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 March 31, 1998
--------------
[ ] 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 333-14535
JEFFERSON CASINO CORPORATION
----------------------------
(Exact name of registrant as specified in its charter)
Louisiana 64-0878110
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
711 CASINO MAGIC DRIVE, BAY SAINT LOUIS, MS 39520
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
(228) 467-9257
--------------
(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 May 12, 1998
=======================================================================
<PAGE>
CASINO MAGIC OF LOUISIANA CORP.
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Condensed Statements of Operations For the three months ended March 31,1998
and 1997 1
Condensed Balance Sheets - March 31, 1998 and December 31, 1997 2
Condensed Statements of Cash Flows -
For the three months ended March 31, 1998 and 1997 3
Notes to Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5-6
PART II OTHER INFORMATION
Item 1. Legal Proceedings 7
Item 2. Changes in Securities 7
Item 3. Default Upon Senior Securities 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Item 5. Other Information 7
Item 6. Exhibits and Reports on Form 8-K 7
SIGNATURES 8
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
JEFFERSON CASINO CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED MARCH 31,
1998 1997
------------ ------------
<S> <C> <C>
REVENUES:
Casino . . . . . . . . . . . . . . . $27,055,761 $22,156,416
Other Operating revenues . . . . . . 872,222 1,050,068
------------ ------------
27,927,983 23,206,484
------------ ------------
COSTS AND EXPENSES:
Casino . . . . . . . . . . . . . . . 13,280,944 10,603,664
Other operating costs and expenses . 1,024,736 2,085,982
Advertising and marketing. . . . . . 3,332,013 7,094,254
General and administrative . . . . . 1,760,923 2,090,245
Property operation, maintenance and
energy cost. . . . . . . . . . . . 1,100,981 1,479,573
Rents, property taxes and insurance. 637,623 593,049
Depreciation and amortization. . . . 1,597,202 1,359,381
------------ ------------
22,734,422 25,306,148
INCOME FROM OPERATIONS. . . . . . . . . 5,193,561 (2,099,664)
OTHER (INCOME) EXPENSE:
Interest expense . . . . . . . . . . 4,433,838 3,841,385
Capitalized interest . . . . . . . . - (107,401)
Interest income. . . . . . . . . . . (182,691) (174,999)
Other. . . . . . . . . . . . . . . . 855,929 -
------------ ------------
5,107,076 3,558,985
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES:. . . 86,485 (5,658,649)
INCOME TAX BENEFIT. . . . . . . . . . . - (452,692)
------------ ------------
NET INCOME (LOSS) . . . . . . . . . . . $ 86,484 $(5,205,957)
============ ============
NET INCOME (LOSS) PER COMMON SHARE. . . $ 86.49 $ (5,205.96)
============ ============
WEIGHTED AVERAGE COMMON SHARES. . . . . 1,000 1,000
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
1
<TABLE>
<CAPTION>
JEFFERSON CASINO CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
MARCH 31, DECEMBER 31,
1998 1997 (*)
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . $ 7,580,978 $ 10,675,429
Restricted marketable securities. . . . . 10,430,049 10,629,405
Other current assets. . . . . . . . . . . 1,202,138 1,218,886
------------- -------------
Total current assets. . . . . . . . . 19,213,165 22,523,720
------------- -------------
TOTAL PROPERTY AND EQUIPMENT, NET. . . . . . 76,603,666 77,263,462
------------- -------------
OTHER LONG-TERM ASSETS:
Deferred gaming license cost, net . . . . 37,647,803 38,048,426
Debt issuance costs, net. . . . . . . . . 4,534,130 4,710,121
Other long-term assets. . . . . . . . . . 121,116 91,820
------------- -------------
Total other long-term assets. . . . . 42,303,049 42,850,367
------------- -------------
$138,119,880 $142,637,549
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes and contracts payable . . . . . . . $ 38,475 $ 76,950
Current maturities of long-term debt. . . 3,696,089 3,714,540
Accounts Payable. . . . . . . . . . . . . 3,455,143 3,665,071
Accrued Expenses. . . . . . . . . . . . . 6,322,814 5,614,298
Accrued Interest. . . . . . . . . . . . . 2,967,055 6,547,014
Accrued payroll and related benefits. . . 2,601,414 2,942,523
Accrued progressive gaming liabilities. . 269,623 388,221
Other current liabilities . . . . . . . . - 400,000
------------- -------------
Total current liabilities . . . . . . 19,350,613 23,348,617
------------- -------------
Long-term debt, net of current maturities 116,998,435 117,604,583
------------- -------------
Total noncurrent liabilities. . . . . 116,998,435 117,604,583
------------- -------------
COMMITMENTS AND CONTINGENCIES
Common stock, $0.01 par, 10,000 shares,
authorized issued and outstanding . . . 1 1
Additional paid-in capital. . . . . . . . 22,353,295 22,353,295
Retained deficit. . . . . . . . . . . . . (20,582,464) (20,668,947)
------------- -------------
Total shareholders' equity. . . . . . 1,770,832 1,684,349
------------- -------------
$138,119,880 $142,637,549
============= =============
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
*DERIVED FROM AUDITED FINANCIAL STATEMENTS
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
JEFFERSON CASINO CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31,
---------------------------------
1997 1996
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net Income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ 86,485 $ (5,205,957)
Adjustments for non-cash charges . . . . . . . . . . . . . . . . . . 1,773,193 1,683,104
Changes in assets and liabilities. . . . . . . . . . . . . . . . . . (4,006,226) (4,794,527)
------------ -------------
Net cash used in operating activities. . . . . . . . . . . . . . . . . (2,146,548) (8,317,380)
------------ -------------
Cash flows from investing activities:
Acquisitions of property and equipment . . . . . . . . . . . . . (454,890) (7,994,913)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,060 483,714
------------ -------------
Net cash provided by (used in) investing activities . . . . (284,830) (7,511,199)
------------ -------------
Cash flows from financing activities:
Proceeds from issuance of notes payable and
long-term debt. . . . . . . . . . . . . . . . . . . . . . . . - 4,796,004
Principal payments on notes payable and
long-term debt. . . . . . . . . . . . . . . . . . . . . . . . (663,073) (3,627,482)
Debt issue costs. . . . . . . . . . . . . . . . . . . . . . . . . - (117,665)
------------ -------------
Net cash provided by (used in) financing activities. . . . . (663,073) 1,050,857
------------ -------------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . (3,094,451) (14,777,722)
------------ -------------
Cash and cash equivalents including restricted cash,
beginning of period . . . . . . . . . . . . . . . . . . . . . . . . 10,675,429 20,858,780
------------ -------------
Cash and cash equivalents including restricted cash,
end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,580,978 $ 6,081,058
============ =============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of amount capitalized) . . . . . . . . . . . . . . . 7,837,807 7,282,601
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 . . . . . . . 81,894 -
Property and equipment financed with long-term debt
or capital constributions. . . . . . . . . . . . . . . . . . . . . . - 946,004
Construction in progress and preopening costs and
other included in accounts payable. . . . . . . . . . . . . . . . . - 2,696,646
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
3
<PAGE>
JEFFERSON CASINO CORPORATION
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 ("Jefferson
Corp."), 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." or the "Company"). The financial statements
reflect only the accounts of Louisiana Corp., since the Company conducts no
other operations or business activities. 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
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 financial statements be read in conjunction with
the consolidated financial statements and the notes thereto included in the
Company's Form 10-K for the year ended December 31, 1997.
Certain reclassifications have been made to 1997 amounts to conform with the
March 31, 1998 presentation.
2. Disclosure of contingent interest paid and accrued and management fees
accrual:
No contingent interest or management fees were paid in the first three months
of 1998 or 1997. Contingent interest and management fees were accrued in the
first three months of 1998 in the amount of approximately $347,000 and
$693,000, respectively. No contingent interest and management fees were
accrued during the three months ended March 31, 1997 as a result of negative
Adjusted Consolidated Cash Flow as defined in the indenture. No contingent
interest and management fees were payable during the three months ended March
31, 1998 because the Company's Adjusted Fixed Charge Coverage Ratio (as
defined) did not exceed 1.5 to 1.0.
4
<PAGE>
JEFFERSON CASINO CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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; (ii) construction
projects entail significant construction risks, including, but not limited to,
cost overruns, delay in receipt of governmental approvals, shortages in
materials or skilled labor, labor disputes, unforeseen environmental or
engineering problems, work stoppage, fire and other natural disasters,
construction scheduling problems and weather interferences, any of which, if
it occurred, could delay construction or result in a substantial increase in
costs to the Company. The Company's ability to meet its debt obligations may
be dependent upon the successful completion of a hotel at Casino Magic-Bossier
City and the other planned construction projects and the Company's future
operating performance, which is itself dependent on a number of factors, many
of which are outside of the Company's control, prevailing economic and
competitive conditions and financial business regulatory and other factors
affecting the Company's operations and business. In addition to the risks and
uncertainties discussed above, other factors that could cause actual results
to differ materially are detailed from time to time in the Company's reports
filed with the Securities and Exchange Commission.
Results of Operations:
For the three months ended March 31, 1998 compared to the three months ended
March 31, 1997:
Gaming revenues at Casino Magic-Bossier City increased to $27.1 million for
the first quarter of 1998 compared to $22.2 million in the first quarter of
1997; an increase of $4.9 million or 22.1%. The increase is a result of Casino
Magic's maturity in the Shreveport-Bossier City market, upgrading of product
mix in slot machines, and more effective marketing programs. In addition, the
increase at Casino Magic-Bossier City can be attributable to an overall
increase in the Bossier City/Shreveport, Louisiana gaming market of $18.5
million, to $150.7 million or 14%, between the comparable periods. Casino
Magic-Bossier City's market share for the first quarter of 1998 was 18.5%
compared to 17% in the first quarter of 1997.
Total costs and expenses during the first quarter of 1998 were $22.7 million
compared to $25.3 million in the first quarter of 1997; a cost savings of $2.6
million or 10.3%. The principal area of savings over the comparative quarter
was in Advertising & Marketing which reduced expenses by $3.8 million or
53.0%. Marketing strategy in the first quarter of 1997 provided very
substantial promotions intended to gain rapid market share, which were less
effective than anticipated. The first quarter of 1998 benefited from a more
conservative and effective marketing strategy implemented in the third quarter
of 1997. Casino expenses, which were largely volume driven, increased $2.7
million or 25.2% in the first quarter of 1998 versus the first quarter of
1997. Other administrative and operating expenses decreased $1.5 million or
19.5% over the comparative quarter as a result of a stringent cost cutting and
budgetary programs initiated in the second quarter of 1997.
Casino Magic-Bossier City earned an operating profit of $5.2 million for the
first quarter of 1998 versus a loss of $2.1 million in the first quarter of
1997; an improvement of $7.3 million.
Other (income) and expenses were $5.1 million for the three months ended March
31, 1998 and $3.6 million for the first quarter of 1997. The increase of $1.5
million is principally a result of $0.7 million of management fees and $0.3
million of contingent interest accrued in the first quarter 1998 compared with
no accrual in the first quarter of 1997 for such management fees and
contingent interest, although $0.1 million interest expense was capitalized in
the first quarter 1997 related to completion of the pavilion and other
amenities. No interest has been capitalized in the first quarter of 1998 with
respect to construction of the hotel.
There was no income tax benefit for the third 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 CorpThe
difference between the 0% rate and the statutory rate of 35% is due to a
reduction in the tax valuation allowance against the tax benefit recorded as a
result of the tax sharing agreement.
Casino Magic-Bossier City registered net earnings of $0.1 million in the first
quarter of 1998 compared with a net loss of $5.2 million during the first
quarter of 1997, or $86.49 earnings per share and a loss of $5,205.96 per
share, respectively.
5
<PAGE>
JEFFERSON CASINO CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS-(Continued)
Liquidity and Capital Resources:
At March 31, 1998, the Company had unrestricted cash of $7.6 million compared
to unrestricted cash of $10.7 million at December 31, 1997. The Company had
$10.4 million and $10.7 million in restricted marketable securities at March
31, 1998 and December 31, 1997, respectively, due to the sale of the Crescent
City Queen in the third quarter of 1997.
For the three months ended March 31, 1998, the Company used $2.1 million of
cash flow in operating activities, which was principally used to reduce
accrued interest and other current liabilities. The Company spent $.5 million
for acquisitions of property, equipment and other long-term assets during the
current quarter. The Company plans additional investments in 1998, but most
of such additional expenditures will be either financed from the $11.7 million
in proceeds from the sale of the Crescent City Queen, or subject to the
ability of the Company to generate positive cash flows from operations, or the
availability of other financing, of which there can be no assurance in any
case.
The Company is currently constructing a 188-room hotel and related amenities,
including restaurants, banquet space and swimming pool. The construction of
the hotel is expected to be funded primarily by the $11.7 million in proceeds
received from the sale of the Crescent City Queen, current cash on hand, the
future operating cash flow of Casino Magic-Bossier City, and lease financing
for furniture , fixtures, and equipment. No assurances can be given that the
proceeds from the sale of the Crescent City Queen, current cash on hand, the
cash flow from the operations of Casino Magic-Bossier City, and lease
financing if available, will be sufficient to complete the hotel and related
facilities. If the anticipated sources of funding are not sufficient to
complete the facilities, the timeline for completion may have to be extended,
other sources of funding would need to be found, or other strategies and
contingency plans would need to be employed by the Company.
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 1998 and beyond in order
to continue its planned development. The Company believes that cash and
restricted marketable securities at March 31, 1998, and cash flows from
operations will be sufficient to service its operating needs and debt service
through, at least, the next twelve months, including the completion of the
Casino Magic-Bossier City hotel, with additional financing for the furniture,
fixtures, and equipment of the hotel. There are no assurances that adequate
funding will be available for these planned investments at Casino
Magic-Bossier City.
6
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security-Holders
None.
Item 5. Other Information
On February 19, 1998, Casino Magic entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Hollywood Park, Inc. ("Hollywood"), a
Delaware corporation and HP Acquisition II, Inc. ("HP"), a Minnesota
corporation and the wholly owned subsidiary of Hollywood. Under the Merger
Agreement, Casino Magic has agreed, subject to approval of Casino Magic's
shareholders, to merge "(the "Merger") with HP. Upon such Merger, Casino
Magic shall be the surviving entity and will become the wholly owned
subsidiary of Hollywood. The separate existence of HP will then cease. Upon
the Merger, the shareholders of Casino Magic will be entitled to receive $2.27
for each share of Casino Magic's common stock held. All shareholders of Casino
Magic will be entitled to dissent from the Merger in accordance with the
provisions of Minnesota law.
The Merger is subject to the approval of Casino Magic's shareholders prior to
October 31, 1998, and to the approval of the Mississippi Gaming Commission,
the Nevada Gaming Commission, and the Louisiana Gaming Control Board. The
Merger is also contingent upon other matters, including a requirement that
neither Casino Magic nor Hollywood has materially breached any warranty,
representation or covenant contained in the Merger prior to the time of the
Merger. If the Merger Agreement is terminated for certain reasons, including a
voluntary termination by Casino Magic should the Board of Directors of Casino
Magic determine to accept a proposal of another party to merge with or acquire
Casino Magic on terms which it believes to be superior to those contained in
the Merger Agreement, Casino Magic will be required to pay Hollywood
$3,500,000.
The Proposed Merger was reported in, and the Merger Agreement was provided as
an exhibit to, Casino Magic's Form 8K filed on March 4, 1998.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Financial Data Schedule (filed electronically only)
(b) Reports on Form 8-K:
None.
7
<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: May 14, 1998 /S/ James E. Ernst
-------------------------
James E. Ernst, President
and Chief Executive Officer
Date: May 14, 1998 /S/ Jay S. Osman
--------------------------
Jay S. Osman, Chief Financial Officer and Treasurer (principal
financial and accounting officer)
8
<PAGE>
JEFFERSON CASINO CORPORATION
Quarterly Report on Form 10-Q for the Period Ended March 31, 1998
INDEX TO EXHIBITS
- -------------------
Exhibit
Number Page
- ------ ----
27. Financial Data Schedule (filed electronically only).
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
MARCH 31, 1998, CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF JEFFERSON
CASINO CORPORATION AND ITS SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 7,580,978
<SECURITIES> 10,430,049
<RECEIVABLES> 490,351
<ALLOWANCES> 0
<INVENTORY> 196,393
<CURRENT-ASSETS> 19,213,165
<PP&E> 82,794,029
<DEPRECIATION> 6,190,363
<TOTAL-ASSETS> 138,119,880
<CURRENT-LIABILITIES> 19,350,612
<BONDS> 116,998,435
0
0
<COMMON> 1
<OTHER-SE> 1,770,832
<TOTAL-LIABILITY-AND-EQUITY> 138,119,880
<SALES> 27,927,983
<TOTAL-REVENUES> 27,927,983
<CGS> 0
<TOTAL-COSTS> 22,734,422
<OTHER-EXPENSES> 855,929
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,251,147
<INCOME-PRETAX> 86,485
<INCOME-TAX> 0
<INCOME-CONTINUING> 86,485
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86,485
<EPS-PRIMARY> 86.49
<EPS-DILUTED> 86.49
</TABLE>
