UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 333-06489
THE MAJESTIC STAR CASINO, LLC
(Exact name of registrant as specified in its charter)
Indiana 43-1664986
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Buffington Harbor Drive
Gary, Indiana
46406-3000
(Address of principal executive offices)
(Zip Code)
(219) 977-7777
(Registrant's telephone number, including area code)
Indicate check by 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 filed such reports), and (2) has
been subject filing requirements for the past 90 days.
Yes [X] No [ ]
Shares outstanding of each of the registrant's classes of common stock as of
March 31, 1997:
Class Number of shares
- ----- ----------------
Not applicable Not applicable
<PAGE>
THE MAJESTIC STAR CASINO, LLC
Index
Part 1 FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets as of March 31, 1997 (unaudited)
and December 31, 1996
Statement of Income for the three
months ended March 31, 1997 (unaudited)
Statements of Changes in Members' Equity for the three
months ended March 31, 1997 (unaudited) and the year
ended December 31, 1996
Statement of Cash Flows for the three months ended
March 31, 1997 (unaudited)
Notes to Financial Statements
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II OTHER INFORMATION
Item 1 Legal Proceedings
Item 6 Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
Part I
Item 1. Financial Statements
The Majestic Star Casino, LLC
Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
Unaudited
- ----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 11,306,705 $ 8,935,999
Accounts receivable, less allowance for
doubtful accounts of $250,000 and
$190,000 respectively 605,111 557,816
Inventories 22,228 24,651
Prepaid expenses 894,095 1,169,868
----------- -----------
Total current assets 12,828,139 10,688,334
Property, equipment, and vessel improvements,
net 30,517,158 24,124,802
Organization costs, less accumulated
amortization of $22,834 and $15,772,
respectively 118,407 125,469
Deferred financing costs, less accumulated
amortization of $504,615 and $357,640,
respectively 3,610,692 3,757,667
Deferred costs, less accumulated amortization
of $2,434,829 and $2,131,166, respectively 4,930,729 5,023,767
Investment in Buffington Harbor Riverboats,
L.L.C. 45,344,046 44,946,852
Other assets and deposits 2,042,179 2,028,260
Restricted cash 45,513,363 51,688,854
----------- -----------
Total Assets $144,904,713 $142,384,005
=========== ===========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 2,211,599 $ 2,211,599
Accounts payable 1,330,608 544,154
Accrued liabilities:
Payroll and related 521,840 593,492
Interest 5,900,465 2,468,698
Other accrued liabilites 1,802,047 1,496,758
Due to Buffington Harbor Riverboats,
L.L.C. 725,026 826,512
----------- -----------
Total current liabilitie 12,491,585 8,141,213
Long-term debt, net of current maturities 107,567,847 108,120,746
Note to member 10,759,355 10,759,355
Commitments and Contingencies (3).
----------- -----------
Total Liabilities 130,818,787 127,021,314
----------- -----------
Members' Equity:
Members' contributions 24,000,000 24,000,000
Retained earnings (Accumulated deficit) (9,914,074) (8,637,309)
------------ -----------
Total members' equity 14,085,926 15,362,691
------------ -----------
Total Liabilities and Members' Equity $144,904,713 $142,384,005
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
The Majestic Star Casino, LLC
Statement of Income
(Unaudited)
Three months ended
March 31,
1997
- ---------------------------------------------------------------------------
REVENUES
Casino $ 23,629,068
Food and beverage 389,296
Other 214,428
-----------
Gross Revenues 24,232,792
-----------
COSTS AND EXPENSES
Casino 4,165,385
Gaming and admission taxes 6,849,769
Food and beverage 490,244
Advertising and promotion 2,189,214
General and administrative 5,759,183
Economic incentive - City of Gary 710,322
Depreciation and amortization 1,773,412
-----------
Total costs and expenses 21,937,529
-----------
Operating income 2,295,263
-----------
Other income (expense)
Loss on investment in Buffington Harbor
Riverboats, L.L.C. (635,314)
Interest income 733,244
Interest expenses (3,519,058)
Interest expense to affiliate (150,900)
----------
Total other income (expense) (3,572,028)
----------
NET INCOME (LOSS) $(1,276,765)
==========
The accompanying notes are an integral part of the financial statements.
<PAGE>
The Majestic Star Casino, LLC
Statements of Changes in Members' Equity
For the three months ended March 31, 1997 and
for the period ended December 31, 1996
- ----------------------------------------------------------------------------
Retained Total
Capital Earnings Members'
Contributions (Accumulated Deficit) Equity
------------- ------------------- -------
Balance, December 8, 1993
Members' contributions $ 32,547,090 - $32,547,090
Non-cash contributions 2,212,265 - 2,212,265
Net income - $ 249,295 249,295
----------- ----------- ----------
Balance, December 31, 1995
(audited) 34,759,355 249,295 35,008,650
Conversion of capital
contribution to debt (10,759,355) - (10,759,355)
Net loss - (8,886,604) (8,886,604)
----------- ----------- ----------
Balance, December 31, 1996
(audited) 24,000,000 (8,637,309) 15,362,691
----------- ----------- ----------
Net loss - (1,276,765) (1,276,765)
----------- ----------- ----------
Balance, March 31, 1997
(unaudited) $ 24,000,000 $ (9,914,074) $14,085,926
=========== =========== ==========
The accompanying notes are an integral part of the financial statements.
<PAGE>
The Majestic Star Casino, LLC
Statement of Cash Flows
(Unaudited)
Three months ended
March 31,
1997
- ----------------------------------------------------------------------------
Cash Flows From Operating Activities
Net Income (Loss) ($1,276,765)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 1,315,712
Amortization 457,700
Loss on investment in Buffington Harbor Riverboats, L.L.C. 635,314
Increase in accounts receivable, net (47,295)
Decrease in inventories 2,422
Decrease in prepaid expenses 275,773
Increase in accounts payable 786,454
Decrease in accrued payroll and other expenses (71,651)
Increase in accrued interest 3,431,767
Increase in other accrued liabilities 203,804
----------
Net cash provided by operating activities $5,713,235
----------
Cash Flows From Investing Activities
Acquisition of property, equipment and leasehold interest (7,708,068)
Increase in chartered vessel deposit (13,920)
Investment in Buffington Harbor Riverboats, L.L.C. (1,032,508)
Deferred Expenses (210,625)
Decrease in restricted cash 6,175,491
----------
Net cash used in investing activities (2,789,629)
----------
Cash Flows From Financing Activities
Cash paid to reduce long-term debt (552,900)
----------
Net cash used by financing activities (552,900)
----------
Net increase in cash and cash equivalents $2,370,706
Cash and cash equivalents, beginning of year 8,935,999
----------
Cash and cash equivalents, end of period $11,306,705
==========
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE MAJESTIC STAR CASINO, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 1 Basis of Presentation
The Majestic Star Casino, LLC (the "Company") was formed on
December 8, 1993, as an Indiana limited liability company,
to provide gaming related entertainment to the public. The
Company commenced gaming operations in the City of Gary (the
"City") at Buffington Harbor, located in Lake County in the
State of Indiana, in June 1996.
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting
principles for complete financial statements. In the
opinion of management, all adjustments, consisting of normal
recurring adjustments, considered necessary for a fair
presentation have been included. Operating results for any
interim period are not necessarily indicative of the results
of operations that may be expected for a full year.
Comparative financial information for the first quarter of
1996 is not included in the financial statements as the
Company did not commence operations until the second quarter
of 1996. For further information, refer to the financial
statements and footnotes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31,
1996.
Note 2 Investment in Buffington Harbor Riverboats L.L.C. ("BHR"):
The following financial information is presented for BHR, a
joint venture in which the Company holds a 50% equity
interest. BHR owns and operates the gaming complex from
which the Company operates the Chartered Vessel.
Buffington Harbor Riverboats L.L.C.
Statement of Income
for the three months ended
March 31, 1997
(unaudited)
Gross Revenue $5,322,485
---------
Operating Loss 263,608
---------
Net Loss $1,688,87
--------
Note 3 Commitments and Contingencies:
Legal Proceedings
The Company may, from time to time, be subject to legal
proceedings and claims. Litigation involves many
uncertainties. Management is currently unaware of any
significant pending litigation affecting the Company, other
than those discussed below.
On May 1, 1996, a class action complaint was filed in the
Lake Superior Court in Gary, Indiana, against Trump Indiana,
Inc. (the "Joint Venture Partner") and certain of its
affiliates, the Company and its affiliates, the Indiana
Gaming Commission (the "IGC"), the City of Gary and the
<PAGE>
Mayor of the City of Gary and certain other parties
affiliated with the City of Gary. The plaintiffs were
comprised of two local contractors, a former city employee,
and five persons who claim that they were to be investors in
the riverboat casinos to be operated in Gary, Indiana. The
complaint alleged, among other things, that the Joint
Venture Partner and the Company each have failed to meet
certain obligations with respect to minority hiring goals,
utilization of minority and/or women contractors, investment
in city projects and providing certain residents of the City
of Gary with the right to acquire a 15% equity interest in
their respective projects. Plaintiffs sought various
remedies including damages and injunctive relieve in the
form of an order to enjoin the IGC from issuing gaming
licenses to the Company and the Joint Venture Partner until
they have complied with these conditions. On July 11, 1996,
the court granted a motion filed by the defendants and the
lawsuit was dismissed with prejudice. In December 1996, an
order was entered by the trial judge limiting his original
dismissal to only matters regarding the injunctive relief.
In April 1997 the order that purported to reinstate the suit
was dismissed and the July 11, 1996 order dismissing the
suit with prejudice was reinstated.
On March 5, 1997, three individuals filed a lawsuit in Lake
Circuit Court, Crown Point, Lake County, Indiana, naming Don
H. Barden and the Company as defendants. The suit alleges
that the defendants failed to enter into an agreement to
sell five percent of the Company to the plaintiffs. The
plaintiffs are requesting unspecified damages and attorney's
fees. The Company intends to vigorously defend against such
suit. However, it is too early to determine the outcome of
such suit and the effect, if any on the Company's financial
position and results of operations.
Harbor Lease
Under a lease agreement assumed by BHR, from Trump Indiana,
Inc. with Lehigh Portland Cement Co. ("Lehigh Cement"), BHR
has leased certain property which is integral to the gaming
operations of the Company. The lease places certain
restrictions on the use of the harbor by the Company and
requires the reimbursement of certain costs which may be
incurred by Lehigh Cement. The lease is rent free through
December 29, 1997 and provided BHR is pursuing the necessary
regulatory permits for a new harbor facility, but has been
unable to obtain the necessary regulatory permits, the term
of the agreement shall be extended to the earlier of
December 31, 2005 or, to such time as BHR has obtained
requisite regulatory permits and completed construction of,
its permanent harbor. If the lease is extended, BHR will be
required to pay $125,000 per month beginning January 1998.
If the regulatory permits are obtained, BHR may be required
to construct a new harbor, berthing and guest facilities.
The level of expenditures required for such new facilities
cannot be accurately estimated at this time.
Item 2
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The discussions regarding proposed developments and operations of The
Majestic Star Casino, LLC (the "Company") included in Management's
Discussion and Analysis of Financial Condition and Results of Operations
contain forward looking statements that involve a number of risks and
uncertainties. These proposed developments and operations include the
construction and placing in service of a new casino vessel during the fourth
quarter of 1997, resolution of the need for a new harbor and the Company's
ability to fund planned development needs and service its debt with
<PAGE>
currently available cash, marketable securities and cash flow from
operations. These risks and uncertainties could significantly and adversely
affect anticipated results in the future and, accordingly, results may
differ from those expressed in any forward-looking statement made herein.
Overview
The Company was formed in December 1993 as an Indiana limited liability
company, to develop a riverboat casino in Gary, Indiana, (the "City") as its
sole operation. The Company's efforts resulted in the Indiana Gaming
Commission (the "IGC") granting the Company a five year riverboat owner's
license on June 3, 1996. The Company's operations began in June 1996.
The Company's operations are conducted on a vessel chartered from a
subsidiary of President Casinos, Inc. (the "Chartered Vessel"). The
Chartered Vessel is chartered pursuant to a five year lease and currently
contains approximately 26,000 square feet of gaming space, 932 slot machines
and 50 table games. Due to winter weather conditions during the first
quarter of 1997, the Company conducted all gaming operations with the
Chartered Vessel docked. Total revenue for the quarter ended March 31, 1997
was approximately $24,233,000 compared to approximately $23,646,000 for the
three months ended December 31, 1996. The Company during the three months
ended December 31, 1996 operated dockside approximately 96% of the time due
to both winter weather conditions and a federal law that prohibited cruising
on federal waterways. The federal law prohibiting cruising was amended
during the fourth quarter of 1996 to allow cruises and the IGC advised the
Company that cruising would commence November 15, 1996, subject to winter
weather conditions. The Company has resumed a regular cruising schedule
effective April 1, 1997. While the full impact of cruising is not yet
known, the Company believes that cruising may adversely effect its business.
The Company has entered into various agreements for the design, engineering
and construction of a vessel (the "Permanent Vessel") to replace the
Chartered Vessel. The Permanent Vessel is anticipated to contain
approximately 43,000 square feet of casino space on three decks, 1,600 slot
machines and 71 table games. The Permanent Vessel will have an atrium,
escalators and elevators. The Company has entered into a contract for the
construction of the Permanent Vessel and for the delivery of the vessel on
September 27, 1997 at a fixed cost of $33 million. The Company estimates
that design, engineering, and owner furnished materials will cost
approximately $7 million, excluding additional gaming-related equipment.
The cost of additional gaming-related equipment expenditures is estimated at
approximately $9 to $10 million. It is anticipated that these additional
gaming-related equipment expenditures will be funded through available cash
flow from the casino's future operations and certain equipment financing.
The Company expects to complete the outfitting of the Permanent Vessel and
to place it in service during the fourth quarter of 1997. The Company has
committed under the terms of its Senior Secured Notes due 2003 (the "Senior
Secured Notes") to replace the Chartered Vessel with the Permanent Vessel no
later than June 30, 1998.
The Company and Trump Indiana, Inc. ("Trump"), the holder of a second gaming
license to operate from the City, formed Buffington Harbor Riverboats,
L.L.C. ("BHR") to own and operate certain common facilities at Buffington
Harbor ( the "Gaming Complex") such as the guest pavilion, vessel berths,
parking lots and other infrastructure. The Company and Trump each have a
fifty-percent ownership interest in BHR.
Results of Operations for Period Ending March 31, 1997
Because the Company commenced operations in June 1996, the Company has a
limited operating history and lacks any comparable periods of operation for
the three month period ended March 31, 1997. Therefore, the discussion of
operations herein will focus on events and the Company's revenues and
expenses during the three month period ended March 31, 1997. Management
believes that it is too early to determine whether the results of operations
for this period provides any discernible trends as the Company operated
dockside; however, the Company expects intense competition in the Northern
Illinois/Indiana market to continue with the April 1997 opening of a
<PAGE>
riverboat casino in East Chicago, Indiana as well as the anticipated opening
of an additional riverboat casino to be opened in Michigan City, Indiana
during the second half of 1997.
Future operating results will be subject to significant business, economic,
regulatory and competitive uncertainties and contingencies, including new
and existing casino operations, many of which are beyond the control of the
Company. While the Company believes that the Majestic Star Casino will be
able to attract a sufficient number of customers and generate a sufficient
amount of revenue to meet its debt obligations as they become due, there can
be no assurance with respect thereto.
Three Months Ended March 31, 1997
Operating revenues increased 2.5% to approximately $24,233,000 for the
quarter compared to $23,646,000 for the three months ended December 31,
1996. This increase was primarily attributable to a 2.9% increase in casino
revenues. Casino revenue during the quarter totaled approximately
$23,629,000 of which slot machines accounted for approximately $17,202,000
(72.8%) and table games accounted for approximately $6,427,000 (27.2%). The
average number of slot machines increased to 927 for the quarter from 924
for the three months ended December 31, 1996 and the average win per slot
machine per day increased as a result of a higher handle together with a
slight increase in the hold percentage to approximately $206 for the quarter
compared to $191 for the three months ended December 31, 1996. The average
number of table games during the quarter and three months ended December 31,
1996 was 50. The average win per table game per day during the quarter
declined to approximately $1,428 versus $1,471 for the three months ended
December 31, 1996 due to a 2.3% decline in the table game handle accompanied
by slight decrease in the table game hold percentage. The average daily win
per state passenger count and the average win per patron in both the quarter
and three months ended December 31, 1996 was approximately $33 and $56,
respectively.
Food and beverage revenue for the quarter totaled approximately $389,000 and
other revenue, consisting primarily of commission income, totaled
approximately $215,000.
Casino operating expenses for the quarter totaled approximately $4,165,000
or 17.2% of revenues versus approximately $4,156,000 or 17.6% of revenues
for the three months ended December 31, 1996. These expenses were primarily
comprised of salaries, wages and benefits, and operating and promotional
expenses of the casino.
Gaming and admissions taxes totaled approximately $6,850,000 for the quarter
versus approximately $6,652,000 for the three months ended December 31,
1996. These taxes are based upon 20% of adjusted gross receipts, as defined
by Indiana Gaming laws, and $3 per passenger per the state passenger count.
An additional $710,000 was paid during the quarter versus $690,000 for the
three months ended December 31, 1996 to the City under an agreement whereby
the Company pays 3% of the adjusted gross receipts directly to the City.
Advertising and promotion expenses for the quarter totaled approximately
$2,189,000 versus approximately $1,777,000 for the three months ended
December 31, 1996. Advertising and promotion expenses included salaries,
wages and benefits of the marketing and casino service departments as well
as promotions, advertising and special events. The increase in advertising
and promotion expenses during the quarter was primarily the result of
increased expenditures for media, including radio and billboards.
General and administrative expenses for the quarter ended March 31, 1997
were approximately $5,759,000 versus $6,153,000 during the three months
ended December 31, 1996, and included approximately $1,811,000 for berthing
fees paid to BHR, $1,721,000 for marine operations and $465,000 for security
and surveillance operations. The decrease in general and administrative
expenses primarily was attributable to a $341,000 decline in berthing fees
paid to BHR as a result of on going expense reduction efforts at BHR.
Depreciation and amortization and net interest expense for the quarter were
approximately $1,773,000 and $2,937,000, respectively. Net interest expense
<PAGE>
for the quarter includes accrued but unpaid contingent interest of
approximately $240,000. No contingent interest was paid during the quarter.
The Company's loss in its investment in BHR for the quarter was
approximately $635,000 versus approximately $1,113,000 for the three months
ended December 31, 1996. The Company's loss in its investment was
substantially greater in the three months ended December 31, 1996 as a
result of a change in the estimated useful lives of BHR assets during the
quarter ended December 31, 1996.
As a result of the foregoing, income from operations for the quarter was
approximately $2,295,000 and the net loss was approximately $1,277,000.
Consolidated cash flow as defined in the Indenture governing the Company's
Senior Secured Notes was approximately $4,802,000 during the three month
period ended March 31, 1997. The consolidated cash flow in the second
semiannual period (October - March) was $10,127,000.
Earnings Before Interest, Income Taxes, Depreciation and Amortization
("EBITDA")
EBITDA is presented solely as a supplemental disclosure. EBITDA is used by
the Company to assist in the evaluation of the cash generating ability of
its gaming business.
EBITDA (excluding Chartered Vessel lease payments of approximately $394,000)
was approximately $4,462,000 during the quarter and represented 18.4% of net
revenues compared to approximately $4,078,000 during the three months ended
December 31, 1996. EBITDA during the quarter increased principally as a
result of a 2.5% increase in revenues together with a 15.8% decrease in
berthing fees paid to BHR. EBITDA should be viewed only in conjunction with
all of the Company's financial data and statements, and should not be
construed as an alternative either to income from operations as an indicator
of the Company's operating performance or to cash flows from operating
activities as a measure of liquidity.
Liquidity and Capital Resources
At March 31, 1997, the Company had cash and cash equivalents of
approximately $11 million and restricted cash of approximately $46 million.
For the three months ended March 31, 1997, the Company invested
approximately $8 million, previously held in restricted cash accounts, in
property and equipment primarily for the construction of the Permanent
Vessel. To date, the Company has expended approximately $16 million for the
construction, design and engineering of the Permanent Vessel. The Company
has also contributed approximately $1 million from working capital to BHR
for general enhancements. The Company has committed to spend approximately
$40 million on the Permanent Vessel, excluding additional gaming-related
equipment.
As discussed below, the Company, to date, has met its capital requirements
through net cash from operations, capital contributions and loans.
For the three months ended March 31, 1997, net cash provided from operations
totaled approximately $5.7 million.
Net capital contributions through March 31, 1997, were approximately $24
million, compared to approximately $35 million through December 31, 1995.
This reduction is due to the Company's reassessment of its capital
structure, which resulted, on March 31, 1996, in Barden Development, Inc.
("BDI") converting approximately $11 million of its capital contributions to
the Company into a note. BDI is one of the Company's members and its
manager.
As of March 31, 1997, loans included $105 million 12.75% Senior Secured
Notes due 2003, with Contingent Interest equal to 5% of the Company's
Consolidated Cash Flow (the "Senior Secured Notes"), approximately $11
million borrowed from BDI and approximately $5 million of equipment
financing. At March 31, 1997, approximately $46 million of the proceeds
together with interest earned thereon from the Senior Secured Notes were
<PAGE>
held in escrow for future cash requirements of the Company and were
allocated approximately as follows: $28 million for the Permanent Vessel,
$7 million as an interest reserve, and $11 million designated to repay the
loan due to BDI. The portion designated for the repayment of the loan due
to BDI cannot be paid to BDI until certain remaining conditions, principally
the delivery of the Permanent Vessel, are met. Until repaid, these funds
are available, subject to certain limitations and qualifications, to the
Company for completion of the BHR's facilities and the Permanent Vessel.
If the Company is determined to be in default under the Indenture, any
portion of the proceeds from the Senior Secured Notes held in escrow may no
longer be available to the Company and the Senior Secured Notes may be
accelerated. Either event could materially adversely affect the Company .
Under the terms of it's development agreement with the City, the Company
committed to make development expenditures of $116 million for its casino
and associated infrastructure in the City over the next five years. The
Company has met or accrued a significant portion of these commitments. The
two principal components of the remaining commitment are as follows: (1)
$10 million for off-site development in the City by 1998/1999 with the
particular project(s) to be agreed to by the City and (2) $12 million (a
substantial portion of which has been expended through March 31, 1997, with
the exact amount to be agreed upon by the City and the Company) to be
expended over the five years following the June 1996, opening of the casino
for enhancements to the Company's operations at Buffington Harbor and/or to
BHR's facilities.
The Company anticipates that additional capital contributions to the BHR
Joint Venture, currently estimated not to exceed $500,000, may be required
for the BHR Joint Venture facilities. The Company and its joint venture
partner are also reviewing the feasibility of purchasing additional property
and of constructing a covered parking facility at the Gaming Complex. The
cost and constructing of a covered parking facility at the Gaming Complex is
undetermined at this time. The Company expects to fund such further
investments from operations and/or from the funds designated for the
repayment of the note due to BDI provided the proceeds from the note due to
BDI have not been utilized and are available. There can be no assurance
that the pending facility will be constructed or that funds will be
sufficient for such construction.
The Company currently operates on a Chartered Vessel, which upon the
expiration of the Charter, must be redelivered afloat at the Company's cost
and expense to the owner of the Chartered Vessel. The Company must pay the
cost of any repairs which are necessary in order to bring the Chartered
Vessel into the condition required on redelivery under the contract. The
cost of these additional expenditures is undetermined at this time.
Based upon the Company's anticipated future operations, management believes
that available cash flow from the casino's future operations and certain
equipment financing, together with the proceeds from the Senior Secured
Notes and the note due to BDI, will be adequate to meet the Company's
anticipated future requirements for working capital, the remaining
development obligations to the City, capital expenditures, including the
additional gaming equipment required for the Permanent Vessel, and scheduled
payments of interest and principal on the Senior Secured Notes and other
permitted indebtedness for 1997. No assurance can be given, however, that
operating cash flow will be sufficient for such purposes. The Company will
seek, if necessary and to the extent permitted under the Indenture,
additional financing through borrowings and debt or equity financing. There
can be no assurance that additional financing, if needed, will be available
to the Company, or that, if available, the financing will be on terms
favorable to the Company. There is no assurance that the Company's estimate
of its reasonably anticipated liquidity needs is accurate or that unforeseen
events will not occur, resulting in the need to raise additional funds.
<PAGE>
Part II OTHER INFORMATION
Item 1
Legal Proceedings
On May 1, 1996, a class action complaint was filed in the Lake Superior
Court in Gary, Indiana, against Trump Indiana, Inc. (the "Joint Venture
Partner") and certain of its affiliates, the Company and its affiliates, the
IGC, the City of Gary and the Mayor of the City of Gary and certain other
parties affiliated with the City of Gary. The plaintiffs were comprised of
two local contractors, a former city employee, and five persons who claim
that they were to be investors in the riverboat casinos to be operated in
Gary, Indiana. The complaint alleged, among other things, that the Joint
Venture Partner and the Company each have failed to meet certain obligations
with respect to minority hiring goals, utilization of minority and/or women
contractors, investment in City projects and providing certain residents of
the City of Gary with the right to acquire a 15% equity interest in their
respective projects. Plaintiffs sought various remedies including damages
and injunctive relief in the form of an order to enjoin the IGC from issuing
gaming licenses to the Company and the Joint Venture Partner until they have
complied with these conditions. On July 11, 1996, the court granted a
motion filed by the defendants and the lawsuit was dismissed with prejudice.
In December 1996, an order was entered by the trial judge limiting his
original dismissal to only matters regarding the injunctive relief. In
April 1997 the order that purported to reinstate the suit was dismissed and
the July 11, 1996 order dismissing the suit with prejudice was reinstated.
On March 5, 1997, three individuals filed a lawsuit in Lake Circuit Court,
Crown Point, Lake County, Indiana, naming Don H. Barden and the Company as
defendants. The suit alleges that the defendants failed to enter into an
agreement to sell five percent of the Company to the plaintiffs. The
plaintiffs are requesting unspecified damages and attorney's fees. The
Company intends to vigorously defend against such suit. However, it is too
early to determine the outcome of such suit and the effect, if any on the
Company's financial position and results of operations.
Item 6
Exhibits and Reports on Form 8-K
(a) Exhibit
Exhibit 27 - Financial Data Schedule
(Edgar Version Only)
(b) Reports on Form 8-K
None
<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 duly authorized officers.
THE MAJESTIC STAR CASINO, LLC
Date: May 14, 1997 /s/ Don H. Barden
--------------------------------------
Don H. Barden
President and Chief Executive Officer
Date: May 14, 1997 /s/ Michael E. Kelly
--------------------------------------
Michael E. Kelly
Vice President and Chief Financial
Officer
(principal financial and accounting
officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 11,306,705
<SECURITIES> 0
<RECEIVABLES> 855,111
<ALLOWANCES> 250,000
<INVENTORY> 22,228
<CURRENT-ASSETS> 12,828,139
<PP&E> 34,647,973
<DEPRECIATION> 4,130,816
<TOTAL-ASSETS> 144,904,713
<CURRENT-LIABILITIES> 12,491,585
<BONDS> 118,327,202
<COMMON> 0
0
0
<OTHER-SE> 14,085,926
<TOTAL-LIABILITY-AND-EQUITY> 144,904,713
<SALES> 0
<TOTAL-REVENUES> 24,232,792
<CGS> 0
<TOTAL-COSTS> 21,937,529
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 250,000
<INTEREST-EXPENSE> 3,669,958
<INCOME-PRETAX> 2,295,263
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,295,263
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,276,765)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
