<PAGE>
THIS DOCUMENT IS A COPY OF THE QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED AUGUST 31, 1996 FILED ON OCTOBER 16, 1996 PURSUANT TO A RULE 201
TEMPORARY HARDSHIP EXEMPTION.
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1996
---------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________________
Commission file number 1-12802
-------
HARVEYS CASINO RESORTS
------------------------
(Exact Name of Registrant as Specified in its Charter)
NEVADA 88-0066882
-------- ------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Highway 50 & Stateline Avenue
P.O. Box 128
LAKE TAHOE, NEVADA 89449
-------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 588-2411
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
--- ---
On October 10, 1996 the registrant had outstanding 9,806,930 shares of its $.01
par value, common stock.
This document contains 38 sequentioally numbered pages.
The Exhibit Index begins on Page 25
<PAGE>
HARVEYS CASINO RESORTS
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets,
August 31, 1996 (Unaudited) and
November 30, 1995 3
Condensed Consolidated Statements of
Income (Unaudited) For the Three Months
and Nine Months Ended August 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash
Flows (Unaudited) For the Nine Months
Ended August 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial
Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 2. Changes in Securities 23
Item 3. Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 24
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
HARVEYS CASINO RESORTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
ASSETS
August 31, November 30,
1996 1995
----------- -----------
(Unaudited)
Current assets
Cash and cash equivalents $ 20,370 $ 10,493
Accounts receivable, net 4,951 7,740
Prepaid expenses 3,550 5,381
Other current assets 8,358 7,260
---------- ----------
Total current assets 37,229 30,874
Notes receivable-related party 2,093 2,065
Notes receivable-other 2,797 2,797
Property and equipment (net of accumulated
depreciation of $109,015 and $100,934 at
August and November, respectively) 308,247 250,777
Other assets 18,745 12,993
Investment in unconsolidated affiliate 14,769 13,738
---------- ----------
Total assets $ 383,880 $ 313,244
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt
(including $3,967 of related party debt
at November 30,1995) $ 2,671 $ 6,467
Accounts and contracts payable 7,319 4,676
Accrued expenses 23,396 13,015
---------- ----------
Total current liabilities 33,386 24,158
Long-term debt, net of current portion
(including $7,935 of related party debt
at November 30,1995) 173,571 126,676
Deferred income taxes 15,606 15,895
Minority interest in subsidiary -- 1,758
Other liabilities 14,359 12,456
----------- -----------
Total liabilities 236,922 180,943
----------- -----------
Stockholders' equity
Preferred stock, $.01 par value;
5,000,000 shares authorized; none issued
Common stock, $.01 par value;
30,000,000 shares authorized;
shares issued 9,816,822 (August) and
9,402,657 (November) 98 94
Additional paid-in capital 38,633 31,524
Retained earnings 109,136 102,064
Treasury stock, at cost; 9,832 shares
(August) and 5,350 shares (November) (148) (80)
Net unrealized loss on marketable securities (194) (104)
Deferred compensation (567) (1,197)
---------- ----------
Total stockholders' equity 146,958 132,301
---------- ----------
Total liabilities and stockholders' equity $ 383,880 $ 313,244
---------- ----------
---------- ----------
The accompanying notes are an integral part of these statements.
3
<PAGE>
HARVEYS CASINO RESORTS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended August 31, Ended August 31,
---------------- ----------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Casino $ 54,847 $ 35,120 $137,121 $ 90,597
Lodging 9 505 7,943 21,765 19,334
Food and beverage 12,584 9,995 30,029 25,863
Other 2,036 1,962 4,994 4,970
Management fees and joint venture 932 419 3,501 790
Less: Casino promotional allowances (5,655) (4,585) (14,307) (11,718)
-------- -------- -------- --------
Total net revenues 74,249 50,854 183,103 129,836
-------- -------- -------- --------
Costs and expenses
Casino 23,524 15,804 64,628 43,231
Lodging 3,498 2,688 8,546 7,176
Food and beverage 8,267 5,585 17,886 15,482
Other 816 803 2,139 2,147
Selling, general and administrative 18,491 13,069 49,661 37,573
Depreciation and amortization 4,455 3,263 11,904 9,415
Pre-opening expenses -- -- 4,099 2,147
-------- -------- -------- --------
Total costs and expenses 59,051 41,212 158,863 117,171
-------- -------- -------- --------
Operating income 15,198 9,642 24,240 12,665
-------- -------- -------- --------
Other income(expense)
Interest income 205 202 611 738
Interest expense (5,018) (2,242) (10,092) (6,586)
Life insurance benefits -- 274 -- 274
Minority interest in loss of consolidated subsidiary -- 236 67 767
Other, net 148 (1) (139) 12
-------- -------- -------- --------
(4,665) (1,531) (9,553) (4,795)
-------- -------- -------- --------
Income before income taxes and
extraordinary item 10,533 8,111 14,687 7,870
Income tax provision (4,248) (2,793) (5,834) (2,708)
-------- -------- -------- --------
Income before extraordinary item 6,285 5,318 8,853 5,162
Extraordinary item-loss on early retirement
of debt, net of income tax benefit (380) -- (522) --
-------- -------- -------- --------
Net income $ 5,905 $ 5,318 $ 8,331 $ 5,162
-------- -------- -------- --------
-------- -------- -------- --------
Income (loss) per share
Income before extraordinary item $ 0.64 $ 0.56 $ 0.92 $ 0.55
Extraordinary item-loss on early retirement
of debt, net of income tax benefit $ (0.04) $ -- $ (0.06) $ --
-------- -------- -------- --------
Net income per share $ 0.60 $ 0.56 $ 0.86 $ 0.55
-------- -------- -------- --------
-------- -------- -------- --------
Dividends declared per share $ 0.05 $ 0.04 $ 0.13 $ 0.12
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average shares used in
calculating income(loss) per share 9,878,644 9,486,433 9,650,161 9,461,045
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
HARVEYS CASINO RESORTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine Months Ended August 31,
----------------------------
1996 1995
---------- --------
Cash flows from operating activities:
Net income $ 8,331 $ 5,162
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 11,904 9,415
Other, net 17,962 4,708
---------- --------
Net cash provided by operating activities 38,197 19,285
---------- --------
Cash flows from investing activities:
Capital expenditures (61,791) (50,577)
Investment in unconsolidated affiliate -- (4,001)
Other, net 89 (2,475)
---------- -------
Net cash used in investing activities (61,702) (57,053)
---------- -------
Cash flows from financing activities:
Purchase of notes and accrued interest
in consolidated subsidiary (6,000) --
Principal payments on long-term debt (205,799) (89,538)
Dividends paid (1,259) (1,122)
Proceeds from long-term debt 103,000 131,092
Proceeds from public debt offering 150,000 --
Debt issuance costs (6,313) --
Other, net (247) (593)
---------- --------
Net cash provided by financing activities 33,382 39,839
---------- --------
Increase in cash and cash equivalents 9,877 2,071
Cash and cash equivalents at beginning of period 10,493 7,446
---------- --------
Cash and cash equivalents at end of period $ 20,370 $ 9,517
---------- --------
---------- --------
The accompanying notes are an integral part of these statements.
5
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation and Consolidation - Harveys Casino Resorts (the
"Company") is engaged in the casino entertainment industry. The
Company owns and operates Harveys Resort Hotel Casino on the south
shore of Lake Tahoe, Nevada. Until April 30, 1996, the Company,
through its wholly-owned subsidiary, Harveys C. C. Management Company,
Inc. ('HCCMC') owned 70% of the equity interest in Harveys Wagon Wheel
Casino Limited Liability Company ('HWW') which owns Harveys Wagon
Wheel Hotel Casino in Central City Colorado. On April 30, 1996, the
Company acquired all of the 30% minority interest in HWW in exchange
for common stock of the Company. HCCMC has a contract to manage the
Central City hotel and casino. Through its wholly-owned subsidiary,
Harveys L. V. Management Company, Inc. ('HLVMC'), the Company owns 40%
of the equity interest in Hard Rock Hotel, Inc. ('HRHC'), which owns
the Hard Rock Hotel and Casino in Las Vegas, Nevada. HLVMC has a
contract to manage the Las Vegas hotel and casino which opened for
business on March 9, 1995. Additionally, the Company's wholly-owned
subsidiary, Harveys Iowa Management Company, Inc. ('HIMC') is the
owner and operator of Harveys Casino/ Hotel and Kanesville Queen, a
riverboat casino, hotel, convention center complex in Council Bluffs,
Iowa. The riverboat casino portion of the complex opened for business
on January 1, 1996 and the land-based hotel opened for business on May
24, 1996.
Pursuant to the management agreement with HRHC, the Company earns a
base management fee of 4% of adjusted gross revenue (as defined in
the agreement) and up to an additional 2% of adjusted gross revenue if
certain financial targets are met. The Company also receives, from
HWW, a management fee of 5% of adjusted gross revenue (as defined in
the management agreement with HWW). These fees are for services the
Company renders as the project manager for each of the hotel casinos.
The management fees from HWW are eliminated in consolidation.
The condensed consolidated financial statements include the accounts
of Harveys Casino Resorts and its majority and wholly-owned
subsidiaries. All significant intercompany accounts and transactions
have been eliminated. Investments in unconsolidated affiliates are
stated at cost adjusted by equity in undistributed earnings or losses.
Minority interest represents the minority member's proportionate share
of equity in HWW at November 30, 1995 and its proportionate share of
income or loss from HWW until April 30, 1996, the date on which the
Company acquired the minority interest in HWW.
The condensed consolidated balance sheet as of November 30, 1995 has
been prepared from the audited financial statements at that date. The
accompanying condensed consolidated financial statements have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly,
certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.
In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of
financial condition at August 31, 1996, have been included. All
necessary adjustments affecting cash flows for the nine months ended
August 31, 1996 and 1995 or results of operations for the three and
nine months ended August 31, 1996 and 1995, have also been included.
The results of operations for the interim periods should not be
considered indicative of results for a full fiscal year.
Certain prior year period amounts have been reclassified to conform
to the current period presentation. These reclassifications have no
affect on the net income presented for any of the periods.
These financial statements should be read in conjunction with the
financial statements, and notes thereto, in the Company's Annual
Report on Form 10-K for the year ended November 30, 1995.
6
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
2. Net Income (Loss) Per Share - Net income (loss) per share is computed
based on the weighted average number of shares of common stock and
dilutive common stock equivalents outstanding during the period.
Fully diluted per share amounts are the same as primary per share
amounts for all periods presented.
3. Supplemental Disclosure of Cash Flow Information - The Company made
cash payments for interest of $7.8 million and $4.1 million during the
nine months ended August 31, 1996 and 1995, respectively. The Company
capitalized $2.6 million of interest in the first nine months of
fiscal 1996, and capitalized $ 569,000 in the same period of fiscal
1995. The Company made cash payments for income taxes of $2.1
million in the nine months of fiscal 1996, and $1.0 million during
the same period of fiscal 1995.
4. Future Development Costs - The Company capitalizes costs associated
with new gaming projects until: (i) the project is no longer
considered viable and the costs are expensed; or (ii) the likelihood
of the project is relatively certain and the costs are reclassified
either to pre-opening costs and expensed when operations commence or
to property and equipment and ultimately depreciated. Capitalized
future development costs of approximately $1.1 million and $724,000
were included as other assets on the balance sheet at August 31,1996
and November 30, 1995, respectively.
5. Pre-opening Expenses - Pre-opening expenses are associated with the
acquisition, development and opening of the Company's new casino
resorts. These amounts are expensed when the casino commences
operations and include items that were capitalized as incurred prior
to opening and items that are directly related to the opening of the
property and are non-recurring in nature. Approximately $3.6 million
of pre-opening expenses were expensed in the first quarter of 1996 in
connection with the Company's opening of HIMC's riverboat casino in
Council Bluffs, Iowa on January 1, 1996 and an additional $508,000 was
expensed in the second quarter of 1996 with the opening of HIMC's
land-based hotel facilities in May 1996. Approximately $2.1 million
of pre-opening expenses were expensed in the first quarter of fiscal
1995 in conjunction with the Company's opening of Harveys Wagon Wheel
Hotel Casino in December 1994. During the second quarter of fiscal
1995, the Hard Rock Hotel and Casino opened and expensed approximately
$4.5 million of pre-opening expenses. The Company's equity in the
loss of the Hard Rock Hotel and Casino, which is included in
management fees and joint venture revenues, includes the Company's
share of those pre-opening expenses.
6. Long-Term Debt - As of the following dates long-term debt (in
thousands) consisted of :
<TABLE>
<CAPTION>
August 31, November 30,
1996 1995
------------- ---------------
<S> <C> <C>
Subordinated notes payable to affiliates $ - $ 11,902
10 5/8% senior subordinated notes, due 2006 150,000 -
Banks and others -
Note payable to banks 22,000 115,000
Notes payable to financing company 4,003 5,800
Other 239 441
------------- ---------------
176,242 133,143
Less current portion 2,671 6,467
------------- ---------------
$ 173,571 $ 126,676
------------- ---------------
------------- ---------------
</TABLE>
7
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
6. Long-Term Debt (continued)
Aggregate annual maturities of long-term debt (in thousands), based on
amounts borrowed as of August 31, 1996, are as follows:
<TABLE>
<CAPTION>
Years ending
August 31,
------------
<S> <C>
1997 $ 2,671
1998 1,351
1999 11
2000 22,012
2001 14
2002 and thereafter 150,183
------------
$ 176,242
------------
------------
</TABLE>
10 5/8% Senior Subordinated Notes, Due 2006 - On May 22, 1996 the
Company issued and sold, pursuant to an underwritten public offering,
$150 million in aggregate principal amount of 10 5/8% senior
subordinated notes due 2006 (the 'Senior Notes').
The Senior Notes are governed by an indenture ( the 'Indenture') and
are general unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Debt of the Company
(as defined in the Indenture). The Senior Notes are guaranteed by
each of the Restricted Subsidiaries of the Company (as defined in the
Indenture). Each guarantee is a general unsecured obligation of the
guaranteeing Restricted Subsidiary, subordinated in right of payment
to all existing and future Senior Debt of each guaranteeing Restricted
Subsidiary. At August 31, 1996, the guaranteeing Restricted
Subsidiaries were HCCMC, HWW, HIMC and HLVMC.
Interest on the Senior Notes is payable semi-annually on June 1 and
December 1 of each year, commencing December 1, 1996. The Senior
Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after June 1, 2001 at prices ranging from
105.313% of the principal amount plus accrued and unpaid interest to
100% of the principal amount plus accrued and unpaid interest
beginning June 1, 2004 and thereafter. Upon a Change of Control (as
defined in the Indenture) each holder of the Senior Notes will have
the right to require the Company to repurchase such holder's Senior
Notes at 101% of the principal amount plus accrued and unpaid interest
to the repurchase date.
The Indenture contains certain covenants that impose limitations on,
among other things, (i) the incurrance of additional indebtedness by
the Company or any Restricted Subsidiary, (ii) the payment of
dividends, (iii) the repurchase of capital stock and the making of
certain other Restricted Payments and Restricted Investments (as
defined in the Indenture) by the Company or any Restricted Subsidiary,
(iv) mergers, consolidations and sales of assets by the Company or any
Restricted Subsidiary, (v) the creation or incurrance of liens on the
assets of the Company or any Restricted Subsidiary and (vi)
transactions by the Company or any of its subsidiaries with Affiliates
(as defined in the Indenture). These limitations are subject to a
number of qualifications and exceptions as described in the Indenture.
The proceeds from the sale of the Senior Notes, $145.5 million net of
underwriting commissions, were used to (i) payoff a $10 million note
payable to a private investor, (ii) retire the $19 million balance of
the note payable under a riverboat financing agreement, (iii) redeem,
for $7.8 million plus accrued and unpaid interest, the $8 million
aggregate principal amount of subordinated notes that the Company had
issued along with $6 million in cash in an exchange for the $11.9
million aggregate principal amount of subordinated notes, and interest
accrued thereon, payable by HWW to affiliates and (iv) reduce the
outstanding balance under the Company's reducing revolving bank credit
facility.
8
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
6. Long-Term Debt (continued)
Subordinated Notes Payable to Affiliates - In November 1993, HWW
issued approximately $11.9 million of 12% subordinated notes (the
'HWW Notes') payable to affiliates of Mountain City Casino Partners,
L. P. ('Mountain City'), which, until April 30, 1996, owned a 30%
minority interest in HWW. Interest on the notes was payable monthly
beginning March 1995. Approximately $1.9 million of interest accrued
through February 1995, was payable on December 1, 1995. An initial
principal payment of $3.967 million was due in November 1995. HWW did
not make the required principal payment or the $1.9 million interest
payment. On April 30, 1996, the Company completed exchanges whereby,
(i) the Company acquired the HWW Notes, and interest accrued thereon,
in exchange for $6 million cash and $8 million aggregate principal
amount of subordinated notes of the Company, due December 31, 2000
(the 'Debt Exchange') and (ii) the Company acquired all of the 30%
minority equity interest in HWW, and the rights to a priority return
from HWW, from Mountain City for 382,500 shares of the Company's
common stock, par value $0.01 per share (the 'Equity Exchange').
Notes Payable to Banks - On August 14, 1995 the Company entered into a
reducing revolving credit agreement with a consortium of banks. On
May 15, 1996 and again on May 23, 1996 the reducing revolving credit
agreement was amended, essentially to allow for the Debt Exchange, the
Equity Exchange and the issuance of the Senior Notes.
As of August 31, 1996, under the amended reducing revolving credit
agreement (the 'Credit Facility'), the Company could borrow up to a
maximum available principal balance of $150 million. The maximum
available under the Credit Facility is reduced by the advanced but
unpaid principal balance and by any letter of credit exposure. The
advanced but unpaid principal balance at August 31, 1996 and at
November 30, 1995 was $22 million and $115 million, respectively.
Outstanding letters of credit amounted to approximately $2.2 million
at August 31, 1996. The note payable under the Credit Facility
matures in August 2000. Until then, the annual year-end maximum
principal balances are as follows:
<TABLE>
<CAPTION>
November 30,
------------
<S> <C>
1996 $ 150,000
1997 135,000
1998 120,000
1999 97,500
</TABLE>
However, under the terms of the Indenture, the Company may not incur
more than $115 million on indebtedness under the Credit Facility
unless the Company's Fixed Charge Coverage Ratio (as defilned in the
Indenture) is greater than 2.0 to 1.0 for the most recent four
quarters. See Footnote 11-Subsequent Event.
The Company pays quarterly fees at an annual rate of three-eights of
one percent (0.375%) or one-half of one percent (0.5%) on the
unborrowed maximum principal balance depending on the Company's ratio
of funded debt to earnings before interest, taxes, depreciation and
amortization. The rate in effect at November 30, 1995 and August 31,
1996 was 0.5%.
Interest is due and payable monthly and is provided at the higher of
the prime rate or the Federal Funds Rate plus one-half of one percent
(0.5%), plus an applicable margin determined by the Company's ratio of
funded debt to earnings before interest, taxes, depreciation and
amortization. However, in accordance with the terms of the Credit
Facility, the Company has the option to cause portions, or all, of the
outstanding principal balance to accrue interest at a rate equal to
the London Inter-Bank Offering Rate (LIBOR) plus the applicable
margin.
9
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
6. Long-Term Debt (continued)
The note is collateralized by all of the Company's property and
equipment, contract rights, leases, intangibles and other
security interest related to Harveys Resort Hotel Casino, Harveys
Wagon Wheel Hotel Casino and the Company's wholly-owned subsidiary,
HIMC. The Credit Facility also contains covenants which require the
Company to maintain certain financial ratios.
Notes Payable to Financing Company- HWW entered into an equipment
financing agreement with a financing company to finance the
acquisition of up to $7.5 million of gaming and associated equipment.
The principal balances of the secured notes under the equipment
financing agreement as of August 31, 1996 were approximately $2.8
million and $1.2 million. The notes are secured by the equipment
acquired and are payable in monthly payments of approximately $194,000
and $56,000 including interest that accrues at a rate of 12.15% per
annum. The notes will mature in December 1997, and July 1998,
respectively.
7. Extraordinary Item - In May 1996, the Company expensed the remaining
unamortized debt issuance costs related to a $10 million note payable
to a private investor that was retired before maturity. In June 1996,
the Company applied a portion of the net proceeds from the sale of
the Senior Notes to retire the note payable under a riverboat
financing agreement and expensed the unamortized debt issuance cost
related to that agreement. In July 1996, the Company retired the
subordinated notes issued in the Debt Exchange and recognized expense
as the result of writing off the related debt issuance costs. These
items were reflected in the August 31, 1996 three month and nine month
operating results as extraordinary losses net of income tax benefit of
approximately $380,000 and $522,000, respectively.
8. Commitments - Until May 10, 1996, the Company, with the approval of
its lenders, guaranteed up to $66.0 million of a loan on behalf of
HRHC. On May 10, 1996, the Company was released from such guarantee.
The Company paid a fee of approximately $385,000 to the banks
participating in the HRHC loan as a condition of the release.
On January 1, 1996, the Company opened the riverboat casino portion of
its project in Council Bluffs, Iowa and on May 24, 1996 opened the
251-room land-based hotel facilities. The Company is in the process
of finishing construction of the 21,000 square foot convention
facility and other land-based amenities. As a result, the Company has
entered into a number of contracts or agreements relative to the
development of the Council Bluffs project. The cost of the project,
including the riverboat casino vessel and pre-opening expenses, is
expected to be approximately $114 million. Through August 31, 1996,
the Company had incurred approximately $111 million of project costs.
9. Unconsolidated Affiliate - The Company owns a 40% equity interest in
HRHC. Pursuant to a management agreement, the Company earns a base
management fee of 4% of adjusted gross revenue (as defined in the
agreement), and up to an additional 2% of adjusted gross revenue if
certain financial targets are met, from HRHC. The Company accounts
for its investment in HRHC on the equity method. The Hard Rock Hotel
and Casino opened on March 9, 1995. Operating results prior to the
opening were immaterial. Summarized, unaudited statement of
operations information (in thousands of dollars) for HRHC follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended August 31, Ended August 31,
------------------ ------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net revenues $18,315 $17,370 $56,570 $37,274
Operating income 2,439 1,266 9,085 45
Net income (loss) 690 (421) 2,991 (2,189)
</TABLE>
10
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
9. Unconsolidated Affiliate (continued)
The results for the nine months ended August 31, 1995 include the effects of
nonrecurring pre-opening expenses of approximately $4.5 million.
10. Summarized Financial Information of Subsidiaries - The Senior Notes
issued by the Company are guaranteed by all direct and indirect
subsidiaries of the Company except for subsidiaries which are
inconsequential. The guarantees are full and unconditional and are
joint and several. The following summarized combined financial
information of the guarantor subsidiaries includes the accounts of
HCCMC, HWW (which became wholly-owned on April 30, 1996), HLVMC and
HIMC (which commenced operations January 1, 1996). Full separate
financial statements of the guarantor subsidiaries have not been
included because management has determined they are not material to
investors.
<TABLE>
<CAPTION>
August 31, 1996 November 30, 1995
--------------- -----------------
(Unaudited)
<S> <C> <C>
Balance Sheet Data (in thousands)
Assets:
Current assets $ 14,820 $ 6,591
Noncurrent assets 185,410 130,627
--------------- ---------------
Total assets $ 200,230 $ 137,218
--------------- ---------------
--------------- ---------------
Liabilities and Stockholder's Equity:
Current liabilities $ 23,928 $ 16,862
Noncurrent liabilities 133,929 83,371
Minority interest in subsidiary - 1,758
Stockholder's equity 42,373 35,227
--------------- ---------------
Total liabilities and stockholder's equity $ 200,230 $ 137,218
--------------- ---------------
--------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
Three Months Nine Months
Ended August 31, Ended August 31,
------------------------- -----------------------
1996 1995 1996 1995
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Statement of Operations Data
(in thousands)
Net revenues $ 32,933 $ 10,448 $ 83,709 $ 32,001
Costs and expenses (26,962) (8,900) (69,606) (28,461)
Other expense (3,607) (821) (7,434) (2,500)
Income tax provision (959) (247) (2,638) (360)
----------- ------------ ----------- -----------
Net income $ 1,405 $ 480 $ 4,031 $ 680
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
Statement of Cash Flows Data
(in thousands)
Net cash provided by operating activities $ 14,688 $ 8,562
Net cash used in investing activities (54,314) (47,306)
Net cash provided by financing activities 49,471 39,707
----------- -----------
Increase in cash and cash equivalents $ 9,845 $ 963
----------- -----------
----------- -----------
</TABLE>
11
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
11. Subsequent Event - In October 1996, the Company's Credit Facility was
amended. Among other things the amendment (i) extended the maturity
date from August 16, 2000 to February 15, 2002, (ii) extended the due
dates of required repayments of principal, (iii) relaxed the terms of
certain financial covenants and (iv) reduced the maximum available
principal balance to $115 million.
12
<PAGE>
HARVEYS CASINO RESORTS
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
OVERVIEW
Prior to fiscal 1995, the Company's operations were substantially limited to
those of Harveys Resort Hotel Casino on the south shore of Lake Tahoe, Nevada.
During fiscal 1993, the Company began investing in expansion projects designed
to expand the Company's operations into new and diverse markets. On December 2,
1994, the first of the expansion projects, Harveys Wagon Wheel Hotel Casino
opened in Central City, Colorado. On March 9, 1995, the Hard Rock Hotel and
Casino opened in Las Vegas, Nevada. On January 1, 1996, the riverboat casino
portion of Harveys Casino/ Hotel and Kanesville Queen opened for business in
Council Bluffs, Iowa and, on May 24, 1996, the adjacent land-based hotel, food
and beverage facilities opened.
On April 30, 1996, the Company acquired the 30% minority interest in HWW and
Harveys Wagon Wheel Hotel Casino and HWW became wholly-owned by the Company.
The operations of Harveys Wagon Wheel Hotel Casino are managed by HCCMC, a
wholly-owned subsidiary of the Company. HCCMC receives a fee for management
services provided by HCCMC. The accounts of HWW are consolidated with those of
the Company. All significant intercompany transactions and accounts, including
the management fee, are eliminated in consolidation.
The Hard Rock Hotel and Casino is owned by HRHC, a Nevada corporation, of which
the Company, through its wholly owned subsidiary, HLVMC, owns 40% of the equity
interest. HLVMC manages the operations of the Hard Rock Hotel and Casino
pursuant to a management agreement between the Company and HRHC and receives
management fees that are included in the Company's consolidated revenues. The
investment in HRHC is accounted for on the equity method.
Harveys Casino/Hotel and Kanesville Queen project is wholly-owned and, since its
opening in 1996, operated by the Company's wholly-owned subsidiary, HIMC. The
accounts of HIMC are consolidated with those of the Company. All significant
intercompany transactions and accounts are eliminated in consolidation.
On May 22, 1996, the Company received $145.5 million in proceeds, net of
underwriting discounts and commissions, from the issuance and sale of $150
million in aggregate principal amount of Senior Notes.
The changes in the operating results for the third quarter and first nine months
of fiscal 1996 as compared to the third quarter and first nine months of fiscal
1995 were primarily the result of the opening of the Company's expansion
projects in fiscal 1996 and fiscal 1995. The changes in the Company's financial
condition, liquidity, and capital resources, as discussed below, were primarily
attributable to the Company's expansion efforts, the acquisition of the
minority interests in HWW, the acquisition of the HWW Notes and the public
offering of the Senior Notes.
13
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Nine Months
Ended August 31, Ended August 31,
--------------------- ---------------------
1996 1995 1996 1995
--------- --------- --------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Net Revenues
Harveys Resort Hotel Casino $ 41,316 $ 40,401 $ 99,394 $ 97,830
Harveys Wagon Wheel Hotel Casino 10,927 10,029 32,330 31,211
Harveys Casino/Hotel & Kanesville Queen (1) 21,074 - 47,878 -
Harveys Las Vegas Management Company (2) 932 419 3,501 790
Corporate and Development (3) - 5 - 5
--------- --------- --------- ---------
Total Net Revenues $ 74,249 $ 50,854 $ 183,103 $ 129,836
--------- --------- --------- ---------
--------- --------- --------- ---------
Operating Income
Harveys Resort Hotel Casino (3) $ 11,941 $ 10,173 $ 18,470 $ 16,130
Harveys Wagon Wheel Hotel Casino (4) 1,694 1,186 5,683 2,861
Harveys Casino/Hotel & Kanesville Queen (1) 3,400 - 5,087 -
Harveys Las Vegas Management Company (2) 877 362 3,333 679
Corporate and Development (3) (2,714) (2,079) (8,333) (7,003)
--------- --------- --------- ---------
Total Operating Income $ 15,198 $ 9,642 $ 24,240 $ 12,667
--------- --------- --------- ---------
--------- --------- --------- ---------
EBITDA (5)
Harveys Resort Hotel Casino $ 14,072 $ 12,770 $ 24,968 $ 23,214
Harveys Wagon Wheel Hotel Casino 2,432 2,068 7,915 7,502
Harveys Casino/Hotel & Kanesville Queen 4,900 - 12,152 -
Harveys Las Vegas Management Company 932 419 3,499 1,952
Corporate and Development (2,683) (2,079) (8,291) (7,003)
--------- --------- --------- ---------
Total EBITDA $ 19,653 $ 13,178 $ 40,243 $ 25,665
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
(1) The riverboat casino portion of Harveys Casino/Hotel & Kanesville Queen
commenced casino operations on January 1, 1996, and the land- based
hotel facilities opened on May 24, 1996. The operating results for the
nine months ended August 31, 1996 include approximately $4.1 million
of pre-opening expenses.
(2) Net revenues and operating income for HLVMC, the wholly-owned subsidiary
of the Company which provides management services to the Hard Rock Hotel
and Casino, consist of fees earned by such entity pursuant to the terms
of a management agreement and the 40% equity interest in the income or
loss of the Hard Rock Hotel and Casino. The fiscal 1995 periods include
the effect of HLVMC's pro rata share of after-tax pre-opening expenses
of approximately $1.2 million.
(3) Harveys Resort Hotel Casino is a revenue-generating asset owned by the
Company. The operating results relative to corporate and development
expenses have been excluded from those of Harveys Resort Hotel Casino
and presented under 'Corporate and Development' in the table above.
(4) The nine months ended August 31, 1995 includes approximately $2.1 million
of pre-opening expenses.
(5) EBITDA (operating income plus depreciation and amortization) should not
be construed as an indicator of the Company's operating performance, or
as an alternative to cash flows from operating activities as a measure
of liquidity. The Company has presented EBITDA solely as supplemental
disclosure because the Company believes that it enhances the
understanding of the financial performance of companies with substantial
depreciation and amortization. For the nine months ended August 31,
1995, Harveys Wagon Wheel Hotel Casino's EBITDA excludes approximately
$2.1 million of pre-opening expenses. For the nine months ended August
31, 1995, HLVMC's EBITDA excludes approximately $1.2 million of HLVMC's
pro rata share of after-tax pre-opening expenses associated with the
March 1995 opening of the Hard Rock Hotel and Casino. For the nine
months ended August 31, 1996, Harveys Casino Hotel & Kanesville Queen's
EBITDA excludes approximately $4.1 million of pre-opening expenses.
For the three months and nine months ended August 31, 1995, EBITDA for
Harveys Resort Hotel Casino includes $274,000 of life insurance benefits.
14
<PAGE>
COMPARISON OF THE THIRD QUARTERS ENDED AUGUST 31, 1996 AND AUGUST 31, 1995
The Company's consolidated net revenues for the third quarter of fiscal 1996
amounted to approximately $74.2 million, a new record for the Company's third
quarter and an increase of $23.4 million, or 46.0%, over net revenues recorded
in the third quarter of fiscal 1995. The increase was largely attributable to
the $21.1 million of net revenues produced by the Company's facility in Council
Bluffs, Iowa. The increase in net revenues generated during the current year
third quarter at the Company's Lake Tahoe property amounted to approximately
$915,000. Harveys Wagon Wheel Hotel Casino experienced a 9.0% increase in net
revenues, up $898,000 from the third quarter of operations in fiscal 1995. The
Company believes that available and convenient customer parking is a key element
to continued progress in the Central City market. Consequently, the Company has
recently commenced construction of a 550-car parking facility adjacent to the
Harveys Wagon Wheel Hotel Casino. The Company anticipates that construction of
the parking facility will be completed by the summer of 1997. The Hard Rock
Hotel and Casino, which opened during the second quarter of fiscal 1995,
contributed an increase of approximately $513,000 to the Company's net revenues
in the third quarter of fiscal 1996, by way of management fees and equity in the
joint venture income.
Fiscal 1996 third quarter casino revenues, enhanced by the riverboat casino
operations in Council Bluffs, amounted to approximately $54.8 million, an
increase of $19.7 million over the prior year comparable quarter. The initial
third quarter of gaming activity on board the riverboat produced approximately
$18.5 million of casino revenue, accounting for the majority of the quarter-
over-quarter increase. The Colorado property contributed $1.5 million to the
increase in casino revenues. Casino costs and expenses also increased for the
comparable quarterly periods, up $7.7 million to $23.5 million for the current
year period. The riverboat casino accounted for $7.1 million of the increase
while the Colorado operation accounted for approximately $957,000 due to
increases in casino complimentaries and promotions.
Lodging revenues for the fiscal 1996 third quarter improved by approximately
$1.6 million over the prior year third quarter and amounted to $9.5 million.
Increases in the occupancy rate at the Lake Tahoe hotel and the opening of the
hotel facility in Council Bluffs accounted for the lodging revenues improvement.
Lodging profit margins deteriorated for the quarter-to-quarter comparison due to
pricing and promotions at the Council Bluffs property designed to attract
initial customers and ensure a high occupancy rate.
In June 1996, HWW entered into a management agreement with an unaffiliated
management company (the 'Food Service Manager') whereby the Food Service Manager
will provide substantially all of the food service and a portion of the beverage
service at Harveys Wagon Wheel Hotel Casino. The managed food service
facilities include a Tony Roma's Famous For Ribs restaurant. The Food Service
Manager pays HWW a monthly base fee and potentially an annual percentage fee if
the Food Service Manager's food and beverage revenues exceed an established
target. Consequently, operating results for Harveys Wagon Wheel Hotel Casino
for periods after
15
<PAGE>
the outsourcing reflect diminished food and beverage revenues and diminished
food and beverage costs and expenses. Other revenues include fees earned by
the Company and payable by the Food Service Manager.
Food and beverage revenues for the current fiscal year third quarter amounted to
$12.6 million, an improvement of $2.6 million over the prior year third quarter.
The beverage and limited food service aboard the Council Bluffs riverboat casino
and the recently opened food and beverage offerings at the Council Bluffs land-
based facilities provided $2.7 million of revenue. The outsourcing of food
services to the Food Service Manager in July at Harveys Wagon Wheel Hotel Casino
resulted in a $276,000 decline in food and beverage revenues from the Colorado
property. The revenue contribution from the Lake Tahoe food and beverage
operations improved by approximately $186,000. Food and beverage costs
increased by $2.7 million or, 48.0%, in the quarter-to-quarter comparison due to
promotions during the first full quarter of operation of the Council Bluffs
land-based restaurants. A $500,000 improvement in food and beverage costs was
recognized as the result of outsourcing food services at Harveys Wagon Wheel
Hotel Casino pursuant to the Company's agreement with the Food Service Manager.
Other revenues for the fiscal third quarter improved by $74,000 from those of
the prior fiscal year third quarter. Additionally, the contribution from the
Company's management fees and 40% equity participation in the Hard Rock Hotel
and Casino amounted to an increase of approximately $513,000 in management fees
and joint venture revenues.
Selling, general and administrative expenses increased by approximately $5.4
million, or 41.5%, to $18.5 million for the current fiscal year third quarter.
The second full quarter of operations in Council Bluffs resulted in
approximately $5.2 million of selling, general and administrative expenses. The
Central City operations recognized an increase in overall selling, general and
administrative expenses of approximately $242,000 from the third quarter of
fiscal 1995 compared to the current fiscal year third quarter due to increases
in advertising and promotional expenses. The selling, general and administrative
expenses incurred by the Lake Tahoe property declined approximately $580,000
comparing fiscal 1996 third quarter selling, general and administrative expenses
to those of the prior year third quarter. However, this savings was offset by an
increase of approximately $600,000 in corporate and business development
expenses. Depreciation and amortization expenses increased by $1.2 million, due
to the opening and operation of the facilities in Council Bluffs. Net interest
expense increased by $2.8 million to approximately $4.8 million for the third
quarter of fiscal 1996 as a result of the financing of the Council Bluffs
project and the issuance of the Senior Notes.
In June 1996, the Company retired the $19 million principal balance
outstanding under a note payable resulting from the financing of the
construction of the Company's riverboat. At that time, the Company expensed
the remaining unamortized debt issuance costs related to the riverboat
financing. In July 1996, the Company redeemed, for $7.8 million plus accrued
and unpaid interest, the $8 million aggregate principal amount of
subordinated notes issued in the Debt Exchange and expensed the remaining
unamortized debt issuance costs associated with those notes. The expensing
16
<PAGE>
of the debt issuance costs was reported as an extraordinary loss, net of
income tax benefits, in the results of operations for the third quarter of
fiscal 1996.
The net income for the fiscal 1996 third quarter amounted to approximately$5.9
million compared to $5.3 million for the prior fiscal year third quarter. If
the extraordinary loss on early retirement of debt was excluded from the current
year period, the Company would have had net income of approximately $6.3
million for the third quarter of fiscal 1996.
COMPARISON OF THE NINE MONTH PERIODS ENDED AUGUST 31, 1996 AND AUGUST 31, 1995
The Company's consolidated net revenues through the nine months ended August 31,
1996 amounted to approximately $183.1 million, an increase of $53.3 million, or
41.0%, over net revenues recorded in the same period of fiscal 1995. The
increase was primarily attributable to the $47.9 million of net revenues
produced by the operations of the Company's Council Bluffs facility. Net
revenues generated during the current year at the Company's Lake Tahoe property
accounted for approximately $1.6 million of the increase. Harveys Wagon Wheel
Hotel Casino experienced a $1.1 million increase in net revenues, compared to
net revenues generated during the property's inaugural operations in fiscal
1995. The Hard Rock Hotel and Casino, which opened in March 1995, contributed
an increase of $2.7 million in the Company's net revenues for the first nine
months of fiscal 1996, by way of management fees and equity in the joint venture
income. The prior year period's management fees and equity in joint venture
income were diminished by approximately $1.2 million as a result of HLVMC's pro
rata share of after-tax pre-opening expenses.
Year-to-date casino revenues, including eight months of casino revenues from
the riverboat casino operations in Council Bluffs, amounted to approximately
$137.1 million, an increase of $46.5 million over the prior year period. The
gaming activity on board the riverboat produced approximately $44.4 million of
casino revenue, accounting for the majority of the year-to-date increase.
Casino revenues for the Lake Tahoe casino operations were flat and the Colorado
operations contributed approximately $2.1 million to the casino revenue
increase. Casino costs and expenses also increased for the comparable year-to-
date periods, up $21.4 million to $64.6 million for the first nine months of
fiscal 1996. The riverboat casino accounted for $17.9 million of the increase
while the Lake Tahoe and Colorado operations accounted for approximately
$991,000 and $2.5 million of the increase, respectively, due, in part, to
increases in casino complimentaries and promotions at both properties.
Lodging revenues for the fiscal 1996 nine month period increased by
approximately $2.4 million over the prior year comparable period and amounted to
$21.8 million. Increases in the occupancy rate at the Lake Tahoe property and
the opening of the hotel facility in Council Bluffs at the end of May 1996
provided for the lodging revenues improvement. Lodging profit margins
deteriorated for the 1996 nine month period compared to the 1995 nine month
period while improvements in lodging profit margins were recognized at both Lake
Tahoe and Central City, such improvements were more than offset by the lower
margin recognized in Council Bluffs as a result of pricing and promotions
designed to attract initial customers to and ensure a high occupancy rate at the
land-based hotel.
17
<PAGE>
Food and beverage revenues for the current fiscal year period amounted to $30.0
million, an improvement of $4.2 million over the 1995 period. The beverage and
limited food service aboard the Council Bluffs riverboat casino and expanded
food and beverage offerings available at the Council Bluffs land-based
facilities provided $4.0 million of the increase. Food and beverage costs and
expenses increased by $2.4 million, or 15.5 %, in the period-to-period
comparison due to the opening of the land-based restaurants in Council Bluffs
offset by improvements in cost-of-sales at the Lake Tahoe property and
improvements in cost-of-sales and labor at the Central City operations, due in
part to the outsourcing of food services at the Colorado property.
Other revenues for the fiscal year-to-date period remained flat with those from
the prior fiscal year period. The contribution from the Company's management
fees and 40% equity participation in the Hard Rock Hotel and Casino amounted to
an increase in revenues of approximately $2.7 million. The Hard Rock Hotel and
Casino opened in March 1995 and, consequently, the nine month period of the
prior year includes the effect of HLVMC's pro rata share of after-tax pre-
opening expenses of approximately $1.2 million.
Selling, general and administrative expenses increased by approximately $12.1
million, or 32.2%, to $49.7 million for the current fiscal year period. The
operations in Council Bluffs resulted in approximately $12.4 million of
selling, general and administrative expenses, excluding the recognition of pre-
opening expenses. The Central City and Lake Tahoe operations recognized
improvements in overall selling, general and administrative expenses of
approximately $169,000 and $1.5 million, respectively. Corporate and
development expenses increased by approximately $1.3 million for the same
period-to-period comparison. Depreciation and amortization expenses increased by
$2.5 million. All of the increase in depreciation and amortization was
associated with the opening and operation of the facilities in Council Bluffs.
Net interest expense increased by $3.6 million, or 62.1%, to approximately $9.5
million for the fiscal 1996 period as a result of the financing of the Council
Bluffs project and the issuance of the Senior Notes.
With the opening of the Council Bluffs riverboat casino in January 1996 and the
opening of land-based facilities in May 1996, the Company recognized
approximately $4.1 million of pre-opening expenses. The Company opened Harveys
Wagon Wheel Hotel Casino in the first quarter of 1995 and recognized
approximately $2.1 million of pre-opening expenses. Additionally, the Company's
equity in the loss from the Hard Rock Hotel and Casino included the prorata
effects of approximately $4.5 million of pre-opening costs expensed at the Hard
Rock Hotel and Casino during the second quarter of fiscal 1995. These charges
had previously been incurred in connection with the development of the
properties and deferred until operations commenced.
In May 1996, the Company expensed the remaining unamortized debt issuance costs
related to a $10 million note payable to a private investor that was retired
before maturity. The write-off of these costs along with the expensing of
similar costs associated with debt retired in the third quarter of fiscal 1996
was reflected in the 1996 operating results as an extraordinary loss, net of
income tax benefit, and amounted to approximately $522,000.
18
<PAGE>
The Company's net income for the fiscal 1996 period was approximately $8.3
million compared to $5.2 million for the prior fiscal year period. If pre-
opening expenses, net of taxes, were excluded from both periods and if the
extraordinary loss on early retirement of debt was excluded from the current
year period, the Company would have had net income of approximately $11.3
million for the current fiscal year period and approximately $7.3 million for
the comparable period of fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity and capital resources to date have
been cash flow from operations, borrowings under various credit arrangements,
and in fiscal 1996, the net proceeds of $145.5 million, net of underwriting
discounts and commissions, from the Company's public debt offering.
At August 31, 1996, the Company had approximately $ 20.4 million of cash and
cash equivalents and a maximum of $125.8 million available under the Credit
Facility, subject to compliance with certain financial covenants. Cash flow
from operations for the nine months of fiscal 1996 was approximately $38.2
million compared to $19.3 million for the first nine months of fiscal 1995.
During the first nine months of fiscal 1996, the Company continued to fund the
development and construction of the Council Bluffs project with cash
expenditures of $53.8 million . Additionally, the Company made cash payments
for dividends of approximately $1.3 million during the nine month period and
incurred additional cash expenditures of approximately $8 million in connection
with capital improvements and replacements at Harveys Resort Hotel Casino.
On April 30, 1996, pursuant to the terms of the Debt Exchange, the Company paid
the holders of the HWW Notes an aggregate of $6 million in cash and issued an
aggregate of $8 million in subordinated notes in exchange for all of the
outstanding HWW Notes and unpaid interest accrued thereon. On such date,
pursuant to the terms of the Equity Exchange, the Company also exchanged
382,500 shares of the Company's common stock for (i) 30% of the equity interests
of HWW, (ii) the rights to an approximately $3 million priority return from HWW
and (iii) an option to acquire an additional 5% of the equity interests in HWW.
On May 22, 1996, the Company completed its public debt offering of the $150
million in Senior Notes. The proceeds, $145.5 million net of underwriting
discounts and commissions, were used to (i) payoff a $10 million note payable to
a private investor, (ii) retire the $19 million principal balance of the note
payable under a riverboat financing agreement, (iii) redeem, for $7.8 million
plus accrued and unpaid interest, the $8 million aggregate principal amount of
subordinated notes issued in the Debt Exchange and (iv) reduce the outstanding
principal balance under the Credit Facility.
In May 1996, in preparation for the public debt offering, the Company negotiated
a release of its guarantee of the amount outstanding under HRHC's reducing
revolving credit facility. The Company paid a fee of approximately $385,000 to
the banks participating in the reducing revolving credit facility in connection
with the release.
19
<PAGE>
As a result of the Debt Exchange, the Equity Exchange, the public debt offering
and the use of proceeds therefrom, and borrowings to fund capital expenditures,
the Company's long-term debt at August 31, 1996 amounted to approximately $173.6
million, compared to approximately $126.7 million at November 30, 1995.
The Company's debt, including the current portion of approximately $2.7
million, consists of the $150 million in Senior Notes, $22 million outstanding
under the Credit Facility, $4 million outstanding under HWW's equipment
financing notes payable to a financing company and approximately $239,000 of
other debt.
The equipment financing agreement entered into by HWW allowed for the financing
of up to $7.5 million of gaming and associated equipment. Under the terms of
the agreement, repayments of principal and interest are due in 36 monthly
installments. The equipment financing agreement is secured by all of the gaming
and associated equipment financed under the agreement. The obligation under the
financing agreement is guaranteed by the Company.
Until October 1996, the maximum available principal balance under the Credit
Facility was $150 million, reduced by outstanding borrowings and letter of
credit exposure. At November 30, 1995 the outstanding borrowings under the
Credit Facility amounted to $115 million and letters of credit exposure amounted
to approximately $1.7 million leaving $33.3 million available. At August 31,
1996 the outstanding borrowings under the Credit Facility amounted to $22
million, the letters of credit exposure had increased to $2.2 million and the
maximum amount available was approximately $125.8 million, subject to compliance
with financial covenants.
In October 1996, the Credit Facility was amended. Among other things the
amendment (i) extended the maturity date from August 16, 2000 to February 15,
2002, (ii) extended the due dates of required repayments of principal, (iii)
relaxed the terms of certain financial covenants and (iv) reduced the maximum
available principal balance to $115 million.
There are no required repayments of principal under the Credit Facility in
fiscal 1996 or 1997. In 1998, required repayments of principal, assuming
maximum principal amounts are outstanding, total $11.5 million. The year-end
maximum principal balance outstanding under the Credit Facility reduces to
$103.5 million in 1998, $92 million in 1999, $74.75 million in 2000 and $57.5
million in 2001. The Company is required to make payments reducing the
principal balance outstanding under the Credit Facility to the applicable
maximum permitted principal balance on October 1 of each of 1998, 1999, 2000
and 2001. The Credit Facility is secured by all of the real and personal
property of (i) Harveys Resort Hotel Casino, (ii) HIMC and (iii) HWW, including
a pledge of the subsidiaries' stock, as well as all of the contracts the Company
has entered into in connection with its ownership and operation of (a)Harveys
Resort Hotel Casino, (b) HIMC and (c) HWW. Interest on borrowings outstanding
under the Credit Facility is payable, at the Company's option, at either the
LIBOR or the prime rate of Wells Fargo Bank, formerly First Interstate Bank of
Nevada, N. A. ('Wells Fargo'), in each case plus an applicable margin. The
applicable margin is determined with
20
<PAGE>
reference to the Company's funded debt to EBITDA ratio. The applicable margins
as of August 31, 1996 were 2.25% with respect to the LIBOR based interest rate,
and 0.75%, with respect to the Wells Fargo prime rate based interest rate.
The Credit Facility contains certain financial and other covenants. The
financial covenants prevent the Company from making any investments in or
advances to affiliates without the prior written consent of the lenders under
the Credit Facility. The covenants allow the declaration and payment of
dividends without the prior written consent of the lenders if certain fixed
charge coverage ratios are maintained. The covenants require the Company to
maintain certain set standards with respect to (i) minimum tangible net worth,
(ii) fixed charge coverage ratios and (iii) minimum annual capital expenditures.
The financial covenants also limit the Company's ability to incur additional
indebtedness.
The Company pays Wells Fargo an annual agency fee of $100,000 for its services
as agent of the lenders under the Credit Facility and an annual non-usage fee
ranging from 3/8 of one percent to 1/2 of one percent of the average daily
amount of the unused portions of funds committed under the Credit Facility,
depending upon the applicable interest rate margin.
The Senior Notes are governed by the Indenture and are general unsecured
obligations of the Company, subordinated in right of payment to all existing and
future Senior Debt of the Company (as defined in the Indenture). The Senior
Notes are guaranteed by each of the Restricted Subsidiaries of the Company (as
defined in the Indenture). Each guarantee is a general unsecured obligation
of the guaranteeing Restricted Subsidiary, subordinated in right of payment to
all existing and future Senior Debt of each guaranteeing Restricted Subsidiary.
At August 31, 1996, the guaranteeing Restricted Subsidiaries were HCCMC, HWW,
HIMC and HLVMC.
Interest on the Senior Notes is payable semi-annually on June 1 and December 1
of each year, commencing December 1, 1996. The Senior Notes are redeemable at
the option of the Company, in whole or in part, at any time on or after June 1,
2001 at prices ranging from 105.313% of the principal amount plus accrued and
unpaid interest, to 100% of the principal amount plus accrued and unpaid
interest beginning June 1, 2004 and thereafter. Upon a Change of Control (as
defined in the Indenture) each holder of the Senior Notes will have the right to
require the Company to repurchase such holder's Senior Notes at 101% of the
principal amount plus accrued and unpaid interest to the repurchase date.
The Indenture contains certain covenants that impose limitation on, among other
things, (i) the incurrance of additional indebtedness by the Company or any
Restricted Subsidiary, (ii) the payment of dividends, (iii) the repurchase of
capital stock and the making of certain other Restricted Payments and Restricted
Investments (as defined in the Indenture) by the Company or any Restricted
Subsidiary, (iv) mergers, consolidations and sales of assets by the Company or
any Restricted Subsidiary, (v) the creation or incurrance of liens on the assets
of the Company or any Restricted
21
<PAGE>
Subsidiary and (vi) transactions by the Company or any of its subsidiaries with
Affiliates (as defined in the Indenture). These limitations are subject to a
number of qualifications and exceptions as described in the Indenture.
The Company believes that its existing cash and cash equivalents, cash flows
from operations, and its borrowing capacity under the Credit Facility are
sufficient to meet the cash requirements of its existing operations, including,
(i) final payments for construction of the Council Bluffs project, (ii) capital
improvements and replacements at the operating properties, (iii) the
construction of a parking garage adjacent to Harveys Wagon Wheel Hotel Casino
and (iv) debt service requirements. The existing sources of cash also provide
the Company some flexibility in potential expansion of current operations or in
its pursuit of new gaming opportunities in existing and emerging jurisdictions.
The realization of such expansion opportunities may require capital investments
in excess of current resources and additional financing may be required. The
Company believes that additional funds could be obtained through additional debt
or equity financing. However, no assurance can be made that such financing
would be available at terms acceptable to the Company, if at all.
CAUTIONARY STATEMENT FOR PURPOSES OF THE 'SAFE HARBOR' PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
The foregoing Management's Discussion and Analysis of Financial Condition and
Results of Operations and the Commitments footnote to the Condensed Consolidated
Financial Statements (Note 8) may contain various 'forward-looking statements'
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Sections 21E of the Securities Exchange Act of 1934, as amended, which represent
the Company's expectations or beliefs concerning future events. Statements
containing expressions such as 'believes', 'anticipates' or 'expects' used in
the Company's press releases and periodic reports on Forms 10-K and 10-Q filed
with the Securities and Exchange Commission are intended to identify forward-
looking statements. The Company cautions that these and similar statements
included in this report and in previously filed periodic reports including
reports filed on Forms 10-K and 10-Q are further qualified by important factors
that could cause actual results to differ materially from those in the forward-
looking statements. Such factors include, without limitation, the following:
increased competition in existing markets or the opening of new gaming
jurisdictions; a decline in the public acceptance of gaming; the limitation,
conditioning or suspension of any of the Company's gaming licenses; increases in
or new taxes imposed on gaming revenues or gaming devices; a finding of
unsuitability by regulatory authorities with respect to the Company's officers,
directors or key employees; loss or retirement of key executives, significant
increases in fuel or transportation prices; adverse economic conditions in the
Company's key markets; severe and unusual weather in the Company's key markets,
adverse results of significant litigation matters. Many of the foregoing
factors have been discussed in the Company's prior Securities and Exchange
Commission filings and, had the amendments to the Securities Act of 1933 and
Securities Exchange Act of 1934 become effective at a different time, would have
been discussed in an earlier filing.
22
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See attached Exhibit Index
(b) Reports on Form 8-K
On June 14, 1996, the Company filed a Current Report on Form 8-K,
under Item 5, Other Events, in order to file the First
Supplemental Indenture, dated June 5, 1996, between the
Registrant and IBJ Schroder Bank and Trust Company, as Trustee.
The First Supplemental Indenture supplements the Indenture dated
May 15, 1996 between the Registrant and IBJ Schroder Bank & Trust
Company, as Trustee for the Registrant's $150 million, 10 5/8%
Senior Subordinated Notes Due 2006.
On July 3, 1996, the Company filed a Current Report on Form 8-K
under Item 4, Changes in Registrant's Certifying Accountant. On
June 27, 1996 Grant Thornton LLP was dismissed as the
Registrant's certifying accountant and Deloitte & Touche LLP was
selected as the principal accountant to audit the Registrant's
financial statements.
23
<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
undersigned thereunto duly authorized.
HARVEYS CASINO RESORTS
-------------------------------------------
Registrant
Date: October 14, 1996
John J. McLaughlin
-------------------------------------------
John J. McLaughlin,
Senior Vice President,
Chief Financial Officer and Treasurer
(Authorized Officer and Principal Financial
Officer)
24
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
- ------- ------------------------------------------------------------- ----
2.1 Acquisition Agreement, dated as of March 28, 1996, between
the Registrant and Mountain City Casino Partners, L. P. (9)
3.1 Restated Articles of Incorporation of the Registrant (1)
3.2 Sixth Amended Bylaws of the Registrant (11)
4.1 Form of Stock Certificate of the Registrant (1)
4.2 Indenture, dated as of April 30, 1996 between the Registrant
and IBJ Schroder Bank and Trust, as Trustee (including form
of Note) (9)
4.3 Indenture, dated as of May 15, 1996 by and among the
Registrant (the 'Issuer') Harveys Wagon Wheel Casino Limited
Liability Company, Harveys C. C. Management Company, Inc.,
Harveys Iowa Management Company, Inc. and Harveys L. V.
Management Company,Inc. (the 'Guarantors') and IBJ Schroder
Bank & Trust Company as Trustee (including form of Note) (10)
4.4 First Supplemental Indenture, dated as of June 5, 1996,
supplementing the Indenture as of May 15, 1996 among the
Registrant (the 'Issuer'), Harveys Wagon Wheel Casino Limited
Liability Company, Harveys C. C. Management Company, Inc.,
Harveys Iowa Management Company, Inc. and Harveys L.V.
Management Company, Inc. (the 'Guarantors'), and IBJ Schroder
Bank and Trust Company as Trustees (12)
10.1 Amended and Restated Loan Agreement, dated April 20, 1989,
between the Registrant and First Interstate Bank of Nevada,
N.A., First Interstate Bank of California, First Interstate
Bank of Oregon, N.A., First Interstate Bank of Washington,
N.A., First Interstate Bank of Denver, N.A., West One Bank,
Idaho, N.A., National Bank of Detroit and First Interstate
Bank of Utah, N.A. (1)
10.2 Amended and Restated Promissory Note, dated April 20, 1989,
between the Registrant and First Interstate Bank of Nevada,
N.A., First Interstate Bank of California, First Interstate
Bank of Oregon, N.A., First Interstate Bank of Washington,
N.A., First Interstate Bank of Denver, N.A., West One Bank,
Idaho, N.A., National Bank of Detroit and First Interstate
Bank of Utah, N.A. (1)
10.3 Rate Reduction Agreement, dated February 27, 1990, between
First Interstate Bank of Nevada, N.A., First Interstate Bank of
California, First Interstate Bank of Oregon, N.A., First
Interstate Bank of Washington , N.A., First Interstate Bank of
Denver, N.A., West One Bank, Idaho, N.A., National Bank of
Detroit and First Interstate Bank of Utah, N.A. and the
Registrant. (1)
10.4 First Amendment to Amended and Restated Loan Agreement, dated
August 30, 1991, between the Registrant and First Interstate
Bank of Nevada, N.A., First Interstate Bank of California,
First Interstate Bank of Denver, N.A., West One Bank, Idaho,
N.A., National Bank of Detroit and First Interstate Bank of
Utah, N.A. (1)
25
<PAGE>
Exhibitt
Number Description Page
- ------- ------------------------------------------------------------- ----
10.5 Second Amended and Restated Promissory Note, dated August 30,
1991, between the Registrant and First Interstate Bank of
Nevada, N.A., First Interstate Bank of California, First
Interstate Bank of Denver, N.A., West One Bank, Idaho, N.A.,
National Bank of Detroit and First Interstate Bank of Utah,
N.A. (1)
10.6 Second Amendment to Amended and Restated Loan Agreement and
Amendment to A/R Note, dated March 30, 1992, between the
Registrant and First Interstate Bank of Nevada, N.A., First
Interstate Bank of California, First Interstate Bank of
Denver, N.A., West One Bank, Idaho, N.A., National Bank of
Detroit and First Interstate Bank of Utah, N.A. (1)
10.7 Letter Agreement, dated November 25, 1992, between the Registrant
and First Interstate Bank of Nevada, N.A., First Interstate Bank
of California, First Interstate Bank of Denver, N.A., West One
Bank, Idaho, N.A., National Bank of Detroit and First Interstate
Bank of Utah, N.A. (1)
10.8 Third Amendment to Amended and Restated Loan Agreement, dated
January 8, 1993, between the Registrant and First Interstate
Bank of Nevada, N.A., First Interstate Bank of California First
Interstate Bank of Denver, N.A., West One Bank, Idaho, N.A.,
NBD Bank, N.A., and First Interstate Bank of Utah, N.A. (1)
10.9 Third Amended and Restated Promissory Note, dated January 15,
1993, between the Registrant and First Interstate Bank of
Nevada, N.A., First Interstate Bank of California, First
Interstate Bank of Denver, N.A., West One Bank, Idaho, N.A.,
NBD Bank, N.A., and First Interstate Bank of Utah, N.A. (1)
10.10 Fourth Amendment to Amended and Restated Loan Agreement (1)
10.11 Net Lease Agreement, dated February 28, 1985, between Park
Cattle Co. and the Registrant (1)
10.12 Lease, dated July 9, 1973, between Park Cattle Co. and the
Registrant (1)
10.13 Deed of Trust with Assignment of Rents and Security
Agreement (Nevada Property), dated March 15, 1985, between
the Registrant and Lawyers Title of Northern Nevada, as
Trustee, and First Interstate Bank of Nevada, N.A., First
Interstate Bank of California, National Bank of Detroit,
First Interstate Bank of Denver, N.A.,First Interstate of
Washington, N.A., and First Interstate Bank of Utah, N.A.
(1)
10.14 First Amendment to Deed of Trust with Assignment of Rents
and Security Agreement (Nevada Property), dated April 20,
1989, between the Registrant and Western Title Company,
Inc.,as Trustee, and First Interstate Bank of Nevada, N.A.,
First Interstate Bank of California, National Bank of
Detroit, First Interstate Bank of Denver, N.A.,First
Interstate Bank of Washington, N.A., First Interstate Bank
of Utah, N.A., First Interstate Bank of Oregon, N.A., and
West One Bank, Idaho, N.A. (1)
26
<PAGE>
Exhibitt
Number Description Page
- ------- ------------------------------------------------------------- ----
10.15 Deed of Trust and Assignment of Rents (California Property),
dated March 15, 1985, between the Registrant and Lawyers
Title Insurance Corporation, as Trustee, and First
Interstate Bank of Nevada, N.A., First Interstate Bank of
California, National Bank of Detroit, First Interstate Bank
of Denver, N.A.,First Interstate Bank of Washington, N.A.,
and First Interstate Bank of Utah, N.A. (1)
10.16 First Amendment to Deed of Trust with Assignment of rents
and Security Agreement (California Property), dated April
20, 1989, between the Registrant and Western Tiel Company,
Inc., as Trustee, and First Interstate Bank of Nevada, N.A.,
First Interstate Bank of California, National Bank of Detroit,
First Interstate Bank of Denver, N.A.,First Interstate of
Washington, N.A., and First Interstate Bank of Utah, N.A.,
First Interstate Bank of Oregon, N.A., and West One Bank Idaho,
N.A. (1)
10.17 Second Amendment to Deed of Trust with Assignment of Rents
and Security Agreement (Nevada Property), dated January 12,
1993, between the Registrant and Western Title Company,
Inc., as Trustee, and First Interstate Bank of Nevada,
N.A., First Interstate Bank of California, First Interstate
Bank of Denver, N.A.,First Interstate Bank of Utah, N.A.,
West One Bank, Idaho, and NBD Bank, N.A. (1)
10.18 Second Amendment to Deed of Trust with Assignment of Rents
and Security Agreement (California Property), dated January
12, 1993, between the Registrant and Western Title Company,
Inc., as Trustee, and First Interstate Bank of Nevada,
N.A., First Interstate Bank of California, First Interstate
Bank of Denver, N.A.,First Interstate Bank of Utah, N.A.,
West One Bank, Idaho, and NBD Bank, N.A. (1)
10.19 Employment Agreement, dated November 1, 1993, between
Richard F. Kudrna, Sr. and the Registrant (1)
10.20 Employment Agreement, dated November 30, 1993, between
Thomas M. Yturbide and the Registrant (1)
10.21 Employment Agreement, dated November 30, 1993, between
William B. Ledbetter and the Registrant (1)
10.22 Collective Bargaining Agreements between the Registrant and
International Alliance of Theatrical Stage Employees and
Moving Picture Machine Operators (1)
10.23 Outside Directors Retirement Plan, Amended (1)
10.24 Director Emerita Resolution - Beverlee Ledbetter (1)
10.25 Supplemental Executive Retirement Plan (1)
10.26 Senior Supplemental Executive Retirement Plan (1)
10.27 Honorary Director Resolution - Vera Gross (1)
10.28 Stockholders Agreement among the Registrant, Lily Pond
Investments, Inc. and Hard Rock Hotel, Inc. (1)
27
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------- -------------------------------------------------------------------------------------------- ----
<S> <C> <C>
10.29 Management Agreement between the Registrant and Hard Rock Hotel, Inc. (1)
10.30 Definitive Agreement between Harveys C.C. Management Company and Mountain City
Casino Partners, L.P. (1)
10.31 Management Agreement between the Registrant and Harveys Wagon Wheel Casino
Limited Liability Company (1)
10.32 Form of Assignment and Assumption Agreement between Mountain City Casino
Partners, L.P. and Harveys Wagon Wheel Casino Limited Liability Company (1)
10.33 Loan Agreement between Harveys Wagon Wheel Casino Limited Liability Company
and Mountain City Casino Partners, L.P. (1)
10.34 Employment Agreement, dated November 29, 1993, between Charles W. Scharer and
the Registrant (1)
10.35 1993 Omnibus Incentive Plan (2)
10.36 1993 Non-Employee Directors Stock Option Program (2)
10.37 Form of Deferred Compensation Agreement and Schedule of 1994 Participants (2)
10.38 Form of Indemnification Agreement for Directors and Officers and Schedule of Indemnities (2)
10.39 Loan Agreement among Hard Rock Hotel, Inc., as borrower, the Registrant,
as guarantor, First Interstate Bank of Nevada, N.A., as agent, and the several lenders
thereunder (2)
10.40 Promissory Note among Hard Rock Hotel, Inc., as borrower, the Registrant, as
guarantor, First Interstate Bank of Nevada, N.A., as agent, and the several lenders
thereunder (2)
10.41 Guaranty of Loan executed by the Registrant (2)
10.42 Amendment No. 1 to 1993 Non-Employee Directors Stock Option Program (2)
10.43 $22,200,000 Construction Loan Agreement between Harveys Wagon Wheel Casino
Limited Liability Company, as borrower, and the Registrant, as lender (3)
10.44 Secured Promissory Note between Harveys Wagon Wheel Casino
Limited Liability Company, as maker, and the Registrant, as holder (3)
10.45 Deed of Trust, Security Agreement and Financing Agreement among Harveys Wagon
Wheel Casino Limited Liability Company, as Grantor, the Public Trustee of the County
of Gilpin, State of Colorado, as trustee, and the Registrant, as beneficiary (3)
28
<PAGE>
Exhibit
Number Description Page
- ------- -------------------------------------------------------------------------------------------- ----
10.46 Security Agreement between Harveys Wagon Wheel Casino Limited Liability
Company, as obligor, and the Registrant, as lender (3)
10.47 Assignment of Rents, Income and Other Contract Rights between Harveys Wagon
Wheel Casino Limited Liability Company, as borrower, and the Registrant, as lender (3)
10.48 Subordination Agreement among 150 Rodeo Partners, Inc., the Registrant, and Harveys
Wagon Wheel Casino Limited Liability Company (3)
10.49 Fifth Amendment to Amended and Restated Loan Agreement, dated November 8, 1994,
between the Registrant, and First Interstate Bank of Nevada, N.A., West One Bank,
Idaho, Society Generale, The Daiwa Bank, Limited, United States National Bank of
Oregon, U.S. Bank of Nevada and First Security Bank of Idaho, N.A. (4)
10.50 First Amendment to Construction Loan Agreement, dated November 1, 1994, between
Harveys Wagon Wheel Casino Limited Liability Company and the Registrant (4)
10.51 Amended and Restated Secured Promissory Note, dated November 1, 1994, between
Harveys Wagon Wheel Casino Limited Liability Company and the Registrant (4)
10.52 First Amendment to Deed of Trust, Security Agreement and Financing Statement, dated
November 1, 1994, between Harveys Wagon Wheel Casino Limited Liability Company
and the Registrant (4)
10.53 First Amendment to Security Agreement, dated November 1, 1994, between Harveys
Wagon Wheel Casino Limited Liability Company and the Registrant (4)
10.54 First Amendment to Assignment of Rents, Income and Other Contract Rights, dated
November 1, 1994, between Harveys Wagon Wheel Casino Limited Liability Company
and the Registrant (4)
10.55 Amended and Restated Subordination Agreement, dated November 1, 1994, by and
between 150 Rodeo Partners, Inc. and the Registrant and Harveys Wagon Wheel Casino
Limited Liability Company (4)
10.56 First Amendment to Loan Agreement, dated November 8, 1994, by and among First
Interstate Bank of Nevada, N.A., Societe Generale, NBD Bank, N.A., United States
National Bank of Oregon, West One Bank, Idaho, First Security Bank of Idaho, N.A.,
The Daiwa Bank, Limited, and U.S. Bank of Nevada and First Interstate of Nevada,
N.A., Hard Rock Hotel, Inc., and Harveys Wagon Wheel, Inc. (4)
10.57 First Amendment to Guaranty of Loan, dated November 8, 1994, between the Registrant
and First Interstate Bank of Nevada, N.A., Societe Generale, NBD Bank, N.A., United
States National Bank of Oregon, West One Bank, Idaho, First Security Bank of Idaho,
N.A., The Daiwa Bank, Limited, and U.S. Bank of Nevada (4)
29
<PAGE>
Exhibit
Number Description Page
- ------- -------------------------------------------------------------------------------------------- ----
10.58 Employment Agreement dated November 17, 1993, by and between the Registrant and
Bob Hall (4)
10.59 Employment Agreement dated January 13, 1994, by and between the Registrant and
Stephen L. Cavallaro (4)
10.60 Excursion Boat Sponsorship and Operations Agreement, dated August 22, 1994, by and
between Iowa West Racing Association and Harveys Iowa Management Company, Inc.
(4)
10.61 Purchase Agreement, dated September 12, 1994, by and between the City of Council
Bluffs and Harveys Iowa Management Co. (4)
10.62 Commitment Letter, dated January 18, 1995, between the Registrant and First Interstate
Bank of Nevada, N.A. (4)
10.63 Form of Deferred Compensation Agreement and Schedule of 1995 Participants (5)
10.64 Long-term Incentive Plan Guidelines (1994-1996 Performance Period) (5)
10.65 Short-term Incentive Plan (5)
10.66 Employment Agreement dated May 9, 1995 by and between the Registrant and Gary
Armentrout. (6)
10.67 Loan Purchase Agreement (with Full Recourse to Seller) dated March 10, 1995 by and
between the Registrant ("Sellers") and First Interstate Bank of Nevada, N.A. ("Buyer")
(6)
10.68 Option Agreement dated March 10, 1995 by and between First Interstate Bank of
Nevada, N.A. and the Registrant. (6)
10.69 Employment Agreement dated August 5, 1995, by and between the Registrant and Gary
R. Selesner. (7)
10.70 Employment Agreement dated August 14, 1995, by and between the Registrant and John
McLaughlin. (7)
10.71 Employment Agreement dated August 14, 1995, by and between the Registrant and
Kevin Servatius. (7)
10.72 Employment Agreement dated August 24, 1995, by and between the Registrant and
Edward B. Barraco. (7)
10.73 Employment Agreement dated August 21, 1995, by and between the Registrant and
David J. Hurst. (7)
</TABLE>
30
<PAGE>
Exhibit
Number Description Page
- ------- ------------------------------------------------------------- ------
10.74 Employment Agreement dated August 21, 1995, by and between
the Registrant and Lou R. Kelmanson. (7)
10.75 Reducing Revolving Credit Agreement, dated as of August 14,
1995, by and among the Registrant and Harveys C.C.
Management Company, Inc., Harveys Iowa Management Company,
Inc., (the "Borrowers")and First Interstate Bank of Nevada,
N.A., First Interstate Bank of California, Bank of the West,
First Security Bank of Idaho, N.A., Imperial Bank, Norwest
Bank of Nebraska, N.A., NBD Bank, Societe Generale, The
Daiwa Bank, Limited, U.S. Bank of Nevada, West One Bank,
Idaho and Argentbank, (the"Lenders"). (7)
10.76 Second Amendment to Loan Agreement, dated November 7, 1995,
by and among First Interstate Bank of Nevada, N. A.,
Societe Generale, NBD Bank, N. A., United States National
Bank of Oregon, West One Bank, Idaho, First Security Bank of
Idaho, N. A., The Daiwa Bank, Limited, U. S. Bank of Nevada,
Hard Rock Hotel, Inc. and Harveys Casino Resorts. (8)
10.77 Second Amended and Restated Reducing Revolving Credit
Promissory Note, dated November 7, 1995 between First
Interstate Bank of Nevada, N. A. as Agent Bank and Hard Rock
Hotel, Inc. (8)
10.78 Second Amendment to Guaranty of Loan, dated November 7,
1995, between Harveys Casino Resorts and First Interstate
Bank of Nevada, N. A., Societe Generale, NBD Bank, N. A.,
United State National Bank of Oregon, West One Bank, Idaho,
First Security Bank of Idaho, N. A., The Daiwa Bank, Limited
and U. S. Bank of Nevada. (8)
10.79 Employment Agreement, dated October 22, 1995 and effective
December 1, 1995 by and between Harveys Casino Resorts and
Thomas M. Yturbide. (8)
10.80 Employment Agreement, dated October 22, 1996 and effective
December 1, 1995 by and between Harveys Casino Resorts and
Charles W. Scharer. (8)
10.81 Modification of Employment Agreement, dated November 21, 1995
by and between Harveys Casino Resorts and Richard F.
Kudrna, Sr. (8)
10.82 Harveys Casino Resorts Management Incentive Plan, approved
August 8, 1995. (8)
10.83 Long-term Incentive Plan Guidelines (1995-1997 Performance
Period) (8)
10.84 1996 Omnibus Incentive Plan (10)
10.85 First Amendment, dated as of May 15, 1996, to Reducing
Revolving Credit Agreement by and among the Registrant,
Harveys C. C. Management Company, Inc., Harveys Wagon Wheel
Casino Limited Liability Company and Harveys Iowa Management
Company, Inc. (the 'Borrowers'), Wells Fargo Bank, N. A.,
Bank of the West, First Security Bank of Idaho, N. A.,
Imperial Bank, Norwest Bank of Nebraska, N. A., NBD Bank,
Societe Generale, The Sumitomo Bank Limited, Chicago Branch,
U. S. Bank of Nevada, West One Bank, Idaho and Argentbank
(the 'Lenders') (11)
31
<PAGE>
Exhibit
Number Description Page
- ------- ------------------------------------------------------------- ------
10.86 Second Amendment, dated as of May 23, 1996, to Reducing
Revolving Credit Agreement by and among the Registrant,
Harveys C. C. Management Company, Inc., Harveys Wagon Wheel
Casino Limited Liability Company and Harveys Iowa Management
Company, Inc. (the 'Borrowers'), Wells Fargo Bank, N. A.,
Bank of the West, First Security Bank of Idaho, N. A.,
Imperial Bank, Norwest Bank of Nebraska, N. A., NBD Bank,
Societe Generale, The Sumitomo Bank Limited, Chicago Branch,
U. S. Bank of Nevada, West One Bank, Idaho and Argentbank
(the 'Lenders') (11)
10.87 Release of Guaranty Agreement, dated May 10, 1996, by and
among the Registrant, the Lenders, the Agent Bank, the Banks
and Hard Rock Hotel, Inc. (13)
21.1 List of Subsidiaries of the Registrant (13)
27 Financial Data Schedule (13)
_______________________________________________
(1) Incorporated herein by reference to Registration Statement
No. 33-70670.
(2) Incorporated herein by reference to the Registrant's Quarterly
Report on Form 10-Q for the period ended February 28, 1994.
(3) Incorporated herein by reference to the Registrant's Quarterly
Report on Form 10-Q for the period ended May 31, 1994.
(4) Incorporated herein by reference to Registrant's Annual Report
on Form 10-K for the period ended November 30, 1994.
(5) Incorporated herein by reference to Registrant's Quarterly
Report on Form 10-Q for the period ended February 28, 1995.
(6) Incorporated herein by reference to Registrant's Quarterly
Report on Form 10-Q for the period ended May 31, 1995.
(7) Incorporated herein by reference to Registrant's Quarterly
Report on Form 10-Q for the period ended August 31, 1995.
(8) Incorporated herein by reference to Registrant's Annual
Report on Form 10-K for the period ended November 30, 1995
(9) Incorporated herein by reference to Registration Statement
No. 333-616
(10) Incorporated herein by reference to Registration Statement
No. 333-3576
(11) Incorporated herein by reference to Registrant's Quarterly
Report on Form 10-Q for the period ended May 31, 1996
(12) Incorporated herein by reference to Registrant's Current
Report on Form 8-K filed June 14, 1996
(13) Filed herewith
32
<PAGE>
EXHIBIT 10.87
RELEASE OF GUARANTY AGREEMENT
THIS RELEASE OF GUARANTY AGREEMENT ('Release Agreement') is made
and entered into as of the 10th day of May, 1996, by and among FIRST
INTERSTATE BANK OF NEVADA, N.A., IMPERIAL BANK, NBD BANK (formerly known as
NBD BANK, N.A.), UNITED STATES NATIONAL BANK OF OREGON, WEST ONE BANK, IDAHO,
FIRST SECURITY BANK OF IDAHO, N.A. and U.S. BANK OF NEVADA (hereinafter
collectively called 'Lenders') and FIRST INTERSTATE BANK OF NEVADA, N.A., as
administrative and collateral agent, for the Lenders, herein in such capacity
called the 'Agent Bank' and together with the Lenders collectively referred
to as the 'Banks', parties of the first part, HARD ROCK HOTEL, INC., a Nevada
corporation, hereinafter called 'Borrower', party of the second part, and
HARVEYS CASINO RESORTS, a Nevada corporation, formerly known as HARVEY'S
WAGON WHEEL, INC., a Nevada corporation, hereinafter called 'Guarantor',
party of the third part.
R_E_C_I_T_A_L_S:
A. Borrower, Guarantor And Banks (The Sumitomo Bank, Limited,
Chicago Branch, having acquired the interest of The Daiwa Bank, Limited by
Assignment, Assumption and Consent Agreement dated as of February 2, 1996;
First Interstate Bank of Nevada, N.A., having acquired the interest of
Societe Generale, by Assignment, Assumption and Consent Agreement dated as of
May 9, 1996; and Imperial Bank having acquired the interest of The Sumitomo
Bank, Limited, Chicago Branch, by Assignment, Assumption and Consent
Agreement dated as of May 10, 1996) entered into a Loan Agreement dated as of
December 13, 1993, as amended by First Amendment to Loan Agreement dated as
of November 8, 1994, and Second Amendment to Loan Agreement dated as of
November 7, 1995 (collectively the 'Loan Agreement'). In this Release
Agreement, all capitalized words and terms not otherwise herein defined shall
have the respective meanings and be construed herein as provide in Section
1.01 of the Loan Agreement. This Release Agreement shall be deemed to
incorporate such words and terms as a part herein in the same manner and with
the same effect as if the same were fully set forth herein.
B. On or about December 13, 1993, Guarantor executed the Guaranty of
Loan, as amended by First Amendment to Guaranty of Loan dated as of November
8, 1994, and as further amended by Second Amendment to Guaranty of Loan dated
as of November 7, 1995 (collectively the 'Guaranty of Loan') in favor of
Lenders for the purpose of guarantying the full and prompt performance of
each and
<PAGE>
every term, covenant, representation, warranty and provision of Borrower
contained in the Loan Agreement and each of the Loan Documents.
C. Guarantor has requested that the Banks agree to release Guarantor
from: (i) all obligations under the Guaranty of Loan, and (ii) all
obligations under the Loan Agreement and any of the Loan Documents under
which Guarantor guaranties the performance of the terms, covenants,
representations, warranties and provisions by Borrower contained in the Loan
Agreement and each of the Loan Documents (collectively the 'Guarantied
Obligations').
D. In consideration of Borrower's prompt performance and compliance
with the terms of the Loan Agreement and each of the Loan Documents and in
further consideration of the terms and conditions hereinafter set forth,
Banks have agreed as of May 10, 1996 (the 'Guaranty Release Effective Date')
to release Guarantor from the Guarantied Obligations.
NOW, THEREFORE in consideration of the foregoing and other good and
valuable considerations, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed as follows:
1. As of the Guaranty Release Effective Date, Banks shall and do
hereby unconditionally and irrevocably release and fully discharge Guarantor
from each and every of the Guarantied Obligations.
2. In consideration of its release from the Guarantied Obligations, on
the Guaranty Release Effective Date: (i) Guarantor shall pay to Agent Bank a
non-refundable fee ('Guaranty Release Fee') in such amount as has been agreed
to by and between Guarantor and Agent Bank in the Guaranty Release Fee Side
Letter executed concurrently herewith, which Guaranty Release Fee shall be
distributed by Agent Bank amongst the Lenders as agreed between them by
separate agreement, and (ii) Guarantor agrees to reimburse Agent Bank for all
reasonable fees and out-of-pocket expenses incurred by Agent Bank in
connection with this Release Agreement, including, but not limited to,
reasonable attorneys' fees of Henderson & Nelson and other like expenses.
3. REPRESENTATIONS AND WARRANTIES. As of the Guaranty Release Effective
Date, Borrower hereby reaffirms and ratifies each and every warranty and
representation included within Article IV of the Loan Agreement. Borrower
further represents that as of the Guaranty Release Effective Date, no Default or
Event of Default has occurred and is continuing under the Loan Agreement or any
of the
<PAGE>
Loan Documents.
4. LOAN AGREEMENT AND LOAN DOCUMENTS UNCHANGED. Except as
specifically set forth in this Release Agreement with respect to the release
of Guarantor from the Guarantied Obligations, the Loan Agreement and each of
the Loan Documents shall remain unchanged and in full force and effect.
5.COUNTERPARTS. This Release Agreement may be executed by the
parties hereto in any number of separate counterparts with the same effect as
if the signatures hereto and hereby were upon the same instrument. All such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Release Agreement to be
executed as of the day and year first above written.
BORROWER: LENDERS:
HARD ROCK HOTEL, INC., FIRST INTERSTATE BANK OF
a Nevada corporation NEVADA, N.A., as a Lender
and as Agent Bank
By Peter A Morton By Grace Bartholet
President Vice President
By Thomas M. Yturbide IMPERIAL BANK
Secretary By Steven K. Johnson
Senior Vice President
GUARANTOR: By Margo L. Gravin
Vice President
HARVEYS CASINO RESORTS,
a Nevada corporation, NBD BANK
formerly known as HARVEY'S (Formerly known as NBD
WAGON WHEEL, INC., a Bank, N.A.)
Nevada corporation
By James Junker,
Authorized Agent
By Charles W. Scharer Vice President
President
UNITED STATES NATIONAL
By Diane Shevlin BANK OR OREGON
Assistant Secretary
By Dan Rice
Vice President
<PAGE>
WEST ONE BANK, IDAHO
By Anthony W. Olbrich
Senior Vice President
FIRST SECURITY BANK OF
IDAHO, N.A.
By David P. Williams
Vice President
U.S. BANK OF NEVADA
By Kurt Imerman
Vice President
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
Name of Subsidiary State of Incorporation or Organization
- ------------------ --------------------------------------
West Ad............................................... Nevada
Wagon Wheel Stages, Inc. ............................. Nevada
Reno Projects, Inc. .................................. Nevada
Harveys C.C. Management Company, Inc. ................ Nevada
Harveys L.V. Management Company, Inc. ................ Nevada
Harveys Iowa Management Company, Inc. ................ Nevada
Harveys Maryland Management Company, Inc. ............ Nevada
Harveys Wagon Wheel Casino Limited Liability Company.. Colorado
Harveys N.Y. Management Company, Inc. ................ Nevada
Harveys Tahoe Management Company, Inc. ............... Nevada
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<PAGE>
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<S> <C>
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<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> AUG-31-1996
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<SECURITIES> 1,998
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0
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<COMMON> 98
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