UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: to
Commission file number 1-11569
RIO HOTEL & CASINO, INC.
(Exact name of registrant as specified in its charter)
NEVADA 95-3671082
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3700 West Flamingo Road, Las Vegas, Nevada 89103
(Address of principal executive offices) (Zip Code)
(702) 252-7733
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES (X) NO ( )
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
21,319,741 shares of Common Stock, $0.01 par value as of May 5, 1997
<PAGE>
FORM 10-Q
TABLE OF CONTENTS
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of
Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
EXHIBIT INDEX 14
2
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1997 1996
(Unaudited)
ASSETS
<S>
Current assets: <C> <C>
Cash and cash equivalents $ 19,310,062 $ 10,623,094
Accounts receivable, net 12,105,556 8,690,105
Federal income taxes receivable 1,724,135 1,147,106
Inventories 4,547,968 3,871,345
Prepaid expenses and other current assets 6,846,524 5,534,895
Total current assets 44,534,245 29,866,545
Property and equipment:
Land and improvements 55,952,725 51,311,851
Building and improvements 393,036,750 196,918,053
Equipment, furniture and improvements 79,535,235 72,052,458
Less: accumulated depreciation (65,582,851) (60,501,211)
462,941,859 259,781,151
Construction in progress 13,053,785 190,210,277
Net property and equipment 475,995,644 449,991,428
Other assets, net 19,179,206 14,691,613
$ 539,709,095 $ 494,549,586
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 356,227 $ 352,239
Accounts payable 8,700,664 5,854,830
Accrued expenses 16,432,121 11,967,407
Accounts payable - related party 15,785,501 19,604,470
Accrued interest 5,197,619 7,072,067
Total current liabilities 46,472,132 44,851,013
Non-current liabilities:
Long-term debt, less current maturities 300,451,999 253,949,283
Deferred income taxes 12,984,824 13,874,060
Total non-current liabilities 313,436,823 267,823,343
Total liabilities 359,908,955 312,674,356
Stockholders' equity:
Common stock, $0.01 par value;
100,000,000 shares authorized;
21,204,541 and 21,170,441 shares
issued and outstanding 212,046 211,705
Additional paid-in capital 113,482,690 113,140,798
Retained earnings 66,105,404 68,522,727
Total stockholders' equity 179,800,140 181,875,230
$ 539,709,095 $ 494,549,586
See accompanying Notes to Consolidated Financial Statements
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31, 1997 March 31, 1996
<S> <C> <C>
Revenues:
Casino $ 33,012,359 $ 28,591,974
Room 14,995,925 10,447,578
Food and beverage 23,253,604 17,187,397
Other 5,203,978 3,610,268
Casino promotional allowances (6,538,281) (4,748,340)
69,927,585 55,088,877
Expenses:
Casino 18,230,112 13,022,789
Room 4,191,490 3,319,454
Food and beverage 17,954,856 13,423,506
Other 2,863,254 1,866,675
Selling, general and administrative 9,014,196 7,990,396
Depreciation and amortization 5,367,613 4,064,450
Preopening expense 11,200,000 -
68,821,521 43,687,270
Operating profit 1,106,064 11,401,607
Interest expense 4,919,405 2,876,496
Income (loss) before income tax (3,813,341) 8,525,111
Income tax benefit (provision) 1,396,018 (3,199,277)
Net income (loss) $ (2,417,323) $ 5,325,834
Earnings (loss) per common share:
Primary:
Net income (loss) $ (0.11) $ 0.25
Weighted average number of common
shares outstanding 21,489,034 21,456,306
Fully diluted:
Net income (loss) $ (0.11) $ 0.25
Weighted average number of common
shares outstanding 21,503,113 21,532,203
See accompanying Notes to Consolidated Financial Statements
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (2,417,323) $ 5,325,834
Adjustments to reconcile net income to net
cash provided by operating activities:
Compensation expense recognized from
stock option grant 28,871 30,400
Depreciation and amortization 5,367,613 4,064,450
Provision for uncollectible accounts 136,043 375,694
Deferred income taxes (936,851) 898,202
(Increase) decrease in assets:
Accounts receivable (3,551,494) (1,965,106)
Inventories (676,623) 328,381
Prepaid expenses and other current assets (1,947,831) (349,016)
Other, net 631,280 291,074
Increase (decrease) in liabilities:
Accounts payable 2,845,833 (853,971)
Accrued federal income tax - 2,261,310
Accrued expenses 4,567,255 2,172,393
Accrued interest (1,976,990) (2,091,771)
Net cash provided by operating activities 2,069,783 10,487,874
Cash flows from investing activities:
Purchase of land and improvements (4,640,874) (3,086,202)
Purchase of equipment, furniture and
improvements (30,263,951) (22,601,120)
Funds advanced for purchase of interest in golf
course (5,180,196) -
Net cash used in investing activities (40,085,021) (25,687,322)
Cash flows from financing activities:
Proceeds from borrowings 37,000,000 8,000,000
Net proceeds from issuance of senior
subordinated notes 121,562,500 -
Net proceeds from common stock issuance 195,500 251,600
Payments on notes and loans payable (112,055,794) -
Repurchase of common stock - (58,750)
Net cash provided by financing activities 46,702,206 8,192,850
Net increase (decrease) in cash and cash equivalents 8,686,968 (7,006,598)
Cash and cash equivalents, beginning of period 10,623,094 19,992,695
Cash and cash equivalents, end of period $ 19,310,062 $ 12,986,097
See accompanying Notes to Consolidated Financial Statements
</TABLE>
5
<PAGE>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
(Unaudited)
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Cash payments made for interest, net of
capitalized interest $ 6,579,425 $ 4,706,661
Cash payments made for income taxes $ - $ -
</TABLE>
1997
Purchase of property and equipment financed through payables
totaled $15,785,501.
Tax benefit arising from the exercise of stock options under
the Company's Non-Statutory Stock Option Plan totaled $117,862.
1996
Purchase of property and equipment financed through payables
totaled $13,429,785.
Tax benefit arising from the exercise of stock options under
the Company's Non-Statutory Stock Option Plan totaled $142,013.
6
<PAGE>
RIO HOTEL & CASINO, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - 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., Rio
Resort Properties, Inc., Rio Leasing, Inc., and Rio
Properties' wholly owned subsidiaries, Cinderlane, Inc.
and HLG, Inc. (collectively, the "Company").
All significant intercompany balances and transactions
have been eliminated in consolidation.
The consolidated balance sheet as of March 31, 1997 and
the related consolidated statements of income and cash
flows for the three month periods ended March 31, 1997 and
1996 are unaudited but, in the opinion of management,
reflect all adjustments necessary for a fair presentation
of results for such periods. The results of operations
for an interim period are not necessarily indicative of
the results for the full year. The consolidated financial
statements should be read in conjunction with the
consolidated financial statements and notes thereto
contained in the Company's annual report for the year
ended December 31, 1996.
NOTE 2 - PREOPENING EXPENSE
During the first quarter of 1997, the Company's operating
expenses include $11.2 million in one-time preopening
expenses, consisting primarily of direct incremental
personnel costs and advertising and marketing expenses
associated with the opening of the Masquerade Village and
Tower.
NOTE 3 - LONG-TERM DEBT
On February 4, 1997, the Company entered into an agreement
with Salomon Brothers Inc and BancAmerica Securities, Inc.
for the sale by the Company of $125 million in principal
amount of the Company's 9 1/2% Senior Subordinated Notes
Due 2007. The net proceeds from the sale of the notes,
which was received on February 11, 1997, net of an original
issue discount of 2.75%, was $121,562,500.
NOTE 4 - EARNINGS PER COMMON SHARE
The Financial Accounting Standards Board recently issued
Statement of Financial Accounting Standards No. 128 ("SFAS
128"), "Earnings Per Share". SFAS 128 establishes new
standards for computing and reporting earnings per share
and is effective for financial statements issued for
periods after December 15, 1997. Earlier application of
SFAS 128 is not permitted and on adoption requires
restatement (as applicable) of all prior period earnings
per share data presented. Although the Company does not
expect the implementation of FASB 128 to have a material
effect on earnings per share as presented, such effect has
not been determined.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information included herein contains statements that may
be considered forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, such as
statements relating to plans for future expansion, capital
spending and financing sources. Such forward-looking information
involves important risks and uncertainties that could
significantly affect anticipated results in the future and,
accordingly, such results may differ from those expressed in any
forward-looking statements made herein. These risks and
uncertainties include, but are not limited to, those relating to
construction activities, dependence on existing management,
gaming regulations (including actions affecting licensing),
leverage and debt service (including sensitivity to fluctuations
in interest rates), domestic or global economic conditions and
changes in federal or state tax laws or the administration of
such laws.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
OVERVIEW
Throughout the first quarter of 1997, the Masquerade Village
and Tower expansion project was phased into operation,
consisting of the opening of (i) Masquerade Village on
February 7, 1997, including five of the six new Masquerade
Village and Tower restaurants, 30,000 square feet of
additional casino space, approximately 32,000 square feet of
retail area, a wine cellar, and the "Masquerade Show in the
Sky", an entertainment event provided daily to Rio customers;
and (ii) approximately 1,000 of the 1,031 new suites by March
31, 1997. During the second quarter of 1997, the highest
floors of the 41-story Masquerade Tower will be completed with
the addition of 31 new suites and the opening of the VooDoo
Cafe on the 40th and 41st floors which will offer dining,
entertainment and panoramic views of the Las Vegas Strip and
surrounding valley.
In addition, during the first quarter of 1997, the Company
entered into an agreement to purchase a 60% equity interest in
the Seven Hills Golf Course (the "Golf Course") located
approximately 15 minutes south of the Rio. Pursuant to the
terms of the agreement, the Company will operate the Golf
Course as its general partner. In addition to providing an
attractive amenity for the Rio's local and tourist customers,
the Golf Course has been planned as a premier, limited play,
public course. The Golf Course is scheduled to open in the
fall of 1977.
REVENUES
The Company's net revenues increased to $69.9 million in the
first quarter of 1997 from $55.1 million in the same period in
the prior year, an increase of $14.8 million or 27%. Casino
revenues increased $4.4 million, or 15%, to $33.0 million for
the three months ended March 31, 1997 compared to $28.6
million in the first quarter of 1996. With the opening of the
Masquerade Village casino area on February 7, 1997, the
average number of slot machines and table games available
increased from 1,996 and 77, respectively, in the first
quarter of 1996 to 2,284 and 95, respectively, in the current
year period. Table game handle increased 62% in the current
year's first quarter from the same period in the prior year.
However, a lower table game win percentage resulted in a table
game win increase of $3.3 million, or 32%, to $13.7 million
for the three months ended March 31, 1997 from $10.4 million
in the prior year period. Slot machine revenues were $17.9
million in the first quarter of 1997, an increase of $1.3
million, or 8%, from 1996 first quarter revenues of $16.6
million. Race and sports book revenues were each
approximately $0.1 million lower in the 1997 period compared
to the first quarter of 1996. A lower hold percentage in the
sports book and a decrease in wagers in the race book, which
was negatively impacted by the inability to televise live
races from California tracks due to an industry-wide contract
dispute, were the primary reasons for the lower wins. In
addition, the race and sports book facility was renovated and
remodeled during the first quarter of 1997, which resulted, at
times, in reduced seating capacity and lower betting station
availability.
Room revenues increased by $4.6 million, or 43%, to $15.0
million in the first quarter of 1997 from $10.4 million in the
same period in the prior year. Management believes that the
primary reasons for this increase in revenues were the
additional availability of the new suites in the Masquerade
Tower and an
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
MATERIAL CHANGES IN RESULTS OF OPERATIONS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (CONTINUED)
increase in the average room rate from $76 in the first
quarter of 1996 to $89 in the current year's quarter. The
occupancy rate was 93.2% during the quarter ended March 31,
1997 compared to 96.9% for the same quarter in the prior year.
Food and beverage revenues increased $6.1 million, or 35%, to
$23.3 million in the three months ended March 31, 1997
compared to $17.2 million in the first quarter of 1996.
Management believes that the opening of Masquerade Village,
including the five new restaurants and bars and increased
customers generated through the additional rooms, was the
primary reason for the increase. An increase in the average
food check also contributed to the increase in food and
beverage revenues.
Other revenues increased by $1.6 million to $5.2 million in
the current year's first quarter from $3.6 million in the
prior year period. The primary reasons for this increase were
an increase in gift shop and other retail sales, increased
telephone revenues due to the increase in rooms occupied, and
rental income received from the retail outlets leased to third
parties in the Masquerade Village.
OPERATING MARGINS
Before preopening expense, operating profit as a percentage of
net revenues was 18% and 21% for the quarters ended March 31,
1997 and 1996, respectively. The one-time preopening
expenses, which consisted primarily of direct incremental
personnel costs and advertising and marketing expenses
associated with the opening of the Masquerade Village and
Tower, totaled approximately $11.2 million in the first
quarter of 1997. Casino operating profit was 45% for the
three months ended March 31, 1997 compared to 54% in the same
quarter in the prior year. Management believes that expenses
associated with the current quarter's 62% increase in table
game volume and the decrease in table game hold percentage was
the primary contributor to the decrease in the casino's
operating profit margin. For the three months ended March 31,
1997 and 1996, hotel operating profits were 72% and 68%,
respectively; food and beverage were 23% and 22%,
respectively; and other operating departments were 45% and
48%, respectively. Selling, general and administrative
expenses increased $1.0 million to $9.0 million for the
quarter ended March 31, 1997 compared to the prior year's
first quarter. As a percentage of net revenues, selling,
general and administrative expenses decreased from 14% for the
quarter ended March 31, 1996 to 13% for the quarter ended
March 31, 1997.
PROMOTIONAL ALLOWANCES
Promotional allowances, which represent the retail value of
rooms, food, beverage and other services provided to customers
without charge, were 8% of gross revenues in each of the
quarters ended March 31, 1997 and 1996.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased by $1.3 million, or
31%, to $5.4 million in the first quarter of 1997 compared to
$4.1 million in the prior year's first quarter. This increase
is primarily attributable to depreciation expense associated
with the opening of the Masquerade Village and Tower.
OTHER INCOME (EXPENSE)
Interest expense increased by $2.0 million to $4.9 million in
the first quarter of 1997 from $2.9 million in the same period
in 1996. Interest expense was reduced by $2.5 million and
$0.4 million for the three month periods ended March 31, 1997
and 1996, respectively, due to interest being capitalized on
the Masquerade Village and Tower construction projects. In
addition, interest expense was higher in the current year's
quarter due to the issuance on February 11, 1997 of $125.0
million in principal amount of 91/2% Senior Subordinated Notes
Due 2007.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
MATERIAL CHANGES IN RESULTS OF OPERATIONS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (CONTINUED)
NET INCOME
Net loss for the first quarter of 1997, after deducting $11.2
million of preopening expenses associated with the opening of
the Masquerade Village casino, retail, dining and
entertainment complex and approximately 1,000 new suites in
the Masquerade Tower, was $2.4 million. Adjusted on a pro
forma basis for the one-time charge of $11.2 million in
preopening expenses, net income for the quarter would have
been $4.7 million. This compares to net income in the first
quarter of 1996 of $5.3 million.
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
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
On February 4, 1997, the Company entered into an agreement
with Salomon Brothers Inc and BancAmerica Securities, Inc. for
the sale of $125.0 million in principal amount of the
Company's 9 1/2% Senior Subordinated Notes Due 2007.
Approximately $112.0 million of the net proceeds of $121.6
million were utilized to reduce the principal amount that had
been drawn under the Company's $200.0 line of credit, thereby
increasing the amount available to the Company under the line
of credit by a corresponding amount.
During the quarter ended March 31, 1997, net cash provided by
operating activities was $2.1 million. Net cash used in
investing activities was $40.1 million, including
approximately $30.0 million for the construction of the
Masquerade Village and Tower, $4.6 million in land
acquisitions adjacent to the Rio and $5.2 million for advances
associated with the investment in the Golf Course. The
Company has negotiated an $8.0 million loan from Bank of
America, Nevada that is expected to be funded during the
second quarter of 1997 to finance the $9.0 million anticipated
investment in the Golf Course.
Based upon cash on hand, cash available through borrowings
under the $200.0 million line of credit and the $8.0 million
loan from Bank of America, Nevada for the investment in the
Golf Course, and cash provided by operations, the Company
believes that it has adequate cash available to fund the
remaining cost of the Masquerade Village and Tower expansion,
real estate purchase commitments, and investment commitments
associated with the acquisition of the Golf Course and its
operation.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
WILLIAM H. AHERN V. CAESARS WORLD, INC., ET AL., Case No. 94-
532-Civ-Orl-22, instituted on May 10, 1994 in the United
States District Court for the Middle District of Florida,
transferred to the United States District court for the
district of Nevada, Southern Division; WILLIAM POULOS V.
CAESARS WORLD, INC., ET AL., Case No. 94-478-Civ-Orl-22,
instituted on April 26, 1994 in the United States District
Court for the Middle District of Florida, transferred to the
United States District court for the district of Nevada,
Southern Division; 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 Division. Plaintiffs in these actions, each
purportedly representing a class, filed complaints against
manufacturers, distributors and casino operators of video
poker and electronic slot machines, including the Company,
alleging 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 charge defendants with violations
of the Racketeer Influenced and Corrupt Organizations Act, as
well as claims of common law fraud, unjust enrichment and
negligent misrepresentation, and seek damages in excess of $1
billion without any substantiation of that amount. The
Company filed motions to dismiss the Complaints. The Nevada
District Court dismissed the Complaints, granting leave to
Plaintiffs to re-file, and denying as moot all other pending
motions, including those of the Company. The Plaintiffs filed
an amended complaint on or about May 31, 1996. The Company
renewed its motions to dismiss based on abstention and related
doctrines, and joined in the motions to dismiss filed by other
defendants, which were based on defects in the pleadings. The
Nevada District Court consolidated the actions (and one other
action styled WILLIAM POULOS V. AMERICAN FAMILY CRUISE LINE,
N.V, ET AL, Case No. CV-S-95-936-LDG (RLH), in which the
company is not a named defendant), ordered Plaintiffs to file
a consolidated amended complaint on or before February 14,
1997, and ordered all defense motions, including those of the
company, withdrawn without prejudice. The parties have
established a steering committee to address motion practice,
scheduling and discovery matters. Plaintiffs filed their
consolidated amended complaint on February 14, 1997. The
defendants, including the Company, filed consolidated motions
to dismiss the consolidated amended complaints. The motions
to dismiss are based on defects in the pleadings, failure to
state a claim, and abstention and related doctrines.
Management believes that the substantive allegations in the
Complaints are without merit and intends vigorously to defend
the allegations.
On March 27, 1996, a complaint in a purported class action
lawsuit (TOM PAYNE, ET AL. V. AZTAR CORPORATION, ET AL., Case
No. 698592) was filed in the Superior Court of California,
County of San Diego, against a number of gaming entities,
including the Company. The complaint, which is primiarily a
narrower version of the other class action suits filed against
the gaming industry, alleges that the defendants have engaged
in a course of conduct intended to induce persons to play
gaming devices 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 Company joined
in an attempt to remove the case to federal court which was
not successful. The Company filed a motion to dismiss the
complaint for lack of personal jurisdiction and has joined in
another motion to dismiss on other grounds. The motions are
pending. The Management believes that the complaint is
without merit and the Company intends vigorously to defend the
allegations.
On December 27, 1996, a purported stockholder derivative
action (PARK EAST, INC. V. ANTHONY A. MARNELL II, ET AL., Case
No. CV-596-01196-HDM (RLH)), was filed in the United States
District Court for the District Court of Nevada, against the
Company as a nominal defendant, five of the Company's
directors, Marnell Carrao and Marnell Chartered. The
complaint alleges that pursuant to construction contracts and
architectural contracts with Marnell Carrao and Marnell
Chartered, respectively, the Company paid unfair amounts in
exchange for the services provided. The complaint alleges
breach of fiduciary duty by each of the director defendants
and seeks rescission of the contracts, damages to compensate
the Company to the extent that contract amounts are unfair to
the Company, and injunctive relief prohibiting the Company
from entering into similar contracts with Mr. Marnell or
entities which he controls. On January 27, 1997, the Company
and the director defendants filed a motion to dismiss the
complaint. On this same date Marnell Corrao and Marnell
Chartered filed a motion to dismiss and a joinder in the
Company's motion to dismiss. On April 21, 1997, the court
entered an order denying the Company and the individual
directors motion to dismiss. The court granted Marnell Corrao
and Marnell Chartered's motion to dismiss.
11
<PAGE>
ITEM 2. CHANGES IN SECURITIES
The Company's $125 million principal amount of 91/2% Senior
Subordinated Notes Due 2007 limit the ability of the Company
and its subsidiaries to pay dividends or make other
distributions.
During the first quarter of 1997, certain options granted
pursuant to the Company's Non-Statutory Stock Option Plan were
exercised, resulting in the issuance of 34,100 shares of the
Company's Common Stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
4.01 Eleventh Amendment to Credit Agreement and Waiver dated
as of May 13, 1997 among Rio Properties, Inc., Rio
Leasing, Inc., Bank of America National Trust & Savings
Association, as Agent and as a Bank, and Wells Fargo
Bank National Association, First Security Bank, N.A.,
NBD Bank, Societe Generale, U.S. Bank of Nevada, Bank of
Scotland, PNC Bank, National Association, successor by
merger to Midlantic Bank, N.A., and Bank of Hawaii, as
Banks; Twelfth Amendment to Credit Agreement and Waiver
dated as of May 13, 1997 among Rio Properties, Inc., Rio
Leasing, Inc., Bank of America National Trust & Savings
Association, as Agent as a Bank, and Wells Fargo Bank
National Trust & Savings Association, First Security
Bank, N.A., NBD Bank, Societe Generale, U.S. Bank of
Nevada, Bank of Scotland, PNC Bank, National
Association, successor by merger to Midlantic Bank,
N.A., and Bank of Hawaii, as Banks.
11.01 Computation of Earnings Per Common Share
27.01 Financial Data Schedule
(b) REPORT ON FORM 8-K
The Company filed a Form 8-K dated February 4, 1997 with the
Securities and Exchange Commission on February 25, 1997
reporting that the Company and its wholly owned subsidiary
Rio Properties, Inc. (the "Guarantor") entered into an
agreement with Salomon Brothers Inc and Banc America
Securities, Inc. (the "Initial Purchasers") for the sale by
the Company of $125 million in principal amount of the
Company's 91/2% Senior Subordinated Notes Due 2007 (the
"Notes"). The Notes were purchased by the Initial
Purchasers for resale to qualified institutional buyers and
institutional accredited investors.
The Notes were issued under an Indenture dated February 11,
1997 among the Company, the Guarantor and IBJ Schroder Bank
& Trust Company, as trustee.
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Rio Hotel & Casino, Inc.
(Registrant)
May 9, 1997 /S/ RONALD J. RADCLIFFE
(Date) RONALD J. RADCLIFFE
Vice President, Treasurer and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
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EXHIBIT INDEX
SEQUENTIAL
PAGE
EXHIBIT DESCRIPTION NUMBER
4.01 Eleventh Amendment to Credit Agreement and 15
Waiver dated as of May 13, 1997 among Rio
Properties, Inc., Rio Leasing, Inc., Bank of
America National Trust & Savings Association,
as Agent and as a Bank, and Wells Fargo Bank
National Association, First Security Bank,
N.A., NBD Bank, Societe Generale, U.S. Bank of
Nevada, Bank of Scotland, PNC Bank, National
Association, successor by merger to Midlantic
Bank, N.A., and Bank of Hawaii, as Banks;
Twelfth Amendment to Credit Agreement and
Waiver dated as of May 13, 1997 among Rio
Properties, Inc., Rio Leasing, Inc., Bank of
America National Trust & Savings Association,
as Agent as a Bank, and Wells Fargo Bank
National Association, First Security Bank,
N.A., NBD Bank, Societe Generale, U.S. Bank of
Nevada, Bank of Scotland, PNC Bank, National
Association, successor by merger to Midlantic
Bank, N.A., and Bank of Hawaii, as Banks.
11.01 Computation of Earnings per Common Share 39
27.01 Financial Data Schedule 41
14
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EXHIBIT 4.01
15
<PAGE>
ELEVENTH AMENDMENT TO
CREDIT AGREEMENT
THIS ELEVENTH AMENDMENT TO CREDIT AGREEMENT (this
"Eleventh Amendment") is made and dated as of May 13, 1997 among
Rio Properties, Inc., a Nevada corporation (the "Company"), Rio
Leasing, Inc. ("Rio Leasing"; the Company and Rio Leasing, each a
"Borrower" and collectively, the "Borrowers"), 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 the Credit Agreement dated as of
July 15, 1993 among the Borrowers, the Banks and the Agent, as
amended by a First Amendment to Credit Agreement dated as of
October 25, 1993, a Second Amendment to Credit Agreement dated as
of November 8, 1993, a Third Amendment to Credit Agreement dated
as of April 15, 1994, a Fourth Amendment to Credit Agreement
dated as of December 16, 1994, a Fifth Amendment to Credit
Agreement dated as of March 20, 1995, a Sixth Amendment to Credit
Agreement dated as of July 31, 1995, a Seventh Amendment to
Credit Agreement dated as of January 17, 1996, an Eighth
Amendment to Credit Agreement dated as of June 17, 1996, a Ninth
Amendment to Credit Agreement and Notes dated as of January 13,
1997 and a Tenth Amendment to Credit Agreement dated as of
February 3, 1997 (as so amended, the "Agreement").
RECITALS
A. Rio Development Company, Inc., a Nevada
corporation, and wholly-owned subsidiary of the Parent Guarantor,
("Rio Development") is forming Rio Golf Limited Partnership, a
Nevada limited partnership to acquire, complete and manage the
Seven Hills golf course, a golf course under construction in
Henderson, Nevada (the "Seven Hills Venture L.P."). Rio
Development will be the sole general and the managing general
partner of Seven Hills Venture L.P. and will own an approximate
2% partnership interest therein. Rio Resort Properties, Inc., a
Nevada corporation, and wholly-owned subsidiary of the Parent
Guarantor, ("Rio Resorts") will own an approximate 58% limited
partnership interest in the Seven Hills Venture L.P. These
partnership interests will be the sole assets of Rio Development
and Rio Resorts. The golf course is being acquired from the
existing owners, a limited partnership, for a purchase price of
approximately $9,000,000, plus the assumption of certain debt.
B. In anticipation of this acquisition, the Company
already has made and may make up to $6,000,000 in the aggregate
in advances to a general partner of the existing limited
partnership to fund certain Capital Expenditures at the golf
course. Such advances will be applied towards the acquisition
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price of the golf course, and are secured by the existing
partnership interests of such existing partner. The Company has
requested a waiver of Section 7.04 of the Agreement to permit
such advances.
C. Following Seven Hills Venture L.P.'s acquisition
of the golf course, Rio Development desires to obtain up to
$12,000,000 in financing outside the Agreement to repay the
Company for the funds it advanced and also to fund certain
additional Capital Expenditures at the golf course. This
financing will be guarantied by the Company and Rio Resorts and
may be secured by a pledge of the stock of Rio Development and
Rio Resorts, as well as the Seven Hills Venture L.P. partnership
interests owned by Rio Development and Rio Resorts. In the
aggregate, the Parent Guarantor and its Subsidiaries and
Unrestricted Subsidiaries may make up to $12,000,000 in
investments in the Seven Hills Venture L.P., including the
purchase price for the golf course.
D. The Agent and the Banks are willing to agree to
the foregoing transactions PROVIDED that Rio Development, Rio
Resorts and the Seven Hills Venture L.P. shall be deemed
Unrestricted Subsidiaries not included as Subsidiaries for any
purposes under the Agreement, and the Company's guaranty of the
financing referred to in Recital C above shall not be included in
the Interest Coverage Ratio unless and until such guaranty is
called upon.
E. The Borrowers also desire a Swing Line of up to
$10,000,000 be established as a sublimit within the Aggregate
Revolving Commitment to permit same-day borrowings under the
Agreement, and bank of America National Trust and Savings
Association has agreed to be the Swing Line Bank, and the Banks
and the Agent are willing to create such a Swing Line.
F. The Parent Guarantor is creating a new Subsidiary,
HLG, Inc., a Nevada corporation ("HLG") to provide out of state
marketing and collection services, and HLG has agreed to pledge
substantially all of its assets to the Agent, to become a
guarantor and to have its stock is pledged to the Agent.
G. The Agent, the Banks, the Borrowers and the Parent
Guarantor desire to amend the Parent Guarantor Security Agreement
to have the Parent Guarantor pledge its stock in Rio Leasing upon
obtaining requisite regulatory approval and in HLG.
NOW, THEREFORE, for good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the
parties hereby agree as follows:
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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 Borrowers, the Banks
and the Agent hereby agree that the Agreement is amended as
follows:
2.1 The definition of "Banks" in Section 1.01 of the
Agreement is amended by inserting "and shall mean and include the
Swing Line Bank," after "pursuant to Section 10.08".
2.2 The definition of "Funded Debt" in Section 1.01 of
the Agreement is amended by inserting the following at the end of
clause (a) therein:
"PROVIDED, HOWEVER that the Company's obligations under
the Guaranty Obligations permitted under Section
7.08(f) shall not be included in this definition unless
and until a demand is made under such Guaranty
Obligations by a Person entitled to make demand
thereunder,"
2.3 The definition of "Interest Expense" in Section
1.01 of the Agreement is amended by inserting the following at
the end of clause (a) therein:
"PROVIDED, HOWEVER, that the Company's obligations
under the Guaranty Obligations permitted under Section
7.08(f) shall not be included in this definition unless
and until a demand is made under such Guaranty
Obligations by a Person entitled to make demand
thereunder,"
2.4 The definition of "Loan Documents" in Section 1.01
of the Agreement is amended by inserting "the Swing Line
Documents," after "the Collateral Documents,".
2.5 The definition of "Obligations" in Section 1.01 of
the Agreement is amended by inserting "the Swing Line Bank,"
after "the Banks,".
2.6 The definition of "Subsidiary" in Section 1.01 of
the Agreement is amended by inserting "OTHER than Unrestricted
Subsidiaries" after "other business entity".
2.7 The following new definitions are inserted in
proper alphabetical order in Section 1.01 of the Agreement as
follows:
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"'HLG' means HLG, Inc., a Nevada corporation, a
wholly-owned Subsidiary of the Parent Guarantor."
"'RIGHTS OF OTHERS' means, as to any Property in
which a Person has an interest, any legal or equitable
right, title or other interest (other than a Lien) held
by any other Person in that Property, and any option or
right held by any other Person to acquire any such
right, title or other interest in that Property,
INCLUDING any option or right to acquire a Lien;
PROVIDED, however, that (a) any covenant restricting
the use or disposition of Property of such Person
contained in any Contractual Obligation of such Person
and (b) any provision contained in a contract creating
a right of payment or performance in favor of a Person
that conditions, limits, restricts, diminishes,
transfers or terminates such right, shall not be deemed
to constitute a Rights of Others."
"'RIO DEVELOPMENT' means Rio Development Company,
Inc., a Nevada corporation, a wholly-owned Unrestricted
Subsidiary of the Parent Guarantor."
"'RIO RESORTS' means Rio Resort Properties, Inc.,
a Nevada corporation, a wholly-owned Unrestricted
Subsidiary of the Parent Guarantor."
"'SEVEN HILLS VENTURE BASKET' means $12,000,000."
"'SEVEN HILLS VENTURE BASKET EXPENDITURES' means
(without duplication) the aggregate of the amounts
invested directly or indirectly by the Parent Guarantor
and its Subsidiaries and Unrestricted Subsidiaries in
the Seven Hills Golf Course and/or the Seven Hills
Venture L.P., including without limitation all Capital
Expenditures funded by the Parent Guarantor and its
Subsidiaries and Unrestricted Subsidiaries in
connection therewith, all amounts expended to purchase
the Seven Hills Golf Course and all Indebtedness
permitted by Section 7.05(i)."
"'SEVEN HILLS GOLF COURSE' means the Seven Hills
Golf Course, a golf course in Henderson, Nevada and
related equipment and fixtures."
"'SEVEN HILLS VENTURE L.P.' means a Nevada limited
partnership owning, completing construction of and
operating the Seven Hills Golf Course, of which Rio
Development is the approximate 2% general and the
managing partner, and Rio Resorts is an approximate 58%
limited partner."
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<PAGE>
"'SWING LINE' means the revolving line of credit
established as a sublimit within the Aggregate
Revolving Commitment by the Swing Line Bank in favor of
Borrowers pursuant to Section 2.16."
"'SWING LINE BANK' means Bank of America National
Trust and Savings Association."
"'SWING LINE DOCUMENTS' means the promissory note
and any other documents executed by Borrowers in favor
of the Swing Line Bank in connection with the Swing
Line."
"'SWING LINE LOANS' means loans made by the Swing
Line Bank to Borrowers pursuant to Section 2.16."
"'SWING LINE OUTSTANDINGS' means, as of any date
of determination, the aggregate principal Indebtedness
of Borrowers on all Swing Line Loans then outstanding."
"'UNRESTRICTED SUBSIDIARIES' means Rio
Development, Rio Resorts and the Seven Hills Venture
L.P."
2.8 Section 2.01(c) of the Agreement is amended and
restated in its entirety as follows:
"(c) Each Bank severally agrees, on the terms and
conditions hereinafter set forth, to make Loans (each
such Loan, a "REVOLVING LOAN") to the Borrowers on the
Construction Loan Termination Date in an aggregate
principal amount not exceeding the amount set forth
opposite such Bank's name on SCHEDULE 2.01 under the
heading "revolving Commitment" (such amount as the same
may be reduced pursuant to Section 2.05 or Section 2.07
or as a result of one or more assignments pursuant to
Section 10.08, such Bank's "REVOLVING COMMITMENT") and
thereafter to make Revolving Loans to the Borrowers in
an amount not exceeding its Revolving Commitment from
time to time on any Business Day during the period from
the Construction Loan Termination Date to the Revolving
Termination Date; PROVIDED, HOWEVER, that, after giving
effect to any Borrowing of Revolving Loans, (i) each
Bank's Revolving Loans shall not exceed its Available
Revolving Commitment, and (ii) the aggregate principal
amount of all outstanding Revolving Loans PLUS the
aggregate principal amount of all Swing Line
Outstandings shall not exceed the Available Aggregate
Revolving Commitment. Within the limits of each Bank's
Revolving Commitment, and subject to the other terms
and conditions hereof, the Borrowers may borrow under
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<PAGE>
this Section 2.01, prepay pursuant to Section 2.06 and
reborrow pursuant to this Section 2.01."
2.9 A new Section 2.16 is inserted in the Agreement
after Section 2.15 as follows:
"2.16 SWING LINE. (a) The Swing Line Bank shall
from time to time until the Revolving Termination Date
make Swing Line Loans to Borrowers in such amounts as
Borrowers may request, PROVIDED that (i) after giving
effect to such Swing Line Loan, the Swing Line
Outstandings do not exceed $10,000,000, (ii) without
the consent of all of the Banks, no Swing Line Loan may
be made during the continuation of an Event of Default
and (iii) the Swing Line Bank has not given at least
twenty-four (24) hours prior notice to Borrowers that
availability under the Swing Line is suspended or
terminated. Borrowers may borrow, repay and reborrow
under this Section. Unless notified to the contrary by
the Swing Line Bank, borrowings under the Swing Line
may be made in amounts which are integral multiples of
$100,000 upon telephonic request by a Responsible
Officer of Borrowers made to the Agent not later than
1:00 p.m., San Francisco time, on the Business Day of
the requested borrowing (which telephonic request shall
be promptly confirmed in writing by telecopier).
Promptly after receipt of such a request for borrowing,
the Agent shall provide telephonic verification to the
Swing Line Bank that, after giving effect to such
request, availability for Loans will exist under
Section 2.01(c) (and such verification shall be
promptly confirmed in writing by telecopier). Unless
notified to the contrary by the Swing Line Bank, each
repayment of a Swing Line Loan shall be in an amount
which is an integral multiple of $100,000. If
Borrowers instruct the Swing Line Bank to debit its
demand deposit account(s) at the Swing Line Bank or any
of its Affiliates in the amount of any payment with
respect to a Swing Line Loan, or the Swing Line Bank
otherwise receives repayment, after 3:00 p.m., San
Francisco time, on a Business Day, such payment shall
be deemed received on the next Business Day. The Swing
Line Bank shall promptly notify the Agent of the Swing
Line Outstandings each time there is a change therein.
"(b) Swing Line Loans shall bear interest at a
fluctuating rate per annum equal to the Base Rate PLUS
(if applicable) the Applicable Margin. Interest shall
be payable on such dates, not more frequently than
monthly, as may be specified by the Swing Line Bank and
in any event on the Revolving Termination Date. The
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<PAGE>
Swing Line Bank shall be responsible for invoicing
Borrowers for such interest. The interest payable on
Swing Line Loans is solely for the account of the Swing
Line Bank (subject to subsection (d) below).
"(c) The Swing Line Loans shall be payable on
demand made by the Swing Line Bank and in any event on
the Revolving Termination Date.
"(d) Upon the making of a Swing Line Loan, each
Bank shall be deemed to have purchased from the Swing
Line Bank a participation therein in an amount equal to
that Bank's Commitment Percentage of the Revolving
Commitment TIMES the amount of the Swing Line Loan.
Upon demand made by the Swing Line Bank, each Bank
shall, according to its Commitment Percentage of the
Commitment, promptly provide to the Swing Line Bank its
purchase price therefor in an amount equal to its
participation therein. The obligation of each Bank to
so provide its purchase price to the Swing Line Bank
shall be absolute and unconditional (except only demand
made by the Swing Line Bank) and shall not be affected
by the occurrence of a Default or Event of Default;
PROVIDED that no Bank shall be obligated to purchase
its Commitment Percentage Share of (i) Swing Line Loans
to the extent that Swing Line Outstandings are in
excess of $10,000,000 and (ii) any Swing Line Loan made
(absent the consent of all of the Banks) during the
continuation of an Event of Default. Each Bank that
has provided to the Swing Line Bank the purchase price
due for its participation in Swing Line Loans shall
thereupon acquire a pro rata participation, to the
extent of such payment, in the claim of the Swing Line
Bank against Borrowers for principal and interest and
shall share, in accordance with that pro rata
participation, in any principal payment made by
Borrowers with respect to such claim and in any
interest payment made by Borrowers (but only with
respect to periods subsequent to the date such Bank
paid the Swing Line Bank its purchase price) with
respect to such claim.
"(e) In the event that the Swing Line Outstandings
are in excess of $5,000,000 on three (3) consecutive
Business Days, then on the next Business Day (unless
Borrowers have made other arrangements acceptable to
the Swing Line Bank to reduce the Swing Line
Outstandings below $5,000,000), Borrowers shall
requests a Loan pursuant to Section 2.01(c) sufficient
to reduce the Swing Line Outstandings below $5,000,000.
In addition, upon any demand for payment of the Swing
Line
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<PAGE>
Outstandings by the Swing Line Bank (unless Borrowers
have made other arrangements acceptable to the Swing
Line Bank to reduce the Swing Line Outstandings to $0),
Borrowers shall request a Loan pursuant to Section
2.01(c) sufficient to repay all Swing Line Outstandings
(and, for this purpose, Section 2.03(a)(i)(A) shall not
apply). In each case, the Agent shall automatically
provide the responsive Revolving Loans made by each
Bank to the Swing Line Bank (which the Swing Line Bank
shall then apply to the Swing Line Outstandings). In
the event that Borrowers fail to request a Loan within
the time specified by Section 2.03 or any such date,
the Agent may, but is not required to, without notice
to or the consent of Borrowers, cause Revolving Loans
to be made by the Banks under the Revolving Commitment
in amounts which are sufficient to reduce the Swing
Line Outstandings as required above. The conditions
precedent set forth in Section 4.02 shall not apply to
revolving Loans to be made by the Banks pursuant to the
three preceding sentences. The proceeds of such
revolving Loans shall be paid directly to the Swing
Line Bank for application to the Swing Line
Outstandings."
2.10 Section 2.10(c) of the Agreement is amended by
inserting the following new sentence after the first sentence as
follows:
"For purposes of computing the Commitment fee, Swing
Line Outstandings shall not be considered utilization
of the Available Revolving Commitment."
2.11 Section 2.12(a) of the Agreement is amended by
inserting the following at the end of the first sentence:
"(OTHER than payments with respect to Swing Line Loans,
which must be received by 3:00 p.m.), San Francisco
time, on the day of payment (which must be a Business
Day)."
2.12 Section 5.19 of the Agreement is amended and
restated in its entirety as follows:
"5.19 SUBSIDIARIES AND OTHER INVESTMENTS. The
Parent Guarantor does not have any Subsidiaries,
Unrestricted Subsidiaries or any equity investments in
any other corporation or entity other than those
specifically disclosed in SCHEDULE 5.19, in each case
as such Schedule is updated from time to time (which
updates shall be deemed to update any previous Schedule
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from the date received by the Agent without further
action by any party hereto)."
2.13 Section 6.02 of the Agreement (Certificates; Other
Information) is amended by deleting "and" at the end of
subsection (e), deleting the period at the end of subsection (f)
and inserting "; and" in lieu thereof, and inserting a new
subsection (g) as follows:
"(g) Concurrently with the delivery of the
financial statements referred to in Sections 6.01(a)
and (b), a written report, in form and detail
reasonably acceptable to the Agent, describing (i) the
status of the Seven Hills Venture L.P., (ii) the amount
of Seven Hills Venture Basket Expenditures made and
reasonably anticipated to be made, and (iii) the amount
of cash, if any, distributed by the Seven Hills Venture
L.P. to Rio Development or Rio Properties."
2.14 Section 6.14 of the Agreement (New Subsidiaries)
is amended by inserting the following at the end of the proviso
to the first paragraph before the period:
"PROVIDED, FURTHER, that Unrestricted Subsidiaries
shall not be required to be Guarantors or to pledge any
of their assets, or to have any of their capital stock
or other ownership interests pledged."
2.15 Section 7.01 of the Agreement (Limitations on
Liens) is amended by deleting "and" at the end of subsection (k),
deleting the period at the end of subsection (1) and inserting ";
and" in lieu thereof, and inserting a new subsection (m) as
follows:
"(m) Liens on the capital stock of Rio Development
and Rio Resorts and their respective partnership
interests in the Seven Hills Venture L.P. securing
Indebtedness permitted by Section 7.05(i), and Rights
of Others consisting of a partnership interest in the
Seven Hills Venture L.P., or consisting of obligations
of Rio Development or Rio Resorts to sell, or rights of
other Persons to purchase, partnership interests in the
Seven Hills Venture L.P., which obligations or rights
were created substantially concurrently with the
acquisition of the partnership interests in the Seven
Hills Venture L.P."
2.16 Section 7.04 of the Agreement (Loans and
Investments) is amended by deleting "and" at the end of
subsection (b), deleting the period at the end of subsection (c)
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and inserting "; and" in lieu thereof, and inserting a new
subsection (d) as follows:
"(d) investments in Rio Development, Rio
Resorts, the Seven Hills Venture L.P. and the Seven
Hills Golf Course; PROVIDED, that, after giving effect
thereto, the Seven Hills Venture Basket Expenditures
would not exceed the Seven Hills Venture Basket and no
Default or Event of Default then exists or would result
therefrom; PROVIDED, FURTHER, that no Loan Party shall
cause or permit any Unrestricted Subsidiary to own any
assets other than the Seven Hills Venture L.P. or the
Seven Hills Golf Course."
2.17 Section 7.05 of the Agreement (Limitations on
Indebtedness) is amended by deleting "and" at the end of
subsection (g), deleting the period at the end of subsection (h)
and inserting "; and" in lieu thereof, and inserting a new
subsection (i) as follows:
"(i) Indebtedness of Rio Development and/or
Rio Resorts not exceeding $12,000,000 in the aggregate,
the proceeds of which are used FIRST to repay all Seven
Hills Venture Basket Expenditures made by the Parent
Guarantor or any other of its Subsidiaries in
connection with the Seven Hills Venture L.P. and the
Seven Hills Golf Course, and SECOND to make additional
investments in the Seven Hills Venture L.P.; PROVIDED,
that, after giving effect thereto, the Seven Hills
Venture Basket Expenditures would not exceed the Seven
Hills Venture Basket and no Default or Event of Default
then exists or would result therefrom."
2.18 Section 7.08 of the Agreement (Contingent
Obligations) is amended by deleting "and" at the end of
subsection (d), deleting the period at the end of subsection (e)
and inserting ";" in lieu thereof, and inserting the following
new subsections:
"(f) Guaranty Obligations of the Company
and/or Rio Resorts with respect to Indebtedness of Rio
Development and/or Rio Resorts permitted by Section
7.05(i); and
"(g) Contingent Obligations of Rio
Development for the obligations of Seven Hills Venture
L.P. in its capacity as a general partner of Seven
Hills Venture L.P."
2.19 Section 7.13 of the Agreement (Capital
Expenditures) is amended and restated in its entirety as follows:
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"7.13 CAPITAL EXPENDITURES. The Loan
Parties and their respective Subsidiaries and
Unrestricted Subsidiaries shall not make, or become
legally obligated to make, any Capital Expenditures
EXCEPT:
"(a) Capital Expenditures in any fiscal year
not in excess of the SUM OF (i) $7,500,000 PLUS (ii)
the amount, if any, by which $7,500,000 exceeds Capital
Expenditures made by the Loan Parties and their
combined Subsidiaries in the immediately preceding
fiscal year; PROVIDED, HOWEVER, that Capital
Expenditures shall not exceed $12,500,000 in any fiscal
year;
"(b) acquisition costs of Real Property not
exceeding $35,000,000 in the aggregate;
"(c) Capital Expenditures not exceeding
$225,000,000 in the aggregate for the Phase 5
Expansion; and
"(d) Capital Expenditures in connection with
the Seven Hills Venture L.P. and the Seven Hills Golf
Course; PROVIDED, that, after giving effect thereto,
the Seven Hills Venture Basket Expenditures would not
exceed the Seven Hills Venture Basket and no Default or
Event of Default then exists or would result
therefrom."
2.20 Section 8.01(aa) of the Agreement is amended and
restated in its entirety as follows:
"(aa) USE OF DIVIDENDS BY PARENT GUARANTOR.
Any dividends received by the Parent Guarantor from any
other Loan Party as permitted by Section 7.12(c) are
not promptly (i) used to make required interest
payments on the Parent Senior Subordinated Notes as and
when due, (ii) contributed to the Company, or (iii)
used for operating expenses of the Parent Guarantor in
the Ordinary Course of Business;"
2.21 Schedule 5.19 is amended and restated in its
entirety in the form of Schedule 5.19 hereto.
3. REPRESENTATIONS AND WARRANTIES. The Borrowers
jointly and severally represent and warrant to the Banks and
Agent:
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3.1 AUTHORITY. The Borrowers have all necessary power
and have taken all corporate action necessary to make this
Eleventh Amendment, the Agreement, and all other agreements and
instruments to which they are a party executed in connection
herewith and therewith, the valid and enforceable obligations
they purport to be.
3.2 NO LEGAL OBSTACLE TO ELEVENTH AMENDMENT. Neither
the execution of this Eleventh Amendment, the making by any
Borrower of any borrowing under the Agreement, nor the
performance of the Agreement by any Borrower has constituted or
resulted in or will constitute or result in a breach of the
provisions of any contract to which any Borrower is a party, or
the violation of any law, judgment, decree or governmental order,
rule or regulation applicable to any Borrower, or result in the
creation under any agreement or instrument of any security
interest, lien, charge, or encumbrance upon any of the assets of
any Borrower, except as permitted in the Agreement. No approval
or authorization of any governmental authority is required to
permit the execution, delivery or performance by any Borrower of
this Eleventh Amendment, the Agreement, or the transactions
contemplated hereby or thereby, or the making of any borrowing by
any Borrower 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 Eleventh Amendment shall be subject to the compliance by the
Borrowers with their 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 each Borrower,
certified by the Secretary or an Assistant Secretary of each
Borrower as being in full force and effect on the date hereof,
authorizing the amendments to the Agreement, and the Loan
Documents to which each is a party, and the execution, delivery
and performance of this Eleventh Amendment.
4.2 AUTHORIZED SIGNATORIES. A certificate, signed by
the Secretary or an Assistant Secretary of each Borrower dated
the date hereof, as to the incumbency of the person or persons
authorized to execute and deliver this Eleventh Amendment and any
-12-
<PAGE>
instrument or agreement required hereunder on behalf of the
Borrowers.
4.3 FIRST AMENDMENT TO PARENT GUARANTOR SECURITY
AGREEMENT. The First Amendment to Parent Guarantor Security
Agreement substantially in the form of EXHIBIT 4.3 to this
Eleventh Amendment, duly executed and delivered by the Parent
Guarantor, together with all certificates and instruments
representing the Pledged Collateral for HLG and undated stock
transfer powers executed in blank.
4.4 HLG GUARANTY. The HLG Guaranty substantially in
the form of EXHIBIT 4.4 to this Eleventh Amendment, duly executed
and delivered by HLG.
4.5 HLG SECURITY AGREEMENT. The HLG Security
Agreement substantially in the form of EXHIBIT 4.5 to this
Eleventh Amendment, together with all financing statements,
certificates, assurances and other instruments as the Agent shall
have requested.
4.6 OFFICER'S CERTIFICATE. A certificate signed by a
Responsible Officer certifying that Section 5.13 of the Agreement
is true and correct after giving effect to this Eleventh
Amendment.
4.7 OTHER DOCUMENTS. The Loan Parties shall have (and
shall cause any of their respective Subsidiaries to have) done,
executed, acknowledged, delivered, recorded, re-recorded, filed,
re-filed, registered and re-registered, any and all such further
acts, deeds, conveyances, security agreements, Mortgages,
assignments, estoppel certificates, financing statements and
continuations thereof, notices of assignment, transfers,
certificates, assurances and other instruments as the Agent shall
have requested in order (i) to carry out more effectively the
purposes of this Eleventh Amendment and (ii) to perfect and
maintain the validity, effectiveness and priority of any of the
Collateral Documents and the Liens intended to be created
thereby.
4.8 OTHER EVIDENCE. Such other evidence with respect
to the Loan Parties 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 Eleventh Amendment, the Agreement
and the Notes and the compliance with the conditions set forth
herein.
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<PAGE>
5. MISCELLANEOUS.
5.1 EFFECTIVENESS OF THE AGREEMENT. Except as hereby
expressly amended, the Agreement remains in full force and
effect, and is hereby ratified and confirmed in all respects.
5.2 WAIVERS.
(a) The Banks and the Agent hereby waive any
violation of Section 7.04 of the Agreement resulting from the
advances described in Recital B to this Eleventh Amendment;
PROVIDED, that, after giving effect thereto, the Seven Hills
Venture Basket Expenditures made by the Parent Guarantor and its
Subsidiaries and Unrestricted Subsidiaries shall not exceed the
Seven Hills Venture Basket and no other Default or Event of
Default would result therefrom.
(b) This Eleventh 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 Eleventh 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 Eleventh Amendment shall not become
effective until the Borrowers, the Banks and the Agent shall have
signed a copy hereof, and the Parent Guarantor shall have
consented hereto, whether the same instrument or counterparts,
and the same shall have been delivered to the Agent.
5.4 JURISDICTION. This Eleventh Amendment, and any
instrument or agreement required hereunder, shall be governed by
and construed under the laws of the State of Nevada; provide that
the Agent and the Banks shall retain all rights arising under
Federal law.
-14-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Eleventh Amendment to be duly executed and delivered as of the
date first written above.
RIO PROPERTIES, INC.
RIO LEASING, INC.
By:
Ronald J. Radcliffe
Chief Financial Officer
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By:
Janice Hammond
Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Bank
By:
Jon Varnell
Managing Director
WELLS FARGO BANK NATIONAL
ASSOCIATION
By:
Title:
FIRST SECURITY BANK, N.A.
By:
(Signatures continue) Title:
-15-
<PAGE>
NBD BANK
By:
Title:
SOCIETE GENERALE
By:
Title:
U.S. BANK OF NEVADA
By:
Title:
BANK OF SCOTLAND
By:
Title:
PNC BANK, NATIONAL ASSOCIATION,
SUCCESSOR BY MERGER TO MIDLANTIC
BANK, N.A.
By:
Title:
BANK OF HAWAII
By:
Title:
-16-
<PAGE>
CONSENT OF PARENT GUARANTOR
AND SUBSIDIARY GUARANTOR
The undersigned Parent Guarantor, as party to the
Parent Guaranty dated July 15, 1995, and the undersigned
Subsidiary Guarantor, as party to the Subsidiary Guaranty dated
January 13, 1997, hereby consent to the foregoing Eleventh
Amendment to Credit Agreement dated as of May 13, 1997 and
confirm that the Parent Guaranty and Subsidiary Guaranty remain
in full force and effect after giving effect thereto and
represent and warrant that there is no defense, counterclaim or
offset of any type or nature under the Parent Guaranty or the
Subsidiary Guaranty.
Dated as of May 13, 1997
RIO HOTEL & CASINO, INC.
CINDERLANE, INC.
By:
Ronald J. Radcliffe
Chief Financial Officer
-17-
<PAGE>
TWELFTH AMENDMENT TO
CREDIT AGREEMENT AND WAIVER
THIS TWELFTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER
(this "Twelfth Amendment") is made and dated as of May 13, 1997
among Rio Properties, Inc., a Nevada corporation (the "Company"),
Rio Leasing, Inc. ("Rio Leasing"; the Company and Rio Leasing,
each a "Borrower" and collectively, the "Borrowers"), 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 the Credit Agreement dated as of
July 15, 1993 among the Borrowers, the Banks and the Agent, as
amended by a First Amendment to Credit Agreement dated as of
October 25, 1993, a Second Amendment to Credit Agreement dated as
of November 8, 1993, a Third Amendment to Credit Agreement dated
as of April 15, 1994, a Fourth Amendment to Credit Agreement
dated as of December 16, 1994, a Fifth Amendment to Credit
Agreement dated as of March 20, 1995, a Sixth Amendment to Credit
Agreement dated as of July 31, 1995, a Seventh Amendment to
Credit Agreement dated as of January 17, 1996, an Eighth
Amendment to Credit Agreement dated as of June 17, 1996, a Ninth
Amendment to Credit Agreement and Notes dated as of January 13,
1997, a Tenth Amendment to Credit Agreement dated as of February
3, 1997 and an Eleventh Amendment to Credit Agreement dated as of
May 13, 1997 (as so amended, the "Agreement").
RECITAL
The Borrowers notified the Agent that its total
leverage ratio, calculated in accordance with Section 8.01(y) of
the Agreement, was 4.98 to 1 for the fiscal quarter ending March
31, 1997. Such Section requires that such ratio not exceed 4.75
to 1 for such fiscal quarter. Accordingly, the Borrowers have
requested, and the Agent and the Banks are willing, to waive
Section 8.01(y) of the Agreement for the fiscal quarter ending
March 31, 1997 and to amend such section for the fiscal quarters
ending June 30, 1997, September 30, 1997 and December 31, 1997,
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.
-1-
<PAGE>
2. AMENDMENTS TO AGREEMENT. The Borrowers, the Banks
and the Agent hereby agree that the table in Section 8.01(y) of
the Agreement is amended by deleting the ratios set forth
opposite the fiscal quarters ending 6/30/97, 9/30/97 and 12/31/97
and inserting the following ratios in lieu thereof:
FISCAL QUARTER ENDING RATIO
"6/30/97 5.25:1.00
9/30/97 5.00:1.00
12/31/97 4.50:1.00"
3. REPRESENTATIONS AND WARRANTIES. The Borrowers
jointly and severally represent and warrant to the Banks and
Agent:
3.1 AUTHORITY. The Borrowers have all necessary power
and have taken all corporate action necessary to make this
Twelfth Amendment, the Agreement, and all other agreements and
instruments to which they are a party executed in connection
herewith and therewith, the valid and enforceable obligations
they purport to be.
3.2 NO LEGAL OBSTACLE TO TWELFTH AMENDMENT. Neither
the execution of this Twelfth Amendment, the making by any
Borrower of any borrowings under the Agreement, nor the
performance of the Agreement by any Borrower has constituted or
resulted in or will constitute or result in a breach of the
provisions of any contract to which any Borrower is a party, or
the violation of any law, judgment, decree or governmental order,
rule or regulation applicable to any Borrower, or result in the
creation under any agreement or instrument of any security
interest, lien, charge, or encumbrance upon any of the assets of
any Borrower, except as permitted in the Agreement. No approval
or authorization of any governmental authority is required to
permit the execution, delivery or performance by any Borrower of
this Twelfth Amendment, the Agreement, or the transactions
contemplated hereby or thereby, or the making of any borrowing by
any Borrower 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. Except as waived hereby, no Event of
Default under the Agreement has occurred and is continuing.
4. CONDITIONS, EFFECTIVENESS. The effectiveness of
this Twelfth Amendment shall be subject to the compliance by the
-2-
<PAGE>
Borrowers with their 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 each Borrower,
certified by the Secretary or an Assistant Secretary of each
Borrower as being in full force and effect on the date hereof,
authorizing the amendments to the Agreement, and the Loan
Documents to which each is a party, and the execution, delivery
and performance of this Twelfth Amendment.
4.2 AUTHORIZED SIGNATORIES. A certificate, signed by
the Secretary or an Assistant Secretary of each Borrower dated
the date hereof, as to the incumbency of the person or persons
authorized to execute and deliver this Twelfth Amendment and any
instrument or agreement required hereunder on behalf of the
Borrowers.
4.3 OTHER EVIDENCE. Such other evidence with respect
to the Loan Parties 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 Twelfth Amendment, the Agreement
and the Notes and the compliance with the conditions set forth
herein.
5. MISCELLANEOUS.
5.1 WAIVER. The Banks and the Agent hereby waive
compliance with Section 8.01(y) of the Agreement for the fiscal
quarter ending March 31, 1997. This Twelfth 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.
5.2 EFFECTIVENESS OF THE AGREEMENT. Except as hereby
expressly amended, the Agreement remains in full force and
effect, and is hereby ratified and confirmed in all respects.
5.3 COUNTERPARTS. This Twelfth Amendment may be
executed in any number of counterparts and all of such
-3-
<PAGE>
counterparts taken together shall be deemed to constitute one and
the same instrument. This Twelfth Amendment shall not become
effective until the Borrowers, the Banks and the Agent shall have
signed a copy hereof, and the Parent Guarantor shall have
consented hereto, whether the same instrument or counterparts,
and the same shall have been delivered to the Agent.
5.4 JURISDICTION. This Twelfth Amendment, and any
instrument or agreement required hereunder, shall be governed by
and construed under the laws of the State of Nevada; provided
that the Agent and the Banks shall retain all rights arising
under Federal law.
IN WITNESS WHEREOF, the parties hereto have caused this
Twelfth Amendment to be duly executed and delivered as of the
date first written above.
RIO PROPERTIES, INC.
RIO LEASING, INC.
By:
Ronald J. Radcliffe
Chief Financial Officer
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By:
Janice Hammond
Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
By:
Jon Varnell
Managing Director
WELLS FARGO BANK NATIONAL
ASSOCIATION
By:
(Signatures continue) Title:
-4-
<PAGE>
FIRST SECURITY BANK, N.A.
By:
Title:
NBD BANK
By:
Title:
SOCIETE GENERALE
By:
Title:
U.S. BANK OF NEVADA
By:
Title:
BANK OF SCOTLAND
By:
Title:
PNC BANK, NATIONAL ASSOCIATION,
SUCCESSOR BY MERGER TO
MIDLANTIC BANK, N.A.
By:
Title:
BANK OF HAWAII
By:
Title:
-5-
<PAGE>
CONSENT OF PARENT GUARANTOR
AND SUBSIDIARY GUARANTORS
The undersigned Parent Guarantor, as party to the
Parent Guaranty dated July 15, 1993, Cinderlane, Inc., as party
to a Subsidiary Guaranty dated January 13, 1997, and HLG, Inc.,
Inc., as a party to a Subsidiary Guaranty dated May 13, 1997,
hereby consent to the foregoing Twelfth Amendment to Credit
Agreement dated as of May 13, 1997 and confirm that the Parent
Guaranty and each Subsidiary Guaranty remain in full force and
effect after giving effect thereto and represent and warrant that
there is no defense, counterclaim or offset of any type or nature
under the Parent Guaranty or either Subsidiary Guaranty.
Dated as of May 13, 1997
RIO HOTEL & CASINO, INC.
CINDERLANE, INC.
HLG, INC.
By:
Ronald J. Radcliffe
Chief Financial Officer
-6-
<PAGE>
EXHIBIT 11.01
39
<PAGE>
EXHIBIT 11.01
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(Unaudited)
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Primary:
Earnings (loss):
Net income (loss) $ (2,417,323) $ 5,325,834
Shares:
Weighted average number of common shares
and equivalents outstanding 21,191,104 21,167,469
Stock options 297,930 288,837
Weighted average number of common shares
outstanding, as adjusted 21,489,034 21,456,306
Earnings (loss) per common share:
Net income (loss) per common share $ (0.11) $ 0.25
Fully diluted:
Earnings (loss):
Net income (loss) $ (2,417,323) $ 5,325,834
Shares:
Weighted average number of common shares
and equivalents outstanding 21,191,104 21,167,469
Stock options 312,009 364,734
Weighted average number of common shares
outstanding, as adjusted 21,503,113 21,532,203
Earnings (loss) per common share:
Net income (loss) per common share $ (0.11) $ 0.25
</TABLE>
40
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and statements of income of Rio Hotel & Casino,
Inc., as of and for the quarter ended March 31, 1997, and is qualified in
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 19,310
<SECURITIES> 0
<RECEIVABLES> 13,358
<ALLOWANCES> 1,253
<INVENTORY> 4,548
<CURRENT-ASSETS> 44,534
<PP&E> 541,578
<DEPRECIATION> 65,583
<TOTAL-ASSETS> 539,709
<CURRENT-LIABILITIES> 46,472
<BONDS> 300,452
0
0
<COMMON> 212
<OTHER-SE> 179,588
<TOTAL-LIABILITY-AND-EQUITY> 539,709
<SALES> 69,928
<TOTAL-REVENUES> 69,928
<CGS> 0
<TOTAL-COSTS> 68,822
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,919
<INCOME-PRETAX> (3,813)
<INCOME-TAX> (1,396)
<INCOME-CONTINUING> (2,417)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,417)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
