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 June 30, 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 000-21430
---------------
Riviera Holdings Corporation
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Nevada 88-0296885
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2901 Las Vegas Boulevard South, Las Vegas, Nevada 89109
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (702) 794-9527
---------------------------------------------
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 [ ]
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.
As of June 30, 1996 there were 4,938,470 shares of Common Stock, $.001 par
value per share, outstanding
<PAGE>
RIVIERA HOLDINGS CORPORATION
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Independent Accountants' Report 2
Condensed Consolidated Balance Sheets at June 30, 1996
(Unaudited) and December 31, 1995 3
Condensed Consolidated Statements of Operations (Unaudited)
for the Three Months and Six Months ended June 30, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Three Months and Six Months Ended June 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
1
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
Riviera Holdings Corporation
We have reviewed the accompanying condensed consolidated balance sheet of
Riviera Holdings Corporation (the "Company") and subsidiaries as of June 30,
1996, and the related condensed consolidated statements of operations and of
cash flows for the periods ending June 30, 1996 and 1995 of the Company. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Riviera Holdings Corporation as of
December 31, 1995, and the related consolidated statements of operations,
shareholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated February 16, 1996 we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 1995 is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
July 19, 1996
2
<PAGE>
RIVIERA HOLDINGS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1996 1995
-------------- ---------------
(Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 26,083,212 $ 21,962,021
Accounts receivable, net 4,161,046 4,334,364
Inventories 2,513,254 2,186,500
Prepaid expenses and other assets 3,431,761 2,601,519
-------------- --------------
Total current assets 36,189,273 31,084,404
PROPERTY AND EQUIPMENT, NET 122,446,404 121,049,407
OTHER ASSETS 2,060,373 4,758,921
RESTRICTED CASH FOR PERIODIC SLOT PAYMENTS 786,110 1,038,721
------------- -------------
TOTAL ASSETS $ 161,482,160 $ 157,931,453
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,847,318 $ 2,321,967
Accounts payable 7,498,891 8,408,298
Current income taxes payable 50,716
Accrued expenses 9,834,417 9,596,275
-------------- --------------
Total current liabilities 19,180,626 20,377,256
-------------- --------------
DEFERRED INCOME TAXES 4,030,999 3,022,999
-------------- --------------
LONG-TERM DEBT, NET OF CURRENT PORTION 107,200,702 108,249,315
-------------- --------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock ($.001 par value; 20,000,000 shares authorized;
4,938,470 shares issued and outstanding at June 30, 1996 and
4,800,000 shares issued and outstanding at December 31, 1995) 4,938 4,800
Additional paid-in capital 14,092,221 12,536,902
Notes receivable from Employee Shareholders (1,383,272)
Retained earnings 18,355,946 13,740,181
-------------- --------------
Total shareholders' equity 31,069,833 26,281,883
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 161,482,160 $ 157,931,453
============== =============
See notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
RIVIERA HOLDINGS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
REVENUES:
<S> <C> <C> <C> <C>
Casino $ 20,216,512 $ 19,487,001 $ 40,381,809 $ 38,639,185
Rooms 10,513,791 9,964,362 21,771,175 20,505,427
Food and beverage 6,214,968 5,426,426 12,043,225 10,952,261
Entertainment 5,270,569 2,597,925 10,795,071 4,861,835
Other 2,619,703 2,318,056 5,203,521 4,870,661
------------- ------------- ------------- ------------
44,835,543 39,793,770 90,194,801 79,829,369
Less promotional allowances 3,285,494 2,723,729 6,921,756 5,489,495
------------- ------------- ------------- ------------
Net revenues 41,550,049 37,070,041 83,273,045 74,339,874
------------- ------------- ------------- ------------
COSTS AND EXPENSES:
Direct costs and expenses of operating
departments:
Casino 12,066,129 11,159,391 24,472,045 22,261,806
Rooms 4,700,687 4,655,383 9,365,428 9,374,182
Food and beverage 4,163,229 3,891,146 8,088,692 7,802,042
Entertainment 3,671,662 2,091,084 7,393,897 3,673,071
Other 993,067 862,329 1,963,795 1,754,764
Other operating expenses:
Selling, general and administrative 7,901,770 7,717,146 15,361,878 15,014,572
Provision for bad debts 97,170 114,627 240,223 457,117
Depreciation and amortization 1,974,205 1,709,312 3,862,227 3,304,292
------------- ------------- ------------- ------------
Total costs and expenses 35,567,919 32,200,418 70,748,185 63,641,846
------------- ------------- ------------- ------------
INCOME FROM OPERATIONS 5,982,130 4,869,623 12,524,860 10,698,028
------------- ------------- ------------- ------------
OTHER INCOME (EXPENSE)
Interest expense (3,038,600) (3,119,173) (6,100,000) (6,258,761)
Interest income 315,663 295,629 592,902 520,260
------------- ------------- ------------- ------------
Total other income (expense) (2,722,937) (2,823,544) (5,507,098) (5,738,501)
------------- ------------- ------------- ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 3,259,193 2,046,079 7,017,762 4,959,527
INCOME TAXES 1,116,000 705,000 2,402,000 1,710,000
------------- ------------- ------------- ------------
NET INCOME $ 2,143,193 $ 1,341,079 $ 4,615,762 $ 3,249,527
=========== ============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING:
Common and common equivalent shares 5,123,339 5,016,028 5,072,364 5,016,028
Common shares assuming full dilution 5,131,678 5,047,784 5,108,845 5,047,784
NET INCOME PER SHARE:
Common and common equivalent shares $0.42 $0.27 $0.91 $0.65
Common shares assuming full dilution $0.42 $0.27 $0.90 $0.64
See notes to condensed consolidated financial statements
</TABLE>
4
<PAGE>
RIVIERA HOLDINGS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
1996 1995 1996 1995
-------------- -------------- ------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Net Income $ 2,143,193 $ 1,341,079 $ 4,615,762 $ 3,249,627
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,974,205 1,709,312 3,862,227 3,304,292
Provision for bad debts 97,170 114,627 240,223 457,117
Provision for gaming discounts 0 18,001 13,750 35,501
Interest expense 3,038,600 3,119,172 6,100,000 6,258,760
Interest paid (5,979,472) (6,075,395) (6,120,396) (6,275,820)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (30,890) 286,747 (80,655) 828,980
Decrease (increase) in inventories 151,511 240,750 (326,754) 227,560
Decrease (increase) in prepaid expenses
and other assets (934,850) (250,898) (830,242) (454,696)
Decrease (increase) in restricted cash for
slot periodic payments 252,611 252,654 252,611 252,641
Increase (decrease) in accounts payable 270,292 (1,707,907) (909,266) (1,820,048)
Increase (decrease) in accrued liabilities 168,446 (530,566) 46,112 (8,099)
Increase (decrease) in current income taxes payable (746,715) (742,619) (50,716) (572,619)
Increase (decrease) in deferred income taxes 468,000 219,000 1,008,000 454,000
Increase in non-qualified pension plan obligation
to CEO upon retirement 106,249 99,999 212,426 166,665
------------ ------------ ------------ ------------
Net cash provided by (used in ) operating activities 978,350 (1,906,044) 8,033,082 6,103,861
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and equipment (3,024,646) (2,089,749) (5,259,224) (3,988,917)
Decrease (increase) in other assets 1,051,745 38,070 2,698,548 246,494
------------ ------------ ------------ ------------
Net cash used in investing activities (1,972,901) (2,051,679) (2,560,676) (3,742,423)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 49,180 98,359
Payments on long-term borrowings (1,030,306) (992,227) (1,621,621) (1,580,165)
Proceeds from issuance of stock to employees 172,047 172,047
------------ ------------ ------------ ------------
Net cash used in financing activities (809,079) (992,227) (1,351,215) (1,580,165)
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (1,803,630) $ (4,949,950) $ 4,121,191 $ 781,273
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 27,886,842 $ 22,156,580 $ 21,962,021 $ 16,425,357
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 26,083,212 $ 17,206,630 $ 26,083,212 $ 17,206,630
============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION-
INCOME TAXES PAID $ 1,982,000 $1,307,000 $ 2,032,000 $ 1,907,000
------------ ------------ ------------ ------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING
ACTIVITIES -
STOCK ISSUED TO EMPLOYEES WITH NOTES
RECEIVABLE $ 1,383,272 $ 1,383,272
------------ ------------
See notes to condensed consolidated financial statements.
</TABLE>
5
<PAGE>
RIVIERA HOLDINGS CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - Riviera Holdings Corporation ("the Company") and its
wholly-owned subsidiary Riviera Operating Corporation ("ROC") were incorporated
on January 27, 1993, in order to acquire all assets and liabilities of Riviera,
Inc. Casino-Hotel Division (the "Hotel & Casino") .
On November 16, 1995, at a special meeting, the Shareholders of the Company
voted to increase the total number of authorized shares from 5,000,000 to
20,000,000 with 1,088,580 shares voting for the proposed and 1,200 shares voting
against. Accordingly, per share information, average number of shares
outstanding and number of shares outstanding in the accompanying condensed
consolidated financial statements have been adjusted for the stock split as of
the earliest date presented ( June 30, 1995).
The financial information at June 30, 1996 for the three months and six months
ended June 30, 1996; and for the three months and six months ended June 30,
1995, 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 months and six months ended June 30, 1996 and for the three months
and six months ended June 30, 1995, are not necessarily indicative of the
results that will be achieved for the entire year.
These financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto for the year ended December
31, 1995, included in the Company's Annual Report on Form 10-K.
Legal Proceedings
- -----------------
The company is a party to several routine lawsuits both as plaintiff and as
defendant arising from the normal operations of a hotel. Management does not
believe that the outcome of such litigation, in the aggregate, will have a
material adverse effect on the financial position or results of operations of
the Company or ROC.
6
<PAGE>
Nature of Operations
- --------------------
The Company operates the Riviera Hotel and Casino in Las Vegas, Nevada. The
Company is engaged in a single industry segment, the operation of a hotel/casino
with restaurants and related facilities. Although the Company receives
consulting fees through its wholly owned subsidiary Riviera Gaming Management,
Inc. (RGM) these fees were not material in 1995 or 1996. During the third
quarter of 1996, RGM expects to operate the Four Queens Hotel and Casino in
downtown Las Vegas, Nevada under an interim management agreement. Under the
proposed interim management agreement RGM would receive management fees of
$83,333 per month. The interim management agreement would be converted to a 40
month management agreement on the first day of the month after Effective Date of
the Elsinore Corporation/Four Queens Chapter 11 reorganization. This management
agreement provides for management fees equal to 25 percent of the increase in
EBITDA (Earnings before interest, taxes, depreciation and amortization) with a
minimum of $1 million per year. RGM also will be issued warrants to acquire 20
percent of the new entity at a per share price equal to the fresh start
accounting equity of the entity. RGM expects the Effective date to occur during
the fourth quarter of 1996. The Effective Date is contingent upon the licensing
of the new board of directors of the new Elsinore Corporation/Four Queens, Inc.
entity and RGM and its director(s) and officer(s) and other factors.
Casino operations are subject to extensive regulation in the State of Nevada by
the Gaming Control Board and various other state and local regulatory agencies.
Management believes that the Company's procedures for supervising casino
operations, for recording casino and other revenues and for granting credit
comply in all material respects with the applicable regulations.
Earnings Per Share
- ------------------
Earnings per common and common equivalent share and earnings per common shares
assuming full dilution are computed using the weighted average number of shares
outstanding adjusted for the incremental shares attributed to outstanding
options to purchase common stock.
Employee Stock Purchase Plan
- ----------------------------
On May 31, 1996, approximately 560 union and non-union employees participated in
the 1996 employee stock purchase plan. Under the plan, 137,000 shares were
issued to employees at $11.26 (85 percent of market price at May 10, 1996) in
notes receivable of $1,383,272 which are payable over two years via payroll
deduction.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following table sets forth certain operating information for the Company for
the three months and six months ended June 30, 1996 and the three months and six
months ended June 30, 1995.
Three Months Six Months
Ended June 30, Ended June 30,
---------------- --------------
1996 1995 1996 1995
---- ---- ---- ----
Unaudited Uaudited
REVENUES:
Casino $20,216 19,487 $40,382 $38,639
Rooms 10,514 9,964 21,771 20,505
Food and beverage 6,215 5,427 12,043 10,952
Entertainment 5,270 2,598 10,795 4,862
Other 2,620 2,318 5,204 4,871
----- ----- ----- -----
44,835 39,794 90,195 79,829
Less promotional allowances 3,285 2,724 6,922 5,489
----- ----- ----- -----
Net revenues 41,550 37,070 83,273 74,340
------ ------ ------ ------
COSTS AND EXPENSES:
Casino 12,066 11,159 24,472 22,262
Rooms 4,701 4,655 9,365 9,374
Food and beverage 4,163 3,891 8,089 7,802
Entertainment 3,672 2,091 7,394 3,673
Other 993 862 1,964 1,755
Selling,general and 7,902 7,717 15,362 15,015
administrative
Provision for bad debts 97 115 240 457
-- --- --- ---
Total costs and expenses 33,594 30,490 66,886 60,338
------ ------ ------ ------
EBITDA (a) $7,956 $6,580 $16,387 $14,002
====== ====== ======= =======
NET INCOME $2,143 $1,341 $4,616 $3,249
====== ====== ====== ======
(a) "EBITDA" consists of operating income plus depreciation and amortization.
EBITDA should not be construed as an alternative to operating income (as
determined in accordance with generally accepted accounting principles) as an
indicator of the Company's operating performance or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) as a measure of liquidity. Management believes that EBITDA gives an
indication of the cash generating capacity of the Company and is useful as a
comparison with other industry participants.
8
<PAGE>
Comparison of Three Months Ended June 30, 1996 Versus the Three Months Ended
June 30, 1995
- ----------------------------------------------------------------------------
Revenues
Net revenues increased $4,480,000(12.1%) to $41,550,000 for the three months
ended June 30, 1996, compared to the three months ended June 30, 1995. Total
casino revenues increased $729,000 (3.7%). Slot revenues increased $911,000
(6.5%) for the three months ended June 30, 1996 compared to the three months
ended June 30, 1995, due to an increase in promotional programs directed at the
slot player. Table games revenue, including baccarat, decreased $437,000
(10.29%) from the prior year. Historical drop(1) increased $3,312,000 (12.4%)
and the win percentage(2) decreased from 16.0% to 12.8%. The increase in drop
represents an increase in win of $523,000 and the decrease in win percentage
represents a decrease in win of $960,000. The increase in drop is attributable
to special events marketing programs, and the decrease in win percentage is due
to the normal fluctuations in table games except for one dice customer who
accounted for 1.7% of the decrease in win percentage. Room revenues increased
$550,000 (5.5%) to $10,514,000 in the three months ended June 30, 1996 as
compared to 1995 and the average room rate increased $3.13. Occupancy increased
to 99.3% in 1996 from 98.8% in 1995. Food and beverage revenues increased
$788,000 (14.5%) due primarily to increased banquets scheduled in the three
months ended June 30, 1996 and additional covers in the bars and the buffet.
Entertainment revenues increased $2,672,000 from $2,598,000 in three months
ended June 30, 1995 to $5,270,000 in 1996. The Splash production show was closed
in the first half of 1995 (January 1, 1995 through June 23, 1995) and accounted
for $2,544,000 of the increase in entertainment revenues. Promotional allowances
increased $561,000 (20.6%) because of additional show ticket complimentaries
offered to promote the Splash II production show, and also because of additional
casino and slot marketing programs.
Costs and Expenses
Total costs and expenses increased $3,104,000 (10.20%) in the three months ended
June 30, 1996, as compared to 1995. Casino expense increased $907,000 (8.1%) as
the result of increased promotional allowances, especially entertainment
complimentaries. Entertainment costs increased $1,581,000 (75.6%) due primarily
to Splash II expenses of $2,277,000 in 1996 compared to Splash expenses of
$493,000 in 1995. Selling, general and administrative expenses increased
$185,000 (2.4%) because of increased human resources and incentive plan costs
resulting from the increase in profitability.
- --------------------
(1) "Historical Drop" as defined by the regulations of the Nevada Gaming
Commission and Gaming Control Board (which is an approximate measure of
funds exchanged into chips or use at the Hotel & Casino less credit
instruments repaid at the gaming tables).
(2) "Win percentage" is calculated by dividing table games revenue by
Historical Drop.
9
<PAGE>
EBITDA
Earnings before depreciation, interest, taxes, and amortization increased
$1,376,000 (20.9%) to $7,956,000 in the three months ended June 30, 1996
compared to 1995. The increase resulted primarily from increased slot, rooms and
entertainment revenues.
Net Income
The Company reported a net income of $2,143,000 in the three months ended June
30, 1996 as compared to $1,341,000 during the same period in 1995, an increase
of $802,000 (59.8%). Depreciation and amortization increased $265,000 due to
capital improvements that have been made since second quarter 1995. Federal
income tax expense increased $411,000 in the three months ended June 30, 1996.
Comparison of Six Months Ended June 30, 1996 Versus the Six Months Ended
June 30, 1995
- ------------------------------------------------------------------------------
Revenues
Net revenues increased $8,933,000 (12.0%) to $83,273,000 for the six months
ending June 30, 1996, compared to the six months ended June 30, 1995. Total
casino revenues increased $1,743,000 (4.5%). Slot revenues increased $2,431,000
(9.4%) for the six months ended June 30, 1996 compared to the six months ended
June 30, 1995, due to an increase in promotional programs directed at the slot
player. Table games revenue, including baccarat, decreased $688,000 (5.4%) from
the prior year. Historical drop increased $3,370,000 (5.5%) and the win
percentage decreased from 17.0% to 14.3%. The increase in drop represents an
increase in win of $578,000 and the decrease in win percentage represents a
decrease in win of $1,164,000. The increase in drop is attributable to special
events marketing programs, and the decrease in win percentage is due to the
normal fluctuations in table games except for one dice customer who accounted
for 1% of the decrease in win percentage. Room revenues increased $1,266,000
(6.2%) to $21,771,000 in the six months ended June 30, 1996 as compared to 1995
and the average room rate increased $2.47. Occupancy increased to 97.9% in 1996
from 96.7% in 1995. Food and beverage revenues increased $1,091,000 (10.0%) due
to additional covers in all bars and restaurants. Entertainment revenues
increased $5,933,000 from $4,862,000 in 1995 to $10,795,000 in 1996. The Splash
production show was closed in the first half of 1995 and accounted for
$5,398,000 of the increase in entertainment revenues. Promotional allowances
increased $1,433,000 (26.1%) because of additional show ticket complimentaries
offered to promote the Splash II production show, and also because of additional
casino and slot marketing programs.
Costs and Expenses
Total costs and expenses increased $6,548,000 (10.90%) in the six months ended
June 30, 1996, as compared to 1995. Casino expense increased $2,210,000 (9.9%)
as the result of increased promotional allowances, especially entertainment
complimentaries. Entertainment
10
<PAGE>
costs increased $3,721,000 (101.3%) due to the additional Splash II expenses of
$4,028,000 in 1996. Selling, general and administrative expenses increased
$347,000 (2.3%) because of increased human resources and incentive plan costs
resulting from the increase in profitability.
Liquidity and Capital Resources
- ------------------------------------------------------------------------------
The Company had cash and cash equivalents of $26,083,000 at June 30, 1996, which
was an increase of $4,121,000 from the balances at December 31, 1995.
Significant debt service on the bonds and class notes is paid in June and
December and should be considered in evaluating cash increases in the first and
third quarters.
EBIDTA for the six months ended June 30, 1996 and the year ended December
31,1995 was $16,387,000 and $ 27,791,000, respectively, which was adequate to
cover the Company's debt service and capital expenditures. Current projections
of EBITDA for 1996 are modestly in excess of 1995 and management believes that
sufficient cash flow will be available to cover the Company's debt service and
enable investment in budgeted capital expenditures of approximately $11,165,0000
for 1996. However, if cash flow does not meet projections, management would
defer capital expenditures. In the first six months of 1996 the Company made
capital expenditures of $5,259,000.
The following table sets forth the scheduled cash payments required to be made
by the Company in respect of principal and interest on the first Mortgage Notes,
the Class Notes, and other debts for each year through the maturity dates of the
First Mortgage Notes and the Class Notes as of December 31, 1995.
Pre Funded*
Slot Annuities
Total Included in
Principal Principal
Year Interest Principal and Interest Payments
---- -------- --------- ------------ --------
1996 $12,061,000 $ 2,322,000 $14,383,000 $318,000
1997 11,812,000 2,055,000 13,867,000 318,000
1998 11,619,000 1,880,000 13,499,000 217,000
1999 11,425,000 1,844,000 13,269,000 117,000
2000 11,209,000 1,898,000 13,107,000 68,000
2001 11,019,000 572,000 11,591,000
2002 11,000,000 100,000,000 111,000,000 00000000
---------- ----------- ----------- ---------
$80,145,000 $110,571,000 $190,716,000 $1,038,000
=========== ============ ============ ==========
Cash flow from operations is not expected to be sufficient to pay the principal
of the First Mortgage Notes at maturity in 2002. Accordingly, the ability of the
Company to repay the First Mortgage Notes at maturity will be dependent upon its
ability to refinance the First Mortgage Notes. There can be no assurance that
the Company will be able to refinance the principal amount of the First Mortgage
Notes.
11
<PAGE>
The First Mortgage Notes may not be redeemed except as set forth below prior to
June 1, 1998, and thereafter, may be redeemed at the option of the Company at
the following prices (expressed as a percentage of principal amount):
If redeemed during the 12-month period beginning June 1,
Year Percentage
---- ----------
1998 104.3125%
1999 102.8750%
2000 101.4375%
2001 and thereafter 100.0000%
The First Mortgage Notes provide for mandatory redemption by the Company upon
the order of the Nevada Gaming Authorities. The First Mortgage Notes also
provide that, in certain circumstances, the Company must offer to repurchase the
First Mortgage Notes upon the occurrence of a change of control or certain other
events. In the event of such mandatory redemption or repurchase prior to
maturity, the Company would be unable to pay the principal amount for the First
Mortgage Notes without a refinancing.
During the reorganization proceeding of Riviera, Inc., certain capital
expenditures were deferred. Management considers it important to the competitive
position of the Hotel & Casino that expenditures be made to upgrade the
property. Capital expenditures totaled approximately $5,786,000 in 1993,
$8,933,000 in 1994 and $7,836,000 in 1995. Management has budgeted $11,165,000
in 1996 that the Company expects to finance from cash flow.
The Indenture imposes certain financial covenants and restrictions on the
Company and ROC, including a minimum consolidated net worth requirement and
limitations on the payment of dividends, the incurrence of debt and granting of
liens, capital expenditures and mergers and sales of assets. As a result of
these restrictions, the ability of the company and ROC to incur additional
indebtedness to fund operations or to make capital expenditures is limited. In
the event that cash flow from operations is insufficient to cover cash
requirements, the Company and ROC may not be able to obtain additional funds.
The Company and ROC would be required to curtail or defer certain of their
capital expenditure programs under these circumstances, which could have an
adverse effect on the Company's operations.
Effective September 8, 1995, the Board of Directors and holders of 94% of the
Company's 11% Mortgage Notes ("Notes") approved amendments to certain Note
restrictive covenants. Noteholders who consented to the amendments received a
$5.00 fee for each $1,000 of Notes.
12
<PAGE>
The amendments are designed to permit the Company's management team to utilize
its expertise in turning around troubled gaming properties which are either in,
or on the verge of, bankruptcy and managing casinos in so-called "new venues.
The Company would expect to make a limited investment and obtain a profit based
management contract in properties with which it becomes involved.
Business Considerations
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for certain forward-looking statements. Certain matters discussed in this filing
could be characterized as forward-looking statements such as statements relating
to plans for future expansion, as well as other capital spending, financing
sources and effects of regulation and competition. Such forward-looking
statements involve important risks and uncertainties that could cause actual
results to differ materially from those expressed in such forward-looking
statements.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RIVIERA HOLDINGS CORPORATION
By: /s/ William L. Westerman
------------------------------------
William L. Westerman
Chairman of the Board and
Chief Executive Officer
By:/s/ Duane Krohn
------------------------------------
Duane Krohn
Treasurer and
Chief Financial Officer
Date: July 30, 1996
14
<PAGE>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-1-1996
<PERIOD-END> JUN-30-1996
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