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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-20840
PRESIDENT CASINOS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 51-0341200
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or Identification No.)
organization)
802 North First Street, St. Louis, Missouri 63102
----------------------------------------------------
Address of principal executive offices-Zip Code
314-622-3000
----------------------------------------------------
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: Common Stock, $.06 par value,
5,032,927 shares outstanding as of July 13, 1998.
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PRESIDENT CASINOS, INC.
INDEX TO FORM 10-Q
Page No.
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)
as of May 31 and February 28, 1998................................1
Condensed Consolidated Statements of Operations (Unaudited)
for the Three Months Ended May 31, 1998 and 1997..................2
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Three Months Ended May 31, 1998 and 1997..................3
Notes to Condensed Consolidated Financial Statements (Unaudited)....4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................6
Part II. Other Information
Item 1. Legal Proceedings...........................................13
Item 2. Changes in Securities.......................................13
Item 3. Defaults Upon Senior Securities.............................13
Item 4. Submission of Matters to a Vote of Security Holders.........13
Item 5. Other Information...........................................13
Item 6. Exhibits and Reports on Form 8-K............................13
Signature..............................................................14
<PAGE> 3
Part I. Financial Information
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
PRESIDENT CASINOS, INC. (UNAUDITED)
______________________________________________________________________________
<TABLE>
<CAPTION>
(in thousands) May 31, Feb. 28,
1998 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 15,978 $ 19,278
Restricted cash................................ 3,704 4,354
Short-term investments......................... 600 2,622
Accounts receivable, net of allowance for
doubtful accounts of $379 and $369........... 2,827 1,664
Other current assets........................... 5,267 5,908
--------- ---------
Total current assets....................... 28,376 33,826
Property and equipment, net of accumulated
depreciation of $56,782 and $53,495............ 149,178 149,066
Other assets..................................... 4,335 4,364
--------- ---------
$181,889 $187,256
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt........... $ 1,891 $ 1,895
Other current liabilities...................... 29,077 29,615
--------- ---------
Total current liabilities.................. 30,968 31,510
Long-term debt:
Long-term debt, net of current maturities...... 134,758 134,784
Accrued loan fee............................... 1,852 1,300
--------- ---------
Total long-term liabilities................ 136,610 136,084
--------- ---------
Total liabilities.......................... 167,578 167,594
--------- ---------
Minority interest................................ 11,347 10,978
Commitments and contingencies.................... -- --
Stockholders' equity:
Preferred Stock, none issued and outstanding... -- --
Common Stock, 30,xxx shares issued
and outstanding.............................. 302 302
Additional paid-in capital..................... 101,729 101,729
Accumulated deficit............................ (99,067) (93,347)
--------- ---------
Total stockholders' equity................. 2,964 8,684
--------- ---------
$181,889 $187,256
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED STATEMENTS
PRESIDENT CASINOS, INC. OF OPERATIONS (UNAUDITED)
______________________________________________________________________________
<TABLE>
<CAPTION>
(in thousands, except share data) Three Months Ended May 31,
1998 1997
------ ------
<S> <C> <C>
OPERATING REVENUES:
Gaming and gaming cruise....................... $ 42,574 $ 42,462
Food and beverage.............................. 5,481 4,899
Hotel.......................................... 2,223 352
Retail and other............................... 5,033 1,578
Less promotional allowances.................... (3,288) (3,159)
--------- ---------
Net operating revenues....................... 52,023 46,132
--------- ---------
OPERATING COSTS AND EXPENSES:
Gaming and gaming cruise....................... 25,619 24,640
Food and beverage.............................. 3,798 3,299
Hotel.......................................... 695 145
Retail and other............................... 707 409
Selling, general and administrative............ 15,435 12,463
Depreciation and amortization.................. 3,520 3,754
Development costs.............................. 2,777 870
--------- ---------
Total operating costs and expenses........... 52,551 45,580
--------- ---------
OPERATING INCOME (LOSS).......................... (528) 552
--------- ---------
OTHER INCOME (EXPENSE):
Interest income................................ 159 270
Interest expense............................... (4,982) (3,683)
--------- ---------
Total other income (expense)................. (4,823) (3,413)
--------- ---------
LOSS BEFORE MINORITY INTEREST.................... (5,351) (2,861)
Minority interest................................ 369 18
--------- ---------
NET LOSS......................................... $ (5,720) $ (2,879)
========= =========
Basic and diluted net loss per share............. $ (1.14) $ (0.57)
========= =========
Weighted average common and dilutive
potential shares outstanding.................... 5,033 5,033
========= =========
</TABLE>,
See Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED STATEMENTS
PRESIDENT CASINOS, INC. OF CASH FLOWS (UNAUDITED)
______________________________________________________________________________
<TABLE>
<CAPTION>
(in thousands) Three Months Ended May 31,
1998 1997
------ ------
<S> <C> <C>
Net cash used in operating activities............. $ (2,200) $ (1,161)
--------- ---------
Cash flows from investing activities:
Expenditures for property and equipment......... (3,739) (1,637)
Change in restricted cash....................... 650 --
Proceeds from sales of property and equipment... 74 4
Maturity of short-term investments.............. 2,021 --
--------- ---------
Net cash used in investing activities...... (994) (1,633)
--------- ---------
Cash flows from financing activities:
Repayment of notes payable...................... (100) (100)
Payments on capital lease obligations........... (6) --
--------- ---------
Net cash used in financing activities....... (106) (100)
--------- ---------
Net decrease in cash and cash equivalents......... (3,300) (2,894)
Cash and cash equivalents at beginning of period.. 19,278 25,115
--------- ---------
Cash and cash equivalents at end of period........ $ 15,978 $ 22,221
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest............................ $ 7,354 $ 6,656
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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NOTES TO CONDENSED CONSOLIDATED
PRESIDENT CASINOS, INC. FINANCIAL STATEMENTS (UNAUDITED)
______________________________________________________________________________
(dollars in thousands)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The condensed consolidated financial statements include the accounts and
operations of President Casinos, Inc. ("PCI"), its wholly-owned subsidiaries
and a 95% owned limited partnership (collectively, the "Company"). The Company
develops, owns and operates riverboat and/or dockside gaming casinos through
its subsidiaries. The Company conducts gaming operations in Davenport, Iowa,
Biloxi, Mississippi and St. Louis, Missouri. The Davenport operations are
managed by a wholly owned subsidiary which is the general partner of the 95%
Company owned operating partnership ("TCG"). The Company also operates two
non-gaming dinner cruise, excursion and sightseeing vessels on the Mississippi
River in St. Louis, Missouri. In addition, the Company owns and manages
certain hotel and ancillary facilities associated with its gaming operations.
All material intercompany accounts and transactions have been eliminated.
Basis of Presentation
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting only of
normal recurring entries unless otherwise disclosed, necessary to present
fairly the Company's financial information for the interim periods presented
and have been prepared in accordance with generally accepted accounting
principles. The interim results reflected in the condensed consolidated
financial statements are not necessarily indicative of results for the full
year or other periods.
The financial statements contained herein should be read in conjunction with
the audited consolidated financial statements and accompanying notes to the
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the period ending February 28, 1998. Accordingly, footnote
disclosure which would substantially duplicate the disclosure in the audited
consolidated financial statements has been omitted.
Certain amounts for fiscal 1998 have been reclassified to conform with
fiscal 1999 financial statement presentation.
2. INSURANCE PROCEEDS
On April 4, 1998 several river barges broke free of their towboat and struck
the Company's St. Louis casino, the "Admiral," resulting in the severing of
several of the vessel's mooring lines and boarding ramps. The vessel
sustained no hull or structural damage and minimal damage to its bow apron.
There were no reports of serious injuries to the approximate 2,300 guests and
employees aboard.
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The "Admiral" was closed to the public for 26 days, reopening on April 30,
1998. Based upon preliminary estimates, the Company spent approximately
$2,714 in the three-month period ended May 31, 1998, to repair the vessel,
replace the boarding ramps and prepare the Admiral to reopen. Insurance
proceeds from the Company's hull and business interruption coverages recorded
in the three-month period ended May 31, 1998, were $3,900. Income from
insurance proceeds in excess of the net book value of destroyed assets was
$3,616 and is reflected in the financial statements as "Retail and Other"
revenue. The insurance deductibles relating to the hull and business
interruption claims total $1,020. The insurance claims have not been
finalized and claims are being made against the owners of the towboat to
recover insurance deductibles and any damages not covered by or in excess of
the insurance. While the Company believes it has meritorious claims against
the owner there can be no guarantee that the Company will be successful in
recovering such costs.
3. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is from time to time a party to litigation, which may or may not
be covered by insurance, arising in the ordinary course of its business. The
Company does not believe that the outcome of any such litigation will have a
material adverse effect on the Company's financial condition or results of
operations, or which would have any material adverse impact upon the gaming
licenses of the Company's subsidiaries.
4. SUBSEQUENT EVENTS
On July 2, 1998 the Company entered a guilty plea in the United States
District Court for the Eastern District of Missouri to the misdemeanor of
violating the Rivers and Harbors Act by discharging pollutants into the
Mississippi River without a permit in 1995. Under the terms of the plea
agreement, the Company will pay fines and restitution costs of $300, which had
been fully accrued.
The Company acknowledged that pollutants were inadvertently discharged by
its vessel, the "Admiral," into the Mississippi River in 1995 without the
proper permit. The pollutants discharge resulted from leaks in the lines
running from the sewage collection tanks aboard the "Admiral" to the
metropolitan sewer district lines on the levy. The bulk of the material
collected in those lines was clear water from the various water systems aboard
the "Admiral" and very little sewage was discharged. The Company has made
extensive capital improvements to the sewage system to reduce the potential
for any reoccurrence of this nature.
The Company's is pursuing a gaming license for a "cruise to nowhere"
operation in New York City utilizing its 308-foot deep-water vessel,
"President Casino New Yorker" (formerly "Majestic Star"). In January 1998, the
Company submitted a gaming application to the New York City Gambling
Commission and in April 1998 received notification that the Commission was not
prepared to issue a provisional license which would have allowed the Company
to start operations. The Company continues to pursue a New York City license
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but it is not known if the Company will be successful in receiving such a
license.
To utilize "President Casino New Yorker" while the Company pursues this
license, in July 1998, the Company entered into an agreement to charter
"President Casino New Yorker" until February 15, 1999 to an unrelated third
party. The charter may be extended for three additional two-month periods
with an initial charter fee of $400 per month and certain escalations during
each of the extension periods.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion should be read in conjunction with the condensed
consolidated financial statements and the notes thereto included elsewhere in
the report.
Overview
The Company's operating results are affected by a variety of factors,
including competitive pressures, changes in regulations governing the
Company's activities, the seasonal nature of the Company's business, the
timing of the commencement of its proposed gaming operations, the amount of
development expenses incurred by the Company and general weather conditions.
Consequently, the Company's operating results may fluctuate from period to
period and the results for any period may not be indicative of results for
future periods.
--"Admiral" Accident
On April 4, 1998 several river barges broke free of their towboat and struck
the Company's St. Louis casino, the "Admiral," resulting in the severing of
several of the vessel's mooring lines and boarding ramps. The vessel
sustained no hull or structural damage and minimal damage to its bow apron.
There were no reports of serious injuries to the approximate 2,300 guests and
employees aboard.
The "Admiral" was closed to the public for 26 days, reopening on April 30,
1998. Based upon preliminary estimates, the Company spent approximately $2.7
million in the three-month period ended May 31, 1998, to repair the vessel,
replace the boarding ramps and prepare the Admiral to reopen. Insurance
proceeds from the Company's hull and business interruption coverages recorded
in the three-month period ended May 31, 1998, were $3.9 million, including
$1.4 million accrued as a receivable. Income from insurance proceeds in
excess of the net book value of destroyed assets was $3.6 million and is
reflected in the financial statements as "Retail and Other" revenue. The
insurance deductibles relating to the hull and business interruption claims
total $1.0 million. The insurance claims have not been finalized and claims
are being made against the owners of the towboat to recover insurance
deductibles and any damages not covered by or in excess of the insurance.
While the Company believes it has meritorious claims against the owner there
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can be no guarantee that the Company will be successful in recovering such
costs.
--New Operation
On July 24, 1997, the Company, through a newly created subsidiary, President
Broadwater Hotel, LLC ("PBLLC"), purchased for $40.5 million certain real
estate and improvements located on the Gulf Coast in Biloxi, Mississippi from
an entity which was wholly-owned by John E. Connelly, Chairman, Chief
Executive Officer and principal stockholder of the Company. The property
comprises approximately 260 acres and includes two hotels, a 138-slip marina
and the adjacent 18-hole Sun Golf Course (collectively, the "Broadwater
Property"). The marina is currently the site of the Company's casino
operations in Biloxi and had formerly been leased by the Company under a
long-term lease agreement.
The Company is currently developing a master plan for this real estate. The
master plan includes the development of a full-scale luxury destination resort
complex offering an array of entertainment attractions in addition to gaming
and would include the demolition of the existing hotels. Management believes
with its beachfront location and contiguous golf course, this is the best site
for such a development in the rapidly growing Gulf Coast market. It is also
uniquely qualified to be a multi-casino facility.
--"President Casino New Yorker"
The Company's is pursuing a gaming license for a "cruise to nowhere"
operation in New York City utilizing its 308-foot deep-water vessel,
"President Casino New Yorker" (formerly "Majestic Star"). In January 1998, the
Company submitted a gaming application to the New York City Gambling
Commission and in April 1998 received notification that the Commission was not
prepared to issue a provisional license which would have allowed the Company
to start operations. The Company continues to pursue a New York City license
but it is not known if the Company will be successful in receiving such a
license.
To utilize "President Casino New Yorker" while the Company pursues this
license, in July 1998, the Company entered into an agreement to charter
"President Casino New Yorker" until February 15, 1999 to an unrelated third
party. The charter may be extended for three additional two-month periods
with an initial charter fee of $0.4 million per month and certain escalations
during each of the extension periods.
--Competition
Intensified competition for patrons continues to occur at each of the
Company's three casino properties.
Since gaming began in Biloxi in August 1992, steadily increasing competition
along the Mississippi Gulf Coast, including New Orleans and elsewhere in
Louisiana and Mississippi, has had an adverse effect on the results of
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operations in Biloxi. Several large hotel/casino complexes have been built in
recent years and a new large project is under construction and is scheduled to
open in early 1999. There are currently eleven casinos operating in this area
and a twelfth is under construction.
Within a 25-mile radius of the Quad Cities, the Company's Davenport
operation competes with three other casino operations. New casinos, expansion
and increased marketing by these competitors continues to escalate, resulting
in increased promotional and marketing costs.
Competition is intense in the St. Louis market area. There are presently
five other casino companies operating in the market area and competing for
local customers. Two of these are Illinois casino companies operating single
casino vessels on the Mississippi River, one directly across the Mississippi
from the "Admiral" and the second 20 miles upriver in Alton, Illinois. There
are three Missouri casino companies, each of which operates two casino vessels
approximately 20 miles west of St. Louis on the Missouri River, one in the
City of St. Charles, Missouri and two in Maryland Heights, Missouri. The two
casinos in Maryland Heights opened in March 1997.
--Weather Conditions
The Company's operating results are susceptible to the effects of floods and
adverse weather conditions. On various occasions, the Company has temporarily
suspended operations as a result of such adversities. The Davenport casino
operations were temporarily suspended for thirteen days during April 1997, as
a result of flooding on the Mississippi River. Although the Company was not
forced to suspend its St. Louis operations during the three-month period ended
May 31, 1997, high waters caused reduced parking and a general public
perception of diminished access to the casino which combined to negatively
impact revenue during the period.
Results of Operations
Three-Month Period Ended May 31, 1998 Compared to the
Three-Month Period Ended May 31, 1997
The results of operations for fiscal years 1999 and 1998 include the gaming
results for Davenport, Iowa, Biloxi, Mississippi and St. Louis, Missouri, and
of much lesser significance, the non-gaming operations for Davenport (The
Blackhawk Hotel) and St. Louis (Gateway Riverboat Cruises). Beginning in July
1997, the results of operations include the results of the Broadwater
Property, which was purchased July 1997.
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The following table highlights the results of the Company's operations.
Three Months Ended May 31,
1998 1997
------ ------
(in millions)
Biloxi, Mississippi (including hotel)
Operating revenues............................ $ 14.4 $ 10.8
Income from operations........................ $ 0.9 $ 0.1
EBITDA (a).................................... $ 1.6 $ 0.9
EBITDA margin................................. 11.1% 8.3%
Davenport, Iowa (including hotel)
Operating revenues............................ $ 21.4 $ 17.2
Income from operations........................ $ 3.6 $ 1.4
EBITDA (a).................................... $ 4.7 $ 2.5
EBITDA margin................................. 22.0% 14.5%
St. Louis, Missouri Operations
Operating revenues........................... $ 16.2 $ 17.7
Income (loss) from operations................ $ (0.6) $ 1.3
EBITDA (a)................................... $ 0.7 $ 2.6
EBITDA margin................................ 4.3% 14.7%
Corporate Leasing Operations
Operating revenues........................... $ 0.0 $ 0.4
Loss from operations......................... $ (0.4) $ (0.5)
EBITDA (a)................................... $ (0.1) $ 0.1
EBITDA margin................................ n/a 25.0%
Corporate Administrative and Development
Loss from operations......................... $ (3.9) $ (1.8)
EBITDA (a)................................... $ (3.9) $ (1.8)
(a) "EBITDA" consists of earnings from operations before interest, income
taxes, depreciation and amortization for each of the operating subsidiaries.
However, it does not include corporate operating expenses. EBITDA should not
be construed as an alternative to operating income as an indicator of the
Company's operating performance, or as an alternative to cash flows from
operational activities as a measure of liquidity. The Company has presented
EBITDA solely as a supplemental disclosure to facilitate a more complete
analysis of the Company's financial position. The Company believes that this
disclosure enhances the understanding of the financial performance of a
company with substantial depreciation and amortization.
Operating revenues. The Company generated consolidated operating revenues
of $52.0 million during the three-month period ended May 31, 1998 compared to
$46.1 million during the three-month period ended May 31, 1997, an increase of
$5.9 million or 12.8%.
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The Company's Davenport and Biloxi operations each experienced increases in
revenue, partially offset by the Company's St. Louis operation which
experienced a decrease as a result of being closed for 26 days during April
1998.
The increase in revenues at the Company's Davenport operations resulted from
the combination of the prior year's temporary suspension of operations for
thirteen days during April 1997 due to flood conditions and the current year
being positively impacted by a major convention in the Quad City area.
The $3.6 million increase in revenue over the prior year in Biloxi resulted
from a $0.9 million increase in casino revenues and a $2.7 million increase
from the hotel operations acquired in July 1997.
The Company's revenues from food and beverage, hotel, retail, charter and
other non-gaming activities (net of promotional allowances) increased to $9.4
million during the three-month period ended May 31, 1998, from $3.7 million
during the three-month period ended May 31, 1997, an increase of $5.7 million.
The increase was primarily attributable to two factors: (i) the purchase of
the Broadwater Property in July 1997, which contributed $2.6 million in
revenue and (ii) the inclusion of $3.6 million in insurance proceeds in
revenue for the three-month period ended May 31, 1998 compared to $0.5 million
of business interruption proceeds related to flooding in St. Louis during the
Summer of 1996, recognized in the three-month period ended May 31, 1997.
Operating costs and expenses. The Company's consolidated gaming and gaming
cruise operating costs and expenses were $25.6 million during the three-month
period ended May 31, 1998, compared to $24.6 million during the three-month
period ended May 31, 1997, an increase of $1.0 million or 4.1%. Gaming costs
increased $2.4 million at the Davenport and Biloxi operations as a result of
increased gaming revenues while St. Louis gaming costs decreased $1.4 million
as a result of being closed for 26 days. As a percentage of gaming revenues,
gaming and gaming cruise costs increased to 60.2% during the three-month
period ended May 31, 1998 from 58.0% during the three-month period ended May
31, 1997. The increase in gaming and gaming cruise costs as a percent of
revenue is primarily attributable to fixed costs at the St. Louis operations
continuing during the 26-day temporary suspension of operations.
The Company's consolidated selling, general and administrative expenses were
$15.4 million during the three-month period ended May 31, 1998, compared to
$12.5 million for the three-month period ended May 31, 1997, an increase of
$2.9 million or 18.8%. The St. Louis operations increase of $1.9 million was
primarily due to the "Admiral" accident. The acquisition of the Broadwater
Property in July 1997 contributed to $0.7 million of the increase. As a
percentage of consolidated revenues, selling, general and administrative
expenses increased to 29.6% during the three-month period ended May 31, 1998
from 27.0% during the three-month period ended May 31, 1997. The increase in
selling, general and administrative expenses as a percent of revenue is
primarily attributable to fixed costs at the St. Louis operations continuing
during the 26-day temporary suspension of operations.
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Depreciation and amortization expenses were $3.5 million during the three-
month period ended May 31, 1998, compared to $3.8 million during the three-
month period ended May 31, 1997, a decrease of $0.3 million, or 7.9%. The
decrease is primarily attributable to the removing a vessel from service
during fiscal 1998.
Development costs during the three-month period ended May 31, 1998 were $2.8
million compared to $0.9 million during the three-month period ended May 31,
1997, an increase of $1.9 million. The increase was primarily related to $2.1
million the Company incurred pursuing a gaming license in New York City.
Operating income. As a result of the foregoing items, the Company had an
operating loss of $0.5 million during the three-month period ended May 31,
1998, compared to operating income of $0.6 million during the three-month
period ended May 31, 1997.
Interest expense, net. The Company incurred net interest expense of $4.8
million during the three-month period ended May 31, 1998, compared to $3.4
million during the three-month period ended May 31, 1997, an increase of $1.4
million, or 41.2%. The increase is the result of $30.0 million debt secured
by the Company in July 1997 in conjunction with the purchase of the Broadwater
Property.
Minority interest expense. The Company incurred $0.4 million minority
interest expense for the three-month period ended May 31, 1998, with no such
expense for the three-month period ended May 31, 1997. The increase is
attributable to the acquisition of the Broadwater Property in July 1997.
Net loss. The Company incurred a net loss of $5.7 million during the three-
month period ended May 31, 1998, compared to a net loss of $2.9 million during
the three-month period ended May 31, 1997.
Liquidity and Capital Resources
The Company meets its working capital requirements from a combination of
internally generated sources including cash from operations and the sale or
charter of assets no longer utilized in the Company's operations.
The Company requires approximately $9.0 million of cash in order to fund
daily operations. As of May 31, 1998, the Company had approximately $7.6
million in cash and short-term investments in excess of the required $9.0
million. The Company is heavily dependant on cash generated from operations
to continue to operate as planned in its existing jurisdictions and fund
capital expenditures. The Company anticipates that its existing available
cash and cash equivalents and its anticipated cash generated from operations
will be sufficient to fund all of its ongoing operations. To the extent cash
generated from operations is less than anticipated, the Company may be
required to curtail certain planned fiscal 1998 expenditures or seek other
sources of financing. The Company may be limited in its ability to raise cash
through additional financing.
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The Company experienced a net cash decrease from investing activities of
$1.0 million during the three-month period ended May 31, 1998 compared to a
decrease of $1.6 million during the three-month period ended May 31, 1997.
The net cash decrease from investing activities during both periods resulted
primarily from expenditures on property and equipment. During the three-month
period ended May 31, 1998, the Company spent approximately $0.8 million, $1.0
million and $0.6 million at the Company's Biloxi, St. Louis and Davenport
operations. Additionally, the Company spent $1.3 million in conjunction with
pursuing a gaming license in New York City and preparing the "President Casino
New Yorker" to be placed in service. The expenditures were partially offset
by the maturity of $2.0 million in short-term investments.
During both three-month periods ended May 31, 1998 and 1997, the Company
made $0.1 million of principal payments.
In the event the Company identifies a potential growth opportunity, project
financing will be required. Capital investments may include all or some of
the following: acquisition and development of land; acquisition of vessels and
lease options on land and other facilities; and construction of vessels and
other facilities in anticipation of the approval of gaming operations in
potential new jurisdictions. In connection with development activities
relating to potential jurisdictions, the Company also makes expenditures for
professional services which are expensed as incurred. The Company's financing
requirements would depend upon actual development costs, the amounts and
timing of such expenditures, the amount of available cash flow from operations
and the availability of other financing arrangements.
In such case, the Company could pursue a number of alternatives to avail
itself of additional capital, including borrowing additional funds either
directly or on a stand-alone project basis, financing through lease
agreements, selling equity securities and selling assets which are not
currently generating revenues. The Company may also consider strategic
combinations or alliances. Although there can be no assurance that the
Company can effectuate any of the financing strategies discussed above, the
Company believes that if it determines to seek any additional licenses to
operate gaming in other potential jurisdictions it will be able to raise
sufficient capital to pursue its strategic plan.
Year 2000
While the Year 2000 considerations are not expected to materially impact the
Company's internal operations, they may have an effect on some of the
Company's suppliers, and thus indirectly affect the Company. It is not
possible to quantify the aggregate cost to the Company with respect to
suppliers with Year 2000 problems, although the Company does not anticipate it
will have a material adverse impact on its business.
Forward Looking Statements
The statements contained herein include forward-looking statements based on
management's current expectations of the Company's future performance.
12
<PAGE> 15
Predictions relating to future performance are inherently uncertain and
subject to a number of risks. Consequently, the Company's actual results
could differ materially from the expectations expressed in the preceding
paragraphs. Factors that could cause the Company's actual results to differ
materially from the expected results include, among other things: the
intensely competitive nature of the riverboat and dockside casino gaming
industry; increases in the number of competitors in the markets in which the
Company operates; the seasonality of the riverboat and dockside casino gaming
industry in certain markets in which the Company operates; the susceptibility
of the Company's operating results to floods, adverse weather conditions and
natural disasters; the risk that jurisdictions in which the Company proposes
to operate do not enact legislation permitting riverboat or dockside casino
gaming or do not enact such legislation in a timely manner; changes in
governmental regulations governing the Company's activities and other risks
detailed in the Company's filings with the Securities and Exchange Commission.
Part II. Other Information
Item 1. Legal Proceedings
Information with respect to legal proceedings to which the Company is a
party is disclosed in Note 3 of Notes to Condensed Consolidated Financial
Statements included in Part I of this report and is incorporated herein by
reference.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits filed as part of this report are listed on Index to
Exhibits accompanying this report.
(b) Reports on Form 8-K
Not applicable.
13
<PAGE> 16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
President Casinos, Inc.
-----------------------------
(Registrant)
Date: July 13, 1998 /s/ James A. Zweifel
-----------------------------
James A. Zweifel
Duly Authorized Officer and
Principal Financial Officer
14
<PAGE> 17
INDEX TO EXHIBITS
-----------------
EXHIBIT NO.
27 Financial Data Schedule for the three months ended May 31, 1998,
as required under EDGAR.
<TABLE> <S> <C>
<S> <C>
<ARTICLE>5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND THE CONDENSED CONSOLIDATED STATEMENT
OF INCOME OF PRESIDENT CASINOS INC. FILED AS A PART OF THE QUARTERLY REPORT ON
FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY
REPORT ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> MAY-31-1998
<CASH> 15978
<SECURITIES> 0
<RECEIVABLES> 3206
<ALLOWANCES> 379
<INVENTORY> 1954
<CURRENT-ASSETS> 28750
<PP&E> 205960
<DEPRECIATION> 56782
<TOTAL-ASSETS> 181889
<CURRENT-LIABILITIES> 30968
<BONDS> 99198
0
0
<COMMON> 302
<OTHER-SE> 2662
<TOTAL-LIABILITY-AND-EQUITY> 181889
<SALES> 0
<TOTAL-REVENUES> 52023
<CGS> 0
<TOTAL-COSTS> 52551
<OTHER-EXPENSES> 369
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4982
<INCOME-PRETAX> (5720)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5720)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5720)
<EPS-PRIMARY> (1.14)
<EPS-DILUTED> (1.14)
</TABLE>
