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 March 31, 2002
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 333-81584
Delaware MAJESTIC INVESTOR HOLDINGS, LLC 33-4468392
Delaware MAJESTIC INVESTOR CAPITAL CORP. 36-4471622
(State or other (Exact name of registrant as specified (I.R.S. Employer
jurisdiction in its charter) Identification No.)
of incorporation
or organization)
One Buffington Harbor Drive
Gary, Indiana
46406-3000
(219) 977-7823
(Registrant's address and telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days.
Yes ______ No __X___
Shares outstanding of each of the registrant's classes of common stock as of
March 31, 2002:
Class Number of shares
- ----- ----------------
Not applicable Not applicable
MAJESTIC INVESTOR HOLDINGS, LLC
Index
PART I FINANCIAL INFORMATION Page No.
--------
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets, as of March 31, 2002
and December 31, 2001 ...............................................1
Consolidated Statement of Operations for the three months
ended March 31, 2002 ................................................2
Consolidated Statement of Cash Flows for the three months
ended March 31, 2002 ................................................3
Notes to Financial Statements ........................................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................18
Item 3. Quantitative and Qualitative Disclosures About Market Risk ..........24
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ....................................24
SIGNATURES ...................................................................... 25
i
PART 1 - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
MAJESTIC INVESTOR HOLDINGS, LLC
Consolidated Balance Sheets
(Unaudited)
March 31, December 31,
2002 2001
ASSETS
Current Assets:
Cash and cash equivalents $ 17,324,526 $ 17,704,815
Accounts receivable, less allowance for doubtful accounts
of $261,702 and $248,042, respectively 1,388,016 1,464,834
Inventories 886,482 957,564
Prepaid expenses 1,581,998 1,212,653
Due from Seller 269,782 82,832
Note receivable from related party 700,000 700,000
Other 42,283 15,552
------------ -------------
Total current assets 22,193,087 22,138,250
------------ -------------
Property, equipment, and barge improvements, net 121,236,901 122,427,962
Intangible assets (net) 18,892,928 19,290,753
Goodwill 10,897,775 10,602,250
Other Assets:
Deferred financing costs, less accumulated amortization
of $391,375 and $83,897, respectively 7,105,971 7,023,706
Restricted cash 1,000,000 1,000,000
Other assets and deposits 1,523,863 945,618
------------- -------------
Total other assets 9,629,834 8,969,324
------------- -------------
Total Assets $ 182,850,525 $ 183,428,539
============= =============
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 1,836,099 $ 6,656,574
Accounts payable 1,550,489 1,946,730
Other accrued liabilities:
Payroll and related 4,317,326 5,006,114
Interest 5,645,784 1,208,779
Progressive jackpots 2,396,782 2,274,050
Slot club liability 2,376,608 2,241,876
Other accrued liabilities 4,422,778 5,043,988
------------- -------------
Total current liabilities 22,545,866 24,378,111
------------- -------------
Due to related parties 1,341,688 1,177,829
Long-term debt, net of current maturities 145,624,466 145,340,304
------------- -------------
Total Liabilities 169,512,020 170,896,244
------------- -------------
Members' Equity:
Members' contributions 13,803,192 13,803,192
Accumulated deficit (464,687) (1,270,897)
------------- -------------
Total members' equity 13,338,505 12,532,295
------------- -------------
Total Liabilities and Members' Equity $ 182,850,525 $ 183,428,539
============= =============
1
The accompanying notes are an integral part of these consolidated financial
statements.
MAJESTIC INVESTOR HOLDINGS, LLC
Consolidated Statement of Operations
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2002
2002
Revenues:
Casino $ 42,354,751
Rooms 4,088,511
Food and beverage 5,096,101
Other 888,490
------------
Gross Revenues 52,427,853
less promotional allowances (9,115,301)
------------
Net Revenues 43,312,552
------------
Costs and Expenses:
Casino 10,820,025
Rooms 3,412,439
Food and beverage 6,294,634
Other 512,960
Gaming taxes 5,019,754
Advertising and promotion 1,175,555
General and administrative 7,193,702
Depreciation and amortization 3,387,015
Pre-opening expenses 7,287
------------
Total costs and expenses 37,823,371
------------
Operating income 5,489,181
------------
Other Income (Expense):
Gain on sale of assets 6,542
Interest income 31,608
Interest expense (4,515,387)
Other non-operating expense (17,492)
------------
Total other income (expense) (4,494,729)
------------
Net income $ 994,452
============
The accompanying notes are an integral part of these financial statements.
2
MAJESTIC INVESTOR HOLDINGS, LLC
Consolidated Statement of Cash Flows
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2002
Cash Flows From Operating Activities:
Net income $ 994,452
Adjustment to reconcile net income to net cash provided by operating activities
Depreciation 2,362,841
Amortization 1,024,174
Gain on sale of assets (6,542)
Increase in accounts receivable (78,072)
Decrease in inventories 71,082
Increase in prepaid expenses (369,346)
Increase in other assets (604,976)
Decrease in accounts payable (396,241)
Decrease in related party payables (32,060)
Decrease in accrued payroll and other expenses (688,788)
Increase in accrued interest 4,437,005
Increase in other accrued liabilities 252,061
-----------
Net cash provided by operating activities 6,965,590
Cash Flows From Investing Activities:
Acquisition of property, equipment and vessel improvements (1,171,782)
Payment of acquisition related costs (796,649)
Proceeds from sale of equipment 6,542
-----------
Net cash used investing activities (1,961,889)
-----------
Cash Flows From Financing Activities:
Line of credit, net (4,800,000)
Payment of 11.653% Senior Secured Notes issuance costs (505,136)
Cash paid to reduce long-term debt (55,182)
Cash advances to/from affiliates 164,570
Distribution to Barden Development, Inc. (188,242)
-----------
Net cash used in financing activities (5,383,990)
-----------
Net decrease in cash and cash equivalents (380,289)
Cash and cash equivalents, beginning of period 17,704,815
-----------
Cash and cash equivalents, end of period $17,324,526
===========
Interest paid:
Equipment Debt $ 8,361
Line of credit $ 70,020
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 has been made. The results for the three months
ended March 31, 2002 are not necessarily indicative of results to be expected
for the full fiscal year. The financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2001.
Note 2. Recently Issued Accounting Pronouncements
In April 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 145, "Rescission of FASB statements, No. 4, 44 and 64, Amendment of
FASB Statement No. 13 and Technical Corrections." This Statement updates,
clarifies and simplifies existing accounting pronouncements. Management does not
expect the standard to have any material impact on the Company's consolidated
financial position, results of operations and cash flows.
4
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 The Majestic Star
Casino, LLC does business in the State of Indiana, the Company is subject to
certain reviews by the Indiana Gaming Commission.
The Company's directors, officers, managers and key employees are
required to hold individual licenses, the requirements for which vary from
jurisdiction to jurisdiction. Licenses and permits for gaming operations and of
individual licensees are subject to revocation or non-renewal for cause. Under
certain circumstances, holders of our securities are required to secure
independent licenses and permits.
Note 4. Acquisitions
On December 6, 2001, we completed the acquisition of substantially all
of the assets and assumed certain liabilities of Fitzgeralds Las Vegas, Inc.
("Fitzgeralds Las Vegas"), Fitzgeralds Mississippi Inc. ("Fitzgeralds Tunica")
and 101 Main Street Limited Liability Company ("Fitzgeralds Black Hawk") (the
"Fitzgeralds assets") for approximately $152.7 million in cash, which includes
the purchase price of $149.0 million and professional fees and other expenses
related to the acquisition. The parties to the acquisition entered into an
agreement, dated May 9, 2002, in which the parties agreed to a $3.8 million
reduction in the purchase price based upon an analysis of the assets purchased
and liabilities assumed. Accordingly, the purchase price is allocated to the
assets acquired and liabilities assumed based upon their estimated fair values
at the date of acquisition. We determined the estimated fair value of property
and equipment and intangible assets based upon third-party valuations.
The purchase 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.
5
Note 4. Acquisitions (Continued)
(In millions) At December 6, 2001
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 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 March 31, 2002, are as follows:
Gross Carrying Accumulated
Amount Amortization
(in thousands)
Amortized intangible assets:
Customer relationships $ 9,800 $ (390)
Tradename 3,700 (117)
Riverboat excursion license 700 -
-------- -------
Total $ 14,200 $ (507)
======== =======
Unamortized inangible assets:
Gaming license $ 5,200
--------
Total $ 5,200
========
6
Note 5. Other Intangible Assets (Continued)
The amortization expense recorded on the intangible assets for the three
months ended March 31, 2002 was $0.4 million. The estimated amortization expense
for each of the five succeeding fiscal years is as follows:
(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 three months ended
March 31, 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
--------
The increase in goodwill primarily relates to professional fees incurred by
the Company related to the acquisition of Fitzgeralds Las Vegas, Fitzgeralds
Tunica and Fitzgeralds Black Hawk.
In accordance with FAS 142, goodwill is not amortized but instead subject
to impairment tests at least annually.
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.
7
Note 7. Segment Information (Continued)
A summary of the Properties' operations by business segment for the three
months ended March 31, 2002 is presented below:
(in thousands)
Net revenues:
Fitzgeralds Tunica $ 22,250
Fitzgeralds Black Hawk 8,005
Fitzgeralds Las Vegas 13,058
--------
Total $ 43,313
--------
Income (loss) from operations:
Fitzgeralds Tunica $ 4,628
Fitzgeralds Black Hawk 1,259
Fitzgeralds Las Vegas 240
Unallocated and other (1) (638)
--------
Total $ 5,489
--------
Segment depreciation and amortization:
Fitzgeralds Tunica $ 1,780
Fitzgeralds Black Hawk 364
Fitzgeralds Las Vegas 617
Unallocated and other (1) 626
--------
Total $ 3,387
--------
Expenditures for additions to long-lived assets:
Fitzgeralds Tunica $ 513
Fitzgeralds Black Hawk 104
Fitzgeralds Las Vegas 555
--------
Total $ 1,172
--------
Segments assets:
Fitzgeralds Tunica $ 89,921
Fitzgeralds Black Hawk 30,234
Fitzgeralds Las Vegas 45,597
Unallocated and other (1) 17,099
--------
Total $182,851
--------
(1) Unallocated and other include corporate items and
eliminations that are not allocated to the operating
segments.
8
Note 8. Related Party Transactions
During the three months ended March 31, 2002, a distribution of $188,000,
related to the fourth quarter of 2001, was paid to Bardon Development Inc.
("BDI") in accordance with the Management Agreement between the Company and BDI
dated December 5, 2001.
Interest of $185,750 on a $2.0 million note made by Majestic Investor, LLC
to BDI which was later assigned to Majestic Investor Holdings, LLC remains
outstanding at March 31, 2002. BDI repaid the principal of the note in
conjunction with the closing of the acquisition on December 6, 2001.
In December 2001, the Company issued a $700,000 note to BDI. The note bears
interest at a rate of 7% per annum. The principal and accrued but unpaid
interest are due and payable in full on December 12, 2002.
Note 9. Supplemental Guarantor Financial Information
The Company's $152.6 million, 11.653% Senior Secured Notes are
unconditionally and irrevocably guaranteed, jointly and severally, by all of the
restricted subsidiaries of the Company. The guarantees rank senior in right of
payment to all existing and future subordinated indebtedness of these restricted
subsidiaries and equal in right of payment with all existing and future senior
indebtedness of these restricted subsidiaries.
The following condensed consolidating information presents financial
statements as of March 31, 2002 and December 31, 2001 and for the three months
ended March 31, 2002, of Majestic Investor Holdings, LLC, the parent Company,
the guarantor subsidiaries (on a combined basis) and the elimination entries
necessary to combine such entities on a consolidated basis. MICC, a wholly-owned
subsidiary of the Company, is a non-guarantor subsidiary. However, MICC does not
have any material assets, obligations or operations. Therefore, no non-guarantor
subsidiary has been presented below.
9
Condensed consolidating balance sheets as of March 31, 2002
Majestic Investor Guarantor Eliminating Total
Holdings, LLC Subsidiaries Entries Consolidated
ASSETS
Current Assets:
Cash and cash equivalents $ 1,270,853 $ 16,053,673 $ - $ 17,324,526
Accounts receivable (net) 3,422,233 1,189,076 (3,223,293)(a) 1,388,016
Inventories - 886,482 - 886,482
Prepaid expenses and other current assets 705,467 1,888,596 - 2,594,063
------------ ------------ ------------- ------------
Total current assets 5,398,553 20,017,827 (3,223,293) 22,193,087
------------ ------------ ------------- ------------
Property and equipment, net - 121,236,901 - 121,236,901
Intangible assets, net - 18,892,928 - 18,892,928
Due from related parties 145,209,023 - (145,209,023)(b) -
Other assets 14,923,746 5,603,863 - 20,527,609
------------ ------------ ------------- ------------
Total Assets $165,531,322 $165,751,519 $(148,432,316) $182,850,525
============ ============ ============= ============
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 1,700,000 $ 136,099 $ - 1,836,099
Accounts payable, accrued and other 6,070,253 14,639,514 - 20,709,767
------------ ------------ ------------- ------------
Total current liabilities 7,770,253 14,775,613 - 22,545,866
------------ ------------ ------------- ------------
Due to related parties 6,094,291 143,679,713 (148,432,316)(b) 1,341,688
Long-term debt, net of current maturities 145,404,301 220,165 - 145,624,466
------------ ------------ ------------- ------------
Total Liabilities 159,268,845 158,675,491 (148,432,316) 169,512,020
Members' Equity 6,262,477 7,076,028 - 13,338,505
------------ ------------ ------------- ------------
Total Liabilities and Member's Equity $165,531,322 $165,751,519 $(148,432,316) $182,850,525
============ ============ ============= ============
(a) To eliminate intercompany receivables and payables.
(b) To eliminate intercompany accounts and investment in subsidiaries
10
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
------------ ------------ ------------- ------------
Total Assets $166,876,972 $167,407,963 $(150,856,396) $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 11,596,564 935,731 - 12,532,295
------------ ------------ ------------- ------------
Total Liabilities and Member's Equity $166,876,972 $ 67,407,963 $(150,856,396) $183,428,539
============ ============ ============= ============
(a) To eliminate intercompany receivables and payables.
(b) To eliminate intercompany accounts and investment in subsidiaries
11
Condensed consolidating statements of operations for the three months ended
March 31, 2002
Majestic Investor Guarantor Eliminating Consolidated
Holdings, LLC Subsidiaries Entries Total
Revenues:
Casino $ - $42,354,751 $ - $42,354,751
Rooms - 4,088,511 - 4,088,511
Food and beverage - 5,096,101 - 5,096,101
Other - 888,490 - 888,490
----------- ----------- ---------- -----------
Gross revenues - 52,427,853 - 52,427,853
less promotional allowances - (9,115,301) - (9,115,301)
----------- ----------- ---------- -----------
Net revenues - 43,312,552 - 43,312,552
----------- ----------- ---------- -----------
Costs and Expenses:
Casino - 10,820,025 - 10,820,025
Rooms - 3,412,439 - 3,412,439
Food and beverage - 6,294,634 - 6,294,634
Other - 512,960 - 512,960
Gaming taxes - 5,019,754 - 5,019,754
Advertising and promotion - 1,175,555 - 1,175,555
General and administrative 4,205 7,189,497 - 7,193,702
Depreciation and amortization 626,347 2,760,668 - 3,387,015
Pre-opening expenses 7,287 - - 7,287
----------- ----------- ---------- -----------
Total costs and expenses 637,839 37,185,532 - 37,823,371
----------- ----------- ---------- -----------
Operating income (loss) (637,839) 6,127,020 - 5,489,181
----------- ----------- ---------- -----------
Other Income (Expense):
Gain on sale of assets - 6,542 - 6,542
Interest income 16,512 15,096 - 31,608
Interest expense (4,507,026) (8,361) - (4,515,387)
Other non-operating expense (17,492) - - (17,492)
----------- ----------- ---------- -----------
Total other income (expense) (4,508,006) 13,277 - (4,494,729)
----------- ----------- ---------- -----------
Net income $(5,145,845) $ 6,140,297 $ - $ 994,452
=========== =========== ========== ===========
12
Condensed consolidating statements of cash flows for the three months ended
March 31, 2002
Majestic Investor Guarantor Eliminating Consolidated
Holdings, LLC Subsidiaries Entries Total
Net cash provided by (used in) operating activities $ (288,761) $ 7,253,171 $ 1,180(a) $ 6,965,590
----------------- ------------ ----------- ------------
Cash Flows From Investing Activities:
Acquisition of property and equipment - (1,171,782) - (1,171,782)
Payment of acquisition related costs (796,649) - - (796,649)
Proceeds from sale of equipment - 6,542 - 6,542
----------------- ------------ ----------- ------------
Net cash used in investing activities (796,649) (1,165,240) - (1,961,889)
----------------- ------------ ----------- ------------
Cash Flows From Financing Activities:
Line of credit, net (4,800,000) - (4,800,000)
Payment of 11.653% Senior Secured Notes issuance (505,136) - - (505,136)
costs
Cash paid to reduce long-term debt - (55,182) - (55,182)
Cash advances to/from affiliates 7,351,278 (7,185,528) (1,180)(a) 164,570
Distribution to Barden Development, Inc. (188,242) - - (188,242)
---------------- ------------- ----------- ------------
Net cash provided by (used in) financing
activities 1,857,900 (7,240,710) (1,180) (5,383,990)
---------------- ------------- ----------- ------------
Net increase (decrease) in cash and cash equivalents 772,490 (1,152,779) - (380,289)
Cash and cash equivalents, beginning of period 498,363 17,206,452 - 17,704,815
----------------- ------------- ----------- ------------
Cash and cash equivalents, end of period $ 1,270,853 16,053,673 $ - $ 17,324,526
----------------- ------------- ----------- ------------
13
Note 10. Supplemental Consolidating Information
The following information presents consolidating balance sheets as of March
31, 2002 and consolidating statements of operations and cash flows for the three
months ended March 31, 2002.
14
MAJESTIC INVESTOR HOLDINGS, LLC
CONSOLIDATING BALANCE SHEETS AS OF MARCH 31, 2002
Barden Barden Barden
Mississippi Colorado Nevada
Parent Gaming, LLC Gaming, LLC Gaming, LLC Elimination Consolidated
ASSETS
Current Assets:
Cash and cash equivalents $ 1,270,853 $ 8,040,426 $ 3,081,880 $ 4,931,367 $ - $ 17,324,526
Accounts receivable, net 3,422,233 414,625 57,502 716,949 (3,223,293) 1,388,016
Inventories - 372,080 200,263 314,139 - 886,482
Prepaid expenses 5,467 479,758 357,051 739,722 - 1,581,998
Due from Seller - 287,683 12,873 (30,774) - 269,782
Note receivable from related party 700,000 - - - - 700,000
Other - - 42,283 - - 42,283
------------ ----------- ----------- ----------- ------------- ------------
Total current assets 5,398,553 9,594,572 3,751,852 6,671,403 (3,223,293) 22,193,087
------------ ----------- ----------- ----------- ------------- ------------
Property, equipment and barge improvements,
net - 70,584,796 21,840,764 28,811,341 - 121,236,901
Intangible assets, net - 7,567,342 4,000,655 7,324,931 - 18,892,928
Goodwill 7,817,775 1,696,000 499,000 885,000 - 10,897,775
Other Assets:
Deferred financing costs, net 7,105,971 - - - - 7,105,971
Restricted cash - - - 1,000,000 - 1,000,000
Investment in subsidiaries 145,209,023 - - - (145,209,023) -
Other assets and deposits - 478,191 141,363 904,309 - 1,523,863
------------ ----------- ----------- ----------- ------------- ------------
Total other assets 152,314,994 478,191 141,363 1,904,309 (145,209,023) 9,629,834
------------ ----------- ----------- ----------- ------------- ------------
Total Assets 165,531,322 89,920,901 30,233,634 45,596,984 (148,432,316) 182,850,525
============ =========== =========== =========== ============= ============
LIABILITIES AND MEMBERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt 1,700,000 - - 136,099 - 1,836,099
Accounts payable - 550,075 417,914 582,500 - 1,550,489
Other accrued liabilities: - - - - - -
Payroll and related - 1,823,405 697,647 1,796,274 - 4,317,326
Interest 5,645,784 - - - - 5,645,784
Progressive jackpots - 885,689 1,298,215 212,878 - 2,396,782
Slot club liabilities - 149,998 384,556 1,842,054 - 2,376,608
Other accrued liabilites 424,469 1,782,493 1,297,853 917,963 - 4,422,778
------------ ----------- ----------- ----------- ------------- ------------
Total current liabilities 7,770,253 5,191,660 4,096,185 5,487,768 - 22,545,866
------------ ----------- ----------- ----------- ------------- ------------
Due to related parties 6,094,291 79,432,163 24,199,919 40,047,631 (148,432,316) 1,341,688
Long-term debt, net of current maturities 145,404,301 - - 220,165 - 145,624,466
------------ ----------- ----------- ----------- ------------- ------------
Total Liabilities 159,268,845 84,623,823 28,296,104 45,755,564 (148,432,316) 169,512,020
------------ ---------- ---------- ---------- ------------- ------------
Commitments and contingencies
Members' Equity (Deficit):
Members' contributions 13,803,192 - - - - 13,803,192
Accumulated earnings (deficit) (7,540,715) 5,297,078 1,937,530 (158,580) - (464,687)
------------ ----------- ----------- ----------- ------------- ------------
Total members' equity (deficit) 6,262,477 5,297,078 1,937,530 (158,580) - 13,338,505
------------ ----------- ----------- ----------- ------------- ------------
Total Liabilities and Member's
Equity Deficit $165,531,322 $89,920,901 $30,233,634 $45,596,984 $(148,432,316) $182,850,525
============ =========== =========== =========== ============= ============
15
MAJESTIC INVESTOR HOLDINGS, LLC
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2002
Barden Barden Barden
Mississippi Colorado Nevada
Parent Gaming, LLC Gaming, LLC Gaming, LLC Elimination Consolidated
Revenues:
Casino $ - $23,356,959 $ 9,217,305 $ 9,780,487 $ - $ 42,354,751
Rooms - 2,085,520 - 2,002,991 - 4,088,511
Food and beverage - 2,475,101 506,060 2,114,940 - 5,096,101
Other - 335,979 58,584 493,927 - 888,490
----------- ----------- ----------- ----------- ----------- ------------
Gross revenues - 28,253,559 9,781,949 14,392,345 - 52,427,853
less promotional allowances - (6,004,023) (1,776,713) (1,334,565) (9,115,301)
----------- ----------- ----------- ----------- ----------- ------------
Net revenues - 22,249,536 8,005,236 13,057,780 - 43,312,552
----------- ----------- ----------- ----------- ----------- ------------
Costs and expenses:
Casino - 2,902,063 2,587,957 5,330,005 - 10,820,025
Rooms - 1,971,874 - 1,440,565 - 3,412,439
Food and beverage - 4,203,432 271,120 1,820,082 - 6,294,634
Other - 219,346 166,416 127,198 - 512,960
Gaming taxes - 2,779,336 1,483,083 757,335 - 5,019,754
Advertising and promotion - 262,869 733,390 179,296 - 1,175,555
General and administrative 4,205 3,502,397 1,141,057 2,546,043 - 7,193,702
Depreciation and amortization 626,347 1,779,913 363,668 617,087 - 3,387,015
Pre-opening expenses 7,287 - - - - 7,287
----------- ----------- ----------- ----------- ----------- ------------
Total costs and expenses 637,839 17,621,230 6,746,691 12,817,611 - 37,823,371
----------- ----------- ----------- ----------- ----------- ------------
Income (loss) from operations (637,839) 4,628,306 1,258,545 240,169 - 5,489,181
----------- ----------- ----------- ----------- ----------- ------------
Other income (expense):
Gain on sale of assets - 6,542 - - - 6,542
Interest income 16,512 6,894 3,633 4,569 - 31,608
Interest expense (4,507,026) - - (8,361) - (4,515,387)
Other non-operating expenses (17,492) - - - - (17,492)
----------- ----------- ----------- ----------- ----------- ------------
Total other income (expense) (4,508,006) 13,436 3,633 (3,792) - (4,494,729)
----------- ----------- ----------- ----------- ----------- ------------
Net income (loss) $(5,145,845) $ 4,641,742 $ 1,262,178 $ 236,377 $ - $ 994,452
----------- ----------- ----------- ----------- ----------- ------------
16
MAJESTIC INVESTOR HOLDINGS, LLC
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2002
Barden Barden Barden
Mississippi Colorado Nevada
Parent Gaming, LLC Gaming, LLC Gaming, LLC Elimination Consolidated
Cash Flows From Operating Activities:
Net income (loss) $(5,145,845) $ 4,641,742 $ 1,262,178 $ 236,377 $ - $ 994,452
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation - 1,570,600 241,730 550,511 - 2,362,841
Amortization 626,347 209,313 121,938 66,576 - 1,024,174
Gain on sale of assets - (6,542) - - - (6,542)
(Increase) decrease in accounts
receivable, net 68,670 (109,786) (12,955) (24,001) - (78,072)
(Increase) decrease in inventories - (3,933) 13,600 61,415 - 71,082
(Increase) decrease in prepaid expenses 1,999 (146,395) (267,916) 42,966 - (369,346)
Increase in other assets - (2,711) (26,731) (575,534) - (604,976)
Increase (decrease) in accounts payable - (149,454) 148,661 (395,448) - (396,241)
Increase (decrease) in related party payables - 711 - (33,951) 1,180 (32,060)
Decrease in accrued payroll and other expenses - (488,682) (24,196) (175,910) - (688,788)
Increase in accrued interest 4,437,005 - - - - 4,437,005
Increase (decrease) in accrued and other
liabilities (276,937) (520,666) 870,824 178,840 - 252,061
----------- ----------- ----------- ---------- ------- -----------
Net cash provided by (used in) operating
activities (288,761) 4,994,197 2,327,133 (68,159) 1,180 6,965,590
Cash Flows From Investing Activities
Acquisition of property and equipment - (512,590) (103,777) (555,415) - (1,171,782)
Acquisition related costs (796,649) - - - - (796,649)
Proceeds from sale of equipment - 6,542 - - - 6,542
----------- ----------- ----------- ---------- ------- -----------
Net cash used in investing activities (796,649) (506,048) (103,777) (555,415) - (1,961,889)
Cash Flows From Financing Activities
Line of credit, net (4,800,000) - - - - (4,800,000)
Payment of 11.653% Senior Secured Notes
issuance costs (505,136) - - - - (505,136)
Cash paid to reduce long-term debt - - (22,965) (32,217) - (55,182)
Cash advances to/from affiliates 7,351,278 (4,900,067) (2,914,233) 628,772 (1,180) 164,570
Distribution to Barden Development, Inc. (188,242) - - - - (188,242)
----------- ----------- ----------- ---------- ------- -----------
Net cash provided by (used in) financing
activities 1,857,900 (4,900,067) (2,937,198) 596,555 (1,180) (5,383,990)
----------- ----------- ----------- ---------- ------- -----------
Net increase (decrease) in cash and cash
equivalents 772,490 (411,918) (713,842) (27,019) - (380,289)
Cash and cash equivalents, beginning of
period 498,363 8,452,344 3,795,722 4,958,386 - 17,704,815
----------- ----------- ----------- ---------- ------- -----------
Cash and cash equivalents, end of period $ 1,270,853 $ 8,040,426 $ 3,081,880 $4,931,367 $ - $17,324,526
=========== =========== =========== ========== ======= ===========
17
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Statement of Forward-Looking Information
This report includes statements that constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and
are subject to the safe harbor provisions of those sections and the Private
Securities Litigation Reform Act of 1995. Words such as "believes,"
"anticipates," "estimates" or "expects" used in the Company's press releases and
reports filed with the Securities and Exchange Commission are intended to
identify forward-looking statements. All forward-looking statements involve
risks and uncertainties. Although the Company believes its expectations are
based upon reasonable assumptions within the bounds of its current knowledge of
its business and operations, there can be no assurances that actual results will
not materially differ from expected results. The Company cautions that these and
similar statements included in this report and in previously filed reports are
further qualified by important factors that could cause actual results to differ
materially from those in the forward-looking statements. Such factors include,
without limitation: the ability to fund planned development needs and to service
debt from existing operations; the ability to successfully integrate the three
Fitzgeralds casinos; increased competition in existing markets or the opening of
new gaming jurisdictions; a decline in the public acceptance of gaming; the
limitation, conditioning or suspension of our gaming licenses; increases in or
new taxes imposed on gaming revenues, taxes on gaming devices; a finding of
unsuitability by regulatory authorities with respect to the Company or its
officers or key employees; loss and/or retirement of key executives; a
significant increase in fuel or transportation prices; adverse economic
conditions in the Company's markets; severe and unusual weather in our markets;
non-renewal of the Company's or any of its operating subsidiaries' gaming
licenses from the appropriate governmental authorities in Nevada, Mis sissippi
and Colorado; and continuing effects of recent terrorist attacks and any future
occurrences of terrorist attacks or other destabilizing events.
We caution readers not to place undue reliance on forward-looking
statements, which speak only as of the date thereof. All subsequent written and
oral forward-looking statements attributable to us are expressly qualified in
their entirety by the cautionary statements and factors that may affect future
results contained throughout this report. The Company undertakes no obligation
to publicly release any revisions to such forward-looking statements to reflect
events or circumstances after the date hereof.
The following discussion should be read in conjunction with, and is
qualified in its entirety by, our financial statements, including the notes
thereto listed in Item 1.
Overview
The Company was formed on September 14, 2001 and commenced operations of
the Fitzgeralds casinos on December 7, 2001, and accordingly has a limited
operating history. Therefore, the discussion of operations herein will focus on
events and the Company's revenues and expenses during the three months ended
March 31, 2002.
The gaming operations of the Company's properties may be seasonal and,
depending on the location and other circumstances, the effects of such
seasonality could be significant. The properties' results are affected by
inclement weather in relevant markets. For example, the Fitzgeralds Black Hawk
site, located in the Rocky Mountains of Colorado, is subject to snow and
18
icy road conditions during the winter months. Any such severe weather conditions
may discourage potential customers from visiting the Black Hawk facilities.
Also, at Fitzgeralds Las Vegas, business levels are generally weaker from
Thanksgiving through the middle of January (except during the week between
Christmas and New Year's) and throughout the summer, and generally stronger from
mid-January through Easter and from mid-September through Thanksgiving. At
Fitzgeralds Tunica and Fitzgeralds Black Hawk, business levels are typically
weaker from Thanksgiving through the end of the winter and typically stronger
from mid-June to mid-November. Accordingly, the Company's results of operations
are expected to fluctuate from quarter to quarter and the results for any fiscal
quarter may not be indicative of results for future fiscal quarters.
Results of Operations
The following table sets forth information derived from the Company's
consolidated statements of income for the three months ended March 31, 2002,
expressed as a percentage of gross revenues.
19
Consolidated Statement of Operations-- Summary Information
(dollars in thousands)
Three Months Ended
March 31,
2002
------------------
Gross Revenues $ 52,428
Operating Income $ 5,489
Adjusted EBITDA (1) $ 8,883
Consolidated Statement of Operations -- Percentage of Gross Revenues
--------------------------------------------------------------------
2002
-----
Revenues:
Casino 80.8%
Rooms 7.8%
Food and beverage 9.7%
Other 1.7%
-----
Gross revenues 100.0%
less promotional allowances -17.4%
-----
Net revenues 82.6%
-----
Costs and Expenses:
Casino 20.6%
Rooms 6.5%
Food and beverage 12.0%
Other 1.0%
Gaming taxes 9.6%
Advertising and promotions 2.2%
General and administrative 13.7%
Depreciation and amortization 6.5%
Pre-opening expenses -
-----
Total costs and expenses 72.1%
Operating income 10.5%
-----
Other Income (Expense):
Gain on sale of assets -
Interest income -
Interest expense -8.6%
Other nonoperating expense 0.0%
-----
Total other income (expense) -8.6%
-----
Net Income (Loss): 1.9%
-----
Adjusted EBITDA: (1) 16.9%
-----
NOTES:
(1) Adjusted EBITDA (defined as earnings before interest, income taxes,
depreciation and amortization, and excludes pre-opening costs of $7,300
associated with the acquisition of the Fitzgeralds casinos) is presented
solely as a supplemental disclosure to assist in the evaluation of the
Company's ability to generate cash flow. In particular, the Company
believes that an analysis of Adjusted EBITDA enhances the understanding of
the financial performance of companies with substantial depreciation and
amortization.
Results for any one or more periods are not necessarily indicative of
annual results or continuing trends.
20
Three Months Ended March 31, 2002
Consolidated gross revenues for the three months ended March 31, 2002
amounted to approximately $52,428,000. Revenues for Fitzgeralds Tunica accounted
for $28,254,000, or 53.9% of gross revenues, Fitzgeralds Black Hawk accounted
for $9,782,000, or 18.7% of gross revenues and Fitzgeralds Las Vegas accounted
for $14,392,000, or 27.4% of total revenues.
The Company's business can be separated into four operating departments:
casino, hotel rooms (except Fitzgeralds Black Hawk), food and beverage and
other. Consolidated casino revenues were $42,355,000, of which $37,251,000, or
87.9% were derived from slot machine revenues, and $5,104,000, or 12.1%, were
derived from table game revenues for the three months ended March 31, 2002.
Casino revenues attributed to Fitzgeralds Tunica were $23,357,000, of which
$20,867,000, or 89.3%, were derived from slot machine revenues, and $2,490,000,
or 10.7%, were derived from table games revenues for the three months ended
March 31, 2002. Casino revenues attributed to Fitzgeralds Black Hawk were
$9,217,000, of which $9,020,000, or 97.9%, were derived from slot machine
revenues, and $197,000, or 2.1%, were derived from table game revenues for the
three months ended March 31, 2002. Casino revenues attributed to Fitzgeralds Las
Vegas were $9,781,000, of which $7,364,000, or 75.3%, were derived from slot
machine revenues, and $2,417,000, or 24.7%, were derived from table game
revenues for the three months ended March 31, 2002.
The consolidated average number of slot machines in operation was 2,915
during the three months ended March 31, 2002, of which Fitzgeralds Tunica
accounted for 1,382, or 47.4%, Fitzgeralds Black Hawk accounted for 593, or
20.4%, and Fitzgeralds Las Vegas accounted for 940, or 32.2%. The consolidated
average win per slot machine per day was approximately $142 for the three months
ended March 31, 2002, with an average of approximately $168, $169 and $87 at
Fitzgeralds Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas,
respectively. The consolidated average number of table games in operation during
the three months ended March 31, 2002 was 63, 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 average win per table game per day during
the three months ended March 31, 2002 was approximately $848, with an average of
approximately $814, $365, and $1,023 at Fitzgeralds Tunica, Fitzgeralds Black
Hawk and Fitzgeralds Las Vegas, respectively. With repect to Fitzgeralds Black
Hawk the maximum wager is limited to $5.00.
Consolidated hotel room revenues for the three months ended March 31, 2002
was $4,089,000, or 7.8% of gross revenues. Of this amount, Fitzgeralds Tunica
accounted for $2,086,000, or 51.0%, with 507 rooms and Fitzgeralds Las Vegas
accounted for $2,003,000, or 49.0%, with 638 rooms. At Fitzgeralds Tunica during
this period the average daily rate was $48 and the occupancy rate was 95.5%. At
Fitzgeralds Las Vegas during this period the average daily rate was $41 and the
occupancy rate was 84.4%.
Consolidated food and beverage revenues for the three months ended March
31, 2002 amounted to $5,096,000, or 9.7% of gross revenues. Of this amount,
Fitzgeralds Tunica accounted for $2,475,000, or 48.6%, Fitzgeralds Black Hawk
accounted for $506,000, or 9.9%, and Fitzgeralds Las Vegas accounted for
$2,115,000, or 41.5%.
Other consolidated revenues consisted primarily of commission and retail
income and totaled approximately $888,000, or 1.7% of gross revenues. Of this
amount, Fitzgeralds Tunica
21
accounted for $336,000, or 37.8%, Fitzgeralds Black Hawk accounted for
approximately $58,000, or 6.6%, and Fitzgeralds Las Vegas accounted for
$494,000, or 55.6%.
Promotional allowances included in the consolidated gross revenues for the
three months ended March 31, 2002, were $9,115,000, or 17.4% of gross revenues.
Of this amount, Fitzgeralds Tunica accounted for $6,004,000, or 65.9%,
Fitzgeralds Black Hawk accounted for $1,777,000, or 19.5%, and Fitzgeralds Las
Vegas accounted for $1,334,000, or 14.6%.
Consolidated casino operating expenses for the three months ended March 31,
2002, were $10,820,000, or 20.6% of gross revenues and 25.5% of casino revenues.
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 $2,902,000, or 26.8%, Fitzgeralds
Black Hawk accounted for $2,588,000, or 23.9%, and Fitzgeralds Las Vegas
accounted for $5,330,000, or 49.3%.
Consolidated hotel room expenses for the three months ended March 31, 2002,
were $3,412,000, or 6.5% of gross revenues, of which Fitzgeralds Tunica
accounted for $1,972,000, or 57.8%, Fitzgeralds Las Vegas accounted for
$1,440,000, or 42.2%
Consolidated food and beverage expenses for the three months ended March
31, 2002, were $6,295,000, or 12.0% of gross revenues, of which Fitzgeralds
Tunica accounted for $4,204,000, or 66.8%, Fitzgeralds Black Hawk accounted for
$271,000, or 4.3%, and Fitzgeralds Las Vegas accounted for $1,820,000, or 28.9%.
Gaming taxes are levied on adjusted gross receipts (as defined in each of
the applicable state's gaming laws). Gamin g taxes were $5,020,000, or 9.6% of
the gross revenues for the three months ended March 31, 2002. Of this amount,
Fitzgeralds Tunica accounted for $2,780,000, or 55.4%, Fitzgeralds Black Hawk
accounted for $1,483,000, or 29.5%, and Fitzgeralds Las Vegas accounted for
$757,000, or 15.1%.
Consolidated advertising and promotion expenses included salaries, wages
and benefits of the marketing and casino service departments, as well as
promotions, advertising and special events. Advertising and promotion expenses
for the three months ended March 31, 2002, totaled $1,176,000, or 2.2% of gross
revenues. Of this amount, Fitzgeralds Tunica accounted for $263,000, or 22.4%,
Fitzgeralds Black Hawk accounted for $734,000, or 62.4%, and Fitzgeralds Las
Vegas accounted for $179,000, or 15.2%.
Consolidated general and administrative expenses for the three months ended
March 31, 2002 were $7,194,000, or 13.7% of gross revenues, of which Fitzgeralds
Tunica accounted for $3,502,000, or 48.7%, Fitzgeralds Black Hawk accounted for
$1,141,000, or 15.9%, and Fitzgeralds Las Vegas accounted for $2,546,000, or
35.4%. Unallocated corporate expenses accounted for $4,000.
Consolidated depreciation and amortization for the three months ended March
31, 2002 was approximately $3,387,000, or 6.5% of gross revenues, of which
Fitzgeralds Tunica accounted for $1,780,000, or 52.6%, Fitzgeralds Black Hawk
accounted for $364,000, or 10.7%, and Fitzgeralds Las Vegas accounted for
$617,000, or 18.2%. Corporate amortization of deferred financing costs and the
discount on the Investor Holdings Senior Secured Notes accounted for $626,000,
or 18.5% of consolidated depreciation and amortization expense. Of the
consolidated depreciation and amortization expense, approximately $2,363,000, or
69.8%, is depreciation expense, and $1,024,000, or 30.2%, is amortization
expense.
22
Consolidated operating income for the three months ended March 31, 2002 was
$5,489,000, or 10.5% of gross revenues, of which Fitzgeralds Tunica accounted
for operating income of $4,628,000, or 84.3%, Fitzgeralds Black Hawk accounted
for operating income of $1,259,000, or 22.9%, and Fitzgeralds Las Vegas
accounted for operating income of $240,000, or 4.4%. The unallocated corporate
loss principally for amortization was $638,000, or 1.2% of gross revenues.
Consolidated net interest expense for the three months ended March 31, 2002
was approximately $4,484,000, or 8.6% of gross revenues, of which Fitzgeralds
Tunica accounted for interest income of $7,000, Fitzgeralds Black Hawk accounted
for net interest income of $3,000 and Fitzgeralds Las Vegas accounted for net
interest expense of $4,000. The unallocated corporate net interest expense was
approximately $4,491,000 and was associated with the 11.653% Senior Secured
Notes.
As a result of the foregoing, the Company realized consolidated net income
of $994,000 for the three months ended March 31, 2002.
Adjusted EBITDA for the three months ended March 31, 2002 was $8,883,000,
of which Fitzgeralds Tunica accounted for $6,408,000, Fitzgeralds Black Hawk
accounted for $1,622,000 and Fitzgeralds Las Vegas accounted for $857,000.
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.
Liquidity and Capital Resources
At March 31, 2002, the Company had cash and cash equivalents of
approximately $17.3 million. Cash and cash equivalents included $1.3 million at
the Company, $8.0 million at Fitzgeralds Mississippi, $3.1 million at
Fitzgeralds Black Hawk and $4.9 million at Fitzgeralds Las Vegas.
The Company has met its capital requirements to date through net cash from
operations, capital contributions, equipment loans and borrowings under its
credit facility. For the three months ended March 31, 2002, net cash provided by
operating activities totaled approximately $7.0 million. For the three months
ended March 31, 2002, cash used by investing activities totaled approximately
$2.0 million. Approximately $797,000 was expended during the three months ended
March 31, 2002 for professional fees related to the Fitzgeralds acquisition. For
the three months ended March 31, 2002, cash used by financing activities totaled
approximately $5.4 million primarily resulting from the cash paid on the
outstanding line of credit. Approximately $505,000 was expended during the three
months ended March 31, 2002 for professional fees related to the issuance of the
Company's 11.653% Senior Secured Notes. Approximately $4.8 million was repaid on
the credit facility during the three months ended March 31, 2002. As of May 15,
2002, the outstanding borrowings under the credit facility was approxim ately
$1.7 million. The Nevada Regulatory Authorities in April, 2002 approved pledging
the assets of the Barden Nevada pursuant to the terms of the Company's credit
facility. Therefore, the credit facility has been increased by the lender to
$15.0 million from $12.0 million. Also, a cash distribution related to the
fourth quarter of 2001 totaling approximately $188,000 was made to Barden
Development, Inc. during the three months ended March 31, 2002 under the
Management Agreement.
We are required to pay weekly liquidated damages under the 11.653% Senior
Secured Notes until such Notes are registered at an amount per week per
principal amount of such Notes equal to $0.05 for the first 90-day period
following April 5, 2002, increasing by an additional $0.05 per week with respect
to each subsequent 90-day period, up to a maximum amount of $0.20 per week.
Management believes that the Company's cash flow from operations and its
current lines of credit will be adequate to meet the Company's anticipated
future requirements for working
23
capital, its capital expenditures and scheduled payments of interest and
principal on the Company's 11.653% Senior Secured Notes and other permitted
indebtedness for the year 2002. No assurance can be given, however, that such
proceeds and operating cash flow, in light of increased competition will be
sufficient for such purposes. If necessary and to the extent permitted under the
Investor Holdings Indenture, the Company will seek additional financing through
borrowings and debt or equity financing. There can be no assurance that
additional financing, if needed, will be available to the Company, or that, if
available, the financing will be on terms favorable to the Company. In addition,
there is no assurance that the Company's estimate of its reasonably anticipated
liquidity needs is accurate or that unforeseen events will not occur, resulting
in the need to raise additional funds.
Recently Issued Accounting Pronouncements
In April 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 145, "Rescission of FASB statements, No. 4, 44 and 64, Amendment of
FASB Statement No. 13 and Technical Corrections." This Statement updates,
clarifies and simplifies existing accounting pronouncements. Management does not
expect the standard to have any material impact on the Company's consolidated
financial position, results of operations and cash flows.
Item 3. Quantitative And Qualitative Disclosures About Market Risk
There have been no material changes from the information reported in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2001.
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) None
(b) There were no reports on Form 8-K filed during the three months ended
March 31, 2002.
24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MAJESTIC INVESTOR HOLDINGS, LLC
By: Barden Development Inc., Manager
By: /s/ Don H. Barden
---------------------------------------------------- May 15, 2002
Don H. Barden, President and Chief Executive Officer
MAJESTIC INVESTOR CAPITAL CORP.
By: /s/ Don H. Barden
---------------------------------------------------- May 15, 2002
Don H. Barden, President and Chief Executive Officer
/s/ Michael E. Kelly
----------------------------------------------------- May 15, 2002
Michael E. Kelly, Vice President, Chief Operating and
Financial Officer of the Company and
Majestic Investor Capital Corp.
(Principal Financial and Accounting
Officer)
25