UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 28, 2001
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 0-20538
-------
ISLE OF CAPRI CASINOS, INC.
---------------------------
(Exact name of registrant as specified in its charter)
Delaware 41-1659606
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
1641 Popps Ferry Road, Biloxi, Mississippi 39532
- ------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (228) 396-7000
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
--
As of March 8, 2001, the Company had a total of 30,577,976 shares of Common
Stock outstanding.
ISLE OF CAPRI CASINOS, INC.
FORM 10-Q
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
- ------
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS, JANUARY 28, 2001 (UNAUDITED)
AND APRIL 30, 2000. . . . . . . . . . . . . . . . . . . . . 1
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE
MONTHS ENDED JANUARY 28, 2001 AND JANUARY 23, 2000 (UNAUDITED) 2
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE
NINE MONTHS ENDED JANUARY 28, 2001 (UNAUDITED) . . . . . . . 3
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS
ENDED JANUARY 28, 2001 AND JANUARY 23, 2000 (UNAUDITED) . . 4
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS. . . . 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . 21
PART II. OTHER INFORMATION
- --------
ITEM 1. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . 27
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. . . . . . . . . . . . . 28
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. . . . . . . . . . . . . . . . . . 28
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . . . . 28
ITEM 5. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 28
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . 28
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
EXHIBIT LIST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS January 28, April 30,
------ 2001 2000
------------- ----------
(Unaudited)
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 78,404 $ 167,972
Short term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 39,044
Accounts receivable:
Related party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 307
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,970 6,343
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,171 15,167
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . 16,692 9,500
------------- ----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . 119,237 238,333
Property and equipment - net.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 902,973 699,246
Other assets:
Investment in and advances to joint ventures. . . . . . . . . . . . . . . . . . - 1,914
Property held for development or sale . . . . . . . . . . . . . . . . . . . . . 3,782 3,782
Licenses and other intangible assets, net of accumulated amortization of
$14,299 and $11,896, respectively. . . . . . . . . . . . . . . . . . . . . 63,699 91,100
Goodwill, net of accumulated amortization of
$18,016 and $11,721, respectively. . . . . . . . . . . . . . . . . . . . . 263,635 228,530
Berthing, concession, and leasehold rights, net of accumulated amortization of
$2,698 and $2,462, respectively. . . . . . . . . . . . . . . . . . . . . . 3,571 3,806
Deferred financing costs, net of accumulated amortization of $7,396 and
$4,145, respectively.. . . . . . . . . . . . . . . . . . . . . . . . . . . 22,530 25,466
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,469 5,556
Prepaid deposits and other. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,436 7,781
------------- ----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,386,332 $1,305,514
============= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
Current liabilities:
Current maturities of long-term debt. . . . . . . . . . . . . . . . . . . . . . $ 22,266 $ 17,400
Accounts payable:
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,555 24,407
Related party.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 95
Accrued liabilities:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,078 10,010
Payroll and related.. . . . . . . . . . . . . . . . . . . . . . . . . . . 38,676 39,338
Property and other taxes. . . . . . . . . . . . . . . . . . . . . . . . . 14,697 16,096
Income tax payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,080 10,661
Progressive jackpots and slot club awards.. . . . . . . . . . . . . . . . 11,815 9,033
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,965 34,996
------------- ----------
Total current liabilities.. . . . . . . . . . . . . . . . . . . . . . 178,132 162,036
Long-term debt, less current maturities. . . . . . . . . . . . . . . . . . . . . . . 1,005,275 945,501
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,970 25,763
Other accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,487 8,851
Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,084 7,843
Stockholders' equity:
Preferred stock, $.01 par value; 2,050 shares authorized; none issued.. . . . . - -
Common stock, $.01 par value; 45,000 shares authorized; shares issued and
outstanding: 30,564 at January 28, 2001 and 30,369 at April 30, 2000.. . . 305 304
Class B common stock, $.01 par value; 3,000 shares authorized; none
issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . 129,195 125,572
Unearned compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,934) -
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,073) -
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,891 29,644
------------- ----------
Total stockholders' equity. . . . . . . . . . . . . . . . . . . . . . 158,450 155,520
------------- ----------
Total liabilities and stockholders' equity. . . . . . . . . . . . . . $ 1,386,332 $1,305,514
============= ==========
See notes to consolidated financial statements
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended Nine Months Ended
------------------- ------------------
January 28, January 23, January 28, January 23,
2001 2000 2001 2000
-------------------- ------------------ ------------- -------------
Revenue:
Casino . . . . . . . . . . . . . . . . . . . . . $ 229,201 $ 139,001 $ 690,579 $ 408,814
Rooms. . . . . . . . . . . . . . . . . . . . . . 6,144 2,568 17,160 8,013
Pari-mutuel commissions and fees . . . . . . . . 6,060 5,477 14,129 13,826
Food, beverage and other . . . . . . . . . . . . 13,193 6,678 35,710 20,273
-------------------- ------------------ ------------- -------------
Total revenue . . . . . . . . . . . . . . . 254,598 153,724 757,578 450,926
Operating Expenses:
Casino . . . . . . . . . . . . . . . . . . . . . 50,607 27,498 139,762 77,702
Gaming taxes . . . . . . . . . . . . . . . . . . 46,442 28,448 138,053 82,196
Rooms. . . . . . . . . . . . . . . . . . . . . . 3,121 1,251 8,208 3,699
Pari-mutuel. . . . . . . . . . . . . . . . . . . 4,388 4,076 10,402 10,542
Food, beverage and other.. . . . . . . . . . . . 8,195 4,167 22,843 12,476
Marine and facilities. . . . . . . . . . . . . . 16,758 8,353 45,920 26,898
Marketing and administrative.. . . . . . . . . . 81,529 47,511 233,555 138,889
Preopening expenses. . . . . . . . . . . . . . . - - - 3,420
Loss on joint venture and contract buyout. . . . 4,276 - 4,276 -
Depreciation and amortization. . . . . . . . . . 18,530 9,336 49,648 27,261
-------------------- ------------------ ------------- -------------
Total operating expenses. . . . . . . . . . 233,846 130,640 652,667 383,083
-------------------- ------------------ ------------- -------------
Operating income. . . . . . . . . . . . . . . . . . . 20,752 23,084 104,911 67,843
Interest expense . . . . . . . . . . . . . . . . (25,561) (13,649) (72,883) (39,214)
Interest income. . . . . . . . . . . . . . . . . 427 1,162 3,625 2,705
Gain on disposal . . . . . . . . . . . . . . . . - - 271 3,106
Minority interest. . . . . . . . . . . . . . . . (1,282) (1,053) (4,241) (2,244)
Equity in income (loss) of
unconsolidated joint ventures.. . . . . . . (1) (417) (110) 220
-------------------- ------------------ ------------- -------------
Income (loss) before income taxes . . . . . . . . . . (5,665) 9,127 31,573 32,416
Income tax provision (benefit) . . . . . . . . . (2,707) 4,246 14,326 14,375
-------------------- ------------------ ------------- -------------
Net income (loss) . . . . . . . . . . . . . . . . . . $ (2,958) $ 4,881 $ 17,247 $ 18,041
==================== ================== ============= =============
Net income (loss) per common share - basic . . . $ (0.10) $ 0.20 $ 0.57 $ 0.76
Net income (loss) per common share - assuming dilution. $ (0.10) $ 0.19 $ 0.54 $ 0.71
Weighted average basic shares. . . . . . . . . . 29,903 23,893 30,271 23,740
Weighted average diluted shares. . . . . . . . . 29,903 25,938 31,989 25,353
See notes to consolidated financial statements
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
Shares of Additional Total
Common Common Paid-in Unearned Treasury Retained Stockholders'
Stock Stock Capital Compensation Stock Earnings Equity
--------- ----------- -------- ------------ --------- --------- -------------
Balance, April 30, 2000 . . . . . . . . . . . 30,369 $ 304 $125,572 $ - $ - $ 29,644 $ 155,520
Exercise of stock options and warrants . . 195 1 923 - - - 924
Grant of nonvested stock . . . . . . . . . - - 2,700 (2,700) - -
Repurchase of treasury stock . . . . . . . - - - - (14,073) - (14,073)
Amortization of unearned compensation. . . - - - 766 - - 766
Net income . . . . . . . . . . . . . . . . - - - - - 17,247 17,247
--------- ----------- -------- ------------ --------- --------- ------------
Balance, January 28, 2001 . . . . . . . . . . . 30,564 $ 305 $129,195 $ (1,934) $ (14,073) $ 46,891 $ 160,384
========= =========== ======== ============ ========= ========= ============
See notes to consolidated financial statements
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Nine Months Ended
----------------
January 28, January 23,
2001 2000
------------------ -------------
OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,247 $ 18,041
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . 49,648 27,261
Deferred income taxes. . . . . . . . . . . . . . . . . . . - 4,368
Amortization of deferred financing costs . . . . . . . . . 3,251 1,806
Amortization of unearned compensation. . . . . . . . . . . 766 -
Loss on joint venture. . . . . . . . . . . . . . . . . . . 2,867 -
Gain on sale of assets . . . . . . . . . . . . . . . . . . (271) (3,106)
Equity in loss (income) of unconsolidated joint ventures.. 110 (220)
Minority interest. . . . . . . . . . . . . . . . . . . . . 4,241 2,244
Changes in current assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . (1,257) 1,867
Income tax receivable . . . . . . . . . . . . . . . . - 7,509
Prepaid expenses and other assets.. . . . . . . . . . (4,227) (957)
Accounts payable and accrued liabilities. . . . . . . (17,492) 15,468
------------------ -------------
Net cash provided by operating activities.. . . . . . . . . . . 54,883 74,281
INVESTING ACTIVITIES:
Purchase of property and equipment. . . . . . . . . . . . . . . (128,620) (60,063)
Net cash paid for acquisitions. . . . . . . . . . . . . . . . . (111,957) -
Sale of short-term investments. . . . . . . . . . . . . . . . . 39,044 -
Proceeds from sales of property and equipment.. . . . . . . . . 271 6,065
Investments in and advances to joint ventures . . . . . . . . . (955) (198)
Restricted cash.. . . . . . . . . . . . . . . . . . . . . . . . 1,087 2,091
Deposits and other. . . . . . . . . . . . . . . . . . . . . . . 5,504 (357)
Notes receivable. . . . . . . . . . . . . . . . . . . . . . . . - (20,149)
------------------ -------------
Net cash used in investing activities.. . . . . . . . . . . . . (195,626) (72,611)
FINANCING ACTIVITIES:
Proceeds from debt. . . . . . . . . . . . . . . . . . . . . . . 92,041 -
Principal payments on debt and cash paid to retire debt . . . . (27,402) (6,413)
Deferred financing costs. . . . . . . . . . . . . . . . . . . . (315) (111)
Purchase of treasury stock. . . . . . . . . . . . . . . . . . . (14,073) -
Proceeds from exercise of stock options and warrants. . . . . . 924 2,270
------------------ -------------
Net cash provided by (used in) financing activities . . . . . . 51,175 (4,254)
Net decrease in cash and cash equivalents. . . . . .. . . . . . (89,568) (2,584)
Cash and cash equivalents at beginning of period. . . . . . . . 167,972 85,117
------------------ -------------
Cash and cash equivalents at end of period. . . . . . . . . . . $ 78,404 $ 82,533
================== =============
See notes to consolidated financial statements
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
(IN THOUSANDS)
Nine Months Ended
----------------
January 28, January 23,
2001 2000
------------------ -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments (receipts) for:
Interest . . . . . . . . . . . . . . . . . . . . . . . $ 62,777 $ 26,369
Income taxes - net of refunds. . . . . . . . . . . . . 15,191 (1,933)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Notes Payable and debt issued for:
Property and equipment.. . . . . . . . . . . . . . . . - 944
Capital contributions:
Property and equipment.. . . . . . . . . . . . . . . . 22,679 -
Other:
Construction costs funded through accrued liabilities. 4,053 -
Acquisitions of businesses:
Fair value of assets acquired. . . . . . . . . . . . . 146,156 -
Less fair value of liabilities assumed . . . . . . . . (34,199) -
------------------ -------------
Net cash payment . . . . . . . . . . . . . . . . . . . 111,957 -
================== =============
See notes to consolidated financial statements
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Isle of Capri Casinos, Inc. (the "Company" or "Isle of Capri"), was
incorporated as a Delaware corporation on February 14, 1990. The Company,
through its subsidiaries, is engaged in the business of developing, owning and
operating riverboat, dockside and land-based casinos and related facilities.
The Company has licenses to conduct and currently conducts gaming operations
through its subsidiaries in Biloxi, Vicksburg, Tunica, Natchez and Lula,
Mississippi, in Bossier City and Lake Charles, Louisiana, in Bettendorf,
Marquette and Davenport, Iowa, in Kansas City, Missouri, in Black Hawk,
Colorado, in Las Vegas, Nevada, and Pompano, Florida. The Company is also
undertaking development projects in Boonville and St. Louis, Missouri.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and 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 accounting principles generally
accepted in the United States for complete financial statements. In the opinion
of management, all adjustments, consisting of normal recurring adjustments
considered necessary for a fair presentation have been included. Operating
results for the three and nine month periods ended January 28, 2001 are not
necessarily indicative of the results that may be expected for the fiscal year
ending April 29, 2001. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the fiscal year ended April 30, 2000.
The consolidated financial statements of the Company include the accounts
of Isle of Capri Casinos, Inc. and its subsidiaries. All material intercompany
balances and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States necessarily requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements as well as revenues and expenses during the
reporting period. Actual amounts when ultimately realized could differ from
those estimates.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings per Common Share
The following table sets forth the computation of basic and diluted earnings per
share:
Three Months Ended Nine Months Ended
------------------ -----------------
January 28, January 23, January 28, January 23,
2001 2000 2001 2000
-------------------- ----------------- ------------ ------------
(In thousands, except per share data)
Numerator:
Net income (loss) . . . . . . . . . . . . . . . . . $ (2,958) $ 4,881 $ 17,247 $ 18,041
==================== ================= ============ ============
Numerator for basic earnings (loss) per share - income (loss)
available to common stockholders . . . . . . . $ (2,958) $ 4,881 $ 17,247 $ 18,041
Effect of diluted securities. . . . . . . . . . . . - - - -
-------------------- ----------------- ------------ ------------
Numerator for diluted earnings (loss) per share-
income (loss) available to common stockholders after
assumed conversions . . . . . . . . . . . $ (2,958) $ 4,881 $ 17,247 $ 18,041
==================== ================= ============ ============
Denominator:
Denominator for basic earnings per share -
weighted - average shares. . . . . . . . . . . 29,903 23,893 30,271 23,740
Effect of dilutive securities
Employee stock options, warrants
and nonvested restricted stock. . . . . . . - 2,045 1,718 1,613
-------------------- ----------------- ------------ ------------
Dilutive potential common shares. . . . . . . . . . - 2,045 1,718 1,613
-------------------- ----------------- ------------ ------------
Denominator for diluted earnings per share -
adjusted weighted - average shares and
assumed conversions . . . . . . . . . . . 29,903 25,938 31,989 25,353
==================== ================= ============ ============
BASIC EARNINGS (LOSS) PER SHARE . . . . . . . . . . $ (0.10) $ 0.20 $ 0.57 $ 0.76
==================== ================= ============ ============
DILUTED EARNINGS (LOSS) PER SHARE . . . . . . . . . $ (0.10) $ 0.19 $ 0.54 $ 0.71
==================== ================= ============ ============
New Pronouncements
In June 1998, FASB Statement No. 133 Accounting for Derivative Instruments
and Hedging Activities ("FASB 133") was issued. FASB 133 establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. In June
1999, FASB Statement No. 137 Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133 ("FASB
137") was issued. FASB 133, as amended by FASB 137, is effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000. The Company does
not have any derivative or hedging instruments as of January 28, 2001 and
does not anticipate that the adoption of FASB Statement No. 133 will have a
significant effect on earnings or the financial position of the Company.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method over the following estimated useful lives:
YEARS
-------
Slot machines, software and computers. . . 3
Furniture, fixtures, and equipment . . . . 5-10
Leasehold improvements . . . . . . . . . 10-39.5
Riverboats and floating pavilions. . . . 25
Buildings and improvements . . . . . . . 39.5
3. OTHER ASSETS
Licenses and other intangible assets
Licenses and other intangible assets principally represent the license
value attributed to the Louisiana gaming licenses acquired through the Company's
acquisition of St. Charles Gaming Company, Inc. ("SCGC"), Grand Palais
Riverboat, Inc. ("GPRI") and Louisiana Riverboat Gaming Partnership ("LRGP") and
the value of the Lady Luck Gaming Corporation ("Lady Luck") trademarks, player
database and workforce acquired in the acquisition of Lady Luck Gaming
Corporation. These assets are being amortized over a twenty-five-year period
using the straight-line method.
Goodwill
Goodwill reflects the excess purchase price the Company paid in acquiring
the net identifiable tangible and intangible assets of SCGC, GPRI, LRGP, Lady
Luck and subsidiaries, BRDC, Inc., IOC Boonville, Inc. f/k/a Davis Gaming
Boonville, Inc. ("Isle-Boonville"), IOC-Kansas City Inc. f/k/a Kansas City
Flamingo Hilton ("Isle-Kansas City"), Gemini, Inc. ("Lady Luck Las Vegas") and
IOC Davenport, Inc. f/k/a/ The President - Davenport ("Rhythm City-Davenport").
Goodwill is being amortized over a twenty-five-year period using the
straight-line method.
Restricted cash
Restricted cash consists primarily of a certificate of deposit in the
amount of $1.5 million for the Greek Lawsuit (see note 9), construction escrow
related to our Boonville, MO development of $1.0 million, gaming deposits
totaling $0.3 million, workers' compensation in the amount of $0.3 million and
various other deposits totaling $1.4 million.
4. SHORT-TERM INVESTMENTS
Short-term investments consist primarily of short-term commercial paper and
certificates of deposits. The carrying amount of short-term investments
approximates fair value because of the short maturity of these instruments.
5. ISLE OF CAPRI BLACK HAWK L.L.C.
On April 25, 1997, a wholly-owned subsidiary of the Company, Casino America
of Colorado, Inc. formed Isle of Capri Black Hawk L.L.C. ("Isle-Black Hawk"), a
limited liability company, with Blackhawk Gold, Ltd., a wholly-owned subsidiary
of Nevada Gold & Casinos, Inc. Isle-Black Hawk owns a casino in Black Hawk,
Colorado, which opened on December 30, 1998. The Company has a 57% indirect
ownership interest in Isle-Black Hawk. In August 2000, Isle-Black Hawk
completed the construction of a hotel containing 237 rooms at the site of the
Isle-Black Hawk. Isle of Capri loaned Isle-Black Hawk a total of $5.75 million
which was used to develop the hotel. The first loan, $5.0 million, was repaid
by Isle-Black Hawk on November 28, 2000. The second loan, $0.75 million, is due
and payable upon the redemption of the First Mortgage Notes.
6. CAPRI CRUISES, L.L.C.
On April 20, 1998, a subsidiary of the Company formed a joint venture with
Commodore Holdings Limited, parent company of Commodore Cruise Line, to operate
a cruise ship docking from New Orleans. Cruise operations began in early June
1998. In December 2000, the cruise ship ceased operations as a result of
Bankruptcy Court filings by Commodore Holdings, Ltd. and certain subsidiaries,
the owner of the remaining 50% interest in the joint venture and the operator of
the ship. The Company no longer owns an interest in the joint venture and has
recorded a charge of approximately $2.9 million in the third quarter ended
January 28, 2001 for its investment in this venture and related costs.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. MERGERS AND ACQUISITIONS
Isle of Capri - Tunica
In March 1999, a subsidiary of the Company acquired the original Harrah's
casino facility located in Tunica County, Mississippi for $9.5 million. The
Company invested an additional $24.0 million to equip, renovate and open this
facility as an Isle of Capri casino. The Company opened the Isle-Tunica on July
26, 1999 with approximately 875 slot machines, 15 table games and its two
trademark restaurants. The Company invested approximately an additional $44.0
million to construct an on-site hotel with 227 rooms and two live entertainment
theaters with combined seating for 1,800 people. Construction of the hotel and
theaters was completed in November 2000.
Lady Luck Gaming Corporation/Gemini, Inc.
On March 2, 2000, the Company acquired Lady Luck in a merger transaction
pursuant to which Lady Luck became a wholly-owned subsidiary of the Company.
Lady Luck's common stockholders received cash in the amount of $12.00 per share
for an aggregate share consideration of approximately $59 million. Lady Luck
operated dockside riverboat casinos and hotels in Lula and Natchez, Mississippi;
owned a 50% interest in the Lady Luck Casino and Hotel in Bettendorf, Iowa; and
on October 29, 1999, acquired the Miss Marquette Casino in Marquette, Iowa for
$41.7 million. In November 1999, the Company made a secured loan of
approximately $21.0 million to Lady Luck in order to assist Lady Luck in
consummating its acquisition of the Miss Marquette. On March 2, 2000, the
Company also completed the acquisition of certain intellectual property from
entities owned by Lady Luck's former chairman for $31.0 million
contemporaneously with the merger. The Company completed the acquisition of the
Lady Luck Casino and Hotel in Las Vegas on September 12, 2000. The acquisition
price for the Lady Luck Las Vegas facility was $14.5 million.
BRDC, Inc.
On March 2, 2000, a subsidiary of the Company merged with BRDC which owned
a 50% interest in Lady Luck's Bettendorf, Iowa facility that was not owned by
Lady Luck and related real estate in exchange for 6.3 million shares of the
Company's common stock, subject to a post-closing adjustment totaling $153,000.
BRDC was owned by members of the family of Bernard Goldstein, the Company's
Chairman and Chief Executive Officer, including Robert Goldstein, a member of
the Company's board of directors.
Davis Gaming Boonville, Inc.
On May 3, 2000, the Company acquired Isle-Boonville, which has preliminary
approval to develop a gaming facility in Boonville, Missouri. Isle of Capri is
developing a casino project in Boonville with a total expected investment of
approximately $75.0 million, which includes the purchase price of $11.5 million.
Isle of Capri began construction on this project and is funding this development
through its Amended and Restated Senior Credit Facility. The Company expects to
complete the project in late fall of 2001.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. MERGERS AND ACQUISITIONS (Continued)
Flamingo Hilton Riverboat Casino, L.P.
On June 6, 2000, the Company acquired certain assets of Isle-Kansas City
for $33.5 million cash less certain assumed liabilities. Isle of Capri plans
to invest an additional $15.0 million in this project, primarily to re-theme
the casino into an Isle of Capri casino, of which approximately $10.4 million
had been spent as of January 28, 2001. Isle of Capri funded the acquisition and
is funding the re-theming through its Amended and Restated Senior Credit
Facility.
President Casinos - Davenport (Rhythm City-Davenport)
On October 10, 2000, a subsidiary of Isle of Capri acquired certain assets
of the President Casino and Hotel in Davenport, Iowa from a subsidiary of
President Casinos, Inc. for $58.2 million. Isle of Capri anticipates investing
up to an additional $23.0 million in this project primarily to re-theme the
casino into a Rhythm City Casino, a new brand for the Company. Isle of Capri
funded the acquisition and is funding the re-theming through its Amended and
Restated Senior Credit Facility.
The statements of operations reflect results of operations of these
acquisitions from their respective acquisition dates.
Jefferson County, Missouri
On July 26, 2000, the Missouri Gaming Commission selected the Company's
Jefferson County, Missouri project for development. The project will primarily
serve the South St. Louis metropolitan area. The project is expected to include
a 35,000-square-foot casino, the Isle's standard signature restaurants, a
200-room hotel and an entertainment complex. The Company expects to begin
construction in late 2001 and to complete the project eighteen to twenty-four
months thereafter. Isle of Capri expects to invest approximately $105 million
in the project. A town located near the site of the Company's proposed
development has indicated that it intends to condemn and/or annex the Company's
site in order to prevent development of the project. The Company intends to
vigorously oppose these efforts; however, development of the project will be
delayed.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. LONG-TERM DEBT
January 28, April 30,
2001 2000
------------- ----------
(In thousands)
8 3/4 % senior subordinated notes (described below). . . . . . . . . . . . . . . . . $ 390,000 $ 390,000
Variable rate loans (9.84% at January 28, 2001):
Term loans, due in quarterly installments, including interest, beginning July 2000
through March 2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464,688 475,000
Revolver, due March 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,000 -
12 1/2 % note payable, due in monthly installments of $125,000, including
interest, beginning October 1997 through October 2005.. . . . . . . . . . . . . . 5,213 5,818
8 % note payable, due in monthly installments of $66,667, including interest,
through July 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,068 1,587
8 % note payable, due in monthly installments of $11,365, including interest,
through December 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1,213
11% note payable, issued by Isle of Capri Black Hawk L.L.C., due March 2001;
non-recourse to Isle of Capri Casinos, Inc. . . . . . . . . . . . . . . . . . . . 145 768
13% First Mortgage Notes, issued by Isle of Capri Black Hawk L.L.C., due
August 2004; non-recourse to Isle of Capri Casinos, Inc.. . . . . . . . . . . . . 75,000 75,000
Variable rate TIF Bonds due to City of Bettendorf, due in quarterly installments
of various amounts, not including interest; Tax Incremental Financing Payable -
Interest of approximately 6.7% payments made through incremental property
taxes to the City until paid in full, maturity no later than 2011 . . . . . . . . 6,766 7,184
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549,349 481,331
--------------- ----------
1,027,541 962,901
Less: current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,266 17,400
--------------- ----------
Long-term debt.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,005,275 $ 945,501
=============== ==========
On April 23, 1999, the Company issued $390 million of 8 3/4 % Senior
Subordinated Notes due 2009 (the "Senior Subordinated Notes"). The Senior
Subordinated Notes are guaranteed by all of the Company's significant
subsidiaries, excluding the subsidiaries that own and operate the Isle-Black
Hawk. Interest on the Senior Subordinated Notes is payable semi-annually on
each April 15 and October 15 through maturity. The Senior Subordinated Notes
are redeemable, in whole or in part, at the Company's option at any time on or
after April 15, 2004 at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest to the
applicable redemption date, if redeemed during the 12-month period beginning on
April 15 of the years indicated below:
Year Percentage
-------------------- -----------
2004.. . . . . . . . 104.375%
2005.. . . . . . . . 102.917%
2006.. . . . . . . . 101.458%
2007 and thereafter. 100.000%
The Company issued the Senior Subordinated Notes under an indenture between
the Company, the subsidiary guarantors and a trustee. The indenture, among other
things, restricts the ability of the Company and its restricted subsidiaries to
borrow money, make restricted payments, use assets as security in other
transactions, enter into transactions with affiliates, or pay dividends on or
repurchase its stock or its restricted subsidiaries' stock. The Company is also
restricted in its ability to issue and sell capital stock of its subsidiaries
and in its ability to sell assets in excess of specified amounts or merge with
or into other companies.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. LONG-TERM DEBT (CONTINUED)
A substantial part of the proceeds from the Senior Subordinated Notes was
used to prepay long-term debt, including all of the $315 million of 12 1/2 %
Senior Secured Notes due 2003. The proceeds were also used to pay prepayment
premiums, accrued interest and other transaction fees and costs.
On March 2, 2000 Isle of Capri amended and restated its Senior Credit
Facility in connection with the acquisition of Lady Luck and BRDC, as well as to
provide financing for the acquisitions of the Isle-Kansas City, Lady Luck Las
Vegas, Rhythm City-Davenport, and Isle-Boonville and the construction of a
facility at that location. The previous $175.0 million Senior Credit Facility
was expanded under the amended and restated agreement to a $600.0 million Senior
Credit Facility, including a $125.0 million revolver, of which $77.0 million was
drawn as of January 28, 2001. On March 2, 2000, $475.0 million in term loans
were funded under the Company's Amended and Restated Senior Credit Facility in
connection with the acquisition of Lady Luck and BRDC. A portion of the initial
$475.0 million funding was also used to repay outstanding amounts under the
existing credit facility and to fund the redemption of Lady Luck indebtedness
and preferred stock.
The Amended and Restated Senior Credit Facility is secured by liens on
substantially all of the Company's assets and guaranteed by all of its
significant restricted subsidiaries, excluding Casino America of Colorado, Inc.,
Isle-Black Hawk, and its subsidiary. Isle of Capri must repay all amounts
borrowed under its Amended and Restated Senior Credit Facility by March 2007.
Isle of Capri is required to make quarterly principal payments on the $475.0
million term loan portion of its Senior Credit Facility which began in March
2000. Such payments are initially $3.4 million per quarter and will increase by
$1.25 million per quarter in July of each year that the term loan is
outstanding. In addition, Isle of Capri will be required to make substantial
quarterly interest payments on the outstanding balance of its Amended and
Restated Senior Credit Facility and interest payments of $17.1 million
semi-annually on its 8 3/4% Senior Subordinated Notes.
On August 20, 1997, Isle-Black Hawk issued $75.0 million of 13% First
Mortgage Notes with Contingent Interest, due August 31, 2004, that is
non-recourse debt to Isle of Capri Casinos, Inc. Interest on the First Mortgage
Notes is payable semi-annually on February 28 and August 31 of each year,
commencing February 28, 1998. Additionally, contingent interest is payable on
the First Mortgage Notes on each interest payment date, in an aggregate
principal amount of 5% of Isle-Black Hawk's Consolidated Cash Flow (as defined
by an indenture between Isle-Black Hawk and the trustee, dated August 20, 1997,
in connection with the issuance of the First Mortgage Notes (the "Indenture")),
provided that no contingent interest was payable prior to commencement of
operations and may, under certain circumstances, be deferred. Every six months
Isle-Black Hawk has met its debt covenant ratios to pay contingent interest in
accordance with the indenture. The amount of contingent interest expense
recorded for the three and nine months ended January 28, 2001 was $354,000 and
$1,043,000, respectively. The amount of contingent interest expense recorded
for the three and nine months ended January 23, 2000 was $290,000 and $756,000,
respectively.
The First Mortgage Notes are redeemable at the option of Isle-Black Hawk,
in whole or in part, at any time on or after August 1, 2001 at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest to the redemption date, if redeemed during the
12-month period beginning on August 31 of the years indicated below:
Year Percentage
-------------------- -----------
2001.. . . . . . . . 106.500%
2002.. . . . . . . . 103.200%
2003.. . . . . . . . 100.000%
2004 and thereafter. 100.000%
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. LONG-TERM DEBT (CONTINUED)
On June 5, 2000, as required by the Indenture Isle-Black Hawk offered to
purchase for cash up to $1,246,000 principal amount of their 13% First Mortgage
Notes due 2004 at a price of $1,010 per $1,000 principal amount, plus interest
accrued up to, but not including, the payment date. None of the Notes were
tendered for purchase. Isle-Black Hawk is required to make an offer based upon
the amount of its excess cash flow every year during the term of the bonds.
Isle of Capri has $2.0 million available in bank lines of credit other than
the Senior Credit Facility. As of January 28, 2001, Isle of Capri had no
outstanding balances under these lines of credit.
Isle-Black Hawk obtained a letter of credit, as a requirement to warranty
the City of Black Hawk (the "City") improvements according to the subdivision
improvement agreement with the city. The letter of credit, totaling $0.4
million, can be drawn upon by the City for repair on the public improvements
during the one-year warranty period ending February 2002.
As part of a 1997 development agreement between the Isle-Bettendorf and the
City of Bettendorf, the City issued $9.5 million in tax incremental financing
bonds ("TIF Bonds"), $7.5 million of which was used by Isle-Bettendorf to
construct an overpass, parking garage, related site improvements and pay for
disruption damages caused by construction of the overpass. To enable financing
of the City's obligations, Isle-Bettendorf will pay incremental property taxes
on the developed property assessed at a valuation of not less than $32 million
until the TIF Bonds mature which will be no later than 2011. Additionally, the
TIF Bonds will also be repaid from the incremental taxes on the developed
property within the defined "TIF District" which includes Isle-Bettendorf and
over 100 other tax paying entities. As the TIF District will repay the TIF
Bonds, Isle-Bettendorf may not be required to fully repay the $7.5 million. In
the event that the taxes generated by the project and other qualifying
developments in the redevelopment district do not fund the repayment of the
total TIF Bonds prior to their scheduled maturity, Isle-Bettendorf will pay the
City $0.25 per person for each person entering the boat until the remaining
balance has been repaid.
Substantially all of Isle of Capri's assets (other than those related to
the Isle-Black Hawk) are pledged as collateral for long-term debt under the
Amended and Restated Senior Credit Facility. At January 28, 2001, Isle of Capri
was in compliance with all debt covenants.
9. CONTINGENCIES
One of the Company's subsidiaries has been named, along with numerous
manufacturers, distributors and gaming operators, including many of the
country's largest gaming operators, in a consolidated class action lawsuit
pending in Las Vegas, Nevada. These gaming industry defendants are alleged to
have violated the Racketeer Influenced and Corrupt Organizations Act by engaging
in a course of fraudulent and misleading conduct intended to induce people to
play their gaming machines based upon a false belief concerning how those gaming
machines actually operate and the extent to which there is actually an
opportunity to win on any given play. The suit seeks unspecified compensatory
and punitive damages. A motion for certification of the class is currently
pending before the court and no discovery as to the merits of the alleged claims
has begun. The Company is unable at this time to determine what effect, if any,
the suit would have on its financial position or results of operations.
However, the gaming industry defendants are committed to defend vigorously all
claims asserted in the consolidated action.
In May 1998, the Company was named as a defendant in an action brought by
several persons who had a contractual right to acquire property in Cripple
Creek, Colorado which they sold to one of the Company's subsidiaries in 1995.
The plaintiffs allege that the Company breached its purported agreement to
construct a casino facility on the property by the end of 1995. In December
1998, the Company's motion to dismiss the complaint was granted by the United
States District Court in Denver, Colorado and the dismissal was affirmed by the
Tenth Circuit Court of Appeals. The plaintiffs have until May 2001 to decide
whether to file a writ of certiorari with the U.S. Supreme Court. The Company
intends to vigorously defend all claims and allegations in the action.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. CONTINGENCIES (CONTINUED)
In August 1997, a lawsuit was filed which seeks to nullify a contract to
which Louisiana Riverboat Gaming Partnership is a party. Pursuant to the
contract, Louisiana Riverboat Gaming Partnership pays a fixed amount plus a
percentage of revenue to various local governmental entities, including the City
of Bossier and the Bossier Parish School Board, in lieu of payment of a
per-passenger boarding fee. Summary judgment in favor of Louisiana Riverboat
Gaming Partnership was granted on June 4, 1998. That judgment was not appealed
and is now final. On June 11, 1998, a similar suit was filed and judgment was
rendered in the Company's favor on September 16, 1999 by the lower court. The
case has been reversed on appeal and remanded to the lower court for further
proceedings. The Company is vigorously defending this suit.
Lady Luck was named as a defendant in a purported shareholder class action
lawsuit filed alleging violations by Lady Luck of the Securities Act of 1933, as
amended (the "Securities Act") and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), for alleged material misrepresentations and
omissions in connection with Lady Luck's 1993 prospectus and initial public
offering of Common Stock. The complaint sought, among other things, injunctive
relief, rescission and unspecified compensatory damages. Summary judgement
in favor of Lady Luck was granted in February 2001 which judgement is subject to
appeal by the plaintiffs.
Lady Luck and particular joint venture partners are defendants in a lawsuit
brought by the country of Greece and its Minister of Tourism before the Greek
Multi-Member Court of First Instance. The action alleges that the defendants
failed to make specified payments in connection with the gaming license bid
process for Patras, Greece. Although it is difficult to determine the damages
being sought from the lawsuit, the case has been briefed and a preliminary
decision is expected early in the summer of 2001. The outcome of the case
cannot be predicted with any degree of certainty; however, the Company intends
to continue vigorously defending the claims asserted in this action.
The Company is currently involved in an arbitration proceeding concerning
the amount of payments owed to a party which had an interest in property owned
by the Company located in Lula, Mississippi. The claimant is seeking payments
based upon gross revenue from the Company's Lula, Mississippi facility. The
Company disputes this claim and believes that its responsibility is limited to
payments which are fixed in amount. The case is still in its preliminary stage
and its outcome cannot be predicted with any degree of certainty but the Company
intends to continue vigorously defending the claim asserted in this proceeding.
The Company is engaged in various other litigation matters and has a number
of unresolved claims. Although the ultimate liability of this litigation and
these claims cannot be determined at this time, the Company believes that they
will not have a material adverse effect on the Company's consolidated financial
position or results of operations.
The Company is subject to certain federal, state and local environmental
protection, health and safety laws, regulations and ordinances that apply to
businesses generally, and is subject to cleanup requirements at certain of its
facilities as a result thereof. The Company has not made, and does not
anticipate making, material expenditures or incurring delays with respect to
environmental remediation or protection. However, in part because the Company's
present and future development sites have, in some cases, been used as
manufacturing facilities or other facilities that generate materials that are
required to be remediated under environmental laws and regulations, there can be
no guarantee that additional pre-existing conditions will not be discovered and
that the Company will not experience material liabilities or delays.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. DEFERRED BONUS PLAN
In the second quarter of 2001, the Company's stockholders approved the
Deferred Bonus Plan. The Plan provides for the issuance of nonvested stock to
eligible officers and employees who agree to receive a deferred bonus in the
form of nonvested stock. The vesting of the stock is dependent upon continued
service to the Company for a period of five years. The nonvested stock issued
in connection with the Plan totaled 380,681 shares as of January 28, 2001. In
the third quarter 2001, the Company recorded an unearned compensation contra
account in stockholders' equity equal to the fair value of the nonvested award
and recorded compensation expense for the portion of unearned compensation that
had been earned through January 28, 2001.
11. PREOPENING EXPENSES
Preopening expenses of $3.4 million represent salaries, benefits, training,
marketing and other costs incurred in connection with the opening of the
Isle-Tunica on July 26, 1999.
12. LOSS ON JOINT VENTURE AND CONTRACT BUYOUT
The loss on joint venture and contract buyout of $4.3 million includes a
$2.9 million loss due to the termination of the joint venture as a result of
Bankruptcy Court filings by Commodore Holdings, Ltd., the operator of the
Enchanted Capri and owner of the remaining 50% interest in the joint venture
(see footnote 6), and the $1.4 million buyout of the Crowne Plaza license at the
Isle-Biloxi.
13. STOCK REPURCHASE
In November 2000, the Company's Board of Directors approved a stock
repurchase program allowing for the purchase of up to $1.5 million shares of the
Company's outstanding common stock. In January 2001, the Board of Directors
approved an additional $1.5 million shares under the stock repurchase program.
As of January 28, 2001, a total of 1.7 million shares of common stock had been
repurchased at a total cost of $14.1 million.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. CONSOLIDATING CONDENSED FINANCIAL INFORMATION
Certain of the Company's subsidiaries have fully and unconditionally
guaranteed the payment of all obligations under the Company's $390 million
8 3/4% Senior Subordinated Notes due 2009 and the payment of all obligations due
under the Amended and Restated Senior Credit Facility due March 2007. The
following table presents the consolidating condensed financial information of
Isle of Capri Casinos, Inc., as the parent company, its guarantor subsidiaries
and its non-guarantor subsidiaries for the three and nine months ended January
28, 2001 and January 23, 2000 and balance sheet as of January 28, 2001 and April
30, 2000.
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATING CONDENSED GUARANTOR, NONGUARANTOR AND PARENT COMPANY
FINANCIAL INFORMATION
AS OF JANUARY 28, 2001 (UNAUDITED) AND APRIL 30, 2000 AND FOR
THE THREE AND NINE MONTHS ENDED JANUARY 28, 2001 AND JANUARY 23, 2000
(UNAUDITED)
(IN THOUSANDS)
(b)
Isle of Capri (a) Non-Wholly
Casinos, Inc. Wholly Owned Consolidating
Guarantor Owned Non- and Isle of Capri
(Parent Guarantor Guarantor Eliminating Casinos, Inc.
Obligor) Subsidiaries Subsidiaries Entries Consolidated
--------------- -------------- ------------- --------------- --------------
Balance Sheet
- --------------
As of January 28, 2001 (Unaudited)
Current assets. . . . . . . . . . . . . . . $ 11,696 $ 93,371 $ 14,170 $ - $ 119,237
Intercompany receivables. . . . . . . . . . 635,751 319,002 8 (954,761) -
Investments in subsidiaries . . . . . . . . 512,813 50 - (512,813) 50
Property and equipment, net . . . . . . . . 1,942 796,687 104,344 - 902,973
Other assets. . . . . . . . . . . . . . . . 33,061 327,853 3,158 - 364,072
--------------- -------------- ------------- --------------- --------------
Total assets. . . . . . . . . . . . . . . . $ 1,195,263 $ 1,536,963 $ 121,680 $ (1,467,574) $ 1,386,332
=============== ============== ============= =============== ==============
Current liabilities . . . . . . . . . . . . $ 40,176 $ 108,417 $ 18,352 $ - $ 166,945
Intercompany payable. . . . . . . . . . . . 23,892 928,801 2,069 (954,762) -
Long-term debt, less current maturities . . 925,375 16,087 75,000 - 1,016,462
Deferred income taxes . . . . . . . . . . . (14,800) 35,770 - - 20,970
Other accrued liabilities . . . . . . . . . - 9,487 - - 9,487
Minority interest . . . . . . . . . . . . . - - - 12,084 12,084
Stockholders' equity. . . . . . . . . . . . 220,620 438,401 26,259 (524,896) 160,384
--------------- -------------- ------------- --------------- --------------
Total liabilities and stockholders' equity. $ 1,195,263 $ 1,536,963 $ 121,680 $ (1,467,574) $ 1,386,332
=============== ============== ============= =============== ==============
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. CONSOLIDATING CONDENSED FINANCIAL INFORMATION (CONTINUED)
(b)
Isle of Capri (a) Non-Wholly
Casinos, Inc. Wholly Owned Consolidating
Guarantor Owned Non- and Isle of Capri
(Parent Guarantor Guarantor Eliminating Casinos, Inc.
Obligor) Subsidiaries Subsidiaries Entries Consolidated
--------------- -------------- ------------- --------------- ---------------
Statement of Operations
- -----------------------
For the three months ended January 28, 2001
(Unaudited)
Revenue:
Casino. . . . . . . . . . . . . . . . . $ - $ 204,642 $ 24,559 $ - $ 229,201
Rooms, food, beverage and other . . . . 35 23,426 1,936 - 25,397
--------------- -------------- -------------- --------------- -------------
Total revenue. . . . . . . . . . . . . . . . 35 228,068 26,495 - 254,598
Operating expenses:
Casino. . . . . . . . . . . . . . . . . - 46,767 3,840 - 50,607
Gaming taxes. . . . . . . . . . . . . . - 41,563 4,879 - 46,442
Rooms, food, beverage and other . . . . 4,721 99,580 9,690 - 113,991
Management fee expense (revenue). . . . (5,250) 4,182 1,068 - -
Loss on joint venture & contract buyout 2,867 1,409 - - 4,276
Depreciation and amortization . . . . . 294 17,211 1,025 - 18,530
--------------- -------------- -------------- --------------- -------------
Total operating expenses . . . . . . . . . . 2,632 210,712 20,502 - 233,846
--------------- -------------- -------------- --------------- -------------
Operating income (loss). . . . . . . . . . . (2,597) 17,356 5,993 - 20,752
Interest expense, net. . . . . . . . . . . . 1,428 (23,557) (3,005) - (25,134)
Minority interest. . . . . . . . . . . . . . - - - (1,282) (1,282)
Equity in income (loss) of
unconsolidated joint venture. . . . . . (4,498) 5,395 - (898) (1)
--------------- -------------- -------------- --------------- -------------
Income (loss) before income taxes. . . . . . (5,667) (806) 2,988 (2,180) (5,665)
Income tax benefit . . . . . . . . . . . . . (2,707) - - - (2,707)
--------------- -------------- -------------- --------------- -------------
Net income (loss). . . . . . . . . . . . . . $ (2,960) $ (806) $ 2,988 $ (2,180) $ (2,958)
=============== ============== ============== =============== =============
Statement of Operations
- ------------------------
For the nine months ended January 28, 2001
(Unaudited)
Revenue:
Casino. . . . . . . . . . . . . . . . . $ - $ 614,977 $ 75,602 $ - $ 690,579
Rooms, food, beverage and other . . . . 510 61,201 5,288 - 66,999
--------------- -------------- -------------- --------------- -------------
Total revenue. . . . . . . . . . . . . . . . 510 676,178 80,890 - 757,578
Operating expenses:
Casino. . . . . . . . . . . . . . . . . - 128,600 11,162 - 139,762
Gaming taxes. . . . . . . . . . . . . . - 123,114 14,939 - 138,053
Rooms, food, beverage and other . . . . 13,451 276,637 30,840 - 320,928
Management fee expense (revenue). . . . (16,203) 12,968 3,235 - -
Loss on joint venture & contract buyout 2,867 1,409 - - 4,276
Depreciation and amortization . . . . . 868 46,380 2,400 - 49,648
--------------- -------------- -------------- --------------- -------------
Total operating expenses . . . . . . . . . . 983 589,108 62,576 - 652,667
--------------- -------------- -------------- --------------- -------------
Operating income . . . . . . . . . . . . . . (473) 87,070 18,314 - 104,911
Gain on sale of assets . . . . . . . . . . . - 271 - - 271
Interest expense, net. . . . . . . . . . . . 3,008 (63,818) (8,447) - (69,257)
Minority interest. . . . . . . . . . . . . . - - - (4,241) (4,241)
Equity in income (loss) of
unconsolidated joint venture. . . . . . 29,033 35,037 - (64,180) (110)
--------------- -------------- -------------- --------------- -------------
Income (loss) before income taxes. . . . . . 31,567 58,560 9,867 (68,421) 31,573
Income tax provision . . . . . . . . . . . . 14,326 - - - 14,326
--------------- -------------- -------------- --------------- -------------
Net income (loss). . . . . . . . . . . . . . $ 17,241 $ 58,560 $ 9,867 $ (68,421) $ 17,247
=============== ============== ============== =============== ===============
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. CONSOLIDATING CONDENSED FINANCIAL INFORMATION (CONTINUED)
(b)
Isle of Capri (a) Non-Wholly
Casinos, Inc. Wholly Owned Consolidating
Guarantor Owned Non- and Isle of Capri
(Parent Guarantor Guarantor Eliminating Casinos, Inc.
Obligor) Subsidiaries Subsidiaries Entries Consolidated
--------------- -------------- ------------- --------------- ---------------
Statement of Cash Flows
- -----------------------
For the nine months ended January 28, 2001
(Unaudited)
Net cash provided by (used in)
operating activities. . . . . . . . . . $ (22,410) $ 97,754 $ 12,911 $ (33,372) $ 54,883
Net cash provided by (used in)
investing activities. . . . . . . . . . (109,575) (111,486) (7,937) 33,372 $ (195,626)
Net cash provided by (used in)
financing activities. . . . . . . . . . 53,274 (3,418) 1,319 - $ 51,175
--------------- -------------- -------------- --------------- -------------
Net increase (decrease) in cash and
cash equivalents. . . . . . . . . . . . (78,711) (17,150) 6,293 - (89,568)
Cash and cash equivalents at
beginning of the period . . . . . . . . 78,945 82,514 6,513 - 167,972
--------------- -------------- -------------- --------------- -------------
Cash and cash equivalents at
end of the period . . . . . . . . . . . $ 234 $ 65,364 $ 12,806 $ - $ 78,404
=============== ============== ============== =============== =============
Statement of Operations
- ------------------------
For the three months ended January 23, 2000
(Unaudited)
Revenue:
Casino. . . . . . . . . . . . . . . . . $ - $ 116,040 $ 22,961 $ - $ 139,001
Rooms, food, beverage and other . . . . 286 13,394 1,043 - 14,723
--------------- -------------- -------------- --------------- -------------
Total revenue. . . . . . . . . . . . . . . . 286 129,434 24,004 - 153,724
Operating expenses:
Casino. . . . . . . . . . . . . . . . . - 24,260 3,238 - 27,498
Gaming taxes. . . . . . . . . . . . . . - 23,833 4,615 - 28,448
Rooms, food, beverage and other . . . . 1,662 53,246 10,450 - 65,358
Depreciation and amortization . . . . . 269 8,500 567 - 9,336
--------------- -------------- -------------- --------------- -------------
Total operating expenses . . . . . . . . . . 1,931 109,839 18,870 - 130,640
--------------- -------------- -------------- --------------- -------------
Operating income . . . . . . . . . . . . . . (1,645) 19,595 5,134 - 23,084
Interest expense, net. . . . . . . . . . . . (1,319) (8,482) (2,686) - (12,487)
Minority interest. . . . . . . . . . . . . . - - - (1,053) (1,053)
Equity in income (loss) of
unconsolidated joint venture. . . . . . 12,087 10,575 - (23,079) (417)
--------------- -------------- ------------- --------------- --------------
Income (loss) before income taxes. . . . . . 9,123 21,688 2,448 (24,132) 9,127
Income tax provision . . . . . . . . . . . . 4,246 - - - 4,246
--------------- -------------- -------------- --------------- -------------
Net income (loss). . . . . . . . . . . . . . $ 4,877 $ 21,688 $ 2,448 $ (24,132) $ 4,881
=============== ============== ============== =============== =============
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. CONSOLIDATING CONDENSED FINANCIAL INFORMATION (CONTINUED)
(b)
Isle of Capri (a) Non-Wholly
Casinos, Inc. Wholly Owned Consolidating
Guarantor Owned Non- and Isle of Capri
(Parent Guarantor Guarantor Eliminating Casinos, Inc.
Obligor) Subsidiaries Subsidiaries Entries Consolidated
--------------- -------------- ------------- --------------- ---------------
Statement of Operations
- -----------------------
For the nine months ended January 23, 2000
(Unaudited)
Revenue:
Casino. . . . . . . . . . . . . . . . $ - $ 346,168 $ 62,646 $ - $ 408,814
Rooms, food, beverage and other . . . 663 38,042 3,407 - 42,112
--------------- -------------- -------------- --------------- ---------------
Total revenue. . . . . . . . . . . . . . . 663 384,210 66,053 - 450,926
Operating expenses:
Casino. . . . . . . . . . . . . . . . - 68,840 8,862 - 77,702
Gaming taxes. . . . . . . . . . . . . - 69,778 12,418 - 82,196
Rooms, food, beverage and other . . . 4,861 161,091 29,972 - 195,924
Depreciation and amortization . . . . 744 24,960 1,557 - 27,261
--------------- -------------- -------------- --------------- ---------------
Total operating expenses . . . . . . . . . 5,605 324,669 52,809 - 383,083
--------------- -------------- -------------- --------------- ---------------
Operating income . . . . . . . . . . . . . (4,942) 59,541 13,244 - 67,843
Gain on sale of assets . . . . . . . . . . 3,106 - - - 3,106
Interest expense, net. . . . . . . . . . . (2,913) (25,569) (8,027) - (36,509)
Minority interest. . . . . . . . . . . . . - - - (2,244) (2,244)
Equity in income (loss) of
unconsolidated joint venture. . . . . 37,158 28,056 - (64,994) 220
--------------- -------------- -------------- --------------- ---------------
Income (loss) before income taxes. . . . . 32,409 62,028 5,217 (67,238) 32,416
Income tax provision . . . . . . . . . . . 14,375 - - - 14,375
--------------- -------------- -------------- --------------- ---------------
Net income (loss). . . . . . . . . . . . . $ 18,034 $ 62,028 $ 5,217 $ (67,238) $ 18,041
=============== ============== ============== =============== ===============
Statement of Cash Flows
- -----------------------
For the nine months ended January 23, 2000
(Unaudited)
Net cash provided by (used in)
operating activities. . . . . . . . . $ 40,386 $ 57,848 $ 13,203 $ (37,156) $ 74,281
Net cash provided by (used in)
investing activities. . . . . . . . . (53,108) (46,607) (10,052) 37,156 (72,611)
Net cash used in financing activities. . . (1,766) (1,930) (558) - (4,254)
--------------- -------------- -------------- --------------- ---------------
Net increase (decrease) in cash and
cash equivalents. . . . . . . . . . . (14,488) 9,311 2,593 - (2,584)
Cash and cash equivalents at
beginning of the period . . . . . . . 35,826 38,374 10,917 - 85,117
--------------- -------------- -------------- --------------- ---------------
Cash and cash equivalents at
end of the period . . . . . . . . . . $ 21,338 $ 47,685 $ 13,510 $ - $ 82,533
=============== ============== ============== =============== ===============
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. CONSOLIDATING CONDENSED FINANCIAL INFORMATION (CONTINUED)
(b)
Isle of Capri (a) Non-Wholly
Casinos, Inc. Wholly Owned Consolidating
Guarantor Owned Non- and Isle of Capri
(Parent Guarantor Guarantor Eliminating Casinos, Inc.
Obligor) Subsidiaries Subsidiaries Entries Consolidated
--------------- -------------- ------------- --------------- ---------------
Balance Sheet
- -------------
As of April 30, 2000
Current assets. . . . . . . . . . . . . . . $ 130,939 $ 99,785 $ 7,609 $ - $ 238,333
Intercompany receivables. . . . . . . . . . 584,189 238,811 4 (823,004) -
Investments in subsidiaries . . . . . . . . 371,070 - - (369,156) 1,914
Property and equipment, net . . . . . . . . 5,229 595,306 98,711 - 699,246
Other assets. . . . . . . . . . . . . . . . 46,724 315,729 3,568 - 366,021
--------------- -------------- -------------- --------------- ---------------
Total assets. . . . . . . . . . . . . . . . $ 1,138,151 $ 1,249,631 $ 109,892 $ (1,192,160) $ 1,305,514
=============== ============== ============== =============== ===============
Current liabilities . . . . . . . . . . . . $ 44,474 $ 103,698 $ 13,769 $ - $ 161,941
Intercompany payable. . . . . . . . . . . . 23,904 794,475 4,731 (823,015) 95
Long-term debt, less current maturities . . 854,973 15,528 75,000 - 945,501
Deferred income taxes . . . . . . . . . . . (14,801) 40,564 - - 25,763
Other accrued liabilities . . . . . . . . . - 8,851 - - 8,851
Minority interest . . . . . . . . . . . . . - - - 7,843 7,843
Stockholders' equity. . . . . . . . . . . . 229,601 286,515 16,392 (376,988) 155,520
--------------- -------------- -------------- --------------- ---------------
Total liabilities and stockholders' equity. $ 1,138,151 $ 1,249,631 $ 109,892 $ (1,192,160) $ 1,305,514
=============== ============== ============== =============== ===============
(a) Certain of the Company's wholly-owned subsidiaries are guarantors on
the 8 3/4% Senior Subordinated Notes and the Amended and Restated Senior Credit
Facility, including the following: Isle-Biloxi, Isle-Vicksburg, Isle-Tunica,
Isle-Bossier City, Isle-Lake Charles and Pompano Park, Inc., Isle-Natchez,
Isle-Lula, Isle-Bettendorf, and Isle-Marquette became guarantors as of March 2,
2000, the date of the acquisition. Isle-Boonville, Isle-Kansas City, Lady Luck
Las Vegas and Rhythm City-Davenport became guarantors as of the dates of their
respective acquisition (see note 7).
(b) The following non-wholly-owned subsidiaries are not guarantors on the
8 3/4% Senior Subordinated Notes or the Amended and Restated Senior Credit
facility: Isle of Capri Black Hawk L.L.C. and Isle of Capri Black Hawk Capital
Corp.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
You should read the following discussion together with the financial
statements, including the related notes and the other financial information in
this report.
The following discussion includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. In particular,
statements concerning the effects of increased competition in the Company's
markets, the effects of regulatory and legislative matters, the Company's plans
to make capital investments at its facilities, including, without limitation,
considerations to obtain approvals for a new project in the St. Louis
metropolitan area, development of the Isle-Boonville in Boonville, Missouri, and
the expansion of amenities at all facilities, including the conversion of the
former Lady Luck Gaming facilities and the Isle-Kansas City, into Isle of Capri
Casinos and development of the new brand for the Rhythm City-Davenport are
forward looking statements. Although the Company believes that the expectations
are reasonable, there can be no assurance that such expectations are reasonable
or that they will be correct. Actual results may vary materially from those
expected. Important factors that could cause actual results to differ with
respect to the Company's planned capital expenditures principally include a lack
of available capital resources, construction and development risks such as
shortages of materials or labor, and unforeseen delays resulting from a failure
to obtain necessary approvals.
GENERAL
Isle of Capri's results of operations for the nine fiscal months ended
January 28, 2001 reflect the consolidated operations of all of Isle of Capri's
subsidiaries, including the Isle-Biloxi, the Isle-Vicksburg, the Isle-Bossier
City, the Isle-Lake Charles, the Isle-Black Hawk, the Isle-Tunica, the
Isle-Natchez, the Isle-Lula, the Isle-Bettendorf, and the Isle-Marquette.
Results also include the Isle-Kansas City subsequent to its purchase on June 6,
2000, Lady Luck Las Vegas subsequent to its purchase on September 12, 2000 and
Rhythm City - Davenport subsequent to its purchase on October 10, 2000.
Isle of Capri's results of operations for the nine fiscal months ended
January 23, 2000 reflect the consolidated operations of all of Isle of Capri's
subsidiaries owned at that time, including the Isle-Biloxi, Isle-Vicksburg,
Isle-Bossier, Isle-Lake Charles, the Isle-Black Hawk, and the Isle-Tunica which
opened on July 26, 1999. The Rhythm City-Davenport property was purchased on
October 10, 2000, the Lady Luck Las Vegas Casino property was purchased on
September 12, 2000, the Isle-Kansas City was purchased on June 6, 2000 and the
Natchez, Lula, Bettendorf, and Marquette properties were purchased along with
other related assets on March 2, 2000 and are not included in the consolidated
results for the nine fiscal months ended January 23, 2000.
Isle of Capri believes that its historical results of operations may not be
indicative of its future results of operations because of the substantial
present and expected future increase in competition for gaming customers in each
of Isle of Capri's markets, as new casinos open and existing casinos add to or
enhance their facilities.
Isle of Capri also believes that its operating results are affected by
seasonality. Seasonality has historically caused the operating results for Isle
of Capri's first and fourth fiscal quarters ending in July and April,
respectively, to be notably better than the operating results for the second and
third fiscal quarters ending October and January, respectively.
RESULTS OF OPERATIONS
Three Fiscal Months Ended January 28, 2001 Compared to Three Fiscal Months Ended
January 23, 2000
Total revenue for the quarter ended January 28, 2001 was $254.6 million,
which included $229.2 million of casino revenue, $6.1 million of rooms revenue,
$6.1 million of pari-mutuel commissions and $13.2 million of food, beverage and
other revenue. This compares to total revenue for the prior year quarter ended
January 23, 2000 of $153.7 million, which included $139.0 million of casino
revenue, $2.6 million of rooms revenue, $5.5 million of pari-mutuel commissions
and $6.7 million of food, beverage and other revenue. Casino revenue increased
$90.2 million or 64.9% primarily as a result of a full quarter of operations of
the former Lady Luck properties, the Isle-Kansas City, the Lady Luck Las Vegas
and the Rhythm City-Davenport. Casino revenue also increased due to
improvements made at Isle-Lake Charles, Isle-Black Hawk and Isle-Tunica through
the opening of new hotels at these properties in November 2000, August 2000 and
November 2000, respectively, partially offset by decrease at Isle-Bossier due to
additional competition. Room revenue increased $3.6 million or 139.3% due to a
full quarter of operations of the former Lady Luck properties, the Lady Luck Las
Vegas and the Rhythm City-Davenport as well as the Isle-Lake Charles, Isle-Black
Hawk and Isle-Tunica hotels that opened at these properties in November 2000, in
August 2000 and November 2000, respectively. Food, beverage and other revenue
increased by $6.5 million or 97.6% as a result of a full quarter of operations
of the former Lady Luck properties, the Isle-Kansas City, the Lady Luck Las
Vegas and the Rhythm City-Davenport. Revenue does not reflect the retail value
of any complimentaries.
Casino operating expenses for the quarter ended January 28, 2001 totaled
$50.6 million, or 22.1% of casino revenue, versus $27.5 million, or 19.8% of
casino revenue, for the quarter ended January 23, 2000. These expenses are
primarily comprised of salaries, wages and benefits and other operating expenses
of the casinos. The increase in casino operating expenses is attributable to
the additional properties as well as improved casino revenue for the combined
original five Isle of Capri properties.
Operating expenses for the quarter ended January 28, 2001 also included
room expenses of $3.1 million or 50.8% of room revenue from the hotels at the
Isle-Lake Charles, Isle-Bossier City, Isle-Biloxi, Isle-Vicksburg, Isle-Natchez,
Isle-Lula, Isle-Bettendorf, Isle-Marquette, Isle-Tunica, Isle-Black Hawk, Lady
Luck Las Vegas and Rhythm City-Davenport compared to $1.3 million or 48.7% of
room revenue for the quarter ended January 23, 2000 from the hotels at the
Isle-Lake Charles, Isle-Bossier City, Isle-Biloxi, and the Isle-Vicksburg.
These expenses directly relate to the cost of providing hotel rooms. Other
costs of the hotels are shared with the casinos and are presented in their
respective expense categories.
For the quarter ended January 28, 2001, state and local gaming taxes were
paid in Louisiana, Mississippi, Colorado, Iowa, Missouri and Nevada totaling
$46.4 million, compared to $28.4 million for the quarter ended January 23, 2000,
which is consistent with each state's gaming tax rate for the applicable fiscal
quarters. For the quarter ended January 23, 2000, state and local gaming taxes
were only paid in Louisiana, Mississippi and Colorado.
Food, beverage and other expenses totaled $8.2 million for the quarter
ended January 28, 2001, compared to $4.2 million for the quarter ended January
23, 2000. These expenses consist primarily of the cost of goods sold, salaries,
wages and benefits and other operating expenses of these departments. These
expenses have increased as a result of the expansion in the number of properties
operated by the Isle and continued expansion of the original Isle facilities.
Food and beverage and other operating expenses as a percentage of food, beverage
and other revenues decreased from 62.4% for the quarter ending January 23, 2000
to 62.1% for the quarter ended January 28, 2001.
Marine and facilities expenses totaled $16.8 million for the quarter ended
January 28, 2001, versus $8.4 million for the quarter ended January 23, 2000.
These expenses include salaries, wages and benefits, operating expenses of the
marine crews, insurance, public areas, housekeeping and general maintenance of
the riverboats and pavilions. These expenses have increased as a result of the
expansion in the number of properties operated by the Company.
Marketing and administrative expenses totaled $81.5 million, or 32.0% of
total revenue, for the quarter ended January 28, 2001, versus $47.5 million, or
30.9% of total revenue, for the quarter ended January 23, 2000. Marketing
expenses include salaries, wages and benefits of the marketing and sales
departments, as well as promotions, advertising, special events and
entertainment. Administrative expenses include administration and human
resource department expenses, rent, new development activities, professional
fees and property taxes. Marketing and administrative expenses have increased as
a result of the expansion in the number of properties operated by the Company
and continued expansion of Isle facilities.
A loss on joint venture and contract buyout totaled $4.3 million for the
quarter ended January 28, 2001. This includes a $2.9 million loss due to the
termination of the joint venture as a result of Bankruptcy Court filings by
Commodore Holdings, LTD., the operator of the Enchanted Capri and owner of the
remaining 50% interest in the joint venture (see footnote 6), and the $1.4
million buyout of the Crowne Plaza license at the Isle-Biloxi.
Depreciation and amortization expense was $18.5 million for the quarter
ended January 28, 2001 and $9.3 million for the quarter ended January 23, 2000.
These expenses relate to property and equipment, berthing and concession rights
and the amortization of intangible assets. The increase in depreciation and
amortization expense is consistent with the increase in fixed assets placed into
service or acquired and goodwill.
Interest expense was $25.6 million for the quarter ended January 28, 2001,
net of capitalized interest of $0.3 million versus $13.6 million for the quarter
ended January 23, 2000, net of capitalized interest of $0.3 million. Interest
expense primarily relates to indebtedness incurred in connection with the
acquisition of property, equipment, leasehold improvements and berthing and
concession rights. Additionally, interest expense of $3.0 million related to
Isle-Black Hawk is included in interest expense in the quarter ended January 28,
2001. This compares to interest expense of $2.5 million, net of capitalized
interest of $0.3 million, for the quarter ended January 23, 2000.
Isle of Capri's effective tax rate was 47.8% for the quarter ended
January 28, 2001 and 46.5% for the quarter ended January 23, 2000, and includes
the effects of non-deductible goodwill amortization for income tax purposes.
Nine Fiscal Months Ended January 28, 2001 Compared to Nine Fiscal Months Ended
January 23, 2000
Total revenue for the nine months ended January 28, 2001 was $757.6
million, which included $690.6 million of casino revenue, $17.2 million of rooms
revenue, $14.1 million of pari-mutuel commissions and $35.7 million of food,
beverage and other revenue. This compares to total revenue for the prior year
nine months ended January 23, 2000 of $450.9 million, which included $408.8
million of casino revenue, $8.0 million of rooms revenue, $13.8 million of
pari-mutuel commissions and $20.3 million of food, beverage and other revenue.
Casino revenue increased $281.8 million or 68.9% primarily as a result of a
full nine months of operations of the former Lady Luck properties, the inclusion
of approximately eight months of operating results from the acquisition of the
Isle-Kansas City, the inclusion of approximately five months of operating
results from the acquisition of Lady Luck Las Vegas, the inclusion of
approximately four months of operating results from the acquisition of Rhythm
City-Davenport, and the improvements at Isle-Black Hawk and Isle-Lake Charles.
Room revenue increased $9.1 million or 114.2% due to a full nine months of
operations of the former Lady Luck properties, Lady Luck Las Vegas, Rhythm City
Davenport and the Isle-Lake Charles, Isle-Black Hawk and Isle-Tunica hotels that
opened in November 2000, in August 2000 and November 2000, respectively. Food,
beverage and other revenue increased by $15.4 million or 76.1% as a result of a
full nine months of operations of the former Lady Luck properties, the inclusion
of approximately eight months of operating results from the acquisition of the
Isle-Kansas City, the inclusion of approximately five months of operating
results from the acquisition of Lady Luck Las Vegas, and the inclusion of
approximately four months of operating results from the acquisition of Rhythm
City-Davenport. Revenue does not reflect the retail value of any
complimentaries.
Casino operating expenses for the nine months ended January 28, 2001
totaled $139.8 million, or 20.2% of casino revenue, versus $77.7 million, or
19.0% of casino revenue, for the nine months ended January 23, 2000. These
expenses are primarily comprised of salaries, wages and benefits and other
operating expenses of the casinos. The increase in casino operating expenses is
attributable to the additional properties as well as improved casino revenue for
the combined original Isle of Capri properties.
Operating expenses for the nine months ended January 28, 2001 also included
room expenses of $8.2 million or 47.8% of room revenue from the hotels at the
Isle-Lake Charles, Isle-Bossier City, Isle-Biloxi, Isle-Vicksburg, Isle-Natchez,
Isle-Lula, Isle-Bettendorf , Isle-Marquette and Isle-Black Hawk compared to $3.7
million or 46.2% of room revenue for the nine months ended January 23, 2000 from
the hotels at the Isle-Lake Charles, Isle-Bossier City, Isle-Biloxi, and the
Isle-Vicksburg. These expenses relate to the direct cost of providing hotel
rooms. Other costs of the hotels are shared with the casinos and are presented
in their respective expense categories.
For the nine months ended January 28, 2001, state and local gaming taxes
were paid in Louisiana, Mississippi, Colorado, Iowa, Missouri and Nevada
totaling $138.1 million, compared to $82.2 million for the nine months ended
January 23, 2000, which is consistent with each state's gaming tax rate for the
applicable fiscal quarters. For the nine months ended January 23, 2000, state
and local gaming taxes were paid in Louisiana, Mississippi and Colorado.
Food, beverage and other expenses totaled $22.8 million for the nine months
ended January 28, 2001, compared to $12.5 million for the nine months ended
January 23, 2000. These expenses consist primarily of the cost of goods sold,
salaries, wages and benefits and operating expenses of these departments. Food
and beverage and other operating expenses as a percentage of food, beverage and
other revenues increased from 61.5% for the nine months ending January 23, 2000
to 64.0% for the nine months ended January 28, 2001. This was attributable to
the inclusion for five months of operations of the Lady Luck-Las Vegas
operations in the downtown Las Vegas market, whose food and beverage expense is
significantly higher than other Isle properties. The increase was also due to
the start up costs related to the opening of food and beverage outlets related
to the opening of hotels at Isle-Lake Charles, Isle-Tunica and Isle-Black Hawk
and the newly acquired outlets at Isle-Kansas City that have not been converted
to Isle standards.
Marine and facilities expenses totaled $45.9 million for the nine months
ended January 28, 2001, versus $26.9 million for the nine months ended January
23, 2000. These expenses include salaries, wages and benefits, operating
expenses of the marine crews, insurance, housekeeping and general maintenance of
the riverboats and floating pavilions. These expenses have increased as a
result of the expansion in the number of properties operated by the Isle of
Capri.
Marketing and administrative expenses totaled $233.6 million, or 30.8% of
total revenue, for the nine months ended January 28, 2001, versus $138.9
million, or 30.8% of total revenue, for the nine months ended January 23, 2000.
Marketing expenses include salaries, wages and benefits of the marketing and
sales departments, as well as promotions, advertising, special events and
entertainment. Administrative expenses include administration and human
resource department expenses, rent, new development activities, professional
fees and property taxes. Marketing and administrative expenses have increased as
a result of the expansion in the number of properties operated by the Isle of
Capri and continued expansion of Isle facilities.
Pre-opening expenses of $3.4 million for the nine months ended January 23,
2000 represent salaries, benefits, training, marketing and other
non-capitalizable costs, which were expensed in connection with the Isle-Tunica,
which opened on July 26, 1999.
Isle of Capri's results of operations for the nine months ended January 28,
2001 included a gain on sale of assets of $0.3 million compared to $3.1 million
for the nine months ended January 23, 2000. Both gains related to the sale of
an option to purchase 135 acres of land adjacent to the Pompano Park, Inc.
facility.
A loss on joint venture and contract buyout totaled $4.3 million for the
nine months ended January 28, 2001. This includes a $2.9 million loss due to
the termination of the joint venture as a result of Bankruptcy Court filings by
Commodore Holdings, LTD., the operator of the Enchanted Capri and owner of the
remaining 50% interest in the joint venture (see footnote 6), and the $1.4
million buyout of the Crowne Plaza license at the Isle-Biloxi.
Depreciation and amortization expense was $49.6 million for the nine months
ended January 28, 2001 as compared to $27.3 million for the nine months ended
January 23, 2000. These expenses relate to property and equipment, berthing and
concession rights and the amortization of intangible assets. The 81.7% increase
in depreciation and amortization expense is consistent with the increase in
fixed assets placed into service or acquired and goodwill.
Interest expense was $72.9 million for the nine months ended January 28,
2001, net of capitalized interest of $3.4 million versus $39.2 million for the
nine months ended January 23, 2000, net of capitalized interest of $1.5 million.
Interest expense primarily relates to indebtedness incurred in connection with
the acquisition of property, equipment, leasehold improvements and berthing and
concession rights. Additionally, interest expense of $8.2 million net of
capitalized interest of $.07 million related to Isle-Black Hawk is included in
interest expense in the nine months ended January 28, 2001. This compares to
interest expense of $7.6 million, net of capitalized interest of $0.6 million,
for the nine months ended January 23, 2000.
Isle of Capri's effective tax rate was 45.4% for the nine months ended
January 28, 2001 and 44.3% for the nine months ended January 23, 2000, and
includes the effects of non-deductible goodwill amortization for income tax
purposes.
LIQUIDITY AND CAPITAL RESOURCES
At January 28, 2001, Isle of Capri had cash and cash equivalents of $78.4
million compared to $168.0 million in cash and cash equivalents and $39.0
million in short-term investments at April 30, 2000. The $89.6 million decrease
in cash is the net result of $195.6 million net cash used in investing
activities, $54.9 million net cash provided by operating activities, and $51.2
million net cash provided by financing activities.
For the nine months ended January 28, 2001, Isle of Capri used net cash
of $195.6 million for investing activities. Isle of Capri invested $128.6
million in the development of Isle-Boonville, construction of hotels at
Isle-Black Hawk and Isle-Lake Charles, construction of a hotel and two theaters
at Isle-Tunica, conversion of the former Lady Luck properties into Isle of Capri
properties and renovations at Isle-Kansas City and Rhythm City-Davenport. Isle
of Capri also invested $112.0 million in the acquisitions of Isle-Kansas City,
Lady Luck Las Vegas and Rhythm City - Davenport. Isle of Capri received $39.0
million from the sale of short-term investments.
During the nine months ended January 28, 2001, Isle of Capri provided net
cash of $51.2 million for financing activities. Isle received $92.0 million in
proceeds from debt of which $90.0 million was borrowed under the Revolver. The
Revolver is due March 2005 and is a variable rate debt instrument currently at
9.84% interest rate. Isle reduced the Senior Credit Facility and other debt by
$27.4 million and purchased 1.7 million shares of its common stock at a total
cost of $14.1 million.
On May 3, 2000, Isle of Capri acquired Isle-Boonville, which has
preliminary approval to develop a gaming facility in Boonville, Missouri. Isle
of Capri is currently developing the casino project with a total expected
investment of approximately $75.0 million that includes the total purchase price
of $11.5 million. Isle of Capri is funding this development through its Amended
and Restated Senior Credit Facility. The Company expects to complete the
project in the fall of 2001. A significant portion of the principal near term
capital requirements will be related to the construction of the Isle-Boonville,
of which $17.7 million was expended as of January 28, 2001.
On June 6, 2000, Isle of Capri acquired Isle-Kansas City for $33.5 million
cash less certain assumed liabilities. Isle of Capri has invested an additional
$15.0 million in this project, primarily to re-theme the casino into an Isle of
Capri casino. Isle of Capri funded the acquisition and the re-theming through
its Amended and Restated Senior Credit Facility. The Company expects to
complete the project in March and as of January 28, 2001 the Company has spent
$10.4 million.
Isle of Capri completed the acquisition of the Lady Luck Las Vegas casino
and hotel on September 12, 2000. The acquisition price for the Lady Luck Las
Vegas facility was $14.5 million. Isle of Capri funded the acquisition through
its Amended and Restated Senior Credit Facility.
On October 10, 2000, the Company purchased the Rhythm City-Davenport from a
subsidiary of President Casinos, Inc., for $58.2 million. Isle of Capri is
investing up to an additional $23.0 million in this project, primarily to
replace the existing boat and re-theme the casino into a Rhythm City Casino.
Isle of Capri funded the acquisition and is funding the re-theming through its
Amended and Restated Senior Credit Facility. The Company expects the project to
be substantially complete by the end of the fiscal year and as of January 28,
2001 the Company has spent $5.9 million.
All of Isle of Capri's development plans are subject to obtaining permits,
licenses and approvals from appropriate regulatory and other agencies and, in
certain circumstances, negotiating acceptable leases. In addition, many of the
plans are preliminary, subject to continuing refinement or otherwise subject to
change.
Isle of Capri is investing up to an estimated $35.0 million to re-theme the
Lady Luck casinos into Isle of Capri casinos. As of January 28, 2001, $23.1
million was spent on this project.
Isle of Capri anticipates that capital improvements approximating $28.1
million will be made during fiscal 2001 to maintain its existing facilities and
remain competitive in its markets. As of the nine months ended January 28,
2001, Isle of Capri has spent $14.0 million on maintenance capital improvements.
The Missouri Gaming Commission has selected the Isle of Capri's Jefferson
County, Missouri project for development. This project is located in
unincorporated Jefferson County and will primarily serve the South St. Louis
metropolitan area. The Company expects to begin construction in late 2001 and
to complete the project eighteen to twenty-four months thereafter. Isle of
Capri expects to invest approximately $105 million in the project. A town
located near the site of the Company's proposed development has indicated that
it intends to condemn and/or annex Isle of Capri's site in order to prevent
development of the project. Isle of Capri intends to vigorously oppose these
efforts; however, development of the project has been delayed. In addition,
another town located near the Company's site is attempting to annex the property
and will have an election on the annexation issue on April 3, 2001. That town
has not yet approved gaming in a local election, so that issue will also be
voted upon on April 3, 2001. In the event that the property is annexed and the
majority of voters do not approve gaming, the Company could be precluded from
developing the project.
A joint venture in which Isle of Capri owns a 45% interest has applied to
the Louisiana Gaming Control Board for the issuance of a gaming license in
Morgan City, Louisiana. A decision is expected from the Louisiana Gaming
Control Board during the second half of 2001.
Isle of Capri expects that available cash and cash from future operations,
as well as borrowings under its Amended and Restated Senior Credit Facility,
will be sufficient to fund future expansion and planned capital expenditures,
service debt and meet working capital requirements. There is no assurance that
Isle of Capri will have the capital resources to make all of the expenditures
described above or that planned capital investments will be sufficient to allow
Isle of Capri to remain competitive in its existing markets. In addition, the
Indenture governing the Senior Subordinated Notes restricts, among other things,
Isle of Capri's ability to borrow money, create liens, make restricted payments
and sell assets.
Isle of Capri's Amended and Restated Senior Credit Facility, among other
things, restricts Isle of Capri's ability to borrow money, make capital
expenditures, use assets as security in other transactions, make restricted
payments or restricted investments, incur contingent obligations, sell assets
and enter into leases and transactions with affiliates. In addition, the Amended
and Restated Senior Credit Facility requires Isle of Capri to meet certain
financial ratios and tests, including: a minimum consolidated net worth test, a
maximum consolidated total leverage test, a maximum consolidated senior leverage
test, and a minimum consolidated fixed charge coverage test.
Isle of Capri must repay all amounts borrowed under its Amended and
Restated Senior Credit Facility by March 2007. Isle of Capri is required to
make quarterly principal payments on the $475.0 million term loan portion of its
Amended and Restated Senior Credit Facility that began in March 2000. Such
payments were initially $3.4 million per quarter and increase by $1.25 million
per quarter in July of each year that the term loan is outstanding beginning
July 2001. In addition, Isle of Capri will be required to make substantial
quarterly interest payments on the outstanding balance of its Amended and
Restated Senior Credit Facility and interest payments of $17.1 million
semi-annually on its Senior Subordinated Notes.
Isle of Capri is highly leveraged and may be unable to obtain additional
debt or equity financing on acceptable terms. As a result, limitations on Isle
of Capri's capital resources could delay or cause Isle of Capri to abandon
certain plans for capital improvements at its existing properties and
development of new properties. Isle of Capri will continue to evaluate its
planned capital expenditures at each of its existing locations in light of the
operating performance of the facilities at such locations.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
One of our subsidiaries has been named, along with numerous manufacturers,
distributors and gaming operators, including many of the country's largest
gaming operators, in a consolidated class action lawsuit pending in Las Vegas,
Nevada. These gaming industry defendants are alleged to have violated the
Racketeer Influenced and Corrupt Organizations Act by engaging in a course of
fraudulent and misleading conduct intended to induce people to play their gaming
machines based upon a false belief concerning how those gaming machines actually
operate and the extent to which there is actually an opportunity to win on any
given play. The suit seeks unspecified compensatory and punitive damages. A
motion for certification of the class is currently pending before the court and
no discovery as to the merits of the alleged claims has begun. We are unable at
this time to determine what effect, if any, the suit would have on our financial
position or results of operations. However, the gaming industry defendants are
committed to defend vigorously all claims asserted in the consolidated action.
In May 1998, we were named as a defendant in an action brought by several
persons who had a contractual right to acquire property in Cripple Creek,
Colorado which they sold to one of our subsidiaries in 1995. The plaintiffs
allege that we breached our purported agreement to construct a casino facility
on the property by the end of 1995. In December 1998, our motion to dismiss the
complaint was granted by the United States District Court in Denver, Colorado
and was affirmed by the Tenth Circuit Court of Appeals. The plaintiffs have
until May 2001 to decide whether to file a writ of certiorari with the U.S.
Supreme Court. We intend to vigorously defend all claims and allegations in the
action.
In August 1997, a lawsuit was filed which seeks to nullify a contract to
which Louisiana Riverboat Gaming Partnership is a party. Pursuant to the
contract, Louisiana Riverboat Gaming Partnership pays a fixed amount plus a
percentage of revenue to various local governmental entities, including the City
of Bossier and the Bossier Parish School Board, in lieu of payment of a
per-passenger boarding fee. Summary judgment in favor of Louisiana Riverboat
Gaming Partnership was granted on June 4, 1998. That judgment was not appealed
and is now final. On June 11, 1998, a similar suit was filed and judgment was
rendered in our favor on September 16, 1999 by the lower court. The case has
been reversed on appeal and remanded to the lower court for further proceedings.
The Company is vigorously defending this suit.
Lady Luck was named as a defendant in a purported shareholder class action
lawsuit alleging violations by Lady Luck of the Securities Act of 1933, as
amended (the "Securities Act") and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), for alleged material misrepresentations and
omissions in connection with Lady Luck's 1993 prospectus and initial public
offering of Common Stock. The complaint sought, among other things, injunctive
relief, rescission and unspecified compensatory damages. Summary judgement in
favor of Lady Luck was granted in February 2001 which judgement is subject to
appeal by its plaintiffs.
Lady Luck and particular joint venture partners are defendants in a lawsuit
brought by the country of Greece and its Minister of Tourism before the Greek
Multi-Member Court of First Instance. The action alleges that the defendants
failed to make specified payments in connection with the gaming license bid
process for Patras, Greece. Although it is difficult to determine the damages
being sought from the lawsuit, the case has been briefed and a preliminary
decision is expected early in the summer of 2001. The outcome of the case cannot
be predicted with any degree of certainty; however, we intend to vigorously
defend the claims asserted in this action.
Isle of Capri is currently involved in an arbitration proceeding concerning
the amount of payments owed to a party which had an interest in property owned
by the company located in Lula, Mississippi. The claimant is seeking payments
based upon gross revenue from our Lula, Mississippi facility. We dispute this
claim and believe that our responsibility is limited to payments which are fixed
in amount. We intend to vigorously defend the claim asserted in this
proceeding.
We are engaged in various other litigation matters and have a number of
unresolved claims. Although the ultimate liability of this litigation and these
claims cannot be determined at this time, we believe that they will not have a
material adverse effect on our consolidated financial position or results of
operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
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) Documents Filed as Part of this Report.
---------------------------------------
1.. Exhibits.
---------
None.
2.. Reports on Form 8-K.
--------------------
During the quarter ended January 28, 2001, the Company filed the following reports on Form 8-K:
Current Report on Form 8-K filed on November 21, 2000, regarding Item 5 which announced
the Company's earnings for the second quarter ended October 29, 2000.
Current Report on Form 8-K filed on January 9, 2001, regarding Item 5 which announced
its expected earnings shortfall for the third quarter ending January 28, 2001.
Current Report on Form 8-K filed on January 11, 2001, regarding Item 5 which announced
the registrant's plans to repurchase up to an additional 1,500,000 shares of its common
stock.
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 hereunto duly authorized.
ISLE OF CAPRI CASINOS, INC.
Dated: March 14, 2001 /s/ Rexford A. Yeisley
--------------------------
Rexford A. Yeisley, Chief Financial Officer
(Principal Financial and Accounting Officer)
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- ------ -------
None.