FORM 10-Q

        UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                    WASHINGTON, D.C.   20549   
   
   
 X


        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
            OF THE SECURITIES EXCHANGE ACT OF 1934

    For the quarterly period ended April 30,October 31, 1994

                               OR   
   
___

        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) 
          OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________________________  to _________________________________

             Commission file number 1-5976

                       CAESARS WORLD, INC.
     (Exact name of registrant as specified in its charter)

            Florida                          59-0773674
(State  or  other jurisdiction  of             (I.R.S.
Employer   
    incorporation or organization)                 Employer
                                         Identification  No.)

    1801 Century Park East, Suite 2600
      Los Angeles, California                    90067   
 (Address of principal executive offices)     (Zip Code)
                           
                          (310) 552-2711
      (Registrant's telephone number, including area code)

                            Not applicable
      (Former name, former address and former fiscal year,
                 if changed since last report.)


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 Xx  No _____

       APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
          PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed
all  documents  and reports required  to  be  filed  by
Sections  12,  13, or 15(d) of the Securities  Exchange
Act   of   1934  subsequent  to  the  distribution   of
securities  under a plan confirmed by  a  court.
                   Yes _____   No _____
                           
         APPLICABLE ONLY TO CORPORATE ISSUERS:

At   June 9,December   8,  1994,  registrant  had  outstanding
24,878,65425,120,463 shares of its $.10 par value common stock.


         CAESARS WORLD, INC. AND SUBSIDIARIES
                   April 30,October 31, 1994
                           
                         INDEX



Page No.
Part I.  Financial Information

Item 1.  Financial Statements:

  Condensed Consolidated Balance Sheets -
  April 30,October 31, 1994 (Unaudited) and July 31, 19931994             3

  Consolidated Statement of Shareholders' Equity
  (Unaudited) - NineThree months ended April 30,October 31, 1994          4  
  
	Consolidated Statements of Income (Unaudited) -   
	Nine months ended April 30, 1994 and 1993	                5

  Consolidated Statements of Income (Unaudited) -
  Three months ended April 30,October 31, 1994 and 1993               65

  Condensed Consolidated Statements of Cash
  Flows (Unaudited) - NineThree months ended
  April 30,October 31, 1994 and 1993                                  76

  Notes to Condensed Consolidated Financial
  Statements (Unaudited)                                     87

Item  2.   Management's  Discussion  and  Analysis   of
Financial Condition and Results of Operations                119 

Part II.  Other Information

Item 1.  Legal Proceedings                                 2113

Item 5.  Other Information                                 2113

Item 6.  Exhibits and Reports on Form 8-K                  2414


                 PART I.  Financial Information

                  Item 1.  Financial Statements

              CAESARS WORLD, INC. AND SUBSIDIARIES
              Condensed Consolidated Balance Sheets
                         (In thousands)
                                
April 30,October 31, July 31, Assets 1994 19931994 (Unaudited) (a) Current assets Cash and cash equivalent investments $115,970 $108,616$155,932 $143,499 Receivables, net 75,986 66,041 Inventories 12,468 11,36469,537 71,341 Deferred income taxes 36,163 42,748 Prepaid37,120 37,120 Inventories, prepaid expenses and other 14,105 12,36628,359 24,881 Total current assets 254,692 241,135290,948 276,841 Property and equipment, net 617,704 616,393622,711 626,740 Excess cost of investments over net assets 52,609 52,671 acquired, net 52,732 52,916 Other assets 56,320 45,275 $981,448 $955,71956,932 61,769 $1,023,200 $1,018,021 Liabilities and Shareholders' Equity Current liabilities Current maturities of long-term debt and obligations under capital leases $ 29,31827,778 $ 30,26327,778 Accounts payable and accrued expenses 125,122 125,835113,307 132,337 Income taxes 9,738 9,36132,572 19,186 Total current liabilities 164,178 165,459173,657 179,301 Long-term debt, and obligations under capital leases, net of current maturities 221,952 253,422198,667 212,556 Other liabilities, including deferred income taxes of $22,831$19,158 and $29,282 58,370 63,948$20,015 68,962 69,297 Shareholders' equity Common stock 2,612 2,5902,645 2,620 Additional paid-in capital 127,125 117,399138,165 128,028 Common stock in treasury (33,182) (32,695) (30,358) Deferred compensation (20,955) (16,146)(26,664) (18,852) Retained earnings 460,861 399,405500,950 477,766 Total shareholders' equity 536,948 472,890 $981,448 $955,719 (a) The balance sheet at July 31, 1993581,914 556,867 $1,023,200 $1,018,021
(a) The balance sheet at July 31, 1994 has been condensed from the audited balance sheet at that date. See notes to condensed consolidated financial statements. CAESARS WORLD, INC. AND SUBSIDIARIES Consolidated Statement of Shareholders' Equity - (Unaudited) NineThree months Ended April 30,October 31, 1994 (In thousands, except shares outstanding)
Common Stock Additional Common Shares Paid-in Stock in Deferred Retained Outstanding Amount Capital Treasury Compensation Earnings Total Balance July 31, 1993 24,619,631 $2,590 $117,399 $(30,358) $(16,146) $399,405 $472,8901994 24,872,862 $2,620 $128,028 $(32,695) $(18,852) $477,766 $556,867 Stock options exercised 50,392 5 76128,288 3 417 - - - 766420 Amortization of deferred compensation, termination of restricted stock grants and other, net (32,868) (3) (1,230) - 5,406 - 4,173 Common stock purchased and held in treasury (44,048)(9,754) - - (2,337)(487) 1,930 - - (2,337) Vesting of incentive stock grants 89,833 - - - - - -1,443 Issuance of restricted stock grants 199,781 20 10,195226,017 22 9,720 - (10,215)(9,742) - - Net income - - - - - 61,456 61,45623,184 23,184 Balance April 30,October 31, 1994 24,882,721 $2,612 $127,125 $(32,695) $(20,955) $460,861 $536,948
See notes to condensed consolidated financial statements CAESARS WORLD, INC. AND SUBSIDIARIES Consolidated Statements of Income - (Unaudited) (In thousands, except net income per share)
Nine Months Ended April 30, 1994 1993 Revenue Casino $600,763 $564,171 Rooms 51,690 51,692 Food and beverage 60,673 57,758 Other income 51,182 47,823 764,308 721,444 Costs and expenses Casino 324,067 306,464 Rooms 15,723 15,217 Food and beverage 46,240 42,968 Other operating expenses 30,226 28,471 Selling, general and administrative 141,411 137,709 Depreciation and amortization 41,671 40,769 Provision for doubtful accounts 51,836 36,720 651,174 608,318 Operating income 113,134 113,126 Interest and dividend income 2,403 1,258 Interest expense, net (14,471) (21,596) Income before income taxes 101,066 92,788 Income taxes 39,610 35,259 Net income $ 61,456 $ 57,529 Net income per share $ 2.51 $ 2.36 Average number of common and common equivalent shares outstanding 24,532 24,41825,117,413 $2,645 $138,165 $(33,182) $(26,664) $500,950 $581,914
See notes to condensed consolidated financial statements. CAESARS WORLD, INC. AND SUBSIDIARIES Consolidated Statements of Income - (Unaudited) (In thousands, except net income per share)
Three Months Ended April 30,October 31, 1994 1993 Revenue Casino $184,505 $170,820$192,329 $208,660 Rooms 16,725 17,56118,508 19,934 Food and beverage 19,539 18,72921,008 22,313 Earnings of unconsolidated affiliate 1,479 - Other income 16,475 17,299 237,244 224,40919,187 18,176 252,511 269,083 Costs and expenses Casino 107,170 94,540109,797 105,175 Rooms 4,951 5,1834,706 5,938 Food and beverage 15,486 14,58715,541 16,461 Other operating expenses 8,839 9,25811,130 11,043 Selling, general and administrative 46,803 45,42250,596 47,876 Depreciation and amortization 14,013 13,39414,031 13,752 Provision for doubtful accounts 17,106 9,451 214,368 191,8355,851 18,236 211,652 218,481 Operating income 22,876 32,57440,859 50,602 Interest and dividend income 756 2721,396 928 Interest expense, net (4,693) (5,371)(4,861) (5,110) Income before income taxes 18,939 27,47537,394 46,420 Income taxes 7,291 10,44014,210 18,572 Net income $ 11,648 $ 17,035$23,184 $27,848 Net income per share $ .47.94 $ .691.14 Average number of common and common equivalent shares outstanding 24,620 24,58824,609 24,513
See notes to condensed consolidated financial statements. CAESARS WORLD, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows - (Unaudited) (In thousands)
NineThree Months Ended April 30,October 31, 1994 1993 Cash flows from (used for) operating activities: Net income $ 61,456 $ 57,529$23,184 $27,848 Non-cash charges to income, net 47,242 46,37115,689 15,250 Changes in assets and liabilities due to operating activities: Receivables, net (9,945) 1,344 Accounts payable and accrued expenses (713) (20,021)(18,520) (1,288) Income taxes payable 13,386 18,840 Other assets and liabilities, net (12,739) (8,703)4,018 (6,222) Net cash provided from operating activities 85,301 76,52037,757 54,428 Cash flows used for investing activities: Purchases of property and equipment (42,040) (25,052)(9,892) (16,190) Other investing activities, net (1,921) (2,541)(978) (1,035) Net cash used for investing activities (43,961) (27,593)(10,870) (17,225) Cash flows from (used for) financing activities: Issuance of 8 7/8 % Senior Subordinated Notes - 150,000 Increase in long-term bank borrowings - 125,000 Reductions in debt and obligations under capital leases (32,415) (309,312)(14,388) (15,752) Other (1,571) (3,769)(67) 300 Net cash used for financing activities (33,986) (38,081)(14,455) (15,452) Net increase in cash and cash equivalent investments 7,354 10,84612,432 21,751 Cash and cash equivalent investments at the beginning of the period 143,499 108,616 52,336 Cash and cash equivalent investments at the end of the period $ 115,970 $ 63,182$155,931 $130,367 Supplemental cash flow information Cash used for: Payment of interest $ 17,7328,223 $ 28,3727,955 Payment of Federal and state income taxes, net $ 39,756157 $ 36,83558
See notes to condensed consolidated financial statements. Note 1. Condensed Consolidated Financial Statements -- The condensed consolidated balance sheetCondensed Consolidated Balance Sheet as of April 30,October 31, 1994, the consolidated statementConsolidated Statement of shareholders' equity for the nine months ended April 30, 1994, the consolidated statements of incomeShareholders' Equity for the three and nine months ended April 30,October 31, 1994, the Consolidated Statements of Income for the three months ended October 31, 1994 and 1993, and the condensed consolidated statementsCondensed Consolidated Statements of cash flowsCash Flows for the ninethree months ended April 30,October 31, 1994 and 1993, have been prepared by the Company and have not been audited. In the opinion of management, all material adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. All significant intercompany balances and transactions have been eliminated. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's July 31, 19931994 Annual Report to Shareholders. The results of operations for the three and nine month periodsperiod ended April 30,October 31, 1994 are not necessarily indicative of the operating results for the full year. The Company's independent public accountants have made an unaudited interim review of the condensed consolidated financial statements for the three and nine months ended April 30,October 31, 1994 and 1993, in accordance with professional standards and procedures established by the American Institute of Certified Public Accountants. A report from the independent public accountants regarding the unaudited review of the interim financial statements is included herein in Part II, Item 6 (a), Exhibit 15. Note 2. Net Income Per Share -- Net income per share is based upon the weighted average number of common and common equivalent shares outstanding for each period presented. Note 3. Regulatory Environment -- The gaming industry in which the Company operates is subject to extensive regulatory supervision and, accordingly, operating results could be affected by legislative and regulatory changes or changes in the policies of, or application of the laws by governmental entities. There have been recent aborted proposals for a federal gaming excise tax and for withholding on certain gaming winnings which in either case if adopted could materially adversely affect operating results. See also the discussion under the caption "Regulatory and Tax Environment" set forth on page 2425 of the Form 10-K of the Company for the fiscal year ended July 31, 1993.1994. Note 4. Income TaxesContingent Receivable -- In February 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, which supersedes previously issued standards. The Company adopted SFAS 109 effective August 1, 1993. As permissible under the new standard,1993, the Company reflected the impact asannounced it had entered into a cumulative adjustment in the fiscal 1994 first quarter and did not restate prior periods. Under SFAS No. 109, the liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based upon differences between financial and tax reporting utilizing the enacted tax rates and laws in effect when the differences are expected to reverse. The adoptionmanagement operating agreement with one of the new standard had an immaterial impact on net income.bidders for a casino development in New Orleans. In August 1993, the Omnibus Budget Reconciliation Act of 1993 (OBRA)bid was enacted which resulted in an increaseawarded to another operator and the initial bidder's participation in the federal corporate tax rateproject ended. Subsequently, the Company's former principal joined with others and they were awarded the contract to operate the New Orleans casino development project. Pursuant to settlement of a dispute arising with the initial bidder, the Company is to receive $5,000,000 for expenses and pre-development services from 34%the initial bidder. Previously, this receivable, in part, had been contingent (at least as to 35% retroactive to January 1, 1993.timing) on the operator completing its financing. The retroactive impactfinancing was completed in November 1994 and the receivable is due at the end of December 1994. While the Company has received an acknowledgement from a representative of the enactment of OBRAobligors that these amounts are due and the adoptionobligor is seeking financing, in view of SFAS 109 aggregated a net charge to the provisionunavailability of enough information at this time for income taxes in the first quarter of fiscal 1994 of approximately $750,000. Future net income of the Company to fully evaluate this item and the uncertainity as to when collection will be adversely impacted byoccur, the increased tax rate.Company is currently planning to record realization only upon collection of this receivable. The Company will reflect collections of this item as a reduction of expenses. Note 5. On January 1,Labor Contracts -- In November 1994, the Company adoptedagreed to a 401(k) Plan for all full-time employees having at least onenew three year of service (as defined incontract with the Plan). This replaced the Company sponsored Individual Retirement Account (IRA) Plan. The annual pretax cost to the Company of the new 401(k) Plan will be approximately $2 million greater than the previous IRA Plan. Note 6. The Culinary Workers Union and Bartenders Union contracts covering approximately 2,500 employees and another unionin Las Vegas. Another contract covering approximately 20 theatrical stage employees has expired on June 1, 1994 at Caesars Palace in Las Vegas and a tentative agreement has been reached but not yet been ratified by these employees. A work is continuing under a contract extension cancelable with three days notice. The Company is continuing to negotiate with these unions and currently does not expect a work slow- downslow-down or stoppage is not expected in the Las Vegas showroom as a result of thesethis expired labor contracts.contract. Note 6. Exercise of Lease Purchase Option -- Two of the Company's resorts in the Pocono mountains of Pennsylvania are operated under leases the initial 20-year-lease terms of which expire on January 31, 1995. The leases include purchase options at the fair market value of the lease properties excluding personal property, goodwill, certain structures and other intangibles. In November 1994, the Company gave notice to the landlord that the Company will exercise its purchase options to acquire the two resort properties in fiscal 1995. The fair market value purchase price will be determined by independent appraisals. The Company has engaged an independent appraiser and the lessor has notified the Company it has engaged a separate independent appraiser. The Company is uncertain as to the amount or when the purchase option payments will be made. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Cash flow from operations together with available debt capacity are the primary components providing the Company financial flexibility to explore expansion opportunities and provide adequate liquidity. Net cash provided byfrom operating activities was $85.3$37.8 million in the first ninethree months of fiscal 1994,1995, compared with $76.5$54.4 million in the same period of fiscal 1993.1994. The increasedecrease in fiscal 19941995 is primarily attributable to higherlower net income and the changesa decrease in accounts payable and accrued expenses which reduced the cash generated by operating activities by a lesser amount during the fiscal 1994 first nine month period compared with the same period in fiscal 1993.activities. At April 30,October 31, 1994, the Company's cash and cash equivalent investments were $76.1$155.9 million compared with $67.5$143.5 million at July 31, 1993.1994. Cash used for investing activities in the ninethree months ended April 30,October 31, 1994 was primarily for capital expenditure projects at Caesars Palace in Las Vegas, and Caesars Atlantic City. Construction was completed in December 1993 on two rooftop luxury suites, each costing approximately $6 million, on one of the hotel towers at Caesars Palace. In mid- October 1993, Caesars Atlantic City opened a new 15,000-square-foot simulcast casino, bringing the resort's total casino area to approximately 75,000 square feet. This new facility features high-tech systems for race horse betting, a poker area and additional table games. Approximately 300 slot machines were added in the original casino area where table games had previously been located. In the first six months of fiscal 1993, the Company completed its debt restructuring program. The impact of this restructuring combined with the scheduled reduction of bank borrowings has been to significantly reduce interest expense. A description of the new notes, the new bank loan agreement and the debt restructuring is includedCaesars Pocono Resorts in Note 6 of Notes to Consolidated Financial Statements beginning on page 40 of the Form 10-K of the Company for the fiscal year ended July 31, 1993Pennsylvania. Room and in "Debt Restructuring" of Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations on page 21 of the July 31, 1993 Form 10-K incorporated herein by reference. In October 1993, the Company announced an additional $150 million multi- year capital expenditure program for Caesars Palace in Las Vegas. This will dramatically change the exterior of Caesars Palace, add approximately 100 new suites, provide underground parking, add approximately 40,000 square feet of casino spacesuite remodeling as well as provide new entertainment features. This is in addition toongoing construction of the Magical Empire were the major capital expenditures previously announced which includein Las Vegas. The Magical Empire is expected to combine dining and intimate magical experiences in a new state-of-the-art magicalstructure adjacent to the casino and diningis scheduled to open in calendar 1995. At Caesars Atlantic City building modifications are under construction to lease approximately 22,500 square feet to "Planet Hollywood" for a restaurant and entertainment facility scheduled to be opened in fiscalthe spring of 1995. The conceptual design phase of the multi-year capital program is expected to be completeTwenty new Roman Tower Suites are nearly completed at Caesars Pocono Palace in the summer of 1994 with the construction occurring principally in fiscal 1995Pennsylvania and 1996. During the nine months ended April 30, 1994, $6.3 million was advanced by the Company to Windsor Casino Ltd. (WCL). The Company owns one-third of WCL, a management company that will operate a casino for the government in Windsor, Ontario, Canada. See Item 5 "Other Information" in Part II on page 21 of this Form 10-Q. Between April 30, 1994 and June 13, 1994 an additional $8.3 million was advanced to WCL by the Company. A temporary casino was opened to the public on May 17, 1994 and no additional material advances are expected to be madeopened in stages by the Company priorJanuary 1, 1995. See Note 6 to July 31, 1994. WCL is currently negotiating with banks to obtainCondensed Consolidated Financial Statements for a credit line which will repay substantially all the amounts advanced by the owners of WCL including the Company. Such a bank facility will be severally guaranteed by eachdiscussion of the joint venture partners and is expectedpayment to be in place duringmade for the fourth quarterexercise of the Company's fiscal 1994 year. Successful developmentlease purchase option for two of the projects described at Item 5 of Part II of this Report and of other opportunities currently being explored will likely require capital investment by the Company.Pocono resorts. The Company expects to be able to meet its future debt obligations, finance operations and capital expenditures, as well as provide for a substantial expansion of operations through internally generated cash flow, liquidation of cash equivalent investments, future borrowings (including amounts available under the bank credit facilities), capital lease transactions and/or sales of equity and debt securities. Results of OperationsRESULTS OF OPERATIONS Comparison of net income for the three month periods ended April 30,October 31, 1994 and April 30,October 31, 1993 Contribution to revenue and operating income by location, interest and income taxes for the periods, were as follows (in thousands):
Three Months Ended April 30,October 31, 1994 1993 Revenue Nevada $142,157 $133,153$125,614 $155,224 New Jersey 80,389 76,526103,776 94,036 Earnings of unconsolidated affiliate 1,479 - Casino/hotel operations 222,546 209,679230,869 249,260 Pocono Resorts 9,798 9,73414,597 14,492 Other (A) 4,900 4,9967,045 5,331 Total revenue $237,244 $224,409$252,511 $269,083 Contributions to operating income Nevada $ 14,68613,376 $ 22,89327,484 New Jersey 11,014 12,40024,757 22,642 Earnings of unconsolidated affiliate 1,479 - Casino/hotel operations 25,700 35,29339,612 50,126 Pocono Resorts 1,002 1,1334,760 5,077 Other expenses (B) (3,826) (3,852)(3,513) (4,601) Operating income 22,876 32,57440,859 50,602 Interest and dividend income 756 2721,396 928 Interest expense, net (4,693) (5,371)(4,861) (5,110) Income before income taxes 18,939 27,47537,394 46,420 Income taxes 7,291 10,44014,210 18,572 Net income $ 11,64823,184 $ 17,035 27,848
(A) Other revenue is primarily from merchandising operations. (B) Other expenses include the contribution from merchandising operations and corporate expenses. Intercompany transactions have been eliminated. Nevada Operations Revenue increased 7%decreased 19 percent and contribution to operating income decreased 51 percent at the Nevada properties in the three months ended April 30,October 31, 1994 compared with the same prior year period. HigherThe lower casino revenue and operating income during the quarter resulted from record third quartera significantly lower table game and slot machine activity generated by the Company's two Nevada casinos. The table games win percentage was lower than the five-year average but about the same as the year earlier third quarter. Total slot win was flat as compared with the fiscal 1993 third quarteryear- earlier quarter. Casino losses to a small number of high- wagering table game customers in Las Vegas resulted in a table game win because apercentage that was 7.9 percentage points lower than last year's first-quarter table game win percentage. This lower win percentage combined with reduced table game activity more than offset increasedthe record quarterly slot results. The Nevada operations realized all-time quarterly slot machine activityrecords in both volume and win in the fiscalquarter ended October 31, 1994, third quarter. The 36% reduction in operating income from Nevada operations during the three months ended April 30, 1994 compared with the prior year was primarily the result of increased casino expenses and a higher provision for doubtful accounts. Casino expenses includedattributable to enhanced marketing costs associated with the higher volume of business in Nevada operations along with costs related to a world heavyweight championship fight at Caesars Palace.programs. The provision for doubtful accounts increased $6.8at the Nevada operations decreased by $12.2 million during the quarter as thedue to a 13 percent reduction in credit issued and lower use of issuing receivable allowances to high-betting limit customersthe provision as a marketing incentive has intensified with the opening of three new themed casino/hotels on the "Strip" in Las Vegas between October and December 1993. The higher provision for doubtful accountstool to high-wagering customers. There was also caused by a 23% increasereduction in operating expenses resulting from the amount of casino credit issued.decline in table game win and activity when comparing the respective fiscal quarters. Caesars New Jersey Revenue from Caesars Atlantic City for the thirdfirst quarter ended April 30,October 31, 1994 increased 5%10 percent and contribution to operating income increased 9 percent from the same prior year period, primarily attributablequarter. Record results for any previous quarter in both casino activity and win were realized at Caesars Atlantic City with record results from slot machines being the primary contributor to increased casino revenue. Slot activity was 15% higher, which combined with a slightly lower win percentage, resulted in a 14% increase in slot win for the thirdfirst quarter of fiscal 1994, compared withimprovement. Another positive impact on the fiscal 1993 third quarter. Thequarterly comparisons came from Caesars Atlantic City's Simulcast Casino which began operationopened with horse race betting and poker in October 1993 alsoand subsequently the introduction of other games. Increased casino costs and higher marketing expenses, primarily related to more extensive casino busing programs, partially offset the casino revenue increase in New Jersey. Unconsolidated Affiliate During the fiscal 1995 first quarter, the Company had a favorable impact on the third quarter. Table game win for the three months ended April 30, 1994, compared with the three months ended April 30, 1993, was down 15% due to a comparatively low win percentage during the quarter on approximately the same amount of table game activity. Thepositive contribution of operating income from Atlantic City was down 11%, primarily the result of higher operating costs, including the increased payroll costs related to the Simulcast Casino and an increase in the provision for doubtful accounts. Interest Expense The Company's interest expense decreased 13% when comparing the fiscal 1994 third quarter with the fiscal 1993 third quarter, primarily due to reduced amount of debt. Subsequent Event See page 20 for discussion of subsequent event occurring after April 30, 1994. Comparison of net income for the nine month periods ended April 30, 1994 and April 30, 1993 Contribution to revenue and operating income by location, interest and income taxes for the periods, were as follows (in thousands):
Nine Months Ended April 30, 1994 1993 Revenue Nevada $465,429 $423,334 New Jersey 250,473 251,141 Casino/hotel operations 715,902 674,475 Pocono Resorts 33,172 31,644 Other (A) 15,234 15,325 Total revenue $764,308 $721,444 Contributions to operating income Nevada $ 80,489 $ 78,590 New Jersey 40,796 41,168 Casino/hotel operations 121,285 119,758 Pocono Resorts 6,450 6,150 Other expenses (B) (14,601) (12,782) Operating income 113,134 113,126 Interest and dividend income 2,403 1,258 Interest expense, net (14,471) (21,596) Income before income taxes 101,066 92,788 Income taxes 39,610 35,259 Net income $ 61,456 $ 57,529 (A) Other revenue is primarily from merchandising operations. (B) Other expenses include the contribution from merchandising operations and corporate expenses. Intercompany transactions have been eliminated.
Nevada Operations Revenue from Nevada operations increased 10%an unconsolidated affiliate in the nine months ended April 30, 1994 compared with the same prior year period. This increase is primarily due toWindsor, Ontario, Canada. Caesars World has a 12% increase in casino revenue over the prior year and is a Company record for any first nine months period. Table game activity during the nine months ended April 30, 1994 increased 8%, with a win percentage of 22.0% compared with 20.6% for the nine months ended April 30, 1993. Slot activity improved 13% during the nine months, as the number of visitors to Las Vegas increased and marketing programs continued to generate higher levels of customer traffic at Caesars Palace. Slot win increased by 4.8%, less than the activity improvement due to a lower slot win percentage. Contribution to operating income from Nevada operations for the nine months ended April 30, 1994 was 2.4% higher than the nine months ended April 30, 1993. Increased casino costs and a higher provision for doubtful accounts partially offset the higher revenue for the nine months. Casino cost increases were primarily related to the increased activity levels in Las Vegas and include marketing related costs, including a world heavyweight championship fight held in the third quarter at Caesars Palace in Las Vegas, as well as increases in payroll expenses for necessary staffing levels. The provision for doubtful accounts was 38% higher than the nine months ended April 30, 1993, primarily because of increased casino credit issued and marketing incentives for high-betting-limit customers. The intensified competition, particularly in Las Vegas, has increased nearly all types of marketing costs in order to maintain and grow market share. Caesars New Jersey Revenue from Caesars Atlantic City for the nine months ended April 30, 1994 was flat as compared with the nine months ended April 30, 1993. Casino revenue decreased for the nine months, due to lower table game revenue partially offset by increased slot revenue. The decrease in table game revenue was primarily attributable to a 12% lower activity level for the nine months, compared with the same period last year. This decrease is consistent with the Atlantic City industry trend, and was partially offset by a higher win percentage compared with prior year. An increased number of jurisdictions allowing legalized gaming as well as a severe winter reduced the number of visitors to Atlantic City. The fiscal 1994 casino revenue was favorably impacted by the opening in October 1993one-third ownership of the Simulcast Casino, which features horse race betting and poker.company operating the casino on behalf of the Ontario government. The game of keno is expected to be introducedcasino in the Simulcast Casino areaWindsor opened in JuneMay 1994. Costs were flat in the nine months compared with prior year, as increases in payroll related costs associated with the new casino area and in the provision for doubtful accounts were offset by decreases in marketing, busing and legal costs. Other Expenses Other expenses increased 14% in the first nine months of fiscal 1994 compared with fiscal 1993 due to increased compensation costs and costs related to the exploration of expansion opportunities by the Company. See Item 5 of Part II of this Form 10-Q for a discussion of the major expansion activities the Company is currently working on. Interest and Dividend Income A higher balance of interest and dividend earning cash equivalent investments during the first nine months of fiscal 1994 compared with the same period last year is the primary reason for the $1.1 million increase. Interest Expenses The Company's interest expense decreased 33% for the nine months ended April 30, 1994 compared with the nine months ended April 30, 1993. A reduction in borrowings as well as the debt restructuring completed in early fiscal 1993 resulted in the lower interest expense. Income taxes The effective income tax rate during the nine months ended April 30, 1994, was 1.2 percentage points higher than the same period in 1993. The higher tax rate reflects the impactother expenses of two non-recurring tax charges. In August 1993, the Federal tax rate increased, retroactive to January 1, 1993, from 34 to 35 percent. The Company also changed its method for income tax accounting by adopting FASB 109 effective August 1, 1993. The impact of this cumulative change in accounting and the retroactive change in the corporate tax rate aggregated a net charge of approximately $750,000$1.1 million in the first quarter of fiscal 1994. Subsequent Event On June 13, 1994, the Company announced that due to unusually large losses to a small number of long-term, table-game customers in June the Company expects a substantial reduction in the Company's income for the fiscal 1994 fourth quarter ending July 31, 1994, when1995 compared with the sameyear earlier quarter was primarily attributable to reimbursement of pre- opening expenses incurred in prior periods for the operation in Windsor, Canada and improved contribution from the Company's merchandising operations. Income Taxes The higher income tax rate in the first fiscal quarter of last year was primarily due to the adoption of FASB 109 and a retroactive tax rate adjustment during the first quarter of fiscal 1993. The Company's net income for the fiscal 1993 fourth quarter was $25,686,000, or $1.04 per share. The Company can not estimate the size of the expected reduction in net income because about seven weeks remain in the current fiscal quarter and the sizes of either casino wins or losses in the short-term are difficult to predict, particularly when it comes to high-level betting activity. The Company believes that it is highly unlikely that the effects of the recent losses to these high-level customers at its Nevada operations, estimated to total more than $18 million, could be offset enough to avoid the quarter-to-quarter decline in earnings.1994. PART II. Other Information Item 1. Legal Proceedings See Item 3 of the Form 10-K of the Company for the fiscal year ended July 31, 19931994 which is hereby incorporated herein. Item 2. Changes in Securities On December 8, 1994, the Board of Directors of the Company approved an amendment (the "Amendment") to the Rights Agreement, dated as of January 10, 1989, between the Company and Morgan Shareholder Services Trust Company (the "Rights Agreement"), which affects the Rights previously issued to shareholders of the Company pursuant to the Rights Agreement. The amendment requires the Board of Directors to determine whether it is in the best interests of the Company to decide that a person or entity which would otherwise meet the criteria of an "Unqualified Gaming Person" (as defined in the Rights Agreement) should be so deemed by the Board. No other provisions of the Rights Agreement were affected. Item 5. Other Information The Forum Shops at Caesars (the Forum) isWith reference to the Company's 25 percent participation in the limited partnership selected as the preferred bidder to negotiate a shopping complex located on approximately eight acres ownedlease to operate a gaming facility in downtown St. Louis, Missouri, a referendum was approved by the Company atvoters in November 1994 to allow slot machines and other games of chance. Negotiations are currently in process with respect to this lease opportunity, however, the north endultimate composition and size of Caesars Palace in Las Vegas having approximately 235,000 square feet of gross leasable area. The Company leases the land to an independent development company which provided its own financing to construct the Forum and which owns the development and pays rent to the Company. The Company is negotiating the possible lease of approximately four additional acres adjacent to the site to a spin off of current tenant in order for them to add an approximate 200,000 square foot expansion to the Forum, including a new entertainment feature. Since the project is subject to the mutually satisfactory completion of such negotiations, finalizing a new lease agreement,now under discussion and the independent development company obtaining the necessary financing and obtaining regulatory approvals, the ultimate timing and completion of this project is uncertain at this time. On May 20, 1994, Ontario Canada Corp. and Windsor Casino Ltd. announced details of the Interim Casino Operating Agreement for Casino Windsor, the 50,000 square foot temporary casino which opened to the public on May 17, 1994. The casino is owned by the Government of Ontario and operated by Windsor Casino, Ltd., an Ontario company owned equally by Caesars World, Inc., Circus Circus Enterprises, Inc. and Hilton Hotels Corporation. The interim agreement runs until April 30, 1997, and calls for Windsor Casino Ltd. to receive 2.75 percent of gross operating revenue and 5 percent of net operating margins. Windsor Casino Ltd. has first refusal operating rights for casinos in Ontario within 125 kilometers of Casino Windsor and the parent companies agree that without Ontario Casino Corp.'s consent, they will not be part of any U.S.- based competing casinos within this distance. The interim casino includes 65 table games and 1,702 slot machines. A permanent facility, which will include a 75,000 square foot casino and 300-room hotel, will be built in Windsor and is expected to open within three years. Ontario Casino Corp. and Windsor Casino Ltd. also signed a Heads of Agreement which represents a commitment by the parties to negotiate final agreements for the construction, development, financing, and operation of the permanent facility. In October 1993, the Casino Reinvestment Development Authority (CRDA) of the State of New Jersey announced it had selected a joint venture comprised of Doubletree Hotel Corporation, a subsidiary of the Company and an independent developer and operator to build in two phases, a 1,000 room non-gaming Convention Center Headquarters Hotel in Atlantic City. The first phase will be a 600 room first class hotel. As currently proposed, in exchange for a non-controlling interest in the joint venture and receipt of certain CRDA credits, the Company will guarantee a portion of the first mortgage note on the property. The project is subject to final agreements among all the parties, including governmental regulatory agencies and the obtaining of third-party financing for the project and is currently is awaiting regulatory approval, which is uncertain as to timing and result at the current time. Subsidiaries of the Company have also entered into joint ventures to seek opportunities to own and operate riverboats in Michigan City, Indiana and St. Louis, Missouri. The Michigan City project is still in the proposal stage and is a joint venture with a subsidiary of the Company being a 30% partner. With respect to the St. Louis project, the joint venture has previously announced that it had proposed the "Joint Venture Proposal", a $210 million casino and hotel development at Laclede's Landing which includes a $110 million 976-room convention center hotel with parking, and a 152,000 square foot, dockside casino barge and entertainment complex expected to cost approximately $100 million including a $10 million investment for parking. The current plan calls for 2,658 slot machines and 170 gaming tables on two 2,000 gaming position barges to be built in phases about two years apart. On January 24, 1994 the City of St. Louis (City) announced that the Joint Venture Proposal was ranked first among the nine proposals the City had received and the City planned to commence negotiations for a berthing lease with the joint venture. Representatives of the City have cautioned, however, that it had some concerns about the Joint Venture Proposal and if negotiations did not eliminate those concerns or were otherwise unsuccessful, it would move to the second-ranked candidate. Once a lease is negotiated, City agency and board of alderman approvals and state licensing will be required. The ultimate outcome of these negotiations and the obtaining of the ultimate approvals are uncertain atuncertain. See the "Expansion and Growth Opportunities" section of Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K for the fiscal year ended July 31, 1994 for a further discussion of this time. On January 25, 1994, the Missouri gaming law was declared unconstitutional insofar as it allowed slot machines, baccarat, craps, roulette, and other games which in the Court's view do not require skill in deciding the outcome. A voter initiative directed at legalizing games that were found to be unconstitutional did not pass at the April 5, 1994 election. Efforts are in process to obtain a sufficient number of signatures on a petition to have a referendum on the ballot for the November, 1994 election. Currently, Missouri law only authorizes poker and blackjack, video games and craps and the authorization of the video games and craps is being challenged in court as contrary to the aforesaid court decision. The original proposal by the Company as described above does not appear to be financially feasible under such a limited gaming scenario. The joint venture currently expects to finance about 80% of the project through mortgage bonds. Subject to further developments, the Company currently expects to have a 37.5% interest in the ultimate limited partnership and a 50% interest in management companies that will manage the hotel and casino under the Joint Venture Proposal. The Company also is in the process of working with the Agua Caliente Tribe (Tribe) in completing land acquisitions and regulatory approvals with respect to a proposed management project for the Tribe in Palm Springs, California. The ultimate timing of this project is uncertain at this time. The government of Greece plans to shortly issue a new request for proposal ("RFP") to operate private casinos in Greece. The Company has an arrangement with another company to be a manager and investor in a project to be developed by such other company if it is successful in obtaining a franchise from the Greek government. This RFP will be evaluated for submission after it is issued. The prospects and timing for this project are uncertain.expansion activities. Item 6. Exhibits and Reports on Form 8-K (a)Exhibits filed herewith (the * denotes documents included in this filing): *10(a)Amendment No. 1 dated December 9, 1994 to Rights Agreement dated January 10, 1989 between Caesars World, Inc. and First Chicago Trust Company of New York. *10(b)First Amendment dated May 24, 1994August 1, 1992 to CWI's Executive Security Plan as amended and restated asEmpliyment Agreement of January 24, 1989. *10(b) Henry Gluck dated August 1, 1991. *10(c)First Amendment dated May 24,August 1, 1992 to Employment Agreement of J. Terrence Lanni dated August 1, 1991. *10(d)Second Amendment dated October 4, 1994 to CWI's 1985 Executive Security Plan as amended and restated asEmployment Agreement of February 21,Henry Gluck dated August 1, 1991. *10(c) First*10(e)Second Amendment dated May 24,October 4, 1994 to CWI's 401(k) Retirement Savings PlanEmployment Agreement of J. Terrence Lanni dated JanuaryAugust 1, 1994. 10(d) Stock Option Agreement between CWI and Evander Holyfield dated February 22, 1994. Incorporated by reference to Exhibit 28(ii) of this Corporation's registration statement on Form S-8, Registration No. 33-52363 filed with the Commission February 22, 1994.1991. *15 Review Report of Independent Public Accountants *27 Financial Data Schedule (b) During the quarter ended October 31, 1994 a Form 8-K dated August 25, 1994 was filed and included the Company's press release of the same date announcing the earnings for the fiscal year ended July 31, 1994. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CAESARS WORLD, INC. (Registrant) Principal Financial Officer: Date: June 14,December 12, 1994 /s/ Roger Lee Roger Lee Senior Vice President-FinancePresident- Finance and Administration Principal Accounting Officer: Date: June 14,December 12, 1994 /s/ Bruce C. Hinckley Bruce C. Hinckley Vice President and Corporate Controller