SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
-----------------------------
For the Quarter Ended: May 31, 1999
Commission File Number N/A
Louisiana Casino Cruises, Inc.
(Exact name of registrant as specified in its charter)
Louisiana 72-1196619
(State or other jurisdiction of (I.R.S.
Employer Identification
organization or incorporation) Number)
1717 River Road North
Baton Rouge, Louisiana 70802
(Address of principal executive offices, including zip code)
(225) 709-7777
(Registrant's telephone number, including area code)
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).
YES X NO _______
and (2) has been subject to such filing requirements for the past 90 days.
YES X NO _______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, no par value
per share 996,883
Class Outstanding as of July 12, 1999
<PAGE>
LOUISIANA CASINO CRUISES, INC.
INDEX
PAGE NO.
Part I Financial Information
Balance Sheets...................................................1
Statements of Operations.........................................2
Statement of Changes in Shareholders' (Deficit) Equity...........3
Statements of Cash Flows.........................................4
Notes to Financial Statements....................................6
Management's Discussion and Analysis of Financial
Condition and Results of Operations..............................9
Quantitative and Qualitative Disclosures About
Market Risk.....................................................12
Part II Other Information.........................................13
Signatures............................................................14
<PAGE>
LOUISIANA CASINO CRUISES, INC.
BALANCE SHEETS
(in thousands, except share data)
The accompanying notes are an integral
part of these financial statements
1
May 31, November
30,
1999 1998
--------- ----------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 16,343 $ 13,525
Receivables, less allowance for
doubtful accounts
of $133 and $123, respectively 859 332
Prepaid and other current assets 1,227 756
Inventories 286 452
Deferred tax asset - current 1,880 1,466
--------- ----------
Total current assets 20,595 16,531
Property and equipment, at cost, less
accumulated
depreciation of $18,368 and $15,980, 40,769 41,504
respectively
Other assets 1,955 3,988
--------- ----------
Total assets $ 63,319 $ 62,023
========= ==========
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
EQUITY
Current liabilities:
Accounts payable $ 4,033 $ 2,428
Accrued liabilities 1,394 2,028
Accrued interest 2,010 102
Other current liabilities 131 332
--------- ----------
Total current liabilities 7,568 4,890
Senior secured notes 53,000 50,000
Deferred tax liability 3,087 2,994
--------- ----------
Total liabilities 63,655 57,884
--------- ----------
Redeemable common stock warrants - 4,131
--------- ----------
Shareholders' (deficit) equity:
Common stock, no par value:
10,000,000 shares authorized;
996,883 and 982,783
shares issued and outstanding, 1 1
respectively
(Accumulated deficit) retained earnings (337) 7
--------- ----------
Total shareholders' (deficit) equity (336) 8
--------- ----------
Total liabilities and shareholders' $ 63,319 $ 62,023
(deficit) equity
========= ==========
<PAGE>
LOUISIANA CASINO CRUISES, INC.
STATEMENTS OF OPERATIONS
(in thousands, except share data)
(unaudited)
Three Months Ended Six Months Ended
------------------- -------------------
May 31, May 31, May 31, May 31,
1999 1998 1999 1998
--------- -------- --------- ---------
Net revenues:
Casino $ 21,410 $ 17,785 $ 40,706 $ 34,550
Food and beverage 437 330 816 660
Other 185 233 304 421
--------- -------- --------- ---------
Net revenues 22,032 18,348 41,826 35,631
--------- -------- --------- ---------
Costs and expenses:
Casino 9,538 8,398 18,704 16,789
Food and beverage 424 294 824 675
Selling, general and 6,107 5,119 11,903 10,336
administrative
Depreciation and 1,308 1,122 2,574 2,219
amortization
--------- -------- --------- ---------
Total operating expenses 17,377 14,933 34,005 30,019
--------- -------- --------- ---------
Operating income 4,655 3,415 7,821 5,612
Other income (expense):
Interest income 130 114 418 211
Interest expense (1,589) (1,498) (3,736) (2,989)
--------- -------- --------- ---------
Income before income taxes 3,196 2,031 4,503 2,834
and extraordinary item
Provision for income taxes 1,254 756 1,762 1,041
--------- -------- --------- ---------
Net income before 1,942 1,275 2,741 1,793
extraordinary loss
Extraordinary loss on early
extinguishment of debt, - - 1,731 -
net
--------- -------- --------- ---------
Net income 1,942 1,275 1,010 1,793
Dividend requirement on - 33 - 66
redeemable preferred stock
Distributions paid to - 162 - 162
common stock warrantholders
--------- -------- --------- ---------
Net income assigned to $ 1,942 $ 1,080 $ 1,010 $ 1,565
common shareholders
========= ======== ========= =========
Earnings per share :
Basic earnings before $ 1.95 $ 1.10 $ 2.75 $ 1.59
extraordinary loss per share
========= ======== ========= =========
Basic extraordinary $ - $ - $ (1.74)$ -
loss per share
========= ======== ========= =========
Basic earnings per $ 1.95 $ 1.10 $ 1.01 $ 1.59
share
========= ======== ========= =========
Diluted earnings before $ 1.95 $ 1.09 $ 2.75 $ 1.52
extraordinary loss per share
========= ======== ========= =========
Diluted extraordinary $ - $ - $ (1.74)$ -
loss per share
========= ======== ========= =========
Diluted earnings per $ 1.95 $ 1.09 $ 1.01 $ 1.52
share
========= ======== ========= =========
Weighted average common 996,883 982,783 996,883 982,783
shares outstanding
========= ======== ========= =========
Weighted average common
equivalent shares 996,883 1,135,783 996,883 1,135,783
outstanding
========= ======== ========= =========
<PAGE>
LOUISIANA CASINO CRUISES, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' (DEFICIT) EQUITY
(in thousands, except share data)
(unaudited)
Common Stock Retained
----------------- Additional Earnings
Paid-in (Accumulated
Shares Amount Capital Deficit) Total
------- ------- ---------- -------- -------
Balance at November 30, 1998 982,783 $ 1 $ - $ 7 $ 8
Warrants converted to 14,100 - 381 - 381
common shares
Dividends paid to holders of - - (381) (1,354) (1,735)
common stock
Net income - - - 1,010 1,010
------- ------ ---------- -------- -------
Balance at May 31, 1999 996,883 $ 1 $ - $ (337) $ (336)
======= ====== ========== ======== =======
<PAGE>
LOUISIANA CASINO CRUISES, INC.
STATEMENTS OF CASH FLOWS
(page 1 of 2)
(unaudited)
Six Months Ended
-------------------
May 31, May 31,
1999 1998
------- -------
Net income $ 1,010 $ 1,793
Net cash flows from operating activities :
Extraordinary loss on early 1,731 -
extinguishment of debt, net
Depreciation and amortization 2,574 2,219
Amortization of deferred costs 168 338
Other 51 146
(Increase) decrease in receivables (578) 72
Decrease (increase) in inventories 166 (41)
Decrease in prepaid and other assets 657 236
(Increase) decrease in deferred tax asset (414) 505
Increase in accrued interest 1,908 -
Increase in deferred tax liability 93 423
Increase (decrease) in accounts payable 770 (2,110)
and other liabilities
------- -------
Net cash provided by operating 8,136 3,581
activities
------- -------
Cash flows from investing activities :
Capital expenditures (1,777) (2,607)
Decrease in restricted cash - 1,482
Proceeds from sale of fixed - 35
assets
------- -------
Net cash used by investing activities (1,777) (1,090)
------- -------
Cash flows from financing activities :
Proceeds from senior secured notes 55,000 -
Repayment and purchase of senior secured (119)
notes (52,000)
Payment of deferred financing costs (1,057) -
Increase in restricted cash - (2,005)
Repayments of notes payable - (18)
Purchase of common stock warrants (3,749) -
Dividends paid to common stockholders (1,735) (1,040)
Distributions to common stock - (162)
warrantholders
------- -------
Net cash used by financing activities (3,344)
(3,541)
------- -------
Net increase (decrease) in cash and cash 2,818 (853)
equivalents
Cash and cash equivalents, at beginning of 13,525 7,924
period
------- -------
Cash and cash equivalents, at end of period $ 16,343 $ 7,071
======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,637 $ 2,527
======= =======
Cash paid for income taxes $ 168 $ -
======= =======
<PAGE>
LOUISIANA CASINO CRUISES, INC.
STATEMENTS OF CASH FLOWS
(page 2 of 2)
(unaudited)
Supplemental disclosure of noncash investing and financing activities:
Redeemable preferred stock dividends of $66,000 were accrued during the
six month period ended May 31, 1998.
On December 1, 1998, holders of 14,100 redeemable common stock warrants
exercised their right to purchase 14,100 shares of the Company's common stock
for a price of one cent per share, which warrants had an accreted value of
$381,000.
<PAGE>
13
LOUISIANA CASINO CRUISES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Louisiana Casino Cruises, Inc. (the "Company"), a Louisiana corporation,
was formed in August 1991 for the purpose of developing and operating gaming
activities in Louisiana. On July 19, 1994, the Louisiana Riverboat Gaming
Enforcement Division granted the Company a license to conduct riverboat gaming
activities for a period of five years. On December 28, 1994 the Company
commenced operations.
Financing for the project included an offering of $51,000,000 in first
mortgage notes (the "1993 Notes"). The 1993 Notes were issued with detachable
warrants to purchase 153,000 shares of the Company's common stock at a price of
$0.01 per share. On November 25, 1998 the Company issued $50,000,000 of Senior
Secured Increasing Rate Notes (the "1998 Notes"), the proceeds from which were
used to repay the 1993 Notes (see Note 2). The 1998 Notes were defeased on
January 27, 1999 and redeemed on February 24, 1999 from the proceeds of a
$55,000,000 offering of 11% Senior Secured Notes due December 1, 2005 (see Note
2).
A description of the organization and operations of the Company, the
significant accounting policies followed and the financial condition and results
of operations as of November 30, 1998 are contained in the audited financial
statements included in the annual report filed on Form 10-K. The accompanying
unaudited financial statements for the three and six month periods ended May 31,
1999 and 1998 should be read in conjunction with the 1998 audited financial
statements.
The unaudited financial statements as of May 31, 1999 and for the three and
six month periods ended May 31, 1999 and 1998, and the notes thereto have been
prepared in accordance with generally accepted accounting principles for interim
financial information and Rule 10-01 of Regulation S-X. In the opinion of
management, all adjustments (consisting of normal recurring accruals) have been
included to present fairly, in all material respects, the financial position of
the Company as of May 31, 1999 and the results of its operations and its cash
flows for the three and six month periods ended May 31, 1999 and 1998. Operating
results for the three and six month periods ended May 31, 1999 and 1998 are not
necessarily indicative of the results that may be expected for a full year.
Certain amounts in the prior periods have been reclassified to conform to
the current period presentation.
Promotional Allowances
The estimated retail values of complimentary and promotional items were
$1,200,000 and $2,386,000 for the three and six months ended May 31, 1999,
respectively, and $1,079,000 and $2,231,000 for the three and six months ended
May 31, 1998, respectively.
NOTE 2 - SENIOR SECURED NOTES AND REDEEMABLE COMMON STOCK WARRANTS
1999 Notes
On January 27,1999, the Company issued in a private placement, $55,000,000
of 11% Senior Secured Notes due December 1, 2005 with interest due semi-annually
beginning June 1, 1999. These notes were exchanged in May 1999 for $55,000,000
aggregate principal of the Company's new 11% Senior Secured Notes (the "1999
Notes") which are registered under the Securities Act of 1933, as amended. The
Company used the proceeds of the private placement to defease and redeem the
1998 Notes (see below) and for general corporate purposes. On May 28, 1999, the
Company purchased, at market, $2,000,000 of the 1999 Notes.
The 1999 Notes are secured by substantially all of the Company's assets,
other than certain excluded assets. The indenture dated as of January 27, 1999
(the "1999 Indenture") includes certain covenants which limit the ability of the
Company and its restricted subsidiaries, subject to certain exceptions, to: (i)
incur additional indebtedness; (ii) pay dividends or other distributions,
repurchase capital stock or other equity interest or subordinated indebtedness;
(iii) enter into certain transactions with affiliates; (iv) create certain liens
or sell certain assets; and (v) enter into certain mergers and consolidations.
Under the terms of the 1999 Indenture, after December 1, 2002, the Company
may, at its option, redeem all or some of the notes at a premium that will
decrease over time from 105.5% to 100% of their face amount, plus interest.
Prior to December 1, 2001, if the Company publicly offers certain equity
securities the Company may, at its option, apply certain of the net proceeds
from those transactions to the redemption of up to one-third of the principal
amount of the notes at 111% of their face amount, plus interest. If the Company
goes through a change in control, it must give holders of the notes the
opportunity to sell their notes to the Company at 101% of their face amount,
plus interest.
1998 Notes
The Company issued in a private placement $50,000,000 of 1998 Notes due
December 1, 2001. The proceeds from this issuance were used to repay upon
maturity the aggregate principal amount of $43,827,000 and accrued interest
outstanding on the 1993 Notes (see below).
The 1998 Notes were collateralized by substantially all assets of the
Company, bore interest at an initial increasing rate of 12.25% and were defeased
on January 27, 1999 and redeemed on February 24, 1999 from the proceeds of the
offering of the 1999 Notes. The Company incurred an extraordinary loss from
early extinguishment of the 1998 Notes of $1,731,000, net of a tax benefit of
$1,106,000.
1993 Notes and Redeemable Common Stock Warrants
The 1993 Notes were issued with 153,000 detachable warrants to purchase
one share each of the Company's no par value common stock at a price of $.01 per
share. The warrantholders had put rights whereby the Company had an obligation
to purchase the warrants at the value of the Company's common stock as of
December 1, 1998 as determined by two independent investment banking firms. The
warrants are classified as redeemable equity at November 30, 1998 due to the put
right feature and were accreted to the amount at which the Company has the
obligation to repurchase these warrants. The estimated accreted value attributed
to the redeemable common stock warrants as of November 30, 1998 was $4,131,000.
Of the 153,000 warrants, holders of 14,100 warrants elected to convert to an
equivalent number of common shares while holders of 138,900 warrants elected to
have the Company purchase the warrants.
On March 1, 1999, the Company received valuations from the two investment
banking firms. Based upon the average of the values determined by the investment
banking firms, on March 8, 1999 the Company paid $3,749,000 to the holders of
138,900 warrants who exercised their put rights. The holders of the remaining
14,100 warrants elected to exercise their rights to purchase an equal number of
shares of the Company's common stock at a price of $.01 per share on December 1,
1998.
NOTE 3 - EARNINGS PER COMMON SHARE
For the three and six month periods ended May 31, 1999 and 1998, basic
earnings per share ("EPS") is calculated by dividing net income assigned to
common shareholders by the weighted average common shares outstanding. For the
three and six month periods ended May 31, 1999 and 1998, diluted EPS is
calculated by dividing net income assigned to common shareholders before
distributions to common stock warrant holders by the weighted average common and
common equivalent shares outstanding. In 1998, common equivalent shares included
redeemable common stock warrants with the rights to purchase 153,000 shares of
the Company's common stock.
NOTE 4 - CONTINGENCIES
Riverboat gaming licenses in Louisiana are issued for an initial five-year
term with annual renewals thereafter. The Company's original five-year gaming
license for a riverboat gaming facility located in Baton Rouge, Louisiana (the
"Casino Rouge") is up for renewal in July 1999. Each of the Company and its
officers, directors, managers, principal shareholders and their officers and
directors and key gaming employees will be subject to strict scrutiny and full
suitability and approval by the Louisiana Gaming Control Board ("Louisiana
Board) in connection with the Company's renewal application. The factors that
the Louisiana Board has stated it will consider, among others, in order to renew
the Company's license, include the Company's compliance with all the
requirements of the Louisiana Riverboat Economic Development and Gaming Control
Act, the approval of various systems and procedures, the demonstration of good
character (including an examination of criminal and civil records) and methods
of business practice. The Louisiana Board may also seek to impose, as a
condition of the license renewal, certain Louisiana, minority and female
employment and procurement goals. On June 15, 1999 the Company received
conditional license approval from the Louisiana Board until the completion of
their investigation. The Company believes it will be successful in receiving an
unconditional renewal of its license from the Louisiana Board, but no assurance
can be given as to whether or when the license will be extended, or the extent
of any restrictions that may be imposed as a condition to the issuance thereof.
The loss, suspension or failure to obtain a renewal of such license would have a
material adverse effect on the Company.
On February 17, 1999, CRC Holdings, Inc. ("CRC"), the Company's
majority shareholder, announced that it had signed a definitive agreement
to merge with Jackpot Enterprises, Inc. (NYSE: J). The merger agreement
was terminated on April 15, 1999.
The Company is also involved in various legal proceedings; however, in the
opinion of management, the resolution of these matters will not have a material
effect on the financial statements or the results of operations of the Company.
NOTE 5 - DIVIDENDS
On April 9, 1999 the Board of Directors declared a dividend of $1.74 per
share of common stock and $1,735,000 was paid on April 15, 1999 to holders of
record on April 9, 1999.
On June 15, 1999 the Board of Directors declared a dividend of $0.83 per
share of common stock and $827,000 was paid on June 22, 1999 to holders of
record on June 15, 1999.
NOTE 6 - INCOME TAXES
The Company has recorded a provision for income taxes of $1,254,000 and
$1,762,000, for the three and six month periods ended May 31, 1999,
respectively, and a provision for income taxes of $756,000 and $1,041,000, for
the three and six month periods ended May 31,1998, respectively. The current tax
provision for the three and six month periods ended May 31, 1999 is $634,000 and
$885,000, respectively, and for the three and six month periods ended May 31,
1998 is $20,000 and $113,000, respectively. The provision for deferred income
taxes recorded for the three and six month periods ended May 31, 1999 is
$620,000 and $877,000, respectively, and for the three and six month periods
ended May 31, 1998 is $736,000 and $928,000, respectively.
The provision components discussed above exclude the tax benefit of
$1,106,000 derived from the early extinguishment of 1998 Notes discussed in Note
2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company owns and operates the Casino Rouge, which is one of two
riverboat gaming facilities in Baton Rouge. Current Louisiana legislation
authorizes 15 riverboat casinos statewide and one land-based casino in New
Orleans. In addition, three casinos operate in Louisiana on Native American land
under compact agreements with the state. The Casino Rouge opened on December 28,
1994. The Casino Rouge is managed by CRC, doing business as Carnival Resorts and
Casinos, an experienced operator of gaming facilities and owner of approximately
59% of the Company's common stock, no par value per share.
The Company's activities from inception have been financed from (i) cash
flow from operations, (ii) equity and other capital contributions of the
shareholders, (iii) secured equipment financing, (iv) the 1993 Notes, (v) the
1998 Notes and (vi) the 1999 Notes.
Results of Operations
Three months ended May 31, 1999 compared to three months ended May 31,
1998
Taxable casino revenues in the Baton Rouge gaming market for the three
months ended May 31, 1999 and 1998 were $34,180,000 and $30,667,000,
respectively. Riverboat casino patron counts for the same respective periods
were 672,000 and 668,000. The Company's taxable casino revenues and customer
counts increased 24.7% and 17.2%, respectively, for the three months ended May
31, 1999 compared to the same period in 1998. The Company's competitor's
riverboat taxable casino revenues and customer counts declined 6.2% and 17.0%,
respectively, for the three months ended May 31, 1999 compared to the same
period in 1998. The Company's share of the Baton Rouge gaming market for the
three months ended May 31, 1999 and 1998 was 64.0% and 57.2% of taxable casino
revenues and 59.9% and 51.5% of admissions, respectively.
The Company's casino revenues were $21,410,000 and $17,785,000 for the
second quarter ended May 31, 1999 and 1998, respectively. The increase in
customer counts and change in gaming machines to include additional lower
denomination machines generated the additional revenue. Second quarter win per
passenger increased 2.7% to $53.16 in 1999 compared to $51.75 in 1998.
Casino expenses for the three months ended May 31, 1999 and 1998 were
$9,538,000 and $8,398,000, respectively, which represented 44.5% and 47.2% of
casino revenues. Overall casino expenses increased during the 1999 period
primarily due to the market's increased gaming activity and the Company's
increase in market share in both casino revenues and patrons which resulted in
increased gaming and patron taxes. Overall casino expenses as a percent of
casino revenue decreased during the 1999 period primarily due to the elimination
of various special events and promotions.
In the second quarter of 1999, selling, general and administrative
expenses were $6,107,000 compared to $5,119,000 in the second quarter of 1998.
The increase in selling, general and administrative expenses was mainly due to
an increase in revenue based rent and management fees and increased legal
expenses.
The provision for federal and state income taxes was $1,254,000 and
$756,000 for the three months ended May 31, 1999 and 1998, respectively.
The increase was due to improved operating results.
Six months ended May 31, 1999 compared to six months ended May 31, 1998.
Taxable casino revenues in the Baton Rouge gaming market for the six
months ended May 31, 1999 and 1998 were $66,182,000 and $59,732,000,
respectively. Riverboat casino patron counts for the same respective periods
were 1,318,000 and 1,303,000. The Company's taxable casino revenues and customer
counts increased 18.5% and 12.6%, respectively, for the six months ended May 31,
1999 compared to the same period in 1998. The Company's competitor's riverboat
taxable casino revenues and customer counts declined 0.1% and 11.6%,
respectively, for the six months ended May 31, 1999 compared to the same period
in 1998. The Company's share of the Baton Rouge gaming market for the six months
ended May 31, 1999 and 1998 was 62.7% and 58.6% of taxable casino revenues and
58.7% and 52.8% of admissions, respectively.
The Company's casino revenues were $40,706,000 and $34,550,000 for the six
months ended May 31, 1999 and 1998, respectively. The increase in customer
counts and change in gaming machines to include additional lower denomination
machines generated the additional revenue. Six month win per passenger increased
4.7% to $52.59 in 1999 compared to $50.24 in 1998.
Casino expenses for the six months ended May 31, 1999 and 1998 were
$18,704,000 and $16,789,000, respectively, which represented 46.0% and 48.6% of
casino revenues. Overall casino expenses increased during the 1999 period
primarily due to the market's increased gaming activity and the Company's
increase in market share in both casino revenues and patrons which resulted in
increased gaming and patron taxes. Overall casino expenses as a percent of
casino revenue decreased during the 1999 period primarily due to the elimination
of various special events and promotions.
During the first six months of 1999, selling, general and administrative
expenses were $11,904,000 compared to $10,336,000 for the same period in 1998.
The increase in selling, general and administrative expenses was mainly due to
an increase in revenue based rent and management fees and increased legal
expenses.
Net interest expense was $3,318,000 and $2,778,000 for the six months
ended May 31, 1999 and 1998, respectively. The increase is due to the defeasance
of the 1998 Notes.
The provision for federal and state income taxes was $1,762,000 and
$1,041,000 for the six months ended May 31, 1999 and 1998, respectively.
The increase was due to improved operating results.
Liquidity and Capital Resources
During the six months ended May 31, 1999 the Company generated $8,136,000
in cash flows from operations as compared to $3,581,000 for the six months ended
May 31, 1998. The increase in cash flows from operations was primarily due to:
(i) an increase in income before extraordinary loss, (ii) the increase in
accounts payable and other liabilities, (iii) payment in November 1998 of
accrued interest due on the 1993 Notes, and (iv) offset by the increase in
receivables and deferred tax assets.
Investing activities for the six months ended May 31, 1999, used cash
flows of $1,777,000 for capital expenditures for continuing operations.
Investing activities for the six months ended May 31, 1998, used cash flows of
$1,090,000 for capital expenditures related to the new buffet and provided cash
flows due to a decrease in the restricted cash balance as permitted under the
1993 Notes.
Financing activities for the six months ended May 31, 1999 used cash flows
for dividend payments to shareholders of $1,735,000, the purchase of common
stock warrants for $3,749,000 and the purchase of $2,000,000 of the outstanding
1999 notes offset by the net proceeds from the issuance of the 1999 Notes.
Financing activities for the six months ended May 31, 1998 used cash flows for
dividend payments to shareholders and distributions to common stock warrant
holders of $1,202,000 and an increase in restricted cash of $2,005,000 as
required under the 1993 Notes.
The Company believes that cash on hand and operating cash flows will be
sufficient to fund its current operations, capital expenditures and debt service
obligations. As a result of debt restrictions, the ability of the Company to
incur additional indebtedness to fund operations or to make capital expenditures
is limited. To the extent that cash flow from operations is insufficient to
cover cash requirements, the Company would be required to curtail or defer
certain capital expenditures under these circumstances, which could have an
adverse effect on the Company's operations.
Year 2000
As the year 2000 approaches, all companies that use computers must address
"Year 2000" issues. Year 2000 issues result from the past practice in the
computer industry of using two digits rather than four to identify the
applicable year. This practice can create breakdowns or erroneous results when
computers perform operations involving years later than 1999.
The Company has devised and commenced an extensive compliance plan with
the objective of bringing all of the Company's information technology ("IT")
systems and its non-IT systems into Year 2000 compliance by the end of fiscal
1999. The IT systems include the Company's computer equipment and software and
non-IT systems include the Company's communication systems, alarm and security
systems, gaming equipment and shipboard equipment (e.g. shipboard navigation,
control and power generation and distribution systems). Each system will be
evaluated and brought into compliance in three phases:
Phase I -- Evaluate and assess compliance of the system Phase II --
Commit and assign resources needed to implement
compliance plan
Phase III -- Modify or replace non-compliant system
The Company's systems used to maintain financial records and other
critical systems have completed Phases I and II, with completion of Phase III
scheduled by the end of November 30, 1999. Approximately 98% of the Company's
non-critical systems have completed Phase II. The Company anticipates the
non-critical systems will be evaluated and brought into compliance by September
30, 1999.
The Company has also commenced efforts to determine the extent to which it
may be impacted by year 2000 issues of third parties, including its material
vendors and suppliers and certain agencies and regulatory organizations. Year
2000 correspondence was sent to third parties, with continued follow-up for
those that failed to respond and where risks have been identified. The Company
estimates that the process of identifying and evaluating third party risks is
98% complete.
Through May 31, 1999 the Company has incurred $31,000 directly related to
year 2000 readiness. The Company is continuing to evaluate the expected
remaining costs to be incurred in connection with the year 2000 project, with
approximately $400,000 estimated and included in the 1999 capital expenditure
budget. The remaining budgeted amount will be incurred in the third quarter of
1999. The project is being funded by cash on hand and internally generated
funds, which the Company expects to be adequate to complete the project.
A reasonably likely worst case scenario arising from the failure to
correct a material year 2000 problem could involve the interruption in, or
failure of, certain normal business activities or operations. Such failures
could involve certain of our IT and non-IT systems, or could result from the
year 2000 readiness of third parties. Any such failures could materially and
adversely affect the Company's results of operations, liquidity and financial
condition. Due to the general uncertainty inherent in the year 2000 problem, the
Company is unable to determine at this time whether the consequences of year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition.
The Company's year 2000 project includes a contingency plan that is
expected to significantly reduce the Company's level of uncertainty about year
2000 problems. If any of the Company's IT or non-IT systems fail as a result of
year 2000, the Company's plans to implement previously tested manual processes
that will substantially duplicate the functions of these systems until such time
as the Company acquires year 2000 compliant systems. The Company has selected
additional third party vendors as alternative suppliers for any of the Company's
current vendors that may not become year 2000 compliant. The Company believes
that its contingency plan will reduce the possibility of significant
interruptions of normal operations.
Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995
Except for historical information contained herein, the matters discussed
herein are forward looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Such
statements involve risks and uncertainties, including but not limited to local
and regional economic and business conditions, changes or developments in laws,
regulations or taxes, actions taken or to be taken by third parties,
interruption in or failure of certain business activities as a result of the
failure of year 2000 third party readiness, competition, the loss of any
licenses or permits or the Company's failure to obtain an unconditional renewal
of its gaming license on a timely basis, or other factors discussed elsewhere in
this report and the documents filed by the Company with the Securities and
Exchange Commission. These factors may cause the Company's results to differ
materially from the statements made in this report or otherwise made by or on
behalf of the Company.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not applicable.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Exhibit 27 Financial Data Schedule as of May 31, 1999 and
for the six months then ended
(b) Reports on Form 8-K - None
<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.
LOUISIANA CASINO CRUISES, INC.
Dated: July 12, 1999
By: /s/ W. Peter Temling
W. Peter Temling,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> The Financial Data Schedule contains
summary information extracted from the
unaudited balance sheet of Louisiana
Casino Cruises, Inc. as of May 31,1999 and
the related statement of operation for the
six month period ended May 31, 1999 and is
qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-START> DEC-01-1998
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> MAY-31-1999
<CASH> 16,343
<SECURITIES> 0
<RECEIVABLES> 992
<ALLOWANCES> 133
<INVENTORY> 286
<CURRENT-ASSETS> 20,595
<PP&E> 59,137
<DEPRECIATION> 18,368
<TOTAL-ASSETS> 63,319
<CURRENT-LIABILITIES> 7,568
<BONDS> 53,000
0
0
<COMMON> 1
<OTHER-SE> (337)
<TOTAL-LIABILITY-AND-EQUITY> 63,319
<SALES> 0
<TOTAL-REVENUES> 41,826
<CGS> 0
<TOTAL-COSTS> 34,005
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 51
<INTEREST-EXPENSE> 3,736
<INCOME-PRETAX> 4,503
<INCOME-TAX> 1,762
<INCOME-CONTINUING> 2,741
<DISCONTINUED> 0
<EXTRAORDINARY> 1,731
<CHANGES> 0
<NET-INCOME> 1,010
<EPS-BASIC> 1.01
<EPS-DILUTED> 1.01
</TABLE>
