UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(XX) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1998
----------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from: to
------------- -------------
Commission file number: 001-12419
-----------------------------------------
SHOWBOAT MARINA CASINO PARTNERSHIP
SHOWBOAT MARINA FINANCE CORPORATION
- ----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
INDIANA 35-1978576
NEVADA 88-0356197
- ------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE SHOWBOAT PLACE, EAST CHICAGO, INDIANA 46312
- ----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(219) 378-3000
- ----------------------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
- ----------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by 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
------ ------
Indicate the number of shares outstanding of the issuer's
classes of common stock, as of the latest practicable date.
Showboat Marina Casino Partnership Not applicable
1,000 shares of common
stock, $1.00 par value
Showboat Marina Finance Corporation as of May 10, 1998
<PAGE>
SHOWBOAT MARINA CASINO PARTNERSHIP (SMCP)
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997 3-4
Condensed Consolidated Statements of Operations -
For the three months ended March 31, 1998 and 1997 5
Condensed Consolidated Statements of Cash Flows -
For the Three months ended March 31, 1998 and 1997 6
Notes to the Condensed Consolidated Financial
Statements 7-8
ITEM 2. Management's Discussion and Analysis 9-11
of Financial Condition and Results of Operations
PART II OTHER INFORMATION
ITEMS 1 - 6 12
SIGNATURES 13
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SHOWBOAT MARINA CASINO PARTNERSHIP AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997
(IN THOUSANDS)
March 31, December 31,
Assets 1998 1997
- ------------------------------------------------ -------------- --------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,316 $ 7,246
Accounts receivable, net 859 931
Inventories 347 337
Prepaid expenses 992 805
-------------- --------------
Total current assets 10,514 9,319
-------------- --------------
Property and equipment:
Buildings 56,319 56,304
Vessel 82,528 82,528
Furniture, fixtures and equipment 27,124 26,533
Land improvements 2,123 2,123
-------------- --------------
168,094 167,488
Less accumulated depreciation and amortization (10,830) (7,833)
-------------- --------------
Net property and equipment 157,264 159,655
-------------- --------------
Other assets:
Licensing costs, net of accumulated amortization
of $461 and $340 at March 31, 1998 and December
31, 1997, respectively 1,940 2,061
Economic development costs, net of accumulated
amortization of $585 and $432 at March 31, 1998
and December 31, 1997, respectively 8,509 8,662
Debt issuance costs, net of accumulated
amortization of $1,054 and $778 at March 31,
1998 and December 31, 1997, respectively 5,388 5,664
Other assets, net of accumulated amortization of
$264 and $197 at March 31, 1998 and December 31,
1997, respectively 2,513 2,580
-------------- --------------
18,350 18,967
-------------- --------------
$ 186,128 $ 187,941
============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
(continued)
3
<PAGE>
<TABLE>
<CAPTION>
SHOWBOAT MARINA CASINO PARTNERSHIP (SMCP) AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997
(IN THOUSANDS)
(CONTINUED)
March 31, December 31,
LIABILITIES AND PARTNERS' CAPITAL 1998 1997
- ------------------------------------------- -------------- ------------
(unaudited)
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 5,678 $ 5,555
Note payable 3,000 -
Accounts payable 2,902 2,766
Payable to affiliates 2,894 2,712
Accrued expenses 7,383 5,331
Accrued interest 788 5,512
-------------- ------------
Total current liabilities 22,645 21,876
Long-term debt, excluding current maturities 150,514 151,968
-------------- ------------
Total liabilities 173,159 173,844
Partners' capital 12,969 14,097
-------------- ------------
$ 186,128 $ 187,941
============== ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
SHOWBOAT MARINA CASINO PARTNERSHIP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
March 31, March 31,
1998 1997
-------------- -------------
(In thousands)
<S> <C> <C>
Revenues:
Casino $ 44,190 $ -
Food and beverage 2,917 -
Other 191 -
-------------- ------------
47,298 -
Less complimentaries 764 -
-------------- ------------
Net revenues 46,534 -
-------------- ------------
Operating costs and expenses:
Casino 21,467 -
Food and beverage 2,688 -
General and administrative 8,823 -
Selling, advertising and promotion 6,908 -
Depreciation and amortization 3,338 -
-------------- ------------
43,224 -
-------------- ------------
Income from operations 3,310 -
Other (income) expense:
Interest income (36) (713)
Interest expense, net of amounts capitalized 5,475 1,045
-------------- ------------
5,439 332
-------------- ------------
Net loss $ (2,129) $ (332)
============== ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
SHOWBOAT MARINA CASINO PARTNERSHIP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(UNAUDITED)
March 31, March 31,
1998 1997
------------- -------------
(In thousands)
<S> <C> <C>
Net cash (used in) operating activities $ (992) $ (14,543)
------------- -------------
Cash flows from investing activities:
Economic development costs - (327)
Purchase of property and equipment (607) (9,959)
Payments for construction in progress - (18,571)
(Purchase) maturity of short-term investments - 43,421
------------- -------------
Net cash provided by (used in) investing
activities (607) 14,564
------------- -------------
Cash flows from financing activities:
Proceeds from issuance of notes payable 3,000 -
Repayments of long-term debt (1,331) -
Capital contributions 1,000 -
------------- -------------
Net cash provided by financing activities 2,669 -
------------- -------------
Net increase in cash and equivalents 1,070 21
Cash and cash equivalents at beginning of period 7,246 599
------------- -------------
Cash and cash equivalents at end of period $ 8,316 $ 620
============= =============
Supplemental disclosures of cash flow information
and non-cash investing and financing activities:
Cash paid during the period for:
Interest, net of amounts capitalized 9,923 5,770
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
SHOWBOAT MARINA CASINO PARTNERSHIIP (SMCP)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The accompanying consolidated financial statements
present the financial position, results of operations and
cash flows of Showboat Marina Casino Partnership (SMCP) and
its wholly owned subsidiary, Showboat Marina Finance
Corporation (SMFC) as of March 31, 1998 and December 31,
1997 and for the three month periods ended March 31, 1998
and 1997.
SMCP is a general partnership and was formed as of
March 1, 1996. SMCP received a riverboat license from the
Indiana Gaming Commission and commenced operations on April
18, 1997. SMFC was incorporated on March 7, 1996, to assist
SMCP in financing the East Chicago Showboat.
SMCP is effectively owned 55% by Showboat, Inc.
(Showboat) and 45% by Waterfront Entertainment and
Development, Inc. (Waterfront) through various partnership
interests.
Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with generally accepted accounting principles
have been consolidated or omitted. These condensed
consolidated financial statements should be read in
conjunction with the financial statements and notes thereto
included in SMCP's December 31, 1997 annual report on Form
10-K.
The accompanying unaudited condensed consolidated
financial statements contain all adjustments, which in the
opinion of management are necessary for a fair statement of
the results of the interim period. The results of
operations for the interim periods are not indicative of
results of operations for an entire year. Certain prior
period balances have been reclassified to conform to the
current period's presentation.
2. LONG-TERM DEBT
In October 1997, SMCP entered into an unsecured
line of credit agreement with Fleet Bank N.A. in the amount
of $3.0 million. The line of credit is secured by Showboat
with funds on deposit with Fleet Bank N.A. The term of the
line is for a period of one year, renewable annually at an
interest rate of LIBOR plus 75 basis points. The line is
available for general partnership purposes. On March 13,
1998, SMCP borrowed all available funds under this facility.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Showboat Marina Casino Partnership (SMCP or the
Partnership) owns and operates a riverboat casino, the Showboat
Mardi Gras Casino, located in East Chicago, Indiana (the East
Chicago Showboat). The East Chicago Showboat began operations on
April 18, 1997.
SMCP is a general partnership, which was formed as of
March 1, 1996. Showboat Marina Finance Corporation (SMFC) is a
wholly owned subsidiary of SMCP and was formed on March 7, 1996
to assist the Partnership in financing the East Chicago Showboat.
The Partnership is owned 99% by Showboat Marina Partnership and
1% by Showboat Marina Investment Partnership. The Partnership is
effectively owned 55% by Showboat, Inc. (Showboat) and 45% by
Waterfront Entertainment and Development, Inc. (Waterfront)
through the partnership interests.
Information contained in this quarterly report is
supplemental to disclosures in the Partnership's year end
financial reports. This management's discussion and analysis of
financial condition and results of operations should be read in
conjunction with the management's discussion and analysis of
financial condition and results of operations included in the
Partnership's December 31, 1997 Annual Report on Form 10-K.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Prior to the commencement of operations on April 18,
1997, the activities of the Partnership were limited to applying
for the gaming license, securing the land for, arranging for the
financing of and completing the design and construction of the
East Chicago Showboat. All costs, except for some interest
expense, were capitalized. As a result, the Partnership had no
operating history for the three months ended March 31, 1997.
THREE MONTHS ENDED MARCH 31, 1998
REVENUES
For the three months ended March 31, 1998, the
Partnership had gross revenues of $47.3 million. This was offset
by $.8 million of complimentaries, resulting in net revenues of
$46.5 million for the three months ended March 31, 1998.
Casino revenues for the three months ended March 31,
1998 were $44.2 million, and consisted of $11.1 million in table
games revenue and $33.1 million in slot revenue. Slot revenue
represented 74.9% of the total casino win and table game revenue
made up the remaining 25.1% of the total casino win for the East
Chicago Showboat.
8
<PAGE>
INCOME FROM OPERATIONS
The Partnership's income from operations for the three
months ended March 31, 1998 was $3.3 million. Operating expenses
for the three months ended March 31, 1998 were $43.2 million.
Casino division expenses included $12.7 million of gross revenue
and admission taxes, as well as $1.7 million of community benefit
levies.
SMCP is currently reviewing its operations in an effort
to improve margin performance. SMCP implemented a series of cost
controls and continues to evaluate opportunities to reduce costs.
SMCP continues to develop cost-effective marketing programs to
increase awareness in the Chicago gaming market in an effort to
enhance revenue. When compared to the same quarter in the prior
year, the Chicago gaming market has had capacity growth of 46.2%,
while revenue has grown at 25.2% , resulting in a slower than
anticipated absorption of additional gaming capacity.
NET LOSS
For the three months ended March 31, 1998, the
Partnership experienced a net loss of $2.1 million. This loss
was primarily attributable to the level of income from operations
offset by interest expense of $5.4 million.
MATERIAL CHANGES IN FINANCIAL CONDITION
As of March 31, 1998 SMCP held cash and cash
equivalents of $8.3 million compared to $7.2 million in cash and
cash equivalents at December 31, 1997. Since its inception, SMCP
has met its capital requirements through the $40.0 million
capital contribution (the "Capital Contribution"), the $133.7
million net proceeds from the offering (the "Offering") of its 13
1/2% First Mortgage Notes due 2003 (the "East Chicago Notes") and
equipment financing of approximately $20.6 million. The funds
provided by these sources provided sufficient amounts to develop
and commence operations of the East Chicago Showboat.
In October 1997, the Partnership entered into an
unsecured line of credit agreement with Fleet Bank N.A. in the
amount of $3.0 million. The term of the line is for a period of
one year, renewable annually at the rate of LIBOR plus 75 basis
points. The line is available for general partnership purposes.
The line is secured with funds deposited by Showboat with Fleet
Bank N.A. As of March 31, 1998, all funds available under this
facility had been drawn.
SMCP is committed to letter agreements dated April 8,
1994 and April 18, 1995, with the City of East Chicago (which
agreements were also included in the Owner's license issued to
SMCP). Pursuant to the letter agreements and its Owner's license
SMCP is required to reimburse the City of East Chicago for
expenses incurred in connection with the development of East
Chicago Showboat including, but not limited to, professional
planning and design fees, engineering, construction of
infrastructure (including the construction of a proposed on/off
ramp from Highway 912), utilities or other improvements at the
Pastrick Marina or elsewhere related to the East Chicago
Showboat, legal fees and costs, financial and other professional
fees deemed necessary by the City. Additionally, SMCP has
further committed to general and equipment funding for support
and enhancement of neighborhood improvement programs, law
enforcement operations, public safety programs, the East Chicago
School system and infrastructure of East Chicago. SMCP has
fulfilled all but approximately $.9 million of these obligations.
9
<PAGE>
Additionally, pursuant to its letter agreements with
the City, SMCP is committed to contribute annually an aggregate
3.75% of its adjusted gross receipts to fund economic and
community development projects for the City of East Chicago.
Through March 31, 1998, a total of $6.3 million had been
contributed.
SMCP has also agreed to the creation of a $5.0 million
pool for a mortgage guarantee program to assist a minimum of 250
residents of East Chicago by guaranteeing up to 25% of the
purchase price of a home; and the creation of a $500,000 pool to
provide for its employees (who have been employed for at least
six months) who are first time home buyers, down payment
assistance of 5% of the purchase price of a home up to a maximum
of $5,000. As of the date hereof, no East Chicago resident or
employee has received or obtained funds in connection with the
mortgage guarantee program or home down payment assistance
program.
SMCP has purchased a surety bond naming the City of
East Chicago and the Indiana Gaming Commission as beneficiaries
for the amount of the commitments outstanding at the time of
opening plus approximately $2.0 million related to the rental
payment to the City pursuant to the Redevelopment Lease between
the City and SMCP over the 5 year license plus approximately $2.0
million required by the Indiana Gaming Commission.
During 1997, SMCP evaluated its various systems to
determine whether or not those systems were year 2000 compliant.
Based upon this review, SMCP has identified those systems which
are not compliant and has implemented a plan to update those
systems. SMCP expects the cost to update the affected systems
will not exceed $2.0 million. SMCP is currently evaluating the
effect of a failure to bring its systems into compliance will
have on SMCP.
Showboat and the Partnership entered into a standby
equity commitment which requires that if, during any of the first
three Operating Years (as defined), SMCP's Combined Cash Flow (as
defined) is less than $35.0 million, Showboat will be required to
make additional capital contributions to SMCP in the lesser of
(a) $15.0 million, or (b) the difference between the $35.0
million and the Operating Year's Combined Cash Flow. Showboat's
aggregate potential obligation under the standby equity
commitment is $30.0 million. The Partnership anticipates that
the Combined Cash Flow of SMCP for the first full four quarters
of operation will not achieve the $35.0 million threshold and
Showboat will be required to contribute approximately $14.0
million pursuant to its standby equity commitment. As of March
31, 1998, Showboat has contributed $1.0 million to SMCP as part
of this standby equity commitment. There can be no assurance
that the Combined Cash Flow for any future Operating Year will
exceed $35.0 million and that Showboat will not be required to
make additional capital contributions to SMCP in accordance with
the standby equity commitment. The Standby Equity Commitment is
subject to certain limitations, qualifications, and exceptions.
SMCP expects to fund its operating, debt service and
capital needs from operating cash flow and the standby equity
commitment. Based upon SMCP's anticipated operations and other
available sources of cash, management believes that the foregoing
sources of cash will be adequate to meet SMCP's anticipated
future requirements for working capital, capital expenditures and
scheduled payments of principal and interest on the Notes for the
foreseeable future. No assurance can be given, however, that
these sources of cash will be sufficient for that purpose. SMCP
intends to establish initial working capital reserves to provide
for anticipated short-term liquidity needs. Although no
additional financing beyond the line of credit described above is
contemplated, SMCP will seek, if necessary and to the extent
permitted under the Indenture for the East Chicago Notes,
additional financing through bank borrowings, debt or equity
financing. There can be no assurance that additional financing,
if needed, will be available to
10
<PAGE>
SMCP, or that, if available, the financing will be on terms
favorable to SMCP. There is no assurance that SMCP's estimate of
its reasonably anticipated liquidity needs is accurate or that
new business developments or other unforeseen events will not
occur, resulting in the need to raise additional funds.
All statements contained herein that are not historical
facts, including but not limited to, statements regarding SMCP's
current business strategy, and SMCP's plans for future
development and operations, are based upon current expectations.
These statements are forward-looking in nature and involve a
number of risks and uncertainties. Actual results may differ
materially. Among the factors that could cause actual results to
differ materially are the following: the availability of
sufficient capital to finance SMCP's business plan on terms
satisfactory to SMCP; competitive factors, such as expansion of
gaming in Illinois, Indiana and Michigan, states from which SMCP
expects to draw significant numbers of patrons and an increase in
the number of casinos serving the Chicago metropolitan area;
changes in labor, equipment and capital costs; contemplated
joint ventures on terms satisfactory to SMC and to obtain
necessary regulatory approvals; general business and economic
conditions; and other factors described from time to time in
SMCP's reports filed with the Securities and Exchange Commission.
SMCP wishes to caution the readers not to place undue reliance on
any such forward-looking statements, which statements are made
pursuant to the Private Litigation Reform Act of 1995 and, as
such, speak only as of the date made.
11
<PAGE>
SHOWBOAT MARINA CASINO PARTNERSHIP AND SUBSIDIARY
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Partnership is a defendant in various lawsuits
related to routine matters incidental to the operations of
the business. Management does not believe that the outcome
of the pending litigation will have a material adverse
effect on the Partnership.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
No. Description
27.01 Financial Data Schedule
(b) Reports on Form 8-K
None.
12
<PAGE>
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.
Date: May 14, 1998 SHOWBOAT MARINA CASINO
PARTNERSHIP, an Indiana general
partnership
By: SHOWBOAT MARINA INVESTMENT By: SHOWBOAT MARINA PARTNERSHIP an
PARTNERSHIP, an Indiana Indiana general partnership, a
general partnership, a general partner
general partner
By: SHOWBOAT INDIANA INVESTMENT By: SHOWBOAT INDIANA INVESTMENT
LIMITED PARTNERSHIP, a LIMITED PARTNERSHIP, a Nevada
Nevada limited partnership, limited partnership, a general
a general partner partner
By: SHOWBOAT INDIANA, INC., a By: SHOWBOAT INDIANA, INC., a
Nevada corporation, its Nevada corporation, its general
general partner partner
By: /s/ Carlton Geer By: /s/ Carlton Geer
Carlton Geer Carlton Geer
President and Chief President and Chief Executive
Executive Officer Officer
By: /s/ Leann Schneider By: /s/ Leann Schneider
Leann Schneider Leann Schneider
Vice President Finance and Vice President Finance and
Chief Financial Officer Chief
Financial Officer
By: WATERFRONT ENTERTAINMENT AND By: WATERFRONT ENTERTAINMENT AND
DEVELOPMENT, INC., an DEVELOPMENT, INC., an Indiana
Indiana corporation, a corporation, a general partner
general partner
By: /s/ Michael A. Pannos By: /s/ Michael A. Pannos
Michael A. Pannos Michael A. Pannos
President President
By: /s/ Thomas S. Cappas By: Thomas S. Cappas
Thomas S. Cappas Thomas S. Cappas
Treasurer (principal Treasurer (principal financial
financial officer) officer)
SHOWBOAT MARINA FINANCE
CORPORATION, a Nevada
corporation
By: /s/ Michael A. Pannos
Michael A. Pannos
Secretary
By: /s/ Leann Schneider
Leann Schneider
Vice President Finance and Chief
Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the condensed
consolidated financial statements of Showboat Marina Casino Partnership
for the period ended March 31, 1998, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001013788
<NAME> SHOWBOAT MARINA CASINO PARTNERSHIP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 8,316
<SECURITIES> 0
<RECEIVABLES> 972
<ALLOWANCES> 113
<INVENTORY> 347
<CURRENT-ASSETS> 10,514
<PP&E> 168,094
<DEPRECIATION> 10,830
<TOTAL-ASSETS> 186,128
<CURRENT-LIABILITIES> 22,645
<BONDS> 140,000
0
0
<COMMON> 0
<OTHER-SE> 12,969
<TOTAL-LIABILITY-AND-EQUITY> 186,128
<SALES> 46,343
<TOTAL-REVENUES> 46,534
<CGS> 0
<TOTAL-COSTS> 24,155
<OTHER-EXPENSES> 19,069
<LOSS-PROVISION> 163
<INTEREST-EXPENSE> 5,475
<INCOME-PRETAX> (2,129)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,129)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,129)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
