UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 (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)
Registrant's telephone number, including area code
(702) 252-7733
Securities registered pursuant to Section 12(b) of the Act:
Name of each
Title of each class exchange on
which registered
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)
<PAGE>
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 by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-
affiliates of the registrant as of February 29, 1996, based on
the closing price as reported on the New York Stock Exchange of
$13.75 per share, was approximately $222,537,398.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of February 29, 1996.
Common Stock, $.01 par value 21,178,746
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Report is
incorporated by reference from the Rio Hotel & Casino, Inc. Proxy
Statement to be filed with the Commission not later than 120 days
after the end of the fiscal year covered by this Report.
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PART I
ITEM 1. BUSINESS
Rio Hotel & Casino, Inc. (the "Company") owns and operates
the country's only all-suite hotel-casino, the Rio Suite Hotel &
Casino (the "Rio") in Las Vegas, Nevada. Situated on a 45-acre
elevated site adjacent to the Flamingo Road exit from Interstate
15, the freeway linking Las Vegas with Southern California, the
Rio is strategically positioned to attract travelers along
Interstate 15, tourists visiting the Las Vegas Strip and local
Las Vegas residents. The Company markets to both local residents
and Las Vegas visitors. Management believes that the Rio's
unique all-suite concept, diverse high quality dining, easy
access and ample parking provide an attractive alternative to the
Strip and a fun and comfortable environment in which to enjoy
gaming, dining and entertainment.
Decorated throughout in a fun-filled Brazilian Carnival and
rain forest theme, the Rio is currently comprised of an 89,000
square foot casino, three 21-story hotel towers containing 1,551
suites, eight restaurants, seven bars, a 430-seat entertainment
complex, meeting and banquet space, a 59,000 square foot outdoor
entertainment area featuring a landscaped sand beach and two
swimming pools and parking for over 3,200 cars. The Rio's casino
offers approximately 2,000 slot machines, 76 table games, a poker
room, keno and a race and sports book.
The Rio originally opened in 1990 with 424 suites and 44,000
square feet of casino space. Within the past three years the Rio
has been expanded to its present configuration in phases in
accordance with its original master plan. In the fall of 1993,
the Company added a second hotel tower with 437 suites, a new
restaurant and meeting rooms through a $37 million expansion (the
"Phase II Expansion" or "Tower Expansion"). In April 1994, the
Company completed a $25 million expansion (the "Eastside
Expansion") which included a 25,000 square foot addition to the
casino, a two-story parking garage, a new restaurant and the
Copacabana showroom. In March 1995, the Rio completed a $75
million expansion (the "Phase III Expansion") which encompassed
a third hotel tower with 549 suites, 10,000 square feet of casino
space, a new three-level parking garage and a 50% expansion to
its award winning Carnival World Buffet. In December 1995, the
Company completed a $20 million expansion (the "Phase IV
Expansion") which added 141 suites, approximately 5,400 square
feet of meeting room space, 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. Completion of the Phase IV Expansion brought the
Rio's total number of hotel suites to 1,551.
In June 1995, the Company announced a three-phased expansion
and development plan intended to be implemented over the next
several years. The three-phased expansion and development plan
consists of an approximately $185 million expansion at the Rio
(the "Phase V Expansion"), acquisition of approximately 22 acres
of land adjacent to the Rio to be master-planned for the
development of another hotel-casino and the purchase of
approximately 64 acres southeast of Las Vegas (the "Old Vegas
Site") for possible future hotel-casino development. Of the 22
acres of land adjacent to the Rio, approximately 5 acres were
purchased in 1995 and acquisition agreements have been entered
into for the remaining 17 acres. The Company expects to finalize
the purchase of all 17 acres during 1996.
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The Company was incorporated in California in 1981 and
reincorporated in Nevada in 1988. The Company changed its name
from MarCor Resorts, Inc. to Rio Hotel & Casino, Inc. in February
1992. Its executive offices are located at 3700 West Flamingo
Road, Las Vegas, Nevada 89103, and its telephone number is (702)
252-7733.
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.
As currently contemplated, the public area expansion will be
based upon a Brazilian Carnival Mardi Gras theme. The new casino
area will provide regular entertainment, as periodically a themed
overhead entertainment attraction will provide an interactive
show with patrons. The attraction will feature performers dressed
in festive attire who will sing and dance. The attraction may
change to celebrate different holidays and special events.
Management believes the Phase V Expansion will increase the
number of tour and travel customers while enhancing the amenities
available to local patrons. Given the Rio's high average
occupancies and significant room turnaways, management believes
that the additional room inventory will be successfully absorbed.
Opening of the Phase V Expansion is expected to occur in the
spring of 1997.
BUSINESS STRATEGY
The Company's business strategy focuses on attracting and
fostering repeat business from customers in the local resident
and tourist markets in the middle to upper-middle income
segments. To implement its business strategy, the Company
capitalizes on its unique all-suite concept, strategic location,
Brazilian Carnival theme, diverse product offering and friendly
service. The Company strives to provide a quality, affordable
gaming and entertainment experience in order to generate high
customer satisfaction and loyalty. The Rio's value-priced suites
and restaurants provide an attractive alternative to conventional
Las Vegas properties for visitors who desire to avoid the crowds
and congestion of the Strip. The Interstate 15 and Flamingo Road
location is also ideal for attracting local residents.
To encourage repeat visits, the Company attempts to ensure
that each customer has an enjoyable, high quality and high value
experience. Management believes that it must offer consistent
quality, a comfortable and fun atmosphere and, most importantly,
friendly service at affordable prices to provide a high value
experience to its customers. Accordingly, the Rio's suites offer
guests approximately 50% more space than comparably priced Las
Vegas hotel rooms. Similarly, the Company's restaurants have won
awards year after year for their quality dining. All of the Rio's
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restaurants offer generous portions of high quality food at
reasonable prices which management believes is a major factor in
attracting the value-conscious local customer.
Management believes that friendly service combined with a
quality facility are integral to generating repeat business from
locals as well as tourists. As a result, management continually
seeks to instill in each employee a sense of service excellence
designed to exceed guest expectations. To motivate its employees,
management also strives to instill a sense of "Team Rio" in all
of the Company's employees. Management strongly believes that
its employees are one of the Company's biggest assets.
The Company has created an identifiable and innovative
marketing presence and continues to build on its "signature" Rio
theme. The Rio's Brazilian Carnival and rain forest theme
incorporates bright colors, creative interior designs, festive
employee costumes and other exotic touches to contribute to its
tropical ambiance. The Rio's message of a fun-filled, colorful
atmosphere is constantly emphasized. The Rio has developed the
Rio Rita(TM) character as a promotional ambassador to the Rio's
hotel-casino guests and as a focal point upon which many
promotional activities have been built, such as Rio Rita's(TM)
Paycheck Poker Wheel, Carnival Dice(TM), the Jackpot Jungle(TM),
Rio Rita's(TM) Lotto Bucks, Carnival Days(TM), Copacabana(TM)
Dinner Show, Conga Mania(TM) and Brazilia Days(TM). The Company
advertises extensively in the Las Vegas area print, television
and radio media, and periodically in Southern California, Phoenix
and other regional markets.
The success of the Company's business strategy is evidenced
by the large number of awards the Rio has received. In March
1995, the Rio won recognition through 10 "Best of Las Vegas"
awards in an annual readers' survey published by Nevada's largest
daily newspaper. Among others, these distinctions included: "Best
Buffet," "Best Italian Restaurant," "Best Coffee Shop," "Best
Steakhouse," "Friendliest Employees" and "Most Efficient
Service." In addition, the Rio received recognition in the 1995
ZAGAT U.S. HOTELS, RESORTS & SPAS SURVEY for "Best Rooms," "Best
Dining," "Best Service" and "Best Overall" in Las Vegas. Since
these awards, however, are based upon subjective criteria, undue
significance should not be attributed to these awards.
Management believes that these awards exemplify the Company's
reputation for quality and value.
MARKETING STRATEGY
The Company's marketing efforts are targeted at both the
local patron and the tourist market. To market to local patrons,
the Rio relies on its convenient location, its ample parking, its
value-priced food and its slot machine variety. Management
believes that its restaurants, in particular the Carnival World
Buffet, are some of the Rio's greatest attractions for local
patrons. The Carnival World Buffet is one of the most popular
buffets in Las Vegas due to its extensive selections, its high
quality food and the entertainment provided by the live-action
cooking stations. During 1995, the Carnival World Buffet served
an average of approximately 7,500 people per day. In addition to
its emphasis on food and beverage, the Rio also has an aggressive
marketing program which encompasses frequent radio, television
and newspaper advertising, a variety of promotions directed at
the local customer and other programs such as check cashing
promotions.
To attract visitors and fill the Rio's hotel rooms, the
Company markets primarily to three segments of the tourist
market: independent travel, wholesale and special casino
customers. The
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independent travel segment consists of those travelers not
affiliated with groups who make their reservations directly with
the Rio or through independent travel agents. To attract the
independent traveler, the Rio periodically utilizes print media,
radio and direct mail to advertise in Southern California,
Phoenix and other regional travel markets. In addition, the
Company's sales force frequently attends trade shows in order to
establish relationships with and promote the Rio to travel agents
nationwide. The wholesale segment comprises those patrons
participating in travel packages offered by air tour operators.
To capture this segment of the market, the Rio has developed
specialized marketing programs for, and cultivated relationships
with, these operators. Finally, special casino customers are
those frequent gaming customers who are in regular communication
with Rio casino marketing personnel. The Rio utilizes a variety
of promotions and special events and other amenities in marketing
to this segment.
RIO LOCATION
The Rio is strategically located to take advantage of the
dynamic residential and commercial growth of the western portion
of metropolitan Las Vegas, while offering proximity and easy
access to the "Old Four Corners" (Flamingo Road and the Strip)
and the "New Four Corners" (Tropicana Avenue and the Strip) areas
of the Las Vegas Strip.
THE RIO
Since 1992, the Company has consistently expanded the Rio
under its master plan. Upon the completion of the Phase V
Expansion, the Rio will have approximately 2,550 suites, 2,600
slot machines and 92 table games.
<TABLE>
<CAPTION>
APPROXIMATE
TOTALS
AFTER
AS OF AND FOR THE YEAR ENDED COMPLETION
DECEMBER 31, OF
1995 1994 1993 1992 PHASE V
<S> <C> <C> <C> <C> <C>
Casino square
footage 89,000 89,000 79,000 54,000 120,000
Slot machines 2,098 2,200 1,950 1,450 2,600
Table games 73 53 44 31 92
Hotel suites 1,551 861 861 424 2,550
Average daily
hotel occupancy 94.5% 95.9% 96.8% 96.5% --
Average daily
room rate $72.18 $63.80 $62.60 $64.09 --
Restaurant seats 2,540 2,440 1,843 1,209 3,840
</TABLE>
GAMING. The Rio has 89,000 square feet of casino space. The
casino currently has approximately 2,000 slot machines; 76 table
games, including "21," craps, roulette, pai gow poker, Caribbean
stud poker and mini-baccarat; other casino games such as keno and
poker; and a race and sports book.
Gaming operations at the Rio are continually being monitored
and modified to respond to both changing market conditions and
customer demand in an effort to attract new customers while
retaining its existing customer base. New and innovative slot and
table games have been introduced based on
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customer feedback and demand from both local customers and Las
Vegas visitors. Management has introduced such games as Rio
Rita's(TM) Royals, Rio Rita's(TM) Bonus Poker, Sneaky Queens(TM),
Mambo Bucks(TM) and Rio Rita's(TM) Paycheck Poker Wheel.
Management devotes substantial time and attention to the type,
location and player activity of all gaming devices.
HOTEL. The Rio's 21-story hotel towers contain a total of
1,551 suites, comprised of 1,504 standard Rio suites, 16 "super"
suites, 18 "cariocas" suites, 6 two-story penthouse suites, and
7 executive suites that combine a conference room and an
adjoining suite. The Company has progressively added new hotel
suites since 1993 to meet its consistently strong demand. Despite
such expansion, the Rio has maintained average occupancy rates of
95.9% and 94.5% for 1994 and 1995, respectively. During 1994 and
1995, management believes that approximately two potential room
night bookings were turned away for each room night booking
accepted. The Phase V Expansion will add another approximately
1,000 suites in the spring of 1997.
The standard Rio suite measures approximately 600 square
feet, compared to approximately 400 square feet for the typical
Las Vegas hotel room. The Brazilian Carnival and rain forest
theme is carried throughout the guest suites in wall coverings,
art work and other designer accents. Suite amenities include
carved wood finishes, cut glass, polished granite surfaces,
marble tile in the bath areas, room safes and refrigerators.
RESTAURANTS. While important to attracting Las Vegas
visitor gaming customers, the high quality, value and variety of
food services are critical to consistently attracting the local
resident gaming customer to the Rio. To provide such variety,
seven bars and eight restaurants are located in the Rio's main
floor area. The Rio currently serves an average of approximately
13,000 meals per day, including banquets and room service. The
following table sets forth, for each restaurant, the type of
service provided and the current seating capacity:
<TABLE>
<CAPTION>
NUMBER
TYPE OF
SEATS
<S> <C> <C>
All American Bar Steaks, ribs, chicken and seafood 202
& Grille
Antonio's Italian fine-dining 100
Beach Cafe 24-hour full menu coffee shop 318
featuring American and Chinese
cuisine
Buzios Seafood and oyster bar 160
Carnival World Buffet with live action cooking 1,040
Buffet featuring Brazilian, Chinese,
Italian, Mexican, Japanese, Western
BBQ and traditional buffet
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Toscano's Deli & Deli items, pizza and pasta, ice 104
Market cream and gelato, and a large
selection of bakery products
Copacabana Copacabana Dinner Show and Club Rio 430
Showroom nightclub
Fiore Rotisserie Fine-dining featuring rotisserie- 186
& Grille grilled seafood, beef and poultry
Total 2,540
</TABLE>
ENTERTAINMENT AND OTHER ATTRACTIONS. The Rio's Copacabana
Showroom is a unique, circular 430-seat video, entertainment and
restaurant complex which features two 12-foot by 90-foot video
screens, an exhibition cooking area, multiple tiers of dining
room seating and a stage. The Copacabana Showroom features the
Copacabana Dinner Show, a musical review designed around the
Rio's theme. After the dinner show the Copacabana Showroom is
converted into Club Rio, a late-night dance club. The showroom is
also used for casino-hosted events, concerts, viewing of sporting
events on the large video screens, and corporate meetings that
capitalize on the unique audio visual qualities of the room.
The Ipanema Lounge and Mambo's Lounge each offer live
entertainment in separate casino cocktail settings. The Rio also
houses a gift shop, a Rio logo shop, a spa, a hair and beauty
salon, and an exercise room, as well as approximately 13,250
square feet of public meeting and banquet room facilities.
The Rio's pool/outdoor entertainment area is approximately
59,000 square feet and includes a landscaped sand beach, an 11-
foot waterfall, two swimming pools, a multi-level spa, and a
terrace bar and food service facility. The Company hosts beach
parties, volleyball games, outdoor concerts with name performers
and other special events, including professional sporting events.
EXPANSION STRATEGY
RIO MASTER PLAN. The Rio's conceptual master plan was
originally designed to accommodate multiple expansions without
significantly interrupting normal business operations. This
design included construction of a reinforced foundation for the
hotel tower and a elevator core to support and facilitate
additional room construction. The Company has also assembled
ample acreage to allow future expansions. Starting from its
original 30 acres, the Company acquired additional acreage in
1989 and 1991, bringing the current Rio site to 45 acres,
exclusive of the additional 22 acres currently under acquisition
as described elsewhere herein.
Management believes that a high quality, well-maintained
property offering innovative entertainment is integral to success
in the highly competitive Las Vegas gaming market. This belief
has driven the Company's master plan development strategy. The
Company has added substantial new facilities at the Rio every
year since 1992.
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<TABLE>
<CAPTION>
START
DATE OPENING
<S> <C> <C>
Initial Construction 12/88 1/90
Casino (10,000 sq. ft.)/Buffet
Expansion 7/92 12/92
Phase II Expansion
Buzios Restaurant 1/93 5/93
Meeting Rooms 1/93 8/93
437-Suite Tower 1/93 9/93
Eastside Expansion
Two-Story Parking Garage 7/93 10/93
Casino Space (25,000 sq. ft.) 7/93 12/93
Copacabana Showroom 7/93 2/94
Fiore Restaurant 7/93 4/94
Expanded Pool Area 7/93 4/94
Phase III Expansion
Three-Story Parking Garage 5/94 8/94
Casino Space (10,000 sq. ft.) 5/94 11/94
Buffet Expansion 5/94 11/94
549-Suite Tower 5/94 2/95
Phase IV Expansion
141-Suite Addition 4/95 12/95
Buzios Expansion 4/95 12/95
Meeting Rooms Expansion 4/95 11/95
Health Club and Salon 4/95 12/95
</TABLE>
To date, the Company has invested in excess of $250 million
in the development, expansion and renovation of the Rio. The
Phase V Expansion will continue the Rio's commitment to continued
development and provide new, innovative entertainment
attractions.
ADDITIONAL GAMING OPPORTUNITIES. The Company has also
entered into commitments to acquire approximately 22 acres of
land adjacent to the Rio site, bringing the total Rio acreage to
approximately 67 acres. The entire Rio site is now being master-
planned for the development of another hotel-casino, the size and
timing of which has not yet been determined.
As the third step in its strategic plan to provide further
growth for the Company, in 1995 the Company purchased the
approximately 64 acre Old Vegas Site southeast of Las Vegas in
Henderson, Nevada. The Old Vegas Site, already zoned for a hotel-
casino, is situated where the Boulder Highway enters the Las
Vegas valley from Phoenix and Laughlin along U.S. Highway 93-95.
The timing and scale of the proposed development has not yet been
determined. Moreover, the Company may pursue additional
opportunities that management believes to be in the best
interests of the Company.
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COMPETITION
The gaming industry includes land-based casinos, dockside
casinos, riverboat casinos, casinos located on Native American
land and other forms of legalized gaming. There is intense
competition among companies in the gaming industry, some of which
have significantly greater resources than the Company.
The Rio faces competition from all other casinos and hotels
in the Las Vegas area, including competitors located on the Las
Vegas Strip, on the Boulder Highway and in downtown Las Vegas.
Such competition includes a number of hotel-casinos targeted
primarily toward local residents, as well as numerous non-hotel
gaming facilities targeted toward local residents. In recent
months, several of the Company's direct competitors have opened
new hotel-casinos or have commenced or completed major expansion
projects, and other expansions are in progress or are planned. As
of December 31, 1995, there were 37 major gaming properties
located on or near the Las Vegas Strip, 14 located in the
downtown area, 4 located on the Boulder Highway and 11 located in
other areas in or near Las Vegas. According to the Las Vegas
Convention and Visitors Authority, the Las Vegas hotel-motel room
inventory was 90,046 as of December 31, 1995. Seven new hotel-
casinos and 7 hotel-casino expansions are under construction or
have been announced, which will add approximately 19,000 rooms to
the Las Vegas area over approximately the next two years. Four
of the new hotel-casinos are major resorts with a theme and an
attraction which are expected to draw significant numbers of
visitors. Major expansions or enhancements of existing
properties or the construction of new properties by competitors,
could have a material adverse effect on the Company's business.
To a lesser extent, the Rio competes with hotel-casinos
located in the Mesquite, Laughlin and Reno-Lake Tahoe areas of
Nevada and in Atlantic City, New Jersey. The Company also
competes with state-sponsored lotteries, on- and off-track
wagering, card parlors, riverboat and Native American gaming
ventures and other forms of legalized gaming in the United
States, as well as with gaming on cruise ships and international
gaming operations. In addition, many states have legalized, and
additional other states are currently considering legalizing,
casino gaming within those states. The Company believes that the
growth in the legalization of gaming is fueled by a combination
of increasing popularity and acceptability of gaming activities
and the desire and need for states and local communities to
generate revenues without increasing general taxation. The
Company believes that the legalization of unlimited land-based
casino gaming in or near any major metropolitan area, such as
Chicago or Los Angeles, could have a material adverse effect on
its current hotel-casino business. According to the Attorney
General of California, as of January 1996, there were
approximately 9,000 slot machines illegally located in
approximately 30 casinos on Native American land throughout
California, including four casinos in the Palm Springs area. In
November 1995, a proposed initiative for the approval of gaming
on Native American land in California was submitted to the
California Attorney General's office but is facing opposition
from certain government, law enforcement and religious leaders.
The development of casinos, lotteries and other forms of gaming
in other states, particularly in areas close to Nevada, such as
California, could adversely affect the Company's operations.
As its principal methods of competition, the Company
utilizes what management believes to be its unique all-suite
concept based upon a Brazilian Carnival and rain forest theme,
diverse high quality dining, friendly service and ample parking,
which management believes provide an attractive alternative
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to the closest source of the Company's competition, the Las Vegas
Strip, and a fun and comfortable environment in which to enjoy
gaming, dining and entertainment.
REGULATION AND LICENSING
The ownership and operation of casino gaming facilities in
Nevada are subject to: (i) the Nevada Gaming Control Act and the
regulations promulgated thereunder (collectively, "Nevada Act");
and (ii) various local regulations. The Company's gaming
operations are subject to the licensing and regulatory control of
the Nevada Commission, the Nevada State Gaming Control Board (the
"Nevada Board"), and the Clark County Liquor and Gaming Licensing
Board (the "Clark County Board"). The Nevada Commission, the
Nevada Board, and the Clark County Board are collectively
referred to as the "Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the
Nevada Gaming Authorities are based upon declarations of public
policy which are concerned with, among other things: (i) the
prevention of unsavory or unsuitable persons from having a direct
or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible
accounting practices and procedures; (iii) the maintenance of
effective controls over the financial practices of licensees,
including the establishment of minimum procedures for internal
fiscal affairs and the safeguarding of assets and revenues,
providing reliable record keeping and requiring the filing of
periodic reports with the Nevada Gaming Authorities; (iv) the
prevention of cheating and fraudulent practices; and (v)
providing a source of state and local revenues through taxation
and licensing fees. Changes in such laws, regulations and
procedures could have an adverse effect on the Company's gaming
operations.
The Company, which operates the casino, is required to be
licensed by the Nevada Gaming Authorities. The gaming license
requires the periodic payment of fees and taxes and is not
transferable. The Company is registered by the Nevada Commission
as a publicly traded corporation ("Registered Corporation") and
as such, it is required periodically to submit detailed financial
and operating reports to the Nevada Commission and furnish any
other information which the Nevada Commission may require. The
Company has obtained from the Nevada Gaming Authorities the
various registrations, approvals, permits and licenses required
in order to engage in gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual
who has a material relationship to, or material involvement with,
the Company in order to determine whether such individual is
suitable or should be licensed as a business associate of a
gaming licensee. Officers, directors and certain key employees of
the Company must file applications with the Nevada Gaming
Authorities and may be required to be licensed or found suitable
by the Nevada Gaming Authorities. Officers, directors and key
employees of the Company who are actively and directly involved
in gaming activities of the Company may be required to be
licensed or found suitable by the Nevada Gaming Authorities. The
Nevada Gaming Authorities may deny an application for licensing
for any cause which they deem reasonable. A finding of
suitability is comparable to licensing, and both require
submission of detailed personal and financial information
followed by a thorough investigation. The applicant for licensing
or a finding of suitability must pay all the costs of the
investigation. Changes in licensed positions must be reported to
the Nevada Gaming Authorities and in addition to their authority
to deny an application for a finding of suitability or licensure,
the Nevada Gaming Authorities have jurisdiction to disapprove a
change in a corporate position.
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If the Nevada Gaming Authorities were to find an officer,
director or key employee unsuitable for licensing or unsuitable
to continue having a relationship with the Company, the Company
would have to sever all relationships with such person. In
addition, the Nevada Commission may require the Company to
terminate the employment of any person who refuses to file
appropriate applications. Determinations of suitability or of
questions pertaining to licensing are not subject to judicial
review in Nevada.
The Company is required to submit detailed financial and
operating reports to the Nevada Commission. Substantially all
material loans, leases, sales of securities and similar financing
transactions by the Company must be reported to, or approved by,
the Nevada Commission.
If it were determined that the Nevada Act was violated by
the Company, the gaming licenses it holds could be limited,
conditioned, suspended or revoked, subject to compliance with
certain statutory and regulatory procedures. In addition, the
Company and the persons involved could be subject to substantial
fines for each separate violation of the Nevada Act at the
discretion of the Nevada Commission. Further, a supervisor could
be appointed by the Nevada Commission to operate the Company's
gaming properties and, under certain circumstances, earnings
generated during the supervisor's appointment (except for the
reasonable rental value of the Company's gaming properties) could
be forfeited to the State of Nevada. Limitation, conditioning or
suspension of any gaming license or the appointment of a
supervisor could (and revocation of any gaming license would)
materially adversely affect the Company's gaming operations.
Any beneficial holder of the Company's voting securities,
regardless of the number of shares owned, may be required to file
an application, be investigated, and have such holder's
suitability as a beneficial holder of the Company's voting
securities determined, if the Nevada Commission has reason to
believe that such ownership would otherwise be inconsistent with
the declared policies of the State of Nevada. The applicant must
pay all costs of investigation incurred by the Nevada Gaming
Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires more than 5%
of the Company's voting securities to report the acquisition to
the Nevada Commission. The Nevada Act requires that beneficial
owners of more than 10% of the Company's voting securities apply
to the Nevada Commission for a finding of suitability within 30
days after the Chairman of the Nevada Board mails the written
notice requiring such filing. Under certain circumstances, an
"institutional investor," as defined in the Nevada Act, which
acquires more than 10%, but not more than 15%, of the Company's
voting securities may apply to the Nevada Commission for a waiver
of such finding of suitability if such institutional investor
holds the voting securities for investment purposes only. An
institutional investor shall not be deemed to hold voting
securities for investment purposes unless the voting securities
were acquired and are held in the ordinary course of business as
an institutional investor and not for the purpose of causing,
directly or indirectly, the election of a majority of the members
of the board of directors of the Company, any change in the
Company's corporate charter, bylaws, management, policies or
operations of the Company, or any of its gaming affiliates, or
any other action which the Nevada Commission finds to be
inconsistent with holding the Company's voting securities for
investment purposes only. Activities which are not deemed to be
inconsistent with holding voting securities for investment
purposes only include: (i) voting on all matters voted on by
stockholders; (ii) making financial and other inquiries of
management of the type normally made by securities analysts for
informational
12
<PAGE>
purposes and not to cause a change in its management, policies or
operations; and (iii) such other activities as the Nevada
Commission may determine to be consistent with such investment
intent. If the beneficial holder of voting securities who must be
found suitable is a corporation, partnership or trust, it must
submit detailed business and financial information including a
list of beneficial owners. The applicant is required to pay all
costs of investigation.
Any person who fails or refuses to apply for a finding of
suitability or a license within 30 days after being ordered to do
so by the Nevada Commission or the Chairman of the Nevada Board,
may be found unsuitable. The same restrictions apply to a record
owner if the record owner, after request, fails to identify the
beneficial owner. Any stockholder found unsuitable and who holds,
directly or indirectly, any beneficial ownership of the common
stock of a Registered Corporation beyond such period of time as
may be prescribed by the Nevada Commission may be guilty of a
criminal offense. The Company is subject to disciplinary action
if, after it receives notice that a person is unsuitable to be a
stockholder or to have any other relationship with the Company,
the Company (i) pays that person any dividend or interest upon
voting securities of the Company, (ii) allows that person to
exercise, directly or indirectly, any voting right conferred
through securities held by that person, (iii) pays remuneration
in any form to that person for services rendered or otherwise, or
(iv) fails to pursue all lawful efforts to require such
unsuitable person to relinquish his voting securities for cash at
fair market value.
The Nevada Commission may, in its discretion, require the
holder of any debt security of a Registered Corporation to file
applications, be investigated and be found suitable to own the
debt security of a Registered Corporation. If the Nevada
Commission determines that a person is unsuitable to own such
security, then pursuant to the Nevada Act, the Registered
Corporation can be sanctioned, including the loss of its
approvals, if without the prior approval of the Nevada
Commission, it: (i) pays to the unsuitable person any dividend,
interest, or any distribution whatsoever; (ii) recognizes any
voting right by such unsuitable person in connection with such
securities; (iii) pays the unsuitable person remuneration in any
form; or (iv) makes any payment to the unsuitable person by way
of principal, redemption, conversion, exchange, liquidation or
similar transaction.
The Company is required to maintain a current stock ledger
in Nevada which may be examined by the Nevada Gaming Authorities
at any time. If any securities are held in trust by an agent or
by a nominee, the record holder may be required to disclose the
identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for
finding the record holder unsuitable. The Company is also
required to render maximum assistance in determining the
identity of the beneficial owner. The Nevada Commission has the
power to require the Company's stock certificates to bear a
legend indicating that the securities are subject to the Nevada
Act.
The Company may not make a public offering of its securities
without the prior approval of the Nevada Commission if the
securities or proceeds therefrom are intended to be used to
construct, acquire or finance gaming facilities in Nevada, or to
retire or extend obligations incurred for such purposes. On
July 27, 1995, the Nevada Commission granted the Company prior
approval to make public offerings for a period of one year,
subject to certain conditions ("Shelf Approval"). However, the
Shelf Approval may be rescinded for good cause without prior
notice upon the issuance of an interlocutory stop order by the
Chairman of the Nevada Board. Such approval does not constitute a
finding, recommendation or approval by the Nevada Commission or
the Nevada Board as to the
13
<PAGE>
accuracy or adequacy of the prospectus or the investment merits
of the securities. Any representation to the contrary is
unlawful.
Changes in control of the Company through merger,
consolidation, stock or asset acquisitions, management or
consulting agreements, or any act or conduct by a person whereby
such person obtains control, may not occur without the prior
approval of the Nevada Commission. Entities seeking to acquire
control of a Registered Corporation must satisfy the Nevada Board
and Nevada Commission in a variety of stringent standards prior
to assuming control of such Registered Corporation. The Nevada
Commission may also require controlling stockholders, officers,
directors and other persons having a material relationship or
involvement with the entity proposing to acquire control, to be
investigated and licensed as part of the approval process
relating to the transaction.
The Nevada legislature has declared that some corporate
acquisitions opposed by management, repurchases of voting
securities and corporate defense tactics affecting Nevada gaming
licensees, and Registered Corporations that are affiliated with
those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a
regulatory scheme to ameliorate the potentially adverse effects
of these business practices upon Nevada's gaming industry and to
further Nevada's policy to: (i) assure the financial stability of
corporate gaming operators and their affiliates; (ii) preserve
the beneficial aspects of conducting business in the corporate
form; and (iii) promote a neutral environment for the orderly
governance of corporate affairs. Approvals are, in certain
circumstances, required from the Nevada Commission before the
Company can make exceptional repurchases of voting securities
above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada
Act also requires prior approval of a plan of recapitalization
proposed by the Company's Board of Directors in response to a
tender offer made directly to the Registered Corporation's
stockholders for the purposes of acquiring control of the
Registered Corporation.
Licensee fees and taxes, computed in various ways depending
on the type of gaming or activity involved, are payable to the
State of Nevada and to the counties and cities in which the
Nevada licensee's respective operations are conducted. Depending
upon the particular fee or tax involved, these fees and taxes are
payable either monthly, quarterly or annually and are based upon
either (i) a percentage of the gross revenues received, (ii) the
number of gaming devices operated or (iii) the number of table
games operated. A casino entertainment tax is also paid by casino
operations where entertainment is furnished in connection with
the selling of food or refreshments. Nevada licensees that hold a
license as an operator of a slot route, or a manufacturer's or
distributor's license, also pay certain fees and taxes to the
State of Nevada.
Any person who is licensed, required to be licensed,
registered, required to be registered, or is under common control
with such persons (collectively, "Licensees"), and who proposes
to become involved in a gaming venture outside of Nevada is
required to deposit with the Nevada Board, and thereafter
maintain, a revolving fund in the amount of $10,000 to pay the
expenses of investigation of the Nevada Board of their
participation in such foreign gaming. The revolving fund is
subject to increase or decrease at the discretion of the Nevada
Commission. Thereafter, Licensees are required to comply with
certain reporting requirements imposed by the Nevada Act.
Licensees are also subject to disciplinary action by the Nevada
Commission if they knowingly violate any laws of the foreign
jurisdiction pertaining to the foreign gaming operation, fail to
conduct the foreign gaming operation in
14
<PAGE>
accordance with the standards of honesty and integrity required
of Nevada gaming operations, engage in activities that are
harmful to the State of Nevada or its ability to collect gaming
taxes and fees, or employ a person in the foreign operation who
has been denied a license or finding of suitability in Nevada on
the ground of personal unsuitability.
EMPLOYEES
As of December 31, 1995, the Company employed approximately
3,074 employees. None of the Company's employees is covered by
collective bargaining agreements. The Company believes that its
relationship with its employees is good.
ITEM 2. PROPERTIES
The Company owns the 45-acre site in Las Vegas on which the
Rio is located. The Rio site is subject to a deed of trust
securing the Company's $175 million revolving credit facility
(the "Rio Bank Loan"), of which $125 million and $10 million were
outstanding at December 31, 1994 and 1995, respectively. The
Company is in the process of accumulating 22 acres of land
adjacent to the current Rio site. In 1995 the Company
purchased approximately five of such acres of improved land (the
"Warehouse Site"). The purchase of the remaining approximately 17
additional acres of land is currently in escrow, which upon
closing will bring the total Rio acreage to approximately 67
acres. The entire Rio site, including the Warehouse Site and the
additional property the Company is acquiring, is now being master-
planned for the development of another hotel-casino, the size and
timing of which has not yet been determined. In 1995 the
Company purchased the approximately 64 acre Old Vegas Site on
Boulder Highway southeast of Las Vegas. The Company is presently
considering various development options for the property.
ITEM 3. 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 the
Complaints in the United States District Court, Middle District
of Florida, against 41 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 (the "RICO 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.
Management believes that the Complaints are without merit and
intends vigorously to defend the allegations.
15
<PAGE>
Larry Schreier v. Caesars World, Inc., et al., Case No. 95-
923-LDG (RJJ), instituted on September 26, 1995, in the United
States District Court for the District of Nevada, Southern
District. An individual, purportedly representing a class, filed
a complaint against four manufacturers, three distributors and 38
casino operators, including the Company, that manufacture,
distribute or offer for play video poker and electronic slot
machines. The individual allegedly intends to seek class
certification of the interests he claims to represent. The
complaint alleges 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 complaint alleges violations of the RICO Act, as well
as claims of common law fraud, unjust enrichment and negligent
misrepresentation, and seeks damages in excess of $1 billion.
The complaint is similar to the Poulos Complaint and the Ahern
Complaint. The Company filed a motion to dismiss the complaint.
The court has not yet ruled on the motion. Plaintiff's attempts
to consolidate this action with the Ahern Complaint and Poulos
Complaint were not successful. Management believes that the
complaint is without merit and intends vigorously to defend the
allegations.
Hyland, et al. v. Griffin Investigations, et al., Case No.
95-CV-2236 (JEI) instituted on May 5, 1995 in the United States
District Court for the District of New Jersey (Camden Division).
The Company, together with 76 other casino operators and others,
is named as a defendant in the action. The action, purportedly
brought on behalf of "card counters," alleges that the casino
operators exclude "card counters" from play and share information
about "card counters." The action is based on alleged violations
of federal antitrust law, the Fair Credit Reporting Act, and
various state consumer protection laws. The amount of damages
sought by the plaintiffs in the action is unspecified. The
Company has made a motion to dismiss the complaint. The court
has not yet ruled on the motion. Management believes that the
complaint is without merit and the Company intends vigorously to
defend the allegations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
16
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
(a) Price Range of Common Stock
The Company's common stock, $.01 par value ("Common Stock"),
began trading on the New York Stock Exchange (the "NYSE") under
the symbol "RHC" on January 11, 1996. Prior to this date, the
Company's Common Stock was traded on the Nasdaq National Market
under the symbol "RIOH". The following table sets forth the high
and low closing sale prices of the Company's Common Stock, as
reported by the NYSE and the Nasdaq National Market, during the
periods indicated.
<TABLE>
<CAPTION>
High Low
<S> <C> <C> <C>
1994
First Quarter $18 1/8 $14 1/4
Second Quarter 16 1/2 12 5/8
Third Quarter 14 3/8 12 3/8
Fourth Quarter 14 1/8 11 11/16
1995
First Quarter 14 11 1/4
Second Quarter 16 5/8 13 1/4
Third Quarter 14 3/4 12 1/2
Fourth Quarter 13 5/8 11 5/8
1996
First Quarter (through 14 3/8 11 7/8
February 29, 1996)
</TABLE>
The last reported sale price of the Common Stock on the NYSE
on February 29, 1996 was $13.75 per share. There were
approximately 1,607 holders of record of the Company's Common
Stock as of February 29, 1996.
(b) Dividend Policy
The Company has never declared or paid cash dividends on its
Common Stock. The Company presently intends to retain earnings to
finance the operation and expansion of its business and does not
anticipate declaring cash dividends in the foreseeable future.
Under the terms of the covenants in the Rio Bank Loan (as defined
below), the Company's wholly owned subsidiary, Rio Properties,
Inc. ("Rio Properties") cannot pay dividends to the Company
without the consent of the lenders. Under the terms of the
Indenture (as defined below), governing the Subordinated Notes
(as defined below), the payout of dividends and other
distributions is subject to specified restrictions.
17
<PAGE>
<TABLE>
<CAPTION>
Item 6. Selected Financial Data (1)
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Revenues from Continuing Operations $192,537,954 $146,299,304 $109,981,585
Income from Continuing Operations $ 18,745,479 $ 15,966,409 $ 11,679,991
Loss from Discontinued Operations - - - - - - - - -
Minority Interest in Earnings - - - - - - $ - - -
Extraordinary Items - - - $ - - - $ (253,711)
Cumulative Effect of Accounting Change - - - $ - - - (776,888)
Net Income $ 18,745,479 $ 15,966,409 $ 10,649,392
Primary Earnings Per Common Share:
Income from Continuing Operations $ 0.87 $ 0.74 $ 0.60
Loss from Discontinued Operations - - - - - - - - -
Extraordinary Items - - - $ - - - $ (0.01)
Cumulative Effect of Accounting Change - - - $ - - - (0.04)
Net Income $ 0.87 $ 0.74 $ 0.55
Total Assets $308,791,594 $301,165,272 $218,050,376
Long-Term Debt, net of current $110,176,765 $110,146,869 $ 56,875,753
Total Stockholders' Equity $162,887,900 $147,839,167 $129,838,481
Cash Dividends Declared Per Common Share - - - - - - - - -
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31,
1992 1991
<S> <C> <C>
Revenues from Continuing Operations $ 82,475,164 $ 65,784,480
Income from Continuing Operations $ 5,756,628 $ 381,181
Loss from Discontinued Operations $ - - - $ (395,102)
Minority Interest in Earnings $ (242,240) $ (33,164)
Extraordinary Items $ 793,511 166,168
Cumulative Effect of Accounting Change - - - - - -
Net Income $ 6,307,899 $ 119,083
Primary Earnings Per Common Share:
Income from Continuing Operations $ 0.37 $ 0.03
Loss from Discontinued Operations $ - - - $ (0.03)
Extraordinary Items $ 0.05 0.01
Cumulative Effect of Accounting Change - - - - - -
Net Income $ 0.42 $ 0.01
Total Assets $149,518,427 $112,267,283
Long-Term Debt, net of current $ 50,906,000 $ 53,494,595
Total Stockholders' Equity $ 86,872,151 $ 47,731,447
Cash Dividends Declared Per Common Share - - - - - -
(1) The Company divested its real estate operations in December 1991 and results from these
operations are stated and shown above as discontinued operations.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
First Second Third
(In thousands except per share data) Quarter Quarter Quarter
<S> <C> <C> <C>
1995 (a)
Revenues $ 43,828 $ 47,956 $ 49,765
Operating profit 8,387 9,351 10,182
Net income 4,512 4,914 4,884
Net income per common share (b) $ 0.21 $ 0.23 $ 0.23
1994 (a)
Revenues $ 34,049 $ 36,168 $ 37,371
Operating profit 6,622 6,923 6,746
Net income 3,979 4,780 4,022
Net income per common share (b) $ 0.17 $ 0.22 $ 0.19
</TABLE>
<TABLE>
<CAPTION>
Fourth
(In thousands except per share data) Quarter Total
<S> <C> <C>
1995 (a)
Revenues $ 50,989 $ 192,538
Operating profit 9,218 37,138
Net income 4,435 18,745
Net income per common share (b) $ 0.21 $ 0.87
1994 (a)
Revenues $ 38,711 $ 146,299
Operating profit 5,512 25,803
Net income 3,185 15,966
Net income per common share (b) $ 0.15 $ 0.74
(a)There were no dividends paid in 1995 or 1994
(b)Net income per share calculations for each quarter are based on the weighted
average number of common stock and common stock equivalents outstanding during
the respective quarters. Accordingly, the sum of the quarters does not equal
the full year income per share for 1995 or 1994.
</TABLE>
19
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Rio's revenues and profits are derived largely from its
gaming activities, although the Company also seeks to maximize
revenues from food and beverage, lodging, entertainment and
retail sales. The Rio generally views its non-casino related
operations as complementary to its core casino operations. The
Rio utilizes entertainment primarily as a casino marketing tool.
The Rio expects to maintain a food and beverage pricing structure
designed to maximize casino customer foot traffic.
The Company's sole business is the operation of the Rio,
which opened in January 1990. The Rio was originally owned and
operated by a limited partnership (the "Rio Partnership") formed
by the Company in 1988. Through a series of transactions
involving an exchange of preferred stock for partnership
interests and later a merger of Rio Partnership into Rio
Properties, the Company increased its ownership of the Rio from
34.4% in 1988 to 100% in 1992. Prior to 1990, the Company's
operations consisted of real estate development and management.
In December 1991, the Company sold all real estate assets and
operations not used or held for the operation or expansion of the
Rio. In 1995, as part of the Company's three-phased expansion
and development plan, the Company entered into agreements for the
purchase of approximately 22 acres adjacent to the Rio and
approximately 64 acres southeast of Las Vegas, both of which may
be developed into future hotel-casino projects.
The Rio was designed to permit multiple expansions in
accordance with a conceptual master plan and has received
necessary governmental approvals for the Phase V Expansion. An
$8 million buffet-casino expansion was completed in December
1992; the $37 million Tower Expansion was completed in September
1993; and the $25 million Eastside Expansion was completed in
April 1994. In May 1994, the Company commenced its Phase III
Expansion, an expansion which contained a total of 549 additional
suites (365 new suites were placed into service in February 1995
and the remaining suites were placed into service in March 1995),
approximately 10,000 square feet of new casino area that
accommodated approximately 300 additional slot machines (opened
November 1994), an expansion of the Carnival World Buffet by
approximately 50% (opened November 1994), a 527-space, three-
level parking garage (opened August 1994), and associated back-of-
the-house enhancements. The Phase III Expansion was completed in
phases from August 1994 through March 1995. In April 1995, the
Company commenced its $20 million Phase IV Expansion. The
project added 141 suites to the existing 1,410 suites, added
approximately 5,400 square feet of meeting room space, increased
the size of the existing Buzios seafood restaurant to
approximately 160 seats, added a new health club and salon
facility and included a variety of back-of-the-house
improvements. Completion of the Phase IV Expansion occurred in
stages through the end of 1995. See "Item l. Business-Expansion
Strategy".
20
<PAGE>
YEARS ENDED DECEMBER 31, 1995 AND 1994
Operating profit for the Company increased to $37.1 million
for 1995 from $25.8 million for 1994, an increase of $11.3
million or 44%. Management believes that the improvement
in operating results was due to the additional 365 new hotel
suites placed into service in February 1995, the additional 184
new hotel suites placed into service in March 1995, the
additional 141 new hotel suites placed into service in December
1995, an average monthly increase from 1994 levels of
approximately 174 slot machines and 19 table games, additional
restaurant capacity and improved operating efficiencies in the
hotel department.
Net revenues for the Company increased to $192.5 million for
1995 from $146.3 for 1994, an increase of $46.2 million or 32%.
Casino revenues increased to $105.5 million for 1995 from $87.2
million for 1994, an increase of $18.3 million or 21%. The
increase in casino revenues was due primarily to an increase in
slot machine revenues of $8.5 million or 16% to $63.0 million for
1995 from $54.5 million for 1994 and an increase in table games
revenues of $10.3 million or 40% to $36.1 million for 1995 from
$25.8 million for 1994, resulting from the additional slot
machines and table games discussed above, as well as an increase
in the per unit win of both slots and table games.
Room revenues increased by $14.5 million or 76% to $33.8
million for 1995 from $19.3 million for 1994. 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 placed into service in March 1995, and 141 new hotel
suites placed into service in December 1995. The additional 690
suites placed into service in 1995 increased the Rio's total to
1,551 suites compared to 861 suites for 1994. Demand for the
Rio's suites remained high during 1995 with a 94% average daily
occupancy compared to a 96% average daily occupancy during 1994.
The average number of suites available during 1995 was 1,354
compared to 861 during 1994. The average daily room rate during
1995 was $72.18 compared to $63.80 during 1994.
Food and beverage revenues increased to $60.0 million for
1995 from $47.6 million for 1994, an increase of $12.4 million or
26%. The successful opening in February 1994 of the Copacabana
Showroom, a 430-seat video, entertainment and restaurant complex;
the successful opening in April 1994 of Fiore, a 186-seat fine
dining restaurant; the successful opening in June 1994 of Club
Rio, a late-night dance club; the successful completion in
November 1994 of a 50% expansion of the Carnival World Buffet to
980 seats; and increased beverage sales as a result of increased
gaming customers all contributed to the increase in food and
beverage revenues.
Other revenues for 1995 were $12.0 million, which included
entertainment admission revenues of $4.1 million, retail sales of
$4.1 million and miscellaneous other operating revenues,
primarily telephone revenues, of $3.8 million. This represented
an increase in other revenues of $4.9 million, or 68%, compared
to the $7.1 million in other revenues generated during 1994. The
increase in other revenues resulted primarily from increased
entertainment admission revenues, retail sales and telephone
revenues resulting from increased business levels.
21
<PAGE>
The Company's operating margins were relatively consistent
during 1995 compared to 1994. Operating profit as a percentage
of net revenues was 19% during 1995 compared to 18% during 1994.
Casino operating profit was relatively constant at 55% during
1995 compared to 56% during 1994. Food and beverage operating
profit remained relatively constant at 20% during 1995 compared
to 19% during 1994. Hotel operating profit increased to 69%
during 1995 compared to 66% during 1994 due to efficiencies
resulting from increased customer volume, effective cost controls
and a higher average room rate during 1995 compared to 1994.
Selling, general and administrative expenses were 14% of net
revenues in both 1995 and 1994.
During 1995, promotional allowances were $18.8 million, or
9% of gross revenues, which represented the retail value of
rooms, food, beverage and other services provided to customers
without charge. The estimated cost of providing such promotional
allowances was $11.1 million. This compares to 1994 when
promotional allowances were $14.9 million, or 9% of gross
revenues, and the estimated cost of providing such promotional
allowances was $9.1 million.
Depreciation and amortization increased by $3.3 million or
31% to $14.2 million for 1995 compared to $10.9 million for 1994.
This increase is attributable to depreciation expense from
various completed expansion projects such as the Company's
Eastside Expansion and the Phase III Expansion.
Other expenses of the Company increased primarily because of
higher interest expense. Borrowing levels increased in 1995
compared to 1994 due to funding costs of the various expansion
projects. Also, in July 1995, in anticipation of the funding
requirements for the Phase V Expansion, the Company issued
$100 million in 10 5/8% Senior Subordinated Notes. (See "Item 7.
Liquidity and Capital Resources"). The fixed coupon rate of
10 5/8% was higher than the floating rate that the Company was
paying under the Rio Bank Loan. Consequently, the issuance of
these notes resulted in an increase in interest expense.
Interest expense for 1995 was reduced by $949,423 because of
interest capitalized on amounts expended on the Phase III
Expansion, the Phase IV Expansion and the Phase V Expansion.
Interest expense for 1994 was reduced by $619,887 because of
interest capitalized on amounts expended on the Eastside
Expansion and the Phase III Expansion. Other income for 1994 was
a one-time gain of $1.1 million related to the resale of two real
estate parcels previously owned by the Company. A one-time gain
of $966,510 related to the sale of real estate which was sold by
the Company to a related party in December 1991. In April 1994,
the real estate was resold to a non-related party. Pursuant to
the terms of the sales agreement between the Company and the
related party, the Company was entitled to a portion of the
resale proceeds, which equaled $966,510, net of expenses.
Another one-time gain of $173,500 related to the sale of a second
piece of real property owned by the Company until May 1991, when
it was sold to a non-related party. Pursuant to the terms of the
sales agreement, the Company was entitled to a portion of the
resale proceeds or refinancing amount, which equaled $173,500,
net of expenses.
Net income for 1995 increased 17% to $18.7 million or $0.87
per share (fully diluted) from $16.0 million or $0.74 per share
(fully diluted) for 1994 as a result of the factors discussed
above.
22
<PAGE>
YEARS ENDED DECEMBER 31, 1994 AND 1993
Operating profit for the Company increased to $25.8 million
for 1994 from $20.2 million for 1993, an increase of $5.6 million
or 27.5%. Management believes that the improvement in operating
results was due to increased business levels in 1994 as a result
of having an additional 437 hotel suites for nine months of the
year, an addition of approximately 800 slot machines
(approximately 500 slot machines were added in December 1993 and
approximately 300 slot machines were added in November 1994), an
addition of approximately 13 table games and additional
restaurant capacity compared to 1993.
Net revenues for the Company increased to $146.3 million for
1994 from $110.0 million for 1993, an increase of $36.3 million
or 33%. Casino revenues increased to $87.2 million for 1994 from
$71.3 million for 1993, an increase of $15.9 million or 22%. The
increase in casino revenues was due primarily to an increase in
slot machine revenues of $9.3 million or 20% to $54.5 million for
1994, from $45.2 million for 1993, and an increase in table games
revenues of $6.0 million or 30% to $25.8 million for 1994, from
$19.8 million for 1993, resulting from the additional slot
machines and table games discussed above.
Room revenues increased to $19.3 million for 1994 from
$12.3 million for 1993, an increase of $6.9 million or 56%. The
increase in room revenues resulted primarily from the addition of
437 suites during the fourth quarter of 1993 (375 new suites were
placed in service in September 1993 and 62 suites were placed in
service in October 1993), bringing the Company's total to 861
suites available during 1994. Demand for the Rio's suites
remained high during 1994, at a 96% average daily occupancy
compared to a 97% average daily occupancy during 1993. The
average daily room rate during 1994 was $63.80 compared to $62.60
during 1993.
Food and beverage revenues increased to $47.6 million for
1994 from $32.6 million for 1993, an increase of $15.1 million or
46%. The increase was principally due to the successful opening
in February 1994 of a new 430-seat video, entertainment and
restaurant complex, the successful opening in April 1994 of a new
186-seat fine dining restaurant, the successful completion in
November 1994 of a 50% expansion of the Carnival World Buffet to
980 seats, an increase in the number of patrons served in other
Rio restaurants and an increase in the average food check.
Other revenues for the year ended December 31, 1994 were
$7.1 million, which included entertainment admission revenues of
$1.9 million, retail sales of $2.6 million and miscellaneous
other operating revenues, primarily telephone revenues of
$2.6 million. This represented an increase in other revenues of
$2.9 million, or 69%, compared to the $4.2 million in other
revenues generated during the twelve months ended December 31,
1993. The increase of $2.9 million was attributable to increases
of approximately $0.9 million in each of admission revenues,
retail sales, and miscellaneous other revenues.
The Company's operating margins were relatively consistent
during 1994 compared to 1993. Operating profit as a percentage
of net revenues was 18% in both 1994 and 1993. Casino operating
profit was 56% in both 1994 and 1993. Food and beverage
operating profit improved to
23
<PAGE>
19% during 1994 compared to 15% during 1993 as a result of an
increase in volume, price increases and effective cost control
measures. Hotel operating profit improved to 66% during 1994
compared to 64% during 1993 as a result of a higher average room
rate and effective cost control measures. Selling, general and
administrative expenses were 14% of net revenues during 1994, of
which $421,367 were expenses related to gaming development. This
compares favorably to 1993 when selling, general and
administrative expenses were 15% of net revenues, which did not
include any material expenditures related to gaming development.
During 1994, promotional allowances were $14.9 million, or
9% of gross revenues, which represented the retail value of
rooms, food, beverage and other services provided to customers
without charge. The estimated cost of providing such promotional
allowances was $9.1 million. This compares to 1993 when
promotional allowances were $10.4 million, or 9% of gross
revenues, and the estimated cost of providing such promotional
allowances was $6.9 million.
Depreciation and amortization increased to $10.9 million for
1994 from $7.5 million for 1993, an increase of $3.3 million or
44%. This increase is attributable to a full year of
depreciation on the Phase II Expansion which was completed in
September 1993, depreciation on the Eastside Expansion which was
completed in phases by April 1994 and depreciation on the Phase
III Expansion projects completed during 1994.
Other income for 1994 was a one-time gain of $1.1 million
related to the resale of certain real estate previously owned by
the Company. A one-time gain of $966,510 related to the sale of
real estate which was sold by the Company to a related party in
December 1991. In April 1994, the real estate was resold to a
non-related party. Pursuant to the terms of the sales agreement
between the Company and the related party, the Company was
entitled to a portion of the resale proceeds, which equaled
$966,510, net of expenses. A one-time gain of $173,500 related
to the sale of real estate owned by the Company until May 1991,
when it was sold to a non-related party. Pursuant to the terms
of the sales agreement, the Company was entitled to a portion of
the resale proceeds or refinancing amount, which equaled
$173,500, net of expenses.
Income before extraordinary items and cumulative effect of a
change in accounting principle increased 37% to $16.0 million or
$0.74 per share (fully diluted) for 1994, from $11.7 million or
$0.60 per share (fully diluted) for 1993. The results for 1993
were impacted by the cumulative effect of a change in accounting
principle resulting from the adoption of Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes"
("SFAS 109"). Adoption of SFAS 109 resulted in a one-time, non-
cash charge in the amount of $776,888 or ($0.04) per share (fully
diluted). The results for 1993 were also adversely affected by
the extraordinary loss on early extinguishment of debt, net of
income tax benefit, of $253,711 or ($0.01) per share (fully
diluted).
Net income for 1994 increased 50% to $16.0 million or $0.74
per share (fully diluted) from $10.6 million or $0.55 per share
(fully diluted) for 1993 as a result of the factors discussed
above.
24
<PAGE>
IMPACT OF INFLATION
Absent changes in competitive and economic conditions or in
specific prices affecting the industry, the Company believes that
the hotel-casino industry may be able to maintain its real
operating profit margins in periods of general inflation by
increasing minimum wagering limits for its games and increasing
the prices of its hotel rooms, food and beverage and other items,
and by taking action designed to increase the number of patrons.
The industry may be able to maintain growth in gaming revenues by
the tendency of customer gaming budgets to increase with
inflation. Changes in specific prices (such as fuel and
transportation prices) relative to the general rate of inflation
may have a material effect on the hotel-casino industry.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, the Company had working capital of
$5.8 million compared with $50.2 million at December 31, 1994.
Cash and cash equivalents were $20.0 million at December 31, 1995
compared with $76.4 million at December 31, 1994. At December
31, 1995, the Company had $165.0 million available under its bank
facility while the bank facility was fully utilized at December
31, 1994. The decrease in both working capital and cash is
primarily due to the use of cash and cash equivalents during 1995
to repay principal under the Rio Bank Loan and the decision of
the Company not to draw down the full amount of the available Rio
Bank Loan at the end of 1995, 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, the $185 million Phase V Expansion, the purchase of
land adjacent to the Rio and the purchase of the approximately 64
acre Old Vegas Site, both of which may be developed into future
hotel casino projects.
During 1995, cash provided by operating activities was
$42.4 million. Investing activities used $76.1 million of the
Company's cash during 1995. Approximately $27.2 million of such
expenditures was related to the Phase III Expansion,
approximately $18.1 million was related to the Phase IV Expansion
and approximately $7.9 million was related to the Phase V
Expansion. During the first quarter of 1995, the Company
acquired an approximately 5-acre site adjacent to the Rio site, on
which a former commercial warehouse is located, at a purchase
price of $3.2 million (net of credit for profit participation
from the seller to which the Company was entitled and net of
rental proceeds during the term of the escrow). During the
second quarter of 1995, the Company acquired the Old Vegas Site
at a purchase price of $5.7 million (net of credit for profit
participation from the seller to which the Company was entitled).
The Old Vegas Site and additional land acquisitions are part of
the Company's recently announced three phase expansion and
development plan. During 1995, the Company spent approximately
$11.7 million toward the acquisition of certain real property
adjacent to the Rio. The balance of cash used in investing
activities was expended on other capital projects.
During the fourth quarter of 1994, the Board of Directors
authorized the Company to make discretionary repurchases of up to
2 million shares of its Common Stock from time to time in the
open market or otherwise. During 1995, the Company repurchased
430,500 shares of Common Stock at a total cost of $5.4 million.
The repurchased shares of Common Stock were retired.
25
<PAGE>
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 January 1, 1996 the Company's capital commitments
include approximately $2.0 million for the remainder of the Phase
III Expansion, $1.9 million for the Phase IV Expansion,
$177.1 million for the Phase V Expansion and $8.6 million under
commitments for the purchase of real estate. Based upon cash on
hand, cash available through borrowings under the Rio Bank Loan
and cash from operations, the Company believes that it has
adequate cash available to fund the remaining cost of the Phase
III Expansion, the Phase IV Expansion, the Phase V Expansion and
the real estate purchase commitments.
In July 1993, the Company obtained a secured reducing
revolving credit facility ("the Rio Bank Loan") in the original
principal amount of $65 million with a syndicate of banks
consisting of Bank of America National Trust Savings and
Association ("B of A"), Bank of America Nevada, Societe Generale,
NBD Bank, N.A., First Security Bank of Idaho, N.A., First
Interstate Bank of Nevada, N.A. and U. S. Bank of Nevada. As a
result of certain amendments, in December 1994, the Rio Bank Loan
was increased to $125 million and in September 1995, the Rio Bank
Loan was increased to $175 million. As amended, the Rio Bank
Loan is a secured reducing revolving credit facility to be used
(a) to refinance the pre-amendment Rio Bank Loan, (b) to finance
the Phase V Expansion, (c) to finance acquisition of land
adjacent to the Rio for up to $30 million, (d) for Common Stock
repurchases up to $10 million, and (e) for general corporate
purposes.
As amended, the Rio Bank Loan matures on June 30, 2001 and
bears interest based upon a "LIBOR Spread" of from 1% to 3%, or a
"Base Rate Spread" of from 0% to 2% based upon a schedule
determined with reference to the "Funded Debt to EBITDA Ratio" of
Rio Properties. The "LIBOR Spread" is the amount in excess of
the applicable LIBOR rate which is the London interbank offer
rate established in the London interbank market. The "Base Rate
Spread" is the amount in excess of the applicable base rate,
which is the rate per annum equal to the higher of the reference
rate as it is publicly announced from time to time by Bank of
America in San Francisco or 0.50% per annum above the latest
Federal Funds rate. The Rio Bank Loan also provides for an
unused facility fee ranging from 31.25 basis points (one one-
hundredth of one percent) to 50.0 basis points depending upon the
same Funded Debt to EBITDA ratio schedule utilized for the
interest rate. The Rio Bank Loan requires monthly payments of
interest 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 and 1999, a $10.0 million
reduction at the end of each quarter during 2000, a $32.5 million
reduction at March 31, 2001 and maturity at June 30, 2001.
26
<PAGE>
To reduce the risks from interest rate fluctuations, the
Company has previously entered into interest rate swap agreements
in the amount of $20 million from September 30, 1994 through
December 29, 1995 and $15 million from December 29, 1995 through
June 28, 1996. In August 1994, the Company purchased a
$40 million interest rate cap, effective September 30, 1994, for
a three-year term, which provides for quarterly payments to the
Company in the event that three-month LIBOR exceeds 7% on any
quarterly reset date. The Company is exposed to credit risks in
the event of non-performance by the counterparty. However, the
Company does not anticipate non-performance by the counterparty.
The counterparty under these agreements is B of A, the lead bank
in the syndicate participating in the Rio Bank Loan. Management
believes that the financial resources of B of A and its
competitive position within the national banking industry
significantly reduce the chances of non-performance under the
interest rate swap and cap agreements.
The Rio Bank Loan is secured by a first deed of trust on the
Rio, a security interest in substantially all of Rio Properties
other real and personal property, and a guaranty by Rio Hotel &
Casino, Inc., including a pledge of the Company's stock in Rio
Properties. The Rio Bank Loan provides that Rio Hotel & Casino,
Inc. will be permitted to accumulate and hold up to $5 million in
assets which are not to be pledged for the benefit of the Rio
Bank Loan lenders.
The Rio Bank Loan contains certain customary financial
covenants to which the Company is subject. Those covenants
include a requirement that Rio Properties maintain a maximum
ratio of Total Debt (as defined in the Rio Bank Loan) to EBITDA
(as defined in the Rio Bank Loan) ranging from 3.0 to 1 at
December 31, 1995, increasing to 4.25 to 1 for the six month
period ending March 31, 1997 and decreasing to 3.0 to 1 at
December 31, 1997 and thereafter. Rio Properties must meet a
maximum ratio of Senior Debt (as defined in the Rio Bank Loan) to
EBITDA from 1.75 to 1 through December 31, 1995 up to 3.0 to 1
for the six months ended March 31, 1997 and reducing to 1.75 to 1
at December 31, 1997 and thereafter. Rio Properties must
maintain a maximum Interest Coverage Ratio (as defined in the Rio
Bank Loan) of 2.0 to 1 through the fiscal quarter ending December
31, 1996, reducing to 1.5 to 1 for the fiscal quarter ending
March 31, 1997 and increasing to 3.0 to 1 for the fiscal quarter
ending December 31, 1998 and thereafter. Minimum Consolidated
Tangible Net Worth (as defined in the Rio Bank Loan) requirements
of $125 million, plus 75% of accumulated net income after
December 31, 1994 (not reduced by any consolidated net losses)
plus 100% of the net proceeds of any equity offering by Rio
Properties or the Company must be maintained. A maximum annual
capital expenditure permitted under the Rio Bank Loan is
$7.5 million annually, plus the amount available of unused
capital expenditures from the prior fiscal year, but not to
exceed $12.5 million, annually in any event. A specific carve-
out of $200 million for the Phase V Expansion and $30 million for
the identified adjacent Rio land acquisition is incorporated in
the Rio Bank Loan. The Rio Bank Loan also provides for a basket
for $10 million for the repurchase of equity shares of the
Company through open market purchases over the life of the Rio
Bank Loan.
On July 18, 1995, the Company entered into an agreement with
Salomon Brothers Inc. and Montgomery Securities (the "Initial
Purchasers") for the sale by the Company of $100 million in
principal amount of the Company's 10 5/8% Senior Subordinated
Notes Due
27
<PAGE>
2005 (the "Old Notes"). The Old Notes were purchased by the
Initial Purchasers for resale to qualified institutional
investors. The net proceeds from the sale of the Old Notes
(approximately $96.7 million after the deduction of a 2.75%
discount to the Initial Purchasers and offering expenses of
approximately $0.5 million), borrowings under the Rio Bank Loan,
cash on hand and cash from operations will be used to finance the
Company's approximately $185 million Phase V Expansion. Pending
such use, the net proceeds were used to reduce amounts
outstanding under the Rio Bank Loan. Pursuant to a registration
agreement between the Company and the Initial Purchasers, the Company
registered on Form S-4 under the Securities Act of 1933
$100 million principal amount of 10 5/8% Senior Subordinated
Notes Due 2005 (the "New Notes") which were exchanged for the Old
Notes (the Old Notes and the New Notes are collectively referred
to as the "Subordinated Notes").
The Subordinated Notes were issued under an indenture (the
"Indenture") dated July 21, 1995 among the Company, Rio
Properties and IBJ Schroder Bank & Trust Company, as trustee.
The following summary of certain provisions of the Indenture does
not purport to be complete and is subject to the provisions of
the Indenture and the Subordinated Notes. Capitalized terms not
otherwise defined have the same meanings assigned to them in the
Indenture.
The Subordinated Notes mature on July 15, 2005. Interest
payment dates under the Subordinated Notes are January 15 and
July 15, commencing January 15, 1996. The Subordinated Notes are
fully and unconditionally guaranteed (the "Rio Guarantee") on a
senior subordinated basis by Rio Properties. The Subordinated
Notes are subordinated in right of payment to all existing and
future Senior Indebtedness of the Company and are structurally
subordinated to all existing and future indebtedness and other
liabilities (including trade payables) of the Company's
subsidiaries. The Rio Guarantee is subordinated in right of
payment to all existing and future Senior Indebtedness (as
defined in the Indenture) of Rio Properties and is structurally
subordinated to all existing and future indebtedness and other
liabilities (including trade payables) of Rio Properties'
subsidiaries.
The Subordinated Notes may be redeemed at the option of the
Company, in whole or in part, at any time on or after July 15,
2000, at the redemption prices set forth in the Indenture, plus
accrued and unpaid interest, if any, through the redemption date.
The Subordinated Notes will be redeemed from any holder or
beneficial owner of the Subordinated Notes which is required to
be found suitable and is not found suitable by the Nevada Gaming
Commission.
Upon a Change of Control of the Company (as defined in the
Indenture), each holder of Subordinated Notes will have the right
to require the Company to repurchase all or part of such holder's
Subordinated Notes at a price equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest, if
any, to the date of repurchase. The Company's obligation to
repurchase the Subordinated Notes is guaranteed on a senior
subordinated basis by Rio Properties. The Indenture contains
certain covenants that, among other things, limit the ability of
the Company and its Restricted Subsidiaries (as defined in the
Indenture) to incur additional indebtedness, pay dividends or
make other distributions, make investments, repurchase
subordinated obligations or capital stock, create certain liens
(except, among others, liens
28
<PAGE>
securing Senior Indebtedness), enter into certain transactions
with affiliates, sell assets of the Company or its subsidiaries,
issue or sell subsidiary stock, create or permit to exist
restrictions on distributions from subsidiaries, or enter into
certain mergers and consolidations.
On May 2, 1995, the Company announced a three-phase
expansion and development plan to grow the Company over the next
several years. The plan includes the Phase V Expansion on the
existing Rio site, acquisition of approximately 22 acres of land
adjacent to the Rio site to be master-planned for another hotel-
casino property and the purchase of the Old Vegas Site for
possible future hotel-casino development.
The Company cannot accurately state the timing for the
funding requirements of the approximately $185 million Phase V
Expansion costs. Construction commenced in September 1995 and
opening is expected to occur in the spring of 1997. The Company
spent approximately $7.9 million on the Phase V Expansion in 1995
and management anticipates that the bulk of the funds will be
applied in 1996 and the balance of the funds will be applied in
1997. The $185 million Phase V Expansion will be financed with
the proceeds from the Subordinated Notes, funds available under
the Rio Bank Loan, cash on hand and cash from operations.
As described above, the Company has acquired approximately
five acres of land adjacent to the Rio and has entered into
agreements to acquire an additional approximately 17 acres of
land adjacent to the Rio site. The combined cost of the
approximately 22 acres is approximately $20.3 million, which the
Company will fund through cash on hand, cash available through
borrowings under the Rio Bank Loan and cash from operations. The
entire Rio site is now being master-planned for the development
of another hotel-casino, the size and timing of which has not yet
been determined.
As the third step in its expansion and development plan to
provide further growth for the Company, the Company acquired the
Old Vegas Site southeast of Las Vegas. The cost of the Old Vegas
Site was approximately $5.7 million (net of a credit for profit
participation from the seller to which the Company was entitled)
which the Company funded through cash on hand and cash available
through borrowings under the Rio Bank Loan. The timing of the
proposed development on the Old Vegas Site has not yet been
determined.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
29
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Rio Hotel & Casino, Inc.:
We have audited the accompanying consolidated balance sheets
of RIO HOTEL & CASINO, INC. (a Nevada corporation) and
subsidiaries as of December 31, 1995 and 1994 and the related
consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended
December 31, 1995. These financial statements and the schedules
referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Rio Hotel & Casino, Inc. and subsidiaries as of December 31,
1995 and 1994, and the results of their operations and their cash
flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 7 to the consolidated financial
statements, effective January l, 1993, the Company changed its
method of accounting for income taxes.
Our audits were made for the purpose of forming an opinion
on the basic financial statements taken as a whole. The financial
statement schedules listed in Item 14 are the responsibility of
the Company's management and are presented for purposes of
complying with the Securities and Exchange Commission's rules and
are not part of the basic financial statements. These schedules
have been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required
to be set forth therein in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
January 26, 1996
30
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, DECEMBER 31,
1995 1994
ASSETS
<S> <C> <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 19,992,695 $ 76,426,258
ACCOUNTS RECEIVABLE, NET 4,313,442 3,204,416
FEDERAL INCOME TAXES RECEIVABLE 190,914 139,329
INVENTORIES 1,794,850 1,378,598
PREPAID EXPENSES AND OTHER CURRENT ASSETS 4,638,090 4,716,701
TOTAL CURRENT ASSETS 30,929,991 85,865,302
PROPERTY AND EQUIPMENT:
LAND AND IMPROVEMENTS 37,509,960 24,666,679
BUILDING AND IMPROVEMENTS 192,818,896 137,005,432
EQUIPMENT, FURNITURE, AND IMPROVEMENTS 68,500,267 43,108,873
LESS: ACCUMULATED DEPRECIATION (46,707,850) (32,826,276)
252,121,273 171,954,708
CONSTRUCTION IN PROGRESS 17,173,483 38,521,773
NET PROPERTY AND EQUIPMENT 269,294,756 210,476,481
OTHER ASSETS:
OTHER, NET 8,566,847 4,823,489
$ 308,791,594 $ 301,165,272
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
CURRENT MATURITIES OF LONG-TERM DEBT $ 25,252 $ 15,032,534
ACCOUNTS PAYABLE 4,562,132 2,425,645
ACCRUED EXPENSES 9,136,226 7,830,706
ACCOUNTS PAYABLE-RELATED PARTY 6,641,506 10,026,210
ACCRUED INTEREST 4,726,915 351,864
TOTAL CURRENT LIABILITIES 25,092,031 35,666,959
NON-CURRENT LIABILITIES:
LONG-TERM DEBT, LESS CURRENT MATURITIES 110,176,765 110,146,869
DEFERRED INCOME TAXES 10,634,898 7,512,277
TOTAL NON-CURRENT LIABILITIES 120,811,663 117,659,146
TOTAL LIABILITIES 145,903,694 153,326,105
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
COMMON STOCK, $0.01 PAR VALUE;
100,000,000 SHARES AUTHORIZED;
21,139,146 (1995) AND 21,371,346 (1994) SHARES
ISSUED AND OUTSTANDING 211,392 213,714
ADDITIONAL PAID-IN CAPITAL 113,520,158 117,214,582
RETAINED EARNINGS 49,156,350 30,410,871
TOTAL STOCKHOLDERS' EQUITY 162,887,900 147,839,167
$ 308,791,594 $ 301,165,272
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
REVENUES:
CASINO $ 105,546,531 $ 87,164,738 $ 71,295,870
ROOM 33,826,095 19,261,477 12,334,207
FOOD AND BEVERAGE 60,009,994 47,648,778 32,573,861
OTHER 11,966,060 7,111,105 4,172,272
CASINO PROMOTIONAL ALLOWANCES (18,810,726) (14,886,794) (10,394,625)
192,537,954 146,299,304 109,981,585
EXPENSES:
CASINO 48,071,953 38,696,281 31,177,642
ROOM 10,413,883 6,631,787 4,441,851
FOOD AND BEVERAGE 48,257,881 38,795,127 27,799,449
OTHER 6,646,950 4,959,250 2,784,746
SELLING, GENERAL AND ADMINISTRATIVE 27,777,901 20,550,142 16,001,309
DEPRECIATION AND AMORTIZATION 14,231,307 10,863,844 7,544,326
155,399,875 120,496,431 89,749,323
OPERATING PROFIT 37,138,079 25,802,873 20,232,262
OTHER INCOME (EXPENSE):
INTEREST INCOME 420,215 124,786 71,747
INTEREST EXPENSE (8,105,680) (1,923,237) (1,838,713)
OTHER INCOME, NET - - - 1,140,010 - - -
(7,685,465) (658,441) (1,766,966)
INCOME BEFORE INCOME TAX PROVISION 29,452,614 25,144,432 18,465,296
INCOME TAX PROVISION (10,707,135) (9,178,023) (6,785,305)
INCOME BEFORE EXTRAORDINARY ITEMS 18,745,479 15,966,409 11,679,991
EXTRAORDINARY ITEMS:
LOSS ON EARLY EXTINGUISHMENT OF
DEBT, NET OF INCOME TAX BENEFIT - - - - - - (253,711)
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE:
ADOPTION OF SFAS NO. 109 - - - - - - (776,888)
NET INCOME $18,745,479 $15,966,409 $ 10,649,392
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
EARNINGS PER COMMON SHARE:
PRIMARY:
INCOME APPLICABLE TO
COMMON SHARES $0.87 $0.74 $0.60
EXTRAORDINARY ITEMS:
LOSS ON EARLY EXTINGUISHMENT OF
DEBT, NET OF INCOME TAX BENEFIT - - - - - - ($0.01)
CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE:
ADOPTION OF SFAS 109 - - - - - - ($0.04)
NET INCOME $0.87 $0.74 $0.55
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 21,591,325 21,720,121 19,504,466
FULLY DILUTED:
INCOME APPLICABLE TO
COMMON SHARES $0.87 $0.74 $0.60
EXTRAORDINARY ITEMS:
LOSS ON EARLY EXTINGUISHMENT OF
DEBT, NET OF INCOME TAX BENEFIT - - - - - - ($0.01)
CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE:
ADOPTION OF SFAS 109 - - - - - - ($0.04)
NET INCOME $0.87 $0.74 $0.55
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 21,592,769 21,720,381 19,537,515
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
COMMON STOCK
NUMBER ADDITIONAL
OF PAID-IN
SHARES AMOUNT CAPITAL
<S> <C> <C> <C>
Balance, December 31, 1992 18,600,796 $186,008 $82,891,073
Tax benefit of stock options granted 1,120,823
Issuance of common stock 2,547,000 25,470 32,480,730
Common stock offering costs (541,066)
Net income for the year
Implementation of SFAS No. 109 (823,152)
Compensation expense for stock
options granted 54,133
Balance, December 31, 1993 21,147,796 211,478 115,182,541
Tax benefit of stock options granted 886,132
Exercise of common stock options 223,550 2,236 1,003,934
Net income for the year
Compensation expense for stock
options granted in 1993 141,975
Balance, December 31, 1994 21,371,346 213,714 117,214,582
Tax benefit of stock options granted 632,601
Exercise of common stock options 198,300 1,983 965,467
Repurchase of common stock (430,500) (4,305) (5,381,920)
Common stock offering costs 1,801
Net income for the year
Compensation expense for stock
options granted in 1993 87,627
Balance, December 31, 1995 21,139,146 $211,392 $113,520,158
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
TOTAL
RETAINED STOCKHOLDERS'
EARNINGS EQUITY
<S> <C> <C>
Balance, December 31, 1992 $3,795,070 $86,872,151
Tax benefit of stock options granted 1,120,823
Issuance of common stock 32,506,200
Common stock offering costs (541,066)
Net income for the year 10,649,392 10,649,392
Implementation of SFAS No. 109 (823,152)
Compensation expense for stock
options granted 54,133
Balance, December 31, 1993 14,444,462 129,838,481
Tax benefit of stock options granted 886,132
Exercise of common stock options 1,006,170
Net income for the year 15,966,409 15,966,409
Compensation expense for stock
options granted in 1993 141,975
Balance, December 31, 1994 30,410,871 147,839,167
Tax benefit of stock options granted 632,601
Exercise of common stock options 967,450
Repurchase of common stock (5,386,225)
Common stock offering costs 1,801
Net income for the year 18,745,479 18,745,479
Compensation expense for stock
options granted in 1993 87,627
Balance, December 31, 1995 $49,156,350 $162,887,900
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
For the Year Ended December 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 18,745,479 $ 15,966,409
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Loss on early extinguishment of debt,
net of income tax benefit - - - - - -
Compensation expense recognized
from stock option grant 87,627 141,975
Depreciation and amortization 14,231,307 10,863,844
Provision for uncollectible accounts 1,002,463 512,999
Net loss on sale of assets - - - - - -
Cumulative effect of change in accounting
principle - Adoption of SFAS 109 - - - - - -
Deferred income taxes 3,122,621 1,693,101
(Increase) decrease in assets:
Accounts receivable (2,026,109) (790,677)
Inventories (416,252) (510,231)
Prepaid expenses and other current
assets 659,627 (827,476)
Other, net (843,335) (2,881,750)
Increase (decrease) in liabilities:
Accounts payable 2,136,487 (522,443)
Accrued federal income tax payable - - - 546,142
Accrued expenses 1,305,520 1,306,086
Accrued interest 4,375,051 297,896
Net cash provided by operating activities 42,380,486 25,795,875
Cash flows from investing activities:
Purchase of equipment, furniture and
improvements (63,326,652) (66,053,542)
Purchase of land and improvements (12,781,239) - - -
Net cash (used in) investing activities (76,107,891) (66,053,542)
Cash flows from financing activities:
Proceeds from borrowings 10,000,000 60,014,175
Net proceeds from common stock issuance 969,251 1,022,700
Net proceeds from issuance of senior
subordianted notes 96,750,244 - - -
Repurchase of common stock (5,386,225) - - -
Costs paid in connection with prior common
stock offering and stock exchange rights - - - (119,529)
Loan acquisition costs - - - - - -
Payments on notes and loans payable (125,039,428) (18,358)
Net cash (used in) provided by financing activities (22,706,158) 60,898,988
Net increase (decrease) in cash
and cash equivalents (56,433,563) 20,641,321
Cash and cash equivalents, beginning of period 76,426,258 55,784,937
Cash and cash equivalents, end of period $ 19,992,695 $ 76,426,258
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
For the Year Ended December 31,
1993
<S> <C>
Cash flows from operating activities: $ 10,649,392
Net income
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Loss on early extinguishment of debt, 253,711
net of income tax benefit
Compensation expense recognized 54,133
from stock option grant 7,544,326
Depreciation and amortization 523,491
Provision for uncollectible accounts 10,885
Net loss on sale of assets
Cumulative effect of change in accounting 776,888
principle - Adoption of SFAS 109 2,265,571
Deferred income taxes
(Increase) decrease in assets: (1,891,439)
Accounts receivable (223,051)
Inventories
Prepaid expenses and other current (856,554)
assets (662,965)
Other, net
Increase (decrease) in liabilities: 304,585
Accounts payable 91,401
Accrued federal income tax payable 1,628,387
Accrued expenses (92,009)
Accrued interest 20,376,752
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of equipment, furniture and (49,967,458)
improvements 22,499
Purchase of land and improvements (49,944,959)
Net cash (used in) investing activities
Cash flows from financing activities: 65,000,000
Proceeds from borrowings 32,506,200
Net proceeds from common stock issuance
Net proceeds from issuance of senior - - -
subordianted notes - - -
Repurchase of common stock
Costs paid in connection with prior common (456,821)
stock offering and stock exchange rights (1,107,647)
Loan acquisition costs (53,212,000)
Payments on notes and loans payable 42,729,732
Net cash (used in) provided by financing activities
Net increase (decrease) in cash 13,161,525
and cash equivalents 42,623,412
Cash and cash equivalents, beginning of period
$ 55,784,937
Cash and cash equivalents, end of period
See Accompanying Notes to Consolidated Financial Statement
</TABLE>
35
<PAGE>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts
of Rio Hotel & Casino, Inc. and its wholly owned
subsidiaries Rio Properties, Inc. ("Rio Properties," which
owns and operates the Rio Suite Hotel & Casino (the "Rio")
in Las Vegas, Nevada); Rio Development Company, Inc.
(formerly MarCor Development Company, Inc.); Rio Resort
Properties, Inc. (formerly MarCor Resort Properties, Inc.);
and Rio Properties' wholly owned subsidiary, Cinderlane,
Inc.
All significant intercompany balances and transactions have
been eliminated in consolidation.
RECLASSIFICATIONS
The financial statements for prior periods reflect certain
reclassifications, which have no effect on net income, to
conform with classifications adopted in the current year.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from these estimates.
CAPITALIZATION OF INTEREST
The Company capitalizes interest on funds disbursed during
the active construction phases of real estate development
and other major projects. Interest capitalized during the
years ended December 31, 1995, 1994, and 1993 was $949,423,
$619,887 and $467,798, respectively.
PROPERTY AND EQUIPMENT
Land and improvements, building and improvements, and
equipment, furniture and improvements are stated at cost.
Depreciation and amortization of property and equipment is
computed using the straight-line method predominantly over
the following estimated useful lives:
36
<PAGE>
Building and improvements 7 to 45 years
Equipment, furniture and improvements 3 to 15 years
Costs of major improvements are capitalized, while costs of
normal repairs and maintenance are charged to expense as
incurred.
IMPAIRMENT
Management reviews existing information and analyses of the
Company and its operations as well as indicators of
impairment (such as dramatic changes in the manner in which
an asset is used or forecasts showing lack of long-term
profitability) to determine whether an impairment may exist.
The Company considers relevant cash flow and profitability
information, including estimated future operating results,
trends and other available information, in assessing whether
the carrying value of its fixed assets can be recovered.
Upon a determination that the carrying value of an asset
will not be recovered from its future undiscounted cash
flows, the carrying value of that asset would be considered
impaired and will be reduced by a charge to operations in
the amount of the impairment. Impairment is measured as any
deficiency in estimated undiscounted future cash flows of
the fixed assets to recover the carrying value related to
those assets.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost
is determined by using the first-in, first-out method.
REVENUE AND PROMOTIONAL ALLOWANCES
Casino revenues represent the net win from gaming wins and
losses. The retail value of rooms, food, beverage and other
services provided to customers without charge is included in
gross revenue and deducted as promotional allowances. The
estimated departmental costs of providing such promotional
allowances are included in casino costs and expenses as
follows:
<TABLE>
<CAPTION>
For the Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Room $ 1,940,936 $1,273,154 $ 889,448
Food and Beverage 9,020,152 7,823,819 5,969,683
Other operating expenses 104,921 44,888 36,940
$11,066,009 $9,141,861 $6,896,071
</TABLE>
37
<PAGE>
EARNINGS PER SHARE
Earnings per common share are computed on the basis of the
weighted average number of common shares and common stock
equivalents outstanding during the period.
HEDGING TRANSACTION
The Company is a party to an interest rate swap agreement
and has purchased an interest rate cap (Note 6). Any net
payments made or received by the Company in connection with
this interest rate swap agreement or interest rate cap, or
any other hedging transaction that the Company may enter
into, will be classified as cash flows from operating
activities.
Premiums paid for the interest rate cap agreements are
amortized to interest expense over the shorter of the
original life of the debt or the term of the cap.
Unamortized premiums are included in other assets in the
statement of financial position. Accounts receivable under
the agreements are accrued as a reduction of interest
expense. Amounts payable under the interest rate swap
agreements are included in interest expense.
INCOME TAXES
Effective January 1, 1993, the Company implemented the
provisions of SFAS 109. SFAS 109 utilizes the liability
method and deferred taxes are determined based on the
estimated future tax effects of differences between the
financial statement and tax bases of assets and liabilities
given the provisions of the enacted tax laws.
2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents at December 31, 1995 and 1994
include $10 million and $68 million, respectively, in
overnight repurchase agreements with a bank. These items are
recorded at cost which approximates market value and are
considered cash equivalents for purposes of the Consolidated
Statements of Cash Flows.
3. CONSOLIDATED STATEMENTS OF CASH FLOWS
The following supplemental disclosures are provided as part
of the Consolidated Statements of Cash Flows:
<TABLE>
<CAPTION>
For the Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Cash payments made for
interest (net of
amounts capitalized) $3,904,540 $1,919,556 $1,728,693
Cash payments made for
income taxes $7,100,000 $6,240,000 $4,428,335
</TABLE>
38
<PAGE>
Non-cash financing and investing activities:
DECEMBER 31, 1995
Purchase of property and equipment financed through payables
totaled $6,556,126.
Purchase of land financed through long-term debt totaled
$62,042.
Accounts receivable increased by $85,380. 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
("NSOP") totaled $632,601.
DECEMBER 31, 1994
Purchase of property and equipment financed through payables
totaled $10,026,210.
Tax benefit arising from the exercise of stock options
granted under NSOP totaled $886,132.
DECEMBER 31, 1993
Purchase of property and equipment financed through payables
totaled $8,442,660.
Purchase of property and equipment financed through long-
term debt totaled $183,586.
Additional costs of issuing Common Stock totaled $12,194.
Costs of issuing Common Stock financed through payables
totaled $163,801.
Tax benefit arising from the exercise of stock options
granted under the NSOP totaled $1,120,823.
Reduction in paid-in capital as a result of the
implementation of SFAS 109 totaled $823,152. This amount
was charged directly against equity because it reflects the
tax effect of SFAS 109 as it related to the gain on sale of
assets to affiliates of the Company's largest stockholder in
December 1991, which was also recorded directly to equity.
39
<PAGE>
4. ACCOUNTS RECEIVABLE
Components of receivables are as follows:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Casino $3,267,244 $2,082,871
Hotel 1,757,640 1,534,107
Other 113,250 66,573
5,138,134 3,683,551
Less allowance for doubtful
accounts (824,692) (479,135)
$4,313,442 $3,204,416
</TABLE>
5. ACCRUED EXPENSES
Components of accrued expenses are as follows:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Accrued salaries, wages and
related benefits $4,065,736 $4,004,080
Progressive slot machines and
other gaming accruals 2,532,964 2,033,406
Accrued gaming taxes 1,714,232 1,123,036
Other accrued liabilities 823,294 670,184
$9,136,226 $7,830,706
</TABLE>
40
<PAGE>
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
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. $ 10,000,000 $125,000,000
10 5/8% Senior Subordinated
Notes, interest only payable semi-
annually; principal due July 15,
2005. 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. 202,017 165,228
Other short-term financing of
certain insurance premiums - - - 14,175
110,202,017 125,179,403
Less current maturities (25,252) (15,032,534)
$110,176,765 $110,146,869
</TABLE>
The prime interest rate quoted by the Company's primary
lenders at December 31, 1995 and 1994 was 8.50%.
At December 31, 1995, the three month Eurodollar Rate was
5.625%. The margin on the Company's Eurodollar Rate
borrowings at December 31, 1995 was 2.00%.
The Rio Bank Loan was originally entered into on July 15,
1993 in the amount of $65 million with a syndicate of banks
consisting of Bank of America National Trust Savings and
Association, Bank of America Nevada, Societe Generale, NBD
Bank, N.A., First Security Bank of Idaho, N.A., First
Interstate Bank of Nevada, N.A. and U. S. Bank of Nevada.
As a result of certain amendments, in December 1994, the Rio
Bank Loan was increased to $125 million and in September
1995, the Rio Bank Loan was increased to $175 million. As
amended, the Rio Bank Loan is a secured reducing revolving
credit facility to be used (a) to refinance the pre-
amendment Rio Bank Loan, (b) to finance the
41
<PAGE>
Phase V Expansion, (c) to finance acquisition of land
adjacent to the Rio for up to $30 million, and (d) for
general corporate purposes.
The Rio Bank Loan matures on June 30, 2001 and will bear
interest based upon a "LIBOR Spread" of from 1% to 3%, or a
"Base Rate Spread" of from 0% to 2.0% based upon a schedule
determined with reference to Rio Properties' "Funded Debt to
EBITDA Ratio". The "LIBOR Spread" is the amount in excess
of the applicable LIBOR rate which is the London interbank
offer rate established in the London interbank market. The
"Base Rate Spread" is the amount in excess of the applicable
base rate, which is the rate per annum equal to the higher
of the reference rate as it is publicly announced from time
to time by Bank of America in San Francisco or 0.50% per
annum above the latest Federal Funds rate. The Rio Bank
Loan provides for an unused facility fee ranging from 31.25
basis points to 50.0 basis points depending upon the same
Funded Debt to EBITDA ratio schedule utilized for the
interest rate. (A basis point is one one-hundredth of one
percent.) The Rio Bank Loan requires monthly payments of
interest and will require scheduled reductions of the
maximum amount available under the Rio Bank Loan commencing
with a $10 million reduction at December 31, 1997, a $7.5
million reduction at the end of each quarter during 1998 and
1999, a $10.0 million reduction at the end of each quarter
during 2000, a $32.5 million reduction at March 31, 2001 and
maturity at June 30, 2001.
To reduce the risks from interest rate fluctuations, the
Company entered into interest rate swap agreements in the
amount of $20 million from September 30, 1994 through
December 29, 1995 and $15 million from December 29, 1995
through June 28, 1996. In August 1994, the Company
purchased a $40 million interest rate cap, effective
September 30, 1994, for a three-year term, which provides
for quarterly payments to the Company in the event that
three-month LIBOR exceeds 7% on any quarterly reset date.
The Company is exposed to credit risks in the event of non-
performance by the counterparty. At December 31, 1995, the
potential maximum credit risk amounted to $464,333, which is
the carrying value of the unamortized premium. However, the
Company does not anticipate non-performance by the
counterparty. The counterparty under these agreements is
Bank of America National Trust and Savings Association ("B
of A"), the lead bank in the syndicate participating in the
Rio Bank Loan. Management believes that the financial
resources of B of A and its competitive position within the
national banking industry significantly reduce the chances
of non-performance under the interest rate swap and cap
agreements.
The following table discloses (i) the aggregate amount of
interest rate swaps categorized by annual maturity and (ii)
the related weighted average interest rate paid and received
assuming current market conditions:
42
<PAGE>
<TABLE>
<CAPTION>
Maturity: 1996 1997 1998 1999 2000 Total
<S> <C> <C> <C> <C> <C> <C>
Company pays Fixed
Weighted Average $15,000,000 $--- $--- $--- $--- $15,000,000
Interest Rate:
Received by
Company<F1> 5.875%
Paid by Company 4.950%
<FN>
<F1> The Company receives 3-month LIBOR, which was reset at
5.6875% for the three-month period beginning December 29, 1995.
</FN>
</TABLE>
At December 31, 1995 the interest rate swap and interest
rate cap agreements had fair market values of $39,774 and
$28,356, respectively (carrying values of $0 and $464,333,
respectively). Management is of the opinion that the fair
values of all other financial instruments are not materially
different from their carrying values.
As a result of entering into interest rate swap agreements
and cap agreements, the Company has recognized interest
expense of $18,638, $83,833, and $187,875 for the years
ended December 31, 1995, 1994 and 1993, respectively. The
impact of these hedging activities on the Company's weighted
average borrowing rate was an increase of approximately
0.03%, 0.26% and 0.44% for the years ended December 31,
1995, 1994 and 1993, respectively.
As of the years ended December 31, 1995 and 1994, there were
no deferred gains and losses relating to terminated interest
rate swap and interest rate cap agreements.
The revolving credit feature of the Rio Bank Loan allows the
Company to pay down and reborrow principal under the line of
credit as the Company deems appropriate. The Company
utilized this ability by reborrowing $69 million on December
30, 1994 and repaying $69 million on January 3, 1995. The
Company also reborrowed $10 million on December 29, 1995 and
repaid $9 million on January 2, 1996 under the terms of the
Rio Bank Loan. During the third quarter of 1995, the
Company used the net proceeds from the Subordinated Notes (defined
below) to reduce amounts outstanding under the Rio Bank Loan.
The Company had $165 million available under the Rio Bank Loan
at December 31, 1995, while the Company's borrowing capacity
under the Rio Bank Loan was fully utilized at December 31,
1994.
43
<PAGE>
As of December 31, 1995, annual maturities of total notes
and loans payable are as follows:
<TABLE>
<CAPTION>
Year Ending
<S> <C>
December 31, 1996 $25,252
December 31, 1997 25,252
December 31, 1998 25,252
December 31, 1999 25,252
December 31, 2000 25,252
Thereafter 110,075,757
$110,202,017
</TABLE>
Based upon the present operations of the Rio, internal
projections of revenues and expenses, and other anticipated
cash requirements of Rio Properties during 1996, the Company
anticipates meeting required principal and interest payments
under the Rio Bank Loan during 1996.
The carrying values of assets included in the consolidated
financial statements, which collateralize bank loans
payable, are as follows:
December 31,
1995 1994
Building and improvements $192,818,896 $137,005,432
Equipment, furniture and
improvements 68,500,267 43,108,873
Land and improvements 37,509,960 24,666,679
Construction in progress 17,173,483 38,521,773
$316,002,606 $243,302,757
On July 18, 1995, the Company entered into an agreement with
Salomon Brothers Inc. and Montgomery Securities (the
"Initial Purchasers") for the sale by the Company of
$100 million in principal amount of the Company's
10 5/8% Senior Subordinated Notes Due 2005 (the "Old
Notes"). The Old Notes were purchased by the Initial
Purchasers for resale to qualified institutional investors.
The net proceeds from the sale of the Old Notes
(approximately $96.7 million after the deduction of a 2.75%
discount to the Initial Purchasers and offering expenses of
approximately $0.5 million), borrowings under the Rio Bank
Loan, cash on hand and cash from operations will be used to
finance the Company's approximately $185 million Phase V
Expansion. Pending such use, the net proceeds were used to
reduce amounts outstanding under the Rio Bank Loan.
Pursuant to a registration agreement between the Company and
the Initial Purchasers, the Company registered on Form S-4
under the Securities Act of 1933 $100 million principal
amount of 10 5/8% Senior Subordinated Notes Due 2005 (the
"New Notes") which were exchanged for the Old Notes (the Old
Notes and the New Notes are collectively referred to as the
"Subordinated Notes").
44
<PAGE>
The Subordinated Notes were issued under an indenture (the
"Indenture") dated July 21, 1995 among the Company, Rio
Properties and IBJ Schroder Bank & Trust Company, as
trustee. The following summary of certain provisions of the
Indenture does not purport to be complete and is subject to
the provisions of the Indenture and the Subordinated Notes.
Capitalized terms not otherwise defined have the same
meanings assigned to them in the Indenture.
The Subordinated Notes mature on July 15, 2005. Interest
payment dates under the Subordinated Notes are January 15
and July 15, commencing January 15, 1996. The Subordinated
Notes are unconditionally guaranteed (the "Rio Guarantee")
on a senior subordinated basis by Rio Properties. The
Subordinated Notes are subordinated in right of payment to
all existing and future Senior Indebtedness (as defined in
the Indenture) of the Company and are structurally
subordinated to all existing and future indebtedness and
other liabilities (including trade payables) of the
Company's subsidiaries. The Rio Guarantee is subordinated
in right of payment to all existing and future Senior
Indebtedness (as defined in the Indenture) of Rio Properties
and is structurally subordinated to all existing and future
indebtedness and other liabilities (including trade
payables) of Rio Properties' subsidiaries.
The Subordinated Notes may be redeemed at the option of the
Company, in whole or in part, at any time on or after July
15, 2000, at the redemption prices set forth in the
Indenture, plus accrued and unpaid interest, if any, through
the redemption date. The Subordinated Notes will be
redeemed from any holder or beneficial owner of the
Subordinated Notes which is required to be found suitable
and is not found suitable by the Nevada Commission.
Upon a Change of Control of the Company (as defined in the
Indenture), each holder of Subordinated Notes will have the
right to require the Company to repurchase all or part of
such holder's Subordinated Notes at a price equal to 101% of
the aggregate principal amount thereof, plus accrued and
unpaid interest, if any, to the date of repurchase. The
Company's obligation to repurchase the Subordinated Notes is
guaranteed on a senior subordinated basis by Rio Properties.
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and its Restricted
Subsidiaries (as defined in the Indenture) to incur
additional indebtedness, pay dividends or make other
distributions, make investments, repurchase subordinated
obligations or capital stock, create certain liens (except,
among others, liens securing Senior Indebtedness), enter
into certain transactions with affiliates, sell assets of
the Company or its subsidiaries, issue or sell subsidiary
stock, create or permit to exist restrictions on
distributions from subsidiaries, or enter into certain
mergers and consolidations.
45
<PAGE>
7. INCOME TAXES
In February 1992, the Financial Accounting Standards Board
issued SFAS 109 which supersedes previous pronouncements on
accounting for income taxes and is effective for fiscal
years commencing after December 15, 1992. The Company
adopted SFAS 109 in the first quarter of 1993 by reporting
the effect of SFAS 109 as a cumulative effect of a change in
accounting principle and not restating prior periods. The
effect of SFAS 109 recorded in January 1993 decreased net
income as a non-cash, non-recurring cumulative effect of a
change in accounting principle by an amount totaling
$776,888. It also reduced paid-in capital by an amount
totaling $823,152. This amount was charged directly against
equity because it reflects the tax effect of SFAS 109 as it
related to the gain on sale of assets to affiliates of the
Company's largest stockholder in December 1991, which was
also recorded directly to equity.
The federal income tax provisions for the years ended
December 31, 1995, 1994 and 1993 consist of the following:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Provision before tax rate
change and extraordinary
items $10,707,135 $9,178,023 $6,671,872
Additional provision due
to tax rate change (see
below) --- --- 113,433
Provision before
extraordinary item 10,707,135 9,178,023 6,785,305
Income tax benefit from
extraordinary loss on
early retirement of debt --- --- (130,700)
Total Income Tax
Provision $10,707,135 $9,178,023 $6,654,605
</TABLE>
The Revenue Reconciliation Act of 1993 raised the corporate
income tax rate from 34% to 35%, retroactively to January 1,
1993. In accordance with the requirements of SFAS 109, the
deferred income tax assets and liabilities were adjusted
accordingly, resulting in a charge against income in the
amount of $113,433.
46
<PAGE>
The following schedule reconciles the Company's effective
tax rate to the statutory rate:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 35.0%
Depreciation on premium allocated in
Rio Partnership exchange 0.4% 0.5% 0.7%
Disallowance for tax purposes of
certain meals, travel and 1.5% 1.2% 0.4%
entertainment expenses
Other (0.5)% (0.2)% ---
Effective rate 36.4% 36.5% 36.1%
</TABLE>
During 1994, the Company utilized all remaining alternative
minimum tax credit carryforwards.
The Company's deferred tax assets (liabilities) at December
31, 1995 consisted of the following:
<TABLE>
<CAPTION>
Current Non-Current
<S> <C> <C>
Depreciation & amortization $(11,399,852)
Deferred employee benefits $370,122 ---
Bad debt expense 288,642 ---
Other deferred tax assets,
net --- 764,954
$658,764 $(10,634,898)
</TABLE>
The Company's deferred tax assets (liabilities) at
December 31, 1994 consisted of the following:
<TABLE>
<CAPTION>
Current Non-Current
<S> <C> <C>
Depreciation & amortization $(7,613,359)
Deferred employee benefits $ 391,927 ---
Bad debt expense 136,105 ---
Other deferred tax assets, 34,231 101,082
net
$ 562,263 $(7,512,277)
</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 Current 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.
47
<PAGE>
8. COMMITMENTS AND CONTINGENCIES
In connection with the bank loan agreements, the Company has
entered into agreements with certain key stockholders,
directors and executive officers to facilitate borrowings by
the Company. These individuals personally guaranteed the
previous bank loan made to Rio Properties in exchange for
compensation of $1,250,000 upon the satisfaction of certain
terms and conditions. The first potential payment
obligation of the Company of $250,000 commenced with the
fiscal year ended December 31, 1990 and continued to
December 31, 1994, with a two-year extension provision. No
amounts were due or paid arising out of the years ended
December 31, 1990 or 1991. The Company made $250,000
payments in each of the four years ended December 31, 1995,
1994, 1993, and 1992. The Company anticipates paying the
entire balance on or before December 31, 1996.
Effective January 1, 1991, Rio Properties maintains an
employee profit sharing plan for all employees who have
accredited service. Contributions to the plan are
discretionary and cannot exceed amounts permitted under the
Internal Revenue Code. Contributions of $278,835, $215,039,
and $109,701 have been authorized and charged to income for
the years ended December 31, 1995, 1994, and 1993,
respectively.
In the normal course of business, the Company is involved
with various negotiations and legal matters. In addition,
Rio Properties is a potential defendant in various personal
injury allegations. Management is of the opinion that the
effect of these matters is not material to the consolidated
financial statements.
9. STOCKHOLDERS' EQUITY
COMMON STOCK
During 1995, the Company issued 198,300 shares of Common
Stock at exercise prices ranging from $3.00 per share to
$14.25 per share pursuant to options previously granted
under the Company's Non-Statutory Stock Option Plan
("NSOP").
During 1995, the Company repurchased 430,500 shares of
Common Stock from time to time in the open market at a total
cost of $5.4 million. The repurchased shares of Common
Stock were retired.
During 1994, the Company issued 223,550 shares of Common
Stock at exercise prices ranging from $3.00 per share to
$15.625 per share pursuant to options previously granted
under the Company's NSOP.
On November 24, 1993, the Company sold in a public offering
2,300,000 shares of Common Stock at a net price per share of
$13.60. The proceeds from the sale were received in
November 1993.
48
<PAGE>
During 1993, the Company issued 247,000 shares of Common
Stock at exercise prices ranging from $3.00 per share to
$6.00 per share pursuant to options previously granted under
the Company's NSOP.
STOCK OPTIONS
Key officers and employees are eligible to participate in
the Company's NSOP. The Company has granted 2,856,500
options at exercise prices ranging from $3.00 to $15.625 per
share. As of December 31, 1995, 704,250 options had been
exercised and 364,400 option had been forfeited, resulting
in 1,787,850 options outstanding and 145,400 options
available to be granted under the NSOP.
The NSOP will terminate July 8, 1997, subject to the right
of the Board of Directors to terminate the NSOP prior
thereto.
On September 5, 1991, the Company's Board of Directors
adopted the 1991 Directors' Stock Option Plan, which was
ratified by the Company's stockholders on May 16, 1992. On
March 28, 1995, the Company's Board of Directors amended the
1991 Directors' Stock Option Plan, which was ratified by the
Company's Stockholders on May 16, 1995, under which options
to purchase up to 200,000 shares of Common Stock may be
granted to non-employee directors. The option exercise price
is 100% of the fair market value of the Common Stock on the
date of grant. As of December 31, 1995, 108,000 options had
been granted at exercise prices ranging from $3.00 per share
to $16.625 per share. As of December 31, 1995, 20,000
options had been exercised and 22,000 options had been
forfeited, resulting in 66,000 options outstanding and
114,000 options available to be granted under the Directors'
Stock Option Plan.
10. RELATED PARTY TRANSACTIONS
The Company contracted with two affiliates of the Company's
largest stockholder for the design and construction of a 41-
story hotel tower containing approximately 1,000 suites (the
"Phase V Expansion") for a total of $177,109,805. As of
December 31, 1995, the Company had capitalized $6,256,458 in
connection with these contracts. As of December 31, 1995,
$4,151,712 has been accrued in connection with these
construction and design contracts.
The Company contracted with two affiliates of the Company's
largest stockholder for the design and construction of an
addition to an existing 21-story hotel tower of 141
additional suites (the "Phase IV Expansion") for a total of
$18,848,258. As of December 31, 1995, the Company had
capitalized $16,565,576 in connection with these contracts.
As of December 31, 1995, $1,663,182 had been accrued in
connection with these construction and design contracts.
The Company contracted with two affiliates of the Company's
largest stockholder for the design and construction of a 21-
story hotel tower containing 549 suites (the "Phase III
49
<PAGE>
Expansion") for a total of $64,166,368. As of December 31,
1995 and 1994, the Company had capitalized $62,026,368 and
$37,241,468 in connection with these contracts. As of
December 31, 1995 and 1994, $372,370 and $10,026,210 had
been accrued in connection with these contracts.
In 1993, the Company contracted with two affiliates of the
Company's largest stockholder for the design and
construction of a 21-story hotel tower containing 437 suites
(the "Tower Expansion") and an expansion of the Rio's public
area (the "Eastside Expansion"). The two contracts were in
amounts not to exceed $57,557,093. As of December 31, 1994,
all amounts due in connection with these contracts had been
capitalized and paid.
In December 1991, the Company sold non-Rio real estate to an
affiliate of the Company's largest stockholder. In April
1994, the affiliated entity sold the real estate to a non-
related party. Pursuant to the terms of the sales
agreement, the Company was entitled to a portion of the
sales proceeds which equaled $966,510, net of expenses.
The Company reimbursed an affiliate of the Company's largest
stockholder for certain expenses advanced on behalf of or
supplied to the Company during the years ended December 31,
1995 and December 31, 1993 of approximately $878,428 and
$162,425, respectively. Nominal amounts were paid by the
Company to the affiliate for similar purposes during 1994.
Such amounts were generally billed to the Company at the
affiliate's cost.
Two director/officers of the Company are associated with
affiliated entities which render various architectural and
construction services for the Company. The Company paid
these entities, in the aggregate, approximately $51,018,430,
$50,416,348, and $44,567,088 during the years ended
December 31, 1995, 1994, and 1993, respectively, for their
services.
Entities in which a director of the Company is the principal
stockholder and the executive officer received commissions
from the Company totaling approximately $158,789, $124,912
and $90,325 for the years ended December 31, 1995, 1994, and
1993, respectively, arising out of the acquisition of
various insurance coverages by the Company.
The Company believes that the transactions described above
are on terms at least as favorable as would have been
obtained from non-related parties.
11. DEBT GUARANTEE
Summarized financial information is provided below for Rio
Properties, the Company's principal wholly-owned operating
subsidiary, as sole guarantor to the Company's $100,000,000
10 5/8% Senior Subordinated Notes Due 2005. The
Subordinated Notes are fully and unconditionally guaranteed
by Rio Properties and are subordinated to all existing and
future indebtedness and other liabilities (including trade
payables) of the Company's subsidiaries.
50
<PAGE>
Summarized financial statements of Rio Properties have been
prepared since the assets, pre-tax income and parents' net
investment in the non-guarantor subsidiaries on an
individual and combined basis are inconsequential. In
addition, the Company's operations or assets other than its
investment in its subsidiaries are inconsequential. The
difference in net equity between the Company and Rio
Properties is principally a result of the Company's purchase
in 1990 and 1992 of minority interests in a subsidiary,
resulting in the payment of premiums of approximately $13.7
million and $1.3 million, respectively. The premiums were
allocated by the Company, based on fair market values, among
land, building and equipment, furniture and improvements.
<TABLE>
<CAPTION>
For the Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Current Assets $29,995,415 85,120,465 62,303,414
Non-Current Assets 262,320,009 199,788,372 138,644,090
Current Liabilities 33,216,257 44,662,313 29,292,301
Non-Current Liabilities 110,176,765 110,146,869 56,875,753
Revenues 192,537,954 146,299,304 109,981,585
Operating Profit 37,138,205 25,726,349 20,265,334
Income before income
taxes 29,451,596 23,925,361 18,107,197
Net Income 18,733,318 15,174,014 10,745,469
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This information is incorporated by reference from the
Company's Proxy Statement to be filed with the Commission in
connection with the Company's annual meeting of stockholders on
May 23, 1996.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference from the
Company's Proxy Statement to be filed with the Commission in
connection with the Company's annual meeting of stockholders on
May 23, 1996.
51
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
This information is incorporated by reference from the
Company's Proxy Statement to be filed with the Commission in
connection with the Company's annual meeting of stockholders on
May 23, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference from the
Company's Proxy Statement to be filed with the Commission in
connection with the Company's annual meeting of stockholders on
May 23, 1996.
52
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements
Included in Part II of this report:
Consolidated Balance Sheets at December 31, 1995
and December 31, 1994.
Consolidated Statements of Income for the Years Ended
December 31, 1995, 1994 and 1993.
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Included in Part IV of this report:
Schedule III - Condensed Financial Information of
Registrant
Schedule VIII - Valuation and Qualifying Accounts
Other schedules are omitted because of the absence of conditions
under which they are required or because the required information
is given in the financial statements or notes thereto.
3. Exhibits
Number Exhibit Description
3.01 Amended and Restated Articles of Incorporation of Rio
Hotel & Casino, Inc. filed July 19, 1994, are
incorporated herein by reference from the Company's (SEC
File No. 0-13760) Report on Form 10-Q for the Quarter
Ended June 30, 1994, Part II, Item 6(a), Exhibit 4.01.
3.02 Amended and Restated Bylaws of Rio Hotel & Casino, Inc.,
certified March 3, 1993, are incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Report on Form 10-K for the Year Ended December 31,
1992, Part IV, Item 14, Exhibit 4.02.
53
<PAGE>
4.01 Specimen common stock certificate for the common stock
of Rio Hotel & Casino, Inc. is incorporated herein by
reference from the Company's (SEC File No. 333-869)
Registration Statement on Form S-3, filed on
February 12, 1996, Part II, Item 15, Exhibit 4.03.
4.02 Agreement and Plan of Exchange by and between Rio
Hotel & Casino, Inc., a Nevada corporation, and Rio
Properties, Inc., a Nevada corporation, dated August 14,
1992, is incorporated herein by reference from the
Company's (SEC File No. 33-51092) Registration Statement
on Form S-3 filed on August 24, 1992, Part II, Item 16,
Exhibit 2.01.
4.03 Form of Subscription and Exchange Agreement between Rio
Properties, Inc., MarCor Resorts, Inc., and subscriber
is incorporated herein by reference from the Company's
(SEC File No. 33-51092) Registration Statement on
Form S-3 filed on August 24, 1992, Part II, Item 16,
Exhibit 2.02.
4.04 Rio Hotel & Casino, Inc. Non-Statutory Stock Option
Plan, as amended September 5, 1991, as amended
February 28, 1992 (to reflect change in Company name)
and as amended June 22, 1993, is incorporated herein by
reference from the Company's (SEC File No. 33-38752)
Registration Statement on Form S-8 filed on October 5,
1993, Part II, Item 8, Exhibit 4.04.
4.05 Rio Hotel & Casino, Inc. Directors' Stock Option Plan As
Amended February 28, 1992 (to reflect change in Company
name only) is incorporated herein by reference from the
Company's (SEC File No. 2-88147) Report on Form 10-K for
the Year Ended December 31, 1991, Part IV, Item 14(c),
Exhibit 4.07.
4.06 Rio Suite Hotel & Casino Employee Retirement Savings
Plan Trust Agreement dated February 11, 1991; First
Amendment to the Rio Suite Hotel & Casino Employee
Retirement Savings Plan dated March 20, 1992, effective
April 1, 1992; Second Amendment to the Rio Suite Hotel &
Casino Employee Retirement Savings Plan dated
March 20, 1992, effective April 1, 1992; Third Amendment
to the Rio Suite Hotel & Casino Employee Retirement
Savings Plan dated December 14, 1992, effective August
15, 1992, and Rio Suite Hotel & Casino Employee
Retirement Savings Plan, Participant Loan Program dated
March 19, 1992 are incorporated herein by reference from
the Company's (SEC File No. 33-56860) Registration
Statement on Form S-8 filed January 8, 1993, Part II,
Item 8, Exhibit 4.11; Rio Suite Hotel & Casino
Employment Retirement Savings Plan dated February 21,
1991 is incorporated herein by reference from the
Company's (SEC File No. 33-56860) Registration Statement
on Form S-8 filed February 3, 1993, Part II, Item 8,
Exhibit 4.11; Fourth Amendment to the Rio Suite Hotel &
Casino Employee
54
<PAGE>
Retirement Savings Plan dated April 30, 1993, effective
July 1, 1993; Fifth Amendment to the Rio Suite Hotel &
Casino Employee Retirement Savings Plan dated
August 17, 1993, effective July 1, 1993; Sixth
Amendment to the Rio Suite Hotel & Casino Employee
Retirement Savings Plan dated October 27, 1993,
effective October 25, 1993; Seventh Amendment to the Rio
Suite Hotel & Casino Employee Retirement Savings Plan
Trust Agreement dated and effective December 16, 1993;
and Eighth Amendment to the Rio Suite Hotel & Casino
Employee Retirement Savings Plan dated May 3, 1994,
effective May 1, 1994 are incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Report on Form 10-Q for the Quarter Ended June 30, 1994,
Part II, Item 6(a), Exhibit 4.03; Ninth Amendment to the
Rio Suite Hotel & Casino Employee Retirement Savings
Plan dated August 26, 1994, effective August 25, 1994;
Tenth Amendment to the Rio Suite Hotel & Casino Employee
Retirement Savings Plan dated and effective January 1,
1995; and Eleventh Amendment to the Rio Suite Hotel &
Casino Employee Retirement Savings Plan dated and
effective January 12, 1995 are incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Report on Form 10-K for the Year Ended December 31,
1994, Part IV, Item 14(c), Exhibit 4.08.
4.07 Rio Hotel & Casino, Inc. 1995 Long-Term Incentive Plan,
as adopted January 16, 1995 is incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Report on Form 10-K for the Year Ended December 31,
1994, Part IV, Item 14(c), Exhibit 4.09.
4.08 Credit Agreement among Bank of America National Trust
and Savings Association, as agent for itself and other
financial institutions, as Lenders, and Rio Properties,
Inc., as Borrower, dated July 15, 1993; Line A Note
executed by Rio Properties, Inc., as Borrower, in favor
of Bank of America National Trust and Savings
Association, in the amount of $9,692,307.70 dated July
15, 1993; Line A Note executed by Rio Properties, Inc.,
as Borrower, in favor of Bank of America Nevada, in the
amount of $3,230,769.23, dated July 15, 1993; Line A
Note executed by Rio Properties, Inc., as Borrower, in
favor of Societe Generale, in the amount of
$6,461,538.46, dated July 15, 1993; Line A Note executed
by Rio Properties, Inc., as Borrower, in favor of NBD
Bank, N.A., in the amount of $6,461,538.46, dated July
15, 1993; Line A Note executed by Rio Properties, Inc.,
as Borrower, in favor of First Security Bank of Idaho,
N.A., in the amount of $6,461,538.46, dated July 15,
1993; Line A Note executed by Rio Properties, Inc., as
Borrower, in favor of First Interstate Bank of Nevada,
N.A., in the amount of $6,461,538.46, dated July 15,
1993; Line A Note executed by Rio Properties, Inc., as
Borrower, in favor of U.S. Bank of Nevada, in the amount
of $3,230,769.23, dated July 15, 1993; Line B Note
executed by Rio Properties, Inc., as Borrower, in favor
of Bank of America National Trust and Savings
Association, in the amount of $5,307,692.30 dated July
15, 1993; Line B Note executed by Rio Properties, Inc.,
as Borrower, in favor of Bank of America Nevada, in the
amount of
55
<PAGE>
$1,769,230.77, dated July 15, 1993; Line B
Note executed by Rio Properties, Inc., as Borrower, in
favor of First Interstate Bank of Nevada, N.A., in the
amount of $3,538,461.54, dated July 15, 1993; Line B
Note executed by Rio Properties, Inc., as Borrower, in
favor of First Security Bank of Idaho, N.A., in the
amount of $3,538,461.54, dated July 15, 1993; Line B
Note executed by Rio Properties, Inc., as Borrower, in
favor of NBD Bank, N.A., in the amount of $3,538,461.54,
dated July 15, 1993; Line B Note executed by Rio
Properties, Inc., as Borrower, in favor of Societe
Generale, in the amount of $3,538,461.54, dated July 15,
1993; Line B Note executed by Rio Properties, Inc., as
Borrower, in favor of U.S. Bank of Nevada, in the amount
of $1,769,230.77, dated July 15, 1993; Revolving Note
executed by Rio Properties, Inc., as Borrower, in favor
of Bank of America National Trust and Savings
Association, in the amount of $15,000,000, dated July
15, 1993; Revolving Note executed by Rio Properties,
Inc., as Borrower, in favor of Bank of America Nevada,
in the amount of $5,000,000, dated July 15, 1993;
Revolving Note executed by Rio Properties, Inc., as
Borrower, in favor of First Interstate Bank of Nevada,
N.A., in the amount of $10,000,000, dated July 15, 1993;
Revolving Note executed by Rio Properties, Inc., as
Borrower, in favor of First Interstate Bank of Idaho,
N.A., in the amount of $10,000,000, dated July 15, 1993;
Revolving Note executed by Rio Properties, Inc., as
Borrower, in favor of NBD Bank, N.A., in the amount of
$10,000,000, dated July 15, 1993; Revolving Note
executed by Rio Properties, Inc., as Borrower, in favor
of Societe Generale, in the amount of $10,000,000,
dated July 15, 1993; Revolving Note executed by Rio
Properties, Inc., as Borrower, in favor of U.S. Bank of
Nevada, in the amount of $5,000,000, dated July 15,
1993; Security Agreement executed by Rio Properties,
Inc., as Debtor, in favor of Bank of America National
Trust and Savings Association, as agent for itself and
other financial institutions, as Secured Party, dated
July 15, 1993; Construction Deed of Trust With
Assignment of Rents and Fixture Filing among Rio
Properties, Inc., as Trustor, Equitable Deed Company, as
Trustee, and Bank of America National Trust and
Savings Association, as agent for itself and the other
financial institutions, as Beneficiary, dated July 15,
1993; Unsecured Indemnity Agreement executed by Rio
Properties, Inc., as Indemnitor, in favor of Bank of
America National Trust and Savings Association, as agent
for itself and other financial institutions, dated July
15, 1993; Guaranty executed by Rio Hotel & Casino, Inc.,
as Guarantor, in favor of Bank of America National Trust
and Savings Association, as agent for itself and other
financial institutions, as Guaranteed Parties, dated
July 15, 1993; and, Parent Guarantor Security Agreement
by Rio Hotel & Casino, Inc., as Debtor, in favor of Bank
of America National Trust and Savings Association, as
agent for itself and other financial institutions, as
Secured Party, dated July 15, 1993 are incorporated by
reference from the Company's (SEC File No. 2-88147)
Report on Form 8-K dated July 15, 1993, Item 7(c),
Exhibit 28.01; First Amendment to Credit Agreement dated
as of October 25, 1993 and Second Amendment and Waiver
to Credit Agreement dated as of November 8, 1993 among
Rio Properties, Inc., Bank of America National Trust and
Savings Association, Bank of America Nevada, First
Interstate Bank
56
<PAGE>
of Nevada, First Security Bank of Idaho,
N.A., NBD Bank, N.A., Societe Generale, and U.S. Bank of
Nevada are incorporated by reference from the Company's
(SEC File No. 0-13760) Report on Form 10-K for the Year
Ended December 31, 1993, Part IV, Item 14(c), Exhibit
4.09; Third Amendment to Credit Agreement dated as of
April 15, 1994 among Rio Properties, Inc., Bank of
America National Trust and Savings Association, as
Agent and as a Bank, Bank of America, Nevada, First
Interstate Bank of Nevada, First Security Bank of Idaho,
N.A, NBD Bank, N.A., Societe Generale, and U.S. Bank of
Nevada; Memorandum of Amendments to Credit Agreement and
Amendment to Construction Deed of Trust with Assignment
of Rents and Fixture Filing dated as of May 9, 1994 by
Rio Properties, Inc. and Bank of America National Trust
and Savings Association are incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Report on Form 10-Q for the Quarter Ended June 30, 1994,
Part II, Item 6(a), Exhibit No. 4.02; and Fourth
Amendment to Credit Agreement among Rio Properties,
Inc., as Borrower, and Bank of America National Trust
and Savings Association, First Interstate Bank of
Nevada, First Security Bank of Idaho, N.A., NBD Bank,
N.A., Societe Generale, Bank of America, Nevada, U.S.
Bank of Nevada, Bank of Scotland and Midlantic Bank,
N.A., as Lenders; and Second Memorandum of Amendment to
Credit Agreement and Amendment to Construction Deed of
Trust with Assignment of Rents and Fixture Filing
between Borrower and Bank of America National Trust and
Savings Association, as agent for Lenders, dated
December 16, 1994 are incorporated herein by reference
from the Company's (SEC File No. 0-13760) Report on Form
8-K dated December 16, 1994, Item 7(c), Exhibit 10.01;
Fifth Amendment to Credit Agreement dated as of March
20, 1995, among Rio Properties, Inc., Bank of America
National Trust and Savings Association, as Agent and as
a Bank, First Interstate Bank of Nevada, First Security
Bank of Idaho, N.A., NBD Bank, N.A., Societe Generale,
Bank of America Nevada, U.S. Bank of Nevada, Bank of
Scotland and Midlantic Bank, N.A., as Banks, is
incorporated herein by reference from the Company's (SEC
File No. 0-13760) Report on Form 10-K for the Year Ended
December 31, 1994, Part IV, Item 14(c), Exhibit 10.09;
Sixth Amendment to Credit Agreement dated as of July 31,
1995 among Rio Properties, Inc., Bank of America
National Trust and Savings Association, as Agent and as
a Bank, and First Interstate Bank of Nevada, First
Security Bank of Idaho, N.A., NBD Bank, N.A., Societe
Generale, Bank of America Nevada, U.S. Bank of Nevada,
Bank of Scotland, Midlantic Bank, N.A., and Bank of
Hawaii, as Banks is incorporated herein by reference
from the Company's (SEC File No. 0-13760) Report on Form
8-K dated September 15, 1995, Item 7(c), Exhibit 4.01;
and Seventh Amendment to Credit Agreement dated as of
January 17, 1996 among Rio Properties, Inc., Bank of
America National Trust and Savings Association, as Agent
and as a Bank, and First Interstate Bank of Nevada,
First Security Bank of Idaho, N.A., Societe Generale,
Bank of America Nevada, U.S. Bank of Nevada, Bank of
Scotland, Midlantic Bank, N.A., and Bank of Hawaii, as
Banks.
4.09 Indenture dated as of July 21, 1995, among Rio Hotel &
Casino, Inc., Rio Properties,
57
<PAGE>
Inc. and IBJ Schroder Bank & Trust Company for the
Company's 105/8% Senior Subordinated Notes Due 2005
is incorporated herein by reference from the Company's
(SEC File No. 0-13760) Report on Form 8-K dated
July 18, 1995, Item 7(c), Exhibit 4.3.
4.10 Registration Agreement dated July 18, 1995 by Rio Hotel
& Casino, Inc. and accepted July 18, 1995 by Salomon
Brothers Inc. and Montgomery Securities is incorporated
herein by reference from the Company's (SEC File No. 0-
13760) Report on Form 8-K dated July 18, 1995, Item
7(c), Exhibit 4.2.
4.11 Form of Letter of Transmittal to IBJ Schroder Bank &
Trust Company as Exchange Agent for exchange of 105/8%
Senior Subordinated Notes Due 2005 is incorporated
herein by reference from the Company's (SEC File No. 33-
62163) Registration Statement on Form S-4 filed August
28, 1995, Part II, Item 21(a), Exhibit 4.14.
10.01 Agreement by and among MarCor Resorts Inc., Marnell
Corrao, Inc., Marnell Corrao Associates, Inc., MarCor
Partnership, The Anthony A. Marnell II Revocable Living
Trust dated June 16, 1982, Anthony A. Marnell II, Sandra
J. Marnell, Barrett Family Revocable Living Trust dated
December 18, 1981, James A. Barrett, Jr. and Maureen M.
Barrett dated February 22, 1989, is incorporated herein
by reference from the Company's (SEC File No. 0-13760)
Annual Report on Form 10-K for the Year Ended December
31, 1994, Part IV, Item 14(c), Exhibit 10.01; First
Amendment to Agreement dated October 25, 1993 by and
among Rio Hotel & Casino, Inc., and Marnell Corrao,
Inc., Marnell Corrao Associates, Inc., MarCor
Partnership, Anthony A. Marnell II, Barrett Family
Revocable Living Trust dated December 18, 1981, James A.
Barrett, Jr. and Maureen M. Barrett incorporated herein
by reference from the Company's (SEC File No. 0-13760)
Report on Form 10-K for the Year Ended December 31,
1993, Part IV, Item 14(c), Exhibit 10.01.
10.02 Interest Rate Swap Agreement dated as of July 28, 1993
between Rio Properties, Inc. and Bank of America
National Trust and Savings Association is incorporated
herein by reference from the Company's (SEC File No. 0-
13760) Report on Form 10-K for the Year Ended December
31, 1993, Part IV, Item 14(c), Exhibit 10.11.
10.03 Architectural Agreement entered into as of February 25,
1994 between Rio Hotel & Casino, Inc., as Owner, and
Anthony A. Marnell II, Chartered, as Architect, is
incorporated herein by reference from the Company's (SEC
File No. 0-13760), Report on Form 10-K for the Year
Ended December 31, 1993, Part IV, Item 14(c), Exhibit
10.12.
10.04 Building Contract entered into as of February 25, 1994
between Marnell Corrao Associates, Inc., as General
Contractor, and Rio Properties, Inc., as Owner, is
58
<PAGE>
incorporated herein by reference from the Company's (SEC
File No. 0-13760) Report on Form 10-K for the Year Ended
December 31, 1993, Part IV, Item 14(c), Exhibit 10.13.
10.05 Architectural Agreement entered into as of February 9,
1995 between Rio Hotel & Casino, Inc., as Owner, and
Anthony A. Marnell, Chartered, as Architect, is
incorporated herein by reference from the Company's (SEC
File No. 0-13760) Annual Report on Form 10-K for the
Year Ended December 31, 1994, Part IV, Item 14(c),
Exhibit 10.08.
10.06 Building Contract entered into as of February 27, 1995
between Marnell Corrao Associates, Inc., as General
Contractor, and Rio Properties, Inc., as Owner, is
incorporated herein by reference from the Company's (SEC
File No. 0-13760) Annual Report on Form 10-K for the
Year Ended December 31, 1994, Part IV, Item 14(c),
Exhibit 10.09.
10.07 Real Estate Purchase and Sale Agreement entered into as
of January 25, 1995 between Focus 2000, Inc., as Seller,
and Rio Properties, Inc., as Buyer, is incorporated
herein by reference from the Company's (SEC File No. 0-
13760) Annual Report on Form 10-K for the Year Ended
December 31, 1994, Part IV, Item 14(c), Exhibit 10.10.
10.08 Exchange Agreement entered into as of January 6, 1995
between Allied Building Materials, Cinderlane, Inc., and
Rio Hotel & Casino, Inc. is incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Annual Report on Form 10-K for the Year Ended December
31, 1994, Part IV, Item 14(c), Exhibit 10.11.
10.09 Letter Agreement regarding Rate Cap Transaction dated
August 11, 1994 between Bank of America National Trust
and Savings Association and Rio Properties, Inc. is
incorporated herein by reference from the Company's (SEC
File No. 0-13760) Annual Report on Form 10-K for the
Year Ended December 31, 1994, Part IV, Item 14(c),
Exhibit 10.12.
10.10 Architectural Agreement entered into as of July 27, 1995
between Rio Hotel & Casino, Inc., as Owner, and Anthony
A. Marnell II, Chtd., as Architect, is incorporated
herein by reference from the Company's (SEC File No.
333-869) Registration Statement on Form S-3, filed on
February 12, 1996, Part II, Item 16, Exhibit 10.10.
10.11 Building Contract entered into as of August 14, 1995 by
and between Marnell Corrao Associates, Inc., as General
Contractor, and Rio Properties, Inc., as Owner, is
incorporated herein by reference from the Company's
(SEC File No. 333-869) Registration Statement on
Form S-3, filed on February 12, 1996, Part II, Item 16,
Exhibit 10.11.
59
<PAGE>
21.01 List of the Company's subsidiaries.
23.01 Consent of Arthur Andersen LLP.
27.01 Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended December 31, 1995.
60
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
RIO HOTEL & CASINO, INC.
BALANCE SHEETS
December 31,
1995 1994
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 85,885 $ 35,635
Accounts receivable 537 887
Accounts receivable from affiliates - - - 3,213,417
Total current assets 86,422 3,249,939
Other assets:
Investments in subsidiaries 172,308,025 153,227,263
Other, net 2,570,623 1,938,022
174,878,648 155,165,285
$ 174,965,070 $ 158,415,224
LIABILITIES AND STOCKHOLDERS' EQUITY
Non-current liabilities due to subsidiaries $ 12,077,170 $ 10,576,057
Stockholders' equity
Common Stock, $0.01 par value;
100,000,000 shares authorized;
21,139,146 (1995) and 21,371,346 (1994)
shares issued and outstanding 211,392 213,714
Additional paid-in capital 113,520,158 117,214,582
Retained earnings 49,156,350 30,410,871
Total stockholders' equity 162,887,900 147,839,167
$ 174,965,070 $ 158,415,224
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
RIO HOTEL & CASINO, INC.
STATEMENTS OF INCOME
For the Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Revenues
Interest Income $ 1,144 $ 2,537 $ 6,724
Other revenues - - - 966,510 393,537
Subsidiary earnings 18,994,335 15,267,612 10,592,688
18,995,479 16,236,659 10,992,949
Costs and Expenses:
General and administrative 250,000 270,250 343,577
250,000 270,250 343,577
Net income $ 18,745,479 $ 15,966,409 $ 10,649,372
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
RIO HOTEL & CASINO, INC.
STATEMENTS OF CASH FLOW
For the Year Ended December 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 18,745,479 $ 15,966,409
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Earnings from subsidiary investments (18,994,335) (15,267,612)
(Increase) decrease in assets:
Receivables 350 64,113
Prepaid expenses and other current assets - - - - - -
Due from (to) subsidiaries 4,715,730 (1,820,498)
Other, net - - - - - -
Decrease in liabilities:
Accounts payable-trade - - - (25,000)
Net cash provided by (used in) operating activities 4,467,224 (1,082,588)
Cash flows from investing activities:
Investments in subisidiaries - - - (14,390)
Net cash used in investing activities - - - (14,390)
Cash flows from financing activities:
Net proceeds from common stock issuance 969,251 1,022,700
Common stock offerings cost - - - (119,529)
Repurchase of common stock (5,386,225) - - -
Net cash used in (provided by) financing activities (4,416,974) 903,171
Net increase (decrease) in cash and
cash equivalents 50,250 (193,807)
Cash and cash equivalents, beginning of period 35,635 229,442
Cash and cash equivalents, end of period $ 85,885 $ 35,635
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
RIO HOTEL & CASINO, INC.
STATEMENTS OF CASH FLOW
For the Year Ended December 31,
1993
<S> <C>
Cash flows from operating activities:
Net income $ 10,649,392
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Earnings from subsidiary investments (10,592,688)
(Increase) decrease in assets:
Receivables (79,821)
Prepaid expenses and other current assets 13,811
Due from (to) subsidiaries (1,077,493)
Other, net 3,719
Decrease in liabilities:
Accounts payable-trade (164,770)
Net cash provided by (used in) operating activities (1,247,850)
Cash flows from investing activities:
Investments in subisidiaries (30,730,375)
Net cash used in investing activities (30,730,375)
Cash flows from financing activities:
Net proceeds from common stock issuance 32,506,200
Common stock offerings cost (456,821)
Repurchase of common stock - - -
Net cash used in (provided by) financing activities 32,049,379
Net increase (decrease) in cash and
cash equivalents 71,154
Cash and cash equivalents, beginning of period 158,288
Cash and cash equivalents, end of period $ 229,442
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
December 31, December 31, December 31,
1995 1994 1993
<S> <C> <C> <C>
Cash payments made for
interest (net of
amounts capitalized) $ - - - $ - - - $ - - -
Supplemental Schedule of Non-Cash Investing and Financing
Activities
</TABLE>
DECEMBER 31, 1995
Tax benefit arising from the exercise of stock options
granted under the NSOP totaled $632,601.
DECEMBER 31, 1994
Tax benefit arising from the exercise of stock options
granted under the NSOP totaled $886,132.
DECEMBER 31, 1993
Additional costs of issuing Common Stock financed through
payables totaled $12,194.
Costs of issuing Common Stock financed through payables
totaled $163,801.
Tax benefit arising from the exercise of stock options
granted under the Company's NSOP totaled $1,120,823.
Reduction of paid-in capital as a result of the
implementation of SFAS 109 totaled $832,152. This amount was
charged directly against equity because it reflects the tax
effect of SFAS 109 as it related to the gain on sale of assets to
affiliates of the Company's largest stockholder in December 1991,
which was also recorded directly to equity (Note 10).
64
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
For the Three Years Ended December 31, 1995
<S> <C>
Balance, December 31, 1992 $ 263,232
Additions charged to income 523,491
Accounts written off, less recoveries (407,360)
Balance, December 31, 1993 379,363
Additions charged to income 512,999
Accounts written off, less recoveries (413,227)
Balance, December 31, 1994 479,135
Additions charged to income 1,002,463
Accounts written off, less recoveries (656,906)
Balance, December 31, 1995 $ 824,692
</TABLE>
65
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
March 15, 1996 By: /S/ ROGER M. SZEPELAK
Roger M. Szepelak, Treasurer
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/S/ ANTHONY A. MARNELL II Chairman of the Board of March 15, 1996
Anthony A. Marnell II Directors and Chief Executive
Officer (Principal Executive
Officer)
/S/ JAMES A. BARRETT, JR. President, Chief Operating March 15, 1996
James A. Barrett, Jr. Officer and Director
/S/ ROGER M. SZEPELAK Treasurer and Chief Financial March 15, 1996
Roger M. Szepelak Officer (Principal Financial and
Accounting Officer)
/S/ JOHN A. STUART Director March 15, 1996
John A. Stuart
/S/ THOMAS Y. HARTLEY Director March 15, 1996
Thomas Y. Hartley
/S/ PETER M. THOMAS Director March 15, 1996
Peter M. Thomas
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
NUMBER EXHIBIT DESCRIPTION PAGE
<S> <C> <C>
3.01 Amended and Restated Articles of Incorporation of Rio
Hotel & Casino, Inc. filed July 19, 1994, are
incorporated herein by reference from the Company's
(SEC File No. 0-13760) Report on Form 10-Q for the
Quarter Ended June 30, 1994, Part II, Item 6(a),
Exhibit 4.01.
3.02 Amended and Restated Bylaws of Rio Hotel & Casino,
Inc., certified March 3, 1993, are incorporated herein
by reference from the Company's (SEC File No. 0-13760)
Report on Form 10-K for the Year Ended December 31,
1992, Part IV, Item 14, Exhibit 4.02.
4.01 Specimen common stock certificate for the common stock
of Rio Hotel & Casino, Inc. is incorporated herein by
reference from the Company's (SEC File No. 333-869)
Registration Statement on Form S-3, filed on
February 12, 1996, Part II, Item 15, Exhibit 4.03.
4.02 Agreement and Plan of Exchange by and between Rio
Hotel & Casino, Inc., a Nevada corporation, and Rio
Properties, Inc., a Nevada corporation, dated
August 14, 1992, is incorporated herein by reference
from the Company's (SEC File No. 33-51092) Registration
Statement on Form S-3 filed on August 24, 1992,
Part II, Item 16, Exhibit 2.01.
4.03 Form of Subscription and Exchange Agreement between Rio
Properties, Inc., MarCor Resorts, Inc., and subscriber
is incorporated herein by reference from the Company's
(SEC File No. 33-51092) Registration Statement on
Form S-3 filed on August 24, 1992, Part II, Item 16,
Exhibit 2.02.
4.04 Rio Hotel & Casino, Inc. Non-Statutory Stock Option
Plan, as amended September 5, 1991, as amended
February 28, 1992 (to reflect change in Company name)
and as amended June 22, 1993, is incorporated herein by
reference from the Company's (SEC File No. 33-38752)
Registration Statement on Form S-8 filed on October 5,
1993, Part II, Item 8, Exhibit 4.04.
4.05 Rio Hotel & Casino, Inc. Directors' Stock Option Plan
As Amended February 28, 1992 (to reflect change in
Company name only) is incorporated herein by reference
from the Company's (SEC File No. 2-88147) Report on
Form 10-K for the Year Ended December 31, 1991,
Part IV, Item 14(c), Exhibit 4.07.
4.06 Rio Suite Hotel & Casino Employee Retirement Savings
Plan Trust Agreement dated February 11, 1991; First
Amendment to the Rio Suite Hotel & Casino Employee
Retirement Savings Plan dated March 20, 1992, effective
April 1, 1992; Second Amendment to the Rio Suite Hotel
& Casino Employee Retirement Savings Plan dated
67
<PAGE>
March 20, 1992, effective April 1, 1992; Third
Amendment to the Rio Suite Hotel & Casino Employee
Retirement Savings Plan dated December 14, 1992,
effective August 15, 1992, and Rio Suite Hotel & Casino
Employee Retirement Savings Plan, Participant Loan
Program dated March 19, 1992 are incorporated herein by
reference from the Company's (SEC File No. 33-56860)
Registration Statement on Form S-8 filed January 8,
1993, Part II, Item 8, Exhibit 4.11; Rio Suite Hotel &
Casino Employment Retirement Savings Plan dated
February 21, 1991 is incorporated herein by reference
from the Company's (SEC File No. 33-56860) Registration
Statement on Form S-8 filed February 3, 1993, Part II,
Item 8, Exhibit 4.11; Fourth Amendment to the Rio Suite
Hotel & Casino Employee Retirement Savings Plan dated
April 30, 1993, effective July 1, 1993; Fifth Amendment
to the Rio Suite Hotel & Casino Employee Retirement
Savings Plan dated August 17, 1993, effective July 1,
1993; Sixth Amendment to the Rio Suite Hotel & Casino
Employee Retirement Savings Plan dated October 27,
1993, effective October 25, 1993; Seventh Amendment to
the Rio Suite Hotel & Casino Employee Retirement
Savings Plan Trust Agreement dated and effective
December 16, 1993; and Eighth Amendment to the Rio
Suite Hotel & Casino Employee Retirement Savings Plan
dated May 3, 1994, effective May 1, 1994 are
incorporated herein by reference from the Company's
(SEC File No. 0-13760) Report on Form 10-Q for the
Quarter Ended June 30, 1994, Part II, Item 6(a),
Exhibit 4.03; Ninth Amendment to the Rio Suite Hotel &
Casino Employee Retirement Savings Plan dated August
26, 1994, effective August 25, 1994; Tenth Amendment to
the Rio Suite Hotel & Casino Employee Retirement
Savings Plan dated and effective January 1, 1995; and
Eleventh Amendment to the Rio Suite Hotel & Casino
Employee Retirement Savings Plan dated and effective
January 12, 1995 are incorporated herein by reference
from the Company's (SEC File No. 0-13760) Report on
Form 10-K for the Year Ended December 31, 1994, Part
IV, Item 14(c), Exhibit 4.08.
4.07 Rio Hotel & Casino, Inc. 1995 Long-Term Incentive Plan,
as adopted January 16, 1995 is incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Report on Form 10-K for the Year Ended December 31,
1994, Part IV, Item 14(c), Exhibit 4.09.
4.08 Credit Agreement among Bank of America National Trust 74
and Savings Association, as agent for itself and other
financial institutions, as Lenders, and Rio Properties,
Inc., as Borrower, dated July 15, 1993; Line A Note
executed by Rio Properties, Inc., as Borrower, in favor
of Bank of America National Trust and Savings
Association, in the amount of $9,692,307.70 dated July
15, 1993; Line A Note executed by Rio Properties, Inc.,
as Borrower, in favor of Bank of America Nevada, in the
amount of $3,230,769.23, dated July 15, 1993; Line A
Note executed by Rio Properties, Inc., as Borrower, in
favor of Societe Generale, in the amount of
$6,461,538.46, dated July 15, 1993; Line A Note
executed by Rio Properties, Inc., as Borrower, in favor
of NBD Bank, N.A., in the amount of $6,461,538.46,
dated July 15, 1993; Line A Note executed by Rio
Properties, Inc., as Borrower, in favor of First
Security Bank of Idaho,.
68
<PAGE>
N.A., in the amount of $6,461,538.46, dated July 15,
1993; Line A Note executed by Rio Properties, Inc., as
Borrower, in favor of First Interstate Bank of Nevada,
N.A., in the amount of $6,461,538.46, dated July 15,
1993; Line A Note executed by Rio Properties, Inc., as
Borrower, in favor of U.S. Bank of Nevada, in the
amount of $3,230,769.23, dated July 15, 1993; Line B
Note executed by Rio Properties, Inc., as Borrower, in
favor of Bank of America National Trust and Savings
Association, in the amount of $5,307,692.30 dated July
15, 1993; Line B Note executed by Rio Properties, Inc.,
as Borrower, in favor of Bank of America Nevada, in the
amount of $1,769,230.77, dated July 15, 1993; Line B
Note executed by Rio Properties, Inc., as Borrower, in
favor of First Interstate Bank of Nevada, N.A., in the
amount of $3,538,461.54, dated July 15, 1993; Line B
Note executed by Rio Properties, Inc., as Borrower, in
favor of First Security Bank of Idaho, N.A., in the
amount of $3,538,461.54, dated July 15, 1993; Line B
Note executed by Rio Properties, Inc., as Borrower, in
favor of NBD Bank, N.A., in the amount of
$3,538,461.54, dated July 15, 1993; Line B Note
executed by Rio Properties, Inc., as Borrower, in favor
of Societe Generale, in the amount of $3,538,461.54,
dated July 15, 1993; Line B Note executed by Rio
Properties, Inc., as Borrower, in favor of U.S. Bank of
Nevada, in the amount of $1,769,230.77, dated July 15,
1993; Revolving Note executed by Rio Properties, Inc.,
as Borrower, in favor of Bank of America National Trust
and Savings Association, in the amount of $15,000,000,
dated July 15, 1993; Revolving Note executed by Rio
Properties, Inc., as Borrower, in favor of Bank of
America Nevada, in the amount of $5,000,000, dated July
15, 1993; Revolving Note executed by Rio Properties,
Inc., as Borrower, in favor of First Interstate Bank of
Nevada, N.A., in the amount of $10,000,000, dated July
15, 1993; Revolving Note executed by Rio Properties,
Inc., as Borrower, in favor of First Interstate Bank of
Idaho, N.A., in the amount of $10,000,000, dated July
15, 1993; Revolving Note executed by Rio Properties,
Inc., as Borrower, in favor of NBD Bank, N.A., in the
amount of $10,000,000, dated July 15, 1993; Revolving
Note executed by Rio Properties, Inc., as Borrower, in
favor of Societe Generale, in the amount of
$10,000,000, dated July 15, 1993; Revolving Note
executed by Rio Properties, Inc., as Borrower, in favor
of U.S. Bank of Nevada, in the amount of $5,000,000,
dated July 15, 1993; Security Agreement executed by Rio
Properties, Inc., as Debtor, in favor of Bank of
America National Trust and Savings Association, as
agent for itself and other financial institutions, as
Secured Party, dated July 15, 1993; Construction Deed
of Trust With Assignment of Rents and Fixture Filing
among Rio Properties, Inc., as Trustor, Equitable Deed
Company, as Trustee, and Bank of America National Trust
and Savings Association, as agent for itself and the
other financial institutions, as Beneficiary, dated
July 15, 1993; Unsecured Indemnity Agreement executed
by Rio Properties, Inc., as Indemnitor, in favor of
Bank of America National Trust and Savings Association,
as agent for itself and other financial institutions,
dated July 15, 1993; Guaranty executed by Rio Hotel &
Casino, Inc., as Guarantor, in favor of Bank of America
National Trust and Savings Association, as agent for
itself and other financial institutions, as Guaranteed
Parties, dated July 15, 1993; and, Parent Guarantor
Security Agreement by Rio Hotel & Casino, Inc., as
69
<PAGE>
Debtor, in favor of Bank of America National Trust and
Savings Association, as agent for itself and other
financial institutions, as Secured Party, dated July
15, 1993 are incorporated by reference from the
Company's (SEC File No. 2-88147) Report on Form 8-K
dated July 15, 1993, Item 7(c), Exhibit 28.01; First
Amendment to Credit Agreement dated as of October 25,
1993 and Second Amendment and Waiver to Credit
Agreement dated as of November 8, 1993 among Rio
Properties, Inc., Bank of America National Trust and
Savings Association, Bank of America Nevada, First
Interstate Bank of Nevada, First Security Bank of
Idaho, N.A., NBD Bank, N.A., Societe Generale, and U.S.
Bank of Nevada are incorporated by reference from the
Company's (SEC File No. 0-13760) Report on Form 10-K
for the Year Ended December 31, 1993, Part IV, Item
14(c), Exhibit 4.09; Third Amendment to Credit
Agreement dated as of April 15, 1994 among Rio
Properties, Inc., Bank of America National Trust and
Savings Association, as Agent and as a Bank, Bank of
America, Nevada, First Interstate Bank of Nevada, First
Security Bank of Idaho, N.A, NBD Bank, N.A., Societe
Generale, and U.S. Bank of Nevada; Memorandum of
Amendments to Credit Agreement and Amendment to
Construction Deed of Trust with Assignment of Rents and
Fixture Filing dated as of May 9, 1994 by Rio
Properties, Inc. and Bank of America National Trust and
Savings Association are incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Report on Form 10-Q for the Quarter Ended June 30,
1994, Part II, Item 6(a), Exhibit No. 4.02; and Fourth
Amendment to Credit Agreement among Rio Properties,
Inc., as Borrower, and Bank of America National Trust
and Savings Association, First Interstate Bank of
Nevada, First Security Bank of Idaho, N.A., NBD Bank,
N.A., Societe Generale, Bank of America, Nevada, U.S.
Bank of Nevada, Bank of Scotland and Midlantic Bank,
N.A., as Lenders; and Second Memorandum of Amendment to
Credit Agreement and Amendment to Construction Deed of
Trust with Assignment of Rents and Fixture Filing
between Borrower and Bank of America National Trust and
Savings Association, as agent for Lenders, dated
December 16, 1994 are incorporated herein by reference
from the Company's (SEC File No. 0-13760) Report on
Form 8-K dated December 16, 1994, Item 7(c), Exhibit
10.01; Fifth Amendment to Credit Agreement dated as of
March 20, 1995, among Rio Properties, Inc., Bank of
America National Trust and Savings Association, as
Agent and as a Bank, First Interstate Bank of Nevada,
First Security Bank of Idaho, N.A., NBD Bank, N.A.,
Societe Generale, Bank of America Nevada, U.S. Bank of
Nevada, Bank of Scotland and Midlantic Bank, N.A., as
Banks, is incorporated herein by reference from the
Company's (SEC File No. 0-13760) Report on Form 10-K
for the Year Ended December 31, 1994, Part IV, Item
14(c), Exhibit 10.09; Sixth Amendment to Credit
Agreement dated as of July 31, 1995 among Rio
Properties, Inc., Bank of America National Trust and
Savings Association, as Agent and as a Bank, and First
Interstate Bank of Nevada, First Security Bank of
Idaho, N.A., NBD Bank, N.A., Societe Generale, Bank of
America Nevada, U.S. Bank of Nevada, Bank of Scotland,
Midlantic Bank, N.A., and Bank of Hawaii, as Banks is
incorporated herein by reference from the Company's
(SEC File No. 0-13760) Report on Form 8-K dated
September 15, 1995, Item 7(c), Exhibit 4.01; and
Seventh
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<PAGE>
Amendment to Credit Agreement dated as of January 17,
1996 among Rio Properties, Inc., Bank of America
National Trust and Savings Association, as Agent and as
a Bank, and First Interstate Bank of Nevada, First
Security Bank of Idaho, N.A., Societe Generale, Bank of
America Nevada, U.S. Bank of Nevada, Bank of Scotland,
Midlantic Bank, N.A., and Bank of Hawaii, as Banks
4.09 Indenture dated as of July 21, 1995, among Rio Hotel &
Casino, Inc., Rio Properties, Inc. and IBJ Schroder
Bank & Trust Company for the Company's 105/8% Senior
Subordinated Notes Due 2005 is incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Report on Form 8-K dated July 18, 1995, Item 7(c),
Exhibit 4.3.
4.10 Registration Agreement dated July 18, 1995 by Rio Hotel
& Casino, Inc. and accepted July 18, 1995 by Salomon
Brothers Inc. and Montgomery Securities is incorporated
herein by reference from the Company's (SEC File No. 0-
13760) Report on Form 8-K dated July 18, 1995, Item
7(c), Exhibit 4.2.
4.11 Form of Letter of Transmittal to IBJ Schroder Bank &
Trust Company as Exchange Agent for exchange of 105/8%
Senior Subordinated Notes Due 2005 is incorporated
herein by reference from the Company's (SEC File No. 33-
62163) Registration Statement on Form S-4 filed August
28, 1995, Part II, Item 21(a), Exhibit 4.14.
10.01 Agreement by and among MarCor Resorts Inc., Marnell
Corrao, Inc., Marnell Corrao Associates, Inc., MarCor
Partnership, The Anthony A. Marnell II Revocable Living
Trust dated June 16, 1982, Anthony A. Marnell II,
Sandra J. Marnell, Barrett Family Revocable Living
Trust dated December 18, 1981, James A. Barrett, Jr.
and Maureen M. Barrett dated February 22, 1989, is
incorporated herein by reference from the Company's
(SEC File No. 0-13760) Annual Report on Form 10-K for
the Year Ended December 31, 1994, Part IV, Item 14(c),
Exhibit 10.01; First Amendment to Agreement dated
October 25, 1993 by and among Rio Hotel & Casino, Inc.,
and Marnell Corrao, Inc., Marnell Corrao Associates,
Inc., MarCor Partnership, Anthony A. Marnell II,
Barrett Family Revocable Living Trust dated December
18, 1981, James A. Barrett, Jr. and Maureen M. Barrett
incorporated herein by reference from the Company's
(SEC File No. 0-13760) Report on Form 10-K for the Year
Ended December 31, 1993, Part IV, Item 14(c), Exhibit
10.01.
10.02 Interest Rate Swap Agreement dated as of July 28, 1993
between Rio Properties, Inc. and Bank of America
National Trust and Savings Association is incorporated
herein by reference from the Company's (SEC File No. 0-
13760) Report on Form 10-K for the Year Ended December
31, 1993, Part IV, Item 14(c), Exhibit 10.11.
10.03 Architectural Agreement entered into as of February 25,
1994 between Rio Hotel & Casino, Inc., as Owner, and
Anthony A. Marnell II, Chartered, as Architect, is
71
<PAGE>
incorporated herein by reference from the Company's
(SEC File No. 0-13760), Report on Form 10-K for the
Year Ended December 31, 1993, Part IV, Item 14(c),
Exhibit 10.12.
10.04 Building Contract entered into as of February 25, 1994
between Marnell Corrao Associates, Inc., as General
Contractor, and Rio Properties, Inc., as Owner, is
incorporated herein by reference from the Company's
(SEC File No. 0-13760) Report on Form 10-K for the Year
Ended December 31, 1993, Part IV, Item 14(c), Exhibit
10.13.
10.05 Architectural Agreement entered into as of February 9,
1995 between Rio Hotel & Casino, Inc., as Owner, and
Anthony A. Marnell, Chartered, as Architect, is
incorporated herein by reference from the Company's
(SEC File No. 0-13760) Annual Report on Form 10-K for
the Year Ended December 31, 1994, Part IV, Item 14(c),
Exhibit 10.08.
10.06 Building Contract entered into as of February 27, 1995
between Marnell Corrao Associates, Inc., as General
Contractor, and Rio Properties, Inc., as Owner, is
incorporated herein by reference from the Company's
(SEC File No. 0-13760) Annual Report on Form 10-K for
the Year Ended December 31, 1994, Part IV, Item 14(c),
Exhibit 10.09.
10.07 Real Estate Purchase and Sale Agreement entered into as
of January 25, 1995 between Focus 2000, Inc., as
Seller, and Rio Properties, Inc., as Buyer, is
incorporated herein by reference from the Company's
(SEC File No. 0-13760) Annual Report on Form 10-K for
the Year Ended December 31, 1994, Part IV, Item 14(c),
Exhibit 10.10.
10.08 Exchange Agreement entered into as of January 6, 1995
between Allied Building Materials, Cinderlane, Inc.,
and Rio Hotel & Casino, Inc. is incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Annual Report on Form 10-K for the Year Ended December
31, 1994, Part IV, Item 14(c), Exhibit 10.11.
10.09 Letter Agreement regarding Rate Cap Transaction dated
August 11, 1994 between Bank of America National Trust
and Savings Association and Rio Properties, Inc. is
incorporated herein by reference from the Company's
(SEC File No. 0-13760) Annual Report on Form 10-K for
the Year Ended December 31, 1994, Part IV, Item 14(c),
Exhibit 10.12.
10.10 Architectural Agreement entered into as of July 27,
1995 between Rio Hotel & Casino, Inc., as Owner, and
Anthony A. Marnell II, Chtd., as Architect, is
incorporated herein by reference from the Company's
(SEC File No. 333-869) Registration Statement on Form
S-3, filed on February 12, 1996, Part II, Item 16,
Exhibit 10.10.
72
<PAGE>
10.11 Building Contract entered into as of August 14, 1995 by
and between Marnell Corrao
Associates, Inc., as General Contractor, and Rio
Properties, Inc., as Owner, is incorporated herein by
reference from the Company's (SEC File No. 333-869)
Registration Statement on Form S-3, filed on
February 12, 1996, Part II, Item 16, Exhibit 10.11.
21.01 List of the Company's subsidiaries. 91
23.01 Consent of Arthur Andersen LLP. 93
27.01 Financial Data Schedule 95
</TABLE>
73
<PAGE>
EXHIBIT 4.08
74
<PAGE>
SEVENTH AMENDMENT TO
CREDIT AGREEMENT
This Seventh Amendment to Credit Agreement (this "Seventh
Amendment") is made and dated as of January 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 and a Sixth Amendment to
Credit Agreement dated as of July 31, 1995 (as so amended, the
"Agreement").
RECITAL
The Company has requested the Agent and the Banks to
increase the basket for repurchases of shares of the Parent
Guarantor form $5,000,000 to $10,000,000 and to clarify that such
permitted repurchases are net of issuances of such shares, 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 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 the Closing
Date) in the aggregate; and"
-1-
<PAGE>
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 Seventh
Amendment, the Agreement, and all other agreements and
instruments executed in connection herewith and therewith, the
valid and enforceable obligations they purport to be.
3.2 NO LEGAL OBSTACLE TO AGREEMENT. Neither the execution
of this Seventh 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
Seventh 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
Seventh 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 Seventh
Amendment and any note or other instrument or agreement required
hereunder.
-2-
<PAGE>
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 Seventh Amendment and any instrument
or agreement required hereunder on behalf of the Company.
4.3 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
transactions contemplated hereby, the taking of all corporate
action in connection with this Seventh 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 Seventh 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 Seventh 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 Seventh 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 JURISDICTION. This Seventh Amendment, and any
instrument or agreement required hereunder, shall be governed by
-3-
<PAGE>
and construed under the laws of the State of Nevada.
IN WITNESS WHEREOF, the parties hereto have caused this
Seventh 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
FIRST INTERSTATE BANK OF NEVADA
By: /s/
Title: Vice President
FIRST SECURITY BANK OF IDAHO, N.A.
By: /s/ David P. Williams
Title: Vice President
-4-
<PAGE>
NBD BANK
By: /s/
Title:
SOCIETE GENERALE
By: /s/ Maureen Kelly
Title: Vice President
BANK OF AMERICA NEVADA
By: /s/ Alan F. Gordon
Title: Vice President
U.S. BANK OF NEVADA
By: /s/ Terry Gurty
Title: Officer
BANK OF SCOTLAND
By: /s/ Catherine M. Oniffrey
Title: Vice President
MIDLANTIC BANK, N.A.
By: /s/ Denise D. Killen
Title: Vice President
BANK OF HAWAII
By: /s/ Joseph T. Donalson
Title: Vice President
-5-
<PAGE>
CONSENT OF GUARANTOR
The undersigned hereby consents to the foregoing Seventh
Amendment to Credit Agreement dated as of January 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 Seventh Amendment.
RIO HOTEL & CASINO, INC.
By: /s/ James A. Barrett, Jr.
Title: President
-6-
<PAGE>
EXHIBIT 21.01
91
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES OF RIO HOTEL & CASINO, INC.
STATE OF
NAME INCORPORATION PARENT COMPANY
<S> <C> <C>
Rio Properties, Inc. Nevada Rio Hotel & Casino, Inc.
Rio Development Company, Inc. Nevada Rio Hotel & Casino, Inc.
(formerly MarCor Development
Company, Inc.)
Rio Resort Properties, Inc. Nevada Rio Hotel & Casino, Inc.
(formerly MarCor Resort
Properties, Inc.)
Cinderlane, Inc. Nevada Rio Properties, Inc.
</TABLE>
92
<PAGE>
EXHIBIT 23.01
93
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports dated January 26, 1996 (1995 Annual
Report on Form 10-K and Supplemental Schedules), included in this
Form 10-K, into Rio Hotel & Casino, Inc.'s previously filed
registration statements on Form S-8 (File No. 33-38752), Form S-8
(File No. 33-68130), Form S-8 (File No. 33-56860), Form S-3 (File
No. 33-70192), Form S-3 (File No. 33-51092), Form S-3 (File No.
33-36598) and Form S-3 (File No. 333-869).
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
March 15, 1996
94
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000734380
<NAME> FDS95
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 19,993
<SECURITIES> 0
<RECEIVABLES> 5,138
<ALLOWANCES> 825
<INVENTORY> 1,795
<CURRENT-ASSETS> 30,930
<PP&E> 298,829
<DEPRECIATION> 46,708
<TOTAL-ASSETS> 308,792
<CURRENT-LIABILITIES> 25,092
<BONDS> 110,177
0
0
<COMMON> 211
<OTHER-SE> 162,888
<TOTAL-LIABILITY-AND-EQUITY> 308,792
<SALES> 192,538
<TOTAL-REVENUES> 192,958
<CGS> 0
<TOTAL-COSTS> 155,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,106
<INCOME-PRETAX> 29,453
<INCOME-TAX> 10,707
<INCOME-CONTINUING> 18,745
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,745
<EPS-PRIMARY> .87
<EPS-DILUTED> .87
</TABLE>
