UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 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.
21,320,141 shares of Common Stock, $0.01 par value as of August 4, 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 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
EXHIBIT INDEX 17
2
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<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 14,371,452 $ 10,623,094
Accounts receivable, net 17,664,931 8,690,105
Federal income taxes receivable - 1,147,106
Inventories 4,468,592 3,871,345
Prepaid expenses and other current assets 9,933,127 5,534,895
Total current assets 46,438,102 29,866,545
Property and equipment:
Land and improvements 64,756,598 51,311,851
Building and improvements 401,541,177 196,918,053
Equipment, furniture and improvements 80,889,436 72,052,458
Less: accumulated depreciation (71,963,560) (60,501,211)
475,223,651 259,781,151
Construction in progress 3,353,271 190,210,277
Net property and equipment 478,576,922 449,991,428
Other assets, net 22,479,467 14,691,613
$ 547,494,491 $ 494,549,586
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 356,527 $ 352,239
Accounts payable 9,773,323 5,854,830
Accrued expenses 21,241,188 11,967,407
Accounts payable - related party 6,676,759 19,604,470
Accrued interest 8,551,281 7,072,067
Total current liabilities 46,599,078 44,851,013
Non-current liabilities:
Long-term debt, less current maturities 300,355,323 253,949,283
Deferred income taxes 13,259,165 13,874,060
Total non-current liabilities 313,614,488 267,823,343
Total liabilities 360,213,566 312,674,356
Stockholders' equity:
Common stock, $0.01 par value;
100,000,000 shares authorized;
21,319,741 and 21,170,441 shares
issued and outstanding 213,198 211,705
Additional paid-in capital 114,332,473 113,140,798
Retained earnings 72,735,254 68,522,727
Total stockholders' equity 187,280,925 181,875,230
$ 547,494,491 $ 494,549,586
See accompanying Notes to Consolidated Financial Statements
</TABLE>
3
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<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
<S> <C> <C> <C> <C>
Revenues:
Casino $ 51,047,606 $ 27,636,470 $ 84,059,965 $ 56,228,444
Room 17,734,494 9,874,962 32,730,419 20,322,540
Food and beverage 28,906,726 18,086,410 52,160,330 35,273,807
Other 6,484,200 3,960,027 11,688,178 7,570,295
Casino promotional allowances (6,982,455) (4,785,806) (13,520,736) (9,534,146)
97,190,571 54,772,063 167,118,156 109,860,940
Expenses:
Casino 25,518,216 12,871,360 43,748,328 25,894,149
Room 5,457,093 3,320,238 9,648,583 6,639,692
Food and beverage 21,958,407 13,532,231 39,913,263 26,955,737
Other 4,235,529 2,035,734 7,098,783 3,902,409
Selling, general and administrative 15,517,913 7,896,189 24,532,109 15,886,585
Depreciation and amortization 6,869,787 4,189,947 12,237,400 8,254,397
Preopening expense - - 11,200,000 -
79,556,945 43,845,699 148,378,466 87,532,969
Operating profit 17,633,626 10,926,364 18,739,690 22,327,971
Interest expense 7,178,008 2,478,686 12,097,413 5,355,182
Income before income tax 10,455,618 8,447,678 6,642,277 16,972,789
Income tax provision (3,825,768) (2,972,402) (2,429,750) (6,171,679)
Net income $ 6,629,850 $ 5,475,276 $ 4,212,527 $ 10,801,110
Earnings per common share:
Net income $ 0.31 $ 0.25 $ 0.20 $ 0.50
Weighted average number of common
shares outstanding 21,520,348 21,671,769 21,468,088 21,564,566
See accompanying Notes to Consolidated Financial Statements
4
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</TABLE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,212,527 $ 10,801,110
Adjustments to reconcile net income to net
cash provided by operating activities:
Compensation expense recognized from
stock option grant 57,740 50,147
Depreciation and amortization 12,237,400 8,254,397
Provision for uncollectible accounts 5,402,942 450,499
Deferred income taxes (2,540,925) 1,752,448
(Increase) decrease in assets:
Accounts receivable (14,377,768) (832,268)
Inventories (597,247) (500,254)
Prepaid expenses and other current assets (2,379,124) (602,991)
Other, net 826,156 90,478
Increase (decrease) in liabilities:
Accounts payable 3,918,492 809,796
Accrued federal income tax 2,281,192 -
Accrued expenses 6,992,588 4,616,280
Accrued interest 1,479,214 452,698
Net cash provided by operating activities 17,513,187 25,342,340
Cash flows from investing activities:
Purchase of land and improvements (5,641,807) (8,130,804)
Purchase of equipment, furniture and
improvements (47,333,747) (56,820,594)
Funds advanced for purchase of golf course (7,792,655) -
Net cash used in investing activities (60,768,209) (64,951,398)
Cash flows from financing activities:
Proceeds from borrowings 55,000,000 32,000,000
Net proceeds from issuance of senior
subordinated notes 121,562,500 -
Net proceeds from common stock issuance 593,050 838,485
Payments on notes and loans payable (130,152,170) (12,629)
Repurchase of common stock - (1,209,850)
Net cash provided by financing activities 47,003,380 31,616,006
Net increase (decrease) in cash and cash equivalents 3,748,358 (7,993,052)
Cash and cash equivalents, beginning of period 10,623,094 19,992,695
Cash and cash equivalents, end of period $ 14,371,452 $ 11,999,643
See accompanying Notes to Consolidated Financial Statements
</TABLE>
5
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<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
(Unaudited)
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
Cash payments made for interest, net of
capitalized interest $ 11,190,781 $ 5,924,186
Cash payments made for income taxes $ 1,000,000 $ 4,600,000
</TABLE>
1997
Purchase of property and equipment financed through payables
totaled $6,676,759
Tax benefit arising from the exercise of stock options under
the Company's Non-Statutory Stock Option Plan totaled $542,378.
1996
Purchase of property and equipment financed through payables
totaled $18,724,842.
Tax benefit arising from the exercise of stock options under
the Company's Non-Statutory Stock Option Plan totaled $501,893.
Purchase of land financed through payables totaled $10,000.
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, HLG, Inc. and
Cinderlane, Inc. (collectively the "Company").
All significant intercompany balances and transactions
have been eliminated in consolidation.
The consolidated balance sheet as of June 30, 1997 and the
related consolidated statements of income for the three
and six month periods ended June 30, 1997 and 1996 and
consolidated statement of cash flows for the six month
periods ended June 30, 1997 and 1996 are unaudited and,
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
On February 7, 1997 the Company opened the Masquerade
Village casino, retail, dining and entertainment complex
and approximately 1,000 new suites. Operating expenses
for the first quarter and the first six months of 1997
include $11.2 million in one-time preopening expenses,
consisting primarily of direct incremental personnel costs
and advertising and marketing expenses, associated with
this expansion.
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 were received on February 11, 1997 net of an
original issue discount of 2.75%, were $121,562,500.
NOTE 4 - EARNINGS PER COMMON SHARE
The Financial Accounting Standards Board recently issued
Statement of Financial Accounting Standards No. 128 -
"Earnings Per Share" ("SFAS 128"). SFAS 128 is effective
for financial statements issued for periods after December
15, 1997 and replaces currently reported earnings per
share with "basic", or undiluted, earnings per share and
"diluted" earnings per share. Basic earnings per share is
computed by dividing net income by the weighted average
number of shares outstanding during the period, while
diluted earnings per share reflects the additional
dilution for all potentially dilutive securities, such as
stock options. Earlier application of SFAS 128 is not
permitted, and the Company will adopt the provisions of
SFAS 128 for 1998 financial statements, including the
required restating of all previously reported earnings per
share.
7
<PAGE>
The following table reflects the Company's pro-forma
earnings per share for the three and six month periods ended
June 30, 1997 and 1996 as determined in accordance with SFAS
128:
<TABLE>
<CAPTION>
Three Months Six Months Ended
Ended June 30,
June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Earnings per share:
As reported $ 0.31 $ 0.25 $ 0.20 $ 0.50
Basic $ 0.31 $ 0.25 $ 0.20 $ 0.50
Diluted $ 0.31 $ 0.25 $ 0.20 $ 0.50
</TABLE>
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information included herein contains statements that may
be considered forward-looking 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
OVERVIEW
During the first six months of 1997, the Masquerade Village
and Tower expansion project was phased into operation. The
Masquerade Village and Tower expansion consisted of (i) the
Masquerade Village opening on February 7, 1997, including five
new restaurants, 21 retail shops, approximately 30,000 square
feet of gaming area, the "Masquerade Show in the Sky", an
interactive entertainment attraction featuring parade floats
with live entertainers suspended from the Masquerade Village's
ceiling, and approximately 1,000 new suites placed into
service in phases through mid-March 1997 (including 447 which
were available as of December 31, 1996) and (ii) in mid-May
1997, the opening of 31 new suites on the upper floors of the
41-story Masquerade Tower, and the VooDoo Restaurant and
Lounge on the 40th and 41st floors offering panoramic views of
the Las Vegas 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. On August 5, 1997,
the Company agreed to purchase 100% of the Golf Course. The
Company presently expects that closing of escrow should occur
during the third quarter of 1997, and the Golf Course, which
will be renamed Rio Secco Golf Club and operated primarily as
an amenity for the Rio's local and tourist customers, is
scheduled to open in early October 1997.
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
REVENUES
The Company's net revenues increased to $97.2 million in the
second quarter of 1997 from $54.8 million in the same period
in the prior year, an increase of $42.4 million or 77%.
Casino revenues increased $23.4 million, or 85%, to $51.0
million for the three months ended June 30, 1997 compared to
$27.6 million in the second 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 1,899 and 76, respectively, in the second
quarter of 1996 to 2,533 and 106, respectively, in the current
year period. Table game revenues were $26.8 million for the
three months ended June 30, 1997, an increase of $16.4
million, or 156%, from the $10.5 million reported in the same
period in the prior year. When comparing the current year's
three month period ended June 30, 1997 and the same period in
the prior year, the table game hold percentage was 21.4% and
17.3%, respectively, and table game handle increased to $125.3
million, or 107%, from $60.6 million. Increased customer
traffic associated with the Masquerade Village and Tower, and
an increased emphasis by management on marketing to table game
customers with higher credit limits and higher average wagers
are considered by management to be the primary contributors to
the increased table game revenues. Slot machine revenues were
$22.5 million in the second quarter of 1997, an increase of
$6.7 million, or 42%, from 1996 second quarter revenues of
$15.8 million. The increase in the average number of slot
machines available and the increase in customer traffic
associated with the Masquerade Village and Tower expansion are
considered by management to be the primary reasons for the
increase in slot machine revenues. Other casino revenues,
consisting of the race and sports books, keno and poker
increased from $1.3 million in the period ended June 30, 1996
to $1.7 million in the current year's second quarter.
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 JUNE 30, 1997 AND 1996 (continued)
Room revenues increased by $7.9 million, or 80%, to $17.7
million in the second quarter of 1997 from $9.9 million in the
same period in the prior year. Management believes that the
primary reasons for the increase in room revenues were the
additional availability of the new suites in the Masquerade
Tower and an increase in the average room rate from $73 in the
second quarter of 1996 to $89 in the current year's quarter.
The occupancy rate was 88.6% during the quarter ended June 30,
1997 compared to 96.2% for the same quarter in the prior year,
with 83,601 and 63,341 more rooms being available and
occupied, respectively, in the 1997 three month period.
Food and beverage revenues increased $10.8 million, or 60%,
to $28.9 million in the three months ended June 30, 1997
compared to $18.1 million in the second quarter of 1996.
Management believes that the opening of Masquerade Village,
including the initial five new restaurants and bars on
February 7, 1997 and the VooDoo Restaurant and Lounge on May
24, 1997 and increased customers generated through the
additional rooms, were the primary reasons for the increase.
An increase in the average food check also contributed to the
increase in food and beverage revenues.
Other revenues increased by $2.5 million to $6.5 million in
the current year's second quarter from $4.0 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
shop rentals received from the retail outlets leased to third
parties in the Masquerade Village.
OPERATING MARGINS
Operating profit as a percentage of net revenue was 18% and
20% for the quarters ended June 30, 1997 and 1996,
respectively. The casino operating margin was 50% in the
three months ended June 30, 1997 compared to 53% in the same
period in the prior year. Payroll and other volume related
expenses, including casino marketing and promotional costs,
together with an increase in reserves for uncollectibility of
casino receivables of $5.4 million in the current year's
quarter compared to $0.1 million in the prior year's period,
which is directly related to the Company's increased emphasis
on marketing to table game customers with higher credit
limits, are considered to be the primary contributors to the
decrease in the casino operating profit margin. For the three
months ended June 30, 1997 and 1996, hotel operating profits
were 69% and 66%, respectively, food and beverage operating
profits were 24% and 25%, respectively, and other operating
department profit margins were 35% and 49%, respectively. The
decrease in the operating profit margin for other departments
is primarily due to the increase in retail sales and the
correspondingly higher costs of sales, payroll and other
expenses associated with retail sales and expenses associated
with the operation of the "Masquerade Show in the Sky" which
commenced operations on February 7, 1997. Selling, general
and administrative expenses increased from 14% to 16% of net
revenues, primarily due to a $2.2 million increase in
advertising expenses and a $2.6 million increase in payroll
and payroll related expenses.
PROMOTIONAL ALLOWANCES
Promotional allowances, which represent the retail value of
rooms, food, beverage and other services provided to customers
without charge, were 7% and 9% of total revenues for the
quarters ended June 30, 1997 and 1996, respectively. The
decrease in promotional allowances as a percentage of total
revenues is primarily due to the increase in total revenues.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased by $2.7 million, or
64%, to $6.9 million in the second quarter of 1997 compared to
$4.2 million in the prior year's second quarter. This
increase is primarily attributable to depreciation and
amortization expense associated with the opening of the
Masquerade Village and Tower.
10
<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 JUNE 30, 1997 AND 1996 (continued)
OTHER INCOME (EXPENSE)
Interest expense increased by $4.7 million to $7.2 million in
the second quarter of 1997 from $2.5 million in the same
period in 1996. Interest expense was reduced by $0.5 million
and $1.1 million for the three month periods ended June 30,
1997 and 1996, respectively, due to interest being
capitalized on the Masquerade Village expansion in 1996 and
1997 on the cost of the acreage adjacent to the Rio that has
been acquired for possible future expansion of the Rio's
complex. In addition, interest expense was higher in the
current year's quarter due to the issuance on February 11,
1997 of $125 million in principal amount of 9 1/2% Senior
Subordinated Notes Due 2007.
NET INCOME
Net income for the second quarter of 1997 was $6.6 million, or
$0.31 per common share, compared to $5.5 million or $.25 per
common share in the prior year period.
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
REVENUES
The Company's net revenues increased to $167.1 million for the
six month period ended June 30, 1997 from $109.9 million in
the same period in the prior year, an increase of $57.2
million or 52%. Casino revenues increased $27.8 million, or
49%, to $84.1 million for the first half of 1997 compared to
$56.2 million in the first six months 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 1,949 and 76 in the six months ended
June 30, 1996 to 2,408 and 101 in the current year period.
Table game revenues were $40.5 million for the six months
ended June 30, 1997, an increase of $19.7 million, or 94%,
from the $20.8 million reported in the same period in the
prior year. When comparing the current year's six month
period and the same period in the prior year, the table game
hold percentages were 17.1% and 16.1%, respectively, and table
game handle increased to $237.0 million, or 83%, from $129.7
million. The increase in table game handle is considered to
be primarily due to the increased number of table games
available and the increased foot traffic associated with the
Masquerade Village and Tower expansion, and an increased
emphasis by management on marketing to customers with higher
credit limits and average wagers. Slot machine revenues were
$40.5 million in the first six months of 1997, an increase of
$8.1 million, or 25%, from $32.4 million in the same period in
1996. The increase in the average number of slot machines
available and the increase in customer traffic associated with
the Masquerade Village and Tower expansion are considered to
be the primary reasons for the increase in slot machine
revenues. Other casino revenues, consisting of the race and
sports books, keno and poker, were $3.0 million for each of
the periods ended June 30, 1997 and 1996.
Room revenues increased by $12.4 million, or 61%, to $32.7
million for the six months ended June 30, 1997 from $20.3
million in the same period in the prior year. Management
believes that the primary reasons for the increase in room
revenues were the additional availability of the new suites in
the Masquerade Tower and an increase in the average room rate
from $75 in the first half of 1996 to $89 in the current
year's six month period. The occupancy rate was 90.6% during
the six months ended June 30, 1997 compared to 96.5% for the
same period in the prior year, with 122,262 and 94,150 more
rooms being available and occupied, respectively, in the 1997
six month period.
Food and beverage revenues increased $16.9 million, or 48%,
to $52.2 million in the six months ended June 30, 1997
compared to $35.3 million in the first half of 1996.
Management believes that the opening of Masquerade Village,
including the initial five new restaurants and bars on
February 7, 1997 and the VooDoo
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
MATERIAL CHANGES IN RESULTS OF OPERATIONS (continued)
SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (continued)
Restaurant and Lounge on May 24, 1997 and increased customers
generated through the additional rooms and expanded casino and
entertainment areas, were the primary reasons for the
increase. An increase in the average food check also
contributed to the increase in food and beverage revenues.
Other revenues increased by $4.1 million to $11.7 million in
the first six months of 1997 from $7.6 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
shop rentals 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 revenue was 18% and 20% for the six months ended June 30,
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 on February 7, 1997, totaled approximately $11.2
million. The casino operating margin was 48% in the six
months ended June 30, 1997 compared to 54% in the same period
in the prior year. Payroll and other volume related expenses,
increased casino marketing and promotional costs and an
increase in reserves for uncollectibility of casino
receivables of $5.7 million for the six months ended June 30,
1997 compared to $0.4 million in the same period in the prior
year, which is directly related to the Company's increased
emphasis on marketing to table game customers with higher
credit limits, are the primary contributors to the decrease in
the casino operating profit margin. For the six months ended
June 30, 1997 and 1996, hotel operating profits were 71% and
67%, respectively, food and beverage operating profits were
23% and 24%, respectively, and other operating department
profit margins were 39% and 48%, respectively. The decrease
in the operating profit margin for other departments is
primarily due to the increase in retail sales and the
correspondingly higher costs of sales, payroll and other
expenses associated with retail sales and expenses associated
with the operation of the "Masquerade Show in the Sky" which
opened on February 7, 1997. Selling, general and
administrative expenses increased from 14% to 15% of net
revenues, primarily due to a $2.6 million increase in
advertising expenses and a $3.3 million increase in payroll
and payroll related expenses.
PROMOTIONAL ALLOWANCES
Promotional allowances, which represent the retail value of
rooms, food, beverage and other services provided to customers
without charge, were 8% and 9% of total revenues for the six
month periods ended June 30, 1997 and 1996, respectively. The
decrease in promotional allowances as a percentage of total
revenues is primarily due to the increase in total revenues.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased by $4.0 million, or
48%, to $12.2 million in the first six months of 1997 compared
to $8.3 million in the prior year period. This increase is
primarily attributable to depreciation and amortization
expense associated with the opening of the Masquerade Village
and Tower.
OTHER INCOME (EXPENSE)
Interest expense increased by $6.7 million to $12.1 million
for the six months ended June 30, 1997 from $5.4 million in
the same period in 1996. Interest expense was reduced by $2.8
million and $1.5 million for the six month periods ended June
30, 1997 and 1996, respectively, due to interest being
capitalized on the Masquerade Village expansion in 1996 and
for the period prior to its opening in 1997, and, during the
first six months of 1997, on the cost of the acreage adjacent
to the Rio that has been acquired for possible future
expansion of the Rio's complex. In addition, interest expense
was higher in the current year's six month period due to the
issuance on February 11, 1997 of $125 million in principal
amount of 9 1/2% Senior Subordinated Notes Due 2007.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
MATERIAL CHANGES IN RESULTS OF OPERATIONS (continued)
SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (continued)
NET INCOME
Net income for the six month period ended June 30, 1997, after
deducting $11.2 million of preopening expenses associated with
the opening of the Masquerade Village and Tower, was $4.2
million. Adjusted on a pro forma basis for the one-time
charge of $11.2 million for preopening expense, net income for
the first half of 1997 would have been $11.3 million. This
compares to net income in the first six months of 1996 of
$10.8 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 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 with Bank of
America, thereby increasing the amount available to the
Company under the line of credit by a corresponding amount.
During the first six months of 1997, net cash provided by
operating activities was $17.5 million. Net cash used in
investing activities was $60.8 million, including
approximately $43.1 million related to the construction of
the Masquerade Village and Tower expansion, $5.6 million in
land acquisitions adjacent to the Rio and $7.8 million for the
investment in the Rio Secco Golf Club. The Company arranged
for an $8.0 million loan from Bank of America that was funded
in May 1997 as partial funding of its estimated $27.0 million
investment in the Rio Secco Golf Club, which includes a $4.5
million club house scheduled to open in the spring of 1998.
Based upon cash on hand, cash available through borrowings
under the $200.0 million line of credit, $130.0 million of
which was available as of June 30, 1997, and cash provided by
operations, the Company believes that it has adequate cash
available to fund real estate purchase commitments,
investment commitments associated with the acquisition of the
golf course and operations.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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 primarily 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. The motion is
pending. In the interim, several defendants which did not
have jurisdiction motions filed a motion to demur, arguing
that the action should not be considered by the California
court because the matter is relegated to the Nevada regulatory
system pursuant to the Commerce Clause of the U.S.
Constitution. After a hearing conducted on July 11, 1997, the
court sustained the demur without leave to amend. Although
the Company is still technically a defendant in the case,
management believes that the court's ruling will be applied to
all defendants and the Company will be dismissed from the
action. In addition, management believes that the substance
of the complaint is without merit and the Company intends
vigorously to defend the allegations if the action is not
dismissed against the Company pursuant to the demur.
For additional information on litigation in which the Company
is a party, see the Company's report on Form 10-K for the year
ended December 31, 1996, Part I, Item 3, and the Company's
report on Form 10-Q for the quarter ended March 31, 1997, Part
II, Item 1.
ITEM 2. CHANGES IN SECURITIES
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 115,200 shares of the
Company's Common Stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 5. OTHER INFORMATION
The Company has entered into an agreement with Paradise
Valley, L.L.C., to submit a bid for one of the three gaming
licenses to be issued by the City of Detroit, Michigan.
Paradise Valley, L.L.C. is a Michigan limited liability
company whose members are primarily comprised of residents of
Detroit, including former Detroit Mayor Coleman Young. The
Company and Paradise Valley, L.L.C. have formed Paradise
Valley Rio, L.L.C., a Michigan limited liability company, as
the formal entity seeking one of the three gaming licenses.
Plans for a Detroit project are in the conceptual bidding
phase, and are contingent upon licensing and financing issues.
14
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
4.01 Thirteenth Amendment to Credit Agreement dated as of
August 8, 1997 among Rio Properties, Inc. and Rio
Leasing, Inc., as Borrowers, Bank of America National
Trust and Savings Association, as Agent and as a Bank,
and Wells Fargo Bank National Association, First
Security Bank, N.A., NBA 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
10.01 Purchase Agreement dated as of June 1, 1997 among Rio
Development Company, Inc. and Seven Hills Golf Limited
Partnership
11.01 Computation of Earnings Per Common Share
27.01 Financial Data Schedule
(b) REPORTS ON FORM 8-K
NONE
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Rio Hotel & Casino, Inc.
(Registrant)
August 12, 1997 /S/ RONALD J. RADCLIFFE
(Date) RONALD J. RADCLIFFE
Vice President, Treasurer and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
16
<PAGE>
EXHIBIT INDEX
SEQUENTIAL PAGE
EXHIBIT DESCRIPTION NUMBER
4.01 Thirteenth Amendment to Credit Agreement dated 18
as of August 8, 1997 among Rio Properties, Inc.
and Rio Leasing, Inc., as Borrowers, Bank of
America National Trust and Savings Association,
as Agent and as a Bank, and Wells Fargo Bank
National Association, First Security Bank,
N.A., NBA 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
10.01 Purchase Agreement dated as of June 1, 1997 31
among Rio Development Company, Inc. and Seven
Hills Golf Limited Partnership
11.01 Computation of Earnings per Common Share 47
27.01 Financial Data Schedule 49
17
<PAGE>
EXHIBIT 4.01
18
<PAGE>
THIRTEENTH AMENDMENT TO
CREDIT AGREEMENT
THIS THIRTEENTH AMENDMENT TO CREDIT AGREEMENT, (this
"Thirteenth Amendment") is made and dated as of August 8, 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, an Eleventh Amendment to Credit Agreement dated as of
May 13, 1997 and a Twelfth Amendment to Credit Agreement and
Waiver dated as of May 13, 1997 (as so amended, the "Agreement").
RECITALS
A. The Company had previously notified the Agent and
the Banks that it intended to form a limited partnership to
acquire an approximate 60% ownership interest in the Seven Hills
Golf Course. The Company now desires to have Rio Development, a
wholly-owned Unrestricted Subsidiary of the Parent Guarantor,
directly acquire 100% of the Seven Hills Golf Course. The
purchase price for the Seven Hills Golf Course is approximately
$17,000,000, plus the assumption of approximately $6,000,000 in
existing indebtedness secured by the Seven Hills Golf Course.
Bank of America National Trust and Savings Association has also
made a $8,000,000 term loan to Rio Development and Rio Resorts
for use in connection with the Seven Hills Golf Course.
B. In connection with the Seven Hills Golf Course,
the Company has requested that the Agreement be amended to (i)
increase the permitted investment basket (the "SEVEN HILLS
INVESTMENT BASKET") from $12,000,000 to $28,000,000 to permit
such acquisition and for additional improvements in Seven Hills
Golf Course clubhouse and (ii) create a second basket (the "SEVEN
HILLS OPERATING EXPENDITURE BASKET") to enable the Parent
1
<PAGE>
Guarantor and its Subsidiaries to pay up to $5,000,000 per year
in operating expenses related to the Seven Hills Golf Course.
C. Separately, the Company has also requested that
the Agreement be amended to: (i) increase the annual Capital
Expenditures basket from $7,500,000 to $10,000,000, (ii) increase
the amount of Real Property acquisitions permitted thereunder
from $35,000,000 to $40,000,000, and (iii) permit expending up to
$1,900,000 in additional Capital Expenditures towards the
extension of Twain Avenue near the Property and for planning
relating to the development of property no. 2.
D. The Agent and the Banks are willing to consent to
the foregoing and to so amend the Agreement, all 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 Borrowers, the Banks
and the Agent hereby agree that the Agreement is amended as
follows:
2.1 All references to the Seven Hills Venture L.P. are
deleted.
2.2 The following new definitions are inserted in
proper alphabetical order in Section 1.01 of the Agreement as
follows:
"'SEVEN HILLS OPERATING EXPENDITURES' means
(without duplication) the aggregate of all amounts
directly or indirectly paid by the Parent Guarantor and
its Subsidiaries and Unrestricted Subsidiaries, whether
by direct payment, dividend, intercompany charge,
investment, in the Ordinary Course of Business or
otherwise, for net operating expenses relating to the
Seven Hills Golf Course."
"'SEVEN HILLS OPERATING EXPENDITURE BASKET' means
$5,000,000 in any calendar year; PROVIDED, that the
Seven Hills Operating Expenditure Basket for calendar
year 1997 shall be $2,500,000."
2
<PAGE>
2.3 The definitions of "Seven Hills Venture Basket"
and "Seven Hills Venture Basket Expenditures" are renamed to
"Seven Hills Investment Basket" and "Seven Hills Investment
Expenditures," respectively, and are amended and restated in
their entirety as follows:
"'SEVEN HILLS INVESTMENT EXPENDITURES' means
(without duplication) the aggregate of all investments
directly or indirectly made by the Parent Guarantor and
its Subsidiaries and Unrestricted Subsidiaries in the
Seven Hills Golf Course, including without limitation
for the acquisition thereof, all Capital Expenditures
related thereto and all Indebtedness assumed or
incurred in connection therewith."
"'SEVEN HILLS INVESTMENT BASKET' means
$28,000,000."
2.4 The definition is amended and restated in its
entirety as follows:
"'UNRESTRICTED SUBSIDIARIES' means Rio Development
and Rio Resorts."
2.5 Section 6.02(g) of the Agreement is amended and
restated in its entirety 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 acquisition, development and operation of
the Seven Hills Golf Course and (ii) the amount of
Seven Hills Investment Expenditures and Seven Hills
Operating Expenditures made to date and reasonably
anticipated to be made."
2.6 Section 7.01(m) of the Agreement (Limitation on
Liens) is amended and restated in its entirety as follows:
"(m) Liens on the Seven Hills Golf Course securing
Indebtedness permitted by Section 7.05(i)."
2.7 Section 7.04(d) of the Agreement (Loans and
Investments) is amended and restated in its entirety as follows:
"(d) investments and operating expenses relating
to the Seven Hills Golf Course; PROVIDED, that, after
giving effect thereto, (i) Seven Hills Investment
Expenditures shall not exceed the Seven Hills
Investment Basket, (ii) Seven Hills Operating
3
<PAGE>
Expenditures shall not exceed the Seven Hills Operating
Expenditure Basket and (iii) no Default or Event of
Default shall then exist or result therefrom; PROVIDED,
FURTHER, that no Loan Party shall cause or permit Rio
Development to own any assets other than the Seven
Hills Golf Course or any other Unrestricted Subsidiary
to own any assets."
2.8 Section 7.05(i) of the Agreement (Limitation on
Indebtedness) is amended and restated in its entirety as two
subsections as follows:
"(i) Indebtedness not exceeding $6,000,000 in the
aggregate secured by a Lien on the Seven Hills Golf
Course existing at the time Rio Development acquired
the Seven Hills Golf Course; PROVIDED, that, after
giving effect thereto, Seven Hills Investment
Expenditures shall not exceed the Seven Hills
Investment Basket and no Default or Event of Default
shall then exist or result therefrom; and
"(j) Additional unsecured Indebtedness of Rio
Development and/or Rio Resorts not exceeding $8,000,000
in the aggregate, the proceeds of which are used to
acquire or develop the Seven Hills Golf Course or to
reimburse the Parent Guarantor and its Subsidiaries for
acquiring or developing the Seven Hills Golf Course;
PROVIDED, that, after giving effect thereto, Seven
Hills Investment Expenditures shall not exceed the
Seven Hills Investment Basket and no Default or Event
of Default shall then exist or result therefrom."
2.9 Section 7.06 (Transactions With Affiliates) of the
Agreement (Transactions With Affiliates) is amended by inserting
the following proviso at the end thereof before the period:
"PROVIDED, HOWEVER, that the Parent Guarantor and its
Subsidiaries may make Seven Hills Investment
Expenditures and Seven Hills Operating Expenditures
PROVIDED that, after giving effect thereto, (i) Seven
Hills Investment Expenditures shall not exceed the
Seven Hills Investment Basket, (ii) Seven Hills
Operating Expenditures shall not exceed the Seven Hills
Operating Expenditure Basket and (iii) no Default or
Event of Default shall then exist or result therefrom."
2.10 Section 7.08(g) of the Agreement is deleted in its
entirety.
2.11 Section 7.13 of the Agreement (Capital
Expenditures) is amended and restated in its entirety as follows:
4
<PAGE>
"7.13 CAPITAL EXPENDITURES. The Loan Parties and
their respective Subsidiaries and Unrestricted
Subsidiaries shall not make, or become legally
obligated to make, and Capital Expenditures EXCEPT:
"(a) Capital Expenditures in an fiscal year not in
excess of the SUM OF (i) $10,000,000 PLUS (ii) the
amount, if any, by which $10,000,000 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 $20,000,000 in any fiscal
year;
"(b) acquisition costs of Real Property not
exceeding $40,000,000 in the aggregate;
"(c) Capital Expenditures not exceeding
$225,000,000 in the aggregate for the Phase 5
Expansion;
"(d) Capital Expenditures in connection with the
Seven Hills Golf Course; PROVIDED, that, after giving
effect thereto, Seven Hills Investment Expenditures
shall not exceed the Seven Hills Investment Basket and
no Default or Event of Default shall then exist or
result therefrom; and
"(e) Capital Expenditures not exceeding $1,900,000
in the aggregate for the extension of Twain Avenue and
for planning relating to the development of property
number 2."
2.12 Schedule 5.19 is amended and restated in its
entirety in the form of Schedule 5.19 hereto.
2.13 Schedule 5.28 is amended by adding the property
descriptions set forth in the form of Schedule 5.28 hereto.
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
Thirteenth 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.
5
<PAGE>
3.2 NO LEGAL OBSTACLE TO THIRTEENTH AMENDMENT.
Neither the execution of this Thirteenth 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 Thirteenth 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 Thirteenth 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 Thirteenth 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 Thirteenth 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 Thirteenth Amendment, the
6
<PAGE>
Agreement and the Notes and the compliance with the conditions
set forth herein.
5. MISCELLANEOUS.
5.1 NO WAIVER. This Thirteenth 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 respect.
5.3 COUNTERPARTS. This Thirteenth 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 Thirteenth 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 Thirteenth 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.
IN WITNESS WHEREOF, the parties hereto have caused this
Thirteenth Amendment to be duly executed and delivered as of the
date first written above.
RIO PROPERTIES, INC.
RIO LEASING, INC.
By: /s/ Ronald J. Radcliffe
Ronald J. Radcliffe
Chief Financial Officer
(Signatures continue)
7
<PAGE>
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:
Scott Faber
Vice President
WELLS FARGO BANK NATIONAL
ASSOCIATION
By:
Title:
FIRST SECURITY BANK, N.A.
By:
Title:
NBD BANK
By:
Title:
SOCIETE GENERALE
By:
Title:
(Signatures Continue)
8
<PAGE>
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:
9
<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 party to a Subsidiary Guaranty dated May 13, 1997,
hereby consent to the foregoing Thirteenth Amendment to Credit
Agreement dated as of August 8, 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 August 8, 1997
RIO HOTEL & CASINO, INC.
CINDERLANE, INC.
HLG, INC.
By: /s/ Ronald J. Radcliffe
Ronald J. Radcliffe
Chief Financial Officer
1
<PAGE>
SCHEDULE 5.19
TO CREDIT AGREEMENT
<TABLE>
<CAPTION>
SUBSIDIARIES AND OTHER INVESTMENTS
PARENT: RIO HOTEL AND CASINO, INC.
Jurisdiction Percentage
in Which Direct of
PERSON Organized Owner Ownership
SUBSIDIARIES
<S> <C> <C> <C>
Rio Properties, Inc. Nevada Parent Guarantor 100%
Rio Leasing, Inc. Nevada Parent Guarantor 100%
Cinderlane, Inc. Nevada Rio Properties 100%
HLG, Inc. Nevada Parent Guarantor 100%
UNRESTRICTED SUBSIDIARIES
Rio Development
Company, Inc. Nevada Parent Guarantor 100%
Rio Resort
Properties, Inc. Nevada Parent Guarantor 100%
</TABLE>
<PAGE>
SCHEDULE 5.28
TO CREDIT AGREEMENT
CINDERLANE PROPERTIES NOT PLEDGED TO BANKS
The following paragraph is added to Schedule 5.28:
"In addition to the real property listed above, real property
not exceeding $5,000,000 in aggregate value, acquired by
Cinderlane pursuant to Section 7.13(b) of the Agreement (which
real property is contiguous to, and/or to be developed in
conjunction with, existing real property owned by Cinderlane
or the Company) will not be required to be pledged to the
Agent and the Banks."
<PAGE>
EXHIBIT 10.01
31
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is executed
as of the 5th day of August 1997, is effective, retroactively,
as of June 1, 1997, and is among Rio Development Company, Inc., a
Nevada corporation ("Purchaser"), and Seven Hills Golf Limited
Partnership, a Nevada limited partnership ("Seller").
R E C I T A L S
WHEREAS, Seller owns certain real property and
improvements thereon within the Seven Hills Master Planned
Community, located in the City of Henderson, State of Nevada and
particularly described on Exhibit "A" hereto (the "Property"),
which Property is anticipated to be developed and operated as an
18-hole golf course with related improvements (the "Project");
WHEREAS, in connection with the Project, Seller also
owns the Related Assets (as hereinafter defined), which Related
Assets, together with the Property, are collectively referred to
herein as the "Assets"; and
WHEREAS, pursuant to the terms and conditions set forth
herein, Seller desires to sell and assign the Assets to
Purchaser, and Purchaser desires to purchase and acquire same
from Seller.
NOW, THEREFORE, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged,
Purchaser and Seller hereby covenant and agree as follows:
1. SALE OF THE ASSETS. Subject to the terms and
conditions set forth herein, at the Closing (as hereinafter
defined) Seller shall sell, transfer, assign and deliver to
Purchaser, and Purchaser shall purchase and acquire from Seller,
all of Seller's existing assets and business with respect to the
Project, including, without limitation, the assets set forth
below. Except as otherwise expressly provided in this Agreement,
Purchaser agrees that upon the Closing, Purchaser shall assume
all liabilities and obligations to which Seller was subject, as
of the Closing, in connection with the Related Assets.
a. THE PROPERTY. The Property, free of all
liens, exceptions and encumbrances except for those set forth as
exceptions nos. 1, 2 (to the extent these cannot be determined at
Closing), 3 (to the extent these cannot be determined at
Closing), 4, 5, 6, 8, 9, 10, 11, 12 (subject to Purchaser review)
13 and 14 (the "Permitted Exceptions") on that certain
preliminary title report (the "Title Report") no. 97-06-0963LM
prepared by Nevada Title Company ("Escrow Agent") at 7:30 A.M.
dated June 10, 1997, and any and all improvements thereon. It is
agreed that any potential liens or actual liens recorded by/on
behalf of/because of Marnell Corrao Associates, Inc., a Nevada
corporation ("MCA"), whether revealed on the Title Report or not,
shall be deemed Permitted Exceptions.
b. PERSONAL PROPERTY: The Personal Property
listed on Schedule 1 b., attached hereto and made a part hereof
as if fully set forth;
<PAGE>
c. MARKS, DESIGNS. All of Seller's rights and
entitlements to use the "Seven Hills" marks, insignia and designs
(the "Marks");
d. CONTRACTS. All rights and interests in and
to all contracts, agreements, rights, easements, orders,
commitments, understandings and arrangements with respect to the
Project, including, without limitation, the contracts listed on
Exhibit "B" attached hereto (the "Contracts"). With respect to
Seller's Contract with First Security Leasing Company ("First
Security") for the lease of certain equipment used at the
Property, Purchaser agrees that at the Closing, Purchaser shall
replace Seller's deposit to First Security in the amount of
$51,396, and that it shall execute and deliver (or cause the
execution and delivery) to First Security all such documents as
may be necessary to replace Terry Johnston and Terry Taylor as
guarantors under such First Security Contract;
e. PERMITS. All permits owned by or issued to
Seller relating to the Project and all pending applications
therefor (the "Permits");
f. BOOKS, RECORDS. All originals or copies of
all books, records, files and papers, whether in hard copy or
computer format, used in connection with the Project, including,
without limitation, engineering information, manuals, data, sales
and advertising materials and sales and purchase correspondence
(but excluding original documentation with respect to Seller's
construction contract with Kajima Engineering and Construction,
Inc., a California corporation ("Kajima")) (the "Records");
g. TECHNOLOGY, KNOW-HOW. All technology, know-
how, trade secrets, proprietary data, formulae, research and
development data, computer software programs and other intangible
property, and any applications for the same, used by Seller in
connection with the Project (the "Know-how");
h. GOODWILL. All of Seller's goodwill in
connection with the Project (the "Goodwill");
i. EASEMENTS. All of Seller's rights under
easement agreements, or rights to obtain easements, with the City
of Henderson with respect to golf-cart underpasses on the
Property (the "Easements");
j. WARRANTIES. All of Seller's rights, if any,
to warranties from vendors, contractors and subcontractors with
respect to the Property (the "Warranties");
k. BOARD POSITIONS. All of Seller's rights to
appoint a member to the Board of Trustees to the Seven Hills
Master Association (the "Association") and all of Seller's rights
to appoint a member to the architectural review committee of the
Association (collectively, the "Board Positions"); and
l. SILVER CANYON PARTNERSHIP. All of Seller's
rights to receive any property or performance from Silver Canyon
Partnership with respect to the Property as set forth in the
Purchase, Sale and Development Agreement dated May 28, 1996 and
the Declaration of Easements, Covenants and Restrictions recorded
July 19, 1996 in Book 960719 as Document No.
2
<PAGE>
00118 in the official records of the Recorder of Clark County,
Nevada (the "Silver Canyon Rights").
The Personal Property, Marks, Contracts, Permits, Records, Know-
how, Goodwill, Easements, Warranties, Board Positions and Silver
Canyon Rights are collectively referred to herein as the "Related
Assets." All of the Related Assets shall be conveyed to
Purchaser at the Closing free and clear of all liens
and encumbrances except liens and encumbrances created under the
Orix Agreement or the Contracts.
2. CONSIDERATION. The consideration for the transfer
of the Assets by Seller to Purchaser shall be:
a. CASH PURCHASE PRICE. Cash payment to Seller
in the amount of $6,250,000 (the "Cash Purchase Price") {see 7
(a) for the Initial Payment as therein defined};
b. CANCELLATION OF CERTAIN PROMISSORY NOTE.
Cancellation of that certain Promissory Note made by Terry
Johnston payable to the order of Purchaser dated March 4, 1997 in
the original principal amount of $3,750,000.00 (the "Note") with
an outstanding principal balance at June 1, 1997 of $5,299,654.72
of which $1,200,000.00 was credited to the stated
outstanding principal balance on June 30, 1997 and will be
redisbursed at the Closing so the full outstanding principal
balance on the Closing Date will be the $5,299,654.72
as stated above; and
c. ASSUMPTION OF CERTAIN LIABILITIES. The
assumption of the liabilities as expressly provided in Section 3
hereof.
3. ASSUMPTION OF LIABILITIES.
From and after the Closing Date, Purchaser shall
assume, pay, perform and discharge the liabilities incurred in
connection with the following obligations, as set forth in
Section 3(a) through 3(e) hereof:
a. ORIX LOAN. That certain Construction Loan
Agreement (the "Orix Agreement") dated July 2, 1996 among Seller
and Orix USA Corporation, a Delaware corporation ("Orix") and the
Loan Documents (as such term is defined in the Orix Agreement)
(the loan balance under the Orix Agreement, as of June 1, 1997,
is approximately $3,708,777.00).
b. MCA PROJECT NO. 838-97. The amended contract
to complete the golf course at the Project among Seller and MCA,
commonly known as MCA Project No. 838-97 (with an outstanding
obligation of approximately $4,500,000 as of June 1, 1997).
c. MCA PROJECT NO. 848-97. The contract among
Seller and MCA, commonly known as MCA Project No. 848-97 (with an
outstanding obligation of approximately $1,000,000 as of June 1,
1997).
3
<PAGE>
d. MCA PROJECT NO. 878-97. The contract among
Seller and MCA to construct the club house at the Project,
commonly known as MCA Project No. 878-97 (with an outstanding
obligation of approximately $4,500,000 as of June 1, 1997).
e. ADDITIONAL EXPENSES AND LIABILITIES. Except
as expressly excluded in Section 3(f) below, all other expenses
associated with the Project, the Property and the Related Assets,
commencing as of June 1, 1997, including, without limitation,
payroll obligations, obligations under the First Security
Contracts, and obligations in connection with fencing and
portable toilets at the Project, taxes and insurance, as it is
the intent of the parties that the Purchaser is responsible for
costs incurred on and after June 1, 1997 and the Seller is
responsible for costs incurred prior to June 1, 1997 which, as of
the date of Closing, have not been paid either through the use of
the proceeds advanced under the Promissory Note (see Section 2b)
or payments made by MCA or costs incurred by MCA under, MCA
Project Nos. 838-97, 848-97 and 878-97 whether MCA made such
payments or incurred such costs prior to or after June 1, 1997.
f. LIABILITIES NOT ASSUMED. In no event shall
Purchaser assume or incur any liability under this Agreement or
otherwise in respect of (i) any federal, state or local income
tax, business, occupation, withholding or similar tax or other
tax payable in connection with the Project or the Assets arising
prior to the Closing Date or as a result of the Closing; (ii)
the agreement between Seller and Rees Jones, Inc. with
respect to certain design and construction of the golf course at
the Project, provided that Seller will execute a Partial
Assignment of this contract, assigning to Purchaser the benefits
of the contract, but not the obligations of the contact; and/or
(iii) that certain mechanics' lien recorded by Kajima on April
10, 1997, as amended on April 11, 1997 in the Official Records of
Clark County, Nevada, with respect to the Property.
In addition, Purchaser shall not be responsible for the
breach by Seller of any provision set forth in any agreement or
other instrument described in Section 3(a) through 3(e) hereof
which occurred before the date hereof and Seller hereby agrees
that it shall indemnify and forever hold Purchaser harmless in
connection with any such breach.
4. REPRESENTATIONS OF SELLER. Seller represents and
warrants that the following are true and correct in all respects
as of June 1, 1997 and shall be true and correct as of the
Closing:
a. PARTNERSHIP ORGANIZATION. Seller is a
limited partnership duly organized, validly existing and in good
standing under the laws of the State of Nevada, and has all
necessary limited partnership powers to own its properties and to
carry on its business as now owned and operated by it.
b. AUTHORITY. As of the Closing, Seller's
partners (both general and limited) shall have duly authorized
and approved the execution of this Agreement and the sale of the
Assets as contemplated herein, as required under Nevada law and
Seller's Amended and Restated Agreement of Limited Partnership
[undated] (the "Partnership Agreement").
4
<PAGE>
c. MARKETABLE TITLE. To the best of its
knowledge, Seller has good and marketable title to the Related
Assets. The Assets constitute all of Seller's assets in
connection with the Project. None of the Assets are the subject
of, or, to the best of Seller's knowledge, are targeted for, any
proceeding in eminent domain.
d. TRANSACTION NOT A BREACH. Neither the
execution of this Agreement nor the transactions contemplated
hereby will result in or constitute a breach or violation
(whether with notice or lapse of time or both) of the Partnership
Agreement or any lease, contract, mortgage or other agreement by
which Seller is bound, except as to any consents or approvals
required and specified herein.
e. LITIGATION. To the best of Seller's
knowledge, except with respect to the mechanics liens reflected
as items 15 and 16 on the Title Report, there are no
investigations, actions, suits, charges, complaints or other
proceedings of any character pending, or, to the best of Seller
knowledge, threatened or otherwise asserted against or involving
the Seller which could reasonably be expected to affect the title
of the Property, at law or in equity or before any federal,
state, or other governmental division, agency or instrumentality
and no circumstances are known by Seller to exist which would
give rise to any such action, suit or proceeding.
f. MANAGEMENT OF THE PROJECT. Other than that
certain Management Agreement dated January 1, 1996 among Seller
and Mulligan Management Company, LLC (the "Mulligan Agreement"),
there are no agreements to which Seller is party or by which
Seller is bound with respect to supervising and/or operating the
Project.
g. COMPLIANCE WITH CC&RS. To the best of
Seller's knowledge, Seller is in compliance in all material
respects with the terms and provisions of (i) that certain Master
Declaration of Covenants, Conditions and Restrictions and
Reservation of Easements for Seven Hills executed by Silver
Canyon Partnership and dated October 9, 1995 (the "Master
Declaration"), including without limitation, compliance with
Article IX thereof relating to architectural and landscape
matters; and (ii) that certain Declaration of Easements,
Covenants and Restrictions (Golf Course Dedication) dated May 28,
1996 among Silver Canyon Partnership and the Seller
(collectively, the "CC&Rs"). Purchaser and Seller agree that the
existing landscaping of the "Golfscape" (as such term is defined
in Section 1.30 of the Master Declaration) shall, for purposes of
this Agreement, be deemed to be in compliance in all material
respects with the CC&Rs.
h. EMPLOYEES. To the best of Seller's
knowledge, as of the date of the execution of this Agreement and
the Closing Date, Seller is not delinquent in any fashion with
respect to payroll taxes, industrial insurance premiums, FICA and
any other matter or matters with respect to its employees and
employment and labor-related obligations.
i. ENVIRONMENTAL COMPLIANCE. To the best of
Seller's knowledge and without independent inquiry on the part of
Seller, and except for any violations caused by MCA, Seller is in
compliance with all Environmental and Safety Requirements (as
hereinafter defined) and possesses all required permits, licenses
and certificates, and has filed all notices or applications
required by the Environmental and Safety Requirements; EXCEPT,
HOWEVER, where
5
<PAGE>
such noncompliance with Environmental and Safety Requirements or
failure to possess required permits, licenses and certificates
would not, individually or in the aggregate, have a material
adverse effect upon the Property. In addition, Seller has not
been subject to, and has not received any notice of, any private,
administrative or judicial action, or notice of any intended
private, administrative, or judicial action, relating to the
presence or alleged presence of Hazardous Materials (as
hereinafter defined) in, under or upon the Property, and to
Seller's knowledge, Seller does not have any material basis for
any such notice or action.
Without independent inquiry on the part of Seller, there are
no pending, or, to the knowledge of Seller, threatened actions or
proceedings (or notices of potential actions or proceedings) from
any governmental authority or any other entity regarding any
matter relating to health, safety or protection of the
environment with respect to the Property. In addition, to the
knowledge of Seller and without independent inquiry by Seller,
there are no, and there have been no, past or present events,
conditions, circumstances, activities, practices, incidents or
actions which could reasonably be expected to interfere with or
prevent continued compliance with any Environmental and Safety
Requirements, give rise to any legal obligation or liability, or
otherwise form the material basis of any claim, action, suit,
proceeding, hearing or investigation against or involving the
Property, under any Environmental and Safety Requirements.
For purposes of this Agreement, "Environmental and Safety
Requirements" means all applicable federal, state and local laws,
rules, regulations, ordinances and requirements relating to
public health and safety, worker health and safety, and pollution
and protection of the environment, as the same may be amended
from time to time; and "Hazardous Material" means, without
limitation, (i) hazardous materials, hazardous substances,
extremely hazardous substances and hazardous wastes, as those
terms are defined by the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Sec. 9601 et seq.
("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C.
Sec. 6901 et seq. ("RCRA"), and any other Environmental and
Safety Requirements; (ii) petroleum, including, without
limitation, crude oil or any fraction thereof which is liquid
at standard conditions of temperature and pressure (60 degrees
Fahrenheit and 14.7 pounds per square inch absolute); (iii) any
radioactive material, including, without limitation, any source,
special nuclear, or by-product material as defined in 42 U.S.C.
Sec. 2011 et seq.; and (iv) asbestos.
Seller's representations and warranties set forth in this
Section 4(j) shall survive the termination of this Agreement
until such time as all appropriate Certificates of Occupancy have
been issued in connection with the clubhouse at the Project.
5. REPRESENTATIONS OF PURCHASER. Purchaser represents
and warrants that the following are true and correct in all
respects on the date hereof and will be true and correct as of
the Closing:
a. CORPORATE ORGANIZATION. Purchaser is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada, and has all necessary
corporate powers to own its properties and to carry on its
business as now owned and operated by it.
6
<PAGE>
b. AUTHORITY. Purchaser's Board of Directors has
duly authorized and approved the execution of this Agreement and
the acquisition by Purchaser of the Assets as contemplated
herein, as required under Nevada law and Purchaser's Articles of
Incorporation and Bylaws.
c. QUALIFICATION. Purchaser is duly qualified
to do business in the State of Nevada.
6. CONDITIONS PRECEDENT. In addition to the other
terms and provisions set forth in this Agreement, this Agreement,
and the rights, entitlements and obligations of the parties
hereto, is subject to, and is expressly conditioned upon, the
occurrence, on or before the Closing, of the following:
a. PARTNER CONSENTS. The receipt by Seller of
the consent of all of the partners (both general and limited) of
Seller, to the sale of the Assets, in accordance with Section
9.3(e) of the Partnership Agreement.
b. MECHANICS' LIEN. The release or bonding of
that certain mechanics' lien recorded by Kajima on April 10,
1997, as amended on April 11, 1997 in the Official Records of
Clark County, Nevada, with respect to the Property.
c. ADDITIONAL CONSENTS. The receipt by Seller
of all necessary consents and/or approvals required in connection
with the sale and transfer of the Assets as contemplated by this
Agreement.
d. TERMINATION OF MANAGEMENT AGREEMENT. The
termination by Seller of the Mulligan Agreement.
e. REPRESENTATIONS AND WARRANTIES TRUE AT
CLOSING. All representations and warranties of Seller shall be
true on the Closing Date, as though such representations and
warranties were made on such date.
f. RISK OF LOSS. Risk of loss with respect to
any and all of the Assets prior to the Closing shall be upon
Purchaser; PROVIDED HOWEVER, that in the event of a casualty as
to the Assets (or any of them), Purchaser shall be entitled to
any available insurance proceeds with respect thereto from any
applicable policy of insurance covering the same wherein the
Seller is the insured.
g. KAJIMA PARTNERSHIP INTERESTS. Seller's shall
have obtained all of the limited partnership interests held by
Kajima in Seller.
h. ORIX LOAN. Seller shall have obtained from
Orix all necessary documents to allow Purchaser to assume the
Orix Loan evidenced by the Orix Agreement.
i. SURVEY OF GOLF COURSE. An ALTA survey of the
Golf Course, acceptable as to encroachments by Purchaser, if any.
7
<PAGE>
7. THE CLOSING. The date on which the purchase of the
Assets as contemplated by this Agreement shall be consummated is
referred to herein as the "Closing Date," and the transaction by
which Purchaser so acquires title to the Assets is referred to as
the "Closing." Except as otherwise provided herein, the Closing
shall occur by the earlier of August 29, 1997 or
two (2) business days after the later of the satisfaction of the
either Kajima contingency set forth in Section 6(g) above or Orix
contingency set forth in Section 6(h) above;, unless extended in
a writing executed by the Purchaser, provided that such extension
or extensions, in the aggregate do not exceed thirty (30)
calendar days or extended because the contingency related to
either (or both) Kajima set forth in Section 6(g) above or Orix
set forth in Section 6(h) above has (have) not been met. The
Closing shall take place at 9:00 a.m. on the Closing Date at the
office of the Escrow Agent.
a. CERTAIN PAYMENT PRIOR TO CLOSING. On June
30, 1997, Purchaser provided Seller with the sum of $2,000,000 of
the Cash Purchase Price (the "Initial Payment").
b. SELLER'S CLOSING ITEMS. Not less than one
(1) business day prior to the Closing Date, Seller shall deliver
to Escrow Agent the following: (i) a Grant, Bargain and Sale
Deed (the "Deed") conveying title to the Property to Purchaser
subject only to the Permitted Exceptions; (ii) real estate
transfer declarations for state, county and local authorities;
(iii) a commitment for ALTA coverage title insurance in the
amount of $21,250,000.00 and issued through Escrow Agent,
covering the Property and showing title in Seller subject only to
the Permitted Exceptions (iv) appropriate assignments of the
Related Assets (which may include, without limitation, bills of
sale, assignments of the Silver Canyon Rights, the Board
Positions, the Marks and the Contracts, and delivery of the
original Permits or copies thereof, the Warranties, the Records
and the Know-how) all as set forth on Schedule 7 b. attached
hereto and made a part hereof as if fully set forth; (v)
personnel records of Seller's employees who shall be terminated
by Seller prior to the Closing and who will become employees of
Purchaser; and, (vi) such other customary documents as may
reasonably be required by Purchaser in order to consummate the
transactions contemplated by this Agreement. It is agreed that
the real property transfer tax with respect to the Property shall
be based upon the agreed-upon net sales price of the Property of
$6,250,000 and the Seller will execute a Clark County, Nevada
Declaration of Value stating same.
c. PURCHASER'S CLOSING ITEMS. Purchaser shall
deliver to the Escrow Agent not less than one (1) business day
prior to the Closing Date the following: (i) cash in an amount
equal to the Cash Purchase Price less the amount of the Initial
Payment; (ii) the original Note, which Note, at the Closing,
shall each be marked "canceled;" (iii) the original promissory
note evidencing Seller's obligations with respect to the Initial
Payment, which note, at the Closing, shall be marked "canceled;"
(iv) all Closing escrow costs; (v) an express assumption by
Purchaser of Seller's rights, obligations and liabilities under
both the CC&Rs and Golf Course Declaration; (vi) an express
assumption by Purchaser of Seller's rights, obligations and
liabilities under the Orix Agreement and, in the event Orix
refuses to provide Seller with a release of Seller's obligations
under the Orix Agreement at such time, an indemnity from
Purchaser in favor of Seller with respect thereto; (vii) payment
of the closing costs (escrow fees, transfer taxes, title costs,
filing fees); and (viii) such other customary documents as may
reasonably be required by Seller in order to consummate the
transactions contemplated by this Agreement.
8
<PAGE>
8. FURTHER ASSURANCES. Seller hereby agrees that it
shall execute and deliver all deeds, bills of sale, conveyances,
and other instruments as may be necessary or appropriate under
the circumstances in order to vest title in Purchaser to the
Assets. Seller shall cooperate with Purchaser in the preparation
and filing of documents of transfer and/or assignment of
licenses, permits and applications in connection with the
Project.
9. PROPERTY-LINE ADJUSTMENT DISCLOSURE. Purchaser is
aware that as of the Closing, there are on-going adjustments with
respect to the property line between the Property and certain
residential lots adjacent thereto. Purchaser hereby agrees to
indemnify and hold Seller harmless in the event any such
adjustments cause the Property to differ from the legal
description thereof set forth on Exhibit "A" hereto.
10. MISCELLANEOUS.
a. GOVERNING LAW. This Agreement shall be
construed by, and construed in accordance with, the laws of the
State of Nevada.
b. BINDING EFFECT. This Agreement shall be
binding upon, and shall inure to the benefit of the parties and
their respective heirs, successors and assigns.
c. COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
d. NOTICES. All notices, requests, demands, and
other communications hereunder shall be in writing, and be deemed
to have been duly given if delivered or mailed, first class
postage prepaid, to the address of the appropriate party as shown
on the signature pages hereof, or such other address as any party
may designate from time to time.
e. NON-WAIVER. No delay or failure by either
party to exercise any right hereunder, and no partial or single
exercise of any such right, shall constitute a waiver of that or
any other right, unless otherwise expressly provided herein.
f. HEADINGS. Headings in this Agreement are for
reference and convenience only and shall not be used to interpret
or construe the provisions of this Agreement.
g. TIME OF ESSENCE. Time is of the essence with
respect to every provision of this Agreement.
h. ENTIRE AGREEMENT; MODIFICATION. This
Agreement supersedes all prior agreements of the parties hereto
with respect to the subject matter hereof, including, without
limitation, that certain Letter of Intent dated March 4, 1997,
and constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof. This Agreement may
not be amended or modified except by an instrument duly executed
by the parties hereto.
9
<PAGE>
i. BROKER'S FEES. Neither Purchaser nor seller
has engaged any party, including a licensed real-estate broker to
represent the Purchaser in its purchase or the Seller in its sale
as contemplated under this Agreement and each party represents
and warrants that no other advisor, broker or finder has been
engaged or retained by it for the purpose of assisting in or
arranging the purchase and sale contemplated under this Agreement
(or any part thereof) or is entitled to a fee in connection
therewith and each party, based on the representations and
warranties contained in this item (i) agrees to indemnify defend
and hold harmless the other party for any such claims, which
indemnity shall survive the Closing under this Agreement.
IN WITNESS WHEREOF, Purchaser and Seller have signed ten
(10) originals of this Agreement on the day and year first set
forth above.
"PURCHASER" "SELLER"
Rio Development Company, Inc., a Seven Hills Golf Limited Partnership,
Nevada corporation a Nevada limited partnership
By: /s/ James A. Barrett, Jr. By: Three Putt, Inc., a
Nevada corporation, its
James A. Barrett, Jr. Its, President general partner
By: /s/ Terry G. Taylor
Terry G. Taylor, Its Secretary:
10
<PAGE>
EXHIBIT A
Legal Description of the Property
Parcel One (1):
Golf Course Parcels Three (3), Four (4) and Five (5) of Lot AA of
Seven Hills Formerly Silver Canyon, as Shown by Map Thereof on
File in Book 73 of Plats, Page 95, in the Office of the County
Recorder of Clark County, Nevada.
Parcel Two (2):
Golf Course Parcels One (1), Two (2), Six (6) and Seven (7) of
Lot BB of Seven Hills Formerly Silver Canyon, as Shown by Map
Thereof of File in Book 73 of Plats, Page 96, in the Office of
the County Recorder of Clark County, Nevada.
Parcel Three (3):
An easement for ingress and egress over, upon and across the
private streets and walkways and use of the common area
facilities for all owners, families and guests as described in
the Master Declaration of Covenants, Conditions, Restrictions and
Reservation of Easements for Seven Hills, recorded October 12,
1995, in Book 951012 as Document No. 00849 of Official Records.
11
<PAGE>
EXHIBIT B
List of Contracts
1. Agreement for Use of Reclaimed Water dated October 28,
1992, by and between City of Henderson, Nevada and Cosmo World
of Nevada, Inc.
2. Sewer Access and Maintenance Agreement dated June 13,
1995, by and between City of Henderson and Silver Canyon
Partnership, d.b.a. Seven Hills.
3. Water Service Contract dated February 6, 1996 by and
between Silver Canyon Partnership and City of Henderson.
4. Effluent Reuse Management Plan, dated February 10,
1995, as included in the Reclaimed Water Management Plan
prepared for Seven Hills and approved by letter dated March 31,
1995 from the Nevada Department of Conservation and Natural
Resources Division of Environmental Protection.
5. Stormwater General Discharge Permit No.
GNV0022241-30533 Seven Hills.
6. Declaration of Easements, Covenants, and Restrictions
(Golf Course Declaration) recorded July 19, 1996 in Book 960719
as Document No. 00118 in the official records of the Recorder
of Clark County, Nevada.
7. Agreement dated _________________ by an between First
Security Leasing Company ("First Security") and SHGLP.
8. Agreement dated _________________ by an between First
Security Leasing Company ("First Security") and SHGLP.
9. Agreement dated _________________ by an between First
Security Leasing Company ("First Security") and SHGLP.
10. Construction Loan Agreement dated July 2, 1996 among
SHGLP and Orix USA Corporation, a Delaware corporation and the
Loan Documents (as such term is defined in the Orix Agreement).
11. The amended contract to complete the golf course at the
Project among SHGLP and Marnell Corrao Associates, Inc. commonly
known as MCA Project No. 838-97.
12. The contract among SHGLP and MCA, commonly known as MCA
Project No. 848-97.
13. The contract among SHGLP and MCA to construct the club
house at the Project, commonly known as MCA Project No. 878-97.
12
<PAGE>
14. Agreement dated _________________ among SHGLP and Las
Vegas Fertilizer for grow-in materials at the Project.
15. Purchase, Sale and Development Agreement dated May 28,
1996 among Silver Canyon Partnership, a Nevada general
partnership, and Seven Hills Golf Limited Partnership, a Nevada
limited partnerships ("SHGLP").
16. Agreement dated ________________ among First Security
Bank and SHGLP.
TO BE SUBSTITUTED AT CLOSING WITH A REPLACEMENT EXHIBIT,
COMPLETED AS TO ALL BLANK ENTRIES
13
<PAGE>
SCHEDULE 1.b.
PERSONAL PROPERTY
TO BE SUBSTITUTED AT CLOSING WITH THE FULL LISTING
14
<PAGE>
SCHEDULE 7 (b)
LISTING OF
APPROPRIATE ASSIGNMENTS OF THE RELATED ASSETS
TO BE REPLACED AT CLOSING WITH A COMPLETED SCHEDULE LISTING ALL
ASSIGNMENTS TO BE EXECUTED AT CLOSING, INCLUDING, BUT NOT LIMITED
TO THOSE RELATED TO ITEMS 1 - 16 SET FORTH ON EXHIBIT "B"
EXHIBIT 11.01
47
<PAGE>
EXHIBIT 11.01
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Earnings:
Net income $ 6,629,850 $ 5,475,276 $ 4,212,527 $ 10,801,110
Shares:
Weighted average number of common shares
and equivalents outstanding 21,283,776 21,237,707 21,238,207 21,202,588
Stock options 236,572 434,062 229,881 361,978
Weighted average number of common shares
outstanding, as adjusted 21,520,348 21,671,769 21,468,088 21,564,566
Earnings per common share:
Net income per common share $ 0.31 $ 0.25 $ 0.20 $ 0.50
</TABLE>
48
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 14,371
<SECURITIES> 0
<RECEIVABLES> 24,185
<ALLOWANCES> 6,520
<INVENTORY> 4,469
<CURRENT-ASSETS> 46,438
<PP&E> 550,536
<DEPRECIATION> 71,964
<TOTAL-ASSETS> 547,494
<CURRENT-LIABILITIES> 46,599
<BONDS> 300,712
0
0
<COMMON> 213
<OTHER-SE> 187,068
<TOTAL-LIABILITY-AND-EQUITY> 547,494
<SALES> 167,118
<TOTAL-REVENUES> 167,118
<CGS> 0
<TOTAL-COSTS> 142,608
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,770
<INTEREST-EXPENSE> 12,097
<INCOME-PRETAX> 6,642
<INCOME-TAX> 2,430
<INCOME-CONTINUING> 4,213
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,213
<EPS-PRIMARY> .20
<EPS-DILUTED> 0
</TABLE>
