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 October 29, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to ______________________
Commission File Number 0-20538
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ISLE OF CAPRI CASINOS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 41-1659606
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
1641 Popps Ferry Road, Biloxi, Mississippi 39532
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (228) 396-7000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
--
As of December 4, 2000, the Company had a total of 30,548,201 shares of Common
Stock outstanding.
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ISLE OF CAPRI CASINOS, INC.
FORM 10-Q
INDEX
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PAGE
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PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS, OCTOBER 29, 2000 (UNAUDITED)
AND APRIL 30, 2000. . . . . . . . . . . . . . . . . . . . . 1
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX
MONTHS ENDED OCTOBER 29, 2000 AND OCTOBER 24, 1999 (UNAUDITED) 2
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE
SIX MONTHS ENDED OCTOBER 29, 2000 (UNAUDITED). . . . . . . . 3
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS
ENDED OCTOBER 29, 2000 AND OCTOBER 24, 1999 (UNAUDITED) . . 4
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS. . . . 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . 20
PART II. OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . 26
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. . . . . . . . . . . . . 27
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. . . . . . . . . . . . . . . . . . 27
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . . . . 27
ITEM 5. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 27
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . 28
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
EXHIBIT LIST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS October 29, April 30,
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2000 2000
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(Unaudited)
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 112,243 $ 167,972
Short term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 39,044
Accounts receivable:
Related party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 307
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,114 6,343
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,173 15,167
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . 18,108 9,500
------------- ----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . 153,638 238,333
Property and equipment - net.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 874,177 699,246
Other assets:
Investment in and advances to joint ventures. . . . . . . . . . . . . . . . . . 1,929 1,914
Property held for development or sale . . . . . . . . . . . . . . . . . . . . . 3,782 3,782
Licenses and other intangible assets, net of accumulated amortization of
$13,525 and $11,896, respectively. . . . . . . . . . . . . . . . . . . . . 64,473 91,100
Goodwill, net of accumulated amortization of
$15,576 and $11,721, respectively. . . . . . . . . . . . . . . . . . . . . 265,743 228,530
Berthing, concession, and leasehold rights, net of accumulated amortization of
$2,619 and $2,462, respectively. . . . . . . . . . . . . . . . . . . . . . 3,649 3,806
Deferred financing costs, net of accumulated amortization of $6,310 and
$4,145, respectively.. . . . . . . . . . . . . . . . . . . . . . . . . . . 23,552 25,466
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,407 5,556
Prepaid deposits and other. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,977 7,781
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Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,400,327 $1,305,514
============= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
Current liabilities:
Current maturities of long-term debt. . . . . . . . . . . . . . . . . . . . . . $ 16,731 $ 17,400
Accounts payable:
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,857 24,407
Related party.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 95
Accrued liabilities:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,830 10,010
Payroll and related.. . . . . . . . . . . . . . . . . . . . . . . . . . . 41,574 39,338
Property and other taxes. . . . . . . . . . . . . . . . . . . . . . . . . 19,804 16,096
Income tax payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,950 10,661
Progressive jackpots and slot club awards.. . . . . . . . . . . . . . . . 12,614 9,033
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,569 34,996
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Total current liabilities.. . . . . . . . . . . . . . . . . . . . . . 183,929 162,036
Long-term debt, less current maturities. . . . . . . . . . . . . . . . . . . . . . . 998,115 945,501
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,970 25,763
Other accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,309 8,851
Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,801 7,843
Stockholders' equity:
Preferred stock, $.01 par value; 2,050 shares authorized; none issued.. . . . . - -
Common stock, $.01 par value; 45,000 shares authorized; shares issued and
outstanding: 30,527 at October 29, 2000 and 30,369 at April 30, 2000.. . . 305 304
Class B common stock, $.01 par value; 3,000 shares authorized; none
issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 129,118 125,572
Unearned compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . (2,069) -
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,849 29,644
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Total stockholders' equity. . . . . . . . . . . . . . . . . . . . . . 177,203 155,520
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Total liabilities and stockholders' equity. . . . . . . . . . . . . . $ 1,400,327 $1,305,514
============= ==========
</TABLE>
See notes to consolidated financial statements
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ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended Six Months Ended
------------------- ------------------
October 29, October 24, October 29, October 24,
2000 1999 2000 1999
-------------------- ------------------ ------------- -------------
Revenue:
Casino . . . . . . . . . . . . . . . . . . . . . $ 231,043 $ 141,479 $ 461,378 $ 269,813
Rooms. . . . . . . . . . . . . . . . . . . . . . 6,226 2,838 11,016 5,445
Pari-mutuel commissions and fees . . . . . . . . 3,148 3,616 8,069 8,349
Food, beverage and other . . . . . . . . . . . . 11,101 7,062 22,517 13,595
-------------------- ------------------ ------------- -------------
Total revenue . . . . . . . . . . . . . . . 251,518 154,995 502,980 297,202
Operating Expenses:
Casino . . . . . . . . . . . . . . . . . . . . . 44,806 27,248 89,155 50,204
Gaming taxes . . . . . . . . . . . . . . . . . . 46,298 27,852 91,611 53,748
Rooms. . . . . . . . . . . . . . . . . . . . . . 2,835 1,331 5,087 2,448
Pari-mutuel. . . . . . . . . . . . . . . . . . . 2,413 2,839 6,014 6,466
Food, beverage and other.. . . . . . . . . . . . 7,558 4,231 14,648 8,309
Marine and facilities. . . . . . . . . . . . . . 14,668 9,582 29,162 18,545
Marketing and administrative.. . . . . . . . . . 75,307 49,073 152,026 91,378
Preopening expenses. . . . . . . . . . . . . . . - - - 3,420
Depreciation and amortization. . . . . . . . . . 15,897 9,069 31,118 17,925
-------------------- ------------------ ------------- -------------
Total operating expenses. . . . . . . . . . 209,782 131,225 418,821 252,443
-------------------- ------------------ ------------- -------------
Operating income. . . . . . . . . . . . . . . . . . . 41,736 23,770 84,159 44,759
Interest expense . . . . . . . . . . . . . . . . (23,890) (13,455) (47,322) (25,565)
Interest income. . . . . . . . . . . . . . . . . 758 835 3,198 1,543
Gain on disposal . . . . . . . . . . . . . . . . 271 - 271 3,106
Minority interest. . . . . . . . . . . . . . . . (1,555) (701) (2,959) (1,191)
Equity in (loss) income of
unconsolidated joint ventures.. . . . . . . (109) 585 (109) 637
-------------------- ------------------ ------------- -------------
Income before income taxes. . . . . . . . . . . . . . 17,211 11,034 37,238 23,289
Income tax provision . . . . . . . . . . . . . . 7,575 4,402 17,033 10,129
-------------------- ------------------ ------------- -------------
Net income. . . . . . . . . . . . . . . . . . . . . . $ 9,636 $ 6,632 $ 20,205 $ 13,160
==================== ================== ============= =============
Net income per common share - basic. . . . . . . $ 0.32 $ 0.28 $ 0.66 $ 0.56
Net income per common share - assuming dilution. $ 0.30 $ 0.26 $ 0.62 $ 0.53
Weighted average basic shares. . . . . . . . . . 30,489 23,664 30,455 23,643
Weighted average diluted shares. . . . . . . . . 32,358 25,109 32,341 24,946
</TABLE>
See notes to consolidated financial statements
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ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
Shares of Additional Total
Common Common Paid-in Unearned Retained Stockholders'
Stock Stock Capital Compensation Earnings Equity
--------- ----------- -------- -------------- --------- --------------
Balance, April 30, 2000 . . . . . . . . . . . . 30,369 $ 304 $125,572 $ - $ 29,644 $ 155,520
Exercise of stock options and warrants . . 158 1 846 - - 847
Grant of nonvested stock . . . . . . . . . - - 2,700 (2,700) - -
Amortization of unearned compensation. . . - - - 631 - 631
Net income . . . . . . . . . . . . . . . . - - - - 20,205 20,205
--------- ----------- -------- -------------- --------- --------------
Balance, October 29, 2000 . . . . . . . . . . . 30,527 $ 305 $129,118 $ (2,069) $ 49,849 $ 177,203
========= =========== ======== ============== ========= ==============
</TABLE>
See notes to consolidated financial statements
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ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended
----------------
October 29, October 24,
2000 1999
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OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,205 $ 13,160
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . 31,118 17,925
Deferred income taxes. . . . . . . . . . . . . . . . . . . - 4,984
Amortization of deferred financing costs . . . . . . . . . 2,165 1,021
Amortization of unearned compensation. . . . . . . . . . . 631 -
( Gain) loss on disposal of assets.. . . . . . . . . . . . (271) (3,104)
Equity in loss (income) of unconsolidated joint ventures.. 109 637
Minority interest. . . . . . . . . . . . . . . . . . . . . 2,959 1,190
Changes in current assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . (419) 1,247
Income tax receivable . . . . . . . . . . . . . . . . - 6,709
Prepaid expenses and other assets.. . . . . . . . . . (5,632) (1,410)
Accounts payable and accrued liabilities. . . . . . . (6,163) 1,529
------------------ -------------
Net cash provided by operating activities.. . . . . . . . . . . 44,702 43,888
INVESTING ACTIVITIES:
Purchase of property and equipment. . . . . . . . . . . . . . . (84,269) (40,547)
Net cash paid for acquisitions. . . . . . . . . . . . . . . . . (111,957) -
Sale of short-term investments. . . . . . . . . . . . . . . . . 39,044 -
Proceeds from disposals of property and equipment.. . . . . . . 271 4,550
Investments in and advances to joint ventures . . . . . . . . . (124) (1,392)
Restricted cash.. . . . . . . . . . . . . . . . . . . . . . . . (851) 1,640
Deposits and other. . . . . . . . . . . . . . . . . . . . . . . 4,913 (220)
------------------ -------------
Net cash used in investing activities.. . . . . . . . . . . . . (152,973) (35,969)
FINANCING ACTIVITIES:
Proceeds from debt. . . . . . . . . . . . . . . . . . . . . . . 62,000 -
Principal payments on debt and cash paid to retire debt . . . . (10,054) (4,742)
Deferred financing costs. . . . . . . . . . . . . . . . . . . . (251) -
Proceeds from exercise of stock options and warrants. . . . . . 847 547
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Net cash provided by (used in) financing activities . . . . . . 52,542 (4,195)
Net (decrease) increase in cash and cash equivalents. . . . . . (55,729) 3,724
Cash and cash equivalents at beginning of period. . . . . . . . 167,972 85,117
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Cash and cash equivalents at end of period. . . . . . . . . . . $ 112,243 $ 88,841
================== =============
</TABLE>
See notes to consolidated financial statements
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ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended
----------------
October 29, October 24,
2000 1999
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments (receipts) for:
Interest . . . . . . . . . . . . . . . . . . . . . . . $ 48,632 $ 24,537
Income taxes - net of refunds. . . . . . . . . . . . . 15,191 (2,967)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Notes Payable and debt issued for:
Property and equipment.. . . . . . . . . . . . . . . . - 1,008
Capital contributions:
Property and equipment.. . . . . . . . . . . . . . . . 22,694 -
Other:
Construction costs funded through accrued liabilities. 4,322 -
Acquisitions of businesses:
Fair value of assets acquired. . . . . . . . . . . . . 146,156 -
Less fair value of liabilities assumed . . . . . . . . (34,199) -
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Net cash payment . . . . . . . . . . . . . . . . . . . 111,957 -
================== =============
</TABLE>
See notes to consolidated financial statements
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ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Isle of Capri Casinos, Inc. (the "Company" or "Isle of Capri"), 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, dockside and land-based casinos and related facilities.
The Company has licenses to conduct and currently conducts gaming operations in
Biloxi, Vicksburg, Tunica, Natchez and Lula, Mississippi, in Bossier City and
Lake Charles, Louisiana, in Bettendorf, Marquette and Davenport, Iowa, in Kansas
City, Missouri, in Black Hawk, Colorado, and in Las Vegas, Nevada through its
subsidiaries. The Company is also undertaking development projects in Boonville
and St. Louis, Missouri.
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 and six month periods ended
October 29, 2000 are not necessarily indicative of the results that may be
expected for the fiscal year ending April 29, 2001. 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 fiscal year ended April 30,
2000.
The consolidated financial statements of the Company include the accounts
of Isle of Capri Casinos, Inc. and its subsidiaries. All material intercompany
balances and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles necessarily requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements as well as revenues and expenses during the reporting period. Actual
amounts when ultimately realized could differ from those estimates.
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ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings per Common Share
The following table sets forth the computation of basic and diluted earnings per
share:
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Three Months Ended Six Months Ended
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October 29, October 24, October 29, October 24,
2000 1999 2000 1999
-------------------- ----------------- ------------ ------------
(Unaudited)
In thousands, except per share data)
Numerator:
Net income. . . . . . . . . . . . . . . . . . . . . $ 9,636 $ 6,632 $ 20,205 $ 13,160
Numerator for basic earnings per share - income
available to common stockholders . . . . . . . $ 9,636 $ 6,632 $ 20,205 $ 13,160
Effect of diluted securities. . . . . . . . . . . . - - - -
-------------------- ----------------- ------------ ------------
Numerator for diluted earnings per share-
income available to common stockholders after
assumed conversions . . . . . . . . . . . $ 9,636 $ 6,632 $ 20,205 $ 13,160
==================== ================= ============ ============
Denominator:
Denominator for basic earnings per share -
weighted - average shares. . . . . . . . . . . 30,489 23,664 30,455 23,643
Effect of dilutive securities
Employee stock options, warrants
and nonvested restricted stock. . . . . . . 1,869 1,445 1,886 1,303
-------------------- ----------------- ------------ ------------
Dilutive potential common shares. . . . . . . . . . 1,869 1,445 1,886 1,303
-------------------- ----------------- ------------ ------------
Denominator for diluted earnings per share -
adjusted weighted - average shares and
assumed conversions . . . . . . . . . . . 32,358 25,109 32,341 24,946
==================== ================= ============ ============
BASIC EARNINGS PER SHARE. . . . . . . . . . . . . . $ 0.32 $ 0.28 $ 0.66 $ 0.56
==================== ================= ============ ============
DILUTED EARNINGS PER SHARE. . . . . . . . . . . . . $ 0.30 $ 0.26 $ 0.62 $ 0.53
==================== ================= ============ ============
</TABLE>
2. PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method over the following estimated useful lives:
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YEARS
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Slot machines. . . . . . . . . . . 3
Furniture, fixtures, and equipment 5-10
Leasehold improvements . . . . . . 10-39.5
Riverboats and floating pavilions. 25
Buildings and improvements . . . . 39.5
</TABLE>
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ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. OTHER ASSETS
Licenses and other intangible assets
Licenses and other intangible assets principally represent the license
value attributed to the Louisiana gaming licenses acquired through the Company's
acquisition of St. Charles Gaming Company, Inc. ("SCGC"), Grand Palais
Riverboat, Inc. ("GPRI") and Louisiana Riverboat Gaming Partnership ("LRGP") and
the value of the Lady Luck Gaming Corporation ("Lady Luck") trademarks, player
database and workforce acquired in the acquisition of Lady Luck Gaming
Corporation. These assets are being amortized over a twenty-five-year period
using the straight-line method.
Goodwill
Goodwill reflects the excess purchase price the Company paid in acquiring
the net identifiable tangible and intangible assets of SCGC, GPRI, LRGP, Lady
Luck and subsidiaries, BRDC, Inc., IOC Boonville, Inc. f/k/a Davis Gaming
Boonville, Inc. ("Isle-Boonville") , IOC-Kansas City Inc. f/k/a Kansas City
Flamingo Hilton ("Isle-Kansas City"), Gemini, Inc. ("Lady Luck Las Vegas") and
IOC Davenport, Inc. f/k/a/ The President - Davenport ("Isle - Davenport").
Goodwill is being amortized over a twenty-five-year period using the
straight-line method.
Restricted cash
Restricted cash consists primarily of a certificate of deposit in the
amount of $1.5 million for the Greek Lawsuit (see note 9 ), gaming deposits
totaling $1.2 million, deposit of $1.1 million held in trust to secure the
letter of credit for Isle-Black Hawk (see note 8 ), construction escrow related
to our Boonville, MO development of $1.0 million, and various other deposits
totaling $1.6 million.
4. SHORT-TERM INVESTMENTS
Short-term investments consist primarily of short-term commercial paper and
certificates of deposits. The carrying amount of short-term investments
approximates fair value because of the short maturity of these instruments.
5. ISLE OF CAPRI BLACK HAWK L.L.C.
On April 25, 1997, a wholly-owned subsidiary of the Company, Casino America
of Colorado, Inc. formed Isle of Capri Black Hawk L.L.C. ("Isle-Black Hawk"), a
limited liability company, with Blackhawk Gold, Ltd., a wholly-owned subsidiary
of Nevada Gold & Casinos, Inc. Isle-Black Hawk owns a casino in Black Hawk,
Colorado, which opened on December 30, 1998. In August 2000, Isle-Black Hawk
completed the construction of a hotel containing 237 rooms at the site of the
Isle-Black Hawk. The Company has a 57% ownership interest in Isle-Black Hawk.
Isle of Capri loaned Isle-Black Hawk a total of $5.75 million which was used to
develop the hotel. The $5.75 million is two separate notes. The first loan,
$5.0 million, is due and payable on demand (see note 12). The second loan,
$0.75 million, is due and payable upon the redemption of the First Mortgage
Notes.
6. CAPRI CRUISES, L.L.C.
On April 20, 1998, the Company signed an agreement with Commodore Holdings
Limited, parent company of Commodore Cruise Line, to create a joint venture
named Capri Cruises to operate cruise ships in strategic markets. Cruise
operations began in early June 1998. As of October 29, 2000, the Company had
invested $3.0 million into this 50/50 unconsolidated joint venture, which is
operating one cruise ship from the Port of New Orleans.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. MERGERS AND ACQUISITIONS
Isle of Capri - Tunica
In March 1999, a subsidiary of the Company acquired the original Harrah's
casino facility located in Tunica County, Mississippi for $9.5 million. The
Company invested an additional $24.0 million to equip, renovate and open this
facility as an Isle of Capri casino. The Company opened the Isle-Tunica on July
26, 1999 with approximately 875 slot machines, 15 table games and its two
trademark restaurants. The Company invested approximately an additional $44.0
million to construct an on-site hotel with 227 rooms and two live entertainment
theaters with combined seating for 1,800 people. Construction of the hotel and
theaters was completed in November 2000.
Lady Luck Gaming Corporation/Gemini, Inc.
On March 2, 2000, the Company acquired Lady Luck in a merger transaction
pursuant to which Lady Luck became a wholly-owned subsidiary of the Company.
Lady Luck's common stockholders received cash in the amount of $12.00 per share
for an aggregate share consideration of approximately $59 million. Lady Luck
operated dockside riverboat casinos and hotels in Lula and Natchez, Mississippi;
owned a 50% interest in the Lady Luck Casino and Hotel in Bettendorf, Iowa; and
on October 29, 1999, acquired the Miss Marquette Casino in Marquette, Iowa for
$41.7 million. In November 1999, the Company made a secured loan of
approximately $21.0 million to Lady Luck in order to assist Lady Luck in
consummating its acquisition of the Miss Marquette. On March 2, 2000, the
Company also completed the acquisition of certain intellectual property from
entities owned by Lady Luck's former chairman for $31.0 million
contemporaneously with the merger. The Company completed the acquisition of the
Lady Luck Casino and Hotel in Las Vegas on September 12, 2000. The acquisition
price for the Las Vegas facility was $14.5 million.
BRDC, Inc.
On March 2, 2000, a subsidiary of the Company merged with BRDC which owned
a 50% interest in Lady Luck's Bettendorf, Iowa facility that was not owned by
Lady Luck and related real estate in exchange for 6.3 million shares of the
Company's common stock, subject to a post-closing adjustment totaling $153,000.
BRDC was owned by members of the family of Bernard Goldstein, the Company's
Chairman and Chief Executive Officer, including Robert Goldstein, a member of
the Company's board of directors.
Davis Gaming Boonville, Inc.
On May 3, 2000, the Company acquired Isle-Boonville, which has preliminary
approval to develop a gaming facility in Boonville, Missouri. Isle of Capri
intends to develop a casino project in Boonville with a total expected
investment of approximately $75.0 million, which includes a purchase price of
$11.5 million. Isle of Capri began construction on this project and is funding
this development through its Amended and Restated Senior Credit Facility. The
Company expects to complete the project in the fall of 2001.
Flamingo Hilton Riverboat Casino, L.P.
On June 6, 2000, the Company acquired certain assets of Flamingo Hilton
Riverboat Casino, L.P. in Kansas City, Missouri ("Isle-Kansas City") for $33.5
million cash less certain assumed liabilities. Isle of Capri anticipates
investing up to an additional $15.0 million in this project, primarily to
re-theme the casino into an Isle of Capri Casino. Isle of Capri funded the
acquisition and is funding the re-theming through its Amended and Restated
Senior Credit Facility.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. MERGERS AND ACQUISITIONS (CONTINUED)
President Casinos - Davenport (Rhythm City-Davenport)
On October 10, 2000, a subsidiary of Isle of Capri acquired certain assets
of the President Casino and Hotel in Davenport, Iowa from a subsidiary of
President Casinos, Inc. for $58.2 million. Isle of Capri anticipates investing
up to an additional $23.0 million in this project primarily to re-theme the
casino into a Rhythm City Casino, a new brand name for the Company. Isle of
Capri funded the acquisition through its Amended and Restated Senior Credit
Facility.
Jefferson County, Missouri
On July 26, 2000, the Missouri Gaming Commission selected the Company's
Jefferson County, Missouri project for development. The project will primarily
serve the South St. Louis metropolitan area. The project is expected to include
a 35,000-square-foot casino, the Isle's standard signature restaurants, a
200-room hotel and an entertainment complex. The Company expects to begin
construction in 2001 and to complete the project eighteen to twenty-four months
thereafter. Isle of Capri expects to invest approximately $105 million in the
project. A town located near the site of the Company's proposed development has
indicated that it intends to condemn and/or annex the Company's site in order to
prevent development of the project. The Company intends to vigorously oppose
these efforts; however, development of the project could be delayed.
The statements of operations reflect results of operations of these
acquisitions as of their respective acquisition dates.
8. LONG-TERM DEBT
<TABLE>
<CAPTION>
<S> <C> <C>
October 29, April 30,
2000 2000
--------------- ----------
Long-term debt consists of the following: (In thousands)
8 3/4 % senior subordinated notes (described below). . . . . . . . . . . . . . . . . $ 390,000 $ 390,000
Variable rate term loan (9.95% at October 29, 2000), due in quarterly installments,. 530,125 475,000
beginning July, 2000 through March, 2007. . . . . . . . . . . . . . . . . . . . .
12 1/2 % note payable, due in monthly installments of $125,000, including. . . . . .
interest, beginning October 1997 through October 2005.. . . . . . . . . . . . . . 5,421 5,818
8 % note payable, due in monthly installments of $66,667, including interest,
through July 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,244 1,587
8 % note payable, due in monthly installments of $11,365, including interest,
through December 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1,213
11% note payable, issued by Isle of Capri Black Hawk L.L.C., due March 2001;
non-recourse to Isle of Capri Casinos, Inc. . . . . . . . . . . . . . . . . . . . 359 768
13% First Mortgage Notes, issued by Isle of Capri Black Hawk L.L.C., due
August 2004; non-recourse to Isle of Capri Casinos, Inc . . . . . . . . . . . . . 75,000 75,000
Variable rate TIF Bonds due to City of Bettendorf, due in quarterly installments
of various amounts, not including interest; Tax Incremental Financing Payable -
Interest of approximately 6.7% payments made through incremental property
taxes to the City until paid in full, maturity no later than 2011 . . . . . . . . 6,766 7,184
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,931 6,331
--------------- ----------
1,014,846 962,901
Less: current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,731 17,400
--------------- ----------
Long-term debt.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 998,115 $ 945,501
=============== ==========
</TABLE>
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. LONG-TERM DEBT (CONTINUED)
On April 23, 1999, the Company issued $390,000,000 of 8 3/4 % Senior
Subordinated Notes due 2009 (the "Senior Subordinated Notes"). The Senior
Subordinated Notes are guaranteed by all of the Company's significant
subsidiaries, excluding the subsidiaries that own and operate the Isle-Black
Hawk. Interest on the Senior Subordinated Notes is payable semi-annually on
each April 15 and October 15 through maturity. The Senior Subordinated Notes
are redeemable, in whole or in part, at the Company's option at any time on or
after April 15, 2004 at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest to the
applicable redemption date, if redeemed during the 12-month period beginning on
April 15 of the years indicated below:
<TABLE>
<CAPTION>
<S><C>
Year Percentage
-------------------- -----------
2004.. . . . . . . . 104.375%
2005.. . . . . . . . 102.917%
2006.. . . . . . . . 101.458%
2007 and thereafter. 100.000%
</TABLE>
The Company issued the Senior Subordinated Notes under an indenture between
the Company, the subsidiary guarantors and a trustee. The indenture, among other
things, restricts the ability of the Company and its restricted subsidiaries to
borrow money, make restricted payments, use assets as security in other
transactions, enter into transactions with affiliates, or pay dividends on or
repurchase its stock or its restricted subsidiaries' stock. The Company is also
restricted in its ability to issue and sell capital stock of its subsidiaries
and in its ability to sell assets in excess of specified amounts or merge with
or into other companies.
A substantial part of the proceeds from the Senior Subordinated Notes was
used to prepay long-term debt, including all of the $315,000,000 of 12 1/2 %
Senior Secured Notes due 2003. The proceeds were also used to pay prepayment
premiums, accrued interest and other transaction fees and costs.
On March 2, 2000 Isle of Capri amended and restated its Senior Credit
Facility in connection with the acquisition of Lady Luck and BRDC, as well as to
provide financing for the acquisitions of the Isle-Kansas City, Lady Luck Las
Vegas, Isle-Davenport, and Isle-Boonville and the construction of a facility at
that location. The previous $175.0 million Senior Credit Facility was expanded
under the amended and restated agreement to a $600.0 million Senior Credit
Facility, including a $125.0 million revolver, of which $62.0 million was drawn
as of October 29, 2000. On March 2, 2000, $475.0 million in term loans were
funded under the Company's Amended and Restated Senior Credit Facility in
connection with the acquisition of Lady Luck and BRDC. A portion of the initial
$475.0 million funding was also used to repay outstanding amounts under the
existing credit facility and to fund the redemption of Lady Luck indebtedness
and preferred stock.
The Amended and Restated Senior Credit Facility is secured by liens on
substantially all of the Company's assets and guaranteed by all of its
significant restricted subsidiaries, excluding Casino America of Colorado, Inc.,
Isle-Black Hawk, and its subsidiary. Isle of Capri must repay all amounts
borrowed under its Amended and Restated Senior Credit Facility by March 2007.
Isle of Capri is required to make quarterly principal payments on the $475.0
million term loan portion of its Senior Credit Facility which began in March
2000. Such payments are initially $3.4 million per quarter and will increase by
$1.25 million per quarter in July of each year that the term loan is
outstanding. In addition, Isle of Capri will be required to make substantial
quarterly interest payments on the outstanding balance of its Amended and
Restated Senior Credit Facility and interest payments of $17.1 million
semi-annually on its 8 3/4 % Senior Subordinated Notes.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. LONG-TERM DEBT (CONTINUED)
On August 20, 1997, Isle-Black Hawk issued $75 million of 13% First
Mortgage Notes due 2004 with Contingent Interest, which is non-recourse debt to
the Company. Interest on the First Mortgage Notes is payable semi-annually on
February 28 and August 31 of each year, commencing February 28, 1998.
Additionally, contingent interest is payable on the First Mortgage Notes on each
interest payment date, in an aggregate principal amount of 5% of the
Consolidated Cash Flow (as defined in the Indenture governing the First Mortgage
Notes). In February 2000, Isle-Black Hawk made its first contingent interest
payment totaling $1.0 million as required by the Isle-Black Hawk's First
Mortgage Notes. The amount of contingent interest expense recorded for the
three and six months ended October 29, 2000 is $380,000 and $690,000,
respectively. The amount of contingent interest expense recorded for the three
and six months ended October 24, 1999 is $248,000 and $466,000, respectively.
The First Mortgage Notes are redeemable at the option of Isle-Black Hawk,
in whole or in part, at any time on or after August 1, 2001 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 31 of the years indicated below:
<TABLE>
<CAPTION>
<S><C>
Year Percentage
-------------------- -----------
2001.. . . . . . . . 106.500%
2002.. . . . . . . . 103.200%
2003.. . . . . . . . 100.000%
2004 and thereafter. 100.000%
</TABLE>
On June 5, 2000, Isle-Black Hawk offered to purchase for cash up to
$1,246,000 principal amount of their 13% First Mortgage Notes due 2004 at a
price of $1,010 per $1,000 principal amount, plus interest accrued up to, but
not including, the Payment Date in accordance with the terms of its indenture.
No Notes were tendered for purchase. Isle-Black Hawk is required to make an
offer based upon excess cash flow every year during the term of the bonds.
Isle of Capri has $4.5 million available in bank lines of credit other than
the Senior Credit Facility. As of October 29, 2000, Isle of Capri had no
outstanding balances under these lines of credit.
Isle-Black Hawk obtained a letter of credit as a requirement to obtain a
building permit from the City of Black Hawk. The letter of credit, totaling
$2.1 million, can be drawn upon by the City if for any reason Isle-Black Hawk
fails to complete the hotel project; certain public improvements are not
completed; or for repair and maintenance on the public improvements within one
year after completion. The letter of credit is secured by a deposit held in
trust of $1.1 million, which was funded by Isle of Capri, and the balance is
secured by Isle of Capri's open line of credit with the bank.
As part of a 1997 development agreement between the Isle-Bettendorf and the
City of Bettendorf, the City issued $9.5 million in tax incremental financing
bonds ("TIF Bonds"), $7.5 million of which was used by Isle-Bettendorf to
construct an overpass, parking garage, related site improvements and pay for
disruption damages caused by construction of the overpass. To enable financing
of the City's obligations, Isle - Bettendorf will pay incremental property taxes
on the developed property assessed at a valuation of not less than $32 million
until the TIF Bonds mature which will be no later than 2011. Additionally, the
TIF Bonds will also be repaid from the incremental taxes on the developed
property within the defined "TIF District" which includes Isle-Bettendorf and
over 100 other tax paying entities. As the TIF District will repay the TIF
Bonds, Isle-Bettendorf may not be required to fully repay the $7.5 million. In
the event that the taxes generated by the project and other qualifying
developments in the redevelopment district do not fund the repayment of the
total TIF Bonds prior to their scheduled maturity, Isle-Bettendorf will pay the
City $0.25 per person for each person entering the boat until the remaining
balance has been repaid.
Substantially all of Isle of Capri's assets are pledged as collateral for
long-term debt under the Amended and Restated Senior Credit Facility. At
October 29, 2000, Isle of Capri was in compliance with all debt covenants.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. CONTINGENCIES
One of the Company's subsidiaries has been named, along with numerous
manufacturers, distributors and gaming operators, including many of the
country's largest gaming operators, in a consolidated class action lawsuit
pending in Las Vegas, Nevada. These gaming industry defendants are alleged to
have 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 and the extent to which there is actually an
opportunity to win on any given play. The suit seeks unspecified compensatory
and punitive damages. A motion for certification of the class is currently
pending before the court and no discovery as to the merits of the alleged claims
has begun. 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.
However, the gaming industry defendants are committed to defend vigorously all
claims asserted in the consolidated action.
In May 1998, the Company was named as a defendant in an action brought by
several persons who had a contractual right to acquire property in Cripple
Creek, Colorado which they sold to one of the Company's subsidiaries in 1995.
The plaintiffs allege that the Company breached its purported agreement to
construct a casino facility on the property by the end of 1995. In December
1998, the Company's motion to dismiss the complaint was granted by the United
States District Court in Denver, Colorado and was affirmed in November 2000 by
the Tenth Circuit Court of Appeals. The plaintiffs have now requested a panel
hearing before the Tenth Circuit Court of Appeals. The Company intends to
vigorously defend all claims and allegations in the action.
In August 1997, a lawsuit was filed which seeks to nullify a contract to
which Louisiana Riverboat Gaming Partnership is a party. Pursuant to the
contract, Louisiana Riverboat Gaming Partnership pays a fixed amount plus a
percentage of revenue to various local governmental entities, including the City
of Bossier and the Bossier Parish School Board, in lieu of payment of a
per-passenger boarding fee. Summary judgment in favor of Louisiana Riverboat
Gaming Partnership was granted on June 4, 1998. That judgment was not appealed
and is now final. On June 11, 1998, a similar suit was filed and judgment was
rendered in the Company's favor on September 16, 1999 by the lower court. The
case has been reversed on appeal and remanded to the lower court for further
proceedings The Company is vigorously defending this suit.
Lady Luck has been named as a defendant in a purported shareholder class
action lawsuit filed alleging violations by Lady Luck of the Securities Act of
1933, as amended (the "Securities Act") and the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), for alleged material misrepresentations and
omissions in connection with Lady Luck's 1993 prospectus and initial public
offering of Common Stock. The complaint seeks, among other things, injunctive
relief, rescission and unspecified compensatory damages. While the outcome
of this matter cannot presently be determined, the Company intends to
vigorously defend the claims asserted in this action.
Lady Luck and particular joint venture partners are defendants in a lawsuit
brought by the country of Greece and its Minister of Tourism before the Greek
Multi-Member Court of First Instance. The action alleges that the defendants
failed to make specified payments in connection with the gaming license bid
process for Patras, Greece. Although it is difficult to determine the damages
being sought from the lawsuit, the case has been briefed and a preliminary
decision is expected early summer 2001. The outcome of the case cannot be
predicted with any degree of certainty; however, the Company intends to continue
vigorously defending the claims asserted in this action.
The Company is currently involved in an arbitration proceeding concerning
the amount of payments owed to a party which had an interest in property owned
by the Company located in Lula, Mississippi. The claimant is seeking payments
based upon gross revenue from the Company's Lula, Mississippi facility. The
Company disputes this claim and believes that its responsibility is limited to
payments which are fixed in amount. The case is still in its preliminary stage
and its outcome cannot be predicted with any degree of certainty but the Company
intends to continue vigorously defending the claim asserted in this proceeding.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. CONTINGENCIES (CONTINUED)
The Company is engaged in various other litigation matters and has a number
of unresolved claims. Although the ultimate liability of this litigation and
these claims cannot be determined at this time, the Company believes that they
will not have a material adverse effect on the Company's consolidated financial
position or results of operations.
The Company is subject to certain federal, state and local environmental
protection, health and safety laws, regulations and ordinances that apply to
businesses generally, and is subject to cleanup requirements at certain of its
facilities as a result thereof. The Company has not made, and does not
anticipate making, material expenditures or incurring delays with respect to
environmental remediation or protection. However, in part because the Company's
present and future development sites have, in some cases, been used as
manufacturing facilities or other facilities that generate materials that are
required to be remediated under environmental laws and regulations, there can be
no guarantee that additional pre-existing conditions will not be discovered and
that the Company will not experience material liabilities or delays.
10. DEFERRED BONUS PLAN
In the second quarter of 2001, the Company's stockholders approved the
Deferred Bonus Plan. The Plan provides for the issuance of nonvested stock to
eligible officers and employees who agree to receive a deferred bonus in the
form of nonvested stock. The vesting of the stock is dependent upon continued
service to the Company for a period of five years. The nonvested stock issued
in connection with the plan totaled 380,681 shares as of October 29, 2000. In
the second quarter 2001, the Company recorded an unearned compensation contra
account in stockholders' equity equal to the fair value of the nonvested award
and recorded compensation expense for the portion of unearned compensation that
had been earned through October 29, 2000.
11. PREOPENING EXPENSES
Preopening expenses of $3.4 million represent salaries, benefits, training,
marketing and other costs incurred in connection with the opening of the
Isle-Tunica on July 26, 1999.
12. SUBSEQUENT EVENTS
On November 28, 2000 Isle-Black Hawk repaid $5.0 million of the $5.75
million hotel loan.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. CONSOLIDATING CONDENSED FINANCIAL INFORMATION
Certain of the Company's subsidiaries have fully and unconditionally
guaranteed the payment of all obligations under the Company's $390 million 8 3/4
% Senior Subordinated Notes due 2009. The following table presents the
consolidating condensed financial information of Isle of Capri Casinos, Inc., as
the parent company, its guarantor subsidiaries and its non-guarantor
subsidiaries as of and for the three and six months ended October 29, 2000 and
October 24, 1999 and balance sheet as of October 29, 2000 and April 30, 2000.
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATING CONDENSED GUARANTOR, NONGUARANTOR AND PARENT COMPANY
FINANCIAL INFORMATION
AS OF OCTOBER 29, 2000 (UNAUDITED) AND APRIL 30, 2000 AND FOR
THE THREE AND SIX MONTHS ENDED OCTOBER 29, 2000 AND OCTOBER 24, 1999
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
(b)
Isle of Capri (a) Non-Wholly
Casinos, Inc. Wholly Owned Consolidating
Guarantor Owned Non- and Isle of Capri
(Parent Guarantor Guarantor Eliminating Casinos, Inc.
Obligor) Subsidiaries Subsidiaries Entries Consolidated
--------------- -------------- ------------- --------------- --------------
Balance Sheet
--------------
As of October 29, 2000 (Unaudited)
Current assets. . . . . . . . . . . . . . . $ 15,141 $ 126,179 $ 12,318 $ - $ 153,638
Intercompany receivables. . . . . . . . . . 625,587 321,968 11 (947,566) -
Investments in subsidiaries . . . . . . . . 519,203 50 - (517,324) 1,929
Property and equipment, net . . . . . . . . 1,787 767,667 104,723 - 874,177
Other assets. . . . . . . . . . . . . . . . 35,414 331,884 3,285 - 370,583
--------------- -------------- ------------- --------------- --------------
Total assets. . . . . . . . . . . . . . . . $ 1,197,132 $ 1,547,748 $ 120,337 $ (1,464,890) $ 1,400,327
=============== ============== ============= =============== ==============
Current liabilities . . . . . . . . . . . . $ 44,235 $ 124,763 $ 14,931 $ - $ 183,929
Intercompany payable. . . . . . . . . . . . 23,892 916,542 7,132 (947,566) -
Long-term debt, less current maturities . . 906,375 16,740 75,000 - 998,115
Deferred income taxes . . . . . . . . . . . (14,801) 35,771 - - 20,970
Other accrued liabilities . . . . . . . . . - 9,309 - - 9,309
Minority interest . . . . . . . . . . . . . - - - 10,801 10,801
Stockholders' equity. . . . . . . . . . . . 237,431 444,623 23,274 (528,125) 177,203
--------------- -------------- ------------- --------------- --------------
Total liabilities and stockholders' equity. $ 1,197,132 $ 1,547,748 $ 120,337 $ (1,464,890) $ 1,400,327
=============== ============== ============= =============== ==============
</TABLE>
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. CONSOLIDATING CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
(b)
Isle of Capri (a) Non-Wholly
Casinos, Inc. Wholly Owned Consolidating
Guarantor Owned Non- and Isle of Capri
(Parent Guarantor Guarantor Eliminating Casinos, Inc.
Obligor) Subsidiaries Subsidiaries Entries Consolidated
--------------- -------------- -------------- --------------- ---------------
Statement of Operations
-----------------------
For the three months ended October 29, 2000
(Unaudited)
Revenue:
Casino. . . . . . . . . . . . . . . . . $ - $ 204,456 $ 26,587 $ - $ 231,043
Rooms, food, beverage and other . . . . 440 17,905 2,130 - 20,475
--------------- -------------- -------------- --------------- ---------------
Total revenue. . . . . . . . . . . . . . . . 440 222,361 28,717 - 251,518
Operating expenses:
Casino. . . . . . . . . . . . . . . . . - 41,055 3,751 - 44,806
Gaming taxes. . . . . . . . . . . . . . - 41,042 5,256 - 46,298
Rooms, food, beverage and other . . . . 4,415 87,327 11,039 - 102,781
Management fee expense (revenue). . . . (5,636) 4,488 1,148 - -
Depreciation and amortization . . . . . 79 15,017 801 - 15,897
--------------- -------------- -------------- --------------- ---------------
Total operating expenses . . . . . . . . . . (1,142) 188,929 21,995 - 209,782
--------------- -------------- -------------- --------------- ---------------
Operating income . . . . . . . . . . . . . . 1,582 33,432 6,722 - 41,736
Gain on sale of assets . . . . . . . . . . . - 271 - - 271
Interest expense, net. . . . . . . . . . . . 383 (20,410) (3,105) - (23,132)
Minority interest. . . . . . . . . . . . . . - - - (1,555) (1,555)
Equity in income (loss) of
unconsolidated joint venture. . . . . . 15,239 15,542 - (30,890) (109)
--------------- -------------- -------------- --------------- ---------------
Income before income taxes . . . . . . . . . 17,204 28,835 3,617 (32,445) 17,211
Income tax provision . . . . . . . . . . . . 7,575 - - - 7,575
--------------- -------------- -------------- --------------- ---------------
Net income . . . . . . . . . . . . . . . . . $ 9,629 $ 28,835 $ 3,617 $ (32,445) $ 9,636
=============== ============== ============== =============== ===============
Statement of Operations
------------------------
For the six months ended October 29, 2000
(Unaudited)
Revenue:
Casino. . . . . . . . . . . . . . . . . $ - $ 410,335 $ 51,043 $ - $ 461,378
Rooms, food, beverage and other . . . . 475 37,775 3,352 - 41,602
--------------- -------------- -------------- --------------- ---------------
Total revenue. . . . . . . . . . . . . . . . 475 448,110 54,395 - 502,980
Operating expenses:
Casino. . . . . . . . . . . . . . . . . - 81,833 7,322 - 89,155
Gaming taxes. . . . . . . . . . . . . . - 81,551 10,060 - 91,611
Rooms, food, beverage and other . . . . 8,730 177,057 21,150 - 206,937
Management fee expense (revenue). . . . (10,953) 8,786 2,167 - -
Depreciation and amortization . . . . . 574 29,169 1,375 - 31,118
--------------- -------------- -------------- --------------- ---------------
Total operating expenses . . . . . . . . . . (1,649) 378,396 42,074 - 418,821
--------------- -------------- -------------- --------------- ---------------
Operating income . . . . . . . . . . . . . . 2,124 69,714 12,321 - 84,159
Gain on sale of assets . . . . . . . . . . . - 271 - - 271
Interest expense, net. . . . . . . . . . . . 1,579 (40,261) (5,442) - (44,124)
Minority interest. . . . . . . . . . . . . . - - - (2,959) (2,959)
Equity in income (loss) of
unconsolidated joint venture. . . . . . 33,531 29,642 - (63,282) (109)
--------------- -------------- -------------- --------------- ---------------
Income before income taxes . . . . . . . . . 37,234 59,366 6,879 (66,241) 37,238
Income tax provision . . . . . . . . . . . . 17,033 - - - 17,033
--------------- -------------- -------------- --------------- ---------------
Net income . . . . . . . . . . . . . . . . . $ 20,201 $ 59,366 $ 6,879 $ (66,241) $ 20,205
=============== ============== ============== =============== ===============
</TABLE>
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. CONSOLIDATING CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
(b)
Isle of Capri (a) Non-Wholly
Casinos, Inc. Wholly Owned Consolidating
Guarantor Owned Non- and Isle of Capri
(Parent Guarantor Guarantor Eliminating Casinos, Inc.
Obligor) Subsidiaries Subsidiaries Entries Consolidated
--------------- -------------- -------------- --------------- ---------------
Statement of Cash Flows
-----------------------
For the six months ended October 29, 2000
(Unaudited)
Net cash provided by (used in)
operating activities. . . . . . . . . . $ (13,275) $ 88,545 $ 11,710 $ (42,278) $ 44,702
Net cash provided by (used in)
investing activities. . . . . . . . . . (118,179) (70,083) (6,989) 42,278 $ (152,973)
Net cash used in financing activities. . . . 55,703 (2,752) (409) - $ 52,542
--------------- -------------- -------------- --------------- ---------------
Net increase (decrease) in cash and
cash equivalents. . . . . . . . . . . . (75,751) 15,710 4,312 - (55,729)
Cash and cash equivalents at
beginning of the period . . . . . . . . 78,945 82,514 6,513 - 167,972
--------------- -------------- -------------- --------------- ---------------
Cash and cash equivalents at
end of the period . . . . . . . . . . . $ 3,194 $ 98,224 $ 10,825 $ - $ 112,243
=============== ============== ============== =============== ===============
Statement of Operations
------------------------
For the three months ended October 24, 1999
(Unaudited)
Revenue:
Casino. . . . . . . . . . . . . . . . . $ - $ 120,828 $ 20,651 $ - $ 141,479
Rooms, food, beverage and other . . . . 308 12,039 1,169 - 13,516
--------------- -------------- -------------- --------------- ---------------
Total revenue. . . . . . . . . . . . . . . . 308 132,867 21,820 - 154,995
Operating expenses:
Casino. . . . . . . . . . . . . . . . . - 24,411 2,837 - 27,248
Gaming taxes. . . . . . . . . . . . . . - 23,860 3,992 - 27,852
Rooms, food, beverage and other . . . . 1,747 55,154 10,155 - 67,056
Depreciation and amortization . . . . . 245 8,342 482 - 9,069
--------------- -------------- -------------- --------------- ---------------
Total operating expenses . . . . . . . . . . 1,992 111,767 17,466 - 131,225
--------------- -------------- -------------- --------------- ---------------
Operating income . . . . . . . . . . . . . . (1,684) 21,100 4,354 - 23,770
Interest expense, net. . . . . . . . . . . . (1,383) (8,511) (2,726) - (12,620)
Minority interest. . . . . . . . . . . . . . - - - (701) (701)
Equity in income (loss) of
unconsolidated joint venture. . . . . . 14,097 9,549 - (23,061) 585
--------------- -------------- -------------- --------------- ---------------
Income before income taxes . . . . . . . . . 11,030 22,138 1,628 (23,762) 11,034
Income tax provision . . . . . . . . . . . . 4,402 - - - 4,402
--------------- -------------- -------------- --------------- ---------------
Net income . . . . . . . . . . . . . . . . . $ 6,628 $ 22,138 $ 1,628 $ (23,762) $ 6,632
=============== ============== ============== =============== ===============
</TABLE>
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. CONSOLIDATING CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
(b)
Isle of Capri (a) Non-Wholly
Casinos, Inc. Wholly Owned Consolidating
Guarantor Owned Non- and Isle of Capri
(Parent Guarantor Guarantor Eliminating Casinos, Inc.
Obligor) Subsidiaries Subsidiaries Entries Consolidated
--------------- -------------- -------------- --------------- ---------------
Statement of Operations
-----------------------
For the six months ended October 24, 1999
(Unaudited)
Revenue:
Casino. . . . . . . . . . . . . . . . $ - $ 230,128 $ 39,685 $ - $ 269,813
Rooms, food, beverage and other . . . 377 24,648 2,364 - 27,389
--------------- -------------- -------------- --------------- ---------------
Total revenue. . . . . . . . . . . . . . . 377 254,776 42,049 - 297,202
Operating expenses:
Casino. . . . . . . . . . . . . . . . - 44,580 5,624 - 50,204
Gaming taxes. . . . . . . . . . . . . - 45,945 7,803 - 53,748
Rooms, food, beverage and other . . . 3,199 107,845 19,522 - 130,566
Depreciation and amortization . . . . 475 16,460 990 - 17,925
--------------- -------------- -------------- --------------- ---------------
Total operating expenses . . . . . . . . . 3,674 214,830 33,939 - 252,443
--------------- -------------- -------------- --------------- ---------------
Operating income . . . . . . . . . . . . . (3,297) 39,946 8,110 - 44,759
Gain on sale of assets . . . . . . . . . . 3,106 - - - 3,106
Interest expense, net. . . . . . . . . . . (1,594) (17,087) (5,341) - (24,022)
Minority interest. . . . . . . . . . . . . - - - (1,191) (1,191)
Equity in income (loss) of
unconsolidated joint venture. . . . . 25,071 17,481 - (41,915) 637
--------------- -------------- -------------- --------------- ---------------
Income before income taxes . . . . . . . . 23,286 40,340 2,769 (43,106) 23,289
Income tax provision . . . . . . . . . . . 10,129 - - - 10,129
--------------- -------------- -------------- --------------- ---------------
Net income . . . . . . . . . . . . . . . . $ 13,157 $ 40,340 $ 2,769 $ (43,106) $ 13,160
=============== ============== ============== =============== ===============
Statement of Cash Flows
-----------------------
For the six months ended October 24, 1999
(Unaudited)
Net cash provided by (used in)
operating activities. . . . . . . . . $ 19,004 $ 41,120 $ 7,572 $ (23,808) $ 43,888
Net cash provided by (used in)
investing activities. . . . . . . . . (21,477) (35,110) (3,190) 23,808 (35,969)
Net cash used in financing activities. . . (2,529) (1,300) (366) - (4,195)
--------------- -------------- -------------- --------------- ---------------
Net increase (decrease) in cash and
cash equivalents. . . . . . . . . . . (5,002) 4,710 4,016 - 3,724
Cash and cash equivalents at
beginning of the period . . . . . . . 35,826 38,374 10,917 - 85,117
--------------- -------------- -------------- --------------- ---------------
Cash and cash equivalents at
end of the period . . . . . . . . . . $ 30,824 $ 43,084 $ 14,933 $ - $ 88,841
=============== ============== ============== =============== ===============
</TABLE>
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. CONSOLIDATING CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
(b)
Isle of Capri (a) Non-Wholly
Casinos, Inc. Wholly Owned Consolidating
Guarantor Owned Non- and Isle of Capri
(Parent Guarantor Guarantor Eliminating Casinos, Inc.
Obligor) Subsidiaries Subsidiaries Entries Consolidated
--------------- -------------- -------------- --------------- ---------------
Balance Sheet
-------------
As of April 30, 2000
Current assets. . . . . . . . . . . . . . . $ 130,939 $ 99,785 $ 7,609 $ - $ 238,333
Intercompany receivables. . . . . . . . . . 584,189 238,811 4 (823,004) -
Investments in subsidiaries . . . . . . . . 371,070 - - (369,156) 1,914
Property and equipment, net . . . . . . . . 5,229 595,306 98,711 - 699,246
Other assets. . . . . . . . . . . . . . . . 46,724 315,729 3,568 - 366,021
--------------- -------------- -------------- --------------- ---------------
Total assets. . . . . . . . . . . . . . . . $ 1,138,151 $ 1,249,631 $ 109,892 $ (1,192,160) $ 1,305,514
=============== ============== ============== =============== ===============
Current liabilities . . . . . . . . . . . . $ 44,474 $ 103,698 $ 13,769 $ - $ 161,941
Intercompany payable. . . . . . . . . . . . 23,904 794,475 4,731 (823,015) 95
Long-term debt, less current maturities . . 854,973 15,528 75,000 - 945,501
Deferred income taxes . . . . . . . . . . . (14,801) 40,564 - - 25,763
Other accrued liabilities . . . . . . . . . - 8,851 - - 8,851
Minority interest . . . . . . . . . . . . . - - - 7,843 7,843
Stockholders' equity. . . . . . . . . . . . 229,601 286,515 16,392 (376,988) 155,520
--------------- -------------- -------------- --------------- ---------------
Total liabilities and stockholders' equity. $ 1,138,151 $ 1,249,631 $ 109,892 $ (1,192,160) $ 1,305,514
=============== ============== ============== =============== ===============
</TABLE>
(a) Certain of the Company's wholly-owned subsidiaries were guarantors on
the 8 3/4 % Senior Subordinated Notes, including the following: Isle-Biloxi,
Isle-Vicksburg, Isle-Tunica, Isle-Bossier City, Isle-Lake Charles and PPI, Inc.
Isle-Natchez, Isle-Lula, Isle-Bettendorf, and Isle-Marquette became guarantors
as of March 2, 2000, the date of the acquisition. Isle-Boonville, Isle-Kansas
City, Lady Luck Las Vegas and Isle-Davenport became guarantors as of the date
of respective acquisition (see note 7).
(b) The following non-wholly-owned subsidiaries were not guarantors on the 8
3/4 % Senior Subordinated Notes: Isle of Capri Black Hawk L.L.C. and Isle of
Capri Black Hawk Capital Corp.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
You should read the following discussion together with the financial
statements, including the related notes and the other financial information 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 effects of regulatory and legislative matters, the Company's plans
to make capital investments at its facilities, including, without limitation,
considerations to obtain approvals for a new project in the St. Louis
metropolitan area, development of a casino as the Isle-Boonville in Boonville,
Missouri, and the expansion of amenities at all facilities, including the
conversion of the recently acquired Lady Luck Gaming facilities, and the
Isle-Kansas City, into Isle of Capri Casinos and development of the new brand
for the Rhythm City-Davenport are forward looking statements. Although the
Company believes that the expectations 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 or labor, and
unforeseen delays resulting from a failure to obtain necessary approvals.
GENERAL
Isle of Capri's results of operations for the six fiscal months ended
October 29, 2000 reflect the consolidated operations of all of Isle of Capri's
subsidiaries, including the Isle-Biloxi, the Isle-Vicksburg, the Isle-Bossier
City, the Isle-Lake Charles, the Isle-Black Hawk, the Isle-Tunica, the
Isle-Natchez, the Isle-Lula, the Isle-Bettendorf, and the Isle-Marquette.
Results also include the Isle-Kansas City subsequent to its purchase on June 6,
2000, Lady Luck Las Vegas subsequent to its purchase on September 12, 2000 and
Rhythm City - Davenport subsequent to its purchase on October 10, 2000.
Isle of Capri's results of operations for the six fiscal months ended
October 24, 1999 reflect the consolidated operations of all of Isle of Capri's
subsidiaries owned at that time, including the Isle-Lake Charles, the
Isle-Bossier City, the Isle-Biloxi, the Isle-Vicksburg, the Isle-Tunica that
opened July 26, 1999 and the Isle-Black Hawk. The Rhythm City-Davenport
property was purchased on October 10, 2000, the Lady Luck Las Vegas Casino
property was purchased on September 12, 2000, the Isle-Kansas City was purchased
on June 6, 2000 and the Natchez, Lula, Bettendorf, and Marquette properties were
purchased along with other related assets on March 2, 2000 and are not included
in the consolidated results for the six fiscal months ended October 24, 1999.
Isle of Capri believes that its historical results of operations may not be
indicative of its future results of operations because of the substantial
present and expected future increase in competition for gaming customers in each
of Isle of Capri's markets, as new casinos open and existing casinos add to or
enhance their facilities.
Isle of Capri also believes that its operating results are affected by
seasonality. Seasonality has historically caused the operating results for Isle
of Capri's first and fourth fiscal quarters ending in July and April,
respectively, to be notably better than the operating results for the second and
third fiscal quarters ending October and January, respectively.
RESULTS OF OPERATIONS
Three Fiscal Months Ended October 29, 2000 Compared to Three Fiscal Months Ended
October 24, 1999
Total revenue for the quarter ended October 29, 2000 was $251.5 million,
which included $231.0 million of casino revenue, $6.2 million of rooms revenue,
$3.2 million of pari-mutuel commissions and $11.1 million of food, beverage and
other revenue. This compares to total revenue for the prior year quarter ended
October 24, 1999 of $155.0 million, which included $141.5 million of casino
revenue, $2.8 million of rooms revenue, $3.6 million of pari-mutuel commissions
and $7.1 million of food, beverage and other revenue. Casino revenue increased
$89.6 million or 63.3% primarily as a result of a full quarter of operations of
the former Lady Luck properties and the Isle-Kansas City, the inclusion of
approximately two months of operating results from the acquisition of Lady Luck
Las Vegas, the inclusion of approximately one month of operating results from
the acquisition of the Rhythm City-Davenport. Casino revenue also increased due
to improvements made at Isle-Black Hawk through the opening of a new hotel at
that property. Room revenue increased $3.4 million or 119.4% due to a full
quarter of operations of the former Lady Luck properties, the Isle-Black Hawk
hotel that opened in August, 2000, the inclusion of approximately two months of
room revenue from the acquisition of Lady Luck Las Vegas and the inclusion of
approximately one month of room revenue from the acquisition of Isle-Davenport.
Food, beverage and other revenue increased by $4.0 million or 57.2% as a result
of a full quarter of operations of the former Lady Luck properties and the
Isle-Kansas City, the inclusion of approximately two months of operating results
from the acquisition of Lady Luck Las Vegas, and the inclusion of approximately
one month of operating results from the acquisition of Rhythm City-Davenport.
Revenue does not reflect the retail value of any complimentaries.
<PAGE>
Casino operating expenses for the quarter ended October 29, 2000 totaled
$44.8 million, or 19.4% of casino revenue, versus $27.2 million, or 19.3% of
casino revenue, for the quarter ended October 24, 1999. These expenses are
primarily comprised of salaries, wages and benefits and other operating expenses
of the casinos. The increase in casino operating expenses is attributable to
the additional properties as well as improved casino revenue at the original
five Isle of Capri properties.
Operating expenses for the quarter ended October 29, 2000 also included
room expenses of $2.8 million or 45.5% of room revenue from the hotels at the
Isle-Lake Charles, Isle-Bossier City, Isle-Biloxi, Isle-Vicksburg, Isle-Natchez,
Isle-Lula, Isle-Bettendorf, Isle-Marquette, Isle-Black Hawk, Lady Luck Las Vegas
and Isle-Davenport compared to $1.3 million or 46.9% of room revenue for the
quarter ended October 24, 1999 from the hotels at the Isle-Lake Charles,
Isle-Bossier City, Isle-Biloxi, and the Isle-Vicksburg. These expenses directly
relate 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.
For the quarter ended October 29, 2000, state and local gaming taxes were
paid in Louisiana, Mississippi, Colorado, Iowa, Missouri and Nevada totaling
$46.3 million, compared to $27.9 million for the quarter ended October 24, 1999,
which is consistent with each state's gaming tax rate for the applicable fiscal
quarters. For the quarter ended October 24, 1999, state and local gaming taxes
were paid in Louisiana, Mississippi and Colorado.
Food, beverage and other expenses totaled $7.6 million for the quarter
ended October 29, 2000, compared to $4.2 million for the quarter ended October
24, 1999. These expenses consist primarily of the cost of goods sold, salaries,
wages and benefits and operating expenses of these departments. These expenses
have increased as a result of the expansion in the number of properties operated
by the Isle and continued expansion of the original Isle facilities. Food and
beverage and other operating expenses as a percentage of food, beverage and
other revenues increased from 59.9% for the quarter ending October 24, 1999 to
68.1% for the quarter ended October 29, 2000. This was attributable to the
inclusion of two months of Lady Luck-Las Vegas operating in the downtown Las
Vegas market, whose food and beverage expense is significantly higher than other
Isle properties. The increase was also due to the start up costs related to the
opening of food and beverage outlets related to the opening of two new hotels in
Isle-Tunica and Isle-Black Hawk and the newly acquired outlets at Isle-Kansas
City that have not been converted to Isle standards.
Marine and facilities expenses totaled $14.7 million for the quarter ended
October 29, 2000, versus $9.6 million for the quarter ended October 24, 1999.
These expenses include salaries, wages and benefits, operating expenses of the
marine crews, insurance, housekeeping and general maintenance of the riverboats
and floating pavilions. These expenses have increased as a result of the
expansion in the number of properties operated by the Isle and the maturity of
Isle of Capri's vessels and facilities.
Marketing and administrative expenses totaled $75.3 million, or 29.9% of
total revenue, for the quarter ended October 29, 2000, versus $49.1 million, or
31.7% of total revenue, for the quarter ended October 24, 1999. Marketing
expenses include salaries, wages and benefits of the marketing and sales
departments, as well as promotions, advertising, special events and
entertainment. Administrative expenses include administration and human
resource department expenses, rent, new development activities, professional
fees and property taxes. Marketing and administrative expenses have increased as
a result of the expansion in the number of properties operated by the Isle and
continued expansion of Isle facilities.
<PAGE>
Depreciation and amortization expense was $15.9 million for the quarter
ended October 29, 2000 and $9.1 million for the quarter ended October 24, 1999.
These expenses relate to property and equipment, berthing and concession rights
and the amortization of intangible assets. The increase in depreciation and
amortization expense is consistent with the increase in fixed assets placed into
service or acquired.
Interest expense was $23.9 million for the quarter ended October 29, 2000,
net of capitalized interest of $1.7 million versus $13.5 million for the quarter
ended October 24, 1999, net of capitalized interest of $0.2 million. Interest
expense primarily relates to indebtedness incurred in connection with the
acquisition of property, equipment, leasehold improvements and berthing and
concession rights. Additionally, interest expense of $3.2 million related to
Isle-Black Hawk is included in the quarter ended October 29, 2000. This
compares to interest expense of $2.9 million, net of capitalized interest of
$0.1 million, for the quarter ended October 24, 1999.
Isle of Capri's effective tax rate was 44.0% prior to extraordinary items
for the quarter ended October 29, 2000 and 39.9% for the quarter ended October
24, 1999, and includes the effects of non-deductible goodwill amortization
for income tax purposes.
Six Fiscal Months Ended October 29, 2000 Compared to Six Fiscal Months Ended
October 24, 1999
Total revenue for the six months ended October 29, 2000 was $503.0 million,
which included $461.4 million of casino revenue, $11.0 million of rooms revenue,
$8.1 million of pari-mutuel commissions and $22.5 million of food, beverage and
other revenue. This compares to total revenue for the prior year six months
ended October 24, 1999 of $297.2 million, which included $269.8 million of
casino revenue, $5.4 million of rooms revenue, $8.4 million of pari-mutuel
commissions and $13.6 million of food, beverage and other revenue. Casino
revenue increased $191.6 million or 71.0% primarily as a result of a full six
months of operations of the former Lady Luck properties the inclusion of
approximately five months of operating results from the acquisition of the
Isle-Kansas City, the inclusion of approximately two months of operating results
from the acquisition of Lady Luck Las Vegas, the inclusion of approximately one
month of operating results from the acquisition of the Rhythm City-Davenport,
and the improvements at Isle-Black Hawk and Isle-Lake Charles. Room revenue
increased $5.6 million or 102.3% due to a full six months of operations of the
former Lady Luck properties and the Isle-Black Hawk hotel that opened in August
2000. Food, beverage and other revenue increased by $8.9 million or 65.6% as
a result of a full six months of operations of the former Lady Luck properties
the inclusion of approximately five months of operating results from the
acquisition of the Isle-Kansas City, the inclusion of approximately two months
of operating results from the acquisition of Lady Luck Las Vegas, and the
inclusion of approximately one month of operating results from the acquisition
of Rhythm City-Davenport. Revenue does not reflect the retail value of any
complimentaries.
Casino operating expenses for the six months ended October 29, 2000 totaled
$89.2 million, or 19.3% of casino revenue, versus $50.2 million, or 18.6% of
casino revenue, for the six months ended October 24, 1999. These expenses are
primarily comprised of salaries, wages and benefits and other operating expenses
of the casinos. The increase in casino operating expenses is attributable to
the additional properties as well as improved casino revenue at the original
five Isle of Capri properties.
Operating expenses for the six months ended October 29, 2000 also included
room expenses of $5.1 million or 46.2% of room revenue from the hotels at the
Isle-Lake Charles, Isle-Bossier City, Isle-Biloxi, Isle-Vicksburg, Isle-Natchez,
Isle-Lula, Isle-Bettendorf , Isle-Marquette and Isle-Black Hawk as compared to
$2.5 million or 45.0% of room revenue for the six months ended October 24, 1999
from the hotels at the Isle-Lake Charles, Isle-Bossier City, Isle-Biloxi, and
the Isle-Vicksburg. These expenses directly relate 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.
For the six months ended October 29, 2000, state and local gaming taxes
were paid in Louisiana, Mississippi, Colorado, Iowa, Missouri and Nevada
totaling $91.6 million, compared to $53.7 million for the six months ended
October 24, 1999, which is consistent with each state's gaming tax rate for the
applicable fiscal quarters. For the six months ended October 24, 1999, state
and local gaming taxes were paid in Louisiana, Mississippi and Colorado.
<PAGE>
Food, beverage and other expenses totaled $14.6 million for the six months
ended October 29, 2000, compared to $8.3 million for the six months ended
October 24, 1999. These expenses consist primarily of the cost of goods sold,
salaries, wages and benefits and operating expenses of these departments. These
expenses have increased as a result of the expansion in the number of properties
operated by the Isle and continued expansion of the original Isle facilities.
Food and beverage and other operating expenses as a percentage of food, beverage
and other revenues increased from 61.1% for the six months ending October 24,
1999 to 65.1% for the six months ended October 29, 2000. This was attributable
to the inclusion for two months of Lady Luck-Las Vegas operating in the downtown
Las Vegas market, whose food and beverage expense is significantly higher than
other Isle properties. The increase was also due to the start up costs related
to the opening of food and beverage outlets related to the opening of
Isle-Tunica and Isle-Black Hawk and the newly acquired outlets at Isle-Kansas
City that have not been converted to Isle standards.
Marine and facilities expenses totaled $29.2 million for the six months
ended October 29, 2000, versus $18.5 million for the six months ended October
24, 1999. These expenses include salaries, wages and benefits, operating
expenses of the marine crews, insurance, housekeeping and general maintenance of
the riverboats and floating pavilions. These expenses have increased as a
result of the expansion in the number of properties operated by the Isle and the
maturity of Isle of Capri's vessels and facilities.
Marketing and administrative expenses totaled $152.0 million, or 30.2% of
total revenue, for the six months ended October 29, 2000, versus $91.4 million,
or 30.7% of total revenue, for the six months ended October 24, 1999. Marketing
expenses include salaries, wages and benefits of the marketing and sales
departments, as well as promotions, advertising, special events and
entertainment. Administrative expenses include administration and human
resource department expenses, rent, new development activities, professional
fees and property taxes. Marketing and administrative expenses have increased as
a result of the expansion in the number of properties operated by the Isle and
continued expansion of Isle facilities.
Pre-opening expenses of $3.4 million for the six months ended October 24,
1999 represent salaries, benefits, training, marketing and other
non-capitalizable costs, which were expensed in connection with the Isle-Tunica,
which opened on July 26, 1999.
Isle of Capri's results of operations for the six months ended October 29,
2000 included a gain on disposal of $0.3 million as compared to $3.1 million for
the six months ended October 24, 1999. Both gains related to the sale of an
option to purchase 135 acres of land adjacent to the Pompano Park, Inc.
facility.
Depreciation and amortization expense was $31.1 million for the six months
ended October 29, 2000 and $17.9 million for the six months ended October 24,
1999. These expenses relate to property and equipment, berthing and concession
rights and the amortization of intangible assets. The increase in depreciation
and amortization expense is consistent with the increase in fixed assets placed
into service or acquired.
Interest expense was $47.3 million for the six months ended October 29,
2000, net of capitalized interest of $3.0 million versus $25.6 million for the
six months ended October 24, 1999, net of capitalized interest of $1.1 million.
Interest expense primarily relates to indebtedness incurred in connection with
the acquisition of property, equipment, leasehold improvements and berthing and
concession rights. Additionally, interest expense of $5.5 million related to
Isle-Black Hawk is included in the six months ended October 29, 2000, net of
capitalized interest of $0.7 million. This compares to interest expense of $5.6
million, net of capitalized interest of $0.4 million, for the six months ended
October 24, 1999.
Isle of Capri's effective tax rate was 45.7% prior to extraordinary items
for the six months ended October 29, 2000 and 43.5% for the six months ended
October 24, 1999, and includes the effects of non-deductible goodwill
amortization for income tax purposes.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At October 29, 2000, Isle of Capri had cash and cash equivalents of $112.2
million compared to $168.0 million in cash and cash equivalents and $39.0
million in short term investments at April 30, 2000. The decrease in cash is
primarily the net result of cash inflow from operations and cash outflow for the
acquisitions of Isle-Kansas City, Lady Luck Las Vegas and Rhythm City -
Davenport, development of the Isle-Boonville, construction of hotels at
Isle-Black Hawk, Isle-Lake Charles and Isle-Tunica and the conversion of the
former Lady Luck properties into Isle of Capri properties. During the six
months ended October 29, 2000, Isle of Capri's operating activities provided
$44.7 million of cash, compared to $43.9 million of cash provided by operating
activities in the six months ended October 24, 1999.
On May 3, 2000, Isle of Capri acquired Isle-Boonville, which has
preliminary approval to develop a gaming facility in Boonville, Missouri. Isle
of Capri is developing a casino project with a total expected investment of
approximately $75.0 million that includes total purchase price of $11.5 million.
Isle of Capri began construction on this project and is funding this development
through its Amended and Restated Senior Credit Facility. The Company expects to
complete the project in the fall of 2001.
Additionally, on June 6, 2000, Isle of Capri acquired Isle-Kansas City for
$33.5 million cash less certain assumed liabilities. Isle of Capri anticipates
investing up to an additional $15.0 million in this project, primarily to
re-theme the casino into an Isle of Capri Casino. Isle of Capri funded the
acquisition and is funding the re-theming through its Amended and Restated
Senior Credit Facility.
Isle of Capri anticipates that a significant portion of its principal
near-term capital requirements will relate to the construction of the
Isle-Boonville. Isle of Capri plans to invest approximately $75 million.
The Missouri Gaming Commission has selected the Isle of Capri's Jefferson
County, Missouri project for development. This project will primarily serve the
South St. Louis metropolitan area. Isle expects to begin construction in 2001
and to complete the project eighteen to twenty-four months thereafter. Isle of
Capri expects to invest approximately $105 million in the project. A town
located near the site of the Company's proposed development has indicated that
it intends to condemn and/or annex Isle of Capri's site in order to prevent
development of the project. Isle of Capri intends to vigorously oppose these
efforts; however, development of the project could be delayed.
Isle of Capri completed the acquisition of the Las Vegas casino and hotel
on September 12, 2000. The acquisition price for the Las Vegas facility was
$14.5 million. Isle of Capri funded the acquisition through its Amended and
Restated Senior Credit Facility.
A joint venture in which Isle of Capri owns a 45% interest has applied to
the Louisiana Gaming Control Board for the issuance of a gaming license in
Morgan City, Louisiana. A decision is expected from the Louisiana Gaming
Control Board during the first quarter of 2001.
On October 10, 2000, the Company purchased the Rhythm City-Davenport from a
subsidiary of President Casinos, Inc., for $58.2 million. Isle of Capri
anticipates investing up to an additional $23.0 million in this project,
primarily to replace the existing boat and re-theme the casino into a Rhythm
City Casino. Isle of Capri funded the acquisition and intends to fund the
re-theming through its Amended and Restated Senior Credit Facility.
All of Isle of Capri's development plans are subject to obtaining permits,
licenses and approvals from appropriate regulatory and other agencies and, in
certain circumstances, negotiating acceptable leases. In addition, many of the
plans are preliminary, subject to continuing refinement or otherwise subject to
change.
Of the estimated $35.0 million Isle of Capri plans on investing to convert
the Lady Luck casinos into Isle of Capri Casinos, we have spent $14.8 million
for the six months ended October 29, 2000.
Isle of Capri anticipates that capital improvements approximating $28.1
million will be made during fiscal 2001 to maintain its existing facilities and
remain competitive in its markets. As of the six months ended October 29, 2000,
Isle of Capri has spent $13.5 million on maintenance capital improvements.
<PAGE>
Isle of Capri expects that available cash and cash from future operations,
as well as borrowings under its Amended and Restated Senior Credit Facility,
will be sufficient to fund future expansion, planned capital expenditures,
service debt and meet working capital requirements. There is no assurance that
Isle of Capri will have the capital resources to make all of the expenditures
described above or that planned capital investments will be sufficient to allow
Isle of Capri to remain competitive in its existing markets. In addition, the
indenture restricts, among other things, Isle of Capri's ability to borrow
money, create liens, make restricted payments and sell assets.
Isle of Capri's Amended and Restated Senior Credit Facility, among other
things, restricts Isle of Capri's ability to borrow money, make capital
expenditures, use assets as security in other transactions, make restricted
payments or restricted investments, incur contingent obligations, sell assets
and enter into leases and transactions with affiliates. In addition, the Amended
and Restated Senior Credit Facility requires Isle of Capri to meet certain
financial ratios and tests, including: a minimum consolidated net worth test, a
maximum consolidated total leverage test, a maximum consolidated senior leverage
test, and a minimum consolidated fixed charge coverage test.
Isle of Capri must repay all amounts borrowed under its Amended and
Restated Senior Credit Facility by March 2007. Isle of Capri is required to
make quarterly principal payments on the $475.0 million term loan portion of its
Amended and Restated Senior Credit Facility that began in March 2000. Such
payments are initially $3.4 million per quarter and will increase by $1.25
million per quarter in July of each year that the term loan is outstanding. In
addition, Isle of Capri will be required to make substantial quarterly interest
payments on the outstanding balance of its Amended and Restated Senior Credit
Facility and interest payments of $17.1 million semi-annually on its Senior
Subordinated Notes.
Isle of Capri is highly leveraged and may be unable to obtain additional
debt or equity financing on acceptable terms. As a result, limitations on Isle
of Capri's capital resources could delay or cause Isle of Capri to abandon
certain plans for capital improvements at its existing properties and
development of new properties. Isle of Capri will continue to evaluate its
planned capital expenditures at each of its existing locations in light of the
operating performance of the facilities at such locations.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
One of our subsidiaries has been named, along with numerous manufacturers,
distributors and gaming operators, including many of the country's largest
gaming operators, in a consolidated class action lawsuit pending in Las Vegas,
Nevada. These gaming industry defendants are alleged to have 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 and the extent to which there is actually an opportunity to win on any
given play. The suit seeks unspecified compensatory and punitive damages. A
motion for certification of the class is currently pending before the court and
no discovery as to the merits of the alleged claims has begun. We are unable at
this time to determine what effect, if any, the suit would have on our financial
position or results of operations. However, the gaming industry defendants are
committed to defend vigorously all claims asserted in the consolidated action.
In May 1998, we were named as a defendant in an action brought by several
persons who had a contractual right to acquire property in Cripple Creek,
Colorado which they sold to one of our subsidiaries in 1995. The plaintiffs
allege that we breached our purported agreement to construct a casino facility
on the property by the end of 1995. In December 1998, our motion to dismiss the
complaint was granted by the United States District Court in Denver, Colorado
and was affirmed in November 2000 by the Tenth Circuit Court of Appeals. The
plaintiffs have now requested a panel hearing before the Tenth Circuit Court of
Appeals. We intend to vigorously defend all claims and allegations in the
action.
In August 1997, a lawsuit was filed which seeks to nullify a contract to
which Louisiana Riverboat Gaming Partnership is a party. Pursuant to the
contract, Louisiana Riverboat Gaming Partnership pays a fixed amount plus a
percentage of revenue to various local governmental entities, including the City
of Bossier and the Bossier Parish School Board, in lieu of payment of a
per-passenger boarding fee. Summary judgment in favor of Louisiana Riverboat
Gaming Partnership was granted on June 4, 1998. That judgment was not appealed
and is now final. On June 11, 1998, a similar suit was filed and judgment was
rendered in our favor on September 16, 1999 by the lower court. The case has
been reversed on appeal and remanded to the lower court for further proceedings.
We intend to vigorously defend this suit.
Lady Luck has been named as a defendant in a purported shareholder class
action lawsuit alleging violations by Lady Luck of the Securities Act of 1933,
as amended (the "Securities Act") and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), for alleged material misrepresentations and
omissions in connection with Lady Luck's 1993 prospectus and initial public
offering of Common Stock. The complaint seeks, among other things, injunctive
relief, rescission and unspecified compensatory damages. While the outcome of
this matter cannot presently be determined, we intend to vigorously defend the
claims asserted in this action.
Lady Luck and particular joint venture partners are defendants in a lawsuit
brought by the country of Greece and its Minister of Tourism before the Greek
Multi-Member Court of First Instance. The action alleges that the defendants
failed to make specified payments in connection with the gaming license bid
process for Patras, Greece. Although it is difficult to determine the damages
being sought from the lawsuit, the case has been briefed and a preliminary
decision is expected early summer 2001. The outcome of the case cannot be
predicted with any degree of certainty; however, we intend to vigorously defend
the claims asserted in this action.
Isle of Capri is currently involved in an arbitration proceeding concerning
the amount of payments owed to a party which had an interest in property owned
by the company located in Lula, Mississippi. The claimant is seeking payments
based upon gross revenue from our Lula, Mississippi facility. We dispute this
claim and believe that our responsibility is limited to payments which are fixed
in amount. We intend to vigorously defend the claim asserted in this
proceeding.
We are engaged in various other litigation matters and have a number of
unresolved claims. Although the ultimate liability of this litigation and these
claims cannot be determined at this time, we believe that they will not have a
material adverse effect on our consolidated financial position or results of
operations.
<PAGE>
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Stockholders was held September 15, 2000 at which
time the following matters were submitted to a vote of the stockholders:
(1) To elect seven persons to the Company's Board of Directors;
(2) To approve the Company's 2000 Long-Term Stock Incentive Plan;
(3) To approve the Company's Deferred Bonus Plan; and
(4) To approve the Company's selection of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending April 29, 2001.
At the Annual Meeting of Stockholders, each of the following
individuals were elected to serve as directors of the Company until his
successor is elected and qualified or until his earlier death, resignation,
removal or disqualification:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name For Withhold Against
------------------- ---------- -------- -------
Bernard Goldstein . 28,008,559 546,656 -
John M. Gallaway. . 28,178,356 376,859 -
Allan B. Solomon. . 28,177,360 377,855 -
Robert S. Goldstein 28,110,622 444,593 -
Allan J. Glazer . . 28,164,790 390,425 -
Emanuel Crystal . . 28,175,896 379,319 -
Randolph Baker. . . 28,177,468 377,747 -
</TABLE>
The voting on the other matters as ordered at the Annual Meeting of
Stockholders was as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Matter For Withhold Against
----------------------------------- ---------- -------- ---------
2000 Long Term Stock Incentive Plan 24,282,929 12,322 4,259,964
Deferred Bonus Plan . . . . . . . . 27,852,882 9,797 692,536
Selection of Ernst & Young LLP. . . 28,545,642 5,288 4,285
</TABLE>
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
<S> <C> <C>
(a) Documents Filed as Part of this Report.
--------------------------------------------
1. Exhibits.
---------
A list of the exhibits included as part of this Form 10-Q is set forth in the Exhibit Index that
immediately proceeds such exhibits, which is incorporated herein by reference.
2. Reports on Form 8-K.
--------------------
During the quarter ended October 29, 2000, the Company filed the following reports on Form 8-K:
Current Report on Form 8-K filed on August 22, 2000, regarding Item 5 which announced the
Company's earnings for the first quarter ended July 30, 2000.
</TABLE>
<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 hereunto duly authorized.
ISLE OF CAPRI CASINOS, INC.
Dated: December 12, 2000 /s/ Rexford A. Yeisley
--------------------------
Rexford A. Yeisley, Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
------ -------
27 Financial Data Schedule.
