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 June 30, 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 July 31, 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)
June 30, 1996 and December 31, 1995........................... 1
Condensed consolidated statement of income (unaudited)
Six months ended June 30, 1996 and 1995....................... 2
Condensed consolidated statement of income (unaudited)
Three months ended June 30, 1996 and 1995..................... 3
Consolidated statement of stockholders' equity (unaudited)
Six months ended June 30, 1996................................ 4
Consolidated statement of cash flows (unaudited)
Six months ended June 30, 1996 and 1995....................... 5 - 6
Notes to condensed consolidated financial statements
(unaudited)................................................... 7 - 10
Item 2. Management's discussion and analysis of results
of operations.......................................... 11 - 14
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K.......................... 15
SIGNATURE PAGE....................................................... 16
<PAGE>
<TABLE>
BALLY'S CASINO HOLDINGS, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY ENTERTAINMENT CORPORATION)
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
<CAPTION>
June 30 December 31
1996 1995
---------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents............................ $ 135,940 $ 111,297
Marketable securities, at fair value............ 2,550 1,781
Receivables, less allowances of $8,968
and $7,422.................................... 24,312 19,530
Inventories..................................... 6,041 5,960
Deferred income taxes........................... 15,663 15,897
Other current assets............................ 14,505 7,312
---------- ----------
Total current assets.......................... 199,011 161,777
Property and equipment, less accumulated
depreciation of $418,763 and $389,594........... 975,023 986,002
Intangible assets, less accumulated
amortization of $3,446 and $2,549............... 29,209 27,565
Other assets...................................... 69,261 73,676
---------- ----------
$1,272,504 $1,249,020
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Payable to Bally Entertainment Corporation...... $ 38,601 $ 42,711
Accounts payable................................ 15,577 18,441
Income taxes payable............................ 2,706 5,563
Accrued liabilities............................. 74,360 80,872
Current maturities of long-term debt............ 8,013 5,720
---------- ----------
Total current liabilities..................... 139,257 153,307
Long-term debt, less current maturities........... 931,879 918,940
Deferred income taxes............................. 93,259 94,174
Other liabilities................................. 12,113 11,330
Minority interests................................ 26,380 25,941
Stockholders' equity.............................. 69,616 45,328
---------- ----------
$1,272,504 $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>
Six months
ended June 30
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Revenues............................................ $ 443,526 $ 338,586
Costs and expenses:
Cost of operations................................ 256,251 202,196
Selling, general and administrative............... 48,214 34,898
Gaming development costs, including
amortization of pre-opening costs of
$3,281 in 1996.................................. 4,604 2,179
Allocations from Bally Entertainment
Corporation..................................... 6,772 6,580
Depreciation and amortization..................... 32,976 26,096
---------- ----------
348,817 271,949
---------- ----------
Operating income.................................... 94,709 66,637
Gain (loss) on sales of marketable securities....... (50) 318
Interest expense.................................... (48,380) (44,725)
---------- ----------
Income before income taxes, minority interests
and extraordinary item............................ 46,279 22,230
Income tax provision................................ (18,829) (11,305)
Minority interests.................................. (3,579) (657)
---------- ----------
Income before extraordinary item.................... 23,871 10,268
Extraordinary gain on extinguishment of debt........ 326
---------- ----------
Net income.......................................... $ 23,871 $ 10,594
========== ==========
<FN>
See accompanying notes.
</FN>
</TABLE>
2
<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 June 30
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Revenues............................................ $ 223,596 $ 172,442
Costs and expenses:
Cost of operations................................ 127,549 101,523
Selling, general and administrative............... 25,226 17,948
Gaming development costs, including
amortization of pre-opening costs of
$1,320 in 1996.................................. 2,074 1,736
Allocations from Bally Entertainment
Corporation..................................... 3,497 3,053
Depreciation and amortization..................... 16,648 13,086
---------- ----------
174,994 137,346
---------- ----------
Operating income.................................... 48,602 35,096
Gain on sales of marketable securities.............. 215
Interest expense.................................... (24,316) (22,366)
---------- ----------
Income before income taxes and minority
interests......................................... 24,286 12,945
Income tax provision................................ (10,958) (6,991)
Minority interests.................................. (1,629) 577
---------- ----------
Net income.......................................... $ 11,699 $ 6,531
========== ==========
<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 STOCKHOLDERS' 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............................... 23,871 23,871
Change in unrealized gain/loss on
available-for-sale securities.......... 417 417
-------- -------- --------
Balance at June 30, 1996................... $ 48,983 $ 20,633 $ 69,616
======== ======== ========
<FN>
See accompanying notes.
</FN>
</TABLE>
4
<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>
Six months
ended June 30
----------------------
1996 1995
---------- ----------
<S> <C> <C>
OPERATING:
Income before extraordinary item................... $ 23,871 $ 10,268
Adjustments to reconcile to cash provided--
Depreciation and amortization (including
pre-opening costs).............................. 36,257 26,096
Interest accretion on discount notes and other
amortization included in interest expense....... 9,766 9,269
Minority interests................................ 3,579 657
Provision for doubtful receivables................ 1,918 1,315
Deferred income taxes............................. (950) (5,705)
Gain on sales of marketable securities............ (318)
Change in operating assets and liabilities........ (21,384) 4,517
Other, net........................................ 435 (2,299)
---------- ----------
Cash provided by operating activities.......... 53,492 43,800
INVESTING:
Purchases and construction of property and
equipment........................................ (21,018) (62,617)
Decrease in construction-related liabilities....... (5,040) (4,918)
Acquisitions of Bally's Grand, Inc. common stock... (6,995) (15,179)
Purchases of marketable securities................. (7,141)
Net proceeds from sales of marketable securities... 2,435
Other, net......................................... 1,949 (8,213)
---------- ----------
Cash used in investing activities.............. (31,104) (95,633)
FINANCING:
Debt transactions--
Decrease in payable to Bally Entertainment
Corporation..................................... (4,110) (6,722)
Proceeds from long-term borrowings................ 10,000 33,425
Repayments of long-term debt...................... (2,823) (6,589)
Debt issuance costs............................... (812) (510)
---------- ----------
Cash provided by debt transactions............. 2,255 19,604
Equity transactions--
Dividends paid.................................... (5,500)
---------- ----------
Cash provided by financing activities.......... 2,255 14,104
---------- ----------
Increase (decrease) in cash and equivalents......... 24,643 (37,729)
Cash and equivalents, beginning of period........... 111,297 139,729
---------- ----------
Cash and equivalents, end of period................. $ 135,940 $ 102,000
========== ==========
<FN>
(continued)
</FN>
</TABLE>
5
<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>
Six months
ended June 30
----------------------
1996 1995
---------- ----------
<S> <C> <C>
SUPPLEMENTAL CASH FLOWS INFORMATION:
Changes in operating assets and
liabilities were as follows:
Decrease (increase) in receivables............ $ (6,700) $ 3,709
Decrease in income taxes receivable........... 2,412
Decrease (increase) in inventories, other
current assets and other assets............. (7,946) 4,347
Decrease in accounts payable, accrued
liabilities and other liabilities........... (3,881) (5,951)
Decrease in income taxes payable.............. (2,857)
---------- ----------
$ (21,384) $ 4,517
========== ==========
Operating activities include cash payments for
interest and income taxes as follows:
Interest paid................................. $ 37,729 $ 37,503
Interest capitalized.......................... (210) (2,036)
Income taxes paid (net of refunds)............ 22,637 14,690
Investing and financing activities exclude the
following non-cash transactions--
Contribution of net assets into consolidated
venture by minority interest................ $ $ 13,166
Purchases of marketable securities on
margin (including unsettled purchases)...... 9,227
Sales of margined marketable securities
(including unsettled sales)................. 9,148
<FN>
See accompanying notes.
</FN>
</TABLE>
6
<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 June 30, 1996, its condensed consolidated statements of income
for the three and six months ended June 30, 1996 and 1995, its consolidated
statement of stockholders' equity for the six months ended June 30, 1996 and its
consolidated statement of cash flows for the six months ended June 30, 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.
ACQUISITION OF BALLY BY HILTON HOTELS CORPORATION
In June 1996, Bally and Hilton Hotels Corporation ("Hilton") entered into an
agreement pursuant to which Bally will merge with and into Hilton. The
transaction, which has been approved by the Board of Directors of Bally and
Hilton, is subject to approval by the companies' shareholders and gaming
regulators of several states, and is expected to close by year-end 1996.
SEASONAL FACTORS
The Company's operations are subject to seasonal factors and, therefore, the
results of operations for the three and six months ended June 30, 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 six months ended June 30,
1996, a wholly owned subsidiary of Casino Holdings acquired 334,074 shares of
Bally's Grand, Inc. common stock in several transactions 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 June 30, 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
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)
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. Because of Bally's controlling relationship with
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 $107 and $76 for the three months ended June 30, 1996 and 1995,
respectively, and $215 and $137 for the six months ended June 30, 1996 and 1995,
respectively, which management believes were reasonable. Bally's Park Place also
leases land to The Grand, and rental income for each of the three and six month
periods ended June 30, 1996 and 1995 was $174 and $348, respectively.
Pursuant to three notes payable, a subsidiary of Casino Holdings owes Bally
$28,905 and $27,938 at June 30, 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 June 30, 1996 and 1995 was $484 and
zero, respectively, and for the six months ended June 30, 1996 and 1995 was $967
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.
In August 1996, Bally's Grand, Inc. agreed to sell its wholly owned subsidiary
that owns and is developing the 24 acre tract of land expected to be utilized
for the construction of the Paris Casino-Resort to Bally for consideration
having an aggregate value of approximately $60,000 ($40,000 in Bally common
stock and the balance in cash).
8
<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)
LONG-TERM DEBT
The carrying amounts of the Company's long-term debt at June 30, 1996 and
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
----------- -----------
<S> <C> <C>
Casino Holdings:
Senior Discount Notes due 1998, less
unamortized discount of $35,862 and $43,917. $ 161,698 $ 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......... 38,194 31,017
----------- -----------
Total long-term debt............................ 939,892 924,660
Current maturities of long-term debt............ (8,013) (5,720)
----------- -----------
Long-term debt, less current maturities......... $ 931,879 $ 918,940
=========== ===========
</TABLE>
During the six months ended June 30, 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.
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 June 30, 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 June 30, 1996, $12,363 was available to
be paid by Bally's Park Place to Bally, through Casino Holdings, under this
separate net income test. In addition, $5,419 was available as of June 30, 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,
9
<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)
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 $2,736 and $429 at June 30, 1996 and December 31, 1995,
respectively.
GUARANTEES
At June 30, 1996, the Company (through Bally's Park Place) was contingently
liable for the guarantee of payments up to approximately $29,000 in the event
certain nonconsolidated affiliates fail to make required payments pursuant to
various contractual obligations.
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
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Revenues and operating income (loss) for the Company and each of its casino
properties were as follows (in millions):
<TABLE>
<CAPTION>
Six months
ended June 30
------------------
1996 1995
------- -------
<S> <C> <C>
Consolidated (a):
Revenues (b)...................................... $443.5 $338.6
Operating income (c).............................. 94.7 66.6
Bally's Park Place:
Revenues.......................................... $198.1 $196.3
Operating income.................................. 52.8 52.5
Bally's Las Vegas:
Revenues.......................................... $159.7 $139.7
Operating income.................................. 34.6 21.1
Bally's Mississippi (a):
Revenues.......................................... $ 39.5 $ 1.5
Operating income (loss) (c)....................... 3.1 (3.2)
Bally's New Orleans (a):
Revenues.......................................... $ 45.8 $ --
Operating income.................................. 6.4 --
- - - ----------
<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 $3.3 and $4.2 for the six months ended June 30,
1996 and 1995, respectively.
(c) After amortization of pre-opening costs totalling $3.3 at Bally's
Mississippi for the six months ended June 30, 1996.
</FN>
</TABLE>
Revenues and operating income of the Company for the six months ended June 30,
1996 increased $104.9 million (31%) and $28.1 million (42%), respectively, from
the 1995 period. 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 six months ended June 30, 1996 were
$198.1 million compared to $196.3 million for the 1995 period, an increase of
$1.8 million (1%) primarily due to a $2.5 million (1%) increase in casino
revenues. Slot revenues increased $2.9 million (2%) due to a 5% increase in slot
handle (volume) offset, in part, by a decline in the win percentage from 8.5% in
the 1995 period to 8.3% in 1996. On average, Bally's Park Place had 89 (4%) more
slot machines for the 1996 period than in 1995. Table game revenues, excluding
poker, remained essentially unchanged as a 1% increase in the drop (amount
wagered) was offset by a reduction in the hold percentage from 16.4% in the 1995
period to 16.3% in 1996. Other casino revenues
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)
decreased $.4 million (10%). Operating income of Bally's Park Place for the
six months ended June 30, 1996 was $52.8 million compared to $52.5 million for
the 1995 period, an increase of $.3 million (1%) as the aforementioned 1%
revenue increase was substantially offset by a 1% increase in operating
expenses. Casino expenses increased $5.1 million (7%) due primarily to
expanded promotional efforts. This increase in casino expenses was offset, in
part, by a $2.1 million (7%) decrease in other operating expenses primarily
due to a real estate tax refund relating to prior years. In addition, food
and beverage expenses decreased $.6 million (7%) as a result of an increase
in complimentaries, which cost is included in casino expense.
Management believes that the expansion of several casino hotel facilities in
Atlantic City, which includes additional hotel rooms and gaming space, has
caused and will continue to cause intense promotional efforts to attract players
as both Bally's Park Place and its competitors continue to seek to expand their
share of gaming revenues and maximize the utilization of their gaming space.
Further, as a result of the aggressive competition for slot patrons, the
Atlantic City slot win percentage continues to decline. 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 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 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 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 casino hotel resort. The
complex is presently planned to include 75,000 square feet of casino space and
cost approximately $100 million, with completion anticipated in mid-1997.
Bally's Las Vegas
Revenues of Bally's Las Vegas for the six months ended June 30, 1996 were $159.7
million compared to $139.7 million for the 1995 period, an increase of $20.0
million (14%). Casino revenues for the 1996 period were $78.9 million compared
to $64.9 million for 1995, an increase of $14.0 million (22%) 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
$6.7 million (21%) due to a 14% increase in the drop and an increase in the hold
percentage from 14.3% in the 1995 period to 15.2% in 1996. Slot revenues
increased $5.4 million (18%) due to a 26% increase in slot handle offset, in
part, by a decline in the win percentage from 6.0% in the 1995 period to 5.7% in
1996. On average, Bally's Las Vegas had 184 (12%) more slot machines for the
1996 period than in 1995. Other casino revenues increased $1.9 million (66%) due
to additional revenues generated by the relocated and expanded race and sports
book room, which opened in September 1995. Rooms revenue increased $2.5
million (8%) primarily due to a higher average room rate and an increase in
the number of rooms occupied compared to the 1995 period. Food and beverage
revenues increased $1.5 million (7%) primarily due to increased convention
business and the reinstatement of beverage service in the showrooms in the
second quarter of 1995. Other revenues increased $2.1 million (9%) primarily due
to increased entertainment revenues resulting from additional shows in the
1996 period. Operating income of Bally's Las Vegas for the six months ended
June 30, 1996 was $34.6 million compared to $21.1 million for the 1995 period,
an increase of $13.5 million (64%) as the aforementioned 14% increase in
revenues was offset, in part, by a 6% increase in operating expenses. Casino
operating expenses increased $3.8 million (10%) due principally to increased
promotional and marketing costs and to
12
<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)
increased gaming taxes associated with higher casino revenues. Depreciation and
amortization expense increased $2.3 million (21%) due to major capital
improvements recently completed.
The expansion of existing casino hotel resorts and the development of new casino
hotel resorts in Las Vegas continues. In particular, two casino hotel resorts
opened in mid-1996 and another is expected to open later in 1996. These three
casino hotel resorts are adding a total of approximately 270,000 square feet of
gaming space and 6,500 guest rooms to the Las Vegas Strip. 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 completed an
extensive capital improvement program over the last three years including, among
others, improvements to its frontage area along the Strip, the monorail system,
a renovation of all of its hotel rooms, the new race and sports book room and
a slot machine upgrade.
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 six months ended June 30, 1996 were $39.5
million, and included casino revenues of $36.9 million (slot revenues were $28.1
million and table game revenues were $8.8 million) and room revenues of $1.6
million. Operating income for the six months ended June 30, 1996 was $3.1
million, after giving effect to the amortization of $3.3 million of pre-opening
costs. Revenues of Bally's Mississippi for the six months ended June 30, 1995
were $1.5 million (casino revenues were $1.0 million and room revenues were $.5
million). Operating loss for the six months ended June 30, 1995 was $3.2
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 July 31, 1996, ten gaming facilities were
operating in this market. Four of these gaming facilities are located adjacent
to Bally's Mississippi, one of which commenced operations in June 1996 somewhat
closer to Memphis than Bally's Mississippi. These gaming facilities present
significant competition for Bally's Mississippi.
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
New Orleans for the six months ended June 30, 1996 were $45.8 million and
included casino revenues of $44.2 million (slot revenues were $35.1 million
and table game revenues were $9.1 million). Operating income of Bally's New
Orleans for the six months ended June 30, 1996 was $6.4 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 July 31,
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
13
<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)
operations at the temporary location and suspended construction at the permanent
site. It is presently not known if, or when, operations at the temporary site or
construction of the permanent land-based facility will resume.
Interest expense
Interest expense, net of capitalized interest, was $48.4 million for the six
months ended June 30, 1996 compared to $44.7 million for the 1995 period, an
increase of $3.7 million (8%) due, in part, to a decrease in the amount of
capitalized interest.
Income taxes
For the six months ended June 30, 1996, the effective rate of the income tax
provision differed from the U.S. statutory tax rate (35%) due principally to
state income taxes and adjustments of prior years' taxes offset, in part, by the
effects of minority interests' equity in earnings. The effective rate of the
income tax provision for the six months ended June 30, 1995 differed from the
U.S. statutory tax rate due to state income taxes, adjustments of prior years'
taxes and certain nondeductible expenses.
14
<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.
15
<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: August 14, 1996
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996, THE CONDENSED
CONSOLIDATED STATEMENT OF INCOME AND THE CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 135,940
<SECURITIES> 2,550
<RECEIVABLES> 33,280
<ALLOWANCES> 8,968
<INVENTORY> 6,041
<CURRENT-ASSETS> 199,011
<PP&E> 1,393,786
<DEPRECIATION> 418,763
<TOTAL-ASSETS> 1,272,504
<CURRENT-LIABILITIES> 139,257
<BONDS> 931,879
0
0
<COMMON> 0
<OTHER-SE> 69,616
<TOTAL-LIABILITY-AND-EQUITY> 1,272,504<F1>
<SALES> 0
<TOTAL-REVENUES> 443,526
<CGS> 0
<TOTAL-COSTS> 254,333<F2>
<OTHER-EXPENSES> 1,323<F3>
<LOSS-PROVISION> 1,918<F2>
<INTEREST-EXPENSE> 48,380
<INCOME-PRETAX> 46,279
<INCOME-TAX> 18,829
<INCOME-CONTINUING> 23,871
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,871
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THIS AMOUNT INCLUDES 26,380 OF MINORITY INTERESTS.
<F2>THESE AMOUNTS ARE INLCUDED IN COST OF OPERATIONS UNDER COSTS AND
EXPENSES IN THE CONSOLIDATED STATEMENT OF INCOME FOR THE SIX
MONTHS ENDED JUNE 30, 1996.
<F3>GAMING DEVELOPMENT COSTS, EXCLUDING AMORTIZATION OF PRE-OPENING COSTS.
</FN>
</TABLE>
