1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------- ---------
Commission file number 33-51672
CALIFORNIA HOTEL AND CASINO
(Exact name of registrant as specified in its charter)
NEVADA 88-0121743
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2950 SOUTH INDUSTRIAL ROAD
LAS VEGAS, NEVADA
89109
(Address of principal executive offices)
(Zip Code)
(702) 792-7200
(Registrant's telephone number, including area code)
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
filing requirements for the past 90 days.
Yes X No
---- ----
Shares outstanding of each of the Registrant's classes of common stock as of
April 30, 1997
Class Outstanding
----- -----------
Common stock, $.01 par value 1,000
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CALIFORNIA HOTEL AND CASINO
(A WHOLLY-OWNED SUBSIDIARY OF BOYD GAMING CORPORATION)
FORM 10-Q
QUARTER ENDED MARCH 31, 1997
INDEX
Page No.
--------
Part I. Financial Information
Item 1. Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at March 31, 1997
and June 30, 1996 3
Condensed Consolidated Statements of Income for the three and
nine months ended March 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows for the nine
months ended March 31, 1997 and 1996 5
Condensed Consolidated Statements of Changes in Stockholder's
Equity for the nine months ended March 31, 1997 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 14
Signature Page 15
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CALIFORNIA HOTEL AND CASINO AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF BOYD GAMING CORPORATION)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) MARCH 31, JUNE 30,
(IN THOUSANDS, EXCEPT SHARE DATA) 1997 1996
- --------------------------------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $ 36,007 $ 28,444
Accounts receivable, net 8,792 7,414
Inventories 6,984 5,822
Prepaid expenses 11,814 10,772
Income taxes receivable 1,050 --
-------- --------
Total current assets 64,647 52,452
Property, equipment and leasehold interests, net 507,169 490,675
Other assets and deferred charges 24,407 24,139
Goodwill, net 9,987 10,254
-------- --------
Total assets $606,210 $577,520
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Current maturities of long-term debt $ 1,514 $ 1,455
Accounts payable 36,836 29,306
Accrued liabilities
Payroll and related 17,392 18,728
Interest and other 14,569 8,571
Income taxes payable -- 1,047
-------- --------
Total current liabilities 70,311 59,107
Long-term debt, net of current maturities 379,837 363,915
Due to related party -- 500
Deferred income taxes 24,211 24,148
Commitments
Stockholder's equity
Preferred stock, $100 par value; 200,000 shares authorized -- --
Common stock, no par value; 2,500 shares authorized;
1,000 shares outstanding 22,328 22,328
Additional paid-in capital 32,856 32,856
Retained earnings 76,667 74,666
-------- --------
Total stockholder's equity 131,851 129,850
-------- --------
Total liabilities and stockholder's equity $606,210 $577,520
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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CALIFORNIA HOTEL AND CASINO AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF BOYD GAMING CORPORATION)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED) THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------------------ ----------------------------
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------- ----------------------------
Revenues
Casino $ 93,771 $ 95,510 $ 275,513 $ 278,684
Food and beverage 32,530 30,656 92,712 86,687
Rooms 15,951 15,881 46,874 45,738
Other 8,533 8,414 26,214 26,272
------------ ------------ ------------ ------------
Gross revenues 150,785 150,461 441,313 437,381
Less promotional allowances 16,664 15,877 48,568 44,225
------------ ------------ ------------ ------------
Net revenues 134,121 134,584 392,745 393,156
------------ ------------ ------------ ------------
Costs and expenses
Casino 49,924 49,031 148,648 140,387
Food and beverage 22,657 20,588 65,412 64,067
Rooms 5,347 4,991 15,894 15,948
Other 6,410 5,811 18,981 18,241
Selling, general and administrative 18,589 17,047 53,342 51,502
Maintenance and utilities 6,235 5,255 19,311 17,818
Depreciation and amortization 11,247 10,954 32,209 33,702
Corporate expense 2,600 2,650 7,400 8,560
Preopening expense --- --- 3,481 ---
------------ ------------ ------------ ------------
Total 123,009 116,327 364,678 350,225
------------ ------------ ------------ ------------
Operating income 11,112 18,257 28,067 42,931
------------ ------------ ------------ ------------
Other income (expense)
Interest income --- --- 115 ---
Interest expense, net of amounts capitalized (8,869) (7,477) (24,875) (26,306)
------------ ------------ ------------ ------------
Total (8,869) (7,477) (24,760) (26,306)
------------ ------------ ------------ ------------
Income before provision for income taxes 2,243 10,780 3,307 16,625
Provision for income taxes 871 4,880 1,306 7,633
------------ ------------ ------------ ------------
Net income $ 1,372 $ 5,900 $ 2,001 $ 8,992
============ ============ ============ ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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CALIFORNIA HOTEL AND CASINO AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF BOYD GAMING CORPORATION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31,
--------------------------
(IN THOUSANDS) 1997 1996
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,001 $ 8,992
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 32,209 33,702
Deferred income taxes 63 1,465
Other (82)
Changes in assets and liabilities:
Increase in accounts receivable, net (1,378) (721)
Increase in inventories (1,162) (52)
Increase in prepaid expenses (1,042) (1,584)
(Increase) decrease in other assets (268) 2,971
Increase in income taxes receivable (1,050) --
Increase in other current liabilities 12,192 10,732
Decrease in income taxes payable (1,047) (3,032)
-------- --------
Net cash provided by operating activities 40,518 52,391
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, equipment and other assets (48,436) (31,715)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under credit agreements 16,638 (3,500)
Payments on long-term debt (1,157) (19,843)
Contributed capital from parent -- 23,250
Dividends paid -- (12,000)
-------- --------
Net cash provided by (used in) financing activities 15,481 (12,093)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 7,563 8,583
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 28,444 21,798
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 36,007 $ 30,381
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest, net of amounts capitalized $ 23,322 $ 25,092
======== ========
Cash paid for income taxes $ 2,175 $ 7,300
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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CALIFORNIA HOTEL AND CASINO AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF BOYD GAMING CORPORATION)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
COMMON STOCK ADDITIONAL TOTAL
----------------- PAID-IN RETAINED STOCKHOLDER'S
SHARES AMOUNT CAPITAL EARNINGS EQUITY
----------------------------------------------------------
Balances, July 1, 1996 1,000 $ 22,328 $ 32,856 $ 74,666 $129,850
Net income for the nine months 2,001 2,001
ended March 31, 1997 -------- -------- -------- -------- --------
Balances, March 31, 1997 1,000 $ 22,328 $ 32,856 $ 76,667 $131,851
======== ======== ======== ======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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CALIFORNIA HOTEL AND CASINO
(A WHOLLY-OWNED SUBSIDIARY OF BOYD GAMING CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying condensed consolidated financial statements include the
accounts of California Hotel and Casino and its wholly-owned subsidiaries,
collectively referred to herein as the "Company". The Company owns and operates
seven casino entertainment facilities in Las Vegas, Nevada. All material
intercompany accounts and transactions have been eliminated. The Company is a
wholly-owned subsidiary of Boyd Gaming Corporation.
Basis of Presentation
In the opinion of the Company, the accompanying unaudited consolidated condensed
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the results of its operations
for the three and nine month periods ended March 31, 1997 and 1996 and its cash
flows for the nine month periods ended March 31, 1997 and 1996. It is suggested
that this report be read in conjunction with the Company's audited consolidated
financial statements included in the Annual Report on Form 10-K for the fiscal
year ended June 30, 1996. The operating results for the three and nine month
periods ended March 31, 1997 and cash flows for the nine month period ended
March 31, 1997 are not necessarily indicative of the results that will be
achieved for the full fiscal year or for future periods.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Recently Adopted Accounting Standards
On July 1, 1996, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of. SFAS No. 121 requires that long-lived
assets be reviewed whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The adoption of SFAS No. 121
had no effect on the Company's consolidated financial statements.
Note 2. Long-Term Debt
The Company's bank credit facility was amended on March 28, 1997. This amendment
included, among other things, modifications to its financial covenants as well
as the pricing structure of the debt, which is based upon a specific financial
ratio. As such, this amended pricing structure results in slightly higher
interest costs to the Company, the duration of which depends upon the Company's
future operating results and financial condition.
Management believes the Company is in compliance with the modified covenants, as
well as other debt covenants, at March 31, 1997.
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The Company, through its wholly-owned subsidiary, California Hotel Finance
Corporation, has issued $185 million Senior Subordinated Notes at 11%, due
December 2002. The Notes are unconditionally guaranteed on a senior subordinated
and unsecured basis by the Company. The guarantee is subordinated to all
existing and future senior debt (as defined in the Indenture related to the
Notes) of the Company (approximately $196.3 million at March 31, 1997) and is
effectively subordinated to all existing and future indebtedness and other
liabilities (including trade payables) of the subsidiaries of the Company
(approximately $38.3 million at March 31, 1997). The Company is not in default
and there are no payment blockages with respect to the Notes. In addition, the
Company is a guarantor on $200 million in Senior Notes issued on October 4, 1996
by the Company's parent, Boyd Gaming Corporation.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
--------------------- ---------------------
1997 1996 1997 1996
-------- -------- -------- --------
(IN THOUSANDS) (IN THOUSANDS)
NET REVENUES
Stardust $ 45,959 $ 49,930 $137,249 $146,336
Boulder Strip Properties 48,892 49,629 145,649 143,033
Downtown Properties 39,270 35,025 109,847 103,787
-------- -------- -------- --------
TOTAL PROPERTIES $134,121 $134,584 $392,745 $393,156
======== ======== ======== ========
OPERATING INCOME
Stardust 5,495 9,247 13,837 22,164
Boulder Strip Properties 8,126 7,816 19,544 17,382
Downtown Properties 419 4,280 6,549(a) 13,259
-------- -------- -------- --------
TOTAL PROPERTIES $ 14,040 $ 21,343 $ 39,930 $ 52,805
======== ======== ======== ========
- --------------------
(a) Before preopening expense.
The above table sets forth, for the periods indicated, certain operating data
for the Company's properties. As used herein, "Boulder Strip Properties" consist
of Sam's Town Las Vegas, the Eldorado and Jokers Wild; "Downtown Properties"
consist of the California, the Fremont and Main Street Station (opened November
1996). Net revenues displayed in this table and discussed in this section are
net of promotional allowances; as such, references to rooms revenue and food and
beverage revenue do not agree to the amounts on the Statements of Income.
Operating income from properties for the purposes of this table exclude
corporate expense, including related depreciation and amortization, and
preopening expense.
Revenues
Consolidated net revenues declined slightly, .3%, during the quarter ended March
31, 1997 compared to the same quarter in the prior fiscal year. Net revenues at
the Stardust and Boulder Strip Properties declined 8.0% and 1.5%, respectively,
while revenues increased 12.1% at the Downtown Properties during the comparable
quarter in the prior year. The increase in net revenues at the Downtown
Properties was attributable to the first full quarter of operations for Main
Street Station, Brewery and Hotel ("Main Street Station") which opened in
November 1996, partially offset by declines in net revenues at the California
and Fremont of 19.8% and 12.6%, respectively. Company-wide casino revenue
decreased 1.8% during the quarter ended March 1997 compared to March 1996,
whereas food and beverage revenue and rooms revenue increased 5.3% and .9%,
respectively.
Consolidated net revenues were relatively flat during the nine month period
ended March 31, 1997 compared to the same period in the prior fiscal year. Net
revenues at the Stardust declined 6.2%, which offset net revenue increases of
5.8% for the Downtown Properties and 1.8% at the Boulder Strip Properties versus
the comparable period of the prior year. Company-wide casino revenue and rooms
revenue declined 1.1% and 2.0%, respectively, while food and beverage revenue
increased 5.4% during the nine-month period ended March 1997 compared to March
1996.
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OPERATING INCOME
Consolidated operating income for the quarter ended March 31, 1997 was $11.1
million compared to $18.3 million from the same quarter in the prior fiscal
year. Consolidated operating income margin declined to 8.3% from 13.6% during
the same time periods. These declines are attributable to reductions in
operating income at the Stardust and Downtown Properties of $3.8 million and
$3.9 million, respectively, offset by a slight increase in operating income at
the Boulder Strip Properties. Main Street Station, which is included in the
Downtown Properties, posted an operating loss of $1.1 million in its first full
quarter of operation.
Consolidated operating income before preopening expense for the nine month
period ended March 31, 1997 was $31.5 million compared to $42.9 million for the
comparable period in the prior fiscal year. Consolidated operating income
margins declined to 8.0% from 10.9% during the same time periods. These declines
are due to reductions in operating income at the Stardust and Downtown
Properties of $8.3 million and $6.7 million, respectively, offset by a $2.2
million increase in operating income at the Boulder Strip Properties.
STARDUST
Net revenues at the Stardust declined by 8.0% during the quarter ended March 31,
1997 versus the comparable quarter in the prior fiscal year. Casino revenues
declined by 8.8% primarily due to a decline in slot wagering combined with flat
table game wagering offset by lower net winnings. Revenues from rooms, food and
beverage also declined by approximately 7.6% during the period. Operating income
for the three months ended March 31, 1997 declined 40.6% to $5.5 million, and
operating income margin declined from 18.5% to 12.0% during the comparable
quarters ended March 31, 1996 and 1997, respectively. These declines in
operating income and operating income margin are a primary result of the
declines in revenues.
For the nine months ended March 31, 1997, net revenues at the Stardust declined
by 6.2% versus the comparable period in the prior fiscal year. The majority of
the decline is attributable to a 7.0% reduction in casino revenues, as a result
of a lower win percentage in the sports book and a decline in slot wagering.
Revenues from rooms, food and beverage also declined by approximately 6.7%
during the period. Operating income declined by 37.6% to $13.8 million, and
operating income margin declined from 15.1% to 10.1% during the comparable
nine-month periods ended March 31, 1996 and 1997, respectively. These declines
in operating income and operating income margin are primarily the result of the
decline in revenues.
BOULDER STRIP PROPERTIES
Net revenues at the Boulder Strip Properties declined by 1.5% during the quarter
ended March 31, 1997 versus the comparable quarter in the prior fiscal year.
Casino revenue declined by 1.6% primarily as a result of lower win percentages
from table games and race and sports book. Rooms revenue increased 6.3% and food
and beverage revenues decreased 1.3% for the quarter ended March 31, 1997 versus
the comparable quarter in the prior fiscal year. Operating income margin
increased to 16.6% during the quarter ended March 31, 1997, primarily as a
result of improved operating margins in the rooms and food and beverage
departments at Sam's Town Las Vegas.
Net revenues at the Boulder Strip Properties increased 1.8% during the
nine-month period ended March 31, 1997 compared to the same period in the prior
fiscal year. The increase is primarily attributable to a 2.3% increase in casino
revenue as a result of increased wagering volume in table games and slots at
Sam's Town
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Las Vegas. Rooms revenues and food and beverage revenue increased 8.4% and .9%,
respectively, for the nine-month period ended March 31, 1997 compared to the
same period in the prior fiscal year. Operating income margin increased from
12.2% to 13.4% during the comparable nine-month periods ended March 31, 1996 and
1997, respectively, due to the increase in net revenues as well as improved
operating margins in the rooms and food and beverage departments at Sam's Town
Las Vegas.
DOWNTOWN PROPERTIES
Net revenues at the Downtown Properties increased 12.1% during the quarter ended
March 31, 1997 compared to the same quarter in the prior fiscal year. The
increase is attributable to the first full quarter of operations for Main Street
Station (opened November 1996) offset by declines in net revenues of 19.8% and
12.6%, respectively, at the California and Fremont. These two properties have
been adversely affected by the opening of Main Street Station, which has
attracted patrons from their customer bases. Operating income margin for the
Downtown Properties decreased from 12.2% to 1.1% during the quarters ended March
31, 1996 and 1997, respectively. The decline in margin is attributable to the
decline in net revenues at the California and Fremont, in addition to the $1.1
million operating loss generated by Main Street Station. In response to the
recent operating results of the Downtown Properties, management has implemented
various programs to improve performance. These programs include both the
consolidation of certain functions and improved management structure, including
the appointment of a senior manager to oversee all Downtown operations;
increased use of direct marketing programs in the Hawaiian market; increased
utilization of Vacations Hawaii charter operation to improve occupancies;
aggressive pursuit of Fremont Street Experience customers through enhanced
marketing programs; and consolidation of both front and back of the house
operations to improve efficiency and decrease overall operating costs.
Net revenues at the Downtown Properties increased 5.8% during the nine-month
period ended March 31, 1997 compared to the same period in the prior fiscal
year. The increase is attributable to the November 1996 opening of Main Street
Station offset by declines in net revenues of 13.8% and 1.9%, respectively, at
the California and Fremont. These two properties have been adversely affected by
the opening of Main Street Station, which has attracted patrons from their
customer bases. In addition, each component of the California's net revenues
were adversely impacted by a rooms remodel project which reduced its room
availability by approximately 15% during the first fiscal quarter of 1997.
Aggregate operating income margin before preopening expense decreased from 12.8%
to 6.0% during the nine-month periods ended March 31, 1997 and 1996,
respectively. The decline is a result of the reduction in net revenues at the
California and Fremont, as well as a $1.5 million operating loss before
preopening expense generated by Main Street Station since its opening in
November 1996.
Depreciation and amortization expense increased by $.3 million and decreased
$1.5 million, respectively, during the quarter and nine-month periods ended
March 31, 1997 compared to the same periods in the prior fiscal year. The
decline during the nine month period is a result of lower depreciation on older
properties, whereas the increase during the quarter is attributable to the
depreciation related to Main Street Station, which opened in November 1996.
The Company also recorded a preopening charge of $3.5 million upon the opening
of Main Street Station in November 1996.
OTHER INCOME (EXPENSE)
Other income and expense is primarily comprised of interest expense, net of
amounts capitalized, which increased by $1.4 million during the quarter ended
March 31, 1997, and declined by $1.4 million during the nine month period ended
March 1997. The increase during the quarter is attributable to higher levels of
average debt outstanding; whereas the decrease during the period is due to lower
levels of average debt outstanding coupled with a capitalization of interest
costs during the development of Main Street Station.
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PROVISION FOR INCOME TAXES
The Company's tax rate was 38.9% and 39.5%, respectively, for the three and nine
month periods ended March 31, 1997, compared to 45.3% and 45.9%, respectively,
for the same periods from the prior fiscal year. The fluctuation in the tax
rates during fiscal 1997 versus fiscal 1996 is primarily attributable to a
reduction in the level of certain non-deductible Company provided benefits
during the current fiscal periods.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended March 31, 1997, the Company's principal source of
funds was net cash provided by operating activities and financing activities.
Net cash provided by operating activities was $40.5 million versus $52.4 million
during the comparable period in the prior fiscal year. This decline is primarily
attributable to the reduction in net income and the change in operating assets
and liabilities for the opening of Main Street Station. Net cash provided by
financing activities for the nine months ended March 31, 1997 was $15.5 million
which is primarily attributed to borrowings under the Company's $500 million
bank revolving credit facility (the "Bank Credit Facility") to fund the opening
of Main Street Station. As of March 31, 1997, the Company had balances of cash
and cash equivalents of approximately $36.0 million, a working capital deficit
of $2.2 million, and approximately $136 million available under its Bank Credit
Facility. The Company has historically operated with negative working capital in
order to minimize borrowings (and related interest costs) under its long-term
Bank Credit Facility. The working capital deficits are funded through cash
generated from operations as well as fluctuating borrowings under the Bank
Credit Facility.
The Company's principal use of cash during the nine months ended March 31, 1997
was for investing activities of $48.4 million. This amount consists of
capital expenditures, $32 million of which related to the renovation and
expansion of Main Street Station which opened in November 1996.
The Company, as part of its ongoing strategic planning process, has recently
completed a review of its current growth opportunities. Based on this review,
the Company expects to be focusing its growth efforts on the Stardust Resort &
Casino. The Company is considering implementing the next phase of its master
plan for the Stardust, which calls for, among other things, as many as two
additional hotel towers. In addition, the Company has determined that the
61-acre Stardust site is capable of accommodating the development of an entirely
new casino entertainment facility adjacent to the existing Stardust and is
continuing to explore the feasibility of such a project. During the first
quarter of fiscal 1997, the Company purchased a casino hotel site in Reno,
Nevada with plans to develop Sam's Town Reno on the site. The Company has
determined that further development of the Stardust site should take priority
over the Sam's Town Reno project at this time.
There can be no assurance that the above mentioned project will go forward and
ultimately become operational. The sources of funds required to meet the
Company's working capital needs (including maintenance capital expenditures) and
those required to complete the above mentioned projects are expected to be cash
on hand, cash flow from operations, availability under its Bank Credit Facility,
new borrowings to the extent permitted under existing debt agreements, and
vendor and other financing. No assurance can be given that required financing
strategies can be effected on satisfactory terms.
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The Bank Credit Facility was amended as of March 28, 1997 to provide the Company
with greater flexibility. This amendment included, among other things,
modifications to its financial covenants as well as the pricing structure of the
debt, which is based upon a specified financial ratio. As such, this amended
pricing structure results in slightly higher interest costs to the Company, the
duration of which depends upon the Company's future operating results and
financial condition. Management believes the Company is in compliance with the
modified covenants, as well as other debt covenants, at March 31, 1997.
The Company, through its wholly-owned subsidiary, California Hotel Finance
Company, has $185 million principal amount of 11% Senior Subordinated Notes due
December 2002. The Notes are unconditionally guaranteed on a senior
subordinated and unsecured basis by the Company. The guarantee is subordinated
to all existing and future senior debt (as defined in the Indenture related to
the Notes) of the Company (approximately $196.3 million at March 31, 1997) and
is effectively subordinated to all existing and future indebtedness and other
liabilities (including trade payables) of the subsidiaries of the Company
(approximately $38.3 million at March 31, 1997). The Company is not in default
and there are no payment blockages with respect to the Notes. In addition, the
Company is a guarantor on $200 million in Senior Notes issued on October 4,
1996 by the Company's parent, Boyd Gaming Corporation.
PRIVATE SECURITIES LITIGATION REFORM ACT
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward looking statements. Certain information included in this Form 10-Q
and other materials filed or to be filed by the Company with the Securities and
Exchange Commission (as well as information included in oral statements or other
written statements made or to be made by the Company) contains statements that
are forward looking, such as statements relating to plans for future expansion
and other business development activities as well as other capital spending,
financing sources, and the effects of regulation (including gaming and tax
regulation) and competition. Such forward looking statements involve important
risks and uncertainties that could significantly affect anticipated results in
the future, and accordingly, actual results may differ materially from those
expressed in any forward looking statements made by or on behalf of the Company.
These risks and uncertainties include, but are not limited to, those related to
construction and development activities, economic conditions, changes in tax
laws, changes in laws or regulations affecting gaming licenses, changes in
competition, and factors affecting leverage and debt service including
sensitivity to fluctuation in interest rates, and other factors described from
time to time in the Company's reports filed with the Securities and Exchange
Commission, including the Company's Form 10-K for the year ended June 30, 1996.
Any forward looking statements are made pursuant to the Private Securities
Litigation Reform Act of 1995 and, as such, speak only as of the date made.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
10.59 First Amendment to Credit Agreement, dated as of March
28, 1997, among Boyd Gaming Corporation and California
Hotel and Casino, and Wells Fargo Bank, N.A., as Swing
line Lender, Canadian Imperial Bank of Commerce, ("CIBC")
as letter of credit issuer, Bank of America National
Trust and Saving Association and Wells Fargo Bank, N.A.,
as co- managing agents, Bankers Trust Company, Credit
Lyonnais Los Angeles Branch and Societe Generale as
co-agents, and CIBC as administrative agent and
collateral agent.
27. Financial Data Schedule
(b) Reports on Form 8-K:
None.
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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.
CALIFORNIA HOTEL AND CASINO
(Registrant)
Date: May 15, 1997 By /s/ Keith Smith
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Keith Smith
Senior Vice President and
Controller (Chief Accounting Officer)
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