<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, 1998
-----------------------
Commission File Number
HORSESHOE GAMING, L.L.C.
(Exact name of registrant as specified in its charter)
<TABLE>
<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>
4024 Industrial Road
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 JUNE 30, 1998
<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 June 30, 1998 and December 31, 1997......................................................... 3
Consolidated Condensed Statements of Operations
for the three and six months ended June 30, 1998 and 1997...................................... 4
Consolidated Condensed Statements of Cash Flows
for the six months ended June 30, 1998 and 1997................................................ 5
Notes to Consolidated Condensed Financial Statements.................................................. 6
Robinson Property Group, L.P.:
Condensed Balance Sheets
at June 30, 1998 and December 31, 1997......................................................... 7
Condensed Statements of Operations
for the three and six months ended June 30, 1998 and 1997...................................... 8
Condensed Statements of Cash Flows
for the six months ended June 30, 1998 and 1997................................................ 9
Notes to Condensed Financial Statements............................................................... 10
New Gaming Capital Partnership and Subsidiary:
Consolidated Condensed Balance Sheets
at June 30, 1998 and December 31, 1997......................................................... 11
Consolidated Condensed Statements of Operations
for the three and six months ended June 30, 1998 and 1997...................................... 12
Consolidated Condensed Statements of Cash Flows
for the six months ended June 30, 1998 and 1997................................................ 13
Notes to Consolidated Condensed Financial Statements.................................................. 14
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................................................... 15
PART II OTHER INFORMATION
ITEM 5 Other Events...........................................................................................18
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,
1998 1997
--------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 39,255 $ 48,710
Accounts receivable, net 11,417 13,518
Inventories 3,536 2,958
Prepaid expenses and other 5,531 2,102
--------- ---------
Total current assets 59,739 67,288
--------- ---------
Property and Equipment:
Land and land improvements 15,259 14,688
Buildings, boat, barge and improvements 328,471 276,936
Furniture, fixtures and equipment 80,256 68,194
Less: accumulated depreciation (45,736) (42,769)
--------- ---------
378,250 317,049
Construction in progress 316 67,428
--------- ---------
Net property and equipment 378,566 384,477
--------- ---------
Other Assets:
Goodwill, net 36,958 37,960
Assets not in use 24,920 --
Other 22,378 21,831
--------- ---------
$ 522,561 $ 511,556
========= =========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 1,175 $ 1,674
Accounts payable 6,271 8,784
Construction payables 2,113 27,984
Accrued expenses and other 37,682 46,601
--------- ---------
Total current liabilities 47,241 85,043
Long-term Debt, less current maturities 355,610 311,601
Minority Interest (1,841) (1,317)
Commitments and Contingencies
Redeemable Ownership Interests, net 52,423 51,634
Members' Equity 69,128 64,595
--------- ---------
$ 522,561 $ 511,556
========= =========
</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 June 30, Six Months Ended June 30,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Casino $ 103,219 $ 76,760 $ 210,059 $ 156,716
Food and beverage 11,514 6,967 22,596 13,858
Hotel 8,590 1,679 16,873 3,328
Other 2,343 1,048 4,434 2,064
--------- --------- --------- ---------
125,666 86,454 253,962 175,966
Promotional allowances (14,141) (6,474) (28,531) (12,926)
--------- --------- --------- ---------
Net revenues 111,525 79,980 225,431 163,040
--------- --------- --------- ---------
Expenses:
Casino 58,999 41,093 119,547 83,452
Food and beverage 4,146 2,507 8,325 5,088
Hotel 3,058 2,498 5,942 3,669
Other 1,215 344 2,799 599
General and administrative 13,689 10,491 27,194 21,111
Preopening -- -- 653 --
Depreciation and amortization 8,466 4,442 16,413 8,741
--------- --------- --------- ---------
Total expenses 89,573 61,375 180,873 122,660
--------- --------- --------- ---------
Operating Profit Before
and Corporate Expenses 21,952 18,605 44,558 40,380
Development 132 506 313 734
Corporate expenses 2,995 2,812 6,109 5,113
--------- --------- --------- ---------
Operating Income 18,825 15,287 38,136 34,533
Other Income (Expense):
Interest expense, net (10,082) (4,596) (19,811) (9,845)
Interest income 452 1,164 929 2,648
Other, net (60) (347) (170) (411)
Minority interest in loss (income)
of subsidiaries (23) (201) 1 (583)
--------- --------- --------- ---------
Income Before Extraordinary Loss on
Early Retirement of Debt 9,112 11,307 19,085 26,342
Extraordinary Loss on Early Retirement of Debt -- (5,243) -- (5,243)
--------- --------- --------- ---------
Net Income $ 9,112 $ 6,064 $ 19,085 $ 21,099
========= ========= ========= =========
</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,
1998 1997
--------- ---------
<S> <C> <C>
Cash provided by operating activities:
Net income $ 19,085 $ 21,099
Adjustments to reconcile net income to
net cash provided by operating activities:
Minority interest in (loss) income of subsidiary (1) 583
Depreciation and amortization 16,413 8,741
Amortization of debt discount, deferred
finance charges and other 1,366 1,347
Extraordinary loss on early retirement of debt -- 5,243
Loss on sale of property and equipment 48 --
Provision for doubtful accounts 5,224 3,127
Increase in redeemable ownership interests 2,495 1,272
Net change in assets and liabilities (21,088) (5,315)
--------- ---------
Net cash provided by operating activities 23,542 36,097
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (34,951) (84,392)
Proceeds from sale of property and equipment 392 --
Decrease in escrow funds -- 42,235
Increase (decrease) in construction payables (25,871) 8,414
Decrease in other assets (2,172) (471)
--------- ---------
Net cash used in investing activities (62,602) (34,214)
--------- ---------
Cash flows from financing activities:
Proceeds from debt and warrants, net of debt issue
costs of $3,400 -- 156,438
Proceeds from other long-term debt 45,000 --
Payments on debt, including early retirement
premium and penalties (1,775) (97,627)
Distribution to minority shareholders (523) (702)
Capital distributions (13,097) (9,049)
--------- ---------
Net cash provided by financing activities 29,605 49,060
--------- ---------
Net change in cash and cash equivalents (9,455) 50,943
Cash and cash equivalents, beginning of period 48,710 79,159
--------- ---------
Cash and cash equivalents, end of period $ 39,255 $ 130,102
========= =========
</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, 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, 1997 was derived from
audited financial statements, but does not include all disclosures required by
generally accepted accounting principles. The results for the 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:
Construction
The Company has substantially completed the expansion of its casino facilities
in both Tunica, Mississippi, and Bossier City, Louisiana at a total estimated
cost of approximately $314 million.
The Horseshoe Bossier City's new riverboat casino facility replaced the existing
riverboat casino facility (the "Queen of the Red"). The Queen of the Red, along
with related gaming equipment, is included in assets not in use in the
Consolidated Condensed Balance Sheets at June 30, 1998. Management currently
intends to use the Queen of the Red, and the related gaming equipment, in
conjunction with the Company's proposed riverboat gaming facility in Vicksburg,
Mississippi.
Legal
The Company and its subsidiaries, during the normal course of operating their
business, 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. Distribution:
In June 1998, the Company paid a $3.7 million, non-tax distribution to its
members.
6
<PAGE> 7
ROBINSON PROPERTY GROUP, L.P.
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 18,541 $ 23,159
Accounts receivable, net 8,327 10,718
Inventories 1,871 1,424
Prepaid expenses and other 2,296 505
--------- ---------
Total current assets 31,035 35,806
--------- ---------
Property and Equipment:
Land and land improvements 3,169 4,110
Buildings, barge and improvements 137,855 131,154
Furniture, fixtures and equipment 36,373 32,670
Less: accumulated depreciation (25,981) (19,066)
--------- ---------
Net property and equipment 151,416 148,868
--------- ---------
Other Assets:
Goodwill, net 19,070 19,670
Other 4,979 4,739
--------- ---------
$ 206,500 $ 209,083
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accounts payable $ 2,635 $ 4,941
Construction payables 1,301 9,228
Due to affiliates 14,205 10,315
Accrued expenses and other 10,616 9,901
--------- ---------
Total current liabilities 28,757 34,385
--------- ---------
Long-term Debt 85,400 85,400
Commitments and Contingencies
Partners' Capital 92,343 89,298
--------- ---------
$ 206,500 $ 209,083
========= =========
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
7
<PAGE> 8
ROBINSON PROPERTY GROUP, L.P.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Casino $ 51,976 $ 39,739 $ 105,295 $ 80,236
Food and beverage 5,025 3,106 10,133 6,278
Hotel 3,252 829 6,229 1,651
Other 1,394 634 2,530 1,230
--------- --------- --------- ---------
61,647 44,308 124,187 89,395
Promotional allowances (7,254) (3,134) (14,144) (6,558)
--------- --------- --------- ---------
Net revenues 54,393 41,174 110,043 82,837
--------- --------- --------- ---------
Expenses:
Casino 28,937 20,379 57,553 40,541
Food and beverage 1,165 945 2,546 1,754
Hotel 924 791 1,808 1,512
Other 867 232 1,969 375
General and administrative 5,646 4,437 11,024 8,953
Depreciation and amortization 3,822 1,845 7,466 3,653
--------- --------- --------- ---------
Total expenses 41,361 28,629 82,366 56,788
--------- --------- --------- ---------
Operating Profit Before Corporate Expenses 13,032 12,545 27,677 26,049
Corporate expenses 1,498 1,497 3,055 2,737
--------- --------- --------- ---------
Operating Income 11,534 11,048 24,622 23,312
Other Income (Expense):
Interest expense, net (2,731) (936) (5,493) (1,538)
Interest income 137 160 278 360
Other, net (5) (342) (9) (346)
--------- --------- --------- ---------
Net Income $ 8,935 $ 9,930 $ 19,398 $ 21,788
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
8
<PAGE> 9
ROBINSON PROPERTY GROUP, L.P.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
-------- --------
<S> <C> <C>
Cash provided by operating activities:
Net income $ 19,398 $ 21,788
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 7,466 3,653
Provision for doubtful accounts 4,157 2,339
Amortization of debt discounts,
deferred finance charges and other 469 274
Net change in assets and liabilities (5,832) (2,960)
-------- --------
Net cash provided by operating activities 25,658 25,094
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (10,405) (26,692)
Decrease in construction payables (7,925) (657)
Increase in other assets (545) (827)
-------- --------
Net cash used in investing activities (18,875) (28,176)
-------- --------
Cash flows from financing activities:
Proceeds from debt -- 6,400
Capital distributions (15,244) (7,294)
Changes in due to/from affiliates 3,843 456
-------- --------
Net cash used in financing activities (11,401) (438)
-------- --------
Net change in cash and cash equivalents (4,618) (3,520)
Cash and cash equivalents, beginning of period 23,159 22,858
-------- --------
Cash and cash equivalents, end of period $ 18,541 $ 19,338
======== ========
</TABLE>
The accompanying notes are an integral
part of these condensed financial statements.
9
<PAGE> 10
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., 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 condensed balance sheet at December 31, 1997 was derived from
audited financial statements, but does not include all disclosures required by
generally accepted accounting principles. The results for the 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:
Construction
As of June 30, 1998, the Horseshoe Casino Center expansion project was
substantially complete. The total amount incurred and placed in service was
$108.9 million with remaining commitments of $1.1 million.
Legal
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.
10
<PAGE> 11
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- ---------
<S> <C> <C>
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 17,911 $ 16,143
Accounts receivable, net 3,041 2,589
Inventories 1,665 1,535
Prepaid expenses and other 3,010 1,329
--------- ---------
Total current assets 25,627 21,596
--------- ---------
Property and Equipment:
Land and land improvements 12,091 10,579
Buildings, boat and improvements 190,614 145,781
Furniture, fixtures and equipment 43,252 34,914
Less: accumulated depreciation (19,462) (23,452)
--------- ---------
226,495 167,822
Construction in progress 234 67,428
--------- ---------
Net property and equipment 226,729 235,250
--------- ---------
Other Assets:
Goodwill, net 17,888 18,290
Assets not in use 24,920 --
Other 13,208 12,137
--------- ---------
$ 308,372 $ 287,273
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Current maturities of long-term debt $ 13,828 $ 15,003
Accounts payable 3,526 3,568
Due to affiliates 17,450 12,796
Construction payables 811 18,757
Accrued expenses and other 17,137 9,793
--------- ---------
Total current liabilities 52,752 59,917
Long-term Debt, less current maturities 229,272 199,989
Minority Interest (1,841) (1,317)
Commitments and Contingencies
Partners' Capital 28,684 28,189
--------- ---------
$ 308,372 $ 287,273
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
11
<PAGE> 12
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Casino $ 51,243 $ 37,021 $ 104,764 $ 76,480
Food and beverage 6,489 3,861 12,463 7,580
Hotel 5,338 850 10,644 1,677
Other 949 414 1,904 834
--------- --------- --------- ---------
64,019 42,146 129,775 86,571
Promotional allowances 6,887 3,340 14,387 6,368
--------- --------- --------- ---------
Net revenues 57,132 38,806 115,388 80,203
--------- --------- --------- ---------
Expenses:
Casino 30,062 20,714 61,994 42,911
Food and beverage 2,981 1,562 5,779 3,334
Hotel 2,134 1,707 4,134 2,157
Other 348 112 830 224
General and administrative 8,043 5,359 16,170 11,323
Preopening -- -- 653 --
Depreciation and amortization 4,637 2,592 8,936 5,078
--------- --------- --------- ---------
Total expenses 48,205 32,046 98,496 65,027
--------- --------- --------- ---------
Operating Profit Before Corporate Expenses 8,927 6,760 16,892 15,176
Corporate expenses 1,498 1,410 3,055 2,611
--------- --------- --------- ---------
Operating Income 7,429 5,350 13,837 12,565
Other Income (Expense):
Interest expense, net (7,533) (2,977) (14,742) (6,076)
Interest income 211 220 418 467
Other, net (5) (4) (9) (9)
Minority interest in loss (income)
of subsidiary (23) (201) 1 (583)
--------- --------- --------- ---------
Net Income (Loss) $ 79 $ 2,388 $ (495) $ 6,364
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
12
<PAGE> 13
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------
1998 1997
-------- --------
<S> <C> <C>
Cash provided by operating activities:
Net income (loss) $ (495) $ 6,364
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Minority interest in (loss) income of subsidiary (1) 583
Depreciation and amortization 8,937 5,078
Provision for doubtful accounts 1,067 788
Amortization of debt discounts,
deferred finance costs and other 1,088 523
Loss on sale of property and equipment 28 --
Net change in assets and liabilities 3,972 3,341
-------- --------
Net cash provided by operating activities 14,596 16,677
-------- --------
Cash flows from investing activities:
Purchase of property and equipment (24,375) (57,626)
Proceeds from sale of property and equipment 383 --
(Decrease) increase in construction payables (17,946) 9,071
Increase in other assets (3,073) (1,235)
-------- --------
Net cash used in investing activities (45,011) (49,790)
-------- --------
Cash flows from financing activities:
Proceeds from debt 36,533 46,400
Payments on debt (8,425) (8,310)
Capital distributions -- (2,226)
Distributions to minority shareholders (523) (702)
Increase in due to affiliates 4,598 2,564
-------- --------
Net cash provided by financing activities 32,183 37,726
-------- --------
Net change in cash and cash equivalents 1,768 4,613
Cash and cash equivalents, beginning of period 16,143 14,913
-------- --------
Cash and cash equivalents, end of period $ 17,911 $ 19,526
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
13
<PAGE> 14
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 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, 1997 was derived from audited financial statements, but
does not include all disclosures required by generally accepted accounting
principles. The results for the 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:
Construction
As of June 30, 1998, the Horseshoe Bossier City expansion project was
substantially complete. The total amount incurred and placed in service was
$202.6 million with remaining commitments of $1.4 million.
The Horseshoe Bossier City's new riverboat casino facility replaced the existing
riverboat casino facility (the "Queen of the Red"). The Queen of the Red, along
with related gaming equipment, is included in assets not in use in the
Consolidated Condensed Balance Sheets at June 30, 1998. Management currently
intends to use the Queen of the Red, and the related gaming equipment, in
conjunction with the Company's proposed riverboat gaming facility in the
Vicksburg, Mississippi.
Legal
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.
14
<PAGE> 15
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 consolidated
financial condition and results of operations of Horseshoe Gaming, L.L.C. (the
"Company"). The discussion should be read in conjunction with the Consolidated
Condensed Financial Statements and notes thereto.
RESULTS OF OPERATIONS
Three months ended June 30, 1998 and 1997
Net revenues for the three months ended June 30, 1998 were $111.6, compared to
$80.0 for the comparable periods in 1997. Operating income increased to $18.8
million for the three months ended June 30, 1998, from $15.3 million for the
comparable 1997 period. The increase in net revenues and operating income
occurred as a result of an increase in gaming capacity from the completion of
the significant expansions that occurred at both the Horseshoe Casino Center and
Horseshoe Bossier City.
The Horseshoe Casino Center
The Horseshoe Casino Center contributed net revenues and operating profit before
corporate expenses of $54.4 million and $13.0 million, respectively, for the
quarter ended June 30, 1998 and $41.2 million and $12.5 million, respectively,
for the quarter ended June 30, 1997.
The Horseshoe Casino Center's net revenues include casino revenues and
non-casino revenues of $52.0 million and $2.4 million, respectively, for the
quarter ended June 30, 1998 and $39.7 million and $1.5 million, respectively,
for the quarter ended June 30, 1997. The increase in net revenues for the
quarter ended June 30, 1998 compared to the prior year period is due largely to
an increase in total revenue and primarily in slot revenue, resulting from the
recently completed expansion at such property. The increase in slot revenues was
partially offset by a lower than normal win percentage in table games for the
three months ended June 30, 1998. Casino revenue per day increased approximately
30.7% in 1998 to $571,000 from $437,000 in 1997.
The increase of $4.1 million in promotional allowances for the quarter ended
June 30, 1998 compared to the prior year period is due largely to an increase in
the pricing structure of non-casino services. The recently completed expansion
of the property provided management with an opportunity to increase the retail
cost of hotel and food prices. Of the $4.1 million increase over the prior year
period, $1.7 million is caused by an increase in prices. The remaining increase
is caused by an increase in overall volume, mainly in hotel rooms and
entertainment which was not present during 1997.
The Horseshoe Casino Center's margin for operating profit before corporate
expenses for the quarter ended June 30, 1998 was 24.0%, compared with 30.5% for
the quarter ended June 30, 1997. The margin reduction of 6.5 percentage points
was primarily caused by an increase in depreciation and amortization expense due
to the expansion of the casino facility. The margin was also affected by an
increase in bad debt reserves due to increases in total gaming receivables and a
reduction in win percentage in table games as discussed above.
The Horseshoe Bossier City
The Horseshoe Bossier City contributed net revenues and operating profit before
corporate expenses of $57.1 million and $8.9 million, respectively, for the
quarter ended June 30, 1998 and $38.8 million and $6.8 million, respectively,
for the quarter ended June 30, 1997.
The Horseshoe Bossier City's net revenues include casino revenues and non-casino
revenues of $51.2 million and $5.9 million, respectively, for the quarter ended
June 30, 1998 and $37.0 million and $1.8 million, respectively, for the quarter
ended June 30, 1997. The increase in net revenues for the quarter ended June 30,
1998 compared to the prior year period is due largely to an increase in total
revenue and primarily in casino revenue, resulting from the recently completed
expansion at such property. Casino revenue per day increased approximately 38.3%
in 1998 to $563,000 from $407,000 in 1997.
15
<PAGE> 16
The increase of $3.5 million in promotional allowances for the quarter ended
June 30, 1998 compared to the prior year period is due largely to an increase in
the pricing structure of non-casino services. The recently completed expansion
of the property provided management with an opportunity to increase the retail
cost of hotel and food prices. Of the $3.5 million increase over the prior year
period, $1.6 million is caused by an increase in prices. The remaining increase
is caused by an increase in overall volume, mainly in hotel rooms.
The Horseshoe Bossier City's margin for operating profit before corporate
expenses for the quarter ended June 30, 1998 was 15.6%, compared with 17.4% for
the quarter ended June 30, 1997. The margin reduction of 1.8 percentage points
was primarily caused by an increase in depreciation and amortization expense due
to the expansion of the casino facility.
Other Factors Affecting Earnings
The increase in net interest expense of $6.2 million for the three months ended
June 30, 1998, compared with the prior year period ended June 30, 1997, is
mainly due to the increase in the total amount of debt outstanding and the fact
that approximately $2.7 million of construction period interest related to the
now completed expansion programs Horseshoe Casino Center and Horseshoe Bossier
City was capitalized in the three months ended June 30, 1997. Total debt
outstanding increased to $356.7 million as of June 30, 1998 from $297.6 million
as of June 30, 1997. The increased borrowings were necessary to fund a major
portion of the construction.
Six months ended June 30, 1998 and 1997
Net revenues for the six months ended June 30, 1998 were $225.4, compared to
$156.7 for the comparable period in 1997. Operating income increased to $38.1
million for the six months ended June 30, 1998, from $34.5 million for the
comparable 1997 period. The increase in net revenues and operating income
occurred as a result of an increase in gaming capacity from the completion of
the significant expansions that occurred at both the Horseshoe Casino Center and
Horseshoe Bossier City.
The Horseshoe Casino Center
The Horseshoe Casino Center contributed net revenues and operating profit before
corporate expenses of $110.0 million and $27.7 million, respectively, for the
six months ended June 30, 1998 and $82.8 million and $26.0 million,
respectively, for the six months ended June 30, 1997.
The Horseshoe Casino Center's net revenues include casino revenues and
non-casino revenues of $105.3 million and $4.7 million, respectively, for the
six months ended June 30, 1998 and $80.2 million and $2.6 million, respectively,
for the six months ended June 30, 1997. The increase in net revenues for the six
months ended June 30, 1998 compared to the prior year period is due largely to
an increase in total revenue and primarily in slot revenue, resulting from the
recently completed expansion at such property. The increase in slot revenue was
partially offset by a lower than normal win percentage in table games for the
six months ended June 30, 1998. Casino revenue per day increased approximately
31.4% in 1998 to $582,000 from $443,000 in 1997.
The increase of $8.0 million in promotional allowances for the quarter ended
June 30, 1998 compared to the prior year period is due largely to an increase in
the pricing structure of non-casino services. The recently completed expansion
of the property provided management with an opportunity to increase the retail
cost of hotel and food prices. Of the $8.0 million increase over the prior year
period, $3.3 million is caused by an increase in prices. The remaining increase
is caused by an increase in overall volume, mainly in hotel rooms and
entertainment which was not present during 1997.
The Horseshoe Casino Center's margin for operating profit before corporate
expenses for the six months ended June 30, 1998 was 25.2%, compared with 31.4%
for the six months ended June 30, 1997. The margin reduction of 6.2 percentage
points was primarily caused by an increase in depreciation and amortization
expense due to the expansion of the casino facility. The margin was also
affected by an increase in bad debt reserves due to increases in total gaming
receivables and the reduction in win percentage in table games as mentioned
above.
The Horseshoe Bossier City
The Horseshoe Bossier City contributed net revenues and operating profit before
corporate expenses and preopening expenses of $115.4 million and $17.5 million,
respectively, for the six months ended June 30, 1998 and $80.2 million and $15.2
million, respectively, for the six months ended June 30, 1997.
16
<PAGE> 17
The Horseshoe Bossier City's net revenues include casino revenues and non-casino
revenues of $104.8 million and $10.6 million, respectively, for the six months
ended June 30, 1998 and $76.5 million and $3.7 million, respectively, for the
six months ended June 30, 1997. The increase in net revenues for the six months
ended June 30, 1998 compared to the prior year period is due largely to an
increase in total revenue and primarily in casino revenue, resulting from the
recently completed expansion at such property. Casino revenue per day increased
approximately 36.9% in 1998 to $579,000 from $423,000 in 1997.
The increase of $7.6 million in promotional allowances for the quarter ended
June 30, 1998 compared to the prior year period is due largely to an increase in
the pricing structure of non-casino services. The recently completed expansion
of the property provided management with an opportunity to increase the retail
cost of hotel and food prices. Of the $7.6 million increase over the prior year
period, $3.6 million is caused by an increase in prices. The remaining increase
is caused by an increase in overall volume, mainly in hotel rooms.
The Horseshoe Bossier City's margin for operating profit before corporate
expenses and preopening expenses for the six months ended June 30, 1998 was
15.2%, compared with 18.9% for the six months ended June 30, 1997. The margin
reduction of 3.7 percentage points was primarily caused by an increase in
depreciation and amortization expense due to the expansion of the casino
facility. Additionally, the casino enjoyed a higher than normal win percentage
in slots for the six months ended June 30, 1997.
Other Factors Affecting Earnings
Corporate expenses increased approximately $1.0 million during 1998 primarily
due to a non-cash charge to compensation expense to reflect the increased value
of redeemable ownership interests in the Company. Certain of the Company's
employees have ownership interests that are subject to provisions which require
the Company to repurchase these ownership interests in the event of the
termination of the employment relationship at a price based on the then fair
market value of the Company determined by agreement or an independent appraisal.
The increase in net interest expense of $11.7 million for the six months ended
June 30, 1998, compared with the prior year period ended June 30, 1997, is
mainly due to the increase in the total amount of debt outstanding and the fact
that approximately $4.7 million of construction period interest related to the
now completed expansion programs at Horseshoe Casino Center and Horseshoe
Bossier City was capitalized in the six months ended June 30, 1997. Total debt
outstanding increased to $356.7 million as of June 30, 1998 from $227.2 million
as of June 30, 1997. The increased borrowings were necessary to fund a major
portion of the construction.
LIQUIDITY AND CAPITAL RESOURCES
DEVELOPMENT
Tunica, Mississippi
Horseshoe Casino Center has substantially completed the expansion of its casino
facility at a cost of approximately $110 million, of which approximately $108
million had been incurred and placed in service as of June 30, 1998. The newly
expanded casino complex, which was completed on January 21, 1998, includes an
additional 15,000 square feet of gaming space (the gaming facility now includes
1,503 slot machines, 64 table games and 12 poker tables), 312 hotel suites (in
addition to the existing 195 room hotel facility), a multi-level, 1,100 space
parking garage and Bluesville, an entertainment facility which accommodates
approximately 1,000 customers. Additional facilities include a health club, an
additional restaurant, a new, relocated and expanded buffet, a remodeled steak
house and meeting room facilities.
Bossier City, Louisiana
Horseshoe Bossier City has substantially completed the expansion of its entire
casino facility at a cost of approximately $204 million, of which approximately
$203 million had been incurred and placed in service as of June 30, 1998. The
newly expanded casino facility, which was completed on January 28, 1998,
features a new riverboat casino facility (with approximately 40% more gaming
positions and including a total of 1,343 slot machines, 58 table games and 11
poker tables), a 25 story hotel tower with 606 suites, meeting room facilities,
a health club, the renovation and expansion of existing dockside facilities, the
addition of two specialty restaurants, the complete renovation and expansion of
the existing buffet, as well as the recently completed 1,100 space parking
garage, administration building and remodeled existing steak house restaurant.
17
<PAGE> 18
The Horseshoe Bossier City's new riverboat casino facility replaced the existing
riverboat casino facility (the "Queen of the Red"). The Queen of the Red, along
with related gaming equipment, is included in assets not in use in the
Consolidated Condensed Balance Sheets at June 30, 1998. Management intends to
use the Queen of the Red, and the related gaming equipment, in conjunction with
the Company's proposed riverboat gaming facility in Vicksburg, Mississippi.
OTHER ITEMS
Cash and cash equivalents totaled $39.3 million as of June 30, 1998. Management
believes that the Company's cash and cash equivalents on hand, cash from
operations and additional borrowings under its Amended and Restated Credit
Facility will be adequate to meet the Company's existing obligations when they
become due.
Since December 31, 1997 the Company borrowed an additional $45 million under the
Amended and Restated Credit Facility. The borrowings were used to fund the
completion of the of the Horseshoe Bossier City and Horseshoe Casino Center.
During the second quarter of 1998, the Company paid a non-tax distribution of
$3.7 million to its members.
During the first quarter of 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. There was no impact of such adoption on the Company's
consolidated financial statements, as total comprehensive income is the same as
net income for all periods presented.
PART II OTHER INFORMATION
ITEM 5 OTHER EVENTS
Effective July 31, 1998, Walter J. Haybert retired as
Treasurer and Chief Financial Officer of Horseshoe Gaming,
Inc., the Company's Manager, upon the expiration of his
employment contract. Kirk C. Saylor has been appointed as
interim Chief Financial Officer.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a)
Exhibit No. 27.1--- Financial Data Schedule - Horseshoe
Gaming, L.L.C. and Subsidiaries
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 12, 1998 By:/s/ Kirk C. Saylor
-----------------------------------------
Interim Chief Financial Officer
of Horseshoe Gaming, Inc.
19
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
27.1 Financial Data Schedule-Horseshoe Gaming L.L.C. and Subsidiaries
</TABLE>
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 31,046
<SECURITIES> 8,209
<RECEIVABLES> 11,417<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 3,536
<CURRENT-ASSETS> 59,739
<PP&E> 424,302
<DEPRECIATION> 45,736
<TOTAL-ASSETS> 522,561
<CURRENT-LIABILITIES> 47,241
<BONDS> 356,785
0
0
<COMMON> 0
<OTHER-SE> 69,128
<TOTAL-LIABILITY-AND-EQUITY> 522,561
<SALES> 7,663<F2>
<TOTAL-REVENUES> 225,431
<CGS> 9,359
<TOTAL-COSTS> 136,613
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,811
<INCOME-PRETAX> 19,085
<INCOME-TAX> 0
<INCOME-CONTINUING> 19,085
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,085
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>NOTES AND ACCOUNTS RECEIVABLE-TRADE ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL
ACCOUNTS IN THE STATEMENT OF FINANCIAL POSITION.
<F2>NET SALES ARE REPORTED NET OF PROMOTIONAL ALLOWANCES APPLICABLE TO TANGIBLE
ITEMS.
</FN>
</TABLE>
