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 March 31, 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 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 Identification Nos.)
incorporation or organization)
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 May 10, 1996.
THE MIRAGE CASINO-HOTEL Common Stock, no par value - 100 shares
outstanding as of May 10, 1996.
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 March 31,
1996 and for the three-month periods ended March 31, 1996 and 1995
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 March 31, 1996, and the related
condensed combined statements of income and cash flows for the three-month
periods ended March 31, 1996 and 1995. 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, 1995,
and the related combined statements of operations and retained earnings
(accumulated deficit) and cash flows for the year then ended (not
presented herein), and, in our report dated February 9, 1996, 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, 1995, 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
May 6, 1996
-2-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
CONDENSED COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- -----------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 35,280 $ 36,516
Receivables, net of allowance for doubtful
accounts of $50,598 and $44,862 88,773 73,070
Deferred income taxes 23,396 26,709
Other current assets 31,272 30,519
---------- ----------
Total current assets 178,721 166,814
Property and equipment, net of accumulated
depreciation of $305,625 and $289,329 1,016,136 1,021,985
Other assets, net 9,786 9,401
---------- ----------
$1,204,643 $1,198,200
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable $ 57,524 $ 72,186
Accrued expenses 58,425 61,121
Amounts payable to Mirage Resorts, Incorporated
and affiliates 111,722 87,365
Current maturities of long-term debt - 41,882
---------- ----------
Total current liabilities 227,671 262,554
Long-term debt, net of current maturities 207,579 204,700
Other liabilities, including deferred income
taxes of $67,910 and $69,215 68,989 70,321
---------- ----------
Total liabilities 504,239 537,575
---------- ----------
Commitments and contingencies
Stockholder's equity
Common stock 518,945 518,945
Additional paid-in capital 107,142 107,142
Retained earnings 74,317 34,538
---------- ----------
Total stockholder's equity 700,404 660,625
---------- ----------
$1,204,643 $1,198,200
========== ==========
----------
</TABLE>
See note 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
Period Ended
March 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Gross revenues $332,247 $313,814
Less-promotional allowances (27,801) (24,223)
-------- --------
304,446 289,591
-------- --------
Costs and expenses
Casino-hotel operations 169,920 162,696
General and administrative 28,155 28,843
Mirage Resorts, Incorporated management fee 16,869 16,031
Depreciation 17,675 16,524
Corporate development 1 833
-------- --------
232,620 224,927
-------- --------
Operating income 71,826 64,664
-------- --------
Other income and (expense)
Interest expense
Notes payable to non-affiliates (5,627) (8,173)
Notes payable to Mirage Resorts, Incorporated - (12,811)
Other 145 151
-------- --------
(5,482) (20,833)
-------- --------
Income before income taxes and extraordinary item 66,344 43,831
Provision for income taxes (26,565) (18,183)
-------- --------
Income before extraordinary item 39,779 25,648
Extraordinary item-loss on early retirement of debt - (10,439)
-------- --------
Net income $ 39,779 $ 15,209
======== ========
- ----------
</TABLE>
See note 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 Three-Month
Period Ended
March 31,
----------------------
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities
Net income $ 39,779 $ 15,209
Adjustments to reconcile net income to net cash provided
by operating activities
Provision for losses on receivables 5,892 6,966
Depreciation of property and equipment 17,675 16,524
Amortization of debt discount and issuance costs 2,967 2,787
Loss on early retirement of debt - 10,439
Deferred income taxes 2,008 (87)
Changes in assets and liabilities
Increase in receivables and other operating assets (22,841) (20,460)
Decrease in trade accounts payable and accrued expenses (17,358) (7,314)
Other 607 790
-------- --------
Net cash provided by operating activities 28,729 24,854
-------- --------
Cash flows from investing activities
Capital expenditures (12,886) (16,223)
Other 446 (266)
-------- --------
Net cash used for investing activities (12,440) (16,489)
-------- --------
Cash flows from financing activities
Increase in management fee obligations to Mirage Resorts, Incorporated 1,278 2,394
Advances from Mirage Resorts, Incorporated and affiliates 15,313 3,524
Increase in income taxes payable to Mirage Resorts, Incorporated 7,766 11,969
Net reduction in bank credit facility and commercial paper borrowings (41,882) (20,000)
-------- --------
Net cash used for financing activities (17,525) (2,113)
-------- --------
Cash and cash equivalents
Increase (decrease) for the period (1,236) 6,252
Balance, beginning of period 36,516 28,511
-------- --------
Balance, end of period $ 35,280 $ 34,763
======== ========
Supplemental cash flow disclosures
Interest paid (including $12,750 to Mirage Resorts, Incorporated
in 1995), net of amounts capitalized $ 5,046 $ 17,444
Income taxes paid to Mirage Resorts, Incorporated 16,791 6,301
----------
</TABLE>
See note to condensed combined financial statements.
-5-
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP. AND SUBSIDIARY
NOTE TO CONDENSED COMBINED FINANCIAL STATEMENTS
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., 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 Nevada 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 1995
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, 1995 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 1995 condensed combined financial statements have
been reclassified to conform with the 1996 presentation. These
reclassifications had no effect on the Company's net income.
-6-
<PAGE>
MANAGEMENT'S ANALYSIS OF OPERATIONS (COMPARISON OF OPERATING RESULTS FOR
THE THREE-MONTH PERIODS ENDED MARCH 31, 1996 AND 1995)
RESULTS OF OPERATIONS
Operating income increased by 11.1% over the 1995 first quarter, setting
a new record. This increase is particularly noteworthy given the
exceptionally high table games win percentage of 23.3% in the 1995
period. The table games win percentage in the 1996 first quarter was
22.3%. By comparison, the win percentage for the full years 1995 and
1994 was 21.1% and 19.4%, respectively.
The Mirage had the best quarter in its six-year history. Despite a
decline in the table games win percentage, casino revenues approximately
equaled the strong results of the 1995 period, principally reflecting a
5.9% increase in slot revenues. Led by a $5.3 million increase in room
revenues, net non-casino revenues at The Mirage grew by 13.1%. Between
late February and mid-August 1995, all 2,765 standard guest rooms and 61
of the 279 suites at The Mirage were significantly refurbished and
enhanced. This project resulted in 8% more available room nights during
the 1996 period. The substantial improvement in the quality of The
Mirage's guest rooms allowed the facility to achieve increases in both
the average room rate and occupancy. Occupancy of available standard
guest rooms was 99.1%, versus 98.3% in the prior year's first quarter.
Treasure Island also had the best quarter in its history. Strong
increases in room rates and slot and entertainment revenues primarily
accounted for the increase in revenues and operating income. Treasure
Island's operating income has increased over the prior year's quarter in
each of the five full quarters since its first anniversary.
OTHER INCOME AND EXPENSE
Interest expense related to notes payable to non-affiliates declined by
$2.5 million, or 31.2%. This decline primarily reflects the retirement
of the remaining $126.0 million principal amount of TI Finance's 9 7/8%
first mortgage notes which were called for redemption in March 1995.
During the 1995 period, the Company incurred $12.8 million of interest
expense related to the long-term notes payable to MRI. Such notes were
repaid in April 1995.
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. This includes reimbursement for any additional taxes
and interest thereon resulting from Internal Revenue Service audit
adjustments. Under the Internal Revenue Code, MRI's consolidated
subsidiaries are jointly and severally liable for all income tax
liabilities.
-7-
<PAGE>
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 and benefits. This resulted in a combined provision in the
1996 and 1995 periods at a rate above the federal income tax statutory
rate.
EXTRAORDINARY ITEM
As noted previously, in March 1995, the Company called for redemption
the remaining $126.0 million principal amount of the 9 7/8% first
mortgage notes. Although this early retirement was financially
advantageous to the Company, the call premium and the write-off of the
related unamortized debt issuance costs resulted in an extraordinary
charge of $10.4 million.
-8-
<PAGE>
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.
The Registrants filed no reports on Form 8-K during the three-
month period ended March 31, 1996.
-9-
<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.
May 10, 1996 by: DANIEL R. LEE
-------------- --------------------------------
Date DANIEL R. LEE
Treasurer
(Principal Financial Officer)
THE MIRAGE CASINO-HOTEL
May 10, 1996 by: DOUGLAS G. POOL
-------------- --------------------------------
Date DOUGLAS G. POOL
Senior Vice President, Treasurer
and Chief Financial Officer
(Principal Financial Officer)
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANTS' CONDENSED COMBINED BALANCE SHEET AS OF MARCH 31, 1996 AND THE
RELATED CONDENSED COMBINED STATEMENTS OF INCOME AND CASH FLOWS FOR THE THREE
MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 35,280
<SECURITIES> 0
<RECEIVABLES> 139,371
<ALLOWANCES> 50,598
<INVENTORY> 0
<CURRENT-ASSETS> 178,721
<PP&E> 1,321,761
<DEPRECIATION> 305,625
<TOTAL-ASSETS> 1,204,643
<CURRENT-LIABILITIES> 227,671
<BONDS> 207,579
0
0
<COMMON> 518,945
<OTHER-SE> 181,459
<TOTAL-LIABILITY-AND-EQUITY> 1,204,643
<SALES> 0
<TOTAL-REVENUES> 304,446
<CGS> 0
<TOTAL-COSTS> 164,028
<OTHER-EXPENSES> 17,675
<LOSS-PROVISION> 5,892
<INTEREST-EXPENSE> 5,627
<INCOME-PRETAX> 66,344
<INCOME-TAX> 26,565
<INCOME-CONTINUING> 39,779
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,779
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
