UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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
(219) 977-7823
(Registrant's address and telephone number, including area code)
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
filing requirements for the past 90 days. Yes [X] No [ ]
Shares outstanding of each of the registrant's classes of common stock as of
June 30, 1998:
Class Number of shares
----- ----------------
Not applicable Not applicable
<PAGE> i THE MAJESTIC STAR CASINO, LLC
Index
Page No.
--------
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, as of June 30, 1998 (Unaudited)
and December 31, 1997 1
Statements of Income (Unaudited) for the three
and six months ended June 30, 1998 and 1997 2
Statements of Cash Flows (Unaudited) for the six months
ended June 30, 1998 and 1997 3
Notes to Financial Statements (Unaudited) 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 18
Part II OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
i
<PAGE> 1
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
THE MAJESTIC STAR CASINO, LLC
Balance Sheets
June 30, December 31,
1998 1997
-------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $15,777,088 $ 8,083,594
Accounts receivable, less allowance for doubtful accounts
of $93,796 and $370,000, respectively 770,421 879,887
Inventories 30,882 33,717
Prepaid expenses 1,379,840 995,887
---------- ---------
Total current assets 17,958,231 9,993,085
---------- ---------
Property, equipment, and vessel improvements, net 58,375,485 61,206,890
Other assets:
Organizational costs, less accumulated amortization of
$58,145 and $44,021, respectively 83,096 97,220
Deferred financing costs, less accumulated amortization
of $1,244,451 and $947,941, respectively 2,853,639 3,150,149
Deferred costs, less accumulated amortization of $2,323,862
and $1,758,662, respectively 3,328,167 3,893,367
Investment in Buffington Harbor Riverboats, L.L.C. 42,201,820 43,541,985
Other assets and deposits 3,991,418 974,551
Restricted cash -- 11,904,716
---------- ----------
Total other assets 52,458,140 63,561,988
---------- ----------
Total assets $128,791,856 $134,761,963
=========== ===========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 1,827,191 $ 1,889,427
Short-term debt -- 100,696
Accounts payable 744,493 1,519,235
Other accrued liabilities:
Payroll and related 619,751 1,453,789
Interest 3,606,270 3,076,512
Other accrued liabilities 3,593,660 2,939,877
Due to Buffington Harbor Riverboats, L.L.C. 719,596 719,058
---------- ----------
Total current liabilities 11,110,961 11,698,594
Long-term debt, net of current maturities 109,504,073 110,828,515
Note to member 10,759,355 10,759,355
Commitments and contingencies -- --
----------- -----------
Total long-term liabilities 120,263,428 121,587,870
----------- -----------
Total liabilities 131,374,389 133,286,464
----------- -----------
Members' equity:
Members' contributions 24,000,000 24,000,000
Retained earnings (accumulated deficit) (26,582,533) (22,524,501)
---------- ----------
Total members' equity (2,582,533) 1,475,499
----------- -----------
Total liabilities and members' equity $128,791,856 $134,761,963
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 2 THE MAJESTIC STAR CASINO, LLC
Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C) <C> <C> <C>
Revenues:
Casino $27,635,544 $22,600,741 $55,219,428 $46,229,809
Food and beverage 391,625 362,630 858,141 751,926
Other 254,352 218,625 817,892 433,053
---------- ---------- ---------- ----------
Gross revenues 28,281,521 23,181,996 56,895,461 47,414,788
---------- ---------- ---------- ----------
Less promotional allowances (78,595) (21,100) (210,857) (35,346)
Net revenues 28,202,926 23,160,896 56,684,604 47,379,442
---------- ---------- ---------- ----------
Costs and Expenses:
Casino 4,609,372 3,967,178 9,488,392 8,132,563
Gaming and admission taxes 8,176,607 6,603,209 16,306,860 13,452,978
Food and beverage 578,445 457,838 1,176,364 933,836
Advertising and promotion 3,216,868 2,675,787 6,128,878 4,865,001
General and administrative 5,612,006 5,165,134 12,138,343 10,924,317
Economic incentive - City
of Gary 854,241 678,123 1,706,517 1,388,445
Depreciation and amortization 1,901,726 1,830,323 3,832,417 3,603,735
Loss on disposition of assets 168,683 -- 903,675 --
---------- ---------- ---------- ----------
Total costs and expenses 25,117,948 21,377,592 51,681,446 43,300,875
---------- ---------- ---------- ----------
Operating income 3,084,978 1,783,304 5,003,158 4,078,567
---------- ---------- ---------- ----------
Other Income (Expense):
Loss on investment in
Buffington Harbor
Riverboats, L.L.C. (673,986) (1,074,931) (1,600,534) (1,710,245)
Interest income 236,683 425,761 459,690 1,159,005
Interest expense (3,810,203) (2,963,116) (7,629,663) (6,482,174)
Interest expense to affiliate (145,162) (160,314) (290,683) (311,214)
---------- ---------- ---------- ----------
Total other income (expense)(4,392,668) (3,772,600) (9,061,190) (7,344,628)
---------- ---------- ---------- ----------
Net Income (Loss) $(1,307,690) $(1,989,296) $(4,058,032) $(3,266,061)
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 3 THE MAJESTIC STAR CASINO, LLC
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the six months For the six months
Ended June 30, 1998 Ended June 30, 1997
-------------------- -------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $(4,058,032) $(3,266,061)
Adjustment to reconcile net loss to net cash
provided by operating activities--
Depreciation 2,956,585 2,647,040
Amortization 875,832 956,695
Loss on investment in Buffington Harbor
Riverboats, L.L.C. 1,600,534 1,710,245
Loss on disposal of chartered vessel improvements 754,714 --
Loss on disposal of assets 148,961 --
(Increase) decrease in accounts receivable, net 109,466 (50,040)
Decrease in inventories 2,835 4,559
(Increase) decrease in prepaid expenses (383,953) 63,212
Increase in other assets (1,429) --
Increase (decrease) in accounts payable (774,742) 22,801
Increase (decrease) in accrued payroll and other expenses (834,038) 303,407
Increase in accrued interest 529,758 436,960
Increase (decrease) in other accrued liabilities 763,142 (402,163)
--------- ---------
Net cash provided by operating activities 1,689,633 2,426,655
--------- ---------
Cash Flows From Investing Activities
Acquisition of property, equipment and vessel improvements (1,516,194) (20,616,621)
Proceeds from sale of slot equipment 481,800 --
(Increase) decrease in Chartered Vessel deposit 609,274 42,775)
Increase in Letter of Credit deposit (3,624,708) --
Investment in Buffington Harbor Riverboats, L.L.C. (260,369) (1,709,443)
Deferred expenses -- (191,734)
Decrease in restricted cash 11,904,716 24,006,152
---------- ----------
Net cash provided by investment activities 7,594,519 1,445,579
---------- ----------
Cash Flows From Financing Activities
Cash paid to reduce short-term debt (100,694) --
Cash paid to reduce long-term debt (1,008,164) (1,273,087)
Reduction of notes payable (481,800) --
---------- ----------
Net cash used by financing activities (1,590,658) (1,273,087)
---------- ----------
Net increase in cash and cash equivalents 7,693,494 2,599,147
Cash and cash equivalents, beginning of period 8,083,594 8,935,999
---------- ----------
Cash and cash equivalents, end of period $ 15,777,088 $11,535,146
========== ==========
Interest paid:
Principal Member $ 145,162 $ 150,900
Equipment Debt $ 193,725 $ 139,661
Senior Secured Note $6,693,750 $ 6,693,750
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4 THE MAJESTIC STAR CASINO, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 and 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 on June 7, 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 (which include normal recurring adjustments) considered
necessary for a fair presentation of the results for the interim periods
have been made. The results for the three and six months ended June 30,
1998, are not necessarily indicative of results to be expected for the full
fiscal year. The financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
Note 2 Investment in Buffington Harbor Riverboats, L.L.C. ("BHR"):
On October 31, 1995, the Company and Trump Indiana, Inc. (the "Joint Venture
Partner") entered into the First Amended and Restated Operating Agreement of
BHR for the purpose of acquiring and developing certain facilities for the
gaming operations in the City ("BHR Property"). BHR is responsible for the
management, development and operation of the BHR Property. The Company and
the Joint Venture Partner have each entered into an agreement with BHR (the
"Berthing Agreement") to use BHR Property for their respective gaming
operations and have committed to pay cash operating losses of BHR as
additional berthing fees. The Company and the Joint Venture Partner share
equally in the operating expenses relating to the BHR Property, except for
costs associated with food and beverage and gift shop, which are allocated
on a percentage of use by the casino customers of the Company and the Joint
Venture Partner.
The following represents selected financial information of BHR:
Buffington Harbor Riverboats, L.L.C.
Statements of Income
(Unaudited) Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
---- ---- ---- ----
Gross Revenue $5,085,419 $4,987,443 $9,900,523 $10,309,928
Operating Income
(Loss) 131,557 (310,712) (243,231) (574,320)
Net Loss (1,347,933) (1,731,618) (3,201,069) (3,420,491)
<PAGE> 5
Note 3 Commitments and Contingencies:
Legal Proceedings
On January 15, 1998, the Company filed a petition for "Correction of an
Error" and on January 20, 1998, filed an appeal to the March 1, 1997,
property tax assessment of the Chartered Vessel. The Company believes it
was not given proper notice of the 1997 property tax assessment in
accordance with the general assessment provisions of the property tax law
and the Company further believes the assessment of approximately $1.2
million was incorrectly calculated. According to legal counsel, the
probable 1998 property tax liability is estimated not to exceed
approximately $641,000. The tax is payable in semiannual installments due
in May and November 1998. The first semiannual installment of $280,000 was
paid in May.
On March 27, 1998, a complaint was filed in the Lake County Superior Court
in East Chicago, Indiana, against BHR, the Joint Venture Partner and the
Company. The plaintiff, a former employee of the Company, claims to have
been assaulted in the BHR parking lot on June 25, 1997, and is requesting
compensatory and punitive damages totaling approximately $11 million. The
suit alleges that the Joint Venture Partner and the Company failed to
provide adequate security to prevent assaults. 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 with Lehigh Portland Cement Company ("Lehigh
Cement"), BHR has leased certain property which is integral to the gaming
operations of the Joint Venture Partner and the Company. The lease places
certain restrictions on the use of the harbor by the Joint Venture Partners,
requires the reimbursement of certain costs which may be incurred by Lehigh
Cement and requires BHR to pursue permitting of and building of a new
harbor. The lease was rent free through December 29, 1997, and subject to
certain conditions, primarily continuing progress toward permitting of and
then building of a new harbor, the lease has been extended until the earlier
of December 31, 2005, or the completion of a new harbor. Starting in
January 1998, under the lease, the BHR Joint Venture pays rent of $125,000
per month. A new harbor may require new guest facilities. The level of
expenditures required for such new facilities cannot be accurately estimated
at this time.
<PAGE> 6
Indiana Gaming Regulations
The ownership and operation of riverboat gaming operations in Indiana are
subject to strict state regulation under the Riverboat Gambling Act ("Act")
and the administrative rules promulgated thereunder. The Indiana Gaming
Commission ("IGC") is empowered to administer, regulate and enforce the
system of riverboat gaming established under the Act and has jurisdiction
and supervision over all riverboat gaming operations in Indiana, as well as
all persons on riverboats where gaming operations are conducted. The IGC is
empowered to regulate a wide variety of gaming and nongaming related
activities, including the licensing of supplies to, and employees at,
riverboat gaming operations and to approve the form of entity qualifiers and
intermediary and holding companies. Indiana is a new jurisdiction and the
emerging regulatory framework is not yet complete. The IGC has adopted
certain final rules and has published others in proposed or draft form which
are proceeding through the review and final adoption process. The IGC has
broad rulemaking power, and it is impossible to predict what effect, if any,
the amendment of existing rules or the finalization of currently new rules
might have on the Company's operations.
<PAGE> 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Statement on Forward-Looking Information
This quarterly report includes various "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which
represent the Company's expectations or beliefs concerning future events.
Statements containing expressions such as "believes", "anticipates" or
"expects" used in the Company's press releases and reports filed with the
Securities and Exchange Commission (including periodic reports on Form 10-K
and Form 10-Q) are intended to identify forward-looking statements. All
forward-looking statements involve risks and uncertainties. Although the
Company believes its expectations are based upon reasonable assumptions
within the bounds of its knowledge of its business and operations, there can
be no assurances that actual results will not materially differ from
expected results. The Company cautions that these and similar statements
included in this report and in previously filed periodic reports are further
qualified by important factors that could cause actual results to differ
materially from those in the forward-looking statements. Such factors
include, without limitation, the following: the purchase of real estate
for, and the design and construction of, a covered parking facility located
at the Company's gaming complex; the ability to fund planned development
needs and to service debt from existing operations and from new financing;
increased competition in existing markets or the opening of new gaming
jurisdictions; a decline in the public acceptance of gaming; the limitation,
conditioning or suspension of the Company's gaming license; increases in or
new taxes imposed on gaming revenues or gaming devices; a finding of
unsuitability by regulatory authorities with respect to the Company's
officers, or key employees; loss and/or retirement of key executives;
significant increase in fuel or transportation prices; adverse economic
conditions in the Company's markets; severe and unusual weather in the
Company's markets and adverse results of significant litigation matters.
Readers are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date thereof. The Company undertakes
no obligation to publicly release any revisions to such forward-looking
statements to reflect events or circumstances after the date hereof.
Overview
The Company was formed in December 1993 as an Indiana limited liability
company to develop a riverboat casino in the City, as its sole operation.
The Company's efforts resulted in the IGC granting the Company a five year
riverboat owner's license on June 3, 1996. The Company began operations on
June 7, 1996. The Company's operations through October 19, 1997, were
conducted on the Chartered Vessel. The Chartered Vessel was chartered
pursuant to a five year lease, which began in May 1996, and contained
approximately 26,000 square feet of gaming space, 932 slot machines and 50
table games.
<PAGE> 8
The Company and the Joint Venture Partner, the holder of a second gaming
license to operate from the City, formed 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 the Joint Venture Partner each have a fifty-percent ownership
interest in BHR.
In 1996, the Company entered into various agreements for the design,
engineering and construction of the Permanent Vessel. The Chartered Vessel
was replaced with the Permanent Vessel on October 27, 1997. The Permanent
Vessel, which is owned by the Company, contains approximately 43,000 square
feet of casino space on three decks, approximately 1,516 slot machines and
69 table games including 8 poker tables. The Permanent Vessel has an
atrium, escalators and elevators. The Company to date has expended
approximately $51.6 million, excluding capitalized interest, on the
Permanent Vessel including a recent slot upgrade of approximately $982,000.
On March 30, 1998, the Company executed an amendment to the August 17, 1995,
charter agreement whereby New Yorker Acquisition Corporation, the lessor,
accepted re-delivery of the Chartered Vessel effective March 1, 1998, "as-
is, where-is" at Erie, Pennsylvania, from the Company, the lessee. The
Company also agreed to release a $500,000 escrow account with accrued
interest thereon, free and clear of any claims thereon, to New Yorker
Acquisition Corporation in lieu of restoring the Chartered Vessel back to
its original condition. As of March 1, 1998, all obligations of New Yorker
Acquisition Corporation and the Company have been fully satisfied and the
parties have no further obligations under the original charter agreement.
The Company during the three months ended March 31, 1998, and the three
months ended June 30, 1998, wrote-off assets previously utilized and/or left
on board the Chartered Vessel that had a net book value of approximately
$735,000 and $20,000, respectively.
The federal law that prohibited cruising on federal waterways was amended
during the fourth quarter of 1996 to allow cruises and, as a result, the
Indiana Gaming Commission advised the Company that cruising could commence
November 15, 1996, subject to winter weather conditions. However, due
primarily to winter weather conditions during the first and second quarters
of both 1998 and 1997, the Company conducted a significant amount of its
gaming operations with the Permanent Vessel or the Chartered Vessel,
respectively, docked. The Company resumed a regular cruising schedule
during June 1998.
The approach of the year 2000 has become a potential problem for businesses
utilizing computers in their operations since many computer programs are
date sensitive and will only recognize the last two digits of the year,
thereby recognizing the year 2000 as the year 1900 or not at all (the "Year
2000 Issue"). Management has undertaken a comprehensive assessment of the
Company's exposure to the Year 2000 Issue and what will be required to
ensure that the Company is year 2000 compliant. The primary computer
programs utilized in the Company's operations and financial reporting
systems have been acquired from independent software vendors. The Company
is in the process of contacting these vendors to determine whether their
systems are year 2000 compliant, and, if not, establish timelines as to when
the Company will receive the required upgrades that assure that these
systems will be year 2000 compliant. Maintenance or modification costs
associated with the Year 2000 Issue will be expensed as incurred, while the
costs of any new software will be capitalized and amortized over the
software's useful life. The Company does not expect to incur costs in
connection with the Year 2000 Issue that would have a material impact on
operations. Although the Company presently believes that all of its
software programs will be year 2000 compliant, there can be no assurances
that the Company will not be adversely affected by the Year 2000 Issue.
<PAGE> 9
The Company competes, and expects to compete, with various gaming operations
on Native American lands, including those located, or to be located, in
Michigan, Wisconsin and possibly northern Indiana. The Pokagon Band of the
Potawatomi Indians have proposed building a land-based casino in northern
Indiana, specifically in St. Joseph or Elkhart Counties. In addition, the
Saginaw Chippewa Tribe is currently operating one of the largest Native
American gaming complexes in the U.S. in Mt. Pleasant, Michigan,
approximately 250 miles northeast of Gary, Indiana. In addition, the
Governor of Michigan has recently signed a number of Indian compacts that
would allow land-based casinos in Michigan, including southwest Michigan.
The opening of land-based casinos, which generally have a competitive
advantage over cruising casinos in close proximity to the Company, could
have an adverse effect on the Company.
With respect to the State of Michigan, the Company also expects future
competition from three land-based casinos to be developed in Detroit,
Michigan, pursuant to a November 1996 voter initiative.
The Company believes that its ability to compete successfully in the
riverboat gaming industry will be primarily based on the quality and
location of its gaming facilities, the effectiveness of its marketing
efforts, and overall levels of customer service and satisfaction. Although
management believes that the location and amenities of the Majestic Star
Casino will enable the Company to compete effectively with other casinos in
the immediate area, the Company expects intense competition to continue in
its market area.
Because of the climate in the Chicago metropolitan area, the Company's
operations are expected to be seasonal with stronger results expected during
the period May through September. Accordingly, the Company's results of
operations are expected to fluctuate from quarter to quarter and the results
for any fiscal quarter may not be indicative of results for future fiscal
quarters.
Results of Operations
The discussions of results of operations contained herein provides a
comparison of the six and three month period ended June 30, 1998, with the
six and three month period ended June 30, 1997. Gross revenues were
approximately $56.9 million and $28.3 million during the six month and three
month period ended June 30, 1998 compared to $47.4 million and $23.2 million
during the six and three months ended June 30, 1997, respectively. Due to
winter weather conditions and mechanical difficulties, the Company did not
operate three days during the six months ended June 30, 1998.
<PAGE> 10
The following table sets forth: (i) summary information from the Company's
statements of income, as well as information relative to EBITDA (as defined
below) derived therefrom; and (ii) the Company's statements of income, as
well as information relative to EBITDA, expressed as a percentage of gross
revenues.
STATEMENTS OF INCOME -- SUMMARY INFORMATION (dollars in thousands)
Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
---- ---- ---- ----
Gross Revenues(1) $28,282 $23,182 $56,895 $47,415
Operating Income(2),(3),(4) $ 3,085 $1,783 $5,003 $ 4,079
EBITDA (5) $ 5,155 $4,007 $10,491 $ 8,470
STATEMENTS OF INCOME -- AS A PERCENTAGE OF GROSS REVENUES
Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
Casino 97.7% 97.5% 97.1% 97.5%
Food and beverage 1.4% 1.6% 1.5% 1.6%
Other (1) 0.9% 0.9% 1.4% 0.9%
---- ---- ---- ----
Gross Revenues 100.0% 100.0% 100.0% 100.0%
less promotional allowances (0.3)% (0.1)% (0.4)% (0.1)%
Net Revenues 99.7% 99.9% 99.6% 99.9%
Costs and Expenses:
Casino 16.3% 17.1% 16.7% 17.2%
Gaming and admission taxes 28.9% 28.5% 28.7% 28.4%
Food and beverage 2.0% 2.0% 2.1% 2.0%
Advertising and promotion 11.4% 11.5% 10.8% 10.3%
General and administrative(2) 19.8% 22.3% 21.3% 23.0%
Economic incentive-City
of Gary 3.0% 2.9% 3.0% 2.9%
Depreciation and amortization 6.7% 7.9% 6.7% 7.6%
Loss on disposition of
assets (3)(4) 0.6% 0.0% 1.6% 0.0%
---- ---- ---- ----
Total 88.7% 92.2% 90.9% 91.4%
Operating Income (Loss): 11.0% 7.7% 8.7% 8.5%
Other Income (Expense):
Loss on investment in BHR (2.4)% (4.6)% (2.8)% (3.6)%
Interest income 0.8% 1.8% 0.8% 2.4%
Interest expense (13.5)% (12.8)% (13.4)% (13.7)%
Interest expense to
affiliate (0.5)% (0.7)% (0.5)% (0.7)%
---- ---- ---- ----
Total (15.6)% (16.3)% (15.9)% (15.6)%
---- ---- ---- ----
Net Income (Loss): (4.6)% (8.6)% (7.2)% (7.1)%
---- ---- ---- ----
EBITDA: (5) 18.2% 17.3% 18.4% 17.9%
NOTES:
1. Includes a lump sum payment in March 1998 of approximately $314,000 from
the Company's Joint Venture Partner to compensate the Company for the loss
of certain parking spaces to be utilized by the Joint Venture Partner for
the construction of a hotel facility.
2. Includes approximately $752,000 during the three months ended March 31,
1998 in expenses associated with the lease and subsequent termination of
the charter vessel lease agreement effective March 1, 1998.
3. Includes losses on disposal for assets previously utilized on the
Chartered Vessel during the three months ended March 31,1998 and the three
months ended June 30, 1998 of approximately $735,000 and $20,000,
respectively.
<PAGE> 11
4. Includes a loss on disposal during the three months ended June 30, 1998
of approximately $149,000 for slot machines replaced during the quarter.
5. EBITDA (defined as earnings before interest, income taxes, depreciation
and amortization and, for purposes hereof, does not include payments
associated with, and termination of, the Chartered Vessel lease) is
presented solely as a supplemental disclosure to assist in the evaluation of
the Company's ability to generate cash flow. In particular, the Company
believes that an analysis of EBITDA enhances the understanding of the
financial performance of companies with substantial depreciation and
amortization.
Results for any one or more periods are not necessarily indicative of annual
results or continuing trends.
Comparison of the Three Months Ended June 30, 1998 and 1997
Gross revenues for the second quarter ended June 30, 1998, amounted to
approximately $28,282,000, an increase of approximately $5,100,000 from
gross revenues recorded in the second quarter ended June 30, 1998. The
22.0% increase in gross revenues was attributable to a 27.3% increase in the
number of admissions.
Casino revenues during the three months ended June 30, 1998, totaled
approximately $27,636,000, of which slot machines accounted for
approximately $21,215,000 (76.8%) and table games accounted for
approximately $6,421,000 (23.2%). The average number of slot machines in
operation increased to 1,518 during the three months ended June 30, 1998,
from 932 during the three months ended June 30, 1997. The average win per
slot machine per day decreased to approximately $153 for the three months
ended June 30, 1998, from approximately $209 during the three months ended
June 30, 1997. The average number of table games in operation (excluding
poker) during the three months ended June 30, 1998, increased to 61 from 50
during the three months ended June 30, 1997. The average win per table game
per day during the three months ended June 30, 1998, declined to
approximately $1,064 compared to approximately $1,075 during the three
months ended June 30, 1997. During the three months ended June 30, 1998,
the Company operated 8 poker tables with an average win per table per day of
$622. The average daily win per state passenger count was approximately $31
and the average daily win per patron was approximately $54 during the three
months ended June 30, 1998, compared to an average daily win per state
passenger count of approximately $32 and an average daily win per patron of
approximately $55 for the three months ended June 30, 1997.
Food and beverage revenues for the three months ended June 30, 1998, totaled
approximately $392,000 or 1.4% of gross revenues, compared to approximately
$363,000 or 1.6% of gross revenues for the three months ended June 30, 1997.
Other revenue, consisted primarily of commission income, totaling
approximately $254,000, or 0.9% of gross revenues compared to approximately
$219,000 or 0.9% of gross revenues for the three months ended June 30, 1997.
Promotional allowances (complementaries) included in the Company's gross
food revenues for the three months ended June 30, 1998, and 1997, were
approximately $79,000 and $21,000, respectively. Promotional allowances
provided to the Company's gaming patrons at facilities located in, and/or
owned by BHR for the three months ended June 30, 1998, and 1997, totaled
approximately $79,000 and $59,000, respectively, and are characterized in
the financial statements as an expense to the casino. BHR invoices the
Company monthly for these promotional allowances at cost, which approximates
the retail value of these promotional allowances.
Casino operating expenses for the three months ended June 30, 1998, totaled
approximately $4,609,000, or 16.3% of gross revenues and 16.7% of casino
revenues, respectively, compared to approximately $3,967,000, or 17.1% of
gross revenues and 17.6% of casino revenues, respectively, for the three
months ended June 30, 1997. These expenses were primarily comprised of
salaries, wages and benefits, and operating and promotional expenses of the
casino. The dollar increase of $642,000 in casino operating expenses is
primarily attributed to an increase in payroll expense associated with
operating more table games, additional slot machines, increased customer
volumes, and operating the larger Permanent Vessel.
<PAGE> 12
Gaming and admissions taxes totaled approximately $8,177,000 for the three
months ended June 30, 1998, compared to approximately $6,603,000 for the
three months ended June 30, 1997. These taxes are levied on adjusted gross
receipts, as defined by Indiana gaming laws, at the rate of 20%, plus $3 per
passenger per the state passenger count. An additional $854,000 was paid
during the three months ended June 30, 1998, compared to approximately
$678,000 in the three months ended June 30, 1997, to the City under an
agreement whereby the Company principally pays 3% of the adjusted gross
receipts directly to the City.
Advertising and promotion expenses for the three months ended June 30, 1998,
totaled approximately $3,217,000, or 11.4% of gross revenues, compared to
approximately $2,676,000, or 11.5% of gross revenues during the three months
ended June 30, 1997. 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 $541,000 increase in
advertising and promotion expenses during the three months ended June 30,
1998, was primarily the result of increased expenditures in general media
(including billboards, print and radio), and direct mail, and was partially
off-set by a decline in subsidies provided to charter bus operators and/or
patrons.
General and administrative expenses for the three months ended June 30,
1998, were approximately $5,612,000, or 19.8% of gross revenues, compared to
$5,165,000, or 22.3% of gross revenues, during the three months ended June
30, 1997. These expenses included approximately $1,669,000 for berthing
fees paid to BHR, $1,247,000 for marine operations and $457,000 for security
and surveillance operations during the second quarter of 1998. The $447,000
increase in these expenses is primarily attributed to an increase of
approximately $375,000 for property taxes during the three months ended June
30, 1998.
Depreciation and amortization for the second quarter ended June 30, 1998,
was approximately $1,902,000, or 6.7% of gross revenues, compared to
approximately $1,830,000, or 7.9% of gross revenues, during the three months
ended June 30, 1997. The dollar increase in depreciation expense for the
three months ended June 30, 1998, is principally attributable to the
increased expense associated with the Permanent Vessel.
Operating income for the three months ended June 30, 1998, was approximately
$3,085,000, or 11.0% of gross revenues, compared to an operating income for
the three months ended June 30, 1997 of $1,783,000, or 7.7% of gross
revenues. During the three months ended June 30, 1998, the Company had a
net loss on disposition of assets totaling approximately $169,000. The
Company wrote-off assets used on the Chartered Vessel that had a net book
value of approximately $20,000 and slot machines that had a net book value
of approximately $149,000.
Net interest expense for the three months ended June 30, 1998, was
$3,719,000, or approximately 13.2% of gross revenues, compared to
$2,698,000, or approximately 11.7% for the same period last year. The
increase in net interest expense in both dollars and as a percentage of
gross revenues is attributed to the Permanent Vessel being placed into
service combined with the additional interest expense associated with the
financing of additional slot equipment in late 1997 for use on the Permanent
Vessel. During the three months ended June 30, 1997, approximately $720,000
of interest expense was capitalized during the construction of the Permanent
Vessel. For the three months ended June 30, 1998, and 1997, the Company had
accrued contingent interest of approximately $270,000 and $192,000,
respectively. No contingent interest was paid during the three months ended
June 30, 1998, or 1997.
The Company's loss relating to its investment in BHR for the three months
ended June 30, 1998, was approximately $674,000. The loss represents the
Company's 50% share of BHR's non-cash net loss (primarily depreciation and
amortization).
<PAGE> 13
As a result of the foregoing, the Company experienced net losses of
approximately $1,308,000 and $1,989,000 during the three months ended June
30, 1998, and 1997, respectively.
Comparison of the Six Months Ended June 30, 1998 and 1997
Gross revenues for the six months ended June 30, 1998, amounted to
approximately $56,895,000, an increase of $9,481,000 over gross revenues
recorded in the six months ended June 30, 1997. The 20.0% increase in gross
revenues was attributable to an overall 25.2% increase in the number of
admissions attracted by the larger Permanent Vessel.
Casino revenues during the six months ended June 30, 1998, totaled
approximately $55,219,000, of which slot machines accounted for
approximately $41,594,000 (75.3%) and table games accounted for
approximately $13,625,000 (24.7%). The average number of slot machines in
operation increased to 1,531 during the six months ended June 30, 1998, from
930 during the six months ended June 30, 1997. The average win per slot
machine per day decreased to approximately $152 for the six months ended
June 30, 1998, from approximately $207 during the six months ended June 30,
1997. The average number of table games in operation (excluding poker)
during the six months ended June 30, 1998, increased to 61 from 50 during
the six months ended June 30, 1997. The average win per table game per day
during the six months ended June 30,1998, declined to approximately $1,167,
compared to approximately $1,251 during the six months ended June 30, 1997.
During the six months ended June 30, 1998, the Company operated 8 poker
tables with an average win per table per day of $617. The average daily
win per state passenger count was approximately $31 and the average daily
win per patron was approximately $55 during the six months ended June 30,
1998, compared to an average daily win per state passenger count of
approximately $33 and an average daily win per patron of approximately $56
for the six months ended June 30, 1997.
Food and beverage revenues for the six months ended June 30, 1998, totaled
approximately $858,000 or 1.5% of gross revenues, compared to approximately
$752,000 or 1.6% of gross revenues for the six months ended June 30, 1997.
The dollar increase in food and beverage revenues is attributed to an
overall increase in the number of customers attracted to the Permanent
Vessel. Other revenue totaling approximately $818,000, or 1.4% of gross
revenues for the six months ended June 30, 1998, consisted primarily of
commission income of approximately $504,000 and a lump sum payment of
$314,000 from the Company's Joint Venture Partner to compensate the Company
for the loss of certain parking spaces to be utilized by the Joint Venture
Partner for the construction of a hotel facility.
Promotional allowances (complementaries) included in the Company's gross
food revenues for the six months ended June 30, 1998, and 1997, were
approximately $211,000 and $35,000, respectively. The $176,000 dollar
increase was attributable to the increase in the number of customers
attracted to the larger Permanent Vessel. Promotional allowances provided
to the Company's gaming patrons at facilities located in, and/or owned by
BHR for the six months ended June 30, 1998, and 1997, totaled approximately
$174,000 and $194,000, respectively, and are characterized in the financial
statements as an expense to the casino. BHR invoices the Company monthly
for these promotional allowances at cost, which approximates the retail
value of these promotional allowances.
Casino operating expenses for the six months ended June 30, 1998, totaled
approximately $9,488,000, or 16.7% of gross revenues and 17.2% of casino
revenues, respectively, compared to approximately $8,133,000, or 17.2% of
gross revenues and 17.6% of casino revenues, respectively, for the six
months ended June 30, 1997. These expenses were primarily comprised of
salaries, wages and benefits, and operating and promotional expenses of the
casino. The dollar increase of $1,355,000 in casino operating expenses is
primarily attributed to an increase in payroll expense associated with
operating more table games, additional slot machines, increased customer
volumes, and operating the larger Permanent Vessel.
<PAGE> 14
Gaming and admissions taxes totaled approximately $16,307,000 for the six
months ended June 30, 1998, compared to approximately $13,453,000 for the
three months ended June 30, 1997. These taxes are levied on adjusted gross
receipts, as defined by Indiana gaming laws, at the rate of 20%, plus $3 per
passenger per the state passenger count. An additional $1,707,000 was paid
during the six months ended June 30, 1998, compared to approximately
$1,389,000 in the six months ended June 30, 1997, to the City under an
agreement whereby the Company principally pays 3% of the adjusted gross
receipts directly to the City.
Advertising and promotion expenses for the six months ended June 30, 1998,
totaled approximately $6,129,000, or 10.8% of gross revenues, compared to
approximately $4,865,000, or 10.3% of gross revenues during the six months
ended June 30, 1997. 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 $1,264,000 increase in
advertising and promotion expenses during the six months ended June 30,
1998, was primarily the result of increased expenditures in general media
(including billboards, print and radio) and direct mail, partially off-set
by a decline in bus subsidies.
General and administrative expenses for the six months ended June 30, 1998,
were approximately $12,138,000, or 21.3% of gross revenues, compared to
$10,924,000, or 23.0% of gross revenues, during the six months ended June
30, 1997. These expenses included approximately $3,520,000 for berthing
fees paid to BHR, $3,305,000 for marine operations and $922,000 for security
and surveillance operations during the six months ended June 30, 1998. The
dollar increase in these expenses is primarily attributed to an increase for
property taxes and berthing fees paid to BHR during the six months ended
June 30, 1998.
Depreciation and amortization for the second quarter ended June 30, 1998,
was approximately $3,832,000, or 6.7% of gross revenues, compared to
approximately $3,604,000, or 7.6% of gross revenues, during the six months
ended June 30, 1997. The dollar increase in depreciation expense for the six
months ended June 30, 1998, is principally attributable to the increased
expense of the Permanent Vessel.
Operating income for the six months ended June 30, 1998, was approximately
$5,003,000, or 8.7% of gross revenues, compared to an operating income for
the six months ended June 30, 1997 of $4,079,000, or 8.5% of gross
revenues. During the six months ended June 30, 1998, the Company had a net
loss on the disposition of assets totaling approximately $904,000. The
Company wrote-off slot machines that had a net book value of approximately
$149,000 and assets used on the Chartered Vessel that had a net book value
of approximately $755,000.
Net interest expense for the six months ended June 30, 1998, was $7,461,000,
or approximately 13.1% of gross revenues, compared to $5,634,000, or
approximately 12.0% for the same period last year. The increase in net
interest expense is attributed to the Permanent Vessel being placed into
service combined with the additional interest expense associated with the
financing of new gaming equipment in late 1997 for the Permanent Vessel.
During the six months ended June 30, 1997, approximately $720,000 of
interest expense was capitalized during the construction of the Permanent
Vessel. For the six months ended June 30, 1998, and 1997, the Company had
accrued contingent interest of approximately $535,000 and $432,000,
respectively. No contingent interest was paid during the six months ended
June 30, 1998, or 1997.
The Company's loss relating to its investment in BHR for the six months
ended June 30, 1998, was approximately $1,600,000. The loss represents the
Company's 50% share of BHR's non-cash net loss (primarily depreciation and
amortization).
As a result of the foregoing, the Company experienced net losses of
approximately $4,058,000 and $3,266,000 during the six months ended June 30,
1998, and 1997, respectively.
<PAGE> 15
Earnings Before Interest, Income Taxes, Depreciation and Amortization
("EBITDA")
EBITDA is presented solely as a supplemental disclosure and is used by the
Company to assist in the evaluation of the cash generating ability of its
gaming business.
EBITDA (excluding loss on disposal of assets and Chartered Vessel lease and
termination payments) during the three and six month periods ended June 30,
1998 was approximately $5,155,000 and $10,491,000, respectively, or 18.2%
and 18.4%, respectively, of gross revenues, compared to approximately
$4,007,000 and $8,470,000, respectively, or 17.3% and 17.9%, respectively,
of gross revenues, during the three and six month periods ended June 30,
1997. The increase in EBITDA for the quarter and six months ended June 30,
1998, is primarily due to an increase in casino revenue and admissions
associated with operating the larger Permanent Vessel.
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 June 30, 1998, the Company had cash and cash equivalents of approximately
$15.8 million. During the six months ended June 30, 1998, the Company
expended approximately $1.5 million for property and equipment, including
$982,000 for new slot equipment. The Company also contributed approximately
$260,000 from working capital to BHR for general enhancements during this
period.
The Company, to date, has met its capital requirements through net cash from
operations, capital contributions and loans. For the six months ended June
30, 1998, net cash provided from operations totaled approximately $1.7
million compared to approximately $2.4 million for the six months ended June
30, 1997. The change in cash provided from operations was primarily
attributable to an increase in property taxes and payroll expenses
associated with operating the larger Permanent Vessel. The consolidated
cash flow as defined in the Indenture governing the Company's Senior Secured
Notes was approximately $5.4 million and $10.2 million respectively, during
the three and six month periods ended June 30, 1998.
As of June 30, 1998, loans included: (i) $105 million principal amount of
12.75% Senior Secured Notes due 2003, with additional contingent interest
equal to 5% of the Company's consolidated cash flow (as defined in the
underlying Indenture); (ii) approximately $10.8 million borrowed from BDI;
and (iii) approximately $6.3 million of equipment financing.
During January 1998, approximately $10.8 million of the proceeds from the
Senior Secured Notes, together with interest of $1.1 million earned thereon,
was reclassified from restricted cash to operating cash as the proceeds were
not required to complete the Permanent Vessel.
The Senior Secured Notes mature on May 15, 2003, and are redeemable at the
option of the Company, in whole or part, at any time on or after May 15,
2000, at various premiums. Holders of the Senior Secured Notes have the
right to require that the Company repurchase the notes at a premium under
certain conditions including a change in control of the Company.
<PAGE> 16
The Senior Secured Notes carry a coupon interest rate of 12.75%, plus
contingent interest equal to 5% of the Company's Consolidated Cash Flow, as
defined, (not to exceed $3 million annually), both payable semi-annually.
The payment of contingent interest can be deferred under certain conditions.
The contingent interest ordinarily payable on November 15, 1996, May 15,
1997, November 15, 1997, and May 15, 1998, was deferred, as allowed under
the terms of the Indenture. During the six months ended June 30, 1998, the
Company accrued contingent interest payable of approximately $535,000. The
Senior Secured Notes are collateralized by essentially all the assets of the
Company.
The Indenture contains financial and other covenants, which, among other
things, limits the Company's ability to (1) issue indebtedness, (2) make
investments, (3) make distributions and equity repurchases, (4) enter into
merger, consolidation and asset sale transactions, (5) create liens and (6)
enter into transactions with affiliates. These restrictions are subject to
a number of qualifications and exceptions as described in the Indenture.
If the Company is determined to be in default under the Indenture, the
Senior Secured Notes may be accelerated, which would materially adversely
affect the Company.
Under the terms of its development agreement with the City, the Company
committed, among other things, 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 portion of
these commitments 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 June 30, 1998, 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 BHR's facilities.
In May 1996, the Company arranged for a $12.5 million five year surety bond
(the "Bond") to be issued to the IGC. The Bond's primary purpose was to
provide collateral for completion of the Company's off-site development
obligations under the Development Agreement. In 1996 to support the
Company's obligations to the bonding company, the Company obtained a $3.5
million letter of credit from a bank to benefit the bonding company. The
beneficial owner (the "Owner") of the Company guaranteed the Company's
obligations to the bonding company under the Bond and to the bank under the
$3.5 million letter of credit. During May 1998, the Company replaced the
Owner's financial guarantee depositing $3.6 million with the bank to
guarantee the letter of credit to benefit the bonding company.
The Company anticipates that additional capital contributions to BHR,
including capital for the expansion of the valet parking, are currently
estimated not to exceed $700,000, may be required for the BHR facilities.
The Company and the Joint Venture Partner are continuing to review the
feasibility of purchasing additional property for the construction of a
covered parking facility at the Gaming Complex. The timing and cost of
purchasing the additional property and of constructing 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 that the
proceeds from the note due to BDI have not been utilized and are available.
There can be no assurance that such facility will be constructed or that
sufficient funds will be available for such construction.
<PAGE> 17
Under a lease agreement with Lehigh Portland Cement Company ("Lehigh
Cement"), BHR has leased certain property which is integral to the gaming
operations of the Company and its Joint Venture Partner. The lease places
certain restrictions on the use of the harbor by the Company and its Joint
Venture Partner and requires the reimbursement of certain costs which may be
incurred by Lehigh Cement. The lease was rent free through December 29,
1997 and, subject to certain conditions, such as progress toward permits for
a new harbor, has been extended to the earlier of December 21, 2005, or to
such time as BHR has obtained requisite regulatory permits and completed
construction of its permanent harbor, with a monthly payment of $125,000.
BHR anticipates filing the requisite regulatory permits during 1998. If the
regulatory permits are obtained, the BHR Joint Venture 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.
Through October 19, 1997, the Company conducted its gaming operations on the
Chartered Vessel. On March 30, 1998, the Company executed an amendment to
the August 17, 1995, Charter Agreement whereby New Yorker Acquisition
Corporation, the lessor, accepted re-delivery of the Chartered Vessel
effective March 1, 1998, "as is where is" at Erie, Pennsylvania from the
Company. The Company also agreed to release to New Yorker Acquisition
Corporation a $500,000 escrow account with accrued interest thereon, free
and clear of any claims in lieu of restoring the Chartered Vessel back to
its original condition. The Company during the six months ended June 30,
1998, wrote-off assets previously utilized on the chartered vessel that had
a net book value of approximately $755,000. As of March 1, 1998, all
obligations of the Company and New Yorker Acquisition Corporation have been
fully satisfied and the parties have no further obligations under the
original charter agreement.
The Company during the month of June 1998 took delivery on 126 new slot
machines from various vendors. The Company anticipates financing these new
slot machines whose aggregate purchase price, excluding sales and use tax,
was approximately $936,000 with a third party. The terms of the financing
are anticipated to be similar in nature to previous gaming equipment
financing the Company undertook when additional slot equipment was obtained
for the Permanent Vessel in late 1997. The cost of these new slot machines
is categorized as a current payable on the Company's balance sheet. There
can be no assurance that the additional financing will be available to the
Company, or that, if available, the financing will be on terms favorable to
the Company.
Although BDI to date has contributed approximately $24 million to the
Company, the Members' Equity Account became negative during the first
quarter of 1998 and continues to be negative as of June 30, 1998. The
decline in the Members' Equity Account is primarily attributed to start-up
costs, operating losses and the disposition of assets previously utilized on
the Chartered Vessel.
Based upon the Company's anticipated future operations on board the
Permanent Vessel and capital expenditures, management believes that the
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 and scheduled
payments of interest and principal on the Senior Secured Notes and other
permitted indebtedness for 1998. No assurance can be given, however, that
operating cash flow from the Permanent Vessel in light of increased
competition within the marketplace and such other proceeds will be
sufficient for such purposes. Also there is no guaranty that the Note due
to BDI will be repaid in 1998. 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.
In addition, 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> 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
<PAGE> 19
Part II OTHER INFORMATION
Item 1. Legal Proceedings
Various legal proceedings are pending against the Company. Management
considers all such pending proceedings, primarily personal injury claims, to
be ordinary litigation incidental to the character of the Company's
business. Management believes that the resolution of these proceedings will
not, individually or in the aggregate, have a material effect on the
Company's financial condition or results of operations.
On January 15, 1998, the Company filed a petition for "Correction of an
Error" and on January 20, 1998, filed an appeal to the March 1, 1997
property tax assessment of the Chartered Vessel. The Company believes it
was not given proper notice of the 1997 property tax assessment in
accordance with the general assessment provisions of the property tax law
and the Company further believes the assessment of approximately $1.2
million was incorrectly calculated. According to legal counsel, the
probable 1998 property tax liability is estimated not to exceed
approximately $641,000. The tax is payable in semiannual installments due
in May and November 1998. The first semiannual installment of $280,000 was
paid in May.
On March 27, 1998, a complaint was filed in the Lake County Superior Court
in East Chicago, Indiana, against BHR, Trump Indiana, Inc. (the "Joint
Venture Partner") and the Company. The plaintiff, a former employee of the
Company, claims to have been assaulted in the BHR parking lot on June 25,
1997 and is requesting compensatory and punitive damages totaling
approximately $11 million. The suit alleges that the Joint Venture Partner
and the Company failed to provide adequate security to prevent assaults.
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.
From time to time, the Company may be involved in routine administrative
proceedings involving alleged violations of certain provisions of the
Riverboat Gambling Act. Management believes that the outcome of any such
proceedings will not, either individually or in the aggregate, have a
material adverse effect on the Company or its ability to retain and/or renew
any license required under the Riverboat Gambling Act for the Company's
operations. In March 1998, the Company agreed to settle two such
proceedings with the payment of $120,000 in April 1998 to the IGC. No such
proceedings are pending at this time.
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
No. Description
- -- -----------
27 Financial Data Schedule (Edgar Version Only) (filed herewith).
(b) REPORTS ON FORM 8-K
None
<PAGE> 20 SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on
August 13, 1998.
The Majestic Star Casino, LLC
By: Barden Development Inc., Manager
By: /S/ MICHAEL E. KELLY
Michael E. Kelly
Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/S/ MICHAEL E. KELLY Vice President and Chief August 13, 1998
Financial Officer(Principal
Financial and Accounting
Officer of the Company)
<PAGE> EXHIBIT INDEX
Exhibit Description
- ------- -----------
27 Financial Data Schedule (EDGAR filing only)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 15,777,088
<SECURITIES> 0
<RECEIVABLES> 864,217
<ALLOWANCES> 93,796
<INVENTORY> 30,882
<CURRENT-ASSETS> 17,958,231
<PP&E> 65,488,685
<DEPRECIATION> 7,113,200
<TOTAL-ASSETS> 128,791,856
<CURRENT-LIABILITIES> 11,110,961
<BONDS> 105,000,000
<COMMON> 0
0
0
<OTHER-SE> (2,582,533)
<TOTAL-LIABILITY-AND-EQUITY> 128,791,856
<SALES> 56,895,461
<TOTAL-REVENUES> 56,895,461
<CGS> 0
<TOTAL-COSTS> 51,681,446
<OTHER-EXPENSES> 1,600,534
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,460,656
<INCOME-PRETAX> (4,058,032)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,058,032)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,058,032)
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</TABLE>
