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 June 30, 1997
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
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(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 August 14, 1997.
THE MIRAGE CASINO-HOTEL Common Stock, no par value - 100 shares
outstanding as of August 14, 1997.
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 June
30, 1997 and for the three-month and six-month periods ended June
30, 1997 and 1996 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.
We have reviewed the accompanying condensed combined balance
sheet of THE MIRAGE CASINO-HOTEL and subsidiaries and GNS FINANCE
CORP. (collectively, the "Company") as of June 30, 1997, and
the related condensed combined statements of income for the
three-month and six-month periods ended June 30, 1997 and 1996
and the related condensed combined statements of cash flows for
the six-month periods ended June 30, 1997 and 1996. These
condensed combined financial statements are the responsibility of
the Company's management.
We conducted our reviews 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 reviews, 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. as of
December 31, 1996, and the related combined statements of income
and retained earnings and cash flows for the year then ended (not
presented herein), and, in our report dated March 7, 1997, 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. as of
December 31, 1996, 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
August 11, 1997
2
<PAGE>
<TABLE>
<CAPTION>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP.
CONDENSED COMBINED BALANCE SHEETS
(In thousands)
June 30, December 31,
1997 1996
----------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 37,311 $ 57,664
Receivables, net of allowance for doubtful accounts
of $41,971 and $36,558 64,509 66,805
Deferred income taxes 24,727 22,969
Other current assets 29,121 31,042
Advances to Mirage Resorts, Incorporated and affiliates 123,205 -
---------- ----------
Total current assets 278,873 178,480
Property and equipment, net of accumulated depreciation
of $378,410 and $348,678 977,617 988,811
Advances to Mirage Resorts, Incorporated and affiliates 30,527 70,353
Other assets, net 13,910 11,717
---------- ----------
$1,300,927 $1,249,361
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable $ 45,444 $ 80,149
Accrued expenses 62,206 60,980
Income taxes payable to Mirage Resorts, Incorporated 17,114 9,901
Management fees payable to Mirage Resorts, Incorporated 15,151 15,056
Current maturities of long-term debt 123,205 -
---------- ----------
Total current liabilities 263,120 166,086
Long-term debt, net of current maturities 100,000 216,699
Other liabilities, including deferred income taxes of $87,766
and $80,205 88,900 81,246
---------- ----------
Total liabilities 452,020 464,031
---------- ----------
Commitments and contingencies
Stockholder's equity
Common stock 518,945 518,945
Additional paid-in capital 107,142 107,142
Retained earnings 222,820 159,243
---------- ----------
Total stockholder's equity 848,907 785,330
---------- ----------
$1,300,927 $1,249,361
========== ==========
</TABLE>
- ----------
See notes to condensed combined financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP.
CONDENSED COMBINED STATEMENTS OF INCOME (Unaudited)
(In thousands)
For the Three-Month For the Six-Month
Period Ended Period Ended
June 30, June 30,
-------------------- ---------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Gross revenues $300,049 $278,760 $618,365 $611,007
Less - promotional allowances (23,300) (24,363) (48,922) (52,164)
-------- -------- -------- --------
276,749 254,397 569,443 558,843
-------- -------- -------- --------
Costs and expenses
Casino-hotel operations 162,639 150,858 328,050 320,778
General and administrative 30,296 27,700 59,251 55,856
Mirage Resorts, Incorporated
management fee 15,151 14,169 31,120 31,038
Depreciation 17,030 17,725 33,699 35,400
-------- -------- -------- --------
225,116 210,452 452,120 443,072
-------- -------- -------- --------
Operating income 51,633 43,945 117,323 115,771
-------- -------- -------- --------
Other income (expense)
Interest expense (5,754) (5,375) (11,340) (11,002)
Other, including interest income 106 181 355 326
-------- ------- -------- --------
(5,648) (5,194) (10,985) (10,676)
-------- ------- -------- --------
Income before income taxes 45,985 38,751 106,338 105,095
Provision for income taxes 18,788 15,740 42,761 42,305
-------- -------- -------- --------
Net income $ 27,197 $ 23,011 $ 63,577 $ 62,790
======== ======== ======== ========
</TABLE>
- ----------
See notes to condensed combined financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP.
CONDENSED COMBINED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
For the Six-Month
Period Ended
June 30,
----------------------
1997 1996
--------- --------
<S> <C> <C>
Cash flows from operating activities
Net income $ 63,577 $ 62,790
Adjustments to reconcile net income to net cash provided by
operating activities
Provision for losses on receivables 7,645 9,791
Depreciation of property and equipment 33,699 35,400
Amortization of debt discount and issuance costs 6,683 6,014
Deferred income taxes 5,803 2,486
Changes in working capital pertaining to operating activities
Increase in receivables and other current assets (3,428) (6,229)
Decrease in accounts payable and accrued expenses (33,479) (23,703)
Increase (decrease) in management fees and income
taxes payable to Mirage Resorts, Incorporated 7,308 (2,982)
Other (2,761) (480)
--------- --------
Net cash provided by operating activities 85,047 83,087
--------- --------
Cash flows from investing activities
Capital expenditures (26,143) (23,255)
Advances to Mirage Resorts, Incorporated and affiliates (83,379) (24,649)
Other 4,122 831
--------- --------
Net cash used for investing activities (105,400) (47,073)
--------- --------
Cash flows used for financing activities
Decrease in bank credit facility and commercial paper borrowings - (41,882)
--------- --------
Cash and cash equivalents
Decrease for the period (20,353) (5,868)
Balance, beginning of period 57,664 36,516
--------- --------
Balance, end of period $ 37,311 $ 30,648
========= ========
</TABLE>
- ----------
See notes to condensed combined financial statements.
5
<PAGE>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP.
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. and MH,
INC., combined with the accounts of GNS FINANCE CORP.
("Finance") (collectively, the "Company"). All significant inter-
company 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 accompanying condensed combined financial statements have
been prepared in accordance with the accounting policies
described in the Company's 1996 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, 1996 contained herein was
derived from audited financial statements, but does not include
all disclosures included in the Form 10-K and applicable under
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
results for the 1997 interim periods are not necessarily
indicative of expected results for the full year.
Certain amounts in the 1996 condensed combined financial
statements have been reclassified to conform with the 1997
presentation. These reclassifications had no effect on the
Company's net income.
NOTE 2 - BANK CREDIT FACILITY AMENDMENT
On March 7, 1997, MRI's $1 billion revolving bank credit facility
was amended to, among other things, increase the total
availability to $1.75 billion and extend the maturity to March
2002. Pursuant to the amendment, the Company is no longer liable
for or a guarantor of any borrowings, which are uncollateralized.
6
<PAGE>
NOTE 3 - ADVANCES TO MRI AND AFFILIATES
At June 30, 1997, current maturities of long-term debt represent
the accreted value of Finance's Zero Coupon First Mortgage Notes
Due March 15, 1998. The funds necessary to retire the $133
million face amount of the notes upon maturity are anticipated to
be provided by MRI (using borrowings under MRI's $1.75 billion
bank credit facility) through the repayment of advances made to
MRI and affiliates by the Company. As a result, advances to MRI
and affiliates in an amount equal to the accreted value of the
notes have been classified as a current asset at June 30, 1997.
7
<PAGE>
MANAGEMENT'S ANALYSIS OF OPERATIONS (COMPARISON OF OPERATING
RESULTS FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1997 AND 1996)
The improvement in the Company's operating results during the
1997 six-month period was achieved against the backdrop of
increased competition in the Las Vegas market. According to the
Las Vegas Convention and Visitors Authority, during the period
January through May 1997, the number of Las Vegas visitors rose
by approximately 5% over the same 1996 period. Meanwhile, the
number of available guest rooms in Las Vegas increased by
almost 12%. As a result, city-wide hotel room occupancy
rates declined. Management believes that this trend continued
during June.
The Company, however, focuses on operating superior, "must see"
properties and has been less affected by the city-wide trend. In
the 1997 six-month period, Company-wide standard guest room
occupancy remained very high (99.5%, versus 99.7% in the 1996
period) and the average standard room rate increased by 2%.
The Company-wide table games win percentage was 20.9%, versus
19.6% in the 1996 period. The 1997 period also benefited from
a non-recurring gain of $4.0 million related to the sale and
exchange of land in Las Vegas. There were no such non-recurring
items in the first six months of 1996.
The earnings improvement was led by The Mirage, which achieved
net revenues of $384.4 million and operating income of $85.1
million. Such amounts reflect strong increases of $15.7 million,
or 4%, and $7.3 million, or 9%, respectively, over the 1996
period. The improvement in revenues was broadly distributed.
Casino revenues grew by $7.1 million, or 3%, principally due to
an increase in the table games win percentage. Entertainment
revenues increased by 8% over the 1996 period, reflecting
additional performances by Siegfried & Roy as well as an increase
in the average ticket price for the show. Food and beverage
and room revenues also increased over the prior-year period.
Treasure Island performed well during the first six months of
1997, amidst competitive market conditions and ongoing construc-
tion of a new hotel lobby and other amenities. Treasure
Island achieved net revenues of $185.0 million and operating
income of $32.2 million during the 1997 period, versus the
strong $190.1 million and $38.0 million reported in the 1996
period. The ongoing construction has temporarily reduced the
number of slot machines offered at Treasure Island, contributing
to a 10% decline in slot revenues. The decline in slot
revenues primarily accounts for the decrease in net revenues
and operating income. Treasure Island's net non-casino revenues
increased slightly over the prior-year period, primarily
reflecting a 7% increase in entertainment revenues resulting
from an increase in the average ticket price for Mystere.
Room revenues also showed a small improvement, reflecting stable
occupancy at a higher average daily room rate. Standard guest
room occupancy was in excess of 99% during both six-month
periods. The new hotel lobby opened in early August, and is
scheduled to be followed by a new Italian restaurant and other
new features in the third and fourth quarters.
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 June 30, 1997.
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.
August 14, 1997 by: DANIEL R. LEE
- --------------- -----------------------------
Date Daniel R. Lee
Treasurer
(Principal Financial Officer)
THE MIRAGE CASINO-HOTEL
August 14, 1997 by: CHRISTOPHER W. NORDLING
- --------------- -----------------------------
Date Christopher W. Nordling
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 JUNE 30, 1997 AND THE
RELATED CONDENSED COMBINED STATEMENT OF INCOME AND CASH FLOWS FOR THE SIX
MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 37,311
<SECURITIES> 0
<RECEIVABLES> 106,480
<ALLOWANCES> 41,971
<INVENTORY> 0
<CURRENT-ASSETS> 278,873
<PP&E> 1,356,027
<DEPRECIATION> 378,410
<TOTAL-ASSETS> 1,300,927
<CURRENT-LIABILITIES> 263,120
<BONDS> 100,000
0
0
<COMMON> 518,945
<OTHER-SE> 329,962
<TOTAL-LIABILITY-AND-EQUITY> 1,300,927
<SALES> 0
<TOTAL-REVENUES> 569,443
<CGS> 0
<TOTAL-COSTS> 320,405
<OTHER-EXPENSES> 33,699
<LOSS-PROVISION> 7,645
<INTEREST-EXPENSE> 11,340
<INCOME-PRETAX> 106,338
<INCOME-TAX> 42,761
<INCOME-CONTINUING> 63,577
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,577
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
