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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 1-2500
BALLY'S GRAND, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-0980760
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3645 LAS VEGAS BOULEVARD SOUTH, LAS VEGAS, NEVADA 89109
(Address of principal executive offices) (Zip code)
(702) 739-4111
(Registrant's telephone number, including area code)
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 twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of April 30, 1997 -- Common Stock, $.01 par value --
8,528,847 shares.
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PART I FINANCIAL INFORMATION
Company or group of companies for which report is filed:
BALLY'S GRAND, INC.
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share amounts)
Three months ended
March 31,
1997 1996
_______________________________________________________________________________
Revenue
Casino $ 43.3 40.1
Rooms 17.2 17.7
Food and beverage 11.9 12.1
Other 10.2 11.3
____________________________________________________________________________
82.6 81.2
_______________________________________________________________________________
Expenses
Casino 21.5 19.8
Rooms 4.8 5.0
Food and beverage 9.9 10.0
Other expenses 26.5 27.2
____________________________________________________________________________
62.7 62.0
_______________________________________________________________________________
Operating income 19.9 19.2
Interest and dividend income 1.2 .9
Interest expense (8.4) (8.4)
_______________________________________________________________________________
Income before income taxes 12.7 11.7
Provision for income taxes 4.4 4.2
_______________________________________________________________________________
Net income $ 8.3 7.5
_______________________________________________________________________________
_______________________________________________________________________________
Net income per share $ .92 .86
_______________________________________________________________________________
_______________________________________________________________________________
Average number of shares 8,989,418 8,754,304
_______________________________________________________________________________
_______________________________________________________________________________
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BALLY'S GRAND, INC.
CONSOLIDATED BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
______________________________________________________________________________________________
<S> <C> <C> <C>
Assets Current assets
Cash and equivalents $ 131.7 115.9
Marketable securities, at fair value
(Hilton Hotels Corporation common stock) 35.3 38.1
Receivables, less allowances of $4.5
and $4.9 16.4 17.4
Inventories 1.9 1.8
Deferred income taxes 9.6 7.1
Other current assets 6.1 3.8
______________________________________________________________________
Total current assets 201.0 184.1
Property and equipment, net 373.4 376.5
Other assets 15.3 16.6
______________________________________________________________________
Total assets $ 589.7 577.2
______________________________________________________________________________________________
______________________________________________________________________________________________
Liabilities and Current liabilities
stockholders' equity Accounts payable $ 8.5 13.2
Income taxes payable 14.1 8.8
Accrued liabilities 37.2 31.1
______________________________________________________________________
Total current liabilities 59.8 53.1
Long-term debt 315.0 315.0
Deferred income taxes and other liabilities 88.7 90.5
Stockholders' equity 126.2 118.6
______________________________________________________________________
Total liabilities and stockholders' equity $ 589.7 577.2
______________________________________________________________________________________________
______________________________________________________________________________________________
</TABLE>
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BALLY'S GRAND, INC.
Consolidated Statements of Cash Flows
(in millions)
Three months ended
March 31,
1997 1996
_______________________________________________________________________________
Operating Activities
Net income $ 8.3 7.5
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6.5 6.5
Amortization of debt issue costs .2 .2
Change in working capital components:
Receivables 1.0 (2.6)
Other current assets (2.4) (.3)
Accounts payable and accrued liabilities 1.4 5.0
Income taxes payable 5.3 1.0
Change in deferred income taxes (2.7) 3.2
Other 1.1 (.7)
____________________________________________________________________________
Net cash provided by operating activities 18.7 19.8
_______________________________________________________________________________
Investing Activities
Capital expenditures (2.3) (2.5)
Decrease in construction-related liabilities (1.0) (1.9)
Other, net - (.1)
____________________________________________________________________________
Net cash used in investing activities (3.3) (4.5)
_______________________________________________________________________________
Financing Activities
Purchases of common stock for treasury - (1.2)
Proceeds from exercise of warrants .4 -
____________________________________________________________________________
Net cash provided by (used in) financing activities .4 (1.2)
_______________________________________________________________________________
Increase in Cash and Equivalents 15.8 14.1
Cash and Equivalents at Beginning of Year 115.9 64.7
_______________________________________________________________________________
Cash and Equivalents at End of Period $ 131.7 78.8
_______________________________________________________________________________
_______________________________________________________________________________
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Bally's Grand, Inc., a Delaware corporation (the Company) and its
subsidiaries. The Company owns and operates the casino hotel resort in Las
Vegas, Nevada known as "Bally's Las Vegas." 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
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, 1996.
Effective December 18, 1996, Hilton Hotels Corporation (HHC) completed the
merger of Bally Entertainment Corporation (BEC) with and into HHC pursuant to
an agreement dated June 6, 1996 (the Merger). As a result, a wholly owned
subsidiary of BEC which owned shares of the Company's common stock became a
wholly owned subsidiary of HHC. As of March 31, 1997, this wholly owned
subsidiary of HHC owned approximately 84% (78% on a fully diluted basis) of the
outstanding common stock of the Company.
All adjustments have been recorded which are, in the opinion of management,
necessary for a fair presentation of the consolidated balance sheet of the
Company at March 31, 1997 and its consolidated statements of income and cash
flows for the three months ended March 31, 1997 and 1996. All such adjustments
were of a normal recurring nature.
The accompanying 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, which have no effect on net income, have
been made to prior years' financial statements to conform with the 1997
presentation.
NOTE 2: SEASONAL FACTORS
The Company's operations are somewhat seasonal and, therefore, the results of
operations for the three months ended March 31, 1997 and 1996 are not
necessarily indicative of the results of operations for the full year.
NOTE 3: EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Earnings per common and common equivalent share is computed by dividing net
income by the weighted average number of shares of common stock and common
stock equivalents outstanding during each period. Common stock equivalents,
which represent the dilutive effect of the assumed exercise of outstanding
warrants, increased the weighted average number of shares outstanding by
476,316 shares and 313,651 shares for the three months ended March 31, 1997
and 1996, respectively.
NOTE 4: INCOME TAXES
For the period from January 1, 1996 to December 18, 1996, taxable income or
loss of the Company is included in the consolidated federal income tax return
of BEC. For periods subsequent to December 18, 1996, taxable income or loss
of the Company is included in the consolidated federal income tax return of
HHC. Under a tax sharing arrangement between BEC, and now HHC, and the
Company, 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. Payments to BEC or HHC for tax liabilities are due at
such time and in such amounts as payments would be required to
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be made to the Internal Revenue Service. Payments from BEC or HHC for tax
benefits are due at the time BEC or HHC files the applicable consolidated
federal income tax return.
NOTE 5: LONG-TERM DEBT
In October 1996, HHC announced an offer to purchase for cash (the Tender
Offer) any and all of the Company's 10 3/8% First Mortgage Notes due 2003
(the Notes) and a solicitation of consents to proposed amendments to the
indenture for the Notes (the Consent Solicitation). In connection therewith,
HHC purchased $312,219,000 principal amount of the Notes in December 1996 at
a premium of 12.4% (10.4% for the Tender Offer and 2% for the Consent
Solicitation). Because HHC received consents for at least a majority of the
principal amount of the Notes, certain restrictive covenants and events of
default and related provisions contained in the indenture governing the Notes
were eliminated.
NOTE 6: TRANSACTIONS WITH BEC/HHC
In August 1993, the Company, BEC and Bally's Grand Management Co., Inc. (the
Manager), a Nevada corporation and, at that time, a wholly owned subsidiary
of BEC, entered into a management agreement (the Management Agreement)
whereby the Manager provides management services to the Company and BEC
licensed, and now HHC licenses, the use of the "Bally" name and certain
computer software to the Company for a $3 million annual management fee.
Pursuant to the Management Agreement, management fees for each of the three
month periods ended March 31, 1997 and 1996 were $750,000. In addition,
certain of the Company's insurance coverages were obtained by BEC (and are
currently obtained by HHC) pursuant to corporate-wide programs. In these
circumstances, BEC or HHC charged the Company its proportionate share of the
respective insurance premiums.
In August 1996, the Company sold Paris Casino Corp., an indirect wholly owned
subsidiary that owns 24 acres of land next to Bally's Las Vegas upon which the
Paris Casino-Resort is planned to be developed, to BEC for consideration
having an aggregate value of approximately $57.5 million ($17.5 million in
cash and 1,457,195 shares of BEC common stock which were converted into
1,457,195 shares of HHC common stock in the Merger). In addition, BEC
reimbursed the Company for Paris Casino-Resort development costs incurred to
date and certain transaction-related costs, and granted the Company certain
operating considerations pursuant to a shared facilities agreement. The
transaction was negotiated and approved by an independent Special Committee
of the Board of Directors of the Company. The Special Committee retained
independent legal counsel and financial advisors in connection with the
evaluation and negotiation of the transaction. For financial accounting
purposes, because BEC owned approximately 85% of the outstanding common stock
of the Company at that time, the excess of the sales price over the
historical net book value of Paris Casino Corp. (net of income taxes of
$10,593,000) was accounted for as an increase to stockholders' equity.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL SPENDING
The Company has no scheduled principal payments on its long-term debt until
2003. Management plans to make capital expenditures totaling approximately
$24 million at Bally's Las Vegas during 1997 for various improvements,
renovations and equipment to maintain the casino hotel resort in first-class
condition. The Company believes that during 1997 it will be able to satisfy
its debt service requirements (interest on its public indebtedness is
approximately $32.7 million per annum) and the aforementioned capital
expenditures out of existing cash balances and cash flow from operations.
RESULTS OF OPERATIONS
COMPARISON OF FISCAL QUARTERS ENDED MARCH 31, 1997 AND 1996
Revenues for the three months ended March 31, 1997 were $82.6 million
compared to $81.2 million for the 1996 quarter, an increase of $1.4 million
(2%). Casino revenues for the 1997 quarter were $43.3 million compared to
$40.1 million for 1996, an increase of $3.2 million or 8%. Slot revenues
increased $3.4 million (21%) primarily attributable to an increase of 32% in
the slot handle (volume). Table game revenues increased $1.2 million (6%)
due to a 1% increase in the drop (amount wagered) and an increase in the
hold percentage from 15.8% in the 1996 quarter to 16.6% in 1997. Other
casino revenues decreased $1.4 million due to a 5 point decrease in the race
and sports book hold percentage. Rooms and food and beverage revenues
remained consistent between periods.
Management believes that the additional casino and hotel room capacity
resulting from the opening of new casino hotels may have a short-term
negative impact on the Company, but that over the long term the Company
benefits from the increase in the number of visitors to Las Vegas that these
new properties attract. To enhance its competitiveness in the Las Vegas
market, Bally's Las Vegas completed an extensive capital improvement program
over the last three years including, among others, improvements to its
frontage area along the Strip, a monorail system, the renovation of all of
its hotel rooms, a new race and sports book room and a slot machine
upgrade.
Operating income for the three months ended March 31, 1997 was $19.9 million
compared to $19.2 million for the 1996 quarter, an increase of $.7 million
(4%).
Interest expense, net of capitalized interest, was $8.4 million for both
three month periods ended March 31, 1997 and 1996.
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ACCOUNTING CHANGES
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (SFAS) No. 128, "Earnings per Share." This
statement establishes standards for computing and presenting earnings per
share. SFAS No. 128 is effective for financial statements issued for periods
ending after December 15, 1997 and earlier application is not permitted. The
Company's adoption of SFAS No. 128 is not expected to have a material impact
on its earnings per share presentation.
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this report, including without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequacy of resources, are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements reflect the Company's current views
with respect to future events and financial performance, and are subject to
certain risks and uncertainties which could cause actual results to differ
materially from historical results or those anticipated. Although the
Company believes the expectations reflected in such forward-looking statements
are based upon reasonable assumptions, it can give no assurance that its
expectations will be attained. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise.
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PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27. Financial data schedule for the three month period ended March
31, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
BALLY'S GRAND, INC.
(Registrant)
Date: May 15, 1997 /s/ LEON H. FLINDERS
_______________________________
Leon H. Flinders
Chief Financial Officer and
Controller
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED BALANCE SHEETS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 131,700
<SECURITIES> 35,300
<RECEIVABLES> 20,900
<ALLOWANCES> 4,500
<INVENTORY> 1,900
<CURRENT-ASSETS> 201,000
<PP&E> 450,200
<DEPRECIATION> 76,800
<TOTAL-ASSETS> 589,700
<CURRENT-LIABILITIES> 59,800
<BONDS> 315,000
0
0
<COMMON> 100
<OTHER-SE> 126,100
<TOTAL-LIABILITY-AND-EQUITY> 589,700
<SALES> 82,600
<TOTAL-REVENUES> 82,600
<CGS> 0
<TOTAL-COSTS> 61,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,200
<INTEREST-EXPENSE> 7,200
<INCOME-PRETAX> 12,700
<INCOME-TAX> 4,400
<INCOME-CONTINUING> 8,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,300
<EPS-PRIMARY> .92
<EPS-DILUTED> .92
</TABLE>
