<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: DECEMBER 31, 1994
------------------------------
[ ] 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: 1-9481
--------------------------------------
SAHARA GAMING CORPORATION
- --------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 88-0304348
- ---------------------------- ----------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
2535 LAS VEGAS BLVD. SOUTH, LAS VEGAS, NEVADA 89109
- --------------------------------------------------------------------------
(Address of principal executive office and zip code)
(702) 737-2111
--------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by a 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
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES NO
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
6,194,433 as of February 10, 1995
- ------------------------------------ ------------------------------------
Amount Outstanding Date
<PAGE>
SAHARA GAMING CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements
Balance sheets at December 31, 1994
(unaudited) and September 30, 1994 2
Statements of Operations for the three months
ended December 31, 1994 and 1993 (unaudited) 3
Statement of Changes in Stockholders' Equity
for the three months ended December 31, 1994
(unaudited) 4
Statements of Cash Flows for the three months
ended December 31, 1994 and 1993 (unaudited) 5
Notes to Consolidated Condensed Financial
Statements (unaudited) 6
Independent Accountants' Review Report 13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 14
PART II. OTHER INFORMATION 22
</TABLE>
1
<PAGE>
Sahara Gaming Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
December 31, September 30,
ASSETS 1994 1994
- -------------------------------------------- ------------ -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and short-term investments $38,802,353 $55,582,503
Accounts receivable, net 8,442,689 7,907,050
Accounts receivable, officer 509,728 500,525
Inventories 2,775,545 2,787,397
Prepaid expenses & other 7,361,456 7,323,786
------------ ------------
Total current assets 57,891,771 74,101,261
Restricted cash 21,303,159 23,079,791
Property and equipment, net 325,938,013 314,470,366
Goodwill 48,449,091 48,835,414
Other assets 18,986,940 18,068,605
------------ ------------
Total assets $472,568,974 $478,555,437
============ ============
LIABILITIES and STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current portion of long-term debt $23,373,901 $23,238,239
Accounts payable 12,074,804 6,790,785
Interest payable 5,385,111 11,589,574
Accrued and other liabilities 14,902,503 15,970,810
------------ ------------
Total current liabilities 55,736,319 57,589,408
Deferred income taxes 3,995,335 4,945,335
Long-term debt - less current portion 378,177,985 379,092,885
Stockholders' Equity:
Common Stock, $.01 par value;
authorized-100,000,000 shares; issued
and outstanding-6,194,433 shares 61,944 61,944
Preferred stock, exchangeable, redeemable
8% cumulative, stated at $2.14 liquidation
value, authorized-10,000,000 shares;
issued and outstanding-7,570,895 shares 16,201,715 16,201,715
Additional paid-in capital 51,513,504 51,513,504
Accumulated deficit (33,030,054) (30,761,580)
------------ ------------
Total 34,747,109 37,015,583
Less treasury stock - 4,875 shares, at cost (87,774) (87,774)
------------ ------------
Total stockholders' equity 34,659,335 36,927,809
------------ ------------
Total liabilities and stockholders' equity $472,568,974 $478,555,437
============ ============
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
2
<PAGE>
Sahara Gaming Corporation and Subsidiaries
Consolidated Condensed Statements of Operations
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
December 31, 1994 December 31, 1993
----------------- -----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues:
Casino $38,620,676 $37,542,078
Hotel 9,625,342 9,672,886
Food and beverage 7,285,647 7,850,733
Other revenues 6,108,249 6,065,180
----------- -----------
Total revenues 61,639,914 61,130,877
----------- -----------
Operating expenses:
Casino 17,051,723 17,218,159
Hotel 4,125,914 4,111,922
Food and beverage 9,056,991 9,230,100
Other operating expenses 3,390,404 3,410,303
Selling, general & administrative 7,363,443 6,967,533
Utilities & property expenses 6,001,063 5,696,660
Depreciation & amortization 6,776,382 6,620,563
----------- -----------
Total operating expenses 53,765,920 53,255,240
----------- -----------
Operating income 7,873,994 7,875,637
Interest expense 11,092,468 9,502,250
----------- -----------
Net loss before income tax benefit (3,218,474) (1,626,613)
Federal income tax (benefit) (950,000) (425,000)
----------- -----------
Net loss (2,268,474) (1,201,613)
Dividends on preferred shares 324,034 299,600
----------- -----------
Net loss applicable to common shares ($2,592,508) ($1,501,213)
=========== ===========
Average common shares outstanding 6,189,558 6,189,558
=========== ===========
Loss per common share ($0.42) ($0.24)
=========== ===========
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
3
<PAGE>
Sahara Gaming Corporation and Subsidiaries
Consolidated Condensed Statement of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Preferred Paid-in Accumulated Treasury
Stock Stock Capital Deficit Stock Total
------- ----------- ----------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances, October 1, 1994 $61,944 $16,201,715 $51,513,504 ($30,761,580) ($87,774) $36,927,809
Net loss (2,268,474) (2,268,474)
------- ----------- ----------- ------------ -------- -----------
Balances, December 31, 1994 $61,944 $16,201,715 $51,513,504 ($33,030,054) ($87,774) $34,659,335
======= =========== =========== ============= ========= ============
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
4
<PAGE>
Sahara Gaming Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
December 31, 1994 December 31, 1993
----------------- -----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Cash and short-term investments
provided by operations $ 4,992,421 $ 5,617,507
Increase (decrease) in accounts payable 5,284,019 (810,381)
Decrease in inventories 11,852 38,270
Decrease(Increase) in prepaid expenses & other 57,039 (60,722)
Decrease in deferred income taxes (950,000) (425,000)
Decrease in interest payable (6,204,463) (3,898,331)
Increase (decrease) in other current liabilities (1,610,449) 672,855
Increase in accounts receivable, net (535,639) (33,092)
Increase in due from officer (9,203) (48,991)
Increase in other assets (1,443,523) (296,097)
------------ ------------
Net cash provided by (used in) operating activities (407,946) 756,018
------------ ------------
Cash flows from investing activities:
Increase (decrease) in restricted cash 1,681,925 (35,865,417)
Capital expenditures (15,793,062) (9,932,950)
------------ ------------
Net cash used in investing activities (14,111,137) (45,798,367)
------------ ------------
Cash flows from financing activities:
Cash proceeds of long-term debt 0 115,000,000
Cash paid on long-term debt (2,261,067) (45,798,505)
Loan issue cost 0 (4,050,312)
------------ ------------
Net cash provided by (used in) financing activities (2,261,067) 65,151,183
------------ ------------
Increase (decrease) in cash and short-term investments (16,780,150) 20,108,834
Cash and short-term investments,
beginning of year 55,582,503 29,177,866
------------ ------------
Cash and short-term investments,
end of year $ 38,802,353 $ 49,286,700
============ ============
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
5
<PAGE>
SAHARA GAMING CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF PRESENTATION AND GENERAL INFORMATION
Sahara Gaming Corporation (the "Company" or "Sahara Gaming"), a publicly traded
Nevada corporation, is the successor corporation of two affiliates, Sahara
Resorts and Sahara Casino Partners, L.P., which combined in a business
combination in September, 1993. The Company's primary business operations are
conducted through four wholly owned subsidiary corporations, Sahara Nevada Corp.
("SNC"), Hacienda Hotel Inc. ("HHI"), Santa Fe Hotel Inc. ("SFHI") and Pioneer
Hotel Inc. ("PHI") (the "Operating Companies"). The Operating Companies in turn
own the Sahara Hotel and Casino (the "Sahara"), the Hacienda Resort Hotel and
Casino (the "Hacienda"), and the Santa Fe Hotel and Casino (the "Santa Fe"),
each located in Las Vegas, Nevada, and the Pioneer Hotel & Gambling Hall (the
"Pioneer") in Laughlin, Nevada, respectively.
These consolidated condensed financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Annual Report to stockholders for the year ended September 30, 1994.
The results of operations for the three month period ended December 31, 1994
are not necessarily indicative of the results to be expected for the entire
year.
In the opinion of the Company, the accompanying unaudited consolidated condensed
financial statements contain all adjustments (consisting of only normal
accruals) necessary to present fairly the financial position of the Company at
December 31, 1994, the results of its operations for the three month period
ended December 31, 1994 and 1993, the changes in stockholders' equity for the
three month period ended December 31, 1994, and cash flows for the three month
periods ended December 31, 1994 and 1993.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Pre-Opening Expenses: All pre-opening expenses directly related to development
of gaming operations are capitalized as incurred.
Capitalization of Interest: Interest costs are capitalized on funds disbursed
during the development phase of projects.
Reclassifications: Certain balances in the 1993 financial statements have been
reclassified to conform with current year classifications.
6
<PAGE>
NOTE 3 - CASH AND SHORT-TERM INVESTMENTS
Approximately $5.1 million of the Company's consolidated cash and short-term
investments is held by PHI and is subject to certain restrictions, including
restrictions on its availability for distribution to the Company, by the terms
of an indenture pursuant to which $120.0 million principal amount of 13-1/2%
First Mortgage Bonds due 1998 ("13-1/2% Notes") of Pioneer Finance Corp. was
issued, the proceeds of which were loaned to PHI.
In addition, approximately $22.6 million of the Company's consolidated cash and
short term investments is held by SFHI and is subject to certain restrictions
and limitations on its use, including restrictions on its availability for
distribution to the Company, by the terms of an indenture pursuant to which
$115.0 million First Mortgage Notes due 2000 ("11% Notes") of SFHI was issued.
NOTE 4 - RESTRICTED CASH
Net proceeds of $32.0 million from the offering of the 11% Notes were loaned to
the Company's indirect wholly-owned subsidiary, Sahara Parkville, Inc.
("Parkville, Inc."), and are restricted for use in connection with the
development and construction of a proposed dockside riverboat gaming facility in
Parkville, Missouri. As of December 31, 1994, approximately $21.3 million
remained available from the $32.0 million dedicated to the Parkville
development, approximately $6.1 million had been used in connection with the
purchase of a riverboat for the site and approximately $4.6 million had been
spent in connection with other expenses associated with developing the proposed
Parkville project, including approximately $3.5 million in interim interest.
(See Note 8)
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT, NET
In March 1994, the Company, through a wholly-owned subsidiary, purchased for
approximately $15.1 million a 40-acre parcel of land located in southeast Las
Vegas, for future development of a proposed casino hotel complex. The purchase
was financed with the proceeds from a private placement of $15 million principal
amount of 12% First Mortgage Notes due March 31 1995 ("12% Notes"). As of
December 31, 1994, the Company had recorded approximately $1.2 million in
preliminary engineering and development costs and $1.7 million representing
capitalized interest. (See Notes 6 and 9)
During the three-month period ended December 31, 1994, Sahara Parkville, Inc.,
capitalized $1.2 million in connection with the development of the proposed
dockside riverboat gaming facility. As of December 31, 1994, the Company has
incurred $14.8 million in developing the proposed Parkville project. Of this
amount, approximately $8.0 million was used to purchase a riverboat for the
site, approximately $3.1 million was used
7
<PAGE>
for preliminary engineering and development expenses and approximately $3.7
million represents capitalized interest costs. (See Notes 4 and 9)
The Company completed construction in December 1994 of an expansion of the Santa
Fe, including the addition of three themed restaurants, approximately 300 new
slot machines, a dedicated bingo room, race book and other public areas. The
cost of construction and equipment was approximately $14.4 million. During the
three-month period ended December 31, 1994, the Company recorded approximately
$12.0 million in construction costs associated with the expansion of the Santa
Fe.
The Company completed construction in December 1994 of an expansion of the
Pioneer, including addition of casino space, the addition of a special events
area and increased the administrative and support areas. The cost of
construction and equipment was approximately $4.1 million. During the
three-month period ended December 31, 1994, the Company recorded approximately
$2.2 million in construction costs associated with the expansion of the Pioneer.
NOTE 6 - LONG-TERM DEBT
On March 31, 1994, the Company issued the 12% Notes. The principal amount of
the 12% Notes and all accrued interest is due and payable on March 31, 1995.
The Company is in discussions with the holders of the 12% Notes regarding a
possible extension of the maturity date. The 12% Notes are guarantied by the
Company and are secured by, among other things, a first priority lien on the
real property pursuant to the Deed of Trust relating thereto. (See Notes 5 and
9)
NOTE 7 - INCOME TAXES
For the three months ended December 31, 1994, a tax benefit of $950,000 was
recognized. All of the benefit was a deferred tax benefit. The tax benefit for
federal income taxes differs from the amounts computed by applying the federal
income tax rate of 35% to income before benefit for federal income taxes for the
following items:
<TABLE>
<CAPTION>
% of Pretax
Amount Income
------------ -----------
<S> <C> <C>
Expected benefit for federal
income taxes $1,126,466 35
Amortization of goodwill (135,213) (3)
Other (41,253) (1)
---------- --
Benefit for federal income taxes $ 950,000 31
========== ==
</TABLE>
The Company has federal net operating loss credit carryforwards of approximately
$32.0 million expiring at various dates through 2009.
8
<PAGE>
NOTE 8 - SAHARA PARKVILLE, INC.
The development of the proposed Parkville casino is subject to substantial
uncertainties, as discussed below, including the granting of necessary gaming
and other licenses and certain other approvals, commencement and completion of
construction, and the negotiation of additional agreements, as well as the risks
inherent in the establishment of a new business enterprise.
At the request of the Missouri Gaming Commission ("MGC"), the Company updated
its gaming application in February 1995 and is preparing to submit additional
information required before the MGC will determine whether to commence its
investigation of Parkville Inc. An investigation typically takes at least
several months to complete. No assurance can be given that Parkville Inc. will
be chosen for investigation, or if chosen, will be granted a license.
In order to use the vessel purchased for the Parkville casino, Parkville Inc.,
will be required to obtain a gaming license permitting dockside, rather than
"cruising", riverboat gaming. It is the company's intention to request such a
license in the application process from the MGC. No assurance can be given that
the MGC will pass legislation eliminating the need for riverboats to cruise or
that Parkville Inc. will be licensed for dockside gaming.
If Parkville Inc. is not licensed or if the construction of the proposed
facility is not complete by June 30, 1995, Parkville Inc. will be unable to
commence operations by that date and SFHI will be required under the terms of
the indenture under which the 11% Notes were issued to offer to repurchase that
principal amount of 11% Notes purchasable with the funds remaining in the
Parkville collateral account (See Note 4) and obtained upon disposition of
assets related to the project (unless waivers are obtained from the holders of
the 11% Notes). Based on current development and construction plans, the
Company does not believe the facility can be completed and operating before June
30, 1995. Therefore, the Company currently intends to seek approval from the
holders of the 11% Notes for, among other things, an extension of the date by
which operations of the proposed Parkville casino must be commenced before
Parkville Inc. is required to commence the repurchase offer. No assurance can
be given that if such approval is sought that it will be obtained. In the event
Parkville Inc. is required to commence a repurchase offer, the holders of
warrants to acquire additional 11% Notes will be entitled to acquire for no
additional consideration up to an additional $11.5 million principal amount of
the 11% Notes.
The estimated total cost of the Parkville project was originally expected to be
approximately $38.5 million. As a result of the delay in commencing
construction of the proposed facility, revisions to the scope of the project,
and increased construction costs associated with the project, it is currently
estimated that the project will cost approximately $50.0 million.
9
<PAGE>
Parkville Inc. borrowed $32.0 million from the proceeds of the offering of the
11% Notes. The loan proceeds are restricted for use in connection with the
Parkville development. The balance of the originally budgeted project cost was
expected to be financed through equipment financing and an equity contribution
from SFHI. The balance of the anticipated cost of the project in excess of the
originally budgeted amount is expected to be financed, to the extent permitted
by the indenture under which the 11% Notes were issued, through equipment
financing, other financing sources and additional loans or equity investments
from the Company, although no assurance can be given that the additional
necessary funds will be available.
In the event the Company is required to commence the repurchase offer of the 11%
Notes, the Company may pursue development of the Parkville casino through a
joint venture or other arrangement. Although the Company continues the analysis
of the financial statement impact of either pursuit of the proposed development
through a joint venture or other arrangement, or ceasing the development of a
Missouri casino development, the Company expects that implementation of either
such action will result in a non-recurring charge to earnings in an amount not
yet determined.
NOTE 9 - HENDERSON, NEVADA PROJECT
In December 1994, the Company entered into an agreement to sell the real
property located in Henderson, Nevada purchased for possible development of a
hotel/casino. (See Note 5) The agreement was subject to several contingencies.
In February 1995, the purchaser terminated the agreement in accordance with its
terms.
The 12% Notes issued in connection with the purchase of the property mature on
March 31, 1995. The Company is in discussions with the holders of the 12% Notes
regarding a possible extension of the maturity date. No assurance can be given
that the Company will be successful in obtaining an extension of the maturity
date. If the Company is unable to obtain a satisfactory extension, additional
financing or a sale of the property would be required to satisfy the notes. If
the Company is not successful in that regard before March 31, 1995, Sahara
Gaming would not have sufficient cash resources to repay the 12% Notes and
would default in the payment thereof, which would result in cross-default under
substantially all of the Company's long-term indebtedness. Assuming an
extension is negotiated, the Company is evaluating the possibility of pursuing
the development and financing for the proposed project.
10
<PAGE>
NOTE 10 - SUPPLEMENTAL INFORMATION
Supplemental statement of cash flows information for the three month period
ended December 31, 1994 and 1993 is presented below:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Operating Activities:
Cash paid during the period
for interest, net of amount
capitalized of $1,804,035
for 1994 $16,812,419 $13,262,042
=========== ===========
Investing Activities:
Purchase accounting adjustments
to property due to adoption of
SFAS 109 $11,062,602
===========
</TABLE>
11
<PAGE>
NOTE 11-Subsidiary Information
The Company's primary operations are in the hotel/casino industry and are
conducted through SNC, HHI, PHI and SFHI. The operations by Subsidiary for the
three months ending December 31, 1994 and December 31, 1993 were as set forth in
the following table (dollars in thousands):
<TABLE>
<CAPTION>
Year SNC HHI PHI SFHI Other TOTAL
---- -------- ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues 1994 $20,537 $13,488 $11,408 $16,195 $12 $61,640
======== ======= ======== ======== ======= ========
1993 $20,884 $13,100 $12,714 $14,492 ($59) $61,131
======== ======= ======== ======== ======= ========
Operating income (loss) 1994 $1,538 $1,151 $1,797 $3,660 ($272) $7,874
======== ======= ======== ======== ======= ========
1993 $1,313 $1,426 $2,179 $3,319 ($181) $7,876
======== ======= ======== ======== ======= ========
Depreciation and Amortization 1994 $2,050 $1,267 $1,251 $2,036 $172 $6,776
======== ======= ======== ======== ======= ========
1993 $2,034 $1,265 $1,360 $1,800 $162 $6,621
======== ======= ======== ======== ======= ========
Capital Expenditures 1994 $430 $161 $1,453 $13,078 $671 $15,793
======== ======= ======== ======== ======= ========
1993 $657 $136 $153 $8,987 $0 $9,933
======== ======= ======== ======== ======= ========
Identifiable Assets 1994 $107,203 $79,781 $100,791 $148,586 $36,208 $472,569
======== ======= ======== ======== ======= ========
1993 $110,351 $83,782 $105,243 $151,970 $19,730 $471,076
======== ======= ======== ======== ======= ========
</TABLE>
12
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Sahara Gaming Corporation:
We have reviewed the accompanying consolidated condensed balance sheet of Sahara
Gaming Corporation and subsidiaries as of December 31, 1994, the related
consolidated condensed statements of operations and of cash flows for the three-
month periods ended December 31, 1994 and 1993, and of stockholders' equity for
the three-month period ended December 31, 1994 in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants. All information included in these financial
statements is the representation of the Company's management.
A review of interim financial information consists principally of inquiries of
Company personnel and analytical procedures applied to financial data. It is
substantially less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such consolidated condensed financial statements in order for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Sahara Gaming Corporation and
subsidiaries as of September 30, 1994, and the related consolidated statements
of operations, stockholders' equity and cash flows for the year then ended (not
presented herein); and in our report dated December 16, 1994 we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated condensed balance
sheet as of September 30, 1994 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
As discussed in Note 9, the Company's agreement to sell certain land in
Henderson, Nevada was terminated in February 1995. The current portion of long-
term debt includes $15,000,000 borrowed to acquire the land through a private
placement of 12% Notes (the "Notes") which mature in March 1995. Management of
the Company is currently negotiating to obtain an extension of the Notes. If the
Company is unable to obtain a satisfactory extension, additional financing or
the sale of the property would be required to repay the Notes in March 1995. A
nonpayment default under the Notes would, under cross-default provisions,
constitute a default under substantially all of the Company's long-term debt
agreements. Although the outcome of these matters is not certain, management
believes that the Company will be able to obtain an extension.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 10, 1995
13
<PAGE>
SAHARA GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended December 31, 1994 and 1993
- ---------------------------------------------
Revenues increased $500,000 to $61.6 million for the quarter ended December 31,
- --------
1994 from $61.1 million in the prior year quarter. The Santa Fe Hotel and
Casino ("Santa Fe") and the Hacienda Hotel and Casino ("Hacienda") recorded
revenue increases of $1.7 million, or 11.8%, and $400,000, or 3.0%,
respectively, when comparing the 1994 period with the prior year. The Pioneer
Hotel and Gambling Hall ("Pioneer") and the Sahara Hotel and Casino ("Sahara")
reported decreases of $1.3 million, or 10.3%, and $300,000, or 1.7%,
respectively when comparing the two periods.
The Company's casino revenues totalled $38.6 million, a $1.1 million, or 2.9%,
increase over the prior year's quarter. A $1.2 million, or 11.1% increase in
casino revenues at the Santa Fe and a $900,000, or 11.4%, increase in casino
revenues at the Sahara in the current year's quarter over that of the prior year
were partially offset by a decrease in casino revenues at the Pioneer of $1.1
million, or 9.9%, when comparing the two fiscal periods. The Hacienda reported
casino revenues for the 1994 three month period that were comparable to the 1993
period. Management believes that the increase in casino revenues at the Santa
Fe is primarily due to the property's growing popularity with the residents of
northwest Las Vegas and the continuing growth of the local population. Slot
machine handle and revenues were higher at the Sahara for the fiscal 1994
quarter. Although the Sahara recorded a decrease in table game handle of 3.4%,
an increase in the table game hold percentage resulted in a net increase in
table game win of 11.7%. The decrease in casino revenues at the Pioneer is
believed to be primarily due to the construction of the expansion which was
completed in December 1994, coupled with a decreased growth rate in the Laughlin
gaming market and continued increase in the competitive environment in
Laughlin.
The Company's hotel revenues decreased $50,000, or 0.5%, during the three months
ended December 31, 1994 from the corresponding 1993 period on a net decrease of
9,921 occupied room nights. Contributing to this decrease were approximately
8,600 fewer room nights recorded at the Sahara in the period. The decrease at
the Sahara is believed to be the result of reduced convention business in the
period. Offsetting the decrease in revenues at the Sahara was an increase at
the Hacienda, primarily the result of an increase in the average room rate
associated with tour and travel contracts. Room occupancy percentages were 84.4%
at the Sahara, 92.4% at the
14
<PAGE>
Hacienda, 95.9% at the Santa Fe and 80.3% at the Pioneer for the three months
ended December 31, 1994. This compares to 88.9%, 92.5%, 93.2% and 85.4% for
each of the hotel/casinos for the quarter ended December 31, 1993, respectively.
The Company's food and beverage revenues decreased $600,000, or 7.2%, primarily
at the Sahara. The change is considered to be primarily the result of the fewer
occupied room nights and a decrease in banquet functions at the Sahara related
to the reduced convention business.
Operating expenses increased $500,000, or 1.0%, in the current quarter when
- ------------------
compared to the same prior year period. The Santa Fe and Hacienda recorded
operating expense increases of $1.2 million and $700,000, respectively, when
compared to the prior year period. The Sahara and Pioneer reported decreases of
$600,000 and $900,000, respectively, compared to the prior year period.
Casino expenses were $200,000, or 1.0%, lower for the Company's current three
month period, with the Sahara and Hacienda each reporting a relatively small
increase and decrease, respectively. The Santa Fe reported an increase of
$600,000, or 14.2%, primarily due to the increase in the Santa Fe's business
volume. Casino expenses at the Pioneer decreased $800,000, or 13.4%, for the
quarter ended December 31, 1994 over the comparable 1993 period, primarily
associated with the decrease in casino revenues.
Selling, general and administrative for the Company increased $400,000, or 5.7%,
in the 1994 period. Increases of $200,000, or 16.3%, and $300,000, or 19.4%, at
the Hacienda, and Santa Fe, respectively, were primarily related to increased
advertising and promotional costs. At the Pioneer, the increase in the covered
period was $300,000 or 41.9% and was primarily attributed to payroll and
promotional costs. The increases described above were offset by a decrease of
$600,000, or 19.1%, at the Sahara related to reduced advertising costs in the
period.
Depreciation and amortization expense for the Company increased $200,000, or
2.4%, in the quarter ended December 31, 1994 as compared to the prior year
period, with an increase of $200,000, or 13.1%, at the Santa Fe, primarily due
to increased depreciation on an expansion project, partially offset by a
decrease of $100,000, or 8.0%, at the Pioneer, due to decreased amortization of
intangible property.
Operating income for the three months ended December 31, 1994 was $7.9 million,
- ----------------
the same as in the 1993 period. Period to period changes for the four
hotel/casinos were as follows: the Santa Fe increased operating income to $3.7
million in the current period as compared to $3.1 million in the prior year
period, a 16.6% increase; the Sahara had operating income of $1.3 million for
the 1994 period as compared to $1.1 million for the quarter in 1993, a 21.9%
increase; the Pioneer experienced operating income of $1.8 million in 1994
compared to $2.2 million in 1993, a 17.5% decrease; and the Hacienda's
operating income was $1.2 million in the three month period of this year
compared to income of $1.4 million last year, a 19.3% decrease.
15
<PAGE>
Interest expense increased $1.6 million in the fiscal 1994 period to $11.1
- ----------------
million as compared to $9.5 million for the period ended December 31, 1993. The
increase in interest expenses is primarily the result of the issuance of $115
million principal amount of 11% First Mortgage Notes due 2000 (the "11% Notes")
in December 1993.
Loss before federal income tax increased to $3.2 million for the three months
- ------------------------------
ended December 31, 1994 as compared to a loss of $1.6 for the same period in
fiscal 1994. Net loss in the current period was $2.3 million as compared to a
loss of $1.2 last year.
LIQUIDITY AND CAPITAL RESOURCES; TRENDS AND FACTORS RELEVANT TO FUTURE
OPERATIONS
The Company's earnings before interest, taxes, depreciation and amortization
("EBITDA") was $14.7 million for the quarter ended December 31, 1994 as compared
to $14.5 million for the prior year period. EBITDA is presented to enhance the
understanding of the financial performance of the Company and its ability to
service its indebtedness, but should not be construed as an alternative to
operating income (as determined in accordance with generally accepted
accounting principles) as an indicator of the Company's operating performance,
or to cash flows from operating activities (as determined in accordance with
generally accepted accounting principles) as a measure of liquidity.
The Company has historically generated sufficient cash liquidity from operations
to finance operations, meet existing debt service obligations, complete capital
improvements to maintain existing facilities, and provide working capital to the
parent company. However, as of December 31, 1994, the outstanding amount of the
Company's long-term debt in relation to its stockholders equity balance (11:1)
or as a percent of total assets, (85%) categorizes the Company as highly
leveraged.
The indentures under which the $120.0 million principal amount of First Mortgage
Notes due 1998 ("13-1/2% Notes") and the 11% Notes were issued contain
restrictions on payments to and investments in affiliates by Pioneer Hotel Inc.
("Pioneer Inc.") and Santa Fe Hotel Inc. ("Santa Fe Inc."), as applicable,
including to the Company. As a result of these restrictions, all or a
significant portion of the cash flow generated by Pioneer Inc. and Santa Fe
Inc., as applicable, is not currently and is not expected in the near future to
be available for distribution to the Company.
Approximately $32.9 million of the Company's current assets at December 31,
1994, including approximately $27.7 million of cash and short term investments,
were held by Pioneer Inc. and the Santa Fe Inc., and are subject to the
indenture restrictions described above and are not currently available for
distribution to the Company. Excluding the
16
<PAGE>
working capital of Pioneer Inc. and Santa Fe Inc., and $15.0 million of
indebtedness, together with accrued interest, that matures in March 1995 (See
"Debt Obligations"), the Company had a working capital balance of approximately
$2.8 million at December 31, 1994.
To the extent cash flow generated by Pioneer Inc. and Santa Fe Inc. is not
available for distribution to the Company, the Company must rely on existing
cash resources and cash flow generated by Sahara Nevada Corp. ("Sahara Nevada")
and Hacienda Hotel Inc. ("Hacienda Inc."), the subsidiaries of the Company that
own the Sahara and Hacienda, respectively. Historically, the operating results
of Sahara Nevada and Hacienda Inc. have not generated sufficient cash flow to
provide liquidity to the Company. Based on current operations and available
resources, management believes that, barring unforeseen circumstances, the
Company will have sufficient cash resources to meet its operating requirements
through the fiscal year ending September 30, 1995, although no assurance can be
given to that effect. The Company has entered into an agreement to sell
substantially all of the assets of the Hacienda. (See "Debt Obligations")
The Company's principal uses of funds generated from operations for the last
three fiscal years have been for interest payments on indebtedness and capital
expenditures. Additionally, the Company has incurred indebtedness to finance its
capital expenditures. Interest expense for the quarter ended December 31,
1994, and for fiscal years 1994, 1993, and 1992 was $11.1 million, $43.2
million, $37.8 million and $39.6 million, respectively. Capital expenditures
for the quarter ended December 31, 1994 and for fiscal years 1994, 1993 and 1992
were $15.8 million, $40.1 million, $3.8 million and $5.5 million, respectively.
Excluding $12.0 million and $2.2 million incurred in the first quarter of fiscal
1995 at the Santa Fe Inc. and Pioneer Inc., respectively, related to expansions
of the Santa Fe and the Pioneer, management believes that future capital
expenditures required to maintain the facilities will be approximately $2.5
million per year in the aggregate. These expenditures are likely to be used for
the acquisition of slot machines and computer equipment and the refurbishment of
casinos, hotel rooms, food and beverage facilities and public areas and are
expected generally to be financed with cash flow from operations.
Capital Expenditures In May 1994, the Company commenced construction of an
- ---------------------
expansion of the Santa Fe, which was completed in December 1994. The expansion
included the addition of three themed restaurants, approximately 300 new slot
machines, a dedicated bingo room, race book, and other public areas. The cost
of construction and equipment was approximately $14.4 million. The expansion
was financed through working capital made available through the issuance of 11%
Notes.
The Company commenced construction of an expansion of the Pioneer in July 1994,
which was completed in December 1994. The Pioneer expansion included the
addition of casino space, the addition of a special events area and increased
administrative and support areas. The cost of construction and equipment was
approximately $4.1 million. The expansion was financed through working capital
and equipment financing.
17
<PAGE>
Debt Obligations The Company's $15.0 million principal amount of 12% Notes
- ----------------
due March 31, 1995 ("12% Notes"), are secured by the property acquired for the
possible development of a hotel/casino in Henderson, Nevada. In December 1994,
the Company entered into an agreement to sell this property, subject to several
contingencies. In February 1995, the buyer terminated the agreement in
accordance with its terms. The Company is in discussions with the holders of the
debt regarding a possible extension of the maturity date of the 12% Notes. No
assurance can be given that the Company will be successful in obtaining an
extension of the maturity date. If the Company is unable to obtain satisfactory
extensions, additional financing or a sale of the property would be required to
repay the Notes. If the Company is not successful in that regard before March
31, 1995, the Company would not have sufficient cash resources to repay the 12%
Notes and would default in the payment thereof, which would result in cross-
defaults under substantially all of the Company's long-term indebtedness.
Assuming an extension is negotiated, the Company is evaluating the possibilities
of pursuing the development and financing for the proposed project.
Approximately $22.0 million principal amount of indebtedness is scheduled to
mature in December 1995 under the terms of a note secured by a first deed of
trust ("PERS Note") on the Hacienda. In January 1995, the Company entered into
an agreement to sell substantially all of the assets of the Hacienda property
for $80 million in an all cash transaction. The sale is subject to several
contingencies, including the buyer's obtaining all appropriate regulatory
licenses and approvals. Additionally, the Company is aware that the buyer is a
defendant in litigation involving the buyers acquisition of the Hacienda. The
buyer has informed the Company that he believes the allegations are without
merit and intends to defend the lawsuit vigorously. Proceeds from the sale, if
consummated, will be used in part to repay the PERS Note, approximately $22.0
million outstanding as of December 31, 1994. Additionally, $32.0 million of
proceeds will be used to satisfy an affiliate note in favor of Sahara Nevada.
(See affiliate notes discussed below) Furthermore, the Company has entered into
an agreement, contingent upon consummation of the sale of the assets of the
Hacienda, to acquire $20.0 million principal amount of the 13-1/2% Notes for
$15.5 million from the proceeds of the Hacienda sale. The 13-1/2% Notes acquired
pursuant to this agreement would be available to meet the Company's $12.75
million sinking fund payment due in December 1996. Remaining proceeds may be
utilized for working capital purposes, including the development of proposed
projects, expansion or renovation of existing facilities and reduction of
outstanding indebtedness.
The $115.0 million principal amount of 12-1/8% First Mortgage Notes due in 1996
("12-1/8% Note") is scheduled to mature in August 1996. Affiliate notes in the
principal amounts of $18 million issued by Santa Fe Inc. and $32 million issued
by Hacienda Inc., each in favor of Sahara Nevada, mature simultaneously with the
maturity of the 12-1/8% Notes or, if earlier, upon the sale of the Hacienda or
the Santa Fe. Upon consummation of the sale of substantially all of the assets
of the Hacienda, the $32 million affiliate note will become due and will be paid
out of the proceeds of the sale. Such funds may then be used by Sahara Nevada
for capital expenditures at the Sahara, or may be loaned to wholly-owned
subsidiaries of the Company, pursuant to comparable affiliate notes that would
mature in August 1996. Although management has in the past and is currently
exploring refinancing alternatives, as well as possible dispositions of certain
assets (including the sale of the Hacienda), in
18
<PAGE>
order to satisfy the 12-1/8% Notes when they mature, no assurance can be given
that the Company will be able to refinance some or all of its indebtedness or
dispose of any assets. Any such refinancing would be subject to the Company's
future operations and the prevailing market conditions at the time of such
proposed refinancing.
If the Company is ultimately unable to refinance such debt prior to maturity,
and/or obtain sufficient proceeds from asset dispositions to repay the debt, and
if the holders of the various debt instruments were not to extend the maturity
dates, events of default would occur under certain of the Company's debt
agreements, which would lead to cross-defaults in other material agreements of
the Company including, without limitation, agreements relating to substantially
all of the outstanding long-term debt of the Company and its subsidiaries.
Current operations are providing sufficient cash flow to meet operating
requirements and interest expense on existing indebtedness and to fund limited
capital improvements. No assurance can be given that operations will continue
to provide sufficient cash flow to meet operating requirements and interest
expense. Results from operations at the Pioneer for the twelve months ended
December 31, 1994 provided EBITDA of $14.0 million, approximately 1.0 times
annual debt service on the 13-1/2% Notes. During the three months ended
December 31, 1994, the Pioneer had EBITDA of $3.0 million compared to $3.5
million in the prior year period. (See Results of Operations - Revenues) As of
December 31, 1994, Pioneer had a working capital balance of $2.9 million.
Management believes that, based on current operations, the anticipated impact of
the recently completed expansions, and available resources, barring
unforeseen circumstances, the Pioneer will have sufficient cash resources to
meet its debt service requirements through the fiscal year ending September 30,
1995, although no assurance can be given to that effect.
Parkville Inc. The development of the proposed Parkville casino is subject to
- --------------
substantial uncertainties, as discussed below, including the granting of
necessary gaming and other licenses and certain other approvals, commencement
and completion of construction, and the negotiation of additional agreements, as
well as the risks inherent in the establishment of a new business enterprise.
At the request of the Missouri Gaming Commission ("MGC"), the Company updated
its gaming application in February 1995 and is preparing to submit additional
information required before the MGC will determine whether to commence its
investigation of Parkville Inc. An investigation typically takes at least
several months to complete. No assurance can be given that Parkville Inc. will
be chosen for investigation, nor if chosen, will be granted a license.
In order to use the vessel purchased for the Parkville casino, Parkville Inc.,
will be required to obtain a gaming license permitting dockside, rather than
"cruising", riverboat gaming. It is the company's intention to request such a
license in the application process from the MGC. No assurance can be given that
the MGC will pass legislation eliminating the need
19
<PAGE>
for riverboats to cruise or that Parkville Inc. will be licensed for dockside
gaming.
If Parkville Inc. is not licensed or if the construction of the proposed
facility is not complete by June 30, 1995, Parkville Inc. will be unable to
commence operations by that date and SFHI will be required under the terms of
the indenture under which the 11% Notes were issued to offer to repurchase that
principal amount of 11% Notes purchasable with the funds remaining in the
Parkville collateral account (See Note 4) and obtained upon disposition of
assets related to the project (unless waivers are obtained from the holders of
the 11% Notes). Based on current development and construction plans, the
Company does not believe the facility can be completed and operating before June
30, 1995. Therefore, the Company currently intends to seek approval from the
holders of the 11% Notes for, among other things, an extension of the date by
which operations of the proposed Parkville casino must be commenced before
Parkville Inc. is required to commence the repurchase offer. No assurance can
be given that if such approval is sought that it will be obtained. In the event
Parkville Inc. is required to commence a repurchase offer, the holders of
warrants to acquire additional 11% Notes will be entitled to acquire for no
additional consideration up to an additional $11.5 million principal amount of
the 11% Notes.
The estimated total cost of the Parkville project was originally expected to be
approximately $38.5 million. As a result of the delay in commencing
construction of the proposed facility, revisions to the scope of the project,
and increased construction costs associated with the project, it is currently
estimated that the project will cost approximately $50.0 million.
Parkville Inc. borrowed $32.0 million from the proceeds of the offering of the
11% Notes. The proceeds are restricted for use in connection with the Parkville
development. The balance of the originally budgeted project cost was expected
to be financed through equipment financing and an equity contribution from SFHI.
The balance of the anticipated cost of the project in excess of the originally
budgeted amount is expected to be financed to the extent permitted by the
indenture under which the 11% Notes were issued, through equipment financing,
other financing sources and additional loans or equity investments from the
Company, although no assurance can be given that the additional necessary funds
will be available.
In the event the Company is required to commence the repurchase offer of the 11%
Notes, the Company may pursue development of the Parkville casino through joint
venture or other arrangement. Although the Company continues analysis of the
financial statement impact of either pursuit of the proposed development through
a joint venture or ceasing the development of a Missouri casino development, the
Company expects that implementation of either such action will result in a non-
recurring charge to earnings in an amount not yet determined.
20
<PAGE>
Treasure Bay The Company is incurring and expects to incur professional
- ------------
expenses and other expenses associated with the legal proceedings involving
Treasure Bay and the Company's investment in Treasure Bay. The Company included
an estimate of such expenses in the charge agreement income relating to the
investment in Treasure Bay recorded in the fourth quarter of fiscal 1994. The
Company will review the status of the legal proceeding involving Treasure Bay in
order to evaluate the adequacy of the previously recorded charge against income.
Related Parties LICO, a company wholly-owned by Mr. Lowden, Chairman of the
- ---------------
Board, Chief Executive Officer and 51% stockholder of the Company, had borrowed
$476,000 from Hacienda Inc., pursuant to an unsecured demand loan. The
outstanding balance of the loan including accrued interest was $510,000 as of
December 31, 1994. The demand loan to LICO bears interest at 2% over the prime
rate.
As of September 30, 1993, Mr. Lowden had borrowed an aggregate of $1.9 million
from the Company. The unsecured demand loans were evidenced by promissory notes
and accrued interest at a rate equal to 2% over the prime rate. On January 4,
1994, Mr. Lowden repaid the loans from the Company in full, together with
accrued interest.
In November 1993, Mr. Lowden and Bank of America entered into a personal loan
agreement whereby the principal balance (approximately $4,739,917 as of January
30, 1995) of the loan is amortized through quarterly principal payments through
April 1998, with any remaining principal balance due July 31, 1998. The loan is
secured by substantially all of Sahara Gaming's common stock (the "Pledged
Shares") owned by Mr. Lowden. Mr. Lowden's loan agreement provides that in the
event the market value of the Pledged Shares is less than three times the
outstanding loan balance, the bank, at its sole option, may require either an
immediate reduction in the outstanding balance or the pledging of additional
collateral acceptable to the bank such that the value of the pledged collateral
is at least three times the outstanding loan balance. If an event of default
were to occur under his personal loan with the bank, and if the bank acquired
the Pledged Shares upon foreclosure, Mr. Lowden's ownership of Sahara Gaming's
outstanding common stock would be reduced to below 50%. If Mr. Lowden ceases to
own more than 50% of the outstanding shares of Sahara Gaming's common stock, an
event of default would be triggered under certain of Sahara Gaming's long-term
indebtedness, which would result in cross-defaults under substantially all of
Sahara Gaming's other long-term indebtedness, including the Notes.
Effects of Inflation
- --------------------
The Company has been generally successful in recovering costs associated with
inflation through price adjustments in its hotel and contract sales operations.
Any such increases in costs associated with casino operations and maintenance of
properties may not be completely recovered by the Company.
21
<PAGE>
SAHARA GAMING CORPORATION
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Certain legal proceedings were disclosed in the Company's annual report on
Form 10-K for the year ended September 30, 1994
Except as set forth below, there were no material developments in any
material legal proceeding during the quarter ended December 31, 1994
On or about January 17, 1995, the Company and Santa Fe commenced an
adversary proceeding in Treasure Bay's bankruptcy case in the United States
Bankruptcy Court for the Southern District of Mississippi. The adversary
proceeding seeks the return of bankroll or cage cash at Treasure Bay's
casinos on the grounds that such funds are held by Treasure Bay in
constructive trust for the Company and SFHI. The complaint alleges that
Treasure Bay fraudulently induced the Company to execute the guarantees of
the loans by which Treasure Bay obtained the bankroll or cage cash. The
complaint also seeks an order of the Bankruptcy Court requiring the
bankroll or cage cash to be held in tact pending the litigation. The
defendants in the adversary proceeding, Treasure Bay Corp. and Treasure Bay
Gaming & Resorts, have not yet responded to the complaint.
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10.102 Bill of Sale dated as of December 28, 1994 from PDS
Financial Corporation to Pioneer Hotel Inc. with respect
to the sale of certain gaming equipment.*
10.103 Credit Agreement dated as of December 28, 1994 by and
between Pioneer Hotel Inc. and PDS Financial Corporation.*
10.104 Promissory Note dated as of December 28, 1994 in the
amount of $627,800 by Pioneer Hotel Inc. to the order of
PDS Financial Corporation.*
10.105 Security Agreement dated as of December 28, 1994 by
Pioneer Hotel Inc. in favor of PDS Financial Corporation.*
10.106 Subordination Agreement dated as of December 28, 1994 by
and between PDS Financial Corporation and Pioneer Hotel
Inc.*
10.107 Agreement for Purchase and Sale dated as of January 10,
1995 by and among Hacienda Hotel Inc., Sahara Gaming
Corporation, as Guarantor, and William G. Bennett.*
27 Financial Data Schedule, Article 5.
(b) Reports on Form 8K.
None
----------
* to be filed by amendment
22
<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 authorized.
SAHARA GAMING CORPORATION, Registrant
By: /s/ Thomas K. Land
---------------------------------------------
Thomas K. Land, Chief Financial Officer
Dated: February 14, 1995
23
<PAGE>
Sahara Gaming Corporation
Las Vegas, Nevada
We have made a review, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants, of the unaudited interim financial information of Sahara Gaming
Corporation and subsidiaries for the periods ended December 31, 1994 and 1993,
as indicated in our report dated February 10, 1995 (which includes an
explanatory paragraph regarding the Company's ability to repay certain
indebtedness); because we did not perform an audit, we expressed no opinion on
that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended December 31, 1994 is
incorporated by reference in Registration Statement No. 33-44700 on Form S-8 and
in post-effective Amendment No. 1 to Registration Statement No. 33-7053 on Form
S-8.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 10, 1995
24
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<ARTICLE> 5
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> DEC-31-1994
<CASH> 38,802,353
<SECURITIES> 0
<RECEIVABLES> 8,952,417
<ALLOWANCES> 0
<INVENTORY> 2,775,545
<CURRENT-ASSETS> 57,891,771
<PP&E> 456,893,713
<DEPRECIATION> 130,955,700
<TOTAL-ASSETS> 472,568,974
<CURRENT-LIABILITIES> 55,736,319
<BONDS> 378,177,985
<COMMON> 61,944
0
16,201,715
<OTHER-SE> 18,630,676
<TOTAL-LIABILITY-AND-EQUITY> 472,568,974
<SALES> 0
<TOTAL-REVENUES> 61,639,914
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<OTHER-EXPENSES> 20,140,888
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<INTEREST-EXPENSE> 11,092,468
<INCOME-PRETAX> (3,218,474)
<INCOME-TAX> (950,000)
<INCOME-CONTINUING> (2,268,474)
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