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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 16, 2000
JCC HOLDING COMPANY
(Exact Name of Registrant as Specified in Charter)
DELAWARE 1-12095 62-1650470
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
ONE CANAL PLACE
365 CANAL STREET, SUITE 900
NEW ORLEANS, LOUISIANA 70130
(Address of Principal Executive Offices and Zip Code)
(504) 533-6000
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
Attached hereto as Exhibit 99.1 is the presentation made by Frederick
W. Burford, the Registrant's President and Chief Executive Officer, at the
Registrant's Annual Meeting of Stockholders held in New Orleans, Louisiana on
May 16, 2000..
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS.
(c) Exhibits.
The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
99.1 Presentation made by Frederick W.
Burford, the Registrant's President
and Chief Executive Officer, at the
Registrant's Annual Meeting of
Stockholders held in New Orleans,
Louisiana on May 16, 2000.
</TABLE>
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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 hereunto duly authorized.
JCC HOLDING COMPANY
(REGISTRANT)
/s/ L. Camille Fowler
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L. Camille Fowler
Vice President - Finance, Secretary and Treasurer
Date: May 16, 2000
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
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<S> <C>
99.1 Presentation made by Frederick W. Burford, the Registrant's
President and Chief Executive Officer, at the Registrant's
Annual Meeting of Stockholders held in New Orleans, Louisiana
on May 16, 2000.
</TABLE>
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EXHIBIT 99.1
JCC ANNUAL MEETING PRESENTATION
Thanks Colin. Thank you all for coming. My name is Fred Burford and I am
president and chief executive officer of JCC Holding Company. Before I proceed,
I would like to ask that any stockholder who has questions to please hold your
questions until after my presentation, at which time I will open the floor for
questions from stockholders. Also before proceeding, my attorneys have asked
that I make the following statement. Statements in this presentation that are
not historical fact, including particular statements about JCC Holding Company's
efforts to increase revenues and control and decrease costs, are forward-looking
statements made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Management cautions that the future performance
of JCC Holding Company involves certain risks and uncertainties, and that JCC
Holding Company's actual results could differ materially from those currently
anticipated as a result of certain factors including, without limitation,
factors that are contained in documents that JCC Holding Company files with the
U.S. Securities and Exchange Commission.
With the formalities of the annual meeting behind us, I want to take a few
moments to talk about our business; where we've been and where we want to go.
Speaking on behalf of the Board and our casino manager, Harrah's Entertainment,
we are enormously proud of what has been accomplished in New Orleans in the past
year. It hasn't been easy and there is still a lot of hard work ahead, but we
feel certain we are moving in the right direction, although slower than we all
anticipated.
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Simply stated, any solid, viable business is an outgrowth of many healthy
partnerships. Much of the hard work thus far has demonstrated our commitment to
these partnerships, especially the local and state communities, our many
employees, and our numerous vendors. We have met our commitments to these
various partners over and over again. It is now time that we focus on our
commitment to our partnership with you, our shareholders.
As I'll discuss in the next few minutes, we believe that with a fair assessment
of our situation by the state of Louisiana and other key constituent groups, and
with appropriate refinements, we will be successful and, over time, the business
will flourish.
Let me elaborate further, it was just about one year ago when we last met as a
group. At that inaugural JCC Holding annual meeting, we laid out a vision for a
world-class casino that would be a strong engine for the New Orleans and
Louisiana economies, and be a successful urban casino. At that meeting we
displayed artists renderings of the interior and exterior of the casino,
described in some detail the construction underway and offered a glimpse into
our plans to build market share and establish a strong base of loyal, returning
customers. At that time, we expressed cautious optimism about the short-term
prospects for success. We recognized that the challenges we faced were
significant. Specifically, we noted the more than $120 million in annual
payments to the state and city. We also talked about our competitive position,
which is affected by many factors that, to a large extent, are no one's fault,
but a reality of life. Years ago when the legislation for this enterprise was
germinated it was a political and regulatory environment that was very different
from today.
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At that time no one foresaw the Gulf Coast being a $1 billion casino market
complete with large hotels, numerous food offerings and multiple entertainment
facilities. These things alone changed the competitive landscape for our
business; a situation that would worsen if the much discussed move to dockside
gaming occurs as a means of increasing state gaming taxes. Frankly, we
understand the motives of the riverboat operators as they, too, seek to make
their businesses more competitive with their out-of-state, and untaxed Native
American, competitors.
Yet, their success in seeking this relief, were it to occur without some
structural change to the landbased act, would simply add another competitive
disadvantage to our casino.
So let me talk a bit about what we will be doing to put our business on a sound
financial footing in the face of these realities.
But, first, I think it is important to recap briefly what we have accomplished
thus far.
As most of you know, JCC Holding Company opened the casino doors on October 28,
1999 to overflow crowds. By opening the casino on time and on budget, we were
able to live up to the commitments made publicly since 1996. Construction was
resumed and, at its peak, employed more than 700 skilled and trained laborers.
We fully paid unsecured creditors to the tune of $54 million. We designed and
completed a beautiful, state-of-the-art complex that offers a unique gaming
experience and captures the flavor and excitement of New Orleans. In total we
invested more than $300 million of new capital in this community. Then we began
a series of regular daily payments to the state of approximately $274,000. We
also began making various payments to the city which average $55,000 per day. We
hired and employed nearly 3,000 permanent employees, the majority of whom are
residents of Orleans Parish.
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And, yet, meeting all of these commitments was just a transition to a raft of
new ones. We initiated a number of special programs in the city as called for
under our lease. For example, we have started to fund our Community Opportunity
for Prosperity and Empowerment grant program, and we have re-activated the small
business incubator, Newcorp. In addition, we have started to make certain annual
payments to the Audubon Institute and the Orleans Parish school board that
exceed $2.5 million. So the commitments required of our company continue on, to
the benefit of the local community.
At the same time, the economic impact of our business statewide is just
beginning to surface. JCC Holding Company is the 6th largest employer in New
Orleans, employing nearly 3,000 employees directly and indirectly creating
nearly 1,500 new jobs for the citizens of Louisiana according to a recently
released economic impact study by Dr. Loren Scott. In addition, this same report
estimated that we will generate almost $100 million in new household earnings
for the citizens of Louisiana. We have become an important part of the local and
state communities, responsible for improving lives, returning capital to the
city and state and participating in the economic growth of the hospitality and
tourism industry as it competes against well-funded, operationally unfettered
competitors on the Mississippi Coast, just an hour's drive away.
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However, all of this continues to be possible only if the business is
economically viable. As we look at our revenue growth, beginning with the
opening weekend through the April numbers released today by the state, which are
in the range of $19 million, we are pleased, yet concerned on a number of
levels. The casino is drawing large crowds through its doors. A recent survey of
customers by our marketing department indicated that 96% of respondents said
that they are pleased with our service and their experience at our facility.
More importantly, they also said that they intend to come back and play again.
As a result, we have built a business that presently has gross gaming revenues
of approximately $20 million a month, achieved by vigorous competition, which
includes, among other successes, recapturing patrons from the Gulf Coast market,
and growing the overall market. Lets explore this a little further.
By most measures, generating approximately $20 million per month in gross gaming
revenue is a home run. In fact, Harrah's New Orleans is today among the highest
grossing commercial casinos in the southeastern US, including our Mississippi
Coast competitors. In the first quarter of 2000, our casino generated $10
million more in gross gaming revenue than the much talked about Beau Rivage, a
facility with a large hotel and numerous food outlets. However, despite our
favorable comparison from a gaming revenue perspective, the fact remains that
given the structural expenses embedded in our business, the current level of
revenue is not sufficient to cover our costs.
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Therefore, we know we have to work to increase revenues through a variety of
measures. Our marketing efforts continue to ramp up and they are showing some
results. In March, the New Orleans market grew 58% over the prior year with our
casino capturing 46.8% of the market. Since our opening, the substantial rate of
growth on the Gulf Coast has slowed from 45% in October to 19% in March. Clearly
the Gulf Coast is being impacted by our business, but the clear operational
advantages those operators enjoy over their Louisiana counterparts still
translates into growth for their market.
We have further attempted to gain even more ground by recently introducing an
air charter program and we have 20 flights scheduled for this month. Our
expanded bus service program has seen an almost threefold increase in passengers
from March to April. We continue to see the positive impact of Harrah's
brand-wide Total Rewards program with a customer base of more than 19 million
patrons and marketing campaigns designed to drive trial visits and build
loyalty. In addition, our casino manager has hired a new vice-president of
operations, who is vigorously examining the mix of table games in order to make
us as competitive as we can be. We expect more from these initiatives over the
next few months.
Yet, while we have devoted significant energies to increasing revenues, we have
also been looking closely at how best to control and decrease our costs. We have
formed a task force to review operations, evaluating where we can be more
efficient without affecting the customer experience. We are making good progress
in this area and continue to evaluate our operations on a daily basis. Lest this
statement be taken out of context, let me be very clear. We as executives of
this business get paid by you the stockholders to review all forms of
expenditures, but our primary focus is on growing revenues. Therefore, we must
ensure that our customers enjoy an outstanding experience and we will NOT scrimp
on the service experience or on the long-term marketing of our casino!
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But clearly, the greatest cost we face is the significant required payment due
to the State of Louisiana each year. The State minimum guaranteed payment of
$100 million represents, at our current run rate, an effective gaming tax burden
of 44.5%, creating a very difficult, if not impossible, burden for the casino
and its operating budget. When you add in the payments to the City of New
Orleans, this tax rate is 53.40%. We know of no casino in the United States that
operates with a tax burden of this size. In fact, I challenge anyone to find any
business in the United States that operates with a 50% tax on its gross
revenues.
The burden is so great that, as many of you know, in March Harrah's stepped in
and committed to fund the daily minimum payments to the state and renewed its
guarantee of these payments through March 31, 2001. We are grateful to Harrah's
Entertainment for stepping up with this commitment, which has helped our cash
flow significantly. For the long-term, however, a state tax rate of 44.5% --
more than five times what our competitors are paying down the road on the Gulf
Coast - puts the casino's viability in question. And remember our Gulf Coast
competitors are not burdened with our operational restrictions. For example,
that first quarter Beau Rivage statistic does not reflect nearly $40 million in
non-gaming revenue it earned from its non-gaming sources such as its hotel and
restaurants. What are sources of revenue for the Gulf Coast casinos are huge
expenses to us. Simply put, when Beau Rivage offers a discounted, or free, room
in its own hotel its cost for generating the revenue from the patron is its
fixed costs for the room. When we offer a discounted, or free, room our cost is
the retail, or slightly reduced, cost of purchasing that room from another
hotel. The same is true for meals and catering. What a Gulf Coast casino
operator offers at its cost we are required to pay for at retail, or close
thereto.
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Nonetheless, to our shareholders and bondholders, we make the following promise.
We will continue to do everything in our power to increase our gross gaming
revenues and to reduce variable costs. At the same time, however, there appears
to be a growing understanding in the community and around the state that a
comprehensive plan to ensure the long-term success of the casino is needed not
only to help the casino, but also, to continue the casino's many benefits to the
local and state economies. Recent legislative proposals regarding dockside
riverboat gaming have fostered a larger dialogue on the tax situation for all
gaming, including Harrah's New Orleans. We have a duty and obligation to be
engaged in this dialogue because the issues of dockside gaming and taxes
directly impact our business. During this period of dialogue, with the support
of HET, JCC Holding will continue to live up to its commitments to the state. It
would not, however, be in the best interests of our shareholders to forego
seeking appropriate adjustments from various stakeholders, at the appropriate
time, which are necessary to make our operations economically feasible.
Operating a casino with a 44.5% tax burden and other operating and competitive
restraints make long-term success in today's highly competitive environment
close to impossible, especially given the structural expenses imbedded in the
business. No one can successfully operate a casino under these constraints and
at the same time continue to provide the statewide economic benefits generated
by Harrah's New Orleans, according to the Loren Scott study.
Therefore, despite the many challenges ahead, we remain committed to doing
everything within our power to make our company successful. With the support of
fair and reasonable people, that goal can be realized.
Thank you.
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