UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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 (I.R.S. Employer
jurisdiction of as specified in its charter) Identification No.)
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 X No
------ ------
Shares outstanding of each of the registrant's classes of common stock as of
September 30, 2002:
Class Number of shares
- ----- ----------------
Not applicable Not applicable
MAJESTIC INVESTOR HOLDINGS, LLC
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 2002
and December 31, 2001...................................1
Consolidated Statements of Operations for the three and
nine months ended September 30, 2002 and the
quarter and three quarters ended September 30, 2001.....2
Consolidated Statements of Cash Flows for the nine months
ended September 30, 2002 and September 30, 2001.........3
Notes to Financial Statements....................................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................21
Item 3. Quantitative and Qualitative Disclosures About Market Risk......32
Item 4. Controls and Procedures.........................................32
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................33
SIGNATURES.................................................................34
CERTIFICATIONS.............................................................35
i
PART 1 - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
MAJESTIC INVESTOR HOLDINGS, LLC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
2002 2001
ASSETS
Current Assets:
Cash and cash equivalents $ 21,666,223 $ 17,704,815
Accounts receivable, less allowance for doubtful accounts
of $255,315 and $248,042, respectively 1,185,320 1,464,834
Inventories 809,934 957,564
Prepaid expenses 1,718,682 1,212,653
Due from Seller -- 82,832
Note receivable from related party 700,000 700,000
Other 12,953 15,552
------------- -------------
Total current assets 26,093,112 22,138,250
------------- -------------
Property, equipment and improvements, net 119,007,950 122,427,962
Intangible assets, net 18,090,497 19,290,753
Goodwill 5,521,620 10,602,250
Other Assets:
Deferred financing costs, net of accumulated amortization
of $1,057,483 and $83,897, respectively 7,025,837 7,023,706
Restricted cash 1,000,000 1,000,000
Other assets, prepaid leases and deposits 1,560,049 945,618
------------- -------------
Total other assets 9,585,886 8,969,324
------------- -------------
Total Assets $ 178,299,065 $ 183,428,539
============= =============
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 142,714 $ 6,656,574
Accounts payable 1,919,975 1,946,730
Other accrued liabilities:
Payroll and related 4,228,144 5,006,114
Interest 5,928,736 1,208,779
Progressive jackpots 2,261,494 2,274,050
Slot club liability 530,889 2,241,876
Other accrued liabilities 5,472,254 5,043,988
------------- -------------
Total current liabilities 20,484,206 24,378,111
------------- -------------
Due to related parties 1,024,958 1,177,829
Long-term debt, net of current maturities 146,182,998 145,340,304
------------- -------------
Total Liabilities 167,692,162 170,896,244
Commitments and contingencies
Members' Equity:
Members' contributions 13,803,192 13,803,192
Accumulated deficit (3,196,289) (1,270,897)
------------- -------------
Total Members' Equity 10,606,903 12,532,295
------------- -------------
Total Liabilities and Member's Equity $ 178,299,065 $ 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)
SUCCESSOR PREDECESSOR SUCCESSOR PREDECESSOR
THREE MONTHS ENDED QUARTER ENDED NINE MONTHS ENDED THREE QUARTERS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2002 2001 2002 2001
REVENUES:
Casino $ 41,842,819 $ 41,675,764 $ 124,623,910 $ 123,241,796
Rooms 3,809,375 3,911,347 11,836,762 12,308,778
Food and beverage 4,936,422 4,984,045 14,917,985 14,994,449
Other 1,027,702 896,388 2,894,987 2,883,185
---------------- ----------------- ---------------- --------------------
Gross Revenues 51,616,318 51,467,544 154,273,644 153,428,208
less promotional allowances (8,310,465) (8,154,937) (25,268,138) (23,736,051)
---------------- ----------------- ---------------- --------------------
Net Revenues 43,305,853 43,312,607 129,005,506 129,692,157
COSTS AND EXPENSES:
Casino 15,071,737 14,054,860 45,198,684 42,180,970
Rooms 2,342,772 2,641,602 6,784,231 8,061,053
Food and beverage 2,864,833 2,882,895 8,571,704 8,713,808
Other 396,134 478,654 1,171,573 1,309,257
Gaming taxes 4,981,141 4,949,008 14,779,970 14,496,526
Advertising and promotion 2,850,918 3,737,082 9,904,546 11,373,161
General and administrative 6,429,515 5,707,126 18,321,796 19,305,780
Depreciation and amortization 3,825,340 -- 10,705,505 --
Reorganization items -- 151,808 -- 108,644
Loss on disposal of assets 9,889 95,228 9,311 120,222
Pre-opening expenses -- -- 124,269 --
---------------- ----------------- ---------------- --------------------
Total costs and expenses 38,772,279 34,698,263 115,571,589 105,669,421
---------------- ----------------- ---------------- --------------------
Operating income 4,533,574 8,614,344 13,433,917 24,022,736
OTHER INCOME (EXPENSE):
Interest income 33,220 9,491 95,024 33,837
Interest expense (4,462,963) (7,601) (13,571,821) (40,401)
Other non-operating income (expense) (10,931) 10,235 (38,306) 30,725
---------------- ----------------- ---------------- --------------------
Total other income (expense) (4,440,674) 12,125 (13,515,103) 24,161
Net income (loss) $ 92,900 $ 8,626,469 $ (81,186) $ 24,046,897
================ ================= ================ ====================
The accompanying notes are an integral part of these consolidated financial
statements.
2
MAJESTIC INVESTOR HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SUCCESSOR PREDECESSOR
Nine Months Ended September 30,
2002 2001
Cash Flows From Operating Activities:
Net income (loss) $ (81,186) $ 24,046,897
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation 7,285,135 --
Amortization 3,420,370 --
Loss on sale of assets 9,311 120,222
Reorganization expenses incurred in connection with Chapter 11 and related
legal proceedings -- 108,644
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 380,982 (36,408)
Decrease in inventories 147,631 49,880
Increase in prepaid expenses (795,948) (283,818)
(Increase) decrease in other assets 879,182 (31,839)
Increase (decrease) in accounts payable (223,128) 1,043,073
Decrease in amounts due to related parties, net (134,651) (23,597,192)
Decrease in accrued payroll and related expenses (864,418) --
Increase in accrued interest 4,719,957 --
Increase (decrease) in other accrued liabilities 138,722 (521,171)
Increase in liabilities subject to compromise -- 142,967
------------ ------------
Net cash provided by operating activities before reorganization items 14,881,959 1,041,255
Reorganization items:
Interest received on cash accumulated because of the bankruptcy
proceedings -- 128,961
Other reorganization items incurred in connection with Chapter 11 and
related legal proceedings -- (237,605)
------------ ------------
Net cash provided by operating activities 14,881,959 932,611
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, equipment and vessel improvements (3,918,301) (943,565)
Payment of acquisition related costs (986,158) --
Proceeds from seller from purchase price adjustment 3,800,000 --
Proceeds from sale of equipment 43,867 31,963
------------ ------------
Net cash used in investing activities (1,060,592) (911,602)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Line of credit, net (6,500,000) --
Payment of 11.653% Senior Secured Notes issuance costs (1,410,945) --
Cash paid to reduce long-term debt (104,808) (214,345)
Distribution to Barden Development, Inc. (1,844,206) --
------------ ------------
Net cash used in financing activities (9,839,959) (214,345)
------------ ------------
Net increase (decrease) in cash and cash equivalents 3,961,408 (193,336)
Cash and cash equivalents, beginning of period 17,704,815 12,951,883
------------ ------------
Cash and cash equivalents, end of period $ 21,666,223 $ 12,758,547
============ ============
INTEREST PAID:
Equipment Debt $ 8,391 $ 46,549
Senior Secured Notes - Fixed Interest 11.653% $ 8,707,126 $ --
Lines of credit $ 98,168 $ --
SUPPLEMENTAL NONCASH OPERATING AND FINANCING ACTIVITIES:
Elimination of slot based progressives $ 400,000 $ --
Elimination of slot club $ 1,300,000 $ --
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
3
MAJESTIC INVESTOR HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 have been made. The results for the three and
nine months ended September 30, 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.
Certain reclassifications have been made to the 2001 financial
statements to conform to the 2002 presentations. These reclassifications have no
effect on previously reported net income.
NOTE 2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In April 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 145, "Rescission of
FASB statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and
Technical Corrections" which is effective for fiscal years beginning after May
15, 2002. SFAS No. 145 updates, clarifies and simplifies existing accounting
pronouncements. Management does not expect SFAS No. 145 to have a material
impact on the Company's consolidated financial position, results of operations
or cash flows.
In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities" which will become effective for
exit or disposal activities initiated
4
NOTE 2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)
after December 31, 2002. SFAS No. 146 supercedes Emerging Issues Task Force
Issue No. 94-3 "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity." SFAS No. 146 requires that a liability for
a cost associated with an exit or disposal activity be recognized when the
liability is incurred and states that an entity's commitment to an exit plan, by
itself, does not create a present obligation that meets the definition of a
liability. SFAS No. 146 also establishes that fair value is the objective for
initial measurement of the liability. Adoption of SFAS No. 146 will have no
impact on historical consolidated financial position or results of operations.
In October 2002, the FASB issued SFAS No. 147, "Acquisition of Certain
Financial Institutions," which is not applicable to the Company.
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 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 Majestic Star 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, the Company 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. Pursuant to the
terms of the purchase and sale agreement, the parties agreed to a $3.8 million
reduction on May 9, 2002, based upon a negotiated settlement of the value of
working capital at December 6, 2001. We are accounting for the acquisition under
the purchase method. 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.
5
NOTE 4. ACQUISITIONS (CONTINUED)
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.
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
========
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 No. 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.
NOTE 5. OTHER INTANGIBLE ASSETS
The gross carrying amount and accumulated amortization of the Company's
intangible assets, other than goodwill, as of September 30, 2002, are as
follows:
Gross Carrying Accumulated
Amount Amortization
(in thousands) (in thousands)
-------------- --------------
Amortized intangible assets:
Customer relationships $ 9,800 $(1,007)
Tradename 3,700 (302)
Riverboat excursion license 700 --
------- -------
Total $14,200 $(1,309)
======= =======
Unamortized intangible assets:
Gaming license $ 5,200 $ --
------- -------
Total $ 5,200 $ --
------- -------
</Table>
6
NOTE 5. OTHER INTANGIBLE ASSETS (CONTINUED)
The amortization expense recorded on the intangible assets for the
three and nine months ended September 30, 2002 was $0.4 million and $1.2
million, respectively. The estimated amortization expense for each of the five
succeeding fiscal years is as follows:
(In thousands)
For the year ended December 31,
2002 $ 1,595
2003 $ 1,642
2004 $ 1,642
2005 $ 1,642
2006 $ 1,642
NOTE 6. GOODWILL
The changes in the carrying amount of goodwill for the nine months
ended September 30, 2002 are as follows:
(In thousands)
Balance as of January 1, 2002 $ 10,602
Goodwill acquired 296
----------
Balance as of March 31, 2002 10,898
Purchase price adjustment (3,800)
Goodwill adjustments (549)
Goodwill acquired 164
----------
Balance as of June 30, 2002 6,713
Goodwill adjustments (1,191)
----------
Balance as of September 30, 2002 $ 5,522
----------
The increase in goodwill acquired primarily relates to professional
fees incurred by the Company related to the acquisition of Fitzgeralds Tunica,
Fitzgeralds Black Hawk and Fitzgeralds Las Vegas. The decrease in goodwill is
primarily due to a $3.8 million purchase price adjustment resulting from the
final purchase price settlement of the valuation of the assets and liabilities
of the Fitzgeralds Las Vegas, Fitzgeralds Tunica and Fitzgeralds Black Hawk
properties and adjustments of estimates of liabilities for slot based programs.
In accordance with FAS No.142, goodwill is not amortized but instead is
subject to impairment tests at least annually.
7
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 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 and nine months ended September 30, 2002 and September 30, 2001 is
presented below (in thousands):
8
FOR THE AS OF AND FOR THE
(a) (a)
SUCCESSOR PREDECESSOR SUCCESSOR PREDECESSOR
THREE MONTHS ENDED QUARTER ENDED NINE MONTHS ENDED THREE QUARTERS ENDED
SEPTEMBER 30, 2002 SEPTEMBER 30, 2001 SEPTEMBER 30, 2002 SEPTEMBER 30, 2001
------------------ ------------------ ------------------ --------------------
NET REVENUES:
Fitzgeralds Tunica $ 22,409 $ 21,113 $ 66,515 $ 63,176
Fitzgeralds Black Hawk 9,062 9,525 24,969 25,916
Fitzgeralds Las Vegas 11,835 12,675 37,521 40,600
------------ ---------- ----------- ------------
$ 43,306 $ 43,313 $ 129,005 $ 129,692
------------ ---------- ----------- ------------
INCOME (LOSS) FROM OPERATIONS:
Fitzgeralds Tunica $ 3,867 $ 5,249 $ 11,812 $ 15,579
Fitzgeralds Black Hawk 2,254 2,649 5,037 6,217
Fitzgeralds Las Vegas (922) (281) (1,341) 2,227
Unallocated and other (1) (666) 997 (2,074) --
------------ ---------- ----------- ------------
$ 4,533 $ 8,614 $ 13,434 $ 24,023
------------ ---------- ----------- ------------
SEGMENT DEPRECIATION AND AMORTIZATION(2)
Fitzgeralds Tunica $ 1,866 $ -- $ 5,481 $ --
Fitzgeralds Black Hawk 364 -- 1,091 --
Fitzgeralds Las Vegas 938 -- 2,203 --
Unallocated and other (1) 657 -- 1,930 --
------------ ---------- ----------- ------------
$ 3,825 $ -- $ 10,705 $ --
------------ ---------- ----------- ------------
EXPENDITURES FOR ADDITIONS TO LONG-LIVED ASSETS:
Fitzgeralds Tunica $ 324 $ 97 $ 1,820 $ 627
Fitzgeralds Black Hawk 524 3 963 156
Fitzgeralds Las Vegas 335 13 1,135 161
------------ ---------- ----------- ------------
$ 1,183 $ 113 $ 3,918 $ 944
------------ ---------- ----------- ------------
SEGMENT ASSETS:
Fitzgeralds Tunica $ 89,832
Fitzgeralds Black Hawk 30,896
Fitzgeralds Las Vegas 43,464
Unallocated and other (1) 147,358
311,550
Less: Intercompany (133,251)
-----------
178,299
-----------
GOODWILL:
Fitzgeralds Tunica $ 3,998
Fitzgeralds Black Hawk 1,524
Fitzgeralds Las Vegas --
-----------
$ 5,522
-----------
(1) Unallocated and other include corporate items and eliminations that are not
allocated to the operating segments.
(2) The predecessor company discontinued recording depreciation and amortization
of their property and equipment due to the filing of the bankruptcy cases on
December 5, 2000.
(a) The segment information provided is derived from prior year consolidated
financial information provided by the predecessor company and is for the
quarter and three quarters ended September 30, 2001
9
NOTE 8. RELATED PARTY TRANSACTIONS
During the nine months ended September 30, 2002, distributions of
$1,844,000 were paid to Barden Development Inc. ("BDI") in accordance with the
Management Agreement between the Company and BDI dated December 5, 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 balance
sheets as of September 30, 2002 and December 31, 2001, statements of operations
for the three and nine months ended September 30, 2002 and statements of cash
flows for the nine months ended September 30, 2002 of the 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 information has been presented below.
10
Condensed consolidating balance sheets as of September 30, 2002 (Unaudited)
Majestic Investor Guarantor Eliminating Total
Holdings, LLC Subsidiaries Entries Consolidated
ASSETS
Current Assets:
Cash and cash equivalents $ 6,309,143 $ 15,357,080 $ -- $ 21,666,223
Accounts receivable (net) 43,919 1,141,401 -- 1,185,320
Inventories -- 809,934 -- 809,934
Prepaid expenses and other current assets 4,863,078 1,704,102 (4,135,545)(a) 2,431,635
------------------ ------------- ------------- -------------
Total current assets 11,216,140 19,012,517 (4,135,545) 26,093,112
------------------ ------------- ------------- -------------
Property and equipment, net -- 119,007,950 -- 119,007,950
Intangible assets, net -- 18,090,497 -- 18,090,497
Due from related parties 129,116,043 -- (129,116,043)(b) --
Other assets 7,025,837 8,081,669 15,107,506
Investment in subsidiaries 16,459,909 -- (16,459,909)(b) --
------------------ ------------- ------------- -------------
Total assets $ 163,817,929 $ 164,192,633 $(149,711,497) $ 178,299,065
================== ============= ============= =============
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ -- $ 142,714 $ -- $ 142,714
Accounts payable, accrued and other 6,176,822 14,164,670 -- 20,341,492
------------------ ------------- ------------- -------------
Total current liabilities 6,176,822 14,307,384 -- 20,484,206
------------------ ------------- ------------- -------------
Due to related parties 992,165 133,284,381 (133,251,588)(b) 1,024,958
Long-term debt, net of current maturities 146,042,039 140,959 146,182,998
------------------ ------------- ------------- -------------
Total Liabilities 153,211,026 147,732,724 (133,251,588) 167,692,162
Members' Equity 10,606,903 16,459,909 (16,459,909)(b) 10,606,903
------------------ ------------- ------------- -------------
Total Liabilities and Member's Equity $ 163,817,929 $ 164,192,633 $(149,711,497) $ 178,299,065
================== ============= ============= =============
(a) To eliminate intercompany receivables and payables.
(b) To eliminate intercompany accounts and investment in subsidiaries.
11
Condensed consolidating balance sheets as of December 31, 2001
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)(b) --
------------------ ------------- ------------- -------------
Total other 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)(b) 12,532,295
------------------ ------------- ------------- -------------
Total Liabilities and Member's Equity $ 167,812,703 $ 167,407,963 $(151,792,127) $ 183,428,539
================== ============= ============= =============
(a) To eliminate intercompany receivables and payables.
(b) To eliminate intercompany accounts and investment in subsidiaries.
12
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2002 (UNAUDITED)
MAJESTIC INVESTOR GUARANTOR ELIMINATING
HOLDINGS, LLC SUBSIDIARIES ENTRIES CONSOLIDATED
REVENUES:
Casino $ -- $ 41,842,819 $ -- $ 41,842,819
Rooms -- 3,809,375 -- 3,809,375
Food and beverage -- 4,936,422 -- 4,936,422
Other -- 1,027,702 -- 1,027,702
------------------ ------------- ------------- -------------
Gross Revenues -- 51,616,318 -- 51,616,318
less promotional allowances -- (8,310,465) -- (8,310,465)
------------------ ------------- ------------- -------------
Net Revenues -- 43,305,853 -- 43,305,853
COSTS AND EXPENSES:
Casino -- 15,071,737 -- 15,071,737
Rooms -- 2,342,772 -- 2,342,772
Food and beverage -- 2,864,833 -- 2,864,833
Other -- 396,134 -- 396,134
Gaming taxes -- 4,981,141 -- 4,981,141
Advertising and promotion -- 2,850,918 -- 2,850,918
General and administrative 8,175 6,421,340 -- 6,429,515
Depreciation and amortization 657,668 3,167,672 -- 3,825,340
Loss on disposal of assets -- 9,889 -- 9,889
------------------ ------------- ------------- -------------
Total costs and expenses 665,843 38,106,436 -- 38,772,279
------------------ ------------- ------------- -------------
Operating income (loss) (665,843) 5,199,417 -- 4,533,574
OTHER INCOME (EXPENSE):
Interest income 19,190 14,030 -- 33,220
Interest expense (4,454,389) (8,574) -- (4,462,963)
Other non-operating expense (10,931) -- -- (10,931)
Equity in net income (loss) of subsidiaries 5,204,873 -- (5,204,873)(a) --
------------------ ------------- ------------- -------------
Total other income (expense) 758,743 5,456 (5,204,873) (4,440,674)
------------------ ------------- ------------- -------------
Net income $ 92,900 $ 5,204,873 $ (5,204,873) $ 92,900
================== ============= ============= =============
(a) To eliminate equity in net income of subsidiaries.
13
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2002 (UNAUDITED)
MAJESTIC INVESTOR GUARANTOR ELIMINATING
HOLDINGS, LLC SUBSIDIARIES ENTRIES CONSOLIDATED
REVENUES:
Casino $ -- $ 124,623,910 $ -- $ 124,623,910
Rooms -- 11,836,762 -- 11,836,762
Food and beverage -- 14,917,985 -- 14,917,985
Other -- 2,894,987 -- 2,894,987
------------------ ------------- ------------ -------------
Gross Revenues -- 154,273,644 -- 154,273,644
less promotional allowances -- (25,268,138) -- (25,268,138)
------------------ ------------- ------------ -------------
Net Revenues -- 129,005,506 -- 129,005,506
COSTS AND EXPENSES:
Casino -- 45,198,684 -- 45,198,684
Rooms -- 6,784,231 -- 6,784,231
Food and beverage -- 8,571,704 -- 8,571,704
Other -- 1,171,573 -- 1,171,573
Gaming taxes -- 14,779,970 -- 14,779,970
Advertising and promotion -- 9,904,546 -- 9,904,546
General and administrative 19,878 18,301,918 -- 18,321,796
Depreciation and amortization 1,930,193 8,775,312 -- 10,705,505
Loss on disposal of assets -- 9,311 -- 9,311
Pre-opening expenses 124,269 -- -- 124,269
------------------ ------------- ------------ -------------
Total costs and expenses 2,074,340 113,497,249 -- 115,571,589
------------------ ------------- ------------ -------------
Operating income (loss) (2,074,340) 15,508,257 -- 13,433,917
OTHER INCOME (EXPENSE):
Interest income 53,988 41,036 -- 95,024
Interest expense (13,546,708) (25,113) -- (13,571,821)
Other non-operating expense (38,306) -- -- (38,306)
Equity in net income (loss) of subsidiaries 15,524,180 -- (15,524,180)(a) --
------------------ ------------- ------------ -------------
Total other income (expense) 1,993,154 15,923 (15,524,180) (13,515,103)
------------------ ------------- ------------ -------------
Net income (loss) $ (81,186) $ 15,524,180 $(15,524,180) $ (81,186)
================== ============= ============ =============
(a) To eliminate equity in net income of subsidiaries.
14
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2002 (UNAUDITED)
MAJESTIC INVESTOR GUARANTOR ELIMINATING CONSOLIDATED
HOLDINGS, LLC SUBSIDIARIES ENTRIES TOTAL
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ (10,568,902) $ 22,405,364 $ 3,045,497 $ 14,881,959
------------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, equipment and vessel improvements -- (3,918,301) -- (3,918,301)
Payment of acquisition related costs (986,158) -- -- (986,158)
Proceeds from seller from purchase price adjustment 3,800,000 -- -- 3,800,000
Proceeds from sale of equipment -- 43,867 -- 43,867
------------------ ------------ ------------ ------------
Net cash provided by (used in) investing activities 2,813,842 (3,874,434) -- (1,060,592)
------------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Line of credit, net (6,500,000) -- -- (6,500,000)
Payment of 11.653% Senior Secured Notes issuance costs (1,410,945) -- -- (1,410,945)
Cash paid to reduce long-term debt -- (104,808) -- (104,808)
Cash advances to/from affiliates 23,320,991 (20,275,494) (3,045,497) (a) --
Distribution to Barden Development, Inc. (1,844,206) -- -- (1,844,206)
------------------ ------------ ------------ ------------
Net cash provided by (used in) financing activities 13,565,840 (20,380,302) (3,045,497) (9,859,959)
------------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 5,810,780 (1,849,372) -- 3,961,408
Cash and cash equivalents, beginning of period 498,363 17,206,452 -- 17,704,815
------------------ ------------ ------------ ------------
Cash and cash equivalents, end of period $ 6,309,143 $ 15,357,080 $ -- $ 21,666,223
================== ============ ============ ============
(a) To eliminate intercompany receivables and payables.
15
NOTE 10. SUPPLEMENTAL CONSOLIDATING INFORMATION
The following information presents consolidating balance sheets as of
September 30, 2002, consolidating statements of operations for the three and
nine months ended September 30, 2002, and consolidating statements of cash flows
for the nine months ended September 30, 2002.
16
MAJESTIC INVESTOR HOLDINGS, LLC
CONSOLIDATING BALANCE SHEETS AS OF SEPTEMBER 30, 2002
(UNAUDITED)
Barden Barden Barden
Mississippi Colorado Nevada
Parent Gaming, LLC Gaming, LLC Gaming, LLC Elimination Consolidated
ASSETS
Current Assets:
Cash and cash equivalents $ 6,309,143 $ 8,186,736 $ 2,945,457 $ 4,224,887 $ $ 21,666,223
Accounts receivable (net) 43,919 656,863 60,583 423,955 1,185,320
Inventories -- 395,545 153,283 261,106 809,934
Prepaid expenses and other 46,467 367,852 151,510 1,165,806 1,731,635
Receivable from related party 4,116,611 17,912 -- 1,022 (4,135,545) --
Note receivable from related party 700,000 -- -- -- 700,000
------------- ------------- ------------- ------------ ------------- -------------
Total current assets 11,216,140 9,624,908 3,310,833 6,076,776 (4,135,545) 26,093,112
------------- ------------- ------------- ------------ ------------- -------------
Property and equipment, net -- 68,609,555 22,163,800 28,234,595 119,007,950
Intangible assets, net -- 7,148,717 3,756,780 7,185,000 18,090,497
Goodwill -- 3,997,904 1,523,716 -- 5,521,620
Other Assets:
Deferred financing costs, net 7,025,837 -- -- -- 7,025,837
Restricted cash -- -- -- 1,000,000 1,000,000
Due from related parties 129,116,043 -- -- -- (129,116,043) --
Other assets and deposits -- 450,616 141,363 968,070 1,560,049
Investment in subsidiaries 16,459,909 -- -- -- (16,459,909) --
------------- ------------- ------------- ------------ ------------- -------------
Total other assets 152,601,789 450,616 141,363 1,968,070 (145,575,952) 9,585,886
------------- ------------- ------------- ------------ ------------- -------------
Total Assets $ 163,817,929 $ 89,831,700 $ 30,896,492 $ 43,464,441 $(149,711,497) $ 178,299,065
============= ============= ============= ============ ============= =============
LIABILITIES AND MEMBERS' DEFICIT
Current Liabilities:
Current maturities of long-term debt $ -- $ -- $ -- $ 142,714 $ $ 142,714
Accounts payable -- 411,560 688,268 820,147 1,919,975
Other accrued liabilities:
Payroll and related -- 2,232,612 575,226 1,420,306 4,228,144
Interest 5,928,736 -- -- -- 5,928,736
Progressive jackpots -- 671,392 1,360,965 229,137 2,261,494
Slot club liabilities -- 144,867 357,245 28,777 530,889
Other accrued liabilities 248,086 2,254,133 1,936,138 1,033,897 5,472,254
------------- ------------- ------------- ------------ ------------- -------------
Total current liabilities 6,176,822 5,714,564 4,917,842 3,674,978 -- 20,484,206
------------- ------------- ------------- ------------ ------------- -------------
Due to related parties 992,165 71,626,546 20,259,598 41,398,237 (133,251,588) 1,024,958
Long-term debt, net of current maturities 146,042,039 -- -- 140,959 146,182,998
------------- ------------- ------------- ------------ ------------- -------------
Total Liabilities 153,211,026 77,341,110 25,177,440 45,214,174 (133,251,588) 167,692,162
Commitments and contingencies
Members' Equity:
Members' contributions 13,803,192 -- -- -- -- 13,803,192
Accumulated earnings (deficit) (3,196,289) 12,490,590 5,719,052 (1,749,733) (16,459,909) (3,196,289)
------------- ------------- ------------- ------------ ------------- -------------
Total members' equity (deficit) 10,606,903 12,490,590 5,719,052 (1,749,733) (16,459,909) 10,606,903
Total Liabilities and Member's
Equity (Deficit) $ 163,817,929 $ 89,831,700 $ 30,896,492 $ 43,464,441 $(149,711,497) $ 178,299,065
============= ============= ============= ============ ============= =============
17
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2002 (UNAUDITED)
BARDEN BARDEN BARDEN
MISSISSIPPI COLORADO NEVADA
PARENT GAMING, LLC GAMING, LLC GAMING, LLC ELIMINATION CONSOLIDATED
REVENUES:
Casino $ -- $ 22,952,028 $ 9,892,182 $ 8,998,609 $ $ 41,842,819
Rooms -- 2,110,610 -- 1,698,765 3,809,375
Food and beverage -- 2,341,432 521,095 2,073,895 4,936,422
Other -- 325,545 72,208 629,949 1,027,702
----------- ------------ ------------ ------------ ----------- ------------
Gross Revenues -- 27,729,615 10,485,485 13,401,218 -- 51,616,318
less promotional allowances -- (5,320,535) (1,423,696) (1,566,234) (8,310,465)
----------- ------------ ------------ ------------ ----------- ------------
Net Revenues -- 22,409,080 9,061,789 11,834,984 43,305,853
COSTS AND EXPENSES:
Casino -- 7,814,426 2,557,076 4,700,235 15,071,737
Rooms -- 971,875 -- 1,370,897 2,342,772
Food and beverage -- 779,222 287,748 1,797,863 2,864,833
Other -- 88,848 162,679 144,607 396,134
Gaming taxes -- 2,743,713 1,539,753 697,675 4,981,141
Advertising and promotion -- 1,379,939 758,257 712,722 2,850,918
General and administrative 8,175 2,897,863 1,128,437 2,395,040 6,429,515
Depreciation and amortization 657,668 1,866,026 363,669 937,977 3,825,340
Loss on disposal of assets -- -- 9,889 -- 9,889
----------- ------------ ------------ ------------ ----------- ------------
Total costs and expenses 665,843 18,541,912 6,807,508 12,757,016 38,772,279
----------- ------------ ------------ ------------ ----------- ------------
Operating income (665,843) 3,867,168 2,254,281 (922,032) 4,533,574
OTHER INCOME (EXPENSE):
Interest income 19,190 8,478 2,398 3,154 33,220
Interest expense (4,454,389) -- -- (8,574) (4,462,963)
Other non-operating expense (10,931) -- -- -- (10,931)
Equity in net income (loss) of subsidiaries 5,204,873 -- -- -- (5,204,873) --
----------- ------------ ------------ ------------ ----------- ------------
Total other income (expense) 758,743 8,478 2,398 (5,420) (5,204,873) (4,440,674)
----------- ------------ ------------ ------------ ----------- ------------
Net income (loss) $ 92,900 $ 3,875,646 $ 2,256,679 $ (927,452) $(5,204,873) $ 92,900
=========== ============ ============ ============ =========== =============
18
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2002 (UNAUDITED)
BARDEN BARDEN BARDEN
MISSISSIPPI COLORADO NEVADA
PARENT GAMING, LLC GAMING, LLC GAMING, LLC ELIMINATION CONSOLIDATED
REVENUES:
Casino $ -- $ 68,608,974 $ 27,666,361 $ 28,348,575 $ -- $ 124,623,910
Rooms -- 6,271,670 -- 5,565,092 -- 11,836,762
Food and beverage -- 7,129,605 1,480,106 6,308,274 -- 14,917,985
Other -- 1,048,210 189,446 1,657,331 -- 2,894,987
------------ ------------ ------------ ------------ ------------ -------------
Gross Revenues -- 83,058,459 29,335,913 41,879,272 -- 154,273,644
less promotional allowances -- (16,543,257) (4,366,452) (4,358,429) -- (25,268,138)
------------ ------------ ------------ ------------ ------------ -------------
Net Revenues -- 66,515,202 24,969,461 37,520,843 -- 129,005,506
COSTS AND EXPENSES:
Casino -- 23,776,579 7,471,672 13,950,433 -- 45,198,684
Rooms -- 2,609,641 -- 4,174,590 -- 6,784,231
Food and beverage -- 2,251,300 823,919 5,496,485 -- 8,571,704
Other -- 256,831 488,023 426,719 -- 1,171,573
Gaming taxes -- 8,176,420 4,385,416 2,218,134 -- 14,779,970
Advertising and promotion -- 4,285,805 2,336,443 3,282,298 -- 9,904,546
General and administrative 19,878 7,871,538 3,320,584 7,109,796 -- 18,321,796
Depreciation and amortization 1,930,193 5,481,301 1,091,005 2,203,006 -- 10,705,505
(Gain)/loss on disposal of assets -- (6,542) 15,853 -- -- 9,311
Pre-opening expenses 124,269 -- -- -- -- 124,269
------------ ------------ ------------ ------------ ------------ -------------
Total costs and expenses 2,074,340 54,702,873 19,932,915 38,861,461 -- 115,571,589
------------ ------------ ------------ ------------ ------------ -------------
Operating income (2,074,340) 11,812,329 5,036,546 (1,340,618) -- 13,433,917
OTHER INCOME (EXPENSE):
Interest income 53,988 22,925 7,778 10,333 -- 95,024
Interest expense (13,546,708) -- (625) (24,488) -- (13,571,821)
Other non-operating expense (38,306) -- -- -- -- (38,306)
Equity in net income (loss)
of subsidiaries 15,524,180 -- -- -- (15,524,180) --
------------ ------------ ------------ ------------ ------------ -------------
Total other income (expense) 1,993,154 22,925 7,153 (14,155) (15,524,180) (13,515,103)
------------ ------------ ------------ ------------ ------------ -------------
Net income (loss) $ (81,186) $ 11,835,254 $ 5,043,699 $ (1,354,773) $(15,524,180) $ (81,186)
============ ============ ============ ============ ============ =============
19
MAJESTIC INVESTOR HOLDINGS, LLC
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2002 (UNAUDITED)
BARDEN BARDEN BARDEN
MISSISSIPPI COLORADO NEVADA
PARENT GAMING, LLC GAMING, LLC GAMING, LLC ELIMINATION CONSOLIDATED
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (81,186) $ 11,835,254 $ 5,043,699 $(1,354,773) $(15,524,180) $ (81,186)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation -- 4,853,363 725,192 1,706,580 -- 7,285,135
Amortization 1,930,193 627,938 365,813 496,426 -- 3,420,370
Income from wholly-owned subsidiaries (15,524,180) -- -- -- 15,524,180 --
(Gain) loss on sale of assets -- (6,542) 15,853 -- -- 9,311
Changes in operating assets and liabilities:
Decrease in accounts receivable, net 225,582 (64,340) 19,632 200,108 -- 380,982
(Increase) decrease in inventories -- (27,398) 60,580 114,449 -- 147,631
Increase in prepaid expenses (39,000) (34,489) (49,421) (673,038) -- (795,948)
(Increase) decrease in other assets 1,035,122 24,864 2,597 (183,401) -- 879,182
Increase (decrease) in accounts payable -- (287,968) 222,642 (157,802) -- (223,128)
Increase (decrease) in amounts due to related
parties, net (1,691,556) (1,715,343) (1,313,930) 1,540,681 (3,045,497) (134,651)
Decrease in accrued payroll and other expenses -- (163,665) (148,877) (551,876) -- (864,418)
Increase in accrued interest 4,719,957 -- -- -- -- 4,719,957
Increase (decrease) in other accrued
liabilities (1,143,834) 215,735 1,698,129 (631,308) -- 138,722
------------ ------------ ----------- ----------- ------------ ------------
Net cash provided by (used in) operating
activities (10,568,902) 15,257,409 6,641,909 506,046 (3,045,497) 14,881,959
------------ ------------ ----------- ----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, equipment and
improvements -- (1,820,112) (963,452) (1,134,737) -- (3,918,301)
Payment of acquisition related costs (986,158) -- -- -- -- (986,158)
Proceeds from seller from purchase price
adjustment 3,800,000 -- -- -- -- 3,800,000
Proceeds from sale of equipment -- 6,542 37,325 -- -- 43,867
------------ ------------ ----------- ----------- ------------ ------------
Net cash provided by (used in) investing
activities 2,813,842 (1,813,570) (926,127) (1,134,737) -- (1,060,592)
------------ ------------ ----------- ----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Line of credit, net (6,500,000) -- -- -- -- (6,500,000)
Payment of 11.653% Senior Secured Notes
issuance costs (1,410,945) -- -- -- -- (1,410,945)
Cash paid to reduce long-term debt -- -- -- (104,808) -- (104,808)
Cash advances to/from affiliates, net 23,320,991 (13,709,447) (6,566,047) -- (3,045,497) --
Distribution to Barden Development, Inc. (1,844,206) -- -- -- -- (1,844,206)
------------ ------------ ----------- ----------- ------------ ------------
Net cash provided by (used in) financing
activities 13,565,840 (13,709,447) (6,566,047) (104,808) (3,045,497) (9,859,959)
------------ ------------ ----------- ----------- ------------ ------------
Net increase (decrease) in cash and cash
equivalents 5,810,780 (265,608) (850,265) (733,499) -- 3,961,408
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 $ 6,309,143 $ 8,186,736 $ 2,945,457 $ 4,224,887 $ -- $ 21,666,223
------------ ------------ ----------- ----------- ------------ ------------
20
NOTE 11. SUBSEQUENT EVENTS
On October 17, 2002, the Company redeemed $865,000 of the 11.653% Senior
Secured Notes at a discount to par of 87 3/4%, plus accrued interest of $38,359.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
STATEMENT OF FORWARD-LOOKING INFORMATION
This quarterly 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", "plans", "intends", "will", "could" 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 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. Therefore, the discussion of operations herein will focus on
events and the Company's revenues and expenses during the three and nine months
ended September 30, 2002 and the combined results of operations of the three
Fitzgeralds casino properties for the quarter and nine months ended September
30, 2001. All prior year comparative financial information for the Fitzgeralds
properties has been derived from the predecessor's unaudited financial
statements and other financial disclosures made to the public.
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
21
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 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.
On October 21, 2002, Jon S. Bennett was named as the Company's Vice
President and Chief Financial Officer. Mr. Bennett will oversee all aspects of
the Company's financial management, accounting and reporting processes for its
four casinos and two hotels.
RESULTS OF OPERATIONS
The following table sets forth information derived from the Company's
consolidated statements of operations for the three and nine months ended
September 30, 2002, and the combined statements of operations for Fitzgeralds
Las Vegas, Inc., Fitzgeralds Mississippi, Inc. and 101 Main Street Limited
Liability Company for the quarter and three quarters ended September 30, 2001,
expressed as a percentage of gross revenues.
22
CONSOLIDATED STATEMENTS OF OPERATIONS - SUMMARY INFORMATION
(dollars in thousands)
SUCCESSOR PREDECESSOR SUCCESSOR PREDECESSOR
------------------ ------------- ----------------- --------------------
THREE MONTHS ENDED QUARTER ENDED NINE MONTHS ENDED THREE QUARTERS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2002 2001 2002 2001
-------------------------------------------------------------------------------------------
Gross Revenues $ 51,616 $ 51,468 $ 154,274 $ 153,428
Operating Income $ 4,534 $ 8,614 $ 13,434 $ 24,023
Adjusted EBITDA (1) $ 8,369 $ 7,693 $ 24,273 $ 24,124
CONSOLIDATED STATEMENTS OF OPERATIONS - PERCENTAGE OF GROSS REVENUES
SUCCESSOR PREDECESSOR SUCCESSOR PREDECESSOR
------------------ ------------- ----------------- --------------------
THREE MONTHS ENDED QUARTER ENDED NINE MONTHS ENDED THREE QUARTERS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2002 2001 2002 2001
-------------------------------------------------------------------------------------------
REVENUES:
Casino 81.0 % 81.0 % 80.7 % 80.3 %
Rooms 7.4 % 7.6 % 7.7 % 8.0 %
Food and beverage 9.6 % 9.7 % 9.7 % 9.8 %
Other 2.0 % 1.7 % 1.9 % 1.9 %
---------- --------------- ------------------- -----------------
Gross Revenues 100.0 % 100.0 % 100.0 % 100.0 %
less promotional allowances (16.1)% (15.8)% (16.4)% (15.5)%
---------- --------------- ------------------- -----------------
Net Revenues 83.9 % 84.2 % 83.6 % 84.5 %
COSTS AND EXPENSES:
Casino 29.2 % 27.3 % 29.3 % 27.5 %
Rooms 4.5 % 5.1 % 4.4 % 5.3 %
Food and beverage 5.6 % 5.6 % 5.6 % 5.7 %
Other 0.8 % 0.9 % 0.8 % 0.9 %
Gaming taxes 9.7 % 9.6 % 9.6 % 9.4 %
Advertising and promotion 5.5 % 7.3 % 6.4 % 7.4 %
General and administrative 12.5 % 11.1 % 11.9 % 12.6 %
Depreciation and amortization 7.4 % - % 6.9 % - %
Reorganization items - % 0.3 % - % 0.1 %
(Gain)/loss on disposal of assets 0.0 % 0.2 % 0.0 % 0.1 %
Pre-opening expenses - % - % 0.1 % - %
---------- --------------- ------------------- -----------------
Total costs and expenses 75.2 % 67.4 % 75.0 % 69.0 %
---------- --------------- ------------------- -----------------
Operating income 8.7 % 16.8 % 8.6 % 15.5 %
OTHER INCOME (EXPENSE):
Interest income (0.0)% 0.0 % (0.0)% 0.0 %
Interest expense (8.6)% (0.0)% (8.8)% (0.0)%
Other non-operating expense (0.0)% 0.0 % (0.0)% 0.0 %
---------- --------------- ------------------- -----------------
Total other income (expense) (8.6)% 0.0 % (8.8)% 0.0 %
---------- --------------- ------------------- -----------------
Net income (loss) 0.1 % 16.8 % (0.2)% 15.5 %
========== =============== ================== =================
Adjusted EBITDA: (1) 16.2 % 15.0 % 15.7 % 15.7% %
NOTES:
(1) Adjusted EBITDA (defined as earnings before interest, income taxes,
depreciation and amortization, (gain)/loss on sale of assets, other
non-operating expenses and excluding pre-opening costs associated with the
acquisition of the Fitzgeralds casinos and reorganization items related to
the bankruptcy of the predecessor company) 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.
23
THREE MONTHS ENDED SEPTEMBER 30, 2002 (SUCCESSOR) COMPARED TO QUARTER ENDED
SEPTEMBER 30, 2001 (PREDECESSOR)
For the three and nine months ended September 30, 2002, the Company
utilized a calendar financial reporting period resulting in ninety-two and two
hundred seventy three days of operations, as compared to the period ended
September 30, 2001, in which a "4-4-5" (weeks) reporting period was used
resulting in ninety-one and two hundred seventy three days of operations. The
Company believes that 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 September 30,
2002 amounted to approximately $51,616,000, an increase of approximately
$148,000, or 0.3%, from gross revenues recorded in the quarter ended September
30, 2001. For the three months ended September 30, 2002, gross revenues for
Fitzgeralds Tunica accounted for $27,730,000, or 53.7% of consolidated gross
revenues, Fitzgeralds Black Hawk accounted for $10,485,000, or 20.3% of
consolidated gross revenues and Fitzgeralds Las Vegas accounted for $13,401,000,
or 26.0% of consolidated gross revenues, compared to $25,758,000, or 50.0%,
$11,448,000, or 22.2% and $14,262,000, or 27.8%, respectively, for the quarter
ended September 30, 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 September 30,
2002 totaled approximately $41,843,000, or 81.0% of consolidated gross revenues,
of which slot machines accounted for approximately $37,444,000, or 89.5%, and
table games accounted for approximately $4,399,000, or 10.5%, compared to
$41,676,000, or 81.0% of consolidated gross revenues, of which slot machines
accounted for approximately $37,418,000, or 89.8%, and table games accounted for
approximately $4,258,000, or 10.2%, for the quarter ended September 30, 2001.
Casino revenues attributed to Fitzgeralds Tunica were $22,952,000, or 82.8% of
its gross revenues, of which $20,758,000, or 90.4%, were derived from slot
machine revenues, and $2,194,000, or 9.6%, were derived from table games
revenues for the three months ended September 30, 2002, compared to $21,027,000,
or 81.6% of its gross revenues, of which $18,832,000, or 89.6%, were derived
from slot machines revenues, and $2,195,000, or 10.4%, were derived from table
games revenues for the quarter ended September 30, 2001. Casino revenues
attributed to Fitzgeralds Black Hawk were $9,892,000, or 94.3% of its gross
revenues, of which $9,700,000, or 98.1%, were derived from slot machine
revenues, and $192,000, or 1.9%, were derived from table game revenues for the
three months ended September 30, 2002 compared to $10,697,000, or 93.4% of its
gross revenues, of which $10,476,000, or 97.9%, were attributed to slot machine
revenues and $221,000, or 2.1% were derived from table game revenues for the
quarter ended September 30, 2001. Casino revenues attributed to Fitzgeralds Las
Vegas were $8,999,000, or 67.1% of its gross revenues, of which $6,986,000, or
77.6%, were derived from slot machine revenues, and $2,013,000, or 22.4%, were
derived from table game revenues for the three months ended September 30, 2002,
compared to casino revenues of $9,951,000, or 69.8% of its gross revenues, of
which $8,110,000, or 81.5%, were attributed to slot machines revenues and
$1,841,000, or 18.5%, were derived from table game revenues for the quarter
ended September 30, 2001.
The consolidated average number of slot machines in operation was 2,871
during the three months ended September 30, 2002 compared to 2,948 during the
quarter ended September 30, 2001. Fitzgeralds Tunica accounted for 1,375, or
47.9%, Fitzgeralds Black Hawk accounted for 591, or 20.6%, and Fitzgeralds Las
Vegas accounted for 905, or 31.5%. The consolidated average win per slot machine
per day was approximately $142 for the three months ended
24
September 30, 2002, with an average of approximately $164, $178 and $84 at
Fitzgeralds Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas,
respectively, compared to approximately $148, $193 and $93, respectively, for
the quarter ended September 30, 2001. The consolidated average number of table
games in operation during the three months ended September 30, 2002 was 65, of
which Tunica accounted for 34, or 52.3%, Fitzgeralds Black Hawk accounted for 6,
or 9.2%, and Fitzgeralds Las Vegas accounted for 25, or 38.5%, compared to 62,
of which Tunica accounted for 33, or 53.2%, Fitzgeralds Black Hawk accounted for
6, or 9.7%, and Fitzgeralds Las Vegas accounted for 23, or 37.1%, during the
quarter ended September 30, 2001. The consolidated average win per table game
per day during the three months ended September 30, 2002 was approximately $688,
with an average of approximately $701, $348 and $751 at Fitzgeralds Tunica,
Fitzgeralds Black Hawk and Fitzgeralds Las Vegas, respectively, compared to
approximately $713, with an average of approximately $731, $405 and $767 at
Fitzgeralds Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas,
respectively during the quarter ended September 30, 2001. With respect to
Fitzgeralds Black Hawk the maximum wager is limited to $5.00.
Consolidated room revenues for the three months ended September 30,
2002 was approximately $3,809,000, or 7.4% of gross revenues, compared to
approximately $3,911,000 or 7.6%, for the quarter ended September 30, 2001. Of
this amount, Fitzgeralds Tunica accounted for $2,110,000, or 55.4%, with 507
rooms and Fitzgeralds Las Vegas accounted for $1,699,000, or 44.6%, with 638
rooms, compared to $2,107,000, or 53.9%, at Fitzgeralds Tunica and $1,804,000,
or 46.1% at Fitzgeralds Las Vegas during the quarter ended September 30, 2001.
During the three months ended September 30, 2002, at Fitzgeralds Tunica the
average daily rate was $48 and the occupancy rate was 97.7% and at Fitzgeralds
Las Vegas the average daily rate was $33 and the occupancy rate was 88.6%,
compared to $47 and 95.6% at Fitzgeralds Tunica and $34 and 92.4% at Fitzgeralds
Las Vegas during the quarter ended September 30, 2001.
Consolidated food and beverage revenues for the three months ended
September 30, 2002 amounted to $4,936,000, or 9.6% of consolidated gross
revenues, compared to $4,984,000, or 9.7%, for the quarter ended September 30,
2001. Of this amount, Fitzgeralds Tunica accounted for $2,341,000, or 47.4%,
Fitzgeralds Black Hawk accounted for $521,000, or 10.6%, and Fitzgeralds Las
Vegas accounted for $2,074,000, or 42.0%, compared to $2,298,000, or 46.1%,
$686,000, or 13.8%, and $2,000,000, or 40.1%, respectively, during the quarter
ended September 30, 2001.
Other consolidated revenues consisted primarily of commission and
retail income and totaled approximately $1,028,000, or 2.0% of consolidated
gross revenues for the three months ended September 30, 2002, compared to
$896,000, or 1.7% of consolidated gross revenues during the quarter ended
September 30, 2001. Of this amount, Fitzgeralds Tunica accounted for $325,000,
or 31.7%, Fitzgeralds Black Hawk accounted for approximately $72,000, or 7.0%,
and Fitzgeralds Las Vegas accounted for $630,000, or 61.3%, compared to
$326,000, or 36.2%, $65,000, or 7.2%, and $507,000, or 56.6%, respectively,
during the quarter ended September 30, 2001.
Consolidated promotional allowances included in the consolidated gross
revenues for the three months ended September 30, 2002, were $8,311,000, or
16.1% of consolidated gross revenues compared to $8,155,000, or 15.8% of
consolidated gross revenues during the quarter ended September 30, 2001. Of this
amount, Fitzgeralds Tunica accounted for $5,321,000, or 64.0%, Fitzgeralds Black
Hawk accounted for $1,424,000, or 17.1%, and Fitzgeralds Las Vegas accounted for
$1,566,000, or 18.9%, compared to $4,645,000, or 57.0%, $1,923,000, or 23.6%,
and $1,587,000, or 19.4%, respectively, during the quarter ended September 30,
2001.
25
Consolidated casino operating expenses for the three months ended
September 30, 2002, were $15,072,000, or 29.2% of consolidated gross revenues
and 36.0% of casino revenues compared to $14,055,000, or 27.3% of consolidated
gross revenues and 33.7% of consolidated casino revenues during the quarter
ended September 30, 2001. These expenses were primarily comprised of salaries,
wages and benefits, and operating expenses of the casinos. Of the consolidated
casino operating expenses, Fitzgeralds Tunica accounted for $7,815,000, or
51.8%, Fitzgeralds Black Hawk accounted for $2,557,000, or 17.0%, and
Fitzgeralds Las Vegas accounted for $4,700,000, or 31.2%.
Consolidated general and administrative expenses for the three months
ended September 30, 2002 were $6,430,000, or 12.5% of consolidated gross
revenues compared to $5,707,000, or 11.1% for the quarter ended September 30,
2001. During the three months ended September 30, 2002, Fitzgeralds Tunica
accounted for $2,898,000, or 45.1%, Fitzgeralds Black Hawk accounted for
$1,129,000, or 17.6%, Fitzgeralds Las Vegas accounted for $2,395,000, or 37.3%
and unallocated corporate expenses accounted for approximately $8,000.
Consolidated depreciation and amortization for the three months ended
September 30, 2002 was approximately $3,825,000, or 7.4% of consolidated gross
revenues compared to $0 in the quarter ended September 30, 2001. The increase of
$3,825,000 was due to 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. During the three months ended September
30, 2002, Fitzgeralds Tunica accounted for $1,866,000, or 48.8%, Fitzgeralds
Black Hawk accounted for $364,000, or 9.5%, and Fitzgeralds Las Vegas accounted
for $938,000, or 24.5% of consolidated depreciation and amortization expense.
Corporate amortization of deferred financing costs accounted for $657,000, or
17.2% of consolidated depreciation and amortization expense. Of the consolidated
depreciation and amortization expense, approximately $2,475,000, or 64.7%, is
depreciation expense, and $1,350,000, or 35.3%, is amortization expense.
Consolidated operating income for the three months ended September 30,
2002 was $4,534,000, or 8.7% of consolidated gross revenues compared to
$8,614,000, or 16.8% for the quarter ended September 30, 2001. The $4,080,000
decrease was primarily due to the discontinuance of the recognition of
depreciation and amortization by the predecessor in the prior year. Fitzgeralds
Tunica accounted for operating income of $3,867,000, or 85.3%, Fitzgeralds Black
Hawk accounted for operating income of $2,254,000, or 49.7%, Fitzgeralds Las
Vegas accounted for operating loss of $922,000, or (20.3)%, and the unallocated
corporate loss principally for amortization was $666,000, or (14.7)% of
consolidated operating income for the quarter ended September 30, 2002, compared
to $5,249,000, or 60.9%, $2,649,000, or 30.8%, a loss of $281,000, or (3.3)%,
and intercompany eliminations of $997,000, or 11.7%, respectively, for the
quarter ended September 30, 2001.
Consolidated net interest expense for the three months ended September
30, 2002 was approximately $4,430,000, or 8.6% of consolidated gross revenues
compared to approximately $2,000 of net interest income during the quarter ended
September 30, 2001. The $4,432,000 increase is attributable to interest expense
associated with the 11.653% Senior Secured Notes. The predecessor companies
discontinued accruing interest on their debt on December 5, 2000 with the
commencement of the Bankruptcy Cases. Fitzgeralds Tunica accounted for interest
income of $8,000, Fitzgeralds Black Hawk accounted for interest income of
$2,000, Fitzgeralds Las Vegas accounted for net interest expense of $5,000 and
the unallocated corporate net interest expense primarily associated with the
11.653% Senior Secured Notes was approximately
26
$4,435,000 during the three months ended September 30, 2002 compared to net
interest expense of approximately $0, $0 and $2,000, respectively, during the
quarter ended September 30, 2001.
As a result of the foregoing, the Company realized a consolidated net
income of approximately $93,000 for the three months ended September 30, 2002
compared to net income of approximately $8,626,000 for the quarter ended
September 30, 2001. The $8,533,000 or 98.9% decrease is principally attributed
to an increase in depreciation and amortization expense and interest expense, as
previously discussed.
Adjusted EBITDA is presented solely as a supplemental disclosure and is
used by the Company to assist in the evaluation of the cash generating ability
of its gaming business. Consolidated Adjusted EBITDA represents earnings before
interest, income taxes, depreciation and amortization, (gain)/loss on sale of
assets, other non-operating expenses and excluding pre-opening costs associated
with the acquisition of the Fitzgeralds casinos and reorganization items related
to the bankruptcy of the predecessor company. Consolidated Adjusted EBITDA for
the three months ended September 30, 2002 was $8,369,000 of which Fitzgeralds
Tunica accounted for $5,733,000, Fitzgeralds Black Hawk accounted for
$2,628,000, Fitzgeralds Las Vegas accounted for $16,000 and approximately
$(8,000) was associated with unallocated corporate general and administrative
expenses. Consolidated Adjusted EBITDA for the quarter ended September 30, 2001
was $7,693,000 of which Fitzgeralds Tunica accounted for $5,200,000, Fitzgeralds
Black Hawk accounted for $2,641,000 and Fitzgeralds Las Vegas accounted for
$(148,000). Adjusted 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.
NINE MONTHS ENDED SEPTEMBER 30, 2002 (SUCCESSOR) COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 2001 (PREDECESSOR)
Consolidated gross revenues for the nine months ended September 30,
2002 amounted to approximately $154,274,000, an increase of $846,000, or 0.6%,
from consolidated gross revenues recorded in the nine month period ended
September 30, 2001. For the nine months ended September 30, 2002, gross revenues
for Fitzgeralds Tunica accounted for $83,059,000, or 53.8% of consolidated gross
revenues, Fitzgeralds Black Hawk accounted for $29,336,000, or 19.0% of gross
revenues and Fitzgeralds Las Vegas accounted for $41,879,000, or 27.2% of
consolidated gross revenues, compared to $77,381,000, or 50.4%, $31,292,000, or
20.4%, and $44,755,000, or 29.2%, respectively, for the nine month period ended
September 30, 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 nine months ended September 30,
2002 totaled approximately $124,624,000, or 80.7% of consolidated gross
revenues, of which slot machines accounted for approximately $110,609,000, or
88.8%, and table games accounted for approximately $14,015,000, or 11.2%,
compared to casino revenues of approximately $123,242,000, or 80.3% of
consolidated gross revenues, of which slot machines accounted for approximately
$109,525,000, or 88.9%, and table games accounted for approximately $13,717,000,
or 11.1%, for the nine month period ended September 30, 2001. Casino revenues
attributed to Fitzgeralds Tunica were $68,609,000, or 82.6% of its gross
revenues, of which $61,581,000, or 89.8%, were derived from slot machine
revenues and $7,028,000, or 10.2%, were derived from table games revenues for
the nine months ended September 30, 2002, compared to casino revenues of
approximately $63,471,000, or 82.0% of its gross revenues, of which $56,480,000,
or 89.0%, were derived from slot machine revenues and $6,991,000, or 11.0%, were
derived from table games revenues for the nine month period ended September 30,
2001. Casino revenues attributed to Fitzgeralds Black Hawk were $27,666,000, or
94.3% of its gross revenues, of which $27,126,000, or 98.0%, were derived from
slot machine revenues, and $540,000, or 2.0%, were derived from table game
revenues for the nine months ended September 30, 2002, compared to casino
revenues of approximately $29,209,000, or 93.3% of its gross revenues, of which
$28,563,000, or 97.8%, were derived from slot machines revenues and $646,000, or
2.2%, were derived from table games revenues for the nine month period ended
September 30, 2001. Casino revenues attributed to Fitzgeralds Las Vegas were
$28,349,000, or 67.7% of its gross revenues, of which $21,902,000, or 77.3%,
were derived from slot machine revenues, and $6,447,000, or 22.7%, were derived
from table game revenues for the nine months ended September 30, 2002, compared
to casino revenues of approximately $30,562,000, or 68.3% of its gross revenues,
of which $24,482,000 or 80.1%, were derived from slot machine revenues and
$6,080,000, or 19.9%, were derived from table games revenues for the nine month
period ended September 30, 2001.
The consolidated average number of slot machines in operation was 2,877
during the nine months ended September 30, 2002, compared to 2,899 during the
nine month period ended
27
September 30, 2001. Fitzgeralds Tunica accounted for 1,378, or 47.9%,
Fitzgeralds Black Hawk accounted for 593 or 20.6% and Fitzgeralds Las Vegas
accounted for 906 or 31.5%. The consolidated average win per slot machine per
day was approximately $141 for the nine months ended September 30, 2002, with an
average of approximately $164, $168 and $89 at Fitzgeralds Tunica, Fitzgeralds
Black Hawk and Fitzgeralds Las Vegas, respectively, compared to $138 for the
nine months ended September 30, 2001, with an average of approximately $155,
$176 and $93, respectively, for the nine month period ended September 30, 2001.
The consolidated average number of table games in operation during the nine
months ended September 30, 2002 was 64, of which Tunica accounted for 34, or
53.1%, Fitzgeralds Black Hawk accounted for 6, or 9.4%, and Fitzgeralds Las
Vegas accounted for 24, or 37.5%, compared to 63 during the nine months ended
September 30, 2001, of which Tunica accounted for 34, or 54.0%, Fitzgeralds
Black Hawk accounted for 6, or 9.5%, and Fitzgeralds Las Vegas accounted for 23,
or 36.5%. The consolidated average win per table game per day during the nine
months ended September 30, 2002 was approximately $748, with an average of
approximately $752, $330 and $845 at Fitzgeralds Tunica, Fitzgeralds Black Hawk
and Fitzgeralds Las Vegas, respectively, compared to approximately $752, with an
average of approximately $761, $394 and $832 at Fitzgeralds Tunica, Fitzgeralds
Black Hawk and Fitzgeralds Las Vegas, respectively during the nine month period
ended September 30, 2001. At Fitzgeralds Black Hawk the maximum wager is limited
to $5.00.
Consolidated room revenues for the nine months ended September 30, 2002
was approximately $11,837,000, or 7.7% of gross revenues compared to
approximately $12,309,000 or 8.0% for the nine month period ended September 30,
2001. Of this amount, Fitzgeralds Tunica accounted for $6,272,000, or 53.0% with
507 rooms and Fitzgeralds Las Vegas accounted for $5,565,000, or 47.0%, with 638
rooms compared to $6,182,000 or 50.2% at Fitzgeralds Tunica and $6,127,000 or
49.8% at Fitzgeralds Las Vegas during the nine months ended September 30, 2001.
During the nine months ended September 30, 2002, at Fitzgeralds Tunica the
average daily rate was $49 and the occupancy rate was 95.1% and at Fitzgeralds
Las Vegas the average daily rate was $36 and the occupancy rate was 88.8%
compared to the $48 and 93.3% and $38 and 93.6%, respectively during the nine
month period ended September 30, 2001.
Consolidated food and beverage revenues for the nine months ended
September 30, 2002 amounted to $14,918,000, or 9.7% of consolidated gross
revenues compared to $14,995,000 or 9.8% of consolidated gross revenues for the
nine months ended September 30, 2001. Of this amount, Fitzgeralds Tunica
accounted for $7,130,000, or 47.8%, Fitzgeralds Black Hawk accounted for
$1,480,000, or 9.9% and Fitzgeralds Las Vegas accounted for $6,308,000, or 42.3%
during the nine months ended September 30, 2002, compared to $6,833,000 or
45.6%, $1,847,000 or 12.3% and $6,315,000 or 42.1%, respectively, during the
nine month period ended September 30, 2001.
Other consolidated revenues consisted primarily of commission and
retail income and totaled approximately $2,895,000, or 1.9% of consolidated
gross revenues for the nine months ended September 30, 2002 compared to
$2,883,000, or 1.9% of consolidated gross revenues during the nine month period
ended September 30, 2001. Of this amount, Fitzgeralds Tunica accounted for
$1,048,000 or 36.2%, Fitzgeralds Black Hawk accounted for approximately $190,000
or 6.6%, and Fitzgeralds Las Vegas accounted for $1,657,000, or 57.2% during the
nine months ended September 30, 2002, compared to $896,000 or 31.1%, $236,000 or
8.2% and $1,751,000 or 60.7%, respectively, during the nine month period ended
September 30, 2001.
Consolidated promotional allowances included in the consolidated gross
revenues for the nine months ended September 30, 2002, were $25,268,000, or
16.4% of consolidated gross
28
revenues compared to $23,736,000, or 15.5% of consolidated gross revenues during
the nine month period ended September 30, 2001. Of this amount, Fitzgeralds
Tunica accounted for $16,543,000, or 65.5%, Fitzgeralds Black Hawk accounted for
$4,367,000, or 17.3%, and Fitzgeralds Las Vegas accounted for $4,358,000, or
17.2%, during the nine months ended June 30, 2002, compared to $14,205,000, or
59.9%, $5,376,000, or 22.6% and $4,155,000 or 17.5%, respectively, during the
nine month period ended September 30, 2001.
Consolidated casino operating expenses for the nine months ended
September 30, 2002, were $45,199,000, or 29.3% of consolidated gross revenues
and 36.3% of consolidated casino revenues compared to $42,181,000, or 27.5% of
consolidated gross revenues and 34.2% of consolidated casino revenues during the
nine month period ended September 30, 2001. These expenses were primarily
comprised of salaries, wages and benefits, and operating expenses of the
casinos. Of the consolidated casino operating expenses, Fitzgeralds Tunica
accounted for $23,777,000, or 52.6%, Fitzgeralds Black Hawk accounted for
$7,472,000, or 16.5%, and Fitzgeralds Las Vegas accounted for $13,950,000, or
30.9%, during the nine months ended September 30, 2002, compared to $20,987,000,
or 49.8%, $7,612,000, or 18.0% and $13,582,000, or 32.2%, respectively, during
the nine month period ended September 30, 2001.
Consolidated general and administrative expenses for the nine months
ended September 30, 2002 were $18,322,000, or 11.9% of consolidated gross
revenues, compared to $19,306,000, or 12.6%, for the nine month period ended
September 30, 2001. During the nine months ended September 30, 2002 Fitzgeralds
Tunica accounted for $7,871,000, or 43.0%, Fitzgeralds Black Hawk accounted for
$3,321,000, or 18.1%, Fitzgeralds Las Vegas accounted for $7,110,000, or 38.9%
and unallocated corporate expenses accounted for approximately $20,000, compared
to $8,415,000, or 43.6%, $3,539,000, or 18.3% and $7,352,000, or 38.1%,
respectively, during the nine month period ended September 30, 2001.
Consolidated depreciation and amortization for the nine months ended
September 30, 2002 was approximately $10,705,000, or 6.9% of consolidated gross
revenues compared to $0 in the nine month period ended September 30, 2001. The
increase of $10,705,000 was due to the discontinuance of the recognition of
depreciation and amortization by the predecessor company subsequent to the
filing of the bankruptcy cases on December 5, 2000. During the nine months ended
September 30, 2002, Fitzgeralds Tunica accounted for $5,481,000, or 51.2%,
Fitzgeralds Black Hawk accounted for $1,091,000, or 10.2%, and Fitzgeralds Las
Vegas accounted for $2,203,000, or 20.6%. Corporate amortization of deferred
financing costs accounted for $1,930,000, or 18.0% of consolidated depreciation
and amortization expense. Of the consolidated depreciation and amortization
expense, approximately $7,285,000, or 68.1%, is depreciation expense, and
$3,420,000, or 31.9%, is amortization expense.
Consolidated operating income for the nine months ended September 30,
2002 was $13,434,000, or 8.6% of consolidated gross revenues compared to
$24,023,000 or 15.7% for the nine month period ended September 30, 2001. The
$10,589,000 decrease is primarily due to the discontinuance of the recognition
of depreciation and amortization by the predecessor in the prior year.
Fitzgeralds Tunica accounted for operating income of $11,812,000, or 87.9%,
Fitzgeralds Black Hawk accounted for operating income of $5,037,000, or 37.5%,
Fitzgeralds Las Vegas accounted for operating loss of $1,341,000, or (10.0%),
and the unallocated corporate loss principally for amortization was $2,074,000
or (15.4%) of consolidated operating income for the nine months ended September
30, 2002.
Consolidated net interest expense for the nine months ended September
30, 2002 was approximately $13,477,000 or 8.8% of consolidated gross revenues
compared to $7,000 net
29
interest expense during the period ended September 30, 2001. The $13,470,000
increase is attributable to interest expense associated with the 11.653% Senior
Secured Notes. The predecessor companies discontinued accruing interest on their
debt on December 5, 2000 with the commencement of the Bankruptcy Cases.
Fitzgeralds Tunica accounted for interest income of $23,000, Fitzgeralds Black
Hawk accounted for net interest income of $7,000, Fitzgeralds Las Vegas
accounted for net interest expense of $14,000 and the unallocated corporate net
interest expense associated with the 11.653% Senior Secured Notes was
approximately $13,493,000 during the nine months ended September 30, 2002
compared to net interest expense of $5,000, $4,000 and net interest income of
$2,000 respectively, for the nine month period ended September 30, 2001.
As a result of the foregoing, the Company realized a consolidated net
loss of $81,000 for the nine months ended September 30, 2002 compared to net
income of $24,047,000 during the nine months ended September 30, 2001. The
$24,128,000 decrease in net income is principally attributed to an increase in
depreciation and amortization expense and interest expense as previously
discussed.
Adjusted EBITDA is presented solely as a supplemental disclosure and is
used by the Company to assist in the evaluation of the cash generating ability
of its gaming business. Consolidated Adjusted EBITDA represents earnings before
interest, income taxes, depreciation and amortization, (gain)/loss on sale of
assets, other non-operating expenses and excluding pre-opening costs associated
with the acquisition of the Fitzgeralds casinos and reorganization items related
to the bankruptcy of the predecessor company. Consolidated Adjusted EBITDA for
the nine months ended September 30, 2002 was $24,273,000, of which Fitzgeralds
Tunica accounted for $17,287,000, Fitzgeralds Black Hawk accounted for
$6,144,000, Fitzgeralds Las Vegas accounted for $862,000 and approximately
$(20,000) was associated with unallocated corporate general and administrative
expenses. Adjusted 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.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2002, the Company had cash and cash equivalents of
approximately $21.7 million. Cash and cash equivalents included $6.3 million at
Majestic Investor Holdings, LLC, $8.2 million at Fitzgeralds Mississippi, $3.0
million at Fitzgeralds Black Hawk and $4.2 million at Fitzgeralds Las Vegas.
The Company has met its capital requirements to date through net cash
from operations and proceeds of $3.8 million from Fitzgeralds Gaming Corporation
related to the purchase price adjustment on certain assets and liabilities
acquired on December 6, 2001. For the nine months ended September 30, 2002, net
cash provided by operating activities totaled approximately $14.9 million. For
the nine months ended September 30, 2002, cash used by investing activities
totaled approximately $1.1 million. For the nine months ended September 30,
2002, cash used by financing activities totaled approximately $9.9 million.
Approximately $6.5 million was repaid on the outstanding line of credit and
approximately $1.4 million was expended for professional fees related to the
issuance of the Company's 11.653% Senior Secured Notes during the nine months
ended September 30, 2002. As of November 14, 2002, there are no outstanding
borrowings under the Company's $15.0 million credit facility. Also during the
nine months ended September 30, 2002, cash distributions were made to BDI, Inc.
under the Management Agreement totaling approximately $1.8 million.
In connection with the issuance by the Company of $152,632,000 of
unregistered 11.653% Senior Secured Notes due 2007 (the "Unregistered Notes") on
December 6, 2001, the Company entered in a registration rights agreement
pursuant to which the Company agreed to file with the Securities and Exchange
Commission ("SEC") a registration statement (the
30
"Registration Statement") to exchange up to $152,632,000 principal amount of
11.653% Senior Secured Notes due 2007 registered under the Securities Act of
1933 (the "Registered Notes") for any and all of its outstanding Unregistered
Notes. The registration rights agreement requires the Company to pay liquidated
damages to the holders of the Unregistered Notes if the Registration Statement
was not declared effective by the SEC on or prior to April 5, 2002. The
Registration Statement was declared effective by the SEC on August 8, 2002 and
the Company is required to pay liquidated damages pursuant to the terms of the
registration rights agreement for the period from April 6, 2002 until August 8,
2002. On May 31, 2002, in connection with the first scheduled interest payment
on the Unregistered Notes, the Company made its initial liquidated damages
payment of $61,053 to the holders of the Notes. The final liquidated damages
payment of $114,474 will be paid to the holders of the Unregistered Notes with
the next scheduled interest payment on November 30, 2002. Pursuant to the
Registration Statement, the offer to exchange the Registered Notes for any or
all of the Unregistered Notes commenced on August 8, 2002 and was completed on
Friday, September 6, 2002 at 5p.m. Eastern Standard Time. On October 17, 2002,
the Company redeemed $865,000 of the 11.653% Senior Secured Notes at a discount
to par of 87 3/4%, plus accrued interest of $38,359.
Management believes that the Company's cash flow from operations and
its current line of credit will be adequate to meet the Company's anticipated
future requirements for working 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 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" which is effective for fiscal
years beginning after May 15, 2002. SFAS No. 145 updates, clarifies and
simplifies existing accounting pronouncements. Management does not expect SFAS
No. 145 to have a material impact on the Company's consolidated financial
position, results of operations or cash flows.
In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities" which will become effective for
exit or disposal activities initiated after December 31, 2002. SFAS No. 146
supercedes Emerging Issues Task Force Issue No. 94-3 "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity." SFAS
No. 146 requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred and states that an
entity's commitment to an exit plan, by itself, does not create a present
obligation that meets the definition of a liability. SFAS No. 146 also
establishes that fair value is the objective for initial measurement of the
liability. Adoption of SFAS No. 146 will have no impact on historical
consolidated financial position or results of operations.
In October 2002, the FASB issued SFAS No. 147, "Acquisition of
Certain Financial Institutions," which is not applicable to the Company.
31
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.
ITEM 4. CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including its Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Rule 15d-15 of the
Securities Exchange Act of 1934. Based upon that evaluation, the Company's Chief
Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective in timely alerting them to
material information relating to the Company required to be disclosed in the
Company's periodic SEC reports. There have been no significant changes in the
Company's internal controls or in other factors which could significantly affect
internal controls subsequent to the date the Company carried out its evaluation.
32
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibit numbers in the following list correspond to the
number assigned to such exhibits in the Exhibit Table of Item
601 of Regulation S-K:
Exhibit
Numbers Description
------- -----------
10.1 Employment Agreement dated as of October
21, 2002 by and between the Company and
Jon Scott Bennett, filed herewith.
99.1 Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002
99.2 Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002
(b) On August 8, 2002, the Company filed a Report on Form 8-K
under Item 9 announcing an offer to exchange up to
$152,632,000 principal amount of 11.653% Senior Secured Notes
due 2007. On September 9, 2002, the Company filed a Report on
Form 8-K under Item 9 announcing the successful completion of
the exchange offer.
33
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: /s/ Don H. Barden November 13, 2002
---------------------------------------------------------
Don H. Barden, President and Chief Executive Officer
By: /s/ Jon S. Bennett November 13, 2002
----------------------------------------------------------
Jon S. Bennett, Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
MAJESTIC INVESTOR CAPITAL CORP.
By: /s/ Don H. Barden November 13, 2002
---------------------------------------------------------
Don H. Barden, President and Chief Executive Officer
By: /s/ Jon S. Bennett November 13, 2002
----------------------------------------------------------
Jon S. Bennett, Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
34
CERTIFICATIONS
I, Don H. Barden, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Majestic Investor
Holdings, LLC and Majestic Investor Capital Corp.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact necessary to make the statements made, in
light of the circumstances under with such statements were made, not
misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a - 14 and 15d - 14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 13, 2002
/s/ Don H. Barden
- -----------------------------------------
Don H. Barden
President and Chief Executive Officer
35
I, Jon S. Bennett, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Majestic Investor
Holdings, LLC and Majestic Investor Capital Corp.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact necessary to make the statements made, in
light of the circumstances under with such statements were made, not
misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a - 14 and 15d - 14) for the registrant and have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 13, 2002
/s/ Jon S. Bennett
- -----------------------------------------
Jon S. Bennett
Vice President and Chief Financial Officer
36
EXHIBIT INDEX
Exhibit
Numbers Description
- ------- -----------
10.1 Employment Agreement dated as of October 21, 2002
by and between the Company and Jon Scott Bennett,
filed herewith.
99.1 Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
99.2 Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002