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: March 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-11569
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.
21,239,341 shares of Common Stock, $0.01 par value as of
May 3, 1996
This document consists of 18 pages with exhibits, 15 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 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
EXHIBIT INDEX 16
EXHIBITS 17
2
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1996 1995
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $12,986,097 $19,992,695
ACCOUNTS RECEIVABLE, NET 5,905,920 4,313,442
FEDERAL INCOME TAXES RECEIVABLE ---- 190,914
INVENTORIES 1,466,469 1,794,850
PREPAID EXPENSES AND OTHER CURRENT ASSETS 5,178,020 4,638,090
TOTAL CURRENT ASSETS 25,536,506 30,929,991
PROPERTY AND EQUIPMENT:
LAND AND IMPROVEMENTS 40,596,162 37,509,960
BUILDING AND IMPROVEMENTS 194,483,154 192,818,896
EQUIPMENT, FURNITURE, AND IMPROVEMENTS 70,382,573 68,500,267
LESS: ACCUMULATED DEPRECIATION (50,643,960) (46,707,850)
254,817,929 252,121,273
CONSTRUCTION IN PROGRESS 42,983,810 17,173,483
NET PROPERTY AND EQUIPMENT 297,801,739 269,294,756
OTHER ASSETS:
OTHER, NET 8,179,941 8,566,847
$331,518,186 $308,791,594
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
CURRENT MATURITIES OF LONG-TERM DEBT $25,252 $25,252
ACCOUNTS PAYABLE 3,708,161 4,562,132
ACCRUED EXPENSES 11,308,619 9,136,226
ACCOUNTS PAYABLE-RELATED PARTY 13,432,851 6,641,506
FEDERAL INCOME TAXES PAYABLE 2,119,297 ----
ACCRUED INTEREST 2,635,144 4,726,915
TOTAL CURRENT LIABILITIES 33,229,324 25,092,031
NON-CURRENT LIABILITIES:
LONG-TERM DEBT, LESS CURRENT MATURITIES 118,176,765 110,176,765
DEFERRED INCOME TAXES 11,533,100 10,634,898
TOTAL NON-CURRENT LIABILITIES 129,709,865 120,811,663
TOTAL LIABILITIES 162,939,189 145,903,694
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
COMMON STOCK, $0.01 PAR VALUE;
100,000,000 SHARES AUTHORIZED;
21,183,746 (1996) AND 21,139,146 (1995) SHARES
ISSUED AND OUTSTANDING 211,838 211,392
ADDITIONAL PAID-IN CAPITAL 113,884,975 113,520,158
RETAINED EARNINGS 54,482,184 49,156,350
TOTAL STOCKHOLDERS' EQUITY 168,578,997 162,887,900
$331,518,186 $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
MARCH 31, 1996 MARCH 31, 1995
(Unaudited) (Unaudited)
<S> <C> <C>
REVENUES:
CASINO $28,591,974 $24,565,850
ROOM 10,447,578 7,275,008
FOOD AND BEVERAGE 17,187,397 13,831,753
OTHER 3,562,515 2,529,411
CASINO PROMOTIONAL ALLOWANCES (4,748,340) (4,373,869)
55,041,124 43,828,153
EXPENSES:
CASINO 13,022,789 10,698,519
ROOM 3,319,454 2,123,146
FOOD AND BEVERAGE 13,423,506 11,104,366
OTHER 1,866,675 1,508,289
SELLING, GENERAL AND ADMINISTRATIVE 7,990,396 6,386,723
DEPRECIATION AND AMORTIZATION 4,064,450 3,619,773
43,687,270 35,440,816
OPERATING PROFIT 11,353,854 8,387,337
OTHER INCOME (EXPENSE):
INTEREST INCOME 47,753 56,392
INTEREST EXPENSE (2,876,496) (1,152,991)
(2,828,743) (1,096,599)
INCOME BEFORE INCOME TAX PROVISION 8,525,111 7,290,738
INCOME TAX PROVISION (3,199,277) (2,779,006)
NET INCOME $ 5,325,834 $ 4,511,732
EARNINGS PER COMMON SHARE:
PRIMARY:
NET INCOME $0.25 $0.21
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 21,456,306 21,612,639
FULLY DILUTED:
NET INCOME $0.25 $0.21
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 21,532,203 21,696,551
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 THREE MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1995
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $5,325,834 $4,511,732
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
COMPENSATION EXPENSE RECOGNIZED FROM
STOCK OPTION GRANT 30,400 32,844
DEPRECIATION AND AMORTIZATION 4,064,450 3,619,773
PROVISION FOR UNCOLLECTIBLE ACCOUNTS 375,694 148,210
DEFERRED INCOME TAXES 898,202 528,649
(INCREASE) DECREASE IN ASSETS:
ACCOUNTS RECEIVABLE (1,965,106) (1,107,423)
INVENTORIES 328,381 126,655
PREPAID EXPENSES AND OTHER CURRENT ASSETS (349,016) 162,615
OTHER, NET 291,074 (691,069)
INCREASE (DECREASE) IN LIABILITIES:
ACCOUNTS PAYABLE (853,971) 125,762
ACCRUED FEDERAL INCOME TAX PAYABLE 2,261,310 2,192,883
ACCRUED EXPENSES 2,172,393 (145,318)
ACCRUED INTEREST (2,091,771) 162,888
NET CASH PROVIDED BY OPERATING ACTIVITIES 10,487,874 9,668,201
CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASE OF LAND AND IMPROVEMENTS (3,086,202) (2,212,352)
PURCHASE OF EQUIPMENT, FURNITURE, AND
IMPROVEMENTS 22,601,120) (18,283,477)
NET CASH (USED IN) INVESTING ACTIVITIES (25,687,322) (20,495,829)
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM BORROWINGS 8,000,000 - - -
NET PROCEEDS FROM COMMON STOCK ISSUANCE 251,600 33,300
PAYMENTS ON NOTES AND LOANS PAYABLE - - - (45,014,175)
REPURCHASE OF COMMON STOCK (58,750) (1,610,875)
NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES 8,192,850 (46,591,750)
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (7,006,598) (57,419,378)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 19,992,695 76,426,258
CASH AND CASH EQUIVALENTS, END OF PERIOD $12,986,097 $19,006,880
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES
THREE MONTHS ENDED
MARCH 31, MARCH 31,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Cash payments made for interest (net
of amounts capitalized) $5,114,723 $1,165,183
Cash payments made for income taxes $0 $0
</TABLE>
1996
Purchase of property and equipment financed through payables
totaled $13,429,785.
Accounts receivable increased by $3,066. This was financed
through payables and will be reimbursed to the Company.
Tax benefit arising from the exercise of stock options granted
under the Company's Non-Statutory Stock Option Plan totaled
$142,013.
1995
Purchase of property and equipment financed through payables
totaled $5,613,418.
Additional asset purchases financed through payables totaled
$23,280.
Tax benefit arising from the exercise of stock options granted
under the Company's Non-Statutory Stock Option Plan totaled
$21,945.
6
<PAGE>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 sheet as of March 31, 1996 and the
related consolidated statements of income and consolidated
statements of cash flows for the three month periods ended
March 31, 1996 and March 31, 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>
MARCH 31, DECEMBER 31,
1996 1995
(Unaudited)
<S> <C> <C>
Bank loan ("Rio Bank Loan"),
originally a $65 million
revolving credit facility,
which was amended to be a
$175 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. $ 18,000,000 $ 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. 202,017 202,017
118,202,017 110,202,017
Less current maturities (25,252) (25,252)
$ 118,176,765 $ 110,176,765
</TABLE>
The prime interest rate quoted by the Company's primary
lenders at March 31, 1996 and December 31, 1995 was 8.50%.
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 $157 million and $165 million
available under the Rio Bank Loan at March 31, 1996 and
December 31, 1995, respectively.
7
<PAGE>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 three months ended
March 31, 1996 and 1995 were $3,199,277 and $2,779,006,
respectively, which represent effective rates of 37.5% and
38.1%, respectively. A reconciliation between the
statutory rates and the effective rates is as follows:
<TABLE>
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 2.1% 1.0%
Effective Rate 37.5% 38.1%
</TABLE>
The Company's deferred tax assets (liabilities) at March
31, 1996 consisted of the following:
<TABLE>
<CAPTION>
CURRENT NON-CURRENT
<S> <C> <C>
Depreciation and amortization ($12,298,054)
Deferred employee benefit $370,122
Bad debt expense 439,791
Other deferred tax
liabilities, net 764,954
$809,913 ($11,533,100)
</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, 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 MARCH 31, 1996 AND 1995
OPERATING PROFIT
Operating profit for the Company increased to $11.4 million in
the first quarter of 1996 from $8.4 million in the first
quarter of 1995, an increase of $3.0 million or 35%.
Management believes that the improvement in operating results
was due to increased business levels during the first quarter
of 1996 as a result of having an additional 365 new hotel
suites placed into service in February 1995, 184 new hotel
suites placed into service in March 1995, 141 new hotel suites
placed into service in December 1995, and the addition of 18
table games, compared to the first quarter of 1995. Management
believes that operating efficiencies also improved from the
first quarter of 1995 to the first quarter of 1996 in the food
and beverage department.
REVENUES
Net revenues for the Company increased to $55.0 million in the
first quarter of 1996 from $43.8 million in the first quarter
of 1995, an increase of $11.2 million or 26%. Casino revenues
increased to $28.6 million in the first quarter of 1996 from
$24.6 million in the first quarter of 1995, an increase of $4.0
million or 16%. The increase in casino revenues was due
primarily to increases in both slot machine revenues and table
game revenues. Slot machine revenues increased $1.7 million or
11% to $16.6 million in the first quarter of 1996 from $14.9
million in the first quarter of 1995. The increase in slot
machine revenues resulted primarily from increased business
levels from the new hotel suites placed in service during 1995.
Table game revenues increased $2.4 million or 31% to $10.3
million in the first quarter of 1996 from $7.9 million in the
first quarter of 1995. The increase in table game revenues
resulted primarily from the addition of 6 table games in April
1995, the addition of 8 table games in November 1995, and the
addition of 4 table games in January 1996. Table game revenues
also increased as a result of the increased business level from
the new hotel suites discussed above.
Room revenues increased by $3.2 million or 44% to $10.5 million
in the first quarter of 1996 from $7.3 million in the first
quarter of 1995. The increase in room revenue resulted
primarily from the addition of the new hotel suites as
discussed above, as well as an increase in the average room
rate of approximately $2.69 per room night during the first
quarter of 1996 compared to the first quarter of 1995. The
average daily room rate during the first quarter of 1996 was
approximately $76.25 compared to approximately $73.56 during
the first quarter of 1995. The additional 690 suites placed
into service in 1995 increased the Rio's total to 1,551 suites.
The average number of suites available during the first quarter
of 1996 was 1,551 suites compared to 1,142 suites available
during the first quarter of 1995. Demand for the Rio's suites
remained high during the first quarter of 1996 with a 97%
occupancy rate, compared to the 96% occupancy rate attained
during the first quarter of 1995.
Food and beverage revenues increased to $17.2 million in the
first quarter of 1996 from $13.8 million in the first quarter
of 1995, an increase of $3.4 million or 24%. An increase in
the average food check of approximately $1.00 per cover and
increased beverage sales as a result of increased gaming
customers contributed to the increase in food and beverage
revenues.
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 MARCH 31, 1996 AND 1995 (continued)
Other revenues increased by $1.0 million or 41% to $3.5 million
in the first quarter of 1996 from $2.5 million in the first
quarter of 1995. The increase in other revenues resulted
primarily from an increase in telephone revenue from the
additional hotel suites, as well as increased merchandise sales
and showroom admissions revenue resulting from increased
customers.
OPERATING MARGINS
The Company's operating margins improved slightly during the
first quarter of 1996 compared to the first quarter of 1995.
Operating profit as a percentage of net revenues was 21% in the
first quarter of 1996 compared to 19% during the first quarter
of 1995. Casino operating profit was 54% in the first quarter
of 1996 compared to 56% in the first quarter of 1995.
Management believes that the decline in the casino operating
margin is the result of a decrease in the table games win
percentage to 15.0% in the first quarter of 1996 from 16.0% in
the first quarter of 1995. Food and beverage operating profit
was 22% during the first quarter of 1996 compared to 20% during
the first quarter of 1995. Management believes that this
improvement is the result of effective cost controls and a
higher average food check during the first quarter of 1996
compared to the first quarter of 1995. Hotel operating profit
was 68% during the first quarter of 1996 compared to 71% during
the first quarter of 1995. Management believes 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% of other
revenues in the first quarter of 1996 compared to 60% in the
first quarter of 1995. Management believes the improvement is
due to the increase in other revenues, particularly telephone
and showroom admissions, which do not require significant
incremental expense. Selling, general and administrative
expenses were 15% of the net revenues in both the first quarter
of 1996 and 1995.
PROMOTIONAL ALLOWANCES
During the first quarter of 1996, promotional allowances were
$4.7 million, or 8% 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 $2.8 million. This
compares to the first quarter of 1995 when promotional
allowances were $4.4 million or 9% of gross revenues and the
estimated cost of providing such promotional allowances was
$2.7 million.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased by $0.5 million or 12%
to $4.1 million in the first quarter of 1996 compared to $3.6
million in the first quarter of 1995. This increase is
primarily attributable to depreciation expense from the
Company's $75 million expansion project (the "Phase III
Expansion") and the Company's $20 million expansion project
(the "Phase IV Expansion"). The Phase III Expansion 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. The Phase IV Expansion was
completed in December 1995 and included 141 new hotel suites,
approximately 5,400 square feet of meeting room space, and also
doubled the size of the existing 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 $1.7 million or 150% to $2.9
million in the first quarter of 1996 from $1.2 million in the
first quarter of 1995. Interest expense increased primarily as
a result of the Company successfully completing in July 1995 a
placement of $100 million in principal amount of 10 5/8% Senior
Subordinated Notes Due 2005. Interest expense in the first
quarter of 1996 was reduced by $0.4 million because of interest
10
<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 MARCH 31, 1996 AND 1995 (continued)
capitalized on amounts expended on the Company's $185 million
expansion project (the "Phase V Expansion"). The Phase V
Expansion, for which construction commenced in September 1995,
will center around a 41-story curved tower containing
approximately 1,000 new suites located immediately southeast of
the existing towers. The Phase V Expansion is planned to
include 120,000 square feet of public space containing a casino
expansion with capacity for approximately 600 slot machines and
30 table games, new retail and entertainment space, 6
additional restaurants, including one restaurant at the top of
the tower overlooking the Strip, as well as an expanded pool
and beach area and additional parking facilities. The new
suites will be similar in size and decor to the existing
suites. Opening of the Phase V Expansion is expected to occur
in the spring of 1997. Interest expense in the first quarter
of 1995 was reduced by $0.3 million because of interest
capitalized on amounts expended on the Phase III Expansion.
NET INCOME
Net income for the first quarter of 1996 was $5.3 million or
$0.25 per share (fully diluted) compared to $4.5 million or
$0.21 per share (fully diluted) for the first quarter of 1995
as a result of the factors discussed above.
MATERIAL CHANGES IN FINANCIAL CONDITION
At March 31, 1996, cash and cash equivalents were $13.0 million
compared with $20.0 million at December 31, 1995. At March 31,
1996, the Company had $157.0 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 Company
did not utilize this ability at the end of the first 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 $75 million
Phase III Expansion, the $20 million Phase IV Expansion and the
$185 million Phase V Expansion.
During the first three months of 1996, cash provided by
operating activities was $10.5 million. Investing activities
used $25.7 million of the Company's cash during the first three
months of 1996. Approximately $1.9 million of such
expenditures was related to the Company's Phase III Expansion,
approximately $2.0 million was related to the Company's Phase
IV Expansion and approximately $16.6 million was related to the
Company's Phase V Expansion. During the first three months of
1996, the Company spent approximately $3.3 million toward the
previously reported acquisition of approximately 22 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
three months of 1996, the Company repurchased 5,000 shares of
Common Stock at an average cost of $11.75 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 April 1, 1996 the Company's capital commitments include
approximately $160.5 million for the Phase V Expansion and
$9.6 million under commitments for the balance of the purchase
price of the approximately 22
11
<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 MARCH 31, 1996 AND 1995 (continued)
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.
12
<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 within which to file an amended complaint that complies
with the applicable pleading requirements. 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.
TOM PAYNE, ET. AL. V. AZTAR CORPORATION, ET. AL., Case No.
698592, instituted on March 27, 1996, in the Superior Court of
the State of California in and for the County of San Diego.
The Company, along with six other casino operators, is named
as a defendant in the action. Three individuals, purportedly
representing a class, allege the defendants have induced the
plaintiffs to play video poker machines based on a false
belief concerning how video poker machines operate, as well as
the extent to which there is an opportunity for a player to
win on a given play. The complaint alleges violations of the
California Unfair Business Practices Act and the California
Consumer Legal Remedies Act. The plaintiffs seek, among other
remedies, damages in an unspecified amount, an injunction
prohibiting the allegedly wrongful acts and the disgorgement
of allegedly ill-gotten gains. The Company has not yet
responded to the complaint; however, management believes the
complaint is without merit and intends vigorously to defend
the allegations.
ITEM 2. CHANGES IN SECURITIES
During the first quarter of 1996, certain options granted
pursuant to the Company's Non-Statutory Stock Option Plan were
exercised, resulting in the issuance of 49,600 shares of the
Company's Common Stock. Also during the first quarter of
1996, the Company repurchased 5,000 shares of its Common
Stock. The repurchased shares of Common Stock were retired.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
13
<PAGE>
ITEM 5. OTHER INFORMATION
The Company's Common Stock began trading on the New York Stock
Exchange under the symbol "RHC" on January 11, 1996. Prior to
this date, the Common Stock was traded on the Nasdaq National
Market under the symbol "RIOH".
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit
NUMBER DESCRIPTION
11.01 Computation of Earnings Per Common Share
27.01 Financial Data Schedule
(b) REPORT ON FORM 8-K
NONE
14
<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)
May 10, 1996 /s/ Roger M. Szepelak
(Date) ROGER M. SZEPELAK
Treasurer and Chief Financial
Officer
(Duly Authorized Officer and
Principal Financial Officer)
15
<PAGE>
EXHIBIT INDEX
Sequential
EXHIBIT DESCRIPTION Page
Number
11.01 Computation of Earnings per Common Share 17
27.01 Financial Data Schedule 18
16
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11.01
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
THREE MONTHS ENDED
MARCH 31, MARCH 31,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
PRIMARY:
EARNINGS:
NET INCOME $ 5,325,834 $ 4,511,732
SHARES:
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND EQUIVALENTS OUTSTANDING 21,167,469 21,297,196
STOCK OPTIONS 288,837 315,443
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, AS ADJUSTED 21,456,306 21,612,639
EARNINGS PER COMMON SHARE:
NET INCOME PER COMMON SHARE $ 0.25 $ 0.21
FULLY DILUTED:
EARNINGS:
NET INCOME $ 5,325,834 $ 4,511,732
SHARES:
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND EQUIVALENTS OUTSTANDING 21,167,469 21,297,196
STOCK OPTIONS 364,734 399,355
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, AS ADJUSTED 21,532,203 21,696,551
EARNINGS PER COMMON SHARE:
NET INCOME PER COMMON SHARE $ 0.25 $ 0.21
</TABLE>
17
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 12,986
<SECURITIES> 0
<RECEIVABLES> 7,163
<ALLOWANCES> 1,257
<INVENTORY> 1,466
<CURRENT-ASSETS> 25,537
<PP&E> 348,446
<DEPRECIATION> 50,644
<TOTAL-ASSETS> 331,518
<CURRENT-LIABILITIES> 33,229
<BONDS> 118,177
0
0
<COMMON> 212
<OTHER-SE> 168,367
<TOTAL-LIABILITY-AND-EQUITY> 331,518
<SALES> 55,089
<TOTAL-REVENUES> 55,089
<CGS> 0
<TOTAL-COSTS> 43,687
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,876
<INCOME-PRETAX> 8,525
<INCOME-TAX> 3,199
<INCOME-CONTINUING> 5,326
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,326
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
