<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 33-51672
CALIFORNIA HOTEL AND CASINO
(Exact name of registrant as specified in its charter)
NEVADA 88-0121743
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2950 SOUTH INDUSTRIAL ROAD
LAS VEGAS, NEVADA
89109
(Address of principal executive offices)
(Zip Code)
(702) 792-7200
(Registrant's telephone number, including area code)
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
filing requirements for the past 90 days.
Yes X No
--- ---
Shares outstanding of each of the Registrant's classes of common stock as of
October 31, 1996
Class Outstanding
Common stock, no par value 1,000
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CALIFORNIA HOTEL AND CASINO
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1996
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 1996
and June 30, 1996 3
Consolidated Statements of Operations for the three
months ended September 30, 1996 and 1995 4
Consolidated Statements of Cash Flows for the three
months ended September 30, 1996 and 1995 5
Consolidated Statement of Changes in Stockholder's Equity
for the three months ended September 30, 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information 10
Signatures 11
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CALIFORNIA HOTEL AND CASINO AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF BOYD GAMING CORPORATION)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
(IN THOUSANDS, EXCEPT SHARE DATA) 1996 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 32,428 $ 28,444
Accounts receivable, net 7,458 7,414
Inventories 6,047 5,822
Prepaid expenses 12,447 10,772
-------- --------
Total current assets 58,380 52,452
Property, equipment and leasehold interests, net 503,364 490,675
Other assets and deferred charges 16,313 24,139
Goodwill, net 10,165 10,254
-------- --------
Total assets $588,222 $577,520
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Current maturities of long-term debt $ 1,479 $ 1,455
Accounts payable 41,159 29,306
Accrued liabilities
Payroll and related 18,286 18,728
Interest and other 12,652 8,571
Income taxes payable -- 1,047
-------- --------
Total current liabilities 73,576 59,107
Long-term debt, net of current maturities 358,544 363,915
Due to related party 3,374 500
Deferred income taxes 23,773 24,148
Commitments
Stockholder's equity
Preferred stock, $100 par value, 200,000 shares authorized -- --
Common stock, no par value; 2,500 shares authorized; 1,000
shares issued 22,328 22,328
Additional paid-in capital 32,856 32,856
Retained earnings 73,771 74,666
-------- --------
Total stockholder's equity 128,955 129,850
-------- --------
Total liabilities and stockholder's equity $588,222 $577,520
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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CALIFORNIA HOTEL AND CASINO AND SUBSIDIARIES
(a wholly owned subsidiary of Boyd Gaming Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
September 30,
-------------------
(In thousands) 1996 1995
- ------------------------------------------------------------------------
Revenues
Casino $ 87,761 $ 87,345
Food and beverage 29,158 27,183
Rooms 15,045 14,617
Other 7,576 7,316
-------- --------
Gross revenues 139,540 136,461
Less promotional allowances 15,852 13,304
-------- --------
Net revenues 123,688 123,157
-------- --------
Costs and expenses
Casino 48,528 44,176
Food and beverage 20,600 22,082
Rooms 5,462 5,780
Other 5,597 5,072
Selling, general and administrative 16,876 16,368
Maintenance and utilities 6,890 7,010
Depreciation and amortization 10,412 11,310
Corporate expense 3,000 3,302
-------- --------
Total 117,365 115,100
-------- --------
Operating income 6,323 8,057
-------- --------
Other expense
Interest expense (7,767) (9,600)
-------- --------
Loss before benefit for income taxes (1,444) (1,543)
Benefit for income taxes (549) (91)
-------- --------
Net loss $ (895) $ (1,452)
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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CALIFORNIA HOTEL AND CASINO AND SUBSIDIARIES
(a wholly owned subsidiary of Boyd Gaming Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended
September 30,
--------------------------
1996 1995
--------------------------
(In Thousands)
- --------------
<TABLE>
<CAPTION>
<S> <C> <C>
Cash flows from operating activities
Net loss $ (895) $ (1,452)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 10,412 11,310
Deferred income taxes (375) 97
Other 17 4
Changes in assets and liabilities:
Increase in accounts receivable, net (44) (725)
Increase in inventories (225) (163)
Increase in prepaid expenses (1,675) (3,164)
(Increase) decrease in other assets 10,914 (2,235)
Increase in other current liabilities 5,747 7,751
Decrease in income taxes payable (1,047) (189)
--------- --------
Net cash provided by operating activities 22,829 11,234
--------- --------
Cash flows from investing activities -
Acquisition of property, equipment and
other assets (12,998) (5,773)
--------- --------
Cash flows from financing activities
Proceeds from issuance of long-term debt -- 17,500
Net borrowings under credit agreements (5,000) (14,500)
Payments on long-term debt (847) (6,600)
---------- --------
Net cash used in financing activities (5,847) (3,600)
---------- --------
Net increase in cash and cash equivalents 3,984 1,861
Cash and cash equivalents, beginning of period 28,444 21,798
---------- --------
Cash and cash equivalents, end of period $ 32,428 $ 23,659
========== =========
Supplemental disclosure of cash
flow information
Cash paid for interest $ 4,738 $ 5,973
========== =========
Cash paid for income taxes $ -- $ 500
========== =========
Supplemental schedule of non-cash investing
and financing activities
Property additions acquired on contracts
and trade payables which were accrued,
but not yet paid $ 10,489 $ 4,548
========== =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 6
CALIFORNIA HOTEL AND CASINO AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF BOYD GAMING CORPORATION)
CONSOLIDATED STATEMENT OF
CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional Total
--------------------- Paid-In Retained Stockholder's
Shares Amount Capital Earnings Equity
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCES, JULY 1, 1996 1,000 $22,328 $32,856 $74,666 $129,850
NET LOSS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 1996 (895) (895)
------ ------- ------- ------- --------
BALANCES, SEPTEMBER 30, 1996 1,000 $22,328 $32,856 $73,771 $128,955
====== ======= ======= ======= ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONSOLIDATED FINANCIAL STATEMENTS.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying Consolidated Financial Statements include the accounts of
California Hotel and Casino and its wholly owned subsidiaries, collectively
referred to herein as the "Company". The Company owns and operates six casino
entertainment facilities in Las Vegas, Nevada. All material intercompany
accounts and transactions have been eliminated. The Company is a wholly owned
subsidiary of Boyd Gaming Corporation.
Basis of Presentation
In the opinion of the Company, the accompanying unaudited Consolidated Financial
Statements contain all adjustments necessary to present fairly the results of
its operations for the three months ended September 30, 1996 and 1995 and its
cash flows for the three months ended September 30, 1996 and 1995. It is
suggested that this report be read in conjunction with the Company's audited
financial statements included in the Annual Report on Form 10-K for the fiscal
year ended June 30, 1996. The operating results for the three months ended
September 30, 1996 and cash flows for the three months ended September 30, 1996
are not necessarily indicative of the results that will be achieved for the full
fiscal year or for future periods.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Recently Adopted Accounting Standards
The FASB issued SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
to Be Disposed Of, in March 1995. This statement was adopted by the Company for
the fiscal year beginning July 1, 1996 and requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The adoption of SFAS No. 121 did not have an
effect on the financial position or results of operations of the Company.
Note 2. LONG-TERM DEBT
The Company, through its wholly owned subsidiary California Hotel Finance
Corporation, has issued $185 million senior subordinated notes at 11%. The notes
are unconditionally guaranteed on a senior subordinated and unsecured basis by
the Company. The guarantee is subordinated to all existing and future senior
debt (as defined in the Indenture related to the notes) of the Company
(approximately $175 million at September 30, 1996) and is effectively
subordinated to all existing and future indebtedness and other liabilities
(including trade payables) of the subsidiaries of the Company (approximately
$25.8 million at September 30, 1996). The Company is not in default and there
are no payment blockages with respect
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<PAGE> 8
to the notes. In connection with Boyd Gaming Corporation's issuance of
$200,000,000 Senior Notes on October 4, 1996, the Company is a guarantor to
those Notes.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Financial Highlights
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1996 1995
- ------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
NET REVENUES
Stardust $ 45,266 $ 47,794
Boulder Strip Properties 45,220 42,912
Downtown Properties 33,202 32,451
- ------------------------------------------------------------------------------
Total Properties $123,688 $123,157
- ------------------------------------------------------------------------------
OPERATING INCOME
Stardust $ 3,472 $ 5,803
Boulder Strip Properties 3,812 2,893
Downtown Properties 2,366 2,984
- ------------------------------------------------------------------------------
Total Properties $ 9,650 $ 11,680
- ------------------------------------------------------------------------------
</TABLE>
The above table sets forth for the periods indicated certain Income Statement
Data for the Company's properties. As used herein, "Boulder Strip Properties"
consist of Sam's Town Las Vegas, the Eldorado and Jokers Wild; "Downtown
Properties" consist of the California and the Fremont.
Consolidated net revenues increased slightly for the three-month period
ended September 30, 1996 compared to the same period in the prior fiscal year.
Revenues at the Boulder Strip Properties increased 5.4% while revenues at the
Downtown Properties increased 2.3% and revenues at the Stardust declined 5.3%
for the three month period ended September 30, 1996, versus the comparable
period of the prior year. Company-wide casino revenue increased slightly and
food and beverage revenue increased 2.5%. Rooms revenue decreased 8.9% as a
result of a decline in the average daily room rate at the Stardust and a rooms
remodel project at the California Hotel and Casino which removed approximately
17% of its rooms from service for the current year's first fiscal quarter.
Consolidated operating income for the first quarter of fiscal 1997 was
$6.3 million versus $8.1 million for the prior year's first quarter, a decrease
of 22%. Consolidated operating income margin declined to 5.1% from 6.5% for the
first three months of fiscal 1997 versus the same period in fiscal 1996.
Net revenues at the Stardust decreased 5.3% for the first quarter of
fiscal 1997 versus the first quarter in the prior fiscal year. Casino revenue
declined 5.5% as a result of increased wagering volumes offset by lower win
percentages. Rooms revenue for the three months ended September 30, 1996
decreased 13% with a 1.3% increase in occupied rooms offset by a 2.6% decrease
in the average daily room rate. Operating income margin for the quarter declined
to 7.7% from 12.1% in the prior year's first quarter. The decline in operating
income and operating income margin is attributable primarily to decreased
operating income and operating income margins in the casino and rooms
departments along with higher advertising and promotional expenses.
Net revenues at the Boulder Strip Properties increased 5.4% for the
three months ended September 30, 1996 compared to the same period in the prior
year primarily as a result of a 8.1% increase in revenues
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<PAGE> 9
at Sam's Town Las Vegas. Casino revenues at the Boulder Strip Properties
increased 6.8% for the three months ended September 30, 1996, while rooms
revenue and food and beverage revenue were consistent with the prior year's
first fiscal quarter. The operating income margin at the Boulder Strip
Properties increased to 8.4% from 6.7% for the three months ended September 30,
1996 versus the comparable period in the prior fiscal year due to improved
operating margins at Sam's Town Las Vegas in the casino, rooms and food and
beverage departments.
Net revenues at the Downtown Properties increased 2.3% for the three
months ended September 30, 1996 compared to the same period in the prior year.
Net revenues at the California decreased 5.8% for the first three months of
fiscal 1996 with casino revenue declining 6.0%, rooms revenue declining 6.6% and
food and beverage revenue declining 3.9%. All revenues were impacted for the
first fiscal quarter due to a rooms remodel project at the California. The
California had approximately 17% of its rooms base unavailable in the three
month period ended September 30, 1996. At the Fremont, net revenues increased
11.6% for the three months ended September 30, 1996 versus the comparable period
in the prior fiscal year, with casino revenue increasing 6.5% and rooms and food
and beverage increasing 2.5% and 27.8%, respectively. Operating income margins
at the Downtown Properties were 7.1% for the three months ended September 30,
1996 versus 9.2% in the comparable period in the prior fiscal year with
operating income margins at both the California and Fremont declining. Operating
income margins at the California declined in the casino and rooms departments
primarily as a result of the rooms remodel project while operating income
margins at the Fremont declined due to declines in the casino and rooms
departments which were partially offset by increased margins in the food and
beverage departments.
Interest expense was $7.8 million for the first quarter of fiscal 1997
compared to $9.6 million in the first quarter of the prior year. The Company
incurred lower interest expense for the quarter ended September 30, 1996 as a
result of lower borrowings and increased capitalized interest compared to the
first quarter of the prior fiscal year.
As a result of these factors net loss decreased $.6 million for the
first fiscal quarter of 1997 compared to the first fiscal quarter of the prior
year.
FINANCIAL CONDITION AND CAPITAL RESOURCES
For the three months ended September 30, 1996 the Company's net cash
provided by operating activities was $22.8 million versus $11.2 million in last
year's first fiscal quarter. This increase was primarily a result of decreases
in other assets. As of September 30, 1996 the Company had balances of cash and
cash equivalents of approximately $32.4 million and had approximately $244
million of credit available under its bank credit facility.
The Company's principal uses of funds for the three months ended
September 30, 1996 and 1995 were cash used in investing activities, mainly for
capital expenditures and for the three months ended September 30, 1996 cash used
in financing activities related to the reduction of long-term debt. Capital
expenditures for the three months ended September 30, 1996 totaled $13.0
million. Of this amount $10 million was related to the renovation and expansion
of Main Street Station. Main Street Station, which is expected to cost
approximately $45 million, has approximately $23 million remaining to be spent.
This project is expected to be completed in the Company's second fiscal
quarter. The Company plans to fund the Main Street Station renovation primarily
from cash flow from operations and availability under its bank credit facility.
The source of funds required to meet the Company's working capital
needs (including maintenance
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<PAGE> 10
capital expenditures) and those required to complete the above mentioned project
is expected to be cash on hand, cash flow from operations, availability under
its bank credit facility, new borrowings to the extent permitted under existing
debt agreements and vendor and other financing. No assurance can be given that
required financing strategies can be effected on satisfactory terms.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a). Exhibits.
27. Financial Data Schedule
(b). Reports on Form 8-K.
None.
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
CALIFORNIA HOTEL AND CASINO
(Registrant)
Date: November 14, 1996 By /s/ KEITH SMITH
---------------------------------
Keith Smith
Vice President and Controller
(Chief Accounting Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 32,428
<SECURITIES> 0
<RECEIVABLES> 11,408
<ALLOWANCES> 0
<INVENTORY> 6,047
<CURRENT-ASSETS> 58,380
<PP&E> 503,364
<DEPRECIATION> 0
<TOTAL-ASSETS> 588,222
<CURRENT-LIABILITIES> 73,576
<BONDS> 0
0
0
<COMMON> 22,328
<OTHER-SE> 106,627
<TOTAL-LIABILITY-AND-EQUITY> 588,222
<SALES> 123,688
<TOTAL-REVENUES> 123,688
<CGS> 0
<TOTAL-COSTS> 117,365
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,767
<INCOME-PRETAX> (1,444)
<INCOME-TAX> (549)
<INCOME-CONTINUING> (895)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (895)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
