<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 20549
FORM 10-Q
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000.
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-11853
ARGOSY GAMING COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 37-1304247
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
219 PIASA STREET
ALTON, ILLINOIS 62002
(618) 474-7500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL
EXECUTIVE OFFICES)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 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 / /
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date: 28,346,604 shares of Common
Stock, $.01 par value per share, as of May 10, 2000.
- --------------------------------------------------------------------------------
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<PAGE>
TABLE OF CONTENTS
PART I
<TABLE>
FINANCIAL STATEMENTS OF ARGOSY GAMING COMPANY
<S> <C>
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Income 2
Condensed Consolidated Statements of Cash Flows 3
Condensed Consolidated Statement of Stockholders' Equity 4
Notes to Condensed Consolidated Financial Statements 5
FINANCIAL STATEMENTS OF GUARANTOR SUBSIDIARIES OF THE COMPANY'S FIRST MORTGAGE
NOTES PROVIDED PURSUANT TO RULE 3-10 OF REGULATION S-X.
FINANCIAL STATEMENTS OF ALTON GAMING COMPANY
Condensed Balance Sheets 11
Condensed Statements of Income 12
Condensed Statements of Cash Flows 13
Condensed Statement of Stockholders' Equity 14
Notes to Condensed Financial Statements 15
FINANCIAL STATEMENTS OF MISSOURI GAMING COMPANY
Condensed Balance Sheets 16
Condensed Statements of Income 17
Condensed Statements of Cash Flows 18
Notes to Condensed Financial Statements 19
FINANCIAL STATEMENTS OF ARGOSY OF LOUISIANA, INC.
Condensed Consolidated Balance Sheets 20
Condensed Consolidated Statements of Operations 21
Condensed Consolidated Statements of Cash Flows 22
Notes to Condensed Consolidated Financial Statements 23
FINANCIAL STATEMENTS OF CATFISH QUEEN PARTNERSHIP IN COMMENDAM
Condensed Balance Sheets 24
Condensed Statements of Operations 25
Condensed Statements of Cash Flows 26
Notes to Condensed Financial Statements 27
FINANCIAL STATEMENTS OF JAZZ ENTERPRISES, INC.
Condensed Balance Sheets 28
Condensed Statements of Operations 29
Condensed Statements of Cash Flows 30
Notes to Condensed Financial Statements 31
FINANCIAL STATEMENTS OF THE INDIANA GAMING COMPANY
Condensed Consolidated Balance Sheets 32
Condensed Consolidated Statements of Income 33
Condensed Consolidated Statements of Cash Flows 34
Condensed Statement of Stockholders' Equity 35
Notes to Condensed Consolidated Financial Statements 36
</TABLE>
<PAGE>
TABLE OF CONTENTS (CONTINUED)
<TABLE>
<S> <C>
FINANCIAL STATEMENTS OF INDIANA GAMING COMPANY, L.P.
Condensed Balance Sheets 37
Condensed Statements of Income 38
Condensed Statements of Cash Flows 39
Condensed Statement of Partners' Equity 40
Notes to Condensed Financial Statements 41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS 42
PART II
Item 1 Legal Proceedings 49
Item 2 Changes in Securities 51
Item 3 Defaults upon Senior Securities 51
Item 4 Submission of Matters to a Vote of Security Holders 51
Item 5 Other Information 51
Item 6 Exhibits and Reports on Form 8-K 51
</TABLE>
<PAGE>
ARGOSY GAMING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
-------------------- --------------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 46,326 $ 47,090
Other current assets 45,628 53,327
-------------------- --------------------
Total current assets 91,954 100,417
-------------------- --------------------
NET PROPERTY AND EQUIPMENT 404,377 405,205
-------------------- --------------------
OTHER ASSETS:
Goodwill and other intangible assets, net 57,672 58,543
Other, net 2,701 2,695
-------------------- --------------------
Total other assets 60,373 61,238
-------------------- --------------------
TOTAL ASSETS $ 556,704 $ 566,860
==================== ====================
CURRENT LIABILITIES:
Accounts payable $ 13,837 $ 17,894
Other current liabilities 52,868 54,528
Current maturities of long-term debt 32,668 32,668
-------------------- --------------------
Total current liabilities 99,373 105,090
-------------------- --------------------
LONG-TERM DEBT 323,326 346,705
DEFERRED INCOME TAXES 9,787 9,945
OTHER LONG-TERM OBLIGATIONS 222 219
MINORITY INTERESTS IN EQUITY OF CONSOLIDATED SUBSIDIARIES 52,219 46,656
STOCKHOLDERS' EQUITY:
Common stock, $.01 par; 60,000,000 shares authorized; 28,345,104 shares
issued and outstanding at March 31, 2000;
28,325,106 shares issued and outstanding at December 31, 1999 283 283
Capital in excess of par 80,475 80,362
Retained deficit (8,981) (22,400)
-------------------- --------------------
Total stockholders' equity 71,777 58,245
-------------------- --------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 556,704 $ 566,860
==================== ====================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
<PAGE>
ARGOSY GAMING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------
MARCH 31, MARCH 31,
2000 1999
----------------------------- ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES:
Casino $ 165,528 $ 129,128
Admissions 4,988 4,278
Food, beverage and other 16,496 13,593
----------------------------- ------------------
187,012 146,999
Less promotional allowances (12,195) (9,608)
----------------------------- ------------------
Net revenues 174,817 137,391
----------------------------- ------------------
COSTS AND EXPENSES:
Casino 71,745 59,450
Selling, general and administrative 33,685 28,652
Food, beverage and other 11,059 9,637
Other operating expenses 7,570 6,588
Depreciation and amortization 8,835 8,473
----------------------------- ------------------
132,894 112,800
----------------------------- ------------------
Income from operations 41,923 24,591
----------------------------- ------------------
OTHER INCOME (EXPENSE):
Interest income 482 907
Interest expense (10,107) (14,134)
----------------------------- ------------------
(9,625) (13,227)
----------------------------- ------------------
Income before income taxes and minority interests 32,298 11,364
Minority interests (10,379) (7,843)
Income tax expense (8,500) (600)
----------------------------- ------------------
Net income 13,419 2,921
Preferred stock dividends and accretion - (27)
----------------------------- ------------------
Net income attributable to common stockholders $ 13,419 $ 2,894
============================= ==================
Basic income per share $ 0.47 $ 0.11
============================= ==================
Diluted income per share $ 0.46 $ 0.10
============================= ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
ARGOSY GAMING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------
MARCH 31, MARCH 31,
2000 1999
----------------------------- ----------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,419 $ 2,921
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 8,166 7,948
Amortization 1,038 1,038
Compensation expense recognized on issuance of stock 28 66
Minority interests 10,379 7,843
Deferred income taxes 7,103 -
Changes in operating assets and liabilities:
Other current assets 1,344 173
Accounts payable and other current liabilities (7,899) 10,248
----------------------------- ----------------------
Net cash provided by operating activities 33,578 30,237
----------------------------- ----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (5,922) (4,130)
----------------------------- ----------------------
Net cash used in investing activities (5,922) (4,130)
----------------------------- ----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt, installment contracts and other (20,225) (2,113)
Repayment of partner loans (3,110) (3,368)
Partnership equity distributions (4,048) (3,424)
Payment of preferred equity return and dividends to partner (1,037) (1,123)
----------------------------- ----------------------
Net cash used in financing activities (28,420) (10,028)
----------------------------- ----------------------
Net (decrease) increase in cash and cash equivalents (764) 16,079
Cash and cash equivalents, beginning of period 47,090 89,857
----------------------------- ----------------------
Cash and cash equivalents, end of period $ 46,326 $ 105,936
============================= ======================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
ARGOSY GAMING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
TOTAL
COMMON CAPITAL IN RETAINED STOCKHOLDERS'
SHARES STOCK EXCESS OF PAR DEFICIT EQUITY
----------- ------ ------------- --------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1999 28,325,106 $ 283 $ 80,362 $ (22,400) $ 58,245
Stock options exercised 19,998 - 85 - 85
Restricted Stock
compensation expense - - 28 - 28
Net income for the three
months ended March 31,
2000 - - - 13,419 13,419
----------- ------ ------------- --------- -------------
Balance, March 31, 2000 28,345,104 $ 283 $ 80,475 $ (8,981) $ 71,777
=========== ====== ============= ========= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
ARGOSY GAMING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(In Thousands, Except Share and Per Share Data)
1. BASIS OF PRESENTATION
Argosy Gaming Company (collectively with its subsidiaries, "Argosy" or
"Company") is engaged in the business of providing casino style gaming and
related entertainment to the public and, through its subsidiaries or joint
ventures, operates riverboat casinos in Alton, Illinois; Lawrenceburg,
Indiana; Riverside, Missouri; Baton Rouge, Louisiana; and Sioux City, Iowa.
Indiana Gaming Company, L.P., ("Indiana Partnership") is a limited
partnership which owns the casino in Lawrenceburg, Indiana. The Company is
the sole general partner, holds a 57.5% interest and manages the Indiana
Partnership.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. Interim results may not
necessarily be indicative of results which may be expected for any other
interim period or for the year as a whole. For further information, refer to
the financial statements and footnotes thereto for the year ended December
31, 1999, included in the Company's Annual Report on Form 10-K (File No.
1-11853). The accompanying unaudited condensed consolidated financial
statements contain all adjustments which are, in the opinion of management,
necessary to present fairly the financial position and the results of
operations for the periods indicated. Such adjustments include only normal
recurring accruals. Certain 1999 amounts have been reclassified to conform to
the 2000 financial statement presentation.
5
<PAGE>
ARGOSY GAMING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) CONTINUED
(In Thousands, Except Share and Per Share Data)
2. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------
MARCH 31, MARCH 31,
2000 1999
------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
NUMERATOR:
Net income $ 13,419 $ 2,921
Preferred stock dividends and accretion - (27)
------------- ------------
Numerator for basic earnings per share -
Income attributable to common shareholders 13,419 2,894
Effect of dilutive securities:
Preferred stock dividends - 27
------------- ------------
Numerator for diluted earnings per share -
Income available to common
stockholders after assumed conversions $ 13,419 $ 2,921
DENOMINATOR:
Denominator for basic earnings per share -
weighted-average shares outstanding 28,232,917 27,114,690
Effect of dilutive securities:
Restricted stock 98,217 68,558
Employee and directors stock options 706,340 119,470
Preferred stock - 1,046,624
Warrants 65,643 12,987
------------- ------------
Dilutive potential common shares 870,200 1,247,639
Denominator for diluted earnings per share - adjusted
Weighted-average shares and assumed conversions 29,103,117 28,362,329
============= ============
Basic earnings per share $ 0.47 $ 0.11
============= ============
Diluted earnings per share $ 0.46 $ 0.10
============= ============
</TABLE>
6
<PAGE>
ARGOSY GAMING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) CONTINUED
(In Thousands, Except Share and Per Share Data)
3. SUBSIDIARY GUARANTORS
The Company has outstanding at March 31, 2000, $22.2 million First
Mortgage Notes, due 2004, ("Mortgage Notes"). The Mortgage Notes rank senior
in right of payment to all existing and future indebtedness of the Company.
The Mortgage Notes are unconditionally guaranteed, on a joint and
several basis, by the following wholly-owned subsidiaries of the Company:
Alton Gaming Company, The Missouri Gaming Company, The St. Louis Gaming
Company, Iowa Gaming Company, Jazz Enterprises, Inc., Argosy of Louisiana,
Inc., Catfish Queen Partnership in Commendam and The Indiana Gaming Company
(the "Guarantors"). The Mortgage Notes are secured, subject to certain prior
liens, by a first lien on (i) substantially all of the assets of the Company
including the assets used in the Company's Alton, Riverside, Baton Rouge and
Sioux City operations, (ii) a pledge of all the capital stock of, and
partnership interests in, the Company's subsidiaries, excluding the Company's
partnership interest in its Sioux City property, (iii) a pledge of the
intercompany notes payable to the Company from its subsidiaries and (iv) an
assignment of the proceeds of the management agreement relating to the
Lawrenceburg Casino project. The collateral for the Mortgage Notes does not
include assets of the Indiana Partnership. Pursuant to a $200 million Credit
Facility ("Credit Facility"), the Company is obligated to redeem the Mortgage
Notes in June 2000 and was required to escrow funds sufficient for the
redemption.
The Credit Facility is secured by a second lien on substantially all of
the Company's assets and the Company's subsidiaries are co-borrowers. The
Company's joint-venture subsidiaries that operate the Argosy Casino
Lawrenceburg and the Belle of Sioux City casino are not co-borrowers nor are
the assets pledged. The Company also has outstanding $200 million of Senior
Subordinated Notes due 2009 ("Subordinated Notes"). The balance outstanding
under the Credit Facility is $85 million at March 31, 2000. All of the
Company's wholly-owned operating subsidiaries guarantee the Subordinated
Notes. The Company's joint-venture subsidiaries that operate the Argosy
Casino & Hotel Lawrenceburg and the Belle of Sioux City Casino do not
guarantee the Subordinated Notes. The Subordinated Notes rank junior to all
of the senior indebtedness of the Company, including borrowings under the
Credit Facility and the subsidiary guarantees will rank junior to the senior
indebtedness of the subsidiary guarantors.
The following tables present summarized balance sheet information of the
Company as of March 31, 2000 and December 31, 1999 and summarized operating
statement information for the three months ended March 31, 2000 and 1999. The
column labeled "Parent Company" represents the holding company for each of
the Company's direct subsidiaries, the column labeled "Guarantors" represents
each of the Company's direct subsidiaries, all of which are wholly-owned by
the parent company, and the column labeled "Non-Guarantors" represents the
partnerships which operate the Company's casinos in Sioux City, Iowa and
Lawrenceburg, Indiana. The Company believes that separate financial
statements and other disclosures regarding the Guarantors, except as
otherwise required under Regulation S-X, are not material to investors.
7
<PAGE>
ARGOSY GAMING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED) CONTINUED
(In Thousands, Except Share and Per Share Data)
Summarized balance sheet information as of March 31, 2000 and December 31,
1999 is as follows:
<TABLE>
<CAPTION>
MARCH 31, 2000
---------------------------------------------------------------------
PARENT NON-
COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets $ 39,292 $ 26,923 $ 30,020 $ (4,281) $ 91,954
Non-current assets 355,105 400,912 218,075 (504,742) 469,350
---------- --------- -------- ---------- ----------
$394,397 $ 427,835 $248,095 $ (509,023) $ 561,304
========== ========= ======== ========== ==========
LIABILITIES AND EQUITY:
Current liabilities $ 35,419 $ 50,778 $ 45,553 $ (27,777) $ 103,973
Non-current
liabilities 287,201 244,240 62,255 (208,142) 385,554
Stockholders' equity 71,777 132,817 140,287 (273,104) 71,777
---------- --------- -------- ---------- ----------
$394,397 $ 427,835 $248,095 $ (509,023) $ 561,304
========== ========= ======== ========== ==========
<CAPTION>
DECEMBER 31, 1999
---------------------------------------------------------------------
PARENT NON-
COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets $ 46,723 $ 23,161 $ 34,493 $ (3,960) $ 100,417
Non-current assets 348,036 386,193 220,180 (487,966) 466,443
---------- --------- -------- ---------- ----------
$394,759 $ 409,354 $254,673 $ (491,926) $ 566,860
========== ========= ======== ========== ==========
LIABILITIES AND EQUITY:
Current liabilities $ 30,159 $ 45,410 $ 56,948 $ (27,427) $ 105,090
Non-current
liabilities 306,355 236,263 70,852 (209,945) 403,525
Stockholders' equity 58,245 127,681 126,873 (254,554) 58,245
---------- --------- -------- ---------- ----------
$394,759 $ 409,354 $254,673 $ (491,926) $ 566,860
========== ========= ======== ========== ==========
</TABLE>
8
<PAGE>
ARGOSY GAMING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED) CONTINUED
(In Thousands, Except Share and Per Share Data)
Summarized operating statement information for the three months ended
March 31, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000
---------------------------------------------------------------------
PARENT NON-
COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenues $ 1,214 $ 87,331 $ 101,042 $ (14,770) $ 174,817
Costs and expenses 3,778 56,547 73,468 (899) 132,894
Net interest expense 6,727 70 2,828 - 9,625
Net income (loss) 13,419 20,034 23,675 (43,709) 13,419
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1999
---------------------------------------------------------------------
PARENT NON-
COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenues $ 665 $ 62,552 $ 84,837 $ (10,663) $ 137,391
Costs and expenses 5,025 46,600 62,041 (866) 112,800
Net interest expense
(income) 9,738 (704) 4,193 - 13,227
Net income (loss) 2,894 9,767 17,278 (27,045) 2,894
</TABLE>
9
<PAGE>
ARGOSY GAMING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) CONTINUED
(In Thousands, Except Share and Per Share Data)
4. COMMITMENTS AND CONTINGENT LIABILITIES
LAWRENCEBURG, INDIANA--Under terms of the Lawrenceburg partnership
agreement, effective December 10, 1999, each limited partner had the right
("Put Rights") to sell its interest to the other partners (pro rata in
accordance with their respective percentage interests). On April 28, 2000,
Conseco Entertainment, L.L.C., a 29% limited partner in the Indiana
Partnership ("Selling Partner") notified the other partners ("Non-Selling
Partners") that it was exercising it's irrevocable Put Right to sell it's
limited partnership interest. Under terms of the partnership agreement, the
Partners have until June 27, 2000 to negotiate a price. If a price cannot be
agreed upon by June 27, 2000, then the Selling Partners and the Non-Selling
Partners will each hire appraisers to determine the purchase price. Upon the
conclusion of this process, if the Non-Selling Partners elect not to pay
appraised value, the Indiana Partnership must be sold in its entirety. There
is no provision to preclude any of the Non-Selling Partners from bidding for
the Indiana Partnership in this event.
OTHER - A predecessor entity to the Company "Predecessor"), as a result
of a certain shareholder loan transaction, could be subject to federal and
certain state income taxes (plus interest and penalties, if any) if it is
determined that it failed to satisfy all of the requirements of the
S-Corporation provisions of the Internal Revenue Code relating to the
prohibition concerning a second class of stock. An audit is currently being
conducted by the Internal Revenue Service ("IRS") of the Company's federal
income tax returns for the 1992 and 1993 tax years and the IRS has identified
the S-Corporation status as one of the issues, although the IRS has yet to
make a formal claim of deficiency. If the IRS successfully challenges the
Predecessor's S-Corporation status, the Company would be required to pay
federal and certain state income taxes on the Predecessor's taxable income
from the commencement of its operations until February 25, 1993 (plus
interest and penalties, if any, thereon until the date of payment). If the
Predecessor was required to pay federal and state income taxes on its taxable
earnings through February 25, 1993, such payments could amount to
approximately $15.0 million, including interest through March 31, 2000, but
excluding penalties, if any. While the Company believes the Predecessor has
legal authority for its position that it is not subject to federal and
certain state income taxes because it met the S-Corporation requirements, no
assurances can be given that the Predecessor's position will be upheld. This
contingent liability could have a material adverse effect on the Company's
results of operations, financial condition and cash flows. No provision has
been made for this contingency in the accompanying condensed consolidated
financial statements.
The Company is subject, from time to time, to various legal and
regulatory proceedings, in the ordinary course of business. The Company
believes that current proceedings will not have a material effect on the
financial condition of the Company.
10
<PAGE>
ALTON GAMING COMPANY
CONDENSED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---------------------- ---------------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 7,473 $ 4,260
Other current assets 2,216 1,862
---------------------- ---------------------
Total current assets 9,689 6,122
DUE FROM AFFILIATES - 3,485
NET PROPERTY AND EQUIPMENT 50,977 46,252
OTHER ASSETS 6 2
---------------------- ---------------------
TOTAL ASSETS $ 60,672 $ 55,861
====================== =====================
CURRENT LIABILITIES:
Accounts payable $ 8,015 $ 7,798
Other accrued liabilities 11,466 8,679
---------------------- ---------------------
Total current liabilities 19,481 16,477
---------------------- ---------------------
OTHER LONG-TERM OBLIGATIONS 222 218
DUE TO AFFILIATE 984 -
DEFERRED INCOME TAXES 2,761 2,813
STOCKHOLDER'S EQUITY:
Common stock - $1 par value, 1,000 shares authorized,
issued and outstanding 1 1
Capital in excess of par 256 256
Retained earnings 36,967 36,096
---------------------- ---------------------
Total stockholder's equity 37,224 36,353
---------------------- ---------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 60,672 $ 55,861
====================== =====================
</TABLE>
See accompanying notes to condensed financial statements.
11
<PAGE>
ALTON GAMING COMPANY
CONDENSED STATEMENTS OF INCOME
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------
MARCH 31, MARCH 31,
2000 1999
----------------------------- ------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES:
Casino $ 28,188 $ 18,109
Food, beverage and other 2,108 1,494
----------------------------- ------------------------
30,296 19,603
Less promotional allowances (1,134) (610)
----------------------------- ------------------------
Net revenues 29,162 18,993
COSTS AND EXPENSES
Casino 12,280 8,409
Food, beverage and other 1,648 1,149
Other operating expenses 1,701 1,429
Selling, general and administrative 3,547 2,998
Depreciation and amortization 1,553 1,026
Management fees - related party 986 634
----------------------------- ------------------------
21,715 15,645
----------------------------- ------------------------
Income from operations 7,447 3,348
----------------------------- ------------------------
OTHER INCOME (EXPENSE)
Interest income 14 33
Interest expense (16) (29)
----------------------------- ------------------------
(2) 4
----------------------------- ------------------------
Income before income taxes 7,445 3,352
Income tax expense 3,019 1,311
----------------------------- ------------------------
Net income $ 4,426 $ 2,041
============================= ========================
</TABLE>
See accompanying notes to condensed financial statements.
12
<PAGE>
ALTON GAMING COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------
MARCH 31, MARCH 31,
2000 1999
----------------------------- --------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,426 $ 2,041
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 1,553 1,026
Deferred income taxes (69) (97)
Changes in operating assets and liabilities:
Other current assets (441) 8
Accounts payable (5,833) 217
Income taxes payable to affiliate 228 1,408
Other accrued liabilities 2,555 957
----------------------------- --------------------
Net cash provided by operating activities 2,419 5,560
----------------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (124) (1,260)
----------------------------- --------------------
Net cash used in investing activities (124) (1,260)
----------------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Due from affiliates 4,469 686
Payment of dividends (3,555) -
Increase in other long-term obligations 4 4
----------------------------- --------------------
Net cash provided by financing activities 918 690
----------------------------- --------------------
Net increase in cash and cash equivalents 3,213 4,990
Cash and cash equivalents, beginning of period 4,260 4,383
----------------------------- --------------------
Cash and cash equivalents, end of period $ 7,473 $ 9,373
============================= ====================
</TABLE>
See accompanying notes to condensed financial statements.
13
<PAGE>
ALTON GAMING COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands, Except Share and Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
TOTAL
COMMON CAPITAL IN RETAINED STOCKHOLDERS'
SHARES STOCK EXCESS OF PAR EARNINGS EQUITY
------ ------ ------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1999 1,000 $ 1 $ 256 $36,096 $ 36,353
Net income - - - 4,426 4,426
Dividends - - - (3,555) (3,555)
------ ------ ------------- -------- -------------
Balance, March 31, 2000 1,000 $ 1 $ 256 $36,967 $ 37,224
====== ====== ============= ======== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
14
<PAGE>
ALTON GAMING COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In Thousands, Except Share and Per Share)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Alton Gaming Company ("Company"), an Illinois Corporation and a
wholly-owned subsidiary of Argosy Gaming Company ("Argosy"), is engaged in
the business of providing casino-style gaming and related entertainment to
the public through the operation of the Alton Belle Casino in Alton, Illinois.
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. Interim results may not necessarily be indicative of
results which may be expected for any other interim period or for the year as
a whole. For further information refer to the financial statements and
footnotes thereto for the year ended December 31, 1999 included in Argosy's
Annual Report on Form 10-K (File No. 1-11853). The accompanying unaudited
condensed financial statements contain all adjustments which are, in the
opinion of management, necessary to present fairly the financial position and
the results of operations for the periods indicated. Such adjustments include
only normal recurring accruals. Certain 1999 amounts have been reclassified
to conform to the 2000 presentation.
2. COMMITMENTS AND CONTINGENCIES
In June 1996, Argosy issued $235 million of 13 1/4% First Mortgage Notes,
due 2004 ("Mortgage Notes"). The assets of the Company are pledged as
collateral, and the Company is a guarantor, under the terms of the Mortgage
Notes. As part of a refinancing, in June 1999, Argosy retired through a
tender offer $212.7 million of its Mortgage Notes and at March 31, 2000,
$22.2 million of the Mortgage Notes remain outstanding. On June 8, 1999,
Argosy issued $200 million Senior Secured Subordinated Notes due 2009
("Subordinated Notes") and entered into a five year, $200 million Senior
Secured revolving bank credit agreement ("Credit Facility"). The Company is a
named borrower under the Credit Facility and borrowings are secured by
substantially all of the assets of the Company. The Company is a guarantor,
under the terms of the Subordinated Notes. The Subordinated Notes rank junior
to all of the senior indebtedness of Argosy, including borrowings under the
Credit Facility.
15
<PAGE>
THE MISSOURI GAMING COMPANY
CONDENSED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---------------------- ----------------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 4,618 $ 5,027
Other current assets 1,386 1,457
---------------------- ----------------------
Total current assets 6,004 6,484
NET PROPERTY AND EQUIPMENT 62,736 63,574
OTHER ASSETS 918 958
---------------------- ----------------------
TOTAL ASSETS $ 69,658 $ 71,016
====================== ======================
CURRENT LIABILITIES:
Accounts payable $ 1,832 $ 1,528
Other accrued liabilities 10,090 7,824
---------------------- ----------------------
Total current liabilities 11,922 9,352
---------------------- ----------------------
DUE TO AFFILIATES 31,888 37,996
DEFERRED INCOME TAXES 2,460 2,555
STOCKHOLDER'S EQUITY:
Common stock - $.01 par value, 1,000 shares authorized
issued and outstanding - -
Capital in excess of par 5,000 5,000
Retained earnings 18,388 16,113
---------------------- ----------------------
Total stockholder's equity 23,388 21,113
---------------------- ----------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 69,658 $ 71,016
====================== ======================
</TABLE>
See accompanying notes to condensed financial statements.
16
<PAGE>
THE MISSOURI GAMING COMPANY
CONDENSED STATEMENTS OF INCOME
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------
MARCH 31, MARCH 31,
2000 1999
-------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES
Casino $ 24,830 $ 19,198
Food, beverage and other 2,894 2,759
-------------- ------------
27,724 21,957
Less promotional allowances (1,595) (1,542)
-------------- ------------
Net Revenues 26,129 20,415
-------------- ------------
COSTS AND EXPENSES
Casino 12,093 9,946
Food, beverage and other 1,992 1,990
Other operating expenses 1,167 1,104
Selling, general and administrative 4,805 3,881
Depreciation and amortization 1,355 1,459
-------------- ------------
21,412 18,380
-------------- ------------
Income from operations 4,717 2,035
-------------- ------------
OTHER INCOME (EXPENSE):
Interest income 3 6
Interest expense (1,037) (889)
-------------- ------------
(1,034) (883)
-------------- ------------
Income before income taxes 3,683 1,152
Income tax expense 1,408 440
-------------- ------------
Net income $ 2,275 $ 712
============== ============
</TABLE>
See accompanying notes to condensed financial statements.
17
<PAGE>
THE MISSOURI GAMING COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------
MARCH 31, MARCH 31,
2000 1999
----------------------------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,275 $ 712
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 1,315 1,419
Amortization 40 40
Deferred income taxes (95) 124
Changes in operating assets and liabilities:
Income taxes payable to affiliate 1,035 316
Other current assets 71 138
Accounts payable 304 (529)
Other accrued liabilities 1,319 1,413
----------------------------- -------------------
Net cash provided by operating activities 6,264 3,633
----------------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (477) (315)
----------------------------- -------------------
Net cash used in investing activities (477) (315)
----------------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on installment contracts (88) (88)
Due to affiliates (6,108) (2,054)
----------------------------- -------------------
Net cash used in financing activities (6,196) (2,142)
----------------------------- -------------------
Net (decrease) increase in cash and cash equivalents (409) 1,176
Cash and cash equivalents, beginning of period 5,027 3,905
----------------------------- -------------------
Cash and cash equivalents, end of period $ 4,618 $ 5,081
============================= ===================
</TABLE>
See accompanying notes to condensed financial statements.
18
<PAGE>
THE MISSOURI GAMING COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In Thousands, Except Share and Per Share Data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Missouri Gaming Company ("Company") (a Missouri corporation and a
wholly owned subsidiary of Argosy Gaming Company, ("Argosy")) owns and
operates a riverboat casino and related facilities in Riverside, Missouri.
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. Interim results may not necessarily be indicative of
results which may be expected for any other interim period or for the year as
a whole. For further information refer to the financial statements and
footnotes thereto for the year ended December 31, 1999 included in Argosy's
Annual Report on Form 10-K (File No. 1-11853). The accompanying unaudited
condensed financial statements contain all adjustments which are, in the
opinion of management, necessary to present fairly the financial position and
the results of operations for the periods indicated. Such adjustments include
only normal recurring accruals.
2. COMMITMENTS AND CONTINGENCIES
The Company is restricted from making certain distributions to Argosy
and other affiliates unless approved by state gaming authorities.
In June 1996, Argosy issued $235 million of 13 1/4% First Mortgage
Notes, due 2004 ("Mortgage Notes"). The assets of the Company are pledged as
collateral, and the Company is a guarantor, under the terms of the Mortgage
Notes. As part of a refinancing, in June 1999, Argosy retired through a
tender offer $212.7 million of its Mortgage Notes and at March 31, 2000,
$22.2 million of the Mortgage Notes remain outstanding. On June 8, 1999,
Argosy issued $200 million Senior Secured Subordinated Notes due 2009
("Subordinated Notes") and entered into a five year, $200 million Senior
Secured revolving bank credit agreement ("Credit Facility"). The Company is a
named borrower under the Credit Facility and borrowings are secured by
substantially all of the assets of the Company. The Company is a guarantor,
under the terms of the Subordinated Notes. The Subordinated Notes rank junior
to all of the senior indebtedness of Argosy, including borrowings under the
Credit Facility.
19
<PAGE>
ARGOSY OF LOUISIANA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------------------- ----------------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,233 $ 4,192
Other current assets 2,190 2,805
--------------------- ----------------------
Total current assets 7,423 6,997
NET PROPERTY AND EQUIPMENT 39,085 39,548
OTHER ASSETS 1,569 1,596
--------------------- ----------------------
TOTAL ASSETS $ 48,077 $ 48,141
===================== ======================
CURRENT LIABILITIES:
Accounts payable $ 428 $ 771
Due to affiliates 5,104 7,397
Other accrued liabilities 5,056 4,772
Accrued interest - related party 4,056 3,706
Current maturities of long-term debt-related party 16,687 16,687
--------------------- ----------------------
Total current liabilities 31,331 33,333
--------------------- ----------------------
LONG-TERM DEBT-RELATED PARTY 31,382 31,382
DEFERRED INCOME TAXES 432 432
MINORITY INTEREST IN CONSOLIDATED PARTNERSHIP 1,331 1,132
STOCKHOLDER'S DEFICIT:
Common stock - $1 par value, 1,000 shares authorized
issued and outstanding 1 1
Accumulated deficit (16,400) (18,139)
--------------------- ----------------------
Total stockholder's deficit (16,399) (18,138)
--------------------- ----------------------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT $ 48,077 $ 48,141
===================== ======================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
20
<PAGE>
ARGOSY OF LOUISIANA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
MARCH 31, MARCH 31,
2000 1999
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES
Casino $ 17,674 $ 12,579
Food, beverage and other 1,591 1,297
----------- -----------
19,265 13,876
Less promotional allowances (1,034) (850)
----------- -----------
Net revenues 18,231 13,026
----------- -----------
COST AND EXPENSES
Casino 8,310 7,439
Food, beverage and other 1,242 1,117
Other operating expenses 1,322 1,211
Selling, general and administrative 4,039 2,775
Depreciation and amortization 1,052 1,371
----------- -----------
15,965 13,913
----------- -----------
Income (loss) from operations 2,266 (887)
Interest (expense) income net:
Interest to related party (350) (351)
Other 22 10
----------- -----------
Income (loss) before minority interest 1,938 (1,228)
Minority interest (199) 121
----------- -----------
Net income (loss) $ 1,739 $ (1,107)
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
21
<PAGE>
ARGOSY OF LOUISIANA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------
MARCH 31, MARCH 31,
1999 1999
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,739 $ (1,107)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 1,025 1,344
Amortization 27 27
Minority interest 199 (121)
Changes in operating assets and liabilities:
Other current assets 615 (65)
Accounts payable (343) (46)
Other accrued liabilities 642 310
----------- -----------
Net cash provided by operating activities 3,904 342
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (562) (560)
----------- -----------
Net cash used in investing activities (562) (560)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on installment contracts (8) (38)
(Decrease) increase in due to affiliates (2,293) 1,283
----------- -----------
Net cash (used in) provided by financing activities (2,301) 1,245
----------- -----------
Net increase in cash and cash equivalents 1,041 1,027
Cash and cash equivalents, beginning of period 4,192 3,025
----------- -----------
Cash and cash equivalents, end of period $ 5,233 $ 4,052
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
22
<PAGE>
ARGOSY OF LOUISIANA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Share and Per Share Data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Argosy of Louisiana, Inc. (collectively with its controlled
partnership Catfish Queen Partnership in Commendam ("Partnership") "the
Company") was formed on July 29, 1993. The Company entered a partnership
agreement with Jazz Enterprises, Inc. ("Jazz") to form the Partnership to
provide riverboat gaming and related entertainment in Baton Rouge, Louisiana.
The Company is the 90% general partner of the Partnership, along with the 10%
partner in commendam Jazz. Both the Company and Jazz are wholly owned
subsidiaries of Argosy Gaming Company ("Argosy").
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. Interim results may not
necessarily be indicative of results which may be expected for any other
interim period or for the year as a whole. For further information refer to
the financial statements and footnotes thereto for the year ended December
31, 1999 included in Argosy's Annual Report on Form 10-K (File No. 1-11853).
The accompanying unaudited condensed consolidated financial statements
contain all adjustments which are, in the opinion of management, necessary to
present fairly the financial position and the results of operations for the
periods indicated. Such adjustments include only normal recurring accruals.
2. COMMITMENTS
In June 1996, Argosy issued $235 million of 13 1/4% First Mortgage
Notes, due 2004 ("Mortgage Notes"). The assets of the Company are pledged as
collateral, and the Company is a guarantor, under the terms of the Mortgage
Notes. As part of a refinancing, in June 1999, Argosy retired through a
tender offer $212.7 million of its Mortgage Notes and at March 31, 2000,
$22.2 million of the Mortgage Notes remain outstanding. On June 8, 1999,
Argosy issued $200 million Senior Secured Subordinated Notes due 2009
("Subordinated Notes") and entered into a five year, $200 million Senior
Secured revolving bank credit agreement ("Credit Facility"). The Company is a
named borrower under the Credit Facility and borrowings are secured by
substantially all of the assets of the Company. The Company is a guarantor,
under the terms of the Subordinated Notes. The Subordinated Notes rank junior
to all of the senior indebtedness of Argosy, including borrowings under the
Credit Facility.
23
<PAGE>
CATFISH QUEEN PARTNERSHIP IN COMMENDAM
CONDENSED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------------- ---------------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,223 $ 4,182
Other current assets 1,359 1,974
----------------- ---------------------
Total current assets 6,582 6,156
NET PROPERTY AND EQUIPMENT 39,085 39,548
OTHER ASSETS 1,569 1,596
----------------- ---------------------
TOTAL ASSETS $47,236 $ 47,300
================= =====================
CURRENT LIABILITIES:
Accounts payable $ 428 $ 771
Other accrued liabilities 4,646 4,415
Accrued interest-related party 4,056 3,706
Due to affiliates 5,104 7,397
Notes payable and current maturities of long-term
debt-related party 16,687 16,687
----------------- ---------------------
Total current liabilities 30,921 32,976
LONG-TERM DEBT-RELATED PARTY 2,684 2,684
PARTNERS' EQUITY 13,631 11,640
----------------- ---------------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $47,236 $ 47,300
================= =====================
</TABLE>
See accompanying notes to condensed financial statements.
24
<PAGE>
CATFISH QUEEN PARTNERSHIP IN COMMENDAM
CONDENSED STATEMENTS OF OPERATIONS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------
MARCH 31, MARCH 31,
2000 1999
----------------------------- ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES:
Casino $17,674 $12,579
Food, beverage and other 1,591 1,297
----------------------------- ------------------
19,265 13,876
Less promotional allowances (1,034) (850)
----------------------------- ------------------
Net revenues 18,231 13,026
----------------------------- ------------------
COSTS AND EXPENSES
Casino 8,310 7,439
Food, beverage and other 1,242 1,117
Other operating expenses 1,322 1,211
Selling, general and administrative 3,986 2,752
Depreciation and amortization 1,052 1,371
----------------------------- ------------------
15,912 13,890
----------------------------- ------------------
Income (loss) from operations 2,319 (864)
----------------------------- ------------------
INTEREST (EXPENSE) INCOME (NET):
Related parties (350) (351)
Other 22 10
----------------------------- ------------------
(328) (341)
----------------------------- ------------------
Net income (loss) $ 1,991 $ (1,205)
============================= ==================
</TABLE>
See accompanying notes to condensed financial statements.
25
<PAGE>
CATFISH QUEEN PARTNERSHIP IN COMMENDAM
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------
MARCH 31, MARCH 31,
2000 1999
----------------------------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,991 $ (1,205)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 1,025 1,344
Amortization 27 27
Changes in operating assets and liabilities:
Other current assets 615 (65)
Accounts payable (343) (46)
Accrued interest to related parties 350 351
Other accrued liabilities 239 (64)
----------------------------- -------------------
Net cash provided by operating activities 3,904 342
----------------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (562) (560)
----------------------------- -------------------
Net cash used in investing activities (562) (560)
----------------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on installment contracts (8) (38)
(Decrease) increase in due to affiliates (2,293) 1,283
----------------------------- -------------------
Net cash (used in) provided by financing activities (2,301) 1,245
----------------------------- -------------------
Net increase in cash and cash equivalents 1,041 1,027
Cash and cash equivalents, beginning of period 4,182 3,025
----------------------------- -------------------
Cash and cash equivalents, end of period $ 5,223 $ 4,052
============================= ===================
</TABLE>
See accompanying notes to condensed financial statements.
26
<PAGE>
CATFISH QUEEN PARTNERSHIP IN COMMENDAM
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In Thousands, Except Share and Per Share Data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Catfish Queen Partnership in Commendam ("Partnership") provides
riverboat gaming and related entertainment in Baton Rouge, Louisiana. The
Partnership is comprised of a 90% general partner, Argosy of Louisiana, Inc.
("General Partner"), and a 10% partner in commendam, Jazz Enterprises, Inc.
("Jazz") both wholly owned subsidiaries of Argosy Gaming Company ("Argosy").
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. Interim results may not necessarily be indicative of
results which may be expected for any other interim period or for the year as
a whole. For further information, refer to the financial statements and
footnotes thereto for the year ended December 31, 1999, included in the
Argosy's Annual Report on Form 10-K (File No. 1-11853). The accompanying
unaudited condensed financial statements contain all adjustments which are,
in the opinion of management, necessary to present fairly the financial
position and the results of operations for the periods indicated. Such
adjustments include only normal recurring accruals. Certain 1999 amounts have
been reclassified to conform to the 2000 presentation.
2. COMMITMENTS
In June 1996, Argosy issued $235 million of 13 1/4% First Mortgage
Notes, due 2004 ("Mortgage Notes"). The assets of the Partnership are pledged
as collateral, and the Partnership is a guarantor, under the terms of the
Mortgage Notes. As part of a refinancing, in June 1999, Argosy retired
through a tender offer $212.7 million of its Mortgage Notes and at March 31,
2000, $22.2 million of the Mortgage Notes remain outstanding. On June 8,
1999, Argosy issued $200 million Senior Secured Subordinated Notes due 2009
("Subordinated Notes") and entered into a five year, $200 million Senior
Secured revolving bank credit agreement ("Credit Facility"). The Partnership
is a named borrower under the Credit Facility and borrowings are secured by
substantially all of the assets of the Partnership. The Partnership is a
guarantor, under the terms of the Subordinated Notes. The Subordinated Notes
rank junior to all of the senior indebtedness of Argosy, including borrowings
under the Credit Facility.
27
<PAGE>
JAZZ ENTERPRISES, INC.
CONDENSED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
-------------------- --------------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 55 $ 46
Other current assets 62 104
-------------------- ---------------------
Total current assets 117 150
NET PROPERTY AND EQUIPMENT 50,133 50,631
GOODWILL, NET 18,592 18,728
NOTE RECEIVABLE 1,892 1,892
OTHER ASSETS 1,489 1,303
-------------------- ---------------------
TOTAL ASSETS $ 72,223 $ 72,704
==================== =====================
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 3,139 $ 2,923
Current maturities of long-term debt 604 604
-------------------- ---------------------
Total current liabilities 3,743 3,527
-------------------- ---------------------
LONG-TERM DEBT 5,729 5,883
LONG-TERM DEBT - RELATED PARTY 75,860 76,147
STOCKHOLDER'S DEFICIT
Common stock, no par value, 100,000 shares authorized, 200 shares
issued and outstanding - -
Accumulated deficit (13,109) (12,853)
-------------------- ---------------------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT $ 72,223 $ 72,704
==================== =====================
</TABLE>
See accompanying notes to condensed financial statements.
28
<PAGE>
JAZZ ENTERPRISES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------
MARCH 31, MARCH 31,
2000 1999
----------------------------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES:
Lease revenue $ 1,060 $ 757
Rent revenue 57 120
----------------------------- -------------------
1,117 877
----------------------------- -------------------
COSTS AND EXPENSES:
Operating expenses 268 277
Selling, general and administrative 437 399
Depreciation and amortization 675 675
----------------------------- -------------------
1,380 1,351
----------------------------- -------------------
Loss from operations (263) (474)
OTHER EXPENSE:
Interest expense (192) (206)
Equity in income (loss) of unconsolidated partnership 199 (121)
----------------------------- -------------------
Net loss $ (256) $ (801)
============================= ===================
</TABLE>
See accompanying notes to condensed financial statements.
29
<PAGE>
JAZZ ENTERPRISES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------
MARCH 31, MARCH 31,
2000 1999
----------------------------- ------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (256) $ (801)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation 526 526
Amortization 149 149
Equity in (income) loss of unconsolidated partnership (199) 121
Other current assets 42 44
Accounts payable and accrued liabilities 216 (20)
----------------------------- ------------------------
Net cash provided by operating activities 478 19
----------------------------- ------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (28) -
----------------------------- ------------------------
Net cash used in investing activities (28) -
----------------------------- ------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (154) (164)
(Payments to) advances from affiliate (287) 179
----------------------------- ------------------------
Net cash (used in) provided by financing activities (441) 15
----------------------------- ------------------------
Net increase in cash and cash equivalents 9 34
Cash and cash equivalents, beginning of period 46 -
----------------------------- ------------------------
Cash and cash equivalents, end of period $ 55 $ 34
============================= ========================
</TABLE>
See accompanying notes to condensed financial statements.
30
<PAGE>
JAZZ ENTERPRISES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In Thousands, Except Share and Per Share Data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Jazz Enterprises, Inc., ("Jazz" or "the Company") a Louisiana
corporation and a wholly owned subsidiary of Argosy Gaming Company ("Argosy")
was incorporated for the purpose of developing a riverboat gaming operation
and an entertainment complex known as "Catfish Town" in Baton Rouge,
Louisiana.
The Company entered into a partnership ("Partnership") with Argosy of
Louisiana, Inc. (a wholly owned subsidiary of Argosy) ("ALI") in which the
Company owns 10% and ALI owns 90%, to operate a riverboat casino in Baton
Rouge, Louisiana.
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. Interim results may not necessarily be indicative of
results which may be expected for any other interim period or for the year as
a whole. For further information, refer to the financial statements and
footnotes thereto for the year ended December 31, 1999, included in Argosy's
Annual Report on Form 10-K (File No. 1-11853). The accompanying unaudited
condensed financial statements contain all adjustments which are, in the
opinion of management, necessary to present fairly the financial position and
the results of operations for the periods indicated. Such adjustments include
only normal recurring accruals.
2. COMMITMENTS
In June 1996, Argosy issued $235 million of 13 1/4% First Mortgage
Notes, due 2004 ("Mortgage Notes"). The assets of the Company are pledged as
collateral, and the Company is a guarantor, under the terms of the Mortgage
Notes. As part of a refinancing, in June 1999, Argosy retired through a
tender offer $212.7 million of its Mortgage Notes and at March 31, 2000,
$22.2 million of the Mortgage Notes remain outstanding. On June 8, 1999,
Argosy issued $200 million Senior Secured Subordinated Notes due 2009
("Subordinated Notes") and entered into a five year, $200 million Senior
Secured revolving bank credit agreement ("Credit Facility"). The Company is a
named borrower under the Credit Facility and borrowings are secured by
substantially all of the assets of the Company. The Company is a guarantor,
under the terms of the Subordinated Notes. The Subordinated Notes rank junior
to all of the senior indebtedness of Argosy, including borrowings under the
Credit Facility.
31
<PAGE>
THE INDIANA GAMING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---------------------- -----------------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 23,692 $ 29,979
Other current assets 1,978 1,619
---------------------- -----------------------
Total current assets 25,670 31,598
---------------------- -----------------------
NET PROPERTY AND EQUIPMENT 185,949 187,685
OTHER ASSETS:
Due from affiliate - 1,553
Intangible assets, net 27,780 28,121
---------------------- -----------------------
Total other assets 27,780 29,674
---------------------- -----------------------
TOTAL ASSETS $ 239,399 $ 248,957
====================== =======================
CURRENT LIABILITIES:
Accounts payable $ 3,926 $ 3,278
Accrued interest and dividends payable-related parties 484 765
Other accrued liabilities 18,153 29,769
Income taxes payable 54,986 48,266
Current maturities of long-term debt 9,822 9,822
---------------------- -----------------------
Total current liabilities 87,371 91,900
---------------------- -----------------------
LONG-TERM DEBT 32,597 37,022
DEFERRED INCOME TAXES 750 408
MINORITY INTERESTS 50,953 45,724
STOCKHOLDER'S EQUITY:
Common stock - $.01 par value, 1,000 shares authorized
issued and outstanding - -
Retained earnings 67,728 73,903
---------------------- -----------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 239,399 $ 248,957
====================== =======================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
32
<PAGE>
THE INDIANA GAMING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------
MARCH 31, MARCH 31,
2000 1999
----------------------------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES:
Casino $ 85,840 $ 73,079
Admissions 4,988 4,278
Food, beverage and other 9,147 7,523
----------------------------- -------------------
99,975 84,880
Less promotional allowances (8,173) (6,411)
----------------------------- -------------------
Net revenues 91,802 78,469
----------------------------- -------------------
COST AND EXPENSES:
Casino 34,716 30,368
Food, beverage and other 5,708 5,006
Other operating expenses 2,314 2,023
Selling, general and administrative 14,844 11,873
Depreciation and amortization 3,521 3,328
Management fees-related parties 1,711 1,460
----------------------------- -------------------
62,814 54,058
----------------------------- -------------------
Income from operations 28,988 24,411
----------------------------- -------------------
OTHER INCOME (EXPENSE):
Interest income 72 99
Interest expense (1,437) (2,172)
----------------------------- -------------------
(1,365) (2,073)
----------------------------- -------------------
Income before minority interests and income taxes 27,623 22,338
Minority interests (10,045) (7,693)
Income tax expense (7,062) (5,880)
----------------------------- -------------------
Net income $ 10,516 $ 8,765
============================= ===================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
33
<PAGE>
THE INDIANA GAMING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------
MARCH 31, MARCH 31,
2000 1999
----------------------------- ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,516 $ 8,765
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 3,169 2,982
Amortization 352 346
Deferred income taxes 342 343
Minority interests 10,045 7,693
Changes in operating assets and liabilities:
Other current assets (359) 282
Accounts payable 648 (664)
Accrued interest and dividends payable to related parties (12) (21)
Accrued liabilities (4,895) 313
----------------------------- ------------------
Net cash provided by operating activities 19,806 20,039
----------------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (1,444) (919)
----------------------------- ------------------
Net cash used in investing activities (1,444) (919)
----------------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt and installment contracts (1,316) (1,798)
Decrease (increase) in due from affiliates 1,553 (14,249)
Repayment of partnership loans (3,110) (3,368)
Payment of preferred equity return and dividends to partner (1,037) (1,123)
Partnership equity distributions (4,048) (3,424)
Payment of dividends (16,691) -
----------------------------- ------------------
Net cash used in financing activities (24,649) (23,962)
----------------------------- ------------------
Net decrease in cash and cash equivalents (6,287) (4,842)
Cash and cash equivalents, beginning of period 29,979 25,491
----------------------------- ------------------
Cash and cash equivalents, end of period $ 23,692 $ 20,649
============================= ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
34
<PAGE>
INDIANA GAMING COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands, Except Share and Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED STOCKHOLDERS'
SHARES STOCK EARNINGS EQUITY
------ ------- --------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1999 1,000 $ - $ 73,903 $ 73,903
Net income - - 10,516 10,516
Dividends - - (16,691) (16,691)
------ ------- --------- -------------
Balance, March 31, 2000 1,000 $ - $ 67,728 $ 67,728
====== ======== ========= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
35
<PAGE>
THE INDIANA GAMING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Share and Per Share Data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Indiana Gaming Company, a wholly owned subsidiary of Argosy Gaming
Company ("Argosy") (collectively with its controlled partnership Indiana
Gaming Company L.P. ("Partnership") "the Company") was formed effective April
11, 1994 to provide riverboat gaming and related entertainment in
Lawrenceburg, Indiana. The Company is a 57.5% general partner in the
Partnership, together with, two limited partners including, Conseco
Entertainment, L.L.C., ("Conseco") a 29% limited partner and Centaur, Inc., a
13.5% limited partner.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. Interim results may not
necessarily be indicative of results which may be expected for any other
interim period or for the year as a whole. For further information refer to
the financial statements and footnotes thereto for the year ended December 31,
1999, included in Argosy's Annual Report on Form 10-K (File No. 1-11853).
The accompanying unaudited condensed consolidated financial statements
contain all adjustments which are, in the opinion of management, necessary to
present fairly the financial position and the results of operations for the
periods indicated. Such adjustments include only normal recurring accruals.
Certain 1999 amounts have been reclassified to conform to the 2000 financial
statement presentation.
2. COMMITMENTS AND CONTINGENCIES
CITY INFRASTRUCTURE IMPROVEMENTS AND UNRESTRICTED GRANTS-In accordance
with the terms of a Development Agreement, the Company entered into a lease
with the City of Lawrenceburg for docking privileges for its riverboat
casino. The initial term of the lease is for six years and thereafter
automatically extends for up to nine renewal term periods of five years each,
unless terminated by the Company. Under the terms of the Development
Agreement, the Company pays an annual fee to the City of Lawrenceburg ranging
from 5%-14% of Adjusted Gross Receipts, as defined, with a minimum of $6
million per year.
BONDING OBLIGATION-The Company is required, by Indiana Gaming Statute,
to post a bond in favor of the Indiana Gaming Commission to collateralize
certain obligations to the City of Lawrenceburg under the Development
Agreement, and to the State of Indiana. This bond is collateralized by
certain real estate of the Company.
TERMINATION OF LAWRENCEBURG PARTNERSHIP-Under terms of the
Lawrenceburg partnership agreement, effective December 10, 1999, each limited
partner had the right ("Put Rights") to sell its interest to the other
partners (pro rata in accordance with their respective percentage interests).
On April 28, 2000, Conseco notified the other partners ("Non-Selling
Partners") that it was exercising it's irrevocable Put Right to sell its
limited partnership interest. Under terms of the partnership agreement, the
Partners have until June 27, 2000 to negotiate a sales price. If a price
cannot be agreed upon by June 27, 2000, then Conseco and the Non-Selling
Partners will each hire appraisers to determine the purchase price. Upon the
conclusion of this process, if the Non-Selling Partners elect not to pay
appraised value, the Indiana Partnership must be sold in its entirety. There
is no provision to preclude any of the Non-Selling Partners from bidding for
the Indiana Partnership in this event.
In June 1996, Argosy issued $235 million of 13 1/4% First Mortgage
Notes, due 2004 ("Mortgage Notes"). The assets of the Company are pledged as
collateral, and the Company is a guarantor, under the terms of the Mortgage
Notes. As part of a refinancing, in June 1999, Argosy retired through a
tender offer $212.7 million of its Mortgage Notes and at December 31, 1999,
$22.2 million of the Mortgage Notes remain outstanding. On June 8, 1999,
Argosy issued $200 million Senior Secured Subordinated Notes due 2009
("Subordinated Notes") and entered into a five year, $200 million Senior
Secured revolving bank credit agreement ("Credit Facility"). The Company is a
named borrower under the Credit Facility and borrowings are secured by
substantially all of the assets of the Company. The Company is a guarantor,
under the terms of the Subordinated Notes. The Subordinated Notes rank junior
to all of the senior indebtedness of Argosy, including borrowings under the
Credit Facility.
36
<PAGE>
INDIANA GAMING COMPANY, L.P.
CONDENSED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------------------- ----------------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 23,692 $ 29,979
Other current assets 1,584 1,225
----------------------- ----------------------
Total current assets 25,276 31,204
----------------------- ----------------------
NET PROPERTY AND EQUIPMENT 184,754 186,477
INTANGIBLE ASSETS, NET 27,780 28,121
----------------------- ----------------------
TOTAL ASSETS $ 237,810 $ 245,802
======================= ======================
CURRENT LIABILITIES:
Accounts payable $ 4,855 $ 3,278
Accrued interest and dividends payable-related parties 1,161 1,847
Other accrued liabilities 17,978 29,782
Due to affiliates 204 953
Current maturities of long-term debt 17,875 17,875
----------------------- ----------------------
Total current liabilities 42,073 53,735
----------------------- ----------------------
LONG-TERM DEBT 60,599 69,234
PARTNERS' EQUITY:
General partner 84,236 77,160
Limited partners 50,902 45,673
----------------------- ----------------------
Total partners' equity 135,138 122,833
----------------------- ----------------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 237,810 $ 245,802
======================= ======================
</TABLE>
See accompanying notes to condensed financial statements.
37
<PAGE>
INDIANA GAMING COMPANY, L.P.
CONDENSED STATEMENTS OF INCOME
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------
MARCH 31, MARCH 31,
2000 1999
----------------------------- ---------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES:
Casino $ 85,840 $ 73,079
Admissions 4,988 4,278
Food, beverage and other 9,147 7,523
----------------------------- ---------------------
99,975 84,880
Less promotional allowances (8,173) (6,411)
----------------------------- ---------------------
Net revenues 91,802 78,469
----------------------------- ---------------------
COST AND EXPENSES:
Casino 34,716 30,368
Food, beverage and other 5,708 5,006
Other operating expenses 2,314 2,023
Selling, general and administrative 14,844 11,873
Depreciation and amortization 3,507 3,315
Management fees-related parties 4,278 3,650
----------------------------- ---------------------
65,367 56,235
----------------------------- ---------------------
Income from operations 26,435 22,234
----------------------------- ---------------------
OTHER INCOME (EXPENSE):
Interest income 72 99
Interest expense (2,871) (4,233)
----------------------------- ---------------------
(2,799) (4,134)
----------------------------- ---------------------
Net income prior to preferred equity return 23,636 18,100
Preferred equity return (1,071) (1,322)
----------------------------- ---------------------
Net income attributable to common equity partners $ 22,565 $ 16,778
============================= =====================
</TABLE>
See accompanying notes to condensed financial statements.
38
<PAGE>
INDIANA GAMING COMPANY, L.P.
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------
MARCH 31, MARCH 31,
2000 1999
------------------------------ -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 22,565 $ 16,778
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 3,155 2,969
Amortization 352 346
Accrued preferred equity dividends 1,071 1,322
Changes in operating assets and liabilities:
Due from affiliates 180 161
Other current assets (358) 281
Accounts payable 648 (660)
Accrued interest payable to related parties (53) 689
Accrued liabilities (11,805) (5,383)
------------------------------ -------------------
Net cash provided by operating activities 15,755 16,503
------------------------------ -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (1,444) (919)
------------------------------ -------------------
Net cash used in investing activities (1,444) (919)
------------------------------ -------------------
CASH FLOWS FROM FINANCING ACTIVITES:
Payments on installment contracts (1,316) (894)
Payment of preferred return to partners (1,703) (2,643)
Payment of preferred equity principal to partner (736) -
Partnership equity distributions (9,524) (8,056)
Payments on long-term debt and partner loans (7,319) (8,833)
------------------------------ -------------------
Net cash used in financing activities (20,598) (20,426)
------------------------------ -------------------
Net decrease in cash and cash equivalents (6,287) (4,842)
Cash and cash equivalents, beginning of period 29,979 25,491
------------------------------ -------------------
Cash and cash equivalents, end of period $ 23,692 $ 20,649
============================== ===================
</TABLE>
See accompanying notes to condensed financial statements.
39
<PAGE>
INDIANA GAMING COMPANY
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
(In Thousands, Except Share and Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
COMMON EQUITY PREFERRED EQUITY
-------------------------------- ----------------------------
TOTAL
GENERAL LIMITED GENERAL LIMITED PARTNERS'
PARTNER PARTNERS TOTAL PARTNER PARTNERS TOTAL EQUITY
--------- --------- ---------- ------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 $ 59,470 $ 32,597 $ 92,067 $17,690 $13,076 $ 30,766 $122,833
Net income prior to
preferred equity return 13,591 10,045 23,636 - - - 23,636
Preferred equity return (616) (455) (1,071) 616 455 1,071 -
Accrued preferred equity
distribution - - - (616) (455) (1,071) (1,071)
Preferred equity principal
repayments - - - (423) (313) (736) (736)
Common equity distributions (5,476) (4,048) (9,524) - - - (9,524)
--------- --------- ---------- ------- -------- --------- ----------
Balance, March 31, 2000 $ 66,969 $38,139 $ 105,108 $17,267 $12,763 $ 30,030 $ 135,138
========= ========= ========== ======= ======== ========= ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
40
<PAGE>
INDIANA GAMING COMPANY, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In Thousands)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Indiana Gaming Company, L.P. ("Partnership"), an Indiana limited
partnership was formed to provide riverboat gaming and related entertainment
in Lawrenceburg, Indiana. The Partnership is comprised of a 57.5% general
partner, The Indiana Gaming Company ("General Partner"), a wholly owned
subsidiary of Argosy Gaming Company, ("Argosy"), and two limited partners
including, Conseco Entertainment, L.L.C., ("Conseco") a 29% limited partner,
Centaur, Inc., a 13.5% limited partner.
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and Article 10 of
Regulations S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. Interim results may not necessarily be indicative of
results which may be expected for any other interim period or for the year as
a whole. For further information, refer to the financial statements and
footnotes thereto for the year ended December 31, 1999, included in Argosy's
Annual Report on Form 10-K (File No. 1-11853). The accompanying unaudited
condensed financial statements contain all adjustments which are, in the
opinion of management, necessary to present fairly the financial position and
the results of operations for the periods indicated. Such adjustments include
only normal recurring accruals. Certain 1999 amounts have been reclassified
to conform to the 2000 financial statement presentation.
2. COMMITMENTS AND CONTINGENCIES
CITY INFRASTRUCTURE IMPROVEMENTS AND UNRESTRICTED GRANTS-In accordance
with the terms of a Development Agreement, the Partnership entered into a
lease with the City of Lawrenceburg for docking privileges for its riverboat
casino. The initial term of the lease is for six years and thereafter
automatically extends for up to nine renewal term periods of five years each,
unless terminated by the Partnership. Under the terms of the Development
Agreement, the Partnership pays an annual fee to the City of Lawrenceburg
ranging from 5%-14% of Adjusted Gross Receipts, as defined, with a minimum of
$6 million per year.
BONDING OBLIGATION-The Partnership is required, by Indiana Gaming
Statute, to post a bond in favor of the Indiana Gaming Commission to
collateralize certain obligations to the City of Lawrenceburg under the
Development Agreement, and to the State of Indiana. This bond is
collateralized by certain real estate of the Partnership.
TERMINATION OF PARTNERSHIP-Under terms of the Lawrenceburg partnership
agreement, effective December 10, 1999, each limited partner had the right
("Put Rights") to sell its interest to the other partners (pro rata in
accordance with their respective percentage interests). On April 28, 2000,
Conseco informed the other partners ("Non-Selling Partners") that it was
exercising it's irrevocable Put Right to sell it's limited partnership
interest. Under terms of the partnership agreement, the Partners have until
June 27, 2000 to negotiate a price. If a price cannot be agreed upon by June
27, 2000, then Conseco and the Non-Selling Partners will each hire appraisers
to determine the purchase price. Upon the conclusion of this process, if the
Non-Selling Partners elect not to pay appraised value, the Indiana
Partnership must be sold in its entirety. There is no provision to preclude
any of the Non-Selling Partners from bidding for the Indiana Partnership in
this event.
41
<PAGE>
ARGOSY GAMING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
EXCEPT WHERE OTHERWISE NOTED, THE WORDS, "WE," "US," "OUR" AND SIMILAR
TERMS, AS WELL AS REFERENCES TO "ARGOSY" OR THE "COMPANY" REFER TO ARGOSY
GAMING COMPANY AND ALL OF ITS SUBSIDIARIES.
OVERVIEW
We, through our subsidiaries or joint ventures, own and operate the
Alton Belle Casino, in Alton, Illinois; the Argosy Casino in Riverside,
Missouri; the Argosy Casino in Baton Rouge, Louisiana; the Belle of Sioux
City Casino in Sioux City, Iowa; and the Argosy Casino in Lawrenceburg,
Indiana.
Our results of operations for the three months ended March 31, 2000
reflect increases in both revenues and operating income at all of our casino
properties over 1999 amounts. This improvement is attributable to the
successful implementation of our operating strategy, which has been developed
with the goal to position us as the premier riverboat casino operator, and to
favorable regulatory changes in Illinois, Louisiana and Missouri.
Our ability to recover the carrying value of our long-lived assets in
Baton Rouge is dependent on several factors, including maintaining the
current level of operating results and the competitive environment. If we do
not achieve anticipated operating results, or if we experience significant
deterioration in our operating results or the competitive environment,
management's evaluation of recoverability could change and we could record an
impairment loss amounting to a substantial portion of our $115 million
investment in Baton Rouge.
During December 1999, we replaced our landing facility at our Alton
property. We are currently evaluating the future use of the replaced assets,
which may include utilization at one of our other operations or the sale of
the assets. If these assets are sold, a loss could be recorded for a
substantial portion of the $6.9 million remaining net book value.
42
<PAGE>
ARGOSY GAMING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(continued)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------
MARCH 31, MARCH 31,
2000 1999
----------------------------- -------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASINO REVENUES
Alton Belle Casino $ 28,188 $ 18,109
Argosy Casino - Riverside 24,830 19,198
Argosy Casino - Baton Rouge 17,674 12,579
Belle of Sioux City Casino 8,996 6,163
Argosy Casino - Lawrenceburg 85,840 73,079
----------------------------- -------------------------
Total $ 165,528 $ 129,128
============================= =========================
NET REVENUES
Alton Belle Casino $ 29,162 $ 18,993
Argosy Casino - Riverside 26,129 20,415
Argosy Casino - Baton Rouge 18,231 13,026
Belle of Sioux City Casino 9,240 6,369
Argosy Casino - Lawrenceburg 91,802 78,469
Other 253 119
----------------------------- -------------------------
Total $ 174,817 $ 137,391
============================= =========================
INCOME (LOSS) FROM OPERATIONS(1)
Alton Belle Casino $ 8,433 $ 3,982
Argosy Casino - Riverside 4,717 2,035
Argosy Casino - Baton Rouge 3,379 (107)
Belle of Sioux City Casino 1,549 845
Argosy Casino - Lawrenceburg 29,002 24,424
Corporate (3) (3,582) (5,026)
Jazz Enterprises, Inc. (1,323) (1,231)
Other (252) (331)
----------------------------- -------------------------
Total $ 41,923 $ 24,591
============================= =========================
EBITDA(1)(2)
Alton Belle Casino $ 9,986 $ 5,008
Argosy Casino - Riverside 6,072 3,494
Argosy Casino - Baton Rouge 4,431 1,264
Belle of Sioux City Casino 1,916 1,125
Argosy Casino - Lawrenceburg 34,220 29,199
Lawrenceburg financial advisory fee (4) (1,711) (1,460)
Corporate (3) (3,487) (5,019)
Jazz Enterprises, Inc. (648) (556)
Other (21) 9
----------------------------- -------------------------
Total $ 50,758 $ 33,064
============================= =========================
</TABLE>
43
<PAGE>
ARGOSY GAMING COMPANY
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(continued)
(1) Income from operations and EBITDA are presented before consideration of
any management fee paid to us and in the case of Sioux City and
Lawrenceburg before the 30% and 42.5% minority interests, respectively.
(2) "EBITDA" is defined as earnings before interest, taxes, depreciation and
amortization and is presented before any management fees paid to Argosy.
EBITDA should not be construed as an alternative to operating income, or
net income (as determined in accordance with generally accepted
accounting principles) as an indicator of our operating performance, or
as an alternative to cash flows generated by operating, investing and
financing activities (as an indicator of cash flow or a measure of
liquidity). EBITDA is presented solely as a supplemental disclosure
because management believes that it is a widely used measure of operating
performance in the gaming industry and for companies with a significant
amount of depreciation and amortization. EBITDA may not be comparable to
similarly titled measures reported by other companies. We have other
significant uses of cash flows, including debt service and capital
expenditures, which are not reflected in EBITDA.
(3) Includes expenses related to a severance package and a settlement
arrangement of approximately $1.8 million for the three months ended
March 31, 1999.
(4) The Lawrenceburg partnership pays a financial advisory fee equal to 5.0%
of its EBITDA to a minority partner.
44
<PAGE>
ARGOSY GAMING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(continued)
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31,
1999
CASINO--Casino revenues for the three months ended March 31, 2000
increased by $36.4 million to $165.5 million from $129.1 million for the
three months ended March 31, 1999. The Western properties (Alton, Riverside,
Sioux City and Baton Rouge) reported an aggregate 42% increase in casino
revenues from $56.0 to $79.7 million. In particular, Alton casino revenues
increased from $18.1 to $28.2 million, Riverside casino revenues increased
from $19.2 to $24.8 million, Sioux City casino revenues increased from $6.2
to $9.0 million, and Baton Rouge casino revenues increased from $12.6 to
$17.7 million. The Lawrenceburg casino generated total casino revenues of
$85.8 million for the three months ended March 31, 2000 an increase of $12.8
million over the three months ended March 31, 1999. Each of our casinos
reported increases in passengers as well as an increase in the average win
per passenger for the three months ended March 31, 2000 versus March 31, 1999.
Casino expenses increased to $71.7 million for the three months ended
March 31, 2000 from $59.5 million for the three months ended March 31, 1999.
This increase is due to increased gaming and admission taxes at all
properties totaling $8.7 million and increases in other casino expenses of
$3.5 million at all properties due to increases in overall revenues and
admissions at all properties.
ADMISSIONS--Admissions revenues (net of complimentary admissions)
increased slightly by $0.2 million to $1.7 million.
FOOD, BEVERAGE AND OTHER--Food, beverage and other revenues increased
$2.9 million to $16.5 million for the three month period ended March 31,
2000. This increase is primarily attributable to a $1.6 million increase at
Lawrenceburg and a $0.6 million increase at Alton. All properties experienced
increases in food, beverage and other revenues. Food, beverage and other net
profit improved $1.5 million to $5.4 million for the three months ended March
31, 2000.
The Lawrenceburg hotel generated, $0.9 million in net revenues and
$0.3 million of operating profit. The hotel occupancy percentage was 85% and
the average daily room rate including promotional allowances was $84.
OTHER OPERATING EXPENSES--Other operating expenses increased by $1.0
million to $7.6 million for the three months ended March 31, 2000 as compared
to the three months ended March 31, 1999 due to increases attributable to the
overall increase in revenues.
SELLING, GENERAL AND ADMINISTRATIVE--Selling, general and
administrative expenses increased $5.0 million to $33.7 million for the three
months ended March 31, 2000 due primarily to an increase of $2.9 million at
Lawrenceburg due to additional payments to the city due to increased gaming
revenue and $3.1 million at our other properties relating to expanded
promotions. Corporate expenses for the three months ended March 31, 1999
included $1.8 million due to expenses related to a severance package and
settlement arrangement.
DEPRECIATION AND AMORTIZATION--Depreciation and amortization increased
$0.3 million from $8.5 million for the three months ended March 31, 1999 to
$8.8 million for the three months ended March 31, 2000.
INTEREST EXPENSE--Net interest expense decreased $3.6 million to $9.6
million for the three months ended March 31, 2000. This decrease is primarily
attributable to a refinancing completed during June 1999 which lowered the
average borrowing rate and average debt balances outstanding. We also reported
a decrease in interest expense to a minority partner.
45
<PAGE>
ARGOSY GAMING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(continued)
MINORITY INTEREST - Our minority interest expense increased by $2.5
million for the three months ended March 31, 2000 as compared to the three
months ended March 31, 1999. This increase is primarily attributable to
improved income at our Indiana Partnership.
INCOME TAX EXPENSE - During the three months ended March 31, 2000, and
1999, we recorded income tax expense at effective rates of 39% and 17%,
respectively. Income tax expense for the three months ended March 31, 1999
was reduced by the utilization of net operating losses.
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS - We reported net
income attributable to common shareholders of $13.4 million for the three
months ended March 31, 2000, compared to $2.9 million for the three months
ended March 31, 1999, due primarily to the factors discussed above.
COMPETITION
Our Alton Casino faces competition from five other riverboat casino
operators in the St. Louis area and expects the level of competition to
remain intense in the future. Our Riverside Casino faces competition from
three casino companies in the Kansas City area. Our Baton Rouge Casino faces
competition from one casino located in downtown Baton Rouge, a nearby Native
American casino and multiple casinos throughout Louisiana. We face
competition in Sioux City, Iowa, from video gaming devices in nearby South
Dakota, from two land-based Native American casinos and, to a lesser extent,
from slot machines at a pari-mutual race track in Council Bluffs, Iowa and
from two riverboat casinos in the Council Bluffs, Iowa/Omaha, Nebraska
market. The Indiana Partnership faces competition from one other riverboat
casino in the Cincinnati market. In addition, The Indiana Partnership
competes with a riverboat casino in the Louisville, Kentucky area
approximately 100 miles from our Lawrenceburg facility
and a competing riverboat is expected to open approximately 45 miles from our
Lawrenceburg facility in the third quarter of 2000. There could be further
unanticipated competition in any market which we operate as a result of
legislative changes or other events. We expect each market in which we
participate, both current and prospective, to be highly competitive.
LIQUIDITY AND CAPITAL RESOURCES
In the three months ended March 31, 2000, we generated cash flows from
operating activities of $33.6 million compared to $30.2 million for the same
period in 1999. This increase is attributable to improved operations at each
of our five casino locations.
In the three months ended March 31, 2000, we used cash flows for
investing activities of $5.9 million versus $4.1 million for the three months
ended March 31, 1999. The primary use of funds in 2000 was construction in
progress for the Baton Rouge hotel of $2.5 million. In the three months ended
March 31, 1999, we used cash flows for investing activities of $4.1 million.
46
<PAGE>
ARGOSY GAMING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(continued)
During the three months ended March 31, 2000, we used $28.4 million in
cash flows for financing activities compared to using $10.0 million of cash
flows for financing activities for the same period in 1999. The uses of cash
flows in both 2000 and 1999 were to repay loans, partner distributions
related to the Lawrenceburg partnership and for payments on other long term
debt.
At March 31, 2000, we had approximately $46.3 million of cash and cash
equivalents, including approximately $23.7 million held at the Indiana
Partnership. In addition, we have placed in escrow $25.2 million to fund
interest payments, redemption premium and principal for the $22.2 million of
Mortgage Notes that were not tendered in our June 1999 refinancing but which
will be redeemed in June 2000. At March 31, 2000, we had outstanding $200
million of Senior Subordinated Notes, which were issued in June 1999 and are
due in June 2009 and $85.0 million on a senior secured revolving credit
facility. As of May 9, 2000 availability under the credit facility was
approximately $120.0 million.
We have made a significant investment in property and equipment and
plan to make significant additional investments at certain of its existing
properties. In 2000, we expect maintenance capital expenditures primarily
related to the purchase of new gaming product and facility enhancements to be
approximately $20.0 million, and expenditures related to the Baton Rouge
hotel to be approximately $18.0 million.
On April 28, 2000, we received notice that Conseco Entertainment,
L.L.C., a 29% limited partner in the Indiana Partnership was exercising their
put rights under terms of the Lawrenceburg Partnership agreement. Ultimately
we will have the right to purchase our pro rata share of the selling
partner's interest. If we elect to purchase the minority interest, we will be
required to fund a portion of the purchase by obtaining additional debt or
equity financing. No assurance can be given that we would be able to obtain
such additional financing on favorable terms.
47
<PAGE>
ARGOSY GAMING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(continued)
CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. WHEN USED IN THIS
DOCUMENT, THE WORDS "ANTICIPATE", "BELIEVE", "ESTIMATE" AND "EXPECT" AND
SIMILAR EXPRESSIONS ARE GENERALLY INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. INVESTORS ARE CAUTIONED THAT ANY FORWARD-LOOKING STATEMENTS,
INCLUDING THOSE REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE
COMPANY OR ITS MANAGEMENT, ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND
INVOLVE RISKS AND UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF
VARIOUS FACTORS INCLUDING, BUT NOT LIMITED TO, (i) GENERAL ECONOMIC
CONDITIONS IN THE MARKETS IN WHICH THE COMPANY OPERATES, (ii) INCREASED
COMPETITIVE PRESSURES IN THE MARKETS IN WHICH THE COMPANY OPERATES, (iii) THE
EFFECT OF FUTURE LEGISLATION OR REGULATORY CHANGES ON THE COMPANY'S
OPERATIONS, AND (iv) OTHER RISKS DETAILED FROM TIME TO TIME IN THE COMPANY'S
SECURITIES AND EXCHANGE COMMISSION FILINGS. THE COMPANY DOES NOT INTEND TO
UPDATE THESE FORWARD-LOOKING STATEMENTS.
48
<PAGE>
ARGOSY GAMING COMPANY
OTHER INFORMATION
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS -
The Company is from time to time a party to legal proceedings arising
in the ordinary course of business. Other than as disclosed below, the
Company is unaware of any legal proceedings which, even if the outcome were
unfavorable to the Company, would have a material adverse impact on either
its financial condition or results of operations.
CAPITOL HOUSE PRESERVATION COMPANY, L.L.C. V. JAZZ ENTERPRISES, INC. ET. AL.
In July 1995, Capitol House Preservation Company, L.L.C. ("Capitol House")
filed a cause of action in the U.S. District Court of the Middle District of
Louisiana against Jazz, the former shareholders of Jazz ("Former Jazz
Shareholders"), Catfish Queen Partnership (the "Partnership"), Argosy of
Louisiana, Inc. ("Argosy Louisiana") and the Company alleging that Jazz and
Argosy obtained the gaming license for Baton Rouge based upon false and
fraudulent pretenses and declarations and financial misrepresentations. The
complaint alleges unfair trade practices as well as violations of RICO and seeks
damages of $158 million plus court costs and attorneys' fees. The plaintiff was
an applicant for a gaming license in Baton Rouge whose application was denied by
the Louisiana Gaming Enforcement Division.
On June 7, 1995, the Company consummated its purchase of all of the
outstanding capital stock of Jazz from the Former Jazz Shareholders. The Company
intends to seek indemnification from the Former Jazz Shareholders for any
liability the Company, Argosy Louisiana or Jazz suffers as a result of such
cause of action. As part of the consideration payable by the Company to the
Former Jazz Shareholders for the acquisition of Jazz, the Company agreed at the
time of such acquisition to annual deferred purchase price payments of
$1,350,000 for each of the first ten years after closing and $500,000 for each
of the next ten years. Payments are to be made quarterly by the Company. The
definitive acquisition documents provide the Company with offset rights against
such deferred purchase price payments for indemnification claims of the Company
against the Former Jazz Shareholders and for liabilities that the Former Jazz
Shareholders contractually agreed to retain. There can be no assurance that the
Former Jazz Shareholders will have assets sufficient to satisfy any claim in
excess of the Company's offset rights.
The defendants filed a Motion to Dismiss, or alternatively to abstain and
stay the action, pending resolution of certain Louisiana state court claims
filed by Capitol House. The trial court decided in favor of the defendants and
dismissed the suit without prejudice to the rights of plaintiff to revive the
suit after the conclusion of the pending state court matters. The plaintiff
appealed this dismissal to the U.S. Fifth Circuit Court of Appeals. While the
appeal was pending, several of the Louisiana state court claims were resolved.
On March 11, 1997, the U.S. Fifth Circuit Court of Appeals vacated the trial
court's dismissal and remanded the case to the district court for further
proceedings. The defendants have re-urged the previously filed motion to
dismiss. On November 17, 1997, the district court granted the motion and
dismissed, with prejudice, all of the federal claims under RICO. The claims of
Capitol House that arose under Louisiana state law were dismissed, without
prejudice. Capitol House filed an appeal of the district court dismissal on
January 9, 1998, with the U.S. Fifth Circuit Court of Appeals. On November 4,
1998, the Fifth Circuit affirmed the district court's dismissal of Capitol
House's RICO claims. This matter is now concluded in federal court.
Additionally, Capitol House filed an amended petition in the Nineteenth
Judicial District Court for East Baton Rouge Parish, State of Louisiana, on
November 26, 1997, amending its previously filed but unserved suit against
Richard Perryman, the person selected by the Louisiana Gaming Division to
evaluate and rank the applicants seeking a gaming license for East Baton Rouge
Parish, and now adding its state law claims against Jazz, the Former Jazz
Shareholders, Argosy Gaming Company, Argosy of Louisiana, Inc.
49
<PAGE>
and Catfish Queen Partnership in Commendam, d/b/a the Belle of Baton Rouge
Casino. This suit alleges that these parties violated the Louisiana Unfair Trade
Practices Act in connection with obtaining the gaming license that was issued to
the Company. The suit alleges the same, or substantially similar, facts that
formed the basis of the federal claim which was dismissed on November 17, 1997.
The defendants have filed a Peremptory Exception of No Cause of Action,
Peremption and Prescription and Exception of Lis Pendens in response to Capitol
House's state court suit. A hearing on these exceptions was held June 1, 1998.
The Court granted the exception and dismissed the suit as to Argosy Gaming
Company, Argosy of Louisiana, Inc. and Catfish Queen Partnership in Commendam,
d/b/a the Belle of Baton Rouge Casino. The Court denied the exception as to Jazz
and the Former Jazz Shareholders. On behalf of Jazz and the Former Jazz
Shareholders, a supervisory writ was filed with the First Circuit Court of
Appeal, State of Louisiana, seeking a dismissal of the claims. Capitol House has
also appealed the dismissal of the claims as to the other parties. On December
10, 1998, the Court of Appeal granted a hearing and then denied the supervisory
writs of Jazz and the Former Jazz Shareholders and affirmed the ruling of the
trial court. Jazz and the Former Jazz Shareholders filed a Motion for Rehearing
before the Court of Appeal, which was ultimately denied. Thereafter, Jazz and
the Former Jazz Shareholders filed a writ of certiorari to the Louisiana Supreme
Court, which writ was also denied. Jazz and the Former Jazz Shareholders are now
conducting discovery and intend to file additional exceptions and/or motions for
summary judgment in the trial court. Capitol House's appeal of the trial court's
dismissal of Argosy Gaming Company, Argosy of Louisiana, Inc. and Catfish Queen
Partnership in Commendam was finally argued before the First Circuit, which
reversed the trial court's ruling and overturned the defendants' peremptory
exception of no cause of action thereby causing these defendants to return to
this litigation. Argosy, Argosy of Louisiana and the Partnership have filed a
writ or certiorari with the Louisiana Supreme Court which was eventually denied,
and therefore, Argosy, Argosy of Louisiana and the Partnership will join with
Jazz and the Former Jazz Shareholders to assert their additional defenses in
this matter by various exceptions and/or motions for summary judgment. An
adverse ruling in this matter could have a material adverse effect on the
Company.
GAMEDEV OF SIOUX CITY, INC. F/K/A SIOUX CITY RIVERBOAT CORP., INC. V. ARGOSY
GAMING COMPANY AND IOWA GAMING COMPANY
This suit was filed on June 11, 1998 in the Iowa District Court in
Woodbury County, Iowa. Gamedev of Sioux City, Inc. ("Gamedev"), the limited
partner of the limited partnership, Belle of Sioux City, L.P., seeks damages
based on claims of breach of fiduciary duty and misrepresentation against the
defendants. Iowa Gaming Company, a wholly-owned subsidiary of the Company, is
the general partner of the Belle of Sioux City, L.P. On July 21, 1998, the
defendants responded to the Petition by filing a motion to dismiss on the
grounds that plaintiff's claims are derivative in nature, and that plaintiff has
failed to comply with the demand requirements under Iowa limited partnership
law. Also, plaintiff is not entitled to an equitable accounting because it has
an adequate remedy at law. In response, on August 4, 1998, plaintiff filed a
First Amended and Substituted Petition and added claims for fraudulent
misrepresentation, breach of the partnership agreement, and breach of the
management agreement. Defendants filed a motion to dismiss based on
substantially similar grounds and requested a more specific statement on the
claims for breach of contract. On September 25, 1998, the court denied the
motion to dismiss and granted the request for a more specific statement.
Plaintiff subsequently filed a Second Amended Petition on October 14, 1998.
Plaintiff has since filed a Third and Fourth Amended Petition, adding a claim
for fraudulent nondisclosure. The Court has denied in part and granted in part
one of Argosy's motions for partial summary judgment. The Court has scheduled
May 30, 2000 for the trial date. The parties are proceeding with final discovery
and trial preparation. A settlement conference, if required, is set for May 24,
2000. The Company is unable to determine what effect, if any, the suit would
have on its business or operations.
50
<PAGE>
INTERIM HOLDINGS, L.L.C. VS. ARGOSY GAMING COMPANY, ET AL
On January 6, 2000, the Company was named as a defendant in a lawsuit
filed by Interim Holdings, L.L.C., in the Circuit Court of St. Louis County,
Missouri, in a case styled INTERIM HOLDINGS, L.L.C. V. ARGOSY GAMING COMPANY, ET
AL.. The Company has removed the case to Federal court, and the federal court,
on April 13, 2000, remanded the lawsuit back to the Circuit Court of St. Louis
County, Missouri. The lawsuit is styled as a "bill in equity." It concerns a
loan and consulting agreement entered into between Argosy and a Floyd Warmann
and Interim Holdings, Inc., as part of Argosy's attempt to obtain lease rights
for a gaming facility in downtown St. Louis. The complaint alleges that Argosy's
consulting payments and loans to Warmann, in return for his working to obtain
lease rights for a potential St. Louis gaming facility, defrauded the creditors
of Warmann. Management believes that the claims are without merit and does not
expect that the lawsuit will have a material adverse effect on the Company's
financial position or results of operations.
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
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
27 - Financial Data Schedule
(b) REPORTS ON FORM 8-K - None
51
<PAGE>
ARGOSY GAMING COMPANY
SIGNATURES
Pursuant to the requirement 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.
Date: May 11, 2000 /s/ Dale R. Black
------------------------- --------------------------------------------
Dale R. Black
Vice President-Chief Financial Officer
52
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
2000 FORM 10-Q OF ARGOSY GAMING COMPANY AND IS QUALIFIED IN THIS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 46,326
<SECURITIES> 0
<RECEIVABLES> 4,958
<ALLOWANCES> 1,399
<INVENTORY> 1,256
<CURRENT-ASSETS> 91,954
<PP&E> 539,907
<DEPRECIATION> 135,530
<TOTAL-ASSETS> 556,704
<CURRENT-LIABILITIES> 99,373
<BONDS> 323,859
0
0
<COMMON> 283
<OTHER-SE> 71,494
<TOTAL-LIABILITY-AND-EQUITY> 556,704
<SALES> 0
<TOTAL-REVENUES> 174,817
<CGS> 0
<TOTAL-COSTS> 132,894
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 291
<INTEREST-EXPENSE> 10,107
<INCOME-PRETAX> 21,919
<INCOME-TAX> 8,500
<INCOME-CONTINUING> 13,419
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,419
<EPS-BASIC> .47
<EPS-DILUTED> .46
</TABLE>
