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FORM 10 - K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (Fee Required)
For the Fiscal Year Ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required)
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 of Incorporation) (I.R.S. Employer Identification No.)
P.O. Box 95997, Las Vegas, Nevada 89193-5997
(Address of principal executive offices)
Registrant's telephone number, including area code: (702) 382-1212
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
___________________ _____________________
Not applicable Not applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $ .01 par value
___________________________________________________________
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 17, 1997: $377,712,477
The number of shares outstanding of each of the registrant's classes of common
stock, as of March 17, 1997: 29,822,475 shares of Common Stock, $ .01 Par
Value
Part III incorporates information by reference from the Registrant's definitive
Proxy Statement to be filed with the Commission within 120 days after the close
of the Registrant's fiscal year.
Exhibit Index on page 66
Total number of pages 69
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PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
FORM 10-K
INDEX
Page no.
PART I
Item 1. Business................................................ 3 - 14
Item 2. Properties.............................................. 15
Item 3. Legal Proceedings....................................... 15 - 16
Item 4. Submission of Matters to a Vote of Security Holders..... 17
Part II
Item 5. Market for Registrant's Common Stock and Related
Stockholders Matters................................. 17
Item 6. Selected Financial Data................................. 18 - 19
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 19 - 25
Item 8. Consolidated Financial Statements and
Supplementary Data................................... 26 - 59
Item 9. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure.................. 60
Part III
Item 10. Directors and Executive Officers of the Registrant...... 60
Item 11. Executive Compensation.................................. 60
Item 12. Security Ownership of Certain Beneficial Owners
and Management....................................... 60
Item 13. Certain Relationships and Related Transactions.......... 60
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K.......................................... 61 - 64
Signatures.............................................. 65
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PART I
Item 1. Business
Primadonna Resorts, Inc. ("Company") owns and operates three resort-casinos on
both sides of Interstate 15 at the California/Nevada border, newly designated
as Primm, Nevada ("Primm"), a 50% interest in NEW YORK-NEW YORK Hotel & Casino,
LLC ("NEW YORK-NEW YORK") on the Las Vegas "Strip", and the Primm Valley Golf
Club ("Primm Valley") in California.
Buffalo Bill's Resort & Casino ("Buffalo Bill's"), Primadonna Resort & Casino
("Primadonna"), and Whiskey Pete's Hotel & Casino ("Whiskey Pete's" and
together with Buffalo Bill's and Primadonna, "Primm Properties") form a major
destination location and offer, to the more than ten million vehicles traveling
through Primm on Interstate 15, the first opportunity to wager upon entering
Nevada, and the last opportunity before leaving. The Company estimates that
more than 25% of all passing vehicles stopped at the Primm Properties in 1996.
The Company is a 50% joint venture partner with MGM Grand, Inc. ("MGM") in
NEW YORK-NEW YORK, which was completed in late December 1996, and opened to the
public on January 3, 1997. The New York themed mega-resort is located at the
premier location on the Las Vegas "Strip", the corner of Tropicana Avenue and
Las Vegas Boulevard.
In February 1997, the Company opened the challenging championship 18-hole Primm
Valley Golf Club, designed by Tom Fazio, and located in California, four miles
south of Primm. This represents the first phase of a golf educational complex
to include an additional 18-hole championship course and a golf academy.
Business Strategy
The Company's business strategy at Primm is to capitalize on its unique and
advantageous location on the heavily traveled Interstate 15 corridor.
Approximately 10.8 million, 10.6 million and 10.4 million vehicles traveled
through Primm on Interstate 15 in 1996, 1995, and 1994, respectively. The next
closest casino-hotel is located in Jean, Nevada, approximately eleven miles
north towards Las Vegas. Most of the land between Primm and Jean that is not
owned, leased or subject to the Company's exclusive gaming rights, is owned by
the Federal Government. The Primm Properties offer a convenient stop for
Interstate 15 travelers, and an attractive destination location for Southern
California residents, and to a lesser extent, visitors from Las Vegas and
elsewhere.
The Company positions its Primm Properties to appeal to "tiered" market
segments including the family/entertainment-oriented Buffalo Bill's, the
conference/leisure-oriented Primadonna, and the value-oriented Whiskey Pete's.
These hotel-casinos attract drive-by and overnight customers offering good
values on dining and lodging, with an emphasis on service, quality, cleanliness
and comfort. The Primm Properties offer an array of amenities and attractions,
including 113,500 square feet of casino space, 2,676 hotel rooms, 10
restaurants, and a variety of rides. The three casinos include approximately
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4,150 slot machines, 105 table games, poker, keno, and race and sports books.
In addition, the Primm Properties offer one-of-a-kind swimming pools, a movie
theater, motion simulation theaters, ferris wheel, bowling center, an
interactive water flume ride, and "The Desperado" roller coaster. These
attractions encourage visits by families and provide entertainment for
children, while allowing adults to spend more time in the Company's casinos.
The 6,100-seat Star of the Desert Arena hosts top-name entertainers, and has
allowed the Company to use special events as part of extended stay packages.
To further advance Primm as a destination location, increase mid-week
utilization, and attract a more upscale clientele, the Company opened Primm
Valley in February 1997. A second 18-hole course and a golf school is under
construction with opening expected by the end of 1997.
Additionally, the Company is constructing a 25,000 square foot conference
center at the Primadonna that is expected to open in mid-1997. The Company
intends to pursue group and conference business to coincide with the opening of
the conference center. In addition, a 600,000 square foot themed outlet mall is
to be constructed adjacent to the Primadonna, by third party developers; the
anticipated opening is mid-1998.
The Company is actively continuing bus and tour contracts with major operators.
Special events and entertainment promotions are held to further enhance the
destination concept as well as to foster repeat visits from patrons.
A major element of the Company's business strategy at Primm is to emphasize
slot machine play. Slot play contributes to a consistent cash flow, profit
generation, and provides significant operating leverage because of lower
associated labor costs. The Company's low minimum and maximum ($500) betting
limits for its table games also helps stabilize its cash flows. The Company
has installed player tracking systems to encourage customer loyalty, and
visitations. Additionally, the Company uses these systems to more efficiently
target and administer its direct mail programs.
The Company's strategy at NEW YORK-NEW YORK is to create an atmosphere that
will cause visitors to believe that the hotel, with its New York skyline, the
"Manhattan Express" roller coaster and its Coney Island style amusement center,
are a "must-see" on any Las Vegas visit. NEW-YORK-NEW YORK is targeted towards
the upper end of the middle market.
The Company's growth and diversification strategy is to develop or acquire
additional casino operations by capitalizing upon its design, development,
marketing, and operational expertise. The Company is actively seeking
opportunities to expand beyond Primm and NEW YORK-NEW YORK, however, the
Company is highly selective in its evaluation of expansion opportunities. The
Company's expansion activities focus on (i) venues with long-term growth
potential, political stability, and a reliable regulatory environment, (ii)
unique locations that provide immediate access to high population density or
traffic flow and some degree of market protection, (iii) development sites with
enough available land to grow, and (iv) projects that generate meaningful cash
flow and an above average return on investment. The Company believes that it is
well positioned to pursue business opportunities either alone, or through
strategic alliances with other entities.
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Current Operations
Buffalo Bill's Resort & Casino
Buffalo Bill's is a western-themed resort-casino, targeted towards the family/
entertainment market segment, offering diverse amenities that appeal to all age
groups. The 35 foot high ceiling gives one the feel of the wide open spaces of
the old west. Buffalo Bill's has 1,239 rooms in two 16-story towers. The
complex includes approximately 46,000 square feet of casino space including
approximately 1,700 slot machines, 42 table games, a keno lounge, and a race
and sports book; four restaurants; a deli; two bars; two motion simulation
theaters; a movie theater; the 6,100-seat Star of the Desert Arena; a Ghost
Town attraction including various novelty, gift, and food specialty shops; a
buffalo shaped swimming pool with a Jacuzzi; a video arcade and midway games.
In addition, Buffalo Bill's features "The Desperado", the tallest and fastest
roller coaster in the western hemisphere, and the interactive "Adventure
Canyon" water log flume ride, both of which are accessible from within the
casino. In April 1997 the Company is opening another thrill ride , the "Turbo
Drop", which gives riders the experience of weightlessness from 6Gs of negative
force.
Whiskey Pete's Hotel & Casino
Whiskey Pete's attracts travelers seeking a value-oriented casual and friendly
atmosphere. The congenial, "down to earth" atmosphere is promoted through the
Gold Rush period dress of the employees, the use of wood and bright colors
throughout the interior, and the "home-style" cooking offered in the Whiskey
Pete's restaurants.
Whiskey Pete's, an 1850's Gold Rush themed hotel-casino, offers a 36,400
square foot casino, three restaurants, a snack bar, three bars and a lounge,
a 650 seat showroom, 777 rooms, swimming pool with a water slide and Jacuzzi,
and an arcade. The casino includes approximately 1,350 slot machines, 30 table
games, a keno lounge, and a race and sports book. The casino entrance features
the original Bonnie & Clyde "Death Car" and the Dutch Schultz-Al Capone
"Gangster Car".
Primadonna Resort & Casino
The Primadonna Resort & Casino is currently being re-themed to a golf resort
atmosphere, and will soon be renamed Primm Valley Resort & Casino. The rooms
renovation has been completed, and the balance of the project should be
finished by mid-1997. The project also includes the construction of a 25,000
square foot conference center, capable of accommodating 2,500 people, and the
addition of 15,000 square feet of casino space. During construction of the
expansion, the Company may experience an impact on business levels as areas of
the casino are taken out of service for remodeling work. The Primadonna is
targeted to the upscale conference/leisure market. The property is located
between Whiskey Pete's and Buffalo Bill's, and the current monorail system is
being upgraded and extended to connect all three properties.
Primadonna currently has a 31,100 square foot casino, including 1,100 slot
machines and 33 table games, keno lounge, poker and a race and sports book, 660
rooms, three restaurants, two bars, a snack bar, ferris wheel, arcade, and
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bowling center. The property is a four-story diamond shaped building with a
large interior courtyard consisting of a swimming pool, Jacuzzi and garden.
Primm Valley Golf Club
The Primm Valley Golf Club, located approximately four miles south in
California, was completed in December 1996 and opened to the public in February
1997. The first phase offers an 18-hole Tom Fazio designed championship course,
a driving range, and other practice facilities. The second phase, currently
under construction, includes a clubhouse, to be completed in mid-1997, and a
second Tom Fazio designed 18-hole course, to be completed by the end of 1997.
The addition of the golf course, coupled with the Primadonna re-theming and the
conference center, is expected to appeal to groups seeking an attractive
setting for mid-week conferences, with golf as a recreational option. The
Company also believes that the attractiveness of Primm Valley is enhanced by
the limited number of premier golf facilities available to Las Vegas visitors
and residents.
NEW YORK - NEW YORK
The 48 story NEW YORK-NEW YORK Hotel & Casino complex includes such landmarks
as the Statue of Liberty, Empire State Building, Central Park, and the Brooklyn
Bridge. This New York-themed property contains an 84,000 square foot casino,
2,033 rooms, themed restaurants and lounges, retail outlets, the "Manhattan
Express" roller coaster and a Coney Island style amusement area. The casino has
approximately 2,400 slots machines, 71 table games, a keno lounge, and a race
and sports book. The property includes approximately 30,000 square feet of
retail space, and will be opening a showroom in mid-1997.
The operating agreement for NEW YORK-NEW YORK contains a buy/sell provision
allowing either party, at any time six months after opening, to make an offer
for a stated price, for the other party's interest. The other party must either
sell its interest, or buy the offering party's interest, at the stated price.
NEW YORK-NEW YORK is managed by a chief executive officer appointed by the
board of directors consisting of three representatives from each company. If
the Company and MGM are unable to reach agreement on any joint venture
decision, there is no mechanism for resolving the dispute other than through
the buy/sell provision.
Amenities
The Company offers numerous other amenities at Primm. Interstate 15 travelers
have 24-hour Unocal and Texaco service stations as well as a truck stop at
Whiskey Pete's that offers a lounge and shower facilities. Located adjacent to
Primadonna is the RV Village offering 199 full-service hookups for
recreational vehicles. Subleased to a franchisee is a 24-hour McDonald's.
The Primm Properties also benefit from a convenience store (owned by the
Company's Chairman of the Board and his brothers and sisters), located just
south of Primadonna on the California side of the border. This store attracts
Las Vegas residents who want to purchase California lottery tickets.
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Other Projects
Retail Outlet Mall
The team of Sheldon Gordon and Randy Brant, developers of the Forum Shops at
Caesar's Palace, along with the TrizecHahn Centers, intend to develop up to a
1.0 million square foot highly themed retail outlet mall on 100 acres of land
adjacent to the Primadonna and owned by Primm South Real Estate Company. The
first phase of the project is approximately 600,000 square feet and is expected
to be completed by the middle of 1998. The Company may incur approximately $1.5
million of infrastructure costs related to roadways and water/sewer systems to
accommodate the development, which will be built and financed by the
developers. The Company is planning to directly connect the Primadonna casino
to the mall.
Southwest
The Company has advanced a total of $3.8 million to Southwest Casino and Hotel
Corp. ("Southwest"), a developer and manager of Native American gaming
enterprises. Southwest manages a Class II Indian gaming facility in Eagle Pass,
Texas for the Kickapoo Traditional Tribe of Texas. Among other games, the
Kickapoo facility operates Lucky Tab 2 machines which are currently the subject
of litigation in Texas concerning their use in a Class II facility. An adverse
ruling would impact the profitability of this operation. Southwest also manages
a Class II Indian gaming facility just outside Oklahoma City, Oklahoma for the
Cheyenne and Arapaho Tribes.
The Company holds a $1.6 million Convertible Term Promissory Note which is
convertible into preferred stock of Southwest, and a $2.2 million Demand
Promissory Note which is secured by the management contract on the Kickapoo
gaming facility, a deed of trust, and a UCC-1 financing statement. Based upon
the current financial condition of Southwest, the Company has fully reserved
the $1.6 million Convertible Term Promissory Note and related interest. No
reserve has been established for the Demand Promissory Note due to its
collateralization. Additionally, the Company has issued an $800,000 reducing
letter of credit related to the Texas facility, which has been reduced to
$515,000 as of February 28, 1997.
Competition
The Company's Primm Properties compete primarily with two casino-hotels
located 11 miles north along Interstate 15 in Jean, Nevada, and with numerous
other casino-hotels in the Las Vegas area, principally on the basis of
location, range and pricing of amenities, gaming mix, and overall atmosphere.
The NEW YORK-NEW YORK Hotel & Casino competes primarily with the other mega-
resorts and hotels on Las Vegas Boulevard, and with a few major casino-hotels
in downtown Las Vegas.
Several new major resort projects have been announced and are expected to be
completed within the next two years. Several current resorts have announced
plans to add additional rooms in Las Vegas. This increase in capacity may
increase competition for customers both at the Company's Primm Properties and
at NEW YORK-NEW YORK. Since many of the Company's current customers stop at
Primm as they are driving on Interstate 15 to and from major casino-hotels
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located in Las Vegas, the Company believes that its success at Primm is also
favorably influenced by the popularity of the Las Vegas casino-hotels.
To a lesser extent, the Company's Primm resort-casinos also compete with gaming
establishments in or near Laughlin, Nevada, approximately 90 miles away in
Southern Nevada. Laughlin caters to moderate to middle income, value oriented
customers who travel primarily by car, bus, and recreational vehicle. The
addition of major gaming properties or the substantial expansion of existing
Laughlin casino-hotels could have an adverse effect on the number of customers
visiting the Company's Primm Properties.
Since the 1980's, legalized gaming opportunities have proliferated throughout
the United States. Some form of gaming is legal in all 50 states except Hawaii
and Utah. Riverboat, dockside or land-based gaming is currently legal in
several states, and in excess of 100 compacts have been negotiated between
Indian tribes and certain states to allow various forms of gaming on Indian
owned land. California sponsors a lottery (as do numerous other states) and
allows other non-casino style gaming, including pari-mutuel wagering, card
parlors and bingo.
There are currently Indian casinos in California and Arizona , several of
which are quite large and offer slot machines and table games. Indian casinos
located along Interstate 10 in the San Bernadino-Palm Springs region and in the
greater San Diego area pose the most direct competition to the Primm
Properties. Despite the fact that compacts have not been negotiated between the
Tribes and the State of California, these Indian casinos have operated with
casino-type gaming.
There are various cases making their way through the California court system
that are intended to force the State to negotiate full scale gaming compacts
with the Indian tribes. Additionally, there are state and local initiatives as
well as legislation continually being presented to allow some form of Indian
and non-Indian casino gaming at various locales in California.
While the Company believes that the continued spread of legalized gaming may,
in the future, present the Company with additional opportunities for expansion,
increased legalized gaming in some jurisdictions, particularly in areas close
to Nevada, such as Southern California and Arizona, could adversely affect the
Company's operations, particularly the number of bus groups and individuals
making day trips to the Company's properties.
Business Risks
The Company is highly dependent on customers from Southern California traveling
to and from Las Vegas along Interstate 15. In the event that the Interstate, or
the entrance and exit ramps providing access to the Primm Properties, were
impaired for an extended period of time due to road modifications, repairs,
weather, or other factors, the operations and financial performance of the
Company would be adversely affected. Additionally, significant increases in
fuel costs could have an impact on the number of travelers on Interstate 15.
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As with any major construction project, the expansion and remodeling of the
Primadonna, the construction of a club house and second golf course at Primm
Valley, and the plans for an outlet mall, involve many potential risks,
including shortages of materials and labor, work stoppages, labor disputes,
weather interference, engineering, environmental, or geological problems,
governmental regulations and approvals, and unanticipated cost increases,
including those arising from design changes, any of which could give rise to
delays or cost overruns.
The Company's employees primarily live in the Las Vegas area, which is
approximately 40 miles away from Primm . The continued growth and expansion of
resort properties in Las Vegas could adversely impact the Company's ability to
attract and retain qualified employees, and may put pressure on compensation
costs.
While the Company believes that it has sufficient water for its present
expansion plans and operations, the Company will need further governmental
approvals to use additional water for future expansion. There can be no
assurance that future requests for additional water will be granted.
Regulation and Licensing
The ownership and operation of casino gaming facilities in Nevada are subject
to (i) the Nevada Gaming Control Act and the regulations promulgated thereunder
(collectively, "Nevada Act"); and (ii) various local regulations. The Company's
gaming operations are subject to the licensing and regulatory control of the
Nevada Gaming Commission ("Nevada Commission"), the Nevada State Gaming Control
Board ("Nevada Board"), and the Clark County Liquor and Gaming Licensing Board
("CCLGLB"). The Nevada Commission, the Nevada Board and the CCLGLB are
collectively referred to as the "Nevada Gaming Authorities". The PRMA Land
Development Company, which owns and operates the Primm Valley Golf Club, is
subject to licensing and regulatory control of the California and San
Bernadino County Alcoholic Beverage Commissions.
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of
periodic reports with the Nevada Gaming Authorities; (iv) the prevention of
cheating and fraudulent practices; and (v) to provide a source of state and
local revenues through taxation and licensing fees. Changes in such laws,
regulations and procedures could have an adverse effect on the Company's gaming
operations.
The Primadonna Corporation, which operates Whiskey Pete's, Primadonna, and
Buffalo Bill's, is required to be licensed by the Nevada Gaming Authorities.
Additionally, PRMA Las Vegas, Inc., which is a 50% joint venture party in NEW
YORK-NEW YORK, as well as NEW YORK_NEW YORK itself, are required to be licensed
by the Nevada Gaming Authorities. The gaming license requires the periodic
payment of fees and taxes and is not transferable. The Company is registered
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by the Nevada Commission as a publicly traded corporation ("Registered
Corporation") and as such, it is required periodically to submit detailed
financial and operating reports to the Nevada Commission and furnish any other
information which the Nevada Commission may require. No person may become a
stockholder of, or receive any percentage of profits from, The Primadonna
Corporation, PRMA Las Vegas, Inc., or NEW YORK-NEW YORK without first obtaining
licenses and approvals from the Nevada Gaming Authorities. The Company, The
Primadonna Corporation, PRMA Las Vegas, Inc., and NEW YORK-NEW YORK have
obtained from the Nevada Gaming Authorities the various registrations,
approvals, permits and licenses required in order to engage in gaming
activities in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a material
relationship to, or material involvement with, the Company, The Primadonna
Corporation, PRMA Las Vegas, Inc., or NEW YORK-NEW YORK in order to determine
whether such individual is suitable or should be licensed as a business
associate of a gaming licensee. Officers, directors and certain key employees
of The Primadonna Corporation, PRMA Las Vegas, Inc., or NEW YORK-NEW YORK must
file applications with the Nevada Gaming Authorities and may be required to be
licensed or found suitable by the Nevada Gaming Authorities. Officers,
directors and key employees of the Company who are actively and directly
involved in gaming activities of The Primadonna Corporation, PRMA Las Vegas,
Inc., or NEW YORK-NEW YORK may be required to be licensed or found suitable by
the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an
application for licensing for any cause which they deem reasonable. A finding
of suitability is comparable to licensing, and both require submission of
detailed personal and financial information followed by a thorough
investigation. The applicant for licensing or a finding of suitability must pay
all the costs of the investigation. Changes in licensed positions must be
reported to the Nevada Gaming Authorities and, in addition to their authority
to deny an application for a finding of suitability or licensure, the Nevada
Gaming Authorities have jurisdiction to disapprove a change in a corporate
position.
If the Nevada Gaming Authorities were to find an officer, director, or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company, The Primadonna Corporation, PRMA Las Vegas,
Inc., or NEW YORK-NEW YORK, the companies involved would have to sever all
relationships with such person. In addition, the Nevada Commission may require
the Company, The Primadonna Corporation, PRMA Las Vegas, Inc., or NEW YORK-NEW
YORK to terminate the employment of any person who refuses to file appropriate
applications. Determinations of suitability, or of questions pertaining to
licensing, are not subject to judicial review in Nevada.
The Company, The Primadonna Corporation, PRMA Las Vegas, Inc., and NEW YORK-NEW
YORK are required to submit detailed financial and operating reports to the
Nevada Commission. Substantially all material loans, leases, sales of
securities and similar financing transactions by the Company, The Primadonna
Corporation, PRMA Las Vegas, Inc., or NEW YORK-NEW YORK must be reported to or
approved by the Nevada Commission.
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If it were determined that the Nevada Act was violated by The Primadonna
Corporation or NEW YORK-NEW YORK, the gaming licenses they hold could be
limited, conditioned, suspended, or revoked, subject to compliance with certain
statutory and regulatory procedures. In addition, the Company, The Primadonna
Corporation, PRMA Las Vegas, Inc., or NEW YORK-NEW YORK and the persons
involved, could be subject to substantial fines for each separate violation of
the Nevada Act at the discretion of the Nevada Commission. Further, a
supervisor could be appointed by the Nevada Commission to operate the Company's
gaming properties and, under certain circumstances, earnings generated during
the supervisor's appointment (except for the reasonable rental value of the
Company's gaming properties), could be forfeited to the State of Nevada.
Limitation, conditioning or suspension of any gaming license or the appointment
of a supervisor could (and revocation of any gaming license would) materially
adversely affect the Company's gaming operations.
Any beneficial holder of the Company's voting securities, regardless of the
number of shares owned, may be required to file an application, be
investigated, and have his suitability as a beneficial holder of the Company's
voting securities determined, if the Nevada Commission has reason to believe
that such ownership would otherwise be inconsistent with the declared policies
of the State of Nevada. The applicant must pay all costs of investigation
incurred by the Nevada Gaming Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires more than 5% of the Company's
voting securities to report the acquisition to the Nevada Commission. The
Nevada Act requires that beneficial owners of more than 10% of the Company's
voting securities apply to the Nevada Commission for a finding of suitability
within thirty days after the Chairman of the Nevada Board mails the written
notice requiring such filing. Under certain circumstances, an "institutional
investor", as defined in the Nevada Act, which acquires more than 10%, but not
more than 15%, of the Company's voting securities, may apply to the Nevada
Commission for a waiver of such finding of suitability if such institutional
investor holds the voting securities for investment purposes only. An
institutional investor shall not be deemed to hold voting securities for
investment purposes unless the voting securities were acquired and are held in
the ordinary course of business as an institutional investor, and not for the
purpose of causing, directly or indirectly, the election of a majority of the
members of the board of directors of the Company, any change in the Company's
corporate charter, bylaws, management, policies or operations of the Company,
or any of its gaming affiliates, or any other action which the Nevada
Commission finds to be inconsistent with holding the Company's voting
securities for investment purposes only. Activities which are not deemed to be
inconsistent with holding voting securities for investment purposes only
include: (i) voting on all matters voted on by stockholders; (ii) making
financial and other inquiries of management of the type normally made by
securities analysts for informational purposes and not to cause a change in its
management, policies or operations; and (iii) such other activities as the
Nevada Commission may determine to be consistent with such investment intent.
If the beneficial holder of voting securities who must be found suitable is a
corporation, partnership or trust, it must submit detailed business and
financial information, including a list of beneficial owners. The applicant is
required to pay all costs of investigation.
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Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada
Commission or the Chairman of the Nevada Board, may be found unsuitable. The
same restrictions apply to a record owner if the record owner, after request,
fails to identify the beneficial owner. Any stockholder found unsuitable and
who holds, directly or indirectly, any beneficial ownership of the common stock
of a Registered Corporation, beyond such period of time as may be prescribed
by the Nevada Commission, may be guilty of a criminal offense. The Company is
subject to disciplinary action if, after it receives notice that a person is
unsuitable to be a stockholder or to have any other relationship with the
Company, The Primadonna Corporation, PRMA Las Vegas, Inc., or NEW YORK-NEW
YORK, the Company (i) pays that person any dividend or interest upon voting
securities of the Company, (ii) allows that person to exercise, directly or
indirectly, any voting rights conferred through securities held by that person,
(iii) pays remuneration in any form to that person for services rendered or
otherwise, or (iv) fails to pursue all lawful efforts to require such
unsuitable person to relinquish his voting securities for cash at fair market
value. Additionally, the CCLGLB has taken the position that it has the
authority to approve all persons owning or controlling the stock of any
corporation controlling a gaming license.
The Nevada Commission may, at its discretion, require the holder of any debt
security of a Registered Corporation to file applications, be investigated, and
be found suitable to own the debt security of a Registered Corporation. If the
Nevada Commission determines that a person is unsuitable to own such security,
then pursuant to the Nevada Act, the Registered Corporation can be sanctioned,
including loss of its approvals, if without the prior approval of the Nevada
Commission, it: (i) pays to the unsuitable person any dividend, interest, or
any distribution whatsoever; (ii) recognizes any voting rights by such
unsuitable person in connection with such securities; (iii) pays the unsuitable
person remuneration in any form; or (iv) makes any payment to the unsuitable
person by way of principal, redemption, conversion, exchange, liquidation, or
similar transaction.
The Company is required to maintain a current stock ledger in Nevada which may
be examined by the Nevada Gaming Authorities at any time. If any securities are
held in trust by an agent or nominee, the record holder may be required to
disclose the identity of the beneficial owner to the Nevada Gaming Authorities.
A failure to make such disclosure may be grounds for finding the record holder
unsuitable. The Company is also required to render maximum assistance in
determining the identity of the beneficial owner. The Nevada Commission has the
power to require the Company's stock certificates to bear a legend indicating
that the securities are subject to the Nevada Act. However, to date, the Nevada
Commission has not imposed such a requirement on the Company.
The Company may not make a public offering of its securities without the prior
approval of the Nevada Commission if the securities or proceeds therefrom are
intended to be used to construct, acquire, or finance gaming facilities in
Nevada, or to retire or extend obligations incurred for such purposes. On July
25, 1996, the Nevada Commission granted the Company prior approval to make
public offerings for a period of one year, subject to certain conditions
("Shelf Approval"). However, the Shelf Approval may be rescinded for good cause
without prior notice upon the issuance of an interlocutory stop order by the
Chairman of the Nevada Board.
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<PAGE>
Changes in control of the Company through merger, consolidation, stock or asset
acquisitions, management or consulting agreements, or any act or conduct by a
person whereby he obtains control, may not occur without the prior approval of
the Nevada Commission. Entities seeking to acquire control of a Registered
Corporation must satisfy the Nevada Board and Nevada Commission in a variety of
stringent standards prior to assuming control of such Registered Corporation.
The Nevada Commission may also require controlling stockholders, officers,
directors and other persons having a material relationship or involvement with
the entity proposing to acquire control, to be investigated and licensed as
part of the approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions opposed by
management, repurchases of voting securities, and corporate defense tactics
affecting Nevada gaming licensees, and Registered Corporations that are
affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policies to: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of
corporate affairs. Approvals are, in certain circumstances, required from the
Nevada Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof, and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Company's
Board of Directors in response to a tender offer made directly to the
Registered Corporation's stockholders for the purpose of acquiring control of
the Registered Corporation.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly, semi-annually, or annually, and
are based upon either: (i) a percentage of the gross revenues received; (ii)
the number of gaming devices operated; or (iii) the number of table games
operated. A casino entertainment tax is also paid by casino operations where
entertainment is furnished in connection with the selling of food or
refreshments. Nevada licensees that hold a license as an operator of a slot
route, or a manufacturer's or distributor's license, also pay certain fees and
taxes to the State of Nevada.
Any person who is licensed, required to be licensed, registered, required to be
registered, or is under common control with such persons (collectively
"Licensees"), and who proposes to become involved in a gaming venture outside
of Nevada, is required to deposit with the Nevada Board, and thereafter
maintain, a revolving fund in the amount of $10,000, to pay the expenses of
investigation by the Nevada Board of their participation in such foreign
gaming. The revolving fund is subject to increase or decrease at the discretion
of the Nevada Commission. Thereafter, Licensees are required to comply with
certain reporting requirements imposed by the Nevada Act. Licensees are also
subject to disciplinary action by the Nevada Commission, if it knowingly
violates any laws of the foreign jurisdiction pertaining to the foreign gaming
13
<PAGE>
operation, fails to conduct the foreign gaming operation in accordance with the
standards of honesty and integrity required of Nevada gaming operations,
engages in activities that are harmful to the State of Nevada or its ability to
collect gaming taxes and fees, or employs a person in the foreign operation who
has been denied a license or finding of suitability in Nevada on the grounds of
personal unsuitability.
The sale of alcoholic beverages at Primadonna, Whiskey Pete's, Buffalo Bill's,
Primm Valley Golf Course, and NEW YORK-NEW YORK is subject to licensing,
control, and regulation by the applicable state and local authorities. All
licenses are revocable and are not transferable. The agencies involved have
full power to limit, condition, suspend, or revoke any such licenses, and any
such disciplinary action could (and revocation would) have a material adverse
effect upon the operations of the Company.
The gaming industry represents a significant source of tax revenues for the
State of Nevada and Clark County. From time to time, various changes in the tax
laws and their administration are proposed by various legislators and
officials. Recent proposals have included a federal gaming tax and increases in
state and local gaming taxes. A federal study of gaming has been passed into
law. The two year study of gaming by the commission will have broad powers,
including subpoenas. The impact of this study is not known at this time. In
addition, federal income tax proposals have been suggested which would limit
the deductibility of promotional allowances provided to customers, modify the
withholding requirements on amounts won by customers, and impose withholding on
negotiated discounts provided to customers. It is not possible to determine
with certainty the likelihood of possible changes in the tax laws or their
administration. Such changes, if adopted, could have a material adverse effect
on the Company's financial results.
The Company and certain of its officers and directors have been investigated
and found suitable by the Mississippi Gaming Commission ("MGC") in connection
with a proposed acquisition in Biloxi Mississippi, which acquisition was later
abandoned by the Company. The Company is also registered with the MGC as a
"publicly traded holding company" and remains subject to the reporting
requirements by the Mississippi Gaming Control Act and the regulations
promulgated thereunder as such requirements relate to the Company's
registration as a publicly traded holding company. Such reporting and
registration requirements are similar to those imposed by the State of Nevada
discussed above.
Employees
As of December 31, 1996, the Company had a total of 3,805 employees, of whom
1,214 were in gaming operations, 427 in hotel operations, 1,008 in food and
beverage, and 1,156 in other operations. None of the Company's employees is
represented by a labor union, but there can be no assurance that this will
continue. Management considers its labor relations to be good.
As of December 31, 1996, NEW YORK-NEW YORK, in which the Company is a 50%
partner, had 1,777 employees. None of these employees are currently
represented by labor unions, however, the property is negotiating with the
Teamsters and Culinary Unions for representation of certain employees.
14
<PAGE>
Item 2. Properties
The Primm Properties are located on approximately 142 acres of land on both
sides of Interstate 15 at the California/Nevada state line. Substantially all
of the land is leased from Primm South Real Estate Company, a corporation owned
by the Company's Chairman, and his brothers and sisters. The lease has an
expiration date of 2043 with an option to renew for an additional 25 years.
Rent for all properties covered by the lease is approximately $441,000 per
month. Rent increases each year by the cost of living, but not more than eight
percent in any one year. Each eight years, the rent is to be reset by two
appraisers, or, if they are unable to agree, by another appraiser selected by
the other appraisers. The lease provides for a fee of $100,000 per year,
adjusted every 10 years by the cost of living but not more than eight percent
annually, for the exclusive right to any gaming activity on any of the unleased
acreage owned by the lessor. In addition, the lessor has made available to the
Company acreage for a wastewater treatment plant operated by the Company and
the associated rapid infiltration basins.
The Company owns approximately 12 acres immediately north of Buffalo Bill's
that are currently the site of 144 company-owned mobile homes rented to
employees. The Company owns approximately 535 acres of land in California,
approximately four miles south of Primm, which is the location for the Primm
Valley Golf Club. Upon completion of the second golf course, approximately 100
acres will remain for future use.
The Company has first priority on water in various wells located on federal
land, and has received permits to pipe the water to its property. The Company
believes that there is adequate water, and that the Company has the necessary
permits to pipe sufficient quantities of water, to meet present and ongoing
needs of the Primm Properties. Such permits and rights are subject to the
jurisdiction and on-going regulatory authority of the U.S. Bureau of Land
Management, the States of Nevada and California, and local governmental units.
The Company believes that adequate water for Primm Valley is available. There
can be no assurances that any future requests for additional water will be
approved, or that no further requirements will be imposed by governmental
agencies on the Company's use and delivery of water to the Primm Properties.
The wastewater treatment plant has sufficient capacity to support the Primm
requirements. The plant was constructed, and will be upgraded, in a manner to
allow for expansion on the site if additional capacity is needed in the future.
NEW YORK-NEW YORK is located on approximately 20 acres at the intersection of
Tropicana and Las Vegas Boulevard on the Las Vegas "Strip". This is subject to
a first priority deed of trust secured by the $285 million of bank financing
due December 2001.
Item 3. Legal Proceedings
On April 26, 1994, a purported class action lawsuit was filed in the United
States District Court, Middle District of Florida, against 41 manufacturers,
distributors and casino operators of video poker and electronic slot machines,
including the Company ("Poulos"). On May 10, 1994, a complaint alleging
substantially identical claims was filed by another plaintiff in the United
States District Court, Middle District of Florida, against 48 manufacturers,
15
<PAGE>
distributors and casino operators of video poker and electronic slot machines,
including the Company and most of the other major hotel-casino companies
("Ahern"). The complaints allege that the defendants have engaged in a course
of fraudulent and misleading conduct intended to induce persons to play such
games based on a false belief concerning how the gaming machines operate, as
well as the extent to which there is an opportunity to win. The two lawsuits
have been consolidated into a single action, and discovery with respect to
jurisdictional issues is currently in progress ("Poulos/Ahern"). On December 9,
1994 the Florida Court ordered the case be transferred to the United States
District Court for the District of Nevada. On April 17, 1996, the federal
district court in Las Vegas, Nevada, dismissed the purported class action suit,
and gave the claimants until May 31, 1996 to file amended complaints. On May
31, 1996 the plaintiffs filed an amended complaint, and also filed a motion to
substitute Brenda McElmore for Mr. Ahern as one of the class representatives.
The motion has not been opposed by the Company. On July 12, 1996, the
plaintiffs filed a motion seeking to lift the December 30, 1994 stay of
discovery and seeking leave to add additional defendants. The defendants
(including the Company) have opposed those motions, and no hearing date has
been set on these motions. By order dated August 17, 1996, the Case was
transferred to Judge Ezra of the United States District Court of Hawaii, and
assigned the new Case No. CV-S-94-1126-DAE(RJJ)-BASE FILE.
On September 26, 1995, a complaint was filed in the United States District
Court for Nevada against 45 operators, manufacturers and distributors of video
poker and electronic slot machines, including the Company ("Schreier"). The
complaint alleges that the defendants have engaged in fraudulent conduct to
induce persons to play the devices by misrepresenting how the devices operate,
and the opportunity to win. The complaint alleges violations of the Racketeer
Influenced and Corrupt Organizations Act, and common law fraud and seeks
unspecified compensatory and punitive damages. On August 15, 1996 the Court
granted the motion to dismiss, without prejudice. 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. On December 13, 1996 Judge Ezra consolidated the Poulos/Ahern
and Schreier cases("Poulos/Ahern/Schreier"). The plaintiffs, Poulos/Ahern/
Schreier had until February 14, 1997 to file one consolidated complaint, which
was done. The defendants (including the Company) appointed a steering committee
to file consolidated pleadings in response to the consolidated complaint. On
February 14, 1997, the parties filed a case management order. The defendants
filed a motion to dismiss on March 21, 1997.
An amended complaint in a purported class action lawsuit was filed on August
23, 1995 in the United States District Court for New Jersey against 80 named
defendants, including the Company and other casino operators. The complaint
alleged that the defendants had conspired to deprive skilled blackjack players
from having the opportunity to play and win in the casinos. The complaint
alleged violation of various statutes, including the Fair Credit Act, the
Sherman Act, and several state antitrust and fraud statutes. The complaint
sought compensatory and exemplary damages, including treble damages for alleged
violations of the Sherman Act. On May 30, 1996, the United States District
Court for New Jersey granted the defendants' motion for dismissal, in its
entirety.
Management does not expect that the above litigation will have a material
adverse effect on the Company's financial position or results of operations.
16
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Part II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
The Company's common stock is quoted on the NASDAQ National Market System under
the symbol "PRMA". The following table sets forth, for the periods indicated,
the high and low closing sales price per share of the common stock as reported
by NASDAQ.
<TABLE>
<CAPTION>
HIGH LOW
_____ _____
Fiscal Year Ending December 31, 1996
<C> <C>
<S>
First Quarter................................... $17.75 $12.25
Second Quarter.................................. 25.00 15.25
Third Quarter................................... 23.75 17.00
Fourth Quarter.................................. 19.50 15.63
Fiscal Year Ending December 31, 1995
First Quarter................................... $25.00 $19.50
Second Quarter.................................. 25.75 20.88
Third Quarter................................... 24.25 15.25
Fourth Quarter.................................. 17.38 14.25
</TABLE>
As of February 4, 1997 there were 489 holders of record of the Company's
common stock.
The Company has neither declared nor paid any dividends since its initial
public offering on June 22, 1993. The payment of any dividends in the future
will be at the discretion of the Company's Board of Directors and will depend
upon, among other things, future earnings, operations, capital requirements,
loan restrictions, the general financial condition of the Company and general
business conditions.
17
<PAGE>
Item 6. Selected Financial Data
The selected consolidated financial data presented below is qualified in its
entirety by, and should be read in conjunction with, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements, Notes thereto, and other financial and
statistical information included elsewhere in this report.
<TABLE>
<CAPTION>
Years ended December 31,
___________________________________________
1996 1995 1994 1993 1992
_______ _______ _______ _______ _______
Income Statement Data:
(In thousands, except share data)
<C> <C> <C> <C> <C>
<S>
Net revenues $234,935 $239,797 $193,860 $144,279 $129,147
EBITDA (1) 67,395 71,057 63,228 56,301 49,619
Operating Income 31,012 43,992 41,560 44,996 39,642
Net Income (2) 16,768 23,307 26,462 29,125 25,180
Cash dividends (3) - - - 65,141 24,775
EBITDA per share $ 2.21 $ 2.31 $ 2.05 $ 1.94 $ 1.84
Earnings per share .55 .76 .86 1.00 .93
Balance Sheet Data:
(In thousands, except share data)
Total Assets $399,971 $373,219 $311,613 $165,674 $104,336
Long term debt 168,200 145,500 116,100 - 28,682
Stockholders' equity 201,018 196,046 171,357 144,836 68,807
Equity per share $ 6.58 $ 6.36 $ 5.56 $ 4.99 $ 2.55
Other Data:
Employees 3,805 3,834 3,705 2,159 1,763
Average hotel rooms 2,676 2,411 1,664 908 799
Slot machines 4,150 4,140 4,207 2,409 2,105
Table games 105 113 106 64 59
</TABLE>
____________________________
(1) "EBITDA" consists of operating income plus depreciation, amortization, and
pre-opening costs ( including pre-opening costs of New York - New York). 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 as an alternative to cash flows from
operating activities (as determined in accordance with generally accepted
accounting principles) or as a measure of liquidity.
(2) Pro forma for 1993 and 1992, reflecting provisions for federal income taxes
assuming an effective tax rate of 35% from January 1 through June 22, 1993 (the
date of the initial public offering), and a 34% rate for 1992. Also assumes the
Company would not have incurred interest on certain subordinated notes in 1993,
and would not have recorded the reinstatement of deferred taxes.
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<PAGE>
(3) The Company has not paid any dividends since its initial public offering in
June, 1993. Previously, the Company had distributed a substantial portion of
its net income as cash dividends to its S corporation stockholders.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read in conjunction with the
"Selected Financial Data" and the Consolidated Financial Statements and Notes
thereto included elsewhere in this report.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Summary of Operations
The Company continued the process of absorbing the capacity provided by Buffalo
Bill's, while continuing to pursue its strategy of enhancing Primm as a
destination location. The Tom Fazio designed golf course has been completed and
it opened to the public in February 1997. The expansion and upgrade of the
Primadonna is under way, and the construction of an upscale factory outlet mall
is expected to break ground in mid-1997.
The Company continued its focus on marketing in an effort to absorb mid-week
capacity. With the addition of comprehensive player tracking systems, the
Company is now positioned to more effectively execute its direct mail marketing
campaigns. There were an additional 52,000 occupied rooms during 1996, a
substantial portion of which were during the mid-week period.
Net revenues, before the equity loss from NEW YORK-NEW YORK, increased to
$242.8 million, an increase of 1.2%. Net income was $16.8 million, a decline of
$6.5 million, which was primarily due to the $7.8 million loss from NEW YORK-
NEW YORK, $1.1 million in pre-opening costs associated with the golf course, a
$2.3 million increase in selling, general and administrative expenses, and a
$900,000 increase in the cost of promotional allowances, offset by a $3.0
million decrease in interest expense and the corresponding $3.5 million
reduction in the tax provision.
Revenues
Overall casino revenue of $170.4 million was virtually unchanged from the
prior year. Slot revenue increased $1.4 million, while table games revenue
declined $1.3 million, yielding a net increase of $118,000 in casino revenue.
Food and beverage revenue increased to $29.7 million from $28.1 million, an
increase of $1.6 million, or 5.7%. The increase is primarily due to increased
food covers, coupled with selected beverage price increases. Hotel revenue
increased to $23.6 million from $19.8 million, an increase of $3.8 million, or
19.4%. An increase in rooms sold, including a substantial increase in
complimentary rooms provided to customers, coupled with a 10% increase in
rates, were the primary causes of the increase. The increase in complimentary
rooms contributed $2.4 million of the revenue increase, while cash revenues
contributed $1.4 million.
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<PAGE>
Entertainment revenue declined to $11.7 million from $13.2 million, a decrease
of $1.5 million, or 11.0%. The decline was primarily due to the reduced
ridership on "The Desperado" roller coaster, the log flume ride, and the motion
theaters. These declines were compounded by "The Desperado" being out of
service for repairs during 20 days of the peak summer season, and the log flume
ride undergoing extensive renovations to make the ride more interactive and
exciting, which caused it to be out of service for 30 days. The motion theaters
are located in close proximity to the other two rides, and management believes
that they were impacted by the reduced levels of activity in the area when each
of the two primary rides was out of service. To address the declining volume in
this area, the Company is installing a new thrill ride, the "Turbo Drop", which
the Company anticipates will reinvigorate this segment of its business, upon
its completion in April 1997.
Service station revenue increased to $15.0 million from $13.0 million, an
increase of $2.0 million, or 15.6%. This increase was due to a 7% increase in
gallons sold coupled with an 8% increase in prices. Other revenue declined
$356,000, or 5.2%, primarily due to reduced volume in the gift shops.
Equity loss in NEW YORK-NEW YORK is the Company's share of earnings from its
50% interest in NEW YORK-NEW YORK Hotel & Casino. The property was completed
in December 1996, and opened to the public on January 3, 1997. Accordingly, in
1996, NEW YORK-NEW YORK wrote-off its pre-opening costs of $15.8 million and
incurred a small operating loss, offset slightly by interest income. The
Company's 50% share of this loss amounted to a $7.8 million.
Costs and Expenses
Casino expenses increased to $51.7 million from $49.8 million, an increase of
$1.9 million, or 3.7%. The increase was primarily due to increased promotional
allowances, which are all charged to casino expense, along with increases in
payroll and related benefits. Food and beverage costs increased $1.2 million,
or 4.6%, primarily as a result of the increased volume. Hotel costs increased
$401,000, or 3.7%, due primarily to an additional 52,000 occupied rooms.
Service station costs increased $1.9 million, or 15.8%, due to higher product
cost and increased volume.
Selling, general and administrative expenses increased to $44.6 million from
$42.3 million, an increase of $2.3 million, or 5.4%. The increase is primarily
a result of an $829,000 increase in bus promotions, a $345,000 increase in
general marketing expenses, an incremental $450,000 related to the departure of
the Company's former president, and an increase of $672,000 in development
expenses, offset by a decrease of $206,000 in legal and other professional
fees.
Pre-opening costs of $1.1 million related to the completion of the Primm Valley
Golf Club were recorded in 1996. There were no such costs in 1995.
Interest Income (Expense)
Interest expense, net, was $4.9 million as compared to $7.9 million in the
prior year. The Company incurred $11.4 million of interest of which $6.1
million was capitalized as part of the NEW YORK-NEW YORK investment and the
20
<PAGE>
golf club development, and earned interest income of $400,000. In 1995, the
Company incurred $12.9 million of interest, of which $4.7 million was
capitalized, and earned interest income of $300,000. The decrease in interest
incurred is due to a decline in interest rates offset by a slight increase in
the average long-term debt outstanding.
Income Taxes
Income taxes decreased $3.5 million due primarily to lower earnings before
taxes. The Company's effective tax rate was not materially different from the
prior year.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Summary of Operations
During 1995 the Company embarked on several projects to further develop its
Primm complex and enhance its position as a destination location. The addition
in June of a second tower at Buffalo Bill's increased its available rooms to
1,239, and that of the entire complex to 2,676, enabling the Company to further
capitalize on weekend demand. In July, the Company initiated an aggressive
marketing campaign targeting the Southern California market. The program was
designed both to introduce new customers to the resort complex, and also to
increase the awareness of the enhanced gaming and entertainment facilities for
customers who had not visited since the opening of Buffalo Bill's. Although the
weekend demand continued to be strong, as evidenced by high room occupancy and
casino utilization, an expanded market penetration is necessary to fully
exploit the idle mid-week capacity.
A championship 18 hole golf course, designed by world renowned golf course
architect Tom Fazio, was begun with expected completion in late 1996. This
championship course, combined with the completion of the conference center, is
expected to enable the Company to more effectively utilize its mid-week
capacity. Additionally, the proposed Gordon-Brant retail outlet mall, initially
scheduled to break ground in the summer of 1996, is expected to further entice
mid-week travelers, although this proposed project will not be completed until
mid-1998.
Net revenues increased to $239.8 million, an increase of 23.7%, while net cash
provided by operating activities increased to $61.7 million, an increase of
16.1%. Despite these increases, net income declined 11.9% to $23.3 million,
primarily due to increased casino expenses, coupled with increased marketing,
advertising, depreciation and interest expense.
Revenues
Net revenues increased to $239.8 million from $193.9 million, an increase of
23.7%. Although casino revenue continued to be the largest revenue component,
and contributed the largest dollar increase, $25.4 million, it represented
71.0% of net revenues in 1995 compared to 74.8% in 1994, and 78.4% in 1993.
This shift in revenue source is primarily due to the expanded Primm complex
and the attendant amenities now offered. This change in revenue mix yields
21
<PAGE>
lower operating income margins as a larger proportion of revenues is derived
from other less profitable sources.
Casino revenues increased to $170.3 million from $144.9 million, an increase of
$25.4 million, or 17.5%. Slot revenue accounted for $20.0 million of this
increase, while table games revenue provided $5.4 million of the increase.
These increases resulted primarily from the full year of operations at Buffalo
Bill's, which opened in August 1994, and provided increases in casino capacity,
available and occupied rooms, and attracted additional visitors from Interstate
15.
Food and beverage revenues increased to $28.1 million from $21.3 million, an
increase of $6.8 million, or 31.9%. The full year of Buffalo Bill's, along with
the added hotel tower, yielded a significant increase in the number of meals
and drinks served. The increase in food and beverage promotional allowances
contributed $2.3 million to the increase, while cash sales contributed $4.5
million to the increase.
Hotel revenues increased to $19.8 million from $12.3 million, an increase of
$7.5 million, or 61.1% The full year of operations at Buffalo Bill's, including
the second tower addition in June 1995, provided significant additional
capacity. The number of rooms sold at the Primm complex increased 30.4% to
635,000, while the average daily room rate increased 26.1%.
Entertainment revenues increased by $7.7 million to $13.2 million. This
increase primarily resulted from the full year of operations of the attractions
at Buffalo Bill's: "The Desperado" roller coaster, the Star of the Desert
Arena, and the arcade facilities.
Service station revenues increased by $500,000, or 3.8%, as a result of slight
increases in the number of gallons sold.
Other revenues increased to $6.8 million from $4.4 million, an increase of
$2.4 million, or 53.8%. This increase was primarily due to the full year of
operations of the retail outlets and Buffalo Bill's, coupled with increased
income from commissions and vending machines.
Costs and Expenses
Casino expenses increased to $49.8 million from $38.5 million, an increase of
$11.3 million, or 29.5%. This increase was primarily due to payroll costs for
the full year at Buffalo Bill's, increased promotional allowances (all of which
are charged to casino expenses), and increased gaming taxes.
Food & beverage costs increased to $26.0 million from $21.4 million, an
increase of $4.6 million, or 21.7%. This increase resulted from increases in
both payroll and cost of goods sold, that were necessary to accommodate the
increased meal and drinks served. These increases were partially offset by the
increase in food and beverage promotional allowances, the cost of which are
charged to casino expenses.
Hotel expenses increased to $11.0 million from $7.8 million, an increase of
$3.2 million, or 40.3%. This increase was primarily due to the additional rooms
available, and occupied, at Buffalo Bill's.
22
<PAGE>
Entertainment expenses increased to $5.6 million from $3.3 million, an increase
of $2.3 million, or 72.4%. This increase was primarily due to a full year of
costs associated with the rides and attractions at Buffalo Bill's, coupled with
the increased expenses for headliner entertainment in the Star of the Desert
Arena, which opened in January 1995.
Service station expenses increased $400,000, or 3.9%. This increase resulted
from an increase in the cost of goods sold to support increased volumes, and
a slight increase in other operating costs.
Other expenses increased by $800,000, or 32.7%. This increase resulted from an
increase in cost of goods sold to support the increased sales volumes in the
retail outlets, and vending machines.
Selling, general and administrative expenses increased to $42.3 million from
$31.9 million, an increase of $10.4 million, or 32.9%. This increase is
primarily attributable to increased advertising ($3.6 million), marketing and
bus promotions ($1.0 million), administrative payroll ($2.3 million),
professional fees and development costs ($1.5 million), and increased security
and porter staffs to service the expanded facility ($1.9 million).
Property costs increased to $19.0 million from $14.0 million, an increase of
$5.0 million, or 35.4%. This increase is a result of increased rent expense
($1.2 million), utilities ($1.3 million), repairs and maintenance ($1.5
million), and property taxes and insurance ($1.0 million). All of these
increases primarily reflect the added capacity costs for Buffalo Bill's,
including the second tower addition.
Depreciation and amortization expense increased to $27.1 million from $18.7
million, an increase of $8.4 million, or 44.9%. This increase was primarily
due to a full year of operations at Buffalo Bill's.
The Company did not incur any pre-opening costs in 1995 compared to $3.0
million in 1994, which was attributable to the opening of Buffalo Bill's.
Interest Income (Expense)
Interest expense, net, increased to $7.9 million from $2.3 million, an increase
of $5.6 million. The increase is due to an increase in long-term debt
outstanding, coupled with the fact that in 1994 all interest expense incurred
during the first seven months was capitalized as part of the construction cost
of Buffalo Bill's.
Income Taxes
Income tax expense was $12.8 million in both 1995 and 1994, despite a decrease
in income before taxes. During the third quarter of 1994, the Internal Revenue
Service completed an audit of the Company's tax returns as a Subchapter S
corporation. The audit resulted in additional tax liabilities for the former
Subchapter S shareholders. As explained more fully in the 1994 discussion, the
Company's deferred tax liability was reduced, on a one-time basis, by $1.2
million which, correspondingly, reduced the 1994 tax provision by the same
amount.
23
<PAGE>
Liquidity and Capital Resources
The Company held cash and cash equivalents of $10.0 million. Net cash provided
by operations was $55.9 million compared to $61.7 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 a portion of its NEW YORK-NEW YORK equity investment, which cannot be
fully funded out of operating cash flows.
The Company has a $250 million Reducing Revolving Credit Facility,
("Agreement", see Note 8 of the Consolidated Financial Statements). At December
31, 1996 the amount outstanding under the Agreement was $167,800,000 at an
average all-in rate of 7.8%.
The Company is a 50% joint venture partner with MGM Grand, Inc. ("MGM") in the
NEW YORK-NEW YORK Hotel & Casino, LLC. The joint venture secured a $285
million Construction/Revolving loan from Bank of America as agent for a
sixteen bank consortium. At December 31, 1996, the full $285 million was
outstanding. The Company and MGM executed Keep-Well Agreements in conjunction
with the bank loan. In January 1997, the joint venture obtained an additional
$20 million of term loan financing. The Company may contribute up to
approximately $7.0 million in additional equity to fund remaining construction
liabilities.
In September 1995, amended November 1996, the Board of Directors approved a
stock repurchase program authorizing the Company to acquire up to $50 million
worth of its outstanding shares. The Company had acquired 835,000 shares for
$13.3 million at December 31, 1996, and an aggregate of 935,000 shares at a
cost of $15.1 million at February 28, 1997.
In September 1995, the Company announced that Sheldon Gordon and Randy Brant,
developers of the Forum shops at Ceasars Palace, along with the TrizecHahn
Centers, intended to develop, in two phases, up to a one million square foot
themed shopping facility on 100 acres of land that is owned by the Primm South
Real Estate Company and is adjacent to the Primadonna. For its part, the
Company expects to incur approximately $1.5 million for infrastructure costs to
accommodate this planned development. The facility is to be built and financed
by the developers. The first phase of approximately 600,000 square feet is
expected to be completed by mid-1998.
The Company has granted two loans to the Southwest Casino and Hotel Corp.
("Southwest" See Other Projects). Southwest was required to post a reducing
standby letter of credit of $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 remaining balance on the letter of credit
at December 31, 1996, was $601,000.
Capital requirements for 1997 include $13.5 million for the second phase of
the Primm Valley Golf Club, $18.0 million for the Primadonna expansion and
infrastructure, $3.0 million for the conference center, $5.4 million for an
24
<PAGE>
upgraded and expanded monorail system, and $10.0 million for maintenance of
existing facilities, and up to $7.0 million of additional equity for NEW YORK-
NEW YORK.
The Company believes that its current cash flow, coupled with its bank
facility, provides both the resources and flexibility to meet existing
obligations and to fund its commitments on the projects discussed above. The
Company continues to actively pursue other gaming opportunities and, if
successful in securing another location, depending upon the amount of funding
required, the Company may need to obtain additional bank or vendor financing,
or issue public or private debt or equity, or a combination thereof.
Certain statements contained in this Annual Report on Form 10-K that are not
historical facts are "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 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, those set
forth under "Business Risks".
25
<PAGE>
Item 8. Consolidated Financial Statements and Supplementary Data
Index to Consolidated Financial Statements Page no.
Report of Independent Public Accountants......................... 27
Consolidated Balance Sheets as of December 31, 1996 and 1995..... 28 - 29
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994................................. 30
Consolidated Statements of Stockholders' Equity for
the years ended December 31, 1996, 1995, and 1994................ 31
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994........................... 32 - 33
Notes to Consolidated Financial Statements....................... 34 - 45
New York - New York Hotel & Casino, LLC Financial
Statements and Supplementary Data................................ 46 - 59
26
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Primadonna Resorts, Inc.:
We have audited the accompanying consolidated balance sheets of Primadonna
Resorts, Inc. (a Nevada corporation) and subsidiaries as of December 31, 1996
and 1995, and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Primadonna Resorts,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Las Vegas, Nevada
January 29, 1997
27
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Amounts in Thousands)
<TABLE>
<Capiton>
December 31,
1996 1995
________ ________
<C> <C>
<S>
CURRENT ASSETS:
Cash and cash equivalents $ 10,027 $ 9,148
Accounts and notes receivable 1,170 3,311
Income tax refund receivable 221 994
Inventories 2,713 2,514
Prepaid expenses and other 5,790 6,587
________ ________
Total current assets 19,921 22,554
________ ________
PROPERTY AND EQUIPMENT:
Buildings and improvements 187,756 186,001
Land improvements 90,950 66,032
Furniture, fixtures and equipment 130,169 119,318
________ ________
408,875 371,351
Less: accumulated depreciation
and amortization (116,183) (89,999)
________ ________
292,692 281,352
Land 4,274 3,603
Construction in progress 3,949 8,170
________ ________
300,915 293,125
INVESTMENT IN JOINT VENTURE 68,593 49,561
________ _______
NOTES RECEIVABLE, net 2,926 2,110
________ ________
OTHER ASSETS 7,616 5,869
________ ________
$399,971 $373,219
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
28
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Amounts in Thousands Except Share Data)
<TABLE>
<CAPTION>
December 31,
1996 1995
________ ________
<C> <C>
<S>
CURRENT LIABILITIES:
Accounts payable-trade $ 5,599 $ 7,118
Accrued expenses 10,684 9,089
Current portion of long-term debt 1,100 -
________ ________
Total current liabilities 17,383 16,207
________ ________
LONG-TERM DEBT, net of current portion 168,200 145,500
________ ________
DEFERRED INCOME TAXES PAYABLE 13,370 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;
30,002,975 and 30,765,375 shares
issued and outstanding in 1996
and 1995, respectively 308 308
Additional paid - in capital 128,236 127,179
Retained earnings 85,767 68,999
Less: treasury stock, at cost (13,293) (440)
________ ________
201,018 196,046
________ ________
$399,971 $373,219
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
29
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands Except Share Data)
<TABLE>
<CAPTION>
Years Ended
December 31,
_________________________________
1996 1995 1994
________ ________ ________
<C> <C> <C>
<S>
REVENUES:
Casino $170,395 $170,277 $144,939
Food and beverage 29,709 28,095 21,298
Hotel 23,584 19,756 12,263
Entertainment 11,750 13,207 5,489
Service station 14,984 12,966 12,490
Other 6,433 6,789 4,415
Equity loss in New York - New York (7,842) - -
________ ________ ________
249,013 251,090 200,894
Less: promotional allowances (14,078) (11,293) (7,034)
________ ________ ________
Net revenues 234,935 239,797 193,860
________ ________ ________
COSTS AND EXPENSES:
Casino 51,661 49,799 38,469
Food and beverage 27,214 26,017 21,385
Hotel 11,369 10,968 7,816
Entertainment 5,492 5,636 3,270
Service station 13,846 11,958 11,510
Other 2,922 3,046 2,296
Selling, general and administrative 44,611 42,330 31,859
Property costs 18,306 18,986 14,027
Depreciation and amortization 27,358 27,065 18,673
Pre-opening costs 1,144 - 2,995
________ ________ ________
203,923 195,805 152,300
________ ________ ________
Income from operations 31,012 43,992 41,560
OTHER INCOME (EXPENSE)
Interest expense, net (4,923) (7,875) (2,342)
________ ________ ________
Income before income taxes 26,089 36,117 39,218
INCOME TAXES:
Income tax provision 9,321 12,810 12,756
________ ________ ________
NET INCOME: $ 16,768 $ 23,307 $ 26,462
======== ======== ========
Earnings per share $0.55 $0.76 $0.86
======== ======== ========
Weighted average number of shares of
common stock outstanding 30,535,221 30,801,430 30,818,432
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
30
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Amounts in Thousands Except Share Data)
<TABLE>
<CAPTION>
Additional
Common Stock Treasury Paid-in Retained
Shares Amount Stock Capital Earnings Total
__________ ______ ________ _______ ________ ________
<C> <C> <C> <C> <C> <C>
<S>
Balances, December 31, 1993 30,670,000 $307 $ - $125,299 $19,230 $144,836
Net income - - - - 26,462 26,462
Exercise of stock options 3,875 - - 59 - 59
___________ _____ _______ ________ ________ _________
Balances, December 31, 1994 30,673,875 307 - 125,358 45,692 171,357
Net income - - - - 23,307 23,307
Exercise of stock options 121,500 1 - 1,821 - 1,822
Purchase of treasury stock (30,000) - (440) - - (440)
___________ _____ ________ _______ _______ ________
Balances, December 31, 1995 30,765,375 308 (440) 127,179 68,999 196,046
Net income - - - - 16,768 16,768
Exercise of stock options 42,600 - - 1,057 - 1,057
Purchase of treasury stock (805,000) - (12,853) - - (12,853)
___________ _____ ________ _______ _______ ________
Balances, December 31, 1996 30,002,975 $308 $(13,293) $128,236 $85,767 $201,018
=========== ===== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
31
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
_________________________________
1996 1995 1994
________ ________ ________
<C> <C> <C>
<S>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,768 $ 23,307 $ 26,462
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 27,358 27,065 18,673
Amortization of debt issuance costs 425 536 185
Equity loss in New York - New York 7,842 - -
Allowance for doubtful accounts 1,852 - -
Pre-opening costs 1,144 - 2,995
Increase in life insurance cash
surrender value (75) (299) -
Gain on sale of assets (314) (334) -
Deferred income taxes (1,771) 6,147 3,786
Change in current assets and liabilities
due to operating activities:
(Increase) decrease in accounts and
notes receivable 1,581 (764) (7)
(Increase) decrease in income tax
refund receivable 773 1,862 (2,856)
(Increase) in inventories (199) (196) (1,029)
(Increase) decrease in prepaid expenses
and other 472 (883) (549)
Increase (decrease) in accounts
payable - trade (1,519) 2,352 2,562
Increase in accrued expenses 1,595 2,931 3,595
Decrease in income taxes payable - - (675)
________ ________ ________
Total adjustments 39,164 38,417 26,680
________ ________ ________
Net cash provided by operating activities 55,932 61,724 53,142
________ ________ ________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (35,158) (36,970) (155,463)
Decrease in construction payables - (4,621) (6,032)
Investment in joint venture (26,874) (45,687) (5,845)
Increase in other assets (4,670) (3,438) (1,580)
Proceeds from disposal of other assets 789 2,940 -
Pre-opening costs (1,144) - (2,995)
________ ________ ________
Net cash used in investing activities (67,057) (87,776) (171,915)
________ ________ ________
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
32
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
_________________________________
1996 1995 1994
________ ________ ________
<C> <C> <C>
<S>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock $ 1,057 $ 1,822 $ 59
Purchase of treasury stock (12,853) (440) -
Proceeds from issuance of long-term debt 70,400 209,400 115,000
Debt issuance costs - (1,504) (1,771)
Principal payments of long-term debt (46,600) (180,000) -
_______ ________ ________
Net cash provided by
financing activities 12,004 29,278 113,288
_______ ________ ________
Net increase (decrease) in cash and
cash equivalents 879 3,226 (5,485)
Cash and cash equivalents, beginning of year 9,148 5,922 11,407
________ ________ ________
Cash and cash equivalents, end of year $ 10,027 $ 9,148 $ 5,922
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
33
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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"). Investments in unconsolidated affiliates which are 50% or less owned
are accounted for under the equity method.
All of the Company's existing business activities are conducted by The
Primadonna Corporation. PRMA Land Development Company owns and operates the
Company's Primm Valley Golf Club in California. PRMA Las Vegas, Inc. holds
the Company's investment in a joint venture with MGM Grand, Inc., which owns
and operates the NEW YORK-NEW YORK Hotel & Casino, LLC 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
for the reported periods. Actual results may differ from those estimates.
Significant intercompany and interdivision accounts and transactions have been
eliminated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Casino Revenues and Promotional Allowances
Casino revenues represent the net win from gaming wins and losses. The retail
value of food, beverage, and hotel rooms provided to customers without charge,
is included in gross revenues, and then deducted as promotional allowances.
The estimated departmental costs of providing such promotional allowances is
included in casino costs and expenses as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
________ ________ ________
(In thousands)
<C> <C> <C>
<S>
Food and beverage $ 6,534 $ 6,536 $ 4,388
Hotel 2,403 1,265 888
Other 1,022 1,273 293
________ _______ _______
$ 9,959 $ 9,074 $ 5,569
======== ======== ========
</TABLE>
34
<PAGE>
b. Cash and Cash Equivalents
Cash equivalents are stated at market value and consist of highly liquid
investments with a maturity of less than three months. There were no
significant or unrealized gains or losses from cash equivalent investments
during the years ended December 31, 1996, 1995, and 1994. The Company's cash
management policies, at times, causes deficit ledger balances in the general
disbursement accounts, which amounted to $2,089,000 and $2,203,000 at December
31, 1996 and 1995, respectively.
c. Inventories
Inventories are valued at the lower of cost or market as determined on the
first-in, first-out method.
d. Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization are
provided for on the straight-line method over the following estimated useful
lives:
Buildings and improvements 10 to 40 years
Land improvements 5 to 15 years
Furniture, fixtures and equipment 3 to 12 years
Normal repairs and maintenance are charged to expense when incurred.
Expenditures which materially extend the useful life of assets are
capitalized.
e. Capitalized Interest
The Company capitalizes interest costs associated with debt incurred in
connection with major construction projects. Interest capitalized was
$6,100,000, $4,665,000, and $2,048,000 for the years ended December 31, 1996,
1995, and 1994, respectively.
f. Pre-Opening Costs
During construction of a new facility, the Company defers certain operating
costs, including incremental salaries and wages, as pre-opening costs. Upon
substantial completion of the facilities or commencement of operations, the
Company expenses all such pre-opening costs.
g. Stock Options
The Company has adopted SFAS No. 123- "Accounting for Stock Based
Compensation". As provided by SFAS No. 123, the Company accounts for stock
options under Accounting Principles Board (APB) Opinion No. 25- "Accounting for
Stock Issued to Employees". The Company discloses the pro forma net income and
earnings per share effect as if the Company had used the fair value based
method prescribed under SFAS No. 123.
35
<PAGE>
h. Development Costs
The Company defers costs associated with projects in jurisdictions in which
gaming has been approved and the Company has identified a site; otherwise these
costs are expensed as incurred.
i. Reclassifications
The consolidated financial statements for prior periods reflect certain
reclassifications to conform with classifications adopted in 1996.
3. STATEMENT OF CASH FLOWS
The following supplemental disclosures are provided as part of the accompanying
consolidated statements of cash flows:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
________ ________ ________
(In thousands)
<C> <C> <C>
<S>
Cash payments made for interest
(net of amounts capitalized) $ 5,274 $ 6,899 $ 1,753
======== ======== ========
Cash payments made for income taxes $ 9,900 $ 4,800 $ 12,500
======== ======== ========
</TABLE>
4. INVESTMENT IN JOINT VENTURE
On December 28, 1994 the Company and MGM Grand, Inc.("MGM"), formed a joint
venture to own and operate the NEW YORK - NEW YORK Hotel & Casino, LLC. The
hotel/casino, which cost $460 million, was completed in December 1996. The
Company holds a 50% interest in the joint venture. The Company has contributed
$62.5 million in cash and certain rights to the New York theme from a third
party licensor to the joint venture. MGM has contributed $22.5 million in cash
and land upon which the property is located, valued at $41.2 million, to the
joint venture. The joint venture secured limited recourse bank financing of
$285 million, and term loan financing of $20 million, which funded the
construction of, and equipment for, the hotel/casino. The joint venture
partners have executed Keep-Well Agreements in conjunction with the financing.
Summary condensed financial information for the joint venture is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1996
____________________________
(In thousands)
<C>
<S>
Net revenues $ 345
Operating loss (15,830)
Interest income, net 147
Net loss (15,683)
Total assets $457,090
Long-term debt 285,000
Member equity 111,664
</TABLE>
36
<PAGE>
Pre-opening costs of $15,762,000 were expensed in the year ended December 31,
1996, and are included in the operating loss reflected above.
5. NOTES RECEIVABLE
The Company entered into an agreement to loan Southwest Casino and Hotel Corp.
("Southwest"), a developer and manager of Native American gaming enterprises,
$1,600,000. This Convertible Term Promissory Note bears interest at 8%.
Interest is payable quarterly beginning January 15, 1997, and the principal is
due on or before July 15, 2000. This note may be converted, in whole, into
16,000 shares of Series B Convertible Preferred Stock. Southwest has not made
payments on the note, and collectability is in doubt. The Company has recorded
a reserve of $1,600,000 on the note and further reserved $252,000 of interest
due.
Additionally, the Company entered into a Demand Promissory Note with Southwest
in July 1995 to loan an aggregate of $2,248,000 to Southwest for construction
of the Kickapoo gaming facility in Eagle Pass, Texas. The note bears interest
at 12% for the first six months, 15% the next six months, and 18% thereafter.
Principal and interest are payable on demand, or, if no demand, $24,800 monthly
beginning December 1996, $34,800 monthly beginning December 1997, $70,000
monthly beginning December 1998, with the remaining principal and interest due
December 31, 1999. The note also 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. Amounts advanced at December 31, 1996 and 1995
were $2,248,000 and $438,000, respectively. At December 31, 1996, $151,000 of
accrued interest is outstanding, and classified as long-term. Southwest has not
made payments on this note since the December 1996 payment. This note is
secured by the management contract on the Kickapoo gaming facility, a deed of
trust, and a UCC-1 financing statement. No reserve has been recorded on this
note.
In connection with casino development efforts in Maryland, the Company entered
into a letter of intent ("Letter") for a proposed joint venture. Pursuant to
the terms of the Letter, the Company advanced funds for the development of an
office and apartment building, which would have included a casino entertainment
complex. The Letter was terminated on December 20, 1995, and the amounts
advanced at December 31, 1995 were $1,246,000. The notes outstanding were
non-interest bearing until the maturity date, December 20, 1996, at which time
the notes were paid.
37
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995
________ ________
(In thousands)
<C> <C>
<S>
Convertible Term Promissory Note, 8%,
due July 15, 2000, and related interest $ 1,852 $ 1,600
Demand Promissory Note, 12-18%, due
December 1, 1999, and related interest 2,399 634
Promissory Note, non-interest bearing,
due December 20, 1996 - 923
Promissory Note, non-interest bearing,
due December 20, 1996 - 323
Amount due on life insurance policies(Note 6) 527 510
Allowance for doubtful accounts (1,852) -
________ ________
2,926 3,990
Less: current portion - 1,880
________ ________
$ 2,926 $ 2,110
======= =======
</TABLE>
6. LIFE INSURANCE
Included in Other Assets is the cash surrender value of various life insurance
policies held on behalf of the Company's principal shareholder and Chairman of
the Board. The aggregate face value of all policies was $94 million at December
31, 1996 and 1995. The Company is the primary beneficiary on $24 million of
face value on the policies. The Company's principal shareholder and Chairman of
the Board has agreed to reimburse the Company, with respect to certain policies
with a face value of $70 million, for the difference between premiums paid by
the Company and such policies' cash surrender value.
7. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995
________ ________
(In thousands)
<C> <C>
<S>
Compensation and related benefits $ 4,422 $ 3,837
Unredeemed chips and token liability 1,178 601
Accrued gaming taxes 716 852
Progressive jackpot liabilities 652 703
Accrued sales and use taxes 1,235 883
Accrued interest 1,040 1,490
Other 1,441 723
_______ _______
$ 10,684 $ 9,089
======= =======
</TABLE>
38
<PAGE>
8. LONG-TERM DEBT
As of December 31, 1996 and 1995, the Company had an outstanding balance of
$167,800,000 and $144,000,000, respectively, on its Reducing Revolving Bank
Credit 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 December 31, 1996, the
$1,100,000 due for the theme rights is reflected as a current obligation.
The Reducing Revolving Bank Credit agreement entered into on December 28, 1993,
was amended and restated on July 17, 1995, and amended on March 27, 1996 (the
"Agreement"). The Agreement provides for a maximum principal balance of
$250,000,000, with scheduled reductions which will 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 primarily upon the Company's debt
to earnings before interest, taxes, depreciation and amortization ("EBITDA")
ratio. The margin 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 December 31, 1996, was 7.8% and at December 31, 1995, was 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 a deed of trust on all real property, leasehold
interests in real property, and personal property of the Company. The Agreement
contains certain restrictive covenants relating to the use of proceeds, sale or
transfer of assets, the incurrence of additional debt over a specified level,
capital expenditures, maintenance of certain minimum financial ratios, and a
minimum tangible net worth.
9. INCOME TAXES
The Company files a consolidated federal income tax return. The provision
(benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
________ ________ ________
(In thousands)
<C> <C> <C>
<S>
Current $ 11,092 $ 6,663 $ 8,970
Deferred (1,771) 6,147 3,786
________ ________ ________
$ 9,321 $ 12,810 $ 12,756
======== ======== ========
</TABLE>
39
<PAGE>
The tax effect of significant temporary differences representing deferred tax
assets and liabilities for the Company is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995
________ ________
(In thousands)
<C> <C>
<S>
Deferred tax assets (liabilities):
Current
Progressive jackpots $ 55 $ 179
Accrued vacation, workers compensation,
and group health 389 377
Inventories 30 170
Outstanding chip and token liability 182 176
Other (59) 20
________ ________
597 922
________ ________
Long-term:
Depreciation (16,634) (15,531)
Pre-opening costs 394 -
Bad debt allowances 648 -
Joint venture timing differences 2,185 -
Other 37 65
________ _______
(13,370) (15,466)
________ _______
$(12,773) $(14,544)
======== ========
</TABLE>
The Company did not record a valuation allowance at December 31, 1996 or 1995,
relating to recorded tax benefits, because all benefits are likely to be
realized. The net current deferred tax asset is included in Prepaid expenses
and other in the accompanying consolidated balance sheets.
The provision for income taxes differs from the amount computed at the federal
statutory rate as a result of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
_____ _____ _____
<C> <C> <C>
<S>
Federal Statutory rate 35% 35% 35%
Permanent differences 1 - 1
Change in deferred tax liability due to
IRS adjustment of S corporation taxable
income - - (3)
_____ _____ _____
Effective tax rate 36% 35% 33%
===== ===== =====
</TABLE>
In 1994, the Internal Revenue Service (IRS) completed an audit of the Company's
income tax returns as a Subchapter S corporation for the fiscal years 1990 to
1993. As a result of the audit, an additional tax liability, due primarily to
40
<PAGE>
adjustments of certain fixed asset depreciable lives, was assessed against the
Company's then Subchapter S shareholders. Because the adjustment decreased the
differences between accounting and tax expense items, the deferred tax
liability and tax provision were reduced, on a one-time basis, by $1.2 million.
10. LEASES
The Company entered into a lease agreement on July 1, 1993 which covers the
property upon which Whiskey Pete's, Primadonna, and Buffalo Bill's are located.
The land is owned by Primm South Real Estate Company ("Primm South"). Certain
shareholders and one Director of the Company are shareholders of Primm South.
The lease has an initial term of 50 years, with an option to extend for one
additional 25 year period. Monthly lease payments were $258,000 through June
1994, $417,000 through June 1995, $429,000 through June 1996, and are currently
$441,000 through June 1997. Lease payments are subject to annual increases
based upon the Consumer Price Index, not to exceed 8% per year. The lease
provides for the base rent to be adjusted every 8 years, based upon appraisal.
The Company is required to pay all taxes, insurance, utilities, and maintenance
expenses related to the property.
The lease further provides the Company with the exclusive right to conduct
gaming activities on the landlord's property in Primm, Nevada, for 10 years,
for a $100,000 annual fee. This right can be extended, at the Company's
option, for consecutive 10 year periods so long as the Company is in compliance
with the lease agreement. At each renewal period, the fee will be increased by
the Consumer Price Index, subject to a maximum annual increase of 8%.
Future minimum lease payments, for all leases with noncancelable lease terms
in excess of one year, at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Years ending December 31,
_________________________
(In thousands)
<C>
<S>
1997 $ 5,446
1998 5,410
1999 5,393
2000 5,393
2001 5,393
Thereafter $219,784
</TABLE>
Rent expense is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
________ ________ ________
(In Thousands)
<C> <C> <C>
<S>
$ 5,609 $ 5,764 $ 4,615
======== ======== ========
</TABLE>
41
<PAGE>
11. RELATED-PARTY TRANSACTIONS
The Company leases certain property from Primm South as discussed in Note 10.
Included in property costs and expenses for the years ended December 31, 1996,
1995 and 1994, is a lease expense of $5,320,000, $5,175,000, and $4,021,000,
respectively.
The Company has an agreement with the Chairman of the Company that provides for
each party to share undivided interests of 75% and 25%, respectively, in a jet
aircraft. Operational expenses are borne by the participants based upon actual
flight hours utilized by each party.
The Company had entered into an agreement with one of the Company's
shareholders, to display advertising on a race car owned by the shareholder's
company. The agreement was ended in 1994. In 1994, the Company paid $250,000
to the shareholder's racing company.
In September 1996, the Company entered into a new two-year agreement with a
director of the Company for certain consulting services. Contract terms
provide for monthly payments of $12,500 and include an option to renew the
agreement for one additional year. The agreement provides for a waiver of any
fees to which the director would otherwise be entitled to in his capacity as a
director of the Company. This agreement replaces a substantially similar
agreement executed in September 1993 for a one year term with two one year
renewal options. The Company exercised its option to renew the agreement in
September 1994 and 1995. Fees of $150,000 were incurred for the years ended
December 31, 1996, 1995, and 1994. The director is also a partner in a law firm
which provides legal services to the Company. The total amount for such
services were $264,000, $250,000, and $284,000 for the years ended December 31,
1996, 1995, and 1994, respectively.
12. CAPITAL STOCK, STOCK OPTIONS AND INCENTIVES
a. Authorized Shares
The authorized capital stock of the Company consists of 10,000,000 shares of
preferred stock, $.01 par value, and 100,000,000 shares of common stock, $.01
par value. The preferred stock may be issued in one or more series having such
respective terms, rights, and preferences as are designated by the Board of
Directors. No preferred stock has been issued.
b. Treasury Stock
In September 1995, the Board of Directors authorized the Company to acquire up
to $15 million of the Company's outstanding common shares. In November 1996,
the Board increased the total stock repurchase authorization to $50 million. As
of December 31, 1996, the Company has acquired 835,000 shares for $13.3
million. As of February 28, 1997, the Company had acquired an additional 100,000
shares for $1.8 million.
42
<PAGE>
c. Stock Incentive Plan
The Company's Board of Directors adopted the 1993 Stock Incentive Plan
("Plan"),amended June 1995, for officers, employees, employee-directors,
consultants, or advisors. A maximum of 3,000,000 shares of common stock had
been reserved for issuance under the Plan, as amended, which will terminate
after 10 years. In November 1995, the Company's Compensation Committee amended
all outstanding stock options to reduce the exercise price per share to $15
(the market price on the date of amendment). Excluded from the amendment were
those stock options which had been issued in connection with the Company's
initial public offering.
The Plan is administered by a committee of the Board of Directors appointed for
that purpose, which may amend or terminate the Plan, select those who will be
granted awards (as defined by the Plan), and determines the amount, type,
terms, and conditions of awards. The committee may enter into any arrangements
involving the issuance of (i) common stock, (ii) an option, warrant,
convertible security, stock appreciation right, or similar right, with an
exercise or conversion privilege at a fixed or variable price related to the
common stock or other equity securities of the Company, and/or the passage of
time, the occurrence of one or more events, or the satisfaction of performance
criteria or other conditions, or (iii) any similar security with a value
derived from the value of the common stock or other equity securities of the
Company, other than securities that do not constitute derivative securities.
Option activity under the Stock Incentive Plan was as follows:
<TABLE>
<CAPTION>
Number Price Range
of Shares of Options
_________ ___________
<C> <C>
<S>
Balance, December 31, 1993 560,500 $15.00-$32.00
Granted 639,500 $15.00-$31.75
Exercised (3,875) $15.00
Canceled (55,000) $15.00-$32.00
_________
Balance, December 31, 1994 1,141,125 $15.00-$32.00
Granted 987,000 $15.00-$24.75
Exercised (121,500) $15.00
Canceled (785,000) $15.00-$32.00
_________
Balance, December 31, 1995 1,221,625 $15.00
Granted 534,000 $14.25-$24.13
Exercised (42,600) $15.00
Canceled (431,200) $15.00-$21.75
__________
Balance, December 31, 1996 1,281,825 $14.25-$24.13
==========
</TABLE>
As of December 31, 1996, 1995, and 1994, 304,525, 241,225, and 106,625 options,
respectively, were exercisable at $15.00.
43
<PAGE>
The Company grants stock options to various employees and directors. The
options vest ratably over 3 to 5 years, with an expiration 10 years from date
of issuance. The exercise price is the market value on the date granted. The
weighted average exercise prices of the 1996 and 1995 grants were $19.65 and
$15.00, respectively. The Company applies APB Opinion No. 25 and related
interpretations in accounting for the plan. Accordingly, no compensation
expense has been recognized for the stock options. In accordance with SFAS No.
123, the Company has calculated, on a pro forma basis, the estimated
compensation expense related to its stock option programs utilizing the
following assumptions for the grants in 1996 and 1995, respectively: the risk
free interest rate for 5 year bonds is 5.83% and 6.32%, the expected volatility
is 19% and 18% over the 4.39 and 4.45 years weighted average term of the
options, and expected forfeitures are 45% in both years. The effect on net
income and earnings per share would be as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995
________ ________
(In Thousands, except share data)
<C> <C>
<S>
Net income as reported $ 16,768 $ 23,307
Pro forma $ 16,164 $ 22,946
======== ========
Primary earnings per share as reported $ .55 $ .76
Pro forma $ .53 $ .74
====== =====
Fully diluted earnings per share as reported $ .55 $ .76
Pro forma $ .53 $ .74
====== =====
</TABLE>
d. Eligible Directors' Stock Option Plan
In 1993, the Company adopted the Eligible Directors' Stock Option Plan
("Directors Plan"). A maximum of 300,000 shares of common stock have been
reserved for issuance under the Directors' Plan, which will terminate in 10
years. The Directors' Plan provides that each person who is an eligible
director at the time the Company first registers its common stock under Section
12 of the Securities Exchange Act of 1934, as amended, will be granted an
option to purchase 4,500 shares of common stock at an exercise price equal to
the initial public offering price. At each annual shareholders' meeting,
commencing in 1994, each eligible director will receive an option to purchase
4,500 shares of common stock. Any person elected as an eligible director at
least 90 days before an annual meeting, will also be granted an option for
4,500 shares. The options granted to the directors are exercisable at a rate of
1,500 shares per year commencing on the first anniversary after the date of
grant, provided that all options expire 10 years after the date of grant. The
exercise price of the options shall be the fair market value of the common
stock on the date of grant of the option. In 1996, the Board of Directors
granted each eligible director an additional 5,000 shares.
44
<PAGE>
Option activity under the Eligible Directors' Plan was as follows:
<TABLE>
<CAPTION>
Number Price Range
of Shares of Options
_________ ___________
<C> <C>
<S>
Balance, December 31, 1993 9,000 $31.25
Granted 9,000 $23.25-$25.25
Canceled (4,500) $31.25
_________
Balance, December 31, 1994 13,500 $23.25-$31.25
Granted 13,500 $15.00-$24.50
_________
Balance, December 31, 1995 27,000 $15.00-$31.25
Granted 28,500 $24.13
__________
Balance, December 31 ,1996 55,500 $15.00-$31.25
==========
</TABLE>
13. COMMITMENTS AND CONTINGENCIES
a. Southwest joint venture
On January 16, 1996, the Company and Southwest entered into an agreement to
fund the development of a casino for the Kickapoo Traditional Tribe of Texas in
Eagle Pass, Texas (see Note 5). Southwest was required to post an $800,000
letter of credit in favor of the Kickapoo Tribe. The Company has issued an
$800,000 reducing letter of credit on behalf of Southwest. At December 31,
1996, the balance under the letter of credit had been reduced to $601,000.
b. 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.
45
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members of NEW YORK-NEW YORK Hotel & Casino, LLC:
We have audited the accompanying balance sheets of NEW YORK-NEW YORK Hotel &
Casino, LLC, (a Nevada limited liability company in the development stage),
(the "Company") as of December 31, 1996 and 1995, and the related statements of
operations, changes in members' equity and cash flows for each of the two years
in the period ended December 31, 1996 and for the period from inception
(December 23, 1994) through December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NEW YORK-NEW YORK Hotel &
Casino, LLC as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for each of the two years in the period ended December 31,
1996 and for the period from inception through December 31, 1996, in conformity
with generally accepted accounting principles.
Arthur Andersen LLP
Las Vegas, Nevada
January 29, 1997
46
<PAGE>
NEW YORK-NEW YORK HOTEL & CASINO, LLC
(A Development Stage Company)
BALANCE SHEETS
ASSETS
(in Thousands)
<TABLE>
<CAPTION>
December 31,
1996 1995
________ ________
<C> <C>
<S>
CURRENT ASSETS:
Cash and cash equivalents $ 6,104 $ 504
Restricted cash 10,868 -
Accounts receivable 370 30
Advance deposits 2,207 -
Prepaid expenses 1,890 -
Inventories 350 46
________ ________
Total current assets 21,789 580
________ ________
PROPERTY AND EQUIPMENT:
Land 49,563 49,474
Buildings, fixtures and equipment 380,989 -
Construction in progress - 107,017
________ ________
Total property and equipment 430,552 156,491
________ ________
OTHER ASSETS:
Pre-opening expenses - 786
Other assets, net 4,750 3,680
________ ________
Total other assets 4,750 4,466
________ ________
TOTAL ASSETS $457,091 $161,537
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
47
<PAGE>
NEW YORK-NEW YORK HOTEL & CASINO, LLC
(A Development Stage Company)
BALANCE SHEETS
LIABILITIES AND MEMBERS' EQUITY
(in Thousands)
<TABLE>
<CAPTION>
December 31,
1996 1995
________ ________
<C> <C>
<S>
CURRENT LIABILITIES:
Current portion of capital lease $ 172 $ -
Accounts payable 12,683 187
Accounts payable accrued 10,231 -
Construction payables 12,625 14,990
Retention payable 14,596 3,747
Other accrued liabilities 9,291 1,265
________ ________
Total current liabilities 59,598 20,189
________ ________
LONG-TERM DEBT:
Long-term capital lease 829 -
Note payable 285,000 59,001
________ ________
TOTAL LIABILITIES 345,427 79,190
________ ________
MEMBERS' EQUITY:
Member contributions 127,400 82,400
Deficit accumulated during the
development stage (15,736) (53)
________ ________
Total members' equity 111,664 82,347
________ ________
TOTAL LIABILITIES AND MEMBERS' EQUITY $457,091 $161,537
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
48
<PAGE>
NEW YORK-NEW YORK HOTEL & CASINO, LLC
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(in Thousands)
<TABLE>
<CAPTION>
For the
Period
From
Inception
(December 23,
For the twelve months 1994)
ended December 31, through
_________________________________
December 31,
1996 1995 1996
________ ________ ________
<C> <C> <C>
<S>
REVENUES $ 345 $ 149 $ 494
________ ________ ________
COSTS AND EXPENSES:
Cost of sales 185 88 273
Operating expenses 228 393 621
Pre-opening costs 15,762 - 15,762
Abandonment loss - 642 642
________ ________ ________
Total costs and expenses 16,175 1,123 17,298
________ ________ ________
OPERATING LOSS (15,830) (974) (16,804)
OTHER INCOME (EXPENSE)
Interest income, net 147 921 1,068
________ ________ ________
NET LOSS $(15,683) $ (53) $(15,736)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
49
<PAGE>
NEW YORK-NEW YORK HOTEL & CASINO, LLC
(A Development Stage Company)
STATEMENTS OF CHANGES IN MEMBERS' EQUITY
(in Thousands)
<TABLE>
<CAPTION>
Deficit
Accumulated
MGM PRMA During the
GRAND, LAS VEGAS, Development
INC. INC. TOTAL Stage
________ ________ ________ ________
<C> <C> <C> <C>
<S>
INCEPTION, December 23, 1994 $ - $ - $ - $ -
Members' contributions 41,200 41,200 82,400 -
Net loss (27) (26) (53) (53)
________ ________ ________ ________
Balance, December 31, 1995 41,173 41,174 82,347 (53)
Members' contributions 22,500 22,500 45,000 -
Net loss (7,841) (7,842) (15,683) (15,683)
________ ________ ________ ________
Balance, December 31, 1996 $ 55,832 $ 55,832 $111,664 $(15,736)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
50
<PAGE>
NEW YORK-NEW YORK HOTEL & CASINO, LLC
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(in Thousands)
<TABLE>
<CAPTION>
For the
Period
From
Inception
(December 23,
For the twelve months 1994)
ended December 31, through
_________________________________
December 31,
1996 1995 1996
________ ________ ________
<C> <C> <C>
<S>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(15,683) $ (53) $(15,736)
Adjustments to reconcile net income to
net cash provided by operating activities:
Pre-opening expenses 15,762 - 15,762
Increase in accounts receivable (340) (30) (370)
Increase in advance deposits (2,207) - (2,207)
Increase in prepaid expenses (1,890) - (1,890)
Increase in inventories (304) (46) (350)
Increase in accounts payable 12,496 187 12,683
Increase in other accrued liabilities 18,257 1,265 19,522
________ ________ ________
Net cash provided by operating activities 26,091 1,323 27,414
________ ________ ________
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in property and equipment (262,211) (111,544) (373,755)
Increase in restricted cash (10,868) - (10,868)
Increase in other assets (1,070) - (1,070)
Increase in pre-opening expenses (14,976) (786) (15,762)
(Decrease) increase in construction
payables (2,365) 14,990 12,625
________ _______ ________
Net cash used in investing activities (291,490) (97,340) (388,830)
________ ________ ________
</TABLE>
The accompanying notes are an integral part of these financial statements.
51
<PAGE>
NEW YORK-NEW YORK HOTEL & CASINO, LLC
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(in Thousands)
<TABLE>
<CAPTION>
For the
Period
From
Inception
(December 23,
For the twelve months 1994)
ended December 31, through
_________________________________
December 31,
1996 1995 1996
________ ________ ________
<C> <C> <C>
<S>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt $225,999 $ 59,001 $285,000
Increase in deferred financing fees, net - (2,480) (2,480)
Members' contributions 45,000 40,000 85,000
_______ ________ ________
Net cash provided by
financing activities 270,999 96,521 367,520
_______ ________ ________
Increase (decrease) in cash and
cash equivalents 5,600 504 6,104
Cash and cash equivalents, beginning of period 504 - -
________ ________ ________
Cash and cash equivalents, end of period $ 6,104 $ 504 $ 6,104
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest, net of
amounts capitalized $ - $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Capital lease for equipment $ 1,001 $ - $ 1,001
======== ======== ========
Retention payable included in
construction in progress $ 14,596 $ 3,747 $ 18,343
======== ======== ========
Contributed land, at fair market value $ - $ 41,200 $ 41,200
======== ======== ========
Contributed intangible asset,
at fair market value $ - $ 1,200 $ 1,200
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
52
<PAGE>
New York-New York Hotel & Casino, LLC
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
1. Organization and Operations
MGM Grand, Inc. ("MGM"), a Delaware corporation, and PRMA Las Vegas, Inc.
("Primadonna"), a Nevada corporation, entered into an operating agreement (the
"Agreement") dated December 23, 1994 (inception) to establish NEW YORK-NEW YORK
Hotel & Casino, LLC, a Nevada limited liability company (the "Company"), doing
business as NEW YORK-NEW YORK Hotel & Casino (the "Hotel-Casino"). The
Agreement will expire on December 23, 2024. The purpose of the Company is to
acquire certain unimproved property for development and operation of the Hotel-
Casino which opened to the public January 3, 1997, at an approximate cost of
$460,000,000. MGM contributed to the Company land with a fair market value of
$41,200,000 to comprise its total initial equity investment. Primadonna
contributed to the Company an intangible asset with a fair market value of
$1,200,000 and cash of $40,000,000 for a total initial equity investment of
$41,200,000. Each member contributed cash of $22,500,000 during fiscal year
1996. Each member has a 50% ownership interest in the Company. Profits and
Losses (as defined), quarterly Net Cash Flow Payments (as defined), and
additional capital contributions will be allocated to each member at their 50%
ownership interest. MGM and Primadonna shall not be liable under a judgment,
decree, order of any court or in any other manner, for a debt, obligation or
liability of the Company, except as it relates to the Bank Credit Facility
(see Note 4).
Since the planned principal operations had not commenced as of December 31,
1996, the Company has accounted for its operations as a development stage
company. There were no operations, nor members' equity contributions during the
period from inception (December 23, 1994) through December 31, 1994.
Comparative and cumulative information for 1994 is therefore not presented.
2. Summary of Significant Accounting Policies
a. Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
b. Cash and Cash Equivalents
Cash and cash equivalents include all cash balances and highly liquid
investments with original maturates of three months or less.
c. Restricted Cash
Restricted cash represents amounts withdrawn against the Company's Bank Credit
Facility (as defined herein), which are restricted for payment of certain
construction payables.
53
<PAGE>
d. Inventories
Inventories, which consist primarily of beverage and gift shop merchandise, are
stated at the lower of cost, determined on a first-in, first-out basis, or
market value.
e. Property and Equipment
Property and equipment are stated at cost. No depreciation has been charged to
expense in the current year as the property had not yet opened to the public,
and no assets had yet been placed in service.
f. Capitalized Interest
The Company capitalizes interest costs associated with debt incurred during the
active construction and development phases of its facilities and other major
projects. Interest costs capitalized to construction in progress for the year
ended December 31, 1996 and 1995 were $13,951,000 and $759,000, respectively.
g. Pre-opening Expenses
Pre-opening expenses include direct incremental project salaries and other pre-
opening expenses incurred during the pre-opening phase of the project. All pre-
opening costs directly related to gaming and hotel operations are capitalized
as incurred and charged to expense in the period the project is ready for its
intended use. All pre-opening costs were expensed in the period ending December
31, 1996, as the property was ready for use as of December 25, 1996.
h. Income Taxes
The Company is not subject to income taxes, therefore no provision for income
taxes has been made as the members include their respective shares of the
Company's income or loss in their income tax returns.
I. Valuation of Land
The land contributed by MGM has been included in property and equipment at a
value of $41,200,000 (see Note 1). This amount exceeds MGM's original cost
basis and represents the valuation which has been agreed upon by the members.
j. Fair Value of Financial Instruments
The fair value of the Company's financial instruments approximates their
recorded value at December 31, 1996 and 1995.
k. Reclassifications
Certain reclassifications have been made to prior year amounts to conform to
current year presentation.
54
<PAGE>
3. Other Assets
Other assets at December 31, 1996 and 1995 consist of the following:
<TABLE>
<CAPTION>
1996 1995
_______ ________
(in thousands)
<C> <C>
<S>
Deferred financing fees $ 2,994 $ 2,675
Intangible asset 1,319 1,200
Organization costs 461 -
Chips and tokens 513 -
________ ________
Subtotal 5,287 3,875
Less: amortization (537) (195)
________ ________
Other assets, net $ 4,750 $ 3,680
======== ========
</TABLE>
Deferred financing fees and costs related to obtaining the Company's long-term
debt facility were capitalized, and are being amortized to interest expense on
a straight-line basis over the period of the loan. In accordance with the
Company's capitalization of interest costs during the development phase, the
amortized portion of these fees was included in capitalized interest.
Intangible asset represents certain rights related to the "New York Theme,"
contributed by Primadonna, in accordance with the Agreement. Upon opening the
Hotel-Casino, this amount will be amortized over the life of the Agreement
(30 years).
Organization costs consist primarily of professional and legal fees incurred to
establish the Company, and obtain requisite Gaming Licenses. Upon opening the
Hotel-Casino, these costs will be amortized over 5 years.
Chips and tokens consist of the cost of purchasing the gaming chips and tokens
used in the Hotel-Casino. Upon opening the Hotel-Casino, these costs will be
amortized over 3 years.
55
<PAGE>
4. Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
________ ________
(in thousands)
<C> <C>
<S>
Amount due under Bank Credit Facility at
floating interest rates based on Libor
plus between .75% to 2.00% depending on the
Guarantor Funded Debt Ratio as defined.
Interest on the Bank Credit Facility ranged
from 6.25% to 8.75% during 1996, maturing
March 31, 2002. $285,000 $ 59,001
Less-current portion of long-term debt - -
________ ________
Total long-term debt $285,000 $ 59,001
======== ========
</TABLE>
On September 15, 1995, the Company entered into a secured limited recourse
financing agreement for a $225,000,000 Construction/Revolving Loan (the "Bank
Credit Facility") with a consortium of banks, led by Bank of America. On
September 26, 1996, the Bank Credit Facility was amended to increase the
Commitment to $285,000,000. The Bank Credit Facility was a non-revolving
construction line of credit, which converted to a 5 year reducing revolver upon
the commencement of operations of New York New York on January 3, 1997.
Interest on the Bank Credit Facility is variable based on a formula defined in
the Bank Credit Facility agreement. An initial payment of $20,000,000 is due on
the Initial Reduction Date (as defined, which is March 31, 1998). Thereafter,
quarterly installments are due of $9,375,000 for the next four quarters;
$11,250,000 for the next eight quarters; $12,500,000 for the next three
quarters; and the balance maturing four years after the Initial Reduction Date.
Additional principal payments are due one year after operations commence based
on 50% of Available Cash Flow (as defined).
The Company incurred commitment fees on a quarterly basis on the unused portion
of the Bank Credit Facility (as defined) at .5%. Commitment fees incurred
during the years ended December 31, 1996 and 1995 were $284,000 and $228,000,
respectively; these amounts are included in capitalized interest. Substantially
all property and equipment of the Hotel-Casino is pledged as collateral under
the Bank Credit Facility.
The Bank Credit Facility contains various restrictive covenants including the
maintenance of certain financial ratios and limitations of additional debt,
distributions, disposition of property, mergers and similar transactions.
Compliance with these covenants is not required until the Hotel-Casino
commences operations.
As a condition to the Bank Credit facility, MGM and Primadonna (collectively,
the "Guarantors") guaranteed completion of the Hotel-Casino and, in addition,
entered into a "Keep Well" agreement whereby, if the Company fails to be in
compliance with any of the financial ratio covenants (as defined), the
Guarantors shall contribute Acceptable Cash Equity (as defined) to the Company.
56
<PAGE>
The Bank Credit Facility allows for the issuance of letters of credit of up to
$20,000,000 and the issuance of swing line loans of up to $10,000,000. As of
December 31, 1996, the Company has not issued any letters of credit nor
received advances on the swing line loans.
Interest payable at December 31, 1996 and 1995 was approximately $2,158,000 and
$175,000 respectively, and is included in other accrued liabilities in the
accompanying balance sheets.
Scheduled maturities of long-term debt are as follows as of December 31, 1996:
<TABLE>
<CAPTION>
(in thousands)
<C>
<S>
1997 $ -
1998 48,125
1999 43,125
2000 45,000
2001 48,750
Thereafter 100,000
________
$285,000
========
</TABLE>
5. Capital Lease
In December, 1996, the Company entered into a five-year master equipment lease
agreement to purchase various powered supply carts with a fair market value of
$1,001,000 at an interest rate of 7.46%. The future minimum lease payments by
year under the lease, together with the present value of the minimum lease
payments, consisted of the following at December 31, (in thousands):
<TABLE>
<CAPTION>
<C>
<S>
1997 $ 240
1998 240
199 240
2000 240
2001 241
_______
Minimum lease payments 1,201
Less: amounts representing interest 200
_______
Present value of minimum lease payments $1,001
=======
</TABLE>
6. Abandonment Loss
The Company incurred costs related to the construction of flyover ramps to
divert traffic from the heavily traveled intersection in front of the Hotel-
Casino. Based upon the results of the traffic studies subsequently performed,
management changed their intentions and abandoned construction of these
flyovers; therefore $642,000 of abandonment loss, the cumulative costs incurred
to date, was charged to expense as of December 31, 1995.
57
<PAGE>
7. Related Party Transactions
During the year ended December 31, 1996 and 1995, the Company engaged in
certain transactions with MGM and Primadonna. In 1995 MGM and Primadonna, each,
contributed $5,000,000, respectively to the Company, which amounts were
advanced to, and subsequently repaid by the Company, during the year ended
December 31, 1995. In addition, the Company has reimbursed expenses related to
construction and pre-opening expenses paid for by MGM and Primadonna. These
reimbursed expenses approximated $96,000 and $1,544,000 for 1996 and $414,000
and $2,279,000 for 1995, for MGM and Primadonna, respectively. Included in
these amounts is interest paid of $0 and $4,000 to MGM and Primadonna,
respectively for 1996, and $44,000 and $40,000 to MGM and Primadonna,
respectively for 1995.
The Company leased approximately 5,800 square feet of office space from MGM.
The annual lease expense was approximately $55,500 for the years ended December
31, 1996 and 1995.
8. Commitments and Contingencies
Litigation
The Company is party to various litigation arising in the normal course of
business. Management is of the opinion that the ultimate resolution of these
matters will not have a material effect on the financial position or the
results of operations of the Company.
The Company has been named as a defendant in a trademark infringement and
unfair competition action. The action alleges that the plaintiff owns the
trademark rights for a stylized design mark featuring an apple surrounded by
the words, "New York New York" for restaurant services. Prior to filing the
complaint the plaintiff offered to sell the trademark to the Company for at
least one million dollars; the Company declined such purchase. The
litigation is currently in the early stages of development, and, in the opinion
of management, the ultimate outcome of this matter is not presently known. The
Company has retained outside counsel who have indicated that there is very
little likelihood of a damage award being rendered against the Company, even if
the Court concluded that the trademark infringement had occurred. However, the
Company could be required to either obtain a trademark license, or negotiate a
purchase from the plaintiff.
9. Subsequent Events
The Hotel-Casino opened to the public on January 3, 1997.
On January 15, 1997, the Company signed a letter of intent to purchase improved
real property located at 3782 Las Vegas Boulevard South, from LaQuinta Inns,
Inc. The purchase price is expected to be $13,500,000, and the transaction is
contemplated to close on or before March 14, 1997.
58
<PAGE>
On January 21, 1997, the Company entered into a $20,000,000 Master Security
Agreement for equipment financing with a financial institution (the "Note").
The Note is payable in 58 monthly installments of $254,000 and one final
installment of $5,000,000. The Note contains a Contract Rate of interest equal
to the sum of 1) one and 88/100 percent (1.88%) per annum, plus 2) a variable
per annum interest rate which shall be equal to the one month LIBOR rate. The
Company has the option to convert to a fixed rate, based on the Treasury Rate,
for the remaining length of time on the Note, plus one and 88/100 percent
(1.88%) per annum.
59
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
The information required by Items 10, 11, 12, and 13 is incorporated by
reference from the 1996 Proxy Statement to be filed with the Securities and
Exchange Commission within 120 days of the end of the fiscal year covered by
this report.
Page 60
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements:
Reference is made to the Index to Financial Statements and Related
Information under Item 8 in Part II hereof where these documents are
listed.
(a)(2) Financial Statement Schedules:
None.
(a)(3) Exhibits
3.1 Amended and Restated Articles of Incorporation of Primadonna Resorts,
Inc. (incorporated by reference to Exhibit 3.1 to the Registration
Statement on Form S-1 No. 33-61212 filed by the Registrant).
3.2 Bylaws of Primadonna Resorts, Inc., dated April 12, 1993 (incorporated
by reference to Exhibit 3.2 to the Registration Statement on Form S-1
No. 33-61212 filed by the Registrant).
10.1 Primadonna Resorts, Inc. 1993 Eligible Directors' Stock Option Plan
(incorporated by reference to Exhibit 4.1 to the Registration Statement
on Form S-8 No. 33-70842 filed by the Registrant).
10.2 Form of Eligible Director Nonqualified Stock Option Agreement
(incorporated by reference to Exhibit 4.2 to the Registration Statement
on Form S-8 No. 33-70842 filed by the Registrant).
10.3 Primadonna Resorts, Inc. 1993 Stock Incentive Plan (incorporated by
reference to Exhibit 4.1 to the Registration Statement on Form S-8
No. 33-70844 filed by the Registrant).
10.4 Form of Employee Incentive Stock Option Award Agreement (incorporated
by reference to Exhibit 4.2 to the Registration Statement on Form S-8
No. 33-70844 filed by the Registrant).
10.5 Form of Employee Nonqualified Stock Option Award Agreement
(incorporated by reference to Exhibit 4.3 to the Registration Statement
on Form S-8 No. 33-70844 filed by the Registrant).
10.6 Form of Consultant Nonqualified Stock Option Award Agreement
(incorporated by reference to Exhibit 4.4 to the Registration Statement
on Form S-8 No. 33-70844 filed by the Registrant).
10.7 Form of Special Employee Nonqualified Stock Option Award Agreement
(incorporated by reference to Exhibit 4.5 to the Registration Statement
on Form S-8 No. 33-70844 filed by the Registrant).
Page 61
<PAGE>
10.8 Form of Special Employee Incentive Stock Option Award Agreement (Early
Vesting Provisions) (incorporated by reference to Exhibit 4.6 to the
Registration Statement on Form S-8 No. 33-70844 filed by the
Registrant).
10.9 Closing Agreement on Final Determination Covering Specific Matters dated
July 1, 1992 between the Primadonna Corporation d.b.a. Primadonna Resort
& Casino and the Internal Revenue Service (incorporated by reference to
Exhibit 10.12 to the Registration Statement on Form S-1 No. 33-61212
filed by the Registrant).
10.10 Agreement dated May 19, 1993 between RP Racing Enterprises, Inc. and The
Primadonna Corporation (incorporated by reference to Exhibit 10.13 to
the Registration Statement on Form S-1 No. 33-61212 filed by the
Registrant).
10.11 Amended and Restated Ground Lease Agreement dated July 1, 1993 between
Primm South Real Estate Company and The Primadonna Corporation
(incorporated by reference to Exhibit 1 to the Form 10-Q for the quarter
ended September 30, 1993).
10.12 Aircraft Co-Ownership Agreement by and among Gary E. Primm, as Trustee
of the Gary E. Primm Family Trust, and Primadonna Resorts, Inc. dated as
of September 7, 1993 (incorporated by reference to Exhibit 10.12 to the
Form 10-K for the year ended December 31, 1993).
10.13 Reducing Revolving Credit Agreement by and among The Primadonna
Corporation, Primadonna Resorts, Inc. First Interstate Bank of Nevada,
N.A., Bank of America NT&SA, Bank of America Nevada, Midlantic National
Bank, First Security Bank of Utah, N.A., and Michigan National Bank
dated December 28, 1993 (incorporated by reference to Exhibit 10.13 to
the Form 10-K for the year ended December 31, 1993).
10.14 Employment Agreement by and among Gary E. Primm and The Primadonna
Corporation dated as of October 1, 1993 (incorporated by reference to
Exhibit 10.14 to the Form 10-K for the year ended December 31, 1993).
10.15 Consulting Agreement between Mr. Robert E. Armstrong and The Primadonna
Corporation dated November 23, 1993 (incorporated by reference to
Exhibit 10.15 to the Form 10-K for the year ended December 31, 1993).
10.16 Employment Agreement by and among William Paulos and Primadonna Resorts,
Inc. dated January 9, 1994 (sic) (incorporated by reference to Exhibit
10.16 to the Form 10-K for the year ended December 31, 1994).
10.17 Operating Agreement by and between MGM Grand, Inc. ("MGM") and PRMA Las
Vegas, Inc. ("PRMA-LV") dated as of December 26, 1994 (incorporated by
reference to Exhibit 10.17 to the Form 10-K for the year ended December
31, 1994).
10.18 Contribution Agreement with Joint Escrow Instructions by and among PRMA-
LV, MGM and New York-New York Hotel, LLC dated as of December 26, 1994
(incorporated by reference to Exhibit 10.18 to the Form 10-K for the year
ended December 31, 1994).
Page 62
<PAGE>
10.19 Split-Dollar Agreement among Gary Primm, Primadonna Corporation and
Robert E. Armstrong, Trustee of the 1992 Primm Children's Trust U/A
dated December 22, 1992 (the ("Trustee") dated January 19, 1994 (Split-
Dollar Agreement I") (incorporated by reference to Exhibit 10.19 to the
Form 10-K for the year ended December 31, 1994).
10.20 Amendment to Split-Dollar Agreement I among Gary Primm, the Primadonna
Corporation and the Trustee dated June 16, 1994 (incorporated by
reference to Exhibit 10.20 to the Form 10-K for the year ended December
31, 1994).
10.21 Second Amendment to Split-Dollar Agreement I among Gary Primm, the
Primadonna Corporation and the Trustee dated December 15, 1994
(incorporated by reference to Exhibit 10.21 to the Form 10-K for the
year ended December 31, 1994).
10.22 Split-Dollar Agreement among Gary Primm, The Primadonna Corporation and
the Trustee dated January 19, 1994 ("Split-Dollar Agreement II")
(incorporated by reference to Exhibit 10.22 to the Form 10-K for the
year ended December 31, 1994).
10.23 First Amendment to Split-Dollar Agreement II among Gary Primm, the
Primadonna Corporation and the Trustee dated December 15, 1994
(incorporated by reference to Exhibit 10.23 to the Form 10-K for the
year ended December 31, 1994).
10.24 Split-Dollar Agreement among Gary Primm, The Primadonna Corporation and
the Trustee dated February 14, 1994 ("Split-Dollar Agreement III")
(incorporated by reference to Exhibit 10.24 to the Form 10-K for the
year ended December 31, 1994).
10.25 First Amendment to Split-Dollar Agreement III among Gary Primm, the
Primadonna Corporation and the Trustee dated December 15, 1994
(incorporated by reference to Exhibit 10.25 to the Form 10-K for the
year ended December 31, 1994).
10.26 Amended and Restated Reducing Revolving Credit Agreement dated July 17,
1995 by and among Primadonna Resorts, Inc., The Primadonna Corporation,
and PRMA Land Development Company, as "Borrowers", and First Interstate
Bank of Nevada, N.A. as "Agent Bank" for a consortium of seventeen
participating bank listed therein as "Lenders". (incorporated by
reference to Exhibit 10.26 to the Form 10-Q for the quarter ended June
30, 1995).
10.27 First Amendment to Amended and Restated Reducing Revolving Credit
Agreement, dated march 27, 1996 by and among Primadonna Resorts, Inc.,
The Primadonna Corporation, and PRMA Land Development Company as
"Borrowers", and First Interstate Bank, N.A. as "Agent Bank" for a
consortium of seventeen participating banks listed therein as "Lenders"
(incorporated by reference to Exhibit 10.27 to the Form 10-Q for the
quarter ended March 31, 1996).
10.28 Consulting Agreement between Robert E. Armstrong and The Primadonna
Corporation dated September 1, 1996 (incorporated by reference to Ex-
hibit 10.28 to the Form 10-Q for the quarter ended September 30, 1996).
Page 63
<PAGE>
21 Subsidiaries
23 Consent of Independent Public Accounts
24 Power of Attorney (See page 53 hereof)
(b) Reports on Form 8-K
No report on Form 8-K was filed during the three-month period ended
December 31, 1996.
27 Financial Data Schedule
Page 64
<PAGE>
POWER OF ATTORNEY
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 27th, day of
March 1997.
Primadonna Resorts, Inc.
By: /s/ Gary E. Primm
_____________________
Gary E. Primm
Chairman of the Board,
Chief Executive Officer
and Director
Each person whose signature appears below hereby authorizes Gary E. Primm, as
attorney-in-fact to sign on his behalf, individually, and in each capacity
stated below, and to file all amendments and/or supplements to this Annual
Report on Form 10-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.
Signature Title Date
_________ _____ ____
/s/Gary E. Primm Chairman of the Board, Chief March 27, 1997
______________________ Executive Officer and Director
Gary E. Primm
/s/Craig F. Sullivan Chief Financial Officer and March 27, 1997
______________________ Treasurer ( Principal Financial Officer)
Craig F. Sullivan
/s/Michael P. Shaunnessy Vice President - Finance March 27, 1997
______________________ (Principal Accounting Officer)
Michael P. Shaunnessy
/s/Robert E. Armstrong Secretary and Director March 27, 1997
______________________
Robert E. Armstrong
/s/Madison B. Graves II Director March 27, 1997
______________________
Madison B. Graves II
/s/H. Martin Rosa Director March 27, 1997
______________________
H. Martin Rosa
/s/Sigmund Rogich Director March 27, 1997
______________________
Sigmund Rogich
/s/George C. Swarts Director March 27, 1997
______________________
George C. Swarts
Page 65
<PAGE>
Primadonna Resorts, Inc. and Subsidiaries
Exhibit Index
Sequentially
Exhibit Numbered
No. Description Page
_______ _______________________________ ____________
21 Subsidiaries 67
23 Consent of Independent Public Accountants 68
24 Power of Attorney ( see page 65 hereof)
27 Financial Data Schedule 69
Page 66
<PAGE>
Exhibit 21
Primadonna Resorts, Inc. and Subsidiaries
The Primadonna Corporation, a Nevada corporation
PRMA Land Development Company, a Nevada corporation
PRMA Las Vegas, Inc., a Nevada corporation
Page 67
<PAGE>
Consent of Independent Accountants
As independent public accountants, we hereby consent to incorporation of our
report dated January 29, 1997 included in this Annual Report on Form 10-K, into
Primadonna Resorts, Inc. and Subsidiaries previously filed Registration
Statements on Form S-8 (File No. 33-70842) and Form S-8 (File No. 33-70844).
/s/Arthur Andersen LLP
____________________
Arthur Andersen LLP
Las Vegas, Nevada
March 27, 1997
Page 68
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ANNUAL FORM
10-K AS OF DECEMBER 31, 1996, CONSOLIDATED FINANCIAL STATEMENTS, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 10027
<SECURITIES> 0
<RECEIVABLES> 1170
<ALLOWANCES> 0
<INVENTORY> 2713
<CURRENT-ASSETS> 19921
<PP&E> 417098
<DEPRECIATION> 116183
<TOTAL-ASSETS> 399971
<CURRENT-LIABILITIES> 17383
<BONDS> 168200
0
0
<COMMON> 308
<OTHER-SE> 214003
<TOTAL-LIABILITY-AND-EQUITY> 399971
<SALES> 249013
<TOTAL-REVENUES> 234935
<CGS> 112504
<TOTAL-COSTS> 203923
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4923
<INCOME-PRETAX> 26089
<INCOME-TAX> 9321
<INCOME-CONTINUING> 16768
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16768
<EPS-PRIMARY> .55
<EPS-DILUTED> .55
</TABLE>
