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 June 30, 2001
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 333-06489
Indiana THE MAJESTIC STAR CASINO, LLC 43-1664986
Indiana THE MAJESTIC STAR CASINO CAPITAL CORP. 35-2100872
(State or other jurisdiction of (Exact name of registrant as (I.R.S. Employer
incorporation or organization) specified in its charter) Identification No.)
One Buffington Harbor Drive
Gary, Indiana
46406-3000
(219) 977-7823
(Registrant's address and telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days.
Yes X No ______
-----
Shares outstanding of each of the registrant's classes of common stock as of
June 30, 2001:
Class Number of shares
- ----- ----------------
Not applicable Not applicable
THE MAJESTIC STAR CASINO, LLC
Index
Part I FINANCIAL INFORMATION Page No.
--------
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets, as of June 30, 2001 (Unaudited)
and December 31, 2000............................................................. 1
Consolidated Statements of Income for the three months and six months
ended June 30, 2001 and 2000 (Unaudited).......................................... 2
Consolidated Statements of Cash Flows for the six months
ended June 30, 2001 and 2000 (Unaudited).......................................... 3
Notes to Financial Statements.......................................................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................... 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk............................. 20
Part II OTHER INFORMATION
Item 1. Legal Proceedings...................................................................... 20
Item 6. Exhibits and Reports on Form 8-K....................................................... 21
SIGNATURES............................................................................................ 22
PART 1 - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
THE MAJESTIC STAR CASINO, LLC
Consolidated Balance Sheets
June 30, December 31,
2001 2000
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 16,533,640 $ 16,119,512
Accounts receivable, less allowance for doubtful accounts
of $106,811 and $120,420, respectively 1,602,230 2,059,577
Inventories 41,159 53,479
Prepaid expenses 1,005,896 636,337
Note due from affiliate 2,000,000 2,000,000
Restricted cash 2,000,000 2,000,000
------------ ------------
Total current assets 23,182,925 22,868,905
------------ ------------
Property, equipment, and vessel improvements, net 47,531,949 49,158,571
Other Assets:
Deferred financing costs, less accumulated amortization
of $1,694,156 and $1,269,380, respectively 5,780,997 5,840,448
Deferred costs, less accumulated amortization
of $5,652,029 and $5,099,462, respectively - 552,553
Investment in Buffington Harbor Riverboats, L.L.C. 42,524,662 43,924,033
Other assets and deposits 2,498,263 4,252,799
------------ ------------
Total other assets 50,803,922 54,569,833
Total Assets $121,518,796 $126,597,309
============ ============
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 2,892,599 $ 8,811,719
Accounts payable 1,185,679 789,293
Accrued payroll and related 1,381,326 1,108,066
Accrued interest 7,088,838 7,107,058
Other accrued liabilities 3,546,759 3,597,924
Due to Buffington Harbor Riverboats, L.L.C. 138,557 380,736
------------ ------------
Total current liabilities 16,233,758 21,794,796
Long-term debt, net of current maturities 128,395,057 128,233,486
------------ ------------
Total long-term liabilities 128,395,057 128,233,486
------------ ------------
Total Liabilities 144,628,815 150,028,282
------------ ------------
Members' Equity:
Members' contributions 24,000,000 24,000,000
Accumulated deficit (47,110,019) (47,430,973)
------------ ------------
Total members' equity (23,110,019) (23,430,973)
------------ ------------
Total Liabilities and Members' Equity $121,518,796 $126,597,309
============ ============
The accompanying notes are an integral part of these consolidated
financial statements.
1
THE MAJESTIC STAR CASINO, LLC
Consolidated Statements of Income
(Unaudited)
Three Months Three Months Six Months Six Months
Ended June 30, Ended June 30, Ended June 30, Ended June 30,
2001 2000 2001 2000
Revenues:
Casino $ 31,011,048 $ 29,115,712 $ 62,931,224 $ 59,746,813
Food and beverage 525,975 460,080 1,069,878 990,003
Other 324,678 282,967 622,657 504,045
------------ ------------ ------------ ------------
Gross Revenues 31,861,701 29,858,759 64,623,759 61,240,861
------------ ------------ ------------ ------------
less promotional allowances (150,582) (90,897) (279,519) (192,029)
Net Revenues 31,711,119 29,767,862 64,344,240 61,048,832
------------ ------------ ------------ ------------
Costs and Expenses:
Casino 6,692,339 6,251,717 13,345,619 12,173,478
Gaming and admission taxes 8,631,441 8,110,737 17,509,581 16,691,532
Food and beverage 610,445 615,417 1,243,842 1,178,057
Advertising and promotion 1,615,298 1,908,997 3,733,606 4,251,642
General and administrative 6,511,203 6,278,485 13,247,170 12,894,928
Economic incentive - City of Gary 931,256 900,255 1,889,033 1,847,026
Depreciation and amortization 2,140,188 2,289,274 4,446,996 4,549,150
Loss on disposal of assets 12,114 - 12,114 -
------------ ------------ ------------ ------------
Total costs and expenses 27,144,284 26,354,882 55,427,961 53,585,813
------------ ------------ ------------ ------------
Operating income 4,566,835 3,412,980 8,916,279 7,463,019
------------ ------------ ------------ ------------
Other Income (Expense):
Loss on investment in
Buffington Harbor Riverboats, L.L.C. (750,797) (720,663) (1,548,995) (1,451,837)
Interest income 105,658 241,184 244,424 432,466
Interest expense (3,548,389) (3,700,107) (7,243,275) (7,526,208)
Other non-operating expense (24,688) (26,131) (47,479) (78,100)
------------ ------------ ------------ ------------
Total other income (expense) (4,218,216) (4,205,717) (8,595,325) (8,623,679)
------------ ------------ ------------ ------------
Income (loss) before extraordinary item 348,619 (792,737) 320,954 (1,160,660)
Extraordinary Item:
Loss on bond redemption - (382,500) - (382,500)
------------ ------------ ------------ ------------
Net income (loss) $ 348,619 $ (1,175,237) $ 320,954 $ (1,543,160)
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
2
THE MAJESTIC STAR CASINO, LLC
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
2001 2000
Cash Flows From Operating Activities:
Net income (loss) $ 320,954 $ (1,543,160)
Adjustment to reconcile net income (loss) to net cash provided by operating activities
Depreciation 3,308,079 3,411,026
Amortization 1,138,917 1,138,124
Loss on investment in Buffington Harbor Riverboats, L.L.C. 1,548,995 1,451,837
Loss on disposal of assets 12,114 -
Loss on bond redemption - 382,500
Decrease in accounts receivable 457,347 578,911
Decrease in inventories 12,320 16,112
Increase in prepaid expenses (369,559) (370,062)
Increase in other assets (439,372) (263,171)
Increase (decrease) in accounts payable 396,386 (201,211)
Increase (decrease) in accrued payroll and other expenses 273,260 (262,189)
Decrease in accrued interest (18,220) (834,510)
Decrease in other accrued liabilities (318,054) (113,028)
----------- ------------
Net cash provided by operating activities 6,323,167 3,391,179
----------- ------------
Cash Flows From Investing Activities:
Acquisition of property, equipment and vessel improvements (1,695,421) (1,301,260)
Decrease in deposits 1,828,568 -
Proceeds from sale of slot machines 1,850 -
Investment in Buffington Harbor Riverboats, L.L.C. (149,618) (159,912)
----------- ------------
Net cash used in investing activities (14,621) (1,461,172)
----------- ------------
Cash Flows From Financing Activities:
Redemption of 12 3/4% of Senior Secured Notes - (6,382,500)
Decrease in restricted cash - 7,357,874
Line of credit, net (5,100,000) -
Cash paid to reduce long-term debt (794,418) (1,086,893)
Issuance of loan to Barden Development, Inc. - (2,000,000)
Distribution to Barden Development, Inc. - (597,610)
----------- ------------
Net cash used in financing activities (5,894,418) (2,709,129)
----------- ------------
Net increase (decrease) in cash and cash equivalents 414,128 (779,122)
Cash and cash equivalents, beginning of period 16,119,512 20,145,044
----------- ------------
Cash and cash equivalents, end of period $16,533,640 $ 19,365,922
=========== ============
Interest paid:
Equipment Debt $ 31,047 $ 148,403
Senior Secured Notes - Fixed Interest $ 7,068,750 $ 7,936,271
Line of credit $ 161,697 $ 246,138
The accompanying notes are an integral part of these consolidated
financial statements.
3
THE MAJESTIC STAR CASINO, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 Basis of Presentation
The Majestic Star Casino, LLC (the "Company") was formed on December 8, 1993 as
an Indiana limited liability company to provide gaming and related entertainment
to the public. The Company commenced gaming operations in the City of Gary (the
"City") at Buffington Harbor, located in Lake County, Indiana on June 7, 1996.
The Majestic Star Casino Capital Corp., a wholly-owned subsidiary of the Company
was incorporated on May 11, 1999 in the State of Indiana solely for the purpose
of serving as a co-issuer to facilitate the offering of the 10-7/8% Senior
Secured Notes and has no assets, liabilities, or operations. Majestic Investor,
LLC was formed in September 2000 as an "unrestricted subsidiary" of the Company
under the Indenture relating to the Company's 10-7/8% Senior Secured Notes.
Majestic Investor, LLC was initially formed to satisfy the Company's off-site
development obligations under the Development Agreement with the City of Gary
and currently is a party to a Purchase Agreement to acquire certain assets of
Fitzgeralds Gaming Corporation.
The accompanying consolidated financial statements are unaudited and include the
accounts of The Majestic Star Casino, LLC, and its wholly-owned subsidiary,
Majestic Investor, LLC. All significant intercompany transactions and balances
have been eliminated. Investments in affiliates in which the Company has the
ability to exercise significant influence, but not control, are accounted for by
the equity method. 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 periods have been made. The results for the six months ended June 30,
2001 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, 2000.
Note 2 Investment in Buffington Harbor Riverboats, L.L.C. ("BHR"):
On October 31, 1995, the Company and Trump Indiana, Inc. (the "Joint Venture
Partner") entered into the First Amended and Restated Operating Agreement of BHR
for the purpose of acquiring and developing certain facilities for the gaming
operations in the City ("BHR Property"). BHR is responsible for the management,
development and operation of the BHR Property. The Company and the Joint Venture
Partner have each entered into an agreement with BHR (the "Berthing Agreement")
to use BHR Property for their respective gaming operations and have committed to
pay cash operating losses of BHR as
4
THE MAJESTIC STAR CASINO, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
additional berthing fees. The Company and the Joint Venture Partner share
equally in the operating expenses relating to the BHR Property, except for costs
associated with food and beverage and the gift shop, which are allocated on a
percentage of use by the casino customers to the Company and the Joint Venture
Partner.
The following represents selected financial information of BHR:
Buffington Harbor Riverboats, L.L.C.
Statements of Income
(Unaudited)
Three Months Three Months Six Months Six Months
Ended June 30, 2001 Ended June 30, 2000 Ended June 30, 2001 Ended June 30, 2000
-------------------- ------------------- ------------------- -------------------
Gross Revenue $ 4,172,560 $ 4,939,461 $ 8,339,223 $ 10,072,753
Operating Income $ 7,639 $ 87,367 $ 16,170 $ 176,669
Net Loss $ (1,501,594) $ (1,460,888) $ (3,097,990) $ (2,903,675)
Note 3 Commitments and Contingencies:
Legal Proceedings
On January 15, 1998, the Company filed a petition for "Correction of an Error"
and on January 20, 1998, filed an appeal to the March 1, 1997, county property
tax assessment of the Chartered Vessel. The Company believes it was not given
proper notice of the 1997 property tax assessment in accordance with the general
assessment provisions of the property tax law and the Company further believes
the assessment of approximately $1.2 million was excessive. The tax was payable
in semiannual installments due in May and November 1998. Payments totaling
approximately $560,000 in the aggregate have been paid based upon an estimate
provided to the Company by legal counsel. On March 15, 2001, the Lake County
Property Tax Assessment Board of Appeals granted the Company partial relief,
reducing the 1998 tax liability to approximately $660,000. The Company believes
the assessment is still excessive, and has filed a further appeal to the Indiana
State Board of Tax Commissioners. It is too early to determine the outcome of
this matter and the effect, if any, on the Company's financial position.
There have been no other material changes in the legal proceedings previously
described in the Company's Annual Report on Form 10-K for the year ended
December 31, 2000.
5
Indiana Gaming Regulations
The ownership and operation of riverboat gaming operations in Indiana are
subject to strict state regulation under the Riverboat Gambling Act ("Act") and
the administrative rules promulgated thereunder. The Indiana Gaming Commission
("IGC") is empowered to administer, regulate and enforce the system of riverboat
gaming established under the Act and has jurisdiction and supervision over all
riverboat gaming operations in Indiana, as well as all persons on riverboats
where gaming operations are conducted. The IGC is empowered to regulate a wide
variety of gaming and nongaming related activities, including the licensing of
supplies to, and employees at, riverboat gaming operations and to approve the
form of entity qualifiers and intermediary and holding companies. Indiana is a
relatively new jurisdiction and the emerging regulatory framework is not yet
complete. The IGC has adopted certain final rules and has published others in
proposed or draft form which are proceeding through the review and final
adoption process. The IGC has broad rulemaking power, and it is impossible to
predict what effect, if any, the amendment of existing rules or the finalization
of currently proposed rules might have on the Company's operations.
Note 4 Recently Issued Accounting Pronouncements
At the end of the second quarter 2001, the Emerging Issues Task Force ("EITF")
had not reached a consensus on the portion of Issue 00-22, "Accounting for
'Points' and Certain Other Time-Based Sales Incentive Offers, and Offers for
Free Products or Services to be Delivered in the Future", which addresses the
income statement classification of cash coupons or rebates provided under the
Company's Cash Back Program. Currently, the Company expenses such cash awards
as casino operating expenses. However, if the EITF were to reach a consensus
that cash coupons or rebates should be recorded as a reduction in revenue the
Company would be required to reclassify these operating expenses. Due to
anticipated additional consideration of EITF 00-22 by the EITF, the Company is
currently unable to quantify the impact of adoption. The Company presently
expects that adoption or subsequent application of EITF 00-22 will have no
material effect on its financial position or results of operations.
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS 141 requires, among
other things, that the purchase method of accounting for business combinations
be used for all business combinations initiated after June 30, 2001. SFAS 142
addresses the accounting for goodwill and other intangible assets subsequent to
their acquisition. SFAS 142 requires, among other things, that goodwill and
other indefinite-lived intangible assets no longer be amortized and that such
assets be tested for impairment at least annually. SFAS 142 is effective for
fiscal years beginning after December 15, 2001. The Company is currently
evaluating the impact these standards will have on its financial statements.
6
Note 5 Supplemental Consolidating Information
The following consolidating financial schedules are presented as supplemental
information. The "Unrestricted Subsidiary" balances relate to Majestic
Investor, LLC, a wholly-owned subsidiary of The Majestic Star Casino, LLC.
7
THE MAJESTIC STAR CASINO, LLC
CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 2001
(UNAUDITED)
UNRESTRICTED ELIMINATIONS/
PARENT SUBSIDIARY ADJUSTMENTS CONSOLIDATED
ASSETS
Current Assets:
Cash and cash equivalents $ 13,783,507 $ 2,750,133 $ - $ 16,533,640
Accounts receivable (net) 1,500,980 101,250 - 1,602,230
Intercompany accounts 250,000 (250,000) - -
Inventories 41,159 - - 41,159
Prepaid expenses 1,005,896 - - 1,005,896
Note due from affiliate - 2,000,000 - 2,000,000
Restricted cash - 2,000,000 - 2,000,000
--------------------------------------------------------------------
Total current assets 16,581,542 6,601,383 - 23,182,925
--------------------------------------------------------------------
Property, equipment, and vessel improvements, net 47,531,949 - - 47,531,949
Other Assets:
Deferred financing costs (net) 3,977,758 1,803,239 - 5,780,997
Investment in Buffington Harbor Riverboats, L.L.C. 42,524,662 - - 42,524,662
Investment in Majestor Investor, LLC 8,904,622 - (8,904,622) -
Other assets and deposits 1,998,263 500,000 - 2,498,263
--------------------------------------------------------------------
Total other assets 57,405,305 2,303,239 (8,904,622) 50,803,922
Total Assets $ 121,518,796 $ 8,904,622 $ (8,904,622) $ 121,518,796
====================================================================
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 2,892,599 $ - $ - $ 2,892,599
Accounts payable 1,185,679 - 1,185,679
Accrued payroll and related 1,381,326 - - 1,381,326
Accrued interest 7,088,838 - - 7,088,838
Other accrued liabilities 3,685,316 3,685,316
--------------------------------------------------------------------
Total current liabilities 16,233,758 - - 16,233,758
Long-term debt, net of current maturities 128,395,057 - - 128,395,057
--------------------------------------------------------------------
Total long-term liabilities 128,395,057 - - 128,395,057
--------------------------------------------------------------------
Total Liabilities 144,628,815 - - 144,628,815
--------------------------------------------------------------------
Members' Equity:
Members' contributions 24,000,000 9,000,500 (9,000,500) 24,000,000
Accumulated income (deficit) (46,187,274) (95,878) 95,878 (46,187,274)
Members' distributions (922,745) (922,745)
--------------------------------------------------------------------
Total members' equity (23,110,019) 8,904,622 (8,904,622) (23,110,019)
--------------------------------------------------------------------
Total Liabilities and Members' Equity $ 121,518,796 $ 8,904,622 $ (8,904,622) $ 121,518,796
====================================================================
8
THE MAJESTIC STAR CASINO, LLC
CONSOLIDATING STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 2001
(UNAUDITED)
UNRESTRICTED
PARENT SUBSIDIARY CONSOLIDATED
Revenues:
Casino $ 62,931,224 $ - $ 62,931,224
Food and beverage 1,069,878 - 1,069,878
Other 622,657 - 622,657
-------------------------------------------------
Gross Revenues 64,623,759 - 64,623,759
-------------------------------------------------
less promotional allowances (279,519) - (279,519)
Net Revenues 64,344,240 - 64,344,240
-------------------------------------------------
Costs and Expenses:
Casino 13,345,619 - 13,345,619
Gaming and admission taxes 17,509,581 - 17,509,581
Food and beverage 1,243,842 - 1,243,842
Advertising and promotion 3,733,606 - 3,733,606
General and administrative 13,243,282 3,888 13,247,170
Economic incentive - City of Gary 1,889,033 - 1,889,033
Depreciation and amortization 4,446,996 - 4,446,996
Loss on disposal of assets 12,114 - 12,114
-------------------------------------------------
Total costs and expenses 55,424,073 3,888 55,427,961
-------------------------------------------------
Operating income (loss) 8,920,167 (3,888) 8,916,279
-------------------------------------------------
Other Income (Expense):
Loss on investment in
Buffington Harbor Riverboats, L.L.C. (1,548,995) - (1,548,995)
Interest income 139,106 105,318 244,424
Interest expense (7,243,275) - (7,243,275)
Other non-operating expense (47,479) - (47,479)
-------------------------------------------------
Total other income (expense) (8,700,643) 105,318 (8,595,325)
Net income $ 219,524 $ 101,430 $ 320,954
=================================================
9
THE MAJESTIC STAR CASINO, LLC
CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2001
(UNAUDITED)
UNRESTRICTED
PARENT SUBSIDIARY CONSOLIDATED
Cash Flows From Operating Activities:
Net income $ 219,524 $ 101,430 $ 320,954
Adjustment to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation 3,308,079 - 3,308,079
Amortization 1,138,917 - 1,138,917
Loss on investment in Buffington Harbor Riverboats, L.L.C. 1,548,995 - 1,548,995
Loss on disposal of assets 12,114 - 12,114
(Increase) Decrease in accounts receivable 541,097 (83,750) 457,347
Decrease in inventories 12,320 - 12,320
Increase in prepaid expenses (369,559) - (369,559)
Increase in other assets (102,994) (336,378) (439,372)
Increase in accounts payable 396,386 - 396,386
Increase in accrued payroll and other expenses 273,260 - 273,260
Decrease in accrued interest (18,220) - (18,220)
Decrease in other accrued liabilities (318,054) - (318,054)
--------------------------------------------------
Net cash provided by (used in) operating activities 6,641,865 (318,698) 6,323,167
--------------------------------------------------
Cash Flows From Investing Activities:
Acquisition of property, equipment and vessel improvements (1,695,421) - (1,695,421)
(Increase) Decrease in deposits 2,328,568 (500,000) 1,828,568
Proceeds from sale of slot machines 1,850 - 1,850
Investment in Buffington Harbor Riverboats, L.L.C. (149,618) - (149,618)
--------------------------------------------------
Net cash provided by (used in) investing activities 485,379 (500,000) (14,621)
--------------------------------------------------
Cash Flows From Financing Activities:
Line of credit, net (5,100,000) - (5,100,000)
Cash paid to reduce long-term debt (794,418) - (794,418)
--------------------------------------------------
Net cash used in financing activities (5,894,418) - (5,894,418)
--------------------------------------------------
Net increase (decrease) in cash and cash equivalents 1,232,826 (818,698) 414,128
Cash and cash equivalents, beginning of period 12,550,681 3,568,831 16,119,512
--------------------------------------------------
Cash and cash equivalents, end of period $ 13,783,507 $ 2,750,133 $ 16,533,640
==================================================
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Statement on Forward-Looking Information
This quarterly report contains "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, which represent the Company's
expectations or beliefs concerning future events. Statements containing
expressions such as "believes," "anticipates" or "expects" used in the Company's
press releases and reports filed with the Securities and Exchange Commission
(including periodic reports on Form 10-K and Form 10-Q) 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 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 periodic 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 following: the construction of a covered parking
facility located at the Company's gaming complex; the ability to fund planned
development needs and to service debt from existing operations and from new
financing; 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 the Company's gaming license;
increases in or new taxes imposed on gaming revenues, admission taxes or gaming
devices; a finding of unsuitability by regulatory authorities with respect to
the Company's officers or key employees; loss and/or retirement of key
executives; significant increase in fuel or transportation prices; adverse
economic conditions in the Company's markets; severe and unusual weather in the
Company's markets; and non-renewal of the Company's license from the IGC.
Readers are cautioned not to place undue reliance on forward-looking statements,
which speak only as of the date thereof. The Company undertakes no obligation to
publicly release any revisions to such forward-looking statements to reflect
events or circumstances after the date hereof.
Results of Operations
The discussion of results of operations contained herein provides a comparison
of the results of operations for the three and six month periods ended June 30,
2001, with the three and six month periods ended June 30, 2000.
The following table sets forth: (i) summary information from the Company's
consolidated statements of income; (ii) information relative to EBITDA (as
defined below) derived therefrom; and (iii) detailed information from the
Company's consolidated statements of income, as well as information relative to
EBITDA, expressed as a percentage of gross revenues.
11
Consolidated Statements of Income-- Summary Information
(dollars in thousands)
Three Months Three Months Six Months Six Months
Ended June 30, Ended June 30, Ended June 30, Ended June 30,
2001 2000 2001 2000
---- ---- ---- ----
Gross Revenues $ 31,862 $ 29,859 $ 64,624 $ 61,241
Operating Income $ 4,567 $ 3,413 $ 8,916 $ 7,463
EBITDA (1) $ 6,719 $ 5,702 $ 13,375 $ 12,012
Consolidated Statements of Income -- Percentage of Gross Revenues
- ------------------------------------------------------------------------------------------
Three Months Three Months Six Months Six Months
Ended June 30, Ended June 30, Ended June 30, Ended June 30,
2001 2000 2001 2000
---- ---- ---- ----
Revenues:
Casino 97.3% 97.5% 97.3% 97.6%
Food and beverage 1.7% 1.5% 1.7% 1.6%
Other 1.0% 1.0% 1.0% 0.8%
-----------------------------------------------------------------
Gross revenues 100.0% 100.0% 100.0% 100.0%
less promotional allowances -0.5% -0.3% -0.4% -0.3%
-----------------------------------------------------------------
Net revenues 99.5% 99.7% 99.6% 99.7%
-----------------------------------------------------------------
Costs and Expenses:
Casino 21.0% 20.9% 20.7% 19.9%
Gaming and admission taxes 27.1% 27.2% 27.1% 27.3%
Food and beverage 1.9% 2.1% 1.9% 1.9%
Advertising and promotions 5.1% 6.4% 5.8% 6.9%
General and administrative 20.5% 21.0% 20.7% 21.1%
Economic incentive - City of Gary 2.9% 3.0% 2.9% 3.0%
Depreciation and amortization 6.7% 7.7% 6.9% 7.4%
Loss on disposal of assets 0.0% 0.0% 0.0% 0.0%
-----------------------------------------------------------------
Total costs and expenses 85.2% 88.3% 86.0% 87.5%
Operating income 14.3% 11.4% 13.6% 12.2%
-----------------------------------------------------------------
Other Income (Expense):
Loss on investment in
Buffington Harbor Riverboats, L.L.C. -2.3% -2.4% -2.4% -2.4%
Interest income 0.3% 0.8% 0.4% 0.7%
Interest expense -11.1% -12.4% -11.2% -12.4%
Other nonoperating expense -0.1% -0.1% -0.1% -0.1%
-----------------------------------------------------------------
Total other income (expense) -13.2% -14.1% -13.3% -14.2%
Income (loss) before extraordinary item 1.1% -2.7% 0.3% -2.0%
Extraordinary item:
Loss on bond redemption 0.0% -1.3% 0.0% -0.6%
Net Income (loss): 1.1% -4.0% 0.3% -2.6%
=================================================================
EBITDA: (1) 21.1% 19.1% 20.7% 19.6%
NOTES:
1. EBITDA (defined as earnings before interest, income taxes, depreciation
and amortization, and other nonoperating expense) 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 EBITDA enhances the understanding of the financial performance
of companies with substantial depreciation and amortization. EBITDA for
the six months ended June 30, 2001 includes $3,888 of general and
administrative expenses associated with Majestic Investor, LLC, an
unrestricted subsidiary.
Results for any one or more periods are not necessarily indicative of annual
results or continuing trends.
12
Comparison of the Three Months Ended June 30, 2001 with the Three Months Ended
June 30, 2000
Gross revenues for the second quarter ended June 30, 2001 amounted to
approximately $31,862,000, an increase of approximately $2,003,000 or 6.7% from
gross revenues recorded in the second quarter ended June 30, 2000. The increase
was principally attributable to a 13.9% increase in the slot win combined with a
6.1% increase in the number of admissions.
Casino revenues totaled approximately $31,011,000, of which slot machines
accounted for approximately $26,342,000 (84.9%) and table games accounted for
approximately $4,669,000 (15.1%). Slot revenues increased $3,214,000 or 13.9% to
$26,342,000. The average number of slot machines in operation decreased by 8
units to 1,424 during the three months ended June 30, 2001, from 1,432 during
the three months ended June 30, 2000. Coin-in increased by 5.8% during the three
months ended June 30, 2001, compared to the three months ended June 30, 2000.
The average win per slot machine per day increased to approximately $203 for the
three months ended June 30, 2001, from approximately $178 for the three months
ended June 30, 2000. Table games revenues declined by $1,300,000, or 22.0%, due
primarily to a 10.1% decrease in the table drop and a lower than anticipated
table hold of 14.8%, compared to 17.0% in the prior year. During the three
months ended June 30, 2001, two of the three months experienced a table hold
greater than 16.5%. The average number of table games in operation during the
three months ended June 30, 2001 and 2000 was 50 and 56, respectively. The
average win per table game per day during the three months ended June 30, 2001
decreased to approximately $1,026, compared to approximately $1,175 for the
three months ended June 30, 2000. The average daily win per state passenger
count was approximately $38 and the average daily win per patron was
approximately $68 for the three months ended June 30, 2001, compared to an
average daily win per state passenger count of $38 and an average daily win per
patron of $67 for the three months ended June 30, 2000.
Food and beverage revenues for the three months ended June 30, 2001 totaled
approximately $526,000, or 1.7% of gross revenues, compared to approximately
$460,000, or 1.5% of gross revenues, for the three months ended June 30, 2000.
Other revenue totaled approximately $325,000, or 1.0% of gross revenues, and
consisted primarily of commission income during the three months ended June 30,
2001, compared to approximately $283,000, or 0.9% of gross revenues, during the
three months ended June 30, 2000.
Promotional allowances (complementaries) included in the Company's gross food
revenues for the three months ended June 30, 2001 and 2000, were approximately
$151,000 and $91,000, respectively. Promotional allowances provided to the
Company's gaming patrons at facilities located in, and/or owned by BHR for the
three months ended June 30, 2001 and 2000, were approximately $210,000 and
$127,000, respectively, and are characterized in the financial statements as an
expense. The increase in promotional allowances is directly attributable to
additional food kiosks being operated during the three months ended June 30,
2001 and a 6.1% increase in admissions. BHR and other
13
third party operators of food kiosks invoice the Company monthly for these
promotional allowances at cost, which approximates retail value.
Casino operating expenses for the three months ended June 30, 2001 totaled
approximately $6,692,000, or 21.0% of gross revenues and 21.6% of casino
revenues, respectively, compared to approximately $6,252,000, or 20.9% of gross
revenues and 21.5% of casino revenues, respectively, for the three months ended
June 30, 2000. These expenses were primarily comprised of salaries, wages and
benefits, and operating and promotional expenses of the casino. The dollar
increase of $441,000, or 7.0%, in casino operating expenses, is primarily
attributed to an increase of approximately $230,000 associated with Club
Majestic as a result of a 16% increase in rated slot wagering and an increase of
approximately $185,000 for complementaries.
Gaming and admissions taxes totaled approximately $8,631,000 for the three
months ended June 30, 2001, compared to approximately $8,111,000 for the three
months ended June 30, 2000. These taxes are levied on adjusted gross receipts,
as defined by Indiana gaming laws, at the rate of 20%, plus $3 per passenger per
the state passenger count. An additional $931,000 was paid during the three
months ended June 30, 2001, compared to approximately $900,000 in the three
months ended June 30, 2000, to the City under an agreement whereby the Company
pays 3% of the adjusted gross receipts directly to the City.
Advertising and promotion expenses for the three months ended June 30, 2001
totaled approximately $1,615,000, or 5.1% of gross revenues, compared to
approximately $1,909,000, or 6.4% of gross revenues, during the three months
ended June 30, 2000. Advertising and promotion expenses included salaries, wages
and benefits of the marketing and casino service departments, as well as
promotions, advertising and special events. The $294,000, or 15.4% decrease in
advertising and promotion expenses during the three months ended June 30, 2001
was primarily the result of a decrease of approximately $182,000 for external
advertising including production, billboard and radio advertising.
General and administrative expenses for the three months ended June 30, 2001
were approximately $6,511,000, or 20.4% of gross revenues, compared to
$6,278,000, or 21.0% of gross revenues, during the three months ended June 30,
2000. These expenses included approximately $1,591,000 for berthing fees paid to
BHR, approximately $1,486,000 for marine operations including housekeeping, and
$706,000 for security and surveillance operations during the second quarter of
2001. The $233,000 or 3.7% increase in general and administrative expenses is
primarily attributed to higher expenditures for insurance.
Depreciation and amortization for the three months ended June 30, 2001 was
approximately $2,140,000, or 6.7% of gross revenues, compared to approximately
$2,289,000, or 7.7% of gross revenues, during the three months ended June 30,
2000.
14
Operating income for the three months ended June 30, 2001 was approximately
$4,567,000, or 14.3% of gross revenues, compared to operating income for the
three months ended June 30, 2000 of $3,413,000, or 11.4% of gross revenues. The
$1,154,000 or 33.8% increase in operating income is principally attributed to an
increase in gross revenues offset by changes in expenses as previously
discussed.
Net interest expense for the three months ended June 30, 2001 was approximately
$3,443,000, or 10.8% of gross revenues, compared to approximately $3,459,000 or
11.6% of gross revenues for the same period last year. Net interest expense
includes approximately $53,000 of interest income earned at the Company's
unrestricted subsidiary, Majestic Investor, LLC.
The Company's loss relating to its investment in BHR for the three months ended
June 30, 2001 was approximately $751,000. The loss represents the Company's 50%
share of BHR's non-cash net loss (primarily depreciation and amortization).
Other non-operating expense includes unused line of credit fees of approximately
$25,000 associated with the Company's $20.0 million credit facility.
As a result of the foregoing, the Company experienced a net income of
approximately $349,000 compared to a net loss of approximately $1,175,000 during
the three months ended June 30, 2001 and 2000, respectively. The net income for
the three months ended June 30, 2001 excluding the accounts of Majestic Investor
was approximately $296,000.
Comparison of the Six Months Ended June 30, 2001 with the Six Months Ended June
30, 2000
Gross revenues for the six months ended June 30, 2001, amounted to approximately
$64,624,000, an increase of approximately $3,383,000 or 5.5% from gross revenues
recorded in the six months ended June 30, 2000. The increase was principally
attributable to a $5,640,000 or 11.9% increase in the slot win partially offset
by a decline in table revenues.
Casino revenues totaled approximately $62,931,000, of which slot machines
accounted for approximately $52,891,000 (84.0%) and table games accounted for
approximately $10,040,000 (16.0%). Slot revenues increased $5,640,000 or 11.9%.
The average number of slot machines in operation increased slightly by 5 units
to 1,429 during the six months ended June 30, 2001, from 1,424 during the six
months ended June 30, 2000. The average win per slot machine per day increased
12.1% to approximately $204 for the six months ended June 30, 2001, from
approximately $182 for the six months ended June 30, 2000. Table games revenues
declined by approximately $2,500,000, or 19.7%, due primarily to a 10.1%
decrease in the table drop and a lower than anticipated table hold of 15.3%,
compared to 17.1% in the prior year. The average number of table games in
operation during the six months ended June 30, 2001 and 2000, was 51 and 56,
respectively. The average win per table game per day during the six months ended
June 30, 2001 decreased to approximately $1,088, compared to approximately
$1,226 for the six months ended June 30, 2000. The average daily win per state
passenger count was
15
approximately $38 and the average daily win per patron was approximately $70 for
the six months ended June 30, 2001, compared to an average daily win per state
passenger count of $38 and an average daily win per patron of $67 for the six
months ended June 30, 2000.
Food and beverage revenues for the six months ended June 30, 2001 totaled
approximately $1,070,000, or 1.7% of gross revenues, compared to approximately
$990,000, or 1.6% of gross revenues, for the six months ended June 30, 2000.
Other revenue totaled approximately $623,000, or 0.9% of gross revenues, and
consisted primarily of commission income during the six months ended June 30,
2001, compared to approximately $504,000, or 0.8% of gross revenues, during the
six months ended June 30, 2000.
Promotional allowances (complementaries) included in the Company's gross food
revenues for the six months ended June 30, 2001 and 2000, were approximately
$280,000 and $192,000, respectively. Promotional allowances provided to the
Company's gaming patrons at facilities located in, and/or owned by BHR for the
six months ended June 30, 2001 and 2000, were approximately $381,000 and
$202,000, respectively, and are characterized in the financial statements as an
expense. The increase in promotional allowances is directly attributable to
additional food kiosks being operated during the six months ended June 30, 2001
and a 3.9% increase in the number of admissions. BHR and other third party
operators of food kiosks invoice the Company monthly for these promotional
allowances at cost, which approximates retail value.
Casino operating expenses for the six months ended June 30, 2001 totaled
approximately $13,346,000, or 20.7% of gross revenues and 21.2% of casino
revenues, respectively, compared to approximately $12,173,000, or 19.9% of gross
revenues and 20.4% of casino revenues, respectively, for the six months ended
June 30, 2000. These expenses were primarily comprised of salaries, wages and
benefits, and operating and promotional expenses of the casino. The dollar
increase of approximately $1,173,000, or 9.6%, in casino operating expenses, is
primarily attributed to an increase of approximately $587,000 associated with
Club Majestic as a result of a 19% increase in rated slot wagering,
approximately $320,000 for casino gaming equipment rental of proprietary games
such as Wheel of Fortune(R) and Austin Powers(R), and approximately $298,000 for
complementaries.
Gaming and admissions taxes totaled approximately $17,510,000 for the six months
ended June 30, 2001, compared to approximately $16,692,000 for the six months
ended June 30, 2000. These taxes are levied on adjusted gross receipts, as
defined by Indiana gaming laws, at the rate of 20%, plus $3 per passenger per
the state passenger count. An additional $1,889,000 was paid during the six
months ended June 30, 2001, compared to approximately $1,847,000 in the six
months ended June 30, 2000, to the City under an agreement whereby the Company
pays 3% of the adjusted gross receipts directly to the City.
16
Advertising and promotion expenses for the six months ended June 30, 2001
totaled approximately $3,734,000, or 5.8% of gross revenues, compared to
approximately $4,252,000, or 6.9% of gross revenues, during the six months ended
June 30, 2000. Advertising and promotion expenses included salaries, wages and
benefits of the marketing and casino service departments, as well as promotions,
advertising and special events. The $518,000, or 12.2%, decrease in advertising
and promotion expenses during the six months ended June 30, 2001 was primarily
the result of a decrease in mass marketing expenditures including the chartered
bus program partially offset by an increase in promotional expenses associated
with direct mail and Club Majestic promotions.
General and administrative expenses for the six months ended June 30, 2001 were
approximately $13,247,000, or 20.5% of gross revenues, compared to $12,895,000,
or 21.1% of gross revenues, during the six months ended June 30, 2000. These
expenses included approximately $3,207,000 for berthing fees paid to BHR,
approximately $3,105,000 for marine operations including housekeeping, and
approximately $1,358,000 for security and surveillance operations during the six
months ended June 30, 2001. These expenses also include approximately $3,900 for
general and administrative expenses associated with Majestic Investor, LLC. The
$352,000 or 2.7% increase in general and administrative expenses was primarily
due to increases in expenditures for general insurance and professional fees.
Depreciation and amortization for the six months ended June 30, 2001 was
approximately $4,447,000, or 6.9% of gross revenues, compared to approximately
$4,549,000, or 7.4% of gross revenues, during the six months ended June 30,
2000.
Operating income for the six months ended June 30, 2001 was approximately
$8,916,000, or 13.8% of gross revenues, compared to an operating income for the
six months ended June 30, 2000 of $7,463,000, or 12.2% of gross revenues. The
$1,453,000 or 19.5% increase in operating income is principally attributed to an
increase in gross revenues partially offset by increased expenses as previously
discussed.
Net interest expense for the six months ended June 30, 2001 was approximately
$7,000,000, or 10.8% of gross revenues, compared to approximately $7,094,000 or
11.6% of gross revenues for the same period last year. Net interest expense
includes approximately $105,000 of interest income earned at Majestic Investor,
LLC during the six months ended June 30, 2001.
The Company's loss relating to its investment in BHR for the six months ended
June 30, 2001 was approximately $1,549,000. The loss represents the Company's
50% share of BHR's non-cash net loss (primarily depreciation and amortization).
Other non-operating expense includes unused line of credit fees of approximately
$47,000 associated with the $20.0 million credit facility.
As a result of the foregoing, the Company experienced a net income of
approximately $321,000 compared to a net loss of approximately $1,543,000 during
the six months
17
ended June 30, 2001, and 2000, respectively. The net income for the six months
ended June 30, 2001 excluding the accounts of Majestic Investor, LLC was
approximately $220,000.
Earnings Before Interest, Income Taxes, Depreciation and Amortization ("EBITDA")
Consolidated EBITDA is presented solely as a supplemental disclosure and is used
by the Company to assist in the evaluation of the cash generating ability of its
gaming business.
Consolidated EBITDA represents "earnings before interest, income taxes,
depreciation and amortization, and nonoperating expenses." Consolidated EBITDA
during the three and six months ended June 30, 2001 was approximately $6,719,000
and $13,375,000, respectively, or 21.1% and 20.7% of gross revenues. The EBITDA
excluding Majestic Investor, LLC for the three and six months ended June 30,
2001 was approximately $6,719,000 and $13,379,000, respectively, or 21.1% and
20.7% of gross revenues, compared to EBITDA of approximately $5,702,000 or
$12,012,000, respectively, or 19.1% or 19.6%, respectively, of gross revenues,
for the three and six months ended June 30, 2000. The increases of $1,017,000
and $1,367,000, or 17.8% and 11.4%, respectively, in EBITDA during the three and
six months ended June 30, 2001 compared to the three and six months ended June
30, 2000 are primarily the result of increased gaming revenues combined with a
reduction in marketing expenditures.
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 June 30, 2001, the Company had cash, cash equivalents and restricted cash of
approximately $18.5 million, which amount includes $4.8 million at Majestic
Investor, LLC. During the six months ended June 30, 2001, the Company's capital
expenditures were approximately $1.7 million, which included approximately $1.4
million for slot machines and other gaming equipment. The Company also made
capital contributions of approximately $213,000 to BHR during the six months
ended June 30, 2001.
The Company, including the accounts of Majestic Investor, LLC, has met its
capital requirements to date through net cash from operations, capital
contributions and equipment loans. For the six months ended June 30, 2001, net
cash provided by operating activities totaled approximately $6.3 million,
compared to net cash provided by operating activities of approximately $3.4
million during the six months ended June 30, 2000. For the six months ended June
30, 2001, cash used by investing activities totaled approximately $15,000,
compared to approximately $1.5 million used by investing activities during the
six months ended June 30, 2000. For the six months ended June 30, 2001, cash
used by financing activities totaled approximately $5.9 million which included
net repayments of $5.1 million under the line of credit facility, compared to
$2.7
18
million used by financing activities during the six months ended June 30, 2000.
As of August 13, 2001, the outstanding borrowings under the credit facility were
$2.7 million.
On September 14, 2000, Mr. Barden purchased through Gary New Century, LLC
("GNC"), an affiliated company, approximately 190 acres of land adjacent to the
gaming complex. On September 29, 2000, GNC sold a portion of the land to
Buffington Harbor Parking Associates, LLC ("BHPA") which portion had been
formerly leased by Lehigh Portland Cement to BHR. Simultaneously, BHPA sold a
small portion of the purchased land to BHR. As a result of these transactions,
the lease agreement between Lehigh and BHR was terminated which relieves BHR of
the remaining 62 monthly payments of $125,000 each and the need to construct a
new harbor.
The Company entered into a lease in the second quarter of 2001 with BHPA for a
parking garage on land adjacent to the gaming complex. BHPA was formed by the
Joint Venture Partner and AMB Parking, LLC (a company indirectly owned by Don H.
Barden, Chairman and CEO of the Company) to construct and operate a parking
garage. The parking project is estimated to cost approximately $37.9 million,
including approximately $14.2 million for the land. BHPA closed the financing
necessary to construct the parking garage on June 19, 2001. Construction is
anticipated to be completed early 2002. Lease payments are intended to be
sufficient to service the debt on the BHPA financing. The Company believes that
the convenience of the new parking structure will attract a significant number
of new customers to Buffington Harbor, thereby providing opportunities to
increase the Company's net revenues and cash flow.
Majestic Investor, LLC entered into a definitive purchase agreement dated as of
November 22, 2000, as amended December 4, 2000, with Fitzgeralds Gaming
Corporation to purchase three of Fitzgeralds brand casinos. Majestic Investor,
LLC plans to purchase Fitzgeralds casinos in Las Vegas, Nevada; Tunica,
Mississippi; and Black Hawk, Colorado for $149.0 million in cash, subject to
adjustment in certain circumstances, plus assumption of certain liabilities. The
sale is consistent with the reorganization that Fitzgeralds Gaming Corporation
has negotiated with a committee representing its noteholders. To facilitate this
transaction, Fitzgeralds Gaming Corporation and its subsidiaries voluntarily
filed for Chapter 11 Bankruptcy in U. S. District Court in Nevada on December 5,
2000. The sale was approved by the Bankruptcy Court on March 19, 2001 but
remains contingent on, among other things, licensing and financing. Majestic
Investor, LLC and its affiliates have filed all required licensing applications.
Pending successful completion of financing and licensing, it is anticipated that
the transaction will close early in the fourth quarter of 2001.
A loan of $2.0 million made by Majestic Investor, LLC to Barden Development,
Inc. (a company wholly-owned by Mr. Barden and a member of the Company) remains
outstanding. The loan has an annual interest rate of 9.75%.
Management believes that the Company's cash flow from operations, certain
planned equipment financing and its current line of credit will be adequate to
meet the Company's anticipated future requirements for working capital, its
capital expenditures and scheduled payments of interest and principal on the
Senior Secured Notes, lease payments to BHPA and other permitted indebtedness
for the year 2001. No assurance can be given, however, that such proceeds and,
operating cash flow in light of increased competition principally dockside
gambling in Illinois and the purchase of certain Indiana
19
gaming facilities by larger more recognized brand names, will be sufficient for
such purposes. If necessary and to the extent permitted under the Indenture, the
Company will seek additional financing through borrowings and debt or equity
financing. There can be no assurance that additional financing, if needed, will
be available to the Company, or that, if available, the financing will be on
terms favorable to the Company. In addition, there is no assurance that the
Company's estimate of its reasonably anticipated liquidity needs is accurate or
that unforeseen events will not occur, resulting in the need to raise additional
funds.
Item 3. Quantitative And Qualitative Disclosures About Market Risk
Interest Rate Risk
- ------------------
The Company does not have any financial instruments held for trading purposes
and does not hedge any of its market risks with derivative instruments.
The Company's primary market risk exposure relates to interest risk exposure
through its borrowings. The fair value of the Company's debt obligations
approximates their carrying value.
Part II OTHER INFORMATION
Item 1. Legal Proceedings
Various legal proceedings are pending against the Company. Management considers
all such pending proceedings, primarily personal injury and equal employment
opportunity claims, to be ordinary litigation incidental to the character of the
Company's business. Management believes that the resolution of these proceedings
will not, individually or in the aggregate, have a material effect on the
Company's financial condition or results of operations.
On January 15, 1998, the Company filed a petition for "Correction of an Error"
and on January 20, 1998, filed an appeal to the March 1, 1997, county property
tax assessment of the Chartered Vessel. The Company believes it was not given
proper notice of the 1997 property tax assessment in accordance with the general
assessment provisions of the property tax law and the Company further believes
the assessment of approximately $1.2 million was excessive. The tax is payable
in semiannual installments due in May and November 1998. Payments totaling
approximately $560,000 in the aggregate have been paid based upon an estimate
provided to the Company by legal counsel. On March 15, 2001, the Lake County
Property Tax Assessment Board of Appeals granted the Company partial relief,
reducing the 1998 tax liability to approximately $660,000. The Company believes
the assessment is still excessive, and has filed a further appeal to the Indiana
State Board of Tax Commissioners. It is too early to determine the outcome of
this matter and the effect, if any, on the Company's financial position.
20
There have been no other material changes in the legal proceedings previously
described in the Company's Annual Report on Form 10-K for the year ended
December 31, 2000.
Item 6. Exhibits and Reports on Form 8-K
(a) None
(b) The Company filed no reports on Form 8-K during the quarter ended
June 30, 2001.
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, on August 14, 2001.
21
THE MAJESTIC STAR CASINO, LLC
By: Barden Development Inc., Manager
By: /s/ Don H. Barden
----------------------------------------------------
Don H. Barden, President and Chief Executive Officer
THE MAJESTIC STAR CASINO CAPITAL CORP.
By: /s/ Don H. Barden
----------------------------------------------------
Don H. Barden, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrants and
in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ Michael E. Kelly Vice President, Chief Operating and August 14, 2001
- -----------------------------
Michael E. Kelly Financial Officer of the Company and
The Majestic Star Casino Capital
Corp. (Principal Financial and Chief
Accounting Officer)
22