SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
------------------
[ ] 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
(State or other jurisdiction of. (I.R.S. Employer
Incorporation or organization) . Indentification No.)
711 CASINO MAGIC DRIVE, BAY SAINT LOUIS, MS 39520
(Address of principal executive offices) (Zip Code)
(228) 467-9257
(Registrant's telephone number, including area code)
NOT APPLICABLE
(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 13, 1998
=======================================================================
CASINO MAGIC OF LOUISIANA, CORP.
INDEX TO FORM 10-Q/A
PART I FINANCIAL INFORMATION PAGE NO.
Item 1.. . . . . . . . . . . . . Financial Statements
Condensed Consolidated Statements of Operations -
For the three months ended September 30, 1998 and 1997 1
Condensed Consolidated Statements of Operations -
For the nine months ended September 30, 1998 and 1997 2
Condensed Consolidated Balance Sheets -
September 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Cash Flows -
For the nine months ended September 30, 1998 and 1997 4
Notes to Condensed Consolidated Financial Statements 5
Item 2.. . . . . . . . . . . . . Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
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
ITEM 1: FINANCIAL STATEMENTS
CASINO MAGIC OF LOUISIANA, CORP.
CONDENSED STATEMENTS OF OPERATIONS
Three months ended
September 30,
1998 1997
-------------------- ------------
(Unaudited)
Revenues:
Casino . . . . . . . . . . . . . . . . . . . . . $ 28,290,048 $22,794,023
Other operating income . . . . . . . . . . . . . 794,722 955,928
-------------------- ------------
Total revenues . . . . . . . . . . . . . . . . 29,084,770 23,749,951
-------------------- ------------
Costs and expenses:
Casino . . . . . . . . . . . . . . . . . . . . . 14,262,577 12,560,095
Other operating costs and expenses . . . . . . . 999,677 157,141
Advertising and marketing. . . . . . . . . . . . 3,653,989 2,422,708
General and administrative . . . . . . . . . . . 2,520,040 1,653,235
Property operation, maintenance and energy cost. 1,192,222 978,478
Rents, property taxes and insurance. . . . . . . 808,228 700,854
Depreciation and amortization. . . . . . . . . . 1,642,438 1,523,933
-------------------- ------------
Total costs and expenses . . . . . . . . . . . 25,079,171 19,996,444
-------------------- ------------
Income from operations . . . . . . . . . . . . . . 4,005,599 3,753,507
-------------------- ------------
Other (Income) Expenses:
Interest expense . . . . . . . . . . . . . . . . 4,584,582 4,304,030
Capitalized interest . . . . . . . . . . . . . . (299,638) --
Interest income. . . . . . . . . . . . . . . . . (142,368) --
(Gain) loss on sale of assets. . . . . . . . . . 1,930,379 (1,439,916)
Other. . . . . . . . . . . . . . . . . . . . . . 1,088,776 944,739
-------------------- ------------
Total other expense. . . . . . . . . . . . . . 7,161,731 3,808,853
-------------------- ------------
Income (loss) before income taxes. . . . . . . . . (3,156,132) (55,346)
Income tax expense . . . . . . . . . . . . . . . . -- --
Net income (loss). . . . . . . . . . . . . . . . . $ (3,156,132) $ (55,346)
==================== ============
Net income (loss) per common share:. . . . . . . . $ (3,156.14) $ (55.35)
==================== ============
Weighted average commons shares - 1,000
<FN>
See notes to condensed financial statements.
1
CASINO MAGIC OF LOUISIANA, CORP.
CONDENSED STATEMENTS OF OPERATIONS
Nine months ended
September 30,
1998 1997
------------------- ------------
(Unaudited)
Revenues:
Casino . . . . . . . . . . . . . . . . . . . . . $ 81,421,376 $65,630,025
Other operating income . . . . . . . . . . . . . 2,435,624 2,845,638
------------------- ------------
Total revenues. . . . . . . . . . . . . . . . . 83,857,000 68,475,663
------------------- ------------
Costs and expenses:
Casino . . . . . . . . . . . . . . . . . . . . . 40,152,817 35,219,187
Other operating costs and expenses . . . . . . . 2,938,252 3,394,540
Advertising and marketing. . . . . . . . . . . . 10,327,186 12,156,679
General and administrative . . . . . . . . . . . 6,161,485 5,595,267
Property operation, maintenance and energy cost. 3,373,482 3,897,550
Rents, property taxes and insurance. . . . . . . 2,270,601 1,918,873
Depreciation and amortization. . . . . . . . . . 4,820,759 4,310,605
------------------- ------------
Total costs and expenses . . . . . . . . . . . 70,044,582 66,492,701
------------------- ------------
Income (loss) from operations. . . . . . . . . . . 13,812,418 1,982,962
------------------- ------------
Other (Income) Expenses:
Interest expense . . . . . . . . . . . . . . . . 13,445,339 12,559,021
Capitalized interest . . . . . . . . . . . . . . (400,246) (107,401)
Interest income. . . . . . . . . . . . . . . . . (424,366) (277,076)
(Gain) loss on sale of assets. . . . . . . . . . 1,930,379 (1,439,916)
Other. . . . . . . . . . . . . . . . . . . . . . 3,016,361 801,471
------------------- ------------
Total other expense. . . . . . . . . . . . . . 17,567,467 11,536,099
------------------- ------------
Income (loss) before income taxes. . . . . . . . . (3,755,049) (9,553,137)
Income tax expense (benefit) . . . . . . . . . . . -- (452,692)
Net income (loss). . . . . . . . . . . . . . . . . $ (3,755,049) $(9,100,445)
=================== ============
Net income (loss) per common share:. . . . . . . . $ (3,755.05) $ (9,100.45)
=================== ============
Weighted average common shares - 1,000
<FN>
See notes to condensed financial statements.
2
CASINO MAGIC OF LOUISIANA, CORP.
CONDENSED BALANCE SHEETS
ASSETS
September 30, December 31,
1998 1997(*)
--------------- --------------
(Unaudited)
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . $ 8,032,576 $ 10,675,429
Restricted marketable securities. . . . . . . . . . . . . 1,599,185 10,629,405
Other current assets. . . . . . . . . . . . . . . . . . . 1,353,461 1,218,886
--------------- --------------
Total current assets. . . . . . . . . . . . . . . . . . 10,985,222 22,523,720
Property and equipment, net . . . . . . . . . . . . . . . . 86,887,042 77,263,462
Other long-term assets
Deferred gaming license cost, net . . . . . . . . . . . . 36,846,558 38,048,426
Debt issuance costs, net. . . . . . . . . . . . . . . . . 4,106,087 4,710,121
Other long-term assets. . . . . . . . . . . . . . . . . . 111,714 91,820
--------------- --------------
Total other long-term assets. . . . . . . . . . . . . . 41,064,359 42,850,367
--------------- --------------
$ 138,936,623 $ 142,637,549
=============== ==============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Notes and contracts payable . . . . . . . . . . . . . . . $ 3,448,965 $ 76,950
Curent maturities of long-term debt . . . . . . . . . . . 3,594,815 3,714,540
Accounts payable. . . . . . . . . . . . . . . . . . . . . 3,520,732 3,665,071
Accrued expenses. . . . . . . . . . . . . . . . . . . . . 7,897,988 5,614,298
Accrued interest. . . . . . . . . . . . . . . . . . . . . 3,754,805 6,547,014
Accrued payroll and related benefits. . . . . . . . . . . 2,588,546 2,942,523
Accrued progressive gaming liabilities. . . . . . . . . . 543,921 388,222
Other current liabilities . . . . . . . . . . . . . . . . 92,122 492,122
--------------- --------------
Total current liabilities . . . . . . . . . . . . . . . 25,441,894 23,440,740
Long-term debt, net of current maturities . . . . . . . . . 115,657,551 117,604,583
--------------- --------------
Total noncurrent liabilities. . . . . . . . . . . . . . 115,657,550 117,604,583
Shareholder's Equity
Common stock, $0.01 par value, 10,000 shares authorized,
1,000 shares issued and outstanding at September 30, 1998
and December 31, 1997 1 1
Additional paid-in capital 22,278,401 22,278,400
Retained deficit. . . . . . . . . . . . . . . . . . . . . . (24,441,224) (20,686,175)
--------------- --------------
Total shareholder's equity (2,162,822) 1,592,226
--------------- --------------
$ 138,936,623 $ 142,637,549
=============== ==============
<FN>
* Derived from audited financial statements
See notes to condensed financial statements.
3
CASINO MAGIC OF LOUISIANA, CORP.
CONDENSED STATEMENTS OF CASH FLOWS
Nine months ended
September 30,
1998 1997
------------------- ------------
(Unaudited)
Cash Flows from Operating Activities:
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,755,049) $(9,100,445)
Adjustments for non-cash charges 7,355,172 3,338,432
Changes in assets and liabilities (2,002,831) 3,983,016
------------------- ------------
Net Cash Used in Operating Activities. . . . . . . . . . . . . . . . . (1,597,292) (1,778,997)
------------------- ------------
Cash Flows From Investing Activities:
Acquisitions of property and equipment . . . . . . . . . . . . . . . (10,801,871) (7,350,091)
Proceeds from sale of assets -- 11,700,000
Decrease in marketable securities 9,030,220 --
Other, net (19,903) 85,150
------------------- ------------
Net Cash Provided by (Used in) Investing Activities (1,791,544) 4,435,059
------------------- ------------
Cash Flows From Financing Activities:
Net proceeds from issuance of long-term debt -- 3,850,000
Principal payments on notes payable and long-term debt . . . . . . . (2,448,601) (9,094,455)
Other, net -- (316,958)
------------------- ------------
Net Cash Used in Financing Activities. . . . . . . . . . . . . . . . . (2,448,601) (5,561,413)
------------------- ------------
Net Decrease in Cash and Cash Equivalents. . . . . . . . . . . . . . . (2,642,853) (2,905,351)
Cash and Cash Equivalents, Beginning of Period 10,675,429 20,858,780
------------------- ------------
Cash and Cash Equivalents, End of Period $ 8,032,576 $17,953,429
=================== ============
Supplemental Cash Flow Information
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 15,837,301 $15,688,211
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 3,957,815 342,293
Property and equipment financed with long-term debt 298,895 946,000
<FN>
See notes to condensed financial statements.
4
CASINO MAGIC OF LOUISIANA, CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Information with respect to the Three and Nine Months Ended September 30,
1998 and 1997 is 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 reflect only the accounts of Louisiana Corp., since the Company
conducts no other operations or business activities. 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.
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 financial statements be read in conjunction
with the consolidated financial statements and the notes thereto included in
the Company's Form 10-K for the year ended December 31, 1997 and Form 10-Q for
June 30, 1998.
Certain reclassifications have been made to 1997 amounts to conform with
the September 30, 1998 presentation.
2. Disclosure of contingent interest paid and accrued and management fees
accrual:
No contingent interest or management fees were paid in the first nine
months of 1998 or 1997. Contingent interest and management fees were accrued
in the first nine months of 1998 in the amount of $972,889 and $1,945,779,
respectively. Contingent interest and management fees were accrued in the
first nine months of 1997 in the amount of approximately $400,736 and
$801,471, respectively. No contingent interest or management fees were
payable during the nine months ended September 30, 1998 or 1997 because the
Company's Adjusted Fixed Charge Coverage Ratio (as defined) did not exceed 1.5
to 1.0.
3. New Accounting Pronouncements
(a) Accounting for Start-Up Costs:
During April 1998, the Accounting Standards Executive Committee of the
AICPA issued Statement of Position 98-5 ("SOP"), "Reporting on the Costs of
Start-Up Activities." The SOP requires costs of start-up activities and
organization costs to be expensed as incurred. The SOP is effective for
financial statements for fiscal years beginning after December 15, 1998. The
company has adopted the SOP. However, the costs that have been expensed are
immaterial.
(b) Accounting for Derivative Instruments and Hedging Activities:
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities. The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income statement,
and requires that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting.
Statement 133 is effective for fiscal years beginning after June 15,
1999. A company may also implement the Statement as of the beginning of any
fiscal quarter after issuance (that is, fiscal quarters beginning June 16,
1998 and thereafter). Statement 133 cannot be applied retroactively.
Statement 133 must be applied to (a) derivative instruments and (b) certain
derivative instruments embedded in hybrid contracts that were issued,
acquired, or substantively modified after December 31, 1997 (and, at the
company's election, before January 1, 1998).
We believe the impact of adopting Statement 133 on the financial
statements will be immaterial.
5
CASINO MAGIC OF LOUISIANA, CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(Information with respect to the Three and Nine Months Ended September 30,
1998 and 1997 is Unaudited)
4. Other Commitments and Contingencies
Terminated Legal Proceedings
In July 1997, the Company entered into an agreement to sell Carlo
Corporation ("Carlo") the Crescent City Riverboat acquired by the Company in
connection with its establishment of Casino Magic-Bossier City. A deposit of
$1,000,000 was paid by Carlo under the agreement and was subject to forfeiture
as liquidated damages if the purchase of the vessel was not completed. On
August 29, 1997, Carlo commenced litigation in the Circuit Court of Harrison
County, Mississippi and subsequently transferred to the United States District
Court for the Southern District of Mississippi ("Court") seeking return of the
deposit and punitive damages. On September 8, 1998, the Court awarded Carlo
return of the $1,000,000 deposit. The Court did not award punitive damages.
The deposit of $1,000,000 was paid by Casino Magic-Bossier City to Carlo in
November 1998. There was no impact on the accompanying statement of
operations as a result of the resolution of these legal proceedings.
5. Subsequent Events
On February 19, 1998, Casino Magic entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Hollywood Park, Inc. ("Hollywood"), and
Acquisition II, Inc. ("HP") a wholly-owned subsidary of Hollywood. Under the
Merger Agreement, Casino Magic merged (the "Merger") with HP, effective
October 15, 1998. Casino Magic is the surviving entity and is now a
wholly-owned subsidiary of Hollywood. In connection with the Merger, the
shareholders of Casino Magic received $2.27 for each share of Casino Magic's
stock held.
The Merger received approval of the Mississippi Gaming Commission, the
Nevada Gaming Commission, and the Louisiana Gaming Control Board.
6
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 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, 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. Those factors include prevailing economic and competitive
conditions, regulatory compliance, 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, 1998 compared to the three months
ended September 30, 1997:
Gaming revenues at Casino Magic-Bossier City increased to $28.3 million
in the third quarter of 1998 compared to $22.8 million in the third quarter of
1997, an increase of $5.5 million or 24.1% (the Shreveport-Bossier City market
increased 16.0% over the same period). The increase was a result of Casino
Magic's greater maturity in the Shreveport-Bossier City market, the upgrading
of product mix in slot machines, and more effective marketing programs.
Total costs and expenses during the third quarter of 1998 were $25.1
million compared to $20.0 million in the third quarter of 1997, an increase of
$5.1 million or 25.4%. Casino expenses, which were volume driven, increased
$1.7 million in the 1998 period over the comparable prior quarter while
advertising and marketing expenses increased $1.2 million or 50.8% over the
comparable prior quarter. The Company spent more in marketing costs,
specifically bus programs and entertainment, in the current quarter in an
attempt to offset the effects of facilities disruption from remodeling the
pavilion and food areas and hotel construction. Other administrative and
operating expenses increased $1.7 million over the comparative quarters.
Casino Magic-Bossier City earned an operating profit of $4.0 million for
the third quarter of 1998 compared to an operating profit of $3.8 million in
the third quarter of 1997, an improvement of $0.2 million or 6.7%. Operating
margins (including depreciation) decreased from 15.8% to 13.8%, primarily as
a result of increased marketing expenses, but was more than offset by
increased revenues.
Other (income) and expenses increased $3.4 million over the comparable
prior quarter. The increase is principally a result of increased management
fees and contingent interest which are a function of operating profit although
such amounts were accrued rather than paid as a result of the Company's
Adjusted Fixed Charge Coverage Ratio. See "Liquidity and Capital Resources."
Also included in Other (income) and expenses was $1.9 million loss on sale of
assets due to impairment in value in the third quarter of 1998 compared to a
$1.4 million gain on the sale of assets for the same period in 1997.
There was no income tax benefit for the third quarter of 1998 or 1997.
The Company is included in a consolidated group subject to a tax-sharing
agreement between itself, all affiliated companies and its parent, Casino
Magic Corp. The difference between the 0% rate and the statutory rate of 35%
is due to the 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 $3.2 million in the
third quarter of 1998 compared with a net loss of $0.6 million during the
third quarter of 1997, or a loss per share of $3,156.14 and $55.35,
respectively.
7
CASINO MAGIC OF LOUISIANA, CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS-(CONTINUED)
Results of Operations (continued):
For the nine months ended September 30, 1998 compared to the nine months
ended September 30, 1997:
Gaming revenues at Casino Magic-Bossier City increased to $81.4 million
for the first nine months of 1998 compared to $65.6 million in the first nine
months of 1997, an increase of $15.8 million or 24.1% (the Shreveport-Bossier
City market increased 14.5% over the same period). The increase was a result
of Casino Magic-Bossier City's greater maturity in the Shreveport-Bossier City
market, the upgrading of slot machines and more effective marketing programs.
Total costs and expenses during the first nine months of 1998 were $70.0
million compared to $66.5 in the first nine months of 1997, an increase of
$3.6 million or 5.3%. Casino expenses, which were largely volume driven,
increased $4.9 million or 14.0% in the first nine months of 1998 versus the
first nine months of 1997. Other administrative and operating expenses
increased $0.4 million in the 1998 period from the comparable prior period.
The first nine months of 1998 benefited from a more conservative and effective
market strategy implemented in the third quarter of 1997. The principal area
of savings in the 1998 period was in advertising and marketing expenses which
were reduced by $1.8 million or 15.0% from the comparable prior period,
although such amounts increased in the third quarter of 1998 in an effort to
offset the disruptive affect of construction at the facility.
Casino Magic-Bossier City earned an operating profit of $13.8 million for
the first nine months of 1998 versus an operating profit of $2.0 million in
the first nine months of 1997, an improvement of $11.8 million or 596.6%. Net
revenues grew by 22.5% while expenses grew by only 5.3%. The Company believes
these improvements are a result of general market growth, more efficient
marketing programs, and more efficient operations.
Other (income) and expenses were $17.6 million for the first nine months
of 1998 and $11.5 million for the first nine months of 1997. The increase in
net expenses is principally due to an increase of $1.9 million in management
fees during the first nine months of 1998 compared to a very minimal expense
for the first nine months of 1997, although such amounts were accrued rather
than paid as a result of the Company's Adjusted Fixed Charge Coverage Ratio.
See "Liquidity and Capital Resources". Also contributing to the increase in
net expense is $0.9 million in shared expenses related to the merger between
Casino Magic and Hollywood Park, Inc. There were no expenses in the first
nine months of 1997 relating to merger costs.
There was no income tax benefit for the first nine months of 1998, but
there was an income tax benefit of $0.5 million reflecting a 5% tax rate for
the first nine months 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 Corp. The difference between
the 0% rate in 1998 and the 5% rate in 1997 and the statutory rate of 35% is
due to the 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 $3.8 million in the
first nine months of 1998 compared with a net loss of $9.1 million during the
first nine months of 1997, or a loss per share of $3,755.05 and a loss per
share of $9,100.45, respectively.
Liquidity and Capital Resources:
At September 30, 1998, the Company had unrestricted cash of $8.0 million
compared to unrestricted cash of $10.7 million at December 31, 1997. The
Company had $1.6 million and $10.6 million in restricted marketable securities
at September 30, 1998 and December 31, 1997, respectively. Proceeds from the
sale of restricted marketable securities have been used to construct the
188-room hotel which is scheduled to open in December 1998.
For the nine months ended September 30, 1998, the Company's net
expenditures of cash for operating activities amounted to $1.6 million and the
Company made principal payments on long term debt of $2.4 million. The
Company spent $10.8 million for acquisitions of property, equipment and other
long-term assets. Of this amount, $9.8 million was paid with respect to the
hotel, restaurants and related amenities currently under construction.
No contingent interest or management fees were paid in the first nine
months of 1998 or 1997. Contingent interest and management fees were accrued
in the first nine months of 1998 in the amount of $972,889 and $1,945,779,
respectively. Contingent interest and management fees were accrued in the
first nine months of 1997 in the amount of $400,736 and $801,471,
respectively. No contingent interest or management fees were payable during
the nine months ended September 30, 1998 or 1997 because the Company's
Adjusted Fixed Charge Coverage Ratio (as defined) did not exceed 1.5 to 1.0.
8
CASINO MAGIC OF LOUISIANA, CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS-(CONTINUED)
Liquidity and Capital Resources (continued):
The Company commenced expansion of the land based pavilion and
construction of a 188-room hotel and related amenities, including restaurants,
banquet space and swimming pool in March 1998. The construction of the hotel
is to be funded primarily by the remaining proceeds from the sale of the
Crescent City Queen, current cash on hand, the future operating cash flow of
Casino Magic-Bossier City, and financing for furniture, fixtures and equipment
for which the Company has received a financing commitment. No assurances can
be given that such sources will be sufficient to complete the hotel and
related facilities. If the anticipated sources of funding are not sufficient
to complete the facilities, the timeline for completion may have to be
extended, other sources of funding would need to be found, or other strategies
and contingency plans would need to be employed by the Company.
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 1999 and beyond in
order to continue its planned development. The Company believes that cash and
restricted marketable securities at September 30, 1998, cash flows from
operations, financing for the furniture, fixtures and equipment of the hotel,
and other sources will be sufficient to service its operating needs and debt
service through, at least, the next twelve months, including the completion of
the Casino Magic-Bossier City hotel. Although there can be no assurances that
these sources of financing will prove adequate to complete all of these
planned investments at Casino Magic-Bossier City.
Year 2000:
The Year 2000 (Y2K) issue is the result of computerized systems being
written to store and process the year portion of dates using two digits rather
than four. Date-aware systems (i.e. any system or component that performs
calculations, comparisions, sequencing, or other operations involving dates)
may fail or produce erroneous results on or before January 1, 2000, because
the year 2000 will be interpreted as the year 1900.
The Company is currently working to fully determine and resolve the
potential impact of the Year 2000 on the processing of date-sensitive
information by its computerized information systems and components. Based on
the Company's current assessment, the costs of addressing potential problems
are not currently expected to have a materially adverse impact on the
Company's financial position, results of operations or cash flows in any given
year.
While the Company fully anticipates achieving the Year 2000 compliance
well in advance of January 1, 2000, there are certain risks which exist with
respect to the Company's business and the Year 2000. Those risks range from
slight delays and inefficiencies in processing data and carrying out
accounting and financial functions to, in a most reasonable likely worst case
scenario, extensive and costly inability to process data, provide vital
accounting functions and communicate with customers and suppliers. Until the
Company substantially completes its Year 2000 program, it is uncertain if
there will be any material effect on the Company's results of operations,
liquidity or financial condition. As of the date of this filing, the Company
has not finalized a contingency plan to address the failure to be Year 2000
compliant.
9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
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
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: January 29, 1999 __________________________________
----------------------------------
Marlin F. Torguson, Principal Acting Financial Officer
11
CASINO MAGIC OF LOUISIANA, CORP.
Quarterly Report on Form 10-Q for the Period Ended September 30, 1998
INDEX TO EXHIBITS
- -------------------
Exhibit
Number Page
- ------ ----
27. Financial Data Schedule (filed electronically only).
12