_______________________________________________________________________________
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 June 30, 1996
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 333-4356-02
COAST WEST, INC.
(Exact name of registrant as specified in its charter)
NEVADA 88-0345708
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification number)
4000 WEST FLAMINGO ROAD, LAS VEGAS, 89103
NEVADA (Zip code)
(Address of principal executive offices)
(702) 367-7111
(Registrant's telephone number, including area code)
None
(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 X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Shares of Common Stock outstanding as of August 1, 1996: 1,010
_______________________________________________________________________________
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
COAST WEST, INC.
(A Development Stage Enterprise and
A Wholly Owned Subsidiary of Coast Resorts, Inc.)
CONDENSED BALANCE SHEETS
(amounts in thousands, except share data)
(Unaudited)
June 30, December 31,
1996 1995
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1 $ 1
------- ------
TOTAL CURRENT ASSETS 1 1
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PROPERTY AND EQUIPMENT 158 143
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$ 159 $ 144
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LIABILITIES AND
STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
TOTAL CURRENT LIABILITIES $ $ --
------- ------
NONCURRENT LIABILITIES:
Advances from affiliates 1,541 496
Deferred rent 1,473 593
------- ------
TOTAL NONCURRENT LIABILITIES 3,014 1,089
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY (DEFICIENCY):
Common Stock, $1.00 par value, 25,000
shares authorized, 1,010 shares issued
and outstanding -- --
Additional paid - in capital 1 1
Deficit accumulated during
development stage (2,856) (946)
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TOTAL STOCKHOLDER'S EQUITY
(DEFICIENCY) (2,855) (945)
------- ------
$ 159 $ 144
======= ======
The accompanying notes are an integral part of these condensed financial
statements.
2
COAST WEST, INC.
(A Development Stage Enterprise and
A Wholly Owned Subsidiary of Coast Resorts, Inc.)
STATEMENTS OF LOSS INCURRED DURING THE DEVELOPMENT STAGE
(amounts in thousands, except per share data)
(Unaudited)
For the Period
September 29, 1995,
the Date of
Three Months Ended Six Months Ended Inception, through
June 30, 1996 June 30, 1996 June 30, 1996
------------------ ---------------- --------------------
Rent Expense................. $(955) $(1,910) $(2,856)
----- -------- --------
NET LOSS.................. $(955) $(1,910) $(2,856)
===== ======== ========
The accompanying notes are an integral part of these condensed financial
statements.
3
COAST WEST, INC.
(A Development Stage Enterprise and
A Wholly Owned Subsidiary of Coast Resorts, Inc.)
CONDENSED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(Unaudited)
For the Period
September 29, 1995,
the Date of
Six Months Ended Inception, through
June 30, 1996 June 30, 1996
---------------- -------------------
CASH FLOWS FROM DEVELOPMENT STAGE ACTIVITIES:
Net loss $(1,910) $(2,856)
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ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
USED FOR DEVELOPMENT STAGE ACTIVITIES:
Non-cash rent expense 880 1,326
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TOTAL ADJUSTMENTS 880 1,326
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NET CASH USED BY DEVELOPMENT STAGE (1,030) (1,530)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (15) (158)
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NET CASH USED FOR INVESTING ACTIVITIES (15) (158)
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CASH FLOW FROM FINANCING ACTIVITIES:
Borrowings from affiliate 1,045 1,688
Issuance of common stock -- 1
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NET CASH PROVIDED BY FINANCING ACTIVITIES 1,045 1,689
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NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS -- 1
CASH AND CASH EQUIVALENTS, at beginning of period 1 --
------- -------
CASH AND CASH EQUIVALENTS, at end of period $ 1 $ 1
======= =======
The accompanying notes are an integral part of these condensed financial
statements.
4
PART I. FINANCIAL INFORMATION
COAST WEST, INC.
(A Development Stage Enterprise
and A Wholly Owned Subsidiary
of Coast Resorts, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1--BACKGROUND INFORMATION AND BASIS OF PRESENTATION
Background Information
Coast West, Inc. ("Coast West") is a development stage Nevada corporation,
and a wholly owned subsidiary of Coast Resorts, Inc. ("Coast Resorts"), which is
also a Nevada corporation. Coast West was formed in September 1995 as part of a
reorganization (the "Reorganization") with Coast Resorts. Coast West has no
operations, but holds a long-term lease (the "Coast West Lease") on
approximately fifty acres of land in Las Vegas on which Coast West may develop
and operate a future hotel-casino. Coast Resorts has another wholly owned
subsidiary, Coast Hotels and Casinos, Inc., a Nevada corporation (the "CHC"),
which owns and operates two hotel-casinos located in Las Vegas, the Gold Coast
Hotel and Casino, (the "Gold Coast") and the Barbary Coast Hotel and Casino (the
"Barbary Coast"), and is in the process of constructing a third hotel-casino in
Las Vegas, The Orleans Hotel and Casino and ("The Orleans").
The Gold Coast and the Barbary Coast had previously been owned and operated
independently by two partnerships, Gold Coast Hotel and Casino, a Nevada
limited partnership, and Barbary Coast Hotel and Casino, a Nevada partnership,
respectively (collectively, the "Predecessor Partnerships"). On January 1, 1996,
the partners of the Predecessor Partnerships completed the Reorganization with
Coast Resorts, which was formed in September 1995 for the purpose of effecting
the Reorganization. Coast Resorts and the Predecessor Partnerships were all
related through common ownership and management control.
In the Reorganization, the partners of the Predecessor Partnerships each
transferred to Coast Resorts, their respective partnership interests in the
Predecessor Partnerships in exchange for an aggregate of 1,000,000 shares of
common stock, par value $.01 per share, of Coast Resorts ("Coast Resorts Common
Stock"). Coast Resorts immediately contributed to CHC all of the assets and
liabilities of the Predecessor Partnerships other than those relating to the
Coast West Lease, which Coast Resorts contributed to Coast West. Coast Resorts
retained the liability for an aggregate principal amount of $51.0 million in
notes payable to former partners and retained the liability for $1.5 million
relating to demand notes due to a related party (the "Exchange Liabilities").
On January 16, 1996, the Exchange Liabilities were exchanged for 494,353 shares
of Coast Resorts Common Stock, based upon management's estimate of the fair
market value of such Coast Resorts Common Stock.
Basis of Presentation
Prior to the Reorganization, the Gold Coast and the Barbary Coast hotel-
casinos historically operated under a high degree of common control. The former
Managing General Partner of the Gold Coast Hotel and Casino was also a general
partner, and the principal manager, of the Barbary Coast Hotel and Casino. Due
to common control of the Predecessor Partnerships and the continuation of
ownership by the former partners, the Reorganization was accounted for as a
reorganization of entities under common control. Accordingly, the financial
statements of Coast West for all periods are presented as if the Reorganization
occurred at the beginning of the earliest period presented and include the
accounts of all entities involved on a historical cost basis, in a manner
similar to a pooling of interests.
The accompanying financial statements reflect the Exchange Liabilities as
obligations of CHC at December 31, 1995, as the exchange for Coast Resorts
Common Stock had not yet occurred. The exchange was accounted for subsequent to
the completion of the Reorganization, through the issuance of Coast Resorts
Common Stock in the approximate amount of $52.5 million reflecting the
historical cost basis of the Exchange Liabilities.
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The accompanying financial statements are unaudited and have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The unaudited
financial statements should be read in conjunction with the audited financial
statements and footnotes for the year ended December 31, 1995. In the opinion
of management, all adjustments and normal recurring accruals considered
necessary for a fair presentation of the results for the interim period have
been included. The interim results reflected in the unaudited financial
statements are not necessarily indicative of expected results for the full year.
Coast West plans to hold the Coast West Lease for future development.
Coast West has had no source of income during its development stage. CHC has
agreed to provide Coast West with advances sufficient to make lease payments on
the Coast West Lease, as more fully explained in Note 3.
NOTE 2--LEASES AND COMMITMENTS
In January 1996, in connection with the Reorganization, Coast Resorts
contributed its rights under the Coast West Lease to Coast West. The Coast West
Lease is for a parcel of land located in the northwest area of Las Vegas which
is to be used for future expansion opportunities. The Coast West Lease term runs
through December 31, 2055, with three 10-year renewal options, with monthly
payments of $166,667 through December 31, 1995. Thereafter, the monthly rent
will be increased by the amount of $5,000 in January of each year. The lease
includes a put option exercisable by the landlord requiring the purchase of the
land at fair market value at the end of the 20th through 24th years of the
lease, provided that the purchase price shall not be less than ten times, nor
more than fifteen times, the annual rent at such time. Based on the terms of
the lease, the potential purchase price commitment ranges from approximately $31
million to $51 million in the years 2014 through 2018. Coast West has no source
of income during its development stage and CHC has agreed to provide advances to
Coast West sufficient to make payments for its lease and other obligations
during Coast West's development stage. Such advances will be collateralized by
Coast West's interest in the Coast West Lease. There can be no assurance that
Coast West will develop a gaming property at the Coast West site, or that it
will be able to repay such advances.
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NOTE 3--PRIVATE PLACEMENT FINANCING
On January 30, 1996, CHC completed a private placement of $175 million
principal amount of 13% First Mortgage Notes Due December 15, 2002 (the "First
Mortgage Notes"). Interest on the First Mortgage Notes is payable semi-annually
commencing June 15, 1996. The First Mortgage Notes are unconditionally
guaranteed by Coast Resorts, Coast West and certain future Subsidiaries of CHC.
Net proceeds from the offering (after deducting original issue discount and
commissions) were approximately $164.1 million. Of that amount, (i)
approximately $114.8 million was deposited in a construction disbursement
account restricted for use by CHC to finance in part the cost of developing,
constructing, equipping and opening the Orleans, (ii) approximately $19.3
million was used by CHC to purchase U.S. Government Obligations which were
deposited into an interest escrow account restricted to fund the interest
payable on the First Mortgage Notes through December 15, 1996 and (iii)
approximately $29.2 million was used by CHC to repay all outstanding
indebtedness under CHC's New Revolving Facility, which facility was terminated.
The balance of approximately $800,000 was used to pay, in part, the offering
expenses of approximately $2.4 million.
The indenture governing the First Mortgage Notes also limits the activities
of Coast West to (i) activities relating to the Coast West Lease including
related borrowings and repayments to CHC, (ii) activities related to the
planning and future development of the property underlying the Coast West Lease
and (iii) other activities incidental or related to those indicated above.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Loss Incurred During the Development Stage
The Company, formed in 1995 as a wholly owned subsidiary of Coast
Resorts, has no operations but holds a lease on approximately fifty acres of
land held for possible future development. The net loss for Coast West was
$955,000 in the second quarter of 1996, and was $1.9 million for the first six
months of fiscal 1996 (Coast West was not in existence in the first six months
of 1995). The net loss was due entirely to rent expense (including $440,000 of
deferred rent expense in the second quarter and $880,000 for the first half of
1996). Cumulative net loss to date for Coast West is $2.9 million (including
$1.3 million in deferred rent expense).
Liquidity and Capital Resources
Coast West plans to hold the Coast West Lease for future development.
Coast West, a development stage company, has no operatons and no sources of
liquidity. CHC has agreed to provide advances to Coast West (up to a maximum of
$8.0 million in the aggregate) to satisfy rent payable under the Coast West
Lease and other obligations during Coast West's development stage. (See Note 2
to Notes to Condensed Financial Statements).
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PART II. OTHER INFORMATION
Item 1: Legal Proceedings.
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None.
Item 2: Changes in Securities.
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None.
Item 3: Defaults Upon Senior Securities.
--------------------------------
None.
Item 4: Submission of Matters to a Vote of Security Holders.
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None.
Item 5: Other Information.
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None.
Item 6: Exhibits and Reports on Form 8-K:
---------------------------------
(a) Exhibits.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
There were no reports filed on Form 8-K during the three months
ended June 30, 1996.
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on
its behalf by the undersigned thereunto duly authorized.
Date: August 14, 1996 COAST WEST, INC., a Nevada corporation
By:/s/ Michael J. Gaughan
-----------------------------------
Michael J. Gaughan
President
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