<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 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 0-21732
PRIMADONNA RESORTS, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0297563
(State or other jurisdiction of (IRS employer identification
incorporation or organization) number)
P.O. Box 95997 , Las Vegas, Nevada 89193-5997
(address of principal executive offices)
(702) 382 - 1212
(Registrant's telephone number, including area code)
__________________________________________________
(Former name, former address and former fiscal year,
if change since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 12, 1996
Common Stock, $.01 par value 29,999,475 Shares
Total No. of Pages 23 Exhibit Index on page 18
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PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
Form 10 - Q
INDEX
Page No.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets at September 30, 1996
(Unaudited) and December 31, 1995..................... 3 - 4
Consolidated Statements of Income (Unaudited) for the
Three and Nine Months Ended September 30, 1996 and 1995. 5 - 6
Consolidated Statements of Cash Flows (Unaudited) for
the Nine Months Ended September 30, 1996 and 1995....... 7 - 8
Notes to Consolidated Financial Statements (Unaudited)..... 9 - 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 12 - 16
Part II. OTHER INFORMATION 17
2
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PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Amounts in Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
_________ ___________
(Unaudited)
<C> <C>
<S>
CURRENT ASSETS:
Cash and cash equivalents $ 8,154 $ 9,148
Accounts and notes receivable 2,447 3,311
Income tax refund receivable - 994
Inventories 2,508 2,514
Prepaid expenses and other 6,391 6,587
________ ________
Total current assets 19,500 22,554
________ ________
PROPERTY AND EQUIPMENT:
Buildings and improvements 187,421 186,001
Land improvements 66,073 66,032
Furniture, fixtures and equipment 125,715 119,318
________ ________
379,209 371,351
Less: accumulated depreciation
and amortization (109,502) (89,999)
________ ________
269,707 281,352
Land 3,896 3,603
Construction in progress 27,073 8,170
________ ________
300,676 293,125
________ ________
INVESTMENT IN JOINT VENTURE 62,691 49,561
________ _______
NOTES RECEIVABLE, net of current portion 4,226 2,110
________ ________
OTHER ASSETS 7,580 5,869
________ ________
$394,673 $373,219
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Amounts in Thousands Except Share Data)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
_________ ___________
(Unaudited)
<C> <C>
<S>
CURRENT LIABILITIES:
Accounts payable - trade $ 5,935 $ 7,118
Accrued expenses 10,971 9,080
Current portion of long - term debt 1,100 -
________ ________
Total current liabilities 18,006 16,198
________ ________
LONG - TERM DEBT 149,006 145,509
________ ________
DEFERRED INCOME TAXES PAYABLE 16,471 15,466
________ ________
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value;
10,000,000 shares authorized; no
shares issued and outstanding
Common stock, $.01 par value;
100,000,000 shares authorized;
30,346,475 and 30,675,375 shares
issued and outstanding in 1996
and 1995, respectively 308 308
Additional paid - in capital 128,123 127,179
Retained earnings 90,198 68,999
Less: treasury stock, at cost (7,439) (440)
________ ________
211,190 196,046
________ ________
$394,673 $373,219
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands Except Share Data)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
____________________________
1996 1995
_________ ___________
(Unaudited)
<C> <C>
<S>
REVENUES:
Casino $ 43,338 $ 43,482
Food and beverage 7,917 7,750
Hotel 5,969 5,876
Entertainment 3,605 4,613
Service station 3,812 3,587
Other 1,672 1,741
________ ________
66,313 67,049
Less: promotional allowances (3,362) (2,876)
________ ________
Net revenues 62,951 64,173
________ ________
COSTS AND EXPENSES:
Casino 12,958 12,552
Food and beverage 7,156 7,626
Hotel 3,003 3,137
Entertainment 1,468 1,705
Service station 3,443 3,386
Other 703 857
Selling, general and administrative 10,593 11,067
Property costs 5,183 5,638
Depreciation and amortization 6,882 6,687
________ ________
51,389 52,655
________ ________
Income from operations 11,562 11,518
OTHER INCOME (EXPENSE)
Interest income 126 81
Interest expense (1,069) (2,225)
________ ________
Income before taxes 10,619 9,374
INCOME TAXES:
Income tax provision 3,827 3,371
________ ________
NET INCOME: $ 6,792 $ 6,003
======== ========
Earnings per share $0.22 $0.19
======== ========
Weighted average number of shares of
common stock outstanding 30,656,529 30,821,280
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands Except Share Data)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
____________________________
1996 1995
_________ ___________
(Unaudited)
<C> <C>
<S>
REVENUES:
Casino $130,684 $128,664
Food and beverage 22,725 21,433
Hotel 17,940 14,537
Entertainment 9,104 10,288
Service station 11,605 9,751
Other 5,030 4,590
________ ________
197,088 189,263
Less: promotional allowances (10,282) (7,875)
________ ________
Net revenues 186,806 181,388
________ ________
COSTS AND EXPENSES:
Casino 38,811 36,234
Food and beverage 20,577 19,664
Hotel 8,471 8,237
Entertainment 4,041 4,728
Service station 10,685 9,060
Other 2,135 2,370
Selling, general and administrative 31,326 31,393
Property costs 13,758 14,412
Depreciation and amortization 20,433 20,433
________ ________
150,237 146,531
________ ________
Income from operations 36,569 34,857
OTHER INCOME (EXPENSE)
Interest income 291 129
Interest expense (3,936) (6,077)
________ ________
Income before taxes 32,924 28,909
INCOME TAXES:
Income tax provision 11,725 10,236
________ ________
NET INCOME: $ 21,199 $ 18,673
======== ========
Earnings per share $0.69 $0.61
======== ========
Weighted average number of shares of
common stock outstanding 30,667,955 30,797,306
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
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PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
____________________________
1996 1995
_________ ___________
(Unaudited)
<C> <C>
<S>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 21,199 $ 18,673
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 20,433 20,433
Amortization of debt issuance costs 319 -
Increase in life insurance cash
surrender value (271) -
Gain on sale of assets (286) -
Deferred income taxes 1,298 3,325
Change in current assets and liabilities
due to operating activities:
(Increase) decrease in accounts and
notes receivable 864 (320)
Decrease in income tax refund receivable 994 2,856
(Increase) decrease in inventories 6 (264)
Increase in prepaid
expenses and other (96) (1,121)
Decrease in accounts
payable - trade (1,183) (1,349)
Increase in accrued expenses 1,891 2,815
_______ ________
Total adjustments 23,969 26,375
_______ ________
Net cash provided by operating activities 45,168 45,048
_______ ________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (27,962) (35,874)
Investment in joint venture (13,130) (42,626)
Increase in other assets (3,979) (1,695)
Proceeds from disposal of other assets 364 -
Decrease in construction payables - (4,621)
________ ________
Net cash used in investing activities (44,707) (84,816)
________ ________
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
____________________________
1996 1995
_________ ___________
(Unaudited)
<C> <C>
<S>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 947 1,673
Purchase of treasury stock (6,999) -
Proceeds from issuance of long-term debt 32,001 37,400
Principal payments of long-term debt (27,404) -
_______ _______
Net cash provided by (used in)
financing activities (1,455) 39,073
_______ ______
Net increase (decrease) in cash and
cash equivalents (994) (695)
Cash and cash equivalents, beginning of year 9,148 5,922
_______ _______
Cash and cash equivalents, end of period $ 8,154 $ 5,227
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organizational Structure and Basis of Presentation
The consolidated financial statements of Primadonna Resorts, Inc., a Nevada
corporation, include the accounts of its wholly-owned subsidiaries, The
Primadonna Corporation, PRMA Land Development Company, and PRMA Las Vegas, Inc.
(collectively the "Company"). The Company owns and operates three hotel
- -resort/casinos; Whiskey Pete's Hotel & Casino ("Whiskey Pete's"), Primadonna
Resort & Casino ("Primadonna"), and Buffalo Bill's Resort & Casino
("Buffalo Bill's").
Information as of December 31, 1995 included in the accompanying consolidated
financial statements and the notes thereto, has been audited. Information with
respect to the three and nine month periods ended September 30, 1996 and 1995,
included in these consolidated financial statements and notes thereto is
unaudited. These unaudited consolidated financial statements have been prepared
in accordance with the rules and regulations of the Securities and Exchange
Commission, and do not contain all of the information and disclosures required
by generally accepted accounting principles. However, the accompanying
unaudited consolidated financial statements do contain all adjustments which,
in the opinion of management, are necessary to fairly present the financial
position and results of operations for the three and nine month periods
presented. Interim results are not necessarily indicative of results to be
expected for any future interim period or for the entire fiscal year.
The accompanying consolidated financial statements should be read in con-
junction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
All of the Company's existing business activities are conducted by The
Primadonna Corporation. PRMA Land Development Company holds the Company's
development in the golf course in California. PRMA Las Vegas, Inc. holds the
Company's investment in a joint venture with MGM Grand, Inc., to develop and
operate the New York - New York Hotel & Casino in Las Vegas, Nevada.
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, liabilities, revenues and expenses.
Actual results may differ from those estimates. Significant intercompany and
interdivision accounts and transactions have been eliminated.
Certain reclassifications, which have no effect on net income, have been made
in the 1995 consolidated financial statements to conform with the current year
presentation.
9
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2. Statements of Cash Flows
The following supplemental disclosures are provided as part of the
accompanying consolidated statements of cash flows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
_____ _____ _____ _____
(In thousands)
<C> <C> <C> <C>
<S>
Cash payments made for interest
(net of amounts capitalized) $1,271 $1,944 $4,173 $5,621
______ ______ ______ ______
Cash payments made for income taxes $3,200 $3,800 $7,200 $4,800
______ ______ ______ ______
</TABLE>
3. Investment in Joint Venture
On December 28, 1994 the Company and MGM Grand, Inc.("MGM"), formed a joint
venture to develop and operate the New York - New York Hotel and Casino. The
project, which is anticipated to cost $460 million, is scheduled to open
January 3, 1997. The Company has contributed $50 million in cash and certain
rights to the New York theme from a third party licensor to the joint venture.
MGM has contributed land (valued at $41.2 million) on which most of the project
is being constructed and cash of $10.0 million. The joint venture has secured
limited recourse bank financing of $285 million to fund the hotel/casino. The
joint venture parties have executed Keep-Well and Completion Guaranty
Agreements in conjunction with the financing. As of September 30, 1996, $225
million had been drawn on the bank financing. The joint venture is pursuing
lease financing of up to $25 million, and anticipates the joint venture parties
will each contribute an additional $20 to $25 million in subordinated loans or
equity to the joint venture for completion of the project.
4. Long-Term Debt
As of September 30, 1996, the Company had an outstanding balance of
$148,600,000, and at December 31, 1995, $144,000,000, on its Reducing Revolving
Bank Credit Agreement ("Agreement"). The Company incurred a liability in
connection with the acquisition of the New York - New York theme rights of
$1,100,000, due January 6, 1997, and $400,000 due January 7, 1998. At September
30, 1996, the $1,100,000 due for the theme rights is reflected as a current
obligation.
The Agreement entered into on December 28, 1993, was amended and restated on
July 17, 1995, and amended on March 27, 1996. The Agreement provides for a
maximum principal balance of $250,000,000, with scheduled reductions that
reduce the maximum permitted balance to $212,500,000 as of August 18, 1997,
$175,000,000 as of February 18, 1999, $125,000,000 as of February 18, 2000,
with the remaining principal balance due July 18, 2000.
The Agreement provides for interest payments at least quarterly, at the prime
rate or LIBOR, plus a sliding margin, based upon the Company's debt to earnings
before interest, taxes, depreciation and amortization ("EBITDA") ratio. The
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margin, effective April 1, 1996, for the prime rate ranges between 0% and 1.0%,
while the margin for LIBOR ranges between 1.0% and 2.0%. The weighted average
interest rate at September 30, 1996 was 7.2%, and at December 31, 1995, 7.5%.
The Company incurs commitment fees of .35% to .5% for the unused portion of the
Agreement, depending upon the debt to EBITDA ratio achieved by the Company.
The obligation is secured by all real property, leasehold interests in real
property, and personal property of the Company.
5. Commitments and Contingencies
a. Southwest Investment
On January 16, 1995, the Company and Southwest Casino & Hotel Corp.
("Southwest") entered into an agreement to fund the development of a casino for
the Kickapoo Traditional Tribe of Texas in Eagle Pass, Texas. The Company has
invested in Southwest in the form of a $1.6 million Convertible Term Promissory
Note and has committed to fund a $2.2 million Demand Promissory Note in
furtherance of this venture. As of September 30, 1996, $2.1 million has been
advanced under the Demand Promissory Note.
Southwest was required to post a standby letter of credit for $800,000 in favor
of the Kickapoo Tribe, which the Company posted on behalf of Southwest.
Southwest is reimbursing the Company for the costs incurred. The facility
opened in August 1996, with Class II gaming.
b. Biloxi Acquisition
In July 1996, the Company signed a letter of intent to purchase certain assets
of BH Acquisition Corporation. In a separate transaction, the Company signed a
letter of intent, to purchase Presidents Casinos', Inc. leasehold rights under
its lease with BH Acquisition Corporation for the Broadwater Marina.
In October 1996, after completion of due diligence, the Company decided not to
enter into definitive purchase agreements.
c. Litigation
Currently, there are lawsuits pending against the Company arising in the normal
course of business. In management's opinion, the ultimate outcome of these
matters will not have a material adverse effect on the results of operations or
the financial position of the Company.
11
<PAGE>
Item 2, Management's Discussion and Analysis of Financial Condition and Results
of Operations (Unaudited)
SUMMARY OF OPERATIONS
For the three months ended September 30, 1996 net income was up 13.1% to $6.8
million. This improvement was primarily due to a 2.4% decrease in operating
expenses coupled with lower interest expense. Net revenues decreased to $63.0
million from $64.2 million, or 1.9%. This decrease was primarily due to reduced
entertainment volume and increases in promotional allowances.
Income from operations was $11.6 million, an increase of $44,000, over 1995.
EBITDA (earnings before interest, taxes, depreciation and amortization) rose
1.3% to $18.4 million from $18.2 million in the prior year. Earnings per share
increased to $.22 from $.19 in the prior year quarter.
Net income for the nine months ended September 30, 1996 was up 13.5% to $21.2
million due primarily to a 3.0% increase in net revenues and lower interest
expense. The added room capacity at Buffalo Bill's, targeted marketing
programs, increased bus customers, and improved highway traffic contributed to
the revenue gains. Operating expenses increased to $150.2 million from $146.5
million, or 2.5%. This increase is primarily due to increases in promotional
allowances, cost of gasoline and diesel, advertising, and increased business
volume. EBITDA rose 3.1% to $57.0 million from $55.3 million in the prior year.
Earnings per share increased to $.69 from $.61 in 1995.
REVENUES
Net revenues for the third quarter decreased by $1.2 million, or 1.9%. This
decrease was due to decreased entertainment, and increased promotional
allowances, offset by increased service station revenue. For the nine months
ended September 30, 1996, net revenues rose 3.0% to $186.8 million. Additional
occupied rooms, coupled with an increase in bus customers, and a continuing
marketing campaign, contributed to the increased revenues.
The $1.2 million decrease in net revenues in the third quarter was primarily
due to volume decreases in the entertainment area. During the third quarter,
the Desperado Roller Coaster was out of service for repairs for approximately
20 days, which included the July 4 holiday period. Also, the log flume ride
underwent renovations during the quarter. This down time contributed
significantly to reduced ridership volume and also impacted the activity in the
arcade area. Revenues from these areas declined $702,000. A reduced schedule of
shows and events contributed to an additional $275,000 decline in entertainment
revenue. The increase in service station revenue was primarily due to an
increase in prices.
For the nine months ended September 30, 1996, an increase in occupied rooms,
coupled with increased bus customers and highway traffic, generated a net
revenue increase of $5.4 million. Casino revenues accounted for $2.0 million of
the increase, while additional revenues from hotel and food and beverage added
$1.2 million and $1.1 million, respectively, net of promotional allowances. The
service station contributed $1.9 million of additional revenue for the nine
months while entertainment revenue declined by $1.2 million. The increase in
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casino revenues was derived from slots, and was fueled by increased visitor
volume. Higher promotional allowances contributed to an additional 48,000
occupied rooms, and coupled with a 12% increase in the average daily rate,
resulted in the overall hotel revenue increase. Food and beverage revenue
increases were primarily due to increased volume, and to a lesser extent, an
increase in promotional allowances, as well as a slight price increase on
selected items. The increase in service station revenue was due to a 10%
increase in volume coupled with an 8% increase in prices. The decline in
entertainment revenue primarily occurred in the third quarter.
COSTS AND EXPENSES
Expenses for the three months ended September 30, 1996 decreased $1.3 million,
or 2.4%. Casino expense increased $406,000 primarily due to increased
promotional allowances, which are all charged to casino expense. Food and
beverage costs decreased $470,000 due to increased promotional allowances which
are charged to casino expenses. Entertainment costs decreased $237,000 due
primarily to lower costs for entertainers. Selling, general and administrative
expenses declined $474,000 primarily due to reduced professional fees,
development costs, and advertising, offset by $400,000 for costs associated
with the resignation of the Company's former President. Property costs
decreased $455,000 due primarily to lower utilities and insurance costs.
For the nine month period ended September 30, 1996, expenses increased $3.7
million to $150.2 million. Casino expenses increased $2.6 million primarily due
to higher promotional allowances and increased costs commensurate with the
increased business volume. Food and beverage costs increased $913,000 primarily
due to increased volume and slightly higher payroll costs associated with
enhanced customer service. Hotel costs increased $234,000 primarily as a result
of 48,000 additional occupied rooms. Entertainment costs decreased $687,000
due primarily to lower entertainer and show production costs. Service station
costs increased $1.6 million due to increases in product cost coupled with
increased volume. Selling, general, and administrative expenses decreased
$67,000. This decrease is primarily the result of lower professional fees,
development costs, and advertising, offset by costs associated with the
resignation of the Company's former President. Property costs are down $654,000
due primarily to lower utilities and insurance costs.
INTEREST EXPENSE
Interest expense was $1.1 million and $2.2 million for the three months ended
September 30, 1996 and 1995, respectively. The Company incurred $2.7 million of
interest during the third quarter of 1996, of which $1.6 million was
capitalized as part of the New York - New York investment and the golf course
development. In the third quarter of 1995, the Company incurred $3.2 million of
interest, of which $1.0 million was capitalized. The decline in interest
incurred was primarily due to lower rates.
Interest expense for the nine months ended September 30, 1996 was $3.9 million
compared to $6.1 million in the prior year. The Company incurred $8.3 million
of interest through September 30, 1996, of which $4.4 million was
capitalized as part of the New York - New York investment and the golf course
development. Through September 30, 1995, the Company incurred $9.5 million of
interest of which $3.4 million was capitalized. Again, the decline in interest
incurred was primarily due to lower rates.
13
<PAGE>
INCOME TAXES
Income taxes increased to $3.8 million from $3.4 million for the three months
ended September 30, 1996, primarily as a result of increased earnings before
taxes. For the nine months ended September 30, 1996, income taxes increased to
$11.7 million from $10.2 million in the prior year. Again, the increase is due
primarily to the increase in earnings before taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company held cash and cash equivalents of $8.2 million as of September 30,
1996. Net cash provided by operations during the nine months ended September
30, 1996 was $45.2 million as compared to $45.0 million in the prior year.
The Company funds its daily operations through cash flow from operations. The
Company borrows funds for significant capital expenditures and investments,
such as the golf course development and the New York - New York investment,
which can not be fully funded out of operating cash flows.
The Company has a $250 million Reducing Revolving Credit Facility, amended and
restated July 1995, and amended March 1996. ("Agreement" see Note 4)
The Company is a 50% joint venture partner with MGM Grand, Inc. ("MGM") in the
development and operation of the New York - New York Hotel & Casino, a $460
million project, including construction costs, pre-opening costs, and
capitalized interest. In conjunction with the development, the joint venture
secured a $225 million Construction/ Revolving loan from Bank of America as
agent for a sixteen bank consortium, amended September 24, 1996 , to $285
million. The Company and MGM have executed a Completion Guaranty and Keep-Well
Agreements in conjunction with the financing. As of September 30, 1996, $225
million had been drawn on the bank loan. The joint venture is pursuing lease
financing of up to $25 million, and the joint venture partners anticipate the
need to contribute $20 million to $25 million each, in subordinated loans or
additional equity for project completion.
In September 1995, the Board of Directors approved a stock repurchase program
authorizing the Company to acquire up to $15.0 million worth of its outstanding
shares. On November 12, 1996, the Board amended the stock repurchase program,
increasing the authorized amount to $50.0 million. The Company has acquired an
aggregate of 835,000 shares at a cost of $13.3 million as of November 12, 1996.
The Company is presently developing a golf course complex in California
approximately 4 miles south of the Nevada/California border. The first phase of
this project includes, among other things, a Tom Fazio designed 18-hole
championship course. This course is expected to cost $27.0 million, and be
completed in the fourth quarter of 1996, with full operations to commence in
early 1997. Phase two of this project, which includes a second golf course, is
in the final design stages.
14
<PAGE>
In September 1995, the Company, together with Sheldon Gordon and Randy Brant,
developers of the Forum shops at Caesars Palace, announced the intent to
develop a one million square foot themed shopping facility on 100 acres of land
that is adjacent to the Primadonna Resort & Casino, and owned by Primm South
Real Estate Company. The Company may incur certain infrastructure costs to
accommodate this planned development. The facility is to be built and financed
by the developers. The first phase of construction is expected to commence in
early 1997, contingent upon obtaining project financing, with completion
expected approximately twelve months thereafter.
The Company has granted two loans to the Southwest Casino and Hotel Corp.
("Southwest"). A Convertible Term Note, for $1.6 million, bears interest at 8%,
and is convertible into 16,000 shares of Series B Convertible Preferred Stock.
The Company has also provided $2.1 million, and has agreed to provide an
additional $100,000, pursuant to a Demand Promissory Note; the proceeds were
used for the construction of the Kickapoo gaming facility at Eagle Pass, Texas.
The Demand Promissory Note bears interest at 12% through June 1, 1997, 15%
through December 1, 1997, and 18% thereafter. The Demand Promissory Note
requires the borrower to use its best efforts to obtain take-out financing in
an amount equal to at least 75% of the principal amount of the note.
Before opening the facility, Southwest was required to post a standby letter of
credit for $800,000 in favor of the Kickapoo Tribe, which the Company has
posted on behalf of Southwest. Southwest is reimbursing the Company for the
costs incurred. The facility opened in August 1996, offering Class II gaming.
In July 1996, the Company signed a letter of intent to purchase certain assets
of BH Acquisition Corporation. In a separate transaction, the Company signed a
letter of intent to purchase Presidents Casinos', Inc. leasehold rights under
its lease with BH Acquisition Corporation for the Broadwater Marina.
In October 1996, after completion of due diligence, the Company decided not to
enter into definitive purchase agreements.
Capital expenditures for the nine months ended September 30, 1996 were $42.8
million, as compared to $78.5 million for the nine months ended September 30,
1995. Of the $42.8 million, $18.4 million was for the golf course, $13.1
million for the New York-New York investment, $1.7 million for Southwest, $3.5
million for the purchase slot machines and related player tracking systems, and
$6.1 million for the maintenance of existing facilities. For the balance of the
year, capital requirements are expected to include $3.0 million for the
Primadonna conference center, $1.6 million for the golf course, $20.0 million
to $25.0 million for the New York - New York investment, and $5.0 million for
the maintenance of existing facilities.
15
<PAGE>
The Company believes that its current cash flow, coupled with its reducing
revolving credit facility, provide the resources and flexibility to meet
existing obligations and to fund its commitments on the projects discussed
above. The Company continues to pursue other gaming opportunities, and if
successful, may need to obtain additional bank or vendor financing, or issue
public or private debt or equity, or a combination thereof.
FORWARD LOOKING INFORMATION
Information contained in this Form 10-Q contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995,
which can be identified by the use of forward-looking terminology such as
"may," "will," "should," "expect," "anticipate," "estimate," or "continue," or
the negative thereof, or other variations thereon, or comparable terminology.
These statements are subject to a number of risks and uncertainties, including
but not limited to, cost overruns and delays associated with construction
projects (including material and labor shortages, work stoppages, design
changes, weather, and unanticipated cost increases), such as New York -
New York and the golf course. Further, costs or delays associated with
engineering, environmental or geological matters could impact the golf course
project.
16
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On July 12, 1996, the plaintiffs in the purported class action suites filed
April 26, 1994 and May 10, 1994, as discussed in the Annual Report Form 10 - K,
Legal Proceedings, filed a motion seeking to lift the stay of discovery and
seeking leave to add additional defendants. The defendants (including the
Company) have opposed these motions, and no hearing date has been set on these
motions. By order dated August 17, 1996, the Case was transferred to Judge
David Ezra and assigned the new Case No. CV-S-94-1126-DAE(RJJ)-BASE FILE.
On August 15, 1996, the Court granted the motion to dismiss, without prejudice,
the September 15, 1995 complaint filed in the United States District Court for
Nevada, as discussed in the Annual Report Form 10 - K, Legal Proceedings. An
amended complaint was filed on September 30, 1996. The defendants (including
the Company) have filed motions to dismiss the amended complaint for failure to
state a claim and on other grounds.
Items 2 through 5. None.
Item 6. Exhibits and Reports on Form 8 - K.
(a) Exhibits.
10.28 Consulting Agreement between Robert E. Armstrong and The Primadonna
Corporation dated September 1, 1996.
Exhibit 27. Financial Data Schedule as of September 30, 1996.
See exhibit index on page 18 for exhibits filed with this report.
(b) Reports on Form 8 - K. No report of Form 8 - K was filed during the
quarter for which this report is filed.
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 under-
signed thereunto duly authorized.
PRIMADONNA RESORTS, INC.
________________________
(Registrant)
Date: November 12, 1996 By /s/Michael P. Shaunnessy
__________________________
Michael P. Shaunnessy
Chief Accounting Officer
17
<PAGE>
EXHIBIT INDEX
Exhibit Sequentially
No. Description Numbered
Pages
_______ ___________________________________________ ____________
10.28 Consulting Agreement between Robert E. Armstrong
and The Primadonna Corporation dated
September 1, 1996 19 - 22
27 Financial Data Schedule as of September 30, 1996 23
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM QUARTERLY
FORM 10-Q AS OF SEPTEMBER 30, 1996, AND ANNUAL REPORT FORM 10-K AS OF DECEMBER
31, 1995, CONSOLIDATED FINANCIAL STATEMENTS, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-END> SEP-30-1996 SEP-30-1996
<CASH> 8122 8122
<SECURITIES> 0 0
<RECEIVABLES> 2447 2447
<ALLOWANCES> 0 0
<INVENTORY> 2601 2601
<CURRENT-ASSETS> 19561 19561
<PP&E> 410178 410178
<DEPRECIATION> 109502 109502
<TOTAL-ASSETS> 394734 394734
<CURRENT-LIABILITIES> 18067 18067
<BONDS> 149006 149006
0 0
0 0
<COMMON> 308 308
<OTHER-SE> 218321 218321
<TOTAL-LIABILITY-AND-EQUITY> 394734 394734
<SALES> 66313 197088
<TOTAL-REVENUES> 62951 186806
<CGS> 28731 84720
<TOTAL-COSTS> 51389 150237
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 943 3645
<INCOME-PRETAX> 10619 32924
<INCOME-TAX> 3827 11725
<INCOME-CONTINUING> 6792 21199
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6792 21199
<EPS-PRIMARY> .22 .69
<EPS-DILUTED> .22 .69
</TABLE>
<PAGE>
The Primadonna Corporation
P.O. Box 95997
Las Vegas, Nevada 89193-5997
Dated as of September 1, 1996
Mr. Robert E. Armstrong
1750 Skyline Blvd.
Reno, Nevada 89509
Dear Mr. Armstrong:
Subject to the terms and conditions of this letter, The Primadonna Corporation
(the "Corporation") agrees to engage you to provide certain consulting services
to the Corporation as an independent contractor ("Contractor").
1.Term. This agreement is effective as of September 1, 1996 and shall continue
until August 31, 1998. The Corporation shall have the right to extend this
agreement for one year on the similar terms and conditions.
2.Scope Of Services. During the term of this agreement, Contractor hereby
agrees to provide his exclusive consulting services to the Corporation, and its
affiliates with respect to: (i) the planning and development of present and
future casino gaming opportunities in Clark County, Nevada and jurisdictions
outside the State of Nevada; (ii) strategic planning and development of the
Corporation's non-gaming businesses, properties and opportunities; (iii)
corporate, venturer, governmental, lobbyist, director, banking, investor and
underwriting relations; (iv) special projects; and (v) related matters.
Contractor understands and acknowledges that the Contractor may be required to
incur substantial travel and meeting time in connection with the provision of
such services. The Contractor agrees to undergo gaming license investigation,
or be found suitable if required by governmental entities which have
jurisdiction over casino gaming to be conducted by the Corporation, and any of
its affiliates. The Contractor shall make himself available up to seven
hundred (700) hours each contract year, and such services shall be provided as
and when the Corporation requests, provided the Corporation recognizes that the
Contractor has other obligations that may preclude him in some incidences to
provide such services at the times requested by the Corporation. The
Contractor will take reasonable steps to keep the Corporation's chief executive
officer and chief financial officer informed of progress related to the
services undertaken by the Contractor including time and expense records,
respond to the Corporation's inquiries, and make himself available for
corporate meetings and functions. Corporation hereby acknowledges that the
scope of services provided by the Contractor hereunder are not intended to
include legal services and legal advice rendered, from time to time, to the
Corporation, or affiliates by the Contractor individually, or as a member of
the law firm of McDonald, Carano, Wilson, McCune, Bergin, Frankovich & Hicks
(the "Firm") or similar services rendered by other members of the Firm. Such
legal services shall be billed and paid separately in accordance with
established practice and procedure.
19
<PAGE>
3.Authorization and Decision-Making. The Corporation authorizes and directs
the Contractor to take all actions which Contractor deems advisable on the
Corporation's behalf within the scope of services at Paragraph 2, except
Contractor shall not obligate the Corporation to expend funds, enter contracts
or undertake other obligations without the prior consent or authorization of
the Corporation.
4.Base Fee. The Corporation agrees to pay the Contractor TWELVE THOUSAND FIVE
HUNDRED DOLLARS ($12,500.00) per month (the "Base Fee"), commencing
September 1, 1996, and any time in excess of hours set forth at Paragraph 1
shall be at the rate of $200.00 per hour, or $2,400 per diem, whichever is
less. As an additional incentive to the Contractor, the Corporation may award
additional sums and grant stock options and short term incentive plan
compensation to the Contractor based upon superior performance or results
achieved by the Contractor hereunder, as determined by the Corporation in its
sole and absolute discretion. Contractor waives any right he may have to a
finder's fee or similar compensation from the Corporation arising during the
term hereof. The Contractor hereby acknowledges that it shall be his sole
responsibility to report the income earned hereunder as self-employment income
for federal and state tax purposes, to pay all federal and state taxes, and to
obtain his own workman's compensation, medical, or similar coverage. The
Contractor hereby unconditionally releases, indemnifies, and saves and holds
the Corporation harmless from any and all liability, cost, expense related or
associated with such tax, workman's compensation and similar laws.
5.Costs and Other Charges. The Corporation agrees to reimburse Contractor for
all expenses reasonably and necessarily incurred directly on behalf of the
Corporation under this agreement, such as airfare (business class), meals, auto
rental(s), transportation, cellular phone charges, long distance calls, copying
charges, secretarial services, gratuities and lodging. The Corporation shall be
furnished with full and complete accounts in accordance with the Corporation's
policies and procedures. Any extraordinary expense or cost shall be approved
by the Corporation prior to the actual expenditure being made.
6.Discharge and Withdrawal. The Corporation shall have a right to terminate
this agreement upon a material breach of this agreement by the Contractor if
the Contractor has failed to to cure any material breach of this agreement
within a period of thirty (30) days from the Contractor's receipt of a written
notice from the Corporation which notice reasonably sets forth the
circumstances asserted as a material breach of this agreement. The
Contractor's failure to obtain a required gaming license, or finding of
suitability through no fault, action, or omission of the Corporation shall
constitute a material breach of this agreement. The Contractor may withdraw
from this agreement upon Corporation's failure to timely pay fees, costs and
other charges payable by the Corporation under this agreement. Upon
termination, all unpaid costs, fees and other charges will immediately become
due and payable by the Corporation. Upon termination, the Contractor will
deliver all of the Corporation's funds, documents, property and files to the
Corporation (other than Firm files), in the Contractor's possession, within
thirty (30) days of such termination.
20
<PAGE>
7.Confidentiality Covenants. In connection with the Contractor's engagement
under this agreement, the Contractor will develop for the Corporation's benefit
and/or the Corporation will furnish to Contractor, certain Information (as
hereinafter defined). When used herein, certain "Information" shall mean any
and all non-public information concerning or relating to legalized gaming
opportunities, merger(s) and acquisition(s) involving the Corporation (or its
affiliates), management changes, operating results and major equity and debt
financing (the "Business Matters"), including, but not limited to: letters of
intent, business plans, marketing plans and studies, potential business and
political contacts, due diligence, customer lists, appraisals, real property
descriptions, demographic studies, permits, licenses, approvals, knowledge,
concepts, ideas and all other information disclosed by the Corporation, its
employees, agents or other representatives (including advisors, accountants,
and attorneys), whether orally or in writing, to the Contractor or which
becomes known by the Contractor as a consequence of a relationship with the
Corporation (including the Contractor's own work product); provided, however,
that "Information" shall not include information which (i) becomes generally
available to the public other than as a result of a disclosure by the
Contractor, or (ii) was available to the Contractor on a non-confidential basis
prior to its disclosure to the Contractor by the Corporation. In consideration
of the Corporation furnishing such Information to the Contractor and entering
into this agreement, Contractor hereby covenants as follows:
(a)All Information heretofore or hereafter furnished to the Contractor by or on
behalf of the Corporation or prepared by the Contractor under this agreement
shall be deemed confidential and shall be kept in strict confidence;
(b)Unless reasonably necessary to the rendition of services hereunder and
subject to the consent of the Corporation, the Contractor shall not directly or
indirectly: (i) disclose or reveal any Information to any person, firm, or
entity; (ii) use the Information in any way detrimental to the Corporation or
for any purpose whatsoever other than to evaluate the Business Matters; and
(iii) except as may be required by law or judicial process, disclose to any
person or entity the terms, conditions, or other facts with respect to the
Business Matters (including the potentiality, existence and status thereof)
or that Information has been made available to the Contractor; and (c)Upon
written notice from the Corporation, Contractor will deliver promptly to the
Corporation all written or intangible material in the possession or under the
control of theContractorcontaining or reflecting any Information (whether
prepared by the Corporation or otherwise), without retaining any copies,
summaries, analyzes, or extracts thereof other than Information contained in
the possession and control of the Firm necessary to the legal representation of
the Corporation, and its affiliates.
8.Indemnity.Except for the Contractor's gross negligence and intentional
wrongdoing, the Corporation agrees to defend, save and hold Contractor harmless
from and against any and all claims, losses, causes of actions, or proceedings
(including attorney's fees and costs) arising from or related to this agreement
and the acts or omissions of the Contractor hereunder. Except for gross
negligence or intentional wrongdoing, the Contractor shall not be liable to the
Corporation for any action or inaction in connection with this agreement.
21
<PAGE>
9.Severability. The provisions of this agreement shall be severable in the
event that any of the provisions hereof are held by a court of competent
jurisdiction to be invalid, void, or otherwise unenforceable, and the remaining
provision shall remain enforceable to the fullest extent permitted by law. In
addition, if any provision hereof is held to be invalid, void, or otherwise
unenforceable, it shall be deemed to be modified to the extent necessary to
make such provision valid, binding, and enforceable.
10.Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA WITHOUT REGARD TO ITS CONFLICTS
OF LAW DOCTRINE, STATUTES, OR REGULATIONS.
11.Notices.All notices and other communications provided for herein shall be
mailed by registered or certified mail, return receipt requested, or telecopied
or delivered in hand to the applicable party at its address set forth above.
12.Waiver.This agreement may be waived, amended or modified only by an
instrument in writing signed by the party against which such waiver, amendment
or modification is sought to be enforced, and such written instrument shall set
forth specifically the provisions of this agreement that are to be so waived,
amended or modified.
13.Binding Effect. Every covenant, term, and provision of this agreement
shall be binding upon and inure to the benefit of the parties, affiliates (i.e.
parent or subsidiary corporation), their respective heirs, legatees, legal
representatives, successors, transferors, and assigns.
14.Integration.This letter contains the entire agreement and understanding of
the parties hereto with respect to the rendition of consulting services by the
Contractor to the Corporation, and all prior agreements, covenants, or
understandings of the parties hereto are hereby revoked and superceded in their
entirety.
15.Counterparts. This agreement may be executed in any number of
counterparts and each such counterpart shall for all purposes be deemed an
original, and all such counterparts shall together constitute but one and the
same instrument.
Please indicate your agreement with the foregoing by executing the accompanying
copy of this agreement and returning it to us, whereupon it shall constitute a
binding agreement between us as of the date first above written.
Very truly yours,
The Primadonna Corporation
By:__________________________________
Gary E. Primm, President
Agreed and Accepted:
By: _______________________________________
Robert E. Armstrong, Contractor
22
