THIS DOCUMENT IS A COPY OF THE FORM 10-Q FILED ON NOVEMBER 14, 1996, PURSUANT
TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
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 September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 0-20712
CASINO MAGIC CORP.
(Exact name of registrant as specified in its charter)
MINNESOTA 64-0817483
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
711 CASINO MAGIC DRIVE, BAY ST. LOUIS, MS 39520
(Address of principal executive offices) (Zip Code)
(601) 467-9257
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
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 the issuer's classes of common
stock, as of the latest practicable date.
35,637,083 shares common stock outstanding as of November 13, 1996
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Condensed Consolidated Statements of Operations
For the nine months ended September 30, 1996 and 1995..........1
Condensed Consolidated Statements of Operations
For the three months ended September 30, 1996 and 1995........2
Condensed Consolidated Balance Sheets -
September 30, 1996 and December 31, 1995......................3
Condensed Consolidated Statements of Cash Flows -
For the nine months ended September 30, 1996 and 1995.........4
Notes to Condensed Consolidated Financial Statements............5-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................12-22
PART II OTHER INFORMATION
Item 1. Legal
Proceedings.............................................23
Item 2. Changes in
Securities.........................................23
Item 3. Default Upon Senior
Securities.................................23
Item 4. Submission of Matters to a Vote of Security
Holders............23
Item 5. Other
Information..............................................23
Item 6. Exhibits and Reports on Form
8-K...............................24
SIGNATURES.....................................................25
44
PART I - FINANCIAL INFORMATION
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
<S> <C>
REVENUES:
Casino........................................$118,123,734 $126,991,812
Food and beverage................................4,897,699 4,750,428
Room.............................................1,442,641 1,943,621
Royalty and management fees......................2,860,041 1,587,865
Other operating income...........................1,439,795.......597,789
- -------------------------------------------------------------------------------
Total revenues............................128,763,910 135,871,515
- ------------------------------------------------------------------------------- --------------------------------------
COSTS AND EXPENSES:
Casino.........................................9,475,040 53,055,671
Food and beverage..............................5,543,721 4,966,277
Rooms............................................811,275 995,731
Other operating costs and expenses.............1,883,661 972,163
Advertising and marketing.....................15,288,395 18,703,291
General and administrative.....................15,288,225 18,013,104
Property operation, maintenance and energy cost.4,818,119 5,056,073
Rents, property taxes and insurance .............4,234,866 4,246,628
Development expenses............................1,462,841 1,525,458
Preopening expense.....................................-- 1,940,785
Depreciation and amortization..................12,564,323 10,762,792
- -------------------------------------------------------------------------------
Total costs and expenses.................111,370,466 120,237,973
- ------------------------------------------------------------------------------- --------------------------------------
INCOME FROM OPERATIONS..............................17,393,444 15,633,542
- -------------------------------------------------------------------------------
OTHER (INCOME) EXPENSE:
Equity (income) loss from unconsolidated
casino operations...........................(883,337) (56,224)
Interest expense, net...........................12,250,572 11,652,833
Other............................................ 259,598 177,099
Write-off of in Porto Carras Casino, S.A........26,982,422 --
- -------------------------------------------------------------------------------
Total other expense........................38,609,255 11,773,708
- -------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES:..................(21,215,811) 3,859,834
INCOME TAX EXPENSE (BENEFIT).........................(3,836,505) 1,732,928
- -------------------------------------------------------------------------------
NET INCOME (LOSS) ................................$(17,379,306) $2,126,906
===============================================================================
NET INCOME (LOSS) PER COMMON SHARE:
Primary........................................$(.48) $.06
===============================================================================
Fully-diluted............... .$(.49) $.06
===============================================================================
AVERAGE SHARES AND EQUIVALENTS OUTSTANDING:
Primary....................................... 36,485,878 33,913,256
===============================================================================
Fully-diluted........ ........................ 35,387,280 33,951,218
===============================================================================
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
<S> <C>
REVENUES:
Casino..........................................$39,849,171 $43,553,337
Food and beverage..................................1,718,984 1,797,133
Rooms................................................505,075 729,859
Royalty and management fees..........................730,034 1,291,716
Other operating income................................467,971 145,592
- --------------------------------------------------------------------------------
Total revenues.................................43,271,235 47,517,637
- --------------------------------------------------------------------------------
COSTS AND EXPENSES:
Casino..............................................16,432,601 18,052,479
Food and beverage....................................2,010,774 1,725,244
Rooms..................................................279,844 350,650
Other operating costs and expenses.....................721,940 326,188
Advertising and marketing............................5,365,483 6,274,926
General and administrative...........................5,422,144 5,383,581
Property operation, maintenance and energy cost......1,681,739 1,728,713
Rents, property taxes and insurance...................1,348,281 1,420,666
Development expenses....................................473,117 398,162
Preopening expenses.........................................-- (458,570)
Depreciation and amortization........................4,179,874 4,090,317
- --------------------------------------------------------------------------------
Total costs and expenses.......................37,915,797 39,292,356
- --------------------------------------------------------------------------------
INCOME FROM OPERATIONS.....................................5,355,438 8,225,281
- --------------------------------------------------------------------------------
OTHER (INCOME) EXPENSE:
Equity loss from unconsolidated casino operations....(290,088) (1,739,589)
Interest expense, net...............................4,540,596 3,968,882
Other.................................................146,616 544,133
Write-off of in Porto Carras Casino, S.A......... . 26,982,422 --
--------------------
Total other expense............................31,379,546 2,773,426
- --------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES:.....................(26,024,108) 5,451,855
INCOME TAX EXPENSE (BENEFIT)............................(5,341,377) 2,049,844
- --------------------------------------------------------------------------------
NET INCOME (LOSS).....................................$(20,682,731) $3,402,011
================================================================================
NET INCOME (LOSS) PER COMMON SHARE:
Primary...............................................$(.57)$.10
================================================================================
Fully-diluted........................................$(.57) $.10
================================================================================
AVERAGE SHARES AND EQUIVALENTS OUTSTANDING:
Primary........................................... 36,403,759 35,783,30
================================================================================
Fully-diluted .....................................36,404,350 35,783,642
================================================================================
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER31,
1996 1995 (*)
(UNAUDITED)
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $16,699,095 $30,755,698
Restricted cash.......................................37,816,861 --
Other current assets..... . 16,551,141 17,325,354
- -------------------------------------------------------------------------------
Total current assets...........................71,067,097 48,081,052
- -------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, NET............................249,199,965 169,791,757
- -------------------------------------------------------------------------------
OTHER LONG-TERM ASSETS:
Investment in unconsolidated subsidiaries .............716,011 18,574,859
Deferred gaming license cost.......................16,841,976 --
Foreign casino concession agreement, net............9,726,174 10,437,845
Other long-term assets ..26,071,861 21,545,329
- -------------------------------------------------------------------------------
Total other long-term assets .................53,356,022 50,558,033
----------------------------------------
$373,623,084 $268,430,842
===============================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES................................... 34,400,050 32,170,741
- -------------------------------------------------------------------------------
OTHER LONG-TERM LIABILITIES............................ 2,550,809 4,241,325
- -------------------------------------------------------------------------------
LONG-TERM DEBT, NET OF CURRENT MATURITIES.............. 258,615,025 136,840,010
----------------------------------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $0.01 par, 50,000,000 shares authorized,
35,535,083 issued and outstanding at September 30, 1996 and
35,279,564 issued and outstanding at December 31, 1995 .........355,351 352,796
Undesignated stock, 2,500,000 shares authorized, none issued
- ----Additional paid-in capital...........................66,485,475 66,087,413
Retained earnings......................................11,696,979 29,076,285
Currency translation adjustments..........................(303,023) (224,195)
Less unearned compensation................................ (177,582) (113,533)
- -------------------------------------------------------------------------------
Total shareholders' equity....................78,057,200 95,178,766
- ------------------------------------------------------------------------------- ----------------------------------------
$373,623,084 $268,430,842
===============================================================================
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
* DERIVED FROM AUDITED FINANCIAL STATEMENTS
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...............................$(17,243,368) $2,216,906
Adjustments for non-cash charges ...................29,882,726 12,795,592
Changes in assets and liabilities ..................(5,687,216) 3,405,233
------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ......6,952,142 18,417,731
------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment ..........(42,202,267) (8,871,140)
Acquisition of gaming license...................(15,000,000) --
Investments in unconsolidated subsidiaries................ -- (7,489,669)
Decrease in marketable securities.........................-- 8,744,233
Other, net.......................................... 898,890 (2,374,716)
- ------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES... ..(56,303,377)
------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable
long-term debt...............................121,077,031 1,424,401
Principal payments on notes payable
and long-term deb.........................(48,230,214) (2,803,934)
Net proceeds from sale of common stock 264,676 8,322,805
Other............................................. -- 373,560
- ------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 73,111,493
------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 23,760,258
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 30,755,698 20,486,068
------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD............ 54,515,956 $36,229,339
==========================================
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID DURING THE PERIOD FOR:
Interest (net of amount capitalized).......... 6,558,224 $7,665,034
Income taxes (net of refunds)..................(7,587,982) (4,236,206)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment and other asset acquisitions included in
accounts and construction payable and accrued
expenses 1,225,532 --
Property and equipment financed with long-term debt 46,416,570 --
Gaming license acquisition financed with
long-term debt....................................1,042,070 --
Common stock granted to officers.......................135,398 --
Reclassification of long-term liabilities
to accrued expenses...............................250,000 7,210,000
Acquisition of securities available-for-sale
through sale of subsidiary.........................1,198,052 --
Commitment for land option..................................-- 750,000
Write-off of unearned compensation......................--.....1,047,573
Reserve for shut down of Porto Carras.................4,078,320 --
Purchase of all the capital stock of
Casino One Corporation for 2,125,000
shares of Casino Magic Corp. stock...................-- 12,617,187
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...............................$(17,243,368) $2,216,906
Adjustments for non-cash charges
Changes in assets and liabilities
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment
Acquisition of gaming license...................(15,000,000) --
Investments in unconsolidated subsidiaries................
Decrease in marketable securities.........................-- 8,744,233
Other, net.......................................... 898,890 (2,374,716)
- ------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES... (9,991,292)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable
long-term debt...............................121,077,031 1,424,401
Principal payments on notes payable
and long-term deb.........................(48,230,214) (2,803,934)
Net proceeds from sale of common stock 264,676
Other............................................. -- 373,560
- ------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,316,832
-----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 15,743,271
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS, END OF PERIOD............
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID DURING THE PERIOD FOR:
Interest (net of amount capitalized)..........
Income taxes (net of refunds)..................(7,587,982)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment and other asset acquisitions included in
accounts and construction payable and accrued
expenses 1,225,532 --
Property and equipment financed with long-term debt
Gaming license acquisition financed with
long-term debt....................................1,042,070 --
Common stock granted to officers.......................135,398 --
Reclassification of long-term liabilities
to accrued expenses...............................250,000 7,210,000
Acquisition of securities available-for-sale
through sale of subsidiary.........................1,198,052 --
Commitment for land option..................................-- 750,000
Write-off of unearned compensation......................--.....1,047,573
Reserve for shut down of Porto Carras.................4,078,320 --
Purchase of all the capital stock of
Casino One Corporation for 2,125,000
shares of Casino Magic Corp. stock...................--
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, RISKS AND UNCERTAINTIES:
ORGANIZATION AND BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of Casino Magic
Corp. and its wholly-owned subsidiaries ("the Company"). All significant
intercompany accounts and transactions have been eliminated. Investments in
unconsolidated affiliates are accounted for using the equity method of
accounting.
The Company conducts casino gaming operations in Bay St. Louis, Mississippi,
Biloxi, Mississippi, in the Argentina Province of Neuquen in the cities of
Neuquen City and San Martin de los Andes, and through a jointly owned company
in Porto Carras, Greece; however, the Company anticipates that Porto Carras
Casino will be closed or sold in the near future. See Note 2. The Company
manages one casino facility in Xanthi, Greece. The Company opened casino
gaming operations in Bossier City, Louisiana on October 4, 1996.
Additionally, Casino Magic is pursuing gaming opportunities in other
jurisdictions.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted.
The accompanying unaudited condensed consolidated financial statements contain
all adjustments which are, in the opinion of management, necessary for a fair
statement of the results of the interim periods. The results of operations
for the interim periods are not indicative of results of operations for an
entire year.
It is suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
Certain reclassifications have been made to 1995 amounts to conform with the
September 30, 1996 presentation.
ACTIVITIES OF THE COMPANY:
Casino Magic of Louisiana Corp. ("Louisiana Corp."), holds a license to
operate riverboat gaming activities (referred to as "Casino Magic-Bossier
City") in Bossier City Louisiana. Using a temporary facility, the Company
began operations in Bossier City, Louisiana, on October 4, 1996, on a 23 acre
parcel of land.
CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES:
Gaming regulation licensing. The Company has gaming operations in the United
States and abroad that depends on the continued licensability or qualification
of the Company and subsidiaries that hold gaming licenses in various
jurisdictions. Such licensing and qualifications are reviewed and require
renewal periodically by the gaming authorities in those jurisdictions.
Competition. The gaming industry is extremely competitive and the Company
faces competition from existing and proposed gaming operations in both the
United States, specifically on the Mississippi Gulf Coast where the Company's
two major casino facilities are located, and abroad. Casino Magic-Bossier
City opened on October 4, 1996, and faces competition from three existing and
proposed additional gaming operations in the Bossier City/Shreveport,
Louisiana area.
Substantial leverage and ability to service debt. Following the consummation
of the debt offering related to Casino Magic-Bossier City of $115,000,000
aggregate principal amount of first mortgage notes, which are non-recourse to
the parent (see Note 5), the Company is highly leveraged, with substantial
debt service in addition to construction and operating expenses.
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, RISKS AND UNCERTAINTIES
(CONTINUED):
CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES (CONTINUED):
Construction risks. Any construction project such as the Company's Casino
Magic-Bossier City project entails significant construction risks, including,
but not limited to, cost overruns, delays in receipt of governmental
approvals, shortages of materials or skilled labor, labor disputes, unforeseen
environmental or engineering problems, work stoppages, fire and other natural
disasters, construction scheduling problems and weather interferences, any of
which, if it occurred, could delay construction or result in a substantial
increase in costs to the Company. Such risks may be compounded by the
Company's decision to construct Casino Magic-Bossier City on an accelerated
schedule.
Foreign operations. The Company has investments and net assets of
approximately $16.9 million in gaming operations in Argentina which are
subject to risks associated with the distance of these casino facilities from
the Company's executive offices, the stability of the relevant government and
local economy, regulations imposed by a foreign government, the continued
ability to repatriate cash, and currency exchange issues.
Severe weather. The Mississippi Gulf Coast is subject to severe weather,
including hurricanes. Severe weather could cause damage to one or both of the
Company's Mississippi casino facilities. The Company maintains insurance
against casualty losses resulting from severe weather, and against business
interruption. Such insurance may not adequately compensate the Company for
loss of profits resulting from severe weather.
Pervasiveness of estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
2. IMPAIRMENT OF LONG LIVED ASSETS
At September 30, 1996, management determined that its 49% equity investment in
Porto Carras Casino S.A., and notes and accounts receivable relating to unpaid
management fees and royalties, was impaired. Because of this impairment,
management wrote off its investment in such gaming facilities in Porto Carras,
Greece, ("Porto Carras") and in all unpaid notes and receivables related
thereto. This charge included $16.0 million which represents the Company's
investment in Porto Carras, $6.9 million in outstanding receivables and other
assets, and an estimated $4.0 million shut down accrual. Management's decision
was based, primarily, on recent results from the Company's Greek gaming
facilities. In September 1996, Hyatt Corporation opened a new casino in the
City of Thessaloniki, Porto Carras's primary market and was required by the
Greek Government to charge an $8 admission tax compared to Porto Carras' $20
admission tax. Although the Company anticipated some revenue loss as a result
of this increased competition and admission fee differential, the actual
effects have been much greater than anticipated and resulted in a $2.0 million
loss from operations at Porto Carras for the month of September 1996. Despite
new marketing and cost containment efforts, these losses have continued;
furthermore, the majority owner in Porto Carras venture has been unwilling or
unable to advance any funds to the operation. Additionally, the majority
owner has informed the Company that it does not intend to operate a
substantial portion of the Porto Carras resort area, consisting of two hotels
and amenities, during the 1997 season. These factors, among others, have led
to the Company's decision to write off its investment in Porto Carras and will
most likely lead to the closure or selling for a nominal amount of Porto
Carras in the near future. The Company continues to explore its options,
including a sale or liquidation of its share of Porto Carras.
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED)
<S> <C>
Land and improvements............................$66,822,229 $58,018,386
Buildings and improvements........................41,615,235 41,672,748
Barges and improvements...........................55,067,757 35,973,068
Crescent City Riverboat............................30,650,576 --
Leasehold improvements................................348,621 1,362,141
Furniture and equipment............................68,159,622 54,916,169
Construction in progress......................... 25,087,558 8,424,425
- ---------------------------------------------------------------------------
287,751,598 200,366,937
Less accumulated depreciation.....................(38,551,633) (30,575,180)
- --------------------------------------------------------------------------- ------------
$249,199,965$169,791,757
===========================================================================
</TABLE>
In May 1996, Casino Magic, through its wholly-owned subsidiary, Jefferson
Corp. acquired Crescent City Capital Development Corporation ("Crescent
City"), for $50 million plus the assumption of up to $5.7 million in equipment
liabilities. Jefferson Corp. paid $15 million in cash at closing and caused
Crescent City to issue $35 million of 11.5% secured, three year notes
("Louisiana Notes"). Crescent City, which was the subject of a plan of
reorganization under Chapter 11 of the U.S. Bankruptcy Code, at the time of
the acquisition owned the Crescent City Queen riverboat ("Crescent City
Riverboat"), gaming and related equipment, surveillance equipment and a
license to conduct riverboat gaming operations in Louisiana. Crescent City
emerged from the bankruptcy proceedings and the concurrent acquisition by
Jefferson Corp. renamed as Casino Magic of Louisiana, Corp. ("Louisiana
Corp.") The balances associated with the costs of the Crescent City
Riverboat, gaming license (shown under other assets) and various gaming
equipment are comprised of the cost to acquire Louisiana Corp., additional
costs incurred to operate and maintain the Crescent City Riverboat and
capitalized interest. The acquisition of Crescent City by Jefferson Corp. was
accounted for as a purchase.
The Crescent City Riverboat is stated at its estimated fair value. The
allocation of the fair value of the acquired assets are subject to revisions
within a one-year period from the date of acquisition based on subsequent
events in accordance with the principles of purchase accounting.
The Crescent City Riverboat is located in a shipyard in Morgan City,
Louisiana. Louisiana Corp. anticipates selling the Crescent City Riverboat.
Interest is capitalized during construction at the Company's weighted average
interest rate. Interest is also capitalized on deferred gaming license cost
(shown under other assets) as the license is an integral part of the riverboat
casino and entertainment complex under development. For the period from May
13, 1996 through September 30, 1996, approximately $1,500,000 and $800,000 of
interest cost was capitalized related to property and equipment and deferred
gaming license cost, respectively.
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
4. OTHER ASSETS:
Included under other assets is "Deferred gaming license cost." Deferred
gaming license costs represent the estimated fair value of the Louisiana
gaming license, an asset acquired in conjunction with the purchase of Crescent
City. This cost will be amortized on a straight-line basis over the estimated
life of the license of twenty-five years, assuming subsequent renewals by
Louisiana gaming regulators.
5. LONG-TERM DEBT:
Long-term debt, including capital lease obligations, consists of the
following:
<TABLE>
<CAPTION>
SEPTEMBER 30,DECEMBER31,
1996 1995
(UNAUDITED)
<S> <C>
Notes payable, bank (a)............................$5,222,668 $2,765,423
Notes payable, equipment (b).........................4,340,896 --
Notes payable, land (c)..............................3,805,797 4,102,507
Capital lease obligations..............................273,322 259,557
Other (d),.............................................832,005 928,500
Louisiana First Mortgage Notes (as defined herein) (e) 115,000,000 --
First Mortgage Notes (as defined herein) (f) ........135,000,000 135,000,000
Unamortized original issue discount......(2,373,147) (2,620,232)
- --------------------------------------------------------------------
Less current maturities............................(3,486,516) (3,595,745)
- -------------------------------------------------------------------
$258,615,025$36,840,010
====================================================================</TABLE>
(a) Consist of three notes payable to banks. The detail of these notes
is as follows: (i) $3,000,000 uncollateralized promissory note,
payable in monthly installments of interest only through July 1996; there-
after, principal and interest based on a 60 month amortization through
February 2000. The promissory note bears interest at prime plus 1% (9.25%
at September 30, 1996) throughout the life of the note with a final
balloon payment due on 2000. (ii) $1,700,000 note collateralized by gaming
equipment. The first payment is due 60 days following the opening of
Casino Magic-Bossier City's gaming facility. The note is payable in
thirty-six monthly payments of $53,463.49, including interest at prime
plus 1/4% (8.5% at September 30, 1996). (iii) $1,343,749 assumed note
collateralized by the company jet. The note is payable in 40
remaining monthly payments of $35,000, including interest at prime plus
1% (9.25% at September 30, 1996) throughout the life of the note with a
final balloon payment due October 1999.
(b) Note collateralized by gaming equipment. The first payment is due 60
days following the opening of Casino Magic-Bossier City's gaming facility.
The note is payable in thirty-six monthly payments of $135,788.17, including
interest at prime plus 1% (9.25% at September 30, 1996).
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
5. LONG-TERM DEBT (CONTINUED):
(c) Consists of four notes payable for land acquisitions at June 30, 1996.
The detail of the four notes is as follows: (i) $1,258,544 note payable in
monthly installments of $14,446 including interest at prime plus 2% (10.25% at
June 30, 1996), through April 1997;. (ii) $870,942 note payable in monthly
installments of $12,134 including interest at 8% through July 2003. (iii)
$3,000,000 note payable in monthly installments of $111,699 including interest
at 8.75% through November 1998
(d) Consists of various collateralized notes payable through the year
2004. The interest rates on these notes vary from 7.9% to 10% fixed rates.
(e) On August 22, 1996, a wholly owned subsidiary of the Company,
Louisiana Corp., sold $115,000,000 million aggregate principal amount of 13%,
First Mortgage Notes securities due in 2003 ("Louisiana First Mortgage Notes")
with contingent interest. The Louisiana First Mortgage Notes are governed by
an Indenture (the "Louisiana Indenture").
Contingent Interest is payable on the Louisiana First Mortgage Notes, on
each interest payment date, in an aggregate amount equal to 5% of Louisiana
Corp. Adjusted Consolidated Cash Flow (this and other capitalized terms used
in this note 5(e) and not elsewhere defined herein are as defined in the
Louisiana Indenture) for the six-month period ending on June 30 or December 31
(each, a "Semiannual Period") most recently completed prior to such interest
payment date; provided that no Contingent Interest is payable with respect to
any period prior to the Commencement Date. Payment of all or a portion of any
installment of Contingent Interest may be deferred, at the option of Louisiana
Corp., if, and only to the extent that, (i) the payment of such portion of
Contingent Interest will cause the Company's Adjusted Fixed Charge Coverage
Ratio for Louisiana Corp.'s most recently completed Reference Period prior to
such interest payment date to be less than 1.5 to 1.0 on a pro forma basis
after giving effect to the assumed payment of such Contingent Interest and
(ii) the principal amount of the Louisiana First Mortgage Notes corresponding
to such Contingent Interest has not then matured and become due and payable
(at stated maturity, upon acceleration, upon redemption, upon maturity of a
repurchase obligation or otherwise). The aggregate amount of Contingent
Interest payable in any Semiannual Period will be reduced pro rata for
reductions in the outstanding principal amount of notes prior to the close of
business on the record date immediately preceding such payment of Contingent
Interest.
The Louisiana Indenture pursuant to which the Louisiana First Mortgage
Notes have been issued contains certain covenants that will limit the ability
of the Company and its subsidiaries to, among other things, incur additional
Indebtedness and issue preferred stock, pay dividends, make investments or
make other restricted payments, incur liens, enter into mergers or
consolidations, enter into transactions with affiliates or sell assets.
(f) On October 14, 1993, a wholly owned indirect subsidiary of the
Company, Casino Magic Finance Corp. ("Finance Corp."), sold $135,000,000 in
aggregate principal amount of 11 1/2% First Mortgage Notes due in 2001 (the
"Finance Notes") and warrants to purchase 810,000 shares of Casino Magic Corp.
common stock. Proceeds from the Notes were allocated by the underwriter
between Finance Corp. and the Company based on the estimated fair market value
at the time of issuance of the Finance Notes and the warrants in the amounts
of $131,760,000 and $3,240,000 ($4 per warrant), respectively. The value of
the warrants is treated as original issue discount for financial statement
purposes, and is reflected in the balance sheet net of amortization as an
adjustment to the carrying value of long-term debt. The Finance Notes are
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
5. LONG-TERM DEBT (CONTINUED):
governed by an Indenture (the "Indenture") entered into on the same date
between Finance Corp., the Company and IBJ Schroder Bank & Trust Company as
the Trustee. Under Section 4.10 of the Indenture, the Company's ability to
pay dividends on its common stock is restricted to an amount which is
determined under a formula based primarily on the Company's future income, and
is precluded upon the occurrence of an "Event of Default" as defined under the
Indenture. Events of Default include, among other things, the failure to pay
the interest or principal due on the Finance Notes, the entry of a judgment in
excess of $10,000,000 against the Company or certain material subsidiaries,
which is not discharged within 60 days after entry, and the default by the
Company or certain material subsidiaries under indebtedness due to third
parties. The Indenture also contains certain covenants that restrict, among
other things, the making of certain investments, payments of dividends and
other distributions, the incurrence of additional indebtedness and future
guarantees of indebtedness, certain transactions with shareholders and
affiliates, certain mergers and consolidations, certain asset sales and the
creation of certain liens. Additionally, in Mississippi, where certain of the
Company's subsidiaries are incorporated, laws exist which prohibit payments of
dividends if such payments would create negative equity on a fair market value
basis. The Finance Notes are secured by a pledge of the stock of Finance
Corp., Bay St. Louis and Biloxi along with the accounts receivable,
inventories, property and equipment, property held for development and
deposits of Bay St. Louis and Biloxi. The book basis of these pledged assets
is approximately $154,000,000 at September 30, 1996. The effective interest
rate of the Notes is 13.06%. The proceeds from the Finance Notes were used to
pay off substantially all outstanding obligations at October 14, 1993.
Maturities of the Company's long-term debt, including capital lease
obligations, as of September 30, 1996,
are as follows:
Year ending September 30,
1997.......................$3,486,515
1998........................5,931,587
1999........................3,442,888
2000..........................826,883
2001..........................240,039
Thereafter................250,546,775
Unamortized original issue discount
(2,373,147)
$262,101,54
6. GOLDIGGERS SALE:
On June 13, 1996, the Company sold the capital stock of Atlantic-Pacific
Corp., which operates "Goldiggers," a small casino-hotel in Deadwood, South
Dakota, with approximately 8,500 square feet of gaming area and nine hotel
rooms, to Royal Casino Group, Inc. ("RCG"), an unaffiliated party whose common
stock trades on the NASDAQ market (ticker symbol WINZ.) Goldiggers generated
revenues of $754,082 and a pre-tax operating cash flow deficit of
approximately $210,028 during the first six months of 1996 and, except for its
negative cash flow impact, had not been regarded by the Company as material to
its operations for several years. In consideration for the sale of such
stock, the Company received shares of RCG Series A Convertible Preferred Stock
and warrants to acquire shares of RCG common stock. The Indenture required
that at least 85% of the consideration received by the Company in respect of
such asset sale be in the form of cash. By selling such securities for cash
to a subsidiary that is not subject to the investment covenants of such
Indenture,
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
6. GOLDIGGERS SALE (CONTINUED):
Management has taken steps which it believes are sufficient to cure such
violation. The securities are held as of August 9, 1996, by Casino Magic
American Corp., a wholly-owned subsidiary of the Company, and are valued on
the Company's balance sheet at $1,350,156 at September 30, 1996.
7. SUBSEQUENT EVENTS:
On October 4, 1996, Louisiana Corp. began gaming operations, using a temporary
facility in Bossier City, Louisiana.
On November 5, 1996, voters in Louisiana parishes Caddo and Bossier passed a
referendum allowing for the continuation of riverboat gaming in the respective
parish.
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussions regarding proposed Company developments and operations
included in "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" and "NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS" contain forward looking statements that involve a number of risks
and uncertainties. These forward-looking statements relate to: (i) completion
of the golf course at Casino Magic-BSL in early 1997; (ii) the construction
project at Bossier City, (iii) completion of a hotel in 1997 or 1998, and
repositioning of the gaming facility, at Casino Magic-Biloxi; (iv) the pending
closure of Porto Carras. (v) the Company's ability to fund planned
developments and debt service obligations over the next twelve months with
currently available cash and marketable securities and with cash flow from
operations. Such construction projects entail significant construction risks,
including, but not limited to, cost overruns, delay in receipt of governmental
approvals, shortages in materials or skilled labor, labor disputes, unforeseen
environmental or engineering problems, work stoppage, fire and other natural
disasters, construction scheduling problems and weather interferences, any of
which, if it occurred, could delay construction or result in a substantial
increase in costs to the Company. Such risks may be compounded by the
Company's decision to construct Casino Magic-Bossier City on an accelerated
schedule. The anticipated closure of Porto Carras could be affected by further
deterioration or improvements in the operations prior to closure or
unanticipated regulatory or other action by Greek authorities. The Company's
ability to meet its consolidated debt obligations may be dependent upon the
successful completion of Casino Magic-Bossier City and the other planned
construction projects and the Company's future operating performance, which is
itself dependent on a number of factors, many of which are outside of the
Company's control, prevailing economic and competitive conditions and
financial business regulatory and other factors affecting the Company's
operations and business. In addition to the risks and uncertainties discussed
above, other factors that could cause actual results to differ materially are
detailed from time to time in the Company's reports filed with the Securities
and Exchange Commission.
RESULTS OF OPERATIONS
The Company commenced operations in September 1992 as one of the first
entrants in the Mississippi gaming market. Since late 1995, the Company has
strengthened its management team with the addition of a new Chief Executive
Officer, Chief Financial Officer and several other key executives who
collectively possess substantial development and operational experience within
the gaming industry. The Company believes that its new management team will
enhance the Company's operational and financial performance through focused
attention on its core Mississippi properties, Casino Magic-BSL and Casino
Magic-Biloxi, and the focused development of its current projects, especially
Casino Magic-Bossier City. In addition, management has placed a priority on
defining and developing the "Magic" theme throughout its properties to enhance
the customer experience, as well as to strengthen the "Casino Magic" brand
identity.
The following table sets forth for the periods indicated certain operating
information for the Company on a consolidated basis and for its existing
properties. The principal operating entities are Mardi Gras Casino Corp.
("Casino Magic-BSL") and Biloxi Casino Corp. ("Casino Magic-Biloxi") both
dockside casinos operating on the Gulf Coast of Mississippi (together referred
to collectively as the "Casino Magic-Gulf Coast") and Casino Magic Neuquen SA,
which operates gaming facilities at two casino sites in Neuquen and San Martin
de los Andes, Argentina (together referred to collectively as "Casino
Magic-Neuquen".) The Company also owns a 49% interest in Porto Carras Casino
S.A. ("Porto Carras") which manages a casino at the Porto Carras resort
approximately 60 miles south of Thessaloniki, Greece. The Company however,
anticipates that Porto Carras will be closed or disposed of the in near
future. The revenues, costs and expenses of Porto Carras were not included
below as Porto Carras was accounted for under the equity method of accounting.
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDEDSEPTEMBER 30,
1996 1995 1996 1995
(Dollars in thousands)
(Unaudited)
<S> <C> <C> <C>
REVENUES:
Casino Magic-BSL (1) $21,592 $ 22,369 63,630 66,641
Casino Magic-Biloxi (2) 16,734 18,717 49,379 56,267
Casino Magic-Neuquen (3) 4,215 4,373 12,141 9,607
Corporate and Other (4)(5) 730 2,059 3,614 3,357
- -------------------------------------------------------------------------
Total revenues 43,271 47,518 128,764 135,872
COST AND EXPENSES:
Casino Magic-BSL 16,804 18,328 49,335 53,513
Casino Magic-Biloxi 14,822 14,724 42,285 44,793
Casino Magic-Neuquen 3,065 2,903 9,361 8,633
Corporate and Other 3,224 3,338 10,389 13,299
---------------------------------
Total costs and expenses 37,915 39,293 111,370 120,238
INCOME (LOSS) FROM OPERATIONS:
Casino Magic-BSL 4,788 4,041 14,295 13,128
Casino Magic-Biloxi 1,912 3,993 7,094 11,474
Casino Magic-Neuquen 1150 1,470 2,780 974
Corporate and Other (2,494) (1,279) (6,775) (9,942)
---------------------------------
Total income from operations 5,356 $8,225 $17,394 $15,634
=================================
______________________
</TABLE>
___________________
(1) Began operations September 30, 1992; expanded casino capacity December
31, 1992.
(2) Began operations June 5, 1993; expanded casino capacity December 16,
1993.
(3) Began operations on January 1, 1995.
(4) Includes management fees and royalty fees from Porto Carras which
began operations May 18, 1995. Equity in earnings with respect to Porto
Carras is reported as non-operating income.
(5) Corporate and Other includes the operations of Goldiggers through June
13, 1996.
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED):
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1995:
Consolidated revenues were $43.3 million for the third quarter of 1996, a
decrease of $4.2 million from third quarter 1995 revenues of $47.5.
Management believes the decline is attributable to intensified competition in
the Biloxi market, where Casino Magic-Biloxi is located, the construction
disruption caused by the development of a new buffet and kitchen at Casino
Magic-BSL and the loss of revenues due to the sale of the Goldiggers gaming
facility located in Deadwood, South Dakota, which the Company sold in June
1996. Casino Magic-Biloxi revenues declined $2.0 million or 11% in the third
quarter of 1996 as compared to the same period in 1995. Competitive pressures
will likely continue to effect Casino Magic-Biloxi revenues and operating
margins until such time as the planned Casino Magic-Biloxi hotel is completed.
Casino Magic-BSL revenues declined $0.8 million or 3.5% in the third quarter
of 1996 as compared to the same period in 1995. The lack of revenues in the
third quarter of 1996 from Goldiggers accounted for $0.8 million of the
decrease in the third quarter of 1996 compared to the same period in 1995.
Consolidated operating costs and expenses decreased $1.4 million, or 3.5%,
from $39.3 million in the third quarter of 1995 to $37.9 million in the third
quarter of 1996. Casino expenses declined $1.6 million from $18.0 million in
the third quarter of 1995 to $16.4 million in the third quarter of 1996. This
decline is primarily attributable to personnel reductions and the overall
decline in gaming activities at Casino Magic-Gulf Coast. Advertising and
marketing expenses declined $0.9 million in the third quarter of 1996 compared
to the same period of 1995. This decrease is the result of management's
decision to reduce marketing budgets and a reduction in management's emphasis
on air charter programs to attract customers. Preopening expense in the third
quarter of 1995 reflect a credit of $0.5 million due to an overaccrual in the
second quarter of 1995. There were no preopening expenses in the third
quarter of 1996.
Management's decision in the second quarter of 1996 to sell its gaming
facility Goldiggers caused a reduction in overall consolidated operating costs
and expenses of $0.8 million.
Consolidated income from operations decreased $2.7 million, or 34.9%, to $5.4
million in the third quarter of 1996 compared to $8.2 million in the third
quarter of 1995. Operating margins (income from operations as a percentage of
revenues) decreased from 17.3% to 12.5% over the comparative periods. Casino
Magic-BSL's operating margin grew from 18.1% to 22.2%, Casino Magic-Biloxi's
operating margin decreased from 21.3% to 11.4% and Casino Magic-Neuquen's
operating margin decreased from 33.6% to 27.3%. The increased margin at
Casino Magic-BSL is primarily due to cost-cutting measures. The decline in
Casino Magic-Biloxi's margin is due to the decline in revenues from loss in
market share along the Biloxi Strip. Casino Magic-Neuquen's decreased margin
is attributable to a decline in revenues. Management fees and royalties
declined in the third quarter of 1996 as compared to the same period in the
1995 by $0.6 million. Management fees and royalty income have minimal
operating costs associated with them and any decline in the revenues levels
have a significant impact on operating margins.
Consolidated other (income) expense (non-operating income and expenses)
increased $28.6 million, to $31.4 million in the third quarter of 1996,
compared to $2.8 million in the third quarter of 1995. Approximately $27.0
million of this increase is due to management's decision to write off its
investment in its gaming facility in Porto Carras, Greece, where the Company
has a 49% equity interest. Management's decision was based on recent results
from Porto Carras. In August 1996, Hyatt Corporation opened a new casino in
the City of Thessaloniki, Porto Carras' primary market and was required by the
Greek Government to charge an $8 admission tax compared to Porto Carras' $20
admission tax. Although the Company anticipated some revenue loss as a result
of this increased competition and
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED):
admission tax differential, the actual effects have been much greater than
anticipated and resulted in $2.0 million loss in operation at Porto Carras
for the month of September 1996. Despite new marketing and cost containment
efforts, these losses have continued; furthermore, the majority owner in Porto
Carras venture has been unwilling or unable to advance any funds to the
operation. Additionally, the majority owner has informed the Company that it
does not intend to operate a substantial portion of the Porto Carras resort
area, consisting of two hotels and amenities, during the 1997 season. These
factors, among others, have led to the Company's decision to write off its
investment in Porto Carras and will most likely lead to the closure or selling
for a nominal amount of Porto Carras in the near future. The Company
continues to explore its options, including a sale or liquidation of its share
of Porto Carras. Interest expense, net, increased by $0.6 million in the
third quarter of 1996 compared to the same period in 1995. This was due to
the increased debt from the issuance of the $115,000,000 Louisiana First
Mortgage Notes in August 1996.
The Company's effective tax rate for the third quarter of 1996 of
approximately (20.5)% is the result of an allowance against deferred tax
assets of approximately $3.4 million. This allowance reduces deferred tax
assets, which relate primarily to the Porto Carras write off, to their
estimated realizable value. The effective tax rate for the third quarter of
1995 of 37.5% is due to significant permanent tax differences.
The Company had a net loss of $20.7 million, or ($0.57) per share in the
quarter ended September 30, 1996, compared to net income of $3.4 million, or
$0.10 per share for the quarter ended September 30, 1995. The net decrease in
the net income (loss) for the quarter is attributable to the write off of
Porto Carras Casino S.A. and weaker operating margins for the comparative
periods.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995:
Consolidated revenues decreased $7.1 million, or 5.2%, to $128.8 million in
the first nine months of 1996, compared to $135.9 million in the same period
of 1995. Management believes that the decline in the 1996 revenues is
primarily attributable to competition on the Gulf Coast of Mississippi where
the majority of the Company's revenues are generated. Casino Magic-Biloxi
revenues declined $6.9 million, or 12.2%, to $49.4 million in the first nine
months of 1996, compared to $56.3 million in the first nine months of 1995.
This decline is the result primarily of competing hotel/casino operations on
either side of the Casino Magic-Biloxi with significantly greater amenities
than Casino Magic-Biloxi. Competitive pressures will likely continue to
effect Casino Magic-Biloxi revenues and operating margins until such time as
the planned Casino Magic-Biloxi hotel is completed. Casino Magic-BSL revenues
declined $3.0 million, or 4.5%, to $63.3 million in the first nine months of
1996, compared to $66.6 million in the first nine months of 1995, as a result
of increased competition in the Gulf Coast and the New Orleans, Louisiana
markets. The decline in revenues at Casino Magic-Gulf Coast was partially
offset by an increase in revenues at Casino Magic-Neuquen to $12.1 million in
the first nine months of 1996, compared to $9.6 million in the first nine
months of 1995. The majority of the increase in revenues at Casino
Magic-Neuquen is attributable to the increased slot revenues of $2.8 million.
Slot revenues increased in 1996 compared to the same period in 1995 due to an
increase in the number of slots at Casino Magic-Neuquen from 89 to 400 in May
1995. The remaining revenue increases at Casino Magic-Neuquen are due to
increased customer counts and their influence on table game revenues and food
and beverage revenues.
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED):
Consolidated operating costs and expenses decreased $8.8 million, or 7.4%,
from $120.2 million in the first nine months of 1995 to $111.4 million in the
first nine months of 1996. Casino expenses declined $3.6 million from $53.1
million in the first nine months of 1995 to $49.5 million in the first nine
months of 1996. This decline is primarily attributable to personnel
reductions and the overall decline in gaming activities at Casino Magic-Gulf
Coast. Food and Beverage expenses increased to $5.5 million in the first nine
months of 1996 from $5.0 million in the first nine months of 1995. This
increase is attributable to increased activity at Casino Magic-Neuquen. Other
operating costs and expenses increased to $1.9 million in the first nine
months of 1996 from $1.0 million during the same period in 1995. This
increase is due to the Casino Magic-Gulf Coast properties in-house operation
of their respective gift shops and the operations of a child-care facility at
Casino Magic-BSL. Advertising and marketing expenses decreased $3.4 million
in the first nine months of 1996 compared to the same period of 1995. This
decrease is the result of management's decision to reduce marketing budgets
and a reduction in management's emphasis on air charter programs to attract
customers. General and administrative expenses decreased $2.8 million, or
15.1% in the first nine months of 1996 compared to the same period of 1995.
The decline is a result of cost reduction measures implemented in early 1996,
including the elimination of several corporate officer positions. In future
periods this reduction will be partially offset due to additions in July 1996
to the Company's management of two key executive officer positions, Vice
President/Chief Operating Officer and Vice President/Construction and
Development.
Preopening expenses of $1.9 million (net of a $0.5 million overaccrual) were
incurred in the first nine months of 1995, due to the opening of Porto Carras
on May 18, 1995. There were no preopening expenses incurred in the first nine
months of 1996. Depreciation and amortization increased $1.8 million, or
16.7%, in the first nine months of 1996 as compared to the same period in
1995. This increase is due to the addition of tangible depreciable property,
the amortization of the investment costs in excess of equity interest in Porto
Carras which was amortized for 105 days in the first nine months of 1995 and
for a full nine months in 1996, and a change in 1996 in the method used to
amortize the Company's land option deposits over the life of the option.
Consolidated income from operations increased $1.8 million, or 7.4%, to $17.4
million in the first nine months of 1996 compared to $15.6 million in same
period of 1995. Operating margins (income from operations as a percentage of
revenues) grew from 11.5% to 13.5% over the comparative periods. Casino
Magic-BSL's operating margin grew from 19.7% to 22.4%, Casino Magic-Biloxi's
operating margin decreased from 20.4% to 14.4% and Casino Magic-Neuquen's
operating margin increased from 10.1% to 22.3%. The increased margin at
Casino Magic-BSL is primarily due to cost-cutting measures, the decline in
Casino Magic-Biloxi's margin is due to the significant decline in revenues
from loss in market share along the Biloxi Strip and Casino Magic-Neuquen's
increased margin is attributable to the increase in the number of slot
machines and the associated low cost revenues.
Consolidated other (income) expense (non-operating income and expenses)
increased $26.8 million from $11.8 million to $38.6 million over the
comparative periods. Approximately $27.0 million of this increase is due to
management's decision to write off its investment in its gaming facility in
Porto Carras, Greece, where the Company has a 49% equity interest.
Management's decision was based on recent results from Porto Carras. In
August 1996, Hyatt Corporation opened a new casino in the City of
Thessaloniki, Porto Carras's primary market and was required by the Greek
Government to charge an $8 admission tax compared to Porto Carras' $20
admission tax. Although the Company anticipated some revenue loss as a result
of this increased competition and admission tax differential, the actual
effects have been much greater than anticipated and resulted in $2.0 million
loss in operation at Porto Carras for the month of
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED):
September 1996. Despite new marketing and cost containment efforts, these
losses have continued; furthermore, the majority owner in Porto Carras venture
has been unwilling or unable to advance any funds to the operation.
Additionally, the majority owner has informed the Company that it does not
intend to operate a substantial portion of the Porto Carras resort area,
consisting of two hotels and amenities, during the 1997 season. These
factors, among others, have led to the Company's decision to write off its
investment in Porto Carras and will most likely lead to the closure or selling
for a nominal amount of Porto Carras in the near future. The Company
continues to explore its options, including a sale or liquidation of its share
of Porto Carras.
The Company's effective tax rate for the first nine months of 1996 of
approximately (18.1%) is the result of an allowance against deferred tax
assets of approximately $3.4 million. This allowance reduces deferred tax
assets, which relate primarily to the Porto Carras write off, to their
estimated realizable value. The effective tax rate for the third quarter of
1995 of 44.9% is due to significant permanent tax differences.
The Company had a net loss of $17.4 million, or ($0.48) per share in the
current year's first nine months as compared to net income of $2.1 million, or
$0.06 per share in the 1995 period. The decrease in the net income (loss) for
the first nine months is attributable to the write off of Porto Carras Casino
S.A. and weaker operating margins for the comparative periods.
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had unrestricted cash and marketable
securities of $16.7 million compared to cash and marketable securities of
$30.8 million at December 31, 1995. In addition, the Company had $37.8
million in restricted cash relating to the Louisiana First Mortgage Notes (see
discussion of offering below) for the construction of Casino Magic-Bossier.
For the nine months ended September 30, 1996, the Company generated $7.0
million cash flow from operating activities and received $ 121.0 million of
proceeds from the issuance of a long term note payables. The Company spent
$57.1 million for acquisitions of property, equipment and other long-term
assets and reduced long term debt by 47.4 million.
The Company expended approximately $11.2 million in capital improvements at
Casino Magic-Gulf Coast during 1996, plans additional investments at Casino
Magic-Gulf Coast, subject to the availability of financing.
The Company is pursuing gaming opportunities outside of Mississippi, primarily
in Indiana.
In May 1996, Casino Magic, through its wholly-owned subsidiary, Jefferson Corp
acquired Crescent City, for $50 million plus the assumption of up to $5.7
million in equipment liabilities. Jefferson Corp paid $15 million in cash at
closing and caused Crescent City to issue $35 million of 11.5% secured, three
year Louisiana Notes. Crescent City, which was the subject of a plan of
reorganization under Chapter 11 of the U.S. Bankruptcy Code, at the time of
the acquisition owned the Crescent City Riverboat, gaming and related
equipment and surveillance equipment and a license to conduct riverboat gaming
operations in Louisiana. Crescent City emerged from the bankruptcy
proceedings and the concurrent acquisition by Jefferson Corp. renamed Casino
Magic of Louisiana, Corp. The Crescent City Riverboat is one of the largest
riverboats in the United States and could not be used at Casino Magic-Bossier
City because of the Crescent City Riverboat's size. Therefore, the Company
purchased a casino riverboat (the "Bossier Riverboat") for use at Casino
Magic-Bossier City for $20 million. The intends to sell the Crescent City
Riverboat and the proceeds will be used to assist in the funding of Casino
Magic-Bossier City. The Company can give no assurances that it will be able
to sell the Crescent City Riverboat on acceptable terms or in a timely manner.
The assets acquired as a part of the acquisition of Louisiana Corp., which
included gaming, surveillance and related equipment, are being used at Casino
Magic-Bossier City.
To fund the initial development of Casino Magic-Bossier City, on August 22,
1996 Louisiana Corp. sold $115.0 million aggregate principal amount of 13%
First Mortgage Notes due in 2003 with contingent interest. Contingent
Interest is payable on the Louisiana First Mortgage Notes, on each interest
payment date, in an aggregate amount equal to 5% of Louisiana Corp. Adjusted
Consolidated Cash Flow (as defined in the Louisiana Indenture) for the
six-month period ending on June 30 or December 31 (each, a "Semiannual
Period") most recently completed prior to such interest payment date; provided
that no Contingent Interest is payable with respect to any period prior to the
Commencement Date (as defined in the Louisiana Indenture). Payment of all or
a portion of any installment of Contingent Interest may be deferred, at the
option of Louisiana Corp., if, and only to the extent that, (i) the payment of
such portion of Contingent Interest will cause the Company's Adjusted Fixed
Charge Coverage Ratio (as defined in the Louisiana Indenture) for Louisiana
Corp.'s most recently completed Reference Period prior to such interest
payment date to be less than 1.5 to 1.0 on a pro forma basis after giving
effect to the assumed payment of such Contingent Interest and (ii) the
principal amount of the Louisiana First Mortgage Notes corresponding to such
Contingent Interest has not then matured and become due and payable at stated
maturity, upon acceleration, upon redemption, upon maturity of a repurchase
obligation or otherwise). The aggregate amount of Contingent Interest payable
in any Semiannual Period will be reduced pro rata for reductions in the
outstanding principal amount of notes prior to the close of business on the
record date immediately preceding such payment of Contingent Interest.
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED):
The Louisiana First Mortgage Notes are governed by the Louisiana Indenture
which contains certain covenants that limit the ability of Louisiana Corp. and
its subsidiaries to, among other things, incur additional Indebtedness and
issue preferred stock, pay dividends, make investments or make other
restricted payments, incur liens, enter into mergers or consolidations, enter
into transactions with affiliates or sell assets.
Excluding amounts expended in May 1996 in connection with Jefferson Corp.'s
acquisition of Louisiana Corp., the total project cost for Casino
Magic-Bossier City is estimated to be $71.4 million which includes: (i)
approximately $13.6 million expended for the acquisition of the 23-acre site,
(ii) $20.0 million expended for the acquisition of the Bossier Riverboat, and
(iii) $37.8 million as the amended development and construction budget for the
buildings and other improvements at Casino Magic-Bossier City (including
approximately $8.4 million of preopening costs, opening bankroll and
additional gaming equipment but excluding estimated fees and expenses and
$11.7 million aggregate remaining reserves for completion costs, operating
expenses and fixed interest). At the closing of the Louisiana First Mortgage
Notes, approximately $45.2 million of the net proceeds thereof were deposited
in collateral accounts (the "Cash Collateral Accounts") to be disbursed only
in accordance with the Cash Collateral and Disbursement Agreement executed at
the closing of the Louisiana First Mortgage Notes. As of November 14, 1996,
all of the originally deposited amounts, plus accrued interest thereon,
remained in the Interest Reserve Account (intended to fund the first payment
of fixed interest on the Louisiana First Mortgage Notes in February 1997) and
in the Operating Reserve Account (intended to fund operating losses, if any,
occurring during the period of operations with temporary mooring, boarding and
parking facilities which commenced October 4, 1996). As of October 18, 1996,
the Company had finalized all plans and specifications for Casino
Magic-Bossier City, had agreed upon a guaranteed maximum price of $19.4
million with its general contractor for completion of Casino Magic-Bossier
City in accordance with such plans (although there can be no assurance that
there will not be change orders to certain aspects of the project as
construction continues that could increase the cost to an extent) and amended
the construction budget to an extent that will require, in addition to the
amount deposited in the Construction Disbursement Account, an additional $3.8
million to be funded from the Completion Reserve Account (established with an
original deposit of $5.0 million to fund cost overruns arising in connection
with developing and constructing Casino Magic-Bossier City).
The Company opened Casino Magic-Bossier City on October 4, 1996 using a
temporary boarding facility. After the initial opening, the Company's plans
for the development of Casino Magic-Bossier City are divided into two phases.
The first phase includes 30,000 square feet of floating dockside casino space
that has 985 slots and 44 table games. The plan also includes 1,550 parking
spaces together with an entertainment and food and
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED):
beverage pavilion. The second phase plans includes the construction of a
60,000 square feet entertainment facility and a 400-room convention hotel and
related amenities, including restaurants, banquet space, a theater, a swimming
pool, a health club and a child-care facility. The development and
construction of the second phase improvements are largely dependent upon
receipt of proceeds from a future sale of the Crescent City Riverboat and
future operating cash flow of Casino Magic-Bossier City and no assurances can
be given that such funds will become available or that such hotel and related
facilities will ever be developed.
At September 30, 1996, management determined that its 49% equity investment in
Porto Carras Casino S.A., and notes and accounts receivable relating to unpaid
management fees and royalties, was impaired. Because of this impairment
management wrote off its investment in its gaming facility in Porto Carras,
Greece, where the Company has a 49% equity interest and all unpaid notes and
receivables. This charge included $16.0 million which represents the
Company's investment in Porto Carras, $6.9 million in outstanding receivables
and other assets and a estimated $4.0 million shut down reserve. Management's
decision was based on recent results from the Company's Greek gaming
facilities. In September 1996, Hyatt Corporation opened a new casino in the
City of Thessaloniki, Porto Carras's primary market and was required by the
Greek Government to charge an $8 admission tax compared to Porto Carras' $20
admission tax. Although the Company anticipated some revenue loss as a result
of this increased competition and admission fee differential, the actual
effects have been much greater than anticipated and resulted in $2.0 million
loss in operation at Porto Carras for the month of September 1996. Despite
new marketing and cost containment efforts, these losses have continued;
furthermore, the majority owner in Porto Carras venture has been unwilling or
unable to advance any funds to the operation. Additionally, the majority
owner has informed the Company that it does not intend to operate a
substantial portion of the Porto Carras resort area, consisting of two hotels
and amenities, during the 1997 season. These factors, among others, have led
to the Company's decision to write off its investment in Porto Carras and will
most likely lead to the closure or selling for a nomimal amount of Porto
Carras in the near future. The Company continues to explore its options,
including a sale or liquidation of its share of Porto Carras. Management
believes that some additional funding for the closure of Porto Carras may be
required. Management's belief is that the additional funding will not exceed
$4.0 million.
The Company plans to construct a hotel at Casino Magic-Biloxi on top of the
eight-story parking garage adjacent to the casino that will consist of
approximately 380 rooms, including 85 suites. The hotel project has an
estimated cost of $27 million. Construction on the hotel has commenced and
completion is estimated for late 1997 or early 1998. Currently the hotel
construction costs are initially anticipated to be funded out of the cash flow
of the Company. The construction of the hotel based solely on the cash flow
of the Company will impede timely completion of the construction project. In
addition to the planned Biloxi hotel, the Company is considering a barge
repositioning project has an estimated cost of $15 million. The plans to
reposition the floating gaming facility at Casino Magic-Biloxi including
providing the casino with a new facade. The repositioning of the gaming
facility and the new facade will provide Casino Magic-Biloxi with an enhanced
visual appeal from the Biloxi Strip. In future periods the Company may
determine that additional debt or equity financing will be necessary to
complete the hotel and barge repositioning at Casino Magic-Biloxi. However,
until such time, the cash flow of the Company will be used to begin
construction on the hotel. No assurances can be given that such funds will
become available or that such hotel and related facilities will ever be
developed.
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED):
The Company has entered into discussions concerning the sale of Casino
Magic-Neuquen, and has retained an investment banking firm to assist in the
sale of Casino Magic-Neuquen. The Company anticipates if a sale is completed,
that the sale proceeds would be used to further the development of Casino
Magic-Gulf Coast, particularly Casino Magic-Biloxi. No assurances can be
given that Casino Magic Neuquen will be sold and the sale proceeds will become
available for the development of amenities at Casino Magic-Gulf Coast.
The Company plans to continue the further development of Casino Magic-BSL into
a destination resort. Construction is underway on a championship golf course
designed by Palmer Course Design Company. The estimated total cost of the
golf course is $12 million, of which approximately $8.5 million has been
expended through September 30, 1996. The opening of the golf course is
anticipated for early 1997. The golf course construction has been and will
continue to be funded out of the Company's cash flow.
In May 1995, the Company entered into an agreement with Lakes Regional
Greyhound Park ("LRGP"). Under the terms of the agreement the parties intend
to form an entity to pursue a gaming development at LRGP's pari-mutual track
in Belmont, New Hampshire. The entity will be equally owned by the Company
and LRGP and the Company will manage gaming operations. Under the agreement
the Company is obligated to provide up to $4 million in funding to the entity,
of which the payment of $3 million is subject to certain contingencies,
including the passage of legislation permitting gaming at racetracks in New
Hampshire.
At September 30, 1996, the Company has, included in other assets, $2.1 million
which has been paid for options to purchase land. The options expire at
various times through the year 2000. The aggregate exercise price to purchase
the underlying properties for options which are due to expire in 1997 is $1.3
million, and expiring beyond 1997 is $15 million. The Company's intent to
excise these options will be based on the likelihood of obtaining a gaming
license for the site at a future date.
In early 1996, the Company, through a wholly-owned subsidiary, entered into a
consulting agreement with Sisseton-Wahpeton Dakota Nation ("Sisseton"). The
agreement specifies that the Company will provide consulting services to
Sisseton during the development and opening of a hotel and casino facility, on
Tribal land, for a fee payable after the opening of the facility. The
agreement also specifies that the Company will provide consulting services to
Sisseton after the opening of the facility, which is anticipated in late
November 1996, for a period of two years and includes unlimited one year
extensions. The fee for these services is based on gross revenues of the
hotel and casino facility. This agreement replaces all previous agreements
entered into between the Company and Sisseton.
In June 1996, Sisseton received a $17,500,000 loan for the construction of its
planned hotel and casino development from a consortium of lenders, of which
the Company, through a wholly-owned subsidiary, participated in the loan for
up to $5 million, or a 28.6% participation. On July 11, 1996 the Company
received payment in full of all outstanding amounts under a bridge loan
agreement with Sisseton. The Company's participation in $17.5 million loan
through November 12, 1996 is approximately $4.3 million.
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED):
The Company commenced operations in 1995 outside the United States becoming
subject to certain risks including foreign currency exchange, repatriation of
earnings and profits, and adverse foreign tax treatment. In addition, the
Company will incur the general business risk associated with operating in
foreign countries where culture and business practices may vary significantly
from that in the United States. Such risks could have a material impact on
the operating results and liquidity of the Company.
On June 13, 1996, the Company sold the capital stock of Atlantic-Pacific
Corp., which operates "Goldiggers," a small casino-hotel in Deadwood, South
Dakota, with approximately 8,500 square feet of gaming area and nine hotel
rooms, to Royal Casino Group, Inc. ("RCG"), an unaffiliated party whose common
stock trades on the NASDAQ market (ticker symbol WINZ.) Goldiggers generated
revenues of $754,082 and a pre-tax operating cash flow deficit of
approximately $210,028 during the first six months of 1996 and, except for its
negative cash flow impact, had not been regarded by the Company as material to
its operations for several years. In consideration for the sale of such
stock, the Company received shares of RCG Series A Convertible Preferred Stock
and warrants to acquire shares of RCG common stock.
The Company will have a significant need for cash in 1996 and beyond in order
to continue its planned pursuit of gaming opportunities and the continued
development of its existing properties. The Company believes that cash and
marketable securities at September 30, 1996, and cash flows from operations
will be sufficient to service its operating and debt service requirements,
including the completion of the golf course at Casino Magic-BSL, the hotel at
Casino Magic-Biloxi and the expansion into the Bossier City, Louisiana market
through, at least, the next twelve months, but are not sufficient to
reposition and renovate the Casino Magic-Biloxi gaming facility or to engage
in any other development activities, without additional debt or equity
financing. Under the terms of the Indenture of the Finance Notes, Casino Magic
Corp., Mardi Gras Casino Corp., Biloxi Casino Corp. and Casino Magic Finance
Corp. have certain restrictions relative to additional borrowings and
guarantees. Jefferson Corp and Louisiana Corp. have certain restrictions
relative to additional borrowings and cash flow under the terms of the
Louisiana Indenture. Although there are no assurances that the Company will
be able to raise additional debt or equity financing on acceptable terms, the
Company believes it possesses the ability to raise such additional financing
to develop the Company's planned gaming properties if the need arises or defer
these planned developments until such time as financing or cash is available.
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 20, 1994, International Gaming Network, Inc.,
commenced litigation in Federal Court against Casino Magic Corp. by filing a
Complaint with the U.S. District Court, District of South Dakota, Southern
Division. Plaintiff, in that litigation, has alleged, among other things,
that the Company intentionally and improperly interfered with Plaintiff's
existing and perspective contractual, economic or business relationship with
the Sisseton-Wahpeton Sioux Tribe, and seeks damages of $28,292,102. In April
1994, the Company entered into an agreement with the Tribe to develop and
manage a gaming casino on tribal lands in northeastern South Dakota. (The
Company has since canceled the management agreement and entered into a
consulting agreement with the Tribe.) On November 9, 1994, the Company
interposed an answer denying the allegations contained in Plaintiff's
estimated range of potential loss, if any, which may be sustained by the
Company in connection with this litigation, but believes the lawsuit is
meritless and intends to vigorously defend the claim. The United States
District Court, on October 7, 1996, filed a Judgment of Dismissal, dismissing
all of Plaintiff's claims, pursuant to a Motion for Summary Judgment which had
been brought by Casino Magic. Pursuant to a Notice of Appeal dated November
5, 1996, the Plaintiff has appealed the dismissal of its claims to the United
States Court of Appeals for the Eight Circuit. The Company can furnish no
opinion at this time concerning likelihood of a favorable outcome or an
estimation range or potential loss, if any, which may be sustained by the
Company in connection with this litigation, but believes the lawsuit is
meritless and intends to vigorously defend the claim.
Reference is made to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 and Form 10-Q for the quarter ended March 31, 1996 and
June 30, 1996 on file with the Securities and Exchange Commission. During the
quarter ended September 30, 1996 the Company was not party to any newly
instituted legal proceedings and there have been no other material
developments during such period to existing legal proceedings.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
4.1(1) Form of Casino Magic of Louisiana Corp.'s ("Louisiana Corp") 13%
First Mortgage Notes due 2003 with Contingent Interest in the aggregate
principal amount of $115,000,000.
4.2(1) Form of Guarantee issued on August 22, 1996 by Jefferson Casino
Corporation.
4.3(1) Indenture dated as of August 22, 1996 by and among Louisiana Corp,
First Union Bank of Connecticut, as Trustee, and the Guarantors named therein,
for Louisiana Corp.'s $115,000,000 of 13% First Mortgage Notes due 2003 with
contingent interest.
4.4(1) Registration Rights Agreement dated as of August 22, 1996 by and
among Louisiana Corp, the Guarantors named therein and the Initial Purchasers
named therein.
4.5(1) Cash Collateral and Disbursement Agreement dated August 22, 1996 by
and among Louisiana Corp, First Union Bank of Connecticut, as Trustee, and
First National Bank of Commerce, as disbursement agent.
4.6(1) Security Agreement dated as of August 22, 1996 by and between First
Union Bank of Connecticut, as Trustee, and Louisiana Corp, as Guarantor.
4.7(1) Stock Pledge and Security Agreement dated as of August 22, 1996 by
and between First Union Bank of Connecticut, as Trustee, and Jefferson Casino
Corporation, as Pledgor.
4.8(1) Security Agreements dated as of August 22, 1996 by and between
First Union Bank of Connecticut, as Trustee, and Jefferson Casino Corporation.
4.9(1) First Preferred Ship Mortgages dated as of August 22, 1996 executed
in favor of First Union Bank of Connecticut, as Trustee, by Louisiana Corp.
4.10(1) First Preferred Ship Mortgages dated as of August 22, 1996
executed in favor of First Union Bank of Connecticut, as Trustee, by Louisiana
Corp.
4.11(1) Mortgage of Louisiana Corp dated as of August 22, 1996 executed in
favor of First Union Bank of Connecticut, as Trustee.
4.12(1) Cash Collateral and Disbursement Agreement.
4.13(1) Form of Accounts Pledge Agreement.
4.14(1) Note Purchase Agreement dated August 16, 1996.
4.15(1) Collateral Assignment dated August 22, 1996.
27. Financial Data Schedule (filed electronically only).
__________
(1) Incorporated by reference to Casino Magic of Louisiana Corp.
Registration Statement (No. 333-14535) on Form s-4 dated October 21, 1996.
(b) Reports on Form 8-K:
Form 8-K filed on July 3, 1996, relating to a press release announcing
the Company's consent solicitation and proposed senior debt offering of
$145,000,000. This debt amount was issued in an alternative method on August
22, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CASINO MAGIC CORP.
Registrant
Date: NOVEMBER 14, 1996 /S/ JAMES E. ERNST
JAMES E. ERNST, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
Date: NOVEMBER 14, 1996 /S/ JAY S. OSMAN
JAY S. OSMAN, CHIEF FINANCIAL OFFICER
AND TREASURER (PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER
30, 1996, CONSOLIDATED FINANCIAL STATEMENTS OF CASINO MAGIC CORP AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
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<SECURITIES> 5767
<RECEIVABLES> 4346245
<ALLOWANCES> 0
<INVENTORY> 583672
<CURRENT-ASSETS> 71067097
<PP&E> 287751598
<DEPRECIATION> 38551633
<TOTAL-ASSETS> 373623083
<CURRENT-LIABILITIES> 34400050
<BONDS> 258615025
0
0
<COMMON> 355351
<OTHER-SE> 77701849
<TOTAL-LIABILITY-AND-EQUITY> 373623083
<SALES> 128763910
<TOTAL-REVENUES> 128763910
<CGS> 0
<TOTAL-COSTS> 111370466
<OTHER-EXPENSES> 26358683
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<INTEREST-EXPENSE> 12250572
<INCOME-PRETAX> (21215811)
<INCOME-TAX> (3836505)
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<NET-INCOME> (17379306)
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<EPS-DILUTED> (0.49)
</TABLE>
