UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-22436
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Delaware Lady Luck Gaming Corporation 88-0295602
(State or other jurisdiction of (Exact name of Registrant as specified in its charter) (I.R.S. employer
incorporation or organization) identification number)
206 North Third Street, Las Vegas, Nevada 89101
(Address of principal executive offices)(Zip code)
Registrant's telephone number, including area code: (702) 477-3000
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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 ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. As of April 30, 1997, there
were 29,285,698 shares of common stock, $.001 par value per share, outstanding.
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PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
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LADY LUCK GAMING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
ASSETS
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March 31, 1997 December 31, 1996
Current assets:
Cash and cash equivalents................................ $ 18,856 $ 15,490
Accounts receivable...................................... 992 1,276
Inventories.............................................. 1,239 1,198
Prepaid expenses......................................... 2,490 2,620
Total current assets................................. 23,577 20,584
Property and equipment, net of accumulated
depreciation and amortization of $31,689 and
$28,736 as of March 31, 1997 and December
31, 1996, respectively................................... 171,144 173,119
Other assets:
Pre-opening costs........................................ 1,348 1,353
Deferred financing fees and costs net of
accumulated amortization of $2,699 and
$2,482 as of March 31, 1997 and
December 31, 1996, respectively...................... 3,388 3,605
Investment in unconsolidated affiliates, net............. 22,391 21,449
Other.................................................... 3,791 3,608
30,918 30,015
TOTAL ASSETS.................................................. $ 225,639 $ 223,718
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The accompanying notes are an integral part of these condensed consolidated
balance sheets.
2
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LADY LUCK GAMING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(in thousands)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
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March 31, 1997 December 31, 1996
Current liabilities:
Current portion of long-term debt........................ $ 3,441 $ 3,385
Accrued interest......................................... 1,879 1,825
Accounts payable......................................... 5,518 4,416
Construction and retention payables...................... 1,957 1,957
Income taxes payable..................................... 42 42
Other accrued liabilities................................ 8,102 8,267
Total current liabilities............................ 20,939 19,892
Long-term debt:
Mortgage note payable.................................... 173,500 173,500
Other long-term debt..................................... 6,783 7,581
Total long-term debt................................. 180,283 181,081
Total liabilities............................... 201,222 200,973
Commitments and contingencies (Notes 6, 7 and 8)
Series A mandatory cumulative redeemable preferred
stock, $38.98 and $37.89, as of March 31, 1997
and December 31, 1996, respectively per share
liquidation value, 1,800,000 shares authorized,
433,638 shares issued and outstanding.................... 16,902 16,430
Stockholders' equity:
Common stock, $.001 par value, 75,000,000
shares authorized, 29,285,698 shares issued
and outstanding ..................................... 29 29
Additional paid-in capital............................... 31,382 31,382
Accumulated deficit...................................... (23,896) (25,096)
Total stockholders' equity........................... 7,515 6,315
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY..................................... $ 225,639 $ 223,718
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The accompanying notes are an integral part of these condensed consolidated
balance sheets.
3
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LADY LUCK GAMING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(Unaudited)
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Three Months Ended
March 31,
1997 1996
Revenues:
Casino.......................................... $ 36,799 $ 34,722
Food and beverage............................... 4,439 3,844
Hotel........................................... 991 525
Equity in net income of affiliates.............. 942 1,138
Other........................................... 1,430 1,166
Gross revenues.............................. 44,601 41,395
Less: Promotional allowances................ (3,393) (2,731)
Net revenues................................ 41,208 38,664
Costs and expenses:
Casino.......................................... 14,899 13,298
Food and beverage............................... 1,688 1,666
Hotel........................................... 563 285
Other........................................... 74 72
Selling, general and
administrative.............................. 13,384 12,028
Related party management/license fees 514 528
Depreciation and amortization................... 2,953 2,747
Total costs and expenses.................... 34,075 30,624
Operating income .................................... 7,133 8,040
Other income (expense):
Interest income................................. 159 319
Interest expense................................ (5,672) (5,320)
Other........................................... 52 53
(5,461) (4,948)
Income before income tax provision................... 1,672 3,092
Income tax provision................................. - 124
NET INCOME........................................... 1,672 2,968
Preferred stock dividends............................ 472 422
Income applicable to
common stockholders............................. $ 1,200 $ 2,546
NET INCOME PER SHARE
Applicable to common stockholders............... $ 0.04 $ 0.09
Weighted average number of common
shares outstanding.............................. 29,285,698 29,285,698
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The accompanying notes are an integral part of these condensed consolidated
statements.
4
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LADY LUCK GAMING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
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Three Months Ended
March 31,
1997 1996
Cash flows from operating activities:
Net income................................... $ 1,672 $ 2,968
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization.............. 2,953 2,747
Amortization of bond offering
fees and costs........................... 217 217
Equity in net income of unconsolidated
affiliates................................. (942) (1,138)
(Increase) decrease in assets:
Accounts receivable........................ 284 (179)
Inventories................................ (41) (14)
Prepaid expenses........................... 130 242
Increase (decrease) in liabilities:
Accounts payable........................... 1,102 1,719
Accrued interest........................... 54 633
Other accrued liabilities.................. (165) (695)
Federal income taxes payable............... - (71)
Net cash provided by (used in)
operating activities......................... 5,264 6,429
Cash flows from investing activities:
Purchase of property and equipment........... (698) (6,396)
Construction and retention payables.......... - 1,370
Pre-opening costs............................ 5 (93)
Restricted cash.............................. - (121)
Other assets................................. (183) 233
Net cash provided by (used in) investing
activities................................... (876) (5,007)
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The accompanying notes are an integral part of these condensed consolidated
statements.
5
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LADY LUCK GAMING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands, except supplemental schedule)
(Unaudited)
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Three Months Ended
March 31,
1997 1996
Cash flows from financing activities:
Payments on debt and slot contracts.......... (1,022) (643)
Net cash provided by (used in) financing
activities................................... (1,022) (643)
Net increase (decrease) in cash and cash
equivalents.................................. 3,366 779
Cash and cash equivalents,
beginning of period.......................... 15,490 22,148
Cash and cash equivalents, end of period $ 18,856 $ 22,927
Supplemental disclosures of cash flow
information :
Cash paid during the period for:
Interest (net of amount capitalized
of $262 for the three months
ended March 31, 1996,
respectively) ............................... $ 5,402 $ 4,471
Income taxes paid.............................. $ - $ 225
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Supplemental Schedule of Non-Cash Investing and Financing Activities:
The liquidation value of the Series A mandatory cumulative redeemable
preferred stock increased by approximately $472,000 and $422,000 for the three
month period ended March 31, 1997 and 1996, respectively.
The Company entered into contracts for the purchase of slot machines, other
equipment and land which totaled approximately $280,000 during the three month
period ended March 31, 1997.
The accompanying notes an integral part of these condensed consolidated
statements.
6
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LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The Company and Basis of Presentation
Certain notes and other information have been condensed or omitted from the
interim financial statements presented in this Quarterly Report on Form 10-Q.
Therefore, these financial statements should be read in conjunction with the
Company's 1996 Annual Report on Form 10-K. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. The results for the three month
period ended March 31, 1997 are not necessarily indicative of future financial
results. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates. Among the
estimates made by management is the evaluation of the recoverability of the
carrying values of the land held for development and the projects under
development by Lady Luck Vicksburg, Inc. and Lady Luck Kimmswick, Inc. The
Company has made certain reclassifications for the three months ended March 31,
1996 in order to classify amounts in a manner consistent with the three months
ended March 31, 1997.
The consolidated financial statements of Lady Luck Gaming Corporation
("LLGC"), a Delaware corporation, include the accounts of LLGC and its
subsidiaries (collectively the "Company"). The Company's operations primarily
include those of LLGC, Lady Luck Gaming Finance Corporation ("LLGFC"), a
Delaware corporation; Lady Luck Mississippi, Inc. ("LLM"), Lady Luck Biloxi,
Inc. ("LLB"), Lady Luck Gulfport, Inc. ("LLG"), Lady Luck Vicksburg, Inc.
("LLV") and Lady Luck Tunica, Inc. ("LLT"), each a Mississippi corporation
(collectively the "Mississippi Companies"); Gold Coin Incorporated ("GCI"), a
Delaware corporation; Lady Luck Kimmswick, Inc. ("LLK"), a 93% owned Missouri
corporation; Magnolia Lady, Inc. ("MLI"), a Mississippi corporation; Lady Luck
Quad Cities, Inc. ("LLQC"), a Delaware corporation; and Old River Development,
Inc. ("ORD"), a Mississippi corporation. The Company also owns investments in
joint ventures with BRDC and Bally's (see Note 4) which are accounted for under
the equity method. LLGC and its subsidiaries were organized to develop and
operate gaming and hotel properties in emerging jurisdictions.
LLGC and LLGFC were formed in February 1993, pursuant to an Investment
Agreement dated October 20, 1992 between Andrew H. Tompkins, certain affiliates
of Mr. Tompkins and certain holders of equity and debt securities of GCI (the
"Investment Agreement"). Pursuant to the Investment Agreement, Mr. Tompkins
indirectly contributed all outstanding common stock of the Mississippi Companies
to LLGFC in exchange for 550,000 shares of LLGC Class B Common Stock and 216,819
shares of LLGC Series A Mandatory Cumulative Redeemable Preferred Stock ("Series
A"), liquidation value of $5,420,000. In connection with the contribution of the
stock of the Mississippi Companies, Mr. Tompkins received $3,734,000 which
represented the historical carrying value of the net assets of $13,400,000 in
excess of the capital contribution required by the Investment Agreement. LLM
began dockside casino operations on February 26, 1993 in Natchez, Mississippi
and acquired and took over operation of the 147-room River Park in Natchez,
Mississippi on April 15, 1996; GCI reopened on May 28, 1993; LLB began dockside
casino operations on December 13, 1993 in Biloxi, Mississippi, and MLI, which
does business as Lady Luck Rhythm & Blues, commenced dockside gaming operations
on June 27, 1994 in Coahoma County, Mississippi, commenced operation of a
173-room hotel on August 16, 1994, commenced gaming operations of Country Casino
and the Pavilion, as described below, on May 21, 1996 and acquired and took over
operation of the 120-room Riverbluff in Helena, Arkansas on July 3, 1996. LLQC
commenced operation of the Bettendorf Joint Venture on April 21, 1995 (see Note
4). ORD commenced operation of a 240-room hotel on August 24, 1994 and
contributed it to the Bally's Joint Venture in March 1995 (see Note 4). LLQC and
BRDC commenced casino operation of the Bettendorf Joint Venture on April 21,
1995 (see Note 4). All of the other Mississippi Companies and LLK are in various
stages of development and have no operating history.
7
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LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. Certain Risks and Uncertainties
The Company's operations in Mississippi, Iowa and Colorado are dependent on
the continued licensability or qualifications of the Company and its
subsidiaries that hold the gaming licenses in these jurisdictions. Such
licensing and qualifications are reviewed periodically by the gaming authorities
in these states.
Mississippi Gaming Commission regulations require licensees to invest
certain minimum amounts in land-based, non-gaming infrastructure (the
"Land-Based Requirement"). The Mississippi Gaming Commission (the "Commission")
found, during the quarter ended March 31, 1997, that LLB complied with the
Land-Based Requirement.
A significant portion of the Company's consolidated revenues and operating
income are generated by the Company's Coahoma County casino operations. These
casinos are highly dependent on patronage by residents in Arkansas. A change in
general economic conditions or the extent and nature of regulations enabling
casino gaming in Arkansas could adversely affect these casinos' future operating
results.
3. Net Income Per Share
Net income per share is computed using the weighted average number of
common shares and common stock equivalents, if dilutive, actually outstanding
during the period. Common stock equivalents represent the shares that would be
outstanding assuming exercise of dilutive stock options. No common stock
equivalents are included in the computation for the three month period ended
March 31, 1997 and 1996, as the effect would be anti-dilutive or would dilute
earnings per share by less than three percent.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS No. 128").
SFAS No. 128 establishes new accounting standards for the computation and
financial statement presentation of earnings per share data. SFAS No. 128 is
effective for statements issued for periods ending after December 15, 1997 and
earlier implementation is not permitted. The Company expects that there will be
no material effect upon implementing SFAS No. 128 on its earnings per share
calculations.
4. Investment in Unconsolidated Affiliates
The Company's investments in joint ventures with Bettendorf Riverfront
Development Company (BRDC) and Bally's Entertainment Corporation ("Bally's") are
accounted for under the equity method and the Company's portion of income or
loss from the joint ventures is included in Equity in Net Income of
Unconsolidated Affiliates in the accompanying Consolidated Statements of
Operations for the three month period ended March 31, 1997 and 1996.
In December 1994, the Company entered into a joint venture (the "Bettendorf
Joint Venture") with BRDC to complete and operate a casino in Bettendorf, Iowa
("Lady Luck Bettendorf"). The joint venture agreement required that the Company
and BRDC each contribute cash to the Bettendorf Joint Venture of $3.0 million in
return for a 50% ownership interest. In addition, BRDC is leasing certain real
property to the Bettendorf Joint Venture at the lease rate of $150,000 per
month. The Company is leasing a gaming vessel with a cost of $21,635,000 and a
carrying value net of accumulated depreciation as of March 31, 1997 and December
31, 1996 of $19,948,000 and $20,168,000, respectively, to the Bettendorf Joint
Venture for approximately $189,000 per month plus applicable taxes, which amount
was determined upon cost of the assets and the Company's cost of capital at the
time the lease was entered into. In addition, the Company is leasing certain
gaming equipment with a cost of $3,705,000 and a carrying value net of
accumulated depreciation as of March 31, 1997 and December 31, 1996 of
$2,610,000 and $2,755,000, respectively, to the Bettendorf Joint Venture, as
discussed below, for approximately $122,000 per month net of applicable taxes,
which amount was determined based upon cost of the assets and the Company's cost
of capital at the time the lease was entered into. The Company's rental income
relating to the gaming vessel lease was $567,000 and $595,000 for the three
month period ended March 31, 1997 and 1996, respectively. The Company's rental
income relating to the gaming equipment lease was $366,000 and $300,000 for the
three month period ended March 31, 1997 and 1996, respectively.
8
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LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Lady Luck Bettendorf commenced operations on April 21, 1995. All net
profits and losses from all operations of Lady Luck Bettendorf are allocated
equally between the Company and BRDC. The Company has also been granted the
right to manage Lady Luck Bettendorf with substantially the same terms and fees
as the Company's wholly-owned casinos, less $37,500 per month, with a portion of
the fees received, up to $325,000 annually, by the Company paid to BRDC as
consultants. Lady Luck Bettendorf incurred $359,000 and $428,000, respectively,
in management fees for the three month periods ended March 31, 1997 and 1996.
Summarized balance sheet information for the Bettendorf Joint Venture as of
March 31, 1997 and December 31, 1996 is as follows (in thousands):
March 31, 1997 December 31, 1996
Current assets $ 6,287 $ 5,935
Property and equipment, net 13,187 12,435
Total assets $ 19,474 $ 18,370
Current liabilities $ 3,888 $ 5,492
Long-term liabilities 2,374 1,107
Members' equity 13,212 11,771
Total liabilities and
members' equity $ 19,474 $ 18,370
Summarized results of operations for the Bettendorf Joint Venture for the
three month period ended March 31, 1997 and 1996 are as follows (in thousands):
Three Months Ended March 31,
1997 1996
Net revenues $ 17,417 $ 15,055
Costs and expenses 15,976 13,656
Net income $ 1,441 $ 1,399
In March 1995, the Company formed a joint venture with affiliates of
Bally's to complete a casino/hotel project in northern Tunica County,
Mississippi. Upon formation of the Bally's Joint Venture, ORD contributed its
existing 240-room hotel in northern Tunica County, as well as other related
assets and liabilities, with a total net cost of $16.1 million, to the joint
venture. Bally's contributed a closed dockside casino (the "Dockside Casino")
which was, at the time of such contribution, located at Mhoon Landing in
southern Tunica County, and certain other assets to the joint venture. The
Dockside Casino has been relocated to the ORD hotel site. A Bally's entity
manages and controls the Bally's Joint Venture. The Bally's Joint Venture is
owned 58% by Bally's, 35% by ORD and 7% by D.J. Brata, a former 11% minority
shareholder of ORD. The Company is currently negotiating with Bally's and D.J.
Brata the final amount of the Company's initial capital contribution to be
credited to its partners' capital account and other matters in accordance with
the joint venture agreement and, in 1995, provided a reserve of $350,000
relating to any unfavorable resolution of these matters. Hotel operations under
Bally's management commenced in April 1995 and casino operations commenced in
December 1995.
9
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LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Summarized balance sheet information for the Bally's Joint Venture as of
March 31, 1997 and December 31, 1996 is as follows (in thousands):
March 31, 1997 December 31, 1996
Current assets $ 9,109 $ 8,630
Property and equipment, net 50,532 51,537
Other assets 973 1,041
Total assets $ 60,614 $ 61,208
Current liabilities $ 6,724 $ 7,279
Long-term liabilities 6,326 6,994
Partners' capital 47,564 46,935
Total liabilities and
partners' capital $ 60,614 $ 61,208
Summarized results of operations for the Bally's Joint Venture for the
three month period ended March 31, 1997 and 1996 are as follows (in thousands):
Three Months Ended March 31,
1997 1996
Net revenues $ 15,438 $ 20,428
Costs and expenses 14,805 19,175
Net income (loss) $ 633 $ 1,253
Net income of the Bally's Joint Venture for the three month period ended
March 31, 1996 includes pre-opening expenses of $2.0 million.
5. Long-Term Debt
At March 31, 1997 and December 31, 1996, long-term debt consisted of the
following (in thousands):
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March 31, 1997 December 31, 1996
11 7/8% First Mortgage Notes; semi-annual payments
of interest only; due March 2001; collateralized by
substantially all assets of the Company (the "2001
Notes").............................................. $ 173,500 $ 173,500
Note payable to a corporation; monthly payments of
interest only at 10%; principal due July 2001,
collateralized by a deed of trust................... 2,750 2,750
Note payable to a corporation; annual payments of
principal of $119 plus accrued interest at 8%; due
June 2003; collateralized by a land deed of trust
833 833
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10
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LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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Notes payable to corporations; monthly payments of
principal and interest at rates up to prime plus
7%; due through May 1998 secured by the
equipment........................................... 3,028 3,589
Mortgage note payable to a corporation; quarterly
payments of principal and interest at prime plus 1
1/2% based on a 20 year amortization; due April
2006; collateralized by a deed of trust............. 2,888 2,925
Note payable to a corporation; quarterly payments of
principal and accrued interest at 9%; due October
1998, collateralized by a deed of trust............. 330 385
Other..................................................... 395 484
183,724 184,466
Less: current portion..................................... (3,441) (3,385)
Total long-term debt................................ $ 180,283 $ 181,081
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The Indenture as supplemented effective March 28, 1996, covering the 2001
Notes (the "Indenture") provides for, among other things, restrictions on the
Company's and certain of its subsidiaries' abilities (a) to pay dividends or
other distributions on its capital stock, (b) to incur additional indebtedness,
(c) to make asset sales (d) to engage in other lines of business, and (e) to
maintain a minimum consolidated net worth as defined. The Company believes it
was in compliance with the Indenture as of March 31, 1997 and December 31, 1996.
6. Employment Agreements
On October 24, 1994, LLGC entered Letter Agreements with Alain J. Uboldi,
LLGC's President, Chief Operating Officer and Director, and Rory J. Reid, LLGC's
Senior Vice-President, General Counsel, Secretary and Director (the
"Agreements"). The Agreements provide that in the event of a Change of Control,
as defined in the Agreements, and the subsequent termination of the employment
of either Mr. Uboldi or Mr. Reid, under certain circumstances, LLGC would be
required to pay to Mr. Uboldi and Mr. Reid a lump sum severance payment equal to
2.99 times the sum of their respective annual base salary plus the amount of any
bonus paid in the year preceding such termination. In the event of such
termination, Mr. Uboldi and Mr. Reid would also receive in cash an amount equal
to the product of the difference between subtracting the exercise price of each
option held by Mr. Uboldi or Mr. Reid (whether or not fully exercisable) from
the current price of LLGC's common stock, as defined. Further, in connection
with the Agreements, Mr. Uboldi and Mr. Reid would receive life, disability,
accident and health insurance benefits substantially similar to those they are
receiving immediately prior to their termination for a 36-month period after
such termination.
7. Litigation
Shareholder Class Action Lawsuits
LLGC has been named as a defendant in a purported shareholder class action
lawsuit alleging violations by the Company of the Securities Act of 1933 and the
Securities Exchange Act of 1934 for alleged material misrepresentations and
omissions in connection with LLGC's 1993 prospectus and initial public offering
of Common Stock. The complaint seeks, inter alia, injunctive relief, rescission
and unspecified compensatory damages. In addition to the Company, the complaint
also names as defendants Andrew H. Tompkins, Chairman and Chief Executive
Officer of LLGC, Alain Uboldi, Director and Chief Operating Officer of LLGC,
Michael Hlavsa, the former Chief Financial Officer of LLGC, Bear Stearns & Co.,
Inc. and Oppenheimer & Co., Inc., who acted as lead underwriters for the initial
public offering. LLGC has retained outside counsel to respond to the complaint
and while
11
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LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
the outcome of this matter cannot presently be determined, the Company believes
based in part on advice of counsel, that it has meritorious defenses.
Greek Lawsuits
The Company and certain of its joint venture partners (the "Defendants")
are defendants in a lawsuit brought by the country of Greece and its Minister of
Tourism before the Greek Multi-Member Court of First Instance. The action
alleges that the Defendants failed to make certain payments in connection with
the gaming license bid process for Patras, Greece. The payments the Company is
alleged to have been required to make aggregate approximately 2.1 billion
drachma (which was approximately $7,722,000 as of April 14, 1997 based upon
published exchange rates). Although it is difficult to determine the damages
being sought from the lawsuit, the action may seek damages up to such aggregate
amount. The Company's Greek counsel is defending the lawsuit and in management's
opinion, the ultimate outcome of this matter is not presently known.
Also, a Greek architect filed an action against the Company alleging that
he was retained by the Company to provide professional services with respect to
a casino in Loutraki, Greece. The plaintiff in such action sought damages of
approximately $800,000. On July 29, 1996, the Company's Greek counsel was served
with a decision by the Athens Court of First Instance in such matter. The Greek
Court entered judgement against the Company in the amount of approximately 87.1
million drachma (which was approximately $320,000 as of April 14, 1997 based
upon published exchange rates). The Company intends to appeal the Court's
decision and has been informed by its Greek counsel that it has meritorious
grounds to prosecute such appeal.
Other Matters
On November 5, 1996, the United States Bankruptcy Court for the Northern
District of Mississippi dismissed a lawsuit which had been brought by Superior
Boat Works, Inc. ("Superior") against LLM on or about September 23, 1993.
Superior had previously done construction work for LLM on its Natchez barge
("Lady Luck Natchez"), as well as some minor preparatory work on one other barge
of the Company. Such proceeding alleged damages of approximately $47,000,000, of
which approximately $3,400,000 was alleged for additional construction work on
Lady Luck Natchez and the remaining amount was alleged for unjust enrichment,
for causing the bankruptcy of Superior and for future work Superior expected to
perform for the Company. Superior has appealed the decision to dismiss the
action. The Company, based in part on the advice of its counsel, believes that
it has meritorious defenses and does not believe that the appeal of the decision
will have a material adverse effect on the Company's financial condition or
results of operations.
8. Commitments and Contingencies
Lease Commitments
MLI leases approximately 1,000 acres of land surrounding the Helena Bridge
which connects Mississippi to Arkansas. The MLI lease provides that the monthly
lease payment would increase by $150,000 per month beginning July 1, 1995 until
an additional casino either north or south of the Lady Luck Rhythm & Blues
property commenced operation. In accordance with the lease agreement, this
additional rent was paid by the Company. With the opening of the Country Casino
on May 21, 1996, this provision was satisfied and the rental payment reverted to
a percentage basis.
LLGC on its own or through its operating subsidiaries, has entered into a
series of leases and options to lease in various locations where it is operating
or intends to develop and operate dockside casinos. The leases are primarily for
a term of 40 years from the date of execution and are cancelable at the option
of LLGC with a maximum period of notice of 60 days with the exception of certain
leases entered into by LLB and LLG which are cancelable upon six months notice
on the fifth anniversary of the commencement date of such leases and upon six
months notice on any fifth anniversary date thereafter. In addition, LLGC, on
its own or through its operating subsidiaries, has entered into certain options
to either lease or purchase additional property in other states. Most of the
leases are contingent upon regulatory approval of the lease and all leases
contain certain periodic rent adjustments.
12
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Prior to suspending development of a planned casino in Gulfport,
Mississippi, the Company entered into three leases for real property (the
"Gulfport Lease"). During December 1996, the Company agreed to accept
approximately $400,000 compensation from the Mississippi Transportation
Commission in exchange for surrendering one of these leasehold interests
pursuant to condemnation proceedings. The surrender of the leasehold interest
also released the Company from its remaining obligations under the lease. The
remaining leases currently require annual payments of approximately $830,000 and
provide for future increases based on the Consumer Price Index. The Company is
seeking joint venture partners to assume the leases or invest in the proposed
casino project; however, there can be no assurance that such a joint venture
will be consummated. The principal lease is terminable by LLG in November 1998
and requires an annual lease payment of approximately $550,000 per year through
such date. The Company was required to prepay these lease payments for the
twelve months ending November 1998. The Company was required to make
improvements to the leased property of at least $1.0 million on or before May 8,
1995 (the "Improvement Requirement"). While the Company has spent in excess of
$1.0 million on the Gulfport Project, the landlord, while not now claiming that
the Company is in default, has reserved the right to claim that Lady Luck
Gulfport has not satisfied the Improvement Requirement. The Company has been in
discussions with third parties, including joint venture partners, regarding an
assumption of the Gulfport Lease. There can be no assurance that such
negotiations or discussions will be successful. A reserve of approximately
$600,000 was provided as of December 31, 1995 to fully reserve the prepaid lease
payment for the twelve months ending November 1998, and an additional reserve of
approximately $350,000 was provided as of December 31, 1996 to reserve a portion
of future lease payments.
Central City Memorandum of Understanding
During November 1996, GCI entered into a non-binding Memorandum of
Understanding (the "Memorandum") with BWCC, Inc. which does business as
Bullwhackers - Central City ("Bullwhackers"). The Memorandum provides for a
combination of the respective companies' gaming establishments which currently
operate on adjacent real property in Central City, Colorado and the use of, but
not the title transfer or assumption of debt related to, the assets of GCI and
Bullwhackers. Pursuant to the Memorandum, Bullwhackers shall provide resources
and expertise to manage the joint operation subsequent to the completion of
certain capital improvements to be made by GCI to combine the facilities and
improve GCI's gaming equipment, which capital improvements shall in no event
exceed $1.5 million. The Memorandum provides for distributions to be made at
least quarterly in accordance with certain priorities which first recognize the
capital improvements to be made by GCI. The Memorandum provides GCI an option to
purchase the assets of Bullwhackers and gives Bullwhackers an option to purchase
the assets of GCI upon advance written notice after the joint facility commences
gaming operations. In addition, the Memorandum provides a put option for
Bullwhackers to sell its assets to GCI under similar terms. The option price
shall be determined based on carrying amounts or earnings multiples and shall be
at discounted amounts if the sale is within a certain period and shall be in
exchange for certain consideration, a portion of which may include LLGC common
stock. The transactions contemplated by the Memorandum are subject to various
contingencies including, inter alia, the due diligence investigation of the
parties, governmental approvals, approval by the Boards of Directors of GCI and
Bullwhackers, and the negotiation and execution of definitive agreements.
However, no assurance can be provided that these contingencies will be
satisfied.
Construction Commitments
The Company has entered into an agreement for the construction of a
cruising gaming vessel in the amount of $16.0 million and as of December 31,
1996, approximately $6.0 million has been expended under this contract and
approximately $1.9 million is included in construction payables. It is
anticipated that this vessel will be utilized by LLK and, therefore, the
Missouri Project will be responsible for payment of the remaining amounts under
the contract. However, if the Missouri Project is not consummated the Company
may be responsible for the then outstanding obligations.
Development Stage Projects
In addition to its Operating Casinos, the Company has dockside or riverboat
casino projects in various stages of development in Kimmswick, Missouri and
Vicksburg, Mississippi. The current status of each of these Development Stage
Projects is described below.
13
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Kimmswick, Missouri
On November 30, 1995, LLK entered into an Agreement of General Partnership
(the "Kimmswick Agreement") with Davis Gaming Company II ("Davis") to form a
joint venture (the "Kimmswick Joint Venture") to construct and operate a hotel
and casino on an approximately 45-acre parcel of land in Jefferson County,
Missouri (the "Kimmswick Site"). Pursuant to the Kimmswick Agreement, either
party may elect to dissolve the partnership if a gaming license is not issued by
the gaming authorities in the State of Missouri on or prior to May 31, 1997. The
Company believes such license will not be issued on or before that date and has
made no determination yet as to whether to elect to dissolve the partnership nor
has the Company received notice from Davis with regards to its intentions in
this matter. Through March 31, 1997, the Company had expended approximately $8.4
million in the Missouri Project. Such investment consists of approximately $6.0
million for construction of the partially finished cruising vessel and
approximately $2.4 million in other costs associated with the development of the
project.
Pursuant to the Kimmswick Agreement, LLK will contribute certain assets
with a book value of approximately $8.0 million to the Kimmswick Joint Venture
in consideration of a 40% interest in the Kimmswick Joint Venture (if the assets
contributed by LLK are determined to have a value of less than $8.0 million, LLK
will have to contribute additional cash or assets in the amount of such
shortfall or its interest in the Kimmswick Joint Venture will be proportionately
reduced) and Davis will contribute $15.0 million in cash in consideration of a
60% interest in the Kimmswick Joint Venture. Generally, LLK's interest in the
Kimmswick Joint Venture will not be reduced below 20%. In addition, Davis agrees
either to obtain financing on behalf of the Kimmswick Joint Venture or provide
additional capital to the Kimmswick Joint Venture in amounts aggregating an
additional $57.0 million. Such additional capital contributions by Davis would
be, depending upon the circumstances under which such contributions are made,
either treated as preferred capital contributions or result in Davis receiving
an increased interest in the Kimmswick Joint Venture. In the event that the
costs of completing the first two phases of the Missouri Project exceed $80.0
million, each of LLK and Davis will have the right, but not the obligation, to
make an additional capital contribution to the Kimmswick Joint Venture based
upon their pro rata share of the additional amount of required funding. If only
one of such partners elects to contribute additional capital, the contributing
partner may elect to withdraw such contribution, to advance the non-contributing
partner's share and have the entire contribution treated as a loan to the joint
venture or to advance the non-contributing partner's share and have the entire
contribution treated as an additional capital contribution (which will result in
a proportionate adjustment of the partners' respective interests in the joint
venture). The partners will have no other right or obligation to make additional
capital contributions to the joint venture.
The obligations of Davis to contribute capital to, or otherwise provide
financing to, the Kimmswick Joint Venture are subject to satisfaction of
numerous conditions, including that there shall be no governmental regulation
that is likely to increase the cost of, or diminish the EBITDA to be generated
by, the Missouri Project in amounts exceeding certain thresholds and that a
gaming license shall have been obtained from the Missouri Gaming Commission.
There can be no assurance that any of such conditions will be satisfied and,
therefore, there can be no assurance that the Kimmswick Joint Venture will be
funded.
Development of the Missouri Project is subject to approval by gaming
authorities in the State of Missouri. The Company has filed an application
seeking such approval. The State of Missouri investigates applicants at its
discretion and there can be no assurance that the Company's application will be
actively reviewed in future periods.
Beginning with the first quarter in which the Kimmswick Joint Venture has
operating income, the joint venture will distribute 80% of its Available Funds
(defined as net income less debt repayments and capital expenditures and other
reserves) in each of the first three fiscal quarters of each fiscal year to the
partners and, at the end of each fiscal year, the joint venture will distribute
an amount which, together with all other amounts previously distributed during
such fiscal year, equals 90% of Available Funds for such fiscal year. All
distributions of Available Funds shall be made first to Davis to the extent of
its priority or preferred interest and then to the partners in proportion to
their respective interests in the joint venture. LLK will also be entitled to
certain additional distributions to the extent that its tax liability in respect
of the joint venture exceeds the amount otherwise distributed to it.
14
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Kimmswick Agreement provides that the Company will manage the Kimmswick
Joint Venture for a five-year term. The Company will be paid a management fee
equal to 2% of the joint venture's gross revenues plus 7% of the EBITDA of the
joint venture but such management fee will in no event exceed 4% of the joint
venture's gross revenues and the aggregate management fee in any year plus the
amount of all distributions to LLK in such year generally will not exceed the
amount of distributions to Davis in such year. LLK's continued engagement as
manager of the Kimmswick Joint Venture will be dependent upon, among other
things, the achievement of certain performance standards. In addition, upon
meeting certain other performance criteria, LLK will have the unilateral right
to manage the Kimmswick Joint Venture for an additional five years.
The Company has provided no reserve for the assets designated for the
Kimmswick Joint Venture. Management believes that the project is viable and that
the assets as of March 31, 1997 are stated at estimated net realizable value.
This assumption is based upon expected future economic, market and gaming
regulatory conditions. Changes in these assumptions could result in changes in
the estimated net realizable value of the property.
Vicksburg, Mississippi
The Company's planned casino project in Vicksburg, Mississippi is expected
to be located on approximately 23.9 acres of land owned by the Company
immediately south of the I-20 bridge along the Mississippi River, with access to
Washington Street (the "Vicksburg Project"). The original Vicksburg Project
plans include a "Monte Carlo" themed 32,000 square foot dockside casino, a
250-room hotel, 934 parking spaces, restaurant facilities and an arcade. A
gaming license was granted to LLV on August 18, 1994. As of March 31, 1997,
approximately $14.4 million has been spent by the Company to develop the
Vicksburg Project (including approximately $7.0 million to acquire the land).
Reserves of $3.8 million were provided in 1994 to reduce the carrying value of
the Vicksburg Project assets to estimated net realizable value. The Company
currently estimates that it will cost an additional $47.9 million to complete
construction and commence operations of the Vicksburg Project. The Company has
ceased committing material amounts of capital to the Vicksburg Project and is
considering alternatives to provide a return on its investment in the Vicksburg
Project, either through formation of a joint venture to complete and operate the
project, or through the sale of certain assets related thereto. There can be no
assurance that the Company will form a joint venture or sell such assets.
Management's calculation of net realizable value is based upon assumptions
regarding future economic, market and gaming regulatory conditions including the
viability of the Vicksburg site for the development of a casino project. Changes
in these assumptions could result in changes in the estimated net realizable
value of the property.
Environmental Matters
The Company is subject to certain federal, state and local environmental
protection, health and safety laws, regulations and ordinances that apply to
businesses generally, such as the Clean Air Act, the Clean Water Act, the
Resource Conservation and Recovery Act, CERCLA, the Occupational Safety and
Health Act, and similar state statutes. The Colorado casino operations of Lady
Luck Central City are located generally within the Central City/Clear Creek
Superfund Site as designated by the EPA pursuant to CERCLA. The Superfund Site
includes numerous specifically identified areas of mine tailings and other waste
piles from former gold mine operations that are the subject of ongoing
investigation and cleanup by the EPA and the State of Colorado. CERCLA requires
cleanup of sites from which there has been a release or threatened release of
hazardous substances and authorizes the EPA to take any necessary response
actions at Superfund sites, including ordering Potentially Responsible Parties
("PRP's") to clean up or contribute to the cleanup of a Superfund site. PRP's
are broadly defined under CERCLA, and include past and present owners and
operators of a site. Courts have interpreted CERCLA to impose strict, joint and
several liability upon all persons liable for response costs.
The Vicksburg Site had been used as a bulk petroleum storage facility since
the early 1950's, and contained above ground storage tanks and barge and truck
loading docks associated with that operation. Known releases of petroleum
products from three of the seven tanks have occurred since 1986, along with
other small releases at various locations on site. The Subsurface Assessment of
the environmental condition of the site by an outside environmental consultant
indicated that certain of the soils
15
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
at the site were contaminated with petroleum hydrocarbons and associated
volatile organic compounds, and that such contamination was present in
significant concentrations in some locations on site.
Remediation efforts at the Vicksburg Site have been completed by the seller
at their own expense. On February 21, 1996, the Mississippi Department of
Environmental Quality determined that the environmental remediation conducted by
the seller meets all federal and state standards, and has certified that no
further action is required. However, no assurance can be provided that the
Mississippi Department of Environmental Quality or the Federal Environmental
Protection Agency will not alter target cleanup levels in the future, resulting
in additional cleanup requirements. This would expose the Company to additional
liability as the owner of the property, and could result in a material delay of
the construction of new facilities on-site.
In the course of conducting the environmental investigation at the proposed
site for Lady Luck Gulfport before development of the project was suspended, the
Company identified certain contamination at the site. Pursuant to an
administrative order issued by the Mississippi Department of Environmental
Quality, the Company undertook remedial activities, including soil remediation
and the installation of groundwater monitoring wells. No additional remediation
is currently required, although some additional soil remediation may be required
in the course of obtaining a building permit. Although there can be no
assurances, the Company believes that the cost of such additional soil
remediation, if any, will not be material.
Although the Company knows of no other pre-existing conditions at the
intended sites for its development or pre-development stage projects that will
result in any material environmental liability or delay, there can be no
assurance that pre-existing conditions will not be discovered and result in
material liability or delay to the Company. The Company does not anticipate
making material expenditures with respect to such environmental protection, and
health and safety laws and regulations; accordingly, no accrual for any costs
has been made. However, the compliance or cleanup costs associated with such
laws, regulations and ordinances may result in future additional costs to the
Company's operations.
16
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
All statements contained herein that are not historical facts, including
but not limited to, statements regarding the Company's current business
strategy, the Company's prospective joint ventures, asset sales and expansions
of existing projects, and the Company's plans for future development and
operations, are based upon current expectations. These statements are
forward-looking in nature and involve a number of risks and uncertainties.
Generally, the words "anticipates," "believes," "estimates," "expects," and
similar expressions as they relate to the Company and its management are
intended to identify forward looking statements. Actual results may differ
materially. Among the factors that could cause actual results to differ
materially are the following: the availability of sufficient capital to finance
the Company's business plan on terms satisfactory to the Company; competitive
factors, such as legalization of gaming in jurisdictions from which the Company
draws significant numbers of patrons and an increase in the number of casinos
serving the markets in which the Company's casinos are located; changes in
labor, equipment and capital costs; the ability of the Company to consummate its
contemplated joint ventures on terms satisfactory to the Company and to obtain
necessary regulatory approvals therefor; changes in regulations affecting the
gaming industry; the ability of the Company to comply with the Indenture as
supplemented by the Amendments and Waivers; future acquisitions or strategic
partnerships; general business and economic conditions; and other factors
described from time to time in the Company's reports filed with the Securities
and Exchange Commission. The Company wishes to caution readers not to place
undue reliance on any such forward-looking statements, which statements are made
pursuant to the Private Litigation Reform Act of 1995 and, as such, speak only
as of the date made.
Results of Operations
Three Months Ended March 31, 1997 Compared to the Three Months Ended March 31,
1996
The Company's gross revenues increased from $41.4 million in the three
month period ended March 31, 1996 to $44.6 million during the three month period
ended March 31, 1997, an increase of $3.2 million or 8%. The opening of Country
Casino adjacent to Lady Luck Rhythm & Blues in Coahoma County, Mississippi, (the
"Lady Luck Rhythm & Blues/Country Casino Complex") an increase in slot revenues
at Lady Luck Biloxi and the acquisition of the 147-room River Park Hotel in
Natchez, Mississippi, were primarily responsible for this increase and were
offset partially by decreases in gaming revenues at Lady Luck Natchez.
The Lady Luck Rhythm & Blues/Country Casino Complex contributed $2.9
million of the Company's net $3.2 million increase in gross revenues. A 61%
increase in the average number of slot machines partially offset by a 30%
decrease in the average daily net win per slot machine accounted for $2.0
million of the Lady Luck Rhythm & Blues/Country Casino Complex's increase in
gross revenues. Country Casino, which opened May 21, 1996, increased the average
number of slot machines in operation and diluted the average daily net win per
slot machine significantly. In addition, increased competition from the addition
of two casinos and a significant number of hotel rooms in Tunica County,
Mississippi during 1996 had an adverse effect on average daily net win per slot
machine at this facility. Increases in food and beverage, hotel and other
revenues offset partially by a 5% decrease in table and card game revenues
accounted for the balance of the increase in gross revenues at the Lady Luck
Rhythm & Blues/Country Casino Complex.
Lady Luck Biloxi contributed $1.0 million of the Company's net $3.2 million
increase in gross revenues. An 8% increase in the average number of slot
machines and a 20% increase in the average daily net win per slot machine
accounted for a $1.2 million increase in Lady Luck Biloxi's increase in gross
revenues which was offset partially by slight decreases in table game revenues
and food and beverage revenues. Lady Luck Biloxi's increase in slot machine
results was primarily a result of increased marketing expenditures.
LLM's gross revenues decreased $0.6 million in the three month period ended
March 31, 1997 compared to the three month period ended March 31, 1996. The
decrease was due to the following: (i) approximately 14 days of business
interruption from adverse weather and river conditions during the three month
period ended March 31, 1997 and (ii) management changes during the second half
of 1996 from which the results of operations have not yet fully recovered. The
decrease was offset partially by the hotel's gross room revenues which were $0.3
million during the three month period ended March 31, 1997. LLM acquired the
147-room Best Western River Park in Natchez, Mississippi on April 15, 1996.
17
<PAGE>
The increased competition from and capacity in the Tunica County,
Mississippi market as described above, adversely affected the results of
operations during the three month period ended March 31, 1997. During the three
month period ended March 31, 1997, the Company's equity in net income of
unconsolidated affiliates from the Bally's Joint Venture was $0.2 million, a
$0.2 million decrease from the $0.4 million for the three month period ended
March 31, 1996, even after deducting the Company's share of pre-opening expenses
of $0.7 million, for the three month period ended March 31, 1996.
Casino operating expenses company-wide as a percentage of casino revenues
increased from 38% in the three month period ended March 31, 1996 to 40% in the
three month period ended March 31, 1997, primarily due to the following: (i) a
2% increase in the cost of complimentary rooms, food and beverage furnished to
casino customers in relation to casino revenues, and (ii) a 13% decrease in
table and card game net revenues and a 4% increase in related expenses exclusive
of complementaries.
Food and beverage gross revenues increased from $3.8 million in the three
month period ended March 31, 1996 to $4.4 million in the three month period
ended March 31, 1997, an increase of $0.6 million or 16%, including a 20%
increase in complimentary food and beverage revenues. This increase was also due
to higher customer counts and additional outlets at the Lady Luck Rhythm &
Blues/Country Casino complex, improvements at Lady Luck Natchez and the addition
of outlets from acquisition of the River Park, and was offset partially by
changes in outlets at Lady Luck Biloxi. Food and beverage costs and expenses,
prior to reclassifying the cost of complementaries, as a percentage of related
revenues increased from 90% for the three month period ended March 31, 1996 to
92% for the three month period ended March 31, 1997, due to an increase in
operating supplies and other expense.
Consolidated gross room revenues and operating results between periods are
not comparable because LLM purchased the River Park on April 15, 1996 and MLI
acquired the 120-room Riverbluff in Helena, Arkansas on July 3, 1996.
Notwithstanding this lack of comparability, gross room revenues at MLI's
173-room hotel adjacent to Lady Luck Rhythm & Blues decreased 9% in the three
month period ended March 31, 1997 compared to the three month period ended March
31, 1996.
Despite an increase in selling, general and administrative expenses of 12%
from $12.0 million in the three month period ended March 31, 1996 to $13.4
million in the three month period ended March 31, 1997, amounts increased only
1% as a percentage of gross revenues. The $1.4 million increase in expense is
primarily due to an increase of $1.5 million for selling, general and
administrative expenses primarily related to the Lady Luck Rhythm &
Blues/Country Casino Complex and Lady Luck Biloxi, offset partially by: (i) a
$0.4 million reduction in fees and costs incurred during the three month period
ended March 31, 1996 (these fees and costs related to the solicitation of the
amendments and waivers of continuing defaults (the "Amendments and Waivers")
under the Indenture relating to the First Mortgage Notes due 2001 issued by the
Company (the "2001 Notes") which was completed in March 1996), and (ii) a $0.1
million reduction in development costs due to further focusing development
efforts.
Operating income was $7.1 million and $8.0 million for the three month
period ended March 31, 1997 and 1996, respectively. This decrease is due to the
following: (i) a $0.2 million decrease in equity in net income of unconsolidated
affiliates, (ii) increased casino operating expenses as a percentage of casino
revenues, and offset partially by: (i) increased food and beverage revenues and
operating margins after reclassifying the cost of complementaries, and (ii)
consistent selling, general and administrative expenses as a percentage of gross
revenues on an expanded revenue base, and (iii) the acquisition of two
additional hotel operations.
The net income applicable to common stockholders was $2.5 million or $0.09
per share in the three month period ended March 31, 1996 compared with net
income applicable to common stockholders of $1.2 million or $0.04 per share for
the three month period ended March 31, 1997. This decrease was primarily due to
decreases in operating income as described above, an increase in preferred stock
dividends due to compounding on unpaid dividend amounts, and a decrease in
equity in net income of affiliates.
Certain Risks and Uncertainties
The Company's operations in Mississippi, Iowa and Colorado are dependent on
the continued licensability or qualification of the Company and its subsidiaries
that hold the gaming licenses in these jurisdictions. Such licensing and
qualifications are reviewed periodically by the gaming authorities in those
states. In addition, the Company's directors and many of the employees of
casinos are required to obtain gaming licenses. The failure of the Company or
any of its key personnel to obtain or retain a license in a particular
jurisdiction could have a material adverse effect on the Company's ability to
continue its current gaming
18
<PAGE>
operations or to obtain or retain licenses in other jurisdictions. In addition,
any regulations adopted by the gaming commissions, the legislatures or any
governmental authority having jurisdiction in Mississippi, Colorado, Missouri,
Iowa, or other jurisdictions in which the Company has or intends to have gaming
operations may materially adversely affect the Company's operations.
Mississippi Gaming Commission regulations require licensees to invest
certain minimum amounts in land-based, non- gaming infrastructure (the
Land-Based Requirement). While the Mississippi Gaming Commission (the
"Commission") previously expressed concern as to whether LLB is in compliance
with such requirements, the Commission found, during the three month period
ended March 31, 1997, that LLB did in fact comply with the Land-Based
Requirement.
A significant portion of the Company's consolidated revenues and operating
income are generated by the Company's Rhythm & Blues and Country Casino gaming
operations in Coahoma County, Mississippi. These casinos are highly dependent on
patronage by residents of Arkansas. A change in general economic conditions or
the extent and nature of regulations enabling casino gaming in Arkansas could
adversely effect these casinos' future operating results. If gaming were
legalized in certain areas of Arkansas, it could have a material adverse effect
on the Company's Coahoma County facilities and the Bally's Saloon and Gambling
Hall.
The Company believes that its gaming markets are extremely competitive and
expects them to become even more competitive as the number of gaming and other
entertainment establishments increases. Such competition is particularly intense
in the Colorado and Mississippi markets and the Company also competes with
gaming facilities nationwide. It is also possible that substantial local and
nationwide competition could cause the supply of gaming facilities to exceed the
demand for gaming. Additionally, certain of the Company's competitors have more
gaming industry experience, larger operations or significantly greater financial
and other resources than the Company. Given these factors it is possible that
substantial competition could have a material adverse effect on the Company's
future results of operations.
The Company is highly leveraged. As of March 31, 1997, the Company's total
long-term indebtedness was approximately $180.3 million and its stockholders'
equity was approximately $7.5 million. This level of indebtedness could have
important consequences to stockholders. While management believes the Company
will have sufficient cash flow to meet its debt service and other cash outflow
requirements and maintain compliance with the covenants of the Indenture as
supplemented, to the extent that a substantial portion of the Company's cash
flow from operations is dedicated to the payment of principal and interest on
its indebtedness, such cash flow would not be available for other purposes such
as general operations, maintenance and improvement of casino and hotel
facilities or expansion of existing sites or into other gaming markets.
Furthermore, the Company's ability to obtain additional financing in the future
for working capital, capital expenditures or acquisitions may be limited and the
Company's level of indebtedness could limit its flexibility in planning for, or
reacting to, changes in its industry.
The Company currently estimates that it will cost approximately an
additional $72.0 million to complete development of the first two phases of the
Missouri Project and an additional $47.9 million to complete development of the
Vicksburg Project. The Company has entered into an Agreement of General
Partnership for a joint venture with Davis Gaming Company II with respect to the
Missouri Project which would reduce the Company's future capital commitments to
zero with respect to such project. There can be no assurance that the Kimmswick
Joint Venture will be consummated. In addition, Davis has entered into a gaming
joint venture with another party in Missouri. If the Kimmswick Joint Venture is
not consummated, there can be no assurance that the Company will be able to
continue to implement its business strategy with regard to the Missouri Project.
The Company has ceased committing material amounts of capital to the Vicksburg
Project and is actively seeking joint venture partners to finance its
completion. See "Business - Development Stage Projects." Rising costs and
capital constraints have forced the Company to seek joint venture partners to
complete the development of the Development Stage Projects and may further
suspend or delay certain projects, including the Pre-development Stage Projects.
The Company believes that, unless it is able to raise additional capital through
equipment or bank financing, joint venture arrangements, dispositions of
non-essential assets, or issuances of additional debt or equity securities,
while simultaneously reducing expenses, it will not be able to complete any of
the Development Stage Projects or pursue further the Pre-development Stage
Projects. There can be no assurance that additional capital, whether from equity
or debt financing or other sources, will be available, or if available, will be
on terms satisfactory to the Company.
Long-lived assets, which are not to be disposed of, including property and
equipment, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. An estimate of undiscounted future cash flows produced by the asset
is compared to the carrying amount to determine whether an impairment exists. If
an asset is determined to be impaired, the loss is measured based on quoted
market prices in active markets, if available.
19
<PAGE>
If quoted market prices are not available, the estimate of fair value is based
on the best information available, including considering prices for similar
assets and the results of valuation techniques to the extent available.
The Company has evaluated the recoverability of LLB's and GCI's long-lived
assets as of March 31, 1997 pursuant to Financial Accounting Standards Board
Statement No. 121. In performing its review for recoverability, the Company
compared the estimated undiscounted future cash flows to the carrying value of
LLB's and GCI's long-lived assets. The carrying value of LLB's and GCI's
long-lived assets were $32.9 million and $9.5 million, respectively, at March
31, 1997. As the estimated undiscounted future cash flows exceeded the carrying
value of long-lived assets, the Company was not permitted or required to
recognize an impairment loss. Circumstances affecting management's estimates of
future undiscounted cash flow to be generated by LLB and GCI could differ in
future periods and result in a significant write-down.
20
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Operating Casinos
Amounts shown in the following tables are in millions except percentage
amounts.
<TABLE>
<CAPTION>
Lady Luck Rhythm & Blues/County Casino Complex (a)
<S> <C> <C> <C>
% Increase
(Decrease)
Three months ended March 31, 1997 vs.
1997 1996 1996
Gross revenues................... $25.6 $22.7 13
Net revenues..................... 23.7 21.4 11
Management/license fee........... 0.9 0.8 13
Operating income................. 6.4 6.7 (4)
Operating margin (b)............. 27% 31% (4)pts
</TABLE>
____________________
(a) Country Casino and the Pavilion opened May 21, 1996; therefore, a
comparison of 1997 to 1996 may not be meaningful.
(b) Operating income divided by net revenues.
____________________
MLIs gross revenues rose from $22.7 million during the three month period
ended March 31, 1996 to $25.6 million during the three month period ended March
31, 1997, an increase of $2.9 million or 13%. Slot machines generated $2.0
million of this increase. Increases in food and beverage, hotel and other
revenues offset partially by a 5% decrease in table and card game revenues
accounted for the balance of the increase in gross revenues at MLI.
There was a 61% increase in the average number of slot machines from the
three month period ended March 31, 1996 to the three month period ended March
31, 1997 which was partially offset by a 30% decrease in the average daily net
win per slot machine. During the three month period ended March 31, 1997, MLI
operated an average number of 1,361 slot machines, an increase of 515 over the
846 average number of slot machines in operation during the three month period
ended March 31, 1996. This increase was partially offset by a $66 decrease in
the average daily net win per slot machine from $221 during the three month
period ended March 31, 1996 to $155 during the three month period ended March
31, 1997.
Despite only a 1 percentage point decrease in the table games hold
percentage and an increase in the average number of tables in operation from 31
during the three month period ended March 31, 1996 to 51 during the three month
period ended March 31, 1997, table games revenues decreased 10% primarily
because the average daily net win per table game decreased from $1,248 to $691,
a decrease of $557 or 45%.
MLI's operating income decreased from $6.7 million to $6.4 million during
the three month period ended March 31, 1996 and 1997, respectively, a decrease
of $0.3 million or 4%. Operating income decreased despite an increase in gross
and net revenues due primarily to a $0.9 million increase in selling, general
and administrative expenses including casino marketing, rent and other expenses.
21
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Other factors
Additional casino and hotel capacity has been added to the Tunica,
Mississippi market, which competition the Company believes has adversely
affected revenues and operating results at MLI, the extent, materiality and
permanence of which are not presently known.
MLI's casinos are highly dependent on patronage by residents in Arkansas. A
change in general economic conditions or the extent and nature of regulations
enabling casino gaming in Arkansas could materially adversely affect these
casinos' future operating results. If gaming were legalized in certain areas of
Arkansas, it could have a material adverse effect on the Lady Luck Rhythm &
Blues/Country Casino Complex and the Bally's Saloon and Gambling Hall.
22
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Lady Luck Natchez
<S> <C> <C> <C>
% Increase
(Decrease)
Three months ended March 31, 1997 vs.
1997 1996 1996
Gross revenues................... $7.5 $8.1 (7)
Net revenues..................... 6.9 7.4 (7)
Management/license fee........... 0.3 0.3 -
Operating income................. 0.2 1.8 (89)
Operating margin (a)............. 3% 24% (21)pts
</TABLE>
____________________
(a) Operating income divided by net revenues
____________________
LLM's gross revenues decreased from $8.1 million to $7.5 million during the
three month period ended March 31, 1996 and 1997, respectively, a decrease of
$0.6 million or 7%. Revenues and results of operations for the three month
period ended March 31, 1997 were negatively impacted by the closing of the
casino for approximately 14 days due to adverse weather and river conditions.
During these comparative periods, the average number of slot machines in
operation increased from 554 to 591, an increase of 37, or 7%. The decrease in
the table games revenues was primarily due to the average number of table games
in operation during the three month period ended March 31, 1996 and 1997,
respectively, decreasing from 18 to 16, a decrease of 11%. During the three
month period ended March 31, 1997, the hotel's gross room revenues were $0.3
million.
During the three month period ended March 31, 1997, LLM had operating
income of $0.2 million compared with operating income of $1.8 million for the
prior year period, a $1.6 million decrease or 89%. This decrease was primarily
due to the casino closing as noted above and competitive pressures.
Other factors
The Company believes the purchase of the River Park in April 1996 has
enhanced casino marketing efforts at Lady Luck Natchez by enabling it to offer
casino customers rooms at a Company operated hotel facility.
While other gaming projects have been announced in the Natchez market, none
are being developed at this time. If additional gaming projects were developed
in the Natchez market, LLM could be materially adversely affected.
If the Company develops its Vicksburg Project, the Company believes that
the revenues of LLM would not be materially adversely affected but, rather, the
revenues for the Vicksburg Project would be taken from the four existing
Vicksburg casinos.
23
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Lady Luck Bettendorf (a)
<S> <C> <C> <C>
% Increase
(Decrease)
Three months ended March 31, 1997 vs.
1997 1996 1996
Gross revenues................... $18.6 $15.7 18
Net revenues..................... 17.4 15.1 15
Management/license fee........... 0.4 0.4 -
Operating income................. 1.5 1.5 -
Operating margin (b)............. 9% 10% (1)pt
</TABLE>
____________________
(a) Lady Luck Bettendorf is 50% owned by LLQC. The Company includes 50% of
its net income as equity in net income of affiliates using the equity method of
accounting.
(b) Operating income divided by net revenues.
____________________
The Bettendorf Joint Venture's gross revenues rose from $15.7 million to
$18.6 million during the three month period ended March 31, 1996 and 1997,
respectively, an increase of $2.9 million or 18%. This increase in gross
revenues was due to increases in the average number of slot machines in
operation and the average daily win per slot machine, and increases in food and
beverage revenues.
The Bettendorf Joint Venture has generated a steadily increasing average
daily net win per slot machine. During the three month period ended March 31,
1996, the Bettendorf Joint Venture generated average daily net win per slot
machine of $159 compared to average daily net win per slot machine of $182 for
the three month period ended March 31, 1997, a $23 increase or 14%. This
increase in average daily net win per slot machine was achieved despite an 8%
increase in the average number of slot machines. For the three month period
ended March 31, 1997, average daily net win per table was $710, which was a $170
decrease, or 19%, from the average daily net win per table of $880 achieved in
the three month period ended March 31, 1996. This was partially offset by the
19% increase in the average number of table games.
During the three months ended March 31, 1997, operating income remained
unchanged from the three month period ended March 31, 1996 despite the net
increase revenues described above. The offsetting increase in expenses was
primarily due to increases in promotional allowances for food and beverage
furnished to customers by the casino. This increase was offset partially by: (i)
improved food and beverage operating margins (ii) increased selling, general and
administrative expenses for cash giveaways, special promotions and direct mail,
and (iii) a 3 percent increase in casino expenses as a percentage of casino
revenues primarily due to special promotions involving cash incentives to slot
players.
24
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Lady Luck Biloxi
<S> <C> <C> <C>
% Increase
(Decrease)
Three months ended March 31, 1997 vs.
1997 1996 1996
Gross revenues................... $8.1 7.1 14
Net revenues..................... 7.3 6.4 14
Management/license fee........... 0.3 0.3 -
Operating loss................... (0.8) (0.7) 14
Operating margin (a)............. (11)% (11)% -
</TABLE>
____________________
(a) Operating income divided by net revenues
____________________
During the three month period ended March 31, 1996 and 1997, total gross
revenues increased from $7.1 million to $8.1 million. Slot machine revenues
increased $1.2 million; however, the increase was partially offset by a $0.1
million decrease in table games revenues and a $0.1 million decrease in food and
beverage revenues.
This increase in slot revenues was due to an increase in the average number
of slot machines in operation during these comparative three month period which
increased from 602 to 650, an increase of 48 or 8% and an increase in the
average daily net win per slot machine from $82 to $98, an increase of $16 or
20%. The decrease in table games revenues during these comparative periods was
due to a decrease in the average number of table games in operation from 24 to
23, a decrease of 1 or 4% and a decrease in the average daily net win per table
game from $535 to $523, a decrease of $12 or 2%.
LLB's operating loss increased from $0.7 million to $0.8 million in the
three month period ended March 31, 1996 and 1997, respectively despite the net
increase in revenues described above. The offsetting increase in expenses was
primarily due to: (i) increases in selling expenses from additional advertising,
direct mail and bus programs, (ii) non-recurring general and administrative
expenses of approximately $250,000, and (iii) a decrease in table and card game
operating margin due to decreases in table games drop and the related hold
percentage.
Other factors
Additional hotel capacity has been added in close proximity to LLB and
additional casino and hotel capacity are currently under construction in Biloxi.
The Company believes the Gulf Coast gaming market will remain at least constant
in the near-term and that the long-term effects on LLB's results of operations
are not presently known.
25
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Lady Luck Central City
<S> <C> <C> <C>
% Increase
(Decrease)
Three months ended March 31, 1997 vs.
1997 1996 1996
Gross revenues................... $1.5 1.5 -
Net revenues..................... 1.4 1.4 -
Management/license fee........... 0.1 0.1 -
Operating loss................... (0.3) (0.3) -
Operating margin (a)............. (21)% (21)% -
</TABLE>
____________________
(a) Operating income divided by net revenues.
____________________
GCI's gross revenues for the three month period ended March 31, 1997
remained unchanged from the $1.5 million earned during the three month period
ended March 31, 1996.
Slot revenues increased $ 0.1 million for the three month period ended
March 31, 1997 compared to three month period ended March 31, 1997 due to the
following: (i) an increase in the average number of slot machines in operation
from 289 to 300, an increase of 11 or 4%, and (ii) an increase in average daily
net win per slot machine from $45 to $47, an increase of $2 or 4%. This increase
in slot revenues was offset by a decrease in table and card game revenues from
the elimination of card games and declines in table play.
Other factors
During November 1996, GCI entered into the non-binding Memorandum with
Bullwhackers. The Memorandum provides for a combination of the respective
companies' gaming establishments which currently operate on adjacent real
property in Central City, Colorado and the use of, but not the title transfer or
assumption of debt related to, the assets of GCI and Bullwhackers. Pursuant to
the Memorandum, Bullwhackers shall provide resources and expertise to manage the
joint operation subsequent to the completion of certain capital improvements to
be made by GCI to combine the facilities and improve GCI's gaming equipment,
which capital improvements shall in no event exceed $1.5 million. The Memorandum
provides for distributions to be made at least quarterly in accordance with
certain priorities which first recognize the capital improvements to be made by
GCI. The Memorandum provides GCI an option to purchase the assets of
Bullwhackers and Bullwhackers an option to purchase the assets of GCI upon
advance written notice after the joint facility commences gaming operations. In
addition, the Memorandum provides a put option for Bullwhackers to sell its
assets to GCI under similar terms. The option price shall be determined based on
carrying amounts or earnings multiples and shall be at discounted amounts if the
sale is within a certain period and shall be in exchange for certain
consideration, a portion of which may include LLGC common stock. The
transactions contemplated by the Memorandum are subject to various contingencies
including, inter alia, the due diligence investigation of the parties,
governmental approvals, approval by the Boards of Directors of GCI and
Bullwhackers, and the negotiation and execution of definitive agreements.
However, no assurance can be provided that these contingencies will be
satisfied.
Additional casinos developed in the Central City or competing Colorado
gaming markets or changes in the Colorado gaming legislation may have a material
adverse effect on the net revenues and operating results of GCI.
26
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
During the three month period ended March 31, 1997, the Company generated
$5.3 million in cash from operations. Cash flow from operations and cash on hand
at the beginning of the period were the primary sources of cash during the three
month period ended March 31, 1997. The primary uses of cash and non-cash
resources during the three month period ended March 31, 1997, other than
operating expenditures, include:
A. $0.7 million cash for the purchase of property and equipment. Also
included are portions of the costs of remodeling a portion of the River Park.
B. $1.0 million cash for payment of debt and slot contracts.
C. $0.3 million for the acquisition of slot machines and other assets by
certain subsidiaries for the incurrence of indebtedness.
GCI did not generate positive operating cash flow during the three month
period ended March 31, 1997. Due to debt service requirements on an equipment
note payable and a mortgage note, GCI required cash infusions of $0.1 million
during the three month period ended March 31, 1997 and for the remainder of
1997, is expected to require additional cash infusions to cover up to $80,000 of
scheduled repayments on an equipment note payable and anticipated operating cash
shortfalls, depending upon the timing of the transaction contemplated by the
Memorandum as described below becoming effective, if at all.
During November 1996, GCI entered into the Memorandum with Bullwhackers.
Pursuant to the Memorandum, certain capital improvements would be made by GCI to
combine the GCI and Bullwhackers facilities and improve GCI's gaming equipment,
which capital improvements shall in no event exceed $1.5 million. The Memorandum
provides for distributions to be made quarterly in accordance with certain
priorities which first recognize the capital improvements to be made by GCI. The
Memorandum provides GCI an option to purchase the assets of Bullwhackers and
Bullwhackers an option to purchase the assets of GCI upon advance written notice
after the joint facility commences gaming operations in addition to a put option
for Bullwhackers to sell its assets to GCI under similar terms. The transactions
contemplated by the Memorandum are subject to various contingencies including,
inter alia, the due diligence investigation of the parties, governmental
approvals, approval by the Boards of Directors of GCI and Bullwhackers, and the
negotiation and execution of definitive agreements. There can be no assurance
that these contingencies will be satisfied.
The Company is making improvements to the Rhythm & Blues casino of
approximately $0.5 million during the remainder of 1997. The Company is
remodeling additional portions of the River Park and expects to spend
approximately $0.3 million during the remainder of 1997 in addition to amounts
already expended. The additional River Park remodeling includes replacement of
certain furniture and equipment.
Various other amounts of cash and non-cash resources may be used during the
remainder of 1997 for capital improvements, expansions or acquisitions which
cannot currently be estimated and may be contingent upon market conditions and
other factors. If significant cash or other resources become available, the
Company may make additional capital expenditures related to the Lady Luck Rhythm
& Blues, Lady Luck Natchez, Lady Luck Biloxi and other capital acquisitions,
improvements, or expansions which cannot currently be estimated and may be
contingent upon market conditions and the amount of excess cash or non-cash
resources available, if any. Capital expenditures at Lady Luck Rhythm & Blues
could include additional hotel rooms and signage. In any case, the amount of
such capital expenditures will be based upon cash available and market
conditions at the time any commitment is made.
The Company may also repurchase a portion of the 2001 Notes from time to
time in early satisfaction of any required repurchase expected pursuant to the
Indenture or otherwise, the amount of which and the timing of repurchase cannot
currently be estimated and is dependent on adequate cash availability and market
conditions.
27
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company has entered into an agreement for the construction of a
cruising gaming vessel in the amount of $16.0 million and as of March 31, 1997,
approximately $6.0 million has been expended under this contract, approximately
$1.9 million of which is included in construction payables at March 31, 1997. It
is anticipated that this vessel will be utilized by LLK and, therefore, the
Missouri Project will be responsible for payment of the remaining amounts under
the contract. If the Missouri Project is never consummated the Company may be
responsible for the then outstanding obligations.
No further significant expenditures for projects under development are
anticipated from existing cash or cash flow from operations. If the Company
determines it needs additional funds, there can be no assurance that such funds,
whether from equity or debt financing or other sources, will be available, or if
available, will be on terms satisfactory to the Company.
LLGC has been named as a defendant in a purported shareholder class action
lawsuit alleging violations by the Company of the Securities Act of 1933 and the
Securities Exchange Act of 1934 for alleged material misrepresentations and
omissions in connection with LLGC's 1993 prospectus and initial public offering
of Common Stock. The complaint seeks, inter alia, injunctive relief, rescission
and unspecified compensatory damages. In addition to LLGC, the complaint also
names as defendants Andrew H. Tompkins, Chairman and Chief Executive Officer of
LLGC, Alain Uboldi, Director and Chief Operating Officer of LLGC, Michael
Hlavsa, the former Chief Financial Officer of LLGC, Bear Stearns & Co., Inc. and
Oppenheimer & Co., Inc., who acted as lead underwriters for the initial public
offering. The Company has retained outside counsel to respond to the complaint
and while the outcome of this matter cannot presently be determined, the Company
believes based in part on advice of counsel, that it has meritorious defenses.
The Company and certain of its joint venture partners (the "Defendants")
are defendants in a lawsuit brought by the country of Greece and its Minister of
Tourism before the Greek Multi-Member Court of First Instance. The action
alleges that the Defendants failed to make certain payments in connection with
the gaming license bid process for Patras, Greece. The payments the Company is
alleged to have been required to make aggregate approximately 2.1 billion
drachma (which was approximately $7,722,000 as of April 14, 1997 based upon
published exchange rates). Although it is difficult to determine the damages
being sought from the lawsuit, the action may seek damages up to such aggregate
amount. The Company's Greek counsel is defending the lawsuit and in management's
opinion, the ultimate outcome of this matter is not presently known.
Also, a Greek architect filed an action against the Company alleging that
he was retained by the Company to provide professional services with respect to
a casino in Loutraki, Greece. The plaintiff in such action sought damages of
approximately $800,000. On July 29, 1996, the Company's Greek counsel was served
with a decision by the Athens Court of First Instance in such matter. The Greek
Court entered judgement against the Company in the amount of approximately 87.1
million drachma (which was approximately $320,000 as of April 14, 1997, based
upon published exchange rates). The Company intends to appeal the Court's
decision and has been informed by its Greek counsel that it has meritorious
grounds to prosecute such appeal.
On November 5, 1996, the United States Bankruptcy Court for the Northern
District of Mississippi dismissed a lawsuit which had been brought by Superior
against LLM on or about September 23, 1993. Superior had previously done
construction work for LLM on its Natchez barge ("Lady Luck Natchez"), as well as
some minor preparatory work on one other barge of the Company. Such proceeding
alleged damages of approximately $47,000,000, of which approximately $3,400,000
was alleged for additional construction work on Lady Luck Natchez and the
remaining amount was alleged for unjust enrichment, for causing the bankruptcy
of Superior and for future work Superior expected to perform for the Company.
Superior has appealed the decision to dismiss the action. The Company, based in
part on the advice of its counsel, believes that it has meritorious defenses and
does not believe that the appeal of the decision will have a material adverse
effect on the Company's financial condition or results of operations.
The Company is subject to certain federal, state and local environmental
protection, health and safety laws, regulations and ordinances that apply to
non-gaming businesses generally. In the course of conducting the environmental
investigation at the proposed site for Lady Luck Gulfport, the Company
identified certain contamination at the site. Pursuant to an administrative
28
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
order issued by the Mississippi Department of Environmental Quality, the Company
undertook remedial activities, including soil remediation and the installation
of groundwater monitoring wells. No additional remediation is currently
required, although some additional soil remediation may be required in the
course of obtaining a building permit. Although there can be no assurances, the
Company believes that the cost of such additional soil remediation, if any, will
not have a material impact on the liquidity or capital resources of the Company.
Additionally, although the Company knows of no other pre-existing conditions at
its Operating Casinos or at the intended sites for the Development Stage
Projects or the Pre-development Stage Projects that will result in any material
environmental liability or delay, there can be no assurance that pre-existing
conditions will not be discovered and result in material liability or delay to
the Company.
In the opinion of management, the Company believes it will have sufficient
cash flow to meet its debt service and other cash outflow requirements and
maintain compliance with the revised covenants of the Indenture during the
remainder of 1997. There can be no assurance, however, that the Company will in
fact have sufficient cash resources to meet its cash requirements under any
circumstances.
Impact of Inflation
Absent changes in competitive and economic conditions or in specific prices
affecting the industry, management does not expect that inflation will have a
significant impact on the Company's operations. Changes in specific prices (such
as fuel and transportation prices) relative to the general rate of inflation may
have a material effect on the hotel-casino industry.
Seasonality and Weather
A flood or other severe weather condition could cause the Company to lose
the use of one or more dockside facilities for an extended period. The inability
to use a dockside facility during any period could have a material adverse
effect on the Company's financial results. In addition, a disproportionate
amount of GCI's revenues is received during the summer months. GCI is accessible
only via a narrow, winding mountain road and, accordingly, inclement weather may
have an adverse effect on revenues. While seasonal revenue fluctuations may
occur at the Company's existing and proposed casinos in Mississippi, Iowa and
Missouri, such seasonal fluctuations are expected to be less significant than
those experienced in Colorado.
29
<PAGE>
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company has been named as a defendant in a purported shareholder class
action lawsuit alleging violations by the Company of the Securities Act of 1933
and the Securities Exchange Act of 1934 for alleged material misrepresentations
and omissions in connection with the Company's 1993 prospectus and initial
public offering of Common Stock. The complaint seeks, inter alia, injunctive
relief, rescission and unspecified compensatory damages. In addition to the
Company, the complaint also names as defendants Andrew H. Tompkins, Chairman and
Chief Executive Officer of LLGC, Alain Uboldi, Director and Chief Operating
Officer of LLGC, Michael Hlavsa, the former Chief Financial Officer of LLGC,
Bear Stearns & Co., Inc. and Oppenheimer & Co., Inc., who acted as lead
underwriters for the initial public offering. The Company has retained outside
counsel to respond to the complaint and while the outcome of this matter cannot
presently be determined, the Company believes based in part on advice of
counsel, that it has meritorious defenses.
The Company and certain of its joint venture partners (the "Defendants")
are defendants in a lawsuit brought by the country of Greece and its Minister of
Tourism before the Greek Multi-Member Court of First Instance. The action
alleges that the Defendants failed to make certain payments in connection with
the gaming license bid process for Patras, Greece. The payments the Company is
alleged to have been required to make aggregate approximately 2.1 billion
drachma (which was approximately $7,722,000 as of April 14, 1997 based upon
published exchange rates). Although it is difficult to determine the damages
being sought from the lawsuit, the action may seek damages up to such aggregate
amount. The Company's Greek counsel is defending the lawsuit and in management's
opinion, the ultimate outcome of this matter is not presently known.
Also, a Greek architect filed an action against the Company alleging that
he was retained by the Company to provide professional services with respect to
a casino in Loutraki, Greece. The plaintiff in such action sought damages of
approximately $800,000. On July 29, 1996, the Company's Greek counsel was served
with a decision by the Athens Court of First Instance in such matter. The Greek
Court entered judgement against the Company in the amount of approximately 87.1
million drachma (which was approximately $320,000 as of April 14, 1997 based
upon published rates). The Company intends to appeal the Court's decision and
has been informed by its Greek counsel that it has meritorious grounds to
prosecute such appeal.
On November 5, 1996, the United States Bankruptcy Court for the Northern
District of Mississippi dismissed a lawsuit which had been brought by Superior
Boat Works, Inc. ("Superior") against LLM on or about September 23, 1993.
Superior had previously done construction work for LLM on its Natchez barge
("Lady Luck Natchez"), as well as some minor preparatory work on one other barge
of the Company. Such proceeding alleged damages of approximately $47,000,000, of
which approximately $3,400,000 was alleged for additional construction work on
Lady Luck Natchez and the remaining amount was alleged for unjust enrichment,
for causing the bankruptcy of Superior and for future work Superior expected to
perform for the Company. Superior has appealed the decision to dismiss the
action. The Company, based in part on the advice of its counsel, believes that
it has meritorious defenses and does not believe that the appeal of the decision
will have a material adverse effect on the Company's financial condition or
results of operations.
In addition, from time to time the Company is a party to legal proceedings
arising in the ordinary course of business. The Company does not believe that
the results of such legal proceedings will have a material adverse impact on its
financial condition.
30
<PAGE>
Item 2. CHANGES IN SECURITIES
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
(a) None.
(b) None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
Item 5. OTHER INFORMATION - None.
31
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description of Exhibits
3.1 Certificate of Incorporation of Lady Luck Gaming Corporation, as
amended. Incorporated by reference to Exhibit 3.1 to the Form S-1
Registration Statement filed by Lady Luck Gaming Corporation
under the Securities Act (No. 33-63930) (the "Form S-1").
3.2 By-Laws of Lady Luck Gaming Corporation, as amended. Incorporated
by reference to Exhibit 3.2 to the Form S- 1.
4.1 Indenture dated as of February 17, 1994 by and among Lady Luck
Gaming Finance Corporation, the Guarantors named therein and
First Trust National Association (the "Indenture"). Incorporated
by reference to Exhibit 4.1 to the Annual Report on Form 10-K for
the fiscal year ended December 31, 1993 by Lady Luck Gaming
Corporation (the "Form 10-K").
4.2 Registration Rights Agreement dated as of February 17, 1994 by
and among Lady Luck Gaming Finance Corporation, the Guarantors
named therein and the Purchasers who were signatories thereto.
Incorporated by reference to Exhibit 4.2 to the Form 10-K.
4.3 Pledge Agreement dated as of February 17, 1994 from Lady Luck
Gaming Finance Corporation, as Pledgor to First Trust National
Association, as Trustee. Incorporated by reference to Exhibit 4.4
to the Form 10-K.
4.4 Pledge Agreement dated as of February 17, 1994 from Lady Luck
Gaming Finance Corporation, as Pledgor to First Trust National
Association, as Trustee. Incorporated by reference to Exhibit 4.4
to the Form 10-K.
4.5 Leasehold Deed of Trust, Assignment of Rents and Security
Agreement dated as of February 17, 1994 by and among Lady Luck
Gulfport, Inc., as Trustor, Jim B. Tohill as Trustee, and First
Trust National Association, as Beneficiary. Incorporated by
reference to National Exhibit 4.5 to the Form 10-K.
4.6 Leasehold Deed of Trust, Assignment of Rents and Security
Agreement dated as of February 17, 1994 by and among Lady Luck
Mississippi, Inc. as Trustor, Jim B. Tohill, as Trustee, and
First Trust National Association, as Beneficiary. Incorporated by
reference to Exhibit 4.6 to the Form 10-K.
4.7 Leasehold Deed of Trust, Assignment of Rents and Security
Agreement dated as of February 17, 1994 by and among Lady Luck
Tunica, Inc., as Trustor, Jim B. Tohill, as Trustee, and First
Trust National Association, as Beneficiary. Incorporated by
reference to Exhibit 4.7 to the Form 10-K.
4.8 Leasehold Deed of Trust, Assignment of Rents and Security
Agreement dated as of February 17, 1994 by and among Lady Luck
Biloxi, Inc., as Trustor, Jim B. Tohill, as Trustee, and First
Trust National Association, as Beneficiary. Incorporated by
reference to Exhibit 4.8 to the Form 10-K.
4.9 Leasehold Deed of Trust, Assignment of Rents and Security
Agreement dated as of February 17, 1994 by and among Magnolia
Lady, Inc., as Trustor, Jim B. Tohill, as Trustee, and First
Trust National Association, as Beneficiary. Incorporated by
reference to Exhibit 4.9 to the Form 10-K.
4.10 Leasehold Deed of Trust, Assignment of Rents and Security
Agreement dated as of February 17, 1994 by and among Gold Coin
Incorporated, as Trustor, Jim B. Tohill, as Trustee, and First
Trust National Association, as Beneficiary. Incorporated by
reference to Exhibit 4.10 to the Form 10-K.
32
<PAGE>
4.11 First Preferred Vessel Mortgage on the Whole of the Lady Luck I
dated as of February 17, 1994 from Lady Luck Mississippi, Inc. in
favor of First Trust National Association. Incorporated by
reference to Exhibit 4.11 to the Form 10-K.
4.12 First Preferred Fleet Mortgage on the Whole of the Lady Luck
Tunica I and Lady Luck Tunica II dated as of February 17, 1994
from Lady Luck Tunica, Inc. in favor of First Trust National
Association. Incorporated by reference to Exhibit 4.12 to the
Form 10-K.
4.13 First Preferred Vessel Mortgage on the Whole of the Lady Luck
Biloxi, Inc. dated as of February 17, 1994 from Lady Luck Biloxi,
Inc. in favor of First Trust National Association. Incorporated
by reference to Exhibit 4.13 to the Form 10-K.
4.14 Security Agreement dated as of February 17, 1994 by and between
Lady Luck Kimmswick, Inc. and First Trust National Association.
Incorporated by reference to Exhibit 4.14 to the Form 10-K.
4.15 Security Agreement dated as of February 17, 1994 by and between
Lady Luck Vicksburg, Inc. and First Trust National Association.
Incorporated by reference to Exhibit 4.15 to the Form 10-K.
4.16 Deed of Trust, Assignment of Rents and Security Agreement dated
as of February 17, 1994 by and among Gold Coin Incorporated, the
Public Trustee of the County of Gilpin, State of Colorado and
First Trust National Association. Incorporated by reference to
Exhibit 4.16 to the Form 10-K.
4.17 Deed of Trust, Assignment of Rents and Security Agreement dated
as of February 17, 1994 by and among Lady Luck Biloxi, Inc., Jim
B. Tohill and First Trust National Association. Incorporated by
reference to Exhibit 4.17 to the Form 10-K.
4.18 Deed of Trust, Assignment of Rents and Security agreement dated
as of February 17, 1994 by and among Lady Luck Mississippi, Inc.,
Jim B. Tohill and First Trust National Association. Incorporated
by reference to Exhibit 4.18 to the Form 10-K.
4.19 Assignment of Option dated as of February 17, 1994 by Lady Luck
Gulfport, Inc. in favor of First Trust National Association.
Incorporated by reference to Exhibit 4.19 to the Form 10-K.
4.20 Assignment of Option dated as of February 17, 1994 by Lady Luck
Kimmswick, Inc. in favor of First Trust National Association.
Incorporated by reference to Exhibit 4.20 to the Form 10-K.
4.21 Assignment of Option dated as of February 17, 1994 by Lady Luck
Vicksburg, Inc. in favor of First Trust National Association.
Incorporated by reference to Exhibit 4.21 to the Form 10-K.
4.22 Stockholders Agreement dated as of April 1, 1993 by and among the
Lady Luck Gaming Corporation, Andrew H. Tompkins and all current
stockholders and warrant holders of Lady Luck Gaming Corporation.
Incorporated by reference to Exhibit 4.14 to the Form S-1.
4.23 Cash Collateral and Disbursement Agreement dated February 17,
1994 among First Trust National Association. the Company and the
Guarantors named therein. Incorporated by reference to Exhibit
4.18 to the Form 10-K.
4.24 First Amendment to Stockholders Agreement dated as of June 9,
1993, by and among Andrew H. Tompkins and the Stockholders named
therein. Incorporated by reference to Exhibit 4.24 to the
Registration Statement on Form S-4 (Registration No. 33-
91616)(the "Form S-4, No. 91616").
4.25 Second Supplemental Indenture dated as of March 17, 1995 by and
among Lady Luck Gaming Finance Corporation, the Guarantors named
therein and First Trust National Association. Incorporated by
reference to Exhibit 4.25 to the Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1995 by Lady Luck Gaming
Corporation.
33
<PAGE>
4.26 Third Supplemental Indenture by and among Lady Luck Gaming
Finance Corporation, Lady Luck Quad Cities, Inc. and First Trust
National Association. Incorporated by reference to Exhibit 4.26
to the Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 by Lady Luck Gaming Corporation the ("1995 Form
10-K.")
4.27 Fourth Supplemental Indenture by and among Lady Luck Gaming
Finance Corporation, the Guarantors named therein and First Trust
National Association. Incorporated by reference to Exhibit 4.27
to the 1995 Form 10- K.
4.28 Specimen Common Stock Certificate. Incorporated by reference to
Exhibit 4.15 to the Form S-1.
4.29 Security Agreement (Lady Luck Gaming Finance Corporation) by and
between Lady Luck Gaming Finance Corporation and First Trust
National Association. Incorporated by reference to Exhibit 4.29
to the 1995 Form 10-K
4.30 Security Agreement (Lady Luck Gaming Corporation) by and between
Lady Luck Gaming Corporation and First Trust National
Association. Incorporated by reference to Exhibit 4.30 to the
1995 Form 10-K
4.31 Pledge Agreement between Lady Luck Quad Cities, Inc. and First
Trust National Association. Incorporated by reference to Exhibit
4.31 to the 1995 Form 10-K
10.1.Lease for parking lot in Biloxi, Mississippi dated May 28, 1993
by and between John M. Mladnick and Lady Luck Biloxi, Inc.
Incorporated by reference to Exhibit 10.18 to the Form S-1.
10.2 Lease Agreement dated January 12, 1994 by and among Tyrone J.
Gollott, Gary F. Gollott, Thomas H. Gollott and Lady Luck Biloxi,
Inc. Incorporated by reference to Exhibit 10.10 to the Form 10-K.
10.3 Lease Agreement dated January 17, 1994 by and between Michael S.
Sinopoli and Lady Luck Biloxi, Inc. Incorporated by reference to
Exhibit 10.11 to the Form 10-K.
10.4 Lease for Parcel in Biloxi, Mississippi dated July 25, 1993 by
and among Lady Luck Biloxi, Inc. and Joe G., Jackie R. and John
Brett Aldrich. Incorporated by reference to Exhibit 10.12 to the
Form S-1.
10.5 Lease for casino site in Tunica, Mississippi, dated March 18,
1993 between Lady Luck Tunica, Inc. and D.C. Parker and Richard
B. Flowers. Incorporated by reference to Exhibit 10.5 to the Form
S-1.
10.6 Lease for casino site in Gulfport, Mississippi dated October 5,
1992 between Lady Luck Gulfport, Inc. and Mississippi Coast
Marine Inc. Incorporated by reference to Exhibit 10.6 to the Form
S-1.
10.7 Lease in Gulfport, Mississippi dated October 1, 1993 by and
between Coast Materials Company and Lady Luck Gulfport, Inc.
Incorporated by reference to Exhibit 10.15 to the Form 10-K.
10.8 Agreement to Lease in Gulfport, Mississippi dated September 23,
1993 by and among Robert C. Fielding, Lady Luck Gulfport, Inc.
and Lady Luck Gaming Corporation. Incorporated by reference to
Exhibit 10.16 to the Form 10-K.
10.9 Leases of part of casino site in Natchez, Mississippi dated
October 29, 1991 between Lady Luck Mississippi, Inc. and Silver
Land, Inc. Incorporated by reference to Exhibit 10.7 to the Form
S-1.
34
<PAGE>
10.10 Silver Land, Inc. Amended and Restated Lease Agreement dated
December 31, 1992. Incorporated by reference to Exhibit 10.8 to
the Form S-1.
10.11 Lease for part of casino site in Natchez, Mississippi dated June
30, 1992 by and between Lady Luck Mississippi, Inc. and the City
of Natchez and amendment thereto dated October 27, 1992.
Incorporated by reference to Exhibit 10.9 to the Form S-1.
10.12 Lease for part of casino site in Natchez, Mississippi dated June
30, 1992 by and between Lady Luck Mississippi, Inc. and the City
of Natchez and amendment thereto dated October 27, 1992.
Incorporated by reference to Exhibit 10.10 to the Form S-1.
10.13 Sublease Contract dated August 13, 1993 by and between Callon
Petroleum Company and Lady Luck Mississippi, Inc. Incorporated by
reference to Exhibit 10.22 to the Form 10-K.
10.14 Lease for parking lot in Central City, Colorado dated June 1,
1993 by and among Gold Coin Incorporated and J. Scott Bradley and
Phyllis M. Brown (Lots 1-12). Incorporated by reference to
Exhibit 10.21 to the Form S-4 Registration Statement previously
filed under the Securities Act (No. 33-65232) (the "Form S-4, No.
65232").
10.15 Lease for parking lot in Central City, Colorado dated June 1,
1993 by and among J. Scott Bradley and Phyllis M. Brown and Gold
Coin Incorporated (Lots 13-21). Incorporated by reference to
Exhibit 10.22 to the Form S-4, No. 65232.
10.16 Agreement of Option, Purchase and Sale and Joint Escrow
Instructions for Vicksburg, Mississippi casino site dated May 21,
1993 by and between Lady Luck Vicksburg, Inc. and Vicksburg
Terminal Company, Inc. Incorporated by reference to Exhibit 10.11
to the Form S-1.
10.17 Option to purchase site in Jefferson County, Missouri dated July
8, 1993 by and between Lady Luck Kimmswick, Inc. and Donald J.
Branch. Incorporated by reference to Exhibit 10.17 to the Form
S-1.
10.18 Lease in Coahoma, Mississippi dated November 30, 1993 (sic) by
and among Roger Allen Johnson, Jr., Charles Bryant Johnson and
Magnolia Lady, Inc. Incorporated by reference to Exhibit 10.28 to
the Form 10-K.
10.19 Agreement dated March 19, 1994 by and among Lady Luck Gaming
Corporation, Old River Development, Inc. and D.J. Brata.
Incorporated by reference to Exhibit 10.29 to the Form 10-K.
10.20 Lady Luck Gaming Corporation Employee Stock Option Plan.
Incorporated by reference to Exhibit 10.31 to the Form 10-K.
10.21 Indemnification Agreement dated April 28, 1993 by and among
Terry Christensen, Barry Fink, Kimberly Harrison, Colorado Casino
Properties Investment L.P. and Lady Luck Gaming Corporation.
Incorporated by reference to Exhibit 10.13 to the Form S-1.
10.22 $2,300,000 Promissory Note of Gold Coin Incorporated dated April
28, 1993. Incorporated by reference to Exhibit 10.14 to the Form
S-1.
10.23 Warrant Agreement dated April 1, 1993. Incorporated by reference
to Exhibit 10.15 to the Form S-1.
10.24 Amendment to Agreement dated March 19, 1994 (sic) by and among
Lady Luck Gaming Corporation, Old River Development, Inc. and
D.J. Brata. Incorporated by reference to Exhibit 10.32 to the
Form S-4 registration statement filed under the Securities Act
(No. 33-77184) (the "Form S-4, No. 77184").
10.25 Option Agreement dated April 28, 1994 by and between
Seven-Thirty, Inc. and Lady Luck Scott City. Inc. Incorporated by
reference to Exhibit 10.33 to the Form S-4, No. 77184.
35
<PAGE>
10.26 Lease dated September 13, 1993 by and between Nancy Harris
Holmes, James S. Williams, Tempe Kyser Adams and Ben C. Adams as
Trustee under the Trust Agreement dated September 9, 1993, as
Lessor and D.J. Brata as Lessee. Incorporated by reference to
Exhibit 10.34 to the Quarterly Report of Form 10-Q for the
quarter ended June 30, 1994 of Lady Luck Gaming Corporation (the
"June 30, 1994 Form 10-Q.")
10.27 Assignment of Lease Agreement dated September 30, 1993 by and
between D.J. Brata, as assignor, and Old River Development, Inc.,
as assignee. Incorporated by reference to Exhibit 10.35 to the
Form 10-Q for the quarter ended June 30, 1994.
10.28 Modification of Lease Agreement dated February 8, 1994 by and
between Old River Development, Inc., Lady Luck Tunica, Inc. and
Nancy Harris Holmes, James S. Williams, Tempe Kyser Adams and Ben
C. Adams, Jr., as Trustee under the Trust dated September 9,
1993. Incorporated by reference to Exhibit 10.36 to the Form 10-
Q for the quarter ended June 30, 1994.
10.29 Second Modification of Lease Agreement dated April 7, 1994 by
and between Old River Development, Inc., Lady Luck Gaming
Corporation and Nancy Harris Holmes, James S. Williams, Tempe
Kyser Adams and Ben C. Adams, Jr., as Trustee under the Trust
Agreement dated September 9, 1993. Incorporated by reference to
Exhibit 10.37 to the June 30, 1994 Form 10-Q.
10.30 Escrow Agreement Concerning Agreement of Option and Purchase and
Sale of Property dated April 21, 1994 by and among Vicksburg
Terminal Company, Inc. and Lady Luck Vicksburg, Inc., including
Exhibit A, Agreement of Option, Purchase and Sale and Joint
Escrow Instructions. Incorporated by reference to Exhibit 10.38
to the June 30, 1994 Form 10-Q.
10.31 Agreement dated July 18, 1994 by and among Green Bridge Company,
an Iowa corporation, Bettendorf Riverfront Development Company,
L.C., an Iowa limited liability company, Lady Luck Casino, Inc.,
a Nevada corporation, and Lady Luck Gaming Corporation.
Incorporated by reference to Exhibit 10.40 to the June 30, 1994
Form 10-Q.
10.32 Management Agreement dated August 15, 1994 by and among the
Pueblo of Santa Ana, (the "Pueblo"), a federally recognized
Indian Tribe, Santa Ana Nonprofit Enterprise, an enterprise at
the Pueblo, and Lady Luck New Mexico, Inc., a New Mexico
corporation. Incorporated by reference to Exhibit 10.41 to the
Quarterly Report on Form 10-Q for the quarter ended September 30,
1994 of Lady Luck Gaming Corporation.
10.33 Letter Agreement dated October 24, 1994 by and between Alain
Uboldi and Lady Luck Gaming Corporation. Incorporated by
reference to Exhibit 10.41 to the Annual Report on Form 10-K for
the fiscal year ended December 31, 1994 by Lady Luck Gaming
Corporation (the "1994 Form 10-K").
10.34 Letter Agreement dated October 24, 1994 by and between Rory J.
Reid and Lady Luck Gaming Corporation. Incorporated by reference
to Exhibit 10.42 to the 1994 Form 10-K.
10.35 Amended and Restated Joint Venture Agreement by and among Old
River Development, Inc., D.J. Brata, Bally's Operator, Inc., a
Delaware corporation, Bally's Tunica, Inc., a Mississippi
corporation and Bally's Olympia Limited Partnership, a Delaware
limited partnership dated February 24, 1995. Incorporated by
reference to Exhibit 2(a) to the Form 8-K of Lady Luck Gaming
Corporation dated February 28, 1995.
10.36 Stock Exchange Agreement dated December 30, 1994 by and between
Grace Brothers, Ltd. an Illinois limited partnership and Lady
Luck Gaming Corporation. Incorporated by reference to Exhibit
10.44 to the 1994 Form 10-K.
10.37 Stock Exchange Agreement dated February 17, 1995 by and between
Grace Brothers, Ltd. an Illinois limited partnership and Lady
Luck Gaming Corporation. Incorporated by reference to Exhibit
10.45 to the 1994 Form 10-K.
36
<PAGE>
10.38 Real Estate Lease dated January 12, 1995 by and among
Greenbridge Company, an Iowa corporation, Bettendorf Riverfront
Development Company, L.C., an Iowa limited liability company,
Lady Luck Bettendorf, L.C., an Iowa limited liability company and
Lady Luck Quad Cities, Inc., a Delaware corporation. Incorporated
by reference to Exhibit 10.46 to the 1994 Form 10-K.
10.39 Operating Agreement dated December 2, 1994 by and between Lady
Luck Quad Cities, Inc., a Delaware corporation and Bettendorf
Riverfront Development Company, L.C., an Iowa limited liability
company. Incorporated by reference to Exhibit 10.47 to the 1994
Form 10-K.
10.40 Charter Agreement dated December 9, 1994 by and among Lady Luck
Gaming Corporation, Lady Luck Kimmswick, Inc. and Lady Luck
Bettendorf, L.C., an Iowa limited liability company. Incorporated
by reference to Exhibit 10.48 to the 1994 Form 10-K.
10.41 Memorandum of Intent dated February 22, 1995 by and among C-A
International Associates, a Virginia limited partnership and Lady
Luck Mississippi, Inc. Incorporated by reference to Exhibit 10.50
to the 1994 Form 10-K.
10.42 Agreement of General Partnership dated as of November 30, 1995
by and among Lady Luck Kimmswick, Inc., a Missouri corporation
and Davis Gaming Company II. Incorporated by reference to Exhibit
2 to the Form 8-K of Lady Luck Gaming Corporation dated December
1, 1995.
10.43 Memorandum of Understanding between Lady Luck Biloxi, Inc., Lady
Luck Gaming Corporation and Algernon Blair, Inc. Incorporated by
reference to Exhibit 10.58 to the Form S-4, No. 91616.
10.44 Contribution and Sale Agreement dated February 5, 1996 between
Lady Luck Mississippi, Inc. and Holstar, Inc. Incorporated by
reference to Exhibit 2 to the Form 8-K of Lady Luck Gaming
Corporation dated February 5, 1996.
10.45 License Agreement dated as of January 1, 1996 among Lady Luck
Casino, Inc., Lady Luck Gaming Corporation and the other parties
listed on the signature pages thereto. Incorporated by reference
to Exhibit 10.45 to the 1995 Form 10-K.
10.46 Services Agreement dated as of January 1, 1996 among Lady Luck
Gaming Corporation and Marco Polo International Marketing, Inc.
Incorporated by reference to Exhibit 10.46 to the 1995 Form 10-K.
10.47 Office Lease dated as of January 1, 1996 among Lady Luck Gaming
Corporation and Gemini, Inc. Incorporated by reference to Exhibit
10.47 to the 1995 Form 10-K.
10.48 Assignment and Assumption Agreement dated as of January 1, 1996
among Lady Luck Gaming Corporation and Lady Luck Casinos, Inc.
Incorporated by reference to Exhibit 10.48 to the 1995 Form 10-K.
10.49 Contract for the Purchase and Sale of Real Estate and Personal
Property dated as of April 12, 1996 by and between River Park
Hotel Group, Inc. and Lady Luck Mississippi, Inc. Incorporated by
reference to Exhibit 10.49 to the Quarterly Report on Form 10-Q
for the quarter ended March 31, 1996 of Lady Luck Gaming
Corporation.
10.50 Memorandum of Understanding dated November 1996 between Gold
Coin, Inc., a Delaware corporation and Colorado Gaming, Inc., a
Colorado corporation.
21 Subsidiaries of Lady Luck Gaming Corporation. Incorporated by
reference to Exhibit 21 to the 1996 Form 10-K.
27 Financial Data Schedule
37
<PAGE>
(b) Reports on Form 8-K.
None.
38
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Lady Luck Gaming Corporation
Registrant
DATE: May 13, 1997
/s/James D. Bowen
James D. Bowen
Vice President Finance and
Principal Accounting Officer
and duly authorized officer
39
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Statement of Financial Condition at March 31, 1997
(Unaudited) and the Condensed Consolidated Statement of Income for the Three
Months Ended March 31, 1997 (Unaudited) and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000906527
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 18,856
<SECURITIES> 0
<RECEIVABLES> 1,376
<ALLOWANCES> 384
<INVENTORY> 1,239
<CURRENT-ASSETS> 23,577
<PP&E> 202,833
<DEPRECIATION> 31,689
<TOTAL-ASSETS> 225,639
<CURRENT-LIABILITIES> 20,939
<BONDS> 180,283
16,902
0
<COMMON> 29
<OTHER-SE> 7,486
<TOTAL-LIABILITY-AND-EQUITY> 225,639
<SALES> 41,208
<TOTAL-REVENUES> 44,601
<CGS> 17,224
<TOTAL-COSTS> 17,224
<OTHER-EXPENSES> 16,851
<LOSS-PROVISION> 46
<INTEREST-EXPENSE> 5,672
<INCOME-PRETAX> 1,672
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,672
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,672
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
