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 27, 2002
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 March 8, 2002, the Company had a total of 31,468,604 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 27, 2002 (UNAUDITED)
AND APRIL 29, 2001. . . . . . . . . . . . . . . . . . . . . . . . . 1
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND THE NINEIX
NINE MONTHS ENDED JANUARY 27, 2002 AND JANUARY 28, 2001 (UNAUDITED) 2
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE NINE
MONTHS ENDED JANUARY 27, 2002 (UNAUDITED) . . . . . . . . . . . . . 3
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS
ENDED JANUARY 27, 2002 AND JANUARY 28, 2001 (UNAUDITED) . . . . . . 4
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS. . . . . . . . 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . 28
PART II OTHER INFORMATION
- ------------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. . . . . . . . . . . . . . . . 36
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . . . . . . 36
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . 36
ITEM 5. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . . . . . . . . . . 36
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
EXHIBIT LIST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS January 27, April 29,
------
2002 2001
---- ----
Current assets:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Unaudited)
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 76,836 $ 76,659
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,018 9,203
Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 4,700
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,843 14,536
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . 17,445 16,359
------------ -----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . 112,142 121,457
Property and equipment - net.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 893,924 872,168
Other assets:
Property held for development or sale . . . . . . . . . . . . . . . . . . . . . 2,860 2,860
Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306,647 291,755
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,918 66,411
Deferred financing costs, net of accumulated amortization of $9,122 and
$8,533, respectively.. . . . . . . . . . . . . . . . . . . . . . . . . . . 18,835 21,856
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,681 4,300
Prepaid deposits and other. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,284 2,100
------------ -----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,405,291 $1,382,907
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------
Current liabilities:
Current maturities of long-term debt. . . . . . . . . . . . . . . . . . . . . . $ 35,959 $ 20,936
Accounts payable trade. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,204 22,635
Accrued liabilities:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,449 9,521
Payroll and related.. . . . . . . . . . . . . . . . . . . . . . . . . . . 43,494 35,653
Property and other taxes. . . . . . . . . . . . . . . . . . . . . . . . . 17,934 14,963
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,682 -
Progressive jackpots and slot club awards.. . . . . . . . . . . . . . . . 12,808 12,616
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,066 43,222
------------ -----------
Total current liabilities.. . . . . . . . . . . . . . . . . . . . . . 193,596 159,546
Long-term debt, less current maturities. . . . . . . . . . . . . . . . . . . . . . . 998,856 1,018,185
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,281 15,563
Other accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,197 9,670
Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,092 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: 31,130 at January 27, 2002 and 30,615 at April 29, 2001.. . . 309 306
Class B common stock, $.01 par value; 3,000 shares authorized; none issued - -
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 131,451 129,408
Unearned compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . (1,586) (1,800)
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,721 54,788
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . (4,084) -
------------ -----------
202,811 182,702
Treasury stock, 3,086 shares at January 27, 2002 and 1,959 shares
at April 29, 2001. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25,542) (16,661)
------------ -----------
Total stockholders' equity. . . . . . . . . . . . . . . . . . . . . . 177,269 166,041
------------ -----------
Total liabilities and stockholders' equity. . . . . . . . . . . . . . $ 1,405,291 $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 Nine Months Ended
-------------------- -------------------
January 27, January 28, January 27, January 28,
2002 2001 2002 2001
-------------------- ------------------- ------------- -------------
Revenues:
Casino . . . . . . . . . . . . . . . . . . . . . . . $ 255,704 $ 229,201 $ 770,990 $ 690,579
Rooms. . . . . . . . . . . . . . . . . . . . . . . . 11,592 13,363 41,551 35,355
Pari-mutuel commissions and fees . . . . . . . . . . 6,975 6,060 15,390 14,129
Food, beverage and other . . . . . . . . . . . . . . 35,948 37,309 112,017 107,711
-------------------- ------------------- ------------- -------------
Gross revenues. . . . . . . . . . . . . . . . . 310,219 285,933 939,948 847,774
Less promotional allowances.. . . . . . . . . . 48,084 48,425 154,371 140,805
-------------------- ------------------- ------------- -------------
Net revenues. . . . . . . . . . . . . . 262,135 237,508 785,577 706,969
Operating expenses:
Casino . . . . . . . . . . . . . . . . . . . . . . . 51,080 50,607 152,019 139,762
Gaming taxes . . . . . . . . . . . . . . . . . . . . 55,904 46,442 165,280 138,053
Rooms. . . . . . . . . . . . . . . . . . . . . . . . 2,791 3,121 9,584 8,208
Pari-mutuel. . . . . . . . . . . . . . . . . . . . . 4,814 4,388 11,025 10,402
Food, beverage and other.. . . . . . . . . . . . . . 8,735 8,195 26,166 22,843
Marine and facilities. . . . . . . . . . . . . . . . 16,445 16,758 51,937 45,920
Marketing and administrative.. . . . . . . . . . . . 65,479 64,439 201,759 182,946
Preopening expenses. . . . . . . . . . . . . . . . . 2,334 - 3,871 -
Other charges. . . . . . . . . . . . . . . . . . . . - 4,276 - 4,276
Depreciation and amortization. . . . . . . . . . . . 18,647 18,530 53,083 49,648
-------------------- ------------------- ------------- -------------
Total operating expenses. . . . . . . . . . . . 226,229 216,756 674,724 602,058
-------------------- ------------------- ------------- -------------
Operating income. . . . . . . . . . . . . . . . . . . . . 35,906 20,752 110,853 104,911
Interest expense . . . . . . . . . . . . . . . . . . (21,133) (25,561) (68,130) (72,883)
Interest income. . . . . . . . . . . . . . . . . . . 113 427 641 3,625
Gain on disposal of assets . . . . . . . . . . . . . - - 125 271
Minority interest. . . . . . . . . . . . . . . . . . (1,962) (1,282) (5,624) (4,241)
Equity in loss of
unconsolidated joint ventures . . . . . . . . . . - (1) - (110)
-------------------- ------------------- ------------- -------------
Income (loss) before income taxes and extraordinary item. 12,924 (5,665) 37,865 31,573
Income tax provision (benefit) . . . . . . . . . . . 4,842 (2,707) 13,494 14,326
-------------------- ------------------- ------------- -------------
Income (loss) before extraordinary item.. . . . . . . . . 8,082 (2,958) 24,371 17,247
Extraordinary loss on extinguishment of debt, net of
applicable income tax benefit of $1,420. . . . . . . (2,438) - (2,438) -
-------------------- ------------------- ------------- -------------
Net income (loss) . . . . . . . . . . . . . . . . . . . . $ 5,644 $ (2,958) $ 21,933 $ 17,247
==================== =================== ============= =============
Earnings (loss) per share of common stock:
Earnings (loss) per common share - basic:
Income (loss) before extraordinary item . . . . . . . . $ 0.29 $ (0.10) $ 0.87 $ 0.57
Extraordinary loss, net.. . . . . . . . . . . . . . . . (0.09) - (0.09) -
-------------------- ------------------- ------------- -------------
Net income (loss) . . . . . . . . . . . . . . . . . . . $ 0.20 $ (0.10) $ 0.78 $ 0.57
==================== =================== ============= =============
Earnings (loss) per common share - assuming dilution:
Income (loss) before extraordinary item . . . . . . . . $ 0.27 $ (0.10) $ 0.82 $ 0.54
Extraordinary loss, net . . . . . . . . . . . . . . . . (0.08) - (0.08) -
-------------------- ------------------- ------------- -------------
Net income (loss).. . . . . . . . . . . . . . . . . . . $ 0.19 $ (0.10) $ 0.74 $ 0.54
==================== =================== ============= =============
Weighted average basic shares. . . . . . . . . . . . 27,750 29,903 28,107 30,271
Weighted average diluted shares. . . . . . . . . . . 29,652 29,903 29,588 31,989
See notes to consolidated financial statements.
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
Accumulated
Other
Shares of Additional Unearned Compre- Total
Common Common Paid-in Compen- hensive Treasury Retained Stockholders'
Stock Stock Capital sation Loss Stock Earnings Equity
--------- ----------- --------- --------- --------- ---------- --------- ---------------
Balance, April 29, 2001 . . . . . 30,615 $ 306 $ 129,408 $ (1,800) $ - $ (16,661) $ 54,788 $ 166,041
Net income . . . . . . . . . - - - - - - 21,933 21,933
Unrealized loss on interest
rate swap contracts . . . - - - - (4,084) - - (4,084)
--------- ----------- --------- --------- --------- ---------- --------- ---------------
Comprehensive income (loss),
January 27, 2002. . . . . - - - - (4,084) - 21,933 17,849
Exercise of stock
options and warrants. . . 515 3 1,950 - - (768) - 1,185
Grant of nonvested stock . . - - 93 (93) - - - -
Amortization of unearned
compensation . . . . . . - - - 307 - - - 307
Purchase of treasury stock . - - - - - (8,113) - (8,113)
--------- ----------- --------- --------- --------- ---------- --------- ---------------
Balance, January 27, 2002 . . . . 31,130 $ 309 $ 131,451 $ (1,586) $ (4,084) $ (25,542) $ 76,721 $ 177,269
========= =========== ========= ========= ========= ========== ========= ===============
See notes to consolidated financial statements.
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Nine Months Ended
------------------
January 27, January 28,
2002 2001
------------------- -------------
OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . $ 21,933 $ 17,247
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization. . . . . . . . . . . . . 53,083 49,648
Amortization of deferred financing costs . . . . . . . 3,036 3,251
Amortization of unearned compensation. . . . . . . . . 307 766
Gain on disposal of assets . . . . . . . . . . . . . . (125) (271)
Other charges. . . . . . . . . . . . . . . . . . . . . - 4,276
Deferred income taxes. . . . . . . . . . . . . . . . . 2,454 -
Equity in loss of unconsolidated joint venture.. . . . - 110
Extraordinary item (net of taxes). . . . . . . . . . . 2,438 -
Minority interest. . . . . . . . . . . . . . . . . . . 5,624 4,241
Changes in current assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . 185 (1,257)
Income tax receivable . . . . . . . . . . . . . . 4,700 -
Prepaid expenses and other assets.. . . . . . . . (1,088) (5,636)
Accounts payable and accrued liabilities. . . . . 10,164 (17,492)
------------------- -------------
Net cash provided by operating activities.. . . . . . . . . 102,711 54,883
INVESTING ACTIVITIES:
Purchase of property and equipment. . . . . . . . . . . . . (80,377) (128,620)
Net cash paid for acquisitions. . . . . . . . . . . . . . . - (111,957)
Sale of short-term investments. . . . . . . . . . . . . . . - 39,044
Proceeds from sales of assets.. . . . . . . . . . . . . . . 125 271
Investments in and advances to joint ventures . . . . . . . (1,055) (955)
Restricted cash.. . . . . . . . . . . . . . . . . . . . . . 619 1,087
Prepaid deposits and other. . . . . . . . . . . . . . . . . (1,135) 5,504
------------------- -------------
Net cash used in investing activities.. . . . . . . . . . . (81,823) (195,626)
FINANCING ACTIVITIES:
Proceeds from debt. . . . . . . . . . . . . . . . . . . . . 130,000 -
Net proceeds from (reduction in) line of credit . . . . . . (42,400) 77,000
Principal payments on debt. . . . . . . . . . . . . . . . . (91,906) (12,361)
Deferred financing costs. . . . . . . . . . . . . . . . . . (1,950) (315)
Purchase of treasury stock. . . . . . . . . . . . . . . . . (8,113) (14,073)
Proceeds from exercise of stock options and warrants. . . . 1,182 924
Cash distribution to minority partner.. . . . . . . . . . . (7,524) -
------------------- -------------
Net cash (used in) provided by financing activities . . . . (20,711) 51,175
Net increase (decrease) in cash and cash equivalents. . . . 177 (89,568)
Cash and cash equivalents at beginning of period. . . . . . 76,659 167,972
------------------- -------------
Cash and cash equivalents at end of period. . . . . . . . . $ 76,836 $ 78,404
=================== =============
See notes to consolidated financial statements.
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
(IN THOUSANDS)
Nine Months Ended
-------------------
January 27, January 28,
2002 2001
------------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Net cash payments (receipts) for:
Interest. . . . . . . . . . . . . . . . . . . . . . . $ 65,701 $ 62,777
Income taxes. . . . . . . . . . . . . . . . . . . . . (7,630) 15,191
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Capital contributions:
Property and equipment. . . . . . . . . . . . . . . . $ - $ 22,679
Other:
Construction costs funded through accrued liabilities 1,509 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, Natchez, Vicksburg, Lula and Tunica,
Mississippi; in Bossier City and Lake Charles, Louisiana; in Bettendorf,
Davenport and Marquette, Iowa; in Kansas City and Boonville, Missouri; in Black
Hawk, Colorado; in Las Vegas, Nevada; and in Pompano, Florida. All of the
subsidiaries are wholly owned except for Black Hawk.
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 months ended January 27, 2002 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
materially from those estimates.
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 $17.1 million and $50.6 million of slot
points expense and cash coupon redemptions, previously reported as marketing
expenses, have been reclassified to promotional allowances for the three and
nine months ended January 28, 2001, respectively.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Effective April 30, 2001, Isle of Capri adopted the requirements of
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities" as amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities-Deferral of the
Effective Date of FASB Statement No. 133," and SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities." These
statements establish accounting and reporting standards for derivative
instruments, including instruments embedded in other contracts and for hedging
activities. All derivatives, whether designated in hedging relationships or
not, are required to be recorded on the balance sheet at fair value. If the
derivative is designated as a fair value hedge, the changes in the fair value of
the derivative and of the hedged item attributable to the hedged risk are
recognized in earnings. If the derivative is designated as a cash flow hedge,
the effective portions of changes in the fair value of the derivative are
recorded in other comprehensive income (OCI) and are recognized in the income
statement when the hedged item affects earnings. Ineffective portions of
changes in the fair value of cash flow hedges are recognized in earnings.
The Company uses derivative instruments to manage exposure to interest rate
risks. The Company's objective for holding derivatives is to minimize the risks
using the most effective methods to eliminate or reduce the impacts of these
exposures. Isle of Capri's primary exposure to interest rate risk is associated
with its Amended and Restated Senior Credit Facility and Isle-Black Hawk's
Secured Credit Facility. The Company is hedging cash flows associated with
forecasted transactions over the next three years. See Note 6.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
Three Months Ended Nine Months Ended
------------------ -----------------
January 27, January 28, January 27, January 28,
2002 2001 2002 2001
------------- ------------- ------------- ------------
(Unaudited)
(In thousands, except per share data)
Numerator:
Income (loss) before extraordinary item. . . . . . . . . . $ 8,082 $ (2,958) $ 24,371 $ 17,247
Extraordinary loss, net. . . . . . . . . . . . . . . . . . (2,438) - (2,438) -
------------- ------------- ------------- ------------
Net income (loss). . . . . . . . . . . . . . . . . . . . . 5,644 (2,958) 21,933 17,247
Numerator for basic earnings (loss) per share - income
(loss) available to common stockholders . . . . . . . 5,644 (2,958) 21,933 17,247
Effect of diluted securities.. . . . . . . . . . . . . . . - - - -
------------- ------------- ------------- ------------
Numerator for diluted earnings (loss) per share-
income (loss) available to common stockholders after
assumed conversions. . . . . . . . . . . . . . . $ 5,644 $ (2,958) $ 21,933 $ 17,247
============= ============= ============= ============
Denominator:
Denominator for basic earnings (loss) per share -
weighted - average shares . . . . . . . . . . . . . . 27,750 29,903 28,107 30,271
Effect of dilutive securities
Employee stock options, warrants
and nonvested restricted stock . . . . . . . . . . 1,902 - 1,481 1,718
------------- ------------- ------------- ------------
Dilutive potential common shares.. . . . . . . . . . . . . 1,902 - 1,481 1,718
------------- ------------- ------------- ------------
Denominator for diluted earnings (loss) per share -
adjusted weighted - average shares and
assumed conversions. . . . . . . . . . . . . . . 29,652 29,903 29,588 31,989
============= ============= ============= ============
BASIC EARNINGS (LOSS) PER SHARE
Income (loss) before extraordinary item. . . . . . . . . . $ 0.29 $ (0.10) $ 0.87 $ 0.57
Extraordinary loss, net. . . . . . . . . . . . . . . . . . (0.09) - (0.09) -
------------- ------------- ------------- ------------
Net income (loss). . . . . . . . . . . . . . . . . . . . . $ 0.20 $ (0.10) $ 0.78 $ 0.57
============= ============= ============= ============
DILUTED EARNINGS (LOSS) PER SHARE
Income (loss) before extraordinary item. . . . . . . . . . $ 0.27 $ (0.10) $ 0.82 $ 0.54
Extraordinary loss, net. . . . . . . . . . . . . . . . . . (0.08) - (0.08) -
------------- ------------- ------------- ------------
Net income (loss). . . . . . . . . . . . . . . . . . . . . $ 0.19 $ (0.10) $ 0.74 $ 0.54
============= ============= ============= ============
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 St. Charles Gaming
Company, Inc. ("SCGC"), Grand Palais Riverboat, Inc. ("GPRI"), Louisiana
Riverboat Gaming Partnership ("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 SCGC,
GPRI and 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.
For the nine months ended January 27, 2002, goodwill and other intangible
assets increased by $11.4 million due to the recording of the final purchase
accounting adjustments for Lady Luck Las Vegas and Rhythm City-Davenport.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)
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 Nine Months Ended
------------------ -------------------
January 27, January 28, January 27,
2002 2001 2002
-------------------------------------- ------------------- ------------
(Unaudited)
(In thousands, except per share data)
Income (loss) before extraordinary item . . . $ 8,082 $ (2,958) $ 24,371
Reported net income (loss). . . . . . . . . . 5,644 (2,958) 21,933
Amortization expense, net of taxes. . . . . . - 1,730 -
-------------------------------------- ------------------- ------------
Adjusted net income (loss). . . . . . . . . . $ 5,644 $ (1,228) $ 21,933
====================================== =================== ============
Income (loss) per common share
before extraordinary item:
Basic.. . . . . . . . . . . . . . . . . . $ 0.29 $ (0.10) $ 0.87
Diluted . . . . . . . . . . . . . . . . . $ 0.27 $ (0.10) $ 0.82
Reported net income (loss) per common share:
Basic. . . . . . . . . . . . . . . . . . $ 0.20 $ (0.10) $ 0.78
Diluted. . . . . . . . . . . . . . . . . $ 0.19 $ (0.10) $ 0.74
Adjusted net income (loss) per common share:
Basic. . . . . . . . . . . . . . . . . . $ 0.20 $ (0.04) $ 0.78
Diluted. . . . . . . . . . . . . . . . . $ 0.19 $ (0.04) $ 0.74
January 28,
2001
------------
(Unaudited)
(In thousands, except per share data)
Income (loss) before extraordinary item . . . $ 17,247
Reported net income (loss). . . . . . . . . . 17,247
Amortization expense, net of taxes. . . . . . 6,858
------------
Adjusted net income (loss). . . . . . . . . . $ 24,105
============
Income (loss) per common share
before extraordinary item:
Basic.. . . . . . . . . . . . . . . . . . $ 0.57
Diluted . . . . . . . . . . . . . . . . . $ 0.54
Reported net income (loss) per common share:
Basic. . . . . . . . . . . . . . . . . . $ 0.57
Diluted. . . . . . . . . . . . . . . . . $ 0.54
Adjusted net income (loss) per common share:
Basic. . . . . . . . . . . . . . . . . . $ 0.80
Diluted. . . . . . . . . . . . . . . . . $ 0.75
5. RESTRICTED CASH
Restricted cash consists primarily of a certificate of deposit in the
amount of $1.0 million for the construction escrow related to the development of
Isle-Boonville, workers' compensation in the amount of $0.5 million and various
other deposits totaling $2.2 million.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT
Long-term debt consists of the following:
January 27, April 29,
2002 2001
------------ ----------
(In thousands)
8.75 % Senior Subordinated Notes (described below) . . . . . . . . . . . . . . $ 390,000 $ 390,000
Senior Credit Facility (described below):
Variable rate term loans. . . . . . . . . . . . . . . . . . . . . . . . . . 496,809 461,250
Revolver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,000 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
Isle-Black Hawk Secured Credit Facility, non-recourse to Isle of Capri
Casinos, Inc. (described below):
Variable rate term loans. . . . . . . . . . . . . . . . . . . . . . . . . . 80,000 -
Revolver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,600 -
Variable rate TIF Bonds due to City of Bettendorf (described below). . . . . . 6,220 6,493
12.5 % note payable, due in monthly installments of $125,000, including
interest, beginning October 1997 through October 2005.. . . . . . . . . . . 4,315 4,999
8 % note payable, due in monthly installments of $66,667, including interest,
through July 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 888
8 % note payable, due in monthly installments of $11,365, including interest,
through December 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,135 1,168
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,409 6,323
------------ ----------
1,034,815 1,039,121
Less: current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,959 20,936
------------ ----------
Long-term debt.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 998,856 $1,018,185
============ ==========
8.75% Senior Subordinated Notes
On April 23, 1999, the Company issued $390.0 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 (CONTINUED)
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
$600.0 million Amended and Restated Credit Agreement to add $50.0 million of
additional term loans under the same terms, conditions and covenants. The
additional amounts under the term loan portion of the facility are as follows:
Tranche B. $26,667
Tranche C. 23,333
-------
Total.. $50,000
=======
Proceeds from the loans were used to reduce outstanding borrowings under Isle of
Capri's $125.0 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 .5 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 .5 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 .5 of 1% in excess of the federal
funds effective rate or the rate that the bank group announces from time to
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT (CONTINUED)
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, which were designated
as cash flow hedges, was $200.0 million. For the three and nine months ended
January 27, 2002, other comprehensive income (loss) included $.7 million and
($4.1) million, respectively for changes in the fair value of derivative
instruments for cash flow hedges. The fair value of the estimated interest
differential between the applicable future variable rates and the interest rate
swap contracts, expressed in present value terms, is recorded in other accrued
long-term liabilities in the accompanying balance sheet. There was no effect on
income related to hedge ineffectiveness.
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 January 27, 2002. 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 January 27, 2002, $49.0 million was outstanding under the revolving
credit agreement. The outstanding amounts under the term loan portion of the
facility at January 27, 2002 were (in thousands):
Tranche A. $ 78,750
Tranche B. 222,965
Tranche C. 195,094
--------
Total.. $496,809
========
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 was non-recourse debt to the Isle of Capri Casinos. Interest on the
First Mortgage Notes was payable semi-annually on February 28 and August 31 of
each year, commencing February 28, 1998. Additionally, contingent interest was
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 been required to pay contingent interest in accordance with the
Indenture. The amount of contingent interest expense recorded for the three and
nine months ended January 27, 2002 totaled $0.2 million and $1.0 million,
respectively. The amount of contingent interest expense recorded for the three
and nine months ended January 28, 2001 totaled $0.4 million and $1.0 million,
respectively.
On August 16, 2001, as required by the Indenture, Isle-Black Hawk offered
to purchase for cash up to $4.2 million principal amount of First Mortgage Notes
at a price of $1,010 per $1,000 principal
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT (CONTINUED)
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 was required to make an offer based
upon excess cash flow, as defined, every year during the term of the First
Mortgage Notes.
On December 18, 2001, Isle-Black Hawk redeemed all of its outstanding 13%
First Mortgage Notes in the principal amount of $75.0 million. The redemption
price of the First Mortgage Notes was 106.500% of the principal amount plus
accrued and unpaid interest to the date of redemption, equaling a redemption
price of $1,065 for each $1,000 principal amount of Notes, plus accrued and
unpaid interest. Isle of Capri recorded a $2.4 million extraordinary loss, net
of taxes of $1.4 million during the three months ended January 27, 2002 relating
to the extinguishment of the First Mortgage Notes resulting from early payment
premiums and the write-off of previously recorded debt acquisition costs.
Isle-Black Hawk Secured Credit Facility
On November 16, 2001 Isle-Black Hawk entered into a $90.0 million secured
credit facility (the "Secured Credit Facility"), that is non-recourse debt to
the Isle of Capri, primarily for the purpose of funding the redemption of the
13% First Mortgage Notes. The Secured Credit Facility provides for a $10.0
million revolving credit facility, a $40.0 million Tranche A term loan maturing
on November 16, 2005 and a $40.0 million Tranche B term loan maturing on
November 16, 2006.
Isle-Black Hawk is required to make quarterly principal payments on the
term loan portions of the Secured Credit Facility that will commence in March
2002. Such payments on the Tranche A term loan initially will be $2.0 million
per quarter with scheduled increases to $2.5 million per quarter commencing
March 2003 and to $3.0 million per quarter commencing March 2005. Such payments
on the Tranche B term loan initially will be $0.1 million per quarter with a
scheduled increase to $9.6 million per quarter commencing March 2006.
At the Company's option, the revolving credit facility and the Tranche A
term loan may bear interest at (1) the highest of .5 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 B term loan may bear interest at (1) the
highest of .5 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 3.00%, or (2) a rate tied to a LIBOR rate plus an
applicable margin of up to 4.00%. Within 90 days of the loan closing,
Isle-Black Hawk is required to enter into interest rate swap agreements that
effectively convert $40.0 million of the floating rate term loans to a fixed
rate basis. See Note 14.
The Secured Credit Facility provides for certain covenants, including those
of a financial nature. Isle-Black Hawk was in compliance with these covenants
as of January 27, 2002. The Secured Credit Facility is secured by liens on the
Isle-Black Hawk's assets.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT (CONTINUED)
At January 27, 2002, $1.6 million was outstanding under the revolving
credit agreement. The outstanding amounts under the term loan portion of the
facility at January 27, 2002 were (in thousands):
Tranche A. $40,000
Tranche B. 40,000
-------
Total.. $80,000
=======
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 $2.5 million available in bank lines of credit other than
the Senior Credit Facility and Isle-Black Hawk Secured Credit Facility. As of
January 27, 2002, 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 $0.4
million and insured by $0.2 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.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. CONTINGENCIES
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. The Company is
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. 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 the lower
court rendered judgment in our favor on September 16, 1999. The case was
reversed on appeal and remanded to the lower court for further proceedings;
however, on October 8, 2001, the trial court dismissed the case again, this time
on the basis that the plaintiffs lack standing. The plaintiffs have amended the
petition and continue to pursue this matter. The Company intends to vigorously
defend this suit. In addition, a similar action was recently filed against the
Municipality of Bossier City, challenging the validity of its contracts with
LRGP and other casinos. Exceptions have been filed requiring joinder of all
interested parties, including LRGP. The Company believes the claims are without
merit and to continue to vigorously defend this suit along with the other
interested parties.
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 payment the Company is alleged to have been
required to make aggregates approximately $2.1 billion drachma (which was
approximately $5.3 million as of January 27, 2002 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. The court granted summary judgment in our
favor and dismissed the lawsuit, but the Ministry of Tourism has appealed the
matter. Accordingly, the outcome is still in doubt and cannot be predicted with
any degree of certainty. The Company believes the claims against the Company to
be without merit and we intend to continue vigorously defending the claims
asserted in this action.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. CONTINGENCIES (CONTINUED)
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 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 Company's
Lula, Mississippi facility. The Company disputes this claim and believes that
its responsibility is currently limited to payments that are fixed in amount. An
arbitration proceeding was held in January 2002 and the Company is awaiting a
decision.
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, we believe that they will not
have a material adverse effect on our 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.
8. BUSINESS INTERRUPTION INSURANCE RECOVERIES
During the three and nine months ended January 27, 2002, Isle of Capri
recorded $2.4 million and $4.1 million, respectively, in business interruption
insurance proceeds. These amounts are recorded in the Consolidated Statements
of Operations in the line item "Marketing and Administrative Operating
Expenses." All of the business interruption insurance proceeds relate to the
flooding of the Mississippi River that closed Isle-Marquette from April 18, 2001
through May 2, 2001 and Rhythm City-Davenport from April 18, 2001 through May
20, 2001.
9. PREOPENING EXPENSES
For the three and nine months ended January 27, 2002, preopening expenses
of $2.3 million and $3.9 million, respectively, represent salaries, benefits,
training, marketing and other costs incurred in connection with the opening of
the Isle-Boonville on December 6, 2001.
10. OTHER CHARGES
For the three and nine months ended January 28, 2001, other charges of $4.3
million include 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, and the $1.4 million buyout of the Crowne Plaza license at the
Isle-Biloxi.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. EXTRAORDINARY ITEM
The Company incurred a pre-tax extraordinary loss totaling $3.9 million for
the three and nine months ended January 27, 2002. This loss is associated with
the extinguishment of debt, related to the refinancing of Isle-Black Hawk's
$75.0 million 13% First Mortgage Notes on December 18, 2001. This loss included
early payment premiums, as well as the write-off of debt acquisition costs. The
tax benefit from the extraordinary loss for the three and nine months ended
January 27, 2002, was approximately $1.4 million.
12. STOCK REPURCHASE PROGRAM
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.
In October 2001, the Board of Directors resolved that the Company buy up to
$25.0 million of stock in the Corporation even if the total number of shares to
be purchased exceeds the 3.0 million shares previously authorized by the board.
As of January 27, 2002, a total of 3.0 million shares of common stock had been
repurchased at a total cost of $24.7 million.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. CONSOLIDATING CONDENSED FINANCIAL INFORMATION
Certain of the Company's subsidiaries have fully and unconditionally
guaranteed the payment of all obligations under the Company's $390.0 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 tables present 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
27, 2002 and January 28, 2001 and balance sheets as of January 27, 2002 and
April 29, 2001.
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATING CONDENSED GUARANTOR, NONGUARANTOR, AND PARENT COMPANY
FINANCIAL INFORMATION
AS OF JANUARY 27, 2002 (UNAUDITED) AND APRIL 29, 2001 AND FOR
THE THREE AND NINE MONTHS ENDED JANUARY 27, 2002 AND JANUARY 28, 2001
(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 January 27, 2002
Balance Sheet
- ------------------------------------------
Current assets . . . . . . . . . . . . . . $ 2,420 $ 100,019 $ 9,703 $ - $ 112,142
Intercompany receivables . . . . . . . . . 907,247 87,922 3 (995,172) -
Investments in subsidiaries. . . . . . . . 252,478 275,405 - (526,789) 1,094
Property and equipment, net. . . . . . . . 2,047 788,338 103,539 - 893,924
Other assets . . . . . . . . . . . . . . . 18,244 377,524 2,363 - 398,131
--------------- -------------- ------------- --------------- --------------
Total assets.. . . . . . . . . . . . . . . $ 1,182,436 $ 1,629,208 $ 115,608 $ (1,521,961) $ 1,405,291
=============== ============== ============= =============== ==============
Current liabilities. . . . . . . . . . . . $ 61,520 $ 109,591 $ 22,485 $ - $ 193,596
Intercompany payables. . . . . . . . . . . 23,891 969,843 1,440 (995,174) -
Long-term debt,
less current maturities.. . . . . . . . 912,804 13,666 72,386 - 998,856
Deferred income taxes. . . . . . . . . . . 491 9,790 - - 10,281
Other accrued liabilities. . . . . . . . . 6,461 9,736 - - 16,197
Minority interest. . . . . . . . . . . . . - - - 9,092 9,092
Stockholders' equity . . . . . . . . . . . 177,269 516,582 19,297 (535,879) 177,269
--------------- -------------- ------------- --------------- --------------
Total liabilities and stockholders' equity $ 1,182,436 $ 1,629,208 $ 115,608 $ (1,521,961) $ 1,405,291
=============== ============== ============= =============== ==============
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. 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 January 27, 2002
Statement of Operations
- --------------------------------------------
Revenues:
Casino . . . . . . . . . . . . . . . . . . . $ - $ 228,674 $ 27,030 $ - $ 255,704
Rooms, food, beverage and other. . . . . . . 12 49,376 5,127 - 54,515
--------------- -------------- -------------- --------------- ---------------
Gross revenues . . . . . . . . . . . . . . . 12 278,050 32,157 - 310,219
Less promotional allowances. . . . . . . . . - 42,414 5,670 - 48,084
--------------- -------------- -------------- --------------- ---------------
Net revenues . . . . . . . . . . . . . . . . 12 235,636 26,487 - 262,135
Operating expenses:
Casino.. . . . . . . . . . . . . . . . . . . - 47,001 4,079 - 51,080
Gaming taxes . . . . . . . . . . . . . . . . - 50,578 5,326 - 55,904
Rooms, food, beverage and other. . . . . . . 4,016 88,607 7,975 - 100,598
Management fee expense (revenue).. . . . . . (6,252) 5,072 1,180 - -
Depreciation and amortization. . . . . . . . 161 17,390 1,096 - 18,647
--------------- -------------- -------------- --------------- ---------------
Total operating expenses . . . . . . . . . . (2,075) 208,648 19,656 - 226,229
--------------- ------------- ------------- -------------- ----------------
Operating income.. . . . . . . . . . . . . . 2,087 26,988 6,831 - 35,906
Gain on disposal of asset. . . . . . . . . . - - - - -
Interest expense . . . . . . . . . . . . . . (19,492) (21,389) (2,294) 22,042 (21,133)
Interest income. . . . . . . . . . . . . . . 21,107 1,025 23 (22,042) 113
Minority interest. . . . . . . . . . . . . . - - - (1,962) (1,962)
Equity in income of
unconsolidated joint venture.. . . . . . 5,354 6,412 - (11,766) -
--------------- -------------- -------------- --------------- ---------------
Income before income taxes and
extraordinary item.. . . . . . . . . . . 9,056 13,036 4,560 (13,728) 12,924
Income tax provision . . . . . . . . . . . . 4,842 - - - 4,842
--------------- -------------- -------------- --------------- ---------------
Income before extraordinary item.. . . . . . 4,214 13,036 4,560 (13,728) 8,082
Extraordinary loss on extinguishment of
debt, net of tax . . . . . . . . . . . . - - (6,769) 4,331 (2,438)
--------------- -------------- -------------- --------------- ----------------
Net income (loss). . . . . . . . . . . . . . $ 4,214 $ 13,036 $ (2,209) $ (9,397) $ 5,644
=============== ============== ============== =============== ===============
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. 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 Nine Months Ended January 27, 2002
Statement of Operations
- -------------------------------------------
Revenues:
Casino. . . . . . . . . . . . . . . . . . . $ - $ 688,125 $ 82,865 $ - $ 770,990
Rooms, food, beverage and other . . . . . . 329 152,923 15,706 - 168,958
--------------- -------------- -------------- --------------- ---------------
Gross revenues. . . . . . . . . . . . . . . 329 841,048 98,571 - 939,948
Less promotional allowances.. . . . . . . . - 137,214 17,157 - 154,371
--------------- -------------- -------------- --------------- ---------------
Net revenues. . . . . . . . . . . . . . . . 329 703,834 81,414 - 785,577
Operating expenses:
Casino. . . . . . . . . . . . . . . . . . . - 139,931 12,088 - 152,019
Gaming taxes. . . . . . . . . . . . . . . . - 148,946 16,334 - 165,280
Rooms, food, beverage and other.. . . . . . 11,791 267,614 24,937 - 304,342
Management fee expense (revenue). . . . . . (19,057) 15,441 3,616 - -
Depreciation and amortization . . . . . . . 584 49,393 3,106 - 53,083
--------------- -------------- -------------- --------------- ---------------
Total operating expenses. . . . . . . . . . (6,682) 621,325 60,081 - 674,724
--------------- -------------- -------------- --------------- ---------------
Operating income. . . . . . . . . . . . . . 7,011 82,509 21,333 - 110,853
Gain on disposal of asset.. . . . . . . . . 125 - - - 125
Interest expense. . . . . . . . . . . . . . (61,556) (73,933) (8,418) 75,777 (68,130)
Interest income.. . . . . . . . . . . . . . 73,067 3,185 166 (75,777) 641
Minority interest.. . . . . . . . . . . . . - - - (5,624) (5,624)
Equity in income of
unconsolidated joint venture. . . . . . 15,353 18,528 - (33,881) -
--------------- -------------- -------------- --------------- ---------------
Income before income taxes and
extraordinary item. . . . . . . . . . . 34,000 30,289 13,081 (39,505) 37,865
Income tax provision. . . . . . . . . . . . 13,494 - - - 13,494
--------------- -------------- -------------- --------------- ---------------
Income before extraordinary item. . . . . . 20,506 30,289 13,081 (39,505) 24,371
Extraordinary loss on extinguishment of
debt, net of tax. . . . . . . . . . . . - - (6,769) 4,331 (2,438)
--------------- -------------- -------------- --------------- ----------------
Net income. . . . . . . . . . . . . . . . . $ 20,506 $ 30,289 $ 6,312 $ (35,174) $ 21,933
=============== ============== ============== =============== ===============
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. 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 Nine Months Ended January 27, 2002
Statement of Cash Flows
- -------------------------------------------
Net cash provided by
operating activities. . . . . . . . . . . . $ 11,399 $ 114,543 $ 11,328 $ (34,559) $ 102,711
Net cash provided by (used in)
investing activities. . . . . . . . . . . . 3,255 (106,855) (2,807) 24,584 (81,823)
Net cash used in
financing activities. . . . . . . . . . . . (15,553) (2,051) (13,082) 9,975 (20,711)
--------------- -------------- -------------- --------------- ---------------
Net increase (decrease) in cash and
cash equivalents. . . . . . . . . . . . . . (899) 5,637 (4,561) - 177
Cash and cash equivalents at
beginning of the period . . . . . . . . . . 159 58,908 13,042 4,550 76,659
--------------- -------------- -------------- --------------- ---------------
Cash and cash equivalents at
end of the period . . . . . . . . . . . . . $ (740) $ 64,545 $ 8,481 $ 4,550 $ 76,836
=============== ============== ============== =============== ===============
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. 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
--------------- ------------- ------------- --------------- ---------------
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 $ .-. $ 159,546
Intercompany payables. . . . . . . . . . . 23,884 962,691 2,188 (988,762) (1)
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)
13. 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 January 28, 2001
Statement of Operations
- -------------------------------------------
Revenues:
Casino. . . . . . . . . . . . . . . . . . . $ - $ 204,642 $ 24,559 $ - $ 229,201
Rooms, food, beverage and other . . . . . . 35 52,124 4,573 - 56,732
--------------- -------------- -------------- --------------- ---------------
Gross revenues. . . . . . . . . . . . . . . 35 256,766 29,132 - 285,933
Less promotional allowances . . . . . . . . - 43,726 4,699 - 48,425
--------------- -------------- -------------- --------------- ---------------
Net revenues. . . . . . . . . . . . . . . . 35 213,040 24,433 - 237,508
Operating expenses:
Casino. . . . . . . . . . . . . . . . . . . - 46,767 3,840 - 50,607
Gaming taxes. . . . . . . . . . . . . . . . - 41,563 4,879 - 46,442
Rooms, food, beverage and other . . . . . . 4,721 83,590 8,590 - 96,901
Management fee expense (revenue). . . . . . (5,250) 4,182 1,068 - -
Other charges . . . . . . . . . . . . . . . 2,867 1,409 - - 4,276
Depreciation and amortization . . . . . . . 294 17,211 1,025 - 18,530
--------------- -------------- -------------- --------------- ---------------
Total operating expenses. . . . . . . . . . 2,632 194,722 19,402 - 216,756
--------------- -------------- -------------- --------------- ---------------
Operating income (loss).. . . . . . . . . . (2,597) 18,318 5,031 - 20,752
Interest income (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) 156 2,026 (2,180) (5,665)
Income tax benefit. . . . . . . . . . . . . (2,707) - - - (2,707)
--------------- -------------- -------------- --------------- ---------------
Net income (loss).. . . . . . . . . . . . . $ (2,960) $ 156 $ 2,026 $ (2,180) $ (2,958)
=============== ============== ============== =============== ===============
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. 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 Nine Months Ended January 28, 2001
Statement of Operations
- -------------------------------------------
Revenues:
Casino. . . . . . . . . . . . . . . . . . . $ - $ 614,977 $ 75,602 $ - $ 690,579
Rooms, food, beverage and other.. . . . . . 510 143,948 12,737 - 157,195
--------------- -------------- -------------- --------------- ---------------
Gross revenues. . . . . . . . . . . . . . . 510 758,925 88,339 - 847,774
Less pomotional allowances. . . . . . . . . - 126,500 14,305 - 140,805
--------------- -------------- -------------- --------------- ---------------
Net revenues. . . . . . . . . . . . . . . . 510 632,425 74,034 - 706,969
Operating expenses:
Casino. . . . . . . . . . . . . . . . . . . - 128,600 11,162 - 139,762
Gaming taxes. . . . . . . . . . . . . . . . - 123,114 14,939 - 138,053
Rooms, food, beverage and other.. . . . . . 13,451 232,884 23,984 - 270,319
Management fee expense (revenue). . . . . . (16,203) 12,968 3,235 - -
Other charges.. . . . . . . . . . . . . . . 2,867 1,409 - - 4,276
Depreciation and amortization.. . . . . . . 868 46,380 2,400 - 49,648
--------------- -------------- -------------- --------------- ---------------
Total operating expenses. . . . . . . . . . 983 545,355 55,720 - 602,058
--------------- -------------- -------------- --------------- ---------------
Operating income (loss) . . . . . . . . . . (473) 87,070 18,314 - 104,911
Gain on sale of assets. . . . . . . . . . . - 271 - - 271
Interest income (expense), net. . . . . . . 3,007 (63,818) (8,447) - (69,258)
Minority interest.. . . . . . . . . . . . . - - - (4,241) (4,241)
Equity in income (loss) of
unconsolidated joint venture. . . . . . 29,033 35,037 - (64,180) (110)
--------------- -------------- -------------- --------------- ---------------
Income before income taxes. . . . . . . . . 31,567 58,560 9,867 (68,421) 31,573
Income tax provision. . . . . . . . . . . . 14,326 - - - 14,326
--------------- -------------- -------------- --------------- ---------------
Net income .. . . . . . . . . . . . . . . . $ 17,241 $ 58,560 $ 9,867 $ (68,421) $ 17,247
=============== ============== ============== =============== ===============
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. 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 Nine Months Ended January 28, 2001
Statement of Cash Flows
Net cash provided by (used in)
operating activities. . . . . . . . . . . . $ (22,410) $ 97,754 $ 12,911 $ (33,372) $ 54,883
Net cash 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
=============== ============== ============== =============== ===============
(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 acquisitions.
(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.
ISLE OF CAPRI CASINOS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. SUBSEQUENT EVENTS
In the fourth quarter of fiscal 2002, Isle-Black Hawk entered into three
interest rate swap agreements that effectively convert $40.0 million of its
floating rate debt to a fixed-rate basis for the next three years.
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,
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. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements.
GENERAL
Isle of Capri's results of operations for the three and nine months ended
January 27, 2002 reflect the consolidated operations of all of Isle of Capri's
subsidiaries, including the Isle-Biloxi, the Isle-Vicksburg, the Isle-Natchez,
the Isle-Bossier City, the Isle-Lake Charles, the Isle-Tunica, the Isle-Lula,
the Isle-Kansas City, the Isle-Black Hawk, the Isle-Bettendorf, Rhythm
City-Davenport, the Isle-Marquette, Lady Luck Las Vegas and Pompano Park.
Results also include the Isle-Boonville subsequent to its opening on December 6,
2001.
Isle of Capri's results of operations for the three and nine 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-Natchez,
the Isle-Bossier City, the Isle-Lake Charles, the Isle-Tunica, the Isle-Lula the
Isle-Black Hawk, 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 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.
Through the third quarter, the Isle-Tunica and Lady Luck Las Vegas
continued to produce negative EBITDA results. The company is currently
reviewing its options for these properties and has retained an advisor to assist
in this assessment. It is possible that a significant impairment loss would be
required to be recorded in accordance with the Financial Accounting Standards
Board Statement Number 121:"Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" in the fourth fiscal quarter.
RESULTS OF OPERATIONS
Three Fiscal Months Ended January 27, 2002 Compared to Three Fiscal Months Ended
January 28, 2001
Gross revenue for the quarter ended January 27, 2002 was $310.2 million,
which included $255.7 million of casino revenue, $11.6 million of rooms revenue,
$7.0 million of pari-mutuel commissions and $35.9 million of food, beverage and
other revenue. This compares to gross revenue for the prior year quarter ended
January 28, 2001 of $285.9 million, which included $229.2 million of casino
revenue, $13.4 million of rooms revenue, $6.1 million of pari-mutuel commissions
and $37.3 million of food, beverage and other revenue.
Casino revenue increased $26.5 million or 11.6% primarily as a result of
the opening of the Isle-Boonville in December 2001 and due to improved revenue
from the Isle-Kansas City which was still under renovation during a portion of
the prior year quarter resulting in lower revenues for that quarter. Casino
revenue also increased due to improvements at Isle-Bettendorf and Isle-Lula,
partially offset by decreases at the Isle-Bossier and Lady Luck Las Vegas due to
additional competition in Bossier City and reduced travel to Las Vegas. Room
revenue decreased $1.8 million or 13.3% due to lower occupancy levels, primarily
at Lady Luck Las Vegas and Isle-Bossier City. Food, beverage and other revenue
decreased by $1.4 million or 3.6% primarily due to a decline in other revenues
which includes gift shop and other miscellaneous revenues.
Casino operating expenses for the quarter ended January 27, 2002 totaled
$51.1 million, or 20.0% of casino revenue, versus $50.6 million, or 22.1% of
casino revenue, for the quarter ended January 28, 2001. These expenses are
primarily comprised of salaries, wages and benefits and other operating expenses
of the casinos. The increase in casino operating expenses is primarily
attributable to the Isle-Boonville which opened in December 2001 as well as
improved casino revenue. However, the decrease in casino operating expenses as a
percentage of casino revenue is related to cost containment programs at the
properties as well as efficiencies achieved through standardization.
For the quarter ended January 27, 2002, state and local gaming taxes were
paid in Louisiana, Mississippi, Colorado, Iowa, Missouri and Nevada totaling
$55.9 million, or 21.9% of casino revenue, compared to $46.4 million, or 20.3%
of casino revenues for the three months ended January 28, 2001, which is
consistent with each state's gaming tax rate for the applicable fiscal quarters.
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.
Operating expenses for the quarter ended January 27, 2002 also included
room expenses of $2.8 million or 24.1% of room revenue from the hotels at the
Isle-Biloxi, Isle-Vicksburg, Isle-Natchez, Isle-Bossier City, Isle-Lake Charles,
Isle-Tunica, Isle-Lula, Isle-Black Hawk, Isle-Bettendorf, Rhythm City-Davenport,
Isle-Marquette and Lady Luck Las Vegas compared to $3.1 million or 23.4% of room
revenue for the quarter ended January 28, 2001. The decrease in room expenses
is consistent with the decline in room revenue. 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.
Food, beverage and other expenses totaled $8.7 million for the quarter
ended January 27, 2002, compared to $8.2 million for the quarter ended January
28, 2001. Food and beverage and other operating expenses as a percentage of
food, beverage and other revenues increased to 24.3% for the quarter ended
January 27, 2002 from 22.0% for the quarter ending January 28, 2001. 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 primarily as a result of the opening of the Isle-Boonville in December
2001 and continued expansion of the original Isle facilities.
Marine and facilities expenses totaled $16.4 million for the quarter ended
January 27, 2002, versus $16.8 million for the quarter ended January 28, 2001.
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 decreased primarily due to
lower costs at the Isle-Bossier City and Isle-Lake Charles.
Marketing and administrative expenses totaled $65.5 million, or 25.0% of
net revenue, for the quarter ended January 27, 2002, versus $64.4 million, or
27.1% of net revenue, for the quarter ended January 28, 2001. 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. These expenses are lower because the current quarter
expense is net of business interruption insurance proceeds for partial
settlements of $2.2 million for Rhythm City-Davenport and $0.2 million for
Isle-Marquette related to flooding which had occurred at those properties.
Preopening expenses of $2.3 million represent salaries, benefits, training,
marketing and other costs incurred in connection with the opening of the
Isle-Boonville in December 2001.
Results of operations for the quarter ended January 28, 2001 included a
loss on joint venture and contract buyout totaling $4.3 million. 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,
and the $1.4 million buyout of the Crowne Plaza license.
Depreciation and amortization expense was $18.6 million for the quarter
ended January 27, 2002 and $18.5 million for the quarter ended January 28, 2001.
Depreciation expense increased by $4.0 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
$3.9 million which occurred due to the Company's early adoption of Financial
Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets," at
the beginning of the first quarter of 2002.
Interest expense was $21.1 million for the quarter ended January 27, 2002,
net of capitalized interest of $0.5 million versus $25.6 million for the quarter
ended January 28, 2001 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 $2.3 million related to
Isle-Black Hawk is included in interest expense in the quarter ended January 27,
2002. This compares to interest expense of $3.0 million for the quarter ended
January 28, 2001.
Isle of Capri's effective tax rate was 37.5% for the quarter ended January
27, 2002 compared to 47.8% for the quarter ended January 28, 2001. 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.
On December 18, 2001, Isle-Black Hawk redeemed all of its outstanding 13%
First Mortgage Notes in the principal amount of $75.0 million. A net
extraordinary loss of $2.4 million was recorded by the Isle of Capri for the
extinguishment of the First Mortgage Notes related to early payment premiums and
the write-off of debt acquisition costs.
Nine Fiscal Months Ended January 27, 2002 Compared to Nine Fiscal Months Ended
January 28, 2001
Gross revenue for the nine months ended January 27, 2002 was $940.0
million, which included $771.0 million of casino revenue, $41.6 million of rooms
revenue, $15.4 million of pari-mutuel commissions and $112.0 million of food,
beverage and other revenue. This compares to gross revenue for the nine months
ended January 28, 2001 of $847.8 million, which included $690.6 million of
casino revenue, $35.4 million of rooms revenue, $14.1 million of pari-mutuel
commissions and $107.7 million of food, beverage and other revenue.
Casino revenue increased $80.4 million or 11.6% primarily as a result of a
full nine months of operations of the Isle-Kansas City, Lady Luck Las Vegas and
Rhythm City-Davenport and due to the revenue generated by the Isle-Boonville
which opened in December 2001. 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, in August 2000
and in November 2000, respectively, partially offset by decreases at the
Isle-Bossier due to additional competition. Room revenue increased $6.2 million
or 17.5% due to a full nine months 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 in November 2000, respectively. Food, beverage and other revenue
increased by $4.3 million or 4.0% as a result of a full nine months of
operations of the Isle-Kansas City, Lady Luck Las Vegas and Rhythm
City-Davenport partially offset by a decline in revenue at the Isle-Bossier due
to additional competition.
Casino operating expenses for the nine months ended January 27, 2002
totaled $152.0 million, or 19.7% of casino revenue, versus $139.8 million, or
20.2% of casino revenue, for the nine months ended January 28, 2001. 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 nine months ended January 27, 2002 also included
room expenses of $9.6 million or 23.1% of room revenue from the hotels at the
Isle-Biloxi, Isle-Vicksburg, Isle-Natchez, Isle-Bossier City, Isle-Lake Charles,
Isle-Tunica, Isle-Lula, Isle-Black Hawk, Isle-Bettendorf, Rhythm City-Davenport,
Isle-Marquette and Lady Luck Las Vegas compared to $8.2 million or 23.2% of room
revenue for the nine months ended January 28, 2001. Operating expenses for the
nine months ended January 28, 2001 did not include Lady Luck Las Vegas and
Rhythm City-Davenport until they were acquired on September 12, 2000 and October
10, 2000, respectively. 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 nine months ended January 27, 2002, state and local gaming taxes
were paid in Louisiana, Mississippi, Colorado, Iowa, Missouri and Nevada
totaling $165.3 million, or 21.4% of casino revenue, compared to $138.1 million,
or 20.0% of casino revenues for the nine months ended January 28, 2001, which is
consistent with each state's gaming tax rate for the applicable fiscal quarters.
For the nine months ended January 28, 2001, state and local gaming taxes were
paid in Louisiana, Mississippi and Colorado, for the full period; in Iowa for
the full period for Isle-Bettendorf and Isle-Marquette and from the date of
acquisition of Rhythm City-Davenport on October 10, 2000; in Nevada from the
date of acquisition of Lady Luck Las Vegas on September 12, 2000; and Missouri
from the date of acquisition of Isle-Kansas City on June 6, 2000. 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 $26.2 million for the nine months
ended January 27, 2002 compared to $22.8 million for the nine months ended
January 28, 2001. Food and beverage and other operating expenses as a
percentage of food, beverage and other revenues increased to 23.4% for the nine
months ended January 27, 2001 from 21.2% for the nine months ended January 28,
2001. 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 $51.9 million for the nine months
ended January 27, 2001 versus $45.9 million for the nine months ended January
28, 2001. 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 $201.8 million, or 25.7% of
net revenue, for the nine months ended January 27, 2002, versus $182.9 million,
or 25.9% of net revenue, for the nine months ended January 28, 2001. 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.
Marketing and administrative expenses for the nine months ended January 27, 2002
are net of business interruption proceeds of $3.4 million for Rhythm
City-Davenport and $0.7 million for Isle-Marquette.
Preopening expenses of $3.9 million represent salaries, benefits, training,
marketing and other costs incurred in connection with the opening of the
Isle-Boonville in December 2001.
Depreciation and amortization expense was $53.1 million for the nine months
ended January 27, 2002 and $49.6 million for the nine months ended January 28,
2001. Depreciation expense increased by $15.1 million compared to the prior
year consistent with an increase in fixed assets placed into service or
acquired. This increase was partially offset by a decrease in amortization of
goodwill of $11.7 million which occurred due to the Company's early adoption of
Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets," at the beginning of the first quarter 2002.
Interest expense was $68.1 million for the nine months ended January 27,
2002, net of capitalized interest of $1.3 million versus $72.9 million for the
nine months ended January 28, 2001, net of capitalized interest of $3.4 million.
The lower interest expense is primarily the result of lower interest rates on
the variable rate term loans. 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 $8.3 million related to Isle-Black Hawk is included in
interest expense in the nine months ended January 27, 2002. This compares to
interest expense of $8.1 million, net of capitalized interest of $0.7 million,
for the nine months ended January 28, 2001.
Isle of Capri's effective tax rate was 35.6% for the nine months ended
January 27, 2002 compared to 45.4% for the nine months ended January 28, 2001.
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.
LIQUIDITY AND CAPITAL RESOURCES
At January 27, 2002, Isle of Capri had cash and cash equivalents of $76.8
million compared to $76.7 million in cash and cash equivalents at April 29,
2001. The $0.1 million increase in cash is the net result of $102.7 million net
cash provided by operating activities, $81.8 million net cash used in investing
activities, and $20.7 million net cash used by financing activities.
Isle of Capri invested $80.4 million in property and equipment during the
nine months ended January 27, 2002 primarily for the development of Boonville
and implementation of a company-wide slot enhancement program. Approximately
$9.5 million was expended on maintenance capital expenditures. The following
table reflects expenditures for property and equipment on major projects:
ACTUAL PROJECTED
------------------------------ -------------------
FISCAL YEAR NINE MONTHS THREE MONTHS FISCAL YEAR
ENDED 4/29/01 ENDED 1/27/02 ENDING 4/28/02 ENDING 4/28/02
-------------- -------------- --------------- ---------------
COSTS ($IN MILLIONS)
------------------------------------------------------------------
PROPERTY PROJECT
- ----------------------- ------------------------------
Isle-Boonville. . . . . Develop casino $ 25.6 $ 34.4 $ 4.5 $38.9
Isle-Tunica . . . . . . Construct hotel & 2 theaters 31.4 0.9 - 0.9
Lady Luck properties. . Convert to Isle 31.8 2.6 - 2.6
Isle-Lake Charles . . . Construct hotel 24.4 0.4 - 0.4
Isle-Black Hawk . . . . Construct hotel 7.1 - - -
Rhythm City - Davenport Renovations 17.5 1.6 - 1.6
Isle-Kansas City. . . . Renovations 12.6 1.5 - 1.5
Lady Luck Las Vegas . . Renovations 1.4 1.1 0.6 1.7
All . . . . . . . . . . Slot program - 28.4 6.6 35.0
All . . . . . . . . . . Maintenance 7.4 9.5 16.5 26.0
-------------- --------------- ----------- ------
Total . . . . . . . . . $ 159.2 $ 80.4 $ 28.2 $108.6
============== =============== =========== ======
During the nine months ended January 27, 2002 Isle of Capri used net cash
of $20.7 million in financing activities. Isle borrowed $50.0 million under the
"Greenshoe Option" in its term loans, which was used to reduce its Revolving
Credit Facility. The Revolving Credit Facility is due March 2005 and is a
variable rate debt instrument currently bearing interest at an average rate of
5.01%. Isle-Black Hawk borrowed $80.0 million under a new secured credit
facility. Isle made principal payments on the Senior Credit Facility and other
debt of $16.9 million and Isle-Black hawk redeemed $75.0 million in principal
outstanding on its 13% First Mortgage Notes. Isle made net reductions to its
line of credit of $42.4 million. Isle of Capri purchased 1,076,600 shares of
its common stock at a total cost of $8.1 million and made cash distributions to
a minority partner totaling $7.5 million.
On May 3, 2000, Isle of Capri acquired Isle-Boonville and spent 19 months
developing the casino project. The Company opened the facility December 6,
2001. The total expected investment in this casino project is approximately
$71.0 million which includes the purchase price of $11.5 million, a portion of
which was allocated to goodwill. Approximately $6.5 million of preopening and
other expenditures were incurred. The project is substantially complete, and as
of January 27, 2002, the Company had spent $66.5 million.
Isle of Capri anticipates that up to $26.0 million in capital improvements
will be made during fiscal 2002 to maintain its existing facilities and remain
competitive in its markets and $35.0 million for its slot upgrade program. For
the nine months ended January 27, 2002, Isle of Capri spent $9.5 million on
maintenance capital improvements and $28.4 million on its slot upgrade program.
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 $50.0 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.
On December 18, 2001, Isle-Black Hawk redeemed all of its outstanding 13%
First Mortgage Notes in the principal amount of $75.0 million. The redemption
price of the First Mortgage Notes was 106.5% of the principal amount plus
accrued and unpaid interest to the date of redemption, equaling a redemption
price of $1,065 for each $1,000 principal amount of Notes, plus accrued and
unpaid interest. Isle of Capri recorded an extraordinary loss of $2.4 million,
net of taxes of $1.4 million, during the three months ended January 27, 2002 on
the extinguishment of the First Mortgage Notes related to early payment premiums
and the write-off of debt acquisition costs.
On November 16, 2001 Isle-Black Hawk entered into a $90.0 million Secured
Credit Facility that is non-recourse debt to the Isle of Capri primarily for the
purpose of funding the redemption of the 13% First Mortgage Notes. The Secured
Credit Facility provides for a $10.0 million revolving credit facility, a $40.0
million Tranche A term loan maturing on November 16, 2005 and a $40.0 million
Tranche B term loan maturing on November 16, 2006. Isle-Black Hawk is required
to make quarterly principal payments on the term loan portions of the new credit
facility that will commence in March 2002. Such payments on the Tranche A term
loan initially will be $2.0 million per quarter with scheduled increases to $2.5
million per quarter commencing March 2003 and to $3.0 million per quarter
commencing March 2005. Such payments on the Tranche B term loan initially will
be $0.1 million per quarter with a scheduled increase to $9.6 million per
quarter commencing March 2006.
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. 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 the lower
court rendered judgment in our favor on September 16, 1999. The case was
reversed on appeal and remanded to the lower court for further proceedings;
however, on October 8, 2001, the trial court dismissed the case again, this time
on the basis that the plaintiffs lack standing. The plaintiffs have amended the
petition and continue to pursue this matter. The Company intends to vigorously
defend this suit. In addition, a similar action was recently filed against the
Municipality of Bossier City, challenging the validity of its contracts with
LRGP and other casinos. Exceptions have been filed requiring joinder of all
interested parties, including LRGP. The Company believes the claims are without
merit and to continue to vigorously defend this suit along with the other
interested parties.
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 payment the Company is alleged to have been
required to make aggregates approximately $2.1 billion drachma (which was
approximately $5.3 million as of January 27, 2002 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. The court granted summary judgment in our
favor and dismissed the lawsuit, but 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 Company's
Lula, Mississippi facility. The Company disputes this claim and believes that
its responsibility is currently limited to payments that are fixed in amount.
An arbitration proceeding was held in January 2002 and the Company is awaiting a
decision.
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, 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 27, 2002, 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: March 11, 2002 /s/ Rexford A. Yeisley
--------------------------
Rexford A. Yeisley, Chief Financial Officer
(Principal Financial and Accounting Officer)
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
- --------------- -----------
None.