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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, 2000
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,
5,032,998 shares outstanding as of January 16, 2001.
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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 November 30 and February 29, 2000.............................1
Condensed Consolidated Statements of Operations
and Net Income (Loss) Per Share Information (Unaudited)
for the Three and Nine Months Ended November 30, 2000 and 1999......2
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Nine Months Ended November 30, 2000 and 1999................3
Notes to Condensed Consolidated Financial Statements (Unaudited)......4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................13
Item 3 Quantitative and Qualitative Disclosures About Market Risk....29
Part II. Other Information
Item 1. Legal Proceedings.............................................30
Item 2. Changes in Securities.........................................30
Item 3. Defaults Upon Senior Securities...............................30
Item 4. Submission of Matters to a Vote of Security Holders...........30
Item 5. Other Information.............................................30
Item 6. Exhibits and Reports on Form 8-K..............................31
Signature................................................................32
<PAGE> 3
Part I. Financial Information
Item 1. Financial Statements
PRESIDENT CASINOS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Nov. 30, Feb. 29,
2000 2000
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 12,349 $ 12,408
Restricted cash................................ 3,325 2,780
Restricted short-term investments.............. 6,575 960
Accounts receivable, net of allowance for
doubtful accounts of $264 and $331........... 984 1,401
Inventories.................................... 1,113 1,728
Prepaid expenses and other current assets...... 2,872 2,218
--------- ---------
Total current assets....................... 27,218 21,495
Property and equipment, net of accumulated
depreciation of $46,224 and $81,027............ 110,726 142,490
Other assets..................................... 535 1,409
--------- ---------
$138,479 $165,394
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Current maturities of long-term debt........... $108,491 $135,577
Short-term debt................................ 550 4,513
Accrued loan fee............................... 7,000 5,996
Accounts payable............................... 4,567 3,969
Accrued payroll and benefits................... 4,860 7,499
Accrued interest............................... 4,581 6,445
Other accrued expenses......................... 7,274 7,756
--------- ---------
Total current liabilities.................. 137,323 171,755
Long-term liabilities:
Notes payable................................. -- --
--------- ---------
Total liabilities.......................... 137,323 171,755
--------- ---------
Minority interest................................ 13,557 13,220
Commitments and contingencies.................... -- --
Stockholders' deficit:
Preferred Stock, none issued and outstanding... -- --
Common Stock, $0.06 par value per share;
100,000 shares authorized; 5,033 shares
issued and outstanding....................... 302 302
Additional paid-in capital..................... 101,729 101,729
Accumulated deficit............................ (114,432) (121,612)
--------- ---------
Total stockholders' deficit................ (12,401) (19,581)
--------- ---------
$138,479 $165,394
========= =========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
1
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PRESIDENT CASINOS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Nov. 30, Ended Nov. 30,
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Gaming................................... $ 33,091 $ 45,555 $120,721 $139,348
Food and beverage........................ 4,605 6,240 16,146 18,874
Hotel.................................... 1,544 1,594 5,697 5,856
Retail and other......................... 1,191 1,589 4,375 7,111
Less promotional allowances.............. (4,274) (4,747) (13,048) (13,900)
--------- --------- --------- ---------
Net operating revenues................. 36,157 50,231 133,891 157,289
--------- --------- --------- ---------
OPERATING COSTS AND EXPENSES:
Gaming and gaming cruise................. 20,798 27,916 73,745 84,206
Food and beverage........................ 2,927 3,655 10,358 11,384
Hotel.................................... 659 650 2,267 2,229
Retail and other......................... 563 715 1,895 2,221
Selling, general and administrative...... 10,138 12,332 34,663 38,036
Depreciation and amortization............ 1,911 3,676 8,299 10,000
Impairment of long-lived assets.......... -- -- 11,400 --
Development costs........................ 61 29 225 162
--------- --------- --------- ---------
Total operating costs and expenses..... 37,057 48,973 142,852 148,238
--------- --------- --------- ---------
OPERATING INCOME/(LOSS).................... (900) 1,258 (8,961) 9,051
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income.......................... 493 105 703 402
Interest expense......................... (5,504) (5,168) (15,877) (14,981)
Gain/(loss) on sale of assets............ 34,308 (35) 34,297 (33)
--------- --------- --------- ---------
Total other income (expense)........... 29,297 (5,098) 19,123 (14,612)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE MINORITY INTEREST..... 28,397 (3,840) 10,162 (5,561)
Minority interest.......................... 2,246 332 2,982 1,023
--------- --------- --------- ---------
NET INCOME (LOSS).......................... $ 26,151 $ (4,172) $ 7,180 $ (6,584)
========= ========= ========= =========
Basic and diluted net income (loss)
per share................................ $ 5.20 $ (0.83) $ 1.43 $ (1.31)
========= ========= ========= =========
Weighted average common and dilutive
potential shares outstanding.............. 5,033 5,033 5,033 5,033
========= ========= ========= =========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
2
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PRESIDENT CASINOS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended Nov. 30,
2000 1999
------ ------
<S> <C> <C>
Net cash provided by (used in)
operating activities............................ $ (8,495) $ 3,087
--------- ---------
Cash flows from investing activities:
Expenditures for property and equipment......... (8,427) (6,895)
Change in restricted cash....................... (545) 237
Proceeds from sales of property, equipment
and inventory................................. 58,207 140
Purchase of short-term investments.............. (5,615) (685)
Other........................................... -- 185
--------- ---------
Net cash provided by (used in)
investing activities........................ 43,620 (7,018)
--------- ---------
Cash flows from financing activities:
Repayment of notes payable...................... (32,536) (1,054)
Payments on capital lease obligations........... (3) (905)
Minority interest payments...................... (2,645) (520)
--------- ---------
Net cash used in financing activities......... (35,184) (2,479)
--------- ---------
Net decrease in cash and cash equivalents......... (59) (6,410)
Cash and cash equivalents at beginning of period.. 12,408 17,110
--------- ---------
Cash and cash equivalents at end of period........ $ 12,349 $ 10,700
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.......................... $ 16,122 $ 14,960
========= =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Assets acquired in exchange for debt............ $ 1,644 $ 5,393
========= =========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
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PRESIDENT CASINOS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in thousands)
1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts and operations of
President Casinos, Inc., its wholly-owned subsidiaries, a 95%-owned limited
partnership and a limited liability company in which the Company has a 100%
ownership interest and in which an entity wholly-owned by the Chairman of the
Board of the Company has preferred rights to certain cash flows (collectively,
the "Company" or "PCI"). All material intercompany balances and transactions
have been eliminated.
PCI owns and operates riverboat and dockside gaming casinos through its
subsidiaries. The Company conducts dockside gaming operations in Biloxi,
Mississippi through its wholly-owned subsidiary The President Riverboat
Casino-Mississippi, Inc. ("President Mississippi") and in St. Louis, Missouri
north of the Arch through its wholly-owned subsidiary, President Riverboat
Casino-Missouri, Inc. ("President Missouri"). In addition, the Company owns
and manages certain hotel and ancillary facilities associated with its gaming
operations. The Broadwater Property in Biloxi is owned by the President
Broadwater Hotel, LLC, a limited liability corporation in which the Company
has a 100% ownership interest. The Company also operates two nongaming dinner
cruise, excursion and sightseeing vessels in St. Louis near the base of the
arch.
On October 10, 2000, the Company sold the assets of its Davenport casino and
hotel operations. The Davenport casino operations were managed by the
Company's wholly-owned subsidiary, President Riverboat Casino-Iowa, Inc. ("PRC
Iowa"), which is the general partner of the 95% Company-owned operating
partnership, The Connelly Group, L.P. ("TCG"). The Blackhawk Hotel in
Davenport was a wholly-owned subsidiary of the Company. The operating results
of the Davenport casino and hotel operations have been included in the
consolidated operating results until the date of such sale.
Basis of Presentation
The Company is experiencing difficulty generating sufficient cash flow to
meet its obligations and sustain its operations. As a result of the Company's
relatively high degree of leverage and the need for significant capital
expenditures at its St. Louis property, management determined that, pending a
restructuring of its indebtedness, it would not be in the best interest of the
Company to make the regularly scheduled interest payments on its $75,000
Senior Exchange Notes and $25,000 Secured Notes. Accordingly, the Company did
not pay the regularly scheduled interest payments of $6,375 that were each due
and payable March 15, and September 15, 2000, respectively. Under the
Indentures pursuant to which the Senior Exchange Notes and Secured Notes were
issued, an Event of Default occurred on April 15, 2000, and is continuing as
of the date hereof. Additionally, the Company did not pay the $25,000
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<PAGE> 7
principal payment due September 15, 2000 on the Senior Exchange Notes. The
holders of at least 25% of the Senior Exchange Notes and Secured Notes have
been notified of the defaults and have instructed the Indenture Trustee to
accelerate the Senior Exchange Notes and Secured Notes and declare the unpaid
principal and interest to be due and payable.
On October 10, 2000, the Company sold the assets of its Davenport operations
for aggregate consideration of $58,200 in cash. On November 22, 2000, the
Company entered into an agreement with a majority of the holders of its 13%
Senior Notes and a majority of the holders of its 12% Secured Notes. The
agreement provides for a proposed restructuring of the Company's debt
obligations under the notes and the application of certain of the proceeds
received by the Company from the sale of the assets of the Company's
Davenport, Iowa operations. Approximately $43,000 of the proceeds from the
sale were deposited with a trustee. Of this amount, $12,750 was used to pay
missed interest payments due March 15, 2000 and September 15, 2000 on the 12%
and 13% Notes; $25,000 was used to partially redeem the 12% and 13% Notes; and
$5,250 will be used to pay interest due March 15, 2001 on the 12% and 13%
Notes. In addition, the Company made combined principal and interest payments
of $1,851 and $1,953 to pay off TCG's line of credit and the indebtedness on
the Company's Biloxi casino vessel, respectively.
As part of the proposed restructuring, the maturity of the 12% Notes and the
13% Notes will be extended from September 15, 2001 to September 15, 2003, if
the Company meets certain interest coverage ratios for the first half of
calendar 2001. In lieu of the partial redemption of the 13% Notes scheduled
for September 15, 2000, the restructured 13% Notes will provide for a sinking
fund payment of $15,000 due August 31, 2001. The sinking fund payment is
subject to extension or termination based upon satisfaction of certain
financial-based performance tests by the Company's St. Louis operations for
the quarter ending in July 2001, and each quarter thereafter on a rolling
basis. In addition to the forgoing, as part of the proposed restructuring
certain additional assets will be pledged to secure the 13% Notes and the
Company will issue to the holders of the 12% Notes and the 13% Notes warrants
to purchase up to 10% of the fully diluted common stock of the Company at an
exercise price of $2.625 per share.
To consummate the proposed restructuring, the Company will solicit consent
of the noteholders to waive certain defaults and to amend the Indentures
governing the 12% and 13% Notes. The Company has until May 30, 2001 to cause
the proposed restructuring to close and become effective unless such date is
extended. In the event the proposed restructuring is not completed by means
of a consent solicitation, the Company anticipates seeking a final order of a
court confirming the restructuring as part of a plan of reorganization.
Additionally, the Company did not pay the $30,000 note and the associated
$7,000 loan fee due July 22, 2000 related to the Broadwater Property. The
Company is currently in negotiations with the lender to restructure this debt.
Also in default, due to cross default provisions associated with other debt
agreements, is the Company's $2,700 "President Casino-Mississippi" note. This
debt is currently due and classified in current liabilities. See Note 3-
Short-Term Debt and Notes Payable.
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<PAGE> 8
By suspending certain interest and principal payments until such time as the
restructuring plan has been fully negotiated and implemented, the Company
believes that its liquidity and capital resources will be sufficient to
maintain its normal operations at current levels during the proposed
restructuring period and does not anticipate any adverse impact on its
operations, customers or employees. However, costs incurred and to be
incurred in connection with the restructuring plan have been and will continue
to be substantial and, in any event, there can be no assurance that the
Company will be able to restructure successfully its indebtedness or that its
liquidity and capital resources will be sufficient to maintain its normal
operations during the restructuring period.
As of November 30, 2000, the Company has $12,349 of unrestricted cash and
cash equivalents. Of this amount, the Company requires approximately $6,500
of cash to fund daily operations. The Company is heavily dependant on cash
generated from operations to continue to operate as planned in its existing
jurisdictions and to make 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 its ongoing operating
properties but not meet all its obligations for borrowed money. To the extent
cash generated from operations is less than anticipated, the Company may be
required to curtail certain planned expenditures.
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 accounting principles generally
accepted in the United States of America. 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 29, 2000. Accordingly, footnote
disclosure which would substantially duplicate the disclosure in the audited
consolidated financial statements has been omitted in the accompanying
unaudited condensed consolidated financial statements.
Certain amounts for fiscal 2000 have been reclassified to conform with
fiscal 2001 financial statement presentation.
2. Property and Equipment
On October 10, 2000, the Company sold the assets of its Davenport casino and
hotel operations for aggregate consideration of $58,200 in cash. An
allocation of $56,100 was made to the assets of TCG and $2,100 to the assets
of the Blackhawk Hotel. The Company recognized a net gain of $34,310 on the
transaction. See Note 5-Segment Information, for results of operations of the
Davenport properties.
6<PAGE> 9
During August 2000, management evaluated the net realizable value of its
assets based on their intended future use and current market conditions.
Specifically, during the quarter, the Company entered into an option to sell
one vessel and with the sale of the Davenport properties, the need to maintain
a reserve vessel for the upcoming hull inspection was eliminated. As a
result, the Company recorded an impairment of long-lived assets of $11,400 on
two casino vessels not currently used by the Company's operations and
accounted for in the Company's leasing segment. The net realizable value was
determined primarily by current offers from unrelated third parties on the two
vessels. The Company is unable to predict whether these offers will result in
sales.
3. Short-Term Debt and Notes Payable
Short-term debt is summarized as follows:
<TABLE>
<CAPTION>
Nov. 30, Feb. 29,
2000 2000
------ ------
<S> <C> <C>
"President Casino-Broadwater" note payable...... $ -- $ 3,966
Construction note payable....................... 487 --
Various equipment notes payable................. 63 547
--------- ---------
Short-term debt............................ $ 550 $ 4,513
========= =========
</TABLE>
"President Casino-Broadwater" Barge Note
In August 1999, the Company purchased "President Casino-Broadwater," the
vessel on which the Company conducts its Biloxi gaming operations. The
Company had previously leased the "President Casino-Broadwater" since June
1995. On October 10, 2000, the Company paid the then outstanding principal
balance of $1,853, interest of $16 and related fees of $84 from the proceeds
of the sale of its Davenport operations.
Construction Note Payable
In conjunction with the relocation of the "Admiral" (see Note 6), the
Company negotiated extended payment terms with a vendor providing certain
services related to the new site development. Under the terms of the
agreement, the Company pays $250 against monthly progress billings and any
unpaid outstanding balance bears an interest rate of 9.75%. As of November
30, 2000, the Company paid $1,250 against $1,737 invoiced.
Various Equipment Notes Payable
TCG and President Missouri purchased various gaming and office equipment on
payment terms ranging from six to twelve months. The terms are non-interest
bearing and payments are generally due monthly. The Company paid the balance
of TCG's indebtedness in conjunction with the sale of the Davenport assets.
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Long-term notes payable, classified as current as described in Note 1, are
summarized as follows:
<TABLE>
<CAPTION>
Nov. 30, Feb.29,
2000 2000
------ ------
<S> <C> <C>
Senior Exchange notes, 13%, principal
payments of $25,000 due September 2000 and
$50,000 due September 2001, net of discount
of $135 and $284.............................. $ 56,115 $ 74,716
Secured Notes, 12%, principal payment of
$25,000 due September 2001, net of a gain
on modification of terms of $353 and $655..... 19,103 25,655
Broadwater Hotel note payable, variable interest
rate, 10.625% and 9.875% as of November 30
and February 29, 2000, respectively,
principal payment due July 2000............... 30,000 30,000
M/V "President Casino-Mississippi" note payable,
variable interest rate, 9.67% and 9.29% as of
November 30 and February 29, 2000,
respectively, principal payments due quarterly
of $100, with a final payment of $2,100 due
August 2002.................................... 2,700 3,000
Line of credit, prime plus 0.5%, combined
rate of 9.0% as of February 29, 2000........... -- 2,200
Gaming equipment note payable, 11.0%, monthly
combined principal and interest payments of
$74 due through August 2001.................... 571 --
--------- ---------
Total notes payable.......................... 108,489 135,571
Less: Current maturities....................... (108,489) (135,571)
--------- ---------
$ -- $ --
========= =========
</TABLE>
Senior Exchange Notes
In April 1995, the Company exchanged $100,000 of Senior Notes for an equal
principal amount of 13% Senior Exchange Notes due 2001 ("Senior Exchange
Notes") registered under the Securities Act of 1933. The Senior Exchange
Notes rank equal in right of payment to all present and future senior debt (as
defined in the indenture governing the Senior Exchange Notes (the "Note
Indenture")) of the Company and its subsidiaries and were payable as follows:
25% of the outstanding principal amount on each of September 15, 1999 and
September 15, 2000 and the remainder of the outstanding principal amount on
September 15, 2001. In addition, the Senior Exchange Notes are
unconditionally guaranteed, jointly and severally on a senior basis, by all of
the Company's then existing wholly-owned subsidiaries (the "Guarantors"), and,
under certain circumstances, the Company's future subsidiaries, although the
subsidiary guarantee from TCG is limited in amount. As security for the
obligations of the Company and the Guarantors under the Senior Exchange Notes,
the Company and the Guarantors have pledged their equity interests in each
Guarantor and certain investments in certain gaming ventures. The Note
Indenture contains certain restrictive covenants which, among other things,
limit the Company's ability to pay dividends, incur additional indebtedness
(exclusive of $15,000 of senior debt), issue preferred stock, create liens on
certain assets, merge or consolidate with another company and sell or
8
<PAGE> 11
otherwise dispose of all or substantially all of its properties or assets. On
November 22, 2000, the Company and its principal subsidiaries executed an
agreement with a majority of holders of its Senior Exchange Notes and a
majority of the holders of its Secured Notes. See Note 1-Basis of
Presentation.
Secured Notes
On December 3, 1998, the Company repurchased $25,000 of its Senior Exchange
Notes. The repurchased notes were used to satisfy the $25,000 principal
payment due September 15, 1999 on the Company's $100,000 Senior Exchange
Notes. The repurchase was funded by the issuance of $25,000 of new 12% notes
due September 15, 2001 (the "Secured Notes"). The Secured Notes have no
mandatory redemption obligation and are secured by mortgages on the "Admiral"
and the "New Yorker," as well as subsidiary guarantees.
Broadwater Hotel Note
In conjunction with the purchase of the Broadwater Property, President
Broadwater, L.L.C. ("PBLLC") borrowed the sum of $30,000 from a third party
lender, evidenced by a non-recourse promissory note (the "Indebtedness").
Except as set forth in the promissory note and related security documents,
PBLLC's obligations under the Indebtedness are nonrecourse and are secured by
the Broadwater Property, its improvements and leases thereon. The
Indebtedness bears interest at a variable rate per annum equal to the greater
of (i) 8.75% or (ii) 4% plus the LIBOR 30-day rate.
PBLLC is obligated under the Indebtedness to make monthly payments of
interest accruing under the Indebtedness, and was obligated to repay the
Indebtedness in full on July 22, 2000. In addition, PBLLC was obligated to
pay to the lender a loan fee in the amount of $7,000 which was fully earned
and nonrefundable when the Indebtedness was due. As of the default date, the
Company is accruing, but has not paid, interest on the unpaid fee balance at
the stipulated rate. The Company has continued to make the monthly interest
payments accruing on the $30,000 principal and is in negotiations with the
lender regarding restructuring this debt under acceptable terms. There can be
no assurances that such negotiations will be successful.
M/V "President Casino-Mississippi" Note
The 9.67% term note payable is collateralized by the vessel "President
Casino-Mississippi" and various equipment and is personally guaranteed by Mr.
Connelly. This note also contains certain covenants which, among other
things, require the Company to maintain a minimum tangible net worth of
$40,000. The Company received a waiver of the net worth covenant through the
period ended September 30, 2000, at which time the Company's net worth
requirement returned to $40,000. The aforementioned default on the Company's
Senior Exchange Notes and Secured Notes also constituted a default under this
vessel note. The Company has continued to make the quarterly principal and
interest payments related to this note. No action has been taken by the
lender to accelerate the note and declare the unpaid principal due and
payable.
9
<PAGE> 12
Line of Credit
TCG, the Company's 95%-owned partnership, maintained a line of credit
provided by Firstar Bank, N.A. Outstanding principal of $1,800 and interest
of $51 were paid from the proceeds of the sale of the assets of the Davenport
casino operations and the line of credit was terminated on October 10, 2000.
The various agreements governing the notes described above generally limit
borrowings by the Company's affiliates without the respective lenders' prior
consent.
4. Commitments and Contingent Liabilities
On January 16, 1997, a case entitled "Whalen v. John E. Connelly, J. Edward
Connelly and Associates, Inc., President Casinos, Inc. and PRC-Iowa, Inc." was
filed in the Iowa District Court for Scott County by Michael L. Whalen
("Whalen"), who is a five percent limited partner in TCG. Whalen filed this
lawsuit (the "Whalen Conversion Lawsuit") after accepting from Della III,
Inc., a former general partner, shares of Common Stock and cash to which he
was determined to be entitled pursuant to a previous judgment. Whalen claimed
in this lawsuit that because he asked for the stock and cash while he was
appealing the judgment in a previous lawsuit and was not given the stock or
cash until after the judgment was affirmed, the named defendants committed the
tort of conversion. Whalen sought as damages the difference in the value of
the stock on the date of its "highest valuation" and the date he accepted the
stock in 1996. Although the Company and Mr. Connelly were named as defendants,
they were dismissed by the trial court for lack of jurisdiction. The
remaining defendants were JECA, a company controlled by Mr. Connelly that is
the successor to Della III, and PRC-Iowa, Inc., which was the general partner
of TCG and which had asserted a counterclaim against Mr. Whalen. In November
1998, the trial Court granted the remaining defendants' motion for summary
judgment and dismissed Whalen's claim for conversion. The trial court also
dismissed the counterclaim against Mr. Whalen. Mr. Whalen appealed to the
Supreme Court of Iowa. On December 20, 2000, that Court reversed the judgment
and ruled that JECA could be found liable for conversion. The case was
remanded to the District Court for further proceedings to determine the amount
of damages. Further proceedings have not yet been scheduled in the District
Court.
On December 28, 2000, Mr. Whalen filed another lawsuit in Scott County
District Court, "Whalen v. The Connelly Group L.P. and President Riverboat
Casino Iowa, Inc." In this lawsuit, Whalen asks for injunctive relief to
prevent TCG or PRC-Iowa, Inc. from making any further distribution of assets
from the remaining proceeds of the sale of TCG's assets to IOC-Davenport, Inc.
and Isle of Capri Casinos, Inc. pending a determination of whether the assets
can be distributed in light of the potential for a judgment in Whalen's favor
in the Whalen Conversion Lawsuit. A hearing in this case is currently
scheduled for February 15, 2001. The Company believes that, consistent with
the Supreme Court's ruling in the Whalen Conversion lawsuit discussed above,
damages in the Whalen Conversion Action, if any, should be assessed against
JECA and not PRC-Iowa. The Company believes that it has meritorious defenses
and that the outcome of this action will not result in a material adverse
effect on the Company.
10
<PAGE> 13
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, results of
operations, or cash flows, or would have any material adverse impact upon the
gaming licenses of the Company's subsidiaries.
5. Segment Information
The Company evaluates performance based on operations EBITDA. Operations
EBITDA is earnings before interest, taxes, depreciation and amortization of
each of the reportable segments. Corporate and development expenses,
gain/loss on sale of assets and impairment of long-lived assets are not
allocated to the reportable segments and are therefore excluded from
operations EBITDA.
The Company has no inter-segment sales and accounts for transfers of
property and inventory at its net book value at the time of such transfer.
The Company's reportable segments are based on its three geographic gaming
operations and its leasing operation. The Biloxi Properties consists of the
Biloxi casino and the Broadwater Property and the St. Louis Properties
consists of the St. Louis casino and Gateway Riverboat Cruises. The Davenport
Properties consists of the Davenport casino and the Blackhawk Hotel, the
assets of which were sold, and operations ceased, on October 10, 2000.
The Company's reportable segments, other than the leasing operation, are
similar in operations, but have distinct and separate regional markets.
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Nov. 30, Ended Nov. 30,
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Biloxi Properties................... $ 13,589 $ 14,367 $ 42,697 $ 45,708
St. Louis Properties................ 14,855 16,486 46,631 49,413
Davenport Properties................ 7,713 19,378 44,563 60,348
--------- --------- --------- ---------
Gaming and ancillary operations..... 36,157 50,231 133,891 155,469
Leasing Operation................... -- -- -- 1,820
--------- --------- --------- ---------
Net operating revenues......... $ 36,157 $ 50,231 $133,891 $157,289
========= ========= ========= =========
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Nov. 30, Ended Nov. 30,
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
EBITDA (before development and
impairment expenses and gain/loss
on sale of property and equipment):
Biloxi Properties................... $ 953 $ 1,809 $ 5,093 $ 5,683
St. Louis Properties................ 568 1,698 3,269 5,516
Davenport Properties................ 1,025 2,921 7,027 10,334
--------- --------- --------- ---------
Gaming and ancillary operations..... 2,546 6,428 15,389 21,533
Leasing Operation................... (271) (309) (871) 1,003
--------- --------- --------- ---------
Operations EBITDA................. 2,275 6,119 14,518 22,536
OTHER COSTS AND EXPENSES:
Corporate expense................... 1,203 1,156 3,555 3,323
Development expense................. 61 29 225 162
Depreciation and amortization....... 1,911 3,676 8,299 10,000
(Gain) loss on sale of assets....... (34,308) 35 (34,297) 33
Loss on impairment.................. -- -- 11,400 --
Interest, net....................... 5,011 5,063 15,174 14,579
--------- --------- --------- ---------
Total other costs and expenses... (26,122) 9,959 4,356 29,097
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST.............. 28,397 (3,840) 10,162 (5,561)
Minority interest................... 2,246 332 2,982 1,023
--------- --------- --------- ---------
NET INCOME (LOSS).................... $ 26,151 $ (4,172) $ 7,180 $ (6,584)
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Nov. 30, Feb. 29,
2000 2000
------ ------
<S> <C> <C>
Property and Equipment:
Biloxi Properties..................... $ 53,443 $ 54,638
St. Louis Properties.................. 40,821 36,496
Davenport Properties.................. -- 22,873
--------- ---------
Gaming and ancillary operations..... 94,264 114,007
Leasing Operations.................... 13,023 25,685
--------- ---------
Operations Assets................... 107,287 139,692
Corporate Assets...................... 38 54
Development Assets.................... 3,401 2,744
--------- ---------
Net Property and Equipment.......... $110,726 $142,490
========= =========
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
Nine Months Ended Nov. 30,
2000 1999
------ ------
<S> <C> <C>
Additions to Property and Equipment:
Biloxi Properties..................... $ 840 $ 7,724
St. Louis Properties.................. 7,842 1,629
Davenport Properties.................. 730 2,011
Leasing Operations.................... -- --
--------- ---------
Operations' Assets.................. 9,412 11,364
Corporate Assets...................... 1 8
Development Assets.................... 658 916
--------- ---------
$ 10,071 $ 12,288
========= =========
</TABLE>
Included in additions to property and equipment is $1,644 and $5,393,
respectively, of assets acquired in exchange for debt.
6. Relocation of the "Admiral"
During July 1998, the Company and the City of St. Louis reached an agreement
for the relocation of the "Admiral" approximately 1,000 feet north from its
then current location on the Mississippi River. The casino was closed at
midnight December 3, 2000 to prepare for the move and reopened December 7,
2000 at 5:00 p.m. The new location provides guests with improved parking and
valet service, and better ingress/egress including improved access from
Interstate 70. This site is also less susceptible to flooding than the
previous mooring site of the "Admiral."
The aggregate cost to relocate the "Admiral" and construct ancillary
facilities is expected to be approximately $8,760. Under the terms of the
agreement, the City funded $3,000 of the relocation costs, $2,400 of which was
financed through bank debt. The Company will pay for the remaining costs.
Under the terms of the agreement, the Company has placed $500 in escrow to be
used to fund a portion of these costs. It is anticipated that the City will
repay the $2,400 in debt from annual allocations of $600 from the City's
annual home dock city public safety fund that is funded by admission taxes
from the "Admiral." The Company has guaranteed repayment of the bank debt if
the City fails to pay the obligation. As of January 11, 2001, the Company has
guaranteed $1,948.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion should be read in conjunction with the consolidated
financial statements of the Company included elsewhere in this report.
The Company is experiencing difficulty generating sufficient cash flow to
meet its obligations and sustain its operations. As a result of the Company's
high degree of leverage and the need for significant capital expenditures at
its St. Louis property, management determined that, pending a restructuring of
its indebtedness, it would not be in the best interest of the Company to make
13
<PAGE> 16
the regularly scheduled interest payments on its Senior Exchange Notes and
Secured Notes. Accordingly, the Company did not pay the regularly scheduled
interest payments of $6.4 million that were each due and payable March 15,
2000 and September 15, 2000, respectively. Under the Indentures pursuant to
which the Senior Exchange Notes and Secured Notes were issued, an Event of
Default occurred on April 15, 2000, and is continuing as of the date hereof.
Additionally the Company did not pay the $25.0 million principal payment due
September 15, 2000 on the Senior Exchange Notes. The holders of at least 25%
of the Senior Exchange Notes and Secured Notes have instructed the Indenture
Trustee to accelerate the Senior Exchange Notes and Secured Notes and declare
the unpaid principal and interest to be due and payable.
On October 10, 2000, the Company sold the assets of its Davenport operations
for aggregate consideration of $58.2 million in cash. An allocation of $56.1
million was made to the assets of TCG and $2.1 million to the assets of the
Blackhawk Hotel. The Company recognized a gain of $34.3 million on the
transaction.
On November 22, 2000, the Company entered into an agreement with a majority
of the holders of its 13% Senior Notes and a majority of holders of its 12%
Secured Notes. The agreement provides for a proposed restructuring of the
Company's debt obligations under the notes and the application of certain of
the proceeds received by the Company from the sale of the assets of the
Company's Davenport operations. Approximately $43.0 million of the proceeds
from the sale were deposited with a securities intermediary. Of this amount,
$12.8 million was used to pay missed interest payments due March 15, 2000 and
September 15, 2000 on the 12% and 13% Notes; $25.0 million was used to
partially redeem the 12% and 13% Notes; and $5.3 million will be used to pay
interest due March 15, 2001 on the 12% and 13% Notes. In addition, the
Company made combined principal and interest payments of $1.9 million and $2.0
million to pay off TCG's line of credit and the indebtedness on the Company's
Biloxi casino vessel, respectively.
As part of the proposed restructuring, the maturity of the 12% Notes and the
13% Notes will be extended from September 15, 2001 to September 15, 2003, if
the Company meets certain interest coverage ratios for the first half of
calendar 2001. In lieu of the partial redemption of the 13% Notes scheduled
for September 15, 2000, the restructured 13% Notes will provide for a sinking
fund payment of $15 million due August 31, 2001. The sinking fund payment is
subject to extension or termination based upon satisfaction of certain
financial-based performance tests by the Company's St. Louis operations for
the calendar quarter ending in July 2001, and each quarter thereafter on a
rolling basis. In addition to the foregoing, as part of the proposed
restructuring certain additional assets will be pledged to secure the 13%
Notes and the Company will issue to the holders of the 12% Notes and the 13%
Notes warrants to purchase up to 10% of the fully diluted common stock of the
Company at an exercise price of $2.625 per share.
To consummate the proposed restructuring, the Company will solicit consent
of the noteholders to waive certain defaults and to amend the Indentures
governing the 12% Notes and the 13% Notes. The Company has until May 30, 2001
to cause the proposed restructuring to close and become effective unless such
date is extended. In the event the proposed restructuring is not completed by
14
<PAGE> 17
means of a consent solicitation, the Company anticipates seeking a final order
of a court confirming the restructuring as part of a plan of reorganization.
Additionally, the Company did not pay the $30.0 million note and the
associated $7.0 million loan fee due July 22, 2000 related to the Broadwater
Property. The Company continues to make monthly interest payments accruing on
the $30.0 million principal and is currently negotiating with the lender for
restructuring the debt. Also in default, due to cross default provisions
associated with other debt agreements, is the Company's $2.7 million
"President Casino-Mississippi" note. The Company continues to make quarterly
principal and interest payments. These debts are currently due and classified
in current liabilities. In the event that these notes are accelerated, at
this time the Company does not have the resources available to repay such
indebtedness. See Liquidity and Capital Resources.
By suspending certain interest and principal payments until such time as a
restructuring plan has been negotiated and implemented, the Company believes
that its liquidity and capital resources will be sufficient to maintain its
normal operations at current levels during the restructuring period and does
not anticipate any adverse impact on its operations, customers or employees.
However, costs incurred and to be incurred in connection with the
restructuring plan have been and will continue to be substantial and, in any
event, there can be no assurance that the Company will be able to restructure
successfully its indebtedness or that its liquidity and capital resources will
be sufficient to maintain its normal operations during the restructuring
period.
Management is pursuing various strategic financing alternatives in order to
fund these obligations and the Company's continuing operations. The Company
is working with recognized financial advisors in the gaming industry to pursue
these alternatives, including the restructuring and refinancing of outstanding
debt obligations and/or the sale of all or a portion of its assets. The
Company's ability to continue as a going concern is dependent on its ability
to restructure successfully, refinance its debts or sell/charter assets on a
timely basis under acceptable terms and conditions and the ability of the
Company to generate sufficient cash to fund future operations. There can be
no assurance in this regard.
Overview
The Company's operating results are affected by a number of factors,
including competitive pressures, changes in regulations governing the
Company's activities, the results of pursuing various development
opportunities 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. The Company's
operations are not significantly affected by seasonality.
--Competition
Intensified competition for patrons continues to occur at each of the
Company's properties.
15
<PAGE> 18
Since gaming began in Biloxi in August 1992, there has been steadily
increasing competition along the Mississippi Gulf Coast, in nearby New Orleans
and elsewhere in Louisiana and Mississippi. Several large hotel/casino
complexes have been built in recent years with the largest single resort in
the area opening in March 1999. There are currently twelve casinos operating
on the Mississippi Gulf Coast. See "Potential Growth Opportunities" regarding
a master plan for a destination resort the Company is developing in Biloxi,
Mississippi.
Within a 45-mile radius of the Quad Cities, the Company's Davenport casino
operations competed with three other casino operations. Expansion and
increased marketing by these competitors and changes in the Illinois gaming
laws resulted in a decrease in market share and an increase in promotional and
marketing costs for the Company's Davenport operations. The assets of the
Davenport operations were sold on October 10, 2000.
Competition is intense in the St. Louis market area. There are presently
four other casino companies operating eight casinos in the market area. Two
of these are Illinois casino companies operating single casino vessels on the
Mississippi River, one across the Mississippi from the "Admiral" and the
second 20 miles upriver. There were three Missouri casino companies in the
market area, each of which operated 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. In April 2000, one of these
two casino companies purchased the other resulting in all four casinos being
operated by the same company.
Applications were submitted to the Missouri Gaming Commission for approval
of potential new licenses at four different locations within the St. Louis
Metropolitan area along the Mississippi River, three of which are within 20
miles or less of the "Admiral." In July 2000, the Gaming Commission announced
its decision to award an additional license to the applicant proposing a site
at the greatest distance from the "Admiral" of the four proposed locations.
The Commission's decision is being challenged by one of the applicants whose
proposal was not selected and certain other entities. Management believes
that the opening of one or more additional casinos in the St. Louis market
would have a negative impact on the Company's results of operations, with the
currently selected location having the least impact.
--Regulatory Matters
Differences in gaming regulations in the St. Louis market between Illinois
and Missouri operators have given both competitive advantages and
disadvantages to the various operators. Missouri regulations formerly did not
require vessels to actually cruise. However, simulated cruising requirements
were imposed which restricted entry to a vessel to a 45-minute period every
two hours. Those competitors having two adjacent casino vessels could
alternate hourly boarding times and provide virtually continuous boarding for
their guests. Thus, they had a distinct competitive advantage over the
Company, which has a single casino vessel in Missouri. Illinois casino
vessels were formerly required to cruise, thereby limiting ingress and egress
to their casinos. On June 25, 1999, legislation was enacted eliminating the
Illinois cruising requirements. This change immediately gave the Illinois
16
<PAGE> 19
operators an advantage over the Missouri operators as Illinois patrons could
enter and exit the vessel at any time. However, this advantage was negated on
August 16, 1999, when the Missouri Gaming Commission allowed "continuous
boarding" by establishing a program eliminating the boarding restrictions for
the "Admiral" and other casinos in eastern Missouri. This change to
"continuous boarding" also enabled the "Admiral" to compete more effectively
with the Missouri operators who have two adjacent casino vessels. The program
was subsequently extended to all casinos in the state of Missouri.
Other Missouri regulations limit the loss per cruise per passenger by
limiting the amount of chips or tokens a guest may purchase during each two-
hour gaming session to $500. Companies that operate adjacent casinos enable
guests who reach the 2-hour loss limit to move to the adjacent casino and
continue to play. The lack of a statutory loss limit on Illinois casinos
allows them to attract higher stake players; additionally, their guests are
not burdened with the administrative requirements related to the loss limits.
Any easing of the loss limits in Missouri would be expected to have a positive
impact on the Company's St. Louis operations.
--Weather Conditions
The Company's operating results are susceptible to the effects of floods,
hurricanes and adverse weather conditions. Historically, the Company has
temporarily suspended operations on various occasions as a result of such
adversities. Under less severe conditions, high river levels cause reduced
parking and a general public perception of diminished access to the casino
resulting in decreased revenues.
--Potential Growth Opportunities
Biloxi, Mississippi
In July 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 111-slip marina
and the adjacent 18-hole Sun Golf Course (collectively, the "Broadwater
Property"). The marina is the site of the Company's casino operations in
Biloxi and was formerly leased by the Company under a long-term lease
agreement. The Company invested $5.0 million in PBLLC.
PBLLC financed the purchase of the Broadwater Property with $30.0 million of
financing from a third party lender, evidenced by a non-recourse promissory
note (the "Indebtedness") and issued a $10.0 million membership interest to
the seller. Except as set forth in the promissory note and related security
documents, PBLLC's obligations under the Indebtedness are nonrecourse and are
secured by the Broadwater Property, its improvements and leases thereon. The
Indebtedness bears interest at a variable rate per annum equal to the greater
of (i) 8.75%, or (ii) 4% plus the LIBOR 30-day rate. The membership interest
grows at the same rate. The accrued balance of the membership account and
unpaid growth as of November 30, 2000 was $13.4 million and is included on the
17
<PAGE> 20
balance sheet in minority interest. Cash payments relating to this membership
interest have totaled $0.2 million since its inception.
PBLLC is obligated to make monthly payments of interest accruing under the
Indebtedness, and was obligated to repay the Indebtedness in full on July 22,
2000. In addition, PBLLC was obligated to pay to the lender a loan fee in the
amount of $7.0 million which was fully earned and nonrefundable when the
Indebtedness was due. See Liquidity and Capital Resources for a discussion of
the repayment of this obligation.
The Company has developed a master plan for the Broadwater Property.
Management believes that this site is ideal for the development of
"Destination Broadwater," a full-scale luxury destination resort offering an
array of entertainment attractions in addition to gaming. The plans for the
resort feature a village which will include a cluster of casinos, hotels,
restaurants, theaters and other entertainment attractions. Management
believes that with its beachfront location and contiguous golf course, the
property is the best site for such a development in the Gulf Coast market.
In January 1999, the Company received the permit from the Mississippi
Department of Marine Resources ("DMR") for development of the full-scale
destination resort. This is the first of three permit approvals required of
the Joint Permit Application submitted in August 1998 to the DMR, the U.S.
Army Corps of Engineers and the Mississippi Department of Environment Quality.
The two remaining permit approvals are still pending and awaiting the
completion of the Environmental Impact Statement ("EIS"). The Company has
received the Draft EIS, the notice of which was posted in the Federal Register
in early June for public comment. The comment period has been closed and the
Final EIS is currently pending.
In March 1999, to facilitate its proposed master plan development, the
Company entered into contracts with the State of Mississippi and the owners of
Deer Island to purchase for $15.0 million and convey title to the island to
the State of Mississippi. Deer Island encompasses approximately 500 acres and
is located just offshore of Biloxi. It is primarily wilderness which the
state would preserve for use by the people of Mississippi. This transaction
completes another essential step towards securing the necessary agreements and
approvals from the State of Mississippi for the Company's Destination
Broadwater development plans. The purchase and conveyance of the title are
contingent on the occurrence of various events, including the issuance to the
Company of all required federal, state and local permits and the issuance by
the State of Mississippi of the tidelands and fast lands leases and casino
licenses necessary for development of Destination Broadwater.
In connection with the Company's proposed Destination Broadwater development
plan, to date, the Company has not identified any specific financing
alternatives or sources as the necessary regulatory approvals have not been
obtained. There can be no assurance that the Company will be able to obtain
the regulatory approvals or the requisite financing. Should the Company fail
to raise the required capital, such failure would materially and adversely
impact the Company's business plan.
18
<PAGE> 21
St. Louis, Missouri
Slot Upgrade Machines and Loss Limit Card Tracking System
During the summer of 1998, all Missouri casinos in the St. Louis market,
except the "Admiral," migrated from a manual/paper system of regulating the
Missouri $500 loss limit to an electronic system. This paperless loss
tracking system is more accommodating to guests and allows for the use of bill
validators on slot machines, a convenience that the "manual/paper" system does
not allow.
The slot machines offered by the "Admiral" until the end of August 2000
lacked bill validators. As a result, the Company could not provide guests the
convenience of using bill validators nor adapt to the paperless loss tracking
system, putting the "Admiral" at a significant competitive disadvantage with
the other casinos in the area market.
Effective August 28, 2000, Missouri began to allow credits generated through
use of the bill validators to go directly to the slot "credit meter" for use
by the customer. Previously in Missouri, a customer using a bill validator
received tokens in the tray and fed these tokens into the machine. The
regulatory change provided a significant added convenience to slot players.
In March 2000, the Company purchased 850 previously owned slot machines that
are equipped with bill validators and are fitted to operate with an electronic
loss limit system. Effective August 28, 2000, approximately 700 of these
machines were installed on the "Admiral," all of which are currently
operational with the electronic loss limit system. As of November 30, 2000,
the Company also added approximately 50 new machines with bill validators, and
which are fitted to operate with an electronic loss limit system. Management
believes the Company will be better positioned to compete in the St. Louis
market with these additions.
Relocation of the "Admiral"
During July 1998, the Company and the City of St. Louis reached an agreement
for the relocation of the "Admiral" approximately 1,000 feet north from its
then current location on the Mississippi River, to the Laclede's Landing
District. The casino was closed at midnight December 3, 2000 to prepare for
the move and reopened December 7, 2000 at 5:00 p.m. The new location provides
for an improved operation with better ingress and egress, provides better
parking and is less susceptible to flooding. The Company believes that this
move will result in increased revenues for the "Admiral" and increased rent
and tax revenues for the City of St. Louis. The City funded the first $3.0
million of the estimated $8.8 million in costs to relocate and improve the
"Admiral." Of the $3.0 million City-funded relocation costs, $2.4 million was
financed through bank debt. The Company will pay for the remaining costs. It
is anticipated that the City will repay the $2.4 million debt from gaming
taxes it receives based upon gaming revenues of the "Admiral." The Company
has guaranteed repayment of the bank debt if the City fails to pay it. As of
January 11, 2001, the Company guaranteed $1.9 million.
19
<PAGE> 22
The platform construction on the new levee site began in September 1999. As
of the end of November 2000, the Company has spent approximately $6.2 million
on the relocation, of which the City has reimbursed the Company $3.0 million.
The anticipated benefits of relocating the "Admiral" include:
Ingress/Egress -- Traffic ingress to and egress from the casino, at its
former location, was difficult. Access from the major highways has
historically been poor. Significant improvements in exit and entrance ramps
to the Laclede's Landing area off the main highway have been completed and
road improvements within the Laclede's Landing area are underway or completed.
Four roads to and from the main highway provide improved ingress to and egress
from the new location.
Guest Parking -- Parking in the former location was limited and not
controlled by the Company. All parking facilities, including the valet
parking areas, were operated by third parties. Directly across the street
from the casino was a large flood wall, which limited parking. Guests had to
either use the parking garages in the proximity of the casino and walk
considerable distances or park on the levee. The new location provides the
potential for significantly improved parking facilities with parking garages
and lots conveniently located, and the potential to expand and control the
parking.
Flooding -- Flooding and high water on the Mississippi River has negatively
impacted the financial results of the "Admiral" operations every year since it
has opened. The impact first occurs as the river rises and reduces or totally
eliminates parking on the levee, which formerly was the closest parking to the
casino. Periodically the river level has reached levels that have made the
construction of costly scaffolding necessary to keep access to the casino
open. The new location is four feet higher and is much less susceptible to
flooding. Historically, if the "Admiral" had been at its new location
since it opened for gaming in 1994, it is unlikely that the casino would have
been forced to close due to flooding.
Laclede's Landing Entertainment District -- Laclede's Landing is a historic
area located north of the Arch on the Mississippi River and is an
entertainment destination. The "Admiral" was formerly located "next to" the
Laclede's Landing area. The casino was not visible from the downtown area,
major highways or the Laclede's Landing entertainment area due to a flood wall
and other infrastructure. The relocated "Admiral" is centrally positioned in
the entertainment district and readily visible to those coming to the
Laclede's Landing area.
Commercial Development -- There has been significant commercial development
in recent years in the Laclede's Landing area. The number of conventions and
entertainment at the nearby convention center and TWA Dome continues to be a
catalyst for business in the area. Management believes that the relocated
"Admiral" will serve as a catalyst for further commercial and entertainment
growth in the Laclede's Landing area.
20
<PAGE> 23
While management believes both the slot upgrade and relocation of the
"Admiral" should enhance St. Louis operations, there can be no assurances that
these expected benefits will be realized.
Results of Operations
The results of operations for the three-month and nine-month periods ended
November 30, 2000 and 1999 include the gaming results for the Company's
operations in Biloxi, Mississippi and St. Louis, Missouri and of much lesser
significance, the non-gaming operations in Biloxi (the Broadwater Property)
and St. Louis (Gateway Riverboat Cruises). The results of operations also
include the Company's gaming operations in Davenport, Iowa and to a much
lesser significance the non-gaming operations in Davenport (the Blackhawk
Hotel) through the date of sale. The assets of the Davenport operations were
sold on October 10, 2000.
The following table highlights the results of the Company's operations.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Nov. 30, Nov. 30,
2000 1999 2000 1999
------ ------ ------ ------
(in millions)
<S> <C> <C> <C> <C>
Biloxi, Mississippi Operations
Operating revenues................. $ 13.6 $ 14.4 $ 42.8 $ 45.7
Operating income................... 0.3 1.0 3.0 4.0
St. Louis, Missouri Operations
Operating revenues................. 14.9 16.5 46.6 49.4
Operating income (loss)............ (0.7) 0.6 (0.2) 2.0
Davenport, Iowa Operations
Operating revenues................. 7.7 19.4 44.5 60.3
Operating income................... 1.0 1.8 5.5 7.0
Corporate Leasing Operations
Operating revenues................. -- -- -- 1.8
Operating loss..................... (0.3) (1.0) (13.6) (0.5)
Corporate Administrative and
Development expense................ (1.2) (1.2) (3.7) (3.5)
</TABLE>
21
<PAGE> 24
The following table highlights certain supplemental measures of the
Company's financial performance.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Nov. 30, Nov. 30,
2000 1999 2000 1999
------ ------ ------ ------
(dollars in millions)
<S> <C> <C> <C> <C>
Biloxi, Mississippi Operations
EBITDA............................. $ 0.9 $ 1.8 $ 5.0 $ 5.7
EBITDA margin...................... 6.7% 12.6% 11.7% 12.5%
St. Louis, Missouri Operations
EBITDA............................. $ 0.6 $ 1.7 $ 3.3 $ 5.5
EBITDA margin...................... 4.0% 10.3% 7.1% 11.1%
Davenport, Iowa Operations
EBITDA............................. $ 1.0 $ 2.9 $ 7.0 $ 10.3
EBITDA margin...................... n/a 14.9% n/a 17.1%
Corporate Leasing Operations
EBITDA............................. $ (0.3) $ (0.3) $(12.3) $ 1.0
Corporate Administrative and
Development
EBITDA............................. $ (1.2) $ (1.2) $ (3.7) $ (3.5)
</TABLE>
"EBITDA" consists of earnings from operations before interest, income taxes,
depreciation and amortization. For the purposes of this presentation, EBITDA
margin is calculated as EBITDA divided by operating revenue.
EBITDA and EBITDA margin are not determined in accordance with generally
accepted accounting principles. Since not all companies calculate these
measures in the same manner, the Company's EBITDA measures may not be
comparable to similarly titled measures reported by other companies.
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 performance. The Company
believes that this disclosure enhances the understanding of the financial
performance of a company with substantial interest, depreciation and
amortization.
Three-Month Period Ended November 30, 2000 Compared to the
Three-Month Period Ended November 30, 1999
On October 10, 2000, the Company sold the assets of its Davenport operations
for aggregate consideration of $58.2 million in cash. An allocation of $56.1
million was made to the assets of TCG and $2.1 million to the assets of the
Blackhawk Hotel. The Company recognized a gain of $34.3 million on the
transaction.
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<PAGE> 25
Operating revenues. The Company generated consolidated operating revenues
of $36.2 million during the three-month period ended November 30, 2000,
compared to $50.2 million during the three-month period ended November 30,
1999, a decrease of $14.0 million, or 27.9%. Excluding the Davenport
operations, revenues decreased $2.3 million, or 7.5%.
Gaming revenues from the Company's Biloxi and St. Louis operations decreased
by $0.3 million and $1.4 million, respectively, during the three-month period
ended November 30, 2000, compared to the three-month period ended November 30,
1999, primarily as a result of increased competition. In Biloxi, changes in
marketing campaigns of competitors negatively impacted market share. In St.
Louis, gaming revenues decreased primarily as a result of the disruption of
the slot floor as the slot product was updated with bill validators and the
new electronic loss limit tracking system through out the period.
The Company's revenues from food and beverage, hotel, retail, charter and
other non-gaming activities (net of promotional allowances) decreased to $3.1
million during the three-month period ended November 30, 2000, from $4.7
million during the three-month period ended November 30, 1999, a decrease of
$1.6 million, or 34.4%. Excluding the Davenport operations, revenues
decreased $0.7 million, or 24.4%. The decrease was primarily attributable to:
(i) an increase $0.5 million in promotional allowances in Biloxi in response
to the competitive pressures in the market and (ii) a decrease of $0.2 million
in food and beverage revenues in St. Louis primarily due to a reduction in
complementary offers.
Operating costs and expenses. The Company's consolidated gaming and gaming
cruise operating costs and expenses were $20.8 million during the three-month
period ended November 30, 2000, compared to $27.9 million during the
three-month period ended November 30, 1999, a decrease of $7.1 million, or
25.4%. Excluding the Davenport operations, gaming and gaming cruise operating
expenses decreased $0.5 million, or 2.9%. As a percentage of gaming revenues,
Biloxi and St. Louis gaming and gaming cruise costs increased to 62.9% during
the three-month period ended November 30, 2000, from 61.1% during the
three-month period ended November 30, 1999.
The Company's consolidated selling, general and administrative expenses were
$10.1 million during the three-month period ended November 30, 2000, compared
to $12.3 million for the three-month period ended November 30, 1999, a
decrease of $2.2 million, or 17.9%. Excluding the Davenport operations,
selling, general and administrative expenses increased $0.1 million, or 1.2%.
Increased costs incurred relating to the proposed restructuring and costs
associated with preparing for the "Admiral" relocation were offset by
decreases in general corporate overhead. Excluding the Davenport operations,
as a percentage of revenues, selling, general and administrative expenses
increased to 29.8% during the three-month period ended November 30, 2000 from
27.3% during the three-month period ended November 30, 1999.
Depreciation and amortization expenses were $1.9 million for the three-month
period ended November 30, 2000 compared to $3.7 million during the three-
month period ended November 30, 1999, a decrease of $1.8 million. The
Davenport operations and the leasing operations ceased depreciating assets as
of June 30, 2000 and August 31, 2000, respectively, based on management's
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decision to sell such assets. Depreciation expense for the three-month period
ended November 30, 1999 was $1.1 million and $0.8 million, respectively, for
the Davenport and leasing operations.
Development costs were less than $0.1 million during both three-month
periods ended November 30, 2000 and November 30, 1999. All such costs
incurred are for Destination Broadwater.
Operating income. As a result of the foregoing items, the Company incurred
an operating loss of $0.9 million during the three-month period ended November
30, 2000, compared to operating income of $1.3 million during the three-month
period ended November 30, 1999.
Interest expense, net. The Company incurred net interest expense of $5.0
million during the three-month period ended November 30, 2000, compared to
$5.1 million during the three-month period ended November 30, 1999, a decrease
of $0.1 million, or 2.0%. This decrease is the result of (i) the
extinguishment of the Davenport line of credit and the Biloxi barge note and
(ii) interest income earned on the proceeds from the sale of the Davenport
assets, offset by an increase in interest expense as a result of compounding
interest and penalties on certain indebtedness in default.
Minority interest expense. The Company incurred $2.2 million minority
interest expense for the three-month period ended November 30, 2000, compared
to $0.3 million during the three-month period ended November 30, 1999. The
increase is the result of the minority interest related to the gain on sale of
the Davenport casino assets.
Net income/loss. The Company incurred net income of $26.2 million during
the three-month period ended November 30, 2000, compared to a net loss of $4.2
million during the three-month period ended November 30, 1999.
Nine-Month Period Ended November 30, 2000 Compared to the
Nine-Month Period Ended November 30, 1999
On October 10, 2000, the Company sold the assets of its Davenport operations
for aggregate consideration of $58.2 million in cash. An allocation of $56.1
million was made to the assets of TCG and $2.1 million to the assets of the
Blackhawk Hotel. The Company recognized a gain of $34.3 million on the
transaction.
Operating revenues. The Company generated consolidated operating revenues
of $133.9 million during the nine-month period ended November 30, 2000,
compared to $157.3 million during the nine-month period ended November 30,
1999, a decrease of $23.4 million, or 14.9%. Excluding the Davenport
operations, revenues decreased $7.6 million, or 7.8%. The Company's Biloxi
and St. Louis operations experienced decreases of $2.9 million and $2.8
million, respectively. Additionally, the corporate leasing operation
experienced a $1.8 million decrease in operating revenues as a result of the
expiration of a charter agreement.
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<PAGE> 27
Gaming revenues decreased to $120.7 million for the nine-month period ended
November 30, 2000, compared to $139.3 million for the nine-month period ended
November 30, 1999, a decrease of $18.6 million or 13.4%. Excluding the
Davenport operations, gaming revenues decreased $3.8 million, or 4.5%. Gaming
revenues from the Biloxi and St. Louis operations contributed $1.5 million and
$2.3 million, respectively, to the decrease.
The Company's revenues from food and beverage, hotel, charter, retail and
other (net of promotional allowances) were $13.2 million for the nine-month
period ended November 30, 2000, compared to $17.9 million for the nine-month
period ended November 30, 1999, a decrease of $4.7 million or 26.3%.
Excluding the Davenport operations, revenues decreased $3.8 million, or 29.9%.
Operating costs and expenses. The Company's consolidated gaming and gaming
cruise operating costs and expenses were $73.7 million for the nine-month
period ended November 30, 2000, compared to $84.2 million for the nine-month
period ended November 30, 1999, a decrease of $10.5 million, or 12.5%.
Excluding the Davenport operations, gaming and gaming cruise operating costs
and expenses decreased $1.5 million, or 2.9%. Gaming costs decreased $0.6
million and $0.9 million at the Biloxi and St. Louis operations, respectively.
Decreased gaming revenues at both properties resulted in reduced gaming taxes.
In addition, reduced current year promotions contributed to reduced gaming
costs at the St. Louis property. As a percentage of gaming revenues, Biloxi
and St. Louis gaming and gaming cruise costs increased to 61.3% during the
nine-month period ended November 30, 2000, from 60.3% during the nine-month
period ended November 30, 1999.
The Company's consolidated selling, general and administrative expenses were
$34.7 million for the nine-month period ended November 30, 2000, compared to
$38.0 million for the nine-month period ended November 30, 1999, a decrease of
$3.3 million, or 8.7%. Excluding the Davenport operations, selling, general
and administrative expenses decreased $0.8 million, or 3.0%. Excluding the
Davenport operations, as a percentage of revenues, selling, general and
administrative expenses increased to 32.0% during the nine-month period ended
November 30, 2000 from 31.5% during the nine-month period ended November 30,
1999.
Depreciation and amortization expenses were $8.3 million during the nine-
month period ended November 30, 2000, compared to $10.0 million during the
nine-month period ended November 30, 1999, a decrease of $1.7 million, or
17.0%. The Davenport operations and the leasing operations ceased
depreciating assets as of June 30, 2000 and August 31, 2000, respectively,
based on management's decision to sell such assets. Depreciation expense for
the nine-month period ended November 30, 2000 was $1.5 million and $1.3
million, respectively, for the Davenport and leasing operations compared to
$3.3 million and $1.5 million for the nine months ended November 30, 1999.
Development costs were $0.2 million during both nine-month periods ended
November 30, 2000 and November 30, 1999. Development costs for both nine-
month periods were for Destination Broadwater.
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<PAGE> 28
Operating income. As a result of the foregoing items, the Company incurred
an operating loss of $9.0 million during the nine-month period ended November
30, 2000 compared to operating income of $9.1 million during the nine-month
period ended November 30, 1999.
Interest expense, net. The Company incurred net interest expense of $15.2
million during the nine-month period ended November 30, 2000 million and $15.0
million during the nine-month period ended November 30, 1999.
Minority interest expense. The Company incurred $3.0 million minority
interest expense for the nine-month period ended November 30, 2000, compared
to $1.0 million for the nine-month period ended November 30, 1999. The
increase is the result of the minority interest related to the gain on sale of
the Davenport casino assets.
Net income/loss. The Company generated net income of $7.2 million during
the nine- month period ended November 30, 2000, compared to a net loss of $6.6
million during the nine-month period ended November 30, 1999.
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.
The Company requires approximately $6.5 million of cash in order to fund
daily operations. As of November 30, 2000, the Company had approximately $5.8
million in non-restricted cash in excess of the required $6.5 million. The
Company is heavily dependant on cash generated from operations to continue to
operate as planned in its existing jurisdictions and to fund capital
expenditures. To the extent cash generated from operations is less than
anticipated, the Company may be required to curtail certain planned fiscal
2001 expenditures or seek other sources of financing. The Company may be
limited in its ability to raise cash through additional financing.
The Company has $3.3 million in restricted cash as of November 30, 2000. Of
this amount, $3.0 million relates to the Broadwater Property. Pursuant to
debt agreement for the Broadwater Property, revenues are deposited in
lockboxes that are controlled by the lender. Such revenues include the
operations of the hotels and golf course and $2.9 million annually of proceeds
from rental of the Biloxi casino's mooring site. Expenditures from the
lockboxes are limited to the operating expenses, capital improvements and debt
service of the Broadwater Property as defined by such agreements.
The Company has $6.6 million in restricted short-term investments. Of this
amount, $5.3 million consists of certificates of deposit restricted for the
March 15, 2001 interest payment on the 12% Secured Notes and 13% Senior
Exchange Notes and $1.3 million consists of certificates of deposit
guaranteeing certain other obligations of the Company.
The Company used $8.5 million in cash flow from operating activities during
the nine-month period ended November 30, 2000, compared to generating cash
flow of $3.1 million during the nine-month period ended November 30, 1999.
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The Company experienced a net cash increase from investing activities of
$43.6 million during the nine-month period ended November 30, 2000, compared
to a decrease of $7.0 million during the nine-month period ended November 30,
1999. During the nine-month period ended November 30, 2000, the Company
received $58.2 million cash proceeds from the sale of the assets of the
Davenport operations. The net cash decrease from investing activities for the
nine-month period ended November 30, 1999 resulted primarily from expenditures
on property and equipment. During the nine-month period ended November 30,
2000, the Company had fixed asset additions of approximately $10.1 million, of
which, $1.6 million were non-cash additions in exchange for debt. The Company
spent approximately $0.8 million, $6.4 million and $0.5 million at the
Company's Biloxi, St. Louis and Davenport operations, respectively.
Additionally, the Company spent $0.7 million in conjunction with the potential
development of the Broadwater Property into a multi-casino destination resort.
The indenture governing the Company's Senior Exchange Notes due 2001 and the
indenture covering the Company's Secured Notes due 2001 (collectively, the
"Indentures"), restricts the ability of PCI, TCG and PCI's wholly-owned
subsidiaries which are guarantors of the Senior Exchange Notes and Secured
Notes (collectively, the "Guarantors"), among other things, to dispose of or
create liens on certain assets, to make certain investments and to pay
dividends. Under the Indentures, the Guarantors have the ability to seek to
borrow additional funds of $15.0 million and may borrow additional funds for
certain uses. The Indentures also provide that the Guarantors must use cash
proceeds from the sale of certain assets within 180 days to either (i)
permanently reduce certain indebtedness or (ii) contract with an unrelated
third party to make investments or capital expenditures or to acquire long-
term tangible assets, in each case, in gaming and related businesses (provided
any such investment is substantially complete in 270 days). In the event such
proceeds are not so utilized, the Company must make an offer to all holders of
Senior Exchange Notes to repurchase at par value an aggregate principal amount
of Senior Exchange Notes equal to the amount by which such proceeds exceeds
$5.0 million. Any remaining proceeds must be used in a like manner to
repurchase Secured Notes. Certain provisions of the Indenture do not apply to
the Company's consolidated entities which do not guarantee the Senior Exchange
Notes and Secured Notes.
On December 3, 1998, the Company repurchased $25.0 million of its Senior
Exchange Notes for $23.8 million. The repurchased notes were used to satisfy
the $25.0 million principal payment due September 15, 1999 on the Company's
$100.0 million Senior Exchange Notes. The repurchase was funded by the
issuance of $25.0 million of new 12% notes due September 15, 2001 (the
"Secured Notes"). The Secured Notes have no mandatory redemption obligation
and are secured by mortgages on the "Admiral" and the "New Yorker," as well as
subsidiary guarantees.
In conjunction with the purchase of the Broadwater Property, PBLLC borrowed
$30.0 million from a third party lender, evidenced by a non-recourse
promissory note (the "Indebtedness"). Except as set forth in the promissory
note and related security documents, PBLLC's obligations under the
Indebtedness are nonrecourse and are secured by the Broadwater Property, its
improvements and leases thereon. The Indebtedness bears interest at a
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<PAGE> 30
variable rate per annum equal to the greater of (i) 8.75% or (ii) 4% plus the
LIBOR 30-day rate.
Under the terms of the Indebtedness, PBLLC is required to make monthly
payments of interest, and was to repay the Indebtedness in full and a $7.0
million loan fee on July 22, 2000. The Company defaulted on the principal and
loan fee payments on July 22, 2000. The Company has continued to make the
monthly interest payments accruing on the $30.0 million principal and is in
negotiations with the lender. The lender accelerated the note and has
declared the unpaid principal and loan fee due and payable. The Company is
continuing its discussions with the lender concerning the restructuring of the
note.
In August 1999, the Company purchased "President Casino-Broadwater," the
vessel on which the Company conducts its Biloxi gaming operations. On October
10, 2000, the Company paid the then outstanding principal balance of $1.9
million and a restructuring fee of $0.1 million from the proceeds of the sale
of its Davenport operations.
The 9.67% term note payable is collateralized by the vessel "President
Casino-Mississippi" and various equipment and is personally guaranteed by Mr.
Connelly. This note also contains certain covenants which, among other
things, require the Company to maintain a minimum tangible net worth of $40.0
million. The aforementioned default on the Company's Senior Exchange Notes
and Secured Notes also constituted a default under this note. The Company has
continued to make the quarterly principal and interest payments related to
this note. No action has been taken by the lender to accelerate the note and
declare the unpaid principal due and payable.
TCG, the Company's 95%-owned partnership, maintained a line of credit
collateralized by first mortgages on the M/V "President" and the Blackhawk
Hotel, various personal property and an assignment of various contracts. The
principal and interest on the line of credit were paid from the proceeds of
the sale of the assets of the Davenport casino operations and the line of
credit was terminated.
In connection with the Company's proposed "Destination Broadwater"
development plan, to date, the Company has not identified any particular
financing alternatives or sources as the necessary regulatory approvals have
not been obtained. There can be no assurance that the Company will be able to
obtain the regulatory approvals or the requisite financing. Should the
Company fail to raise the required capital, such failure would materially and
adversely impact the Company's business plan.
Prospective Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which, after being amended by
SFAS No. 137 "Accounting for Derivative Instruments and Hedging Activities --
Deferral of the Effective Date of FASB Statement No. 133," is effective for
fiscal years beginning after June 15, 2000. The statement establishes
accounting and reporting standards for derivative instruments. The Company is
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<PAGE> 31
currently evaluating the impact of this new standard, but management believes
it will not materially impact the Company as the Company does not engage in
hedging activities or utilize derivative instruments.
Forward Looking Statements
This quarterly report on Form 10-Q and certain information provided
periodically in writing and orally by the Company's designated officers and
agents contain certain statements which constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933,
as amended and Section 21E of the Securities Exchange Act of 1934, as amended.
The terms "Company," "we," "our" and "us" refer to President Casinos, Inc.
The words "expect," "believe," "goal," "plan," "intend," "estimate," and
similar expressions and variations thereof are intended to specifically
identify forward-looking statements. Those statements appear in this
quarterly report on Form 10-Q and the documents incorporated herein by
reference, particularly "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and include statements regarding the
intent, belief or current expectations of the Company, its directors or its
officers with respect to, among other things: (i) our financial prospects;
(ii) our financing plans and our ability to meet our obligations under our
debt obligations and obtain satisfactory operating and working capital; (iii)
our operating and restructuring strategy; and (iv) the effect of competition
and regulatory developments on our current and expected future revenues. You
are cautioned that any such forward looking statements are not guarantees of
future performance and involve risks and uncertainties, and that actual
results may differ materially from those projected in the forward looking
statements as a result of various factors. The factors that might cause such
differences include, among others, the following: (i) continuation of future
operating and net losses by the Company; (ii) the inability of the Company to
restructure its debt obligations; (iii) the inability of the Company to obtain
sufficient cash from its operations and other resources to fund ongoing
obligations; (iv) developments or new initiatives by our competitors in the
markets in which we compete; (v) our stock price; (vi) adverse governmental or
regulatory changes or actions which could negatively impact our operations;
and (vii) other factors including those identified in the Company's filings
made from time-to-time with the Securities and Exchange Commission. The
Company undertakes no obligation to publicly update or revise forward looking
statements to reflect events or circumstances after the date of this quarterly
report on Form 10-Q or to reflect the occurrence of unanticipated events.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Although the majority of debt carries a fixed interest rate, the Company is
exposed to interest rate risk in respect to the variable-rate debt maintained,
which risk may be material. The Company has not engaged in any hedging
transactions with respect to such risks.
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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
Not applicable.
Item 3. Defaults Upon Senior Securities
The Company has 13.0% Senior Exchange Notes and 12.0% Secured Notes. The
Company did not pay the regularly scheduled interest payments of $6.4 million
that were each due and payable March 15, and September 15, 2000, respectively,
under the Senior Exchange Notes and the Secured Notes. Under the Indentures
pursuant to which the Senior Exchange Notes and Secured Notes were issued, an
Event of Default occurred on April 15, 2000, and is continuing as of the date
hereof. Additionally, the Company did not pay the $25.0 million principal
payment due September 15, 2000 on the Senior Exchange Notes. In November
2000, the Company paid (i) $12.8 million interest and (ii) $18.75 million and
$6.25 million principal on the Senior Exchange Notes and Secured Notes,
respectively. Total arrearage as of January 16 2001, is $56.25 million of
principal and $0.6 million of interest on the Senior Exchange Notes and $18.75
million of principal and %0.2 million interest on the Secured Notes.
Additionally, the Company did not pay the $30.0 million note and the
associated $7.0 million loan fee due July 22, 2000, related to the Broadwater
Property. The Company is obligated under the Indebtedness to make monthly
payments of interest accruing under the Indebtedness at a variable rate per
annum equal to the greater of (i) 8.75% or (ii) 4% plus the LIBOR 30-day rate.
The Company has continued to make the monthly interest payments related to the
$30.0 million note. Since the date of default, the Company is accruing, but
has not paid, interest on the $7.0 million fee and late fees on the entire
$37.0 million. Total arrearage as of January 16, 2001, is $37.0 million of
principal and $1.1 million of interest and fees.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
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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
On October 12, 2000, the Company filed a Current Report on Form
8-K dated September 20, 2000, reporting under Item 7 that James
A. Zweifel, Executive Vice President and Chief Financial Officer,
had been named Vice President and General Manager of the
President Casino by the Arch, the Company's St. Louis casino.
The Company also announced that Ralph J. Vaclavik had been
appointed Chief Financial Officer and Senior Vice President.
On October 20, 2000, the Company filed a Current Report on Form
8-K dated September 20, 2000, reporting under Item 2 that the
Company had consummated the sale of certain assets utilized in
its Davenport, Iowa operations to Isle of Capri Casinos, Inc.
pursuant to the terms and conditions of an Asset Sale Agreement,
dated as of July 19, 2000, by and among The Connelly Group, L.P.,
a limited partnership in which the Company holds a 95% ownership
interest, TCG/Blackhawk, Inc., a wholly-owned subsidiary of the
Company, IOC-Davenport, Inc. and Isle of Capri Casinos, Inc.
31<PAGE> 34
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 16, 2001 /s/ Ralph J. Vaclavik
-----------------------------
Ralph J. Vaclavik
Senior Vice President and
Chief Financial Officer
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INDEX TO EXHIBITS
-----------------
EXHIBIT NO.
27 Financial Data Schedule for the nine-months ended November 30,
2000, as required under EDGAR.
----------------------
