<PAGE>
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 February 28, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 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 April 7, 1997, the registrant had outstanding 9,822,176 shares of its $.01
par value, common stock.
<PAGE>
HARVEYS CASINO RESORTS
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets,
February 28, 1997 and November 30, 1996 3
Condensed Consolidated Statements of
Operations For the Three Months Ended
February 28, 1997 and February 29, 1996 4
Condensed Consolidated Statements of Cash
Flows For the Three Months Ended February
28, 1997 and February 29, 1996 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
HARVEYS CASINO RESORTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
ASSETS
<TABLE>
<CAPTION> February 28, November 30,
1997 1996
---------- ------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 18,868 $ 21,121
Accounts and notes receivable, net 7,388 8,760
Prepaid expenses 5,228 3,992
Other current assets 7,280 7,275
-------- -----------
Total current assets 38,764 41,148
Property and equipment, (net of accumulated
depreciation of $117,050 and $112,977) 315,337 314,908
Notes receivable 2,193 4,868
Other assets 17,218 17,607
Investment in unconsolidated affiliate 15,455 15,237
--------- -----------
Total assets $ 388,967 $ 393,768
========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 2,643 $ 2,753
Accounts and contracts payable 5,440 9,542
Accrued expenses 19,878 17,140
--------- -----------
Total current liabilities 27,961 29,435
Long-term debt, net of current portion 178,004 181,354
Deferred income taxes 19,339 19,339
Other liabilities 14,137 13,877
-------- -----------
Total liabilities 239,441 244,005
--------- -----------
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 9,832,322
and 9,818,322 98 98
Additional paid-in capital 38,855 38,659
Retained earnings 111,120 111,607
Treasury stock, at cost; 10,113 shares
and 10,036 shares (152) (151)
Net unrealized loss on marketable securities (31) (25)
Deferred compensation (364) (425)
---------- ----------
Total stockholders' equity 149,526 149,763
---------- ----------
Total liabilities and stockholders' equity $ 388,967 $ 393,768
========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<PAGE>
HARVEYS CASINO RESORTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
February 28,1997 February 29,1996
<S> <C> <C>
Revenues
Casino $ 43,998 $ 36,935
Lodging 6,946 6,065
Food and beverage 9,108 8,428
Other 2,087 1,541
Management fees and joint venture 993 1,060
Less: Casino promotional allowances (4,578) (4,555)
------------- ----------
Total net revenues 58,554 49,474
------------- ----------
Costs and expenses
Casino 22,368 19,763
Lodging 3,058 2,289
Food and beverage 6,540 4,346
Other operating 664 645
Selling, general and administrative 16,905 14,385
Depreciation and amortization 4,420 3,561
Pre-opening expenses - 3,590
---------- ----------
Total costs and expenses 53,955 48,579
----------- ----------
Operating income 4,599 895
----------- -----------
Other income (expense)
Interest income 43 197
Interest expense (4,950) (2,151)
Minority interest in loss of consolidated
subsidiary - 167
Other, net 315 (4)
----------- -----------
Total other income (expense) (4,592) (1,791)
----------- -----------
Income (loss) before income taxes 7 (896)
Income tax (provision) benefit (3) 320
----------- -----------
Net income (loss) $ 4 $ (576)
=========== ===========
Net income (loss) per common share $ 0.00 $ (0.06)
=========== ===========
Dividends declared per common share $ 0.05 $ 0.04
=========== ==========
Weighted average common shares used
in calculating net income (loss)
per common share 9,851,672 9,483,449
============ ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<PAGE>
HARVEYS CASINO RESORTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
-------------------
February 28, February 29,
------------ -----------
1997 1996
------------ -----------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 4 $ (576)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities
Depreciation and amortization 4,420 3,561
Other, net 1,307 7,932
--------- - ---------
Net cash provided by operating activities 5731 10,917
---------- ---------
Cash flows from investing activities
Capital expenditures (7,610) (9,655)
Proceeds from disposition of assets 3,510 -
Other, net (129) 167
---------- ---------
Net cash used in investing activities (4,229) (9,488)
---------- ---------
Cash flows from financing activities
Principal payments on long-term debt (4,815) (25,504)
Dividends paid (491) (376)
Proceeds from long-term debt 1,500 29,000
Other, net 51 36
---------- --------
Net cash (used in) provided by
financing activities (3,755) 3,156
---------- ---------
(Decrease) increase in cash and cash equivalents (2,253) 4,585
Cash and cash equivalents at beginning of period 21,121 10,493
----------- ---------
Cash and cash equivalents at end of period $ 18,868 $ 15,078
=========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<PAGE>
HARVEYS CASINO RESORTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation and Consolidation - Harveys Casino Resorts, a
Nevada corporation,(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.
Additionally, the Company's wholly-owned subsidiary, Harveys Iowa
Management Company, Inc. ('HIMC') is the owner and operator of Harveys
Casino Hotel, 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.
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 the loss from
HWW for the three months ended February 29, 1996.
The condensed consolidated balance sheet as of November 30, 1996 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, results of operations and cash flows have been included. The
results of operations for the interim periods should not be considered
indicative of results for a full fiscal year.
<PAGE>
1. Basis of Presentation and Consolidation (continued)
Certain prior year period amounts have been reclassified to conform to
the current period presentation. These reclassifications had no effect
on net income (loss).
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, 1996.
2. Net Income (Loss) Per Common Share - Net income (loss) per common 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. 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 nonrecurring in nature. Approximately $3.6 million of pre-opening
expenses were expensed in the first quarter of 1996 in conjunction with
the Company's opening of HIMC's riverboat casino in Council Bluffs, Iowa
on January 1, 1996.
4. Recently Adopted Accounting Standards - The Financial Accounting
Standards Board ('FASB') issued Statement of Financial Accounting
Standards ('SFAS') No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, in March 1995. This
statement was adopted by the Company for the fiscal year beginning
December 1, 1996 and requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The adoption of SFAS No. 121,
during the first quarter of fiscal 1997, did not have an effect
on the financial position or results of operations of the Company.
The FASB issued SFAS No. 123, Accounting for Stock-Based Compensation, in
October 1995. This statement was adopted by the Company for the fiscal
year beginning December 1, 1996 and requires certain disclosures about
the impact on results of operations of the fair value of stock-based
employee compensation arrangements. Management intends to continue to
account for stock-based employee compensation arrangements in accordance
with Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, and accordingly adoption of SFAS No. 123 did not
have a significant effect on the financial position or results of
operations of the Company. The Company will include the pro forma
effects of this statement in its notes to financial statements for the
fiscal year ending November 30, 1997.
<PAGE>
5. Recently Issued Accounting Standards - The FASB has issued SFAS No. 128,
Earnings Per Share, which (a) simplifies current standards by
eliminating the presentation of primary earnings per share ('EPS') and
requiring the presentation of basic EPS, which includes no potential
common shares and thus no dilution, (b) requires companies with
complex capital structures to present basic and diluted EPS on the face
of the income statement and, (c) eliminates the modified treasury
stock method of computing potential shares. SFAS No. 128 will be
effective for the Company beginning December 1, 1997, including
interim periods ending after that date. On adoption, restatement of all
prior-period EPS data presented will be required. The Company has not yet
determined what effect, if any, the adoption of SFAS No. 128 will have on
the Company's EPS.
6. Commitments - The Company has commenced construction of a parking
facility adjacent to Harveys Wagon Wheel Hotel/Casino in Central
City, Colorado. As currently designed, the facility will accommodate
approximately 550 automobiles and is scheduled for completion
in the summer of 1997. The Company has entered into various contracts or
agreements relative to the construction of the parking facility. The
cost of the project, as currently planned, is estimated to be
approximately $10.8 million. Through February 28, 1997, the Company had
expended approximately $4.5 million.
7. Summarized Financial Information of Subsidiaries - The 10 5/8% Senior
Subordinated Notes due 2006, (the "Senior Subordinated 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
unaudited 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.
<PAGE>
7. Summarized Financial Information of Subsidiaries (continued)
<TABLE>
<CAPTION>
February 28, 1997 November 30, 1996
<S> <C> <C>
Balance Sheet Data (in thousands)
Assets
Current assets $ 14,208 $ 13,952
Noncurrent assets 192,871 191,279
----------- ------------
Total assets $ 207,079 $ 205,231
=========== ============
Liabilities and Stockholder's Equity
Current liabilities $ 33,958 $ 35,203
Noncurrent liabilities 123,792 122,414
Minority interest in subsidiary 2,041 2,098
Stockholder's equity 47,288 45,516
----------- ------------
Total liabilities and stockholder's
equity $ 207,079 $ 205,231
=========== ============
Three Months Ended
February 28,1997 February 29, 1996
Statement of Operations Data(in thousands)
Net revenues $ 33,880 $ 21,615
Costs and expenses 27,807 20,542
Other expense ( 30) (524)
Income tax provision ( 2,438) ( 196)
----------- ------------
Net income $ 3,605 $ 353
=========== ============
Statement of Cash Flows Data (in thousands)
Net cash provided by operating
activities $ 5,597 $ 7,288
Net cash used in investing activities (5,311) (8,363)
Net cash (used in) provided by
financing activities (826) 7,553
----------- ------------
(Decrease) increase in cash and cash
equivalents $ (540) $ 6,478
=========== ============
</TABLE>
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
- --------
The Company currently owns and operates Harveys Resort Hotel/Casino on the south
shore of Lake Tahoe, Nevada, Harveys Wagon Wheel Hotel/Casino in Central City,
Colorado and Harveys Casino Hotel in Council Bluffs, Iowa. Additionally, the
Company owns a 40% equity interest in and manages the Hard Rock Hotel and Casino
in Las Vegas, Nevada.
The following table presents certain operating results for the Company's
properties. The operating results for Harveys Resort Hotel/Casino have been
presented excluding the effects of corporate and new business development
expenses. Those expenses have been presented under the caption "Corporate and
Development". On April 30, 1996, the Company acquired the 30% minority interest
in HWW. As a result of the acquisition, Harveys Wagon Wheel Hotel/Casino and
HWW became wholly owned by the Company. The riverboat casino portion of Harveys
Casino Hotel opened on January 1, 1996 and the land-based facilities opened on
May 24, 1996. The operating results of Harveys L. V. Management Company consist
of fees earned by such entity for managing the operations of the Hard Rock Hotel
and Casino and the 40% equity interest in the income or loss of the Hard Rock
Hotel and Casino.
<TABLE>
<CAPTION>
Three Months Ended
February 28, 1997 February 29, 1996
(dollars in thousands)
<S> <C> <C>
Net Revenues:
Harveys Resort Hotel/Casino $ 24,674 $ 27,858
Harveys Wagon Wheel Hotel/Casino 10,283 9,684
Harveys Casino Hotel - Iowa 22,604 10,872
Harveys L.V. Management Company 993 1,060
Operating Income (Loss):
Harveys Resort Hotel/Casino $ 1,194 $ 2,386
Harveys Wagon Wheel Hotel/Casino 1,571 1,303
Harveys Casino Hotel - Iowa (1) 3,564 (1,232)
Harveys L. V. Management Company 938 1,003
Corporate and Development (2,668) (2,565)
EBITDA (2):
Harveys Resort Hotel/Casino $ 3,181 $ 4,605
Harveys Wagon Wheel Hotel/Casino 2,321 2,074
Harveys Casino Hotel - Iowa (1) 5,094 2,874
Harveys L. V. Management Company 993 1,058
Corporate and Development (2,571) (2,565)
</TABLE>
(1) The operating loss for the first quarter of fiscal 1996 includes
approximately $3.6 million of pre-opening expenses. These expenses
have been excluded in the EBITDA calculation for that period.
(2) 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.
<PAGE>
<PAGE>
Results of Operations, Quarter Ended February 28, 1997 Compared to Quarter
Ended February 29, 1996.
The Company's consolidated net revenues for the first quarter of fiscal 1997
amounted to approximately $58.6 million, a new record for the Company's first
quarter and an increase of $9.1 million, or 18.4%, over net revenues recorded
in the first quarter of fiscal 1996. The improvement was attributable to the
$11.7 million increase in net revenues produced by Harveys Casino Hotel. Net
revenues for the first quarter of fiscal 1997 from this Council Bluffs, Iowa
property were provided by a full three months of operations of the complete
facility while the first quarter of fiscal 1996 provided two months of revenues
from the riverboat casino. Net revenues from the Company's Lake Tahoe property
declined by approximately $3.2 million, or 11.4%, the result of adverse weather
conditions and severe flooding in northern Nevada and in many of the northern
California communities that provide many of the Lake Tahoe property's customers.
Mud slides triggered by the inclement weather closed U. S. Highway 50, the major
link between the south shore of Lake Tahoe and northern California, for 42 days
of the first quarter. Harveys Wagon Wheel Hotel/Casino experienced a 6.2%
increase in net revenues, up $0.6 million while the revenue contribution from
the management fees and equity in earnings from the Hard Rock Hotel and Casino
remained relatively level at approximately $1.0 million.
Casino revenues for the first quarter of fiscal 1997, enhanced by a full quarter
of operations in Council Bluffs, amounted to approximately $44 million, an
improvement of $7.1 million over the comparable quarter of the prior year. The
three months of gaming activity on board the riverboat produced an increase of
approximately $9 million in casino revenues compared to those produced during
the first two months of casino operations at the Council Bluffs property during
the first quarter of fiscal 1996. The Company's Lake Tahoe property suffered a
decline in casino revenues of approximately $3 million, or 16.9 %, as a result
of the adverse weather and road conditions. Harveys Wagon Wheel Hotel/Casino
produced an increase of approximately $1.1 million in casino revenue over the
prior year comparable quarter. Casino costs and expenses increased for the
comparable quarterly periods, up $2.6 million to $22.4 million for the current
year period. The Council Bluffs casino accounted for $3.2 million of the
increase while the Colorado operations accounted for approximately $0.7 million
of the increase. The Lake Tahoe operations produced a $1.3 million improvement
in casino costs due to lower payroll and related costs and the reduction of
other operating costs in reaction to the lower casino volume resulting from the
impact of the adverse weather conditions.
Lodging revenues for the fiscal 1997 first quarter improved by approximately
$0.9 million over the prior year first quarter and amounted to $6.9 million.
The opening of the hotel facility in Council Bluffs, which was under
construction at the end of the first quarter of fiscal 1996, contributed $1.0
million accounting for all of the quarter-over-quarter increase. Lodging profits
improved by approximately $0.1 million. However, as expected, due to promotional
pricing of rooms at the Company's new hotel in Council Bluffs, total lodging
costs and expenses increased at a higher rate than lodging revenue.
<PAGE>
Food and beverage revenues for the current fiscal year first quarter amounted to
$9.1 million, an improvement of nearly $0.7 million, or 8.1%, over the prior
year first quarter. Food and beverage revenue from the Council Bluffs property,
which included revenues from the land-based facilities in 1997, contributed an
increase of approximately $2.4 million. That increase was offset by declines at
Lake Tahoe, precipitated by the effects of the adverse weather, and at Central
City as the result of outsourcing, during the second quarter of fiscal 1996, the
food service and a portion of the beverage service to an unaffiliated management
company whose facilities at the property include a Tony Roma's Famous For Ribs
restaurant and a Tony Roma's Express. Food and beverage profits and margins
declined for the quarter-to-quarter comparison primarily as a result of the
decision to attractively price the food and beverage offerings at the Council
Bluffs property to attract local customers.
Other revenues and the contribution from management fees and equity in the
earnings from the Hard Rock Hotel and Casino remained relatively level at
approximately $2.6 million in the aggregate.
Selling, general and administrative expenses increased by approximately $2.5
million, or 17.5%, to $16.9 million for the current fiscal year first quarter.
The three months of operations for the first quarter of fiscal 1997 in Council
Bluffs accounted for approximately $2.7 million of the increase. The Lake Tahoe
operations recognized an improvement in overall selling, general and
administrative expenses of approximately $0.4 million from the first quarter of
fiscal 1996 compared to the current fiscal year first quarter, while these
expenses increased by less than $0.2 million at the Central City property.
Depreciation and amortization expenses increased by approximately $0.9 million.
The increase was associated with the expanded facilities in Council Bluffs.
With the opening of the Council Bluffs riverboat casino in the first quarter of
fiscal 1996, the Company recognized approximately $3.6 million of pre-opening
expenses. These charges had previously been incurred in connection with the
development of the property and deferred until operations commenced.
Interest expense, net of interest income and interest capitalized, increased by
approximately $3.0 million to $4.9 million for the first quarter of fiscal 1997.
The increase was attributable to the Senior Subordinated Notes which were issued
in May 1996, and to the effect of capitalizing approximately $1.1 million of
interest in the first quarter of fiscal 1996 in connection with the construction
of the Council Bluffs facilities compared to the effect of capitalizing
approximately $0.1 million of interest in the current year first quarter in
connection with the construction of the parking facility in Central City.
The fiscal 1997 first quarter produced break-even results compared to a loss of
approximately $0.6 million for the prior fiscal year first quarter. If
pre-opening expenses, net of taxes, are excluded from the results net income of
approximately $1.7 million would have been recognized for the prior fiscal year
first quarter.
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The Company's primary sources of liquidity and capital resources during the
first quarter of fiscal year 1997 have been cash flow of approximately $5.7
million from operations and the net proceeds of approximately $3.5 million from
the sale of the Company's note receivable from an unrelated party and the sale
of the Company's airplane.
At February 28, 1997, the Company had approximately $18.9 million of cash and
cash equivalents and a maximum of approximately $86 million available under a
reducing revolving credit agreement with a consortium of banks ( the "Credit
Facility"), subject to compliance with certain financial covenants.
During the first quarter of fiscal 1997, the Company expended approximately $1.3
million in cash relative to construction payables and retentions associated with
the construction of the hotel and convention center portion of Harveys Casino
Hotel in Council Bluffs and expended approximately $2.3 million in cash relative
to the construction of a parking garage at Harveys Wagon Wheel Hotel/Casino in
Central City, Colorado. Additionally, the Company made cash payments for
dividends of approximately $0.4 million during the quarter, incurred additional
cash expenditures of approximately $4.0 million in connection with capital
improvements and replacements and made net cash payments of approximately $3.3
million reducing the Company's outstanding borrowings.
The Company expects that its primary capital needs for the remainder of fiscal
year 1997 will include (a) approximately $1.5 million for the payment of
construction retentions relative to the hotel and convention center portion of
Harveys Casino Hotel in Council Bluffs, (b) approximately $6.3 million for the
completion of construction of a parking garage adjacent to Harveys Wagon Wheel
Hotel/Casino, (c) approximately $13.0 million of capital expenditures at the
Company's current facilities, and (d) dividend payments and debt service.
The Company's debt at February 28, 1997, including the current portion of
approximately $2.6 million amounted to $180.6 million and consisted of $150
million of Senior Subordinated Notes, $27.5 million outstanding under the Credit
Facility, $2.9 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.
<PAGE>
The maximum available principal balance under the Credit Facility at February
28, 1997 was $115 million, reduced by outstanding borrowings and letters of
credit exposure. At February 28, 1997 the outstanding borrowings under the
Credit Facility amounted to $27.5 million, the letters of credit exposure was
$1.5 million and the maximum amount available was approximately $86 million,
subject to compliance with financial covenants.
There are no required repayments of principal under the Credit Facility in
fiscal 1997. The Credit Facility is secured by all of the real and personal
property of (a) Harveys Resort Hotel/Casino, (b) HIMC, and (c) HWW, as well as
all of the contracts the Company has entered into in connection with its
ownership and operation of (i) Harveys Resort Hotel/Casino, (ii) HIMC, and
(iii) HWW. Additional security is provided by a pledge of the stock of the
following subsidiaries of the Company: HLVMC, HCCMC, HIMC and Reno Projects,
Inc., a Nevada corporation, which is wholly owned by the Company. Interest on
borrowings outstanding under the Credit Facility is payable, at the Company's
option, at either the London Inter-Bank Offering Rate ('LIBOR') or the prime
rate of Wells Fargo Bank, National Association ("Wells Fargo"), in each case
plus an applicable margin. The applicable margin is determined with reference
to the Company's funded debt to EBITDA ratio. The applicable margins as of
February 28, 1997 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 (a) minimum tangible net worth, (b) fixed
charge coverage ratios, and (c) minimum annual capital expenditures. The
financial covenants also limit the Company's ability to incur additional
indebtedness. The Company was in compliance with these covenants at February
28, 1997.
The Senior Subordinated 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 Subordinated 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 February 28, 1997, the
guaranteeing Restricted Subsidiaries were HCCMC, HWW, HIMC and HLVMC.
Interest on the Senior Subordinated Notes is payable semi-annually on June 1 and
December 1 of each year. The Senior Subordinated Notes will mature on June 1,
2006. The Senior Subordinated 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
<PAGE>
thereafter. Upon a Change of Control (as defined in the Indenture) each holder
of the Senior Subordinated Notes will have the right to require the Company to
repurchase such holder's Senior Subordinated 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 (a) the incurrance of additional indebtedness by the Company or any
Restricted Subsidiary, (b) the payment of dividends, (c) 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, (d) mergers, consolidations and sales of assets by the Company or
any Restricted Subsidiary, (e) the creation or incurrance of liens on the
assets of the Company or any Restricted Subsidiary, and (f) 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 was in compliance with
these covenants at February 28, 1997.
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 for the
remainder of fiscal year 1997, including (a) final payments for construction of
the Council Bluffs project, (b) capital improvements and replacements at the
operating properties, (c) the construction of a parking garage adjacent
to Harveys Wagon Wheel Hotel/Casino, and (d) dividend and 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.
<PAGE>
<PAGE> CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR' PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This document includes 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. All forward-looking statements involve risks and uncertainties.
Although the Company believes its expectations are based upon reasonable
assumptions within the bounds of its knowledge of its business and operations,
there can be no assurances that actual results will not materially differ from
expected results. 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.
Readers are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date thereof. The Company undertakes no
obligation to publicly release any revisions to such forward-looking statements
to reflect events or circumstances after the date thereof.
<PAGE>
<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
None
<PAGE>
<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: April 11, 1997 /S/ John J. McLaughlin
---------------------------------
John J. McLaughlin,
Senior Vice President, Chief Financial
Officer and Treasurer
(Authorized Officer)
<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
--------------------------------------------------------------
3.1 Restated Articles of Incorporation of the Registrant (1)
3.2 Sixth Amended Bylaws of the Registrant (2)
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) (3)
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 asTrustee
(including form of Note) (4)
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 & TrustCompany as Trustee (5)
10.1 Modification of Employment Agreement, dated November 27, 1996
between John McLaughlin and the Registrant (6)
10.2 Extension of Employment Agreement dated February 10, 1997 between
Stephen L. Cavallaro and the Registrant (6)
10.3 1997 Deferred Compensation Participants and Form of Agreement (6)
27 Financial Data Schedule (6)
- -------------------------------------------------------------------------------
(1) Incorporated herein by reference to Registration Statement No.33-70670
(2) Incorporated herein by reference to Registrant's Quarterly Report on
Form 10-Q for the period ended May 31, 1996
(3) Incorporated herein by reference to Registration Statement No.333-616
(4) Incorporated herein by reference to Registration Statement No.333-3576
(5) Incorporated herein by reference to Registrant's Current Report on
Form 8-K filed June 14, 1996
(6) Filed herewith
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 18,868
<SECURITIES> 471
<RECEIVABLES> 7,717
<ALLOWANCES> 324
<INVENTORY> 3,326
<CURRENT-ASSETS> 38,746
<PP&E> 432,387
<DEPRECIATION> 117,050
<TOTAL-ASSETS> 388,961
<CURRENT-LIABILITIES> 27,961
<BONDS> 178,004
0
0
<COMMON> 98
<OTHER-SE> 149,428
<TOTAL-LIABILITY-AND-EQUITY> 388,967
<SALES> 11,195
<TOTAL-REVENUES> 58,554
<CGS> 4,381
<TOTAL-COSTS> 32,630
<OTHER-EXPENSES> 21,325
<LOSS-PROVISION> 160
<INTEREST-EXPENSE> 4,950
<INCOME-PRETAX> 7
<INCOME-TAX> 3
<INCOME-CONTINUING> 4
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
<PAGE>
MODIFICATION OF EMPLOYMENT AGREEMENT
THIS MODIFICATION, made and entered into this 27th day of November, 1996, by and
between HARVEYS CASINO RESORTS, a Nevada corporation, hereinafter referred to as
'Harveys', and/or 'Employer', and JOHN MCLAUGHLIN, hereinafter referred to as
Employee', is as follows:
WITNESSETH:
WHEREAS, Harveys and Employee did, on the 14th day of August, 1995, execute an
Employment Agreement (the 'Agreement') and
WHEREAS, Harveys desires to continue to engage the services of Employee, who is
desirous of continued employment by Harveys under the terms and conditions as
set forth herein; and
WHEREAS, the parties desire to amend the Agreement as of the date hereof in the
follow particulars:
A. Section 3.01 shall be modified by extending the term of employment for two
(2) additional years commencing the 18th day of September, 1997, and terminating
on the 17th day of September, 1999, unless further extended by mutual agreement
of the parties.
B) Section 3.01 shall also be modified by adding the following language:
Effective the 1st day of December, 1996, Employee's annual salary shall be
increased to $210,000.00 per annum.'
C) Paragraph 6.01 shall be modified by adding the following language:'Employee's
performance shall be evaluated by the President/CEO at least annually and any
salary adjustments shall be effective as of the annual anniversary date of
commencement of employment.'
Where not inconsistent herewith, the remaining terms and conditions of the
Agreement shall remain in full force and effect and shall be deemed restated
herein as if set forth herein verbatim.
DATED this 27th day of November, 1996
EMPLOYEE: John McLaughlin
EMPLOYER: Harveys Casino Resorts, a Nevada Corporation
Charles W. Scharer, Chief Executive Officer
<PAGE>
EXTENSION OF EMPLOYMENT AGREEMENT
THIS EXTENSION AGREEMENT is made and entered into this 10th day of February,
1997, by and between HARVEYS CASINO RESORTS, a Nevada corporation, hereinafter
referred to as 'Harveys', and STEPHEN L. CAVALLARO, hereinafter referred to as
'Employee', as follows:
WITNESSETH:
WHEREAS, Harveys and Employee did, on the 2nd day of February, 1996, enter into
an Employment Agreement (the 'Agreement') superseding a prior Employment
Agreement dated the 13th day of January, 1994; and
WHEREAS, pursuant to Paragraph 3.01 of the Agreement, Employee agreed to be
employed by Harveys for a period of three (3) years commencing the 1st day of
February, 1996, and terminating on the 31st day of January, 1999; and
WHEREAS, Harveys and Employee desire to extend the term of employment and
clarify Employee's vacation time;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained and other good and valuable consideration receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
a)Paragraph 3.01 of the Agreement shall be deleted and, in lieu thereof,
the following language added:
3.01 Employer hereby employs the Employee, and Employee hereby agrees to be
employed by Harveys for a period of four (4) years commencing on the 1st day of
February, 1996, to the 31st day of January, 2000.
b) Paragraph 7.03 shall be amended by deleting the first sentence thereof
and substituting the following:
7.03 Employee shall be entitled to three (3) weeks paid vacation during each
twelve (12) months of the term of employment as set forth in 3.01 hereinabove
and, commencing in the third twelve-month period, i. e. February 1, 1998, and
continuing during each successive twelve-month period thereafter, said vacation
period shall be increased to four (4) weeks.
Where not inconsistent herewith, the parties hereto republish and reaffirm the
terms and conditions of the Agreement as if set forth herein verbatim.
DATED this 10th day of February, 1997
EMPLOYEE: Stephen L. Cavallaro
EMPLOYER: Harveys Casino Resorts, a Nevada Corporation
Charles W. Scharer, Chief Executive Officer
<PAGE>
1997 DEFERRED COMPENSATION PARTICIPANTS
Name Title Percent
- ---- ----- -------
AIAZZI, Gary Director of Property Development 2.0
CAVALLARO, Steve C.O.O. of Subsidiary Properties 2.5
GOLDBERG, Arthur Director of Comp. & Benefits & Risk Mgmt. 10.0
HEWITT, John Corporate Controller 5.0
SCHARER, Chuck President/ Chief Executive Officer 10.0
EWALD, Sue V.P., Property Operations 10.0
FLETCHER, Bill Director of Player Development & Casino
Services 12.0
HERBACK, Phil Director of Facilities Management 14.0
STEPHENS, Willie V. P. of Casino Operations 8.0
FRENCH, Bill Director of Food & Beverage 8.0
WELCH, Verne Sr. V. P./General Manager 15.0
<PAGE>
Exhibit A
HARVEYS CASINO RESORTS
DEFERRED COMPENSATION PLAN
ENROLLMENT FORM
I, , hereby elect to enroll in the Deferred
Compensation Plan for eligible executives and defer percent ( %) of my
annual compensation during the 1997 plan year, in accordance with the Deferred
Compensation Agreement of Harveys Casino Resorts.
I elect to receive such deferred compensation:
A. Date of Pay-out (Select One)
1. Upon Termination
--------
2. At Age 64
--------
AND
B. Method of Distribution (Select One)
1. In a Lump Sum Distribution
--------
2. In Equal Installments
Over a Five-Year Period
--------
I understand that such election is irrevocable and may not be changed, although
I may change the percentage of annual compensation to be deferred during future
plan years during the annual enrollment period.
-----------------------------------
(Signature)
-----------------------------------
(Date)
<PAGE>
Exhibit B
HARVEYS CASINO RESORTS
DEFERRED COMPENSATION AGREEMENT
BENEFICIARY DESIGNATION FORM
You can designate one or more persons to be your beneficiary in the event of
your death. If there is not a surviving spouse or child(ren), and no beneficiary
is designated, payments will be made to your estate. You may change your
beneficiary at any time.
I designate the following person(s) as my beneficiary(ies):
Primary Beneficiary(ies)
Name Relationship SS# %
- -----------------------------------------------------------------
- -------------------------------------------------------------------
Secondary Beneficiary(ies)
Name Relationship SS# %
- -------------------------------------------------------------------
- -------------------------------------------------------------------
- -------------------------------------------------------------------
In the event of one or more of the contingent beneficiary(ies) death, their
interest shall lapse and their percentage will pass to the remaining
beneficiary(ies) in equal amounts.
Nevada is a community property state; therefore, if you select a primary
beneficiary(ies) other than your spouse, your spouse must sign this form as
indication of their knowledge and consent.
- --------------------------------------- -----------------
(Your Signature) (Date)
- --------------------------------------- -----------------
(Your Spouse's Signature) (Date)
<PAGE>
Exhibit C
HARVEYS CASINO RESORTS
DEFERRED COMPENSATION ANNUAL ENROLLMENT
I, , hereby elect to re-enroll in the Plan and defer
% of my annual compensation during the 1997 plan year in accordance with the
Deferred Compensation Agreement of Harveys Casino Resorts.
-------------------------------
(Signature)
------------------------------
(Date)
