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 JULY 29, 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
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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 September 7, 2001, the Company had a total of 30,642,762 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, JULY 29, 2001 (UNAUDITED)
AND APRIL 29, 2001. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE
MONTHS ENDED JULY 29, 2001 AND JULY 30, 2000 (UNAUDITED). . 2
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR
THREE MONTHS ENDED JULY 29, 2001 (UNAUDITED). . . . . . . . . . . . . 3
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE
MONTHS ENDED JULY 29, 2001 AND JULY 30, 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
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
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 July 29, April 29,
------------ 2001 2001
------------ -----------
Current assets: . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Unaudited)
Cash and cash equivalents. . . . . . . . . . . . . . . . . $ 88,641 $ 76,659
Accounts receivable .. . . . . . . . . . . . . . . . . . . . . 9,020 9,203
Income tax receivable. . . . . . . . . . . . . . . . . . . . . - 4,700
Deferred income taxes. . . . . . . . . . . . . . . . . . . . 14,536 14,536
Prepaid expenses and other assets. . . . . . . . . . . . 14,344 16,359
--------------- ---------------
Total current assets.. . . . . . . . . . . . . . . . . . 126,541 121,457
Property and equipment - net. . . . . . . . . . . . . . . . . . 884,615 872,168
Other assets:
Property held for development or sale. . . . . . . . 2,860 2,860
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287,835 291,755
Other intangible assets. . . . . . . . . . . . . . . . . . . . 66,411 66,411
Deferred financing costs, net of accumulated
amortization of $9,667 and
$8,533, respectively. . . . . . . . . . . . . . . . . . . 21,210 21,856
Restricted cash. . . . . . . . . . . . . . . . . . . . . . . . . 4,418 4,300
Prepaid deposits and other . . . . . . . . . . . . . . . 2,779 2,100
--------------- ---------------
Total assets.. . . . . . . . . . . . . . . . . . . . . . $ 1,396,669 $1,382,907
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------------------------------------------
Current liabilities:
Current maturities of long-term debt.. . . . . . .$ 20,849 $ 20,936
Accounts payable trade.. . . . . . . . . . . . . . . . . 20,464 22,635
Accrued liabilities:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,520 9,521
Payroll and related. . . . . . . . . . . . . . . . . . 35,373 35,653
Property and other taxes . . . . . . . . . . . . . 18,137 14,963
Income taxes . . . . . . . . . . . . . . . . . . . . . . 2,600 -
Progressive jackpots and
slot club awards. . . . . . . . . . . . . . . . . . 12,790 12,616
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,952 43,222
--------------- ---------------
Total current liabilities. . . . . . . . . . . . 163,685 159,546
Long-term debt, less current maturities.. . . . . . 1,014,680 1,018,185
Deferred income taxes . . . . . . . . . . . . . . . . . . . 22,962 15,563
Other accrued liabilities . . . . . . . . . . . . . . . . . . 9,865 9,670
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . 15,573 13,902
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: 30,642 at July 29, 2001
and 30,615 at April 29, 2001.. . . . . . . . . . 306 306
Class B common stock, $.01 par value;
3,000 shares authorized; none issued. . . . - -
Additional paid-in capital. . . . . . . . . . . . 129,973 129,408
Unearned compensation . . . . . . . . . . . . . (2,063) (1,800)
Retained earnings.. . . . . . . . . . . . . . . . . . 60,642 54,788
--------------- ---------------
188,858 182,702
Treasury stock, 2,215 shares at
July 29, 2001 and 1,959 at
April 29, 2001. . . . . . . . . . . . . . . . . . . . . . (18,954) (16,661)
--------------- ---------------
Total stockholders' equity.. . . . . . . . . 169,904 166,041
--------------- ---------------
Total liabilities and stockholders'
equity.. . . . . . . . . . . . . . . . . . . . . . $ 1,396,669 $1,382,907
========== ===========
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
July 29, July 30,
2001 2000
---------- ----------
Revenues:
Casino . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 257,588 $ 230,335
Rooms. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,167 9,895
Pari-mutuel commissions and fees . . . . . . 5,290 4,921
Food, beverage and other . . . . . . . . . . . . . 39,135 35,245
----------------- -------------
Gross revenues. . . . . . . . . . . . . . . . . . . 317,180 280,396
Less promotional allowances.. . . . . . . 54,244 44,729
----------------- -------------
Net revenues. . . . . . . . . . . . . . . . 262,936 235,667
Operating Expenses:
Casino . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,418 44,349
Gaming taxes . . . . . . . . . . . . . . . . . . . . . 54,484 45,313
Rooms. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,463 2,252
Pari-mutuel. . . . . . . . . . . . . . . . . . . . . . . 4,095 3,601
Food, beverage and other.. . . . . . . . . . . . 8,912 7,090
Marine and facilities. . . . . . . . . . . . . . . . 17,890 14,494
Marketing and administrative.. . . . . . . . 70,624 60,924
Preopening expenses. . . . . . . . . . . . . . . 390 -
Depreciation and amortization. . . . . . . . 17,293 15,221
----------------- -------------
Total operating expenses. . . . . . . . . . 228,569 193,244
----------------- -------------
Operating income. . . . . . . . . . . . . . . . . . . . 34,367 42,423
Interest expense . . . . . . . . . . . . . . . . . . (24,367) (23,432)
Interest income. . . . . . . . . . . . . . . . . . . 233 2,440
Gain on disposal of asset. . . . . . . . . . . . 125 -
Minority interest. . . . . . . . . . . . . . . . . . (1,671) (1,404)
----------------- -------------
Income before income taxes. . . . . . . . . . . . 8,687 20,027
Income tax provision . . . . . . . . . . . . . . 2,833 9,458
----------------- -------------
Net income. . . . . . . . . . . . . . . . . . . . . . . . $ 5,854 $ 10,569
============ =========
Net income per common share - basic. . $ 0.21 $ 0.35
Net income per common share -
assuming dilution. . . . . . . . . . . . . . . $ 0.20 $ 0.33
Weighted average basic shares. . . . . . . 28,461 30,433
Weighted average diluted shares. . . . . 29,682 32,326
See notes to consolidated financial statements.
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
Shares of Additional
Common Common Paid-in Unearned
Stock Stock Capital Compensation
----------- ----------- ------------ ------------------
Balance, April 29, 2001 .. . . . . . 30,615 $ 306 $129,408 $ (1,800)
Exercise of stock options
and warrants . . . . . . . . . . 27 - 163 -
Grant of nonvested stock . . - - 402 (402)
Amortization of unearned
compensation. . . . . . . . . - - - 139
Purchase of treasury stock. . - - - -
Net income . . . . . . . . . . . .. . - - - -
----------- ----------- ------------ -----------------
(30,642) 306 129,973 (2,063)
======= ======== ======== ==========
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
Total
Treasury Retained Stockholders'
Stock Earnings Equity
----------- ------------ -------------
Balance, April 29, 2001 . . . . . . . . . . . . . . $ (16,661) $ 54,788 $166,041
Exercise of stock options
and warrants . . . . . . . . . . . . . . . . . . - - 163
Grant of nonvested stock . . . . . . . . . . - - -
Amortization of unearned
compensation. . . . . . . . . . . . . . . . . - - 139
Purchase of treasury stock . . . . . . . . . (2,293) - (2,293)
Net income . . . . . . . . . . . . . . . . . . . . . - 5,854 5,854
------------- ----------- -------------
(18,954) 60,642 169,904
======= ======== ========
See notes to consolidated financial statements.
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Three Months Ended
--------------------
July 29, July 30,
2001 2000
---------- ----------
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,854 $ 10,569
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . 17,293 15,221
Amortization of deferred financing costs. . . . . 1,146 1,086
Amortization of unearned compensation . . . . . 139 -
Gain on disposal of assets. . . . . . . . . . . . . . . . . (125) -
Minority interest . . . . . . . . . . . . . . . . . . . . . . . 1,671 1,404
Changes in current assets and liabilities:
Accounts receivable. . . . . . . . . . . . . . . . . . 183 (1,233)
Income tax receivable. . . . . . . . . . . . . . . . . 4,700 -
Prepaid expenses and other assets. . . . . . . . 1,789 108
Accounts payable and accrued liabilities.. . 15,402 11,520
----------- ----------
Net cash provided by operating activities. . . . . . . 48,052 38,675
INVESTING ACTIVITIES:
Purchase of property and equipment.. . . . . . . . . . (29,401) (28,623)
Net cash paid for acquisitions . . . . . . . . . . . . . . . - (39,799)
Sale of short-term investments.. . . . . . . . . . . . . . . - 5,875
Proceeds from sales of assets. . . . . . . . . . . . . . . . 125 37
Investments in and advances to joint ventures. . . (663) (98)
Restricted cash. . . . . . . . . . . . . . . . . . . . . . . (118) (857)
Deposits and other . . . . . . . . . . . . . . . . . . . . . . . 209 1,076
----------- -----------
Net cash used in investing activities. . . . . . . . . (29,848) (62,389)
FINANCING ACTIVITIES:
Proceeds from debt . . . . . . . . . . . . . . . . . . . . . . 50,000 (5,221)
Net reduction in line of credit . . . . . . . . . . . . . . (48,000) -
Principal payments on debt . . . . . . . . . . . . . . . . (5,592) -
Deferred financing costs . . . . . . . . . . . . . . . . . . (500) (157)
Purchase of treasury stock . . . . . . . . . . . . . . . . . (2,202) -
Proceeds from exercise of stock options
and warrants . . . . . . . . . . . . . . . . . . . . . . . . . . 72 513
----------- -----------
Net cash used in financing activities. . . . . . . . . (6,222) (4,865)
Net increase (decrease) in cash
and cash equivalents . . . . . . . . . . . . . . . . . . 11,982 (28,579)
Cash and cash equivalents at beginning
of period . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,659 167,972
----------- ----------
Cash and cash equivalents at
end of period . . . . . . . . . . . . . . . . . . . . . . . $88,641 $ 139,393
======= =======
See notes to consolidated financial statements.
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
(IN THOUSANDS)
Three Months Ended
--------------------
July 29, July 30,
2001 2000
---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Net cash payments for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,615 $ 11,698
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . (10,233) 3,076
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Other:
Construction costs funded through
accrued liabilities. . . . . . . . . . . . . . . . . . . 546 4,055
Acquisitions of businesses:
Fair value of assets acquired. . . . . . . . . . . . . - 51,894
Less fair value of liabilities assumed . . . . . . - (12,095)
-------------- ------------
Net cash payment . . . . . . . . . . . . . . . . . . . . . - 39,799
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. All of the subsidiaries
are wholly-owned except for Black Hawk. We are currently developing a casino in
Boonville, Missouri and have received preliminary approval from the Missouri
Gaming Commission to develop a casino and hotel facility in Jefferson County,
Missouri, which is in the St. Louis metropolitan area.
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 months ended July 29, 2001 are not necessarily indicative
of the results that may be expected for the fiscal year ending April 28, 2002.
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 29, 2001.
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
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Pronouncements
See note 4, Goodwill and Other Intangible Assets.
Effective fourth quarter fiscal 2001, the Company adopted new guidance
issued by the Emerging Issues Task Force of the Financial Accounting Standards
Board relative to EITF Issue No.00-14 Accounting for Certain Sales Incentives
and EITF Issue No.00-22, Accounting for "Points" and Certain Other Time-Based
Sales Incentive Offers, and Offers for Free Products or Services to be Delivered
in the Future. EITF Issue No.00-14 requires the redemption of coupons for cash
to be recognized as a reduction of revenue and EITF Issue No.00-22 requires the
redemption of "points" for cash to be recognized as a reduction of revenue. The
Company has complied with the requirements of this new guidance in the
accompanying consolidated statements of operations. To be consistent with the
fiscal 2002 presentation, approximately $15.8 million of slot points expense and
cash coupon redemptions, previously reported as marketing expenses, have been
reclassified to promotional allowances for the three months ended July 30, 2000.
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. As of July
29, 2001, the Company has adopted FASB Statement No. 133 (see Item 3). The
impact of the adoption of FASB 133 on the Company's financial statements was not
material.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
2. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
Three Months Ended
--------------------------
July 29, July 30,
2001 2000
---------- ----------
(Unaudited)
(In thousands, except per share data)
Numerator:
Net income. . . . . . . . . . . . . . . . . . . . . . . . $ 5,854 $ 10,569
======== ========
Numerator for basic earnings per share
- income available to common
stockholders . . . . . . . . . . . . . . . . . . . . $ 5,854 $ 10,569
Effect of diluted securities. . . . . . . . . . . . - -
------------- -------------
Numerator for diluted earnings per share-
income available to common
stockholders after
assumed conversions . . . . . . . . . . . . $ 5,854 $ 10,569
======== ========
Denominator:
Denominator for basic earnings per
share -weighted - average shares. . . 28,461 30,433
Effect of dilutive securities
Employee stock options, warrants
and nonvested restricted stock. . . 1,220 1,893
------------- -------------
Dilutive potential common shares. . . . 1,220 1,893
------------- -------------
Denominator for diluted earnings per
share - adjusted weighted - average
shares and assumed conversions . . . 29,681 32,326
======== ========
BASIC EARNINGS PER SHARE. . . . $ 0.21 $ 0.35
======== ========
DILUTED EARNINGS PER SHARE. . $ 0.20 $ 0.33
======== ========
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
3. 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
4. GOODWILL AND OTHER INTANGIBLE ASSETS
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"), Isle-Kansas City, Lady Luck Las Vegas and
Rhythm City-Davenport. 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")
which are deemed to have indefinite lives.
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. The Company has elected early adoption and has applied the
new rules on accounting for goodwill and other intangible assets beginning in
the first quarter of fiscal 2002. Application of the nonamortization provisions
of the Statement, net of taxes, is expected to result in an increase in net
income of approximately $11.9 million ($0.40 per share) per year.
The following table sets forth the pro forma effect of adoption of Statements of
Financial Accounting Standard No. 142, Goodwill and Other Intangible Assets:
Three Months Ended
-------------------
July 29, July 30,
2001 2000
---------- ----------
(Unaudited)
(In thousands, except per share data)
Reported net income . . . . . . . . . . . . $ 5,854 $ 10,569
Amortization expense, net
of taxes. . . . . . . . . . . . . . . . . . . - 2,705
------------ ------------
Adjusted net income.. . . . . . . . . . . $ 5,854 $ 13,274
======= =======
Reported net income per common share:
Basic. . . . . . . . . . . . . . . . . . . . . $ 0.21 $ 0.35
Diluted. . . . . . . . . . . . . . . . . . . $ 0.20 $ 0.33
Adjusted net income per common share:
Basic. . . . . . . . . . . . . . . . . . . . . $ 0.21 $ 0.44
Diluted. . . . . . . . . . . . . . . . . . . $ 0.20 $ 0.41
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
5. RESTRICTED CASH
Restricted cash consists primarily of a certificate of deposit in the
amount of $1.5 million for the Greek Lawsuit (see note 8), construction escrow
related to our Boonville, MO development of $1.0 million, workers' compensation
in the amount of $0.5 million and various other deposits totaling $1.4 million.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
6. LONG-TERM DEBT
Long-term debt consists of the following:
July 29, April 29,
2001 2001
---------- ----------
(In thousands)
8.75 % senior subordinated notes
(described below) . . . . . . . . . . . . . . . . . . . . . . . . . $ 390,000 $ 390,000
Senior Credit Facility (described below):
Variable rate term loans. . . . . . . . . . . . . . . . . . . . . 506,436 461,250
Revolver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000 93,000
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
(described below) . . . . . . . . . . . . . . . . . . . . . . . . . 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
(described below). . . . . . . . . . . . . . . . . . . . . . . . . . 6,493 6,493
12.5 % note payable, due in monthly installments of
$125,000, including interest, beginning October
1997 through October 2005.. . . . . . . . . . . . . . . . . 4,778 4,999
8 % note payable, due in monthly installments of
$66,667, including interest, through July 2002 . . 690 888
8 % note payable, due in monthly installments of
$11,365, including interest, through
December 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,157 1,168
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,975 6,323
---------- ----------
1,035,529 1,039,121
Less: current maturities . . . . . . . . . . . . . . . . . . . . . 20,849 20,936
---------- ----------
Long-term debt.. . . . . . . . . . . . . . . . . . . . . . . . . . . $1,014,680 $1,018,185
======== =========
8.75% Senior Subordinated Notes
On April 23, 1999, the Company issued $390 million of 8.75% 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%
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
6. LONG-TERM DEBT (CONTINUED)
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.
Senior Credit Facility
Simultaneously with the issuance of the Senior Subordinated Notes, the
Company entered into a $175.0 million five-year credit facility (the "Senior
Credit Facility") comprised of a $50.0 million term loan and a $125.0 million
revolver. On March 2, 2000, the Company amended and restated the Senior Credit
Facility in connection with the acquisition of Lady Luck and BRDC, as well as,
to provide financing for the pending acquisitions of the Flamingo Hilton
Riverboat Casino in Kansas City, Missouri and of Davis Gaming Boonville, Inc.
The previous $175.0 million Senior Credit Facility was expanded under the
amended and restated agreement to a $600.0 million facility ("Amended and
Restated Senior Credit Facility").
The Amended and Restated Senior Credit Facility provides for a $125.0
million revolving credit facility and a $100.0 million Tranche A term loan
maturing on March 2, 2005, a $200.0 million Tranche B term loan maturing on
March 2, 2006, and a $175.0 million Tranche C term loan maturing on March 2,
2007. The Company is required to make quarterly principal payments on the term
loan portion of its Senior Credit Facility that began in March 2000. Such
payments were initially $3.4 million per quarter with scheduled increases of
$1.25 million per quarter in July of each year that the term loan is
outstanding. On March 2, 2000, Isle of Capri drew $475.0 million in term loans
under this facility in connection with the acquisition of Lady Luck and BRDC. A
portion of the initial $475.0 million draw was also used to repay outstanding
amounts under the existing credit facility and to fund the redemption of Lady
Luck notes and preferred stock.
On June 18, 2001, Isle of Capri exercised an option under its existing $600
million Amended and Restated Credit Agreement to add $50 million of additional
term loans under the same terms, conditions and covenants. Proceeds from the
loans were used to reduce outstanding borrowings under Isle of Capri's $125
million revolving loan facility.
At the Company's option, the revolving credit facility and the Tranche A
term loan may bear interest at (1) the highest of of 1% in excess of the
federal funds effective rate or the rate that the bank group announces from time
to time as its prime lending rate plus an applicable margin of up to 2.25%, or
(2) a rate tied to a LIBOR rate plus an applicable margin of up to 3.25%. At
the Company's option, the Tranche B term loan may bear interest at (1) the
highest of of 1% in excess of the federal funds effective rate or the rate
that the bank group announces from time to time as its prime lending rate plus
an applicable margin of up to 2.50%, or (2) a rate tied to a LIBOR rate plus an
applicable margin of up to 3.50%. At the Company's option, the Tranche C term
loan may bear interest at (1) the highest of of 1% in excess of the federal
funds effective rate or the rate that the bank group announces from time to time
as its prime lending rate plus an applicable margin of up to 2.625%, or (2) a
rate tied to a LIBOR rate plus an applicable margin of up to 3.625%. The
Company entered into three interest rate swap agreements in the fourth quarter
of fiscal 2001 and one interest rate swap agreement in the first quarter of
fiscal 2002 that effectively convert portions of the floating rate term loans to
a fixed-rate basis. The notional value of the swaps was $200 million. See Item
3, "Quantitative and Qualitative Disclosures about Market Risk" in Part I of
this Form 10-Q.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
6. LONG-TERM DEBT (CONTINUED)
The Amended and Restated Senior Credit Facility provides for certain
covenants, including those of a financial nature. The Company was in compliance
with these covenants as of July 29, 2001. 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 their subsidiaries.
At July 29, 2001, $45.0 million was outstanding under the revolving credit
agreement. The outstanding amounts under the term loan portion of the facility
at April 29, 2001 were (in thousands):
Tranche A. . . . . . . . $ 86,250
Tranche B. . . . . . . . 224,099
Tranche C. . . . . . . . 196,087
--------
Total. . . . . . . . . . $506,436
=======
13% First Mortgage Notes
On August 20, 1997, Isle-Black Hawk issued $75.0 million of 13% First
Mortgage Notes ("First Mortgage Notes") with contingent interest, due August 31,
2004, that is non-recourse debt to the Isle of Capri Casinos. 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 the Consolidated Cash Flow (as defined in
the Indenture governing the First Mortgage Notes). 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 months ended July 29, 2001 and July 30, 2000 totaled $.4 million and $.3
million, 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 31, 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 and
thereafter. . . 100.000%
On June 5, 2000, as required by the Indenture, Isle-Black Hawk offered
to purchase for cash up to $1.2 million principal amount of First Mortgage Notes
at a price of $1,010 per $1,000 principal amount, plus interest accrued up to,
but not including, the payment date in accordance with the terms of the
Indenture. None of the First Mortgage Notes were tendered for purchase. Isle
Black-Hawk is required to make an offer based upon excess cash flow, as defined,
every year during the term of the First Mortgage Notes.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
6. LONG-TERM DEBT (CONTINUED)
Variable Rate TIF Bonds
As part of the City of Bettendorf Development Agreement dated June 17,
1997, 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 $32.0 million until
the TIF Bonds mature. 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.
Other
Isle of Capri has $2.0 million available in bank lines of credit other than
the Senior Credit Facility. As of July 29, 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 guarantee
the City of Black Hawk (the "City") improvements according to the subdivision
improvement agreement with the City. The letter of credit, totaling $.4 million
and insured by $.2 million of restricted cash, can be drawn upon by the City for
repair on the public improvements during the one-year warranty period ending
February 2002.
At July 29, 2001, Isle of Capri was in compliance with all debt covenants.
7. COMMITMENTS
Jefferson County, Missouri
On July 26, 2000, the Missouri Gaming Commission preliminarily 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 signature restaurants, a
200-room hotel and an entertainment complex. 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 and has filed a declaratory
judgment challenging the town's right to condemn and/or annex the property.
Development of the project has been delayed.
8. 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.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
8. 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. The court granted summary judgment in favor of
Louisiana Riverboat Gaming Partnership and that decision was not appealed and
is now final. Subsequently , some other individuals filed a similar suit in
the same court. The trial court dismissed the case on the basis of res
judicata; however, on appeal the appellate court reversed and rendered the case
for further proceedings. The Company and the City are vigorously defending
the suit.
Lady Luck and several 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. The payments the Company is alleged to have been
required to make aggregate approximately $2.1 billion drachma (which was
approximately $8.9 million as of July 29, 2001 based on published exchange
rates). Although it is difficult to determine the damages being sought from the
lawsuit, the action may seek damages up to that aggregate amount plus interest
from the date of the alleged breach. Although the court granted summary
judgment in our favor and dismissed the lawsuit, the Ministry of Tourism has
appealed the matter . Accordingly, the outcome is still in doubt and cannot be
predicted with any degree of certainty. We believe the claims against the
Company to be without merit and we intend to continue vigorously defending the
claims asserted in this action.
We are currently involved in an arbitration proceeding concerning the
amount of payments owed to a party which had an interest in property located in
Lula, Mississippi that was purchased by the Company. The claimant is seeking
payments based upon a percentage of gross revenue generated by the Lula,
Mississippi facility. The Company disputes this claim and believe that its
responsibility is limited to payments that are fixed in amount. We are
vigorously defending the claims 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.
9. 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 July 29, 2001, a total of 2.2 million shares of common stock had been
repurchased at a total cost of $18.9 million.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
10. 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 8.75%
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 months ended July 29, 2001 and July 30,
2000 and balance sheet as of July 29, 2001 and April 29, 2001.
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATING CONDENSED GUARANTOR, NONGUARANTOR AND PARENT
COMPANY FINANCIAL INFORMATION
AS OF JULY 29, 2001 (UNAUDITED) AND APRIL 29, 2001 AND FOR
THE THREE MONTHS ENDED JULY 29, 2001 AND JULY 30, 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
--------------- ---------------- --------------- --------------- --------------
As of July 29, 2001
Balance Sheet
- -----------------
Current assets . . . . . . $ 10,524 $ 106,713 $ 22,213 $ (12,909) $ 126,541
Intercompany
receivables . . . . . . 883,771 94,352 - (978,123) -
Investments
in subsidiaries. . . . 259,720 262,827 - (521,845) 702
Property and
equipment, net. . . 1,884 779,646 103,085 - 884,615
Other assets . . . . . . 20,104 361,717 2,990 - 384,811
---------- -------------- --------------- ----------------- --------------
Total assets.. . . . . . $ 1,176,003 $ 1,605,255 $ 128,288 $ (1,512,877) $ 1,396,669
======== ========= ========= =========== =========
Current liabilities. $ 46,837 $ 119,209 $ 17,859 $ (12,821) $ 171,084
Intercompany
payables. . . . . . 23,892 954,320 - (978,212) -
Long-term debt,
less current
maturities.. . . . 923,936 14,681 76,063 - 1,014,680
Deferred income
Taxes . . . . . . . 11,434 4,129 - - 15,563
Other accrued
liabilities. . . . . - 9,865 - - 9,865
Minority interest. - - - 15,573 15,573
Stockholders'
equity . . . . . . 169,904 503,051 34,366 (537,417) 169,904
---------- -------------- --------------- ----------------- --------------
Total liabilities
and stockholders'
equity. . . . . . . $1,176,003 $ 1,605,255 $ 128,288 $ (1,512,877) $ 1,396,669
======= ========= ========= ========== ==========
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
10. 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
--------------- ---------------- --------------- --------------- --------------
For the Three Months Ended July 29, 2001
Statement of Operations
- ------------------------------
Revenue:
Casino . . . . . . . . . . . $ - $ 230,538 $ 27,050 $ - $ 257,588
Rooms, food,
beverage and other. . 12 54,378 5,202 - 59,592
--------------- -------------- -------------- --------------- ---------------
Gross revenue. . . . . . . 12 284,916 32,252 - 317,180
Less promotional
allowances. . . . . . . - 48,707 5,537 - 54,244
--------------- -------------- -------------- --------------- ---------------
Net revenue. . . . . . . 12 236,209 26,715 - 262,936
Operating expenses:
Casino.. . . . . . . . . - 47,461 3,957 - 51,418
Gaming taxes . . . . . - 49,115 5,369 - 54,484
Rooms, food,
beverage and other. (2,282) 98,112 9,544 - 105,374
Depreciation and
amortization. . . . . 234 16,069 990 - 17,293
--------------- -------------- -------------- --------------- ---------------
Total operating
expenses . . . . . . . (2,048) 210,757 19,860 - 228,569
Operating income.. . 2,060 25,452 6,855 - 34,367
Gain on sale of assets.. 125 - - - 125
Interest expense, net. . . (21,861) (26,175) (3,044) 26,713 (24,367)
Interest income. . . . . . . 25,804 1,071 71 (26,713) 233
Minority interest. . . . . - - - (1,671) (1,671)
Equity in income (loss) of
unconsolidated joint
venture . . . . . . 2,559 5,951 - (8,510) -
--------------- -------------- -------------- --------------- ---------------
Income (loss) before
income taxes. . . . 8,687 6,299 3,882 (10,181) 8,687
Income tax provision . . 2,833 - - - 2,833
--------------- -------------- -------------- --------------- ---------------
Net income (loss). . . $ 5,854 $ 6,299 $ 3,882 $ (10,181) $ 5,854
= ======== ========= ========= ========= =======
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
10. 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
--------------- ---------------- --------------- --------------- --------------
For the Three Months Ended July 29, 2001
Statement of Cash Flows
- -----------------------------------------
Net cash provided by (used in)
operating activities. . . . . $ (2,979) $ 51,440 $ 8,256 $ (8,665) $ 48,052
Net cash provided by (used in)
investing activities. . . . . 6,937 (44,998) (452) 8,665 (29,848)
Net cash provided by (used in)
financing activities. . . . . (5,442) (641) (139) - (6,222)
-------------- --------------- -------------- --------------- ---------------
Net increase (decrease) in cash and
cash equivalents. . . . . . . (1,484) 5,801 7,665 - 11,982
Cash and cash equivalents at
beginning of the year . . . 159 63,458 13,042 - 76,659
-------------- --------------- -------------- --------------- ---------------
Cash and cash equivalents at
end of the year . . . . . . . $ (1,325) $ 69,259 $ 20,707 $ - $ 88,641
======== ======== ========= ========== ==========
For the Three Months Ended July 30, 2000
Statement of Operations
- -----------------------------------------
Revenue:
Casino. . . . . . . . . . . . . $ - $ 205,879 $ 24,456 $ - $ 230,335
Rooms, food,
beverage and other . . . 35 46,599 3,427 - 50,061
--------------- -------------- -------------- --------------- ---------------
Gross revenue . . . . . . . 35 252,478 27,883 - 280,396
Less promotional
allowances.. . . . . . . . . - 40,131 4,598 - 44,729
--------------- -------------- -------------- --------------- ---------------
Net revenue . . . . . . . . 35 212,347 23,285 - 235,667
Operating expenses:
Casino. . . . . . . . . . . . . - 40,778 3,571 - 44,349
Gaming taxes. . . . . . . - 40,509 4,804 - 45,313
Rooms, food,
beverage and other.. . (1,002) 80,626 8,737 - 88,361
Depreciation
and amortization . . . . 495 14,152 574 - 15,221
--------------- -------------- -------------- --------------- ---------------
Total operating
expenses. . . . . . . . . (507) 176,065 17,686 - 193,244
Operating income. . . 542 36,282 5,599 - 42,423
Interest expense, net . 1,196 (19,851) (2,337) - (20,992)
Minority interest.. . . . - - - (1,404) (1,404)
Equity in income (loss) of
Unconsolidated
joint venture. . . . . . . 18,292 14,100 - (32,392) -
--------------- -------------- -------------- --------------- ---------------
Income (loss) before
income taxes . . . . . 20,030 30,531 3,262 (33,796) 20,027
Income tax provision.. 9,458 - - - 9,458
--------------- -------------- -------------- --------------- ---------------
Net income (loss).. . . . $ 10,572 $ 30,531 $3,262 $(33,796) $10,569
=========== ======== ========= ========= =========
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
10. 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
--------------- ---------------- --------------- --------------- --------------
For the Three Months Ended July 30, 2000
Statement of Cash Flows
- -------------------------------------------
Net cash provided by (used in)
operating activities. . . . . $ 11,890 $ 42,407 $ 8,003 $ (23,625) $ 38,675
Net cash provided by (used in)
investing activities. . . . . . (56,286) (25,050) (4,678) 23,625 (62,389)
Net cash provided by (used in)
financing activities. . . . . . (3,093) (1,570) (202) - (4,865)
------------ --------------- -------------- -------------- ---------------
Net increase (decrease) in cash and
cash equivalents. . . . . . . . (47,489) 15,787 3,123 - (28,579)
Cash and cash equivalents at
beginning of the year . . . 78,945 82,514 6,513 - 167,972
------------ --------------- -------------- -------------- ---------------
Cash and cash equivalents at
end of the year . . . . . . . . $ 31,456 $ 98,301 $ 9,636 $ - $ 139,393
======== ======== ========= ======== =========
As of April 29, 2001
Balance Sheet
- -------------------------
Current assets. . . . . . . . . $ 14,606 $ 92,445 $ 14,407 $ - $ 121,458
Intercompany
receivables. . . . . . . . . . 858,629 130,130 3 (988,763) (1)
Investments in
subsidiaries.. . . . . . . . 256,497 256,877 - (513,335) 39
Property and
equipment, net . . . . . . 1,714 766,777 103,677 - 872,168
Other assets. . . . . . . . 33,350 352,746 3,147 - 389,243
------------ --------------- -------------- -------------- ---------------
Total assets. . . . . . . . $1,164,796 $1,598,975 $ 121,234 $(1,502,098) $1,382,907
========== ========= ========== ========= ==========
Current liabilities . . . . $ 36,682 $ 110,457 $ 12,406 $ 1 $ 159,546
Intercompany payables 23,884 962,691 2,188 (988,763) -
Long-term debt,
less current maturities. . 926,750 15,279 76,156 - 1,018,185
Deferred income taxes . . 11,434 4,129 - - 15,563
Other accrued liabilities.. - 9,670 - - 9,670
Minority interest.. . . . . . . - - - 13,902 13,902
Stockholders' equity. . . . . 166,046 496,749 30,484 (527,238) 166,041
------------ --------------- -------------- -------------- ---------------
Total liabilities and
stockholders' equity. $1,164,796 $1,598,975 $ 121,234 $(1,502,098) $1,382,907
========== ======= ========== ========= ==========
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. CONSOLIDATING CONDENSED FINANCIAL INFORMATION (CONTINUED)
(a) Certain of the Company's wholly-owned subsidiaries are guarantors on the
8.75 % 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 6).
(b) The following non-wholly-owned subsidiaries are not guarantors on the
8.75 % 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 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 three months ended July 29,
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, the Isle-Marquette, the Isle-Kansas City, Lady
Luck Las Vegas, Rhythm City-Davenport, and Pompano Park.
Isle of Capri's results of operations for the three months ended July 30,
2000 reflect the consolidated operations of all of Isle of Capri's subsidiaries
owned at that time, 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, the Isle-Marquette, and
the Isle-Kansas City subsequent to its purchase on June 6, 2000. Not included
in the consolidated results for the three months ended July 30, 2000 are the
operations of the Rhythm City-Davenport property which was purchased on October
10, 2000 and the Lady Luck Las Vegas Casino property which was purchased on
September 12, 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 and weather. 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 July 29, 2001 Compared to Three Fiscal Months Ended
July 30, 2000
Gross revenue for the quarter ended July 29, 2001 was $317.2 million, which
included $257.6 million of casino revenue, $15.2 million of rooms revenue, $5.3
million of pari-mutuel commissions and $39.1 million of food, beverage and other
revenue. This compares to gross revenue for the prior year quarter ended July
30, 2000 of $280.4 million, which included $230.3 million of casino revenue,
$9.9 million of rooms revenue, $4.9 million of pari-mutuel commissions and $35.3
million of food, beverage and other revenue.
Casino revenue increased $27.3 million or 11.8% primarily as a result of a
full quarter of operations of the Isle-Kansas City, Lady Luck Las Vegas and
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 decreases at the Isle-Bossier due to
additional competition and the Isle-Lula due to declining economic conditions in
that area. Room revenue increased $5.3 million or 53.3% due to a full quarter
of operations of the Lady Luck Las Vegas and 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 $3.9 million or
11.0% as a result of a full quarter of operations of the Isle-Kansas City, Lady
Luck Las Vegas and Rhythm City-Davenport.
Casino operating expenses for the quarter ended July 29, 2001 totaled $51.4
million, or 20.0% of casino revenue, versus $44.3 million, or 19.3% of casino
revenue, for the quarter ended July 30, 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.
Operating expenses for the quarter ended July 29, 2001 also included room
expenses of $3.5 million or 22.8% 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, the Isle-Black Hawk,
Lady Luck Las Vegas and Rhythm City-Davenport compared to $2.3 million or
22.8% of room revenue for the quarter ended July 30, 2000. Operating expenses
for the quarter ended July 30, 2000 did not include the new hotel at the
Isle-Lake Charles, or the hotels at Isle-Tunica and Isle-Black Hawk that had
not yet opened. Operating expenses also did not include Lady Luck Las Vegas and
Rhythm City-Davenport that had not yet been acquired. 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 July 29, 2001, state and local gaming taxes were paid
in Louisiana, Mississippi, Colorado, Iowa, Missouri and Nevada totaling $54.5
million, or 21.2% of casino revenue, compared to $45.3 million, or 19.7% of
casino revenues for the three months ended July 30, 2000, which is consistent
with each state's gaming tax rate for the applicable fiscal quarters. For the
fiscal quarter ended July 30, 2000, state and local gaming taxes were paid in
Louisiana, Mississippi, Colorado, Iowa and Missouri. Legislation was passed
April 1, 2001 that allowed Louisiana riverboats which had been required to
conduct cruises, including the riverboats at the Isle-Lake Charles, to remain
permanently dockside beginning April 1, 2001. The legislation also increased the
gaming tax for operators from 18.5% to 21.5% for Isle-Lake Charles. The
legislation increased the gaming tax for Isle-Bossier City by 1% each year until
21.5% is reached.
Food, beverage and other expenses totaled $8.9 million for the quarter
ended July 29, 2001, compared to $7.1 million for the quarter ended July 30,
2000. Food and beverage and other operating expenses as a percentage of food,
beverage and other revenues increased to 22.8% for the quarter ended July 29,
2001 from 20.1% for the quarter ending July 30, 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.
Marine and facilities expenses totaled $17.9 million for the quarter ended
July 29, 2001, versus $14.5 million for the quarter ended July 30, 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 $70.6 million, or 26.9% of
net revenue, for the quarter ended July 29, 2001, versus $60.9 million, or 25.9%
of net revenue, for the quarter ended July 30, 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.
Depreciation and amortization expense was $17.3 million for the quarter
ended July 29, 2001 and $15.2 million for the quarter ended July 30, 2000.
Depreciation expense increased by $5.7 million compared to the prior year
quarter consistent with an increase in fixed assets placed into service or
acquired. This increase was offset by a decrease in amortization of goodwill of
$3.6 million before the effect of income taxes which occurred due to the
Company's early adoption of Financial Accounting Standards (SFAS) No. 142,
"Goodwill and Other Intangible Assets," which requires that goodwill and other
indefinite lived intangible assets not be amortized under any circumstance and
only reduced if it is found to be impaired (see note number 4 "Goodwill and
Other Intangible Assets" to the financial statements).
Interest expense was $24.4 million for the quarter ended July 29, 2001, net
of capitalized interest of $0.4 million versus $23.4 million for the quarter
ended July 30, 2000, net of capitalized interest of $1.3 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 July 29,
2001. This compares to interest expense of $2.4 million, net of capitalized
interest of $.7 million, for the quarter ended July 30, 2000.
Isle of Capri's effective tax rate was 32.6% for the quarter ended July 29, 2001
compared to 47.2% for the quarter ended July 30, 2000. The decline in the
effective tax rate is primarily a result of the Company's early adoption of SFAS
No. 142, Goodwill and Other Intangible Assets, as discussed above. Effective
with the adoption of SFAS No. 142 for the first quarter of fiscal 2002, income
tax expense does not include the effects of non-deductible goodwill amortization
for income tax purposes. Income tax expense for the quarter ended July 30, 2000
does include the effects of non-deductible goodwill amortization for income tax
purposes.
LIQUIDITY AND CAPITAL RESOURCES
At July 29, 2001, Isle of Capri had cash and cash equivalents of $88.6
million compared to $76.7 million in cash and cash equivalents at April 29,
2001. The $11.9 million increase in cash is the net result of $48.1 million net
cash provided by operating activities, $29.8 million net cash used in investing
activities, and $6.2 million net cash used in financing activities.
Isle of Capri invested $29.4 million in property and equipment during the
three months ended July 29, 2001 primarily for the development of Boonville and
implementation of company-wide slot program expansion. Approximately $6.1
million was expended on maintenance capital expenditures. The following table
reflects expenditues for property and equipment on major projects:
COSTS ($IN MILLIONS)
------------------------------
PRIOR CURRENT
PROPERTY PROJECT YEAR QUARTER
- --------------- ------------- ----------- ---------------
Isle-Boonville. . . . . . . . . . Develop casino $ 16.2 $ 5.8
Isle-Tunica . . . . . . . . . . . . Construct hotel & 2 theaters 31.4 0.7
Lady Luck properties. . . . .Convert to Isle 31.8 1.5
Isle-Lake Charles . . . . . . . Construct hotel 24.4 0.4
Isle-Black Hawk . . . . . . . .Construct hotel 7.1 -
Rhythm City - Davenport Renovations 17.5 1.3
Isle-Kansas City. . . . . . . . Renovations 12.6 0.7
Lady Luck Las Vegas . . . Renovations 1.4 0.2
All . . . . . . . . . . . . . . . . . Slot program - 12.7
All . . . . . . . . . . . . . . . . . Maintenance 16.8 6.1
----------- --------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 159.3 $ 29.4
======= ========
COSTS ($IN MILLIONS)
------------------------------
REMAINDER EXPECTED
OF CURRENT
PROPERTY PROJECT YEAR YEAR
- --------------- ------------- ------------------ -------------
Isle-Boonville. . . . . . . . . . Develop casino $ 41.5 $ 47.3
Isle-Tunica . . . . . . . . . . . . Construct hotel & 2 theaters - 0.7
Lady Luck properties. . . . .Convert to Isle - 1.5
Isle-Lake Charles . . . . . . . Construct hotel - 0.4
Isle-Black Hawk . . . . . . . .Construct hotel - -
Rhythm City - Davenport Renovations 4.4 5.7
Isle-Kansas City. . . . . . . . Renovations 3.3 4.0
Lady Luck Las Vegas . . . Renovations 1.4 1.6
All . . . . . . . . . . . . . . . . . Slot program 22.3 35.0
All . . . . . . . . . . . . . . . . . . Maintenance 19.9 26.0
----------- --------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 92.8 $ 122.2
======= ========
During the three months ended July 29, 2001, Isle of Capri used net cash of $6.2
million for financing activities. Isle borrowed $50.0 million under the
"Greenshoe Option" under its term loans which was used to reduce its Revolving
Credit Facility. The Revolver is due March 2005 and is a variable rate debt
instrument currently at 7.35% interest rate. Isle made principle payments on the
Senior Credit Facility and other debt of $5.6 million and purchased 256,000
shares of its common stock at a total cost of $2.3 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, a portion of which was allocated to goodwill, and preopening
and other expenses that flow through income as incurred. The Company expects to
complete the project by the end of 2001. A significant portion of the principal
near term capital requirements will be related to the construction of the
Isle-Boonville, of which $22.0 million was expended as of July 29, 2001.
On June 6, 2000, Isle of Capri acquired Isle-Kansas City for $33.5 million
cash less certain assumed liabilities. Isle of Capri is investing up to an
additional $16.6 million in this project, primarily to re-theme the casino into
an Isle of Capri casino. This project is substantially complete and as of July
29, 2001, the company had spent $13.3 million.
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 $23.2 million in this project, primarily to
replace the existing boat and re-theme the casino into a Rhythm City Casino. The
project is substantially complete, and as of July 29, 2001 the Company has spent
$18.8 million.
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 July 29, 2001 $35.0
million was spent on this project.
Isle of Capri anticipates that capital improvements approximating $26.0
million will be made during fiscal 2002 to maintain its existing facilities and
remain competitive in its markets and $35.0 for its slot upgrade program. As of
the three months ended July 29, 2001, Isle of Capri has spent $6.1 million on
maintenance capital improvements and $12.7 million on its slot upgrade program.
On July 26, 2000, the Missouri Gaming Commission preliminarily 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. Isle of Capri
expects to invest approximately $105.0 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 and has filed a declaratory judgment action challenging the town's right
to condemn and/or annex the property. Development of the project has been
delayed.
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.
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 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.
On June 18, 2001, Isle of Capri exercised the option under its existing
$600.0 million Amended and Restated Credit Agreement to add $50 million of
additional term loans under the same terms, conditions and covenants. Proceeds
from the loans were used to reduce outstanding borrowings under Isle of Capri's
$125.0 million revolving loan facility.
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 $525.0 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss arising from adverse changes in market
rates and prices, including interest rates, foreign currency exchange rates,
commodity prices and equity prices. Isle of Capri's primary exposure to market
risk is interest rate risk associated with its Amended and Restated Senior
Credit Facility.
The Company has entered into four interest rate swap agreements that
effectively convert portions of its floating-rate debt to a fixed-rate basis for
the next two to three years, thus reducing the impact of interest rate changes
on future interest expense. $200.0 million or 39.5% of the Company's $506.4
million variable rate term debt outstanding under its Amended and Restated
Senior Credit Facility was designated as hedged items to interest rate swap
agreements at July 29, 2001.
The Company evaluates the effectiveness of these hedged
transactions on a quarterly basis. The Company found no portion of the hedging
instruments to be ineffective during the three months ended July 29, 2001.
Accordingly, no gain or losses have been recognized on these cash flow hedges.
There has been no material change in the Company's financial instruments
that are sensitive to changes in interest rates from that reported in Form 10-K
for the year ended April 29, 2001.
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 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. The court granted summary judgment in favor of
Louisiana Riverboat Gaming Partnership and that decision was not appealed and
is now final. Subsequently , some other individuals filed a similar suit in
the same court. The trial court dismissed the case on the basis of res
judicata; however, on appeal the appellate court reversed and rendered the case
for further proceedings. The Company and the City are vigorously defending
the suit.
Lady Luck and several 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. The payments the Company is alleged to have been
required to make aggregate approximately $2.1 billion drachma (which was
approximately $8.9 million as of July 29, 2001 based on published exchange
rates). Although it is difficult to determine the damages being sought from the
lawsuit, the action may seek damages up to that aggregate amount plus interest
from the date of the alleged breach. Although the court granted summary
judgment in our favor and dismissed the lawsuit, the Ministry of Tourism has
appealed the matter . Accordingly, the outcome is still in doubt and cannot be
predicted with any degree of certainty. We believe the claims against the
Company to be without merit and we intend to continue vigorously defending the
claims asserted in this action.
We are currently involved in an arbitration proceeding concerning the
amount of payments owed to a party which had an interest in property located in
Lula, Mississippi that was purchased by the Company. The claimant is seeking
payments based upon a percentage of gross revenue generated by the Lula,
Mississippi facility. The Company disputes this claim and believe that its
responsibility is limited to payments that are fixed in amount. We are
vigorously defending the claims asserted in this proceeding.
The Company is 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)
(a) Documents filed as Part of this Report.
----------------------------------------------
1. Exhibits.
-----------
None.
2. Reports on Form 8-K.
--------------------------
During the quarter ended July 29, 2001, the Company filed the
following reports on Form 8-K:
None.
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: September 12, 2001 /s/ Rexford A. Yeisley
--------------------------
Rexford A. Yeisley, Chief Financial Officer
(Principal Financial and Accounting Officer)
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
- -------------------------- --------------------
None.