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, 1997
-------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from - to -
--------------- ---------------
Commission file number 333-145352
Jefferson Casino Corporation
------------------------
(Exact name of registrant as specified in its charter)
Louisiana 72-1310739
----------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
711 CASINO MAGIC DRIVE, BAY ST. LOUIS, MS 39520
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
(601) 466-8099
------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of the issuer's classes of common
stock, as of the latest practicable date.
1,000 shares of common stock outstanding as of August 27, 1997
========================================================================
<PAGE>
JEFFERSON CASINO CORPORATION AMD SUBIDIARY
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Condensed Statements of Operations
For the six and three months ended June 30, 1997 2
Condensed Balance Sheets -
June 30, 1997 and December 31, 1996 3
Condensed Statements of Cash Flows -
For the six months ended June 30, 1997 and 1996 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-9
PART II OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Default Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
1
<PAGE>
PART I - FINANCIAL INFORMATION
JEFFERSON CASINO CORPORATION AND SUBSIDIARY.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Six months Three months
ended ended
June 30, 1997 June 30, 1997
------------- -------------
Revenues:
Casino $ 42,836,002 $ 20,679,586
Other operating revenues 1,889,710 839,642
------------ -----------
44,725,712 21,519,228
------------ ----------
Costs and expenses:
Casino 22,659,092 12,055,428
Other operating costs and expenses 3,237,399 1,151,417
Advertising and marketing 9,733,971 2,639,717
General and administrative 3,942,032 1,851,787
Property operation maintenance and energy cost 2,919,072 1,439,499
Rents, property taxes and insurance 1,218,019 624,970
Depreciation and amortization 2,786,672 1,427,291
------------ ----------
46,496,257 21,190,109
------------ ----------
Income (loss) from operations (1,770,545) 329,119
Other (income) expense:
Interest expense 7,977,915 4,136,530
Capitalized interest (107,401) -
Other (income) (143,268) 31,731
------------ ---------
7,727,246 4,168,261
------------ ----------
(Loss) before income taxes: (9,497,791) (3,839,142)
------------ -----------
Income tax benefit (452,692) -
------------ ----------
Net (loss) $ (9,045,099) $ (3,839,142)
============= ===========
Net income (loss) per common share $ (9,045.10) $(3,839.14)
============ ===========
Weighted average Common Shares - 1,000
See notes to consolidated financial statements.
2
<PAGE>
JEFFERSON CASINO CORPORATION AND SUBSIDIARY
CONDENSED BALANCE SHEET
ASSETS
(Unaudited)
JUNE 30, DECEMBER 31,
ASSETS 1997 1996 (*)
Current assets: ------------- ------------
Cash and cash equivalents $ 8,689,316 $ 3,959,126
Restricted cash - 16,899,654
Other current assets 2,787,715 964,997
------------- -----------
Total current assets 11,477,031 21,823,777
------------- -----------
Total property and equipment, net 77,195,769 73,821,826
------------ ----------
Other long-term assets:
Deferred gaming license cost, net 38,849,671 38,337,333
Property held for sale 10,137,657 10,101,182
Debt issuance costs, net 4,983,978 5,096,981
Other long-term assets 62,275 148,846
------------ ----------
Total other long-term assets 54,033,581 53,684,342
------------ ----------
$142,706,381 $149,329,945
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Notes and contracts payable $ 48,770 $ 4,486,710
Current maturities of long-term debt 3,149,908 1,878,605
Accounts payable 4,520,634 2,837,908
Accrued expenses 2,554,537 535,661
Accrued interest 5,721,279 5,581,119
Accrued payroll and related benefits 2,447,140 1,720,191
Accrued progressive gaming liabilities 494,093 113,432
Other current liabilities 1,223,117 92,123
------------ ----------
Total current liabilities 20,159,478 17,245,749
------------ ----------
Long-term debt, net of current maturities 119,357,999 119,850,193
------------ -----------
Commitments and contingencies
Common stock, no par value, 10,000 shares authorized,
1,000 shares issued and outstanding - -
Additional paid-in capital 22,278,401 22,278,401
Retained deficit (19,089,497) (10,044,398)
------------ -----------
Total shareholder's equity 3,188,904 12,234,003
------------ -----------
$142,706,381 $149,329,945
============ ============
See notes to consolidated financial statements.
* Derived from audited financial statements
3
<PAGE>
JEFFERSON CASINO CORPORATION AND SUBSIDIARY
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
June 30, June 30
1997 1996
Cash flows from operating activities:
Net (loss) $(9,045,099) $ -
Adjustments for non-cash charges 2,756,407 -
Changes in assets and liabilities 4,582,228 (107,150)
----------- ----------
.Net cash used in operating activities (1,706,464) (107,150)
----------- ----------
Cash flows from investing activities:
Acquisitions of property and equipment (5,944,738) (15,695,516)
Other, net 86,571 (368,582)
----------- ----------
Net cash used in investing activities (5,858,167) (16,064,098)
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of notes payable and
long-term debt 3,850,000 -
Principal payments on notes payable and
long-term debt (8,454,833) -
Capital contributions received - 15,550,000
Other, net - 621,248
----------- ----------
Net cash provided (used in) by
financing activities (4,604,833) 16,171,248
----------- ----------
Net decrease in cash and cash equivalents (12,169,464) -
Cash and cash equivalents including restricted cash,
beginning of period 20,858,780 -
---------- ----------
Cash and cash equivalents including restricted cash,
end of period $ 8,689,316 $ -
=========== =========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of amount capitalized) $ 7,515,161 $ -
Income taxes (net of refunds) -
Supplemental schedule of non-cash investing and financing activities:
Property and equipment and other asset acquisitions
included in accounts and construction payable and
accrued expenses $ 1,840,529 $ 977,564
Property and equipment financed with
long-term debt - 52,848,425
See notes to condensed consolidated financial statements.
4
<PAGE>
JEFFERSON CASINO CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of significant accounting policies, risks and uncertainties:
Organization and basis of presentation:
On May 13, 1996 ("Inception"), Jefferson Casino Corporation (the "Company"), a
Louisiana corporation and a wholly owned subsidiary of Casino Magic Corp.
("Casino Magic"), acquired all of the outstanding capital stock of Crescent
City Capital Development Corporation, a Louisiana corporation. Immediately
following the acquisition, the name of Crescent City Capital Development
Corporation ("Crescent City") was changed to Casino Magic of Louisiana, Corp.
("Louisiana Corp."). For all periods presented the Company has conducted all
of its business activities through its wholly owned subsidiary, Louisiana
Corp. Louisiana Corp. has developed a new dockside riverboat casino and
entertainment complex in Bossier City, Louisiana ("Casino Magic-Bossier
City"). Casino Magic-Bossier City opened on October 4, 1996, using a
temporary facility and opened the permanent facility on December 31, 1996.
Prior to October 4, 1996, the Company had no revenues or expenses other than
interest income and expense.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted.
The accompanying unaudited condensed financial statements contain all
adjustments which are, in the opinion of management, necessary for a fair
statement of the results of the interim periods. The results of operations
for the interim periods are not indicative of results of operations for an
entire year.
It is suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's Form S-4 filed with the Securities and Exchange
Commission on July 19, 1997.
Certain reclassifications have been made to 1996 amounts to conform with the
June 30, 1997 presentation.
2. Earning per share
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128 (FAS 128), "Earnings Per Share", which simplifies the computation of
earnings per share. FAS 128 is effective for financial statements issued for
periods ending after December 15, 1997 and requires restatement for all prior
period earnings per share data presented. Basic earnings per share and
diluted earnings per share calculated in accordance with FAS 128 would remain
unchanged both at the three months ended June 30, 1997 and the six months
ended June 30, 1997.
3. Disclosure of contingent interest paid and accrued and management fees
No contingent interest or management fees were paid in the first six months of
1997. Contingent interest and management fees were accrued in the first six
months of 1997, in the amount of $40,616 and $81,233, respectively. No
contingent interest and management fees are currently payable based upon
certain ratios which were not met during the six months ended June 30, 1997.
5
<PAGE>
JEFFERSON CASINO CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For all periods presented, the Company has conducted all of its business
activities through its wholly owned subsidiary, Casino Magic of Louisiana,
Corp. The discussions regarding proposed Company developments and operations
included in "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" and "NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS" contain forward looking statements that involve a number of risks
and uncertainties. These proposed developments and operations include: (i)
the Company's ability to fund planned developments and debt service
obligations over the next twelve months with currently available cash and
marketable securities and with cash flow from operations. The Company's
ability to meet its debt obligations is entirely dependent upon Casino
Magic-Bossier City's future operating performance, which is itself dependent
on a number of factors, many of which are outside of the Company's control,
including prevailing economic conditions and financial, business, regulatory
and other factors affecting the Company's operations and business.
Results of Operations:
For the three months ended June 30, 1997:
Casino Magic-Bossier City commenced temporary operations on October 4, 1996
and significant construction activities continued until its grand opening on
February 26, 1997. Gaming revenues at Casino Magic-Bossier City were $20.7
million for the second quarter of 1997. This represents approximately a 17%
share of total gaming revenues in the four casino Bossier City/Shreveport
Market. Although the Company continues to implement and improve cost
effective marketing and promotional programs to increase revenues, there can
be no assurance it will be successful in doing so. In addition to marketing
and promotional efforts the Company has installed new signage in August 1997
next to the Interstate 20 off-ramp that directly accesses the casino and to
the entrance of the casino. The Company anticipates that the new signage will
increase the visibility of Casino Magic-Bossier City.
Total costs and expenses during the second quarter of 1997 were $21.2 million.
Casino Magic-Bossier City earned an operating profit of $0.3 million for the
second quarter of 1997. The Company continues to operate at revenue levels
that are less than anticipated and management continues to implement cost
control measures to enable the Company to be cash flow positive. The Company
instituted a number of cost saving measures and management changes in May 1997
designed to improve profitability and cash flow. As part of the Company's
efforts to improve operations the former Chief Operating Officer and the
former Vice President of Marketing of Casino Magic Corp. have assumed the
operational and marketing responsibilities at Casino Magic-Bossier City.
Although the Company continues to implement cost reduction programs to reduce
operating costs, there can be no assurance it will be successful in doing so.
However, Casino Magic-Bossier City has achieved positive cash flow at the
operating income level earned during the second quarter of 1997.
Other (income) and expenses were $4.2 million for the three months ended June
30, 1997. The costs include $4.1 million in interest expense relating
primarily to the First Mortgage Notes issued to develop Casino Magic-Bossier
City. The remaining difference is due to interest income and capitalized
interest for the period.
6
<PAGE>
JEFFERSON CASINO CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
Results of operations (continued):
There was no income tax benefit for the second quarter of 1997. The Company
is included in a consolidated group subject to a tax-sharing agreement between
itself, all affiliated companies and its ultimate parent Casino Magic. The
difference between the 0% rate and the statutory rate of 35% is due to a tax
valuation allowance against the tax benefit recorded as a result of the tax
sharing agreement.
Casino Magic-Bossier City incurred a net loss of $3.8 million during the
second quarter of 1997, or a loss of $3,839 per share. This is the result of
lower than anticipated revenues.
For the six months ended June 30, 1997:
Gaming revenues at Casino Magic-Bossier City were $44.7 million for the second
six months of 1997. This represents approximately a 17% share of total gaming
revenues in the four casino Bossier City/Shreveport Market. During the first
six months of 1997, the Company attempted to increase Casino Magic-Bossier
City's market share through significant marketing, advertising and promotional
efforts. However, this attempt to strengthen Casino Magic-Bossier City's
market share was not as successful as anticipated. Although the Company
continues to implement and improve cost effective marketing and promotional
programs to increase revenues, including significant new outdoor signage,
there can be no assurance it will be successful in doing so.
Total costs and expenses during the first six months of 1997 were $46.5
million. Casino Magic-Bossier City incurred an operating loss of $1.8 million
for the first six months of 1997. The Company incurred $7.1 million in total
marketing and promotional expenses during the first quarter of 1997, including
approximately $4.0 million in promotional give-away programs which were
expected to generate a level of incremental gaming revenues that were not
achieved. Additionally, in the first quarter of 1997, Casino Magic-Bossier
City was incurring operating expenses at a level consistent with operating a
property at significantly higher revenue levels. Beginning in May 1997 the
Company has implemented changes to reduce overall operating costs, and
specifically marketing and promotional costs. Although the Company continues
to implement cost reduction programs to reduce operating costs, there can be
no assurance it will be successful in doing so. However, Casino Magic-Bossier
City has achieved positive cash flow at the operating income level earned
during the second quarter of 1997.
Other (income) and expenses were $7.7 million for the six months ended June
30, 1997. Expenses included $8.0 million in interest expense relating
primarily to the First Mortgage Notes related to the development of Casino
Magic-Bossier City. The remaining difference is due to interest income and
capitalized interest for the period.
Income tax benefit for the first quarter of 1997 was $0.5 million reflecting a
5% rate. The Company is included in a consolidated group subject to a
tax-sharing agreement between itself, all affiliated companies and its
ultimate parent Casino Magic. The difference between the 5% rate and the
statutory rate of 35% is due to a tax valuation allowance against the tax
benefit recorded as a result of the tax sharing agreement.
7
<PAGE>
JEFFERSON CASINO CORPORATION AND SUBSIDIAR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
Results of operations (continued):
Casino Magic-Bossier City incurred a net loss of $9.0 million during the first
six months of 1997, or a loss of $9,045 per share. This is the result of
lower than anticipated revenues, exceptionally high advertising and
promotional costs that should not recur in future periods and operating costs
incurred in anticipation of significantly higher revenues, specifically in the
first quarter of 1997.
Liquidity and Capital Resources:
At June 30, 1997, the Company had unrestricted cash and marketable securities
of $8.7 million compared to unrestricted cash and marketable securities of
$4.0 million at December 31, 1996. In addition, at December 31, 1996, the
Company had $16.9 million in restricted cash relating to the Notes issued to
fund the construction of Casino Magic-Bossier City. The Company had no such
restricted cash at June 30, 1997 due to the completion of the construction of
the Casino Magic-Bossier City casino. For the six months ended June 30, 1997,
the Company expended $1.7 million of cash flow in operating activities and
refinanced approximately $3.9 million of long term equipment debt. The
Company spent $5.9 million for acquisitions of property, equipment and other
long-term assets. The Company plans additional investments in 1997, but most
of such additional expenditures will be subject to the ability of the Company
to generate positive cash flows from operations or the availability of
financing, of which there can be no assurance in either case.
The Company opened Casino Magic-Bossier City on October 4, 1996, using a
temporary boarding facility, and on December 31, 1996, opened the permanent
facility. The Company's plans for the development of Casino Magic-Bossier
City are divided into two phases. The first phase (which was completed on
December 31, 1996) includes a 30,000 square foot floating dockside casino
space, with 986 slots and 44 table games; a 37,000 square foot entertainment
and food and beverage pavilion, with 1,550 covered parking spaces and surface
parking spaces for 400 cars. The second phase plans include the construction
of a 60,000 square foot entertainment facility and a 400-room convention hotel
and related amenities, including restaurants, banquet space, a theater, a
swimming pool, a health club and a child-care facility.
The development and construction of the second phase improvements are largely
dependent upon receipt of proceeds from a future sale of the Crescent City
Queen (a gaming riverboat owned by Casino Magic-Bossier City) and future
operating cash flow of Casino Magic-Bossier City. No assurances can be given
that such funds will become available or that such hotel and related
facilities will ever be developed.
As of May 1997, Casino Magic-Bossier City had complied with all aspects of the
Cash Collateral and Disbursement Agreement (as defined in the indenture
concerning the $115,000,000 First Mortgage Notes used for the development of
Casino Magic-Bossier City) and all restricted cash has been released.
8
<PAGE>
JEFFERSON CASINO CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
Liquidity and Capital Resources (Continued):
Jefferson Corp and Louisiana Corp. have certain restrictions relative to
additional borrowings and cash flow under the terms of the Indenture
associated with the Louisiana First Mortgage Notes.
The Company will have a significant need for cash in 1997 and beyond in order
to continue the development of its gaming facility. The Company believes that
cash and marketable securities at June 30, 1997, and cash flows from
operations will be sufficient to service its operating and debt service
requirements, but are not sufficient at current levels to engage in any hotel
development activities without additional debt or equity financing.
9
<PAGE>
JEFFERSON CASINO CORPORATION AND SUBSIDIARY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
Casino Magic of Louisiana, Corp. commenced an offering to exchange its 13%
Series B First Mortgage Notes Due 2003 with Contingent Interest for all
outstanding 13% Series A First Mortgage Notes Due 2003 with Contingent
Interest. Both the Series A and Series B First Mortgage Notes have been
guaranteed by the Company. As of August 21, 1997, $104.7 million principal
amount of the Series A First Mortgage Notes had been tendered and accepted for
exchange and Casino Magic of Louisiana, Corp. had extended the exchange offer
through the close of business on August 28, 1997. The Series B First Mortgage
Notes are identical to the Series A First Mortgage Notes in all respect except
that the Series B First Mortgage Notes have been registered under the
Securities Act of 1933.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security-Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K:
None.
10
<PAGE>
SIGNATURES
The Issuer has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JEFFERSON CASINO CORPORATION
Date: August 27, 1997 /S/ James E. Ernst
-------------------------
James E. Ernst, President
and Chief Executive Officer
Date: August 27, 1997 /S/ Jay S. Osman
--------------------------
Jay S. Osman, Chief Financial Officer and Treasurer (principal
financial and accounting officer)
11
<PAGE>
SIGNATURES
The Issuer has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JEFFERSON CASINO CORPORATION
Date: August 27, 1997
James E. Ernst, President
and Chief Executive Officer
Date: August 27, 1997
Jay S. Osman, Chief Financial
Officer and Treasurer (principal
financial and accounting officer)
12
JEFFERSON CASINO CORPORATION
Quarterly Report on Form 10-Q for the Period Ended September 30, 1996
INDEX TO EXHIBITS
Exhibit
Number Page
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 8,689,316
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 199,300
<CURRENT-ASSETS> 11,477,031
<PP&E> 79,878,101
<DEPRECIATION> 2,682,332
<TOTAL-ASSETS> 142,706,381
<CURRENT-LIABILITIES> 20,159,478
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,188,905
<TOTAL-LIABILITY-AND-EQUITY> 142,706,381
<SALES> 44,725,712
<TOTAL-REVENUES> 44,725,712
<CGS> 0
<TOTAL-COSTS> 46,496,257
<OTHER-EXPENSES> (143,268)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,870,514,
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,770,545)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,045,099)
<EPS-PRIMARY> (9,045.10)
<EPS-DILUTED> (9,045.10)
</TABLE>
