<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
QUARTERLY REPORT FILED PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
-----------------
Commission File Number 333-00214
---------
HORSESHOE GAMING, L.L.C.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 7999 88-0343515
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer Identification No.)
of incorporation or organization) Classification Code Number)
</TABLE>
330 South Fourth Street
Las Vegas, Nevada 89101
(702) 383-8500
(Address, including zip code, and telephone number, including
area code, of registrants' principal executive office)
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 such
filing requirements for the past 90 days.
Yes X No
----- -----
<PAGE> 2
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
QUARTER ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
INDEX PAGE
----
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements:
<S> <C>
Horseshoe Gaming, L.L.C. and Subsidiaries:
Consolidated Condensed Balance Sheets
at June 30, 1997 (unaudited) and December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Condensed Statements of Operations (unaudited)
for the six and three months ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Condensed Statements of Cash Flows (unaudited)
for the six months ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Condensed Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
New Gaming Capital Partnership and Subsidiary:
Consolidated Condensed Balance Sheets
at June 30, 1997 (unaudited) and December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . 7
Consolidated Condensed Statements of Operations (unaudited)
for the six and three months ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . 8
Consolidated Condensed Statements of Cash Flows (unaudited)
for the six months ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Notes to Consolidated Condensed Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Robinson Property Group, L.P.:
Condensed Balance Sheets
at June 30, 1997 (unaudited) and December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . 11
Condensed Statements of Operations (unaudited)
for the six and three months ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . 12
Condensed Statements of Cash Flows (unaudited)
for the six months ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Notes to Condensed Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
PART II OTHER INFORMATION
ITEM 6 Exhibits and reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
2
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ----------
(Unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $130,102 $ 79,159
Accounts receivable, net 10,019 8,026
Inventories 1,765 1,435
Prepaid expenses and other 2,961 1,639
-------- ---------
Total current assets 144,847 90,259
-------- ---------
Property and Equipment:
Land 14,533 10,225
Buildings, boat, barge and improvements 133,717 121,807
Furniture, fixtures and equipment 44,418 41,572
Less: accumulated depreciation (33,712) (26,493)
-------- ---------
158,956 147,111
Construction in progress 104,920 38,644
-------- ---------
Net property and equipment 263,876 185,755
-------- ---------
Escrow funds - 42,235
Goodwill, net 38,555 39,226
Other assets, net 18,502 20,122
-------- --------
$465,780 $377,597
======== ========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 1,199 $ 11,060
Accounts payable 3,063 3,184
Construction payables 22,520 14,106
Accrued expenses and other 25,331 23,751
-------- --------
Total current liabilities 52,113 52,101
Long-term debt, less current maturities 296,440 221,648
-------- --------
Minority Interest (946) (827)
Commitments and Contingencies
Redeemable Ownership Interests, net 26,861 24,893
Members' Equity 91,312 79,782
-------- --------
$465,780 $377,597
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
3
<PAGE> 4
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Casino $ 76,760 $ 80,221 $ 156,716 $163,893
Food and beverage 6,967 6,830 13,858 13,541
Hotel 1,679 2,057 3,328 4,028
Other 1,048 1,133 2,064 2,383
--------- --------- --------- --------
86,454 90,241 175,966 183,845
Promotional allowances (6,474) (6,309) (12,926) (12,563)
--------- --------- --------- --------
Net Revenues 79,980 83,932 163,040 171,282
--------- --------- --------- --------
Expenses:
Casino 41,093 42,019 83,452 84,071
Food and beverage 2,507 2,663 5,088 5,411
Hotel 2,498 2,051 3,669 3,692
Other 344 351 599 729
General and administrative 13,303 13,317 26,224 27,506
Development 506 3,026 734 3,909
Depreciation and amortization 4,442 4,009 8,741 7,732
--------- --------- --------- --------
Total expenses 64,693 67,436 128,507 133,050
--------- --------- --------- --------
Operating Income 15,287 16,496 34,533 38,232
Other Income (Expense):
Interest expense (4,596) (7,639) (9,845) (14,254)
Interest and other income 1,164 1,423 2,648 2,555
Other (347) 291 (411) 236
Minority interest in income
of subsidiaries (201) (522) (583) (1,025)
--------- --------- --------- --------
Income before extraordinary loss on
early retirement of debt 11,307 10,049 26,342 25,744
Extraordinary loss on early
retirement of debt (5,243) - (5,243) -
--------- --------- --------- --------
Net Income $ 6,064 $ 10,049 $ 21,099 $ 25,744
========= ========= ========= ========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
4
<PAGE> 5
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1997 1996
-------- ---------
<S> <C> <C>
Cash provided by operating activities:
Net Income $ 21,099 $ 25,744
Adjustments to reconcile net income to
net cash provided by operating activities:
Minority interest in income of subsidiary 583 1,025
Depreciation and amortization 8,741 7,784
Amortization of debt discount, deferred
finance charges and other 1,347 1,829
Extraordinary loss on early retirement of debt 5,243 -
Loss on disposal of land and other assets - 201
Provision for doubtful accounts 3,127 2,753
Increase in redeemable ownership interests 1,272 2,957
Net change in assets and liabilities (5,315) (2,803)
-------- --------
Net cash provided by operating activities 36,097 39,490
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (84,392) (16,575)
Proceeds from land held for sale - 1,400
Decrease (increase) in escrow funds 42,235 (45,120)
Increase (decrease) in construction payable 8,414 (2,409)
Increase in other assets (471) (3,629)
-------- --------
Net cash used in investing activities (34,214) (66,333)
-------- --------
Cash flows from financing activities:
Proceeds from debt and warrants, net of debt issue
costs of $3,400 156,438 49,073
Payments on debt, including early retirement
premium and penalties (97,627) (11,373)
Distributions to minority shareholders (702) (735)
Capital distributions (9,049) (11,150)
-------- --------
Net cash provided by financing activites 49,060 25,815
-------- --------
Net change in cash and cash equivalents 50,943 (1,028)
Cash and cash equivalents, beginning of period 79,159 65,541
-------- --------
Cash and cash equivalents, end of period $130,102 $ 64,513
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
5
<PAGE> 6
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Introduction:
The accompanying unaudited Consolidated Condensed Financial Statements of
Horseshoe Gaming, L.L.C. and Subsidiaries (the "Company"), a Delaware limited
liability company, have been prepared in accordance with the instructions to
Form 10-Q and therefore do not include all information and disclosures
necessary for complete financial statements in conformity with generally
accepted accounting principles. The consolidated condensed balance sheet at
December 31, 1996 was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.
The results for the interim periods indicated are unaudited, but reflect all
adjustments (consisting only of normal recurring adjustments) which management
considers necessary for a fair presentation of operating results. Results of
operations for interim periods are not necessarily indicative of a full year of
operations.
2. Contingencies:
The Company and its subsidiaries, during the normal course of operating their
businesses, become engaged in various litigation and other legal disputes. In
the opinion of the Company's management, the ultimate disposition of such
disputes will not have a material impact on the Company's operations.
3. Long-Term Debt:
In June 1997, the Company received proceeds of approximately $155.9 million,
net of costs, from the sale of $160 million principal amount of 9 3/8% Senior
Subordinated Notes. The Notes were sold at a price of 99.899% of par value,
are due June 15, 2007 and require semi-annual interest payments. The net
proceeds from the notes received by the Company were used to repay
approximately $76 million outstanding (including prepayment penalty) under the
Credit Facility and to repurchase $13 million in aggregate principal amount of
Senior Notes which had a fair market value of $14.5 million together with
accrued and unpaid interest related thereto. The remainder will be loaned to
HE and RPG to finance a portion of the costs associated with the expansion of
Horseshoe Bossier City and Horseshoe Casino Center, respectively.
The Company is required to file a registration statement with the Securities
and Exchange Commission (the "SEC") for new notes with identical terms (the
"Registered Notes") and have such registration statement declared effective by
the SEC by December 8, 1997. The Company is required to exchange the Senior
Subordinated Notes for the Registered Notes within 30 days of the registration
statement being declared effective. If the Company does not meet these
deadlines, the Company will be obligated to pay liquidated damages equal
to $0.05 per week per $1,000 principal amount of the notes, increasing by $0.05
per week per $1,000 principal amount for each 90 day period the Company is in
default up to a maximum of $0.35 per week per $1,000 principal amount.
4. Unit Option Plan:
During 1997 the Company's manager, Horseshoe Gaming, Inc., approved the
Company's 1997 Unit Option Plan which provides for certain employees to be
granted options to purchase membership units in the Company at a fixed price of
$3.47 per unit. The options vest in three equal annual installments beginning
one year subsequent to the date of the option holder's employment and expire
after 10 years. At June 30, 1997, 631,225 units had been granted, 210,408 of
which had been vested. Management estimated that the minimum fair value of the
options (as prescribed by SFAS No. 123, Accounting for Stock-Based
Compensation) was immaterial on the date of grant and June 30, 1997.
Any units purchased by employees upon exercise of the options may be
repurchased by the Company at a price equal to the then fair market value of
the units. Accordingly, the unit option plan is accounted for as a variable
plan under APB Opinion No. 25, "Accounting for Stock Issued to Employees." On
the date of grant the exercise price of the options exceeded management's
estimate of the fair value of the units; therefore, no compensation expense was
recorded. Compensation expense will be recognized in future periods to the
extent the fair value of the units in the Company increases above the exercise
price of the options.
6
<PAGE> 7
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 19,526 $ 14,913
Accounts receivable, net 1,870 1,901
Inventories 1,256 957
Prepaid expenses and other 1,860 1,102
-------- --------
Total current assets 24,512 18,873
-------- --------
Property and Equipment:
Land 10,424 6,115
Buildings, boat and improvements 72,468 71,554
Furniture, fixtures and equipment 25,445 24,125
Less: accumulated depreciation (19,101) (15,028)
-------- --------
89,236 86,766
Construction in progress 70,558 18,482
-------- --------
Net property and equipment 159,794 105,248
-------- --------
Other Assets:
Goodwill, net 18,453 18,788
Other, net 10,433 11,269
-------- --------
$213,192 $154,178
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Current maturities of long-term debt $ 15,214 $ 11,854
Accounts payable 1,601 1,882
Due to affiliates 5,140 2,536
Construction payables 16,232 7,161
Accrued expenses and other 13,809 8,373
-------- --------
Total current liabilities 51,996 31,806
Long-term debt, less current maturities 132,567 97,837
Minority Interest (946) (827)
Commitments and Contingencies
Partners' Capital 29,575 25,362
-------- --------
$213,192 $154,178
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
7
<PAGE> 8
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ---------------------
1997 1996 1997 1996
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Casino $ 37,021 $42,683 $76,480 $86,208
Food and beverage 3,861 4,107 7,580 7,973
Hotel 850 1,164 1,677 2,239
Other 414 493 834 954
-------- ------- ------- -------
42,146 48,447 86,571 97,374
Promotional allowances (3,340) (3,640) (6,368) (7,002)
-------- ------- ------- -------
Net revenues 38,806 44,807 80,203 90,372
-------- ------- ------- -------
Expenses:
Casino 20,714 23,724 42,911 47,885
Food and beverage 1,562 1,485 3,334 3,320
Hotel 1,707 1,138 2,157 2,021
Other 112 156 224 347
General and administrative 6,769 6,730 13,934 14,978
Depreciation and amortization 2,592 2,260 5,078 4,210
-------- ------- ------- -------
Total 33,456 35,493 67,638 72,761
-------- ------- ------- -------
Operating Income 5,350 9,314 12,565 17,611
Other Income (Expense):
Interest expense (2,977) (2,844) (6,076) (5,465)
Interest income 220 144 467 409
Other, net (4) 418 (9) 418
Minority interest in income
of subsidiary (201) (522) (583) (1,025)
-------- ------- ------- -------
Net Income $ 2,388 $ 6,510 $ 6,364 $11,948
======== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
8
<PAGE> 9
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1997 1996
------- ---------
<S> <C> <C>
Cash provided by operating activities:
Net Income $ 6,364 $ 11,948
Adjustments to reconcile net income to
net cash provided by operating activities:
Minority interest in income of subsidiary 583 1,025
Depreciation and amortization 5,078 4,210
Amortization of debt discount, deferred
finance charges and other 523 327
Loss on disposal of land and other assets 217
Provision for doubtful accounts 788 795
Net change in assets and liabilities 3,341 (4,302)
-------- ---------
Net cash provided by operating activites 16,677 14,220
-------- ---------
Cash flows from investing activities:
Purchase of property and equipment (57,626) (14,035)
Proceeds from land held for sale - 1,400
Increase (decrease) in construction payable 9,071 (2,409)
Increase in other assets (1,235) (658)
-------- ---------
Net cash used in investing activities (49,790) (15,702)
-------- ---------
Cash flows from financing activities:
Proceeds from debt 46,400 9,000
Payments on debt (8,310) (4,022)
Capital distributions (2,226) (14,170)
Distributions to minority shareholders (702) (735)
Changes in due to/from affiliates 2,564 (381)
-------- ---------
Net cash provided by (used in) financing activities 37,726 (10,308)
-------- ---------
Net change in cash and cash equivalents 4,613 (11,790)
Cash and cash equivalents, beginning of period 14,913 27,025
-------- ---------
Cash and cash equivalents, end of period $ 19,526 $ 15,235
======== =========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
9
<PAGE> 10
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Introduction:
The accompanying unaudited Consolidated Condensed Financial Statements of New
Gaming Capital Partnership and Subsidiary (the "Partnership") have been
prepared in accordance with the instructions to Form 10-Q and therefore do not
include all information and disclosures necessary for complete financial
statements in conformity with generally accepted accounting principles. The
consolidated condensed balance sheet at December 31, 1996 was derived from
audited financial statements, but does not include all disclosures required by
generally accepted accounting principles. The results for the interim periods
indicated are unaudited, but reflect all adjustments (consisting only of normal
recurring adjustments) which management considers necessary for a fair
presentation of operating results. Results of operations for interim periods
are not necessarily indicative of a full year of operations.
2. Contingencies:
The Partnership and its subsidiary, during the normal course of operating their
business, become engaged in various litigation and other legal disputes. In
the opinion of the Partnership's management, the ultimate disposition of such
disputes will not have a material impact on the Partnership's operations.
10
<PAGE> 11
ROBINSON PROPERTY GROUP, L.P.
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- --------
(Unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 19,338 $ 22,858
Accounts receivable, net 8,010 5,883
Inventories 510 478
Prepaid expenses and other 744 275
-------- --------
Total current assets 28,602 29,494
-------- --------
Property and Equipment:
Land 4,110 4,110
Buildings, barge and improvements 61,249 50,253
Furniture, fixtures and equipment 18,384 16,933
Less: accumulated depreciation (14,439) (11,370)
-------- --------
69,304 59,926
Construction in progress 34,363 20,162
-------- --------
Net property and equipment 103,667 80,088
-------- --------
Other Assets:
Goodwill, net 20,102 20,438
Other, net 4,347 3,857
-------- --------
$156,718 $133,877
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accounts payable $ 1,409 $ 1,274
Due to affiliates 2,232 1,736
Construction payables 6,288 6,945
Accrued expenses and other 10,375 8,503
-------- --------
Total current liabilities 20,304 18,458
Long-term debt, less current maturities 49,400 43,000
Commitments and Contingencies
Partners' Capital 87,014 72,419
-------- --------
$156,718 $133,877
======== ========
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
11
<PAGE> 12
ROBINSON PROPERTY GROUP, L.P.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ---------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Casino $39,739 $37,538 $80,236 $77,685
Food and beverage 3,106 2,723 6,278 5,568
Hotel 829 893 1,651 1,789
Other 634 640 1,230 1,429
------- ------- ------- -------
44,308 41,794 89,395 86,471
Promotional allowances (3,134) (2,669) (6,558) (5,561)
------- ------- ------- -------
Net revenues 41,174 39,125 82,837 80,910
------- ------- ------- -------
Expenses:
Casino 20,379 18,295 40,541 36,186
Food and beverage 945 1,178 1,754 2,091
Hotel 791 913 1,512 1,671
Other 232 195 375 382
General and administrative 5,934 6,585 11,690 12,528
Depreciation and amortization 1,845 1,764 3,653 3,512
------- ------- ------- -------
Total 30,126 28,930 59,525 56,370
------- ------- ------- -------
Operating Income 11,048 10,195 23,312 24,540
Other Income (Expense):
Interest expense (936) (1,834) (1,538) (4,784)
Interest and other income 160
141 360 442
Other, net (342) - (346) -
------- ------- ------- -------
Net Income $ 9,930 $ 8,502 $21,788 $20,198
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
12
<PAGE> 13
ROBINSON PROPERTY GROUP, L.P.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1997 1996
-------- --------
<S> <C> <C>
Cash provided by operating activities:
Net Income $ 21,788 $ 20,198
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 3,653 3,512
Amortization of debt discount, deferred
finance charges and other 274 1,150
Provision for doubtful accounts 2,339 1,958
Net change in assets and liabilities (2,960) (2,663)
-------- --------
Net cash provided by operating activities 25,094 24,155
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (26,692) (2,270)
Increase in construction payable (657) -
(Increase) decrease in other assets (827) 305
-------- --------
Net cash used in investing activities (28,176) (1,965)
-------- --------
Cash flows from financing activities:
Proceeds from debt 6,400 -
Payments on debt - (32,000)
Capital distributions (7,294) -
Changes in due to/from affiliates 456 (4,519)
-------- --------
Net cash used in financing activities (438) (36,519)
-------- --------
Net change in cash and cash equivalents (3,520) (14,329)
Cash and cash equivalents, beginning of period 22,858 32,706
-------- --------
Cash and cash equivalents, end of period $ 19,338 $ 18,377
======== ========
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
13
<PAGE> 14
ROBINSON PROPERTY GROUP, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Introduction:
The accompanying unaudited Condensed Financial Statements of Robinson Property
Group, L.P. (the "Partnership"), have been prepared in accordance with the
instructions to Form 10-Q and therefore do not include all information and
disclosures for complete financial statements in conformity with generally
accepted accounting principles. The consolidated condensed balance sheet at
December 31, 1996 was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.
The results for the interim periods indicated are unaudited, but reflect all
adjustments (consisting only of normal recurring adjustments) which management
considers necessary for a fair presentation of operating results. Results of
operations for interim periods are not necessarily indicative of a full year of
operations.
2. Contingencies:
The Partnership, during the normal course of operating its business, becomes
engaged in various litigation and other legal disputes. In the opinion of the
Partnership's management, the ultimate disposition of such disputes will not
have a material impact on the Partnership's operations.
14
<PAGE> 15
PART I FINANCIAL INFOMATION
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis provides information which
Management believes is relevant to an assessment and understanding of the
Company's consolidated financial condition and results of operations. The
discussion should be read in conjunction with the Consolidated Condensed
Financial Statements and notes thereto.
INTRODUCTION
The formation of the Company culminated with a transaction which
resulted in the Company (a newly formed holding company) owning, as of
October 1, 1995, 50% or more of several entities that were previously
owned by Mr. Binion, certain related parties and certain unrelated parties
(the "Roll-Up Transaction"). Mr. Binion now services as the Chairman of
the Board of Directors and Chief Executive Officer of Horseshoe Gaming,
Inc. ("HGI"), the manager of the Company.
As a result of the Roll-Up Transaction, the Company owned 89% of HE,
the partnership that owns the Horseshoe Bossier City, 100% of RPG, the
partnership that owns the Horseshoe Casino Center, and 80% of Horseshoe
Ventures, L.L.C., a Delaware limited liability company ("Horseshoe
Ventures"), which was formed to pursue casino development opportunities in
new jurisdictions. As of December 31, 1995, a wholly owned subsidiary of
the Company acquired an additional 2.92% ownership interest in HE and
in 1996 entered into an option agreement to acquire an additional 1%
ownership interest in HE.
RESULTS OF OPERATIONS
The Horseshoe Bossier City is one of four riverboat casinos currently
operating in the Bossier City/Shreveport, Louisiana market. The
Louisiana Gaming Control Board has approved the relocation of a riverboat
casino to the Bossier City/Shreveport market on the basis of a proposal
to locate a new facility adjacent to an existing competitor's facility in
Shreveport in October 1997 (although the owner of the riverboat has
recently requested permission for the riverboat to remain in New
Orleans). The Louisiana Gaming Control Board is currently accepting
proposals for the remaining fifteenth license, which was rescinded due
to the withdrawal of the joint venture's financial partner. This
license, once granted, may be located in the Bossier City/Shreveport
market. Management believes that the Bossier City/Shreveport market is
sufficiently large to allow six riverboat casinos to operate profitably.
The Horseshoe Bossier City is undergoing a major expansion of the
Horseshoe Bossier City and the potential addition of two riverboat
casinos in the Bossier City/Shreveport Market will increase the size and
scope of the overall gaming market, mitigating the potential adverse
impact on future operating levels at the Horseshoe Bossier City. The
impact on operating margins from the overall increase in supply to this
market is uncertain.
The Horseshoe Casino Center operates in the competitive Tunica County,
Mississippi, market, which currently consists of nine casinos. Several
of the existing Tunica casinos have recently completed or are undergoing
significant expansion projects, including the Horseshoe Casino Center (see
"Liquidity and Capital Resources" and "Development" sections below for
additional discussion of expansion plans) . While Management expects that
this new competition will affect the Horseshoe Casino Center's revenues
and operating income, Management also believes the expansion will increase
the size and scope of the overall Tunica gaming market, mitigating the
potential adverse impact on future operating levels at the Horseshoe
Casino Center. The impact on operating margins from the overall increase
in supply to this market is uncertain.
The Company has not experienced any significant seasonal trends;
however, the Company has a limited operating history and the Company may
determine in the future that its revenues and income may be seasonal in
nature.
Three months ended June 30, 1997 and 1996
Net revenues of the Company for the quarter ended June 30, 1997 was
$80.0 million as compared to $83.9 million for the comparable period in
1996. The decrease in net revenues of $3.9 million, or 4.6%, occurred
at the Horseshoe Bossier City, which reflected a decrease in casino
revenues of $5.7 million.
The Horseshoe Bossier City contributed net revenues and operating
income, respectively, of $38.8 million and $5.4 million for the quarter
ended June 30, 1997, and $44.8 million and $9.3 million for the quarter
ended June 30, 1996. Operating income decreased by 41.9%, or $3.9 million
in the 1997 period as compared to the 1996 period. The decrease in
operating income is due to a reduction in volume from increased
competition and construction interruption and a reduction in hold
percentage, mainly in table games for the months of April and May. The
Horseshoe Bossier City's net revenues include casino revenues and
non-casino revenues, respectively, of $37.0 million and $1.8 million for
the quarter ended June 30, 1997 and $42.7 million and $2.1 million for
15
<PAGE> 16
the quarter ended June 30, 1996. Casino revenue per day decreased approximately
13.2% in 1997 to $407,000 from $469,000 in 1996.
The Horseshoe Casino Center contributed net revenues and operating income of
$41.2 million and $11.0 million, respectively for the three months ended June
30, 1997 and $39.1 million and $10.2 million, respectively for the three months
ended June 30, 1996. Operating income increased by 7.8%, or $.8 million in the
1997 period as compared to the 1996 period. The increase in operating income
is due to the increase in casino revenues from increased volume. The
Horseshoe Casino Center's 1997 net revenues include casino revenues and
non-casino revenues, respectively, of $39.7 million and $1.5 million for the
quarter ended June 30, 1997 and $37.5 million and $1.6 million for the quarter
ended June 30, 1996. Casino revenue per day increased approximately 5.8% in
1996 to $437,000 from $413,000 in 1996.
Development expenses, which are included in operating income, were $.5 million
and $3.0 million for the quarters ended June 30, 1997 and 1996, respectively.
The 1996 period includes expenses associated with the Company's failure to
obtain a license to conduct gaming in the state of Indiana.
The increase of $.4 million in depreciation and amortization is mainly due to
Horseshoe Bossier City's addition of a parking garage and administrative
building during 1996.
OTHER FACTORS AFFECTING EARNINGS
The decrease in net interest expense of $2.8 million for the three months ended
June 30, 1997, compared with the prior year period ended June 30, 1996, is
mainly due to the capitalization of interest related to the expansion of both
the Horseshoe Bossier City and Horseshoe Casino center. Total interest
capitalized for the three months ended June 30, 1997 was $2.7 million.
Six months ended June 30, 1997 and 1996
Net revenues of the Company for the six months ended June 30, 1997 was $163.0
million as compared to $171.3 million for the comparable period in 1996. The
decrease in net revenues of $8.3 million, or 4.8%, occurred at the Horseshoe
Bossier City, which reflected a decrease in casino revenues of $10.2 million.
The Horseshoe Bossier City contributed net revenues and operating income,
respectively, of $80.2 million and $12.6 million for the six months ended June
30, 1997, and $90.4 million and $17.6 million for the six months ended June 30,
1996. Operating income decreased by 28.4%, or $5.0 million in the 1997 period
as compared to the 1996 period. The decrease in operating income is due to a
reduction in volume from increased competition and construction interruption
and a reduction in hold percentage, mainly in table games for the months of
April and May. The Horseshoe Bossier City's net revenues include casino
revenues and non-casino revenues, respectively, of $76.5 million and $3.7
million for the six months ended June 30, 1997 and $86.2 million and $4.2
million for the six months ended June 30, 1996. Casino revenue per day
decreased approximately 10.8% in 1997 to $423,000 from $474,000 in 1996.
The Horseshoe Casino Center contributed net revenues and operating income of
$82.8 million and $23.3 million, respectively for the six months ended June 30,
1997 and $80.9 million and $24.5 million, respectively for the six months ended
June 30, 1996. Operating income decreased by 4.9%, or $1.2 million in the 1997
period as compared to the 1996 period. During 1996 two additional casinos
commenced operations in the Tunica market which caused an increase in casino
service levels designed to mitigate potential erosion of revenue from increased
competition. Direct and indirect marketing costs, promotional allowances and
the maturation of the work force from the growth in service levels all reflect
increases from the 1996 period as a direct result of increased competition in
the Tunica market. The Horseshoe Casino Center's 1997 net revenues include
casino revenues and non-casino revenues, respectively, of $80.2 million and
$2.6 million for the six months ended June 30, 1997 and $77.7 million and $3.2
million for the six months ended June 30, 1996. Casino revenue per day
increased approximately 3.7% in 1996 to $443,000 from $427,000 in 1996.
Development expenses, which are included in operating income, were $.7 million
and $3.9 million for the six months ended June 30, 1997 and 1996, respectively.
The 1996 period includes expenses associated with the Company's failure to
obtain a license to conduct gaming in the state of Indiana.
The increase of $.7 million in depreciation and amortization is mainly due to
Horseshoe Bossier City's addition of a parking garage and administrative
building during 1996.
16
<PAGE> 17
OTHER FACTORS AFFECTING EARNINGS
The decrease in net interest expense of $4.5 million for the six months ended
June 30, 1997, compared with the prior year period ended June 30, 1996, is
mainly due to the capitalization of interest related to the expansion of both
the Horseshoe Bossier City and Horseshoe Casino Center. Total interest
capitalized for the six months ended June 30, 1997 was $4.7 million
LIQUIDITY AND CAPITAL RESOURCES
In June 1997, the Company received proceeds of approximately $155.9 million,
net of costs, from the sale of $160 million principal amount of 9 3/8% Senior
Subordinated Notes. The Notes were sold at a price of 99.899% of par value,
are due June 15, 2007 and require semi-annual interest payments. The net
proceeds from the Notes received by the Company were used to repay
approximately $76 million (including prepayment penalty) outstanding under
the Credit Facility, and to repurchase $13 million in aggregate principal
amount of Senior Notes which had a fair market value of approximately $14.5
million together with accrued and unpaid interest related thereto. The
remainder is to be loaned to HE and RPG to finance a portion of the costs
associated with the expansion of Horseshoe Bossier City and Horseshoe Casino
Center, respectively. The expansion of the Horseshoe Casinos is budgeted to
cost an aggregate of approximately $275 million (exclusive of capitalized
interest). As of June 30, 1997, approximately $113 million had been expended
by the Company in connection with the expansion projects. The Company
anticipates that the remaining costs associated with the expansion of the
Horseshoe Casinos, which are estimated to be approximately $162 million, will
be funded with excess cash on hand including the remaining proceeds from the
offering, cash flow from operations, FF&E financing, and to the extent
necessary, additional borrowings under the Credit Facility or a replacement
credit facility.
As of June 30, 1997, the Company had approximately $130 million of cash and
cash equivalents and had the ability to borrow an additional $172 million
pursuant to the most restrictive debt incurrence tests set forth in the Credit
Facility, the Senior Notes and the Notes. The lender under the Credit Facility
has entered into an amendment to the Credit facility pursuant to which the
lender has agreed to purchase on, or prior to, August 31, 1997, up to an
additional $80 million in notes pursuant to the Credit Facility, subject to the
fulfillment of certain conditions by the Company, including receipt of certain
regulatory approvals. The Company intends to amend its Credit Facility or
enter into a new revolving credit facility to provide for approximately $100
million of borrowing capacity. There can be no assurance, however, that the
Company will be able to amend the Credit Facility to provide for additional
borrowing capacity or that the Company will be able to obtain additional
financing on acceptable terms, if at all. The failure of the Company to obtain
additional financing would have a material adverse effect on the Company and
its ability to complete the Horseshoe Casinos expansion projects.
DEVELOPMENT
Bossier City, Louisiana
Horseshoe Bossier City is currently expanding its entire casino facility at
a cost of approximately $180 million, excluding financing costs attributable to
such expenditures. The expansion plans include a 25 story hotel tower with 606
suites, meeting room facilities, a health club and spa, the renovation and
expansion of existing dockside facilities, a new expanded riverboat casino
facility (with approximately 40% more space and featuring approximately 1,349
slot machines, 61 table games and 10 poker tables), the addition of two
specialty restaurants, the enlargement of the existing buffet and the recently
completed 1,100 space parking garage, administration building and remodeled
existing steak house restaurant. Management estimates the project will be
completed during the fourth quarter of 1997.
Tunica, Mississippi
Horseshoe Casino Center is expanding its casino complex at a cost of
approximately $95 million, excluding financing costs attributable to such
expenditures. Development plans include an additional 15,000 square feet of
gaming space for approximately 420 slot machines and 17 table games, 309
additional hotel suites, a multi-level, 1,000 space parking garage and
Bluesville, an entertainment facility which will accommodate approximately
1,000 customers. Additional facilities will include a health club, one
additional restaurant, a relocated and expanded buffet, a remodeled steak
house, meeting room facilities and other amenities. Management expects the
project will be completed during the fourth quarter of 1997.
17
<PAGE> 18
OTHER ITEMS
The Company is currently conducting discussions with Lady Luck Gaming
Corporation regarding joint development of a casino on a Vicksburg, Mississippi
site owned by Lady Luck. A definite agreement has not been reached, and there
is no assurance that an agreement will be reached, nor is there any assurance as
to what may be the terms of any such agreement.
The Company may be required to repurchase ownership interest held by
employees, in the event of termination of their employment, at a price
determined by independent appraisal. The total ownership interest held by
employees subject to buy-out provisions was 9.1% as of June 30, 1997. The
value of these ownership interests, amounting to $26.9 million, is reflected in
the accompanying consolidated financial statements as Redeemable Ownership
Interest.
PART II OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
27.1 Financial Data Schedule-Horseshoe Gaming L.L.C. and
Subsidiaries (for SEC use only).
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements 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.
HORSESHOE GAMING, L.L.C.
a Delaware limited liability company
By: Horseshoe Gaming, Inc.,
a Nevada corporation
Its: Manager
Date: August 13, 1997 By: /s/ Walter J. Haybert
-----------------------------------
Treasurer and Chief Financial
Officer of Horseshoe Gaming, Inc.
19
<PAGE> 20
EXHIBIT INDEX
Exhibit
Number Description
27.1 Financial Data Schedule-Horseshoe Gaming L.L.C. and Subsidiaries
(for SEC use only)
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 27,725
<SECURITIES> 102,377
<RECEIVABLES> 10,019<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 1,765
<CURRENT-ASSETS> 144,847
<PP&E> 192,668
<DEPRECIATION> 33,712
<TOTAL-ASSETS> 465,780
<CURRENT-LIABILITIES> 52,113
<BONDS> 297,639
0
0
<COMMON> 0
<OTHER-SE> 91,312
<TOTAL-LIABILITY-AND-EQUITY> 465,780
<SALES> 5,250<F2>
<TOTAL-REVENUES> 163,040
<CGS> 5,687
<TOTAL-COSTS> 92,808
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,845
<INCOME-PRETAX> 26,342
<INCOME-TAX> 0
<INCOME-CONTINUING> 26,342
<DISCONTINUED> 0
<EXTRAORDINARY> 5,243
<CHANGES> 0
<NET-INCOME> 21,099
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>NOTES AND ACCOUNTS RECEIVABLE-TRADE ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL
ACCOUNTS.
<F2>NET SALES ARE REPORTED NET OF PROMOTIONAL ALLOWANCES APPLICABLE TO TANGIBLE
ITEMS.
</FN>
</TABLE>
