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, 2000.
or
[ ] 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: 333-88829
Peninsula Gaming Company, LLC/Peninsula Gaming Corp.
(Exact name of registrant as specified in its charter)
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Iowa 42-1483875
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
3rd Street Ice Harbor, PO Box 1750, Dubuque, Iowa 52001-1750
(Address of principal executive offices) (Zip Code)
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(319) 583-7005
(Registrant's telephone number including area code)
--------------------------------------------------------------------------------
(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 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 such
filing requirements for the last 90 days. Yes __X__ No _____
All of the common equity interests of Peninsula Gaming Company, LLC (The
"Company") are held by Peninsula Gaming Partners, LLC, and all of the common
stock of Peninsula Gaming Corp. is held by Peninsula Gaming Company, LLC.
<PAGE>
PENINSULA GAMING COMPANY, LLC
INDEX TO FORM 10-Q
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Peninsula Gaming Company, LLC:
Balance Sheets (Unaudited) as of December 31, 1999 and June 30, 2000.......................3
Statement of Operations (Unaudited) for the Three and Six Months Ended June 30, 2000.......4
Statement of Changes in Members' Equity (Unaudited) for the Six Months Ended
June 30, 2000...........................................................................5
Statement of Cash Flows (Unaudited) for the Six Months Ended June 30, 2000.................6
Notes to Financial Statements (Unaudited)..................................................7
Predecessor Company:
Greater Dubuque Riverboat Entertainment Company, L.C. and
Harbor Community Investment, L.C.:
Combined Statement of Operations (Unaudited) for the Three and Six Months Ended
June 30, 1999...........................................................................8
Combined Statement of Changes in Members' Equity (Unaudited) for the Six Months
Ended June 30, 1999.....................................................................9
Combined Statement of Cash Flows (Unaudited) for the Six Months Ended
June 30, 1999..........................................................................10
Notes to Combined Financial Statements (Unaudited)........................................11
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................................................12
Item 3 - Quantitative and Qualitative Disclosures About Market Risk..........................15
PART II - OTHER INFORMATION.....................................................................16
Signatures......................................................................................19
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PENINSULA GAMING COMPANY, LLC
BALANCE SHEET (UNAUDITED)
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June 30, December 31,
2000 1999
------------ ------------
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,435,732 $ 7,918,742
Accounts receivable, less allowance for doubtful accounts 139,215 115,616
Inventory 104,054 99,813
Prepaid expenses 570,263 630,754
------------ ------------
Total current assets 8,249,264 8,764,925
------------ ------------
PROPERTY AND EQUIPMENT, NET 19,059,880 18,950,194
------------ ------------
OTHER ASSETS:
Deposits 27,473 27,472
Bond issuance costs, net of amortization 4,351,496 4,520,894
Goodwill and other intangible assets, net of amortization 55,204,410 55,911,404
------------ ------------
Total other assets 59,583,379 60,459,770
------------ ------------
TOTAL $ 86,892,523 $ 88,174,889
============ ============
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 848,816 $ 476,868
Accrued payroll and payroll taxes 838,194 1,131,771
Other accrued expenses 1,432,313 2,609,630
Current maturities of capital lease obligations 132,371 151,331
------------ ------------
Total current liabilities 3,251,694 4,369,600
------------ ------------
LONG-TERM LIABILITIES:
Senior secured notes, net of discount 70,244,832 70,203,780
Capital lease obligations, net of current maturities 343,410 324,450
------------ ------------
Total long-term liabilities 70,588,242 70,528,230
------------ ------------
Total liabilities 73,839,936 74,897,830
------------ ------------
COMMITMENTS AND CONTINGENCIES
PREFERRED MEMBER INTEREST, REDEEMABLE 7,000,000 7,000,000
MEMBERS' EQUITY:
Common member interest 9,000,000 9,000,000
Accumulated deficit (2,947,413) (2,722,941)
------------ ------------
Total members' equity 6,052,587 6,277,059
------------ ------------
TOTAL $ 86,892,523 $ 88,174,889
============ ============
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See notes to financial statements (unaudited).
-3-
<PAGE>
PENINSULA GAMING COMPANY, LLC
STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Six Months
Ended June 30, Ended June 30,
2000 2000
------------ -------------
REVENUES:
Casino $ 11,419,618 $ 22,267,775
Food and beverage 667,188 1,298,296
Other 48,258 84,526
Less promotional allowances (264,048) (469,143)
------------ ------------
Total net revenues 11,871,016 23,181,454
------------ ------------
EXPENSES:
Casino 5,283,902 9,999,188
Food and beverage 666,651 1,310,040
Boat operations 544,655 1,060,868
Other 10,816 18,699
Selling, general and administrative 1,685,909 3,454,811
Depreciation and amortization 872,501 1,734,507
------------ ------------
Total expenses 9,064,434 17,578,113
------------ ------------
INCOME FROM OPERATIONS 2,806,582 5,603,341
------------ ------------
OTHER INCOME (EXPENSE):
Interest income 118,596 198,820
Interest expense 2,372,853) (4,754,408)
Loss on sale of assets (6,387)
------------ ------------
Total other expense (2,254,257) (4,561,975)
------------ ------------
NET INCOME BEFORE PREFERRED MEMBER DISTRIBUTIONS 552,325 1,041,366
LESS PREFERRED MEMBER DISTRIBUTIONS (157,500) (315,000)
------------ ------------
NET INCOME TO COMMON INTERESTS $ 394,825 $ 726,366
============ ============
See notes to financial statements (unaudited).
-4-
<PAGE>
PENINSULA GAMING COMPANY, LLC
STATEMENT OF CHANGES IN MEMBERS' EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
Common Total
Member Accumulated Members'
Interest Deficit Equity
------------ ------------ ----------
BALANCE, DECEMBER 31, 1999 $ 9,000,000 $(2,722,941) $6,277,059
Net Income to Common Interest 726,366 726,366
Member Distributions (950,838) (950,838)
----------- ----------- ----------
BALANCE, JUNE 30, 2000 $ 9,000,000 $(2,947,413) $6,052,587
=========== =========== ==========
See notes to financial statements (unaudited).
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<PAGE>
PENINSULA GAMING COMPANY, LLC
STATEMENT OF CASH FLOWS (UNAUDITED)
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Six Months
Ended June 30,
2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 726,366
Adjustments to reconcile net income to net cash flows provided by operating
activities:
Depreciation and amortization 1,734,507
Provision for doubtful accounts 59,546
Amortization of bond issuance costs and bond discount 391,457
Loss on sale of assets 6,387
Changes in operating assets and liabilities:
Receivables (83,145)
Inventory (4,241)
Prepaid expenses and other assets 60,491
Accounts payable 371,948
Accrued expenses (1,470,894)
----------
Net cash provided by operating activities 1,792,422
CASH FLOWS FROM INVESTING ACTIVITIES - Purchase of property and equipment (1,143,587)
CASH FLOWS FROM FINANCING ACTIVITIES:
Member distributions (950,838)
Bond issuance costs (181,007)
----------
Net cash used by financing activities (1,131,845)
NET DECREASE IN CASH (483,010)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,918,742
----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,435,732
==========
</TABLE>
See notes to financial statements (unaudited).
-6-
<PAGE>
PENINSULA GAMING COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Summary of Significant Accounting Policies
Basis of Presentation
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments, consisting only of normal recurring entries unless
otherwise disclosed, necessary to present fairly the financial information of
Peninsula Gaming Company, LLC (the "Company") for the interim periods presented
and have been prepared in accordance with generally accepted accounting
principles. The interim results reflected in the financial statements are not
necessarily indicative of results for the full year or other periods.
The financial statements contained herein should be read in conjunction with the
audited financial statements and accompanying notes to the financial statements
included in the Company's Annual Report on Form 10-K for the period ending
December 31, 1999. Accordingly, footnote disclosure which would substantially
duplicate the disclosure in the audited financial statements has been omitted in
the accompanying unaudited financial statements.
2. Commitments and Contingencies
The Company is involved in various legal actions arising in the normal course of
business. In the opinion of management, such matters will not have a material
effect upon the financial position of the Company.
3. Unaudited Pro Forma Summarized Operating Results
The following unaudited supplemental pro forma information of the Company,
Greater Dubuque Riverboat Entertainment Company, L.C. ("GDREC") and Harbor
Community Investment, L.C. ("HCI") for the six months ended June 30, 1999 has
been adjusted as if the Company had been formed and the acquisition of the
Diamond Jo casino from GDREC and HCI (the "Acquisition") had been completed as
of January 1, 1999 to give effect to (i) the elimination of amortization expense
related to intangible assets not purchased, (ii) amortization of goodwill
related to the Acquisition over a forty year period, (iii) elimination of
non-recurring expenses related to the Acquisition, (iv) increase in executive
compensation expense incurred annually due to the Acquisition, (v) elimination
of interest expense of $0.3 million for the six months ended respectively
related to debt of the predecessor companies not assumed by the Company as part
of the Acquisition, (vi) interest expense of $4.8 million for the six months
ended on the notes calculated at an interest rate of 12 1/4 % interest rate per
annum and (vii) amortization of the original $4.8 million of bond issuance costs
and original issue discount of $0.8 million over a period of seven years. Such
following pro forma supplemental financial information does not purport to be
indicative of the actual results of operations of the Company, GDREC and HCI
that would have resulted had the Company been formed and had the Acquisition
been completed as of January 1, 1999 or of the future results of operations of
the Company, GDREC and HCI.
Pro Forma
Six Months Ended
June 30, 1999
(in thousands)
Net Revenues $22,903
Income from Operations 5,473
Net Income to Common Interests 693
-7-
<PAGE>
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Six Months
Ended June 30, Ended June 30,
1999 1999
--------------------- -----------------
REVENUES:
Casino $ 11,428,095 $ 21,992,638
Food and beverage 692,150 1,300,187
Other 58,987 113,642
Less promotional allowances (261,747) (503,676)
------------ -------------
Total net revenues 11,917,485 22,902,791
------------ -------------
EXPENSES:
Casino 4,779,205 9,281,364
Food and beverage 702,342 1,306,327
Boat operations 496,848 963,999
Other 11,900 18,972
Selling, general and administrative 2,017,636 3,690,813
Depreciation and amortization 536,775 1,065,896
Sale of business expense 143,471 326,620
Ownership litigation 208,990 298,537
------------ -------------
Total expenses 8,897,167 16,952,528
------------ -------------
INCOME FROM OPERATIONS 3,020,318 5,950,263
------------ -------------
OTHER INCOME (EXPENSE):
Interest income 31,681 72,423
Interest expense (147,903) (319,202)
Loss on sale of assets (22,338) (97,750)
------------ -------------
Total other expense (138,560) (344,529)
------------ -------------
NET INCOME $ 2,881,758 $ 5,605,734
============ =============
See notes to combined financial statements (unaudited).
-8-
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GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
COMBINED STATEMENT OF CHANGES IN MEMBERS' EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
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Unrealized Gain Total
Member Member on Investments Retained Members'
Units Interest Available for Sale Earnings Equity
----------- ------------ ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998 112 $ 4,100,000 $ 1,508 $ 12,595,500 $ 16,697,008
Net income 5,605,734 5,605,734
Member distributions (5,258,468) (5,258,468)
Change in unrealized gain on
securities available for sale (1,508) (1,508)
---------- ----------- ----------- ------------ ------------
BALANCE, JUNE 30, 1999 112 $ 4,100,000 $ -- $ 12,942,766 $ 17,042,766
========== =========== =========== ============ ============
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See notes to combined financial statements (unaudited).
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<PAGE>
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
COMBINED STATEMENT OF CASH FLOWS (UNAUDITED)
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Six Months
Ended June 30,
1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,605,734
Adjustments to reconcile net income to net cash flows provided by operating
activities:
Depreciation and amortization 1,065,896
Loss on sale of assets 97,750
Changes in operating assets and liabilities:
Receivables (22,577)
Inventory (3,085)
Prepaid expenses and other assets 43,338
Accounts payable (213,204)
Accrued expenses 391,240
----------
Net cash provided by operating activities 6,965,092
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 35,455
Purchase of property and equipment (358,011)
Proceeds from sale of available for sale securities 512,000
----------
Net cash provided by investing activities 189,444
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on long-term liabilities (2,598,691)
Member distributions (5,258,468)
----------
Net cash used by financing activities (7,857,159)
----------
NET DECREASE IN CASH (702,623)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,820,717
----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,118,094
==========
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See notes to combined financial statements (unaudited).
-10-
<PAGE>
GREATER DUBUQUE RIVERBOAT ENTERTAINMENT COMPANY, L.C.
AND HARBOR COMMUNITY INVESTMENT, L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
1. Summary of Significant Accounting Policies
Basis of Presentation
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments, consisting only of normal recurring entries unless
otherwise disclosed, necessary to present fairly the financial information of
Greater Dubuque Riverboat Entertainment Company, L.C. and Harbor Community
Investment, L.C. (the "Companies") for the interim periods presented and have
been prepared in accordance with generally accepted accounting principles. The
interim results reflected in the financial statements are not necessarily
indicative of results for the full year or other periods.
The financial statements contained herein should be read in conjunction with the
audited financial statements and accompanying notes to the financial statements
included in Peninsula Gaming Company, LLC's Annual Report on Form 10-K for the
period ending December 31, 1999. Accordingly, footnote disclosure which would
substantially duplicate the disclosure in the audited financial statements has
been omitted in the accompanying unaudited financial statements.
Certain amounts for fiscal 1999 have been reclassified to conform with fiscal
2000 financial statement presentation.
2. Commitments and Contingencies
The Companies are involved in various legal actions arising in the normal course
of business. In the opinion of management, such matters will not have a material
effect upon the financial position of the Companies.
-11-
<PAGE>
Item 2. MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the combined financial statements and the related notes thereto appearing
elsewhere in this report. Some statements contained in the Management's
Discussion and Analysis of Financial Condition and Results of Operations
constitute "forward-looking statements" within the meaning of the Litigation
Reform Act, which involve risks and uncertainties, including the risks and
uncertainties discussed below, as well as other risks set forth in our Annual
Report on Form 10-K for the year ended December 31, 1999. Should these risks or
uncertainties materialize, or should underlying assumptions prove incorrect, our
future performance and actual results of operations may differ materially from
those expected or intended.
The results of operations for the three and six months ended June 30,
2000 discussed below are our results of operations. The results of operations
for the three and six months ended June 30, 1999 discussed below are the
combined results of operations of the predecessor companies. As a result of a
substantially different capital structure of our company in comparison to that
of the predecessor companies, and of the applications of purchase accounting in
connection with the acquisition, our results of operations may not be entirely
comparable to the results of operations of the predecessor companies.
Selected Financial Data
Statement of Operations Data
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Three Months Ended June 30 Six Months Ended June 30
1999 (1) 2000 1999 (1) 2000
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<S> <C> <C> <C> <C>
Revenues:
Casino $ 11,428,095 $ 11,419,618 $ 21,992,638 $ 22,267,775
Food and beverage 692,150 667,188 1,300,187 1,298,296
Other 58,987 48,258 113,642 84,526
Less: Promotional
Allowances (261,747) (264,048) (503,676) (469,143)
------------ ------------ ------------ ------------
Net revenues 11,917,485 11,871,016 22,902,791 23,181,454
------------ ------------ ------------ ------------
Expenses:
Casino 4,779,205 5,283,902 9,281,364 9,999,188
Food and beverage 702,342 666,651 1,306,327 1,310,040
Boat operations 496,848 544,655 963,999 1,060,868
Other 11,900 10,816 18,972 18,699
Selling, general and
administrative 2,017,636 1,685,909 3,690,813 3,454,811
Selling and litigation
expenses (2) 352,461 0 625,157 0
Depreciation and
amortization 536,775 872,501 1,065,896 1,734,507
------------ ------------ ------------ ------------
Total expenses 8,897,167 9,064,434 16,952,528 17,578,113
------------ ------------ ------------ ------------
Income From Operations 3,020,318 2,806,582 5,950,263 5,603,341
</TABLE>
(1) Certain expenses for 1999 have been reclassified on a comparative basis
to the three and six month periods ended June 30, 2000.
(2) Consists of non-recurring charges related to sale of business and
certain litigation costs and expenses incurred by our predecessor
companies.
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<PAGE>
Three months ended June 30, 2000 Compared to Three months ended June 30, 1999
For the three months ended June 30, 2000 and 1999, Dubuque was a
two-casino market consisting of the Diamond Jo and the Greyhound Park. Casino
gaming win in the Dubuque market increased 1.6% to $20.9 million for the three
months ended June 30, 2000 from $20.6 million for the three months ended June
30, 1999. We believe this increase was primarily due to increased player's club
promotions and a change in slot mix at the Greyhound track. Admissions to the
casinos in the Dubuque market decreased 1.6% to 518,874 for the three months
ended June 30, 2000 from 527,382 for the three months ended June 30, 1999. This
can be primarily attributed to our decrease in bus group and banquet passengers
of 6,178 for the three months ended June 30, 2000. For the three months ended
June 30, 2000 our share of the Dubuque market casino gaming win decreased to
54.5% from 55.5% and casino admissions decreased to 52.6% from 53.3%, in each
case, for the three months ended June 30, 1999. We believe our market share
decrease was primarily due to change in slot mix at the Greyhound Park and a
decrease in group bus passengers.
Net Revenues remained constant at $11.9 million for the three months
ended June 30, 2000 and 1999. Our admissions for the three months ended June 30,
2000 decreased 3.1% to 272,753 from 281,354 for the three months ended June 30,
1999 primarily due to a decrease in bus and banquet passengers of 6,178 for the
three months ended June 30, 2000 compared to the three months ended June 30,
1999. The decrease in bus passengers is due to our change in marketing strategy.
For the three months ended June 30, 2000 our win per admission increased 3.1% to
$41.87 from $40.62 for the three months ended June 30, 1999. Our win per gaming
position increased 4.0% to $137.59 for the three months ended June 30, 2000 from
$132.33 for the three months ended June 30, 1999. Our casino revenues remained
relatively constant at $11.4 million for the three months ended June 30, 2000
and 1999. Casino revenues were derived 81.3% from slot machines and 18.7% from
table games for the three months ended June 30, 2000 compared to 80.4% from slot
machines and 19.6% from table games for the three months ended June 30, 1999.
Food and beverage revenues, other revenues and promotional allowances remained
substantially unchanged at $0.5 million for three months ended June 30, 2000 and
1999.
Casino operating expenses increased 10.6% to $5.3 million for the three
months ended June 30, 2000 from $4.8 million for the three months ended June 30,
1999. This increase was due primarily to an increase in player points expense of
approximately $278,000 due to a triple point promotion and an increase in casino
and players club promotions of approximately $259,000 over last year. Food and
beverage expenses were substantially unchanged at $0.7 million for the three
months ended June 30, 2000 and 1999. Selling, general and administrative
expenses decreased 16.4% to $1.7 million for the three months ended June 30,
2000 from $2.0 million for the three months ended June 30, 1999 primarily due to
a decrease in professional fees of $135,000, a decrease in management bonuses of
$93,000, a decrease in labor expense of $74,000 due to a remodeling project, a
decrease in group subsidies of $71,000, and a decrease in employee insurance
claims of $26,000. This was partially offset by an increase in head tax paid to
the Dubuque Racing Association of $136,000. This tax commenced on April 1, 2000
per our agreement with the Dubuque Racing Association and continues thereafter.
We are required to pay the sum of $.50 for each patron admitted on the boat,
which, based on annual attendance, would approximate $500,000 annually.
Non-recurring expenses for the three months ended June 30, 1999 included $0.4
million related to sale of business and certain litigation costs incurred by the
predecessor companies.
Depreciation and amortization expenses increased 62.5% to $0.9 million
for the three months ended June 30, 2000 from $0.5 million for the three months
ended June 30, 1999. This increase was primarily due to the amortization of
goodwill of $0.4 million that was recorded in connection with the July 1999
acquisition. Net interest expense was $2.3 million for the three months ended
June 30, 2000 and $0.1 million for the three months ended June 30, 1999. The
increase in interest expense is due to the issuance of $71 million senior
secured notes at 12.25% interest rate related to the acquisition in July of
1999.
-13-
<PAGE>
Six months ended June 30, 2000 Compared to Six months ended June 30, 1999
For the six months ended June 30, 2000 and 1999, Dubuque was a
two-casino market consisting of the Diamond Jo and the Greyhound Park. Casino
gaming win in the Dubuque market increased 4.6% to $40.1 million for the six
months ended June 30, 2000 from $38.3 million for the six months ended June 30,
1999. We believe this increase was primarily due to better weather in January
2000 than January 1999, an increase in our table games revenue, an increase in
our player's club promotions and a change in slot mix at the Greyhound track.
Admissions to the casinos in the Dubuque market increased 1.4% to 968,791 for
the six months ended June 30, 2000 from 955,738 for the six months ended June
30, 1999. For the six months ended June 30, 2000 our share of the Dubuque market
casino gaming win decreased to 55.5% from 57.4% and casino admissions decreased
to 53.7% from 55.2%, in each case, for the six months ended June 30, 1999. We
believe our market share decrease was primarily due to a change in slot mix at
the Greyhound Park and the decrease in group bus passengers at our facility.
Net Revenues increased 1.2% to $23.2 million for the six months ended
June 30, 2000 from $22.9 million for the six months ended June 30, 1999. This
was primarily due to increased casino revenues which arose from an increase in
table games revenue of $153,000 due to hold percentage increasing from 19.4% for
the six months ended June 30, 1999 to 22.0% for the six months ended June 30,
2000 and an increase in slot revenue of $132,000 due to greater emphasis on
promotions geared towards our players club members. Our admissions for the six
months ended June 30, 2000 decreased 1.3% to 520,659 from 527,289 for the six
months ended June 30, 1999. This was primarily due to the decrease in bus group
and banquet passengers of 10,662 for the six months ended June 30, 2000 compared
to the six months ended June 30, 1999. The decrease in bus passengers is due to
our change in marketing strategy. For the six months ended June 30, 2000 our win
per admission increased 2.5% to $42.77 from $41.71 for the six months ended June
30, 1999. Consistent with an increase in net revenues, win per gaming position
increased 2.7% to $131.49 for the six months ended June 30, 2000 from $128.04
for the six months ended June 30, 1999. Our casino revenues increased 1.3% to
$22.3 million for the six months ended June 30, 2000 from $22.0 million for the
six months ended June 30, 1999. Casino revenues were derived 80.5% from slot
machines and 19.5% from table games for the six months ended June 30, 2000
compared to 80.9% from slot machines and 19.1% from table games for the six
months ended June 30, 1999. Food and beverage revenues, other revenues and
promotional allowances remained substantially unchanged at $0.9 million for the
six months ended June 30, 2000 and 1999.
Casino operating expenses increased 7.7% to $10.0 million for the six
months ended June 30, 2000 from $9.3 million for the six months ended June 30,
1999. This increase was due primarily to an increase in player points expense of
approximately $425,000 due to a triple point promotion and an increase in casino
and players club promotions of approximately $307,000. Food and beverage
expenses were substantially unchanged at $1.3 million for the six months ended
June 30, 2000 and 1999. Selling, general and administrative expenses decreased
6.4% to $3.5 million for the six months ended June 30, 2000 from $3.7 million
for the six months ended June 30, 1999 primarily due to a decrease in group
subsidies of $105,000, a decrease management bonuses of $102,000 and a decrease
in professional fees of $57,000. This decrease was offset by the increase in
head tax paid to the Dubuque Racing Association of $136,000. This tax commenced
on April 1, 2000 per our agreement with the Dubuque Racing Association and
continues thereafter. We are required to pay the sum of $.50 for each patron
admitted on the boat, which, based on annual attendance, would approximate
$500,000 annually. Non-recurring expenses for the six months ended June 30, 1999
included $0.6 million related to sale of business and certain litigation costs
incurred by the predecessor companies.
-14-
<PAGE>
Depreciation and amortization expenses increased 62.7% to $1.7 million
for the six months ended June 30, 2000 from $1.1 million for the six months
ended June 30, 1999. This increase was primarily due to the amortization of
goodwill of $0.7 million that was recorded in connection with the July 1999
acquisition. Net interest expense was $4.6 million for the six months ended June
30, 2000 and $0.2 million for the six months ended June 30, 1999. The increase
in interest expense is due to the issuance of $71 million senior secured notes
at 12.25% interest rate related to the acquisition in July of 1999.
Liquidity and Capital Resources
Our cash balance decreased $0.5 million during the six month period
ended June 30, 2000 to $7,435,731 from $7,918,742 at December 31, 1999 (after
giving effect to the bond interest payment of $4.3 million made on June 30,
2000).
Cash flows from operating activities of $1.8 million for the six month
period consisted of net income of $0.7 million increased by non cash charges of
$2.2 million, principally depreciation and amortization, and a decrease in
working capital of $1.1 million. The change in working capital is primarily
comprised of a decrease in accrued expenses of $1,022,000 relating to the bond
issuance and the acquisition.
Cash flows used for investing activities for the six month period ended
June 30, 2000 were $1.1 million. The primary use of these funds were for capital
expenditures which were used to commence the remodeling of our entire casino.
This is being done as an effort to improve the gaming experience for our
patrons.
Cash flows from financing activities for the period ended June 30, 2000
of $1.1 million reflects distributions to members of $0.9 million and bond
issuance costs of $0.2 million.
We believe that cash on hand and cash generated from operations will be
sufficient to satisfy our working capital requirements, maintenance, and capital
expenditures and other cash obligations. However, we cannot assure you that this
will be the case. If cash on hand and cash generated from operations are
insufficient to meet these obligations, we may have to refinance our debt or
sell some or all of our assets to meet our obligations.
Under the terms of the indenture governing the notes, we have the
ability to obtain a new credit facility to borrow up to $10.0 million if we
determine that the availability of this facility would benefit our operations.
As a condition to the granting of our gaming license, we were required
by the gaming commission to spend up to a maximum of $11.5 million toward the
development and construction of a hotel contiguous to the Diamond Jo portside
facility. At the April 20, 2000 gaming commission meeting, the contingency was
lifted and our license was renewed with no future requirement toward
development.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks which are inherent in
the Company's financial instruments which arise from transactions entered into
in the normal course of business. Although the Company currently utilizes no
derivative financial instruments which expose the Company to significant market
risk, the Company is exposed to fair value risk due to changes in interest rates
with respect to its long-term fixed interest rate debt borrowing.
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<PAGE>
The following describes information relating to the Company's
instrument which is subject to interest rate risk at June 30, 2000 (dollars in
millions):
Description Contract Terms Interest Rate Cost Fair Value
----------- -------------- ------------- ------ ----------
Senior Secured Notes Due July 1, 2006 12 1/4% fixed $ 71.0 $ 65.50*
* Represents fair value as of August 14, 2000 based on information provided by
Jefferies, & Co., Inc.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.
We are not a party to, and none of our property is the subject of, any
pending legal proceedings other than litigation arising in the normal course of
business. We believe this litigation is either covered by insurance or not
material. We did not assume liability for any litigation involving the Diamond
Jo or any of the related real property we acquired from our predecessor
companies.
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
Not applicable
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.
--------
3.1A. Certificate of Formation of Peninsula Gaming Company, LLC
(incorporated by reference from Exhibit 3.1A to the
Company's Form 10-K for the year ended December 31, 1999,
file number 333-88829)
3.1B. Amendment to Certificate of Formation of Peninsula Gaming
Company, LLC (incorporated by reference from Exhibit 3.1B to
the Company's Form 10-K for the year ended December 31,
1999, file number 333-88829)
3.2. Operating Agreement of Peninsula Gaming Company, LLC
(incorporated by reference from Exhibit 3.2 to the Company's
Form 10-K for the year ended December 31, 1999, file number
333-88829)
3.3. Articles of Incorporation of Peninsula Gaming Corp
(incorporated by reference from Exhibit 3.3 to the Company's
Form 10-K for the year ended December 31, 1999, file number
333-88829)
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<PAGE>
3.4. Bylaws of Peninsula Gaming Corp (incorporated by reference
from Exhibit 3.4 to the Company's Form 10-K for the year
ended December 31, 1999, file number 333-88829)
27.1. Financial Data Schedule
(b) Reports on Form 8-K
-------------------
None
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Dubuque, State of Iowa on August 14, 2000.
PENINSULA GAMING COMPANY
By: /s/ M. Brent Stevens
--------------------
M. Brent Stevens
Chief Executive Officer
By: /s/ George T. Papanier
----------------------
George T. Papanier
Chief Operating Officer
By: /s/ Natalie A. Schramm
-----------------------
Natalie A. Schramm
Chief Financial Officer
PENINSULA GAMING CORP.
By: /s/ M. Brent Stevens
----------------------
M. Brent Stevens
President and Treasurer
(principal financial officer)
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