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 September 30, 1995
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 No. 1-11324
GNS FINANCE CORP.
THE MIRAGE CASINO-HOTEL
___________________________________________________________
(Exact name of each Registrant as specified in its charter)
88-0235356
Nevada 88-0224157
_______________________________ ________________________________
(State or other jurisdiction of (I.R.S. Employer Identifica-
incorporation or organization) tion Nos.)
3400 Las Vegas Boulevard South, Las Vegas, Nevada 89109
______________________________________________________________________
(Address of principal executive offices - Zip Code)
(702) 791-7111
______________________________________________________________________
(Registrants' telephone number, including area code)
______________________________________________________________________
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the Registrants (1) have 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 Registrants were required to file such
reports), and (2) have been subject to such filing requirements for
the past 90 days. YES X NO
_____ _____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
GNS FINANCE CORP. Common Stock, no par value - 200 shares outstanding
as of November 10, 1995.
THE MIRAGE CASINO-HOTEL Common Stock, no par value - 100 shares
outstanding as of November 10, 1995.
The Registrants meet the conditions set forth in General Instructions
H(1)(a) and (b) of Form 10-Q and, accordingly, are filing this Form
10-Q with the reduced disclosure format provided in General
Instruction H(2).
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited condensed combined financial information as of
September 30, 1995 and for the three-month and nine-month periods
ended September 30, 1995 and 1994 included in this report was
reviewed by Arthur Andersen LLP, independent public accountants,
in accordance with the professional standards and procedures
established for such reviews by the American Institute of
Certified Public Accountants.
<PAGE>
REVIEW REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
_______________________________________________
To the Directors and Stockholder
of THE MIRAGE CASINO-HOTEL and Subsidiaries
and GNS FINANCE CORP. and Subsidiary
We have reviewed the accompanying condensed combined balance
sheet of THE MIRAGE CASINO-HOTEL and subsidiaries and GNS FINANCE
CORP. and subsidiary (collectively, the "Company") as of
September 30, 1995, and the related condensed combined statements
of income for the three-month and nine-month periods ended
September 30, 1995 and 1994 and the related condensed combined
statements of cash flows for the nine-month periods ended
September 30, 1995 and 1994. These combined financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted 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 the financial statements
referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the combined balance sheet of THE MIRAGE
CASINO-HOTEL and subsidiaries and GNS FINANCE CORP. and
subsidiary as of December 31, 1994, and the related combined
statements of operations and accumulated deficit and cash flows
for the year then ended (not presented herein), and, in our
report dated February 8, 1995 (except for Note 7, as to which the
date is March 13, 1995), we expressed an unqualified opinion on
those combined financial statements. In our opinion, the
information set forth in the accompanying condensed combined
balance sheet of THE MIRAGE CASINO-HOTEL and subsidiaries and GNS
FINANCE CORP. and subsidiary as of December 31, 1994, is fairly
stated, in all material respects, in relation to the combined
balance sheet from which it has been derived.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
November 10, 1995
-2-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
CONDENSED COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
____________ ___________
(Unaudited)
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 21,034 $ 28,511
Receivables, net of allowance for doubtful
accounts of $51,538 and $34,990 68,044 56,788
Deferred income taxes 21,095 18,530
Other current assets 29,945 30,509
__________ __________
Total current assets 140,118 134,338
Property and equipment, net of accumulated
depreciation of $272,534 and $237,846 1,029,656 1,015,649
Other assets, net 9,207 11,452
__________ __________
$1,178,981 $1,161,439
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable $ 51,154 $ 64,593
Accrued expenses 55,983 51,345
Amounts payable to Mirage Resorts,
Incorporated and affiliates 121,762 82,788
__________ __________
Total current liabilities 228,899 198,726
Notes payable to Mirage Resorts, Incorporated - 518,943
Notes payable to non-affiliates 256,898 339,926
Other liabilities, including deferred income
taxes of $58,416 and $52,379 59,665 52,733
__________ __________
Total liabilities 545,462 1,110,328
__________ __________
Commitments and contingencies
Stockholder's equity
Common stock 518,945 2
Additional paid-in capital 107,142 107,142
Retained earnings (accumulated deficit) 7,432 (56,033)
__________ __________
Total stockholder's equity 633,519 51,111
__________ __________
$1,178,981 $1,161,439
========== ==========
</TABLE>
SEE NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS.
-3-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
CONDENSED COMBINED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the Three-Month For the Nine-Month
Period Ended Period Ended
September 30, September 30,
_____________________ _____________________
1995 1994 1995 1994
________ ________ ________ ________
<S> <C> <C> <C> <C>
Gross revenues $300,900 $296,941 $877,930 $827,912
Less-promotional allowances (24,955) (23,095) (71,116) (69,214)
________ ________ ________ ________
275,945 273,846 806,814 758,698
________ ________ ________ ________
Costs and expenses
Casino-hotel operations 156,881 153,512 464,899 447,031
General and administrative 27,589 26,397 85,141 80,198
Mirage Resorts, Incorporated management fee 15,279 14,901 44,572 41,610
Depreciation 17,799 19,058 51,134 56,983
Corporate development 686 322 2,271 1,462
________ ________ ________ ________
218,234 214,190 648,017 627,284
________ ________ ________ ________
Operating income 57,711 59,656 158,797 131,414
________ ________ ________ ________
Other income and (expenses)
Interest expense
Notes payable to non-affiliates (6,476) (11,556) (21,919) (38,357)
Notes payable to Mirage Resorts, Incorporated - (9,657) (14,235) (25,385)
Other, net 106 105 333 293
________ ________ ________ ________
(6,370) (21,108) (35,821) (63,449)
________ ________ ________ ________
Income before federal income taxes and extraordinary item 51,341 38,548 122,976 67,965
Provision for federal income taxes (19,231) (17,625) (49,072) (37,257)
________ ________ ________ ________
Income before extraordinary item 32,110 20,923 73,904 30,708
Extraordinary item-loss on early retirements of debt,
net of applicable federal income tax benefit - (4,265) (10,439) (10,238)
________ ________ ________ ________
Net income $ 32,110 $ 16,658 $ 63,465 $ 20,470
======== ======== ======== ========
</TABLE>
SEE NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS.
-4-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
CONDENSED COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION> For the Nine-Month
Period Ended
September 30,
________________________
1995 1994
_________ _________
<S> <C> <C>
Cash flows from operating activities
Net income $ 63,465 $ 20,470
Adjustments to reconcile net income to net cash provided
by operating activities
Provision for losses on receivables 17,147 15,131
Depreciation of property and equipment 51,134 56,983
Amortization of debt discount and issuance costs 8,343 9,722
Loss on early retirements of debt 10,439 11,287
Changes in assets and liabilities
Net increase in receivables and other operating assets (27,337) (24,244)
Net decrease in trade accounts payable and accrued expenses (8,407) (17,464)
Other, net 2,202 3,894
_________ _________
Net cash provided by operating activities 116,986 75,779
_________ _________
Cash flows from investing activities
Capital expenditures (67,316) (29,740)
Other, net 985 (21)
_________ _________
Net cash used for investing activities (66,331) (29,761)
_________ _________
Cash flows from financing activities
Increase (decrease) in management fee obligations
to Mirage Resorts, Incorporated (112,517) 41,610
Advances from Mirage Resorts, Incorporated and affiliates 27,856 14,417
Increase (decrease) in income taxes currently payable
to Mirage Resorts, Incorporated (40,212) 14,834
Repayment of notes payable to Mirage Resorts, Incorporated
(excluding notes related to management fees and income taxes) (353,022) -
Borrowings under bank credit facilities 154,000 153,000
Repayments of borrowings under bank credit facilities (119,000) (145,000)
Early retirements of public debt (134,180) (117,314)
Other principal payments on debt - (27,074)
Issuance of common stock to Mirage Resorts, Incorporated 518,943 -
Other - (245)
_________ _________
Net cash used for financing activities (58,132) (65,772)
_________ _________
Cash and cash equivalents
Decrease for the period (7,477) (19,754)
Balance, beginning of period 28,511 40,676
_________ _________
Balance, end of period $ 21,034 $ 20,922
========= =========
Supplemental cash flow disclosures
Interest paid (including $16,309 and $24,287 to
Mirage Resorts, Incorporated), net of amounts capitalized $ 35,244 $ 53,551
Income taxes paid to Mirage Resorts, Incorporated (including
amounts represented by a note payable) 85,823 19,240
</TABLE>
SEE NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS.
-5-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The condensed combined financial statements include the
consolidated accounts of THE MIRAGE CASINO-HOTEL ("MCH") and
its wholly owned subsidiaries, Treasure Island Corp. ("TI")
and MH, INC. ("MH"), combined with the consolidated accounts
of GNS FINANCE CORP. ("Finance") and its wholly owned
subsidiary, Treasure Island Finance Corp. ("TI Finance")
(collectively, the "Company"). All significant intercompany
balances and transactions have been eliminated in
consolidation or combination, as appropriate.
MCH and Finance are wholly owned subsidiaries of Mirage
Resorts, Incorporated ("MRI"). The condensed combined
financial statements include various transactions between
the Company and MRI and its other wholly owned subsidiaries.
The condensed combined financial statements have been
prepared in accordance with the accounting policies
described in the Company's 1994 Annual Report on Form 10-K
and should be read in conjunction with the Notes to Combined
Financial Statements which appear in that report. The
Condensed Combined Balance Sheet at December 31, 1994 was
derived from audited financial statements, but does not
include all disclosures required by generally accepted
accounting principles.
In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, necessary for a fair
presentation of the results for the interim periods have
been included. The interim results reflected in the
condensed combined financial statements are not necessarily
indicative of expected results for the full year.
Certain amounts in the 1994 condensed combined financial
statements have been reclassified to conform with the 1995
presentation. These reclassifications had no effect on the
Company's net income.
NOTE 2 - NOTES PAYABLE
Early Retirement of Notes Payable to Non-Affiliates
On March 13, 1995, the Company called for redemption the
remaining $125,991,000 outstanding principal amount of TI
Finance's 9 7/8% first mortgage notes collateralized by The
Mirage and Treasure Island. The notes (originally scheduled
to mature on October 1, 2000) were redeemed on April 12,
1995 at the initial stated redemption price of 106.5% of the
principal amount. The redemption premium and the write-off
of the unamortized debt issue costs resulted in an
extraordinary loss of $10.4 million. The redemption was
funded principally by borrowings under MRI's bank credit
facility discussed below.
-6-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (Unaudited)
Bank Credit Facility Amendment
On April 6, 1995, MRI's $525 million revolving bank credit
facility maturing in May 1999 was amended to increase the
total availability to $1 billion (as so amended, the
"Facility").
Borrowings under the Facility bear interest at a specified
premium over, at the borrower's option, the prime rate or
the one-, two-, three- or six-month London Interbank Offered
Rate ("LIBOR"). The premium is based on MRI's Annualized
Funded Debt Ratio (as defined) and the rating of Finance's
zero coupon first mortgage notes. The premium is currently
zero for prime rate borrowings and 75 basis points for LIBOR
borrowings. Alternatively, bids may be requested from the
participating banks, which in the past has resulted in
borrowings at less than these premiums. MRI incurred all
costs associated with amending the Facility and pays
commitment fees on the unused portion of the Facility.
MRI and its significant subsidiaries, including MCH, MH and
TI but excluding the subsidiary which owns and operates the
Golden Nugget-Laughlin hotel-casino and certain other
subsidiaries (the "Excluded Subsidiaries"), are directly
liable for or have guaranteed the repayment of borrowings
under the Facility. Borrowings under the Facility are
currently uncollateralized. If MRI's Leverage Ratio (as
defined) were to exceed 2.75 to 1.0, or if the rating of its
first mortgage notes were to decline to below investment
grade, the banks would be granted a first lien on the Golden
Nugget hotel-casino, Bellagio, a major luxury hotel, casino
and resort facility currently under construction on the Las
Vegas Strip, Shadow Creek and certain other assets,
including The Mirage and Treasure Island properties if the
first mortgage notes are then no longer outstanding. MRI
has agreed, with certain limited exceptions, not to dispose
of or further encumber such properties and assets without
the approval of its bank group.
The credit agreement governing the Facility contains
covenants requiring MRI and its subsidiaries, including MCH,
MH and TI but excluding the Excluded Subsidiaries, to
maintain a specified tangible net worth and certain
financial ratios. The credit agreement also contains
covenants that limit to various permitted amounts the
ability of MRI and its subsidiaries, including MCH, MH and
TI but excluding the Excluded Subsidiaries, to, among other
things, incur additional debt, commit funds to capital
expenditures or new business ventures, make investments,
merge or sell assets.
Transactions with MRI
On April 11, 1995, the $518,943,000 outstanding principal
balance of long-term notes payable to MRI was repaid by the
Company using the proceeds from the sale to MRI of Finance's
common stock.
-7-
<PAGE>
MANAGEMENT'S ANALYSIS OF OPERATIONS (COMPARISON OF OPERATING
RESULTS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND
1994)
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
1995 1994 % Increase
________ ________ __________
(In thousands)
<S> <C> <C> <C>
Gross revenues
The Mirage $582,735 $556,221 4.8%
Treasure Island 295,195 271,691 8.7%
________ ________ _____
$877,930 $827,912 6.0%
________ ________ _____
Net revenues
The Mirage $532,613 $505,062 5.5%
Treasure Island 274,201 253,636 8.1%
________ ________ _____
$806,814 $758,698 6.3%
________ ________ _____
Operating income
The Mirage $110,936 $ 97,401 13.9%
Treasure Island 50,132 35,475 41.3%
Corporate development (2,271) (1,462) 55.3%
________ ________ _____
$158,797 $131,414 20.8%
________ ________ _____
</TABLE>
The Mirage's gross revenues and operating income improved despite
the fact that there were approximately 11% fewer available room-
nights in the 1995 period due to a major guest room enhancement
program. The program involved refurbishing and enhancing all
2,765 of the standard guest rooms and 61 of the 279 suites. The
enhancement program was completed on August 18 and has been very
well received by the public. For the month of September, The
Mirage's average standard room rate rose by 13.2% over September
1994, despite some room reservations honored during the period
that reflected rates charged prior to the enhancement program.
Despite accommodating fewer hotel guests, The Mirage's table
games revenues increased by 14.4%, reflecting an increase in
both activity and win percentage. The Mirage experienced
a table games win percentage of 22.2% during the 1995 period,
versus 20.9% in the 1994 period. Slot revenues were also up $1.5
million.
The Mirage's gross non-casino revenues were down by only $1.2
million, or less than 1%, from the 1994 period. The impact of
the reduction in room inventory was significantly offset by a
$4.1 million, or 12.4%, increase in gross entertainment revenues.
This improvement principally reflects additional performances by
Siegfried & Roy, as well as an increase in the show's average
ticket price.
The improvement in Treasure Island's operating results was broad-
based. Casino revenues increased by $7.9 million, or 7.0%, and
gross non-casino revenues grew by $15.6 million, or 9.9%. The
growth in gross non-casino revenues is primarily attributable to
higher room and entertainment revenues. Room revenues grew by
-8-
<PAGE>
13.3%, principally reflecting an increase in the average room
rate. Entertainment revenues showed a 31.8% improvement over the
1994 period, representing an increase in both occupancy and the
average ticket price for "Mystere" as well as additional
performances of the show during the 1995 period.
OTHER INCOME AND EXPENSES
Interest expense related to notes payable to non-affiliates
declined by $16.4 million, or 42.9%, primarily reflecting debt
levels that on average were approximately 38% lower than they
were in the prior-year period.
In April 1995, the $518.9 million outstanding principal balance
of the notes payable to MRI was retired using the proceeds from
the sale to MRI of Finance's common stock. As a result, interest
expense for the nine-month period related to long-term notes
payable to MRI decreased by $11.2 million, or 43.9%.
FEDERAL INCOME TAXES
MRI and its subsidiaries file federal income tax returns on a
consolidated basis. MRI has tax allocation agreements (which are
not binding on the Internal Revenue Service) with each of its key
subsidiaries, including MCH, TI, Finance and TI Finance, which
require each of them to reimburse MRI for the amount of tax they
would pay on a stand-alone basis, except they receive no benefit
from carrybacks to prior years. Under the Internal Revenue Code,
MRI's consolidated subsidiaries, including MCH, TI, Finance and
TI Finance, are jointly and severally liable with MRI for all
income taxes owed by MRI and its consolidated subsidiaries.
As a result of the tax allocation agreements, the tax provision
is not calculated on the combined income or loss of MCH, TI,
Finance and TI Finance. Instead, it reflects the sum of their
respective tax provisions, which resulted in a combined provision
in the 1995 and 1994 periods at a rate above the federal income
tax statutory rate.
EXTRAORDINARY ITEM
During the nine-month period of each year, some of the Company's
more expensive debt was retired prior to its scheduled maturity.
Although management believes that these early retirements were
financially beneficial for the Company, the repurchase premiums
paid and the write-off of the unamortized debt issuance costs
resulted in extraordinary charges in both periods.
-9-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
10.1 Amendment No. 2 to Reducing Revolving Loan Agreement (the
"MRI Loan Agreement"), dated as of August 30, 1995, among
MRI, MCH, TI, Bellagio, MH, GNLV, CORP., each bank party
thereto, Bank of America National Trust and Savings
Association, Bankers Trust Company, The Long-Term Credit
Bank of Japan, Ltd., Los Angeles Agency, Societe Generale,
Credit Lyonnais Los Angeles Branch and Credit Lyonnais
Cayman Island Branch, as Co-Agents, and Bank of America
National Trust and Savings Association, as Administrative
Co-Agent (without Exhibits). Incorporated by reference to
Exhibit 10.1 to MRI's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1995 (the "MRI Form 10-Q").
10.2 Amendment No. 3 to the MRI Loan Agreement, dated as of
August 30, 1995 (without Exhibits). Incorporated by
reference to Exhibit 10.2 to the MRI Form 10-Q.
10.3 Amendment No. 4 to the MRI Loan Agreement, dated as of
September 5, 1995 (without Exhibits). Incorporated by
reference to Exhibit 10.3 to the MRI Form 10-Q.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
The Registrants filed no reports on Form 8-K during the
three-month period ended September 30, 1995.
-10-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrants have duly caused this report to be signed
on their behalf by the undersigned thereunto duly authorized.
GNS FINANCE CORP.
November 10, 1995 by: DANIEL R. LEE
_________________ ________________________________
Date DANIEL R. LEE
Treasurer
(Principal Financial Officer)
THE MIRAGE CASINO-HOTEL
November 10, 1995 by: DOUGLAS G. POOL
_________________ ________________________________
Date DOUGLAS G. POOL
Senior Vice President, Treasurer
and Chief Financial Officer
(Principal Financial Officer)
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANTS' CONDENSED COMBINED BALANCE SHEET AS OF SEPTEMBER 30, 1995 AND
THE RELATED CONDENSED COMBINED STATEMENTS OF INCOME AND CASH FLOWS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 21,034
<SECURITIES> 0
<RECEIVABLES> 119,582
<ALLOWANCES> 51,538
<INVENTORY> 0
<CURRENT-ASSETS> 140,118
<PP&E> 1,302,190
<DEPRECIATION> 272,534
<TOTAL-ASSETS> 1,178,981
<CURRENT-LIABILITIES> 228,899
<BONDS> 256,898
<COMMON> 518,945
0
0
<OTHER-SE> 114,574
<TOTAL-LIABILITY-AND-EQUITY> 1,178,981
<SALES> 0
<TOTAL-REVENUES> 806,814
<CGS> 0
<TOTAL-COSTS> 447,752
<OTHER-EXPENSES> 51,134
<LOSS-PROVISION> 17,147
<INTEREST-EXPENSE> 36,154
<INCOME-PRETAX> 122,976
<INCOME-TAX> 49,072
<INCOME-CONTINUING> 73,904
<DISCONTINUED> 0
<EXTRAORDINARY> (10,439)
<CHANGES> 0
<NET-INCOME> 63,465
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
