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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 December 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 number 0-20326
Gold River Hotel & Casino Corporation
(Exact name of Registrant as specified in its charter)
Delaware 88-0288624
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
2800 West Sahara, Suite 4-B, Las Vegas, Nevada 89102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (702) 362-0040
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 preceeding 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
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
LAST FIVE YEARS
Indicate by check mark whether the Registrant has filed all documentation
and reports required to be filed by Section 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
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date. 581,194 shares of
Series A Common Stock and 1,179,750 shares of Series B Common Stock, outstanding
on February 7, 1997
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INDEX
Part I FINANCIAL INFORMATION
Item 1 Financial Statements:
Gold River Hotel & Casino Corporation
(Debtor in Possession)
Condensed Consolidated Balance Sheets
at December 31, 1996 and June 30, 1996 3
Gold River Hotel & Casino Corporation
(Debtor in Possession)
Condensed Consolidated Statements of Operations
for the three months ended December 31, 1996 and 1995 5
Gold River Hotel & Casino Corporation
(Debtor in Possession)
Condensed Consolidated Statements of Operations
for the six months ended December 31, 1996 and 1995 6
Gold River Hotel & Casino Corporation
(Debtor in Possession)
Condensed Consolidated Statements of Cash Flows
for the six months ended December 31, 1996 and 1995 7
Gold River Hotel & Casino Corporation
(Debtor in Possession)
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 18
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GOLD RIVER HOTEL & CASINO CORPORATION
(d.b.a. GOLD RIVER GAMBLING HALL & RESORT)
(DEBTOR IN POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, June 30,
ASSETS 1996 1996
( in thousands, except share data)
CURRENT ASSETS:
Cash and cash equivalents $ 3,163 $ 3,600
Accounts receivable, net 423 457
Inventories 689 597
Prepaid expenses and other 1,723 1,328
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Total Current Assets 5,998 5,982
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PROPERTY AND EQUIPMENT - NET 28,726 29,000
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DEPOSITS 760 944
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TOTAL $ 35,484 $ 35,926
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LIABILITIES AND SHAREHOLDERS' DEFICIENCY
LIABILITIES NOT SUBJECT TO COMPROMISE:
Accounts payable $ 2,356 2,135
Accrued expenses
Payroll and related 711 908
Other 1,325 889
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Total 4,392 3,932
LIABILITIES SUBJECT TO COMPROMISE:
Accounts payable 1,029 1,089
Accrued expenses
Interest payable 11,578 11,350
Long-term debt - current by its terms 508 492
Long-term debt 673 269
Notes subject to demand for acceleration
80,000 80,000
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Total 93,788 93,200
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIENCY:
Preferred Stock - Series A, $.01 par value
Authorized 500,000 shares; no shares issued and outstanding
Preferred Stock, $.01 par value
Authorized 500,000 shares; no shares issued and outstanding
Common Stock - Series A, $.01 par value
Authorized 1,733,580 shares;
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issued and outstanding 581,194 shares 6 6
Common Stock - Series B, $.01 par value
Authorized 2,913,580 shares;
issued and outstanding 1,179,750 shares 12 12
Additional paid-in-capital 22,136 22,136
Accumulated deficit (84,850) (83,360)
Total Shareholders' Deficiency (62,696) (61,206)
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TOTAL $ 35,484 $ 35,926
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See accompanying notes to condensed consolidated financial statements
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GOLD RIVER HOTEL & CASINO CORPORATION
(d.b.a. GOLD RIVER GAMBLING HALL & RESORT)
(DEBTOR IN POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended December 31, 1996 and 1995
1996 1995
REVENUES: ( in thousands, except per share data)
Casino $ 7,575 $ 8,857
Food and beverage 2,562 2,697
Rooms 1,471 1,693
Other 564 562
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12,172 13,809
Less: promotional allowances (1,087) (1,312)
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11,085 12,497
COSTS AND EXPENSES:
Direct costs and expenses of
operating departments:
Casino 4,240 4,540
Food and beverage 1,939 1,974
Rooms 1,028 924
Other 367 356
Other operating expenses:
Selling, general and administrative
2,244 2,827
Depreciation and amortization 432 1,131
Maintenance and utilities 699 813
Professional fees related to debt
reorganization 477 -
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11,426 12,565
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LOSS FROM OPERATIONS (341) (68)
OTHER EXPENSE:
Note discount amortization - 123
Interest expense 65 2,549
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LOSS BEFORE INCOME TAXES (406) (2,740)
Income tax (benefit) provision - -
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NET LOSS $ (406) $ (2,740)
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Weighted average shares outstanding 1,760,944 1,760,944
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Net loss per share $ (0.23) $ (1.56)
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See accompanying notes to condensed consolidated financial statements
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GOLD RIVER HOTEL & CASINO CORPORATION
(d.b.a. GOLD RIVER GAMBLING HALL & RESORT)
(DEBTOR IN POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended December 31, 1996 and 1995
1996 1995
REVENUES: ( in thousands, except per share data)
Casino $ 14,523 $ 17,016
Food and beverage 4,996 5,394
Rooms 3,063 3,580
Other 1,155 1,276
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23,737 27,266
Less: promotional allowances (2,254) (2,622)
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21,483 24,644
COSTS AND EXPENSES:
Direct costs and expenses of
operating departments:
Casino 8,651 9,199
Food and beverage 3,728 4,064
Rooms 2,139 1,962
Other 738 735
Other operating expenses:
Selling, general and administrative 4,534 5,815
Depreciation and amortization 713 2,269
Maintenance and utilities 1,713 1,868
Professional fees related to debt
reorganization 549 -
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22,765 25,912
LOSS FROM OPERATIONS (1,282) (1,268)
OTHER EXPENSE:
Note discount amortization - 243
Interest expense 208 5,100
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LOSS BEFORE INCOME TAXES (1,490) (6,611)
Income tax (benefit) provision - -
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NET LOSS $ (1,490) $ (6,611)
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Weighted average shares outstanding 1,760,944 1,760,944
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Net loss per share $ (0.85) $ (3.75)
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See accompanying notes to condensed consolidated financial statements
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GOLD RIVER HOTEL & CASINO CORPORATION
(d.b.a. GOLD RIVER GAMBLING HALL & RESORT)
(DEBTOR IN POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended December 31, 1996 and 1995
1996 1995
( in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,490) $ (6,611)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization 713 2,269
Amortization of note discount - 243
Other noncash adjustments:
Decrease (increase) in accounts
receivable, net 34 (263)
Increase in inventories (92) (58)
Increase in prepaid expenses (395) (276)
Decrease in deposits 184 14
Increase in liabilities not subject to
compromise 460 -
Decrease in accounts payable subject to
compromise (60) -
Increase in accounts payable - 1,362
Increase in interest payable 228 4,802
Decrease in accrued liabilities, net - (271)
Decrease in debt due to contracts
restructuring 128 -
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Net cash provided by (used in) operating
activities (290) 1,211
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CASH FLOWS FROM INVESTING ACTIVITIES -
Capital expenditures paid in cash (121) (325)
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CASH FLOWS FROM FINANCING ACTIVITIES -
Cash paid to reduce long term-debt (26) (470)
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INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (437) 416
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 3,600 2,195
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 3,163 $ 2,611
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during periods for interest $ 96 $ 298
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SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During the six months ended December 31, 1995, finance agreement obligations of
$78,000 were incurred with the acquisition of new equipment.
See accompanying notes to condensed consolidated financial statements
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1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Presentation
These condensed consolidated financial statements of Gold River Hotel & Casino
Corporation ("Gold River" or the "Company") should be read in conjunction with
the audited consolidated financial statements and notes thereto for the fiscal
year ended June 30, 1996 included in Gold River's Annual Report on Form 10-K.
The accompanying condensed consolidated financial statements have been prepared
on a going concern basis which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in the
financial statements, included in Gold River's Annual Report on Form 10-K,
during the years ended June 30, 1996, 1995 and 1994, Gold River incurred net
losses of $70,340,000, $5,631,000 and $4,396,000 (which in 1996 includes a
recognized loss on permanent impairment of assets of $59,060,000), respectively.
The Company's current liabilities exceeded its current assets at December 31,
1996, June 30, 1996 and 1995 by $92,182,000, $91,150,000 and $77,651,000,
respectively. During the six months ended December 31, 1996 and 1995, Gold
River incurred net losses of $1,490,000 and $6,611,000, respectively.
Furthermore, at June 30, and December 31, 1996, there is a stockholders'
deficiency of $61,206,000 and $62,696,000, respectively. These factors among
others indicate that the Company is unable to continue as a going concern
without the pending reorganization of debt for equity. Also, Gold River was
unable to fund the semiannual interest payments due August 31, 1995, February
28, and August 31, 1996 relating to the New Mortgage Notes and the February 28,
and August 31, 1996 McCarthy Note interest payments. The financial statements
do not include all of the consequences of the proceedings under Chapter 11.
Particularly, such financial statements do not purport to show, with respect to
the reorganization proceedings, (1) the realizable value of assets on a
liquidation basis or their ability to satisfy liabilities, (2) the total amount
of liabilities and contingencies which may be allowed, or the status and
priority of such liabilities and contingencies, (3) the effect upon the
Company's equity accounts of the reorganization, (4) as to operations, the
effect of any changes that may be made to the Company's business, pursuant to
the future effectiveness of the Plan. The Company's (or its successor's)
ability to continue as a going concern is dependent upon its:
- - - Obtaining approval of the Bankruptcy Court and certain creditor
categories.
- - - Obtaining the requisite regulatory approvals required by the State of
Nevada, including approvals by the gaming authorities.
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- - - Obtaining sufficient cash to fund all distributions and cash reserves
required at the time the Plan becomes effective.
- - - Achieving profitable operations and sufficient cash flows to meet future
obligations required by the Plan.
The outcome of these matters is not presently determinable. The condensed
consolidated financial statements do not include all adjustments that might be
necessary should the Company be unable to continue as a going concern.
INTERIM FINANCIAL INFORMATION - The financial information at December 31, 1996
and for the three and six months ended December 31, 1996 and 1995 are unaudited.
However, such information reflects all adjustments (consisting solely of normal
recurring adjustments) that are, in the opinion of management, necessary for a
fair presentation of the financial position, results of operations, and cash
flows for the interim periods. The results of operations for the three and six
months ended December 31, 1996, are not necessarily indicative of the results
that will be achieved for the entire year.
ESTIMATES AND ASSUMPTIONS - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from these estimates.
B. Summary of Significant Accounting Policies
CASINO REVENUES AND PROMOTIONAL ALLOWANCES - Casino revenues include the
aggregate of gaming wins and losses.
Promotional allowances consist primarily of accommodations, food and beverages
furnished without charge to customers. The retail value of such services is
included in the respective revenue classifications and is then deducted as
promotional allowances.
The estimated costs of providing promotional allowances are classified as costs
of the casino operating department through interdepartmental allocations. Such
allocations for the six months ended December 31, 1996 and 1995 are as follows:
Six Months Ended December 31,
(in thousands)
1996 1995
Rooms $ 299 $ 482
Food and beverage 1,750 1,733
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Total costs allocated to casino department $ 2,049 $ 2,215
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2. SELECTED OPERATING DATA
The Indenture of the New Mortgage Notes requires that the Company present the
following information:
Three Months Ended Three Months Ended
December 31, 1996 December 31, 1995
(in thousands)
Room occupancy rate 77% 83%
Paid occupancy rate 69% 68%
Average paid room rate $ 21 $ 22
Room revenues $ 1,471 $ 1,693
Food and beverage revenues $ 2,562 $ 2,697
Complimentaries:
Food and beverage $ 931 $ 970
Room $ 156 $ 341
Change in net credit $ 72 $ 587
Provision for bad debts $ 23 $ 32
Slot win $ 6,151 $ 6,935
Table win $ 909 $ 1,234
Maintenance expenses $ 337 $ 389
Promotional expenses $ 266 $ 250
3. BANKRUPTCY/REORGANIZATION
On June 7, 1996, the Company filed with the United States Bankruptcy Court for
the District of Nevada ("Bankruptcy Court") the Joint Plan of Reorganization of
Debtors and the Official Committee of Bondholders the ("Plan") and related
Disclosure Statement. Thereafter, the Plan and Disclosure Statement were
amended. At a hearing held on October 21, 1996, the Bankruptcy Court, approved
the amended Disclosure Statement, pending certain further amendments and
clarifications. The Company was informed in November, 1996 that Mr. Allen E.
Paulson had acquired approximately 91% of the New Mortgage Notes. The Official
Committee of Bondholders and Mr. Paulson on December 13, 1996 filed with the
Bankruptcy Court the second amended Joint Plan of Reorganization and Disclosure
Statement. Under the Plan, Mr. Paulson will acquire the remaining 9% of the New
Mortgage Notes and accordingly will receive 100% of the new Gold River stock.
Mr. Paulson will become the sole shareholder of the reorganized Company. The
Bankruptcy Court will hold a hearing on the confirmation of the Plan on February
26, 1997. See Liquidity and Capital Resources contained herein.
Mr. Paulson is 73 years old and resides in Los Angles, California. He has been
the Chairman and Chief Executive Officer and Chairman of the Board of Directors
of Full House Resorts, Inc. ("Full House") since August 20, 1994 and owns over
2.4 million shares of Full House stock.
Full House, with its subsidiaries, among other things, operates Deadwood
Gulch Resort in Deadwood, South Dakota, owns 80% of a joint venture company
involved in the "Mill," a casino in North Bend, Oregon, and a 50% interest in
developing video lottery terminal games at the Delaware State Fairgrounds in
Harrington Delaware. In addition, Full House has rights to develop gaming
commercial activities on native American lands in southcentral Michigan and
California. Mr. Paulson was the Chairman and Chief Executive Officer of
Gulfstream Aerospace Corporation ("Gulfstream") until his retirement in 1992
and he is currently Chairman Emeritus on the Gulfstream Board of Directors.
Mr. Paulson also serves on the Board of Directors of DIAL Corporation and
CardioDynamics International Corporation.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THE THREE MONTHS ENDED DECEMBER 31, 1996 VERSUS THE THREE MONTHS ENDED DECENBER
31, 1995
Gold River's revenues net of promotional allowances decreased $1,412,000 or 11%
during the three months ended December 31, 1996, as compared to the same period
during the prior year. Such decrease is primarily the result of decreases in
casino revenues of $1,282,000 or 14%; food and beverage revenues of $135,000 or
5%; and room revenues of $222,000 or 13%; and an offsetting reduction in
promotional allowances of $225,000 or 17%.
The 14% decrease in casino revenues for the quarter ended December 31, 1996 as
compared to the same quarter in 1995, reflects, in part, the overall downturn in
gaming revenue of 10% in comparison to the December 31, 1995 quarter experienced
by the Laughlin market as reported in the Nevada Gaming Control Board's Gaming
Revenue Report (the "GCB Report"), and, in part, the gain in market share by
properties that built hotel rooms within the last two years. Gold River's slot
revenue decreased $784,000 or approximately 11% for the quarter ended December
31, 1996, as com-pared to the same period during the prior year. Table games
revenues decreased $324,000 or approximately 26% for the quarter ended December
31, 1996 as compared to the same period in 1995. This was the result of a
decrease in table games "play" of approximately 27%. Additionally, other gaming
revenues (composed of Keno, Bingo, Poker, and the Race/Sports books) also
declined $174,000 or 25% for the quarter ended December 31, 1996 as compared to
the same period in 1995.
During the three months ended December 31, 1996 beverage revenues decreased
$94,000 or 11%, as compared to the same period during the prior year,
generally as a result of a decrease in casino traffic. Food revenues
decreased $41,000 or 2%, primarily as a result of a decrease in amount of the
average food check of 7%, which more than offset an increase in the number of
customers served of 6%.
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The $222,000 or 13% decrease in room revenues during the three months ended
December 31, 1996 as compared to the same period during the prior year, is the
result of a 3% decrease in the average room rate and a decrease of
approximately 8,000 in the number of occupied rooms for the quarter. During
the three months ended December 31, 1996 Gold River's hotel room occupancy
was 77% as compared to 83% during the same period of the prior year.
COST AND EXPENSES
Operating expenses were $11,426,000 during the three months ended December 31,
1996 as compared to $12,565,000 during the three months ended December 31, 1995,
a decrease of $1,139,000 or 9%.
The $300,000 or 7% decrease in casino expense is primarily the result of a
decrease of approximately $79,000 in gaming taxes; a decrease of approximately
$161,000 in casino personnel costs; and a decrease of approximately $133,000 in
the estimated cost of providing rooms, food and beverages to customers without
charge; offset by an increase of $73,000 in other casino department expenses.
The $35,000 or 2% decrease in food and beverage expenses is primarily the result
of an approximate $37,000, or 3% increase in the cost of sales; an approximate
$6,000 increase in other food and beverage expenses; offset by an approximate
$78,000 decrease in personnel costs.
The $104,000, or 11%, increase in room expenses is primarily attributable to an
increase in hotel materials and supplies of $10,000, a $114,000 decrease in the
estimated cost of providing rooms to customers without charge (Note: the
estimated cost of providing rooms to customers without charge is allocated to
the casino depart-ment. Consequently, a decrease in such amount results in an
increase in hotel depart-mental expenses) and decreases in hotel personnel costs
of $18,000; and in hotel bad debt expense of $7,000.
The $583,000 or 21% decrease in selling, general and administrative expense
during the three months ended December 31, 1996 in comparison to the same period
during the prior year is attributable largely to decreases in professional and
consulting services of approximately $237,000; in personnel costs of
approximately $90,000; in property taxes of approximately $49,000; and other
selling, general and administrative expenses of approximately $207,000.
The decrease of $699,000 in depreciation and amortization expense during the
three months ended December 31, 1996 as compared to the same period
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during the prior year is due to the revaluation of the Company's property and
equipment.
The $114,000, or 14%, decrease in maintenance and utilities expense during
the three months ended December 31, 1996 as compared to the same period
during the prior year is primarily the result of a decreases of $62,000, or
15%, in utilities; $20,000, or 10%, in personnel costs; and $32,000 in other
maintenance expenses. Professional fees related to debt restructuring were
$477,000 during the three months ended December 31, 1996, no such expenses
were recorded during the same period in the prior year.
The $123,000 decrease in note discount amortization and the $2,484,000 decrease
in interest expense are attributable to the Company's Chapter 11 filing and
reflect the ceasing of interest accrual on the New Mortgage Notes.
THE SIX MONTHS ENDED DECEMBER 31, 1996 VERSUS THE SIX MONTHS ENDED DECEMBER 31,
1995
Gold River's revenues net of promotional allowances decreased $3,161,000 or 13%
during the six months ended December 31, 1996, as compared to the same period
during the prior year. Such decrease is primarily the result of decreases in
casino revenues of $2,493,000 or 15%; food and beverage revenues of $398,000 or
7%; room revenues of $517,000 or 14%; and other revenues of $121,000 or 9%; and
an offsetting reduction in promotional allowances of $368,000 or 14%.
The 15% decrease in casino revenues for the six months ended December 31, 1996
as compared to the same six months in 1995, reflects, in part, the overall
downturn in gaming revenue of 9% in comparison to the six months ended December
31, 1995 experienced by the Laughlin market as reported in the GCB Report, and,
in part, the gain in market share by properties that built hotel rooms within
the last two years. Gold River's slot revenue decreased $1,534,000 or
approximately 12% for the six months ended December 31, 1996, as compared to the
same period during the prior year. Table games revenues decreased $693,000 or
approximately 27% for the six months ended December 31, 1996 as compared to the
same period in 1995. This was the result of a decrease in table games "play" of
approximately 26%, and a decline in table games "hold". Additionally, other
gaming revenues (composed of Keno, Bingo, Poker, and the Race/Sports books) also
declined $266,000 or 21% for the six months ended December 31, 1996 as compared
to the same period in 1995.
During the six months ended December 31, 1996 beverage revenues decreased
$152,000 or 9%, as compared to the same period during the prior year, generally
as a result of a decrease in casino traffic. Food revenues decreased $246,000
or 7%, primarily as a result of a decrease in the number of customers served of
5%.
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The $517,000 or 14% decrease in room revenues during the six months ended
December 31, 1996 as compared to the same period during the prior year, is
the result of a 7% decrease in the average room rate and a decrease of
approximately 13,000 in the number of occupied rooms for the six months.
During the six months ended December 31, 1996 Gold River's hotel room
occupancy was 78% as compared to 85% during the same period of the prior year.
The decrease of $121,000 or 9% in other revenues during the six months ended
December 31, 1996, as compared to the same period during the
prior year, is primarily due to decreases in miscellaneous and retail revenues.
COSTS AND EXPENSES
Operating expenses were $22,765,000 during the six months ended December 31,
1996 as compared to $25,912,000 during the six months ended December 31, 1995, a
de-crease of $3,147,000 or 12%.
The $548,000 or 6% decrease in casino expense is primarily the result of a
decrease of approximately $281,000 in gaming taxes; a decrease of approximately
$234,000 in casino personnel costs; and a decrease of approximately $167,000 in
the estimated cost of providing rooms, food and beverages to customers without
charge; offset by an increase of $134,000 in other casino department expenses.
The $336,000 or 8% decrease in food and beverage expenses is primarily the
result of an approximate $88,000, or 3% decrease in the cost of sales; an
approximate $234,000 decrease in personnel costs; and an approximate $14,000
decrease in other food and beverage expenses.
The $177,000, or 9%, increase in room expenses is primarily attributable to
increases in hotel personnel costs of $5,000 in hotel materials and supplies of
$23,000 and in hotel bad debt expense of $7,000 a $183,000 decrease in the
estimated cost of providing rooms to customers without charge (Note: the
estimated cost of providing rooms to customers without charge is allocated to
the casino department. Consequently, a decrease in such amount results in an
increase in hotel departmental expenses) and a decrease of approximately
$44,000, in "other" hotel expenditures.
The $1,281,000 or 22% decrease in selling, general and administrative expense
during the six months ended December 31, 1996 in comparison to the same period
during the prior year is attributable largely to decreases in professional and
consulting services of approximately $557,000; in personnel costs of
approximately $215,000; in property taxes of approximately $119,000; and other
selling, general and administrative expenses of approximately $390,000.
The decrease of $1,556,000 in depreciation and amortization expense during the
six months ended December 31, 1996 as compared to the same
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period during the prior year is due to the revaluation of the Company's
property and equipment.
The $155,000, or 8%, decrease in maintenance and utilities expense during the
six months ended December 31, 1996 as compared to the same period during the
prior year is primarily the result of decreases of $104,000, or 6%, in
utilities; $26,000, or 1%, in personnel costs; and $25,000, or 1% in other
maintenance expenses. Professional fees related to debt restructuring were
$549,000 during the six months ended December 31, 1996, no such expenses were
recorded during the the same period in the prior year.
The $243,000 decrease in note discount amortization and the $4,892,000 decrease
in interest expense are attributable to the Company's Chapter 11 filing and
reflect the ceasing of interest accrual on the New Mortgage Notes.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, Gold River had $3,163,000 in cash available for operating
requirements, future debt service and capital expenditures. Growth in cash
flows from operations is necessary for Gold River to continue to meet its debt
service requirements and to fund any additional capital expenditures.
The Company's February 9, 1996 voluntary Chapter 11 petition filing contemplates
restructuring the Company's debt plus accrued interest. In the proposed Joint
Plan of Reorganization (the "Plan") the holders of the Company's mortgage notes
("Bondholders") will exchange their interest in the principal amount of the
Company's debt of $75,000,000 and accrued interest of approximately $10,980,000
for all of the Company's equity. Mr. Paulson who will acquire all of the New
Mortgage Notes will receive 100% of the new Gold River stock and become the sole
shareholder of the reorganized Company. The Company's current Series A common
stock and Series B common stock will be canceled and new common stock issued.
The McCarthy Western Contractors, Inc. ("McCarthy") $5,000,000 Note is secured
by a Deed of Trust on the hotel's real property. McCarthy will receive at its
option either:
1) the McCarthy Cram Down Note; or
2) cash on the effective date from Mr. Paulson in an amount mutually acceptable
to McCarthy and Paulson.
If McCarthy elects to receive the McCarthy Cram Down Note the note will be a new
promissory note which will be in the principal amount of $5,000,000, will bear
interest at a rate equal to 100 basis points above the yield rate reported on
the Confirmation Date for Treasury Bonds and Notes with coterminous maturity,
will be payable semiannually in cash
15
<PAGE>
payments of interest and principal, (amortized over a period of 30 years), will
mature in 10 years, will be callable at 100% of the outstanding principal
balance plus accrued interest, and will be secured by the New McCarthy Trust
Deed, which will include the collateral originally covered by the old McCarthy
Trust Deed and the supplemental McCarthy collateral.
Implementation of the Plan is subject to a number of conditions, certain
distribution requirements and approval of the Plan by certain creditors and the
Bankruptcy Court. Under Chapter 11, certain claims against the Company in
existence prior to the filing of the petition are stayed while Gold River
continues business operations as debtor-in-possession.
Claims collaterlized by the assets of the Company also are stayed, although the
holders of such claims have the right to move the Bankruptcy Court for relief
from the stay. Pre-petition liabilities of the Company as of February 9, 1996
are reflected in the June 30, and December 31, 1996 balance sheets as
"Liabilities Subject To Compromise". Additional claims (liabilities subject to
compromise) have arisen subsequent to the filing date as a result of executory
contract rejections, including leases, and from determination of allowed claims
for contingencies and other disputed amounts. Liabilities incurred subsequent
to the filing date of February 9, 1996 are reported in the accompanying June 30,
and December 31, 1996 balance sheets as "Liabilities Not Subject To Compromise".
The Company will continue to conduct its business as usual under the supervision
of the Bankruptcy Court while it awaits the confirmation of the Plan.
The financial statements do not include all of the consequences of the
proceedings under Chapter 11. Particularly, such financial statements do not
purport to show, with respect to the reorganization proceedings, (1) the
realizable value of assets on a liquidation basis or their ability to satisfy
liabilities, (2) the total amount of liabilities and contingencies which may be
allowed, or the status and priority of such liabilities and contingencies, (3)
the effect upon the Company's equity accounts of the reorganization, (4) as to
operations, the effect of any changes that may be made to the Company's
business, pursuant to the future effectiveness of the Plan. The Company's (or
its successor's) ability to continue as a going concern is dependent upon its:
- - - Obtaining approval of the Bankruptcy Court and certain creditor
categories.
- - - Obtaining the requisite regulatory approvals required by the State of
Nevada, including approvals by the gaming authorities.
- - - Obtaining sufficient cash to fund all distributions and cash reserves
required at the time the Plan becomes effective.
- - - Achieving profitable operations and sufficient cash flows to meet future
obligations required by the Plan.
The outcome of these matters is not presently determinable. The consolidated
financial statements do not include all adjustments that might be necessary
should the Company be unable to continue as a going concern. As shown in the
financial statements, during the three months
16
<PAGE>and six months ended December 31, 1996 and 1995, Gold River incurred
net losses of $406,000, and $2,740,000, and $1,490,000 and $6,611,000
respectively. The Company's current liabilities exceeded its current assets
at June 30, and December 31, 1996 by $91,150,000 and $92,182,000,
respectively. Furthermore, at June 30, and December 31, 1996, there is a
stockholders' deficiency of $61,206,000 and $62,696,000, respectively. Voting
on the Plan will occur in February, 1997 and the hearing on the confirmation
of the Plan will be held in Bankruptcy Court on February 26, 1997.
The Effective Date will occur on the first business day that is at least eleven
(11) days after the Confirmation Date, and on which all conditions to the
Effective Date have been satisfied. The conditions to the Effective Date are:
1) The confirmation order is a final order
2) Paulson has made his contribution to the Debtors
3) When combined with Paulson's contribution, the Debtors have
cash sufficient to fund all distributions to be made under
the Plan on the Effective Date.
4) The Debtors have cash sufficient to fund normal working
capital and the minimum gaming reserve requirement.
Since the Bankruptcy filing the Company, other than its payment obligations for
debt service, has had sufficient cash flows to met its obligations as they have
occurred. In management's opinion, the significant reduction or elimination of
debt service should insure the viability of the Company's future operating
results. The Company believes that it will be able to meet it's obligations,
other than debt service noted above, when they become due.
As of the date of filing this report on Form 10-Q, the Company has engaged
various professionals with the approval of certain holders of the New Mortgage
Notes for the Bankruptcy filing and process and is required to pay for the
Noteholder's professionals. As a result, the Company has incurred $549,000, as
of December 31, 1996 for these professional and related Bankruptcy costs. The
Company believes that subsequent to December 31, 1996 additional costs connected
with the Chapter 11 filing will have some impact in the short term on Gold
River's ability to meet its normal and ordinary obligations as they occur. The
financial statements for the three months ended December 31, 1996 do not reflect
all the professional and related Bankruptcy costs or adjustments necessary to
finalize the adoption of the Plan. Due to the extended timetable for Plan
implementation management has revised its estimate from approximately $150,000
($425,000 at September 30, 1996 less $275,000 incurred and accrued at December
31, 1996) to approximately $450,000 for the additional professional and related
Bankruptcy costs that will be paid or accrued before the Plan becomes effective.
17
<PAGE>
The Liquidity and Capital Resources section of the Company's Form 10-K for the
fiscal year ended June 30, 1996 should be read in conjunction with the above
December 31, 1996 Liquidity and Capital Resources.
PART II - OTHER INFORMATION
ITEM 3 .
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report on Form 10-Q for the quarter
ended December 31, 1996 to be signed on its behalf by the undersigned, thereunto
duly authorized, this 7th day of February, 1997.
GOLD RIVER HOTEL & CASINO CORPORATION
(Registrant)
By/s/ Benjamin F. Martello
Benjamin F. Martello
Secretary, Treasurer and
Chief Financial and Accounting Officer
18
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