UNITED STATES
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 September 30, 2000.
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: 333-88829
Peninsula Gaming Company, LLC/Peninsula Gaming Corp.
(Exact name of registrant as specified in its charter)
Iowa 42-1483875
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3rd Street Ice Harbor, PO Box 1750, Dubuque, Iowa 52001-1750
(Address of principal executive offices) (Zip Code)
(319) 583-7005
(Registrant's telephone number including area code)
- --------------------------------------------------------------------------------
(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 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 last 90 days. Yes __X__ No _____
All of the common equity interests of Peninsula Gaming Company, LLC
(the "Company") are held by Peninsula Gaming Partners, LLC, and all of the
common stock of Peninsula Gaming Corp. is held by Peninsula Gaming Company, LLC.
PENINSULA GAMING COMPANY, LLC
INDEX TO FORM 10-Q
Page
----
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Peninsula Gaming Company, LLC:
Balance Sheets (Unaudited) as of December 31, 1999 and September 30, 2000.......................3
Statements of Operations (Unaudited) for the Three and Nine Months Ended
September 30, 2000 and the period July 15, 1999 (Date of Inception) through
September 30, 1999............................................................................4
Statements of Changes in Members' Equity (Unaudited) for the Nine
Months Ended September 30, 2000 and the period July 15, 1999
(Date of Inception) through September 30, 1999..............................................5
Statements of Cash Flows (Unaudited) for the Nine Months Ended
September 30, 2000 and the period July 15, 1999 (Date of
Inception) through September 30, 1999......................................................6
Notes to Financial Statements (Unaudited)......................................................7
Predecessor Company:
Greater Dubuque Riverboat Entertainment Company, L.C. and
Harbor Community Investment, L.C.:
Combined Statement of Operations (Unaudited) for the Period January 1, 1999 through
July 14, 1999...............................................................................9
Combined Statement of Changes in Members' Equity (Unaudited) for
the Period January 1, 1999 through July 14, 1999...........................................10
Combined Statement of Cash Flows (Unaudited) for the Period January 1, 1999 through
July 14, 1999 .............................................................................11
Notes to Combined Financial Statements (Unaudited)............................................12
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................................13
Item 3 - Quantitative and Qualitative Disclosures About Market Risk.................................17
PART II - OTHER INFORMATION.........................................................................17
Signatures..........................................................................................19
-2-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PENINSULA GAMING COMPANY, LLC
BALANCE SHEETS (UNAUDITED)
September 30, December 31,
2000 1999
--------------- --------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $10,691,959 $ 7,918,742
Accounts receivable, less allowance for doubtful accounts 130,616 115,616
Inventory 103,679 99,813
Prepaid expenses 639,171 630,754
----------- ------------
Total current assets 11,565,425 8,764,925
----------- ------------
PROPERTY AND EQUIPMENT, NET 19,271,709 18,950,194
----------- ------------
OTHER ASSETS:
Deposits 84,972 27,472
Bond issuance costs, net of amortization 4,171,435 4,520,894
Goodwill and other intangible assets, net of amortization 54,850,913 55,911,404
----------- ------------
Total other assets 59,107,320 60,459,770
----------- ------------
TOTAL $89,944,454 $ 88,174,889
=========== ============
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 646,969 $ 476,868
Accrued payroll and payroll taxes 1,041,034 1,131,771
Other accrued expenses 3,933,353 2,609,630
Current maturities of capital lease obligations 113,552 151,331
----------- ------------
Total current liabilities 5,734,908 4,369,600
----------- ------------
LONG-TERM LIABILITIES:
Senior secured notes, net of discount 70,266,336 70,203,780
Capital lease obligations, net of current maturities 362,229 324,450
----------- ------------
Total long-term liabilities 70,628,565 70,528,230
----------- ------------
Total liabilities 76,363,473 74,897,830
----------- ------------
COMMITMENTS AND CONTINGENCIES
PREFERRED MEMBER INTEREST, REDEEMABLE 7,000,000 7,000,000
MEMBERS' EQUITY:
Common member interest 9,000,000 9,000,000
Accumulated deficit (2,419,019) (2,722,941)
----------- ------------
Total members' equity 6,580,981 6,277,059
----------- ------------
TOTAL $89,944,454 $ 88,174,889
=========== =============
See notes to financial statements (unaudited).
-3-
PENINSULA GAMING COMPANY, LLC
STATEMENTS OF OPERATIONS (UNAUDITED)
Period
From July 15
(Date of
Three Months Inception) Nine Months
Ended Through Ended
September 30, September 30, September 30,
2000 1999 2000
-------------- --------------- --------------
REVENUES:
Casino $12,523,436 $10,104,788 $34,791,210
Food and beverage 729,118 631,330 2,027,414
Other 48,019 59,000 132,545
Less promotional allowances (302,590) (265,170) (771,733)
----------- ----------- -----------
Total net revenues 12,997,983 10,529,948 36,179,436
----------- ----------- -----------
EXPENSES:
Casino 5,470,206 3,951,427 15,469,394
Food and beverage 694,065 606,067 2,004,105
Boat operations 580,397 423,758 1,641,266
Other 12,384 10,025 31,083
Selling, general and administrative 1,985,499 1,670,400 5,440,309
Start-up and organization costs 0 3,134,095 0
Depreciation and amortization 883,858 691,910 2,618,365
----------- ----------- -----------
Total expenses 9,626,409 10,487,682 27,204,522
----------- ----------- -----------
INCOME FROM OPERATIONS 3,371,574 42,266 8,974,914
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income 101,012 57,111 299,833
Interest expense (2,375,941) (1,957,546) (7,130,349)
Loss on sale of assets (39,878) (8,175) (46,265)
----------- ----------- -----------
Total other expense (2,314,807) (1,908,610) (6,876,781)
----------- ----------- -----------
NET INCOME/(LOSS) BEFORE PREFERRED
MEMBER DISTRIBUTIONS 1,056,767 (1,866,344) 2,098,133
LESS PREFERRED MEMBER DISTRIBUTIONS (157,500) (131,250) (472,500)
----------- ----------- -----------
NET INCOME/(LOSS) TO COMMON INTERESTS $899,267 $(1,997,594) $1,625,633
=========== =========== ===========
See notes to financial statements (unaudited).
-4-
PENINSULA GAMING COMPANY, LLC
STATEMENTS OF CHANGES IN MEMBERS' EQUITY (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
Common Total
Member Accumulated Members'
Interest Deficit Equity
------------- -------------- ------------
BALANCE, DECEMBER 31, 1999 $ 9,000,000 $ (2,722,941) $ 6,277,059
Net Income to Common Interest 1,625,633 1,625,633
Member Distributions (1,321,711) (1,321,711)
----------- ------------ ------------
BALANCE, SEPTEMBER 30, 2000 $ 9,000,000 $(2,419,019) $ 6,580,981
=========== ============ ============
See notes to financial statements (unaudited).
-5-
PENINSULA GAMING COMPANY, LLC
STATEMENTS OF CASH FLOWS (UNAUDITED)
Period From
Nine Months July 15 (Date of
Ended Inception) Through
September 30, September 30,
2000 1999
-------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ 1,625,633 $ (1,997,594)
Adjustments to reconcile net income/(loss) to net cash flows provided by
operating activities:
Depreciation and amortization 2,618,365 691,911
Provision for doubtful accounts 88,817 0
Amortization of bond issuance costs and bond discount 593,024 145,567
Loss on sale of assets 46,265 8,175
Changes in operating assets and liabilities:
Receivables (103,816) (8,852)
Inventory (3,866) (2,375)
Prepaid expenses and other assets (65,917) (743,083)
Accounts payable 170,101 191,750
Accrued expenses 1,232,984 3,883,013
----------- ------------
Net cash provided by operating activities 6,201,590 2,168,512
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 23,332 25,000
Purchase of property and equipment (1,948,986) (43,690)
Acquisition, net of cash acquired 0 (68,000,000)
----------- ------------
Net cash used by investing activities (1,925,654) (68,018,690)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior secured notes 0 70,181,189
Bond issuance costs (181,008) (4,365,904)
Proceeds from issuance of common membership interest 0 9,000,000
Member distributions (1,321,711) (71,453)
------------ ------------
Net cash provided/(used) by financing activities (1,502,719) 74,743,832
------------ -----------
NET INCREASE IN CASH 2,773,217 8,893,654
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,918,742 -
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,691,959 $ 8,893,654
============ ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES
Issuance of preferred member interest, redeemable $ 0 $ 7,000,000
See notes to financial statements (unaudited).
-6-
PENINSULA GAMING COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Summary of Significant Accounting Policies
Basis of Presentation
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments, consisting only of normal recurring entries unless
otherwise disclosed, necessary to present fairly the financial information of
Peninsula Gaming Company, LLC (the "Company") for the interim periods presented
and have been prepared in accordance with generally accepted accounting
principles. The interim results reflected in the financial statements are not
necessarily indicative of results for the full year or other periods.
The financial statements contained herein should be read in conjunction with the
audited financial statements and accompanying notes to the financial statements
included in the Company's Annual Report on Form 10-K for the period ending
December 31, 1999. Accordingly, footnote disclosure which would substantially
duplicate the disclosure in the audited financial statements has been omitted in
the accompanying unaudited financial statements.
2. Commitments and Contingencies
The Company is involved in various legal actions arising in the normal course of
business. In the opinion of management, such matters will not have a material
effect upon the financial position of the Company.
3. Unaudited Pro Forma Summarized Operating Results
The following unaudited supplemental pro forma information of the Company,
Greater Dubuque Riverboat Entertainment Company, L.C. ("GDREC") and Harbor
Community Investment, L.C. ("HCI") for the period January 1, 1999 through July
14, 1999 has been adjusted as if the Company had been formed and the acquisition
of the Diamond Jo casino from GDREC and HCI (the "Acquisition") had been
completed as of January 1, 1999 to give effect to (i) the elimination of
amortization expense related to intangible assets not purchased, (ii)
amortization of goodwill related to the Acquisition over a forty year period,
(iii) elimination of non-recurring expenses related to the Acquisition, (iv)
increase in executive compensation expense incurred annually due to the
Acquisition, (v) elimination of interest expense of $0.3 million related to debt
of the predecessor companies not assumed by the Company as part of the
Acquisition, (vi) interest expense of $7.1 million on the notes calculated at an
interest rate of 12 1/4 % interest rate per annum and (vii) amortization of the
original $4.8 million of bond issuance costs and original issue discount of $0.8
million over a period of seven years. Such following pro forma supplemental
financial information does not purport to be indicative of the actual results of
operations of the Company, GDREC and HCI that would have resulted had the
Company been formed and had the Acquisition been completed as of January 1, 1999
or of the future results of operations of the Company, GDREC and HCI.
Pro Forma
Period January 1, 1999
Through July 14, 1999
(in thousands)
Net Revenues $24,750
Income from Operations 5,986
Net Income to Common Interests 814
-7-
4. New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133), which we are required to adopt effective
January 1, 2001. We expect to adopt SFAS 133 as of January 1, 2001. The effect
of adopting the Statement is currently being evaluated, however, we do not
believe the effects of adoption will be material to our financial position or
results of operations.
-8-
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
Period From
January 1
Through July 14,
1999
----------------
REVENUES:
Casino $ 23,763,442
Food and beverage 1,408,046
Other 121,360
Less promotional allowances (543,259)
------------
Total net revenues 24,749,589
------------
EXPENSES:
Casino 9,797,175
Food and beverage 1,429,958
Boat operations 1,054,539
Other 20,713
Selling, general and administrative 4,121,942
Depreciation and amortization 1,156,822
Sale of business expense 1,566,761
Ownership litigation 304,742
-----------
Total expenses 19,452,652
-----------
INCOME FROM OPERATIONS 5,296,937
-----------
OTHER INCOME (EXPENSE):
Interest income 76,119
Interest expense (331,101)
Loss on sale of assets (97,750)
-----------
Total other expense (352,732)
-----------
NET INCOME $ 4,944,205
===========
See notes to combined financial statements (unaudited).
-9-
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
COMBINED STATEMENT OF CHANGES IN MEMBERS' EQUITY (UNAUDITED)
FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH JULY 14, 1999
Unrealized Gain Total
Member Member on Investments Retained Members'
Units Interest Available for Sale Earnings Equity
------- ----------- ------------------ ------------ -------------
BALANCE, DECEMBER 31, 1998 112 $ 4,100,000 $ 1,508 $ 12,595,500 $ 16,697,008
Net income 4,944,205 4,944,205
Member distributions (5,258,468) (5,258,468)
Change in unrealized gain on
securities available for sale
(1,508) (1,508)
------- ----------- -------- ------------ -------------
BALANCE, JULY 14, 1999 112 $ 4,100,000 $ - $ 12,281,237 $ 16,381,237
======= =========== ======== ============ =============
See notes to combined financial statements (unaudited).
-10-
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
COMBINED STATEMENT OF CASH FLOWS (UNAUDITED)
Period From
January 1
Through July 14,
1999
-----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $4,944,205
Adjustments to reconcile net income to net cash flows
provided by operating activities:
Depreciation and amortization 1,156,822
Loss on sale of assets 97,750
Changes in operating assets and liabilities:
Receivables (72,927)
Inventory 7,298
Prepaid expenses and other assets 91,452
Accounts payable (408,484)
Accrued expenses 317,600
---------------
Net cash provided by operating activities 6,133,716
---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 35,455
Purchase of property and equipment (467,955)
Proceeds from sale of available for sale securities 512,000
---------------
Net cash provided by investing activities 79,500
---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on long-term liabilities (3,018,921)
Member distributions (5,258,468)
---------------
Net cash used by financing activities (8,277,389)
---------------
NET DECREASE IN CASH (2,064,173)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,820,717
---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,756,544
===============
See notes to combined financial statements (unaudited).
-11-
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
1. Summary of Significant Accounting Policies
Basis of Presentation
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments, consisting only of normal recurring entries unless
otherwise disclosed, necessary to present fairly the financial information of
Greater Dubuque Riverboat Entertainment Company, L.C. and Harbor Community
Investment, L.C. (the "Companies") for the interim periods presented and have
been prepared in accordance with generally accepted accounting principles. The
interim results reflected in the financial statements are not necessarily
indicative of results for the full year or other periods.
The financial statements contained herein should be read in conjunction with the
audited financial statements and accompanying notes to the financial statements
included in Peninsula Gaming Company, LLC's Annual Report on Form 10-K for the
period ending December 31, 1999. Accordingly, footnote disclosure which would
substantially duplicate the disclosure in the audited financial statements has
been omitted in the accompanying unaudited financial statements.
Certain amounts for fiscal 1999 have been reclassified to conform with fiscal
2000 financial statement presentation.
2. Commitments and Contingencies
The Companies are involved in various legal actions arising in the normal course
of business. In the opinion of management, such matters will not have a material
effect upon the financial position of the Companies.
-12
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the combined financial statements and the related notes thereto appearing
elsewhere in this report. Some statements contained in the Management's
Discussion and Analysis of Financial Condition and Results of Operations
constitute "forward-looking statements" within the meaning of the Litigation
Reform Act, which involve risks and uncertainties, including the risks and
uncertainties discussed below, as well as other risks set forth in our Annual
Report on Form 10-K for the year ended December 31, 1999. Should these risks or
uncertainties materialize, or should underlying assumptions prove incorrect, our
future performance and actual results of operations may differ materially from
those expected or intended.
The results of operations for the three and nine months ended September
30, 2000 discussed below are our results of operations. The results of
operations for the three and nine months ended September 30, 1999 discussed
below are the combined results of operations of the company (July 15, 1999 to
September 30, 1999) and the predecessor companies (January 1, 1999 to July 14,
1999). As a result of a substantially different capital structure of our company
in comparison to that of the predecessor companies, and of the applications of
purchase accounting in connection with the acquisition, our results of
operations may not be entirely comparable to the results of operations of the
predecessor companies.
Selected Financial Data
- -----------------------
Statement of Operations Data
Three Months Ended September 30 Nine Months Ended September 30
------------------------------- --------------------------------
1999 (1) 2000 1999 (1) 2000
-------- ---- ------- ----
Revenues:
Casino $11,875,592 $12,523,436 $33,868,230 $34,791,210
Food and beverage 739,189 729,118 2,039,376 2,027,414
Other 66,718 48,019 180,360 132,545
Less: Promotional Allowances (304,753) (302,590) (808,429) (771,733)
------------ ----------- ----------- -----------
Net revenues 12,376,746 12,997,983 35,279,537 36,179,436
----------- ----------- ----------- -----------
Expenses:
Casino 4,467,238 5,470,206 13,748,602 15,469,394
Food and beverage 729,698 694,065 2,036,025 2,004,105
Boat operations 514,298 580,397 1,478,297 1,641,266
Other 11,766 12,384 30,738 31,083
Selling, general and
administrative 2,101,529 1,985,499 5,792,342 5,440,309
Selling and litigation
expenses (2) 1,246,346 0 1,871,503 0
Organizational costs 3,134,095 0 3,134,095 0
Depreciation and
amortization 782,836 883,858 1,848,732 2,618,365
----------- ----------- ----------- -----------
Total expenses 12,987,806 9,626,409 29,940,334 27,204,522
---------- ----------- ----------- -----------
Income/(Loss) From
Operations (611,060) 3,371,574 5,339,203 8,974,914
- ----------
(1) Certain expenses for 1999 have been reclassified on a comparative basis
to the three and nine month periods ended September 30, 2000.
(2) Consists of non-recurring charges related to sale of business and certain
litigation costs and expenses incurred by our predecessor companies.
-13-
Three months ended September 30, 2000 Compared to Three months ended
September 30, 1999
For the three months ended September 30, 2000 and 1999, Dubuque was a
two-casino market consisting of the Diamond Jo and the Greyhound Park. Casino
gaming win in the Dubuque market increased 5.6% to $22.4 million for the three
months ended September 30, 2000 from $21.2 million for the three months ended
September 30, 1999. We believe this increase was primarily due to increased
player's club promotions and a change in our slot mix and the slot mix at the
Greyhound Park. Admissions to the casinos in the Dubuque market decreased 2.1%
to 568,010 for the three months ended September 30, 2000 from 580,099 for the
three months ended September 30, 1999. This can be primarily attributed to our
decision to decrease bus group and banquet passengers by 7,473 for the three
months ended September 30, 2000. For the three months ended September 30, 2000
and 1999 our share of the Dubuque market casino gaming win and casino admissions
remained relatively constant at 56% and 54% respectively.
Net Revenues increased to $13.0 million for the three months ended
September 30, 2000 from $12.4 million for the three months ended September 30,
1999 due to slot revenue increasing $644,000 for three months ended September
30, 2000 compared to the three months ended September 30, 1999. This was as a
result of an increased emphasis on our player's club promotions. Our admissions
for the three months ended September 30, 2000 decreased 2.7% to 304,094 from
312,442 for the three months ended September 30, 1999 primarily due to a
decrease in bus and banquet passengers of 7,473 due to our change in marketing
strategy. For the three months ended September 30, 2000 our win per admission
increased 8.3% to $41.18 from $38.01 for the three months ended September 30,
1999. Number of gaming positions at September 30, 2000 was 868 compared to 949
at September 30, 1999. This was due to the elimination of six blackjack and five
live poker games with the addition of one 3 card poker table game. Consistent
with an increase in net revenue, our win per gaming position increased 11.9% to
$153.84 for the three months ended September 30, 2000 from $137.51 for the three
months ended September 30, 1999. Our casino revenues increased 5.5% to $12.5
million for the three months ended September 30, 2000 from $11.9 million for the
three months ended September 30, 1999. Casino revenues were derived 83.3% from
slot machines and 16.7% from table games for the three months ended September
30, 2000 compared to 81.9% from slot machines and 18.1% from table games for the
three months ended September 30, 1999. Food and beverage revenues, other
revenues and promotional allowances remained substantially unchanged at $0.5
million for three months ended September 30, 2000 and 1999.
Casino operating expenses increased 22.5% to $5.5 million for the three
months ended September 30, 2000 from $4.5 million for the three months ended
September 30, 1999. This increase was due primarily to an increase in player
points expense of approximately $253,000 due to a triple point promotion, an
increase in casino and players club promotions of approximately $429,000 and an
increase of $357,000 in gaming taxes due to increased revenue. Food and beverage
expenses were substantially unchanged at $0.7 million for the three months ended
September 30, 2000 and 1999. Selling, general and administrative expenses
decreased 5.5% to $2.0 million for the three months ended September 30, 2000
from $2.1 million for the three months ended September 30, 1999 primarily due to
a decrease in general marketing expenses of $119,000 due to a shifting of
marketing strategy towards our player's club, a decrease in group subsidies of
$62,000 and a decrease in employee insurance claims of $25,000. This was
partially offset by an increase in head tax paid to the Dubuque Racing
Association of $152,000. This tax commenced on April 1, 2000 per our agreement
with the Dubuque Racing Association and continues thereafter. We are required to
pay the sum of $.50 for each patron admitted on the boat, which, based on annual
attendance, would approximate $500,000 annually. Non-recurring expenses for the
three months ended September 30, 1999 included $1.2 million related to sale of
business and certain litigation costs incurred by the predecessor companies and
$3.1 million of organization costs related to the formation of Peninsula Gaming
Company, LLC.
-14-
Depreciation and amortization expenses increased 12.9% to $0.9 million for
the three months ended September 30, 2000 from $0.8 million for the three months
ended September 30, 1999. This increase was primarily due to the amortization of
goodwill of $0.4 million for the three months ended September 30, 2000 compared
to $0.3 million for the three months ended September 30, 1999. The goodwill was
recorded in connection with the July 1999 acquisition. Net interest expense was
$2.3 million for the three months ended September 30, 2000 and $2.0 million for
the three months ended September 30, 1999. The increase in interest expense is
due to the issuance of $71 million senior secured notes at 12.25% interest rate
related to the acquisition in mid July of 1999, resulting in three months
interest expense for the period ended September 30, 2000 compared to two and a
half months for the period ended September 30, 1999.
Nine months ended September 30, 2000 Compared to Nine months
ended September 30, 1999
For the nine months ended September 30, 2000 and 1999, Dubuque was a
two-casino market consisting of the Diamond Jo and the Greyhound Park. Casino
gaming win in the Dubuque market increased 5.0% to $62.5 million for the nine
months ended September 30, 2000 from $59.5 million for the nine months ended
September 30, 1999. We believe this increase was primarily due to better weather
in January 2000 than January 1999, an increase in our table games revenue, an
increase in our player's club promotions and a change in slot mix at the
Greyhound Park. Admissions to the casinos in the Dubuque market remained
relatively constant at 1,536,801 for the nine months ended September 30, 2000
compared to 1,535,837 for the nine months ended September 30, 1999. For the nine
months ended September 30, 2000 our share of the Dubuque market casino gaming
win decreased to 55.6% from 56.9% and casino admissions decreased to 53.7% from
54.7%, in each case, for the nine months ended September 30, 1999. We believe
our market share decrease was primarily due to a change in slot mix at the
Greyhound Park, a decrease in our slot hold percentage coupled with an increase
in the Greyhound Park's hold percentage and a decrease in group bus passengers
at our facility.
Net Revenues increased 2.6% to $36.2 million for the nine months ended
September 30, 2000 from $35.3 million for the nine months ended September 30,
1999. This was primarily due to increased casino revenues which arose from an
increase in slot revenue of $789,000 due to greater emphasis on promotions
geared towards our players club members. Our admissions for the nine months
ended September 30, 2000 decreased 1.8% to 824,753 from 839,731 for the nine
months ended September 30, 1999. This was primarily due to the decrease in bus
group and banquet passengers of 18,135 for the nine months ended September 30,
2000 compared to the nine months ended September 30, 1999. The decrease in bus
passengers is due to our change in marketing strategy. For the nine months ended
September 30, 2000 our win per admission increased 4.6% to $42.18 from $40.33
for the nine months ended September 30, 1999. Number of gaming positions
decreased at September 30, 2000 to 868 from 949 at September 30, 1999. This was
due to the elimination of six blackjack and five live poker games with the
addition of one 3 card poker table game. Consistent with an increase in net
revenue, win per gaming position increased 5.7% to $138.74 for the nine months
ended September 30, 2000 from $131.21 for the nine months ended September 30,
1999. Our casino revenues increased 2.7% to $34.8 million for the nine months
ended September 30, 2000 from $33.9 million for the nine months ended September
30, 1999. Casino revenues were derived 81.5% from slot machines and 18.5% from
table games for the nine months ended September 30, 2000 compared to 81.2% from
slot machines and 18.8% from table games for the nine months ended September 30,
1999. Food and beverage revenues, other revenues and promotional allowances
remained substantially unchanged at $1.4 million for the nine months ended
September 30, 2000 and 1999.
Casino operating expenses increased 12.5% to $15.5 million for the nine
months ended September 30, 2000 from $13.7 million for the nine months ended
September 30, 1999. This increase was due primarily to an increase in casino and
players club promotions of approximately $738,000, an
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increase in player points expense of approximately $678,000 due to a triple
point promotion and an increase in gaming taxes of $419,000. Food and beverage
expenses were substantially unchanged at $2.0 million for the nine months ended
September 30, 2000 and September 30, 1999. Selling, general and administrative
expenses decreased 6.1% to $5.4 million for the nine months ended September 30,
2000 from $5.8 million for the nine months ended September 30, 1999 primarily
due to a decrease in general marketing expenses of $195,000 due to a shifting of
marketing strategy towards our player's club, a decrease in group subsidies of
$167,000, a decrease in professional fees of $115,000 and a decrease management
bonuses of $68,000. This decrease was offset by the increase in head tax paid to
the Dubuque Racing Association of $288,000. This tax commenced on April 1, 2000
per our agreement with the Dubuque Racing Association and continues thereafter.
We are required to pay the sum of $.50 for each patron admitted on the boat,
which, based on annual attendance, would approximate $500,000 annually.
Non-recurring expenses for the nine months ended September 30, 1999 included
$1.9 million related to sale of business and certain litigation costs incurred
by the predecessor companies and $3.1 million of organization costs related to
the formation of Peninsula Gaming Company, LLC.
Depreciation and amortization expenses increased 41.6% to $2.6 million for the
nine months ended September 30, 2000 from $1.8 million for the nine months ended
September 30, 1999. This increase was primarily due to the amortization of
goodwill of $1.1 million for the nine months ended September 30, 2000 compared
to $0.4 million for the nine months ended September 30, 1999. The goodwill was
recorded in connection with the July 1999 acquisition. Net interest expense was
$6.8 million for the nine months ended September 30, 2000 and $2.2 million for
the nine months ended September 30, 1999. The increase in interest expense is
due to the issuance of $71 million senior secured notes at 12.25% interest rate
related to the acquisition in mid July of 1999.
Liquidity and Capital Resources
- -------------------------------
Our cash balance increased $2.8 million during the nine month period ended
September 30, 2000 to $10,691,959 from $7,918,742 at December 31, 1999.
Cash flows from operating activities of $6.2 million for the nine month
period consisted of net income of $1.6 million increased by non cash charges of
$3.3 million, principally depreciation and amortization, and an increase in
working capital of $1.2 million. The change in working capital is primarily
comprised of an increase in accrued expenses of $1,022,000 relating to the bond
issuance and the acquisition.
Cash flows used for investing activities for the nine month period ended
September 30, 2000 were $1.9 million. The primary use of these funds were for
capital expenditures which were used for remodeling our entire casino and the
purchase of slot machines. This was done in an effort to improve the gaming
experience for our patrons.
Cash used for financing activities for the period ended September 30, 2000
of $1.5 million reflects distributions to members of $1.3 million and bond
issuance costs of $0.2 million.
We believe that cash on hand and cash generated from operations will be
sufficient to satisfy our working capital requirements, maintenance, and capital
expenditures and other cash obligations. However, we cannot assure you that this
will be the case. If cash on hand and cash generated from operations are
insufficient to meet these obligations, we may have to refinance our debt or
sell some or all of our assets to meet our obligations.
Under the terms of the indenture governing the notes, we have the ability
to obtain a new credit facility to borrow up to $10.0 million if we determine
that the availability of this facility would benefit our operations.
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As a condition to the granting of our gaming license, we were required by
the gaming commission to spend up to a maximum of $11.5 million toward the
development and construction of a hotel contiguous to the Diamond Jo portside
facility. At the April 20, 2000 gaming commission meeting, the contingency was
lifted and our license was renewed with no future requirement toward
development.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks which are inherent in the
Company's financial instruments which arise from transactions entered into in
the normal course of business. Although the Company currently utilizes no
derivative financial instruments which expose the Company to significant market
risk, the Company is exposed to fair value risk due to changes in interest rates
with respect to its long-term fixed interest rate debt borrowing.
The following describes information relating to the Company's instrument
which is subject to interest rate risk at September 30, 2000 (dollars in
millions):
Description Contract Terms Interest Rate Cost Fair Value
- ----------- -------------- ------------- ---- ----------
Senior Secured Notes Due July 1, 2006 12 1/4% fixed $71.0 $66.70*
* Represents fair value as of November 14, 2000 based on information provided by
Jefferies, & Co., Inc.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
We are not a party to, and none of our property is the subject of, any
pending legal proceedings other than litigation arising in the normal course of
business. We believe this litigation is either covered by insurance or not
material. We did not assume liability for any litigation involving the Diamond
Jo or any of the related real property we acquired from our predecessor
companies.
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
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Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
--------
3.1A. Certificate of Formation of Peninsula Gaming Company,
LLC (incorporated by reference from Exhibit 3.1A to
the Company's Form 10-K for the year ended December
31, 1999, file number 333-88829)
3.1B. Amendment to Certificate of Formation of Peninsula
Gaming Company, LLC (incorporated by reference from
Exhibit 3.1B to the Company's Form 10-K for the year
ended December 31, 1999, file number 333-88829)
3.2. Operating Agreement of Peninsula Gaming Company, LLC
(incorporated by reference from Exhibit 3.2 to the
Company's Form 10-K for the year ended December 31, 1999,
ile number 333-88829)
3.3. Articles of Incorporation of Peninsula Gaming Corp
(incorporated by reference from Exhibit 3.3 to the
Company's Form 10-K for the year ended December 31, 1999,
file number 333-88829)
3.4. Bylaws of Peninsula Gaming Corp (incorporated by reference
from Exhibit 3.4 to the Company's Form 10-K for the year
ended December 31, 1999, file number 333-88829)
27.1. Financial Data Schedule
(b) Reports on Form 8-K
-------------------
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Dubuque, State of Iowa on November 14, 2000.
PENINSULA GAMING COMPANY
By: /s/ M. Brent Stevens
--------------------------------------
M. Brent Stevens
Chief Executive Officer
By: /s/ George T. Papanier
--------------------------------------
George T. Papanier
Chief Operating Officer
By: /s/ Natalie A. Schramm
--------------------------------------
Natalie A. Schramm
Chief Financial Officer
PENINSULA GAMING CORP.
By: /s/ M. Brent Stevens
--------------------------------------
M. Brent Stevens
President and Treasurer
(principal financial officer)
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