SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
-----------------------------
For the Quarter Ended: August 31, 1999
Commission File Number N/A
Louisiana Casino Cruises, Inc.
(Exact name of registrant as specified in its charter)
Louisiana 72-1196619
(State or other jurisdiction of (I.R.S.
Employer Identification
organization or incorporation) Number)
1717 River Road North
Baton Rouge, Louisiana 70802
(Address of principal executive offices, including zip code)
(225) 709-7777
(Registrant's telephone number, including area code)
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).
YES X NO _______
and (2) has been subject to such filing requirements for the past 90
days.
YES X NO _______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, no par value
per share 984,883
Class Outstanding as
of October 8, 1999
LOUISIANA CASINO CRUISES, INC.
INDEX
PAGE NO.
Part I Financial Information
Balance Sheets.........................................1
Statements of Operations...............................2
Statement of Changes in Shareholders' Equity...........3
Statements of Cash Flows...............................4
Notes to Financial Statements..........................6
Management's Discussion and Analysis of Financial
Condition and Results of Operations....................9
Quantitative and Qualitative Disclosures About
Market Risk...........................................12
Part II Other Information................................13
Signatures..................................................14
LOUISIANA CASINO CRUISES, INC.
BALANCE SHEETS
(in thousands, except share data)
The accompanying notes are an integral
part of these financial statements
1
August November
31, 30,
1999 1998
-------- --------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 18,649 $ 13,525
Receivables, less allowance
for doubtful accounts
of $197 and $123, 401 332
respectively
Prepaid expenses and other 1,132 756
current assets
Inventories 148 452
Deferred tax asset - current 1,687 1,466
-------- --------
Total current assets 22,017 16,531
Property and equipment, at cost,
less accumulated
depreciation of $19,714 and 41,146 41,504
$15,980, respectively
Other assets 1,963 3,988
-------- --------
Total assets $ 65,126 $ 62,023
======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable $ 2,251 $ 1,219
Accrued liabilities 4,445 3,237
Accrued interest 1,459 102
Other current liabilities 242 332
-------- --------
Total current liabilities 8,397 4,890
Senior secured notes 53,000 50,000
Deferred tax liability 3,303 2,994
-------- --------
Total liabilities 64,700 57,884
-------- --------
Redeemable common stock warrants - 4,131
-------- --------
Shareholders' equity:
Common stock, no par value:
10,000,000 shares authorized;
996,883 and 982,783
shares issued and outstanding, 1 1
respectively
Retained earnings 425 7
-------- --------
Total shareholders' equity 426 8
-------- --------
Total liabilities and $ 65,126 $ 62,023
shareholders' equity
======== ========
LOUISIANA CASINO CRUISES, INC.
STATEMENTS OF OPERATIONS
(in thousands, except share data)
(unaudited)
Three Months Nine
Ended Months Ended
---------------- ----------------
August August August August
31, 31, 31, 31,
1999 1998 1999 1998
------- ------- ------- --------
Net revenues:
Casino $ 21,295 $16,895 $62,001 $51,445
Food and beverage 421 407 1,237 1,066
Other 282 47 586 573
------- ------- ------- --------
Net revenues 21,998 17,349 63,824 53,084
------- ------- ------- --------
Costs and expenses:
Casino 9,937 8,428 28,641 25,216
Food and beverage 537 482 1,361 1,158
Selling, general and 6,174 5,403 18,077 15,739
administrative
Depreciation and amortization 1,372 1,187 3,946 3,510
------- ------- ------- --------
Total operating expenses 18,020 15,500 52,025 45,623
------- ------- ------- --------
Operating income 3,978 1,849 11,799 7,461
Other income (expense):
Interest income 115 87 533 298
Interest expense (1,498) (1,497) (5,234) (4,486)
------- ------- ------- --------
Income before income taxes and 2,595 439 7,098 3,273
extraordinary item
Provision for income taxes 1,006 151 2,768 1,192
------- ------- ------- --------
Income before extraordinary loss 1,589 288 4,330 2,081
Extraordinary loss on early - - 1,731 -
extinguishment of debt, net
------- ------- ------- --------
Net income 1,589 288 2,599 2,081
Dividend requirement on - 33 - 99
redeemable preferred stock
Distributions paid to common - 107 - 269
stock warrantholders
------- ------- ------- --------
Net income assigned to common $ 1,589 $ 148 $ 2,599 $1,713
shareholders
======= ======= ======= ========
Basic and diluted earnings per share :
Earnings before extraordinary $ 1.59 $ .15 $ 4.34 $1.74
loss per share
======= ======= ======= ========
Extraordinary loss per share $ - $ - $ (1.74) $ -
======= ======= ======= ========
Earnings per share $ 1.59 $ .15 $ 2.60 $ 1.74
======= ======= ======= ========
Weighted average common shares 996,883 982,783 996,883 982,783
outstanding
======= ======= ======= ========
Weighted average common 996,883 1,135,783996,883 1,135,783
equivalent shares outstanding
======= ======= ======= ========
LOUISIANA CASINO CRUISES, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands, except share data)
(unaudited)
Common Stock Additional
Retained
-----------------
Shares Amount Paid-in Total
Capital Earnings
------ ------- ----------- ---------- --------
Balance at November 30, 982,783 $ 1 $ - $ 7 $ 8
1998
Warrants converted to 14,100 - 381 - 381
common shares
Dividends paid to - - (381) (2,181) (2,562)
holders of
Common stock
Net income - - - 2,599 2,599
------ ------- ----------- ---------- --------
Balance at August 31, 996,883 $ 1 $ - $ 425 $ 426
1999
====== ======= =========== ========== ========
LOUISIANA CASINO CRUISES, INC.
STATEMENTS OF CASH FLOWS
(page 1 of 2)
(unaudited)
Nine Months
Ended
----------------
August August
31, 31,
1999 1998
------ -------
Net income $ 2,599 $ 2,081
Adjustment to reconcile net income to
net cash provided
by operating activities :
Extraordinary loss on early 1,731 -
extinguishment of debt, net
Depreciation and amortization 3,946 3,510
Amortization of deferred costs 209 832
Provision for doubtful accounts 74 64
Increase in receivables (143) (191)
Decrease (increase) in inventories 304 (121)
Decrease in prepaid and other assets 798 56
(Increase) decrease in deferred tax (221) 687
asset
Increase (decrease) in accrued 1,357 (1,267)
interest
Increase in deferred tax liability 309 495
Increase (decrease) in accounts 2,148 (2,253)
payable and other
liabilities
------ -------
Net cash provided by operating 13,111 3,885
activities
------ -------
Cash flows from investing activities :
Capital expenditures (3,518) (3,515)
Decrease in restricted cash - 1,482
Proceeds from sale of fixed - 35
assets
------ -------
Net cash used by investing (3,518) (1,998)
activities
------ -------
Cash flows from financing activities :
Proceeds from senior secured notes 55,000 -
Repayment and purchase of senior (119)
secured notes (52,000)
Payment of deferred financing costs (1,158) -
Increase in restricted cash - (2,005)
Repayments of notes payable - (18)
Purchase of common stock warrants (3,749) -
Dividends paid to common (2,562) (1,727)
stockholders
Distributions to common stock - (269)
warrantholders
------ -------
Net cash used by financing (4,138)
activities (4,469)
------ -------
Net increase (decrease) in cash and 5,124 (2,251)
cash equivalents
Cash and cash equivalents, at 13,525 7,924
beginning of period
------ -------
Cash and cash equivalents, at end of $ 18,649 $ 5,673
period
====== =======
Supplemental disclosure of cash flow information:
Cash paid for interest $ 3,775 $ 5,047
====== =======
Cash paid for income taxes $ 858 $ -
====== =======
LOUISIANA CASINO CRUISES, INC.
STATEMENTS OF CASH FLOWS
(page 2 of 2)
(unaudited)
Supplemental disclosure of noncash investing and financing activities:
Redeemable preferred stock dividends of $99,000 were accrued during the
nine month period ended August 31, 1998.
On December 1, 1998, holders of 14,100 redeemable common stock warrants
exercised their right to purchase 14,100 shares of the Company's common stock
for a price of one cent per share, which warrants had an accreted value of
$381,000.
LOUISIANA CASINO CRUISES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Louisiana Casino Cruises, Inc, a Louisiana corporation, (the "Company"),
was formed in August 1991 for the purpose of developing and operating gaming
activities in Louisiana. The Louisiana Riverboat Gaming Enforcement Division has
granted the Company a license to conduct riverboat gaming activities. The
Company is in the process of renewing its gaming license (see Note 4).
Financing for the project included an offering of $51,000,000 in first
mortgage notes (the "1993 Notes"). The 1993 Notes were issued with detachable
warrants to purchase 153,000 shares of the Company's common stock at a price of
$0.01 per share. On November 25, 1998 the Company issued $50,000,000 of Senior
Secured Increasing Rate Notes (the "1998 Notes"), the proceeds from which were
used to repay the 1993 Notes (see Note 2). The 1998 Notes were defeased on
January 27, 1999 and redeemed on February 24, 1999 from the proceeds of a
$55,000,000 offering of 11% Senior Secured Notes due December 1, 2005 (see Note
2).
A description of the organization and operations of the Company, the
significant accounting policies followed and the financial condition and results
of operations as of November 30, 1998 are contained in the audited financial
statements included in the annual report filed on Form 10-K. The accompanying
unaudited financial statements for the three and nine month periods ended August
31, 1999 and 1998 should be read in conjunction with the 1998 audited financial
statements including the notes thereto.
The unaudited financial statements as of August 31, 1999 and for the three
and nine month periods ended August 31, 1999 and 1998, and the notes thereto
have been prepared in accordance with generally accepted accounting principles
for interim financial information and Rule 10-01 of Regulation S-X. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
have been included to present fairly, in all material respects, the financial
position of the Company as of August 31, 1999 and the results of its operations
and its cash flows for the three and nine month periods ended August 31, 1999
and 1998. Operating results for the three and nine month periods ended August
31, 1999 and 1998 are not necessarily indicative of the results that may be
expected for a full year.
Certain amounts in the prior periods have been reclassified to conform to
the current period presentation.
Promotional Allowances
The estimated retail values of complimentary and promotional items
provided to customers were $1,224,000 and $3,610,000 for the three and nine
months ended August 31, 1999, respectively, and $936,000 and $3,167,000 for the
three and nine months ended August 31, 1998, respectively.
NOTE 2 - SENIOR SECURED NOTES AND REDEEMABLE COMMON STOCK WARRANTS
1999 Notes
On January 27, 1999 the Company issued in a private placement, $55,000,000
of 11% Senior Secured Notes due December 1, 2005 with interest due semi-annually
beginning June 1, 1999. These notes were exchanged in May 1999 for $55,000,000
aggregate principal of the Company's new 11% Senior Secured Notes (the "1999
Notes") which are registered under the Securities Act of 1933, as amended. The
Company used the proceeds of the private placement to defease and redeem the
1998 Notes (see below) and for general
corporate purposes. On May 28, 1999, the Company purchased $2,000,000 of the
1999 Notes at the market price of $2,010,000.
The 1999 Notes are secured by substantially all of the Company's assets,
other than certain excluded assets. The indenture dated as of January 27, 1999,
under which the Company issued the 1999 Notes (the "1999 Indenture"), includes
certain covenants which limit the ability of the Company and its restricted
subsidiaries, subject to certain exceptions, to: (i) incur additional
indebtedness; (ii) pay dividends or other distributions, repurchase capital
stock or other equity interest or subordinated indebtedness; (iii) enter into
certain transactions with affiliates; (iv) create certain liens or sell certain
assets; and (v) enter into certain mergers and consolidations.
Under the terms of the 1999 Indenture, after December 1, 2002, the Company
may, at its option, redeem all or some of the notes at a premium that will
decrease over time from 105.5% to 100% of their face amount, plus interest.
Prior to December 1, 2001, if the Company publicly offers certain equity
securities the Company may, at its option, apply certain of the net proceeds
from those transactions to the redemption of up to one-third of the principal
amount of the notes at 111% of their face amount, plus interest. If the Company
goes through a change in control, it must give holders of the notes the
opportunity to sell their notes to the Company at 101% of their face amount,
plus interest.
1998 Notes
The Company issued in a private placement $50,000,000 of 1998 Notes due
December 1, 2001. The proceeds from this issuance were used to repay upon
maturity the aggregate principal amount of $43,827,000 and accrued interest
outstanding on the 1993 Notes (see below).
The 1998 Notes were collateralized by substantially all assets of the
Company, bore interest at an initial increasing rate of 12.25% and were defeased
on January 27, 1999 and redeemed on February 24, 1999 from the proceeds of the
offering of the 1999 Notes. The Company incurred an extraordinary loss from
early extinguishment of the 1998 Notes of $1,731,000, net of a tax benefit of
$1,106,000.
1993 Notes and Redeemable Common Stock Warrants
The 1993 Notes were issued with 153,000 detachable warrants to purchase
one share each of the Company's no par value common stock at a price of $.01 per
share. Pursuant to the terms of the warrants the warrantholders had the right to
require the Company to redeem the warrants at a price per warrant equal to the
value of the Company's common stock as of December 1, 1998 as determined by two
independent investment banking firms. The warrants are classified as redeemable
equity at November 30, 1998 and were accreted to the amount at which the Company
was obligated to repurchase these warrants. The estimated accreted value
attributed to the redeemable common stock warrants as of November 30, 1998 was
$4,131,000.
On December 1, 1998 the holders of 138,900 warrants elected to have the
Company redeem the warrants. On March 1, 1999, the Company received valuations
from the two investment banking firms. Based upon the average of the values
determined by the investment banking firms, on March 8, 1999, the Company paid
$3,749,000 to the holders of 138,900 warrants who exercised their put rights.
On December 1, 1998 the holders of the remaining 14,100 warrants elected
to exercise their rights to purchase an equal number of shares of the Company's
common stock at a price of $.01 per share. On September 21, 1999, at a previous
warrantholder's request, the Company purchased 12,000 shares of the Company's
common stock for $324,000, the price originally offered for the warrants.
NOTE 3 - EARNINGS PER COMMON SHARE
Basic earnings per share ("EPS") is calculated by dividing net income
assigned to common shareholders by the weighted average common shares
outstanding. Diluted EPS is calculated by dividing net income assigned to common
shareholders before distributions to common stock warrant holders by the
weighted average common and common equivalent shares outstanding, unless
antidilutive. In 1998, common equivalent shares included redeemable common stock
warrants with the rights to purchase 153,000 shares of the Company's common
stock.
NOTE 4 - CONTINGENCIES
Riverboat gaming licenses in Louisiana are issued for an initial five-year
term with annual renewals thereafter. The Company's original five-year gaming
license for a riverboat gaming facility located in Baton Rouge, Louisiana (the
"Casino Rouge") was up for renewal in July 1999. On June 15, 1999 the Company
received conditional license approval from the Louisiana Gaming Control Board
("Louisiana Board") until the completion of their investigation. Each of the
Company and its officers, directors, managers, principal shareholders and their
officers and directors and key gaming employees will be subject to strict
scrutiny and full suitability and approval by the Louisiana Board in connection
with the Company's renewal application. The factors that the Louisiana Board has
stated it will consider, among others, in order to renew the Company's license,
include the Company's compliance with all the requirements of the Louisiana
Riverboat Economic Development and Gaming Control Act, the approval of various
systems and procedures, the demonstration of good character (including an
examination of criminal and civil records) and methods of business practice. The
Louisiana Board may also seek to impose, as a condition of the license renewal,
certain Louisiana, minority and female employment and procurement goals. The
Company believes it will be successful in receiving an unconditional renewal of
its license from the Louisiana Board, but no assurance can be given as to
whether or when the license will be extended, or the extent of any restrictions
that may be imposed as a condition to the issuance thereof. The loss, suspension
or failure to obtain a renewal of such license would have a material adverse
effect on the Company.
The Company is also involved in various legal proceedings that arise from
time to time in the ordinary course of its business; however, in the opinion of
management, the resolution of these matters will not have a material effect on
the financial statements or the results of operations of the Company.
NOTE 5 - DIVIDENDS
On April 9, 1999 the Board of Directors declared a dividend of $1.74 per
share of common stock and $1,735,000 was paid on April 15, 1999 to holders of
record on April 9, 1999.
On June 15, 1999 the Board of Directors declared a dividend of $0.83 per
share of common stock and $827,000 was paid on June 22, 1999 to holders of
record on June 15, 1999.
On September 17, 1999 the Board of Directors declared a dividend of $0.95
per share of common stock and $936,000 was paid on September 28, 1999 to holders
of record on September 24, 1999.
NOTE 6 - INCOME TAXES
The Company has recorded a provision for income taxes of $1,006,000 and
$2,768,000, for the three and nine month periods ended August 31, 1999,
respectively, and a provision for income taxes of $151,000 and $1,192,000, for
the three and nine month periods ended August 31, 1998, respectively. The
current tax provision for the three and nine month periods ended August 31, 1999
is $788,000 and $1,673,000, respectively, and for the three and nine month
periods ended August 31, 1998 is $13,000 and $126,000, respectively. The
provision for deferred income taxes recorded for the three and nine month
periods ended August 31, 1999 is $218,000 and $1,095,000, respectively, and for
the three and nine month periods ended August 31, 1998 is $138,000 and
$1,066,000, respectively.
The provision components discussed above exclude the tax benefit of
$1,106,000 derived from the early extinguishment of 1998 Notes discussed in Note
2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company owns and operates the Casino Rouge, which is one of two
riverboat gaming facilities in Baton Rouge. Current Louisiana legislation
authorizes 15 riverboat casinos statewide and one land-based casino in New
Orleans. In addition, three casinos operate in Louisiana on Native American land
under compact agreements with the state. The Casino Rouge opened on December 28,
1994. The Casino Rouge is managed by CRC Holdings, Inc., a Florida corporation,
doing business as Carnival Resorts and Casinos, an experienced operator of
gaming facilities and owner of approximately 59% of the Company's common stock.
The Company's activities from inception have been financed from (i) cash
flow from operations, (ii) equity and other capital contributions of the
shareholders, (iii) secured equipment financing, (iv) the 1993 Notes, (v) the
1998 Notes, and (vi) the 1999 Notes.
Results of Operations
Three months ended August 31, 1999 compared to three months ended August
31, 1998
According to public reports filed with the Louisiana Gaming Control Board,
total taxable casino revenues in the Baton Rouge gaming market for the three
months ended August 31, 1999 and 1998 were $36,455,000 and $29,637,000,
respectively. Riverboat casino patron counts for the same respective periods
were 680,000 and 653,000. The Company's taxable casino revenues and customer
counts increased 26.2% and 13.6%, respectively, for the three months ended
August 31, 1999 compared to the same period in 1998. The Company's competitor's
riverboat taxable casino revenues increased 18.4% while customer counts declined
7.3%, for the three months ended August 31, 1999 compared to the same period in
1998. The Company's share of the Baton Rouge gaming market for the three months
ended August 31, 1999 and 1998 was 60.7% and 59.2% of taxable casino revenues
and 59.6% and 54.7% of admissions, respectively.
The Company's casino revenues were $21,295,000 and $16,895,000 for the
third quarter ended August 31, 1999 and 1998, respectively. The increase in
customer counts and change in gaming machines to include additional lower
denomination machines generated the additional revenue. Third quarter win per
passenger increased 11.0% to $52.54 in 1999 compared to $47.34 in 1998.
Casino expenses for the three months ended August 31, 1999 and 1998 were
$9,937,000 and $8,428,000, respectively, which represented 46.7% and 50.0% of
casino revenues. Overall casino expenses increased during the 1999 period
primarily due to the market's increased gaming activity and the Company's
increase in market share in both casino revenues and patrons which resulted in
increased gaming and patron taxes. Overall casino expenses as a percentage of
casino revenue decreased during the 1999 period primarily due to the increase in
casino revenues and the ability to leverage certain casino expenses to support a
higher casino base.
In the third quarter of 1999, selling, general and administrative expenses
were $6,174,000 compared to $5,403,000 in the third quarter of 1998. The
increase in selling, general and administrative expenses was mainly due to an
increase in revenue based rent and management fees and increased legal expenses.
The provision for federal and state income taxes was $1,006,000 and
$151,000 for the three months ended August 31, 1999 and 1998, respectively. The
increase was due to improved operating results.
Nine months ended August 31, 1999 compared to nine months ended August 31,
1998.
According to public reports filed with the Louisiana Gaming Control Board,
total taxable casino revenues in the Baton Rouge gaming market for the nine
months ended August 31, 1999 and 1998 were $102,637,000 and $89,369,000,
respectively. Riverboat casino patron counts for the same respective periods
were 1,998,000 and 1,956,000. The Company's taxable casino revenues and customer
counts increased 21.1% and 12.9%, respectively, for the nine months ended August
31, 1999 compared to the same period in 1998. The Company's competitor's
riverboat taxable casino revenues increased 5.9% while customer counts declined
10.2%, for the nine months ended August 31, 1999 compared to the same period in
1998. The Company's share of the Baton Rouge gaming market for the nine months
ended August 31, 1999 and 1998 was 62.0% and 58.8% of taxable casino revenues
and 59.0% and 53.4% of admissions, respectively.
The Company's casino revenues were $62,001,000 and $51,455,000 for the
nine months ended August 31, 1999 and 1998, respectively. The increase in
customer counts and change in gaming machines to include additional lower
denomination machines generated the additional revenue. Nine month win per
passenger increased 6.7% to $52.57 in 1999 compared to $49.25 in 1998.
Casino expenses for the nine months ended August 31, 1999 and 1998 were
$28,641,000 and $25,216,000, respectively, which represented 46.2% and 49.0% of
casino revenues. Overall casino expenses increased during the 1999 period
primarily due to the market's increased gaming activity and the Company's
increase in market share in both casino revenues and patrons which resulted in
increased gaming and patron taxes. Overall casino expenses as a percent of
casino revenue decreased during the 1999 period primarily due to the elimination
of various special events and promotions.
During the first nine months of 1999, selling, general and administrative
expenses were $18,077,000 compared to $15,739,000 for the same period in 1998.
The increase in selling, general and administrative expenses was mainly due to
an increase in revenue based rent and management fees and increased legal
expenses.
Net interest expense was $4,701,000 and $4,188,000 for the nine months
ended August 31, 1999 and 1998, respectively. The increase is due to the
defeasance of the 1998 Notes.
The provision for federal and state income taxes was $2,768,000 and
$1,192,000 for the nine months ended August 31, 1999 and 1998, respectively. The
increase was due to improved operating results.
Liquidity and Capital Resources
During the nine months ended August 31, 1999 the Company generated
$13,111,000 in cash flows from operations as compared to $3,885,000 for the nine
months ended August 31, 1998. The increase in cash flows from operations was
primarily due to: (i) an increase in income before extraordinary loss, (ii) the
increase in accounts payable and other liabilities, (iii) payment in November
1998 of accrued interest due on the 1993 Notes, (iv) decrease in inventories,
(v) decrease in prepaid expenses and other assets and (vi) offset by the
increase in the deferred tax assets.
Investing activities for the nine months ended August 31, 1999, used cash
flows of $3,518,000 for routine capital expenditures and remodeling of the
riverboat. Investing activities for the nine months ended August 31, 1998, used
cash flows of $1,998,000 for routine capital expenditures, the Company's new
International Market Place Buffet and new meeting and planning space offset by
cash flows provided due to a decrease in the restricted cash balance as
permitted under the 1993 Notes.
Financing activities for the nine months ended August 31, 1999 used cash
flows for dividend payments to shareholders of $2,562,000, the purchase of
common stock warrants for $3,749,000 and the purchase of $2,000,000 of the
outstanding 1999 Notes offset by the net proceeds from the issuance of the 1999
Notes. Financing activities for the nine months ended August 31, 1998 used cash
flows for dividend payments to shareholders of $1,727,000 and distributions to
common stock warrantholders of $269,000 and an increase in restricted cash of
$2,005,000 as required under the 1993 Notes.
The Company believes that cash on hand and operating cash flows will be
sufficient to fund its current operations, capital expenditures and debt service
obligations. As a result of debt restrictions, the ability of the Company to
incur additional indebtedness to fund operations or to make capital expenditures
is limited. To the extent that cash flow from operations is insufficient to
cover cash requirements, the Company would be required to curtail or defer
certain capital expenditures under these circumstances, which could have an
adverse effect on the Company's operations.
Year 2000
As the year 2000 approaches, all companies that use computers must address
"Year 2000" issues. Year 2000 issues result from the past practice in the
computer industry of using two digits rather than four to identify the
applicable year. This practice can create breakdowns or erroneous results when
computers perform operations involving years later than 1999.
The Company has devised and commenced an extensive compliance plan with
the objective of bringing all of the Company's information technology ("IT")
systems and its non-IT systems into Year 2000 compliance by November 30, 1999.
The IT systems include the Company's computer equipment and software and non-IT
systems include the Company's communication systems, alarm and security systems,
gaming equipment and shipboard equipment (e.g. shipboard navigation, control and
power generation and distribution systems). Each system will be evaluated and
brought into compliance in three phases:
Phase I -- Evaluate and assess compliance of the system Phase II --
Commit and assign resources needed to
implement compliance plan
Phase III -- Modify or replace non-compliant system
The Company's systems used to maintain financial records and other
critical systems have completed Phases I and II, with completion of Phase III
scheduled by the end of November 30, 1999. Approximately 98% of the Company's
non-critical systems have completed Phase II. The Company anticipates the
non-critical systems will be evaluated and brought into compliance by October
31, 1999.
The Company has also commenced efforts to determine the extent to which it
may be impacted by year 2000 issues of third parties, including its material
vendors and suppliers and certain agencies and regulatory organizations. Year
2000 correspondence was sent to third parties, with continued follow-up for
those that failed to respond and where risks have been identified. The Company
estimates that the process of identifying and evaluating third party risks is
98% complete.
Through August 31, 1999 the Company has incurred $345,000 directly related
to year 2000 readiness. The Company is continuing to evaluate the expected
remaining costs to be incurred in connection with the year 2000 project, with
approximately $400,000 estimated and included in the 1999 capital expenditure
budget. The remaining budgeted amount will be incurred in the fourth quarter of
1999. The project is being funded by cash on hand and internally generated
funds, which the Company expects to be adequate to complete the project.
A reasonably likely worst case scenario arising from the failure to
correct a material year 2000 problem could involve the interruption in, or
failure of, certain normal business activities or operations. Such failures
could involve certain of our IT and non-IT systems, or could result from the
year 2000 readiness of third parties. Any such failures could materially and
adversely affect the Company's results of operations, liquidity and financial
condition. Due to the general uncertainty inherent in the year 2000 problem, the
Company is unable to determine at this time whether the consequences of year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition.
The Company's year 2000 project includes a contingency plan that is
expected to significantly reduce the Company's level of uncertainty about year
2000 problems. If any of the Company's IT or non-IT systems fail as a result of
year 2000, the Company's plans to implement previously tested manual processes
that will substantially duplicate the functions of these systems until such time
as the Company acquires year 2000 compliant systems. The Company has selected
additional third party vendors as alternative suppliers for any of the Company's
current vendors that may not become year 2000 compliant. The Company believes
that its contingency plan will reduce the possibility of significant
interruptions of normal operations.
Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995
Except for historical information contained herein, the matters discussed
herein are forward looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Such
statements involve risks and uncertainties, including but not limited to local
and regional economic and business conditions, changes or developments in laws,
regulations or taxes, actions taken or to be taken by third parties,
interruption in or failure of certain business activities as a result of the
year 2000, competition, the loss of any licenses or permits or the Company's
failure to obtain an unconditional renewal of its gaming license on a timely
basis, or other factors discussed elsewhere in this report and the documents
filed by the Company with the Securities and Exchange Commission. These factors
may cause the Company's results to differ materially from the statements made in
this report or otherwise made by or on behalf of the Company.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not applicable.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
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
On September 21, 1999, at a previous warrantholder's request, the Company
purchased 12,000 shares of the Company's common stock for $324,000, the
price originally offered for the warrants.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Exhibit 27 Financial Data Schedule as of August 31, 1999
and for the nine months then ended
(b) 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 thereunto duly authorized.
LOUISIANA CASINO CRUISES, INC.
Dated: October 11, 1999
By: /s/ W. Peter Temling
W. Peter Temling,
Chief Financial Officer