<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 September 30, 1997
------------------------
Commission File Number 333-00214
HORSESHOE GAMING, L.L.C.
(Exact name of registrant as specified in its charter)
Delaware 7999 88-0343515
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of incorporation Classification Code Number) Identification No.)
or organization)
4024 Industrial Rd.
Las Vegas, Nevada 89103
(702) 650-0080
(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 SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
INDEX PAGE
- ----- -----
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements:
Horseshoe Gaming, L. L. C. and Subsidiaries:
Consolidated Condensed Balance Sheets
at September 30, 1997 (unaudited) and December 31, 1996...................... 3
Consolidated Condensed Statements of Operations (unaudited)
for the three and nine months ended September 30, 1997 and 1996.............. 4
Consolidated Condensed Statements of Cash Flows (unaudited)
for the nine months ended September 30, 1997 and 1996........................ 5
Notes to Consolidated Condensed Financial Statements.............................. 6
New Gaming Capital Partnership and Subsidiary:
Consolidated Condensed Balance Sheets
at September 30, 1997 (unaudited) and December 31, 1996...................... 7
Consolidated Condensed Statements of Operations (unaudited)
for the three and nine months ended September 30, 1997 and 1996.............. 8
Consolidated Condensed Statements of Cash Flows (unaudited)
for the nine months ended September 30, 1997 and 1996........................ 9
Notes to Consolidated Condensed Financial Statements.............................. 10
Robinson Property Group, L.P.:
Condensed Balance Sheets
at September 30, 1997 (unaudited) and December 31, 1996...................... 11
Condensed Statements of Operations (unaudited)
for the three and nine months ended September 30, 1997 and 1996.............. 12
Condensed Statements of Cash Flows (unaudited)
for the nine months ended September 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>
September 30, December 31,
1997 1996
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 87,945 $ 79,159
Accounts receivable, net 10,764 8,026
Inventories 1,994 1,435
Prepaid expenses and other 2,940 1,639
-------- --------
Total current assets 103,643 90,259
-------- --------
Property and Equipment:
Land 14,688 10,225
Buildings, boat, barge and improvements 134,636 121,807
Furniture, fixtures and equipment 44,908 41,572
Less: accumulated depreciation (37,555) (26,493)
-------- --------
156,677 147,111
Construction in progress 160,615 38,644
-------- --------
Net property and equipment 317,292 185,755
-------- --------
Escrow funds -- 42,235
Goodwill, net 38,140 39,226
Other assets, net 19,727 20,122
$478,802 $377,597
======== ========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 1,198 $ 11,060
Accounts payable 5,256 3,184
Construction payables 21,406 14,106
Accrued expenses and other 26,037 23,751
-------- --------
Total current liabilities 53,897 52,101
Long-term debt, less current maturities 296,571 221,648
-------- --------
Minority Interest (989) (827)
Commitments and Contingencies
Redeemable Ownership Interests, net 29,003 24,893
Members' Equity 100,320 79,782
-------- --------
$478,802 $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 Nine Months Ended
September 30, September 30,
--------------------- -----------------------
1997 1996 1997 1996
------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Casino $80,569 $79,788 $237,285 $243,681
Food and beverage 7,648 6,829 21,506 20,370
Hotel 1,698 2,027 5,026 6,055
Other 1,031 990 3,095 3,373
------- ------- -------- --------
90,946 89,634 266,912 273,479
Promotional allowances (7,168) (6,325) (20,094) (18,888)
------- ------- -------- --------
Net revenues 83,778 83,309 246,818 254,591
------- ------- -------- --------
Expenses:
Casino 43,500 42,200 126,952 126,271
Food and beverage 2,655 1,824 7,743 7,235
Hotel 1,908 1,712 5,577 5,404
Other 239 382 838 1,111
General and administrative 10,372 11,315 32,083 34,765
Development 164 1,402 898 5,311
Pre opening 541 - 541 -
Depreciation and amortization 4,580 3,989 13,321 11,721
Corporate charges 4,020 1,968 8,533 6,024
------- ------- -------- --------
67,979 64,792 196,486 197,842
------- ------- -------- --------
Operating Income 15,799 18,517 50,332 56,749
Other Income (Expense):
Interest expense (4,994) (7,094) (14,839) (21,348)
Interest and other income 1,269 1,851 3,917 4,406
Other (9) (120) (420) 116
Minority interest in income
of subsidiaries (367) (627) (950) (1,652)
------- ------- -------- --------
Income before extraordinary loss on
early retirement of debt 11,698 12,527 38,040 38,271
Extraordinary loss on early retirement
of debt - - (5,243) -
------- ------- -------- --------
Net Income $11,698 $12,527 $ 32,797 $ 38,271
======= ======= ======== ========
</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>
Nine Months Ended
September 30,
-------------------------------
1997 1996
--------- ---------
<S> <C> <C>
Cash provided by operating activities:
Net Income $ 32,797 $ 38,271
Adjustments to reconcile net income to
net cash provided by operating activities:
Minority interest in income of subsidiary 950 1,651
Depreciation and amortization 13,321 11,721
Amortization of debt discount, deferred
finance charges and other 1,798 1,911
Extraordinary loss on early retirement of debt 5,243 -
Loss on disposal of land and other assets 295 217
Provision for doubtful accounts 4,432 3,729
Increase in redeemable ownership interests 2,907 3,157
Net change in assets and liabilities (4,688) (11,482)
--------- ---------
Net cash provided by operating activities 57,055 49,175
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (141,945) (32,391)
Proceeds from land held for sale - 1,100
Decrease (increase) in escrow funds 42,235 (30,098)
Increase (decrease) in construction payable 7,300 3,508
Increase in other assets (1,687) (4,419)
--------- ---------
Net cash used in investing activities (94,097) (62,300)
--------- ---------
Cash flows from financing activities:
Proceeds from debt and warrants, net of debt issue costs
of $4,027 155,811 49,073
Payments on debt, including early retirement premium
and penalties (97,639) (15,547)
Distributions to minority shareholders (1,112) (735)
Capital distributions (11,232) (15,379)
--------- ---------
Net cash provided by financing activities 45,828 17,412
--------- ---------
Net change in cash and cash equivalents 8,786 4,287
Cash and cash equivalents, beginning of period 79,159 65,541
--------- ---------
Cash and cash equivalents, end of period $ 87,945 $ 69,828
========= =========
</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., a Delaware limited liability company, and Subsidiaries
(the "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. Commitments and 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.
The Company may be required to repurchase ownership interests held by employees,
in the event of termination of their employment, at a price determined by
independent appraisal. Of the total ownership interest, 9.1% was held by
employees subject to buy-out provisions as of September 30, 1997. The value of
these ownership interests, estimated to be $29.0 million, is reflected in the
accompanying consolidated financial statements as Redeemable Ownership Interest.
3. Long-Term Debt:
In June 1997, the Company completed its 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.
In August 1997, the Company filed a registration statement on Form S-4 with the
Securities and Exchange Commission ("SEC") to register under the Securities Act
of 1933 the exchange of its Senior Subordinated Notes for its Registered Notes
which have equivalent terms. This exchange was completed on November 10, 1997.
On September 27, 1997, the Company received a commitment from CIBC Wood Gundy
Securities Corp. ("CIBC") to provide a $130 million Senior Secured Revolving
Credit Facility (the "Facility"). CIBC will act as syndication agent and will
use reasonable efforts to form a syndicate of financial institutions that will
collectively participate in the Facility. This Facility is intended to enable
the Company to fund the completion of the expansion of the Bossier City and
Tunica properties and may also provide the funds with which to pursue potential
gaming opportunities.
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 September 30, 1997, 631,225 units had been granted, of which
336,653 had vested as of November 1, 1997. 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 September 30,
1997.
Any units purchased by employees upon exercise of the options may be repurchased
upon termination of employment 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
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
5. Development:
The expansion of the Horseshoe Casinos is budgeted to cost an aggregate of
approximately $320 million. As of September 30, 1997, approximately $178 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 $142 million will
be funded with excess cash on hand, cash flow from operations, and to the extent
necessary, additional borrowings under the Facility discussed above.
In August 1997, the Company and Lady Luck Vicksburg, Inc. ("Lady Luck") signed a
Contribution and Sale Agreement with respect to a proposed new limited liability
company, which is intended to develop a riverboat gaming facility, including a
riverboat casino, a hotel of approximately 200 rooms, an 800-car parking garage
and other amenities, in Vicksburg, Mississippi. The consummation of the
Contribution and Sale Agreement and the development of the facility are subject
to certain conditions precedent, including the mutual determination by the
Company and Lady Luck of the intended scope and cost of the proposed facility,
the obtaining of requisite regulatory approvals, and the arrangement of
appropriate project financing. The facility is to be developed and operated by a
wholly-owned subsidiary of the Company, which will have a 75% profit interest in
the proposed limited liability company, with Lady Luck holding the remaining 25%
interest. Under the terms of the Contribution and Sale Agreement, the Company
and Lady Luck intend to contribute certain real property and other previously
acquired assets having a combined net book value of approximately $42 million.
The total cost of the project, including the value of the contributed assets, is
estimated to be approximately $100 million.
7
<PAGE> 8
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 10,536 $ 14,913
Accounts receivable, net 1,841 1,901
Inventories 1,385 957
Prepaid expenses and other 1,506 1,102
-------- --------
Total current assets 15,268 18,873
-------- --------
Property and Equipment:
Land 10,579 6,115
Buildings, boat and improvements 73,156 71,554
Furniture, fixtures and equipment 25,754 24,125
Less: accumulated depreciation (21,000) (15,028)
-------- --------
88,489 86,766
Construction in progress 105,036 18,482
-------- --------
Net property and equipment 193,525 105,248
-------- --------
Other Assets:
Goodwill, net 18,254 18,788
Other, net 11,563 11,269
-------- --------
$238,610 $154,178
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Current maturities of long-term debt $ 14,503 $ 11,854
Accounts payable 3,121 1,882
Due to affiliates 5,461 2,536
Construction payables 13,083 7,161
Accrued expenses and other 10,148 8,373
-------- --------
Total current liabilities 46,316 31,806
Long-term debt, less current maturities 159,989 97,837
Minority Interest (989) (827)
Commitments and Contingencies
Partners' Capital 33,294 25,362
--------- --------
$ 238,610 $154,178
========= ========
</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 OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ------------------------
1997 1996 1997 1996
------- ------- -------- ---------
<S> <C> <C> <C> <C>
Revenues:
Casino $42,315 $43,478 $118,795 $129,686
Food and beverage 4,458 3,980 12,038 11,953
Hotel 878 1,160 2,555 3,399
Other 441 342 1,275 1,296
------- ------- -------- --------
48,092 48,960 134,663 146,334
Promotional allowances (4,003) (3,479) (10,371) (10,481)
------- ------- -------- --------
Net revenues 44,089 45,481 124,292 135,853
------- ------- -------- --------
Expenses:
Casino 23,754 23,428 66,665 71,313
Food and beverage 1,662 831 4,996 4,151
Hotel 1,050 903 3,207 2,924
Other 123 153 347 500
General and administrative 6,134 6,153 17,812 19,102
Development - 500 - 500
Pre opening 265 - 265 -
Depreciation and amortization 2,396 2,239 7,474 6,449
Corporate charges 2,010 983 4,266 3,012
------- ------- -------- --------
37,394 35,190 105,032 107,951
------- ------- -------- --------
Operating Income 6,695 10,291 19,260 27,902
Other Income (Expense):
Interest expense (3,044) (2,785) (9,120) (8,250)
Interest income 216 247 683 656
Other, net (5) - (14) 418
Minority interest in income
of subsidiary (367) (627) (950) (1,652)
------- ------- -------- --------
Net Income $ 3,495 $ 7,126 $ 9,859 $ 19,074
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
9
<PAGE> 10
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------
1997 1996
-------- --------
<S> <C> <C>
Cash provided by operating activities:
Net Income $ 9,859 $ 19,074
Adjustments to reconcile net income to
net cash provided by operating activities:
Minority interest in income of subsidiary 950 1,651
Depreciation and amortization 7,474 6,449
Amortization of debt discount, deferred
finance charges and other 897 497
Loss on disposal of land and other assets - 217
Provision for doubtful accounts 1,286 620
Net change in assets and liabilities 956 (2,148)
-------- --------
Net cash provided by operating activities 21,422 26,360
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (93,256) (24,023)
Proceeds from land held for sale - 1,100
Increase in construction payable 5,922 442
Increase in other assets (3,012) (2,394)
-------- --------
Net cash used in investing activities (90,346) (24,875)
-------- --------
Cash flows from financing activities:
Proceeds from debt 80,400 25,000
Payments on debt (15,599) (8,821)
Capital distributions (2,002) (14,928)
Distributions to minority shareholders (1,112) (735)
Changes in due to/from affiliates 2,860 (12,892)
-------- --------
Net cash provided by (used in) financing activities 64,547 (12,376)
-------- --------
Net change in cash and cash equivalents (4,377) (10,891)
Cash and cash equivalents, beginning of period 14,913 27,025
-------- --------
Cash and cash equivalents, end of period $ 10,536 $ 16,134
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
10
<PAGE> 11
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.
11
<PAGE> 12
ROBINSON PROPERTY GROUP, L.P.
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 12,331 $ 22,858
Accounts receivable, net 8,821 5,883
Inventories 609 478
Prepaid expenses and other 742 275
-------- --------
Total current assets 22,503 29,494
-------- --------
Property and Equipment:
Land 4,110 4,110
Buildings, barge and improvements 61,479 50,253
Furniture, fixtures and equipment 18,547 16,933
Less: accumulated depreciation (16,344) (11,370)
-------- --------
67,792 59,926
Construction in progress 55,579 20,162
-------- --------
Net property and equipment 123,371 80,088
-------- --------
Other Assets:
Goodwill, net 19,886 20,438
Other, net 4,220 3,857
-------- --------
$169,980 $133,877
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accounts payable $ 2,049 $ 1,274
Due to affiliates 2,477 1,736
Construction payables 8,323 6,945
Accrued expenses and other 9,705 8,503
-------- --------
Total current liabilities 22,554 18,458
Long-term debt, less current maturities 56,400 43,000
Commitments and Contingencies
Partners' Capital 91,026 72,419
-------- --------
$169,980 $133,877
======== ========
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
12
<PAGE> 13
ROBINSON PROPERTY GROUP, L.P.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------------
1997 1996 1997 1996
------- ------- -------- ---------
<S> <C> <C> <C> <C>
Revenues:
Casino $38,254 $36,310 $118,490 $113,995
Food and beverage 3,190 2,849 9,468 8,417
Hotel 820 867 2,471 2,656
Other 590 648 1,820 2,077
------- ------- -------- --------
42,854 40,674 132,249 127,145
Promotional allowances (3,165) (2,846) (9,723) (8,407)
------- ------- -------- --------
Net revenues 39,689 37,828 122,526 118,738
------- ------- -------- --------
Expenses:
Casino 19,746 18,772 60,287 54,958
Food and beverage 993 993 2,747 3,084
Hotel 858 809 2,370 2,480
Other 116 229 491 611
General and administrative 4,838 5,162 14,271 15,663
Pre opening 277 - 277 -
Depreciation and amortization 2,179 1,750 5,832 5,262
Corporate charges 2,010 985 4,267 3,012
------- ------- -------- --------
Total 31,017 28,700 90,542 85,070
------- ------- -------- --------
Operating Income 8,672 9,128 31,984 33,668
Other Income (Expense):
Interest expense (822) (927) (2,360) (5,711)
Interest and other income 89 171 449 613
Other, net (5) (6) (351) (6)
------- ------- -------- --------
Net Income $ 7,934 $ 8,366 $ 29,722 $ 28,564
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
13
<PAGE> 14
ROBINSON PROPERTY GROUP, L.P.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------
1997 1996
-------- --------
<S> <C> <C>
Cash provided by operating activities:
Net Income $ 29,722 $ 28,564
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 5,832 5,262
Amortization of debt discount, deferred
finance charges and other 456 1,214
Loss on sale of assets 295 -
Provision for doubtful accounts 3,146 3,109
Net change in assets and liabilities (4,705) (6,732)
-------- --------
Net cash provided by operating activities 34,746 31,417
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (48,597) (8,061)
Increase in construction payable 1,378 3,066
Increase in other assets (913) (59)
-------- --------
Net cash used in investing activities (48,132) (5,054)
-------- --------
Cash flows from financing activities:
Proceeds from debt 13,400 -
Payments on debt - (32,000)
Capital distributions (11,216) (8,199)
Changes in due to/from affiliates 675 (3,501)
-------- --------
Net cash provided by (used in) financing activities 2,859 (43,700)
-------- --------
Net change in cash and cash equivalents (10,527) (17,337)
Cash and cash equivalents, beginning of period 22,858 32,706
-------- --------
Cash and cash equivalents, end of period $ 12,331 $ 15,369
======== ========
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
14
<PAGE> 15
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.
15
<PAGE> 16
PART I FINANCIAL INFORMATION
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 serves 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 is presently considering a proposal by Hollywood Casinos, Sodak Gaming
Corp. and New Orleans Paddlewheels Company to relocate the license for the New
Orleans Flamingo Hilton Casino, which is now closed, to a new proposed facility
to be located adjacent to an existing competitor's facility in Shreveport. A
decision by the Gaming Control Board is expected prior to December 31, 1997. The
Louisiana Gaming Control Board is accepting proposals until January 15, 1998 for
the remaining fifteenth license, which was recently awarded to Hollywood Casino
and subsequently rescinded due to the withdrawal of their joint venture
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 project,
including a new 25-story hotel on site and a new, expanded riverboat casino
facility containing over 1800 gaming positions (see "Liquidity and Capital
Resources" and "Development" sections below for additional discussion of
expansion plans). While Management expects that the new competition will affect
the Horseshoe Bossier City's revenues and operating income, Management also
believes the 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 September 30, 1997 and 1996
Net revenues of the Company for the quarter ended September 30, 1997 was $83.8
million as compared to $83.3 million for the comparable period in 1996.
Operating income of the Company declined $2.7 million, or 14.6%, for the three
months ended September 30, 1997, to $15.8 million, as compared to $18.5 million
for the prior year period mainly due to an increase of $2.0 million in corporate
charges resulting from the Company continuing to build its corporate
infrastructure. The Company currently allocates the expenses associated with its
corporate office and staff equally to the Horseshoe Bossier City and the
Horseshoe Casino Center.
The Horseshoe Bossier City contributed net revenues and operating income,
respectively, of $44.1 million and $6.7 million for the quarter ended September
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<PAGE> 17
30, 1997, and $45.5 million and $10.3 million for the quarter ended September
30, 1996. Operating income excluding corporate charges decreased by 23.0 %, or
2.6 million in the 1997 period as compared to the 1996 period. The Horseshoe
Bossier City's net revenues include casino revenues and non-casino revenues,
respectively, of $42.3 million and $1.8 million for the quarter ended September
30, 1997 and $43.5 million and $2.0 million for the quarter ended September 30,
1996. Casino revenue per day decreased approximately 2.7 % in 1997 to $460,000
from $473,000 in 1996. The reduction of $1.2 million in casino revenues occurred
in slot revenue and was a result of both a reduction in hold percentage, and a
decrease in volume due to construction interruption and increased competition.
The Horseshoe Casino Center contributed net revenues and operating income of
$39.7 million and $8.7 million, respectively for the three months ended
September 30, 1997 and $37.8 million and $9.1 million, respectively for the
three months ended September 30, 1996. Operating income excluding corporate
charges increased by 5.9 %, or $.6 million in the 1997 period as compared to the
1996 period. The Horseshoe Casino Center's 1997 net revenues include casino
revenues and non-casino revenues, respectively, of $38.3 million and $1.4
million for the quarter ended September 30, 1997 and $36.3 million and $1.5
million for the quarter ended September 30, 1996. Casino revenue per day
increased approximately 5.3% in 1997 to $416,000 from $395,000 in 1996 despite
disruption related to the property's expansion project.
OTHER FACTORS AFFECTING EARNINGS
The decrease in net interest expense of $1.5 million for the three months ended
September 30, 1997, compared with the prior year period ended September 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 September 30, 1997 and 1996 was $3.6
million and $.6 million, respectively.
Nine months ended September 30, 1997 and 1996
Net revenues of the Company for the nine months ended September 30, 1997 was
$246.8 million as compared to $254.6 million for the comparable period in 1996.
The decrease in net revenues of $7.8 million, or 3.1 %, occurred at the
Horseshoe Bossier City, which reflected a decrease in casino revenues of $10.9
million. Operating income excluding corporate charges of the Company declined
$3.9 million, or 6.2%, for the nine months ended September 30, 1997, to $58.9
charges, as compared to $62.8 million for the prior year period. Corporate
charges reflect an increase of $2.5 million for the nine months ended September
30, 1997 as compared to the prior year period resulting from the Company
continuing to build its corporate infrastructure. The Company currently
allocates the expenses associated with its corporate office and staff equally to
the Horseshoe Bossier City and the Horseshoe Casino Center.
The Horseshoe Bossier City contributed net revenues and operating income,
respectively, of $124.3 million and $19.3 million for the nine months ended
September 30, 1997, and $135.9 million and $27.9 million for the nine months
ended September 30, 1996. Operating income excluding corporate charges
decreased by 23.9%, or $7.4 million in the 1997 period as compared to the 1996
period. The Horseshoe Bossier City's net revenues include casino revenues and
non-casino revenues, respectively, of $118.8 million and $5.5 million for the
nine months ended September 30, 1997 and $129.7 million and $6.2 million for the
nine months ended September 30, 1996. Casino revenue per day decreased
approximately 8.0% in 1997 to $435,000 from $473,000 in 1996. The decrease in
casino revenue is partially due to a reduction in volume from increased
competition and construction interruption. Casino revenues were also affected by
a reduction in hold percentage in the 1997 period as compared to the 1996
period.
The Horseshoe Casino Center contributed net revenues and operating income of
$122.5 million and $32.0 million, respectively for the nine months ended
September 30, 1997 and $118.7 million and $33.7 million, respectively for the
nine months ended September 30, 1996. The Horseshoe Casino Center's 1997 net
revenues include casino revenues and non-casino revenues, respectively, of
$118.5 million and $4.0 million for the nine months ended September 30, 1997 and
$114.0 million and $4.7 million for the nine months ended September 30, 1996.
Casino revenue per day increased approximately 4.3% in 1997 to $434,000 from
$416,000 in 1996 despite disruption related to the property's expansion project.
Development expenses, which are included in operating income, were $.9 million
and $5.3 million for the nine months ended September 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 $1.6 million in depreciation and amortization is mainly due to
Horseshoe Bossier City's addition of a parking garage in the second quarter of
1996 and an administrative building during the fourth quarter of 1996.
OTHER FACTORS AFFECTING EARNINGS
The decrease in net interest expense of $6.0 million for the nine months ended
September 30, 1997, compared with the prior year period ended September 30,
1996, is mainly due to the capitalization of interest related to the expansion
of both the Horseshoe
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<PAGE> 18
Bossier City and Horseshoe Casino Center. Total interest capitalized for the
nine months ended September 30, 1997 and 1996 was $8.3 million and $.7 million,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
In June 1997, the Company completed its 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.
In August 1997, the Company filed a registration statement on Form S-4 with the
Securities and Exchange Commission ("SEC") to register under the Securities Act
of 1933 the exchange of its Senior Subordinated Notes for its Registered Notes
which have equivalent terms. This exchange was completed on November 10, 1997.
On September 27, 1997, the Company received a commitment from CIBC Wood Gundy
Securities Corp. ("CIBC") to provide a $130 million Senior Secured Revolving
Credit Facility (the "Facility"). CIBC will act as syndication agent and will
use reasonable efforts to form a syndicate of financial institutions that will
collectively participate in the Facility. This Facility is intended to enable
the Company to fund the completion of the expansion of the Bossier City and
Tunica properties and may also provide the funds with which to pursue potential
gaming opportunities.
The expansion of the Horseshoe Casinos is budgeted to cost an aggregate of
approximately $320 million. As of September 30, 1997, approximately $178 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 $142 million will
be funded with excess cash on hand, cash flow from operations, and to the extent
necessary, additional borrowings under the Facility discussed above.
DEVELOPMENT
Bossier City, Louisiana
Horseshoe Bossier City is currently expanding its entire casino facility at a
cost of approximately $210 million. 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 expects 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 $110 million. Development plans include an additional 15,000
square feet of gaming space to add approximately 420 slot machines and 17 table
games, 309 hotel suites (to add to its existing 200 room hotel facility), a
multi-level, 1,100 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.
OTHER ITEMS
In August, 1997 the Company and Lady Luck Vicksburg, Inc. ("Lady Luck") signed a
Contribution and Sale Agreement with respect to a proposed new limited liability
company, which is intended to develop a riverboat gaming facility, including a
riverboat casino, a hotel of approximately 200 rooms, an 800-car parking garage
and other amenities, in Vicksburg, Mississippi. The consummation of the
Contribution and Sale Agreement and the development of the facility are subject
to certain conditions precedent including the mutual determination by the
Company and Lady Luck of the intended scope and cost of the proposed facility,
the obtaining of requisite regulatory approvals, and the arrangement of
appropriate project financing. The facility is to be developed and operated by a
wholly-owned subsidiary of the Company, which will have a 75% profit interest in
the proposed limited liability company, with Lady Luck holding the remaining 25%
interest. Under the terms of the Contribution and Sale Agreement, the Company
and Lady Luck intend to contribute certain real property and other previously
acquired assets having a combined net book value of approximately $42 million.
The total cost of the project, including the value of the contributed assets, is
estimated to be approximately $100 million.
The Company may be required to repurchase ownership interests held by employees,
in the event of termination of their employment, at a price determined by
independent appraisal. Of the total ownership interest, 9.1% was held by
employees subject to buy-out provisions as of September 30, 1997. The value of
these ownership interests, estimated to be $29.0 million, is reflected in the
accompanying consolidated financial statements as Redeemable Ownership Interest.
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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
19
<PAGE> 20
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: November 11, 1997 By: /s/ Walter J. Haybert
-----------------------------
Treasurer and Chief Financial Officer
of Horseshoe Gaming, Inc.
20
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
27.1 Financial Data Schedule-Horseshoe Gaming L.L.C. and Subsidiaries
</TABLE>
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 22,229
<SECURITIES> 65,716
<RECEIVABLES> 10,764<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 1,994
<CURRENT-ASSETS> 103,643
<PP&E> 354,847
<DEPRECIATION> 37,555
<TOTAL-ASSETS> 478,802
<CURRENT-LIABILITIES> 53,897
<BONDS> 297,769
0
0
<COMMON> 0
<OTHER-SE> 100,320
<TOTAL-LIABILITY-AND-EQUITY> 478,802
<SALES> 8,041<F2>
<TOTAL-REVENUES> 246,818
<CGS> 8,581
<TOTAL-COSTS> 141,110
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,839
<INCOME-PRETAX> 38,040
<INCOME-TAX> 0
<INCOME-CONTINUING> 38,040
<DISCONTINUED> 0
<EXTRAORDINARY> 5,243
<CHANGES> 0
<NET-INCOME> 32,797
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Notes and accounts receivable-trade are reported net of allowances for
doubtfull accounts.
<F2>Net sales are reported net of promotional allowances applicable to tangible
items.
</FN>
</TABLE>
