<TABLE>
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: September 30, 1996
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
<CAPTION>
<S> <C> <C>
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)
Delaware Lady Luck Gaming Finance Corporation 88-0295603
(State or other jurisdiction of (Exact name of Registrant as specified in its charter) (I.R.S. employer
incorporation or organization) identification number)
Mississippi Lady Luck Tunica, Inc. 88-0289742
(State or other jurisdiction of (Exact name of Registrant as specified in its charter) (I.R.S. employer
incorporation or organization) identification number)
Mississippi Lady Luck Biloxi, Inc. 88-0285242
(State or other jurisdiction of (Exact name of Registrant as specified in its charter) (I.R.S. employer
incorporation or organization) identification number)
Delaware Gold Coin Incorporated 88-1223906
(State or other jurisdiction of (Exact name of Registrant as specified in its charter) (I.R.S. employer
incorporation or organization) identification number)
Mississippi Magnolia Lady, Inc. 88-0301634
(State or other jurisdiction of (Exact name of Registrant as specified in its charter) (I.R.S. employer
incorporation or organization) identification number)
Mississippi Old River Development, Inc. 64-0837159
(State or other jurisdiction of (Exact name of Registrant as specified in its charter) (I.R.S. employer
incorporation or organization) identification number)
Missouri Lady Luck Kimmswick, Inc. 43-1653661
(State or other jurisdiction of (Exact name of Registrant as specified in its charter) (I.R.S. employer
incorporation or organization) identification number)
Iowa Lady Luck Quad Cities, Inc. 42-1426966
(State or other jurisdiction of (Exact name of Registrant as specified in its charter) (I.R.S. employer
incorporation or organization) identification number)
Mississippi Lady Luck Mississippi, Inc. 88-0277687
(State or other jurisdiction of (Exact name of Registrant as specified in its charter) (I.R.S. employer
incorporation or organization) identification number)
Mississippi Lady Luck Vicksburg, Inc. 88-0284406
(State or other jurisdiction of (Exact name of Registrant as specified in its charter) (I.R.S. employer
incorporation or organization) identification number)
1
<PAGE>
Mississippi Lady Luck Gulfport, Inc. 88-0289741
(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 November 12, 1996, there were 29,285,698 shares of common stock, $.001 par value per share,
outstanding.
</TABLE>
2
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
LADY LUCK GAMING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
ASSETS
<CAPTION>
<S> <C> <C>
September 30, 1996 December 31, 1995
Current assets:
Cash and cash equivalents................................ $ 17,317 $ 22,148
Restricted cash.......................................... - 8,858
Accounts receivable, net................................. 1,026 597
Inventories.............................................. 1,129 885
Prepaid expenses......................................... 2,556 2,731
-------------- -------------
Total current assets................................. 22,028 35,219
-------------- -------------
Property and equipment, net of accumulated
depreciation and amortization of $25,812 and
$17,611 as of September 30, 1996 and
December 31, 1995, respectively.......................... 174,036 155,664
Other assets:
Pre-opening costs........................................ 1,328 1,100
Deferred financing fees and costs, net of
accumulated amortization of $2,256 and
$1,607 as of September 30, 1996 and
December 31, 1995, respectively...................... 3,821 4,470
Investment in unconsolidated affiliates, net............. 21,079 17,619
Other.................................................... 3,777 3,209
-------------- --------------
30,005 26,398
-------------- --------------
TOTAL ASSETS.................................................. $ 226,069 $ 217,281
============== ==============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
3
<PAGE>
<TABLE>
LADY LUCK GAMING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(in thousands)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
<S> <C> <C>
September 30, 1996 December 31, 1995
Current liabilities:
Current portion of long-term debt........................ $ 3,350 $ 5,624
Accrued interest......................................... 1,802 2,326
Accounts payable......................................... 5,050 3,240
Construction and retention payables...................... 1,957 3,126
Income taxes payable..................................... 42 195
Other accrued liabilities................................ 8,293 9,191
-------------- ------------
Total current liabilities............................ 20,494 23,702
-------------- ------------
Long-term debt:
Mortgage notes payable................................... 173,500 173,500
Other long-term debt..................................... 8,357 3,473
-------------- ------------
Total long-term debt................................. 181,857 176,973
-------------- ------------
Total liabilities............................... 202,351 200,675
-------------- ------------
Commitments and contingencies (Notes 7, 8, 9 and 10)
Series A mandatory cumulative redeemable preferred
stock, $36.83 and $33.83, as of
September 30, 1996 and December 31, 1995,
respectively per share liquidation value,
1,800,000 shares authorized, 433,638 shares
issued and outstanding................................... 15,971 14,669
-------------- -------------
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...................................... (23,664) (29,474)
-------------- --------------
Total stockholders' equity........................... 7,747 1,937
-------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY...................................... $ 226,069 $ 217,281
============== =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
4
<PAGE>
<TABLE>
LADY LUCK GAMING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Casino.......................................... $ 38,319 $ 37,180 $ 109,664 $ 103,698
Food and beverage............................... 4,790 3,906 12,602 10,921
Hotel........................................... 1,299 578 2,879 2,103
Equity in net income (loss) of unconsolidated
affiliates.................................. 789 (122) 3,450 (1,162)
Other........................................... 2,053 1,255 4,377 2,695
---------- ---------- ---------- -----------
Gross revenues.............................. 47,250 42,797 132,972 118,255
Less: Promotional allowances................ (3,520) (2,290) (9,079) (6,585)
---------- ---------- ---------- -----------
Net revenues................................ 43,730 40,507 123,893 111,670
Costs and expenses:
Casino.......................................... 15,454 13,389 42,248 36,799
Food and beverage............................... 1,975 2,080 5,358 6,192
Hotel........................................... 643 341 1,358 1,376
Other........................................... 16 83 159 231
Selling, general and
administrative.............................. 14,546 12,485 40,696 37,738
Related party management/license fees........... 881 1,602 1,924 4,141
Depreciation and amortization................... 2,955 2,563 8,348 7,184
Settlement of claim............................. 1,100 - 1,100 -
Pre-opening expenses............................ - - 247 -
---------- ---------- ---------- -----------
Total costs and expenses.................... 37,570 32,543 101,438 93,661
---------- ---------- ---------- -----------
Operating income .................................... 6,160 7,964 22,455 18,009
Other income (expense):
Interest income................................. 191 328 829 896
Interest expense................................ (5,695) (5,139) (16,356) (14,813)
Other........................................... 156 40 253 (360)
---------- ---------- ---------- -----------
Income before income tax (benefit)
provision and extraordinary item................ 812 3,193 7,181 3,732
---------- ---------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
5
<PAGE>
<TABLE>
LADY LUCK GAMING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
(in thousands, except share and per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Income before income tax (benefit)
provision and extraordinary item................ 812 3,193 7,181 3,732
Income tax (benefit) provision....................... (175) - 69 -
-------- -------- -------- --------
Income before extraordinary
item............................................ 987 3,193 7,112 3,732
Extraordinary gain on early
extinguishment of debt.......................... - - - 2,257
-------- -------- -------- --------
NET INCOME........................................... 987 3,193 7,112 5,989
Preferred stock dividends............................ (446) (399) (1,302) (1,162)
-------- -------- -------- --------
Income applicable to
common stockholders............................. $ 541 $ 2,794 $ 5,810 $ 4,827
======== ======== ======== ========
NET INCOME PER SHARE
Before extraordinary item....................... $ .03 $ .11 $ .24 $ 0.13
======== ======== ======== ========
Extraordinary item.............................. $ - $ - $ - $ 0.08
======== ======== ======== ========
Applicable to common stockholders............... $ .02 $ 0.10 $ .20 $ 0.17
======== ======== ======== ========
Weighted average number of common
shares outstanding.............................. 29,285,698 29,285,698 29,285,698 28,841,254
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
6
<PAGE>
<TABLE>
LADY LUCK GAMING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income................................... 7,112 5,989
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization.............. 8,348 7,184
Amortization of bond offering
fees and costs........................... 649 653
Loss on disposition of assets............ - 480
Gain on early extinguishment
of debt.................................. - (2,257)
Equity in net (income) loss of
unconsolidated affiliates.................. (3,450) 1,162
(Increase) decrease in assets:
Accounts receivable........................ (429) 529
Inventories................................ (244) (90)
Prepaid expenses........................... 175 777
Federal income tax receivable.............. - 2,308
Increase (decrease) in liabilities:
Accounts payable........................... 1,810 (2,149)
Accrued interest........................... (524) (4,571)
Other accrued liabilities.................. (898) 3,440
Federal income taxes payable............... (153) -
-------- --------
Net cash provided by (used in)
operating activities......................... 12,396 13,455
-------- --------
Cash flows from investing activities:
Purchase of property and equipment........... (19,514) (8,538)
Construction and retention payables.......... (1,169) (7,195)
Pre-opening costs............................ (228) (363)
Investments in unconsolidated affiliates..... (10) (2,144)
Restricted cash.............................. 8,858 (105)
Other assets................................. (568) (83)
-------- --------
Net cash provided by (used in) investing
activities................................... (12,631) (18,428)
-------- --------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
7
<PAGE>
<TABLE>
LADY LUCK GAMING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands, except supplemental schedule)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1996 1995
<S> <C> <C>
Cash flows from financing activities:
Issuance of notes payable.................... 40 2,219
Payments on debt and slot contracts.......... (4,636) (4,893)
--------- --------
Net cash provided by (used in) financing
activities................................... (4,596) (2,674)
--------- --------
Net increase (decrease) in cash and cash
equivalents.................................. (4,831) (7,647)
Cash and cash equivalents,
beginning of period.......................... 22,148 28,914
--------- --------
Cash and cash equivalents, end of period $ 17,317 $ 21,267
========= ========
Supplemental disclosures of cash flow
information :
Cash paid during the period for:
Interest (net of amount capitalized
of $514 and $519 for the nine months
ended September 30, 1996 and 1995,
respectively) ............................... $ 16,231 $ 18,865
--------- --------
Income taxes paid.............................. $ 225 $ (2,103)
--------- --------
</TABLE>
Supplemental Schedule of Non-Cash Investing and Financing Activities:
The liquidation value of the Series A mandatory cumulative redeemable
preferred stock increased by approximately $1,302,000 and $1,162,000 for the
periods ended September 30, 1996 and 1995, respectively.
On April 15, 1996, Lady Luck Mississippi acquired the River Park Hotel for
approximately $4,000,000, including approximately $1,000,000 cash and a mortgage
note for the balance.
During the second quarter of 1996, certain subsidiaries acquired slot
machines in exchange for approximately $3,800,000 of indebtedness.
On July 3, 1996, Magnolia Lady, Inc. acquired the Riverbluff Hotel for
approximately $1,000,000, including approximately $600,000 cash and a
non-recourse mortgage note for the balance.
In February 1995, 2,000,000 shares of common stock were issued upon the
conversion of $6,500,000 of the 2001 Notes.
On March 31, 1995, the Company contributed net assets totaling
approximately $16,100,000 to the Bally's Joint Venture.
In addition to net cash investments in and cash payments on behalf of the
Bettendorf Joint Venture during 1995 of approximately $2,100,000, the Company
contributed non-cash assets of approximately $837,000.
The accompanying notes an integral part of these condensed consolidated
statements.
8
<PAGE>
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 1995 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 nine
month periods ended September 30, 1996 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 to the three and nine months ended
September 30, 1995 in order to conform to current period presentation.
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 148 room Best Western River Park
Hotel in Natchez, Mississippi on April 15, 1996; GCI reopened on May 28, 1993;
LLT began dockside casino operations on September 18, 1993 in Southern Tunica
County, Mississippi and ceased operations on April 24, 1994; 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
of Lady Luck Rhythm & Blues 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 Hotel in
Helena, Arkansas on July 3, 1996. 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). All of the other Mississippi Companies and LLK are in various
stages of development and have no operating history.
9
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. Certain Risks and Uncertainties Applicable to Gaming Industry Licensing
and Concentration of Risk
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"). While the Company believes that its Mississippi
operating subsidiaries are in compliance with the Land-Based Requirement, the
Mississippi Gaming Commission (the "Commission") has expressed concern as to
whether LLB is in compliance with such requirements. The Commission may
condition, revoke, or suspend LLB's license if it ultimately determines that it
is not in compliance with the Land-Based Requirement and the Company does not
take steps to cure such noncompliance. The revocation or suspension of LLB's
gaming license would have a material adverse impact on LLB's results of
operations or financial position, and may have a material adverse impact on
LLGC's results of operations or financial condition taken as a whole.
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. 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 effect
these casinos' future operating results. On November 5, 1996, Arkansas residents
voted to defeat a ballot measure which would have allowed voters in Hot Springs,
Arkansas, to decide whether to allow up to three casinos in the city. The
measure, if passed, would also have created a state lottery and legalized
charitable bingo.
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 year. 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 nine month periods
ended September 30, 1996 and 1995, as the effect would be anti-dilutive or would
dilute earnings per share by less than one percent.
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 (Loss) of
Unconsolidated Affiliates in the accompanying Condensed Consolidated Statements
of Operations for the three and nine month periods ended September 30, 1996 and
1995.
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 a lease rate equal to $150,000 per
month. The Company is leasing a gaming vessel to the Bettendorf Joint Venture
for approximately $200,000 per month, which amount was determined based upon
arms-length negotiations between the Company and BRDC. Due to delays in
completing the Company's Kimmswick, Missouri project (the "Missouri Project"),
the gaming vessel being leased is the gaming vessel which had originally been
intended for the Missouri Project. In addition, the Company is leasing certain
gaming equipment to the Bettendorf Joint Venture, as discussed below, for
approximately $122,000 per month, its fair market rental value.
10
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Lady Luck Bettendorf commenced operations in April 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 by the Company paid to BRDC as consultants.
Summarized balance sheet information for the Bettendorf Joint Venture as of
September 30, 1996 and December 31, 1995 is as follows (in thousands):
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
<S> <C> <C>
Current assets $ 4,445 $ 3,142
Property and equipment, net 12,076 11,435
Other assets 14 -
------------- ------------
Total assets $ 16,535 $ 14,577
============= ============
Current liabilities $ 3,000 $ 7,108
Long-term liabilities 2,786 1,880
Members' equity 10,749 5,589
------------- ------------
Total liabilities and
members' equity $ 16,535 $ 14,577
============= ============
</TABLE>
The Bettendorf Joint Venture's net income for 1995 includes pre-opening
expenses of $2.3 million. Summarized results of operations for the Bettendorf
Joint Venture for the three and nine month periods ended September 30, 1996 and
1995 are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net revenues $ 17,192 $ 13,267 $ 48,869 $ 23,395
Costs and expenses 15,281 12,081 43,709 23,974
---------- ---------- ---------- ---------
Net income $ 1,911 $ 1,186 $ 5,160 $ (579)
========== ========== ========== =========
</TABLE>
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 (the "Bally's Joint Venture"). 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 commenced in April 1995 and casino operations commenced in December
1995.
11
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Summarized balance sheet information for the Bally's Joint Venture as of
September 30, 1996 and December 31, 1995 is as follows (in thousands):
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
<S> <C> <C>
Current assets $ 7,544 $ 10,110
Property and equipment, net 51,981 51,511
Other assets 1,300 4,329
----------- ----------
Total assets $ 60,825 $ 65,950
=========== ==========
Current liabilities $ 6,145 $ 6,148
Long-term liabilities 7,327 485
Partners' capital 47,353 59,317
----------- ----------
Total liabilities and
partners' capital $ 60,825 $ 65,950
=========== ==========
</TABLE>
Summarized results of operations for the Bally's Joint Venture for the
three and nine month periods ended September 30, 1996 and 1995 are as follows
(in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net revenues $ 15,639 $ 801 $ 54,875 $ 1,323
Costs and expenses 16,067 2,844 52,340 3,817
--------- --------- -------- --------
Net income $ (428) $ (2,043) $ 2,535 $ (2,494)
========= ========= ======== ========
</TABLE>
Net income of the Bally's Joint Venture for the nine months ended September
30, 1996 includes pre-opening expenses of $3.3 million which were fully expensed
prior to the beginning of the quarter ended September 30, 1996.
12
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Long-Term Debt
At September 30, 1996 and December 31, 1995, long-term debt consisted of
the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31, 1995
1996
<S> <C> <C>
11 7/8% First Mortgage Notes; generally quarterly
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 3,000
Note payable to a corporation; annual payments of
principal of $119,000 plus accrued interest at
8%; due June 2003; collateralized by a land
deed of trust....................................... 833 952
Notes payable to a corporation; non-interest bearing
through December 1996; thereafter at prime
plus 7%; secured by the equipment................... 962 1,574
Notes payable to a corporation; monthly payments
of principal and interest at 13 1/4%; due
February 1997; secured by the equipment............. 207 552
Note payable to a corporation; payment of principal
and accrued interest at 14%; due March 1996;
secured by a gaming vessel.......................... - 2,219
Note payable to a corporation; payment of principal
and accrued interest at 13 1/4%; due January
1997; secured by the equipment...................... 81 294
Note payable to a corporation; non-interest bearing
through June 1997; thereafter at prime plus
3%; secured by the equipment........................ 361 -
Notes payable to a corporation; non-interest bearing
through May 1997; thereafter at prime plus
7%; secured by the equipment........................ 2,677 -
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....... 2,962 -
13
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note payable to a corporation; quarterly payments
of principal and accrued interest at 9%;
collateralized by a deed of trust................... 385 -
Other..................................................... 489 506
------------- ------------
185,207 182,597
Less current portion...................................... (3,350) (5,624)
------------- ------------
Total long-term debt................................ $ 181,857 $ 176,973
============= ============
</TABLE>
The Indenture as supplemented, 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. The Company believes it is in compliance with the
Indenture.
6. Hotel Acquisition and Remodeling Projects
Riverbluff Hotel
On July 3, 1996, MLI which operates Lady Luck Rhythm & Blues, Country
Casino and an entertainment complex known as the Pavilion, acquired the
Riverbluff Hotel in Helena, Arkansas. The Riverbluff Hotel is located at the
entrance to the bridge which crosses the Mississippi River and provides
immediate access to its Mississippi facilities. The Riverbluff Hotel features
120 guest rooms, adding to the existing 173 guest rooms at the Mississippi site.
The Company purchased the Riverbluff for approximately $1.0 million, comprised
of cash of $0.6 million and a mortgage note for the balance.
Remodeling Projects
The Company is expending approximately $0.9 million to remodel the
Riverbluff Hotel and portions of the River Park Hotel. The remodeling includes
replacement of certain furniture and equipment and is expected to be completed
by December 31, 1996.
7. 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.
14
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
8. Litigation
Shareholder Class Action Lawsuit
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.
Greek Lawsuits
The Company and certain of its joint venture partners (the "Defendants")
have been named as defendants in two separate lawsuits brought by the country of
Greece and its Minister of Tourism before the Greek Multi-Member Court of First
Instance. Each action alleges that the Defendants failed to make certain
payments in connection with the gaming license bid process for Loutraki, Greece
and Patras, Greece. The Company has been informed by its Greek counsel that the
lawsuit regarding the gaming license bid process for Loutraki, Greece has been
dismissed. Accordingly, the payments the Company is alleged to have been
required to make aggregate approximately 2.1 billion drachmae (which was
approximately $8.8 million as of November 7, 1996 based upon published exchange
rates) related to Patras, Greece. 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 remaining lawsuit
and in management's opinion, the ultimate outcome of this matter is not
presently known.
Additionally, a lawyer and a consultant which were allegedly retained by
the Company in connection with the Company's bid for a gaming license in Greece
recently threatened litigation against the Company. On or about September 24,
1996, the Company and the lawyer and consultant reached an agreement whereby in
exchange for certain consideration mutual releases were executed.
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 seeks 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
$375,000. 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. The decision is subject to adjustment for certain
additional work performed by Superior. The Company believes the additional
charges will be less than the credit to which the court ruled LLM is
15
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
entitled to for excess payments made to Superior by LLM. Superior also has
the right to appeal. The Company, based in part on the advice of its counsel,
does not believe that Superior has meritorious grounds to prosecute an appeal.
9. Commitments and Contingencies
Lease Commitments
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 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 leases
currently require annual payments of approximately $920,000 and provide for
future increases based on the Consumer Price Index. The Company is seeking joint
venture partners to assume the leases or to invest in the proposed casino
project. The principal lease (the "Gulfport 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 the 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 its Gulfport project, the landlord, while not now claiming that
the Company is in default, has reserved the right to claim that LLG 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. Because the Company has suspended development of its
Gulfport project and in order to conserve its funds, the Company may not make
the required monthly lease payments in the future. Accordingly, 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.
Construction Commitment
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 September 30,
1996, approximately $6.0 million has been expended under this contract,
approximately $1.9 million of which is included in construction payables. It is
anticipated that this vessel will be utilized by LLK and, therefore, the
Missouri Project (as hereinafter defined) 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.
16
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Kimmswick, Missouri
The Company and a local investor had intended to develop a theme hotel and
entertainment center, including a casino on a cruising vessel (the "Missouri
Project"), in Jefferson County, Missouri, located just outside the city of
Kimmswick and approximately 20 miles south of St. Louis. The Company has an
option to lease an approximately 46 acre site (the "Kimmswick Site") for a term
of 50 years.
Construction of the Missouri Project was delayed due to the prohibition
against games of chance (slot machines and roulette) until Missouri voters
ratified a constitutional amendment in November 1994. Through September 30,
1996, the Company had expended cash of approximately $8.4 million in the
Missouri Project. Such investment consists of approximately $6.0 million for
construction of a partially finished cruising vessel and approximately $2.4
million in other costs associated with the development of the project. This
investment excludes the cost of the cruising vessel which had initially been
intended for use by the Missouri Project, which is now being leased to the
Bettendorf Joint Venture.
On November 30, 1995, the Company entered into a partnership agreement (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 the Kimmswick Site. Pursuant to the Kimmswick Agreement, the Company
will contribute certain assets with a book value of approximately $8 million to
the Kimmswick Joint Venture for a 40% interest in the Kimmswick Joint Venture
(if the assets contributed by LLK are determined to have a value of less than $8
million, LLK will be required 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 million in cash for 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 will
agree 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 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
million, 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 partners'
share and have the entire contribution treated as a loan to the joint venture or
to advance the non-contributing partners' 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 or 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 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 the next twelve months. In addition, a person owning real
property adjacent to the site of the Kimmswick Project was seeking to overturn
decisions by the Jefferson County Commission ("Commission") with respect to the
zoning of such site. A trial was conducted in April 1996 and the court has
decided to uphold the zoning decisions made by the Commission.
17
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Beginning with the first quarter in which the joint venture has operating
income, the joint venture will distribute 80% of its available funds (as
defined) 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. The Company 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.
The 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 gross revenues plus 7% of earnings before interest, taxes, depreciation
and amortization, 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 the Company in such year generally will not
exceed the amount of distributions to Davis in such year. The Company's
continued engagement as manager will be dependent upon, among other things, the
achievement of certain performance standards. In addition, upon meeting certain
other performance criteria, Lady Luck Kimmswick 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 September 30, 1996 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 (the
"Vicksburg Project") 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 Site"). The
Vicksburg Project is expected to have a "Monte Carlo" theme and is expected to
consist of a 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 September 30, 1996, approximately $14.3 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 approximately $48.0 million to complete construction and
commence operations of LLV. 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. During the quarter ended September 30, 1996, pursuant to certain
requirements, the Company demolished certain structures that already existed at
the site at the time it was purchased. The cost of such demolition was
approximately $0.2 million.
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's operational and development activities are subject to
federal, state and local laws and various governmental regulations that require
the Company to protect the environment. Failure to comply with the applicable
laws and regulations can result in delays in operational and development
activities, injunctive actions and damages as well as civil and criminal
penalties. To the extent that planned development of its properties is delayed,
interrupted or discontinued
18
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
because of regulation or the economics of the properties, future earnings
of the Company could be adversely affected. The Company believes its operations
are presently in substantial compliance with applicable air and water quality
laws and regulations. The laws and regulations governing environmental
compliance are continually changing and generally are becoming more obstructive.
The Company's Gold Coin casino is located generally within the Central
City/Clear Creek Superfund site as designated by the Environmental Protection
Agency ("EPA"). The Superfund site includes numerous specifically identified
areas of mine tailings and other waste piles of former gold mine operations that
are subject to ongoing investigations and cleanup by the EPA and other
governmental agencies. Generally, the EPA can require potentially responsible
parties ("PRP's") to cleanup or contribute to the cleanup of the Superfund site.
GCI is not included within any of the specific areas within the Superfund site
currently identified for investigation or remediation. The Company and the
predecessor owners of the GCI site have conducted investigations at the site in
accordance with the requirements of governmental authorities as a prerequisite
to obtaining development permits. Nonetheless, the EPA or other governmental
agencies could broaden their investigations and identify additional areas,
including the GCI site, for cleanup. No other Company sites have been designated
as Superfund sites.
The Vicksburg Site had been used as a bulk petroleum storage facility since
the early 1950's, and contained aboveground 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.
Remediation efforts at the Vicksburg Site are complete. Under the terms of
the acquisition of the Vicksburg Site, the purchase price for the Vicksburg Site
of $4.5 million was placed in an escrow account, with all costs required to
remediate environmental conditions on site paid out of such escrow account (with
any funds remaining after remediation going to the seller of the Vicksburg
Site). The Mississippi Department of Environmental Quality has determined that
the environmental remediation conducted by the seller meets all federal and
state standards, and has stated that no further action is required.
Although the Company knows 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.
Other than those described, the Company has not made and 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.
For properties currently in operation or under development, the Company has
taken extra precautions to minimize the possibility of environmental
contamination. The Company does not believe that any significant capital
expenditures to monitor or reduce hazardous substances or other environmental
impacts are currently required. As a result, near term reclamation obligations
are not expected to have a significant impact on the Company's liquidity.
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 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.
19
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
10. Subsequent Event
During October 1996, Gold Coin, Inc. ("GCI"), entered into a non-binding
Memorandum of Understanding (the "Memorandum") with BWCC, Inc. which does
business as Bullwhackers ("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. Budgeted 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, 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 the
Company's 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. No
assurance can be provided that these contingencies will be satisfied.
11. Summarized Financial Information
Summarized balance sheet information of LLK, a partially owned subsidiary
of LLGC, as of September 30, 1996 and December 31, 1995, for which assets of the
subsidiary collateralize the outstanding 2001 Notes, is as follows (in
thousands):
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
<S> <C> <C>
Current assets $ 50 $ 50
Property and equipment 726 726
Other assets 1,378 1,150
----------- ----------
Total assets $ 2,154 $ 1,926
=========== ==========
Current liabilities $ - $ -
Long-term liabilities 2,404 2,176
Stockholders' deficit (250) (250)
----------- ----------
Total liabilities and
stockholders' deficit $ 2,154 $ 1,926
=========== ==========
</TABLE>
LLK has no operations for the three and nine month periods ended September
30, 1996 and 1995. Stockholders' deficit represents the write-down of certain
project development costs during 1994.
The following subsidiaries of the Company are not guarantors of the 2001
Notes: LLDC, Lady Luck Cape Girardeau and Lady Luck Lawrenceburg. Each
subsidiary that is not a guarantor of the 2001 Notes is currently inactive. It
is the intent of the Company to wind down the operations of these subsidiaries
in the immediate future. Accordingly, no separate financial information is being
provided with respect to these non-guarantor subsidiaries.
20
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following presents summarized consolidated balance sheets as of
September 30, 1996 and December 31, 1995 and summarized consolidated statements
of operations for each of the three and nine month periods ended September 30,
1996 and 1995, for Lady Luck Gaming Finance Corporation and subsidiaries.
<TABLE>
<CAPTION>
LADY LUCK GAMING FINANCE CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
As of September 30, 1996 and December 31, 1995
(in thousands)
ASSETS
September 30, December 31,
<S> <C> <C>
1996 1995
Current assets:
Cash and cash equivalents................. $ 16,207 $ 22,146
Restricted cash........................... - 8,858
Accounts receivable....................... 723 396
Inventories............................... 1,129 885
Prepaid expenses.......................... 2,538 2,418
----------- -----------
Total current assets.................. 20,597 34,703
----------- -----------
Total property and equipment, net............. 173,537 154,954
----------- -----------
Other assets:
Pre-opening costs......................... 1,328 1,100
Deferred financing fees and costs, net 3,821 4,470
Investment in unconsolidated
affiliates, net....................... 21,079 17,619
Other..................................... 3,234 2,491
----------- -----------
29,462 25,680
----------- -----------
TOTAL ASSETS:................................. $ 223,596 $ 215,337
=========== ===========
</TABLE>
21
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
LADY LUCK GAMING FINANCE CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
As of September 30, 1996 and December 31, 1995
(in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
September 30, December 31,
1996 1995
<S> <C> <C>
Current liabilities:
Current portion of long-term debt......... $ 3,349 $ 5,622
Accrued interest.......................... 1,797 2,326
Accounts payable.......................... 4,592 2,234
Construction and retention payables....... 1,957 3,126
Other accrued liabilities................. 23,703 29,182
---------- ---------
Total current liabilities............. 35,398 42,490
---------- ---------
Mortgage notes payable.................... 173,500 173,500
Other long-term debt...................... 8,281 3,338
---------- ---------
Total liabilities................ 217,179 219,328
---------- ---------
Commitments and contingencies:
Stockholders' equity (deficit):
Retained earnings/(accumulated
deficit).............................. 6,417 (3,991)
---------- ---------
Total stockholders' equity (deficit)...... 6,417 (3,991)
---------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)................................. $ 223,596 $ 215,337
========== =========
</TABLE>
22
<PAGE>
LADY LUCK GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
LADY LUCK GAMING FINANCE CORPORATION AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Gross revenues........................ $ 47,250 $ 42,797 $ 132,972 $ 118,255
Less: Promotional allowances.......... (3,520) (2,290) (9,079) (6,586)
-------- -------- --------- ---------
Net revenues.......................... 43,730 40,507 123,893 111,669
-------- -------- --------- ---------
Expenses:
Operating department expenses......... 18,088 15,893 49,123 44,595
Selling, general and administrative 12,336 11,280 36,424 34,198
Related party management/license
fees............................. 1,384 1,602 4,142 4,141
Depreciation and amortization......... 2,928 2,537 8,264 7,105
Pre-opening expenses.................. - - 247 -
-------- -------- --------- ---------
Total costs and expenses......... 34,736 31,312 98,200 90,039
-------- -------- --------- ---------
Operating income...................... 8,994 9,195 25,693 21,630
Other income (expense):
Interest income....................... 183 328 806 896
Interest expense...................... (5,695) (5,139) (16,353) (14,813)
Other................................. 156 490 262 48
-------- -------- --------- ---------
Income before extraordinary item.......... 3,638 4,874 10,408 7,761
Extraordinary gain on early
extinguishment of debt, net........... - - - 2,257
-------- --------- --------- ---------
NET INCOME................................ $ 3,638 $ 4,874 $ 10,408 $ 10,018
======== ========= ========= =========
</TABLE>
23
<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 therefore; 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 September 30, 1996 Compared to the Three Months Ended
September 30, 1995
The Company's gross revenues rose to $47.3 million in the third quarter of
1996 from $42.8 million in the third quarter of 1995, an increase of $4.5
million or 11%. The opening of Country Casino adjacent to Lady Luck Rhythm &
Blues in Coahoma County, Mississippi, the acquisition of the 148-room Best
Western River Park Hotel in Natchez, Mississippi, the opening of the casino at
the Company's joint venture with Bally's in Robinsonville, Mississippi, and
improvements in the operations of Lady Luck Bettendorf in Bettendorf, Iowa, were
primarily responsible for the increase in the Company's 1996 third quarter
revenues.
Lady Luck Rhythm & Blues generated $2.5 million of the Company's overall
$4.5 million increase in gross revenues. A 58% increase in the average number of
slot machines partially offset by a 33% decrease in the average daily net win
per slot machine was responsible for $1.2 million of Lady Luck Rhythm & Blues'
increase in gross revenues. These changes in slot machine revenues were due
primarily to the May 21, 1996 opening of Country Casino which currently operates
approximately 637 machines including certain slot machines which have been
relocated from the existing Rhythm & Blues casino. Increases in food and
beverage, hotel and other revenues accounted for the balance of the increase in
gross revenues at Lady Luck Rhythm & Blues.
LLM acquired and took over operation of the 148-room Best Western River
Park Hotel in Natchez, Mississippi on April 15, 1996. During the quarter ended
September 30, 1996, the hotel generated $0.5 million in gross revenues in
addition to revenues generated by the hotel's food and beverage outlets.
The Bally's Joint Venture, which was formed March 31, 1995, included only
hotel operations until the December 18, 1995, opening of the casino. During the
quarter ended September 30, 1996, equity in net loss of unconsolidated
affiliates from the Bally's Joint Venture was $0.2 million, a net improvement of
$0.5 million over the $0.7 million equity in net loss of unconsolidated
affiliates for the quarter ended September 30, 1995. The loss for the quarter
ended September 30, 1996 was adversely affected by increased competition in the
Tunica market.
During the 1996 third quarter, the Company's equity in net income of
unconsolidated affiliates from the Bettendorf Joint Venture was $1.0 million, an
increase of $0.4 million over the $0.6 million equity in net income of
unconsolidated affiliates for the 1995 third quarter. These amounts do not
include the gross revenues recognized by the Company for the leasing of a gaming
vessel and equipment to the Bettendorf Joint Venture.
24
<PAGE>
Casino operating expenses as a percentage of casino revenues increased from
36% in the third quarter of 1995 to 40% in the third quarter of 1996, primarily
due to the following: (i) a 0.8% increase in cash incentives to slot machine
players in relation to slot machine net revenues, (ii) a 2.1% increase in the
cost of complimentary rooms, food and beverage furnished to casino customers in
relation to casino revenues, and (iii) a 6% decrease in table and card games net
revenues while related payroll expenses increased 9%.
Food and beverage revenues increased from $3.9 million in the third quarter
of 1995 to $4.8 million in the third quarter of 1996, an increase of $0.9
million or 23%. This increase was due to increased customer counts at Lady Luck
Rhythm & Blues, the opening of Country Casino and improvements at Lady Luck
Natchez offset partially by a decrease at Lady Luck Biloxi. The costs of food
and beverage sales, prior to reclassifying the cost of complementaries, as a
percentage of related revenues remained constant in the third quarter of 1995
compared to the third quarter 1996 while other food and beverage expenses
decreased 6% in relation to food and beverage revenues.
Hotel operations results between periods are not comparable because on
April 15, 1996, LLM purchased the River Park, a 148-room hotel in Natchez,
Mississippi and on July 3, 1996, MLI purchased the 120-room Riverbluff Hotel in
Helena, Arkansas.
Selling, general and administrative expenses as a percentage of gross
revenues for the third quarter of 1995 and the third quarter of 1996 were 29%
and 31%, respectively. This increase was due to the following: (i) significant
increases in casino marketing expenses by MLI and LLM, (ii) increased
development costs due to expensing the cost of demolishing certain structures at
the Vicksburg site during the quarter ended September 30, 1996, and (iii)
increased corporate overhead costs due to expenses in connection with, and,
effective January 1, 1996, rent, salary and marketing expenses incurred in
conjunction with changes to the Old Management Agreements, as defined below.
These increases were offset partially by a reduction in fees and costs related
to the solicitation of the Amendments and Waivers which was completed in March
1996.
Related party management/license fees decreased from $1.6 million in third
quarter 1995 to $0.9 million in the third quarter of 1996, a decrease of $0.7
million or 44%. This decrease was due to the Company entering into new marketing
agreements (the "New Marketing Agreements") which became effective January 1,
1996 in replacement of its previous management agreements (the "Old Management
Agreements") with Lady Luck Casino, Inc. ("LLCI"). Under the New Marketing
Agreements, LLGC pays an annual licensing fee generally equal to 9% of the
Company's Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") (calculated as EBITDA of LLGC and all its subsidiaries and joint
ventures (multiplied, in the case of the Bettendorf Joint Venture and its
Kimmswick, Missouri Joint Venture, by the interest owned by the Company in such
joint ventures), excluding, among other things, all revenues and expenses
arising from any casino or casino/hotel for which LLGC is not the operator and
which does not utilize LLCI's mailing list or Lady Luck name and excluding
revenues from the lease of property and equipment owned by LLGC to third
parties). With respect to the Bettendorf Joint Venture, LLCI assigned to LLGC
its rights to receive a management fee and its obligation to pay part of that
fee to its joint venture partner. In addition, included in selling general and
administrative expenses are items that were formerly included under the Old
Management Agreements. LLGC now pays a related party, Gemini, the sum of
$300,000 per year as adjusted based on the Consumer Price Index for corporate
office facilities and certain services with respect to such corporate office
facilities. The Company now reimburses LLCI for certain marketing costs and pays
a salary to Andrew H. Tompkins, CEO and Chairman of the Board of the Company.
Operating income was $8.0 million and $6.2 million for the third quarters
of 1995 and 1996, respectively, a decrease of $1.8 million or 23%. This decrease
was due to reduced operating income by MLI and LLM and a $1.1 million settlement
of a claim offset partially by an increase in equity in net income of
unconsolidated affiliates.
Interest expense, net of any capitalized interest, increased from $5.1
million in the third quarter of 1995 to $5.7 million in the third quarter of
1996. This $0.6 million increase is primarily attributable to a 1 3/8% increase
in the interest rate on the 2001 Notes.
The net income applicable to common stockholders was $2.8 million or $0.10
per share in the third quarter 1995 compared with $0.5 million or $0.02 per
share for the third quarter of 1996. This decrease was due to decreased
operating
25
<PAGE>
income as described above, a $1.1 million settlement of a claim, and
increases in interest expense offset partially by a decrease in the provision
for income taxes.
Nine Months Ended September 30, 1996 Compared to the Nine Months Ended
September 30, 1995
The Company's gross revenues increased from $118.3 million in the first
nine months of 1995 to $133.0 million during the first nine months of 1996, an
increase of $14.7 million or 12%. The opening of Country Casino adjacent to Lady
Luck Rhythm & Blues in Coahoma County, Mississippi, the acquisition of the
148-room Best Western River Park Hotel in Natchez, Mississippi, the opening of
the casino at the Company's joint venture with Bally's in Robinsonville,
Mississippi, the opening of Lady Luck Bettendorf, in Bettendorf, Iowa,
improvements in its operations and income from leasing a gaming vessel and
certain equipment to Lady Luck Bettendorf were primarily responsible for this
increase in the Company's September 30, 1996 year-to-date gross revenues, over
the comparable prior-year period.
Lady Luck Rhythm & Blues generated $7.7 million of the Company's overall
$14.7 million increase in gross revenues. A 38% increase in the average number
of slot machines partially offset by a 19% decrease in the average daily net win
per slot machine originated $5.8 million of Lady Luck Rhythm & Blues' increase
in gross revenues. These changes, when analyzed quarterly, indicate, for the
first quarter of 1996, an approximately consistent average daily net win per
slot machine while the average number of slot machines in operation increased by
14%, and for the six months ended September 30, 1996, a 48% increase in the
average number of slot machines in operation partially offset by a 32% decrease
in the average daily net win per slot machine. The strong demand during the
first quarter of 1996, the May 21, 1996 opening of Country Casino and increased
competition from the casinos in Tunica, Mississippi, during the third quarter of
1996 were primarily responsible for the changes noted. Increases in food and
beverage, hotel and other revenues offset partially by a 2% decrease in table
and card games revenues accounted for the balance of the increase in gross
revenues at Lady Luck Rhythm & Blues.
LLM's gross revenues increased $2.1 million in the first nine months of
1996 compared to the same period in 1995. LLM acquired and took over operation
of the 148-room Best Western River Park Hotel in Natchez, Mississippi on April
15, 1996. During the period from April 15, 1996 through September 30, 1996, the
hotel's gross room revenues were $0.9 million. The remainder of LLM's increase
in gross revenues was primarily from increases in food and beverage operations
on the barge in addition to the increase in food and beverage revenues from food
and beverage sold at the hotel site.
The Bally's Joint Venture, which was formed March 31, 1995, included only
hotel operations until the December 18, 1995 opening of the casino. During the
nine months ended September 30, 1996, the Company's equity in net income of
unconsolidated affiliates from the Bally's Joint Venture was $0.9 million, after
deducting the Company's share of pre- opening expenses of $1.1 million, a net
increase of $1.8 million over the Company's $0.9 million equity in net loss of
unconsolidated affiliates in the nine months ended September 30, 1995.
During the first nine months of 1996, the Company's equity in net income of
unconsolidated affiliates from the Bettendorf Joint Venture was $2.6 million, an
increase of $2.9 million over the Company's $0.3 million equity in net loss of
unconsolidated affiliates for the first nine months of 1995. The Company's $0.3
million loss for 1995 is after deducting the Company's share of pre-opening
expenses of $1.1 million upon commencement of operations on April 21, 1995. In
addition, for the leasing of a gaming vessel and equipment to the Bettendorf
Joint Venture, the Company recognized revenue of $3.1 million, a $1.5 million
increase over the $1.6 million of revenue recognized during the period from
commencement of operations through September 30, 1995.
Casino operating expenses as a percentage of casino revenues increased from
35% in the nine months of 1995 to 39% in the first nine months of 1996,
primarily due to the following: (i) a 1.2% increase in cash incentives to slot
machine players in relation to slot machine net revenues, (ii) a 0.9% increase
in the cost of complimentary rooms, food and beverage furnished to casino
customers in relation to casino revenues, (iii) a 7% decrease in table and card
games net revenues and an 8% increase in related expenses, and (iv) an increase
in the local gaming tax rate paid by LLM.
Food and beverage revenues increased from $10.9 million in the first nine
months of 1995 to $12.6 million in the first nine months of 1996, an increase of
$1.7 million or 16%. This increase was due to increased customer counts at Lady
Luck Rhythm & Blues and improvements at Lady Luck Natchez offset partially by
changes in outlets at Lady Luck Biloxi.
26
Food and beverage costs and expenses, prior to reclassifying the cost of
complementaries, as a percentage of related revenues declined from 102% for the
nine months ended September 30, 1995 to 90% for the nine months ended September
30, 1996, continuing a trend of lowering costs of sales and labor expenses as a
percentage of food and beverage revenues which was partially offset by the costs
associated with outlet changes at Lady Luck Biloxi.
Hotel operating results between periods are not comparable because ORD's
hotel operations, which commenced August 25, 1994, were contributed to the
Bally's Joint Venture effective March 31, 1995, and because on April 15, 1996,
LLM purchased the River Park, a 148-room hotel in Natchez, Mississippi.
Selling, general and administrative expenses as a percentage of gross
revenues for the nine months ended September 30, 1995 and 1996, were 32% and
31%, respectively. This decrease was due to the following: (i) a reduction in
fees and costs related to the solicitation of the Amendments and Waivers which
was completed in March 1996, and (ii) a 12% increase in gross revenues while
certain selling, general and administrative expenses remained fixed. These items
were offset partially by the following: (i) increased corporate overhead costs
due to expenses in connection with, and, effective January 1, 1996, rent, salary
and marketing expenses incurred in conjunction with changes to the Old
Management Agreements, (ii) increased marketing expenses incurred in the second
and third quarters of 1996 related to the Country Casino and the Pavilion, and
(iii) increased development costs due to expensing the cost of demolishing
certain pre-existing structures at the Vicksburg site during the quarter ended
September 30, 1996.
Related party management/license fees decreased from $4.1 million during
the first nine months of 1995 to $1.9 during the first nine months of 1996, a
decrease of $2.2 million or 54%. This decrease was due to the Company entering
into the New Marketing Agreements in replacement of the Old Management
Agreements as described above.
For the first nine months, operating income was $18.0 and $22.5 million,
for 1995 and 1996, respectively. This increase is due to the following: (i) a
$4.6 million increase in equity in net income of unconsolidated affiliates, (ii)
the acquisition of two additional hotel operations, (iii) reduced related party
management fees, and (iv) increased food and beverage revenues and operating
margins, offset partially by: (i) increased casino operating expenses as a
percentage of casino revenues, (ii) increased selling, general and
administrative expenses as a percentage of gross revenues, and (iii) a $1.1
million settlement of a claim.
Interest expense, net of any capitalized interest, increased from $14.8
million in the nine months ended September 30, 1995 to $16.4 in the nine months
ended September 30, 1996, an increase of $1.6 million or 11%. This increase is
primarily attributable to a 1 3/8% increase in the interest rate on the 2001
Notes offset partially by a $6.5 million higher balance outstanding of 2001
Notes for a portion of the first nine months of 1995.
The net income applicable to common stockholders was $4.8 million or $0.17
per share in the nine months ended September 30, 1995 compared with net income
applicable to common stockholders of $5.8 million or $0.20 per share for the
nine months ended September 30, 1996. This increase was due to increased
operating income as described above offset partially by increases in interest
expense and preferred stock dividends. In addition, net income applicable to
common stockholders for the nine months ended September 30, 1995 also included
an extraordinary gain of $2.3 million or $0.8 per share resulting from an
exchange of common stock for indebtedness.
Certain Risks and Uncertainties Applicable to Gaming Industry Licensing and
Concentration of Risk
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.
Mississippi Gaming Commission regulations require licensees to invest
certain minimum amounts in land-based, non-gaming infrastructure (the
"Land-Based Requirement"). While the Company believes that its Mississippi
operating subsidiaries are in compliance with the Land-Based Requirement, the
Mississippi Gaming Commission (the "Commission") has expressed concern as to
whether LLB is in compliance with such requirements. The Commission may
condition, revoke, or suspend LLB's license if it ultimately determines that it
is not in compliance with the Land-Based Requirement and the Company does not
take steps to cure such noncompliance. The revocation or suspension of LLB's
gaming license
27
would have a material adverse impact on LLB's results of operations or
financial position, and may have a material adverse impact on LLGC's results of
operations or financial condition taken as a whole.
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. 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 effect
these casinos' future operating results. On November 5, 1996, Arkansas residents
voted to defeat a ballot measure which would have allowed voters in Hot Springs,
Arkansas, to decide whether to allow up to three casinos in the city. The
measure, if passed, would also have created a state lottery and legalized
charitable bingo.
28
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Operating Casinos
None of the Company's subsidiaries that are registrants hereunder, other
than the companies for which results of operations are set forth below,
currently has any operations. Amounts shown in the following tables are in
millions, except percentage amounts.
LLGC manages and charges fees to its wholly-owned operating subsidiaries
with substantially the same terms as the Old Management Agreements with LLCI.
LLGC does not separately allocate the fees under the New Marketing Agreement,
certain selling general and administrative expenses, rent for corporate office
facilities and certain services with respect to such corporate office facilities
and a salary to the Chairman of the Board of the Company that were formerly
included under the Old Management Agreements (all capitalized terms are defined
below).
<TABLE>
<CAPTION>
Lady Luck Rhythm & Blues
% Increase % Increase
Three months ended (Decrease) Nine months ended(Decrease)
September 30, 1996 vs. September 30, 1996 vs.
1996 1995 1995 1996 1995 1995
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.................... $25.8 $23.3 11 $72.5 $64.8 12
Net revenues...................... 23.9 22.2 8 68.0 61.5 11
Management/license fee............ 0.8 0.9 (11) 2.3 2.3 0
Operating income.................. 5.8 7.5 (23) 18.5 20.7 (11)
Operating margin (a).............. 24% 34% (10)pts 27% 34% (7) pts
</TABLE>
____________________
(a) Operating income divided by net revenues.
Three months ended September 30, 1996 versus three months ended September
30, 1995
MLI's gross revenues rose from $23.3 million during the quarter ended
September 30, 1995 to $25.8 million during the quarter ended September 30, 1996,
an increase of $2.5 million or 11%. Slot machines generated $1.2 million of this
increase due primarily to the May 21, 1996 opening of Country Casino which
currently operates 637 machines including certain slot machines which were
relocated from the existing Rhythm & Blues casino. Increases in food and
beverage, hotel and other revenues accounted for the balance of the increase in
gross revenues at MLI.
Comparatively, from the third quarter of 1995 to the third quarter of 1996,
there was a 58% increase in the average number of slot machines partially offset
by a 33% decrease in the average daily net win per slot machine. During the
quarter ended September 30, 1996, MLI operated an average number of 1,323 slot
machines, an increase of 488 over the 835 average number of slot machines in
operation during the third quarter of 1995. This increase was partially offset
by a $75 decrease in the average daily net win per slot machine from $229 during
the third quarter of 1995 to $154 during the quarter ended September 30, 1996.
During the quarter ended September 30, 1996 compared to the quarter ended
September 30, 1995, table games revenues decreased 6% primarily because the
average daily net win per table game decreased from $1,166 to $708, a decrease
of $458 or 39% and the hold percentage decreased 2 percentage points. These
decreases were offset partially by an increase in the average number of table
games in operation from 32 during the quarter ended September 30, 1995 to 50
during the quarter ended September 30, 1996.
MLI's operating income decreased from $7.5 million to $5.8 million during
the quarters ended September 30, 1995 and 1996, respectively, a decrease of $1.7
million or 23%. Contrary to the increase in gross and net revenues, operating
29
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
income decreased due primarily to the following: (i) a 5% increase in
casino marketing expenses in relation to casino revenues, (ii) a 4% increase in
casino expenses, prior to reclassifying the cost of complementaries, in relation
to casino revenues, and (iii) an increase in depreciation expense due to the
addition of Country Casino, the Pavilion and the Riverbluff Hotel. These expense
increases were offset partially by a 15% decrease in food and beverage costs and
expenses, prior to reclassifying the cost of complementaries, in relation to
food and beverage revenues.
Nine months ended September 30, 1996 versus nine months ended September 30,
1995
MLI's gross revenues rose from $64.8 million during the nine months ended
September 30, 1995 to $72.5 million during the nine months ended September 30,
1996, an increase of $7.7 million or 12%. Slot machines generated $5.8 million
of this increase. Increases in food and beverage, hotel and other revenues
offset partially by a 2% decrease in table and card games revenues accounted for
the balance of the increase in gross revenues at MLI.
There was a 38% increase in the average number of slot machines from the
first nine months of 1995 to the first nine months of 1996 which was partially
offset by a 18% decrease in the average daily net win per slot machine. During
the nine months ended September 30, 1996, MLI operated an average number of
1,076 slot machines, an increase of 295 over the 781 average number of slot
machines in operation during the first nine months of 1995. This increase was
partially offset by a $41 decrease in the average daily net win per slot machine
from $224 during the first nine months of 1995 to $183 during the nine months
ended September 30, 1996. This decrease in the average daily net win per slot
machine for the comparative nine month periods occurred during the second and
third quarters as the average daily net win per slot machine was approximately
constant during the comparative first quarter periods even though the average
number of slot machines in operation during the comparative first quarters
increased 14%.
Despite only a 2% decrease in the table games hold percentage and an
increase in the average number of tables in operation from 33 during the nine
months ended September 30, 1995 to 40 during the first nine months of 1996,
table games revenues decreased 5% primarily because the average daily net win
per table game decreased from $1,176 to $905, a decrease of $271 or 23%.
MLI's operating income decreased from $20.7 million to $18.5 million during
the first nine months ended September 30, 1995 and 1996, respectively, a
decrease of $2.2 million or 11%. Operating income decreased despite an increase
in gross and net revenues due primarily to the following: (i) additional fixed
rent of $150,000 per month from July 1, 1995 until May 31, 1996 prior to the
opening of Country Casino at which time rent reverted to a lesser amount based
on a percentage, (ii) from disruption attributable to construction, (iii) from
the operations of Country Casino and the Pavilion which contributed to a $3.9
million increase in selling, general and administrative expenses including
casino marketing, rent and other expenses, and (iv) $0.2 million of other
pre-opening expenses for the opening of Country Casino and the Pavilion.
Other factors
Additional casino capacity has been added to the Tunica, Mississippi
market, which competition, the Company believes has adversly affected revenues
and operating results at MLI, the extent of which is 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 adversely effect these casinos' future
operating results. On November 5, 1996, Arkansas residents voted to defeat a
ballot measure which would have allowed voters in Hot Springs, Arkansas, to
decide whether to allow up to three casinos in the city. The measure, if passed,
would also have created a state lottery and legalized charitable bingo.
30
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Lady Luck Natchez
% Increase %Increase
Three months ended (Decrease) Nine months ended (Decrease)
September 30, 1996 vs. September 30, 1996 vs.
1996 1995 1995 1996 1995 1995
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.................... $ 8.7 $8.1 7 $25.2 $23.1 9
Net revenues...................... 7.9 7.6 4 23.1 21.8 6
Management/license fee............ 0.3 0.3 - 0.8 0.8 -
Operating income.................. 1.0 1.4 (29) 4.2 4.3 (2)
Operating margin (a).............. 13% 18% (5)pts 18% 20% (2) pts
</TABLE>
____________________
(a) Operating income divided by net revenues.
Three months ended September 30, 1996 versus three months ended September
30, 1995
During the third quarter of 1996, LLM had operating income of $1.0 million
compared with operating income of $1.4 million for the prior year period, a $0.4
million decrease or 29%. This decrease is primarily due to an increase in casino
marketing expenses.
LLM's gross revenues increased from $8.1 million to $8.7 million during the
quarters ended September 30, 1995 and 1996, respectively, an increase of $0.6
million or 7%. The increase was from an increase in slot machines and food and
beverage revenues and the addition of hotel revenue offset partially by a
decrease in table games revenues. Slot machine revenues increased during these
comparative periods due to the average number of slot machines in operation
increasing from 533 to 593, an increase of 60 or 11%, which was partially offset
by a decrease in average daily net win per slot machine from $121 to $109, a
decrease of $12 or 10%. The decrease in net table game revenue is due to the
average number of table games decreasing from 20 in the quarter ended September
30, 1995 to 16 in the quarter ended September 30, 1996, a decrease of 4 tables
or 20%. This was partially offset by an increase in the average net table game
win per day. For the quarter ended September 30, 1996, the average net table
game win was $810, an increase of $33 or 4% from the $777 achieved in the
quarter ended September 30, 1995. During the quarter ended September 30, 1996,
the hotel generated $0.5 million in gross revenues in addition to revenues
generated by the hotel's food and beverage outlets.
Nine months ended September 30, 1996 versus nine months ended September 30,
1995
During the first nine months of 1996, LLM had operating income of $4.2
million compared with operating income of $4.3 million for the prior year
period, a $0.1 million decrease or 2%.
LLM's gross revenues increased from $23.1 million to $25.2 million during
the nine months ended September 30, 1995 and 1996, respectively, an increase of
$2.1 million or 9%. The increase was from an increase in slot machines and food
and beverage revenues and the addition of hotel revenue offset partially by a
decrease in table games revenues. During these comparative periods, the average
number of slot machines in operation increased from 534 to 577, an increase of
43, or 8%. The decrease in the table games revenues was primarily due to the
average number of table games in operation during the nine months ended
September 30, 1995 and 1996, respectively, decreasing from 19 to 17, a decrease
of 11%. During the period from April 15, 1996 through September 30, 1996, the
hotel's gross room revenues were $0.9 million.
31
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Other factors
The Company believes the purchase of the River Park will enhance 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 this or additional gaming projects were
developed in the Natchez market, LLM would be materially affected.
If the Company develops its Vicksburg Project, the Company believes that
the revenues of LLM would not be materially affected but, rather, the revenues
for the Vicksburg Project would be taken from the four existing Vicksburg
casinos.
32
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Lady Luck Bettendorf (a)
<TABLE>
<CAPTION>
% Increase
Three months ended (Decrease) Nine months ended
September 30, 1996 vs September 30,
1996 1995 1995 1996 1995
<S> <C> <C> <C> <C> <C>
Gross revenues.................... $18.2 $13.6 34 $51.3 $24.0
Net revenues...................... 17.2 13.3 29 48.9 23.4
Management/license fee............ 0.4 0.3 33 1.3 0.5
Operating income.................. 2.0 1.3 54 5.4 (0.4)
Operating margin (b).............. 12% 10% 2 pts 11% (2)%
</TABLE>
____________________
(a) Lady Luck Bettendorf commenced operations April 21, 1995; therefore,
1995 figures may lack comparability with 1996 amounts. Due to the lack of
comparability, changes between nine month periods have not been presented.
(b) Operating income divided by net revenues.
The Bettendorf Joint Venture commenced operations April 21, 1995 and has
generated steadily increasing average daily net win per slot machine. During the
third quarter of 1995, the Bettendorf Joint Venture generated average daily net
win per slot machine of $130. By the first quarter of 1996, average daily net
win per slot machine had increased to $159. By the second quarter of 1996,
average daily net win per slot machine had increased to $179. Moreover, the
third quarter of 1996 generated average daily net win per slot machine of $184,
a $54 increase or 42%, over the third quarter of 1995. This increase in average
daily net win per slot was achieved despite a 3% increase in the average number
of slot machines. For the three months ended September 30, 1996, average daily
net win per table was $603. This is a $267 decrease, or 31%, from the average
daily net win per table of $870 achieved in the quarter ended September 30,
1995. This was partially offset by the 21% increase in the average number of
table games.
Operating income for 1995 includes pre-opening expenses of $2.3 million.
Lady Luck Bettendorf is 50% owned by LLQC. The Company includes 50% of Lady Luck
Bettendorf's net income as equity in net income of unconsolidated affiliates
using the equity method of accounting.
33
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Lady Luck Biloxi
<TABLE>
<CAPTION>
% Increase % Increase
Three months ended (Decrease) Nine months ended (Decrease)
September 30, 1996 vs. September 30, 1996 vs.
1996 1995 1995 1996 1995 1995
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.................... $8.7 $8.8 (1) $23.5 $23.8 (1)
Net revenues...................... 7.9 8.4 (6) 21.5 22.2 (3)
Management/license fee............ 0.3 0.3 - 0.8 0.9 (11)
Operating (loss) income........... 0.2 0.3 (33) (0.6) (0.5) (20)
Operating margin (a).............. 3% 4% (1)pts (3)% (2)% (1) pts
</TABLE>
____________________
(a) Operating income divided by net revenues.
Three months ended September 30, 1996 versus three months ended September
30, 1995
LLB's operating income of $0.3 million during the quarter ended September
30, 1995 decreased to $0.2 million for the third quarter of 1996. This decrease
in operating income was primarily due to a decrease in total net revenues of
$0.5 million offset by a decrease in expenses of $0.4 million.
Total casino revenues increased from $7.2 million during the quarter ended
September 30, 1995 to $7.3 million for the quarter ended September 30, 1996.
Slot machine revenues increased, however, the increase was offset by a decrease
in table games revenues. The average number of slot machines in operation during
these comparative quarters increased from 591 to 648, an increase of 57 or 10%.
This increase was partially offset by a decrease in the average daily net win
per slot machine from $106 to $100, a decrease of $6 or 6%. The decrease in
table games revenues were primarily due to a decrease in the average number of
table games in operation from 26 during the three months ended September 30,
1995 to 23 during the third quarter of 1996, a decrease of 3 or 12%, while the
average daily net win per table game increased from $609 to $638, an increase of
5%.
Nine months ended September 30, 1996 versus nine months ended September 30,
1995
LLB had an operating loss of $0.6 million for the nine months ended
September 30, 1996 compared to a $0.5 million loss for the nine months ended
September 30, 1995. While total net revenues have decreased $0.7 million during
the first three quarters of 1996 as compared to 1995, total operating expenses
have decreased $0.6 million, primarily due to a reduction of casino expenses.
During the nine months ended September 30, 1995 and 1996, total net
revenues decreased from $22.2 million to $21.5 million. Slot machine revenues
increased $1.0 million, however, the increase was offset by a $0.6 million
decrease in table games revenues and a $0.6 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 nine months which
increased from 588 to 623, an increase of 35 or 6% and an increase in the
average daily net win per slot machine from $91 to $92, an increase of $1 or 1%.
The decrease in table games revenues during these comparative periods was due to
a decrease in the average daily net win per table game from $631 to $606, a
decrease of $25 or 4%, and a decrease in the average number of table games in
operation from 26 to 23, a decrease of 3 or 12%. Food and beverage revenues
decreased due to changes in the outlets and a temporary closing of one outlet
during remodeling.
34
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Other Factors
Subsequent to the first quarter of 1995, 900 new hotel rooms opened in
close proximity to LLB. In addition, 400 more rooms are currently being
constructed in close proximity to LLB. Due to these room additions, announced
closings or consolidation of existing competitors' gaming facilities, and future
project openings, the Company believes the Gulf Coast gaming market will remain
at least constant in the near term.
35
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Lady Luck Central City
% Increase % Increase
Three months ended (Decrease) Nine months ended (Decrease)
September 30, 1996 vs. September 30, 1996 vs.
1996 1995 1995 1996 1995 1995
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.................... $1.9 $1.9 - $5.1 $5.5 (7)
Net revenues...................... 1.8 1.7 6 4.8 5.1 (6)
Management/license fee............ 0.1 0.1 - 0.2 0.2 -
Operating loss.................... (0.3) (0.4) 25 (0.8) (0.8) -
Operating margin (a).............. (17)% (24)% 7 pts (17)% (16)% (1) pt
</TABLE>
____________________
(a) Operating income divided by net revenues.
Three months ended September 30, 1996 versus three months ended September
30, 1995
For the three months ended September 30, 1996, GCI generated an average
daily net win per slot machine of approximately $56 as compared with an average
daily net win per slot machine of approximately $52 for the three months ended
September 30, 1995, an increase of $4 daily per slot or 8%. The average number
of slot machines increased from 289 in the quarter ended September 30, 1995 to
300 in the quarter ended September 30, 1996, an increase of 11 machines or 4%.
The increase in average daily net win per slot and the average number of slots
produced a 10% increase in slot net revenue. The increase in slot net win was
partially offset by the closure of the poker room and a decrease in table games
revenue.
Nine months ended September 30, 1996 versus nine months ended September 30,
1995
GCI's gross revenues decreased from $5.5 million to $5.1 million during the
nine months ended September 30, 1995 and 1996, respectively, a decrease of $0.4
million or 7%. The decrease was due to declines in slot revenues from decreasing
the average number of slot machines in operation from 351 to 293 for these
comparative periods. These machines were relocated, primarily in June 1995, to
other operating properties with higher average daily net wins per slot machine
or operating margins. This decrease was partially offset by an increase in
average daily net win per slot machine from $45 to $52 for the nine months ended
September 30, 1995, an increase of $7 or 16%. The Company has implemented and
has planned additional actions designed to improve its future operating
performance including operating management personnel changes, and planned
capital expenditures to enhance the casino during the rest of the year.
Other Factors
During October 1996, Gold Coin, Inc. ("GCI"), entered into a non-binding
Memorandum of Understanding (the "Memorandum") with BWCC, Inc. which does
business as Bullwhackers ("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. Budgeted 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
36
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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
the Company's 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. 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
effect on the net revenues and operating results of GCI.
37
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
During the nine months ended September 30, 1996, the Company's cash
generated by operations exceeded its uses of operating cash by $12.4 million.
Additional sources of cash were $8.9 million of restricted cash, and $3.0
million of cash and cash equivalents related to the Greek Projects, which became
available for specified uses upon consent from a sufficient number of holders of
the 2001 Notes. Excess cash flow from operations, restricted cash and cash on
hand at the beginning of the year were the primary sources of cash during the
nine months ended September 30, 1996. The primary uses of cash and other
resources during the first nine months of 1996, other than operating
expenditures, include:
A. $20.7 million cash for property and equipment, primarily related to the
construction of Country Casino and the Pavilion, but also including $4.0 million
for the acquisition of the River Park Hotel comprising $1.0 million cash and a
mortgage note for the balance, and $1.0 million for the acquisition of the
Riverbluff Hotel comprising $0.6 million cash and a mortgage note for the
balance. Also included are portions of the costs of remodeling Lady Luck
Natchez, the Riverbluff Hotel and a portion of the River Park Hotel.
B. $4.6 million cash for payment of debt and slot contracts.
C. $3.8 million for the acquisition of slot machines by certain
subsidiaries in exchange for indebtedness.
GCI did not generate operating cash flow during the first nine months of
1996; the Company expects this trend to continue.
Due to debt service requirements on an equipment note payable and a
mortgage note, GCI required cash infusions of $0.8 million during the first nine
months of 1996 and, during the remainder of 1996, is expected to require
additional cash infusions to cover up to $0.3 million of scheduled repayments on
an equipment note payable and anticipated operating cash shortfalls.
During October 1996, Gold Coin, Inc. ("GCI"), entered into a non-binding
Memorandum of Understanding (the "Memorandum") with BWCC, Inc. which does
business as Bullwhackers ("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. Budgeted 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, 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 the
Company's 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. No
assurance can be provided that these contingencies will be satisfied.
38
<PAGE>
LADY LUCK GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company is expending approximately $0.9 million to remodel the
Riverbluff Hotel and portions of the River Park Hotel. The remodeling includes
replacement of certain furniture and equipment and is expected to be completed
by December 31, 1996.
Various other amounts of cash and other resources may be used during the
remainder of 1996 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 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 other resources available, if any.
Capital expenditures at Lady Luck Rhythm & Blues could include additional hotel
rooms and signage. Capital expenditures at Lady Luck Biloxi could include $2.0
million for additional parking. 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 2001 Notes from time to time in early
satisfaction of any repurchase expected pursuant to the Indenture, which such
amount and the timing of repurchase cannot currently be estimated and is
dependent on excess cash flow 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 September 30,
1996, approximately $6.0 million has been expended under this contract,
approximately $1.9 million of which is included in construction payables at
September 30, 1996. It is anticipated that this vessel will be utilized by Lady
Luck Kimmswick and, therefore, the Missouri Project will be responsible for
payment of the remaining amounts under the contract. However, 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.
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 1996 and during 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.
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.
39
<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")
have been named as defendants in two separate lawsuits brought by the country of
Greece and its Minister of Tourism before the Greek Multi-Member Court of First
Instance. Each action alleges that the Defendants failed to make certain
payments in connection with the gaming license bid process for Loutraki, Greece
and Patras, Greece. The Company has been informed by its Greek counsel that the
lawsuit regarding the gaming license bid process for Loutraki, Greece has been
dismissed. Accordingly, the payments the Company is alleged to have been
required to make aggregate approximately 2.1 billion drachmae (which was
approximately $8.8 million as of November 7, 1996 based upon published exchange
rates) related to Patras, Greece. 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 remaining lawsuit
and in management's opinion, the ultimate outcome of this matter is not
presently known.
Additionally, a lawyer and a consultant which were allegedly retained by
the Company in connection with the Company's bid for a gaming license in Greece
recently threatened litigation against the Company. On or about September 24,
1996, the Company and the lawyer and consultant reached an agreement whereby in
exchange for certain consideration mutual releases were executed.
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 seeks 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
$375,000. 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 the 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.
The decision is subject to adjustment for certain additional work performed
by Superior. The Company believes the additional charges will be less than the
credit to which the court ruled LLM is entitled to for excess payments made to
Superior by LLM. Superior also has the right to appeal.
40
<PAGE>
The Company, based in part on the advice of its counsel, does not believe
that any appeal of the decision would have a material adverse effect on the
Company's financial condition or results of operations.
Item 2. CHANGES IN SECURITIES
(a) None.
(b) 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
(a) None.
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.
3.3 Certificate of Incorporation of Lady Luck Gaming Finance Corporation, as
amended. Incorporated by reference to Exhibit 3.1 to the Form S-4
registration statement filed under the Securities Act (No. 33- 77184) ("the
Form S-4, No. 77184").
41
<PAGE>
3.4 By-Laws of Lady Luck Gaming Finance Corporation, as amended. Incorporated
by reference to Exhibit 3.2 to the Form S-4 Registration Statement
previously filed under the Securities Act (No. 33-65232) (the "Form S-4,
No. 65232").
3.5 Articles of Incorporation of Lady Luck Mississippi, Inc. Incorporated by
reference to Exhibit 3.5 to the Form S-4, No. 65232.
3.6 Bylaws of Lady Luck Mississippi, Inc. Incorporated by reference to Exhibit
3.6 to the Form S-4, No. 65232.
3.7 Articles of Incorporation of Lady Luck Biloxi, Inc. Incorporated by
reference to Exhibit 3.7 to the Form S-4, No. 65232.
3.8 Bylaws of Lady Luck Biloxi, Inc. Incorporated by reference to Exhibit 3.8
to the Form S-4, No. 65232.
3.9 Articles of Incorporation of Lady Luck Tunica, Inc. Incorporated by
reference to Exhibit 3.9 to the Form S-4, No. 65232.
3.10 Bylaws of Lady Luck Tunica, Inc. Incorporated by reference to Exhibit 3.10
to the Form S-4, No. 65232.
3.11 Articles of Incorporation of Lady Luck Gulfport, Inc. Incorporated by
reference to Exhibits 3.11 to the Form S-4, No. 65232.
3.12 Bylaws of Lady Luck Gulfport, Inc. Incorporated by reference to Exhibit
3.12 to the Form S-4, No. 65232.
3.13 Articles of Incorporation of Lady Luck Vicksburg, Inc. Incorporated by
reference to Exhibit 3.13 to the Form S-4, No. 65232.
3.14 Bylaws of Lady Luck Vicksburg, Inc. Incorporated by reference to Exhibit
3.14 to the Form S-4, No. 65232.
3.15 Certificate of Incorporation of Gold Coin Incorporated, as amended.
Incorporated by reference to Exhibit 3.15 to the Form S-4, No. 77184.
3.16 Amended and Restated By-Laws of Gold Coin Incorporated. Incorporated by
reference to Exhibit 3.16 to the Form S-4, No. 65232.
3.17 Articles of Incorporation of Lady Luck Kimmswick, Inc. Incorporated by
reference to Exhibit 3.17 to the Form S-4, No. 65232.
3.18 By-Laws of Lady Luck Kimmswick, Inc. Incorporated by reference to Exhibit
3.18 to the Form S-4, No. 65232.
3.19 Articles of Incorporation of Magnolia Lady, Inc. Incorporated by reference
to Exhibit 3.19 to the Form S-4, No. 65232.
3.20 Bylaws of Magnolia Lady, Inc. Incorporated by reference to Exhibit 3.20 to
the Form S-4, No. 65232.
3.21 Articles of Incorporation of Lady Luck Quad Cities, Inc. Incorporated by
reference to Exhibit 3.21 to the Form S-4 registration statement filed
under the Securities Act (No. 33-91616) (the "Form S-4, No. 33- 91616").
42
<PAGE>
3.22 Bylaws of Lady Luck Quad Cities, Inc. Incorporated by reference to Exhibit
3.22 to the Form S-4, No. 33-91616.
3.23 Articles of Incorporation of Old River Development, Inc. Incorporated by
reference to Exhibit 3.23 to the Form S-4, No. 33-91616.
3.24 Bylaws of Old River Development, Inc. Incorporated by reference to Exhibit
3.24 to the Form S-4, No. 33-91616.
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.
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.
43
<PAGE>
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.
44
<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 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 Registrant's
Form 10-K for the year 1995 (the "1995 Form 10-K").
4.28 Specimen Common Stock Certificate. Incorporated by reference to the Form
10-K.
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.
10.10Silver Land, Inc. Amended and Restated Lease Agreement dated December 31,
1992. Incorporated by reference to Exhibit 10.8 to the Form S-1.
10.11Lease 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.
45
<PAGE>
10.12Lease 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.
10.13Sublease 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.
10.14Lease 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").
10.15Lease 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.
10.16Agreement 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.
10.17Option 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.
10.18Lease 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.
10.19Agreement 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.
10.20Lady Luck Gaming Corporation Employee Stock Option Plan. Incorporated by
reference to Exhibit 10.31 to the Form 10-K.
10.21Indemnification 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.
10.23Warrant Agreement dated April 1, 1993. Incorporated by reference to
Exhibit 10.15 to the Form S-1.
10.24Amendment 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").
10.25Option 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.
10.26Lease 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
46
<PAGE>
D.J. Brata as Lessee.Incorporated by reference to Exhibit 10.34 to the Form
10-Q for the quarter ended June 30, 1994.
10.27Assignment 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.
10.28Modification 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.
10.29Second 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 Form 10-Q for the quarter ended June 30,
1994.
10.30Escrow 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 Form 10-Q for the quarter ended June 30, 1994.
10.31Agreement 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 Form 10-Q for the quarter ended June 30, 1994.
10.32Management 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 Form 10-Q for the quarter ended September 30, 1994.
10.33Letter 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").
10.34Letter Agreement dated October 24, 1994 by and between Rory J. Reid and
Lady Luck Gaining Corporation. Incorporated by reference to Exhibit 10.42
to the 1994 Form 10-K.
10.35Amended 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
previously filed on February 28, 1995.
10.36Stock 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.
10.37Stock 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.
47
<PAGE>
10.38Real 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.
10.39Operating 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.
10.40Charter 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.
10.41Memorandum 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.
10.42Agreement 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 dated
December 1, 1995.
10.43Memorandum 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.
10.44Contribution 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 dated February 5, 1996.
10.45License 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.
10.46Services 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.
10.47Office 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.
10.48Assignment 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.
10.49Contract 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.
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
48
<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: November 13, 1996
/s/James D. Bowen
James D. Bowen
Vice President Finance and
Principal Accounting Officer
and duly authorized officer
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 September 30, 1996
(Unaudited) and the Condensed Consolidated Statement of Income for the Nine
Months Ended September 30, 1996 (Unaudited) and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000908535
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 17,316
<SECURITIES> 0
<RECEIVABLES> 1,341
<ALLOWANCES> 315
<INVENTORY> 1,129
<CURRENT-ASSETS> 22,028
<PP&E> 199,848
<DEPRECIATION> 25,812
<TOTAL-ASSETS> 226,069
<CURRENT-LIABILITIES> 20,494
<BONDS> 181,857
15,971
0
<COMMON> 29
<OTHER-SE> 7,718
<TOTAL-LIABILITY-AND-EQUITY> 226,069
<SALES> 123,893
<TOTAL-REVENUES> 132,972
<CGS> 49,123
<TOTAL-COSTS> 49,123
<OTHER-EXPENSES> 52,315
<LOSS-PROVISION> 148
<INTEREST-EXPENSE> 16,356
<INCOME-PRETAX> 7,181
<INCOME-TAX> 69
<INCOME-CONTINUING> 7,112
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,112
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
