Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT UNDER 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. 1-4748
Griffin Gaming & Entertainment, Inc.
(Exact name of registrant as specified in its charter)
Delaware 59-0763055
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1133 Boardwalk, Atlantic City, New Jersey 08401
(Address of principal executive offices) (Zip Code)
(609) 344-6000
(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 such filing requirements for the past 90
days.
Yes X No
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes X No
Number of shares outstanding of each class of registrant's common
stock as of September 30, 1995: Common Stock - 7,941,035 shares and
Class B Redeemable Common Stock - 35,000 shares.
Exhibit Index is presented on page 20
Total number of pages 24
1<PAGE>
GRIFFIN GAMING & ENTERTAINMENT, INC.
FORM 10-Q
INDEX
Page Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
at September 30, 1995 and
December 31, 1994 3
Consolidated Statements of
Operations for the Quarters
and Three Quarters Ended
September 30, 1995 and 1994 4
Consolidated Statements of
Cash Flows for the Three
Quarters Ended September 30,
1995 and 1994 5
Notes to Consolidated
Financial Statements 6
Item 2. Management's Discussion
and Analysis of Financial
Condition and Results of
Operations 12
Part II. Other Information
Item 1. Legal Proceedings 17
Item 6. Exhibits and Reports on
Form 8-K 18
2<PAGE>
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
GRIFFIN GAMING & ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, except par value)
September 30, December 31,
1995 1994
(Unaudited)
ASSETS
Current assets:
Cash (including cash equivalents
of $33,182 and $21,321) $ 47,489 $ 35,503
Restricted cash equivalents 3,994 5,388
Receivables, less allowance for
doubtful accounts of $3,979
and $3,901 7,348 6,509
Inventories 2,382 1,793
Prepaid expenses 7,624 9,531
Total current assets 68,837 58,724
Land held for investment, development
and resale 93,795 87,641
Property and equipment, net of
accumulated depreciation of $59,288
and $49,024 159,858 159,117
Deferred charges and other assets 12,686 11,766
$335,176 $317,248
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
debt $ 577 $ 5
Accounts payable and accrued
liabilities 38,489 41,046
Total current liabilities 39,066 41,051
Long-term debt, net of unamortized
discounts 216,486 212,466
Deferred income taxes 53,700 53,700
Shareholders' equity:
Common Stock - $.01 par value 79 397
Class B Stock - $.01 par value
Capital in excess of par 129,572 129,237
Accumulated deficit (103,727) (119,603)
Total shareholders' equity 25,924 10,031
$335,176 $317,248
3<PAGE>
GRIFFIN GAMING & ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except per share data)
(Unaudited)
Quarter Ended Three Quarters Ended
September 30, September 30,
1995 1994 1995 1994
Revenues:
Casino $76,058 $69,582 $206,690 $ 216,624
Rooms 2,113 2,424 5,180 18,928
Food and beverage 3,811 4,267 9,708 24,970
Other casino/hotel revenues 1,480 1,406 4,124 11,138
Other operating revenues 4,577
Real estate related 2,140 2,081 6,361 6,211
85,602 79,760 232,063 282,448
Expenses:
Casino 42,035 37,700 118,021 123,359
Rooms 819 873 2,701 5,218
Food and beverage 4,091 4,412 10,731 21,584
Other casino/hotel
operating expenses 8,764 9,002 25,885 38,020
Other operating expenses 3,483
Selling, general and
administrative 9,706 9,249 29,099 38,700
Depreciation 3,350 3,303 10,312 14,093
Real estate related 82 165 222 954
Write-down of non-operating
real estate 20,525
Loss on SIHL Sale 73,108
68,847 64,704 196,971 339,044
Earnings (loss) from
operations 16,755 15,056 35,092 (56,596)
Other income (deductions):
Interest income 726 861 2,698 2,087
Interest expense (6,357) (6,600) (18,956) (29,685)
Amortization of debt
discounts (964) (832) (2,958) (14,163)
Recapitalization costs 1,300 (8,488)
Proceeds from Litigation
Trust 2,542
Earnings (loss) before
extraordinary item 10,160 9,785 15,876 (104,303)
Extraordinary item - gain on
exchange of debt (1,300) 186,000
Net earnings $10,160 $ 8,485 $ 15,876 $ 81,697
Per share data - primary:
Earnings (loss) before
extraordinary item $1.16 $1.25 $1.87 $(17.20)
Extraordinary item (.16) 30.67
Net earnings $1.16 $1.09 $1.87 $ 13.47
Weighted average number
of shares and equivalents 8,743 7,808 8,493 6,065
Per share data - fully diluted:
Net earnings $1.16 $1.83
Weighted average number
of shares and equivalents 8,743 8,697
4<PAGE>
GRIFFIN GAMING & ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
Three Quarters Ended
September 30,
1995 1994
Cash flows from operating activities:
Cash received from customers $ 230,798 $ 278,046
Cash paid to suppliers and employees (181,533) (224,815)
Cash flow from operations before
interest and income taxes 49,265 53,231
Interest received 2,630 2,203
Interest paid (23,766) (13,423)
Income taxes paid (285)
Net cash provided by operating
activities 28,129 41,726
Cash flows from investing activities:
Cash proceeds from SIHL Sale, net of
cash balances transferred 39,747
Payments for property and equipment (16,954) (6,057)
Proceeds from sale of property 135
Casino Reinvestment Development
Authority deposits and bond
purchases (2,234) (2,175)
Net cash provided by (used in)
investing activities (19,188) 31,650
Cash flows from financing activities:
Proceeds from borrowing 1,815
Cash (including cash proceeds of SIHL
Sale) distributed to noteholders (102,134)
Collection of note receivable from
related party 3,008
Payments of recapitalization costs (8,705)
Proceeds from Litigation Trust 2,542
Repayments of non-public debt (181) (117)
Proceeds from exercise of stock
options 17
Net cash provided by (used in)
financing activities 1,651 (105,406)
Net increase (decrease) in cash and
cash equivalents 10,592 (32,030)
Cash and cash equivalents at beginning
of period 40,891 76,794
Cash and cash equivalents at end
of period $ 51,483 $ 44,764
5<PAGE>
GRIFFIN GAMING & ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. General:
The accompanying consolidated interim financial statements, which
a r e u naudited, include the operations of Griffin Gaming &
Entertainment, Inc. ("GGE") and its subsidiaries. GGE was known as
Resorts International, Inc. until its name change, which was effective
June 30, 1995. "GGE" is used herein to refer to the corporation both
before and after its name change. The term "Company" as used herein
includes GGE and/or one or more of its subsidiaries, as the context
may require.
W h i l e the accompanying interim financial information is
unaudited, management of the Company believes that all adjustments
necessary for a fair presentation of these interim results have been
made and all such adjustments are of a normal recurring nature.
The notes presented herein are intended to provide supplemental
disclosure of items of significance occurring subsequent to December
31, 1994 and should be read in conjunction with the Notes to
Consolidated Financial Statements contained in pages 42 through 61 of
GGE's Annual Report on Form 10-K for the year ended December 31, 1994.
Certain amounts in the consolidated balance sheet as of December
31, 1994 were reclassified for comparative purposes.
B. Disposition of Paradise Island and Related Operations:
The Company disposed of its Paradise Island operations and
properties as part of a prepackaged bankruptcy plan of reorganization
(the "Plan"), which was effective May 3, 1994. Pursuant to the Plan,
GGE sold 100% of the equity of its Bahamian subsidiaries along with
certain assets and liabilities of GGE and its U.S. subsidiaries which
supported the Paradise Island operations (the "SIHL Sale") to Sun
International Hotels Limited ("SIHL").
The consolidated statements of operations include the Paradise
Island operations through April 30, 1994.
F o r information as to the revenues and contribution to
consolidated earnings from operations of the operations disposed of,
see the Paradise Island portion of the casino/hotel segment and the
a i r line segment included in the segment tables in "Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations."
C. Reverse Repurchase Agreements:
C a s h equivalents at September 30, 1995 included reverse
repurchase agreements (federal government securities purchased under
agreements to resell those securities) with the institutions listed in
the following table under which the Company had not taken delivery of
the underlying securities. These agreements matured during the first
week of October 1995.
6<PAGE>
(In Thousands of Dollars)
Prudential Securities, Inc. $21,956
National Westminster Bank NJ $11,004
D. Property and Equipment:
Property and equipment are depreciated over the estimated useful
lives reported below using the straight-line method for financial
reporting purposes.
Land improvements 10 - 25 years
Hotels and other buildings 20 - 22 years
Furniture, machinery and equipment 3 - 5 years
E. Reverse Stock Split:
On June 27, 1995, GGE's shareholders approved a one-for-five
reverse stock split (the "Reverse Stock Split") of GGE's common stock
(the "Common Stock"), par value $.01 per share, of which there were
previously 100,000,000 shares authorized. The Reverse Stock Split
became effective on June 30, 1995, on which date each share of Common
Stock was reclassified into one-fifth of a new share of Common Stock
and the total authorized shares of Common Stock was, therefore,
reduced to 20,000,000. The par value of the Common Stock remains $.01
per share after the Reverse Stock Split. As of June 30, 1995,
$318,000 was reclassified from Common Stock to capital in excess of
par in order to reflect the Reverse Stock Split. GGE's Class B
Redeemable Common Stock (the "Class B Stock") described below was not
affected by the Reverse Stock Split.
F. Class B Stock:
GGE is authorized to issue 120,000 shares of Class B Stock, of
which 35,000 shares were outstanding as of September 30, 1995. Each
share of Class B Stock was issued as part of a unit (the Unit )
comprising $1,000 principal amount of 11.375% Junior Mortgage Notes
due 2004 (the "Junior Mortgage Notes") issued by Resorts International
Hotel Financing, Inc. ("RIHF"), a subsidiary of GGE, and one share of
Class B Stock. Shares of Class B Stock may not be transferred
s e parately from the related Junior Mortgage Note. Upon the
redemption, or cancellation following the purchase thereof, of each
$1,000 principal amount of Junior Mortgage Notes, GGE will redeem, at
a price of $.01 per share, the share of Class B Stock issued as part
of that Unit.
7<PAGE>
G. Stock Options and Warrants:
In March 1995, the Compensation/Option Committee of GGE's Board
of Directors granted options to purchase 115,000 shares of Common
Stock at an exercise price of $10.46875 per share (after adjustment
for the Reverse Stock Split), subject to the approval by GGE's
shareholders of certain amendments to GGE's 1994 Stock Option Plan
(the "1994 SOP"). Such approval was granted in June 1995. Of these
options, 25% became vested on September 27, 1995, and the remainder of
the options will vest 25% on August 1, 1996, 1997 and 1998.
On June 30, 1995, in accordance with the 1994 SOP, the four
members of the Compensation/Option Committee were each granted options
to purchase 1,000 shares of Common Stock at an exercise price of
$14.0625 (after adjustment for the Reverse Stock Split). These
options were fully exercisable upon grant.
In accordance with the anti-dilution and adjustment provisions of
the 1994 SOP, GGE's previous stock option plan (the "1990 SOP") and
GGE's outstanding warrants, all of GGE's outstanding options and
warrants as of June 30, 1995 were reduced by 80% and the exercise
prices were increased accordingly as a result of the Reverse Stock
Split.
In addition, options to purchase 15,000 shares were granted to
members of management on August 9, 1995 at an exercise price of $15.75
per share.
As of September 30, 1995 GGE had the following options and
warrants outstanding after adjustment for the Reverse Stock Split:
Exercise Options Options
Plan Price Outstanding Exercisable
1990 SOP $ 9.37500 280,677 280,677
1994 SOP $ 5.15625 206,000 56,750
1994 SOP $10.46875 115,000 28,750
1994 SOP $14.06250 4,000 4,000
1994 SOP $15.75000 15,000 -0-
Warrants $ 6.00000 933,370 933,370
1,554,047 1,303,547
8<PAGE>
H. Complimentary Services:
The Consolidated Statements of Operations reflect each category
of operating revenues excluding the retail value of complimentary
services provided to casino patrons without charge. The retail value
of such complimentary services excluded from revenues amounted to
$9,554,000 and $7,583,000 for the third quarter of 1995 and 1994,
respectively, and $22,193,000 and $22,342,000 for the first three
quarters of 1995 and 1994, respectively. The rooms, food and
beverage, and other casino/hotel operations departments allocate a
percentage of their total operating expenses to the casino department
for complimentary services provided to casino patrons. These
allocations do not necessarily represent the incremental cost of
providing such complimentary services to casino patrons. Amounts
a l l ocated to the casino department from the other operating
departments were as follows:
Quarter Ended Three Quarters Ended
September 30, September 30,
(In Thousands of Dollars) 1995 1994 1995 1994
Rooms $1,438 $1,071 $ 3,737 $ 3,243
Food and beverage 4,653 3,688 12,802 11,854
Other casino/hotel
operations 2,185 1,974 4,900 5,377
Total allocated to casino $8,276 $6,733 $21,439 $20,474
I. Related Party Transaction:
Effective May 1, 1995 Thomas E. Gallagher became President and
Chief Executive Officer of GGE. Mr. Gallagher has been President and
Chief Executive Officer of The Griffin Group, Inc. ("Griffin Group"),
a corporation controlled by Merv Griffin, Chairman of the Board of
Directors of GGE, since April 1992. In connection with Mr.
Gallagher's appointment as President and Chief Executive Officer of
GGE, following review and approval by independent members of GGE's
Board of Directors, GGE agreed to pay $300,000 per year for his
services in this capacity. Such payment is to be made to Griffin
Group where Mr. Gallagher remains President and Chief Executive
Officer.
J. Per Share Data:
Per share data was computed using the weighted average number of
shares of outstanding Common Stock. When dilutive, stock options and
warrants were included as share equivalents using the treasury stock
method. Per share data has been restated for all periods presented to
give effect to the Reverse Stock Split.
9<PAGE>
K. Statements of Cash Flows:
Supplemental disclosures required by Statement of Financial
Accounting Standards No. 95 "Statement of Cash Flows" are presented
below.
Three Quarters Ended
September 30,
(In Thousands of Dollars) 1995 1994
Reconciliation of net earnings to net cash
provided by operating activities:
Net earnings $15,876 $ 81,697
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Extraordinary item - gain on exchange
of debt (186,000)
Loss on SIHL Sale 73,108
Write-down of non-operating real
estate 20,525
Depreciation 10,312 14,093
Amortization of debt discounts 2,958 14,163
Provision for doubtful receivables 887 1,097
Provision for discount on Casino
Reinvestment Development Authority
obligations, net of amortization 1,175 1,098
Deferred tax benefit (300)
Recapitalization costs 8,488
Proceeds from Litigation Trust (2,542)
Net loss on sale of property 138
Net increase in receivables (1,979) (246)
Net decrease in inventories and
prepaid expenses 1,112 4,036
Net decrease in deferred charges
and other assets 318 1,048
Net increase (decrease) in accounts
payable and accrued liabilities (2,530) 11,323
Net cash provided by operating activities $28,129 $ 41,726
10<PAGE>
Three Quarters Ended
September 30,
(In Thousands of Dollars) 1995 1994
Non-cash investing and financing
activities:
Exchange of real estate in Atlantic
City (at carrying value of property
exchanged) $1,501
Exchange of Senior Secured Redeemable
Notes due April 15, 1994 for:
Mortgage Notes due 2003 and Junior
Mortgage Notes due 2004 (at
estimated market value) $135,300
SIHL Series A Ordinary Shares (at
estimated market value) 60,000
Common Stock (at estimated market
value) 24,415
Other liabilities 1,425
Reduction in note receivable from
related party applied to prepaid
services 2,310
Issuance of Common Stock for
prepaid services 2,060
Issuance of Common Stock in settlement
of certain recapitalization costs 865
Increase in liabilities for additions
to other assets 179 176
L. Commitments and Contingencies:
GGE and certain of its subsidiaries are defendants in certain
litigation. In the opinion of management, based upon advice of
counsel, the aggregate liability, if any, arising from such litigation
w i ll not have a material adverse effect on the accompanying
consolidated financial statements.
11<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL CONDITION
Liquidity
At September 30, 1995 the Company's working capital amounted to
$ 2 9 , 7 71,000, including unrestricted cash and equivalents of
$47,489,000. A significant portion of the unrestricted cash and
e q u i valents is required for day-to-day operations, including
approximately $10,000,000 of currency and coin on hand which amount
varies by days of the week, holidays and seasons, as well as
additional cash balances necessary to meet current working capital
needs.
In addition, the Company has a $19,738,000 senior credit facility
(the "Senior Facility") available for the period ending May 2, 1996
should the Company have additional cash needs. The Company believes
that the Senior Facility will also serve as a source of funds for
expansion, development and/or an investment opportunity as well as a
safeguard if an emergency arises from current operations. However,
market interest rates and other economic conditions, among other
factors, will determine if it is appropriate for the Company to draw
on the Senior Facility.
The Company will satisfy the interest payment due December 15,
1995 on its 11.375% Junior Mortgage Notes due 2004 by cash payment.
Capital Expenditures and Resources
During the first three quarters of 1995 the Company's $16,954,000
of capital expenditures included approximately $6,100,000 for an
Atlantic City land acquisition, $4,000,000 for the conversion of
certain existing facilities into an additional 10,000 square feet of
casino gaming area and $2,900,000 for certain restaurant renovations
at Merv Griffin's Resorts Casino Hotel (the "Resorts Casino Hotel") in
Atlantic City.
The Company purchased a 4.4 acre tract on the Boardwalk, adjacent
to Resorts Casino Hotel, from an affiliate of Harrah's Atlantic City
in exchange for certain non-operating real estate in the marina area
of Atlantic City and cash. The Company has been leasing this property
and using it as a parking lot since 1985. The Company is exploring
the feasibility of using this additional acreage to expand its
Atlantic City operations.
The Company modified a portion of its bus waiting area to house
approximately 180 slot machines and converted Mr. G's lounge to
accommodate approximately 135 more slot machines. This project was
completed by Memorial Day weekend. The cost noted above includes the
cost of slot machines and related equipment. The new slot machines
were financed by a $1,815,000 bank loan.
12<PAGE>
In late June 1995 the Company opened the California Pizza Kitchen
and the new Oceanside cocktail lounge in the space formerly occupied
by the Celebrity Deli in Resorts Casino Hotel.
RESULTS OF OPERATIONS
General
The Paradise Island portion of the casino/hotel segment and the
airline segment were disposed of through the SIHL Sale effective May
3, 1994. Results of these operations for the first four months of
1994 are included in the segment tables which follow.
Revenues
Revenues by geographic and business segment were as follows (in
thousands of dollars):
Quarter Ended Three Quarters Ended
September 30, September 30,
1995 1994 1995 1994
Casino/hotel:
Atlantic City, New Jersey:
Casino $76,058 $69,582 $206,690 $188,509
Rooms 2,113 2,424 5,180 5,509
Food and beverage 3,811 4,267 9,708 11,324
Other casino/hotel 1,474 1,406 4,118 3,430
83,456 77,679 225,696 208,772
Paradise Island,
The Bahamas (a):
Casino 28,115
Rooms 13,419
Food and beverage 13,646
Other casino/hotel 7,708
-0- -0- -0- 62,888
Total casino/hotel 83,456 77,679 225,696 271,660
Real estate related -
Atlantic City, New Jersey 2,140 2,081 6,361 6,211
Airline (a) 5,674
Other segments 6 6 7
Intersegment eliminations (1,104)
Revenues from operations $85,602 $79,760 $232,063 $282,448
(a) These operations were disposed of through the SIHL Sale.
13<PAGE>
Third Quarter and First Three Quarters 1995 Compared to 1994
Casino/hotel - Atlantic City, New Jersey
Casino revenues increased by $6,476,000 and $18,181,000 for the
third quarter and first three quarters of 1995, respectively. For the
third quarter the Company's slot and table game win increased by
$5,422,000 and $1,362,000, respectively, while revenues from poker,
simulcasting and keno declined. The increase in slot win was
primarily due to increased amounts wagered by patrons; the increase in
table game win was largely due to an increase in the Company's hold
percentage (ratio of casino win to total amount of chips purchased for
table games or total amount wagered for slots).
For the first three quarters, the Company's slot win and table
game win increased by $16,937,000 and $2,399,000, respectively. The
Company's revenue from poker, simulcasting and keno was down for this
period. The Company's slot win was up primarily due to an increase in
amounts wagered, though slot win was also favorably affected by an
increase in hold percentage. The Company's table game win was up due
to increases in both amounts wagered and hold percentage.
The increased amounts wagered reflect the Company's recent casino
expansion as well as increased emphasis on bus and junket air
programs. The Company s current junket programs were initiated in
September 1994. In addition, poor weather conditions during the first
quarter of 1994 adversely affected operations in that period as the
principal means of transportation to Atlantic City is by automobile or
bus.
The decreases in food and beverage revenues for the first three
quarters was primarily attributable to the closing of the Celebrity
Deli in early April and, to a lesser extent, Mr. G's lounge in mid
March for the renovations discussed under "FINANCIAL CONDITION -
Capital Expenditures and Resources" above.
Casino/hotel - Paradise Island, The Bahamas
The Company's Paradise Island casino/hotel facilities were
disposed of in the SIHL Sale effective May 3, 1994. The Company's
Paradise Island revenues for 1994 reflect the Company's operation of
the Paradise Island properties through April 30, 1994.
Airline
The Company's airline operation was effectively disposed of in
the SIHL Sale by means of an option/put agreement with a nominal
option price. The only aircraft owned by the Company was transferred
to a subsidiary of SIHL as part of the SIHL Sale. Pursuant to an
agreement, the Company operated the airline on behalf of SIHL for a
small management fee through early May 1995. All profits earned or
losses incurred in such operation accrued to or were borne by SIHL.
Airline revenues presented in the segment tables herein reflect
airline operations through April 30, 1994.
14<PAGE>
Contribution to Consolidated Earnings (Loss) Before Extraordinary Item
Results by geographic and business segment were as follows (in
thousands of dollars):
Quarter Ended Three Quarters Ended
September 30, September 30,
1995 1994 1995 1994
Casino/hotel:
Atlantic City, New Jersey $12,947 $ 11,445 $ 23,206 $ 16,742
Paradise Island,
The Bahamas (a)(b) 10,206
12,947 11,445 23,206 26,948
Real estate related -
Atlantic City, New Jersey 2,052 1,911 6,124 (15,283)
Airline(a)(b) (7)
Other segments (20) (20) (24)
Corporate expense, net of
management fees 1,776 1,700 5,782 4,878
Loss on SIHL Sale (73,108)
Earnings (loss) from
operations 16,755 15,056 35,092 (56,596)
Other income (deductions):
Interest income 726 861 2,698 2,087
Interest expense (6,357) (6,600) (18,956) (29,685)
Amortization of debt
discounts (964) (832) (2,958) (14,163)
Recapitalization costs 1,300 (8,488)
Proceeds from Litigation
Trust 2,542
Earnings (loss) before
extraordinary item $10,160 $ 9,785 $ 15,876 $(104,303)
(a) These operations were disposed of through the SIHL Sale.
( b ) The Paradise Island casino/hotel segment subsidized the
operations of Paradise Island Airlines, Inc. in the amount of $993,000
for the first three quarters of 1994.
Third Quarter and First Three Quarters 1995 Compared to 1994
Casino/hotel - Atlantic City, New Jersey
For the third quarter and first three quarters of 1995 casino,
hotel and related operating results increased by $1,502,000 and
$6,464,000, respectively, as the increased revenues described above
were partially offset by net increases in operating costs.
15<PAGE>
For the third quarter the most significant variances in operating
expenses were increases in casino promotional costs ($1,700,000),
payroll and related costs ($800,000) and casino win tax ($600,000).
Casino promotional costs increased primarily due to increases in costs
associated with the junket air program, which was expanded in
September 1994. Payroll and related costs increased primarily due to
increased salary and wage rates, although the average number of
employees was up slightly for the quarter. Casino win tax increased
relative to the increase in casino revenues.
For the first three quarters the most significant variances in
o p erating expenses were increases in casino promotional costs
($6,000,000), casino win tax ($1,500,000), payroll and related costs
($1,400,000) and the accrual for performance and incentive bonuses
( $ 800,000). Casino promotional costs increased due to costs
associated with the expanded junket air program as well as increases
in the amount of cash giveaway to bus patrons. Casino win tax
increased relative to the increase in casino revenues. Payroll and
related costs increased due to increased salary and wage rates, as the
average number of employees was down slightly for the year-to-date
period.
Casino/hotel - Paradise Island, The Bahamas
The Company's Paradise Island casino/hotel facilities were
disposed of in the SIHL Sale effective May 3, 1994. The Paradise
Island operating results for 1994 reflect the Company's operation of
the Paradise Island properties through April 30, 1994.
Real Estate Related - Atlantic City, New Jersey
Atlantic City real estate related results for the first three
quarters of 1995 include a $400,000 credit from the favorable
settlement of certain prior years' property tax appeals. For the
first three quarters of 1994 the results for this segment include a
charge of $20,525,000 for the write-down of certain non-operating
properties to net realizable value.
Airline
The Company's airline operation was effectively disposed of in
the SIHL Sale by means of an option/put agreement with a nominal
option price. Pursuant to an agreement, the Company operated the
airline on behalf of SIHL for a small management fee through early May
1995. All profits earned or losses incurred in such operation accrued
to or were borne by SIHL. Operating results of the airline segment
presented in the segment tables herein include airline operations
through April 30, 1994.
Corporate Expense
The corporate expense segment includes credits for management
fees which GGE charges certain subsidiaries based on three percent of
their gross revenues. The corresponding charges are included in the
segments where the respective subsidiary's operations are reported.
Management fees charged to Resorts International Hotel, Inc., GGE's
subsidiary that
16<PAGE>
owns and operates the Resorts Casino Hotel, amounted to $2,790,000 and
$2,558,000 for the third quarter of 1995 and 1994, respectively, and
$7,436,000 and $6,846,000 for the first three quarters of 1995 and
1994, respectively. Management fees charged to other subsidiaries
totaled $1,971,000 for the first three quarters of 1994.
Corporate expense for the first three quarters of 1995 includes a
credit of $1,000,000 from a favorable litigation settlement.
T h e Environmental Protection Agency ("EPA") has named a
predecessor to GGE as a potentially responsible party in the Bay Drum
hazardous waste site (the "Site") in Tampa, Florida which the EPA has
listed on the National Priorities List. No formal action has
commenced against GGE and GGE intends to dispute any claims of this
nature, if asserted. Although it may ultimately be determined that
GGE is one of several hundred parties that are jointly and severally
liable for the costs of Site remediation and for damages to natural
resources at the Site caused by hazardous wastes, the extent of such
liability, if any, cannot be determined at this time.
Loss on SIHL Sale
The loss on SIHL Sale represents the difference between the
carrying values and the fair values of the assets and equity interests
sold in the SIHL Sale. See Note B of Notes to Consolidated Financial
Statements.
Other Income (Deductions)
The decreases in interest expense and amortization of debt
discounts for the first three quarters of 1995 are attributable to the
restructuring of the Company's debt pursuant to the Plan, which
resulted in a significant decrease in the principal amount of debt
outstanding as well as a reduction in interest rates.
Recapitalization costs include legal and other advisory fees
incurred in connection with the restructuring that was effected in May
1994.
Proceeds from Litigation Trust represent the distribution that
the Company received as a holder of units of beneficial interest in a
litigation trust (the "Litigation Trust") established under a previous
plan of reorganization.
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
The following is an update of the status of certain litigation
which was previously described in "Item 3. Legal Proceedings" of GGE's
Annual Report on Form 10-K for the year ended December 31, 1994 and in
"Item 1. Legal Proceedings" of GGE's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995.
17<PAGE>
U.S. District Court Action - Friedman
This action was dismissed with prejudice as to the plaintiff in
September 1995.
U.S. District Court Action / U.S. Bankruptcy Court Action - Rogers
The U. S. District Court Action was discontinued without
prejudice to plaintiff.
On September 25, 1995 plaintiff Rogers filed a Complaint in
Adversary Proceeding in the Bankruptcy Court for the District of New
J e r s e y , which court approved the Company s 1990 Plan of
Reorganization. The complaint alleges that the Company did not comply
with its 1990 Plan of Reorganization in that Merv Griffin failed to
timely redeem his $11,000,000 promissory note in September 1991, and
the Company did not demand such redemption at that time. The
complaint further alleges that the Company violated the court order
approving the 1990 Plan of Reorganization by filing a pre-packaged
plan of reorganization in another district. The complaint seeks to
have a trustee appointed for the Company and to have the issuance of
C o m mon Stock to Merv Griffin pursuant to the 1990 Plan of
Reorganization voided. The Company has not yet responded to the
summons it received. A pre-trial conference has been scheduled for
November 22, 1995.
U.S. Bankruptcy Court Action - GGE v. Lowenschuss
The trial for the Company's action against the Trustee of the
Fred Lowenschuss Associates Pension Plan was held on November 2 and 3,
1995 in the Bankruptcy Court for the District of New Jersey. Closing
arguments in this trial are scheduled for late November 1995.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
The following Part I exhibits are filed herewith:
Exhibit
Number Exhibit
(11) Statement re computation of per share data.
(27)(a) Financial data schedule as of September 30, 1995.
(27)(b) Restated financial data schedule as of December 31,
1994.
b. Reports on Form 8-K
No Current Report on Form 8-K was filed by GGE covering an event
during the third quarter of 1995. No amendments to previously filed
Forms 8-K were filed during the third quarter of 1995.
18<PAGE>
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.
GRIFFIN GAMING & ENTERTAINMENT, INC.
(Registrant)
/s/ Matthew B. Kearney
Matthew B. Kearney
Executive Vice President - Finance
(Authorized Officer of Registrant
and Chief Financial Officer)
Date: November 10, 1995
19<PAGE>
GRIFFIN GAMING & ENTERTAINMENT, INC.
Form 10-Q for the quarterly period
ended September 30, 1995
EXHIBIT INDEX
Exhibit Reference to Previous Filing
Number Exhibit or Page Number in Form 10-Q
(11) Statement re computation Page 21.
of per share data.
(27)(a) Financial data schedule Page 22.
as of September 30, 1995.
(27)(b) Restated financial data Page 23.
schedule as of December
31, 1994.
20<PAGE>
EXHIBIT 11
GRIFFIN GAMING & ENTERTAINMENT, INC.
COMPUTATION OF PER SHARE DATA
(In Thousands, except per share data)
Quarter Ended Three Quarters Ended
September 30, September 30,
1995 1994 1995 1994
Per Share Data - Primary:
Earnings (loss):
Earnings (loss) before
extraordinary item $10,160 $ 9,785 $15,876 $(104,303)
Extraordinary item (1,300) 186,000
Net earnings $10,160 $ 8,485 $15,876 $ 81,697
Shares and share
equivalents:
Weighted average number
of shares of Common
Stock outstanding 7,941 7,808 7,940 6,065
Weighted average number
of share equivalents
outstanding 802 553
Weighted average number
of shares and share
equivalents 8,743 7,808 8,493 6,065
Earnings (loss) per share:
Earnings (loss) before
extraordinary item $1.16 $1.25 $1.87 $(17.20)
Extraordinary item (.16) 30.67
Net earnings $1.16 $1.09 $1.87 $ 13.47
Per Share Data - Fully
Diluted:
Net earnings $10,160 $15,876
Shares and share
equivalents:
Weighted average number
of shares of Common
Stock outstanding 7,941 7,940
Weighted average number
of share equivalents
outstanding 802 757
Weighted average number
of shares and share
equivalents 8,743 8,697
Net earnings per share $1.16 $1.83
21<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GRIFFIN
GAMING & ENTERTAINMENT, INC.'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
THERETO INCLUDED IN THE FORM 10-Q FOR THE QUARTER 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> $51,483<F1>
<SECURITIES> 0
<RECEIVABLES> $8,851
<ALLOWANCES> $3,979
<INVENTORY> $2,382
<CURRENT-ASSETS> $68,837
<PP&E> $219,146
<DEPRECIATION> $59,288
<TOTAL-ASSETS> $335,176
<CURRENT-LIABILITIES> $39,066
<BONDS> $216,486<F2>
<COMMON> $79
0
0
<OTHER-SE> $25,845
<TOTAL-LIABILITY-AND-EQUITY> $335,176
<SALES> 0
<TOTAL-REVENUES> $232,063
<CGS> 0
<TOTAL-COSTS> $157,560<F3>
<OTHER-EXPENSES> $10,312<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> $21,914
<INCOME-PRETAX> $15,876
<INCOME-TAX> 0
<INCOME-CONTINUING> $15,876
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $15,876
<EPS-PRIMARY> $1.87
<EPS-DILUTED> $1.83
<FN>
<F1>INCLUDES NON-RESTRICTED CASH EQUIVALENTS OF $33,182 AND
RESTRICTED CASH EQUIVALENTS OF $3,994.
<F2>NET OF UNAMORTIZED DISCOUNTS.
<F3>EXCLUDES DEPRECIATION.
<F4>DEPRECIATION EXPENSE.
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RESORTS
INTERNATIONAL, INC.'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO
INCLUDED IN THE FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994, EXCEPT AS
NOTED IN FOOTNOTE 2, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
[/LEGEND]
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> $40,891<F1>
<SECURITIES> 0
<RECEIVABLES> $8,834
<ALLOWANCES> $3,901
<INVENTORY> $1,793
<CURRENT-ASSETS> $58,724
<PP&E> $208,141<F2>
<DEPRECIATION> $49,024
<TOTAL-ASSETS> $317,248
<CURRENT-LIABILITIES> $41,051
<BONDS> $212,466<F3>
<COMMON> $397
0
0
<OTHER-SE> $9,634
<TOTAL-LIABILITY-AND-EQUITY> $317,248
<SALES> 0
<TOTAL-REVENUES> $353,016
<CGS> 0
<TOTAL-COSTS> $243,224<F4>
<OTHER-EXPENSES> $110,238<F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> $50,317
<INCOME-PRETAX> $(98,891)
<INCOME-TAX> 0
<INCOME-CONTINUING> $(98,891)
<DISCONTINUED> 0
<EXTRAORDINARY> $190,008<F6>
<CHANGES> 0
<NET-INCOME> $91,117
<EPS-PRIMARY> $2.79<F7>
<EPS-DILUTED> 0
<FN>
<F1>INCLUDES NON-RESTRICTED CASH EQUIVALENTS OF $21,321 AND
RESTRICTED CASH EQUIVALENTS OF $5,388.
<F2>RESTATED TO EXCLUDE LAND HELD FOR INVESTMENT, DEVELOPMENT AND RESALE.
<F3>NET OF UNAMORTIZED DISCOUNTS.
<F4>EXCLUDES DEPRECIATION.
<F5>INCLUDES DEPRECIATION OF $17,250, WRITE-DOWN OF NON-OPERATING REAL
ESTATE OF $20,525 AND LOSS ON SIHL SALE OF $72,463 (SEE NOTE 2 OF
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS).
<F6>INCLUDES GAIN ON EXCHANGE OF DEBT - $186,000 AND GAIN ON RIH'S
PURCHASE OF 12,899 UNITS - $4,008 (SEE NOTES 2 AND 7 OF NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS.)
<F7>INCLUDES LOSS BEFORE EXTRAORDINARY ITEM - $(3.02) PER SHARE AND
EXTRAORDINARY ITEM - $5.81 PER SHARE.
</FN>
</TABLE>
