UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO.1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
-------------
[ ] 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) 466-8099
------------------
(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 August 13, 1997
========================================================================
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
INDEX to Form 10-Q/A
Amendment No. 1
PART I FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements.
Condensed Consolidated Statements of Operations
For the six months ended June 30, 1997 and 1996 1
Condensed Consolidated Statements of Operations -
For the three months ended June 30, 1997 and 1996 2
Condensed Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Cash Flows -
For the six months ended June 30, 1997 and 1996 4
Notes to Condensed Consolidated Financial Statements 5-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-15
PART II OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Default Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16-17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
<PAGE>
PART I - FINANCIAL INFORMATION
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) SIX MONTHS ENDED
JUNE 30,
1997 1996
REVENUES: ----------- -----------
Casino $ 123,731,151 $ 78,274,563
Food and beverage 4,986,717 3,178,715
Rooms 775,014 937,566
Royalty and management fees - 2,130,007
Other operating income 2,245,541 971,824
------------- ------------
Total revenues 131,738,423 85,492,675
------------- ------------
COSTS AND EXPENSES:
Casino 58,241,241 33,042,439
Food and beverage 6,597,024 3,532,947
Rooms 368,665 531,431
Other operating costs and expenses 2,308,621 1,161,721
Advertising and marketing 21,405,322 9,922,912
General and administrative 14,080,585 9,866,081
Property operation, maintenance
and energy cost 6,044,447 3,136,380
Rents, property taxes and insurance 3,959,568 2,886,585
Development expenses 455,132 989,724
Depreciation and amortization 10,353,382 8,384,449
------------- ------------
Total costs and expenses 123,813,987 73,454,669
------------- ------------
INCOME FROM OPERATIONS 7,924,436 12,038,006
------------- ------------
OTHER (INCOME) EXPENSE:
Equity (income) loss from
unconsolidated subsidiary 229,061 (428,735)
Interest expense, net 15,749,566 7,709,976
Other (1,427,177) (51,532)
------------- ------------
Total other expense 14,551,450 7,229,709
------------- ------------
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTERESTS (6,627,014) 4,808,297
INCOME TAX EXPENSE (BENEFIT) (1,935,000) 1,504,872
MINORITY INTEREST 201,512 -
------------- ------------
NET INCOME (LOSS) $ (4,893,526) $ 3,303,425
============= ============
NET INCOME (LOSS) PER COMMON SHARE:
Primary $ (0.14) $ 0.09
============= ============
Fully-diluted $ (0.14) $ 0.09
============== ============
AVERAGE SHARES AND EQUIVALENTS OUTSTANDING:
Primary 35,637,083 36,526,938
============= ============
Fully-diluted 35,637,083 36,648,715
============= ============
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
1
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) THREE MONTHS ENDED
JUNE 30,
1997 1996
REVENUES: -------- --------
Casino $ 62,057,468 $ 38,514,881
Food and beverage 2,479,674 1,626,879
Rooms 227,583 499,883
Royalty and management fees - 1,205,479
Other operating income 1,192,820 520,986
------------ ------------
Total revenues 65,957,545 42,368,108
------------ ------------
COSTS AND EXPENSES:
Casino 31,705,786 16,642,453
Food and beverage 1,707,142 1,251,708
Rooms (57,582) 269,871
Other operating costs and expenses 1,153,665 571,940
Advertising and marketing 8,250,625 5,104,770
General and administrative 6,763,040 4,410,679
Property operation, maintenance
and energy cost 3,034,439 1,592,326
Rents, property taxes and insurance 1,986,566 1,424,803
Development expenses 172,843 489,463
Depreciation and amortization 5,313,728 4,137,222
------------ ------------
Total costs and expenses 60,030,252 35,895,235
------------ ------------
INCOME FROM OPERATIONS 5,927,293 6,472,873
------------ ------------
OTHER (INCOME) EXPENSE:
Equity loss from unconsolidated
Subsidiaries 113,937 169,414
Interest expense, net 8,069,102 3,889,461
Other (1,235,441) (42,336)
------------ ------------
Total other expense 6,947,598 4,016,539
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST: (1,020,305) 2,456,334
INCOME TAX EXPENSE (BENEFIT) - 796,583
MINORITY INTEREST 201,512 -
------------ ------------
NET INCOME (LOSS) $ (1,221,817) $ 1,659,751
============ ============
NET INCOME (LOSS) PER COMMON SHARE:
Primary $ (0.03) $ 0.05
============ ============
Fully-diluted $ (0.03) $ 0.05
============ ============
AVERAGE SHARES AND EQUIVALENTS OUTSTANDING:
Primary 35,637,083 36,872,546
============ ============
Fully-diluted 35,637,083 36,883,341
============ ============
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
JUNE 30 DECEMBER 31,
(UNAUDITED) 1997 1996 (*)
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 29,261,749 $ 17,561,512
Other current assets 10,133,609 24,394,985
------------- ------------
Total current assets 39,395,358 41,956,497
------------- ------------
PROPERTY AND EQUIPMENT, NET 251,535,343 243,692,571
------------- -------------
OTHER LONG-TERM ASSETS:
Investment in unconsolidated subsidiaries 835,433 957,831
Deferred gaming license cost 38,849,671 38,337,333
Foreign casino concession agreement, net 9,014,503 9,488,950
Other long-term assets 27,393,152 36,168,509
------------- ------------
Total other long-term assets 76,092,759 84,952,623
------------- ------------
$ 367,023,460 $ 370,601,691
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES $ 47,004,730 $ 48,448,985
------------- ------------
OTHER LONG-TERM LIABILITIES 266,760 266,761
------------- ------------
LONG-TERM DEBT, NET OF CURRENT MATURITIES 256,042,583 258,261,231
MINORITY INTEREST 4,801,888 -
------------- ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $0.01 par, 50,000,000 shares
authorized, 35,637,083 issued and
outstanding at June 30, 1997 and
December 31, 1996 356,371 356,371
Undesignated stock, 2,500,000 shares
authorized, none issued - -
Additional paid-in capital 67,123,707 67,123,702
Retained earnings (7,406,594) (2,513,062)
Currency translation adjustments - -
Less unearned compensation (377,829) (492,141)
Unrealized holding loss on securities (788,156) (850,156)
------------- ------------
Total shareholders' equity 58,907,499 63,624,714
------------- ------------
$367,023,460 $370,601,691
============= ============
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
* DERIVED FROM AUDITED FINANCIAL STATEMENTS
3
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) SIX MONTHS ENDED
JUNE 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES: ------------ ------------
Net income (loss) $ (4,893,526) $ 3,303,425
Adjustments for non-cash charges 9,505,514 8,596,273
Changes in assets and liabilities 6,624,971 (6,720,168)
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 11,236,959 5,179,530
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (20,409,274) (9,217,492)
Acquisition of gaming license - (15,000,000)
Proceeds from sale of subsidiary and
Property equipment 8,174,586 -
Other, net 290,874 (108,099)
----------- ------------
NET CASH USED IN INVESTING ACTIVITIES (11,943,814) (24,325,591)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes
payable and long-term debt 6,350,000 4,343,749
Principal payments on notes payable
and long-term debt (10,842,560) (4,118,606)
Net proceeds from sale of common stock - -
Other - 123,391
----------- ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES (4,492,560) 348,534
----------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (5,199,415) (18,797,527)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 34,546,164 30,755,698
----------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 29,346,749 $ 11,958,171
============ ===========
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID DURING THE PERIOD FOR:
Interest (net of amount capitalized) $ 16,708,321 $ 7,197,402
Income taxes (net of refunds) (6,382,324) -
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 1,931,566 1,198,172
Property and equipment financed with
long-term debt 18,079 46,416,570
Gaming license acquisition financed
with long-term debt - 1,042,070
Common stock granted to officers - 135,938
Reclassification of long-term liabilities
to accrued expenses 170,029 250,000
Acquisition of securities available-for-sale
through sale of subsidiary - 1,198,052
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE THREE AND SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of Casino Magic
Corp. and its subsidiaries ("the Company"). All significant inter-company
accounts and transactions have been eliminated.
The Company conducts casino gaming operations in Bay St. Louis, Mississippi
("Casino Magic-BSL"), Biloxi, Mississippi ("Casino Magic-Biloxi"), Bossier
City, Louisiana ("Casino Magic-Bossier"), and through a 51% owned subsidiary,
in the Argentina Province of Neuquen in the cities of Neuquen City and San
Martin de los Andes ("Casino Magic-Neuquen").
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, 1996 and Form 10-Q for March 31, 1997.
Certain reclassifications have been made to 1996 amounts to conform with the
June 30, 1997 presentation.
2. LONG TERM DEBT:
Long-term debt, including capital lease obligations, consists of the
following:
June 30, December 31,
1997 1996
(unaudited)
------------- ------------
Notes payable, bank (a) $ 9,572,353 $ 9,585,130
Equipment contracts (b) 2,465,702 622,274
Notes payable, land (c) 3,426,539 4,678,401
Capital lease obligations 838,708 308,514
Louisiana First Mortgage Notes (d) 115,000,000 115,000,000
First Mortgage Notes (e) 135,000,000 135,000,000
Unamortized original
issue discount (2,100,905) (2,284,450)
-------------- --------------
264,202,397 262,909,869
Less current maturities (8,159,814) (4,648,638)
------------- -------------
$ 256,042,583 $ 258,261,231
============== =============
5
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE THREE AND SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 IS UNAUDITED)
(a) Consists of four 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; thereafter, monthly payments
of $63,200 including principal and interest based on a 60 month amortization
through February 2000. The promissory note bears interest at prime plus 1%
(9.50% at June 30, 1997) throughout the life of the note with a final payment
of unpaid balance due February 2000. (ii) $1,700,000 note collateralized by
gaming equipment. The note is payable in six monthly payments, based on a
twenty-four month amortization. Monthly payments of $70,833, including
interest at prime plus 2% (10.5% at June 30, 1997) with a final payment of
unpaid balance due November 1997. (iii) $2,500,000 line of credit due March
1998. Interest is payable quarterly at prime plus .25% (8.75% at June 30,
1997). (iv) $3,850,000 collateralized by gaming equipment. The note is
payable in twelve quarterly principal payments of $385,000, excluding interest
at prime plus .25% (8.75% at June 30, 1997).
(b) Consists of five notes payable collateralized by equipment. The detail
of these notes is as follows: (i) $1,075,740 note payable in monthly payments
of $12,150, including interest at 8.25% through December 1999. (ii) $946,004
note payable in monthly payments of $4,540, including interest at 11.25%
through March 1998. (iii) $442,356 note payable in monthly installments of
$13,923 including interest at 8.30% through September 1999. (iv) $111,165 note
payable in monthly installments of $3,583 including interest at 9.9% through
December 1999. (v) $188,700 note payable in monthly installments of $623
including interest at 19.44% through July 1998.
(c) Consists of six notes payable for land acquisitions. The detail of the
notes is as follows: (i)$593,400 note payable in monthly installments of
$14,959 including interest at prime plus 2% (11.0% at June 30, 1997), through
April 1999. (ii)$1,000,000 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. (iv) $300,000 note payable in monthly installment of $3,965 including
interest at 10% through February 2003. (v) $500,000 note pyable in monthly
installments of $6,470 including interest at 9.5% through June 2004. (vi)
$70,000 note payable in monthly installments of $925 including interest at 10%
through March 2003.
(d) On August 22, 1996, a wholly owned subsidiary of the Company, Casino
Magic-Bossier City, sold $115,000,000 aggregate principal amount of 13%, First
Mortgage Notes due in 2003 ("Series A Notes") with contingent interest. On
July 22, 1997, Casino Magic-Bossier City commenced an offer to exchange up to
an aggregate of $115,000,000 principal amount of 13% Series B First Mortgage
Notes due 2003 with Contingent Interest (the "Series B Notes" and, together
with the Series A Notes, the "Louisiana First Mortgage Notes") for such Series
A Notes under in effective registration statement filed under the Securities
Act of 1933. The terms of the Series B Notes are identical to those of the
Series A Notes.
6
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE THREE AND SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 IS UNAUDITED)
Contingent Interest is payable on the Louisiana First Mortgage Notes, on each
interest payment date, in an aggregate amount equal to 5% of Casino
Magic-Bossier City's Adjusted Consolidated Cash Flow (as defined in the
Louisiana First Mortgage Notes Indenture ("Louisiana Indenture") for the
Accrual Period (as defined in the Louisiana Indenture, but generally a six
month period) last 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 Casino Magic-Bossier City, if, and only to the extent that, (i) the
payment of such portion of Contingent Interest will cause Casino Magic-Bossier
City's Adjusted Fixed Charge Coverage Ratio (as defined in the Louisiana
Indenture) for Casino Magic-Bossier City'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.
No contingent interest or management fees were paid in the first six months of
1997. Additionally, contingent interest and management fees were accrued in
the first six months of 1997, in the amount of $40,616 and $81,233,
respectively. No contingent interest and management fees are due based upon
certain ratios which were not met during the six months ended June 30, 1997.
The Series A Notes were issued to consolidate the funding necessary to develop
Casino Magic-Bossier City project. This included the repayment of the
Louisiana Land Note and the Louisiana Notes.
The Louisiana First Mortgage Notes are secured by a first priority security
interest, subject to permitted liens, in substantially all of the existing and
future assets of Bossier City, including the Bossier Riverboat and
substantially all of the other assets that comprise Casino Magic-Bossier
City, the Crescent City Riverboat, and an assignment of the construction
contracts pursuant to which Casino Magic-Bossier City was being constructed.
The Jefferson Guarantee will be secured by a pledge of all of the capital
stock of Jefferson Casino Corp., a wholly owned subsidiary of the Company.
The Louisiana Indenture permits Casino Magic-Bossier City to sell secured
assets, including the Crescent City Riverboat, so long as the net proceeds of
that sale are used, or contractually committed to be used, to make capital
improvements or acquire non-current assets, within 180 days after receipt of
the proceeds, at the Casino Magic-Bossier City casino property in connection
with its gaming and related business operations. Otherwise, the net proceeds
from such an asset sale must be used to offer to redeem Louisiana First
Mortgage Note at 101% of the principal amount thereof.
7
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE THREE AND SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 IS UNAUDITED)
The Louisiana First Mortgage Notes are governed by the Louisiana Indenture.
The Louisiana Indenture pursuant to which the Louisiana First Mortgage Notes
have been issued contains certain covenants that will limit the ability of
Casino Magic-Bossier City 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.
(e) 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 the
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 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 Casino Magic-BSL, Casino
Magic-Biloxi and Finance Corp., which is not discharged within 60 days after
entry, and the default by the Company or Casino Magic-BSL, Casino Magic-Biloxi
and Finance Corp. 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 Saint Louis and
Biloxi along with the accounts receivable, inventories, property and
equipment, property held for development and deposits of Casino Magic-BSL and
Casino Magic-Biloxi. The book basis of these pledged assets is approximately
$160,000,000 at June 30, 1997. The effective interest rate of the Notes is
13.06%. The proceeds from the Notes were used to pay off substantially all
outstanding obligations at October 14, 1993.
8
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE THREE AND SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 IS UNAUDITED)
Maturities of the Company's long-term debt, including capital lease
obligations, as of June 30, 1997, are as follows:
Year ending June 30,
1998 $ 8,159,814
1999 5,854,240
2000 1,407,714
2001 135,276,488
2002 257,047
Thereafter 115,347,999
-------------
266,303,302
Unamortized original issue
discount (2,100,905)
--------------
$ 264,202,397
==============
3 SALE OF INTEREST IN SUBSIDIARY
On June 1, 1997 the Company sold a 49% interest in a wholly-owned subsidiary,
Casino Magic Neuquen S.A., for $7.0 million. The Company retained a
controlling interest in Casino Magic-Neuquen and manages its two facilities
located in Neuquen City and San Martin de Los Andes, Argentina for a fee equal
to two percent of Casino Magic-Neuquen's gross monthly revenues.
4. EARNING PER SHARE:
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128 (FAS 128), "Earnings Per Share", which simplifies the computation of
earnings per share. FAS 128 is effective for financial statements issued for
periods ending after December 15, 1997 and requires restatement for all prior
period earnings per share data presented. Basic earnings per share and
diluted earnings per share calculated in accordance with FAS 128 would remain
unchanged at $(0.03) and $(0.14) per share for the second quarter of 1997 and
the six months ended June 30, 1997, respectively, $0.05 and $0.09 per share
for the second quarter of 1996 and the six months ended June 30, 1996,
respectively.
9
<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 proposed developments and operations include: (i)
completion of a hotel in 1998 at Casino Magic-Biloxi and (ii) the Company's
ability to fund planned developments and debt service obligations over the
next twelve months with currently available cash, marketable securities
and cash flow from operations. In addition to the risks and uncertainties
discussed below, 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 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 "Casino Magic-Gulf Coast"), Casino Magic of
Louisiana, Corp. ("Casino Magic-Bossier City") and Casino Magic Neuquen SA, a
51% owned subsidiary of the Company, 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".) During 1996, the
Company had a 49% interest in Porto Carras Casino S.A. ("Porto Carras")
pursuant to which it managed a casino at the Porto Carras resort
approximately 60 miles south of Thesseloniki, Greece until December 1996. The
revenues, costs and expenses of Porto Carras are not included below as Porto
Carras was accounted for under the equity method of accounting.
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------- ------------------
1997 1996 1997 1996
(Dollars in thousands)
(Unaudited)
REVENUES: -------- ------- -------- --------
Casino Magic-BSL (1) $ 23,503 $ 20,993 $ 45,569 $ 42,037
Casino Magic-Biloxi (2) 16,567 15,811 32,659 32,644
Casino Magic-Bossier City 21,519 - 44,726 -
Casino Magic-Neuquen (3) 4,369 3,983 8,784 7,926
Corporate and Other (4)(5) - 1,581 - 2,886
-------- --------- --------- --------
Total revenues 65,958 42,368 131,738 85,493
COST AND EXPENSES:
Casino Magic-BSL 18,821 16,297 37,069 32,531
Casino Magic-Biloxi 14,961 13,330 29,670 27,463
Casino Magic-Bossier City 21,190 46,497 -
Casino Magic-Neuquen 3,303 3,113 6,386 6,296
Corporate and Other 1,756 3,155 4,192 7,165
-------- --------- --------- --------
Total costs and expenses 60,031 35,895 123,814 73,455
10
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INCOME (LOSS) FROM OPERATIONS:
Casino Magic-BSL 4,683 4,696 8,501 9,506
Casino Magic-Biloxi 1,606 2,481 2,989 5,181
Casino Magic-Bossier City 329 - (1,771) -
Casino Magic-Neuquen 1,065 870 2,398 1,630
Corporate and Other (1,756) (1,574) (4,192) (4,279)
--------- --------- -------- --------
Total income from operations $ 5,927 $ 6,473 $ 7,925 $ 12,038
========= ======== ======== ========
______________________
(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. Casino Magic divested of Porto Carras
in December 1996.
(5)Corporate and Other includes the operations of Goldiggers through June 13,
1996.
Three months ended June 30, 1997 compared to three months ended June 30, 1996:
Consolidated revenues increased $23.6 million, or 5.5% to $66.0 million in the
second quarter of 1997, compared to $42.4 million in the second quarter of
1996. The increase in the 1997 second quarter consolidated revenues is
primarily attributable to Casino Magic-Bossier City, the Company's new
facility which opened in late 1996 and accounted for $21.5 million of the
increase. Casino Magic-Biloxi revenues increased $0.8 million or 4.8%, to
$16.6 million in the second quarter of 1997, compared to $15.8 million in the
second quarter of 1996. Casino Magic-BSL revenues increased $2.5 million in
the second quarter of 1997 as compared to 1996. The increased win at Casino
Magic-Gulf Coast is due to a strong direct mailing effort during the second
quarter of 1997. In addition, at Casino Magic-BSL the opening of the golf
course in February 1997 has had a positive impact on gaming revenues.
Revenues at Casino Magic-Neuquen increased $0.4 million, or 10.0% to $4.4
million in the second quarter of 1997. Royalty and management fees decreased
$1.2 million in the second quarter of 1997 because the Company ceased earning
such royalties and management fees when the Company divested itself of its
Greek operations in December 1996.
Consolidated operating costs and expenses increased by $24.1 million, or
67.2%, from $35.9 million in the second quarter of 1996 to $60.0 million in
the second quarter of 1997. Of this increase, $21.2 million is related to
Casino Magic-Bossier City, which opened in October 1996.
11
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Excluding the effects of Casino Magic-Bossier City, operating costs in the
second quarter of 1997 increased $3.8 million or 8.1% when comparing the
second quarter of 1997 to the same period in 1996. These increases were the
direct result of increased marketing, advertising and promotional efforts at
both properties on the Gulf Coast, and increased costs incurred as the result
of the opening of a golf course at Casino Magic-BSL in February 1997.
Earnings before income taxes, depreciation and amortization (EBITDA) decreased
by $0.6 million or 5.9% in the second quarter of 1997 as compared to the same
period in 1996. The second quarter 1996 results include revenues of $1.2
million and EBITDA of $0.7 million from operations in South Dakota and Greece
which were sold during 1996. The remaining changes in EBITDA are the result
of the following:
(i) EBITDA contribution of $1.8 million from Casino Magic-Bossier City
which continues to achieve lower than expected revenues. Operating
expenditures at Casino Magic-Bossier City have been reduced to help offset the
lower operating revenues.
(ii) EBITDA at Casino Magic-BSL increased to $6.6 million from $6.2
million for the 1997 period compared to 1996. The increased EBITDA is the
result of an increase in revenues primarily achieved through a more effective
marketing and advertising programs coupled with the new golf course which
opened in February 1997.
(iii) EBITDA at Casino Magic-Biloxi for the second quarter of 1997
declined to $3.1 million compared with $3.9 million during the same period in
1996. The decrease in EBITDA was primarily the result of increased marketing
and advertising costs of $1.7 million with no increase in revenues and
(iv) EBITDA at Casino Magic-Neuquen increased $0.2 million in the second
quarter of 1997 as compared to the second quarter of 1996. This increase is
the result of increased slot machine revenues. Casino Magic-Neuquen has
continued to grow its slot machine player base and American style gaming
continues to attract more customers in that market.
Income from operations decreased $0.6 million to $5.9 million in the second
quarter of 1997 compared to $6.5 million in the same period in 1996. In
addition to the items described above with respect to EBITDA results,
depreciation and amortization increased $1.4 million as the result of the
Company's new gaming facility in Casino Magic-Bossier City.
Other (income) expense (non-operating income and expense) increased by $3.1
million over the comparative quarter in 1996. Approximately $4.1 million of
this increase is the results of the addition of the $115 million in Louisiana
First Mortgage Notes in August 1996 related to the development of Casino
Magic-Bossier City. This was offset in part by a gain of $1.3 million from
the sale of a 49% interest in Casino Magic-Neuquen during the second quarter
of 1997, for $7.0 million.
The Company had net loss of $1.2 million, or $0.03 per share in the 1997
second quarter compared to net income of $1.6 million, or $0.05 per share in
the 1996 second quarter. The majority of this decline in net income between
the periods is due to the increase in interest expense of $4.1 million and a
less than anticipated contribution to operating income from the Company's new
gaming facility in Casino Magic-Bossier City.
12
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six months ended June 30, 1997 compared to June 30, 1996:
Consolidated revenues increased $46.2 million or 54.1% to $131.7 million in
the first six months of 1997, compared to $85.5 million in the first six
months of 1996. This increase was primarily the result of the Company's new
gaming facility, Casino Magic-Bossier City, which accounted for $44.7 million
in revenues in the first six months in 1997. Excluding the effect of Casino
Magic-Bossier City, revenues increased $1.5 million due to a $3.5 million
increase in revenues at Casino Magic-BSL, a $0.9 million increase in revenues
at Casino Magic-Neuquen and the loss of $2.5 million in revenues from
operations in South Dakota and Greece which were sold during 1996. Revenues
at Casino Magic-Biloxi were unchanged during the comparative periods.
Operating costs and expenses increased by $50.4 million, or 68.6%, to $123.8
million in the first six months of 1997. Of this increase, $46.5 million
relates to the opening of Casino Magic-Bossier City in late 1996. Offsetting
this increase is a decrease of $1.0 million relating to the operating costs
from a gaming facility in South Dakota which the Company sold in June 1996.
Excluding the effects of Casino Magic-Bossier City and the sale of a
subsidiary in the second quarter 1996, operating expenses increased $5.0
million, or 6.9%, when comparing the first six months of 1997 to the same
period in 1996. These increases were the direct result of increased
marketing, advertising and promotional efforts at both properties on the Gulf
Coast. Additionally, increased costs were incurred as a result of the opening
of a golf course at Casino Magic-BSL in February 1997.
Earnings before income taxes, depreciation and amortization (EBITDA) decreased
$2.1 million or 10.5% in the first six months of 1997 compared to the same
period in 1996. The first six months of 1996 results include revenues of $2.5
million and EBITDA of $1.5 million from operations in South Dakota and Greece
which were sold during 1996. The remaining changes in EBITDA are the result
of the following:
(i) EBITDA contribution of $1.0 million from Casino Magic-Bossier City due
to lower than expected revenues and high marketing and promotional
expenditures as well as a level of overall expenses consistent with operating
a property at higher expected revenue levels. Operating expenditures at
Casino Magic-Bossier City have been reduced to a level that allows for
positive cash flow at the current revenue levels.
(ii) EBITDA at Casino Magic-BSL decreased to $11.9 million for the 1997
period from $12.4 million for 1996. The decline is the result of increased
expenditures due to a significant increase in marketing and advertising
expense and the new golf course which opened in February 1997. These efforts
did generate additional revenues for the period.
(iii) EBITDA at Casino Magic-Biloxi for the first six months of 1997
declined to $5.9 million compared with $8.0 million during the same period in
1996. The decrease in EBITDA was primarily the result of increased marketing
and advertising costs of $1.9 million.
(iv) EBITDA at Casino Magic-Neuquen increased $0.8 million in the six
months of 1997 compared to the second quarter of 1996. This increase is the
result of increased slot machine revenues. Casino Magic-Neuquen has continued
to grow the slot machine player base and American style gaming continues to
attract more customers in that market.
13
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Income from operations decreased $4.1 million to $7.9 million in the first six
months of 1997 compared to $12.0 million in the same period in 1996. In
addition to the items described above with respect to EBITDA results,
depreciation and amortization increased $2.0 million primarily as the result
of the Company's new gaming facility in Casino Magic-Bossier City.
Other (income) expense (non-operating income and expense) increased by $7.3
million over the comparative 1996 six month period. Approximately $7.5
million of this increase is the result of the addition of the $115 million in
Louisiana First Mortgage Notes in August 1996 related to the development of
Casino Magic-Bossier City. This was offset in part by a gain of $1.3 million
from the sale of a 49% interest in Casino Magic Neuquen during the second
quarter of 1997, for $7.0 million.
The Company had net loss of $4.9 million, or $0.14 per share in the current
year second quarter compared to net income of $3.3 million, or $0.09 per share
in the first six months of the preceding year. The majority of this decline
in net income between the periods is due to the increase in interest expense
of $7.9 million and a less than anticipated contribution to operating income
from the Company's new gaming facility in Casino Magic-Bossier City.
Liquidity and Capital Resources
At June 30, 1997, the Company had unrestricted cash and marketable securities
of $29.3 million compared to unrestricted cash and marketable securities of
$17.6 million at December 31, 1996. In addition, the Company had $17.0
million in restricted cash, related to the $115 million Louisiana First
Mortgage Notes, at December 31, 1996. At June 30, 1997, the Company has $0 in
restricted cash. For the six month period ended June 30, 1997, the Company
generated $11.2 million of cash flow from operating activities and received
$6.4 million of proceeds from the incurrence of long term debt. The Company
spent $20.4 million for the acquisitions of property, equipment and other
long-term assets, and reduced long term debt by $10.8 million.
The Company expended approximately $14.5 million in capital improvements at
its Gulf Coast properties and $5.9 million in capital expenditures at Casino
Magic-Bossier City during the first six months of 1997. The Company plans
additional investments in 1997 at its Gulf Coast properties and Casino
Magic-Bossier City, much of which is subject to the cash flows of the Company
or the availability of financing. There are no assurances that adequate
funding will be available for these planned investments.
The Company opened Casino Magic-Bossier City on October 4, 1996, using a
temporary boarding facility, and on December 31, 1996, opened the permanent
facility. The Company's plans for the development of Casino Magic-Bossier
City are divided into two phases. The first phase (which has been completed)
includes a 30,000 square foot floating dockside casino space, with 986 slots
and 44 table games; a 37,000 square foot entertainment and food and beverage
pavilion, with 1,550 covered parking spaces and surface parking spaces for 400
cars.
14
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The second phase plans include the construction of a 60,000 square foot
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 Queen Riverboat (a gaming riverboat owned
by Casino Magic-Bossier City) and future operating cash flow of Casino
Magic-Bossier City. No assurances can be given that such funds will become
available or that such hotel and related facilities will ever be developed.
The Company is currently constructing a hotel tower at Casino Magic-Biloxi
above the eight-story parking garage adjacent to the casino. The hotel will
consist of approximately 378 rooms, including approximately 86 suites and will
include standard amenities such as a swimming pool and modest conference
space. The hotel structure, when completed, is expected to be one of the
tallest buildings in Biloxi. Construction on the hotel commenced in December
1996, and completion is estimated for 1998. The hotel construction costs are
being funded solely out of the cash flow of Casino Magic-BSL and Casino
Magic-Biloxi, and any lack of cash flow from operations in the future may
delay or prevent completion of the hotel as planned.
On June 1, 1997, the Company sold 49% of its wholly-owned subsidiary, Casino
Magic-Neuquen for $7.0 million. The Company will use these funds for the
development plans for Casino Magic-Gulf Coast, specifically the hotel at
Casino Magic-Biloxi.
Under the terms of the Indenture associated with the $135,000,000 First
Mortgage 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 associated with the Louisiana First Mortgage
Notes.
The Company will have a significant need for cash in 1997 and beyond in order
to continue its planned development of its existing properties. The Company
believes that cash and marketable securities at June 30, 1997, and its cash
flows from operations will be sufficient to service its operating and debt
service requirements, as well as the planned 1997 construction activities
relating to the Casino Magic-Biloxi hotel, through at least the next twelve
months, but are not sufficient to engage in any other development activities
without additional debt or equity financing.
15
<PAGE>
PART II - OTHER INFORMATION
CASINO MAGIC CORP. AND SUBSIDIARIES
ITEM 1. LEGAL PROCEEDINGS
On or about September 6, 1996 Casino America, Inc. ("Plaintiff) commenced
litigation in the Chancery Court of Harrison County, Mississippi, Second
Judicial District, Civil Action No. C2402-96-1064 against Casino Magic Corp.
(the "Company"), and Edward Ernst, its Chief Executive Officer (collectively
"Defendants"), seeking injunctive relief and unspecified compensatory damages
in an amount to be proven at trial as well as punitive damages.
Plaintiff claims, among other things, that Defendants (i) breached the terms
of an agreement they had with Plaintiff, (ii) tortiously interfered with
certain business relations of Plaintiff; and (iii) breached covenants of good
faith and fair dealing they allegedly owed to Plaintiff.
On or about October 8, 1996, Defendants interposed an answer to Plaintiff's
complaint denying the allegations contained in the complaint.
The discovery phase of this litigation is continuing. While the Company's
management cannot predict the outcome of this action, management believes
Plaintiff's claims are without merit. The Company intends to vigorously
defend this action.
Reference is made to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 and Form 10-Q for the quarter ended March 31, 1997 on
file with the Securities and Exchange Commission.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
(a)On June 30, 1997, the annual meeting of the shareholders of the Company was
held at the Company's offices in Bossier City, Louisiana.
(b)All members of the Board of Directors were elected at the annual meeting.
See (c) below for the names of such members.
(c)The only matter voted upon at the annual meeting was the election of the
members of the Board of Directors. Shares entitled to vote were
35,637,083 and the number of votes cast for, against or withheld, as well as
abstentions, with respect to the election of directors is set forth below.
Information on broker non-votes was not available ("n/a").
16
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
Election of the following members of the Company's Board of Directors:
Votes Cast Number of
Votes Cast in Against or Number of Broker Non
Favor Withheld Abstentions Votes
Marlin F. Torguson 31,654,987 214,099 0 n/a
James E. Ernst 31,809,479 208,753 0 n/a
Roger H. Frommelt 31,712,791 208,813 0 n/a
E. Thomas Welch 31,729,802 208,338 0 n/a
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K:
None.
17
<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: SEPTEMBER 9, 1997 /S/ JAMES E. ERNST
-------------------- ---------------------------------
JAMES E. ERNST, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
Date: SEPTEMBER 9, 1997 /S/ JAY S. OSMAN
-------------------- --------------------------------
JAY S. OSMAN, CHIEF FINANCIAL
OFFICER AND TREASURER (PRINCIPAL
FINANCIAL AND ACCOUNTING OFFICER)
18
<PAGE>
CASINO MAGIC CORP.
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1997
INDEX TO EXHIBITS
Exhibit
Number Page
None
19
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 29,261,746
<SECURITIES> 5,767
<RECEIVABLES> 8,181,851
<ALLOWANCES> 0
<INVENTORY> 957,425
<CURRENT-ASSETS> 39,395,358
<PP&E> 300,771,256
<DEPRECIATION> 49,235,913
<TOTAL-ASSETS> 367,023,460
<CURRENT-LIABILITIES> 47,004,730
<BONDS> 256,042,583
0
0
<COMMON> 356,371
<OTHER-SE> 63,353,016
<TOTAL-LIABILITY-AND-EQUITY> 367,023,460
<SALES> 131,738,423
<TOTAL-REVENUES> 131,738,423
<CGS> 0
<TOTAL-COSTS> 123,813,987
<OTHER-EXPENSES> (996,604)
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<INCOME-PRETAX> (6,828,526)
<INCOME-TAX> (1,935,000)
<INCOME-CONTINUING> 7,924,436
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (4,893,526)
<EPS-PRIMARY> (0.14)
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