FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the period ended March 31, 1995
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 May 1, 1995, 47,024,656 shares of the registrant's common stock
were outstanding.
<PAGE>
BALLY ENTERTAINMENT CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial statements:
Condensed consolidated balance sheet (unaudited)
March 31, 1995 and December 31, 1994 . . . . . . . . 1
Condensed consolidated statement of operations
(unaudited)
Three months ended March 31, 1995 and 1994 . . . . . 2
Condensed consolidated statement of stockholders'
equity (unaudited)
Three months ended March 31, 1995. . . . . . . . . . 3
Condensed consolidated statement of cash flows
(unaudited)
Three months ended March 31, 1995 and 1994 . . . . . 4 - 5
Notes to condensed consolidated financial statements
(unaudited). . . . . . . . . . . . . . . . . . . . . . 6 - 9
Item 2. Management's discussion and analysis of
financial condition and results of operations . . . . . . 10 - 18
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K . . . . . . . . 19
SIGNATURE PAGE . . . . . . . . . . . . . . . . . . . . . . . . 20
<PAGE>
<TABLE>
Bally Entertainment Corporation
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
<CAPTION>
March 31 December 31
1995 1994
- ----------------------------------------------------------------------
(In thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents . . . . . . . . . . . $ 157,257 $ 178,427
Marketable securities, at fair value . . . 3,553 6,031
Receivables, less allowances of $13,368
and $12,196. . . . . . . . . . . . . . . 23,336 23,450
Inventories. . . . . . . . . . . . . . . . 8,036 8,113
Deferred income taxes. . . . . . . . . . . 15,151 16,299
Other current assets . . . . . . . . . . . 7,855 16,373
---------- ----------
Total current assets . . . . . . . . . . 215,188 248,693
Property and equipment, less accumulated
depreciation of $460,254 and $445,239. . . 1,203,560 1,186,868
Investment in and receivables from
discontinued operations. . . . . . . . . . 290,796 291,012
Intangible assets, less accumulated
amortization of $25,503 and $24,398. . . . 124,515 123,367
Other assets . . . . . . . . . . . . . . . . 86,519 86,221
---------- ----------
$1,920,578 $1,936,161
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note and accounts payable. . . . . . . . . $ 20,371 $ 28,745
Income taxes payable . . . . . . . . . . . 28,000 27,707
Accrued liabilities. . . . . . . . . . . . 112,813 113,990
Current maturities of long-term debt . . . 7,205 7,200
---------- ----------
Total current liabilities. . . . . . . . 168,389 177,642
Long-term debt, less current maturities. . . 1,265,790 1,258,990
Deferred income taxes. . . . . . . . . . . . 150,489 152,851
Other liabilities. . . . . . . . . . . . . . 13,104 15,656
Minority interests . . . . . . . . . . . . . 25,243 37,410
Stockholders' equity . . . . . . . . . . . . 297,563 293,612
---------- ----------
$1,920,578 $1,936,161
========== ==========
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
Bally Entertainment Corporation
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
<CAPTION>
Three months ended
March 31
-----------------------
1995 1994
- ---------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . $ 228,298 $ 212,289
Costs and expenses:
Cost of operations . . . . . . . . . . . . 143,039 140,356
Selling, general and administrative. . . . 27,142 30,913
Gaming development costs, including
amortization of pre-opening costs of
$3,330 in 1994 . . . . . . . . . . . . . 443 3,774
Depreciation and amortization. . . . . . . 17,296 18,071
---------- ----------
187,920 193,114
---------- ----------
Operating income . . . . . . . . . . . . . . 40,378 19,175
Gain on sales of marketable securities . . . 103
Interest expense . . . . . . . . . . . . . . (32,252) (33,240)
---------- ----------
Income (loss) from continuing operations
before income taxes and minority
interests. . . . . . . . . . . . . . . . . 8,229 (14,065)
Income tax benefit (provision) . . . . . . . (3,100) 5,600
Minority interests . . . . . . . . . . . . . (955) (1,179)
---------- ----------
Income (loss) from continuing operations . . 4,174 (9,644)
Income from discontinued operations. . . . . 5,007
---------- ----------
Income (loss) before extraordinary item. . . 4,174 (4,637)
Extraordinary gain (loss)on
extinguishment of debt . . . . . . . . . . 326 (20,735)
---------- ----------
Net income (loss). . . . . . . . . . . . . . 4,500 (25,372)
Preferred stock dividend requirement . . . . (694) (694)
---------- ----------
Net income (loss) applicable to
common stock . . . . . . . . . . . . . . . $ 3,806 $ (26,066)
========== ==========
Per common and common equivalent share:
Income (loss) from continuing operations.. $ .07 $ (.23)
Income from discontinued operations. . . . .11
Extraordinary gain (loss) on
extinguishment of debt . . . . . . . . . .01 (.44)
---------- ----------
Net income (loss). . . . . . . . . . . . . $ .08 $ (.56)
========== ==========
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
Bally Entertainment Corporation
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(unaudited)
<CAPTION>
Total
Series D Capital in 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, 1994 . . . $ 694 $ 31,426 $295,110 $ (31,581) $ (2,037) $293,612
Net income . . . . . . 4,500 4,500
Preferred stock
dividend --
$1.00 per share. . . (694) (694)
Change in unrealized
gain on available-for-
sale securities . . . 25 25
Exercise of stock
options . . . . . . . 13 107 120
-------- -------- -------- -------- -------- --------
Balance at
March 31, 1995. . . . . $ 694 $ 31,439 $295,217 $(27,750) $ (2,037) $297,563
======== ======== ======== ======== ======== ========
<CAPTION>
Series D Common stock
preferred ----------------------
Share amounts stock Issued Treasury
- -------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Balance at December 31, 1994 . . . . . . . . . . . . . . 694 47,138 147
Exercise of stock options. . . . . . . . . . . . . . . 20
-------- -------- --------
Balance at March 31, 1995. . . . . . . . . . . . . . . . 694 47,158 147
======== ======== ========
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
Bally Entertainment Corporation
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<CAPTION>
Three months ended
March 31
-----------------------
1995 1994
- ---------------------------------------------------------------------
(In thousands)
<S> <C> <C>
OPERATING:
Income (loss) from continuing operations. . $ 4,174 $ (9,644)
Adjustments to reconcile to cash
provided (used)--
Depreciation and amortization
(including pre-opening costs) . . . . . 17,296 21,401
Interest accretion on discount notes
and other amortization included in
interest expense. . . . . . . . . . . . 5,007 4,680
Deferred income taxes . . . . . . . . . . (1,212) (31,303)
Provision for doubtful receivables. . . . 1,524 982
Change in operating assets and liabilities (3,464) 761
Other, net. . . . . . . . . . . . . . . . 566 1,091
---------- ----------
Cash provided by (used in) operating
activities. . . . . . . . . . . . . . 23,891 (12,032)
INVESTING:
Purchases of property and equipment . . . . (32,032) (13,897)
Decrease in construction-related liabilities (1,364) (8,406)
Acquisitions of Bally's Grand, Inc.
common stock . . . . . . . . . . . . . . . (11,305) (4,019)
Purchases of marketable securities. . . . . (3,353)
Net proceeds from sales of marketable
securities . . . . . . . . . . . . . . . . 2,434
Other, net. . . . . . . . . . . . . . . . . (2,729) (949)
---------- ----------
Cash used in investing activities . . . (48,349) (27,271)
FINANCING:
Debt transactions --
Proceeds from issuance of long-term debt . 425,000
Proceeds from construction loan. . . . . . 10,184
Net borrowing under credit agreements. . . 4,000
Repayments of long-term debt . . . . . . . (6,517) (378,319)
Debt issuance costs. . . . . . . . . . . . (14,750)
Equity transactions --
Preferred stock dividends. . . . . . . . . (694) (694)
Proceeds from exercise of stock options. . 99 77
---------- ----------
Cash provided by financing activities . 3,072 35,314
DISCONTINUED OPERATIONS:
Cash provided by (used in)
discontinued operations . . . . . . . 216 (420)
---------- ----------
Decrease in cash and equivalents . . . . . . (21,170) (4,409)
Cash and equivalents, beginning of period. . 178,427 192,078
---------- ----------
Cash and equivalents, end of period. . . . . $ 157,257 $ 187,669
========== ==========
<FN>
(continued)
</FN>
</TABLE>
<PAGE>
<TABLE>
Bally Entertainment Corporation
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS--(continued)
(unaudited)
<CAPTION>
Three months ended
March 31
-----------------------
1995 1994
- ---------------------------------------------------------------------
(In thousands)
<S> <C> <C>
SUPPLEMENTAL CASH FLOWS INFORMATION:
Changes in operating assets and
liabilities were as follows--
(Increase) decrease in receivables . . $ 107 $ (846)
Decrease in inventories. . . . . . . . 77 56
(Increase) decrease in other
current assets . . . . . . . . . . . 8,518 (569)
(Increase) decrease in other assets. . 169 (816)
Decrease in accounts payable and
accrued liabilities. . . . . . . . . (10,171) (9,740)
Increase in income taxes payable . . . 138 12,561
Increase (decrease) in other
liabilities . . . . . . . . . . . . (2,302) 115
---------- ----------
$ (3,464) $ 761
========== ==========
Cash payments for interest and income
taxes for continuing operations were
as follows--
Interest paid. . . . . . . . . . . . . $ 20,535 $ 24,279
Interest capitalized . . . . . . . . . (747) (103)
Income taxes paid (net of refunds) . . 4,265 13,142
Investing and financing activities exclude
the following non-cash transactions--
Purchases of marketable securities
on margin. . . . . . . . . . . . . . $ 1,311 $
Sales of marketable securities on
margin . . . . . . . . . . . . . . . 3,290
Unsettled sales of marketable
securities . . . . . . . . . . . . . 1,517
Purchase of Bally's Grand, Inc.
common stock for a note payable. . . 3,873
<FN>
See accompanying notes.
</FN>
</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 accompanying 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 presently 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, 1994.
All adjustments have been recorded which are, in the opinion of
management, necessary for a fair presentation of the condensed
consolidated balance sheet of the Company at March 31, 1995, its
condensed consolidated statements of operations and cash flows for the
three months ended March 31, 1995 and 1994, and its condensed
consolidated statement of stockholders' equity for the three months
ended March 31, 1995. All such adjustments were of a normal recurring
nature, except for those adjustments required to present Bally's Health
& Tennis as a discontinued operation and to reflect a refinancing of
indebtedness of a subsidiary in March 1994 (see "Long-term debt").
Certain reclassifications have been made to prior period financial
statements to conform with the 1995 presentation.
Seasonal factors
The Company's operations are subject to seasonal factors and, therefore,
the results of operations for the three months ended March 31, 1995 and
1994 are not necessarily indicative of the results of operations for the
full year.
Acquisitions of Bally's Grand, Inc. common stock
Bally's Grand, Inc. owns and operates the casino hotel resort in Las
Vegas, Nevada known as "Bally's Las Vegas." Bally's Grand, Inc. has
been consolidated since December 1993 as a result of Bally's acquisition
of a controlling interest therein at that time. During the three months
ended March 31, 1995, Bally acquired 850,810 shares of Bally's Grand,
Inc. common stock in several transactions for $4,873 in cash and a note
payable of $3,873. Additionally, Bally's Grand, Inc. repurchased
600,000 shares of its common stock in several transactions during that
period for a total cash consideration of $6,432. As a result of the
aforementioned transactions, Bally owns approximately 80% of the Bally's
Grand, Inc. common shares outstanding at March 31, 1995. 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 ($2,253 in
1995) is being amortized using the straight-line method over 20 years.
Marketable securities
Marketable securities consist of common stock of certain publicly traded
gaming companies. These securities are considered available-for-sale
securities and are carried at fair value with the change in unrealized
gains or losses reported net of tax, as a credit or charge to
accumulated deficit. Gross unrealized gains and losses of securities
held at March 31, 1995 were $181 and zero, respectively. Gross realized
gains and losses on sales of available-for-sale equity securities
totalled $323 and $220, respectively, for the three months ended March
31, 1995. The cost of securities sold is determined on the specific
identification method.
Long-term debt
The carrying amounts of the Company's long-term debt at March 31, 1995
and December 31, 1994 are as follows:
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
------------ -----------
<S> <C> <C>
Bally Entertainment Corporation:
6% Convertible Subordinated Debentures
due 1998. . . . . . . . . . . . . . . . . $ 15,715 $ 15,715
10% Convertible Subordinated Debentures
due 2006. . . . . . . . . . . . . . . . . 80,000 80,000
Bally's Casino Holdings, Inc.:
Senior Discount Notes due 1998. . . . . . . 145,936 149,281
Bally's Park Place, Inc.:
9-1/4% First Mortgage Notes due 2004. . . . 425,000 425,000
GNAC, CORP.:
10-5/8% First Mortgage Notes due 2003,
less unamortized discount of $1,789
and $1,824. . . . . . . . . . . . . . . . 273,211 273,176
Bally's Grand, Inc.:
10-3/8% First Mortgage Notes due 2003 . . . 315,000 315,000
Bally's Casino Lakeshore Resort:
Construction loan . . . . . . . . . . . . . 14,542 4,358
Other secured and unsecured obligations. . . 3,591 3,660
---------- ----------
Total long-term debt . . . . . . . . . . . . 1,272,995 1,266,190
Current maturities of long-term debt . . . . (7,205) (7,200)
---------- ----------
Long-term debt, less current maturities. . . $1,265,790 $1,258,990
========== ==========
</TABLE>
During the three months ended March 31, 1995, Bally's Casino Holdings,
Inc. ("Casino Holdings") purchased $10,040 principal amount of its
Senior Discount Notes due 1998 (the "Senior Discount Notes") for $6,448
in cash, which resulted in an extraordinary gain of $326, net of income
taxes of $176.
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 retire and defease its 11-7/8%
First Mortgage Notes due 1999 (the "11-7/8% Notes") and pay dividends of
$30,214 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.
Earnings (loss) per common and common equivalent share
Earnings (loss) per common and common equivalent share is computed by
dividing net income (loss) applicable to common stock by the weighted
average number of shares of common stock and common stock equivalents
outstanding during each period, which totalled 48,692,783 and 46,888,070
for the three months ended March 31, 1995 and 1994, respectively.
Common stock equivalents, which represent the dilutive effect of the
assumed exercise of certain outstanding stock options, increased the
weighted average number of shares outstanding by 1,693,182 for the three
months ended March 31, 1995. The assumed exercise of outstanding stock
options was not applicable for the three months ended March 31, 1994.
Discontinued operations
In June 1994, Bally's Board of Directors (the "Board") approved a plan
to spin-off Bally's Health & Tennis (the "Spin-off"), which is expected
to be accomplished by distributing substantially all of the issued and
outstanding stock of Bally's Health & Tennis to Bally's stockholders.
The Spin-off, which is anticipated to be completed in the third quarter
of 1995, is subject to satisfaction of certain conditions and receipt of
certain consents. As a result of the Board's action regarding the Spin-
off, the Company recorded a charge in June 1994 to provide for estimated
operating losses through disposal.
The Company's investment in and receivables from discontinued operations
at March 31, 1995 and December 31, 1994 consists of:
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
------------ -----------
<S> <C> <C>
Investment in fitness centers segment. . . $ 229,438 $ 229,438
Income taxes receivable from
fitness centers segment. . . . . . . . . 52,990 52,990
Other receivables from fitness centers
segment. . . . . . . . . . . . . . . . . 8,368 8,584
------------ -----------
$ 290,796 $ 291,012
============ ===========
</TABLE>
Summarized financial information of the fitness centers segment is as
follows:
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
------------ -----------
<S> <C> <C>
Financial position:
Current assets . . . . . . . . . . . . . . $ 183,641 $ 186,491
Property and equipment, net. . . . . . . . 375,242 381,973
Total assets . . . . . . . . . . . . . . . 841,207 841,384
Current liabilities . . . . . . . . . . . 245,493 240,256
Long-term debt, less current maturities. . 283,234 289,711
Total liabilities. . . . . . . . . . . . . 611,769 611,946
Total equity . . . . . . . . . . . . . . . 229,438 229,438
</TABLE>
<TABLE>
<CAPTION>
Three months ended
March 31
--------------------------
1995 1994
------------ -----------
<S> <C> <C>
Results of operations:
Revenues . . . . . . . . . . . . . . . . . $ 176,495 $ 183,839
Operating income . . . . . . . . . . . . . 10,216 5,887
Net income . . . . . . . . . . . . . . . . -- 5,007
</TABLE>
<PAGE>
Bally Entertainment Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
As described 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 in the Company's
financial statements because of the Spin-off. 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. The following discussion and
analysis of financial condition and results of operations is that of the
Company's continuing operations.
RESULTS OF OPERATIONS
Revenues, operating income (loss) before depreciation and amortization
("EBITDA") and operating income (loss) for the Company and each of its
casino properties were as follows (in millions):
<TABLE>
<CAPTION>
Three months ended
March 31
------------------
1995 1994
- ----------------------------------------------------------------------
<S> <C> <C>
Consolidated:
Revenues (a) . . . . . . . . . . . . . . . $228.3 $212.3
EBITDA (b) . . . . . . . . . . . . . . . . 57.7 40.6
Operating income . . . . . . . . . . . . . 40.4 19.2
Bally's Park Place:
Revenues (a) . . . . . . . . . . . . . . . $ 92.3 $ 76.4
EBITDA (b) . . . . . . . . . . . . . . . . 29.2 16.5
Operating income . . . . . . . . . . . . . 22.3 9.2
The Grand:
Revenues (a) . . . . . . . . . . . . . . . $ 61.8 $ 50.5
EBITDA (b) . . . . . . . . . . . . . . . . 12.1 2.0
Operating income (loss). . . . . . . . . . 7.8 (2.8)
Bally's Las Vegas:
Revenues (a) . . . . . . . . . . . . . . . $ 72.3 $ 68.8
EBITDA (b) . . . . . . . . . . . . . . . . 18.4 17.0
Operating income . . . . . . . . . . . . . 12.9 12.0
Bally's Saloon & Gambling Hall (c):
Revenues (a) . . . . . . . . . . . . . . . $ 1.0 $ 15.9
EBITDA (b) . . . . . . . . . . . . . . . . (1.7) 5.4
Operating income (loss) (d). . . . . . . . (1.9) 1.1
<FN>
- ---------
Notes:
(a) Includes interest and other income for each of the three month
periods ended March 31, 1995 and 1994.
(b) The Company has presented EBITDA supplementally because the Company
believes it allows for a more complete analysis of its results of
operations. This data should not be considered as an alternative
to any measure of performance or liquidity as promulgated under
generally accepted accounting principles (such as net income or cash
provided by (used in) operating, investing and financing activities)
nor should it be considered as an indicator of the Company's overall
financial performance.
(c) On February 9, 1995, Bally's Saloon & Gambling Hall ("Bally's
Mississippi") suspended operations at its Mhoon Landing site and
entered into a venture agreement with Lady Luck Gaming Corporation
("Lady Luck") under which Bally's Mississippi plans to relocate its
dockside casino to Lady Luck's site in Robinsonville, Mississippi
(which is presently the closest gaming site to Memphis, Tennessee),
where Lady Luck operates a 240-room hotel. Bally's Mississippi
contributed its dockside casino and related assets to the venture
effective April 1, 1995.
(d) Includes a charge of $3.3 million for amortization of pre-opening
costs in the three months ended March 31, 1994.
</FN>
</TABLE>
Comparison of the three months ended March 31, 1995 and 1994
Revenues of the Company for the first quarter of 1995 were $228.3
million compared to $212.3 million for the 1994 quarter, an increase of
$16.0 million (8%). Operating income of the Company for the first
quarter of 1995 was $40.4 million compared to $19.2 million for the 1994
quarter, an increase of $21.2 million. These increases principally
reflect improved operating results at both of the Company's Atlantic
City casino hotel resorts.
Atlantic City
Revenues of Bally's Park Place for the first quarter of 1995 were
$92.3 million compared to $76.4 million for the 1994 quarter, an
increase of $15.9 million (21%). Revenues during the first quarter of
1994 were negatively affected by severe weather in the northeastern
United States. Casino revenues for the 1995 quarter were $80.6 million
compared to $65.7 million in 1994, an increase of $14.9 million (23%).
Slot revenues increased $12.1 million (28%) due to a 31% increase in
slot handle (volume) offset, in part, by a decline in the win percentage
from 8.9% in the 1994 quarter to 8.6% in 1995. Bally's Park Place added
124 slot machines (a 6% increase) since March 31, 1994. Table game
revenues, excluding poker, increased $2.0 million (10%) due to a 12%
increase in the drop (amount wagered) offset, in part, by a decrease in
the hold percentage from 17.1% in the 1994 quarter to 16.7% in 1995.
Other casino revenues were $1.9 million for 1995 compared to $1.1
million in 1994, an increase of $.8 million which was primarily due to
the introduction of horse race simulcasting and keno operations in June
1994. Other revenues increased $.8 million (38%) due to higher
dividends from a multi-casino linked progressive trust, increased
entertainment income and additional interest income. Operating income
of Bally's Park Place for the first quarter of 1995 was $22.3 million
compared to $9.2 million for the 1994 quarter, an increase of
$13.1 million as the aforementioned revenue increase was offset, in
part, by a $2.8 million increase in operating expenses. The operating
margin (before depreciation and amortization) increased from 22% in the
1994 quarter to 32% in 1995. Casino expenses increased $4.5 million
(15%) due to expanded marketing and promotional efforts, increased
gaming taxes associated with higher gaming revenues and an increase in
salaries, benefits and other costs associated with the operation of
horse race simulcasting and keno in 1995. Selling, general and
administrative expenses decreased $2.2 million (22%) primarily due to a
reevaluation of the cost associated with certain employee benefit plans.
Revenues of The Grand for the first quarter of 1995 were $61.8 million
compared to $50.5 million for the 1994 quarter, an increase of
$11.3 million (22%). As described previously, revenues during the first
quarter of 1994 were negatively affected by severe weather in the
northeastern United States. Casino revenues for the 1995 quarter were
$57.4 million compared to $45.6 million in 1994, an increase of
$11.8 million (26%). Slot revenues increased $7.3 million (27%) due to
a 36% increase in slot handle offset, in part, by a decline in the win
percentage from 9.1% in the 1994 quarter to 8.5% in 1995. Table game
revenues increased $4.5 million (23%) due to an increase in the hold
percentage from 14.8% in the 1994 quarter to 18.2% in 1995. Other
revenues decreased $.6 million (32%) due primarily to an adjustment to
the reserve for unclaimed gaming chips and tokens in the first quarter
of 1994. Operating income of The Grand for the first quarter of 1995
was $7.8 million compared to an operating loss of $2.8 million for the
1994 quarter, an improvement of $10.6 million due primarily to the
aforementioned revenue increase. The operating margin (before
depreciation and amortization) increased from 4% in the 1994 quarter to
20% in 1995. Operating expenses increased less than 2% primarily due to
an increase in casino operating expenses of $1.9 million (6%) for
promotional expenses and gaming taxes associated with the aforementioned
increase in casino volume, partially offset by decreases in other
operating expenses of $.7 million (9%) and depreciation and amortization
expense of $.4 million (9%).
Management believes that the expanded number of slot machines in
Atlantic City has caused and will continue to cause intense promotional
efforts to attract slot players as both the Company's Atlantic City
casinos and their competitors continue to seek to expand their share of
slot revenues and maximize the utilization of their slot machines.
Further, as a result of the aggressive competition for slot patrons, the
Atlantic City slot win percentage has declined. Management believes
that the slot win percentage will continue to be subject to competitive
pressure and may further decline. However, management believes its
Atlantic City casinos are well-positioned to compete for additional
casino revenues by continuing to offer attractive promotional slot and
table game programs and special events and by enhancing the appearance
and comfort of their gaming space through various improvements. In
1994, Bally's Park Place expanded its casino floor space from 68,100 to
71,400 square feet and added another 8,700 square feet of gaming space
to offer horse race simulcasting and keno, and to relocate and expand
its poker operations. Further, Bally's Park Place completed a slot
machine upgrade during the first quarter of 1995, replacing the majority
of its slot machines with state-of-the-art machines with embedded bill
acceptors and reconfigured its slot machine layout, adding additional
slot stools and aisle space. During the second quarter of 1994, The
Grand reconfigured its casino floor, widening the aisles, adding
additional slot stools and replacing the majority of its slot machines
with state-of-the-art machines with embedded bill acceptors.
Additionally, The Grand completed an expansion in April 1995 which
increased its casino floor and other gaming space by nearly 30% to
accommodate approximately 400 additional slot machines, poker, horse
race simulcasting and keno.
Las Vegas
Revenues of Bally's Las Vegas for the first quarter of 1995 were $72.3
million compared to $68.8 million for the 1994 quarter, an increase of
$3.5 million (5%). Casino revenues for the 1995 quarter were $33.2
million compared to $33.5 million for 1994, a decrease of $.3 million
(1%). Slot revenues increased $2.0 million (16%) due to a 22% increase
in slot handle offset, in part, by a decline in the win percentage from
6.4% in the 1994 quarter to 6.1% in 1995. Management believes the
increase in slot handle was attributable, in part, to an increase in
walk-in business which resulted from the July 1994 opening of a new
automated walkway system and related improvements to the front of the
property. Table game revenues decreased $1.8 million (9%) from the 1994
quarter due to a decrease in the hold percentage from 16.2% in the 1994
quarter to 14.3% in 1995 offset, in part, by a 3% increase in the drop.
Other casino revenues decreased $.5 million (23%). Rooms revenue
increased $.7 million (5%) due to an increase in the number of rooms
occupied and a higher average room rate compared to the 1994 quarter.
Food and beverage revenues increased $1.5 million (15%) primarily due to
an increase in the number of banquets attributable to increased
convention business. Other revenues increased $1.6 million (17%) due to
an increase in interest income earned on invested cash. Operating
income of Bally's Las Vegas for the first quarter of 1995 was $12.9
million compared to $12.0 million for the 1994 quarter, an increase of
$.9 million (8%) as the aforementioned revenue increase was offset, in
part, by a $2.6 million (5%) increase in operating expenses. The
operating margin (before depreciation and amortization) for the 1995
quarter of 25% remained unchanged from 1994. The increase in operating
expenses was primarily due to increases in other operating expenses of
$1.2 million (11%) and depreciation and amortization expense of $.6
million (12%). Other operating expenses increased due principally to
the cost of operating a gift shop in 1995 (contracted out in 1994) and
additional costs associated with the operation of the automated walkway
system and related improvements to the frontage area. Depreciation and
amortization expense increased due to major capital improvements
completed during 1994. In addition, casino operating expenses increased
$.4 million (2%) and food and beverage expenses increased $.4 million
(4%).
Three new major casino hotels opened for business in Las Vegas during
the latter part of 1993 that contain 370,000 total square feet of casino
space, 10,400 total hotel guest rooms and a theme park. In addition,
there have been several public announcements concerning new casino
projects in Las Vegas which, when opened, will further expand capacity.
Management believes that the additional casino and hotel room capacity
resulting from the opening of new casino hotels had a short-term
negative impact on Bally's Las Vegas, but that over the long term
Bally's Las Vegas benefits from the increase in the number of visitors
to Las Vegas that these new properties attract. To enhance its
competitiveness in the Las Vegas market, Bally's Las Vegas has completed
an extensive renovation of its main tower and improvements to its
frontage area along the Strip, expects to operate by June 1995 a
monorail that will transport passengers between Bally's Las Vegas and
The MGM Grand Hotel and Theme Park, and has commenced a renovation of
the south tower hotel rooms and corridors and a redesign of the lower-
level retail mall. In addition, Bally's Las Vegas intends to add
approximately 7,500 square feet of gaming space in 1995 (primarily for
additional slot machines) by relocating the race and sports book area to
space formerly occupied by a theater.
Mississippi
On February 9, 1995, Bally's Mississippi entered into a venture
agreement with Lady Luck under which Bally's Mississippi plans to
relocate its dockside casino from Mhoon Landing to Lady Luck's site in
Robinsonville, Mississippi (which is presently the closest gaming site
to Memphis), where Lady Luck operates a 240-room hotel. Effective
April 1, 1995, Bally's Mississippi contributed its dockside casino and
related assets to the venture, and Lady Luck contributed its hotel and
related assets to the venture. Bally's Mississippi is the majority
owner and general manager (through an affiliate) of the venture. The
Robinsonville site is expected to be developed to include a restaurant,
an entertainment lounge, administrative facilities and additional
parking. Casino operations are expected to commence at the
Robinsonville site in the summer of 1995. In connection with the
planned relocation, Bally's Mississippi suspended operations at Mhoon
Landing on February 9, 1995. Revenues of Bally's Mississippi for the
period January 1, 1995 through February 9, 1995 were $1.0 million.
Operating loss of Bally's Mississippi for the first quarter of 1995 was
$1.9 million, and includes payroll and payroll-related expenses (for
approximately 50 employees) and certain equipment rental expense (under
lease commitments) incurred subsequent to the suspension of operations
at Mhoon Landing. Revenues and operating income of Bally's Mississippi
for the first quarter of 1994 were $15.9 million and $1.1 million,
respectively. Operating income for the 1994 quarter included
amortization of pre-opening costs of $3.3 million.
The Mississippi gaming legislation does not limit the number of gaming
licenses that may be granted and management believes this resulted in a
saturation of gaming facilities in and around the Memphis market. As of
May 1, 1995, nine gaming facilities were operating in this market and
these facilities (as well as any others which subsequently commence
operations there) present significant competition for the venture
between Bally's Mississippi and Lady Luck. The Company anticipates
improved operating results at the Robinsonville site due to its close
proximity to Memphis, but there can be no assurance that such improved
results will be attained given these competitive conditions.
New Orleans
Bally's Casino Lakeshore Resort ("Bally's New Orleans") expects to
commence the operation of a riverboat casino in New Orleans, Louisiana
by mid-1995, subject to the issuance of a Certificate of Final Approval
by the Louisiana Riverboat Gaming Commission.
Interest expense
Interest expense, net of capitalized interest, was $32.3 million for
the first quarter of 1995 compared to $33.2 million for the 1994
quarter, a decrease of $.9 million (3%) due to an increase in the amount
of capitalized interest and the March 1994 refinancing of Bally's Park
Place's public indebtedness at a more favorable rate.
Income taxes
For the three months ended March 31, 1995 and 1994, the effective rates
of the income tax provision (benefit) on income (loss) from continuing
operations 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.
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 in the foreseeable future are
expected to be recovered substantially by allocations to its
subsidiaries. Bally has debt service requirements and preferred stock
dividend payments of approximately $17 million during the remainder of
1995. Cash requirements for Bally during the remainder of 1995 also
include income tax payments, which management expects to be recovered
substantially from subsidiaries pursuant to tax sharing agreements.
Sources of cash available to Bally are generally limited to existing
cash balances ($11.2 million at March 31, 1995), dividends, management
fees or cost allocations to subsidiaries, receipts pursuant to tax
sharing agreements, capital transactions and asset sales. In addition,
Bally received approximately $15 million from a subsidiary of Casino
Holdings in April 1995, to repay its obligation to Bally for shares of
Bally's Grand, Inc. common stock purchased previously and to purchase
additional shares of Bally's Grand, Inc. common stock from Bally. 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 be paid to Bally. As of March 31,
1995, almost $4 million was available for the payment of dividends by
Bally's Park Place pursuant to the net income test. Dividends to Bally
from subsidiaries other than Bally's Park Place are not presently
expected during the remainder of 1995. Bally believes it will be able
to satisfy its cash needs during the remainder of 1995, but remains
dependent upon the ability of its subsidiaries to pay dividends and cost
allocations or advance funds to meet its future cash requirements.
The Spin-off of Bally's Health & Tennis, which is subject to
satisfaction of certain conditions and receipt of certain consents, is
expected to be accomplished by distributing substantially all of the
issued and outstanding stock of Bally's Health & Tennis to Bally's
stockholders. Because the Spin-off is expected to be a dividend,
stockholders' equity of the Company will be reduced by the amount of its
investment in Bally's Health & Tennis, and the Company's debt to equity
ratio will increase substantially.
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 continue to incur costs and obligations in the pursuit of new
gaming ventures. Sources of cash available to Casino Holdings are
generally limited to existing cash balances ($22.7 million at March 31,
1995) and loan repayments, dividends and management fees from
subsidiaries. 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.
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. As of March 31, 1995,
Bally's Park Place may pay dividends (other than those available
pursuant to the net income test) of up to $25 million to Casino Holdings
pursuant to the indenture of the 9-1/4% Notes (subject to the approval
of the New Jersey Casino Control Commission), and any such dividends are
not available to be paid by Casino Holdings to Bally. Bally's Grand,
Inc. is presently not expected to pay dividends during the remainder of
1995.
Bally's New Orleans and Bally's Mississippi are expected to commence
operations by mid-1995 and in the summer of 1995, respectively, and are
expected to generate unrestricted cash flows thereafter, a portion of
which will be used by each of Bally's New Orleans and Bally's
Mississippi to pay management fees to Casino Holdings and to repay
Casino Holdings for project costs and working capital requirements
funded by Casino Holdings. Casino Holdings believes it will be able to
satisfy its cash needs during the remainder of 1995, although it remains
dependent upon the ability of its subsidiaries to generate cash to repay
advances and pay dividends.
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 March 31,
1995 are not significant. Management plans to make capital expenditures
of approximately $10 million during the remainder of 1995 for the
completion of the penthouse floor in the hotel tower, restaurant and
kitchen renovations and other improvements and equipment necessary to
maintain Bally's Park Place in first-class condition. As of March 31,
1995, 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 and pay
dividends during the remainder of 1995 out of existing cash balances
($16.4 million at March 31, 1995) and cash flow from operations.
In December 1994, Bally's Park Place acquired 3.1 acres of land adjacent
to its existing facility, which Bally's Park Place intends to develop to
provide additional casino space and a state-of-the-art entertainment
complex. This project is presently in the planning stage, therefore,
the cost and specifics of the design and funding of this project have
yet to be determined.
Bally's Las Vegas. Bally's Grand, Inc. has no scheduled principal
payments on its indebtedness outstanding at March 31, 1995 until 2003;
however, several major capital improvements are in process or planned.
Bally's Las Vegas, through a joint venture formed with a subsidiary of
MGM Grand, Inc., has substantially completed construction of and expects
to operate by June 1995 the 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 total cost of this project
to be approximately $15 million, of which approximately $12 million was
expended through March 31, 1995. Other significant capital improvement
projects planned for 1995, certain of which have already commenced,
include renovation of the south tower hotel rooms and corridors,
redesign of the lower-level retail mall and relocation of the race and
sports book area. These and certain other public area improvements for
1995 are expected to cost approximately $34 million, of which
approximately $3 million was expended through March 31, 1995. In
addition, capital expenditures of approximately $6 million are required
during the remainder of 1995 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
during the remainder of 1995 out of existing cash balances
($81.9 million at March 31, 1995) and cash flow from operations.
Bally's Grand, Inc. intends to develop a separate, themed casino hotel
resort on the 24 acres of land situated on the Strip adjacent to Bally's
Las Vegas. This project, which is presently expected to include outdoor
attractions in addition to convention and entertainment facilities, is
in the preliminary planning phase of development. As a result, the
specifics of the cost and funding of this project have yet to be
determined.
Bally's Mississippi. As described previously, Bally's Mississippi
entered into a venture agreement with Lady Luck under which Bally's
Mississippi plans to relocate its dockside casino from Mhoon Landing to
Lady Luck's site in Robinsonville, Mississippi (which is presently the
closest gaming site to Memphis), where Lady Luck operates a 240-room
hotel. The Robinsonville site is expected to be developed to include a
restaurant, an entertainment lounge, administrative facilities and
additional parking prior to the commencement of operations. In March
1995, Bally's Mississippi received a commitment from a lender for a
construction loan which converts to a three-year term loan for maximum
borrowings of up to $10 million. Proceeds from the construction loan
are expected to substantially cover Bally's Mississippi's relocation and
reopening expenses (including development of the site).
Bally's New Orleans. Construction of Bally's New Orleans' riverboat
casino commenced in January 1994, and management estimates that a total
of approximately $55 million will be required to construct and equip the
riverboat and to develop related landside improvements. Management
anticipates the cost will be funded by third parties and Casino
Holdings. Bally's New Orleans, to date, has a construction loan for
borrowings of up to approximately $23 million (which will be replaced
with a five-year loan upon completion of the riverboat casino pursuant
to a commitment from another lender) and Casino Holdings has funded
approximately $23 million of the project cost through March 31, 1995.
In April 1995, Bally's New Orleans received a commitment from a lender
for a five-year term loan for approximately $7 million to finance
equipment purchases. In addition, Bally's New Orleans may seek
additional third-party financing to enable it to fund pre-opening costs
and working capital requirements or to repay amounts funded by Casino
Holdings.
The Grand
The Grand has no scheduled principal payments under its public
indebtedness until 2003. Management expects to make capital
expenditures of approximately $10 million during the remainder of 1995
for the aforementioned expansion of its casino floor and other gaming
space, a temporary entertainment facility and certain other public area
improvements necessary to maintain The Grand in first-class condition.
As of March 31, 1995, The Grand had an unused line of credit totalling
$20 million. The Company believes The Grand will be able to satisfy its
debt service and capital expenditure requirements during the remainder
of 1995 out of existing cash balances ($22.9 million at March 31, 1995)
and cash flow from operations.
<PAGE>
Bally Entertainment Corporation
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
None.
<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: May 15, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 1995, THE CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS AND THE CONDENSED CONSOLIDATED STATEMENT
OF STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 157,257
<SECURITIES> 3,553
<RECEIVABLES> 36,704
<ALLOWANCES> 13,368
<INVENTORY> 8,036
<CURRENT-ASSETS> 215,188
<PP&E> 1,663,814
<DEPRECIATION> 460,254
<TOTAL-ASSETS> 1,920,578
<CURRENT-LIABILITIES> 168,389
<BONDS> 1,265,790
<COMMON> 31,439
0
694
<OTHER-SE> 265,430
<TOTAL-LIABILITY-AND-EQUITY> 1,920,578
<SALES> 0
<TOTAL-REVENUES> 228,298
<CGS> 0
<TOTAL-COSTS> 141,515<F1>
<OTHER-EXPENSES> 443
<LOSS-PROVISION> 1,524<F1>
<INTEREST-EXPENSE> 32,252
<INCOME-PRETAX> 8,229
<INCOME-TAX> 3,100
<INCOME-CONTINUING> 4,174
<DISCONTINUED> 0
<EXTRAORDINARY> 326
<CHANGES> 0
<NET-INCOME> 4,500
<EPS-PRIMARY> .08
<EPS-DILUTED> 0
<FN>
<F1>THESE AMOUNTS ARE INCLUDED IN THE COST OF OPERATIONS LINE IN THE
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 1995. THESE AMOUNTS EXCLUDE DEPRECIATION AND AMORTIZATION.
</FN>
</TABLE>
