<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_________________to___________________
Commission file number 0-21732
PRIMADONNA RESORTS, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0297563
(State or other jurisdiction of (IRS employer identification
incorporation or organization) number)
P.O. Box 95997 , Las Vegas, Nevada 89193-5997
(address of principal executive offices)
(702) 382 - 1212
(Registrant's telephone number, including area code)
__________________________________________________
(Former name, former address and former fiscal year,
if change since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 31, 1997
Common Stock, $.01 par value 28,854,000 Shares
Total No. of Pages 23 Exhibit Index on page 22
1
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PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
Form 10 - Q
INDEX
Page No.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets at September 30, 1997
(Unaudited) and December 31, 1996..................... 3 - 4
Consolidated Statements of Income (Unaudited) for the
Three and Nine Months Ended September 30, 1997 and 1996 5 - 6
Consolidated Statements of Cash Flows (Unaudited) for
the Nine Months Ended September 30, 1997 and 1996. ... 7 - 8
Notes to Consolidated Financial Statements (Unaudited)... 9 - 15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 16 - 20
Part II. OTHER INFORMATION 20
2
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PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Amounts in Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
_________ ___________
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,574 $ 10,027
Accounts and notes receivable 652 1,170
Income tax refund receivable - 221
Inventories 2,770 2,713
Prepaid expenses and other 6,993 5,790
________ ________
Total current assets 17,989 19,921
________ ________
PROPERTY AND EQUIPMENT:
Buildings and improvements 205,294 187,756
Land improvements 95,296 90,950
Furniture, fixtures and equipment 143,026 130,169
________ ________
443,616 408,875
Less: accumulated depreciation
and amortization (136,875) (116,183)
________ ________
306,741 292,692
Land 5,574 4,274
Construction in progress 17,442 3,949
________ ________
329,757 300,915
________ ________
INVESTMENT IN JOINT VENTURE 97,870 68,593
________ _______
NOTES RECEIVABLE, net of current portion 2,790 2,926
________ ________
OTHER ASSETS 8,138 7,616
________ ________
$456,544 $399,971
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Amounts in Thousands Except Share Data)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
_________ __________
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts and construction payables $13,537 $ 5,599
Accrued expenses 8,678 10,684
Current portion of long-term debt 1,639 1,100
________ ________
Total current liabilities 23,854 17,383
________ ________
LONG-TERM DEBT 211,099 168,200
________ ________
DEFERRED INCOME TAXES PAYABLE 14,653 13,370
________ ________
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;
28,854,000 and 30,002,975 shares
issued and outstanding in 1997
and 1996, respectively 309 308
Additional paid - in capital 128,752 128,236
Retained earnings 113,539 85,767
Less: treasury stock, at cost (35,662) (13,293)
________ ________
206,938 201,018
________ ________
$456,544 $399,971
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands Except Share Data)
<TABLE>
<CAPTION>
Three Months Ended September 30,
____________________________
1997 1996
_________ ___________
(Unaudited)
<S> <C> <C>
REVENUES:
Casino $ 41,964 $ 43,338
Food and beverage 8,007 7,917
Hotel 5,438 5,969
Entertainment 3,894 3,605
Service station 4,597 3,812
Other 1,969 1,672
Operating income from New York-New York 12,999 -
________ ________
78,868 66,313
Less: promotional allowances (5,057) (3,362)
________ ________
Net revenues 73,811 62,951
________ ________
COSTS AND EXPENSES:
Casino 14,648 12,958
Food and beverage 7,206 7,156
Hotel 2,552 3,003
Entertainment 2,152 1,468
Service station 4,086 3,443
Other 714 703
Selling, general and administrative 11,846 10,593
Property costs 5,494 5,183
Depreciation and amortization 7,244 6,882
________ ________
55,942 51,389
________ ________
Income from operations 17,869 11,562
OTHER INCOME (EXPENSE)
Interest expense, net (3,352) (943)
Interest expense, net from New York-New York (2,511) -
________ ________
Income before taxes 12,006 10,619
INCOME TAX PROVISION 4,299 3,827
________ ________
NET INCOME $ 7,707 $ 6,792
======== ========
Earnings per share $0.27 $0.22
======== ========
Weighted average number of shares of
common stock outstanding 29,030,241 30,656,529
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands Except Share Data)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
____________________________
1997 1996
_________ ___________
(Unaudited)
<S> <C> <C>
REVENUES:
Casino $124,770 $130,684
Food and beverage 22,821 22,725
Hotel 16,374 17,940
Entertainment 10,155 9,104
Service station 12,557 11,605
Other 5,338 5,030
Operating income from New York-New York 42,416 -
________ ________
234,431 197,088
Less: promotional allowances (13,498) (10,282)
________ ________
Net revenues 220,933 186,806
________ ________
COSTS AND EXPENSES:
Casino 41,274 38,811
Food and beverage 20,159 20,577
Hotel 7,922 8,471
Entertainment 5,516 4,041
Service station 11,375 10,685
Other 2,041 2,135
Selling, general and administrative 35,087 31,326
Property costs 14,215 13,758
Depreciation and amortization 21,483 20,433
________ ________
159,072 150,237
________ ________
Income from operations 61,861 36,569
OTHER INCOME (EXPENSE)
Interest expense, net (9,579) (3,645)
Interest expense, net from New York-New York (7,519) -
________ ________
Income before taxes 44,763 32,924
INCOME TAX PROVISION 16,027 11,725
________ ________
Income before extraordinary item: 28,736 21,199
EXTRAORDINARY ITEM-loss on early retirement
of debt, net of income tax benefit 964 -
________ ________
NET INCOME $ 27,772 $ 21,199
======== ========
Earnings per share before extraordinary item $0.97 $0.69
extraordinary item ($0.03) -
net income $0.94 $0.69
======== ========
Weighted average number of shares of
common stock outstanding 29,569,380 30,667,955
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
____________________________
1997 1996
_________ __________
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 27,772 $ 21,199
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 21,483 20,433
Amortization of debt issuance costs 202 319
Equity income from New York-New York
in excess of distributions (22,277) -
Increase in life insurance cash
surrender value (366) (271)
Gain on sale of assets (75) (286)
Deferred income taxes 1,554 1,298
Extraordinary loss 1,483 -
Change in current assets and liabilities
due to operating activities:
Decrease in accounts and
notes receivable 518 864
Decrease in income tax refund receivable 221 994
(Increase) decrease in inventories (57) 6
(Increase) decrease in prepaid
expenses and other (1,474) (96)
Increase (decrease) in accounts
and construction payables 7,938 (1,183)
Increase (decrease) in accrued expenses (2,006) 1,891
________ ________
Total adjustments 7,144 23,969
________ ________
Net cash provided by operating activities 34,916 45,168
________ ________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (49,950) (27,962)
Investment in joint venture (7,000) (13,130)
Increase in other assets (1,871) (3,979)
Proceeds from disposal of other assets 275 364
________ ________
Net cash used in investing activities (58,546) (44,707)
________ ________
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
____________________________
1997 1996
_________ __________
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from exercise of
stock options $ 517 $ 947
Purchase of treasury stock (22,369) (6,999)
Proceeds from issuance of long-term debt 328,300 32,001
Principal payments of long-term debt (285,271) (27,404)
________ ________
Net cash provided by (used in)
financing activities 21,177 (1,455)
________ ________
Net decrease in cash and
cash equivalents (2,453) (994)
Cash and cash equivalents, beginning of year 10,027 9,148
________ ________
Cash and cash equivalents, end of period $ 7,574 $ 8,154
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
PRIMADONNA RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organizational Structure and Basis of Presentation
The consolidated financial statements of Primadonna Resorts, Inc., a Nevada
corporation, include the accounts of its wholly-owned subsidiaries, The
Primadonna Corporation, PRMA Land Development Company, and PRMA Las Vegas, Inc.
(collectively the "Company"). The Company owns and operates three hotel-
resort/casinos; Whiskey Pete's Hotel & Casino ("Whiskey Pete's"), Primm Valley
Resort & Casino ("Primm Valley"), and Buffalo Bill's Resort & Casino ("Buffalo
Bill's"). The Company owns and operates the Primm Valley Golf Club in
California, and has a 50% investment in a joint venture with MGM Grand, Inc.,
which owns and operates the NEW YORK-NEW YORK Hotel & Casino
("NEW YORK-NEW YORK"). Investments in unconsolidated affiliates which are 50%
or less owned are accounted for under the equity method.
Information as of December 31, 1996, included in the accompanying consolidated
financial statements and the notes thereto, has been audited. Information with
respect to the three and nine month periods ended September 30, 1997 and 1996,
included in these consolidated financial statements and notes thereto, is
unaudited. These unaudited consolidated financial statements have been prepared
in accordance with the rules and regulations of the Securities and Exchange
Commission, and do not contain all of the information and disclosures required
by generally accepted accounting principles. However, the accompanying
unaudited consolidated financial statements do contain all adjustments which,
in the opinion of management, are necessary to fairly present the financial
position and results of operations for the three and nine month periods
presented. Interim results are not necessarily indicative of results to be
expected for any future interim period or for the entire fiscal year.
The accompanying consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses.
Actual results may differ from those estimates. Significant intercompany and
interdivision accounts and transactions have been eliminated.
9
<PAGE>
2. Statements of Cash Flows
The following supplemental disclosures are provided as part of the
accompanying consolidated statements of cash flows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
________________________
1997 1996
_____ _____
(In thousands)
<S> <C> <C>
Cash payments made for interest
(net of amounts capitalized) $ 9,918 $ 4,173
======== ========
Cash payments made for income taxes $ 14,200 $ 7,200
======== ========
Capitalized lease obligation $ 383 $ -
======== ========
</TABLE>
3. 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. The hotel/
casino opened on January 3, 1997. The Company holds a 50% interest in the joint
venture. The Company has contributed cash of $69.5 million and certain rights
to the New York theme acquired from a third party licensor. MGM has contributed
land (valued at $41.2 million) on which the property is located and cash of
$29.5 million. The joint venture has secured limited recourse bank financing of
$285 million, and term loan financing of $20 million. The joint venture
partners have executed Keep-Well Agreements in conjunction with the bank
financing. Should NEW YORK-NEW YORK fail to meet certain minimum financial
ratios, then the partners would be required to make additional equity
contributions, to the extent needed, to bring the ratios into compliance.
Summary condensed financial information for the joint venture is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1997
__________________ ________________
(In thousands)
<S> <C> <C>
Net revenues $ 61,709 $196,978
Operating income 25,999 84,833
Interest expense, net 5,023 15,039
Net income 20,976 69,794
Total assets $472,016 $472,016
Long-term debt 236,193 236,193
Member equity 170,217 170,217
</TABLE>
10
<PAGE>
4. Long-Term Debt
On June 5, 1997, the Company entered into a Credit Agreement ("Agreement") with
a sixteen bank consortium led by Wells Fargo Bank as agent, for a $250,000,000
revolving loan. This loan replaces the prior Reducing Revolving Bank Credit
Agreement. As of September 30, 1997, the Company had an outstanding balance of
$210,900,000 under the Agreement. The Agreement provides that the Company may,
upon certain conditions, increase the maximum permitted balance to
$350,000,000. The Agreement has no scheduled reductions, and expires on June 5,
2002.
The Agreement provides for interest payments at least quarterly, at the prime
rate or LIBOR plus a sliding margin, based upon the Company's debt to earnings
before interest, taxes, depreciation and amortization ("EBITDA") ratio. The
margin for prime rate ranges between 0% and 1.125%, while the margin for LIBOR
ranges between 0.50% and 2.375%. The weighted average interest rate at
September 30, 1997 was 7.2%. The Company incurs commitment fees of .20% to .50%
for the unused portion of the Agreement, depending upon the debt to EBITDA
ratio achieved by the Company. The obligation is secured by substantially all
real property, leasehold interests in real property, and personal property of
the Company, excluding the Primm Valley Golf Club. 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 and investments, and maintenance of certain minimum financial
ratios.
As of June 5, 1997, the Company terminated its prior Reducing Revolving Bank
Credit Agreement. As a result of this early termination, the Company recorded
an extraordinary charge of $964,000 net of taxes, related to the write off of
unamortized debt issuance costs.
The Company incurred a liability in connection with the acquisition of the
NEW YORK-NEW YORK theme rights of $1,100,000, due January 6, 1997, and
$400,000 due January 7, 1998. At September 30, 1997, the $1,500,000 due for the
theme rights is reflected as a current obligation. In accordance with the terms
of the theme rights agreement, the payment of $1,100,000 is being withheld
pending the determination of indemnity obligations.
11
<PAGE>
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
_________ __________
(Unaudited)
(In thousands)
<S> <C> <C>
Credit Agreement $250,000,000, June 5, 1997,
5 year term, LIBOR plus applicable margin $210,900 $ -
Reducing Revolving Bank Credit Agreement,
Amended March 27, 1996, Terminated June 5,
1997, LIBOR plus applicable margin - 167,800
NEW YORK-NEW YORK theme rights due January
6, 1997 and January 7, 1998, no interest 1,500 1,500
Other 338 -
________ ________
212,738 169,300
Less: current portion 1,639 1,100
________ ________
Total long-term debt $211,099 $168,200
======== ========
</TABLE>
12
<PAGE>
5. Earnings Per Share
The Company will adopt Statement of Financial Accounting Standards ("SFAS")
No. 128- "Earnings per Share", effective for fiscal years ending after December
15, 1997. Pro forma earnings per share under SFAS No. 128 are as follows:
<TABLE>
<CAPTION>
Three Months Ended September 30,
1997 1996
__________________________ __________________________
Income Shares Per-Share Income Shares Per-Share
Amount Amount
__________________________ __________________________
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Income before
extraordinary item $ 7,707 28,917,789 $ .27 $ 6,792 30,484,297 $ .22
Extraordinary item - - - - - -
_______ ___________ ____ _______ _________ ______
Net income available
to common shareholders $ 7,707 28,917,789 $ .27 $ 6,792 30,484,297 $ .22
_______ ___________ ____ _______ _________ ______
Diluted EPS:
Income before
extraordinary item $ 7,707 28,917,789 $ .27 $ 6,792 30,484,297 $ .22
Effect of Dilutive
Securities Stock option 112,452 - 172,232 -
_______ ___________ ____ _______ _________ ______
Income before
extraordinary item 7,707 29,030,241 .27 6,792 30,656,529 .22
Extraordinary item - - - - -
_______ ___________ ____ _______ _________ ______
Net income available
to common shareholders
and assumed conversion $ 7,707 29,030,241 $ .27 $ 6,792 30,656,529 $ .22
======= ========== ===== ======= ========== =====
</TABLE>
Options to purchase 788,000 and 398,000 shares of common stock at September 30,
1997 and 1996, respectively at prices of $18.75-$31.25 and $19.50-$31.25,
respectively, were outstanding during the period but not included in the
computation of diluted earnings per share because their exercise price was in
excess of the average market price of the common shares for the periods
presented.
13
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
__________________________ __________________________
Income Shares Per-Share Income Shares Per-Share
Amount Amount
__________________________ __________________________
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Income before
extraordinary item $28,736 29,420,056 $ .98 $21,199 30,522,818 $ .69
Extraordinary item (964) - ( .03) - - -
_______ ___________ ____ _______ _________ ______
Net income available
to common shareholders $27,772 29,420,056 $ .95 $21,199 30,522,818 $ .69
_______ ___________ ____ _______ _________ ______
Diluted EPS:
Income before
extraordinary item $28,736 29,420,056 $ .98 $21,199 30,522,818 $ .69
Effect of Dilutive
Securities Stock option 149,324 ( .01) 145,137 -
_______ ___________ ____ _______ _________ ______
Income before
extraordinary item 28,736 29,569,380 .97 21,199 30,667,955 .69
Extraordinary item (964) - ( .03) - - -
_______ ___________ ____ _______ _________ ______
Net income available
to common shareholders
and assumed conversion $27,772 29,569,380 $ .94 $21,199 30,667,955 $ .69
======= ========== ===== ======= ========== =====
</TABLE>
Options to purchase 334,000 and 398,000 shares of common stock at September 30,
1997 and 1996, respectively at prices of $21.75-$31.25 and $19.50-$31.25,
respectively, were outstanding during the period but not included in the
computation of diluted earnings per share because their exercise price was in
excess of the average market price of the common shares for the periods
presented.
6. Commitments and Contingencies
a. Southwest Investment
On January 16, 1995, the Company and Southwest Casino & Hotel Corp.
("Southwest") entered into an agreement to fund the construction of a casino
for the Kickapoo Traditional Tribe of Texas in Eagle Pass, Texas, which began
operation in August 1996. The Company has invested in Southwest in the form of
14
<PAGE>
a $1.6 million Convertible Term Promissory Note, which has been fully reserved
including $252,000 of interest due. Additionally the Company has made a $2.2
million Demand Promissory Note to Southwest. At September 30, 1997 and 1996,
the amounts advanced, including accrued interest, were $2.4 million and $2.1
million, respectively. Southwest has not made payments on the Demand Promissory
Note since December 1996. The Demand Promissory Note is secured by the
management contract on the Kickapoo gaming facility.
Southwest was required to post a letter of credit for $800,000 in favor
of the Kickapoo Tribe, which the Company posted on behalf of Southwest.
Southwest reimbursed the Company for the costs incurred. As of August 10,
1997 the letter of credit expired.
c. Litigation
Currently, there are lawsuits pending against the Company arising in the normal
course of business. In management's opinion, the ultimate outcome of these
matters will not have a material adverse effect on the results of operations or
the financial position of the Company.
15
<PAGE>
Item 2, Management's Discussion and Analysis of Financial Condition and Results
of Operations (Unaudited)
SUMMARY OF OPERATIONS
For the third quarter of 1997, net income increased 13% to $7.7 million, or
$.27 per share, compared to $6.8 million, or $.22 per share in the prior year
period. For the nine month period ended September 30, 1997, net income before
extraordinary items, increased to $28.7 million, or $.97 per share from $21.2
million, or $.69 per share in the prior year period.
These increases, as well as the substantial increases in operating income, were
attributable to the Company's 50% share of earnings from NEW YORK-NEW YORK,
which more than offset significant declines during the respective periods in
the Company's operations at Primm, Nevada. The gaming and hotel capacity
increases in the Las Vegas market and the ongoing construction disruptions at
Primm Valley, continue to impact operations at Primm. The Company increased
marketing and promotional costs in both the three and nine month periods in
response to these pressures. The declining revenues at Primm coupled with these
increased costs, have caused operating income at Primm to decline by $6.7
million and $17.1 million for the respective three and nine month periods.
An extraordinary charge of $1.0 million (net of taxes), or $.03 per share, was
recorded in the second quarter of 1997, resulting from the early termination of
the Company's prior bank credit facility.
REVENUES
Net revenues for the third quarter increased 17% to $73.8 million, and for the
nine months ended September 30, 1997, net revenues increased 18% to $220.9
million. These increases are due to the Company's 50% share of earnings from
NEW YORK-NEW YORK, which offset 3% and 4% declines in net revenues from the
operations at Primm, Nevada, during each of the respective periods.
For the three month period, casino business volume was down approximately 1%
from the prior year, and combined with lower win percentages, casino revenue
declined $1.4 million, or 3%. For the nine month period, casino business
volume was down approximately 2%, and combined with the lower win percentages,
casino revenue declined $5.9 million, or 5%.
Food and beverage revenue was up slightly in both periods, however, increases
in promotional allowances offset cash revenue declines of $.3 million and $.8
million in the respective three and nine month periods.
Hotel revenue declined $.5 million, or 9%, for the three month period, and $1.6
million, also 9%, for the nine month period. The number of occupied rooms
increased 1% for the three month period, and 4% for the nine month period,
primarily due to increased promotional allowances. However, the overall average
daily rates declined 9% and 13%, respectively, primarily due to price
reductions, but also from a greater proportion of occupied rooms being at the
lower midweek rate.
16
<PAGE>
Entertainment revenue increased $.3 million, or 8%, for the three month period
and $1.1 million, or 12%, for the nine month period, primarily due to revenues
from Primm Valley Golf Club of $.4 million and $.9 million, respectively. A
stronger headliner schedule in the Star of the Desert Arena contributed $.1
million and $.4 million in increased revenue, for the respective periods.
Revenues from the arcades and amusement rides were down approximately $.1
million in both the three and nine month periods, despite increases in
promotional allowances of $.3 million for the three month period and $1.1
million for the nine month period.
Service station revenues rose $.8 million for the three month period, and
increased $1.0 million for the nine month period. The increase for the three
month period is primarily due to a 32% increase in gallons sold, offset by a
10% decrease in prices. The majority of the volume increase was due to diesel
sales. During the prior year period one of the service stations was undergoing
remodeling which impacted diesel sales volume. For the nine month period, the
number of gallons sold increased 12%, while prices declined 4%.
Operating income from NEW YORK-NEW YORK contributed $13.0 million and $42.4
million to the three and nine month periods, respectively. These amounts
reflect the Company's share of the pre-interest, pre-tax earnings of the
property.
COSTS AND EXPENSES
Casino expenses increased $1.7 million for the three month period and $2.5 for
the nine month period. These increases are primarily due to increases in
promotional allowances of $1.8 million and $3.2 million, respectively, the
costs of which are charged to casino expense. This was partially offset by a
slight decline in gaming taxes attributable to the reduced casino revenue.
During the third quarter, the Company enhanced its buffet offering to include
seafood, which caused an increase in the cost of sales. This increase was
offset by the increased promotional allowance cost transfer. For the nine month
period, food and beverage costs decreased $.4 million due to an increase in the
promotional cost transfer and lower cash revenues, which were partially offset
by the food cost increase experienced in the third quarter.
Hotel expenses decreased $.5 million for both the third quarter and the nine
month period, despite the increase in occupied rooms. This is primarily due to
an increase in the amount of hotel costs transferred to casino expense to
reflect the costs associated with the increased promotional room allowances.
Entertainment costs increased $.7 million for the three month period, and $1.5
million for the nine month period. The operating expenses of the Primm Valley
Golf Club, which opened in February, were $.7 million and $1.8 million,
respectively. Amusement costs increased $.2 million in the three and nine month
periods. Arena costs for the nine month period are up $.3 million due primarily
to headliner entertainer costs. These costs are partially offset by an increase
in the costs transferred to the casino for promotional allowances.
Service station costs increased $.6 million for the three month period, and $.7
million for the nine month period. The increase in the three month period was
primarily due to the 32% increase in gallons sold, offset by a 9% decrease in
product cost. For the nine month period, product costs decreased 4% while
gallons sold increased 12%.
17
<PAGE>
Selling, general and administrative expenses increased $1.3 million and $3.8
million for the respective three and nine month periods. The increases are
primarily due to increased marketing and advertising of $1.2 million and $2.9
million, respectively. Additionally, increases in overhead payroll costs and
development costs contributed to the increase.
Depreciation and amortization increases for the periods are primarily the
result of the new Primm Valley Golf Club, and the refurbishment of the
Primm Valley Resort & Casino, including the conference center.
INTEREST EXPENSE
Interest expense, net, increased to $3.4 million from $.9 million for the
three month period and to $9.6 million from $3.6 million for the nine month
period. An increase in outstanding debt contributed an additional $1.1 million
and $3.1 million in the respective periods. During the prior year three and
nine month periods, the Company capitalized $1.1 million and $3.1 million of
interest related to the investment in NEW YORK-NEW YORK. Since the facility is
completed, there is no related capitalization in the current year periods.
Additionally, capitalized interest on other construction projects declined by
$.2 million and $.4 million for the respective three and nine month periods.
Interest expense, net, from NEW YORK-NEW YORK is the Company's 50% share of the
interest expense recorded by the joint venture for the respective periods.
INCOME TAXES
The provision for income taxes increased by $.5 million and $4.3 million for
the respective three and nine month periods, primarily as a result of an
increase in earnings before taxes. The Company's effective tax rate was
approximately 35.8% in both the three month and nine month periods compared to
36.0% and 35.6, respectively in the prior year.
EXTRAORDINARY ITEM
In the second quarter of 1997, the Company recorded an extraordinary charge of
$1.0 million, net of a $.5 million tax benefit, related to the write off of the
unamortized loan costs associated with the early retirement of its former bank
credit facility.
LIQUIDITY AND CAPITAL RESOURCES
The Company held cash and cash equivalents of $7.6 million as of September 30,
1997. Net cash provided by operations for the nine months ended September 30,
1997 was $34.9 million as compared to $45.2 million in the prior year. This
decline is primarily due to substantially reduced results at the Primm, Nevada
operations.
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 equity investment in NEW YORK-NEW YORK, which can not
be fully funded out of operating cash flows.
On June 5, 1997 Company entered into a $250 million, Credit Facility, which may
be increased to $350 million. (See Note 4). The Company is currently in the
process of increasing the Credit Facility by approximately $40-$60 million.
18
<PAGE>
In November 1996, the Board of Directors expanded the stock repurchase program
authorizing the Company to acquire up to $50.0 million worth of its outstanding
shares. The Company has acquired an aggregate of 2,014,500 shares at a cost of
$35.7 million as of September 30, 1997.
The Company is constructing a second golf course at the Primm Valley Golf Club,
with expected completion by the end of 1997. The club house was completed and
opened in July 1997.
The Company has expanded and upgraded the Primm Valley Resort & Casino, to
include an additional 15,000 square feet of casino space and a 21,400 square
foot conference center. The bars, some restaurants and buffet have been
renovated to include design elements to reinforce the golf and resort theme.
The conference center and most public areas were completed in the third
quarter. The Company also constructed a new parking garage at Primm Valley
which opened in early October. By mid-1998, the Primm Valley casino will be
expanded by another 15,000 square feet to connect directly to the Fashion
Outlet of Las Vegas, the highly themed, upscale factory outlet mall discussed
below.
Sheldon Gordon and Randy Brant, developers of the Forum shops at Caesars
Palace, along with the TrizecHahn centers, are developing, in two phases, up to
a one million square foot themed shopping facility on 100 acres of land owned
by Primm 650 Limited Partnership and adjacent to the Primm Valley Resort &
Casino. The Company expects to incur approximately $1.5 million of
infrastructure costs to accommodate the Fashion Outlet of Las Vegas
development. The facility is being built and financed by the developers, with
the first phase of approximately 600,000 square feet under construction, and
completion is expected by the fall of 1998.
Southwest was required to post a letter of credit for $800,000 in favor
of the Kickapoo Tribe, which the Company posted on behalf of Southwest.
Southwest reimbursed the Company for the costs incurred. As of August 10,
1997 the letter of credit expired.
Capital expenditures through September 30, 1997 were $57.0 million, compared to
$41.0 million in 1996. Of the $57.0 million, $14.8 million was for the second
golf course, $7.0 million for a NEW YORK-NEW YORK investment, $28.6 million for
the Primm Valley expansions and upgrades, $2.0 million for the expanded and
upgraded monorail, and $4.6 million for the maintenance of existing facilities.
For the balance of the year, capital requirements are expected to include $5.0
million for the Primm Valley expansion and upgrade, $2.5 million for the second
golf course and academy, $3.5 million for the monorail, and $5.4 million for
the maintenance of existing facilities.
The Company believes that its current cash flow, coupled with its credit
facility, provide the resources and flexibility to meet existing obligations
and to fund its commitments on the projects discussed above. The Company
19
<PAGE>
continues to 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.
FORWARD LOOKING INFORMATION
Information contained in this Form 10-Q contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995,
which can be identified by the use of forward-looking terminology such as
"believes", "should", "may," "expect", "will", "exploring", or "continue," or
the negative thereof, or other variations thereon, or comparable terminology.
As with any construction projects, the Primadonna expansion and upgrade, the
golf course and golf academy, and the outlet mall, involve many risks and
uncertainties, including but not limited to material and labor shortages, work
stoppages, design changes, and weather. Further, engineering, environmental, or
geological problems and governmental regulations and approvals could give rise
to delays or cost overruns. For additional factors which could cause forward
looking statements to be materially different than actual results, see
"Business Risks" section of Annual Report Form 10-K at December 31, 1996.
PART II. OTHER INFORMATION
Items 1 through 5. Are not applicable.
Item 6. Exhibits and Reports on Form 8 - K.
(a) Exhibits.
4.3 Form of Combination Employee Incentive and Nonqualified Stock
Option Agreement, previously filed as Exhibit 4.3 of the
Registration Statement on Form S - 8 filed by the Company with the
Commission on August 11, 1997 and incorporated herein by reference.
27. Financial Data Schedule as of September 30, 1997.
See exhibit index on page 22 for exhibits filed with this report
(b) Reports on Form 8 - K. No report of Form 8 - K was filed during the
quarter for which this report is filed.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the under-
signed thereunto duly authorized.
PRIMADONNA RESORTS, INC.
________________________
(Registrant)
Date: October 31, 1997 By /s/Michael P. Shaunnessy
__________________________
Michael P. Shaunnessy
Chief Accounting Officer
21
<PAGE>
EXHIBIT INDEX
Exhibit Sequentially
No. Description Numbered
Pages
_______ ___________________________________________ ____________
27 Financial Data Schedule as of September 30, 1997 23
22
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This schedule contains summary financial information extracted from quarterly
Form 10-Q as of September 30, 1997, and Annual Report Form 10-K as of December
31, 1996, Consolidated Financial Statements, and is qualified in its entirety
by reference to such financial statements.
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