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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED APRIL 30, 1996
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 0-20538
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CASINO AMERICA, INC.
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(Exact name of registrant as specified in its charter)
Delaware 41-1659606
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
711 Washington Loop, Biloxi, Mississippi 39530
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (601) 436-7000
Securities Registered Pursuant To Section 12(b) Of The Act: None
Securities Registered Pursuant To Section 12(g) Of The Act:
Common Stock, $.01 Par Value Per Share
(Title of Class)
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 past 90 days. Yes x No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates/1/ of the
Company is $150,892,962, based on the last reported sale price of $8.25 per
share on June 28, 1996 on the Nasdaq National Market, multiplied by 18,290,056
shares of Common Stock outstanding and held by non-affiliates of the Company on
such date.
As of June 28, 1996, the Company had a total of 24,758,282 shares of Common
Stock outstanding.
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/1/Affiliates for the purpose of this item refer to the directors, executive
officers and/or persons owning 10% or more of the Company's common stock, both
of record and beneficially; however, this determination does not constitute an
admission of affiliate status for any of these individual stockholders.
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DOCUMENT INCORPORATED BY REFERENCE:
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Document Part of Form 10-K into which Incorporated
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Casino America's Definitive Proxy Statement Part III
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INDEX
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PAGE
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PART I........................................................... 1
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ITEM 1. BUSINESS............................................ 1
ITEM 2. PROPERTIES.......................................... 26
ITEM 3. LEGAL PROCEEDINGS................................... 28
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 29
PART II....................................................... 30
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS........................ 30
ITEM 6. SELECTED FINANCIAL DATA............................. 31
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................ 32
ITEM 8. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.......... 39
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE................ 71
PART III...................................................... 71
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.. 71
ITEM 11. EXECUTIVE COMPENSATION.............................. 71
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.............................. 71
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...... 71
PART IV....................................................... 71
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K................................ 71
SIGNATURES.................................................... 73
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PART I
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ITEM 1. BUSINESS.
GENERAL
Casino America is a leading developer, owner and operator of dockside and
riverboat casinos and related facilities in the United States. All of the
Company's properties are based on a tropical island theme and operate under the
"Isle of Capri Casino" name. The Company currently owns and operates dockside
casinos in Biloxi and Vicksburg, Mississippi (the "Isle-Biloxi" and the "Isle-
Vicksburg") and, through a 50% interest in Louisiana Riverboat Gaming
Partnership ("LRGP"), owns and operates a dockside riverboat casino in Bossier
City, Louisiana (the "Isle-Bossier City"). Through St. Charles Gaming Company,
Inc. ("SCGC"), 50% of the capital stock of which is owned by LRGP and the other
50% is owned by the Company, the Company owns and operates a riverboat casino
and land-based facility, and through Grand Palais Riverboat, Inc. ("GPRI"), 100%
of the capital stock of which is owned by the Company, the Company owns and
operates the Grand Palais riverboat casino (the "Grand Palais"), both such
riverboat casinos being located on a site one mile from Lake Charles, Louisiana
(the "Isle-Lake Charles"). See "--Recent Acquisitions--Grand Palais Acquisition"
and "--Recent Acquisitions--SCGC Acquisition." The Company has agreed to acquire
the remaining 50% interest in LRGP and LRG Hotels, L.L.C. ("LRG Hotels" and such
purchase, the "LRGP Acquisition"). See "--Recent Acquisitions--LRGP Acquisition"
and "--Recent Developments--Senior Secured Notes Offering and Retirement of
Mortgage Notes." Upon consummation of the LRGP Acquisition, the Company would
own 100% of both the Isle-Bossier City and the Isle-Lake Charles.
Shreveport/Bossier City is currently the closest casino gaming market to the
Dallas/Ft. Worth, Texas metropolitan area and Lake Charles is currently the
closest casino gaming market to the Houston, Texas metropolitan area. The
Company also owns and operates Pompano Park, a harness racing track in Pompano
Beach, Florida, midway between Miami and West Palm Beach off of Interstate 95.
The Company was incorporated in Delaware in February 1990 under the name of
Kana Corporation as a vehicle to raise capital for the acquisition of or
investment in a business enterprise. In April 1992 the name of the Company was
changed to Anubis II Corporation ("Anubis"). In June 1992, Riverboat Corporation
of Mississippi (the "Biloxi Gaming Subsidiary"), Riverboat Services, Inc. (the
"Consulting Subsidiary"), and Casino Career Training Center, Inc. (the "Training
Subsidiary") became wholly owned subsidiaries of Anubis via stock-for-stock
exchanges (collectively, the "Reorganization"). Prior to the Reorganization, the
Biloxi Gaming Subsidiary and the Consulting Subsidiary were owned by Bernard
Goldstein and members of his family and the Training Subsidiary was owned by
Messrs. James E. Ernst and Allan B. Solomon. In connection with the
Reorganization, Anubis changed its name to Casino America, Inc., and Messrs.
Goldstein, Ernst and Solomon took over management of the Company.
At the time of the Reorganization, the Biloxi Gaming Subsidiary was
developing the Isle-Biloxi; the Consulting Subsidiary provided riverboat and
dockside casino consulting services to a related party; and the Training
Subsidiary provided training for casino employees in connection with gaming
activities.
The Biloxi Gaming Subsidiary currently owns and operates the Isle-Biloxi.
Riverboat Corporation of Mississippi-Vicksburg, a wholly owned subsidiary of the
Company, currently owns and operates the
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Isle-Vicksburg. The Consulting Subsidiary provides riverboat and dockside casino
consulting and management services. The Company now trains its casino employees
on an ongoing basis and the Training Subsidiary is inactive.
STRATEGY
The Company's business strategy, which has been implemented in its existing
operations, emphasizes the operation and development of value-oriented gaming
facilities and complementary amenities with a tropical island theme using the
"Isle of Capri Casino" brand name. Management believes that the consistent use
of the Isle of Capri Casino name and associated theme has created a readily
identifiable brand image connoting excitement, quality and value, complemented
by the Company's emphasis on customer service and non-gaming entertainment
amenities. The Company seeks to identify slot-oriented customers and active
casino patrons through its use of database marketing and generate repeat
visitors to the Company's gaming facilities. Management believes that its
strategy fosters customer loyalty, enhances the Company's ability to compete
effectively in its existing markets, and facilitates the efficient and cost-
effective development of gaming facilities in new markets. The Company also
believes that good community relations are fundamental to its success and, as a
result, takes an active role in community activities in each jurisdiction in
which it has gaming facilities.
The Company has historically identified and entered new gaming markets
which it believes provide attractive long-term opportunities, sometimes entering
those markets with the assistance of a joint venture partner. The Company is now
consolidating its ownership interests in these facilities and anticipates that
most of its near-term development activities will focus on expanding its
existing facilities. The Company anticipates adding complementary amenities,
such as hotels and additional restaurants, in order to compete effectively in
its markets and provide customers with a complete entertainment and resort
experience designed to increase a customer's length of stay at and use of the
Company's facilities. The Company also expects to continue reviewing gaming
opportunities in new markets on the basis of demographic, regulatory,
competitive and other factors. The Company's strategy when entering new markets
has been to develop its projects in phases when appropriate. By reducing the
amount of its initial capital commitment, the Company is able to utilize cash
flow from operations to help fund subsequent phases and increase the funds
available for its other projects. Phased development also allows the Company to
better assess market size, customer preferences and competitive factors and
adapt the nature and scope of new facilities accordingly. The Company's strategy
of making investments through joint ventures, followed by consolidation of its
ownership interests (such as through the LRGP Acquisition and the SCGC
Acquisition (as defined)) may be implemented in connection with the development
of its existing properties and the entry into new gaming markets if the Company
believes that such a strategy is appropriate, and if it is able to identify
suitable joint venture partners which provide supplemental expertise and
resources.
MARKETING
The Company attracts customers to its casinos by designing and implementing
marketing strategies and promotions that emphasize their tropical island theme
and promote repeat visitation and customer loyalty. For example, the Company
offers membership in its Island Gold Players Club to its customers and "V.I.P."
services to higher wagering and repeat gaming patrons. The Island Gold Players
Club is a promotional activity in which members accumulate points that can be
exchanged for benefits such as
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casino cash tokens, prizes and complimentary services. In addition, Island Gold
Players Club members receive tournament priority and monthly newsletters and a
daily "free pull" on a slot machine offering awards up to $100,000. It is
anticipated that (to the extent permitted by law) Island Gold Players Club
membership cards will be usable on an interchangeable basis at the Company's
gaming facilities. Further, the Company uses the Island Gold Players Club to
track patron slot play and develop a customer database, which the Company
utilizes in its marketing programs. As of April 30, 1996, the Company had
enrolled approximately 1.6 million members in the Island Gold Players Club.
To encourage group sales, the Company utilizes bus programs, corporate and
hotel sales programs and golf package programs with hotels and golf courses
located near its casinos. The Company's Biloxi hotel is included in the Holiday
Inn worldwide reservations system which the Company believes provides the hotel
with significant marketing benefits.
The Company has increased its reliance on database marketing in order to
best identify the segments of the population that are most likely to be
attracted to the Company's facilities, and intends to emphasize food and
entertainment amenities to enhance its customer-friendly atmosphere with a view
toward attracting repeat customers. Database marketing helps the Company to
identify those customers and potential customers that are most likely to be
attracted by the Company's emphasis on slot machine play. The Company also
places significant emphasis on attracting local residents and seeks to maintain
a strong local identity in each market in which it operates by staging and
supporting special events. The Company further enhances its facilities' appeal
to local patrons by offering liberal rules on its table games and by encouraging
enrollment in the Island Gold Players Club.
The Company uses television, radio, outdoor and print media to promote its
services and to achieve greater name recognition. To further enhance the Isle of
Capri Casino tropical theme, the Company engaged Geoffrey Holder, a well-known
actor and television personality popularly known as the "Uncola(R)/2/ Man," as a
celebrity spokesperson for certain of the Company's television and print media
advertisements.
CURRENT OPERATIONS
The Isle-Bossier City
The Isle-Bossier City, which commenced operations on May 20, 1994, is among
the highest revenue-producing dockside and riverboat casino facilities in the
United States. The Isle-Bossier City, one of only three licensed gaming
facilities currently operating in the Shreveport/Bossier City market, the
closest gaming market to the Dallas/Ft. Worth, Texas metropolitan area, is
located on a 26-acre site along the Red River approximately 1/4 mile from the
Isle of Capri Boulevard exit off Interstate 20. The Isle-Bossier City consists
of a dockside riverboat casino, a land-based entertainment and support pavilion
and parking on-site for 1,200 cars, of which 940 are accommodated in an attached
parking garage. Additional overflow parking is available nearby on weekends. The
Isle-Bossier City features the Company's festive tropical island theme
throughout the facility. The features of the land-based pavilion include
towering palm trees, exotic rock formations and a waterfall. The riverboat also
features a tropical decor, including
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/2/The Uncola(R) trademark is owned by Dr. Pepper/Seven-Up Companies, Inc.
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signage and lighting fixtures. To enhance the tropical island experience,
patrons are served by friendly, attentive support staff dressed in tropical
attire.
The riverboat offers 30,000 square feet of gaming space on three levels
with 942 slot machines and 64 table games, including a poker room and video
poker bars. The 72,200 square-foot land-based pavilion offers a variety of non-
gaming amenities, including three restaurants, a gift shop, an entertainment
lounge area, a giant nine-screen television wall featuring live races from
Louisiana Downs and other sporting events, an Island Gold Players Club Booth and
administrative offices. Restaurant offerings include Calypso's, a 348-seat
buffet style restaurant; Coral Reef, a 102-seat casual dining restaurant; and
Tradewinds, a 24-seat delicatessen and fast food outlet. Live entertainment is
featured in the Caribbean Cove, a 136-seat entertainment lounge.
The Isle-Bossier City is readily accessible from an exit off Interstate 20
onto Isle of Capri Boulevard, a four-lane road leading directly to the entrance
of the facility. Approaching the Isle-Bossier City, customers enter a multi-lane
porte cochere providing convenient access to free valet parking, an attached
parking garage or surface parking lots.
The Shreveport/Bossier City market is among the leading riverboat gaming
markets in the United States. The Company believes that the Isle-Bossier City
attracts customers from three primary groups: (a) local residents; (b) residents
of northeastern Texas; and (c) residents of the Dallas/Ft. Worth metropolitan
area. Approximately 550,000 and 1.8 million people live within 50 and 100 miles,
respectively, of the Isle-Bossier City. The Company believes that approximately
65% of the Isle-Bossier City's business is derived from Texas; approximately 30%
of the Isle-Bossier City's business comes from northeastern Texas, including
Tyler, Longview and Texarkana, and 26% of the Isle-Bossier City's business comes
from the Dallas/Ft. Worth metropolitan area with a population of approximately
4.5 million located 180 miles west on Interstate 20.
The Isle-Bossier City is one of three comparably sized facilities currently
operating in the Shreveport/Bossier City market, all of which opened between
April and July 1994. Overall, there is currently an aggregate of approximately
90,000 square feet of casino floor space in use in the Shreveport/Bossier City
market.
The Company owns and operates the 234-room Isle of Capri Hotel, located
approximately 2.5 miles east of the Isle-Bossier City on Interstate 20, from
which the Company offers shuttle service to the Isle-Bossier City. The Company
recently completed a $1.1 million renovation of the Isle of Capri Hotel that
management believes has significantly improved the hotel's appearance and
competitive position in the market.
The Shreveport/Bossier City hotel market consists of approximately 5,350
hotel/motel rooms. Hotel occupancy during 1993, prior to the introduction of
gaming, averaged approximately 43.1%. During 1994, occupancy rates rose to
approximately 70.2% with the heaviest demand during the peak summer months.
During 1995, occupancy increased to 72.5%. Several of the area's hotels have
incorporated cosmetic upgrades to their facilities due to the increasing demand
for quality, overnight accommodations. The Company believes that the Isle of
Capri Hotel is well positioned to take advantage of increasing demand in the
Shreveport/Bossier City hotel market.
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The Isle-Lake Charles
The Isle-Lake Charles, which commenced operations on July 29, 1995, is one
of two riverboat gaming facilities (each comprised of two licensed riverboats)
in the Lake Charles, Louisiana market and one of three gaming facilities in
southwest Louisiana (a land-based Indian-owned casino is located in Kinder,
Louisiana 35 miles northeast of Lake Charles). On July 12, 1996, the Isle-Lake
Charles began operating its second riverboat casino, the Grand Palais, which is
the fourth licensed riverboat casino in the Lake Charles market. Lake Charles is
currently the closest casino gaming market to Houston, Texas, a metropolitan
area with a population of approximately 4.2 million located approximately 145
miles west on Interstate 10. The Isle-Lake Charles is located on a 16-acre site
along the Calcasieu River adjacent to Interstate 10 in Calcasieu Parish, one
mile from the City of Lake Charles. The Isle-Lake Charles commenced operations
with an approximately 27,500 square-foot riverboat casino which presently
contains approximately 24,700 square feet of gaming space with 891 slot machines
and 43 table games on three levels. A fourth level of that riverboat contains
approximately 9,000 square feet of entertainment space. The Grand Palais
consists of an approximately 41,700 square foot riverboat casino containing
approximately 24,200 square feet of gaming space with 880 slot machines and 48
table games on two levels. The Grand Palais offers a large bar and foyer when
customers enter the boat and a spacious third level where the Company may
provide a variety of non-gaming and entertainment amenities and, to the extent
permissible, expansion of its gaming square footage on the Grand Palais to
30,000 square feet.
The Isle-Lake Charles opened a new $30 million, 105,000 square foot land-
based pavilion in May 1996. The new pavilion is based on a tropical theme,
including rock formations, waterfalls, water arches with jets of water shooting
up to 30 feet in the air, ponds with porcelain sea life and flower beds
landscaped in the shape of playing card suits. The expansion of the Isle-Lake
Charles' land-based non-gaming amenities is intended to attract Texas patrons
previously drawn to similar amenities at the land-based casino in Kinder. The
pavilion provides panoramic views of the lake and the city of Lake Charles with
separate entrances to each of the riverboats. In addition, the lighted rooftop
rotunda is topped by the Isle of Capri parrot, reaching approximately 145 feet
above the ground and visible from the interstate.
The new pavilion offers a wide variety of non-gaming amenities, including
Calypso's, a 489-seat buffet style restaurant; Tradewinds grill and restaurant
and Caribbean Cove, which share 220 seats in the pavilion and feature a free,
live Caribbean-themed revue entitled "Island Fever"; the Tropics bar; the Banana
Cabana gift shop and the Island Gold Players Club booth. The pavilion is
scheduled to include a 14,000 square foot activity center, built for live boxing
to be broadcast on television and other special events, concerts, banquet and
meeting facilities and administrative offices. The Isle-Lake Charles provides
free valet parking or free self-parking for more than 2,000 vehicles, including
approximately 1,400 spaces in an attached parking garage from which patrons can
access the casino by elevator.
The Company believes that the Isle-Lake Charles attracts customers from
three primary groups: (a) residents of southeast Texas, particularly from the
Houston metropolitan area, located 145 miles to the west on Interstate 10, and
the population centers of Beaumont, Galveston, Orange and Port Arthur, Texas;
(b) local area residents; and (c) tourists. Approximately 480,000 and 1.6
million people live within 50 and 100 miles, respectively, of the Isle-Lake
Charles. Like the Isle-Bossier City, a significant portion of the business of
the Isle-Lake Charles is (and will continue to be) derived from residents of
Texas, where casino gaming has not been legalized. See "Regulatory Matters."
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The Isle-Lake Charles was the second gaming facility to enter the Lake
Charles, Louisiana market and the third gaming facility to enter the southwest
Louisiana market. Two riverboats, containing an aggregate of approximately
55,000 square feet of casino floor space, are currently operated by Players
International from a single location in the City of Lake Charles approximately
four miles from the site of the Isle-Lake Charles. In addition, a land-based,
Indian-owned casino opened in January 1995 in Kinder, Louisiana, approximately
35 miles northeast of the site of the Isle-Lake Charles. As a new entrant into
the Lake Charles market, the Isle-Lake Charles has faced the additional
challenge of competing for established customers of its competitors. Management
believes that the Isle-Lake Charles has several competitive advantages in the
Lake Charles gaming market. The Isle-Lake Charles, with its location at the
western end of the Lake Charles gaming market, is the first gaming facility
reached by patrons arriving from the west, including Texas. The Company is
attempting to capitalize on its superior location by advertising with three
back-to-back billboards immediately preceding the exit to the Isle-Lake Charles.
Moreover, management believes that its convenient, free on-site parking
facilities further enhance the advantages of the Isle-Lake Charles' location.
The Company believes that adding the Grand Palais to the site of the Isle-Lake
Charles will enable the Company to more effectively compete with the existing
two-boat operation in Lake Charles and the land-based casino in Kinder. In
addition, although land-based casinos are generally preferred by gaming
customers to riverboat casinos (because, among other things, the requirement of
cruising), the two-boat operation at the Isle-Lake Charles will provide at least
one boat at dockside at all times. Moreover, the land-based casino requires a
total of approximately 70 miles more per round trip for patrons from Texas.
The Isle-Biloxi
The Isle-Biloxi, which commenced operations on August 1, 1992, was the
first gaming facility to open in Mississippi. The Isle-Biloxi currently consists
of a 50,000 square-foot dockside casino containing 32,500 square feet of gaming
space with 1,149 slot machines and 42 table games on two levels, an adjacent
land-based pavilion and on-site parking for more than 1,100 vehicles. During
fiscal 1996, the Company completed an approximately $50 million Biloxi
Improvement Program, which began in October 1994 and culminated with a grand
opening of its new facilities in August 1995. The Company implemented the Biloxi
Improvement Program in order to enhance its long-term competitive position in
the Mississippi Gulf Coast market. The major components of the Biloxi
Improvement Program included the addition of a 367-room, 15-story hotel tower
and a 32,000 square-foot land-based pavilion providing a variety of non-gaming
amenities and enhancements to the casino. The improvements focused on the
transformation of the Isle-Biloxi into a more customer-friendly resort
destination that the Company believes has resulted in a significant increase in
the number of its casino visitors. The enhancement of the island-themed decor in
the casino and the themed amenities are designed to further increase
identification of the Isle of Capri Casino brand name and distinguish the Isle-
Biloxi from its competitors, most of which offer a distinctive theme in the
Mississippi Gulf Coast market.
As an integral part of the Biloxi Improvement Program, the 367-room Isle of
Capri Casino Crowne Plaza hotel facility and the casino are directly accessible
through the pavilion. The Company believes that the hotel fills an important
niche in the Mississippi Gulf Coast market where a lack of quality hotel rooms
has been cited as an impediment to the further development of that market as a
resort destination. The hotel is included in the Crowne Plaza and Holiday Inn
Worldwide reservation system. Recently named Crowne Plaza Resort of the Year for
1995, the hotel offers spacious rooms, most with balconies overlooking Point
Cadet Marina, and provides amenities including meeting rooms, full room service,
a
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heated pool and access to exercise facilities (which include a jacuzzi, dry
sauna and massage facility). The Company reserves a portion of the rooms for
selected casino patrons at all times. The Company directly markets organizations
to attract convention and group traffic, which the Company believes accounted
for approximately 5% of the Isle-Biloxi's casino revenue. The hotel offers more
than 15,000 square feet of meeting space for such events. The Company is party
to a management agreement with a subsidiary of Ocean Hospitalities, Inc. ("Ocean
Hospitalities"), an experienced developer and manager of hotels in the United
States, which is responsible for managing the front desk and housekeeping.
The other major component of the Biloxi Improvement Program is a 32,000
square-foot, 50-foot high atrium-style pavilion offering a wide variety of non-
gaming amenities. The pavilion features three dining facilities: Calypso's, a
280-seat buffet style restaurant; Coral Reef, a 146-seat fine dining facility;
and Tradewinds Grill, where visitors can enjoy a "Cheeseburger in Paradise," and
Caribbean Cove, which together share 88 seats. Calypso's and Coral Reef provide
panoramic views of the Gulf of Mexico and Deer Island. The Caribbean Cove is an
open-air lounge area located at the center of the pavilion, surrounded by a
dramatic fountain and an entertainment stage, which offers seating for an
additional 116 people. The pavilion's entertainment area features a Las Vegas-
style revue, performances of which are scheduled several times daily. Musical
performances by other groups and artists are also scheduled throughout the day.
The pavilion also features Banana Cabana, a gift shop, and a lounge area
designed to provide a comfortable waiting area for bus patrons.
The renovated casino provides customers with the impression of a
traditional land-based casino, rather than that of a floating pavilion casino.
Guests approach the facility on a four-lane ramp divided by a series of
cascading waterfalls featuring four sculptured dolphins and enter a four-lane
porte cochere, which serves as the main valet parking and bus drop off area. The
casino is also directly accessible through an entrance which is situated
adjacent to the primary self-parking areas. The refurbished casino is highly
visible and directly accessible from the pavilion and features 40-foot high
ceilings and a dramatic waterfall to enhance the visual experience. Further
enhancing the tropical ambiance, music from the pavilion's entertainment area,
which features steel drums and Caribbean-oriented melodies, is audible
throughout the casino.
The Company believes that the Isle-Biloxi attracts customers from four
primary groups: (a) local area residents; (b) Alabama, Florida and Georgia
residents, primarily from along the Gulf Coast; (c) tourists; and (d) residents
of southeastern Louisiana, including those from the New Orleans and Baton Rouge
metropolitan areas. There are approximately 660,000 and 2.9 million people
residing within 50 and 100 miles, respectively, of Biloxi and the Company
believes that this population base has provided a significant portion of the
Isle-Biloxi's business. Biloxi is the easternmost city on the Mississippi Gulf
Coast where casino gaming is presently permitted. As a result, Biloxi is
currently the closest gaming market to Mobile, Alabama, located approximately 45
miles east of Biloxi on Interstate 10. The Company believes that approximately
23% of the Isle-Biloxi's customer base is derived from Alabama, particularly the
Mobile metropolitan area. The Mississippi Gulf Coast, with its 26 miles of white
sand beaches and approximately 18 golf courses open to the public, is a major
regional tourist destination which attracted approximately six million visitors
in 1995. The tourist season is heaviest from May to September, which the Company
believes contributes to some seasonality in the Isle-Biloxi's business.
At present, 12 gaming facilities (including the Isle-Biloxi), comprising
approximately 560,000 square feet of casino floor space, are located along the
Mississippi Gulf Coast. Eight facilities are located in Biloxi and collectively
account for approximately 360,000 square feet of casino floor space. Two other
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facilities are located in Gulfport, approximately 10 miles west of Biloxi, and
two are located in Bay St. Louis and Lakeshore, each approximately 30 miles west
of Biloxi. Management believes that the location of the Isle-Biloxi affords it
several significant competitive advantages. The Isle-Biloxi is located on Casino
Row, a cluster of four casinos at the eastern end of U.S. Highway 90, affording
visitors the convenience and visual impact of four gaming facilities located
within walking distance. With its location at the eastern end of Biloxi, Casino
Row is the first area reached by visitors from Alabama, Florida and Georgia. The
Biloxi Improvement Program was designed to position the Isle-Biloxi to more
fully realize the benefits of its superior location through the revitalization
of the casino enhanced by its physical, visual and operational integration with
the new hotel, pavilion and related amenities. The Company believes that, as a
result, the Isle-Biloxi offers customers a resort destination, instead of a day-
trip site, where customers can extend their use of the casino.
A number of the Company's competitors in the Mississippi Gulf Coast have
either purchased existing hotels in the area or have announced plans to build
additional hotels. The Mississippi Gulf Coast hotel market consists of
approximately 9,175 hotel/motel rooms, with the greatest concentration located
in Biloxi and Gulfport. More than 5,000 additional hotel/motel rooms have been
proposed or are currently under construction in the Mississippi Gulf Coast
market. Hotel occupancy is generally highest in the peak tourist months between
May and September. In 1995, hotel occupancy rates in the market averaged
approximately 69%. Occupancy at the Isle-Biloxi since the opening of its hotel
in August 1995 has averaged approximately 87%.
The Isle-Vicksburg
The Isle-Vicksburg, which commenced operations on August 9, 1993, was the
first of four gaming facilities to open in the Vicksburg, Mississippi area. The
Isle-Vicksburg is located on a site consisting of approximately 18 acres along
the Mississippi River, approximately one mile north of Interstate 20. The Isle-
Vicksburg originally opened with a riverboat and barge casino containing 21,000
square feet of gaming space and a temporary land-based facility. The temporary
facilities were subsequently replaced in May 1994 with a 32,000 square-foot
dockside casino, a 12,000 square-foot land-based pavilion containing a variety
of non-gaming amenities and administrative offices. The Isle-Vicksburg provides
on-site parking for 900 vehicles, and a 13-acre site located approximately 1/2
mile from the casino provides off-site parking for 200 vehicles and a 67-space
recreational vehicle park.
The land-based pavilion features Calypso's, a 206-seat buffet-style
restaurant (as well as 36 seats on a patio overlooking the Mississippi River),
and the Tradewinds delicatessen, which includes seating for 60 people and live
entertainment. Other amenities include a reception area, an Island Gold Club
Players booth and a Banana Cabana gift shop. Patrons are provided easy access to
the second level of the floating pavilion casino from the land-based pavilion by
means of either escalator or a wide stairway which offers patrons panoramic
views of the Mississippi River through a wall of windows. The floating pavilion
casino provides a spacious and exciting gaming environment on two levels
containing 773 slot machines and 47 table games, including a poker room with
seven tables. The casino features a tropical island theme and decor including
exotic rock formations, cascading waterfalls, towering palm trees and tropical-
themed slot machine signage and lighting fixtures, the Caribbean's Sports Bar
and the High Roller Hut (with $5, $25 and $100 slots).
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The 67-space recreational vehicle park features amenities including a 1,200
square-foot guest services facility, swimming pool and hot tub, shower and
laundry facilities, cable television and telephone capability and a message, fax
and mail center. Recreational vehicle park guests receive a complimentary
breakfast, free shuttle service to the Isle-Vicksburg and a casino coupon book.
The recreational vehicle park is heavily marketed through the casino, an outdoor
billboard campaign on major interstates and monthly and annual advertisements in
recreational vehicle park publications. The recreational vehicle park frequently
is fully occupied on weekends and holidays and offers the Isle-Vicksburg a
substitute to a hotel facility.
The Company believes that the Isle-Vicksburg attracts customers from three
primary groups: (a) local and area residents, primarily from Vicksburg and
Jackson, Mississippi; (b) northeastern Louisiana residents; and (c) tourists.
Vicksburg is approximately 45 miles west of Jackson, Mississippi, a metropolitan
area with a population of approximately 420,000. The Isle-Vicksburg is directly
accessible from Jackson on Interstate 20, and a significant portion of the Isle-
Vicksburg's business comes from Jackson residents. Approximately 530,000 and 1.5
million people live within 50 and 100 miles, respectively, of the Isle-
Vicksburg. Vicksburg, a river port city best known as the site of an historic
Civil War battle and the home of the Vicksburg National Military Park and
Cemetery, drew approximately 900,000 visitors in 1995.
The Isle-Vicksburg is one of four gaming facilities currently operating an
aggregate of approximately 105,000 square feet of casino floor space in the
Vicksburg area. The Isle-Vicksburg is the second largest casino in the Vicksburg
area. Other regional casino competition includes one dockside gaming facility in
Natchez, Mississippi (approximately 60 miles south of Vicksburg and 80 miles
southwest of Jackson); two dockside gaming facilities in Greenville,
Mississippi, with another under construction (approximately 80 miles north of
Vicksburg and 90 miles northwest of Jackson); and a land-based, Indian-owned
casino near Philadelphia, Mississippi (approximately 115 miles northeast of
Vicksburg and 70 miles northeast of Jackson). Management believes that the Isle-
Vicksburg enjoys certain competitive advantages in the Vicksburg gaming market
based on its convenient location. The Isle-Vicksburg is located approximately
one mile from an exit off Interstate 20 which provides easy access from Jackson
and the surrounding areas. Only one other competitor in Vicksburg is located
closer to the Interstate than the Isle-Vicksburg. The Isle-Vicksburg also offers
ample parking on-site and immediately adjacent to the facility. Management
further believes that the gaming and non-gaming facilities and the distinctive
tropical theme provide one of the most exciting and spacious gaming environments
in the Vicksburg market.
Pompano Park
On June 30, 1995, the Company acquired Pompano Park, a harness racing track
located in Pompano Beach, Florida, midway between Miami and West Palm Beach.
Pompano Park is the only racetrack licensed to conduct harness racing in
Florida. Pompano Park also broadcasts its racing events through simulcast and
off-track betting facilities. Pompano Park is comprised of approximately 180
acres of owned land used for harness racing operations and 143 acres of leased
land used for training operations. The Company has a four-year option to
purchase the leased land at a cost of $12 million, plus cost of living
adjustments. The Company believes that, because of its size and location,
Pompano Park would be an attractive location for casino gaming if casino gaming
is ever legalized in Florida and the site is available for gaming under
applicable law. Pompano Park competes against numerous other pari-mutuel
facilities, including thoroughbred and dog race tracks and jai alai frontons,
located throughout south Florida. For the 10 months ended April 30, 1996, total
revenue at Pompano Park was approximately
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$17.3 million, derived primarily from pari-mutuel wagering of approximately
$40.0 million wagered on-track and approximately $42.4 million wagered at other
pari-mutuel facilities receiving Pompano Park's simulcast transmission. During
fiscal 1996, Pompano Park conducted approximately 200 live racing programs.
In connection with the acquisition of Pompano Park, the Company agreed to
pay to the sellers specified additional consideration if, and for so long as (i)
casino gaming may legally be conducted by the Company at Pompano Park or (ii) as
a result of the purchase of the pari-mutuel license acquired in connection with
the acquisition of Pompano Park, the Company may legally conduct casino gaming
at any other location. The additional consideration would be an amount equal to
$25 million plus 5% of the gaming net win (as defined), payable monthly. The $25
million portion of such amount would be payable $10 million at such time as the
Company receives all licenses, permits or approvals necessary to conduct such
casino gaming operations and $15 million at such time as the Company opens such
a casino gaming facility to the public. The Company's obligation to pay any such
additional consideration will terminate if casino gaming has not been legally
permitted in Florida within six years after the closing of the acquisition of
Pompano Park.
Pompano Park can accommodate up to 14,500 customers and parking for up to
4,000 automobiles. The six-story, air-conditioned facility includes a box seat
area, clubhouse and dining room accommodations, a large grandstand area and food
and beverage facilities which range from fast food stands to indoor dining
areas. The grandstand building also contains the Company's executive and
administrative offices. The grounds surrounding the grandstand are extensively
landscaped and the track is easily accessible from surrounding communities from
an extensive freeway system.
In connection with recent changes to Florida law, the Company expects to
operate limited stakes (with a maximum $10 pot) poker rooms at Pompano Park,
beginning January 1, 1997, subject to county approval. Such activities will not
constitute casino gaming or create any obligation for additional consideration
in connection with the acquisition of Pompano Park. Although the Company
believes that Broward County, the county in which Pompano Park is located, will
approve the operation of such poker rooms, no assurance can be given in that
regard.
The Company plans to open and operate a minimum of 50 tables from 5 p.m. to
2 a.m. on each evening that live racing is held at Pompano Park. Pompano Park
has received approval to conduct 183 live evening racing performances during the
1996-97 racing season and intends to seek approval to increase such number. The
Company expects that it will receive $.25 per player per game plus $.50 per pot.
The Company must distribute at least 50% of the net proceeds (reflecting its
direct costs of operating poker rooms) to supplement its purses for harness
races and breeders' awards. See "Regulatory Matters--Florida."
Effective July 1, 1996, Pompano Park offers "full card" simulcasting of
harness races from any harness track outside of Florida for wagering at Pompano
Park, even on days in which no races are held at Pompano Park. Florida recently
reduced both its tax rate on retransmission of its simulcast signal from 3.3% to
2.4% of "handle" (i.e., the aggregate contributions to pari-mutuel pools) and
the surcharge applied to simulcast races from $100 per race to a fixed fee of
$500 per day, regardless of the number of races. Because Pompano Park typically
broadcasts more than five races per day, the reduction in the surcharge as well
as the reduction in the out of state signal tax is expected to favorably impact
operating results at Pompano Park. See "Regulatory Matters--Florida."
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COMPETITION
General
Competition in the gaming industry is intense in the markets where the
Company operates gaming facilities. As new gaming opportunities arise in
existing gaming jurisdictions, in new gaming jurisdictions and on Indiana-owned
lands, new or expanded operations by others can be expected to increase
competition for the Company's existing and future operations and could limit new
opportunities for the Company or result in the saturation of certain gaming
markets. Casino gaming does not have a long operating history in the
jurisdictions where the Company operates gaming facilities and, therefore, the
effects of competition in these jurisdictions cannot be predicted with any
degree of certainty. Many of the Company's competitors have more gaming industry
experience, are larger and have greater financial resources than the Company. As
a result, increased competition could have a material adverse effect on the
Company.
Bossier City Operations
The Isle-Bossier City is one of three comparably sized gaming facilities
currently licensed and operating in the Shreveport/Bossier City market, all of
which opened between April and July 1994 and each of which has comparable
amenities. The Isle-Bossier City will face increased competition from existing
competitors to the extent that they add to or enhance existing amenities. In
that regard, Binion's Horseshoe Casino recently broke ground on a 606-room all
suites hotel at its dockside riverboat casino location in Bossier City. In
addition to existing competition, the granting of additional gaming licenses in
the Shreveport/Bossier City market or the relocation of existing licenses to
that market from elsewhere in the State of Louisiana would increase competition
for the Isle-Bossier City. In that regard, Casino Magic Corp. was recently
granted a license to operate a gaming facility in the Shreveport/Bossier City
market, which facility is to be located less than 1/2 mile from the site of the
Isle-Bossier City. In addition, the Company believes that Binion's Horseshoe
Casino will seek approval to obtain a license to operate an additional dockside
riverboat casino at its existing site, making it likely in management's opinion
that at least a fifth dockside riverboat casino (operated by Binion's Horseshoe
Casino or another operator) eventually will be operating in the
Shreveport/Bossier City market, where only three currently operate. Moreover,
the legalization of casino gaming in Texas would have a material adverse effect
on the Isle-Bossier City.
Lake Charles Operations
The Isle-Lake Charles is one of two riverboat gaming facilities operating
in the Lake Charles, Louisiana market. The Isle-Lake Charles' riverboat
competitor, Players International, operates two riverboats and a 134-room hotel
facility from a single location in the City of Lake Charles approximately two
miles form the site of the Isle-Lake Charles. In addition, a land-based, Indian-
owned casino with approximately 68,500 square feet of gaming space is operating
in Kinder, Louisiana, approximately 35 miles to the northeast of the Isle-Lake
Charles. Riverboats in the Lake Charles market are subject to cruising
requirements, which makes a land-based casino more desirable to many gaming
customers. Players International and the Company each hold two gaming licenses
and operate two riverboats from a single facility. (Louisiana, unlike certain
other jurisdictions, does not permit license holders to operate a second boat
out of the same location without a gaming license for each boat.) However,
because of a limited operating history at the Isle-Lake Charles with a temporary
land-based pavilion and because,
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prior to July 12, 1996, only one riverboat operated at the site of the Isle-Lake
Charles, the Company's expectations regarding such operation are not based on
historical operating results. In addition to existing competition, the granting
of additional gaming licenses in the Lake Charles market or the relocation of
existing licenses from elsewhere in the State of Louisiana to that market would
increase competition for the Isle-Lake Charles. Moreover, the legalization of
casino gaming in Texas would have a material adverse effect on the Isle-Lake
Charles.
Biloxi Operations
Twelve gaming facilities (including the Isle-Biloxi), with an aggregate of
approximately 560,000 square feet of casino floor space, are located along the
Mississippi Gulf Coast. Eight facilities are located in Biloxi and collectively
account for approximately 360,000 square feet of casino floor space. Two of the
other four facilities are located in Gulfport, approximately 10 miles from
Biloxi, and the other two are located in Bay St. Louis and Lakeshore (the gaming
operations of such casino have been temporarily suspended as of July 16, 1996),
each approximately 30 miles from Biloxi. Because Mississippi law does not limit
the number of gaming licenses that may be granted, there may be increases in the
number of gaming facilities along the Mississippi Gulf Coast and the surrounding
areas, which could have a material adverse effect on the Isle-Biloxi. In
addition, the Company believes that many of its competitors will add to or
enhance their existing amenities and new competitors will enter the Mississippi
Gulf Coast market. Mirage Resorts, Inc. has announced plans and received a
gaming license to open a "Golden Nugget" casino and resort complete in Biloxi,
at a site approximately two miles from the Isle-Biloxi, in late 1997. In
addition, an "Imperial Palace" casino is currently being built and will be
located on the Back Bay in Biloxi, approximately three miles from the Isle-
Biloxi. Both such developments are expected to include substantial hotel
facilities. Certain existing and future competitors have more extensive
financial resources than does the Company. Intense competition on the
Mississippi Gulf Coast has contributed to the closure of two gaming facilities
(and the temporary closure of a third) in that area and two others are operating
under bankruptcy protection. In addition, the legalization of casino gaming in
Alabama would increase competition for, and would have a material adverse effect
on, the Isle-Biloxi.
Vicksburg Operations
The Isle-Vicksburg is one of four gaming facilities currently operating an
aggregate of approximately 105,000 square feet of casino floor space in the
Vicksburg area. The Isle-Vicksburg is the second largest casino in the Vicksburg
area. Two competitors have hotels on their site and the competitor closest to
the Isle-Vicksburg has a hotel within 1/2 mile of its casino. (The Isle-
Vicksburg does not contain a hotel, but operates a 67-space recreational vehicle
park located 1/2 mile from its facilities.) Other local casino competition
includes one gaming facility in Natchez, Mississippi (approximately 60 miles
south of Vicksburg and 80 miles southwest of Jackson); two gaming facilities in
Greenville, Mississippi, with another under construction (approximately 80 miles
north of Vicksburg and 90 miles northwest of Jackson); and a land-based, Indian-
owned casino near Philadelphia, Mississippi (approximately 115 miles northeast
of Vicksburg and 70 miles northeast of Jackson). Because Mississippi does not
limit the number of gaming licenses that may be granted, there may be increases
in the number of gaming facilities in Vicksburg and elsewhere in counties
bordering the Mississippi River, which could have a material adverse effect on
the Isle-Vicksburg. While the Mississippi statutes specify that gaming may only
be held on the Mississippi River and on navigable waters within counties
bordering the Mississippi River, several controversies have arisen concerning
the exact permissible locations of casinos within this statutory language.
Specifically, there have been several attempts to expand gaming as far east of
the Mississippi
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River as possible. It is likely that these controversies and efforts to expand
gaming east of the Mississippi River will continue. In the event sites are
approved in the eastern part of Warren County, in which the Isle-Vicksburg is
located, the Isle-Vicksburg could be adversely affected.
RECENT DEVELOPMENTS
Senior Secured Notes Offering and Retirement of Mortgage Notes
The Company intends to issue and sell (the "Offering") $300 million of
Senior Secured Notes (the "Notes") to finance the LRGP Acquisition, retire
indebtedness (including its 11 1/2% First Mortgage Notes (the "Mortgage Notes"))
in an aggregate principal amount of approximately $184 million and provide
capital for expanding its existing facilities and possibly for entering new
gaming markets. The Company has filed a registration statement on Form S-3 with
the Securities and Exchange Commission (the "Commission") relating to the Notes.
The Notes are expected to be secured by substantially all of the property and
assets of the Company. In order to complete the Offering, the Company will be
required to retire and/or defease, or defease the covenants contained in the
indenture relating to, all of the $105 million principal amount of Mortgage
Notes (the "Mortgage Notes Retirement"). In that regard, the Company has entered
into agreements to repurchase certain of the Mortgage Notes concurrently with
the closing of the Offering. The Offering is subject to consummation of the
Mortgage Notes Retirement, which is conditioned on consummation of the Offering.
The Company intends to consummate the Offering and the Mortgage Notes Retirement
simultaneously.
Management Changes
Effective July 24, 1996, the Chief Operating Officer, Juris Basens, and the
Vice President of Marketing, David Paltzik, resigned from the Company. In
addition, the general manager of the Isle-Vicksburg resigned, such resignation
becoming effective on that date as well. President John Gallaway will assume the
responsibilities of the Chief Operating Officer position.
Goldstein Family Equity Purchase and Rights Offering
On March 11, 1996, the Company sold an aggregate of 1,020,940 shares of its
Common Stock, at a price of $5.875 per share, to Bernard Goldstein, the Chairman
and Chief Executive Officer of the Company, and three members of his family (the
"Goldstein Family Equity Purchase"). Proceeds from the sale totaled
approximately $6.0 million. A portion of the proceeds was used to retire
approximately $1.6 million in loans payable to Mr. Goldstein and a related
party, which amount includes accrued interest.
In connection with the Goldstein Family Equity Purchase, the Company issued
to its shareholders (other than those shareholders participating in the
Goldstein Family Equity Purchase), and certain other of its securityholders,
rights ("Rights") to purchase up to 4,296,085 shares of Common Stock (pursuant
to a registration statement declared effective by the Securities and Exchange
Commission (the "Commission") on July 2, 1996) at the same price, and in the
same pro rata amount, as shares purchased in the Goldstein Family Equity
Purchase (the "Rights Offering"). The Rights will expire on July 26, 1996
(except with respect to certain Rights exercisable by Crown Casino, as to which
the Company has agreed that the exercise period shall commence on the date that
the underlying shares of Common Stock
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are registered for resale with the Commission). In the event the Rights Offering
is fully subscribed, the Company will receive net proceeds of approximately
$25.1 million.
Hotel Joint Venture
On June 18, 1996, the Company entered into a letter of intent to form a
joint venture (the "Hotel Joint Venture") with H.I. Development Corporation, an
experienced developer of hotel properties, and certain of its affiliates
("HID"). The purpose of the Hotel Joint Venture will be to develop, own and
operate hotel properties adjacent to the Isle-Bossier City and the Isle-Lake
Charles and, in the event the Company elects to develop a casino there, in
Cripple Creek, Colorado. The letter of intent provides that the Company and HID
will each contribute approximately $10 million in assets to the Hotel Joint
Venture. The Company's contribution is expected to consist of cash, certain land
or other property. See "Business--Future Development Opportunities--Hotel Joint
Venture."
RECENT ACQUISITIONS
The Company has recently completed, or entered agreements contingent on the
Offering to complete, the following acquisitions as part of its overall strategy
to consolidate its ownership interests in its gaming facilities.
LRGP Acquisition
The Company has agreed to acquire the remaining 50% interest in LRGP held
by LRSD. The consideration for the LRGP Acquisition will be (i) $85 million in
cash payable at closing, (ii) five-year warrants to purchase 500,000 shares of
Common Stock at an exercise price of $10.50 per share delivered at closing and
(iii) $1.5 million per year for seven years, payable monthly beginning on
October 1, 1998. The Company has escrowed 625,000 shares of Common Stock (for
which the Company has the right to substitute $5 million in cash), some or all
of which will be forfeited if the Company does not fulfill its obligation to
close the transaction by October 1, 1996, as such date may be extended. The
Company has the right to extend the deadline to December 1, 1996, provided that
it pays to LRSD its 50% share of LRGP's net income for the period from and after
October 1, 1996 until closing or termination, plus $166,667 per month. The
Company intends to use a portion of the net proceeds of the Offering to
consummate the LRGP Acquisition.
Grand Palais Acquisition
On May 3, 1996, the Company purchased all of the outstanding common stock
of GPRI in a bankruptcy proceeding under Chapter 11 of the United States
Bankruptcy Code. GPRI owns the Grand Palais, gaming equipment, certain other
furniture, fixtures and equipment, all necessary gaming licenses issued by the
State of Louisiana, and other permits and authorizations. The aggregate
consideration paid by the Company in connection with the Grand Palais
Acquisition was approximately $62.4 million, consisting of cash in the amount of
approximately $8.4 million, approximately $37.9 million in notes and assumed
indebtedness and 2,250,000 shares of Common Stock and five-year warrants to
purchase an additional 500,000 shares of Common Stock at an exercise price of
$10.00 per share. In connection with the Grand Palais Acquisition, Bernard
Goldstein, the Chairman of the Company, and three of his sons
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(including Robert Goldstein, a director of the Company) pledged certain of their
assets for the issuance of a letter of credit to secure the repayment of a
portion of the principal of certain notes issued to effect the Grand Palais
Acquisition. The Company issued to two of Mr. Goldstein's sons (other than
Robert Goldstein) a five-year warrant to purchase 12,500 shares of Common Stock
at an exercise price of $5.875 per share. On July 12, 1996, the Gaming Board
authorized the commencement of gaming on the Grand Palais and, pursuant to such
approval, the Grand Palais opened on such date. The Company has agreed with the
State of Louisiana to hold the excess cash flow (as defined in such agreement)
generated by GPRI during its first six months of operation in a special escrow
account.
SCGC Acquisition
On May 3, 1996, the Company purchased from Crown Casino Corporation ("Crown
Casino") the remaining 50% interest in SCGC (the other 50% of which is owned by
LRGP), in exchange for 1,850,000 shares of Common Stock, a five-year warrant to
purchase an additional 416,667 shares of Common Stock at an exercise price of
$12.00 per share which can be exercised only by exchanging up to $5 million
principal amount of indebtedness owed to Crown Casino for any such shares and
the restructuring of certain indebtedness owed to Crown Casino.
FUTURE DEVELOPMENT OPPORTUNITIES
Although the Company intends to focus primarily on the development of its
existing properties in the near term, the Company also intends to continue to
pursue new development opportunities in jurisdictions where gaming has been
legalized and may be legalized in the future. There can be no assurance if or
when necessary approvals for existing or future development opportunities will
be obtained. In addition, there are significant regulatory, financial, business
and other risks inherent in the development, construction and operation of any
new gaming facility. There can be no assurance that the Company will be
successful in dealing with such matters. The Company believes that its financial
position following the Offering, its operating experience and its ability to
enter new markets quickly will enable it to compete for new gaming
opportunities.
Hotel Joint Venture
On June 18, 1996, the Company entered into a letter of intent to form a
joint venture with HID. The purpose of the Hotel Joint Venture will be to
develop, own and operate hotel properties adjacent to the Isle-Bossier City and
the Isle-Lake Charles and, in the event the Company elects to develop a casino
there, in Cripple Creek, Colorado. Preliminary plans are for the Hotel Joint
Venture to build a 350-room hotel on the site of the Isle-Bossier City, a 400-
room hotel on the site of the Isle-Lake Charles and a 147-room hotel in Cripple
Creek, Colorado, where the Company would lease space from the Hotel Joint
Venture to operate a casino and restaurant. The letter of intent provides that
the Company and HID will each contribute approximately $10 million in assets to
the Hotel Joint Venture. The Company's contribution is expected to consist of
cash, certain land or other property. The Hotel Joint Venture may pursue other
similar such projects in addition to or instead of the aforementioned. HID will
be principally responsible for designing and building the hotels, subject to the
Company's approval. The Hotel Joint Venture will attempt to obtain non-recourse
construction and permanent financing for the hotels without
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any guarantee by the Company or HID, although no assurance can be given that it
will be able to do so. The Company expects to agree to rent a portion of the
rooms, at favorable rates, at each hotel for its gaming customers. Formation of
the Hotel Joint Venture is subject to execution of a definitive agreement,
obtaining all necessary approvals and consents and commitments for financing, as
to which no assurance can be given.
Cripple Creek, Colorado
The Company owns 1.6 acres of land and leases an additional 1.3 acres of
land in Cripple Creek, Colorado for use in connection with a possible gaming
development in Cripple Creek. The property is located at the eastern end of the
Cripple Creek gaming market, and would be the first gaming facility reached by
patrons from Colorado Springs and other areas to the east. The Company intends
to contribute its property at Cripple Creek to the Hotel Joint Venture for the
construction of a 147-room hotel. The Company expects to lease from the Hotel
Joint Venture a portion of the hotel built at Cripple Creek to operate a casino
and restaurant. In the event the Hotel Joint Venture does not pursue the
construction of a hotel at Cripple Creek, the Company may build such a hotel
either alone or with another joint venture partner or sell its interest in such
Colorado property.
EMPLOYEES
As of June 30, 1996, the Company employed approximately 5,950 employees. A
marine crew at the Isle-Lake Charles has elected union representation by the
Seafarer's International Union. None of the Company's other employees is subject
to a collective bargaining agreement. The Company believes that its relationship
with its employees is satisfactory.
REGULATORY MATTERS
Mississippi
In June 1990, Mississippi enacted legislation legalizing dockside casino
gaming for counties along the Mississippi River, which is the western border for
most of the state, and the Gulf Coast, which is the southern border for most of
the state. The legislation gave each of those counties the opportunity to hold a
referendum on whether to allow dockside casino gaming within its boundaries.
Mississippi law permits gaming licensees to offer unlimited stakes gaming
on a 24-hour basis and to issue house credit for qualifying patrons. The minimum
legal age for gaming is 21. The law does not restrict the amount or percentage
of space on a vessel that may be utilized for gaming.
The legislation also does not limit the number of licenses that the
Mississippi Gaming Commission can grant for a particular area and does not
impose different conditions on different licensees.
The ownership and operation of casino gaming facilities in Mississippi are
subject to extensive state and local regulation. The Company was required to
register as a publicly traded holding company under the Mississippi Act. The
Company's gaming operations are subject to regulatory control by the
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Mississippi Gaming Commission, the state tax commission (the "Tax Commission")
and various other local, city and county regulatory agencies (hereinafter
collectively referred to as the "Mississippi Gaming Authorities"). Subsidiaries
of the Company (the "Gaming Subsidiaries") have obtained gaming licenses from
the Mississippi Gaming Authorities to operate the Isle-Biloxi and the Isle-
Vicksburg. Effective October 29, 1991, the Mississippi Gaming Commission adopted
gaming regulations applicable to the Company and the Gaming Subsidiaries.
The licenses held by the Gaming Subsidiaries have terms of two years and
are not transferable. New licenses will need to be obtained at the end of each
two-year period. There can be no assurance that new licenses can be obtained.
The Isle-Biloxi received a second license in April 1996 and the Isle-Vicksburg
obtained a second license in February 1995. The Mississippi Gaming Commission
may at any time revoke, suspend, condition, limit or restrict a license or
approval to own shares of stock in the Gaming Subsidiaries for any cause deemed
reasonable by such agency. Substantial fines for each violation of gaming laws
or regulations may be levied against the Gaming Subsidiaries, the Company and
the persons involved. A violation under the gaming license held by a Gaming
Subsidiary may be deemed a violation of all the other licenses held by the
Company.
A Gaming Subsidiary must submit detailed financial, operating and other
reports to the Mississippi Gaming Commission and/or the Tax Commission
periodically. Numerous transactions, including without limitation, substantially
all loans, leases, sales of securities and similar financing transactions
entered into by a Gaming Subsidiary must be reported to or approved by the
Mississippi Gaming Commission. The Company is also required to periodically
submit detailed financial and operating reports to the Mississippi Gaming
Commission and furnish any other information which the Mississippi Gaming
Commission may require.
The directors, officers and key employees of the Company and its
subsidiaries who are actively and directly engaged in the administration or
supervision of gaming, or who have any other significant involvement with or
influence over the activities of a Gaming Subsidiary, must be found suitable
therefor and may be required to be licensed by the Mississippi Gaming
Commission. The finding of suitability is comparable to licensing, and both
require submission of detailed personal financial information followed by a
thorough investigation. The applicant is required to pay all costs of
investigation. There can be no assurance that such persons will be found
suitable by such commission. An application for a finding of suitability of an
individual may be denied for any cause deemed reasonable by the issuing agency.
Changes in licensed positions must be reported to the issuing agency. In
addition to its authority to deny an application for a finding of suitability,
the Mississippi Gaming Commission has jurisdiction to disapprove a change in
corporate position. If the Mississippi Gaming Commission were to find a
director, officer or key employee unsuitable for licensing or unsuitable to
continue having a relationship with a Gaming Subsidiary, the Gaming Subsidiary
would have to suspend, dismiss and sever all relationships with such person. The
Gaming Subsidiary would have similar obligations with regard to any person who
refuses to file appropriate applications. Each gaming employee must obtain a
work permit which may be revoked upon the occurrence of certain specified
events.
Any individual who is found to have a material relationship to, or material
involvement with, the Company may be required to be investigated in order to be
found suitable or be licensed as a business associate of a Gaming Subsidiary.
Key employees, controlling persons or others who exercise significant influence
upon the management or affairs of the Company may also be deemed to have such a
relationship or involvement.
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Beneficial owners of more than 5% of the Company's voting securities must
be found suitable by the Mississippi Gaming Commission. Any person who acquires
more than 5% of the voting securities of the Company must report the acquisition
to the Mississippi Gaming Commission. Any beneficial owner of the Company's
voting securities (whether or not a controlling stockholder) may be required to
be found suitable if such commission has reason to believe that such ownership,
without a finding of suitability, would be inconsistent with the declared policy
of the State of Mississippi. If the stockholder who is required to be found
suitable is a corporation, partnership or trust, it must submit detailed
business and financial information including a list of beneficial owners.
Any stockholder found unsuitable and who holds, directly or indirectly, any
beneficial ownership of shares of Common Stock beyond such period of time as may
be prescribed by the Mississippi Gaming Commission may be guilty of a
misdemeanor. Any person who fails or refuses to apply for a finding of
suitability or a license within 30 days after being ordered to do so by the
Mississippi Gaming Commission may be found unsuitable. The Company is subject to
disciplinary action if, after it receives notice that a person is unsuitable to
be a stockholder of or to have any other relationship with it, a Gaming
Subsidiary or the Company (a) pays the unsuitable person any dividends or
interest upon any securities of the Gaming Subsidiary or any payments or
distribution of any kind whatsoever, (b) recognizes the exercise, directly or
indirectly, of any voting rights in its securities by the unsuitable person, or
(c) pays the unsuitable person any remuneration in any form for services
rendered or otherwise, except in certain limited and specific circumstances. In
addition, if the Mississippi Gaming Commission finds any stockholder unsuitable,
such stockholder must immediately divest himself of all of such stockholder's
securities in the Gaming Subsidiary and/or the Company.
The regulations provide that a change in control of the Company may not
occur without the prior approval of the Mississippi Gaming Commission.
Mississippi law prohibits the Company from making a public offering of its
securities without the approval of the Mississippi Gaming Commission if any part
of the proceeds of the offering is to be used to finance the construction,
acquisition or operation of gaming facilities in Mississippi, or to retire or
extend obligations incurred for one or more such purposes. The Mississippi
Gaming Commission has the authority to grant a continuous approval of securities
offerings and has granted such approval for the Company, subject to an annual
renewal thereof.
Regulations of the Mississippi Gaming Commission prohibit certain
repurchases of securities of publicly traded corporations registered with the
Mississippi Gaming Commission, including holding companies such as the Company,
without prior approval of the Mississippi Gaming Commission. Transactions
covered by these regulations are generally aimed at discouraging repurchases of
securities at a premium over market price from certain holders of greater than
3% of the outstanding securities of the registered publicly traded corporation.
The regulations of the Mississippi Gaming Commission also require prior approval
for a "plan of recapitalization" as defined in such regulations.
The Company is required to maintain in the State of Mississippi current
stock ledgers, which may be examined by the Mississippi Gaming Authorities at
any time. If any securities are held in trust by an agent or by a nominee, the
record holder may be required to disclose the identity of the beneficial owner
to the Mississippi Gaming Authorities. A failure to make such disclosure may be
grounds for finding the record holder unsuitable. The Company also is required
to render maximum assistance in determining the identity of the beneficial
owner.
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The Mississippi Act requires that certificates representing shares of
Common Stock bear a legend to the general effect that the securities are subject
to the Mississippi Act and regulations of the Mississippi Gaming Commission. The
Mississippi Gaming Commission has the authority to grant a waiver from the
legend requirement, which the Company has obtained. The Mississippi Gaming
Authorities, through the power to regulate licenses, have the power to impose
additional restrictions on the holders of the Company's securities at any time.
The Mississippi Gaming Commission has enacted regulations requiring that,
as a condition to licensure or subsequent licensure, an applicant provide a plan
to develop infrastructure facilities amounting to 25% of the cost of the casino
and a parking facility capable of accommodating 500 cars. "Infrastructure
facilities" include any of the following: a 250-room hotel, theme park, golf
course, marina, tennis complex, or any other facilities approved by the
Mississippi Gaming Commission, but do not include parking facilities, roads,
sewage and water systems or civic facilities. The Mississippi Gaming Commission
may reduce the number of rooms required in a hotel, where it is shown to the
satisfaction of the Mississippi Gaming Commission that sufficient rooms are
available to accommodate the anticipated number of visitors.
The Company's future gaming operations outside of Mississippi are also
subject to approval by the Mississippi Gaming Commission. Gaming taxes
aggregating 12% of the gross gaming revenues of the Company with respect to its
Biloxi operations and Vicksburg operations are payable to the State of
Mississippi and the cities of Biloxi and Vicksburg. These taxes are payable
monthly. Additionally, license fees and annual fees based on the number of games
made available for play are payable to the State of Mississippi and the City of
Vicksburg and Biloxi.
The laws and regulations permitting and governing Mississippi casino gaming
were recently adopted. Consequently, the interpretation and application of such
Mississippi laws and regulations will evolve over time. Changes in such laws or
regulations could have a material adverse effect on the Company.
Louisiana
In July 1991, the Louisiana legislature adopted legislation permitting
certain types of gaming activity on certain rivers and waterways in Louisiana.
The legislation granted authority to supervise riverboat gaming activities to
the Louisiana Riverboat Gaming Commission and the Riverboat Gaming Enforcement
Division of the Louisiana State Police (the "Louisiana Enforcement Division").
The Louisiana Riverboat Gaming Commission was authorized to hear and determine
all appeals relative to the granting, suspension, revocation, condition or
renewal of all licenses, permits and applications. In addition, the Louisiana
Riverboat Gaming Commission established regulations concerning authorized
routes, duration of excursions, minimum levels of insurance, construction of
riverboats and periodic inspections. The Louisiana Enforcement Division was
authorized to investigate applicants and issue licenses, investigate violations
of the statute and conduct continuing reviews of gaming activities.
However, in May 1996, the regulatory oversight of riverboat gaming was
transferred to the Gaming Board. In a special legislative session held in March
and April of 1996, the Louisiana legislature adopted the Louisiana Gaming
Control Law (the "Gaming Control Law"), which is designed to consolidate the
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regulatory oversight of four forms of gaming--riverboat, video poker, the land-
based casino in New Orleans, and Indian gaming--into one board, this being the
Gaming Board. The Gaming Board will now oversee all licensing matters for
riverboat casinos, the land-based casino, video poker, and certain aspects of
Indian gaming other than those limited responsibilities reserved to the
Louisiana State Police (the "Louisiana State Police"). The Gaming Board will be
composed of nine voting members appointed by the governor, five of whom have
been appointed. The Gaming Board held its first meeting on July 10, 1996, at
which it adopted a set of emergency rules conferring certain authority to the
Chairman. On July 12, 1996, the Gaming Board (acting through the Chairman)
issued all necessary approvals to operate the Grand Palais and formally
authorized the commencement of gaming on the Grand Palais. Pursuant to that
approval, the Grand Palais opened on July 12, 1996.
The Gaming Control Law abolished the Louisiana Riverboat Gaming Commission,
effective May 1, 1996. Likewise, the Gaming Control Law removed all riverboat
licensing authority from the Louisiana Enforcement Division, reserving to the
Louisiana State Police only the authority to license "non-key gaming employees"
and "nongaming vendors." The Gaming Board will now make all licensing and
permitting determinations--whether for operators, key employees, or
manufacturers and suppliers--with regard to riverboat gaming. However, the
Louisiana State Police will continue to be involved broadly in gaming
enforcement, reporting to the Gaming Board. The Gaming Control Law provides that
the Louisiana State Police will continue to conduct suitability investigations,
will continue to audit, investigate, and enforce compliance with standing
regulations, will initiate enforcement and administrative actions, and will
perform "all other duties and functions necessary for the efficient,
efficacious, and thorough regulation and control of gaming activities and
operations under the [Gaming] Board's jurisdiction."
The Gaming Control Law did not abolish the Louisiana Riverboat Economic
Development and Gaming Control Act, which is the 1991 statute that authorized
gaming on certain rivers and waterways in Louisiana (the "Riverboat Act"). The
Gaming Control Law has amended the Riverboat Act to the extent that it has
transferred licensing and regulatory authority to the Gaming Board; otherwise,
the Riverboat Act remains in effect, with the Gaming Board now being authorized
to enforce the Riverboat Act. (For instance, the fifteen licenses that the
Riverboat Act authorizes remain unaffected; the statutory terms of those
licenses remain unaffected; the taxation terms of the Riverboat Act remain
unaffected.) The Gaming Control Law also provides that any rules or regulations
"promulgated by entities whose powers have been transferred to the [Gaming]
Board shall be considered valid and remain in effect until repealed by the
[Gaming] Board...." Accordingly, the rules that the Louisiana Riverboat Gaming
Commission previously adopted still remain in effect. Meantime, the Louisiana
State Police continues to enforce the rules and regulations that the Louisiana
Enforcement Division previously adopted.
The Riverboat Act continues to authorize issuance of up to 15 licenses to
conduct gaming activities on riverboats of new construction in accordance with
applicable law. However, no more than six licenses may be granted to riverboats
operating from any one parish.
In issuing a license, the applicant must be found to be a person of good
character, honesty and integrity and a person whose prior activities, criminal
record, if any, reputation, habits, and associations do not pose a threat to the
public interest of the State of Louisiana or to the effective regulation and
control of gaming, or create or enhance the dangers of unsuitable, unfair or
illegal practices, methods and activities in the conduct of gaming or the
carrying on of business and financial arrangements in connection therewith. The
Gaming Board will not grant a license unless it finds that: (i) the applicant is
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capable of conducting gaming operations, which means that the applicant can
demonstrate the capability, either through training, education, business
experience, or a combination of the above, to operate a gaming casino; (ii) the
proposed financing of the riverboat and the gaming operations is adequate for
the nature of the proposed operation and from a source suitable and acceptable
to the Gaming Board; (iii) the applicant demonstrates a proven ability to
operate a vessel of comparable size, capacity and complexity to a riverboat so
as to ensure the safety of its passengers; (iv) the applicant submits a detailed
plan of design of the riverboat in its application for a license; (v) the
applicant designates the docking facilities to be used by the riverboat; (vi)
the applicant shows adequate financial ability to construct and maintain a
riverboat; and (vii) the applicant has a good faith plan to recruit, train and
upgrade minorities in all employment classifications.
Certain persons affiliated with a riverboat gaming licensee, including and
officers of the licensee, directors and officers of any holding company of the
licensee involved in gaming operations, persons holding 5% or greater interests
in the licensee, and persons exercising influence over a licensee ("Affiliated
Gaming Persons"), are subject to the application and suitability requirements of
the Louisiana gaming law.
The Louisiana gaming law specifies certain restrictions relating to the
operation of riverboat gaming, including the following: (i) except in
Shreveport/Bossier City, gaming is not permitted while a riverboat is docked,
other than the 45 minutes between excursions, and during times when dangerous
weather or water conditions exist; (ii) except in Shreveport/Bossier City, each
round-trip riverboat cruise may not be less than three nor more than eight hours
in duration, subject to specific exceptions; (iii) agents of the Louisiana State
Police are permitted on board at any time during gaming operations; (iv) gaming
devices, equipment and supplies may only be purchased or leased from permitted
suppliers; (v) gaming may only take place in the designated gaming area while
the riverboat is upon a designated river or waterway; (vi) gaming equipment may
not be possessed, maintained or exhibited by any person on a riverboat except in
the specifically designated gaming area, or a secure area used for inspection,
repair or storage of such equipment; (vii) wagers may be received only from a
person present on a licensed riverboat; (viii) persons under 21 are not
permitted in designated gaming areas; (ix) except for slot machine play, wagers
may be made only with tokens, chips or electronic cards purchased from the
licensee aboard a riverboat; (x) licensees may only use docking facilities and
routes for which they are licensed and may only board and discharge passengers
at the riverboat's licensed berth; (xi) licensees must have adequate protection
and indemnity insurance; (xii) licensees must have all necessary federal and
state licenses, certificates and other regulatory approvals prior to operating a
riverboat; and (xiii) gaming may only be conducted in accordance with the terms
of the license and the rules and regulations adopted by the Louisiana
Enforcement Division.
An initial license to conduct riverboat gaming operations is valid for a
term of five years. LRGP was issued an initial operator's license by the
Louisiana Enforcement Division with respect to the Isle-Bossier City on December
22, 1993, and SCGC was issued an initial operator's license by the Gaming Board
with respect to the Isle-Lake Charles on March 14, 1995. The license to operate
the Grand Palais was issued to a previous owner and the Grand Palais ceased
operations as a result of the bankruptcy of GPRI. The Company acquired the Grand
Palais and has been advised by the chief counsel to the Gaming Board that it
will treat the running of the five-year license period as having been suspended
from June 6, 1995 until the date gaming operations commenced on the Grand Palais
(July 12, 1996), providing 57 months remaining on such license. The Louisiana
gaming law provides that a renewal application for the period succeeding the
initial five-year term of the operator's license must be made to the Gaming
Board on an
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annual basis. The application for renewal consists of a statement under oath of
any and all changes in information, including financial information, provided in
the previous application.
The transfer of a license or permit or an interest in a license or permit
is prohibited. The sale, purchase, assignment, transfer, pledge or other
hypothecation, lease, disposition or acquisition (a "Transfer") by any person of
securities which represents 5% or more of the total outstanding shares issued by
a corporation that holds a license is subject to Gaming Board approval. A
security issued by a corporation that holds a license must generally disclose
these restrictions. Prior Gaming Board approval is required for the Transfer of
any ownership interest of 5% or more in any non-corporate licensee or for the
Transfer of any "economic interest" of 5% or more in any licensee or Affiliated
Gaming Person. An "economic interest" is defined for purposes of a Transfer as
any interest whereby a person receives or is entitled to receive, by agreement
or otherwise, a profit, gain, thing of value, loan, credit, security interest,
ownership interest or other benefit. Accordingly, approval is being sought with
respect to the LRGP Acquisition.
A licensee must notify the Gaming Board of any withdrawals of capital,
loans, advances or distributions in excess of 5% of retained earnings for a
corporate licensee, or of capital accounts for a partnership or limited
liability company licensee, upon completion of any such transaction. No prior
approval of any such withdrawal, loan, advance or distribution is required, but
any such transaction is ineffective if disapproved by the Gaming Board within
120 days after the required notification. In addition, the Gaming Board may
issue an emergency order for not more than 10 days prohibiting payment of
profits, income or accruals by, or investments in a licensee.
Riverboat gaming licensees and their Affiliated Gaming Persons are required
to notify the Gaming Board within 30 days after the receipt by any such persons
of any loans or extensions of credit. The Gaming Board is required to
investigate the reported loan or extension of credit, and to either approve or
disapprove the transaction. If disapproved, the loan or extension of credit must
be rescinded by the licensee or Affiliated Gaming Person. The Company is an
Affiliated Gaming Person of LRGP and SCGC is therefore required to notify the
Gaming Board of the sale and issuance of the Notes offered hereby.
Fees for conducting gaming activities on a riverboat include (i) $50,000
per riverboat for the first year of operation and $100,000 per year per
riverboat thereafter, plus (ii) 18 1/2% of net gaming proceeds.
Proposals to amend or supplement Louisiana's riverboat gaming statute are
frequently introduced in the Louisiana state legislature. No assurance can be
given that changes in Louisiana gaming law will not occur or that such changes
will not have a material adverse effect on the Company's business in Louisiana.
Florida
On June 15, 1995, the Florida Department of Business and Professional
Regulation, acting through its division of pari-mutuel wagering (the
"Division"), issued its final order (the "Order") approving PPI, Inc. ("PPI"), a
wholly owned subsidiary of the Company, as a pari-mutuel wagering permit holder
with respect to harness and quarter horse racing at Pompano Park. Pursuant to
the Order and the relevant provisions of Chapter 550 of the Florida Statutes and
the applicable rules and regulations thereunder (the "Florida Statute"), PPI
also was granted a license to conduct harness racing at Pompano Park for the
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racing season commencing July 1, 1995 and ending June 30, 1996 on a total of 198
evening racing dates. The Division has approved PPI's license to conduct a total
of 183 live evening racing performances for the season beginning July 1, 1996 to
June 30, 1997. PPI intends to seek approval to increase the number of live
evening races. Although PPI does not presently intend to conduct quarter horse
racing operations at Pompano Park, it may do so in the future, subject to
Division approval. The transfer of 10% or more of stock of a pari-mutuel racing
permit holder such as PPI would require the prior approval of the Division.
The Florida Statute establishes minimum purse requirements for breeders and
owners, license fees and the tax structure on pari-mutuel permit holders. The
Division may revoke or suspend any permit or license upon the willful violation
by the permit holder or licensee of any provision of the Florida Statute. In
lieu of suspending or revoking a permit or license, the Division may impose
various civil penalties against the permit holder or licensee. Penalties so
imposed may not exceed $1,000 for each count or separate offense.
Pursuant to Division order and recent enactments to the Florida Statute,
PPI is also authorized to conduct full-card pari-mutuel wagering at Pompano Park
on simulcast harness races from outside Florida throughout the racing season and
on night thoroughbred races within Florida if the thoroughbred permitholder has
decided to simulcast night races. Pompano Park has been granted the exclusive
right in Florida to conduct full-card simulcasting on days in which no live
racing is held at Pompano Park, although, on such days, Pompano Park must offer
to rebroadcast its simulcast signals to other pari-mutuel facilities (other than
thoroughbred parks). In addition, Pompano Park may transmit its live races into
any dog racing or jai alai facility throughout Florida, including Dade and
Broward counties, for intertrack wagering. The Florida Statute establishes the
percentage split between Pompano Park and the other facilities receiving such
signals. Recent legislation in Florida provided certain reductions in applicable
tax and license fees related to intertrack wagering on broadcasts of simulcast
harness racing and thoroughbred racing. The Company believes that simulcast
rights at Pompano Park and the recent changes in the Florida Statute are
important to the results of operations of PPI.
Effective January 1, 1997, the Florida Statute permits pari-mutuel
facilities to be licensed by the Division to operate card rooms in those
counties in which a majority vote of the County Commission has been obtained and
a local ordinance has been adopted. Card rooms can only be operated at pari-
mutuel facilities on days that the facility is running live races. The hours of
operation extend from two hours before the post time of the first live race and
continue until two hours after the conclusion of the last live race at the
racing facility. Thoroughbred racing facilities must choose between operating
card rooms or simulcasting night races from outside the state, but cannot do
both (and if electing to simulcast night races, they will be required to
retransmit the night simulcast signal to certain other pari-mutuel facilities,
including Pompano Park).
The card room operator will be the "house" and will deal the cards. The
house can charge a fee per player or establish a "rake" for each game. The only
card games that have been authorized are "nonbanking" games (i.e., those in
which the house is not allowed to play against the players). The winnings of any
player in a single round, hand or game may not exceed $10.00 and all card games
must be played with tokens or chips.
Card rooms may be operated and managed on behalf of the parimutuel permit
holder by card room management companies, which specifically require a special
license from the Division. Similarly, all
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employees of the card room management company or the card room operator need to
obtain a specific occupational license ($50 per license) from the Division
before they can work in the card room. There is no statutory limit on the number
of card tables allowed in a card room, however, the annual license fee for the
first card table is $1,000 and $500 for each table thereafter. The card room's
annual occupational license fee is $250.
Each card room operator is required to pay a tax of 10% of the card room
operator's monthly gross receipts from card room operations. "Gross receipts" is
defined as the total amount of money received by a card room from any person for
participation in authorized games. At least 50% of the monthly "net proceeds,"
if any, at Pompano Park must be distributed as follows: 47% to supplement purses
for harness racing, and 3% to supplement breeders' awards during the next
ensuring race meet. "Net proceeds" are the total amount of gross receipts
received by a card room operator from card room operations, less direct
operating expenses as defined in the statute.
The Division is currently promulgating rules to give effect to the
foregoing provisions of the Florida Statute.
Texas and Alabama Legalization Potential
Casino gaming is currently prohibited in several jurisdictions adjacent to
Louisiana and Mississippi. As a result, residents of these jurisdictions,
principally Texas and Alabama, comprise a significant portion of the customers
of the Isle-Bossier City and the Isle-Biloxi, respectively. It is anticipated
that residents of Texas will comprise a significant portion of the customers of
the Isle-Lake Charles.
Although casino gaming is not currently permitted in Texas and the Texas
Attorney General has issued an opinion that gaming in Texas would require an
amendment to the Texas Constitution, the Texas legislature has considered
various proposals to authorize casino gaming. No gaming legislation was enacted
in the most recent legislative session ended May 29, 1995. If the Texas
legislature (which meets every two years in odd-numbered years) does not enact
legislation to amend the Texas Constitution in a special session, the next
opportunity for the enactment of such legislation would be in 1997. Although
special sessions may be called by the Texas Governor for matters that were
pending in the preceding regular legislative session, Texas Governor George Bush
has publicly opposed the legalization of gaming in Texas. A constitutional
amendment would require a two-thirds vote of those present and voting in each
house of the Texas legislature and approval by the electorate in a referendum.
The legalization of casino gaming in Texas at or near the primary market areas
of the Isle-Bossier City or the Isle-Lake Charles, including the Dallas/Ft.
Worth and Houston areas, would have a material adverse effect on the Company.
Casino gaming is currently illegal in Alabama due to a constitutional
prohibition against lotteries. Several attempts have been made to pass a
resolution of the Alabama legislature providing for a statewide referendum on
the repeal of the pertinent section of the Alabama Constitution prohibiting
lotteries. This action would require a three-fifths vote of each house of the
legislature, followed by a statewide referendum. Both the Governor and the
Attorney General of Alabama have stated their opposition to legalized casino
gaming, even though pari-mutuel wagering and limited charitable bingo exist
within the state. The legalization of casino gaming in Alabama would have a
material adverse effect on the Isle-Biloxi, both because the Mobile metropolitan
area is a major market for the Isle-Biloxi and because a
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substantial portion of the Isle-Biloxi's customers are residents of areas east
of Mobile, including Florida and Georgia, and pass though the Mobile area when
traveling to Biloxi.
NON-GAMING REGULATION
The Company is subject to certain federal, state and local safety and
health, employment and environmental laws, regulations and ordinances that apply
to non-gaming businesses generally, such as the Clean Air Act, Clean Water Act,
Occupational Safety and Health Act, Resource Conservation Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act and the Oil
Pollution Act of 1990. The Company has not made, and does not anticipate making,
material expenditures with respect to such environmental laws and regulations.
However, the coverage and attendant compliance costs associated with such laws,
regulations and ordinances may result in future additional costs to the
Company's operations. For example, in 1990 the U.S. Congress enacted the Oil
Pollution Act of 1990 to consolidate and rationalize mechanisms under various
oil spill response laws. The Department of Transportation has promulgated
regulations requiring owners and operators of certain vessels to establish
through the Coast Guard evidence of financial responsibility for clean-up of oil
pollution. This requirement has been satisfied by proof of adequate insurance.
The riverboats operated by the Company in Louisiana must comply with U.S.
Coast Guard requirements as to boat design, on-board facilities, equipment,
personnel and safety. The riverboats must hold Certificates of Documentation and
Inspection issued by the U.S. Coast Guard. The U.S. Coast Guard requirements
also set limits on the operation of the riverboats and require individual
licensing of certain personnel involved with the operation of the riverboats.
Loss of a riverboat's Certificate of Documentation and Inspection could preclude
its use as a riverboat casino.
Any permanently moored vessel used for casino operations in Mississippi
must meet the fire safety standards of the Mississippi Fire Prevention Code and
the Life Safety Code and the Standards for the Construction and Fire Protection
of Marine Terminals, Piers and Wharfs of the National Fire Protection
Association. Additionally, any establishment to be constructed for dockside
gaming must meet the Southern Building Code or the local building code, if such
a local building code has been implemented at the casino's site.
While permanently moored vessels, such as the Isle-Biloxi and the Isle-
Vicksburg casino barges, are not required to hold Certificates of Inspection
from the U.S. Coast Guard, the Mississippi Gaming Commission has engaged the
American Bureau of Shipping (the "ABS") to inspect and certify all casino barges
with respect to stability and single compartment flooding integrity, in
accordance with Mississippi regulations. All casino barges must be inspected
prior to licensing every two years. Inspections subsequent to initial licensing
must be performed by the ABS or other company approved by the Gaming Commission.
All shipboard employees of the Company, even those who have nothing to do
with its operation as a vessel, such as dealers, waiters and security personnel,
may be subject to the Jones Act which, among other things, exempts those
employees from state limits on workers' compensation awards.
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ITEM 2. PROPERTIES.
The Company owns the three floating pavilions at the Isle-Biloxi location
as well as the floating pavilion at the Isle-Vicksburg location. LRGP owns the
riverboat casino at the Isle-Bossier City location. SCGC and GPRI, respectively,
own the riverboat casinos at the Isle-Lake Charles. The Company also owns or
leases all of its gaming and non-gaming equipment.
The Company leases its executive offices in Biloxi, Mississippi pursuant to
two leases. The first term of the first lease terminates on July 20, 1997.
Monthly rent is $2,442 plus an annual increase of 4%. The Company has the option
to renew for two additional three-year periods. The first term of the second
lease terminates on May 17, 1997. Monthly rent is $3,333 plus an annual increase
of 4%. The Company has the option to renew for two additional three-year terms.
The Company leases the Biloxi berth (the "Berth Lease") from the Biloxi
Port Commission at an initial annual rent of the greater of $500,000 (the
"Minimum Rent") or 1% of the gross gaming revenues received from the operations
at the site, net of state and local gaming taxes. The lease terminates on July
1, 1999, but is renewable at the option of the Company for eight additional
terms of five years each. For each of the renewal terms, the amount of the
Minimum Rent is adjusted to reflect any increase in the cost of living index,
limited to 6% for each renewal period.
The Company leases land-based facilities in Biloxi from the City of Biloxi
(the "Casino Lease") at an annual rent of (i) $500,000 per year (the "Base
Rent"), plus (ii) 3% of the gross gaming revenues received from the operations
at the site, net of state and local gaming taxes and fees, in excess of $25
million. The lease terminates on July 1, 1999 but is renewable at the option of
the Company for six additional terms of five years each and a seventh option
renewal term, concluding on January 31, 2034. For each of the renewal terms, the
amount of the Base Rent is adjusted to reflect any increase in the Consumer
Price Index limited to 6% for each renewal period. The Company was required to
make certain parking, landscaping, utilities and other related improvements,
amounting to $1.4 million, the payments for which are being applied as a rent
credit ratably over the initial term of the Casino Lease. In addition, in order
to lease the property subject to the Casino Lease, the Company acquired the
leasehold interest of Coastal Cruise Lines, Inc. and The Factory, Inc., the
original lessee, for consideration of $1,000,000 per year for ten years
resulting in monthly installments of $83,333.
In April 1994, the Company entered an Addendum to the Casino Lease, which
requires the Company to pay 4% of gross non-gaming revenues received from
operations at the Isle-Biloxi, net of sales tax, comps and discounts. Additional
rent will be due to the City of Biloxi for the amount of any increase from and
after January 1, 2016 in the rent due to the State Institutions of Higher
Learning under a lease between the City of Biloxi and the State Institutions of
Higher Learning (the "IHL Lease") and for any increases in certain tidelands
leases between the City of Biloxi and the State of Mississippi.
In April 1994, in connection with the construction of a hotel, the Company
entered a lease for additional land adjoining the Isle-Biloxi. The Company first
acquired the leasehold interest of Sea Harvest, Inc., the original lessee, for
consideration of $8,000 per month for a period of ten years. The Company's lease
is with the City of Biloxi, Mississippi, for an initial term of 25 years, with
options to renew for six additional terms of 10 years each and a final option
period with a termination date commensurate with the termination date of the IHL
Lease, but in no event later than December 31, 2085. Annual rent (which includes
payments to be made pursuant to the purchase of a related leasehold interest)
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is $404,000, plus 4% of gross non-gaming revenue, as defined. The annual rent is
adjusted after each five-year period based on increases in the Consumer Price
Index, limited to a 10% increase in any five-year period. The annual rent will
increase 10 years after the commencement of payments pursuant to a termination
of lease and settlement agreement to an amount equal to the sum of annual rent
had it been $500,000 annually plus adjustments thereto based on the Consumer
Price Index.
In June 1993, the Company entered into a lease for the exclusive use of
approximately 133 parking spaces and the additional use of 169 spaces in another
parking lot from the hours of 6:00 p.m. to 6:00 a.m. daily on property adjacent
to the Isle-Biloxi. The rent is $50,000 per year and the lease expires in June
1997. The Company has also entered a joint venture arrangement to sub-lease
property for the construction of a two-level parking garage next to the Isle-
Biloxi. The Company pays 50% of the rent, which is (i) $96,000 per year until
November 2000 to acquire the leasehold interest of the original lessee of the
property, plus (ii) $25,000 per month to the City of Biloxi, the lessor, plus
annual increases attributable to the Consumer Price Index (limited to 3% per
rental year) until the first option renewal period ends on November 30, 1995
and, thereafter, $25,000 per month, plus annual increases attributable to the
Consumer Price Index (limited to 3% per rental year) until the second option
renewal period ends on November 30, 2000. If the property is leased to a third
party, with the consent of the Company and its joint venture partner, for use of
the property as a gaming site, certain expenses, up to a maximum of $940,000,
will be refunded.
The Company owns approximately 13.1 acres of land in the City of Vicksburg,
Mississippi for use in connection with the Isle-Vicksburg. The Company owns an
additional 13 acres in Vicksburg on which it has off-site parking for 260
vehicles and operates a 67-vehicle recreational vehicle park. The Company
entered a lease for approximately five acres of land adjacent to the Isle-
Vicksburg to be used for additional parking.
LRGP owns approximately 26 acres in Bossier City, Louisiana for use in
connection with the Isle-Bossier City. LRG Hotels owns a 234-room hotel located
on approximately 10.5 acres of land on Interstate 20 in Bossier City, Louisiana.
The hotel is located 2.5 miles east of the Isle-Bossier City and five miles west
of the Louisiana Downs horse racing track.
The Company owns approximately 180 acres, and leases an additional 143
acres, at Pompano Park. The lease ends on July 1, 1999. The annual rent is $1.00
plus all maintenance and operating expenses of the premises. The Company has the
exclusive option to purchase the premises during the term of the lease for not
less than $12 million.
The Company also owns two additional riverboat casinos and one floating
pavilion that are currently held for sale. The riverboat casinos and the
floating pavilions were previously used by the Company at the Isle-Biloxi and
one of the riverboats and the floating pavilion were previously used by the
Company at the Isle-Vicksburg.
SCGC owns approximately 2.7 acres and leases approximately 10.5 acres of
land in Calcasieu Parish, Louisiana for use in connection with the Isle-Lake
Charles, which it also intends to use in connection with the Grand Palais. The
lease commenced on March 24, 1995 and has an initial term of five years. The
annual rent on the leased property is $750,000 for the first four years and
$900,000 for the fifth year of the initial term. The Company has the option to
renew the lease for seven additional terms of five years each. For the first
renewal term, the rent increases each year by 5% or the percentage increase in
the
27
<PAGE>
average consumer price index for Calcasieu Parish, Louisiana for the previous 12
month period, whichever is higher. Rent for the second and all subsequent
renewal terms will be no less than the rent for the last year of the preceding
term, subject to market adjustments upward based upon the rent paid by other
riverboat gaming operators in Louisiana and Mississippi for comparable property
usages. The rent for the fourth and all subsequent renewal terms will not be
less than $1.5 million per year. The Company also leases an additional 5.75
acres of land in Calcasieu Parish. The lease commenced on July 17, 1995 and has
an initial term of five years. The annual rent on the leased property is
$100,000 for the initial term. The Company has the option to renew the lease for
seven additional terms of five years each. For the first renewal term, the rent
increases each year by 5% or the percentage increase in the average consumer
price index for Calcasieu Parish, Louisiana for the previous 12-month period,
which ever is higher. Rent for the second and all subsequent renewal terms will
be no less then the rent for the last year of the preceding term, subject to
market adjustments upward based upon the rent paid by other riverboat gaming
operators in Louisiana and Mississippi for comparable property usage.
The Company owns 1.6 acres and leases 1.3 acres of land in Cripple Creek,
Colorado. The lease has an initial term of 25 years, with options to renew for
seven additional terms of 10 years each. Annual rent under the lease for the
first year of the lease is $250,000 and increases at the rate of $10,000 per
year to a maximum annual rent of $300,000. The amount of the rent is also
adjusted seven years after the rent commencement date and every two years
thereafter to reflect any increase in the Consumer Price Index (limited to 4%
for each year), applied cumulatively and in the aggregate. The Company has an
option to purchase the leased land at a price, depending on the date of
exercise, of $3.2 million to $5.0 million, or $5.0 million as adjusted by
increases in the Consumer Price Index if exercised after the year 2009.
Substantially all of the Company's property is presently pledged as
collateral for the Mortgage Notes. See Note 3 of Notes to Consolidated Financial
Statements. The Company intends to make an offer to repurchase all of the
outstanding Mortgage Notes using a portion of the proceeds of the Offering. If
any Mortgage Notes remain outstanding after the Offering, the Company intends to
defease the covenants of such Mortgage Notes, including the covenants granting a
first mortgage lien to the holders of such Mortgage Notes.
ITEM 3. LEGAL PROCEEDINGS.
The Company has been named, along with two gaming equipment suppliers, 41
of the country's largest gaming operators and four gaming distributors (the
"Gaming Industry Defendants") in a consolidated class action lawsuit pending in
Las Vegas, Nevada. The suit alleges that the Gaming Industry Defendants violated
the Racketeer Influenced and Corrupt Organizations Act by engaging in a course
of fraudulent and misleading conduct intended to induce people to play their
gaming machines based upon a false belief concerning how those gaming machines
actually operate, as well as the extent to which there is actually an
opportunity to win on any given play. The suit seeks unspecified compensatory
and punitive damages. The actions are in the early stages of discovery and
preliminary motions. The Company is unable at this time to determine what
effect, if any, the suit would have on its financial position or results of
operations.
The Company is engaged in various matters of litigation and has a number of
unresolved claims pending. While the ultimate liability with respect to such
litigation and claims cannot be determined at
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<PAGE>
this time, it is the opinion of management that such liability is not likely to
be material to the Company's consolidated financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the Company's 1996 fiscal year.
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<PAGE>
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
(a) Market Information. The following table sets forth, for the calendar
periods indicated, (a) the high and low bid quotations for the Common Stock as
reported on the Nasdaq Small-Cap Market until May 10, 1993 and (b) the high and
low sale prices on the Nasdaq National Market thereafter. The quotations reflect
interdealer prices, without retail mark-up or commissions, and may not
necessarily represent actual transactions. All prices listed have been adjusted
to reflect the Company's three-for-two stock dividend distributed in June 1993
and the Company's three-for-two stock dividend distributed in April 1994.
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
Fiscal Year Ended April 30, 1995
First Quarter.......................... $23.25 $ 9.50
Second Quarter......................... 14.25 10.00
Third Quarter.......................... 11.50 7.25
Fourth Quarter......................... 15.38 8.38
Fiscal Year Ended April 30, 1996
First Quarter.......................... 17.50 13.25
Second Quarter......................... 16.00 6.50
Third Quarter.......................... 8.00 5.12
Fourth Quarter......................... 8.38 5.38
Fiscal Year Ending April 30, 1997
First Quarter (through July 19, 1996).. 9.75 6.62
</TABLE>
(b) Holders of Common Stock. As of June 28, 1996, there were 401 holders
of record of the Common Stock.
(c) Dividends. The Company has never paid any dividends with respect to
its Common Stock and the current policy of the Board of Directors is to retain
earnings to provide for the growth of the Company. In addition, the Company's
indenture with respect to the Mortgage Notes limits, and the indenture with
respect to the Notes will limit, the Company's ability to pay dividends. See
"Item 8 -- Financial Statements and Supplementary Data-- Casino America, Inc. --
Notes to Consolidated Financial Statements --Note 3." Consequently, no cash
dividends are expected to be paid on the Common Stock in the foreseeable future.
Further, there can be no assurance that the current and proposed operations of
the Company will generate the funds needed to declare a cash dividend or that
the Company will have legally available funds to pay dividends. In addition, the
Company may fund part of its operations in the future from indebtedness, the
terms of which may prohibit or restrict the payment of cash dividends. If a
holder of Common Stock is disqualified by the regulatory authorities from owning
such shares, such holder will not be permitted to receive any dividends with
respect to such stock. See "Item 1--Business--Regulatory Matters."
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following selected historical financial information has been derived
from the consolidated financial statements of the Company and should be read in
conjunction with the consolidated financial statements and notes thereto, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
Year Year Year Year Four months Year
ended ended ended ended ended ended
April 30, April 30, April 30, April 30, April 30, December 31,
1996 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues $157,963 $127,537 $144,633 $58,664 $ 508 $3,243
Operating income (loss) 3,193 20,196 39,915 17,587 (260) (496)
Income (loss) before
income taxes 5,703 30,054 31,555 15,451 (260) (491)
Net income (loss) 1,555 18,069 20,353 10,042 (260) (491)
Net Income (loss) per
common and common
equivalent share
Primary .10 1.16 1.28 .71 (.04) (.08)
Fully diluted .10 1.15 1.28 .68 (.04) (.08)
- ---------------------------------------------------------------------------------------------------
April 30, April 30, April 30, April 30, April 30, December 31,
1996 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------
(in thousands)
BALANCE SHEET DATA
Total assets $226,474 $211,899 $176,538 $58,484 $1,133 $ 758
Long-term debt
including
current portion 139,778 138,857 126,649 34,051 200 __
Stockholders' equity
(deficit) 50,270 42,015 23,650 14,945 19 (42)
</TABLE>
31
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the consolidated financial statements, including
the notes thereto, included elsewhere in this Form 10-K.
GENERAL
The Company's results of operations for the fiscal year ended April 30,
1996 reflect the Company's equity in the income of the Isle-Bossier City and the
Isle-Lake Charles, which commenced operations on July 29, 1995. In addition, the
fiscal 1996 results of operations were impacted by the substantial expansion of
the Isle-Biloxi, which included adding a hotel and enhancements to the land-
based pavilion and the casino, completed in August 1995 and the acquisition of
Pompano Park in June 1995. The results of operations for the fiscal year ended
April 30, 1995 reflect a full year of operations for the Isle-Biloxi and the
Isle-Vicksburg and the Company's equity in the income of the Isle-Bossier City,
which commenced operations on May 20, 1994. The results of operations for the
fiscal year ended April 30, 1994 reflect a full year of operations of the Isle-
Biloxi and almost three full quarters of operations of the Isle-Vicksburg.
The Company believes that the results of operations for the fiscal years
ended April 30, 1996, 1995 and 1994 may not be indicative of the results of
operations for future periods primarily because, in the past, the Company has
reported its interests in the Isle-Bossier City and the Isle-Lake Charles using
the equity method of accounting. Upon consummation of the LRGP Acquisition, the
Company will consolidate the results of operations of the Isle-Bossier City and
the Isle-Lake Charles. In addition, the Company believes that its historical
results may not be comparable to future results of operations because of the
substantial present and expected future increase in gaming competition for
gaming customers in each of the Company's markets as new casinos open and as
existing casinos add to or enhance their facilities. Furthermore, the historical
results of operations reflect the Isle-Lake Charles as a single riverboat
operation, whereas the Isle-Lake Charles now operates two riverboats with a
recently expanded land-based pavilion. The Company believes that seasonality
does not have a significant effect on its business.
RESULTS OF OPERATIONS
Fiscal Year Ended April 30, 1996 Compared to Fiscal Year Ended April 30, 1995
Total revenue was $158.0 million for the fiscal year ended April 30, 1996,
as compared to $127.5 million for the fiscal year ended April 30, 1995,
representing an increase of 24%. Casino revenue, in total, increased by 5% to
$123.9 million from $117.6 million compared to the prior year, due mainly to a
$12.1 million increase in casino revenue at the Isle-Biloxi attributable
primarily to increased casino traffic as a result of the opening of a 367-room
hotel on site, partially offset by a $5.7 million decrease in casino revenue at
the Isle-Vicksburg attributable to increased promotional activity by competitors
in that market. The Company has not consolidated the revenue of the Isle-Bossier
City and Isle-Lake Charles, which totaled $150.8 million and $57.3 million,
respectively, for fiscal 1996, compared to
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<PAGE>
$147.0 million for the Isle-Bossier City in the prior fiscal year (the Isle-Lake
Charles was not in operation during fiscal 1995), but will consolidate that
revenue following the LRGP acquisition.
Revenue for fiscal 1996 includes room revenue of $4.4 million from the new
hotel and entertainment pavilion at the Isle-Biloxi. Room revenue does not
reflect the value of any complementaries.
The Company received management fees of $6.3 million for fiscal 1996,
compared to $4.6 million for fiscal 1995, representing an increase of 37%. In
addition to fees under the Company's management agreement with LRGP with respect
to the Isle-Bossier City, $1.6 million in fees were received under the Company's
management agreement with SCGC with respect to the Isle-Lake Charles in fiscal
1996. As a result of the LRGP Acquisition and SCGC Acquisition, future fees from
its management agreements will not be reported because such amounts will be
eliminated in consolidation.
Fiscal 1996 revenue includes pari-mutuel commissions, simulcast fees and
admissions of $15.1 million generated by Pompano Park.
Food, beverage and other revenue was $8.2 million for fiscal 1996,
compared to $5.3 million for fiscal 1995, representing an increase of 55%.
Food, beverage and other revenue does not reflect the value of any
complementaries. Of the $2.9 million increase, $1.5 million is attributable
to revenue generated at Pompano Park. The remainder of the increase in
food, beverage and other revenue is attributable to the opening of the new
hotel at the Isle-Biloxi on August 1, 1995.
Casino expenses for fiscal 1996 totaled $49.9 million, as compared to
$46.0 million for fiscal 1995. Casino expenses consist primarily of
salaries, wages and benefits, and operating and certain promotional
expenses of the casinos. Casino expenses as a percentage of casino revenues
increased from 39% to 40% in fiscal 1996 due to the cost of
complementaries.
Fiscal 1996 operating expenses also include room expenses of $2.6 million
from the new hotel and entertainment pavilion at the Isle-Biloxi. These expenses
are those directly relating to the cost of providing hotel rooms. Other costs of
the hotel are shared with the casino and are presented in their respective
expense categories.
Gaming taxes paid to the State of Mississippi, cities and counties totaled
$15.1 million for fiscal 1996, as compared to $13.9 million in fiscal 1995, and
are consistent with the aforementioned increase in casino revenue. Gaming taxes
in both years represented 12% of casino revenue as required by Mississippi law.
Pari-mutuel operating costs of Pompano Park totaled $11.4 million in fiscal
1996. Such costs consist primarily of compensation, benefits, purses, simulcast
fees and other direct costs of track operations.
Food and beverage expenses of $5.4 million in fiscal 1996 reflect a $1.7
million increase, or 46%, over fiscal 1995, consistent with the percentage
increase in food and beverage revenues. Of the $1.7 million increase, $1.2
million was attributable to Pompano Park, while the remainder occurred at the
Isle-Biloxi due to the opening of its hotel.
Marine and facilities expenses totaled $10.8 million in fiscal 1996,
representing an increase of 50% over the $7.2 million reported in fiscal 1995.
Of the $3.6 million increase, $1.8 million relates to
33
<PAGE>
facilities and maintenance costs of Pompano Park, while an additional $1.3
million relates to the expansion at the Isle-Biloxi and the associated labor,
rent expense, utility and maintenance costs of that expanded facility.
Marketing and administrative expenses totaled $33.2 million for fiscal
1996, a 23% increase over the $26.9 million for the prior fiscal year. Of the
$6.3 million increase, $1.9 million represented additional promotions at the
Isle-Biloxi and the Isle-Vicksburg in response to increased competition in those
markets. The remaining increase of $4.4 million primarily reflects the $1.5
million charge for costs associated with the September 1995 withdrawal of the
Company's registration statement and cancellation of its previously planned
public offering of securities and $2.5 million in administrative and promotional
expenses for Pompano Park.
Depreciation and amortization expense was $12.1 million for fiscal 1996,
representing a 35% increase over depreciation and amortization expense of $8.9
million in the prior fiscal year. The increase was primarily attributable to the
new hotel and entertainment pavilion at the Isle-Biloxi.
Preopening expenses of $1.3 million in fiscal 1996 represent salaries,
benefits, training, marketing and other non-capitalizable costs which were
expensed as incurred in connection with the opening of the new hotel at the
Isle-Biloxi. Fiscal 1995 preopening expenses of $0.5 million relate to the
expansion of facilities at the Isle-Vicksburg.
Interest expense--Other was $15.2 million, net of capitalized interest of
$1.5 million, in fiscal 1996, as compared to $14.0 million, net of capitalized
interest of $1.0 million, in fiscal 1995. This $1.2 million increase was
primarily due to additional debt incurred to finance the new hotel and pavilion
and furniture, fixtures and equipment at the Isle-Biloxi, as well as additional
indebtedness relating to land purchased for new development and the acquisition
of Pompano Park.
Interest income--Unconsolidated joint ventures was $0.7 million in fiscal
1996 as compared to $3.0 million in fiscal 1995. Interest at the rate of 11.5%
was being charged to LRGP with respect to the Company's loan to the joint
venture, which was repaid in full in May 1995.
The Company had net income of $1.6 million for fiscal 1996, as compared to
net income of $18.1 million for fiscal 1995, representing a decrease of 91%.
This decrease was due mainly to an $11.8 million pretax one-time charge which
included $9.3 million related to the write-down of two riverboats, a barge and
certain gaming equipment, all of which were reclassified during the year as
being held for sale, as well as $2.5 million related to abandoned projects and
certain other costs associated with the recent change in executive management.
In addition, the Company incurred a $0.3 million charge in connection with
accounting for deferred taxes related to its investment in SCGC and a $1.2
million pretax loss on disposal of an airplane and other equipment. The
Company's net income for fiscal 1996 includes $16.4 million, representing the
Company's equity in the income of LRGP and SCGC (which includes $1.3 million for
the Company's share of the net losses of SCGC), compared to $19.9 for fiscal
1995. The Company also incurred a pretax charge of approximately $1.5 million
for legal, printing and accounting costs associated with the September 1995
withdrawal of the Company's registration statement and the proposed transactions
relating thereto. The Company's effective income tax rate was 73% for fiscal
1996 as compared to 40% for fiscal 1995. The increase in the effective tax rate
was due to a $0.7 million fourth quarter adjustment to prior years' taxes and
the exclusion of the Company's share of the net loss
34
<PAGE>
of SCGC in its calculation of income taxes. Earnings per share decreased 91%
from $1.16 in fiscal 1995 to $0.10 in fiscal 1996.
Fiscal Year Ended April 30, 1995 Compared to Fiscal Year Ended April 30, 1994
Total revenue was $127.5 million for the fiscal year ended April 30, 1995,
as compared to $144.6 million for the fiscal year ended April 30, 1994,
representing a decrease of 12%. Casino revenue for fiscal 1995 totaled $117.6
million, a 17% decrease over fiscal 1994 casino revenue of $141.0 million. The
decrease in casino revenue in fiscal 1995 resulted from increased competition in
the Biloxi and Vicksburg markets, as well as ongoing construction of the 367-
room Crowne Plaza hotel and entertainment pavilion at the Isle-Biloxi. The
Company does not consolidate the revenue of the Isle-Bossier City, which was
$147.0 million in fiscal 1995, but will consolidate this revenue following the
LRGP Acquisition.
The Company received a management fee of $4.6 million in fiscal 1995 under
its management agreement with LRGP with respect to the Isle-Bossier City, as
opposed to no revenue from management fees in fiscal 1994.
Food, beverage and other revenue totaled $5.3 million in fiscal 1995,
representing a 47% increase over the fiscal 1994 level of $3.6 million. Revenue
does not reflect the value of any complimentaries. The increase was attributable
primarily to the opening of the restaurant at the Isle-Vicksburg in February
1994.
Casino expenses for fiscal 1995 totaled $46.0 million, as compared to
casino expenses of $42.7 million for fiscal 1994. The expenses are primarily
comprised of salaries, wages and benefits, and operating and promotional
expenses of the casinos. Casino expenses increased in total from fiscal 1994 to
fiscal 1995 due primarily to a full year of operations in fiscal 1995 at the
Isle-Vicksburg as well as to the opening of the restaurant in Vicksburg which
increased casino expenses (beyond the increase in food and beverage expenses)
due to the cost of complimentaries. Casino expenses as a percentage of casino
revenue were 39% in fiscal 1995, as compared to 30% in fiscal 1994. Casino
expenses tend to increase as a percentage of revenue when casino revenue
decreases because of the relatively fixed nature of casino expenses.
Preopening expenses totaled $0.5 million in fiscal 1995, as compared to
$3.5 million in fiscal 1994. The fiscal 1994 preopening expenses related to the
opening of the Isle-Vicksburg and the expansion and opening of the floating
pavilion facility at the Isle-Biloxi; the fiscal 1995 amount related to the
opening of the new floating pavilion facility at the Isle-Vicksburg in May 1994.
The fiscal 1995 equity in net income of unconsolidated joint ventures includes
expenses relating to the opening of the Isle-Bossier City. The Company's share
of these preopening expenses was $1.6 million in fiscal 1995 as compared to $1.8
million in fiscal 1994.
Gaming taxes paid to the State of Mississippi, cities and counties totaled
$13.9 million in fiscal 1995, as compared to $16.9 million in fiscal 1994,
reflecting lower casino revenue in fiscal 1995. Gaming taxes in both years
represented 12% of casino revenue, as required by Mississippi law.
35
<PAGE>
Food and beverage expenses totaled $3.7 million in fiscal 1995 as compared
to $2.3 million in fiscal 1994, an increase of 63%. These expenses consist
primarily of the salaries, wages, benefits and operating expenses of the food
and beverage operations. The increase in these expenses from fiscal 1994 to
fiscal 1995 was primarily due to the fact that the restaurant at the Isle-
Vicksburg was open for only a portion of the 1994 fiscal year, as opposed to the
full 1995 fiscal year. The Company's food and beverage operations are designed
to draw customers to the casinos and are not expected to produce operating
income.
Marine and facilities expenses totaled $7.2 million in fiscal 1995, as
compared to $7.8 million in fiscal 1994. These expenses include the salaries,
wages, benefits and operating expenses of the marine crews for Coast Guard-
certified riverboats, and insurance, housekeeping and general maintenance of the
facilities. The decline in fiscal 1995 was primarily attributable to the
elimination of the marine crew at the Isle-Vicksburg in fiscal 1995.
Marketing and administrative expenses totaled $26.9 million in fiscal 1995
as compared to $26.1 million in fiscal 1994. The increase in these expenses was
primarily attributable to an increase in marketing activities in response to
increased competition in the Company's markets. Administrative expenses, which
include general administrative and office expenses, professional fees, property
taxes, rent and new development projects were also higher due primarily to one
full year of operations at the Isle-Vicksburg and increased expenses at the
corporate level due to increased activity in the new development area. See
"Business--Future Development Opportunities."
Depreciation and amortization expense was $8.9 million in fiscal 1995,
representing an increase of 62% over depreciation and amortization expense of
$5.5 million in fiscal 1994. This increase was primarily attributable to the
Company's growth in depreciable fixed assets from fiscal 1994 to fiscal 1995,
principally relating to the addition of a new floating pavilion casino and
gaming equipment, restaurant and administrative office building at the Isle-
Vicksburg.
Interest expense--Related parties was $1.3 million in fiscal 1994, as
compared to none in fiscal year 1995. This expense primarily represented
interest paid to affiliated companies in connection with capital leases of
certain property and equipment in fiscal 1994, which arrangements were
discontinued prior to the beginning of the 1995 fiscal year.
Interest expense--Other was $14.0 million in fiscal 1995, as compared to
$6.9 million in fiscal 1994, an increase of $7.1 million. The Company's interest
expense increased significantly in fiscal 1995 due primarily to a full year of
interest expense relating to its First Mortgage Notes, which were outstanding
for only a portion of fiscal 1994.
Interest income--Unconsolidated joint ventures was $3.0 million in fiscal
1995, as compared to $1.1 million in fiscal 1994. Interest at the rate of 11
1/2% was being charged to LRGP and LRG Hotels with respect to the Company's loan
to such joint ventures, which had an outstanding principal balance of $2.3
million at April 30, 1995.
Interest income--Other was $1.0 million in fiscal 1995, essentially
unchanged from fiscal 1994, reflecting slightly lower cash balances during
fiscal 1995, offset by higher interest rates.
36
<PAGE>
The Company had net income of $18.1 million in fiscal 1995, as compared to
$20.4 million in fiscal 1994, representing a decrease of 11%. This decrease was
due primarily to a decrease in casino revenue and operating income at the Isle-
Biloxi and the Isle-Vicksburg and an increase in interest expense due to a full
year of interest on the First Mortgage Notes. Earnings per share decreased 9%
from $1.28 in fiscal 1994 to $1.16 in fiscal 1995. The Company's fiscal 1995 net
income includes $19.9 million of equity in the income of the Isle-Bossier City,
which opened in May 1994.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1996, the Company had cash and cash equivalents of $18.6
million compared to $19.0 million at April 30, 1995 and approximately $3.5
million available under lines of credit. Fiscal 1996 operating activities
provided $11.8 million of cash flow to the Company as compared to $8.5 million
in fiscal 1995. In addition, in fiscal 1996, the Company received $3.0 million
in distributions and repayments from LRGP, primarily related to the repayment of
a note receivable, as well as $12.2 million borrowed for the construction of the
hotel at the Isle-Biloxi and $2.8 million in proceeds from the sale of its
aircraft and other equipment. The Company invested $34.5 million in property and
equipment in fiscal 1996, primarily to build the new hotel at the Isle-Biloxi
and to acquire Pompano Park and property held for future development in
Colorado.
On March 11, 1996, the Company sold an aggregate of 1,020,940 shares of
Common Stock. Proceeds from the sale totaled approximately $6.0 million. A
portion of the proceeds was used to retire a total of $1.6 million in loans
payable to the Chairman and a related party, including accrued interest. In
addition, the Company issued to certain shareholders Rights to purchase shares
of Common Stock. In the event that the Rights Offering is fully subscribed, the
Company would receive net proceeds of approximately $25.1 million.
On May 3, 1996, the Company purchased all of the common stock of GPRI. The
aggregate consideration paid by the Company in the Grand Palais Acquisition was
approximately $62.4 million, consisting of cash in the amount of approximately
$8.4 million, notes and the assumption of indebtedness of approximately $37.9
million, 2,250,000 shares of Common Stock and warrants to purchase an additional
500,000 shares of Common Stock at an exercise price of $10.00 per share. On the
same date, the Company consummated the SCGC Acquisition for 1,850,000 shares of
Common Stock and restructured the terms of an existing $20.0 million note
previously issued to Crown Casino.
The Company anticipates that its principal near-term capital requirements
will relate to the consolidation of its Louisiana joint ventures, the expansion
of its operations at the Isle-Lake Charles in connection with the Grand Palais
Acquisition and investments in the Hotel Joint Venture. The Company also
anticipates that capital improvements approximating $20 million will be made
during fiscal 1997 to maintain its existing facilities and remain competitive in
its markets. The Company expects to receive approximately $289.3 million in net
proceeds from the Offering and intends to finance the LRGP Acquisition and
retire approximately $184 million of indebtedness, including the Mortgage Notes,
with a portion of the net proceeds from the Offering.
Although the Company is not presently committed to making any significant
capital expenditures or investment into a new gaming market, the Offering and
the Rights Offering are intended to provide capital for making improvements and
enhancements to the Company's existing facilities and other general
37
<PAGE>
corporate purposes. The Company believes that it will be necessary to make
certain capital improvements to its land-based facilities at the Isle-Bossier
City and the Isle-Vicksburg and that enhancements to its non-gaming amenities at
all facilities will be important to its operations. The Company may, in the
future, also consider expanding its casino square footage at the Isle-Biloxi. In
addition, the Company may consider making investments in jurisdictions where
gaming is not presently permitted, but in which it believes that gaming may be
legalized in the future.
An important component of the Company's operating strategy will be to
develop, open and operate, either directly, through the Hotel Joint Venture or
otherwise, hotel facilities at its gaming facilities in order to attract
additional gaming patrons and encourage longer visits to and a greater level of
play at the Company's casinos. The Company has entered into a letter of intent
to form the Hotel Joint Venture. The letter of intent provides that the Company
and HID will each contribute approximately $10 million in assets to the Hotel
Joint Venture. The Company's contribution is expected to consist of cash,
certain land located near the Isle-Bossier City, the Isle-Lake Charles and, in
the event the Company elects to develop a casino there, in Cripple Creek,
Colorado, or other property. No assurance can be made that the Company will
enter into the Hotel Joint Venture, or if it does, that the Company will not be
required to make significant investments of cash into the Hotel Joint Venture to
accomplish its objectives.
The Company expects that available cash, net proceeds from the Rights
Offering and the Offering and cash from future operations will be adequate to
fund the aforementioned transactions, planned capital expenditures, debt service
and working capital requirements. No assurance can be made that the Company will
have sufficient capital resources to expand into new gaming markets or make
significant capital expenditures at its existing properties. In addition, the
Indenture governing the Notes will place certain limits on the Company's ability
to incur additional indebtedness and to make certain investments. Following the
Offering, the Company will be highly leveraged and, as a result, may be unable
to obtain debt or equity financing on terms acceptable to the Company.
Limitations on the Company's capital resources would likely delay any plans with
respect to entry into new markets or significant capital improvements at its
existing properties.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the asset carrying amount. Statement No. 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company will adopt Statement 121 in the first quarter of fiscal 1997 and, based
on current circumstances, does not believe the effect of adoption will be
material.
38
<PAGE>
ITEM 8. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CASINO AMERICA, INC.
Report of Independent Auditors............................................................. 40
Consolidated Balance Sheets, April 30, 1995 and 1996....................................... 41
Consolidated Statements of Income, Years ended April 30, 1994, 1995 and 1996............... 43
Consolidated Statements of Stockholders' Equity, Years ended April 30, 1994, 1995 and 1996. 44
Consolidated Statements of Cash Flows, Years ended April 30, 1994, 1995 and 1996........... 45
Notes to Consolidated Financial Statements................................................. 46
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
Report of Independent Auditors............................................................. 60
Balance Sheets, April 30, 1995 and 1996.................................................... 61
Statements of Operations, Years ended April 30, 1994, 1995 and 1996........................ 63
Statements of Partners' Capital (Deficit), Years ended April 30, 1994, 1995 and 1996....... 64
Statements of Cash Flows, Years ended April 30, 1994, 1995 and 1996........................ 65
Notes to Financial Statements.............................................................. 66
</TABLE>
39
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Casino America, Inc.
We have audited the accompanying consolidated balance sheets of Casino
America, Inc. as of April 30, 1995 and 1996, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended April 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Casino America,
Inc. at April 30, 1995 and 1996, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended April 30,
1996, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
June 3, 1996
40
<PAGE>
CASINO AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS APRIL 30
- ---------------------------------------------------------------------------- --------------------------
1995 1996
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................................. $ 18,997,000 $ 18,585,000
Accounts receivable:
Related parties.......................................................... 2,409,000 3,171,000
Other.................................................................... 825,000 1,764,000
Income tax receivable...................................................... 1,189,000 --
Deferred income taxes...................................................... -- 1,001,000
Prepaid expenses and other assets.......................................... 1,941,000 2,858,000
------------ ------------
Total current assets................................................... 25,361,000 27,379,000
Property and equipment--Net................................................. 133,485,000 129,306,000
Other assets:
Investment in and advances to joint ventures............................... 20,861,000 34,281,000
Notes receivable--Related party............................................ 4,700,000 4,700,000
Other investments.......................................................... 2,250,000 2,250,000
Property held for development or sale...................................... 1,398,000 15,840,000
Restricted cash............................................................ 12,171,000 --
Berthing, concession, and leasehold rights, net of accumulated
amortization of $896,000 and $1,209,000, respectively.................... 5,373,000 5,060,000
Deferred financing costs, net of accumulated amortization of $682,000 and
$1,229,000, respectively.................................................. 4,089,000 4,327,000
Prepaid expenses........................................................... 955,000 743,000
Deposits and other......................................................... 1,256,000 2,588,000
------------ ------------
53,053,000 69,789,000
------------ ------------
Total assets........................................................... $211,899,000 $226,474,000
============ ============
</TABLE>
See notes to consolidated financial statements.
41
<PAGE>
CASINO AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30
--------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1996
- ----------------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt....................................... $ 6,793,000 $ 8,884,000
Accounts payable--Trade.................................................... 8,369,000 6,169,000
Accrued liabilities:
Interest................................................................ 5,631,000 5,802,000
Payroll and payroll related............................................. 5,670,000 6,333,000
Property and other taxes................................................ 1,207,000 6,880,000
Progressive jackpots and slot club awards............................... 2,232,000 1,851,000
Deferred income taxes................................................... 1,477,000 --
Other................................................................... 480,000 2,392,000
------------ ------------
Total current liabilities............................................ 31,859,000 38,311,000
Long-term debt, less current maturities............................................ 132,064,000 130,894,000
Deferred income taxes.............................................................. 5,961,000 6,999,000
Stockholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued.. -- --
Common stock, $.01 par value; 45,000,000 shares authorized; shares
issued and outstanding: 14,853,124 and 16,038,882, respectively........... 149,000 160,000
Class B common stock, $.01 par value; 3,000,000 shares authorized; none
issued.................................................................... -- --
Additional paid-in capital................................................. 7,168,000 13,857,000
Retained earnings.......................................................... 34,698,000 36,253,000
------------ ------------
Total stockholders' equity........................................... 42,015,000 50,270,000
------------ ------------
Total liabilities and stockholders' equity........................... $211,899,000 $226,474,000
============ ============
</TABLE>
See notes to consolidated financial statements.
42
<PAGE>
CASINO AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
-------------------------------------------
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Revenue:
Casino............................................ $140,994,000 $117,613,000 $123,936,000
Rooms............................................. -- -- 4,422,000
Management fee--Joint ventures.................... -- 4,613,000 6,308,000
Pari-mutuel commissions and fees.................. -- -- 15,063,000
Food, beverage, and other......................... 3,639,000 5,311,000 8,234,000
------------ ------------ ------------
Total revenue.................................. 144,633,000 127,537,000 157,963,000
Operating expenses:
Casino............................................ 42,726,000 46,039,000 49,910,000
Rooms............................................. -- -- 2,602,000
Gaming taxes...................................... 16,915,000 13,924,000 15,116,000
Pari-mutuel....................................... -- -- 11,375,000
Food and beverage................................. 2,253,000 3,678,000 5,382,000
Marine and facilities............................. 7,764,000 7,199,000 10,781,000
Marketing and administrative...................... 26,113,000 26,895,000 33,167,000
One-time charge................................... -- -- 11,798,000
Preopening expenses............................... 3,475,000 483,000 1,311,000
Loss on disposal of equipment..................... 22,000 178,000 1,217,000
Depreciation and amortization..................... 5,450,000 8,945,000 12,111,000
------------ ------------ ------------
Total operating expenses....................... 104,718,000 107,341,000 154,770,000
------------ ------------ ------------
Operating income.......................................... 39,915,000 20,196,000 3,193,000
Interest expense:
Related parties................................... (1,333,000) -- (56,000)
Other............................................. (6,909,000) (14,029,000) (15,237,000)
Interest income:
Unconsolidated joint ventures..................... 1,107,000 2,961,000 747,000
Other............................................. 1,016,000 1,022,000 622,000
Equity in income (loss) of unconsolidated joint ventures.. (2,241,000) 19,904,000 16,434,000
------------ ------------ ------------
Income before income taxes................................ 31,555,000 30,054,000 5,703,000
Income taxes.............................................. 11,202,000 11,985,000 4,148,000
------------ ------------ ------------
Net income................................................ $ 20,353,000 $ 18,069,000 $ 1,555,000
============ ============ ============
Net income per common and common equivalent share......... $ 1.28 $ 1.16 $ 0.10
Weighted average common and common equivalent shares...... 15,886,000 15,604,000 15,721,000
</TABLE>
See notes to consolidated financial statements.
43
<PAGE>
CASINO AMERICA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
SHARES OF COMMON PAID-IN RETAINED STOCKHOLDERS'
COMMON STOCK STOCK CAPITAL EARNINGS EQUITY
------------ --------- ------------ -------- --------------
<S> <C> <C> <C> <C> <C>
Balance, April 30, 1993..................... 15,804,620 $158,000 $ 4,761,000 $ 10,026,000 $ 14,945,000
Exercise of stock options........... 102,869 1,000 301,000 -- 302,000
Purchase and retirement of
common stock....................... (1,125,000) (11,000) (489,000) (13,750,000) (14,250,000)
Issuance of warrants................ -- -- 2,300,000 -- 2,300,000
Net income.......................... -- -- -- 20,353,000 20,353,000
---------- -------- ----------- ------------ ------------
Balance, April 30, 1994..................... 14,782,489 148,000 6,873,000 16,629,000 23,650,000
Exercise of stock options........... 64,715 1,000 220,000 -- 221,000
Issuance of stock for services...... 5,920 -- 75,000 -- 75,000
Net income.......................... -- -- -- 18,069,000 18,069,000
---------- -------- ----------- ------------ ------------
Balance, April 30, 1995..................... 14,853,124 149,000 7,168,000 34,698,000 42,015,000
Issuance of common stock............ 1,020,940 10,000 5,988,000 -- 5,998,000
Exercise of stock options........... 145,218 1,000 566,000 -- 567,000
Issuance of stock for compensation.. 18,100 -- 115,000 -- 115,000
Issuance of stock for services...... 1,500 -- 20,000 -- 20,000
Net income.......................... -- -- -- 1,555,000 1,555,000
---------- -------- ----------- ------------ ------------
Balance, April 30, 1996..................... 16,038,882 $160,000 $13,857,000 $ 36,253,000 $ 50,270,000
========== ======== =========== ============ ============
</TABLE>
See notes to consolidated financial statements.
44
<PAGE>
CASINO AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
-------------------------------------------
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income......................................................... $ 20,353,000 $ 18,069,000 $ 1,555,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.............................. 5,450,000 8,945,000 12,111,000
Amortization of bond discount and deferred financing
costs..................................................... 311,000 786,000 705,000
Deferred income taxes...................................... 1,422,000 5,544,000 (1,440,000)
Equity in (income) loss of unconsolidated joint ventures... 2,241,000 (19,904,000) (16,434,000)
Write-down of assets held for sale......................... -- -- 9,257,000
Other...................................................... 22,000 308,000 1,346,000
Changes in current assets and liabilities, net of Pompano
Park acquisition:
Accounts receivable..................................... 68,000 (3,952,000) 179,000
Prepaid expenses and other assets....................... 409,000 (932,000) 675,000
Accounts payable and accrued expenses................... 14,269,000 (321,000) 3,802,000
------------ ------------ ------------
Net cash provided by operating activities.......................... 44,545,000 8,543,000 11,756,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment................................. (45,975,000) (46,584,000) (22,201,000)
Purchase of Pompano Park........................................... -- -- (7,959,000)
Increase in notes receivable and other investments................. -- (6,950,000) --
Proceeds from disposals of property and equipment.................. 105,000 1,408,000 2,767,000
Advances to joint ventures......................................... (33,319,000) (10,553,000) --
Repayments and distributions from joint ventures................... -- 43,413,000 3,014,000
(Increase) decrease in restricted cash............................. (11,672,000) (499,000) 12,171,000
Deposits and other................................................. 170,000 (986,000) (1,332,000)
------------ ------------ ------------
Net cash used in investing activities.............................. (90,691,000) (20,751,000) (13,540,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings........................................... 109,063,000 15,000,000 10,500,000
Principal payments on borrowings................................... (37,397,000) (7,941,000) (14,908,000)
Deferred financing costs........................................... (2,045,000) (1,226,000) (785,000)
Proceeds from sale of stock and exercise of options................ 243,000 221,000 6,565,000
Purchase and retirement of common stock............................ (7,000,000) -- --
------------ ------------ ------------
Net cash provided by financing activities.......................... 62,864,000 6,054,000 1,372,000
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents............... 16,718,000 (6,154,000) (412,000)
Cash and cash equivalents at beginning of year..................... 8,433,000 25,151,000 18,997,000
------------ ------------ ------------
Cash and cash equivalents at end of year........................... $ 25,151,000 $ 18,997,000 $ 18,585,000
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest, net of amounts capitalized....................... $ 2,284,000 $ 13,259,000 $ 14,417,000
Income taxes--net.......................................... 10,020,000 7,758,000 (341,000)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES
Debt issued for:
Land....................................................... $ 450,000 $ 2,290,000 $ --
Property and equipment..................................... 12,618,000 2,125,000 4,316,000
Purchase and retirement of common stock.................... 7,250,000 -- --
Insurance premiums......................................... -- -- 855,000
Allocation of deferred financing costs to unconsolidated joint
venture..................................................... 1,912,000 -- --
Bond discount recorded to reflect the issuance of warrants......... 2,300,000 -- --
Underwriting discount on first mortgage notes...................... 3,412,000 -- --
</TABLE>
See notes to consolidated financial statements.
45
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Casino
America, Inc. and its wholly owned subsidiaries (the Company). All material
intercompany balances and transactions have been eliminated in consolidation.
The Company's investments in its 50%-owned joint ventures, Louisiana Riverboat
Gaming Partnership (LRGP) and LRG Hotels, LLC and LRGP's 50%-owned joint
venture, St. Charles Gaming Company, Inc. (SCGC) are accounted for using the
equity method of accounting. Certain reclassifications have been made to the
prior-year financial statements to conform to the 1996 presentation.
The Company is engaged in the business of developing, owning, and operating
riverboat and dockside casinos and related facilities. The Company commenced
operations in Biloxi, Mississippi, and Vicksburg, Mississippi, on August 1, 1992
and August 9, 1993, respectively. LRGP and SCGC commenced operations in Bossier
City, Louisiana and Lake Charles, Louisiana on May 20, 1994 and July 29, 1995,
respectively.
The preparation of financial statements in conformity with generally
accepted accounting principles necessarily requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements as well as revenues and expenses during the reporting period. Actual
amounts when ultimately realized could differ from those estimates.
Cash Equivalents and Concentrations of Cash
The Company considers cash and all highly liquid investments with a
maturity at the time of purchase of three months or less to be cash equivalents.
Cash and cash equivalents are placed primarily with one high-credit-quality
financial institution. At April 30, 1996, cash equivalents were invested in a
short-term certificate of deposit and an overnight repurchase agreement. The
carrying amount of cash and cash equivalents approximates fair value because of
the short maturity of these instruments.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
------
<S> <C>
Leasehold improvements.............. 10--31
Buildings and land improvements..... 25
Riverboats and floating pavilions... 25
Furniture, fixtures, and equipment.. 5--10
</TABLE>
Interest capitalized during the years ended April 30, 1994, 1995 and 1996
totaled $773,000, $1,006,000 and $1,525,000, respectively. Depreciation expense
for the years ended April 30, 1994, 1995 and 1996, totaled $5,134,000,
$8,632,000, and $11,788,000, respectively.
46
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Debt Acquisition Costs
The costs of issuing long-term debt have been capitalized and are being
amortized using the bonds outstanding method.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense for the
years ended April 30, 1994, 1995 and 1996 totaled $6,373,000, $5,665,000 and
$7,085,000, respectively.
Berthing, Concession, and Leasehold Rights
Berthing, concession, and leasehold rights are recorded at cost and are
being amortized over approximately 20 years using the straight-line method.
Revenue and Promotional Allowances
Casino revenue is the net win from gaming activities which is the
difference between gaming wins and losses. Casino revenues are net of accruals
for anticipated payouts of progressive electronic gaming device jackpots.
Revenue does not include the retail amount of food, beverage, and other
items provided gratuitously to customers, which totaled $10,169,000, $9,987,000,
and $13,797,000 for the years ended April 30, 1994, 1995 and 1996, respectively.
The estimated cost of providing such complimentary services, which is included
in casino expense, was $8,234,000, $7,960,000, and $11,608,000 for the years
ended April 30, 1994, 1995 and 1996, respectively.
Preopening Expenses
Preopening expenses, which consist principally of payroll and marketing
costs, are expensed as incurred.
Net Income per Common Share
Net income per common and common equivalent share is based on the weighted-
average number of common shares outstanding during the period plus, in periods
in which they have a dilative effect, the effect of common shares contingently
issuable upon the exercise of warrants and stock options.
Stock Based Compensation
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly,
recognizes no compensation expense for the stock option grants.
47
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Impairment of Long-Lived Assets
In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company will adopt Statement No.
121 in fiscal 1997 and, based on current circumstances, does not believe the
adoption will have a material effect on the Company's financial statements.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
APRIL 30
--------------------------
1995 1996
------------ ------------
<S> <C> <C>
Property and equipment:
Land and land improvements.......... $ 18,687,000 $ 25,485,000
Leasehold improvements.............. 5,368,000 50,130,000
Buildings and improvements.......... 5,203,000 6,099,000
Riverboats and floating pavilions... 51,020,000 33,591,000
Furniture, fixtures, and equipment.. 35,211,000 35,835,000
Construction in progress............ 33,082,000 375,000
------------ ------------
148,571,000 151,515,000
Less: Accumulated depreciation...... 15,086,000 22,209,000
------------ ------------
$133,485,000 $129,306,000
============ ============
</TABLE>
48
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
APRIL 30
--------------------------
1995 1996
------------ ------------
<S> <C> <C>
11 1/2% first mortgage notes, less unamortized discount of $1,885,000 and
$1,727,000, respectively, due November 2001....................................
Variable rate note (10.25% at April 30, 1996), due in monthly installments of
$188,000, including interest, with the remaining principal and interest due
October 2000................................................................... 15,000,000 14,670,000
8% note payable, due in monthly installments of $83,334, including interest,
through July 2002.............................................................. 5,488,000 4,906,000
12% note payable, principal due in annual installments of $1,812,500 and
$3,625,000 through November 1996............................................... 5,438,000 3,625,000
9/1//4% note payable to bank, due in monthly installments of $172,333, including
interest, through February 1997................................................ 3,479,000 1,664,000
8% note payable due in monthly installments of $11,365, including interest,
commencing December 1995 through December 2015................................. 1,470,000 1,347,000
Variable rate note (9.25% at April 30, 1996), due in monthly installments
ranging from $11,458 to $34,722, including interest, with the remaining
principal and interest due June 2000........................................... -- 4,861,000
9/1//4% note payable, due in monthly installments ranging from $46,045 to
$97,595, including interest, through October 1999.............................. -- 3,354,000
Other............................................................................. 4,867,000 2,078,000
------------ ------------
138,857,000 139,778,000
Less: Current maturities.......................................................... 6,793,000 8,884,000
------------ ------------
Long-term debt.................................................................... $132,064,000 $130,894,000
============ ============
</TABLE>
In November 1993, the Company issued 105,000 units, consisting of $1,000
principal amount of 11 1/2% First Mortgage Notes due 2001 (the "First Mortgage
Notes" ) and 3.263 warrants (the Warrants) to purchase 1.5 shares of common
stock per warrant at an exercise price of $16 per share. The First Mortgage
Notes and the Warrants are separately transferable. Interest on the First
Mortgage Notes is payable semiannually on each May 15 and November 15 through
maturity.
The First Mortgage Notes are redeemable at the option of the Company, in
whole or in part, at any time after November 15, 1997, at the redemption prices
set forth in the indenture, plus accrued interest. The Company is required to
redeem, at par plus accrued interest, 20% of the original aggregate principal
amount of the First Mortgage Notes in November 1999 and November 2000.
The First Mortgage Notes restrict, among other things: (i) the incurrence
of additional debt, except under certain circumstances including meeting certain
pro forma coverage tests; (ii) the payment of dividends on and redemptions of
capital stock; (iii) the businesses in which the Company may engage; (iv) the
use of proceeds from the sale of assets; (v) transactions with affiliates; (vi)
the creation of liens; and (vii) sale and leaseback transactions. At April 30,
1995 and 1996, no dividends were permitted to be paid under these restrictions.
49
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company has $3,500,000 available in bank lines of credit. As of April
30, 1996, the Company had no outstanding balances under these lines of credit.
Substantially all of the Company's assets are pledged as collateral for
long-term debt.
The aggregate principal payments due on a total long-term debt over the
next five years and thereafter are as follows:
<TABLE>
<CAPTION>
Year ending April 30:
<S> <C>
1997........ $ 8,884,000
1998........ 2,952,000
1999........ 3,048,000
2000........ 27,398,000
2001........ 22,655,000
Thereafter.. 74,841,000
------------
$139,778,000
============
</TABLE>
The fair value of the 11 1/2% First Mortgage Notes, estimated based on
quoted market prices, was approximately $106,265,000 and $106,773,000 as of
April 30, 1995 and 1996, respectively. The carrying value of the Company's other
short- and long-term obligations approximates fair value at April 30, 1996.
4. LEASE COMMITMENTS
The Company has an agreement with the Biloxi Port Commission which provides
the Company with certain docking rights. This agreement expires July 1999, with
eight renewal options of five years each. Annual rentals are the greater of
$500,000 or 1% of gross monthly gaming revenue, as defined. Annual rent during
each renewal term is adjusted for increases in the Consumer Price Index, limited
to 6% for each renewal period.
In addition, the Company leases certain land, buildings, and other
improvements from the City of Biloxi under a lease and concession agreement.
This agreement expires on July 1999, with options to renew for seven additional
terms of five years each. Annual rent is $500,000 plus 3% of gross gaming
revenue, as defined, in excess of $25,000,000. Annual rent during each renewal
term is adjusted for increases in the Consumer Price Index, limited to 6% for
each renewal period. This agreement also allows rent credits to be amortized
over the initial term of the lease, for costs and expenses incurred by the
Company for construction of certain improvements to the leased assets. Such rent
credits, net of accumulated amortization, are included in prepaid expenses in
the consolidated balance sheet.
In April 1994, the Company entered an Addendum to the lease with the City
of Biloxi, which requires the Company to pay 4% of gross non-gaming revenues
received as defined, net of sales tax, comps and discounts. Additional rent will
be due to the City of Biloxi for the amount of any increase from and after
January 1, 2016 in the rent due to the State Institutions of Higher Learning
under a lease between the City of Biloxi and the State Institutions of Higher
Learning (the "IHL Lease") and for any increases in certain tidelands leases
between the City of Biloxi and the State of Mississippi.
50
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In April 1994, in connection with the construction of a hotel, the Company
entered a lease for additional land. The Company first acquired the leasehold
interest of Sea Harvest, Inc., the original lessee, for consideration of $8,000
per month for a period of ten years. The Company's lease is with the City of
Biloxi, Mississippi, for an initial term of 25 years, with options to renew for
six additional terms of 10 years each and a final option period with a
termination date commensurate with the termination date of the IHL Lease, but in
no event later than December 31, 2085. Annual rent (which includes payments to
be made pursuant to the purchase of a related leasehold interest) is $404,000,
plus 4% of gross non-gaming revenue, as defined. The annual rent is adjusted
after each five-year period based on increases in the Consumer Price Index,
limited to a 10% increase in any five-year period. The annual rent will increase
10 years after the commencement of payments pursuant to a termination of lease
and settlement agreement to an amount equal to the sum of annual rent had it
been $500,000 annually plus adjustments thereto based on the Consumer Price
Index.
In February 1995, in conjunction with its planned Colorado operation, the
Company entered into a lease agreement for the use of land. The lease has an
initial term of 25 years, with options to renew for seven additional terms of 10
years each. The base rent is $250,000 per year increased by $10,000 each year
until the annual rent is $300,000. After seven years, and every two years
thereafter, the annual rent is adjusted based on increases in the Consumer Price
Index, limited to a 4% increase in any two-year period.
Minimum rental obligations under all noncancelable operating leases with
terms of one year or more as of April 30, 1996, are as follows:
<TABLE>
<CAPTION>
Year ending April 30:
<S> <C>
1997........ $ 2,799,000
1998........ 2,458,000
1999........ 2,394,000
2000........ 1,477,000
2001........ 895,000
Thereafter.. 14,950,000
-----------
$24,973,000
===========
</TABLE>
Rent expense for operating leases was approximately $3,857,000, $3,085,000,
and $4,076,000 for the years ended April 30, 1994, 1995 and 1996, respectively.
Such amounts include contingent rentals of $1,619,000, $833,000, and $1,288,000
for the years ended April 30, 1994, 1995 and 1996, respectively.
51
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. RELATED PARTY TRANSACTIONS
During November 1993, in connection with two capital lease agreements with
certain related parties, the Company exercised a bargain purchase option and
purchased the equipment for approximately $17,161,000.
During the year ended April 30, 1994, the Company issued $3,000,000 of 10%
promissory notes to several directors of the Company which were repaid with the
proceeds of the First Mortgage Notes.
During the years ended April 30, 1994, 1995 and 1996, the Company incurred
construction costs of approximately $8,093,000, $3,501,000 and $2,391,000,
respectively, which were paid to related parties. As of April 30, 1996, there
were no outstanding amounts owed to related parties for construction services.
During 1995, the Company entered into a lease agreement for a tugboat with
a related party. The agreement provides for monthly rental payments that range
from $3,781 to $7,500. The Company has a purchase option on the vessel which is
exercisable at any time during the 10-year term of the lease, at a price equal
to the unamortized balance of the $450,000 original cost of the vessel at the
time of exercise of the purchase option.
During the year ended April 30, 1996, the Company repaid $1,556,000 in
loans and interest payable to the Chairman and Chief Executive Officer and a
related party.
The Company provides management services to LRGP and SCGC pursuant to
respective management agreements. Management fees for these services are based
upon a percentage of LRGP's and SCGC's revenue and operating income, as defined
in the management agreements. The revenue under the management agreements is
reflected as management fee--joint ventures in the accompanying consolidated
income statements.
The note receivable in the accompanying consolidated balance sheets bears
interest at 11 1/2% and is due from SCGC. The note is due three days after
certain debt of SCGC is repaid.
52
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. INCOME TAXES
Income tax expense (benefit) consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
---------------------------------------
1994 1995 1996
----------- ------------ ------------
<S> <C> <C> <C>
Current:
Federal.............. $ 9,548,000 $ 4,501,000 $ 3,976,000
State................ 232,000 1,940,000 1,612,000
----------- ----------- -----------
9,780,000 6,441,000 5,588,000
Deferred:
Federal.............. 1,422,000 5,599,000 (1,561,000)
State................ -- (55,000) 121,000)
----------- -----------
1,422,000 5,544,000 (1,440,000)
----------- ----------- -----------
$11,202,000 $11,985,000 $ 4,148,000
=========== =========== ===========
</TABLE>
A reconciliation of income tax expense to the statutory corporate
federal tax rate of 35% is as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
------------------------------------
1994 1995 1996
----------- ----------- ----------
<S> <C> <C> <C>
Statutory tax expense................ $11,044,000 $10,519,000 $1,996,000
Effects of:
State taxes....................... 151,000 1,225,000 1,048,000
Adjustment to prior years' taxes.. -- -- 720,000
Other--Net........................ 7,000 241,000 384,000
----------- ----------- ----------
$11,202,000 $11,985,000 $4,148,000
=========== =========== ==========
</TABLE>
53
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Significant components of the Company's net deferred income tax liability
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
--------------------------
1995 1996
------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Property and equipment................... $ 8,143,000 $12,866,000
LRGP..................................... 2,399,000 940,000
Other.................................... 92,000 59,000
----------- -----------
Total deferred tax liabilities.............. 10,634,000 13,865,000
Deferred tax assets:
Dividends................................ 920,000 680,000
Write-down of assets held for sale....... -- 3,240,000
Preopening costs......................... 2,016,000 1,500,000
Accrued expenses......................... 819,000 1,600,000
Alternative minimum tax credit........... -- 1,186,000
Other.................................... 361,000 341,000
----------- -----------
Total deferred tax assets................... 4,116,000 8,547,000
Valuation allowance on deferred tax assets.. (920,000) (680,000)
----------- -----------
Net deferred tax asset...................... 3,196,000 7,867,000
----------- -----------
Net deferred tax liability.................. $ 7,438,000 $ 5,998,000
=========== ===========
</TABLE>
At April 30, 1996, the Company's alternative minimum tax credit can be
carried forward indefinitely to reduce future regular tax liabilities.
54
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. COMMON STOCK
Under the Company's 1992 and 1993 Stock Option Plans, as amended, a maximum
of 958,750 and 875,000 options, respectively, may be granted to directors,
officers, and employees. The plans provide for the issuance of incentive stock
options and nonqualified options which have a maximum term of 10 years and are,
generally, exercisable in yearly installments of 25%, commencing one year after
the date of grant.
Stock options outstanding are as follows:
<TABLE>
<CAPTION>
OPTIONS EXERCISE PRICE
--------- --------------
<S> <C> <C>
Outstanding options at April 30, 1995............... 1,327,599 $ .89--18.00
Options granted..................................... 493,375 5.69-- 6.25
Options exercised................................... (145,218) .89--13.33
Options canceled.................................... (157,568) .89--17.75
--------- -------------
Outstanding options at April 30, 1996............... 1,518,188 $ .89--18.00
========= =============
</TABLE>
At April 30, 1996, 543,251 options are exercisable at prices ranging from
$.89 to $18.00.
In addition, the Company has the following outstanding warrants:
<TABLE>
<CAPTION>
NUMBER OF
-------------------- EXERCISE
DATE ISSUED EXPIRATION DATE WARRANTS SHARES PRICE
----------------- --------- -------- -------
<S> <C> <C> <C> <C>
February 1993..................................... October 31, 1997 900,000 900,000 $ 5.33
November 1993..................................... November 15, 1996 342,615 513,923 16.00
June 1995......................................... June 9, 2001 1 416,667 12.00
</TABLE>
On March 11, 1996, the Company sold an aggregate of 1,020,940 shares of its
common stock at a price of $5.875 per share to the Chairman and Chief Executive
Officer of the Company and three members of his family. On March 1, 1996, when
the Board adopted resolutions authorizing the Company's officers to consummate
the sale of these shares, the last reported sales price on NASDAQ was $5.75 per
share. Proceeds from the sale totaled $5,998,000.
The Company's board of directors has authorized the offering (the
"Offering"), on a pro rata basis, of rights to purchase shares of the Company's
common stock at a price of $5.875 per share at a ratio of approximately one
share for every four shares owned to its shareholders of record on March 15,
1996. The primary purpose of the Offering is to ensure that all shareholders
have the same opportunity to purchase shares of the Company's common stock as
has been afforded to the Chairman and Chief Executive Officer of the Company and
his family.
55
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. ACQUISITION OF POMPANO PARK
On June 30, 1995, the Company acquired 100% of Pompano Park ("Pompano
Park"), a harness racing track located in Pompano, Florida, for approximately
$8,000,000. The acquisition was accounted for as a purchase, and the results of
operations of Pompano Park have been included in the consolidated income
statement from the date of acquisition. Pro forma operating results giving
effect to the Pompano Park acquisition have not been provided because the pro
forma effect of the acquisition was not material to the operating results of the
Company. If casino gaming is legally permitted in Florida at the Pompano Park
site by June 30, 2001, the Company is required to pay additional consideration
to the seller amounting to $25,000,000 plus 5% of net gaming win, as defined.
The probability of the Company paying such additional consideration is remote;
however, if such payments are made in the future, they would be accounted for as
additional purchase price and allocated to goodwill. Such goodwill will be
amortized over a period to be determined at date of payment not to exceed 40
years.
9. ONE-TIME CHARGE
During January 1996, the Company recorded an $11,798,000 pretax one-time
charge. The components of the one-time charge include $9,257,000 related to the
write-down of two riverboats, a barge and certain gaming equipment all of which
were reclassified during the quarter as being held for sale, $1,991,000 related
to costs associated with the recent change in executive management and $550,000
related to costs associated with certain abandoned projects. The write-down
relates to two riverboats which are currently not being used in operations and
have been placed for sale. Each riverboat was written down to a carrying value
of approximately $5,000,000 based upon a recent purchase/lease option agreement
on one riverboat and a recent oral purchase offer received by the Company. The
amount of such offer and purchase/lease option range from $5,000,000 to
$6,000,000. The Company currently does not expect to take further write-downs
relating to these riverboats.
56
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. INVESTMENT IN LRGP
Summarized results of operations of LRGP are as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
------------------------------------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Total revenue............ $ -- $147,012,000 $150,846,000
Operating income (loss).. (3,625,000) 44,097,000 38,381,000
Net income (loss)........ (3,775,000) 40,162,000 34,453,000
</TABLE>
Summarized balance sheet information for LRGP is as follows:
<TABLE>
<CAPTION>
APRIL 30
-------------------------
1995 1996
----------- ------------
<S> <C> <C>
Current assets................................. $ 6,549,000 $ 6,950,000
Property and equipment, net.................... 52,727,000 49,204,000
Investment in and advances to affiliates....... 4,289,000 67,832,000
Other assets................................... 507,000 335,000
----------- ------------
Total assets............................. $64,072,000 $124,321,000
=========== ============
Current liabilities:
Note payable to the Company................. $ 2,300,000 $ --
Other....................................... 17,130,000 27,834,000
Long-term debt, less current maturities........ 8,514,000 27,500,000
Partners' capital.............................. 36,128,000 68,987,000
----------- ------------
Total liabilities and partners' capital.. $64,072,000 $124,321,000
=========== ============
</TABLE>
At April 30, 1996, the Company's retained earnings includes approximately
$20,627,000 of undistributed earnings of LRGP. Certain debt covenants restrict
LRGP from making dividend payments to the Company.
On June 9, 1995, LRGP acquired a 50% interest in SCGC, which operates a
riverboat casino in Lake Charles, Louisiana, for $1,000,000 cash and a
$20,000,000 note payable to the seller, The note bears interest at 11 1/2% and
requires equal quarterly principal payments commencing June 1996 through June
2000 with interest payable monthly. Additionally, the Company has issued a
warrant that allows the seller to convert 50% of the outstanding principal
balance of the note payable (up to a maximum of $5,000,000) into 416,667 shares
of common stock of the Company at $12 per share. The difference between the
carrying amount of the investment and LRGP's equity in SCGC's net assets is
being amortized on a straight-line basis over 25 years. The purchase agreement
obligates LRGP to provide loans or a financing source to SCGC for all expenses
and development costs of the Lake Charles riverboat casino up to a maximum of
$45,000,000. As of April 30, 1996, advances to SCGC totaled approximately
$41,702,000.
57
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Summarized results of operations of SCGC from the date of acquisition to April
30, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Total .......................................... $57,263,000
Operating loss.................................. (643,000)
Net loss........................................ (5,346,000)
</TABLE>
Summarized balance sheet information for SCGC as of April 30, 1995 and 1996 is
as follows:
<TABLE>
<CAPTION>
APRIL 30
----------------------------
1995 1996
-------------- -----------
<S> <C> <C>
Current assets.......................................................................... $ 1,125,000 $ 7,142,000
Property and equipment, net............................................................. 24,399,000 69,919,000
Other assets............................................................................ 9,442,000 10,126,000
----------- -----------
Total assets...................................................................... $34,966,000 $87,187,000
=========== ===========
Current liabilities:
Advances from and notes payable to related parties................................... $ 9,856,000 $48,787,000
Other................................................................................ 26,190,000 44,357,000
Long-term debt, less current maturities................................................. 2,266,000 637,000
Partners' deficit....................................................................... (3,346,000) (6,594,000)
----------- -----------
Total liabilities and partners' deficit........................................... $34,966,000 $87,187,000
=========== ===========
</TABLE>
11. EMPLOYEE BENEFIT PLAN
The Company has a defined-contribution, profit-sharing plan, including
401(k) plan provisions, covering substantially all of its employees. The
Company's contribution expense related to this plan was approximately $220,000,
$203,000, and $328,000 for the years ended April 30, 1994, 1995, and 1996,
respectively. The Company's contribution is based on a percentage of employee
contributions and may include an additional discretionary amount.
12. LITIGATION
The Company has been named, along with two gaming equipment suppliers, 41
of the country's largest gaming operators, and four gaming distributors (the
"Gaming Industry Defendants") in a consolidated class action lawsuit pending in
Las Vegas, Nevada. The suits alleges that the Gaming Industry Defendants
violated the Racketeer Influenced and Corrupt Organizations Act by engaging in a
course of fraudulent and misleading conduct intended to induce people to play
their gaming machines based upon a false belief concerning how those gaming
machines actually operate, as well as the extent to which there is actually an
opportunity to win on any given play. The suit seeks unspecified compensatory
and punitive damages. The actions are in the early stages of discovery and
preliminary motions. The Company is unable at this time to determine what
effect, if any, the suit would have on its financial position or results of
operations.
The Company is engaged in various matters of litigation and has a number of
unresolved claims pending. While the ultimate liability with respect to such
litigation and claims cannot be determined at this time, it is the opinion of
management that such liability is not likely to be material to the Company's
consolidated financial position or results of operations.
58
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. SUBSEQUENT EVENTS
Purchase of GPRI and SCGC
On May 3, 1996, the Company purchased all of the outstanding shares of
common stock of Grand Palais Riverboat, Inc. (GPRI) in a bankruptcy proceeding.
Pursuant to the Plan of Reorganization adopted in such bankruptcy proceeding,
the Company purchased 100% of the shares of the reorganized GPRI, which at the
time of closing owned the Grand Palais Riverboat, gaming equipment, certain
other furniture, fixtures and equipment, all necessary gaming licenses issued by
the State of Louisiana, and other permits and authorizations. The Company
intends to operate the Grand Palais vessel as part of a two-riverboat operation
with SCGC. The aggregate consideration paid by the Company in connection with
the GPRI acquisition was approximately $62.4 million, consisting of $8.4 million
in cash, approximately $37.9 million in promissory notes and assumed
indebtedness. The Company also issued 2,250,000 shares of its common stock, and
five-year warrants to purchase an additional 500,000 shares of common stock at
an exercise price of $10 per share, to GPRI's former secured debt holders.
At the time of the GPRI acquisition, the Company also purchased the
remaining 50% interest in SCGC not already owned by LRGP, in exchange for
1,850,000 shares of the Company's common stock and a five-year warrant. The
warrant allows the seller to convert its note payable to LRGP (up to a maximum
of $5,000,000) to 416,667 shares of common stock of the Company at an exercise
price of $12 per share. The purchase agreement also provides for the
restructuring of certain indebtedness owed to the seller.
14. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1995
---------------------------------------------------
JULY 31 OCTOBER 31 JANUARY 31 APRIL 30
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenue...................................... $33,616,000 $32,017,000 $30,143,000 $31,761,000
Operating income............................. 6,073,000 4,945,000 5,001,000 4,177,000
Net income................................... 3,908,000 4,685,000 4,772,000 4,704,000
Net income per common and common equivalent
share................................. 0.25 0.30 0.31 0.30
1996
---------------------------------------------------
JULY 31 OCTOBER 31 JANUARY 31 APRIL 30
----------- ----------- ----------- -----------
Revenue...................................... $32,418,000 $35,691,000 $43,418,000 $46,436,000
Operating income (loss)...................... 2,367,000 2,128,000 (7,315,000) 6,013,000
Net income (loss)............................ 2,334,000 2,044,000 (6,547,000) 3,724,000
Net income (loss) per common and common
equivalent share...................... 0.15 0.13 (0.44) 0.23
</TABLE>
The fourth quarter of 1996 was adversely affected by interest expense
totaling $400,000 that had been capitalized in the second quarter of 1996 and a
$720,000 adjustment to prior years' taxes.
59
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Executive Management Committee
Louisiana Riverboat Gaming Partnership
We have audited the accompanying balance sheets of Louisiana Riverboat
Gaming Partnership (the Partnership) as of April 30, 1995 and 1996, and the
related statements of operations, partners' capital (deficit), and cash flows
for each of the three years in the period ended April 30, 1996. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Louisiana Riverboat Gaming
Partnership at April 30, 1995 and 1996 and the results of its operations and its
cash flows for each of the three years in the period ended April 30, 1996, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
New Orleans, Louisiana
May 22, 1996
60
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30
-------------------------
ASSETS 1995 1996
- ---------------------------------------------- ----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................ $ 5,627,656 $ 6,053,634
Accounts receivable...................... 218,784 226,264
Prepaid expenses......................... 702,204 670,491
----------- ------------
Total current assets............ 6,548,644 6,950,389
Property and equipment:
Land..................................... 3,788,742 3,811,845
Pavilion................................. 23,176,694 23,194,612
Riverboat................................ 17,391,154 17,534,400
Furniture, fixtures, and equipment....... 12,338,308 12,805,529
----------- ------------
56,694,898 57,346,386
Less accumulated depreciation............ 3,967,576 8,142,479
----------- ------------
52,727,322 49,203,907
Investments in and advances to joint venture 2,515,574 61,961,132
Other assets:
Advances to affiliate.................... 1,773,813 5,871,128
Debt acquisition costs................... 20,670 6,079
Deposits and other....................... 486,141 329,141
----------- ------------
2,280,624 6,206,348
----------- ------------
Total assets.................... $64,072,164 $124,321,776
=========== ============
</TABLE>
See accompanying notes.
61
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30
-------------------------
LIABILITIES AND PARTNERS' CAPITAL 1995 1996
- ------------------------------------------------------- ----------- ------------
<S> <C> <C>
Current liabilities:
Revolving line of credit........................... $ 2,000,000 $ --
Current maturities:
Notes payable............................... 4,497,568 17,252,266
Mortgage note payable to related party...... 2,300,000 --
Accounts payable:
Trade....................................... 2,971,708 2,917,329
Related parties............................. 1,667,158 53,418
Accrued liabilities:
Interest.................................... 1,000 691,778
Payroll and payroll related................. 3,056,625 2,751,138
Taxes....................................... 1,516,872 976,093
Progressive jackpots and slot club awards... 949,565 1,992,549
Other....................................... 469,130 1,199,348
----------- ------------
Total current liabilities................ 19,429,626 27,833,919
Long-term notes payable, less current maturities....... 8,514,618 27,500,000
Partners' capital...................................... 36,127,920 68,987,857
----------- ------------
Total liabilities and partners' capital $64,072,164 $124,321,776
=========== ============
</TABLE>
See accompanying notes.
62
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
----------------------------------------
1994 1995 1996
------------ ------------- -------------
<S> <C> <C> <C>
Revenue:
Casino..................................... $ -- $142,265,343 $145,603,545
Food and beverage.......................... -- 4,524,276 4,882,843
Other...................................... -- 222,243 359,798
----------- ------- -------
Total revenue.......................... -- 147,011,862 150,846,186
Operating expenses:
Casino..................................... -- 30,484,595 32,753,896
Gaming taxes............................... -- 32,097,530 33,334,435
Food and beverage.......................... -- 3,636,962 4,140,214
Marine and facilities...................... -- 5,228,605 5,752,466
Marketing and administrative............... -- 14,036,536 22,716,817
Management fee--related party.............. -- 4,613,078 4,708,995
Depreciation and amortization.............. 108,710 5,779,627 4,950,683
Other...................................... -- 3,834,474 4,107,583
Preopening expenses........................ 3,515,904 3,203,641 --
--------- --------- ------------
Total operating expenses............... 3,624,614 102,915,048 112,465,089
Operating income (loss)........................ (3,624,614) 44,096,814 38,381,097
Interest income (expense), net:
Related parties............................ (150,154) (2,686,067) 1,355,432
Other...................................... -- (1,248,687) (2,625,469)
----------- ---------- ----------
(150,154) (3,934,754) (1,270,037)
Equity in loss of unconsolidated joint venture -- -- (2,657,648)
----------- ------------ ----------
Net income (loss).............................. $(3,774,768) $ 40,162,060 $ 34,453,412
=========== ============ ============
</TABLE>
See accompanying notes.
63
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
LOUISIANA
RIVERSITE
DEVELOPMENT,
CSNO, INC. INC. TOTAL
------------ ------------- ------------
<S> <C> <C> <C>
Partners' deficit, April 30, 1993 $ (129,686) $ (129,686) $ (259,372)
Net loss..................... (1,887,384) (1,887,384) (3,774,768)
----------- ----------- -----------
Partners' deficit, April 30, 1994 (2,017,070) (2,017,070) (4,034,140)
Net income................... 20,081,030 20,081,030 40,162,060
----------- ----------- -----------
Partners' capital, April 30, 1995 18,063,960 18,063,960 36,127,920
Net income................... 17,226,706 17,226,706 34,453,412
Distributions................ (818,475) (775,000) (1,593,475)
----------- ----------- -----------
Partners' capital, April 30, 1996 $34,472,191 $34,515,666 $68,987,857
=========== =========== ===========
</TABLE>
See accompanying notes.
64
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
-------------------------------------------
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).............................................. $ (3,774,768) $ 40,162,060 $ 34,453,412
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization.............................. 108,710 5,779,627 4,950,683
Equity in loss of unconsolidated joint venture............. -- -- 2,657,648
Changes in operating assets and liabilities:
Accounts receivable.................................... (3,150) (225,317) (7,480)
Inventories............................................ (31,300) (217,034) 27,980
Prepaid expenses....................................... (262,281) (191,589) 3,733
Deposits and other..................................... 250,000 (486,141) 157,000
Accounts payable--trade................................ 1,663,530 1,291,541 (54,379)
Accounts payable--related parties...................... -- 1,667,158 (1,613,740)
Accrued liabilities.................................... 1,277,821 4,715,371 1,617,714
------------ ------------ ------------
Net cash provided by (used in) operating activities............ (771,438) 52,495,676 42,192,571
CASH FLOWS FROM INVESTING ACTIVITIES
Net advances to affiliates..................................... (360,401) (1,401,729) (4,097,315)
Investment in and net advances to joint venture................ -- (2,515,574) (42,864,395)
Purchases of property and equipment............................ (29,604,637) (20,528,638) (651,488)
------------ ------------ ------------
Net cash used in investing activities.......................... (29,965,038) (24,445,941) (47,613,198)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payments) of revolving line of credit.......... -- 2,000,000 (2,000,000)
Proceeds from notes payable.................................... 3,572,000 16,098,930 24,878,688
Payments on notes payable...................................... (3,572,000) (9,185,674) (13,138,608)
Proceeds from mortgage note payable............................ 32,681,060 10,580,000 --
Payments on mortgage note payable.............................. (1,316,000) (42,514,737) (2,300,000)
Debt acquisition cost.......................................... -- (29,182) --
Partner distributions.......................................... -- -- (1,593,475)
------------ ------------ ------------
Net cash provided by (used in) financing activities............ 31,365,060 (23,050,663) 5,846,605
------------ ------------ ------------
Net increase in cash and cash equivalents...................... 628,584 4,999,072 425,9780
Cash and cash equivalents:
Beginning of year.......................................... -- 628,584 5,627,656
------------ ------------ ------------
End of year................................................ $ 628,584 $ 5,627,656 $ 6,053,634
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Investment in joint venture through note payable............... $ -- $ -- $ 20,000,000
============ ============ ============
Purchases of property and equipment through accounts payable
and notes payable............................................ $ 14,438,867 $ -- $ --
============ ============ ============
Debt acquisition costs funded by mortgage note payable......... $ 1,912,250 $ -- $ --
============ ============ ============
Cash payments for interest, net of amounts capitalized......... $ -- $ 5,220,775 $ 4,074,402
============ ============ ============
</TABLE>
See accompanying notes.
65
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Nature of Business
Louisiana Riverboat Gaming Partnership (the Partnership), a Louisiana
partnership formed January 4, 1993, is 50% owned by Louisiana Riversite
Development, Inc., a wholly owned subsidiary of Louisiana Downs, Inc., and 50%
owned by CSNO, Inc., a wholly owned subsidiary of Casino America, Inc. (Casino
America). The Partnership is engaged in the business of operating dockside
casinos and related facilities. The Partnership commenced gaming operations on
May 20, 1994, operating as the Isle of Capri Casino in Bossier City, Louisiana.
As further discussed in Note 2, in June 1995, the Partnership purchased a 50%
interest in St. Charles Gaming Company, Inc. (SCGC), which owns and operates the
Isle of Capri-Lake Charles in Lake Charles, Louisiana. This investment is
accounted for using the equity method of accounting with the difference between
the carrying amount of the investment and SCGC's equity in net assets amortized
using the straight-line method over 25 years. At April 30, 1996, accumulated
amortization was approximately $761,000. The recoverability of these costs is
assessed annually to determine if such costs should be completely or partially
written off or the amortization period accelerated. This riverboat casino
commenced operations in Lake Charles on July 29, 1995.
The Partnership and SCGC are managed by a wholly owned subsidiary (the
Manager) of Casino America, Inc. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and in banks. The
Partnership considers all highly liquid investments with a maturity at the time
of purchase of three months or less to be cash equivalents. The carrying amounts
of cash and cash equivalents approximates fair value. The Partnership deposits
cash in an interest-bearing account with a financial institution. The account is
collateralized by securities issued by the United States Government and other
high-quality credit instruments.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
<S> <C>
Pavilion............................... 25 years
Riverboat.............................. 25 years
Furniture, fixtures and equipment...... 5 years
</TABLE>
The Partnership capitalized interest related to the construction of its
Bossier City facilities totaling $847,000 during the year ended April 30, 1994.
No interest was capitalized during 1995 and 1996.
66
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
APRIL 30, 1996
Debt Acquisition Costs
The Partnership defers debt acquisition costs and amortizes these costs
using the straight-line method over the expected term of the related debt. At
April 30, 1995 and 1996, accumulated amortization was approximately $1,920,761
and $1,935,400, respectively.
Preopening Expenses
Preopening expenses, which consist principally of payroll, marketing and
local licensing fees, are expensed as incurred.
Casino Revenue and Promotional Allowances
Casino revenue is the net win from gaming activities which is the
difference between gaming wins and losses. Casino revenues are net of accruals
for anticipated payouts of progressive electronic gaming device jackpots.
Revenue does not include the retail amount of food, beverage and other
items provided gratuitously to customers, which totaled approximately $8,816,000
in 1995 and $10,149,500 in 1996. The estimated cost of providing such
complimentary services, which is included in casino expense, was approximately
$7,299,000 in 1995 and $8,621,000 in 1996.
Income Taxes
No provision for income taxes has been made in the accompanying financial
statements since any liability is that of the individual partners and not of the
Partnership.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense totaled
$127,416 in 1994, $3,779,297 in 1995, and $4,627,200 in 1996.
Reclassifications
Certain amounts previously reported have been reclassified to conform to
the presentation at April 30, 1996.
Impairment of Long-Lived Assets
In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Partnership will adopt Statement
No. 121 in fiscal 1997 and, based on current circumstances, does not believe the
adoption will have a material effect on the Partnership's financial statements.
67
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
APRIL 30, 1996
2. INVESTMENT IN AND ADVANCES TO JOINT VENTURE
On June 9, 1995, the Partnership acquired a 50% interest in SCGC from Crown
Casino (Crown) for $1,000,000 cash and a $20,000,000 note payable to Crown.
Additionally, Casino America, Inc. has issued a warrant that allows Crown to
convert 50% of the outstanding principal balance of the note payable (up to a
maximum of $5,000,000) to common stock of Casino America, Inc. at $12 per share.
Further, the purchase agreement obligates the Partnership to provide loans or a
financing source to SCGC, for all expenses and development costs of the Lake
Charles riverboat casino up to a maximum of $45,000,000. At April 30, 1996, the
Partnership had advanced to SCGC approximately $2,516,000 and $41,702,000,
respectively.
These advances earn interest ranging from 9.75% to 12% and are included,
along with the related accrued interest of approximately $12,000 in 1995 and
$2,169,000 in 1996, in investment in and advances to joint venture in the
accompanying balance sheet. See Note 3 for additional information regarding
financing for SCGC.
Condensed financial information for the joint venture as of April 30, 1996
and for the period from the date of acquisition is summarized below:
<TABLE>
<CAPTION>
<S> <C>
Condensed financial information:
Current assets..................... $ 7,142,000
Noncurrent assets.................. $80,045,000
Current liabilities................ $93,144,000
Noncurrent liabilities............. $ 637,000
Total revenue...................... $57,263,000
Operating loss..................... $ 643,000
Net loss........................... $ 5,346,000
</TABLE>
On May 3, 1996, Casino America purchased the stock of Grand Palais
Riverboat Inc. (Grand Palais) and intends to operate the Grand Palais vessel as
part of a two-riverboat operation with SCGC. In connection with the Grand Palais
acquisition and pursuant to a stock purchase agreement dated January 19, 1996
between Casino America and Crown, Casino America purchased the remaining 50%
interest in SCGC owned by Crown in exchange for 1,850,000 shares of Casino
America common stock. In addition, Casino America issued another five-year
warrant which allows Crown to convert its note payable to the Partnership (up to
a maximum of $5,000,000) for 416,667 shares of Casino America common shares at
$12 per share. Further the $20,000,000 note payable to Crown was restructured
into two $10,000,000 notes payable.
68
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
APRIL 30, 1996
3. NOTES PAYABLE
Long-term notes payable consist of the following:
<TABLE>
<CAPTION>
APRIL 30
------------------------
1995 1996
----------- -----------
<S> <C> <C>
Senior secured increasing rate notes (12.5% at April 30, 1996), interest payable
monthly with principal due July 1996............................................ $ -- $ 8,378,687
11.5% note payable to Crown, interest due monthly with quarterly principal
payments of $500,000 commencing June 1996 with any remaining balance due
February 2002, collateralized by SCGC stock..................................... -- 10,000,000
11.5% note payable to Crown, interest payable monthly commencing May 1996,
with principal due May 2001, collateralized by SCGC stock....................... -- 10,000,000
Note payable to bank, interest at prime plus 1% (9.25% at April 30, 1996) due in
monthly principal payments of $625,000 commencing May 1996, collateralized
by furniture, fixtures and equipment............................................ -- 15,000,000
9.25% note payable, due in monthly installments of $279,675, including interest,
through September 1996, collateralized by gaming equipment...................... 4,440,757 1,373,579
Note payable...................................................................... 8,571,429 --
----------- -----------
13,012,186 44,752,266
Less current maturities........................................................... 4,497,568 17,252,266
----------- -----------
Long-term notes payable........................................................... $ 8,514,618 $27,500,000
=========== ===========
</TABLE>
In 1995, the Partnership entered into a $15,000,000 credit agreement with a
bank to be repaid in six monthly principal payments of $2,500,000 each
commencing in February 1996. In February 1996, this credit agreement was amended
to provide for the repayment of principal in 24 monthly payments of $625,000
each commencing in May 1996. This credit agreement contains various restrictive
covenants, including certain financial covenants.
In July 1995, the Partnership and SCGC entered into an agreement to issue
$38,400,000 of senior secured increasing rate notes (0.25% every third month),
due July 1996, primarily to pay for certain development costs and operating
expenses of SCGC and pay certain debt obligations owed by the Partnership. The
Partnership received proceeds of approximately $8,400,000 from the issuance of
these notes to retire the note payable secured by a first preferred ship
mortgage on the Partnership's riverboat. Under the terms of the agreement, the
notes are due July 1996 but can be extended for two six-month periods at the
option of the issuers if the notes are not in default. Additionally, the
agreement provides if either the Partnership or SCGC is unable to pay its
portion of the notes as they become due, the other issuer will pay the
obligation upon demand. The agreement provides for contingent interest, payable
commencing May 1996, based on the consolidated cash flow, as defined, of the
Partnership and SCGC. The notes are collateralized by substantially all the
assets of the Partnership and SCGC and include various restrictive covenants,
including certain financial covenants, for both the Partnership and SCGC.
69
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
APRIL 30, 1996
In 1995, the Partnership entered into a revolving credit agreement with a
bank, whereby the bank committed to lend the Partnership up to $2,000,000
through October 1996. Amounts outstanding under the revolving line of credit
bear interest, payable monthly, at the prime rate (average rate of 8.69% in
1996) and are secured by a continuing security interest in all funds on deposit
or in certificates of deposit with the bank. Further, the credit agreement
contains certain restrictive covenants, including certain financial covenants.
Maturities of long-term debt after April 30, 1996 are $17,252,266 in 1997,
$9,500,000 in 1998, $2,000,000 in 1999, $2,000,000 in 2000, $12,000,000 in 2001
and $2,000,000 thereafter.
The carrying value of the Partnership's short and long-term obligations
approximates fair value.
4. EMPLOYEE BENEFIT PLAN
Partnership employees who have completed 12 consecutive months of
employment and are at least 21 years of age may participate in the Casino
America, Inc. 401(k) Plan (the "Plan"). The Partnership's contribution is based
on a percentage of employee contributions and may include an additional
discretionary amount. The Partnership's contribution expense related to the Plan
was $16,784 in 1994, $188,075 in 1995 and $219,690 in 1996.
5. RELATED PARTY TRANSACTIONS
Management services are provided to the Partnership pursuant to a
management agreement with the Manager. Management fees for these services are
based upon a percentage of revenue and operating income, as defined by the
management agreement. Additionally, the Partnership pays certain expenses,
primarily payroll, of the Manager. The Partnership incurred management fees of
$4,613,078 in 1995 and $4,708,995 in 1996 and other expenses on behalf of the
Manager of approximately $1,217,000 in 1995 and $1,726,000 in 1996. In 1994, the
Partnership paid $250,000 in management fees, classified as preopening expense,
in accordance with the terms of the management agreement.
During 1994 and 1995, the Partnership made advances to LRG Hotels, LLC, a
limited liability corporation owned by the partners for working capital, debt
payments and payments under a noncompete agreement entered into with the former
owner. The advances earn interest at 11.5%. These advances and related accrued
interest are reflected as advances to affiliate in the accompanying balance
sheets.
The Partnership incurred construction costs and construction management
fees, totaling approximately $21,000,000 through April 30, 1995, which were paid
to an affiliated company of Louisiana Riversite Development, Inc. These
expenditures are capitalized as property and equipment.
During 1995, the Partnership advanced approximately $673,000 for expansion
costs related to potential gaming jurisdictions in other states to an affiliated
company of Louisiana Riversite Development, Inc. In 1996, these advances were
recorded as distributions to CSNO, Inc. and Louisiana Riversite Development,
Inc. in the amounts of approximately $343,000 and $300,000 respectively.
70
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
--------
ITEM 10, "DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT," ITEM 11,
"EXECUTIVE COMPENSATION," ITEM 12, "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT" and ITEM 13, "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS" have been omitted from this report and incorporated by reference
into a definitive proxy statement to be filed with the Commission within 120
days after the end of the fiscal year covered by this report.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Documents Filed as Part of this Report.
1. Financial Statements.
The following financial statements of the Company and Louisiana
Riverboat Gaming Partnership and reports of independent auditors
are included on pages 43 to 80 of this Form 10-K:
CASINO AMERICA, INC.
Report of Independent Auditors
Consolidated Balance Sheets - April 30, 1995 and 1996
Consolidated Statements of Income - Years ended April
30, 1994, 1995 and 1996
Consolidated Statements of Stockholders' Equity - Years
ended April 30, 1995, 1995 and 1996
Consolidated Statements of Cash Flows - Years ended
April 30, 1994, 1995 and 1996
Notes to Consolidated Financial Statements
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
Report of Independent Auditors
Balance Sheets - April 30, 1995 and 1996
Statements of Operations - Years ended April 30, 1994,
1995 and 1996
Statements of Partners' Capital (Deficit) - Years ended
April 30, 1994, 1995 and 1996
Statements of Cash Flows - Years ended April 30, 1994,
1995 and 1996
Notes to Financial Statements
2. Financial Statements Schedules.
None required or applicable.
71
<PAGE>
3. Exhibits.
A list of the exhibits included as part of this Form 10-K is set
forth in the Exhibit Index that immediately precedes such
exhibits, which is incorporated herein by reference.
(b) Reports on Form 8-K. No current reports on Form 8-K were filed during
the fourth quarter ended April 30, 1996.
72
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CASINO AMERICA, INC.
Dated: July 29, 1996 By: /s/ Bernard Goldstein
------------------------------------------
Bernard Goldstein, Chairman of the Board,
Chief Executive Officer, and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Dated: July 29, 1996 /s/ Bernard Goldstein
------------------------------------------
Bernard Goldstein, Chairman of the Board,
Chief Executive Officer and Director
(Principal Executive Officer)
Dated: July 29, 1996 /s/ John M. Gallaway
------------------------------------------
John M. Gallaway, President, Chief
Operating Officer and Director
Dated: July 29, 1996 /s/ Rexford A. Yersley
------------------------------------------
Rexford A. Yersley, Chief Financial
Officer (Principal Financial and
Accounting Officer)
Dated: July 29, 1996 /s/ Allan B. Solomon
------------------------------------------
Allan B. Solomon, Executive Vice
President, Secretary, General Counsel
and Director
Dated: July 29, 1996 /s/ Robert S. Goldstein
------------------------------------------
Robert S. Goldstein, Director
Dated: July 29, 1996 /s/ Martin Greenberg
------------------------------------------
Martin Greenberg, Director
Dated: July 29, 1996 /s/ Emanuel Crystal
------------------------------------------
Emanuel Crystal, Director
73
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
3.1 Certificate of Incorporation of Casino America, Inc., as
amended.(5)
3.2 Bylaws of Casino America, Inc., as amended.(5)
4.1 Specimen Certificate of Common Stock.(2)
4.2 Warrant Agreement, dated as of November 1, 1993, between the
Company and Shawmut Bank Connecticut, National Association, as
Warrant Agent.(4)
4.3A Specimen Warrant Agreement with respect to warrants to purchase
900,000 shares of the Company's Common Stock.(3)
4.3B Form of Warrant Agreement with respect to warrants to purchase
500,000 shares of the Company's Common Stock
4.4A Warrant, dated June 9, 1995, of Crown Casino Corporation to
purchase up to 416,667 shares of Common Stock of Casino America,
Inc.(7)
4.4B Warrant, dated May 3, 1996, of Crown Casino Corporation to
purchase up to 416,667 shares of Common Stock of Casino America,
Inc.(8)
4.5 Indenture dated November 1, 1993 between the Company and Shawmut
Bank Connecticut, National Association, as Trustee.(4)
4.5A First Supplemental Indenture dated as of April 29, 1994 between
the Company and Shawmut Bank Connecticut, National Association, as
Trustee.(4)
4.5B Second Supplemental Indenture dated as of March 8, 1995 between
the Company and Shawmut Bank Connecticut, National Association, as
Trustee.(7)
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
4.5C Third Supplemental Indenture dated as of May 3, 1996 between the
Company and Fleet National Bank, as Trustee.(8)
4.6 Casino America, Inc. hereby agrees to furnish to the Securities
and Exchange Commission, upon its request, the instruments
defining the rights of holders of long term debt where the total
amount of securities authorized thereunder does not exceed 10% of
Casino America, Inc.'s total consolidated assets.
10.1 Amended and Restated Berth Rental Agreement dated May 12, 1992
between the Biloxi Port Commission and Riverboat Corporation of
Mississippi.(2)
10.2 Biloxi Waterfront Project Lease dated May 12, 1986 with Point
Cadet Development Corporation.(2)
10.3 Addendum to Lease Agreement, dated August 1, 1992, between the
City of Biloxi, Mississippi, Point Cadet Development Corporation,
and Riverboat Corporation of Mississippi.(4)
10.3A Second Addendum to Lease, dated April 9, 1994, by and between the
City of Biloxi, Mississippi, Point Cadet Development Corporation,
the Biloxi Port Commission and Riverboat Corporation of
Mississippi.(4)
10.3B Third Addendum to Casino Lease, dated April 26, 1995, by and
between the City of Biloxi, Mississippi, Point Cadet Development
Corporation, the Biloxi Port Commission and Riverboat Corporation
of Mississippi.(7)
10.4 Declaration of Shared Facilities Agreement for the Isle of Capri
Casino and Hotel, Biloxi, Mississippi, dated as of April 26, 1995,
made by Riverboat Corporation of Mississippi.(7)
10.5 Intercreditor Agreement, dated as of May 1, 1995, by and among The
Peoples Bank, Shawmut Bank of Connecticut, N.A. and Riverboat
Corporation of Mississippi.(7)
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
10.6 Agreement for Sale and Purchase by and between the Company and
Pompano Park Associates, Limited Partnership, dated as of
November 8, 1994.(7)
10.6A Variable Gaming Adjustment Covenant made as of June 30, 1995 by
PPI, Inc. in favor of Pompano Park Associates, Limited
Partnership.(7)
*10.7 Casino America, Inc. 1992 Stock Option Plan.(1)
*10.8 Casino America, Inc. 1992 Stock Option Plan Amendment.(3)
*10.9 Casino America, Inc. 1993 Stock Option Plan, as amended.(7)
*10.10 Casino America, Inc. description of Employee Bonus Plan.(3)
10.11 Partnership Agreement dated January 4, 1993 of Louisiana Riverboat
Gaming Partnership.(3)
10.11A First Amendment to Partnership Agreement of Louisiana Riverboat
Gaming Partnership dated August 31, 1993.(5)
10.11B Second Amendment to Partnership Agreement of Louisiana Riverboat
Gaming Partnership dated April 20, 1995.(7)
10.12 Management Agreement dated January 4, 1993 between Riverboat
Services, Inc. and Louisiana Riverboat Gaming Partnership.(3)
10.13 Management Agreement dated as of March 2, 1995 between Riverboat
Services, Inc. and St. Charles Gaming Company, Inc.(7)
*10.14 Casino America, Inc. Retirement Trust and Savings Plan.(3)
10.15 Deed of Trust, Leasehold Deed of Trust, Assignment of Rents,
Fixture Filing, Security Agreement and Financing Statement, dated
as of November 15, 1993, in a Principal
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
Amount of $105,000,000 by Riverboat Corporation of Mississippi to
J. Morton Matrick, as trustee for the benefit of Shawmut Bank
Connecticut, National Association, as Indenture Trustee.(4)
10.15A Deed of Trust, Leasehold Deed of Trust, Assignment of Rents,
Fixture Filing, Security Agreement and Financing Statement, dated
as of November 15, 1993, in a Principal Amount of $105,000,000 by
Riverboat Corporation of Mississippi to J. Morton Matrick, as
trustee for the benefit of Shawmut Bank Connecticut, National
Association, as Indenture Trustee.(4)
10.16 Security Agreement, dated November 16, 1993, from Casino America,
Inc. and The Collateral Grantors Party Thereto to Shawmut Bank
Connecticut, National Association, as Trustee.(4)
10.17 First Preferred Fleet Mortgage, dated November 15, 1993, by
Riverboat Corporation of Mississippi to Shawmut Bank Connecticut,
National Association, as Trustee.(4)
10.18 Security Agreement Supplement No. 2, dated January 4, 1994,
between the Company and Shawmut Bank Connecticut, National
Association, as Trustee.(4)
10.19 First Amendment to First Preferred Fleet Mortgage, dated January
6, 1994, by Riverboat Corporation of Mississippi to Shawmut Bank
Connecticut, National Association, as Trustee.(4)
*10.20 Director's Option Plan.(6)
*10.21 Consulting Agreement between the Company and William C.
Broadhurst.(6)
10.22 Biloxi Waterfront Project Lease dated April 9, 1994 by and between
the City of Biloxi, Mississippi and Riverboat Corporation of
Mississippi.(4)
10.22A First Amendment to Biloxi Waterfront Project Lease (Hotel Lease),
dated April 26, 1995, by and between
</TABLE>
77
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
Riverboat Corporation of Mississippi and the City of Biloxi,
Mississippi.(7)
10.23 Settlement Agreement, dated April 14, 1994, by and between the
City of Biloxi, Mississippi, Point Cadet Development Corporation,
Riverboat Corporation of Mississippi, the Company, Sea Harvest,
Inc. and Wayne Hicks and Terryss Hicks.(4)
*10.24 Employment Agreement dated March 21, 1994 between the Company and
Allan B. Solomon.(4)
*10.25 Agreement dated May 12, 1995 between the Company and Martin
Greenberg.(7)
10.26 Management Agreement dated December 23, 1994 between Riverboat
Corporation of Mississippi and Mississippi Innkeepers, Inc.(7)
10.27 Amended Stock Purchase Agreement dated as of June 2, 1995, among
Crown Casino Corporation, St. Charles Gaming Company, Inc. and
Louisiana Riverboat Gaming Partnership.(7)
10.28 Crowne Plaza Resort New Development License Agreement between
Holiday Inns Franchising, Inc. and Riverboat Corporation of
Mississippi, dated December 30, 1994.(7)
10.29 Security Agreement - Pledge dated as of June 9, 1995, between
Louisiana Riverboat Gaming Partnership and Crown Casino
Corporation.(7)
10.30 Shareholders Agreement, dated as of June 9, 1995 by and between
Crown Casino Corporation and Louisiana Riverboat Gaming
Partnership.(7)
</TABLE>
78
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
10.31 Agreement of Lease between Port Resources, Inc. and CRU, Inc., as
landlords and St. Charles Gaming Company, Inc., as tenant, of
certain land in Calcasieu Parish, Louisiana, dated March 24, 1995,
and amended by Amendment to Lease, dated May 3, 1995, Second
Amendment to Lease, dated May 16, 1995 and Third Amendment to
Lease, dated June 6, 1995, along with related Memorandum of
Lease.(7)
10.31A Agreement of Lease between Port Resources, Inc. and CRU, Inc., as
landlords and St. Charles Gaming Company, Inc., as tenant, of
certain land in Calcasieu Parish, Louisiana, dated July 17, 1995,
and amended by Amendment to Lease, dated July 17, 1995.(7)
10.32 Bareboat Charter Party Agreement dated as of March 20, 1995,
between Riverboat Chartering Company, L.C., and Riverboat
Corporation of Mississippi.(7)
10.33 Purchase Option Agreement, dated as of March 20, 1995, between
Riverboat Chartering Company, L.C. and Riverboat Corporation of
Mississippi.(7)
10.34 Guaranty Agreement, dated as of March 20, 1995, between Riverboat
Chartering Company, L.C. and Riverboat Corporation of
Mississippi.(7)
10.35 Development Agreement between St. Charles Gaming Company, Inc. and
Calcasieu Parish Police Jury dated June 5, 1995.(7)
10.36 Note Purchase Agreement, dated as of July 20, 1995, by and among
Louisiana Riverboat Gaming Partnership, St. Charles Gaming
Company, Inc., Nomura Holding America Inc. and First National Bank
of Commerce.(7)
10.37 Lease between Pompano Park Associates, Inc., as Lessor, and the
Company, as lessee, dated as of July 1, 1995.(7)
10.38 Ground Lease with Option to Purchase, dated February 9, 1995,
between Iron Dukes, Inc. and Isle of Capri Casino Colorado,
Inc.(7)
</TABLE>
79
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
10.39 Promissory Note dated June 29, 1995 by and between PPI, Inc. and
Capital Bank.(9)
10.40 Florida Real Estate Mortgage, Assignment of Rents, and Security
Agreement dated June 29, 1995 by and between PPI, Inc. and Capital
Bank.(9)
*10.41 Employment Agreement dated December 11, 1995 between Casino
America, Inc. and John M. Gallaway.(9)
*10.42 Employment Agreement dated December 11, 1995 between Casino
America, Inc. and Allan B. Solomon.(9)
*10.43 Employment Agreement dated December 22, 1995 by and between Casino
America, Inc. and Rexford A. Yeisley.(10)
10.44 Stock Purchase Agreement dated February 27, 1996 by and between
Casino America, Inc., on the one hand, and Bernard Goldstein,
Robert Goldstein, Richard Goldstein and Jeffrey Goldstein, on the
other hand.(10)
10.45 Stock Purchase and Sale Agreement pursuant to a Plan of
Reorganization dated December 29, 1995 between Casino America,
Inc. and Grand Palais Riverboat, Inc. with exhibits.(10)
10.46 Form of Stock Purchase Agreement dated January 19, 1996 by and
among Casino America, Inc. and Crown Casino Corporation, without
exhibits.(10)
10.47 Purchase Agreement, dated July 2, 1996, by and between CSNO, Inc.,
LRGP Holdings, Inc. and Louisiana River Site Development, Inc.
10.48 Escrow Agreement, dated July 2, 1996, by and among LRGP Holdings,
Inc., Casino America, Inc., Louisiana River Site Development,
Inc., Louisiana Downs, Inc. and Boult, Cummings, Conners & Berry,
PLC.
21 Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP.
</TABLE>
80
<PAGE>
- ----------------------
(1) Filed as an exhibit to the Company's Current Report on Form 8-K filed
June 16, 1992 (File No. 0-20538), and incorporated into the Company's
Form 10-K for the year ended April 30, 1996, by reference.
(2) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended April 30, 1992 (File No. 0-20538), and incorporated
into the Company's Form 10-K for the year ended April 30, 1996, by
reference.
(3) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended April 30, 1993 (File No. 0-20538), and incorporated
into the Company's Form 10-K for the year ended April 30, 1996, by
reference.
(4) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended April 30, 1994 (File No. 0-20538), and incorporated
into the Company's Form 10-K for the year ended April 30, 1996, by
reference.
(5) Filed as an exhibit to the Company's Registration Statement on Form S-1
filed September 3, 1993, as amended (File No. 33-68434), and
incorporated into the Company's Form 10-K for the year ended April 30,
1996, by reference.
(6) Filed as an exhibit to the Company's Registration Statement on Form S-8
filed June 30, 1994 (File No. 33-80918), and incorporated into the
Company's Form 10-K for the year ended April 30, 1996, by reference.
(7) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended April 30, 1995 (File No. 0-20538), and incorporated
into the Company's Form 10-K for the year ended April 30, 1996, by
reference.
(8) Filed as an exhibit to the Company's Registration Statement on Form S-3
(No. 333-2610), and incorporated into the Company's Form 10-K for the
year ended April 30, 1996, by reference.
(9) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended October 31, 1995, and incorporated into the
Company's Form 10-K for the fiscal year ended April 30, 1996, by
reference.
(10) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended January 30, 1996, and incorporated into the
Company's Form 10-K for the fiscal year ended April 30, 1996, by
reference.
* Management contract or compensatory plan.
81
<PAGE>
EXHIBIT 4.3B
------------
FORM OF WARRANT
---------------
THE SECURITIES REPRESENTED BY THIS WARRANT, INCLUDING THE UNDERLYING COMMON
STOCK, HAVE NOT BEEN REGISTERED WITH, APPROVED OR OTHERWISE REVIEWED BY THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION, OR ANY OTHER FEDERAL OR STATE
AGENCY. THE SECURITIES HAVE BEEN ISSUED TO THE PERSON WHOSE NAMES APPEARS ON
THE FACE OF THIS WARRANT IN RELIANCE UPON LEGALLY-RECOGNIZED EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF FEDERAL AND STATE SECURITIES LAW. BEFORE THIS
WARRANT MAY BE OFFERED, SOLD OR PURCHASED, AN OPINION OF COUNSEL MUST BE
OBTAINED STATING THAT THE OFFER, SALE OR PURCHASE, AS THE CASE MAY BE, WILL NOT
VIOLATE FEDERAL OR ANY STATE'S SECURITIES LAWS. THESE SECURITIES ARE ALSO
SUBJECT TO RESTRICTIONS IMPOSED BY THE CERTIFICATE OF INCORPORATION AND BYLAWS
OF THE CORPORATION. A COPY OF THE CORPORATION'S CERTIFICATE OF INCORPORATION
AND BYLAWS CAN BE OBTAINED AT THE PRINCIPAL OFFICES OF THE CORPORATION.
Warrant to Purchase
500,000 Shares of Common Stock
CASINO AMERICA, INC.
(Incorporated under the laws of the State of Delaware)
STOCK PURCHASE WARRANT
Void after 5:00 p.m., Eastern Standard Time, on October 1, 2001
This is to certify that _____________________ ("Holder"), or its
assigns, is entitled, subject to the terms and conditions hereinafter set forth,
on or before 5:00 p.m. Eastern Standard Time, on October 1, 2001 to purchase
500,000 shares of Common Stock ("Share(s)") of Casino America, Inc. (the
"Company") from the Company at an exercise price of $10.50 (the "Exercise
Price") per Share. Upon presentation and surrender of this Warrant, together
with the form of subscription duly executed and the payment to the Company of
the Exercise Price by certified or cashier's check payable to the order of the
Company, the Holder will be entitled to receive a certificate representing the
Shares so purchased as well as a new Warrant for any Warrants not exercised.
<PAGE>
1. Except to the extent that this Warrant provides otherwise, the
purchase rights represented by this Warrant are exercisable at the option of the
Holder at any time within the period specified above, for all or any whole
number of Shares which are subject to this Warrant. The Company agrees to
reserve from its authorized and unissued shares a sufficient number of unissued
Shares to provide for the issuance and delivery of all shares purchasable
pursuant to this Warrant.
2. Except to the extent that this Warrant expressly provides
otherwise, the Holder shall not be entitled to any of the rights of a
shareholder of the Company; but immediately upon the exercise of this Warrant
and upon payment and receipt by the Company as provided herein, the Holder shall
be deemed a record owner of the shares so purchased and, as such, shall have all
of the rights of such a record owner.
3. Subject to the limitations and restrictions provided herein and by
operation of federal and state securities laws, this Warrant and all rights
hereunder are transferable by the Holder, in whole or in part, in person or by
duly authorized attorney, on the books of the Company upon surrender of this
Warrant, properly endorsed, to the Company. The Shares when issued shall be
fully paid and nonassessable.
4. The Company may deem and treat the Holder as the absolute owner
hereof for all purposes and shall not be affected by any notice to the contrary.
5. Unless such exercise is registered or exempt from registration
under federal and state securities laws, this Warrant shall not be exercisable
except for a security which at the time of such exercise is exempt under the
Securities Act, is the subject matter of an exempt transaction, is registered by
description, by coordination, or by qualification, or at such time is the
subject matter of a transaction which has been registered by description.
6. The number of Shares purchasable pursuant to this Warrant and/or
the Exercise Price shall be subject to adjustment from time to time as
hereinafter set forth in the following subsections of this Section 6.
a. In any of the following events, occurring hereafter, appropriate
adjustment shall be made in the number of Shares purchasable pursuant to this
Warrant and/or the Exercise Price, so as to maintain the proportionate interest
of the Holder: (i) recapitalization of the Company through a split-up of the
outstanding common shares or a combination of the outstanding common shares into
a lesser number; (ii) declaration of a dividend on the common shares, payable in
common shares or other securities convertible into common shares; or (iii) any
stock split or reverse
-2-
<PAGE>
stock split with respect to the common shares. Irrespective of any adjustment
or change in the purchase price per share or in the number of the Shares
purchasable pursuant to this Warrant or any other warrants of like tenor, series
and date, such warrants may continue to express the purchase price per share and
the number of shares purchasable thereunder as expressed when initially issued.
b. If the Company offers for subscription any of its shares of
capital stock or other securities convertible into common shares, to the record
owners of the common shares as a class or classes, the Holder shall be entitled
to subscribe for the same number of common shares as the Holder would have been
entitled to subscribe for the same number of common shares as the Holder would
have been entitled to purchase had the Holder theretofore fully exercised this
Warrant and become a shareholder.
c. In the event that the Company, or any successor, shall be
consolidated or merge with or into another entity, or all or substantially all
of the Company's assets shall be sold to another corporation in exchange for
stock with the view of distributing such stock to the Company's shareholders,
the Holder shall have the right thereafter to receive upon the exercise of this
Warrant the kind and amount of shares of stock and other securities and property
receivable upon such consolidation, merger, sale or conveyance, and adequate
provisions to that effect shall be made a condition of such consolidation,
merger, sale or conveyance. Such provisions shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section of the Warrant. The Holder shall
receive notice of any such transaction.
d. In the event that any dissolution, liquidation or winding up of
the Company, whether voluntary or involuntary, shall at any time be proposed,
the Company shall give to the Holder at least 20 days' prior written notice of
the date as of which the record owners of the Shares will be fixed in respect of
their right to exchange their Shares for the securities or other property
distributable upon such dissolution, liquidation or winding up. In the event
that such dissolution, liquidation or winding up shall actually take place, this
Warrant and all rights with respect hereto shall automatically terminate and
become null and void as of the fixed date referred to above.
e. Upon the occurrence of any event requiring any adjustment of the
number of Shares purchasable pursuant to this Warrant and/or the purchase price
per share, the Company shall promptly give to the Holder written notice thereof
and the adjustment(s) resulting therefrom, which notice shall set forth in
reasonable detail the computations which constitute the basis for such
adjustment(s). The Company's Board of Directors shall in good
-3-
<PAGE>
faith determine all such adjustments, which shall be binding upon the parties.
7. Each certificate for the Shares purchasable pursuant to this
Warrant will, when issued, bear a legend which describes and/or refers to the
restrictions imposed on the transfer of the Shares by federal and state
securities laws as well as any standard gaming legend then required to be
affixed to the certificates by any state regulatory authorities.
8. After such time as any of the Shares have been purchased, the
Company agrees to use its best efforts to file all reports necessary to enable
the holder to use Rule 144 of the Securities Act.
9. Registration Rights.
a. The Holders of at least 25% of the Warrants may request
registration under the Securities Act of 1933, as amended (the "Act") and
appropriate state securities laws, of all or part of the Warrant Shares issuable
upon exercise of their Warrants (the "Registrable Securities"). Promptly upon
receipt of such request, the Company will use its best efforts to effect the
registration under the Act of the Registrable Securities which the Company has
been so requested to register by the Holders thereof.
b. The Company shall advise the Holder of this Warrant or of the
Warrant Shares by written notice at least two weeks prior to the filing of any
new registration statement or post-effective amendment thereto under the Act
covering securities of the Company and will, upon the request of at least the
Holders of at least 25% of the Registrable Securities, include in any such new
registration statement such information as may be required to permit a public
offering of all or any portion of the Registrable Securities.
c. Notwithstanding the provisions of Section 9(b) above, no such
obligations shall apply to: (i) a registration statement on Forms S-4 or S-8;
(ii) if any underwriter of the Company's securities determines for any reason
that it would not permit such registration; or (iii) if the Holder has had two
prior opportunities to have its securities registered.
d. The Company and the Holder shall supply and furnish
indemnification in the manner set forth herein.
e. The following provisions of this Section shall also be applicable:
(i) Any Holder whose Registrable Securities are included in any
such registration statement pursuant to this Section shall bear all of the fees
and disbursements of its own
-4-
<PAGE>
counsel and his pro rata share of any registration fees, transfer taxes or
underwriting discounts or commissions or other underwriting compensation and
charges applicable to the Registrable Securities sold by him pursuant thereto;
provided, however, in the event of a registration upon request pursuant to
Section 9.a. above, the Holders whose Registrable Securities are included in any
such registration statement shall pay their pro rata share of all costs,
expenses, commissions and other fees of such registration. The exercise by the
Holder of the Warrants shall be effective at the time of the Closing of the
Offering.
(ii) The Company shall indemnify and hold harmless each Holder
and each underwriter, within the meaning of the Act, who may purchase from or
sell for any such Holder any Registrable Securities from and against any and all
losses, claims, damages and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims damages or
liabilities are caused by any such untrue statement or alleged untrue statement
or omission or alleged omission based upon information furnished or required to
be furnished in writing to the Company by such Holder or underwriter expressly
for use therein. The Holder or underwriter shall at the same time indemnify the
Company, its directors, each officer signing the related registration statement
and each person, if any, who controls the Company from and against any and all
losses, claims, damages and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement or caused by any omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
insofar as such losses, claims, damages or liabilities are caused by any untrue
statement or alleged untrue statement or omission based upon information
furnished in writing to the Company by any such Holder or underwriter expressly
for use therein. This indemnification by the Holder shall be limited to the net
proceeds received by the Holder from any offering.
f. The Company's agreements with respect to Registrable Securities in
this Section shall continue in effect regardless of the exercise and surrender
of this Warrant.
g. This right of registration shall in all instances be subject and
limited to a proration of securities if requested by an underwriter, with all
other shareholders of the Company who own restricted securities and who request
registration at such time.
10. Notices herein required or permitted to be given to the Holder by
the Company shall be given by first class mail, postage
-5-
<PAGE>
prepaid, addressed to the Holder at the address of such Holder appearing in the
records of the Company and shall be deemed to have been given when sent pursuant
to the provisions hereof.
11. This Warrant shall be construed in accordance with the laws of the
State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
on this _____ day of ________________, 1996.
CASINO AMERICA, INC.
By:
-----------------------------
Authorized Signatory
-6-
<PAGE>
SUBSCRIPTION FORM
-----------------
(To be executed by the Holder to exercise the rights to purchase the Shares
evidenced by the within Warrant)
CASINO AMERICA, INC.
711 Washington Loop
Biloxi, Mississippi 39530
The undersigned hereby irrevocably subscribes for _________ Shares pursuant
to and in accordance with the terms and conditions of this Warrant, herewith
encloses the purchase price therefor in the form or forms permitted by this
Warrant and requests that a certificate for the Shares be issued in the name of
the undersigned and be delivered to the undersigned at the address stated below.
Dated: Signed:
----------------------- ----------------------------
Address:
---------------------------
---------------------------
<PAGE>
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, _______________________________________________________
hereby sells, assigns and transfers unto
Name: __________________________________________________________________________
(Please typewrite or print in block letters)
Address: _______________________________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
______ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ________________________________________ Attorney, to
transfer the same on the books of the Company with full power of substitution in
the premises.
Date: ____________________, 199_
Signature:
------------------------------------
Signature Guaranty:
---------------------------
(By a member of the New York Stock Exchange or a commercial bank or trust
company in New York City.)
<PAGE>
EXHIBIT 10.47
PURCHASE AGREEMENT
------------------
THIS PURCHASE AGREEMENT is made as of the 2nd day of July, 1996, by and
between CSNO, Inc., a Louisiana corporation ("CSNO"), LRGP Holdings, Inc., a
Louisiana corporation ("Purchaser") and Louisiana River Site Development, Inc.,
a Louisiana corporation ("Seller").
A. Louisiana Riverboat Gaming Partnership (the "Partnership") is a
Louisiana general partnership existing under the Revised Uniform General
Partnership Act of the State of Louisiana pursuant to the Partnership Agreement
dated January 4, 1993, the First Amendment to Partnership Agreement dated August
31, 1993, the Second Amendment to Partnership Agreement dated April 20, 1995 and
the Third Amendment to Partnership Agreement dated December 29, 1995 (as so
amended, the "Partnership Agreement"). All capitalized terms used herein, if not
otherwise defined, shall have the meanings set forth in the Partnership
Agreement.
B. The Partnership is the owner and operator of a gaming facility located
in Bossier City, Louisiana (the "Bossier Casino Facility"). In addition, the
Partnership owns 50% of the outstanding common stock of St. Charles Gaming
Company, Inc. ("SCGC").
C. SCGC is the owner and operator of a gaming facility located in Calcasieu
Parish, Louisiana (the "Isle-Calcasieu").
D. CSNO is a General Partner of the Partnership owning a 50% interest in
the Partnership, and Seller is a General Partner of the Partnership owning a 50%
interest in the Partnership ("Seller's Partnership Interest").
E. LRG Hotels, L.L.C. (the "LLC") is a Louisiana limited liability company
formed on June 23, 1993 under the Louisiana Limited Liability Company Act. The
LLC is the owner and operator of a hotel facility located in Bossier City,
Louisiana (the "Hotel Facility," and together with the Bossier Casino Facility,
the "Isle-Bossier City").
F. CSNO and Seller are the two members of the LLC. CSNO owns a 50% interest
in the LLC, and Seller owns a 50% interest in the LLC ("Seller's LLC Interest,"
and together with Seller's Partnership Interest, "Seller's Interests").
<PAGE>
G. Seller wishes to sell and assign, and CSNO, through Purchaser, a wholly
owned subsidiary of Casino America, Inc., wishes to purchase and accept
assignment of, Seller's Interests, on the terms and subject to the conditions
more specifically set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Assignment. On the Closing Date (as defined below), Seller shall sell,
assign, convey, transfer and set over to Purchaser, or to a party designated in
writing by Purchaser in advance, all right, title and interest in and to
Seller's Interests, to have and to hold such Seller's Interests to Purchaser,
its successors and assigns forever, in accordance with the Partnership Agreement
and the Operating Agreement of the LLC.
2. Purchase Price.
(a) As full cash consideration for Seller's Interests, Purchaser shall pay
to Seller on the Closing Date, by federal funds wire transfer to an account
designated in advance by Seller, an aggregate amount of Eighty-Five Million
Dollars ($85,000,000).
(b) In addition to the cash payment to be made at Closing, CSNO and
Purchaser hereby agree (i) to cause to be executed and delivered to Seller at
Closing an Amended and Restated Docking Agreement with respect to the Grand
Palais Riverboat substantially in the form of Exhibit A hereto, which amendment
will provide that the amount of the docking fee payable to Louisiana Downs
thereunder will be $125,000 per month, payable on the first day of every
calendar month for a period of 84 consecutive calendar months beginning on
October 1, 1998, and providing that the amount payable thereunder will be
payable regardless of whether the Grand Palais Riverboat remains docked at the
Lake Charles, Louisiana facility; and (ii) to deliver to Seller (or its
designees) at Closing, a warrant or warrants to purchase 500,000 shares of the
Company's common stock, in the form of Exhibit B hereto.
3. Consents and Closing Date. The parties hereby agree to use their
commercially reasonable efforts to obtain any consents and approvals (including
governmental and regulatory approvals) that may be required in order to
consummate the transactions described in this Agreement. The closing of the
purchase and sale of the Seller's Interests (the "Closing") shall occur on a
date specified by Purchaser on no less than three (3) business days' advance
notice to Seller (the "Closing Date").
2
<PAGE>
4. Admission to Partnership and LLC. The parties agree that from and after
the Closing Date, Purchaser or its designee shall be admitted to the Partnership
as a General Partner and to the LLC as a member in respect of the Seller's
Interests, and Seller's interests in each of the Partnership and the LLC shall
terminate. Effective as of the Closing Date, Purchaser hereby accepts the
assignment of the Seller's Interests and assumes all liabilities of a General
Partner of the Partnership and of a member of the LLC in respect of the Seller's
Interests, which acceptance and assumption shall be confirmed by the delivery at
Closing of appropriate documentation executed by Purchaser. In accordance with
such admissions, the Partnership shall amend the Partnership Agreement to
reflect the respective Partnership Interests of the Partners subsequent to the
Closing, and the LLC shall amend its Operating Agreement to reflect the
respective membership interests of the members of the LLC subsequent to the
Closing. CSNO hereby agrees to cause to be filed with the Louisiana Secretary of
State, on the Closing Date or the next succeeding business day, an Amended and
Restated Certificate of General Partnership, together with Amended and Restated
Articles of Organization of the LLC, reflecting the transfer of Seller's
Interests.
5. Representations and Warranties. Each of CSNO and Purchaser represents
and warrants to Seller, and Seller represents and warrants to each of CSNO and
Purchaser, as follows:
Such party has full power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance by such party of this Agreement have been duly and validly approved
by such party and no other actions or proceedings on the part of such party are
necessary to authorize the execution, delivery and performance by such party of
this Agreement and the consummation of the transactions contemplated hereby.
Such party has duly and validly executed and delivered this Agreement. This
Agreement constitutes the legal, valid and binding obligation of such party
enforceable in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws in effect which affect the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific remedies.
Such party has not retained, and no amounts shall be owing by reason of the
execution, delivery or performance of this Agreement to, any broker or similar
agent. Such party is fully aware of the business, affairs and business prospects
of the Partnership and the LLC, and has been afforded full and complete access
to the records and personnel of the Partnership and the LLC for the purpose of
making its decision whether or not to
3
<PAGE>
enter into this Agreement and consummate the transactions contemplated hereby.
Seller further represents and warrants to each of CSNO and Purchaser that
(i) it is the record and beneficial owner of Seller's Interests, free and clear
of any lien, claim, option, call, right of first refusal, charge, encumbrance,
restriction on transfer (other than any restriction under the Securities Act of
1933, as amended, state securities or "blue sky" laws, Louisiana laws and
regulations relating to the conduct of the gaming business of the Partnership
and the LLC and any right that may be held by CSNO) or other right of any other
party, and (ii) to the best of Seller's knowledge, no consents other than (A)
the consents of the Louisiana Gaming Control Board and the Louisiana State
Police Riverboat Gaming Enforcement Division, (B) consents required under
financing arrangements to which the Partnership is a party and which will be
obtained by CSNO prior to the Closing Date if such financing arrangements are to
remain in place as of the Closing Date, and (C) depending on the date of the
Closing Date, approval of the transactions contemplated hereby pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, are required for the
consummation by Seller of the transactions contemplated hereby. Seller agrees
not to invoke the provisions of Sections 10.2 or 10.3 of the Partnership
Agreement prior to the Closing Date or the termination of this Agreement.
6. Conditions Precedent to Purchaser's and Seller's Obligations; Liquidated
Damages. The respective obligations of each of Purchaser and Seller at the
Closing are not subject to the fulfillment of any conditions precedent
whatsoever, other than: (a) the representations and warranties of the other
party contained herein shall be true and correct as of the date hereof and shall
be true and correct as of the Closing Date, in each case in all material
respects; and (b) the parties shall have executed and delivered any and all
documentation in form and substance reasonably acceptable to the parties
conveying to Purchaser all of the right, title and interest of Seller in and to
the Seller's Interests.
Notwithstanding the foregoing, in the event that, notwithstanding the
fulfillment of all conditions precedent on the part of Seller as described in
Section 6 above, Purchaser fails to consummate the transactions contemplated
hereby prior to the date of termination of this Agreement (as the same may be
extended) as set forth below, the sole remedy of Seller relating to such failure
to close shall be the foreclosure by Seller on the Collateral (as described in
the Escrow Agreement attached hereto as Exhibit C (the "Escrow Agreement")),
which foreclosure shall constitute liquidated damages to Seller resulting from
Purchaser's failure to consummate the transactions contemplated hereby; and
provided, further, that in the event that Purchaser's
4
<PAGE>
failure to consummate the transactions contemplated hereby shall result solely
from the failure to obtain consents or approvals that may be required from the
Louisiana Gaming Control Board and the Louisiana State Police Riverboat Gaming
Enforcement Division, or otherwise under Louisiana law, then Seller shall only
be entitled to foreclose on that portion of the Collateral as described in the
Escrow Agreement.
7. Allocation of Taxable Income and Tax Losses. CSNO and Seller hereby
agree that the distributive share of the Partnership's and the LLC's taxable
income and tax losses allocable to the Seller's Interests in accordance with the
Partnership Agreement and the Operating Agreement of the LLC shall be allocated
to Seller to but not including the Closing Date, and from and including the
Closing Date, to Purchaser. Accordingly, Seller's share of all distributions
made by the Partnership and the LLC relating to the period from and after the
Closing Date shall be made to Purchaser. The Partnership and the LLC shall
report the taxable income and tax losses of the Partnership and the LLC in
respect of the Seller's Interests. Except as set forth in the last sentence of
Section 10 below, nothing in this Agreement shall obligate CSNO to cause the
Partnership to make any distributions to Seller prior to or on the Closing Date,
and upon the Closing Date Seller shall be deemed to have waived any interest in
any distributions that are made after the Closing Date.
8. Publicity. The parties shall cooperate with one another in connection
with the issuance and content of any press releases or similar public comment
regarding the execution of this Agreement or the subject matter hereof, it being
understood that the parties are free to make any disclosures that are, in their
judgment, required by law.
9. Non-Competition Provisions. In the event that the purchase and sale of
Seller's Interests is consummated as provided herein, then from and after the
Closing Date, all obligations and agreements of the parties purporting to
restrict the parties' and their affiliates' rights to compete with one another
and their affiliates shall be null and void, with the effect that any and all
documents and agreements containing any such obligations shall be deemed to be
amended so as to remove such restrictions. The parties agree that from and after
the Closing Date, the parties and their affiliates may compete with one another
without restriction.
10. Termination. This Agreement shall terminate unless Purchaser shall have
caused the Collateral to be delivered to the Escrowee on or prior to July 10,
1996, in accordance with Section 1 of the Escrow Agreement. This Agreement may
be terminated by the mutual agreement of the parties, expressed in writing. In
5
<PAGE>
addition, in the event that the Seller's Interests have not been purchased by
Purchaser prior to October 1, 1996, notwithstanding Purchaser's willingness to
purchase the Seller's Interests pursuant hereto, this Agreement shall terminate;
provided, that Purchaser shall have the right, in its sole discretion, to extend
the date appearing in this Section 9 until November 1, 1996, and again (if
previously so extended) until December 1, 1996, by delivering to Seller written
notice of its election to so extend such date not less than two (2) days prior
to October 1, 1996 or November 1, 1996, as the case may be. If Purchaser so
elects to extend such date, then with respect to any calendar month (or portion
thereof) between October 1, 1996 and the Closing Date, LRSD shall receive, as a
distribution, its share of the net income of LRGP (including accrued interest
income accruing after October 1, 1996) for such month or portion thereof, which
distribution shall be accompanied by a statement of the Chief Financial Officer
of Casino America setting forth such net income, and which shall be paid within
20 days of the end of each calendar month or portion thereof. Louisiana Downs
shall additionally be entitled to all payments required to be paid to it under
the Docking Agreement in effect between Grand Palais Riverboat, Inc. and
Louisiana Downs, Inc. with respect to such month, such payments to be determined
as if the Grand Palais Riverboat had commenced operations on June 1, 1996.
11. Notices. All notices given hereunder shall be in writing and shall be
deemed properly given if delivered in person or if sent by overnight courier, by
certified or registered mail or by facsimile transmission, to the following
addresses (or to such other addresses as either party may subsequently
designate):
If to CSNO or Purchaser: CSNO, Inc.
c/o Casino America, Inc.
711 Washington Loop
Biloxi, Mississippi 39530
Facsimile: (601) 436-4072
Attn: John A. Gallaway
President
with copies to:
Allan B. Solomon, Esq.
General Counsel
Casino America, Inc.
2200 Corporate Blvd., N.W.,
Suite 310
Boca Raton, Florida 33431
Facsimile: (407) 995-6665
and
6
<PAGE>
Paul W. Theiss, Esq.
Mayer, Brown & Platt
190 South LaSalle Street
Suite 3100
Chicago, Illinois 60603
Facsimile: (312) 701-7711
If to Seller: Louisiana River Site Development,
Inc.
c/o The DeBartolo Corporation
7620 Market Street
Youngstown, Ohio 44512
Attn: Edward J. DeBartolo, Jr.
Facsimile: (216) 726-3721
with a copy to:
Louisiana River Site Development,
Inc.
c/o The DeBartolo Corporation
7620 Market Street
Youngstown, Ohio 44512
Attn: Arthur D. Wolfcale, Esq.
Facsimile: (216) 726-3721
12. Further Assurances; Releases. Seller, at its sole cost and expense,
upon the request of CSNO or Purchaser, shall execute and deliver such further
instruments and do or cause to be done such further acts as may be necessary to
be done by Seller to effectuate and confirm the assignment of the Seller's
Interests. In addition, at Closing the parties shall deliver to one another
mutual and general releases relating to their activities as partners in LRGP and
with respect to the Calcasieu Joint Operating Agreement in effect among the
parties. Upon execution hereof, CSNO shall cause Casino America, Inc. to enter
into an Amendment to Termination and Limited Participation Agreement in the form
of Exhibit D hereto.
13. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Louisiana.
7
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument as of the
day first written above.
CSNO, INC.: SELLER:
CSNO, Inc. LOUISIANA RIVER SITE
a Louisiana corporation DEVELOPMENT, INC., a Louisiana
corporation
By: By:
------------------------ ---------------------------
Its: Its:
----------------------- --------------------------
LRGP Holdings, Inc.,
as Purchaser
By:
------------------------
Title:
---------------------
The undersigned, as the parent corporations of the parties hereto, hereby
execute this Agreement for the sole purpose of guaranteeing the performance of
their respective subsidiaries of the obligations of such entities under this
Agreement (and, in the case of Casino America, the obligations of Grand Palais
Riverboat, Inc. under any Amended and Restated Docking Agreement that may be
executed at Closing):
Casino America, Inc., Louisiana Downs, Inc.,
a Delaware corporation a Louisiana corporation
By: By:
------------------------ ---------------------------
Title: Title:
--------------------- ------------------------
8
<PAGE>
The undersigned hereby executes this Agreement for the sole purpose of
acknowledging the receipt of sufficient consideration for the execution and
delivery of the Amended and Restated Docking Agreement.
Grand Palais Riverboat, Inc.,
a Louisiana corporation
By:
------------------------
Title:
---------------------
9
<PAGE>
EXHIBIT 10.48
-------------
ESCROW AGREEMENT
This Escrow Agreement is made this 2ND day of July, 1996, by and among LRGP
HOLDINGS, INC., a Louisiana corporation ("Purchaser"), CASINO AMERICA, INC., a
Delaware corporation ("Casino America"), LOUISIANA RIVER SITE DEVELOPMENT, INC.,
a Louisiana corporation ("LRSD"), LOUISIANA DOWNS, INC., a Louisiana corporation
("Louisiana Downs"), and Boult, Cummings, Conners & Berry, PLC ("Escrowee").
RECITALS:
A. Pursuant to the terms of a Purchase Agreement, dated the date hereof
(the "Purchase Agreement"), Purchaser is obligated to purchase the interests of
LRSD (the "Seller") in Louisiana Riverboat Gaming Partnership (the
"Partnership") and LRG Hotels, L.L.C. ("LRGH"), in consideration of the payment
of the consideration described therein, including the cash payment of $85
million.
B. Purchaser has agreed to post collateral and place the same into escrow
in order to secure its obligation to consummate the transactions contemplated by
the Purchase Agreement (the "Purchase").
C. Purchaser, Casino America, LRSD and Louisiana Downs desire Escrowee to
act, and Escrowee has agreed to act, as the Escrow Agent pursuant to the terms
hereof.
NOW, IT IS HEREBY MUTUALLY AGREED AS FOLLOWS:
1. Deposit of Collateral. On behalf of Purchaser, on or before July 10,
1996, Casino America shall transfer unto Escrowee a stock certificate of Casino
America, representing 625,000 shares of common stock of Casino America (the
"Escrowed Shares"), together with stock powers executed in blank by Casino
America (the "Collateral"), to hold for the benefit of Seller to secure the
obligation of Purchaser to consummate the Purchase. The parties acknowledge
that the Escrowed Shares shall not have been registered for resale with the
Securities and Exchange Commission (the "SEC"). Escrowee shall provide to
Casino America a written acknowledgement of its receipt of such certificate.
2. Holding of Collateral. Escrowee agrees to cause the Collateral to be
held in a secure location in the custody of the Escrowee. While in such
custody, and for so long as the Escrowed Shares have not been paid over to
Seller pursuant to the terms
<PAGE>
hereof, Purchaser shall be entitled to receive any dividends or distributions
paid on such Escrowed Shares, and shall have the power to vote said Escrowed
Shares on all matters that may be brought for a vote while said Escrowed Shares
are held in escrow.
3. Release of Collateral. The Collateral shall be released and delivered
to the Seller on the latest of (i) October 2, 1996, (ii) November 2, 1996, in
the event that the Closing Date (as defined in the Purchase Agreement) has been
extended thereunder to November 1, 1996 and not subsequently extended, or (iii)
December 2, 1996, in the event that the Closing Date has been extended
thereunder to December 1, 1996, but in each case only in the event that Escrowee
shall have received written notice signed by Seller (by officers acting therefor
with apparent authority so to act, there being no obligation on the part of
Escrowee to ascertain such authority) in the form of Annex I hereto; provided,
that in the event that the failure of Purchaser to consummate the transactions
contemplated by the Purchase Agreement results solely from the failure to obtain
consents or approvals that may be required from the Louisiana Gaming Control
Board and the Louisiana State Police Riverboat Gaming Enforcement Division, or
otherwise under Louisiana law, and Purchaser has delivered the notice described
in the following paragraph, then Seller shall only be entitled to foreclose on
that portion of the Collateral equal in value to $750,000, valuing the Escrowed
Shares at $8.00 per share, with the composition of such $750,000 (in the case
where both Escrowed Shares and cash are being held) to be in proportion to the
cash and Escrowed Shares being held. In such instance, the balance of the
Collateral shall be returned to Casino America, or to such other party as may be
directed by Casino America. In the event that the Purchase is consummated,
Purchaser, Casino America, LRSD and Louisiana Downs shall execute and deliver to
Escrowee a joint direction, directing that the Collateral be released and paid
to Casino America, or such other party as may be directed by Casino America.
The parties hereto (other than Escrowee) shall deliver such a notice to Escrowee
simultaneously upon consummation of the Purchase.
In the event that Purchaser shall deliver a notice to Escrowee (with a copy
to the parties hereto) not later than the third business day prior to the date
that the Collateral is to be disbursed to Seller that Purchaser does not intend
to consummate the transactions contemplated by the Purchase Agreement, and that
such failure to consummate will result solely from the failure to obtain
consents or approvals that may be required from the Louisiana State Police
Riverboat Gaming Enforcement Division, or otherwise under Louisiana law, then
Seller shall either (i) notify the parties hereto of its agreement with such
notification, in which case the Collateral shall be disbursed as provided in the
proviso in the foregoing paragraph, or (ii)
-2-
<PAGE>
notify the parties hereto of its disagreement with such notification, in which
case the Escrowee shall deliver to Seller on the appropriate date its $750,000
of Collateral, and Seller and Purchaser shall seek to resolve their disagreement
regarding the remaining $4,250,000 of Collateral (which shall continue to be
held by Escrowee pending such resolution or deposited pursuant to Section 5.2).
The losing party in any such proceeding brought for this purpose shall pay all
costs and expenses of the prevailing party.
4. Substitution of Collateral; Registration of Escrowed Shares. On no
more than one occasion prior to the termination of the Purchase Agreement, and
prior to the consummation of the Purchase, Purchaser and Casino America shall
have the right, in their sole discretion, to substitute cash for all or any
portion of the Escrowed Shares, using a conversion rate of $8.00 per Escrowed
Share, and upon any such substitution shall give prompt written notice thereof
to the other parties hereto. Escrowee shall cooperate with Purchaser and Casino
America in affecting such conversion. Any cash so received by the Escrowee
shall be held in an interest-bearing account, with accrued interest being
payable upon the termination of this Agreement (i) to Seller if the Collateral
is paid to Seller at the termination of this Agreement, or (ii) to Purchaser if
the Collateral is paid to Purchaser at the termination of this Agreement, or
(iii) proportionately if the Collateral is paid to both parties. In addition,
Purchaser agrees to cause the Escrowed Shares to be registered with the SEC for
resale on or prior to October 1, 1996, unless the Closing shall take place prior
to October 1, 1996 as contemplated by the Purchase Agreement, which registration
shall be at Purchaser's expense. In the event that the Closing Date is extended
by Purchaser pursuant to the Purchase Agreement to a date beyond October 1,
1996, Purchaser shall not be relieved of its obligation to so cause the Escrowed
Shares to be so registered, but the failure to do so shall not constitute a
default under the Purchase Agreement or relieve Seller of its obligation to
consummate the sale of the Seller's Interests (as defined in the Purchase
Agreement) thereunder; provided, that Casino America may be liable to Seller for
damages suffered by Seller arising directly as a result of the failure of CSNO
or Casino America to so register the Escrowed Shares.
In the event that between the date hereof and the date of termination of
this Agreement, Casino America shall (i) recapitalize Casino America through a
split-up of the outstanding common shares; (ii) declare a dividend on its common
shares, payable in common shares or other securities convertible into common
shares, of (iii) consummate any stock split of its common shares, the number of
shares held by Escrowee pursuant hereto shall be given the same privileges as
those outstanding or be adjusted, so as to maintain the percentage interest in
Casino
-3-
<PAGE>
America represented by the Escrowed Shares. In no event shall the rights
offering being conducted by Casino America on the date hereof give rise to any
such adjustment.
5. Escrowee.
5.1. Duties. Escrowee's obligations and duties in connection herewith are
confined to those specifically enumerated in this Agreement. Escrowee shall not
be in any manner liable or responsible for the sufficiency, correctness,
genuineness or validity of any instruments deposited with it or with reference
to the form of execution thereof, or the identity, authority or rights of any
person executing or depositing same, and Escrowee shall not be liable for any
loss that may occur by reason of forgery, false representation or the exercise
of its discretion in any particular manner or for any other reason. Purchaser,
Casino America, LRSD and Louisiana Downs shall jointly and severally indemnify,
defend and hold Escrowee harmless from any demands, suits or causes of action
arising out of this Escrow Agreement, except where such liability results from
Escrowee's gross negligence or willful misconduct.
5.2. Interpleader. In the event of a dispute between the parties hereto
sufficient in the sole discretion of Escrowee to justify its doing so, Escrowee
shall be entitled to tender into the registry or custody of any court of
competent jurisdiction all money or property in its hands under this Agreement,
together with such legal pleadings as it deems appropriate, and thereupon be
discharged from all further duties and liabilities under this Agreement. Any
such legal action may be brought in such court in New Orleans or the Eastern
District of Louisiana as Escrowee shall determine to have jurisdiction thereof.
5.3 Reliance, Etc.
a. Escrowee shall be protected in acting upon any written notice,
request, waiver, consent, certificate, receipt, authorization or other paper or
document which Escrowee reasonably believes to be genuine and what it purports
to be.
b. Escrowee may confer with legal counsel in the event of any
dispute or question as to the construction of any of the provisions hereof, or
its duties hereunder, and it shall incur no liability and it shall be fully
protected in acting in good faith in accordance with the opinions and
instructions of such counsel.
c. In the event Escrowee incurs legal fees and expenses in
connection with any legal proceeding arising out of this Escrow Agreement, the
non-prevailing party which is a party to such legal proceeding shall be
responsible for paying or
-4-
<PAGE>
reimbursing, as the case may be, any and all such fees and expenses. In the
event that any such legal proceeding does not proceed to final judgment or no
"non-prevailing party" results from such legal proceeding, any and all such
reasonable fees and expenses shall be paid (i) pursuant to the terms of a
written agreement settling such litigation or, (ii) in the absence of any such
agreement, equally by Purchaser and LRSD.
5.4 Successor Escrowee. Escrowee shall have the right to resign as
Escrowee hereunder by delivering 30 days prior notice in writing to Purchaser,
Casino America, LRSD and Louisiana Downs. If Escrowee resigns, a successor
Escrowee shall be appointed by mutual agreement of Purchaser, Casino America,
LRSD and Louisiana Downs, such resignation shall take effect upon such
appointment, and Escrowee shall deliver the Collateral to such successor
Escrowee. Any successor Escrowee at any time serving hereunder shall be
entitled to all rights, powers and indemnities granted to the Escrowee hereunder
as if originally named herein.
5.5 Waiver of Conflict. Purchaser and Casino America hereby acknowledge
that Escrowee has from time to time served as counsel to LRSD and Louisiana
Downs, and hereby waive any claim of conflict or disqualification resulting
therefrom, and covenants that it will not object to Escrowee's continuing
representation of LRSD and Louisiana Downs.
6. Termination. This Escrow Agreement shall terminate upon the delivery
in full of the Collateral or otherwise at the mutual discretion of Purchaser,
Casino America, LRSD and Louisiana Downs.
7. Miscellaneous.
a. Any notice or other communication required or desired to be given
hereunder shall be delivered in writing and shall be deemed delivered upon the
hand delivery or facsimile transmission thereof during business hours, or upon
the earlier of receipt or three (3) days after posting by registered mail or
certified mail, return receipt requested, or on the next business day following
delivery to a reliable or recognized air freight delivery service, provided such
notices shall be addressed or delivered to the parties at their respective
addressed set forth below, or if via facsimile transmission, to the facsimile
telephone numbers set forth below:
1. If to Purchaser or Casino America, on the one hand, or LRSD or
Louisiana Downs, on the other hand, at the addresses set forth for
Casino America or LRSD, respectively, in the Purchase Agreement.
-5-
<PAGE>
2. If to Escrowee:
Boult, Cummings, Conners & Berry, PLC
414 Union Street, Suite 1600
Nashville, TN 37219
Attn: Christopher Harris, Esq.
Facsimile: (615) 252-2380
or at such other address as may from time to time be designated in writing by
the party to be given notice.
b. This Escrow Agreement shall be governed by the internal laws of
the State of Louisiana, without regard to its conflict of law provisions.
c. This Escrow Agreement shall be binding on each of the parties
hereto and upon their successors and assigns.
d. The parties hereto agree that no assignment of the interest of
any of the parties hereto shall be binding upon the Escrowee unless and until
written evidence of such assignment in form satisfactory to Escrowee shall be
filed with Escrowee.
e. The parties hereto agree that in case said property shall be
attached, garnished, or levied upon under any order of court, or the delivery
thereof shall be stayed or enjoined by an order of court, or any order, judgment
or decree shall be made or entered by any court affecting the property deposited
under this agreement, or any part hereof, Escrowee is hereby expressly
authorized, in its sole discretion, to obey and comply with all writs, orders or
decrees so entered or issued, whether with or without jurisdiction, and in case
Escrowee obeys or complies with any such writ, order or decree it shall not be
liable to any of the parties hereto or to any other person, firm or corporation,
by reason of such compliance notwithstanding such writ, order or decree being
subsequently reversed, modified, annulled, set aside or vacated.
Notwithstanding the foregoing, Escrowee shall give prompt notice to the other
parties hereto of the institution of any proceedings of the type described
above, and shall keep the parties apprised of material developments in any such
proceedings.
f. This Escrow Agreement may be executed in two or more
counterparts, which when taken together will serve as one fully executed
original.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
as of the date first above written.
LRGP HOLDINGS, INC.
By:___________________________
Title:___________________
CASINO AMERICA, INC.
By:___________________________
Title:___________________
LOUISIANA RIVER SITE DEVELOPMENT, INC.
By:___________________________
Title:___________________
LOUISIANA DOWNS, INC.
By:___________________________
Title:___________________
BOULT, CUMMINGS, CONNERS & BERRY,
PLC, as Escrowee
By:___________________________
Title:___________________
-7-
<PAGE>
Annex I
-------
LOUISIANA RIVER SITE DEVELOPMENT, INC.
C/O THE EDWARD J. DEBARTOLO CORPORATION
7620 MARKET STREET
YOUNGSTOWN, OHIO 44513-3287
[DATE]
Boult, Cummings, Conners
& Berry, PLC
414 Union Street, Suite 1600
Nashville, TN 37219
Attn: Christopher Harris
Gentlemen:
This notice is being delivered to you pursuant to Section 3 of the Escrow
Agreement, dated July 2, 1996, among LRGP Holdings, Inc., Casino America, Inc.,
Louisiana River Site Development, Inc., Louisiana Downs, Inc. and you (the
"Escrow Agreement"). You are acting as Escrowee thereunder.
Pursuant to Section 3 of the Escrow Agreement, this is to notify you, and
the undersigned hereby represents to you, to Purchaser, to Casino America, Inc.
and to CSNO, Inc. as follows:
1. The Purchase Agreement referred to in the Escrow Agreement (the
"Purchase Agreement") has terminated by its terms, without the
termination date thereunder having been extended pursuant to the terms
of the Agreement or by mutual agreement of the parties.
2. All conditions precedent to the obligations of the Purchaser to
consummate the transactions contemplated by the Purchase Agreement
have been fulfilled.
[ALTERNATIVE ONE:
3. Purchaser has not delivered to the parties to the Escrow Agreement a
notice of the type referred to in the second paragraph of Section 3 of
the Escrow Agreement.
4. Accordingly, you are hereby directed, pursuant to the terms of the
Escrow Agreement, to deliver to the undersigned all of the Collateral
being held by you (together with any accrued interest thereon)
thereunder, to Seller at [Insert Address].]
-8-
<PAGE>
[ALTERNATIVE TWO:
3. Purchaser has delivered to the parties to the Escrow Agreement a
notice of the type referred to in the second paragraph of Section 3 of
the Escrow Agreement, and Seller agrees with such notice.
4. Accordingly, you are hereby directed, pursuant to the terms of the
Escrow Agreement, to deliver to the undersigned $750,000 of the
Collateral being held by you (together with a proportionate amount of
any accrued interest thereon) thereunder, to Seller at [Insert
Address], and to deliver the balance of the Collateral (together with
a proportionate amount of any accrued interest thereon) to Purchaser,
at Purchaser's address as set forth in the Escrow Agreement.]
[ALTERNATIVE THREE:
3. Purchaser has delivered to the parties to the Escrow Agreement a
notice of the type referred to in the second paragraph of Section 3 of
the Escrow Agreement, and Seller disagrees with such notice.
4. Accordingly, you are hereby directed, pursuant to the terms of the
Escrow Agreement, to deliver to the undersigned $750,000 of the
Collateral being held by you (together with a proportionate amount of
any accrued interest thereon) thereunder, to Seller at [Insert
Address], and to continue to hold the balance of the Collateral in
accordance with the terms of the Escrow Agreement]
Very truly yours,
Louisiana River Site Development, Inc.
By: _________________________
Title: ______________________
cc: John A. Gallaway
Allan B. Soloman
Paul W. Theiss
-9-
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF CASINO AMERICA, INC.
<TABLE>
<CAPTION>
State of Other Name(s)
Incorporation or Under Which it
Name Organization Does Business
---- ------------ --------------
<S> <C> <C>
Riverboat Corporation of Mississippi Isle of Capri Casino--Biloxi
Mississippi
Riverboat Corporation of Mississippi Isle of Capri
Mississippi--Vicksburg Casino--Vicksburg
Riverboat Services, Inc. Iowa None
CSNO, Inc. Louisiana None
Louisiana Riverboat Gaming Louisiana Isle of Capri
Partnership Casino--Bossier City
St. Charles Gaming Company, Louisiana Isle of Capri Casino--Lake
Inc. Charles
PPI, Inc. Florida None
LRGP Holdings, Inc. Louisiana None
ASMI Management, Inc. Florida None
Isle of Capri Casino Colorado, Colorado None
Inc.
</TABLE>
<PAGE>
EXHIBIT 21
<TABLE>
<CAPTION>
State of Other Name(s)
Incorporation or Under Which it
Name Organization Does Business
---- ---------------- --------------
<S> <C> <C>
Riverboat Corp. of Mississippi None
Mississippi--Tunica
Casino Career Training Center, Iowa None
Inc.
Riverboat Corp. of Indiana, Indiana None
Inc.
Riverboat Corp. of Indiana, Indiana None
L.L.C.
EEA Corporation Mississippi None
Riverboat Corp. of Missouri, Missouri None
Inc.
WB Holdings, Inc. Louisiana None
</TABLE>
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the following Registration
Statements of Casino America, Inc. of our report dated June 3, 1996, with
respect to the consolidated financial statements of Casino America, Inc., and
our report dated May 22, 1996, with respect to the financial statements of
Louisiana Riverboat Gaming Partnership, both of which are included in Casino
America, Inc.'s Annual Report (Form 10-K) for the year ended April 30, 1996:
. Form S-3 No. 33-70294 (for the registration of up to 582,960
shares of common stock);
. Post-Effective Amendment No. 1 to Form S-8 No. 33-61752 (the 1992
Stock Option Plan, as amended);
. Form S-8 No. 33-80918 (the 1993 Stock Option Plan; the Director's
Option Plan; and the Stock Bonus Plan);
. Form S-8 No. 33-86940 (the Employee Stock Purchase Plan; the 1993
Stock Option Plan; the Consulting Agreement, dated October 1, 1993,
with Theodore E. Deutch; the Consulting Agreement, dated October 1,
1993, with Scott Crawford; and the Consulting Agreement, dated
November 10, 1994, with Becker & Poliakoff, P.A.);
. Form S-8 No. 33-93088 (the Retirement Trust and Savings Plan); and
. Form S-3 No. 333-2610 (for the registration of 4,296,085 shares of
common stock issuable upon the exercise of rights).
ERNST & YOUNG LLP
Chicago, Illinois
July 29, 1996
