UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q/A
AMENDMENT NO. 1 TO
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 333-81584
Delaware MAJESTIC INVESTOR HOLDINGS, LLC 33-4468392
Delaware MAJESTIC INVESTOR CAPITAL CORP. 36-4471622
(State or other (Exact name of registrant as specified (I.R.S. Employer
jurisdiction in its charter) Identification No.)
of incorporation
or organization)
One Buffington Harbor Drive
Gary, Indiana
46406-3000
(219) 977-7823
(Registrant's address and 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), and (2) has been subject to filing requirements
for the past 90 days.
Yes ______ No __X___
Shares outstanding of each of the registrant's classes of common stock as of
March 31, 2002:
Class Number of shares
- ----- ----------------
Not applicable Not applicable
EXPLANATORY NOTE
The Registrant completed the acquisition of the assets of three subsidiaries of
Fitzgeralds Gaming Corporation on December 6, 2001. Financial statements for
the acquired business were not available when the Registrant filed its
Quarterly Report on Form 10-Q for the quarter ended March 31, 2002. In order
to comply with Rule 3-02 of Regulation S-X, this Amendment No. 1 to the
Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 is being
filed to include such financial statements in Item 1 of this Report and to
reference such financial data in Item 2 of this Report.
MAJESTIC INVESTOR HOLDINGS, LLC
Index
PART I FINANCIAL INFORMATION Page No.
--------
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of March 31, 2002
and December 31, 2001 ...............................................1
Consolidated Statements of Operations for the three months
ended March 31, 2002 and for the quarter ended April 1, 2001 ........2
Consolidated Statement of Cash Flows for the three months
ended March 31, 2002 and for the quarter ended April 1, 2001 ........3
Notes to Financial Statements ........................................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................18
Item 3. Quantitative and Qualitative Disclosures About Market Risk ..........25
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ....................................25
SIGNATURES .......................................................................26
i
PART 1 - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
MAJESTIC INVESTOR HOLDINGS, LLC
Consolidated Balance Sheets
(Unaudited)
March 31, December 31,
2002 2001
ASSETS
Current Assets:
Cash and cash equivalents $ 17,324,526 $ 17,704,815
Accounts receivable, less allowance for doubtful accounts
of $261,702 and $248,042, respectively 1,388,016 1,464,834
Inventories 886,482 957,564
Prepaid expenses 1,581,998 1,212,653
Due from Seller 269,782 82,832
Note receivable from related party 700,000 700,000
Other 42,283 15,552
------------ -------------
Total current assets 22,193,087 22,138,250
------------ -------------
Property, equipment, and barge improvements, net 121,236,901 122,427,962
Intangible assets (net) 18,892,928 19,290,753
Goodwill 10,897,775 10,602,250
Other Assets:
Deferred financing costs, less accumulated amortization
of $391,375 and $83,897, respectively 7,105,971 7,023,706
Restricted cash 1,000,000 1,000,000
Other assets and deposits 1,523,863 945,618
------------- -------------
Total other assets 9,629,834 8,969,324
------------- -------------
Total Assets $ 182,850,525 $ 183,428,539
============= =============
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 1,836,099 $ 6,656,574
Accounts payable 1,550,489 1,946,730
Other accrued liabilities:
Payroll and related 4,317,326 5,006,114
Interest 5,645,784 1,208,779
Progressive jackpots 2,396,782 2,274,050
Slot club liability 2,376,608 2,241,876
Other accrued liabilities 4,422,778 5,043,988
------------- -------------
Total current liabilities 22,545,866 24,378,111
------------- -------------
Due to related parties 1,341,688 1,177,829
Long-term debt, net of current maturities 145,624,466 145,340,304
------------- -------------
Total Liabilities 169,512,020 170,896,244
------------- -------------
Members' Equity:
Members' contributions 13,803,192 13,803,192
Accumulated deficit (464,687) (1,270,897)
------------- -------------
Total members' equity 13,338,505 12,532,295
------------- -------------
Total Liabilities and Members' Equity $ 182,850,525 $ 183,428,539
============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
1
MAJESTIC INVESTOR HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<Table>
<Caption>
SUCCESSOR PREDECESSOR
-------------- -------------
FOR THE THREE FOR THE
MONTHS ENDED QUARTER ENDED
MARCH 31, APRIL 1,
2002 2001
-------------- -------------
REVENUES:
Casino.................................................... $42,354,751 $40,978,430
Rooms..................................................... 4,088,511 4,234,563
Food and beverage......................................... 5,096,101 5,135,856
Other..................................................... 888,490 1,030,705
----------- -----------
Gross revenues......................................... 52,427,853 51,379,554
Less promotional allowances............................ (9,115,301) (7,959,294)
----------- -----------
Net revenues........................................... 43,312,552 43,420,260
----------- -----------
COSTS AND EXPENSES:
Casino.................................................... 15,839,779 18,248,135
Rooms..................................................... 3,412,439 2,919,557
Food and beverage......................................... 6,294,634 2,696,185
Other..................................................... 512,960 399,494
Selling, general and administrative....................... 8,369,257 10,450,784
Depreciation and amortization............................. 3,387,015 --
Reorganization items...................................... -- 6,319
Pre-opening expenses...................................... 7,287 --
----------- -----------
Total costs and expenses............................... 37,823,371 34,720,474
----------- -----------
Operating income....................................... 5,489,181 8,699,786
----------- -----------
OTHER INCOME (EXPENSE):
Gain on sale of assets.................................... 6,542 3,713
Interest income........................................... 31,608 13,379
Interest expense.......................................... (4,515,387) (16,722)
Other non-operating income (expense)...................... (17,492) 10,245
----------- -----------
Total other income (expense)........................... (4,494,729) 10,615
----------- -----------
Net income............................................. $ 994,452 $ 8,710,401
=========== ===========
</Table>
The accompanying notes are an integral part of these financial statements.
2
MAJESTIC INVESTOR HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<Table>
<Caption>
SUCCESSOR PREDECESSOR
-------------- -------------
FOR THE THREE FOR THE
MONTHS ENDED QUARTER ENDED
MARCH 31, APRIL 1,
2002 2001
-------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 994,452 $ 8,710,401
Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation.............................................. 2,362,841 --
Amortization.............................................. 1,024,174 --
Gain on sale of assets.................................... (6,542) (3,713)
(Increase) decrease in accounts receivable................ (78,072) 16,506
Decrease in inventories................................... 71,082 6,947
(Increase) decrease in prepaid expenses................... (369,346) 228,380
(Increase) decrease in other assets....................... (604,976) 34,424
(Increase) decrease in accounts payable................... (396,241) 924,469
Decrease in related party payables........................ (32,060) (8,600,296)
Increase in accrued interest.............................. 4,437,005 --
(Increase) decrease in other accrued liabilities.......... (436,727) (415,302)
Decrease in liabilities subject to compromise............. -- (391,430)
----------- -----------
Net cash provided by operating activities before
reorganization items................................... 6,965,590 510,386
----------- -----------
REORGANIZATION ITEMS:
Interest received on cash accumulated because of the
bankruptcy proceedings.................................. -- 36
Other reorganization items incurred in connection with
Chapter 11 and related legal proceedings................ -- (43)
----------- -----------
Net cash provided by operating activities................... 6,965,590 510,379
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, equipment and vessel
improvements.............................................. (1,171,782) (418,191)
Payment of acquisition related costs........................ (796,649) --
Proceeds from sale of equipment............................. 6,542 3,713
----------- -----------
Net cash used investing activities...................... (1,961,889) (414,478)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Line of credit, net......................................... (4,800,000) --
Payment of 11.653% Senior Secured Notes issuance costs...... (505,136) --
Cash paid to reduce long-term debt.......................... (55,182) (86,712)
Cash advances to/from affiliates............................ 164,570 --
Distribution to Barden Development, Inc. ................... (188,242) --
----------- -----------
Net cash used in financing activities................... (5,383,990) (86,712)
----------- -----------
Net increase (decrease) in cash and cash equivalents........ (380,289) 9,189
Cash and cash equivalents, beginning of period.............. 17,704,815 2,840,011
----------- -----------
Decrease in cash and cash equivalents included in net assets
held for sale............................................. -- 9,930
Cash and cash equivalents, end of period.................... $17,324,526 $ 2,859,130
=========== ===========
</Table>
The accompanying notes are an integral part of these consolidated financial
statements.
3
MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
Majestic Investor Holdings, LLC (the "Company"), is a Delaware limited
liability company formed on September 14, 2001. The Company owns and operates
three Fitzgeralds brand casinos through its wholly-owned subsidiaries, Barden
Mississippi Gaming, LLC, Barden Colorado Gaming, LLC and Barden Nevada Gaming,
LLC, each of which is a "restricted subsidiary" of the Company under the
Indenture relating to the Company's 11.653% Senior Secured Notes (the "Notes").
Majestic Investor Capital Corp. ("MICC"), another wholly-owned subsidiary of the
Company, was formed specifically to facilitate the offering of the Company's
Notes and does not have any material assets or operations.
The Company is a wholly-owned subsidiary of Majestic Investor, LLC and an
indirect wholly-owned subsidiary of The Majestic Star Casino, LLC ("Majestic
Star"), owner and operator of the Majestic Star Casino, a riverboat casino
located at Buffington Harbor in Gary, Indiana. The Company is indirectly wholly-
owned and controlled by Don H. Barden, the Company's Manager, Chairman,
President and Chief Executive Officer.
Except where otherwise noted, the words "we," "us," "our" and similar
terms, as well as the "Company," refer to Majestic Investor Holdings, LLC and
all of its subsidiaries.
The accompanying consolidated financial statements are unaudited and
include the accounts of the Company's wholly-owned subsidiaries, Majestic
Investor Capital Corp., Barden Mississippi Gaming, LLC, Barden Colorado Gaming,
LLC and Barden Nevada Gaming, LLC. All significant intercompany transactions and
balances have been eliminated. These financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (which include normal
recurring adjustments) considered necessary for a fair presentation of the
results for the interim period has been made. The results for the three months
ended March 31, 2002 are not necessarily indicative of results to be expected
for the full fiscal year. The financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2001.
NOTE 2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In April 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 145, "Rescission of FASB statements, No. 4, 44 and 64, Amendment of
FASB Statement No. 13 and Technical Corrections." This Statement updates,
clarifies and simplifies existing accounting pronouncements. Management does not
expect the standard to have any material impact on the Company's consolidated
financial position, results of operations and cash flows.
NOTE 3. COMMITMENTS AND CONTINGENCIES
GAMING REGULATIONS
The ownership and operation of our casino gaming facilities are subject to
various state and local regulations in the jurisdictions where they are located.
In Nevada, our gaming operations are subject to the Nevada Gaming Control Act,
and to the licensing and regulatory control of the Nevada Gaming Commission, the
Nevada State Gaming Control Board and various local ordinances and regulations,
including, without limitation, applicable city and county gaming and liquor
licensing authorities. In Mississippi, our gaming operations are subject to the
Mississippi Gaming Control Act, and to the licensing and/or regulatory control
of the Mississippi Gaming Commission, the Mississippi State Tax Commission and
various state and local regulatory agencies, including liquor licensing
authorities. In Colorado, our gaming operations are subject to the Limited
Gaming Act of 1991, which created the Division of Gaming within the Colorado
Department of
4
MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Revenue and the Colorado Limited Gaming Control Commission to license,
implement, regulate and supervise the conduct of limited gaming. Our operations
are also subject to the Colorado Liquor Code and the state and local liquor
licensing authorities. In addition, as The Majestic Star Casino, LLC does
business in the State of Indiana, the Company is subject to certain reviews by
the Indiana Gaming Commission.
The Company's directors, officers, managers and key employees are required
to hold individual licenses, the requirements for which vary from jurisdiction
to jurisdiction. Licenses and permits for gaming operations and of individual
licensees are subject to revocation or non-renewal for cause. Under certain
circumstances, holders of our securities are required to secure independent
licenses and permits.
NOTE 4. ACQUISITIONS
On December 6, 2001, we completed the acquisition of substantially all of
the assets and assumed certain liabilities of Fitzgeralds Las Vegas, Inc.
("Fitzgeralds Las Vegas"), Fitzgeralds Mississippi Inc. ("Fitzgeralds Tunica")
and 101 Main Street Limited Liability Company ("Fitzgeralds Black Hawk") (the
"Fitzgeralds assets") for approximately $152.7 million in cash, which includes
the purchase price of $149.0 million and professional fees and other expenses
related to the acquisition. The purchase and sale agreement dated November
22, 2000 included a provision whereby the purchase price of $149.0 million was
subject to adjustment in certain circumstances including an adjustment related
to the working capital of the acquired properties at the date of acquisition.
Pursuant to the terms of the purchase and sale agreement, the parties agreed to
a $3.8 million purchase price reduction, on May 9, 2002 based upon a negotiated
settlement of the value of working capital at December 6, 2001. The Company
will record this amount as a reduction of goodwill in the second quarter of
2002. Accordingly, the purchase price is allocated to the assets acquired and
liabilities assumed based upon their estimated fair values at the date of
acquisition. We determined the estimated fair value of property and equipment
and intangible assets based upon third-party valuations.
The purchase price was determined based upon estimates of future cash flows
and the net worth of the assets acquired. Majestic Investor Holdings, LLC funded
the acquisition through the issuance of its 11.653% Senior Secured Notes. The
following table summarizes the estimated fair value of the assets acquired and
the liabilities assumed at the acquisition date.
<Table>
<Caption>
AT DECEMBER 6,
2001
--------------
(IN MILLIONS)
Current assets.............................................. $ 12.2
Property and equipment...................................... 122.9
Intangible assets........................................... 19.4
Goodwill.................................................... 10.6
Other noncurrent assets..................................... 2.0
------
Total assets acquired.................................. 167.1
Current liabilities......................................... 14.0
Other noncurrent liabilities................................ 0.4
------
Total liabilities assumed.............................. 14.4
------
Net......................................................... $152.7
======
</Table>
Intangible assets primarily include $9.8 million for customer
relationships, $3.7 million for tradename and $5.2 million for gaming licenses.
Intangible assets for customer relationships and tradenames are being amortized
over a period of 8-10 years. In accordance with SFAS 142, goodwill, and other
indefinite lived intangible assets, such as the Company's gaming license, are
not amortized but instead are subject to impairment tests at least annually.
5
MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. OTHER INTANGIBLE ASSETS
The gross carrying amount and accumulated amortization of the Company's
intangible assets, other than goodwill, as of March 31, 2002, are as follows:
<Table>
<Caption>
GROSS CARRYING ACCUMULATED
AMOUNT AMORTIZATION
-------------- ------------
(IN THOUSANDS)
Amortized intangible assets:
Customer relationships................................... $ 9,800 $(390)
Tradename................................................ 3,700 (117)
Riverboat excursion license.............................. 700 --
------- -----
Total.................................................... $14,200 $(507)
======= =====
Unamortized intangible assets:
Gaming license........................................... $ 5,200
-------
Total.................................................... $ 5,200
=======
</Table>
The amortization expense recorded on the intangible assets for the three
months ended March 31, 2002 was $0.4 million. The estimated amortization expense
for each of the five succeeding fiscal years is as follows:
<Table>
<Caption>
FOR THE YEAR ENDED DECEMBER 31,
- ------------------------------- (IN THOUSANDS)
2002........................................................ $1,595
2003........................................................ $1,642
2004........................................................ $1,642
2005........................................................ $1,642
2006........................................................ $1,642
</Table>
NOTE 6. GOODWILL
The changes in the carrying amount of goodwill for the three months ended
March 31, 2002 are as follows:
<Table>
<Caption>
(IN THOUSANDS)
Balance as of January 1, 2002............................... $10,602
Goodwill acquired........................................... 296
-------
Balance as of March 31, 2002................................ $10,898
=======
</Table>
The increase in goodwill primarily relates to professional fees incurred by
the Company related to the acquisition of Fitzgeralds Las Vegas, Fitzgeralds
Tunica and Fitzgeralds Black Hawk.
In accordance with FAS 142, goodwill is not amortized but instead subject
to impairment tests at least annually.
6
NOTE 7. SEGMENT INFORMATION
The Company owns and operates three properties as follows: a casino and
hotel located in downtown Las Vegas, Nevada; a casino and hotel located in
Tunica, Mississippi; and a casino located in Black Hawk, Colorado (collectively,
the "Properties").
The Company identifies its business in three segments based on geographic
location. The Properties market in each of their segments primarily to
middle-income guests, emphasizing their Fitzgeralds brand and
7
MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
their "Fitzgerald Irish Luck" theme. The major products offered in each segment
are as follows: casino, hotel rooms (except in Black Hawk, Colorado) and food
and beverage.
The accounting policies of each business segment are the same as those
described in the summary of significant accounting policies previously described
in the Company's Annual Report on Form 10-K for the year ended December 31,
2001. There are minimal inter-segment sales. Corporate costs are allocated to
the business segment through management fees from Majestic Star and are
reflected in "General and Administrative" expenses.
A summary of the Properties' operations by business segment for the three
months ended March 31, 2002 and for the quarter ended April 1, 2001 is presented
below:
<Table>
<Caption>
Successor Predecessor
--------- -----------
For the Three
Months ended For the Quarter
March 31, 2002 ended April 1, 2001
-------------- -------------------
(In thousands)
Net revenues:
Fitzgeralds Tunica........................................ $22,250 $ 21,236
Fitzgeralds Black Hawk.................................... 8,005 7,875
Fitzgeralds Las Vegas..................................... 13,058 14,309
-------- --------
Total.................................................. $ 43,313 $ 43,420
======== ========
Income (loss) from operations:
Fitzgeralds Tunica........................................ $ 4,628 $ 5,442
Fitzgeralds Black Hawk.................................... 1,259 1,594
Fitzgeralds Las Vegas..................................... 240 1,664
Unallocated and other(1).................................. (638) --
-------- --------
Total.................................................. $ 5,489 $ 8,700
======== ========
Segment depreciation and amortization:
Fitzgeralds Tunica........................................ $ 1,780 $ --
Fitzgeralds Black Hawk.................................... 364 --
Fitzgeralds Las Vegas..................................... 617 --
Unallocated and other(1).................................. 626 --
-------- --------
Total.................................................. $ 3,387 $ -- (2)
======== ========
Expenditures for additions to long-lived assets:
Fitzgeralds Tunica........................................ $ 513 $ 247
Fitzgeralds Black Hawk.................................... 104 59
Fitzgeralds Las Vegas..................................... 555 112
-------- --------
Total.................................................. $ 1,172 $ 418
======== ========
Segment assets:
Fitzgeralds Tunica........................................ $ 89,921 $ 71,342
Fitzgeralds Black Hawk.................................... 30,234 38,409
Fitzgeralds Las Vegas..................................... 45,597 41,441
Unallocated and other(1).................................. 17,099 --
-------- --------
Total.................................................. $182,851 $151,192
======== ========
</Table>
- ---------------
(1)Unallocated and other include corporate items and eliminations that are not
allocated to the operating segments.
(2)Fitzgeralds Las Vegas, Inc., Fitzgeralds Mississippi Inc. and 101 Main
Street Limited Liability Company discontinued recording depreciation and
amortization of their property and equipment and interest on the senior
secured notes subsequent to the filing of the bankruptcy cases on December
5, 2000.
8
MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. RELATED PARTY TRANSACTIONS
During the three months ended March 31, 2002, a distribution of $188,000,
related to the fourth quarter of 2001, was paid to Bardon Development Inc.
("BDI") in accordance with the Management Agreement between the Company and BDI
dated December 5, 2001.
Interest of $185,750 on a $2.0 million note made by Majestic Investor, LLC
to BDI which was later assigned to Majestic Investor Holdings, LLC remains
outstanding at March 31, 2002. BDI repaid the principal of the note in
conjunction with the closing of the acquisition on December 6, 2001.
In December 2001, the Company issued a $700,000 note to BDI. The note bears
interest at a rate of 7% per annum. The principal and accrued but unpaid
interest are due and payable in full on December 12, 2002.
NOTE 9. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
The Company's $152.6 million, 11.653% Senior Secured Notes are
unconditionally and irrevocably guaranteed, jointly and severally, by all of the
restricted subsidiaries of the Company. The guarantees rank senior in right of
payment to all existing and future subordinated indebtedness of these restricted
subsidiaries and equal in right of payment with all existing and future senior
indebtedness of these restricted subsidiaries.
The following condensed consolidating information presents financial
statements as of March 31, 2002 and December 31, 2001 and for the three months
ended March 31, 2002, of Majestic Investor Holdings, LLC, the parent Company,
the guarantor subsidiaries (on a combined basis) and the elimination entries
necessary to combine such entities on a consolidated basis. MICC, a wholly-owned
subsidiary of the Company, is a non-guarantor subsidiary. However, MICC does not
have any material assets, obligations or operations. Therefore, no non-guarantor
subsidiary has been presented below.
9
MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Condensed consolidating balance sheets as of March 31, 2002.
<Table>
<Caption>
MAJESTIC INVESTOR GUARANTOR ELIMINATING TOTAL
HOLDINGS, LLC SUBSIDIARIES ENTRIES CONSOLIDATED
----------------- ------------- ------------- ------------
ASSETS
Current Assets:
Cash and cash equivalents....... $ 1,270,853 $ 16,053,673 $ -- $ 17,324,526
Accounts receivable (net)....... 3,422,233 1,189,076 (3,223,293)(a) 1,388,016
Inventories..................... -- 886,482 -- 886,482
Prepaid and other current
assets....................... 705,467 1,888,596 -- 2,594,063
------------ ------------- ------------- ------------
Total current assets......... 5,398,553 20,017,827 (3,223,293) 22,193,087
------------ ------------- ------------- ------------
Property and equipment, net....... -- 121,236,901 -- 121,236,901
Intangible assets, net............ -- 18,892,928 -- 18,892,928
Due from related parties.......... 145,209,023 -- (145,209,023)(b) --
Other assets...................... 14,923,746 5,603,863 -- 20,527,609
Investment in subsidiaries........ 7,076,028 -- (7,076,028) --
------------ ------------- ------------- ------------
Total Assets................. $172,607,350 $ 165,751,519 $(155,508,344) $182,850,525
============ ============= ============= ============
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term
debt......................... $ 1,700,000 $ 136,099 $ -- 1,836,099
Accounts payable, accrued and
other........................ 6,070,253 14,639,514 -- 20,709,767
------------ ------------- ------------- ------------
Total current liabilities.... 7,770,253 14,775,613 -- 22,545,866
------------ ------------- ------------- ------------
Due to related parties............ 6,094,291 143,679,713 (148,432,316)(b) 1,341,688
Long-term debt, net of current
maturities...................... 145,404,301 220,165 -- 145,624,466
------------ ------------- ------------- ------------
Total Liabilities............ 159,268,845 158,675,491 (148,432,316) 169,512,020
Members' equity................... 13,338,505 7,076,028 (7,076,028) 13,338,505
------------ ------------- ------------- ------------
Total Liabilities and
Member's Equity............ $172,607,350 $ 165,751,519 $(155,508,344) $182,850,525
============ ============= ============= ============
</Table>
- ---------------
(a) To eliminate intercompany receivables and payables.
(b) To eliminate intercompany accounts and investment in subsidiaries.
10
MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Condensed consolidating balance sheets as of December 31, 2001.
<Table>
<Caption>
MAJESTIC INVESTOR GUARANTOR ELIMINATING TOTAL
HOLDINGS, LLC SUBSIDIARIES ENTRIES CONSOLIDATED
----------------- ------------ ------------- ------------
ASSETS
Current Assets:
Cash and cash equivalents....... $ 498,363 $ 17,206,452 $ -- $ 17,704,815
Accounts receivable (net)....... 269,501 1,196,044 (711)(a) 1,464,834
Inventories..................... - 957,564 -- 957,564
Prepaid expenses and other
current assets............... 707,467 1,303,570 -- 2,011,037
------------ ------------ ------------- ------------
Total current assets......... 1,475,331 20,663,630 (711) 22,138,250
------------ ------------ ------------- ------------
Property and equipment, net....... -- 122,427,962 -- 122,427,962
Intangible assets, net............ -- 19,290,753 -- 19,290,753
Due from related parties.......... 150,855,685 -- (150,855,685)(b) --
Other assets...................... 14,545,956 5,025,618 -- 19,571,574
Investment in subsidiaries........ 935,731 -- (935,731) --
------------ ------------ ------------- ------------
Total Assets................. $167,812,703 $167,407,963 $(151,792,127) $183,428,539
============ ============ ============= ============
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term
debt......................... $ 6,500,000 $ 156,574 $ -- 6,656,574
Accounts payable, accrued and
other........................ 2,526,703 15,195,545 (711)(a) 17,721,537
------------ ------------ ------------- ------------
Total current liabilities.... 9,026,703 15,352,119 (711) 24,378,111
------------ ------------ ------------- ------------
Due to related parties............ 1,168,273 150,865,241 (150,855,685)(b) 1,177,829
Long-term debt, net of current
maturities...................... 145,085,432 254,872 -- 145,340,304
------------ ------------ ------------- ------------
Total Liabilities............ 155,280,408 166,472,232 (150,856,396) 170,896,244
Members equity.................... 12,532,295 935,731 (935,731) 12,532,295
------------ ------------ ------------- ------------
Total Liabilities and
Member's Equity............ $167,812,703 $167,407,963 $(151,792,127) $183,428,539
============ ============ ============= ============
</Table>
- ---------------
(a) To eliminate intercompany receivables and payables.
(b) To eliminate intercompany accounts and investment in subsidiaries.
11
MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Condensed consolidating statements of operations for the three months ended
March 31, 2002.
<Table>
<Caption>
MAJESTIC INVESTOR GUARANTOR ELIMINATING CONSOLIDATED
HOLDINGS, LLC SUBSIDIARIES ENTRIES TOTAL
----------------- ------------ ----------- ------------
REVENUES:
Casino............................... $ -- $42,354,751 $ -- $42,354,751
Rooms................................ -- 4,088,511 -- 4,088,511
Food and beverage.................... -- 5,096,101 -- 5,096,101
Other................................ -- 888,490 -- 888,490
----------- ----------- ----------- -----------
Gross revenues.................... -- 52,427,853 -- 52,427,853
Less promotional allowances....... -- (9,115,301) -- (9,115,301)
----------- ----------- ----------- -----------
Net revenues...................... -- 43,312,552 -- 43,312,552
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Casino............................... -- 10,820,025 -- 10,820,025
Rooms................................ -- 3,412,439 -- 3,412,439
Food and beverage.................... -- 6,294,634 -- 6,294,634
Other................................ -- 512,960 -- 512,960
Gaming taxes......................... -- 5,019,754 -- 5,019,754
Advertising and promotion............ -- 1,175,555 -- 1,175,555
General and administrative........... 4,205 7,189,497 -- 7,193,702
Depreciation and amortization........ 626,347 2,760,668 -- 3,387,015
Pre-opening expenses................. 7,287 -- -- 7,287
----------- ----------- ----------- -----------
Total costs and expenses.......... 637,839 37,185,532 -- 37,823,371
----------- ----------- ----------- -----------
Operating income (loss)........... (637,839) 6,127,020 -- 5,489,181
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Gain on sale of assets............... -- 6,542 -- 6,542
Interest income...................... 16,512 15,096 -- 31,608
Interest expense..................... (4,507,026) (8,361) -- (4,515,387)
Other non-operating expense.......... (17,492) -- -- (17,492)
Equity in net income of
subsidiaries...................... 6,140,297 -- (6,140,297) --
----------- ----------- ----------- -----------
Total other income (expense)...... 1,632,291 13,277 (6,140,297) (4,494,729)
----------- ----------- ----------- -----------
Net income........................ $ 994,452 $ 6,140,297 $(6,140,297) $ 994,452
=========== =========== =========== ===========
</Table>
12
MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Condensed consolidating statements of cash flows for the three months ended
March 31, 2002.
<Table>
<Caption>
MAJESTIC INVESTOR GUARANTOR ELIMINATING CONSOLIDATED
HOLDINGS, LLC SUBSIDIARIES ENTRIES TOTAL
----------------- ------------ ----------- ------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES............................ $ (288,761) $ 7,253,171 $ 1,180(a) $ 6,965,590
=========== =========== ======= ===========
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and
equipment.......................... -- (1,171,782) -- (1,171,782)
Payment of acquisition related
costs.............................. (796,649) -- -- (796,649)
Proceeds from sale of equipment....... -- 6,542 -- 6,542
----------- ----------- ------- -----------
Net cash used in investing
activities......................... (796,649) (1,165,240) -- (1,961,889)
----------- ----------- ------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Line of credit, net................... (4,800,000) -- (4,800,000)
Payment of 11.653% Senior Secured
Notes issuance costs............... (505,136) -- -- (505,136)
Cash paid to reduce long-term debt.... -- (55,182) -- (55,182)
Cash advances to/from affiliates...... 7,351,278 (7,185,528) (1,180)(a) 164,570
Distribution to Barden Development,
Inc. .............................. (188,242) -- -- (188,242)
----------- ----------- ------- -----------
Net cash provided by (used in)
financing activities............... 1,857,900 (7,240,710) (1,180) (5,383,990)
----------- ----------- ------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 772,490 (1,152,779) -- (380,289)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD................................ 498,363 17,206,452 -- 17,704,815
----------- ----------- ------- -----------
CASH AND CASH EQUIVALENTS, END OF
PERIOD................................ $ 1,270,853 $16,053,673 $ -- $17,324,526
=========== =========== ======= ===========
</Table>
NOTE 10. SUPPLEMENTAL CONSOLIDATING INFORMATION
The following information presents consolidating balance sheets as of March
31, 2002 and consolidating statements of operations and cash flows for the three
months ended March 31, 2002.
13
MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidating balance sheets as of March 31, 2002.
<Table>
<Caption>
BARDEN BARDEN BARDEN
MISSISSIPPI COLORADO NEVADA
GAMING, GAMING, GAMING,
PARENT LLC LLC LLC ELIMINATION CONSOLIDATED
------------ ---------------- ----------- ----------- ------------- ------------
ASSETS
Current Assets:
Cash and cash equivalents.......... $ 1,270,853 $ 8,040,426 $ 3,081,880 $ 4,931,367 $ -- $ 17,324,526
Accounts receivable, net........... 3,422,233 414,625 57,502 716,949 (3,223,293) 1,388,016
Inventories........................ -- 372,080 200,263 314,139 -- 886,482
Prepaid expenses................... 5,467 479,758 357,051 739,722 -- 1,581,998
Due from Seller.................... -- 287,683 12,873 (30,774) -- 269,782
Note receivable from related
party............................ 700,000 -- -- -- -- 700,000
Other.............................. -- -- 42,283 -- -- 42,283
------------ ----------- ----------- ----------- ------------- ------------
Total current assets............. 5,398,553 9,594,572 3,751,852 6,671,403 (3,223,293) 22,193,087
------------ ----------- ----------- ----------- ------------- ------------
Property, equipment and barge
improvements, net.................. -- 70,584,796 21,840,764 28,811,341 -- 121,236,901
Intangible assets, net............... -- 7,567,342 4,000,655 7,324,931 -- 18,892,928
Goodwill............................. 7,817,775 1,696,000 499,000 885,000 -- 10,897,775
Other Assets:
Deferred financing costs, net...... 7,105,971 -- -- -- -- 7,105,971
Restricted cash.................... -- -- -- 1,000,000 -- 1,000,000
Investment in subsidiaries......... 152,285,051 -- -- -- (152,285,051) --
Other assets and deposits.......... -- 478,191 141,363 904,309 -- 1,523,863
------------ ----------- ----------- ----------- ------------- ------------
Total other assets............... 159,391,022 478,191 141,363 1,904,309 (152,285,051) 9,629,834
------------ ----------- ----------- ----------- ------------- ------------
Total Assets..................... $172,607,350 $89,920,901 $30,233,634 $45,596,984 $(155,508,344) $182,850,525
============ =========== =========== =========== ============= ============
LIABILITIES AND MEMBERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term
debt............................. $ 1,700,000 $ -- $ -- $ 136,099 $ -- $ 1,836,099
Accounts payable................... -- 550,075 417,914 582,500 -- 1,550,489
Other accrued liabilities:......... -- -- -- -- -- --
Payroll and related.............. -- 1,823,405 697,647 1,796,274 -- 4,317,326
Interest......................... 5,645,784 -- -- -- -- 5,645,784
Progressive jackpots............. -- 885,689 1,298,215 212,878 -- 2,396,782
Slot club liabilities............ -- 149,998 384,556 1,842,054 -- 2,376,608
Other accrued liabilities........ 424,469 1,782,493 1,297,853 917,963 -- 4,422,778
------------ ----------- ----------- ----------- ------------- ------------
Total current liabilities........ 7,770,253 5,191,660 4,096,185 5,487,768 -- 22,545,866
------------ ----------- ----------- ----------- ------------- ------------
Due to related parties............... 6,094,291 79,432,163 24,199,919 40,047,631 (148,432,316) 1,341,688
Long-term debt, net of current
maturities......................... 145,404,301 -- -- 220,165 -- 145,624,466
------------ ----------- ----------- ----------- ------------- ------------
Total Liabilities................ 159,268,845 84,623,823 28,296,104 45,755,564 (148,432,316) 169,512,020
------------ ----------- ----------- ----------- ------------- ------------
Commitments and Contingencies
Members' Equity (Deficit):
Members' contributions............. 13,803,192 -- -- -- -- 13,803,192
Accumulated earnings (deficit)..... (464,687) 5,297,078 1,937,530 (158,580) (7,076,028) (464,687)
------------ ----------- ----------- ----------- ------------- ------------
Total members' equity
(deficit)...................... 13,338,505 5,297,078 1,937,530 (158,580) (7,076,028) 13,338,505
------------ ----------- ----------- ----------- ------------- ------------
Total Liabilities and Member's
Equity (Deficit)............... $172,607,350 $89,920,901 $30,233,634 $45,596,984 $(155,508,344) $182,850,525
============ =========== =========== =========== ============= ============
</Table>
14
MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidating statements of operations for the three months ended March 31,
2002.
<Table>
<Caption>
BARDEN BARDEN BARDEN
MISSISSIPPI COLORADO NEVADA
GAMING, GAMING, GAMING,
PARENT LLC LLC LLC ELIMINATION CONSOLIDATED
----------- ----------- ----------- ----------- ------------ ------------
REVENUES:
Casino................... $ -- $23,356,959 $9,217,305 $9,780,487 $ -- $42,354,751
Rooms.................... -- 2,085,520 -- 2,002,991 -- 4,088,511
Food and beverage........ -- 2,475,101 506,060 2,114,940 -- 5,096,101
Other.................... -- 335,979 58,584 493,927 -- 888,490
----------- ----------- ----------- ----------- ------------ -----------
Gross revenues......... -- 28,253,559 9,781,949 14,392,345 -- 52,427,853
Less promotional
allowances........... -- (6,004,023) (1,776,713) (1,334,565) (9,115,301)
----------- ----------- ----------- ----------- ------------ -----------
Net revenues........... -- 22,249,536 8,005,236 13,057,780 -- 43,312,552
----------- ----------- ----------- ----------- ------------ -----------
COSTS AND EXPENSES:
Casino................... -- 2,902,063 2,587,957 5,330,005 -- 10,820,025
Rooms.................... -- 1,971,874 -- 1,440,565 -- 3,412,439
Food and beverage........ -- 4,203,432 271,120 1,820,082 -- 6,294,634
Other.................... -- 219,346 166,416 127,198 -- 512,960
Gaming taxes............. -- 2,779,336 1,483,083 757,335 -- 5,019,754
Advertising and
promotion.............. -- 262,869 733,390 179,296 -- 1,175,555
General and
administrative......... 4,205 3,502,397 1,141,057 2,546,043 -- 7,193,702
Depreciation and
amortization........... 626,347 1,779,913 363,668 617,087 -- 3,387,015
Pre-opening expenses..... 7,287 -- -- -- -- 7,287
----------- ----------- ----------- ----------- ------------ -----------
Total costs and
expenses............. 637,839 17,621,230 6,746,691 12,817,611 -- 37,823,371
----------- ----------- ----------- ----------- ------------ -----------
Income (loss) from
operations............... (637,839) 4,628,306 1,258,545 240,169 -- 5,489,181
----------- ----------- ----------- ----------- ------------ -----------
OTHER INCOME (EXPENSE):
Gain on sale of assets... -- 6,542 -- -- -- 6,542
Interest income.......... 16,512 6,894 3,633 4,569 -- 31,608
Interest expense......... (4,507,026) -- -- (8,361) -- (4,515,387)
Other non-operating
expenses............... (17,492) -- -- -- -- (17,492)
Equity in net income of
subsidiaries........... 6,140,297 -- -- -- (6,140,297) --
----------- ----------- ----------- ----------- ------------ -----------
Total other income
(expense)............ 1,632,291 13,436 3,633 (3,792) (6,140,297) (4,494,729)
----------- ----------- ----------- ----------- ------------ -----------
Net income (loss)...... $ 994,452 $4,641,742 $1,262,178 $ 236,377 $ (6,140,297) $ 994,452
=========== =========== =========== =========== ============ ===========
</Table>
15
MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidating statements of cash flows for the three months ended March 31,
2002.
<Table>
<Caption>
BARDEN BARDEN BARDEN
MISSISSIPPI COLORADO NEVADA
GAMING, GAMING, GAMING,
PARENT LLC LLC LLC ELIMINATION CONSOLIDATED
----------- ----------- ----------- ---------- ----------- ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)............. $(5,145,845) $ 4,641,742 $ 1,262,178 $ 236,377 $ -- $ 994,452
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation................ -- 1,570,600 241,730 550,511 -- 2,362,841
Amortization................ 626,347 209,313 121,938 66,576 -- 1,024,174
Gain on sale of assets...... -- (6,542) -- -- -- (6,542)
(Increase) decrease in
accounts receivable,
net....................... 68,670 (109,786) (12,955) (24,001) -- (78,072)
(Increase) decrease in
inventories............... -- (3,933) 13,600 61,415 -- 71,082
(Increase) decrease in
prepaid expenses.......... 1,999 (146,395) (267,916) 42,966 -- (369,346)
Increase in other assets.... -- (2,711) (26,731) (575,534) -- (604,976)
Increase (decrease) in
accounts payable.......... -- (149,454) 148,661 (395,448) -- (396,241)
Increase (decrease) in
related party payables.... -- 711 -- (33,951) 1,180 (32,060)
Decrease in accrued payroll
and other expenses........ -- (488,682) (24,196) (175,910) -- (688,788)
Increase in accrued
interest.................. 4,437,005 -- -- -- -- 4,437,005
Increase (decrease) in
accrued and other
liabilities............... (276,937) (520,666) 870,824 178,840 -- 252,061
----------- ----------- ----------- ---------- ------- -----------
Net cash provided by (used
in) operating
activities............. (288,761) 4,994,197 2,327,133 (68,159) 1,180 6,965,590
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of property and
equipment................... -- (512,590) (103,777) (555,415) -- (1,171,782)
Acquisition related costs..... (796,649) -- -- -- -- (796,649)
Proceeds from sale of
equipment................... -- 6,542 -- -- -- 6,542
----------- ----------- ----------- ---------- ------- -----------
Net cash used in investing
activities................ (796,649) (506,048) (103,777) (555,415) -- (1,961,889)
</Table>
16
MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidating statements of cash flows for the three months ended March 31,
2002 (continued).
<Table>
<Caption>
BARDEN BARDEN BARDEN
MISSISSIPPI COLORADO NEVADA
GAMING, GAMING, GAMING,
PARENT LLC LLC LLC ELIMINATION CONSOLIDATED
----------- ----------- ----------- ---------- ----------- ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Line of credit, net........... (4,800,000) -- -- -- -- (4,800,000)
Payment of 11.653% Senior
Secured Notes issuance
costs....................... (505,136) -- -- -- -- (505,136)
Cash paid to reduce long-term
debt........................ -- -- (22,965) (32,217) -- (55,182)
Cash advances to/from
affiliates.................. 7,351,278 (4,900,067) (2,914,233) 628,772 (1,180) 164,570
Distribution to Barden
Development, Inc............ (188,242) -- -- -- -- (188,242)
----------- ----------- ----------- ---------- ------- -----------
Net cash provided by (used
in) financing
activities................ 1,857,900 (4,900,067) (2,937,198) 596,555 (1,180) (5,383,990)
----------- ----------- ----------- ---------- ------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS.......... 772,490 (411,918) (713,842) (27,019) -- (380,289)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD........... 498,363 8,452,344 3,795,722 4,958,386 -- 17,704,815
----------- ----------- ----------- ---------- ------- -----------
CASH AND CASH EQUIVALENTS, END
OF PERIOD..................... $ 1,270,853 $ 8,040,426 $ 3,081,880 $4,931,367 $ -- $17,324,526
=========== =========== =========== ========== ======= ===========
</Table>
17
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Statement of Forward-Looking Information
This report includes statements that constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and
are subject to the safe harbor provisions of those sections and the Private
Securities Litigation Reform Act of 1995. Words such as "believes,"
"anticipates," "estimates" or "expects" used in the Company's press releases and
reports filed with the Securities and Exchange Commission are intended to
identify forward-looking statements. All forward-looking statements involve
risks and uncertainties. Although the Company believes its expectations are
based upon reasonable assumptions within the bounds of its current knowledge of
its business and operations, there can be no assurances that actual results will
not materially differ from expected results. The Company cautions that these and
similar statements included in this report and in previously filed reports are
further qualified by important factors that could cause actual results to differ
materially from those in the forward-looking statements. Such factors include,
without limitation: the ability to fund planned development needs and to service
debt from existing operations; the ability to successfully integrate the three
Fitzgeralds casinos; increased competition in existing markets or the opening of
new gaming jurisdictions; a decline in the public acceptance of gaming; the
limitation, conditioning or suspension of our gaming licenses; increases in or
new taxes imposed on gaming revenues, taxes on gaming devices; a finding of
unsuitability by regulatory authorities with respect to the Company or its
officers or key employees; loss and/or retirement of key executives; a
significant increase in fuel or transportation prices; adverse economic
conditions in the Company's markets; severe and unusual weather in our markets;
non-renewal of the Company's or any of its operating subsidiaries' gaming
licenses from the appropriate governmental authorities in Nevada, Mississippi
and Colorado; and continuing effects of recent terrorist attacks and any future
occurrences of terrorist attacks or other destabilizing events.
We caution readers not to place undue reliance on forward-looking
statements, which speak only as of the date thereof. All subsequent written and
oral forward-looking statements attributable to us are expressly qualified in
their entirety by the cautionary statements and factors that may affect future
results contained throughout this report. The Company undertakes no obligation
to publicly release any revisions to such forward-looking statements to reflect
events or circumstances after the date hereof.
The following discussion should be read in conjunction with, and is
qualified in its entirety by, our financial statements, including the notes
thereto listed in Item 1.
Overview
The Company was formed on September 14, 2001 and commenced operations of
the Fitzgeralds casinos on December 7, 2001, and accordingly has a limited
operating history. The discussion of operations herein focuses on events and
the Company's revenues and expenses during the three months ended March 31,
2002 and the combined results of operations of the three Fitzgeralds casino
properties for the quarter ended April 1, 2001.
The gaming operations of the Company's properties may be seasonal and,
depending on the location and other circumstances, the effects of such
seasonality could be significant. The properties' results are affected by
inclement weather in relevant markets. For example, the Fitzgeralds Black Hawk
site, located in the Rocky Mountains of Colorado, is subject to snow and
18
icy road conditions during the winter months. Any such severe weather conditions
may discourage potential customers from visiting the Black Hawk facilities.
Also, at Fitzgeralds Las Vegas, business levels are generally weaker from
Thanksgiving through the middle of January (except during the week between
Christmas and New Year's) and throughout the summer, and generally stronger from
mid-January through Easter and from mid-September through Thanksgiving. At
Fitzgeralds Tunica and Fitzgeralds Black Hawk, business levels are typically
weaker from Thanksgiving through the end of the winter and typically stronger
from mid-June to mid-November. Accordingly, the Company's results of operations
are expected to fluctuate from quarter to quarter and the results for any fiscal
quarter may not be indicative of results for future fiscal quarters.
Results of Operations
The following table sets forth information derived from the Company's
consolidated statements of income for the three months ended March 31, 2002, and
the combined statement of operations for Fitzgeralds Las Vegas, Inc.,
Fitzgeralds Mississippi, Inc. and 101 Main Street Limited Liability Company for
the quarter ended April 1, 2001 expressed as a percentage of gross revenues.
19
Consolidated Statement of Operations-- Summary Information
(dollars in thousands)
Successor Predecessor
------------------ ------------------
Three Months Ended Quarter Ended
March 31, April 1,
2002 2001
------------------ ------------------
Gross Revenues $ 52,428 $ 51,380
Operating Income $ 5,489 $ 8,700
Adjusted EBITDA (1) $ 8,883 $ 8,700
Consolidated Statement of Operations -- Percentage of Gross Revenues
--------------------------------------------------------------------
Successor Predecessor
------------------ ------------------
Three Months Ended Quarter Ended
March 31, April 1,
2002 2001
------------------ ------------------
Revenues:
Casino 80.8% 79.8%
Rooms 7.8% 8.2%
Food and beverage 9.7% 10.0%
Other 1.7% 2.0%
----- -----
Gross revenues 100.0% 100.0%
less promotional allowances -17.4% -15.5%
----- -----
Net revenues 82.6% 84.5%
----- -----
Costs and Expenses:
Casino 30.2% 35.5%
Rooms 6.5% 5.7%
Food and beverage 12.0% 5.2%
Other 1.0% 0.8%
Selling, general and
administrative 15.9% 20.3%
Depreciation and amortization 6.5% -
Pre-opening expenses - -
----- -----
Total costs and expenses 72.1% 67.5%
Operating income 10.5% 17.0%
----- -----
Other Income (Expense):
Gain on sale of assets - -
Interest income - -
Interest expense -8.6% -
Other nonoperating expense - -
----- -----
Total other income (expense) -8.6% -
----- -----
Net Income: 1.9% 17.0%
----- -----
Adjusted EBITDA: (1) 16.9% 17.0%
----- -----
NOTES:
(1) Adjusted EBITDA (defined as earnings before interest, income taxes,
depreciation and amortization, and excludes pre-opening costs of $7,300
associated with the acquisition of the Fitzgeralds casinos) is presented
solely as a supplemental disclosure to assist in the evaluation of the
Company's ability to generate cash flow. In particular, the Company
believes that an analysis of Adjusted EBITDA enhances the understanding of
the financial performance of companies with substantial depreciation and
amortization.
Results for any one or more periods are not necessarily indicative of
annual results or continuing trends.
20
QUARTER ENDED MARCH 31, 2002 (SUCCESSOR) COMPARED TO QUARTER ENDED APRIL 1,
2001 (PREDECESSOR)
For the three months ended March 31, 2002, the Company utilized a calendar
financial reporting period resulting in ninety days of operations, as compared
to the period ended April 1, 2001, in which a "4-4-5" (weeks) reporting period
was used resulting in ninety-one days of operations. The additional day of
operations in the prior year period does not have a significant impact on the
comparability of financial information used in the following "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
Consolidated gross revenues for the three months ended March 31, 2002
amounted to approximately $52.4 million an increase of approximately $1.1
million or 2.0% from gross revenues recorded in the period ended April 1, 2001.
For the three months ended March 31, 2002, gross revenues for Fitzgeralds Tunica
accounted for $28.2 million or 53.9% of consolidated gross revenues, Fitzgeralds
Las Vegas accounted for $14.4 million or 27.4% and Fitzgeralds Black Hawk
accounted for $9.8 million or 18.7% compared to $26.2 million or 51.0%, $15.7
million or 30.5% and $9.5 million or 18.5%, respectively, for the period ended
April 1, 2001.
The Company's business can be separated into four operating departments:
casino, rooms (except Fitzgeralds Black Hawk), food and beverage, and other.
Consolidated casino revenues for the three months ended March 31, 2002 totaled
approximately $42.4 million of which slot machines accounted for approximately
$37.3 million or 87.9% and table games accounted for approximately $5.1 million
or 12.1% as compared to the period ended April 1, 2001. Casino revenues
attributed to Fitzgeralds Tunica were $23.4 million for the three months ended
March 31, 2002 compared to $21.5 million in the prior year period, an increase
of $1.8 million or 8.4%. The increase in casino revenues is primarily
attributable to a $1.9 million or 9.8% increase in slot revenues. Casino
revenues attributed to Fitzgeralds Las Vegas were $9.8 million for the
three-month period compared to $10.5 million in the prior period, a decrease of
$0.7 million or 7.0%. The decrease in casino revenues is primarily attributable
to lower overall visitor volumes in the Las Vegas marketplace. Casino revenues
attributed to Fitzgeralds Black Hawk were $9.2 million for the three month
period compared to $8.9 million, an increase of $0.3 million or 3.4%.
21
The consolidated average number of slot machines in operation was 2,915
during the three month period ended March 31, 2002 compared to 2,870 during the
period ended April 1, 2001. Fitzgeralds Tunica accounted for 1,382 or 47.4%;
Fitzgeralds Las Vegas accounted for 940 or 32.2% and Fitzgeralds Black Hawk
accounted for 593 or 20.4%. The consolidated average win per slot per day was
approximately $142 for the three months ended March 31, 2002 compared to $140 in
the period ended April 1, 2001, with an average of approximately $168, $87, and
$169 compared to $159, $94, and $167 at Fitzgeralds Tunica, Fitzgeralds Las
Vegas and Fitzgeralds Black Hawk. The consolidated average win per table per day
was approximately $848 for the three month period ended March 31, 2002 compared
to $824 in the period ended April 1, 2002 with an average of approximately $814,
$1,023, and $365 compared to $818, $957, and $345 at Fitzgeralds Tunica,
Fitzgeralds Las Vegas, and Fitzgeralds Black Hawk respectively.
Consolidated room revenues totaled $4.1 million or 7.8% of gross revenues
for the three months ended March 31, 2002 compared to $4.2 million or 8.2% of
gross revenues in the period ended April 1, 2001. Of this amount, Fitzgeralds
Tunica accounted for $2.1 million or 51.0% and $2.0 million or 47.7%,
respectively. Fitzgeralds Las Vegas accounted for $2.0 million or 49.0% and $2.2
million or 52.3%, respectively. At Fitzgeralds Tunica, the average daily rate
was $48 for both periods, with an occupancy of 95.5% and 93.1%, respectively. At
Fitzgeralds Las Vegas, the average daily rate was $41 and $40, respectively,
with an occupancy of 84.4% and 93.9%, respectively.
Consolidated food and beverage revenues for the three months ended March
31, 2002, totaled approximately $5.1 million or 9.7% of gross revenues, compared
to approximately $5.1 million or 10.0% of gross revenues for the period ended
April 1, 2001. Of this amount, Fitzgeralds Tunica accounted for $2.5 million or
48.6% and $2.3 million or 45.3%, respectively, and Fitzgeralds Las Vegas
accounted for $2.1 million or 41.5% and $2.2 million or 43.6%, respectively, for
the three-month period ended March 31, 2002 and the period ended April 1, 2001,
respectively.
Other consolidated revenues consisted primarily of commission and retail
income and for the three months ended March 31, 2002 totaled approximately $0.9
million or 1.7% of gross revenues, compared to approximately $1.0 million or
2.0% of gross revenues, for the period ended April 1, 2001.
Consolidated promotional allowances included in the consolidated gross
revenues for the three months ended March 31, 2002 were $9.1 million or 17.4% of
gross revenues compared to approximately $8.0 million or 15.5% of gross
revenues, for the period ended April 1, 2001. The $1.2 million or 14.5% increase
is primarily attributable to a $1.1 million or 21.2% increase at Fitzgeralds
Tunica as a result of a 9.8% increase in slot revenues.
Consolidated casino operating expenses including food and beverage, rooms,
and other for the three months ended March 31, 2002 were $26.1 million or 49.7%
of gross revenues and 61.5% of casino revenues compared to $24.3 million or
47.2% of gross revenues and 59.2% of casino revenues in the period ended April
1, 2001. The $1.8 million or 7.4% increase in casino operating expenses is
attributable to $0.3 million in additional payroll costs, $0.4 million for
higher costs related to complementaries, $0.1 million for increased costs for
slot machines leases, and $0.2 million for higher gaming taxes.
Consolidated selling, general, and administrative expenses for the three
months ended March 31, 2002 totaled $8.4 million or 16.0% of gross revenues
compared to $10.5 million or 20.3% of gross revenues in the period ended April
1, 2001. The $2.1 million or 19.9% decrease in selling, general, and
administrative expenses is primarily attributable to lower costs associated with
marketing and advertising programs and administrative salaries and wages.
Consolidated depreciation and amortization for the three months ended March
31, 2002 totaled $3.4 million or 6.5% of gross revenues compared to $0 in the
period ended April 1, 2001. The increase of $3.4 million was due to recognition
of these items following the Fitzgeralds acquisition after the discontinuance of
the recognition of depreciation and amortization by Fitzgeralds Gaming
Corporation subsequent to the filing of the bankruptcy cases on December 5,
2000.
Consolidated operating income for the three months ended March 31, 2002 was
$5.5 million, or 10.5% of gross revenues, of which Fitzgeralds Tunica accounted
for operating income of $4.6 million, or 84.3%,
22
Fitzgeralds Black Hawk accounted for operating income of $1.3 million, or 22.9%
and Fitzgeralds Las Vegas accounted for operating income of $0.2 million, or
4.4%. The unallocated corporate loss principally for amortization was $0.6
million or 1.2% of gross revenues.
Consolidated net interest expense for the three months ended March 31, 2002
was approximately $4.5 million or 8.6% of gross revenues, as compared to $4,000
for the period ended April 1, 2001. The increase of $4.5 million is attributable
to interest expense associated with the 11.653% Senior Secured Notes. The
Fitzgeralds companies discontinued accruing interest on the Notes on December 5,
2000 with the commencement of the Bankruptcy Cases.
As a result of the foregoing, the Company realized consolidated net income
of $1.0 million for the three months ended March 31, 2002.
EBITDA for the three months ended March 31, 2002 was $8.9 million, of which
Fitzgeralds Tunica accounted for $6.4 million, Fitzgeralds Black Hawk accounted
for $1.6 million and Fitzgeralds Las Vegas accounted for $0.9 million. EBITDA
should be viewed only in conjunction with all of the Company's financial data
and statements, and should not be construed as an alternative either to income
from operations (as an indicator of the Company's operating performance) or to
cash flows from operating activities as a measure of liquidity.
23
Liquidity and Capital Resources
At March 31, 2002, the Company had cash and cash equivalents of
approximately $17.3 million. Cash and cash equivalents included $1.3 million at
the Company, $8.0 million at Fitzgeralds Mississippi, $3.1 million at
Fitzgeralds Black Hawk and $4.9 million at Fitzgeralds Las Vegas.
The Company has met its capital requirements to date through net cash from
operations, capital contributions, equipment loans and borrowings under its
credit facility. For the three months ended March 31, 2002, net cash provided by
operating activities totaled approximately $7.0 million. For the three months
ended March 31, 2002, cash used by investing activities totaled approximately
$2.0 million. Approximately $797,000 was expended during the three months ended
March 31, 2002 for professional fees related to the Fitzgeralds acquisition. For
the three months ended March 31, 2002, cash used by financing activities totaled
approximately $5.4 million primarily resulting from the cash paid on the
outstanding line of credit. Approximately $505,000 was expended during the three
months ended March 31, 2002 for professional fees related to the issuance of the
Company's 11.653% Senior Secured Notes. Approximately $4.8 million was repaid on
the credit facility during the three months ended March 31, 2002. As of May 15,
2002, the outstanding borrowings under the credit facility was approximately
$1.7 million. The Nevada Regulatory Authorities in April, 2002 approved pledging
the assets of the Barden Nevada pursuant to the terms of the Company's credit
facility. Therefore, the credit facility has been increased by the lender to
$15.0 million from $12.0 million. Also, a cash distribution related to the
fourth quarter of 2001 totaling approximately $188,000 was made to Barden
Development, Inc. during the three months ended March 31, 2002 under the
Management Agreement.
We are required to pay weekly liquidated damages under the 11.653% Senior
Secured Notes until such Notes are registered at an amount per week per
principal amount of such Notes equal to $0.05 for the first 90-day period
following April 5, 2002, increasing by an additional $0.05 per week with respect
to each subsequent 90-day period, up to a maximum amount of $0.20 per week.
Management believes that the Company's cash flow from operations and its
current lines of credit will be adequate to meet the Company's anticipated
future requirements for working
24
capital, its capital expenditures and scheduled payments of interest and
principal on the Company's 11.653% Senior Secured Notes and other permitted
indebtedness for the year 2002. No assurance can be given, however, that such
proceeds and operating cash flow, in light of increased competition will be
sufficient for such purposes. If necessary and to the extent permitted under the
Investor Holdings Indenture, the Company will seek additional financing through
borrowings and debt or equity financing. There can be no assurance that
additional financing, if needed, will be available to the Company, or that, if
available, the financing will be on terms favorable to the Company. In addition,
there is no assurance that the Company's estimate of its reasonably anticipated
liquidity needs is accurate or that unforeseen events will not occur, resulting
in the need to raise additional funds.
Recently Issued Accounting Pronouncements
In April 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 145, "Rescission of FASB statements, No. 4, 44 and 64, Amendment of
FASB Statement No. 13 and Technical Corrections." This Statement updates,
clarifies and simplifies existing accounting pronouncements. Management does not
expect the standard to have any material impact on the Company's consolidated
financial position, results of operations and cash flows.
Item 3. Quantitative And Qualitative Disclosures About Market Risk
There have been no material changes from the information reported in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2001.
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) None
(b) There were no reports on Form 8-K filed during the three months ended
March 31, 2002.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MAJESTIC INVESTOR HOLDINGS, LLC
By: Barden Development Inc., Manager
By: /s/ Don H. Barden
---------------------------------------------------- July 26, 2002
Don H. Barden, President and Chief Executive Officer
MAJESTIC INVESTOR CAPITAL CORP.
By: /s/ Don H. Barden
---------------------------------------------------- July 26, 2002
Don H. Barden, President and Chief Executive Officer
26