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, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition to period from:
Commission file number: 1-11569
RIO HOTEL & CASINO, INC.
(Exact name of registrant as specified in its charter)
NEVADA 95-3671082
(State or other jurisdiction (I.R.S. Employer
of 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.
21,221,541 shares of Common Stock, $0.01 par value as of
August 1, 1996
<PAGE>
FORM 10-Q
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION NUMBER
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 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
EXHIBIT INDEX 17
2
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
1996 1995
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $11,999,643 $19,992,695
ACCOUNTS RECEIVABLE, NET 4,695,211 4,313,442
FEDERAL INCOME TAXES RECEIVABLE 735,700 190,914
INVENTORIES 2,295,104 1,794,850
PREPAID EXPENSES AND OTHER CURRENT ASSETS 5,198,188 4,638,090
TOTAL CURRENT ASSETS 24,923,846 30,929,991
PROPERTY AND EQUIPMENT:
LAND AND IMPROVEMENTS 43,665,818 37,509,960
BUILDING AND IMPROVEMENTS 195,165,303 192,818,896
EQUIPMENT, FURNITURE, AND IMPROVEMENTS 71,860,028 68,500,267
LESS: ACCUMULATED DEPRECIATION (54,705,659) (46,707,850)
255,985,490 252,121,273
CONSTRUCTION IN PROGRESS 82,323,683 17,173,483
NET PROPERTY AND EQUIPMENT 338,309,173 269,294,756
OTHER ASSETS:
OTHER, NET 8,252,289 8,566,847
$371,485,308 $308,791,594
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
CURRENT MATURITIES OF LONG-TERM DEBT $25,252 $25,252
ACCOUNTS PAYABLE 5,371,928 4,562,132
ACCRUED EXPENSES 13,752,506 9,136,226
ACCOUNTS PAYABLE-RELATED PARTY 18,734,842 6,641,506
ACCRUED INTEREST 5,179,613 4,726,915
TOTAL CURRENT LIABILITIES 43,064,141 25,092,031
NON-CURRENT LIABILITIES:
LONG-TERM DEBT, LESS CURRENT MATURITIES 142,164,136 110,176,765
DEFERRED INCOME TAXES 12,387,346 10,634,898
TOTAL NON-CURRENT LIABILITIES 154,551,482 120,811,663
TOTAL LIABILITIES 197,615,623 145,903,694
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
COMMON STOCK, $0.01 PAR VALUE;
100,000,000 SHARES AUTHORIZED;
21,207,341 (1996) AND 21,139,146 (1995) SHARES
ISSUED AND OUTSTANDING 212,074 211,392
ADDITIONAL PAID-IN CAPITAL 113,700,151 113,520,158
RETAINED EARNINGS 59,957,460 49,156,350
TOTAL STOCKHOLDERS' EQUITY 173,869,685 162,887,900
$371,485,308 $308,791,594
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
CASINO $27,636,470 $25,401,679 $56,228,444 $49,967,529
ROOM 9,874,962 8,885,626 20,322,540 16,160,634
FOOD AND BEVERAGE 18,086,410 15,217,504 35,273,807 29,049,257
OTHER 3,890,984 3,061,339 7,453,499 5,590,750
CASINO PROMOTIONAL ALLOWANCES (4,785,806) (4,609,846) (9,534,146) (8,983,715)
54,703,020 47,956,302 109,744,144 91,784,455
EXPENSES:
CASINO 12,871,360 11,235,189 25,894,149 21,933,708
ROOM 3,320,238 2,693,388 6,639,692 4,816,534
FOOD AND BEVERAGE 13,532,231 12,702,579 26,955,737 23,806,945
OTHER 2,035,734 1,679,346 3,902,409 3,187,635
SELLING, GENERAL AND ADMINISTRATIVE 7,896,189 6,807,545 15,886,585 13,194,268
DEPRECIATION AND AMORTIZATION 4,189,947 3,487,643 8,254,397 7,107,416
43,845,699 38,605,690 87,532,969 74,046,506
OPERATING PROFIT 10,857,321 9,350,612 22,211,175 17,737,949
OTHER INCOME (EXPENSE):
INTEREST INCOME 69,043 47,203 116,796 103,595
INTEREST EXPENSE (2,478,686) (1,629,741) (5,355,182) (2,782,732)
(2,409,643) (1,582,538) (5,238,386) (2,679,137)
INCOME BEFORE INCOME TAX PROVISION 8,447,678 7,768,074 16,972,789 15,058,812
INCOME TAX PROVISION (2,972,402) (2,853,809) (6,171,679) (5,632,815)
NET INCOME $5,475,276 $4,914,265 $10,801,110 $9,425,997
EARNINGS PER COMMON SHARE:
PRIMARY:
NET INCOME $0.25 $0.23 $0.50 $0.44
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 21,671,769 21,689,827 21,564,566 21,644,821
FULLY DILUTED:
NET INCOME $0.25 $0.23 $0.50 $0.44
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 21,671,905 21,690,027 21,567,153 21,663,449
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1995
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $10,801,110 $9,425,997
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
COMPENSATION EXPENSE RECOGNIZED FROM
STOCK OPTION GRANT 50,147 59,900
DEPRECIATION AND AMORTIZATION 8,254,397 7,107,416
PROVISION FOR UNCOLLECTIBLE ACCOUNTS 450,499 423,266
DEFERRED INCOME TAXES 1,752,448 1,319,796
(INCREASE) DECREASE IN ASSETS:
ACCOUNTS RECEIVABLE (832,268) (935,089)
INVENTORIES (500,254) (140,999)
PREPAID EXPENSES AND OTHER CURRENT ASSETS (602,991) 28,263
OTHER, NET 90,478 (347,411)
INCREASE (DECREASE) IN LIABILITIES:
ACCOUNTS PAYABLE 809,796 645,870
ACCRUED FEDERAL INCOME TAX PAYABLE - 761,924
ACCRUED EXPENSES 4,616,280 1,603,812
ACCRUED INTEREST 452,698 172,645
NET CASH PROVIDED BY OPERATING ACTIVITIES 25,342,340 20,125,390
CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASE OF LAND AND IMPROVEMENTS (8,130,804) (8,570,751)
PURCHASE OF EQUIPMENT, FURNITURE, AND
IMPROVEMENTS (56,820,594) (31,294,698)
NET CASH (USED IN) INVESTING ACTIVITIES (64,951,398) (39,865,449)
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM BORROWINGS 32,000,000 ---
NET PROCEEDS FROM COMMON STOCK ISSUANCE 838,485 558,451
PAYMENTS ON NOTES AND LOANS PAYABLE (12,629) (34,964,760)
REPURCHASE OF COMMON STOCK (1,209,850) (1,610,875)
NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES 31,616,006 (36,017,184)
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (7,993,052) (55,757,243)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 19,992,695 76,426,258
CASH AND CASH EQUIVALENTS, END OF PERIOD $11,999,643 $20,669,015
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
5
<PAGE>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Cash payments made for interest
(net of amounts capitalized) $5,924,186 $2,679,190
Cash payments made for income taxes $4,600,000 $3,500,000
</TABLE>
1996
Purchase of property and equipment financed through payables
totaled $18,724,842.
Purchase of land financed through payables totaled $10,000.
Tax benefit arising from the exercise of stock options granted
under the Company's Non-Statutory Stock Option Plan totaled
$501,893.
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.
6
<PAGE>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
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., Rio
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 sheets as of June 30, 1996 and
the related consolidated statements of income for the
three month and six month periods ended June 30, 1996
and June 30, 1995 and the consolidated statements of cash
flows for the six month periods ended June 30, 1996 and
June 30, 1995 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, 1995.
The Company's consolidated balance sheet for the year ended
December 31, 1995 is audited.
NOTE 2 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
(Unaudited)
<S> <C> <C>
Bank loan ("Rio Bank Loan"),
originally a $65 million
revolving credit facility,
which was amended to be a
$200 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. $42,000,000 $10,000,000
10 5/8% Senior Subordinated
Notes, interest only payable
semi-annually; principal due
July 15, 2005. 100,000,000 100,000,000
Special Improvement District
assessment bonds, payable
over 10 years in twenty
substantially equal semi-
annual installments of
principal, plus 6.1%
interest. 189,388 202,017
142,189,388 110,202,017
Less current maturities (25,252) (25,252)
$142,164,136 $110,176,765
</TABLE>
The prime interest rates quoted by the Company's primary
lenders at June 30, 1996 and December 31, 1995 were 8.25%
and 8.50%, respectively.
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 $10 million
on December 29, 1995 and repaying $9 million on January 2,
1996. The Company had $158 million and $165 million
available under the Rio Bank Loan at June 30, 1996 and
December 31, 1995, respectively.
7
<PAGE>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
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, 1996 and 1995 were $6,171,679 and $5,632,815,
respectively, which represent effective rates of 36.4% and
37.4%, respectively. A reconciliation between the
statutory rates and the effective rates is as follows:
<TABLE>
<CAPTION>
1996 1995
<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 0.0% 1.7%
Other 1.0% 0.3%
Effective Rate 36.4% 37.4%
</TABLE>
The Company's deferred tax assets (liabilities) at June
30, 1996 consisted of the following:
<TABLE>
<CAPTION>
CURRENT NON-CURRENT
<S> <C> <C>
Depreciation and amortization ($13,152,300)
Deferred employee benefit $370,122
Bad debt expense 426,519
Other deferred tax liabilities, net 764,954
$796,641 ($12,387,346)
</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.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information included herein contains statements that may
be considered forward-looking, such as statements relating to
plans for future expansion, capital spending and financing
sources. Such forward-looking information involves important
risks and uncertainties that could significantly affect
anticipated results in the future and, accordingly, such results
may differ from those expressed in any forward-looking statements
made herein. These risks and uncertainties include, but are
not limited to, those relating to construction activities,
dependence on existing management, gaming regulations (including
actions affecting licensing), leverage and debt service
(including sensitivity to fluctuations in interest rates),
domestic or global economic conditions and changes in federal or
state tax laws or the administration of such laws.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
REVENUES
The Company's net revenues increased to $54.7 million in the
second quarter of 1996 from $48.0 million in the same period in
the prior year, an increase of $6.7 million or 14.1%. Casino
revenues were $27.6 million in the three months ended June 30,
1996 compared to $25.4 million in the second quarter of 1995,
an increase of $2.2 million or 8.8%. An increase in table game
revenue to $10.5 million in the 1996 second quarter when
compared to the 1995 three month period is the primary reason
for the increase in casino revenues. Management believes that
the addition of 141 new hotel suites in December 1995, an
average of eleven more table games being available in the 1996
second quarter than in the 1995 second quarter coupled with a
higher table game win percentage of 17.3% compared to 15.6% in
the prior year's quarter were the primary reasons for the
increase in casino revenues. Slot machine revenues were
relatively flat when comparing the 1996 and 1995 second
quarters even though there were approximately 12% fewer slot
machines available in the 1996 quarter due to space limitations
associated with the Phase V Expansion project and remodeling of
the casino. Management anticipates that additional slot
machines and some table games will be temporarily out of
service during the third and fourth quarters of 1996 due to the
Phase V Expansion project.
Room revenues increased by $1.0 million or 11.1% to $9.9
million in the second quarter of 1996 from $8.9 million in the
second quarter of 1995. The increase in room revenues resulted
primarily from 141 new hotel suites being placed into service
in December 1995. Demand for the Rio's suites remained high,
with occupancy rates of 96.2% and 95.4% being attained for the
quarters ended June 30, 1996 and 1995, respectively.
Food and beverage revenues increased to $18.1 million in the
second quarter of 1996 from $15.2 million in the second quarter
of 1995, an increase of $2.9 million or 18.9%. An increase in
the average food check and increased beverage sales due to
increased casino activity contributed to the increase in food
and beverage revenues.
Other revenues increased by $0.8 million or 27.1% to $3.9
million in the three months ended June 30, 1996 compared to
$3.1 million in the second quarter of 1995. Increased
telephone revenues from the additional hotel suites, as well as
increased merchandise sales and admissions to entertainment
activities were the primary reasons for the increase in other
revenues.
OPERATING MARGINS
Casino operating profit was 53.4% of casino revenues in the
second quarter of 1996 compared to 55.8% in the same period in
1995. Management believes that the decline in the operating
margin in the casino was due to
9
<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, 1996 AND 1995 (continued)
the change in the ratio between table game revenues, which
traditionally have a lower operating margin, and slot machine
revenues. Food and beverage operating profit was 25.2% during
the second quarter of 1996 compared to 16.5% in the second
quarter of 1995. Management believes that the this improvement
is the result of effective cost controls and a higher average
food check during the three month period ended June 30, 1996
compared to the same period in the prior year. Hotel operating
profit was 66.4% during the second quarter of 1996 compared to
69.7% during the second quarter of 1995. Management believes
that the decline in the hotel operating margin is the result of
increases in normal operating expenses including employee
salaries, wages, benefits and travel agent commissions. Other
expenses were 52.3% of other revenues for the three months
ended June 30, 1996 compared to 54.9% in the second quarter of
the prior year. Management believes the improvement is due to
the increase in other revenues, particularly telephone and
entertainment admissions, which do not require significant
incremental expense. Selling, general and administrative
expenses were 14.4% and 14.2% of net revenues for the quarters
ended June 30, 1996 and 1995, respectively.
PROMOTIONAL ALLOWANCES
During the second quarter of 1996, promotional allowances were
$4.8 million, or 8.0% of gross revenues, which represent the
retail value of rooms, food, beverage and other services
provided to customers without charge. The estimated cost of
providing such promotional allowances was $2.7 million. In the
second quarter of 1995, promotional allowances were $4.6
million or 8.8% of gross revenues, and the estimated cost of
providing such promotional allowances was $2.7 million.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased by $0.7 million or
20.1% to $4.2 million in the second quarter of 1996 compared to
$3.5 million in the second quarter of 1995. This increase is
primarily attributable to depreciation expense from the $20.0
million Phase IV Expansion project which was completed in
December 1995. This expansion project included the addition of
141 new hotel suites, approximately 5,400 square feet of
meeting room space, doubled the size of Buzios seafood
restaurant, added a new health club and salon facility and
included a variety of back-of-the-house improvements.
OTHER INCOME (EXPENSE)
Interest expense increased by approximately $0.9 million or
52.1% to $2.5 million in the second quarter of 1996 from $1.6
million in the second quarter of 1995. Interest expense
increased as a result of the Company's July 1995 issuance of
$100 million in principal amount of 10 5/8% Senior Subordinated
Notes Due 2005, the proceeds from which were primarily utilized
to repay the Rio Bank Loan, and to increased borrowings in
connection with the Phase V Expansion project. Interest
expense in the second quarter of 1996 was reduced by $1.1
million because of interest capitalized on amounts expended on
the Phase V Expansion project, which will center around a 41-
story curved tower containing over 1,000 new hotel suites.
This project will also include approximately 60,000 square feet
of public area which will provide additional casino space,
restaurants, new retail and interactive entertainment space as
well as an expanded pool and beach area and additional parking
facilities. Interest expense in the second quarter of 1995 was
reduced by $39,000 because of interest capitalized on amounts
expended on the Phase IV Expansion project.
NET INCOME
Net income for the second quarter of 1996 was $5.5 million or
$0.25 per share (fully diluted) compared to $4.9 million or
$0.23 per share (fully diluted) for the second quarter of 1995.
10
<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, 1996 AND 1995
REVENUES
Net revenues for the Company increased to $109.7 million in the
first half or 1996 from $91.8 million in the 1995 six month
period, an increase of approximately $17.9 million or 19.6%.
Casino revenues increased approximately $6.2 million, or 12.5%,
to $56.2 million in the 1996 period from $50.0 million in the
period ended June 30, 1995. Table game and slot machine
revenues were the main contributors to this increase, with
table game revenues increasing to $20.8 million and slot
machine revenues to $32.4 million in the six months ended June
30, 1996 from $16.0 million and $30.9 million in the same
period in the prior year, respectively. Management believes
that the increase in table game revenues was primarily the
result of an average of 14 more tables being available in the
1996 period and the increase in the number of available and
occupied rooms. The increase in slot machine revenues occurred
primarily in the first three months of 1996, with revenues
remaining relatively flat in the second half of the six month
period due to an approximate 10% decrease in the number of slot
machines available during this period as a result of space
limitations resulting from the Phase V Expansion and casino
remodeling projects.
Room revenues increased approximately $4.1 million or 25.8% to
$20.3 million in the six months ended June 30, 1996 from $16.2
million in the prior year period. The increase in room revenue
resulted primarily from the addition of 365 new hotel suites
placed into service in February 1995, 184 new hotel suites
being placed into service in March 1995 and an additional 141
new hotel suites being placed into service in December 1995.
The hotel occupancy percentage increased to 96.5% in the 1996
period based on 282,234 available room nights from 95.4% in the
1995 period based on 230,528 room nights available.
Food and beverage revenues increased to $35.3 million in the
six month period ended June 30, 1996 from $29.1 million in the
same period in 1995, an increase of $6.2 million or 21.4%. An
increase in the average food check and increased beverage sales
due to increased casino activity contributed to the increase in
food and beverage revenues.
Other revenues increased by $1.9 million or 33.3% to $7.5
million in the 1996 period compared to $5.6 million in the six
month period in 1995. Increased telephone revenues from the
additional hotel suites, as well as increased merchandise sales
and admissions to entertainment activities were the primary
reasons for the increase in other revenues.
OPERATING MARGINS
Casino operating profit was 53.9% in the six month period in
1996 compared to 56.1% in the same period in 1995. Management
believes that the decline in the operating margin in the casino
was due to the change in the ratio between table game revenues,
which traditionally have a lower operating margin, and slot
machine revenues. Food and beverage operating profit was 23.6%
in the six month period ended June 30, 1996 compared to 18.0%
during the first six months of 1995. Management believes that
this improvement is the result of effective cost controls and a
higher average food check in the 1996 period. Hotel operating
profit was 67.3% for the first six months of 1996 compared to
70.2% in the prior year period. Management believes that the
decline in the hotel operating margin is the result of
increases in normal operating expenses including employee
salaries, wages, benefits and travel agent commissions. Other
expenses were 52.4% of other revenues for the six months ended
June 30, 1996 compared to 57% in the first six months of 1995.
Management believes the improvement is due to the increase in
other revenues, particularly telephone and entertainment
admissions, which do not require significant incremental
expense. Selling, general and administrative expenses were
14.5% and 14.4% of net revenues for the six month periods ended
June 30, 1996 and 1995, respectively.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANAYLSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (continued)
MATERIAL CHANGES IN RESULTS OF OPERATIONS (continued)
SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (continued)
PROMOTIONAL ALLOWANCES
Promotional allowances, which represent the retail value of
rooms, food, beverage and other services provided to customers
without charge, were $9.5 million or 8.0% or gross revenues in
the first six months of 1996. The estimated cost of providing
such promotional allowances $5.5 million. This compares to
promotional allowances in the same six month period in 1995 of
$9.0 million or 8.9% of gross revenues at an estimated cost of
$5.3 million.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased by approximately $1.2
million or 16.1% to $8.3 million in the first six months of
1996 compared to $7.1 million in the same period in the prior
year. This increase is primarily attributable to the 365 new
hotel suites which were placed into service in February 1995
and 184 new hotel suites in March 1995, as well as completion
in December 1995 of the Phase IV Expansion project which
included 141 new hotel suites, the addition of approximately
5,400 square feet of meeting room space, the expansion of
Buzios seafood restaurant, the addition of a new health club
and salon facility and a variety of back-of-the-house
improvements.
OTHER INCOME (EXPENSE)
Interest expense increased by $2.6 million or 92.4% to $5.4
million in the first six months of 1996 from $2.8 million in
the same period in 1995. Interest expense increased primarily
as a result of the Company's July 1995 issuance of $100 million
in principal amount of 10 5/8% Senior Subordinated Notes Due
2005, the proceeds from which were primarily utilized to repay
the Rio Bank Loan, and to increased borrowings in connection
with the Phase V Expansion project. Interest expense in the
first six months of 1996 was reduced by $1.5 million because of
interest capitalized on amounts expended on the Phase V
Expansion project, which will center around a 41-story curved
tower containing over 1,000 new hotel suites. This project
will also include approximately 60,000 square feet of public
area which will provide additional casino space, restaurants,
new retail and interactive entertainment space as well as an
expanded pool and beach area and additional parking facilities.
Interest expense in the first six months of 1995 was reduced by
$360,000 because of interest capitalized on amounts expended on
the Phase IV Expansion project.
NET INCOME
Net income for the first six months of 1996 was $10.8 million
or $0.50 per share (fully diluted) compared to $9.4 million or
$0.44 per share (fully diluted) for the first six months of
1995.
MATERIAL CHANGES IN FINANCIAL CONDITION
In June 1996, the Rio Bank Loan was increased from $175 million
to $200 million. This increase is for general corporate
purposes and for architectural, engineering and development
costs associated with a second hotel-casino with up to 3,000
rooms that is being master-planned for the Rio's 73 acre site.
The Rio Bank Loan still matures on June 30, 2001 and requires
scheduled reductions of the maximum amount available under the
Rio Bank Loan commencing with a $10 million reduction at
December 31, 1997, a $7.5 million reduction at the end of each
quarter during 1998, a $10 million reduction at the end of each
quarter during 1999, a $12.5 million reduction at the end of
each quarter during 2000, a $35 million reduction at March 31,
2001 and maturity at June 30, 2001.
At June 30, 1996, cash and cash equivalents were $12.0 million
compared with $20.0 million at December 31, 1995. At June 30,
1996, the Company had $158.0 million available under the Rio
Bank Loan compared with $165.0 million available at December
31, 1995. 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
12
<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, 1996 AND 1995 (continued)
Company did not utilize this ability at the end of the second
quarter of 1996, but the Company did reborrow $10 million on
December 29, 1995 and repay $9 million on January 2, 1996. The
decrease in cash is primarily due to the decision of the
Company not to draw down any 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
$185 million Phase V Expansion and the previously reported
acquisition of land adjacent to the Rio.
During the first six months of 1996, cash provided by operating
activities was $25.3 million. Investing activities used $65.0
million of the Company's cash during the first six months of
1996. Approximately $2.2 million of such expenditures was
related to the Company's Phase III Expansion, approximately
$2.3 million was related to the Company's Phase IV Expansion
and approximately $48.7 million was related to the Company's
Phase V Expansion. During the first six months of 1996, the
Company spent approximately $7.9 million toward the acquisition
of approximately 28 acres of land 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 ("Common Stock") from
time to time in the open market or otherwise. During the first
six months of 1996, the Company repurchased 75,000 shares of
Common Stock at an average cost of $16.13 per share. The
repurchased shares of Common Stock were retired.
Under the Rio Bank Loan, the Company is subject to annual
capital expenditure limits of $7.5 million plus the amount
available of unused capital expenditures from the prior fiscal
year, but not to exceed $12.5 million annually in any event.
However, the Company received a written waiver to allow the
Company to construct the Phase III Expansion, the Phase IV
Expansion and the Phase V 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, 1996 the Company's capital commitments include
approximately $129.9 million for the Phase V Expansion and
$7.6 million under commitments for the balance of the purchase
price of the approximately 28 acres of land adjacent to the
Rio. 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 V Expansion and the real
estate purchase commitments. 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.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
WILLIAM H. AHERN V. CAESARS WORLD, INC., ET AL., Case No. 94-
532-Civ-Orl-22, instituted on May 10, 1994 (the "Ahern
Complaint") and WILLIAM POULOS V. CAESARS WORLD, INC., ET AL.,
Case No. 94-478-Civ-Orl-22, instituted on April 26, 1994 (the
"Poulos Complaint") (collectively, the Ahern Complaint and the
Poulos Complaint are referred to as the "Complaints"). Two
individuals, each purportedly representing a class, filed
Complaints in the United States District Court, Middle
District of Florida, against various manufacturers,
distributors and casino operators of video poker and
electronic slot machines, including the Company. The
Complaints allege that the defendants have engaged in a course
of conduct intended to induce persons to play such games based
on a false belief concerning how the gaming machines operate,
as well as the extent to which there is an opportunity to win
on a given play. The Complaints allege violations of the
Racketeer Influenced and Corrupt Organizations Act, as well as
claims of common law fraud, unjust enrichment and negligent
misrepresentation, and seek damages in excess of $1 billion
without any substantiation of that amount. The Complaints
were consolidated and transferred to the United States
District Court for the District of Nevada (the "Nevada
District Court"). The Company filed a motion to dismiss the
action based on jurisdiction, abstention and related
doctrines. Various other defendants filed similar motions and
motions to dismiss based on defects in the pleadings. The
Nevada District Court entered an order granting the motions to
dismiss based on defects in the pleadings, and denying as moot
all other pending motions, including those of the Company.
The Nevada District Court granted the plaintiffs until May 31,
1996 to file an amended complaint that complied with the
applicable pleading requirements. The Plaintiffs filed an
amended complaint on or about May 31, 1996. The Company
renewed its motion to dismiss based on abstention and related
doctrines, and joined in the motion to dismiss filed by other
defendants, which was based on defects in the pleadings.
Management does not know whether the plaintiffs intend to file
amended complaints, but believes that they will do so.
Management continues to believe that the substantive
allegations in the Complaints are without merit.
For additional information on litigation in which the Company
is a party, see the Company's report on Form 10-K for the year
ended December 31, 1995, Part I, Item 3, and the Company's
report on Form 10-Q for the quarter ended March 31, 1996, Part
II, Item 1.
ITEM 2. CHANGES IN SECURITIES
During the second quarter of 1996, certain options granted
pursuant to the Company's Non-Statutory Stock Option Plan were
exercised, resulting in the issuance of 93,595 shares of the
Company's Common Stock. Also during the second quarter of
1996, the Company repurchased 70,000 shares of its Common
Stock. The repurchased shares of Common Stock were retired.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
14
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of stockholders was held on May
23, 1996.
(a) Election of Directors.
<TABLE>
<CAPTION>
VOTES CAST
NAME OF DIRECTOR For Against Abstain
<S> <C> <C> <C>
Anthony A. Marnell II 17,370,812 251,551 31
James A. Barrett, Jr. 17,372,929 249,434 31
John A. Stuart 17,598,429 23,934 31
Thomas Y. Hartley 17,598,529 23,834 31
Peter M. Thomas 17,529,229 24,134 31
</TABLE>
(b) Approval and ratification of amendment to the 1991
Director's Stock Option Plan.
<TABLE>
<CAPTION>
VOTES CAST
For Against Abstain
<S> <C> <C>
17,249,077 158,876 34,441
</TABLE>
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
Exhibit
NUMBER DESCRIPTION
<S> <C>
10.01 Eighth Amendment to Credit Agreement dated as of June
17, 1996 among Rio Properties, Inc. and Bank of America
National Trust and Savings Association, as agent, and
Wells Fargo Bank National Assocation, First Security
Bank of Idaho, N.A., NBD Bank, Societe Generale, Bank of
America Nevada, U. S. Bank of Nevada, Bank of Scotland,
Midlantic Bank, N.A., and Bank of Hawaii, as Banks.
11.01 Computation of Earnings Per Common Share
27.01 Financial Data Schedule
</TABLE>
(b) REPORT ON FORM 8-K
NONE
15
<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 12, 1996 /s/ Ronald J. Radcliffe
(Date) RONALD J. RADCLIFFE
Treasurer and Chief
Financial Officer
(Duly Authorized Officer
and Principal Financial
Officer)
16
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
EXHIBIT DESCRIPTION Page
Number
<S> <C> <C>
10.01 Eighth Amendment to Credit Agreement dated as of 18
June 17, 1996 among Rio Properties, Inc. and
Bank of America National Trust and Savings
Association, as agent, and Wells Fargo Bank
National Assocation, First Security Bank of
Idaho, N.A., NBD Bank, Societe Generale, Bank of
America Nevada, U. S. Bank of Nevada, Bank of
Scotland, Midlantic Bank, N.A., and Bank of
Hawaii, as Banks
11.01 Computation of Earnings per Common Share 33
27.01 Financial Data Schedule 35
</TABLE>
17
<PAGE>
EXHIBIT 10.01
EIGHTH AMENDMENT TO
CREDIT AGREEMENT
THIS EIGHTH AMENDMENT TO CREDIT AGREEMENT (this "Eighth
Amendment") is made and dated as of June 17, 1996 among Rio
Properties, Inc., a Nevada corporation (the "Company"), the
several financial institutions party hereto ("Banks"), and Bank
of America National Trust and Savings Association, as agent for
the Banks (the "Agent") and amends that Credit Agreement dated as
of July 15, 1993 among the Company, the Banks and the Agent, as
amended by a First Amendment to Credit Agreement dated as of
October 25, 1993, a Second Amendment to Credit Agreement dated as
of November 8, 1993, a Third Amendment to Credit Agreement dated
as of April 15, 1994, a Fourth Amendment to Credit Agreement
dated as of December 16, 1994, a Fifth Amendment to Credit
Agreement dated as of March 20, 1995, a Sixth Amendment to Credit
Agreement dated as of July 31, 1995 and a Seventh Amendment to
Credit Agreement dated as of January 17, 1996 (as so amended, the
"Agreement").
RECITAL
The Company has requested the Agent and the Banks to
increase the Commitments, amend the scheduled Commitment
Reduction dates, modify the capital expenditures which are
permitted and modify various financial covenants, and the Agent
and Banks are willing to do so on the terms and conditions set
forth herein.
NOW, THEREFORE, for good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the
parties hereby agree as follows:
1. TERMS. All terms used herein shall have the same
meanings as in the Agreement unless otherwise defined herein.
All references to the Agreement herein shall mean the Agreement
as hereby amended.
2. AMENDMENTS TO AGREEMENT. The Banks and the Agent
hereby agree that the Agreement is amended as follows:
2.1 The definition of "Aggregate Revolving Commitment"
in Section 1.01 of the Agreement is amended and restated in its
entirety as follows:
"'AGGREGATE REVOLVING COMMITMENT' means the
combined Revolving Commitments of the Banks, in the
1
<PAGE>
amount of $200,000,000, as such amount may be reduced
from time to time pursuant to this Agreement."
2.2 Section 1.01 of the Agreement is further amended
by inserting the following new definitions in proper alphabetical
order:
"'AVAILABLE AGGREGATE REVOLVING COMMITMENT' means
an amount equal to the Aggregate Revolving Commitment;
PROVIDED, HOWEVER, unless and until the Agent shall
have notified the Banks and the Company that it has
received an Appraisal in form and substance
satisfactory to the Banks showing an Appraisal Value of
the Real Property of an amount not less than 160% of
$200,000,000, the Available Aggregate Revolving
Commitment shall be an amount equal to the lesser of
(a) $175,000,000, and (b) the Aggregate Revolving
Commitment."
"'AVAILABLE REVOLVING COMMITMENT,' with respect to
each Bank, means an amount equal to such Bank's
Commitment Percentage of the Available Aggregate
Revolving Commitment."
2.3 Section 2.01(c) of the Agreement is amended by
inserting the following at the end of the first sentence thereof:
"PROVIDED, FURTHER, that the aggregate principal amount
of all outstanding Revolving Loans shall not exceed the
Available Aggregate Revolving Commitment, and each
Bank's Revolving Loans shall not exceed its Available
Revolving Commitment."
2.4 Section 2.07(a) of the Agreement is amended and
restated in its entirety as follows:
"(a) AUTOMATIC COMMITMENT REDUCTIONS. On the
first Commitment Reduction Date on December 31, 1997 the
Aggregate Revolving Commitment shall reduce to $190,000,000.
Thereafter, the Aggregate Revolving Commitment shall be
automatically reduced on each Commitment Reduction Date, which
will reduce the Aggregate Revolving Commitment as follows:
2
<PAGE>
<TABLE>
<CAPTION>
Maximum Remaining
Commitment Aggregate
Reduction Amount of Each Revolving
Dates Reduction Commitment
<S> <C> <C>
12/31/97 $10,000,000 $190,000,000
03/31/98 7,500,000 182,500,000
06/30/98 7,500,000 175,000,000
09/30/98 7,500,000 167,500,000
12/31/98 7,500,000 160,000,000
03/31/99 10,000,000 150,000,000
06/30/99 10,000,000 140,000,000
09/30/99 10,000,000 130,000,000
12/31/99 10,000,000 120,000,000
03/31/00 12,500,000 107,500,000
06/30/00 12,500,000 95,000,000
09/30/00 12,500,000 82,500,000
12/31/00 12,500,000 70,000,000
03/31/01 35,000,000 35,000,000
06/30/01 35,000,000 0
</TABLE>
"The Aggregate Revolving Commitment shall be reduced to
zero on the Revolving Termination Date. Such automatic
reductions shall occur without regard to any other
reductions of the Aggregate Revolving Commitment
occurring pursuant to Sections 2.05 or 2.06 or pursuant
to any other provision of this Agreement."
2.5 Section 2.10(c) of the Agreement is amended by
inserting "Available Revolving" before the word "Commitment" in
the first sentence thereof.
2.6 Section 7.12(b) of the Agreement is amended and
restated in its entirety as follows:
"(b) Repurchases of shares of the Parent Guarantor
not exceeding $10,000,000 (net of issuances of such
shares) since June 17, 1996 in the aggregate; and"
2.7 Section 7.13 of the Agreement is amended by
deleting "$200,000,000" and inserting "$225,000,000" in lieu
thereof and deleting "$30,000,000" and inserting "$35,000,000" in
lieu thereof.
3
<PAGE>
2.8 Section 8.01(y) of the Agreement (Total Leverage
Ratio) is amended by amending and restating the table therein in
its entirety as follows:
<TABLE>
<CAPTION>
"Fiscal Quarter Ending Ratio
<S> <C>
Through 6/30/96 3.50:1.00
09/30/96 4.25:1.00
12/31/96 4.50:1.00
03/31/97 4.75:1.00
06/30/97 4.75:1.00
09/30/97 4.50:1.00
12/31/97 3.75:1.00
03/31/98 3.50:1.00
06/30/98 3.25:1.00
9/30/98 and thereafter 3.00:1.00"
</TABLE>
2.9 Section 8.01(z) of the Agreement (Senior Leverage
Ratio) is amended by amending and restating the table therein in
its entirety as follows:
<TABLE>
<CAPTION>
"Fiscal Quarter Ending Ratio
<S> <C>
Through 6/30/96 2.25:1.00
09/30/96 3.00:1.00
12/31/96 3.25:1.00
03/31/97 3.50:1.00
06/30/97 3.50:1.00
09/30/97 3.00:1.00
12/31/97 2.50:1.00
03/31/98 2.25:1.00
06/30/98 2.00:1.00
9/30/98 and thereafter 1.75:1.00"
</TABLE>
2.10 Schedule 2.01 to the Agreement is amended and
restated in its entirety in the form of Schedule 2.01 hereto.
3. REPRESENTATIONS AND WARRANTIES. The Company
represents and warrants to the Banks and Agent:
3.1 AUTHORITY. The Company has all necessary power
and has taken all corporate action necessary to make this Eighth
Amendment, the Agreement, and all other agreements and
instruments executed in connection herewith and therewith, the
valid and enforceable obligations they purport to be.
4
<PAGE>
3.2 NO LEGAL OBSTACLE TO AGREEMENT. Neither the
execution of this Eighth Amendment, the making by the Company of
any borrowings under the Agreement, nor the performance of the
Agreement has constituted or resulted in or will constitute or
result in a breach of the provisions of any contract to which the
Company is a party, or the violation of any law, judgment, decree
or governmental order, rule or regulation applicable to the
Company, or result in the creation under any agreement or
instrument of any security interest, lien, charge, or encumbrance
upon any of the assets of the Company. No approval or
authorization of any governmental authority is required to permit
the execution, delivery or performance by the Company of this
Eighth Amendment, the Agreement, or the transactions contemplated
hereby or thereby, or the making of any borrowing by the Company
under the Agreement.
3.3 INCORPORATION OF CERTAIN REPRESENTATIONS. The
representations and warranties set forth in Article V of the
Agreement are true and correct in all respects on and as of the
date hereof as though made on and as of the date hereof.
3.4 DEFAULT. No Event of Default under the Agreement
has occurred and is continuing.
4. CONDITIONS, EFFECTIVENESS. The effectiveness of
this Eighth Amendment shall be subject to the compliance by the
Company with its agreements herein contained, and to the delivery
of the following to the Agent in form and substance satisfactory
to the Agent:
4.1 CORPORATE RESOLUTIONS. A copy of a resolution
or resolutions passed by the Board of Directors of the Company,
certified by the Secretary or an Assistant Secretary of the
Company as being in full force and effect on the date hereof,
authorizing the amendments to the Agreement herein provided for
and the execution, delivery and performance of this Eighth
Amendment and any note or other instrument or agreement required
hereunder.
4.2 AUTHORIZED SIGNATORIES. A certificate, signed by
the Secretary or an Assistant Secretary of the Company dated the
date hereof, as to the incumbency of the person or persons
authorized to execute and deliver this Eighth Amendment and any
instrument or agreement required hereunder on behalf of the
Company.
4.3 REVOLVING NOTES. The Company shall have executed
and delivered an amended and restated Revolving Note in favor of
each Bank in substantially the form of Exhibit A to this Eighth
Amendment reflecting Schedule 2.01 hereto.
5
<PAGE>
4.4 COLLATERAL DOCUMENTS. The Company shall have (and
shall cause any of its Subsidiaries to have) done, executed,
acknowledged, delivered, recorded, re-recorded, filed, re-filed,
registered and re-registered, any and all such further acts,
deeds, conveyances, security agreements, Mortgages, assignments,
estoppel certificates, financing statements and continuations
thereof, notices of assignment, transfers, certificates,
assurances and other instruments as the Agent shall have
requested in order (i) to carry out more effectively the purposes
of this Eighth Amendment and (ii) to perfect and maintain the
validity, effectiveness and priority of any of the Collateral
Documents and the Liens intended to be created thereby.
4.5 RECORDATION OF AMENDMENT TO DEED OF TRUST. An
amendment to the Deed of Trust reflecting changes to said Deed of
Trust as required by this Eighth Amendment, shall have been duly
recorded in a first-priority lien position with the County
Recorder's Office of Clark County, Nevada.
4.6 TITLE INSURANCE. A title insurance company
acceptable to the Banks shall have issued or committed to issue
endorsements to the ALTA Lender's coverage policy of title
insurance issued in connection with the Deed of Trust as
requested by the Agent to reflect this Eighth Amendment and the
amendment to the Deed of Trust or any additional Deeds of Trust.
In addition, one or more other title insurance companies
acceptable to the Agent and the Banks shall have issued such
reinsurance as the Agent and the Banks may require. No title
matter may be insured over by any title company without the
express written consent of the Agent.
4.7 AMENDMENT FEE. An amendment fee of $212,500 for
the ratable benefit of each Bank according to its Revolving
Commitment as in effect immediately prior to the effectiveness of
this Eighth Amendment.
4.8 UPFRONT FEE. An upfront fee for the benefit of
each Bank increasing its Revolving Commitment as contemplated by
this Eighth Amendment in an amount equal to 75 basis points on
such increased portion. If the Appraisal referred to in the
definition of "Available Aggregate Revolving Commitment" does not
demonstrate an Appraisal Value sufficient to permit an increase
in the Aggregate Revolving Commitment to $200,000,000, as
provided in such definition, the Agent shall notify each Bank,
and each Bank shall return to the Agent for distribution to the
Company, the portion of its upfront fee attributable to the
portion of its Revolving Commitment which was not increased.
4.9 OTHER EVIDENCE. Such other evidence with respect
to the Company or any other person as the Agent or any Bank may
reasonably request to establish the consummation of the
6
<PAGE>
transactions contemplated hereby, the taking of all corporate
action in connection with this Eighth Amendment and the Agreement
and the compliance with the conditions set forth herein.
5. MISCELLANEOUS.
5.1 EFFECTIVENESS OF THE AGREEMENT. Except as hereby
expressly amended, the Agreement shall remain in full force and
effect, and is hereby ratified and confirmed in all respects.
5.2 WAIVERS. This Eighth Amendment is specific in
time and in intent and does not constitute, nor should it be
construed as, a waiver of any other right, power or privilege
under the Loan Documents, or under any agreement, contract,
indenture, document or instrument mentioned in the Loan
Documents; nor does it preclude any exercise thereof or the
exercise of any other right, power or privilege, nor shall any
future waiver of any right, power, privilege or default
hereunder, or under any agreement, contract, indenture, document
or instrument mentioned in the Loan Documents, constitute a
waiver of any other default of the same or of any other term or
provision.
5.3 COUNTERPARTS. This Eighth Amendment may be
executed in any number of counterparts and all of such
counterparts taken together shall be deemed to constitute one and
the same instrument. This Eighth Amendment shall not become
effective until the Parent Guarantor, the Company, the Majority
Banks and the Agent shall have signed a copy hereof, whether the
same or counterparts, and the same shall have been delivered to
the Agent.
5.4 PREPAYMENT AND BORROWING OF LOANS. If any Bank's
Commitment Percentage is increased as a result of this Eighth
Amendment (an "Increasing Bank"), the Company shall be deemed to
have requested a Borrowing of Loans from each Increasing Bank in
an amount such that, after giving effect to the prepayments
described in the next sentence, the Interest Periods and
principal amounts of all Banks' outstanding Loans shall be
ratable in accordance their respective revised Commitment
Percentages set forth on revised Schedule 2.01 hereto. The
proceeds of such Loans shall be used to partially and ratably
prepay the outstanding Loans of any Bank whose Commitment
Percentage is decreased as a result of this Eighth Amendment (a
"Decreasing Bank"), and the Company shall be deemed to have
requested a prepayment of a portion of each Decreasing Bank's
Loans in an amount such that, after giving effect to the
Borrowing described above, the Interest Periods and principal
amounts of all Banks' outstanding Loans shall be ratable in
accordance with their respective revised Commitment Percentages.
7
<PAGE>
Notwithstanding anything in the Agreement to the contrary, the
Company shall pay accrued interest on the portion of each Loan so
prepaid on the next regularly scheduled interest payment date
relating to the remaining portion of such Loan, and the Company
shall not be required to pay any costs set forth in Section 3.04
of the Agreement with respect to such prepayments.
5.5 JURISDICTION. This Eighth Amendment, and any
instrument or agreement required hereunder, shall be governed by
and construed under the laws of the State of Nevada; provided
that the Agent and the Banks shall retain all rights arising
under Federal law.
IN WITNESS WHEREOF, the parties hereto have caused this
Eighth Amendment to be duly executed and delivered as of the date
first written above.
RIO PROPERTIES, INC.
By: /s/ James A. Barrett, Jr.
Title: President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By: /s/ L. Chenevert, Jr.
L. Chenevert, Jr.
Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
By: /s/ Jon Varnell
Jon Varnell
Managing Director
WELLS FARGO BANK NATIONAL ASSOCIATION
By: /s/
Title: Vice President
(Signatures continue)
8
<PAGE>
FIRST SECURITY BANK OF IDAHO, N.A.
By: /s/
Title: Vice President
NBD BANK
By: /s/
Title: Authorized Agent
SOCIETE GENERALE
By: /s/ Donald L. Schubert
Title: Vice President
BANK OF AMERICA NEVADA
By: /s/ Alan F. Gordon
Title: Vice President
U.S. BANK OF NEVADA
By: /s/
Title: Officer
BANK OF SCOTLAND
By: /s/
Title:
MIDLANTIC BANK, N.A.
By: /s/ Denise D. Killen
Title: Vice President
(Signatures continue)
9
<PAGE>
BANK OF HAWAII
By: /s/ Joseph T. Donaldson
Title: Vice President
10
<PAGE>
SCHEDULE 2.01
TO CREDIT AGREEMENT
SCHEDULE OF BANK COMMITMENTS
REVOLVING COMMITMENTS
<TABLE>
<CAPTION>
Revolving Commitment
Commitment Percentage
<S> <C> <C>
Bank of America National Trust
and Savings Association $ 41,714,286.00 20.85714300
Societe Generale 28,434,261.00 14.21713050
Wells Fargo Bank National
Association 28,434,261.00 14.21713050
First Security Bank of
Idaho, N.A. 22,858,000.00 11.42900000
NBD Bank 16,000,000.00 8.00000000
Bank of America Nevada 14,315,739.00 7.15786950
U.S. Bank of Nevada 14,243,453.00 7.12172650
Bank of Scotland 12,000,000.00 6.00000000
Midlantic Bank, N.A. 12,000,000.00 6.00000000
Bank of Hawaii 10,000,000.00 5.00000000
TOTAL $200,000,000.00 100%
</TABLE>
1
<PAGE>
EXHIBIT A
TO EIGHTH AMENDMENT
FORM OF SECOND AMENDED AND RESTATED REVOLVING NOTE
RIO PROPERTIES, INC.
$ Las Vegas, Nevada
July 15, 1993
FOR VALUE RECEIVED, RIO PROPERTIES, INC., a Nevada
corporation (the "Company"), promises to pay to the order of
(the "Bank"), the principal amount of $ or, if
different, the aggregate principal amount of Loans made by the
Bank to the Company under the Credit Agreement referred to below
outstanding on the Revolving Termination Date.
The Company also promises to pay interest on the unpaid
principal amount hereof from the date hereof until paid at the
rates and at the times which shall be determined in accordance
with the provisions of the Credit Agreement dated as of July 15,
1993, among the Company, the Banks named therein and Bank of
America National Trust and Savings Association, as Agent (as
amended from time to time, the "Credit Agreement").
This amended and restated Revolving Note (the "Note")
is one of the Company's Revolving Notes issued pursuant to and
entitled to the benefits of the Credit Agreement to which
reference is hereby made for a more complete statement of the
terms and conditions under which the Loans evidenced hereby are
made and are to be repaid. This Note amends and restates the
prior note delivered by the Company in favor of the Bank.
Capitalized terms used herein without definition shall have the
meanings set forth in the Credit Agreement.
All payments of principal and interest in respect of
this Note shall be made in lawful money of the United States of
America in same day funds at the office of Bank of America for
credit to: BANCONTROL Account No. 12337-14196, Reference: Rio
Properties, Inc., at 1850 Gateway Boulevard, Concord, California
94520 or at such other place as shall be designated in writing
for such purpose in accordance with the terms of the Credit
Agreement. Each of the Bank and any subsequent holder of this
Note agrees that before disposing of this Note or any part hereof
it will make a notation hereon of all principal payments
previously made hereunder and of the date to which interest
hereon has been paid; provided that the failure to make a
1
<PAGE>
notation of any payment made on this Note shall not limit or
otherwise affect the obligation of the Company hereunder with
respect to payments of principal or interest on this Note.
This Note is subject to prepayment as provided in the
Credit Agreement. Upon the occurrence of an Event of Default,
the unpaid balance of the principal amount of this Note may
become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit
Agreement.
The Company promises to pay all actual and reasonable
costs and expenses, including reasonable attorneys' fees and the
reasonably allocated cost of inhouse counsel and staff, incurred
in the collection and enforcement of this Note. The Company and
endorsers of this Note hereby consent to renewals and extensions
of time at or after the maturity hereof, without notice, and
hereby waive diligence, presentment, protest, demand and notice
of every kind and, to the full extent permitted by law, the right
to plead any statute of limitations as a defense to any demand
hereunder.
THIS CREDIT AGREEMENT AND THIS NOTE SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEVADA; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL
RIGHTS ARISING UNDER FEDERAL LAW.
IN WITNESS WHEREOF, the Company has caused this Note to
be executed and delivered by its duly authorized officer, as of
the day and year and the place first above written.
RIO PROPERTIES, INC.
By:
Title:
2
<PAGE>
TRANSACTIONS ON REVOLVING NOTE
<TABLE>
<CAPTION>
Amount of Outstanding
Type of Amount of End of Principal or Principal
Loan Made Loan Made Interest Interest Paid Balance Notation
Date This Date This Date Period This Date This Date Made By
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
3
<PAGE>
CONSENT OF GUARANTOR
The undersigned hereby consents to the foregoing Eighth
Amendment to Credit Agreement dated as of June 17, 1996 and
confirms that its Parent Guaranty dated as of July 15, 1993
remains in full force and effect before and after giving effect
to this Eighth Amendment.
RIO PROPERTIES, INC.
By: /s/ James A. Barrett, Jr.
Title: President
1
<PAGE>
EXHIBIT 11.01
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
THREE MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
PRIMARY:
EARNINGS:
NET INCOME $5,475,276 $4,914,265
SHARES:
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND EQUIVALENTS OUTSTANDING 21,237,707 21,292,259
STOCK OPTIONS 434,062 397,568
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, AS ADJUSTED 21,671,769 21,689,827
EARNINGS PER COMMON SHARE:
NET INCOME PER COMMON SHARE $ 0.25 $ 0.25
FULLY DILUTED:
EARNINGS:
NET INCOME $5,475,276 $4,914,265
SHARES:
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND EQUIVALENTS OUTSTANDING 21,237,707 21,292,259
STOCK OPTIONS 434,198 397,768
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, AS ADJUSTED 21,671,905 21,690,027
EARNINGS PER COMMON SHARE:
NET INCOME PER COMMON SHARE $ 0.25 $ 0.23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
PRIMARY:
EARNINGS:
NET INCOME $10,801,110 $9,425,997
SHARES:
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND EQUIVALENTS OUTSTANDING 21,202,588 21,293,134
STOCK OPTIONS 361,978 351,687
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, AS ADJUSTED 21,564,566 21,644,821
EARNINGS PER COMMON SHARE:
NET INCOME PER COMMON SHARE $ 0.50 $ 0.50
FULLY DILUTED:
EARNINGS:
NET INCOME $10,801,110 $9,425,997
SHARES:
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND EQUIVALENTS OUTSTANDING 21,202,588 21,293,134
STOCK OPTIONS 364,565 370,315
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, AS ADJUSTED 21,567,153 21,663,449
EARNINGS PER COMMON SHARE:
NET INCOME PER COMMON SHARE $ 0.50 $ 0.44
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted
from the consolidated financial statements of Rio
Hotel & Casino, Inc. for the period from January 1,
1996 through June 30, 1996, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 12,000
<SECURITIES> 0
<RECEIVABLES> 5,914
<ALLOWANCES> 1,219
<INVENTORY> 2,295
<CURRENT-ASSETS> 24,924
<PP&E> 393,015
<DEPRECIATION> 54,706
<TOTAL-ASSETS> 371,485
<CURRENT-LIABILITIES> 43,064
<BONDS> 142,164
0
0
<COMMON> 212
<OTHER-SE> 173,658
<TOTAL-LIABILITY-AND-EQUITY> 371,485
<SALES> 109,861
<TOTAL-REVENUES> 109,861
<CGS> 0
<TOTAL-COSTS> 87,533
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,355
<INCOME-PRETAX> 16,973
<INCOME-TAX> 6,172
<INCOME-CONTINUING> 10,801
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,801
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
