Circus-Circus was an unprofitable business and a small time casino when William Bennett and William Pennington purchased it in 1974 for $50,000. With a new marketing program in place and a stock offering in October of 1983, the company was rejuvenated. What it has become is a hotel/casino that is targeted mainly towards middle income gamblers as well as family oriented vacationers, but has not strayed away from the high rollers that are found in most casinos. With the focus being on many market segments, along with it’s amusement park type atmosphere, this company can be categorized as a broad differentiator. Most recently, to go along with their amusement park atmosphere, Circus-Circus has broke ground into developing an aquatic environment that has beaches, snorkeling reef, and a swim-up shark exhibit.
1. Financial Ratio Analysis
A. Current Ratio 151,849/129,768124,380/95,532110,923/82,000
1.17 times1.3 times1.35 times
B. Total Debt to 1,694,739/968,161/826,424/
Total Assets2,729,1112,213,503 1,512,548
C. Asset Turnover1,170,182/ 1,299,596/ 1,334,250/
2,729,111 2,213,503 1,512,548
43% 59% 88%
The results for current ratio are favorable. It states that Circus-Circus can pay off their short run debt with money to spare. Total debt to total asset is also favorable showing that they do not borrow much money that is listed as an asset. Asset turnover, however, is unfavorable. It was not as bad in 1995, but they are only making back about half of what they are spending. This is most likely due to the new aquatic addition they are putting adding.
4. Circus-Circus’ stock has been in somewhat of a slump since mid-March when the stock was at 26, but in June of 1998, had plummeted to 16.One of the main reasons for the drop is the rumor that Hilton Hotels has planned a takeover of the business. Talks had stopped between the two in March because Circus-Circus was asking for more than Hilton was willing to pay. There are rumors circulating that the talks will continue soon because Hilton now considers the offer to be just right. This will benefit both companies due to the competition in both the hotel and casino industry.