FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the period ended March 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
Commission file number: 33-65438
BALLY'S CASINO HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3886977
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8700 West Bryn Mawr Avenue, Chicago, Illinois 60631
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 399-1300
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes: X No:
As of April 30, 1996, all 100 outstanding shares of the registrant's common
stock were held by an indirect wholly owned subsidiary of Bally Entertainment
Corporation.
The registrant meets the conditions set forth in General Instruction H (1) (a)
and (b) of Form 10-Q and is therefore filing this form with the reduced
disclosure format.
<PAGE>
BALLY'S CASINO HOLDINGS, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY ENTERTAINMENT CORPORATION)
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial statements:
Condensed consolidated balance sheet (unaudited)
March 31, 1996 and December 31, 1995.......................... 1
Condensed consolidated statement of income (unaudited)
Three months ended March 31, 1996 and 1995.................... 2
Consolidated statement of stockholder's equity (unaudited)
Three months ended March 31, 1996............................. 3
Consolidated statement of cash flows (unaudited)
Three months ended March 31, 1996 and 1995.................... 4 - 5
Notes to condensed consolidated financial statements
(unaudited)................................................... 6 - 8
Item 2. Management's discussion and analysis of results
of operations.......................................... 9 - 12
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K.......................... 13
SIGNATURE PAGE....................................................... 14
<PAGE>
<TABLE>
BALLY'S CASINO HOLDINGS, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY ENTERTAINMENT CORPORATION)
CONDENSED COLSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
<CAPTION>
March 31 December 31
1996 1995
---------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents............................ $ 129,195 $ 111,297
Marketable securities, at fair value............ 2,281 1,781
Receivables, less allowances of $8,201
and $7,422.................................... 25,862 19,530
Inventories..................................... 5,822 5,960
Deferred income taxes........................... 15,177 15,897
Other current assets............................ 10,761 7,312
---------- ----------
Total current assets.......................... 189,098 161,777
Property and equipment, less accumulated
depreciation of $404,671 and $389,594........... 980,474 986,002
Intangible assets, less accumulated
amortization of $3,036 and $2,549............... 29,620 27,565
Other assets...................................... 70,799 73,676
---------- ----------
$1,269,991 $1,249,020
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Payable to Bally Entertainment Corporation...... $ 56,695 $ 42,711
Accounts payable................................ 11,244 18,441
Income taxes payable............................ 13,893 5,563
Accrued liabilities............................. 74,024 80,872
Current maturities of long-term debt............ 5,866 5,720
---------- ----------
Total current liabilities..................... 161,722 153,307
Long-term debt, less current maturities........... 921,421 918,940
Deferred income taxes............................. 92,631 94,174
Other liabilities................................. 11,723 11,330
Minority interests................................ 24,725 25,941
Stockholder's equity.............................. 57,769 45,328
---------- ----------
$1,269,991 $1,249,020
========== ==========
<FN>
See accompanying notes.
</FN>
</TABLE>
1
<PAGE>
<TABLE>
BALLY'S CASINO HOLDINGS, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY ENTERTAINMENT CORPORATION)
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands)
(Unaudited)
<CAPTION>
Three months
ended March 31
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Revenues............................................ $ 219,930 $ 166,144
Costs and expenses:
Cost of operations................................ 128,702 100,673
Selling, general and administrative............... 22,988 16,950
Gaming development costs, including
amortization of pre-opening costs of
$1,961 in 1996.................................. 2,530 443
Allocations from Bally Entertainment
Corporation..................................... 3,275 3,527
Depreciation and amortization..................... 16,328 13,010
---------- ----------
173,823 134,603
---------- ----------
Operating income.................................... 46,107 31,541
Gain (loss) on sales of marketable securities....... (50) 103
Interest expense.................................... (24,064) (22,359)
---------- ----------
Income before income taxes, minority interests
and extraordinary item............................ 21,993 9,285
Income tax provision................................ (7,871) (4,314)
Minority interests.................................. (1,950) (1,234)
---------- ----------
Income before extraordinary item.................... 12,172 3,737
Extraordinary gain on extinguishment of debt........ 326
---------- ----------
Net income.......................................... $ 12,172 $ 4,063
========== ==========
<FN>
See accompanying notes.
</FN>
</TABLE>
2
<PAGE>
<TABLE>
BALLY'S CASINO HOLDINGS, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY ENTERTAINMENT CORPORATION)
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(In thousands)
(Unaudited)
<CAPTION>
Retained
Addi- earnings Total
tional (accum- stock-
paid-in ulated holder's
capital deficit) equity
-------- -------- --------
<S> <C> <C> <C>
Balance at December 31, 1995............... $ 48,983 $ (3,655) $ 45,328
Net income............................... 12,172 12,172
Change in unrealized gain/loss on
available-for-sale securities.......... 269 269
-------- -------- --------
Balance at March 31, 1996.................. $ 48,983 $ 8,786 $ 57,769
======== ======== ========
<FN>
See accompanying notes.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
BALLY'S CASINO HOLDINGS, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY ENTERTAINMENT CORPORATION)
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Three months
ended March 31
----------------------
1996 1995
---------- ----------
<S> <C> <C>
OPERATING:
Income before extraordinary item................... $ 12,172 $ 3,737
Adjustments to reconcile to cash provided--
Depreciation and amortization (including
pre-opening costs).............................. 18,289 13,010
Interest accretion on discount notes and other
amortization included in interest expense....... 4,850 4,596
Minority interests................................ 1,950 1,234
Provision for doubtful receivables................ 1,012 947
Deferred income taxes............................. (998) 554
Change in operating assets and liabilities........ (11,697) (4,667)
Other, net........................................ 160 (389)
---------- ----------
Cash provided by operating activities.......... 25,738 19,022
INVESTING:
Purchases and construction of property and
equipment........................................ (15,108) (29,563)
Acquisitions of Bally's Grand, Inc. common stock... (6,995) (7,432)
Purchases of marketable securities................. (3,353)
Net proceeds from sales of marketable securities... 2,434
Other, net......................................... 2,445 (2,870)
---------- ----------
Cash used in investing activities.............. (19,658) (40,784)
FINANCING:
Debt transactions--
Increase in payable to Bally Entertainment
Corporation..................................... 13,984 3,143
Proceeds from construction loan................... 10,184
Repayments of long-term debt...................... (1,383) (6,516)
Debt issuance costs............................... (783)
---------- ----------
Cash provided by debt transactions............. 11,818 6,811
Equity transactions--
Dividend paid..................................... (2,000)
---------- ----------
Cash provided by financing activities.......... 11,818 4,811
---------- ----------
Increase (decrease) in cash and equivalents......... 17,898 (16,951)
Cash and equivalents, beginning of period........... 111,297 139,729
---------- ----------
Cash and equivalents, end of period................. $ 129,195 $ 122,778
========== ==========
<FN>
(continued)
</FN>
</TABLE>
4
<PAGE>
<TABLE>
BALLY'S CASINO HOLDINGS, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY ENTERTAINMENT CORPORATION)
CONSOLIDATED STATEMENT OF CASH FLOWS--(CONTINUED)
(In thousands)
(Unaudited)
<CAPTION>
Three months
ended March 31
----------------------
1996 1995
---------- ----------
<S> <C> <C>
SUPPLEMENTAL CASH FLOWS INFORMATION:
Changes in operating assets and
liabilities were as follows:
Increase in receivables....................... $ (7,344) $ (311)
Decrease in income taxes receivable........... 3,011
(Increase) decrease in inventories, other
current assets and other assets............. (4,081) 7,006
Decrease in accounts payable, accrued
liabilities and other liabilities........... (8,602) (14,373)
Increase in income taxes payable.............. 8,330
---------- ----------
$ (11,697) $ (4,667)
========== ==========
Operating activities include cash payments for
interest and income taxes as follows:
Interest paid................................. $ 20,507 $ 20,003
Interest capitalized.......................... (159) (747)
Income taxes paid (net of refunds)............ 540 840
Investing activities exclude the following
non-cash transactions--
Purchases of marketable securities on
margin...................................... $ $ 1,311
Sales of margined marketable securities
(including unsettled sales)................. 4,807
<FN>
See accompanying notes.
</FN>
</TABLE>
5
<PAGE>
BALLY'S CASINO HOLDINGS, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY ENTERTAINMENT CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands)
(Unaudited)
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of Bally's Casino Holdings, Inc., a Delaware corporation ("Casino
Holdings"), which is an indirect wholly owned subsidiary of Bally Entertainment
Corporation ("Bally"), and the subsidiaries which it controls (collectively, the
"Company"). The Company operates in one industry segment, and all significant
revenues arise from the operation of a casino hotel resort in Atlantic City, New
Jersey, a casino hotel resort in Las Vegas, Nevada, a dockside casino and hotel
in Robinsonville, Mississippi (near Memphis, Tennessee) and a riverboat casino
in New Orleans, Louisiana. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1995.
All adjustments have been recorded which are, in the opinion of management,
necessary for a fair presentation of the condensed consolidated balance sheet of
the Company at March 31, 1996, its condensed consolidated statement of income
for the three months ended March 31, 1996 and 1995, its consolidated statement
of stockholder's equity for the three months ended March 31, 1996 and its
consolidated statement of cash flows for the three months ended March 31, 1996
and 1995. All such adjustments were of a normal recurring nature.
The accompanying condensed consolidated financial statements have been prepared
in conformity with generally accepted accounting principles which require the
Company's management to make estimates and assumptions that affect the amounts
reported therein. Actual results could vary from such estimates. In addition,
certain reclassifications have been made to prior period financial statements to
conform with the 1996 presentation.
SEASONAL FACTORS
The Company's operations are subject to seasonal factors and, therefore, the
results of operations for the three months ended March 31, 1996 and 1995 are not
necessarily indicative of the results of operations for the full year.
ACQUISITIONS OF BALLY'S GRAND, INC. COMMON STOCK
Bally's Grand, Inc. owns and operates the casino hotel resort in Las Vegas,
Nevada known as "Bally's Las Vegas." During the three months ended March 31,
1996, Casino Holdings acquired 334,074 shares of Bally's Grand, Inc. common
stock in several transaction for $5,765. As a result, Casino Holdings' ownership
of Bally's Grand, Inc. common stock increased to approximately 85% of the shares
outstanding at March 31, 1996.
ALLOCATIONS FROM BALLY AND TRANSACTIONS WITH RELATED PARTIES
Bally allocates costs to the Company (exclusive of Bally's Grand, Inc., which
pays to an indirect wholly owned subsidiary of Bally a $3,000 annual management
fee that is included in "Allocations from Bally Entertainment Corporation")
consisting of the Company's allocable share of Bally's corporate overhead
including executive salaries and benefits, public company reporting costs and
other corporate headquarters' costs. While the Company does not obtain a
measurable direct benefit from these allocated costs, management believes that
the Company receives an indirect benefit from Bally's oversight. Bally's method
for allocating costs is designed to apportion the majority of its operating
costs to its subsidiaries and is generally based upon many subjective factors
including various measures of operational size and extent of Bally's oversight
requirements. Management of Bally believes that the methods used to allocate
these costs are reasonable and expects similar allocations in future years.
Because of Bally's controlling relationship with
6
<PAGE>
BALLY'S CASINO HOLDINGS, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY ENTERTAINMENT CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(All dollar amounts in thousands)
(Unaudited)
the Company and the allocation of certain Bally costs, the operating results of
the Company could be significantly different if the Company operated
autonomously. In addition, certain of the Company's insurance coverage is
obtained by Bally pursuant to corporate-wide programs. In these circumstances,
Bally charges the Company its proportionate share of the respective insurance
premiums.
Certain executive officers of Bally's Park Place, Inc. ("Bally's Park Place")
function in a similar capacity for GNOC, CORP. (a wholly owned subsidiary of
Bally which owns and operates the casino hotel resort in Atlantic City known as
"The Grand"), and exercise decision-making and operational authority over both
entities. No allocation of cost is made from Bally's Park Place to The Grand for
these executive officers as management deems the direct allocable cost to be
immaterial. In addition, certain administrative and support operations of
Bally's Park Place and The Grand are consolidated, including limousine services,
legal services and purchasing. Costs of these operations are allocated to or
from Bally's Park Place either directly or using various formulas based on
estimates of utilization of such services. On a net basis, allocations to The
Grand were $108 and $61 for the three months ended March 31, 1996 and 1995,
respectively, which management believes were reasonable. Bally's Park Place also
leases land to The Grand, and rental income was $174 for each of the three month
periods ended March 31, 1996 and 1995.
Pursuant to three notes payable, a subsidiary of Casino Holdings owes Bally
$28,422 and $27,938 at March 31, 1996 and December 31, 1995, respectively. Two
of these notes are payable on demand and the third is due in October 1996. These
notes bear interest at varying market-based rates and interest expense related
to these notes for the three months ended March 31, 1996 and 1995 was $483 and
zero, respectively. In addition, Bally and Casino Holdings have a cash
management arrangement whereby Bally advances available funds to Casino Holdings
to generally fund project costs and working capital requirements of Casino
Holdings' subsidiaries. These advances are non-interest bearing and are payable
on demand.
LONG-TERM DEBT
The carrying amounts of the Company's long-term debt at March 31, 1996 and
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
----------- -----------
<S> <C> <C>
Casino Holdings:
Senior Discount Notes due 1998, less
unamortized discount of $39,907 and $43,917. $157,653 $153,643
Bally's Park Place:
9-1/4% First Mortgage Notes due 2004.......... 425,000 425,000
Bally's Las Vegas:
10-3/8% First Mortgage Notes due 2003......... 315,000 315,000
Other secured and unsecured obligations......... 29,634 31,017
----------- -----------
Total long-term debt............................ 927,287 924,660
Current maturities of long-term debt............ (5,866) (5,720)
----------- -----------
Long-term debt, less current maturities......... $921,421 $918,940
=========== ===========
</TABLE>
During the three months ended March 31, 1995, Casino Holdings purchased $10,040
principal amount of its Senior Discount Notes due 1998 (the "Senior Discount
Notes") for $6,448 in cash, which resulted in an extraordinary gain of $326, net
of income taxes of $176.
7
<PAGE>
BALLY'S CASINO HOLDINGS, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY ENTERTAINMENT CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(All dollar amounts in thousands)
(Unaudited)
Under the terms of the Senior Discount Notes, dividends received by Casino
Holdings other than from Bally's Park Place are not available to be paid to
Bally unless available pursuant to a net income test (generally limited to 50%
of the Company's consolidated net income exclusive of income attributable to
Bally's Park Place). At March 31, 1996, no amounts were available for the
payment of dividends to Bally under such net income test. However, any dividends
paid by Bally's Park Place to Casino Holdings pursuant to a separate net income
test (generally limited to 50% of Bally's Park Place's aggregate consolidated
net income, as defined, earned since April 1, 1994) may be declared as dividends
by Casino Holdings and be paid to Bally. At March 31, 1996, $6,597 was available
to be paid by Bally's Park Place to Bally, through Casino Holdings, under this
separate net income test. In addition, $5,807 was available as of March 31, 1996
for the payment of dividends by Bally's Las Vegas to Casino Holdings.
INCOME TAXES
Taxable income or loss of the Company (partially exclusive of Bally's Grand,
Inc., which must file its own separate consolidated federal income tax return
for the period from January 1, 1995 through March 21, 1995, the date Bally's
ownership percentage of outstanding common stock of Bally's Grand, Inc.
increased to 80%) is included in the consolidated federal income tax return of
Bally. Under a tax sharing agreement between Bally's Park Place and Bally,
income taxes are allocated to Bally's Park Place based on amounts Bally's Park
Place would pay or receive if it filed a separate consolidated federal income
tax return, except that Bally's Park Place receives credit from Bally for the
tax benefit of Bally's Park Place's net operating losses and tax credits, if
any, that can be utilized in Bally's consolidated federal income tax return,
regardless of whether these losses or credits could be utilized by Bally's Park
Place on a separate consolidated federal income tax return basis. For periods
subsequent to March 21, 1995, taxable income or loss of Bally's Grand, Inc. is
also included in the consolidated federal income tax return of Bally. Under a
tax sharing arrangement between Bally's Grand, Inc. and Bally, income taxes are
allocated to Bally's Grand, Inc. based on amounts Bally's Grand, Inc. would pay
or receive if it filed a separate consolidated federal income tax return. Casino
Holdings has entered into a similar tax sharing agreement with Bally (which
generally excludes Bally's Park Place and Bally's Grand, Inc. from its stand
alone computation). If there is a default and following an acceleration under
the Senior Discount Notes while Casino Holdings is a member of the Bally
consolidated group, payments to Bally, in the aggregate, under these tax sharing
agreements will be decreased (retroactively to the date of the Casino Holdings
tax sharing agreement and refunded to the extent paid) to the extent that Casino
Holdings would have owed less, in the aggregate, if there had been a single tax
sharing agreement with Casino Holdings which included Bally's Park Place in its
stand alone computation. Payments to Bally for tax liabilities are due at such
time and in such amounts as payments would be required to be made to the
Internal Revenue Service. Payments from Bally for tax benefits are due at the
time Bally files the applicable consolidated federal income tax return. Under
these tax sharing arrangements, the Company had income taxes payable to Bally of
$6,581 and $429 at March 31, 1996 and December 31, 1995, respectively.
GUARANTEE
At March 31, 1996, the Company (through Bally's Park Place) was contingently
liable for the guarantee of payments (up to $34,200) in the event certain
nonconsolidated affiliates fail to make required payments pursuant to various
contractual obligations.
8
<PAGE>
BALLY'S CASINO HOLDINGS, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY ENTERTAINMENT CORPORATION)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Revenues and operating income (loss) for the Company and each of its casino
properties were as follows (in millions):
<TABLE>
<CAPTION>
Three months
ended March 31
------------------
1996 1995
------- -------
<S> <C> <C>
Consolidated (a):
Revenues (b)......................................... $219.9 $166.1
Operating income (c)................................. 46.1 31.5
Bally's Park Place:
Revenues............................................. $ 94.1 $ 92.3
Operating income..................................... 22.6 22.3
Bally's Las Vegas:
Revenues............................................. $ 82.1 $ 72.3
Operating income..................................... 20.1 12.9
Bally's Mississippi (a):
Revenues............................................. $ 20.6 $ 1.0
Operating income (loss) (c).......................... 1.3 (1.9)
Bally's New Orleans (a):
Revenues............................................. $ 22.9 $ --
Operating income..................................... 3.1 --
<FN>
- - ----------
Notes:
(a) Bally's New Orleans commenced operation of its riverboat casino in July
1995 and Bally's Mississippi reopened its dockside casino in December 1995.
Between December 1993 and February 1995, Bally's Mississippi operated the
dockside casino at a different site.
(b) Includes interest income of $1.6 and $2.2 for the three months ended March
31, 1996 and 1995, respectively.
(c) After amortization of pre-opening costs totalling $2.0 million at Bally's
Mississippi for the three months ended March 31, 1996.
</FN>
</TABLE>
Revenues and operating income of the Company for the first quarter of 1996
increased $53.8 million (32%) and $14.6 million (46%), respectively, from the
1995 quarter. These increases principally reflect improved operating results at
Bally's Las Vegas and the operations of Bally's New Orleans, which commenced
operation of its riverboat casino in July 1995, and Bally's Mississippi, which
reopened its dockside casino in December 1995.
Bally's Park Place
Revenues of Bally's Park Place for the first quarter of 1996 were $94.1 million
compared to $92.3 million for the 1995 quarter, an increase of $1.8 million (2%)
primarily due to a $1.6 million (2%) increase in casino revenues. Slot revenues
increased $2.1 million (4%) due to a 6% increase in slot handle (volume) offset,
in part, by a decline in the win percentage from 8.6% in the 1995 quarter to
8.4% in 1996. On average, Bally's Park Place had 89 (4%) more slot machines for
the first quarter of 1996 than in 1995. Table game revenues, excluding poker,
decreased $.4 million (2%) due to a decrease in the hold percentage from 16.7%
in the 1995 quarter to 16.3% in 1996 offset, in
9
<PAGE>
BALLY'S CASINO HOLDINGS, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY ENTERTAINMENT CORPORATION)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS--(CONTINUED)
part, by a 1% increase in the drop (amount wagered). Other casino revenues
decreased $.1 million (5%). Operating income of Bally's Park Place for the first
quarter of 1996 was $22.6 million compared to $22.3 million for the 1995
quarter, an increase of $.3 million (1%) as the aforementioned revenue increase
was offset, in part, by a 2% increase in operating expenses. Casino expenses
increased $2.5 million (7%) due primarily to expanded promotional efforts.
Selling, general and administrative expenses decreased $.9 million (12%)
primarily due to an increase in the estimated realizable value of certain funds
on deposit with the Casino Reinvestment Development Authority (the "CRDA") in
the first quarter of 1996 resulting from the approved use of such funds for
reimbursement of certain costs to complete several floors of hotel rooms in
prior years.
Management believes that the expansion of several casino hotel facilities in
Atlantic City, which includes additional hotel rooms and slot machines, has
caused and will continue to cause intense promotional efforts to attract slot
players as both Bally's Park Place and its competitors continue to seek to
expand their share of slot revenues and maximize the utilization of their slot
machines. Further, as a result of the aggressive competition for slot patrons,
the Atlantic City slot win percentage has declined. Management believes that the
slot win percentage will continue to be subject to competitive pressure and may
decline further. In addition, proposals for several new casino hotel resorts
were recently announced for the marina district in Atlantic City and, if and
when such resorts are opened, capacity and competition will further increase.
However, management believes Bally's Park Place is well-positioned to compete
for additional casino revenues in the Atlantic City market through the
attractive promotional gaming programs and special events it offers, and because
of the appearance and comfort of its gaming space and hotel accommodations.
During the first quarter of 1995, Bally's Park Place completed a slot machine
upgrade, replacing the majority of its slot machines with state-of-the-art
machines with embedded bill acceptors, and reconfigured its slot machine layout,
adding additional slot stools and increasing aisle space. In addition, Bally's
Park Place broke ground in April 1996 for construction of a western-themed
casino complex on approximately four acres of Boardwalk property it owns
adjacent to its existing facility. The complex is presently planned to include
approximately 75,000 square feet of casino space and cost between $80 and $100
million, with completion anticipated in mid-1997.
Bally's Las Vegas
Revenues of Bally's Las Vegas for the first quarter of 1996 were $82.1 million
compared to $72.3 million for the 1995 quarter, an increase of $9.8 million
(14%). Casino revenues for the 1996 quarter were $40.1 million compared to $33.2
million for 1995, an increase of $6.9 million (21%) due, in part, to additional
walk-in business resulting from the June 1995 opening of a monorail system
connecting Bally's Las Vegas and MGM Grand. Table game revenues increased $3.0
million (18%) due to an increase in the hold percentage from 14.3% in the 1995
quarter to 15.8% in 1996 and a 6% increase in the drop. Slot revenues increased
$2.5 million (18%) due to a 19% increase in slot handle offset, in part, by a
decline in the win percentage from 6.1% in the 1995 quarter to 6.0% in 1996. On
average, Bally's Las Vegas had 180 (12%) more slot machines for the first
quarter of 1996 than in 1995. Other casino revenues increased $1.4 million (90%)
due to additional revenues generated by the relocated and expanded race and
sports book room, which opened in September 1995. Rooms revenue increased $1.4
million (8%) due to a higher average room rate and an increase in the number of
rooms occupied compared to the 1995 quarter. Food and beverage revenues
increased $.7 million (6%) primarily due to the reinstatement of beverage
service in the showrooms in the second quarter of 1995 and increased convention
business, and other revenues increased $.8 million (7%) due, in part, to
increased rental income from a redesign of the retail shopping mall and
increased gift shop revenues. Operating income of Bally's Las Vegas for the
first quarter of 1996 was $20.1 million compared to $12.9 million for the 1995
quarter, an increase of $7.2
10
<PAGE>
BALLY'S CASINO HOLDINGS, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY ENTERTAINMENT CORPORATION)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS--(CONTINUED)
million (56%) as the aforementioned 14% increase in revenues was offset, in
part, by a 4% increase in operating expenses. Casino operating expenses
increased $1.2 million (6%) due principally to increased promotional costs and
increased gaming taxes associated with higher casino revenues, and depreciation
and amortization expense increased $1.0 million (18%) due to major capital
improvements recently completed.
There have been various public announcements concerning the expansion of
existing casino hotel resorts and the development of new casino hotel resorts in
Las Vegas, certain of which have commenced construction. In particular, three
casino hotel resorts are expected to open on the Strip in 1996 with a total of
approximately 270,000 square feet of gaming space and 6,900 guest rooms.
Management believes that the additional casino and hotel room capacity resulting
from the opening of new casino hotels may have a short-term negative impact on
Bally's Las Vegas, but that over the long term Bally's Las Vegas benefits from
the increase in the number of visitors to Las Vegas that these new properties
attract. To enhance its competitiveness in the Las Vegas market, Bally's Las
Vegas recently completed an extensive capital improvement program, including
improvements to its frontage area along the Strip, the monorail system, the
renovation of all of its hotel rooms and the new race and sports book room,
among others. In addition, Bally's Grand, Inc. has announced its intention to
develop a separate casino hotel resort with a Paris, France theme (the Paris
Casino-Resort") on approximately 24 acres of land situated on the Strip adjacent
to Bally's Las Vegas. The Paris Casino- Resort is presently planned to include,
among other things, an 85,000 square- foot casino, 3,000 guest rooms and a
50-story replica of the Eiffel Tower. Construction of the Paris Casino-Resort is
expected to commence in the third quarter of 1996, with completion expected in
1998. The cost of the project, exclusive of the value of the land, is presently
estimated to be between $375 million and $425 million.
Bally's Mississippi
As described previously, Bally's Mississippi reopened its dockside casino in
December 1995 in Robinsonville, Mississippi, where Lady Luck Gaming Corporation
had constructed a 238-room hotel. Between December 1993 and February 1995,
Bally's Mississippi operated the dockside casino at a different site. Revenues
of Bally's Mississippi for the first quarter of 1996 were $20.6 million, and
included casino revenues of $19.4 million (slot revenues were $14.3 million and
table game revenues were $5.1 million) and room revenues of $.6 million.
Operating income for the 1996 quarter was $1.3 million, after giving effect to
the amortization of $2.0 million of pre-opening costs. Revenues of Bally's
Mississippi for the first quarter of 1995 were $1.0 million. Operating loss for
the 1995 quarter was $1.9 million, and included gaming-related costs (primarily
slot machine lease costs) and general and administrative costs incurred during
the temporary cessation of casino operations.
Mississippi gaming law does not limit the number of gaming licenses that may be
granted. As a result, management believes there was a saturation of gaming
facilities in and around the Memphis, Tennessee market, which led to the closing
of six casinos in that market since April 1994 (including Bally's Mississippi,
which was moved and reopened). As of April 30, 1996, nine gaming facilities were
operating in this market, three of which are located immediately adjacent to
Bally's Mississippi. These gaming facilities present significant competition for
Bally's Mississippi. In addition, a casino is expected to commence operations in
mid-1996 somewhat closer to Memphis than Bally's Mississippi and, upon opening,
may affect Bally's Mississippi's results of operations.
Bally's New Orleans
As described previously, Bally's New Orleans commenced the operation of its
riverboat casino in July 1995 in New Orleans, Louisiana. Revenues of Bally's
11
<PAGE>
BALLY'S CASINO HOLDINGS, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY ENTERTAINMENT CORPORATION)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS--(CONTINUED)
New Orleans for the first quarter of 1996 were $22.9 million and included casino
revenues of $22.1 million (slot revenues were $17.1 million and table game
revenues were $5.0 million). Operating income of Bally's New Orleans for the
first quarter of 1996 was $3.1 million.
Louisiana law currently limits to fifteen the number of riverboat gaming
licenses that may be granted (all of which have been granted as of April 30,
1996), with a maximum of six riverboats in any one parish. Four riverboats are
presently operating in the New Orleans area (including Bally's New Orleans).
During 1995, Bally's New Orleans also competed with a land-based casino which
was operating at a temporary location and was expected to become the largest
land-based casino in the United States when it moved to its permanent location.
However, in November 1995, the competitor ceased operations at the temporary
location and suspended construction at the permanent site. It is presently not
known if, or when, construction of the permanent land-based facility will
resume.
Interest expense
Interest expense, net of capitalized interest, was $24.1 million for the first
quarter of 1996 compared to $22.4 million for the 1995 quarter, an increase of
$1.7 million (8%) due to a higher average level of debt and a decrease in the
amount of capitalized interest.
Income taxes
For the three months ended March 31, 1996, the effective rate of the income tax
provision differed from the U.S. statutory tax rate (35%) due principally to
state income taxes, substantially offset by the effects of minority interests'
equity in earnings. The effective rate of the income tax provision for the three
months ended March 31, 1995 differed from the U.S. statutory tax rate due to
state income taxes, adjustments of prior years' taxes and certain nondeductible
expenses.
12
<PAGE>
BALLY'S CASINO HOLDINGS, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY ENTERTAINMENT CORPORATION)
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule (filed electronically only).
(b) Reports on Form 8-K:
None.
13
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALLY'S CASINO HOLDINGS, INC.
------------------------------
Registrant
/s/ John W. Dwyer
------------------------------
John W. Dwyer
Vice President and Controller
(chief accounting officer)
Dated: May 15, 1996
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 1996, THE CONDENSED
CONSOLIDATED STATEMENT OF INCOME AND THE CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 129,195
<SECURITIES> 2,281
<RECEIVABLES> 34,063
<ALLOWANCES> 8,201
<INVENTORY> 5,822
<CURRENT-ASSETS> 189,098
<PP&E> 1,385,145
<DEPRECIATION> 404,671
<TOTAL-ASSETS> 1,269,991
<CURRENT-LIABILITIES> 161,722
<BONDS> 921,421
0
0
<COMMON> 0
<OTHER-SE> 57,769
<TOTAL-LIABILITY-AND-EQUITY> 1,269,991<F1>
<SALES> 0
<TOTAL-REVENUES> 219,930
<CGS> 0
<TOTAL-COSTS> 127,690<F2>
<OTHER-EXPENSES> 569<F3>
<LOSS-PROVISION> 1,012<F2>
<INTEREST-EXPENSE> 24,064
<INCOME-PRETAX> 21,993
<INCOME-TAX> 7,871
<INCOME-CONTINUING> 12,172
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,172
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THIS AMOUNT INCLUDES 24,725 OF MINORITY INTERESTS.
<F2>THESE AMOUNTS ARE INCLUDED IN COST OF OPERATIONS UNDER COSTS AND
EXPENSES IN THE CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE THREE
MONTHS ENDED MARCH 31, 1996.
<F3>GAMING DEVELOPMENT COSTS, EXCLUDING AMORTIZATION OF PRE-OPENING COSTS.
</FN>
</TABLE>
