SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
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| Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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For the quarterly period ended September 30, 2001. | ||
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or | ||
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| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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Commission File Number 1-11853 | ||
ARGOSY GAMING COMPANY
(Exact name of Registrant as Specified in its Charter)
Delaware |
| 37-1304247 |
(State or other jurisdiction of incorporation) |
| (I.R.S. Employer Identification No.) |
219 Piasa Street
(618) 474-7500
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
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 ý No o
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: 28,798,270 shares of Common Stock, $.01 par value per share, as of November 12, 2001.
ARGOSY GAMING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data)
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| September 30, |
| December 31, |
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| 2001 |
| 2000 |
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| (unaudited) |
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Current assets: |
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Cash and cash equivalents |
| $ | 57,791 |
| $ | 59,374 |
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Accounts receivable, net |
| 4,131 |
| 2,444 |
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Deferred income taxes |
| 4,849 |
| 4,849 |
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Other current assets |
| 7,058 |
| 5,527 |
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Total current assets |
| 73,829 |
| 72,194 |
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Net property and equipment |
| 444,540 |
| 397,989 |
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Other assets: |
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Goodwill, net |
| 731,428 |
| 29,482 |
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Intangible and other assets, net |
| 33,918 |
| 29,804 |
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Deferred finance costs, net |
| 26,391 |
| 7,767 |
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Total other assets |
| 791,737 |
| 67,053 |
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Total assets |
| $ | 1,310,106 |
| $ | 537,236 |
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Current liabilities: |
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Accounts payable |
| $ | 14,000 |
| $ | 15,304 |
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Accrued payroll and related expenses |
| 20,734 |
| 11,677 |
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Accrued interest payable |
| 16,750 |
| 2,659 |
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Other accrued liabilities |
| 68,341 |
| 52,275 |
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Current maturities of long-term debt |
| 4,214 |
| 23,775 |
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Total current liabilities |
| 124,039 |
| 105,690 |
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Long-term debt |
| 1,017,321 |
| 252,561 |
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Deferred income taxes |
| 17,471 |
| 10,762 |
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Other long-term obligations |
| 560 |
| 236 |
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Minority interests in equity of consolidated subsidiaries |
| - |
| 64,035 |
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Stockholders' equity: |
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Common stock, $.01 par; 60,000,000 shares authorized; 28,773,270 and 28,394,423 shares issued and outstanding at September 30, 2001 and December 31, 2000, respectively |
| 288 |
| 284 |
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Capital in excess of par |
| 82,031 |
| 80,693 |
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Retained earnings |
| 68,396 |
| 22,975 |
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Total stockholders' equity |
| 150,715 |
| 103,952 |
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Total liabilities and stockholders' equity |
| $ | 1,310,106 |
| $ | 537,236 |
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See accompanying notes to condensed consolidated financial statements.
ARGOSY GAMING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Share and Per Share Data)
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| Nine Months Ended |
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| September 30, |
| September 30, |
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| 2001 |
| 2000 |
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| (unaudited) |
| (unaudited) |
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Revenues: |
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Casino |
| $ | 554,389 |
| $ | 502,428 |
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Admissions |
| 13,945 |
| 14,772 |
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Food, beverage and other |
| 57,586 |
| 50,348 |
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| 625,920 |
| 567,548 |
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Less promotional allowances |
| (74,528 | ) | (72,053 | ) | ||
Net revenues |
| 551,392 |
| 495,495 |
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Costs and expenses: |
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Casino |
| 216,120 |
| 184,568 |
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Selling, general and administrative |
| 105,207 |
| 105,344 |
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Food, beverage and other |
| 43,166 |
| 35,151 |
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Other operating expenses |
| 26,216 |
| 22,615 |
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Depreciation and amortization |
| 33,923 |
| 26,923 |
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Write down of assets |
| - |
| 6,800 |
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| 424,632 |
| 381,401 |
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Income from operations |
| 126,760 |
| 114,094 |
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Other income (expense): |
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| �� |
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Interest income |
| 706 |
| 1,160 |
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Interest expense |
| (46,342 | ) | (27,417 | ) | ||
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| (45,636 | ) | (26,257 | ) | ||
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Income before income taxes, minority interests and extraordinary item |
| 81,124 |
| 87,837 |
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Minority interests |
| (4,086 | ) | (30,994 | ) | ||
Income tax expense |
| (31,617 | ) | (22,538 | ) | ||
Income before extraordinary item |
| 45,421 |
| 34,305 |
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Extraordinary loss on extinguishment of debt |
| - |
| (1,154 | ) | ||
Net income |
| $ | 45,421 |
| $ | 33,151 |
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Basic income per share before extraordinary loss |
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Basic income per share before extraordinary loss |
| $ | 1.59 |
| $ | 1.22 |
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Extraordinary loss |
| - |
| (0.04 | ) | ||
Basic income per share |
| $ | 1.59 |
| $ | 1.18 |
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Diluted income per share before extraordinary loss |
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Diluted income per share before extraordinary loss |
| $ | 1.55 |
| $ | 1.18 |
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Extraordinary loss |
| - |
| (0.04 | ) | ||
Diluted income per share |
| $ | 1.55 |
| $ | 1.14 |
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See accompanying notes to condensed consolidated financial statements.
ARGOSY GAMING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Share and Per Share Data)
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| Three Months Ended |
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| September 30, |
| September 30, |
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| 2001 |
| 2000 |
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| (unaudited) |
| (unaudited) |
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Revenues: |
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Casino |
| $ | 216,127 |
| $ | 172,152 |
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Admissions |
| 4,834 |
| 5,068 |
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Food, beverage and other |
| 22,356 |
| 17,614 |
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| 243,317 |
| 194,834 |
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Less promotional allowances |
| (28,625 | ) | (25,517 | ) | ||
Net revenues |
| 214,692 |
| 169,317 |
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Costs and expenses: |
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Casino |
| 87,886 |
| 62,844 |
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Selling, general and administrative |
| 37,245 |
| 36,814 |
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Food, beverage and other |
| 17,103 |
| 12,421 |
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Other operating expenses |
| 10,196 |
| 7,659 |
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Depreciation and amortization |
| 12,694 |
| 8,874 |
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| 165,124 |
| 128,612 |
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Income from operations |
| 49,568 |
| 40,705 |
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Other income (expense): |
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Interest income |
| 81 |
| 229 |
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Interest expense |
| (20,515 | ) | (7,905 | ) | ||
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| (20,434 | ) | (7,676 | ) | ||
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Income before income taxes and minority interests |
| 29,134 |
| 33,029 |
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Minority interests |
| - |
| (10,756 | ) | ||
Income tax expense |
| (11,977 | ) | (9,138 | ) | ||
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Net income |
| $ | 17,157 |
| $ | 13,135 |
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Basic income per share |
| $ | 0.60 |
| $ | 0.46 |
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Diluted income per share |
| $ | 0.58 |
| $ | 0.45 |
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See accompanying notes to condensed consolidated financial statements.
ARGOSY GAMING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands, Except Share and Per Share Data)
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| Nine Months Ended |
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| September 30, |
| September 30, |
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| 2001 |
| 2000 |
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| (unaudited) |
| (unaudited) |
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Cash flows from operating activities: |
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Net income |
| $ | 45,421 |
| $ | 33,151 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Extraordinary loss |
| - |
| 1,154 |
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Depreciation |
| 27,011 |
| 24,623 |
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Amortization |
| 8,617 |
| 2,826 |
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Compensation expense recognized on issuance of stock |
| - |
| 39 |
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Write down of assets |
| - |
| 6,800 |
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Minority interests |
| 4,086 |
| 30,994 |
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Deferred income taxes |
| 5,336 |
| 13,519 |
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Changes in operating assets and liabilities, net of effect from acquisition: |
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Accounts receivable and other current assets |
| (663 | ) | 9,663 |
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Accounts payable and other current liabilities |
| 20,156 |
| 11,872 |
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Net cash provided by operating activities |
| 109,964 |
| 134,641 |
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Cash flows from investing activities: |
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Purchases of property and equipment |
| (20,455 | ) | (22,465 | ) | ||
Purchases of Minority Interests in Partnership |
| (366,700 | ) | (9,058 | ) | ||
Purchase of Empress Casino Joliet, net of cash acquired |
| (453,880 | ) | - |
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Other |
| 89 |
| (713 | ) | ||
Net cash used in investing activities |
| (840,946 | ) | (32,236 | ) | ||
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Cash flows from financing activities: |
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Proceeds (repayment) of line of credit, net |
| 135,400 |
| (62,800 | ) | ||
Proceeds from issuance of long-term debt |
| 634,000 |
| - |
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Payments on long-term debt |
| (14,642 | ) | (3,844 | ) | ||
Repurchase of First Mortgage Notes |
| - |
| (23,716 | ) | ||
Decrease in restricted cash held in escrow |
| - |
| 25,244 |
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Payments of deferred finance costs |
| (20,807 | ) | - |
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Repayment of partner loans |
| (266 | ) | (16,535 | ) | ||
Partnership equity distributions |
| (5,199 | ) | (12,816 | ) | ||
Repayment of partner capital contribution |
| - |
| (3,964 | ) | ||
Payment of preferred equity return and dividends to partner |
| (456 | ) | (1,548 | ) | ||
Proceeds from stock option exercises |
| 1,342 |
| 281 |
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Other |
| 27 |
| (212 | ) | ||
Net cash provided by (used in) financing activities |
| 729,399 |
| (99,910 | ) | ||
Net (decrease) increase in cash and cash equivalents |
| (1,583 | ) | 2,495 |
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Cash and cash equivalents, beginning of period |
| 59,374 |
| 47,090 |
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Cash and cash equivalents, end of period |
| $ | 57,791 |
| $ | 49,585 |
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See accompanying notes to condensed consolidated financial statements.
ARGOSY GAMING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands, Except Share and Per Share Data)
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| Shares |
| Common Stock |
| Capital in Excess of Par |
| Retained Earnings |
| Total Stockholders' Equity |
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Balance, December 31, 2000 |
| 28,394,423 |
| $ | 284 |
| $ | 80,693 |
| $ | 22,975 |
| $ | 103,952 |
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Stock options exercised |
| 378,847 |
| 4 |
| 1,338 |
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| 1,342 |
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Net income for the nine months ended September 30, 2001 |
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| 45,421 |
| 45,421 |
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Balance, September 30, 2001 |
| 28,773,270 |
| $ | 288 |
| $ | 82,031 |
| $ | 68,396 |
| $ | 150,715 |
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See accompanying notes to condensed consolidated financial statements.
ARGOSY GAMING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(In Thousands, Except Share and Per Share Data)
1. Basis of Presentation
Argosy Gaming Company (collectively with its subsidiaries, "Argosy" or "Company") is engaged in the business of providing casino style gaming and related entertainment to the public, through its riverboat casinos in Alton and Joliet, Illinois; Lawrenceburg, Indiana; Riverside, Missouri; Baton Rouge, Louisiana; and Sioux City, Iowa.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Interim results may not necessarily be indicative of results which may be expected for any other interim period or for the year as a whole. For further information, refer to the financial statements and footnotes thereto for the year ended December 31, 2000, included in the Company's Annual Report on Form 10-K (File No. 1-11853). The accompanying unaudited condensed consolidated financial statements contain all adjustments which are, in the opinion of management, necessary to present fairly the financial position and the results of operations for the periods indicated. Such adjustments include only normal recurring accruals. Certain 2000 amounts have been reclassified to conform to the 2001 financial statement presentation.
�� The Financial Accounting Standards Board recently issued FASB Statement 142, Accounting for Goodwill and Intangible Assets. Upon adoption of the statement, amortization of the remaining book value of goodwill will cease as of January 1, 2002 and will be tested for impairment at least annually. The provisions of the statement are effective for fiscal years beginning after December 15, 2001. Goodwill and intangible assets acquired in transactions completed after June 30, 2001, will follow the new requirements immediately. Based on the Company’s preliminary review, application of the non-amortization provisions of the statement would have increased diluted income per share by $0.04 and $0.11 for the three months and nine months ended September 30, 2001, respectively. The diluted income per share effect for the three months and nine months ended September 30, 2000, would have been less than $0.01 and $0.01, respectively. During 2002, the Company will perform the first of the required impairment tests of goodwill and indefinite lived intangible assets as of January 1, 2002, and has not yet determined what the effect of these tests will be on the earnings and financial position of the Company.
The Company adopted new accounting guidance (EITF 00-14 and EITF 00-22) issued in, and effective beginning with the first quarter 2001, which requires that the cost of the cash-back component of the Company’s ‘Argosy Preferred Card’ customer loyalty program, including promotional coupons, be treated as a reduction of revenues. These costs had previously been treated as a casino expense. The new guidance impacts only the classification of these costs on Argosy’s income statement. It does not impact operating profit or EBITDA. The prior year’s results have been reclassified to reflect the impact of implementing this new guidance.
2. Long-Term Debt
Long-term debt consists of the following:
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| September 30, |
| December 31, |
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| 2001 |
| 2000 |
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Senior Subordinated notes, due September 2011, interest payable semi-annually at 9.0% |
| $ | 200,000 |
| $ | - |
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Senior Subordinated Notes, including unamortized premium of $8,522 at September 30, 2001, due June 2009, interest payable semi-annually at 10.75% |
| 358,522 |
| 200,000 |
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Senior secured line of credit, expires July 31, 2006, interest payable at least quarterly at either LIBOR or prime plus a margin |
| 182,800 |
| 47,400 |
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Term Loan, matures July 31, 2008, principal and interest payments due quarterly with interest at LIBOR and/or Base Rate |
| 275,000 |
| - |
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Notes payable, principal and interest payments due quarterly through September 2015, discounted at 10.5% |
| 5,213 |
| 5,831 |
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Notes payable, principal and interest payments due monthly, interest payable at prime + 1%, secured by gaming vessel and certain equipment |
| - |
| 14,024 |
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Loans from partner, principal due in annual installments, interest payable at prime + 6% |
| - |
| 9,081 |
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| 1,021,535 |
| 276,336 |
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Less: current maturities |
| 4,214 |
| 23,775 |
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Long-term debt, less current maturities |
| $ | 1,017,321 |
| $ | 252,561 |
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On July 26, 2001, the Company issued $200,000 of 9.0% Senior Subordinated Notes due 2011. On February 1, 2001, the Company issued $150,000 of additional 10¾% Senior Subordinated Notes due 2009. Prior to this issuance, the Company had $200,000 of outstanding 10¾% Subordinated Notes (all “Subordinated Notes”). On July 31, 2001, the Company entered into an amended and restated Senior Secured Line of Credit Agreement, maintaining the Company’s available line of credit at $400,000 and adding a Term Loan Commitment of $275,000 (“Credit Facility”). The Credit Facility is secured by liens on substantially all of the Company’s assets and the Company’s subsidiaries are co-borrowers. Substantially all of the Company’s wholly-owned operating subsidiaries guarantee the Subordinated Notes. The Subordinated Notes rank junior to all of the senior indebtedness of the Company, including borrowings under the Credit Facility.
The Subordinated Notes and the Credit Facility contain certain restrictions on the payment of dividends on the Company’s common stock and the incurrence of additional indebtedness, as well as other customary debt covenants. In addition, the Credit Facility requires the Company to maintain certain financial ratios.
3. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share:
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| Nine Months Ended |
| Three Months Ended |
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|
| September 30, |
| September 30, |
| September 30, |
| September 30, |
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|
| 2001 |
| 2000 |
| 2001 |
| 2000 |
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|
| (unaudited) |
| (unaudited) |
| (unaudited) |
| (unaudited) |
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Numerator: |
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Numerator for basic and diluted earnings per share - |
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Net Income before extraordinary item |
| $ | 45,421 |
| $ | 34,305 |
| $ | 17,157 |
| $ | 13,135 |
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Denominator: |
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Denominator for basic earnings per share - |
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Weighted-average shares outstanding |
| 28,595,457 |
| 28,306,336 |
| 28,762,020 |
| 28,379,063 |
| ||||
Effect of dilutive securities (computed using the treasury stock method): |
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Restricted stock |
| - |
| 46,110 |
| - |
| - |
| ||||
Employee and directors stock options |
| 615,971 |
| 689,700 |
| 495,655 |
| 605,664 |
| ||||
Warrants |
| 76,925 |
| 65,807 |
| 78,018 |
| 61,140 |
| ||||
Dilutive potential common shares |
| 692,896 |
| 801,617 |
| 573,673 |
| 666,804 |
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Denominator for diluted earnings per share - adjusted |
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Weighted-average shares and assumed conversions |
| 29,288,353 |
| 29,107,953 |
| 29,335,693 |
| 29,045,867 |
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Basic income per share before extraordinary loss |
| $ | 1.59 |
| $ | 1.22 |
| $ | 0.60 |
| $ | 0.46 |
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Extraordiary loss |
| - |
| (0.04 | ) | - |
| - |
| ||||
Basic income per share |
| $ | 1.59 |
| $ | 1.18 |
| $ | 0.60 |
| $ | 0.46 |
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Diluted earnings per share before extraordinary loss |
| $ | 1.55 |
| $ | 1.18 |
| $ | 0.58 |
| $ | 0.45 |
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Extraordinary loss |
| - |
| (0.04 | ) | - |
| - |
| ||||
Diluted earnings per share |
| $ | 1.55 |
| $ | 1.14 |
| $ | 0.58 |
| $ | 0.45 |
|
4. Acquisitions
In 2001, the Company purchased the 42.5% limited partnership interests in the Argosy Casino and Hotel in Lawrenceburg, Indiana ( the “Lawrenceburg Casino”) for an aggregate price of $365 million including all preferred equity interest and outstanding partner loans. As a result of these acquisitions, the Company now owns 100% of the Lawrenceburg casino.
The purchase prices for the minority interests were determined based upon estimates of future cash flows and evaluations of the net worth of the assets acquired. The purchases are being accounted for under the purchase method. The allocation of the purchase price resulted in approximately $296 million in goodwill, which is being amortized over a 40-year life. In accordance with FASB Statement 142, amortization of the remaining book value of goodwill will cease as of January 1, 2002, and will be tested for impairment at least annually. The purchases were funded with approximately $155 million of net proceeds from the issuance of Subordinated Notes and borrowings of approximately $210 million under Credit Facility.
On July 31, 2001, the Company diversified its operations and cash flows by completing the acquisition of 100% of the Empress Casino Joliet Corporation (with casino operations located in Joliet, Illinois) for approximately $469 million. The purchase price was determined based upon estimates of future cash flows and the net worth of the assets acquired. This acquisition was funded through the issuance of Senior Subordinated Notes due 2011 and borrowings under the Credit Facility. The results of operations for the Empress Casino Joliet for the two months ending September 30, 2001, since the acquisition, are included in the Company’s condensed consolidated statements of income.
The Empress Casino Joliet acquisition is being accounted for using the purchase method under FASB Statement 141. The preliminary allocation of the purchase price, using appraised values, resulted in approximately $410,842 in goodwill and $5,400 in intangibles. Finalization of the allocation requires completion of appraisals and a change in working capital adjustment to the purchase price. In accordance with FASB Statement 142, the goodwill will not be amortized but instead subject to annual impairment tests.
The following unaudited pro forma consolidated financial information for the Company has been prepared assuming the acquisitions had occurred on the first day of the respective year.
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| For the nine months ended |
| For the three months ended |
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|
| September 30, |
| September 30, |
| September 30, |
| September 30, |
| ||||
|
| 2001 |
| 2000 |
| 2001 |
| 2000 |
| ||||
|
| (unaudited) |
| (unaudited) |
| (unaudited) |
| (unaudited) |
| ||||
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Net revenues |
| $ | 714,737 |
| $ | 675,745 |
| $ | 240,893 |
| $ | 229,090 |
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Income from operations |
| $ | 169,502 |
| $ | 161,096 |
| $ | 55,592 |
| $ | 56,109 |
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Net income |
| $ | 55,455 |
| $ | 45,016 |
| $ | 17,722 |
| $ | 17,274 |
|
|
|
|
|
|
|
|
|
|
| ||||
Diluted net income per share |
| $ | 1.89 |
| $ | 1.55 |
| $ | 0.60 |
| $ | 0.59 |
|
These unaudited pro forma results are presented for comparative purposes only. The pro forma results are not necessarily indicative of what our actual results would have been had the acquisitions been completed as of the beginning of the respective year, or of future results.
5. Commitments and Contingent Liabilities
The Company is subject to, from time to time, various legal and regulatory proceedings in the ordinary course of its business.
The Company believes that current proceedings will not have a material effect on the financial condition of the Company or the
results of its operations.
6. Subsidiary Guarantors
The Credit Facility is secured by a first lien on substantially all of the Company’s assets and the Company’s subsidiaries are co-borrowers. The Subordinated Notes are fully and unconditionally guaranteed, on a joint and several basis, by substantially all of the Company’s subsidiaries. The Subordinated Notes rank junior to all of the senior indebtedness of the Company, including borrowings under the Credit Facility.
The Company’s subsidiary which operates the Lawrenceburg Casino & Hotel is now a guarantor. Prior to the Company’s acquisition of the minority interests in Lawrenceburg, the subsidiary was a non-guarantor. As such, previous financial statements
have been reclassified to reflect this subsidiary as a guarantor.
Condensed balance sheets as of September 30, 2001, and December 31, 2000, are as follows:
|
| September 30, 2001 |
| ||||||||||
|
| Parent Company |
| Guarantors |
| Eliminations |
| Consolidated |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Current assets: |
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 7,781 |
| $ | 50,010 |
| $ | - |
| $ | 57,791 |
|
Other current assets |
| 6,274 |
| 9,764 |
| - |
| 16,038 |
| ||||
Total current assets |
| 14,055 |
| 59,774 |
| - |
| 73,829 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net property and equipment |
| 4,320 |
| 440,220 |
| - |
| 444,540 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Other assets: |
|
|
|
|
|
|
|
|
| ||||
Goodwill, net |
| - |
| 731,428 |
| - |
| 731,428 |
| ||||
Intangible and other assets, net |
| 219 |
| 33,699 |
| - |
| 33,918 |
| ||||
Deferred finance costs, net |
| 26,391 |
| - |
| - |
| 26,391 |
| ||||
Investment in subsidiaries |
| 1,153,387 |
| - |
| (1,153,387 | ) | - |
| ||||
Total other assets |
| 1,179,997 |
| 765,127 |
| (1,153,387 | ) | 791,737 |
| ||||
Total assets |
| $ | 1,198,372 |
| $ | 1,265,121 |
| $ | (1,153,387 | ) | $ | 1,310,106 |
|
Current liabilities: |
|
|
|
|
|
|
|
|
| ||||
Accounts payable |
| $ | 2,160 |
| $ | 11,840 |
| $ | - |
| $ | 14,000 |
|
Other current liabilities |
| 24,125 |
| 81,700 |
| - |
| 105,825 |
| ||||
Current maturities of long-term debt |
| 3,544 |
| 670 |
| - |
| 4,214 |
| ||||
Total current liabilities |
| 29,829 |
| 94,210 |
| - |
| 124,039 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Long-term debt |
| 1,012,778 |
| 4,543 |
| - |
| 1,017,321 |
| ||||
Deferred income taxes |
| 5,050 |
| 12,421 |
| - |
| 17,471 |
| ||||
Intercompany advances and investments, net |
| - |
| 705,735 |
| (705,735 | ) | - |
| ||||
Other long-term obligations |
| - |
| 560 |
| - |
| 560 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Stockholders' equity: |
|
|
|
|
|
|
|
|
| ||||
Common stock, $.01 par; 60,000,000 shares authorized; 28,773,270 shares issued and outstanding at September 30, 2001 |
| 288 |
| 1 |
| (1 | ) | 288 |
| ||||
Capital in excess of par |
| 82,031 |
| 5,256 |
| (5,256 | ) | 82,031 |
| ||||
Retained earnings |
| 68,396 |
| 442,395 |
| (442,395 | ) | 68,396 |
| ||||
Total stockholders' equity |
| 150,715 |
| 447,652 |
| (447,652 | ) | 150,715 |
| ||||
Total liabilities and stockholders' equity |
| $ | 1,198,372 |
| $ | 1,265,121 |
| $ | (1,153,387 | ) | $ | 1,310,106 |
|
|
| December 31, 2000 |
| ||||||||||
|
| Parent Company |
| Guarantors |
| Eliminations |
| Consolidated |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Current assets: |
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 3,476 |
| $ | 55,898 |
| $ | - |
| $ | 59,374 |
|
Other current assets |
| 4,842 |
| 7,978 |
| - |
| 12,820 |
| ||||
Total current assets |
| 8,318 |
| 63,876 |
| - |
| 72,194 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net property and equipment |
| 2,181 |
| 395,808 |
| - |
| 397,989 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Other assets: |
|
|
|
|
|
|
|
|
| ||||
Goodwill, net |
| - |
| 29,482 |
| - |
| 29,482 |
| ||||
Intangible and other assets, net |
| 271 |
| 29,533 |
| - |
| 29,804 |
| ||||
Deferred finance costs, net |
| 7,657 |
| 110 |
| - |
| 7,767 |
| ||||
Investment in subsidiaries |
| 343,751 |
| - |
| (343,751 | ) | - |
| ||||
Total other assets |
| 351,679 |
| 59,125 |
| (343,751 | ) | 67,053 |
| ||||
Total assets |
| $ | 362,178 |
| $ | 518,809 |
| $ | (343,751 | ) | $ | 537,236 |
|
|
|
|
|
|
|
|
|
|
| ||||
Current liabilities: |
|
|
|
|
|
|
|
|
| ||||
Accounts payable |
| $ | 1,960 |
| $ | 13,344 |
| $ | - |
| $ | 15,304 |
|
Other current liabilities |
| 7,283 |
| 59,328 |
| - |
| 66,611 |
| ||||
Current maturities of long-term debt |
| - |
| 23,775 |
| - |
| 23,775 |
| ||||
Total current liabilities |
| 9,243 |
| 96,447 |
| - |
| 105,690 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Long-term debt |
| 247,400 |
| 5,161 |
| - |
| 252,561 |
| ||||
Intercompany advances and investments, net |
| - |
| 102,241 |
| (102,241 | ) | - |
| ||||
Deferred income taxes |
| 1,583 |
| 9,179 |
| - |
| 10,762 |
| ||||
Other long-term obligations |
| - |
| 236 |
| - |
| 236 |
| ||||
Minority interests in equity of consolidated subsidiaries |
| - |
| - |
| 64,035 |
| 64,035 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Stockholders' equity: |
|
|
|
|
|
|
|
|
| ||||
Common stock, $.01 par; 60,000,000 shares authorized; 28,394,423 shares issued and outstanding at December 31, 2000 |
| 284 |
| 1 |
| (1 | ) | 284 |
| ||||
Capital in excess of par |
| 80,693 |
| 5,256 |
| (5,256 | ) | 80,693 |
| ||||
Retained earnings |
| 22,975 |
| 300,288 |
| (300,288 | ) | 22,975 |
| ||||
Total stockholders' equity |
| 103,952 |
| 305,545 |
| (305,545 | ) | 103,952 |
| ||||
Total liabilities and stockholders' equity |
| $ | 362,178 |
| $ | 518,809 |
| $ | (343,751 | ) | $ | 537,236 |
|
Condensed statements of income for the nine and three months ended September 30, 2001 and 2000, are as follows
|
| Nine months ended September 30, 2001 |
| ||||||||||
|
| Parent Company |
| Guarantors |
| Eliminations |
| Consolidated |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Revenues: |
|
|
|
|
|
|
|
|
| ||||
Casino |
| $ | - |
| $ | 554,389 |
| $ | - |
| $ | 554,389 |
|
Admissions |
| - |
| 13,945 |
| - |
| 13,945 |
| ||||
Food, beverage and other |
| 3,474 |
| 57,586 |
| (3,474 | ) | 57,586 |
| ||||
|
| 3,474 |
| 625,920 |
| (3,474 | ) | 625,920 |
| ||||
Less promotional allowances |
| (6 | ) | (74,522 | ) | - |
| (74,528 | ) | ||||
Net revenues |
| 3,468 |
| 551,398 |
| (3,474 | ) | 551,392 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Costs and expenses: |
|
|
|
|
|
|
|
|
| ||||
Casino |
| - |
| 216,120 |
| - |
| 216,120 |
| ||||
Selling, general and administrative |
| 14,961 |
| 93,720 |
| (3,474 | ) | 105,207 |
| ||||
Food, beverage and other |
| - |
| 43,166 |
|
|
| 43,166 |
| ||||
Other operating expenses |
| 169 |
| 26,047 |
|
|
| 26,216 |
| ||||
Depreciation and amortization |
| 306 |
| 33,617 |
|
|
| 33,923 |
| ||||
|
| 15,436 |
| 412,670 |
| (3,474 | ) | 424,632 |
| ||||
Income (loss) from operations |
| (11,968 | ) | 138,728 |
| - |
| 126,760 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Other income (expense): |
|
|
|
|
|
|
|
|
| ||||
Interest income |
| 3,514 |
| 1,001 |
| (3,809 | ) | 706 |
| ||||
Interest expense |
| (17,546 | ) | (32,605 | ) | 3,809 |
| (46,342 | ) | ||||
|
| (14,032 | ) | (31,604 | ) | - |
| (45,636 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Income (loss) before income taxes, minority interests and equity in net income of consolidated subsidiaries |
| (26,000 | ) | 107,124 |
| - |
| 81,124 |
| ||||
Equity in net income of consolidated subsidiaries |
| 63,801 |
| - |
| (63,801 | ) | - |
| ||||
Minority interests |
| - |
| (4,086 | ) | - |
| (4,086 | ) | ||||
Income tax (expense) benefit |
| 7,620 |
| (39,237 | ) | - |
| (31,617 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 45,421 |
| $ | 63,801 |
| $ | (63,801 | ) | $ | 45,421 |
|
|
| Nine months ended September 30, 2000 |
| ||||||||||
|
| Parent Company |
| Guarantors |
| Eliminations |
| Consolidated |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Revenues: |
|
|
|
|
|
|
|
|
| ||||
Casino |
| $ | - |
| $ | 502,428 |
| $ | - |
| $ | 502,428 |
|
Admissions |
| - |
| 14,772 |
| - |
| 14,772 |
| ||||
Food, beverage and other |
| 3,131 |
| 50,148 |
| (2,931 | ) | 50,348 |
| ||||
|
| 3,131 |
| 567,348 |
| (2,931 | ) | 567,548 |
| ||||
Less promotional allowances |
| (8 | ) | (72,045 | ) | - |
| (72,053 | ) | ||||
Net revenues |
| 3,123 |
| 495,303 |
| (2,931 | ) | 495,495 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Costs and expenses: |
|
|
|
|
|
|
|
|
| ||||
Casino |
| - |
| 184,568 |
| - |
| 184,568 |
| ||||
Selling, general and administrative |
| 12,046 |
| 96,229 |
| (2,931 | ) | 105,344 |
| ||||
Food, beverage and other |
| - |
| 35,151 |
| - |
| 35,151 |
| ||||
Other operating expenses |
| 212 |
| 22,403 |
| - |
| 22,615 |
| ||||
Depreciation and amortization |
| 281 |
| 26,642 |
| - |
| 26,923 |
| ||||
Write down of assets |
| 6,800 |
| - |
| - |
| 6,800 |
| ||||
|
| 19,339 |
| 364,993 |
| (2,931 | ) | 381,401 |
| ||||
Income (loss) from operations |
| (16,216 | ) | 130,310 |
| - |
| 114,094 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Other income (expense): |
|
|
|
|
|
|
|
|
| ||||
Interest income |
| 4,473 |
| 3,998 |
| (7,311 | ) | 1,160 |
| ||||
Interest expense |
| (23,097 | ) | (11,631 | ) | 7,311 |
| (27,417 | ) | ||||
|
| (18,624 | ) | (7,633 | ) | - |
| (26,257 | ) | ||||
Income (loss) before income taxes, minority interests, extraordinary item and equity in net income of consolidated subsidiaries |
| (34,840 | ) | 122,677 |
| - |
| 87,837 |
| ||||
Equity in net income of consolidated subsidiaries |
| 56,866 |
| - |
| (56,866 | ) | - |
| ||||
Minority interests |
| - |
| (30,994 | ) | - |
| (30,994 | ) | ||||
Income tax (expense) benefit |
| 12,279 |
| (34,817 | ) | - |
| (22,538 | ) | ||||
Income (loss) before extraordinary item |
| 34,305 |
| 56,866 |
| (56,866 | ) | 34,305 |
| ||||
Extraordinary item |
| (1,154 | ) | - |
| - |
| (1,154 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 33,151 |
| $ | 56,866 |
| $ | (56,866 | ) | $ | 33,151 |
|
|
| Three months ended September 30, 2001 |
| ||||||||||
|
| Parent Company |
| Guarantors |
| Eliminations |
| Consolidated |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Revenues: |
|
|
|
|
|
|
|
|
| ||||
Casino |
| $ | - |
| $ | 216,127 |
| $ | - |
| $ | 216,127 |
|
Admissions |
| - |
| 4,834 |
| - |
| 4,834 |
| ||||
Food, beverage and other |
| 1,446 |
| 22,356 |
| (1,446 | ) | 22,356 |
| ||||
|
| 1,446 |
| 243,317 |
| (1,446 | ) | 243,317 |
| ||||
Less promotional allowances |
| (1 | ) | (28,624 | ) | - |
| (28,625 | ) | ||||
Net revenues |
| 1,445 |
| 214,693 |
| (1,446 | ) | 214,692 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Costs and expenses: |
|
|
|
|
|
|
|
|
| ||||
Casino |
| - |
| 87,886 |
| - |
| 87,886 |
| ||||
Selling, general and administrative |
| 5,741 |
| 32,950 |
| (1,446 | ) | 37,245 |
| ||||
Food, beverage and other |
| - |
| 17,103 |
|
|
| 17,103 |
| ||||
Other operating expenses |
| 49 |
| 10,147 |
|
|
| 10,196 |
| ||||
Depreciation and amortization |
| 130 |
| 12,564 |
|
|
| 12,694 |
| ||||
|
| 5,920 |
| 160,650 |
| (1,446 | ) | 165,124 |
| ||||
Income (loss) from operations |
| (4,475 | ) | 54,043 |
| - |
| 49,568 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Other income (expense): |
|
|
|
|
|
|
|
|
| ||||
Interest income |
| 959 |
| 47 |
| (925 | ) | 81 |
| ||||
Interest expense |
| (5,028 | ) | (16,412 | ) | 925 |
| (20,515 | ) | ||||
|
| (4,069 | ) | (16,365 | ) | - |
| (20,434 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Income (loss) before income taxes and equity in net income of consolidated subsidiaries |
| (8,544 | ) | 37,678 |
| - |
| 29,134 |
| ||||
Equity in net income of consolidated subsidiaries |
| 22,189 |
| - |
| (22,189 | ) | - |
| ||||
Income tax (expense) benefit |
| 3,512 |
| (15,489 | ) | - |
| (11,977 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 17,157 |
| $ | 22,189 |
| $ | (22,189 | ) | $ | 17,157 |
|
|
| Three months ended September 30, 2000 |
| ||||||||||
|
| Parent Company |
| Guarantors |
| Eliminations |
| Consolidated |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Revenues: |
|
|
|
|
|
|
|
|
| ||||
Casino |
| $ | - |
| $ | 172,152 |
| $ | - |
| $ | 172,152 |
|
Admissions |
| - |
| 5,068 |
| - |
| 5,068 |
| ||||
Food, beverage and other |
| 1,060 |
| 17,614 |
| (1,060 | ) | 17,614 |
| ||||
|
| 1,060 |
| 194,834 |
| (1,060 | ) | 194,834 |
| ||||
Less promotional allowances |
| (2 | ) | (25,515 | ) | - |
| (25,517 | ) | ||||
Net revenues |
| 1,058 |
| 169,319 |
| (1,060 | ) | 169,317 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Costs and expenses: |
|
|
|
|
|
|
|
|
| ||||
Casino |
| - |
| 62,844 |
| - |
| 62,844 |
| ||||
Selling, general and administrative |
| 4,971 |
| 32,903 |
| (1,060 | ) | 36,814 |
| ||||
Food, beverage and other |
| - |
| 12,421 |
| - |
| 12,421 |
| ||||
Other operating expenses |
| 58 |
| 7,601 |
| - |
| 7,659 |
| ||||
Depreciation and amortization |
| 95 |
| 8,779 |
| - |
| 8,874 |
| ||||
|
| 5,124 |
| 124,548 |
| (1,060 | ) | 128,612 |
| ||||
Income (loss) from operations |
| (4,066 | ) | 44,771 |
| - |
| 40,705 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Other income (expense): |
|
|
|
|
|
|
|
|
| ||||
Interest income |
| 1,210 |
| 1,040 |
| (2,021 | ) | 229 |
| ||||
Interest expense |
| (6,700 | ) | (3,226 | ) | 2,021 |
| (7,905 | ) | ||||
|
| (5,490 | ) | (2,186 | ) | - |
| (7,676 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Income (loss) before income taxes, minority interests, and equity in net income of consolidated subsidiaries |
| (9,556 | ) | 42,585 |
| - |
| 33,029 |
| ||||
Equity in net income of consolidated subsidiaries |
| 19,859 |
| - |
| (19,859 | ) | - |
| ||||
Minority interests |
| - |
| (10,756 | ) | - |
| (10,756 | ) | ||||
Income tax (expense) benefit |
| 2,832 |
| (11,970 | ) | - |
| (9,138 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 13,135 |
| $ | 19,859 |
| $ | (19,859 | ) | $ | 13,135 |
|
Condensed statements of cash flows for the nine months ended September 30, 2001 and 2000, are as follows:
|
| Nine months ended September 30, 2001 |
| ||||||||||
|
| Parent Company |
| Guarantors |
| Eliminations |
| Consolidated |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net cash provided by operating activities |
| $ | 1,279 |
| $ | 108,685 |
| $ | - |
| $ | 109,964 |
|
|
|
|
|
|
|
|
|
|
| ||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
| ||||
Purchases of property and equipment |
| (2,448 | ) | (18,007 | ) | - |
| (20,455 | ) | ||||
Purchase of minority interests in Partnership |
| 1,373 |
| (303,011 | ) | (65,062 | ) | (366,700 | ) | ||||
Purchase of Empress Casino Joliet, net of cash acquired |
| - |
| (453,880 | ) | - |
| (453,880 | ) | ||||
Investments in and advances from (to) subsidiaries |
| (745,834 | ) | 680,772 |
| 65,062 |
| - |
| ||||
Other |
| - |
| 89 |
| - |
| 89 |
| ||||
Net cash used in investing activities |
| (746,909 | ) | (94,037 | ) | - |
| (840,946 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
| ||||
Proceeds from line of credit, net |
| 135,400 |
| - |
| - |
| 135,400 |
| ||||
Proceeds from issuance of long-term debt |
| 634,000 |
| - |
| - |
| 634,000 |
| ||||
Payments on long-term debt |
| - |
| (14,642 | ) | - |
| (14,642 | ) | ||||
Payments of deferred finance costs |
| (20,807 | ) | - |
| - |
| (20,807 | ) | ||||
Repayment of partner loans |
| - |
| (266 | ) | - |
| (266 | ) | ||||
Partnership equity distributions |
| - |
| (5,199 | ) | - |
| (5,199 | ) | ||||
Payment of preferred equity return and dividends to partner |
| - |
| (456 | ) | - |
| (456 | ) | ||||
Proceeds from stock option exercises |
| 1,342 |
| - |
| - |
| 1,342 |
| ||||
Other |
| - |
| 27 |
| - |
| 27 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net cash provided by (used in) financing activities |
| 749,935 |
| (20,536 | ) | - |
| 729,399 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net (decrease) increase in cash and cash equivalents |
| 4,305 |
| (5,888 | ) | - |
| (1,583 | ) | ||||
Cash and cash equivalents, beginning of period |
| 3,476 |
| 55,898 |
| - |
| 59,374 |
| ||||
Cash and cash equivalents, end of period |
| $ | 7,781 |
| $ | 50,010 |
| $ | - |
| $ | 57,791 |
|
|
| Nine months ended September 30, 2000 |
| ||||||||||
|
| Parent Company |
| Guarantors |
| Eliminations |
| Consolidated |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net cash provided by operating activities |
| $ | 3,549 |
| $ | 131,092 |
| $ | - |
| $ | 134,641 |
|
|
|
|
|
|
|
|
|
|
| ||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
| ||||
Purchases of property and equipment |
| (1,197 | ) | (21,268 | ) | - |
| (22,465 | ) | ||||
Purchases of minority interests in partnership |
| - |
| (9,058 | ) | - |
| (9,058 | ) | ||||
Investments in and advances (to) from subsidiaries |
| 60,625 |
| (60,625 | ) | - |
| - |
| ||||
Other |
| - |
| (713 | ) | - |
| (713 | ) | ||||
Net cash (used in) provided by investing activities |
| 59,428 |
| (91,664 | ) | - |
| (32,236 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
| ||||
Repayment of line of credit, net |
| (62,800 | ) | - |
| - |
| (62,800 | ) | ||||
Payments on long-term debt |
| - |
| (3,844 | ) | - |
| (3,844 | ) | ||||
Repurchase of First Mortgage Notes |
| (23,716 | ) | - |
| - |
| (23,716 | ) | ||||
Decrease in restricted cash held in escrow |
| 25,244 |
| - |
| - |
| 25,244 |
| ||||
Repayment of partner loans |
| - |
| (16,535 | ) | - |
| (16,535 | ) | ||||
Partnership equity distributions |
| - |
| (12,816 | ) | - |
| (12,816 | ) | ||||
Repayment of partner capital contribution |
| - |
| (3,964 | ) | - |
| (3,964 | ) | ||||
Payment of preferred equity return and dividends to partners |
| - |
| (1,548 | ) | - |
| (1,548 | ) | ||||
Proceeds from stock option exercises |
| 281 |
| - |
| - |
| 281 |
| ||||
Other |
| - |
| (212 | ) | - |
| (212 | ) | ||||
Net cash used in financing activities |
| (60,991 | ) | (38,919 | ) | - |
| (99,910 | ) | ||||
Net increase in cash and cash equivalents |
| 1,986 |
| 509 |
| - |
| 2,495 |
| ||||
Cash and cash equivalents, beginning of period |
| 531 |
| 46,559 |
| - |
| 47,090 |
| ||||
Cash and cash equivalents, end of period |
| $ | 2,517 |
| $ | 47,068 |
| $ | - |
| $ | 49,585 |
|
ARGOSY GAMING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Except where otherwise noted, the words, “we,” “us,” “our” and similar terms, as well as references to “Argosy” or the “Company” refer to Argosy Gaming Company and all of its subsidiaries.
Overview
Through our subsidiaries, we own and operate the Alton Belle Casino, in Alton, Illinois; the Empress Casino in Joliet, Illinois; the Argosy Casino in Riverside, Missouri; the Argosy Casino in Baton Rouge, Louisiana; the Belle of Sioux City Casino in Sioux City, Iowa; and the Argosy Casino in Lawrenceburg, Indiana. In the first quarter of 2001, the Company became the sole owner of the Argosy Casino in Lawrenceburg, Indiana, through the purchase of the 42.5% minority interests in the property. Prior to this acquisition, we were the majority owner of the Lawrenceburg casino and, as such, our historical consolidated financial statements included the assets, liabilities and results of operations for the Lawrenceburg casino on a consolidated basis. On February 5, 2001, we opened our 300-room hotel at our Baton Rouge location.
On July 31, 2001, we completed our acquisition of the Empress Casino in Joliet, Illinois on a 300-acre site approximately 40 miles southwest of Chicago and approximately two miles from the intersection of Interstate 55 and Interstate 80. The acquisition was funded through the issuance of $200 million of 9.0% Senior Subordinated Notes due 2011 and a $275 million Term Loan through our amended and restated Credit Facility dated July 31, 2001. The results of operations for the Empress Casino Joliet for the two months ending September 30, 2001, since the acquisition, are included in the Company’s condensed consolidated statements of income.
|
| Nine Months Ended |
| Three Months Ended |
| ||||||||
|
| September 30, |
| September 30, |
| September 30, |
| September 30, |
| ||||
|
| 2001 |
| 2000 |
| 2001 |
| 2000 |
| ||||
|
| (unaudited) |
| (unaudited) |
| (unaudited) |
| (unaudited) |
| ||||
Casino Revenues |
|
|
|
|
|
|
|
|
| ||||
Alton Belle Casino |
| $ | 92,491 |
| $ | 85,761 |
| $ | 30,915 |
| $ | 29,385 |
|
Argosy Casino - Riverside |
| 73,747 |
| 72,983 |
| 24,478 |
| 24,632 |
| ||||
Argosy Casino - Baton Rouge |
| 58,526 |
| 54,189 |
| 19,973 |
| 18,212 |
| ||||
Belle of Sioux City Casino |
| 27,509 |
| 26,450 |
| 9,541 |
| 8,829 |
| ||||
Argosy Casino - Lawrenceburg |
| 258,496 |
| 263,045 |
| 87,600 |
| 91,094 |
| ||||
Empress Casino Joliet (7) |
| 43,620 |
| - |
| 43,620 |
| - |
| ||||
Total |
| $ | 554,389 |
| $ | 502,428 |
| $ | 216,127 |
| $ | 172,152 |
|
Net Revenues (1) |
|
|
|
|
|
|
|
|
| ||||
Alton Belle Casino |
| $ | 88,948 |
| $ | 82,176 |
| $ | 29,709 |
| $ | 28,066 |
|
Argosy Casino - Riverside |
| 70,620 |
| 69,627 |
| 23,406 |
| 23,422 |
| ||||
Argosy Casino - Baton Rouge |
| 58,485 |
| 51,138 |
| 20,112 |
| 17,037 |
| ||||
Belle of Sioux City Casino |
| 26,803 |
| 25,614 |
| 9,299 |
| 8,592 |
| ||||
Argosy Casino - Lawrenceburg |
| 263,883 |
| 266,463 |
| 89,728 |
| 92,058 |
| ||||
Empress Casino Joliet (7) |
| 42,338 |
| - |
| 42,338 |
| - |
| ||||
Other |
| 315 |
| 477 |
| 100 |
| 142 |
| ||||
Total (1) |
| $ | 551,392 |
| $ | 495,495 |
| $ | 214,692 |
| $ | 169,317 |
|
Income (loss) from Operations(2) |
|
|
|
|
|
|
|
|
| ||||
Alton Belle Casino |
| $ | 27,386 |
| $ | 24,905 |
| $ | 8,928 |
| $ | 8,549 |
|
Argosy Casino - Riverside |
| 15,181 |
| 13,086 |
| 4,662 |
| 4,637 |
| ||||
Argosy Casino - Baton Rouge |
| 7,418 |
| 8,940 |
| 2,859 |
| 2,570 |
| ||||
Belle of Sioux City Casino |
| 5,947 |
| 4,961 |
| 2,225 |
| 1,871 |
| ||||
Argosy Casino - Lawrenceburg |
| 84,507 |
| 86,021 |
| 28,925 |
| 29,757 |
| ||||
Empress Casino Joliet (7) |
| 11,163 |
| - |
| 11,163 |
| - |
| ||||
Jazz Enterprises, Inc. (5) |
| (3,526 | ) | (3,821 | ) | (1,026 | ) | (1,236 | ) | ||||
Corporate |
| (18,306 | ) | (12,346 | ) | (5,879 | ) | (5,126 | ) | ||||
Other |
| (1,088 | ) | (852 | ) | (367 | ) | (317 | ) | ||||
Total (6) |
| $ | 128,682 |
| $ | 120,894 |
| $ | 51,490 |
| $ | 40,705 |
|
|
|
|
|
|
|
|
|
|
| ||||
EBITDA(2)(3) |
|
|
|
|
|
|
|
|
| ||||
Alton Belle Casino |
| $ | 31,788 |
| $ | 29,436 |
| $ | 10,437 |
| $ | 10,025 |
|
Argosy Casino - Riverside |
| 18,340 |
| 17,230 |
| 5,716 |
| 6,042 |
| ||||
Argosy Casino - Baton Rouge |
| 11,914 |
| 12,287 |
| 4,397 |
| 3,654 |
| ||||
Belle of Sioux City Casino |
| 7,110 |
| 6,133 |
| 2,609 |
| 2,275 |
| ||||
Argosy Casino - Lawrenceburg |
| 96,452 |
| 101,773 |
| 32,599 |
| 34,944 |
| ||||
Lawrenceburg financial advisory fee (4) |
| (927 | ) | (5,089 | ) | - |
| (1,747 | ) | ||||
Empress Casino Joliet (7) |
| 12,746 |
| - |
| 12,746 |
| - |
| ||||
Jazz Enterprises, Inc. (5) |
| (1,559 | ) | (1,795 | ) | (435 | ) | (560 | ) | ||||
Corporate |
| (13,216 | ) | (12,065 | ) | (3,871 | ) | (5,031 | ) | ||||
Other |
| (43 | ) | (93 | ) | (14 | ) | (23 | ) | ||||
Total (6) |
| $ | 162,605 |
| $ | 147,817 |
| $ | 64,184 |
| $ | 49,579 |
|
(1) New accounting guidance issued in, and effective beginning with the first quarter 2001 requires that the cost of the cash-back component of the Company’s ‘Argosy Preferred Card’ customer loyalty program, including promotional coupons, be treated as a reduction of revenues. These costs had previously been treated as a casino expense. The new guidance impacts only the classification of these costs on Argosy’s income statement. It does not impact operating profit or property EBITDA. The prior year’s results have been reclassified to reflect the impact of implementing this new guidance.
(2) Income from operations and EBITDA exclude (i) consideration of any management fee paid to us, (ii) 42.5% minority interest in our Lawrenceburg casino for periods prior to our February 2001 acquisition of Conseco Entertainment, L.L.C.’s 29.0% minority interest and our March 2001, acquisition of Centaur, Inc.’s 13.5% minority interest and (iii) the 30% minority interest in our Sioux City casino for the period prior to our July 2000 acquisition of this interest.
(3) “EBITDA” is defined as earnings before interest, taxes, depreciation and amortization and is presented before any management fees paid to Argosy. EBITDA should not be construed as an alternative to operating income, or net income (as determined in accordance with generally accepted accounting principles) as an indicator of our operating performance, or as an alternative to cash flows generated by operating, investing and financing activities (as an indicator of cash flow or a measure of liquidity). EBITDA is presented solely as a supplemental disclosure because management believes that it is a widely used measure of operating performance in the gaming industry and for companies with a significant amount of depreciation and amortization. EBITDA may not be comparable to similarly titled measures reported by other companies. We have other significant uses of cash flows, including debt service and capital expenditures, which are not reflected in EBITDA.
(4) The Lawrenceburg partnership paid a financial advisory fee equal to 5.0% of its EBITDA to a minority partner prior to our acquisition of Conseco’s minority interest in February, 2001.
(5) Jazz Enterprises, Inc. is a wholly-owned subsidiary that owns and operates the Catfish Town real estate development adjacent to the Company’s Baton Rouge casino.
(6) The three and nine months ended September 30, 2001, exclude a $1.9 million pretax charge related to the abandoned Kenosha casino development. The nine months ended September 30, 2000, exclude a $6.8 million pretax charge related to the write-off of assets.
(7) Amounts reflect two months of operations since Argosy’s purchase of the Empress Casino Joliet on July 31, 2001. Preliminary purchase accounting has been completed with certain amounts classified as intangibles and goodwill. In accordance with FASB Statement 142, Accounting for Goodwill and Intangible Assets, no amortization expense has been recorded on the goodwill portion of the purchase price. Income from operations could be affected if future reclassifications are required upon finalization of the purchase accounting.
Nine months ended September 30, 2001 compared to nine months ended September 30, 2000
Casino—Casino revenues for the nine months ended September 30, 2001, increased $52.0 million, or 10.3%, to $554.4 million from $502.4 million for the nine months ended September 30, 2000. Alton, Riverside, Sioux City and Baton Rouge reported an aggregate 5.4% increase in casino revenues from $239.4 million to $252.3 million. In particular, Alton casino revenues increased from $85.8 million to $92.5 million, Riverside casino revenues increased from $73.0 million to $73.8 million, Sioux City casino revenues increased from $26.4 million to $27.5 million, and Baton Rouge casino revenues increased from $54.2 million to $58.5 million. Lawrenceburg casino revenues decreased $4.5 million, or 1.7%, to $258.5 million for the nine months ended September 30, 2001, from $263.0 million for the nine months ended September 30, 2000. Our Empress Casino Joliet, acquired July 31, 2001, recorded $43.6 million in casino revenue for the two months since acquisition through September 30, 2001. Each of our casinos reported increases in the average win per passenger for the nine months ended September 30, 2001, versus the nine months ended September 30, 2000.
Casino expenses increased $31.5 million to $216.1 million for the nine months ended September 30, 2001, from $184.6 million for the nine months ended September 30, 2000. Joliet had $21.5 million in casino expenses for their two months of operations since our acquisition. The remaining increase is due to increased gaming taxes totaling $3.7 million and increases in other casino expenses of $6.3 million to support the overall increased revenues as well as increased payroll related costs at all properties.
Admissions—Admissions revenues (net of complimentary admissions) decreased to $2.6 million for the nine months ended September 30, 2001, from $5.0 million for the nine months ended September 30, 2000, due to an increase in complimentary admissions given to customers as part of Lawrenceburg’s marketing program.
Food, Beverage and Other—Food, beverage and other revenues increased $7.3 million to $57.6 million for the nine month period ended September 30, 2001, from $50.3 million for the nine month period ended September 30, 2000. Joliet contributed $4.0 million of this increase. Food, beverage and other net profit decreased $0.8 million to $14.4 million for the nine months ended September 30, 2001, from $15.2 million for the nine months ended September 30, 2000.
Selling, General and Administrative—Selling, general and administrative expenses decreased $0.1 million to $105.2 million for the nine months ended September 30, 2001, from $105.3 million for the nine months ended September 30, 2000, due primarily to decreases in management fees of $4.2 million (due to Argosy’s acquisition of Lawrenceburg’s minority interests in the first quarter 2001) and in promotions expense of $3.5 million at Lawrenceburg, offset by $3.1 million in expenses for Joliet, the $1.9 million of expense to abandon the Kenosha casino development and other increases, primarily payroll, at our properties.
Other Operating Expenses—Other operating expenses increased by $3.6 million to $26.2 million for the nine months ended September 30, 2001, as compared to $22.6 million for the nine months ended September 30, 2000. Joliet accounted for $1.8 million of the increase with the remaining portion of the increase relating to the overall increase in revenues.
Depreciation and Amortization—Depreciation and amortization increased $7.0 million from $26.9 million for the nine months ended September 30, 2000, to $33.9 million for the nine months ended September 30, 2001, due primarily to $4.8 million in incremental goodwill amortization related to the Lawrenceburg acquisition in the first quarter 2001 and the acquisition of Joliet, which added $1.6 million of depreciation and intangible asset amortization for the two months of operations since the acquisition.
Write Down of Assets – For the nine months ended September 30, 2000, $6.8 million related to the Alton landing facility was written down.
Interest Expense—Net interest expense increased $19.3 million to $45.6 million for the nine months ended September 30, 2001, from $26.3 million for the nine months ended September 30, 2000. This increase is primarily attributable to additional borrowings in connection with the Lawrenceburg and Joliet acquisitions.
Minority Interests – Our minority interest expense decreased by $26.9 million to $4.1 million for the nine months ended September 30, 2001, as compared to $31.0 million for the nine months ended September 30, 2000. This decrease is attributable to our Lawrenceburg casino minority interest acquisitions during the first quarter 2001, and as the sole owner, we will no longer incur minority interest expense.
Income Tax Expense – Income tax expense increased by $9.1 million to $31.6 million for the nine months ended September 30, 2001, from $22.5 million for the nine months ended September 30, 2000, due to greater pre-tax earnings.
Extraordinary Loss – We recorded an extraordinary loss of $1.2 million for the nine months ended September 30, 2000, related to the completion of the final phase of the early extinguishment of debt in conjunction with the 1999 refinancing. This extraordinary loss is net of a $0.8 million tax benefit.
Net Income – Net income was $45.4 million for the nine months ended September 30, 2001, compared to $33.2 million for the nine months ended September 30, 2000, due primarily to the factors discussed above.
Three months ended September 30, 2001 compared to three months ended September 30, 2000
Casino—Casino revenues for the three months ended September 30, 2001, increased $43.9 million, or 25.5%, to $216.1 million from $172.2 million for the three months ended September 30, 2000. Alton, Riverside, Sioux City and Baton Rouge reported an aggregate 4.7% increase in casino revenues from $81.1 million to $84.9 million. In particular, Alton casino revenues increased from $29.4 million to $30.9 million, Riverside casino revenues decreased from $24.6 million to $24.5 million, Sioux City casino revenues increased from $8.8 million to $9.5 million, and Baton Rouge casino revenues increased from $18.2 million to $20.0 million. Lawrenceburg casino revenues decreased $3.5 million, or 3.8%, to $87.6 million for the three months ended September 30, 2001, from $91.1 million for the three months ended September 30, 2000. Joliet reported casino revenues of $43.6 million for the two months of operations since our acquisition on July 31, 2001. Each of our casinos reported increases in the average win per passenger for the three months ended September 30, 2001, versus the three months ended September 30, 2000.
Casino expenses increased $25.1 million to $87.9 million for the three months ended September 30, 2001, from $62.8 million for the three months ended September 30, 2000. Joliet had $21.5 million in casino expenses for their two months of operation. The remaining increase is due to increased gaming taxes totaling $0.9 million and increases in other casino expenses of $2.7 million to support the overall increased revenues as well as increased payroll related costs at all properties.
Admissions—Admissions revenues (net of complimentary admissions) decreased to $0.8 million for the three months ended September 30, 2001, from $1.7 million for the three months ended September 30, 2000, due to an increase in complimentary admissions given to customers as part of Lawrenceburg’s marketing program.
Food, Beverage and Other—Food, beverage and other revenues increased $4.7 million to $22.4 million for the three month period ended September 30, 2001, from $17.7 million for the three month period ended September 30, 2000. Joliet contributed $4.0 million of this increase. Food, beverage and other net profit was $5.3 million for the three months ended September 30, 2001, and $5.2 million for the three months ended September 30, 2000.
Selling, General and Administrative—Selling, general and administrative expenses increased $0.4 million to $37.2 million for the three months ended September 30, 2001, from $36.8 million for the three months ended September 30, 2000, due primarily to a decrease in management fees of $1.7 million (due to Argosy’s acquisition of Lawrenceburg’s minority interest in the first quarter 2001) offset by increases in general and administrative costs and the $1.9 million write-off of expenses related to the abandonment of the Kenosha casino development.
Other Operating Expenses—Other operating expenses increased by $2.5 million to $10.2 million for the three months ended September 30, 2001, as compared to $7.7 million for the three months ended September 30, 2000. Joliet’s operations accounted for $1.8 million of the increase with the remaining $0.7 increase related to the overall increase in revenues.
Depreciation and Amortization—Depreciation and amortization increased $3.8 million from $8.9 million for the three months ended September 30, 2000, to $12.7 million for the three months ended September 30, 2001, due primarily to $1.9 million in incremental goodwill amortization related to the Lawrenceburg acquisition late in the first quarter 2001 and $1.6 million of depreciation and intangible asset amortization at Joliet.
Interest Expense—Net interest expense increased $12.7 million to $20.4 million for the three months ended September 30, 2001, from $7.7 million for the three months ended September 30, 2000. This increase is primarily attributable to additional borrowings in connection with the Lawrenceburg and Joliet acquisitions.
Minority Interests – We had no minority interest expense for the three months ended September 30, 2001, as compared to $10.8 million for the three months ended September 30, 2000. This decrease is attributable to our Lawrenceburg casino minority interest acquisitions during the first quarter 2001, and as the sole owner, we no longer incur minority interest expense.
Income Tax Expense – Income tax expense increased by $2.9 million to $12.0 million for the three months ended September 30, 2001, from $9.1 million for the three months ended September 30, 2000, due to greater pre-tax earnings.
Net Income – Net income was $17.2 million for the three months ended September 30, 2001, compared to $13.1 million for the three months ended September 30, 2000, due primarily to the factors discussed above.
Competition
Our Alton Casino faces competition from four other riverboat casino operators in the St. Louis area. Our Riverside Casino faces competition from three casino companies in the Kansas City area. Our Baton Rouge Casino faces competition from one casino located in downtown Baton Rouge, a nearby Native American casino and multiple casinos throughout Louisiana. We face competition in Sioux City, Iowa from video gaming devices in nearby South Dakota, from two land-based Native American casinos and, to a lesser extent, from slot machines at a pari-mutual race track in Council Bluffs, Iowa and from two riverboat casinos in the Council Bluffs, Iowa/Omaha, Nebraska market. The Lawrenceburg casino faces competition from two riverboat casinos in the Cincinnati market, the second of which opened in October 2000. Our Joliet casino faces competition from eight other riverboat casino operators in the Chicago area. There could be further unanticipated competition in any market which we operate as a result of legislative changes or other events. We expect each market in which we participate, both current and prospective, to be highly competitive.
Liquidity and Capital Resources
In the nine months ended September 30, 2001, we generated cash flows from operating activities of $110.0 million compared to $134.6 million for the same period in 2000. This reduction is due primarily to benefiting from the utilization of net operating loss carry forwards which reduced cash tax payments by approximately $16.1 million during the nine months ended September 30, 2000.
In the nine months ended September 30, 2001, we used cash flows for investing activities of $840.9 million compared to $32.2 million for the nine months ended September 30, 2000. The increase in the use of funds for the nine months ended September 30, 2001, is due primarily to our acquisition of the minority interests in the Lawrenceburg casino requiring the use of $375.7 million in cash (including deferred financing fees) and our acquisition of the Empress Casino Joliet requiring the use of $468.7 million in cash (including deferred financing fees). During the nine months ended September 30, 2001, $6.0 million of cash was used for construction of the Baton Rouge Hotel.
During the nine months ended September 30, 2001, cash of $729.4 million was provided by financing activities compared to using $99.9 million of cash flows for financing activities for the same period in 2000. $769.4 million was provided through the issuance of Senior Subordinated Notes and borrowings on our Credit Facility. These funds were used to fund the purchase of the Lawrenceburg casino minority interests and our acquisition of the Empress Casino Joliet. Cash flows in 2001 and 2000 were used for repayment of long-term debt, repayment of partner loans, and distributions related to the Lawrenceburg partnership.
At September 30, 2001, we had approximately $57.8 million of cash and cash equivalents. At September 30, 2001, we had outstanding $558.5 million of Senior Subordinated Notes, including $8.5 million of unamortized premium, $275.0 million of a Term Loan, and $182.8 million on a senior secured revolving credit facility. The Senior Subordinated Notes, due June 2009 and September 2011, bear interest at 10.75% and 9.0%, respectively, and the Senior Secured Credit Facility (including the Term Loan) bears interest at LIBOR or prime plus a margin. As of September 30, 2001, availability under the credit facility was approximately $216.9 million. During October 2001 we effectively fixed the interest rate on approximately $200.0 million of our Term Loan through interest rate swap agreements expiring on September 30, 2004. The Subordinated Notes and the Credit Facility contain certain restrictions on the payment of dividends on the Company’s common stock and the occurrence of additional indebtedness, as well as other typical debt covenants. In addition, the Credit Facility requires the Company to maintain certain financial ratios as follows: (1) Total Funded Debt to EBITDA Ratio of a maximum of 4.25 to 1.0; (2) Senior Leverage Ratio of a maximum of 2.50 to 1.0; and (3) Fixed Charge Ratio of a minimum of 1.25 to 1.0. As of September 30, 2001, the Company is in compliance with these ratios.
Consistent with gaming industry practice, we conduct our operations with a net working capital deficit. Unlike traditional industrial companies, a gaming company’s balance sheet has limited accounts receivable and inventories. In addition, casinos generate significant cash on a daily basis. We generally apply our daily cash flows to pay down indebtedness under our revolving credit facility and pay our current liabilities pursuant to their normal cycles. Given the significant daily cash flows generated by our operations and the financial flexibility provided by our credit facility, the existence of a working capital deficit has no impact on our ability to operate our business or meet our obligations as they become due. We believe that cash on hand, operating cash flows, and funds available under our Credit Facility will be sufficient to fund our current operating, capital expenditure and debt service obligations for the next 12 months.
Cautionary Statements for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995
...... This Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this document, the words "anticipate", "believe", "estimate" and "expect" and similar expressions are generally intended to identify forward-looking statements. Investors are cautioned that any forward-looking statements, including those regarding the intent, belief or current expectations of the Company or its management, are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward-looking statements as a result of various factors including, but not limited to, (i) competitive and general economic conditions in the markets in which the Company operates, (ii) increased competitive pressures in the markets in which the Company operates, (iii) the effect of future legislation or regulatory changes on the Company's operations and (iv) other risks detailed from time to time in the Company's Securities and Exchange Commission filings. The Company does not intend to update these forward-looking statements.
ARGOSY GAMING COMPANY
OTHER INFORMATION
PART II. Other Information
Item 1. Legal Proceedings -
The Company is from time to time a party to legal proceedings arising in the ordinary course of business. No material changes have occurred in our legal proceedings since our last filing, and we are unaware of any legal proceedings, which, even if the outcome were unfavorable to the Company, would have a material adverse impact on either its financial condition or results of operations.
Item 2. Changes in Securities
Effective July 26, 2001, 100% of the previously issued (February 1, 2001) private placement Senior Subordinated Notes (“Restricted Notes”) were exchanged by the note holders for registered notes with substantially identical terms.
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information-None
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K
1. |
| Report on Form 8-K, dated July 24, 2001, filed with the Securities and Exchange Commission, containing a Press Release dated July 24, 2001, announcing the Company’s second quarter operating results for the period ended June 30, 2001. | ||
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| Report on Form 8-K, dated July 31, 2001, filed with the Securities and Exchange Commission, containing the following related to the Company’s consummation of the acquisition of the Empress Casino Joliet Corporation on July 31, 2001. | ||
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| a. | Financial statements of business acquired. | |
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| b. | Pro forma financial information. | |
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3. |
| Report on Form 8-K, dated August 9, 2001, filed with the Securities and Exchange Commission, containing the script of a conference call discussing the acquisition of the Empress Casino Joliet and updating financial guidance for the third quarter and fiscal 2001, taking into account the acquisition. | ||
ARGOSY GAMING COMPANY
SIGNATURES
Pursuant to the requirement 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.
Date: November 14, 2001 |
| /s/ Dale R. Black |
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| Dale R. Black |
