revolving credit facility (the entire amount was unused at June
30, 1996) impose restrictions on the Company's ability to incur debt and issue
preferred stock, make acquisitions and certain restricted payments, create
liens, sell assets or enter into transactions with affiliates. The revolving
credit facility is, in certain circumstances, more restrictive than the
indenture for the Notes. Also, the indenture for the Notes and the revolving
credit facility presently limit the payment of dividends by the Company to 50%
of aggregate consolidated net income (as defined) earned since April 1, 1994.
At June 30, 1996, $12,363 was available to be paid as dividends.
Income taxes
Taxable income or loss of the Company is included in the consolidated federal
income tax return of BEC. Under agreements among the Company, BEC and
Bally's Casino Holdings, Inc., income taxes are allocated to the Company based
on amounts the Company would pay or receive if it filed a separate
consolidated federal income tax return, except that the Company receives
credit from BEC for the tax benefit of the Company's net operating losses and
tax credits, if any, that can be utilized in BEC's consolidated federal income
tax return, regardless of whether these losses or credits could be utilized
by the Company on a separate consolidated federal income tax return basis.
Payments to BEC for tax liabilities are due at such time and in such amounts
as payments are required to be made to the Internal Revenue Service. Payments
from BEC for tax benefits are due at the time BEC files the applicable
consolidated federal income tax return. Under the tax sharing agreement, the
Company had federal income taxes payable to BEC of $2,000 at June 30, 1996 and
$514 at December 31, 1995, which are classified as income taxes payable in the
accompanying condensed consolidated balance sheet.
Guarantees
At June 30, 1996, the Company was contingently liable for the guarantee of
payments up to approximately $29,000 in the event certain affiliates fail to
make required payments pursuant to various contractual obligations.<PAGE>
BALLY'S PARK PLACE, INC.
(An Indirect Wholly Owned Subsidiary of Bally Entertainment Corporation)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
Comparison of the Six Months Ended June 30, 1996 and 1995
Revenues of the Company for the six months ended June 30, 1996 were $198.1
million compared to $196.3 million for the 1995 period, an increase of $1.8
million (1%) primarily due to a $2.5 million (1%) increase in casino revenues.
Slot revenues increased $2.9 million (2%) due to a 5% increase in slot handle
(volume) offset, in part, by a decline in the win percentage from 8.5% in 1995
to 8.3% in 1996. On average, the Company had 89 (4%) more slot machines for
the six months ended June 30, 1996 compared to the same period in 1995. Slot
revenues approximated 71% of the Company's casino revenues in 1996 compared
to 70% in 1995. Table game revenues, excluding poker, remained essentially
unchanged as a 1% increase in the drop (amount wagered) was offset by a
reduction in the hold percentage from 16.4% in 1995 to 16.3% in 1996. Other
casino revenues decreased $.4 million (10%) primarily due to reduced poker
revenues. In addition, rooms revenue decreased $.7 million (6%) due to
increased complimentaries in 1996 causing reduced occupancy of rooms by paying
customers.
Atlantic City casino revenues (excluding poker, horse race simulcasting and
keno) for the six months ended June 30, 1996 increased approximately 4% from
1995 due to a 4% increase in both table game and slot revenues. Since June
30, 1995, the number of slot machines in Atlantic City increased approximately
11% and the number of table games, excluding poker tables, increased
approximately 8%. Slot revenues approximated 69% of total casino revenues in
Atlantic City for both 1996 and 1995. Management believes that the expansion
of several casino hotel facilities in Atlantic City, which includes additional
hotel rooms and gaming space, has caused and will continue to cause intense
promotional efforts to attract players as both the Company and its competitors
continue to seek to expand their share of gaming revenues and maximize the
utilization of their gaming space. Further, as a result of the aggressive
competition for slot patrons, the Atlantic City slot win percentage continues
to decline. Management believes that the slot win percentage will continue
to be subject to competitive pressure and may decline further. In addition,
proposals for several new casino hotel resorts were recently announced for
Atlantic City and, if and when such resorts are opened, capacity and
competition will further increase. However, management believes Bally's Park
Place Casino-Resort is well-positioned to compete for additional casino
revenues in the Atlantic City market through the attractive promotional gaming
programs and special events it offers and the appearance and comfort of its
gaming space and hotel accomodations. During the first quarter of 1995, the
Company completed a slot machine upgrade, replacing the majority of its slot
machines with state-of-the-art machines with embedded bill acceptors, and
reconfigured its slot machine layout, adding slot stools and increasing aisle
space. In addition, the Company broke ground in April 1996 for construction
of a western-themed casino complex on approximately 4 acres of Boardwalk
property it owns adjacent to Bally's Park Place Casino-Resort. The complex
is presently planned to include 75,000 square feet of casino space and cost
approximately $100 million, with completion anticipated in mid-1997.
Operating income of the Company for the six months ended June 30, 1996 was
$52.8 million compared to $52.5 million for the 1995 period, an increase of
$.3 million (1%) as the aforementioned revenue increase was substantially
BALLY'S PARK PLACE, INC.
(An Indirect Wholly Owned Subsidiary of Bally Entertainment Corporation)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
offset by a 1% increase in operating expenses. Casino expenses increased $5.1
million (7%) due primarily to expanded promotional efforts. This increase in
casino expenses was offset, in part, by a $2.1 million (7%) decrease in other
operating expenses primarily due to a real estate tax refund relating to prior
years. In addition, food and beverage expenses decreased $.6 million (7%) as
a result of an increase in complimentaries, which cost is included in casino
expenses. Operating costs and expenses include allocations from BEC of its
overhead (including executive salaries and benefits, public company reporting
costs and other corporate headquarter's costs) of $2.2 million and $2.4
million for the six months ended June 30, 1996 and 1995, respectively.
Management of BEC believes that the methods used to allocate these costs are
reasonable.
For the six months ended June 30, 1996 and 1995, the effective rates of the
income tax provision varied from the U.S. statutory tax rate (35%) due
principally to state income taxes.
<PAGE>
BALLY'S PARK PLACE, INC.
(An Indirect Wholly Owned Subsidiary of Bally Entertainment Corporation)
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 27 Financial Data Schedule. (Filed electronically only.)
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Bally's Park Place, Inc.
----------------------------
Registrant
/s/ Joseph A. D'Amato
----------------------------
Joseph A. D'Amato
Vice President of Finance
and Administration
(Principal Financial Officer)
Dated: August 9, 1996
12
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996, AND THE CONSOLIDATED
STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30 1996, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 38,934
<SECURITIES> 0
<RECEIVABLES> 10,108
<ALLOWANCES> 1,505
<INVENTORY> 2,260
<CURRENT-ASSETS> 65,511
<PP&E> 810,452
<DEPRECIATION> 349,433
<TOTAL-ASSETS> 559,788
<CURRENT-LIABILITIES> 45,019
<BONDS> 427,495
0
0
<COMMON> 1
<OTHER-SE> 38,780
<TOTAL-LIABILITY-AND-EQUITY> 559,788
<SALES> 0
<TOTAL-REVENUES> 198,095
<CGS> 0
<TOTAL-COSTS> 112,096
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 183<F1>
<INTEREST-EXPENSE> 20,694
<INCOME-PRETAX> 32,118
<INCOME-TAX> 13,573
<INCOME-CONTINUING> 18,545
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,545
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>
THE PROVISION FOR DOUBTFUL RECEIVABLES IS INCLUDED IN CASINO AND ROOMS
OPERATING COSTS AND EXPENSES IN THE CONSOLIDATED STATEMENT OF INCOME FOR THE
SIX MONTHS ENDED JUNE 30, 1996.
</FN>
</TABLE>
