UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED APRIL 30, 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)
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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
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Securities Registered Pursuant to Section 12(b) Of The Act: None
Securities Registered Pursuant to Section 12(g) Of The Act:
Common Stock, $.01 Par Value Per Share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
--
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting and non-voting stock held by
non-affiliates1 of the Company is $269,021,585, based on the last reported sale
price of $14.56 per share on July 14, 2000 on the Nasdaq Stock Market;
multiplied by 18,472,951 shares of Common Stock outstanding and held by
non-affiliates of the Company on such date.
As of July 14, 2000, the Company had a total of 30,464,801 shares of Common
Stock outstanding.
1 Affiliates for the purpose of this item refer to the directors, executive
officers and/or persons owning 10% or more of the Company's common stock, both
of record and beneficially; however, this determination does not constitute an
admission of affiliate status for any of the individual stockholders.
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DOCUMENT INCORPORATED BY REFERENCE:
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Document Part of Form 10-K into which Incorporated
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Isle of Capri Casinos, Inc.'s Definitive Proxy Part III
Statement for its Annual Meeting of Stockholders
to be held September 15, 2000.
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PAGE
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PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
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ITEM 1. BUSINESS. . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. PROPERTIES. . . . . . . . . . . . . . . . . . . . . . 25
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . 27
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . 29
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDERS' MATTERS. . . . . . . . . . . . . 30
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . 31
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . 32
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK. . . . . . . . . . . . . . . 38
ITEM 8. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS. . . . . . 39
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . 73
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
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ITEM 10. DIRECTOR AND EXECUTIVE OFFICERS OF THE REGISTRANT. . 73
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . 73
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT. . . . . . . . . . . . . . . . . . 73
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . 73
PART IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K . . . . . . . . . . . . . . . . . 73
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
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PART I
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ITEM 1. BUSINESS.
OVERVIEW
We are a leading developer, owner and operator of branded gaming and
related lodging and entertainment facilities in growing markets in the United
States. We were incorporated in Delaware in February 1990 under the name Kana
Corporation. In 1992 our name was changed to Casino America, Inc. On September
28, 1998 our name was changed to Isle of Capri Casinos, Inc. We conduct our
business through subsidiaries, and our principal asset is the stock of those
subsidiaries, which in turn hold substantially all of the assets of our
businesses. Our principal executive offices are located at 1641 Popps Ferry
Road, Biloxi, MS 39532, and our telephone number is 228/396-7000.
On March 2, 2000, we merged with Lady Luck Gaming Corporation ("Lady
Luck"). Lady Luck wholly owned the Lady Luck Casino and Hotel facilities in
Lula, Mississippi, Natchez, Mississippi and Marquette, Iowa, and owned a 50%
interest in the Lady Luck Casino & Hotel in Bettendorf , Iowa (collectively, the
"Lady Luck properties"). In addition, on March 2, 2000 we acquired Bettendorf
Riverfront Development Corporation ("BRDC") which was owned by family members of
Bernard Goldstein, our chairman of the board and chief executive officer,
including Robert Goldstein, and which owned the remaining 50% interest in the
Lady Luck Casino & Hotel in Bettendorf, Iowa. The Lady Luck acquisition was
funded through our Senior Secured Credit Facility, which was amended and
restated in connection with the acquisition (the "Senior Secured Credit
Facility"). In connection with the BRDC acquisition, we issued 6.3 million
shares of common stock to BRDC's shareholders.
On June 6, 2000, we acquired the Kansas City Flamingo Casino (the
"Isle-Kansas City") from a subsidiary of Hilton Hotels Corporation. The
acquisition was funded through our Senior Secured Credit Facility.
As a result of the Lady Luck, BRDC and Isle-Kansas City acquisitions, we
now wholly own and operate 10 gaming facilities located in Lake Charles and
Bossier City, Louisiana, Biloxi, Vicksburg, Tunica, Natchez and Lula,
Mississippi, Bettendorf and Marquette, Iowa and Kansas City, Missouri. We also
own a 57% interest in and operate a gaming facility in Black Hawk, Colorado. The
gaming facilities in Lake Charles, Bossier City, Biloxi, Vicksburg, Tunica and
Black Hawk operate under the name "Isle of Capri" and feature our distinctive
tropical island theme. The former Lady Luck properties and the Isle-Kansas City
are being converted to "Isle of Capri" branded properties, and the Company
anticipates that the conversion of these properties will be completed by
December 2000. In addition, we wholly own and operate a pari-mutuel harness
racing facility in Pompano Beach, Florida and own a 50% interest in and operate
gaming activities aboard a cruise ship based in New Orleans, Louisiana.
We have entered into contracts to acquire the Lady Luck Casino and Hotel in
Las Vegas and the President Casino in Davenport, Iowa. Subject to receipt of
all required approvals, we expect to complete both transactions this fall. We
are also developing a casino in Boonville, Missouri which we expect to complete
in the fall of 2001. Also, the Missouri Gaming Commission has recently selected
our Jefferson County, Missouri project for development which we expect to
complete in the spring of 2002.
For the fiscal year ended April 30, 2000, we had total revenue of $684.9
million and EBITDA of $159.3 million.
STRATEGY
Our business strategy, which has been implemented in our existing
operations, emphasizes the standardized operation and development of
value-oriented gaming facilities and complementary amenities with a tropical
island theme using the "Isle of Capri Casino" brand name. We believe that the
consistent use of the Isle of Capri Casino name and associated theme has created
a readily identifiable brand image connoting excitement, quality and value,
complemented by an emphasis on customer service and non-gaming entertainment
amenities. We seek to identify slot-oriented customers and active casino
patrons through the use of database marketing and generate repeat visitors to
our gaming facilities. We believe that our strategy fosters customer loyalty,
enhances our ability to compete effectively in existing markets, and facilitates
the consistent, efficient and cost-effective development of gaming facilities in
new markets. We also believe that good community relations are fundamental to
our success and, as a result, we take an active role in community activities in
each jurisdiction in which we have gaming facilities.
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We have historically identified and entered new gaming markets which we
believe provide attractive long-term opportunities. We anticipate that most of
our near-term focus will be incorporating the "Isle of Capri" brand at the
former Lady Luck properties and the Isle-Kansas City property expanding existing
facilities and pursuing new development opportunities. We have recently added
hotels at the Isle-Bossier City and the Isle-Vicksburg in order to compete
effectively in our markets and provide customers with a complete resort
experience designed to increase a customer's length of stay at and use of our
facilities. We are currently constructing a hotel and two theaters at the Isle
- Tunica, a hotel at the Isle - Black Hawk and an additional hotel at the Isle -
Lake Charles. We are also considering the construction of additional lodging
facilities, casino improvements or other amenities at the Isle - Bossier City
and the Isle - Biloxi. We are currently developing a casino in Boonville,
Missouri and have been selected by the Missouri Gaming Commission to develop a
casino and hotel facility in Jefferson County, Missouri, which will primarily
serve the South St. Louis metropolitan area. We also expect to continue
reviewing gaming opportunities in new markets on the basis of demographic,
regulatory, competitive and other factors.
MARKETING
We attract customers to our casinos by designing and implementing marketing
and promotional programs that emphasize our Isle Style tropical island theme and
generate loyal customers. We have developed an extensive proprietary database of
primarily slot-oriented customers that allows us to create effective targeted
marketing and promotional programs, merchandise giveaways, game tournaments and
other special events, such as Capri Cruises. These programs are designed to
reward customer loyalty, attract new customers to our properties and maintain
high recognition of our ''Isle of Capri'' brand.
As of July 12, 2000, our database contained approximately 4.9 million
members, of whom approximately 1.3 million receive regular mailings. To develop
this database, we offer all of our customers membership in the Island Gold
Players Club, which allows them to earn points based on play and redeem these
points for casino cash tokens, prizes and complimentary services at any Isle of
Capri casino. Island Gold Players Club members receive a card that, when
inserted into a slot machine or presented at a gaming table at the issuing
facility, allows us to track their gaming preferences, maximum, minimum and
total amount wagered and frequency of visits. Players are classified in groups
according to these characteristics. Our database is used for direct mailings,
giveaways and other promotional events that are tailored to these specific
groups of players. We have effectively used our database to encourage repeat
visits, increase customers' length of stay and improve our operating results.
We place significant emphasis on attracting local residents and seek to
maintain a strong local identity in each market in which we operate by
initiating and supporting community and special events. We use radio and
television media to promote the ''Isle of Capri'' brand name and attract
customers to our properties. To further enhance Isle Style, we have engaged a
well-known actor to narrate our radio and television advertisements.
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CURRENT OPERATIONS
Here is an overview of our existing casino properties:
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ISLE ISLE ISLE ISLE ISLE ISLE
LAKE CHARLES BOSSIER CITY BILOXI VICKSBURG BLACK HAWK TUNICA
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DATE OPENED. . . . . . . . JUL-95 MAY-94 AUG-92 AUG-93 DEC-98 JUL-99
Casino square footage 48,900 20,000 32,500 27,000 43,000 28,000
Slot machines . . . . 1,836 1,079 1,212 793 1,145 891
Table games . . . . . 90 45 40 28 12 15
Hotel rooms . . . . . 241 539 367 124 237 -
Parking spaces. . . . 2,000 1,200 1,300 1,100 1,100 1,336
ISLE ISLE ISLE ISLE ISLE
NATCHEZ LULA BETTENDORF MARQUETTE KANSAS CITY
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DATE OPENED. . . . . . . . FEB-93 JUN-94 APR-95 DEC-94 OCT-96
Casino square footage 14,300 56,000 25,000 18,700 30,000
Slot machines . . . . 634 1,542 1,163 698 1,025
Table games . . . . . 16 41 44 36 46
Hotel rooms . . . . . 143 607 256 24 -
Parking spaces. . . . 645 2,085 500 590 2,054
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The Isle-Lake Charles
The Isle-Lake Charles, which commenced operations on July 29, 1995, is one
of two riverboat gaming facilities that operates two riverboats in the Lake
Charles, Louisiana market and one of three gaming facilities in southwest
Louisiana. Lake Charles is the closest gaming market to Houston, Texas, a
metropolitan area with a population of approximately 4.2 million that is located
approximately 140 miles west of Lake Charles.
The Isle-Lake Charles is located on a 19-acre site along the Calcasieu
River adjacent to Interstate 10 in Calcasieu Parish, one mile from the City of
Lake Charles. Our Crown riverboat has 24,700 square feet of gaming space with
892 slot machines and 41 table games on three levels. Our Grand Palais riverboat
has 24,200 square feet of gaming space with 944 slot machines and 49 table games
on two levels. Each of our riverboats has a large bar and foyer and the Grand
Palais riverboat has a top level which is not yet utilized. In the Lake Charles
market, we are required to cruise. However, because we have two riverboats, one
riverboat is always dockside, allowing us to offer our customers continuous
boarding.
The Isle-Lake Charles offers on-site accommodations to our customers
through the Inn at the Isle, a 241-room hotel, and provides free valet and
self-parking for more than 2,000 vehicles, including approximately 1,400 spaces
in an attached parking garage from which patrons can access the pavilion by
elevator. The lighted rooftop rotunda of the Isle-Lake Charles' pavilion is
topped by the Isle of Capri parrot which is 145 feet above the ground and
visible from Interstate 10. We believe that these amenities help us attract a
significant portion of the overnight visitors from Texas.
The Isle-Lake Charles also includes a 105,000 square foot land-based
pavilion. The pavilion is based on a tropical island theme and includes rock
formations, waterfalls, water arches with jets of water shooting up to 30 feet
in the air, ponds with porcelain sea life, flower beds landscaped in the shape
of playing card suits and an arcade. The pavilion provides panoramic views of
the lake and the city of Lake Charles and has separate entrances to the
riverboats. The pavilion offers customers a wide variety of non-gaming
amenities, including a 80-seat Farraddays' restaurant, a 489-seat Calypso's
buffet, a 40-seat Tradewinds deli, Caribbean Cove, which features free, live
entertainment and can accommodate 180 customers, a Banana Cabana souvenir gift
shop and an Island Gold Players Club booth. The pavilion also has a 16,000
square foot activity center comprised of a 1,100-seat special events center
designed for live boxing, televised pay-per-view events, concerts, banquets and
other events, meeting facilities and administrative offices.
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The Lake Charles market, excluding a nearby Native American-owned casino,
had gaming revenues of $303 million in 1999. We believe that the Isle-Lake
Charles attracts customers primarily from southeast Texas, including Houston,
Beaumont, Galveston, Orange and Port Arthur and local area residents.
Approximately 490,000 and 1.6 million people live within 50 and 100 miles,
respectively, of the Isle-Lake Charles.
We are building a new on-site 250-room deluxe hotel which is scheduled to
be completed in the fall of 2000. The hotel will include a Kitts Kitchen & Rum
Mill restaurant, and banquet and meeting facilities. We believe the
availability of additional quality overnight accommodations will attract a
different segment of customers and increase their length of stay at our
facility.
The Isle-Bossier City
The Isle-Bossier City, which commenced operations on May 20, 1994, is one
of four dockside gaming facilities currently operating in the Bossier
City/Shreveport, Louisiana market. Bossier City/Shreveport is the closest gaming
market to Dallas/Ft. Worth, Texas, a metropolitan area with a population of
approximately 4.5 million that is located approximately 190 miles west of
Bossier City/Shreveport.
The Isle-Bossier City is located on a 38-acre site along the Red River
approximately one-quarter mile off Interstate 20 and has a dockside riverboat
casino, a land-based entertainment pavilion and a parking garage. We opened our
new on-site 305-room deluxe hotel in late June 1999. We also own and operate a
234-room hotel two miles from the Isle-Bossier City. The casino has
approximately 20,000 square feet of gaming space on three levels with 1,079 slot
machines, 45 table games and a video poker bar. The approximately 72,200 square
foot land-based pavilion features towering palm trees, exotic rock formations
and a waterfall. The pavilion offers a wide variety of non-gaming amenities,
including a 107-seat Farraddays' restaurant, a 352-seat Calypso's buffet, a
40-seat Tradewinds deli, Caribbean Cove, which features free, live entertainment
and can accommodate 550 customers, a Banana Cabana souvenir gift shop, an
entertainment lounge area, a large nine-screen television wall featuring
sporting events, an Island Gold Players Club booth and administrative offices.
The Isle-Bossier City has on-site parking for 1,200 cars, of which 940 are
accommodated in an attached parking garage. Additional overflow parking is
available nearby on weekends.
The 305-room Isle of Capri Casino Bossier City Hotel facility is directly
accessible from the casino through the atrium. The hotel offers spacious rooms
and provides amenities, including banquet facilities, arcade, child care
facilities, meeting rooms, a heated pool and exercise facilities with a hot tub.
The Bossier City/Shreveport market had gaming revenue of $642 million in
1999. We believe that the Isle-Bossier City attracts customers primarily from
the local area, northeastern Texas and the Dallas/Ft. Worth metropolitan area.
Approximately 540,000 and 1.8 million people live within 50 and 100 miles,
respectively, of the Isle-Bossier City.
The Isle-Biloxi
The Isle-Biloxi, which commenced operations on August 1, 1992, was the
first gaming facility to open in Mississippi. Biloxi is the closest gaming
market to Mobile, Alabama, a metropolitan area with a population of
approximately 600,000, that is located approximately 60 miles east of Biloxi.
The Isle-Biloxi is located at the eastern end of a cluster of facilities known
as ''Casino Row'' and is the first property reached by visitors coming from
Alabama, Florida and Georgia via Highway 90.
The Isle-Biloxi's eight-acre facility consists of a 50,000 square foot
dockside gaming facility containing 32,500 square feet of gaming space with
1,212 slot machines and 40 table games on two levels, an adjacent land-based
pavilion, a 367-room hotel and on-site parking for 1,300 vehicles. The 32,000
square foot, 50-foot high pavilion offers a wide variety of non-gaming
amenities, including a 119-seat Farraddays' restaurant, a 280-seat Calypso's
buffet, an 88-seat Tradewinds deli, Caribbean Cove, an open-air lounge area that
can accommodate 116 customers and a Fantasy Isle Arcade of arcade games for all
ages. Calypso's and Farraddays' provide panoramic views of the Gulf of Mexico
and Deer Island. Caribbean Cove is located at the center of the pavilion and is
surrounded by a dramatic fountain and an entertainment stage. The entertainment
area features a stage and sound system used for special events. Musical
performances in the pavilion are scheduled six days a week providing a Caribbean
feel to Calypso's, Tradewinds and the hotel lobby. Headliner entertainment
appears monthly in the Flamingo Bay Ballroom with a portion of the seating
reserved for loyal customers.
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The 367-room Isle of Capri Crowne Plaza Resort hotel facility is directly
accessible from the casino through the atrium. The hotel is included in the
Crowne Plaza and Holiday Inn Worldwide reservation system. The hotel offers
spacious rooms, most with balconies overlooking a marina, and provides
amenities, including meeting rooms, full room service, a heated pool and
exercise facilities with a hot tub, a dry sauna and massage therapy.
The Mississippi Gulf Coast market (which includes Biloxi, Gulfport and Bay
St. Louis) had gaming revenue of $1.0 billion in 1999.
We believe that the Isle-Biloxi attracts customers from the local area,
Alabama, Florida, Georgia and southeastern Louisiana, including New Orleans and
Baton Rouge. There are approximately 660,000 and 2.9 million people residing
within 50 to 100 miles, respectively, of the Isle-Biloxi.
The Mississippi Gulf Coast hotel market consists of approximately 16,000
hotel/motel rooms. The Isle-Biloxi's hotel occupancy is consistently in excess
of 90%. A number of our competitors in the Mississippi Gulf Coast market have
purchased existing hotels in the area, have built or are presently building or
upgrading their facilities or have announced plans to build or upgrade
additional hotels.
We are currently evaluating possible expansion at the Isle - Biloxi which
could include additional gaming space, hotel rooms and parking.
The Isle-Vicksburg
The Isle-Vicksburg, which commenced operations on August 9, 1993, was the
first of four dockside gaming facilities to open in the Vicksburg, Mississippi
market. Vicksburg is the closest gaming market to Jackson, Mississippi, a
metropolitan area with a population of approximately 420,000 that is located
approximately 40 miles east of Vicksburg.
The Isle-Vicksburg is located on an 18-acre site along the Mississippi
River, approximately one mile north of Interstate 20, and consists of a 27,000
square foot dockside casino, a new on-site 124-room hotel and a 12,000 square
foot land-based pavilion. The casino has two levels with a total of 793 slot
machines and 28 table games. The Isle-Vicksburg provides on-site parking for 900
vehicles.
The land-based pavilion offers customers a wide variety of non-gaming
amenities, including a 67-seat Farraddays' restaurant, a 277-seat Calypso's
buffet, a Tradewinds deli, live entertainment, a Banana Cabana souvenir gift
shop, an Island Gold Players Club booth and a reception area. Customers have
easy access to the second level of the casino from the land-based pavilion by
either escalator or a wide stairway, both of which provide panoramic views of
the Mississippi River through a wall of windows.
In February 1999, we opened a new on-site 124-room hotel at the
Isle-Vicksburg, which has 69 deluxe rooms with balconies overlooking the
Mississippi River. The hotel is located on the bank of the Mississippi River,
adjacent to the casino. The Isle-Vicksburg's 67-space recreational vehicle park
is located approximately one-half mile from the casino and provides off-site
parking for 200 vehicles.
The Vicksburg market had gaming revenue of $213 million in 1999. We believe
that the Isle-Vicksburg attracts customers primarily from Vicksburg and Jackson,
Mississippi, northeastern Louisiana and tourists from other locales.
Approximately 530,000 and 1.5 million people live within 50 and 100 miles,
respectively, of the Isle-Vicksburg.
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The Isle-Black Hawk
On December 30, 1998, we opened our 57%-owned Isle-Black Hawk. This
land-based casino is the first casino reached by customers arriving from Denver,
Colorado, a metropolitan area with a population of approximately 2.2 million
that is located approximately 40 miles east of Black Hawk/Central City. The
Isle-Black Hawk is the largest gaming facility currently operating in the Black
Hawk/Central City market.
The Isle-Black Hawk is located on an approximately 9.4-acre site which is
readily accessible from Highway 119 and contains 43,000 square feet of gaming
space on a single floor with 1,145 slot machines, 12 table games and on-site
covered parking for 1,100 vehicles. The Isle-Black Hawk offers customers a wide
variety of non-gaming amenities, including a 52-seat Farraddays' restaurant, a
254-seat Calypso's buffet, a 36-seat Tradewinds deli, a Banana Cabana souvenir
gift shop and a 4,000 square foot event center that can be used for meetings and
entertainment.
We manage the Isle-Black Hawk for a fee which is equal to two percent of
revenue (after deducting one-half of gaming taxes) plus ten percent of operating
income, not to exceed four percent of revenue, as defined.
The Black Hawk/Central City market had gaming revenue of $355 million in
1999. We believe that the Isle-Black Hawk's customers are primarily ''day
trippers'' from areas such as Denver, Boulder, Fort Collins and Golden, Colorado
and Cheyenne, Wyoming.
There are less than 200 hotel rooms in the Black Hawk/Central City market.
We are currently in the process of opening an on-site 237-room hotel.
The Isle - Tunica
In July 1999, we opened the Isle-Tunica in Tunica County, Mississippi. The
facility contains approximately 891 slots and 15 table games, a Farraddays'
restaurant and Calypso's buffet. A 227 room hotel and two theaters are under
construction and scheduled to be completed in the fall of 2000.
The Tunica market includes 10 casinos and had gaming revenue of $1.2
billion in 1999. We believe the Isle-Tunica attracts customers primarily from
Memphis, Tennessee, which is located approximately 40 miles north of the
Isle-Tunica.
The Isle - Lula
The Lady Luck Casino in Lula commenced operations in June 1994 and is the
only casino facility in Coahoma County, Mississippi. The facility is located
next to the Helena Bridge, which crosses the Mississippi River between Arkansas
and Mississippi. Coahoma County is located approximately 120 miles southeast of
Little Rock, Arkansas, the property's primary market, and 60 miles southwest of
Memphis, Tennessee. Isle-Lula is the closest gaming facility to Little Rock,
Arkansas, and approximately 420,000 people live within the property's primary
target market.
The property consists of two casinos containing approximately 63,000 square
feet of gaming space, 1,542 slot machines and 41 table games. The facility also
includes two on-site hotels with a combined 487 rooms, plus an off-site 120-room
hotel, an entertainment facility, movie theaters, an arcade, a Does' Steakhouse
and other restaurant facilities and a gift shop.
We are currently renovating and re-branding the Lady Luck-Lula as an "Isle
of Capri" property. The conversion will include reconfiguring the pavilion,
re-theming the casinos, and adding Calypso's Buffet, Banana Cabana gift shop and
Tradewinds' Marketplace deli. The conversion is expected to be completed by
December 2000.
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The Isle-Bettendorf
Lady Luck-Bettendorf opened in April 1995 as a joint venture between Lady
Luck and BRDC. The property serves the Quad Cities metropolitan area, including
Bettendorf and Davenport, Iowa and Moline and Rock Island, Illinois, and is one
of three gaming facilities serving that market. The facility is located off of
Interstate 74 on the Mississippi River and is accessible from Interstate 74 and
Interstate 80, the two interstate highways serving the Quad Cities metropolitan
area.
The Isle-Bettendorf consists of a riverboat containing approximately 25,000
square feet of gaming space, 1,163 slot machines, 44 table games, a 256-room
hotel, a 500-car parking garage, approximately 16,000 square feet of convention
space, a Farraddays' restaurant and a buffet.
We are in the process of converting the Lady Luck-Bettendorf to an "Isle of
Capri" property, and the conversion is scheduled to be completed by this fall.
In addition to the recently completed Farraddays' restaurant, the conversion of
the Lady Luck-Bettendorf will include the addition of Calypso's Buffet,
Tradewinds Deli & Marketplace and re-theming of the property to the tropical
"Isle of Capri" theme.
The Isle-Natchez
Lady Luck-Natchez commenced operations in February 1993, and is the only
gaming facility serving the Natchez area. The facility includes a three-story,
dockside casino containing approximately 14,300 square feet of gaming space, 634
slot machines and 16 table games. Isle-Natchez also owns and operates a
143-room hotel containing convention and banquet facilities which is located
approximately 1 mile from the casino, as well as John Martin's, a gourmet
restaurant, located near the casino facility.
We have completed the conversion of the Isle-Natchez and began operating
the facility as Isle of Capri Casino and Hotel-Natchez in July 2000. The
conversion included the addition of Calypso's Buffet and an overall re-theming
of the property.
The Isle-Marquette
The Miss Marquette Casino, which was acquired by Lady Luck in October 1999,
is located approximately 140-miles north of the Isle-Bettendorf. The
Isle-Marquette, which opened in December 1994, currently competes only minimally
with another riverboat and a race track with slot machines both of which are in
the Dubuque area, approximately 50 miles south of Marquette.
The Isle-Marquette includes a riverboat containing approximately 18,700
square feet of gaming space, 698 slot machines and 36 tables games. The
facility also includes a land-based facility containing a buffet restaurant, an
entertainment showroom, as well as a 24-room hotel, a marina and parking for
approximately 590 vehicles. We are re-theming the Isle-Marquette and adding
Calypso's Buffet as part of the conversion of the facility to an "Isle of
Capri". The conversion is scheduled to be completed by this fall.
The Isle-Kansas City
On June 6, 2000, we acquired the Flamingo Casino in Kansas City from a
subsidiary of Hilton Hotels Corporation. The facility is one of four casinos in
the Kansas City metropolitan area, and is the closest facility to downtown
Kansas City. The property contains approximately 63,000 square feet of gaming
space, 1,022 slot machines and 44 table games. The property has three
restaurants and other non-gaming amenities, including an entertainment lounge
and gift shop. We are renovating and re-theming the facility as an Isle of
Capri and the conversion is scheduled to be completed by December 2000. We
anticipate having all of our operating systems in place and expect to commence
operation as an Isle of Capri by this fall. The facilities' conversion, which
will include adding a Farraddays' restaurant, Calypso's Buffet and Tradewinds
Deli & Marketplace is are expected to be completed by the end of 2000.
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OTHER OPERATIONS
Pompano Park
In 1995, we acquired Pompano Park, a harness racing track located in
Pompano Beach, Florida, midway between Miami and West Palm Beach. Pompano Park
is the only racetrack licensed to conduct harness racing in Florida. During
fiscal year end 2000, Pompano Park conducted 172 live racing programs. Pompano
Park also offers daily ''full card'' simulcasting and wagering on other harness
races and operates a 15-table limited stakes poker room with a $10 maximum win.
Pompano Park is conveniently located off of Interstate 95 and the Florida
Turnpike on a 220-acre owned facility. Pompano Park can accommodate up to 14,500
customers and has 4,000 parking spaces and 980 horse stalls. The six-story,
air-conditioned facility includes a box seat area, a 218,400 square foot
clubhouse, a large grandstand, a 1,200-seat dining area from which the races can
be viewed, five concession stands, five bars and a 165-seat Player's Lounge
cafeteria.
We believe that Pompano Park would be an attractive location for
casino-style gaming if such gaming were to be legalized in Florida.
Capri Cruises
On April 20, 1998, Commodore Cruise Lines and we formed Capri Cruises as a
joint venture. We own a 50% interest in the joint venture and operate the casino
on the Enchanted Capri cruise ship, which is based in the Port of New Orleans.
The cruise ship offers two and five night cruises for up to 550 passengers. We
provide discounted and complimentary cruises on the Enchanted Capri to many of
our Island Gold Players Club members.
TRADEMARKS
We own the following trademarks listed in this documents Isle of Capri,
Tradewinds, Farraddays', Calypso's, Inn at the Isle, Island Gold, and Isle
Style.
We consider all of these marks and the name recognition associated with
these marks, to be extremely valuable to us and to our operations and to further
development and implementation of the "Isle of Capri" brand and theme.
COMPETITION
We face intense competition in each of the markets in which we operate. Our
existing gaming facilities compete directly with other gaming properties in
Louisiana, Mississippi, Colorado, Iowa and Missouri, and with gaming facilities
located in bordering states, including Illinois. We expect this competition to
increase as new gaming operators enter our markets, existing competitors expand
their operations, gaming activities expand in existing jurisdictions and gaming
is legalized in new jurisdictions. Several of our competitors may have better
name recognition, marketing and financial resources than we do. We cannot
predict with any certainty the effects of existing and future competition on our
operating results.
We also compete with other forms of gaming and entertainment such as online
computer gambling, bingo, pull tab games, card parlors, sports books,
pari-mutuel or telephonic betting on horse racing and dog racing,
state-sponsored lotteries, jai-alai, video lottery terminals, video poker
terminals and, in the future, may compete with in-flight gaming or gaming at
other venues.
We also compete with gaming operations in other gaming jurisdictions such
as Las Vegas, Nevada and Atlantic City, New Jersey. Our competition also
includes casinos located on Native American reservations throughout the United
States, which have the advantages of being land-based and exempt from certain
state and federal taxes. Some Native American tribes are either in the process
of establishing or are considering the establishment of gaming at additional
locations. Expansion of existing gaming jurisdictions and the development of new
gaming jurisdictions and casinos on Native American-owned lands will increase
competition for our existing and future operations. In addition, increased
competition could limit new opportunities for us or result in the saturation of
certain gaming markets.
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The gaming industry is subject to political and regulatory uncertainty.
Legislatures in the states in which we operate often consider legislation,
including without limitation, tax legislation, which could adversely affect our
operations. In addition, regulatory bodies in states in which operate
periodically consider regulations which could adversely affect our operations.
In addition, in 1996 the federal government established the National Gambling
Impact Study Commission to study gaming, including the casino industry. The
Commission issued its report in June 1999 and we remain unable to determine at
this time the ultimate impact of the Commission's report.
RECENT TRANSACTIONS
Lady Luck Acquisition
On March 2, 2000, we acquired by merger Lady Luck Gaming Corp. ("Lady
Luck"), a publicly traded company that owned 100% of the Lady Luck Casinos in
Natchez and Lula, Mississippi and Marquette, Iowa, and a 50% interest in the
Lady Luck Casino in Bettendorf, Iowa. The consideration for the merger was
$12.00 per share of Lady Luck common stock, $23.5 million for the purchase of
preferred stock, plus assumption of approximately $298.2 million in Lady Luck
indebtedness.
BRDC Acquisition
On March 2, 2000, we acquired the 50% interest in the Lady Luck Casino and
Hotel - Bettendorf which was owned by Bettendorf Riverfront Development, LC
("BRDC"), an entity which was owned by members of Bernard Goldstein's family
including Robert Goldstein, one of our directors (the "BRDC Acquisition"). The
Company issued 6.3 million shares of its common stock to the owners of BRDC as
consideration for the transaction. The remaining 50% interest in the Lady Luck
Casino and Hotel - Bettendorf was owned by Lady Luck, and was acquired by us as
part of the Lady Luck merger on the same date. As a result, following the
merger and the BRDC Acquisition, we own 100% of Lady Luck Casino & Hotel -
Bettendorf.
Gemini Acquisition
In connection with the merger, Lady Luck entered into a First Amendment to
Purchase Agreement with Lady Luck's Chairman, Andrew Tompkins, and entities
owned by Mr. Tompkins, pursuant to which Lady Luck would acquire the Lady Luck
Casino & Hotel in Las Vegas and various related intellectual property interests
(the "Tompkins Assets") owned by Mr. Tompkins. The Tompkins Assets involves two
closings. The first closing, in which we purchased for $31.0 million the
intellectual property assets, occurred on March 2, 2000. The second closing will
involve the purchase for $14.5 million of the Las Vegas casino and hotel and
will occur upon receipt of approval of the Nevada Gaming Regulators and certain
other conditions, which are expected to be met this fall.
Flamingo Casino Acquisition
On June 6, 2000, we acquired the Kansas City Flamingo Casino from a
subsidiary of Hilton Hotels Corporation for $33.5 million. The acquisition was
funded through the Senior Secured Credit Facility. We are currently converting
the facility to an Isle of Capri, and expect the conversion to be completed by
the end of 2000.
Boonville Acquisition
On May 3, 2000 we acquired for $11.5 million the stock of Davis Gaming
Boonville, Inc., an affiliate of Davis Gaming. Davis Gaming Boonville had
previously been selected by the Missouri Gaming Commission to develop a casino
project in Boonville, Missouri, which is located on Interstate 70 between Kansas
City and St. Louis. We are currently developing the facility, which will
include a 28,000 square foot casino, Calypso's Buffet, Tradewinds Marketplace
and an entertainment area. The facility is expected to be completed by the fall
of 2001.
Davenport Acquisition
On July 18, 2000, we signed an agreement to purchase the Davenport, Iowa
casino and hotel from President Casino et al for $58.2 million. The closing of
the transaction is subject to a number of conditions including the satisfactory
completion of a due diligence review and the necessary regulatory approvals.
<PAGE>
Amended and Restated Credit Facility.
On March 2, 2000, in connection with the Lady Luck acquisition, we entered
into a $600 million Senior Credit Facility (amending and restating our existing
$175 million Senior Secured Credit Facility), consisting of a $125 million
revolver with a 5-year term, a $100 million Term Loan with a 5-year term; a $200
million Term Loan with a 6-year term; and a $175 million Term Loan with a 7-year
term. The Senior Credit Facility is secured by liens on substantially all of
our assets and guaranteed by all of our significant restricted subsidiaries. We
used the initial borrowings under the new Senior Credit Facility to complete the
Lady Luck acquisition and retire certain Lady Luck indebtedness, to complete the
Boonville and Flamingo acquisitions, for working capital and further general
corporate purposes. We plan to use future borrowings under the Senior Credit
Facility to complete the Gemini Acquisition, to develop the Boonville facility,
to complete our expansion projects at our facilities, to complete the conversion
of the Lady Luck and Flamingo facilities to "Isle of Capri" properties, to
complete the Davenport acquisition, to finance additional expansion projects and
for working capital and general corporate purposes.
FUTURE DEVELOPMENTS
Jefferson County
The Missouri Gaming Commission has selected our Jefferson County, Missouri
project for development. This project, which will primarily serve the South St.
Louis metropolitan area, was selected over three other projects, including our
proposed project at the Jefferson Barracks site in South St. Louis County. The
project is expected to include a 35,000 square foot casino, our signature
restaurants and a 200-room hotel. We expect to begin construction in late 2000
and to complete this project in the spring of 2002.
Morgan City, Louisiana
A joint venture in which we own 45% and have a management contract has
applied to the Louisiana Gaming Commission for the issuance of a license to
develop a project near Morgan City, Louisiana. The gaming commission is not
expected to make a decision until early 2001.
EMPLOYEES
As of April 30, 2000, we employed approximately 10,000 people. None of our
employees are subject to a collective bargaining agreement. We believe that our
relationship with our employees is satisfactory.
REGULATORY MATTERS
Louisiana
In July 1991, Louisiana enacted legislation permitting certain types of
gaming activity on certain rivers and waterways in Louisiana. The legislation
granted authority to supervise riverboat gaming activities to the Louisiana
Riverboat Gaming Commission and the Riverboat Gaming Enforcement Division of the
Louisiana State Police. The Louisiana Riverboat Gaming Commission was authorized
to hear and determine all appeals relative to the granting, suspension,
revocation, condition or renewal of all licenses, permits and applications. In
addition, the Louisiana Riverboat Gaming Commission established regulations
concerning authorized routes, duration of excursions, minimum levels of
insurance, construction of riverboats and periodic inspections. The Riverboat
Gaming Enforcement Division of the Louisiana State Police was authorized to
investigate applicants and issue licenses, investigate violations of the statute
and conduct continuing reviews of gaming activities.
In May 1996, regulatory oversight of riverboat gaming was transferred to
the Louisiana Gaming Control Board, which is comprised of nine voting members
appointed by the governor. The Louisiana Gaming Control Board now oversees all
licensing matters for riverboat casinos, land-based casinos, video poker and
certain aspects of Native American gaming other than those responsibilities
reserved to the Louisiana State Police.
The Louisiana Gaming Control Board is empowered to issue up to 15 licenses
to conduct gaming activities on a riverboat of new construction in accordance
with applicable law. However, no more than six licenses may be granted to
riverboats operating from any one parish.
<PAGE>
The Louisiana State Police continues to be involved broadly in gaming
enforcement and reports to the Louisiana Gaming Control Board. Louisiana law
permits the Louisiana State Police, among other things, to continue to (1)
conduct suitability investigations, (2) audit, investigate and enforce
compliance with standing regulations, (3) initiate enforcement and
administrative actions and (4) perform ''all other duties and functions
necessary for the efficient, efficacious, and thorough regulation and control of
gaming activities and operations under the Louisiana Gaming Control Board's
jurisdiction.''
Louisiana gaming law specifies certain restrictions relating to the
operation of riverboat gaming, including the following:
- except in Bossier City/Shreveport, gaming is not permitted while a
riverboat is docked, other than the 45 minutes between excursions and during
times when dangerous weather or water conditions exist;
- except in Bossier City/Shreveport, each round-trip riverboat cruise may
not be less than three nor more than eight hours in duration, subject to
specific exceptions;
- agents of the Louisiana State Police are permitted on board at any time
during gaming operations;
- gaming devices, equipment and supplies may only be purchased or leased
from permitted suppliers;
- gaming may only take place in the designated gaming area while the
riverboat is on a designated river or waterway;
- gaming equipment may not be possessed, maintained or exhibited by any
person on a riverboat except in the specifically designated gaming area or in a
secure area used for inspection, repair or storage of such equipment;
- wagers may be received only from a person present on a licensed riverboat;
- persons under 21 are not permitted in designated gaming areas;
- except for slot machine play, wagers may be made only with tokens, chips
or electronic cards purchased from the licensee aboard a riverboat;
- licensees may only use docking facilities and routes for which they are
licensed and may only board and discharge passengers at the riverboat's licensed
berth;
- licensees must have adequate protection and indemnity insurance;
- licensees must have all necessary federal and state licenses, certificates
and other regulatory approvals prior to operating a riverboat; and
- gaming may only be conducted in accordance with the terms of the license
and Louisiana law.
To receive a gaming license in Louisiana, an applicant must be found to be
a person of good character, honesty and integrity and a person whose prior
activities, criminal record, if any, reputation, habits and associations do not
(1) pose a threat to the public interest of the State of Louisiana or to the
effective regulation and control of gaming or (2) create or enhance the dangers
of unsuitable, unfair or illegal practices, methods and activities in the
conduct of gaming or the carrying on of business and financial arrangements of
gaming activities. In addition, the Louisiana Gaming Control Board will not
grant a license unless it finds that:
- the applicant can demonstrate the capability, either through training,
education, business experience or a combination of the preceding, to operate a
gaming operation;
<PAGE>
- the proposed financing of the riverboat and the gaming operations is
adequate for the nature of the proposed operation and is from a suitable and
acceptable source;
- the applicant demonstrates a proven ability to operate a vessel of
comparable size, capacity and complexity to a riverboat so as to ensure the
safety of its passengers;
- the applicant submits with its application for a license a detailed plan
of design of the riverboat;
- the applicant designates the docking facilities to be used by the
riverboat;
- the applicant shows adequate financial ability to construct and maintain a
riverboat; and
- the applicant has a good faith plan to recruit, train and upgrade
minorities in all employment classifications.
An initial license to conduct riverboat gaming operations is valid for a
term of five years and legislation passed in the 1999 legislative session
provides for renewals every five years thereafter. A gaming license is deemed
to be a privilege under Louisiana law and, as such, may be denied, revoked,
suspended, conditioned or limited at any time by the Louisiana Gaming Control
Board.
The Isle-Bossier City was issued its initial gaming license on December 22,
1993 and received a five-year renewal of the license on July 20, 1999. The
Crown Vessel operated at the Isle-Lake Charles was issued its initial gaming
license on March 14, 1995 and received a five-year renewal on July 20, 1999. The
license to operate the Grand Palais was issued to a previous owner and the Grand
Palais ceased operations as a result of its bankruptcy. Isle of Capri acquired
the Grand Palais, which is operated at the Isle-Lake Charles, and was issued a
five-year renewal on July 20, 1999.
Louisiana gaming law provides that a renewal application for the period
succeeding the initial five-year term of an operator's license must be made to
the Louisiana Gaming Control Board and must include a statement under oath of
any and all changes in information, including financial information, provided in
the previous application. The transfer of a license or an interest in a license
is prohibited.
Certain persons affiliated with a riverboat gaming licensee, including
directors and officers of the licensee, directors and officers of any holding
company of the licensee involved in gaming operations, persons holding 5% or
greater interests in the licensee and persons exercising influence over a
licensee, are subject to the application and suitability requirements of
Louisiana gaming law.
The sale, purchase, assignment, transfer, pledge or other hypothecation,
lease, disposition or acquisition by any person of securities which represent 5%
or more of the total outstanding shares issued by a licensee is subject to the
approval of the Louisiana Gaming Control Board. A security issued by a licensee
must generally disclose these restrictions. Prior approval from the Louisiana
Gaming Control Board is required for the sale, purchase, assignment, transfer,
pledge or other hypothecation, lease, disposition or acquisition of any
ownership interest of 5% or more of any non-corporate licensee or for the
transfer of any ''economic interest'' of 5% or more of any licensee or
affiliated gaming person. An ''economic interest'' is defined as any interest
whereby a person receives or is entitled to receive, by agreement or otherwise,
a profit, gain, thing of value, loan, credit, security interest, ownership
interest or other benefit.
Fees payable to the state for conducting gaming activities on a riverboat
include (1) $50,000 per riverboat for the first year of operation and $100,000
per year per riverboat thereafter, plus (2) 18.5% of net gaming proceeds. A
statute also authorizes local governing authorities to levy boarding fees. Isle
of Capri has development agreements with the local governing authorities in the
jurisdictions in which it operates pursuant to which it makes payments in lieu
of boarding fees.
A licensee must notify and/or seek approval from the Louisiana Gaming
Control Board in connection with any withdrawals of capital, loans, advances or
distributions in excess of 5% of retained earnings for a corporate licensee, or
of capital accounts for a partnership or limited liability company licensee,
upon completion of any such transaction. The Louisiana Gaming Control Board may
issue an emergency order for not more than ten days prohibiting payment of
profits, income or accruals by, or investments in, a licensee. Riverboat gaming
licensees and their affiliated gaming persons must notify the Louisiana Gaming
Control Board 60 days prior to the receipt by any such persons of any loans or
extensions of credit or modifications thereof. The Louisiana Gaming Control
Board is required to investigate the reported loan, extension of credit or
modification thereof and to determine whether an exemption exists on the
requirement of prior written approval and, if such exemption is not applicable,
to either approve or disapprove the transaction. If the Louisiana Gaming Control
Board disapproves of a transaction, the transaction cannot be entered into by
the licensee or affiliated gaming person. Isle of Capri is an affiliated gaming
person of its subsidiaries which hold the licenses to conduct riverboat gaming
at the Isle-Bossier City and the Isle-Lake Charles.
<PAGE>
The failure of a licensee to comply with the requirements set forth above
may result in the suspension or revocation of that licensee's gaming license.
Additionally, if the Louisiana Gaming Control Board finds that the individual
owner or holder of a security of a corporate license or intermediary company or
any person with an economic interest in a licensee is not qualified under
Louisiana law, the Louisiana Gaming Control Board may require, under penalty of
suspension or revocation of the license, that the person not:
- receive dividends or interest on securities of the corporation;
- exercise directly or indirectly a right conferred by securities of the
corporation;
- receive remuneration or economic benefit from the licensee; or
- continue its ownership or economic interest in the licensee.
A licensee must periodically report the following information to the
Louisiana Gaming Control Board, which is not confidential and is available for
public inspection: (1) the licensee's net gaming proceeds from all authorized
games, (2) the amount of net gaming proceeds tax paid and (3) all quarterly and
annual financial statements presenting historical data, including annual
financial statements that have been audited by an independent certified public
auditor.
During the 1996 special session of the Louisiana legislature, legislation
was passed which provided for local option elections to be held in November 1996
which gave voters in each parish within the state the opportunity to decide
whether the various forms of gaming permitted under Louisiana law, including
riverboat gaming, were permissible in each parish. In November 1996, voters in
Calcasieu and Bossier parishes, the parishes in which the Isle-Lake Charles and
Isle-Bossier City are located, voted favorably to permit the continuation of
riverboat gaming.
During the 1996 special session of the Louisiana legislature, legislation
was also enacted placing on the ballot for a state-wide election a
constitutional amendment limiting the expansion of gaming. In October 1996,
voters passed the constitutional amendment. As a result, local option elections
are required before new or additional forms of gaming can be brought into a
parish.
Proposals to amend or supplement Louisiana's riverboat gaming statute are
frequently introduced in the Louisiana State legislature. There is no assurance
that changes in Louisiana gaming law will not occur or that such changes will
not have a material adverse effect on Isle of Capri's business in Louisiana.
Mississippi
In June 1990, Mississippi enacted legislation legalizing dockside casino
gaming for counties along the Mississippi River, which is the western border for
most of the state, and the Gulf Coast, which is the southern border for most of
the state. The legislation gave each of those counties the opportunity to hold a
referendum on whether to allow dockside casino gaming within its boundaries.
Gaming vessels in Mississippi must be located on the Mississippi River, on
navigable waters in eligible counties along the Mississippi River or in the
waters lying south of the counties along the Mississippi Gulf Coast. Mississippi
law permits unlimited stakes gaming on permanently moored vessels on a 24-hour
basis and does not restrict the percentage of space, which may be utilized for
gaming. There are no limitations on the number of gaming licenses, which may be
issued in Mississippi.
<PAGE>
The ownership and operation of gaming facilities in Mississippi are subject
to extensive state and local regulation intended to:
- prevent unsavory or unsuitable persons from having any direct or indirect
involvement with gaming at any time or in any capacity;
- establish and maintain responsible accounting practices and procedures for
gaming operations;
- maintain effective control over the financial practices of licensees,
including establishing minimum procedures for internal fiscal affairs and
safeguarding of assets and revenues, providing reliable record keeping and
making periodic reports;
- provide a source of state and local revenues through taxation and
licensing fees;
- prevent cheating and fraudulent practices; and
- ensure that gaming licensees, to the extent practicable, employ
Mississippi residents.
The regulations are subject to amendment and interpretation by the
Mississippi Gaming Commission. Changes in Mississippi laws or regulations may
limit or otherwise materially affect the types of gaming that may be conducted
in Mississippi and such changes, if enacted, could have an adverse effect on
Isle of Capri and its Mississippi gaming operations.
Isle of Capri is registered as a publicly traded holding company under the
Mississippi Gaming Control Act. Isle of Capri's gaming operations in Mississippi
are subject to regulatory control by the Mississippi Gaming Commission, the
State Tax Commission and various other local, city and county regulatory
agencies (collectively referred to as the ''Mississippi Gaming Authorities'').
Subsidiaries of Isle of Capri have obtained gaming licenses from the Mississippi
Gaming Authorities. Isle of Capri's future gaming operations outside of
Mississippi are also subject to approval by the Mississippi Gaming Commission.
The licenses held by Isle of Capri's Mississippi gaming operations have terms of
two years and are not transferable. The Isle-Biloxi received a fourth gaming
license in April 2000, the Isle-Vicksburg obtained a third gaming license in
January 1999, and the Isle-Tunica obtained its initial license on May 20, 1999.
The Isle-Natchez received a renewal license on May 18, 2000, and Isle-Lula
received a renewal license in May 18, 2000. There is no assurance that new
licenses can be obtained at the end of each two-year period of a license.
Moreover, the Mississippi Gaming Commission may, at any time, and for any cause
it deems reasonable, revoke, suspend, condition, limit or restrict a license or
approval to own shares of stock in the subsidiaries of Isle of Capri that
operate in Mississippi.
Substantial fines for each violation of Mississippi's gaming laws or
regulations may be levied against Isle of Capri, its subsidiaries and the
persons involved. A violation under a gaming license held by a subsidiary of
Isle of Capri operating in Mississippi may be deemed a violation of all the
other licenses held by Isle of Capri.
Isle of Capri and each of its Mississippi gaming subsidiaries must
periodically submit detailed financial, operating and other reports to the
Mississippi Gaming Commission and/or the State Tax Commission. Numerous
transactions, including substantially all loans, leases, sales of securities and
similar financing transactions entered into by any subsidiary of Isle of Capri
operating a casino in Mississippi, must be reported to or approved by the
Mississippi Gaming Commission. In addition, the Mississippi Gaming Commission
may, at its discretion, require additional information about the operations of
Isle of Capri.
Certain officers and employees of Isle of Capri and the officers, directors
and certain key employees of Isle of Capri's Mississippi gaming subsidiaries
must be found suitable or be licensed by the Mississippi Gaming Commission. Isle
of Capri believes that all required findings of suitability related to all
Mississippi Isle of Capri properties have been applied for or obtained, although
the Mississippi Gaming Commission at its discretion may require additional
persons to file applications for findings of suitability. In addition, any
person having a material relationship or involvement with Isle of Capri may be
required to be found suitable or licensed, in which case those persons must pay
the costs and fees associated with such investigation. The Mississippi Gaming
Commission may deny an application for a finding of suitability for any cause
that it deems reasonable. Changes in certain licensed positions must be reported
to the Mississippi Gaming Commission. In addition to its authority to deny an
application for a finding of suitability, the Mississippi Gaming Commission has
jurisdiction to disapprove a change in a licensed position. The Mississippi
Gaming Commission has the power to require Isle of Capri and any of its
Mississippi gaming subsidiaries to suspend or dismiss officers, directors and
other key employees or to sever relationships with other persons who refuse to
file appropriate applications or whom the authorities find unsuitable to act in
such capacities.
<PAGE>
Employees associated with gaming must obtain work permits that are subject
to immediate suspension under certain circumstances. The Mississippi Gaming
Commission will refuse to issue a work permit to a person who has been convicted
of a felony, committed certain misdemeanors or knowingly violated the
Mississippi Gaming Control Act, and it may refuse to issue a work permit to a
gaming employee for any other reasonable cause.
At any time, the Mississippi Gaming Commission has the power to investigate
and require the finding of suitability of any record or beneficial stockholder
of Isle of Capri. Mississippi law requires any person who individually or in
association with others acquires, directly or indirectly, beneficial ownership
of more than 5% of Isle of Capri's common stock to report the acquisition to the
Mississippi Gaming Commission, and such person may be required to be found
suitable. In addition, any person who, individually or in association with
others, becomes, directly or indirectly, a beneficial owner of more than 10% of
Isle of Capri's common stock, as reported to the U.S. Securities and Exchange
Commission, must apply for a finding of suitability by the Mississippi Gaming
Commission and must pay the costs and fees that the Mississippi Gaming
Commission incurs in conducting the investigation.
The Mississippi Gaming Commission has generally exercised its discretion to
require a finding of suitability of any beneficial owner of more than 5% of a
registered publicly-traded holding company's stock. However, the Mississippi
Gaming Commission has adopted a policy that generally permits certain
institutional investors to own beneficially up to 10% of a registered public
company's stock without a finding of suitability. If a stockholder who must be
found suitable is a corporation, partnership or trust, it must submit detailed
business and financial information, including a list of beneficial owners.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Mississippi Gaming
Commission may be found unsuitable. Isle of Capri believes that compliance by
Isle of Capri with the licensing procedures and regulatory requirements of the
Mississippi Gaming Commission will not affect the marketability of Isle of
Capri's securities. Any person found unsuitable and who holds, directly or
indirectly, any beneficial ownership of Isle of Capri's securities beyond such
time as the Mississippi Gaming Commission prescribes may be guilty of a
misdemeanor. Isle of Capri is subject to disciplinary action if, after receiving
notice that a person is unsuitable to be a stockholder or to have any other
relationship with Isle of Capri or its subsidiaries operating casinos in
Mississippi, Isle of Capri:
- pays the unsuitable person any dividend or other distribution upon its
voting securities;
- recognizes the exercise, directly or indirectly, of any voting rights
conferred by its securities;
- pays the unsuitable person any remuneration in any form for services
rendered or otherwise, except in certain limited and specific circumstances; or
- fails to pursue all lawful efforts to require the unsuitable person to
divest himself of the securities, including, if necessary, the immediate
purchase of the securities for cash at a fair market value.
Isle of Capri may be required to disclose to the Mississippi Gaming
Commission upon request the identities of the holders of any of Isle of Capri's
debt securities. In addition, under the Mississippi Gaming Control Act, the
Mississippi Gaming Commission may, in its discretion, (1) require holders of
Isle of Capri's securities, including the notes, to file applications, (2)
investigate such holders and (3) require such holders to be found suitable to
own such securities. Although the Mississippi Gaming Commission generally does
not require the individual holders of obligations such as the notes to be
investigated and found suitable, the Mississippi Gaming Commission retains the
discretion to do so for any reason, including but not limited to a default, or
where the holder of the debt instrument exercises a material influence over the
gaming operations of the entity in question. Any holder of debt securities
required to apply for a finding of suitability must pay all investigative fees
and costs of the Mississippi Gaming Commission in connection with such an
investigation.
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The Mississippi regulations provide that a change in control of Isle of
Capri may not occur without the prior approval of the Mississippi Gaming
Commission. Mississippi law prohibits Isle of Capri from making a public
offering of its securities without the approval of the Mississippi Gaming
Commission if any part of the proceeds of the offering is to be used to finance
the construction, acquisition or operation of gaming facilities in Mississippi,
or to retire or extend obligations incurred for one or more such purposes. The
Mississippi Gaming Commission has the authority to grant a continuous approval
of securities offerings and has granted such approval for Isle of Capri, subject
to an annual renewal.
Regulations of the Mississippi Gaming Commission prohibit certain
repurchases of securities of publicly traded corporations registered with the
Mississippi Gaming Commission, including holding companies such as Isle of
Capri, without prior approval of the Mississippi Gaming Commission. Transactions
covered by these regulations are generally aimed at discouraging repurchases of
securities at a premium over market price from certain holders of greater than
3% of the outstanding securities of the registered publicly traded corporation.
The regulations of the Mississippi Gaming Commission also require prior approval
for a ''plan of recapitalization'' as defined in such regulations.
Isle of Capri must maintain in the State of Mississippi current stock
ledgers, which may be examined by the Mississippi Gaming Authorities at any
time. If any securities are held in trust by an agent or by a nominee, the
record holder may be required to disclose the identity of the beneficial owner
to the Mississippi Gaming Authorities. A failure to make such disclosure may be
grounds for finding the record holder unsuitable. Isle of Capri must render
maximum assistance in determining the identity of the beneficial owner.
Mississippi law requires that certificates representing shares of Isle of
Capri common stock bear a legend to the general effect that the securities are
subject to the Mississippi Gaming Control Act and regulations of the Mississippi
Gaming Commission. The Mississippi Gaming Commission has the authority to grant
a waiver from the legend requirement, which Isle of Capri has obtained. The
Mississippi Gaming Authorities, through the power to regulate licenses, have the
power to impose additional restrictions on the holders of Isle of Capri's
securities at any time.
The Mississippi Gaming Commission has enacted a regulation requiring that,
as a condition to licensure or license renewal, an applicant must provide a plan
to develop infrastructure facilities amounting to 25% of the cost of the casino
and a parking facility capable of accommodating 500 cars. In 1999, the
Mississippi Gaming Commission approved amendments to this regulation that
increased the infrastructure development requirement from 25% to 100% for new
casinos (or upon acquisition of a closed casino), but grandfathered existing
licensees and development plans approved prior to the effective date of the new
regulation (including the Isle-Tunica and the Isle-Lula). ''Infrastructure
facilities'' include any of the following:
- a 250-room or larger hotel of at least a two-star rating as defined by the
current edition of the Mobil Travel Guide;
- theme parks;
- golf courses;
- marinas;
- entertainment facilities;
- tennis complexes; and
- any other facilities approved by the Mississippi Gaming Commission.
Parking facilities, roads, sewage and water systems or civic facilities are
not considered ''infrastructure facilities.'' The Mississippi Gaming Commission
may reduce the number of rooms required in a hotel if it is satisfied that
sufficient rooms are available to accommodate the anticipated number of
visitors.
<PAGE>
License fees and taxes are payable to the State of Mississippi and to the
counties and cities in which a Mississippi Gaming Subsidiary's respective
operations will be conducted. The license fee payable to the state of
Mississippi is based upon gross revenue of the licensee (generally defined as
gaming receipts less payout to customers as winnings) and equals 4% of gross
revenue of $50,000 or less per month, 6% of gross revenue over $50,000 and less
than $134,000 per calendar month, and 8% of gross revenue over $134,000 per
calendar month. The foregoing license fees are allowed as a credit against the
licensee's Mississippi income tax liability for the year paid. Additionally, a
licensee must pay a $5,000 annual license fee and an annual fee based upon the
number of games it operates. The gross revenue tax imposed by the Mississippi
communities and counties in which Isle of Capri's casino operations are located
equals 0.4% of gross revenue of $50,000 or less per calendar month, 0.6% of
gross revenue over $50,000 and less than $134,000 per calendar month and 0.8% of
gross revenue over $134,000 per calendar month. These fees have been imposed in,
among other cities and counties, Biloxi, Vicksburg, Tunica County and Coahoma
County. Certain Local and Private Laws of the State of Mississippi may impose
fees or taxes on the Mississippi Gaming Subsidiaries in addition to the fees
described above.
The Mississippi Gaming Commission requires, as a condition of licensure or
license renewal, that casino vessels on the Mississippi Gulf Coast that are not
self-propelled must be moored to withstand a Category 4 hurricane with 155
mile-per-hour winds and 15-foot tidal surge. Isle of Capri believes that all of
its Mississippi Gaming Subsidiaries currently meet this requirement. A 1996
Mississippi Gaming Commission regulation prescribes the hurricane emergency
procedure to be used by the Mississippi Gulf Coast casinos.
The sale of food or alcoholic beverages at Isle of Capri's Mississippi
gaming locations is subject to licensing, control and regulation by the
applicable state and local authorities. The agencies involved have full power to
limit, condition, suspend or revoke any such license, and any such disciplinary
action could (and revocation would) have a material adverse effect upon the
operations of the affected casino or casinos. Certain officers and managers of
Isle of Capri and its Mississippi gaming subsidiaries must be investigated by
the Alcoholic Beverage Control Division of the State Tax Commission in
connection with liquor permits that have been issued. The Alcoholic Beverage
Control Division of the State Tax Commission must approve all changes in
licensed positions.
During 1998, certain anti-gaming groups proposed referenda that, if
adopted, would have banned gaming in Mississippi and required that gaming
entities cease operations within two years after the ban. The referenda were
declared illegal by Mississippi courts on constitutional and procedural grounds.
A revised initiative has been submitted to the Secretary of State and could be
placed on the ballot for the November 2000 election.
Colorado
The State of Colorado created the Division of Gaming (the ''Division'')
within the Department of Revenue to license, implement, regulate and supervise
the conduct of limited gaming under the Colorado Limited Gaming Act. The
Director of the Division, under the supervision of a five-member Colorado
Limited Gaming Control Commission (the ''Colorado Commission''), has been
granted broad power to ensure compliance with the Colorado gaming regulations
(the ''Colorado Regulations''). The Director may inspect, without notice,
impound or remove any gaming device. He may examine and copy any licensee's
records, may investigate the background and conduct of licensees and their
employees, and may bring disciplinary actions against licensees and their
employees. He may also conduct detailed background investigations of persons who
loan money to Isle of Capri or its Colorado gaming subsidiaries.
The Colorado Commission is empowered to issue five types of gaming and
gaming-related licenses, and has delegated authority to the Director to issue
certain types of licenses and approve certain changes in ownership. The licenses
are revocable and non-transferable. The failure or inability of Isle of Capri or
any of its Colorado gaming subsidiaries to maintain necessary gaming licenses
will have a material adverse effect on the operating results of Isle of Capri.
All persons employed by Isle of Capri and its Colorado gaming subsidiaries and
involved, directly or indirectly, in gaming operations in Colorado also are
required to obtain a Colorado gaming license. All licenses must be renewed
annually, except those for key and support employees, which must be renewed
every two years.
As a general rule, under the Colorado Regulations, it is a criminal
violation for any person to have an "ownership interest" or right to receive
profits, in more than three retail gaming licenses in Colorado. The Colorado
Commission has ruled that a person does not have an ownership interest in a
retail licensee for purposes of the multiple license prohibition if:
<PAGE>
- such person has less than a five percent (5%) ownership interest in an
institutional investor which has an interest in a publicly traded licensee or
publicly traded company affiliated with a licensee (such as Isle of Capri);
- a person has a five percent (5%) or more ownership interest in an
institutional investor, but the institutional investor has less than a five
percent (5%) ownership interest in a publicly traded licensee or publicly traded
company affiliated with a licensee;
- an institutional investor has less than a five percent (5%) ownership
interest in a publicly traded licensee or publicly traded company affiliated
with a licensee;
- an institutional investor possesses voting securities in a fiduciary
capacity for another person, and does not exercise voting control over five
percent (5%) or more of the outstanding voting securities of a publicly traded
licensee or of a publicly traded company affiliated with a licensee;
- a registered broker or dealer retains possession of voting securities of a
publicly traded licensee or of a publicly traded company affiliated with a
licensee for its customers in street name or otherwise, and exercises voting
rights for less than five percent (5%) of the publicly traded licensee's voting
securities or of a publicly traded company affiliated with a licensee;
- a registered broker or dealer acts as a market maker for the stock of a
publicly traded licensee or of a publicly traded company affiliated with a
licensee and possesses a voting interest in less than five percent (5%) of the
stock of the publicly traded licensee or of a publicly traded company affiliated
with a licensee;
- an underwriter is holding securities of a publicly traded licensee or of a
publicly traded company affiliated with a licensee as part of an underwriting
for no more than 90 days if it exercises voting rights of less than five percent
(5%) of the outstanding voting securities of a publicly traded licensee or of a
publicly traded company affiliated with a licensee;
- a stock clearinghouse holds voting securities for third parties, if it
exercises voting rights with respect to less than five percent (5%) of the
outstanding voting securities of a publicly traded licensee or of a publicly
traded company affiliated with a licensee; or
- a person owns less than five percent (5%) of the voting securities of the
publicly traded licensee or publicly traded company affiliated with a licensee.
Hence, Isle of Capri's and its stockholders' business opportunities in
Colorado are limited to such interests that comply with the statute and the
Colorado Commission's rule.
In addition, pursuant to the Colorado Regulations, no manufacturer or
distributor of slot machines or associated equipment may, without notification
being provided within ten days, knowingly have an interest in any casino
operator, allow any of its officers or any other person with a substantial
interest in such business to have such an interest, employ any person if such
person is employed by a casino operator, or allow any casino operator or person
with a substantial interest therein to have an interest in a manufacturer's or
distributor's business. The Colorado Commission has ruled that a person does not
have a ''substantial interest'' if such person's sole ownership interest in such
licensee is through the ownership less than five percent (5%) of such voting
securities of a publicly traded licensee or publicly traded affiliated company
of a licensee.
In other contexts, counsel for the Division has informed counsel for Isle
of Capri that, for purposes of the three-license rule described above, the
Division has taken the position that only a person deemed to have ''beneficial
ownership'' (as defined in the rules and regulations of the U.S. Securities and
Exchange Commission under Section 13(d) of the U.S. Securities Exchange Act of
1934) of shares of the publicly traded holding company (or licensee) will be
deemed to have an ''ownership interest'' under the horizontal rule. However, the
Division has not passed on this issue with respect to Isle of Capri, and neither
the Colorado Commission nor the Colorado legislature has addressed this issue.
As a result, there is no assurance that the Division, the Colorado Commission or
the Colorado legislature will not apply a more restrictive interpretation in
this instance.
<PAGE>
Under the Colorado Regulations, any person or entity having any direct or
indirect interest in a gaming licensee or an applicant for a gaming license,
including, without limitation, Isle of Capri and its stockholders, may be
required to supply the Colorado Commission with substantial information,
including background information, source of funding information, a sworn
statement that such person or entity is not holding his interest for any other
party, and fingerprints. Such information, investigation and licensing as an
''associated person'' automatically will be required of all persons (other than
certain institutional investors discussed below) which directly or indirectly
own ten percent (10%) or more of a direct or indirect legal, beneficial or
voting interest in Black Hawk LLC, through their ownership in Isle of Capri.
Such persons must report their interest within ten (10) days and file
appropriate applications within 45 days after acquiring such interest.
Persons directly or indirectly having a five percent (5%) or more interest
(but less than 10%) in Black Hawk LLC, through their ownership in Isle of Capri,
must report their interest to the Colorado Commission within ten (10) days after
acquiring such interest and may be required to provide additional information
and to be found suitable. If certain institutional investors provide certain
information to the Colorado Commission, such investors, at the Colorado
Commission's discretion, may be permitted to own up to 14.99% of Black Hawk LLC,
through their ownership in Isle of Capri, before being required to be found
suitable. All licensing and investigation fees will have to be paid by the
person in question. The associated person investigation fee currently is $51 per
hour.
The Colorado Commission also has the right to request information from any
person directly or indirectly interested in, or employed by, a licensee, and to
investigate the moral character, honesty, integrity, prior activities, criminal
record, reputation, habits and associations of (1) all persons licensed pursuant
to the Colorado Limited Gaming Act; (2) all officers, directors and stockholders
of a licensed privately held corporation; (3) all officers, directors and
stockholders holding either a five percent (5%) or greater interest or a
controlling interest in a licensed publicly traded corporation; (4) all general
partners and all limited partners of a licensed partnership; (5) all persons
which have a relationship similar to that of an officer, director or stockholder
of a corporation (such as members and managers of a limited liability company);
(6) all persons supplying financing or loaning money to any licensee connected
with the establishment or operation of limited gaming and (7) all persons having
a contract, lease or ongoing financial or business arrangement with any
licensee, where such contract, lease or arrangement relates to limited gaming
operations, equipment, devices or premises.
In addition, under the Colorado Regulations, every person who is a party to
a ''gaming contract'' of lease with an applicant for a license, or with a
licensee, upon the request of the Colorado Commission or the Director, must
promptly provide to the Colorado Commission or Director all information which
may be requested concerning financial history, financial holdings, real and
personal property ownership, interests in other companies, criminal history,
personal history and associations, character, reputation in the community and
all other information which might be relevant to a determination whether a
person would be suitable to be licensed by the Colorado Commission. Failure to
provide all information requested constitutes sufficient grounds for the
Director or the Colorado Commission to require a licensee or applicant to
terminate its ''gaming contract'' (as defined below) or lease with any person
who failed to provide the information requested. In addition, the Director or
the Colorado Commission may require changes in ''gaming contracts'' before an
application is approved or participation in the contract is allowed. A ''gaming
contract'' is defined as an agreement in which a person does business with or on
the premises of a licensed entity.
The Colorado Commission and the Division have interpreted the statute and
regulations to permit the Colorado Commission to investigate and license any
lenders to Isle of Capri or its Colorado gaming subsidiaries. In any event, such
lenders may not be able to exercise certain of their rights and remedies without
prior approval of the Colorado gaming authorities.
An application for licensure or suitability may be denied for any cause
deemed reasonable by the Colorado Commission or the Director, as appropriate.
Specifically, the Colorado Commission and the Director must deny a license to
any applicant who, among other things, (1) fails to prove by clear and
convincing evidence that the applicant is qualified; (2) fails to provide
information and documentation requested; (3) fails to reveal any fact material
to qualification, or supplies information which is untrue or misleading as to a
material fact pertaining to qualification; (4) has been, or is any director,
officer, general partner, stockholder, limited partner or other person who has a
financial or equity interest in the applicant who has been convicted of certain
crimes, including the service of a sentence upon conviction of a felony in a
correctional facility, city or county jail, or community correctional facility
or under the state board of parole or any probation department within ten years
prior to the date of the application, gambling-related offenses, theft by
deception or crimes involving fraud or misrepresentation, is under current
prosecution for such crimes (during the pendency of which license determination
may be deferred), is a career offender or a member or associate of a career
offender cartel, or is a professional gambler or (5) has refused to cooperate
with any state or federal body investigating organized crime, official
corruption or gaming offenses.
<PAGE>
If the Colorado Commission determines that a person or entity is unsuitable
to own interests in Isle of Capri, then Isle of Capri and any of its Colorado
gaming subsidiaries may be sanctioned, which may include the loss by Isle of
Capri and its Colorado gaming subsidiaries of their respective approvals and
licenses.
The Colorado Commission does not need to approve in advance a public
offering of securities but rather requires a filing of notice and additional
documents with regard to such public offering prior to such public offering.
Under the regulations, the Colorado Commission may, in its discretion, require
additional information and prior approval of such public offering.
In addition, the Colorado Regulations prohibit a licensee or affiliated
company thereof, such as Isle of Capri, from paying dividends, interest or other
remuneration to any unsuitable person, or recognizing the exercise of any voting
rights by any unsuitable person. Further, Isle of Capri may repurchase the
shares of anyone found unsuitable at the lesser of the cash equivalent to the
original investment in Isle of Capri or the current market price. The Colorado
Regulations also require anyone with a material involvement with a licensee,
including a director or officer of a holding company such as Isle of Capri, to
file for a finding of suitability if required by the Colorado Commission.
Because of their authority to deny an application for a license or
suitability, the Colorado Commission and Director effectively can disapprove a
change in corporate position of a licensee and with respect to any entity which
is required to be found suitable, or to indirectly cause the Isle of Capri and
its Colorado gaming subsidiaries and other entities required to be found
suitable to suspend or dismiss managers, officers, directors and other key
employees or sever relationships with other persons who refuse to file
appropriate applications or whom the authorities find unsuitable to act in such
capacities.
The sale, lease, purchase, conveyance or acquisition of a controlling
interest in Isle of Capri is subject to the approval of the Colorado Commission.
Under certain circumstances, Isle of Capri may not sell any interest in its
Colorado gaming subsidiaries without the prior approval of the Colorado
Commission.
The Isle-Black Hawk must meet certain architectural requirements, fire
safety standards and standards for access for disabled persons. The Isle-Black
Hawk also must not exceed certain gaming square footage limits as a total of
each floor and the full building. The casino at the Isle-Black Hawk may operate
only between 8:00 a.m. and 2:00 a.m. and may permit only individuals 21 years or
older to gamble in the casino. It may permit only slot machines, blackjack and
poker, with a maximum single bet of $5.00. The Isle-Black Hawk may not provide
credit to its gaming patrons.
The Colorado Regulations permit gaming only in a limited number of cities
and certain commercial districts.
The Colorado Constitution permits a gaming tax of up to 40% on adjusted
gross gaming proceeds, and authorizes the Colorado Commission to change the rate
annually. The current gaming tax rate is .25% on adjusted gross gaming proceeds
of up to and including $2 million, 2% over $2 million up to and including $4
million, 4% over $4 million up to and including $5 million, 11% over $5 million
up to and including $10 million, 16% over $10 million up to and including $15
million and 20% on adjusted gross gaming proceeds in excess of $15 million.
Black Hawk has imposed an annual device fee of $750 per gaming device and may
revise the same from time to time. The Colorado Commission may revise the gaming
tax or device fee at any time, but has been considering such provisions only
annually.
<PAGE>
The sale of alcoholic beverages is subject to licensing, control and
regulation by the Colorado Liquor Agencies. All persons who directly or
indirectly own 10% or more of Black Hawk LLC, through their ownership of Isle of
Capri, must file applications and possibly be investigated by the Colorado
Liquor Agencies. The Colorado Liquor Agencies also may investigate those persons
who, directly or indirectly, loan money to or have any financial interest in
liquor licensees. All licenses are revocable and not transferable. The Colorado
Liquor Agencies have the full power to limit, condition, suspend or revoke any
such license and any such disciplinary action could (and revocation would) have
a material adverse effect upon the operating results of Isle of Capri. The
Isle-Black Hawk holds a retail gaming tavern license. Accordingly, a person with
an interest in Black Hawk LLC may not have an interest in a hotel and restaurant
license.
Iowa
Iowa Gaming Regulations
In 1989, the State of Iowa legalized riverboat gaming on the Mississippi
River and other waterways located in Iowa. The legislation authorized the
granting of licenses to not-for-profit corporations which, in turn, are
permitted to enter into operating agreements with qualified persons who also
actually conduct riverboat gaming operations. Such operators must likewise be
approved and licensed by the Iowa Racing and Gaming Commission (the "Iowa Gaming
Commission").
On August 11, 1994, the Riverbend Regional Authority, a not-for-profit
corporation organized for the purpose of facilitating riverboat gaming in
Bettendorf, Iowa, entered into an operator's contract with the Lady Luck
Bettendorf, L.C. authorizing Lady Luck Bettendorf, L.C. to operate riverboat
gaming operations in Bettendorf. The initial term of the operator's contract
was for three years. As successor in interest to Lady Luck Bettendorf, L.C.,
Isle-Bettendorf has the right to renew the contract for succeeding three-year
periods as long as Scott County voters approve gaming in the jurisdiction. The
operator's contract was renewed effective September 1, 1998. Under the
operator's contract, Isle-Bettendorf pays the Riverbend Regional Authority a fee
equal to 4.1 % of the adjusted gross receipts. Further, pursuant to statute,
Isle-Bettendorf generally must pay a fee to the City of Bettendorf equal to
1.65% of adjusted gross receipts.
On June 10, 1994, the Marquette Gaming Corporation n/k/a Upper
Mississippi Gaming Corporation, a not-for-profit corporation organized for the
purpose of facilitating riverboat gaming in Marquette, Iowa, entered into an
management agreement for the Miss Marquette for a period of twenty-five years.
Under the management agreement, the non-profit organization is to be paid a fee
of $.50 per passenger. Further, pursuant to a dock site agreement (which also
has a term of twenty-five years), Isle-Marquette is required to pay a fee to the
City of Marquette in the amount of $1 per passenger, plus a fixed amount of
$15,000 per month and 2.5% of gaming revenues (less state wagering taxes) in
excess of $20,000,000 - $40,000,000; 5% of gaming revenues (less state wagering
taxes) in excess of $40,000,000-$60,000,000; and 7.5% of gaming revenues (less
state wagering taxes) in excess of $60,000,000.
In 1994, Iowa amended the enabling legislation removing several previous
restrictions including loss and wager limits and restrictions on the amount of
space on a vessel that may be utilized for gaming. Current law permits gaming
licensees to offer unlimited stakes gaming on games approved by the Iowa Gaming
Commission on a 24-hour basis. Dockside casino gaming is authorized by the Iowa
Gaming Commission although the licensed vessel is required to conduct at least
one two-hour excursion cruise each day for at least 100 days during the
excursion season. The legal age for gaming is 21.
The enabling legislation gives each county the opportunity to hold a
referendum on whether to allow casino gaming within its boundaries. A
referendum was passed in Scott County on April 7, 1994, with 80% voting in favor
of passage and authorizing casino gaming in Bettendorf for a period of nine
years from the issuance date of the license. Similarly, a referendum was passed
in Clayton County with approximately 60% voting in favor of passage. Another
referendum cannot be held until 2002 and if approved, subsequent referenda will
occur at eight-year intervals.
On January 20, 2000 the Iowa Gaming Commission granted both Isle-Bettendorf
and Isle-Marquette gaming licenses. Each license was for an initial term of
thirteen months beginning on March 1, 2000, is not transferable and will need to
be renewed in March 2001 and at the end of each annual renewal period.
<PAGE>
The ownership and operation of gaming facilities in Iowa are subject to
extensive state laws, regulations of the Iowa Gaming Commission and various
county and municipal ordinances (collectively, the "Iowa Gaming Laws"),
concerning the responsibility, financial stability and character of gaming
operators and persons financially interested or involved in gaming operations,
Iowa Gaming Laws seek to: (1) prevent unsavory or unsuitable persons from having
direct or indirect involvement with gaming at any time or in any capacity; (2)
establish and maintain responsible accounting practices and procedures; (3)
maintain effective control over the financial practices of licensees (including
the establishment of minimum procedures for internal fiscal affairs, the
safeguarding of assets and revenues, the provision of reliable record keeping
and the filing of periodic reports with the Iowa Gaming Commission); (4) prevent
cheating and fraudulent practices; and (5) provide a source of state and local
revenues through taxation and licensing fees. Changes in Iowa Gaming Laws could
have a material adverse effect on the Iowa gaming operations.
Gaming licenses granted to individuals must be renewed every year, and
licensing authorities have broad discretion with regard to such renewals.
Licenses are not transferable. The Iowa gaming operations must submit detailed
financial and operating reports to the Iowa Gaming Commission. Any contract in
excess of $50,000 must be submitted to and approved by the Iowa Gaming
Commission
Missouri
Conducting gambling games and operating a gaming riverboat in Missouri are
subject to extensive regulation under the Missouri Riverboat Gambling Act (the
"Act") and the rules and regulations promulgated thereunder. The Missouri
Gaming Commission (the "Commission") is charged with such regulatory authority,
including the issuance of riverboat gaming licenses. IOC-Kansas City, Inc., a
subsidiary of the Company, has been issued a license in connection with our
Kansas City operation, and we have additional applications pending in connection
with the Boonville project and our development in Jefferson County.
In order to obtain a gaming license, applicants must submit comprehensive
application forms and undergo extensive background investigation by the
Commission. An applicant will not receive a license to conduct gambling games
and to operate an excursion gambling boat if the applicant has not established
its good repute and moral character and no licensee shall either employ or
contract with any person who has pled guilty to, or been convicted of, a felony,
to perform any duties directly connected with the licensee's privileges under a
license granted by the Commission. Each license granted entitles a licensee to
conduct gambling games on an excursion gambling boat or to operate an excursion
gambling boat and the equipment thereon from a specific location. The duration
of the license initially runs for two one-year terms; thereafter, two-year
terms. The Commission also licenses the serving of alcoholic beverages on
riverboats and adjacent facilities. In addition, all local income, earnings,
use, property and sales taxes are applicable to licensees.
In determining whether to grant a license, the Commission considers the
following factors, among other: (i) the integrity of the applicants; (ii) the
types and variety of games the applicant may offer; (iii) the quality of the
physical facility, together with improvements and equipment, and how soon the
project will be completed; (iv) the financial ability of the applicant to
develop and operate the facility successfully; (v) the status of governmental
actions required by the facility; (vi) management ability of the applicant;
(vii) compliance with applicable statutes, rules, charters, and ordinances;
(viii) the economic, ecological and social impact of the facility as well as the
cost of public improvements; (ix) the extent of public support or opposition;
(x) the plan adopted by the home dock city or county; and (xi) effects on
competition.
A licensee is subject to the imposition of penalties, suspension or
revocation of its license for any act that is injurious to the public health,
safety, morals, good order, and general welfare of the people of the state of
Missouri, or that would discredit or tend to discredit the Missouri gaming
industry or the state of Missouri, including without limitation: (i) failing to
comply with or make provision for compliance with the legislation, the rules
promulgated thereunder or any federal, state or local law or regulation; (ii)
failing to comply with any rules, order or ruling of the Commission or its
agents pertaining to gaming; (iii) receiving goods or services from a person or
business entity who does not hold a supplier's license but who is required to
hold such license by the legislation or the rules; (iv) being suspended or ruled
ineligible or having a license revoked or suspended in any state of gaming
jurisdiction; (v) associating with, either socially or in business affairs, or
employing persons of notorious or unsavory reputation or who have extensive
police records, or who have failed to cooperate with any officially constituted
investigatory or administrative body and would adversely affect public
confidence and trust in gaming; (vi) employing in any Missouri gaming operation
any person known to have been found guilty of cheating or using any improper
device in connection with any gambling game; (vii) use of fraud, deception,
misrepresentation or bribery in securing any license or permit issued pursuant
to the legislation; (viii) obtaining any fee, charge, or other compensation by
fraud, deception or misrepresentation; and (ix) incompetence, misconduct, gross
negligence, fraud, misrepresentation or dishonesty in the performance of the
functions or duties
regulated by the Act.
<PAGE>
An ownership interest in a license or in a business entity which holds a
license, other than a publicly held business entity, may not be transferred
without the approval of the Commission. In addition, an ownership interest in a
license or in a business entity which holds either directly or indirectly a
license, other than a publicly held business entity, may not be pledged as
collateral to other than a regulated bank or savings and loan association
without the Commission's approval.
Every employee participating in a riverboat gaming operation must hold an
occupational license. In addition, the Commission issues supplier's licenses,
which authorize the supplier licensee to sell or lease gaming equipment and
supplies to any licensee involved in the operation of gaming operations.
Even if continuously docked, licensed riverboats must establish and abide
by a cruise schedule. Riverboat cruises are generally required to be a minimum
of two hours. They may disembark at any time. Missouri law imposes a maximum
loss per person per cruise of $500. Minimum and maximum wagers on games are set
by the licensee and wagering may be conducted only with a cashless wagering
system, whereby money is converted to tokens, electronic cards or chips which
can only be used for wagering. Pursuant to a law which was passed during the
2000 legislative session, effective August 28, 2000, cash must be converted to
electronic credits which may be utilized for wagering. No person under the age
of 21 is permitted to wager, and wagers may only be taken from a person present
on a licensed excursion gambling boat.
The Act imposes a 20% wagering tax on adjusted gross receipts (generally
defined as gross receipts less winnings paid to wagerers) from gambling games.
The tax imposed is to be paid by the licensee to the Commission on the day after
the day when the wagers were made. Of the proceeds of that tax, 10% goes to the
local government where the home dock is located, and the remainder goes to the
state education assistance fund.
The Act also requires that licensees pay a $2.00 admission tax to the
Commission for each person admitted to a gaming cruise. The licensee is required
to maintain public books and records clearly showing amounts received from
admission fees, the total amount of gross receipts and the total amount of
adjusted gross receipts.
Florida
On June 15, 1995, the Florida Department of Business and Professional
Regulation, acting through its division of pari-mutuel wagering (the ''Florida
Division''), issued its final order approving Pompano Park as a pari-mutuel
wagering permit holder for harness and quarter horse racing at Pompano Park. The
Florida Division approved Pompano Park's license to conduct a total of 150 live
evening performances for the season beginning July 1, 2000 to June 30, 2001.
Although Isle of Capri does not presently intend to conduct quarter horse racing
operations at Pompano Park, it may do so in the future, subject to Florida
Division approval. The Florida Division must approve any transfer of 10% or more
of stock of a pari-mutuel racing permit holder such as Pompano Park.
Chapter 550 of the Florida Statute and the applicable rules and regulations
thereunder (the ''Florida Statute'') establishes license fees, the tax structure
on pari-mutuel permit holders and minimum purse requirements for breeders and
owners. The Florida Division may revoke or suspend any permit or license upon
the willful violation by the permit holder or licensee of any provision of the
Florida Statute. Instead of suspending or revoking a permit or license, the
Florida Division may impose various civil penalties on the permit holder or
licensee. Penalties may not exceed $1,000 for each count or separate offense.
<PAGE>
Pursuant to a Florida Division order and recent enactments to the Florida
Statute, Pompano Park is also authorized to conduct full-card pari-mutuel
wagering on: (1) simulcast harness races from outside Florida throughout the
racing season and (2) night thoroughbred races within Florida if the
thoroughbred permit holder has decided to simulcast night races. Pompano Park
has been granted the exclusive right in Florida to conduct full-card
simulcasting of harness racing on days during which no live racing is held at
Pompano Park. However, on non-race days, Pompano Park must offer to rebroadcast
its simulcast signals to pari-mutuel facilities that are not thoroughbred parks.
In addition, Pompano Park may transmit its live races into any dog racing or jai
alai facility in Florida, including Dade and Broward counties, for intertrack
wagering. The Florida Statute establishes the percentage split between Pompano
Park and the other facilities receiving such signals. Recent legislation in
Florida provided certain reductions in applicable tax and license fees related
to intertrack wagering on broadcasts of simulcast harness racing and
thoroughbred racing. Isle of Capri believes that simulcast rights at Pompano
Park and the recent changes in the Florida Statute are important to Pompano
Park's operating results.
Effective January 1, 1997, the Florida Statute permits pari-mutuel
facilities to be licensed by the Florida Division to operate card rooms in those
counties in which a majority vote of the County Commission has been obtained and
a local ordinance has been adopted. Card rooms can only be operated at
pari-mutuel facilities on days that the facility is running live races. The
hours of operation extend from two hours before post time of the first live race
to two hours after the conclusion of the last live race. Thoroughbred racing
facilities must choose between operating card rooms or simulcasting night races
from outside the state, but may not do both. If racing facilities elect to
simulcast night races, they are required to retransmit the night simulcast
signal to certain other pari-mutuel facilities, including Pompano Park.
The card room operator is the ''house'' and must deal the cards. The house
can charge a fee per player or establish a ''rake'' for each game. The only card
games that have been authorized are ''nonbanking'' games, such as games in which
the house is not allowed to play against the players. The winnings of any player
in a single round, hand or game may not exceed $10.00 and all card games must be
played with tokens or chips.
Card rooms may be operated and managed on behalf of the pari-mutuel permit
holder by card room management companies that hold a special license from the
Florida Division. All employees of the card room management company and the card
room operator need to obtain a specific $50.00 occupational license from the
Florida Division before they can work in the card room. There is no statutory
limit on the number of card tables allowed in a card room. However, the annual
license fee for the first card table is $1,000 and $500 for each table
thereafter. A card room's annual occupational license fee is $250.
Each card room operator is required to pay a tax of 10% of his monthly
gross receipts from card room operations. ''Gross receipts'' is defined as the
total amount of money received by a card room from any person to participate in
authorized games. At least 50% of the monthly ''net proceeds,'' if any, at
Pompano Park must be distributed as follows: 47% to supplement purses for
harness racing and 3% to supplement breeders' awards during the next ensuing
race meet. ''Net proceeds'' are the total amount of gross receipts received by a
card room operator from card room operations, less direct operating expenses as
defined in the Florida Statute.
NON-GAMING REGULATION
Isle of Capri is subject to certain federal, state and local safety and
health, employment and environmental laws, regulations and ordinances that apply
to non-gaming businesses generally, such as the Clean Air Act, Clean Water Act,
Occupational Safety and Health Act, Resource Conservation Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act and the Oil
Pollution Act of 1990. Isle of Capri has not made, and does not anticipate
making, material expenditures with respect to such environmental laws and
regulations. However, the coverage and attendant compliance costs associated
with such laws, regulations and ordinances may result in future additional costs
to Isle of Capri's operations. For example, in 1990 the U.S. Congress enacted
the Oil Pollution Act of 1990 to consolidate and rationalize mechanisms under
various oil spill response laws. The Department of Transportation has
promulgated regulations requiring owners and operators of certain vessels to
establish through the Coast Guard evidence of financial responsibility for
clean-up of oil pollution. This requirement has been satisfied by proof of
adequate insurance.
Our riverboats operated in Louisiana and Iowa must comply with U.S. Coast
Guard requirements as to boat design, on-board facilities, equipment, personnel
and safety and hold U.S. Coast Guard Certificates of Documentation and
Inspection. The U.S. Coast Guard requirements also set limits on the operation
of the riverboats and require licensing of certain personnel involved with the
operation of the riverboats. Loss of a riverboat's Certificate of Documentation
and Inspection could preclude its use as a riverboat casino. Each of our
riverboats is inspected annually and, every five years, is subject to drydocking
for inspection of its hull, which could result in a temporary loss of service.
<PAGE>
Permanently moored vessels such as the casino barges utilized at our
Mississippi and Missouri properties are not required to hold Certificates of
Documentation and Inspection from the U.S. Coast Guard. However, the barges are
inspected by a third party and certified with respect to stability and single
compartment flooding integrity. Our casino barges in Mississippi must be
inspected every two years and must also meet the fire safety standards of the
Mississippi Fire Prevention Code and the Life Safety Code and the Standards for
the Construction and Fire Protection of Marine Terminals, Piers and Wharfs of
the National Fire Protection Association. We would incur additional costs if
either of its Mississippi gaming facilities were not in compliance with one or
more of these regulations.
We are also subject to certain federal, state and local environmental laws,
regulations and ordinances that apply to non-gaming businesses generally, such
as the Clean Air Act, Clean Water Act, Resource Conservation Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act and the Oil
Pollution Act of 1990. The coverage and attendant compliance costs associated
with these laws, regulations and ordinances may result in future additional
costs to our operations.
Regulations adopted by the Financial Crimes Enforcement Network of the U.S.
Treasury Department require us to report currency transactions in excess of
$10,000 occurring within a gaming day, including identification of the patron by
name and social security number. Substantial penalties can be imposed against
Isle of Capri if it fails to comply with these regulations.
All shipboard employees of Isle of Capri, even those who have nothing to do
with its operation as a vessel, such as dealers, waiters and security personnel,
may be subject to the Jones Act which, among other things, exempts those
employees from state limits on workers' compensation awards.
ITEM 2. PROPERTIES
Isle-Lake Charles
We own approximately 2.7 acres and lease approximately 16.25 acres of land
in Calcasieu Parish, Louisiana for use in connection with the Isle-Lake Charles.
This lease currently expires in March 2005 and we have the option to renew it
for sixteen additional terms of five years each. Rent under the Isle-Lake
Charles lease is currently $1.2 million per year and is subject to increases
based on the Consumer Price Index and construction of hotel facilities on the
property.
Isle-Bossier City
We own approximately 38 acres of land in Bossier City, Louisiana for use in
connection with the Isle-Bossier City and own a 234-room hotel on approximately
10.5 acres of land located 2.5 miles east of the Isle-Bossier City.
Isle-Biloxi
We lease the Biloxi berth from the Biloxi Port Commission at an annual rent
of the greater of $500,000 or 1% of the gross gaming revenue net of state and
local gaming taxes. The lease terminates on July 1, 2004 and we have the option
to renew it for seven additional terms of five years each subject to increases
based on the cost of living index.
We lease our land-based facilities from the City of Biloxi at an annual
rent of $500,000 per year, plus 3% of the Isle-Biloxi's gross gaming revenues,
net of state and local gaming taxes and fees, in excess of $25.0 million. The
lease terminates on July 1, 2004, but it is renewable at our option for five
additional terms of five years each and a sixth option renewal term, concluding
on January 31, 2034, subject to rent increases based on the Consumer Price
Index. In April 1994, we entered into an addendum to this lease which requires
us to pay 4% of our gross non-gaming revenue, net of sales tax, complimentaries
and discounts.
In April 1994, in connection with the construction of a hotel, we entered
into a lease for additional land adjoining the Isle-Biloxi. This lease with the
City of Biloxi is for an initial term of 25 years, with options to renew for six
additional terms of ten years each and a final option period concluding December
31, 2085. Annual rent is $404,000 plus 4% of gross non-gaming revenue, as
defined in the lease, and renewals are subject to rent increases based on the
Consumer Price Index.
<PAGE>
We are a party to a lease for the exclusive use of approximately 133
parking spaces and the additional use of 169 spaces in another parking lot on
property adjacent to the Isle-Biloxi. This lease expires on November 30, 2000.
We have also entered into a joint venture arrangement to sublease property
containing a two-level parking garage next to the Isle-Biloxi. The annual rent
under this lease is approximately $169,000. This lease terminates on November
30, 2000.
Isle-Vicksburg
We own approximately 13.1 acres of land in Vicksburg, Mississippi for use
in connection with the Isle-Vicksburg. We own an additional 13 acres of land in
Vicksburg on which we operate off-site parking and a recreational vehicle park.
We also entered into a lease for approximately five acres of land adjacent to
the Isle-Vicksburg to be used for additional parking.
Isle-Black Hawk
Black Hawk LLC owns approximately 9.1 acres of land in Black Hawk, Colorado
for use in connection with the Isle-Black Hawk.
Pompano Park
We own approximately 220 acres at Pompano Park.
Isle-Tunica
We lease approximately 122 acres of land in Tunica County, Mississippi for
use in connection with the Isle-Tunica. The initial lease term is five years and
we have the option to renew the lease for seven additional terms of five years.
Base rent for each lease year equals the greater of 2% of gross gaming revenue
or $800,000. Once gross gaming revenue exceeds $40.0 million during any lease
year, the base rent in the following months of such year shall be increased by
an amount equal to 2% of such excess. The landlord is entitled to receive
additional rent based on excess available cash, as defined in the lease.
Isle-Lula
We lease approximately 1,000 acres of land in Coahoma County, Mississippi
and utilize approximately 50 acres in connection with the operations of
Isle-Lula. Unless terminated by us at an earlier date, the lease expires in
2033. Rent under the lease is currently 5 1/2% of gross gaming revenue as
established by the Mississippi Gaming Commission, as well as $3,333 per month
for the Rhythm & Blues hotel. We also lease the property in Helena, Arkansas,
upon which our off-site hotel is located. Rent under that lease is currently 3%
of the revenue from the hotel. We also own approximately 100 acres in Coahoma
County, which may be utilized for future development.
Isle-Bettendorf
We own approximately 24.6 acres of land in Bettendorf, Iowa used in
connection with the operations of Isle-Bettendorf. We also lease approximately
8 acres of land from an entity owned by members of Bernard Goldstein's family,
including Robert Goldstein, which we utilize for parking. The initial term of
the lease expires 60 days after written notice is given to either party and rent
under the lease is currently $20,000 per month.
Isle-Natchez
Through numerous lease agreements, we lease approximately 64 acres of land
in Natchez, Mississippi which is used in connection with the operations of
Isle-Natchez. Unless terminated by us at an earlier date, the lease expiration
dates vary from 2001- 2037. Rents under the leases currently total
approximately $60,000 per month. We also lease approximately 7.5 acres of land
which is utilized for parking at the facility. We also own approximately 6
acres of property in Natchez, Mississippi, as well as the property upon which
our hotel is located.
<PAGE>
Isle-Marquette
We lease the dock site in Marquette, Iowa which is used in connection with
the operations of the Isle-Marquette. The lease expires in 2019, and rent under
the lease is currently $15,000 per month, plus $.50 per passenger, plus a
percentage of gaming revenues less state wagering taxes that exceed $20,000 per
year. We also lease approximately 5 acres of land used for the employee parking
lot. That is a year-to-year lease which renews every August 15th, and rent is
currently $833 per month. We also own approximately 25 acres of land for the
pavilion, hotel, satellite offices, warehouse, lots by the marina, and other
property.
Isle-Kansas City
We lease approximately 28 acres from the Kansas City Port Authority in
connection with the operation of the Flamingo Casino. The term of the lease is
6 years and we have the option to renew the lease for 4 additional terms of 10
years each. Rent under the lease is currently $3,000,000 per year, subject to
the higher of $3,000,000 (minimum rent) per year, or 3.25% of gross revenues,
less complimentaries.
Other
We own all of the riverboats and barges utilized at our existing
facilities. We also own or lease all of our gaming and non-gaming equipment.
We lease our corporate office in Biloxi and our corporate office in Boca
Raton, Florida. We also own an office in Baton Rouge, Louisiana which is
utilized as a regional office for our Louisiana properties.
The Company has various property leases and options to either lease or
purchase property which are not directly related to our existing operations.
The properties are in Lula, Vicksburg, Natchez, Gulfport and Biloxi,
Mississippi, Lake Charles, and Bossier City, Louisiana, Boonville, St. Louis
County and Jefferson County, Missouri, and may be utilized in the future in
connection with expansion projects at our existing facilities or development of
new projects.
We own one additional riverboat casino, one floating pavilion, a partially
completed vessel and several barges that are currently held for development or
sale.
ITEM 3. 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 November 1999, the Isle-Vicksburg was named as a defendant in an action
brought by individuals who own property adjacent to the Big Black River in the
eastern part of Warren County, Mississippi and several other parties. Also named
as defendants in the action are two other operators in the Vicksburg market and
one of the largest banks in the State of Mississippi. The complaint alleges that
the defendants entered into an agreement to conduct a campaign opposing a gaming
application for a site on the Big Black River. The plaintiffs allege that
because of this agreement trade was improperly restrained and competition in the
gaming business was reduced. The plaintiffs further allege that the defendants
conspired for the purpose of injuring the plaintiffs' property rights. The
Company has settled this lawsuit.
<PAGE>
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.
The plaintiffs have appealed this decision to 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 appealed, and is currently pending. We intend to vigorously defend this
suit.
Lady Luck Gaming Corporation ("Lady Luck")
------------------------------------------
Shareholder Class Action Lawsuits
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.
Greek Lawsuit
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. The payments the Company is alleged to have been
required to make aggregate approximately 2.1 billion drachma (which was
approximately $5.7 million as of April 30, 2000 based on published exchange
rates). Although it is difficult to determine the damages being sought from the
lawsuit, the action may seek damages up to that aggregate amount plus interest.
The case is still in its preliminary stage and its outcome cannot be predicted
with any degree of certainty. However, we intend to vigorously defend the
claims asserted in this action.
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
A special meeting of Isle of Capri stockholders in connection with BRDC
Acquisition.
On February 16, 2000, a special meeting of stockholders was held to
consider the BRDC Acquisition. The acquisition was approved by our stockholders
with 17,849,728 voting for the acquisition and 104,992 voting against the
acquisition.
Special Meeting of Lady Luck Stockholders in connection with the Lady Luck
Acquisition.
-
On February 8, 2000, a special meeting of Lady Luck stockholders was held
in order to consider the Lady Luck acquisition. The acquisition was approved by
the Lady Luck shareholders with not less than 4,010,480 voting for the
acquisition.
Annual Meeting of Stockholders
---------------------------------
The Annual Meeting of Stockholders was held September 22, 1999 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 an amendment to the Company's 1993 Stock Option
Plan to increase the number of shares of the Company's common stock available
for issuance thereunder by 1,150,000 shares; and
(3) To approve the selection of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending April 30, 2000.
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 . 19,965,528 18,333 -
John M. Gallaway. . 19,965,528 18,333 -
Allan B. Solomon. . 19,965,528 18,333 -
Robert S. Goldstein 19,958,475 25,386 -
Allan J. Glazer . . 19,965,528 18,333 -
Emanuel Crystal . . 19,965,528 18,333 -
Randolph Baker. . . 19,965,528 18,333 -
</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
------ --- -------- ---------
Amendment to 1993 Stock Option Plan 17,010,875 542,329 2,430,657
Selection of Ernst & Young LLP. . . 19,943,389 32,740 7,282
</TABLE>
<PAGE>
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS'
MATTERS.
(a) Market Information. The following table presents the high and low bid
------------------
quotations for our Common Stock as reported on the Nasdaq National Market for
the fiscal periods indicated. The quotations reflect interdealer prices,
without retail mark-up or commissions, and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
<S> <C> <C>
Fiscal Year Ended April 25, 1999 . . . . . High Low
------ ------
First Quarter . . . . . . . . . . . . $ 4.13 $ 3.00
Second Quarter. . . . . . . . . . . . 3.63 1.75
Third Quarter . . . . . . . . . . . . 4.25 2.44
Fourth Quarter. . . . . . . . . . . . 6.50 3.88
Fiscal Year Ended April 30, 2000
First Quarter . . . . . . . . . . . . $ 8.69 $ 5.75
Second Quarter. . . . . . . . . . . . 13.00 7.50
Third Quarter . . . . . . . . . . . . 14.06 9.88
Fourth Quarter. . . . . . . . . . . . 16.25 10.38
Fiscal Year Ended April 29, 2001
First Quarter (through July 14, 2000) $17.75 $12.50
</TABLE>
(b) Holders of Common Stock. As of July 14, 2000, there were 1,066
--------------------------
holders of record of the Common Stock.
(c) Dividends. Isle of Capri has never paid any dividends with respect to
---------
its Common Stock and the current policy of the Board of Directors is to retain
earnings to provide for the growth of the company. In addition, our Senior
Credit Facility and the indenture governing our Senior Subordinated Notes limits
our ability to pay dividends. See "Item 8 - Index to Consolidated Financial
Statements -Isle of Capri Casinos, Inc.-Notes to Consolidated Financial
Statements - Note 7." Consequently, no cash dividends are expected to be paid
on our Common Stock in the foreseeable future. Further, there can be no
assurance that our current and proposed operations will generate the funds
needed to declare a cash dividend or that we will have legally available funds
to pay dividends. In addition, we may fund part of our operations in the future
from indebtedness, the terms of which may prohibit or restrict the payment of
cash dividends. If a holder of Common Stock is disqualified by the regulatory
authorities from owning such shares, such holder will not be permitted to
receive any dividends with respect to such stock. See "Item
1-Business-Regulatory Matters."
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following table presents our selected consolidated financial data for
the five most recent fiscal years. This data is from our audited consolidated
financial statements and the notes to those statements. Because the data in
this table does not provide all of the data contained in our financial
statements, including the related notes, you should read ''Management's
Discussion and Analysis of Financial Condition and Results of Operations'' and
the consolidated financial statements, including the related notes, contained
elsewhere in this document, and other data we have filed with the U.S.
Securities and Exchange Commission.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED
APRIL 30, APRIL 25, APRIL 26, APRIL 27, APRIL 30,
2000 (1) 1999 (2) 1998 1997 (3) 1996 (3)
--------- ----------- ----------- ----------- -----------
INCOME STATEMENT DATA: (dollars in millions, except per share data)
Revenue. . . . . . . . . . . . $ 684.9 $ 480.4 $ 440.8 $ 373.4 $ 158.0
Operating income . . . . . . . 113.5 68.7 61.1 28.5 2.4
Net income (loss) before
extraordinary item. . . . 32.1 12.1 7.5 (8.8) 1.6
Net income (loss). . . . . . . 31.1 (24.2) 7.5 (21.1) 1.6
Net income (loss) before
extraordinary item
per common share
Basic. . . . . . . . . . . . . 1.22 0.51 0.32 (0.39) 0.10
Diluted. . . . . . . . . . . 1.15 0.51 0.32 (0.39) 0.10
Net income (loss) per
common share
Basic. . . . . . . . . . . . 1.18 (1.03) 0.32 (0.94) 0.10
Diluted. . . . . . . . . . . . 1.11 (1.01) 0.32 (0.94) 0.10
BALANCE SHEET DATA:
Total assets . . . . . . . . . $1,305.5 $ 676.5 $ 615.7 $ 528.4 $ 226.5
Long-term debt,
including current portion 962.9 532.8 442.1 379.5 139.8
Stockholders' equity . . . . . 155.5 62.0 86.1 78.0 50.3
</TABLE>
(1) The data presented for fiscal years prior to fiscal 2000 is not comparable
to other periods presented because they do not include the operating results of
Isle-Tunica which opened July 26, 1999 and on March 2, 2000, we acquired
Isle-Natchez, Isle-Lula, Isle-Bettendorf, and Isle-Marquette.
(2) The data presented for fiscal years prior to fiscal 1999 are not comparable
to other periods because they do not include the operating results of Isle-Black
Hawk which opened December 30, 1998.
(3) The operating results for fiscal years prior to fiscal 1998 are not
comparable to other periods presented because the Isle-Bossier City and
Isle-Lake Charles were accounted for under the equity method until August 6,
1996, when the remaining interests in these facilities were acquired by Isle of
Capri. In addition, the earnings per share amounts prior to fiscal 1998 have
been restated as required to comply with Statement of Financial Accounting
Standards No. 128, Earnings Per Share. For further discussion of earnings per
common share and the impact of Standards No. 128, see the notes to the
consolidated financial statements.
<PAGE>
ITEM 7. 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 Form 10-K.
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, develop a casino as the Isle-Boonville in Boonville,
Missouri, and to develop hotels at the Isle-Lake Charles, the Isle-Black Hawk,
and the Isle-Tunica and the expansion of non-gaming amenities at all facilities,
including the conversion of the recently acquired Lady Luck Gaming facilities
and the Kansas City Flamingo Hilton Casino into Isle of Capri themed casinos,
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 and labor and unforeseen delays resulting
from a failure to obtain necessary approvals.
GENERAL
Isle of Capri's results of operations for the fiscal year ended April 30,
2000 include approximately two months of operating results from the Lady Luck
casinos in Bettendorf and Marquette, Iowa and Lula and Natchez, Mississippi.
These casinos were acquired through Isle of Capri's acquisition of Lady Luck
Gaming Corporation, BRDC, Inc. and other related assets on March 2, 2000. Prior
to March 2, 2000, the results of operations reflect the consolidated operations
of all of Isle of Capri's subsidiaries, including the Isle-Biloxi, the
Isle-Vicksburg, Isle-Bossier City, the Isle-Lake Charles, the Isle-Black Hawk
(which opened December 31, 1998) and the Isle-Tunica (which opened July 26,
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
Fiscal Year Ended April 30, 2000 Compared to Fiscal Year Ended April 25, 1999
Total revenue for the fiscal year ended April 30, 2000 was $684.9 million,
which included $619.4 million of casino revenue, $12.4 million of rooms revenue,
$22.1 million of pari-mutuel commissions and $31.0 million of food, beverage and
other revenue. This compares to total revenue for the previous fiscal year ended
April 25, 1999 of $480.4 million, which included $424.4 million of casino
revenue, $10.8 million of room revenue, $21.4 million of pari-mutuel commissions
and $23.8 million of food, beverage and other revenue. Casino revenue increased
$195.0 million or 45.9% primarily as a result of the inclusion of approximately
two months of operating results from the acquisition of Lady Luck, a full year
of operations at the Isle-Black Hawk (which commenced operations on December 30,
1998), the opening of a 305-room hotel at the Isle-Bossier City, increased
market share at the Isle-Lake Charles, the opening of the Isle-Tunica on July
26, 1999 and a full year of operating results from a 124-room hotel at the
Isle-Vicksburg (which opened in March 1999). Room revenue and food, beverage and
other revenue have increased primarily as a result of the Lady Luck acquisition
and the increased number of hotel rooms. Pari-mutuel commissions and fees have
increased slightly compared to the prior year as a result of adverse weather
conditions in the prior fiscal year. Revenue does not reflect the retail value
of any complimentaries.
<PAGE>
Casino operating expenses for the fiscal year ended April 30, 2000 totaled
$116.1 million, or 18.7% of casino revenue, versus $77.7 million, or 18.3% of
casino revenue, for the fiscal year ended April 25, 1999. These expenses are
primarily comprised of salaries, wages and benefits and other operating expenses
of the casinos. Casino operating expenses have increased slightly as a
percentage of casino revenue due to weak operating results at the Isle-Tunica.
Operating expenses for the fiscal year ended April 30, 2000 also included
room expenses of $5.8 million from the hotels at the Isle-Lake Charles,
Isle-Bossier City, Isle-Biloxi, Isle-Vicksburg and the Isle-Lula,
Isle-Bettendorf, Isle-Natchez and Isle-Marquette. These expenses reflect those
directly relating to the cost of providing these hotel rooms. Other costs of the
hotels are shared with the casinos and are presented in their respective expense
categories. Rooms operating expenses as a percentage of rooms revenue increased
from 36.1% for the fiscal year ended April 25, 1999 to 46.8% for the fiscal year
ended April 30, 2000. Room expenses and room expenses as a percentage of rooms
revenue both increased primarily as a result of start up costs related to the
opening of the new 305 room deluxe Isle-Bossier City hotel in late June 1999.
Additionally, the hotels acquired through the Lady Luck acquisition currently
have higher operating expenses than the Isle of Capri Casino hotels.
State and local gaming taxes paid in Louisiana, Mississippi, Iowa and
Colorado totaled $122.6 million, or 19.8% of casino revenue, for the fiscal year
ended April 30, 2000, compared to $86.9, or 20.5% of casino revenue million for
the fiscal year ended April 25, 1999, which is consistent with each state's
gaming tax rate for the applicable fiscal years.
Pari-mutuel operating costs of Pompano Park totaled $16.4 million in fiscal
2000 compared to $15.7 million in fiscal 1999. Such costs consist primarily of
compensation, benefits, purses, simulcast fees and other direct costs of track
operations. Pari-mutuel operating costs as a percentage of pari-mutuel revenues
have increased from 73.7% for the fiscal year ended April 25, 1999 to 74.4% for
the fiscal year ended April 30, 2000. This increase is primarily related to
increased competition for simulcasting contracts at Pompano Park.
Food, beverage and other expenses totaled $19.1 million for the fiscal year
ended April 30, 2000, compared to $14.2 million for the fiscal year ended April
25, 1999. These expenses have increased as a result of the opening of the
Isle-Black Hawk and the Isle-Tunica, as well as the Lady Luck acquisition. These
expenses consist primarily of the cost of goods sold, salaries, wages and
benefits and operating expenses of these departments. Food and beverage
operating expenses as a percentage of food, beverage and other revenues
increased from 59.6% for the fiscal year ending April 25, 1999 to 61.6% for the
fiscal year ended April 30, 2000. Food and beverage operating margins were
lower primarily due to increased food cost related to certain seafood items
which are featured in most of the Company's restaurants.
Marine and facilities expenses totaled $39.9 million for the fiscal year
ended April 30, 2000, versus $28.2 million for the fiscal year ended April 25,
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. Marine and facilities expenses have increased
due to the addition of several new and acquired facilities. Marine and
facilities expenses as a percentage of total revenue have remained level at
approximately 5.8%.
Marketing and administrative expenses totaled $205.7 million, or 30.0% of
total revenue, for the fiscal year ended April 30, 2000, versus $144.5 million,
or 30.1% of total revenue, for the fiscal year ended April 25, 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 due
primarily to the opening of the addition of several new and acquired casino
facilities, while these expenses as a percentage of total revenue remains level
as a result of management's expense containment programs.
Preopening expenses of $3.4 million for the fiscal year ended April 30,
2000 represent salaries, benefits, training, marketing and other
non-capitalizable costs, which were expensed in connection with the opening of
the Isle-Tunica.
<PAGE>
Depreciation and amortization expense was $42.3 million for the fiscal year
ended April 30, 2000 and $36.3 million for the fiscal year ended April 25, 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 $55.6 million for the fiscal year ended April 30,
2000, net of capitalized interest of $2.4 million and interest income of $4.8
million, versus $45.7 million for the year ended April 25, 1999, net of
capitalized interest of $7.2 million and interest income of $2.9 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 $9.7 million, net of
capitalized interest of $1.1 million and interest income of $.4 million related
to Black Hawk LLC is included in the fiscal year ended April 30, 2000. This
compares to interest expense of $4.9 million, net of capitalized interest of
$4.8 million and interest income of $0.8 million, for the fiscal year ended
April 25, 1999.
Isle of Capri's effective tax rate was 44.3% prior to extraordinary items
for the fiscal year ended April 30, 2000 and 49.3% for the fiscal year ended
April 25, 1999, which includes the effects of non-deductible goodwill
amortization for income tax purposes. The effective tax rate decreased during
fiscal 2000 compared to fiscal 1999, as a result of increased taxable income
which offsets the fixed effects of the non-deductible goodwill amortization.
Fiscal Year Ended April 25, 1999 Compared to Fiscal Year Ended April 26, 1998
Total revenue for the fiscal year ended April 25, 1999 was $480.4 million,
which included $424.4 million of casino revenue, $10.8 million of rooms revenue,
$21.4 million of pari-mutuel commissions and $23.8 million of food, beverage and
other revenue. This compares to total revenue for the previous fiscal year ended
April 26, 1998 of $440.8 million, which included $388.2 million of casino
revenue, $9.5 million of room revenue, $22.6 million of pari-mutuel commissions
and $20.5 million of food, beverage and other revenue. Casino revenue increased
primarily as a result of increased market share at the Isle-Lake Charles, the
commencement of operations at the Isle-Black Hawk on December 30, 1998 and the
opening of a 124-room hotel at the Isle-Vicksburg. Room revenue and food,
beverage and other revenue have increased as a result of the increased number of
hotel rooms and the development of Isle of Capri's themed restaurant, branded
Farraddays', which opened at each of Isle of Capri's casino properties during
fiscal 1998 and were open a full year in fiscal 1999. Pari-mutuel commissions
and fees decreased slightly compared to the prior year as a result of adverse
weather conditions and increased competition for simulcasting contracts at
Pompano Park. Revenue does not reflect the retail value of any complimentaries.
Casino operating expenses for the fiscal year ended April 25, 1999 totaled
$77.7 million, or 18.3% of casino revenue, versus $76.1 million, or 19.6% of
casino revenue, for the fiscal year ended April 26, 1998. These expenses are
primarily comprised of salaries, wages and benefits and other operating expenses
of the casinos. Casino operating expenses have decreased primarily as a result
of continued refinement of Isle of Capri's payroll and operating cost control
programs.
Operating expenses for the fiscal year ended April 25, 1999 also included
room expenses of $3.9 million from the hotels at the Isle-Lake Charles,
Isle-Bossier City, Isle-Biloxi and the Isle-Vicksburg. These expenses are those
directly relating to the cost of providing hotel rooms. Other costs of the
hotels are shared with the casinos and are presented in their respective expense
categories. Rooms operating expenses as a percentage of rooms revenue increased
from 34.3% for the fiscal year ended April 26, 1998 to 36.1% for the fiscal year
ended April 25, 1999. Room expenses as a percentage of rooms revenue increased
primarily as a result of start up costs related to the opening of the
Isle-Vicksburg hotel in February 1999 and increased competition for the old
Isle-Bossier City hotel.
State and local gaming taxes paid in Louisiana, Mississippi and Colorado
totaled $86.9 million for the fiscal year ended April 25, 1999, compared to
$78.6 million for the fiscal year ended April 26, 1998, which is consistent with
each state's gaming tax rate for the applicable fiscal years.
Pari-mutuel operating costs of Pompano Park totaled $15.7 million in fiscal
1999 compared to $16.3 million in fiscal 1998. Such costs consist primarily of
compensation, benefits, purses, simulcast fees and other direct costs of track
operations. Pari-mutuel operating costs as a percentage of pari-mutuel revenues
have increased from 72.3% for the fiscal year ended April 26, 1998 to 73.7% for
the fiscal year ended April 25, 1999. The increase is primarily related to the
decrease in revenues from simulcasting.
<PAGE>
Food, beverage and other expenses totaled $14.2 million for the fiscal year
ended April 25, 1999, compared to $13.4 million for the fiscal year ended April
26, 1998. These expenses have increased as a result of the opening of the
Isle-Black Hawk and were partially offset by Isle of Capri's payroll and
inventory cost reduction efforts. These expenses consist primarily of the cost
of goods sold, salaries, wages and benefits and operating expenses of these
departments. Food and beverage operating expenses as a percentage of food,
beverage and other revenues decreased from 65.3% for the fiscal year ending
April 26, 1998 to 59.6% for the fiscal year ended April 25, 1999. Food and
beverage operating margins have improved as a result of payroll and inventory
cost reduction efforts.
Marine and facilities expenses totaled $28.2 million for the fiscal year
ended April 25, 1999, versus $26.2 million for the fiscal year ended April 26,
1998. These expenses include salaries, wages and benefits, operating expenses of
the marine crews, insurance, housekeeping and general maintenance of the
riverboats and floating pavilions. Marine and facilities expenses have increased
due to the addition of the Isle-Black Hawk and the maturity of Isle of Capri's
vessels and facilities.
Marketing and administrative expenses totaled $144.5 million, or 30.1% of
total revenue, for the fiscal year ended April 25, 1999, versus $132.3 million,
or 30.0% of total revenue, for the fiscal year ended April 26, 1998. 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 due
primarily to the opening of the Isle-Black Hawk, while these expenses as a
percentage of total revenue remains level as a result of management's expense
containment programs.
Preopening expenses of $3.3 million for the fiscal year ended April 25,
1999 represent salaries, benefits, training, marketing and other
non-capitalizable costs, which were expensed in connection with the opening of
the Isle-Black Hawk.
Isle of Capri's results of operations for the fiscal year ended April 25,
1999 include the reversal of an accrued litigation settlement of $4.2 million
related to the boarding tax liability at the Isle-Bossier City, for which the
courts have determined Isle of Capri is not liable. Isle of Capri has also
recorded a write-down of the assets held for development or sale of $2.4 million
related to its two original riverboat casino vessels and land that Isle of Capri
was planning to develop in Cripple Creek, Colorado. During the third fiscal
quarter of 1999, Isle of Capri entered into an agreement to sell one of its two
original riverboats for less than the recorded value. This sale had not closed
as of the fiscal year ended 1999. Based on the agreed upon sales price, Isle of
Capri has adjusted the valuation allowance related to both original riverboats
to reflect the fair value. Because Isle of Capri has delayed its plans to
develop a casino on the land it owns in Cripple Creek, Isle of Capri has
established a valuation allowance on the land to reflect the fair value of the
land as the carrying value. Isle of Capri also established a reserve for a
future obligation under an operating lease related to its Cripple Creek project
at the discounted present value of $2.7 million. These items occurred during the
third quarter of fiscal 1999.
Depreciation and amortization expense was $36.3 million for the fiscal year
ended April 25, 1999 and $33.6 million for the fiscal year ended April 26, 1998.
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, including the assets placed into service upon the commencement of
operations at the Isle-Black Hawk.
Interest expense was $45.7 million for the fiscal year ended April 25,
1999, net of capitalized interest of $7.2 million and interest income of $2.9
million, versus $46.9 million for the year ended April 26, 1998, net of
capitalized interest of $2.7 million and interest income of $4.7 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 $5.0 million, net of
capitalized interest of $4.8 million and interest income of $.8 million related
to Black Hawk LLC is included in the fiscal year ended April 25, 1999. This
compares to interest expense of $2.0 million, net of capitalized interest of
$2.3 million and interest income of $3.0 million, for the fiscal year ended
April 26, 1998.
<PAGE>
Isle of Capri's effective tax rate was 49.3% prior to extraordinary items
for the fiscal year ended April 25, 1999 and 49.8% for the fiscal year ended
April 26, 1998, which includes the effects of non-deductible goodwill
amortization for income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 2000, Isle of Capri had cash and cash equivalents of $168.0
million and short term investments of $39.0 million that mature within the next
eight months, compared to $85.1 million at April 25, 1999. The increase in cash
is primarily a result of cash flow from operating activities and excess proceeds
from our March 2, 2000 refinancing. During the fiscal year ended April 30, 2000,
Isle of Capri's operating activities provided $130.4 million of cash, compared
to $65.2 million of cash provided by operating activities in the fiscal year
ended April 25, 1999.
Isle of Capri invested $104.6 million in property and equipment during the
fiscal year ended April 30, 2000, primarily for the development of the
Isle-Tunica, the development of a 305-room deluxe hotel at the Isle-Bossier
City, a 250-room deluxe hotel at the Isle-Lake Charles, a 227-room hotel at the
Isle-Tunica and the development of a 237-room hotel at the Isle-Black Hawk. This
compares to $95.0 million invested in property and equipment during the fiscal
year ended April 25, 1999, primarily related to the development of the
Isle-Black Hawk, which commenced operations on December 30, 1998 and the
development of a 124-room hotel at the Isle-Vicksburg.
On March 2, 2000 Isle of Capri acquired Lady Luck in a merger transaction.
Lady Luck's common stockholders received cash in the amount of $12.00 per share
for an aggregate consideration of approximately $59 million. Isle of Capri
intends to invest approximately $35.0 million over the next 12 months to convert
the Lady Luck casinos into Isle of Capri casinos of which $1.6 million was
incurred as of fiscal year end 2000. The Company funded the acquisition of Lady
Luck using amounts drawn under its Amended and Restated Senior Credit Facility.
Simultaneously with the Lady Luck acquisition discussed above, Isle of
Capri acquired BRDC, Inc. which held the other 50% interest in Lady Luck's
Bettendorf, Iowa facility not owned by Lady Luck, and related real estate, in
exchange for 6.3 million shares of Isle of Capri common stock, subject to
post-closing adjustment in certain circumstances. This interest was owned by
members of the family of Bernard Goldstein, Isle of Capri's Chairman and Chief
Executive Officer, including Robert Goldstein, a member of the Company's board
of directors.
On March 2, 2000 Isle of Capri Casinos, Inc. amended and restated its
Senior Credit Facility in connection with its acquisition of Lady Luck Gaming
Corporation and BRDC, Inc., as well as to provide financing for the pending
acquisitions of the Flamingo Hilton Riverboat Casino in Kansas City, Missouri
and of Davis Gaming Boonville, Inc. 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, which is
undrawn as of the date of this filing.
On May 3, 2000, Isle of Capri acquired Davis Gaming Boonville, Inc., 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 the $11.5
million purchase price paid and to be paid for Davis Gaming Boonville, Inc.
Isle of Capri has begun construction on this project and intends to fund this
development through its Amended and Restated Senior Credit Facility.
Additionally, on June 5, 2000, Isle of Capri acquired certain assets of the
Flamingo Hilton Riverboat Casino in Kansas City, Missouri from Flamingo Hilton
Riverboat, L.P., a subsidiary of Hilton Hotels Corporation 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 intends to fund the acquisition and
improvements through cash from operations and its Amended and Restated Senior
Credit Facility.
<PAGE>
Isle of Capri anticipates that a significant portion of its principal
near-term capital requirements will relate to the expansion of the Isle-Tunica,
the Isle-Lake Charles and the Isle-Black Hawk. Isle of Capri is in the process
of investing an additional amount of $44.5 million to construct an on-site hotel
at the Isle-Tunica with approximately 227 rooms and two live entertainment
theaters with combined seating for approximately 1,800 people. The hotel is
currently under construction and the site work necessary for the construction of
the theaters has begun. Isle of Capri has also begun construction of an on-site
250-room deluxe hotel at the Isle-Lake Charles, with an estimated cost of
approximately $33.0 million. Additionally, the Isle-Black Hawk is continuing
the construction of a hotel containing 237 rooms at the Isle-Black Hawk for
approximately $29.0 million. Isle of Capri is assisting Isle-Black Hawk with
the financing of the development of this hotel and plans to loan $5.0 million
with interest payable in cash and another $5.0 million with interest payable in
kind (with additional notes). Additionally, Isle of Capri has agreed to
contribute up to $10.0 million in additional equity to supplement funds
generated from Isle-Black Hawk operations to complete the hotel, if necessary.
The Missouri Gaming Commission has selected our Jefferson County, Missouri
project for development. This project, which will primarily serve the South St.
Louis metropolitan area, was selected over three other projects, including our
proposed project at the Jefferson Barracks site in South St. Louis County.
The project is expected to include a 35,000 square foot casino, our signature
restaurants and a 200-room hotel. We expect to begin construction in late 2000
and to complete this approximately $105 million project in the spring of 2002.
A joint venture in which we own 45% and have a management contract has
applied to the Louisiana Gaming Commission for the issuance of a license. The
gaming commission is not expected to make a decision until early 2001.
On July 18, 2000 the Company signed an agreement to purchase the Davenport,
Iowa casino and hotel from President Casinos et al for $58.2 million. The
closing of the transaction is subject to a number of conditions including the
satisfactory completion of a due diligence review and the necessary regulatory
approvals.
In June 1999, PPI, Inc. sold an option to purchase 135 acres of property,
adjacent to its Pompano Park Harness Racing Track, for $16.3 million. The sale
resulted in a gain on disposal of approximately $3.1 million.
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 its
plans are preliminary, subject to continuing refinement or otherwise subject to
change.
In addition to the $35.0 million Isle of Capri expects to invest to convert
the Lady Luck casinos into Isle of Capri casinos, Isle of Capri anticipates that
capital improvements approximating $27.0 million will be made during fiscal 2001
to maintain its existing facilities and remain competitive in its markets. Isle
of Capri expects that available cash and cash from future operations, as well as
borrowings under its Senior Credit Facility, will be adequate 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 governing the 8
3/4 % Senior Subordinated Notes 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 limits, among
other things, 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 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
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 Senior Credit Facility and interest payments of $17.1 million
semi-annually on its 8 3/4 % 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>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss arising from adverse changes in market
rates and prices, including interest rates, foreign currency exchange rates,
commodity prices and equity prices. Isle of Capri's primary exposure to market
risk is interest rate risk associated with its Amended and Restated Senior
Credit Facility. We do not utilize these financial instruments for trading
purposes. We manage our interest rate risk on long-term debt by managing the mix
of our fixed-rate and variable-rate debt. There has been no change in how we
manage our interest rate risk when compared to the prior fiscal year. Isle of
Capri does not use interest rate derivative instruments to manage exposure to
interest rate changes.
The following table provides information at April 30, 2000, about our
financial instruments that are sensitive to changes in interest rates. The table
presents principal cash flows (in thousands) and related weighted average
interest rates by expected maturity dates.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FISCAL YEAR
(dollars in thousands). . . . . . . . . . . . . 2001 2002 2003 2004
----------------------------------------------- -------- ------------ --------- ------------
Liabilities
Long-term Debt, including Current portion
Fixed Rate . . . . . . . . . . . . . . . . $ 3,650 $ 3,052 $ 2,361 $ 2,321
Avg. interest rate . . . . . . . . . . . . 9.430% 9.432% 9.433% 9.432%
Variable Rate. . . . . . . . . . . . . . . $13,750 $ 18,750 $ 23,750 $ 28,750
Avg. interest rate (1) . . . . . . . . . . - - - -
FISCAL YEAR Fair Value
(dollars in thousands). . . . . . . . . . . . . 2005 Thereafter Total 4/30/00
----------------------------------------------- -------- ------------ --------- ------------
Liabilities
Long-term Debt, including Current portion
Fixed Rate . . . . . . . . . . . . . . . . $ 2,531 $ 473,986 $487,901 $ 452,576
Avg. interest rate . . . . . . . . . . . . 9.430% 10.622%
Variable Rate. . . . . . . . . . . . . . . $33,750 $ 356,250 $475,000 $ 475,000
Avg. interest rate (1) . . . . . . . . . . - -
</TABLE>
(1) Interest is based upon, at our option, a one-, two-, three-, or six-month
Eurodollar rate plus a margin ranging from 1.75% to 3.625%, or the prime rate
plus a margin ranging from 0.75% to 2.625% for our term loan and revolving
credit facility. The applicable margin is dependent upon Isle of Capri's
outstanding indebtedness and operating cash flow.
<PAGE>
ITEM 8. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
PAGE
----
ISLE OF CAPRI CASINOS, INC.
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Consolidated Balance Sheets, April 30, 2000 and April 25, 1999 . . . . . . . . . . . . . . . . . . . 41
Consolidated Statements of Operations, Years ended April 30, 2000, April 25, 1999 and April 26, 1998 42
Consolidated Statements of Stockholders' Equity, Years ended April 30, 2000, April 25, 1999
and April 26, 1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Consolidated Statements of Cash Flows, Years ended April 30, 2000, April 25, 1999 and April 26, 1998 44
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Isle of Capri Casinos, Inc.
We have audited the accompanying consolidated balance sheets of Isle of
Capri Casinos, Inc. as of April 30, 2000 and April 25, 1999, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years ended April 30, 2000, April 25, 1999 and April 26, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Isle of Capri
Casinos, Inc. at April 30, 2000 and April 25, 1999, and the consolidated results
of their operations and their cash flows for the years ended April 30, 2000,
April 25, 1999 and April 26, 1998, in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG LLP
New Orleans, Louisiana
June 15, 2000, except
for Note 20, as to which
the date is July 26, 2000
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
April 30, April 25,
ASSETS 2000 1999
------ ---------- -----------
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 167,972 $ 85,117
Short term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,044 -
Accounts receivable:
Related party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307 41
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,343 5,894
Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 7,509
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,167 4,684
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . 9,500 5,771
---------- -----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . 238,333 109,016
Property and equipment - net.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 699,246 411,176
Other assets:
Investment in and advances to joint ventures. . . . . . . . . . . . . . . . . . 1,914 1,851
Property held for development or sale . . . . . . . . . . . . . . . . . . . . . 3,782 5,532
Licenses and other intangible assets, net of accumulated amortization of
$11,896 and $8,960, respectively.. . . . . . . . . . . . . . . . . . . . . 91,100 63,408
Goodwill, net of accumulated amortization
$11,721 and $8,644, respectively.. . . . . . . . . . . . . . . . . . . . . 228,530 52,818
Berthing, concession, and leasehold rights, net of accumulated amortization of
$2,462 and $2,149, respectively. . . . . . . . . . . . . . . . . . . . . . 3,806 4,119
Deferred financing costs, net of accumulated amortization of $4,145 and
$1,305, respectively.. . . . . . . . . . . . . . . . . . . . . . . . . . . 25,466 19,351
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,556 5,480
Prepaid deposits and other. . . . . . . . . . . . . . . . . . . . . . . . . . . 7,781 3,733
---------- -----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,305,514 $ 676,484
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current maturities of long-term debt. . . . . . . . . . . . . . . . . . . . . . $ 17,400 $ 5,883
Accounts payable:
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,407 20,102
Related party.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 -
Accrued liabilities:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,010 2,033
Payroll and related.. . . . . . . . . . . . . . . . . . . . . . . . . . . 39,338 23,867
Property and other taxes. . . . . . . . . . . . . . . . . . . . . . . . . 16,096 11,700
Income tax payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,661 -
Progressive jackpots and slot club awards.. . . . . . . . . . . . . . . . 9,033 5,351
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,996 9,888
---------- -----------
Total current liabilities.. . . . . . . . . . . . . . . . . . . . . . 162,036 78,824
Long-term debt, less current maturities. . . . . . . . . . . . . . . . . . . . . . . 945,501 526,873
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,763 4,689
Other accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,851 -
Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,843 4,143
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: 30,369 at April 30, 2000 and 23,569 at April 25, 1999.. . . . 304 236
Class B common stock, $.01 par value; 3,000 shares authorized; none
issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 125,572 63,146
Retained earnings (deficit). . . . . . . . . . . . . . . . . . . . . . . . 29,644 (1,427)
---------- -----------
Total stockholders' equity. . . . . . . . . . . . . . . . . . . . . . 155,520 61,955
---------- -----------
Total liabilities and stockholders' equity. . . . . . . . . . . . . . $1,305,514 $ 676,484
========== ===========
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Fiscal Year Ended
-------------------
April 30, April 25, April 26,
2000 1999 1998
------------------- ----------- -----------
Revenue:
Casino . . . . . . . . . . . . . . . . . $ 619,351 $ 424,379 $ 388,223
Rooms. . . . . . . . . . . . . . . . . . 12,444 10,829 9,528
Pari-mutuel commissions and fees . . . . 22,064 21,351 22,565
Food, beverage and other . . . . . . . . 30,991 23,818 20,500
------------------- ----------- -----------
Total revenue . . . . . . . . . . . 684,850 480,377 440,816
Operating Expenses:
Casino . . . . . . . . . . . . . . . . . 116,105 77,679 76,072
Gaming taxes . . . . . . . . . . . . . . 122,572 86,855 78,586
Rooms. . . . . . . . . . . . . . . . . . 5,824 3,914 3,271
Pari-mutuel. . . . . . . . . . . . . . . 16,406 15,741 16,315
Food, beverage and other . . . . . . . . 19,089 14,204 13,379
Marine and facilities. . . . . . . . . . 39,862 28,218 26,203
Marketing and administrative . . . . . . 205,730 144,541 132,300
Accrued litigation settlement (reversal) - (4,215) -
Valuation charge . . . . . . . . . . . . - 5,097 -
Preopening expenses. . . . . . . . . . . 3,420 3,320 -
Depreciation and amortization. . . . . . 42,346 36,277 33,588
------------------- ----------- -----------
Total operating expenses. . . . . . 571,354 411,631 379,714
------------------- ----------- -----------
Operating income . . . . . . . . . . . . 113,496 68,746 61,102
Interest expense . . . . . . . . . . . . (60,413) (48,638) (51,579)
Interest income. . . . . . . . . . . . . 4,780 2,907 4,702
Gain on disposal . . . . . . . . . . . . 3,106 - -
Minority interest. . . . . . . . . . . . (3,700) 2,209 819
Equity in income (loss) of
unconsolidated joint ventures . . . 259 (1,340) -
------------------- ----------- -----------
Income before income taxes
and extraordinary item. . . . . . . 57,528 23,884 15,044
Income tax provision . . . . . . . . . . 25,473 11,775 7,497
------------------- ----------- -----------
Income before extraordinary item.. . . . 32,055 12,109 7,547
Extraordinary loss on extinguishment
of debt, net of applicable income
tax benefit of $634, $19,538,
and $0, respectively. . . . . . . . (984) (36,285) -
------------------- ----------- -----------
Net income (loss). . . . . . . . . . . . $ 31,071 $ (24,176) $ 7,547
=================== =========== ===========
Earnings (loss) per share
of common stock:
Earnings (loss) per common share:
Income before extraordinary item. . $ 1.22 $ 0.51 $ 0.32
Extraordinary loss, net.. . . . . . $ (0.04) $ (1.54) $ -
------------------- ----------- -----------
Net income (loss).. . . . . . . . . $ 1.18 $ (1.03) $ 0.32
=================== =========== ===========
Earnings (loss) per common share -
assuming dilution:
Income before extraordinary item. . $ 1.15 $ 0.51 $ 0.32
Extraordinary loss, net . . . . . . $ (0.04) $ (1.52) $ -
------------------- ----------- -----------
Net income (loss) . . . . . . . . . $ 1.11 $ (1.01) $ 0.32
=================== =========== ===========
Weighted average basic shares . . . 26,327 23,569 23,455
Weighted average diluted shares . . 27,925 23,859 23,465
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
Shares of Additional Retained Total
Common Common Paid-in Earnings Stockholders'
Stock Stock Capital (Deficit) Equity
---------- ------- ----------- ---------- ---------------
Balance, April 27, 1997. . . . . . . . . . . . . 23,345,287 $ 233 $ 62,538 $ 15,202 $ 77,973
Exercise of stock options . . . . . . . . . 8,438 - 8 - 8
Issuance of stock for deferred financing
costs . . . . . . . . . . . . . . . . . . 174,337 2 498 - 500
Issuance of stock for compensation. . . . . 40,500 1 102 - 103
Net income. . . . . . . . . . . . . . . . . - - - 7,547 7,547
---------- ------- ----------- ---------- ---------------
Balance, April 26, 1998. . . . . . . . . . . . . 23,568,562 236 63,146 22,749 86,131
Net loss. . . . . . . . . . . . . . . . . . - - - (24,176) (24,176)
---------- ------- ----------- ---------- ---------------
Balance, April 25, 1999. . . . . . . . . . . . . 23,568,562 236 63,146 (1,427) 61,955
Exercise of stock options and warrants. . . 500,390 5 2,727 - 2,732
Issuance of common stock for acquisition. . 6,300,000 63 59,699 59,762
Net income. . . . . . . . . . . . . . . . . - - - 31,071 31,071
---------- ------- ----------- ---------- ---------------
Balance, April 30, 2000. . . . . . . . . . . . . 30,368,952 $ 304 $ 125,572 $ 29,644 $ 155,520
========== ======= =========== ========== ===============
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Fiscal Year Ended
-------------------
April 30, April 25, April 26,
2000 1999 1998
------------------- ----------- -----------
OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,071 $ (24,176) $ 7,547
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . 42,346 36,277 33,588
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . 17,410 (7,763) 5,303
Amortization of bond discount and deferred financing costs . . 2,969 2,317 1,926
Valuation charge . . . . . . . . . . . . . . . . . . . . . . . - 5,097 -
Gain on disposal of assets.. . . . . . . . . . . . . . . . . . (3,106) 659 -
Equity in (income) loss of unconsolidated joint ventures.. . . (259) 1,340 -
Extraordinary item (net of taxes). . . . . . . . . . . . . . . 984 36,285 -
Minority interest. . . . . . . . . . . . . . . . . . . . . . . 3,700 (2,209) (819)
Changes in current assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . 363 (278) 6,324
Income tax receivable . . . . . . . . . . . . . . . . . . 8,143 15,592 -
Prepaid expenses and other assets.. . . . . . . . . . . . (1,665) (1,126) 1,168
Accounts payable and accrued expenses.. . . . . . . . . . 28,527 3,203 10,272
------------------- ----------- -----------
Net cash provided by operating activities.. . . . . . . . . . . . . 130,483 65,218 65,309
INVESTING ACTIVITIES:
Purchase of property and equipment. . . . . . . . . . . . . . . . . (104,569) (94,996) (65,455)
Net cash paid for acquisitions. . . . . . . . . . . . . . . . . . . (119,355) - -
Purchase of short-term investments. . . . . . . . . . . . . . . . . (39,044) - -
Proceeds from disposals of property and equipment.. . . . . . . . . 6,134 202 251
Investments in and advances to joint ventures . . . . . . . . . . . 196 (1,482) (2,628)
Restricted cash.. . . . . . . . . . . . . . . . . . . . . . . . . . 2,559 44,861 (50,341)
Deposits and other. . . . . . . . . . . . . . . . . . . . . . . . . (3,879) (601) (1,555)
------------------- ----------- -----------
Net cash used in investing activities.. . . . . . . . . . . . . . . (257,958) (52,016) (119,728)
FINANCING ACTIVITIES:
Proceeds from debt. . . . . . . . . . . . . . . . . . . . . . . . . 475,061 447,088 75,000
Principal payments on debt and cash paid to retire debt . . . . . . (258,079) (414,136) (17,823)
Deferred financing costs. . . . . . . . . . . . . . . . . . . . . . (9,384) (13,497) (2,152)
Proceeds from exercise of stock options and warrants. . . . . . . . 2,732 - 8
------------------- ----------- -----------
Net cash provided by financing activities . . . . . . . . . . . . . 210,330 19,455 55,033
Net increase in cash and cash equivalents . . . . . . . . . . . . . 82,855 32,657 614
Cash and cash equivalents at beginning of year. . . . . . . . . . . 85,117 52,460 51,846
------------------- ----------- -----------
Cash and cash equivalents at end of year. . . . . . . . . . . . . . $ 167,972 $ 85,117 $ 52,460
=================== =========== ===========
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
Fiscal Year Ended
-------------------
April 30, April 25, April 26,
2000 1999 1998
------------------- ---------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments (receipts) for:
Interest . . . . . . . . . . . . . . . . . . . . . . $ (1,933) $ 63,297 $ 50,479
Income taxes - net of refunds. . . . . . . . . . . . - 3,140 (4,840)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Notes Payable and Debt issued for:
Property and equipment.. . . . . . . . . . . . . . . 61 8,369 -
Capital Contributions:
Land . . . . . . . . . . . . . . . . . . . . . . . . - - 7,504
Property and equipment . . . . . . . . . . . . . . . - - 1,615
Other:
Deferred financing costs funded through
issuance of common stock . . . . . . . . . . . . . (1,933) - 500
Construction costs funded through accounts payable . - 2,401 1,614
Acquisitions of businesses:
Fair value of assets acquired. . . . . . . . . . . . 496,417 - -
Less fair value of liabilities assumed . . . . . . . (317,300) - -
Less stock issued. . . . . . . . . . . . . . . . . . (59,762) - -
Net cash payment . . . . . . . . . . . . . . . . . . 119,355 - -
</TABLE>
See notes to consolidated financial statements
<PAGE>
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 and Marquette, Iowa and in Black Hawk,
Colorado through its subsidiaries.
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.
Fiscal Year End
Effective April 27, 1997, the Company changed from an April 30 fiscal year
end to a fiscal year ending on the last Sunday in April. This fiscal year
creates more comparability of the Company's quarterly operations, by generally
having an equal number of weeks (13) and week-end days (26) in each quarter.
Periodically this system necessitates a 53 week year. Fiscal 2000 commenced on
April 26, 1999 and ended April 30, 2000 and had 14 weeks in its 4th quarter.
Cash Equivalents
The Company considers all highly liquid investments with a maturity at the
time of purchase of three months or less to be cash equivalents. Cash
equivalents are placed primarily with a high-credit-quality financial
institution. At April 30, 2000, cash equivalents were invested primarily in
short-term commercial paper and U.S. Treasury Bills. The carrying amount of cash
equivalents approximates fair value because of the short maturity of these
instruments.
Revenue and Promotional Allowances
Casino revenue is the net win from gaming activities which is the
difference between gaming wins and losses. Casino revenues are net of accruals
for anticipated payouts of progressive electronic gaming device jackpots.
Revenue does not include the retail amount of food, beverage and other
items provided gratuitously to customers, which totaled $74.9 million, $49.7
million, and $37.0 million for the years ended April 30, 2000, April 25, 1999
and April 26, 1998, respectively. The estimated cost of providing such
complimentary services, which is included in casino expense, was $52.7 million,
$33.1 million and $32.6 million for the years ended April 30, 2000, April 25,
1999 and April 26, 1998, respectively.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense for the
years ended April 30, 2000, April 25, 1999 and April 26, 1998 totaled $14.7
million, $10.8 million and $10.7 million, respectively.
<PAGE>
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
(loss) per share:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal Year Ended
-------------------
April 30, April 25, April 26,
2000 1999 1998
------------------- ----------- ----------
Numerator:
Income before extraordinary item.. . . . . . . . . . . . . . . . $ 32,055 $ 12,109 $ 7,547
Extraordinary loss, net. . . . . . . . . . . . . . . . . . . . . (984) (36,285) -
------------------- ----------- ----------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . 31,071 (24,176) 7,547
Numerator for basic earnings (loss) per share - income
(loss) available to common stockholders . . . . . . . . . . 31,071 (24,176) 7,547
Effect of diluted securities.. . . . . . . . . . . . . . . . . . - - -
------------------- ----------- ----------
Numerator for diluted earnings (loss) per share-
income (loss) available to common stockholders after
assumed conversions. . . . . . . . . . . . . . . . . . $ 31,071 $ (24,176) $ 7,547
=================== =========== ==========
Denominator:
Denominator for basic earnings (loss) per share -
weighted - average shares . . . . . . . . . . . . . . . . . 26,327 23,569 23,455
Effect of dilutive securities
Employee stock options and warrants . . . . . . . . . . . . 1,598 290 10
------------------- ----------- ----------
Dilutive potential common shares.. . . . . . . . . . . . . . . . 1,598 290 10
------------------- ----------- ----------
Denominator for diluted earnings (loss) per share -
adjusted weighted - average shares and assumed conversions. 27,925 23,859 23,465
=================== =========== ==========
BASIC EARNINGS (LOSS) PER SHARE
Income before extraordinary item. . . . . . . . . . . . . . $ 1.22 $ 0.51 $ 0.32
Extraordinary loss, net . . . . . . . . . . . . . . . . . . (0.04) (1.54) -
------------------- ----------- ----------
Net income (loss).. . . . . . . . . . . . . . . . . . . . . $ 1.18 $ (1.03) $ 0.32
=================== =========== ==========
DILUTED EARNINGS (LOSS) PER SHARE
Income before extraordinary item. . . . . . . . . . . . . . $ 1.15 $ 0.51 $ 0.32
Extraordinary loss, net . . . . . . . . . . . . . . . . . . (0.04) (1.52) -
------------------- ----------- ----------
Net income (loss).. . . . . . . . . . . . . . . . . . . . . $ 1.11 $ (1.01) $ 0.32
=================== =========== ==========
</TABLE>
Stock Options
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the market value of the shares at the date of
grant. The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" in accounting for its stock
option plans and accordingly, does not recognize compensation cost.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
April 30, April 25,
2000 1999
--------------- ----------
(In thousands)
Property and equipment:
Land and land improvements. . . . . $ 114,626 $ 60,776
Leasehold improvements. . . . . . . 98,473 98,120
Buildings and improvements. . . . . 307,116 123,845
Riverboats and floating pavilions . 98,448 97,332
Furniture, fixtures, and equipment. 171,364 98,145
Construction in progress. . . . . . 53,565 42,966
--------------- ----------
843,592 521,184
Less: accumulated depreciation. . . 144,346 110,008
--------------- ----------
$ 699,246 $ 411,176
=============== ==========
</TABLE>
The allocation of the purchase price of the Lady Luck and BRDC acquisitions
is tentative pending completion of inventories on the facilities and equipment
acquired. The allocation may change with the completion of these inventories.
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
<S> <C>
YEARS
-------
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>
Interest capitalized during the fiscal years ended April 30, 2000, April
25, 1999, and April 26, 1998 totaled $2.4 million, $7.2 million and $2.7
million, respectively. Depreciation expense for the fiscal years ended April
30, 2000, April 25, 1999 and April 26, 1998 totaled $35.1 million, $30.4 million
and $27.1 million, respectively.
Effective April 26, 1999, Isle of Capri increased its estimate of the
useful lives of all land-based buildings and improvements from 25 years to 39.5
years to more appropriately reflect the expected useful lives of those assets.
Isle of Capri also reduced its estimate of the useful lives of slot machines
from 5 years to 3 years due to technological changes. For the year ended April
30, 2000, the effect of these two changes was immaterial.
3. OTHER ASSETS
Licenses and other intangible assets
Licenses and other intangible assets 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 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.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. OTHER ASSETS (CONTINUED)
Long-lived Assets
The Company periodically evaluates the carrying value of long-lived assets
to be held and used, including goodwill in accordance with Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS 121). SFAS
121 requires impairment losses to be recorded on long-lived assets used in
operations, including related goodwill when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amounts. In that event, a loss is recognized
based on the amount by which the carrying amount exceeds the fair market value
of the long-lived assets. Loss on long-lived assets to be disposed of is
determined in a similar manner, except that fair market values are reduced for
the cost of disposal.
Deferred Financing Costs
The costs of issuing long-term debt are capitalized and are being amortized
using the effective interest method over the term of the related debt.
Berthing, Concession, and Leasehold Rights
Berthing, concession and leasehold rights are recorded at cost and are
being amortized over approximately twenty years 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 Gaming Corporation and BRDC, Inc. Goodwill is being amortized over a
twenty-five-year period using the straight-line method.
Restricted cash
Restricted cash primarily represents cash restricted for a certificate of
deposit in the amount of $1.5 million for the Greek Lawsuit (see footnote 12 for
further details), deposit of $1.1 million held in trust to secure the letter of
credit for Isle-Black Hawk (see footnote 9 for further details), gaming deposits
totaling $1.1 million, workers' compensation in the amount of $0.3 million, and
various other deposits totaling $1.6 million.
4. SHORT-TERM INVESTMENTS
At April 30, 2000 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.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. ISLE OF CAPRI BLACK HAWK, L.L.C.
On April 25, 1997, a wholly-owned subsidiary of the Company, Casino America
of Colorado, formed 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.
Isle-Black Hawk has begun to construct a hotel containing approximately 237
rooms at the site of the Isle-Black Hawk. The Company has a 57% ownership
interest in Isle-Black Hawk. Prior to December 30, 1998, Isle-Black Hawk was a
development stage company.
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 April 30, 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.
7. MERGERS AND ACQUISITIONS
Isle of Capri-Tunica
In March 1999, 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 also plans to invest an additional approximately $44.0
million to construct an on-site hotel with up to 227 rooms and two live
entertainment theaters with combined seating for 1,800 people. Construction of
the hotel is currently underway.
Lady Luck Gaming Corporation
On March 2, 2000 the Company acquired Lady Luck Gaming Corporation ("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 riverboat in
Marquette, Iowa. The Company also completed the acquisition of certain
intellectual property for $31.0 million contemporaneously with the merger. The
Company expects to complete the acquisition of the Las Vegas casino and hotel
upon receipt of regulatory approval in Nevada. The acquisition price for the
Las Vegas facility is $14.5 million.
BRDC, Inc.
On March 2, 2000 the Company merged with BRDC, Inc. ("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 post-closing adjustment in certain circumstances
totaling approximately $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.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. MERGERS AND ACQUISITIONS (CONTINUED)
The operations of Lady Luck and BRDC are included in the consolidated
statements of operations from the date of acquisition. The transactions were
accounted for as a purchase and the excess cost over fair value of the net
assets acquired is being amortized on a straight-line basis over a twenty-five
year period. The allocation of the purchase price of the Lady Luck and BRDC
acquisitions is tentative pending completion of inventories on the facilities
and equipment acquired. The allocation may change with the completion of these
inventories.
The pro forma unaudited results of operations for the years ended April 30,
2000, and April 25, 1999, assuming the purchase of Lady Luck and BRDC had been
consummated as of April 27, 1998, follows:
<TABLE>
<CAPTION>
<S> <C> <C>
April 30, April 25,
2000 1999
----------- -----------
(In thousands, except per share data)
Revenues. . . . . . . . . . . . . . $ 910,698 $ 733,879
Income before extraordinary item. . 13,820 6,580
Net income. . . . . . . . . . . . . 12,836 (29,705)
Income per common share
before extraordinary item:
Basic . . . . . . . . . . . . . 0.52 0.22
Diluted . . . . . . . . . . . . 0.49 0.22
Net income (loss) per common share:
Basic. . . . . . . . . . . . . 0.49 (0.98)
Diluted. . . . . . . . . . . . 0.46 (0.97)
</TABLE>
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
Cash equivalents - The carrying amounts approximate fair value because of
the short maturity of these instruments.
Short-term investments - The carrying amounts approximate fair value
because of the short maturity of these instruments.
Restricted cash - The carrying amounts approximate fair value because of
the short maturity of these instruments.
Long-term debt - The fair value of the company's long-term debt is
estimated based on the quoted market price of the underlying debt issue or
the discounted cash flow of future payments utilizing current rates available to
the company for debt of similar remaining maturities. Debt obligations with a
short remaining maturity are valued at the carrying amount.
The estimated carrying amounts and fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
APRIL 30, 2000 APRIL 25, 1999
---------------- ----------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------ ---------- ----------- ------------
(IN THOUSANDS)
----------------
FINANCIAL ASSETS:
Cash equivalents. . . . . $ 167,972 $ 167,972 $ 85,117 $ 85,117
Short-term investments. . 39,044 39,044 - -
Restricted cash.. . . . . 5,556 5,556 5,480 5,480
FINANCIAL LIABILITIES:
First mortage notes . . . $ 75,000 $ 80,625 $ 75,000 $ 81,375
Other long-term debt. . . 497,901 497,901 67,756 67,756
Senior subordinated notes 390,000 349,050 390,000 390,000
</TABLE>
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. LONG-TERM DEBT
<TABLE>
<CAPTION>
<S> <C> <C>
April 30, April 25,
2000 1999
--------------- ----------
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 (7.82% at April 30, 2000), due in quarterly installments
ranging from $833,333 to $4,166,667, excluding interest, through April 2004. . . 475,000 50,000
12 1/2 % note payable, due in monthly installments of $125,000, including interest,
beginning October 1997 through October 2005. . . . . . . . . . . . . . . . . . . 5,818 6,527
8 % note payable, due in monthly installments of $66,667, including interest,
through July 2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,587 2,283
8 % note payable, due in monthly installments of $11,365, including interest,
through December 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,213 1,250
11% note payable, issued by Isle of Capri Black Hawk, L.L.C., due March 2001;
non-recourse to Isle of Capri Casinos, Inc . . . . . . . . . . . . . . . . . . . 768 1,522
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. . . . . . . . 7,184 -
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,331 6,174
--------------- ----------
962,901 532,756
Less: current maturities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,400 5,883
--------------- ----------
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 945,501 $ 526,873
=============== ==========
</TABLE>
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.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. LONG-TERM DEBT (CONTINUED)
On March 2, 2000 Isle of Capri Casinos, Inc. 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 pending acquisitions of the Flamingo
Hilton Riverboat Casino in Kansas City, Missouri and of Davis Gaming Boonville,
Inc. 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, which was undrawn as of April 30, 2000. On
March 2, 2000, Isle of Capri Casinos, Inc. drew $475.0 million under its Amended
and Restated Senior Credit Facility in connection with the acquisition of Lady
Luck and BRDC. A portion of the initial $475.0 million draw was also used to
repay outstanding amounts under the existing credit facility and to fund the
redemption of Lady Luck notes 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 their subsidiaries. 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.
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
twelve months ended April 30, 2000, is $1,093,000.
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>
Beginning December 1999, Isle-Black Hawk is required to offer to purchase,
at the price of 101% of the aggregate principal amount thereof, the maximum
principal amount of the First Mortgage Notes that may be purchased with 50% of
the Isle-Black Hawk's excess cash flow, as defined (See Subsequent Events).
Isle of Capri has $4.5 million available in bank lines of credit other than
the Senior Credit Facility. As of April 30, 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 "City"). 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. 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.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. LONG-TERM DEBT (CONTINUED)
As part of the City of Bettendorf Development Agreement dated June 17,
1997, the City issued $9,500,000 in tax incremental financing bonds ("TIF
Bonds"), $7,500,000 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 $32,000,000 until
the TIF Bonds mature. 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 $7,500,000. 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 April
30, 2000, Isle of Capri was in compliance with all debt covenants.
The aggregate principal payments due on total long-term debt over the next
five fiscal years and thereafter are as follows:
<TABLE>
<CAPTION>
<S> <C>
Fiscal Year Ending
(In thousands)
-------------------
2001. . . . . . . . $ 17,400
2002. . . . . . . . 21,802
2003. . . . . . . . 26,111
2004. . . . . . . . 31,071
2005. . . . . . . . 36,281
Thereafter. . . . . 830,236
--------
$962,901
========
</TABLE>
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. COMMITMENTS
The Company has an agreement with the Biloxi Port Commission which provides
the Company with certain docking rights. This agreement expires in July 2004,
with seven renewal options of five years each. Annual rentals are the greater of
$500,000 or 1% of gross gaming revenue, as defined. Annual rent during each
renewal term is adjusted for increases in the Consumer Price Index, limited to
6% for each renewal period.
In addition, the Company leases certain land, buildings, and other
improvements from the City of Biloxi under a lease and concession agreement.
This agreement expires in July 2004, with options to renew for six additional
terms of five years each. Annual rent is $530,000 plus 3% of gross gaming
revenue, as defined, in excess of $25.0 million. Annual rent during each renewal
term is adjusted for increases in the Consumer Price Index, limited to 6% for
each renewal period.
In April 1994, the Company entered an Addendum to the lease with the City
of Biloxi, which requires the Company to pay 4% of gross non-gaming revenues
received as defined, net of sales tax, comps and discounts. Additional rent will
be due to the City of Biloxi for the amount of any increase from and after
January 1, 2016 in the rent due to the State Institutions of Higher Learning
under a lease between the City of Biloxi and the State Institutions of Higher
Learning (the "IHL Lease") and for any increases in certain tidelands leases
between the City of Biloxi and the State of Mississippi.
In April 1994, in connection with the construction of a hotel, the Company
entered a lease for additional land. The Company first acquired the leasehold
interest of Sea Harvest, Inc., the original lessee, for consideration of $8,000
per month for a period of ten years. The Company's lease is with the City of
Biloxi, Mississippi, for an initial term of 25 years, with options to renew for
six additional terms of 10 years each and a final option period with a
termination date commensurate with the termination date of the IHL Lease, but in
no event later than December 31, 2085. Annual rent (which includes payments to
be made pursuant to the purchase of a related leasehold interest) is $444,400,
plus 4% of gross non-gaming revenue, as defined. The annual rent is adjusted
after each five-year period based on increases in the Consumer Price Index,
limited to a 10% increase in any five-year period. The annual rent will increase
10 years after the commencement of payments pursuant to a termination of lease
and settlement agreement, to an amount equal to the sum of annual rent as if it
had been $500,000 annually plus adjustments thereto based on the Consumer Price
Index.
In February 1995, in conjunction with its planned Cripple Creek Colorado
operation, the Company entered into a land lease. The lease has an initial term
of 25 years, with options to renew for seven additional terms of 10 years each.
The base rent is $250,000 per year increased by $10,000 each year until the
annual rent is $300,000. After seven years, and every two years thereafter, the
annual rent is adjusted based on increases in the Consumer Price Index, limited
to a 4% increase in any two-year period.
The Company leases approximately 16.25 acres of land in Calcasieu Parish,
Louisiana for use in connection with the Isle-Lake Charles. The initial term of
this lease expires in March 2005 and we have the option to renew it for sixteen
additional terms of five years each. Rent under the Isle-Lake Charles lease is
currently $1.2 million per year and is subject to increases based on the
Consumer Price Index and construction of hotel facilities on the property.
In March 1999, the Company entered into a lease for land in Tunica County,
Mississippi for use in connection with the Isle-Tunica. The initial lease term
is five years with the option to renew the lease for seven additional terms of
five years. Base rent for each lease year equals the greater of 2% of gross
gaming revenue or $800,000. Once gross gaming revenue exceeds $40.0 million
during any lease year, the base rent in the following months of such year shall
be increased by an amount equal to 2% of such excess. The landlord is entitled
to receive additional rent based on excess available cash, as defined in the
lease.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. COMMITMENTS (CONTINUED)
The Company leases riverfront land from the City of Marquette, Iowa, under
a lease agreement. This agreement expires in December 2019. Annual rent is
$180,000 payable in equal monthly installments due on the first of each month.
In addition to the base rent, the Company must also pay the following amounts:
(1) $0.50 per customer per day due the 15th day following each month and (2) 2
1/2% of net gambling receipts, as defined, from $20 million to $40 million, plus
5% of net gambling receipts, as defined, from $40 million to $60 million, plus
7 1/2% of net gambling receipts, as defined, in excess of $60 million, due
annually.
The Company leases approximately 1,000 acres of land in Coahoma County,
Mississippi and utilizes approximately 50 acres in connection with the
operations of Isle-Lula. Unless terminated by the Company at an earlier date,
the lease expires in 2033. Rent under the lease is currently 5 1/2% of
gross gaming revenue as established by the Mississippi Gaming Commission, as
well as $3,333 per month for the Rhythm & Blues hotel. The Company also
leases the property in Helena, Arkansas, upon which the Company's
off-site hotel is located. Rent under that lease is currently 3% of the
revenue from the hotel.
Through numerous lease agreements, the Company leases approximately 64
acres of land in Natchez, Mississippi, which is used in connection with the
operation of Isle - Natchez. Unless terminated by the Company at an earlier
date, the lease expiration dates vary from 2001 - 2037. Rents under the leases
currently total approximately $60,000 per month. The Company also leases
approximately 7.5 acres of land, which is utilized for parking at the facility.
Future minimum payments under capital leases and noncancelable operating
leases with initial terms of one year or more consisted of the following at
April 30, 2000:
<TABLE>
<CAPTION>
<S> <C> <C>
Capital Leases Operating Leases
---------------- -----------------
(In thousands)
2001 . . . . . . . . . . . . . . . . . . . . $ 322 $ 10,552
2002 . . . . . . . . . . . . . . . . . . . . 324 8,958
2003 . . . . . . . . . . . . . . . . . . . . 331 6,431
2004 . . . . . . . . . . . . . . . . . . . . 313 4,707
2005 . . . . . . . . . . . . . . . . . . . . 317 2,730
Thereafter . . . . . . . . . . . . . . . . . 5,264 66,536
---------------- -----------------
Total minimum lease payments . . . . . . . . $ 6,871 $ 99,914
=================
Amounts representing interest. . . . . . . . (4,354)
----------------
Present value of net minimum lease payments. $ 2,517
================
</TABLE>
Rent expense for operating leases was approximately $19.6 million, $10.8
million and $6.8 million for the years ended April 30, 2000, April 25, 1999, and
April 26, 1998, respectively. Such amounts include contingent rentals of $3.0
million $2.6 million and $2.7 million for the years ended April 30, 2000, April
25, 1999, and April 26, 1998, respectively.
11. RELATED PARTY TRANSACTIONS
On January 2, 1998, the Company acquired approximately 0.7 acres of
property (the "Acquired Property") contiguous to the property being developed by
ICBH which was to be used for the expansion of the entrance and the signage of
the Isle-Black Hawk. On January 2, 1998, ICBH, as Lessee, entered into a lease
agreement with the Company for the Acquired Property and will utilize the
Acquired Property in developing the Isle-Black Hawk. The lease payment
consisted of $102,000 paid upon the inception of the lease and $17,000 per
month, commencing July 15, 1998, and continuing until December 31, 2002, and
thereafter on a year to year basis. During the term of the lease, ICBH
purchased the property for $1.5 million plus all interest and out-of-pocket
costs that the Company incurred in connection with the purchase and ownership of
the land, less payments made by ICBH, as lessee.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. RELATED PARTY TRANSACTIONS (CONTINUED)
The Company provides management services to all of its wholly-owned
riverboat casino entities, pursuant to respective management agreements.
Management fees for these services are based upon a percentage of each entity's
revenue and operating income, as defined in the management agreements. The
revenue under the management agreements is eliminated through consolidation.
The Company also leases approximately 8 acres of land from an entity owned
by members of Bernard Goldstein's family, including Robert Goldstein, which we
utilize for parking. The initial term of the lease expires 60 days after
written notice is given to either party and rent under the lease is currently
$20,000 per month.
12. 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 November 1999, the Isle-Vicksburg was named as a defendant in an action
brought by individuals who own property adjacent to the Big Black River in the
eastern part of Warren County, Mississippi and several other parties. Also
named as defendants in the action are two other operators in the Vicksburg
market and one of the largest banks in the State of Mississippi. The complaint
alleges that the defendants entered into an agreement to conduct a campaign
opposing a gaming application for a site on the Big Black River. The plaintiffs
allege that because of this agreement trade was improperly restrained and
competition in the gaming business was reduced. The plaintiffs further allege
that the defendants conspired for the purpose of injuring the plaintiffs'
property rights. The Company has settled this lawsuit.
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. The plaintiffs have appealed this
decision to 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 appealed, and is currently pending. The Company intends to
vigorously defend this suit.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. CONTINGENCIES (CONTINUED)
Lady Luck Gaming Corporation ("Lady Luck")
------------------------------------------
Shareholder Class Action Lawsuits
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.
Greek Lawsuit
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. The payments the Company is alleged to have been
required to make aggregate approximately 2.1 billion drachma (which was
approximately $5.7 million as of April 30, 2000 based on published exchange
rates). Although it is difficult to determine the damages being sought from the
lawsuit, the action may seek damages up to that aggregate amount plus interest.
The case is still in its preliminary stage and its outcome cannot be predicted
with any degree of certainty; however, the Company intends to vigorously defend
the claims asserted in this action.
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.
Environmental Matters
---------------------
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.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. INCOME TAXES
Income tax provision (benefit) consists of the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FISCAL YEAR ENDED
-------------------
APRIL 30, APRIL 25, APRIL 26,
2000 1999 1998
----------- ----------- ----------
(IN THOUSANDS)
Current:
Federal. . . . . $ 6,891 $ (485) $ 1,131
State. . . . . . 538 485 1,063
----------- ----------- ----------
7,429 - 2,194
Deferred:
Federal. . . . . 15,928 (8,558) 4,841
State. . . . . . 1,482 795 462
----------- ----------- ----------
17,410 (7,763) 5,303
----------- ----------- ----------
24,839 (7,763) 7,497
Extraordinary Benefit (634) (19,537) -
----------- ----------- ----------
$ 25,473 $ 11,774 $ 7,497
=========== =========== ==========
</TABLE>
A reconciliation of income tax provision (benefit) to the statutory corporate
federal tax rate of 35% is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FISCAL YEAR ENDED
APRIL 30, APRIL 25, APRIL 26,
2000 1999 1998
---------- ----------- -------------
(IN THOUSANDS)
Statutory tax provision (benefit) $ 19,569 $ (11,178) $ 5,265
Effects of :
State taxes. . . . . . . . . 2,021 591 991
Goodwill . . . . . . . . . . 1,556 1,185 1,327
Valuation allowance. . . . . - - -
Other--net . . . . . . . . . 1,693 1,639 (86)
---------- ----------- -----------
$ 24,839 $ (7,763) $ 7,497
========== =========== ===========
</TABLE>
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. INCOME TAXES (CONTINUED)
Significant components of the Company's net deferred income tax liability are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
FISCAL YEAR ENDED
-------------------
APRIL 30, APRIL 25,
2000 1999
----------- -----------
(IN THOUSANDS)
Deferred tax liabilities:
Property and equipment. . . . . . . . $ 81,072 $ 28,996
Other . . . . . . . . . . . . . . . . 690 1,290
----------- -----------
Total deferred tax liabilities . . . . . . 81,762 30,286
Deferred tax assets:
Dividends . . . . . . . . . . . . . . 351 258
Write-down of assets held for sale. . 20,841 7,440
Preopening expenses . . . . . . . . . (1,522) (1,012)
Accrued expenses. . . . . . . . . . . 9,148 5,035
Charitable contribution carryover . . 926 433
Alternative minimum tax credit. . . . 2,181 4,732
Net operating losses. . . . . . . . . 43,319 21,797
Other . . . . . . . . . . . . . . . . 4,893 (518)
----------- -----------
Total deferred tax assets. . . . . . . . . 80,137 38,165
Valuation allowance on deferred tax assets (8,971) (7,884)
------------ ----------
Net deferred tax assets. . . . . . . . . . 71,166 30,281
------------ ----------
Net deferred tax liabilities . . . . . . . $ 10,596 $ 5
============ ==========
</TABLE>
At April 30, 2000, the Company had alternative minimum tax credits which
can be carried forward indefinitely to reduce future regular tax liabilities.
Additionally, as of April 30, 2000, the Company has federal net operating loss
carryforwards of $104.1 million for income tax purposes, with expiration dates
from 2008 to 2019. Approximately $103.4 million of net operating losses are
subject to limitation under the income tax regulations, which may limit the
amount ultimately utilized.
The utilization of pre-acquisition net operating losses resulted in a
reduction to goodwill of $5.1 million in fiscal 1999.
14. COMMON STOCK
Stock-based compensation.
Under the Company's 1992 and 1993 Stock Option Plans, as amended, a maximum
of 1,058,750 and 4,650,000 options, respectively, may be granted to directors,
officers and employees. The plans provide for the issuance of incentive stock
options and nonqualified options which have a maximum term of 10 years and are,
generally, exercisable in yearly installments ranging from 20% to 25%,
commencing one year after the date of grant.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. COMMON STOCK (CONTINUED)
Stock options outstanding are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
2000 EXERCISE 1999 EXERCISE 1998
OPTIONS PRICE OPTIONS PRICE OPTIONS
---------- --------- ---------- --------- ----------
Outstanding options at beginning of
fiscal year. . . . . . . . . . . . . 3,959,487 $ 4.48 2,718,199 $ 5.24 1,980,138
Options granted . . . . . . . . . . . . . 518,200 10.25 1,342,500 3.05 1,096,500
Options exercised.. . . . . . . . . . . . (380,989) 4.11 - - (8,438)
Options canceled. . . . . . . . . . . . . (176,200) 4.49 (101,212) 6.10 (350,001)
---------- ---------- ----------
Outstanding options at end of fiscal year 3,920,498 $ 5.29 3,959,487 $ 4.48 2,718,199
========== ========== ==========
</TABLE>
Weighted average fair value of options granted during fiscal 2000 and 1999 was
$6.78 and $2.18, respectively.
The following table summarizes information about stock options outstanding at
April 30, 2000:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------- -------------------
WEIGHTED AVERAGE WEIGHTED WEIGHTED
RANGES OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE PRICES. OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
---------------- ----------- ------------------- --------------- ------------- --------------
$.89 - $5.70 . . 2,750,298 7.38 years $ 3.37 696,308 $ 3.78
5.88 - 11.25 . . 932,200 7.54 years 8.73 282,769 7.28
11.56 - 18.00. . 238,000 3.52 years 13.97 238,000 13.97
----------- ------------- --------------
$.89 - $18.00. . 3,920,498 7.19 years $ 5.29 1,217,077 $ 6.58
=========== ============= ==============
</TABLE>
Pro forma information regarding net income and earnings per share is
required by Statement of Financial Accounting Standard No. 123, Accounting for
Stock-based Compensation. Had compensation costs for the Company's two stock
option plans been determined based on the fair value at the grant dates for
awards in fiscal years 2000, 1999 and 1998 consistent with the provisions of
SFAS 123, the Company's net earnings and earnings per share would have been
reduced to the pro forma amounts disclosed below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal Year Ended
April 30, April 25, April 26,
2000 1999 1998
---------- ---------- ---------
(In thousands, except per share data)
NET INCOME (LOSS)
As reported . . . . . . . . . . $ 31,071 ($24,176) $ 7,547
Pro forma . . . . . . . . . . . $ 29,055 ($25,153) $ 6,798
EARNINGS (LOSS) PER COMMON SHARE
Basic
As reported.. . . . . . . . . . $ 1.18 ($1.03) $ 0.32
Pro forma . . . . . . . . . . . $ 1.10 ($1.07) $ 0.29
Diluted
As reported.. . . . . . . . . . $ 1.11 ($1.01) $ 0.32
Pro forma . . . . . . . . . . . $ 1.04 ($1.05) $ 0.29
</TABLE>
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. COMMON STOCK (CONTINUED)
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions used for
grants in fiscal 2000, 1999 and 1998: options vest at 20% per year for five
years; dividend yield of 0%; weighted average expected volatility of .70, .70,
and .74, respectively; risk-free interest rate of 5.8%, 5.2% and 5.3%,
respectively; and expected lives of 6 years.
The pro forma effect on net income (loss) for fiscal 2000, 1999 and 1998 is
not representative of the pro forma effect on net income for future years
because it does not take into account pro forma compensation expense related to
grants made prior to fiscal 1996 or the potential for issuance of additional
stock options in future years.
Warrants
The Company has the following outstanding warrants:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
NUMBER OF
--------- EXERCISE
DATE ISSUED EXPIRATION DATE WARRANTS SHARES PRICE
----------- --------------- --------- ------- ---------
June 1995 . June 9, 2001 1 416,667 $ 12.00
May 1996. . May 3, 2001 1 12,500 $ 5.88
May 1996. . May 3, 2001 380,599 380,599 $ 10.00
May 1996. . May 3, 2001 1 416,667 $ 12.00
August 1996 August 6, 2001 500,000 500,000 $ 10.50
</TABLE>
15. STOCKHOLDER RIGHTS PLAN
In February 1997, the Company adopted a Stockholder Rights Plan. The Plan
is designed to preserve the long-term value of the shareholders' investment in
the Company. Under the Plan, each shareholder will receive a distribution of
one Right for each share of the Company's outstanding common stock. The Rights
were distributed to shareholders of record on March 3, 1997 and will expire ten
years thereafter. Each right entitles the holder to purchase one one-thousandth
(1/1,000) of a share of a new series of participating preferred stock at an
initial exercise price of $12.50. Initially the rights are represented by the
Company's common stock certificates and are not exercisable. The rights become
exercisable shortly after a person or group acquires beneficial ownership of 15%
or more of the Company or publicly announces its intention to commence a tender
or exchange offer that would result in the 15% beneficial ownership level.
Under certain circumstances involving a buyer's acquisition of a 15% position in
the Company, all Rights holders except the buyer will be entitled to purchase
common stock at half price. If the Company is acquired through a merger, after
such an acquisition, all Rights holders except the buyer will be entitled to
purchase stock in the buyer at half price. The Company may redeem the rights at
one cent each at any time before a buyer acquires 15% of the Company's stock.
16. PREOPENING EXPENSES
Preopening expenses of $3.4 million and $3.3 million represent salaries,
benefits, training, marketing and other costs incurred in connection with the
openings of the Isle-Tunica on July 26, 1999 and the Isle-Black Hawk on December
30, 1998, respectively.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
17. VALUATION ALLOWANCE
During fiscal 1999, the Company recorded a valuation allowance totaling
$5.1 million. The valuation allowance reflects the write-down of assets held
for development or sale of $2.4 million related to its two original riverboat
casino vessels and land the Company was planning to develop in Cripple Creek,
Colorado. During the third quarter ended January 24, 1999, the Company entered
an agreement to sell one of its two original riverboats for less than the
recorded value. This sale closed during fiscal year 2000, however, the Company
had adjusted the valuation allowance related to both riverboats to reflect the
fair value, based on the agreed upon sales price as of the third quarter ended
January 24, 1999. Also, management delayed its plans to develop a casino on
land it owns in Cripple Creek, Colorado. Accordingly, during the third quarter
ended January 24, 1999, management established a valuation allowance on the land
it owns in Cripple Creek to reflect the fair value as the carrying value.
Additionally, the valuation allowance included $2.7 million related to future
obligations under an operating lease related to its Cripple Creek, Colorado
project.
18. EXTRAORDINARY ITEM
The Company incurred pre-tax extraordinary losses totaling $1.6 million in
fiscal year 2000 and $55.8 million in fiscal year 1999. These losses are
associated with the extinguishment of debt, primarily related to debt associated
with the acquisition of Lady Luck on March 2, 2000 and the refinancing of the
Company's $315 million 12.5% Senior Secured Notes and other debt on April 23,
1999. These losses included early payment premiums, as well as the write-off of
consent fees and debt acquisition costs. The tax benefit from the extraordinary
losses for fiscal year 2000 and fiscal year 1999 was approximately $0.6 million
and $19.5 million, respectively.
19. EMPLOYEE BENEFIT PLAN
The Company has a defined-contribution, profit-sharing plan, including
401(k) plan provisions, covering substantially all of its employees. The
Company's contribution expense related to this plan was approximately $904,000,
$635,000 and $609,000 for the years ended April 30, 2000, April 25, 1999 and
April 26, 1998, respectively. The Company's contribution is based on a
percentage of employee contributions and may include an additional discretionary
amount.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
20. SUBSEQUENT EVENTS
On May 3, 2000, the Company acquired Davis Gaming Boonville, Inc. and
changed the company name to Isle of Capri Casino-Boonville, Inc., a wholly-owned
subsidiary of the Company. IOC-Boonville has a gaming site in Boonville,
Missouri. Boonville is located midway between Kansas City and St. Louis and
just three miles north of Interstate 70. IOC-Boonville intends to develop a $75
million gaming and entertainment complex with the planned casino consisting of
approximately 900 slot machines and 30 table games in 28,000 square feet of
gaming space. The Isle of Capri's signature restaurants and design and d cor
elements will be showcased in the attached pavilion. Isle of Capri expects to
begin construction on this project four months after receiving the necessary
approvals and intends to fund this development through its Amended and Restated
Senior Credit Facility.
On June 5, 2000, the Isle of Capri Casino-Kansas City, a wholly-owned
subsidiary of the Company, acquired certain assets of the Flamingo Hilton
Riverboat Casino in Kansas City, Missouri, from Flamingo Hilton Riverboat
Casino, L.P., a subsidiary of Hilton Hotel Corporation. The acquisition
included the casino vessel, parking garage and all related gaming equipment for
the purchase price of $33.5 million, less an adjustment for 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 this acquisition and intends to fund the improvements through its
Amended and Restated Credit Facility. The Isle of Capri Casino-Kansas City will
continue to operate under the Flamingo name pursuant to a license agreement
while the facility is converted to the Isle of Capri theme. The property will
include, among other amenities, a Farraddays' Restaurant, Calypso's Buffet and
Tradewinds Marketplace. The facility transition to an Isle of Capri property is
expected to be completed by the end of the year.
On June 5, 2000, the 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.
On July 19, 2000, the Company announced that it had entered into a
definitive agreement to acquire certain assets including the casino vessel,
hotel and all related gaming equipment of the President Casino in Davenport,
Iowa, from President Casinos, Inc. and related parties for $58.2 million.
Completion of the acquisition is subject to a due diligence review and receipt
of all regulatory approvals.
The Missouri Gaming Commission has selected our Jefferson County, Missouri
project for development. This project, which will primarily serve the South St.
Louis metropolitan area, was selected over three other projects, including our
proposed project at the Jefferson Barracks site in South St. Louis County. We
expect to begin construction in late 2000 and to complete this approximately
$105 million project in the spring of 2002.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
21. 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 April 30, 2000, April 25, 1999 and April 26, 1998.
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATING CONDENSED GUARANTOR, NONGUARANTOR AND PARENT COMPANY
FINANCIAL INFORMATION
AS OF AND FOR THE YEARS ENDED APRIL 30, 2000, APRIL 25, 1999 AND APRIL 26, 1998
(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
--------------- -------------- -------------- --------------- --------------
As of April 30, 2000
Balance Sheet
------------------------------------------
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>
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
21. 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
--------------- -------------- -------------- --------------- ---------------
For the year ended April 30, 2000
Statement of Operations
---------------------------------------------
Revenue:
Casino . . . . . . . . . . . . . . . . . $ - $ 530,803 $ 88,548 $ - $ 619,351
Rooms, food, beverage and other. . . . . 1,353 59,509 4,637 - 65,499
--------------- -------------- -------------- --------------- ---------------
Total revenue . . . . . . . . . . . . . . . . 1,353 590,312 93,185 - 684,850
Operating expenses:
Casino . . . . . . . . . . . . . . . . . - 103,509 12,596 - 116,105
Gaming taxes . . . . . . . . . . . . . . - 105,232 17,340 - 122,572
Rooms, food, beverage and other. . . . . (4,997) 253,552 41,776 - 290,331
Depreciation and amortization. . . . . . 1,030 39,202 2,114 - 42,346
--------------- -------------- -------------- --------------- ---------------
Total operating expenses. . . . . . . . . . . (3,967) 501,495 73,826 - 571,354
--------------- -------------- -------------- --------------- ---------------
Operating income. . . . . . . . . . . . . . . 5,320 88,817 19,359 - 113,496
Gain on sale of assets. . . . . . . . . . . . 3,092 14 - - 3,106
Interest expense, net . . . . . . . . . . . . 2,804 (47,683) (10,754) - (55,633)
Minority interest . . . . . . . . . . . . . . - - - (3,700) (3,700)
Equity in income (loss) of
unconsolidated joint venture . . . . . . 44,686 - - (44,427) 259
--------------- -------------- -------------- --------------- ---------------
Income (loss) before income taxes
and extraordinary item . . . . . . . . . 55,902 41,148 8,605 (48,127) 57,528
Income tax provision. . . . . . . . . . . . . 10,977 14,496 - - 25,473
--------------- -------------- -------------- --------------- ---------------
Income (loss) before extraordinary item . . . 44,925 26,652 8,605 (48,127) 32,055
Extraordinary loss on extinguishment of debt
(net of applicable income tax benefit) . - (984) - - (984)
--------------- -------------- -------------- --------------- ---------------
Net income (loss) . . . . . . . . . . . . . . $ 44,925 $ 25,668 $ 8,605 $ (48,127) $ 31,071
=============== ============== ============== =============== ===============
Statement of Cash Flows
---------------------------------------------
Net cash provided by (used in)
operating activities . . . . . . . . . . $ (307,048) $ 267,908 $ 13,825 $ 155,798 $ 130,483
Net cash provided by (used in)
investing activities . . . . . . . . . . (63,577) (21,108) (17,475) (155,798) (257,958)
Net cash used in financing activities . . . . 407,411 (196,327) (754) - 210,330
--------------- -------------- -------------- --------------- ---------------
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . 36,786 50,473 (4,404) - 82,855
Cash and cash equivalents at
beginning of the year. . . . . . . . . . 35,826 38,374 10,917 - 85,117
--------------- -------------- -------------- --------------- ---------------
Cash and cash equivalents at
end of the year. . . . . . . . . . . . . $ 72,612 $ 88,847 $ 6,513 $ - $ 167,972
=============== ============== ============== =============== ===============
</TABLE>
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
21. 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
--------------- -------------- -------------- --------------- ---------------
As of April 25, 1999
Balance Sheet
-----------------------------------------------
Current assets. . . . . . . . . . . . . . . . . $ 36,599 $ 60,679 $ 11,738 $ - $ 109,016
Intercompany receivables. . . . . . . . . . . . 220,578 159,361 - (379,939) -
Investments in subsidiaries . . . . . . . . . . 233,541 - - (231,690) 1,851
Property and equipment, net . . . . . . . . . . 6,605 324,194 80,377 - 411,176
Other assets. . . . . . . . . . . . . . . . . . 44,377 103,916 6,148 - 154,441
--------------- -------------- -------------- --------------- ---------------
Total Assets. . . . . . . . . . . . . . . . . . $ 541,700 $ 648,150 $ 98,263 $ (611,629) $ 676,484
=============== ============== ============== =============== ===============
Current liabilities . . . . . . . . . . . . . . $ 13,395 $ 56,074 $ 9,419 $ (64) $ 78,824
Intercompany payable. . . . . . . . . . . . . . 24,593 349,994 5,289 (379,876) -
Long-term debt, less current maturities . . . . 441,757 9,348 75,768 - 526,873
Deferred income taxes . . . . . . . . . . . . . - 4,689 - - 4,689
Minority interest . . . . . . . . . . . . . . . - - - 4,143 4,143
Stockholders' equity. . . . . . . . . . . . . . 61,955 228,045 7,787 (235,832) 61,955
--------------- -------------- -------------- --------------- ---------------
Total Liabilities and Stockholders' Equity. . . $ 541,700 $ 648,150 $ 98,263 $ (611,629) $ 676,484
=============== ============== ============== =============== ===============
For the year ended April 25, 1999
Statement of Operations
-----------------------------------------------
Revenue:
Casino . . . . . . . . . . . . . . . . . . $ - $ 403,700 $ 20,679 $ - $ 424,379
Rooms, food, beverage and other. . . . . . 429 54,561 1,367 (359) 55,998
--------------- -------------- -------------- --------------- ---------------
Total revenue . . . . . . . . . . . . . . . . . 429 458,261 22,046 (359) 480,377
Operating expenses:
Casino . . . . . . . . . . . . . . . . . . - 74,793 2,886 - 77,679
Gaming taxes . . . . . . . . . . . . . . . - 82,925 3,930 - 86,855
Rooms, food, beverage and other. . . . . . 4,390 192,565 14,224 (359) 210,820
Depreciation and amortization. . . . . . . 3,439 31,853 985 - 36,277
--------------- -------------- -------------- --------------- ---------------
Total operating expenses. . . . . . . . . . . . 7,829 382,136 22,025 (359) 411,631
--------------- -------------- -------------- --------------- ---------------
Operating income (loss) . . . . . . . . . . . . (7,400) 76,125 21 - 68,746
Interest expense, net . . . . . . . . . . . . . (5,671) (34,853) (5,207) - (45,731)
Minority interest . . . . . . . . . . . . . . . - - - 2,209 2,209
Equity in income (loss) of
unconsolidated joint venture . . . . . . . 36,955 - - (38,295) (1,340)
--------------- -------------- -------------- --------------- ---------------
Income (loss) before income taxes
and extraordinary item . . . . . . . . . . 23,884 41,272 (5,186) (36,086) 23,884
Income tax provision (benefit). . . . . . . . . 11,775 2,374 - (2,374) 11,775
--------------- -------------- -------------- --------------- ---------------
Income (loss) before extraordinary item . . . . 12,109 38,898 (5,186) (33,712) 12,109
Extraordinary loss on extinguishment of
debt (net of applicable income tax benefit) (36,285) - - - (36,285)
--------------- -------------- -------------- --------------- ---------------
Net income (loss) . . . . . . . . . . . . . . . $ (24,176) $ 38,898 $ (5,186) $ (33,712) $ (24,176)
=============== ============== ============== =============== ===============
</TABLE>
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
21. 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
-------------------------------------------
Net cash provided by (used in)
operating activities . . . . . . . . . $ (33,503) $ 94,689 $ 2,757 $ 1,275 $ 65,218
Net cash provided by (used in)
investing activities . . . . . . . . . (7,465) (49,368) 6,092 (1,275) (52,016)
Net cash provided by (used in)
financing activities . . . . . . . . . 56,773 (38,840) 1,522 - 19,455
--------------- -------------- -------------- --------------- ---------------
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . 15,805 6,481 10,371 - 32,657
Cash and cash equivalents at
beginning of the year. . . . . . . . . 20,021 31,892 547 - 52,460
--------------- -------------- -------------- --------------- ---------------
Cash and cash equivalents at
end of the year. . . . . . . . . . . . $ 35,826 $ 38,373 $ 10,918 $ - $ 85,117
=============== ============== ============== =============== ===============
As of April 26, 1998
Balance Sheet
-------------------------------------------
Current assets. . . . . . . . . . . . . . . $ 20,732 $ 46,913 $ 1,612 $ - $ 69,257
Intercompany receivables. . . . . . . . . . 190,117 122,536 - (312,653) -
Investments in subsidiaries . . . . . . . . 196,208 - - (194,499) 1,709
Property and equipment, net . . . . . . . . 3,194 289,675 40,942 - 333,811
Other assets. . . . . . . . . . . . . . . . 42,239 115,396 53,323 - 210,958
--------------- -------------- -------------- --------------- ---------------
Total Assets. . . . . . . . . . . . . . . . $ 452,490 $ 574,520 $ 95,877 $ (507,152) $ 615,735
=============== ============== ============== =============== ===============
Current liabilities . . . . . . . . . . . . $ 19,393 $ 50,969 $ 7,904 $ (311) $ 77,955
Intercompany payable. . . . . . . . . . . . 23,892 288,450 - (312,342) -
Long-term debt, less current maturities . . 323,074 31,568 75,000 - 429,642
Deferred income taxes . . . . . . . . . . . - 16,155 - - 16,155
Minority interest . . . . . . . . . . . . . - - - 5,852 5,852
Stockholders' equity. . . . . . . . . . . . 86,131 187,378 12,973 (200,351) 86,131
--------------- -------------- -------------- --------------- ---------------
Total Liabilities and Stockholders' Equity. $ 452,490 $ 574,520 $ 95,877 $ (507,152) $ 615,735
=============== ============== ============== =============== ===============
</TABLE>
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
21. 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
--------------- -------------- -------------- --------------- ---------------
For the year ended April 26, 1998
Statement of Operations
-------------------------------------
Revenue:
Casino . . . . . . . . . . . . . $ - $ 388,223 $ - $ - $ 388,223
Rooms, food, beverage and other. 268 52,729 - (404) 52,593
--------------- -------------- -------------- --------------- ---------------
Total revenue . . . . . . . . . . . . 268 440,952 - (404) 440,816
Operating expenses:
Casino . . . . . . . . . . . . . - 76,072 - - 76,072
Gaming taxes . . . . . . . . . . - 78,586 - - 78,586
Rooms, food, beverage and other. (645) 192,517 - (404) 191,468
Depreciation and amortization. . 1,575 32,013 - - 33,588
--------------- -------------- -------------- --------------- ---------------
Total operating expenses. . . . . . . 930 379,188 - (404) 379,714
--------------- -------------- -------------- --------------- ---------------
Operating income (loss) . . . . . . . (662) 61,764 - - 61,102
Interest expense, net . . . . . . . . (6,990) (37,855) (2,032) - (46,877)
Minority interest . . . . . . . . . . - - - 819 819
Equity in income (loss) of
unconsolidated joint venture . . 22,696 - - (22,696) -
--------------- -------------- -------------- --------------- ---------------
Income (loss) before income taxes . . 15,044 23,909 (2,032) (21,877) 15,044
Income tax provision (benefit). . . . 7,497 (556) - 556 7,497
--------------- -------------- -------------- --------------- ---------------
Net income (loss) . . . . . . . . . . $ 7,547 $ 24,465 $ (2,032) $ (22,433) $ 7,547
=============== ============== ============== =============== ===============
Statement of Cash Flows
-------------------------------------
Net cash provided by
operating activities . . . . . . $ 5,975 $ 48,323 $ 3,596 $ 7,415 $ 65,309
Net cash provided by (used in)
investing activities . . . . . . (4,618) (34,683) (80,096) (331) (119,728)
Net cash provided by (used in)
financing activities . . . . . . (2,730) (12,200) 77,047 (7,084) 55,033
--------------- -------------- -------------- --------------- ---------------
Net increase (decrease) in cash and
cash equivalents . . . . . . . . (1,373) 1,440 547 - 614
Cash and cash equivalents at
beginning of the year. . . . . . 21,394 30,452 - - 51,846
--------------- -------------- -------------- --------------- ---------------
Cash and cash equivalents at
end of the year. . . . . . . . . $ 20,021 $ 31,892 $ 547 $ - $ 52,460
=============== ============== ============== =============== ===============
</TABLE>
(a) Certain of the Company's wholly owned subsidiaries were guarantors on
the 8 3/4 % Senior Subordinated Notes, including the following: Riverboat
Corporation of Mississippi, Riverboat Corporation of Mississippi -Vicksburg,
Isle of Capri - Tunica, Inc., Louisiana Riverboat Gaming Partnership, St.
Charles Gaming Company, Inc., Grand Palais Riverboat, Inc. and PPI, Inc.
IOC-Natchez (f/k/a Lady Luck Mississippi, Inc.), IOC-Lula (f/k/a Magnolia Lady,
Inc.), Isle of Capri Bettendorf, L.C., Isle of Capri Marquette, Inc. became
guarantors as of March 2, 2000, the date of the acquisition.
(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>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
22. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FISCAL QUARTERS ENDED
(IN THOUSANDS)
-----------------------
JULY 25, OCTOBER 24, JANUARY 23, APRIL 30,
1999 1999 2000 2000
----------- ------------ ------------ -----------
Revenue . . . . . . . . . . . . . . . $ 142,207 $ 154,995 $ 153,724 $ 233,924
Operating income. . . . . . . . . . . 20,989 23,770 23,084 45,653
Net income before extraordinary item. 6,528 6,632 4,881 14,014
Extraordinary item, net . . . . . . . - - - (984)
Net income. . . . . . . . . . . . . . 6,528 6,632 4,881 13,030
Net income per share
before extraordinary item:
Basic. . . . . . . . . . . . . . 0.28 0.28 0.20 0.47
Diluted. . . . . . . . . . . . . 0.26 0.26 0.19 0.44
Net income per common share
Basic. . . . . . . . . . . . . . 0.28 0.28 0.20 0.44
Diluted. . . . . . . . . . . . . 0.26 0.26 0.19 0.41
FISCAL QUARTERS ENDED
(IN THOUSANDS)
-----------------------
JULY 26, OCTOBER 25, JANUARY 24, APRIL 25,
1998 1998 1999 1999
----------- ------------ ------------ -----------
Revenue . . . . . . . . . . . . . . . $ 114,079 $ 106,926 $ 115,120 $ 144,252
Operating income. . . . . . . . . . . 16,925 14,684 11,902 25,235
Net income before extraordinary item. 2,692 1,928 1,045 6,444
Extraordinary item, net . . . . . . . - - - (36,285)
Net income (loss) . . . . . . . . . . 2,692 1,928 1,045 (29,841)
Net income per share
before extraordinary item:
Basic. . . . . . . . . . . . . . 0.11 0.08 0.04 0.27
Diluted. . . . . . . . . . . . . 0.11 0.08 0.04 0.27
Net income (loss) per common share
Basic. . . . . . . . . . . . . . 0.11 0.08 0.04 (1.27)
Diluted. . . . . . . . . . . . . 0.11 0.08 0.04 (1.23)
</TABLE>
Quarterly data may not necessarily sum to the full year data reported in
the Company's consolidated financial statements.
The third quarter of fiscal 1999 includes the following non-recurring
items: a valuation charge of $5.1 million related to the write-down of certain
assets held for sale or development, a $4.2 million reversal of an accrued
litigation settlement and preopening expenses related to the openings of the
Isle-Black Hawk in December 1998 totaling $3.3 million.
The fourth quarter of fiscal 1999 includes an extraordinary after-tax
charge of $36.3 million related to the refinancing of the Company's $315 million
12.5% Senior Secured Notes and other debt on April 23, 1999.
The first quarter of fiscal 2000 includes the following non-recurring
items: a gain of $3.1 million related to the sale of an option to purchase land
adjacent to the Pompano Park, Inc. facility and preopening expenses of $3.4
million related to expenses incurred with the opening of the Isle-Tunica.
<PAGE>
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The fourth quarter of fiscal 2000 includes an extraordinary item after-tax
charge of $1.0 million associated with the extinguishment of debt, primarily
related to debt associated with acquisition of Lady Luck on March 2, 2000.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
This item has been omitted from this report and is incorporated by
reference to Isle of Capri's definitive proxy statement to be filed with the
U.S. Securities and Exchange Commission within 120 days after the end of the
fiscal year covered by this report.
ITEM 11. EXECUTIVE COMPENSATION.
This item has been omitted from this report and is incorporated by
reference to Isle of Capri's definitive proxy statement to be filed with the
U.S. Securities and Exchange Commission within 120 days after the end of the
fiscal year covered by this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
This item has been omitted from this report and is incorporated by
reference to Isle of Capri's definitive proxy statement to be filed with the
U.S. Securities and Exchange Commission within 120 days after the end of the
fiscal year covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
This item has been omitted from this report and is incorporated by
reference to Isle of Capri's definitive proxy statement to be filed with the
U.S. Securities and Exchange Commission within 120 days after the end of the
fiscal year covered by this report.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents Filed as Part of this Report.
--------------------------------------------
1. Financial Statements.
---------------------
The following financial statements and report of independent
auditors are included on pages 40 to 72 of this Form 10-K:
ISLE OF CAPRI CASINOS, INC.
Report of Independent Auditors
Consolidated Balance Sheets - April 30, 2000 and April 25,
1999
Consolidated Statements of Operations - Years ended April
30, 2000, April 25, 1999 and April 26, 1998
Consolidated Statements of Stockholders' Equity - Years
ended April 30, 2000 and April 25, 1999 and April 26,
1998
Consolidated Statements of Cash Flows - Years ended
April 30, 2000, April 25, 1999 and April 26, 1998
Notes to Consolidated Financial Statements
2. Financial Statements Schedules.
--------------------------------
None required or applicable.
<PAGE>
3. Exhibits.
--------
A list of the exhibits included as part of this Form 10-K is set forth
in the Exhibit Index that immediately precedes such exhibits, which is
incorporated herein by reference.
(b) Reports on Form 8-K.
----------------------
During the year ended April 30, 2000, the Company filed the following
reports on Form 8-K:
Current Report on Form 8-K/A filed on March 14, 2000, regarding Item 7
to amend Form 8-K filed on March 7, 2000 to include the Consent
of Arthur Andersen LLP.
Current Report on Form 8-K filed on March 7, 2000, regarding Item 2
which filed the merger agreement and financial statements of Lady
Luck.
Current Report on Form 8-K filed on February 16, 2000, regarding Item
5 which announced the Company's earnings for the third quarter
ended January 23, 2000.
Current Report on Form 8-K filed on December 30, 1999, regarding Item
5 which filed the merger agreement by and among BRDC, Inc., the
shareholders of BRDC, Inc. and Isle of Capri Casinos, Inc. as an
exhibit.
Current Report on Form 8-K filed on October 15, 1999, containing the
merger agreement between Lady Luck and Isle of Capri, other
agreements related to the Lady Luck acquisition and the press
release announcing the Lady Luck acquisition agreement.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ISLE OF CAPRI CASINOS, INC.
Dated: August 1, 2000 By: /s/ Bernard Goldstein
----------------------
Bernard Goldstein, Chairman of the Board,
Chief Executive Officer, and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Dated: August 1, 2000 /s/ Bernard Goldstein
------------------------
Bernard Goldstein, Chairman of the Board,
Chief Executive Officer and Director
(Principal Executive Officer)
Dated: August 1, 2000 /s/ John M. Gallaway
------------------------
John M. Gallaway, President,
Chief Operating Officer and Director
Dated: August 1, 2000 /s/ Rexford A. Yeisley
--------------------------
Rexford A. Yeisley,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Dated: August 1, 2000 /s/ Allan B. Solomon
------------------------
Allan B. Solomon,
Executive Vice President,
Secretary, General Counsel and
Director
Dated: August 1, 2000 /s/ Emanuel Crystal
----------------------
Emanuel Crystal, Director
Dated: August 1, 2000 /s/ Robert S. Goldstein
---------------------------
Robert S. Goldstein, Director
Dated: August 1, 2000 /s/ Alan J. Glazer
----------------------
Alan J. Glazer, Director
Dated: August 1, 2000 /s/ W. Randolph Baker
-------------------------
W. Randolph Baker, Director
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT
NUMBER EXHIBIT
-------- -------
2.1 Agreement and Plan of Merger, dated as of October 5, 1999. (21)
2.1A Agreement and Plan of Merger, dated as of December 19, 1999. (22)
3.1 Certificate of Incorporation of Casino America, Inc., as amended. (5)
3.1A Amendment to the Company's Certificate of Incorporation dated September 28, 1998. (18)
3.2 Bylaws of Casino America, Inc., as amended. (5)
3.2A Amendments to Bylaws of Casino America, Inc. dated as of February 7, 1997. (14)
4.1 Specimen Certificate of Common Stock. (2)
4.2A Specimen Warrant Agreement with respect to warrants to purchase
900,000 shares of Isle of Capri Casinos, Inc. Common Stock. (3)
4.2B Form of Warrant Agreement with respect to warrants to purchase
500,000 shares of Isle of Capri Casinos, Inc. Common Stock. (13)
4.3A Warrant, dated June 9, 1995, of Crown Casino Corporation to
purchase up to 416,667 shares of Common Stock of Isle of Capri
Casinos, Inc. (7)
4.3B Warrant, dated May 3, 1996, of Crown Casino Corporation to
purchase up to 416,667 shares of Common Stock of Isle of Capri
Casinos, Inc. (8)
4.4A Indenture dated as of August 1, 1996 between Casino America, Inc.
and Fleet National Bank, as Trustee. (8)
4.4B First Supplemental Indenture, dated as of April 21, 1999, between
Isle of Capri Casinos, Inc. and Fleet National Bank, as trustee. (18)
4.5 Isle of Capri Casinos, Inc. hereby agrees to furnish to the
Securities and Exchange Commission, upon its request, the
instruments defining the rights of holders of long term debt
where the total amount of securities authorized thereunder
does not exceed 10% of Isle of Capri Casinos, Inc.'s total
consolidated assets. (18)
4.6 Rights Agreement dated as of February 7, 1997 between Casino
America, Inc. and Norwest Bank Minnesota, N.A., as Rights Agent. (14)
4.7 Indenture, dated as of April 23, 1999, among the Company,
the Subsidiary Guarantors named therein and State Street
Bank and Trust Company, as trustee.(18)
4.8 Registration Rights Agreement, dated as of April 23, 1999,
among Isle of Capri Casinos, Inc., the Subsidiary
Guarantors named therein and Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Wasserstein Perella Securities, Inc.
for themselves and on behalf of the other initial purchasers. (18)
<PAGE>
10.1 Amended and Restated Berth Rental Agreement dated
May 12, 1992 between the Biloxi Port Commission and
Riverboat Corporation of Mississippi. (2)
10.2 Biloxi Waterfront Project Lease dated May 12, 1986 with
Point Cadet Development Corporation.(2)
10.3 Addendum to Lease Agreement, dated August 1, 1992,
between the City of Biloxi, Mississippi, Point Cadet
Development Corporation. (2)
10.3A Second Addendum to Lease, dated April 9, 1994, by
and between the City of Biloxi, Mississippi, Point Cadet
Development Corporation, the Biloxi Port Commission and
Riverboat Corporation of Mississippi. (4)
10.3B Third Addendum to Casino Lease, dated April 26, 1995,
by and between the City of Biloxi, Mississippi, Point
Cadet Development Corporation, the Biloxi Port Commission
and Riverboat Corporation of Mississippi. (7)
10.4 Declaration of Shared Facilities Agreement for the
Isle of Capri Casino and Hotel, Biloxi, Mississippi,
dated as of April 26, 1995, made by Riverboat Corporation
of Mississippi. (7)
10.5 Agreement for Sale and Purchase by and between
Casino America, Inc. and Pompano Park Associates, Limited
Partnership, dated as of November 8, 1994. (7)
10.6 Variable Gaming Adjustment Covenant made as of June 30,
1995 by PPI, Inc. in favor of Pompano Park Associates,
Limited Partnership. (7)
*10.7 Casino America, Inc. 1992 Stock Option Plan.(1)
*10.8 Casino America, Inc. 1992 Stock Option Plan Amendment.(3)
*10.9 Casino America, Inc. 1993 Stock Option Plan, as amended.(7)
*10.10 Casino America, Inc. description of Employee Bonus Plan.(3)
10.11 Management Agreement dated January 4, 1993 between Riverboat
Services, Inc. and Louisiana Riverboat Gaming Partnership. (3)
10.12 Management Agreement dated as of March 2, 1995 between
Riverboat Services, Inc. and St. Charles Gaming Company, Inc.(7)
*10.13 Casino America, Inc. Retirement Trust and Savings Plan.(3)
*10.14 Director's Option Plan.(6)
10.15 Biloxi Waterfront Project Lease dated April 9, 1994 by and
between the City of Biloxi, Mississippi and Riverboat Corporation
of Mississippi. (4)
10.15A First Amendment to Biloxi Waterfront Project Lease
(Hotel Lease), dated April 26, 1995, by and between
Riverboat Corporation of Mississippi and the City of Biloxi,
Mississippi. (7)
10.16 Crowne Plaza Resort New Development License Agreement between
Holiday Inns Franchising, Inc. and Riverboat Corporation of
Mississippi, dated December 30, 1994. (7)
10.17 Security Agreement - Pledge dated as of June 9, 1995,
between Louisiana Riverboat Gaming Partnership and Crown
Casino Corporation. (7)
<PAGE>
10.18 Shareholders Agreement, dated as of June 9, 1995 by and
between Crown Casino Corporation and Louisiana Riverboat Gaming
Partnership. (7)
10.19 Amended and Restated Lease between Port Resources, Inc. and CRU, Inc.,
as landlords and St. Charles Gaming Company, Inc., as tenant, of
certain land in Calcasieu Parish, Louisiana, dated April 19, 1999. (18)
10.20 Development Agreement between St. Charles Gaming Company, Inc.
and Calcasieu Parish Police Jury dated June 5, 1995.(7)
10.21 Note Purchase Agreement, dated as of July 20, 1995, by and among
Louisiana Riverboat Gaming Partnership, St. Charles Gaming
Company, Inc., Nomura Holding America Inc. and First National
Bank of Commerce. (7)
10.22 Lease between Pompano Park Associates, Inc., as Lessor,
and Casino America, Inc., as Lessee, dated as of July 1, 1995.(7)
10.23 Promissory Note dated June 29, 1995 by and between PPI, Inc. and Capital Bank.(9)
*10.24 Employment Agreement dated January 6, 1999 between Isle of Capri Casinos, Inc.
and John M. Gallaway. (18)
*10.25 Employment Agreement dated January 6, 1999 between Isle of Capri Casinos, Inc.
and Allan B. Solomon. (18)
*10.26 Employment Agreement dated January 6, 1999 by and between Isle of Capri
Casinos, Inc. and Rexford A. Yeisley. (18)
*10.27 Employment Agreement dated January 6, 1999 by and between Isle of Capri
Casinos, Inc. and Timothy M. Hinkley. (18)
10.28 Management Agreement dated April 25, 1997 between Casino America, Inc.
and ICB, L.L.C. (15)
10.29 Operating Agreement of ICB, L.L.C. dated as of April 25, 1997 between
Casino America of Colorado, Inc. and Blackhawk Gold, Ltd. (14)
10.30 Amended Casino America, Inc. 1992 Stock Option Plan. (11)
10.31 Amended Casino America, Inc. l993 Stock Option Plan. (11)
10.32 Management Agreement dated July 29, 1997 between Casino America, Inc.
and Isle of Capri Black Hawk, L.L.C. (16)
10.33 Joint Venture Agreement of Capri Cruises between Commodore
Cruises Limited and Isle of Capri Casino Corporation. (18)
*10.34 Amended Casino America, Inc. 1993 Stock Option Plan. (15)
*10.35 Amended Casino America, Inc. 1993 Stock Option Plan. (17)
<PAGE>
10.36 Asset Purchase Agreement by and between Tunica Partners, LP
and Isle of Capri Casino - Tunica, Inc. and Isle of Capri Casinos,
Inc. dated October 7, 1998. (19)
10.37 Amendment No. 1 to Asset Purchase Agreement dated December 7, 1998. (19)
10.38 Amendment No. 2 to Asset Purchase Agreement dated February 24, 1999. (19)
*10.39 Employment Agreement dated January 6, 1999 between Isle of Capri Casinos,
Inc. and Bernard Goldstein. (18)
10.40 Purchase Agreement, dated as of April 20, 1999, among Isle of Capri
Casinos, Inc., the Subsidiary Guarantors named therein and Merrill Lynch
& Co., Merrill Lynch, Pierce Fenner & Smith Incorporated and
Wasserstein Perella Securities, Inc., for themselves and as representatives
of the other initial purchasers. (18)
10.41 Amended and Restated Credit Agreement, dated as of March 2, 2000, among
Isle of Capri Casinos, Inc., the lenders listed therein, CIBC Inc. as swing
line lender, Canadian Imperial Bank of Commerce, as administrative agent and
issuing lender, Bankers Trust Company as co-arranger and syndication agent for
Lenders, The CIT Group/Equipment Financing, Inc. and documentation agent for
lenders and CIBC World Markets Corp as lead arranger. (20)
10.42 Leases of part of casino site in Natchez, Mississippi dated
October 28, 1991 between Lady Luck Mississippi, Inc and Silver Land, Inc.
Incorporated by reference to Exhibit 10.7 to the Form S-1.
10.43 Silver Land, Inc. Amended and Restated Lease Agreement dated
December 31, 1992. Incorporated by reference to Exhibit 10.8 to the Form S-1.
10.44 Option to purchase site in Jefferson County, Missouri dated July 8, 1993
by and between Lady Luck Kimmswick, Inc. and Donald J. Branch. Incorporated
by reference to Exhibit 10.17 to the Form S-1.
10.45 Lease in Coahoma, Mississippi dated November 30, 1993 (sic) by and
among Roger Allen Johnson, Jr., Charles Bryant Johnson and Magnolia Lady, Inc.
Incorporated by reference to Exhibit 10.28 to the Form 10-K.
10.46 Addendum to Lease dated November 30, 1993 between Roger Allen Johnson, Jr.,
Charles Bryant Johnson and Magnolia Lady, Inc.
10.47 Second addendum to lease entered into on November 30, 1993,
and amended by that addendum to Lease dated June 22, 1994
between Roger Allen Johnson, Jr., and Charles Bryant Johnson
and Magnolia Lady, Inc.
10.48 Agreement dated July 18, 1994 by and among Green Bridge
Company, an Iowa corporation, Bettendorf Riverfront Development
Company, Inc., and Iowa limited liability company, Lady Luck Casino,
Inc., a Nevada corporation, and Lady Luck Gaming Corporation.
Incorporated by reference to Exhibit 10.40 to the June 30, 1994
Form 10-Q.
10.49 Letter Agreement dated October 24, 1994 by and between Alain Uboldi and Lady Luck
Gaming Corporation. Incorporated by reference to Exhibit 10.41 to the Annual
Report on Form 10-K for the fiscal year ended December 31, 1994, by Lady Luck
Gaming Corporation (the "1994 Form 10-K")
<PAGE>
10.50 Letter Agreement dated October 24, 1994 by and between
Rory J. Reid and Lady Luck Gaming Corporation. Incorporated by reference to
Exhibit 10.42 to the 1994 Form 10-K.
10.51 Real Estate Lease dated January 12, 1995 by and among Green Bridge Company,
an Iowa corporation, Bettendorf Riverfront Development Company, L.C., an Iowa
limited liability company, Lady Luck Bettendorf, L.C., an Iowa limited liability
company and Lady Luck Quad Cities, Inc., a Delaware corporation. Incorporated
by reference to Exhibit 10.46 to the 1994 Form 10-K.
10.52 Operation Agreement dated December 2, 1994 by and between
Lady Luck Quad Cities, Inc. a Delaware corporation and Bettendorf Riverfront
Development Company, L.C., an Iowa limited liability company. Incorporated
by reference to Exhibit 10.47 to the 1994 Form 10-K.
10.53 Services Agreement dated as of January 1, 1996 among
Lady Luck Gaming Corporation and Marco Polo International
Marketing, Inc. Incorporated by reference to Exhibit 10.46 to
the 1995 Form 10-K.
10.54 Stockholder Support Agreement, dated as of October 5, 1999,
by Andrew H. Tompkins to and for the benefit of Isle of Capri
Casinos, Inc. (21)
10.55 Consulting, Advisory and Noncompetition Agreement, dated
as of October 5, 1999 by and between Isle of Capri Casinos, Inc.
and Andrew H. Thompkins. (21)
10.56 Form of Credit Agreement between Gamblers Supply Management
Company as the Borrower, and Isle of Capri Casinos, Inc. as
the Lender. (21)
10.57 Amended and Restated Lease Agreement by and between
The Port Authority of Kansas City, Missouri and Hilton
Hotels Corporation dated as of August 21, 1995.
10.58 Assignment and Assumption by and among Hilton Hotels
Corporation, a Delaware corporation, Isle of Capri Casinos, Inc.,
a Delaware corporation and IOC-Kansas City, Inc., a Missouri
corporation.
21 Subsidiaries of Isle of Capri Casinos, Inc. (18)
23.1 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
</TABLE>
___________________________
(1) Filed as an exhibit to the Casino America, Inc.'s Current Report on Form
8-K filed June 17, 1992 (File No. 0-20538), and incorporated into
the Casino America, Inc.'s Form 10-K for the year ended April 27,
1997, by reference.
(2) Filed as an exhibit to the Casino America Inc.'s Annual Report on Form
10-K for the fiscal year ended April 30, 1992 (File No. 0-20538),
and incorporated into the Casino America, Inc.'s Form 10-K for the year
ended April 27, 1997, by reference.
(3) Filed as an exhibit to Casino America, Inc.'s Annual Report on Form 10-K
for the fiscal year ended April 30, 1993 (File No. 0-20538), and
incorporated into Casino America, Inc.'s Form 10-K for the year ended
April 27, 1997, by reference.
(4) Filed as an exhibit to Casino America, Inc.'s Annual Report on Form 10-K
for the fiscal year ended April 30, 1994 (File No. 0-20538), and
incorporated into Casino America, Inc.'s Form 10-K for the year ended
April 27, 1997, by reference.
<PAGE>
(5) Filed as an exhibit to Casino America, Inc.'s Registration Statement on
Form S-1 filed September 3, 1993, as amended (File No. 33-68434), and
incorporated into Casino America, Inc.'s Form 10-K for the year ended
April 27, 1997, by reference.
(6) Filed as an exhibit to Casino America, Inc.'s Registration Statement on
Form S-8 filed June 30, 1994 (File No. 33-80918), and incorporated into
Casino America, Inc.'s Form 10-K for the year ended April 27, 1997, by
reference.
(7) Filed as an exhibit to Casino America, Inc.'s Annual Report on Form
10-K for the fiscal year ended April 30, 1995 (File No. 0-20538),
and incorporated into Casino America, Inc.'s Form 10-K for the year
ended April 26, 1998, by reference.
(8) Filed as an exhibit to Casino America, Inc.'s Registration Statement
on Form S-3 filed on March 21, 1996 (No. 333-02610), and incorporated
into Casino America, Inc.'s Form 10-K for the year ended April 27, 1997,
by reference.
(9) Filed as an exhibit to Casino America, Inc.'s Quarterly Report on Form
10-Q for the fiscal quarter ended October 31, 1995, and incorporated
into Casino America, Inc.'s Form 10-K for the fiscal year ended
April 27, 1997, by reference.
(10) Filed as an exhibit to Casino America, Inc.'s Quarterly Report on
Form 10-Q for the fiscal quarter ended January 31, 1996, and
incorporated into Casino America, Inc.'s Form 10-K for the fiscal
year ended April 27, 1997, by reference.
(11) Filed as an exhibit to Casino America, Inc.'s Proxy Statement for
the fiscal year ended April 30, 1996, by reference.
(12) Filed as an exhibit to Casino America, Inc.'s Annual Report on Form
10-K for the fiscal year ended April 30, 1996, by reference.
(13) Filed as an exhibit to Casino America, Inc.'s Current Report on Form
8-K filed on February 24, 1997, and incorporated into Casino America,
Inc.'s Form 10-K for the fiscal year ended April 27, 1997, by
reference.
(14) Filed as an exhibit to Casino America, Inc.'s Annual Report on Form
10-K for the fiscal year ended April 27, 1997, by reference.
(15) Filed as an exhibit to Casino America, Inc.'s Proxy Statement for the
fiscal year ended April 27, 1997, by reference.
(16) Filed as an exhibit to the Isle of Capri Black Hawk L.L.C./Isle of
Capri Black Hawk Capital Corp. Registration Statement on Form S-4
(registration number 333-38093), and incorporated into Casino
America, Inc.'s Form 10-K for the year ended April 26, 1998,
by reference.
(17) Filed as an Exhibit to the Casino America, Inc.'s Proxy Statement
for the fiscal year ended April 26, 1998, by reference.
(18) Filed as an exhibit to Isle of Capri Casinos, Inc.'s Annual Report
on Form 10-K for the fiscal year ended April 25, 1999, by reference.
(19) Filed as an Exhibit to the Isle of Capri Casinos, Inc. Quarterly
Report on form 10-Q for the fiscal quarter ended January 24, 1999,
by reference.
(20) Filed as an Exhibit to the Isle of Capri Casinos, Inc. Quarterly
Report on form 10-Q for the fiscal quarter ended January 23, 2000,
by reference.
(21) Filed as an Exhibit to the Isle of Capri Casinos, Inc. Current
Report on Form 8-K filed on October 5, 1999.
(22) Filed as an Exhibit to the Isle of Capri Casinos, Inc. Current
Report on Form 8-K filed on December 19, 1999.
*Management contract or compensatory plan.
