UNITED STATES
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, 1995
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 0-13760
RIO HOTEL & CASINO, INC.
(Exact name of registrant as specified in its charter)
NEVADA 95-3671082
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3700 West Flamingo Road, Las Vegas, Nevada 89103
(Address of principal executive offices) (Zip Code)
(702) 252-7733
(Registrant's telephone number, including area code)
Not Applicable
(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
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
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
21,373,346 shares of Common Stock, $0.01 par value as of August 1, 1995
This document consists of 25 pages with exhibits, 19 pages
without exhibits.
<PAGE>
FORM 10-Q
TABLE OF CONTENTS
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security
Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
EXHIBIT INDEX 20
EXHIBITS 21
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
1995 1994
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $20,669,015 $76,426,258
ACCOUNTS RECEIVABLE, NET 3,716,239 3,204,416
FEDERAL INCOME TAXES RECEIVABLE - 139,329
INVENTORIES 1,519,597 1,378,598
PREPAID EXPENSES AND OTHER CURRENT ASSETS 4,827,767 4,716,701
------------ ------------
TOTAL CURRENT ASSETS 30,732,618 85,865,302
------------ ------------
PROPERTY AND EQUIPMENT:
LAND AND IMPROVEMENTS 33,237,430 24,666,679
BUILDING AND IMPROVEMENTS 176,165,730 137,005,432
EQUIPMENT, FURNITURE, AND IMPROVEMENTS 59,750,145 43,108,873
LESS: ACCUMULATED DEPRECIATION (39,759,072) (32,826,276)
------------ ------------
229,394,233 171,954,708
CONSTRUCTION IN PROGRESS 8,566,920 38,521,773
------------ ------------
NET PROPERTY AND EQUIPMENT 237,961,153 210,476,481
------------ ------------
OTHER ASSETS:
OTHER, NET 4,996,280 4,823,489
------------ ------------
$273,690,051 $301,165,272
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
CURRENT MATURITIES OF LONG-TERM DEBT $25,252 $15,032,534
ACCOUNTS PAYABLE 3,071,515 2,425,645
ACCRUED EXPENSES 9,434,519 7,830,706
FEDERAL INCOME TAXES PAYABLE 403,327 - - -
ACCOUNTS PAYABLE-RELATED PARTY 4,578,228 10,026,210
ACCRUED INTEREST 524,509 351,864
------------ ------------
TOTAL CURRENT LIABILITIES 18,037,350 35,666,959
------------ ------------
NON-CURRENT LIABILITIES:
LONG-TERM DEBT, LESS CURRENT MATURITIES 90,189,391 110,146,869
DEFERRED INCOME TAXES 8,832,073 7,512,277
------------ ------------
TOTAL NON-CURRENT LIABILITIES 99,021,464 117,659,146
------------ ------------
TOTAL LIABILITIES 117,058,814 153,326,105
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
COMMON STOCK, $0.01 PAR VALUE;
100,000,000 SHARES AUTHORIZED;
21,341,546 (1995) AND 21,371,346 (1994) SHARES
ISSUED AND OUTSTANDING 213,416 213,714
ADDITIONAL PAID-IN CAPITAL 116,580,953 117,214,582
RETAINED EARNINGS 39,836,868 30,410,871
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 156,631,237 147,839,167
------------ ------------
$273,690,051 $301,165,272
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1995 JUNE 30, 1994 JUNE 30, 1995 JUNE 30, 1994
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
CASINO $25,401,679 $21,012,823 $49,967,529 $42,188,116
ROOM 8,885,626 4,612,942 16,160,634 9,349,214
FOOD AND BEVERAGE 15,217,504 12,184,254 29,049,257 22,456,570
OTHER 3,061,339 1,868,123 5,590,750 2,968,737
CASINO PROMOTIONAL ALLOWANCES (4,609,846) (3,509,920) (8,983,715) (6,745,493)
------------ ------------ ------------ ------------
47,956,302 36,168,222 91,784,455 70,217,144
------------ ------------ ------------ ------------
EXPENSES:
CASINO 11,235,189 8,988,372 21,933,708 18,262,770
ROOM 2,693,388 1,704,159 4,816,534 3,362,746
FOOD AND BEVERAGE 12,702,579 9,968,976 23,806,945 18,236,796
OTHER 1,679,346 1,174,294 3,187,635 1,899,631
SELLING, GENERAL AND ADMINISTRATIVE 6,807,545 4,812,821 13,194,268 9,666,127
DEPRECIATION AND AMORTIZATION 3,487,643 2,595,705 7,107,416 5,243,814
------------ ------------ ------------ -----------
38,605,690 29,244,327 74,046,506 56,671,884
------------ ------------ ------------ ------------
OPERATING PROFIT 9,350,612 6,923,895 17,737,949 13,545,260
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
INTEREST INCOME 47,203 17,893 103,595 43,302
INTEREST EXPENSE, NET (1,629,741) (438,002) (2,782,732) (846,150)
OTHER INCOME, NET - 966,510 - 966,510
------------ ------------ ------------ ------------
(1,582,538) 546,401 (2,679,137) 163,662
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAX PROVISION 7,768,074 7,470,296 15,058,812 13,708,922
INCOME TAX PROVISION (2,853,809) (2,689,736) (5,632,815) (4,949,632)
------------ ------------ ------------ ------------
NET INCOME $4,914,265 $4,780,560 $9,425,997 $8,759,290
============ ============ ============ ============
EARNINGS PER COMMON SHARE:
PRIMARY:
NET INCOME $0.23 $0.22 $0.44 $0.40
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 21,689,827 21,750,752 21,644,821 21,747,284
============ ============ ============ ============
FULLY DILUTED:
NET INCOME $0.23 $0.22 $0.44 $0.40
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 21,690,027 21,750,851 21,663,449 21,747,807
============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
JUNE 30, 1995 JUNE 30, 1994
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $9,425,997 $8,759,290
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
COMPENSATION EXPENSE RECOGNIZED FROM
STOCK OPTION GRANT 59,900 73,267
DEPRECIATION AND AMORTIZATION 7,107,416 5,243,814
PROVISION FOR UNCOLLECTIBLE ACCOUNTS 161,833 28,757
(INCREASE) DECREASE IN ASSETS:
ACCOUNTS RECEIVABLE (673,656) (369,975)
INVENTORIES (140,999) (169,086)
PREPAID EXPENSES AND OTHER CURRENT ASSETS 28,263 32,578
OTHER, NET (347,411) (1,698,250)
INCREASE (DECREASE) IN LIABILITIES:
ACCOUNTS PAYABLE 645,870 (1,579,399)
ACCRUED FEDERAL INCOME TAX PAYABLE 761,924 570,313
ACCRUED EXPENSES 1,603,812 (433,011)
ACCRUED INTEREST 172,645 59,012
DEFERRED INCOME TAXES 1,319,796 721,308
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 20,125,390 11,238,618
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASE OF LAND AND IMPROVEMENTS (8,570,751) - - -
PURCHASE OF EQUIPMENT, FURNITURE, AND
IMPROVEMENTS (31,294,698) (23,857,872)
------------ ------------
NET CASH (USED IN) INVESTING ACTIVITIES (39,865,449) (23,857,872)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM BORROWINGS - - - 20,000,000
NET PROCEEDS FROM COMMON STOCK ISSUANCE 556,650 901,400
PAYMENTS ON NOTES AND LOANS PAYABLE (34,964,760) (9,179)
CHANGE IN RESTRICTED CASH - - - (20,000,000)
COSTS PAID IN CONNECTION WITH COMMON STOCK OFFERING 1,801 (119,529)
REPURCHASE OF COMMON STOCK (1,610,875)
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (36,017,184) 772,692
------------ ------------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (55,757,243) (11,846,562)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 76,426,258 55,784,937
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $20,669,015 $43,938,375
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES
SIX MONTHS ENDED
JUNE 30, 1995 JUNE 30, 1994
(Unaudited) (Unaudited)
<S> <C> <C>
Cash payments made for interest
(net of amounts capitalized) $2,679,190 $ 793,742
========== ==========
Cash payments made for income $3,500,000 $2,800,000
taxes ========== ==========
1995
Purchase of property and equipment financed through payables
totaled $4,578,228.
Tax benefit arising from the exercise of stock options granted
under the Company's Non-Statutory Stock Option Plan totaled
$358,597.
1994
Purchase of property and equipment financed through payables
totaled $5,318,639.
Tax benefit arising from the exercise of stock options granted
under the Company's Non-Statutory Stock Option Plan totaled
$761,309.
<PAGE>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - The consolidated financial statements include the
accounts of Rio Hotel & Casino, Inc. and its wholly owned
subsidiaries Rio Properties, Inc. ("Rio Properties," which
owns and operates the Rio Suite Hotel & Casino [the "Rio"]
in Las Vegas, Nevada); Rio Development Company, Inc.
(formerly MarCor Development Company, Inc.); Rio Resort
Properties, Inc. (formerly MarCor Resort Properties,
Inc.); and Rio Properties' wholly owned subsidiary
Cinderlane, Inc. (collectively the "Company").
All significant intercompany balances and transactions
have been eliminated in consolidation.
The consolidated balance sheet as of June 30, 1995 and the
related consolidated statements of income and consolidated
statements of cash flows for the three month and six month
periods ended June 30, 1995 and June 30, 1994 are
unaudited but, in the opinion of management, reflect all
adjustments necessary for a fair presentation of results
for such periods. The results of operations for an
interim period are not necessarily indicative of the
results for the full year. The consolidated financial
statements should be read in conjunction with the
consolidated financial statements and notes thereto
contained in the Company's annual report for the year
ended December 31, 1994.
The Company's consolidated balance sheet for the year
ended December 31, 1994 is audited.
NOTE 2 - LONG-TERM DEBT
Long-term debt consists of the following:
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1995 DECEMBER 31,
1994
(Unaudited)
<S> <C> <C>
Bank loan ("Rio Bank Loan"),
originally a $65 million
revolving credit facility,
which was amended to be a
$125 million revolving credit
facility with interest equal to
the Eurodollar Rate or the Base
Rate, plus a margin. The loan
matures on June 30, 2001 and is
collateralized by a first deed
of trust on the Rio's real
property, equipment and
improvements. In June 1995,
the agent for the bank
syndicate committed to increase
the Rio Bank Loan to
$175 million (see Part I. Item
2. "Management's Discussion and
Analysis of Financial Condition
and Results of Operations-
Material Changes in Financial
Condition-Liquidity and Capital $90,000,000 $125,000,000
Resources.")
Special Improvement District
assessment bonds, payable over
10 years in twenty
substantially equal semi-annual
installments of principal, plus
6.1% interest. 214,643 165,228
Other short-term financing of
certain insurance premiums - - - 14,175
----------- ------------
90,214,643 125,179,403
Less current maturities (25,252) (15,032,534)
----------- ------------
$90,189,391 $110,146,869
=========== ============
</TABLE>
The prime interest rates quoted by the Company's primary
lenders at June 30, 1995 and December 31, 1994 were 9.00%
and 8.50%, respectively. The margin on the Company's base
rate borrowings at June 30, 1995 was 0.25%.
<PAGE>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - LONG-TERM DEBT (continued)
At June 30, 1995, the three month Eurodollar Rate was
6.0625%. The margin on the Company's Eurodollar Rate
borrowings at June 30, 1995 was 1.75%.
The revolving credit feature of the Rio Bank Loan allows
the Company to pay down and reborrow principal under the
line of credit as the Company deems appropriate. The
Company utilized this ability by reborrowing $69 million
on December 30, 1994 and repaying $69 million on January
3, 1995. The Company also reborrowed $10 million on June
30, 1995 and repaid $10 million on July 3, 1995 under the
terms of the Rio Bank Loan. After consideration of these
borrowings, the Company had $35 million available under
the Rio Bank Loan at June 30, 1995, while the Company's
borrowing capacity under the Rio Bank Loan was fully
utilized at December 31, 1994.
NOTE 3 - INCOME TAXES
The Company accounts for income taxes in accordance with
Financial Accounting Standards Board Statement No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"). The
provisions for income taxes for the six months ended June
30, 1995 and 1994 were $5,632,815 and $4,949,632
respectively, which represent effective rates of 37.4% and
36.1%, respectively. A reconciliation between the
statutory rates and the effective rates is as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Statutory Rate 35.0% 35.0%
Depreciation on the premium
allocated in the exchange for
limited partnership units 0.4% 0.4%
Disallowance for tax purposes of
certain meals, travel and
entertainment expenses 1.7% 1.1%
Other 0.3% (0.4%)
------ ------
Effective Rate 37.4% 36.1%
====== ======
</TABLE>
The Company's deferred tax assets (liabilities) at June
30, 1995 consisted of the following:
<TABLE>
<CAPTION>
CURRENT NON-CURRENT
<S> <C> <C>
Depreciation and amortization ($8,933,156)
Deferred employee benefit $391,927
Bad debt expense 224,339
Other deferred tax assets, net 34,231 101,083
-------- ------------
$650,497 ($8,832,073)
======== ============
</TABLE>
The current portion of the Company's net deferred tax
assets is included on the Consolidated Balance Sheets
under the heading "Prepaid Expenses and Other Assets".
The Company has determined that it is probable that the
full amount of the tax benefit from the deferred tax
assets will be realized and, therefore, has not recorded a
valuation allowance to reduce the carrying value of the
deferred tax assets.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
MATERIAL CHANGES IN RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1995 AND 1994
OPERATING PROFIT
Operating profit for the Company increased to $9.3 million in
the second quarter of 1995 from $6.9 million in the second
quarter of 1994, an increase of $2.4 million or 35%.
Management believes that the improvement in operating results
was due to increased business levels during the second quarter
of 1995 as a result of having an additional 365 hotel suites
placed into service in February 1995, 184 new hotel suites
placed into service in March 1995, and the addition of over 215
slot machines, 21 table games, and additional restaurant
capacity compared to the second quarter of 1994. Management
believes that operating efficiencies also improved from the
second quarter of 1994 to the second quarter of 1995 in the
hotel department.
REVENUES
Net revenues for the Company increased to $48.0 million in the
second quarter of 1995 from $36.2 million in the second quarter
of 1994, an increase of $11.8 million or 33%. Casino revenues
increased to $25.4 million in the second quarter of 1995 from
$21.0 million in the second quarter of 1994, an increase of
$4.4 million or 21%. The increase in casino revenues was due
primarily to increases in both slot machine revenues and table
game revenues. Slot machine revenues increased $2.2 million or
16% to $16.0 million in the second quarter of 1995 from $13.8
million in the second quarter of 1994. The increase in slot
machine revenues resulted primarily from the addition of over
215 slot machines in November 1994. Table game revenues
increased $2.4 million or 44% to $8.0 million in the second
quarter of 1995 from $5.6 million in the second quarter of
1994. The increase in table game revenues resulted primarily
from the addition of 9 table games in the second half of 1994,
the addition of 6 table games in January 1995, and the addition
of 6 table games in April 1995.
Room revenues increased by $4.3 million or 93% to $8.9 million
in the second quarter of 1995 from $4.6 million in the second
quarter of 1994. The increase in room revenue resulted
primarily from the addition of 365 new hotel suites placed into
service in February 1995 and 184 new hotel suites placed into
service in March 1995, as well as an increase in the average
room rate of more than $10.00 per room night during the second
quarter of 1995 compared to the second quarter of 1994. The
additional 549 suites placed into service in February and March
1995 increased the Rio's total to 1,410 suites for the entire
second quarter of 1995 compared to 861 suites for the entire
second quarter of 1994. Demand for the Rio's suites remained
high during the second quarter of 1995 with a 95% occupancy
rate, compared to the 96% occupancy rate attained during the
second quarter of 1994.
Food and beverage revenues increased to $15.2 million in the
second quarter of 1995 from $12.2 million in the second quarter
of 1994, an increase of $3.0 million or 25%. The successful
opening in June 1994 of Club Rio, a late night dance club; the
successful completion in November 1994 of a 50% expansion of
the Carnival World Buffet to 980 seats; and increased beverage
sales as a result of increased gaming customers all contributed
to the increase in food and beverage revenues.
OPERATING MARGINS
The Company's operating margins were relatively consistent
during the second quarter of 1995 compared to the second
quarter of 1994. Operating profit as a percentage of net
revenues was 19% in both the second quarter of 1995 and 1994.
Casino operating profit was 56% during the second quarter of
1995 compared to 57% during the second quarter of 1994. Food
and beverage operating profit was 17% during the second quarter
of 1995 compared to 18% during the second quarter of 1994.
Hotel operating profit was 70% during the second quarter of
1995 compared to 63% during the second quarter of 1994.
Management believes that this improvement is due to
efficiencies resulting from increased customer volume,
effective cost controls and a higher average room rate during
the second quarter of 1995 compared to the second quarter of
1994.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
MATERIAL CHANGES IN RESULTS OF OPERATIONS (continued)
THREE MONTHS ENDED JUNE 30, 1995 AND 1994 (continued)
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased by $0.9 million or 34%
to $3.5 million in the second quarter of 1995 compared to $2.6
million in the second quarter of 1994. This increase is
primarily attributable to depreciation expense from the
Company's $75 million expansion project (the "Phase III
Expansion") which included the opening in August 1994 of a 527-
space, three-level parking garage, the opening in November 1994
of approximately 10,000 square feet of casino area that
accommodated approximately 300 additional slot machines, the
completion in November 1994 of a 50% expansion of the Carnival
World Buffet to 980 seats, the placing into service of 365 new
hotel suites in February 1995 and 184 new hotel suites in March
1995, as well as a variety of back-of-the-house enhancements.
OTHER INCOME (EXPENSE)
Other expenses of the Company increased primarily because of
higher interest expense from increased borrowing levels during
the period along with higher prevailing interest rates.
Borrowing levels increased due to funding costs of the
Company's $25 million expansion project (the "Eastside
Expansion"), the Phase III Expansion, and the Company's
$20 million expansion project (the "Phase IV Expansion"). The
Eastside Expansion included a 25,000 square foot expansion of
the casino to accommodate approximately 500 slot machines and
12 table games (completed December 1993); the Copacabana
Showroom, a unique circular 430-seat video entertainment and
restaurant complex (opened February 1994); Fiore, a 186-seat
world class restaurant (opened April 1994); a 36,000 square
foot expansion of the Rio's beach pool area with a second
swimming pool and additional recreation areas (completed April
1994); and a 135,000 square foot, two-level parking garage with
parking spaces for approximately 434 vehicles (opened December
1993). The Phase IV Expansion will add 144 suites to the
existing 1,410 suites, add approximately 5,400 square feet of
meeting room space, double the size of the existing Buzio's
seafood restaurant to approximately 180 seats, add a new health
club and salon facility, and include a variety of back-of-the-
house improvements. Completion of the Phase IV Expansion is
expected to occur in stages through the end of 1995 and will
bring the Rio's total number of hotel suites to 1,554 suites.
Interest expense in the second quarter of 1995 was reduced by
$38,984 because of interest capitalized on amounts expended on
the Phase IV Expansion project. Interest expense in the second
quarter of 1994 was reduced by $30,588 because of interest
capitalized on amounts expended on the Phase III Expansion
project. Other income for the second quarter of 1994 was a one-
time gain of $966,510 from a profit participation agreement on
the sale by an affiliate of certain real estate previously
owned by the Company.
NET INCOME
Net income for the second quarter of 1995 was $4.9 million or
$0.23 per share (fully diluted) compared to $4.8 million or
$0.22 per share (fully diluted) for the second quarter of 1994
as a result of the factors discussed above.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
MATERIAL CHANGES IN RESULTS OF OPERATIONS (continued)
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
OPERATING PROFIT
Operating profit for the Company increased to $17.7 million in
the first six months of 1995 from $13.5 million in the first
six months of 1994, an increase of $4.2 million or 31%.
Management believes that the improvement in operating results
was due to increased business levels during the first six
months of 1995 as a result of having an additional 365 hotel
suites placed into service in February 1995, 184 new hotel
suites placed into service in March 1995, and the addition of
over 215 slot machines, 21 table games, and additional
restaraunt capacity compared to the first six months of 1994.
Management believes that operating efficiencies also improved
from the first six months of 1994 to the first six months of
1995 in the hotel department.
REVENUES
Net revenues for the Company increased to $91.8 million in the
first six months of 1995 from $70.2 million in the first six
months of 1994, an increase of $21.6 million or 31%. Casino
revenues increased to $50.0 million in the first six months of
1995 from $42.2 million in the first six months of 1994, an
increase of $7.8 million or 18%. The increase in casino
revenues was due primarily to increases in both slot machine
revenues and table game revenues. Slot machine revenues
increased $4.1 million or 15% to $30.9 million in the first six
months of 1995 from $26.8 million in the first six months of
1994. The increase in slot machine revenues resulted primarily
from the addition of over 215 slot machines in November 1994.
Table game revenues increased $3.9 million or 32% to $16.0
million in the first six months of 1995 from $12.1 million in
the first six months of 1994. The increase in table game
revenues resulted primarily from the addition of 9 table games
in the second half of 1994, the addition of 6 table games in
January 1995, and the addition of 6 tables games in April
1995.
Room revenues increased by $6.8 million or 73% to $16.2 million
in the first six months of 1995 from $9.4 million in the first
six months of 1994. The increase in room revenue resulted
primarily from the addition of 365 new hotel suites placed into
service in February 1995 and 184 new hotel suites placed into
service in March 1995, as well as an increase in the average
room rate of more than $10.00 per room night during the first
six months of 1995 compared to the first six months of 1994.
The additional 549 suites placed into service in February and
March 1995 increased the Rio's total to 1,410 suites compared
to 861 suites for the entire first six months of 1994. Demand
for the Rio's suites remained high during the first six months
of 1995 with a 96% occupancy, which was identical to the 96%
occupancy attained during the first six months of 1994. The
average number of suites available during the first six months
of 1995 was 1,273 compared to 861 during the first six months
of 1994.
Food and beverage revenues increased to $29.1 million in the
first six months of 1995 from $22.5 million in the first six
months of 1994, an increase of $6.6 million or 29%. The
successful opening in February 1994 of the Copacabana Showroom,
a 430-seat video, entertainment and restaurant complex; the
successful opening in April 1994 of Fiore, a 186-seat world
class restaurant; the successful opening in June 1994 of Club
Rio, a late-night dance club; the successful completion in
November 1994 of a 50% expansion of the Carnival World Buffet
to 980 seats; and increased beverage sales as a result of
increased gaming customers all contributed to the increase in
food and beverage revenues.
OPERATING MARGINS
The Company's operating margins were relatively consistent
during the first six months of 1995 compared to the first six
months of 1994. Operating profit as a percentage of net
revenues was 19% in both the first six months of 1995 and 1994.
Casino operating profit was 56% during the first six months of
1995 compared to 57% during the first six months of 1994. Food
and beverage operating profit was 18% during the first six
months of 1995 compared to 19% during the first six months of
1994. Hotel operating profit was 70% during the first six
months of 1995 compared to 64% during the first six months of
1994. Management believes that this improvement is due to
efficiencies resulting from increased customer volume,
effective cost controls and a higher average room rate during
the first six months of 1995 compared to the first six months
of 1994.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
MATERIAL CHANGES IN RESULTS OF OPERATIONS (continued)
SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (continued)
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased by $1.9 million or 36%
to $7.1 million in the first six months of 1995 compared to
$5.2 million in the first six months of 1994. This increase is
attributable to depreciation expense from various completed
expansion projects such as the Company's Eastside Expansion and
the Phase III Expansion.
OTHER INCOME (EXPENSE)
Other expenses of the Company increased primarily because of
higher interest expense from increased borrowing levels during
the period along with higher prevailing interest rates.
Borrowing levels increased due to funding costs of the Eastside
Expansion, the Phase III Expansion, and the Phase IV Expansion.
Interest expense in the first six months of 1995 was reduced by
$359,689 because of interest capitalized on amounts expended on
the Phase III Expansion project and the Phase IV Expansion
project. Interest expense in the first six months of 1994 was
reduced by $102,896 because of interest capitalized on amounts
expended on the Eastside Expansion project and the Phase III
Expansion project. Other income for the first six months of
1994 was a one-time gain of $966,510 from a profit
participation agreement on the sale by an affiliate of certain
real estate previously owned by the Company.
NET INCOME
Net income for the first six months of 1995 was $9.4 million or
$0.44 per share (fully diluted) compared to $8.8 million or
$0.40 per share (fully diluted) for the first six months of
1994 as a result of the factors discussed above.
MATERIAL CHANGES IN FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1995, the Company had working capital of $12.7
million compared with $50.2 million at December 31, 1994. Cash
and cash equivalents were $20.7 million at June 30, 1995
compared with $76.4 million at December 31, 1994. At June 30,
1995, the Company had $35.0 million available under its bank
facility while the bank facility was fully utilized at December
31, 1994. The decrease in both working capital and cash is
primarily due to the use of cash and cash equivalents during
the first six months of 1995 to repay principal under the bank
facility and the decision of the Company not to draw down the
full amount of the available Rio Bank Loan at the end of the
quarter, as well as the use of cash and cash equivalents to
make capital expenditures for the Company's $75 million Phase
III Expansion and the $20 million Phase IV Expansion.
During the first six months of 1995, cash provided by operating
activities was $20.1 million. Investing activities used $39.9
million of the Company's cash during the first six months of
1995. Approximately $23.3 million of such expenditures was
related to the Company's Phase III Expansion and approximately
$3.7 million was related to the Company's Phase IV Expansion.
During the first quarter of 1995, the Company acquired an
approximate 5 acre site adjacent to the Rio site, on which a
former commercial warehouse is located, at a purchase price of
$3.2 million (net of credit for profit participation from the
seller to which the Company was entitled and net of rental
proceeds during the term of the escrow). During the second
quarter of 1995, the Company acquired approximately 64 acres of
land southeast of Las Vegas at a purchase price of $5.7 million
(net of credit for profit participation from the seller to
which the Company was entitled). The 64-acre site and
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
MATERIAL CHANGES IN FINANCIAL CONDITION (continued)
LIQUIDITY AND CAPITAL RESOURCES (continued)
additional land acquisitions are part of the Company's recently
announced three phase expansion and development plan discussed
below. During the first six months of 1995, the Company spent
approximately $5.2 million toward the acquisition of certain
real property adjacent to the Rio. The balance of cash used in
investing activities was expended on other capital projects.
During the fourth quarter of 1994, the Board of Directors
authorized the Company to make discretionary repurchases of up
to 2 million shares of its Common Stock from time to time in
the open market or otherwise. During the first quarter of
1995, the Company repurchased 138,500 shares of its Common
Stock at a total cost of $1.6 million. These shares of Common
Stock were retired. No open market repurchases were made
during the second quarter of 1995.
The Company is subject to annual capital expenditure limits of
$7.5 million under the Rio Bank Loan. However, the Company
received a written waiver to allow the Company to construct the
Phase III Expansion and the Phase IV Expansion. Because of the
annual restrictions on capital expenditures by the Company
contained in the Rio Bank Loan, any other significant new
capital improvements to the Rio will also require the consent
of the lenders.
As of July 1, 1995 the Company's capital commitments include
approximately $5.9 million for the remainder of the Phase III
Expansion, $16.3 million for the Phase IV Expansion, and
$15.1 million under commitments for the purchase of real
estate. Based upon cash on hand, cash available through
borrowings under the Rio Bank Loan and cash from operations,
the Company believes that it has adequate cash available to
fund the remaining cost of the Phase III Expansion, the Phase
IV Expansion, and the real estate purchase commitments.
The Rio Bank Loan was originally entered into on July 15, 1993
in the amount of $65 million with a syndicate of banks
consisting of Bank of America National Trust Savings and
Association, Bank of America Nevada, Societe Generale, NBD
Bank, N.A., First Security Bank of Idaho, N.A., First
Interstate Bank of Nevada, N.A. and U. S. Bank of Nevada. As a
result of certain amendments, in December 1994, the Rio Bank
Loan was increased to $125 million. In June 1995, the agent
for the bank syndicate committed to increase the Rio Bank Loan
to $175 million, for which final documentation is expected to
be executed and delivered by late August 1995. As amended, the
Rio Bank Loan is a secured reducing revolving credit facility
to be used (a) to refinance the existing Rio Bank Loan, (b) to
finance the Phase V Expansion (discussed below), (c) to finance
acquisition of land adjacent to the Rio for up to $30 million,
and (d) for general corporate purposes.
As amended, the Rio Bank Loan will mature on June 30, 2001 and
will bear interest based upon a "LIBOR Spread" of from 1% to
3%, or a "Base Rate Spread" of from 0% to 2.0% based upon a
schedule determined with reference to Rio Properties' "Funded
Debt to EBIDTA Ratio". The "LIBOR Spread" is the amount in
excess of the applicable London interbank offer rate ("LIBOR").
The "Base Rate Spread" is the amount in excess of the
applicable base rate, which is the rate per annum equal to the
higher of the reference rate as it is publicly announced from
time to time by Bank of America in San Francisco or 0.50% per
annum above the latest Federal Funds rate. As amended, the
Rio Bank Loan will also provide for an unused facility fee
ranging from 31.25 basis points to 50.0 basis points depending
upon the same Funded Debt to EBIDTA ratio schedule utilized for
the interest rate. As amended, the Rio Bank Loan requires
monthly payments of interest and will require scheduled
reductions of the maximum amount available under the Rio Bank
Loan commencing with a $10 million reduction at December
31, 1997, $30 million reductions at December 31, 1998 and
December 31, 1999, a $40 million reduction at
December 31, 2000, a $32.5 million reduction at March 31, 2001
and maturity at June 30, 2001.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
MATERIAL CHANGES IN FINANCIAL CONDITION (continued)
LIQUIDITY AND CAPITAL RESOURCES (continued)
To reduce the risks from interest rate fluctuations, the
Company has previously entered into interest rate swap
agreements in the amount of $20 million from September 30, 1994
through December 29, 1995 and $15 million from
December 29, 1995 through June 28, 1996. In August 1994, the
Company purchased a $40 million interest rate cap, effective
September 30, 1994, for a three-year term, which provides for
quarterly payments to the Company in the event that three-month
LIBOR exceeds 7% on any quarterly reset date. The Company is
exposed to credit risks in the event of non-performance by the
counterparties. However, the Company does not anticipate non-
performance by the counterparties.
As amended, the Rio Bank Loan continues to be secured by a
first deed of trust on the Rio Hotel & Casino, a security
interest in substantially all of Rio Properties other real and
personal property, and a guaranty by Rio Hotel & Casino, Inc.,
including a pledge of the Company's stock in Rio Properties.
As amended, the Rio Bank Loan will provide that Rio Hotel &
Casino, Inc. will be permitted to accumulate and hold up to
$5 million in assets which are not to be pledged for the
benefit of the Rio Bank Loan Lenders.
As amended, the Rio Bank Loan will contain certain customary
financial covenants to which the Company is subject. Those
covenants include a requirement that Rio Properties maintain a
maximum ratio of Total Debt to EBIDTA ranging from 3.0 to 1 at
December 31, 1995, increasing to 4.25 to 1 for the six month
period ending March 31, 1997 and decreasing to 3.0 to 1 at
December 31, 1997 and thereafter. Rio Properties must meet a
maximum ratio of Senior Debt to EBIDTA from 1.75 to 1 through
December 31, 1995 up to 3.0 to 1 for the six months ended March
31, 1997 and reducing to 1.75 to 1 at December 31, 1997 and
thereafter. Rio Properties must maintain a maximum Interest
Coverage Ratio of 2.0 to 1 through the fiscal quarter ending
December 31, 1996, reducing to 1.5 to 1 for the fiscal quarter
ending September 30, 1997, increasing to 2.0 to 1 for the
fiscal quarter ending March 31, 1998, increasing to 2.5 to 1
for the fiscal quarter ending September 30, 1998 and increasing
to 3.0 to 1 for the fiscal quarter ending December 31, 1998 and
thereafter. Minimum Consolidated Tangible Net Worth
requirements of $125 million, plus 75% of accumulated net
income after December 31, 1994 (not reduced by any consolidated
net losses) plus 100% of the net proceeds of any equity
offering by Rio Properties or the Company must be maintained.
A maximum annual capital expenditure permitted under the Rio
Bank Loan, as amended, will be $7.5 million annually, plus the
amount available of unused capital expenditures from the prior
fiscal year, but not to exceed $12.5 million annually in any
event. A specific carve-out of $200 million for the Phase V
Expansion and $30 million for the identified adjacent Rio land
acquisitions is incorporated in the amended Rio Bank Loan. As
amended, the Rio Bank Loan also provides for a basket of
$5 million for the repurchase of equity shares of the Company
through open market purchases over the life of the Rio Bank
Loan.
As amended, the Rio Bank Loan continues to provide for an event
of default if Anthony A. Marnell II beneficially owns less than
10% of the voting stock of the Company, any person holds or
controls a greater amount of the voting stock of the Company,
any person holds or controls a greater amount of voting stock
than the amount held or controlled by Anthony A. Marnell II, or
if either Anthony A. Marnell II or James A. Barrett, Jr. cease
to perform their functions as Chief Executive Officer and
President, respectively, for a period of 30 consecutive days.
The commitment letter from the agent for the bank syndicate
consented to the issuance of the 10-5/8% Senior Subordinated
Notes Due 2005 issued by the Company on July 18, 1995 (the
"Subordinated Notes") as described in more detail below.
On July 18, 1995, the Company entered into an agreement with
Salomon Brothers Inc. and Montgomery Securities (the "Initial
Purchasers") for the sale by the Company of $100 million in
principal amount of the Company's 10-5/8% Senior Subordinated
Notes Due 2005 (the "Subordinated Notes"). The Subordinated
Notes were purchased by the Initial Purchasers for resale to
qualified institutional investors. The net proceeds from the
sale of the Subordinated Notes (estimated to be approximately
$96.8 million after the deduction of a 2.75% discount to the
Initial Purchasers and estimated offering expenses of
$450,000), borrowings under the Rio Bank Loan, cash on hand and
cash from operations will be used to finance the Company's
approximately $185 million Phase V Expansion. Pending such
use, the net proceeds will be used to reduce amounts
outstanding under the Rio Bank Loan.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
MATERIAL CHANGES IN FINANCIAL CONDITION (continued)
LIQUIDITY AND CAPITAL RESOURCES (continued)
The Subordinated Notes were issued under an indenture (the
"Indenture") dated July 21, 1995 among the Company, Rio
Properties, Inc. and IBJ Schroder Bank & Trust Company, as
trustee. The following summary of certain provisions of the
Indenture does not purport to be complete and is subject to the
provisions of the Indenture and the Subordinated Notes.
Capitalized terms not otherwise defined have the same meanings
assigned to them in the Indenture.
The Subordinated Notes mature on July 15, 2005. Interest
payment dates under the Subordinated Notes are January 15 and
July 15, commencing January 15, 1996. The Subordinated Notes
are unconditionally guaranteed (the "Rio Guarantee") on a
senior subordinated basis by Rio Properties, Inc. (the
"Guarantor"), the Company's principal operating subsidiary.
The Subordinated Notes are subordinated in right of payment to
all existing and future Senior Indebtedness of the Company and
are structurally subordinated to all existing and future
indebtedness and other liabilities (including trade payables)
of the Company's subsidiaries. The Rio Guarantee is
subordinated in right of payment to all existing and future
Senior Indebtedness of Guarantor and is structurally
subordinated to all existing and future indebtedness and other
liabilities (including trade payables) of the Guarantor's
subsidiaries.
The Subordinated Notes may be redeemed at the option of the
Company, in whole or in part, at any time on or after July 15,
2000, at the redemption prices set forth in the Indenture, plus
accrued and unpaid interest, if any, through the redemption
date. The Subordinated Notes will be redeemed from any holder
or beneficial owner of the Subordinated Notes which is required
to be found suitable and is not found suitable by the Nevada
Gaming Commission.
Upon a Change of Control of the Company (as defined in the
Indenture), each holder of Subordinated Notes will have the
right to require the Company to repurchase all or part of such
holder's Subordinated Notes at a price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase. The Company's
obligation to repurchase the Subordinated Notes is guaranteed
on a senior subordinated basis by the Guarantor. The Indenture
contains certain covenants that, among other things, limit the
ability of the Company and its Restricted Subsidiaries to incur
additional indebtedness, pay dividends or make other
distributions, make investments, repurchase subordinated
obligations or capital stock, create certain liens (except,
among others, liens securing Senior Indebtedness), enter into
certain transactions with affiliates, sell assets of the
Company or its subsidiaries, issue or sell subsidiary stock,
create or permit to exist restrictions on distributions from
subsidiaries, or enter into certain mergers and consolidations.
Pursuant to a registration agreement between the Company and
Initial Purchasers, the Company will commence an exchange offer
pursuant to an effective registration statement or cause the
Subordinated Notes to be registered under the Securities Act of
1933 (the "Securities Act") pursuant to a resale shelf
registration statement. If an exchange offer registration
statement is not (i) filed within 45 days after the date of
original issuance of the Subordinated Notes or (ii) declared
effective within 120 days after the date of original issuance
of the Subordinated Notes, special interest will accrue and be
payable semiannually until such time as an exchange offer
registration statement is filed or becomes effective, as the
case may be. In addition, if an exchange offer is not
consummated or a resale shelf registration statement is not
declared effective within 150 days after the date of original
issuance of the Subordinated Notes, special interest will
accrue and be payable semiannually until such time as an
exchange offer is consummated or a resale shelf registration is
declared effective, as the case may be. The Subordinated Notes
have not been registered under the Securities Act and are
subject to certain restrictions on transfer. The Exchange
Subordinated Notes registered pursuant to an effective
registration statement generally will be freely transferable.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
MATERIAL CHANGES IN FINANCIAL CONDITION (continued)
LIQUIDITY AND CAPITAL RESOURCES (continued)
On May 2, 1995, the Company announced a three-phase expansion
and development plan to grow the Company over the next several
years. The plan includes the Phase V Expansion (described
below) on the existing Rio site, acquisition of approximately
22 acres of land adjacent to the Rio site to be master-planned
for another hotel-casino property and the purchase of
approximately 64 acres southeast of Las Vegas for possible
future hotel-casino development.
The approximately $185 million Phase V Expansion is planned to
include 120,000 square feet of public space containing a casino
expansion with 600 slot machines and 27 table games, new retail
and entertainment space, and additional restaurants, as well as
an expanded pool and beach area and additional parking
facilities. The Phase V Expansion will center around a 40-
story hotel tower containing approximately 1,000 new suites
located immediately southeast of the existing towers. The
public area expansion will be based on a Brazilian Carnival
Mardi Gras theme and will include a variety of owned and leased
retail and restaurant outlets. Construction is scheduled to
commence in September 1995, subject to governmental approvals
and finalization of financing, with opening expected to occur
in the spring of 1997.
The $185 million Phase V Expansion will be financed with the
proceeds from the Subordinated Notes, funds available under the
Rio Bank Loan, cash on hand and cash from operations. For the
Phase V Expansion, the Company has obtained a capital
expenditure limitation wavier under the Rio Bank Loan.
As described above, the Company has acquired approximately five
acres of land adjacent to the Rio and has entered into
agreements to acquire an additional approximately 17 acres of
land adjacent to the Rio site. The combined cost of the
approximately 22 acres is approximately $20.3 million, which
the Company will fund through cash on hand, cash available
through borrowings under the Rio Bank Loan and cash from
operations. The entire Rio site is now being master-planned
for the development of another hotel-casino, the size and
timing of which has not yet been determined.
As the third step in its expansion and development plan to
provide further growth for the Company, the Company acquired
approximately 64 acres (the "Old Vegas Site") of land southeast
of Las Vegas. The cost of the Old Vegas Site was approximately
$5.7 million (net of a credit for profit participation from the
seller to which the Company was entitled) which the Company
funded through cash on hand and cash available through
borrowings under the Rio Bank Loan. The Old Vegas Site,
already zoned for a hotel-casino, is situated where Boulder
Highway enters the Las Vegas valley from Phoenix and Laughlin
along U. S. Highway 93-95. The timing of the proposed
development on the Old Vegas Site has not yet been determined.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has been advised that a purported class action
lawsuit was filed under the name Hyland, et al v. Griffin
Investigations, et al on May 5, 1995 in the United States
District Court for the District of New Jersey (Camden
Division). The Company, together with 76 other casino
operators and others, is named as a defendant in the action.
The Company has not been served with a summons and complaint.
The action, purportedly brought on behalf of "card counters,"
alleges that the casino operators exclude "card counters" from
play and share information about "card counters." The action
is ostensibly based on purported violations of federal
antitrust law, the Fair Credit Reporting Act, and various
state consumer protection laws. If served, the Company
intends to defend the action vigorously.
The Company has also been advised that a purported class
action lawsuit was filed under the name Florida Horsemen's
Benevolent and Protective Association v. Hialeah Park, Inc. et
al in the United States District Court for the Southern
District of Florida. The Company, together with other casino
and race track operators, is named as a defendant. The action
purportedly claims that the defendants illegally accepted
nearly $11.0 million in off-track wagers. If served, the
Company intends to defend the action vigorously.
ITEM 2. CHANGES IN SECURITIES
As described in more detail in Part I. Item 2. "Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Material Changes in Financial Condition -
Liquidity and Capital Resources," the Company, through Rio
Properties, is in the process of amending the Rio Bank Loan,
principally to increase the loan from $125 million to
$175 million. The Rio Bank Loan, as amended, restricts
dividends payable by Rio Properties to the Company, subject to
an exception for cash interest payments under the Subordinated
Notes, and contains several covenants described above which
impose restrictions on the Company.
The Indenture for the Subordinated Notes is also described in
more detail in Part I. Item 2. "Management's Discussion and
Analysis of Financial Condition and Results of Operations -
Material Changes in Financial Condition - Liquidity and
Capital Resources." The Indenture contains certain covenants
that, among other things, limit the ability of the Company and
its Restricted Subsidiaries to incur additional indebtedness,
pay dividends or make other distributions, make investments,
repurchase subordinated obligations or capital stock, create
certain liens (except, among others, liens securing Senior
Indebtedness), enter into certain transactions with
affiliates, sell assets of the Company or its subsidiaries,
issue or sell subsidiary stock, create or permit to exist
restrictions on distributions from subsidiaries, or enter into
certain mergers and consolidations. The foregoing is a brief
summary and is subject in all respects to the provisions of
the Indenture filed as Exhibit 4.3 to the Company's Report on
Form 8-K dated July 18, 1995.
During the second quarter of 1995, certain options granted
pursuant to the Company's Non-Statutory Stock Option Plan were
exercised, resulting in the issuance of 100,700 shares of the
Company's Common Stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company's Annual Meeting of Stockholders (the "Meeting")
was held on May 16, 1995.
(b) At the Meeting, in addition to the re-election of Anthony A.
Marnell II, James A. Barrett, Jr., John A. Stuart and Thomas Y.
Hartley and the election of Peter M. Thomas to the Board of
Directors, the stockholders voted to approve the 1995 Long-Term
Incentive Plan (the "1995 Plan") and amend the 1991 Directors'
Stock Option Plan (the "Director Plan"). The 1995 Plan was
approved by the stockholders by a vote of 10,557,711 shares in
favor, 1,928,386 shares opposed and 3,887,500 shares abstained
and the Director Plan was amended by the stockholders by a vote
of 11,926,650 shares in favor, 1,387,073 shares opposed and
3,069,874 shares abstained.
<PAGE>
PART II. OTHER INFORMATION (continued)
ITEM 5. OTHER INFORMATION
On August 7, 1995, John M. Lipkowitz was named General Manager
of Rio Properties, Inc. Mr. Lipkowitz has served as Senior
Vice President of Rio Properties, Inc. since July 1, 1995 and
prior thereto, had served as Vice President of Strategic
Marketing since December 1994. Mr. Lipkowitz joined Rio
Properties in 1990 and had served in a variety of positions
including Vice President of Food and Beverage and Executive
Chef. Mr. Lipkowitz replaces Donald P. Marrandino.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit
NUMBER DESCRIPTION
4.01 Purchase Agreement dated July 18, 1995 by Rio Hotel &
Casino, Inc. and confirmed and accepted by Salomon
Brothers Inc. for itself and on behalf of Montgomery
Securities, Exhibit 4.1.(*)
4.02 Registration Agreement dated July 18, 1995 by Rio Hotel
& Casino, Inc. and accepted July 18, 1995 by Salomon
Brothers Inc. and Montgomery Securities, Exhibit 4.2.(*)
4.03 Indenture dated as of July 21, 1995, among Rio Hotel &
Casino, Inc., Rio Properties, Inc. and IBJ Schroder Bank
& Trust Company, Exhibit 4.3.(*)
4.04 Letter dated June 27, 1995 from Bank of America National
Trust and Savings Association, as Agent, to Rio
Properties, Inc.
11.01 Computation of Earnings Per Common Share
27.01 Financial Data Schedule
* Incorporation by reference is hereby made from the
indicated Exhibit Number from the Company's Report on
Form 8-K dated July 18, 1995, Item 7(c).
(b) REPORT ON FORM 8-K
The Company filed a Report on Form 8-K dated July 18, 1995
reporting the issuance of the Subordinated Notes.
<PAGE>
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.
Rio Hotel & Casino, Inc.
(Registrant)
August 3, 1995 By /s/ Harlan D. Braaten
(Date) HARLAN D. BRAATEN
Treasurer and Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
Sequential
EXHIBIT DESCRIPTION Page
Number
4.01 Purchase Agreement dated July 18, 1995 by Rio
Hotel & Casino, Inc. and confirmed and accepted by
Salomon Brothers Inc. for itself and on behalf of
Montgomery Securities, Exhibit 4.1.(*)
4.02 Registration Agreement dated July 18, 1995 by Rio
Hotel & Casino, Inc. and accepted July 18, 1995 by
Salomon Brothers Inc. and Montgomery Securities,
Exhibit 4.2.(*)
4.03 Indenture dated as of July 21, 1995, among Rio
Hotel & Casino, Inc., Rio Properties, Inc. and IBJ
Schroder Bank & Trust Company, Exhibit 4.3.(*)
4.04 Letter dated June 27, 1995 from Bank of America 21
National Trust and Savings Association, as Agent,
to Rio Properties, Inc.
11.01 Computation of Earnings per Common Share 23
27.01 Financial Data Schedule 25
* Incorporation by reference is hereby made from the
indicated Exhibit Number from the Company's Report
on Form 8-K dated July 18, 1995, Item 7(c).
BANK OF AMERICA
June 27, 1995
Agency Management Services
Rio Properties, Inc.
3700 West Flamingo Road
Las Vegas, Nevada 89103
Attention: Harlan Braaten
Chief Financial Officer
and Treasurer
Re: Credit Agreement dated as of July 15, 1993,
as amended
Gentlemen:
We refer to the Credit Agreement dated as of July
15, 1993, as ammended, (the "Credit Agreement") among Rio
Properties, Inc. (The "Company"), the banks parties thereto
(the "Banks"), and Bank of America National Trust and
Savings Association, as agent (the "Agent"). Capitalized
terms not otherwise defined herein shall have the meanings
specified in the Credit Agreement.
This will confirm that the Agent and the Banks
have consented to amending the Credit Agreement on the terms
and conditions outlined in the term sheet dated June 16,
1995. In addition, the Majority Banks have consented to the
Company guarantying, on a subordinated basis, the Senior
Subordinated Notes Due 2005 to be issued by Rio Hotel and
Casino, Inc., and to the Company upstreaming, on a
subordinated basis, cash to Rio Hotel and Casino, Inc. to
make interest payments on such Notes, in each case subject
to documentation.
Although all Banks consented to the increase in
the Aggregate Revolving Commitment, not all Banks agreed to
participate in such increase. Accordingly, BofA committed
to increase its Revolving Commitment in excess of its
Commitment Percentage of such increase to make up the
difference (the "Excess Revolving Commitment"). The Company
agrees to pay to BofA a fee of 1.50% on any portion of its
Excess Revolving Commitment that it continues to hold on
July 14, 1995, which fee shall be payable on such date.
Of course, the Agents and the Banks' consent to
the foregoing amendment terms is subject to satisfactory
documentation, including without limitation their review and
approval of the terms of the subordinated guaranty.
<PAGE>
RIO PROPERTIES, INC.
June 27, 1995
Page 2
If the foregoing accurately sets forth our agreement
with respect to the foregoing, please sign and date a copy
of this letter where indicated below and return one copy to
us.
Very truly yours,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By: /s/ L. Chenevert, Jr.
L. Chenevert, Jr.
Vice President
AGREED AND ACCEPTED:
RIO PROPERTIES, INC.
By: /s/ Harlan D. Braaten
Date: 6/29/95
EXHIBIT 11.01
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
THREE MONTHS ENDED
JUNE 30, 1995 JUNE 30, 1994
(Unaudited) (Unaudited)
<S> <C> <C>
PRIMARY:
EARNINGS:
NET INCOME $ 4,914,265 $ 4,780,560
================== ==================
SHARES:
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND EQUIVALENTS OUTSTANDING 21,292,259 21,305,237
STOCK OPTIONS 397,568 445,515
------------------ ------------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, AS ADJUSTED 21,689,827 21,750,752
================== ==================
EARNINGS PER COMMON SHARE:
NET INCOME PER COMMON SHARE $ 0.23 $ 0.22
================== ==================
FULLY DILUTED:
EARNINGS:
NET INCOME $ 4,914,265 $ 4,780,560
================== ==================
SHARES:
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND EQUIVALENTS OUTSTANDING 21,292,259 21,305,237
STOCK OPTIONS 397,768 445,614
------------------ ------------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, AS ADJUSTED $ 21,690,027 $ 21,750,851
=================== ==================
EARNINGS PER COMMON SHARE:
NET INCOME PER COMMON SHARE $ 0.23 $ 0.22
=================== ==================
</TABLE>
<PAGE>
EXHIBIT 11.01
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE (CONTINUED)
SIX MONTHS ENDED
JUNE 30, 1995 JUNE 30, 1994
(Unaudited) (Unaudited)
<S> <C> <C>
PRIMARY:
EARNINGS:
NET INCOME $ 9,425,997 $ 8,759,290
================== ==================
SHARES:
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND EQUIVALENTS OUTSTANDING 21,293,134 21,236,318
STOCK OPTIONS 351,687 510,966
------------------ ------------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, AS ADJUSTED 21,644,821 21,747,284
================== ==================
EARNINGS PER COMMON SHARE:
NET INCOME PER COMMON SHARE $ 0.44 $ 0.40
================== ==================
FULLY DILUTED:
EARNINGS:
NET INCOME $ 9,425,997 $ 8,759,290
================== ==================
SHARES:
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND EQUIVALENTS OUTSTANDING 21,293,134 21,236,318
STOCK OPTIONS 370,315 511,489
------------------ ------------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, AS ADJUSTED 21,663,449 21,747,807
================== ==================
EARNINGS PER COMMON SHARE:
NET INCOME PER COMMON SHARE $ 0.44 $ 0.40
================== ==================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 20669
<SECURITIES> 0
<RECEIVABLES> 4317
<ALLOWANCES> 641
<INVENTORY> 1520
<CURRENT-ASSETS> 30733
<PP&E> 277720
<DEPRECIATION> 39,759
<TOTAL-ASSETS> 273690
<CURRENT-LIABILITIES> 18037
<BONDS> 90189
<COMMON> 213
0
0
<OTHER-SE> 156418
<TOTAL-LIABILITY-AND-EQUITY> 273690
<SALES> 91888
<TOTAL-REVENUES> 91888
<CGS> 0
<TOTAL-COSTS> 74046
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2783
<INCOME-PRETAX> 15059
<INCOME-TAX> 5633
<INCOME-CONTINUING> 9426
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9426
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
</TABLE>
