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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 November 30, 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,
5,032,942 shares outstanding as of January 13, 1999.
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PRESIDENT CASINOS, INC.
INDEX TO FORM 10-Q
Part I. Financial Information Page No.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)
as of November 30 and February 28, 1998...........................1
Condensed Consolidated Statements of Operations
and Loss Per Share Information (Unaudited) for the
Three and Nine Months Ended November 30, 1998 and 1997............2
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Nine Months Ended November 30, 1998 and 1997..............3
Notes to Condensed Consolidated Financial Statements................4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................7
Part II. Other Information
Item 1. Legal Proceedings...........................................18
Item 2. Changes in Securities.......................................18
Item 3. Defaults Upon Senior Securities.............................18
Item 4. Submission of Matters to a Vote of Security Holders.........18
Item 5. Other Information...........................................18
Item 6. Exhibits and Reports on Form 8-K............................19
Signature..............................................................20
<PAGE> 3
Part I. Financial Information
Item 1. Financial Statements
CONDENSED CONSOLIDATED
PRESIDENT CASINOS, INC. BALANCE SHEETS (UNAUDITED)
______________________________________________________________________________
<TABLE>
<CAPTION>
(in thousands) Nov. 30, Feb. 28,
1998 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 15,520 $ 19,278
Restricted cash................................ 3,274 4,354
Short-term investments......................... 275 2,622
Accounts receivable, net of allowance for
doubtful accounts of $354 and $369........... 1,574 1,664
Other current assets........................... 5,126 5,908
--------- ---------
Total current assets....................... 25,769 33,826
Property and equipment, net of accumulated
depreciation of $67,067 and $53,495............ 145,540 149,066
Other assets..................................... 3,353 4,364
--------- ---------
$174,662 $187,256
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt........... $ 1,888 $ 1,895
Other current liabilities...................... 23,795 29,615
--------- ---------
Total current liabilities.................. 25,683 31,510
Long-term liabilities:
Long-term debt, net of current maturities...... 134,711 134,784
Accrued loan fee............................... 2,984 1,300
--------- ---------
Total long-term liabilities................ 137,695 136,084
--------- ---------
Total liabilities.......................... 163,378 167,594
--------- ---------
Minority interest................................ 12,103 10,978
Commitments and contingencies....................
Stockholders' equity (deficit):
Preferred Stock, none issued and outstanding... -- --
Common Stock, 5,033 shares issued
and outstanding.............................. 302 302
Additional paid-in capital..................... 101,729 101,729
Accumulated deficit............................ (102,850) (93,347)
--------- ---------
Total stockholders' equity (deficit)....... (819) 8,684
--------- ---------
$174,662 $187,256
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
PRESIDENT CASINOS, INC. AND LOSS PER SHARE INFORMATION (UNAUDITED)
______________________________________________________________________________
<TABLE>
<CAPTION>
(in thousands, except per share data) Three Months Nine Months
Ended Nov. 30, Ended Nov. 30,
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Gaming and gaming cruise............. $ 44,539 $ 40,813 $133,707 $127,421
Food and beverage.................... 5,816 5,185 17,404 15,597
Hotel................................ 1,964 1,706 6,566 3,257
Retail and other..................... 2,573 1,590 9,950 4,771
Less promotional allowances.......... (3,936) (3,396) (11,000) (10,020)
--------- --------- --------- ---------
Net operating revenues.............. 50,956 45,898 156,627 141,026
--------- --------- --------- ---------
OPERATING COSTS AND EXPENSES:
Gaming and gaming cruise............. 25,972 24,301 77,576 74,690
Food and beverage.................... 3,729 3,497 11,464 10,406
Hotel................................ 681 507 2,148 1,036
Retail and other..................... 662 667 2,109 1,644
Selling, general and administrative.. 12,691 12,514 41,709 37,321
Depreciation and amortization........ 3,731 3,417 10,759 10,840
Loss (gain) on sale of assets, net... 4 13 76 (457)
Development.......................... 712 595 4,661 1,792
--------- --------- --------- ---------
Total operating costs and expenses.. 48,182 45,511 150,502 137,272
--------- --------- --------- ---------
OPERATING INCOME...................... 2,774 387 6,125 3,754
Interest expense, net................. 4,833 4,755 14,504 12,109
--------- --------- --------- ---------
LOSS BEFORE MINORITY INTEREST. ....... (2,059) (4,368) (8,379) (8,355)
Minority interest..................... (355) (314) (1,124) (554)
--------- --------- --------- ---------
NET LOSS.............................. $ (2,414) $ (4,682) $ (9,503) $ (8,909)
========= ========= ========= =========
Basic and dilutive loss per share..... $ (0.48) $ (0.93) $ (1.89) $ (1.77)
======== ======== ======== ========
Weighted average common and dilutive
potential shares outstanding......... 5,033 5,033 5,033 5,033
====== ====== ====== ======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED
PRESIDENT CASINOS, INC. STATEMENTS OF CASH FLOWS (UNAUDITED)
______________________________________________________________________________
<TABLE>
<CAPTION>
(in thousands) Nine Months Ended Nov. 30,
1998 1997
------ ------
<S> <C> <C>
Net cash provided by operating activities......... $ 917 $ 5,109
-------- ---------
Cash flows from investing activities:
Expenditures for property and equipment......... (7,403) (32,722)
Changes in restricted cash...................... 1,081 (4,736)
Proceeds from the sale of property and equipment 94 1,077
Purchase of lease options....................... (482) (1,200)
Purchase of short-term investments.............. -- (2,000)
Maturity of short-term investments.............. 2,347 --
Minority interest............................... -- (103)
Other........................................... -- (59)
--------- ---------
Net cash used in investing activities......... (4,363) (39,743)
--------- ---------
Cash flows from financing activities:
Proceeds from notes payable..................... -- 30,000
Proceeds from a capital lease refund............ -- 108
Repayment of notes payable...................... (300) (300)
Payments on capital lease obligations........... (12) (65)
--------- ---------
Net cash provided by (used in)
financing activities........................ (312) 29,743
--------- ---------
Net decrease in cash and cash equivalents......... (3,758) (4,891)
Cash and cash equivalents at beginning of period.. 19,278 25,115
--------- ---------
Cash and cash equivalents at end of period........ $ 15,520 $ 20,224
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.......................... $ 15,670 $ 14,313
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Issuance of Class B Unit of LLC................. $ -- $ 10,000
Related party notes and interest thereon
applied against purchase of Biloxi Property... $ -- $ 2,016
Assets acquired under capital leases............ $ -- $ 156
Minority interest distribution.................. $ -- $ 53
Retirement of capital lease obligations......... $ -- $ 48
</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,
a 95%-owned limited partnership and a limited liability corporation
(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%-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, including the Broadwater Property that
was acquired by the Company in July 1997. The President Broadwater Hotel, LLC,
a limited liability corporation in which the Company has a controlling
interest, is managed by a wholly-owned subsidiary of the Company. 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. DEVELOPMENT
The Company pursued a gaming license for a "cruise to nowhere" operation in
New York City utilizing its 308-foot deep-water vessel, "President Casino New
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Yorker." 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.
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
initial charter could be extended for three additional two-month periods. The
initial charter fee was $400 per month with certain escalations to occur
during each of the extension periods. The charter was subsequently
renegotiated whereby the first extension period was amended to two
one-month periods. The terms of the second two extension periods remain
unchanged. The lessee has exercised the right to the first one-month
extension.
The Company is currently developing a master plan for the real estate it
purchased in July 1997 in Biloxi, Mississippi. The master plan anticipates
the development of a full-scale luxury destination resort complex offering an
array of entertainment attractions in addition to gaming. Management believes
that with its beachfront location and contiguous golf course, the Broadwater
Property is the best site for such a development in the rapidly growing Gulf
Coast market. Management also believes that the Broadwater Property is
uniquely qualified to be a multi-casino complex. There can be no assurance
that the Company will be successful in developing a viable master plan for the
Broadwater Property, or that, if a plan is developed, that the Company will be
able to secure adequate financing for the project on acceptable terms.
In December 1993, the Company entered into a lease/purchase option agreement
covering an 18-acre riverfront site and city-owned pier located on contiguous
property in Philadelphia, Pennsylvania for use in connection with possible
future gaming operations. In October 1998, the Company modified its
Philadelphia lease and option agreements. Pursuant to the terms of the third
modification, the Company may extend its option through September 30, 1999 on
a quarter-to-quarter basis for $375 per quarter beginning October 1998. The
Company has remitted $375 for each of the quarters ended December 31, 1998 and
March 31, 1999. The Company also extended its right to secure additional
option periods through December 31, 2001.
3. 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.
The "Admiral" was closed to the public for 26 days, reopening on April 30,
1998. The Company spent approximately $2,714 in the nine-month period ended
November 30, 1998, to repair the vessel, replace the boarding ramps and
prepare the "Admiral" to reopen. Insurance proceeds from the Company's hull
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and business interruption coverages recorded in the nine-month period ended
November 30, 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.
The Company temporarily suspended its Biloxi gaming operations on September
25, 1998 due to Hurricane Georges. The casino was reopened on October 1,
1998. The hurricane caused wind and water damage to the Company's Biloxi
casino and hotel. The Company maintains property, liability and business
interruption insurance to minimize the financial impact from the hurricane.
4. COMMITMENTS AND CONTINGENT LIABILITIES
--Litigation
A shareholder derivative suit captioned Mizel v. John E. Connelly et. al.
was filed on September 11, 1998, in the Court of Chancery of the State of
Delaware alleging that the Board of Directors of the Company failed to
exercise informed business judgment and wasted corporate assets in connection
with the July 1997 acquisition by the Company of certain real estate and
improvements in Biloxi, Mississippi, including the Broadwater Resort and
Broadwater Towers and a related golf course, from an entity wholly-owned by
Mr. Connelly, Chairman of the Board and Chief Executive Officer of the
Company. The suit requests rescission of the transaction, a constructive
trust upon all benefits received by Mr. Connelly in the transaction, the award
of damages to the Company and attorneys fees and costs. The case is in the
preliminary stages. The Company has filed a motion to dismiss this action for
failure by the plaintiff to make a demand for relief upon the Board of
Directors. Based on management's evaluation of the lawsuit, the Company
believes that it has meritorious defenses to the allegations set forth in the
suit, and intends to defend this action vigorously. The suit is covered under
the Company's directors and officers insurance policy.
On April 11, 1997, an action captioned "American Gaming & Entertainment,
Ltd. v. President Mississippi Charter Corporation and President Riverboat
Casino-Mississippi, Inc." was filed in the Chancery Court of Harrison County,
Mississippi by American Gaming & Entertainment, Ltd. ("AGEL"). AGEL is the
subject of bankruptcy proceedings pending in the United States Bankruptcy
Court for the Southern District of Mississippi, (the "Bankruptcy Court") and
is the owner of the "Biloxi Barge" which is utilized in connection with the
Company's Biloxi operations pursuant to the initial charter agreement between
AGEL and Charter Corp. The action filed by AGEL alleged that the President
Riverboat Casino-Mississippi, Inc. and President Mississippi Charter Corp.
("Charter Corp."), a wholly-owned subsidiary of the Company, did not comply
with their respective obligations under the initial charter agreement. The
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Company asserted that AGEL breached its obligations under the initial charter
agreement and, in connection therewith, withheld a portion of the charter
payments due to AGEL under the initial charter agreement. In October of 1998,
this action was dismissed with prejudice pursuant to a settlement agreed upon
by the parties. Pursuant to the settlement, the Company made payments
totaling $3,890, representing back charter of $215 per month from December
1997, and a lump sum payment of $1,525.
In addition, in the above proceeding, an action captioned "International
Game Technology v. President Casinos, Inc., President Mississippi Charter
Corporation, President Riverboat Casino-Mississippi, Inc and President
Riverboat Casinos, Inc." was filed in the Circuit Court of Harrison County,
Mississippi, Second Judicial District, by International Game Technology
("IGT"). The action was removed to the United States District Court, Southern
District of Mississippi, Biloxi Division, on March 11, 1998, and was
subsequently referred to the United States Bankruptcy Court for the Southern
District of Mississippi where it is captioned "In re AmGam Associates, a
Mississippi General Partnership," Chapter 11 Reorganization Case No.
95-07864-SEG, Adversary Proceeding 98-05095. This action alleges that certain
subsidiaries of the Company assumed certain obligations of the owner of the
"Biloxi Barge" to IGT. IGT prays for damages of $3,306, plus late fees and
attorneys' fees under the terms of what is alleged to be the assumption
agreement. The Company vigorously denies that it or any subsidiary has
assumed any obligations to IGT, and the Company has filed a Motion to Dismiss
or in the alternative for Summary Judgment on this action on the basis that
IGT's claim is time-barred and subject to the principles of res judicata. At
this time, however, the outcome of this litigation cannot be determined.
On October 8, 1998, an action captioned "Revere Christophe v. The President
Riverboat Casino-Mississippi, Inc., Imperial Palace of Mississippi, J. Edward
Connelly Associates, Inc., Nicky Cvitanovich and J. Edward Connelly" (Cause
No. 1:98CV464RG) was filed in the United States District Court in the Southern
District of Mississippi alleging various damages for employment
discrimination, slander and tort. The Company believes that the action is
without merit, and intends to defend this action vigorously.
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.
--Other
The Company's common stock was delisted from the Nasdaq National Market
effective the close of business November 19, 1998, because the Company no
longer met the requirements of the market. The stock continues to trade on the
OTC Bulletin Board. The decision by Nasdaq has no effect on the Company's
day-to-day business operations.
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5. SUBSEQUENT EVENT
On December 3, 1998, the Company repurchased $25,000 of its 13% senior
notes. The repurchased notes were used to satisfy the $25,000 principal
payment due September 15, 1999 on the Company's originally outstanding
$100,000 13% senior notes. The repurchase was funded by the issuance of
$25,000 of new 12% notes. The new 12% notes have no mandatory redemption
obligation, mature on September 15, 2001, and are secured by mortgages on two
of the Company's vessels, the "Admiral" and the "President Casino New Yorker",
as well as subsidiary guarantees.
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
this 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. The Company spent approximately $2.7 million during the nine-month
period ended November 30, 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 nine-month
period ended November 30, 1998, were $3.9 million. 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 acquisition of the Broadwater Property has
enabled the Company, on a consolidated basis, to eliminate the $2.8 million
annual payments required under the former 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.
Management believes that with its beachfront location and contiguous golf
course, the Broadwater Property is the best site for such a development in the
rapidly growing Gulf Coast market. Management also believes that the
Broadwater Property is uniquely qualified to be a multi-casino complex. There
can be no assurance that the Company will be successful in developing a viable
master plan for the Broadwater Property, or that, if a plan is developed, that
the Company will be able to secure adequate financing for the project on
acceptable terms.
--"President Casino New Yorker"
The Company pursued 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 the "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.
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
initial charter could be extended for three additional two-month periods. The
initial charter fee was $0.4 million per month with certain escalations to
occur during each of the extension periods. The charter was subsequently
renegotiated whereby the first extension period was amended to two
one-month periods The terms of the second two extension periods remain
unchanged. The lessee has exercised the right to the first one-month
extension.
--Competition
Intensified competition for patrons continues to occur at each of the
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Company's three casino properties.
Since gaming began in Biloxi in August 1992, competition has steadily
increased along the Mississippi Gulf Coast. 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 March 1999. There are currently
eleven casinos operating in this area.
Within a 25-mile radius of the Quad Cities, the Company's Davenport
operation competes with three other casino operations. 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. There are three Missouri
casino companies, each of which operates two casino vessels approximately 20
miles west of St. Louis on the Missouri River.
--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. The Company temporarily
suspended its Biloxi gaming operations on September 25, 1998 due to Hurricane
Georges. The casino was reopened on October 1, 1998.
The Company has historically been susceptible to the effects of flooding on
the Mississippi River in St. Louis. Although the Company was not forced to
suspend its St. Louis operations because of flood conditions during either of
the nine-month periods reported on herein, periodically high waters have
reduced access to parking and caused a general public perception of diminished
access to the casino.
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Results of Operations
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 in Biloxi include the results of the
Broadwater Property.
The following table highlights the results of the Company's operations.
Three Months Ended Nine Months Ended
November 30, November 30,
1998 1997 1998 1997
------ ------ ------ ------
(in millions)
Biloxi, Mississippi Operations
(including hotels)
Operating revenues................. $ 14.3 $ 10.7 $ 44.4 $ 33.0
Income (loss) from operations...... $ 0.6 $ (0.7) $ 3.4 $ (1.0)
EBITDA (a)......................... $ 1.4 $ (0.1) $ 5.8 $ 1.2
EBITDA margin...................... 9.8% n/a 13.1% 3.6%
Davenport, Iowa Operations
(including hotel)
Operating revenues................. $ 19.2 $ 18.5 $ 61.1 $ 55.3
Income from operations............. $ 2.7 $ 2.5 $ 10.2 $ 7.3
EBITDA (a)......................... $ 3.9 $ 3.6 $ 13.7 $ 10.7
EBITDA margin...................... 20.3% 19.5% 22.4% 19.3%
St. Louis, Missouri Operations
Operating revenues................. $ 16.4 $ 16.3 $ 49.4 $ 51.5
Income from operations............. $ 0.7 $ 0.4 $ 0.8 $ 2.7
EBITDA (a)......................... $ 2.0 $ 1.7 $ 4.8 $ 6.6
EBITDA margin...................... 12.2% 10.4% 9.7% 12.8%
Corporate Leasing Operations
Operating revenues................. $ 1.1 $ 0.4 $ 1.8 $ 1.1
Income (loss) from operations...... $ 0.6 $ (0.1) $ (0.1) $ (0.2)
EBITDA (a)......................... $ 1.0 $ 0.2 $ 1.1 $ 1.1
EBITDA margin...................... 90.9% 50.0% 61.1% n/a*
Corporate Administrative and
Development
Loss from operations............... $ (1.8) $ (1.7) $ (8.3) $ (5.0)
EBITDA (a)......................... $ (1.8) $ (1.7) $ (8.3) $ (4.9)
(a) "EBITDA" consists of earnings from operations before interest, income
taxes, depreciation and amortization. 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 operating activities as a
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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 interest, depreciation and amortization.
* Not meaningful as a result of gains on the sales of property and equipment
during the period..
Three-Month Period Ended November 30, 1998 Compared to the
Three-Month Period Ended November 30, 1997
Operating revenues. The Company generated consolidated operating revenues
of $51.0 million during the three-month period ended November 30, 1998
compared to $45.9 million during the three-month period ended November 30,
1997, an increase of $5.1 million or 11.1%.
The Company's Davenport and Biloxi operations each experienced increases in
revenue, while the Company's St. Louis operation remained relatively
unchanged. The increase in Davenport's revenue is primarily the result of the
growth of the Quad Cities' market revenues over the comparable three-month
period ended November 30, 1997. The $3.6 million increase in Biloxi's revenue
primarily is the result of the growth in both the Gulf Coast market revenue as
a whole and the Company's share of the market over the comparable three-month
period ended November 30, 1997.
The Company's revenues from food and beverage, hotel, retail, charter and
other non-gaming activities (net of promotional allowances) increased to $6.4
million during the three-month period ended November 30, 1998, from $5.1
million during the three-month period ended November 30, 1997, an increase of
$1.3 million, or 25.5%. The increase was primarily attributable to two
factors: (i) an increase in charter revenue as a result of a new charter
agreement which contributed $0.7 million to the increase, and (ii) an increase
in Biloxi's food and beverage, retail and other revenue (net of promotional
allowances) of $0.3 million primarily as a result of the inclusion of $0.2
million in business interruption insurance proceeds resulting from the
hurricane.
Operating costs and expenses. The Company's consolidated gaming and gaming
cruise operating costs and expenses were $26.0 million during the three-month
period ended November 30, 1998, compared to $24.3 million during the
three-month period ended November 30, 1997, an increase of $1.7 million. The
increase in operating costs and expenses is primarily the result of the
increase in gaming revenue. As a percentage of gaming revenues, gaming and
gaming cruise costs decreased to 58.3% during the three-month period ended
November 30, 1998 from 59.5% during the three-month period ended November 30,
1997. The decrease is primarily the result of the relationship between the
fixed components of Biloxi's and Davenport's gaming and gaming cruise costs
relative to revenue during a period of increased revenue.
The Company's consolidated selling, general and administrative expenses were
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<PAGE> 15
$12.7 million during the three-month period ended November 30, 1998, compared
to $12.5 million for the three-month period ended November 30, 1997, an
increase of $0.2 million. As a percentage of consolidated revenues, selling,
general and administrative expenses decreased to 24.9% during the three-month
period ended November 30, 1998 from 27.2% during the three-month period ended
November 30, 1997 primarily as a result of fixed costs at Biloxi and the
corporate leasing operation compared to each respective entity's increased
revenues.
Depreciation and amortization expenses were $3.7 million during the three-
month period ended November 30, 1998, compared to $3.4 million during the
three-month period ended November 30, 1997, an increase of $0.3 million, or
8.8%.
Development costs during the three-month period ended November 30, 1998,
were $0.7 million compared to $0.6 million during the three-month period ended
November 30, 1997, an increase of $0.1 million, or 16.7%. The increase was
primarily related to the increase in amortization of the Company's investment
in the Philadelphia lease option and expenses related to the development of a
destination resort in Biloxi.
Operating income/loss. As a result of the foregoing items, the Company had
operating income of $2.8 million during the three-month period ended November
30, 1998, compared to $0.4 million during the three-month period ended
November 30, 1997. The improvement in both Biloxi's and Davenport's operating
incomes were the result of improved revenues. The improvement in St. Louis's
operating income was primarily the result of ongoing efforts to achieve
operating efficiencies.
Interest expense, net. The Company incurred net interest expense of $4.8
million during each of the three-month periods ended November 30, 1998 and
1997, respectively.
Minority interest expense. The Company incurred $0.4 million minority
interest expense for the three-month period ended November 30, 1998, compared
to $0.3 million for the three-month period ended November 30, 1997.
Net loss. The Company incurred a net loss of $2.4 million during the three-
month period ended November 30, 1998, compared to a net loss of $4.7 million
during the three-month period ended November 30, 1997.
Nine-Month Period Ended November 30, 1998 Compared to the
Nine-Month Period Ended November 30, 1997
Operating revenues. The Company generated consolidated operating revenues
of $156.6 million during the nine-month period ended November 30, 1998
compared to $141.0 million during the nine-month period ended November 30,
1997, an increase of $15.6 million or 11.1%.
The Company's Davenport and Biloxi operations each experienced increases in
revenue, offset by the Company's St. Louis operation which experienced a
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<PAGE> 16
decrease primarily 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 the growth of the Quad Cities' market revenues.
The $11.4 million increase in revenues over the prior year in Biloxi
resulted from a $7.2 million increase in casino revenues and a $4.2 million
increase from the hotel operations acquired in July 1997. The increase in
casino revenues is primarily the result of both the growth in both the Gulf
Coast market revenue as a whole and the Company's market share over the
comparable nine-month period ended November 30, 1997.
The Company's revenues from food and beverage, hotel, retail, charter and
other non-gaming activities (net of promotional allowances) increased to $22.9
million during the nine-month period ended November 30, 1998, from $13.6
million during the nine-month period ended November 30, 1997, an increase of
$9.3 million. The increase was primarily attributable to two factors: (i) the
purchase of the Broadwater Property in July 1997, which contributed an
increase of $4.2 million in revenue; and (ii) the inclusion of $3.6 million in
insurance proceeds in revenue for the nine-month period ended November 30,
1998 compared to $0.5 million of business interruption proceeds related to
flooding in St. Louis during the Summer of 1996, recognized in the nine-month
period ended November 30, 1997.
Operating costs and expenses. The Company's consolidated gaming and gaming
cruise operating costs and expenses were $77.6 million during the nine-month
period ended November 30, 1998, compared to $74.7 million during the
nine-month period ended November 30, 1997, an increase of $2.9 million or
3.9%. Combined gaming costs increased $4.6 million at the Davenport and Biloxi
operations as a result of increased gaming revenues while St. Louis gaming
costs decreased $1.6 million primarily as a result of being closed for 26
days. As a percentage of gaming revenues, gaming and gaming cruise costs
decreased to 58.0% during the nine-month period ended November 30, 1998, from
58.6% during the nine-month period ended November 30, 1997. The decrease is
primarily the result of the relationship between the fixed components of
Biloxi's and Davenport's gaming and gaming cruise costs relative to revenue
during a period of increased revenue, offset by the ongoing fixed components
of St. Louis gaming costs incurred during the 26-day period the casino was
closed.
The Company's consolidated selling, general and administrative expenses were
$41.7 million during the nine-month period ended November 30, 1998, compared
to $37.3 million for the nine-month period ended November 30, 1997, an
increase of $4.4 million or 11.8%. The St. Louis operations increase of $1.5
million was primarily due to the "Admiral" accident. The acquisition of the
Broadwater Property in July 1997 contributed to $2.3 million of the increase.
As a percentage of consolidated revenues, selling, general and administrative
expenses increased to 26.6% during the nine-month period ended November 30,
1998 from 26.5% during the nine-month period ended November 30, 1997.
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<PAGE> 17
Depreciation and amortization expenses were $10.8 million during each of the
nine-month periods ended November 30, 1998 and 1997.
Development costs during the nine-month period ended November 30, 1998 were
$4.7 million compared to $1.8 million during the nine-month period ended
November 30, 1997, an increase of $2.9 million. The increase was primarily
related to $2.5 million the Company incurred pursuing a gaming license in New
York City.
Operating income. As a result of the foregoing items, the Company had
operating income of $6.1 million during the nine-month period ended November
30, 1998, compared to operating income of $3.8 million during the nine-month
period ended November 30, 1997.
The improvement in both Biloxi's and Davenport's operating incomes were the
result of improved revenues, while the decrease in St. Louis's operating
income was the result of decreased revenues attributable to being closed 26
days as a result of the April accident and not recapturing its market after
reopening.
Interest expense, net. The Company incurred net interest expense of $14.5
million during the nine-month period ended November 30, 1998, compared to
$12.1 million during the nine-month period ended November 30, 1997, an
increase of $2.4 million, or 19.8%. The increase is the result of $30.0
million debt incurred by the Company in July 1997 in conjunction with the
purchase of the Broadwater Property.
Minority interest expense. The Company incurred a $1.1 million minority
interest expense for the nine-month period ended November 30, 1998, compared
to $0.6 million for the nine-month period ended November 30, 1997. The
increase is attributable to the acquisition of the Broadwater Property in July
1997.
Net loss. The Company incurred a net loss of $9.5 million during the nine-
month period ended November 30, 1998, compared to a net loss of $8.9 million
during the nine-month period ended November 30, 1997.
Liquidity and Capital Resources
During July 1998, the Company reached an agreement with the City of St.
Louis for the relocation of its riverboat casino, the "Admiral", approximately
1,000 feet north from its current location on the Mississippi River. Under
the terms of the agreement, the City will issue debt to finance $3.0 million
of the anticipated $6.0 million costs to move the "Admiral."
On December 3, 1998, the Company repurchased $25.0 million of its 13% senior
notes. The repurchased notes were used to satisfy the $25.0 million principal
payment due September 15, 1999 on the Company's originally outstanding $100
million 13% senior notes. The repurchase was funded by the issuance of $25
million of new 12% Secured Notes due September 15, 2001. The new 12% notes
have no mandatory redemption obligation, mature on September 15, 2001, and
15
<PAGE> 18
are secured by mortgages on two of the Company's vessels, the "Admiral" and
the "President Casino New Yorker", as well as subsidiary guarantees.
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 $7.0 million of cash in order to fund
daily operations. As of November 30, 1998, the Company had approximately $8.8
million in non-restricted cash and short-term investments in excess of the
required $7.0 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. To the extent cash generated
from operations is less than anticipated, the Company may be required to
curtail certain planned fiscal 1999 expenditures or seek other sources of
financing. The Company may be limited in its ability to raise cash through
additional financing.
The Company experienced a net cash decrease from investing activities of
$4.4 million during the nine-period ended November 30, 1998, compared to a
decrease of $39.7 million during the nine-month period ended November 30,
1997. The net cash decrease from investing activities during both periods
resulted from expenditures on property and equipment. In addition to routine
expenditures on property and equipment, during the nine-month period ended
November 30, 1997, the Company acquired the Broadwater Property for $28.5
million in cash and other consideration. During the nine-month period ended
November 30, 1998, the Company spent approximately $1.7 million, $2.1 million
and $1.5 million at the Company's Biloxi, St. Louis and Davenport operations,
respectively. Additionally, the Company spent $1.1 million on improvements to
the "President Casino New Yorker" and spent $0.6 million in conjunction with
the potential development of the Broadwater Property into a multi-casino
destination resort. The expenditures were partially offset by the maturity of
$2.3 million in short-term investments. During the nine-month period ended
November 30, 1997, the Company spent $33.7 million primarily on the
acquisition of the Broadwater Property, offset by the receipt of $1.0 million
of proceeds primarily from the sale of two vessels that the Company did not
intend to use in future operations.
During both nine-month periods ended November 30, 1998 and 1997, the Company
made $0.3 million of principal payments.
For any potential growth opportunities, 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
16
<PAGE> 19
availability of other financing arrangements.
In such case, the Company could pursue a number of alternatives to obtain
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.
--Nasdaq
The Company's Common Stock was delisted from the Nasdaq National Market
effective the close of business November 19, 1998, because the Company no
longer met the requirements of the market. The stock continues to trade on the
OTC Bulletin Board. The decision by Nasdaq has no effect on the Company's
day-to-day business operations.
--Year 2000
The Company has determined that it will need to modify or replace various
portions of its software so that its computer systems will function properly
with respect to dates in the Year 2000 and beyond. As the Company is dependent
on third party software for all of its major applications, the Company has had
discussions with its significant software vendors to ensure that those parties
have appropriate plans to remediate Year 2000 issues. Through these
discussions, the Company has determined that all of the systems that are
critical to the Company's operations are either 2000 compliant or that 2000
compliant versions exist that can be implemented by the Company.
The next phase in the Company's efforts is to implement the Year 2000
versions of the software into the Company's systems. The Company has a May
1999 target date to complete its implementation efforts.
As of November 30, 1998, the Company has incurred less than $0.1 million of
costs related to Year 2000 issues. The Company estimates it will incur less
than $0.3 million in future expenses to ensure all systems will function
properly with respect to dates in the Year 2000. These expenses are not
expected to have a material impact on the financial position, cash flow or
operations of the Company.
The costs for accomplishing the Company's plans to complete the Year 2000
modifications and testing processes are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of various resources, third-party modification
plans and other factors. However, there can be no guarantee that these
estimates will be achieved, and actual results could differ from those plans.
17
<PAGE> 20
Forward Looking Statements
The statements contained herein include forward-looking statements based on
management's current expectations of the Company's future performance.
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 4 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
On December 3, 1998, the Company completed the private placement under
Section 4(2) of the Securities Act of 1933, as amended, $25 million
aggregate principal amount of its 12% Secured Notes due September 15,
2001. The proceeds of such offering were utilized to repurchase $25
million of the Company's 13% Senior Exchange Notes due September 15, 2001.
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
The By-Laws of the Company provide that stockholder proposals,
including nominations of directors, which do not appear in the proxy
statement may be considered at a meeting of the stockholders only if
written notice of the proposal is received by the Secretary of the
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<PAGE> 21
Company not less than 60 and not more than 90 days prior to the
anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is more than 30
days before or more than 60 days after such anniversary date, notice by
the stockholder to be timely must be so delivered not earlier than the
90th day prior to such annual meeting and not later than the 60th day
prior to such annual meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made by the
Company. Pursuant to the By-Laws of the Company, the date by which such
written notice of a proposal must be received by the Company to be
considered at the 1999 Annual Meeting of Stockholders is June 18, 1999.
Any such written notice of a stockholder proposal by a stockholder to the
Secretary of the Company must include: (a) a brief description of the
business desired to be brought before the Annual Meeting and the reasons
for conducting such business at the Annual Meeting; (b) the name and
address, as they appear on the Company's books, of the stockholder
proposing such business and the beneficial owner, if any, on whose behalf
the proposal is made; (c) the class and number of shares of the Company
which are owned beneficially and of record by the stockholder and such
beneficial owner; and (d) any material interest of the stockholder and
such beneficial owner in such business. With respect to each person whom
the stockholder proposes to nominate for election or reelection as a
director, the stockholder's notice shall set forth all information
relating to such person that is required to be disclosed in solicitation
of proxies for election of directors, or is otherwise required, in each
case pursuant to Regulation 14A under the Securities and Exchange Act of
1934, as amended (including such person's written consent to being named
in the proxy statement as a nominee and to serving as a director if
elected).
Anything to the contrary notwithstanding, the By-Laws of the Company
also provide that in the event the number of directors to be elected to
the Board of Directors of the Company is increased and there is no public
announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Company at least 70
days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice shall also be considered timely, but only
with respect to nominees for any new positions created by such increase,
if it shall be delivered to the Secretary of the Company not later than
the close of business on the 10th day following the day on which such
public announcement is made by the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K
On December 15, 1998, the Company filed a Current Report on
Form 8-K dated December 3, 1998, reporting under Item 5 that the
Company had repurchased $25 million of its 13% senior notes.
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<PAGE> 22
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: January 13, 1999 /s/ James A. Zweifel
--------------------------
James A. Zweifel
Executive Vice President and
Principal Financial Officer
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<PAGE> 23
EXHIBIT INDEX
---------------
EXHIBIT NO. DESCRIPTION
10.1 First Amendment to Charter, dated October 30, 1998 (effective as
of December 1, l997), by and between American Gaming &
Entertainment, Ltd. ("AGEL"), owner, and President Mississippi
Charter Corporation, with the concurrence of the following
parties: AmGam Associates, American Gaming & Resorts of
Mississippi, Inc., the Official Committee of the Unsecured
Creditors of AmGam, the Official Committee of the Unsecured
Creditors of AGRM, AGEL and Shamrock Holdings, Inc. (formerly
known as Bennett Holdings Group, Inc.).
10.2 Third Modification to Option Agreement, dated October 22, 1998,
by and between Liberty Landing Associates, and President
Riverboat Casino-Philadelphia, Inc.
27 Financial Data Schedule for the nine-month period ended
November 30, 1998, as required under EDGAR.
21
EXHIBIT 10.1
FIRST AMENDMENT TO CHARTER
This Amendment (the "Amendment"), amending the Charter dated as of February
17, 1995 (the "Charter") between American Gaming & Entertainment, Ltd.
("AGEL"), owner, and President Mississippi Charter Corporation ("Charterer"),
is made and entered into this 30th day of October, 1998, (effective as of
December 1, l997), by Charterer, on the one hand, and AGEL, as owner with the
concurrence of the following parties (hereinafter sometimes referred to
collectively as the "AmGam Group"), on the other hand: AmGam Associates, a
Mississippi partnership ("AmGam"), American Gaming & Resorts of Mississippi,
Inc., a Mississippi corporation ("AGRM"), the Official Committee of the
Unsecured Creditors of AmGam, the Official Committee of the Unsecured
Creditors of AGRM, AGEL and Shamrock Holdings, Inc. (formerly known as Bennett
Holdings Group, Inc.) ("Shamrock").
WHEREAS, pursuant to the Charter, Charterer chartered from AGEL the vessel
known as the Gold Coast Barge, U.S.O.C. No. 995650;
WHEREAS, Charterer desires to amend the Charter as hereinafter set forth;
and
WHEREAS, the parties have entered into a letter agreement dated October 22,
1997 setting forth the financial terms of this Amendment, agreeing to settle
certain litigation, and setting forth other understandings among the parties
(the "Term Sheet");
WHEREAS, this Term Sheet has been approved by the United States Bankruptcy
Court for the Northern District of New York and the United States Bankruptcy
Court for Southern District of Mississippi.
WHEREAS, the members of the AmGam Group have proposed to settle all disputes
among themselves pursuant to an agreement dated November 11, 1996 (the "Global
Settlement");
NOW THEREFORE, in consideration of the foregoing and of the representations,
warranties and covenants in this Amendment and in the Charter, and for other
good and valuable consideration set forth in the Term Sheet, the parties agree
that the Charter shall be amended to conform with provisions of the Term Sheet
as follows:
DEFINITIONS
Capitalized terms used herein and not otherwise defined or re-defined shall
have the meanings set forth in the Charter. The following terms, however,
shall be defined for purposes of this Amendment and for purposes of the
Charter provisions that survive this Amendment as follows:
1. The term "Owner" as used in this Charter shall refer to AGEL.
1
<PAGE> 25
2. The term "Charter" as used hereinbelow and in the Charter shall
hereinafter refer to the Charter, as it has been amended by this Amendment.
Any reference to the Charter in the Charter itself, whether directly or
through the use of words such as "herein," shall refer to the Charter as
amended by this Amendment.
3. The term "Closing Date" shall mean the date of execution of this
Amendment.
4. The term "Payee" shall refer to the law firm of Rimmer, Rawlings,
MacInnis & Hedglin, in its capacity as the escrow agent for the escrow account
of AmGam established pursuant to the Order of the Bankruptcy Court dated April
28, 1996 (as amended on August 1, 1996), or such other person or entity
designated by the Bankruptcy Court or designated to Charterer by the Owner in
writing.
I. CHARTER PERIOD
Section 2 of the Charter shall be amended by deleting the entire Section 2
and substituting, in lieu thereof, the following:
The amended charter period for the Vessel shall extend from December 1, 1997
until April 15, 2000, unless earlier terminated because the Vessel has been
sold to Charterer or a third party (the "Charter Period"). The date of the
expiration of the Charter Period shall be referred to herein as the "Charter
Expiration Date." Upon the Charter Expiration Date, unless the Vessel shall
have been purchased by Charterer pursuant to Section 15 of the Charter (as
amended by this Amendment), the Vessel shall be returned to the Owner in
accordance with the terms of Section 13 of the Charter.
II. CHARTER HIRE AND INITIAL PAYMENT
Section 3 of the Charter shall be amended by deleting the entire Section 3
and substituting, in lieu thereof, the following:
(a) On the Closing Date, Charterer shall pay the Payee the sum of One
Million, Five Hundred Twenty-Five Thousand Dollars ($1,525,000.00)
representing past due sums pursuant to the original charter and in addition
thereto, all monthly Charter Hire payments that have accrued since December 1,
l997, up until the Closing Date. In connection therewith, the parties shall
execute the Agreement of Release attached hereto as Exhibit A.
(b) The Charter Hire owed by Charterer under the Charter for each month of
the Charter Period shall be Two Hundred Fifteen Thousand Dollars
($215,000.00). The Charter Hire for any partial calendar month during the
Charter Period shall be equal to Two Hundred Fifteen Thousand Dollars
($215,000.00) multiplied by a fraction the numerator of which is the number of
Charter Period days in such partial month and the denominator of which is the
total number of days in such month. From and after the Closing date, the
Charter Hire for each month shall be paid prior to the tenth of the month.
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<PAGE> 26
(c) From and after the Closing date, if the Charter Hire in any particular
month is not paid by the tenth calendar day of such month, then Charterer
shall pay to Payee a late fee of $21,500, together with the Charter Hire for
such month.
III. INSURANCE
(d) Subsection (a) of Section 5 of the Charter shall be amended to delete
Subsection 5(a) and to substitute the following language prior to the
"provided however":
(a) Charterer shall obtain and maintain during the Charter Period, at
Charterer's sole cost and expense, insurance in such amounts covering the
Vessel and all equipment aboard the Vessel against such risks as Owner shall
reasonably determine to be desirable to fully protect its economic interests
in the Vessel (which amounts shall in no event be less than $9,000,000,
provided that the value survey submitted to Charterer's underwriter supports
such value to the reasonable satisfaction of such underwriter), and shall
obtain and maintain during the Charter Period at Charterer's sole cost and
expense general liability and such other insurance policies with respect to
the Vessel and the operation to be conducted on the Vessel and at the Dockage
Site, and in such amounts, as Charterer shall reasonably determine to be
necessary or appropriate. In no event shall the amount of general liability
insurance be less than $12,000.00. Both the Owner and Charterer shall be
named as insureds with waiver of subrogation under the general liability,
policies (and such other policies as Charterer shall deem appropriate) and as
loss payees under all other insurance policies so obtained and maintained.
Charterer's responsibility for the cost of the insurance required to be
obtained and maintained under this Section 5 shall for the cost of the
insurance required to be obtained and maintained under this Section 5 shall
commence upon delivery of the Vessel to Charterer at the Delivery Site on the
Commencement Date.
IV. REPRESENTATIONS AND WARRANTIES
Section 6(b) of the Charter shall be amended to add a new paragraph (xi),
which shall read as follows:
(xi) Except as disclosed on Exhibit B to this Amendment, (A) Charterer is
not aware of nor has it received any notice, written or oral, by any
governmental agency or entity that an order or directive has been issued or
will be issued relating to any known condition or defect with respect to the
Vessel; (B) Charterer is unaware of any condition or defect that may result in
a claim for a breach of the representations and warranties of Owner under
Section 6(a) of the Charter, other that those items released pursuant to the
release attached hereto as Exhibit A; and (c) following the date hereof,
Charterer will disclose to Owner each and every notice, written. or oral, by
any governmental agency or entity advising that an order or directive has been
or will be issued relating to a breach of any representation and warranty
under Section 6(a) hereof.
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<PAGE> 27
V. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 8(a) shall be amended to add the following clause at the end of the
sentence comprising Section 8(a) of the Charter, to read as follows:
"; provided, however, that Owner shall be responsible for any breach of the
representations and warranties of Owner under Section 6(a) of the Charter only
to the extent that such breach was not known to Charterer on the Closing Date.
Breaches of representations and warranties that were known to Charterer on or
before the Closing Date are waived and released to the fullest extent of the
law.
VI. REDELIVERY
The first sentence of Section 13(a) shall be deleted in its entirety, and
the following shall be substituted in lieu thereof:
(a) Subject to Charterer's exercise of the Purchase Option set forth in
Section 15 of the Charter (as amended by this Amendment), Owner shall cause
the Vessel (other than the Electrical Equipment, the Fire Pump and the
Transition Equipment) to be removed from the Dockage Site no later than ten
(10) business days after the Charter Expiration Date.
Section 13(b) shall be amended to read as follows:
Upon redelivery of the Vessel, the Owner may require that the Vessel be
surveyed by a qualified independent marine surveyor mutually acceptable to the
Owner and the Charterer. Charterer shall reimburse Owner for one-half of the
reasonable costs of the marine survey obtained pursuant to this Section 13(b)
up to a maximum reimbursement of Five Thousand ($5,000.00) Dollars. In
addition to Charterer's obligations pursuant to Sections 9 and 11 of the
Charter, which shall remain intact, Charterer shall be obligated to redeliver
the Vessel in the same condition that Charterer last used the Vessel in its
normal business operations.
A new section 13(c) shall be added as follows:
(c) On February 1, 2000 (assuming the Charter has not been terminated prior
thereto), Charterer shall establish an escrow account, and shall escrow up to
$500,000.00 of the Charter Hire due from February 1, 2000 until the end of the
Charter Period (the "Removal Escrow"), to fund Owner's share of the cost of
the removal of the Vessel at the termination of the Charter Period. The
Charterer shall fund its equal share of the Removal Escrow concurrently with
Owner. If the amounts held in the Removal Escrow are greater than the cost of
the removal of the Vessel under Section 13(a), then any excess shall be paid
to Owner and Charterer equally upon the removal of the Vessel in accordance
with Section 13(a).
A new Section 13(d) shall be added to the Charter, to read, in its entirety,
as follows:
4
<PAGE> 28
(d) Upon termination of the Charter, for any reason (i) Charterer shall
leave in place all wiring, connections, switches, splitters, couplings and
junctions necessary to operate slot and player tracking systems; and (ii)
Charterer shall be entitled to remove from the Vessel all furniture, slot,
tracking and other equipment and all other property owned by Charterer;
VII. PURCHASE OPTION
Section 15 shall be deleted in its entirety, and a new Section 15 shall be
substituted in lieu thereof to read as follows:
Section 15. Purchase Option. At any time during the Charter Period,
Charterer shall have the right to make a written offer to purchase the Vessel,
which offer shall be addressed to every member of the AmGam Group, or their
assigns. The AmGam Group (or their assigns) shall have the right to accept or
reject the offer within thirty days receipt of the written notice from
Charterer. Charterer's written offer shall state "The AmGam Group shall have
the right to accept or reject this offer within thirty days of receipt of this
written notice from Charterer, and if it this written offer is not rejected in
30 days, it is deemed accepted. The offer shall contain the following
language:
"If the Charterer delivers a written offer containing the foregoing language
and if the AmGam Group does not reject the offer within 30 days of receipt of
the written offer, then such offer shall be deemed to have been accepted."
Any rejection shall be communicated in writing. Upon acceptance, the
parties shall take all actions necessary or appropriate (including the
cancellation of any liens that members of the AmGam Group shall have) to cause
Charterer to receive a good and merchantable title to the Vessel, free and
clear of all liens and encumbrances.
VIII. ASSIGNMENT
Section 17 of the Charter shall be amended by deleting Section 17 in its
entirety and substituting in lieu thereof, the following:
Section 17. Assignment of Sale of Barge.
(a) The Charter, the right to receive payments thereunder, or any other
interest therein, may be assigned by individual members of the AmGam Group
upon the written consent of Charterer, which consent shall not be unreasonably
withheld; provided, however, that the assignee must assume in writing all of
the assignor's obligations under the Charter (including without limitation,
Owner's indemnification obligations pursuant to Section 8 of the Charter). No
assignment shall be permitted unless the transferring party and the transferee
shall have received all governmental approvals, consents and actions necessary
to effectuate such Transfer, and such Transfer shall not unreasonably disturb
Charterer's peaceful enjoyment of the Vessel during the Charter Period. Any
assignment of a percentage interest in the Charter must also include the sale
5
<PAGE> 29
of the same percentage interest in the Vessel pursuant to Section 17(b), and
the "Sale Notice" provided for in Section 17(b) shall include the terms and
conditions of the assignment of the Charter.
(b) The Vessel, or any interest therein, may be sold subject to the Charter
at any time during the Charter Period; provided, however, that Charterer shall
have the first right of refusal with respect to any such sale. Notice of a
proposed sale shall be provided to Charterer by registered mail, setting forth
the name of the proposed transferee, the price to be paid and any other
relevant terms of the proposed transaction (a "Sale Notice"). Charterer shall
have the right, exercisable within thirty days of the date that a Sale Notice
is received, (a) to purchase only the Vessel, or any interest therein, on the
same terms and conditions set forth in the Sale Notice, in which case the
Charter shall remain outstanding, or (b) to purchase both the interest in the
Vessel and the interest in the Charter proposed to be transferred. If
Charterer does not exercise its right of first refusal, then the proposed
transfer can be effected on the same terms and conditions contained in the
Sale Notice within sixty days of the termination of the thirty-day period
during which Charterer had the right to exercise its right of first refusal.
If the Vessel, or such interest therein, is not sold within such sixty-day
period, then the proposed sale cannot be consummated without giving Charterer
another Sale Notice and allowing Charterer to exercise its right of first
refusal.
(c) The AmGam Group shall structure any settlement among the members of the
AmGam Group so that, if Charterer exercises its rights to purchase the Vessel
(or portion thereof) pursuant to this Section 17, Charterer shall receive a
good and merchantable title to the Vessel (or portion thereof), free and clear
of all liens or encumbrances.
IX. NOTICES
Section 19 of the Charter shall be amended to provided for notice as
follows:
If to Charterer:
President Mississippi Charter Corporation
c/o President Casinos, Inc.
800 North First Street
St. Louis, Missouri 63102
Fax: (314) 622-3049
Attention: John S. Aylsworth
with a copy to:
Virginia Boulet
Phelps Dunbar, L.L.P.
400 Poydras Street
New Orleans, Louisiana 70130
6
<PAGE> 30
If to Owner, to all of the following:
American Gaming & Entertainment, Ltd.
c/o Douglas Wellington
1 Woodland Avenue
Paramus, New Jersey 07652
with a copy to:
Robert A. Byrd
145 Main Street
Biloxi, Mississippi 39530
AmGam Associates and
American Gaming & Resorts of Mississippi, Inc.
c/o John Hedglin
Rimmer, Rawlings, MacInnis & Hedglin, P.A.
1290 Deposit Guaranty Plaza
Jackson, Mississippi 39201
The Official Committee of the Unsecured Creditors of AmGam Associates
c/o T. Glover Roberts
Sheinfeld, Maley & Kay, P.C.
1700 Pacific Avenue
Suite 4400
Dallas, Texas 75201
The Official Committee of the Unsecured Creditors of
American Gaming & Resorts of Mississippi, Inc.
c/o William S. Boyd, III
Attorney at Law
1225 Thirty-First Avenue
Gulfport, Mississippi 39501
Shamrock Holdings, Inc.
c/o Richard Breeden
2 Clinton Square
Syracuse, New York 13202
with a copy to:
Brenda T. Rhoades
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201
7
<PAGE> 31
WHEREFORE, this Amendment has been executed by the parties as of the date
first above mentioned.
PRESIDENT MISSISSIPPI CHARTER CORPORATION
/s/ James A. Zweifel
- ------------------------------------
BY:
ITS:
PRESIDENT RIVERBOAT CASINO-MISSISSIPPI, INC.
/s/ James A. Zweifel
- ------------------------------------
BY:
ITS:
AMERICAN GAMING & ENTERTAINMENT, LTD.
/s/ J. Douglas Wellington
- ------------------------------------
BY: J. Douglas Wellington
ITS: President & CEO
AMGAM ASSOCIATES
/s/ J. Douglas Wellington
- ------------------------------------
BY: J. Douglas Wellington
ITS: Management Committee
AMERICAN GAMING & RESORTS OF MISSISSIPPI, INC..
/s/ J. Douglas Wellington
- ------------------------------------
BY: J. Douglas Wellington
ITS: President
THE OFFICIAL COMMITTEE OF THE UNSECURED CREDITORS OF AMGAM ASSOCIATES
/s/ Glover Roberts
- ------------------------------------
BY: Glover Roberts
ITS: Counsel
8
<PAGE> 32
THE OFFICIAL COMMITTEE OF THE UNSECURED CREDITORS OF
AMERICAN GAMING & RESORTS OF MISSISSIPPI, INC.
/s/ William S. Boyd
- ------------------------------------
BY: William S. Boyd
ITS: Counsel
SHAMROCK HOLDINGS, INC.
/s/ Richard C. Breeden
- ------------------------------------
BY: J. Douglas Wellington
ITS: President
EXHIBIT 10.2
THIRD MODIFICATION TO OPTION AGREEMENT
THIS THIRD MODIFICATION TO OPTION AGREEMENT (the "Third Modification to
Option Agreement"), made this 22 day of October, 1998, by and between LIBERTY
LANDING ASSOCIATES, a Pennsylvania general partnership ("Optionor"), and
PRESIDENT RIVERBOAT CASINO-PHILADELPHIA, INC., a Pennsylvania corporation, its
designee or assignee ("Optionee").
WITNESSETH:
WHEREAS, Optionor and Optionee have entered into that certain Option
Agreement dated July 31, 1996 (the "Option Agreement"); and
WHEREAS, Optionor and Optionee have entered into that certain Modification
to Option Agreement dated December 12, 1996 (the "First Modification to Option
Agreement"); and
WHEREAS, Optionor and Optionee have entered into that Second Modification to
Option Agreement dated September 12, 1997 (the "Second Modification to Option
Agreement"); and
WHEREAS, Optionor and Optionee now desire to modify the payment terms under
the Option Agreement for Base Payments due from Optionee to Optionor.
NOW, THEREFORE, in consideration of the sum of TEN AND 00/100 DOLLARS
($10.00), and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. The recitals set forth above are incorporated herein by reference. All
capitalized terms not defined herein shall have the meaning given to such
terms in the Option Agreement. All references to the Option Agreement shall
include the terms of the First Modification to Option Agreement, the Second
Modification to Option Agreement and this Third Modification to Option
Agreement.
2. The parties hereto acknowledge that under the terms of the Option
Agreement, as presently amended, the Optionee has the ability to extend the
Term of the Option for the months of October, November and December, 1998 by
paying to Optionor a monthly Base Payment in the amount of $100,000.00 for
each month (payable on or before the 10th day of each month) in accordance
with the terms and conditions of the Option Agreement. Thereafter, Optionee
was to pay a monthly Base Payment during the subsequent Extension Periods in
accordance with the terms of the Option Agreement, as amended.
3. The parties hereto agree that effective as of October 1, 1998, Optionor
and Optionee hereby amend the Option Agreement so as to provide that, if
Optionee desires to continue and keep the Option in effect, the monthly Base
Payments for the period from October 1, 1998 through December 31, 1998 and the
1
<PAGE> 34
monthly Base Payments for the period from January 1, 1999 through September
30, 1999 are hereby modified so that the total aggregate amount of such Base
Payments is the sum of $1,500,000.00 for such twelve month period (October 1,
1998 through September 30, 1999) to be made in four (4) equal quarterly
payments in the amount of Three Hundred Seventy Five Thousand Dollars
($375,000.00) per quarter (the first of which is to be paid on or before
November 15, 1998 and the subsequent quarterly installments of $375,000.00 are
to be paid in advance on or before the fifteenth (15th) day of January, April
and July, 1999 respectively). Optionee may, at its election, decide not to
continue to pay the quarterly installments of Base Payments as described above
and, if Optionee elects not to continue to pay such quarterly Base Payments,
Optionee shall give notice to Optionor no later than thirty (30) days prior to
the date on which the next quarterly Base Payment is due hereunder; provided,
however, that Optionee may thereafter elect to continue the Option in effect
(notwithstanding that such prior notice was given by Optionee) by paying to
Optionor the next quarterly Base Payment as and when due. However, commencing
on October 1, 1999, if Optionee thereafter desires to keep the Option in
effect, the Base Payments shall again be payable on a monthly basis in the
amount of $277,000.00 per month on or before the fifteenth (15th) day of each
month. The Fifth Extension Period as set forth in Paragraph 5e of the Option
Agreement is hereby amended so as to be for the period from January 1, 2000 to
December 31, 2001. The monthly Base Payments to be paid to Optionor, if
Optionee desires to continue the Option in effect during such period, shall be
in the amount of $277,000.00 per month.
4. Optionor hereby acknowledges that Optionee has previously paid to
Optionor the sum of $100,000.00 as the Base Payment due for the month of
October, 1998. Optionor agrees that it shall credit such $100,000.00 payment
towards the $375,000.00 quarterly payment to be payable by Optionee on
November 15, 1998, if Optionee desires to continue the Option in effect, under
the terms of this Third Modification to Option Agreement. Optionor further
acknowledges that in the event that a New Gaming Company is obtained for all
or a portion of the Premises, then Optionee shall receive, in addition to the
other sums which are to be reimbursed to Optionee from the New Gaming
Company's initial up front consideration payment, a reimbursement of the
amount of any Base Payments made by Optionee to Optionor hereunder.
5. Paragraphs 5b, 5c, 5d, 5e, 6a and 9 of the Option Agreement are hereby
modified and amended so as to incorporate the revised terms as set forth in
this Third Modification to Option Agreement.
6. Except as specifically set forth herein, the terms and conditions of the
Option Agreement, as amended, shall remain in full force and effect.
2
<PAGE> 35
WITNESS the due execution hereof on the day and year first above written.
LIBERTY LANDING ASSOCIATES
Delaware Avenue Development
Corporation, Partner
By: /s/ Mark Mendelson
---------------------------------
Delaware-Washington Corporation,
Partner
By: /s/ Thomas J. Kelly
---------------------------------
PRESIDENT RIVERBOAT CASINO-
PHILADELPHIA, INC.
By: /s/ James A. Zweifel
---------------------------------
<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> 9-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> NOV-30-1998
<CASH> 18794
<SECURITIES> 275
<RECEIVABLES> 1928
<ALLOWANCES> 354
<INVENTORY> 1848
<CURRENT-ASSETS> 25769
<PP&E> 212607
<DEPRECIATION> 67067
<TOTAL-ASSETS> 174662
<CURRENT-LIABILITIES> 25683
<BONDS> 99352
0
0
<COMMON> 302
<OTHER-SE> (1121)
<TOTAL-LIABILITY-AND-EQUITY> 174662
<SALES> 0
<TOTAL-REVENUES> 156627
<CGS> 0
<TOTAL-COSTS> 150502
<OTHER-EXPENSES> 1124
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14504
<INCOME-PRETAX> (9503)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9503)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9503)
<EPS-PRIMARY> (1.89)
<EPS-DILUTED> (1.89)
</TABLE>
