FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the period ended June 30, 1994
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
Commission file number: 1-7244
BALLY ENTERTAINMENT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-2512405
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8700 West Bryn Mawr Avenue, Chicago, Illinois 60631
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 399-1300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes: X No:
As of August 1, 1994, 46,927,493 shares of the registrant's Common
Stock, par value $.66-2/3, were outstanding.
<PAGE>
BALLY ENTERTAINMENT CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial statements:
Condensed consolidated balance sheet at June 30, 1994
and December 31, 1993 (unaudited)
Condensed consolidated statement of operations
(unaudited)
Six months ended June 30, 1994 and 1993
Condensed consolidated statement of operations
(unaudited)
Three months ended June 30, 1994 and 1993
Condensed consolidated statement of stockholders'
equity (unaudited)
Six months ended June 30, 1994
Condensed consolidated statement of cash flows
(unaudited)
Six months ended June 30, 1994 and 1993
Notes to condensed consolidated financial statements
(unaudited)
Item 2. Management's discussion and analysis of
financial condition and results of operations
PART II. OTHER INFORMATION
Item 1. Legal proceedings
Item 4. Submission of matters to a vote of
security holders
Item 6. Exhibits and reports on Form 8-K
SIGNATURE PAGE
<PAGE>
<TABLE>
Bally Entertainment Corporation
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
<CAPTION>
June 30 December 31
1994 1993
- ---------------------------------------------------------------------
(In thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents. . . . . . . . . . . . $ 158,355 $ 192,078
Marketable securities, at fair value. . . . 14,085
Receivables, less allowance for doubtful
accounts ($9,307 and $7,872). . . . . . . 28,699 33,747
Deferred income taxes . . . . . . . . . . . 4,756
Other current assets. . . . . . . . . . . . 15,604 14,354
---------- ----------
Total current assets. . . . . . . . . . . 216,743 244,935
Property and equipment, at cost less
accumulated depreciation ($417,898 and
$392,028) . . . . . . . . . . . . . . . . . 1,202,185 1,177,136
Other assets. . . . . . . . . . . . . . . . . 88,736 83,266
Investment in and net advances to
discontinued operations . . . . . . . . . . 282,797 344,372
Intangible assets, at cost less accumulated
amortization ($22,287 and $20,208). . . . . 124,699 124,546
---------- ----------
$1,915,160 $1,974,255
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . $ 22,719 $ 33,444
Income taxes payable. . . . . . . . . . . . 33,813 43,674
Deferred income taxes . . . . . . . . . . . 10,490
Accrued liabilities . . . . . . . . . . . . 120,871 116,227
Current maturities of long-term debt. . . . 9,044 7,631
---------- ----------
Total current liabilities . . . . . . . . 196,937 200,976
Long-term debt, less current maturities . . . 1,260,838 1,178,654
Deferred income taxes . . . . . . . . . . . . 117,728 174,591
Other liabilities . . . . . . . . . . . . . . 12,776 13,509
Minority interests. . . . . . . . . . . . . . 34,485 42,384
Stockholders' equity. . . . . . . . . . . . . 292,396 364,141
---------- ----------
$1,915,160 $1,974,255
========== ==========
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Bally Entertainment Corporation
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
<CAPTION>
Six months ended
June 30
-----------------------
1994 1993
- ---------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C>
Revenues. . . . . . . . . . . . . . . . . . . $ 450,726 $ 286,673
Operating costs and expenses. . . . . . . . . 389,364 234,220
---------- ----------
Operating income. . . . . . . . . . . . . . . 61,362 52,453
Interest expense. . . . . . . . . . . . . . . 65,083 41,169
---------- ----------
Income (loss) from continuing operations
before income taxes and minority
interests . . . . . . . . . . . . . . . . (3,721) 11,284
Income tax benefit (provision) . . . . . . 1,500 (5,959)
Minority interests. . . . . . . . . . . . . (1,258)
---------- ----------
Income (loss) from continuing operations. . (3,479) 5,325
Discontinued operations:
Income (loss) from operations . . . . . . (22,360) 865
Estimated losses through disposal . . . . (23,731)
---------- ----------
Income (loss) before extraordinary item
and cumulative effect on prior years
of change in accounting for income
taxes . . . . . . . . . . . . . . . . . . . (49,570) 6,190
Extraordinary loss on extinguishment
of debt . . . . . . . . . . . . . . . . . . (20,735) (8,090)
Cumulative effect on prior years of
change in accounting for income taxes . . . (28,197)
---------- ----------
Net loss. . . . . . . . . . . . . . . . . . . (70,305) (30,097)
Preferred stock dividend requirement. . . . . 1,389 1,389
---------- ----------
Net loss applicable to common stock . . . . . $ (71,694) $ (31,486)
========== ==========
Per common share:
Income (loss) from continuing
operations. . . . . . . . . . . . . . . . $ (.10) $ .08
Discontinued operations--
Income (loss) from operations. . . . . . (.48) .02
Estimated losses through disposal. . . . (.51)
Extraordinary loss on extinguishment
of debt.. . . . . . . . . . . . . . . . . (.44) (.17)
Cumulative effect on prior years of
change in accounting for income taxes . . (.61)
---------- ----------
Net loss. . . . . . . . . . . . . . . . . . $ (1.53) $ (.68)
========== ==========
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Bally Entertainment Corporation
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
<CAPTION>
Three months ended
June 30
-----------------------
1994 1993
- ---------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C>
Revenues. . . . . . . . . . . . . . . . . . . $ 238,437 $ 150,547
Operating costs and expenses. . . . . . . . . 196,250 119,771
---------- ----------
Operating income. . . . . . . . . . . . . . . 42,187 30,776
Interest expense. . . . . . . . . . . . . . . 31,843 19,546
---------- ----------
Income from continuing operations
before income taxes and minority
interests . . . . . . . . . . . . . . . . . 10,344 11,230
Income tax provision. . . . . . . . . . . . . (4,100) (6,074)
Minority interests. . . . . . . . . . . . . . (79)
---------- ----------
Income from continuing operations . . . . . . 6,165 5,156
Discontinued operations:
Loss from operations. . . . . . . . . . . . (27,367) (2,803)
Estimated losses through disposal . . . . . (23,731)
---------- ----------
Net income (loss) . . . . . . . . . . . . . . (44,933) 2,353
Preferred stock dividend requirement. . . . . 694 694
---------- ----------
Net income (loss) applicable to common stock $ (45,627) $ 1,659
========== ==========
Per common share:
Income from continuing operations . . . . . $ .12 $ .10
Discontinued operations--
Loss from operations. . . . . . . . . . . (.58) (.06)
Estimated losses through disposal . . . . (.51)
---------- ----------
Net income (loss) . . . . . . . . . . . . . $ (.97) $ .04
========== ==========
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Bally Entertainment Corporation
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(unaudited)
<CAPTION>
Retained Total
Series D Capital in earnings Common stock-
preferred Common excess of (accumulated stock in holders'
Dollar amounts stock stock par value deficit) treasury equity
- -------------------------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1993. . . $ 694 $ 31,325 $294,413 $ 39,507 $ (1,798) $364,141
Net loss. . . . . . . (70,305) (70,305)
Preferred stock
dividends --
$2.00 per share . . (1,389) (1,389)
Unrealized loss on
available-for-sale
securities. . . . . (216) (216)
Exercise of stock
options. . . . . . . 19 146 165
-------- -------- -------- -------- -------- --------
Balance at
June 30, 1994. . . . . $ 694 $ 31,344 $294,559 $(32,403) $ (1,798) $292,396
======== ======== ======== ======== ======== ========
<CAPTION>
Series D Common stock
preferred ------------------------
Share amounts stock Issued Treasury
- -------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Balance at December 31, 1993. . . . . . . . . . . . 694 46,986 110
Exercise of stock options . . . . . . . . . . . . 30
-------- -------- --------
Balance at June 30, 1994 . . . . . . . . . . . . . 694 47,016 110
======== ======== ========
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Bally Entertainment Corporation
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<CAPTION>
Six months ended
June 30
-----------------------
1994 1993
- ---------------------------------------------------------------------
(In thousands)
<S> <C> <C>
OPERATING:
Income (loss) from continuing operations . . $ (3,479) $ 5,325
Adjustments to reconcile to cash provided--
Depreciation and amortization. . . . . . 43,246 23,636
Interest accretion on discount notes . . 7,319 58
Deferred income taxes. . . . . . . . . . (15,087) (37,241)
Change in operating assets and
liabilities . . . . . . . . . . . . . . (25,313) 17,444
Other, net . . . . . . . . . . . . . . . 3,416 680
---------- ----------
Cash provided by operating
activities . . . . . . . . . . . . . 10,102 9,902
INVESTING:
Purchases of property and equipment. . . . . (57,192) (12,083)
Repurchase by Bally's Grand, Inc. of its
common stock . . . . . . . . . . . . . . . (11,549)
Purchase of marketable securities. . . . . . (7,254)
Other, net . . . . . . . . . . . . . . . . . (279) (3,401)
---------- ----------
Cash used in investing activities. . . (76,274) (15,484)
FINANCING:
Debt transactions --
Proceeds from issuance of long-term
debt . . . . . . . . . . . . . . . . . . 425,000 405,181
Proceeds from construction loan. . . . . . 1,907
Net borrowings (repayments) under
revolving credit agreements. . . . . . . 2,000 (3,000)
Repayments of long-term debt . . . . . . . (352,301) (264,019)
Premiums paid on early retirement of
debt . . . . . . . . . . . . . . . . . . (27,692) (9,840)
Debt issuance costs. . . . . . . . . . . . (15,199) (17,518)
---------- ----------
Cash provided by debt transactions . . 33,715 110,804
Equity transactions --
Preferred stock dividends. . . . . . . . . (1,389)
Proceeds from exercise of stock options. . 123 519
---------- ----------
Cash provided by financing activities 2,449 111,323
DISCONTINUED OPERATIONS:
Dividend received from discontinued
operations . . . . . . . . . . . . . . . . 15,000
---------- ----------
Increase (decrease) in cash and equivalents . (33,723) 120,741
Cash and equivalents, beginning of period . . 192,078 25,953
---------- ----------
Cash and equivalents, end of period . . . . . $ 158,355 $ 146,694
========== ==========
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Bally Entertainment Corporation
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS--(continued)
(unaudited)
<CAPTION>
Six months ended
June 30
-----------------------
1994 1993
- ---------------------------------------------------------------------
(In thousands)
<S> <C> <C>
SUPPLEMENTAL CASH FLOWS INFORMATION:
Changes in operating assets and
liabilities were as follows--
(Increase) decrease in receivables. . . $ 2,676 $ (1,222)
(Increase) decrease in other current
assets and other assets . . . . . . . (8,363) 5,859
Decrease in accounts payable
and accrued liabilities . . . . . . . (13,065) (5,550)
Increase (decrease) in income
taxes payable . . . . . . . . . . . . (5,828) 34,438
Decrease in other long-term
liabilities . . . . . . . . . . . . . (733) (16,081)
---------- ----------
$ (25,313) $ 17,444
========== ==========
Cash payments for interest and income
taxes for continuing operations
were as follows--
Interest paid . . . . . . . . . . . . . $ 58,872 $ 33,820
Interest capitalized. . . . . . . . . . (1,386) (24)
Income taxes paid (net of refunds). . . 19,415 8,767
Investing and financing activities exclude
the following non-cash activities--
Capital contribution to Bally's
Health & Tennis Corporation
(forgiveness of income tax
obligation). . . . . . . . . . . . . $ 15,000 $
Reduction in income taxes receivable
from Bally's Health & Tennis
Corporation . . . . . . . . . . . . . 10,861 3,168
Purchase of marketable securities
on margin . . . . . . . . . . . . . . 7,229
Accrued purchases of property
and equipment . . . . . . . . . . . . 3,216
Unsettled purchases of Bally's Grand,
Inc. common stock. . . . . . . . . . 6,087
Issuance of common stock in
satisfaction of preferred stock
dividends and other obligations . . . 2,704
<FN>
See accompanying notes.
</TABLE>
<PAGE>
Bally Entertainment Corporation
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands except per share data) (unaudited)
Basis of presentation
The condensed consolidated financial statements include the accounts of
Bally Entertainment Corporation ("Bally") and the subsidiaries which it
controls (collectively, the "Company"). The condensed consolidated
financial statements have been presented (after restatement of prior
period financial statements) to reflect Bally's Health & Tennis
Corporation ("Bally's Health & Tennis"), which operates the nation's
largest chain of fitness centers, as a discontinued operation because of
Bally's plan to spin-off its fitness centers segment (see "Discontinued
operations"). As a result, the Company's continuing operations comprise
one industry segment, with all significant revenues arising from its
casino operations and, where applicable, supporting hotel operations.
These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31,
1993.
All adjustments have been recorded which are, in the opinion of
management, necessary for a fair presentation of the condensed
consolidated statement of financial position of the Company at June 30,
1994, its condensed consolidated statements of operations for the three
and six months ended June 30, 1994 and 1993, its condensed consolidated
statement of stockholders' equity for the six months ended June 30, 1994
and its condensed consolidated statement of cash flows for the six
months ended June 30, 1994 and 1993. All such adjustments were of a
normal recurring nature, except for those adjustments required to
present Bally's Health & Tennis as a discontinued operation, reflect
refinancings of indebtedness of several subsidiaries and to apply the
provisions of Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes" (see "Income taxes").
Certain reclassifications have been made to prior period financial
statements to conform with the 1994 presentation.
Seasonal factors
The Company's operations are subject to seasonal factors and, therefore,
the results of operations for the three and six months ended June 30,
1994 and 1993 are not necessarily indicative of the results of
operations for the full year.
Marketable securities
Marketable securities consist of common stock of a publicly-traded
gaming company purchased by a subsidiary of Bally's Grand, Inc. In
accordance with SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities", these securities are available-for-sale
securities and are carried at fair value with the unrealized holding
loss reported as a direct charge to retained earnings. At June 30, 1994,
the cost of this common stock exceeded its fair value by $398, based on
the published quoted market closing price of such stock on that date.
In July 1994, these shares were sold, which resulted in a gain of $3,494
before income taxes and minority interests.
Acquisition of Bally's Grand, Inc.
On August 20, 1993 (the "Effective Date"), the Fifth Amended Plan of
Reorganization (the "Chapter 11 Plan") of Bally's Grand, Inc. (a company
originally acquired by Bally in 1986 which owns and operates the casino
resort in Las Vegas, Nevada known as "Bally's Las Vegas") became
effective and Bally's Grand, Inc. emerged from bankruptcy. For almost
two years prior thereto, Bally's Grand, Inc. operated its business and
managed its properties as a debtor-in-possession under chapter 11 of
title 11 of the United States Code. On the Effective Date, Bally
relinquished all of its equity interest in Bally's Grand, Inc. and
Bally's net intercompany receivable from Bally's Grand, Inc. was
cancelled and extinguished. Bally's investment in and advances to
Bally's Grand, Inc. were written down to zero in 1990. Also, Bally did
not provide any type of guarantee or commitment to Bally's Grand, Inc.
nor did it assume any other obligation of Bally's Grand, Inc. in
connection with the Chapter 11 Plan. Accordingly, the Company did not
reflect any equity in earnings of Bally's Grand, Inc. for the period
from January 1, 1991 through the Effective Date.
During 1993, Bally's Casino Holdings, Inc. ("Casino Holdings") and
another subsidiary of Bally acquired approximately 5.2 million shares
(approximately 54% of the shares outstanding at June 30, 1994) of
reorganized Bally's Grand, Inc. common stock in several transactions in
exchange for $41,714 in cash and 1,752,400 shares of Bally Gaming
International, Inc. ("Gaming") common stock. In addition, during the
six months ended June 30, 1994, Bally's Grand, Inc. repurchased 949,579
shares of its common stock for $11,549 in cash. The acquisitions of
Bally's Grand, Inc. common stock have been recorded using the purchase
method of accounting and the excess of the purchase price over the
estimated fair value of net assets acquired of $21,586 is being
amortized using the straight-line method over 20 years. Bally's Grand,
Inc. has been consolidated since December 1993 as a result of Bally's
controlling interest.
The following unaudited pro forma summary consolidated results of
operations of the Company for the three and six months ended June 30,
1993 was prepared to give effect to the acquisition of the controlling
interest in reorganized Bally's Grand, Inc. as if the acquisition had
occurred as of January 1, 1993. The pro forma results have been
prepared for comparative purposes only and do not purport to present
what the Company's results of operations would actually have been if the
acquisition had in fact occurred at such date or to project the
Company's results of operations for any future period. In addition, the
pro forma summary consolidated results of operations of the Company
include adjustments to the historical results of operations of Bally's
Grand, Inc. which principally reflect: (i) the elimination of the
reorganization items of Bally's Grand, Inc., (ii) the effects of
transactions related to the reorganization of Bally's Grand, Inc.
pursuant to the Chapter 11 Plan, (iii) the effects of the adoption of
"fresh-start reporting" and (iv) the income tax effects of the pro forma
adjustments. The pro forma summary consolidated results of operations
is based upon available information and upon certain assumptions that
management believes are reasonable.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, 1993 June 30, 1993
------------------ ----------------
<S> <C> <C>
Revenues. . . . . . . . . . . . . . $ 215,344 $ 417,489
Operating income. . . . . . . . . . 38,535 70,823
Income from continuing operations . 4,757 5,532
Net income (loss) . . . . . . . . . 1,954 (31,608)
Per common share:
Income from continuing operations $ .09 $ .09
Net income (loss) . . . . . . . . .03 (.71)
</TABLE>
Income taxes
Effective January 1, 1993, the Company changed its method of accounting
for income taxes as required by SFAS No. 109. The cumulative effect on
prior years of this change in accounting for income taxes was a charge
of $28,197.
For the three and six months ended June 30, 1994, the effective rate of
the income tax benefit (provision) differed from the U.S. statutory tax
rate (35%) due principally to state income taxes and nondeductible
goodwill amortization offset, in part, by adjustments of prior years'
taxes. For the three and six months ended June 30, 1993, the effective
rate of the income tax provision differed from the U.S. statutory tax
rate (34%) due principally to nondeductible goodwill amortization and
state income taxes.
The decline in net deferred income taxes during the six months ended
June 30, 1994 arose principally from losses during the period (the tax
benefits of which were applied against deferred income taxes) and
adjustments resulting from the settlement of disputed tax matters. See
"Liquidity and Capital Resources" in Management's Discussion and
Analysis of Financial Condition and Results of Operations of this Form
10-Q for a description of this settlement of previously disclosed tax
claims.
<PAGE>
Long-term debt
The carrying amounts of the Company's long-term debt at June 30, 1994
and December 31, 1993 are as follows:
<TABLE>
<CAPTION>
June 30 December 31
1994 1993
---------- -----------
<S> <C> <C>
Bally Entertainment Corporation:
6% Convertible Subordinated Debentures
due 1998 . . . . . . . . . . . . . . . . $ 16,382 $ 18,969
10% Convertible Subordinated Debentures
due 2006 . . . . . . . . . . . . . . . . 85,000 85,000
Bally's Casino Holdings, Inc.:
Senior Discount Notes due 1998 . . . . . . 146,737 139,418
Bally's Park Place, Inc.:
Revolving credit agreement . . . . . . . . 2,000
9-1/4% First Mortgage Notes due 2004 . . . 425,000
11-7/8% First Mortgage Notes due 1999. . . 350,000
Other . . . . . . . . . . . . . . . . . . 2,747 2,771
GNAC, CORP.:
Revolving credit agreement . . . . . . . . 4,000
10-5/8% First Mortgage Notes due 2003
(less unamortized discount of $1,891
and $1,873). . . . . . . . . . . . . . . 273,109 273,127
Bally's Grand, Inc.:
10-3/8% First Mortgage Notes due 2003. . . 315,000 315,000
Belle of Orleans, L.L.C.:
Construction loan. . . . . . . . . . . . . 1,907
---------- ----------
Total long-term debt. . . . . . . . . . . . 1,269,882 1,186,285
Current maturities of long-term debt. . . . (9,044) (7,631)
---------- ----------
Long-term debt, less current
maturities . . . . . . . . . . . . . . . . $1,260,838 $1,178,654
========== ==========
</TABLE>
In March 1994, a subsidiary of Bally's Park Place, Inc. ("Bally's Park
Place") issued $425,000 principal amount of 9-1/4% First Mortgage Notes
due 2004 (the "9-1/4% Notes"). Bally's Park Place used the net proceeds
from the sale of the 9-1/4% Notes to purchase and retire certain of its
11-7/8% First Mortgage Notes due 1999 (the "11-7/8% Notes"), defease the
remaining 11-7/8% Notes at a price of 104.45% of their principal amount
plus accrued interest through the redemption date, thereby satisfying
all obligations thereunder, and pay a $30,000 dividend to Casino
Holdings. The retirement and defeasance of the 11-7/8% Notes resulted
in an extraordinary loss of $20,735, net of income taxes of $14,137. In
connection with the sale of the 9-1/4% Notes, Bally's Park Place
terminated its former credit facility and entered into an agreement for
a new $50,000 revolving credit facility which expires on December 31,
1996, at which time all amounts outstanding become due. The new credit
facility provides for interest on borrowings payable, at Bally's Park
Place's option, at the agent bank's prime rate or the LIBOR rate plus
2%, each of which increases as the balance outstanding increases.
In June 1994, Belle of Orleans, L.L.C. ("Belle") entered into an
agreement for a construction loan generally not to exceed $21,791. The
construction loan is available for fifteen months, provides for interest
on borrowings at the rate of 1% above a bank's stated prime rate (8.25%
at June 30, 1994) and is guaranteed by Bally. Borrowings under the
construction loan are being used by Belle to fund a substantial portion
of the payments for construction of a riverboat casino for operation in
New Orleans, Louisiana. Also in June 1994, Belle received a commitment
from another lender that will enable Belle to convert the borrowings
outstanding under the construction loan into a five-year term loan upon
completion of the riverboat casino.
Earnings (loss) per common share
Earnings (loss) per common share is computed by dividing net income
(loss) applicable to common stock by the weighted average number of
shares of common stock outstanding totalling 46,900,811 and 46,495,554
for the three months ended June 30, 1994 and 1993, respectively, and
46,894,475 and 46,310,534 for the six months ended June 30, 1994 and
1993, respectively.
Discontinued operations
On June 28, 1994, Bally's Board of Directors (the "Board") approved a
plan to spin-off Bally's Health & Tennis (the "Spin-off"). The Spin-off
is expected to be accomplished by distributing all of the stock of
Bally's Health & Tennis to Bally's stockholders and Bally's Health &
Tennis' management and employee related plans. The Spin-off is subject
to satisfaction of certain conditions. As a result of the Board's
action regarding the Spin-off, during the three months ended June 30,
1994, the Company recorded a charge of $23,731 ($.51 per share), net of
income taxes of $4,071, to provide for estimated operating losses until
disposal (which is tentatively scheduled for December 1994).
The investment in and net advances to discontinued operations at
June 30, 1994 and December 31, 1993 consists of:
<TABLE>
<CAPTION>
June 30 December 31
1994 1993
--------- -----------
<S> <C> <C>
Investment in fitness centers segment . . . $ 213,038 $ 258,898
Income taxes receivable from
fitness centers segment . . . . . . . . . 69,759 85,474
--------- ---------
$ 282,797 $ 344,372
========= =========
</TABLE>
Summarized financial information of the fitness centers segment
follows:
<TABLE>
<CAPTION>
June 30 December 31
1994 1993
--------- -----------
<S> <C> <C>
Financial position:
Current assets. . . . . . . . . . . . . . . $ 188,471 $ 208,282
Property and equipment, net . . . . . . . . 400,400 415,002
Total assets. . . . . . . . . . . . . . . . 870,082 924,555
Current liabilities . . . . . . . . . . . . 227,121 213,498
Long-term debt, less current maturities . . 297,333 305,735
Total liabilites. . . . . . . . . . . . . . 657,044 665,657
</TABLE>
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
--------------------- --------------------
1994 1993 1994 1993
--------------------- --------------------
<S> <C> <C> <C> <C>
Results of operations:
Revenues. . . . . . . . $ 160,872 $ 178,759 $ 344,711 $ 378,480
Operating income (loss) (32,126) 3,600 (26,239) 20,704
Income (loss) before
extraordinary item
and cumulative effect
on prior years of change
in accounting for income
taxes . . . . . . . . (27,367) (2,803) (22,360) 865
</TABLE>
<PAGE>
Bally Entertainment Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF CONTINUING OPERATIONS
As discussed in "Basis of presentation" in Notes to condensed
consolidated financial statements of this Form 10-Q, Bally's Health &
Tennis has been reflected as a discontinued operation as a result of the
planned Spin-off. Accordingly, the following discussion and analysis of
financial condition and results of operations is that of the Company's
continuing operations.
Quarter Versus Quarter
Revenues of the Company for the second quarter of 1994 were
$238.4 million compared to $150.5 million for the 1993 period, an
increase of $87.9 million (58%). Operating income for the 1994 quarter
was $42.2 million compared to $30.8 million for 1993, an increase of
$11.4 million (37%). These increases principally reflect the expansion
of the Company's gaming business into Las Vegas, Nevada (Bally's Grand,
Inc. has been consolidated since December 1993) and Tunica, Mississippi
(Bally's Saloon and Gambling Hall ("Bally's Tunica") commenced
operations in December 1993).
Atlantic City
Revenues of Bally's Park Place for the second quarter of 1994 were
$96.1 million compared to $89.5 million for the 1993 period, an increase
of $6.6 million (7%). Casino revenues for the 1994 period were
$80.9 million compared to $75.8 million in the 1993 period, an increase
of $5.1 million (7%). Slot revenues increased $2.0 million (4%) due to
a 13% increase in slot handle (volume) offset, in part, by a decline in
the slot win percentage from 9.8% in the second quarter of 1993 to 9.0%
in 1994. During the twelve months ended June 30, 1994, Bally's Park
Place added 205 slot machines (an 11% increase). Table game revenues,
excluding poker, increased $1.7 million (8%) from the 1993 period due to
a 5% increase in the drop (amount wagered) and an increase in the hold
percentage from 16.3% in the second quarter of 1993 to 17.3% in the 1994
period. Bally's Park Place's poker operations, which commenced in July
1993, contributed $1.2 million to its casino revenues for the second
quarter of 1994. Other revenues increased $1.0 million (54%) due to
higher entrance fees for promotional events and dividends from a multi-
casino linked progressive trust. Operating income of Bally's Park Place
for the second quarter of 1994 was $27.1 million compared to
$24.2 million for the 1993 period, an increase of $2.9 million (12%) due
to the aforementioned increase in revenues offset, in part, by a
$3.7 million (6%) increase in operating expenses. Casino expenses
increased $3.0 million (10%) due to salaries, benefits and other costs
associated with the operation of poker and introduction of horse race
simulcasting and keno in the 1994 period, and expanded marketing and
promotional efforts.
Revenues of The Grand for the second quarter of 1994 were $64.3 million
compared to $58.2 million for 1993, an increase of $6.1 million (10%).
Casino revenues for the 1994 period were $59.0 million compared to
$52.0 million in the 1993 period, an increase of $7.0 million (13%).
Table game revenues increased $5.5 million (30%) due to a 15% increase
in the drop and an increase in the hold percentage from 15.1% in the
second quarter of 1993 to 17.1% in the 1994 period. Slot revenues
increased $1.5 million (4%) due to a 9% increase in slot handle and
approximately $1.2 million from the discontinuation of certain
progressive slot jackpots in the second quarter of 1994 offset, in part,
by a decline in the slot win percentage from 9.7% in the 1993 period to
8.8% in 1994. Operating income of The Grand for the second quarter of
1994 was $6.6 million compared to $5.6 million for the 1993 period, an
increase of $1.0 million (18%) due to the aforementioned increase in
revenues offset, in part, by a $5.1 million (10%) increase in operating
expenses. Casino expenses increased $4.4 million (15%) due to
increases in payroll and payroll-related expenses and the provision for
doubtful receivables and the increased costs of providing complimentary
services in conjunction with increased table games volume and marketing
efforts associated with the comprehensive marketing program which The
Grand introduced in July 1993. In addition, depreciation and
amortization for the second quarter of 1994 includes a $1.2 million
charge for the accelerated depreciation of certain slot machines
associated with a casino floor reconfiguration.
Management believes that the reduced rate of slot revenue growth in the
Atlantic City market, in conjunction with the expanded number of slot
machines resulting in a lower win per slot machine, has caused and will
continue to cause intense promotional efforts to attract slot players as
the Company's Atlantic City casinos and their competitors seek to expand
their share of slot revenues and maximize the utilization of their slot
machine inventory. Further, as a result of the aggressive competition
for slot patrons, the Atlantic City slot win percentage has declined.
Management believes that the slot win percentage will continue to be
subject to competitive pressure and may further decline. However, the
addition of poker, horse race simulcasting and keno over the last year
has had a favorable impact on the Atlantic City gaming environment. The
Company believes its Atlantic City casinos are well-positioned to
compete for their share of casino revenues by continuing to offer
attractive promotional slot and table game programs and special events.
During the second quarter of 1994, The Grand reconfigured its casino
floor, widening the aisles and replacing the majority of its slot
machine inventory with state-of-the-art slot machines with bill
validators. In June 1994, Bally's Park Place expanded its gaming space
by 8,700 square feet to operate horse race simulcasting and keno, and to
relocate and expand its poker operations. Effective July 1, 1994,
Bally's Park Place placed in operation an additional 120 high
denomination slot machines in the gaming space formerly occupied by its
poker operations.
Las Vegas
Revenues of Bally's Grand, Inc. for the second quarter of 1994 were
$65.0 million. Casino revenues were $31.3 million, which primarily
consisted of table game revenues of $15.7 million and slot revenues of
$14.2 million. Table game drop and slot handle for the second quarter
of 1994 were $93.2 million and $218.8 million, respectively, with hold
and win percentages of 16.8% and 6.5%, respectively. Rooms revenue was
$14.9 million and food and beverage revenues were $8.9 million. Other
revenues, primarily from entertainment, were $9.9 million. Operating
income of Bally's Grand, Inc. for the second quarter of 1994 was
$8.8 million.
Three new major casino hotels opened for business in Las Vegas during
the latter part of 1993. The three new properties include 370,000 total
square feet of casino space, 10,400 total hotel guest rooms and a theme
park. Management believes that the additional capacity resulting from
the opening of these new properties has had and will continue to have a
negative impact on Bally's Grand, Inc., but over the long term,
management believes that Bally's Grand, Inc. will benefit from the
increase in the number of visitors to Las Vegas that these new
properties are expected to attract, particularly after completion of
certain major capital improvements that Bally's Grand, Inc. has
commenced and, in some instances, completed.
Tunica
Revenues of Bally's Tunica for the second quarter of 1994 were
$12.0 million. Casino revenues were $11.9 million, which consisted of
slot revenues of $8.8 million and table game revenues of $3.1 million.
Slot handle and table game drop for the second quarter of 1994 were
$102.3 million and $13.0 million, respectively, with win and hold
percentages of 8.6% and 22.6%, respectively. Operating income of
Bally's Tunica for the second quarter of 1994 was $2.0 million.
Revenues of Bally's Tunica for the second quarter of 1994 decreased
$3.9 million (25%) from the first quarter of 1994 due primarily to
increased competition. Including Bally's Tunica, nine gaming facilities
are presently operating in Tunica County, Mississippi. The Mississippi
gaming legislation does not limit the number of licenses that may be
granted and, as of August 1, 1994, 33 gaming operators' licenses had
been issued and approximately 35 additional operators' applications were
pending before the Mississippi Gaming Commission. Approximately 10 of
these operators' applications are for facilities located in Tunica
County, Mississippi. Facilities which have already commenced or
subsequently commence operations in or near the Tunica gaming market
present significant competition for Bally's Tunica. The unlimited
number of gaming licenses which may be granted could result in a
saturation of gaming facilities in or near the Tunica market. If such
saturation occurred, management believes it would have a negative impact
on the operations of Bally's Tunica.
Corporate
Revenues for the second quarter of 1994 were $.8 million compared to
$2.3 million in the 1993 period, a decrease of $1.5 million due
principally to a reduction in interest and other income from
subsidiaries.
Operating loss for the second quarter of 1994 was $.5 million compared
to operating income of $2.2 million in the 1993 period, a decrease of
$2.7 million due primarily to the aforementioned decrease in revenues
and a $1.5 million increase in general and administrative expenses.
General and administrative expenses in the 1993 period were positively
impacted by the reversal of a $1.0 million accrual no longer deemed
necessary.
Six Months Versus Six Months
Revenues of the Company for the six months ended June 30, 1994 were
$450.7 million compared to $286.7 million for 1993, an increase of
$164.0 million (57%). Operating income for the 1994 period was
$61.4 million compared to $52.5 million for 1993, an increase of
$8.9 million (17%). These increases principally reflect the
aforementioned expansion of the Company's gaming business.
Atlantic City
Atlantic City's 1994 and 1993 first quarters were both negatively
impacted by severe weather conditions in the northeastern United States,
however management believes the severity, duration and number of storms
in 1994 had a more dramatic impact on attendance and operating
performance than in 1993.
Revenues of Bally's Park Place for the six months ended June 30, 1994
were $172.4 million compared to $165.6 million for the 1993 period, an
increase of $6.8 million (4%). Casino revenues for the 1994 period were
$146.6 million compared to $141.2 million in 1993, an increase of
$5.4 million (4%). Table game revenues, excluding poker, increased
$3.2 million (8%) from the 1993 period due to a 3% increase in the drop
and an increase in the hold percentage from 16.3% in the 1993 period to
16.9% in 1994. Bally's Park Place's poker operations, which commenced
in July 1993, contributed $2.4 million to its casino revenues for the
six months ended June 30, 1994. These revenue increases were partially
offset by a slot revenue decrease of $.3 million caused by a decline in
the slot win percentage from 9.8% in the 1993 period (which includes the
positive impact from the discontinuation of certain progressive linked
jackpots) to 8.9% in 1994 substantially offset by a 10% increase in slot
handle. Other revenues increased $.9 million (23%) due to higher
entrance fees for promotional events and dividends from a multi-casino
linked progressive trust. Operating income of Bally's Park Place for
the six months ended June 30, 1994 was $36.3 million compared to
$39.4 million for the 1993 period, a decrease of $3.1 million (8%) as a
$9.9 million (8%) increase in operating expenses exceeded the
aforementioned revenue increase. Casino expenses increased $5.2 million
(9%) due to salaries, benefits and other costs associated with the
operation of poker and the introduction of horse race simulcasting and
keno in the 1994 period, and expanded marketing and promotional efforts.
Depreciation and amortization increased $2.2 million (17%) primarily due
to accelerated depreciation associated with the planned replacement of
certain casino equipment in 1994. In addition, the 1993 period included
the recognition of a non-recurring benefit related to the settlement of
amounts owed to a former executive who retired in January 1993.
Revenues of The Grand for the six months ended June 30, 1994 were
$114.8 million compared to $114.3 million for 1993, an increase of
$.5 million. Casino revenues for the 1994 period were $104.6 million
compared to $102.2 million in 1993, an increase of $2.4 million (2%).
Table game revenues increased $4.0 million (10%) due to a 17% increase
in the drop offset, in part, by a decline in the hold percentage from
17.0% in the 1993 period to 16.0% in 1994. Slot revenues decreased $1.6
million (3%) due primarily to a decline in the slot win percentage from
9.7% in the 1993 period to 8.9% in 1994 offset, in part, by a 5%
increase in slot handle. Slot revenues include approximately
$1.5 million and $1.2 million from the discontinuation of certain
progressive slot jackpots in the 1994 and 1993 periods, respectively.
Operating income of The Grand for the six months ended June 30, 1994 was
$3.8 million compared to $11.2 million for the 1993 period, a decrease
of $7.4 million (66%) due primarily to a $7.9 million (8%) increase in
operating expenses. Casino expenses increased $7.2 million (12%)
primarily due to an increase in payroll and payroll-related expenses and
the provision for doubtful receivables and the increased costs of
providing complimentary services and other promotional expenses in
conjunction with the aforementioned comprehensive marketing program. In
addition, depreciation and amortization for the 1994 period includes a
$1.2 million charge for the accelerated depreciation of certain slot
machines associated with the aforementioned casino floor
reconfiguration.
Las Vegas
Revenues of Bally's Grand, Inc. for the six months ended June 30, 1994
were $133.8 million. Casino revenues were $64.8 million, which
primarily consisted of table game revenues of $34.8 million and slot
revenues of $26.5 million. Table game drop and slot handle for the six
months ended June 30, 1994 were $210.9 million and $411.5 million,
respectively, with hold and win percentages of 16.5% and 6.4%,
respectively. Rooms revenue was $30.5 million and food and beverage
revenues were $18.9 million. Other revenues, primarily from
entertainment, were $19.6 million. Operating income of Bally's Grand,
Inc. for the six months ended June 30, 1994 was $20.8 million.
Tunica
Revenues of Bally's Tunica for the six months ended June 30, 1994 were
$27.9 million. Casino revenues were $27.6 million, which consisted of
slot revenues of $19.1 million and table game revenues of $8.5 million.
Slot handle and table game drop for the six months ended June 30, 1994
were $213.4 million and $34.3 million, respectively, with win and hold
percentages of 8.9% and 23.7%, respectively. Operating income of
Bally's Tunica for the six months ended June 30, 1994 was $3.1 million,
which is net of the remaining amortization of $3.3 million of pre-
opening costs.
Corporate
Revenues for the six months ended June 30, 1994 were $1.5 million
compared to $5.9 million in the 1993 period, a decrease of $4.4 million.
The decline in revenues was principally due to a $1.9 million reduction
in interest and other income from subsidiaries and the 1993 period
including nonrecurring income of $2.5 million ($1.7 million for the
forgiveness of a tax liability previously owed to Gaming and $.8 million
for insurance recoveries).
Corporate operated at breakeven for the six months ended June 30, 1994
compared to operating income of $2.9 million in the 1993 period. The
decline in operating income was due principally to the aforementioned
decline in revenues offset, in part, by the 1993 period including a
$1.7 million nonrecurring charge related to the accelerated vesting of
stock options.
Interest Expense
Interest expense, net of capitalized interest, was $31.8 million in the
second quarter of 1994 compared to $19.5 million in the 1993 period, an
increase of $12.3 million (63%). For the six months ended June 30,
1994, net interest expense was $65.1 million compared to $41.2 million
in the 1993 period, an increase of $23.9 million (58%). These increases
were due principally to higher average levels of debt, primarily
resulting from the issuance of the Casino Holdings Senior Discount Notes
due 1998 (the "Senior Discount Notes") in June 1993 and the
consolidation of Bally's Grand, Inc. effective December 1993, offset, in
part, by lower average interest rates.
LIQUIDITY AND CAPITAL RESOURCES
Parent Company
Bally is a holding company without operations of its own. Nevertheless,
Bally has certain cash obligations that must be satisfied by obtaining
cash from its subsidiaries or disposing of or leveraging certain assets.
Bally's corporate cash operating costs for the remainder of 1994 are
expected to be substantially recovered by allocations to its
subsidiaries. Bally has debt service and preferred stock dividend cash
requirements of approximately $11 million for the remainder of 1994.
Cash requirements for Bally for the remainder of 1994 also include
income tax payments, which management estimates to be approximately
$5 million, net of refunds and amounts to be collected from subsidiaries
pursuant to tax sharing agreements. In August 1994, the Company was
authorized by the Board to repurchase on the open market up to 2 million
shares of its common stock.
As disclosed in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, the Internal Revenue Service ("IRS") has
completed an audit of the federal income tax returns of certain of the
Company's fitness center subsidiaries for periods ending on the day
these subsidiaries were acquired. Among other things, the IRS asserted
that these subsidiaries owed additional taxes and interest with respect
to issues arising pursuant to the Company's election in 1983 to treat
the purchases of stock of these subsidiaries as if they were purchases
of assets. In May 1994, the Company and the IRS reached a settlement
with respect to this matter, which will result in the payment of
approximately $4 million in taxes plus accrued interest, each of which
is included in the aforementioned estimated income tax payments for the
remainder of 1994.
Sources of cash available to Bally are generally limited to existing
cash balances ($11.9 million at June 30, 1994), dividends, management
fees or cost allocations to subsidiaries, receipts pursuant to tax
sharing agreements, capital transactions and asset sales. Each of
Bally's principal operating subsidiaries presently have debt covenants
which limit the payment of dividends to Bally and the redemption of
stock owned by Bally. Under the terms of the Senior Discount Notes, an
amount equal to dividends paid pursuant to a net income test by Bally's
Park Place to Casino Holdings may be declared as a dividend by Casino
Holdings and paid to Bally. In February 1994, a $.6 million dividend
was paid by Bally's Park Place to Casino Holdings and by Casino Holdings
to Bally. As of June 30, 1994, approximately $5 million was available
to Bally's Park Place for the payment of dividends to Bally through
Casino Holdings pursuant to the net income test. Additional dividends
may be available from Casino Holdings and are generally limited to 50%
of its consolidated net income exclusive of income attributable to
Bally's Park Place. Dividends from other subsidiaries are not expected
during the remainder of 1994. In addition, a subsidiary of Casino
Holdings has an obligation to Bally of approximately $18 million to be
paid during the remainder of 1994 for shares of Bally's Grand, Inc.
common stock purchased from Bally during 1993. Bally believes that it
will be able to satisfy its cash needs for the remainder of 1994, but
remains dependent upon the ability of its subsidiaries to pay dividends
and allocations to meet its cash requirements in the future.
Subsidiaries
Casino Holdings
Casino Holdings. Casino Holdings is a holding company without
operations of its own and relies on obtaining cash from its subsidiaries
to meet its cash obligations. Casino Holdings has no scheduled interest
or principal payments on the Senior Discount Notes until 1998, but
expects to incur substantial costs in the pursuit of new gaming
ventures. To the extent Casino Holdings requires additional funds for
existing ventures or to develop new ventures, Casino Holdings expects
that it will be able to obtain financing for a significant portion of
the total development costs of new gaming ventures from a combination of
third party sources, including banks, suppliers and debt markets.
Sources of cash available to Casino Holdings are generally limited to
existing cash balances ($36.7 million at June 30, 1994) and loan
repayments, dividends and management fees from subsidiaries. Bally's
Park Place and Bally's Grand, Inc. are both limited with respect to
amounts which may be paid as dividends to Casino Holdings under the
terms of their respective public debt indentures. In March 1994,
Bally's Park Place paid a $30 million dividend to Casino Holdings from
a portion of the proceeds of the sale of its 9-1/4% Notes, which is not
available to be paid by Casino Holdings to Bally. Bally's Grand, Inc.
is not expected to pay dividends or make any other distributions on its
common stock to Casino Holdings in 1994. Bally's Tunica, which
commenced operations in December 1993 and generated cash flows from
operations during the first six months of 1994, is expected to generate
additional but lower cash flows from operations for the remainder of
1994 due to the effects of increased competition. Although Casino
Holdings believes it will be able to satisfy its cash needs for the
remainder of 1994, Casino Holdings remains dependent upon the ability of
its subsidiaries to generate cash to repay advances and pay dividends in
the future.
Bally's Park Place. Bally's Park Place has no scheduled principal
payments under its public indebtedness until 2004, and its scheduled
principal payments under other indebtedness outstanding at June 30, 1994
are not significant. Management expects to make capital expenditures of
approximately $5 million for the remainder of 1994 for the completion of
casino expansion and reconfiguration, construction of a new players
lounge and other public area improvements necessary to maintain the
facility. As of June 30, 1994, Bally's Park Place had an unused line of
credit totalling $50 million. The Company believes that Bally's Park
Place will be able to satisfy its debt service and capital expenditure
requirements for the remainder of 1994 out of cash flow from operations.
Bally's Grand, Inc. Bally's Grand, Inc. has no scheduled principal
payments on its indebtedness outstanding at June 30, 1994 until 2003,
however, it expects to complete several major capital improvements
during the remainder of 1994 and in 1995. In July 1994, Bally's Las
Vegas completed the construction of improvements to its frontage area
along the Strip. These improvements included moving walkways to
transport patrons to and from Bally's Las Vegas' main entrance at a
total cost of approximately $15 million. Currently, through a joint
venture formed with a subsidiary of MGM Grand, Inc., Bally's Grand, Inc.
is committed to jointly construct (with completion expected in mid-1995)
and operate a monorail that will transport passengers between Bally's
Las Vegas and The MGM Grand Hotel and Theme Park. Bally's Las Vegas
expects its portion of the cost of this project to be approximately
$14 million of which approximately $6 million was expended as of
June 30, 1994. Other capital projects planned for 1994 with completion
expected in 1995 include the renovation of additional hotel rooms and
corridors, the lower level shopping arcade and other public areas which,
in total, are estimated to cost approximately $26 million, of which
approximately $8 million is expected to be expended during the remainder
of 1994 and the balance during 1995. In addition, annual capital
expenditures approximating $8 million are required to maintain Bally's
Las Vegas in first-class condition. The Company believes that Bally's
Grand, Inc. will be able to satisfy its debt service and capital
expenditure requirements for the remainder of 1994 out of existing cash
balances ($74.3 million at June 30, 1994) and cash flow from operations.
Bally's Tunica. The total cost to construct and equip Bally's Tunica was
approximately $39 million, which was advanced by Casino Holdings in 1993
and is currently being repaid in 1994 out of available cash flow.
Bally's Tunica may seek third party financing to replace part or all of
Casino Holdings' capital investment in Bally's Tunica. However, there
can be no assurance that third party financing will be available on
terms favorable to Bally's Tunica. Bally's Tunica expects capital
expenditures during the remainder of 1994 to be insignificant.
Other. A subsidiary of Casino Holdings owns an equity interest of
approximately 50% in Belle. In August 1993, the Casino Holdings
subsidiary entered into a formal operating agreement for the
capitalization and development of Belle. Simultaneously, Casino
Holdings and Belle entered into a management agreement with a term of
five years and an option for a second five-year term granting
responsibility for the development and management of Belle to Casino
Holdings. In March 1994, the Louisiana Riverboat Gaming Commission
awarded Belle a permanent operating license. Casino Holdings will
receive management fees based on a percentage of the earnings of Belle.
Construction of the riverboat commenced in January 1994 and operations
are expected to begin in early 1995. Management estimates that not
substantially more than $55 million will be needed to develop Belle, and
anticipates the cost will be substantially funded by third party
financing (as described in "Long-term debt" in Notes to condensed
consolidated financial statements of this Form 10-Q, Belle has already
obtained financing for approximately $22 million). There can be no
assurance that additional third party financing will be available on
terms favorable to Belle. Management anticipates the remainder of any
development costs to be funded by Casino Holdings.
Another subsidiary of Casino Holdings has entered into an option
agreement to acquire a 31-acre site along the Delaware River in
Philadelphia for the purpose of developing a dockside gaming facility
(the "Philadelphia Venture") if gaming were to be legalized in
Pennsylvania. The site includes a 550 foot pier and is easily accessed
from a major highway nearby. Pursuant to the terms of the agreement,
Casino Holdings has agreed to pay $10 million, consisting of an initial
cash payment of $5 million (paid in 1993) and $5 million payable over
the next three years. These payments are due whether or not gaming is
legalized in Pennsylvania. Additionally, in the event Casino Holdings
elects to take title to the property, it will be required to deliver at
the closing of the transaction the balance of the purchase price in the
form of a pre-payable, non-recourse note for approximately $55 million
(including interest), which is payable in various installments over the
five-year period subsequent to the closing of the transaction. Assuming
legalization, the closing of the transaction is scheduled for January
1997, unless accelerated by Casino Holdings. Certain of Casino
Holdings' obligations under the agreement are guaranteed by Bally.
The Grand
The Grand has no scheduled principal payments under its public
indebtedness until 2003, and owes $4 million at June 30, 1994 under
its revolving credit agreement. Management expects to make capital
expenditures of almost $4 million in the remainder of 1994 for certain
public area improvements. As of June 30, 1994, The Grand had an unused
line of credit totalling $16 million. The Company believes The Grand
will be able to satisfy its debt service and capital expenditure
requirements for the remainder of 1994 out of cash flow from operations.
<PAGE>
Bally Entertainment Corporation
PART II. OTHER INFORMATION
Item 1. Legal proceedings
See "Liquidity and Capital Resources" in Management's Discussion
and Analysis of Financial Condition and Results of Operations
of this Form 10-Q for a description of the settlement of
previously disclosed tax claims.
Item 4. Submission of matters to a vote of security holders.
At the annual meeting of stockholders held on May 17, 1994, the
stockholders considered and voted on the following items:
(a) Three persons nominated by the Board of Directors for election
as directors of Class II for a three-year term expiring in 1997
or until their successors have been duly elected, along with the
voting results which resulted in each nominee being elected as
a director, were as follows:
<TABLE>
<CAPTION>
Votes Votes
Nominee cast for withheld
------- ---------- ---------
<S> <C> <C>
George N. Aronoff 40,275,263 1,132,616
Patrick L. O'Malley 40,275,900 1,131,979
Rocco J. Marano 40,258,598 1,149,281
</TABLE>
(b) An amendment to the Company's Restated Certificate of
Incorporation to change the Company's name from Bally
Manufacturing Corporation to Bally Entertainment Corporation,
and the voting results which resulted in the adoption of the
amendment, were as follows:
<TABLE>
<CAPTION>
Votes cast for Votes against Abstentions
-------------- ------------- -----------
<C> <C> <C>
40,663,688 491,786 252,405
</TABLE>
(c) The Company's 1993 Non-Employee Directors' Stock Option Plan
(the "1993 Plan"), and the voting results which resulted in the
adoption of the 1993 Plan, were as follows:
<TABLE>
<CAPTION>
Votes cast for Votes against Abstentions
-------------- ------------- ----------
<C> <C> <C>
37,769,611 3,155,156 483,112
</TABLE>
(d) The Company's Employee Stock Purchase Plan (the "Stock Purchase
Plan"), and the voting results which resulted in the adoption
of the Stock Purchase Plan, were as follows:
<TABLE>
<CAPTION>
Votes cast for Votes against Abstentions
-------------- ------------- -----------
<C> <C> <C>
39,577,503 1,411,546 418,830
</TABLE>
<PAGE>
Bally Entertainment Corporation
PART II. OTHER INFORMATION--(continued)
(e) An amendment to the Company's 1989 Incentive Plan to increase
the number of shares reserved for issuance under such plan and
to limit the number of options, stock appreciation rights or
options in tandem with stock appreciation rights that may be
granted during any one calendar year to certain executive
officers of the Company, and the voting results which resulted
in the adoption of the amendment, were as follows:
<TABLE>
<CAPTION>
Votes cast for Votes against Abstentions
-------------- ------------- -----------
<C> <C> <C>
32,563,408 8,363,550 480,921
</TABLE>
(f) A stockholder proposal relating to long-term compensation awards
for executive officers, and the voting results which resulted
in the defeat of the proposal, were as follows:
<TABLE>
<CAPTION>
Votes cast for Votes against Abstentions
-------------- ------------- -----------
<C> <C> <C>
5,062,172 17,134,762 1,386,801
</TABLE>
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits:
No exhibits are required with this filing.
(b) Reports on Form 8-K:
<TABLE>
<CAPTION>
Date Item Financial statements
---------------- ---------- --------------------
<C> <C> <C>
May 19, 1994 #5 and #7 None
May 20, 1994 #5 and #7 None
</TABLE>
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALLY ENTERTAINMENT CORPORATION
-------------------------------
Registrant
/s/ John W. Dwyer
-------------------------------
John W. Dwyer
Vice President
and Corporate Controller
(Chief Accounting Officer)
Dated: August 15, 1994
