GRAND CASINOS, INC.
1ST QUARTER
FISCAL 1996
FORM 10-Q
PATRICK R. CRUZEN, PRESIDENT
TIMOTHY J. COPE, CHIEF FINANCIAL OFFICER
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 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 No. 1-12962
GRAND CASINOS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1689535
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
13705 First Avenue North
Minneapolis, Minnesota 55441
(Address of principal executive offices) (Zip Code)
(612) 449-9092
(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 _______
As of May 8, 1996, there were 41,585,185 shares of Common Stock, $0.01 par value
per share, outstanding.
GRAND CASINOS, INC. AND SUBSIDIARIES
INDEX
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Page of
Form 10-Q
PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of 3
March 31, 1996 and December 31, 1995
Consolidated Statements of Earnings 4
for the three months ended March 31, 1996
and April 2, 1995
Consolidated Statements of Cash Flows 5
for the three months ended March 31, 1996
and April 2, 1995
Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND 13
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports On Form 8-K 17
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GRAND CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED) *
MARCH 31, 1996 DECEMBER 31, 1995
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ASSETS
Current Assets:
Cash and cash equivalents $298,065 $334,772
Current installments of notes receivable 12,680 13,750
Accounts receivable 16,354 10,864
Deferred income taxes 7,037 6,747
Other current assets 8,426 13,736
- - ----------------------------------------------------------------------------------------------------------
Total Current Assets 342,562 379,869
- - ----------------------------------------------------------------------------------------------------------
Property and Equipment, Net 624,417 542,838
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Other Assets:
Cash and cash equivalents-restricted 7,488 6,902
Securities available for sale 17,791 14,200
Notes receivable, less current installments 40,608 43,594
Investments in and notes from unconsolidated affiliates 113,114 109,413
Debt issuance and deferred licensing costs-net 20,263 20,582
Other long-term assets 10,729 10,710
- - ----------------------------------------------------------------------------------------------------------
Total Other Assets 209,993 205,401
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==========================================================================================================
TOTAL ASSETS $1,176,972 $1,128,108
==========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable-trade $4,862 $6,252
Accounts payable-construction 20,421 12,517
Current installments of long-term debt and capital leases 9,220 11,562
Accrued interest 15,423 4,030
Accrued payroll and related expenses 15,042 17,157
Other accrued expenses 18,801 16,314
- - ----------------------------------------------------------------------------------------------------------
Total Current Liabilities 83,769 67,832
- - ----------------------------------------------------------------------------------------------------------
Long-term Liabilities:
Long-term debt-less current installments 457,805 459,070
Deferred income taxes 75,722 75,106
- - ----------------------------------------------------------------------------------------------------------
Total Long-Term Liabilities 533,527 534,176
- - ----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 617,296 602,008
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COMMITMENTS AND CONTINGENCIES
Shareholders' Equity:
Common stock, $.01 par value; authorized 100,000 shares;
issued and outstanding 41,577 and 40,988
at March 31, 1996 and December 31, 1995, respectively 416 410
Additional paid-in-capital 409,956 397,298
Net unrealized gains on securities available for sale 5,368 2,102
Retained earnings 143,936 126,290
- - ----------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 559,676 526,100
- - ----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,176,972 $1,128,108
==========================================================================================================
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
* FROM AUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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GRAND CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
(UNAUDITED)
THREE MONTHS ENDED
----------------------------------------
MARCH 31, 1996 APRIL 2, 1995
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REVENUES:
Casino $74,303 $62,196
Hotel 5,417 0
Food and beverage 9,179 7,696
Management fee income 18,692 14,108
Retail and other income 2,370 1,064
- - ----------------------------------------------------------------------------------------------
Gross Revenues 109,961 85,064
Less: Promotional allowances (6,125) (3,508)
- - ----------------------------------------------------------------------------------------------
NET REVENUES 103,836 81,556
- - ----------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Casino 24,372 19,613
Hotel 1,797 0
Food and beverage 4,164 3,570
Other operating expenses 2,889 1,137
Depreciation and amortization 6,507 4,404
Lease expense 4,032 3,278
Selling, general and administrative 32,710 24,579
- - ----------------------------------------------------------------------------------------------
Total Costs and Expenses 76,471 56,581
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EARNINGS FROM OPERATIONS 27,365 24,975
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OTHER INCOME (EXPENSE):
Interest income 5,318 2,513
Interest expense (5,725) (4,651)
Gain on sale of investments 0 634
Equity in earnings (loss) of unconsolidated affiliate 858 (150)
- - ----------------------------------------------------------------------------------------------
Total other income (expense), net 451 (1,654)
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Earnings before income taxes and minority interest 27,816 23,321
Provision for income taxes 10,169 8,667
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Earnings before minority interest 17,647 14,654
Minority interest 0 423
- - ----------------------------------------------------------------------------------------------
NET EARNINGS $17,647 $15,077
==============================================================================================
Earnings per Common Share $0.41 $0.45
==============================================================================================
WEIGHTED AVERAGE COMMON SHARES AND COMMON
STOCK EQUIVALENTS OUTSTANDING 42,865 33,453
==============================================================================================
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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GRAND CASINOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
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MARCH 31, 1996 APRIL 2, 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $17,647 $15,077
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 5,965 3,873
Amortization of original issue discount and debt issuance costs 542 1,693
Gain on sale of investment 0 (634)
Equity in (earnings) loss of unconsolidated affiliate (858) 150
Decrease in minority interest 0 (423)
Change in deferred income taxes 616 0
Write off project note receivables 989 0
Changes in operating assets and liabilities:
Other current assets (5,396) (6,535)
Accounts payable - trade 6,514 (838)
Accrued expenses and income taxes 16,683 1,894
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NET CASH PROVIDED BY OPERATING ACTIVITIES 42,702 14,257
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CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for notes receivable 550 (3,923)
Investment in and notes receivable from unconsolidated affiliates (3,468) (3,151)
Proceeds from repayment of notes receivable 2,516 5,211
(Increase) decrease in cash and cash equivalents-restricted (586) (185,365)
Payments for property and equipment (86,936) (24,905)
Proceeds from sale of investment 0 634
Increase in other long-term assets (318) (714)
- - -----------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (88,242) (212,213)
- - -----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in accounts payable-construction 0 (4,324)
Proceeds from issuance of common stock-net 12,663 140
Debt issuance costs and deferred financing costs (223) (10,738)
Proceeds from issuance of long-term debt 0 220,500
Payments on long-term debt and capital lease obligations (3,607) (5,699)
- - -----------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 8,833 199,879
- - -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (36,707) 1,923
Cash and cash equivalents - beginning of period 334,772 29,797
- - -----------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $298,065 $31,720
=============================================================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of capitalized interest $0 $6,156
Income taxes $0 $3,880
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock for debt issuance costs $0 4,000
Increase in goodwill due to an increase in ownership of Stratosphere Corporation $0 8,252
Increase in minority interest due to an increase in ownership of Stratosphere Corporation $0 11,439
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
GRAND CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
NOTE 1 UNAUDITED FINANCIAL STATEMENTS
Grand Casinos, Inc. and Subsidiaries, collectively the
Company, develop, construct, and manage land-based and
dockside casinos and related hotel and entertainment
facilities primarily in emerging gaming jurisdictions. The
Company owns and operates two dockside casinos on the
Mississippi Gulf Coast and manages two Indian-owned casinos in
Minnesota and two Indian-owned casinos in Louisiana. The
Company is constructing Grand Casino Tunica in Tunica County,
Mississippi. It is also an owner of approximately 42% of
Stratosphere Corporation (Stratosphere), which is constructing
the Stratosphere project in Las Vegas, Nevada.
The consolidated financial statements include the accounts of
Grand Casinos, Inc. and its wholly-owned and majority-owned
subsidiaries. The accompanying consolidated financial
statements include the accounts of Stratosphere from October
2, 1994, the date on which the Company first owned over 50% of
the voting stock of Stratosphere, to December 20, 1995, the
date on which the Company again owned less than 50% of the
voting stock of Stratosphere. Investments in unconsolidated
subsidiaries representing between 20% and 50% of voting stock
are accounted for on the equity method. All material
intercompany balances and transactions have been eliminated in
the consolidation.
The accompanying unaudited condensed consolidated financial
statements have been prepared by the Company in accordance
with generally accepted accounting principles for interim
financial information, in accordance with the rules and
regulations of the Securities and Exchange Commission.
Pursuant to such rules and regulations, certain financial
information and footnote disclosures normally included in the
consolidated financial statements have been condensed or
omitted. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered
necessary for fair presentation have been included. Operating
results for the three months ended March 31, 1996, are not
necessarily indicative of the results that may be expected for
the fiscal year ending December 29, 1996.
The condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and
notes thereto included in the Company's annual report on Form
10-K for the fiscal year ended December 31, 1995.
NOTE 2 INCOME RECOGNITION
The Company recognizes revenues from its owned and operated
casinos in accordance with industry practice. Casino revenue
is the net win from gaming activities (the difference between
gaming wins and losses). Casino revenues are net of accruals
for anticipated payouts of progressive and certain other slot
machine jackpots. Revenues include the retail value of food
and beverage and other items which are provided to customers
on a complimentary basis. A corresponding amount is deducted
as promotional allowances.
The costs of such complimentaries are included in casino costs
and expenses in the accompanying Consolidated Statements of
Earnings. Revenue from the management of Indian-owned casino
gaming facilities is recognized when earned according to the
terms of the management contracts.
NOTE 3 INVENTORIES
Inventories, consisting of food and beverage, retail and
operating supplies, are stated at the lower of cost or market.
Cost is determined using the first in, first out method.
NOTE 4 PREOPENING EXPENSES
Preopening expenses incurred prior to opening of Company-owned
facilities are capitalized and amortized to expense using the
straight-line method over the six months following the opening
of the respective facilities. These costs include payroll,
training, and marketing costs incurred prior to commencement
of operations. Depreciation and amortization for the three
months ended March 31, 1996 and April 2, 1995 includes
approximately $.3 million and $0.0 million of preopening
amortization expense.
NOTE 5 EARNINGS PER COMMON SHARE
Earnings per common share was determined by dividing net
earnings by the weighted average number of common shares
outstanding during the three months ended April 2, 1995 and
weighted average number of common shares and common stock
equivalents outstanding during the three months ended March
31, 1996.
NOTE 6 PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, except in the case
of capitalized lease assets, which are stated at the lower of
the present value of the future minimum lease payments or fair
market value at the inception of the lease. Expenditures for
additions, renewals and improvements are capitalized. Costs of
repairs and maintenance are expensed when incurred.
Depreciation of property and equipment is computed using the
straight-line method over useful lives of three to thirty
years. Leasehold acquisition costs are amortized over the
shorter of the estimated useful life or the term of the
respective leases once the assets are placed in service.
NOTE 7 AMORTIZATION OF ORIGINAL ISSUE DISCOUNT AND
DEBT ISSUANCE COSTS
Original issue discounts are amortized using the effective
interest method, over the life of the related indebtedness.
Debt issuance costs are amortized using the straight-line and
effective interest methods, over the life of the related
indebtedness.
NOTE 8 INTEREST COSTS
Interest is capitalized in connection with the construction of
major facilities. The capitalized interest is recorded as part
of the asset to which it relates and is amortized over the
asset's estimated useful life. For the three months ended
March 31, 1996 and April 2, 1995, approximately $6.1 million
and $2.8 million, respectively, of interest cost was
capitalized.
NOTE 9 NOTES RECEIVABLE
Notes receivable consist of the following (in thousands):
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March 31, 1996 Dec. 31, 1995
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Notes from the Coushatta Tribe with interest at a defined
reference rate plus 1% (not to exceed 16%), receivable in 84
monthly installments through January 2002 $26,089 $26,903
Notes from the Tunica-Biloxi Tribe with interest at a defined
reference rate plus 1% (not to exceed 16%), receivable in 84
monthly installments through June 2001 14,058 14,529
Notes from the Mille Lacs Band with interest at a defined
reference rate plus 1% (not to exceed 16%), receivable in
varying installments through October 1997 2,586 3,071
Notes from the Mille Lacs Band, with
interest at 9.75%, receivable in 60 monthly
installments through December 1997 2,156 2,435
Note from Casino Magic Corp. related to
sale of assets with interest at 12% per annum,
principal and interest due May 26, 1996 2,773 2,773
Other 5,626 7,633
-------------------------------------------------------------------------------------------------
$53,288 $57,344
Less current installments of notes receivable 12,680 13,750
------------------------------------------------------------------------------------------------
Notes receivable-less current installments $40,608 $43,594
===============================================================================================
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NOTE 10 LONG-TERM DEBT
On November 30, 1995, the Company completed its public
offering of $450.0 million of eight year 10.125% First
Mortgage Notes due December 1, 2003, realizing net cash
proceeds of approximately $434.5 million after underwriting
and other related offering costs. The Company used $132.6
million of net proceeds to extinguish $115.0 million aggregate
principal amount of 12.5% First Mortgage Notes due on February
1, 2000 (including accrued interest of $4.8 million and $12.8
million related to a tender offer premium and expenses), and
$25.3 million to retire all outstanding principal and interest
due under a credit facility with First Interstate Bank of
Nevada, N.A. (F.I.B. Note). The balance of net proceeds of
approximately $275.7 million is to be used to develop and open
Grand Casino Tunica and to construct additional hotel rooms
and entertainment and gaming-related amenities at Grand Casino
Biloxi and Grand Casino Gulfport.
The 10.125% First Mortgage Notes are secured by substantially
all the assets of Grand Casino Biloxi and Grand Casino
Gulfport, Grand Casino Tunica assets included in Phase 1
development, capital stock owned by the Company in
Stratosphere, and certain existing notes receivable due the
Company from Tribes. The notes require semi-annual payments of
interest only on June 1 and December 1 of each year commencing
June 1, 1996, until December 1, 2003, at which time the entire
principal plus accrued interest is due and payable. The notes
may be redeemed at the Company's option, in whole or in part,
anytime after December 1, 1999, at a premium, declining
ratably thereafter to par value on December 1, 2002, to
maturity.
NOTE 11 COMMITMENTS AND CONTINGENCIES
STRATOSPHERE CORPORATION
On March 9, 1995, the Company converted $33.5 million of
outstanding advances to Stratosphere into an aggregate 8.25
million shares of common stock. The Company has agreed to
provide credit enhancements, subject to certain limitations,
to guarantee completion of construction of the project to a
limit of $50.0 million and to purchase up to $20.0 million of
additional equity in Stratosphere during each of the first
three years (up to $60.0 million total) Stratosphere is
operating to the extent Stratosphere's consolidated cash flow
does not reach $50.0 million in each of such years.
LOAN GUARANTY AGREEMENTS
The Company has guaranteed a loan and security agreement
entered into by the Tunica-Biloxi Tribe of Louisiana for $14.1
million for the purpose of financing casino equipment. The
agreement extends through 1998, and as of March 31, 1996, the
amount outstanding was $9.4 million. In addition, the Company
has guaranteed loan and security agreements entered into by
the Coushatta Tribe of Louisiana for $22.3 million for the
purpose of financing casino equipment. The agreements are for
three years and have various maturity dates through 1998, and
as of March 31, 1996, the amounts outstanding were $16.4
million.
The Company has entered into a master hotel development
agreement with Casino Resource Corporation for the hotel
adjacent to Grand Casino Hinckley. The Company has guaranteed
the mortgage related to the hotel in the amount of $2.9
million as of March 31, 1996.
OPTION AND LOAN AGREEMENT
The Company entered into an option and loan agreement for land
in a state that is reviewing legislation to allow for gaming.
The agreement provides for maximum total payments of $6.1
million, contingent on various conditions. As of March 31,
1996, a total of $3.7 million had been paid pursuant to the
agreement.
OTHER
The Company, in connection with the development and
construction of Grand Casino Tunica in Tunica County,
Mississippi, has entered into a fixed price construction
contract in the amount of $217.4 million. As of March 31,
1996, the balance remaining to complete under the contract is
approximately $154.4 million.
The Company is a defendant in various pending litigation. In
management's opinion, the ultimate outcome of such litigation
will not have a material adverse effect on the results of
operations or the financial position of the Company.
NOTE 12 SUBSEQUENT EVENTS
As noted previously, the Company is an owner of approximately
42% of Stratosphere, which is developing the Stratosphere
project in Las Vegas, Nevada. The Stratosphere casino and
hotel project opened on April 29, 1996.
GRAND CASINOS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(UNAUDITED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company develops, constructs and manages land-based and
dockside casinos primarily in emerging gaming jurisdictions.
The Company's revenues are derived from the Company-owned
casinos of Grand Casino Biloxi and Grand Casino Gulfport, and
from management fee income from Grand Casino Mille Lacs, Grand
Casino Hinckley, Grand Casino Avoyelles, and Grand Casino
Coushatta. Pursuant to the Mille Lacs, Hinckley, Avoyelles,
and Coushatta management contracts, the Company receives a fee
equal to 40% of the net distributable profits generated by
Grand Casino Mille Lacs, Grand Casino Hinckley, Grand Casino
Avoyelles, and Grand Casino Coushatta. The Company commenced
operations in August 1990, and opened its first Company-owned
casinos, Grand Casino Gulfport and Grand Casino Biloxi in May
1993 and January 1994, respectively. Therefore, the Company's
limited operating history may not be indicative of the
Company's future performance. In addition, a comparison of
results from year to year may not be meaningful due to the
opening of new facilities during such years. The Company's
growth strategy contemplates expanding existing operations and
establishing additional gaming operations. The successful
implementation of this growth strategy is contingent upon the
satisfaction of various conditions and the occurrence of
certain events, including obtaining governmental approvals and
increased competition, many of which are beyond the control of
the Company. The following discussion and analysis should be
read in conjunction with the consolidated financial statements
and notes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1995.
Revenues from owned and operated casinos are calculated in
accordance with generally accepted accounting principles and
presented in a manner consistent with industry practice. Net
distributable profits from Grand Casino Mille Lacs, Grand
Casino Hinckley, Grand Casino Avoyelles, and Grand Casino
Coushatta are computed using a modified cash basis of
accounting in accordance with the management contracts. The
effect of the use of the modified cash basis of accounting is
to accelerate the write-off of capital equipment and leased
assets, which thereby impacts the timing of net distributable
profits.
RESULTS OF OPERATIONS
Grand Casino Gulfport and Grand Casino Biloxi commenced
operations on May 14, 1993 and January 17, 1994, respectively,
with Grand Casino Avoyelles and Grand Casino Coushatta opening
June 3, 1994 and January 16, 1995, respectively. As such, a
comparison of results from quarter to quarter may not be
meaningful due to the opening of new facilities.
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE
THREE MONTHS ENDED APRIL 2, 1995
Earnings Per Common Share and Net Earnings
Earnings per common share for the three months ended March 31,
1996 were $.41 versus $.45 for the prior year's comparable
period based upon weighted average common shares outstanding
of 42.9 million and 33.5 million for the three month periods
ended March 31, 1996 and April 2, 1995, respectively. The
primary increase in the weighted average common shares
outstanding is a result of the merger with Gaming Corporation
of America and Grand Gaming Corp. on November 30, 1995 (7.3
million shares).
Net earnings increased $2.6 million to $17.6 million for the
three months ended March 31, 1996 compared to the prior year
principally due to an increase in revenues in 1996 for Grand
Casino Biloxi, Grand Casino Gulfport and management fee
income.
Net Revenues
Net revenues for the Company increased $22.3 million for the
three months ended March 31, 1996 compared to the same period
in the prior year. The increase in net revenues is primarily
due to increased revenues at Company owned facilities Grand
Casino Biloxi and Grand Casino Gulfport in the amount of $17.7
million and increased management fee income from Indian-owned
casinos.
Grand Casino Biloxi and Grand Casino Gulfport generated $74.3
million in gross casino revenue and $17.0 million in gross
hotel, food, beverage, retail, and entertainment revenue
during the three months ended March 31, 1996. The three months
ended April 2, 1995 revenues include $62.2 million in gross
casino revenue and $8.8 million in gross food, beverage and
retail revenue.
Costs and Expenses
Costs and expenses increased $19.9 million for the three month
period ended March 31, 1996 over the comparable period in the
prior year. Following are the specific changes in costs and
expenses.
Casino expenses were $24.4 million for the three month period
March 31, 1996 versus $19.6 million for the prior year,
principally due to the increase of $12.1 million in casino
revenues. Food and beverage expenses increased $.6 million to
$4.2 million for the three month period ended March 31, 1996.
An increase in hotel expenses in the amount of $1.8 million is
a result of the Biloxi and Gulfport hotels being open during
the entire first quarter of 1996. These hotels were not open
during the first quarter of 1995. Increases in selling,
general and administrative expenses in the amount of $8.1
million are primarily attributed to the increases in marketing
expenses for the Biloxi and Gulfport properties and indirect
expenses associated with the Biloxi and Gulfport hotels in the
amount of $3.9 million and $1.7 million, respectively.
Other
Interest income increased by $2.8 million to $5.3 million for
the three months ended March 31, 1996 compared to $2.5 million
for the three months ended March 31, 1996. This increase is
primarily attributable to interest income earned on the
proceeds from the Company's $450.0 million First Mortgage Note
offering that closed on November 30, 1995. In addition,
interest expense increased by $1.1 million to $7.1 million for
the three months ended March 31, 1996 compared to $5.7 million
for the three months ended April 2, 1995, as a result of the
increase in First Mortgage Notes from $115.0 million to $450.0
million.
CAPITAL RESOURCES AND LIQUIDITY
The Company had cash and cash equivalents of $298.1 million.
For the three months ended March 31, 1996, capital
expenditures were $86.9 million compared to $24.9 million for
the comparable period in the prior year. The majority of
expenditures, $74.5 million for the three months ended March
31, 1996 related to construction of Grand Casino Tunica. Based
upon current construction plans, the Company expects that
development, construction, equipping and furnishing Grand
Casino Tunica will require an aggregate of approximately $470
million, of which $189.7 million was expended as of March 31,
1996.
The Company is in the process of securing approximately $120.0
million in new capital lease financing for the Grand Casino
Tunica project. There can be no assurance that the Company
will be able to obtain third party capital lease financing on
acceptable terms or that the project under development will be
completed. These estimates are based upon current construction
plans, which are subject to change, and the scope and cost of
each of the Company's projects may vary significantly from
that which is currently anticipated.
The Company, in conjunction with the closing of Stratosphere
Corporation's First Mortgage Notes, agreed to provide credit
enhancements, subject to certain limitations, to guarantee
completion of construction of the project up to a limit of
$50.0 million and to purchase up to $20.0 million of
additional equity in Stratosphere Corporation during each of
the first three years (up to $60.0 million total) after
Stratosphere Corporation commences operations to the extent
Stratosphere's consolidated cash flow does not reach $50.0
million in each of such years.
Pursuant to the Company's covenants related to the $450.0
million First Mortgage Notes, the Company is restricted from
paying cash dividends and from transferring funds from certain
subsidiaries to the Company. Because of such restrictions and
to provide funds for the growth of the Company, no cash
dividends are expected to be paid on common shares in the
foreseeable future.
GRAND CASINOS, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 -- Financial Data Schedule.
(b) No Form 8-K was filed during the fiscal quarter ended
March 31, 1996.
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.
Dated: May 15, 1996 GRAND CASINOS, INC.
Registrant
By: /s/ Patrick R. Cruzen
Patrick R. Cruzen, President
By: /s/ Timothy J. Cope
Timothy J. Cope, Chief Financial Officer
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<ARTICLE> 5
<MULTIPLIER> 1,000
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> MAR-31-1996
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0
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</TABLE>
