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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
- ----- Act of 1934 for the fiscal year ended September 30, 1995 or
_____ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
COMMISSION FILE NUMBER: 1-9481
SAHARA GAMING CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its Charter)
Nevada 88-0304348
- ---------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4949 N. RANCHO DR., LAS VEGAS, NEVADA 89130
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(Address of principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (702) 658-4300
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS: ON WHICH REGISTERED:
- -------------------- -----------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE AMERICAN STOCK EXCHANGE
EXCHANGEABLE REDEEMABLE PREFERRED STOCK AMERICAN STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
----
(Title of Class)
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 _____
------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K, or any
amendment to this Form 10-K. _______
The number of shares of common stock outstanding as of December 27, 1995,
was 6,195,356. The market value of the common stock held by nonaffiliates of the
Registrant as of December 27, 1995, was approximately $6,359,677. The market
value was computed by reference to the closing sales price of $2.1875 per share
of common stock on the American Stock Exchange as of December 27, 1995.
DOCUMENTS INCORPORATED BY REFERENCE:
PART III HEREOF INCORPORATES BY REFERENCE PORTIONS OF THE PROXY STATEMENT FOR
THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON FEBRUARY 20, 1996 (TO BE FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION WITHIN 120 DAYS AFTER SEPTEMBER 30,
1995).
SAHARA GAMING CORPORATION AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED SEPTEMBER 30, 1995
TABLE OF CONTENTS
PART I
Page
----
Item 1. Business........................................ 3
General..................................... 3
Hotel and Casino Operations................. 3
Development Opportunities................... 7
Nevada Regulations and Licensing............ 9
Item 2. Properties...................................... 13
Item 3. Legal Proceedings............................... 15
Item 4. Submission of Matters to a Vote of
Security Holders............................... 17
PART II
Item 5. Market for the Registrant's Common Stock
and Related Security Holder Matters............ 17
Item 6. Selected Financial Data......................... 18
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.. 19
Item 8. Financial Statements and Supplementary Data..... 32
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure......... 57
PART III
Item 10. Directors and Executive Officers of
the Registrant................................. 57
Item 11. Executive Compensation.......................... 57
Item 12. Security Ownership of Certain Beneficial
Owners and Management.......................... 57
Item 13. Certain Relationships and Related Transactions.. 58
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K............................ 58
PART I
Item 1. Business
--------
GENERAL
Sahara Gaming Corporation (the "Company"), a Nevada corporation, is the
successor to a combination, effective September 30, 1993 (the "Reorganization")
of two affiliates, Sahara Resorts, a Nevada corporation, and Sahara Casino
Partners, L.P., a Delaware limited partnership (the "Partnership"). Mr. Paul W.
Lowden, Chairman of the Board and Chief Executive Officer of the Company, owns
approximately 52% of the Company's common stock (the "Common Stock").
The Company's primary business operations are currently conducted through
two wholly owned subsidiary corporations, Santa Fe Hotel Inc. ("Santa Fe Inc."),
and Pioneer Hotel Inc. ("Pioneer Inc."), each a Nevada corporation. The
subsidiaries in turn own the Santa Fe Hotel and Casino (the "Santa Fe"), located
in Las Vegas, Nevada, and the Pioneer Hotel & Gambling Hall (the "Pioneer")
located in Laughlin, Nevada.
On August 31, 1995, the Company completed the sale of the Hacienda Resort
Hotel and Casino (the "Hacienda"), previously owned and operated by the
Company's wholly-owned subsidiary Hacienda Hotel Inc. ("Hacienda Inc."), for
consideration of $80 million in cash. On October 2, 1995, the Company completed
the sale of the Sahara Hotel and Casino (the "Sahara"), previously owned and
operated by the Company's wholly owned subsidiary Sahara Nevada Corp. ("Sahara
Nevada"), for $128 million in cash and a 27 acre parcel of real property located
on the Las Vegas Strip valued for purposes of the transaction at approximately
$22 million. In addition, the Company holds other real estate parcels for
possible development within or in the area surrounding Las Vegas, Nevada.
The principal executive office of the Company is located at 4949 N. Rancho
Dr., Las Vegas, Nevada 89130 and the telephone number is (702) 658-4300.
HOTEL AND CASINO OPERATIONS
The Company's primary business operations are in the gaming industry and are
conducted at the Santa Fe property in Las Vegas, Nevada and the Pioneer property
in Laughlin, Nevada.
Description of the Hotel-Casinos
The Santa Fe is located on a 40-acre site (including 4 acres acquired in May
1994) in the northwest part of Las Vegas, approximately nine miles from the
north end of the Las Vegas Strip. The target clientele are residents of
northwest Las Vegas and, to a lesser extent, residents of the entire Las Vegas
Valley. The Company also owns a 22-acre tract of property located adjacent to
the Santa Fe, which may be used for future development opportunities.
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The Santa Fe features 200 standard hotel rooms, a 65,000 square foot casino,
an ice skating arena, 60-lane bowling center, three themed restaurants, a
dedicated bingo room, a race book and other public areas. Additionally, the
Santa Fe includes a coffee shop, buffet, five full service bars and a lounge
area that features live entertainment.
The Pioneer is located on approximately 12 acres of land, with Colorado
River frontage of approximately 770 feet, and is situated near the center of
Laughlin's Casino Drive. Approximately 6-1/2 acres of the 12 acres are subject
to a 99-year ground lease which, by its terms, is scheduled to terminate in
December 2078. One of the three motel buildings together with a portion of both
the Pioneer's casino building and a second motel building, are located on land
subject to the ground lease. The leased land lies between and separates the two
parcels of land that are held in fee.
The Pioneer hotel-casino complex was built in 1982 in a classical western
architectural style. The Pioneer is comprised of four buildings. The casino is
located in the main building, totaling approximately 50,000 square feet of which
approximately 21,500 square feet house the casino. An aggregate of 417 motel
rooms are housed in the three remaining buildings. The complex amenities
include a special events area, coffee shop/buffet, bar, snack bar, and gift
shop. A partial second floor in the main building houses a gourmet restaurant,
administrative offices and banquet rooms.
Revenues
The primary source of revenues to the Company's hotel-casinos is gaming,
which represented 61.2% in 1995, 61.2% in 1994, and 61.9% in 1993 of total
revenues in the respective fiscal years. The following table sets forth
information regarding the approximate number of licensed games and gaming
devices of the Santa Fe and the Pioneer as of September 30, 1995:
Santa Fe Pioneer Total
-------- ------- -----
Slot Machines 1874 976 2850
Blackjack ("21") 16 10 26
Craps 2 2 4
Roulette 2 2 4
Poker and Pan 6 0 6
Race/Sports Book 1 0 1
Keno 1 0 1
Bingo 1 0 1
Other 6 2 8
The Santa Fe's market is primarily the residents of northwest Las Vegas,
visitors to the local area, local businesses, and hockey and bowling leagues.
The Santa Fe emphasizes its convenient location, the southwestern theme and
its broad range of amenities, including a 60 lane bowling center and an ice
skating arena. The Santa Fe has
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increased occupied room nights in each fiscal year since opening in February
1991 until fiscal 1994, when it reached near capacity. The occupancy rate for
the last three fiscal years was 91.6% in fiscal 1993, 96.9% in fiscal 1994 and
96.0% in fiscal 1995. At the present time, the Santa Fe is at or near capacity,
and no substantial increase in occupied room nights is expected.
The Santa Fe is implementing an automated player tracking system which it
expects to be operational in fiscal 1996. The "Desert Fortune Player Club" is
being established to encourage repeat business from frequent and active slot and
bingo customers. The players club will offer members points for slot machine and
bingo play. The points can then be redeemed for cash as well as food, beverage,
and rooms at the Santa Fe. Prior to implementing the players club the Santa Fe
utilized a manual system to identify and reward frequent slot players. The new
system will allow the Santa Fe to more precisely track play and more efficiently
reward frequent players. It will also enhance management's ability to market
directly to different segments of the Santa Fe customer base.
The Pioneer has two predominant market segments. A majority of Pioneer
players come from the local area around Laughlin. The Pioneer also attracts a
drive in market of gamblers from Southern California and Arizona. The Pioneer's
focus is on a direct marketing strategy emphasizing the property's unique
atmosphere and attractive prices. The Pioneer has experienced a decrease in
occupied room nights in each of the last three fiscal years with an occupancy
rate of 91.4%, 88.8% and 86.3%, respectively, in fiscal years 1993, 1994 and
1995. Management believes that the decrease is the result primarily of increased
availability in room nights and the continued intense competition in the
Laughlin market.
The Pioneer has an automated slot player tracking system. The "Round-Up
Club" at the Pioneer was established to encourage repeat business from frequent
and active slot customers. The Round-Up Club offers members points for slot
machine play that can be redeemed for cash, as well as gifts, rooms, and food
and beverages at the Pioneer.
Hacienda Inc. continues to provide members, based on availability, space in
the recreational vehicle facility known as "Camperland" located on approximately
14 acres of the Hacienda property. Pursuant to the terms of the agreement under
which the Hacienda was sold, the Company is required to relocate the Camperland
recreational vehicle facility before February 1997. Prior to that time, the
Company is leasing the 14 acre parcel pursuant to an operating lease agreement
with the purchaser of the Hacienda. In October 1995, the Company entered into an
agreement to transfer its rights and obligations under contracts with members of
Camperland to the developer of a recreational vehicle park currently under
construction. Pursuant to the agreement, the Company will pay $4 million to the
developer and the developer will assume all obligations relating to Camperland
contracts. The Company will remain contingently liable for such obligations. The
agreement is subject to, among other things, a due diligence review by the
developer. If that agreement is not consummated, the Company will be obligated
to transfer the Camperland operations to another location on or before February
1997 and continue to service existing contracts. The Company has acquired a 40
acre parcel of property for such purposes.
5
Management and Personnel
At September 30, 1995, the Company employed 32 administrative personnel, and
the Santa Fe and the Pioneer employed 1,153, and 821 persons, respectively.
Pursuant to representation petitions filed with the National Labor
Relations Board ("NLRB") by the Teamsters, Operating Engineers, Culinary and
Bartenders unions, an election was held at the Santa Fe on September 30 and
October 1, 1993. The unions received 300 of the votes cast, 241 employees voted
against representations by the unions, and 31 ballots were challenged. On
October 8 and October 29, 1993, the Santa Fe filed objections and an unfair
labor practice charge alleging misconduct and unlawful interference by Culinary,
Local 226 with employees' federally protected rights in respect to the question
of union representations. A hearing was conducted before an administrative law
judge of the NLRB early in 1994. In July 1995, the administrative law judge
ruled in favor of the unions and recommended the unions be certified by the NLRB
as the bargaining agent for a unit of Santa Fe employees. On August 28, 1995,
the NLRB adopted the recommendation of the administrative law judge and
certified the unions. The Santa Fe believes the certification was issued in
error and has refused to bargain with the unions. In response, the unions filed
an unfair labor practice charge alleging refusal to bargain, and on November 30,
1995, the NLRB issued a bargaining order. The Santa Fe has appealed the
bargaining order to the U.S. Court of Appeals for the District of Columbia. That
appeal is pending. While the appeal is pending, the unions have no legally
enforceable right to represent the Santa Fe employees and the Santa Fe has no
legally enforceable obligation to recognize or bargain with the unions.
From August 1994 to October 1995, complaints alleging unlawful interference
by the Company with employee and union rights under the Nations Labor Relations
Act were filed with the NLRB by several unions relating to the Sahara,
Hacienda, Santa Fe and Pioneer Hotels, including allegations of unilateral
changes in terms and conditions of employment at the Santa Fe. Hearings before
administrative law judges of the NLRB are scheduled for January 29 and February
13, 1996, with respect to these complaints.
Management believes the allegations are without merit and intends to defend
the allegations vigorously. However, it were ultimately determined the Company
improperly made changes in employment terms and conditions at the Santa Fe, the
Company would be required to pay compensation due as a result of the changes.
Both the Santa Fe and the Pioneer are targets of a union boycott in which
the unions ask that the public not patronize the hotel-casino. Management is
unable to determine the impact, if any, of the union boycott.
6
If the Company loses its appeal to the U.S. Court of Appeals or if the
unions are successful in organizing at the Pioneer, operating expenses may
increase. Furthermore, should the unions attempt to call a strike at any
facility, operating revenues would be reduced, which in turn could have a
material adverse effect on the Company and on its financial condition and
results of operations.
Competition
In Las Vegas, Nevada, hotels and gambling casinos compete primarily in three
areas: on or near the Las Vegas Strip; within downtown Las Vegas, and in the
locals market. The Strip and downtown properties have a predominant target
market of out of town visitors, while local properties generally target
residents of the Las Vegas Valley. The Santa Fe targets and competes for the
residents of northwest Las Vegas, a growing residential community, and, to a
lesser extent, the residents of the entire Las Vegas Valley, emphasizing its
convenient location, the southwestern theme and its broad range of amenities.
There has been significant growth in the number of facilities in Las Vegas
catering to the local population, including new facilities and upgraded or
enlarged facilities surrounding the Las Vegas Valley resulting in increased
competition among the locals facilities. In December 1994, and in July 1995, two
new facilities which compete with the Santa Fe opened within five miles of the
Santa Fe in North Las Vegas.
In Laughlin, Nevada, located approximately 90 miles south of Las Vegas, the
gaming market win from October 1994 through September 1995 has decreased
approximately 3.0% compared with the same period in the prior year, according to
the Nevada Gaming Control Board. A number of Las Vegas-based entities have
properties in the Laughlin gaming market, making hotel-casino competition in the
area intense. In fiscal 1995, the Pioneer experienced a 6.6% decrease in
revenues. Management believes that the decrease is attributable primarily to
increased competition both within the Laughlin market and, from the development
of legalized casinos on reservations in Arizona and Southern California.
Management plans to utilize the Pioneer's extensive player data base to attract
visitors by emphasizing the Pioneer's unique atmosphere, attractive prices and
good location, in an effort to maintain and expand its existing customer base.
See Management's Discussion and Analysis of Financial Condition and
Results of Operations for further discussion of competition.
DEVELOPMENT OPPORTUNITIES
Henderson, Nevada
The Company owns a 39 acre parcel of real property in Henderson, Nevada,
located in the
7
southeast Las Vegas Valley. The Company is evaluating the development of a
casino entertainment complex on this property. As of September 30, 1995, the
Company had incurred approximately $19.7 million in development of the project,
representing the land acquisition costs and preliminary engineering and
development costs. The Company has no agreements, arrangements or
understandings with respect to financing the development of the Henderson
property, although it is exploring possible financing arrangements. Any future
development would be subject to, among other things , the Company's ability to
obtain necessary financing. No assurance can be given that the Company will
obtain development financing or develop successfully the Henderson property.
Las Vegas, Nevada
In connection with the sale of the Sahara, the Company acquired an
approximately 27-acre parcel of real property on the Las Vegas Strip. The
Company expects to hold this property for possible future development. The
property is subject to a ground lease, which may be terminated by the Company at
any time after December 1996. The Company has guaranteed payments by the tenant
of a loan to the prior owner of the property ("tenant loan") and has agreed to
pay the loan in full in certain situations, including in the event the lease is
terminated for any reason prior to its scheduled termination date of 2004. The
tenant loan, which is amortized through monthly principal and interest payments
through December 2004, had an outstanding balance of $6.2 million as of
September 30, 1995. Under the terms of the lease, as amended, the water-theme
park remits a base rent of approximately $16,000 monthly plus an annual rent
payment based on gross receipts.
The Company also owns a 40 acre parcel of the real property located
approximately eight miles south of the Las Vegas Strip on Las Vegas Boulevard,
which was acquired for $2.4 million in September 1995. If the Company does not
transfer the Camperland operations as described under "Business-Description of
Hotel Casino-Revenues," the Company expects to make improvements to this
property and relocate the Camperland operations to this site.
Parkville, Missouri
Sahara Parkville, Inc., ("Parkville Inc.") a Missouri corporation and a
wholly owned subsidiary of Santa Fe Inc., was formed in 1993 in connection with
the potential development and operation of a dockside casino in the City of
Parkville, Missouri. As a result of legislative and other setbacks, the Company
ceased the active pursuit of developing the casino and recorded a $14.9 million
charge against income in the quarter ended June 30, 1995 in connection with its
development of the proposed project. In October 1995, the Company sold for $3.3
million in cash the barge vessel acquired in connection with the proposed
project.
Parkville Inc. remains a party to a lease agreement with the City of
Parkville for the site of the proposed development, which is located
approximately ten miles from Kansas City, Kansas and Kansas City, Missouri.
Pursuant to the terms of the lease agreement, the Company may terminate the
lease upon 90 days written notice.
8
Biloxi, Mississippi - Treasure Bay
In April 1994, Santa Fe Inc. purchased from Treasure Bay Gaming & Resorts
Inc. ("Treasure Bay") for $10.0 million approximately 20% of Treasure Bay's
common stock and 33-1/3% of Treasure Bay's preferred stock. The Company also
unconditionally guaranteed the payment of $4.5 million of the indebtedness of
Treasure Bay incurred to finance working capital in connection with the opening
of Treasure Bay's casinos in Biloxi, Mississippi in April 1994 and in Tunica,
Mississippi in May 1994, which indebtedness the Company acquired in December
1994. In connection with its stock purchase, Santa Fe Inc. entered into an
agreement with Treasure Bay to manage both properties. However, in December
1994, Treasure Bay notified the Company that Treasure Bay was assuming
management control of Treasure Bay's properties and alleged that the Company was
in default under the management agreement and had mismanaged the Treasure Bay
properties.
On January 10, 1995, Treasure Bay and its operating subsidiary, Treasure Bay
Corp., filed for Chapter 11 relief in the United States Bankruptcy Court for the
Southern District of Mississippi. Pending resolution of the Treasure Bay
bankruptcy proceedings, Santa Fe Inc. does not expect to receive payments under
the management agreement or with respect to the acquired indebtedness and no
assurance can be given that any amounts will ultimately be repaid.
The operations of Treasure Bay currently consist solely of a riverboat
casino in Biloxi, Mississippi. Since August 1995, Treasure Bay's management, the
Company and an ad hoc committee of Treasure Bay bondholders have each filed
plans of reorganization with the bankruptcy court. The Company believes that
confirmation hearings with respect to the plans will be held sometime in 1996.
The Company's plan of reorganization for Treasure Bay contemplates that, subject
to various conditions, the various classes of secured and unsecured creditors of
the debtor agree to accept modifications to, and reductions in outstanding
amounts of, Treasure Bay's outstanding obligations and the Company would make a
cash equity contribution to acquire 100% of the equity interests in Treasure
Bay. Any plan must be approved by the bankruptcy court, and no assurance can be
given that the Company's plan of reorganization will be approved, that the
various classes of creditors would agree to the plan or that the Company would
elect to proceed with the plan. Additionally, any plan of reorganization may be
amended, resulting in changes to the amount and terms of debt of the reorganized
debtor and equity ownership acquired.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Santa Fe -- Treasure Bay". See "Legal Proceedings" for
information regarding litigation between the Company and certain of its officers
and certain current and former officers of Treasure Bay.
NEVADA REGULATIONS AND LICENSING
The Company, Pioneer Inc., and Santa Fe Inc., (collectively, the "Sahara
Group") are subject to extensive state and local regulation by the Nevada Gaming
Commission, Nevada Gaming Control Board and in the case of Santa Fe Hotel, Inc.,
the Clark County Liquor and Gaming Licensing Board (collectively the "Nevada
Gaming Authorities").
9
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities seek (i) to prevent unsavory or unsuitable persons from having any
direct or indirect involvement with gaming at any time or in any capacity, (ii)
to establish and maintain responsible accounting practices and procedures, (iii)
to maintain effective control over the financial practices of licensees,
including establishing minimum procedures for internal fiscal affairs and the
safeguarding of assets and revenues, providing reliable record-keeping, and
making periodic reports to the Nevada Gaming Authorities, (iv) to prevent
cheating and fraudulent practices, and (v) to provide a source of state and
local revenues through taxation and licensing fees. Changes in such laws,
regulations and procedures could have an adverse effect on any or all of the
members of the Sahara Group.
Licensing and Registration. Pioneer Inc. and Santa Fe Inc. hold Nevada
--------------------------
State gaming licenses to operate the Pioneer and the Santa Fe, respectively
(collectively the "Operating Companies"). The Company has been approved by the
Nevada Gaming Authorities to own, directly or indirectly, a beneficial interest
in the Operating Companies.
The licenses held by members of the Sahara Group are not transferable. Each
issuing agency may at any time revoke, suspend, condition, limit or restrict
licenses or approvals to own a beneficial interest in an Operating Company for
any cause deemed reasonable by such agency. Any failure to retain a valid
license or approval would have a material adverse effect on all members of the
Sahara Group.
If it is determined that the Operating Companies or, when applicable, new
members of the Sahara Group, have violated the Nevada laws or regulations
relating to gaming, the Operating Companies or, when applicable, new members of
the Sahara Group, could, under certain circumstances, be fined and the licenses
of the Operating Companies or, when applicable, new members of the Sahara Group,
could also be limited, conditioned, revoked or suspended. A violation under any
of the licenses held by the Company, or any of the Operating Companies or, when
applicable, new members of the Sahara Group, may be deemed a violation of all
the other licenses held by the Company and each of the Operating Companies or,
when applicable, new members of the Sahara Group. If the Nevada Gaming
Commission does petition for a supervisor to manage the affected casino and
hotel facilities, the suspended or former licensees shall not receive any
earnings of the gaming establishment until approved by the court, and after
deductions for the costs of the supervisor's operation and expenses and amounts
necessary to establish a reserve fund to facilitate continued operation in light
of any pending litigation, disputed claims, taxes, fees, and other contingencies
known to the supervisor which may require payment. The supervisor is authorized
to offer the gaming establishment for sale if requested by the suspended or
former licensee, or without such a request after six months after the date the
license was suspended, revoked, or not renewed.
Individual Licensing. Stockholders, directors, officers and certain key
--------------------
employees of corporate licensees must be licensed by the Nevada Gaming
Authorities. An application for licensing of an individual may be denied for
any cause deemed reasonable by the issuing agency. Changes in licensed
positions must be reported to Nevada Gaming Authorities. In addition to its
authority to deny an application for an individual license, the Nevada Gaming
Authorities have jurisdiction to disapprove a change in corporate position. If
the Nevada Gaming Authorities were to find any such
10
person unsuitable for licensing or unsuitable to continue having a relationship
with a corporate licensee, such licensee would have to suspend, dismiss and
sever all relationships with such person. Such corporate licensee would have
similar obligations with regard to any person who refuses to file appropriate
applications, who is denied licensing following the filing of an application or
whose license is revoked. Each gaming employee must obtain a work permit which
may be revoked upon the occurrence of certain specified events.
Any individual who is found to have a material relationship or a material
involvement with a gaming licensee may be required to be investigated in order
to be found suitable or to be licensed. The finding of suitability is comparable
to licensing and requires submission of detailed financial information and a
full investigation. Key employees, controlling persons or others who exercise
significant influence upon the management or affairs of a gaming licensee may be
deemed to have such a relationship or involvement.
Beneficial owners of more than 10% of the voting securities of a corporation
or partner interests of a partnership registered with the Nevada Gaming
Authorities that is "publicly traded" (a "Registered Entity") must be found
suitable by the Nevada Gaming Authorities, and any person who acquires more than
5% of the voting securities or partner interests, as the case may be, of a
Registered Entity must report the acquisition to the Nevada Gaming Authorities
in a filing similar to the beneficial ownership filings required by the Federal
securities laws. Under certain circumstances an institutional investor, as such
term is defined in the regulations of the Nevada Gaming Commission and Nevada
Gaming Board ("Nevada Gaming Regulations"), that acquires more than 10% of the
Company's voting securities may apply to the Nevada Gaming Commission for a
waiver of such finding of suitability requirement. If the stockholder who must
be found suitable is a corporation, partnership or trust, it must submit
detailed business and financial information including a list of beneficial
owners.
Any beneficial owner of equity or debt securities of a Registered Entity
(whether or not a controlling stockholder) may be required to be found suitable
if the relevant Nevada Gaming Authorities have reason to believe that such
ownership would be inconsistent with the declared policy of the State of Nevada.
If the beneficial owner who must be found suitable is a corporation, partnership
or trust, it must submit detailed business and financial information, including
a list of its securities. In addition, the Clark County Liquor and Gaming
Licensing Board has taken the position that it has the authority to approve all
persons owning or controlling more than 2% of the stock or partner interests of
a Registered Entity, including a gaming licensee or otherwise, or of any
corporation, partnership or person controlling such an entity. The applicant is
required to pay all costs of investigation.
Any stockholder found unsuitable and who beneficially owns, directly or
indirectly, any securities or partner interests of a Registered Entity beyond
such period of time as may be prescribed by the Nevada Gaming Authorities may be
guilty of a gross misdemeanor. Any person who fails or refuses to apply for a
finding of suitability or a license within 30 days after being ordered to do so
may be found unsuitable. A Registered Entity is subject to disciplinary action
if, after it receives notice that a person is unsuitable to be a securityholder
or partner, as the case may be, or to have any other relationship with it, such
Registered Entity (a) pays the unsuitable
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person any dividends or property upon any voting securities or partner interests
or makes any payments or distributions of any kind whatsoever to such person,
(b) recognizes the exercise, directly or indirectly, of any voting rights in its
securities or partner interests by the unsuitable person, (c) pays the
unsuitable person any remuneration in any form for services rendered or
otherwise, except in certain and specific circumstances or (d) fails to pursue
all lawful efforts to require the unsuitable person to divest himself of his
voting securities, including, if necessary, the immediate purchase of the voting
securities for cash at fair market value.
Registered Entities are required to maintain current stock ledgers, as the
case may be, in the State of Nevada that may be examined by the Nevada Gaming
Authorities at any time. If any securities or partner interests are held in
trust by an agent or by a nominee, the record holder may be required to disclose
the identity of the beneficial owner to the Nevada Gaming Authorities. A
failure to make such disclosure may be grounds for finding the record owner
unsuitable. Record owners are required to conform to all applicable rules and
regulations of the Nevada Gaming Authorities. Licensees also are required to
render maximum assistance in determining the identity of a beneficial owner.
The Nevada Gaming Authorities have the power to require that certificates
representing voting securities of a corporate licensee bear a legend to the
general effect that such voting securities or partner interests are subject to
the Nevada Gaming Control Act and the regulations thereunder. The Nevada Gaming
Authorities, through the power to regulate licensees, have the power to impose
additional restrictions on the holders of such voting securities at any time.
Financial Responsibility. Each of the Company and the Operating Companies
------------------------
is required to submit detailed financial and operating reports to the Nevada
Gaming Authorities. Substantially all loans, leases, sales of securities and
other financial transactions entered into by the Company or the Operating
Companies must be reported to and, in some cases, approved by the Nevada Gaming
Authorities.
Certain Transactions. None of the Sahara Group may make a public offering
--------------------
of its securities without the approval of the Nevada Gaming Commission if the
proceeds therefrom are intended to be used to construct, acquire or finance
gaming facilities in Nevada, or retire or extend obligations incurred for such
purposes. Such approval, if given, will not constitute a recommendation or
approval of the investment merits of the securities offered. The Offering
requires the approval of the Nevada Gaming Commission.
Changes in control of the Company through merger, consolidation, acquisition
of assets, management or consulting agreements or any form of takeover cannot
occur without the prior investigation of the Nevada Gaming Control Board and
approval of the Nevada Gaming Commission. The Nevada Gaming Commission may
require controlling stockholders, partners, officers, directors and other
persons having a material relationship or involvement, to be licensed.
The Nevada legislature has declared that some corporate acquisitions opposed
by management, repurchases of voting securities and other corporate defense
tactics that affect corporate gaming licensees in Nevada, and corporations whose
securities are publicly traded that are affiliated with those operations, may be
injurious to stable and productive corporate gaming.
12
The Nevada Gaming Commission has established a regulatory scheme to ameliorate
the potentially adverse effects of these business practices upon Nevada's gaming
industry and to further Nevada's policy to (i) assure the financial stability of
corporate or partnership gaming operators and their affiliates; (ii) preserve
the beneficial aspects of conducting business in the corporate form; and (iii)
promote a neutral environment for the orderly governance of corporate or
partnership affairs. Approvals are, in certain circumstances, required from the
Nevada Gaming Commission before the Company can make exceptional repurchases of
voting securities above the current market price thereof (commonly referred to
as "greenmail") and before an acquisition opposed by management can be
consummated. Nevada's gaming regulations also require prior approval by the
Nevada Gaming Commission if the Company were to adopt a plan of recapitalization
proposed by the Company's Board of Directors in opposition to a tender offer
made directly to the stockholders for the purpose of acquiring control of the
Company.
Miscellaneous. Pursuant to recent changes in Nevada law, the Company, and
-------------
its affiliates, including subsidiaries may engage in gaming activities outside
the State of Nevada without seeking the approval of the Nevada Gaming
Authorities provided that such activities are lawful in the jurisdiction where
they are to be conducted and that certain information regarding the foreign
operation is provided to the Nevada Gaming Board on a periodic basis. The
Company and its Nevada-based affiliates may be disciplined by the Nevada Gaming
Commission if any of them violates any laws of the foreign jurisdiction
pertaining to the foreign gaming operation, fails to conduct the foreign gaming
operation in accordance with the standards of honesty and integrity required of
Nevada gaming operations, engages in activities that are harmful to the State of
Nevada or its ability to collect gaming taxes and fees, or employs a person in
the foreign operation who had been denied a license or finding of suitability in
Nevada on the ground of personal unsuitability.
License fees and taxes, computed in various ways depending on the type of
gaming involved, are payable to the State of Nevada and to the counties and
cities in which the Company and the Operating Companies' respective operations
are conducted. Depending upon the particular fee or tax involved, these fees
and taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross gaming revenues received by the casino
operation; (ii) the number of slot machines operated by the casino; or (iii) the
number of table games operated by the casino. A casino entertainment tax is
also paid by the licensee where entertainment is furnished in connection with
the selling of food or refreshments.
Finally, the Nevada Gaming Authorities may require that lenders to
licensees, including each holder of Notes, be investigated to determine if they
are suitable and, if found unsuitable, may require that they dispose of their
loans (including the Notes).
Item 2. Properties
----------
The Santa Fe was constructed on a 36-acre site in the northwest part of Las
Vegas, approximately nine miles from the north-end of the Las Vegas Strip. The
Santa Fe property is subject to a first priority deed of trust securing 11%
First Mortgage Notes due December 2000 ("11% Notes"). As of September 30, 1995,
$105 million principal amount of 11% Notes was outstanding. In November 1993,
Santa Fe Inc. acquired an
13
approximately 22-acre parcel of property across the street from the Santa Fe
Inc. for a purchase price of approximately $1.6 million. Santa Fe Inc. paid
approximately $750,000 of the purchase price in cash and assumed an $850,000
note, secured by a first deed of trust on the parcel, which note bears interest
at 12% per annum and matures in November 1996. In addition, in May 1994, the
Santa Fe acquired a four-acre parcel for $980,000 which has been improved to
provide additional parking. See "Business-- Description of the Hotel-Casinos"
for more detailed information regarding the Santa Fe.
The Pioneer is located on approximately 12 acres of land, with Colorado
River frontage of approximately 770 feet, and is situated near the center of
Laughlin's Casino Drive. Approximately 6.5 acres of the 12-acre Pioneer site is
leased from an unaffiliated third party pursuant to a lease expiring in 2078.
One of the Pioneer's three motel buildings, a portion of a second motel building
and a portion of the casino building are located on the leased property. The
Pioneer property is subject to a first deed of trust securing 13-1/2% First
Mortgage Notes due December 1, 1998 ("13 1/2% Notes"). As of September 30, 1995,
$82.75 million principal amount of the 13 1/2% Notes was outstanding. See
"Business--Description of the Hotel-Casinos" for more detailed information
regarding the Pioneer.
On March 31, 1994, a wholly-owned subsidiary of the Company purchased 39
acres of real property in Henderson, Nevada, located in southeast Las Vegas
Valley where the Company is evaluating the potential development of a casino
entertainment complex. In connection with the sale of the Hacienda, indebtedness
secured by a first priority deed of trust on this property was repaid in full.
See "Business - Development Opportunities for more information regarding the
real property.
In October 1995, in connection with the Sahara sale, the Company acquired 27
acres of real property located on the Las Vegas Strip, just south of the
Sahara Hotel & Casino. The property was acquired in connection with the sale of
Sahara by the Company. Pursuant to an agreement with holders of 13 1/2% Notes,
in which holders consented to the sale of the Hacienda and Sahara, the Company
agreed to grant a security interest in the property for the benefit of the
holders of the 13 1/2% Notes to secure a contingent $10 million obligation. See
"Business-Development Opportunities" for more information regarding the real
property.
The Company operates a recreational vehicle facility known as "Camperland"
on approximately 14 acres of the Hacienda property. In connection with the sale
of the Hacienda, the Company agreed to relocate the Camperland facility on or
before February 1997. Prior to that time, the Company is leasing the 14 acre
parcel pursuant to an operating lease agreement with the purchaser of the
Hacienda. (See "Business-Hotel & Casino Operations" for more detailed
discussion).
In September 1995, the Company acquired 40 acres of undeveloped real
property located approximately eight miles south of the Las Vegas Strip. The
Company acquired the property with the intention of developing a RV park to
relocate the operations of the Camperland facility, if necessary. (See
"Business-Hotel & Casino Operations" for more detailed discussion).
In May 1993, Parkville Inc. entered into an agreement with the City of
Parkville, Missouri, for
14
a site lease allowing the Company to operate a casino subject to approval by the
Missouri Gaming Commission. The lease agreement, as amended, allows the Company
to terminate the agreement upon 90 days written notice. See "Business-
Development Opportunities" for more detailed information.
Item 3. Legal Proceedings
-----------------
Poulos v. Caesar's World, Inc., et al. and Ahern v. Caesar's World, Inc., et al.
The Company and its predecessor, Sahara Casino Partners, L.P. are defendants
in two class action lawsuits filed in the United States District Court of
Florida, Orlando Division, entitled Poulos v. Caesar's World, Inc., et al. and
Ahern v. Caesar's World, Inc., et al. which have been consolidated in a single
action and a third class action lawsuit filed in the United States District
Court of Nevada, entitled Schrier v. Caesar's World, Inc., et al. Also named as
defendants in these actions are many, if not most, of the largest gaming
companies in the United States and certain gaming equipment manufacturers. Each
complaint is identical in its material allegations. The actions allege that the
defendants have engaged in fraudulent and misleading conduct by inducing people
to play video poker machines and electronic slot machines based on false beliefs
concerning how the machines operate and the extent to which there is actually an
opportunity to win on a given play. The complaints allege that the defendants'
acts constitute violations of the Racketeer Influenced and Corrupt Organizations
Act ("RICO") and also give rise to claims for common law fraud and unjust
enrichment, and it seeks compensatory, special consequential, incidental and
punitive damages of several billion dollars.
In response to the complaints, all of the defendants, including the Company
and the Partnership, filed motions attacking the pleadings for failure to state
a claim, seeking to dismiss the complaints for lack of personal jurisdiction and
venue, and, in the case of the consolidated case, seeking to transfer venue of
the actions to Las Vegas. The Court granted the defendants' motion to transfer
venue of the Poulos action to Las Vegas. Plaintiffs have responded to all
motions and have also propounded discovery with respect to each defendant on
jurisdiction, venue and class issues. The Company expects that there will be
further briefing on the motions, and the Court has not indicated when it will
rule on these motions. Plaintiffs have also filed their motion to certify the
class. A representative group of the defendants took the deposition of each
plaintiff and also obtained documents from the plaintiffs. It is not known when
the Court will rule on the class certification motions.
Hyland v. Griffin Investigations et al.
The Company, its predecessor, Sahara Casino Partners, L.P. and Pioneer Inc.
are defendants in a class-action lawsuit filed in the Unites States District
Court of New Jersey, Camden Division, entitled Hyland v. Griffin Investigations
et al. Also named as defendants in this action are many, if not most, of the
largest gaming companies in the United States. The action alleges violations of
Federal anti-trust law, the Fair Credit Reporting Act and state trespass
statutes stemming from plaintiffs' exclusion from various casinos on the basis
that plaintiffs are card counters. The complaint seeks compensatory as well as
punitive damages. Pioneer Inc. has already been dismissed, and the Company has
filed a motion to dismiss for lack of personal jurisdiction and failure to state
a claim upon which relief may be granted. This motion is presently pending
before the Court.
15
Treasure Bay Litigation
On December 12, 1994, the Company and Santa Fe Inc. filed a lawsuit in the
United States District Court, District of Nevada, naming Treasure Bay officers
A. Clay Rankin III, Joe N. Hendrix and Bernie Burkholder, and former officer
Francis L. Miller as defendants in matters involving violations of Section 10(b)
and Rule 10(b)-5 of the Securities Exchange Act, violation of Nevada state
securities laws, fraud and negligent misrepresentation in connection with the
Company's investment of $10 million in exchange for a 20% interest in Treasure
Bay, and the Company's guarantee of $4.5 million of Treasure Bay's indebtedness.
The defendants have filed answers to the complaint and discovery is continuing.
On December 15, 1994, Francis L. Miller filed a lawsuit in the Mississippi
Circuit Court, Second Judicial District, against the Company and Santa Fe Inc.
as well as Paul W. Lowden and Suzanne Lowden, alleging, among other things, that
the Company made certain misrepresentations which induced Francis Miller to
entrust the management of his investments in Treasure Bay's two Mississippi
casinos to the Company and Santa Fe and to sell the Company and Santa Fe a 20%
ownership interest in Treasure Bay. The lawsuit was subsequently amended to
remove Suzanne Lowden as a defendant. The Company and Santa Fe filed a
successful motion to transfer this case to the United States District Court in
Nevada.
On March 31, 1995, Treasure Bay Corp. commenced an adversary proceeding in
its bankruptcy case by filing a complaint for a preliminary and permanent
injunction pursuant to 11 U.S.C. Sec. 105 and Sec. 362 against the Company and
Santa Fe Inc. The Complaint alleges that the filing of the action on December
12, 1994 against Bernie Burkholder, an officer of Treasure Bay Corp., in Nevada
federal court violated the automatic stay imposed by 11 U.S.C. Sec. 362, or
alternatively, that the Bankruptcy Court should issue an injunction pursuant to
11 U.S.C. Sec. 105 preventing Sahara from proceeding with its action as against
Burkholder. In addition to an injunction, the complaint seeks actual and
punitive damages and attorneys' fees. In a hearing on this complaint, Treasure
Bay abandoned its claims for damages and violation of the stay. However, the
bankruptcy court granted Treasure Bay's request for a stay of discovery against
Bernie Burkholder that will expire after the confirmation hearing on Treasure
Bay's bankruptcy plan.
Treasure Bay-Bankruptcy
On or about January 17, 1995, the Company and Santa Fe Inc. commenced an
adversary proceeding in Treasure Bay's bankruptcy case in the United States
bankruptcy court for the Southern District of Mississippi. The adversary
proceeding seeks the return of bankroll or cage cash at Treasure Bay's casinos
on the grounds that such funds are held by Treasure Bay in constructive trust
for the Company and Santa Fe Hotel Inc. The complaint alleges that Treasure Bay
fraudulently induced the Company to execute the guarantees of the loans by which
Treasure Bay obtained the bankroll or cage cash. The complaint also seeks an
injunction from the bankruptcy court requiring the bankroll or cage cash to be
held intact pending the litigation. Treasure Bay filed an answer to the
complaint denying Sahara's claim. On March 18, 1995, the U.S. bankruptcy court
granted the Company's request for a preliminary injunction prohibiting Treasure
Bay from using the bankroll or cage cash except in the ordinary course of
business until further order of the Court.
16
Subsequent to the bankruptcy court's entry of an injunction to preserve
the bankroll proceeds pending the constructive trust litigation, Treasure Bay
successfully urged the Court to lift the injunction for the limited purpose of
allowing the bankroll proceeds to be used as collateral for specific interim
financing by Treasure Bay. However, the Court conditioned the use of the
bankroll as collateral upon approval of the Mississippi Gaming Commission of the
proposed interim financing. Upon review, Treasure Bay's interim financing plan
was not approved by the Mississippi Gaming Commission and Treasure Bay
subsequently announced that it was withdrawing its plans for interim financing.
The Company is vigorously pursuing its claims and defenses in all
proceedings involving its current and prior relationship with Treasure Bay.
See "Business-Hotel-Casino Operations - Management and Personnel" for
discussion of several proceedings relating to labor matters.
In addition, the Company is subject to various lawsuits relating to routine
matters incidental to its business. The Company does not believe that the
outcome of such litigation, in the aggregate, will have a material adverse
effect on the Company.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
There were no matters submitted to a vote of the Company's security holders
during the fourth quarter of fiscal 1995.
PART II
Item 5. Market for Registrant's Stock and Related Security Holders Matters
-------------------------------------------------------------------
Since October 1, 1993, the Company's Common Stock has traded on the American
Stock Exchange ("AMEX") under the symbol "SGM". The closing sales price of the
Common Stock on December 26, 1995, as reported by the American Stock Exchange
was $2.13 per share. The tables below set forth the high and low closing sales
prices by quarter for the fiscal years ended September 30, 1995 and 1994 for the
Common Stock, as reported by the AMEX.
First Second Third Fourth
Fiscal 1995 Quarter Quarter Quarter Quarter
- --------------------------- -------- -------- -------- -------
High $6 3/8 $5 7/8 $7 7/8 $5 1/2
Low $3 1/16 $3 1/2 $4 $3 3/8
First Second Third Fourth
Fiscal 1994 Quarter Quarter Quarter Quarter
- --------------------------- -------- -------- ------- -------
High $23 1/2 $12 3/8 $10 7/8 $7
Low $ 9 1/2 $ 9 3/4 $ 5 $5
The Company has never paid cash dividends on its Common Stock, nor does it
anticipate paying such dividends in the foreseeable future. On January 25,
1994, the Company announced
17
a 25% stock dividend on the Common Stock payable on February 25, 1994, to
stockholders of record on February 4, 1994. The accompanying financial
statements have been adjusted to give effect to this stock dividend as if it has
occurred as of the earliest period presented.
There were approximately 8,300 stockholders as of December 29, 1995. The
number of stockholders was computed by including those stockholders whose stock
is beneficially held for them by participants in a clearing agency as of that
date.
Item 6. Selected Financial Data
-----------------------
The table below sets forth a summary of selected financial data of the
Company for the years ended September 30 (dollars in thousands, except per share
amounts):
1995 1994 1993 1992 1991
---------- --------- --------- --------- ---------
Total Revenues/(1)/ $251,109 $253,718 $244,765 $219,519 $179,505
Net Loss/(2)/ $(22,041) $(15,739) $ (1,090) $ (6,476) $ (9,069)
Net Loss
Per Common
Share/(3)/ $(3.77) $(2.74) $(0.25) $ (1.52) $ (2.12)
Cash Dividends
Per Common
Share --- --- --- --- ---
Total Assets $366,638 $478,555 $395,089 $359,624 $377,830
Long-Term
Debt $198,655 $379,093 $301,780 $286,764 $309,733
Redeemable
Preferred
Stock/(4)/ $ 17,521 $ 16,202 $ 14,980 --- ---
- -------------------------------------------------------------------------------
(1) Fiscal 1995 includes a $8.9 million gain relating to the sale of
substantially all the assets of Hacienda Inc.
(2) Fiscal 1995 and 1994 amounts presented exclude dividends on preferred
shares. Fiscal Year 1995 includes a $14.9 million charge to reduce the
carrying value of the Company's investment in Parkville, Missouri. Fiscal
Year 1994 includes $12.6 million charge to reduce the carrying value of the
Company's investment in Treasure Bay.
(3) Per common share amounts have been restated to reflect common stock
dividends paid in February 1994. Fiscal 1995 and 1994 per common share
amounts include dividends on preferred shares.
(4) The Company has declared and issued paid-in-kind dividends on its
Exchangeable, Redeemable 8% Preferred Stock during fiscal years 1995 and
1994.
18
Item 7. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations of the Company
------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY
FISCAL 1995 COMPARED TO FISCAL 1994
The Company's revenues decreased $2.6 million, or 1.0%, to $251.1 million in
fiscal 1995 as compared to $253.7 million in the previous fiscal year. The
decrease in revenues is the result of decreases in casino, food and beverage and
other revenues in fiscal 1995 resulting primarily from the agreement to sell
the Hacienda and Sahara, partially offset by a gain of $8.9 million recorded on
the sale of the Hacienda. Operating expenses increased $19.8 million, or 8.9%,
primarily due to a write-down of development costs of $14.9 million and also
increased payroll, advertising and promotional costs, professional fees, as well
as increased depreciation associated with the expansion of two of the Company's
properties. Accordingly, operating income decreased $22.4 million or 67.8% to
$10.6 million in 1995 from $33.0 million in 1994. The Company's interest expense
increased by $1.8 million to $45.0 million in fiscal 1995 primarily as a result
of the issuance of $115.0 million principal amount of 11% Notes in December
1993.
The Company recorded an extraordinary gain of $1.1 million after tax on
early extinguishment of debt in fiscal 1995. In June 1995, the Company recorded
an after-tax charge of $1.7 million in connection with the repurchase of $21.5
million principal amount 11% Notes. In September 1995, the Company recorded a
$2.8 million after-tax gain from the repurchase of $20 million principal amount
of 13 1/2% Notes.
The Company reported a net loss applicable to common shares of $23.4 million
or $3.77 per common share in fiscal 1995 compared to a loss of $17.0 million or
$2.74 per common share in fiscal 1994. For additional information regarding
Results of Operations see discussion below, by property.
SANTA FE
Revenues at the Santa Fe increased 1.5%, or $1.0 million in fiscal 1995 to
$64.8 million as compared to $63.8 million in fiscal 1994. Casino revenues
increased 1.3%, or $600,000, to $49.1 million from $48.5 million. Management
believes that the increase in casino revenues at the Santa Fe is primarily due
to the addition of a race book in December 1994. Other casino revenues reported
were flat when compared to the same twelve month period of 1994, which
management believes is due primarily to the opening of two competing facilities
within five miles of the Santa Fe in December 1994 and July 1995 and the opening
and expansion of other casinos targeting the local population in the Las Vegas
Valley. In addition, management believes that Santa Fe casino revenues were
impacted during construction of the Santa Fe expansion completed during December
1994 and, to a lesser extent, by restricted access to the property from February
1995 to April 1995 during construction on an interchange next to the facility.
The food and beverage departments posted an increase in revenues of $1.2 million
or 17.9% over the same period in the prior year. This increase is believed to be
primarily due to the opening of additional food and beverage facilities in
December 1994. Other revenues for the current period declined $900,000 or 15.2%
to $5.0 million, due to approximately $700,000 recorded in the prior year from a
management agreement for which revenues were not recorded in the current year.
The $1.0 million increase in revenues was offset by a 14.7%, or $7.2
million, increase in operating expenses. Casino expenses increased by 18.1%, or
$3.2 million, primarily due to
19
increased payroll and other costs associated with operating an additional 15,000
square feet of casino space, which includes a new race book, and increased
promotional costs incurred to compete with the expanding competition in the
area. Food and beverage expenses had volume related increases of 21.8%, or $1.8
million over the prior year period, the results of the opening of additional
food and beverage facilities in December 1994. Selling, general and
administrative expenses increased 4.7%, or $400,000, primarily related to
increased advertising and promotional costs. Increases in utilities and
property expenses of 9.3% or $400,000, and depreciation and amortization
expenses of 20.2% or $1.5 million, were related to the expansion project.
Excluding a write-down of development costs of $14.9 million discussed below,
operating income decreased by 42.6%, or $6.3 million, to $8.4 million from $14.7
million.
In the third quarter of 1995, the Company recorded a $14.9 million charge
against income to write-down development costs related to a proposed project in
Parkville, Missouri, by a wholly-owned subsidiary of the Santa Fe.
In the fourth quarter of 1995, revenues decreased $1.6 million or 9.9% to
$14.7 million and operating expenses increased $1.3 million or 9.7% to $14.4
million compared to the same period in the prior year. Accordingly, operating
income decreased $2.9 million to $350,000 or 89% compared to the same period in
the prior year. Additionally, operating income before depreciation and
amortization decreased $2.6 million, or 49.8%, to $2.6 million, compared to the
same period in the prior year. Management believes operations in the fourth
quarter were impacted primarily by the opening in July 1995 of a competing
facility within five miles of the Santa Fe.
Interest expense increased $2.6 million, or 22.7%, in fiscal 1995 compared
to fiscal 1994, primarily due to the 11% Notes issued in December 1993, which
were outstanding for the entire year in fiscal 1995. In addition, as a result
of the repurchase offer described below, interest costs which were previously
capitalized in connection with the development of the proposed Parkville project
were expensed during the fourth quarter of fiscal 1995.
In August 1995, in accordance with the indenture governing the 11% Notes,
Santa Fe Inc. completed an offer to repurchase $21.5 million principal amount of
11% Notes, representing that principal amount that could be purchased with funds
remaining in the Parkville collateral account dedicated for use in the
development of a proposed dockside riverboat casino and received upon
liquidation of the Parkville assets. In satisfaction of the obligation to
liquidate the Parkville assets, Santa Fe Inc. sold the Parkville assets to an
affiliate of the Company, for $2.99 million, which the Company and Santa Fe Inc.
believed to be the fair market value of such assets. The repurchase offer was
required because the proposed casino in Parkville, Missouri that
Santa Fe Inc. intended to develop was not operating by June 30, 1995.
Pursuant to the offer to repurchase, Santa Fe Inc. purchased for cash $21.5
million principal amount of the 11% Notes, at a price of $1,010 per $1,000
principal amount, plus accrued interest. As a result of the commencement of the
repurchase offer, $11.5 million in principal amount of 11% Notes were issued
upon exercise of outstanding warrants. The Company recorded a extraordinary
charge to earnings in the amount of approximately $2.6 million, less income tax
benefit of $890,000, related to debt premium payments, debt issue costs and debt
discount in connection with the repurchase offer.
20
PIONEER
Revenues at the Pioneer decreased 6.6%, or $3.2 million, to $46.0 million
from $49.3 million in fiscal 1994. Casino revenues were $40.5 million in fiscal
1995, representing a decrease of 6.2%, or $2.7 million, comprised mostly of a
decrease in slot revenue of 6.3%, or $2.4 million. The decrease in fiscal 1995
is believed to be primarily due to the competitive gaming market environment in
and around Laughlin, including Indian gaming facilities opened in Arizona and
southern California, coupled with disruption of operations related to the
construction of the expansion which was completed in December 1994.
Operating expenses increased $700,000 or 1.7% to 40.5 million. Casino
expenses decreased only .5%, or $100,000, as volume related decreases in
expenses were offset by increased promotional expenses. Hotel expenses had a
volume related decrease of $100,000, or 19.0%%. Utilities and property expenses
increased 19.9%, or $800,000, primarily due to a $500,000 loss on sale of gaming
equipment, incurred in connection with the expansion of casino space.
Accordingly, operating income decreased by 41.6%, or $3.9 million, to $5.4
million in fiscal 1995 from $9.4 million in fiscal 1994.
In the fourth quarter of 1995, revenues decreased $300,000, or 3.1%, to
$10.8 million and operating income decreased by $500,000 or 44.3% to $600,000,
compared to the same period in the prior year. Additionally, operating income
before depreciation and amortization decreased $300,000 to $2.0 million or 14.3%
compared to the same period in the last fiscal year. Management believes the
decrease in revenues and operating results in the fourth quarter of fiscal 1995
compared to the fourth quarter of fiscal 1994 are the result of increased
competition in and around the Laughlin market.
In September 1995, with proceeds of the sale of Hacienda, the Company
acquired and retired $20 million principal amount of 13-1/2% Notes for $15.5
million. The Company recorded a non-recurring gain of $4.3 million, less income
tax provision of $1.5 million, in connection with the acquisition.
HACIENDA
The Company sold the Hacienda on August 31, 1995. The results for the
Hacienda include eleven months in fiscal 1995 as opposed to twelve months in
fiscal 1994. Accordingly, revenues at the Hacienda, excluding a gain on the sale
of $8.9 million, decreased 6.7%, or $3.6 million, to $50.3 million from $53.8
million in fiscal 1994. Casino revenues decreased 6.0%, or $1.6 million, to
$24.6 million from $26.2 million in the prior year. Food and beverage revenues
decreased 12.9%, or $1.1 million.
The Company recorded a gain of $8.9 million from the sale of substantially
all the assets of the Hacienda. The gain includes the $80 million in cash
consideration less the carrying value of assets sold ($67.1 million), and an
allowance to relocate the Camperland facility ($4.0 million).
21
Operating expenses decreased $2.0 million, or 4.0% to $49.2 million when
comparing the 11 months of fiscal 1995 to the full fiscal year of 1994.
Accordingly, operating income excluding the gain on sale decreased 58.4%, or
$1.5 million, to $1.1 million from $2.6 million.
SAHARA
Revenues at the Sahara for fiscal 1995 decreased 6.7%, or $5.8 million, to
$81.0 million from $86.8 million in fiscal 1994. This decrease in revenues is
primarily attributable to decreased casino revenues. Casino revenues decreased
$3.1 million, or 8.3%, to $34.5 million from $37.6 million in the prior year,
with decreases in slot revenue of $2.0 million, or 9.7%, and in table games of
$1.1 million, or 8.1%. Food and beverage revenues decreased 11.6%, or $1.6
million.
The decrease in revenues was partially offset by a decrease in operating
expenses of $2.2 million, or 2.8%. Operating income decreased by 50.7%, or $3.7
million, to $3.6 million in fiscal 1995.
The agreement to sell the Sahara was executed in June 1995 and closed in
October 1995. Management believes that while the agreement to sell assets of the
Sahara was in escrow, general business conditions were impacted, negatively
affecting operating results. In the fourth quarter, operating income before
deprecation and amortization decreased by 69% or $2.7 million to $1.2 million
compared to fiscal 1994.
FISCAL 1994 COMPARED TO FISCAL 1993
The Company's revenues increased $9.0 million, or 3.7%, to $253.7 million in
fiscal 1994 as compared to $244.8 million in the previous fiscal year. The
increase in revenues is the result of increased casino and hotel revenues in
fiscal 1994. Operating expenses increased $12.6 million, or 6.6%, primarily
due to increased payroll, advertising and promotional costs, professional fees
and increased depreciation associated with the step-up in basis of the
depreciable assets that resulted from the Reorganization and volume related
increases in the casino department. Operating income, accordingly, decreased
$3.7 million or 10% to $33.0 million in 1994 from $36.6 million in 1993. The
Company's interest expense increased by $5.4 million to $43.2 million in fiscal
1994 primarily as a result of the issuance of $115.0 million principal amount of
11% Notes in December 1993. See "Santa Fe" below. The Company charged $12.6
million against income in 1994 in connection with its investment in Treasure
Bay. See "Santa Fe - Treasure Bay" below.
As a result of the above, the Company had a net loss before federal income
tax benefit of $22.8 million, an increase of $21.6 million over the net loss of
$1.2 million in 1993. Excluding the charge relating to Treasure Bay, the net
loss before federal income tax benefit would have been $10.2 million, an
increase of $9.0 from a $1.2 million loss in 1993.
22
SANTA FE
Santa Fe Hotel and Casino
Revenues at the Santa Fe showed continued growth in fiscal 1994, increasing
19.6%, or $10.4 million, to $63.8 million as compared to $53.4 million in fiscal
1993. Casino revenues increased 21.3%, or $8.5 million, to $48.5 million from
$40.0 million, with increases in all gaming areas. Management believes that
ongoing marketing to the expanding population of northwest Las Vegas is
responsible for these results. The hotel rooms and food and beverage
departments posted modest increases. The Santa Fe's expansion, which was
completed and opened in December 1994, increases its food and beverage capacity,
as well as the casino area, and was constructed to meet the growing demand and
to better position the Santa Fe to compete with the expanding competition in the
area.
Operating income increased by 28.9%, or $3.3 million, to $14.7 million from
$11.4 million. The $10.4 million increase in revenues was offset by a 17.0%, or
$7.1 million, increase in operating expenses. In addition to volume related
increases in expenses in the revenue-generating departments, expenses increased
in selling, general and administrative, utilities and property and depreciation
by 35.3%, or $2.0 million, 11.9%, or $500,000, and 21.8%, or $1.2 million,
respectively. Interest expense increased $7.0 million, or 131.1%, due to the
issuance of the 11% Notes.
In the fourth quarter of 1994, revenues increased $1.9 million to $16.3
million or 13% compared to the same period in the 1993 fiscal year. This
increase is less than the 22.8% increase in revenues achieved during the first
nine months of the fiscal year. Additionally, operating income before
depreciation and amortization increased $200,000 to $5.2 million, or 4%,
compared to the same period in the prior year. Management believes operations
in the fourth quarter were impacted by the construction of the expansion and, to
a lesser extent, by the opening of a new locals facility and expansion of
another locals facility, both in the southeast section of the Las Vegas valley.
In the fourth quarter, the Santa Fe recorded a provision to reduce the
carrying value of its investment in Treasure Bay by $12.6 million. The
provision includes the equity interest in the net loss of Treasure Bay through
September 30, 1994, a charge against the Company's investment in Treasure Bay
and a provision for the $3.3 million guarantee of outstanding debt obligations
of Treasure Bay, on which Treasure Bay has defaulted.
As a result of the charges associated with Treasure Bay, the Santa Fe
reported a net loss before federal income tax of $9.3 million for fiscal 1994
compared to net income before federal income tax of $6.1 million in the prior
year. Excluding the charge relating to Treasure Bay, the net income before
federal income tax would have been $3.3 million, a decrease of $2.8 million from
$6.1 million reported in 1993. The net income before federal income tax
decreased primarily due to increased depreciation and amortization resulting
from the Reorganization and increased interest expense associated with the 11%
Notes.
23
PIONEER
Revenues at the Pioneer decreased 8.9%, or $4.8 million, to $49.3 million
from $54.1 million in fiscal 1993. Casino revenues decreased 9.3%, or $4.4
million, comprised mostly of a decrease in slot revenue of 9.3%, or $3.8
million. Hotel revenues decreased 17.6%, or $300,000 with 3,821 fewer occupied
rooms. Food and beverage revenues decreased 11.6%, or $400,000. These
decreases in fiscal 1994 are believed to be primarily due to relatively constant
gaming revenues in 1994 versus 1993 in the Laughlin, Nevada gaming market,
coupled with continued aggressive competition. Additionally, construction of
the Pioneer expansion is believed to have had a negative impact on revenues
during the fourth quarter of fiscal 1994.
Operating income decreased by 32.3%, or $4.5 million, to $9.4 million from
$13.9 million. The $4.8 million decrease in revenues was not offset with a
comparable decrease in operating expenses. Casino expenses decreased only 0.3%,
or $60,000, as volume related decreases in expenses were offset by increased
promotional expenses. Hotel and food and beverage had volume related decreases
in expenses of $90,000, or 14.3%, and $770,000, or 13.1%, respectively. Selling,
general and administrative expenses increased 10.0%, or $400,000, primarily due
to increased payroll and advertising costs. Utilities and property expenses
increased 8.3%, or $300,000, primarily due to increased rent expense associated
with land leases and operating costs of the boats to ferry passengers to the
Arizona parking lot.
In the fourth quarter of 1994, revenues decreased $1.8 million to $11.1
million compared to the same period in the 1993 fiscal year. This decrease is
greater than the 7.3% decrease in revenues experienced during the first nine
months of the current year. Additionally, operating income before depreciation
and amortization decreased $1.4 million to $2.4 million or 38% compared to the
same period in the last fiscal year. Management believes the decrease in
revenues and operating results in the fourth quarter compared to the first three
quarters of fiscal 1994 and the fourth quarter of fiscal 1993 are the result of
both the decrease in size of the Laughlin market during the 1994 fourth quarter
compared to the fourth quarter of the 1993 fiscal year, together with a negative
impact on operations from the construction of the expansion during this period.
In December 1994, an expansion of the facility was completed, which
increased the slot capacity by approximately 20%, provided a special events
area, and increased administrative and support areas. Additionally, management
has increased marketing and promotional efforts in an effort to increase
revenues and improve the Pioneer's operating results. Expense reduction
measures are also being evaluated and where possible, implemented.
HACIENDA
Revenues at the Hacienda decreased 0.1%, or $100,000, to $53.8 million from
$53.9 million in fiscal 1993. The opening of two major casinos in close
proximity to the Hacienda in December 1993 has impacted casino revenues
negatively but has had positive results on hotel, food and beverage and
entertainment revenues as tourist volume has increased at the south end of the
Las Vegas Strip. Casino revenues decreased 6.9%, or $2.0 million, to $26.2
million from $28.1 million in the prior year, which was comprised of decreases
in table games of 13.9%, or $900,000, in poker and keno of 17.9%, or $300,000,
and in slots of 3.9%, or $800,000. The impact of competition on
24
slot revenue, was in part offset by the addition of new up-to-date slot machines
and the continued marketing of the Hacienda slot club. Hotel revenues
increased 13.4%, or $1.3 million, due to an increase of 2,502 occupied room
nights and sales efforts which resulted in an increase in the average room rate.
Due to the increase in occupied room nights, food and beverage revenues
increased 7.1%, or $600,000, and entertainment revenues increased 12.7%, or
$300,000 over revenues reported in the prior year.
Operating income decreased 48.3%, or $2.4 million, to $2.6 million from $5.0
million, due to the decrease in revenues combined with an increase in operating
expenses of $2.3 million, or 4.8%. Selling, general and administrative expenses
increased 12.3%, or $700,000, primarily due to increased advertising and
promotional costs and professional fees. Entertainment expenses increased
54.6%, or $1.0 million, primarily as a result of a new contract with the
production show. The production show is provided through an affiliate of the
Company, LICO.
SAHARA
Revenues at the Sahara for fiscal 1994 increased 4.3%, or $3.6 million, to
$86.8 million from $83.2 million in fiscal 1993. This increase in revenues is
primarily attributable to increased casino revenues. Casino revenues increased
$1.8 million, or 5.1%, to $37.6 million from $35.7 million in the prior year.
An increase in slot revenue of $2.3 million, or 12.8%, to $20.5 million from
$18.2 million was attributable to an increase of 45,067 occupied room nights and
the ongoing addition of new up-to-date slot machines. The increase in slot
revenue was partially offset by a decrease in table game revenues.
Operating income increased by 2.7%, or $200,000, to $7.2 million from $7.0
million. The $3.6 million increase in revenues was offset by an increase in
operating expenses of $3.4 million, or 4.4%. Selling, general and
administrative expenses increased 13.9%, or $1.5 million, primarily due to
increased payroll costs and promotional expenses.
LIQUIDITY AND CAPITAL RESOURCES; TRENDS AND FACTORS RELEVANT TO FUTURE
OPERATIONS
The Company sold substantially all of the assets of the Hacienda for $80
million and the Sahara for $150 million, in August 1995 and in October 1995,
respectively. The transactions resulted in aggregate cash proceeds to the
Company of $208 million and receipt by the Company of a parcel of real property
valued for purposes of the transaction at approximately $22 million. The
Company utilized approximately $170 million of the cash proceeds to retire
approximately $174 million principal amount of indebtedness. Additionally, the
Comapny contributed $15 million of the aggregate cash proceeds to Pioneer Inc.
and used $8 million to pay costs to close the transaction. (See Liquidity -
Pioneer for further discussion of restricted uses). The balance of cash proceeds
of approximately $15 million was added to general working capital.
The Company's earnings before interest, taxes, depreciation and amortization
("EBITDA") were $38.8 million for the year ended September 30, 1995, including a
$8.9 million gain from the sale of the Hacienda and a $14.9 million charge
against earnings due to the write down of development costs related to
Parkville. Excluding the gain and write down, EBITDA was $44.8
25
million for the twelve month period, as compared to $59.7 million for the prior
year period. The Company expects EBITDA in future periods to be reduced due to
the sale of the Hacienda and Sahara, which contributed $17.9 million in the
aggregate to fiscal 1995 EBITDA, exclusive of the gain on sale of Hacienda.
EBITDA is presented to enhance the understanding of the financial performance of
the Company and its ability to service its indebtedness, but should not be
construed as an alternative to operating income (as determined in accordance
with generally accepted accounting principles) as an indicator of the Company's
operating performance, or to cash flows from operating activities (as determined
in accordance with generally accepted accounting principles) as a measure of
liquidity.
The Company historically generated sufficient cash liquidity from operations
to finance operations, meet existing debt service obligations, complete capital
improvements, maintain existing facilities, and provide working capital to the
Company. However, indenture restrictions on Santa Fe Inc. and Pioneer Inc.
restrict the distribution of cash to the Company, and cash flow of these
subsidiaries is not currently, and is not expected in the foreseeable future to
be, available for distribution to the Company. Therefore, the Company and its
subsidiaries other than Pioneer Inc. and Santa Fe Inc. (collectively
"Corporate") must rely on existing cash resources to provide liquidity to fund
cash requirements of the parent company.
Liquidity - Corporate - Excluding assets under agreement for sale,
---------------------
approximately $39.7 million of the Company's current assets at September 30,
1995, including approximately $30.4 million of cash and short-term investments,
was held by Corporate. Excluding the assets and the debt due upon sale, both
classified as current as of September 30, 1995, Corporate had working capital of
approximately $29.7 million at September 30, 1995.
Corporate's principal uses of cash are to satisfy the debt service payments
on the 10-1/4% Subordinated Debentures due 1998 and on a note payable to Sierra
Construction due 1998. In addition, Corporate expects to incur costs in
connection with evaluation and development of proposed projects and for
professional services rendered to the parent company. The Company has in the
past and expects in fiscal 1996 to satisfy the semi-annual dividend payments on
its preferred stock through the issuance of paid-in-kind dividends. Commencing
in fiscal 1997, dividends paid on the preferred stock, to the extent declared,
must be paid in cash. In the event not declared, dividends would accrue on the
preferred stock. The Company is party to indentures and other financing
arrangements that restrict the Company's ability to declare and pay dividends or
make distributions with respect to the Company's capital stock which would
prohibit the payment of cash dividends on the preferred stock.
On October 2, 1995, the Company sold substantially all the assets of the
Sahara for $128 million in cash and exchanged 22 acres of land, a portion of
which was utilized by the Sahara as a parking lot, for 27 acres of land just
south of the Sahara on Las Vegas Boulevard, on which a water theme park
currently operates. The Company utilized approximately $122 million in proceeds
to repurchase and to retire and defease indebtedness of approximately $115
million secured by the Sahara assets and to pay costs to close the transaction,
including approximately $6 million incurred to defease the 12 1/8% First
Mortgage Notes due August 1996. The net proceeds of $6 million was added to
general working capital. The Company expects to record a pre-tax gain of
approximately $40 million on the sale of substantially all of the assets of
Sahara in the first quarter of fiscal 1996.
26
In connection with the acquisition of the 27 Acre Parcel, the Company
assumed the operating lease under which a water theme park operates. The lease
may be terminated by the Company at any time after December 1996. The Company
has guaranteed payments by the tenant of a loan to the prior owner of the
property ("tenant loan") and has agreed to pay the loan in full in certain
situations, including in the event the lease is terminated for any reason prior
to its scheduled termination date of 2004. The tenant loan, which is amortized
through monthly principal and interest payments through December 2004, had an
outstanding balance of $6.2 million as of September 30, 1995. Under the terms of
the lease, as amended, the water-theme park remits a base rent of approximately
$16,000 monthly plus an annual rent payment based on gross receipts.
The Company has agreed to grant a security interest in the 27 Acre Parcel
for the benefit of the holders of the 13-1/2% Notes to secure a contingent
obligation of the Company to contribute or loan $10 million to Pioneer Inc. The
security interest will be released in the event of such a contribution or loan.
In November 1995, the Company sold the Spirit of America barge vessel
("Spirit") for $3.3 million in cash. The Spirit was acquired in connection with
the Company's proposed development of a casino entertainment complex in
Parkville, Missouri. Net proceeds of $3.2 million from this sale were added to
general working capital.
In November 1995, the Company contributed $15 million in cash to the
Pioneer, pursuant to an agreement reached with holders of 13-1/2% Notes, in
which the holders of 13-1/2% Notes consented to the sale of the Hacienda and
Sahara.
In December 1995, the Company acquired in the market $2.3 million principal
amount of 11% First Mortgage Notes due 2000 ("11% Notes") and $2.6 million
principal amount of 10-1/4% Subordinated Debentures. The Company expects to
record an after-tax extraordinary gain of approximately $435,000 from the
retirement of 11% Notes in the first quarter of fiscal 1996.
In November 1995, the Company filed an amended plan of reorganization (the
"Plan") for Treasure Bay Gaming and Resorts ("Debtor") in United States
bankruptcy court ("Court") in the Southern District of Mississippi. The
Company's plan of reorganization for Treasure Bay contemplates that, subject to
various conditions, the various classes of secured and unsecured creditors of
the debtor agree to accept modifications to, and reductions in outstanding
amounts of, Treasure Bay's outstanding obligations and the Company would make a
cash equity contribution to acquire 100% of the equity interests in Treasure
Bay. Any plan must be approved by the bankruptcy court, and no assurance can be
given that the Company's plan of reorganization will be approved, that the
various classes of creditors would agree to the plan or that the Company would
elect to proceed with the plan. Additionally, any plan of reorganization may be
amended, resulting in changes to the amount and terms of debt of the reorganized
debtor and equity ownership acquired. The Company is incurring and expects to
continue to incur professional expenses and other expenses associated with legal
proceedings involving Treasure Bay and the Company's investment in Treasure Bay.
In the event that cash resources at the Santa Fe or Pioneer are insufficient
to meet operating or debt service requirements, Corporate may be required to
make contributions or loans to either the Santa Fe or Pioneer to prevent an
event of default under debt instruments to which Santa Fe Inc. or Pioneer Inc.
is a party. Additionally, the Company may purchase 11% Notes, 13-1/2% Notes
27
and 10-1/4% Subordinated Debentures from time to time in the market and in
privately negotiated transactions or refinance existing indebtedness in order to
reduce outstanding indebtedness and debt service obligations.
Liquidity - Santa Fe - The indenture under which the 11% First Mortgage Notes
--------------------
due 2000 ("11% Notes") were issued contains restrictions on payments to and
investments in affiliates by Santa Fe Inc., including the Company. As a result
of these restrictions, all of the cash flow generated from operations by Santa
Fe Inc. is not currently, and is not expected in the foreseeable future to be,
available for distribution to the Company. Approximately $11.6 million of the
Company's current assets, including approximately $9.3 million of cash and short
term investments, was held by Santa Fe Inc. at September 30, 1995.
Results of operations at the Santa Fe for the twelve months ended September
30, 1995, excluding the $14.9 million charge against earnings to write down
development costs regarding Parkville, generated EBITDA of $17.5 million,
approximately 1.25 times interest expense during the same period compared to
$22.3 million of EBITDA in 1994 or approximately 1.95 times interest expenses.
During the three-month period ended September 30, 1995, the Santa Fe reported
EBITDA of $2.6 million compared to $5.2 million in the same period last year.
Santa Fe Inc.'s principal uses of funds generated from operations are for
interest payments on indebtedness and capital expenditures to maintain the
facility. Interest expense for the years ended September 30, 1995 and 1994 was
$14.0 million and $11.4 million, respectively. Interest expense attributable to
the 11% Notes is expected to increase in fiscal 1996 as a result of the
repurchase offer completed in August 1995 in which Santa Fe Inc. repurchased
$21.5 million principal amount of 11% Notes. Interest cost which were previously
capitalized in connection with the development of the proposed project in
Parkville, Missouri will be expensed in the future. (See Results of Operations -
Revenues; Operating Expenses) Capital expenditures for the years ended September
30, 1995 and 1994 were $15.8 million and $5.5 million, respectively. Management
believes capital expenditures to maintain the facility will be less than that
expended in the year ended September 30, 1995, in which expansion projects were
undertaken. (See Capital Expenditures below)
Management believes that, based on current operations and available
resources, barring unforeseen circumstances, Santa Fe Inc. will have sufficient
cash resources to meet its operating requirements and debt service requirements
through the twelve month period ending September 30, 1996, although no assurance
can be given to that effect. However, in the event Santa Fe Inc. is unable to
meet debt service payments through current operations and available resources,
Santa Fe will explore financing alternatives, including but not limited to
refinancing or modification of existing indebtedness, and the incurrence of
additional permitted indebtedness.
Liquidity - Pioneer - The indenture under which the 13-1/2% Notes were issued
-------------------
contain restrictions on payments to and investments in affiliates by Pioneer
Inc., including to the Company. As a result of these restrictions, all of the
cash flow generated by Pioneer Inc. is not currently, and is not expected in the
foreseeable future to be, available for distribution to the Company.
Approximately $5.6 million of the Company's current assets, including
approximately $3.0 million of cash and short term investments, was held by
Pioneer Inc. at September 30, 1995.
28
In November 1995, the Company made an equity contribution of $15 million in
cash to Pioneer Inc., in accordance with terms of an agreement reached with
holders of the 13-1/2% Notes pursuant to which the holders of the 13-1/2%
Notes consented to the sale of the Hacienda and Sahara. Such funds are
restricted in use for debt service on the 13-1/2% Notes, repurchase of 13-1/2%
Notes, capital expenditures at the Pioneer, and, with respect to $10 million,
contribution to capital to a wholly-owned subsidiary of Pioneer Inc. that owns
the real property in Henderson, Nevada. In December 1995, the Pioneer used $3
million of such funds together with cash on hand to make the December 1, 1995
semi-annual interest payment of $5.6 million on the 13-1/2% Notes. The Company
has also agreed to contribute up to an additional $10 million to Pioneer Inc. in
the event that the 27 acre parcel on Las Vegas Boulevard is sold or Pioneer is
unable to make principal payments when due on the 13-1/2% Notes. Such
obligation will be reduced dollar for dollar to the extent the Company and its
affiliates loans or contributes up to $10 million to Pioneer Inc.
Results from operations at the Pioneer for the twelve months ended September
30, 1995 generated EBITDA of $10.7 million, approximately .78 times interest
expense during the same period, compared with $14.5 million of EBITDA in fiscal
1994 or approximately 1.04 times interest expense. During the three month period
ended September 30, 1995, EBITDA was $2.0 million, compared with $2.4 million of
EBITDA in the same period in fiscal 1994.
Pioneer Inc.'s principal uses of funds are for interest payments on
indebtedness and capital expenditures to maintain the facility. Interest
expense for the years ended September 30, 1995 and 1994 was $13.8 million and
$13.9 million, respectively. Interest expense attributable to the 13-1/2% Notes
is expected to decrease as a result of the retirement of $20 million principal
amount of 13-1/2% Notes in September 1995. (See Results of Operations-Pioneer).
Capital expenditures for the year ended September 30, 1995 and 1994 were $4.0
million and $1.7 million, respectively. Management believes capital expenditures
to maintain the facility will be less than that expended in the year ended
September 30, 1995, in which an expansion project was undertaken. (See Capital
Expenditures below).
Management believes that, based on current operations and available
resources, including the $15 million cash contribution discussed above and
taking into account the retirement of $20 million in principal amount of 13-1/2%
Notes in September 1995, barring unforeseen circumstances, the Pioneer will have
sufficient cash resources to meet its operating requirements and debt service
requirements through the 12 months ending September 30, 1996, although no
assurance can be given to that effect. In the event Pioneer Inc. is unable to
meet debt service payments through current operations and available resources,
Pioneer Inc. will explore financing alternatives, including but not limited to
refinancing or modification of existing indebtedness, and the incurrence of
additional permitted indebtedness.
Capital Expenditures - In December 1994, the Company completed construction of
--------------------
an expansion at the Santa Fe. The cost of construction and equipment was
approximately $14.4 million. During the year period ended September 30, 1995,
the Company recorded approximately $12.0 million in construction costs
associated with the expansion of the Santa Fe.
In December 1994, the Company completed construction of an expansion of the
Pioneer. The cost of construction and equipment was approximately $4.1 million.
During the year ended
29
September 30, 1995, the Company recorded approximately $2.2 million in
construction costs associated with the expansion of the Pioneer.
In September 1995, the Company acquired 40 acres of undeveloped real
property located approximately eight miles south of the Hacienda for $2.4
million. If the Company does not consummate the sale of the Camperland assets
and liabilities, it expects to use the property to relocate the Camperland
operations.
Debt Obligations - In December 1995, the Company acquired $2.6 million
----------------
principal amount of 10-1/4% Subordinated Debentures due 1998 in full
satisfaction of the June 1996 sinking fund obligation and in partial
satisfaction of the June 1997 sinking fund obligation.
Excluding the 10-1/4% Subordinated Debenture 1996 and 1997 sinking fund
payments that have been satisfied above and the $115.0 million principal amount
of 12-1/8% Notes retired and defeased in October 1995 in connection with the
sale of the Sahara, during fiscal 1996 and 1997, scheduled maturities of long-
term debt (excluding capital leases) due to third parties are $3.5 million and
$4.3 million respectively, representing primarily principal amortization
payments under notes payable and capital leases. During fiscal 1996 and 1997,
$2.1 million and $1.7 million of the scheduled maturities are applicable to the
Santa Fe and $700,000 and $300,000 are applicable to the Pioneer Inc.,
respectively. In addition, the Santa Fe has an $8 million note payable to an
affiliate which matures in August 1996.
Additionally, approximately $29.1 million of long-term debt (excluding
capital leases) is scheduled to mature during fiscal 1998 representing primarily
$22.75 million sinking fund payment due on the 13-1/2% Notes in December 1997
and $5.5 million maturity in June 1998 of the 10-1/4% Subordinated Debentures.
Although management has in the past and is currently exploring refinancing
alternatives, as well as possible dispositions of certain assets, in order to
satisfy long-term debt obligations as they become due, no assurance can be given
that the Company will be able to refinance some or all of its indebtedness or
dispose of any assets. Any such refinancing would be subject to the Company's
future operations and the prevailing market conditions at the time of such
proposed refinancing and would require the approval of the Nevada Gaming
Authorities and potentially other state gaming authorities. If the Company is
ultimately unable to refinance such debt prior to maturity, and/or obtain
sufficient proceeds from asset dispositions to repay the debt, and if the
holders of the various debt instruments were to demand payment upon the maturity
dates, events of default would occur which would lead to cross-defaults in other
material agreements of the Company including, without limitations, agreements
relating to substantially all of the outstanding long-term debt of the Company
and its subsidiaries.
Related Parties LICO, a company wholly-owned by Mr. Lowden, Chairman of the
---------------
Board, Chief Executive Officers and 52% stockholder of the Company, borrowed
$476,000 from Hacienda Inc., pursuant to an unsecured demand loan which bears
interest at 2% over the prime rate. The
30
outstanding balance of the loan including accrued interest was $545,000 as of
September 30, 1995.
As of September 30, 1993, Mr. Lowden had borrowed an aggregate of $1.9
million from the Company. The unsecured demand loans were evidenced by
promissory notes and accrued interest at a rate equal to 2% over the prime rate.
On January 4, 1994, Mr. Lowden repaid the loans from the Company in full,
together with accrued interest.
In November 1993, Mr. Lowden and Bank of America entered into a personal
loan agreement whereby the principal balance of the loan is amortized through
quarterly principal payments through April 1998, with any remaining principal
balance due July 31, 1998. In addition, in July 1995, Mr. Lowden prepaid $1
million principal amount of the loan. The loan principal balance was
approximately $3,177,417 as of November 30, 1995. The loan is secured by
substantially all of the common stock of the Company owned by Mr. Lowden (the
"Pledged Shares"). Mr. Lowden's loan agreement provides that in the event the
market value of the Pledged Shares is less than three times the outstanding loan
balance, the bank, at its sole option, may require either an immediate reduction
in the outstanding balance or the pledging of additional collateral acceptable
to the bank such that the value of the pledged collateral is at least three
times the outstanding loan balance. As of December 26, 1995, the market value
of the pledged shares was less than three times the outstanding loan balance.
Mr. Lowden and the bank are in discussions regarding the collateral supporting
the loan. In an event of default were to occur under Mr. Lowden's personal loan
with the bank, and if the bank acquired the Pledged Shares upon foreclosure, Mr.
Lowden's ownership of the Company's outstanding common stock would be reduced to
below 50%. If Mr. Lowden ceases to own more than 50% of the outstanding shares
of the Company's common stock, an event of default would result under certain
of the Company's long-term indebtedness, which could result in cross-defaults
under substantially all of the Company's other long-term indebtedness.
Effects of Inflation
- --------------------
The Company has been generally successful in recovering costs associated
with inflation through price adjustments in its hotel and contract sales
operations. Any such increases in costs associated with casino operations and
maintenance of properties may not be completely recovered by the Company.
31
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
For the Years Ended September 30, 1995, 1994, and 1993
Page
----
Independent Auditors' Report......................................... 33
Consolidated Balance Sheets as of
September 30, 1995 and 1994..................................... 34
Consolidated Statements of Operations for the Years Ended
September 30, 1995, 1994, and 1993.............................. 35
Consolidated Statements of Stockholders' Equity for the
Years Ended September 30, 1995, 1994, and 1993.................. 36
Consolidated Statements of Cash Flows for the Years
Ended September 30, 1995, 1994, and 1993........................ 37
Notes to Consolidated Financial Statement............................ 38
Quarterly Results of Operations (Unaudited).......................... 57
Financial Statement Schedules are omitted because of the absence of conditions
under which they are required or because the information is included in the
financial statements or the notes thereto.
32
INDEPENDENT AUDITORS' REPORT
Sahara Gaming Corporation:
We have audited the accompanying consolidated balance sheets of Sahara Gaming
Corporation and subsidiaries (the "Corporation") as of September 30, 1995 and
1994, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended September 30, 1995. These financial statements are the responsibility of
the Corporation's management. Our responsibility is to express an opinion on the
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Sahara Gaming Corporation and
subsidiaries as of September 30, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1995 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
December 15, 1995
33
SAHARA GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND 1994
September 30, September 30,
ASSETS Notes 1995 1994
- ------------------------------------------ ------- ------------ -------------
Current assets:
Cash and short-term investments 2,3 $ 42,749,932 $ 55,582,503
Accounts receivable, net 5 6,189,109 7,907,050
Accounts receivable, officer 6 545,042 500,525
Inventories 2 1,776,427 2,787,397
Prepaid expenses & other 5,758,808 7,323,786
Assets under agreement for sale 7,21 98,712,541 0
------------ -------------
Total current assets 155,731,859 74,101,261
Restricted cash--less current portion 4 0 23,079,791
Property and equipment: 2,8,11,12,21,22
Land held for development 19,114,486 16,689,665
Land used in operations 29,343,886 63,442,656
Buildings and improvements 86,139,487 236,862,331
Machinery and equipment 48,166,197 103,425,500
Construction in progress 7,566,453 19,325,747
Accumulated depreciation (44,904,176) (125,275,533)
------------ -------------
Property and equipment, net 145,426,333 314,470,366
Goodwill 2,9 47,506,348 48,835,414
Deferred income taxes 2,15 5,663,665 0
Other assets 12,309,796 18,068,605
------------ -------------
Total assets $366,638,001 $ 478,555,437
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------
Current liabilities:
Current portion of long-term debt 11,12,18,21,22 $ 6,234,550 $ 23,238,239
Accounts payable 7,024,980 6,790,785
Interest payable 9,516,776 11,589,574
Accrued and other liabilities 15,709,850 15,970,810
Debt due upon sale of assets 10,21 114,612,680 0
------------ -------------
Total current liabilities 153,098,836 57,589,408
Deferred income taxes 2,15 0 4,945,335
Long-term debt--less current portion 11,12,18,21,22 198,655,174 379,092,885
Commitments 12,18,21,22
Stockholder's Equity: 1,13,14
Common Stock, $.01 par value; authorized--
100,000,000 shares; issued and outstanding--
6,195,356 shares 61,944 61,944
Preferred stock, exchangeable, redeemable
8% cumulative, stated at $2.14 liquidation
value, authorized--10,000,000 shares; issued
and outstanding--8,187,563 shares at
September 30, 1995 and 7,570,895 at
September 30, 1994 17,521,385 16,201,715
Additional paid-in capital 51,513,504 51,513,504
Accumulated deficit (54,125,068) (30,761,580)
------------ -------------
Total 14,971,765 37,015,583
Less treasury stock--4,875 shares, at cost (87,774) (87,774)
------------ -------------
Total stockholders' equity 14,883,991 36,927,809
------------ -------------
Total liabilities and stockholders' equity $366,638,001 $ 478,555,437
============ =============
See the accompanying Notes to Consolidated Financial Statements.
34
SAHARA GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
Notes 1995 1994 1993
----- ------------ ------------ -----------
Revenues: 2
Casino $148,740,793 $155,452,433 $151,445,265
Hotel 39,721,946 39,299,449 37,477,688
Food and beverage 30,755,268 32,240,923 31,565,670
Other 23,028,262 26,724,784 24,276,219
Gain on sale of assets 8,863,049
------------ ------------ ------------
Total revenues 251,109,318 253,717,589 244,764,842
------------ ------------ ------------
Operating expenses: 2
Casino 70,578,873 68,873,260 66,158,899
Hotel 17,316,036 18,011,909 17,720,184
Food and beverage 39,639,544 38,990,583 38,369,853
Other 9,682,434 9,845,726 10,335,397
Other expense paid to affiliate 17 3,425,007 3,549,498 2,975,994
Selling, general & administrative 31,327,009 30,424,408 26,138,735
Utilities & property expenses 25,447,749 24,344,909 23,032,492
Depreciation & amortization 9,12 28,183,806 26,704,563 23,393,465
Write-down of development costs 14,898,317
------------ ------------ ------------
Total operating expenses 240,498,775 220,744,856 208,125,019
------------ ------------ ------------
Operating income 10,610,543 32,972,733 36,639,823
Interest expense 11,12 45,017,461 43,191,261 37,832,723
Provision to reduce carrying value of
investment in Treasure Bay 18 12,579,482
------------ ------------ ------------
Net loss before income tax benefit
and extraordinary item (34,406,918) (22,798,010) (1,192,900)
Federal income tax benefit 2,15 (11,224,000) (7,059,000) (103,000)
------------ ------------ ------------
Net loss before extraordinary item (23,182,918) (15,739,010) (1,089,900)
Extraordinary item-gain on early
extinguishment of debt, net of tax
provision of $615,000 11 1,141,670
------------ ------------ ------------
Net loss (22,041,248) (15,739,010) (1,089,900)
Dividends on preferred shares 1,322,240 1,222,343
------------ ------------ ------------
Net loss applicable to common shares $(23,363,488) $(16,961,353) $ (1,089,900)
============ ============ ============
Average common shares outstanding 6,195,356 6,195,356 4,276,896
============ ============ ============
Loss per common share $ (3.77) $ (2.74) $ (0.25)
============ ============ ============
See the accompanying Notes to Consolidated Financial Statements.
35
SAHARA GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
Additional
Common Preferred Paid-in Accumulated Treasury
Stock Stock Capital Deficit Stock Total
------- ----------- ----------- ------------ --------- ------------
Balances,
September 30, 1992 $42,938 $ 0 $29,944,323 $(12,710,327) $(182,037) $ 17,094,897
Net loss (1,089,900) (1,089,900)
Treasury stock
transactions (38,575) 94,263 55,688
Purchase of minority
interest 19,006 14,980,000 21,607,771 36,606,777
------- ----------- ----------- ------------ --------- ------------
Balances,
September 30, 1993 61,944 14,980,000 51,513,519 (13,800,227) (87,774) 52,667,462
Net loss (15,739,010) (15,739,010)
Other (15) (15)
Preferred stock
dividends 1,221,715 (1,222,343) (628)
------- ----------- ----------- ------------ --------- ------------
Balances,
September 30, 1994 61,944 16,201,715 51,513,504 (30,761,580) (87,774) 36,927,809
Net loss (22,041,248) (22,041,248)
Preferred stock
dividends 1,319,670 (1,322,240) (2,570)
------- ----------- ----------- ------------ --------- ------------
Balances,
September 30, 1995 $61,944 $17,521,385 $51,513,504 $(54,125,068) $ (87,774) $ 14,883,991
======= =========== =========== ============ ========= ============
See the accompanying Notes to Consolidated Financial Statements.
36
SAHARA GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
1995 1994 1993
------------ ------------ ------------
Cash flows from operating activities:
Net loss $(22,041,248) $(15,739,010) $ (1,089,900)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization 28,183,806 26,704,563 23,393,465
Gain on sale of subsidiary assets (8,863,049) 0 0
Write-off of development costs 14,898,317 0 0
Gain on early extinguishment of debt (1,141,670) 0 0
Provision to reduce carrying value of
investments in Treasure Bay 0 12,579,482 0
Debt discount amortization 1,978,747 1,668,603 999,695
Decrease (increase) in accounts receivable,
net 1,165,053 (271,124) 1,449,876
Decrease (increase) in due from officer (44,517) 1,965,007 (730,541)
Decrease (increase) in inventories 618,836 231,177 (90,900)
Decrease (increase) in prepaid expenses
& other 1,660,547 (251,508) (1,676,729)
Decrease in deferred income taxes (11,224,000) (7,059,000) (103,000)
Increase in other assets (868,292) (247,871) (3,257,424)
Increase (decrease) in accounts payable (57,643) (811,050) 1,881,397
Increase (decrease) in interest payable (2,072,798) 5,788,676 (264,714)
Increase (decrease) in other current liabilities (4,803,102) 2,461,480 (4,706,055)
------------ ------------ ------------
Net cash provided by (used in) operating activities (2,611,013) 27,019,425 15,805,170
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sale of subsidiary assets 80,000,000 0 0
Investment in Treasure Bay 0 (10,000,000) 0
Decrease (increase) in restricted cash 22,984,222 (23,079,791) 2,872,425
Capital expenditures (27,992,380) (40,080,972) (3,780,975)
------------ ------------ ------------
Net cash provided by (used in) investing activities 74,991,842 (73,160,763) (908,550)
------------ ------------ ------------
Cash flows from financing activities:
Cash proceeds of long-term debt 1,800,000 130,000,000 4,199,190
Cash paid on long-term debt (87,013,400) (51,726,226) (12,800,158)
Loan issue cost 0 (5,727,799) 0
------------ ------------ ------------
Net cash provided by (used in) financing
activities (85,213,400) 72,545,975 (8,600,968)
------------ ------------ ------------
Increase (decrease) in cash and short-term
investments (12,832,571) 26,404,637 6,295,652
Cash and short-term investments, beginning
of year 55,582,503 29,177,866 22,882,214
------------ ------------ ------------
Cash and short-term investments, end of
year $ 42,749,932 $ 55,582,503 $ 29,177,866
============ ============ ============
See the accompanying Notes to Consolidated Financial Statements.
37
SAHARA GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
1. BASIS OF PRESENTATION AND GENERAL INFORMATION
Sahara Gaming Corporation ("Sahara Gaming"), a publicly traded Nevada
corporation, is the successor corporation to a reorganization of Sahara Resorts
and Sahara Casino Partners, L.P., (the "Partnership") as more fully described
below (the "Reorganization"). During fiscal years 1995, 1994, and 1993, Sahara
Gaming's primary business operations were conducted through four wholly owned
subsidiary corporations, Sahara Nevada Corporation ("SNC"), Hacienda Hotel Inc.,
("HHI"), Santa Fe Hotel Inc., ("SFHI") and Pioneer Hotel Inc., ("PHI") (the
"Operating Companies"). The Operating Companies in turn own the Sahara Hotel
and Casino (the "Sahara"), the Hacienda Resort Hotel and Casino (the
"Hacienda"), and the Santa Fe Hotel and Casino (the "Santa Fe"), each located in
Las Vegas, Nevada, and the Pioneer Hotel & Gambling Hall (the "Pioneer") in
Laughlin, Nevada.
The Company sold substantially all the assets of the Hacienda for $80 million
in cash in August 1995 and the Sahara for $150 million in consideration,
including $128 million in cash and real property valued for purposes of the
transaction at approximately $22 million, in October 1995.
On September 30, 1993, the Partnership and Sahara Resorts consummated a
combination of the two entities through the merger of the Partnership with an
affiliate, Sahara Gaming, and the merger of Sahara Resorts with and into a
wholly-owned subsidiary of Sahara Gaming. The Sahara Resorts merger into a
wholly-owned subsidiary of Sahara Gaming was treated as a reorganization of
companies under common control and accounted for similar to a pooling of
interests, with the accompanying financial statements being adjusted to reflect
such transaction as of the earliest period presented, October 1, 1992. The
merger of the Partnership's minority interest was accounted for by the purchase
method. See Notes 8 and 13
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Sahara Gaming and its wholly owned subsidiaries, primarily SNC, HHI, SFHI and
PHI(collectively, the "Company"). Amounts representing the Company's percentage
interest in less than majority-owned companies in which a significant equity
ownership interest is held are accounted for on the equity method. All material
inter-company accounts and transactions have been eliminated in consolidation.
See Note 18
Cash and Short-Term Investments
Investments which mature within 90 days from the date of purchase are
38
treated as cash equivalents and are included in cash and short-term
investments.
Inventories
Food, beverage, gift shop and other inventories are stated at first-in,
first-out cost, not in excess of market.
Property and Equipment
Property and equipment are stated at cost. Costs of maintenance and repairs
of property and equipment are expensed as incurred. Costs of major improvements
are capitalized; gains or losses on disposals are recognized.
Depreciation and amortization are computed by the straight-line method over
the shorter of the estimated useful lives or lease terms. The length of
depreciation and amortization periods are as follows:
Years
-----
Buildings and improvements 7-40
Machinery and equipment 3-15
Pre-Opening Expenses
All pre-opening expenses directly related to development of gaming operations
are capitalized as incurred and included in other assets and expensed within the
first year of operations.
Capitalization of Interest
Interest costs are capitalized on funds disbursed during the development
phase of projects and included in Property and Equipment and expensed within the
first year of operations.
Goodwill
The excess cost over the net assets of an acquired company is amortized
using the straight line method over a 40 year period. Management periodically
evaluates the realizability of goodwill as events and circumstances indicate a
possible inability to recover the carrying amount. See Note 9
Federal Income Taxes
Deferred income taxes are provided on timing differences between pretax
financial statement income and taxable income resulting from different methods
of depreciation and amortization.
The Company adopted SFAS No. 109, Accounting for Income Taxes, in the quarter
ended December 31, 1993. This Statement supersedes Accounting Principles Board
Opinion No. 11, Accounting for Income Taxes, previously used by the Company. The
cumulative effect of adopting the accounting change did not result in any
material operating adjustments. Certain purchase accounting adjustments were
recorded relative to deferred taxes and property as a result of adopting SFAS
No. 109. See Note 15
39
Revenue Recognition
Casino revenue is recorded as gaming wins less losses. Operating revenues do
not include the retail amount of room, food, beverage and other services
provided gratuitously to customers. The estimated cost of providing these
services has been reported in the accompanying consolidated financial statements
as an expense of each department granting complimentary services. The casino
department has recorded 80%, 79%, and 81% of total promotional allowances in
fiscal years ended September 30, 1995, 1994 and 1993, respectively. The table
below summarizes the departments costs of such services. (dollars in thousands):
1995 1994 1993
------- ------- -------
Food & Beverage $17,180 $16,125 $14,146
Hotel 3,673 3,933 3,523
Other 402 239 486
------- ------- -------
Total $21,255 $20,297 $18,155
======= ======= =======
Indirect Expenses
Certain indirect expenses of operating departments such as utilities and
property expense and depreciation and amortization are shown separately in the
accompanying consolidated statements of operations and are not allocated to
departmental operating costs and expenses.
Reclassification
Certain balances in the 1994 and 1993 financial statements have been
reclassified to conform with current year classifications.
Earnings Per Share
Net income(loss) per common share is computed by dividing net income(loss)
less the amount applicable to preferred stock, by the weighted average common
shares outstanding during the year. Fully diluted earnings per common and
common equivalent share are not presented since dilution is less than 3%.
Financial Accounting Standard Board
In March 1995, the Financial Accounting Standard Board ("FASB") issued
Statement No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of". The Statement requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Statement No. 121 is effective for fiscal years
beginning after December 15, 1995. Management has not determined what effect, if
any, adoption of the Statement will have on the Company's future operations or
financial condition.
In October 1995, the FASB issued Statement No. 123 "Accounting for Stock-
Based Compensation" which establishes financial accounting and reporting
standards for stock-based employee compensation plans and for transactions in
which an entity issues its equity instruments to acquire goods or services from
nonemployees. Statement No. 123 is generally effective for fiscal years
beginning after December 15, 1995. Management has not determined what effect,
if any,
40
adoption of the Statement will have on the Company's future operations or
financial condition.
Fair Value of Financial Instruments
The Company estimates the fair value of its Long Term Debt and Preferred
Stock to be $156 million and $5.6 million at September 30, 1995 based upon
available market prices. The Company estimates that all other financial
instruments have a fair value which approximates their recorded value.
3. CASH AND SHORT-TERM INVESTMENTS
At September 30, 1995, approximately $9.3 million of the Company's
consolidated cash and short term investments was held by SFHI and was subject to
certain restrictions and limitations on its use, including restrictions on its
availability for distribution to the Company, by the terms of an indenture
pursuant to which $115 million principal amount of 11% First Mortgage Notes due
2000 ("11% Notes") of SFHI were issued. In fiscal 1994, SFHI distributed
$700,000 to the Company. As of September 30, 1995, SFHI did not meet the
conditions precedent to making distribution to the Company.
At September 30, 1995, approximately $3.0 million of the Company's
consolidated cash and short-term investments was held by PHI and was subject to
certain restrictions, including restrictions on its availability for
distribution to the Company, by the terms of an indenture pursuant to which the
13-1/2% First Mortgage Notes due 1998 ("13-1/2% Notes")of Pioneer Finance Corp.
were issued, the proceeds of which were loaned to PHI. PHI distributed $2.6
million in fiscal 1993 to the Company and its subsidiaries and affiliates
pursuant to the terms of the indenture. As of September 30, 1995, PHI did not
meet the conditions precedent to making a distribution to the Company.
Pursuant to the Third Supplemental Indenture relating to the 13-1/2% Notes,
the Company, within 60 days of the sale of the Sahara is required to contribute
$15 million in cash to PHI. Such funds are restricted in use to repurchase of
13-1/2% Notes, debt service on 13-1/2% Notes, capital expenditures at the
Pioneer, and with respect to $10 million, contributions to capital to a wholly-
owned subsidiary of Pioneer Inc. which owns the real property in Henderson,
Nevada. See Notes 7, 10 and 21
In June 1995, SFHI repaid in full an $18 million affiliate note owed to SNC.
SNC then loaned $8 million to SFHI pursuant to a new affiliate note on
substantially the same terms and conditions as the original affiliate note. As
of September 30, 1995, approximately $10 million, reflecting the net balance of
the repayment of the original SFHI affiliate note, was held at SNC and was
restricted in use pursuant to an indenture to which $116.2 million
principal amount of 12-1/8% First Mortgage Notes due August 1996 ("12-1/8%
Notes") of Sahara Finance Corp. were issued. See Note 21
4. RESTRICTED CASH
Sahara Parkville, Inc., an indirect wholly-owned subsidiary of the Company
("Parkville Inc."), borrowed from SFHI $32.0 million of proceeds from the
offering by SFHI of the 11% Notes. The proceeds were placed in a collateral
account and restricted for use in connection with the development and
construction of a proposed dockside riverboat gaming facility in Parkville,
Missouri. In August 1995, in accordance with the indenture governing the 11%
Notes, SFHI consummated an offer to repurchase $21.5 million principal amount of
11% Notes, representing that principal amount of 11% Notes that were purchased
with funds remaining in the Parkville collateral account, and received upon
liquidation of the Parkville assets. In satisfaction of the obligation to
liquidate the Parkville assets, the Company acquired the Parkville assets from
SFHI for $2.99 million, which the Company and SFHI believe
41
to be the fair market value of such assets. See Notes 8 and 11
Approximately $18.5 million remained in the collateral account from the $32.0
million dedicated to the Parkville development. Approximately $6.1 million had
been used in connection with the purchase of a riverboat for the site and
approximately $7.4 million had been spent in connection with other expenses
including interim interest.
5. ACCOUNTS RECEIVABLE, NET
Accounts receivable at September 30, 1995 and 1994 consisted of the
following:
1995 1994
----------- -----------
Casino and hotel $ 5,817,793 $ 8,502,265
Other 2,689,018 2,943,424
----------- -----------
Sub-total 8,506,811 11,445,689
Less allowance for
doubtful accounts 2,317,702 3,538,639
----------- -----------
Total $ 6,189,109 $ 7,907,050
=========== ===========
Changes in the allowance for doubtful accounts for the years ended
September 30, 1995, 1994 and 1993 were as follows:
1995 1994 1993
----------- ----------- -----------
Balance, beginning of year $ 3,538,639 $ 3,477,663 $ 5,175,229
Provision 634,938 348,534 645,095
Accounts written-off (1,855,875) (287,558) (2,342,661)
----------- ----------- -----------
Balance, end of year $ 2,317,702 $ 3,538,639 $ 3,477,663
=========== =========== ===========
6. ACCOUNTS RECEIVABLE, OFFICER
As of September 30, 1995 and 1994, included in Accounts Receivable, Officer
is an unsecured demand loan in the principal amount of $476,000, which, together
with accrued interest, totaled $545,000 and $501,000, respectively, from HHI to
LICO, a company wholly-owned by Paul W. Lowden, Chairman of the Board, Chief
Executive Officer and 52% stockholder of the Company. The loan from HHI to LICO
bears interest at the rate equal to 2% over the prime rate. See Note 17
7. ASSETS UNDER AGREEMENT FOR SALE
In May 1995, the Company entered into an agreement to sell substantially all
of the assets of the Sahara for $128 million in cash and to exchange 22 acres of
land, a portion of which was utilized by the Sahara as a parking lot, for 27
acres of land just south of the Sahara on Las Vegas Boulevard, currently
occupied by a water theme park. At September 30, 1995, the properties, and
equipment relating to those assets subject to the agreement have been classified
as current assets on the consolidated balance sheet. On October 2, 1995, the
Company completed the sale. See Note 10 and 21
8. PROPERTY AND EQUIPMENT, NET
In August 1995, the Company sold substantially all of the assets of the
42
Hacienda for $80 million in an all cash transaction. The Company recorded a
pre-tax gain from the sale of the Hacienda of $8.9 million. The gain represents
the $80 million sale price offset by the carrying value of the assets sold
($67.1 million), and an estimated cost to relocate the Camperland operation ($4
million). See Note 22
In September 1995, the Company acquired a 40 acre parcel of real estate
located approximately eight miles south of the Hacienda on Las Vegas Boulevard
for $2.4 million. It is the Company's intention to relocate Camperland
operations to this site, in the event an agreement to sell Camperland operations
is not consummated. See Note 22
In March 1994, the Company, through a wholly-owned subsidiary, purchased for
approximately $15.1 million a 39-acre parcel of land located in southeast Las
Vegas, for future development of a proposed casino hotel complex. The purchase
was financed with the proceeds from a private placement of $15 million principal
amount of 12% First Mortgage Notes due 1995 ("12% Notes"). In September 1995,
from proceeds of the sale of the Hacienda, the Company repaid the 12% Notes. As
of September 30, 1995, in addition to costs to acquire the property, the Company
had recorded approximately $1.8 million in preliminary engineering and
development costs and $2.8 million representing capitalized interest. See Note
11
In June 1995, the Company recorded a $14.9 million pre-tax charge against
income in connection with its development of a proposed dockside riverboat
gaming facility in Parkville, Missouri. As of June 30, 1995, the Company had
incurred $16.9 million in connection with the development of the proposed
Parkville project. Of this amount, approximately $8.0 million was used to
purchase a riverboat for the site, approximately $3.7 million represents
preliminary engineering and development expenses and approximately $5.2 million
represents capitalized interest costs. See Note 4 and 11
In December 1994, the Company completed construction of an expansion of the
Santa Fe, including the addition of three theme restaurants, approximately 300
new slot machines, a dedicated bingo room, race book, and other public areas.
The cost of construction and equipment was approximately $14.4 million. During
the year ended September 30, 1995, approximately $12.0 million in costs
associated with the expansion had been capitalized. The expansion was financed
through working capital and equipment financing.
In May 1994, the Company acquired an additional four-acre tract adjacent to
the Santa Fe. The entire purchase price of $980,000 was paid in cash. In
November 1993, the Company acquired a 22-acre tract of property located next to
the Santa Fe. The Company acquired this property for $1.6 million of which
amount $850,000 is payable pursuant to a note due November 1996. The balance of
the purchase price was paid in cash.
In December 1994, the Company completed construction of an expansion of the
Pioneer, including the addition of casino space, the addition of a special
events area and increased administrative and support areas. The cost of
construction and equipment was approximately $4.1 million. During the year
ended September 30, 1995, approximately $2.2 million in costs associated with
the expansion had been capitalized. The expansion was financed through working
capital and equipment financing.
43
In the Reorganization, the acquisition through merger of the Partnership's
minority interest was accounted for by the purchase method. Accordingly, the
Company recorded a step-up in the basis of the Partnership assets of $38.5
million, Preferred Stock of $15.0 million, Common Stock of $15,217 and
Additional Paid-In Capital of $21.6 million. Costs of approximately $1.7
million associated with the transaction were offset against the increase in
Additional Paid-In Capital. The $38.5 million step-up in basis has been
allocated to land, machinery and equipment, and buildings and improvements
based on appraisals and managements' assessment of the fair values of the
Partnership's assets.
9. GOODWILL AND INTANGIBLE ASSETS
Goodwill is net of accumulated amortization of $9.1 million and $7.8 million
at September 30, 1995 and 1994, respectively. Amortization was $1.4 million in
1995, $1.5 million in 1994 and $1.4 million in 1993.
10. DEBT DUE UPON SALE OF ASSETS
In October 1995 the sale of substantially all of the assets of the Sahara was
consummated. Approximately $121 million cash proceeds from the sale were used to
fund the cost of the Company's retirement and defeasance of the 12-1/8% Notes.
See Note 21
The 12-1/8% First Mortgage Notes due August 1996 ("12-1/8 Notes") were issued
by Sahara Finance Corp., a wholly-owned subsidiary of the Company, were
guarantied by the Company, and were secured by a first deed of trust on the
Sahara Hotel and unsecured affiliates notes totaling $40 million. The 12-1/8%
Notes, effective rate of 12-1/4%, had monthly principal and interest payments of
$1,206,440 and matured on September 1, 1996. The 12-1/8% Notes did not have a
call provision prior to maturity. At September 30, 1995 the 12-1/8% Notes had an
outstanding balance of $114.6 million.
An affiliate note issued pursuant to the 12-1/8% Note indenture in the
principal amounts of $32 million by HHI in favor of SNC, matured upon the sale
of the Hacienda in August 1995. In September 1995, from the proceeds of the sale
of the Hacienda, HHI repaid SNC the $32 million affiliate note. SNC used all of
the $32 million received upon repayment of the Hacienda affiliate note to make a
loan on substantially the same terms and conditions to wholly-owned subsidiary
of the Company for the purpose of consummating the purchase of $20 million
principal amount of 13-1/2% Notes and repaying the $16.8 million principal
amount of 12% Notes. See Notes 11 and 21.
11. LONG-TERM DEBT
Long-term debt, net of unamortized discount, at September 30, 1995 and 1994
consisted of the following:
44
1995 1994
------------ -----------
11% First Mortgage Notes,
("11% Notes") due 2000
Effective Rate - 12.46% $ 97,840,906 $116,232,141
13-1/2% First Mortgage Notes,
("13-1/2% Notes") due 1998 82,750,000 102,750,000
10-1/4% Subordinated Sinking
Fund Debentures ("10-1/4%
Debentures"), due 1998
Effective Rate 16.9% 10,044,751 11,593,111
Note payable to Sierra Construct-
tion Corp., due 1998; interest
at prime plus 2% 6,020,117 6,070,277
Other notes payable, collater-
alized primarily by equipment 7,057,141 11,049,388
Obligations under capital leases 1,176,809 2,428,515
12-1/8% First Mortgage Notes,
("12-1/8% Notes") due 1996 0 114,974,276
11.875% Note payable to the
Public Employees' Retirement
System of Nevada ("PERS") due 1995 0 22,233,416
12% Convertible Mortgage Notes
("12% Notes") due September 1995 0 15,000,000
------------ ------------
Subtotal 204,889,724 402,331,124
Less current portion 6,234,550 23,238,239
------------ ------------
Total long-term Debt $198,655,174 $379,092,885
============ ============
The scheduled maturities of long-term debt (excluding capital leases) for the
year ending September 30 are as follows:
1996 5,748,711
1997 4,671,919
1998 29,091,570
1999 65,357,451
2000 450,288
Thereafter 98,392,976
------------
Total $203,712,915
============
The 11% Notes are secured by, among other things, a first priority deed of
trust on the Santa Fe, pledge of the capital stock of Sahara Parkville, Inc.,
and pledge of SFHI's equity interest in Treasure Bay. The 11% Notes are
guarantied by the Company. Interest is payable semi-annually on June 15 and
December 15, at the rate of 11% per annum. On December 29, 1993, SFHI
consummated a public offering (the
45
"Offering") of 11,500 units, with each unit consisting of $10,000 principal of
the 11% Notes and one warrant to acquire, for no additional consideration, an
additional $1,000 principal amount of the 11% Notes upon exercise no later than
December 15, 1996. Assuming all warrants were exercised on December 15, 1996,
the total principal amount of 11% Notes to be paid at maturity would have been
$126.5 million and the effective rate of interest per annum for the 11% Notes to
maturity would have been 12.46%. SFHI is subject to certain covenants under the
indenture in which the 11% Notes were issued including, among other things,
restrictions on the incurrence of additional debt and making any loan or any
distribution or dividends to any affiliate of the Company.
In August 1995, in accordance with the indenture governing the 11% Notes,
SFHI completed an offer to repurchase for cash $21.5 million principal amount of
11% Notes at a price of $1.010 per 1,000 principal amount, plus accrued
interest, representing that principal amount that could be purchased with funds
remaining in the Parkville collateral account dedicated to use in the
development of a proposed dockside riverboat casino and received upon
liquidation of the Parkville assets. The repurchase offer was required to be
made because the proposed casino in Parkville, Missouri that SFHI intended to
develop was not operating by June 30, 1995. As a result of the commencement of
the Repurchase Offer, warrants to acquire $11.5 million principal amount 11%
Notes were exercised resulting in $126.5 million principal amount of
11% Notes outstanding prior to consummation of the Repurchase Offer. As of
September 30, 1995, $105.0 million principal amount of 11% Notes remain
outstanding, and are reported net of unamortized debt discount of $7.2 million
in the consolidated balance sheet. The Company recorded an extraordinary charge
to earnings in the amount of approximately $2.6 million, less income tax benefit
of $890,000, related to debt premium payments, debt issue costs and debt
discount in connection with the repurchase offer. See Notes 4 and 8
The 13-1/2% Notes are secured by a first deed of trust on the Pioneer and
were issued by Pioneer Finance Corp., a wholly-owned subsidiary of the Company.
The 13-1/2% Notes are guarantied by the Company. Interest is payable semi-
annually on June 1 and December 1 at a rate of 13-1/2% per annum. PHI is
subject to certain conditions under the indenture under which the 13-1/2% Notes
were issued, including, without limitation restrictions on the incurrence of
additional debt and the making of any loans or distributions or dividends to
affiliates of the Company.
In September 1995, from the proceeds of the sale of the Hacienda, the Company
acquired $20 million principal amount of 13-1/2% Notes. The Company recorded a
extraordinary gain of $4.3 million less income tax charge of $1.5 million. The
$20.0 million principal amount of the 13-1/2% Notes acquired were submitted to
the trustee for cancellation and in satisfaction in full of the Company's
remaining $12.75 million sinking fund payment due in December 1996 and reduced
the December 1997 sinking fund obligation to $22.75 million. The remaining
balance of the 13-1/2 Notes, $60 million principal amount, is due in December
1998.
The 10-1/4% Debentures have an effective interest rate of 16.9%, payable
semi-annually, and a principal balance of $11.4 million and $13.5 million less
unamortized discount of $1.3 million and $1.9 million on September 30, 1995 and
1994, respectively; the 10-1/4% Debentures have an annual sinking fund payment
obligation of $2.3 million. The 10-1/4% Debentures restrict the purchase of the
Company's capital stock and payment of cash dividends on any of the Company's
capital stock to the extent of the aggregate consolidated net income of the
Company from September 30, 1982 to the end of the most recent fiscal quarter
preceding the date of declaration of the dividend. As of September 30, 1995, the
Company had a cumulative consolidated net loss of $59.5 million since October 1,
1982. See Note 13
The note payable to Sierra Construction Corp. bears interest at prime plus
46
2% (10.75% at September 30, 1995); payable in monthly installments of principal
and interest of $80,099 commencing December 1993. The balance is due in December
1998.
On December 7, 1994, SFHI borrowed $3.0 million pursuant to a working capital
loan agreement. The loan, which bears interest at an annual rate of 11%, is
guarantied by the Company. The loan is payable through principal and interest
payments on a monthly basis through December 1, 1996.
In August 1995, the sale of substantially all of the assets of the Hacienda
was consummated. Proceeds from the sale were used, in part, to repay a $22
million note secured by a first deed of trust ("PERS Note") on the Hacienda.
On March 31, 1994, a wholly-owned subsidiary of the Company issued $15.0
million principal amount 12% First Mortgage Notes guaranteed by the Company and
HHI ("12% Notes") and secured by, among other things, a first priority lien on a
39 acre parcel of real property located in Henderson, Nevada. The 12% Notes
were repaid from proceeds upon consummation of the sale of substantially all of
the assets of the Hacienda. See Notes 8 and 10
12. LEASES
All non-cancelable leases have been classified as capital or operating
leases. At September 30, 1995, the Company had leases for personal and real
property which expire in various years to 2078. Under most leasing
arrangements, the Company pays the taxes, insurance and the operating expenses
related to the leased property.
At September 30, 1995 and 1994 equipment leased under capital leases are
recorded in the Consolidated Balance Sheet as follows :
September 30
----------------------
1995 1994
---------- ----------
Equipment $5,463,000 $6,069,000
Less accumulated
amortization 4,154,000 3,132,000
---------- ----------
Total $1,309,000 $2,937,000
========== ==========
Amortization of assets leased under capital leases is included in
depreciation and amortization expense in the Consolidated Statements of
Operations.
Future minimum lease payments as of September 30, 1995 are as follows:
Capital Operating
---------- -----------
1996 $ 605,115 $ 673,940
1997 476,089 663,440
1998 293,257 663,440
1999 -0- 663,440
2000 -0- 663,440
Thereafter -0- 51,140,179
---------- -----------
1,374,461 $54,467,879
===========
Less amount representing
interest 197,652
----------
Present value of minimum
lease payments $1,176,809
==========
47
Included in future operating minimum lease payments are rental costs
associated with the real property under the lease at the Pioneer. Approximately
6-1/2 acres of the Pioneer property are subject to a 99 year ground lease,
expiring in December 2078. Under the ground lease the Company is subject to an
annual rental obligation of $663,000 per year, adjusted annually based on the
Consumer Price Index. Additionally, every ten years beginning January 1, 2004,
the annual rent will be adjusted to an amount equal to 10% of the fair market
value of the land subject to the ground lease, on an unimproved basis.
13. STOCKHOLDERS' EQUITY
In the Reorganization, each of the 3,435,000 outstanding shares of Sahara
Resorts was converted into one share of the Company's Common Stock, and each of
the 7,000,000 outstanding Units of the Partnership was converted into .2174 of a
share of the Company's Common Stock (a 4.6:1 exchange ratio) and one share of
the Company's Exchangeable Redeemable Preferred Stock, $2.14 liquidation
preference per share (the "Preferred Stock"). A subsidiary of Sahara Resorts
received .2174 of a share of the Company's Common Stock for each of its
11,300,000 limited partner interests in the Partnership and 81,189 shares of the
Company's Common Stock for its 2% general partner interest in the Partnership.
The shares of the Company's Common Stock received by the Subsidiary of Sahara
Resorts were ultimately transferred as a dividend to the Company and have been
accounted for as retired.
On January 25, 1994, the Company announced a 25% stock dividend on the Common
Stock payable on February 25, 1994 to stockholders of record on February 4,
1994. The accompanying financial statements have been adjusted to give effect
to this stock dividend as if it has occurred as of the earliest period
presented.
In March and September of fiscal years 1995 and 1994, the Company declared a
semi-annual dividend on its Preferred Stock pursuant to the terms of the
Certificate of Designation with respect to the Preferred Stock. Each semi-annual
dividend was paid in shares of Preferred Stock in an amount equal to .04 of a
share for each share of Preferred Stock. Cash was paid in lieu of fractional
shares. The Company may elect in fiscal 1996 to pay dividends declared on the
Preferred Stock in shares of the Preferred Stock. Thereafter, dividends, if
declared, must be paid in cash.
At the election of the Company, the Preferred Stock is redeemable, in whole
or in part, at any time and from time to time at a redemption price equal to the
per share liquidation preference of $2.14 plus (i) an amount equal to all
accrued but unpaid dividends, whether or not declared, plus (ii) under certain
circumstances relating to asset dispositions and mergers, an additional amount
determined in accordance with the Certificate of Determination of the Preferred
Stock (the "Liquidation Preference"). Additionally, at the election of the
Company, if any shares of Preferred Stock have not been redeemed on or prior to
the tenth dividend payment date from the issuance of the Preferred Stock, such
shares may be exchanged from time to time for Junior Subordinated Notes of the
Company. The principal amount of the Junior Subordinated Notes, if issued, will
be equal to the Liquidation Preference of the Preferred Stock for which such
notes are exchanged. The Junior Subordinated Notes will mature on September 30,
2008, and will bear interest at an annual rate of 11%, payable semi-annually.
14. STOCK OPTION PLAN
48
The Company has a Key Employee Stock Option Plan (the "Stock Option Plan")
providing for the grant of up to 319,375 shares of its common stock to key
employees. As of September 30, 1995, there are 40,000 options outstanding under
the Stock Option Plan. The Stock Option Plan provides for both incentive stock
options and non-qualified stock options. Additionally, as of September 30, 1995
there were outstanding 36,000 options granted under the Sahara Resorts 1983 Key
Employee Stock Option Plan which were converted on a one-for-one basis into
options to purchase common stock of the Company in connection with the
Reorganization and assumed by the Company. The outstanding options have exercise
prices ranging from $22.60 to $3.30 per share.
15. FEDERAL INCOME TAXES
Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109. In accordance with SFAS No. 109, deferred income
taxes reflect the net effects of (a) temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes, and (b) operating loss and tax credits
carryforwards. The cumulative effect on prior years of this change in
accounting principle was not material. Deferred income taxes of $11.0 million
were recorded as of October 1, 1993 as a result of the purchase accounting
associated with the incorporation of the Company's investment in a publicly
traded partnership. The Company has recognized approximately $29.3 million in
federal income tax benefit for financial reporting purposes based on book
losses.
The benefit for income taxes attributable to pre-tax income consisted of:
Year Ended September 30 1995 1994 1993
- --------------------------- --------- -------- ------
(Dollars in thousands)
Current --- --- ---
Deferred $(10,609) $(7,059) $(103)
-------- ------- -----
Total benefit $(10,609) $(7,059) $(103)
======== ======= =====
The benefit for income taxes attributable to pre-tax income differs from the
amount computed at the federal income tax statutory rate as a result of the
following:
Year Ended September 30 1995 1994 1993
- -------------------------------------- --------- --------- ------
(Dollars in thousands)
Amount at statutory rate $(11,428) $ (7,979) $(410)
Goodwill 487 522 307
Lobbying costs 0 170
Other 332 228 ---
-------- -------- -----
$(10,609) $ (7,059) $(103)
======== ======== =====
The components of the deferred tax liability consisted of the following:
At September 30 1995 1994
- --------------------------------------------------- -------- --------
(Dollars in thousands)
DEFERRED TAX LIABILITIES
49
Inventories and prepaid expenses $ 1,156 $ 2,036
Fixed asset cost, depreciation
and amortization, net 11,823 20,176
Capitalized Interest 953 1,514
Deferred Payroll 824 994
-------- --------
Gross deferred tax liabilities $ 14,756 $ 24,720
======== ========
DEFERRED TAX ASSETS
Net operating loss carryforward $ 15,647 $ 14,501
Reserves for accounts and
contracts receivable 1,173 1,674
Original issue discount 3,600 3,600
-------- --------
Gross deferred tax assets 20,420 19,775
-------- --------
Net deferred tax assets (liabilities) $ 5,664 ($4,945)
======== ========
At September 30, 1995, the Company has a net operating loss carryforward for
regular income tax purposes of approximately $46 million, which expires by the
year 2010. The Company has not recorded a valuation allowance to reduce the
carrying value of the deferred tax assets since these assets arose principally
from temporary differences which will reverse within the prescribed carryforward
period or will be recognized in periods corresponding to the reversal of certain
of the deferred tax liabilities.
16. BENEFIT PLANS
The Company contributes to multi-employer pension plans under various union
agreements to which SNC and HHI are a party. Contributions, based on wages paid
to covered employees, were approximately $1.9 million, $1.9 million, and $1.7
million for the years ended September 30, 1995, 1994, and 1993, respectively.
The Company's share of any unfunded liability related to multi-employer plans,
if any, is not determinable.
The Company has a savings plan (the "Plan") qualified under Section 401(k) of
the Internal Revenue Code of 1986, as amended. The Plan covers substantially
all employees who are not covered by a collective bargaining unit. The Company's
matching contributions paid in 1995, 1994, and 1993, were $93,000, $89,000, and
$86,000, respectively.
17. RELATED PARTIES
LICO, a company wholly-owned by Mr. Lowden, Chairman of the Board, Chief
Executive Officer and 52% stockholder of the Company, had borrowed $476,000
from Hacienda Inc., pursuant to an unsecured demand loan. The outstanding
balance of the loan including accrued interest was $545,000 as of September 30,
1995. The demand loan to LICO bears interest at 2% over the prime rate.
LICO provides entertainment services to the Company. Entertainment expense
incurred for services provided by LICO was $3.4 million, $3.5 million, and $3.0
million for fiscal years 1995, 1994, and 1993, respectively.
As of September 30, 1993, Mr. Lowden had borrowed an aggregate of $1.9
million from the Company. The unsecured demand loans were evidenced by
promissory notes and accrued interest at a rate equal to 2% over the prime rate.
On January 4,
50
1994, Mr. Lowden repaid the loans from the Company in full, together with
accrued interest.
In November 1993, Mr. Lowden and Bank of America entered into a personal loan
agreement whereby the principal balance of the loan is amortized through
quarterly principal payments through April 1998, with any remaining principal
balance due July 31, 1998. In July 1995, Mr. Lowden prepaid $1.0 million
principal amount of the loan balance. At November 30, 1995, the principal
balance of the loan was approximately $3,177,417. The loan is secured by
substantially all of the Company's common stock (the "Pledged Shares"), owned by
Mr. Lowden. Mr. Lowden's loan agreement provides that in the event the market
value of the Pledged Shares is less than three times the outstanding loan
balance, the bank, at its sole option, may require either an immediate reduction
in the outstanding balance or the pledging of additional collateral acceptable
to the bank such that the value of the pledged collateral is at least three
times the outstanding loan balance. As of September 30, 1995, the market value
of the Pledged Shares is less than three times the outstanding loan balance. Mr.
Lowden and the bank are in discussions regarding the collateral supporting the
loan. If an event of default were to occur under his personal loan with the
bank, and if the bank acquired the Pledged Shares upon foreclosure, Mr. Lowden's
ownership of Sahara Gaming's outstanding common stock would be reduced to below
50%. If Mr. Lowden ceases to own more than 50% of the outstanding shares of
Sahara Gaming's common stock, an event of default would be triggered under
certain of Sahara Gaming's long-term indebtedness, which would result in cross-
defaults under substantially all of Sahara Gaming's other long-term
indebtedness, including the 13-1/2% Notes and 11% Notes.
18. MINORITY INTEREST - TREASURE BAY
Biloxi, Mississippi - Treasure Bay
In April 1994, Santa Fe Inc. purchased from Treasure Bay Gaming & Resorts
Inc. ("Treasure Bay") for $10.0 million approximately 20% of Treasure Bay's
common stock and 33-1/3% of Treasure Bay's preferred stock. The Company also
unconditionally guaranteed the payment of $4.5 million of the indebtedness of
Treasure Bay incurred to finance working capital in connection with the opening
of Treasure Bay's casinos in Biloxi, Mississippi in April 1994 and in Tunica,
Mississippi in May 1994, which indebtedness the Company acquired in December
1994. In connection with its stock purchase, Santa Fe Inc. entered into an
agreement with Treasure Bay to manage both properties. However, in December
1994, Treasure Bay notified the Company that Treasure Bay was assuming
management control of Treasure Bay's properties and alleged that the Company was
in default under the management agreement and had mismanaged the Treasure Bay
properties.
On January 10, 1995, Treasure Bay and its operating subsidiary, Treasure Bay
Corp., filed for Chapter 11 relief in the United States Bankruptcy Court for the
Southern District of Mississippi. Pending resolution of the Treasure Bay
bankruptcy proceedings, Santa Fe Inc. does not expect to receive payments under
the management agreement or with respect to the acquired indebtedness and no
assurance can be given that any amounts will ultimately be repaid.
The operations of Treasure Bay currently consist solely of a riverboat
casino in Biloxi, Mississippi. Since August 1995, Treasure Bay's management, the
Company and an ad hoc committee of Treasure Bay bondholders have each filed
plans of reorganization with the bankruptcy court. The Company believes that
confirmation hearings with respect to the plans will be held sometime in 1996.
The Company's plan of reorganization for Treasure Bay contemplates that, subject
to various conditions, the various classes of secured and unsecured creditors of
the debtor agree to accept modifications to, and reductions in outstanding
amounts of, Treasure Bay's outstanding obligations and the Company would make a
cash equity contribution to acquire 100% of the equity interests in Treasure
Bay. Any plan must be approved by the bankruptcy court, and no assurance can be
given that the Company's plan of reorganization will be approved, that the
various classes of creditors would agree to the plan or that the Company would
elect to proceed with the plan. Additionally, any plan of reorganization may be
amended, resulting in changes to the amount and terms of debt of the reorganized
debtor and equity ownership acquired.
51
In light of Treasure Bay's financial condition, Sahara Gaming recorded a
$12.6 million pre-tax charge against income in the fourth quarter of fiscal 1994
in connection with its investment in Treasure Bay, guarantee related to the
working capital loan and its management contract.
19. CONTINGENCIES
The Company and its predecessor, Sahara Casino Partners, L.P. are defendants
in two class action lawsuits filed in the United States District Court of
Florida, Orlando Division, entitled Poulos v. Caesar's World, Inc., et al. and
Ahern v. Caesar's World, Inc., et al. which have been consolidated in a single
action and a third class action lawsuit filed in the United States District
Court of Nevada, entitled Schrier v. Ceasar's World, Inc., et al. Also named as
defendants in these actions are many, if not most, of the largest gaming
companies in the United States and certain gaming equipment manufacturers. Each
complaint is identical in its material allegations. The actions allege that the
defendants have engaged in fraudulent and misleading conduct by inducing people
to play video poker machines and electronic slot machines based on false beliefs
concerning how the machines operate and the extent to which there is actually an
opportunity to win on a given play. The complaints allege that the defendants'
acts constitute violations of the Racketeer Influenced and Corrupt Organizations
Act ("RICO") and also give rise to claims for common law fraud and unjust
enrichment, and it seeks compensatory, special consequential, incidental and
punitive damages of several billion dollars.
In response to the complaints, all of the defendants, including the Company
and the Partnership, filed motions attacking the pleadings for failure to state
a claim, seeking to dismiss the complaints for lack of personal jurisdiction and
venue, and, in the case of the consolidated case, seeking to transfer venue of
the actions to Las Vegas. The Court granted the defendants' motion to transfer
venue of the Poulos action to Las Vegas. Plaintiffs have responded to all
motions and have also propounded discovery with respect to each defendant on
jurisdiction, venue and class issues. The Company expects that there will be
further briefing on the motions, and the Court has not indicated when it will
rule on these motions. Plaintiffs have also filed their motion to certify the
class. A representative group of the defendants took the deposition of each
plaintiff and also obtained documents from the plaintiffs. It is not known when
the Court will rule on the class certification motions.
The Company, its predecessor, Sahara Casino Partners, L.P. and Pioneer Inc.
are defendants in a class-action lawsuit filed in the Unites States District
Court of New Jersey, Camden Division, entitled Hyland v. Griffin Investigations
et al. Also named as defendants in this action are many, if not most, of the
largest gaming companies in the United States. The action alleges violations of
Federal anti-trust law, the Fair Credit Reporting Act and state trespass
statutes stemming from plaintiffs' exclusion from various casinos on the basis
that plaintiffs are card counters. The complaint seeks compensatory as well as
punitive damages. Pioneer Inc. has already been dismissed, and the Company has
filed a motion to dismiss for lack of personal jurisdiction and failure to state
a claim upon which relief may be granted. This motion is presently pending
before the Court.
On December 12, 1994, the Company and Santa Fe Inc. filed a lawsuit in the
United States District Court, District of Nevada, naming Treasure Bay officers
A. Clay Rankin III, Joe N. Hendrix and Bernie Burkholder, and former officer
Francis L. Miller as defendants in matters involving violations of Section 10(b)
and Rule 10(b)-5 of the Securities Exchange Act, violation of Nevada state
securities laws, fraud and negligent misrepresentation in connection with the
Company's investment of $10 million in exchange for a 20% interest in Treasure
Bay, and the Company's guarantee of $4.5 million of Treasure Bay's indebtedness.
The defendants have filed answers to
52
the complaint and discovery is continuing.
On December 15, 1994, Francis L. Miller filed a lawsuit in the Mississippi
Circuit Court, Second Judicial District, against the Company and Santa Fe as
well as Paul W. Lowden and Suzanne Lowden, alleging, among other things, that
the Company made certain misrepresentations which induced Francis Miller to
entrust the management of his investments in Treasure Bay's two Mississippi
casinos to the Company and Santa Fe and to sell the Company and Santa Fe a 20%
ownership interest in Treasure Bay. The lawsuit was subsequently amended to
remove Suzanne Lowden as a defendant. The Company and Santa Fe filed a
successful motion to transfer this case to the United States District Court in
Nevada.
On March 31, 1995, Treasure Bay Corp. commenced an adversary proceeding in
its bankruptcy case by filing a complaint for a preliminary and permanent
injunction pursuant to 11 U.S.C. Sec. 105 and Sec. 362 against the Company and
Santa Fe. The Complaint alleges that the filing of the action against Bernie
Burkholder, an officer of Treasure Bay Corp., in Nevada federal court violated
the automatic stay imposed by 11 U.S.C. Sec. 362, or alternatively, that the
Bankruptcy Court should issue an injunction pursuant to 11 U.S.C. Sec. 105
preventing Sahara from proceeding with its action as against Burkholder. In
addition to an injunction, the complaint seeks actual and punitive damages and
attorneys' fees. In a hearing on this complaint, Treasure Bay abandoned its
claims for damages and violation of the stay. However, the bankruptcy court
granted Treasure Bay's request for a stay of discovery against Bernie Burkholder
that will expire after the confirmation hearing on Treasure Bay's bankruptcy
plan.
In addition, the Company is subject to various lawsuits relating to routine
matters incidental to its business. The Company does not believe that the
outcome of such litigation, in the aggregate, will have a material adverse
effect on the Company.
20. SUPPLEMENTAL STATEMENT OF CASH FLOWS INFORMATION
Supplemental statement of cash flows information is presented below:
1995 1994 1993
------------ ----------- -----------
Operating activities:
Cash paid during the period
for interest, net of amount
capitalized of $4,693,714
for 1995 and $1,764,186
for 1994 $45,111,514 $38,610,465 $37,138,747
=========== =========== ===========
Investing and financing activities:
Capital lease obligations
incurred in connection with
the acquisition of machinery
and equipment $ 77,682 $ 66,983 $ 708,708
=========== =========== ===========
Long-term debt incurred in
connection with the
acquisition of machinery
and equipment $ 2,533,436 $ 4,019,070 $ 9,674,527
=========== =========== ===========
Preferred stock dividends
53
at liquidation value $ 1,319,670 $ 1,221,715
=========== ===========
Acquisition of minority
interest through the
issuance of common and
preferred stock resulting
in additions to property,
plant and equipment, and
goodwill $36,606,777
===========
Adjustment to property, plant
and equipment under
adoption of SFAS No. 109 $11,062,602
===========
21. SUBSEQUENT EVENTS - ASSETS UNDER AGREEMENT FOR SALE
On October 2, 1995, the Company sold substantially all of the assets of the
Sahara for $128 million in cash and exchanged 22 acres of land, a portion of
which was utilized by the Sahara as a parking lot, for 27 acres of land just
south of the Sahara on Las Vegas Boulevard, on which a water theme park
currently operates. The Company utilized approximately $122 million in proceeds
to retire and defease indebtedness of approximately $115 million secured by the
Sahara assets and to pay costs to close the transaction, including approximately
$6 million of costs associated with the defeasance of the 12-1/8% Notes. The net
proceeds of approximately $6 million was added to working capital. The Company
expects to record a pre-tax gain of approximately $40 million (net of the
extinguishment of debt charge discussed below)on the sale of substantially all
of the assets of Sahara in the first quarter of fiscal 1996.
In connection the sale of the Sahara, in August 1995, the Company commenced
an offer to purchase for cash all outstanding 12-1/8% Notes, approximately
$114.6 million, at a price of $1,047 per $1,000 principal amount, plus accrued
interest. Upon consummation of the sale, the Company accepted $89.2 million
original principal amount of 12-1/8% Notes tendered in the offer and defeased
the remaining balance of 12-1/8% Notes, approximately $27 original principal
amount of 12-1/8% Notes. In November 1995, the Company acquired and retired the
remaining $27 million original principal amount of 12-1/8% Notes that were
defeased upon consummation of the sale. The Company expects to record an
approximate $6.0 million charge for extinguishment of debt against the gain on
the sale of the Sahara in the first quarter of fiscal 1996.
In connection with the acquisition of the 27 acre parcel, the Company
assumed the operating lease under which a water theme park operates. The lease
may be terminated by the Company at any time after December 1996. The Company
has guaranteed payments by the tenant of a loan to the prior owner of the
property ("tenant loan") and has agreed to pay the loan in full in certain
situations, including in the event the lease is terminated for any reason prior
to 2004. The tenant loan, which is amortized through monthly principal and
interest payments through December 2004, had an outstanding balance of $6.2
million as of September 30, 1995. Under the terms of the lease, as amended, the
water-theme park remits a base rent of approximately $16,000 monthly plus an
annual rent payment based on gross receipts.
22. SUBSEQUENT EVENTS - OTHER
In October 1995, upon consummation of the sale of the Sahara, SNC distributed
to the Company the $32 million affiliate note between SNC and an affiliate. The
Company satisfied in full a $15.2 million affiliate note issued
54
between the Company and the same affiliate by offsetting it against the $32
million affiliate note. The Company then forgave, as a contribution to capital,
the balance of $16.8 million to the capital stock of a wholly-owned subsidiary
which owns 39 acres in Henderson, Nevada. Simultaneously, the Company
contributed the capital stock of the wholly-owned subsidiary to the Pioneer.
In addition, upon consummation of the sale of the Sahara and in substance
defeasement of the 12-1/8% Notes, the covenants restricting the use of the $10
million held by SNC, pursuant to the repayment of the original SFHI affiliate
note were extinguished. An $8 million affiliate note issued in June 1995
remains outstanding and matures in August 1996. See Note 3 and 10
The Company has agreed to grant a security interest in the 27 acre parcel
for the benefit of the holders of the 13-1/2% Notes to secure a contingent
obligation of the Company to contribute or loan $10 million to PHI. The
security interest will be released in the event of such a contribution or loan.
In November 1995, the Company contributed $15 million in cash to the Pioneer
Inc., pursuant to an agreement reached with holders of 13-1/2% Notes, in which
the holders of 13-1/2% Notes consented to the sale of the Hacienda and Sahara.
In November 1995, the Company sold the Spirit of America barge vessel
("Spirit") for $3.3 million in cash. The Spirit was acquired in connection with
the Company's proposed development of a casino entertainment complex in
Parkville, Missouri. Net proceeds of $3.2 million from the sale were added to
general working capital.
In December 1995, the Company acquired in the market $2.3 million principal
amount of 11% Notes and $2.6 million principal amount of 10-1/4% Subordinated
Debentures. The Company expects to record an after-tax extraordinary gain of
approximately $435,000 from the early retirement of 11% Notes.
In October 1995, the Company entered into an agreement to transfer its rights
and obligations under contracts with members of Camperland, to the developer of
a recreational vehicle park currently under construction. Pursuant to the
agreement, the Company will pay $4 million to the developer and the developer
will assume all obligations relating to Camperland contracts. The Company will
remain contingently liable for such obligations. The agreement is subject to,
among other things, a due diligence review by the developer. If that agreement
is not consummated, the Company will be obligated to transfer the Camperland
operations to another location on or before February 1997 and continue to
service existing contracts. The Company has acquired a 40 acre parcel of
property for such purposes.
55
23. SUPPLEMENTAL STATEMENT OF SUBSIDIARY INFORMATION
The Company's primary operations are in the gaming industry and in
fiscal years 1995, 1994 and 1993 were conducted through SNC, HHI, PHI and SFHI.
the Company sold substantially all the assets of the Hacienda in August 1995 and
the Sahara in October 1995. "Other" below includes financial information for
SNC, HHI and the Company's other operations. In addition to the financial
information as set forth in the table below (dollars in thousands), see Notes 3,
8, 9, 11, 12 and 22 for additional discussion of subsidiary operations.
YEAR PHI SFHI OTHER TOTAL
---- -------- -------- -------- --------
OPERATING REVENUES 1995 $ 46,034 $ 64,798 $140,277 $251,109
======== ======== ======== ========
1994 $ 49,270 $ 63,831 $140,617 $253,718
======== ======== ======== ========
1993 $ 53,823 $ 53,305 $137,637 $244,765
======== ======== ======== ========
OPERATING INCOME (LOSS) 1995 $ 5,500 $ (6,458) $ 11,569 $ 10,611
======== ======== ======== ========
1994 $ 9,424 $ 14,697 $ 8,852 $ 32,973
======== ======== ======== ========
1993 $ 13,917 $ 11,403 $ 11,320 $ 36,640
======== ======== ======== ========
INTEREST EXPENSE 1995 $ 13,765 $ 14,042 $ 17,210 $ 45,017
======== ======== ======== ========
1994 $ 13,877 $ 11,446 $ 17,868 $ 43,191
======== ======== ======== ========
1993 $ 13,875 $ 5,310 $ 18,648 $ 37,833
======== ======== ======== ========
DEPRECIATION AND AMORTIZATION 1995 $ 5,227 $ 9,104 $ 13,853 $ 28,184
======== ======== ======== ========
1994 $ 5,063 $ 7,574 $ 14,068 $ 26,705
======== ======== ======== ========
1993 $ 4,985 $ 5,542 $ 12,866 $ 23,393
======== ======== ======== ========
CAPITAL EXPENDITURES 1995 $ 5,998 $ 18,621 $ 5,984 $ 30,603
======== ======== ======== ========
1994 $ 1,741 $ 19,598 $ 22,828 $ 44,167
======== ======== ======== ========
1993 $ 1,782 $ 1,015 $ 11,367 $ 14,164
======== ======== ======== ========
IDENTIFIABLE ASSETS 1995 $ 97,782 $ 95,201 $173,655 $366,638
======== ======== ======== ========
1994 $105,971 $146,317 $226,267 $478,555
======== ======== ======== ========
1993 $109,884 $ 75,264 $209,941 $395,089
======== ======== ======== ========
56
SAHARA GAMING CORPORATION
QUARTERLY RESULTS OF OPERATIONS (Unaudited)
- --------------------------------------------------------------------------------
For the Year Ended September 30,
1995 1994
- --------------------------------------------------------------------------------
Revenues
First Quarter $ 61,639,914 $ 61,130,877
Second Quarter 64,333,776 64,984,262
Third Quarter 63,540,828 64,268,323
Fourth Quarter 61,594,800 63,334,127
------------ ------------
$251,109,318 $253,717,589
============ ============
Operating Income
First Quarter $ 7,873,994 $ 7,875,637
Second Quarter 5,554,002 9,555,353
Third Quarter (10,386,802) 9,309,071
Fourth Quarter 7,569,349 6,232,672
------------ ------------
$ 10,610,543 $ 32,972,733
============ ============
Net Income (Loss)
First Quarter (2,268,474) $ (1,201,613)
Second Quarter (3,954,297) (1,411,786)
Third Quarter (16,073,886) (1,308,329)
Fourth Quarter 255,409 (11,817,282)
------------ ------------
$(22,041,248) $(15,739,010)
============ ============
Net Income (Loss)
per Common Share
First Quarter $ ( .42) $ (.24)
Second Quarter ( .69) (.28)
Third Quarter (2.65) (.26)
Fourth Quarter ( .01) (1.96)
------------ ------------
$ (3.77) $ (2.74)
============ ============
Item 9. Changes in and Disagreements with Accountants on
------------------------------------------------
Accounting and Financial Disclosure
-----------------------------------
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
The information regarding the directors and executive officers of the
Company to be included in the Company's Proxy Statement for the 1995 Annual
Meeting of Stockholders (the "Proxy Statement") is incorporated herein by
reference.
Item 11. Executive Compensation
----------------------
The information regarding Executive Compensation to be included in the
Proxy Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
57
The information regarding Security Ownership to be included in the Proxy
Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
The information regarding Certain Relationships and Related Transactions to
be included in the Proxy Statement is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
(a) 1. and 2. Financial Statements and Schedules
The financial statements and schedules filed as part of this report
are listed in the Index to Consolidated Financial Statements under
Item 8.
(b) Reports on Form 8-K filed during the last quarter of 1995.
The Registrant filed a Current Report on Form 8-K dated July 14,
1995 under Item 5. Other Events, reporting certain information
relating to the sale of assets of the Sahara Hotel and Casino.
The Registrant filed a Current Report on Form 8-K dated July 31,
1995 under Item 5. Other Events, reporting certain information
relating to the Santa Fe Hotel Inc. repurchase and consent
solicitation.
(c) Exhibits required by Securities and Exchange Commission Regulation
S-K:
3.1 Articles of Incorporation and Bylaws of the Company (Previously
filed with the Securities and Exchange Commission as an exhibit to
the Company's S-4 (No. 33-67864) Registration Statement on Form 10-K
dated June 15, 1982 and incorporated herein by reference.)
3.2 Certificate of Designation for Exchangeable Redeemable Preferred
Stock. (Previously filed with the Securities and Exchange Commission
as an exhibit to the Company's Registration Statement on Form S-4
(No. 33-67864) and incorporated herein by reference.)
4.1 Indenture dated as of June 15, 1983 between Hacienda Resorts, Inc.
and Valley Bank of Nevada, as Trustee, with respect to the Company's
10-1/4% Subordinated Sinking Fund Debentures due 1998. (Previously
filed with the Securities and Exchange Commission as an exhibit to
the Registration Statement of Hacienda Resorts, Inc. on Form S-1
(No. 2-82796) and incorporated herein by reference.)
10.1 Form of Indenture (the "Pioneer Indenture")between Pioneer Finance,
the Partnership and Security Pacific National Bank, as Trustee,
relating to the 13-1/2% First Mortgage Bonds Due 1998 of Pioneer
Finance (the "Bonds").(1)
10.2 Form of Bonds (included as an exhibit to the Pioneer Indenture).(1)
10.3 Form of Purchase Money Note relating to the acquisition of the
Pioneer Hotel and Gambling Hall (the "Pioneer Acquisition")
(included as an exhibit to the Pioneer Indenture).(1)
58
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
10.4 Form of Purchase Money Deed of Trust relating to the Bonds (included
as an exhibit to the Pioneer Indenture).(1)
10.5 Form of Guaranty of the Partnership relating to the Bonds (included
in the Pioneer Indenture).(1)
10.6 Form of Assignment Agreement from Pioneer Finance Corp. to the
Trustee relating to the Bonds (included as an exhibit to the Pioneer
Indenture).(1)
10.7 Form of Subordination Provision relating to the Bonds (included as
an Exhibit to the Pioneer Indenture).(1)
10.8 Form of Pari Passu Certificate relating to the Bonds (included as an
---- -----
exhibit to the Pioneer Indenture).(1)
10.9 Depositary and Transfer Agent Agreement including Form of Depositary
Receipt and Form of Certificate of Limited Partners' Interest.(2)
10.10 Tax Services Agreement between the Partnership and CLR Fast-tax.(4)
10.11 Acquisition Agreement relating to the Pioneer Acquisition.(1)
10.12 Pioneer Ground Lease, as amended.(1)
10.13 Conformed Lessor's Agreement dated as of November 16, 1988 among
Lessor, Lessee and Pioneer Operating Partnership relating to the
Pioneer Acquisition.(1)
10.14 Promissory Note in the amount of $25,300,000.00 dated December 23,
1980 between Casino Properties and the Public Employees Retirement
System of Nevada, along with Deed of Trust and Assignment of Rents,
Guaranty Agreement of Paul W. Lowden, Subordination Agreement of
Valley Bank of Nevada, Security Agreement and Collateral Assignment
of Agreement, each dated on or about December 23, 1980.(3)
10.15 Net Parking Lease by and between Sahara Las Vegas and Sahara
Operating Partnership dated July 30, 1987 and Amendment thereto.(3)
10.16 Standard Form of Agreement between Owner and Contractor by and
between Sahara Operating Partnership and Sierra Construction
Corp.(3)
10.17 Amendments dated February 25, 1985 relating, respectively, to the
Promissory Note and Deed of Trust referred to in Exhibit 10.14.(3)
10.18 Notes secured by liens on office building in Las Vegas, Nevada in
the original principal amounts of $301,598.05, $23,337.96 and
$649,063.99 bearing interest at 10%, 11% and 13.5% per annum,
respectively.(3)
10.19 Promissory Note in the amount of $4,500,000 dated September 1, 1987
59
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
from Sahara Las Vegas to the Partnership.(2)
10.20 Indenture dated as of August 17, 1989 among Sahara Finance, the
Partnership and U.S. Trust Company of California, N.A., as trustee
(the "Note Trustee"), and related First Supplemental Indenture dated
as of October 5, 1989 relating to Sahara Finance's 12-1/8%
Guarantied First Mortgage Notes Due 1996 (the "First Mortgage
Notes").(4)
10.21 Form of Sahara Finance's 12-1/8% Guarantied First Mortgage Notes due
1996.(4)
10.22 Secured Promissory Note dated August 17, 1989 in the amount of
$116,200,000 issued by Sahara Operating Partnership in favor of
Sahara Finance.(4)
10.23 Deed of Trust and Security Agreement with Assignment of Rents and
Fixture Filing dated as of August 17, 1989 from Sahara Operating
Partnership to Nevada Title Company.(4)
10.24 Guarantee by the Partnership relating to the First Mortgage Notes
(included in the Indenture referred to in Exhibit 10.20).
10.25 Assignment Agreement dated August 17, 1989 between Sahara Finance,
as Assignor, and the Note Trustee, as Assignee, and acknowledged by
Sahara Operating Partnership.(4)
10.26 Note Purchase Agreement dated August 17, 1989 by and among Sahara
Finance, the Partnership, Sahara Operating Partnership and Solomon
Brothers Realty Corp.(4)
10.27 Disbursement and Escrow Agreement dated as of August 17, 1989 among
Sahara Finance, as Lender, Sahara Operating Partnership, as
Borrower, and Nevada Construction Services, as Agent, Amendment
thereto dated as of August 31, 1989 and Second Amendment thereto
dated as of October 5, 1989.(4)
10.28 Assignment of Leases, Rents and Revenues dated as of August 17, 1989
from Sahara Operating Partnership to Sahara Finance.(4)
10.29 Guarantee of Completion dated as of August 17, 1989 by the
Partnership to Sahara Finance.(4)
10.30 Assignment of Structural Engineer's Agreement dated as of August 17,
1989 by Sahara Operating Partnership to Sahara Finance.(4)
10.31 Assignment of Contracts, Warranties, Licenses, Permits and Plans and
Specifications dated as of August 17, 1989 by Sahara Operating
Partnership to Sahara Finance.(4)
10.32 Assignment of Affiliate Notes and Security Agreements dated as of
August 17, 1989 by Sahara Operating Partnership to Sahara Finance,
and Amendment thereto dated as of October 5, 1989.(4)
60
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
10.33 Assignment of General Contractor's Agreement dated as of August 17,
1989 by Sahara Operating Partnership to Sahara Finance.(4)
10.34 Assignment of Airspace Lease and Consent dated as of August 17, 1989
by Sahara Operating Partnership to Sahara Finance.(4)
10.35 Assignment of Architect's Contract dated as of August 17, 1989 by
Sahara Operating Partnership to Sahara Finance.(4)
10.36 Security Agreement dated August 17, 1989 by and between Sahara
Operating Partnership and Santa Fe Operating Partnership, and
Amendment thereto dated as of October 5, 1989.(4)
10.37 Security Agreement dated August 17, 1989 by and between Sahara
Operating Partnership and Hacienda Operating Partnership, and
Amendment thereto dated as of October 5, 1989.(4)
10.38 Security Agreement dated August 17, 1989 by and between Sahara
Finance and Sahara Operating Partnership.(4)
10.39 Amended and Restated Santa Fe Hotel and Casino Note as of August 17,
1989 in the principal amount of $18,181,818 issued by the Santa Fe
Operating Partnership to Sahara Operating Partnership.(4)
10.40 Amended and Restated Hacienda Note dated as of August 17, 1989 in
the principal amount of $32,323,232 by the Hacienda Operating
Partnership to Sahara Operating Partnership.(4)
10.41 Quality Construction Consultant Agreement dated August 17, 1989 by
and among the Trustee, Etc Testing Laboratories, Inc., and Sahara
Operating Partnership.(4)
10.42 Construction Consultant Agreement dated August 17, 1989 by and among
the Trustee, Nevada Construction Services and Sahara Operating
Partnership.(4)
10.43 Third and Fourth Amendments dated, respectively, December 21, 1988
and August 17, 1989 to the Net Parking Lease referred to in Exhibit
10.15.(4)
10.44 Agreement Between Owner and Contractor dated August 11, 1989 between
Sahara Finance and Sierra Construction Corp. relating to the Sahara
Project.(4)
10.45 Structural engineering consulting services agreements dated,
respectively, July 25, 1989 and August 3, 1989 between Sahara
Operating Partnership and Martin Pulsion & Associates, Inc.(4)
10.46 Architect's agreement dated August 10, 1989 between the Partnership
and Fred Dared regarding the Sahara Project.(4)
10.47 Architect's agreement dated August 10, 1989 between the Partnership
and Fred Dared regarding the Hacienda Project.(4)
61
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
10.48 Architect's agreement dated August 10, 1989 between the Partnership
and Quadrille Garlic and Associates regarding the Santa Fe Hotel and
Casino construction.(4)
10.49 Agreement Between Owner and Contractor dated August 11, 1989 between
Sahara Finance and Sierra Construction Corp. relating to the Santa
Fe construction.(4)
10.50 Agreement Between Owner and Contractor dated August 11, 1989 between
Sahara Finance and Sierra Construction Corp. relating to the
Hacienda Expansion.(4)
10.51 Environmental Indemnity Agreement dated as of August 17, 1989 among
Sahara Operating Partnership, Sahara Finance and the Partnership.(4)
10.52 Amendments to Deed of Trust and Promissory Note between Casino
Properties and the Public Employees Retirement System of Nevada
referred to in Exhibit 10.14 hereto.(5)
10.53 Sahara Resorts Key Employee Stock Option Plan. (Previously filed
with the Securities and Exchange Commission as an exhibit to the
Registration Statement of Hacienda Resorts, Inc. on Form S-1
(No. 2-82796) and incorporated herein by reference.)
10.54 Agreement for the sale and purchase of real property and related
documents, assumption of $885,162.11 on three promissory notes in
favor of Dobrusky Family Trust uta, between the Company and
Consolidated Hospitality Services, Inc.(5)
10.55 Form of Second Supplemental Indenture by and among Sahara Finance,
the Partnership and the Trustee, dated February 13, 1990.(7)
10.56 Construction Loan Agreement dated as of December 21, 1989 among
Valley Bank of Nevada and Santa Fe Operating Partnership and the
Partnership as joint and several co-borrowers.(6)
10.57 Construction Deed of Trust, Assignment of Rents and Security
Agreement dated as of December 21, 1989 in favor of Valley Bank of
Nevada and executed by Santa Fe Operating Partnership and the
Partnership.(6)
10.58 Secured Promissory Note dated December 21, 1989 in the original
principal amount of $25,000,000 in favor of Valley Bank of Nevada
and executed by Santa Fe Operating Partnership and the
Partnership.(6)
10.59 Assignment of Leases, Rents, Income and Profits dated December 21,
1989 in favor of Valley Bank of Nevada executed by Santa Fe
Operating Partnership.(6)
10.60 Revolving Credit Agreement dated March 8, 1990 by and among Valley
Bank of Nevada, the Partnership and Hacienda Operating partnership
regarding a $20,000,000 revolving line of credit.(8)
62
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
10.61 Deed of Trust, Assignment of Rents and Security Agreement dated
March 8, 1990 by and among Hacienda Partnership, as Trustor, Chicago
Title Insurance Company, as Trustee, and Valley Bank as
Beneficiary.(8)
10.62 Revolving Credit Agreement dated November 22, 1989 by and among
Valley Bank of Nevada and Sahara Operating Limited Partnership
regarding a $2,500,000 revolving line of credit.
10.63 Revolving Credit Agreement dated September 12, 1990 by and among
Valley Bank of Nevada and Sahara Operating Limited Partnership
regarding a $2,000,000 revolving line of credit.
10.64 Equipment Contract dated December 3, 1990, between Paul Lowden and
Beckman Eisenman & Associates regarding purchase of equipment for
Pioneer.
10.65 Agreement dated February 7, 1991, among Sierra Construction Corp.,
the Company, and Sahara Casino Partners, L.P. (9)
10.66 Agreement dated February 10, 1991 among Sierra Construction Corp.,
Sahara Operating Limited Partnership,, Hacienda Operating Limited
Partnership and Santa Fe Operating Limited Partnership. (9)
10.67 First Supplemental Indenture to Pioneer Indenture dated as of
December 21, 1990 among Pioneer Finance, and Sahara Casino Partners,
L.P. and Security Pacific National Bank. (9)
10.68 Lease agreement for furniture, fixtures and equipment dated March
20, 1991 between Valley Leasing Company, Inc. and Michigan National
Bank, Lessors, and Santa Fe Operating Limited Partnership, Lessee.
(11)
10.69 Promissory Note in the amount of $2,760,079 dated October 10, 1990
executed by Santa Fe Operating Limited Partnership in favor of
Deutsche Credit Corporation, collateralized by equipment. (11)
10.70 Lease agreement for furniture and equipment dated August 6, 1991
between Valley Leasing Company, Inc. and C.I.T. Leasing, Lessors,
and Santa Fe Operating Limited Partnership, Lessee. (11)
10.71 Lease agreement for furniture and equipment dated August 6, 1991
between Valley Leasing Company, Inc. and C.I.T. Leasing, Lessors,
and Hacienda Operating Limited Partnership, Lessee. (11)
10.72 Lease agreement for signage dated April 29, 1991 between SNET as
Lessor and Santa Fe Operating Limited Partnership as Lessee. (11)
10.73 Lease agreement for computer equipment dated August 6, 1991 between
Valley Leasing Company, Inc. as Lessor and Sahara Casino Partners,
L.P. as Lessee. (11)
10.74 Promissory notes dated February 7, 1992, February 14, 1992,
March 10, 1992, April 13, 1992, June 16, 1992, July 20, 1992 and
August 11,
63
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
1992 by Paul W. Lowden in favor of Sahara Resorts in the aggregate
amount of $1,250,000 (10).
10.75 Promissory notes dated September 14, 1992, October 8, 1992, October
19, 1992 and November 24, 1992 by Paul W. Lowden in favor of Sahara
Resorts in the aggregate amount of $650,000.
10.76 Second Supplemental Indenture dated as of September 30, 1993 between
Sahara Resorts, Sahara Gaming Corporation and Nevada State Bank, as
Trustee, with respect to 10-1/4% Subordinated Sinking Fund
Debentures.
10.77 Sahara Gaming Corporation's 1993 Key Employee Stock Option Plan.
10.78 Agreement Concerning Guaranty dated as of April 20, 1994, by and
among Treasure Bay Corp., Treasure Bay Gaming and Resorts, Inc., and
Sahara Gaming Corporation
10.79 Form of Guaranty of Sahara Gaming Corporation of an aggregate of
$4.5 million of indebtedness of Treasure Bay Corp.
10.80 Notice, Consent and Acknowledgment of Assignment
10.81 Form of Credit Agreement by and between Treasure Bay Corp. and
Progressive Distribution Systems, Inc. with respect to equipment
financing indebtedness of Treasure Bay Corp. (the "Credit
Agreements")
10.82 Form of Commercial Security Agreement with respect to the Credit
Agreements
10.83 Form of Promissory Note with respect to the Credit Agreements
10.84 Form of Subordination Agreement by and among Treasure Bay Gaming &
Resorts, Inc., Santa Fe Hotel Inc., First Trust National
Association, and PDS Financial Corporation with respect to the
Credit Agreements
10.85 Offer to Purchase Real Property, dated March 16, 1994, from Sahara
Gaming Corporation to Marcor Green Valley, Limited Partnership
10.86 Note Purchase Agreement, dated as of March 31, 1994, between Sahara
Mission Valley Inc. and Sahara Gaming Corporation and each of Muico
& Co., PaineWebber Managed Investment Trust-PaineWebber High Income
Fund, and Cerberus Partners with respect to $15 million principal
amount of 12% Convertible First Mortgage Notes Due 1995, of Sahara
Mission Valley Inc.
10.87 Assignment, dated as of June 14, 1994, between Cerberus Partners,
Equifax, Inc., U. S. Retirement Income Plan Trust, and Sahara
Mission Valley Inc.
64
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
10.88 Amendment #1 to Note Purchase Agreement, dated as of November 30,
1994, among Sahara Mission Valley Inc., and Sahara Gaming
Corporation, on the one hand and each of Muico & Co., PaineWebber
Managed Investment Trust-PaineWebber High Income Fund, Equifax, Inc.
U. S. Retirement Income Plan Trust and Sherborne Group Master Trust,
on the other
10.89 Agreement of Sale and Escrow Instructions, dated November 25, 1994,
by and between Sahara Mission Valley, Inc. and Players International
10.90 Working Capital Loan Agreement, by and between Santa Fe Hotel Inc.
and Miller & Schroeder Investments Corporation in connection with
$3.0 million Working Capital Loan, dated December 7, 1994
10.91 Treasure Bay I, Biloxi Loan Purchase Agreement, dated December 7,
1994, by and between Santa Fe Hotel Inc. and Miller & Schroeder
Investments Corporation
10.92 Treasure Bay III, Tunica Loan Purchase Agreement, dated December 7,
1994 by and between Santa Fe Hotel Inc. and Miller & Schroeder
Investments Corporation
10.93 Lease Agreement, dated May 26, 1993, between City of Parkville,
Missouri, and Sahara Casino Partners, L.P., was previously filed
with the Commission as Exhibit 10.86 to the Company and Santa Fe
Hotel Inc.'s Registration Statement on Form S-1 (No. 33-70286)
10.94 Amendment to Lease Agreement, made as of September 7, 1993, by
Sahara Casino Partners, L.P., and the City of Parkville, Missouri
10.95 Second Amendment to Lease Agreement, made as of December 27, 1993,
by Sahara Parkville, Inc. and the City of Parkville, Missouri
10.96 Landlord's Consent, Estoppel Certificate and Third Amendment to
Lease Agreement, entered into on December 27, 1993, by and between
the City of Parkville, Missouri, Sahara Parkville, Inc., IBJ
Schroeder Bank & Trust Company, and Santa Fe Hotel Inc.
10.97 Fourth Amendment to Lease Agreement, made as of January 18, 1994 by
Sahara Parkville, Inc and the City of Parkville, Missouri
10.98 Fifth Amendment to Lease Agreement, made as of January 18,1994, by
Sahara Parkville, Inc. and the City of Parkville, Missouri
10.99 Development Agreement by Sahara Parkville, Inc. and the City of
Parkville, Missouri
10.100 Amendment to Development Agreement, dated January 18, 1994, by
Sahara Parkville, Inc. and the City of Parkville, Missouri
10.101 Second Amendment to Development Agreement, dated October 28, 1994,
by
65
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
Sahara Parkville, Inc. and the City of Parkville, Missouri
10.102 Bill of Sale dated as of December 28, 1994 from PDS Financial
Corporation to Pioneer Hotel Inc. with respect to the sale of
certain gaming equipment.
10.103 Credit Agreement dated as of December 28, 1994 by and between
Pioneer Hotel Inc. and PDS Financial Corporation.
10.104 Promissory Note dated as of December 28, 1994 in the amount of
$627,800 by Pioneer Hotel Inc. to the order of PDS Financial
Corporation.
10.105 Security Agreement dated as of December 28, 1994 by Pioneer Hotel
Inc. in favor of PDS Financial Corporation.
10.106 Subordination Agreement dated as of December 28, 1994 by and between
PDS Financial Corporation and Pioneer Hotel Inc.
10.107 Agreement for Purchase and Sale dated as of January 10, 1995 by and
among Hacienda Hotel Inc., Sahara Gaming Corporation, as Guarantor,
and William G. Bennett.
10.108 Letter of Modification and Clarification by and between Hacienda
Hotel Inc., Sahara Gaming Corporation, as Guarantor, and William G.
Bennett dated March 3, 1995.
10.109 Assignment and Consent to Assignment of Agreement for Purchase and
Sale dated January 10, 1995 by and among Hacienda Hotel Inc., Sahara
Gaming Corporation, as Guarantor, and William G. Gennett to Circus
Circus Enterprises, Inc. dated March 5, 1995.
10.110 Amendment #2 to Note Purchase Agreement dated March 30, 1995 between
Sahara Mission Valley, Inc., Sahara Gaming Corporation and Hacienda
Hotel Inc. and Muico & Co., PaineWebber Managed Investment Trust-
Paine Webber High Income Fund, Equifax Inc. U. S. Retirement Income
Plan Trust and Sherborne Group Master Trust.
10.111 Third Amendment to Development Agreements dated June 30, 1995 by
Sahara Parkville, Inc. and the City of Parkville, Missouri.
10.112 Sixth Amendment to Lease Agreement dated June 30, 1995 by Sahara
Parkville, Inc., and the City of Parkville, Missouri.
10.113 Sale and Purchase Contract dated November 7, 1995 by and between
Sahara Gaming Corporation and Argasy Gaming Company.
10.114 Promissory Note dated June 14, 1995 issued by Santa Fe Hotel, Inc.
in favor of Sahara Nevada Corp.
10.115 Hacienda Adventure Club Acquisition and Assignment Agreement dated
September 29, 1995 by and between Hacienda Hotel, Inc. and Resort
Marketing International and Brett Torino.
66
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
10.116 Camperland Responsibility Agreement dated August 31, 1995 by and
among Hacienda Hotel, Inc., Sahara Gaming Corporation and Pinkless,
Inc.
10.117 Assignment Agreement dated October 2, 1995 by and between Howard
Hughes Properties, Limited Partnership and Sahara Las Vegas Corp.
and Guaranty Agreement dated October 2, 1995 by and between Howard
Hughes Properties, Limited Partnership and Sahara Las Vegas Corp.
10.118 Lease Modification Letter dated August 24, 1995 by and between
Wet N' Wild Nevada, Inc. and Sahara Corporation.
22. Subsidiaries of the Company. (12)
23.1 Consent of Deloitte & Touche LLP.
27. Financial Data Schedule
FOOTNOTES TO EXHIBIT INDEX
--------------------------
(1) Previously filed with the Securities and Exchange Commission as an exhibit
to the Registration Statement on Form S-1 (No. 33-24589) of Pioneer
Finance Corp., the Partnership and Pioneer Operating Partnership and
incorporated herein by reference.
(2) Previously filed with the Securities and Exchange Commission as an exhibit
to the Partnership's Annual Report on Form 10-K for the year ended
September 30, 1987 and incorporated herein by reference.
(3) Previously filed with the Securities and Exchange Commission as an exhibit
to the Partnership's Registration Statement on Form S-1 (No. 33-13214) and
incorporated herein by reference.
(4) Previously filed with the Securities and Exchange Commission as an exhibit
to the Company's Annual Report on Form 10-K for the year ended September
30, 1989, and incorporated herein by reference.
(5) Previously filed with the Securities and Exchange Commission as an exhibit
to the Company's Annual Report on Form 10-K for the year ended September
30, 1985, and incorporated herein by reference.
(6) Previously filed with the Securities and Exchange Commission as an exhibit
to Amendment No. 1 to the Registration Statement on Form S-1 (No. 33-
33031) of Sahara Finance Corp., Sahara Casino Partners, L.P., Sahara
Operating Limited Partnership, Hacienda Operating Limited Partnership,
Santa Fe Operating Limited Partnership as filed on February 12, 1990, and
incorporated herein by reference.
(7) Previously filed with the Securities and Exchange Commission as an exhibit
to Amendment No. 2 to the Registration Statement on Form S-1 (No. 33-
33031) of Sahara Finance Corp., Sahara Casino Partners, L.P., Sahara
Operating Limited Partnership, Hacienda Operation Limited Partnership,
Santa Fe Operating Limited Partnership as filed on February 14, 1990, and
incorporated herein by reference.
67
(8) Previously filed with the Securities and Exchange Commission as an exhibit
to post effective Amendment No. 2 to the Registration Statement on Form
S-1 (No. 33-33031) of Sahara Finance Corp., Sahara Casino Partners, L.P.,
Sahara Operating Limited Partnership, Hacienda Operating Limited
Partnership, Santa Fe Operating Limited Partnership, as filed on August
14, 1990 and incorporated herein by reference.
(9) Previously filed with the Securities and Exchange Commission as an exhibit
to post effective Amendment No. 5 to the Registration Statement on Form
S-1 (No. 33-33031) of Sahara Finance Corp., Sahara Casino Partners, L.P.,
Sahara Operating Limited Partnership, Hacienda Operating Limited
Partnership, Santa Fe Operating Limited Partnership, as filed on April 15,
1991 and incorporated herein by reference.
(10) Previously filed with the Securities and Exchange Commission as an exhibit
to post effective Amendment No. 12 to the Registration Statement on Form
S-1 (No. 33-33031) of Sahara Finance Corp., Sahara Casino Partners, L.P.,
Sahara Operating Limited Partnership, Hacienda Operating Limited
Partnership, Santa Fe Operating Limited Partnership, as filed August 14,
1992.
(11) Previously filed with the Securities and Exchange Commission as an exhibit
to post effective Amendment No. 8 to the Registration Statement on Form
S-1 (No. 33-33031) of Sahara Finance Corp., Sahara Casino Partners, L.P.,
Sahara Operating Limited Partnership, Hacienda Operating Limited
Partnership, Santa Fe Operating Limited Partnership, as filed December 30,
1991.
(12) Previously filed with the Securities and Exchange Commission as an exhibit
to Amendment No. 4 to the Registration Statement on Form S-1 (No. 33-
70268) of Sahara Gaming Corporation.
68
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SAHARA GAMING CORPORATION
December 29, 1995 By: /s/ Paul W. Lowden
----------------------------
Paul W. Lowden, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ Paul W. Lowden Chairman of the Board and President December 29, 1995
- ------------------------------------------- (Principal Executive Officer)
Paul W. Lowden
/s/ William J. Raggio Director December 29, 1995
- -------------------------------------------
William J. Raggio
/s/ James W. Lewis Director December 29, 1995
- -------------------------------------------
James W. Lewis
/s/ Keith Ashworth Director December 29, 1995
- -------------------------------------------
Keith Ashworth
/s/ Suzanne Lowden Director December 29, 1995
- -------------------------------------------
Suzanne Lowden
/s/ George P. Miller Director December 29, 1995
- -------------------------------------------
George P. Miller
/s/ Thomas K. Land Director and Chief Financial Officer December 29, 1995
- ------------------------------------------- (Principal Financial and
Thomas K. Land Accounting Officer)
69