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_________
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 May 13, 1997
Page 1 of 18
<PAGE>
Page No.
FINANCIAL INFORMATION
Item 1 Financial Statements:
Gold River Hotel & Casino Corporation
(Debtor in Possession)
Condensed Consolidated Balance Sheets
at March 31, 1997 and June 30, 1996 3
Gold River Hotel & Casino Corporation
(Debtor in Possession)
Condensed Consolidated Statements of Operations
for the three months ended March 31, 1997 and 1996 4
Gold River Hotel & Casino Corporation
(Debtor in Possession)
Condensed Consolidated Statements of Operations
for the nine months ended March 31, 1997 and 1996 5
Gold River Hotel & Casino Corporation
(Debtor in Possession)
Condensed Consolidated Statements of Cash Flows
for the nine months ended March 31, 1997 and 1996 6
Gold River Hotel & Casino Corporation
(Debtor in Possession)
Notes to Condensed Consolidated
Financial Statements 7
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 17
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<PAGE>
GOLD RIVER HOTEL & CASINO CORPORATION
(d.b.a. GOLD RIVER GAMBLING HALL & RESORT)
(DEBTOR IN POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C> March 31, <C> June 30,
1997 1996
----------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,164 $ 3,600
Accounts receivable, net 288 457
Inventories 669 597
Prepaid expenses and other 1,461 1,328
---------- ---------
Total Current Assets 6,582 5,982
---------- ---------
PROPERTY AND EQUIPMENT - NET 28,457 29,000
DEPOSITS 760 944
---------- ---------
TOTAL $ 35,799 $ 35,926
========== =========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
LIABILITIES NOT SUBJECT TO COMPROMISE:
Accounts payable $ 1,585 $ 2,135
Accrued expenses
Payroll and related 720 908
Other 1,389 889
Long-term debt - current by its terms 216 -
--------- ---------
Total Current Liabilities
Not Subject to Compromise 3,910 3,932
LIABILITIES SUBJECT TO COMPROMISE:
Accounts payable 764 1,089
Accrued expenses
Interest payable 10,979 11,350
Long-term debt - current by its terms 23 492
Note subject to demand for acceleration 75,000 80,000
---------- --------
Total Current Liabilities
Subject to Compromise 86,766 92,931
LONG-TERM DEBT NOT SUBJECT TO COMPROMISE 6,405 -
LONG-TERM DEBT SUBJECT TO COMPROMISE 119 269
---------- --------
Total 93,290 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;
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 (83,555) (83,360)
---------- ---------
Total Shareholders' Deficiency (61,401) (61,206)
---------- ---------
TOTAL $ 35,799 $ 35,926
========== =========
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 March 31, 1997 and 1996
1997 1996
----------------- --------------
REVENUES: ( in thousands, except per share data)
Casino $ 8,492 $ 9,233
Food and beverage 2,802 2,771
Rooms 1,586 1,788
Other 936 578
----------- ----------
13,816 14,370
Less: promotional allowances (1,112) (1,431)
----------- ----------
12,704 12,939
COSTS AND EXPENSES:
Direct costs and expenses of
operating departments:
Casino 4,364 4,496
Food and beverage 2,095 2,018
Rooms 1,020 871
Other 346 351
Other operating expenses:
Selling, general and administrative 2,244 2,403
Depreciation and amortization 369 1,222
Maintenance and utilities 758 746
Professional fees related
to reorganization 73 -
----------- ----------
11,269 12,107
----------- ----------
INCOME FROM OPERATIONS 1,435 832
OTHER EXPENSE:
Note discount amortization - 128
Interest expense
(contracual interest $2,541 and $2,429) 140 1,122
----------- ----------
INCOME (LOSS)
BEFORE INCOME TAXES 1,295 (418)
Income tax (benefit) provision - -
----------- ----------
NET INCOME (LOSS) $ 1,295 $ (418)
============ ==========
Weighted average shares outstanding 1,760,944 1,760,944
============ ==========
Net income (loss) per share $ 0.74 $ (0.24)
============= ==========
See accompanying notes to condensed consolidated financial statements
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<PAGE>
GOLD RIVER HOTEL & CASINO CORPORATION
(d.b.a. GOLD RIVER GAMBLING HALL & RESORT)
(DEBTOR IN POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended March 31, 1997 and 1996
- ------------------------------------------------------------------------
1997 1996
------ ------
REVENUES: ( in thousands, except per share data)
Casino $ 23,015 $ 26,249
Food and beverage 7,798 8,165
Rooms 4,649 5,368
Other 2,091 1,854
37,553 41,636
------ ------
Less: promotional allowances (3,366) (4,053)
------- -------
34,187 37,583
COSTS AND EXPENSES:
Direct costs and expenses of
operating departments:
Casino 13,015 13,695
Food and beverage 5,823 6,082
Rooms 3,159 2,833
Other 1,084 1,086
Other operating expenses:
Selling, general and administrative 6,778 8,218
Depreciation and amortization 1,082 3,491
Maintenance and utilities 2,471 2,614
Professional fees related to
reorganization 622 -
------ ------
34,034 38,019
------ ------
INCOME (LOSS) FROM OPERATIONS 153 (436)
OTHER EXPENSE:
Note discount amortization - 371
Interest expense
(contracual interest $7,550 and $13,131) 348 6,222
------ ------
LOSS BEFORE INCOME TAXES (195) (7,029)
Income tax (benefit) provision - -
------ ------
NET LOSS $ (195) $ (7,029)
======= =======
Weighted average shares outstanding 1,760,944 1,760,944
Net loss per share $ (0.11) $ (3.99)
======== =======
See accompanying notes to condensed consolidated financial statements
- 5 -
<PAGE>
GOLD RIVER HOTEL & CASINO CORPORATION
(d.b.a. GOLD RIVER GAMBLING HALL & RESORT)
(DEBTOR IN POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended March 31, 1997 and 1996
________________________________________________________________________
1997 1996
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES: ( in thousands)
Net loss $ (195) $(7,029)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 1,082 3,491
Amortization of note discount - 371
Other noncash adjustments:
Decrease (increase) in accounts
receivable, net 169 (75)
Increase in inventories (72) (100)
Increase in prepaid expenses (133) (339)
Decrease in deposits 184 24
Decrease in liabilities not subject
to compromise (238) -
Decrease in accounts payable subject
to compromise (325) -
Increase in accounts payable - 1,153
Increase in interest payable 327 5,899
Increase in accrued liabilities, net - 1
------ ------
Net cash provided by
operating activities 799 3,396
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures paid in cash (539) (559)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash paid to reduce long-term debt - (684)
Increase in long-term debt 304 -
------ ------
Net cash provided by (used in)
financing activities 304 (684)
------ -------
INCREASE IN CASH AND
CASH EQUIVALENTS 564 2,153
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 3,600 2,195
------ ------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 4,164 $ 4,348
====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during periods for interest $ 42 $ 323
====== ======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During the nine months ended March 31, 1997 and 1996, finance
agreement obligations of $19,000 and $130 000 respectively, were
incurred with the acquisition of new equipment.
A $698,000 amount of interest payable was converted to long-term debt.
See accompanying notes to condensed consolidated financial statements
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<PAGE>
GOLD RIVER HOTEL & CASINO CORPORATION
(d.b.a. GOLD RIVER GAMBLING HALL & RESORT)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DEBTOR IN POSSESSION)
________________________________________________________________________
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 March 31, 1997, June 30, 1996 and 1995 by $84,094,000, $90,881,000 and
$77,651,000, respectively. During the nine months ended March 31, 1997 and
1996, Gold River incurred net losses of $195,000 and $7,029,000,
respectively. Furthermore, at March 31, 1997 and June 30, 1996 there is a
stockholders' deficiency of $61,401,000 and $61,206,000, 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 which the United States Bankruptcy Court for the District of Nevada
("Bankruptcy Court") entered the confirming order for the Chapter 11 reorganization on March 4, 1997
. Also, Gold River has not funded since February 9, 1996, the semi-annual interest payments
due on the New Mortgage Notes. The accrued and unpaid interest as of March 25, 1997, on the McCarthy
Western Contractors, Inc. ("McCarthy") Promissory Note was added to the Note and reclassified to
liabilities not subject to compromise. 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:
(1) Obtaining approval of the Bankruptcy Court and certain creditor categories,
which was obtained on February 26, 1997.
(2) Obtaining the requisite regulatory approvals required by the State of Nevada
including approvals by the gaming authorities.
(3) Obtaining sufficient cash to fund all distributions and cash reserves required
at the time the Plan becomes effective.
(4) 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 March 31, 1997 and for the three and nine
months ended March 31, 1997 and 1996 is 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 nine months ended March 31, 1997, are not necessarily
indicative of the results that will be achieved for the entire year.
- 7 -
<PAGE>
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.
Earnings per Share - The Financial Accounting Standards Board recently issued SFAS No. 128
"Earnings per Share". This statement establishes standards for computing and presenting earnings per
share and is effective for financial statements issued for periods ending after December 15, 1997. Earlier
application of this statement is not permitted and upon adoption requires restatement (as applicable) of all
prior-period earnings per share data presented. Management believes that the implementation of this
standard will not have a significant impact on earnings per share.
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 nine months ended March 31,
1997 and 1996 are as follows:
Nine Months Ended March, 31
(in thousands)
---------------------------------------
1997 1996
------------ ----------
Rooms $ 443 $ 482
Food and beverage 2,510 1,733
---------- ----------
Total costs allocated to casino department $ 2,953 $ 2,215
========== ==========
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<PAGE>
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
March 31, 1997 March 31, 1996
------------------- ----------------
(in thousands)
Room occupancy rate 84% 83%
Paid occupancy rate 75% 68%
Average paid room rate $ 20 $ 22
Room revenues $ 1,586 $ 1,788
Food and beverage revenues $ 2,802 $ 2,771
Complimentaries:
Food and beverage $ 918 $ 1,011
Room $ 194 $ 420
Change in net credit $ (135) $ 587
Provision for bad debts $ 2 $ 32
Slot win $ 6,853 $ 6,935
Table win $ 911 $ 1,234
Maintenance expenses $ 383 $ 389
Promotional expenses $ 136 $ 250
3. BANKRUPTCY/REORGANIZATION
On February 26, 1997 Gold River's confirmation hearing was held in Bankruptcy Court. The "Second
Amended Joint Plan of Reorganization of Debtors, the Official Committee of Bondholders, and Mr. Allen
E. Paulson (December 13, 1996) (As Modified on February 14, 1997 and February 27, 1997)" (the "Plan")
was confirmed and the confirming order entered on March 4, 1997. The effective date of the Plan
occurred on March 25, 1997 and the Debtors expect that the Plan Revesting Date (as defined in the Plan)
will occur prior to July 1, 1998. The reorganization contemplated by the Plan will not occur until the Plan
Revesting Date when the Company emerges from bankruptcy.
Under the Plan Mr. Allen E. Paulson will become the sole shareholder of Gold River and receive 100% of
the new Gold River stock on or before July 1, 1998, the Revesting Date. Mr. Paulson will also serve as the
sole director, President, Secretary and Treasurer of the Reorganized Company which along with becoming
sole shareholder requires Nevada Gaming Authorities approval prior to an effective Revesting Date. Mr.
Paulson is the Chairman of the Board of Directors and Chief Executive Officer of Full House Resorts, Inc.
("Full House") and was the Chairman of the Board of Directors and Chief Executive Officer of Gulfstream
Aerospace Corporation ("Gulfstream") until his retirement in 1992.
In October and November, 1996 Mr. Paulson acquired approximately 91% of the $75,000,000 in New
Mortgage Notes outstanding. Mr. Paulson will acquire the remaining approximate 9% and the entire
$75,000,000 in New Mortgage Notes and accrued interest will be converted to equity. The Class A and B
common stock will be canceled and Gold River deregistered as a publicly traded corporation, privately
held by Mr. Paulson. The only material remaining debt is a $5,750,000 promissory note payable to Mr.
Paulson and secured by a first lien on Gold River's assets. On March 25, 1997, Mr. Paulson made the
contribution of cash necessary to acquire the approximate remaining 9% of the New Mortgage Notes and
also to acquire the McCarthy Promissory Note dated August 31, 1992 in the principal amount of
$5,000,000, plus accrued interest. Mr. Paulson is subject to gaming licensing approval by the State of
Nevada Gaming Control Board and Gaming Commission.
On March 27, 1997, Class 8 general unsecured creditors received full payment on all allowed claims.
Also on March 31, 1997, general unsecured creditors received full payment representing the first of four
semi-annual payments on all allowed Class 9 claims. Certain leases and contracts have been either
assumed or rejected and obligations to secured creditors have been restructured pursuant to the Plan.
Certain conditions need to be satisfied before the Plan becomes finally effective on the Revesting Date.
The most significant of which are the formal conversion of debt for equity and Mr. Paulson's licensing
approval. When Mr. Paulson is licensed by the Nevada gaming authorities, the confirmed Plan can be
implemented and the Company will emerge from bankruptcy. Until the Revesting Date, the Company
continues to operate under the jurisdiction of the Bankruptcy Court.
- 10 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
The Three Months Ended March 31, 1997 Versus the Three Months Ended March 31, 1996
Gold River's revenues net of promotional allowances decreased $235,000 or approximately 2% during the
three months ended March 31, 1997, as compared to the same period during the prior year. Such decrease
is primarily the result of decreases in casino revenues of $741,000, or approximately 8%, and room
revenues of $202,000, or approximately 11%; offset by increases in food and beverage revenues of
$31,000, or approximately 1%, other revenues of $358,000, or approximately 62%; and a reduction in
promotional allowances of $319,000, or approximately 22%.
The approximately 8% decrease in casino revenues for the quarter ended March 31, 1997 as compared to
the same quarter in 1996, reflects, in part, the overall downturn in gaming revenue of approximately 5%
in comparison to the March 31, 1996, quarter experienced by the Laughlin market and, in part, the gain
in market share by properties that added hotel rooms in 1994 and 1995. Gold River's slot revenue
decreased $307,000, or approximately 4%, for the quarter ended March 31, 1997, as compared to the
same period during the prior year. Table games revenues decreased $321,000, or approximately 26%, for
the quarter ended March 31, 1997 as compared to the same period in 1996. 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 $113,000, or approximately 13%, for the
quarter ended March 31, 1997 as compared to the same period in 1996.
During the three months ended March 31, 1997 beverage revenues decreased $33,000, or approximately
4%, as compared to the same period during the prior year, generally as a result of a decrease in casino
traffic. Food revenues increased $64,000, or approximately 3%, primarily as a result of an approximate
12% increase in the average food check amount, which more than offset a decrease in the number of
customers served of approximately 8%.
The $202,000 or approximately 11% decrease in room revenues during the three months ended March 31,
1997 as compared to the same period during the prior year, is the result of decreases in the average room
rate of approximately 10% and 800 in the number of occupied rooms for the quarter. During the three
months ended March 31, 1997 Gold River's hotel room occupancy was 84% as compared to 83% during
the same period of the prior year.
Costs and Expenses
Operating expenses were $11,269,000 during the three months ended March 31, 1997 as compared to
$12,107,000 during the three months ended March 31, 1996, a decrease of $838,000, or approximately
7%.
The $132,000, or approximately 3%, decrease in casino expense is primarily the result of decreases of
$33,000 in gaming taxes, $95,000 in casino personnel costs; and $219,000 in the estimated cost of
providing rooms, food and beverages to customers without charge; offset by increases of $49,000 in Gold
River Gaming Society cash awards and $166,000 in other casino department expenses.
The $77,000 or approximately 4% increase in food and beverage expenses is primarily the result of a
$14,000 increase in other food and beverage expenses and a $89,000 decrease in the estimated cost of
providing food and beverage to customers without charge (Note: the estimated cost of providing food and
beverage to customers without charge is allocated to the casino department. Consequently, a decrease in
such amount results in an increase in food and beverage departmental expenses) offset by decreases of
$21,000 in the cost of sales; and $5,000, in personnel costs.
The $149,000, or approximately 17%, increase in room expenses is primarily attributable to an increase in
outside services of $32,000, in hotel personnel costs of $4,000 and a $131,000 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) ; offset by a decrease of approximately $18,000 in
"other" hotel expenditures.
The $159,000 or approximately 7% decrease in selling, general and administrative expense during the
three months ended March 31, 1997 in comparison to the same period during the prior year is attributable
largely to decreases in property taxes of approximately $145,000 and other selling, general and
administrative expenses of approximately $14,000.
The decrease of $853,000 in depreciation and amortization expense during the three months ended March
31, 1997 as compared to the same period during the prior year is due to the revaluation of the Company's
property and equipment.
The $12,000, or approximately 2%, increase in maintenance and utilities expense during the three months
ended March 31, 1997 as compared to the same period during the prior year is primarily the result of
increases of $30,000 in outside services and $21,000 in other maintenance expenses which more than
offset decreases of $17,000 in personnel costs, $20,000 in utilities and $2,000 in materials and supplies.
Professional fees related to debt reorganization were $73,000 during the three months ended March 31,
1997, no such expenses were recorded during the same period in the prior year.
The $128,000 decrease in note discount amortization and the $982,000 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 Nine Months Ended March 31, 1997 Versus the Nine Months Ended March 31, 1996
Gold River's revenues net of promotional allowances decreased $3,396,000 or approximately 9% during
the nine months ended March 31, 1997, as compared to the same period during the prior year. Such
decrease is primarily the result of decreases in casino revenues of $3,234,000 or approximately 12%; food
and beverage revenues of $367,000 or approximately 5%; and room revenues of $719,000 or
approximately 13%; and an offsetting increase in other revenues of $237,000 or approximately 13%; and
a reduction in promotional allowances of $687,000 or approximately 17%.
The approximately 12% decrease in casino revenues for the nine months ended March 31, 1997 as
compared to the same nine months in 1996, reflects, in part, the overall downturn in gaming revenue of
8% in comparison to the nine months ended March 31, 1996 experienced by the Laughlin market as
and, in part, the gain in market share by properties that added hotel rooms in 1994 and 1995. Gold
River's slot revenue decreased $1,840,000 or approximately 9% for the nine months ended March 31,
1997, as compared to the same period during the prior year. Table games revenues
decreased $1,015,000 or approximately 27% for the nine months ended March 31, 1997 as compared to
the same period in 1996. 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 $379,000 or approximately 18% for the nine months
ended March 31, 1997 as compared to the same period in 1996.
During the nine months ended March 31, 1997 beverage revenues decreased $185,000 or approximately
7%, as compared to the same period during the prior year, generally as a result of a decrease in casino
traffic. Food revenues decreased $182,000 or approximately 3%, primarily as a result of a decrease in the
number of customers served of approximately 6%.
The $719,000 or approximately 13% decrease in room revenues during the nine months ended March 31,
1997 as compared to the same period during the prior year, is the result of decreases in the average room
rate of approximately 9% and approximately 11,000 in the number of occupied rooms for the nine
months. During the nine months ended March 31, 1997 Gold River's hotel room occupancy was 84% as
compared to 87% during the same period of the prior year.
The increase of $237,000 or approximately 13% in other revenues during the nine months ended March
31, 1997, as compared to the same period during the prior year, is primarily due to increases in retail and
miscellaneous revenues.
Costs and Expenses
Operating expenses were $34,034,000 during the nine months ended March 31, 1997 as compared to
$38,019,000 during the nine months ended March 31, 1996, a decrease of $3,985,000 or approximately
10%.
The $680,000 or approximately 5% decrease in casino expense is primarily the result of decreases of
$314,000 in gaming taxes, $330,000 in casino personnel costs and $386,000 in the estimated cost of
providing rooms, food and beverages to customers without charge; offset by an increase of $350,000 in
other casino department expenses.
The $259,000 or approximately 4% decrease in food and beverage expenses is primarily the result of
decreases of $108,000 in the cost of sales, and $239,000 in personnel costs; offset by a $16,000 increase in
other food and beverage expenses and a $72,000 decrease in the estimated cost of providing food and
beverage to customers without charge (Note: the estimated cost of providing food and beverage to
customers without charge is allocated to the casino department. Consequently, a decrease in such amount
results in an increase in food and beverage departmental expenses).
The $326,000, or approximately 12%, increase in room expenses is primarily attributable to increases in
hotel personnel costs of $9,000, in hotel materials and supplies of $24,000 and a $314,000 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) offset by a decrease of approximately
$21,000 in "other" hotel expenditures.
The $1,440,000 or approximately 18% decrease in selling, general and administrative expense during the
nine months ended March 31, 1997 in comparison to the same period during the prior year is attributable
largely to decreases in professional and consulting services of approximately $583,000, in personnel costs
of approximately $153,000, in property taxes of approximately $264,000 and other selling, general and
administrative expenses of approximately $440,000.
The decrease of $2,409,000 in depreciation and amortization expense during the nine months ended
March 31, 1997 as compared to the same period during the prior year is due to the revaluation of the
Company's property and equipment.
The $143,000, or approximately 6%, decrease in maintenance and utilities expense during the nine
months ended March 31, 1997 as compared to the same period during the prior year is primarily the result
of a decrease of $124,000 in utilities, $43,000 in personnel costs and an increase of $24,000 in other
maintenance expenses.
Professional fees related to debt restructuring were $622,000 during the nine months ended March 31,
1997, no such expenses were recorded during the same period in the prior year.
The $371,000 decrease in note discount amortization and the $5,874,000 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 March 31, 1997, Gold River had $4,164,000 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 contemplated restructuring the
Company's debt plus accrued interest. The Plan as confirmed by the Bankruptcy Court has the holders of
the Company's mortgage notes ("Bondholders") exchanging 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, upon receipt of
required approval from the Nevada Gaming Authorities. The Company's current Series A common stock
and Series B common stock will be canceled and new common stock issued.
The McCarthy $5,000,000 Note, which is secured by a Deed of Trust on the hotel's real property, plus
accrued interest thereon has been acquired by Mr. Paulson. This $5,750,000 promissory note payable to
Mr. Paulson will bear interest at eleven percent (11%) per annum and mature sixty (60) months after the
Revesting Date. Interest on the outstanding principal balance shall be due and payable semi-annually, in
arrears commencing six (6) months after the Revesting Date.
The Bankruptcy Court entered its order confirming the Plan on March 4, 1997. Distributions to class 8
and 9 general unsecured creditors were made on March 27, 1997 and March 31, 1997. A Bankruptcy
Court hearing was held on May 12, 1997 which finalized the last of the claims objections. Pre-petition
liabilities of the Company as of February 9, 1996 are reflected in the June 30, 1996 and March 31, 1997
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, 1996 and March 31, 1997 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 Revesting Date and emerging from bankruptcy.
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:
1) Obtaining approval of the Bankruptcy Court and certain creditor categories, which was obtained on
February 26, 1997.
2) Obtaining the requisite regulatory approvals required by the State of Nevada, including approvals
by the gaming authorities.
3) Obtaining sufficient cash to fund all distributions and cash reserves required at the Effective Date
and Revesting Date.
4) Achieving profitable operations and sufficient cash flows to meet future obligations required
by the Plan.
While the outcome of all these matters is not presently determinable certain positive accomplishments.
have occurred including confirmation of the Plan. 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 nine months ended March 31, 1997 and 1996, Gold River
incurred net losses of $195,000 and $7,029,000 respectively. The Company's current liabilities exceeded
its current assets at March 31, 1997 and June 30, 1996 by $84,094,000 and $90,881,000, respectively.
All of the conditions necessary for the Effective Date to occur have been satisfied. The conditions
satisfied as of the Effective Date are:
1) The Confirmation Order is final
2) Paulson contribution's to acquire the remaining approximate 9% of the New Mortgage Notes and the
McCarthy Promissory Note have been made.
3) The Debtors have made initial class 8 and 9 general unsecured creditors payments and will make on
May 28, 1997 the payments necessary as a result of the May 12, 1997 Bankruptcy Court hearing which
finalized the last of the claims objections.
4) The Debtors cash is sufficient to fund the remaining three (3) semi-annual class 9 general unsecured
payments and all other distributions necessary under the Plan.
5) Sufficient cash is available to fund the Debtors normal working capital and 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 the Bankruptcy Court. In addition, the Bankruptcy Court has approved the Noteholder's and
official unsecured creditors employment of professionals that are compensated by the Company. As a
result, the Company has in-curred $622,000, as of March 31, 1997 for these professional and related
Bankruptcy costs. The Company believes that subsequent to March 31, 1997 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 and nine months
ended March 31, 1997 do not reflect all the professional and related Bankruptcy costs or adjustments
necessary to finalize the Plan. Due to the extended timetable for Plan implementation, including the
Revesting Date when the Company will emerge from bankruptcy, management has revised its estimate
from approximately $450,000 at December 31, 1996 for costs through March 25, 1997, the Effective Date,
to approximately $725,000 for the additional professional and re-lated Bankruptcy costs that will be paid
or accrued until the Revesting Date occurs.
The Liquidity and Capital Resources section above should be read in conjunction with the Company's
Form 10-K for the fiscal year ended June 30, 1996.
<PAGE>
PART II - OTHER INFORMATION
Item 3. Bankruptcy/Reorganization
See Note 3 Bankruptcy/Reorganization to the Condensed Consolidated Financial Statements.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K.
In March 1997, the Company filed a Current Report on Form 8-K dated March 13, 1997 relating
to the confirmation hearing held in Bankruptcy Court. The Plan was confirmed and the
confirming order entered on March 4, 1997.
(See Note 3. to the Condensed Consolidated Financial Statements)
<PAGE>
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 March 31, 1997 to be signed on its behalf by the
undersigned, thereunto duly authorized, this 13th day of May, 1997.
GOLD RIVER HOTEL & CASINO CORPORATION
(Registrant)
By /s/ Benjamin F. Martello
------------------------------
Benjamin F. Martello
Secretary, Treasurer and
Chief Financial and Accounting Officer
<PAGE>
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