-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, JDweDnAKochN6C5pHfX4eVisZ8n6145tuE0jqOruxYr4Ys7aXgWzCPYccUypvnhN B0lzZwb8PUo2oX08vwkzMw== 0000016095-94-000016.txt : 19940621 0000016095-94-000016.hdr.sgml : 19940621 ACCESSION NUMBER: 0000016095-94-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19940430 FILED AS OF DATE: 19940614 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAESARS WORLD INC CENTRAL INDEX KEY: 0000016095 STANDARD INDUSTRIAL CLASSIFICATION: 7990 IRS NUMBER: 590773674 STATE OF INCORPORATION: FL FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05976 FILM NUMBER: 94534177 BUSINESS ADDRESS: STREET 1: 1801 CENTURY PARK E STE 2600 CITY: LOS ANGELES STATE: CA ZIP: 90067 BUSINESS PHONE: 3105522711 MAIL ADDRESS: STREET 1: 1801 CENTURY PARK EAST STREET 2: SUITE 2600 CITY: LOS ANGELES STATE: CA ZIP: 90067 FORMER COMPANY: FORMER CONFORMED NAME: LUMS INC DATE OF NAME CHANGE: 19720123 10-Q 1 THIRD QUARTER F1994 FORM 10-Q FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 1994 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to __________________ Commission file number 1-5976 CAESARS WORLD, INC. (Exact name of registrant as specified in its charter) Florida 59-0773674 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1801 Century Park East, Los Angeles, California 90067 (Address of principal executive offices) (Zip Code) (310) 552-2711 (Registrant's telephone number, including area code) Not applicable (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ___ No ___ APPLICABLE ONLY TO CORPORATE ISSUERS: At June 9, 1994, registrant had outstanding 24,878,654 shares of its $.10 par value common stock. CAESARS WORLD, INC. AND SUBSIDIARIES April 30, 1994 INDEX Page No. Part I. Financial Information Item 1. Financial Statements: Condensed Consolidated Balance Sheets - April 30, 1994 (Unaudited) and July 31, 1993 3 Consolidated Statement of Shareholders' Equity (Unaudited) - Nine months ended April 30, 1994 4 Consolidated Statements of Income (Unaudited) - Nine months ended April 30, 1994 and 1993 5 Consolidated Statements of Income (Unaudited) - Three months ended April 30, 1994 and 1993 6 Condensed Consolidated Statements of Cash Flows (Unaudited) - Nine months ended April 30, 1994 and 1993 7 Notes to Condensed Consolidated Financial Statements (Unaudited) 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Part II. Other Information Item 1. Legal Proceedings 21 Item 5. Other Information 21 Item 6. Exhibits and Reports on Form 8-K 24 PART I. Financial Information Item 1. Financial Statements CAESARS WORLD, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands)
April 30, July 31, Assets 1994 1993 (Unaudited) (a) Current assets Cash and cash equivalent investments $115,970 $108,616 Receivables, net 75,986 66,041 Inventories 12,468 11,364 Deferred income taxes 36,163 42,748 Prepaid expenses and other 14,105 12,366 Total current assets 254,692 241,135 Property and equipment, net 617,704 616,393 Excess cost of investments over net assets acquired, net 52,732 52,916 Other assets 56,320 45,275 $981,448 $955,719 Liabilities and Shareholders' Equity Current liabilities Current maturities of long-term debt and obligations under capital leases $ 29,318 $ 30,263 Accounts payable and accrued expenses 125,122 125,835 Income taxes 9,738 9,361 Total current liabilities 164,178 165,459 Long-term debt and obligations under capital leases, net of current maturities 221,952 253,422 Other liabilities, including deferred income taxes of $22,831 and $29,282 58,370 63,948 Shareholders' equity Common stock 2,612 2,590 Additional paid-in capital 127,125 117,399 Common stock in treasury (32,695) (30,358) Deferred compensation (20,955) (16,146) Retained earnings 460,861 399,405 Total shareholders' equity 536,948 472,890 $981,448 $955,719 (a) The balance sheet at July 31, 1993 has been condensed from the audited balance sheet at that date.
See notes to condensed consolidated financial statements. CAESARS WORLD, INC. AND SUBSIDIARIES Consolidated Statement of Shareholders' Equity - (Unaudited) Nine months Ended April 30, 1994 (In thousands, except shares outstanding)
Common Stock Additional Common Shares Paid-in Stock in Deferred Retained Outstanding Amount Capital Treasury Compensation Earnings Total Balance July 31, 1993 24,619,631 $2,590 $117,399 $(30,358) $(16,146) $399,405 $472,890 Stock options exercised 50,392 5 761 - - - 766 Amortization of deferred compensation, termination of restricted stock grants and other, net (32,868) (3) (1,230) - 5,406 - 4,173 Common stock purchased and held in treasury (44,048) - - (2,337) - - (2,337) Vesting of incentive stock grants 89,833 - - - - - - Issuance of restricted stock grants 199,781 20 10,195 - (10,215) - - Net income - - - - - 61,456 61,456 Balance April 30, 1994 24,882,721 $2,612 $127,125 $(32,695) $(20,955) $460,861 $536,948
See notes to condensed consolidated financial statements CAESARS WORLD, INC. AND SUBSIDIARIES Consolidated Statements of Income - (Unaudited) (In thousands, except net income per share)
Nine Months Ended April 30, 1994 1993 Revenue Casino $600,763 $564,171 Rooms 51,690 51,692 Food and beverage 60,673 57,758 Other income 51,182 47,823 764,308 721,444 Costs and expenses Casino 324,067 306,464 Rooms 15,723 15,217 Food and beverage 46,240 42,968 Other operating expenses 30,226 28,471 Selling, general and administrative 141,411 137,709 Depreciation and amortization 41,671 40,769 Provision for doubtful accounts 51,836 36,720 651,174 608,318 Operating income 113,134 113,126 Interest and dividend income 2,403 1,258 Interest expense, net (14,471) (21,596) Income before income taxes 101,066 92,788 Income taxes 39,610 35,259 Net income $ 61,456 $ 57,529 Net income per share $ 2.51 $ 2.36 Average number of common and common equivalent shares outstanding 24,532 24,418
See notes to condensed consolidated financial statements. CAESARS WORLD, INC. AND SUBSIDIARIES Consolidated Statements of Income - (Unaudited) (In thousands, except net income per share)
Three Months Ended April 30, 1994 1993 Revenue Casino $184,505 $170,820 Rooms 16,725 17,561 Food and beverage 19,539 18,729 Other income 16,475 17,299 237,244 224,409 Costs and expenses Casino 107,170 94,540 Rooms 4,951 5,183 Food and beverage 15,486 14,587 Other operating expenses 8,839 9,258 Selling, general and administrative 46,803 45,422 Depreciation and amortization 14,013 13,394 Provision for doubtful accounts 17,106 9,451 214,368 191,835 Operating income 22,876 32,574 Interest and dividend income 756 272 Interest expense, net (4,693) (5,371) Income before income taxes 18,939 27,475 Income taxes 7,291 10,440 Net income $ 11,648 $ 17,035 Net income per share $ .47 $ .69 Average number of common and common equivalent shares outstanding 24,620 24,588
See notes to condensed consolidated financial statements. CAESARS WORLD, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows - (Unaudited) (In thousands)
Nine Months Ended April 30, 1994 1993 Cash flows from (used for) operating activities: Net income $ 61,456 $ 57,529 Non-cash charges to income, net 47,242 46,371 Changes in assets and liabilities due to operating activities: Receivables, net (9,945) 1,344 Accounts payable and accrued expenses (713) (20,021) Other assets and liabilities, net (12,739) (8,703) Net cash provided from operating activities 85,301 76,520 Cash flows used for investing activities: Purchases of property and equipment (42,040) (25,052) Other investing activities, net (1,921) (2,541) Net cash used for investing activities (43,961) (27,593) Cash flows from (used for) financing activities: Issuance of 8 7/8 % Senior Subordinated Notes - 150,000 Increase in long-term bank borrowings - 125,000 Reductions in debt and obligations under capital leases (32,415) (309,312) Other (1,571) (3,769) Net cash used for financing activities (33,986) (38,081) Net increase in cash and cash equivalent investments 7,354 10,846 Cash and cash equivalent investments at the beginning of the period 108,616 52,336 Cash and cash equivalent investments at the end of the period $ 115,970 $ 63,182 Supplemental cash flow information Cash used for: Payment of interest $ 17,732 $ 28,372 Payment of Federal and state income taxes, net $ 39,756 $ 36,835
See notes to condensed consolidated financial statements. Note 1. Condensed Consolidated Financial Statements -- The condensed consolidated balance sheet as of April 30, 1994, the consolidated statement of shareholders' equity for the nine months ended April 30, 1994, the consolidated statements of income for the three and nine months ended April 30, 1994 and 1993, and the condensed consolidated statements of cash flows for the nine months ended April 30, 1994 and 1993, have been prepared by the Company and have not been audited. In the opinion of management, all material adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. All significant intercompany balances and transactions have been eliminated. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's July 31, 1993 Annual Report to Shareholders. The results of operations for the three and nine month periods ended April 30, 1994 are not necessarily indicative of the operating results for the full year. The Company's independent public accountants have made an unaudited interim review of the condensed consolidated financial statements for the three and nine months ended April 30, 1994 and 1993, in accordance with professional standards and procedures established by the American Institute of Certified Public Accountants. A report from the independent public accountants regarding the unaudited review of the interim financial statements is included herein in Part II, Item 6 (a), Exhibit 15. Note 2. Net Income Per Share -- Net income per share is based upon the weighted average number of common and common equivalent shares outstanding for each period presented. Note 3. Regulatory Environment -- The gaming industry in which the Company operates is subject to extensive regulatory supervision and, accordingly, operating results could be affected by legislative and regulatory changes or changes in the policies of or application of the laws by governmental entities. There have been recent aborted proposals for a federal gaming excise tax and for withholding on certain gaming winnings which in either case if adopted could materially adversely affect operating results. See also the discussion under the caption "Regulatory Environment" set forth on page 24 of the Form 10-K of the Company for the fiscal year ended July 31, 1993. Note 4. Income Taxes -- In February 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, which supersedes previously issued standards. The Company adopted SFAS 109 effective August 1, 1993. As permissible under the new standard, the Company reflected the impact as a cumulative adjustment in the fiscal 1994 first quarter and did not restate prior periods. Under SFAS No. 109, the liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based upon differences between financial and tax reporting utilizing the enacted tax rates and laws in effect when the differences are expected to reverse. The adoption of the new standard had an immaterial impact on net income. In August 1993, the Omnibus Budget Reconciliation Act of 1993 (OBRA) was enacted which resulted in an increase in the federal corporate tax rate from 34% to 35% retroactive to January 1, 1993. The retroactive impact of the enactment of OBRA and the adoption of SFAS 109 aggregated a net charge to the provision for income taxes in the first quarter of fiscal 1994 of approximately $750,000. Future net income of the Company will be adversely impacted by the increased tax rate. Note 5. On January 1, 1994 the Company adopted a 401(k) Plan for all full-time employees having at least one year of service (as defined in the Plan). This replaced the Company sponsored Individual Retirement Account (IRA) Plan. The annual pretax cost to the Company of the new 401(k) Plan will be approximately $2 million greater than the previous IRA Plan. Note 6. The Culinary Workers Union and Bartenders Union contracts covering approximately 2,500 employees and another union contract covering approximately 20 theatrical stage employees expired on June 1, 1994 at Caesars Palace in Las Vegas and work is continuing under a contract extension cancelable with three days notice. The Company is continuing to negotiate with these unions and currently does not expect a work slow- down or stoppage as a result of these expired labor contracts. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Cash flow from operations together with available debt capacity are the primary components providing the Company financial flexibility to explore expansion opportunities and provide adequate liquidity. Net cash provided by operating activities was $85.3 million in the first nine months of fiscal 1994, compared with $76.5 million in the same period of fiscal 1993. The increase in fiscal 1994 is primarily attributable to higher net income and the changes in accounts payable and accrued expenses which reduced the cash generated by operating activities by a lesser amount during the fiscal 1994 first nine month period compared with the same period in fiscal 1993. At April 30, 1994 the Company's cash equivalent investments were $76.1 million compared with $67.5 million at July 31, 1993. Cash used for investing activities in the nine months ended April 30, 1994 was primarily for capital expenditure projects at Caesars Palace in Las Vegas and Caesars Atlantic City. Construction was completed in December 1993 on two rooftop luxury suites, each costing approximately $6 million, on one of the hotel towers at Caesars Palace. In mid- October 1993, Caesars Atlantic City opened a new 15,000-square-foot simulcast casino, bringing the resort's total casino area to approximately 75,000 square feet. This new facility features high-tech systems for race horse betting, a poker area and additional table games. Approximately 300 slot machines were added in the original casino area where table games had previously been located. In the first six months of fiscal 1993, the Company completed its debt restructuring program. The impact of this restructuring combined with the scheduled reduction of bank borrowings has been to significantly reduce interest expense. A description of the new notes, the new bank loan agreement and the debt restructuring is included in Note 6 of Notes to Consolidated Financial Statements beginning on page 40 of the Form 10-K of the Company for the fiscal year ended July 31, 1993 and in "Debt Restructuring" of Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations on page 21 of the July 31, 1993 Form 10-K incorporated herein by reference. In October 1993, the Company announced an additional $150 million multi- year capital expenditure program for Caesars Palace in Las Vegas. This will dramatically change the exterior of Caesars Palace, add approximately 100 new suites, provide underground parking, add approximately 40,000 square feet of casino space as well as provide new entertainment features. This is in addition to the major capital expenditures previously announced which include a new state-of-the-art magical and dining entertainment facility to be opened in fiscal 1995. The conceptual design phase of the multi-year capital program is expected to be complete in the summer of 1994 with the construction occurring principally in fiscal 1995 and 1996. During the nine months ended April 30, 1994, $6.3 million was advanced by the Company to Windsor Casino Ltd. (WCL). The Company owns one-third of WCL, a management company that will operate a casino for the government in Windsor, Ontario, Canada. See Item 5 "Other Information" in Part II on page 21 of this Form 10-Q. Between April 30, 1994 and June 13, 1994 an additional $8.3 million was advanced to WCL by the Company. A temporary casino was opened to the public on May 17, 1994 and no additional material advances are expected to be made by the Company prior to July 31, 1994. WCL is currently negotiating with banks to obtain a credit line which will repay substantially all the amounts advanced by the owners of WCL including the Company. Such a bank facility will be severally guaranteed by each of the joint venture partners and is expected to be in place during the fourth quarter of the Company's fiscal 1994 year. Successful development of the projects described at Item 5 of Part II of this Report and of other opportunities currently being explored will likely require capital investment by the Company. The Company expects to be able to meet its future debt obligations, finance operations and capital expenditures, as well as provide for a substantial expansion of operations through internally generated cash flow, liquidation of cash equivalent investments, future borrowings (including amounts available under the bank credit facilities), capital lease transactions and/or sales of equity securities. Results of Operations Comparison of net income for the three month periods ended April 30, 1994 and April 30, 1993 Contribution to revenue and operating income by location, interest and income taxes for the periods, were as follows (in thousands):
Three Months Ended April 30, 1994 1993 Revenue Nevada $142,157 $133,153 New Jersey 80,389 76,526 Casino/hotel operations 222,546 209,679 Pocono Resorts 9,798 9,734 Other (A) 4,900 4,996 Total revenue $237,244 $224,409 Contributions to operating income Nevada $ 14,686 $ 22,893 New Jersey 11,014 12,400 Casino/hotel operations 25,700 35,293 Pocono Resorts 1,002 1,133 Other expenses (B) (3,826) (3,852) Operating income 22,876 32,574 Interest and dividend income 756 272 Interest expense, net (4,693) (5,371) Income before income taxes 18,939 27,475 Income taxes 7,291 10,440 Net income $ 11,648 $ 17,035 (A) Other revenue is primarily from merchandising operations. (B) Other expenses include the contribution from merchandising operations and corporate expenses. Intercompany transactions have been eliminated.
Nevada Operations Revenue increased 7% at the Nevada properties in the three months ended April 30, 1994 compared with the same prior year period. Higher casino revenue during the quarter resulted from record third quarter table game and slot machine activity generated by the Company's two Nevada casinos. The table games win percentage was lower than the five-year average but about the same as the year earlier third quarter. Total slot win was flat as compared with the fiscal 1993 third quarter win because a lower win percentage offset increased slot machine activity in the fiscal 1994 third quarter. The 36% reduction in operating income from Nevada operations during the three months ended April 30, 1994 compared with the prior year was primarily the result of increased casino expenses and a higher provision for doubtful accounts. Casino expenses included marketing costs associated with the higher volume of business in Nevada operations along with costs related to a world heavyweight championship fight at Caesars Palace. The provision for doubtful accounts increased $6.8 million during the quarter as the use of issuing receivable allowances to high-betting limit customers as a marketing incentive has intensified with the opening of three new themed casino/hotels on the "Strip" in Las Vegas between October and December 1993. The higher provision for doubtful accounts was also caused by a 23% increase in the amount of casino credit issued. Caesars New Jersey Revenue from Caesars Atlantic City for the third quarter ended April 30, 1994 increased 5% from the same prior year period, primarily attributable to increased casino revenue. Slot activity was 15% higher, which combined with a slightly lower win percentage, resulted in a 14% increase in slot win for the third quarter of fiscal 1994, compared with the fiscal 1993 third quarter. The Simulcast Casino, which began operation in October 1993, also had a favorable impact on the third quarter. Table game win for the three months ended April 30, 1994, compared with the three months ended April 30, 1993, was down 15% due to a comparatively low win percentage during the quarter on approximately the same amount of table game activity. The contribution of operating income from Atlantic City was down 11%, primarily the result of higher operating costs, including the increased payroll costs related to the Simulcast Casino and an increase in the provision for doubtful accounts. Interest Expense The Company's interest expense decreased 13% when comparing the fiscal 1994 third quarter with the fiscal 1993 third quarter, primarily due to reduced amount of debt. Subsequent Event See page 20 for discussion of subsequent event occurring after April 30, 1994. Comparison of net income for the nine month periods ended April 30, 1994 and April 30, 1993 Contribution to revenue and operating income by location, interest and income taxes for the periods, were as follows (in thousands):
Nine Months Ended April 30, 1994 1993 Revenue Nevada $465,429 $423,334 New Jersey 250,473 251,141 Casino/hotel operations 715,902 674,475 Pocono Resorts 33,172 31,644 Other (A) 15,234 15,325 Total revenue $764,308 $721,444 Contributions to operating income Nevada $ 80,489 $ 78,590 New Jersey 40,796 41,168 Casino/hotel operations 121,285 119,758 Pocono Resorts 6,450 6,150 Other expenses (B) (14,601) (12,782) Operating income 113,134 113,126 Interest and dividend income 2,403 1,258 Interest expense, net (14,471) (21,596) Income before income taxes 101,066 92,788 Income taxes 39,610 35,259 Net income $ 61,456 $ 57,529 (A) Other revenue is primarily from merchandising operations. (B) Other expenses include the contribution from merchandising operations and corporate expenses. Intercompany transactions have been eliminated.
Nevada Operations Revenue from Nevada operations increased 10% in the nine months ended April 30, 1994 compared with the same prior year period. This increase is primarily due to a 12% increase in casino revenue over the prior year and is a Company record for any first nine months period. Table game activity during the nine months ended April 30, 1994 increased 8%, with a win percentage of 22.0% compared with 20.6% for the nine months ended April 30, 1993. Slot activity improved 13% during the nine months, as the number of visitors to Las Vegas increased and marketing programs continued to generate higher levels of customer traffic at Caesars Palace. Slot win increased by 4.8%, less than the activity improvement due to a lower slot win percentage. Contribution to operating income from Nevada operations for the nine months ended April 30, 1994 was 2.4% higher than the nine months ended April 30, 1993. Increased casino costs and a higher provision for doubtful accounts partially offset the higher revenue for the nine months. Casino cost increases were primarily related to the increased activity levels in Las Vegas and include marketing related costs, including a world heavyweight championship fight held in the third quarter at Caesars Palace in Las Vegas, as well as increases in payroll expenses for necessary staffing levels. The provision for doubtful accounts was 38% higher than the nine months ended April 30, 1993, primarily because of increased casino credit issued and marketing incentives for high-betting-limit customers. The intensified competition, particularly in Las Vegas, has increased nearly all types of marketing costs in order to maintain and grow market share. Caesars New Jersey Revenue from Caesars Atlantic City for the nine months ended April 30, 1994 was flat as compared with the nine months ended April 30, 1993. Casino revenue decreased for the nine months, due to lower table game revenue partially offset by increased slot revenue. The decrease in table game revenue was primarily attributable to a 12% lower activity level for the nine months, compared with the same period last year. This decrease is consistent with the Atlantic City industry trend, and was partially offset by a higher win percentage compared with prior year. An increased number of jurisdictions allowing legalized gaming as well as a severe winter reduced the number of visitors to Atlantic City. The fiscal 1994 casino revenue was favorably impacted by the opening in October 1993 of the Simulcast Casino, which features horse race betting and poker. The game of keno is expected to be introduced in the Simulcast Casino area in June 1994. Costs were flat in the nine months compared with prior year, as increases in payroll related costs associated with the new casino area and in the provision for doubtful accounts were offset by decreases in marketing, busing and legal costs. Other Expenses Other expenses increased 14% in the first nine months of fiscal 1994 compared with fiscal 1993 due to increased compensation costs and costs related to the exploration of expansion opportunities by the Company. See Item 5 of Part II of this Form 10-Q for a discussion of the major expansion activities the Company is currently working on. Interest and Dividend Income A higher balance of interest and dividend earning cash equivalent investments during the first nine months of fiscal 1994 compared with the same period last year is the primary reason for the $1.1 million increase. Interest Expenses The Company's interest expense decreased 33% for the nine months ended April 30, 1994 compared with the nine months ended April 30, 1993. A reduction in borrowings as well as the debt restructuring completed in early fiscal 1993 resulted in the lower interest expense. Income taxes The effective income tax rate during the nine months ended April 30, 1994, was 1.2 percentage points higher than the same period in 1993. The higher tax rate reflects the impact of two non-recurring tax charges. In August 1993, the Federal tax rate increased, retroactive to January 1, 1993, from 34 to 35 percent. The Company also changed its method for income tax accounting by adopting FASB 109 effective August 1, 1993. The impact of this cumulative change in accounting and the retroactive change in the corporate tax rate aggregated a net charge of approximately $750,000 in the first quarter of fiscal 1994. Subsequent Event On June 13, 1994, the Company announced that due to unusually large losses to a small number of long-term, table-game customers in June the Company expects a substantial reduction in the Company's income for the fiscal 1994 fourth quarter ending July 31, 1994, when compared with the same quarter of fiscal 1993. The Company's net income for the fiscal 1993 fourth quarter was $25,686,000, or $1.04 per share. The Company can not estimate the size of the expected reduction in net income because about seven weeks remain in the current fiscal quarter and the sizes of either casino wins or losses in the short-term are difficult to predict, particularly when it comes to high-level betting activity. The Company believes that it is highly unlikely that the effects of the recent losses to these high-level customers at its Nevada operations, estimated to total more than $18 million, could be offset enough to avoid the quarter-to-quarter decline in earnings. PART II. Other Information Item 1. Legal Proceedings See Item 3 of the Form 10-K of the Company for the year ended July 31, 1993 which is hereby incorporated herein. Item 5. Other Information The Forum Shops at Caesars (the Forum) is a shopping complex located on approximately eight acres owned by the Company at the north end of Caesars Palace in Las Vegas having approximately 235,000 square feet of gross leasable area. The Company leases the land to an independent development company which provided its own financing to construct the Forum and which owns the development and pays rent to the Company. The Company is negotiating the possible lease of approximately four additional acres adjacent to the site to a spin off of current tenant in order for them to add an approximate 200,000 square foot expansion to the Forum, including a new entertainment feature. Since the project is subject to the mutually satisfactory completion of such negotiations, finalizing a new lease agreement, and the independent development company obtaining the necessary financing and obtaining regulatory approvals, the ultimate timing and completion of this project is uncertain at this time. On May 20, 1994, Ontario Canada Corp. and Windsor Casino Ltd. announced details of the Interim Casino Operating Agreement for Casino Windsor, the 50,000 square foot temporary casino which opened to the public on May 17, 1994. The casino is owned by the Government of Ontario and operated by Windsor Casino, Ltd., an Ontario company owned equally by Caesars World, Inc., Circus Circus Enterprises, Inc. and Hilton Hotels Corporation. The interim agreement runs until April 30, 1997, and calls for Windsor Casino Ltd. to receive 2.75 percent of gross operating revenue and 5 percent of net operating margins. Windsor Casino Ltd. has first refusal operating rights for casinos in Ontario within 125 kilometers of Casino Windsor and the parent companies agree that without Ontario Casino Corp.'s consent, they will not be part of any U.S.- based competing casinos within this distance. The interim casino includes 65 table games and 1,702 slot machines. A permanent facility, which will include a 75,000 square foot casino and 300-room hotel, will be built in Windsor and is expected to open within three years. Ontario Casino Corp. and Windsor Casino Ltd. also signed a Heads of Agreement which represents a commitment by the parties to negotiate final agreements for the construction, development, financing, and operation of the permanent facility. In October 1993, the Casino Reinvestment Development Authority (CRDA) of the State of New Jersey announced it had selected a joint venture comprised of Doubletree Hotel Corporation, a subsidiary of the Company and an independent developer and operator to build in two phases, a 1,000 room non-gaming Convention Center Headquarters Hotel in Atlantic City. The first phase will be a 600 room first class hotel. As currently proposed, in exchange for a non-controlling interest in the joint venture and receipt of certain CRDA credits, the Company will guarantee a portion of the first mortgage note on the property. The project is subject to final agreements among all the parties, including governmental regulatory agencies and the obtaining of third-party financing for the project and is currently is awaiting regulatory approval, which is uncertain as to timing and result at the current time. Subsidiaries of the Company have also entered into joint ventures to seek opportunities to own and operate riverboats in Michigan City, Indiana and St. Louis, Missouri. The Michigan City project is still in the proposal stage and is a joint venture with a subsidiary of the Company being a 30% partner. With respect to the St. Louis project, the joint venture has previously announced that it had proposed the "Joint Venture Proposal", a $210 million casino and hotel development at Laclede's Landing which includes a $110 million 976-room convention center hotel with parking, and a 152,000 square foot, dockside casino barge and entertainment complex expected to cost approximately $100 million including a $10 million investment for parking. The current plan calls for 2,658 slot machines and 170 gaming tables on two 2,000 gaming position barges to be built in phases about two years apart. On January 24, 1994 the City of St. Louis (City) announced that the Joint Venture Proposal was ranked first among the nine proposals the City had received and the City planned to commence negotiations for a berthing lease with the joint venture. Representatives of the City have cautioned, however, that it had some concerns about the Joint Venture Proposal and if negotiations did not eliminate those concerns or were otherwise unsuccessful, it would move to the second-ranked candidate. Once a lease is negotiated, City agency and board of alderman approvals and state licensing will be required. The ultimate outcome of these negotiations and approvals are uncertain at this time. On January 25, 1994, the Missouri gaming law was declared unconstitutional insofar as it allowed slot machines, baccarat, craps, roulette, and other games which in the Court's view do not require skill in deciding the outcome. A voter initiative directed at legalizing games that were found to be unconstitutional did not pass at the April 5, 1994 election. Efforts are in process to obtain a sufficient number of signatures on a petition to have a referendum on the ballot for the November, 1994 election. Currently, Missouri law only authorizes poker and blackjack, video games and craps and the authorization of the video games and craps is being challenged in court as contrary to the aforesaid court decision. The original proposal by the Company as described above does not appear to be financially feasible under such a limited gaming scenario. The joint venture currently expects to finance about 80% of the project through mortgage bonds. Subject to further developments, the Company currently expects to have a 37.5% interest in the ultimate limited partnership and a 50% interest in management companies that will manage the hotel and casino under the Joint Venture Proposal. The Company also is in the process of working with the Agua Caliente Tribe (Tribe) in completing land acquisitions and regulatory approvals with respect to a proposed management project for the Tribe in Palm Springs, California. The ultimate timing of this project is uncertain at this time. The government of Greece plans to shortly issue a new request for proposal ("RFP") to operate private casinos in Greece. The Company has an arrangement with another company to be a manager and investor in a project to be developed by such other company if it is successful in obtaining a franchise from the Greek government. This RFP will be evaluated for submission after it is issued. The prospects and timing for this project are uncertain. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits filed herewith (the * denotes documents included in this filing): *10(a) First Amendment dated May 24, 1994 to CWI's Executive Security Plan as amended and restated as of January 24, 1989. *10(b) First Amendment dated May 24, 1994 to CWI's 1985 Executive Security Plan as amended and restated as of February 21, 1991. *10(c) First Amendment dated May 24, 1994 to CWI's 401(k) Retirement Savings Plan dated January 1, 1994. 10(d) Stock Option Agreement between CWI and Evander Holyfield dated February 22, 1994. Incorporated by reference to Exhibit 28(ii) of this Corporation's registration statement on Form S-8, Registration No. 33-52363 filed with the Commission February 22, 1994. *15 Review Report of Independent Public Accountants SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CAESARS WORLD, INC. (Registrant) Principal Financial Officer: Date: June 14, 1994 /s/ Roger Lee Roger Lee Senior Vice President-Finance and Administration Principal Accounting Officer: Date: June 14, 1994 /s/ Bruce C. Hinckley Bruce C. Hinckley Vice President and Corporate Controller EX-10.A 2 EXHIBIT 10(A) F1994 3RD QTR 10-Q FIRST AMENDMENT TO EXECUTIVE SECURITY PLAN (As Amended and Restated January 24, 1989) Caesars World, Inc. hereby adopts this First Amendment to the Amended and Restated Executive Security Plan to be effective May 24, 1994: (1) Section 5.5 is hereby amended to add the following as the second sentence in such section: "All such amendments shall be formally adopted by the Board by unanimous written consent or by resolution at a duly constituted Board meeting in accordance with the established procedures of the Board." (2) Except as amended by the foregoing, the Plan shall remain in full force and effect. The undersigned, as Secretary of Caesars World, Inc. does hereby certify that the foregoing amendment was duly adopted at the duly held meeting of the Board of Directors of Caesars World, Inc. on May 24, 1994 and is presently in full force and effect. CAESARS WORLD, INC. /s/Roger Lee ____________________________ Roger Lee Senior Vice President - Finance and Administration EX-10.B 3 EXHIBIT 10(B) F1994 3RD QTR FORM 10-Q FIRST AMENDMENT TO 1985 EXECUTIVE SECURITY PLAN (As Amended and Restated February 21, 1991) Caesars World, Inc. hereby adopts this First Amendment to the Amended and Restated 1985 Executive Security Plan to be effective May 24, 1994: (1) Section 5.5 is hereby amended to add the following as the second sentence in such section: "All such amendments shall be formally adopted by the Board by unanimous written consent or by resolution at a duly constituted Board meeting in accordance with the established procedures of the Board." (2) Except as amended by the foregoing, the Plan shall remain in full force and effect. The undersigned, as Secretary of Caesars World, Inc. does hereby certify that the foregoing amendment was duly adopted at the duly held meeting of the Board of Directors of Caesars World, Inc. on May 24, 1994 and is presently in full force and effect. CAESARS WORLD, INC. /s/Roger Lee _____________________________ Roger Lee Senior Vice President - Finance and Administration EX-10.C 4 EXHIBIT 10.C F1994 3RD QTR FORM 10-Q FIRST AMENDMENT TO CAESARS 401(k) RETIREMENT SAVINGS PLAN Caesars World, Inc. hereby adopts this First Amendment to the Caesars 401(k) Retirement Savings Plan to be effective May 24, 1994: (1) Section 12.01 is hereby amended to add the following as the last sentence thereof: "All amendments shall be made by the Board of Directors and shall be formally adopted by unanimous written consent or by resolution at a duly constituted Board meeting in accordance with the established procedures of the Board of Directors. (2) Except as amended by the foregoing, the Plan shall remain in full force and effect. The undersigned, as Secretary of Caesars World, Inc. does hereby certify that the foregoing amendment was duly adopted at the duly held meeting of the Board of Directors of Caesars World, Inc. on May 24, 1994 and is presently in full force and effect. CAESARS WORLD, INC. /s/Phil Ball ________________________ Phil Ball, Secretary EX-15 5 EXHIBIT 15 F1994 3RD QTR FORM 10-Q REVIEW REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders and Directors of Caesars World, Inc.: We have reviewed the accompanying condensed consolidated balance sheet of Caesars World, Inc. (a Florida corporation) and subsidiaries as of April 30, 1994, and the related consolidated statements of income for the three-month and nine-month periods ended April 30, 1994 and 1993, the consolidated statement of shareholders' equity for the nine- month period ended April 30, 1994, and the condensed consolidated statements of cash flows for the nine-month periods ended April 30, 1994 and 1993. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical review procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Caesars World, Inc. and subsidiaries as of July 31, 1993 (not presented herein), and, in our report dated August 24, 1993, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of July 31, 1993, is fairly stated in all material respects, in relation to the consolidated balance sheet from which it has been derived. ARTHUR ANDERSEN & CO. Los Angeles, California May 16, 1994 EXHIBIT 15 -----END PRIVACY-ENHANCED MESSAGE-----