SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1994
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 1-8570
CIRCUS CIRCUS ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0121916
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
2880 Las Vegas Boulevard South, Las Vegas, Nevada 89109-1120
(Address of principal executive offices)
(702) 734-0410
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securi-
ties Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at August 31, 1994
Common Stock, $.01-2/3 par value 85,708,834 shares
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
Form 10-Q
INDEX
Page No.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at
July 31, 1994 (Unaudited) and January 31,
1994 . . . . . . . . . . . . . . . . . . . . 3-4
Condensed Consolidated Statements of Income
(Unaudited) for the Three and Six Months
Ended July 31, 1994 and 1993 . . . . . . . . 5
Condensed Consolidated Statements of Cash
Flows (Unaudited) for the Six Months
Ended July 31, 1994 and 1993 . . . . . . . . 6
Notes to Condensed Consolidated Financial
Statements (Unaudited) . . . . . . . . . . 7-15
Item 2. Management's Discussion and Analysis of Fi-
nancial Condition and Results of Operations . 16-20
Part II. OTHER INFORMATION 21-22
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
July 31, January 31,
1994 1994
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents................ $ 53,453 $ 39,110
Receivables.............................. 8,019 8,673
Inventories.............................. 24,677 20,057
Prepaid expenses......................... 20,562 20,062
Total current assets................ 106,711 87,902
PROPERTY, EQUIPMENT AND LEASEHOLD INTERESTS,
at cost, less accumulated depreciation
and amortization of $374,679 and $336,287
respectively............................. 1,222,954 1,179,961
EXCESS OF PURCHASE PRICE OVER FAIR MARKET
value of net assets acquired, net........ 10,018 10,200
INVESTMENTS IN JOINT VENTURES............... 53,525 3,203
OTHER ASSETS................................ 12,052 16,658
Total Assets......................... $1,405,260 $1,297,924
The accompanying notes are an integral part of these
condensed consolidated financial statements.
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
July 31, January 31,
1994 1994
(Unaudited)
CURRENT LIABILITIES:
Current portion of long-term debt................ $ 177 $ 169
Accounts payable - trade ........................ 21,048 14,804
Accounts payable - construction.................. 7,830 13,844
Accrued liabilities ............................. 68,305 59,438
Income tax payable .............................. 5,277 3,806
Total current liabilities ................ 102,637 92,061
LONG-TERM DEBT ...................................... 605,080 567,345
DEFERRED INCOME TAX ................................. 80,864 77,153
OTHER LONG-TERM LIABILITIES ......................... 1,352 1,415
Total liabilities ........................ 789,933 737,974
STOCKHOLDERS' EQUITY:
Common stock, $.01-2/3 par value
Authorized - 450,000,000 shares
Issued - 96,293,643 and 96,168,769 shares ..... 1,605 1,603
Preferred stock, $.01 par value
Authorized - 75,000,000 shares ................ - -
Additional paid-in capital ...................... 121,612 120,135
Retained earnings ............................... 687,285 618,446
Treasury stock (10,589,309 and 10,062,814 shares),
at cost........................................ (195,175) (180,234)
Total stockholders' equity ............... 615,327 559,950
Total Liabilities and
Stockholders' Equity .................. $1,405,260 $1,297,924
The accompanying notes are an integral part of these
condensed consolidated financial statements.
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
(Unaudited)
Three Months Six Months
Ended July 31, Ended July 31,
REVENUES: 1994 1993 1994 1993
Casino ......................... $150,458 $130,066 $301,706 $252,630
Rooms .......................... 58,844 39,905 113,036 78,756
Food and beverage .............. 50,311 36,966 97,650 70,105
Other .......................... 48,738 30,362 89,115 54,151
308,351 237,299 601,507 455,642
Less-complimentary allowances .. (8,456) (7,022) (16,711) (13,710)
299,895 230,277 584,796 441,932
COSTS AND EXPENSES:
Casino ......................... 59,984 49,653 119,671 96,881
Rooms .......................... 24,349 18,461 48,072 35,932
Food and beverage .............. 47,302 35,432 92,369 67,446
Other operating expenses ....... 29,038 19,225 54,430 35,495
General and administrative ..... 45,193 34,469 88,741 65,950
Depreciation and amortization .. 20,404 11,815 40,894 23,801
226,270 169,055 444,177 325,505
OPERATING PROFIT BEFORE CORPORATE
EXPENSE ........................ 73,625 61,222 140,619 116,427
CORPORATE EXPENSE ................ 5,400 2,935 11,314 6,368
INCOME FROM OPERATIONS ........... 68,225 58,287 129,305 110,059
OTHER INCOME (EXPENSE):
Interest, dividend and
other income (expense)........ (623) (78) (650) (217)
Interest expense ............... (10,067) (1,599) (20,665) (3,567)
(10,690) (1,677) (21,315) (3,784)
INCOME BEFORE PROVISION FOR
INCOME TAX ..................... 57,535 56,610 107,990 106,275
Provision for income tax ....... 20,987 19,247 39,151 36,133
NET INCOME ....................... $ 36,548 $ 37,363 $ 68,839 $ 70,142
EARNINGS PER SHARE................ $ .43 $ .43 $ .80 $ .80
Average shares outstanding ... 85,696,443 87,319,075 85,889,038 87,305,940
The accompanying notes are an integral part of these
condensed consolidated financial statements.
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months
Ended July 31,
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 68,839 $ 70,142
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 41,712 23,853
(Gain) loss on sale of fixed assets 798 894
(Increase) decrease in other current assets (4,466) (1,841)
(Increase) decrease in other non-current assets 4,624 (7,449)
Increase (decrease) in interest payable (396) 2,256
Increase (decrease) in income tax payable 1,471 1,008
Increase (decrease) in other current liabilities 15,507 11,041
Increase (decrease) in deferred taxes 3,711 2,125
Increase (decrease) in other non-current
liabilities (33) (33)
Total adjustments 62,928 31,854
Net cash provided by operating activities 131,767 101,996
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (85,605) (232,296)
Decrease in construction payables (6,014) (3,177)
Increase in investments in joint ventures (50,322) -
Proceeds from sale of equipment and other assets 284 171
Net cash used in investing activities (141,657) (235,302)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net effect on cash of issuances and payments
of debt with initial maturities of
three months or less 37,808 (152,989)
Principal payments of debt with original
maturities in excess of three months (82) (75)
Issuance of senior subordinated debt - 299,841
Exercise of stock options and warrants 1,569 2,838
Purchases of treasury stock (15,031) (7,339)
Other (31) (31)
Net cash provided by financing activities 24,233 142,245
Net increase in cash and cash equivalents 14,343 8,939
Cash and cash equivalents at beginning of period 39,110 43,415
Cash and cash equivalents at end of period $ 53,453 $ 52,354
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the period for:
Interest (net of amount capitalized) $ 20,538 $ 840
Income tax $ 34,000 $ 33,000
The accompanying notes are an integral part of these
condensed consolidated financial statements.
CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All information for the three and six months ended July 31, 1994
and 1993 is unaudited.)
(1) Principles of consolidation and basis of presentation -
Circus Circus Enterprises, Inc. (the "Company") was
incorporated February 27, 1974. The Company operates hotel and
casino facilities in Las Vegas, Reno and Laughlin, Nevada. It is
also a partner in a casino operation in Windsor, Canada, and
opened Circus Circus-Tunica, a riverboat casino in Tunica County,
Mississippi, on August 29, 1994.
The condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries.
Material intercompany accounts and transactions have been
eliminated.
The condensed consolidated financial statements included
herein have been prepared by the Company, without audit, pursuant
to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the
information presented not misleading. In the opinion of
management, all adjustments (which include normal recurring
adjustments) necessary for a fair statement of results for the
interim periods have been made. The results for the three-month
and six-month periods are not necessarily indicative of results to
be expected for the full fiscal year.
Certain reclassifications have been made to the financial
statements for the three and six months ended July 31, 1993 to
conform to the financial statement presentation for the three and
six months ended July 31, 1994. These reclassifications have no
effect on net income.
These financial statements should be read in conjunction with
the financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended
January 31, 1994.
(2) Long-term debt -
Long-term debt consists of the following (in thousands):
July 31, January 31,
1994 1994
(Unaudited)
Amounts due under corporate
debt program at floating
interest rates, currently at
approximately 4.8% $205,258 $167,450
7-5/8% Senior Subordinated
Debentures due 2013 150,000 150,000
6-3/4% Senior Subordinated Notes
due 2003 (net of unamortized
discount of $142 and $150) 149,858 149,850
10-5/8% Senior Subordinated Notes
due 1997 (net of unamortized
discount of $51 and $60) 99,949 99,940
Other notes 192 274
605,257 567,514
Less - current portion (177) (169)
$605,080 $567,345
The Company has established a corporate debt program whereby
it can issue commercial paper or similar forms of short-term debt.
Although the debt instruments issued under this program are short-
term in tenor, they are classified as long-term debt because (i)
they are backed by long-term debt facilities (see below) and (ii)
it is management's intention to continue to replace such
borrowings on a rolling basis as various instruments come due and
to have such borrowings outstanding for longer than one year. To
the extent that the Company incurs debt under this debt program,
it must maintain an equivalent amount of credit available under
its revolving credit and term loan agreements with its bank group.
In September 1993, the Company renegotiated its $350 million
reducing revolver dated April 11, 1990 and its $200 million
reducing revolver dated September 6, 1988. These agreements were
replaced by new revolving loan agreements consisting of a $250
million unsecured 364-day facility and a $500 million unsecured
reducing revolver which matures in September 1998 (the
"Revolvers"). The $250 million facility has provisions for annual
renewal subject to the consent of the banks and converts to a two-
(2) Long-term debt (continued)-
year term loan if not renewed. The Revolvers contain financial
covenants regarding minimum net worth, interest charge coverage,
maximum leverage ratio, new venture capital expenditures and new
venture investments. The maximum available credit under the $500
million revolver reduces by $60 million on March 31, 1997,
September 30, 1997 and March 31, 1998. The Revolvers are for
general corporate purposes. The Company currently incurs
commitment fees of 18.75 basis points on the unused portion of the
$250 million facility and 22.50 basis points on the unused portion
of the $500 million revolver. As of July 31, 1994, the Company
had no direct borrowings under the Revolvers. At such date, the
Company had $205.3 million issued under the corporate debt program
thus reducing, by that amount, the credit available under the
Revolvers for purposes other than repayment of the corporate debt.
The fair value of the debt issued under the corporate debt program
approximates the carrying amount of the debt due to the short-term
maturities of the individual components of the debt.
In July 1993, the Company issued $150 million principal
amount of 6-3/4% Senior Subordinated Notes (the "6-3/4% Notes")
due July 2003 and $150 million principal amount of 7-5/8% Senior
Subordinated Debentures (the "7-5/8% Debentures") due July 2013,
with interest payable each July and January. The 6-3/4% Notes,
which were discounted to $149.8 million, and the 7-5/8% Debentures
are not redeemable prior to maturity and are not subject to any
sinking fund requirements. The net proceeds from these offerings
were used primarily to repay borrowings under the Company's
corporate debt program.
In June 1990, the Company issued $100 million principal
amount of 10-5/8% Senior Subordinated Notes (the "10-5/8% Notes")
due June 1997, with interest payable each June and December. The
10-5/8% Notes, which were discounted to $99.9 million are not
redeemable prior to maturity and are not subject to any sinking
fund requirements. Holders of the 10-5/8% Notes may require the
Company to repurchase all or any portion of their notes at par
upon the occurrence of both a Designated Event (as defined in the
indenture) and a Rating Decline (as defined in the indenture). As
of July 31, 1994, $9.1 million principal amount of the 10-5/8%
Notes was owned by one of the Company's two founders.
(2) Long-term debt (continued) -
The Company has a policy aimed at managing interest rate risk
associated with its current and future anticipated borrowings.
This policy enables the Company to use any combination of interest
rate swaps, futures, options, caps and similar arrangements. The
Company has entered into various interest rate swaps, principally
with its bank group, to manage interest expense, which is subject
to fluctuation due to the variable rate nature of the debt under
the Company's corporate debt program. The Company has interest
rate swap agreements under which it pays a fixed interest rate
(weighted average of approximately 9.1%) and receives a variable
interest rate (weighted average of approximately 4.5% at July 31,
1994) on $140 million notional amount of "initial" swaps, and pays
a variable interest rate (weighted average of approximately 4.6%
at July 31, 1994) and receives a fixed interest rate (weighted
average of approximately 7.1%) on $145 million notional amount of
"reversing" swaps. The net effect of all such swaps at July 31,
1994 resulted in additional interest expense due to an interest
rate differential of approximately .96% on the total notional
amount of the swaps. The initial swaps have the following
termination dates: $50 million in fiscal 1995, $35 million in
fiscal 1996, $30 million in fiscal 1997 and $25 million in fiscal
2000. The reversing swaps expire as follows: $50 million in
fiscal 1995, $35 million in fiscal 1996, $30 million in fiscal
1997 and $30 million in fiscal 2002. In addition to the
aforementioned swaps, the Company has entered into an interest
rate swap with a notional amount of $100 million in which the
Company pays a floating rate (4.6% at July 31, 1994 and capped at
6.5%) and receives a fixed interest rate of 4.75%. This swap
corresponds in both notional amount and maturity to the Company's
10-5/8% Notes due in 1997. The variable interest rates which the
Company pays or receives under the various swaps are based
primarily upon the London Interbank Offering Rate (LIBOR). The
Company is exposed to credit loss in the event of nonperformance
by the other parties to the interest rate swap agreements.
However, the Company considers the risk of nonperformance by the
counterparties to be minimal because the parties to the swaps and
reverse swaps are predominantly members of the Company's bank
group.
(2) Long-term debt (continued) -
As of July 31, 1994, under the Company's most restrictive
loan covenants, the Company was restricted as to the payment of
dividends or the purchase of its own capital stock in excess of
approximately $19 million and was restricted from issuing
additional debt in excess of approximately $469 million.
(3) Warrants, stock options, stock rights and share repurchases -
In June 1989, the stockholders approved a stock purchase
warrant plan enabling the Company to offer warrants to its
officers and other key employees to purchase up to 4.5 million
shares of the Company's common stock. In accordance with the
provisions of such plan, the 4.5 million warrants were issued in
June 1989 at a price of $.17 per warrant with an exercise price of
$14.33 ($.67 per share over the fair market value on the date the
warrants were authorized). Each warrant has a term of seven
years, with 50% of the warrants becoming exercisable two years
from the date of grant and the remaining 50% three years from the
date of grant. As of July 31, 1994, warrants representing 3.5
million shares had been exercised. No warrants were exercised
during the six months ended July 31, 1994.
The Company also has various stock option plans for
executive, managerial and supervisory personnel as well as the
Company's outside directors and consultants. The plans permit
grants of options, performance shares and restricted stock
relating to the Company's common stock. As of July 31, 1994,
options for a total of 13.6 million shares have been granted, of
which options for 5.5 million shares were exercised, options for
3.4 million shares were canceled and options for 4.7 million
shares remained exercisable at prices ranging from $8.58 to
$39.34 with a weighted average exercise price of $28.03 per
share. During the six months ended July 31, 1994, options for
133,379 shares were exercised at prices ranging from $8.58 to
$15.29 with a weighted average exercise price of $11.77 per
share. As of July 31, 1994, options covering 2.9 million shares
remained available for grant.
The stock options, both incentive and nonqualified, granted
prior to 1988 are immediately exercisable. The stock options
granted in 1988 and thereafter are exercisable in one or more
installments beginning not less than nine months after the grant
date.
(3) Warrants, stock options, stock rights and share repurchases
(continued) -
On July 14, 1994, the Company declared a dividend of one
common stock purchase right (the "Rights") for each share of
common stock outstanding at the close of business on August 15,
1994. Each Right entitles the registered holder thereof, after
the Rights become exercisable and until August 15, 2004 (or the
earlier redemption, exchange or termination of the Rights), to
purchase from the Company one share of common stock at an
exercise price of $125, subject to certain antidilution
adjustments. The Rights, unless earlier redeemed, exchanged or
voided, will become exercisable on the earlier to occur of (i) 10
days following a public announcement that a Person or group of
affiliated or associated Persons has acquired, or obtained the
right to acquire, beneficial ownership of 10% or more of the
common stock (an "Acquiring Person"), or (ii) 10 days after a
Person or group commences, or announces an intention to commence,
a tender or exchange offer, the consummation of which would
result in the beneficial ownership by a Person or group of 10% or
more of the common stock.
Among other provisions applicable to the Rights, in the
event that a person becomes an Acquiring Person or the Company
becomes the surviving corporation in a merger with an Acquiring
Person or any affiliate or associate of an Acquiring Person and
the common stock is not changed or exchanged, each Right, other
than Rights that are or were acquired or beneficially owned by
the Acquiring Person (which Rights will thereafter be void), will
thereafter entitle the holder to receive upon exercise common
stock having a market value of two times the exercise price of
the Right. The Rights are redeemable by the Company at a price
of $.01 per Right at any time prior to the close of business on
the first date of public announcement that a person or group has
become an Acquiring Person, and expire on August 15, 2004 (unless
earlier redeemed or exchanged).
During the six months ended July 31, 1994, the Company
repurchased 535,000 shares of its common stock at a cost of
$15.0 million.
(4) Preferred stock -
The Company is authorized to issue up to 75 million shares of
$.01 par value preferred stock in one or more series having such
respective terms, rights and preferences as are designated by the
Board of Directors. No preferred stock has yet been issued.
(5) Earnings per share -
Earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding during the
period. Outstanding stock options and warrants are not included in
earnings per share computations since their exercise would not have
a material dilutive effect.
(6) Investments in joint ventures-
The Company has investments in joint ventures that are
accounted for on the equity method. Under the equity method,
original investments are recorded at cost and adjusted by the
Company's share of earnings or losses of these companies.
Investments in joint ventures consist of the following (in
thousands):
July 31, January 31,
1994 1994
(unaudited)
Circus and Eldorado Joint Venture (50%)
(Hotel/Casino, Reno, Nevada) $ 33,260 $ 2,706
Windsor Casino Limited (33-1/3%)
(Hotel/Casino, Windsor, Canada) 12,530 424
American Entertainment L.L.C. (50%)
(Riverboat Casino, Chalmette, LA) 7,735 73
$ 53,525 $ 3,203
As of July 31, 1994, the Circus and Eldorado Joint Venture and
American Entertainment, L.L.C. were still in the development or
construction stage and had not generated any earnings or losses.
For additional information on these projects, please see Note 8-
Commitments and contingent liabilities.
(7) Commitments and contingent liabilities -
In December 1993, Windsor Casino Limited, a joint venture
composed equally of Circus Circus Enterprises, Inc., Caesars World,
Inc. and Hilton Hotels Corporation or their subsidiaries, was
selected to exclusively negotiate an agreement to design, build and
operate a casino complex in Windsor, Ontario, Canada. The planned
complex includes casino, showroom and meeting facilities as well as
a 300-room hotel, all located in Windsor's central business
district, immediately across the Detroit River from Detroit,
Michigan. A temporary casino opened May 14, 1994 and is operated
by Windsor Casino Limited pending the expected completion of a
permanent facility in 1997. The joint venturers are currently
negotiating an agreement for the permanent facility and
consequently the terms and conditions of the project are still
being finalized. As of July 31, 1994, Circus had a net investment
in the joint venture of approximately $12.5 million.
On August 29, 1994, the Company opened its first dockside
riverboat casino in Tunica County, Mississippi, approximately 20
miles from the Memphis, Tennessee airport. Circus Circus-Tunica
was completed at a cost of approximately $80 million, of which the
Company had incurred approximately $35.6 million as of July 31,
1994. The property features a 60,000 square foot casino, three
restaurants and a gift shop.
The Company has entered into a 50/50 joint venture with
American Entertainment Corporation to develop and operate a
riverboat gaming facility in Louisiana. The riverboat will feature
a 30,000-square-foot casino and will be docked in Chalmette,
Louisiana, approximately 20 minutes from downtown New Orleans.
Construction has begun on the vessel, though the full scope of the
project has not yet been finalized. The Company is required to
contribute $20 million in equity and use commercially reasonable
efforts to obtain financing for the project, although the Company
is not obligated to use its own funds. As of July 31, 1994, the
Company had a net investment in the joint venture of approximately
$7.7 million.
The Company has entered into a 50/50 joint venture with the
Eldorado Hotel/Casino (the "Eldorado"), a privately held company,
to develop and operate a hotel/casino in downtown Reno, Nevada.
Project "C" is themed after a turn-of-the-century mining town and
is located on a site adjacent to Circus Circus-Reno and the
Eldorado. The project broke ground in late 1993 and completion is
(7) Commitments and contingent liabilities -
expected by mid-1995. Of the estimated cost of $310 million, which
excludes interest and preopening expenses, the venturers are
expected to fund 25%-30% in equity. The Company is also obligated
under the joint venture agreement to obtain or provide financing
for the remaining project costs and to provide a $10 million credit
line for working capital purposes. If the Company provides
financing, the loan would bear interest at an agreed upon rate of
10%. Based upon this, it is estimated the project would incur $10-
$11 million in interest during the construction phase. As of July
31, 1994, the Company had a net investment in the joint venture of
approximately $33.3 million.
The collective bargaining agreement with one of the Company's
largest unions expired on May 31, 1994. The agreement has been
extended indefinitely as negotiations continue on a new contract.
The Company does not anticipate any difficulties in renewing such
agreement.
The Company is a defendant in various pending litigation. In
management's opinion, the ultimate outcome of such litigation will
not have a material effect on the results of operations or the
financial position of the Company.
RESULTS OF OPERATIONS
Earnings Per Share
Earnings per share for the three months and six months ended July
31, 1994 were even with the comparable periods in the prior year.
For the second quarter, net income was $36.5 million, or $.43 per
share, versus $37.4 million, or $.43 per share last year. For the
six months, net income was $68.8 million, or $.80 per share,
against $70.1 million, or $.80 per share. The Company continues to
benefit from strong earnings generated by Luxor, its new Egyptian-
themed resort which opened October 15, 1993. However, this benefit
was offset by additional interest expense of $8.5 million and $17.1
million in the three and six month periods.
Revenues
Revenues for the Company increased $71.4 million, or 31%, for the
three months and $146.5 million, or 33%, for the six months,
compared to the same periods a year ago. Luxor was the primary
factor in this growth, generating revenues of $71.5 million for the
quarter and $142.5 million in the year-to-date period. Revenues at
Circus Circus-Las Vegas were up 5% for the quarter and 6% year-to-
date, due largely to the contribution from Grand Slam Canyon. In
Laughlin, combined revenues for the Colorado Belle and the
Edgewater were down 10% in the quarter and 7% in the six months due
primarily to increased competition, as discussed below. Revenues
at the Company's other major properties were essentially flat.
Operating Income
For the three months and six months ended July 31, 1994, income
from operations rose $9.9 million, or 17%, and $19.2 million, or
17%, from the same periods last year. The Company's composite
operating margin was 22.7% and 22.1% for the three and six months,
versus 25.5% and 25.1% last year. The decline in operating margin
was attributable to several factors, as discussed separately for
each property below.
Luxor was the principal factor in the increase in operating income,
posting results of $15.9 million and $32.1 million for the second
quarter and six months. Luxor's operating margin was approximately
22% in both periods, with the lower margins attributable primarily
to higher depreciation expense. With the exception of Excalibur,
operating income for the quarter and six months was flat or down at
the Company's other properties, most notably at the Colorado Belle
and Edgewater.
Operating income at Excalibur increased 4% in the second quarter
versus the prior year, though it remained down 3% on a year-to-date
basis. Results in the quarter benefitted from a combination of
selective price increases in rooms and food and the completion of a
new parking garage in early July. Available parking had been
temporarily reduced during the construction of this garage, which
impeded visitor traffic to the property. In addition, competition
from the new theme resorts in Las Vegas, including the adjacent
Luxor, has somewhat hampered casino results at Excalibur. These
factors are reflected in Excalibur's operating margin, which
improved during the second quarter to 25.7%, though it remained
down slightly for the six-month period.
In Laughlin, the Colorado Belle and the Edgewater continue to
battle the effects of increased competition, not only in the
Laughlin market, but also from Las Vegas. The effect has been a
30% drop in operating income for the second quarter and a 20%
decline for the six months. The supply of rooms in Laughlin
increased 12% over the prior year, which had the effect of
depressing room rates and reducing occupancy percentages. The
resulting lower room revenue, given the mostly fixed costs in that
department, contributed to lower operating margins at these
properties. In addition, the draw of the new themed resorts in Las
Vegas has affected visitor traffic to Laughlin.
At Circus Circus-Las Vegas, operating income for the three and six
months was down slightly versus the prior year, despite modest
increases in revenues. This is due mostly to Grand Slam Canyon,
which generated positive cash flow, but reported an operating loss
after depreciation. However, the recent $12 million expansion at
Grand Slam Canyon is substantially complete and is contributing to
improved results, as that facility has recently generated positive
operating income. In addition, selected prices for rooms and food
were recently increased, which should contribute to improved
margins at Circus Circus-Las Vegas.
Operating income at Circus Circus-Reno was down slightly for the
three months and six months compared with last year. The property
continues to experience some business disruption due to the ongoing
construction of neighboring Project "C" (a joint venture between
Circus and the Eldorado Hotel/Casino).
In Windsor, Canada, the Company's share of results from the
temporary casino which opened May 14, 1994 contributed $2 million
to operating income in the second quarter.
See "Financial Position and Capital Resources" below for additional
details on the Grand Slam Canyon expansion, Project "C" and
Windsor.
Interest Expense
Interest expense increased $8.5 million for the quarter and $17.1
million for the six months compared to the prior year. The
increases were due to a combination of lower capitalized interest,
higher borrowings and a higher average interest rate. Capitalized
interest was $1.2 million and $1.5 million for the three months and
six months ended July 31, 1994 versus $6.5 million and $11.2
million in the year-ago periods when Luxor and Grand Slam Canyon
were still under construction. At July 31, 1994, long-term debt
stood at $605 million compared to $455 million at July 31, 1993.
The increase in debt levels was attributable to expenditures
required to complete Luxor and Grand Slam Canyon as well as funding
the investments in joint ventures and the construction of Circus
Circus-Tunica.
Income Tax
The Company's effective tax rate for the three and six months ended
July 31, 1994 was approximately 36%. This reflects the corporate
statutory rate of 35% pursuant to the Revenue Reconciliation Act of
1993 plus the effect of various non-deductible expenses. The
effective tax rate for the three and six months ended July 31, 1993
was 34%, which reflected the federal statutory rate prior to the
passage of the Revenue Reconciliation Act of 1993.
Financial Position and Capital Resources
The Company had cash and cash equivalents of $53.5 million at July
31, 1994 reflecting normal operating needs. The Company's pre-tax
cash flow from operations was $89.0 million and $171.0 million for
the three and six months ended July 31, 1994 versus $69.9 million
and $133.9 million in the prior year, increases of 27% and 28%,
respectively. In this context, pre-tax cash flow from operations
is defined as the Company's income from operations plus non-cash
operating expenses (primarily depreciation and amortization).
Capital expenditures for the three and six months ended July 31,
1994 were $54.4 million and $85.6 million. Of these amounts, $21.6
million and $27.8 million related to construction of the riverboat
casino in Tunica, Mississippi; $7.3 million and $11.9 million
related to the purchase of land for future expansion of
Circus Circus-Reno; $7.8 million and $10.9 million related to
construction of the new parking garages at Luxor and Excalibur; and
$7.0 million and $9.3 million related to the expansion of Grand
Slam Canyon.
The Company has also funded equity investments in new projects
totalling $29.7 million during the second quarter and $50.3 million
for the six months. These equity investments include the temporary
casino in Windsor, Canada (net investment $12.5 million); Project
"C" in Reno, Nevada (net investment $33.3 million); and the
riverboat casino in Chalmette, Louisiana (net investment $7.7
million).
During the first quarter, the Company repurchased 535,000 shares of
its common stock at a total cost of approximately $15.0 million.
In July 1993, the Company issued $150 million principal amount of
6-3/4% Senior Subordinated Notes due 2003. The notes were priced
at 99.894%. Also in July 1993, the Company issued, at par, $150
million principal amount of 7-5/8% Senior Subordinated Debentures
due 2013. The net proceeds of these offerings were used to retire
amounts outstanding under the Company's short term debt program.
The intention of the Company was to position itself for long-term
growth by securing additional long-term capital at attractive
interest rates.
In September 1993, the Company negotiated a $750 million unsecured
bank credit facility with its bank group, the largest bank credit
ever completed for a gaming company. The managing agent for the
facility is Bank of America with Canadian Imperial Bank of Commerce
acting as Co-Managing Agent. This facility replaced the Company's
previous $350 million and $200 million reducing revolvers.
The Company has several new projects in various stages of
development which should contribute to future growth.
In December 1993, Windsor Casino Limited, a joint venture composed
equally of Circus Circus Enterprises, Inc., Caesars World, Inc. and
Hilton Hotels Corporation or their subsidiaries, was selected to
exclusively negotiate an agreement to design, build and operate a
casino complex in Windsor, Ontario, Canada. The planned complex
includes casino, showroom and meeting facilities as well as a 300-
room hotel, all located in Windsor's central business district,
immediately across the Detroit River from Detroit, Michigan. A
temporary casino opened May 14, 1994 and is operated by Windsor
Casino Limited pending the expected completion of a permanent
facility in 1997. As of July 31, 1994, Circus had a net investment
of approximately $12.5 million in this project.
On August 29, 1994, the Company's newest property, Circus Circus-
Tunica, opened in Tunica County, Mississippi, approximately 20
miles from the Memphis, Tennessee airport. Although not
necessarily indicative of future prospects, early results have been
strong. This circus-themed project was completed on schedule at a
cost of approximately $80 million. The property features a 60,000-
square-foot casino, three restaurants and a gift shop. As of July
31, 1994, the Company had incurred approximately $35.6 million of
costs for this wholly-owned project.
The Company has also entered into a 50/50 joint venture with
American Entertainment Corporation to develop and operate a
riverboat gaming facility in Louisiana. The riverboat will feature
a 30,000-square-foot casino and will be docked in Chalmette,
Louisiana, approximately 20 minutes from downtown New Orleans.
Construction has begun on the vessel, though the full scope of the
project has not yet been finalized. The Company is required to
contribute $20 million in equity and use commercially reasonable
efforts to obtain financing for the project, although the Company
is not obligated to use its own funds. As of July 31, 1994, the
Company had a net investment in the joint venture of approximately
$7.7 million.
The Company has entered into a 50/50 joint venture with the
Eldorado Hotel/Casino (the "Eldorado"), a privately held company,
to develop and operate a hotel/casino in downtown Reno, Nevada.
Project "C" is themed after a turn-of-the-century mining town and
is located on a site adjacent to Circus Circus-Reno and the
Eldorado. The project broke ground in late 1993 and completion is
expected by mid-1995. Of the estimated cost of $310 million, which
excludes interest and preopening expenses, the venturers are
expected to fund 25%-30% in equity. The Company is also obligated
under the joint venture agreement to obtain or provide financing
for the remaining project costs and to provide a $10 million credit
line for working capital purposes. If the Company provides
financing, the loan would bear interest at an agreed upon rate of
10%. Based upon this, it is estimated the project would incur $10-
$11 million in interest during the construction phase. As of July
31, 1994, the Company had a net investment in the joint venture of
approximately $33.3 million.
At Circus Circus-Las Vegas, the Company has substantially completed
the first phase of expansion at Grand Slam Canyon. This $12
million expansion added ten new attractions, midway games and
additional retail facilities. A second expansion phase is
currently being planned.
The Company believes that it has sufficient capital resources
through its bank agreements and its operating cash flows to meet
all of its existing cash obligations, strategically repurchase
shares and fund its commitments on each of the above discussed
projects. The Company anticipates that additional funds could,
however, be raised through debt or equity markets if necessary.
PART II. OTHER INFORMATION
Items 2., 3., and 5. of Part II are not applicable.
Item 1. Legal Proceedings.
Reference is made to Item 1 of the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended April 30, 1994 for a
discussion of an action filed by William H. Poulos against 41
entities, including the Company.
On July 26, 1994, 7547 Partners, a Florida partnership and
alleged stockholder of the Company, filed a self-described class
action complaint in the District Court, Clark County, Nevada (the
"Court") purportedly on behalf of the Company's stockholders
against the Company and each of its directors. On August 10, 1994,
Harry Dines, also claiming to be a stockholder, filed a
substantively identical complaint with the Court. The plaintiffs
in each of the actions allege that the individual defendants
breached their fiduciary and other common law duties in connection
with supposed "indications of interest in the Company" by, among
other things, adopting the Rights Agreement described in the
Company's Current Report on Form 8-K filed with the Securities and
Exchange Commission on July 18, 1994. The complaints request
declaratory and injunctive relief, including prevention of
implementation of the Rights Agreement, and allege damages in
unspecified amounts. Management believes that the claims are
without merit and intends to defend the actions vigorously.
Item 4. Submission of Matters to a Vote of Security Holders.
The 1994 Annual Meeting of the Company's stockholders was held
June 21, 1994. At the meeting, management's nominees, William G.
Bennett, Arthur M. Smith, Jr. and Kurt D. Sullivan, were elected to
fill the three available positions as Class III directors. Voting
(expressed in numbers of shares) was as follows: Mr. Bennett--
77,573,987 for, 1,120,814 against or withheld and no abstentions or
broker non-votes; Mr. Smith--77,687,996 for, 1,006,805 against or
withheld and no abstentions or broker non-votes; and Mr. Sullivan--
77,627,539 for, 1,067,262 against or withheld and no abstentions or
broker non-votes.
At the meeting, stockholders ratified the appointment of
Arthur Andersen & Co. as the Company's independent auditors to
examine and report on its financial statements for the fiscal year
ending January 31, 1995, by a vote of 78,400,805 shares for,
176,955 shares against or withheld and 117,041 abstentions or
broker non-votes.
Item 6. Exhibits and Reports on Form 8-K.
(a) The exhibits filed as part of this report are listed on
the Index to Exhibits accompanying this report.
(b) Reports on Form 8-K. During the fiscal quarter ended
July 31, 1994, the Company filed one report on Form 8-K. Such
report, which was filed with the Securities and Exchange Commission
on July 18, 1994, included information in response to Item 5.
(Other Events) and Item 7. (Financial Statements, Pro Forma
Financial Information and Exhibits). The report did not include
any financial statements or pro forma financial information.
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.
CIRCUS CIRCUS ENTERPRISES, INC.
(Registrant)
Date: September 13, 1994 By CLYDE T. TURNER
Clyde T. Turner
Chairman of the Board,
President and Chief Executive
Officer
Date: September 13, 1994 By DANIEL COPP
Daniel Copp
Executive Vice President and
Chief Financial Officer
INDEX TO EXHIBITS
Exhibit
No. Description
27(a). Financial Data Schedule for the six months ended
July 31, 1994 as required under EDGAR.
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-END> JUL-31-1994
<CASH> 53,453
<SECURITIES> 0
<RECEIVABLES> 8,019
<ALLOWANCES> 0
<INVENTORY> 24,677
<CURRENT-ASSETS> 106,711
<PP&E> 1,597,633
<DEPRECIATION> 374,679
<TOTAL-ASSETS> 1,405,260
<CURRENT-LIABILITIES> 102,637
<BONDS> 605,080
<COMMON> 1,605
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<OTHER-SE> 613,722
<TOTAL-LIABILITY-AND-EQUITY> 1,405,260
<SALES> 584,796
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<TOTAL-COSTS> 444,177
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<INCOME-PRETAX> 107,990
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