<PAGE>
UNITED STATES UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 27, 1997
--------------
( ) 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 (b) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Shares of Common Stock outstanding at September 2, 1997: 23,380,475
__________
<PAGE>
CASINO AMERICA, INC.
FORM 10-Q
INDEX
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets,
July 27, 1997 (unaudited) and
April 27, 1997 1-2
Consolidated Statements of
Operations for the Three Months
Ended July 27, 1997 and
July 31,1996 (unaudited) 3
Consolidated Statements of
Cash Flows for the Three Months
Ended July 27,1997 and
July 31,1996 (unaudited) 4-5
Consolidated Statement of
Stockholders' Equity
(unaudited) 6
Notes to Unaudited Consolidated
Financial Statements 7-10
Item 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 11-15
Part II - OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of
Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
EXHIBIT LIST 19
<PAGE>
CASINO AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 27, 1997 APRIL 27, 1997
-------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 64,230,000 $ 51,846,000
Accounts receivable 4,935,000 5,108,000
Income taxes receivable 6,847,000 11,014,000
Deferred income taxes 5,350,000 5,350,000
Prepaid expenses and other assets 5,361,000 5,097,000
------------ ------------
TOTAL CURRENT ASSETS 86,723,000 78,415,000
------------ ------------
PROPERTY AND EQUIPMENT:
Land improvements 35,807,000 35,468,000
Leasehold improvements 98,634,000 98,388,000
Buildings and improvements 32,366,000 32,358,000
Riverboats and floating pavilions 92,904,000 92,876,000
Furniture, fixtures and equipment 82,413,000 81,214,000
Construction in progress 11,430,000 3,269,000
------------ ------------
353,554,000 343,573,000
Less: Accumulated depreciation 64,940,000 58,339,000
------------ ------------
Property and equipment, net 288,614,000 285,234,000
------------ ------------
OTHER ASSETS:
Other investments 2,250,000 2,250,000
Property held for development or sale 7,943,000 7,943,000
Licenses, and other intangible assets
net of accumulated amortization of
$3,817,000 and $2,894,000, respectively 69,074,000 69,997,000
Goodwill, net of accumulated amortization of
$3,635,000 and $2,963,000, respectively 65,764,000 66,297,000
Berthing, concession and leasehold rights, net of
accumulated amortization of $1,601,000 and
$1,522,000, respectively 4,667,000 4,746,000
Deferred financing costs, net of accumulated
amortization of $1,701,000 and $1,378,000,
respectively 11,274,000 11,565,000
Prepaid expenses, deposits and other 2,468,000 1,974,000
------------ ------------
163,440,000 164,772,000
------------ ------------
TOTAL ASSETS $538,777,000 $528,421,000
============ ============
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
1
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CASINO AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 27, 1997 APRIL 27, 1997
------------- --------------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 13,088,000 $ 14,905,000
Accounts payable - Trade 11,097,000 10,871,000
Accrued liabilities:
Interest 19,573,000 9,898,000
Payroll and payroll related 14,310,000 16,238,000
Property and other taxes 10,259,000 6,669,000
Progressive jackpots and slot club awards 5,279,000 5,566,000
Other 5,798,000 5,391,000
----------- ------------
TOTAL CURRENT LIABILITIES 79,404,000 69,538,000
----------- ------------
LONG-TERM DEBT, NET OF CURRENT MATURITIES 362,101,000 364,617,000
DEFERRED INCOME TAXES 16,293,000 16,293,000
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; 2,050,000
shares authorized; none issued --- ---
Common stock, $0.01 par value; 45,000,000
shares authorized; shares issued and outstanding:
23,370,287 and 23,345,287, respectively 234,000 233,000
Class B common stock, $0.01 par value; 3,000,000
shares authorized; none issued --- ---
Additional paid-in capital 62,595,000 62,538,000
Retained earnings 18,150,000 15,202,000
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 80,979,000 77,973,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $538,777,000 $528,421,000
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
CASINO AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
July 27, 1997 July 31, 1996
---------------- --------------
<S> <C> <C>
REVENUE:
Casino $ 99,147,000 $37,474,000
Rooms 3,078,000 2,183,000
Management fee - joint ventures -- 2,012,000
Pari-mutuel commissions and fees 4,487,000 3,386,000
Food, beverage and other 5,025,000 3,062,000
------------ -----------
TOTAL REVENUE 111,737,000 48,117,000
------------ -----------
OPERATING EXPENSES:
Casino 18,821,000 7,004,000
Rooms 1,129,000 881,000
Gaming taxes 19,698,000 4,948,000
Pari-mutuel 3,764,000 2,910,000
Food, beverage and other 3,474,000 2,175,000
Marine and facilities 5,841,000 2,721,000
Marketing and administrative 34,771,000 17,892,000
Preopening expenses -- 1,984,000
Depreciation and amortization 8,279,000 3,373,000
------------ -----------
TOTAL OPERATING EXPENSES 95,777,000 43,888,000
------------ -----------
OPERATING INCOME 15,960,000 4,229,000
INTEREST EXPENSE, NET OF CAPITALIZED INTEREST
OF $94,000 AND $0, RESPECTIVELY (11,564,000) (4,684,000)
INTEREST INCOME:
Related parties -- 203,000
Other 451,000 119,000
OTHER 67,000 --
EQUITY IN INCOME OF UNCONSOLIDATED
JOINT VENTURES -- 4,279,000
------------ -----------
INCOME BEFORE INCOME TAXES 4,914,000 4,146,000
INCOME TAX PROVISION 1,966,000 1,229,000
------------ -----------
NET INCOME $ 2,948,000 $ 2,917,000
============ ===========
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $0.13 $0.14
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES 23,366,000 20,666,000
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
CASINO AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
July 27, 1997 July 31, 1996
----------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 2,948,000 $ 2,917,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 8,603,000 3,627,000
Equity in income of unconsolidated joint ventures --- (4,279,000)
Other (143,000) 67,000
Changes in current assets and liabilities (net of acquisitions):
Accounts receivable 173,000 546,000
Prepaid expenses and other assets (142,000) 665,000
Accounts payable 226,000 4,354,000
Accrued liabilities 11,456,000 (3,765,000)
Income tax receivable 4,167,000 ---
------------ -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 27,288,000 4,132,000
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (9,981,000) (1,131,000)
Net cash paid for acquisitions --- (8,192,000)
Deposits and other, net (590,000) 1,443,000
------------ -----------
NET CASH USED IN INVESTING ACTIVITIES (10,571,000) (7,880,000)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 30,000 1,000,000
Principal payments on borrowings and cash paid
to retire debt (4,363,000) (6,292,000)
Deferred financing costs --- (1,369,000)
Proceeds from sale of stock and exercise of options --- 14,103,000
------------ -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (4,333,000) 7,442,000
------------ -----------
Net increase in cash and cash equivalents 12,384,000 3,694,000
Cash and cash equivalents at beginning of period 51,846,000 18,585,000
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 64,230,000 $ 22,279,000
============ ===========
</TABLE>
(CONTINUED)
4
<PAGE>
CASINO AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
July 27, 1997 July 31, 1996
------------- -------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest, net of amounts capitalized $ 1,570,000 $ 7,345,000
Income taxes, net of refunds received (2,649,000) 3,185,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Notes payable and debt issued for:
Property and equipment 30,000 467,000
Insurance premiums -- 573,000
Acquisitions:
Debt assumed -- (37,142,000)
Stock issued -- (27,852,000)
Warrants issued -- (1,250,000)
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
CASINO AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Shares of Additional Total
Common Common Paid-In Retained Stockholders'
Stock Stock Capital Earnings Equity
---------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, APRIL 27, 1997 23,345,287 $233,000 $62,538,000 $15,202,000 $77,973,000
Issuance of common stock
for compensation 25,000 1,000 57,000 -- 58,000
Net Income -- -- -- 2,948,000 2,948,000
---------- -------- ----------- ----------- -----------
BALANCE, JULY 27, 1997 23,370,287 $234,000 $62,595,000 $18,150,000 $80,979,000
========== ======== =========== =========== ===========
</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, and in Bossier City and Lake Charles,
Louisiana through its subsidiaries.
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 three-month period
ended July 27, 1997 are not necessarily indicative of the results that
may be expected for the fiscal year ending April 26, 1998. 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 27, 1997.
Licenses, Goodwill and Other Intangible Assets
Licenses, goodwill and other intangible assets principally represent
the excess purchase price the Company paid in acquiring the net
identifiable tangible assets of St. Charles Gaming Company, Inc.
("SCGC"), Grand Palais Riverboat, Inc. ("GPRI") and Louisiana
Riverboat Gaming Partnership ("LRGP"). The license costs included in
this line reflect the value attributed to the Louisiana gaming
licenses acquired through these purchases. The remaining intangible
asset balance has been classified as goodwill and other intangible
assets. These assets are being amortized over a twenty-five-year
period using the straight-line method.
Impact of Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings
per Share," which will become effective for both interim and annual
periods ending after December 15, 1997. SFAS No. 128 will require
companies to disclose basic and diluted earnings per share. Basic
earnings per share will be calculated based on the weighted average
common shares outstanding and would exclude common stock equivalents
from the calculation. The requirements of SFAS No. 128, based on
current circumstances, will not have a significant effect on the
Company's earnings per share calculations.
Reclassifications
Certain prior period amounts have been reclassified to conform with
the current presentation.
7
<PAGE>
Note 2. Business Acquisitions
Purchase of GPRI
On May 3, 1996, the Company purchased all of the outstanding shares of
common stock of GPRI in a bankruptcy proceeding (the "GPRI
Acquisition"). 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 casino, gaming equipment, certain other furniture, fixtures
and equipment, all necessary gaming licenses issued by the State of
Louisiana, and other permits and authorizations. The acquisition was
accounted for as a purchase, and the operating results of GPRI have
been included in the Company's consolidated income statement from the
date operations commenced. GPRI commenced operations on July 12, 1996
as part of a two-riverboat operation with SCGC. The aggregate
consideration paid by the Company in connection with the GPRI
acquisition was approximately $60.8 million, consisting of $7.5
million in cash, approximately $37.1 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. Additionally, in connection
with the Grand Palais Acquisition, Bernard Goldstein, the Chairman of
the Company, and three of his sons (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.
St. Charles Gaming Company
On May 3, 1996, the Company also purchased the remaining 50%
interest in SCGC not already owned by LRGP (the "SCGC Acquisition"),
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 provided for the restructuring of certain
indebtedness owed to the seller. The acquisition was accounted for as
a purchase, however, the operating results of SCGC were still
accounted for under the equity method of accounting as the Company did
not obtain a controlling interest in SCGC.
Louisiana Riverboat Gaming Partnership
On August 6, 1996, the Company acquired the remaining 50% interest in
LRGP held by outside parties (the "LRGP Acquisition"). The
consideration for the acquisition was $85 million in cash, five-year
warrants to purchase 500,000 shares of the Company's common stock at
an exercise price of $10.50 per share and $1.5 million per year for
seven years, payable monthly beginning on October 1, 1998. The
acquisition was accounted for as a purchase, and as a result of this
acquisition, the operating results of LRGP and SCGC, from the
acquisition date forward are consolidated in the Company's financial
statements.
8
<PAGE>
Pro forma Information
The following unaudited consolidated pro forma information shows the
1997 and 1996 results of the Company's operations as though the SCGC
Acquisition, the LRGP Acquisition and the GPRI Acquisition had
occurred at May 1, 1995. Other than amortization of the related
intangible assets and interest on debt incurred to effect the GPRI
Acquisition, adjustments related to the pre-bankruptcy operations of
GPRI have not been included in the pro forma results of operations for
the three months ended July 31, 1996 because the pre-bankruptcy
operations of GPRI were very limited and substantially different than
the post-acquisition operations. The pro forma results are not
necessarily indicative of the future results or actual results that
would have occurred had the purchase been made at the beginning of the
period presented.
Three Months Ended
July 31,1996
-------------------
Total revenue $110,732,000
Operating income 14,919,000
Net income 2,313,000
Net income per common
and common equivalent share $0.11
Note 3. Operating Expenses
On July 12, 1996, GPRI commenced operations as part of a two-boat
operation and expanded pavilion at the Isle-Lake Charles. The Company
incurred $1,984,000 of preopening expenses in connection with the
opening of GPRI during the three-month period ended July 31, 1996.
Note 4. Long-term Debt
On August 6, 1996, the Company issued $315,000,000 of 12 1/2% Senior
Secured Notes due 2003 (the "Senior Secured Notes"). Interest on the
Senior Secured Notes is payable semiannually on each February 1 and
August 1 through maturity. The Senior Secured Notes are redeemable at
the option of the Company, in whole or in part, at any time on or
after August 1, 2000 at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and
unpaid interest to the redemption date, if redeemed during the 12-
month period beginning on August 1, of the years indicated below:
Year Percentage
---- ----------
2000................. 106.250%
2001................. 103.125%
2002 and thereafter.. 100.000%
The Senior Secured 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 July 27, 1997,
no dividends were permitted to be paid under these restrictions.
9
<PAGE>
Part of the proceeds from the Senior Secured Notes were used to prepay
or defease long-term debt, including the $105,000,000 of 11 1/2% First
Mortgage Notes due 2001. The proceeds were also used to pay accrued
interest and other costs, as well as to consummate the LRGP
Acquisition.
The Company has $5,500,000 available in bank lines of credit. As of
July 27, 1997, 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. At July 27, 1997, the Company was either in
compliance with all debt covenants or had obtained waivers.
Note 5. Subsequent Event
In June 1997, the Company entered into a joint venture agreement to
develop a casino facility in Black Hawk, Colorado. On August 20,
1997, the Isle of Capri Black Hawk L.L.C. (the "Isle-Black Hawk"), a
joint venture of which the Company owns 59.2%, issued $75 million of
13% First Mortgage Notes due 2004, which is non-recourse debt to the
joint venture partners. The net proceeds of the issuance will be used
to fund the development of the Isle of Capri Casino in Black Hawk,
Colorado. The project is estimated to cost approximately $104 million
and is expected to take approximately eighteen months to complete from
the commencement of excavation activities. The Company has made
capital investments into the project totaling approximately $8.2
million. Additionally, the Company has provided a completion capital
commitment of up to $5.0 million, if required to enable the facility
to commence operations by April 1, 1999.
Note 6. Contingencies
The Company has challenged a statute that purportedly permits the
Bossier Parish Police Jury to levy an additional $.50 boarding fee per
passenger against LRGP beginning January 1, 1996. The Company's
challenge has been denied at the state court level, however, the
Company has appealed the decision. If the ruling is upheld, the
Company would have to pay the Bossier Parish Police Jury approximately
$2,723,000 as of July 27, 1997, for prior unpaid boarding fees, plus a
continuing $.50 fee per passenger at LRGP. This liability has been
fully recorded.
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.
The following discussion includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. In particular,
statements concerning the effects of increased competition in the Company's
markets, the Company's plans to make capital investments at its facilities,
including, without limitation, considerations to develop hotels at the Isle-
Bossier City and the Isle-Lake Charles and the expansion of non-gaming amenities
at all facilities, are forward-looking statements. Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, there can be no assurance that such expectations are reasonable or
that they will be correct. Actual results may vary materially from those
expected. Important factors that could cause actual results to differ with
respect to the Company's planned capital expenditures principally include a lack
of available capital resources, construction and development risks such as
shortages of materials and labor and unforeseen delays resulting from a failure
to obtain necessary approvals, the Company's limited experience in developing
hotel operations, and changes in gaming laws and regulations in the
jurisdictions in which the Company operates. Other important factors that could
cause the Company's actual results to differ materially from expectations are
discussed under "Risk Factors" in the prospectus dated August 1, 1996 relating
to the issuance of the Company's Senior Secured Notes.
GENERAL
The Company's results of operations for the three fiscal months ended July 27,
1997 reflect the consolidated operations from all of the Company's subsidiaries,
including Isle of Capri Casino in Biloxi, Mississippi (the "Isle-Biloxi"), Isle
of Capri Casino in Vicksburg, Mississippi (the "Isle-Vicksburg"), Isle of Capri
Casino in Bossier City, Louisiana (the "Isle-Bossier City"), Isle of Capri
Casino in Lake Charles, Louisiana (the "Isle-Lake Charles"), and Pompano Park,
Inc. ("PPI"). The LRGP Acquisition, consummated August 6, 1996, gave the Company
100% ownership in the Isle-Bossier City and the Isle-Lake Charles, allowing the
Company to consolidate their results of operations beginning in the quarter
ended October 31, 1996. Previously, the Company reported its interests in the
Isle-Bossier City and the Isle-Lake Charles using the equity method of
accounting. The Company believes that its results of operations for the three
fiscal months ended July 27, 1997 are not readily comparable to the results of
operations for the three months ended July 31, 1996 primarily because of the
consolidation of the results of operations of the Isle-Bossier City and the
Isle-Lake Charles. Furthermore, the historical results of operations reflect the
Isle-Lake Charles as a single riverboat operation. The Isle-Lake Charles has
operated two riverboats since July 12, 1996 as a result of the GPRI Acquisition.
The three months ended October 31, 1996 was the first full quarter of operating
results for GPRI. Because of the lack of comparable information on a
consolidated basis, the following discussion will focus on certain events and
trends that affected the Company's consolidated operations during the quarter
ended July 27, 1997 and comparable data on a location basis.
The Company believes that its historical results may not be indicative of 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. The Company believes that seasonality does not have a significant
effect on its business.
11
<PAGE>
RESULTS OF OPERATIONS
Three Fiscal Months Ended July 27, 1997 - Consolidated Company
Total revenue for the quarter ended July 27, 1997 was $111.7 million which
included $99.1 million of casino revenue, $3.1 million of rooms revenue, $4.5 of
pari-mutuel commissions, and $5.0 million of food, beverage and other revenue.
The consolidated revenue of the Company reflects the inclusion of the Isle-
Bossier City and the Isle-Lake Charles into the Company's consolidated financial
statements. Revenue does not reflect the retail value of any complimentaries.
Also, as a result of the LRGP Acquisition, management fees are not reported for
periods subsequent to the date of acquisition because these amounts have been
eliminated in consolidation.
Casino operating expenses for the quarter totaled $18.9 million, or 19% of
casino revenue. These expenses were primarily comprised of salaries, wages and
benefits, and other operating expenses of the casino.
Operating expenses for the quarter also included room expenses of $1.1 million
from the hotels at the Isle-Biloxi and the Isle-Bossier City. These expenses
were those directly relating to the cost of providing hotel rooms. Other costs
of the hotels are shared with the casinos and are presented in their respective
expense categories.
State and local gaming taxes paid in Mississippi and Louisiana totaled $19.7
million for the quarter which is consistent with each state's applicable gaming
tax rate.
Food and beverage and other expenses totaled $3.5 million for the quarter.
These expenses are comprised primarily of the cost of goods sold, salaries,
wages and benefits, and the operating expenses of these departments.
Marine and facilities expenses totaled $5.8 million for the three fiscal months
ended July 27, 1997 and included salaries, wages and benefits, operating
expenses of the marine crews, insurance, housekeeping and general maintenance of
the riverboats and floating pavilions.
Marketing and administrative expenses totaled $34.7 million for the quarter.
Marketing expenses included salaries, wages and benefits of the marketing and
sales departments as well as promotions, advertising, special events and
entertainment. Administrative expenses included administration and human
resource department expenses, rent, new development activities, professional
fees and property taxes.
Depreciation and amortization expense was $8.3 million for the quarter. These
expenses relate to property and equipment, berthing and concession rights, and
intangible assets.
Interest expense was $11.1 million for the quarter net of capitalized interest
of $0.1 million and interest income of $0.5 million. Interest expense primarily
relates to indebtedness incurred in connection with the acquisition of property,
equipment, leasehold improvements and berthing and concession rights, as well as
indebtedness relating to the purchase of the remaining interest in LRGP.
12
<PAGE>
The Company has improved operating results over the previous quarter to produce
a net income of $2.9 million for the quarter ended July 27, 1997 compared to net
income of $0.3 million before extraordinary item, valuation change and double
jackpot, and after the intraperiod effect of boarding fees, for the quarter
ended April 27, 1997. The improvement relates primarily to the Company's
improved management of staffing, marketing and other expenditure levels at its
Mississippi properties and the Isle-Lake Charles. Also, the improvement relates
to the opening of the second riverboat casino operation at the Isle-Lake
Charles. The Company's effective tax rate for the quarter was approximately 40%.
Three Fiscal Months Ended July 27, 1997, Compared to Three Months Ended July 31,
1996-By Location
Isle-Biloxi
For the quarter ended July 27, 1997, the Isle-Biloxi had total revenue of $23.6
million of which $19.8 million was casino revenue, compared to total revenue of
$23.1 million of which $19.1 million was casino revenue for the quarter ended
July 31, 1996. The increase in revenue relates primarily to increased casino
traffic resulting from a continued increase in occupancy at its 367-room hotel.
Operating income for the three fiscal months ended July 27, 1997 totaled $4.2
million or 18% of total revenues compared to $3.7 million or 16% for the three
months ended July 31, 1996. Increased operating income and operating income
margin are due primarily to improved operating efficiency as a result of
management's expense reduction efforts combined with a shift to direct response
marketing.
Isle-Vicksburg
For the quarter ended July 27, 1997, the Isle-Vicksburg had total revenue of
$13.3 million of which $12.7 million was casino revenue, compared to total
revenue of $14.7 million of which $13.9 million was casino revenue for the
quarter ended July 31, 1996. Operating Income for the three fiscal months ended
July 27, 1997 totaled $2.9 million or 22% of total revenue compared to $2.1
million or 15% for the three months ended July 31, 1996. The decrease in
revenue relates primarily to the impact of increased competition and the overall
weakness of the market. However, the increase in operating income is a result
of management's expense reduction efforts combined with a shift to direct
response marketing.
Isle-Bossier City
For the quarter ended July 27, 1997, the Isle-Bossier City had total revenue of
$34.4 million of which $32.1 million was casino revenue, compared to total
revenue of $40.4 million of which $37.4 million was casino revenue for the
quarter ended July 31, 1996. Operating income for the three fiscal months ended
July 27, 1997 totaled $6.5 million or 19% of total revenue compared to $8.7
million or 22% for the three months ended July 31, 1996. The decrease in
revenues and operating income relates primarily to the addition of a new
competitor in the market, in October, 1996, resulting in increased promotional
activities by the Isle-Bossier City and its competitors in the market.
Isle-Lake Charles
For the quarter ended July 27, 1997, the Isle-Lake Charles had total revenue of
$35.3 million of which $34.5 million was casino revenue, compared to total
revenue of $28.8 million of which $27.8 million was casino revenue for the
quarter ended July 31, 1996. The increase in revenue relates to the
commencement of a two-boat operation on July 12, 1996. Operating income for the
three fiscal months ended July 27, 1997 totaled $6.1 million or 17% of total
revenue compared to operating income of $5.4 million or 19% of total revenue for
the three months ended July 31, 1996. The operating performance at the Isle-
Lake Charles has been positively impacted by the addition of the second
riverboat casino.
13
<PAGE>
Liquidity and Capital Resources
At July 27, 1997, the Company had cash and cash equivalents of $64.2 million
compared to $51.8 million at April 27, 1997. The increase in cash is primarily a
result of the Company's operating activities. During the three fiscal month
period ended July 27, 1997, the Company's operating activities provided $27.3
million of cash compared to $4.1 million of cash flow provided by operating
activities in the first three months of fiscal 1997.
The Company invested $10.0 million in property and equipment in the first three
months of fiscal 1998, primarily for the construction of its 241-room hotel at
the Isle-Lake Charles, as well as in connection with the completion of the
remodeling of the pavilion and the addition of Farraddays' restaurant at the
Isle-Bossier City, which opened in July 1997.
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 $60.8 million, consisting of cash in the amount of approximately
$7.5 million, notes and the assumption of indebtedness of approximately $37.1
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.
In July and August, 1996, the Company received an aggregate of $18.1 million
from the issuance of 3,079,980 shares of common stock issued pursuant to the
Rights Offering.
On August 6, 1996, the Company issued $315,000,000 of 12 1/2% Senior Secured
Notes due 2003. Interest on the Senior Secured Notes is payable semiannually on
each February 1 and August 1, commencing February 1, 1997, through maturity.
Part of the proceeds from the Senior Secured Notes were used to retire or
defease $180,285,000 in long-term debt, including $105,000,000 of 11 1/2% First
Mortgage Notes due 2001. The proceeds were also used to pay accrued interest and
other costs of $16,396,000 and to acquire the remaining 50% interest in LRGP and
LRG Hotels, L.L.C. held by Louisiana River Site Development, Inc. The
consideration for the LRGP Acquisition included $85,000,000 in cash, five-year
warrants to purchase 500,000 shares of common stock at an exercise price of
$10.50 per share, and $1.5 million per year for seven years, payable monthly
beginning on October 1, 1998.
An important component of the Company's operating strategy will be to develop,
open and operate, either directly, through a 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 began construction of a $10.5 million, 241-room
hotel facility at the Isle-Lake Charles in March of 1997. The hotel is
scheduled to open in late September 1997. The Company is currently seeking
financing and/or a joint venture partner for a hotel at the Isle-Bossier City,
and another hotel at the Isle-Lake Charles. Construction of these two hotel
facilities will not begin until such financing and/or a joint venture partner or
partners are obtained.
The Company anticipates that its principal near-term capital requirements will
relate to the completion of its 241-room hotel at the Isle-Lake Charles, the
addition of a Farraddays' restaurant at the Isle-Lake Charles, the Isle-
Vicksburg and the Isle-Biloxi and investments in additional hotel projects
adjacent to the Isle-Bossier City and the Isle-Lake Charles.
On August 20, 1997, subsequent to the quarter ended July 27, 1997, the Company
contributed approximately $8.2 million to the Isle of Capri Black Hawk L.L.C.
(the "Isle-Black Hawk") a joint venture, of which the Company owns 59.2%. On
the same day, the Isle-Black Hawk issued $75 million of 13% First Mortgage
Notes, due 2004 (the "First Mortgage Notes"). The First Mortgage
14
<PAGE>
Notes are non-recourse debt to the joint venture partners. The net proceeds of
the offering will be used to fund the development of the Isle of Capri Casino in
Black Hawk, Colorado. The project is estimated to cost approximately $104
million. Additionally, the Company has provided a completion capital commitment
of up to $5.0 million, if required to enable the facility to commence operations
by April 1, 1999.
The Company is not presently committed to making any other significant capital
expenditures or investment in a new gaming market. However, the Company
believes that, in addition to possibly developing hotels at its existing
properties, it will be necessary to consider making certain capital
improvements to its land-based facilities at the Isle-Vicksburg and that
enhancements to its non-gaming amenities at all facilities will be important to
operations at those facilities. 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
presently permitted and in jurisdictions where gaming is not presently
permitted, but in which it believes that gaming may be legalized in the future.
The Company expects that available cash and cash from future operations will be
adequate to fund planned capital expenditures, debt service and working capital
requirements. However, no assurance can be made that the Company will have
sufficient capital resources to make all of the planned capital expenditures
described above or such capital investments that may be necessary to remain
competitive in the Company's markets. In addition, the Indenture governing the
Senior Secured Notes places certain limits on the Company's ability to incur
additional indebtedness and to make certain investments. The Company is highly
leveraged and, as a result, may be unable to obtain additional debt or equity
financing on terms acceptable to the Company. As a result, limitations on the
Company's capital resources could delay certain plans with respect to capital
improvements at the Company's existing properties. Furthermore, the Company will
continue to evaluate its planned capital expenditures at each location in light
of the operating performance of the respective facilities at such locations.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128 "Earnings per Share," which will
become effective for both interim and annual periods ending after December 15,
1997. SFAS No. 128 will require companies to disclose basic and diluted
earnings per share. Basic earnings per share will be calculated based on the
weighted average common shares outstanding and would exclude common stock
equivalents from the calculation. The requirements of SFAS No. 128, based on
current circumstances, will not have a significant effect on the Company's
earnings per share calculations.
15
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its Chairman, Bernard Goldstein, were named as
defendants in a lawsuit entitled "Martin B. Greenberg v. Casino
America, Inc. and Bernard Goldstein, individually," which was filed on
January 23, 1997 in the United States District Court for the Southern
District of Florida, Fort Lauderdale Division. The lawsuit alleges
that the Company purportedly breached a contract of employment between
Mr. Greenberg and the Company concerning Mr. Greenberg's employment as
Chairman of the Board of the Company's Pompano Park subsidiary. The
suit makes a claim for damages against the Company, and against its
Chairman for related matters, in an unspecified amount.
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 has challenged a statute that purportedly permits the
Bossier Parish Police Jury to levy an additional $.50 boarding fee per
passenger against LRGP beginning January 1, 1996. The Company's
challenge has been denied at the state court level, however, the
Company has appealed the decision. If the ruling is upheld, the
Company would have to pay the Bossier Parish Police Jury approximately
$2,723,000 as of July 27, 1997, for prior unpaid boarding fees, plus a
continuing $.50 fee per passenger at LRGP. This liability has been
fully recorded.
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.
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
16
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
A list of the exhibits included as part of this Form 10-Q is set forth
in the Exhibit Index that immediately precedes such exhibits, which is
incorporated herein by reference.
B. Reports on Form 8-K
During the first quarter ended July 27, 1997, the Company filed the
following reports on Form 8-K for the following dates:
None
17
<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: September 10, 1997 By: /s/ Rexford A. Yeisley
---------------------
Rexford A. Yeisley
Chief Financial Officer & Treasurer
(Duly Authorized Officer and
Principal Financial Officer
and Accounting Officer)
18
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
27 Financial Data Schedule
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Casino
America, Inc.'s Consolidated Financial Statements and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-26-1998
<PERIOD-START> APR-28-1997
<PERIOD-END> JUL-27-1997
<CASH> 64,230
<SECURITIES> 0
<RECEIVABLES> 4,935
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 86,723
<PP&E> 353,554
<DEPRECIATION> 64,940
<TOTAL-ASSETS> 538,777
<CURRENT-LIABILITIES> 79,404
<BONDS> 362,101
0
0
<COMMON> 234
<OTHER-SE> 80,979
<TOTAL-LIABILITY-AND-EQUITY> 538,777
<SALES> 0
<TOTAL-REVENUES> 111,737
<CGS> 0
<TOTAL-COSTS> 46,886
<OTHER-EXPENSES> 48,891
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,564
<INCOME-PRETAX> 4,914
<INCOME-TAX> 1,966
<INCOME-CONTINUING> 2,948
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,948
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
