UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from - to -
--------------- ---------------
Commission file number 333-14535
CASINO MAGIC OF LOUISIANA, CORP.
------------------------
(Exact name of registrant as specified in its charter)
Louisiana 64-0878110
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
711 CASINO MAGIC DRIVE, BAY SAINT LOUIS, MS 39520
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(Address of principal executive offices) (Zip Code)
(601) 466-8099
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of the issuer's classes of common
stock, as of the latest practicable date.
1,000 shares of common stock outstanding as of November 12, 1997
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CASINO MAGIC OF LOUISIANA CORP.
INDEX
PART I FINANCIAL INFORMATION PAGE
NO.
Item 1. Financial Statements
Condensed Statements of Operations
For the three months ended September 30,1997 and 1996 1
Condensed Statements of Operations
For the nine months ended September 30,1997 and 1996 2
Condensed Balance Sheets -
September 30, 1997 and December 31, 1996 3
Condensed Statements of Cash Flows -
For the nine months ended September 30, 1997 and 1996 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-9
PART II OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Default Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
PART I - FINANCIAL INFORMATION
Casino Magic of Louisiana, Corp
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three months Three months
ended ended
September 30, September 30,
1997 1996
------------- ------------
Revenues:
Casino $ 22,794,023 $ --
Other operating revenues 955,928 --
------------ -----------
23,749,951 --
------------ -----------
Costs and expenses:
Casino 12,560,095 --
Other operating costs and expenses 157,141 --
Advertising and marketing 2,422,708 --
General and administrative 1,653,235 --
Property operation maintenance and energy cost 978,478 --
Rents, property taxes and insurance 700,854 --
Depreciation and amortization 1,523,933 --
------------ -----------
19,996,444 --
------------ -----------
Income (loss) from operations 3,753,507 --
Other (income) expense:
Interest expense 4,304,030 2,424,986
Capitalized interest -- (1,685,644)
(Gain) loss on sale of assets (1,439,916) --
Other 944,739 (59)
------------ -----------
3,808,853 739,283
------------ -----------
(Loss) before income taxes: (55,346) ( 739,283)
------------ -----------
Income tax benefit -- --
------------ -----------
Net loss $ (55,346) $ (739,283)
============= ===========
Net loss per common share $ (55.35) $ (739.28)
============ ==========
Weighted average Common Shares - 1,000
See notes to financial statements.
1
PART I - FINANCIAL INFORMATION
CASINO MAGIC OF LOUISIANA, CORP.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For the period
May 13, 1996
Nine months (date of inception)
ended through
September 30, 1997 September 30,1996
------------- -----------
Revenues:
Casino $ 65,630,025 $ --
Other operating revenues 2,845,638 --
------------ -----------
68,475,663 --
------------ -----------
Costs and expenses:
Casino 35,219,187 --
Other operating costs and expenses 3,394,540 --
Advertising and marketing 12,156,679 --
General and administrative 5,595,267 --
Property operation maintenance
and energy cost 3,897,550 --
Rents, property taxes and insurance 1,918,873 --
Depreciation and amortization 4,310,605 --
------------ -----------
66,492,701 --
------------ -----------
Income (loss) from operations 1,982,962 --
Other (income) expense:
Interest expense 12,559,021 3,010,541
Capitalized interest (107,401) (2,271,199)
Interest Income (277,076) --
(Gain) loss on sale of assets (1,439,916) --
Other (income) expense 801,471 (59)
------------ -----------
11,536,099 739,283
------------ -----------
(Loss) before income taxes: (9,553,137) (739,283)
------------ -----------
Income tax benefit (452,692) -
------------ -----------
Net loss $ (9,100,445) $(739,283)
============= ===========
Net loss per common share $ (9,100.45) $ (739.28)
============ ==========
Weighted average Common Shares - 1,000
See notes to financial statements.
2
CASINO MAGIC OF LOUISIANA, CORP.
CONDENSED BALANCE SHEET
ASSETS
(Unaudited)
SEPTEMBER 30, DECEMBER 31,
ASSETS 1997 1996(*)
Current assets: ------------- -----------
Cash and cash equivalents $ 7,428,378 $ 3,959,126
Restricted cash 10,525,051 16,899,654
Other current assets 2,571,995 964,997
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Total current assets 20,525,424 21,823,777
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Total property and equipment, net 77,761,358 73,821,826
------------ ----------
Other long-term assets:
Deferred gaming license cost, net 38,449,048 38,337,333
Property held for sale 1,600 10,101,182
Debt issuance costs, net 4,946,194 5,096,981
Other long-term assets 63,696 148,846
------------ ----------
Total other long-term assets 43,460,538 53,684,342
------------ ----------
141,747,320 149,329,945
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Notes and contracts payable -- 4,486,710
Current maturities of long-term debt 4,725,063 1,878,605
Accounts payable 4,162,118 2,837,908
Accrued expenses 4,575,724 535,661
Accrued interest 2,451,929 5,581,119
Accrued payroll and related benefits 2,246,731 1,720,191
Accrued progressive gaming liabilities 237,085 113,432
Other current liabilities 2,930,994 --
------------ ----------
Total current liabilities 21,329,644 17,153,626
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Long-term debt, net of current maturities 117,191,995 119,850,193
------------ -----------
Total noncurrent liabilities 117,191,995 119,850,193
----------- -----------
Commitments and contingencies
Common stock, $0.01 par value, 10,000 shares authorized,
1,000 shares issued and outstanding 1 1
Additional paid-in capital 22,353,295 22,353,295
Retained deficit (19,127,615) (10,027,170)
------------ -----------
Total shareholder's equity 3,225,681 12,326,126
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$141,747,320 $149,329,945
============ ============
See notes to financial statements.
* Derived from audited financial statements
3
CASINO MAGIC CORP. OF LOUISIANA
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
Sept. 30, Sept. 30,
1997 1996
------------ ------------
Cash flows from operating activities:
Net (loss) $(9,100,445) $ (739,283)
Adjustments for non-cash charges 3,338,432 (19,721,162)
Changes in assets and liabilities 3,983,016 168,779
----------- -----------
Net cash used in operating activities (1,778,997) (20,291,666)
----------- ----------
Cash flows from investing activities:
Acquisitions of property and equipment (7,350,091) (29,291,384)
Proceeds from sale of assets 11,700,000 --
Other, net 85,150 (3,001,905)
----------- ----------
Net cash Provided by (used in)
investing activities 4,435,059 (32,293,289)
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of notes payable and
long-term debt 3,850,000 116,725,457
Principal payments on notes payable and
long-term debt (9,094,455) (43,479,535)
Other, net (316,958) 17,155,893
----------- ----------
Net cash provided by (used in)
financing activities (5,561,413) 90,401,815
----------- ----------
Net (increase) decrease in cash and
cash equivalents (2,905,351) 37,816,860
Cash and cash equivalents including restricted cash,
beginning of period 20,858,780 --
---------- ----------
Cash and cash equivalents including restricted cash,
end of period $ 17,953,429 $37,816,860
=========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of amount capitalized) $15,688,211 $1,292,629
Income taxes (net of refunds) -- --
Supplemental schedule of non-cash investing and financing activities:
Property and equipment and other asset
acquisitions included in accounts and
construction payable and accrued expenses $ 342,293 $ 977,564
Property and equipment financed with long-term debt 946,000 46,416,570
See notes to financial statements.
4
CASINO MAGIC OF LOUISIANA, CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of significant accounting policies, risks and uncertainties:
Organization and basis of presentation:
On May 13, 1996 ("Inception"), Jefferson Casino Corporation ("Jefferson
Corp."), a Louisiana corporation and a wholly owned subsidiary of Casino Magic
Corp. ("Casino Magic"), acquired all of the outstanding capital stock of
Crescent City Capital Development Corporation, a Louisiana corporation.
Immediately following the acquisition, the name of Crescent City Capital
Development Corporation ("Crescent City") was changed to Casino Magic of
Louisiana, Corp. ("Louisiana Corp." or the "Company"). The financial
statements only include the accounts of Louisiana Corp. Louisiana Corp., has
developed a new dockside riverboat casino and entertainment complex in Bossier
City, Louisiana ("Casino Magic-Bossier City"). Casino Magic-Bossier City
opened on October 4, 1996, using a temporary facility and opened the permanent
facility on December 31, 1996. Prior to October 4, 1996, the Company had no
revenues or expenses other than interest income and expense.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted.
The accompanying unaudited condensed financial statements contain all
adjustments which are, in the opinion of management, necessary for a fair
statement of the results of the interim periods. The results of operations
for the interim periods are not indicative of results of operations for an
entire year.
It is suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's Form S-4 filed with the Securities and Exchange
Commission on July 19, 1997 and the Company's June 30, 1997 Form 10-Q.
Certain reclassifications have been made to 1996 amounts to conform with the
September 30, 1997 presentation.
2. Sale of Asset Held for Sale:
In September 1997, the Company sold the Crescent City Queen Riverboat
("Crescent City Queen") for $11.7 million. Other income (expense) for the
period ended September 30, 1997 includes recognized gain on the sale of $1.4
million. The proceeds from the sale are restricted by the Indenture governing
the $115 First Mortgage Notes issued by Louisiana Corp. The Indenture
restriction requires the proceeds from the sale to be used for capital
improvements at the Casino Magic-Bossier City facility.
3. Earnings per share
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128 (FAS 128), "Earnings Per Share", which simplifies the computation of
earnings per share. FAS 128 is effective for financial statements issued for
periods ending after December 15, 1997 and requires restatement for all prior
period earnings per share data presented. Basic earnings per share and
diluted earnings per share calculated in accordance with FAS 128 would remain
unchanged both at the three months ended September 30, 1997 and 1996 and the
nine months ended September 30, 1997 and 1996.
4. Disclosure of contingent interest paid and accrued and management fees
No contingent interest or management fees were paid in the first nine months
of 1997. Contingent interest and management fees were accrued in the first
nine months of 1997 in the amount of approximately $230,000 and $459,000,
respectively. No contingent interest and management fees were payable during
the nine months ended September 30, 1997 because the Company's Adjusted Fixed
Charge Coverage Ratio (as defined) did not exceed 1.5 to 1.0.
5
CASINO MAGIC OF LOUISIANA, CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussions regarding proposed Company developments and operations
included in "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" and "NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS" contain forward looking statements that involve a number of risks
and uncertainties. These proposed developments and operations include: (i)
the Company's ability to fund planned developments and debt service
obligations over the next twelve months with currently available cash and
marketable securities and with cash flow from operations; (ii) construction
projects entail significant construction risks, including, but not limited to,
cost overruns, delay in receipt of governmental approvals, shortages in
materials or skilled labor, labor disputes, unforeseen environmental or
engineering problems, work stoppage, fire and other natural disasters,
construction scheduling problems and weather interferences, any of which, if
it occurred, could delay construction or result in a substantial increase in
costs to the Company. The Company's ability to meet its debt obligations may
be dependent upon the successful completion of a hotel at Casino Magic-Bossier
City and the other planned construction projects and the Company's future
operating performance, which is itself dependent on a number of factors, many
of which are outside of the Company's control, prevailing economic and
competitive conditions and financial business regulatory and other factors
affecting the Company's operations and business. In addition to the risks and
uncertainties discussed above, other factors that could cause actual results
to differ materially are detailed from time to time in the Company's reports
filed with the Securities and Exchange Commission.
Results of Operations:
For the three months ended September 30, 1997:
Gaming revenues at Casino Magic-Bossier City were $22.8 million for the third
quarter of 1997. Based upon public reports made to the Louisiana Gaming
Control Board, this represents approximately a 17% share of total gaming
revenues in the four casino Bossier City/Shreveport Market. Although the
Company continues to implement and improve cost effective marketing and
promotional programs to increase revenues, there can be no assurance it will
be successful in doing so.
Total costs and expenses during the third quarter of 1997 were $20.0 million.
Casino Magic-Bossier City earned an operating profit of $3.8 million for the
third quarter of 1997. The Company continues to operate at revenue levels
that are less than anticipated. Management has continued to implement various
marketing measures to improve revenues while maintaining cost control measures
to enable the Company to be cash flow positive. Although the Company continues
to implement cost reduction programs to reduce operating costs, there can be
no assurance it will be successful in doing so. However, Casino Magic-Bossier
City has achieved positive cash flow at the operating income levels earned
during the third and second quarters of 1997.
Other (income) and expenses were $3.8 million for the three months ended
September 30, 1997. The costs include $4.3 million in interest expense
relating primarily to the First Mortgage Notes issued to develop Casino
Magic-Bossier City. The remaining difference is primarily due to the gain on
the sale of the Crescent City Queen of approximately $1.4 million and
management fees of approximately $0.4 million.
6
CASINO MAGIC OF LOUISIANA, CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
Results of operations (continued):
There was no income tax benefit for the third quarter of 1997. The Company is
included in a consolidated group subject to a tax-sharing agreement between
itself, all affiliated companies and its ultimate parent Casino Magic. The
difference between the 0% rate and the statutory rate of 35% is due to a tax
valuation allowance against the tax benefit recorded as a result of the tax
sharing agreement.
Casino Magic-Bossier City incurred a net loss of $0.1 million during the third
quarter of 1997, or a loss of $55 per share. This is the result of lower than
anticipated revenues.
For the nine months ended September 30, 1997:
Gaming revenues at Casino Magic-Bossier City were $65.6 million for the first
nine months of 1997. Based upon public reports made to the Louisiana Gaming
Control Board, this represents approximately a 17% share of total gaming
revenues in the four casino Bossier City/Shreveport Market. During the first
nine months of 1997, the Company attempted to increase Casino Magic-Bossier
City's market share through significant marketing, advertising and promotional
efforts. However, this attempt to strengthen Casino Magic-Bossier City's
market share was not as successful as anticipated. Although the Company
continues to implement improved and cost effective marketing and promotional
programs to increase revenues, there can be no assurance it will be successful
in doing so.
Total costs and expenses during the first nine months of 1997 were $66.5
million. Casino Magic-Bossier City had operating income of $2.0 million for
the first nine months of 1997. The Company incurred $8.2 million in total
marketing and promotional expenses during the first quarter of 1997, including
approximately $4.0 million in promotional give-away programs which were
expected to generate a level of incremental gaming revenues that were not
achieved. Additionally, in the first four months of 1997, Casino
Magic-Bossier City was incurring operating expenses at a level consistent with
operating a property at significantly higher revenue levels. Beginning in May
1997 the Company implemented changes to reduce overall operating costs, and
specifically marketing and promotional costs. Although the Company continues
to implement cost reduction programs to reduce operating costs, there can be
no assurance it will be successful in doing so. However, Casino Magic-Bossier
City has achieved positive cash flow at the operating income levels earned
during the third and second quarters of 1997.
Other (income) and expenses were $11.5 million for the nine months ended
September 30, 1997. Expenses included $12.6 million in interest expense
relating primarily to the First Mortgage Notes used to develop Casino
Magic-Bossier City. The remaining difference is primarily due to the gain on
the sale of the Crescent City Queen of approximately $1.4 million and
management fees of approximately $0.5 million.
The Company is included in a consolidated group subject to a tax-sharing
agreement between itself, all affiliated companies and its ultimate parent
Casino Magic. The difference between the 5% rate and the statutory rate of
35% is due to a tax valuation allowance against the tax benefit recorded as a
result of the tax sharing agreement.
7
CASINO MAGIC OF LOUISIANA, CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
Results of operations (continued):
Casino Magic-Bossier City incurred a net loss of $9.1 million during the first
nine months of 1997, or a loss of $9,100 per share. This is the result of
lower than anticipated revenues, exceptionally high advertising and
promotional costs that should not recur in future periods and operating costs
incurred in anticipation of significantly higher revenues, specifically in the
first quarter of 1997.
Liquidity and Capital Resources:
At September 30, 1997, the Company had unrestricted cash and marketable
securities of $7.4 million compared to unrestricted cash and marketable
securities of $4.0 million at December 31, 1996. The Company has $10.5
million in restricted cash at September 30, 1997 due to the sale of the
Crescent City Queen. At December 31, 1996, the Company had $16.9 million in
restricted cash relating to the First Mortgage Notes issued to fund the
construction of Casino Magic-Bossier City.
For the nine months ended September 30, 1997, the Company expended $3.6
million of cash flow in operating activities and refinanced approximately $3.9
million of long term equipment debt. The Company spent $7.4 million for
acquisitions of property, equipment and other long-term assets. The Company
plans additional investments in 1997, but most of such additional expenditures
will be subject to the ability of the Company to generate positive cash flows
from operations, the $11.7 million in proceeds from the sale of the Crescent
City Queen or the availability of financing, of which there can be no
assurance in any case.
The Company opened Casino Magic-Bossier City on October 4, 1996 using a
temporary boarding facility, and on December 31, 1996, opened the permanent
facility. The Company plans to construct an approximately 200-room convention
hotel and related amenities, including restaurants, banquet space and swimming
pool. The construction of the hotel is expected to be funded primarily by the
$11.7 million in proceeds received from the sale of the Crescent City Queen
and the future operating cash flow of Casino Magic-Bossier City. No
assurances can be given that the proceeds from the sale of the Crescent City
Queen and the cash flow from the operations of Casino Magic-Bossier City will
be sufficient to develop such hotel and related facilities or that these
improvements will ever be developed.
8
CASINO MAGIC OF LOUISIANA, CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
Liquidity and Capital Resources (Continued):
Jefferson Corp and Louisiana Corp. have certain restrictions relative to
additional borrowings and cash flow under the terms of the Indenture
associated with the Louisiana First Mortgage Notes.
The Company will have a significant need for cash in 1997 and beyond in order
to continue its planned development. The Company believes that cash and
marketable securities at September 30, 1997, and cash flows from operations
will be sufficient to service its operating and debt service through, at
least, the next twelve months, but are not sufficient to complete the Casino
Magic-Bossier City hotel, without additional debt or equity financing. There
are no assurances that adequate funding will be available for these planned
investments at Casino Magic-Bossier City.
9
CASINO MAGIC OF LOUISIANA, CORP.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
The Company has completed an exchange offer for its 13% Series B First
Mortgage Notes Due 2003 with Contingent Interest for all outstanding 13%
Series A First Mortgage Notes Due 2003 with Contingent Interest. All of the
Series A First Mortgage Notes have been exchanged for the Series B First
Mortgage Notes, which are identical to the Series A First Mortgage Notes in
all respects except that the Series B First Mortgage Notes have been
registered under the Securities Act of 1933.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security-Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Purchase agreement for the Crescent City Queen Riverboat.
27 Financial Data Schedule (filed electronically only).
(b) Reports on Form 8-K:
None.
10
SIGNATURES
The Issuer has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CASINO MAGIC OF LOUISIANA, CORP.
Date: November 12, 1997 /S/ James E. Ernst
-------------------------
James E. Ernst, President
and Chief Executive Officer
Date: November 12, 1997 /S/ Jay S. Osman
--------------------------
Jay S. Osman, Chief Financial Officer and Treasurer (principal
financial and accounting officer)
11
CASINO MAGIC OF LOUISIANA, CORP
Quarterly Report on Form 10-Q for the Period Ended September 30, 1997
INDEX TO EXHIBITS
Exhibit
Number Page
10.1 Purchase agreement for the sale of the Crescent City Queen Riverboat
27. Financial Data Schedule (filed electronically only).
13