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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: September 30, 1998
-----------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from: to
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Commission file number 1-11569
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RIO HOTEL & CASINO, INC.
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(Exact name of registrant as specified in its charter)
Nevada 95-3671082
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3700 West Flamingo Road, Las Vegas, Nevada 89103
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(Address of principal executive offices) (Zip Code)
(702) 252-7733
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(Registrant's telephone number, including area code)
Not Applicable
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(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
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Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
24,801,837 shares of Common Stock, $0.01 par value as of
November 9, 1998
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1
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FORM 10-Q
TABLE OF CONTENTS
PAGE
NUMBER
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
CONSOLIDATED BALANCE SHEETS 3
CONSOLIDATED STATEMENTS OF INCOME 4
CONSOLIDATED STATEMENTS OF CASH FLOWS 5
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures about Market
Risk 15
PART II. OTHER INFORMATION 16
SIGNATURE 18
EXHIBIT INDEX 19
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1998 1997
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(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 21,268,560 $ 22,241,976
Accounts receivable, net 37,748,346 28,177,480
Inventories 13,751,877 7,797,343
Prepaid expenses and other current assets 8,418,299 8,277,440
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Total current assets 81,187,082 66,494,239
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Property and equipment:
Land and improvements 101,428,219 85,713,088
Building and improvements 436,802,701 418,618,050
Equipment, furniture and improvements 94,935,270 82,792,652
Less: accumulated depreciation (101,171,701) (82,162,055)
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531,994,489 504,961,735
Construction in progress 105,342,242 5,354,757
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Net property and equipment 637,336,731 510,316,492
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Other assets, net 24,649,363 11,344,116
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$ 743,173,176 $ 588,154,847
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt 2,621,350 2,434,483
Accounts payable 10,217,436 11,440,103
Accrued expenses 26,973,012 23,554,336
Accounts payable - related party 17,362,984 2,808,488
Accrued interest 8,974,492 7,412,999
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Total current liabilities 66,149,274 47,650,409
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Non-current liabilities:
Long-term debt, less current maturities 367,747,286 250,522,894
Deferred income taxes 17,931,762 19,806,419
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Total non-current liabilities 385,679,048 270,329,313
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Total liabilities 451,828,322 317,979,722
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Stockholders' equity:
Common stock, $0.01 par value;
100,000,000 shares authorized;
24,800,941 and 24,643,141 shares
issued and outstanding 248,010 246,432
Additional paid-in capital 182,588,542 179,912,196
Retained earnings 108,508,302 90,016,497
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Total stockholders' equity 291,344,854 270,175,125
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$ 743,173,176 $ 588,154,847
============== ==============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
3
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<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
--------------------------------------- ---------------------------------------
September 30, 1998 September 30, 1997 September 30, 1998 September 30, 1997
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Casino $ 54,902,000 $ 57,155,106 $ 148,986,698 $ 141,215,071
Room 19,829,676 17,667,809 59,936,411 50,398,228
Food and beverage 33,432,655 30,888,182 99,587,841 83,048,512
Other 8,314,524 7,006,583 21,825,801 18,694,761
Casino promotional allowances (9,428,215) (9,142,737) (28,403,850) (22,663,473)
--------------- --------------- --------------- ---------------
107,050,640 103,574,943 301,932,901 270,693,099
--------------- --------------- --------------- ---------------
Expenses:
Casino 31,812,915 30,684,216 83,796,310 74,432,544
Room 6,488,707 5,347,864 18,870,924 14,996,447
Food and beverage 23,848,735 24,111,801 71,532,501 64,025,064
Other 6,346,615 4,154,300 13,829,848 11,253,083
Selling, general and administrative 12,692,845 13,529,920 42,653,806 38,062,029
Depreciation and amortization 7,083,123 6,440,433 20,655,024 18,677,833
Preopening expense - - - 11,200,000
--------------- --------------- --------------- ---------------
88,272,940 84,268,534 251,338,413 232,647,000
--------------- --------------- --------------- ---------------
Operating profit 18,777,700 19,306,409 50,594,488 38,046,099
Interest expense 6,145,319 7,101,757 18,227,681 19,199,170
Merger costs 3,246,138 - 3,246,138 -
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9,391,457 7,101,757 21,473,819 19,199,170
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Income before income tax 9,386,243 12,204,652 29,120,669 18,846,929
Income tax provision (3,425,799) (4,449,386) (10,628,864) (6,879,136)
--------------- --------------- --------------- ---------------
Net income $ 5,960,444 $ 7,755,266 $ 18,491,805 $ 11,967,793
=============== =============== =============== ===============
Earnings per common share:
Basic $ 0.24 $ 0.36 $ 0.75 $ 0.56
=============== =============== =============== ===============
Diluted $ 0.24 $ 0.35 $ 0.73 $ 0.55
=============== =============== =============== ===============
Weighted average number of common shares
outstanding:
Basic 24,794,093 21,378,821 24,678,416 21,305,604
Stock Options 292,154 606,103 752,086 408,521
--------------- --------------- --------------- ---------------
Diluted 25,086,247 21,984,924 25,430,502 21,714,125
=============== =============== =============== ===============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
4
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<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
---------------------------------------
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 18,491,805 $ 11,967,793
Adjustments to reconcile net income to net
cash provided by operating activities:
Compensation expense recognized from
stock option grant 86,160 86,560
Depreciation and amortization 20,655,024 18,677,833
Provision for uncollectible accounts (5,837,501) 11,603,861
Deferred income taxes 1,572,534 1,289,832
(Increase) decrease in assets:
Accounts receivable (3,733,365) (25,466,219)
Inventories (5,954,534) (868,591)
Prepaid expenses and other current assets (3,908,571) (5,620,226)
Other, net 1,159,840 5,285,425
Increase (decrease) in liabilities:
Accounts payable (9,125,929) 1,453,236
Accrued expenses 12,100,552 12,803,614
Accrued interest 1,561,493 1,320,696
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Net cash provided by operating activities 27,067,508 32,533,814
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Cash flows from investing activities:
Purchase of land and improvements (15,642,631) (6,062,970)
Purchase of equipment, furniture and
improvements (116,296,435) (54,506,586)
Funds used for investment in airline (15,000,181) -
Funds used for purchase of golf course - (16,386,159)
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Net cash used in investing activities (146,939,247) (76,955,715)
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Cash flows from financing activities:
Proceeds from borrowings 237,200,000 82,200,000
Net proceeds from issuance of senior
subordinated notes - 121,562,500
Net proceeds from common stock issuance 1,813,150 1,292,963
Payments on notes and loans payable (120,114,827) (157,493,837)
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Net cash provided by financing activities 118,898,323 47,561,626
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Net increase (decrease) in cash and cash equivalents (973,416) 3,139,725
Cash and cash equivalents, beginning of period 22,241,976 10,623,094
---------------- ----------------
Cash and cash equivalents, end of period $ 21,268,560 $ 13,762,819
=============== ===============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
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)
Nine Months Ended
September 30,
-------------------------------------
1998 1997
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<S> <C> <C>
Cash payments made for interest, net of
capitalized interest $ 13,537,653 $ 17,596,459
=============== ===============
Cash payments made for income taxes $ 7,000,000 $ 2,500,000
=============== ===============
Non-cash financing and investing activities:
Purchase of property and equipment financed
through payables $ 17,435,484 $ 2,121,363
=============== ===============
Debt assumed in the purchase of land and golf course $ - $ 4,483,448
=============== ===============
Tax benefit arising from exercise of stock
options under the Company's Non-Statutory
and Long Term Incentive Stock Option Plans $ 778,614 $ 921,399
=============== ===============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
6
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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., Rio Properties'
wholly owned subsidiaries, HLG, Inc. and Cinderlane, Inc.,
and Cinderlane Inc.'s wholly owned subsidiary, Twain Avenue,
Inc. (collectively the "Company").
All significant intercompany balances and transactions have
been eliminated in consolidation.
The consolidated balance sheet as of September 30, 1998 and
the related consolidated statements of income for the three
and nine month periods ended September 30, 1998 and 1997 and
consolidated statements of cash flows for the nine month
periods ended September 30, 1998 and 1997 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
on Form 10-K for the year ended December 31, 1997.
NOTE 2 - INVESTMENT
On February 24, 1998, the Company's credit line with a
consortium of banks was amended and restated, increasing the
amount available from $190.0 million to $275.0 million.
Loan costs will be reduced pursuant to the amended and
restated terms of the new agreement, and a mechanism has
been provided whereby the amount available under the credit
line may be increased by an additional $25.0 million.
In July 1998, the Company made a $15.0 million investment in
New Airline, Inc. ("NAI"), a development stage airline to be
based in Las Vegas, Nevada. The Company's investment
represents approximately 19% of NAI's voting common stock.
In addition, the Company will have a strategic marketing
agreement with NAI. The Company has been advised by NAI
that NAI will commence operations in early 1999, that it has
secured up to five gate locations at McCarran International
Airport in Las Vegas, and that the Las Vegas Convention and
Visitors Authority will provide advertising and marketing
support for NAI.
NOTE 3 - EARNINGS PER COMMON SHARE
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 - "Earnings Per
Share" ("SFAS 128") which became effective for periods
ending after December 15, 1997 and replaces historically
reported earnings per share with "basic," or undiluted,
earnings per share and "diluted" earnings per share. Basic
earnings per share are computed by dividing net income by
the weighted average number of shares outstanding during the
period, while diluted earnings per share reflect the
additional dilution for all potentially dilutive securities,
such as stock options. Earlier application of SFAS 128 was
not permitted. Earnings
7
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per share for the three and nine month periods ended
September 30, 1998 and 1997 in the accompanying Consolidated
Statements of Income have been computed in accordance with
SFAS 128.
NOTE 4 - PURCHASE COMMITMENT
On June 1, 1998, the Company entered into an Aircraft
Purchase Agreement (the "Agreement") to purchase an aircraft
for $27.0 million, with $1.0 million to be deposited within
90 days of the date of the Agreement and the balance due
upon delivery of the aircraft to the Company which shall
occur within 60 days of January 31, 2000. The aircraft will
be used for general corporate purposes, including
transportation of certain international and domestic
customers of the Rio. The Company is purchasing the
aircraft from a company controlled by the Company's Chairman
of the Board and Chief Executive Officer.
NOTE 5 - PROPOSED MERGER
On August 9, 1998, the Company entered into an Agreement and
Plan of Merger (the "Merger Agreement") with Harrah's
Entertainment, Inc., a Delaware corporation ("Harrah's"),
and HEI Acquisition Corp. III, a Nevada corporation
("MergerSub"), providing for the merger of MergerSub with
and into the Company (the "Merger"), with the Company to be
the surviving corporation. If the Merger is consummated,
each share of common stock, par value $0.01 per share, of
the Company issued and outstanding immediately prior to the
Merger would be converted into the right to receive one
share of the common stock, par value $0.10 per share, of
Harrah's. The Merger is subject to the approval of the
stockholders of the Company and Harrah's, the receipt of all
necessary gaming, regulatory and other approvals, and the
satisfaction or waiver of certain other conditions
precedent.
A special meeting of stockholders has been scheduled for
November 18, 1998 to vote upon the Merger Agreement. Copies
of the Joint Proxy Statement were mailed to the Company's
stockholders of record as of October 5, 1998. Subject to
stockholder, regulatory and other approvals, the Merger
could be completed by the end of November 1998. No
assurance can be given that the Merger will be approved by
the stockholders of the Company and Harrah's, or that all
conditions precedent necessary to complete the Merger will
be satisfied or waived.
8
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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 the 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, increased competition in existing
markets or the opening of new gaming jurisdictions (including
expanded casino gaming activities on Native American lands in
California as a result of Proposition 5), dependence on existing
management, gaming regulations (including actions affecting
licensing), leverage and debt service (including sensitivity to
fluctuations in interest rates), issues related to the Year 2000,
domestic or global economic conditions and changes in federal or
state tax laws or the administration of such laws.
PROPOSED MERGER WITH HARRAH'S ENTERTAINMENT, INC.
On August 9, 1998, the Company entered into the Merger
Agreement with Harrah's and MergerSub providing for the merger of
MergerSub with and into the Company, with the Company to be the
surviving corporation. If the Merger is consummated, each share
of common stock, par value $0.01 per share, of the Company issued
and outstanding immediately prior to the Merger would be
converted into the right to receive one share of the common
stock, par value $0.10 per share, of Harrah's. The Merger is
subject to the approval of the stockholders of the Company and
Harrah's, the receipt of all necessary gaming, regulatory and
other approvals, and the satisfaction or waiver of certain other
conditions precedent.
A special meeting of stockholders has been scheduled for
November 18, 1998 to vote upon the Merger Agreement. Copies of
the Joint Proxy Statement were mailed to the Company's
stockholders of record as of October 5, 1998. Subject to
stockholder, regulatory and other approvals, the Merger could be
completed by the end of November 1998. No assurances can be
given that the Merger will be approved by the stockholders of the
Company and Harrah's, or that all conditions precedent necessary
to complete the Merger will be satisfied or waived.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
OVERVIEW
The Company, through a wholly owned subsidiary, owns and
operates an all-suite hotel-casino, the Rio Suite Hotel & Casino
(the "Rio"), in Las Vegas, Nevada. The Rio features over 2,500
suites, including over 1,500 suites contained in three connected
21-story hotel towers (the "Ipanema Towers") and over 1,000
suites in a new 41-story curved tower (the "Masquerade Tower").
On February 7, 1997, the Rio celebrated the grand opening of the
public areas of its Phase V Expansion project, the Masquerade
Village. With the Masquerade Village and Tower, the Rio features
120,000 square feet of gaming space; 15 restaurants, a 737-seat
entertainment complex; a 32,000 square foot retail area; and a
108,000 square foot outdoor entertainment area featuring a
landscaped sand beach and three swimming pools.
9
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On September 8, 1997, the Company acquired the Rio Secco
Golf Club in Henderson, Nevada, a suburb of Las Vegas, Nevada.
The golf course, located in the master-planned community of Seven
Hills, is complete and opened for play in October 1997. The
clubhouse was completed during the second quarter of 1998. In
addition to marketing play on the golf course to local and
tourist customers, the Company intends to use the Rio Secco Golf
Club as part of golf packages for its guests. See Part II, Item
5, "Legal Proceedings" for a discussion of litigation involving
the use of the Rio Secco Golf Club. The Rio Secco Golf Club also
features a golf school operated by Butch Harmon, the Butch Harmon
School of Golf.
The Company has assembled approximately 44 acres immediately
adjacent to the Rio (approximately seven of which are subject to
options to purchase), bringing the total acreage at the Rio to
approximately 84 acres. In October 1997, the Company announced a
new master plan (the "New Master Plan") for continued development
of the existing Rio site and the adjacent 44 acre site. The New
Master Plan is expected to be implemented in phases, the first of
which has commenced and includes a state-of-the-art convention
and entertainment center adaptable to meet a variety of
entertainment, meeting, special event and convention needs
(scheduled to be completed by March 1999); a complex of nine
"Palazzo" suites (scheduled to be completed by December 1998); a
restaurant serving authentic Chinese food (which opened April
1998); a valet parking structure (which opened May 1998); a
retail shopping area (scheduled to be completed by March 1999);
an expanded outdoor area with an additional swimming pool (which
opened July 1998); additional exhibition space in the Masquerade
Village (which opened November 1998); the creation of a concierge
suite level in the Ipanema and Masquerade Towers (which opened
September 1998); an expansion of the Rio's spa (scheduled to be
completed by November 1998); a new road connecting the Rio and
the Las Vegas Strip through an extension of Twain Avenue to
Industrial Road (scheduled to be completed by February 1999); and
additional customer parking (scheduled to be completed by
February 1999).
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
REVENUES
The Company's net revenues increased to $107.1 million in
the third quarter of 1998 from $103.6 million in the same period
in the prior year, an increase of $3.5 million or 3%. Casino
revenues of $54.9 million in the three months ended September 30,
1998 decreased $2.3 million or 4% from the $57.2 million reported
for the same period in the prior year. This decrease is
primarily a result of a lower hold percentage of 17% in table
games for the quarter ended September 30, 1998 as compared to 23%
for the same quarter in the prior year. Table games revenues
were $29.7 million for the three months ended September 30, 1998,
a decrease of $3.9 million or 12% from the $33.6 million reported
for the same period in the prior year. Table games handle was
$170.0 million for the third quarter of 1998, an increase of
$25.0 million or 17% over the $145.0 million reported for the
same period in the prior year. Management attributes the
increase in handle primarily to increased advertising and
promotional efforts, as well as increased emphasis on marketing
to table game customers with higher credit limits and average
wagers. Slot machine revenues of $24.2 million in the third
quarter of 1998 increased $2.5 million or 12% from third quarter
1997 revenues of $21.7 million. Other casino revenues, including
race and sports books, keno and poker, of $1 million in the
quarter ended September 30, 1998 decreased $0.8 million or 45%
from the same quarter in the prior year revenues of $1.8 million.
This decrease is due primarily to losses in the sports book of
$0.1 million in the current year as compared to revenue of $0.4
million in the prior year and due to the closure of the poker
room in May 1998.
Room revenues of $19.8 million increased in the three months
ended September 30, 1998 by $2.1 million or 12% from $17.7
million in the same period for the prior year. This increase is
due primarily to a
10
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higher occupancy percentage in the current quarter of 92.7% as
compared to 89.0% in the prior year as well as an increase in the
average suite rate of $94.84 in the current quarter as compared
to $88.72 in the third quarter of 1997.
Food and beverage revenues increased $2.5 million or 8% to
$33.4 million in the three months ended September 30, 1998 from
$30.9 million in the same three month period in the prior year.
Management believes that this increase is due primarily to
increased advertising and promotional programs as well as food
and beverage prices that were generally higher in the current
year's third quarter than in the prior year's third quarter.
Other revenues increased $1.3 million or 19% to $8.3 million
in the current year's third quarter from $7.0 million in the
prior year's third quarter. Retail sales decreased $1.4 million
due to leasing the gift shop and most other retail shops,
previously operated by the Company, to a third party. This
decrease was offset by an increase in shop rent of $0.5 million,
showroom admissions increase of $0.7 million, golf course
revenues of $0.6 million and recognition of outstanding chip
income of $0.6 million.
OPERATING MARGINS
Operating profit as a percentage of net revenue was 18%
before executive severance for the quarter ended September 30,
1998 and 19% for the same quarter in the prior year. The casino
operating margin was $23.1 million or 42% for the current year's
quarter as compared to $26.5 million or 46% for the prior year's
third quarter. Casino expenses were $31.8 million for the three
months ended September 30, 1998 compared to $30.7 million for the
three months ended September 30, 1997. Increased payroll and
other volume related expenses, including casino marketing and
promotional costs, were the primary reasons for the increase in
casino expense when comparing the two periods. For the three
months ended September 30, 1998 and 1997, hotel operating profits
were 67% and 70%, respectively; food and beverage operating
profits were 29% and 22%, respectively; and other operating
department profits were 24% and 41%, respectively. Management
believes that the food and beverage operating margin was
positively impacted by an increase in food and beverage prices,
volume related purchasing and administrative efficiencies, and
the profitability of the VooDoo Cafe and Lounge which opened in
May 1997. The decrease in other operating department profits is
due primarily to losses incurred in operating the golf course,
offset somewhat by the elimination of costs associated with the
operations of most retail shops being leased to a third party.
Selling, general and administrative expenses, expressed as a
percentage of gross revenues, were 11% and 12%, respectively, in
the quarters ended September 30, 1998 and 1997. This decrease is
due primarily to reversal of 1998 bonus accruals in the third
quarter of the current year as bonus payments are discretionary
and not expected in 1998.
PROMOTIONAL ALLOWANCES
Promotional allowances, which represent the retail value of
rooms, food, beverage and other services provided to customers
without charge, were 8% for each of the quarters ended September
30, 1998 and 1997.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense increased by 10% to
$7.1 million in the quarter ended September 30, 1998 from $6.4
million in the same quarter of the prior year.
11
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OTHER INCOME AND EXPENSE
Interest expense decreased $1.0 million to $6.1 million in
the third quarter of 1998 from $7.1 million in the third quarter
of 1997. Interest expense was reduced by $2.3 million and $.8
million for the three months ended September 30, 1998 and 1997,
respectively, due to capitalization of interest on construction
costs of the upper floors of the Masquerade Tower, which opened
in May 1997 and on land purchases, and in 1998, on the New Master
Plan, the initial phase of which is referred to as the Phase VI
Expansion, that commenced in October 1997.
NET INCOME
Net income for the third quarter of 1998 was $6.0 million or
$0.24 per common share on a diluted basis, compared to $7.8
million or $0.35 per common share on a diluted basis in the third
quarter of 1997. In the current year's quarter, the Company
incurred $2.2 million executive severance expense and $1.1
million in merger costs (total of $2.1 million net of income
tax). Adjusted on a pro forma basis for these expenses, net
income for the quarter ended September 30, 1998 would have been
$8.0 million, or $0.32 per common share on a diluted basis.
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
REVENUES
The Company's net revenues increased $31.2 million or 12% to
$301.9 million in the first nine months of 1998 from $270.7
million in the first nine months of 1997. Casino revenues
increased $7.8 million or 6% to $149.0 million in the nine months
ended September 30, 1998 compared to $141.2 million in the nine
months ended September 30, 1997. Table games revenues of $72.4
million in the current year decreased $1.8 million or 2% from
$74.1 million in the prior year period. Although the Company
experienced a $124.0 million or 32% increase in table games
handle to $505.9 million in the first nine months of 1998 from
$381.9 million in the first nine months of 1997, table games hold
percentages were 14% and 19%, respectively. Increased
advertising and promotional efforts, 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 average wagers are
considered to be the primary contributors to the increased table
game volume. Slot machine revenues were $71.6 million in the
nine months ended September 30, 1998 as compared to $62.2 million
in the nine months ended September 30, 1997, an increase of $9.4
million or 15%. Other casino revenues, including race and sports
books, keno and poker increased $0.1 million or 3% to $5 million
in the first nine months of 1998 when compared to $4.9 million
for the same period in the prior year. The increase in customer
traffic associated with the Masquerade Village and Tower
expansion, together with increased advertising and promotional
efforts are considered to be the primary reasons for increases in
slot machine and other casino revenues, offset somewhat by
closure of the poker room in May 1998.
Room revenues of $59.9 million in the nine months ended
September 30, 1998 reflect an increase of $9.5 million or 19%
over revenues of $50.4 million in the nine months ended September
30, 1997. This increase is due to an increase of 40,920
available suite nights in the nine month period ended September
30, 1998 as compared to the same period in the prior year due to
opening of the Masquerade Tower in February 1997, an increase in
the occupancy percentage from 90% for the nine months ended
September 30, 1997 to 94% for the nine months ended September 30,
1998, and an increase in the average suite rate in the current
year of $95 compared to $89 in the prior year.
12
<PAGE>
Food and beverage revenues increased $16.5 million or 20% to
$99.6 million in the nine months ended September 30, 1998 from
$83.0 million in the nine months ended September 30, 1997.
Management believes that full nine months operations of the five
restaurants and bars in the Masquerade Village in the current
year, the increase of 64,757 suites occupied, increased
advertising and promotional programs and a general increase in
food and beverage prices were the primary reasons for the
increase.
Other revenues of $21.8 million in the first nine months of
1998 increased by $3.1 million or 17% over the first nine months
of 1997 revenues of $18.7 million. A decrease of $4.2 million in
retail sales, which resulted from leasing the gift shop and most
other retail shops that were previously operated by the Company
to a third party, was offset by increases in showroom admissions
of $2.6 million, shop rental revenue increase of $1.6 million,
telephone and salon revenue increases totaling $0.7 million, and
golf course revenues of $2.1 million which did not exist in the
prior year.
OPERATING MARGINS
Operating profit as a percentage of net revenue was 17%
before executive severance for the nine months ended September
30, 1998 and 18% before preopening expense for the first nine
months of the prior year. The casino operating margin was $65.2
million or 44% for the nine months ended September 30, 1998
compared to $66.8 million or 47% for the same period in the prior
year. Casino expenses were $83.8 million for the first nine
months of 1998 after a $4.6 million decrease in the provision for
doubtful accounts. Casino expenses in the first nine months of
the prior year were $74.4 million. Increased payroll and other
volume related expenses together with increased casino marketing
and promotional costs were the primary reasons for the increase
in casino expense when comparing the two periods. For the nine
months ended September 30, 1998 and 1997, hotel operating profits
were 69% and 70%, respectively; food and beverage operating
profits were 28% and 23%, respectively; and other operating
department profits were 37% and 40%, respectively. Management
believes that the food and beverage operating margin was
positively impacted by an increase in food and beverage prices,
volume related purchasing and administrative efficiencies, and
the profitability of the VooDoo Cafe and Lounge which opened in
May 1997 and is located on the 40th and 41st floors of the
Masquerade Tower. The decrease in the operating profit margin
for other departments is primarily due to losses incurred in
operating the golf course, offset somewhat by the elimination of
costs associated with the operations of most retail shops being
leased to a third party. Selling, general and administrative
expenses, expressed as a percentage of gross revenues, were 13%
for each of the nine month periods ended September 30, 1998 and
1997. Increases in payroll, advertising and promotional
expenses, property taxes, casualty insurance and utilities
significantly contributed to the $4.6 million increase, offset
somewhat by reversal of 1998 bonus accruals in the third quarter
of the current year as bonus payments are discretionary and not
expected in 1998.
PROMOTIONAL ALLOWANCES
Promotional allowances, which represent the retail value of
rooms, food, beverage and other services provided to customers
without charge, were 9% and 8% of total revenues for the nine
months ended September 30, 1998 and 1997, respectively.
Management believes that this increase was primarily due to
complimentary rooms, food, beverage and other services being
extended in connection with the volume increase in table games.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased by $2.0 million or
11% to $20.7 million in the nine months ended September 30,
1998 compared to $18.7 million in the nine months ended
September 30,
13
<PAGE>
1997. This increase is primarily attributable to depreciation and
amortization expense associated with the Masquerade Village and
Tower.
OTHER INCOME AND EXPENSE
Interest expense was $18.2 million in the first nine months
of 1998, a decrease of $1.0 million from $19.2 million in the
first nine months of 1997. Interest expense was reduced by $4.5
million and $3.8 million, respectively, for the nine month
periods ended September 30, 1998 and 1997, due primarily to
capitalization of interest related to the Masquerade Village
expansion in 1997 and the Phase VI Expansion in 1998.
NET INCOME
Net income for the first nine months of 1998 was $18.5
million, or $0.73 per common share on a diluted basis, compared
to net income of $12.0 million, or $0.55 per common share on a
diluted basis for the first nine months of 1997. In the current
year, the Company incurred $2.2 million executive severance
expense and $1.1 million in merger costs (total of $2.1 million
net of income tax). Adjusted on a pro forma basis for these
expenses, net income for the nine months ended September 30, 1998
would have been $20.6 million, or $0.81 per common share on a
diluted basis. In the prior year, the Company incurred $11.2
million ($7.1 million net of income tax) associated with the
opening of the Masquerade Village and Tower. Adjusted on a pro
forma basis for these preopening expenses, net income for the
first nine months of 1997 would have been $19.1 million, or $0.88
per common share on a diluted basis.
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 24, 1998, the Company's credit line was amended
and restated, increasing the amount available from $190.0 million
to $275.0 million and reducing the interest rate. The amended
and restated agreement provides a mechanism whereby the amount
available under the credit line may be increased by an additional
$25.0 million.
During the first nine months of 1998, net cash provided by
operating activities was $27.1 million. Net cash used in
investing activities was $146.9 million, including approximately
$98.6 million related to the Phase VI Expansion, $12.5 in land
acquisitions adjacent to the Rio and $15.0 million to invest in a
new airline company.
Based upon cash on hand, cash available through borrowings
under the $275.0 million line of credit, $138.6 million of which
was available as of September 30, 1998, and cash provided by
operations, the Company believes that it has adequate cash
available to fund purchase commitments, the Phase VI Expansion,
ongoing maintenance and upgrades and the Company's operations.
14
<PAGE>
YEAR 2000 ISSUE
BACKGROUND AND RISK FACTORS
The approach of the year 2000 has become a potential problem
for businesses utilizing computers in their operations since many
computer programs are date sensitive and will only recognize the
last two digits of the year, thereby recognizing the year 2000 as
the year 1900 or not at all (the "Year 2000 Issue"). If this
situation occurs, the potential exists for computer system
failures by computer programs, which could disrupt operations.
THE COMPANY'S STATE OF READINESS
The Company has appointed a Year 2000 Project Director who
is currently establishing a task force with members who have
specific expertise in critical areas including Information
Technology, Security, Casino Operations, Hotel Operations,
Facilities Management, and Accounting. The Year 2000 Project
Director will implement the widely accepted five phase
methodology in addressing the Year 2000 Issue as follows:
1. Awareness
2. Assessment
3. Renovation
4. Validation
5. Implementation
In addition, the Year 2000 Project Director has completed a
preliminary inventory of systems that may be sensitive to the
Year 2000 Issue. This preliminary inventory indicates that
substantially all IT-based systems/applications have been
certified as Year 2000 compliant by the applicable software
vendors. All systems and applications are expected to be Year
2000 compliant by mid-1999.
COSTS TO ADDRESS THE YEAR 2000 ISSUE
The Company has not completed its assessment of all costs to
address the Year 2000 Issue; however, it is not expected that
costs incurred will have a material impact on operations.
Maintenance or modification costs associated with the Year 2000
Issue will be expensed as incurred, while the costs of any new
software will be capitalized and amortized over the software's
useful life.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not applicable.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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 of Nevada, against the Company as
a nominal defendant, five of the Company's directors, Marnell
Corrao Associates, Inc. ("Marnell Corrao") and Anthony A. Marnell
II Chartered ("Marnell Chartered"). On July 1, 1998, the Company
executed a settlement agreement (the "Agreement") with Park East,
Inc. The United States District Court for the District of Nevada
took note of the Agreement on July 6, 1998. The Agreement
provides for the settlement and dismissal with prejudice of all
claims asserted by Park East, Inc. in connection with
construction and architectural contracts for Phase V of the
Company's Master Plan expansion project ("Phase V"). The parties
agreed that the terms of the contracts are fair and reasonable to
the Company and its stockholders, and that the Company would
continue to submit construction project contracts to its
independent audit committee. No monetary amounts are being paid
to the plaintiffs in the case; however, the Company will pay up
to $100,000 for plaintiff's attorneys' fees. Notice of the
Agreement and of the Hearing was sent to all record stockholders
and all beneficial owners of Company common stock as of July 6,
1998. The hearing was held on September 15, 1998, and the Court
approved the settlement as fair, reasonable and in the best
interest of the Company and its stockholders. Pursuant to the
settlement, on September 21, 1998, the Court entered its written
Order and Final Judgment, dismissing the action with prejudice.
Several lawsuits were filed on September 18, 1997 and
October 15, 1997 against a number of entities, including the
Company, which have been consolidated by the Clark County,
Nevada, District Court (the "Nevada District Court") under the
designation, "Seven Hills Golf Course Litigation" (Case No.
A377455). These lawsuits arose out of the Company's purchase and
operation of golf course property currently known as the Rio
Secco Golf Club, which the Company acquired as an amenity for the
customers of Rio Suite Hotel & Casino (the "Rio Customers").
Plaintiffs allege, among other things, that the sale of the golf
course was in violation of relevant CC&R's and that other
relevant CC&R's required the Company to open the course to non-
Rio Customers. Plaintiffs are claiming that their interest run
with the land, which the Company denies. On October 28, 1997,
the Company issued a press release opening the golf course for
play to non-Rio Customers and, then, agreed to keep the course
open to non-Rio Customers pending final adjudication of the
lawsuits as to the Company. On March 9, 1998, the Nevada
District Court certified a class consisting of all present and
future record owners of residential lots within the Seven Hills
Master-Planned Community with respect to the issue of right of
access. On April 3, 1998, the Nevada District Court denied
motions for summary judgment filed by various plaintiffs in the
consolidated action on the issue of access to the golf course and
denied a motion for mandatory injunctive relief filed by one of
the builder/plaintiffs related to the issues of fees for play on
the golf course. On October 9, 1998, Judge Mark Gibbons of the
Nevada District Court ruled from the bench that, INTER ALIA, (i)
the Company properly acquired and now owns the golf course
property and (ii) the individuals covered by the CC&R's, I.E.
present and future record owners of residential lots within the
Seven Hills Master-Planned Community, have the right to play at
the golf course subject to the applicable rates/fees and
conditions of the golf course. The Nevada District Court has set
a date of December 21, 1998 for a hearing as to the appropriate
rates/fees and conditions for access to the golf course by
present and future record owners of residential lots within the
Seven Hills Master-Planned Community.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
NONE
16
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
<TABLE>
<CAPTION>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT DESCRIPTION
NUMBER -----------
-------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of
August 9, 1998, by and among Rio Hotel &
Casino, Inc., Harrah's Entertainment, Inc.
and HEI Acquisition Corp. III (incorporated
by reference from Rio's Current Report on
Form 8-K dated August 9, 1998).
2.2 First Amendment to the Agreement and Plan of
Merger, dated as of September 4, 1998, by and
among Rio Hotel & Casino, Inc., Harrah's
Entertainment, Inc. and HEI Acquisition Corp.
III (incorporated by reference from Rio's
Current Report on Form 8-K dated September 4,
1998).
10.1 Letter Agreement dated as of September 24,
1998, by and between the Company and David P.
Hanlon; Release Agreement dated as of October
9, 1998, by and between the Company and David
P. Hanlon; and Consulting Agreement dated as
of October 9, 1998, by and between the
Company and David P. Hanlon.
11.1 Computation of Earnings Per Common Share
27.1 Financial Data Schedule
</TABLE>
(b) REPORT ON FORM 8-K
The Company filed a Form 8-K dated August 9, 1998, under
Item 5, "Other Events," reporting its proposed merger with
Harrah's Entertainment, Inc.
The Company filed a Form 8-K dated September 4, 1998, under
Item 5, "Other Events," reporting that the Company and Harrah's
Entertainment, Inc. amended the merger agreement to eliminate
"pooling of interests" accounting treatment as a condition to the
proposed merger.
17
<PAGE>
SIGNATURE
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)
November 11, 1998 /s/ Ronald J. Radcliffe
- ------------------------------ ------------------------------
(Date) RONALD J. RADCLIFFE
Vice President, Treasurer and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
18
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT DESCRIPTION SEQUENTIAL
NUMBER ----------- PAGE NUMBER
- ------- -----------
<S> <C> <C>
10.1 Letter Agreement dated as of September 24, 1998, 20
by and between the Company and David P. Hanlon;
Release Agreement dated as of October 9, 1998,
by and between the Company and David P. Hanlon;
and Consulting Agreement dated as of October 9,
1998, by and between the Company and David P.
Hanlon.
11.1 Computation of Earnings Per Common Share 36
27.1 Financial Data Schedule 38
</TABLE>
19
<PAGE>
EXHIBIT 10.1
<PAGE>
[RIO HOTEL & CASINO, INC. LETTERHEAD]
September 24, 1998
David P. Hanlon
7174 Durango Street
Las Vegas, Nevada 89120
RE: EMPLOYMENT AGREEMENT
Dear Dave:
This letter (this "Letter") is made with reference to that
certain Employment Agreement dated as of November 25, 1996,
between Rio Hotel & Casino, Inc. (the "Company") and you, as
further amended by that First Amendment to Employment Agreement
dated as of August 31, 1997, by and between the Company and you
(collectively, the Employment Agreement, as amended by the First
Amendment to Employment Agreement, shall hereinafter be referred
to as the "Employment Agreement").
1. In accordance with Paragraph 10(c) of the
Employment Agreement, the Company is hereby terminating your
employment with the Company and the Employment Agreement
effective October 9, 1998 (the "Effective Date").
2. Upon the Effective Date, you will no longer be
employed by the Company or any of its subsidiaries and all
executive officer and/or director positions you hold in the
Company or executive officer and/or director positions held
by you in any of the Company's subsidiaries will be
terminated on the Effective Date.
3. In accordance with Paragraph 10(c)(i) of the
Employment Agreement, you will be entitled to a "Base Salary
Termination Payment" of Two Million and no/100ths Dollars
($2,000,000 U.S.).
4. In accordance with Paragraph 10(c)(iii) of the
Employment Agreement, you will be entitled to receive
reimbursement for expenses incurred, but not yet reimbursed,
which the Company and you presently estimate to be
approximately Thirty Thousand and no/100ths Dollars ($30,000
U.S.). These payments will be made upon completion of a
mutually acceptable accounting which will be completed and
agreed to on or before the Effective Date and will be paid
to you by a separate check on the Effective Date.
<PAGE>
David P. Hanlon
September 24, 1998
Page 2
5. Any deferred compensation pursuant to Paragraph 9
of the Employment Agreement, including any interest accrued
thereon, if any, will be paid to you as provided in the
deferred compensation plan.
6. Any other compensation and benefits to which you
are entitled under applicable plans, programs and agreements
of the Company as described in Paragraph 10(c)(v) of the
Employment Agreement, which are not presently expected to be
material in amount and in no event represent monetary
payments in excess of $50,000, will be paid to you as of the
Effective Date.
7. Under the terms of the Rio Hotel & Casino, Inc.
Long Term Incentive Plan, on October 8, 1996, you were
granted an option to purchase up to 500,000 shares of the
Company's common stock (the "Hanlon Option"). As of
October 8, 1998, you will be fully vested under the Hanlon
Option to purchase 300,000 shares of the Company's common
stock. In consideration for a mutual release of all claims
between the Company and you arising out of the termination
of your employment and of the Employment Agreement, but
preserving all provisions of the Employment Agreement which
survive such termination pursuant to the terms of the
Employment Agreement, the Company's Board of Directors will,
upon the Effective Date, authorize the full vesting of the
option to purchase the remaining 200,000 shares of the
Company's common stock under the Hanlon Option. The mutual
release of claims discussed herein will be in form and
substance mutually agreed upon between you and the Company
on or before the Effective Date.
8. Notwithstanding your termination of employment
from the Company and its subsidiaries and resignation as
officer and director of the Company and its subsidiaries on
or before the Effective Date, there are certain projects for
which you have had primary responsibility in the past and
about which you possess certain important information which
the Company believes will be helpful to the Company to carry
such projects forward. Accordingly, the Company will enter
into a consulting agreement ("Consulting Agreement") with
you on terms and conditions substantially in accordance with
Exhibit A hereto, which will have the following terms:
a. You will be engaged as an independent
consultant to the Company for a period of twelve (12)
months from the Effective Date to consult with the
Company for the projects identified as follows:
(i) Skip Barber School of Racing
(ii) Modular Technology Project
(iii)Butch Harmon School/Rio Secco Golf Club
<PAGE>
David P. Hanlon
September 24, 1998
Page 3
(iv) Peterhoff Museum Exhibit
(collectively, the "Consulting Projects").
b. Pursuant to the Consulting Agreement, you
will be compensated Thirty Five Thousand and no/100ths
Dollars ($35,000 U.S.) per month, payable upon the last
day of each and every month, for twelve calendar
months. The Consulting Agreement will be solely for
consulting purposes within the terms described therein
and will not be deemed for any purposes whatsoever to
be an employment agreement or otherwise contravene or
diminish the termination of your employment or the
Employment Agreement as stated herein.
9. While this notification of termination is
effective immediately for all purposes, the Effective Date
and the payments due to you in accordance with this notice
are subject to the following, all of which must occur on or
before the Effective Date:
a. Resolution of an accounting in form and
substance mutually satisfactory to the Company and you
of amounts to be reimbursed to you pursuant to
Paragraph 10(c)(iii) of the Employment Agreement;
b. Identification by you of material steps to be
completed under the Consulting Projects described in
Paragraph 8 above;
c. Execution of a mutual release as described in
Paragraph 7; and
d. Approval by the Company's Board of Directors
of the material terms and conditions of this Agreement,
which approval is expected to occur on or before the
Effective Date.
In the event the steps outlined in this Paragraph 9 are not
completed by the Effective Date, your employment and the
Employment Agreement will be terminated in accordance with
Paragraph 10(c) thereof, and you will be entitled only to those
payments specified in Paragraph 10(c) of the Employment
Agreement.
<PAGE>
David P. Hanlon
September 24, 1998
Page 4
Please execute and date this Letter to confirm the mutual
understandings and agreements set forth herein.
Sincerely,
Rio Hotel & Casino, Inc.
/s/ James A. Barrett, Jr.
--------------------------------
James A. Barrett, Jr., President
Agreed to and Accepted this 24
day of September, 1998 by
David P. Hanlon
/s/ David P. Hanlon
- ------------------------------
DAVID P. HANLON
<PAGE>
RELEASE AGREEMENT
THIS RELEASE AGREEMENT (this "Agreement") is made and
entered into as of the 9TH day of October 1998, by and between
Rio Hotel & Casino, Inc., a Nevada corporation, whose principal
place of business is 3700 West Flamingo Road, Las Vegas, Nevada
89103 ("Rio"), and David P. Hanlon, an individual, whose
residence address is 7174 Durango Street, Las Vegas, Nevada 89120
("Hanlon").
RECITALS
WHEREAS, Rio and Hanlon entered into that certain Employment
Agreement dated as of November 25, 1996, as further amended by
that First Amendment to Employment Agreement dated as of
August 31, 1997 (collectively, the "Employment Agreement").
WHEREAS, Hanlon has resigned from any and all officer and/or
director positions for Rio and its subsidiaries (the
"Resignation").
WHEREAS, Rio has terminated the Employment Agreement and the
employment of Hanlon by Rio and its subsidiaries (the
"Termination") on the terms and conditions set forth in their
September 24, 1998 letter agreement (the "Termination
Agreement").
WHEREAS, Rio and Hanlon desire to enter into this Agreement
for the purposes of releasing any past, current and/or future
claims and/or disputes among and between the parties with respect
to the Employment Agreement, the Termination, the Resignation and
any other matter related thereto.
NOW, THEREFORE, for and in consideration of the premises and
mutual covenants, agreements, understandings, undertakings,
representations, warranties and promises, and subject to the
conditions hereinafter set forth, and intending to be legally
bound thereby, the parties do hereby covenant and agree that the
Recitals set forth above are true and accurate, and further
covenant and agree as follows:
I. TERMS AND CONDITIONS
A. CONSIDERATION. As consideration for this Agreement,
Rio agrees to pay to Hanlon and Hanlon agrees to accept from Rio
payment of Two Million and no/100ths Dollars ($2,000,000 U.S.)
representing the severance payment to be due to Hanlon under the
terms of the Employment Agreement as a result of the Termination.
Hanlon hereby acknowledges and represents that no other payment,
including any payment under the change-of-control provisions of
the Employment Agreement, will be due and owing by the Company to
Hanlon as a result of the Termination.
B. GENERAL RELEASE. For valuable consideration, the
sufficiency of which is hereby acknowledged, Rio and Hanlon,
jointly and/or individually, on behalf of themselves, their
respective insurers, principals, successors, predecessors,
parents, affiliates, subsidiaries, divisions, officers,
directors, shareholders, employees, attorneys, heirs, executors
and administrators, hereby remise, acquit and forever release the
other party, and their respective successors, predecessors,
parents, affiliates, subsidiaries, divisions, including, but not
limited to their respective officers, directors, shareholders,
managers, employees, advisors, consultants, insurers, attorneys,
heirs, executors, administrators and authorized representatives
from any and all claims, demands, damages, debts, liabilities,
actions, causes
<PAGE>
of action or suits of whatsoever kind or nature, presently known
or unknown, actual or contingent, asserted or unasserted,
foreseeable or unforeseeable, unanticipated or unsuspected, which
any of them has or may have now or in the future, arising
directly or indirectly out of or involving the Employment
Agreement, the Resignation, the Termination, the Termination
Agreement and any other matter related thereto, excluding,
however, paragraphs 12 and 13 of the Employment Agreement which
survive.
C. ADDITIONAL RELEASE. Hanlon, for himself, his agents,
heirs, successors, assigns, representatives, executors and
administrators does hereby and forever release and discharge Rio,
including its predecessors and successors, its affiliated
entities and its past and present Board members, employees,
agents, attorneys, accountants, representatives, successors and
assigns, from any and all causes of action, actions, judgments,
liens, indebtedness, damages, losses, claims, liabilities, and
demands of whatsoever kind and character in any manner
whatsoever, including but not limited to any claim for breach of
contract, breach of implied covenant, breach of oral or written
promise, wrongful termination, infliction of emotional distress,
defamation, interference with contract relations or prospective
economic advantage, negligence, misrepresentation or employment
discrimination, and including without limitation alleged
violations of Nevada Revised Statutes Section 608.017 and Section
613.310 prohibiting discrimination based on race, religious
creed, color, national origin, ancestry, physical disability,
mental disability, medical condition, marital status, sex or age
over 40, Title VII of the 1964 Civil Rights Act prohibiting
discrimination based on race, color, religion, sex or national
origin, the Family and Medical Leave Act, the Americans With
Disabilities Act prohibiting discrimination based on disability,
AND THE AGE DISCRIMINATION IN EMPLOYMENT ACT PROHIBITING
DISCRIMINATION BASED ON AGE OVER 40, as these statutes have been
from time to time amended, excepting only those obligations
expressly recited herein or to be performed hereunder and my
claims to vested interests in employee benefit plans as defined
exclusively in written plan documents.
D. FUTURE LITIGATION. Rio and Hanlon, jointly and/or
individually, covenant and agree to forever refrain from
instituting, prosecuting, maintaining, or assisting with any
claims, suits and actions, which arise out of, or is or may be,
in whole or in part, based upon, related to or connected with the
Employment Agreement, the Resignation, the Termination, the
Termination Agreement and any other matter related thereto or any
way to or with respect to the subject matter of this Agreement as
they relate to the parties.
E. ACKNOWLEDGEMENTS AND AGREEMENTS OF HANLON. Through the
execution of this Agreement, Hanlon hereby acknowledges that:
1. He has the right to consider this Agreement for
twenty-one (21) days before signing it;
2. If he signs this Agreement prior to the expiration
of twenty-one (21) days, he waives this right freely and
voluntarily;
3. He has the right to revoke this Agreement for a
period of seven days after he signs it;
4. This Agreement shall not become effective or
enforceable until the seven (7) day revocation period has
expired without the Agreement having been revoked;
5. This Agreement will be final and binding after the
expiration of the revocation period in subsection 4 of this
Section E. He agrees not to challenge its enforceability.
If he attempts to challenge the enforceability of this
Agreement, he shall initially tender to Rio, by certified
funds delivered to Rio, all monies received pursuant to this
2
<PAGE>
Agreement, and invites Rio to retain such monies and agree
with Hanlon to cancel this Agreement. In the event Rio
accepts this offer, Rio shall retain such monies and this
Agreement shall be canceled. In the event Rio does not
accept such offer, Rio shall so notify Hanlon and shall
place such monies in an interest-bearing escrow account
pending resolution of the dispute as to whether this
Agreement shall be set aside and/or otherwise rendered
unenforceable.
6. Hanlon is aware of his right to consult an
attorney, has been advised to consult with an attorney, and
has had the opportunity to consult with an attorney, if
desired, prior to signing this Agreement; and
7. Hanlon has carefully read this Agreement including
the Release, acknowledges that he has not relied on any
representation or statement, written or oral, not set forth
in this document and warrants and represents that he is
signing this Agreement voluntarily.
F. BINDING EFFECT. The terms of this Agreement shall be
binding upon, and shall inure to the benefit of Rio, Hanlon and
their respective heirs, successors and assigns. The term Rio, as
used in this Agreement, shall include, but is not limited to its
predecessors and successors and its past or present insurers,
principals, affiliates, subsidiaries, divisions, officers,
directors, stockholders, employees attorneys, accountants,
representatives, assigns, heirs, executors, and administrators as
well as, upon consummation of that certain transaction whereby
(i) HEI Acquisition Corp. III, a wholly-owned subsidiary of
Harrah's Entertainment, Inc. ("Harrah's"), will merge with and
into Rio, with Rio continuing as the surviving corporation and
(ii) each outstanding share of Rio common stock will be converted
into the right to receive one share of Harrah's common stock,
Harrah's and its predecessors and successors and its past or
present insurers, principals, affiliates, subsidiaries,
divisions, officers, directors, stockholders, employees
attorneys, accountants, representatives, assigns, heirs,
executors, and administrators.
G. READ AND UNDERSTOOD. Each party to this Agreement
represents and warrants that the terms of this Agreement have
been completely read and are fully understood after advice of its
counsel and voluntarily accepted for the purposes of making a
full, final and complete compromise and settlement as described
in this Agreement.
H. NO UNDUE INFLUENCE. Each party to this Agreement
represents and warrants that he or it has not been influenced to
any extent in entering this Agreement by any representations or
statements made by any other party (or any other party's
representatives, attorneys or insurers) concerning their claims
or the propriety of the settlement provided for in this
Agreement, but has relied solely upon his, her or its own
judgment and the judgment and advice of his, her or its
respective attorneys and other consultants.
I. DIFFERENCE IN FACTS. Each party to this Agreement
fully understands that the facts presently known to him or it may
later be found to be different, and expressly accept and assume
the risk that the facts may be found to be different. This
Agreement shall be effective in all respects and shall not be
subject to termination or rescission because of any such
difference in facts.
II. GENERAL PROVISIONS
A. ASSIGNMENTS. The rights of Hanlon under this Agreement
are personal to Hanlon and may not be assigned or transferred to
any other person, firm or corporation without the prior express
written consent of Rio. Any attempted assignment by Hanlon is
void.
3
<PAGE>
B. COOPERATION. The Parties agree to cooperate fully with
each other in order to achieve the purposes of this Agreement and
to take all actions not specifically described that may be
required to carry out the purposes and intent of this Agreement.
C. MODIFICATION OF AGREEMENT. Any modification of this
Agreement or additional obligation assumed by either party in
connection with this Agreement shall be binding only if evidenced
in an express writing signed by each party or an authorized
representative of each party.
D. NOTICES. Any notice provided for or concerning this
Agreement shall be in writing and be deemed sufficiently given
when sent by certified mail, return receipt requested, Express
Mail, Federal Express, or similar conventional means of expedited
delivery and proof of delivery, to the respective address of each
party as set forth at the beginning of this Agreement. A copy of
a notice to Rio shall also be provided to Rio's General Counsel
at the same address. Any change of address for notices shall be
given to all parties by notice in writing the receipt of which is
duly acknowledged in writing or sent certified mail to the then
proper address of each other party.
E. GOVERNING LAW. It is agreed that this Agreement shall
be governed by, construed, and enforced in accordance with the
laws of the State of Nevada.
F. EFFECT OF PARTIAL INVALIDITY. The invalidity of any
portion of this Agreement will not and shall not be deemed to
affect the validity of any other provision. In the event that
any provision of this Agreement is held to be invalid, the
parties agree that the remaining provisions shall be deemed to be
in full force and effect as if they had been executed by both
parties subsequent to the expungement of the invalid provision.
In the event that a provision is found in a judicial proceeding
to be unenforceable as written, but enforceable if modified, then
the provision shall be deemed to be so modified to the extent
necessary to cause it to be enforceable retroactive to the
original date of this Agreement.
G. ENTIRE AGREEMENT. This Agreement shall constitute the
entire agreement between the parties with respect to their mutual
release of claims, and any prior understanding or representation
of any kind concerning such release which precedes the date of
this Agreement shall not be binding upon either party except to
the extent incorporated in this Agreement. This Agreement does
not impact the Consulting Agreement of even date herewith between
Rio and Hanlon.
H. NEUTRAL INTERPRETATION. The provisions contained
herein shall not be construed in favor of or against any party
because that party or its counsel drafted this Agreement, but
shall be construed as if all parties prepared this Agreement, and
any rules of construction to the contrary are hereby specifically
waived. The terms of this Agreement were negotiated at arm's
length by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives
and to be effective as of the date first above written.
Rio Hotel & Casino, Inc., David P. Hanlon,
a Nevada corporation an individual
By: /s/James A. Barrett, Jr. By: /s/ David P. Hanlon
--------------------------- -------------------------
David P. Hanlon
Its: President
--------------------------
4
<PAGE>
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement"), effective as
of the 9th day of October, 1998, by and between Rio Hotel &
Casino, Inc., a Nevada corporation, whose principal place of
business is 3700 West Flamingo Road, Las Vegas, Nevada 89103
("Rio") and David P. Hanlon, an individual, whose residence
address is 7174 Durango Street, Las Vegas, Nevada 89120
(hereinafter referred to as "Consultant").
RECITALS
A. Consultant has special skills, knowledge, abilities and
experiences in the dealings of Rio and in the various projects
and business opportunities of Rio and its subsidiaries.
B. Consultant desires to be engaged by Rio as an
independent contractor to render consulting services to Rio upon
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants,
promises and agreements contained herein, and intending to be
legally bound hereby, the parties hereto covenant and agree that
the Recitals are true and correct and further agree as follows:
SECTION I
CONSULTING SERVICES
A. ENGAGEMENT. Rio hereby engages Consultant, and
Consultant hereby accepts his engagement by Rio, as an
independent contractor, to render services in the capacity of a
consultant, subject to the terms and conditions herein set forth
for a period, commencing as of the date hereof, and terminating
as of one calendar year afterwards (the "Term").
B. SERVICES. Consultant's services to be rendered
hereunder shall include, but not be limited to, the services
described on Exhibit A attached hereto ("Services").
C. COMMUNICATIONS. In the performance of his services
hereunder, Consultant shall report to the President of Rio, or
his designee. Consultant shall maintain regular direct
communications with the President of Rio, or his designee,
including confidential written reports on the status of his
activities pursuant to this Agreement at such times as may be
requested by the President of Rio, or his designee.
D. INDEPENDENT CONTRACTOR. Consultant is entering into
this Agreement and in the performance of his duties hereunder as
an independent contractor. No term or condition under this
Agreement nor any manner or method of payment hereunder shall
create any relationship between Rio and Consultant other than as
expressed in this Section I.D. Consultant shall not in any way,
at any time, or under any circumstances, be, or be construed to
be, an employee, partner, or joint venturer of Rio.
<PAGE>
SECTION II
FEES
A. CONSULTING FEE. For all services rendered pursuant to
this Agreement, Rio agrees to pay Consultant a monthly
compensation in the amount of Thirty Five Thousand Dollars
($35,000.00) payable on the last day of each month of the Term.
B. TAXES. Consultant shall be solely responsible for and
shall pay when due all federal, state and local income taxes and
all other taxes due on his behalf for any compensation or benefit
received under this Agreement, including, without limitation, all
federal withholding taxes, FICA and Social Security, and any
worker's compensation premiums.
SECTION III
CONFIDENTIALITY
A. CONFIDENTIALITY. Consultant acknowledges in performing
his obligations hereunder he will have access to confidential
information which is proprietary to and a valuable trade secret
of Rio, including but not limited to information concerning Rio's
business, customers, suppliers, marketing methods, files, credit
and collection techniques and files, trade secrets and various
unpublished techniques and "know-how" as well as any materials
prepared by Consultant using such information (collectively,
"Confidential Information"), and that any disclosure or
unauthorized use thereof will cause irreparable harm to Rio.
Accordingly, Consultant covenants and agrees that he will at all
time during and after the term of this Agreement hold all such
information in strictest confidence and will:
1. Use any such Confidential Information for the sole
and limited purpose of performing his obligations hereunder;
2. Not copy any such Confidential Information in
whole or in part, except as necessary in performance of his
obligations hereunder;
3. Not reveal or disclose any such Confidential
Information to any person, firm, corporation or any other
entity whatsoever, without Rio's express written consent,
except as such revelation or disclosure may be required in
connection with Consultant's performance of his duties
hereunder or as required by law or a court of competent
jurisdiction.
5. Use his reasonable efforts to protect the
confidentiality of Confidential Information; and
5. Return to Rio all such Confidential Information in
whatever tangible form and all copies and records thereof
upon Rio's request therefor or at the termination of this
Agreement.
B. ENFORCEMENT. Consultant further acknowledges that Rio
will suffer substantial irreparable injury in the event of
Consultant's breach of the provisions of this Section III.
Consultant therefore agrees that, in the event of his actual or
threatened breach of the provisions of this Section III, Rio
shall be entitled to seek and obtain such temporary restraining
orders,
2
<PAGE>
preliminary injunctions or permanent injunctions as Rio deems
appropriate, restraining Consultant from violating the provisions
of this Section III. Nothing contained in this Agreement shall
prohibit Rio from pursuing any other remedies available for such
breach or threatened breach, including the recovery of damages
from Consultant. If Rio commences legal proceedings to restrain
Consultant from violating the provisions of this Section III and
obtains such restraints in such proceedings, Consultant agrees to
reimburse Rio for all costs incurred in prosecuting such
proceeding, including court costs and reasonable attorneys' fees.
If Rio commences legal proceedings to restrain Consultant from
violating the provisions of this Section III and does not obtain
such restraints in said proceedings, Rio agrees to reimburse
Consultant for all costs incurred in defending such proceedings,
including court costs and reasonable attorneys' fees. If Rio or
Consultant commences legal proceedings against the other to
enforce this Agreement, the prevailing party shall be entitled to
an award of all attorneys' fees and costs reasonably incurred in
prosecuting or defending the action.
C. SURVIVAL. The restrictions and obligations of this
Section III shall survive the expiration, cancellation or
termination of this Agreement and shall continue to bind
Consultant and Rio.
SECTION IV
TERMINATION
A. EVENTS OF TERMINATION. This Agreement and the
engagement of Consultant by Rio shall terminate prior to the
expiration of the Term, upon the occurrence of any one of the
following events:
1. Consultant's continuing or repeated breach of any
material terms and conditions of this Agreement following
written notice to Consultant of such breach;
2. Rio's failure to pay at the times specified the
sums owed Consultant in accordance with this Agreement.
3. Consultant's failure or inability to secure and
maintain any license or approval required of Consultant by
any gaming authority ("Gaming Regulatory Agency") whose
jurisdiction Rio is subject to or by the laws or regulations
of such jurisdictions pertaining to Consultant's
relationship with Rio pursuant to this Agreement; or
4. Upon thirty (30) days written notice from Rio to
Consultant.
B. EFFECT OF TERMINATION. In the event this Agreement and
the engagement of Consultant are terminated:
1. Pursuant to Section IV(A)(1) or (3), then
Consultant shall be entitled to be compensated hereunder
through the date of termination and all other provisions of
this Agreement shall be null and void, except as provided in
Section III hereof.
2. Pursuant to Section IV(A)(2) or (4), then
Consultant shall be entitled to the compensation provided
hereunder in Section II(A) for the balance of the Term, and
Consultant shall have no further obligations, except as
provided in Section III hereof.
3
<PAGE>
SECTION V
REGULATORY COMPLIANCE
Consultant and Rio acknowledge and agree that any Gaming
Regulatory Agency may assert a right to review and approve this
Agreement, as well as a right to insist that Consultant be
licensed. Consultant and Rio each agree to comply expeditiously
with all such requests from any Gaming Regulatory Agency. Rio
shall pay all related costs and expenses incurred in connection
with such investigations and proceedings pertaining to Consultant
while Consultant remains engaged by Rio pursuant to this
Agreement, except disciplinary or enforcement proceedings against
Consultant. Consultant and Rio shall comply with and be bound by
all decisions, opinions and orders issued by any Gaming
Regulatory Agency regarding this Agreement and any matter related
thereto.
SECTION VI
MISCELLANEOUS
A. ASSIGNMENTS. The rights of Consultant under this
Agreement are personal to Consultant and may not be assigned or
transferred to any other person, firm or corporation without the
prior express written consent of Rio. Any attempted assignment
by Consultant is void.
B. COMPLIANCE WITH LAWS. At all times during the term
hereof, both parties agree that its actions and those of its
representatives, agents and consultants will be entirely in
accordance with all applicable laws, rules, ordinances and
regulations of all states, counties, and municipalities in which
such party conducts business. In connection with this Agreement,
Consultant acknowledges that there exist certain casino gaming
licenses currently issued to Rio and its affiliates, the laws of
which may require Rio to disclose private or otherwise
confidential information about Consultant. Consultant agrees to
refrain from all conduct that may negatively affect such licenses
as well as prospective licenses. Consultant further agrees that
this Agreement shall terminate immediately at Rio's option if
Consultant is required to be licensed, qualified or found
suitable and is denied such licensure, qualification or
suitability.
C. COOPERATION. The Parties agree to cooperate fully with
each other in order to achieve the purposes of this Agreement and
to take all actions not specifically described that may be
required to carry out the purposes and intent of this Agreement.
D. MODIFICATION OF AGREEMENT. Any modification of this
Agreement or additional obligation assumed by either party in
connection with this Agreement shall be binding only if evidenced
in writing signed by each party or an authorized representative
of each party.
E. NOTICES. Any notice provided for or concerning this
Agreement shall be in writing and be deemed sufficiently given
when sent by certified mail, return receipt requested, Express
Mail, Federal Express, or similar conventional means of expedited
delivery and proof of delivery, to the respective address of each
party as set forth at the beginning of this Agreement. A copy of
a notice to Rio shall also be provided to Rio's General Counsel
at the same address. Any change of address for notices shall be
given to all parties by notice in writing the receipt of which
4
<PAGE>
is duly acknowledged in writing or sent certified mail to the
then proper address of each other party.
F. GOVERNING LAW. It is agree that this Agreement shall
be governed by, construed, and enforced in accordance with the
laws of the State of Nevada.
G. EFFECT OF PARTIAL INVALIDITY. The invalidity of any
portion of this Agreement will not and shall not be deemed to
affect the validity of any other provision. In the event that
any provision of this Agreement is held to be invalid, the
parties agree that the remaining provisions shall be deemed to be
in full force and effect as if they had been executed by both
parties subsequent to the expungement of the invalid provision.
In the event that a provision is found in a judicial proceeding
to be unenforceable as written, but enforceable if modified, then
the provision shall be deemed to be so modified to the extent
necessary to cause it to be enforceable retroactive to the
original date of this Agreement.
H. ENTIRE AGREEMENT. This Agreement shall constitute the
entire agreement between the parties with respect to the matters
described herein, and any prior understanding or representation
of any kind preceding the date of this Agreement shall not be
binding upon either party except to the extent incorporated in
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives
and to be effective as of the date first above written.
RIO HOTEL & CASINO, INC.
a Nevada corporation
By: /s/ James A. Barrett, Jr. By: /s/ David P. Hanlon
David P. Hanlon, an
Its: President individual
5
<PAGE>
EXHIBIT A
MATERIAL STEPS TO BE PERFORMED BY
DAVID P. HANLON IN CONNECTION WITH CONSULTING PROJECTS
SKIP BARBER SCHOOL OF RACING
(1) Review all agreements and associated documents.
(2) Monitor status of agreements and associated documents.
(3) Provide liaison and support to Rio and Barber in the
discharge of their responsibilities under the
agreements and associated documents.
(4) Visit the Barber School sites when appropriate and
necessary.
(5) Provide such status reports to Rio as requested.
MODULAR TECHNOLOGY
(1) Meet and communicate as appropriate with Rio to review
the status of the Pecos Projects.
(2) Provide liaison and support to the parties to aid in
the discharge of their responsibilities under
agreements between them.
(3) Provide status reports to Rio as requested.
BUTCH HARMON SCHOOL OF GOLF/RIO SECCO GOLF CLUB
(1) Provide such status reports, attend such meetings and
tour facilities as Rio shall request.
PETERHOF MUSEUM EXHIBIT
(1) Meet with Tom Roberts of Rio and Bob Nargassans of
Encore Entertainment to determine what remains to be
done to complete delivery of the artifacts to the
Company and to open the Peterhof Museum Exhibit (the
"Exhibit").
(2) Assist Messrs. Roberts and Nargassans in coordinating
the arrival of the Russian delegation.
(3) Review plans for the Exhibit's grand opening and assist
in coordinating media coverage, working with Jania
Lambert of Rio and Lee Solters, an outside consultant
providing public relations and media service to Rio.
6
<PAGE>
(4) Provide such support to Mr. Roberts as is necessary to
aid in the discharge of the parties' responsibilities
under the various governing agreements.
With regard to each of these consulting projects, be
available to the President and Chairman of Rio to discuss
problems and suggested actions to resolve them.
7
EXHIBIT 11.1
36
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Basic:
Earnings:
Net income $5,960,444 $7,755,266 $18,491,805 $11,967,793
-------------- -------------- -------------- --------------
Shares:
Weighted average number of
common shares and equivalents
outstanding 24,794,093 21,378,821 24,678,416 21,305,604
Stock options - - - -
-------------- -------------- -------------- --------------
Weighted average number of
common shares outstanding, as
adjusted 24,794,093 21,378,821 24,678,416 21,305,604
============== ============== ============== ==============
Earnings per common share:
Net income per common share $ 0.24 $ 0.36 $ 0.75 $ 0.56
============== ============== ============== ==============
Diluted:
Earnings:
Net income $5,960,444 $7,755,266 $18,491,805 $11,967,793
Shares:
Weighted average number of
common shares 24,794,093 21,378,821 24,678,418 21,305,604
Stock options 292,154 606,103 752,086 408,521
-------------- -------------- -------------- --------------
Weighted average number of
common shares outstanding, as
adjusted 25,086,247 21,984,924 25,430,502 21,714,125
============== ============== ============== ==============
Earnings per common share:
Net income per common share $ 0.24 $ 0.35 $ 0.73 $ 0.55
============== ============== ============== ==============
</TABLE>
37
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 21,269
<SECURITIES> 0
<RECEIVABLES> 55,055
<ALLOWANCES> 17,307
<INVENTORY> 13,752
<CURRENT-ASSETS> 81,187
<PP&E> 738,509
<DEPRECIATION> 101,172
<TOTAL-ASSETS> 743,173
<CURRENT-LIABILITIES> 63,528
<BONDS> 370,368
0
0
<COMMON> 248
<OTHER-SE> 291,097
<TOTAL-LIABILITY-AND-EQUITY> 743,173
<SALES> 301,933
<TOTAL-REVENUES> 301,933
<CGS> 0
<TOTAL-COSTS> 251,338
<OTHER-EXPENSES> 3,246
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,228
<INCOME-PRETAX> 29,121
<INCOME-TAX> 10,629
<INCOME-CONTINUING> 18,492
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,492
<EPS-PRIMARY> 0.75
<EPS-DILUTED> 0.73
</TABLE>
