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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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
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(State or other jurisdiction of (I.R.S. Employer Identification Nos.)
incorporation or organization)
3400 Las Vegas Boulevard South, Las Vegas, Nevada 89109
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(Address of principal executive offices - Zip Code)
(702) 791-7111
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(Registrants' telephone number, including area code)
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(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 14, 1997.
THE MIRAGE CASINO-HOTEL Common Stock, no par value - 100 shares outstanding
as of May 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
March 31, 1997 and for the three-month periods ended March 31,
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 March 31, 1997, and the
related condensed combined statements of income and cash flows
for the three-month periods ended March 31, 1997 and 1996. These
condensed combined financial statements are the responsibility
of the Company's management.
We conducted our reviews in accordance with the 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
May 12, 1997
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<PAGE>
<TABLE>
<CAPTION>
THE MIRAGE CASINO-HOTEL AND SUBSIDIARIES
AND
GNS FINANCE CORP.
CONDENSED COMBINED BALANCE SHEETS
(IN THOUSANDS)
March 31, December 31,
1997 1996
---------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 24,110 $ 57,664
Receivables, net of allowance for doubtful accounts
of $38,856 and $36,558 56,622 66,805
Deferred income taxes 23,614 22,969
Other current assets 32,357 31,042
Advances to Mirage Resorts, Incorporated and affiliates 119,908 -
---------- ----------
Total current assets 256,611 178,480
Property and equipment, net of accumulated depreciation of
$364,144 and $348,678 981,228 988,811
Advances to Mirage Resorts, Incorporated and affiliates 17,115 70,353
Other assets, net 15,680 11,717
---------- ----------
$1,270,634 $1,249,361
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable $ 47,918 $ 80,149
Accrued expenses 59,275 60,980
Income taxes payable to Mirage Resorts, Incorporated 19,811 9,901
Management fees payable to Mirage Resorts, Incorporated 15,969 15,056
Current maturities of long-term debt 119,908 -
---------- ----------
Total current liabilities 262,881 166,086
Long-term debt, net of current maturities 100,000 216,699
Other liabilities, including deferred income taxes of $84,980
and $80,205 86,043 81,246
---------- ----------
Total liabilities 448,924 464,031
---------- ----------
Commitments and contingencies
Stockholder's equity
Common stock 518,945 518,945
Additional paid-in capital 107,142 107,142
Retained earnings 195,623 159,243
---------- ----------
Total stockholder's equity 821,710 785,330
---------- ----------
$1,270,634 $1,249,361
========== ==========
</TABLE>
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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
Period Ended
March 31,
-----------------------
1997 1996
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<S> <C> <C>
Gross revenues $318,316 $332,247
Less-promotional allowances (25,622) (27,801)
-------- --------
292,694 304,446
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Costs and expenses
Casino-hotel operations 165,411 169,920
General and administrative 28,955 28,156
Mirage Resorts, Incorporated management fee 15,969 16,869
Depreciation 16,669 17,675
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227,004 232,620
-------- --------
Operating income 65,690 71,826
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Other income (expense)
Interest expense (5,586) (5,627)
Other, including interest income 249 145
-------- --------
(5,337) (5,482)
-------- --------
Income before income taxes 60,353 66,344
Provision for income taxes 23,973 26,565
-------- --------
Net income $ 36,380 $ 39,779
======== ========
</TABLE>
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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 Three-Month
Period Ended
March 31,
-----------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities
Net income $ 36,380 $ 39,779
Adjustments to reconcile net income to net cash provided
by operating activities
Provision for losses on receivables 2,972 5,892
Depreciation of property and equipment 16,669 17,675
(Gain) loss on property transactions (3,994) 614
Amortization of debt discount and issuance costs 3,297 2,967
Deferred income taxes 4,130 2,008
Changes in working capital pertaining to operating activities
(Increase) decrease in receivables and other current assets 5,896 (22,348)
Decrease in accounts payable and accrued expenses (33,936) (17,358)
Increase in management fees and income taxes payable to
Mirage Resorts, Incorporated 10,823 9,044
Other (901) (500)
-------- --------
Net cash provided by operating activities 41,336 37,773
-------- --------
Cash flows from investing activities
Capital expenditures (12,214) (12,886)
Advances to Mirage Resorts, Incorporated and affiliates (66,670) -
Other 3,994 446
-------- --------
Net cash used for investing activities (74,890) (12,440)
-------- --------
Cash flows from financing activities
Advances from Mirage Resorts, Incorporated and affiliates - 15,313
Decrease in bank credit facility and commercial paper
borrowings - (41,882)
-------- --------
Net cash used for financing activities - (26,569)
-------- --------
Cash and cash equivalents
Decrease for the period (33,554) (1,236)
Balance, beginning of period 57,664 36,516
-------- --------
Balance, end of period $ 24,110 $ 35,280
======== ========
</TABLE>
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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 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 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 period 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 March 31, 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 March 31, 1997.
-7-
<PAGE>
MANAGEMENT'S ANALYSIS OF OPERATIONS (COMPARISON OF OPERATING
RESULTS FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND
1996)
The Company's hotel-casinos performed very well during the 1997
first quarter, albeit against difficult comparisons with the
record results of the prior-year period. The solid 1997 results
were achieved despite increased competition and a decline in
the table games win percentage. The Company-wide table games
win percentage was 20.8%, versus 22.3% during the 1996 first
quarter. By comparison, for the full years 1995 and 1996, the
Company-wide table games win percentage was 21.1% and 19.9%,
respectively.
Excluding baccarat revenues in both quarters, the Company's net
revenues were relatively flat. Company-wide standard guest room
occupancy was above 99% in both periods, while the average
standard room rate was essentially unchanged. Results in the
1997 quarter were assisted by a gain of $4.0 million related to
the sale and exchange of land in Las Vegas.
The Mirage reported net revenues of $198.7 million and operating
income of $48.3 million - one of the strongest quarters in its
seven years of operation. This compares with record results in
the 1996 quarter of $207.5 million and $51.2 million, respec-
tively. During the first quarter of 1996, The Mirage benefited
from an above-average level of baccarat play with a significantly
above-average win percentage. The 1997 quarter also experienced
a strong level of baccarat play, but with a more normal win
percentage. Excluding baccarat revenues in both periods, The
Mirage's net revenues rose by 3% over the prior-year quarter.
Occupancy of The Mirage's standard guest rooms was over 99%
during both quarters.
Treasure Island also had a strong 1997 first quarter, producing
net revenues of $94.0 million and operating income of $17.4
million. In the 1996 first quarter, Treasure Island also had the
best quarter in its history, producing net revenues of $96.9
million and $20.6 million. The 1997 first quarter results were
achieved despite the closure of a nearby casino in July 1996, the
openings of additional mid-market competitors over the past year,
and construction underway on several improvements to the resort.
These improvements include a new hotel lobby, a new Italian
restaurant and lounge, additional retail space and a modest
amount of additional gaming area. The construction will be
completed in stages, beginning in July, at a total cost of
approximately $25 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, 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.
May 14, 1997 by: DANIEL R. LEE
------------ ------------------------------
Date DANIEL R. LEE
Treasurer
(Principal Financial Officer)
THE MIRAGE CASINO-HOTEL
May 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 MARCH 31, 1997 AND THE
RELATED CONDENSED COMBINED STATEMENT OF INCOME AND CASH FLOWS FOR THE THREE
MONTHS ENDED MARCH 31, 1997 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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 24,110
<SECURITIES> 0
<RECEIVABLES> 95,478
<ALLOWANCES> 38,856
<INVENTORY> 0
<CURRENT-ASSETS> 136,703
<PP&E> 1,345,372
<DEPRECIATION> 364,144
<TOTAL-ASSETS> 1,270,634
<CURRENT-LIABILITIES> 262,881
<BONDS> 100,000
0
0
<COMMON> 518,945
<OTHER-SE> 302,765
<TOTAL-LIABILITY-AND-EQUITY> 1,270,634
<SALES> 0
<TOTAL-REVENUES> 292,694
<CGS> 0
<TOTAL-COSTS> 162,439
<OTHER-EXPENSES> 16,669
<LOSS-PROVISION> 2,972
<INTEREST-EXPENSE> 5,586
<INCOME-PRETAX> 60,353
<INCOME-TAX> 23,973
<INCOME-CONTINUING> 36,380
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,380
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
