COMPANY IS NOT A SEC REGISTRANT
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
Commission File Number 22-27770
TREASURE BAY GAMING & RESORTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 64-0835173
(State of Incorporation) (IRS Employer Identification No.)
1983 Beach Blvd., Biloxi, Mississippi 39531
(Address of principal executive office)
Shares of Common Stock outstanding at September 30, 1999: 10,000,000.
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TREASURE BAY GAMING AND RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
Unaudited Audited
Sept. 30, 1999 Dec. 31, 1998
------------------- -------------
CURRENT ASSETS
Cash and cash equivalents $2,580 $5,014
Restricted Cash 58 57
Accounts receivable, net of allowance for doubtful
accounts 1,173 2,680
Inventories 235 412
Prepaid expenses 827 697
------------------- ----------------
Total current assets 4,873 8,860
------------------- ----------------
PROPERTY AND EQUIPMENT, net 49,188 46,489
------------------- ----------------
OTHER ASSETS 851 1,077
------------------- ----------------
$54,912 $56,426
=================== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $2,095 $3,586
Accrued Salaries and benefits 1,873 1,539
Accrued Jackpots 799 893
Accrued taxes payable 1,233 1,796
Other accrued expenses 1,057 1,930
Accrued Interest 711 679
Current Portion LTD 2,043 1,627
------------------- ----------------
Total Current Liabilities 9,811 12,050
------------------- ----------------
LONG-TERM DEBT 44,257 39,823
Total liabilities 54,068 51,873
------------------- ----------------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 20,000,000 shares authorized,
10,000,000 shares issued and outstanding 100 100
Additional paid in capital 47,382 47,382
Accumulated deficit (46,638) (42,929)
------------------- ----------------
Total stockholders' equity $844 $4,553
------------------- ----------------
Total liabilities and stockholders' equity $54,912 $56,426
=================== ================
</TABLE>
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<TABLE>
<CAPTION>
TREASURE BAY GAMING & RESORTS, INC & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
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Three Months Ended Nine Months Ended
-------------------------------------- --------------------------------------
September 30, 1999 September 30, 1998 September 30, 1999 September 30,
1998
REVENUES:
Casino 13,580 16,920 43,967 45,806
Rooms 981 1,035 2,886 2,835
Food and beverages 2,993 3,173 8,787 8,497
Other 362 225 1,114 699
------------------ ---------------- ----------------- ------------------
Gross Revenues 17,916 21,353 56,754 57,837
Less: Promotional allowances (2,401) (2,633) (6,983) (6,818)
------------------ ---------------- ----------------- ------------------
NET REVENUES 15,515 18,720 49,771 51,019
------------------ ---------------- ----------------- ------------------
COSTS AND EXPENSES:
Casino 7,061 7,942 23,565 22,664
Rooms 510 548 1,593 1,486
Food and beverages 2,707 2,869 8,525 7,608
General and administrative 3,633 3,246 10,415 10,313
Utilities 396 402 1,081 1,048
Depreciation and amortization 411 1,003 2,516 2,929
Other 225 220 668 556
------------------ ---------------- ----------------- ------------------
Total Operating Expenses 14,943 16,230 48,363 46,604
------------------ ---------------- ----------------- ------------------
Operating Income before
Corporate Expense 572 2,490 1,408 4,415
------------------ ---------------- ----------------- ------------------
Corporate Expense (420) (430) (1,182) (1,127)
------------------ ---------------- ----------------- ------------------
Operating Income after Corporate 152 2,060 226 3,288
------------------ ---------------- ----------------- ------------------
Other income/expense:
Gain/loss sale off assets (66) (18) (65) 72
Interest expense, (1,352) (1,187) (3,923) (3,578)
Other income, principally interest 5 6 53 35
------------------ ---------------- ----------------- ------------------
Total other income (expense) (1,413) (1,199) (3,935) (3,471)
Income/(loss) before provision for income
Taxes and Extraordinary Items: (1,261) 861 (3,709) (183)
Provision for Income Tax 0 0 0 0
Net Income/(loss) ($1,032) 861 ($3,709) ($183)
================= ================ ================= ==================
Average common shares outstanding 10,000 10,000 10,000 10,000
Income (loss) per common share ($0.10) $.01 ($0.37) ($.00)
</TABLE>
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TREASURE BAY GAMING & RESORTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998(AUDITED)
and the NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
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Additional
Common Stock Paid-In Accumulated
----------------------
Shares Amount Capital Deficit Total
-------------- -------------- ---------------
BALANCE, December 31, 1998 10,000,000 100,000 47,382,000 (42,929,000) 4,553,000
Net loss for the Nine months ended Sept. 30, 1999 0 0 0 (3,709,000) (3,709,000)
------------ ---------- -------------- -------------- ---------------
BALANCE, September 30, 1999 10,000,000 $100,000 $47,382,000 (46,638,000) $ 844,000
------------ ---------- -------------- -------------- ---------------
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TREASURE BAY GAMING & RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Month Period Ended September 30, 1999 and the Year Ended
December 31, 1998
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(Unaudited)
Nine Months Ended (Audited)
September 30, December 31,
1999 1998
-------------------- -------------------
Cash Flows from Operating Activities:
Net income (loss) $ (3,709) $ (2,358)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 2,516 3,968
Accretion of discount on first mortgage notes payable 144 232
(Decrease) Increase in receivables 1,507 (1,657)
(Decrease) Increase in inventories 177 (141)
(Decrease) Increase in prepaid expense (129) (82)
(Increase) Decrease in other Assets 226 (662)
(Decrease) in liabilities not subj. to compromise (2,655) 2,183
Net (gain) loss on disposal of assets (65) (64)
-------------------- -------------------
Total adjustments (1,988) 1,419
Cash Flows from Investing Activities:
Purchases of property and equipment (5,150) (2,879)
Proceeds from sale of assets, net of transaction costs 33 200
-------------------- ------------------
Net cash used in investing activities (5,117) (2,679)
Cash Flows from Financing Activities:
Proceeds from issuance of notes payable 5,756 2,638
Repayments of notes payable (1,084) (2,194)
Proceeds from sale of capital stock 0 0
-------------------- -------------------
Net cash provided by financing activities 4,672 444
Net increase in cash and cash equivalents (2,433) (816)
Cash and Cash equivalents, at beginning of period 5,071 5,887
==================== ===================
Cash and cash equivalents, at end of period 2,638 5,071
==================== ===================
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
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TREASURE BAY CASINO & RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. ORGANIZATIONAL STRUCTURE AND BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements include the
accounts of Treasure Bay Gaming & Resorts, Inc., a Delaware corporation
incorporated in August 1993, and its wholly-owned subsidiaries, Treasure Bay
Corp. ("TBC, a Mississippi corporation incorporated in February 1993, and
Shoreline Development Inc. a corporation assumed through the reorganization
process. The Company was organized to develop, own and operate casinos in the
State of Mississippi and other emerging gaming jurisdictions. The Company
currently owns and operates a casino in Biloxi, Mississippi and is under
agreement to manage Casinos in Aruba and U.S. Virgin Island.
The accompanying interim unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10Q and Article 10 of
Regulation S-X. They should be read in conjunction with the audited Shareholders
report for the years ended December 31, 1998, 1997, and 1996. Therefore, they do
not include all of the information and notes required by generally accepted
accounting principles for complete financial statements. Management believes
that all adjustments, necessary for a fair presentation have been included.
Operating results for the nine-months ended September 30, 1999 are not
necessarily indicative of the results that can be expected for the fiscal year
ended December 31, 1999.
August 8, 1997, Treasure Bay Gaming & Resorts, Inc. (the "Company") received
confirmation of its reorganization plan that was filed February 6, 1997. The
company had been operating as a debtor-in-possession since November 18, 1994.
The approved plan provided that all outstanding Securities would be canceled,
annulled and extinguished. New Notes and Common Stock shall be issued. Except as
provided in the Confirmation Order the plan discharged the Company from all
claims or debts that arose before the bankruptcy date. The new equity investor's
contribution was be $9,000,000 of new value in the form of cash and real estate.
This gave the new investors ninety (90%) of the Company's new stock. First
Mortgage Trust surrendered all of the old notes and were issued new notes in the
amount of $27,250,000 and ten (10%) of the issued common stock. An additional
note for $2,250,000.00 for working capital was issued for a total of
$29,250,000.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
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 the 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 those estimates.
Fair Value of Financial Instruments
Cash Equivalents, Receivable and Accounts Payable - The carrying amount
approximates fair value because of the short maturity of these instruments.
Income Taxes
The Company has filed consolidated Federal and Mississippi tax returns for the
period from inception through December 31, 1993, and for the years ended
December 31, 1994, 1995, 1996, 1997, and 1998.
The Company has adopted the provisions of Statement of Financial Accounting
Standards (FAS) No. 109, "Accounting for Income Taxes", which requires, among
other things, that deferred tax assets and liabilities be recorded using the
liability method, and that deferred tax assets be recognized, subject to
appropriate reserves for realization.
The Company expects to have a net operating loss carry-forward for income tax
purposes totaling approximately $73 million which will begin expiring in 2008.
No net tax benefit for the losses has been recorded. The deferred tax asset
resulting from differences in the timing of the deduction of asset valuation
provisions and the capitalization and amortization of preopening expenses for
income tax purposes account for substantially all of the differences between
book and taxable income.
Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share." This replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Basic earnings per share excludes any diluted
effects of options, warrants and convertible securities. The Company does not
currently have any warrants, options or convertible securities all such items
were nullified and void as part of the restructuring plan. For the periods of
the Earnings per common share was determined by dividing net earnings for the
period. The Earnings Per Share calculation for the nine months ended September
30, 1999, is based on the shares outstanding at that time
Litigation and Contingencies
The Company adheres to FAS No. 5, "Accounting for Contingencies," concerning the
recording of liabilities for pending litigation.
Casino Revenues and Complimentaries
In accordance with prevailing industry practice, the Company recognizes as
casino revenues the net win from gaming activities, which is the difference
between gaming wins and losses. Revenues include the retail value of rooms,
food, beverage, and other goods and services provided to customers without
charge. Such amounts are then deducted as promotional allowances.
Corporate Expenses
Corporate expenses primarily include legal, audit, professional services, and
payroll associated with executive administration.
Consolidated Statement of Cash Flows
The following supplemental disclosures are provided as part of the consolidated
statement of cash flows.
Accounting Standard
The Financial Accounting Standards Board has issued FAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of",
effective for fiscal years beginning after December 15, 1995. Generally, FAS No.
121 requires that long-lived assets that are expected to be held and used in
operations be reported at the lower of cost or fair value. Long-lived assets to
be disposed of are to be reported at the lower of carrying amount or fair value
less cost to sell. The Company has employed the methodology prescribed by this
standard in evaluating the carrying amounts of its long-lived assets.
Risk Factors
Certain risk factors have been identified by the Company that may impact its
ability to achieve ongoing successful operations. Such factors include the
following:
Ability to Service Debt Obligations - The Company has significant outstanding
indebtedness as of September 30, 1999. Incremental future borrowings may be
necessary to continue successful operations.
Competition - Competition on the Gulf Coast is expected to increase as new and
current casino operators expand their facilities. Imperial Palace, Biloxi's
first Las Vegas Casino opened in December 1997. Beau Rivage, an even larger
competitor, opened in March 1999. Many of the Company's competitors have greater
financial resources than the Company.
Licensing Risk - The Company is required, in order to operate its casino, to
maintain certain gaming licenses from the State of Mississippi. In addition,
directors and certain stockholders, officers and other key employees are
required to maintain their suitability to own and operate a casino, and in
certain cases will be required to maintain their gaming licenses. The failure of
the Company or certain of the above referenced individuals to retain the
necessary licenses or finding of unsuitability would have a material adverse
impact on the Company. The current casino operator's license is valid through
April 2000.
Proposed Gaming Referendum-Anti-gaming interests have proposed a statewide
referendum intended to abolish legalized gaming in the state of Mississippi. The
latest version of that referendum has been dropped, however, no assurances can
be that future referendums will not be passed.
Severe Weather - A hurricane, flood or other severe weather could cause
significant physical damage to the Company's casino and on-shore facilities,
which could result in service interruption and reduction in the number of
potential customers traveling to the Company's casino market, which could have a
material adverse impact on the Company's operating results. On September 25,
1998, the Company suspended operations due to Hurricane Georges. The Casino
remained closed until October 10, 1998, and had an estimated impact of
$2,000,000.00 on the companies operating income for the year ended December 31,
1998.
PROPERTY AND EQUIPMENT:
Property and equipment consists of the following as of:
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Sept. 30, December 31,
1999 1998
Land $ 19,044 19,044
Casino barge, buildings and improvements 40,289 37,147
Leasehold acquisition costs 19,548 19,548
Furniture, fixtures and equipment 25,637 23,571
104,518 100,100
Less: Accumulated depreciation and amortization (20,329) (18,621)
Valuation reserve (35,000) (35,000)
Total property and equipment, net $ 49,189 $ 46,489
</TABLE>
In accordance with FAS No. 121 (see Note 3), the Company established reserves
during 1994 to reduce the value of its casino facilities to the current
estimated fair value. The Treasure Bay Biloxi casino was written down to the
lower of cost or market value. This resulted in a $35,000,000 charge to income
for Treasure Bay Biloxi for the year ended December 31, 1994. The numbers for
the land have been adjusted to reflect the corrected costs.
LONG-TERM DEBT:
Long-term debt, including capital lease obligations consists of First Mortgage
Notes and other notes payable secured by furniture and fixtures. The First
Mortgage Notes are balloon notes payable in full on August 1, 2006. The
Indenture requires quarterly interest due at 12%, but has imputed interest at
13.5%. The vessel, hotel, and other furniture, fixtures, and equipment secure
the Notes. The Indenture requires compliance with many debt covenants, including
among other restrictions, the Company must retain a consolidated net worth of at
least $3,000,000, and numerous restrictions on borrowings. As of the quarter
ended September 30, 1999, the Company has dropped below the $3,000,000 equity
threshold. This is the second consecutive quarter that the equity is less than
$3,000,000. The Indenture requires that the Company shall, made an irrevocable,
unconditional offer to all the Holders of Notes to purchase $3,000,000 of the
Notes, at 100% of the Principal amount plus accrued interest. In addition the
Company has failed to meet the fixed coverages ratio for the quarter ended as of
September 30, 1999. Although the Company is in default with on these two
covenants, the majority bondholder has agreed not to exercisethe default
provisions of the indenture through January 31, 2000. The Company is current on
all payment to the Noteholders.
The Company's ability to service its debt will depend on its future performance,
which will be affected by many factors including; prevailing economic conditions
and business, which are beyond the Company's control.
Other Long-Term Debt
The Company has accrued deferred rent to normalize the annual lease payments
over the initial term of the lease plus the first two renewal periods.
OPERATING LEASES:
The Company conducts certain operations on leased property and leases certain
equipment and machinery. The Company's operating leases, including the Company's
property leases, are executor contracts.
PLAN OF REORGANIZATION:
On May 10, 1995, the Company filed a Plan of Reorganization (the "Reorganization
Plan") for consideration by creditors. Subsequently, the Company filed a First
and a Second Amended Plan of Reorganization on July 28, 1995, and November 13,
1995, respectively. The original plan was denied confirmation by the bankruptcy
court in October 1996. Subsequent to denying the plan the Judge recused himself
from the case and the case was transferred to a different Judge.
On February 6,1997, the Company filed the Amended Disclosure statement for the
"Amended Joint Plan of Reorganization of Treasure Bay and First Trust National
Association as Indenture Trustee." This plan represented an agreement between
Treasure Bay, the First Mortgage Noteholders, and the Unsecured Creditors
Committee of Treasure Bay. The plan anticipated a $9,000,000 equity infusion of
cash and property in return for 90% of the new common stock in the reorganized
company with the Noteholders obtaining the remaining 10% equity.
The reorganization plan was confirmed on August 8, 1997. In accordance with the
reorganization plan, all accounting entries have been made.
TREASURE BAY CASINO & RESORTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Quarterly report contains forward-looking statements about the business.
The actual results could differ materially from those indicated by the by the
forward looking statements. The following discussion should be read in
conjunction with and is qualified in its entirety by, the unaudited Consolidated
Financial Statements and the Notes thereto included elsewhere in this report.
General Overview
The Company develops, constructs and manages land-based and dockside casinos and
related amenities. The Company is currently operating as a single site facility
in Biloxi, Mississippi. On December 2, 1998, the Company received a gaming
license in St. Croix, U.S. Virgin Islands. The Company has entered into a
management agreement to help in the construction and managing of a St. Croix,
casino for Grapetree Shores. The Casino Divi Carina Bay is scheduled to open in
December 1999. Grapetree Shores is owned by the managing partner of the primary
holder of the Company's First Mortgage Notes (see Note 5). In addition, the
Company is managing a Alahambra Casino, in Aruba for Divi Resorts, a company
owned by the Grapetree Shores.
The Company has a limited operating history that may not be indicative of the
Company's future performance. Additionally, comparison of results from year to
year may not be meaningful due to changes in the local gaming markets and the
sale of the Tunica facility in 1995. Treasure Bay contemplates expanding its
existing operation and establishing additional gaming operations.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1998.
Revenues:
The Company generated $15.5 million in net operating revenues during the three
months ended September 30, 1999 compared to $18.7 for the three months ended
September 30, 1998, an decrease of 17%. Decreases occurred in the casino, food
and beverage, and hotel operations.
The gross casino revenue dropped to $13.5 million and $4.4 million in gross
hotel, food, beverage, retail and other revenue during the three months ended
September 30, 1999. Compared to the three months ended September 30, 1998, when
the Company generated $ 16.9 million in casino revenue and $ 4.4 million in
gross hotel, food, beverage, retail and other revenue.
Costs and Expenses:
Overall operating costs before corporate expenses were $14.9 million during the
three months ended September 30, 1999, compared to $16.2 million in the three
months ended September 30, 1998. The decrease in the operating cost is because
of the decrease in business levels and an adjustment to depreciation expense.
During the three months ended September 30, 1999, the Company made an adjustment
for depreciation that had been over-expensed in prior quarters.
Total Casino expenses decreased from $7.9 million in 1998, to $7.1 million for
the three months ended September 30, 1999. The decrease is attributed to the
reduction in overall business levels.
The food and beverage expenses were $2.7 million for the three months ended
September 30, 1999, compared to $2.9 million for the three months ended
September 30, 1998. Although the expenses have decreased in the quarter ended
September 30, 1999, the profit margin remains consistent with the prior year.
The Company's general and administrative expenses, utilities, depreciation,
lease, and other expenses were $4.6 million for the three months ended September
30, 1999 compared to the $4.9 million for the three months ended September 30,
1998. The reduction is primarily due to the adjustment made to correct
overstated depreciation expense.
Other:
Interest expense increased by $165,000 to $1.4 million for the three months
ended September 30, 1999. The increase is due to additional indebtedness
incurred by the Company during 1998 and 1999.
Capital resources, capital spending, and liquidity:
As of September 30, 1999, the Company had $2.6 million in non-restricted cash
and cash equivalents. The decrease of approximately $2.4 million is primarily
attributed to operating results being lower than anticipated and the increased
interest cost.
As of September 30, 1999, the Company's long-term debt included First Mortgage
Notes that are balloon notes payable in full on August 1, 2006. The Indenture
requires quarterly interest due at 12%, but has imputed interest at 13.5%. The
vessel, hotel, and other furniture, fixtures, and equipment secure the Notes.
The Indenture requires compliance with many debt covenants, including among
other restrictions, the Company must retain a consolidated net worth of at least
$3,000,000, and numerous restrictions on borrowings. The Company is in default
on two of the convents. As of the quarter ended September 30, 1999, the Company
has dropped below the $3,000,000 equity threshold for the second consecutive
quarter. In addition to the default in the equity covenant the Company is not in
compliance with its Fixed Coverage's Ratio. The majority bondholder has agreed
not to exercise the default provisions of the indenture through January 31,
2000.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 1998.
Revenues:
The Company generated $49.8 million in net operating revenues during the nine
months ended September 30, 1999 compared to $51.0 for the nine months ended
September 30, 1998, an increase of 2%. All of the major revenue producing venues
had decreases in revenues during the nine months ended September 30, 1999.
The gross casino revenue decreased to $44.0 million and $12.8 million in gross
hotel, food, beverage, retail and other revenue during the nine months ended
September 30, 1999. During the nine months ended September 30, 1998, the Company
generated $ 45.8 million in casino revenue and $ 12.0 million in gross hotel,
food, beverage, retail and other revenue.
Promotional allowances are the estimated value of the complimentary food,
beverages, hotel rooms and other goods and services given to casino customers
under various marketing programs. The value of these items are deducted against
gross revenue in accordance with generally accepted accounting principals. The
cost of promotional allowances increased to $6.9 million for the nine months
ended September 30, 1999, compared to $6.8 for the nine months ended September
30, 1998. The increase is primarily a result of the increase in the quarter
ended March 31, 1999.
Costs and Expenses:
Overall operating costs before corporate expenses were $48.3 million during the
nine months ended September 30, 1999, compared to $46.6 million in the nine
months ended September 30, 1998. The Company had increases in payroll primarily
due to the changes in the labor market. The Company has had to pay premium wages
and incur the cost of using temporary services to meet the needs of our
customers.
Total Casino expenses increased from $22.6 million in 1998, to $23.6 million for
the nine months ended September 30, 1999. The increase is primarily due to the
increase in promotional expenses and the increase payroll costs. In an effort to
offset ongoing casino construction and anticipated competition the Company
launched several innovative marketing programs.
The food and beverage expenses were $ 8.5 million for the nine months ended
September 30, 1999, compared to $7.6 million for the nine months ended September
30, 1998. The increase is primarily related to increased costs of goods sold and
increased labor costs and to the costs expensed when opening the new brewpub in
the Casino.
The Company's general and administrative expenses, utilities, depreciation,
lease, and other expenses were $14.7 million for the nine months ended September
30, 1999 compared to the $14.8 million for the nine months ended September 30,
1998. The decrease is primarily due to the adjustment in depreciation expense.
Other:
Interest expense increased by $345,000 to $3.9 million for the nine months ended
September 30, 1999. The increase is due to additional indebtedness incurred by
the Company during 1998 and 1999.
Capital resources, capital spending, and liquidity:
The Company expects that future borrowings may be necessary to fund current debt
service and working capital. The Company's ability to service its debt will
depend on its future performance, which will be affected by many factors
including; prevailing economic conditions and business, which are beyond the
Company's control.
Hurricane Georges:
On September 25, 1998, the Mississippi Gaming Commission required all Coast
casinos to close gaming operations to prepare for Hurricane Georges. The
hurricane caused water and wind damage to the casino and hotel. The Company
maintains property, liability, and business interruption insurance to help
offset the costs of hurricane damages. The Company estimates that the operating
loss resulting from the hurricane was $2 million.
Earning Per Common Share and Net Earnings:
The Company incurred a net loss of $3.7 million during the nine months period
ended September 30, 1999, compared to a net loss of $ 0.1 million during the
nine months period ended September 30, 1998.
Year 2000
The Company is continually evaluating and resolving any potential problems
associated with the Year 2000. The Year 2000 problem exists because computer
applications were historically designed to use two digit fields instead of four
to designate a year, and date sensitive systems may not properly account for
2000, which could result in miscalculations or system failures. The Company has
established a Year 2000 team composed of members of the management in
conjunction with the management information department to identify and evaluate
Year 2000 issues, with respect to the Company's information systems, suppliers,
and facilities. The Company has already updated its financial reporting, cage
and table games and slot tracking system, payroll processing systems, and most
of its hardware to be Year 2000 compatible.
Given the inherent risks for a project such as this and the resources required,
the timing and costs involved could differ materially from those anticipated by
the Company. There can be no assurances that these assumptions are correct, the
projects will be completed on schedule, or within budget and actual results
could differ materially. Any failure of third party systems could have a
material adverse affect on the Company.
Inflation
The Company believes the increased competition in the local market will continue
to cause increases in operating expenses, particularly labor cost.
TREASURE BAY CASINO & RESORTS, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Litigation
As a result of the bankruptcy filing, all legal proceedings with respect to
prepetition claims against the Company was automatically stayed pursuant to
Section 362 of the U. S. Bankruptcy Code.
ITEM 2 - CHANGES INS SECURITIES - None
ITEM 3. - DEFAULTS UPON SENIOR SECURITIES - None
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS- None
ITEM 5. - OTHER INFORMATION - None
ITEM 6- EXHIBITS AND REPORTS ON FORM 8-K
(a) No reports on Form 8-k were filed during the quarter ended September 30,
1999.
<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.
TREASURE BAY GAMING & RESORTS, INC.
By /S/ LEE ANN HUNTER
-------------------------
LEE ANN HUNTER
Director of Finance
Dated: September 30, 1999
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<S> <C>
<PERIOD-TYPE> 9-MOS
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0
0
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