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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
--------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from - to -
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Commission file number 0-20712
CASINO MAGIC CORP.
------------------------
(Exact name of registrant as specified in its charter)
MINNESOTA 64-0817483
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
711 CASINO MAGIC DRIVE, BAY ST. LOUIS, MS 39520
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(Address of principal executive offices) (Zip Code)
(601) 467-9257
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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
----- -----
Indicate the number of shares outstanding of the issuer's classes of common
stock, as of the latest practicable date.
35,423,333 shares common stock outstanding as of May 14, 1996
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CASINO MAGIC CORP. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements.
Condensed Consolidated Statements of Operations -
For the three months ended
March 31, 1996 and 1995.............................. 1
Condensed Consolidated Balance Sheets -
March 31, 1996 and December 31, 1995................. 2
Condensed Consolidated Statements of Cash Flows -
For the three months ended
March 31, 1996 and 1995.............................. 3
Notes to Condensed Consolidated Financial Statements... 4-5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 6-10
PART II OTHER INFORMATION
Item 1. Legal Proceedings...................................... 11
Item 2. Changes in Securities.................................. 11
Item 3. Default Upon Senior Securities......................... 11
Item 4. Submission of Matters to a Vote of Security Holders.... 11
Item 5. Other Information...................................... 11
Item 6. Exhibits and Reports on Form 8-K....................... 11
SIGNATURES............................................. 12
PART I - FINANCIAL INFORMATION
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
-------------------------
1996 1995
----------- -----------
REVENUES:
Casino $ 39,759,682 $ 40,970,786
Food and beverage 1,551,836 1,409,385
Rooms 437,683 534,325
Royalty and management fees 924,528 --
Other operating income 450,838 254,314
----------- -----------
43,124,567 43,168,810
----------- -----------
COSTS AND EXPENSES:
Casino 16,392,180 17,041,586
Food and beverage 2,289,047 1,523,819
Rooms 418,219 322,651
Other operating costs and expenses 472,990 353,329
Advertising and marketing 4,818,083 6,046,682
General and administrative 5,415,591 6,121,154
Property operation, maintenance and energy cost 1,544,054 1,604,733
Rents, property taxes and insurance 1,461,782 1,408,086
Development expenses 500,261 603,708
Preopening expenses -- 183,690
Depreciation and amortization 4,247,227 3,204,837
----------- -----------
37,559,434 38,414,275
----------- -----------
INCOME FROM OPERATIONS 5,565,133 4,754,535
----------- -----------
OTHER (INCOME) EXPENSE:
Equity income from unconsolidated casino
operations (663,095) --
Interest expense, net 3,820,515 3,891,351
Other 55,750 197,056
----------- -----------
3,213,170 4,088,407
----------- -----------
INCOME BEFORE INCOME TAXES: 2,351,963 666,128
INCOME TAXES 708,289 344,567
----------- -----------
NET INCOME $ 1,643,674 $ 321,561
=========== ===========
NET INCOME PER COMMON SHARE:
Primary $ .05 $ .01
=========== ===========
Fully-diluted $ .05 $ .01
=========== ===========
Average shares and equivalents outstanding:
Primary 36,181,329 33,331,729*
=========== ===========
Fully-diluted 36,414,089 33,445,275**
=========== ===========
* Corrected; previously reported as 33,913,256
** Corrected; previously reported as 33,915,218
See notes to condensed consolidated financial statements.
-1-
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1996 1995(*)
----------- -----------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 31,855,452 $ 30,755,698
Other current assets 18,133,209 17,325,354
----------- -----------
Total current assets 49,988,661 48,081,052
----------- -----------
PROPERTY AND EQUIPMENT, NET 169,752,078 169,791,757
----------- -----------
OTHER LONG-TERM ASSETS 51,491,962 50,558,033
----------- -----------
$271,232,701 $268,430,842
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES 31,366,188 32,170,741
----------- -----------
OTHER LONG-TERM LIABILITIES 7,483,535 4,241,325
----------- -----------
LONG-TERM DEBT, NET OF CURRENT MATURITIES 135,598,880 136,840,010
----------- -----------
SHAREHOLDERS' EQUITY:
Common stock, $0.01 par, 50,000,000 shares
authorized, 35,279,564 issued and outstanding
at March 31, 1996 and outstanding at
December 31, 1995 352,796 352,796
Undesignated stock, 2,500,000 shares authorized,
none issued -- --
Additional paid-in capital 66,082,527 66,087,413
Retained earnings 30,719,959 29,076,285
Currency translation adjustments (280,765) (224,195)
Less unearned compensation (90,419) (113,533)
----------- -----------
Total shareholders' equity 96,784,098 95,178,766
----------- -----------
$271,232,701 $268,430,842
=========== ===========
See notes to condensed consolidated financial statements.
* Derived from audited financial statements
-2-
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
-------------------------
1996 1995
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,643,674 $ 321,561
Adjustments for non-cash charges 3,922,188 3,927,508
Changes in assets and liabilities (654,469) 3,777,922
----------- -----------
Net cash provided by operating activities 4,911,393 8,026,991
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (4,289,339) (2,488,806)
Decrease in marketable securities -- 9,244,233
Other, net (377,979) (803,070)
----------- -----------
Net cash provided by (used in)
investing activities (4,667,318) 5,952,357
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable
and long-term debt (575,634) (851,991)
Net proceeds from sale of common stock -- 8,354,987
Other, net 1,431,313 21,000
----------- -----------
Net cash provided by financing activities 855,679 7,523,996
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,099,754 21,503,344
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 30,755,698 20,486,068
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 31,855,452 $ 41,989,412
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of amount capitalized) $ (115,391) $ (39,025)
Income taxes (net of refunds) -- (2,920,789)
Supplemental schedule of non-cash investing and financing activities:
Property and equipment and other asset
acquisitions included in accounts and
construction payable and accrued expenses 103,754 84,940
Reclassification of long-term liabilities to
accrued expenses -- 5,195,000
See notes to condensed consolidated financial statements.
-3-
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to the Three Months Ended
March 31, 1996 and 1995 is Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of Casino Magic
Corp. and its wholly-owned subsidiaries ("the Company"). All significant
intercompany accounts and transactions have been eliminated. Investments in
unconsolidated affiliates are accounted for using the equity method of
accounting.
The Company conducts casino gaming operations in Bay Saint Louis, Mississippi,
Biloxi, Mississippi, Deadwood, South Dakota, in the Argentina Province of
Neuquen in the cities of Neuquen City and San Martin de los Andes, and through
a jointly owned company in Porto Carras, Greece. The Company manages one
casino facility in Xanthi, Greece. Additionally, Casino Magic is actively
pursuing gaming opportunities in other jurisdictions.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted.
The accompanying unaudited consolidated financial statements contain all
adjustments which are, in the opinion of management, necessary for a fair
statement of the results of the interim periods. The results of operations
for the interim periods are not indicative of results of operations for an
entire year.
It is suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
Certain reclassifications have been made to 1995 amounts to conform with
the March 31, 1996 presentation.
2. OPTIONS AND LAND DEPOSITS:
The Company, in the normal course of business, acquires options and makes land
deposits in markets where gaming has not yet been approved or the Company has
not been issued a license to operate. Such costs are capitalized and are
classified as options and land deposits. Prior to January 1, 1996, the
Company expensed such amounts previously capitalized at the earlier of their
indicated impairment or the expiration of the option or deposit period. As of
January 1, 1996, the Company began amortizing amounts capitalized for such
options and deposits over their related terms, while still subjecting
capitalized amounts to appropriate impairment tests. This change was made to
recognize the speculative nature of these options and deposits and the
declining utility over time as the option period shortens and gaming has not
been approved or a license to operate has not been obtained. At March 31,
1996, the cumulative effect of this change in accounting policy was not
significant and therefore, the cumulative effect of this change in accounting
method has not been recorded in the March 31, 1996, financial statements of
the Company.
3. SUBSEQUENT EVENTS:
In February 1996, Jefferson Casino Corporation ("Jefferson") and C-M of
Louisiana, Inc. ("CMLI"), two wholly-owned subsidiaries of Casino Magic Corp.
(the "Purchasers"), entered into an agreement to purchase Crescent City
Capital Development Corp. ("Crescent City"), a wholly-owned subsidiary of
Capital Gaming International, Inc. for approximately $56.5 million,
$15,000,000 in cash, $35,000,000 in notes and $6,500,000 by the assumption of
liabilities. Crescent City, which was subject of a reorganization under
Chapter 11 of the U.S. Bankruptcy Code, owns the Crescent City Queen, a casino
riverboat and a license to conduct riverboat gaming operations in Louisiana.
The agreement was contingent upon the approval of the Louisiana State Police,
and the Louisiana Riverboat Gaming Commission and confirmation of the plan of
reorganization by the U.S. Bankruptcy Court. As of April 30, 1996, the
Purchasers had received all of the necessary approvals and
-4-
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to the Three Months Ended
March 31, 1996 and 1995 is Unaudited)
3. SUBSEQUENT EVENTS (CONTINUED):
confirmation for the transfer of the ownership of Crescent City and the
relocation of its gaming license to Bossier City, Louisiana, and the purchase
of Crescent City was consummated on May 13, 1996. The Purchasers will not
succeed to any of the business activities of Crescent City.
In October 1995, the Company acquired approximately 20 acres of land in
Bossier City, Louisiana in exchange for shares of the Company's Common Stock
through the acquisition of two corporations. One of the acquired companies,
Coastal Land of Florida, Inc. ("Coastal"), was the lessee of the Bossier City
property. The acquisition agreement for Coastal included two supplemental
agreements which gave two affiliates of the sole shareholder of Coastal (the
"Shareholder") the rights to receive 2% of net gaming revenues of any casino
entity operating on the Bossier City property and to acquire an equity
interest of up to 25% of any casino entity operating on the Bossier City
property.
In May 1996, the Company, Jefferson, the Shareholder and the two affiliates of
Shareholder entered into an agreement where the Shareholder and his affiliates
agreed to sell to Jefferson the rights under the two agreements discussed
above for cash of $550,000 and a promissory note issued by CMLI and Jefferson
in the principal amount of $6,800,000, bearing interest at the rate of 5.8%
per annum. The first payment of $800,000 plus accrued interest under the note
is due 30 days after the Company opens a casino at Bossier City, Louisiana.
Thereafter, the note requires 58 consecutive monthly payments of $118,873.
The cost to acquire the rights under the agreements will be considered as
additional land acquisition cost. The note is subordinate to the indebtness
of Crescent City under the $35,000,000 in notes issued as part of the purchase
price of Crescent City.
-5-
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussions regarding proposed Company developments and operations
included in "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" contain forward looking statements that involve a
number of risks and uncertainties. These proposed developments and operations
include: (i) completion of the golf course at Casino Magic-BSL in the Fall of
1996; (ii) completion of a hotel in 1997, and repositioning of the gaming
facility, at Casino Magic-Biloxi; (iii) receipt of approximately $9 million in
fees, dividends and loan repayments from the Company's Porto Carras operation;
and (iv) the Company's ability to fund planned developments and debt service
obligations over the next twelve months with currently available cash and
marketable securities, and with cash flow from operations. In addition to the
risks and uncertainties discussed below, other factors that could cause actual
results to differ materially are detailed from time to time in the Company's
reports filed with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain operating
information for the Company on a consolidated basis and for its existing
properties. The principal operating entities are Mardi Gras Casino Corp.
("Casino Magic-BSL") and Biloxi Casino Corp. ("Casino Magic-Biloxi") both
dockside casinos operating on the Gulf Coast of Mississippi (together referred
to collectively as the "Casino Magic-Gulf Coast") and Casino Magic-Neuquen SA,
which operates gaming facilities at two casino sites in Neuquen and San Martin
de los Andes, Argentina. The Company also owns a 49% interest in Porto Carras
Casino S.A. ("Porto Carras") which manages a casino at the Porto Carras resort
approximately 60 miles south of Thesseloniki, Greece.
Quarter ended March 31,
(Dollars in Thousands)
-------------------------
1996 1995
----------- -----------
Revenues:
Casino Magic-BSL (1)............................ $ 21,044 $ 22,192
Casino Magic-Biloxi (2)......................... 16,833 18,298
Casino Magic-Neuquen (3)........................ 3,944 2,246
Corporate and Other (4)......................... 1,304 433
----------- -----------
Total revenues................................ 43,125 43,169
Costs and expenses:
Casino Magic-BSL................................ 16,234 17,382
Casino Magic-Biloxi............................. 14,133 14,826
Casino Magic-Neuquen............................ 3,183 2,664
Corporate and Other............................. 4,009 3,542
----------- -----------
Total costs and expenses...................... 37,559 38,414
EBITDA:
Casino Magic-BSL................................ 6,266 6,287
Casino Magic-Biloxi............................. 4,123 4,843
Casino Magic-Neuquen............................ 1,058 (167)
Corporate and Other............................. (1,634) (3,003)
----------- -----------
Total EBITDA.................................. 9,813 7,960
Income (loss) from operations:
Casino Magic-BSL................................ 4,810 4,810
Casino Magic-Biloxi............................. 2,700 3,472
Casino Magic-Neuquen............................ 761 (418)
Corporate and Other............................. (2,706) (3,109)
----------- -----------
Total income from operations.................. $ 5,565 $ 4,755
=========== ===========
(1) Began operations September 30, 1992; expanded casino capacity
December 31, 1992.
(2) Began operations June 5, 1993; expanded casino capacity
December 16, 1993.
(3) Began operations on January 1, 1995.
(4) Includes management fees and royalty fees from Porto Carras which began
operations May 18, 1995. Equity in earnings with respect to Porto
Carras is reported as non-operating income.
-6-
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED):
Consolidated gaming revenues decreased $1.2 million or 3.0% to $39.8 million
in the first quarter of 1996 compared to $41.0 million in the first quarter of
1995. The decrease in gaming revenues is reflective of intensified
competition on the Gulf Coast which is a major market for Casino Magic-Gulf
Coast. The decrease in gaming revenues from Casino Magic-Gulf Coast was
partially offset by increased gaming revenues of $1.5 million at Casino Magic-
Neuquen and $0.9 million in royalty and management fees.
Operating costs and expenses decreased $0.9 million from $38.4 million in the
first quarter of 1995 to $37.6 million in the first quarter of 1996.
Advertising and marketing expenses decreased $1.2 million or 20.3% in the
first quarter of 1996 as compared to the same period in 1995. The majority of
this decrease is a result of the Company reducing its emphasis on its air
charter program in the Gulf Coast. Casino expenses decreased $0.6 million
from $17.0 million in the first quarter of 1995 to $16.4 million in 1996.
This decrease is the result of cost reduction policies which began in 1995.
Food and beverage expenses increased to $2.3 million in the first quarter of
1996 from $1.5 million in the first quarter in 1995. This increase is
attributable to increased activity at Casino Magic-Neuquen and market share
competition at Casino Magic-Gulf Coast. General and administrative expenses
decreased $0.7 million or 11.5% in the first quarter of 1996 as compared to
the same period in 1995. This decline is a result of cost cutting measures
implemented in early 1996, including the elimination of several corporate
officer positions. Depreciation increased $1.0 million from $3.2 million in
the first quarter of 1995 to $4.2 million in 1996. This increase is due to
the addition of the inn at Casino Magic-BSL, the addition of other tangible
depreciable property, amortization of the concession agreement for Casino
Magic-Neuquen and amortization of investment costs in excess of equity
interest in Porto Carras Casino SA.
Earnings before income taxes, depreciation and amortization (EBITDA) increased
$1.9 million or 23.3% in the first quarter of 1996 as compared to the same
period in 1995. The increase in EBITDA is attributable to increased revenues
at Casino Magic-Neuquen and increased royalty and management fees. Royalty
and management fees are generated at substantially lower costs than revenues
from owned properties and therefore have a greater impact on EBITDA.
Income from operations increased $0.8 million, or 17%, to $5.6 million in the
first quarter of 1996 compared to $4.8 in the first quarter last year.
Operating margin (income from operations as a percentage of revenues) grew
from 11.0% to 12.9% over the comparative periods. Casino Magic-BSL's
operating margin grew from 21.7% to 22.9%, and Casino Magic-Biloxi's operating
margin decreased from 19.0% to 16.0%. The increased margin at Casino Magic-
BSL is due to cost cutting measures, and the decrease at Casino Magic-Biloxi
is due to lower revenues from increased competition.
Other (income) expense (non-operating income and expense) decreased $0.9
million over the comparative quarters. The decrease reflects increased income
from Porto Carras Casino SA, a jointly owned company accounted for using the
equity method of accounting.
The Company had net income of $1.6 million or $0.05 per share in the current
year first quarter compared to net income of $0.3 million or $0.01 per share
in the first quarter of the preceding year. The increase in net income
between periods is reflective of the expanding operations of the Company and
cost cutting measures implemented.
-7-
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had cash and marketable securities of $31.9
million compared to cash and marketable securities of $30.8 million at
December 31, 1995. For the quarter ended March 31, 1996, the Company
generated $4.9 million cash flow from operating activities and received $1.4
million of proceeds from the issuance of a long term note payable. The
Company spent $4.4 million for acquisitions of property, equipment and other
long-term assets during the quarter and reduced long term debt by $0.6
million.
The Company expended approximately $2.5 million in capital improvements at its
two existing Mississippi properties during the quarter. The Company is
currently constructing the 18-hole golf course at the Casino Magic-BSL
property with an expected completion in Fall 1996. The Company has made
significant investments in property and equipment, plans additional
investments at its existing Gulf Coast properties and is pursuing gaming
opportunities outside of Mississippi primarily in Indiana and Louisiana.
In early 1996, the Company, through a wholly-owned subsidiary, entered into a
consulting agreement with Sisseton-Wahpeton Dakota Nation ("Sisseton"). The
agreement specifies that the Company will provide consulting services to
Sisseton during the development and opening of a hotel and casino facility, on
Tribal land, for a fee payable after the opening of the facility. The
agreement also specifies that the Company will provide consulting services to
Sisseton after the opening of the facility for a period of two years and
includes unlimited one year extensions. The fee for these services is based
on gross revenues of the hotel and casino facility. This agreement replaces
all previous agreements entered into between the Company and Sisseton except
for a loan agreement. The loan agreement requires the Company to loan
Sisseton up to $5 million, interest free, until the opening of the facility.
The loan is secured by the revenues generated by current gaming operations
conducted by Sisseton. Through April 1996, the Company had loaned to Sisseton
$3.8 million.
The Company plans to construct a hotel at Casino Magic-Biloxi on top of the
eight-story parking garage adjacent to the casino that will consist of
approximately 250 rooms. In addition, the Company plans to reposition the
floating gaming facility at Casino Magic-Biloxi and provide it with a new
facade. These projects have an estimated cost of between $20 to $25 million.
Construction is scheduled to begin in 1996 and completion is estimated for
1997. Construction costs are anticipated to be funded out of the cash flow of
the Company.
In February 1996, the Company and two of its wholly owned subsidiaries (such
subsidiaries hereafter referred to as the "Purchasers") entered into an
agreement to purchase the Crescent City, a subsidiary of Capital Gaming
International, Inc., for $50 million plus the assumption of up to $6.5 million
in equipment liabilities. The Purchasers will pay $15 million in cash at
closing and will cause Crescent City to issue $35 million of 11.5% secured,
three year notes. Crescent City, which was the subject of a plan of
reorganization under Chapter 11 of the U.S. Bankruptcy Code, owns the Crescent
City Queen, a casino riverboat, and a license to conduct riverboat gaming
operations in Louisiana. The agreement was contingent upon approval of the
Louisiana State Police, the Louisiana Riverboat Gaming Commission, and the
U.S. Bankruptcy Court. As of April 30, 1996, the Company received
confirmation of the plan of reorganization and all necessary approvals for
the transfer of ownership of Crescent City and the relocation of its gaming
license to Bossier City. The purchase of Crescent City was consummated on May
13, 1996. The Purchasers will not succeed to any of the business activities
of Crescent City. The Company plans to utilize Crescent City's gaming license
in Bossier City, Louisiana, where it currently owns 20 acres of land. It is
anticipated that the additional funding needed to complete the project will be
obtained through several sources, including a joint venture partner, short
term financing, the cash flow from the Bossier City project and anticipated
cash flow from existing operations. Because the Crescent City Queen is not
suitable for use at the Bossier City site the
-8-
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED):
Company intends to use the Crescent City Queen in Crawford County Indiana, if
the Company is awarded an Indiana gaming license. However, if the Company is
unsuccessful in obtaining a gaming license in Indiana the Crescent City will
be sold and the proceeds will be used to assist in the funding of the Bossier
City gaming site. The Company anticipates having a determination on the
Indiana gaming license by mid-1996.
The State of Louisiana will hold a referendum on continuing gaming on November
11, 1996. The referendum will be in a menu format giving the voters to option
to accept or reject, individually, various forms of gaming including riverboat
gaming. If riverboat gaming is rejected, the Crescent City gaming license
will have a 4 year and 10 month life beginning from the first day of gaming
operations.
The Company's plans for the Bossier City site are divided into two phases.
The pre-local option referendum construction plan includes 30,000 square feet
of floating dockside casino space that will have approximately 1,000 slots and
60 table games. The plan also includes 1,500 parking spaces together with an
entertainment and food and beverage pavilion. The post-local option
referendum plans, assuming a favorable outcome, include the construction of a
60,000 square feet entertainment facility and a 400-room convention hotel.
Opening of phase I is anticipated during 1996.
In May 1995, the Company entered into an agreement with Lakes Regional
Greyhound Park ("LRGP"). Under the terms of the agreement the parties intend
to form an entity to pursue a gaming development at LRGP's pari-mutual track
in Belmont, New Hampshire. The entity will be equally owned by the Company
and LRGP and the Company will manage gaming operations. Under the agreement
the Company is obligated to provide up to $4 million in funding to the entity,
of which the payment of $3 million is subject to certain contingencies,
including the passage of legislation permitting gaming at racetracks in New
Hampshire.
At March 31, 1996, the Company has on its balance sheet $2.8 million which was
paid for options to purchase land. The options expire at various times
through the year 2000. The exercise price to purchase the underlying
properties which are due to expire in 1997 is $1.3 million, and beyond 1997 is
$15 million.
The Company, through a wholly-owned subsidiary, holds a 49% equity interest in
a joint venture ("Porto Carras") with Touristiki Georgiki Exagogiki SA ("TGE")
to operate a casino in Porto Carras, Greece. Porto Carras leases an existing
450 room resort hotel and constructed an American-style gaming facility in the
hotel. The Company manages the hotel and casino for a fee equal to 2.5% of
hotel gross revenues and 10% of casino net operating income. The Company also
receives a royalty of 2% of casino gross revenues. The Company anticipates
receiving approximately $9 million from Porto Carras in fees, dividends and
loan repayments in 1996, of which $2.4 million has been received through April
1996. The Company believes that it will have no competition until the fall of
1996, when a casino facility is expected to open in Thessaloniki, Greece. It
is anticipated that the opening of a competing casino in Thessaloniki will
affect Porto Carras' revenues. The extent of this likely decline cannot be
determined at this time. However, management is taking operational measures
to reduce this impact by developing Porto Carras as a year-round destination
resort for Europe and developing strong player loyalty in northern Greece.
The Company has invested equity of approximately $17.3 million in Porto
Carras.
The Company entered into a memorandum of understanding with TGE to purchase
the remaining 51% interest in Porto Carras and certain property, including
hotels, marina, golf course and other amenities (collectively the "Property")
at the casino location for approximately $75 million. This memorandum of
understanding expired on March 31, 1996. The Company has no intention of
entering into another agreement to purchase the Property.
-9-
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED):
The Company commenced operations in 1995 outside the United States becoming
subject to certain risks including foreign currency exchange, repatriation of
earnings and profits, and adverse foreign tax treatment. In addition, the
Company will incur the general business risk associated with operating in
foreign countries where culture and business practices may vary significantly
from that in the United States. Such risks could have a material impact on
the operating results and liquidity of the Company.
The Company will have a significant need for cash in 1996 and beyond in order
to continue its planned pursuit of gaming opportunities and the continued
development of its existing properties. The Company believes that cash and
marketable securities at March 31, 1996, together with cash flows from
operations, will be sufficient to service its operating and debt service
requirements, including the completion of the golf course at Casino Magic-BSL,
the hotel at Casino Magic-Biloxi and the expansion into the Bossier City,
Louisiana market through, at least, the next twelve months, but are not
sufficient to reposition and renovate the Casino Magic-Biloxi gaming facility
or to engage in any other development activities, without additional debt or
equity financing. Under the terms of an indenture, Casino Magic Corp., Mardi
Gras Casino Corp., Biloxi Casino Corp. and Casino Magic Finance Corp. have
certain restrictions relative to additional borrowings and guarantees.
Although there are no assurances that the Company will be able to raise
additional debt or equity financing on acceptable terms, the Company believes
it possesses the ability to raise such additional financing to develop the
Company's planned gaming properties if the need arises.
-10-
CASINO MAGIC CORP. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995 on file with the Securities and Exchange
Commission. During the quarter ended March 31, 1996, the Company was not a
party to any newly instituted legal proceedings and there have been no
material developments during such period to existing legal proceedings.
ITEM 2. CHANGES IN SECURITIES
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) Exhibits
10.1 Agreement dated May 3, 1996 between Mark G. George, Stuart
Capital Corporation, Southeast Gaming Corporation, Casino Magic
Corp., and Jefferson Casino Corp. for purchase of Gaming Fee
and Option Agreement.
10.2 Promissory Note dated May 3, 1996 between Jefferson Casino
Corporation, C-M of Louisiana, Inc. and Mark G. George.
10.3 Release dated May 3, 1996 by Mark G. George of Gaming Fee and
Option Agreement.
10.4 Subordination Agreement dated May 3, 1996 between Jefferson
Casino Corporation, C-M of Louisiana, Inc. and Mark G. George.
18. Letter from Arthur Andersen LLP regarding change in accounting
principle or practice.
27. Financial Data Schedule (filed electronically only)
(b) Reports on Form 8-K:
None.
-11-
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 thereunto duly authorized.
CASINO MAGIC CORP.
Registrant
Date: May 14, 1996 JAMES E. ERNST
---------------- --------------------------------------
James E. Ernst, President
and Chief Executive Officer
Date: May 14, 1996 JAY S. OSMAN
---------------- --------------------------------------
Jay S. Osman, Chief Financial Officer
and Treasurer (principal financial
and accounting officer)
-12-
CASINO MAGIC CORP.
Quarterly Report on Form 10-Q for the Period Ended March 31, 1996
INDEX TO EXHIBITS
Exhibit
Number Page
10.1 Agreement dated May 3, 1996 between Mark G. George, Stuart
Capital Corporation, Southeast Gaming Corporation, Casino Magic
Corp., and Jefferson Casino Corp. for purchase of Gaming Fee
and Option Agreement.
10.2 Promissory Note dated May 3, 1996 between Jefferson Casino
Corporation, C-M of Louisiana, Inc. and Mark G. George.
10.3 Release dated May 3, 1996 by Mark G. George of Gaming Fee and
Option Agreement.
10.4 Subordination Agreement dated May 3, 1996 between Jefferson
Casino Corporation, C-M of Louisiana, Inc. and Mark G. George.
18. Letter from Arthur Andersen LLP regarding change in accounting
principle or practice.
27. Financial Data Schedule (filed electronically only)