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: June 30, 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
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 July 31, 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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June 30, 1997 December 31, 1996
Current assets:
Cash and cash equivalents................................ $ 19,000 $ 15,490
Accounts receivable, net................................. 1,116 1,276
Inventories.............................................. 1,112 1,198
Prepaid expenses......................................... 2,520 2,620
Total current assets................................. 23,748 20,584
Property and equipment, net of accumulated
depreciation and amortization of $34,659 and
$28,736 as of June 30, 1997 and December 31,
1996, respectively....................................... 169,365 173,119
Other assets:
Pre-opening costs........................................ 1,381 1,353
Deferred financing fees and costs net of
accumulated amortization of $2,915 and
$2,482 as of June 30, 1997 and
December 31, 1996, respectively...................... 3,172 3,605
Investment in unconsolidated affiliates, net............. 23,825 21,449
Other.................................................... 3,754 3,608
32,132 30,015
TOTAL ASSETS.................................................. $ 225,245 $ 223,718
The accompanying notes are an integral part of these condensed consolidated balance sheets.
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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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June 30, 1997 December 31, 1996
Current liabilities:
Current portion of long-term debt........................ $ 3,282 $ 3,385
Accrued interest......................................... 1,807 1,825
Accounts payable......................................... 5,021 4,416
Construction and retention payables...................... 1,957 1,957
Other accrued liabilities................................ 7,731 8,309
Total current liabilities............................ 19,798 19,892
Long-term debt:
Mortgage notes payable................................... 173,500 173,500
Other long-term debt..................................... 6,303 7,581
Total long-term debt................................. 179,803 181,081
Total liabilities............................... 199,601 200,973
Commitments and contingencies (Notes 6, 7 and 8)
Series A mandatory cumulative redeemable preferred
stock, $40.10 and $37.89, as of June 30, 1997
and December 31, 1996, respectively per share
liquidation value, 1,800,000 shares authorized,
433,638 shares issued and outstanding.................... 17,388 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...................................... (23,155) (25,096)
Total stockholders' equity........................... 8,256 6,315
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY..................................... $ 225,245 $ 223,718
The accompanying notes are an integral part of these condensed consolidated balance sheets.
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3
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LADY LUCK GAMING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
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1997 1996 1997 1996
Revenues:
Casino.......................................... $ 35,043 $ 36,623 $ 71,842 $ 71,345
Food and beverage............................... 4,151 3,968 8,590 7,812
Hotel........................................... 1,115 1,055 2,106 1,580
Equity in net income of
unconsolidated affiliates................... 1,434 1,523 2,376 2,661
Other........................................... 1,432 1,158 2,862 2,324
Gross revenues.............................. 43,175 44,327 87,776 85,722
Less: Promotional allowances................ (3,097) (2,828) (6,490) (5,559)
Net revenues................................ 40,078 41,499 81,286 80,163
Costs and expenses:
Casino.......................................... 14,300 13,496 29,199 26,794
Food and beverage............................... 1,796 1,717 3,484 3,383
Hotel........................................... 603 430 1,166 715
Other........................................... 68 71 142 143
Selling, general and
administrative.............................. 13,105 14,122 26,489 26,150
Related party management/license fees........... 422 515 936 1,043
Depreciation and amortization................... 2,976 2,646 5,929 5,393
Pre-opening expenses............................ - 247 - 247
Total costs and expenses.................... 33,270 33,244 67,345 63,868
Operating income .................................... 6,808 8,255 13,941 16,295
Other income (expense):
Interest income................................. 211 319 370 638
Interest expense................................ (5,723) (5,341) (11,395) (10,661)
Other........................................... 36 44 88 97
Total other income (expense)................ (5,476) (4,978) (10,937) (9,926)
Income before income tax provision................... 1,332 3,277 3,004 6,369
Income tax provision................................. 105 120 105 244
NET INCOME........................................... 1,227 3,157 2,899 6,125
Preferred stock dividends............................ 486 434 958 856
Income applicable to common stockholders............. $ 741 $ 2,723 $ 1,941 $ 5,269
NET INCOME PER SHARE
Applicable to common stockholders............... $ 0.03 $ 0.09 $ 0.07 $ 0.18
Weighted average number of common shares
outstanding..................................... 29,285,698 29,285,698 29,285,698 29,285,698
The accompanying notes are an integral part of these condensed consolidated statements.
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4
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LADY LUCK GAMING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Six Months Ended
June 30,
1997 1996
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Cash flows from operating activities:
Net income................................... $ 2,899 $ 6,125
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization................ 5,929 5,393
Amortization of bond offering
fees and costs............................ 433 432
Equity in net income of unconsolidated
affiliates................................ (2,376) (2,661)
(Increase) decrease in assets:
Accounts receivable....................... 160 (963)
Inventories............................... 86 (161)
Prepaid expenses.......................... 100 (1)
Increase (decrease) in liabilities:
Accounts payable.......................... 605 1,861
Accrued interest.......................... (18) (893)
Other accrued liabilities................. (535) (701)
Federal income taxes payable.............. (43) 20
Net cash provided by (used in)
operating activities......................... 7,240 8,451
Cash flows from investing activities:
Purchase of property and equipment........... (1,557) (17,502)
Construction and retention payables.......... - 790
Pre-opening costs............................ (28) (204)
Restricted cash.............................. - 8,858
Other assets................................. (146) (613)
Net cash provided by (used in) investing
activities................................... (1,731) (8,671)
The accompanying notes are an integral part of these condensed consolidated statements.
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5
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LADY LUCK GAMING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands, except supplemental schedule)
(Unaudited)
Six Months Ended
June 30,
1997 1996
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Cash flows from financing activities:
Issuance of notes payable................... - 40
Payments on debt and slot contracts......... (1,999) (3,502)
Net cash provided by (used in) financing
activities.................................. (1,999) (3,462)
Net increase (decrease) in cash and cash
equivalents................................. 3,510 (3,682)
Cash and cash equivalents,
beginning of period......................... 15,490 22,148
Cash and cash equivalents, end of period $ 19,000 $ 18,466
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest (net of amount capitalized
of $514 for the six months
ended June 30, 1996) ................. $ 10,980 $ 11,121
Income taxes paid........................ $ 80 $ 225
Supplemental Schedule of Non-Cash Investing and Financing Activities:
The liquidation value of the Series A mandatory cumulative redeemable preferred stock increased by approximately $958,000
and $856,000 for the six month period ended June 30, 1997 and 1996, respectively.
On April 15, 1996, Lady Luck Mississippi acquired the River Park for approximately $4,000,000, including approximately
$1,000,000 cash and a non-recourse mortgage note for the balance.
The Company entered into contracts for the purchase of slot machines and, other equipment which totaled approximately
$618,000 and $3,766,000 during the six month periods ended June 30, 1997 and 1996, respectively.
The accompanying notes an integral part of these condensed consolidated statements.
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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 and six
month periods ended June 30, 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 financial statement reclassifications for the three and
six month periods ended June 30, 1996 in order to classify amounts in a manner
consistent with the three and six month periods ended June 30, 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, Chairman and CEO of
LLGC, 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 operations 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, Mississippi casino
operations. These casinos are highly dependent on patronage by residents in
Arkansas. A change in general economic conditions, closure of the Helena Bridge
or a change in 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 and six month periods
ended June 30, 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 Condensed Consolidated Statements
of Operations for the three and six month periods ended June 30, 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 June 30, 1997 and December
31, 1996 of $19,728,000 and $20,168,000, respectively, to the Bettendorf Joint
Venture for approximately $189,000 per month plus applicable taxes, which amount
was determined based upon the cost of the assets and the Company's cost of
capital at the time the lease was consummated. 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 June 30, 1997 and December 31, 1996 of
$2,474,000 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 the cost of the assets and the Company's
cost of capital at the time the lease was entered consummated.
8
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LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company's rental income relating to these leases for the three and six
month periods ended June 30, 1997 and 1996 are as follows (in thousands):
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Three Months Ended Six Months Ended
June 30, June 30,
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1997 1996 1997 1996
Gaming vessel lease $ 566 $ 595 $ 1,133 $ 1,190
Gaming equipment lease 366 154 732 454
Total Bettendorf lease
rental income $ 932 $ 749 $ 1,865 $ 1,644
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Lady Luck Bettendorf commenced operations on April 21, 1995. All net
profits and losses from 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 up to $325,000
annually of the fees received by the Company paid to BRDC as consultants.
Lady Luck Bettendorf incurred management fees for the three and six month
periods ended June 30, 1997 and 1996 as follows (in thousands):
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Three Months Ended Six Months Ended
June 30, June 30,
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1997 1996 1997 1996
Lady Luck Bettendorf management fees $ 437 $ 453 $ 796 $ 881
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Summarized balance sheet information for the Bettendorf Joint Venture as of
June 30, 1997 and December 31, 1996 is as follows (in thousands):
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June 30, 1997 December 31, 1996
Current assets $ 6,532 $ 5,935
Property and equipment, net 15,114 12,435
Total assets $ 21,646 $ 18,370
Current liabilities $ 4,238 $ 5,492
Long-term liabilities 2,107 1,107
Members' equity 15,301 11,771
Total liabilities and
members' equity $ 21,646 $ 18,370
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9
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LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Summarized results of operations for the Bettendorf Joint Venture for the
three and six month periods ended June 30, 1997 and 1996 are as follows (in
thousands):
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Three Months Ended Six Months Ended
June 30, June 30,
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1997 1996 1997 1996
Net revenues $ 19,055 $ 16,622 $ 36,473 $ 31,677
Costs and expenses 16,967 14,772 32,943 28,428
Net income $ 2,088 $ 1,850 $ 3,530 $ 3,249
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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.
Summarized balance sheet information for the Bally's Joint Venture as of
June 30, 1997 and December 31, 1996 is as follows (in thousands): June 30, 1997
December 31, 1996
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Current assets $ 11,217 $ 8,630
Property and equipment, net 49,696 51,537
Other assets 1,031 1,041
Total assets $ 61,944 $ 61,208
Current liabilities $ 7,443 $ 7,279
Long-term liabilities 5,825 6,994
Partners' capital 48,676 46,935
Total liabilities and
partners' capital $ 61,944 $ 61,208
</TABLE>
Summarized results of operations for the Bally's Joint Venture for the
three and six month periods ended June 30, 1997 and 1996 are as follows (in
thousands): Three Months Ended Six Months Ended June 30, June 30, 1997 1996 1997
1996
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Net revenues $ 16,303 $ 18,808 $ 31,741 $ 39,237
Costs and expenses 15,191 17,098 29,996 36,274
Net income $ 1,112 $ 1,710 $ 1,745 $ 2,963
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10
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LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Net income of the Bally's Joint Venture for the three and six month periods
ended June 30, 1996 includes pre- opening expenses of $1.3 million and $3.3
million, respectively.
5. Long-Term Debt
At June 30, 1997 and December 31, 1996, long-term debt of the Company
consisted of the following:
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(in thousands)
June 30, 1997 December 31, 1996
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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............................................... 714 833
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........................................... 2,579 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....... 2,850 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 220 385
Other..................................................... 472 484
183,085 184,466
Less: current portion..................................... (3,282) (3,385)
Total long-term debt................................ $ 179,803 $ 181,081
</TABLE>
The Indenture dated February 17, 1994, as amended and supplemented,
relating to 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 June 30, 1997 and
December 31, 1996.
11
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LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. Employment Agreements
On October 24, 1994, LLGC entered into 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 each of 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 to such executive 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 number of options
held by such executive and the difference between the exercise price of each
option held by Mr. Uboldi or Mr. Reid (whether or not fully exercisable) and the
then 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 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 $7,497,000 as of July 10, 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 judgment against the Company in the amount of approximately 87.1
million drachma (which was approximately $311,000 as of July 10, 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.
12
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
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 Department of
Transportation 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 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 had 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.
13
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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
Bettendorf Joint Venture
The Bettendorf Joint Venture has entered into an agreement for the
construction of an expansion of its facility. Construction, which began on June
23, 1997, includes a 259-room hotel, a 75-slip recreational marina, indoor
swimming pool and fitness center, restaurant facilities, and a fully enclosed
walkway to the riverboat casino. The expansion project is estimated to cost
$39.5 million. The City of Bettendorf, as part of a development agreement, will
provide $7.5 million of the $39.5 million to construct a 500-car parking garage,
and an overpass to provide improved access to the facility. The project is
scheduled to be completed in fall of 1998. Financing of the expansion is
non-recourse to the Company.
Lady Luck Kimmswick
The Company has an agreement for the construction of a cruising gaming
vessel in the amount of $16.0 million and as of June 30, 1997, 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. However, construction has been discontinued and is not
anticipated to resume until such time as LLK is selected for investigation by
the State of Missouri with regard to its gaming license application.
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.
Kimmswick, Missouri
On November 30, 1995, LLK entered into an Agreement of General Partnership
with Davis Gaming Company II ("Davis") to form a joint venture (the "Kimmswick
Joint Venture") to construct and operate a hotel and casino (the "Missouri
14
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Project") on an approximately 45-acre parcel of land in Jefferson County,
Missouri (the "Kimmswick Site"). Pursuant to the Kimmswick Agreement, either
party could elect to dissolve the partnership if a gaming license had not been
issued by the gaming authorities in the State of Missouri on or prior to May 31,
1997. As the State of Missouri did not issue on or before that date, LLK and
Davis mutually agreed to dissolve the Kimmswick Joint Venture.
LLK intends to continue to develop the project. The project, as planned,
includes a land-based hotel and a casino onboard a cruising vessel. The Missouri
Project is estimated to cost an additional $71.9 million to complete development
of these first two phases. LLK has the rights to the proposed Kimmswick Site and
owns the assets which will be utilized for the Missouri Project. The Kimmswick
Site is located in Kimmswick, Missouri, approximately 25 miles south of St.
Louis. The proposed project has received the appropriate zoning approval from
the Jefferson County Planning Commission, and has the necessary U.S. Army Corps
of Engineers 404 permit. Through June 30, 1997, the Company had expended
approximately $8.5 million on the project. Such investment consists of
approximately $6.0 million for construction of the partially finished cruising
vessel and approximately $2.5 million in other costs associated with the
development of the project.
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.
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 June 30, 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 June 30, 1997,
approximately $14.2 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. The
Company 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. The
Company has had talks with various interested parties and is currently
negotiating with Horseshoe Gaming, LLC regarding joint development of a casino;
however, 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.
Long-lived Assets
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
15
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
market prices in active markets, if available. 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 June 30, 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 $32.5 million and $9.3 million, respectively, at June 30,
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.
Although the Company's latest evaluation of recoverability has not resulted
in the recognition of an impairment loss, given the additional casino and hotel
capacity being added to the Biloxi, Mississippi market and the disappointing
performance of GCI, management expects to update its assessment during 1997.
These factors and other circumstances affecting managements estimates could, in
the near future, affect the Company's estimate of undiscounted future cash flows
to be generated by LLB and GCI. A change that results in recognition of an
impairment loss would require the Company to reduce the carrying value of LLB
and GCI to fair market value, which may be significantly below the current
carrying value of the long-lived assets.
Leverage
The Company is highly leveraged. As of June 30, 1997, the Company's total
long-term indebtedness was approximately $179.8 million and its stockholders'
equity was approximately $8.3 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.
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 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.
16
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
9. Subsequent Event
Access to MLI's two casinos, hotel and pavilion operated at the base of the
Helena Bridge in Coahoma County, Mississippi was severely restricted from July
17, 1997 through August 4, 1997. On July 17, 1997, a barge with a large boom
attachment hit the Helena Bridge which crosses the Mississippi River and
connects Arkansas and Mississippi. The resulting structural damage to the
bridge's structure caused the Arkansas Department of Transportation to close the
bridge. MLI's operations are highly dependent upon patronage by residents of
Arkansas. MLI's operating results during the bridge's closure were materially
adversely affected by the bridge's closure and the extent, materiality and
permanence of any adverse changes to customer patronage are not presently known.
17
<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; the recovery of
the Company's Rhythm & Blues/Country Casino Complex in light of the recent
Helena Bridge closing and subsequent reopening; 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 June 30, 1997 Compared to the Three Months Ended June
30, 1996
The Company's gross revenues decreased from $44.3 million in the three
month period ended June 30, 1996 to $43.2 million during the three month period
ended June 30, 1997, a decrease of $1.1 million or 2%. Decreases in casino
revenues at the Lady Luck Rhythm & Blues/Country Casino Complex, Lady Luck
Natchez and Lady Luck Central City were primarily responsible for this decrease
and were offset partially by an increase in food and beverage revenues at the
Lady Luck Rhythm & Blues/Country Casino Complex and the acquisition of the River
Park and Riverbluff hotels on April 15, 1996 and July 3, 1996, respectively.
Decreases in the total amount wagered on table games and the related win
percentage at the Lady Luck Rhythm & Blues/Country Casino Complex triggered a
$0.7 million decline in its table games revenues. This decline in table games
wagers is due at least in part to increased competition from the addition of two
casinos and a significant number of hotel rooms in nearby Tunica County,
Mississippi between the comparative periods. The partially offsetting increase
in food and beverage revenues was primarily due to the addition of a steak house
restaurant between the comparative periods and additional beverage revenues.
Casino revenues decreased $0.4 million at Lady Luck Natchez primarily due
to flooding on the Mississippi River, which closed its operations for
approximately the first 4 days during the three month period ended June 30, 1997
and had a continuing disruptive effect for a period after reopening.
Lady Luck Central City's slot machine revenues declined $0.4 million
between the three month periods ended June 30, 1997 and 1996. This decrease was
due to both a decrease in the total amount wagered on slot machines and a
decrease in the related win percentage. The decrease in the total amount wagered
was at a significantly higher rate than the Central City market's general rate
of decline which was due in part to operational changes and increased
competition from nearby casinos.
Casino operating expenses company-wide as a percentage of casino revenues
increased from 37% in the three month period ended June 30, 1996 to 41% in the
three month period ended June 30, 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, (ii) an increase in table games
payroll expense at each property in relation to table games revenue, and (iii)
increases in slot machine rentals and slot department special events and cash
incentives for players.
18
<PAGE>
Food and beverage costs and expenses, prior to reclassifying the cost of
complementaries, as a percentage of related revenues increased from 87% for the
three month period ended June 30, 1996 to 96% for the three month period ended
June 30, 1997, due to increases in the cost of sales in relation to revenues
primarily at Lady Luck Natchez and Lady Luck Biloxi and an increase in food and
beverage payroll expense primarily at Lady Luck Natchez. These increases in
expenses were primarily the result of marketing an improved "restaurant
experience" to casino customers at these properties.
Consolidated gross room revenues and operating results between periods are
not completely 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 18% in the three
month period ended June 30, 1997 compared to the three month period ended June
30, 1996. This decrease was due to a decrease in occupancy percentage which was
only partially offset by a higher average daily room rate.
Selling, general and administrative expenses as a percentage of total gross
revenues decreased from 32% in the three month period ended June 30, 1996 to 30%
in the three month period ended June 30, 1997, primarily due to a $0.5 million
reduction in rents paid by the Rhythm & Blues/Country Casino Complex. The
Country Casino opened on May 21, 1996 at which time an additional $150,000
monthly rental payment requirement ceased. The additional monthly rental
payments had been required beginning July 1, 1995 until an additional casino
either north or south of the Lady Luck Rhythm & Blues property commenced
operations.
Operating income was $6.8 million and $8.3 million for the three month
periods ended June 30, 1997 and 1996, respectively. This $1.5 million decrease
is due to the following: (i) a $1.1 million decrease in gross revenue as
described above, (ii) a $0.8 million increase in casino operating expenses as
described above, (iii) an increase in food and beverage costs and expenses,
prior to reclassifying the cost of complementaries, as a percentage of related
revenues as described above, (iv) a $0.3 million increase in promotional
expenses primarily at the Lady Luck Rhythm & Blues/Country Casino Complex in
response to increased competition from casinos in nearby Tunica County,
Mississippi, and (v) a $0.3 million increase in depreciation expense primarily
related to the acquisition of the River Park and Riverbluff hotels and the
opening of Country Casino and the Pavilion during 1996. These items were offset
partially by: (i) a $0.5 million reduction in rent expense as described above,
and (ii) the absence of $0.2 million of pre-opening expense which was incurred
during the prior year period in conjunction with the opening of Country Casino
and the Pavilion.
The net income applicable to common stockholders was $0.7 million or $0.03
per share in the three month period ended June 30, 1997 compared with net income
applicable to common stockholders of $2.7 million or $0.09 per share for the
three month period ended June 30, 1996. This $2.0 million or $0.06 per share
decrease was primarily due to the $1.5 million decrease in operating income as
described above and a $0.4 million increase in interest expense. Interest
expense increased during these comparative periods due primarily to interest on
slot machines and other equipment purchased primarily in conjunction with the
addition of Country Casino and to a reduction in interest capitalized during the
three month period ended June 30, 1997.
Six Months Ended June 30, 1997 Compared to the Six Months Ended June 30,
1996
The Company's gross revenues increased from $85.7 million in the six month
period ended June 30, 1996 to $87.8 million during the six month period ended
June 30, 1997, an increase of $2.1 million or 2%. The opening of Country Casino
adjacent to Lady Luck Rhythm & Blues in Coahoma County, Mississippi, an increase
in slot revenues at Lady Luck Biloxi during the quarter ended March 31, 1997 and
the acquisition of the River Park and Riverbluff hotels on April 15, 1996 and
July 3, 1996, respectively, were primarily responsible for this increase and
were offset partially by decreases in casino, food and beverage revenues at Lady
Luck Natchez and Lady Luck Central City, increases in promotional allowances at
the Lady Luck Rhythm & Blues/Country Casino Complex and Lady Luck Biloxi and a
decrease in the equity in net income of affiliates from the Bally's Joint
Venture.
Gross revenues at the Lady Luck Rhythm & Blues/Country Casino Complex
increased from $46.8 million in the six month period ended June 30, 1997 to
$49.5 million in the six month period ended June 30, 1997, an increase of $2.7
million or 6%. Country Casino opened May 21, 1996 and contributed to a $2.0
19
<PAGE>
million increase in slot machine revenues which occurred primarily between the
three month periods ended March 31, 1997 and 1996. Increases in food and
beverage revenues of $1.0 million between the six month periods ended June 30,
1997 and 1996 were primarily due to increased food and beverage furnished to
customers as complimentaries. These and other increases were offset partially by
a $1.0 million decrease in table games revenues between the six month periods
ended June 30, 1997 and 1996. The decrease in table games revenues was due to
decreases in the total amount wagered on table games and the related win
percentage. The increases in complimentaries and the decreases in the total
amount wagered on table games were the result, at least in part, of the addition
of two competitive casinos and a significant number of hotel rooms in nearby
Tunica County, Mississippi during 1996.
Lady Luck Biloxi's gross revenues increased $1.0 million between the six
month periods ended June 30, 1997 and 1996. This increase occurred primarily
between the three month periods ended March 31, 1997 and 1996 during which time
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. The increase in slot revenues was
offset partially by decreases in table game revenues. Lady Luck Biloxi's
increase in slot machine results was primarily a result of increased marketing
expenditures and increased food and beverage furnished as complimentaries to
customers.
Casino, food and beverage revenues decreased $1.5 million at Lady Luck
Natchez primarily due to flooding on the Mississippi and other adverse weather
conditions, which closed its operations for approximately 18 days during the six
month period ended June 30, 1997 and had a continuing disruptive effect for a
period after reopening.
Lady Luck Central City's slot machine revenues declined $0.3 million and
table games revenues decreased $0.1 million between the six month periods ended
June 30, 1997 and 1996. The decrease in slot machine revenues was due to both a
decrease in the total amount wagered on slot machines and a decrease in the
related win percentage. The decrease in the total amount wagered on slot
machines was at a significantly higher rate than the Central City market's rate
of decline and was due in part to operational changes and increased competition
from nearby casinos.
As noted above, the increased competition from and increased capacity in
the Tunica County, Mississippi market as described above, adversely affected the
results of operations during the six month period ended June 30, 1997. During
the six month period ended June 30, 1997, the Company's equity in net income of
unconsolidated affiliates from the Bally's Joint Venture was $0.6 million, a
$0.4 million decrease from the $1.0 million for the six month period ended June
30, 1996, even after deducting the Company's share of pre-opening expenses of
$1.2 million, for the six month period ended June 30, 1996.
Casino operating expenses company-wide as a percentage of casino revenues
increased from 38% in the six month period ended June 30, 1996 to 41% in the six
month period ended June 30, 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) an increase in table
games payroll expense at each property in relation to table games revenue, and
(iii) increases in slot machine rentals and slot department special events and
cash incentives for slot machine players in relation to slot revenues.
Food and beverage costs and expenses, prior to reclassifying the cost of
complementaries, as a percentage of related revenues increased from 89% for the
six month period ended June 30, 1996 to 94% for the six month period ended June
30, 1997, due to increases in the cost of sales in relation to revenues
primarily at Lady Luck Natchez and Lady Luck Biloxi and an increase in food and
beverage payroll expense primarily at Lady Luck Natchez. These increases in
expenses were primarily the result of marketing an improved "restaurant
experience" to casino customers at these properties.
Consolidated gross room revenues and operating results between periods are
not completely 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 13% in the six
month period ended June 30, 1997 compared to the six month period ended June 30,
1996. This decrease was due to a decrease in occupancy percentage which was only
partially offset by a higher average daily room rate.
Selling, general and administrative expenses as a percentage of total gross
revenues decreased from 31% in the six month period ended June 30, 1996 to 30%
in the six month period ended June 30, 1997, primarily due to a reduction in
rents paid by the Rhythm & Blues/Country Casino Complex which was offset
partially by increases in casino marketing expenditures at each property. An
additional monthly rental payment of $150,000 had been required beginning
20
<PAGE>
July 1, 1995 until an additional casino either north or south of the Lady Luck
Rhythm & Blues property commenced operations. Country Casino opened on May 21,
1996 at which time the additional monthly rental payment requirement ceased.
Operating income was $13.9 million and $16.3 million for the six month
periods ended June 30, 1997 and 1996, respectively. This $2.4 million decrease
is due to the following: (i) a $2.4 million increase in casino operating
expenses as described above, (ii) an increase in food and beverage costs and
expenses, prior to reclassifying the cost of complementaries, as a percentage of
related revenues as described above, (iii) a $0.9 million increase in
promotional expenses primarily at the Lady Luck Rhythm & Blues/Country Casino
Complex in response to increased competition from casinos in nearby Tunica
County, Mississippi, (iv) increases in casino marketing expenditures at each
property as described above, and (v) a $0.5 million increase in depreciation
expense primarily related to the acquisition of the River Park and Riverbluff
hotels and the opening of Country Casino and the Pavilion during 1996. These
items were offset partially by: (i) a $2.1 million increase in gross revenue as
described above (ii) a $0.9 million reduction in rent expense as described
above, and (iii) the absence of $0.2 million of pre- opening expense which was
incurred during the prior year period in conjunction with the opening of Country
Casino and the Pavilion.
The net income applicable to common stockholders was $1.9 million or $0.07
per share in the six month period ended June 30, 1997 compared with net income
applicable to common stockholders of $5.3 million or $0.18 per share for the six
month period ended June 30, 1996. This $3.4 million or $0.11 per share decrease
was primarily due to the $2.4 million decrease in operating income as described
above and a $0.7 million increase in interest expense. Interest expense
increased during these comparative periods due primarily to interest on slot
machines and other equipment purchased primarily in conjunction with the
addition of Country Casino and to a reduction in interest capitalized during the
six month period ended June 30, 1997.
21
<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,
unit and per unit amounts. Operating margin is calculated as operating income
divided by net revenues.
Lady Luck Rhythm & Blues/County Casino Complex (a)
<TABLE>
<CAPTION>
% Increase % Increase
Three months ended (Decrease) Six months ended (Decrease)
June 30, 1997 vs. June 30, 1997 vs.
<S> <C> <C> <C> <C> <C> <C>
1997 1996 1996 1997 1996 1996
Gross revenues.................... $ 23.9 $ 24.1 (1) $ 49.5 $46.8 6
Net revenues...................... 22.1 22.6 (2) 45.7 44.1 4
Management/license fee............ 0.7 0.8 (13) 1.6 1.6 -
Operating income.................. 5.1 6.0 (15) 11.5 12.7 (9)
Operating margin.................. 23% 27% (4)pts 25% 29% (4) pts
Average daily net win per
table game.................... $546 $889 (39) $618 $1,046 (41)
Average number of
tables in operation........... 51 40 28 51 35 46
Average daily net win per
slot machine.................. $146 $188 (22) $151 $203 (26)
Average number of slot
machines in operation......... 1,355 1,056 28 1,358 951 43
</TABLE>
(a) Country Casino and the Pavilion opened May 21, 1996; therefore, a
comparison of 1997 to 1996 may not be meaningful.
Lady Luck Natchez
<TABLE>
<CAPTION>
% Increase %Increase
Three months ended (Decrease) Six months ended (Decrease)
June 30, 1997 vs. June 30, 1997 vs.
1997 1996 1996 1997 1996 1996
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.................... $ 7.9 $ 8.4 (6) $ 15.4 $16.5 (7)
Net revenues...................... 7.4 7.7 (4) 14.3 15.2 (6)
Management/license fee............ 0.2 0.3 (33) 0.5 0.6 (17)
Operating income.................. 0.8 1.4 (43) 1.1 3.2 (66)
Operating margin.................. 11% 18% (7)pts 8% 21% (13)pts
Average daily net win per
table game.................... $606 $715 (15) $605 $775 (22)
Average number of
tables in operation........... 16 17 (6) 16 17 (6)
Average daily net win per
slot machine.................. $102 $111 (8) $102 $113 (10)
Average number of slot
machines in operation......... 616 584 5 605 569 6
</TABLE>
22
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Lady Luck Bettendorf (a)
<TABLE>
<CAPTION>
% Increase %Increase
Three months ended (Decrease) Six months ended (Decrease)
June 30, 1997 vs. June 30, 1997 vs.
1997 1996 1996 1997 1996 1996
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.................... $ 20.0 $ 17.4 15 $ 38.6 $ 33.1 17
Net revenues...................... 19.1 16.6 15 36.5 31.7 15
Management/license fee............ 0.4 0.5 (20) 0.8 0.9 (11)
Operating income.................. 2.1 1.9 11 3.6 3.4 6
Operating margin.................. 11% 11% - 10% 11% (1)pt
Average daily net win per
table game.................... $702 $761 (8) $706 $819 (14)
Average number of
tables in operation........... 38 33 15 38 33 15
Average daily net win per
slot machine.................. $197 $179 10 $190 $169 12
Average number of slot
machines in operation......... 880 825 7 872 814 7
</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.
Lady Luck Biloxi
<TABLE>
<CAPTION>
% Increase %Increase
Three months ended (Decrease) Six months ended (Decrease)
June 30, 1997 vs. June 30, 1997 vs.
1997 1996 1996 1997 1996 1996
<S> <C> <C> <C> <C> <C>
Gross revenues.................... $ 7.7 $ 7.7 - $15.8 $14.8 7
Net revenues...................... 7.0 7.2 (3) 14.4 13.5 7
Management/license fee............ 0.2 0.3 (33) 0.5 0.5 -
Operating income.................. (0.4) (0.1) (300) (1.2) (0.8) (50)
Operating margin (a).............. (6)% (1)% (5)pts (8)% (6)% (2)pts
Average daily net win per
table game.................... $604 $649 (7) $562 $591 (5)
Average number of
tables in operation........... 21 23 (9) 22 24 (8)
Average daily net win per
slot machine.................. $89 $93 (4) $93 $ 88 6
Average number of slot
machines in operation......... 657 619 (6) 654 610 7
</TABLE>
23
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Lady Luck Central City
<TABLE>
<CAPTION>
% Increase %Increase
Three months ended (Decrease) Six months ended (Decrease)
June 30, 1997 vs. June 30, 1997 vs.
1997 1996 1996 1997 1996 1996
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.................... $ 1.3 $ 1.8 (28) $ 2.8 $ 3.3 (15)
Net revenues...................... 1.2 1.7 (29) 2.6 3.1 (16)
Management/license fee............ - 0.1 (100) 0.1 0.1 -
Operating income.................. (0.4) (0.2) (100) (0.7) (0.6) (17)
Operating margin (a).............. (33)% (12)% (21)pts (27)% (19)% (8)pts
Average daily net win per
table game.................... $86 $160 (46) $97 $149 (35)
Average number of
tables in operation........... 6 6 - 6 6 -
Average daily net win per
slot machine.................. $40 $56 (29) $43 $50 (14)
Average number of slot
machines in operation......... 300 289 4 300 289 4
</TABLE>
24
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
During the six month period ended June 30, 1997, the Company generated $7.2
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 six
month period ended June 30, 1997. The primary uses of cash and non-cash
resources during the six month period ended June 30, 1997, other than operating
expenditures, include:
A. $1.6 million cash for the purchase of property and equipment. Also
included are costs of remodeling a portion of the River Park.
B. $2.0 million cash for payment of debt and slot contracts.
C. $0.6 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 six month
period ended June 30, 1997. Due to debt service requirements on an equipment
note payable and a mortgage note, GCI required cash infusions of $0.4 million
during the six month period ended June 30, 1997 and for the remainder of 1997 is
expected to require additional cash infusions to cover up to $0.6 million 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.
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.
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,
closure of the Helena Bridge or a change in the extent and nature of regulations
enabling casino gaming in Arkansas could adversely effect these casinos' future
operating results.
Access to MLI's two casinos, hotel and pavilion operated at the base of the
Helena Bridge in Coahoma County, Mississippi was severely restricted from July
17, 1997 through August 4, 1997. On July 17, 1997, a barge with a large boom
attachment hit the Helena Bridge which crosses the Mississippi River and
connects Arkansas and Mississippi. The resulting structural damage to the
bridge's structure caused the Arkansas Department of Transportation to close the
bridge. MLI's operations are highly dependent upon patronage by residents of
Arkansas. MLI's operating results during the bridge's closure were materially
adversely affected by the bridge's closure and the extent, materiality and
permanence of any adverse changes to customer patronage are not presently known.
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 opening of certain of the facilities under construction
may initially have an adverse effect upon LLB's operating results and that the
long-term effects on LLB's results of operations cannot presently be estimated.
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
25
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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.
Various 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, 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.
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 June 30, 1997,
approximately $7.9 million has been expended under this contract, approximately
$1.9 million of which is included in construction payables at June 30, 1997. It
is anticipated that this vessel will be utilized by LLK for the Missouri
Project.
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.
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. 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 June 30, 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 $32.5 million and $9.3 million, respectively, at June 30,
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.
Although the Company's latest evaluation of recoverability has not resulted
in the recognition of an impairment loss, given the additional casino and hotel
capacity being added to the Biloxi, Mississippi market and the disappointing
performance of GCI, management expects to update its assessment during 1997.
These factors and other circumstances affecting
26
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
managements estimates could, in the near future, affect the Company's estimate
of undiscounted future cash flows to be generated by LLB and GCI. A change that
results in recognition of an impairment loss would require the Company to reduce
the carrying value of LLB and GCI to fair market value, which may be
significantly below the current carrying value of the long-lived assets.
The Company is involved in several lawsuits which if adversely decided
could have a material adverse effect upon the Company's financial position and
results of operations. Refer to note 7 to the condensed consolidated financial
statements included in Item 1, Part 1.
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.
27
<PAGE>
PART II ..................OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable
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.
28
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description of Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K.
None.
29
<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: August 11, 1997
/s/James D. Bowen
James D. Bowen
Vice President Finance and
Principal Accounting Officer
and duly authorized officer
30
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 June 30, 1997
(Unaudited) and the Condensed Consolidated Statement of Income for the Three
Months Ended June 3, 1997 (Unaudited) and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000906527
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1997
<PERIOD-END> Jun-30-1997
<CASH> 19,000
<SECURITIES> 0
<RECEIVABLES> 1,424
<ALLOWANCES> 308
<INVENTORY> 1,112
<CURRENT-ASSETS> 23,748
<PP&E> 204,025
<DEPRECIATION> 34,660
<TOTAL-ASSETS> 225,245
<CURRENT-LIABILITIES> 19,798
<BONDS> 179,803
17,388
0
<COMMON> 29
<OTHER-SE> 8,227
<TOTAL-LIABILITY-AND-EQUITY> 225,245
<SALES> 81,286
<TOTAL-REVENUES> 87,776
<CGS> 33,991
<TOTAL-COSTS> 33,991
<OTHER-EXPENSES> 33,354
<LOSS-PROVISION> 92
<INTEREST-EXPENSE> 11,395
<INCOME-PRETAX> 3,004
<INCOME-TAX> 105
<INCOME-CONTINUING> 2,899
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,899
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
