<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1996
-----------------------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
-----------------------------------------------
Commission File Number: 0-20538
------------------------------------------------------
Casino America, Inc.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 41-1659606
- ------------------------------------------------------------------------------
(State of Incorporation) (IRS Employer Identification No.)
711 Washington Loop, Second Floor, Biloxi, Mississippi 39530
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(601) 436-7000
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (a) 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
--- ---
Shares of Common Stock outstanding at March 13, 1996: 16,034,082
----------
<PAGE>
CASINO AMERICA, INC.
FORM 1O-Q/A
INDEX
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets,
January 31, 1996 (unaudited) and
April 30, 1995
Consolidated Statements of
Operations for the Three Months
Ended January 31, 1996 and 1995
(unaudited)
Consolidated Statements of
Operations for the Nine Months
Ended January 31, 1996 and 1995
(unaudited)
Consolidated Statements of
Cash Flows for the Nine Months
Ended January 31, 1996 and 1995
(unaudited)
Notes to Unaudited Consolidated
Financial Statements
Item 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SIGNATURES
<PAGE>
CASINO AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 31, April 30,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8,981,000 $ 18,997,000
Accounts receivable:
Related parties 2,017,000 2,409,000
Other 2,089,000 825,000
Income tax receivable -- 1,189,000
Inventories 854,000 752,000
Prepaid expenses 1,598,000 1,189,000
------------ ------------
TOTAL CURRENT ASSETS 15,539,000 25,361,000
------------ ------------
PROPERTY AND EQUIPMENT:
Land and improvements 25,472,000 18,687,000
Leasehold improvements 50,191,000 5,368,000
Buildings and improvements 6,187,000 5,203,000
Riverboats and floating pavilions 32,724,000 51,020,000
Furniture, fixtures and equipment 35,759,000 35,211,000
Construction in progress 44,000 33,082,000
------------ ------------
150,377,000 148,571,000
Less: Accumulated depreciation 18,648,000 15,086,000
------------ ------------
Property and equipment - net 131,729,000 133,485,000
------------ ------------
OTHER ASSETS:
Investment in and advances to affiliates 30,044,000 20,861,000
Notes receivable - related party 4,700,000 4,700,000
Other investments 2,250,000 2,250,000
Property held for development or sale 15,866,000 1,398,000
Restricted cash -- 12,171,000
Berthing, concession and leasehold rights, net of
accumulated amortization of $1,130,000 and
$895,000, respectively 5,138,000 5,373,000
Deferred financing costs, net of accumulated amortization
of $1,290,000 and $682,000, respectively 4,265,000 4,089,000
Prepaid expenses 796,000 955,000
Deposits and other 968,000 1,256,000
------------ ------------
64,027,000 53,053,000
------------ ------------
TOTAL ASSETS $211,295,000 $211,899,000
============ ============
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
1
<PAGE>
CASINO AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 31, April 30,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and lines of credit $ 3,441,000 $ 389,000
Current maturities of long-term debt 7,807,000 6,404,000
Accounts payable - Trade 4,039,000 8,369,000
Accrued liabilities:
Interest 2,892,000 5,631,000
Payroll and payroll related 6,400,000 5,670,000
Property and other taxes 2,569,000 1,207,000
Progressive jackpots and slot club awards 1,941,000 2,232,000
Deferred income taxes 1,559,000 1,477,000
Other 3,376,000 480,000
------------ ------------
TOTAL CURRENT LIABILITIES 34,024,000 31,859,000
------------ ------------
LONG-TERM DEBT, NET OF CURRENT MATURITIES 131,300,000 132,064,000
------------ ------------
DEFERRED INCOME TAXES 5,496,000 5,961,000
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 2,000,000 shares
authorized; none issued -- --
Common stock, $0.01 par value; 45,000,000 shares authorized;
shares issued and outstanding: 15,010,442 and
14,853,124, respectively 150,000 149,000
Class B common stock, $0.01 par value; 3,000,000
shares authorized; none issued -- --
Additional paid-in capital 7,796,000 7,168,000
Retained earnings 32,529,000 34,698,000
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 40,475,000 42,015,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $211,295,000 $211,899,000
============ ============
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
CASINO AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended January 31,
1996 1995
------------ ------------
<S> <C> <C>
REVENUE:
Casino $31,445,000 $28,034,000
Rooms 1,481,000 --
Management fees - joint ventures 1,583,000 1,195,000
Pari-mutuel commissions and fees 6,113,000 --
Food, beverage and other 2,338,000 913,000
----------- -----------
TOTAL REVENUE 42,960,000 30,142,000
----------- -----------
OPERATING EXPENSES:
Casino 11,351,000 9,474,000
Rooms 984,000 --
Gaming taxes 3,967,000 3,124,000
Pari-mutuel 2,408,000 --
Food and beverage 2,582,000 1,322,000
Marine and facilities 3,834,000 1,684,000
Marketing and administrative 9,853,000 7,175,000
One-time charge 11,798,000 --
Depreciation and amortization 2,703,000 2,362,000
----------- -----------
TOTAL OPERATING EXPENSES 49,480,000 25,141,000
----------- -----------
OPERATING INCOME (LOSS) (6,520,000) 5,001,000
INTEREST EXPENSE (4,464,000) (3,462,000)
INTEREST INCOME:
Related parties 160,000 649,000
Other 44,000 208,000
EQUITY IN INCOME OF UNCONSOLIDATED JOINT VENTURES 2,931,000 5,674,000
LOSS ON DISPOSAL OF EQUIPMENT (795,000) --
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (8,664,000) 8,070,000
INCOME TAX PROVISION (BENEFIT) (2,097,000) 3,298,000
----------- -----------
NET INCOME (LOSS) $(6,547,000) $ 4,772,000
=========== ===========
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE $ (0.44) $ 0.31
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES 14,972,000 15,471,000
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
CASINO AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended January 31,
1996 1995
------------ ------------
<S> <C> <C>
REVENUE:
Casino $ 90,300,000 $ 88,615,000
Rooms 2,969,000 --
Management fees - joint ventures 4,351,000 3,431,000
Pari-mutuel commissions and fees 8,938,000 --
Food, beverage and other 4,969,000 3,730,000
------------ ------------
TOTAL REVENUE 111,527,000 95,776,000
------------ ------------
OPERATING EXPENSES:
Casino 31,922,000 31,346,000
Rooms 1,959,000 --
Gaming taxes 11,104,000 10,401,000
Pari-mutuel 6,221,000 --
Food and beverage 6,654,000 5,547,000
Marine and facilities 8,343,000 5,813,000
Marketing and administrative 25,705,000 19,603,000
One-time charge 11,798,000 --
Preopening expenses 1,290,000 483,000
Depreciation and amortization 8,230,000 6,564,000
------------ ------------
TOTAL OPERATING EXPENSES 113,226,000 79,757,000
------------ ------------
OPERATING INCOME (LOSS) (1,699,000) 16,019,000
INTEREST EXPENSE (11,189,000) (10,824,000)
INTEREST INCOME:
Related parties 590,000 2,674,000
Other 430,000 573,000
EQUITY IN INCOME OF UNCONSOLIDATED JOINT VENTURES 12,207,000 14,000,000
LOSS ON DISPOSAL OF EQUIPMENT (1,121,000) (277,000)
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES (782,000) 22,165,000
INCOME TAX PROVISION 1,387,000 8,800,000
------------ ------------
NET INCOME (LOSS) $ (2,169,000) $ 13,365,000
============ ============
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE $ (0.14) $ 0.85
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES 15,580,000 15,649,000
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
CASINO AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended January 31,
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (2,169,000) $ 13,365,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 9,054,000 6,857,000
Deferred income taxes (383,000) 1,500,000
Equity in income of unconsolidated joint ventures (12,207,000) (14,000,000)
Loss on disposal of equipment 1,121,000 277,000
Stock issued for compensation 88,000 --
One-time charge 11,798,000 --
Changes in current assets and liabilities:
Accounts receivable (872,000) (1,143,000)
Income tax receivable 1,189,000 --
Inventories (102,000) (80,000)
Prepaid expenses 292,000 (326,000)
Accounts payable - Trade (4,330,000) (7,343,000)
Accrued liabilities (583,000) (3,759,000)
------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,896,000 (4,652,000)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (23,731,000) (22,204,000)
Purchase of property held for development or sale (2,697,000) (1,398,000)
Increase in other investments -- (2,250,000)
Proceeds from disposals of property and equipment 2,770,000 --
Advances to joint ventures -- (6,831,000)
Repayments from joint ventures 2,300,000 27,014,000
Distributions from joint ventures 724,000 --
Decrease in restricted cash 12,171,000 5,431,000
Deposits and other - net 274,000 (1,099,000)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (8,189,000) (1,337,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 9,251,000 --
Principal payments on borrowings (13,731,000) (6,293,000)
Deferred financing costs (784,000) (70,000)
Proceeds from sale of stock 541,000 238,000
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (4,723,000) (6,125,000)
------------ ------------
Net decrease in cash and cash equivalents (10,016,000) (12,114,000)
Cash and cash equivalents at beginning of period 18,997,000 25,151,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,981,000 $ 13,037,000
============ ============
</TABLE>
(CONTINUED)
5
<PAGE>
CASINO AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- CONTINUED
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended January 31,
1996 1995
------------ ------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest, net of amounts capitalized $13,104,000 $13,960,000
Income taxes, net of refunds received (341,000) 6,795,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Notes payable and debt issued for:
Land 1,726,000 --
Property and equipment 3,713,000 600,000
Insurance premiums 552,000 --
Account receivable recorded on disposal of property and equipment -- 1,246,000
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE>
CASINO AMERICA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Basis of Presentation:
Casino America, Inc. (the "Company") was incorporated as a Delaware
corporation on February 14, 1990. The Company, through its
subsidiaries, is engaged in the business of developing, owning, and
operating riverboat and dockside casinos and related facilities. The
Company has licenses to conduct gaming operations in Biloxi and
Vicksburg, Mississippi through its subsidiaries, and in Bossier City
and Lake Charles, Louisiana through unconsolidated joint ventures.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments, consisting of normal
recurring adjustments, considered necessary for a fair presentation
have been included. Operating results for the nine month period ended
January 31, 1996 are not necessarily indicative of the results that
may be expected for the year ending April 30, 1996. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K
for the year ended April 30, 1995.
Certain amounts as of the year ended April 30, 1995 and the three and
nine month periods ended January 31, 1995, respectively, have been
reclassified to conform with the 1996 presentation.
Impact of Recently Issued Accounting Standards:
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 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.
Note 2. Operating Expenses
The Company incurred $483,000 in preopening expenses for the nine
month period ended January 31, 1995 in connection with the opening of
the Company's expanded facility at the Isle of Capri Casino in
Vicksburg (the "Isle-Vicksburg").
In addition, included in the equity in income of unconsolidated joint
ventures is $1,600,000 which is the Company's share of the preopening
expenses for the nine month period ended January 31, 1995 in
connection with the opening of the Isle of Capri Casino in Bossier
City, Louisiana on May 23, 1994 owned by the Company's 50% owned joint
venture (the "Isle-Bossier City").
7
<PAGE>
The Isle of Capri Casino in Biloxi, Mississippi, (the "Isle-Biloxi"),
which originally opened on August 1, 1992, underwent a substantial
reconfiguration of its existing casino complex and opened a new hotel
and pavilion on August 1, 1995. The Company incurred $1,290,000 of
preopening expenses in connection with the opening of this expanded
facility during the nine month period ended January 31, 1996.
In addition, included in the Company's equity in income of
unconsolidated joint ventures for the nine months ended January 31,
1996 is a net loss of $1,838,000 which is the Company's share of the
net loss of the 25% owned Isle of Capri Casino in Lake Charles,
Louisiana (the "Isle-Lake Charles") which is managed by a subsidiary
of the Company and opened on July 29, 1995. $470,000 of this loss
represents preopening expenses incurred in connection with the opening
of the facility.
Note 3. Operating Results of Unconsolidated Joint Ventures
The following are combined summarized operating results for the Isle-
Bossier City and LRG Hotels, L.L.C. for the nine month periods ended:
<TABLE>
<CAPTION>
January 31, 1996 January 31, 1995
---------------- ----------------
<S> <C> <C>
Total Revenue $114,490,000 $112,322,000
Operating Income $ 29,877,000 $ 34,931,000
Net Income $ 24,415,000 $ 28,000,000
</TABLE>
Note 4. Business Acquisition
On June 30, 1995, the Company acquired 100% of Pompano Park
("Pompano"), a harness racing track, for approximately $8,000,000.
The acquisition was accounted for as a purchase, and the results of
operations of Pompano have been included in the consolidated income
statement from the date of acquisition. Pro forma operating results
giving effect to the Pompano 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.
Note 5. One-Time Charge
During the third quarter, 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 severance,
relocation and certain costs associated with the recent change in
executive management and $550,000 related to costs associated with
certain abandoned projects. The write-down of the riverboats relates
to two riverboats (the Emerald Lady and Diamond Lady) which are
currently not being used in operations. Each riverboat was written
down to a carrying value of approximately $5,000,000 based upon a
current purchase/lease option agreement on one riverboat and two
recent oral purchase offers received by the Company. The amount of
such offers and purchase/lease option range from $5,000,000 to
$6,000,000. The Company currently does not expect to take additional
write-downs relating to these riverboats.
8
<PAGE>
Note 6. Litigation
Florida Class Action Matter
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 allege
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.
Note 7. Subsequent Events
Sale of Common Stock
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. A portion of the proceeds
were used to retire a total of $1,500,000 in loans payable to the
Chairman and a related party, as well as accrued interest of $56,000.
Rights Offering
The Company intends to make available to its other shareholders, on a
pro rata basis, the same opportunity to purchase shares of the
Company's common stock at the same price of $5.875 per share, at a
ratio of approximately one share for every four shares owned on the
record date of March 15, 1996. The Company's primary purpose of that
offering is to ensure that all shareholders have the same opportunity
to purchase shares as have been afforded to the Chairman and his
family, and the Company will not use any underwriter or other selling
agent in connection therewith.
Note 8. The Isle-Lake Charles ("SCGC") and the Isle-Bossier City ("LRGP")
Covenant Noncompliance
SCGC and LRGP are currently co-obligors under a Note Purchase
Agreement, dated as of July 20, 1995, with Nomura Holding America,
Inc. and First National Bank of Commerce, as Agent (the "Note Purchase
Agreement"), pursuant to which $38.4 million aggregate principal
amount remains outstanding (the "Nomura Borrowing"). A portion of the
proceeds of the Nomura Borrowing were used by SCGC to finance
development costs at the Isle-Lake Charles. As of January 31, 1996,
SCGC and LRGP were not in compliance with respect to certain financial
covenants in the Note Purchase Agreement, and management anticipates
that SCGC will remain out of compliance with respect to such covenants
for the fiscal quarter ending April 30, 1996.
The Note Purchase Agreement provides that upon the failure to comply
with a covenant as described above, the lenders thereunder have the
right, upon the giving of notice, to (among other things) cause an
acceleration of the maturity date of all amounts outstanding under the
Note Purchase Agreement. Management of SCGC, LRGP and the Company
does not believe
9
<PAGE>
that the continuance of the financial covenant noncompliance described
above will lead to an acceleration of the repayment obligations of
SCGC and LRGP under the Note Purchase Agreement. However, in the
event that such repayment obligations are accelerated, SCGC and LRGP
will need to locate other sources of capital in order to meet such
repayment obligations, and there can be no assurance that such sources
will be available, or be available on terms acceptable to LRGP and
SCGC.
10
<PAGE>
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 unaudited consolidated financial statements, including the
notes thereto, included elsewhere in this report.
GENERAL
The Company believes that the results of operations for the nine month periods
ended January 31, 1996 and 1995 may not be indicative of the results of
operations for future periods because of, among other factors, the substantial
present and expected future increase in gaming competition along the Mississippi
Gulf Coast and in Vicksburg, Bossier City and Lake Charles, as well as the
opening of the Isle-Lake Charles on July 29, 1995. Competition in these markets
continues to increase as new casinos open, and the Company also faces
competition from gaming operations in the New Orleans area. Accordingly, the
Company believes that the levels of operating revenues and profitability of the
Company's properties during the nine months ended January 31, 1996 may not be
sustained in future periods. The Company believes that seasonality does not
have a significant effect on its business.
RESULTS OF OPERATIONS
Three Months Ended January 31, 1996 Compared to Three Months Ended January 31,
1995
The Company experienced a net loss of $6.5 million for the three month period
ended January 31, 1996, as compared to net income of $4.8 million for the three
month period ended January 31, 1995. This decrease was due primarily 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 quarter as being held for sale, as well as $2.5
million related to abandoned projects, severance costs and certain other costs
associated with the recent change in executive management. In addition, the
Company incurred a $0.7 million charge in connection with accounting for
deferred taxes related to its investment in St. Charles Gaming Company ("SCGC"),
the joint venture that owns the Isle-Lake Charles, and a $0.8 million loss on
disposal of an airplane and other equipment. The Company's net loss for the
three months ended January 31, 1996 includes $2.9 million of equity in the
income of the Isle-Bossier City, compared to $5.7 million for the same period
last year. The $2.9 million includes $1.0 million for the Company's share of
net losses of the unconsolidated joint venture's 50% interest in the Isle-Lake
Charles, which opened July 29, 1995. The Company's effective income tax rate
was 24% for the three month period ended January 31, 1996 as compared to 41% for
the comparable period ended January 31, 1995. The decrease in the effective
rate is due primarily to the fact that the Company cannot include its share of
the net loss of SCGC in its income tax calculation. The Company experienced a
loss of $0.44 per share for the three months ended January 31, 1996, a decrease
of 242% from earnings per share of $0.31 reported for the three months ended
January 31, 1995.
Total revenues were $43.0 million for the quarter ended January 31, 1996, as
compared to $30.1 million for the quarter ended January 31, 1995, representing
an increase of 43%. Casino revenues increased by $3.4 million or 12% compared
to the prior year's quarter, as a $5.0 million increase in casino revenues at
the Isle-Biloxi was offset by a $1.6 million decrease in casino revenues at the
Isle- Vicksburg. The Company does not consolidate the revenues of the Isle-
Bossier City, which totaled $36.6 million for the three months ended January 31,
1996 compared to $38.9 million for the same period last year.
Revenues for the quarter ended January 31, 1996 include room revenues of $1.5
million from the 370- room Crowne Plaza hotel and entertainment pavilion at the
Isle-Biloxi, which opened on August 1, 1995.
The Company earned management fees of $1.6 million for the three months ended
January 31, 1996, compared to $1.2 million for the three months ended January
31, 1995. In addition to fees earned under the Company's management agreement
with Louisiana Riverboat Gaming Partnership ("LRGP") with respect to the Isle-
Bossier
11
<PAGE>
City, $0.6 million in fees were earned under the Company's management agreement
with SCGC with respect to the Isle-Lake Charles.
The quarter ended January 31, 1996 also includes pari-mutuel commissions and
fees of $6.1 million generated by the Pompano Park Harness Track acquired on
June 30, 1995.
Food, beverage and other revenues totaled $2.3 million for the quarter ended
January 31, 1996, compared to $0.9 million for the quarter ended January 31,
1995. Food and beverage revenues do not reflect the value of any
complimentaries. Of the $1.4 million increase, $0.5 million is attributable to
food and beverage and other revenues generated by ASMI Management, Inc.
("ASMI"), a wholly owned food and beverage service subsidiary of the Company
which is operated at the Pompano Park Harness Track. The remainder results from
an increase in food and beverage revenue at the Isle-Biloxi due to the opening
of the new Crowne Plaza hotel on August 1, 1995.
Casino expenses for the three month period ended January 31, 1996 totaled $11.4
million, as compared to $9.5 million for the comparable period last year.
Casino expenses consist primarily of salaries, wages, benefits, and operating
and certain promotional expenses of the casinos. The increase is due primarily
to the corresponding increase in casino revenues at the Isle-Biloxi for the
period. Casino expenses, as a percentage of casino revenues, were 36% for the
three months ended January 31, 1996 as compared to 34% for the comparable period
last year.
Expenses for the quarter ended January 31, 1996 include room expenses of $1.0
million from the new Crowne Plaza hotel. These expenses are those directly
relating to the cost of providing hotel rooms. Other costs related to 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 $4.0
million for the three months ended January 31, 1996, as compared to $3.1 million
for the same period last year. Gaming taxes in both periods represented 12% of
casino revenues, as required by Mississippi law.
Pari-mutuel operating costs of the Pompano Park Harness Track totaled $2.4
million for the quarter ended January 31, 1996. Operating costs consist
primarily of compensation, benefits, purses, stakes, awards and players'
salaries, bonuses and prizes.
Food and beverage expenses of $2.6 million for the three months ended January
31, 1996 reflect a 95% increase from $1.3 million for the same quarter in 1995.
These expenses consist primarily of the salaries, wages, benefits and operating
costs of the food and beverage operations, including $0.5 million in food and
beverage costs attributable to ASMI. The increase in these expenses is
consistent with the $1.4 million, or 156% increase in food and beverage revenues
in the same comparative periods.
Marine and facilities expenses totaled $3.8 million for the three months ended
January 31, 1996, representing an increase of 128% over the $1.7 million
reported in the comparable period in the prior fiscal year. This increase
primarily relates to the increase in the size of the facility at the Isle-Biloxi
and the associated labor and utility costs of that expanded facility, as well as
costs similarly classified with respect to the Pompano facility.
Marketing and administrative expenses totaled $9.9 million for the three months
ended January 31, 1996 as compared to $7.2 million for the three months ended
January 31, 1995. Marketing expenses included additional promotions at the
Isle-Biloxi and the Isle-Vicksburg, while marketing and administrative expenses
include $1.3 million for the Pompano Park Harness Track.
Depreciation and amortization expense was $2.7 million for the three months
ended January 31, 1996, representing an increase of 14% over depreciation and
amortization expense of $2.4 million for the three months ended January 31,
1995. The increase in depreciation expense is primarily attributable to the new
hotel and entertainment pavilion at the Isle-Biloxi.
12
<PAGE>
Interest expense was $4.5 million for the three months ended January 31, 1996 as
compared to $3.5 million net of capitalized interest of $0.3 million, for the
three months ended January 31, 1995. This increase was primarily due to
additional debt incurred related to the new hotel and pavilion at the Isle-
Biloxi and additional indebtedness relating to furniture, fixtures and equipment
purchases, as well as land purchased for development.
Nine Months Ended January 31, 1996 Compared to Nine Months Ended January 31,
1995
The Company experienced a net loss of $2.2 million for the nine months ended
January 31, 1996, as compared to net income of $13.4 million for the nine months
ended January 31, 1995, representing a decrease of 116%. This decrease was due
primarily 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 quarter as being held for
sale, as well as $2.5 million related to abandoned projects, severance costs and
certain other costs associated with the recent change in executive management.
In addition, the Company incurred a $0.7 million charge in connection with
accounting for deferred taxes related to its investment in SCGC and a $0.8
million loss on disposal of an airplane and other equipment. Reduced operating
income at the Isle-Vicksburg, resulting from an increasingly competitive
environment also contributed to the decrease in net income. The Company's net
loss for the nine months ended January 31, 1996 includes $12.2 million of equity
in the income of the Isle- Bossier City, compared to $14.0 million for the same
period last year. The $12.2 million includes $1.8 million for the Company's
share of net losses of SCGC. The Company also experienced a charge of
approximately $1.5 million for legal, printing and accounting costs associated
with the withdrawal of the Company's registration statement and the proposed
transactions related thereto. The Company's effective income tax rate was 177%
for the nine month period ended January 31, 1996 as compared to 40% for the
comparable period ended January 31, 1995. The increase in the effective rate is
due primarily to the fact that the Company cannot include its share of the net
loss of SCGC in the Company's calculation of income taxes. The Company
experienced a loss of $0.14 per share for the nine months ended January 31,
1996, a decrease of 116% from earnings per share of $0.85 reported for the nine
months ended January 31, 1995.
Total revenues were $111.5 million for the nine months ended January 31, 1996,
as compared to $95.8 million for the nine months ended January 31, 1995,
representing an increase of 16%. Casino revenues, in total, increased by 2% to
$90.3 million from $88.6 million as compared to the prior year, due primarily to
a $5.4 million increase in casino revenues at the Isle-Biloxi and a $3.7 million
decrease in casino revenues at the Isle-Vicksburg. The Company does not
consolidate the revenues of the Isle- Bossier City, which totaled $114.5 million
for the nine months ended January 31, 1996 compared to $112.3 million for the
same period last year.
Revenues for the nine month period ended January 31, 1996 include room revenues
of $3.0 million from the new Crowne Plaza hotel and entertainment pavilion at
the Isle-Biloxi.
The Company earned management fees of $4.4 million for the nine months ended
January 31, 1996, compared to $3.4 million for the nine months ended January 31,
1995. In addition to fees earned under the Company's management agreement with
LRGP with respect to the Isle-Bossier City, $0.9 million in fees were earned
under the Company's management agreement with SCGC with respect to the Isle-Lake
Charles.
The nine months ended January 31, 1996 also includes pari-mutuel commissions and
fees of $8.9 million generated by the Pompano Park Harness Track acquired on
June 30, 1995.
Food, beverage and other revenues were $5.0 million for the nine months ended
January 31, 1996, compared to $3.7 million for the nine months ended January 31,
1995. Food and beverage revenues do not reflect the value of any
complementaries. Of the $1.2 million increase, $0.7 million is attributable to
revenues generated by ASMI, which is operated at the Pompano Park Harness Track.
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 the nine months ended January 31, 1996 totaled $31.9 million
as compared to $31.3 million for the comparable period last year. Casino
expenses consist primarily of salaries, wages, benefits and
13
<PAGE>
operating and certain promotional expenses of the casinos. Casino expenses as a
percentage of casino revenues were 35% for the nine months ended January 31,
1996 and 1995, respectively.
The nine month period ended January 31, 1996 includes room expenses of $2.0
million from the new Crowne Plaza 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 $11.1
million for the nine months ended January 31, 1996, as compared to $10.4 million
for the same period last year, and are consistent with the aforementioned
increase in casino revenues. Gaming taxes in both periods represented 12% of
casino revenues as required by Mississippi law.
Pari-mutuel operating costs of the Pompano Park Harness Track, which was
acquired on June 30, 1995, totaled $6.2 million for the nine months ending
January 31, 1996. Such costs consist primarily of compensation, benefits,
purses, stakes, awards and players' salaries, bonuses and prizes.
Food and beverage expenses of $6.7 million for the nine months ended January 31,
1996 increased by 20% or $1.1 million over the same period in 1995, consistent
with food and beverage revenues. $0.6 million of the increase was attributable
to ASMI's food and beverage operating costs, while the remainder of the increase
occurred at the Isle-Biloxi due to the opening of its hotel.
Marine and facilities expenses totaled $8.3 million for the nine months ended
January 31, 1996, representing an increase of 44% over the $5.8 million reported
in the comparable period in the prior fiscal year. $1.7 million of the increase
relates to facilities and maintenance costs of the Pompano Park Harness Track,
while an additional $0.8 million relates to the increase in the size of the
facility at the Isle-Biloxi and the associated labor and utility costs of that
expanded facility.
Marketing and administrative expenses totaled $25.7 million for the nine months
ended January 31, 1996 as compared to $19.6 million for the nine months ended
January 31, 1995. Marketing expenses included additional promotions at the
Isle-Biloxi and the Isle-Vicksburg in response to increased competition in the
Company's markets, while administrative expenses reflect the aforementioned
charge for costs associated with the withdrawal of the Company's registration
statement and cancellation of its planned public offering, as well as
administrative and promotional expenses for the recently acquired Pompano Park
Harness Track.
Depreciation and amortization expense was $8.2 million for the nine months ended
January 31, 1996, representing an increase of 25% over depreciation and
amortization expense of $6.6 million for the nine months ended January 31, 1995.
The increase is primarily attributable to the new hotel and entertainment
pavilion at the Isle-Biloxi.
Preopening expenses of $1.3 million for the nine months ended January 31, 1996
represent salaries, benefits, training and other non-capitalizable costs which
were expensed upon the opening of the new hotel at the Isle-Biloxi. For the
nine months ended January 31, 1995, $0.5 million in preopening expenses relate
to the expansion of facilities at the Isle-Vicksburg.
Interest expense was $11.2 million, net of capitalized interest of $1.9 million,
for the nine months ended January 31, 1996 as compared to $10.8 million, net of
capitalized interest of $0.3 million, for the nine months ended January 31,
1995. This increase was primarily due to additional debt incurred related to
the new hotel and pavilion at the Isle-Biloxi, as well as additional
indebtedness relating to furniture, fixtures and equipment and land purchased
for new development, and the acquisition of the Pompano Park Harness Track.
Interest Income - Related Parties was $0.6 million for the nine months ended
January 31, 1996 as compared to $2.7 million for the nine months ended January
31, 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.
14
<PAGE>
Liquidity and Capital Resources
- -------------------------------
At January 31, 1996, the Company had cash and cash equivalents of $9.0 million
compared to $19.0 million at April 30, 1995. During the nine month period ended
January 31, 1996, operating activities provided $2.9 million of cash flow to the
Company as compared to $4.7 million of cash flow used in operating activities
for the nine month period ended January 31, 1995.
The Company invested $23.7 million in property and equipment in the nine month
period ended January 31, 1996, primarily at the Isle-Biloxi for its new hotel,
as well as in connection with the acquisition of the Pompano Park Harness Track.
The Company also invested $2.7 million in property held for development in
Colorado during the period, and is currently considering divesting its interest
in Colorado, which represents an aggregate investment of $4.3 million. In
addition, the Company received $0.7 million in distributions and $2.3 million in
repayments from LRGP primarily related to the repayment of a note receivable
during the period. The Company received $12.2 million in cash held by a trustee
which was primarily used 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's principal near-term capital requirements relate to the fact that
the Company is actively seeking to increase its percentage ownership in its
Louisiana joint ventures. On January 2, 1996, the Company reached an agreement
which includes parties representing several groups of creditors to acquire out
of bankruptcy all of the outstanding stock of Grand Palais Riverboat, Inc.
("GPRI"), a wholly owned subsidiary of Hemmeter Enterprises, Inc. If that
acquisition is consummated, the Company intends to move GPRI's gaming vessel to
the site of the Isle-Lake Charles in order to create a two-boat operation
sharing a common pavilion. The terms of the transaction include the issuance of
2,250,000 shares of the Company's common stock and warrants to purchase an
additional 500,000 shares of the Company's common stock at $10.00 per share.
The Company would also be required to make cash payments in an aggregate amount
of approximately $6.5 million. The total value of the transaction is estimated
to be in excess of $45.0 million, plus the assumption of up to $10.0 million in
existing GPRI liabilities. The closing of the transaction is subject to a
number of conditions, including regulatory approvals and other consents and
approvals. While the parties are currently anticipating a closing of the
transaction within approximately 60 days, there are no assurances that such
conditions will be met.
Also on January 2, 1996, the Company reached an agreement whereby Crown Casino
Corporation ("Crown") would exchange its 50% interest in SCGC for 1,850,000
registered shares of the Company's common stock, and the modification and
enhancement of certain payment and other terms of an existing $20 million note
previously issued by LRGP to Crown, which would increase the number of shares of
the Company's stock Crown may purchase pursuant to warrants from 416,667 shares
to 833,334 shares. The warrants would be exercisable by converting a portion of
the LRGP note into the Company's stock at $12.00 per share. The consummation of
this transaction is subject to the consummation of the Grand Palais acquisition
described above, as well as a number of other independent conditions.
On March 11, 1996, the Company sold an aggregate of 1,020,940 shares of its
common stock at $5.875 per share to the Chairman and Chief Executive Officer of
the Company and three members of his family. Proceeds from the sale totaled
$6.0 million. Part of the proceeds were used to retire a total of $1.5 million
in loans payable to the Chairman and a related party, as well as accrued
interest of $0.1 million. In addition, the Company intends to make available to
its other shareholders, on a pro rata basis, the same opportunity to purchase
shares of the Company's common stock at the same price of $5.875 per share, at a
ratio of approximately one share for every four shares owned on the record date
of March 15, 1996. The Company's primary purpose of that offering is to ensure
that all shareholders have the same opportunity to purchase shares as have been
afforded to the Chairman and his family, and the Company will not use any
underwriter or other selling agent in connection therewith.
Excluding proceeds received or expected to be received from the aforementioned
stock transactions, the Company's principal sources of funds in the reasonably
foreseeable future are expected to be amounts available under lines of credit
aggregating $3.5 million, cash flows from operations, management fees and
existing cash balances, which aggregated $9.0 million at January 31, 1996.
Management expects that these funds, coupled
15
<PAGE>
with funds received from the stock transactions, should be sufficient to satisfy
its projected normal operating cash requirements in the reasonably foreseeable
future, as well as costs and capital requirements relating to its pending
transactions, assuming that cash flows from operations do not fall below
expected levels. No significant capital expenditures are committed to by the
Company at this time, other than those discussed above.
The Company's 50%-owned subsidiary, LRGP, is required to provide financing
related to the development of the Isle-Lake Charles in an amount up to $45
million. As of January 31, 1996, debt financing in the form of loans totaling
$45 million were in place, which debt was issued by LRGP and SCGC as co-issuers.
In addition, LRGP has loaned $15.3 million to SCGC with respect to the
construction of the Isle-Lake Charles as of January 31, 1996. The Company
loaned an additional $4.7 million to SCGC to assist with development costs. The
loan bears interest at a rate of 11.5%. One of the loan agreements in place at
LRGP and SCGC restricts the repayment of this note to the Company until such
time as that loan is repaid.
SCGC and LRGP are currently co-obligors under a Note Purchase Agreement, dated
as of July 20, 1995, with Nomura Holding America, Inc. and First National Bank
of Commerce, as Agent (the "Note Purchase Agreement"), pursuant to which $38.4
million aggregate principal amount remains outstanding (the "Nomura Borrowing").
A portion of the proceeds of the Nomura Borrowing were used by SCGC to finance
development costs at the Isle-Lake Charles. As of January 31, 1996, SCGC and
LRGP were not in compliance with respect to certain financial covenants in the
Note Purchase Agreement, and management anticipates that SCGC will remain out of
compliance with respect to such covenants for the fiscal quarter ending April
30, 1996.
The Note Purchase Agreement provides that upon the failure to comply with a
covenant as described above, the lenders thereunder have the right, upon the
giving of notice, to (among other things) cause an acceleration of the maturity
date of all amounts outstanding under the Note Purchase Agreement. Management
of SCGC, LRGP and the Company does not believe that the continuance of the
financial covenant noncompliance described above will lead to an acceleration of
the repayment obligations of SCGC and LRGP under the Note Purchase Agreement.
However, in the event that such repayment obligations are accelerated, SCGC and
LRGP will need to locate other sources of capital in order to meet such
repayment obligations, and there can be no assurance that such sources will be
available, or be available on terms acceptable to LRGP and SCGC.
In order to expand into a new venue beyond the four sites where the Company and
its subsidiaries are currently operating, or to make significant capital
improvements to its existing properties, it will be necessary for the Company to
secure additional sources of funds. No assurance can be given that financing
for any such new projects will be available, or, if available, on terms
acceptable to the Company. In addition, the Company's indenture with respect to
its $105 million 11-1/2% First Mortgage Notes due 2001 places certain limits on
the Company's ability to incur additional indebtedness, which may limit the
Company's financial flexibility in the future. To the extent that the Company's
capital resources remain limited, the Company's plans with respect to entry into
any new venues, and with respect to any capital expenditures at its existing
properties may be delayed.
Impact of Recently Issued Accounting Standards
- ----------------------------------------------
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 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.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CASINO AMERICA, INC.
Dated: , 1996 By: /s/ Rexford A. Yeisley
-------------------------------
Rexford A. Yeisley
Chief Financial Officer &
Treasurer
(Duly Authorized Officer and
Principal Financial Officer and
Accounting Officer)
17
