SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
[x]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1999
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 number N/A
LOUISIANA CASINO CRUISES, INC.
------------------------------------------------
(Exact name of registrant as specified in its charter)
LOUISIANA 72-1196619
------------------- ----------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1717 River Road North
Baton Rouge, Louisiana 70802
----------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (225)
709-7777 -----
- ---------
Securities registered pursuant to Section 12(b) of the Act:
None
- -------
Securities registered pursuant to Section 12(g) of the Act:
None
- -------
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 reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
------- --------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Registration S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
As of February 23, 2000, the aggregate market value of the voting stock
held by non-affiliates of the registrant was $0. (Calculated by excluding all
shares that may be deemed to be beneficially owned by executive officers,
directors and greater than 10% shareholders of the registrant, without conceding
that all such persons are "affiliates" of the registrant for purposes of the
federal securities laws.)
As of February 23, 2000, the number of outstanding shares of the
registrant's common stock was 984,883.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
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 in interest rates,
changes or developments in laws, regulations or taxes, actions taken or to be
taken by third parties, competition, the unpredictability of the effects on
increased competition on the Company, 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.
PART I
ITEM 1. BUSINESS.
GENERAL
Louisiana Casino Cruises, Inc. (the "Company") owns and operates a
riverboat gaming facility in Baton Rouge, Louisiana (the "Casino Rouge"). The
Casino Rouge opened on December 28, 1994, and is one of two riverboat gaming
facilities in Baton Rouge. The Casino Rouge is managed by CRC Holdings, Inc.,
doing business as Carnival Resorts and Casinos ("CRC"), an experienced operator
of gaming facilities and owner of approximately 60% of the Company's common
stock, no par value per share. For the year ended November 30, 1999, the
Company's share of the Baton Rouge gaming market was 61.9% of casino revenues
and 59.1% of admissions, as reported by the Louisiana State Police.
FACILITIES
The Casino Rouge features a four-story, 47,000 square foot riverboat
casino, replicating a 19th century Mississippi River paddlewheel steamboat, and
a two-story, 58,000 square foot dockside embarkation building. The riverboat has
a capacity of 1,800 customers and emphasizes spaciousness and excitement with
its ample aisle space, 15-foot ceilings, a large central atrium and specially
designed lighting. The overall effect avoids the cramped atmosphere found in
many riverboat casinos. Patrons are offered a selection of 974 gaming machines
and 42 table games in 28,000 square feet of gaming space spread over three
decks. The dockside embarkation facility offers a panoramic view of the
Mississippi River and features a variety of amenities, including (i) a 268-seat
"International Marketplace Buffet," (ii) an array of food, bar and lounge areas,
(iii) meeting and planning space and (iv) a gift shop. All of the facilities are
open seven days a week, 24 hours a day, with eight cruises scheduled daily.
The 23-acre site is located on the east bank of the Mississippi River in
the East Baton Rouge Downtown Development District less than one-quarter mile
from the state capital complex. The site is within approximately one mile of
both Interstate 10 and Interstate 110, and the Company believes that the site's
access to major highways is an important competitive advantage over casinos that
lack such access. In addition, the site has convenient parking for approximately
1,650 cars adjacent to the embarkation facility.
COMPETITION
General. The Company faces competition from land-based and riverboat
casinos statewide, casinos on Native American lands, casinos located in
Mississippi (particularly those on the Gulf Coast) and from non-casino gaming
opportunities within Louisiana such as the state lottery, horse racing,
charitable bingo and video poker. The Louisiana Riverboat Economic Development
and Gaming Control Act (the "Louisiana Act") limits the number of gaming casinos
in Louisiana to fifteen riverboat casinos statewide and one land-based casino in
New Orleans. Absent further state legislation and local option referenda,
additional licenses cannot be granted. Fourteen of the fifteen available
riverboat licenses are currently issued and outstanding: two for Baton Rouge;
three for the greater New Orleans area, approximately 75 miles from Baton Rouge;
four for the Shreveport/Bossier City area in the northwest part of the state,
approximately 235 miles from Baton Rouge; four for Lake Charles in the southwest
part of the state, approximately 120 miles from Baton Rouge; and one granted to
a riverboat casino which discontinued operations in New Orleans in October 1997
and whose owners received the approval of the Louisiana Gaming Control Board
(the "Louisiana Board") to relocate the riverboat casino for what will be the
fifth license in the Shreveport/Bossier City area.
Baton Rouge Casinos. The Company's principal competitor is the other Baton
Rouge riverboat casino, Argosy Casino ("Argosy"), which opened on September 30,
1994 and is owned and operated by Argosy Gaming Company. Since commencing
operations on December 28, 1994, the Casino Rouge has achieved an average of 57%
of the market-share of gaming win for Baton Rouge riverboats, as reported by the
Louisiana State Police. Argosy constructed a retail, restaurant and
entertainment center called "Catfish Town" as an integral part of its land-based
facility, which commenced operations in April 1996. In July 1999, Argosy began
construction on a 300-room hotel, which is expected to open in December 2000.
New Orleans Casinos. New Orleans has three riverboat casinos and one
land-based casino. On October 28, 1999, the only land-based casino in New
Orleans, which had previously filed for bankruptcy protection under Chapter 11,
reopened.
Native American Casinos. Gaming is also permitted on Native American lands
in Louisiana and other states, and there are currently three such operating
Native American casinos in Louisiana. The closest such casino is a land-based
facility located on the Chitimacha reservation in Charenton, Louisiana,
approximately 45 miles southwest of Baton Rouge. However, it is not accessible
by a major highway, which the Company believes places it at a competitive
disadvantage. The closest Native American casino to Baton Rouge with major
highway accessibility is a land-based facility located on the Tunica-Biloxi
reservation in Mansura, Louisiana, approximately 65 miles northwest of Baton
Rouge.
Mississippi Casinos. An emerging trend in Mississippi gaming, particularly
on the Gulf Coast (approximately 125 miles from Baton Rouge), is the development
of large-scale destination resort projects. As of December 31, 1999, the
Mississippi Gaming Commission had granted 45 gaming licenses. Of these, 30 of
the licensees have opened and are operating casinos, the remaining licensees
represent entities that have either consolidated or closed casinos.
Other Competition. From time to time proposals have been introduced into
the Louisiana legislature to increase the number of gaming facilities permitted
in Louisiana. However, to date no such legislation has been approved and
currently there are no proposals in the legislature to issue new licenses. There
can be no assurance, however, that such legislation will not be approved in the
future. Alternative forms of gaming are available in Louisiana to potential
customers. Louisiana State law allows the operation of a state lottery, horse
racing and charitable bingo. In July 1991, Louisiana also authorized operation
of video poker terminals at various types of facilities in the state, including
taverns, restaurants, hotels/motels, truck stops, and racing facilities. On
November 5, 1996, a statewide local option referendum was placed before the
voters concerning the banning of video poker. As a result of this referendum, on
July 1, 1999, 33 parishes, including East Baton Rouge Parish, the location of
the Casino Rouge, and three adjacent parishes banned video poker, and a total of
1,395 video poker machines were shut down in East Baton Rouge Parish and the
three adjacent parishes. As of July 31, 1999, approximately 11,000 video poker
terminals at approximately 2,500 non-casino locations were in operation
throughout the state. The locations are widely distributed throughout the state,
and the Company believes that they have had no greater impact on the Baton Rouge
riverboat casinos than on other Louisiana riverboats.
Competition in the gaming industry is intense in the market where the
Company operates its gaming facility. As new gaming opportunities arise in new
or existing gaming jurisdictions and on Native American-owned lands, new or
expanded operations by others can be expected to increase competition for the
Company's operations and could limit new opportunities for the Company or result
in the saturation of certain gaming markets. Casino gaming does not have a long
operating history in the jurisdiction where the Company operates its gaming
facility and other nearby jurisdictions and, therefore, the effects of
competition in these jurisdictions cannot be predicted with any degree of
certainty. Many of the Company's competitors outside of the greater Baton Rouge
area have more gaming industry experience, are larger and have greater financial
resources than the Company. In addition, Native American casinos have advantages
because they do not pay Louisiana gaming taxes or admission fees. As a result,
increased competition both inside and outside of the Company's market could have
a material adverse effect on the Company.
MANAGEMENT AGREEMENT
CRC and the Company are parties to a Casino Consulting and Management
Agreement, dated December 11, 1992, as amended (the "Management Agreement"),
pursuant to which, CRC handles all aspects of the Casino Rouge's management. The
Management Agreement expires in December 2004, subject to extension at the
option of CRC for an additional 10-year period. CRC is entitled to an annual
management fee equal to 2% of the Casino Rouge's gross revenues plus 5% of its
total operating income (as such terms are defined in the Management Agreement).
By separate agreement, CRC has agreed to pay one-half of the 5% fee payable to
CRC with respect to the Company's total operating income to Dan S. Meadows, the
Company's President and Vice Chairman of the Board, Jerry L. Bayles and Thomas
L. Meehan, one of the Company's directors, aggregate holders of approximately
40% of the Company's Common Stock. For the fiscal years ended November 30, 1999,
1998 and 1997, the amount earned by CRC pursuant to the Management Agreement was
$2,758,000, $2,195,000 and $2,214,000, respectively. For the fiscal years ended
November 30, 1999, 1998 and 1997, the aggregate amount paid by CRC to Messrs.
Meadows, Bayles and Meehan was $533,000, $369,000 and $407,000, respectively.
See "Certain Relationships and Related Transactions."
In addition to the Casino Rouge, CRC operates Casino Rama, located north
of Toronto, Canada, for the Chippewas of Mnjikaning First Nations and the
Ontario Casino Corporation. CRC also develops other casinos and hotels.
EMPLOYEES
The Company maintains a staff of approximately 890 full-time equivalent
employees. None of the employees is covered by a collective bargaining
agreement. The Company believes that its employee relations are good.
REGULATORY MATTERS
General
The Company is subject to regulation by the State of Louisiana and, to a
lesser extent, by federal law. The Company is subject to regulations that apply
specifically to the gaming industry and casinos and regulations that apply
specifically to operators of cruising riverboats, in addition to regulations
applicable to businesses generally. Failure to comply with detailed regulatory
requirements may be grounds for the suspension or revocation of a license, which
would have a materially adverse effect upon the Company. Below is a description
of certain regulations to which the Company is subject. Legislative or
administrative changes in applicable legal requirements have been proposed from
time to time. It is possible that the applicable requirements to operate a
Louisiana gaming facility will become more stringent and burdensome, and that
taxes, fees and expenses may increase, as the state gains further experience in
regulating gaming. There can be no assurance that the existing regulatory and
taxing framework under which the Company operates will not become more stringent
and burdensome.
Louisiana Riverboat Gaming Regulation
In July 1991, the Louisiana legislature adopted legislation permitting
certain types of gaming activity on certain rivers and waterways in Louisiana.
Since May 1, 1996, the Louisiana Board has regulated gaming activities.
The Louisiana Act authorized the issuance of up to fifteen licenses to
conduct gaming activities on a riverboat of new construction in accordance with
applicable law. However, no more than six licenses may be granted to riverboats
operating from any one parish. Of the fifteen available licenses, currently
thirteen are in operation, one is being relocated and one has been returned to
the state.
Riverboat gaming licenses in Louisiana are issued for an initial five-year
term with annual renewals thereafter. In issuing or renewing a license, the
Louisiana Board must find that the applicant is a person of good character,
honesty and integrity and that the applicant is a person whose prior activities,
criminal record, if any, reputation, habits and associations do not pose a
threat to the public interest of the State of Louisiana or to the effective
regulation and control of gaming, or create or enhance the dangers of
unsuitable, unfair or illegal practices, methods and activities in the conduct
of gaming or the carrying on of business and financial arrangements in
connection therewith. The Louisiana Board will grant or renew a license if it
finds that: (a) the applicant can demonstrate the capability, either through
training, education, business experience, or a combination of the above, to
operate a gaming casino; (b) the proposed financing of the riverboat and the
gaming operations is adequate for the nature of the proposed operation and from
a source suitable and acceptable to the Louisiana Board; (c) the applicant
demonstrates a proven ability to operate a vessel of comparable size, capacity
and complexity to a riverboat so as to ensure the safety of its passengers, with
each employee being appropriately Coast Guard certified; (d) the applicant
submits a detailed plan of design of the riverboat in its application for a
license; (e) the applicant designates the docking facilities to be used by the
riverboat; (f) the applicant shows adequate financial ability to construct and
maintain a riverboat; and (g) the applicant has a good faith plan to recruit,
train and upgrade minorities in all employment classifications.
The Company's original five-year gaming license for the Casino Rouge was
up for renewal in July 1999. On June 15, 1999, the Company received conditional
license approval from the Louisiana Board until the completion of their
investigation. It is not possible to predict when the Louisiana Board will
complete its investigation, and no time line for such completion has been given.
In connection with the Company's renewal application 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 Board. 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 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. As a result of the Justice Department's recent
indictments of former Louisiana Governor Edwin Edwards and certain other
persons, none of whom are affiliated with the Company, on charges relating to,
among other things, gaming licenses in Louisiana, the Louisiana regulators are
applying greater scrutiny to the suitability and business practices of the
licensees. The Company believes it will be successful in receiving a 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 Louisiana Board
may also seek to impose, as a condition of the license renewal, certain
Louisiana, minority and female employment and procurement goals. The loss,
suspension or failure to obtain a renewal of such license, or the renewal of the
license subject to burdensome conditions, would have a material adverse effect
on the Company.
Other regulations imposed by the Louisiana Act or rules adopted pursuant
thereto include, but are not limited to, the following: (a) the Company must
periodically submit financial and operating reports to the Louisiana Board; (b)
owners holding greater than a 5% interest in the Company must be found suitable
by the Louisiana Board; (c) any individual who is found to have a material
relationship to, or involvement with, the Company may be required to be
investigated for suitability; (d) if a director, officer, or key employee were
found to be unsuitable, the Company would have to sever all relationships with
that person; (e) the transfer of a license or permit or an interest in a license
or permit is prohibited without prior approval; (f) the Company must notify the
Louisiana Board of any withdrawals of capital, loans, advances, or distributions
in excess of 5% of retained earnings upon completion of such transaction; and
(g) the Company must give prior notification to the Louisiana Board if it
applies or receives, accepts or modifies the terms of any loan or other
financing transaction. In some cases, the Louisiana Board will be required to
investigate the reported transaction and to either approve or disapprove the
transaction.
The Louisiana Act or rules adopted pursuant thereto place certain
restrictions and conditions relating to the operation of riverboat gaming,
including the following: (a) gaming is not permitted while a riverboat is
docked, other than the forty-five minutes between excursions, and during times
when dangerous weather or water conditions exist, as certified by the
riverboat's master; (b) each round-trip riverboat cruise may not be less than
three nor more than eight hours in duration, subject to specified exceptions;
(c) agents of the Louisiana Board are permitted on board at any time during
gaming operations; (d) gaming devices, equipment and supplies may only be
purchased or leased from permitted suppliers; (e) gaming may only take place in
the designated gaming area while the riverboat is upon a designated river or
waterway; (f) gaming equipment may not be possessed, maintained or exhibited by
any person on a riverboat except in the specifically designated gaming area, or
a secure area used for inspection, repair or storage of such equipment; (g)
wagers may be received only from a person present on a licensed riverboat; (h)
persons under 21 are not permitted on gaming vessels; (i) except for slot
machine play, wagers may be made only with tokens, chips or electronic cards
purchased from the licensee aboard a riverboat; (j) licensees may only use
docking facilities and routes for which they are licensed and may only board and
discharge passengers at the riverboat's licensed berth; (k) licensees must have
adequate protection and indemnity insurance; (l) licensees must have all
necessary federal and state licenses, certificates and other regulatory
approvals prior to operating a riverboat; and (m) gaming may only be conducted
in accordance with the terms of the license, the Louisiana Act and the rules and
regulations adopted by the Louisiana Board.
Fees for conducting gaming activities on a riverboat pursuant to the
Louisiana Act include (i) $50,000 per riverboat for the first year of operation
and $100,000 per year per riverboat thereafter plus (ii) 18.5% of net gaming
proceeds. The Louisiana Act also authorizes the local governing body to assess a
boarding fee up to $2.50 in East Baton Rouge Parish. The City of Baton Rouge has
imposed an admission fee of $2.50 for each patron boarding the vessel. For
fiscal year ended November 30, 1999, the Company's boarding fee expense was
$3,924,000. For competitive reasons, the Company and its Baton Rouge competitor
have elected not to collect boarding fees from patrons and instead pay those
fees from their respective earnings.
Proposals to amend or supplement the Louisiana Act are frequently
introduced in the Louisiana State legislature. In addition, the state
legislature from time to time considers proposals to repeal the Louisiana Act,
which would effectively prohibit riverboat gaming in the State of Louisiana.
Although the Company does not believe that a prohibition of riverboat gaming in
Louisiana is likely, no assurance can be given that changes in the Louisiana
gaming law will not occur or that such changes will not have a material adverse
affect on the Company's business. On November 5, 1996, in the six parishes in
which riverboats are currently located, including East Baton Rouge Parish,
voters approved the continuation of riverboat gaming. In East Baton Rouge Parish
and the six parishes as a whole, the vote in favor of riverboat gaming was 59%
and 66%, respectively.
Legislation may be proposed that could involve the expansion of cruising
requirements; the creation of "phantom" cruises; the establishment of a minimum
number of annual cruises a vessel must take; or the authorization of
unrestricted dockside gaming. An expansion of cruising requirements could have a
negative impact on future gaming revenue and state tax revenue.
In August 1996, President Clinton signed a bill creating the National
Gambling Impact Study Commission (the NGISC"), composed of individuals
associated with the gaming industry as well as individuals who are openly
opposed to legalized gaming, to examine the economic and social impact of
gaming. The NGISC began a series of hearings on June 20, 1997, and released a
report on its findings, together with recommended legislation and administrative
action, on June 18, 1999. Although no administrative actions have been taken,
any additional regulation of the gaming industry resulting from the NGISC's
recommendations could have a material adverse impact on the gaming industry,
including the Company.
United States Coast Guard
Each cruising riverboat also is regulated by the United States Coast
Guard, whose regulations affect boat design and stipulate on-board facilities,
equipment and personnel (including requirements that each vessel be operated by
a minimum complement of licensed personnel), in addition to restricting the
number of persons who can be aboard the boat at any one time. The Company's
riverboat must hold, and currently possesses, a Certificate of Inspection. Loss
of a vessel's Certificate of Inspection would preclude its use as an operating
riverboat. For vessels of the Casino Rouge's type, the certificate of inspection
is renewed on an annual basis, after a successful U.S. Coast Guard Inspection.
The Casino Rouge has a current certificate of inspection, which was renewed in
November 1999.
All shipboard employees of the Company, even those who have nothing to do
with the actual operation of the vessel, such as dealers, cocktail hostesses and
security personnel, may be subject to the Merchant Marine Act of 1920, which,
among other things, exempts those employees from state limits on workers'
compensation awards. The Company believes that it has adequate insurance to
cover employee claims.
The Shipping Act of 1916; The Merchant Marine Act of 1936
The Shipping Act of 1916, as amended, and the Merchant Marine Act of 1936,
as amended, and applicable regulations thereunder contain provisions which would
prevent persons who are not citizens of the United States from holding in the
aggregate more than 25% of the outstanding shares of the Company's common stock.
The Company's by-laws provide that, in the event a shareholder's ownership
prevents the Company from complying with the foreign shareholder limits imposed
by these Acts, such shareholder will be required, within 30 days, to cure such
problem, including through the sale of a requisite percentage of its ownership
interest in the Company, or the Company will be entitled to purchase such
requisite percentage from such shareholder at the price the shareholder paid to
acquire it. Such payment from the Company may be made in cash, notes or
preferred stock which, in the opinion of a nationally recognized investment
banking firm, have a value equal to the amount required to be paid. See "Market
for Registrant's Common Equity and Related Stockholder Matters - Required
Divestiture of Common Stock". There can be no assurance, however that these
restrictions will be effective in insuring that the Company complies with the
foreign ownership requirements of those Acts.
General Non-Gaming Regulation
The Company is subject to federal, state and local environmental and
safety and health laws, regulations and ordinances that apply to non-gaming
business generally, such as the Clean Air Act, Federal Water Pollution Control
Act, Occupational Safety and Health Act, Resource Conservation Recovery Act, Oil
Pollution Act and Comprehensive Environmental Response, Compensation and
Liability Act, each as amended. The Company has not incurred, and does not
expect to incur material expenditures with respect to such laws. There can be no
assurances, however, that the Company will not incur material liability pursuant
to such laws or any other applicable laws in the future.
Discouragement of Share Accumulations
Louisiana State law requiring approval by the Louisiana Board of
shareholders over certain thresholds may discourage accumulations over such
limits and therefore may discourage changes in control of the Company. See
"Market for Registrant's Common Equity and Related Stockholder Matters Required
Divestiture of Common Stock". The federal laws referred to above may also
discourage ownership by shareholders that are not United States citizens.
ITEM 2. PROPERTIES
The Casino Rouge is located on the east bank of the Mississippi River in
Baton Rouge, Louisiana on a 23-acre site which consists of an 18-acre leased
site and five acres owned by the Company. The Company leases the 18-acre site
pursuant to a 10-year lease entered into in January 1994, the term of which may
be extended at the Company's option for four successive five-year periods. The
annual rent is equal to the greater of (a) 1.25% of all cash revenue generated
on or by the leased premises or any riverboat docked there or (b) $33,333 per
month. In addition, the Company prepaid rent of approximately $1,756,000 in
connection with the lessor's acquisition of nine acres of the 18-acre site
subject to the lease. Pursuant to the lease, the Company must also pay all
property taxes. For the year ended November 30, 1999, the rental expense for the
casino site was $1,098,000 (excluding amortization of prepaid rent of $176,000).
The Company has the option to purchase the entire 18-acre site on or after the
fifteenth anniversary of the date of the lease for a purchase price equal to the
then appraised value of the original nine acres subject to the lease (excluding
improvements). In September 1998, the Company purchased approximately five acres
of land adjacent to its docking facilities for $1,100,000. In January 2000, land
improvements were completed to add 550 parking spaces to the new 5-acre parcel
at a cost of $808,000.
The Company also leased a total of approximately 81,600 square feet for
general warehousing, office use and employee parking pursuant to two separate
two-year leases. On September 1, 1999, the Company purchased a portion of the
previously rented facilities for $793,000. The acquisition includes
approximately 1.3 acres of land, a warehouse, office space and employee parking.
This property was formerly rented for $8,190 per month. The remaining rent is
$7,476 per month. The lease is a triple net lease, has two two-year renewal
options and grants the Company a right of first refusal to purchase the
property. For the year ended November 30, 1999, the rental expense for the
general warehousing, office use and employee parking sites was $163,000.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to pending legal proceedings arising in the normal
course of its business, none of which the Company believes is material to its
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
There is no established public trading market for the Company's common
stock. CRC and three individual shareholders currently own over ninety-nine
percent of the outstanding common stock. See "Security Ownership of Certain
Beneficial Owners and Management" and "Certain Relationships and Related
Transactions."
On January 27, 1999, the Company issued $55 million of its 11% Senior
Secured Notes due December 1, 2005, (the "1999 Notes") to qualified
institutional buyers and institutional accredited investors in reliance on Rule
144A and pursuant to exemptions from registration under Section 4(2) of the
Securities Act of 1933, as amended. In May 1999, the Company consummated an
exchange offer for the 1999 Notes, which resulted in the Company issuing new,
publicly tradable notes in exchange for the 1999 Notes. The new notes are
identical in all material respects, to the 1999 Notes other than certain
provisions relating to registration rights and related liquidated damages. On
May 28, 1999, the Company repurchased $2,000,000 of the Senior Secured Notes at
a cost of $2,010,000 plus accrued interest.
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 (as defined in the 1999 Indenture),
subject to certain exceptions, to: (i) incur additional indebtedness; (ii) pay
dividends or other distributions, repurchase capital stock or other equity
interests 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 1999 Notes at a premium that will
decrease over time from 105.5% to 100% of their face amount, plus accrued but
unpaid 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 1999 Notes at 111% of their face amount, plus interest.
If the Company goes through a change in control, it must give holders of the
1999 Notes the opportunity to sell their 1999 Notes to the Company at 101% of
their face amount, plus interest.
During the year ended November 30, 1999 the Board of Directors authorized,
and the Company paid, a total of $3,498,000 in dividends to the holders of the
Company's common stock. The Company intends to declare and pay dividends from
funds available therefore to the extent permitted based on future earnings, the
1999 Indenture, legal limitations and available cash balances.
REQUIRED DIVESTITURE OF COMMON STOCK
As noted herein, there are various state and federal regulations on the
ownership of the Company's common stock. See "Business-Regulatory Matters". The
Company's By-laws provide that if any governmental commission, regulatory
authority, entity, agency or instrumentality (collectively, an "Authority")
having jurisdiction over the Company or any affiliate of the Company that has
granted a license, certificate of authority, franchise or similar approval
(collectively, a "License") to the Company or any affiliate of the Company
orders or requires any shareholder to divest any or all of the shares owned by
such shareholder (a "Divestiture Order") and the shareholder fails to do so by
the date required by the Divestiture Order (unless the Divestiture Order is
stayed), the Company will have the right to acquire from the shareholder the
shares that the shareholder failed to divest as required by such Divestiture
Order. If, after reasonable notice and an opportunity for affected parties to be
heard, any Authority determines that continued ownership of the Company's common
stock by any shareholder shall be grounds for the revocation, cancellation,
non-renewal, restriction or withholding of any License granted to or applied for
by the Company or any affiliate of the Company, such shareholder shall divest
the shares that provide the basis for such determination, and if such
shareholder fails to divest such shares within 10 days after the date the
Authority's determination becomes effective (unless the determination is
stayed), the Company shall have the right to acquire such shares from the
shareholder.
If the Company determines that persons who are not citizens of the United
States as determined under the Shipping Act of 1916 or the Merchant Marine Act
of 1936 (the "Foreign Citizens") own more than 25% of the Company's outstanding
common stock, the Company may require the Foreign Citizen(s) who most recently
acquired the shares that bring total foreign ownership to more than 25% of the
outstanding common stock (the "Excess Shares") to divest the Excess Shares to
persons who are United States citizens. If the Foreign Citizen(s) so directed
fail to divest the Excess Shares to United States citizens within 30 days after
the date on which the Company gives a written notice to the Foreign Citizen(s)
to divest the Excess Shares, the Company shall have the right to acquire the
shares that the Foreign Citizen(s) failed to divest as required by the Company's
notice. Such acquisition from the Foreign Citizen(s) need not be preceded by an
order or requirement by an Authority, nor is there any requirement for
notification within a specified period.
Whenever the Company has the right to acquire shares of common stock from
a shareholder pursuant to the provisions described in the preceding paragraphs,
the Company will pay the shareholder a price per share equal to the price per
share paid by the shareholder to acquire such common stock. Such payment from
the Company may be made by cash, notes or preferred stock which, in the opinion
of a nationally recognized banking firm, have a value equal to the amount
required to be paid.
When any Divestiture Order is entered or when the Company tenders the
consideration for which it may acquire shares, as described above, the shares in
question shall no longer be entitled to any voting, dividend or other rights
until such time as they have been appropriately divested. The foregoing
provisions of the By-laws relating to required divestiture are in addition to,
and not in replacement of, any applicable requirements.
The provisions of the by-laws described above are uncommon and no
controlling precedent has been found to determine how such by-laws (or
comparable provisions in the Articles of Incorporation) would be enforced or
whether they are enforceable. There can be no assurance that they will prove
enforceable or that, even if they are enforceable, that they will be effective
in insuring that the Company complies with the applicable regulatory
requirements.
REDEEMABLE PREFERRED STOCK
The Company's Articles of Incorporation authorize 50,000 shares of
preferred stock, of which 11,000 shares were designated as redeemable preferred
stock and issued to and held by Thomas L. Meehan one of the Company's directors.
The redeemable preferred stock received non-cash cumulative dividends at the
rate of 12% per annum. On November 30, 1998, the redeemable preferred stock was
redeemed and all accrued and unpaid dividends were paid. Currently, no shares of
preferred stock are outstanding.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial information for each of the fiscal years
presented below has been derived from the Company's financial statements, which
have been audited by PricewaterhouseCoopers LLP, independent accountants. The
information presented below should be read in conjunction with, and is qualified
in its entirety by reference to, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's financial
statements and the notes thereto appearing elsewhere herein.
Fiscal Year Ended November 30,
-----------------------------------------
1999 1998 1997 1996 1995
------- ------- -------- ------- --------
Statement of Operations (dollars in thousands, except per share
Data: data)
Revenues:
Casino $82,250 $68,845 $67,694 $74,615 $65,187
Food and beverage 6,636 5,501 6,253 6,242 6,112
Other 828 673 1,013 1,062 563
------- ------- -------- ------- --------
89,714 75,019 74,960 81,919 71,862
Less: promotional 5,057 4,174 5,216 5,159 4,779
allowances
------- ------- -------- ------- --------
Net revenues 84,657 70,845 69,744 76,760 67,083
------- ------- -------- ------- --------
Costs and expenses:
Casino 38,439 33,302 31,826 33,947 29,849
Food and beverage 1,659 1,538 1,318 1,293 1,619
Selling, general and 24,316 20,948 21,039 21,954 18,085
administrative
Depreciation and 5,382 4,762 4,334 4,162 3,584
amortization
Pre-opening expenses - - - - 1,625
------- ------- -------- ------- --------
Total operating expenses 69,796 60,550 58,517 61,356 54,762
------- ------- -------- ------- --------
Operating income 14,861 10,295 11,227 15,404 12,321
Other income (expense):
Interest income 671 428 280 241 344
Interest expense (6,768 )(6,376 ) (5,955 )(7,002 ) (6,675 )
------- ------- -------- ------- --------
Income before provision 8,764 4,347 5,552 8,643 5,990
for income taxes and
extraordinary loss
Provision for income taxes 3,474 1,666 2,045 1,340 -
------- ------- -------- ------- --------
Income before 5,290 2,681 3,507 7,303 5,990
extraordinary loss
Extraordinary loss on 1,731 - - - -
early extinguishment of
debt
======= ======= ======== ======= ========
Net income $3,559 $2,681 $3,507 $7,303 $5,990
======= ======= ======== ======= ========
Ratio of earnings to 2.20 x 1.83 x 1.95 x 2.25 x 1.60 x
fixed charges (a)
Share and Per Share Data
(b):
Basic earnings per share
Earnings before $5.32 $2.57 $3.37 $6.70 $2.71
extraordinary loss per
share
Extraordinary loss per (1.74 ) - - - -
share
------- ------- -------- ------- --------
Basic earnings per $3.58 $2.57 $3.37 $6.70 $2.71
share
======= ======= ======== ======= ========
Diluted earnings per
share
Earnings before $5.32 $2.46 $2.97 $6.31 $2.70
extraordinary loss per
share
Extraordinary loss per (1.74 ) - - - -
share
------- ------- -------- ------- --------
Diluted earnings per $3.58 $2.46 $2.97 $6.31 $2.70
share
======= ======= ======== ======= ========
Cash dividends declared
on common stock
and common equivalent $3.52 $1.76 $0.42 $3.82 $2.67
shares
======= ======= ======== ======= ========
Weighted average common 994,549 982,783 982,783 982,783 982,783
shares outstanding
Weighted average common 994,549 1,135,783 1,135,783 1,135,783 1,135,783
equivalent shares
outstanding
At November 30,
-----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- --------- ---------
(dollars in thousands)
Balance Sheet Data:
Current assets $21,474 $16,531 $16,807 $11,630 $12,059
Total assets 65,764 62,023 59,757 58,438 62,692
Current 8,594 4,890 11,625 12,612 13,863
liabilities(c)
Long-term 53,000 50,000 40,732 42,656 49,609
obligations (d)
Redeemable preferred
stock and common
stock warrants (e) - 4,131 6,004 5,872 5,740
Shareholders' equity 126 8 (790 ) (3,683 ) (6,520 )
(deficit)
(a) Fixed charges include interest charges, amortization of debt expense and
discounts, and the change to the accreted value of the Company's outstanding
common stock purchase warrants.
(b) Earnings per share amounts have been restated to conform to the Financial
Accounting Standards Board Statement No. 128 "Earnings per Share." Basic
earnings per share are calculated by dividing net income assigned to common
shareholders by weighted average common shares outstanding. Diluted earnings per
share are calculated by dividing net income assigned to common shareholders
before distributions to warrantholders by weighted average common equivalent
shares outstanding.
(c) Amounts as of November 30, 1996 and 1997, include $1,700,000 for estimated
dispute resolution cost.
(d) Amounts as of November 30, 1995, include $1,700,000 for estimated dispute
resolution cost.
(e) Such amounts include preferred stock of approximately $1,364,000, $1,496,000
and $1,628,000 as of November 30, 1995, 1996 and 1997, respectively, and the
assigned value of the warrants of approximately $4,376,000 as of November 30,
1995, 1996 and 1997, and approximately $4,131,000 million as of November 30,
1998.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
On December 28, 1994, the Company commenced operations of its riverboat
gaming facility in Baton Rouge, Louisiana. 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) a December 1993 debt offering of 51,000 units, each unit
consisting of $1,000 principal amount of a Senior Secured Note (the "1993
Notes") and three warrants to purchase one share each of the Company's common
stock, (v) a November 1998 offering consisting of $50,000,000 of Senior Secured
Increasing Rate Notes (the "1998 Notes"), the proceeds of which were used to
repay the 1993 Notes, and (vi) the 1999 Notes, which proceeds were used to
defease and redeem the 1998 Notes and for general corporate purposes.
RESULTS OF OPERATIONS
Year ended November 30, 1999, compared to year ended November 30, 1998.
According to publicly filed reports with the Louisiana Board, total
taxable casino revenue for the two riverboats in the Baton Rouge gaming market
for the years ended November 30, 1999 and 1998, were $138,033,000 and
$118,806,000, respectively. Riverboat casino patron counts in Baton Rouge for
the same respective periods were 2,655,000 and 2,571,000. The Company's taxable
casino revenues and customer counts increased 21.4% and 12.8%, respectively, for
the year ended November 30, 1999, compared to 1998. The Company's competitor's
riverboat taxable casino revenues increased 8.6% while their customer counts
declined 7.9%, for the year ended November 30, 1999, compared to the same period
in 1998. The Company's share of the Baton Rouge gaming market was 61.9% and
59.3% of casino revenues and 59.1% and 54.2% of admissions for the years ended
November 30, 1999 and 1998, respectively.
Casino revenues for the Company were $82,250,000 and $68,845,000 for the
years ended November 30, 1999, and 1998, respectively. Casino revenues consist
of gaming machine and table revenues. Revenues from casino operations were 81.0%
from gaming machines and 19.0% from table games in 1999 compared to 78.0% and
22.0%, respectively, for 1998. Such mix for gaming machines and gaming table win
is attributable to the continuing popularity of gaming machines among the
Company's base casino patrons and generally conforms to that experienced by
riverboats throughout Louisiana. Gaming machine revenues increased 24.1% in 1999
compared to 1998 primarily due to a 22.8% increase in coin in. Table revenues,
excluding poker, decreased 2.2% in 1999 compared to 1998 due to a decrease in
hold percentage from 21.2% to 20.4% on an annual basis, offset by an increase of
1.7% in table game drop. Poker win for 1999 and 1998 was $1,278,000 and
$494,000, respectively. For the year ended November 30, 1999, the Company's win
per passenger increased 5.9% to $52.40 compared to $49.46 in the same period of
1998.
Casino expenses for the year ended November 30, 1999 and 1998 were
$38,439,000 and $33,302,000, respectively, which represents 46.7% and 48.4% of
casino revenues in each period. Overall casino expenses increased during 1999
primarily due to the market's increased gaming activity and the Company's
increase in market share in both casino revenue and patrons, which resulted in
increased gaming and patron taxes. Overall casino expenses as a percent of
casino revenue decreased during 1999 primarily due to the elimination of various
special events and promotions.
Selling, general and administrative expenses were $24,316,000 and
$20,948,000 for the years ended November 30, 1999 and 1998, respectively. The
increase in selling, general and administrative expenses was mainly due to an
increase in revenue based rent and management fees and increased legal fees.
Net interest expense was $6,097,000 and $5,948,000 for the years ended
November 30, 1999 and 1998, respectively. The increase was due to the
defeasement of the 1998 Notes and additional debt outstanding at November 30,
1999.
The Company recorded a market value warrant adjustment of $245,000 for the
year ended November 30, 1998, to reduce the accreted value of its outstanding
redeemable common stock warrants to $4,131,000. Pursuant to the terms of the
warrants, the Company was obligated to purchase the warrants during fiscal 1999
to the extent the holders exercised their put rights. Initially holders of
138,900 warrants exercised their put rights. The actual purchase price for the
138,900 warrants, as determined by two independent investment banking firms in
accordance with the original agreements issued in 1993, was $3,750,000. On
September 21, 1999, at a former warrantholder's request, the Company purchased
from such warrantholder 12,000 shares of the Company's common stock, that were
issued in respect to the warrants that such warrantholder held, for $324,000,
the price originally offered for the warrants.
Year ended November 30, 1998, compared to year ended November 30, 1997.
According to publicly filed reports with the Louisiana Board, total
taxable casino revenues for the two riverboats in the Baton Rouge gaming market
for the years ended November 30, 1998 and 1997, were $118,806,000 and
$117,058,000, respectively. Riverboat casino patron counts in Baton Rouge for
the same respective periods were 2,571,000 and 2,768,000. The Company's taxable
casino revenues increased 1.5% while customer counts decreased 7.1% for the year
ended November 30, 1998, compared to 1997. The Company's competitor's taxable
revenues remained flat as their customer count decreased 8.4%, for the year
ended November 30, 1998 compared to 1997. The Company's share of the Baton Rouge
gaming market was 59.3% and 58.6% of casino revenues and 54.2% and 53.5% of
admissions for the years ended November 30, 1998 and 1997, respectively.
Casino revenues for the Company were $68,845,000 and $67,694,000 for the
years ended November 30, 1998 and 1997, respectively. Casino revenues consist of
gaming machine and table revenues. Revenues from casino operations were 78.0%
from gaming machines and 22.0% from table games in 1998 compared to 75.2% and
24.8%, respectively, for 1997. Such mix for gaming machines and gaming table win
is attributable to the continuing popularity of gaming machines among the
Company's base casino patrons and generally conforms to that experienced by
riverboats throughout Louisiana. Gaming machine revenues increased 5.5% in 1998
compared to 1997 primarily due to a 5.6% increase in coin in. Table revenues,
excluding poker, decreased 11.2% in 1998 compared to 1997 due to a 16.7%
decrease in table game drop offset by an improvement of the hold percentage from
20.1% to 21.2% on an annual basis. Poker win for 1998 and 1997 was $494,000 and
$300,000, respectively. Management believes that the decline in table game drop
is a direct result of patrons converting to gaming machines due to new, exciting
and innovative gaming equipment being introduced by the casino industry. For the
year ended November 30, 1998, the Company's win per passenger increased 8.3% to
$49.46 compared to $45.69 in the same period of 1997.
Casino expenses for the year ended November 30, 1998 and 1997, were
$33,302,000 and $31,826,000, respectively, which represents 48.4% and 47.0% of
casino revenues in each period. Overall casino expenses increased primarily due
to the introduction of the Company's Rouge Arena, a temporary facility used for
concerts, sporting activities, customer parties and other promotional
activities. The facility was in use through July 1998.
Selling, general and administrative expenses were $20,948,000 and
$21,039,000 for the years ended November 30, 1998 and 1997, respectively.
Overall selling, general and administrative expenses for 1998 are lower than
1997 due primarily to a decrease in risk management costs partially offset by an
increase in legal expenses.
Net interest expense was $5,948,000 and $5,675,000 for the years ended
November 30, 1998 and 1997, respectively. The increase in interest expense is
primarily due to interest and related financing costs being charged on both the
1993 Notes and the 1998 Notes for a six day period during which proceeds from
the 1998 Notes were escrowed to repay the 1993 Notes.
The Company had recorded a market value warrant adjustment of $245,000 for
the year ended November 30, 1998, to reduce the accreted value of its
outstanding redeemable common stock warrants to $4,131,000. Pursuant to the
terms of the warrants the Company was obligated to purchase the warrants during
fiscal 1999 to the extent the holders exercised their put rights. Holders of
138,900 warrants exercised their put rights. The actual purchase price for the
138,900 warrants, as determined by two independent investment banking firms in
accordance with the original agreements issued in 1993, was established at
$3,750,000.
LIQUIDITY AND CAPITAL RESOURCES
During the year ended November 30, 1999, the Company generated $16,067,000
in cash flows from operations as compared to $6,693,000 for the year ended
November 30, 1998. The increase in cash flows from operations was primarily due
to an increase in net income, the settlement of a dispute regarding consulting
services and early payment of interest related to the 1993 Notes.
Cash flows used for investing activities were $6,165,000 and $472,000, for
the years ended November 30, 1999 and 1998, respectively. The 1998 amount is net
of $4,807,000 of restricted cash, as permitted by the indenture under which the
1993 Notes were issued (the "1993 Indenture"). In 1999, the Company purchased,
for $793,000, approximately 1.3 acres of previously leased land, consisting of
1,600 square feet of offices, a warehouse and employee parking. In addition,
approximately $1,492,000 was spent on vessel remodeling. In 1998 the Company
acquired approximately five acres of land adjacent to its docking facility for
approximately $1,100,000. The remaining uses of funds for each of the periods
were primarily for capital expenditures for continuing operations.
Cash flows used for financing activities for the years ended November 30,
1999 and 1998, were $5,730,000 and $620,000, respectively. In 1999 the Company
used such cash flows for dividend payments to shareholders of $3,498,000, the
purchase of common stock warrants and related common stock of $4,074,000 and the
purchase of $2,000,000 of the outstanding 1999 Notes offset by the net proceeds
from the issuance of the 1999 Notes. In 1998, the Company sold $50,000,000
principal amount of 1998 Notes. The net proceeds from such offering,
approximately $47,500,000 million, were used to repay the outstanding 1993 Notes
of $43,946,000 and to redeem the Company's redeemable preferred stock and
related accrued dividends of $1,760,000 from Thomas L. Meehan, one of the
Company's directors. In addition, the Company issued dividend payments to common
shareholders and distributions to warrantholders of $1,996,000.
In January 1999, the Company issued the 1999 Notes. The Company used the
proceeds to defease and redeem the 1998 Notes and for general corporate
purposes. The 1999 Indenture includes certain covenants which limit the ability
of the Company and its restricted subsidiaries, (as defined in the 1999
Indenture) subject to certain exceptions, to: (i) incur additional indebtedness;
(ii) pay dividends or other distributions, repurchase capital stock or other
equity interests 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. As a result of the
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,
which, under those circumstances, could have an adverse effect on the Company's
operations.
Historically, the Company has incurred annual maintenance capital
expenditures of approximately $2,500,000. The Company anticipates maintenance
capital expenditures in 2000 of $3,000,000. In addition, the Company may incur
additional discretionary capital expenditures. Management believes that cash on
hand and cash generated from operations will be sufficient to satisfy working
capital requirements and maintenance capital expenditures for the foreseeable
future. However, there can be no assurance that the Company will be able to
generate sufficient cash flow.
YEAR 2000
To date the Company has not experienced any material Year 2000 issues and
has also been informed by its material suppliers and vendors that they have not
experienced material Year 2000 issues. The Company has not spent a material
amount on Year 2000 issues. Most of the Company's expenses have related to the
operating costs associated with time spent by employees and consultants in the
evaluation and implementation process and Year 2000 compliance matters
generally. The Company will continue to monitor any on-going Year 2000 issues.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The market risk inherent in the Company's market risk sensitive
instruments and positions is the potential change arising from increases or
decreases in interest rates as discussed below. Generally, the Company's market
risk sensitive instruments and positions are characterized as "other than
trading." The discussion of the Company's exposure to market risk represents an
estimate of possible changes in fair value or future earnings that would occur
assuming hypothetical future movements in interest rates. The Company's views on
market risk are not necessarily indicative of actual results that may occur and
do not represent the maximum possible gains and losses that may occur, since
actual gains and losses will differ from those estimated, based on actual
fluctuations in interest rates and the timing of transactions.
The Company has entered into fixed-rate debt obligations. As of November
30, 1999 and 1998, the carrying values of the Company's long-term fixed-rate
debt, including accrued interest, was approximately $55,900,000 and $50,100,000,
respectively, compared to fair values of $57,500,000 and $50,100,000,
respectively. Fair values were determined using quoted market prices, where
applicable, or future cash flow discounted at market rates for similar types of
borrowing arrangements. Each approximate 10 percent change in the interest rates
applicable to such debt for 1999 and 1998 would result in changes of
approximately $4,800,000 and $4,500,000, respectively, in the fair values of
these instruments. If these instruments are held to maturity, no change in fair
value will be realized.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Index to Financial Statements on page 22.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is certain information with respect to the directors and
executive officers of the Company.
NAME AGE POSITION
Sherwood M. Weiser.... 68 Chairman of the Board of Directors
Dan S. Meadows........ 53 President and Vice Chairman of the
Board of Directors
Thomas L. Meehan...... 55 Director
Leon R. Tarver II..... 57 Director
W. Peter Temling...... 52 Chief Financial Officer, Secretary,
Treasurer and Director
Dale A. Darrough...... 52 General Manager
The following information summarizes the business experience during at least the
past five years of each director and executive officer of the Company.
Sherwood M. Weiser has been the Chairman of the Board of
Directors of the Company since September 1998. Mr. Weiser also is
Chairman of the Board of Directors, President and Chief Executive
Officer of CRC and held the same positions with CHC
International, Inc. ("CHC"), a predecessor of CRC, from March
1994 until June 1998. From 1990 to March 1994, Mr. Weiser served
as Chairman and Chief Executive Officer of TCC, a predecessor of
CHC. Mr. Weiser is a member of the Board of Directors of Carnival
Corp. (NYSE: CCL) and serves as a member of the Nominating
Committee and Chairman of the Compensation Committee and Plan
Administration Committee of the Board of Directors of Carnival
Corp. Mr. Weiser is also a member of the Board of Directors of
Mellon United National Bank, a subsidiary of Mellon Bank (NYSE:
MEL), and Wyndham International, Inc. (NYSE: WYN) and a trustee
of the University of Miami.
Dan S. Meadows has been President and a director of the
Company since October 1993 and Vice Chairman of the Board of
Directors since September 1998. From the incorporation of the
Company until October 1993, he served as Secretary/Treasurer. He
was elected a director in July 1993. From April 1993 to April
1995, Mr. Meadows was based in Baton Rouge and was directly
responsible for the development and licensing of the Casino
Rouge. Mr. Meadows and Mr. Thomas L. Meehan are the co-owners of
Synura, Inc. ("Synura"), which provided funding for two
corporations in which they own a significant interest: Sportlite,
Inc., an Arizona corporation involved in the development and
marketing of energy saving lighting, and the Company. Mr.
Meadows is currently the President and a Director of Synura and a
Director of Sportlite, Inc. Prior to co-founding Synura; Mr.
Meadows was involved in real estate development and marketing for
19 years.
Thomas L. Meehan has been a director of the Company since
September 1998. Mr. Meehan also served as the Chairman of the
Board of Directors of the Company from its inception until
October 1993. Mr. Meehan is President and Chairman of the Board
of Sportlite, Inc. and Chairman of the Board of Synura. In 1979,
Mr. Meehan co-founded National Electric, Inc. ("NEI") and served
as President and Director from 1979 until 1989. In 1987, NEI
merged its business with Westinghouse Electric Corporation to
become Aptus. Mr. Meehan presently is a member of the Board of
Directors of Manchester Commercial Finance, ATTA, L.L.C., LTM
LTD., and Intergenerational Living and Health Care.
Leon R. Tarver II has been a director of the Company since
December 1994. Since January 1997, he has been President, and
since January 1992, Professor of Public Administration, of
Southern University in Baton Rouge. From February 1994 through
December 1996, Mr. Tarver was Chancellor for Administration of
Southern University. From August 1989 to January 1992, Mr. Tarver
served as the Secretary of the Louisiana Department of Revenue
and Taxation.
W. Peter Temling has been Chief Financial Officer, Secretary and Treasurer
of the Company since May 1998 and became a director of the Company in September
1998. From October 1993 to May 1998 he was Acting Chief Financial Officer of the
Company. He was a director of the Company from November 1993 through November
1994. He also is Executive Vice President/Finance and Chief Financial Officer
and a director of CRC and held the same positions with CHC from 1994 until June
1998. Prior to the formation of CHC in March 1994, Mr. Temling held similar
positions with TCC. Mr. Temling joined TCC in 1981 after serving 12 years with
the Sheraton Corporation, where his responsibilities included business planning
for more than 100 hotels, the opening of hotels worldwide and directing the
financial functions for the franchise division consisting of 400 hotels and
inns. Mr. Temling also is a certified public accountant.
Dale A. Darrough has been General Manager of the Company since February
1996. From October 1995 to February 1996, he served as Executive Vice President,
Operations, with Shuffle Master Gaming, Inc. Prior thereto, from August 1995;
Mr. Darrough was a Consultant to Hyatt Development Corp. He held positions with
Bally's Casino Resort from April 1991 to July 1995, most recently as Senior Vice
President, Casino Operations.
ITEM 11. EXECUTIVE COMPENSATION
The following table provides a summary of the compensation for the fiscal
years ended November 30, 1999, 1998 and 1997, of the Chairman of the Board and
President of the Company and the other executive officers who received cash
compensation in excess of $100,000 during fiscal 1999 from the Company.
SUMMARY COMPENSATION TABLE
Other Annual
Name and Position Year Salary Bonus Compensation (1)
Sherwood M. Weiser (2) 1999 $-- $-- $--
Chairman of the Board 1998 $-- $-- $--
Dan S. Meadows (3) 1999 $-- $-- $--
President and Vice 1998 $-- $-- $--
Chairman of the Board 1997 $-- $-- $--
Dale A. Darrough (4) 1999 $240,000 $115,000 $--
General Manager 1998 $182,000 $ 40,000 $--
1997 $161,000 $ 50,000 $--
(1) Aggregate amount of other annual compensation does not exceed the lesser of
$50,000 or 10% of executive officer's salary and bonuses. (2) Mr. Weiser became
Chairman of the Board in September 1998. (3) Mr. Meadows together with Mr. John
R. Rauen, Senior Vice President/Operations of CRC, serve as the only members of
the Executive Committee of the Board of Directors. They do not receive any
compensation from the Company. They are reimbursed their reasonable expenses for
Board of Directors meetings attended as explained below in "Compensation of
Directors". See "Security Ownership of Certain Beneficial Owners and Management"
and "Certain Relationships and Related Transactions." (4) Mr. Darrough has an
employment agreement effective September 21, 1999, with an initial two-year
term, with a two year extension at Mr. Darrough's option. The agreement states
that upon termination, without cause, Mr. Darrough is entitled to two years
salary and two times his average bonus for the prior two years.
COMPENSATION OF DIRECTORS
Directors of the Company who are either employees of the Company or
elected pursuant to the Shareholder Agreement, dated October 8, 1993, as
amended, by and among the Company, CRC, Jerry L. Bayles, Dan S. Meadows, Leon R.
Tarver II and Thomas L. Meehan (the "Shareholder Agreement"), are reimbursed
their reasonable expenses for meetings attended but do not receive any separate
compensation. As a director, Mr. Tarver receives an annual retainer of $10,000
and reimbursement of reasonable expenses for meetings attended. On December 1,
1994, the Company issued 2,450 shares of common stock to Mr. Tarver, which are
now fully vested. In addition, Mr. Tarver receives $24,000 annually to serve as
Chairman of the Company's Minority Business and Economic Advisory Committee. The
Company's Audit Committee consists of Messrs. Meadows, Rauen, Temling, Meehan
and Tarver.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has no standing Compensation Committee of the Board of
Directors; therefore, all members of the Board of Directors participate in
deliberations concerning executive officer compensation.
EXECUTIVE EMPLOYMENT AGREEMENT
An employment agreement effective September 21, 1999, between Dale A.
Darrough, General Manager, and the Company was signed on January 7, 1999. The
agreement has an initial two-year term, with a two year extension at Mr.
Darrough's option. Mr. Darrough shall receive $250,000 in salary during the
first year of the agreement and $275,000 during the second year. During any year
of the two year extension, Mr. Darrough's salary shall be determined by the
Executive Committee in its sole and absolute discretion. In addition, the
agreement states that upon termination, without cause, Mr. Darrough is entitled
to two years salary and two times his average bonus for the prior two years.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's common stock as of February 23, 2000: (a) by each
person who beneficially owned more than five percent of the Company's common
stock, (b) by each of the Company's directors, (c) by each executive officer
listed in the Summary Compensation Table who is not a director, and (d) by all
executive officers and directors as a group.
Common Stock Percent
Name and Address of Beneficial Owner Beneficially Owned (1) of Class
CRC Holdings, Inc., (3)............. 588,200 59.7%
d/b/a Carnival Resorts and Casinos
3250 Mary Street
Miami, FL 33133
Dan S. Meadows...................... 130,711 13.3%
3500 E. Lincoln Drive
Phoenix, AZ 85018
Jerry L. Bayles..................... 130,711 13.3%
2236 Estate Road
Baton Rouge, LA 70808
Thomas L. Meehan.................... 130,711 13.3%
7331 Tilden Lane
Naples, FL 34108
Sherwood M. Weiser (3).............. 588,200 59.7%
CRC Holdings, Inc.
3250 Mary Street
Miami, FL 33133
W. Peter Temling (3)................ -- --
CRC Holdings, Inc.
3250 Mary Street
Miami, FL 33133
Leon R. Tarver, II.................. 2,450 (2)
16215 Chadsford Avenue
Baton Rouge, LA 70817
Dale A. Darrough.................... -- --
Louisiana Casino Cruises, Inc.
1717 River Road North
Baton Rouge, LA 70802
All directors and executive officers
as a group (six persons)(3)......... 852,072 86.5%
(1) The voting and investment power with regard to the shares of common stock
beneficially owned by all shareholders is restricted by the Shareholder
Agreement. (2) Less than 1%. (3) Mr. Weiser and Mr. Temling are principal
shareholders and officers of CRC. Mr. Weiser has the right to vote in excess of
50% of the outstanding common stock of CRC. Mr. Weiser and Mr. Temling disclaim
beneficial ownership of all shares of the Company's common stock held by CRC.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CRC and the Company are parties to the Management Agreement, pursuant to
which, CRC handles all aspects of Casino Rouge's management. The Management
Agreement expires in December 2004, subject to extension at the option of CRC
for an additional 10-year period. CRC is entitled to an annual management fee
equal to 2% of the Company's gross revenues plus 5% of its total operating
income (as such terms are defined in the Management Agreement). By separate
agreement, CRC has agreed to pay one-half of the 5% fee payable to CRC with
respect to the Company's total operating income to Dan S. Meadows, the Company's
President and Vice Chairman of the Board, Jerry L. Bayles and Thomas L. Meehan,
one of the directors of the Company, aggregate holders of approximately 40% of
the Company's common stock. For the fiscal years ended November 30, 1999, 1998
and 1997, the amount earned by CRC pursuant to the Management Agreement was
$2,758,000, $2,195,000 and $2,214,000, respectively. For the fiscal years ended
November 30, 1999, 1998 and 1997, the aggregate amount paid by CRC to Messrs.
Meadows, Bayles and Meehan was $533,000, $369,000 and $407,000, respectively.
Other than warrantholders who exercised warrants to purchase common stock,
all shareholders are parties to the Shareholder Agreement with regard to the
ongoing operation, management and financing of the Company. Pursuant to the
Shareholder Agreement, all actions by the Company's Board of Directors require
the majority approval of the directors. The Shareholder Agreement also provides
for an Executive Committee of the Board, consisting of one nominee of CRC and
one nominee of the individual shareholders, who currently are Mr. Rauen and Mr.
Meadows, respectively. All actions of the Executive Committee require the
unanimous approval of both members. Unless rescinded by a vote of the holders of
51% of the outstanding common stock, the Shareholder Agreement provides that the
Executive Committee is delegated all of the duties and responsibilities of the
Board of Directors. The Shareholder Agreement also provides that certain actions
cannot be taken without the approval of the holders of either 51% or 67% of the
outstanding common stock, as the case may be, including: (a) the authorization
or issuance of any additional common stock (or any securities convertible into
or rights to acquire common stock); (b) the sale, lease, transfer, mortgage,
pledge or other disposition of or the acquisition of any assets of the Company,
other than in the ordinary course of developing or operating the Casino Rouge;
(c) the authorization or execution of contracts for major landsite improvements,
any amendment to the landsite lease and contracts for acquiring additional land
as part of the Casino Rouge; (d) all submissions to the Louisiana Board and any
modification or amendment of any approvals or licenses; (e) the redemption,
retirement, purchase or other acquisition by the Company of any common stock and
the declaration of any dividend or distribution on account of any capital stock
or any merger, consolidation, split, reverse split or other change of the
capitalization of the Company; (f) the election of any additional members of the
Board of Directors; (g) the approval of the operational budget for the Casino
Rouge presented by CRC pursuant to the Management Agreement; (h) the resolution
of any deadlock between the members of the Executive Committee; (i) any
amendment to the Articles of Incorporation or By-laws of the Company; and (j)
the initiation or settlement of any material litigation or other dispute by or
against the Company.
The Shareholder Agreement also limits the transfer of the common stock
owned by the shareholders party thereto. The shares of common stock issued in
connection with the recent exercise of certain warrants are not subject to the
transfer or other restrictions contained in the Shareholder Agreement. Such
restrictions will also lapse upon the consummation of a public offering of
common stock. Additionally, any transfer must be subject to any required
regulatory approvals. The transferee must agree to hold its shares subject to
the terms of the Shareholder Agreement and must be of such character and
reputation so as not to jeopardize any regulatory approval held by the Company
or the shareholders and affiliates thereof. Any transfer, other than to
Permitted Transferees (as defined in the Shareholder Agreement), is subject to a
right of first refusal by the other parties. If the Management Agreement
terminates for any reason, CRC shall have the right to make an offer to sell to
the other shareholders party to the Shareholder Agreement all its common stock
or to purchase from such other shareholders all their common stock on the terms
set forth in the offer. The Shareholder Agreement also requires CRC, to the
extent required by any individual vendor or supplier, to negotiate and enter
into a guaranty of the Company's payment obligations under agreements to lease
or purchase gaming equipment. The terms of such guaranties shall be subject to
the approval of CRC.
On September 15, 1998, the Company resolved a regulatory inquiry from the
Louisiana Board relating to a 1994 stock ownership issue whereby the Company
agreed to reimburse the Louisiana Riverboat Gaming Enforcement Division of the
State Police (the "Division") $50,000, constituting the Division's costs and
expenses of conducting the investigation, pay a fine of $200,000 and comply with
a decree to establish a regulatory compliance committee. CRC has reimbursed the
Company for such fine and costs.
On November 30, 1998, the Company redeemed from Thomas L. Meehan, one of
the Company's directors, all 11,000 then outstanding shares of the Company's
redeemable preferred stock for an aggregate payment of $1,760,000, including all
accrued dividends. Such redemption was in accordance with the terms of such
preferred stock.
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
a. (1) Financial Statements
The following financial statements of the Company and report of
independent accountants are included on pages 23 through 35 hereto.
Report of Independent Accountants
Balance Sheets- November 30, 1999 and 1998.
Statements of Operations- Years ended November 30, 1999, 1998 and
1997.
Statements of Changes in Shareholders' Equity (Deficit)- Years ended
November 30, 1997, 1998 and 1999.
Statements of Cash Flows- Years ended November 30, 1999, 1998 and
1997.
Notes to Financial Statements
(2) Financial Statement Schedules.
The following schedule and report of independent accountants are
included on pages 36 through 37 attached hereto and should be read in
conjunction with the related financial statements and notes thereto.
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set
forth therein is included in the financial statements or notes
thereto.
Schedule II- Valuation and Qualifying Accounts
(3) Exhibits.
3.1 Amended and Restated Articles of
Incorporation of the Company, as of September 15, 1998. (1)
3.2 By-laws of the Company, as amended as of September 15, 1998. (1)
4.1 Form of Certificate for Common Stock. (3)
4.2 Indenture, dated January 27, 1999, by and between the Company
and U.S. Bank Trust NationalAssociation, as Trustee. (1)
10.1 Casino Consulting and Management Agreement, dated
December 11, 1992, between CRC and the Company,
As amended. (2)
10.2 Shareholder Agreement, dated October 8,
1993, among the Company, Jerry L. Bayles,
Dan S. Meadows, Thomas L. Meehan, Leon R.
Tarver II and CSMC- Management Services,
Inc., as amended. (2)
10.3 Ground Lease Agreement between the Company
and Capital Lake Properties, Inc., dated
June 16, 1993, as amended. (2)
10.4 Lease Agreement, dated July 29, 1994,
between Anvil Realty, Inc. and the Company.(4)
10.5 Lease Agreement, dated July 29, 1994,
between Anvil Realty, Inc. and the Company.(4)
10.6 Mortgage, Leasehold Mortgage, Assignment of Rents,
Fixture Filing, Security Agreement and
Financing Statement,
dated January 27, 1999, by and between the
Company and U.S. Bank Trust National
Association, as Trustee. (1)
10.7 First Preferred Ship Mortgage, dated January 27, 1999, by
and between the Company and U.S. Bank Trust National
Association, as Trustee. (1)
10.8 Security Agreement dated January 27, 1999,
by and between the Company and U.S. Bank
Trust National Association, as Trustee. (1)
10.9 Employee Agreement dated September 21, 1999, between Dale A.
Darrough and the Company.
23. Consent of PricewaterhouseCoopers LLP
27.1 Financial Data Schedule
b. Reports on Form 8-K.
None
(1) Incorporated by reference from the Company's Registration
Statement on Form S-4 (No. 333-74791).
(2) Incorporated by reference from the Company's Registration Statement on Form
S-4 (No. 33-73536).
(3) Incorporated by reference from the Company's Registration Statement on Form
S-1 (No. 33-73534).
(4) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended November 30, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: February 24, 2000 By: /s/ Dan S.Meadows
----------------- -----------------------------
Dan S. Meadows, President and
Vice Chairman of the Board of
Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and on the dates indicated.
Dated: February 24, 2000 /s/ Sherwood M. Weiser
----------------- -------------------------
Sherwood M. Weiser
Chairman of the Board of Directors
Dated: February 24, 2000 /s/ Dan S. Meadows
----------------- ------------------------
Dan S. Meadows, President and
Vice Chairman of the Board of
Directors(Principal Executive Officer)
Dated: February 24, 2000 /s/ Thomas L. Meehan
----------------- ------------------------
Thomas L. Meehan, Director
Dated: February 24, 2000 /s/ Leon R. Tarver, II
----------------- -------------------------
Leon R. Tarver, II, Director
Dated: February 24, 2000 /s/ W. Peter Temling
----------------- -------------------------
W. Peter Temling, Chief
Financial Officer, Secretary,
Treasurer and Director (Principal Financial
and Accounting Officer)
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent
Accountants.......................................................... 23
Balance Sheets- November 30, 1999 and
1998................................................................. 24
Statements of Operations-
Years ended November 30, 1999, 1998 and
1997................................................................. 25
Statements of Changes in Shareholders' Equity (Deficit)-
Years ended November 30, 1997, 1998 and
1999................................................................. 26
Statements of Cash Flows-
Years ended November 30, 1999, 1998 and
1997................................................................. 27
Notes to Financial
Statements........................................................... 29
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders
of Louisiana Casino Cruises, Inc.
In our opinion, the financial statements listed in the index appearing
under Item 14. (a) (1) present fairly, in all material respects, the financial
position of Louisiana Casino Cruises, Inc. at November 30, 1999 and 1998, and
the results of its operations and its cash flows for each of the three years in
the period ended November 30, 1999, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New Orleans, Louisiana
January 6, 2000
<PAGE>
LOUISIANA CASINO CRUISES, INC.
BALANCE SHEETS
(dollars in thousands, except share data)
November 30,
-----------------------
1999 1998
----------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 17,697 $ 13,525
Receivables, less allowance for doubtful accounts
of $152 and $123 at 1999 and 1998,
respectively 468 332
Prepaid expenses and other current assets 1,214 756
Income tax receivable 487 -
Inventories 134 452
Deferred tax asset - current 1,474 1,466
----------- ----------
Total current assets 21,474 16,531
Property and equipment, net 42,403 41,504
Other assets 1,887 3,988
----------- ----------
Total assets $ 65,764 $ 62,023
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,285 $ 2,892
Accrued liabilities 2,080 1,564
Accrued interest 2,915 102
Other current liabilities 314 332
----------- ----------
Total current liabilities 8,594 4,890
Senior secured notes 53,000 50,000
Deferred tax liability 4,044 2,994
----------- ----------
Total liabilities 65,638 57,884
----------- ----------
Redeemable common stock warrants - 4,131
----------- ----------
Commitments and contingencies
Shareholders' equity:
Common stock, no par value:
10,000,000 shares authorized: 984,883 and
982,783 shares issued
and outstanding at 1999 and 1998,
respectively 1 1
Additional paid in capital - -
Retained earnings 125 7
----------- ----------
Total shareholders' equity 126 8
----------- ----------
Total liabilities and shareholders' $ 65,764 $ 62,023
equity =========== ==========
The accompanying notes are an integral part of these financial
statements.
<PAGE>
LOUISIANA CASINO CRUISES, INC.
STATEMENTS OF OPERATIONS
(dollars in thousands, except share data)
Year Ended November 30,
---------------------------
1999 1998 1997
--------- -------- -------
Revenues:
Casino $ 82,250 $ 68,845 $67,694
Food and beverage 6,636 5,501 6,253
Other 828 673 1,013
--------- -------- -------
89,714 75,019 74,960
Less: promotional allowances 5,057 4,174 5,216
--------- -------- -------
Net revenues 84,657 70,845 69,744
--------- -------- -------
Costs and expenses:
Casino 38,439 33,302 31,826
Food and beverage 1,659 1,538 1,318
Selling, general and
administrative 24,316 20,948 21,039
Depreciation and amortization 5,382 4,762 4,334
--------- -------- -------
Total operating expenses 69,796 60,550 58,517
--------- -------- -------
Operating income 14,861 10,295 11,227
Other income (expense):
Interest income 671 428 280
Interest expense (6,768 ) (6,376 ) (5,955 )
--------- -------- -------
Income before provision for income
taxes and extraordinary loss 8,764 4,347 5,552
Provision for income taxes 3,474 1,666 2,045
--------- -------- -------
Income before extraordinary loss 5,290 2,681 3,507
Extraordinary loss on early 1,731 - -
extinguishment of debt, net
--------- -------- -------
Net income 3,559 2,681 3,507
Dividend requirement on redeemable
preferred stock - 132 132
Market value warrant adjustment - (245 ) -
Distributions paid to common stock
warrantholders - 269 65
--------- -------- -------
Net income assigned to common
shareholders $ 3,559 $ 2,525 $ 3,310
========= ======== =======
Basic earnings per share:
Earnings before extraordinary
loss per share $ 5.32 $ 2.57 $ 3.37
Extraordinary loss per share (1.74 ) - -
--------- -------- -------
Basic earnings per share $ 3.58 $ 2.57 $ 3.37
========= ======== =======
Diluted earnings per share:
Earnings before extraordinary
loss per share $ 5.32 $ 2.46 $ 2.97
Extraordinary loss per share (1.74 ) - -
--------- -------- -------
Diluted earnings per share $ 3.58 $ 2.46 $ 2.97
========= ======== =======
Weighted average common shares 994,549 982,783 982,783
outstanding
========= ======== =======
Weighted average common equivalent
shares outstanding 994,549 1,135,783 1,135,783
========= ======== =======
The accompanying notes are an integral part of these financial
statements.
LOUISIANA CASINO CRUISES, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(dollars in thousands, except share data)
Common Stock AdditionalRetained
Earnings/
Paid-In Accumulated
Shares Amount Capital (Deficit) Total
-------- ------- -------- --------- -------
Balance at November 982,783 $ 1 $ - $ (3,684 )$(3,683)
30, 1996
Dividend
requirements on
redeemable
preferred stock - - - (132 ) (132 )
Dividends paid to
holders of
common stock and
distributions to
common
stock
warrantholders - - - (482 ) (482 )
Net income - - - 3,507 3,507
-------- ------- -------- --------- -------
Balance at November
30, 1997 982,783 1 - (791 ) (790 )
-------- ------- -------- --------- -------
Dividend
requirements on
redeemable
preferred stock - - - (132 ) (132 )
Market value warrant
adjustment - - - 245 245
Dividends paid to
holders of
common stock and
distributions to
common
stock
warrantholders - - - (1,996 )(1,996 )
Net income -
- - 2,681 2,681
-------- ------- -------- --------- -------
Balance at November
30, 1998 982,783 1 - 7 8
-------- ------- -------- --------- -------
Warrants converted
to
common shares 14,100 - 381 - 381
Purchase of common (12,000) - - (324 ) (324 )
shares
Dividends paid to
holders of
common stock - - (381 ) (3,117 )(3,498 )
Net income - - - 3,559 3,559
-------- ------- -------- --------- -------
Balance at November 984,883 $ 1 $ - $ 125 $ 126
30, 1999 ======== ======= ======== ========= =======
The accompanying notes are an integral part of these financial
statements.
<PAGE>
LOUISIANA CASINO CRUISES, INC.
STATEMENTS OF CASH FLOWS
Page 1 of 2
(dollars in thousands)
Year Ended November 30,
-----------------------------
1999 1998 1997
-------- -------- ---------
Net income $ 3,559 $ 2,681 $ 3,507
Net cash flows from operating activities:
Extraordinary loss on early 1,731 - -
extinguishment of debt
Depreciation and amortization 5,382 4,762 4,334
Amortization of deferred costs 183 958 917
Loss on note repurchase and warrant
valuation reserve - 282 -
Provision for doubtful accounts 98 52 94
(Increase) decrease in receivables (234 ) 95 (149 )
(Increase) decrease in inventories 318 (9 ) (4 )
(Increase) decrease in prepaid and
other assets 771 264 (285 )
Increase in income taxes receivable (487 ) - -
(Increase) decrease in deferred tax
assets (8 ) 585 190
Increase (decrease) in accrued interest 2,813 (2,425 ) (51 )
Increase (decrease) in accounts
payable and other liabilities 1,941 (552 ) 1,068
-------- -------- ---------
Net cash provided by operating
activities 16,067 6,693 9,621
-------- -------- ---------
Cash flows from investing activities:
Capital expenditures (6,165 ) (5,321 ) (1,214 )
Proceeds from sale of fixed assets - 42 22
Decrease in restricted cash - 4,807 939
-------- -------- ---------
Net cash used by investing
activities (6,165 ) (472 ) (253 )
-------- -------- ---------
Cash flows from financing activities:
Repayment of first mortgage notes (52,000 ) (43,946 ) (722 )
Proceeds from issuance of first
mortgage notes 55,000 50,000 -
Payment of deferred financing costs (1,158 ) (2,900 ) -
Increase in restricted cash - - (2,694 )
Redemption of preferred stock and
payment of accrued dividends - (1,760 ) -
Purchase of common stock warrants and (4,074 ) - -
common stock
Repayments of notes payable - (18 ) 2,223 )
Dividends paid to holders of common
stock and distributions to common stock
warrantholders (3,498 ) (1,996 ) (482 )
-------- -------- ---------
Net cash used by financing
activities (5,730 ) (620 ) (6,121 )
-------- -------- ---------
Net increase in cash and cash equivalents 4,172 5,601 3,247
Cash and cash equivalents at beginning of
year 13,525 7,924 4,677
-------- -------- ---------
Cash and cash equivalents at end of year $17,697 $13,525 $ 7,924
======== ======== =========
The accompanying notes are an integral part of these
financial statements.
<PAGE>
LOUISIANA CASINO CRUISES, INC.
STATEMENTS OF CASH FLOWS
Page 2 of 2
(dollars in thousands)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Year Ended November 30,
--------------------------
1999 1998 1997
-------- ------- -------
Cash paid for interest $ 3,920 $7,567 $5,264
======== ======= =======
Cash paid for income taxes $ 1,817 $ 30 $1,077
======== ======= =======
SUPPLEMENTAL DISCLOSURE OF NONCASH OPERATING, INVESTING AND
FINANCING ACTIVITIES:
Redeemable preferred stock dividends of $132,000 were accrued in each of
the years ended November 30, 1998 and 1997.
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.
The accompanying notes are an integral part of these financial
statements.
<PAGE>
LOUISIANA CASINO CRUISES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Louisiana Casino Cruises, Inc., a Louisiana corporation (the "Company"),
was formed in August 1991 for the purpose of developing and operating gaming
activities in Louisiana. The Louisiana Gaming Control Board (the "Board") has
granted the Company a license to conduct riverboat gaming activities. The
Company is in the process of renewing its gaming license (See Note 7).
Financing for the project included an issuance of common stock for
$3,000,000 to CRC Holdings, Inc., ("CRC"), a credit facility from CRC for
$2,000,000 (subsequently converted to equity), pre-opening expenditures by
Synura, Inc. of $2,200,000 (converted to redeemable preferred stock and equity),
secured bank financing of approximately $6,000,000 and a private placement
offering of $51,000,000 in first mortgage notes (the "1993 Notes"). The 1993
Notes were issued with detachable warrants to purchase up to an aggregate amount
of 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. The 1998 Notes were redeemed on January 27, 1999, from the
proceeds of a $55,000,000 offering of 11% Senior Secured Notes due December 1,
2005 (the "1999" Notes") (see Note 3).
CASINO REVENUE AND PROMOTIONAL ALLOWANCES
The estimated direct cost of providing promotional allowances for food and
beverages and other items have been classified as casino costs and totaled
$3,104,000, $2,793,000 and $3,090,000 for the years ended November 30, 1999,
1998 and 1997, respectively.
INVENTORIES
Inventories consist of food, beverage and supplies and are stated at the
lower of cost or net realizable value. Cost is determined on a first-in,
first-out basis.
LICENSING AND FINANCING COSTS
All costs incurred which relate to obtaining the regulatory approval for
the Baton Rouge riverboat facility are recorded as deferred licensing charges
and are amortized on a straight-line basis over the license period. Costs
incurred in connection with debt offerings are recorded as deferred offering
costs and are being amortized on the effective interest method over the term of
the related debt. Deferred licensing charges and debt offering costs are
classified under prepaid and other assets in the accompanying balance sheets.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation expense of
$5,031,000, $4,522,000 and $4,162,000 for the years ended November 30, 1999,
1998 and 1997, respectively, is calculated on the straight-line basis over the
estimated useful lives of the assets or the expected term of the land lease
(including renewals), whichever is shorter. Useful lives range from four to
thirty years. Expenditures for repairs and maintenance are charged to expenses
as incurred. Expenditures for major renewals and betterments, which
significantly extend the useful lives of existing equipment, are capitalized and
depreciated.
<PAGE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include cash and cash equivalents,
notes payable and warrants. The fair value of the 1999 Notes was approximately
$54,590,000 at November 30, 1999. The fair value of cash and cash equivalents,
the 1998 Notes and warrants approximates carrying value.
INCOME TAXES
The Company accounts for income taxes using the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
which recognizes the amount of taxes payable or refundable for the current year
and recognizes deferred tax liabilities and assets for future tax consequences
of events that have been recognized in the Company's financial statements or tax
returns based on currently enacted rates.
ACCOUNTING 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
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in the financial statements for the years ended November
30, 1998 and 1997, have been reclassed to conform to the presentation of the
financial statements for the year ended November 30, 1999. These
reclassifications have no impact on net income, retained earnings (deficit) or
cash flows for the years ended November 30, 1998 and 1997.
NOTE 2- PROPERTY AND EQUIPMENT
Property and equipment consists of the following :
--------------------
As of November 30,
Estimated (dollars in
thousands)
Useful Life 1999 1998
------------- ---------- -----------
Vessel 18 years $17,160 $16,839
Building 30 years 20,689 20,003
Furniture and fixtures 5-10 years 6,605 6,060
Gaming 5-15 years 10,103 9,468
equipment
Other equipment 4-7 years 8,585 4,977
---------- ---------
63,142 57,347
Less: accumulated depreciation (21,011 ) (15,980 )
Construction in progress 272 137
---------- ---------
$42,403 $41,504
========== =========
Capitalized interest included in the cost of property and equipment at
November 30, 1999 and 1998, was $1,628,000. Unamortized capitalized interest at
November 30, 1999 and 1998, is $1,099,000 and $1,206,000, respectively.
NOTE 3- SENIOR SECURED NOTES, NOTES PAYABLE AND REDEEMABLE COMMON
STOCK WARRANTS
1999 NOTES
Pursuant to the indenture, dated as of January 27, 1999, between the
Company and U.S. Bank Trust National Association, as Trustee (the "1999
Indenture"), the Company issued in a private placement $55,000,000 11% Senior
Secured Notes (the "1999 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 in aggregate principal of the Company's 1999 Notes, which were
registered under the Securities Act of 1933. The 1999 registered Notes are
freely transferable by the holders thereof and are identical in all material
respects to the privately placed 1999 Notes for which they were exchanged, other
than certain provisions relating to registration rights and related liquidated
damages. The Company used the proceeds to defease and redeem the 1998 Notes (see
below) and for general corporate purposes. On May 28, 1999, the Company
repurchased $2,000,000 of the Senior Secured Notes at a cost of $2,010,000 plus
accrued interest.
The 1999 Notes are collateralized by substantially all of the Company's
assets, other than certain identified excluded assets. The 1999 Indenture
includes certain covenants which limit the ability of the Company and its
restricted identified subsidiaries, (as defined in the 1999 Indenture) 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 1999 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
Pursuant to the indenture, dated as of November 15, 1998, between the
Company and U.S. Bank Trust National Association, as Trustee (the "1998
Indenture"), the Company issued in a private placement $50,000,000 of 1998 Notes
due December 1, 2001. On November 25, 1998, the proceeds from the offering were
place in escrow with The Bank of New York, as successor Trustee, 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
1999 Notes.
1993 NOTES AND REDEEMABLE COMMON STOCK WARRANTS
Pursuant to the 1993 Indenture between the Company and The Bank of New
York, as successor trustee, the Company issued $51,000,000 of 1993 Notes in a
private placement on December 1, 1993. These notes were exchanged in April 1994
for $51,000,000 in aggregate principal amount of the Company's 1993 Notes, which
were registered under the Securities Act of 1933. The proceeds from the offering
of the 1993 Notes were used to finance the development and construction of the
Baton Rouge riverboat facility. Interest was payable each June 1 and December 1,
commencing June 1, 1994. The 1993 Notes were freely transferable by the holders
thereof. The 1993 Notes were redeemable at the option of the Company, in whole
or in part after December 1, 1997, at par as provided in the 1993 Indenture.
The private placement was made in units, with each unit consisting of
$1,000 principal amount of 1993 Notes and three warrants to purchase one share
each of the Company's no par value common stock (" Common Stock") at the price
of $.01 per share. The original issue discount on the private placement was
$1,301,000, the amount assigned to the value of the warrants at December 1,
1993. The amortization of the original issue discount was $281,000, and
$253,000, for the years ended November 30, 1998 and 1997, respectively. In
addition to original issue discount amortization, for the year ended November
30, 1997, the Company recorded a credit of $30,000, of the original issue
discount as interest expense relating to the 1993 Notes repurchased by the
Company. The original issue discount was fully amortized upon repayment of the
1993 Notes (see above).
As required by the 1993 Indenture the Company made tender offers to
repurchase 1993 Notes at par from Cumulative Excess Cash Flow (as defined in the
1993 Indenture). The repurchased amounts for the years ended November 30, 1998
and 1997, were $119,000 and $722,000, respectively.
The terms of the 153,000 warrants issued with the 1993 Notes provided for
put rights whereby the Company had an obligation to purchase those warrants upon
the holder's request, at the value of the Common Stock as of December 1, 1998,
as determined by two independent investment banking firms. The warrants were
classified as redeemable equity due to the put right feature and, at each
balance sheet date, were accreted to the amount at which the Company expected to
repurchase the warrants. The estimated accreted value attributed to the
redeemable common stock warrants as of November 30, 1998, was $4,131,000.
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 the Company paid $3,750,000 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 per share of $.01. On September 21, 1999, at a previous
warrantholder's request, the Company purchased and retired 12,000 shares of the
Company's Common Stock that were issued in respect to the warrants that such
warrantholders held, for $324,000, the price originally offered for the
warrants.
NOTE 4- REDEEMABLE PREFERRED STOCK
The Company has authorized 50,000 shares of preferred stock, of which
11,000 shares of 12% cumulative redeemable preferred stock were previously
issued and outstanding. The preferred stock was redeemed on November 30, 1998,
in accordance with its terms, for $1,760,000, including all accrued dividends,
from its owner, Thomas L. Meehan, one of the Company's directors.
NOTE 5- EARNINGS PER COMMON SHARE
In 1997, the Financial Accounting Standards Board issued SFAS No. 128
"Earnings Per Share" which requires the Company to present basic earnings per
share (EPS) and diluted EPS, as defined in the standard. The Company adopted the
standard as of fiscal 1998, therefore, for the years ended November 30, 1999,
1998 and 1997, EPS calculations have been made using the new standard.
For the years ended November 30, 1999, 1998 and 1997, basic EPS is
calculated by dividing net income assigned to common shareholders by the
weighted average common shares outstanding; diluted EPS is calculated by
dividing net income assigned to common shareholders before distributions to
common stock warrantholders by the weighted average common and common equivalent
shares outstanding. In 1998 and 1997 common equivalent shares consist of
redeemable common stock warrants with the rights to purchase 153,000 shares of
the Company's common stock (see Note 3).
NOTE 6- RELATED PARTY TRANSACTIONS
The Company and CRC are party to a separate consulting and management
agreement dated December 11, 1992, as amended, whereby CRC provides consulting
and technical services to the Company in connection with the riverboat facility
and management of the casino operations. CRC receives an annual management fee
of 2% of gross revenues, plus 5% of total operating income, as such terms are
defined in the agreement. The term of the agreement is ten years from the
commencement of casino operations, renewable for an additional ten years at the
option of CRC. CRC entered into a separate agreement with three individual
shareholders including the Company's President and Vice Chairman of the Board
and one of its directors, whereby the three individual shareholders receive half
of the fee of 5% of total operating income. The amount earned by CRC under the
management agreement and expensed for management fees by the Company was
$2,758,000, $2,195,000 and $2,214,000 for the years ended November 30, 1999,
1998 and 1997, respectively. Of the amount earned and expensed, $172,000 and
$165,000 was payable and included in current liabilities at November 30, 1999
and 1998, respectively.
NOTE 7-COMMITMENTS AND CONTINGENCIES
LEGAL MATTERS
At November 30, 1993, the Company was involved in a dispute regarding
consulting services. Although a formal demand had not been made to the Company,
management believed the dispute could lead to litigation and accrued $1,700,000
for the estimated cost of resolution. The Company settled litigation related to
this dispute on May 12, 1998. As a result of the settlement, the Company has
recognized a net reduction of $400,000 within selling, general and
administrative expenses in the year ended November 30, 1998.
On September 15, 1998, the Riverboat Gaming Enforcement Division of the
State Police (the "Division") approved a mutually satisfactory resolution to a
regulatory inquiry relating to a 1994 stock ownership issue whereby the Company
agreed to reimburse the Division $50,000, constituting their costs and expenses
of conducting the investigation, and to pay a fine of $200,000. The Company was
reimbursed by CRC for such fine and costs.
The Company is also involved in other legal proceedings. In the opinion of
management, the resolution of these matters are not likely to have a material
effect on the financial statements, the results of operations or cash flows of
the Company.
LEASE AGREEMENTS
The Company has an operating lease agreement for property on which the
Company constructed the riverboat facility and parking facility. The initial
lease term is ten years beginning January 1994. The terms of the lease include
payment of minimum monthly rent of $7,500 through October 1, 1994, increasing to
the greater of $33,333 or 1.25% of the gross revenue for the remainder of the
lease term. The Company subsequently entered into an amendment to the lease
agreement to lease an additional parcel of land from the lessor. The Company
prepaid rent of $1,755,707 for this additional property. The prepaid rent is
being amortized over the initial lease term. The Company has the option to
purchase the entire site on or after fifteen years for the then appraised value
of the original site, excluding improvements.
The Company also leased a total of approximately 81,600 square feet for
general warehousing, office use and employee parking pursuant to two separate
two-year leases. On September 1, 1999, the Company purchased a portion of the
previously leased property for $793,000. The acquisition includes approximately
1.3 acres of land, a warehouse, office space and employee parking. This property
was formerly leased at $8,190 per month. The remaining rent is $7,476 per month.
The lease is a triple net lease, has two two-year renewal options and grants the
Company a right of first refusal to purchase the properties.
Rental expense for the years ended November 30, 1999, 1998 and 1997, was
$1,467,954, $1,266,000 and $1,216,000, respectively. Rental expense for the
years ended November 30, 1999, 1998 and 1997, includes $698,000, $509,000 and
$464,000, respectively, of contingent rental payments above the monthly minimum
rent with respect to the land lease for the riverboat and parking facilities.
Future minimum lease payments for all leases with non-cancelable terms in excess
of one year as of November 30, 1999, are as follows:
Year ending
November 30, (dollars in thousands)
----------- ----------------------
2000 $ 490
2001 400
2002 400
2003 400
2004 33
-------
Total $ 1,723
=======
RELICENSING
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 the Casino Rouge was up for renewal in July 1999. On June 15, 1999,
the Company received a conditional license approval from the Louisiana Board
until the completion of their investigation. 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 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. The Company
believes it will be successful in receiving a 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.
<PAGE>
NOTE 8- INCOME TAXES
The components of the provision for income taxes were as follows:
Year Ended November 30,
(dollars in thousands)
------------------------------
1999 1998 1997
---------- --------- ---------
Current income taxes:
Federal $ 2,234 $ 271 $ 720
State 198 2 (70 )
---------- --------- ---------
Total current tax expense 2,432 273 650
Deferred income taxes:
Federal 908 1,214 1,216
State 134 179 179
---------- --------- ---------
Total deferred tax provision 1,042 1,393 1,395
---------- --------- ---------
Total provision for income tax $ 3,474 $ 1,666 $ 2,045
========== ========= =========
The following table reconciles the statutory rate to the Company's
effective tax rate:
Year Ended November 30,
------------------------------
1999 1998 1997
---------- -------- --------
Statutory tax rate 34.0 % 34.0 % 34.0 %
State tax expense, net of
federal benefit 4.3 4.9 5.0
Other, net 1.3 (0.6 ) (2.2 )
---------- -------- --------
Effective tax rate 39.6 % 38.3 % 36.8 %
========== ======== ========
The components of the Company's deferred tax assets and
liabilities were as follows:
Year Ended November 30,
(dollars in thousands)
------------------------------
1999 1998 1997
---------- --------- ---------
Deferred tax assets:
Deferred pre-opening costs $ - $ 602 $ 602
Accrued litigation costs - - 663
Alternative minimum tax
credit carry forward 851 414 306
Other, net 623 450 480
---------- --------- ---------
Total deferred tax assets 1,474 1,466 2,051
---------- --------- ---------
Deferred tax liabilities:
Depreciation (4,359 ) (4,084 ) (3,650 )
Deferred pre-opening costs - 50 653
Alternative minimum tax
credit carry forward 295 1,064 801
Other, net 20 (24 ) 10
---------- --------- ---------
Total deferred tax liabilities (4,044 ) (2,994 ) (2,186 )
---------- --------- ---------
Net deferred tax liabilities $(2,570 ) $(1,528 ) $(135 )
========== ========= =========
<PAGE>
NOTE 9-DIVIDENDS
The Company paid the following dividends:
Payment Dividend Aggregate
Date Per Share Payment
------------- ---------- -------------
(dollars in thousands, except per share data)
Fiscal 1999:
April 15, 1999 $1.74 $1,735
June 22, 1999 $0.83 $ 827
September 28,1999 $0.95 $ 936
Fiscal 1998:
March 27, 1998 $1.06 $1,201
July 2, 1998 $0.70 $ 795
Fiscal 1997:
March 28, 1997 $0.42 $ 482
On January 14, 2000, the Company paid a dividend of $0.54 per share for an
aggregate payment of $532,000.
NOTE 10- EMPLOYEE BENEFIT PLAN
In January 1996, the Company established a defined contribution plan (the
"Plan") for all employees, qualified under Section 401(k) of the Internal
Revenue Code. The Plan was terminated June 30, 1997, and plan assets and
participant amounts were transferred to the Carnival Resorts and Casinos 401K
Plan-Casino Rouge (the "CRC Plan") effective July 1, 1997, at their then current
value. The provisions of the CRC Plan are substantially the same as those of the
Plan. Contributions to the CRC Plan by the Company are based on the
participants' contributions. For the years ended November 30, 1999, 1998 and
1997, the Company contributed $166,000, $114,000 and $129,000, respectively. The
Company paid certain expenses associated with plan administration.
In addition, effective December 1, 1998, the Company adopted a
non-qualified deferred compensation arrangement for employees earning in excess
of $80,000 annually.
NOTE 11-SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarter
-------------------------------------
First Second Third Fourth Total
-------------------------------------
(dollars in thousands, except
per share data)
Fiscal 1999:
Income (loss) assigned to common $ (932) $1,942 $1,589 $ 960 $3,559
shareholders
Basic earnings (loss) per share $(0.93) $ 1.95 $ 1.59 $0.97 $ 3.58
(Note 5)
Diluted earnings (loss) per share $(0.93) $ 1.95 $ 1.59 $0.97 $ 3.58
(Note 5)
Fiscal 1998:
Income assigned to common $ 484 $1,080 $ 148 $ 813 $2,525
shareholders
Basic earnings per share (Note 5) $0.49 $ 1.10 $ 0.15 $0.83 $ 2.57
Diluted earnings per share (Note $0.43 $ 1.09 $ 0.15 $0.72 $ 2.46
5)
<PAGE>
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors of
Louisiana Casino Cruises, Inc.
Our report on the financial statements of Louisiana Casino Cruises, Inc.
is included in this Form 10-K. In connection with our audits of such financial
statements, we have also audited the financial statement schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related financial statements.
PricewaterhouseCoopers LLP
New Orleans, Louisiana
January 6, 2000
<PAGE>
SCHEDULE II
LOUISIANA CASINO CRUISES, INC.
VALUATION AND QUALIFYING ACCOUNTS
(dollars in thousands)
Balance at Additions Balance
Charged to at
Costs
Beginning Costs and Deduction End of
of Period Expense Period
----------- --------------- ---------- ---------
Year ended November
30, 1997
- ------------------------
Allowance for doubtful
accounts $ 236 $ 94 $ (32 ) $ 298
=========== ============== ========== =========
Year ended November
30, 1998
- ------------------------
Allowance for doubtful
accounts $ 298 $ 52 $ (227 ) $ 123
=========== ============== ========== =========
Year ended November
30, 1999
- ------------------------
Allowance for doubtful
accounts $ 123 $ 98 $ (69 ) $ 152
=========== ============== ========== =========
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), is dated as of January 7, 2000
and is effective as of September 21, 1999 (the "Effective Date"), between
LOUISIANA CASINO CRUISES, INC., a Louisiana corporation (the "Company"), and
DALE A. DARROUGH (the "General Manager").
WHEREAS, the Company owns and operates a riverboat gaming facility in
Baton Rouge, Louisiana (the "Casino Rouge");
WHEREAS, the Company desires to employ the General Manager as General
Manager of the Casino Rouge and for such other matters as the parties may agree;
and
WHEREAS, the General Manager desires to be employed by the Company, all
upon the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
set forth in this Agreement, the Company and the General Manager agree as
follows:
1. The Company shall employ the General Manager as its General Manager,
and the General Manager agrees to be so employed, on the terms and subject to
the conditions set forth in this Agreement, for an initial term commencing as of
the Effective Date and ending on September 21, 2001 (the "Original Term");
provided, however, that this Agreement shall renew for an additional period of
two (2) years at General Manager's option if he elects so in writing prior to
ninety (90) days from the expiration of the Original Term. The Original Term and
the Extended Term shall be collectively referred to hereinafter as the "Term".
2. Services.
2.1 Office and Duties. The General Manager shall report to the
Executive Committee of the Company (the "Executive Committee"). During the Term,
the General Manager shall serve as General Manager of the Casino Rouge with such
duties, authority and responsibility as are commensurate with such position,
including, without limitation, responsibility for reviewing and enhancing the
profitability and quality of service of Casino Rouge's casino and gaming
business, subject to oversight and direction of the Executive Committee and the
Board of Directors of the Company. The General Manager shall have all the power
and authority necessary to fulfill and discharge his duties and responsibilities
hereunder and shall abide by any lawful directions given by the Executive
Committee. Notwithstanding the foregoing, the General Manager shall not, in
connection with his employment hereunder, cause or permit the Company or any of
its subsidiaries to enter into any agreement, commitment or arrangement with, or
pay any fees or other amounts to any person or entity not dealing at arm's
length with the General Manager without first disclosing the nature of such
relationship to the Executive Committee and obtaining the prior written approval
of the Executive Committee to any such agreement, commitment, arrangement or
payment. The General Manager shall be responsible for such additional duties
commensurate with his position and which are not materially inconsistent with
the foregoing as may be reasonably determined by the Executive Committee from
time to time.
2.2 Best Efforts. During the Term, the General Manager shall
diligently and competently devote the General Manager's best efforts, full time
and energies during business hours to the business and affairs of Casino Rouge
and shall use his best efforts, skills and abilities to promote the interests of
Casino Rouge and otherwise to discharge his obligations under this Agreement.
<PAGE>
3. Compensation.
3.1 Salary. During the first year of the Original Term, the General
Manager shall receive a base salary of $250,000, payable in accordance with the
Company's normal payroll practices and subject to applicable taxes and
withholdings. During the second year of the Original Term, the General Manager
shall receive a base salary not less than $275,000. During any year of the
Extended Term, the General Manager's salary shall be determined by the Executive
Committee in its sole and absolute discretion (collectively, "Base Salary").
3.2 1999 Bonus. In addition to the Base Salary described in Section
3.1 above, the Company shall also pay the General Manager a bonus for fiscal
year ending November 30, 1999 (the "1999 Bonus") in an amount to be determined
by the Executive Committee but which shall not be less than $75,000. The Company
will pay the General Manager $25,000 of the 1999 Bonus as of the Effective Date
with the remainder of the 1999 Bonus paid on or before December 15, 1999. Any
bonus during the remainder of the Term will be determined by the Executive
Committee in its sole and absolute discretion.
3.3 Reinstatement Bonus. In addition to the Base Salary and the 1999
Bonus described in Sections 3.1 and 3.2 above, respectively, the Company shall
also pay the General Manager a one-time reinstatement bonus of $25,000 which was
paid on the Effective Date.
3.4 Moving Expenses. The General Manager shall be entitled to
reimbursement from the Company in an amount not to exceed $5000 for any
reasonable out-of-pocket expenses as a result of the General Manager's
relocation from Shreveport, Louisiana.
4. Reimbursement of Expenses; Benefits.
4.1 Automobile; Country Club Membership. The Company recognizes the
General Manager's need for an automobile for business purposes. In connection
with the General Manager's performance of his duties hereunder, during the Term,
the Company shall provide the General Manager with a monthly automobile
allowance of $600.00; provided that the General Manager shall have sole
responsibility for the General Manager's automobile, including, without
limitation, all fuel, maintenance and insurance expenses associated therewith.
The Company shall also reimburse the General Manager for all reasonable dues and
expenses relating to the Company's membership (of which the General Manager is
permitted to use) at each of the Country Club of Louisiana, the University Club
and the Camelot Club. The Company shall reimburse the General Manager in
accordance with the provisions of Section 4.2 below for all dry cleaning
expenses reasonably and necessarily incurred by the General Manager in
connection with his duties herewith.
4.2 Reimbursement of Expenses. Upon submission of appropriate
documentation and in specific accordance with such guidelines as may be
established from time to time by the Company, the General Manager shall be
entitled to reimbursement for all reasonable, out-of-pocket expenses incurred by
him during the Term in connection with the proper and efficient discharge of his
duties hereunder.
4.3 Employee Benefit Plans and Programs. During the Term, the General
Manager shall be entitled to participate in all pension, medical and dental
insurance, hospitalization, disability and other similar employee benefit plans
and programs of the Company, subject to eligibility and vesting requirements
from time to time in effect, which at any time during the Term may be offered by
the Company to its management employees generally, provided that nothing in this
Agreement shall require the Company at any time to create or continue any such
plan or program or to fix, amend or retain eligibility requirements so as to
include the General Manager. The General Manager shall be entitled to
participate in the Management Company's (as defined below) Deferred Compensation
Plan. The Company shall maintain a $250,000 life insurance policy for the
General Manager for the benefit of the General Manager. Notwithstanding anything
to the contrary contained in this Section 4.3, the undertaking by the Company to
provide to the General Manager benefits pursuant to an employee benefit plan or
program or life insurance policy shall be subject to the eligibility of the
General Manager to participate in any such plan or program or qualify for such
policy without unreasonable cost or expense to the Company, as determined by the
Company in its reasonable discretion.
4.4 Vacations. The General Manager shall be entitled to that amount
of paid vacation during each calendar year as is the Company's policy for
management employees, taking into consideration the business needs of Casino
Rouge.
5. Termination. The General Manager's employment under this Agreement may
be terminated prior to the end of the Term by the Company or the General Manager
only under the following circumstances:
5.1 Death. The General Manager's employment under this Agreement
shall terminate upon the General Manager's death.
5.2 Disability. The Company may terminate the General Manager's
employment under this Agreement by notice to the General Manager if the General
Manager is unable to perform the General Manager's services by reason of the
General Manager's "Disability." "Disability" means the General Manager's
inability to perform his duties under this Agreement by reason of any physical
or mental impairment which reasonably can be expected to result in death or
which has lasted or reasonably can be expected to last for at least six months
during any twelve month period.
5.3 Cause. The Company may terminate this Agreement immediately for
any action by the General Manager involving (a) willful misconduct, dishonesty,
fraud, theft, neglect, (b) breach of this Agreement (c) the willful refusal or
failure of the General Manager to discharge his duties hereunder where such
refusal or failure is not remedied within three days after the date the General
Manager receives notice from the Company of its intent to terminate the General
Manager's employment, or (d) if General Manager is convicted of any felony
(each, a "Cause").
5.4 Change of Control. If there shall be consummated: (a) any
transaction that results in a majority of the common stock, or securities
convertible into or exchangeable for a majority of the common stock, of the
Company being no longer held by the existing holders of the Company's
outstanding common stock immediately prior to such transaction, (b) any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the operating assets of the
Company to any person or entity of which a majority in interest of such entity's
outstanding voting equity interests are not owned by the existing holders of the
Company's outstanding common stock immediately prior to such transaction or (c)
the shareholders of the Company approve a plan or proposal for the liquidation
or dissolution of the Company, then the General Manager, at his sole discretion,
shall be entitled to terminate this Agreement.
5.5 Voluntarily. The General Manager may also terminate the
General Manager's employment hereunder at anytime, for any reason, upon the
General Manager giving the Company at least 60 days' written notice of the
General Manager's intention to so terminate.
6. Payments to General Manager after Termination of Employment.
6.1 Payments After Death or Disability. If the General Manager's
employment is terminated under Section 5.1 or 5.2 above, the General Manager's
designated beneficiary, or, in the absence of such designation, the estate or
other legal representative of the General Manager, shall be entitled to all
accrued Base Salary and all other amounts due the General Manager which may have
accrued during the current fiscal year and through the date of death.
6.2 Payments After Termination for Cause. If the General
Manager's employment hereunder is terminated under Section 5.3 above, the
General Manager shall receive the Base Salary accrued through the date of
termination in accordance with the terms of this Agreement and shall not be
entitled to receive any other payments or compensation from the Company of any
nature whatsoever.
6.3 Payments After Termination for Reasons other than for Cause.
If the General Manager's employment hereunder is terminated by the Company for
reasons other than Cause, the General Manager shall receive an amount equal to
the Change of Control Payment (as hereinafter defined), which shall be paid in
cash at the time of the General Manager's departure, all other amounts due the
General Manager which may have accrued during the current fiscal year and
through the date of termination and no other compensation of any nature
whatsoever.
6.4 Payments After Termination for Change of Control. If the
General Manager's employment hereunder is terminated under Section 5.4 above,
then the General Manager shall receive a termination fee equal to two times his
then current Base Salary, plus two times the average of any bonus paid to the
General Manager for the two proceeding fiscal years (the "Change of Control
Payment"). The Company shall pay the General Manager the Change of Control
Payment in cash on the date on which the General Manager's employment is
terminated.
6.5 Payments After Voluntary Termination. If the General
Manager's employment hereunder is terminated under Section 5.5 above, the
General Manager shall receive the Base Salary accrued through the date of
termination in accordance with the terms of this Agreement and shall not be
entitled to receive any other payments or compensation from the Company of any
nature whatsoever.
7. Confidentiality. The General Manager shall not, during the Term or
any time after the Term, use or divulge to any person any confidential
information relating to the Company, CRC Holdings, Inc. a Florida corporation
(the "Management Company"), or any other casino entity owned or controlled by
Dan Meadows, Jerry Bayles or Thomas Meehan (the "SH Entity" and together with
the Management Company, the "Affiliated Companies") or their respective
businesses, which may have come to the General Manager's knowledge at any time
during his employment with the Company, including, without limitations, business
plans, financial information, methods of operation and doing business, sales,
files, forms, lists and names of and the needs and requirements of suppliers and
the nature and content of any contracts. Any reference to the Company or the
Affiliated Companies in this Section 7 shall be deemed to include all of their
respective direct and indirect subsidiaries. The General Manager further agrees
that all records and copies of records pertaining to the operations, business
and customers of the Company or the Affiliated Companies that are made or
received by the General Manager during the Term shall be the property of the
Company or the Affiliated Companies, as the case may be, and the General Manager
agrees to keep such records subject to the Company's or the Affiliated
Companies' custody and control and to surrender to the Company or the Affiliated
Companies such of those records as are still in his possession at the
termination of this Agreement.
8. Non-Competition.
8.1 Non-Competition. The General Manager acknowledges and agrees
that during the Term, and, if this Agreement is terminated pursuant to any of
Sections 5.2, 5.3, 5.4 or 5.5 above, for a period of two (2) years thereafter,
the General Manager will not, without the prior written consent of the Company
within the Restricted Territory (as defined below), individually or in
conjunction with others, directly or indirectly, engage in any part of the
Prohibited Business (as defined below), whether as an officer, director,
proprietor, employer, partner, independent contractor, investor (other than as a
holder solely as an investment of less than 2% of the outstanding capital of a
publicly traded corporation), consultant, advisor, employee, agent or otherwise.
For purposes of this Section 8.1, the term "Prohibited Business" shall mean the
ownership, operation, development or management of any gaming facility or gaming
related enterprise including, without limitation, any riverboat gaming facility.
The term "Restricted Territory" shall mean the Parish of East Baton Rouge, the
cities of Lake Charles and New Orleans, Louisiana and the gulf coast of
Mississippi.
8.2 Non-Solicitation. The General Manager acknowledges and
agrees that during the Term, and for a period of two (2) years thereafter, the
General Manager will not, hire, directly or indirectly, any employee of the
Company or the Affiliated Companies in any capacity whatsoever, nor attempt to
induce, directly or indirectly, any employee of the Company or the Affiliated
Companies to leave the employment of the Company or the Affiliated Companies, as
the case may be, to work for the General Manager or for any other person, firm
or corporation.
8.3 Acknowledgment of Reasonableness. The General Manager
acknowledges and agrees that the limitations set forth in this Section 8 are
reasonable with respect to scope, duration and geographic area and are properly
required for the protection of the legitimate business interests of the Company
and the Affiliated Companies. If any provisions of Section 8 relating to the
time period, scope of activities or geographic area of restrictions are declared
by a court of competent jurisdiction to exceed the maximum permissible time
period, scope of activities or geographic area, the maximum time period, scope
of activities or geographic area, as the case may be, shall be reduced to the
maximum which such court deems enforceable. If any provisions of Section 8 other
than those described in the preceding sentence are adjudicated to be invalid or
unenforceable, the invalid or unenforceable provisions shall be deemed amended
(with respect only to the jurisdiction in which such adjudication is made) in
such manner as to render them enforceable and to effectuate as nearly as
possible the original intentions and agreement of the parties.
9. Remedies. The restrictions set forth in Sections 7 and 8 are
considered by the parties to be reasonable for the purposes of protecting the
value of the business and goodwill of the Company and the Affiliated Companies.
The General Manager acknowledges that the Company and the Affiliated Companies
would be irreparably harmed and that monetary damages would not provide an
adequate remedy in the event of a breach of the provisions of Sections 7 or 8.
Accordingly, the General Manager agrees that, in addition to any other remedies
available to the Company and the Affiliated Companies, the Company and the
Affiliated Companies shall be entitled to injunctive and other equitable relief
to secure the enforcement of those provisions.
10. Representations and Warranties of the General Manager. The
General Manager represents and warrants to the Company that he is free to be
retained by the Company and perform his services hereunder and he has no other
prior obligations or commitments of any kind which could in any way interfere
with his acceptance, or the full performance of his obligations hereunder, or
the exercise of his best efforts hereunder. The General Manager represents and
warrants to the Company that he has reviewed this Agreement with his own
independent legal counsel.
11. Notices. All notices or other communications which any party to
this Agreement may desire or be required to give under this Agreement shall be
in writing and shall be delivered personally or sent by facsimile or prepaid
overnight courier to the address of such party set forth below or such other
address as either party may from time to time give notice to the other in the
aforesaid manner:
If to the Company: Louisiana Casino Cruises, Inc.
1717 North River Road
Baton Rouge, Louisiana 70802
Attn: President
Facsimile No.:225-709-7770
with copies to: Carnival Resorts and Casinos, Inc.
3250 Mary Street
Miami, Florida 33133
Attn: Chairman and Chief Executive Officer
Facsimile No.: 305-445-4266
Stearns Weaver Miller Weissler
Alhadeff & Sitterson, P.A.
150 West Flagler Street, Suite 2200
Miami, Florida 33130
Attn: Richard E. Schatz, Esq.
Facsimile No.: 305-789-3395
If to the General Manager: Dale A. Darrough
4714 Hamblin Drive
Baton Rouge, LA 70809
Facsimile No.
Such notices shall be deemed given when received or, in the case of
facsimile, the date on which the transmitting party received confirmation of
receipt by facsimile, telephone or otherwise, or, in the case of overnight
courier, the next day.
12. Miscellaneous.
12.1 Entire Agreement. This Agreement is intended to and does
constitute the entire agreement between the parties and supersedes all prior
oral or written agreements or understandings of the parties with regard to the
subject matter of this Agreement. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter of this
Agreement have been made by either party which are not expressly set forth in
this Agreement. No amendment, termination or waiver of any provision of this
Agreement shall be binding upon a party unless in writing and executed by the
party or parties to be bound thereby. No waiver shall be construed as a
continuing waiver thereof or a waiver of any other provision of this Agreement.
12.2 No Delegation. The obligations of the General Manager
hereunder are personal in nature, and the General Manager shall not delegate his
obligations or duties hereunder, or any portion thereof, to any other person or
entity.
12.3 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Louisiana.
12.4 Prevailing Parties. In the event of a dispute regarding any
of the terms of this Agreement, the party prevailing in such dispute shall be
paid its legal costs, including reasonable attorneys' fees, incurred in
connection with the enforcement or interpretation of this Agreement, in
litigation and in preparation for litigation, and at trial and in connection
with any appellate action.
12.5 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
12.6 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which,
together, will constitute one and the same agreement. Any facsimile version of a
manually executed signature page delivered by one party to the other shall be
deemed a manually executed and delivered original.
12.7 Survival. The terms of Sections 7, 8, 9, 10 and 12 of this
Agreement shall survive the expiration or termination of this Agreement.
12.8 Construction. This Agreement shall be interpreted and
construed without reference to any rule requiring that this Agreement be
interpreted or construed against the party causing it to be drafted.
12.9 Affiliated Companies as Third Party Beneficiaries. The
parties hereto expressly agree that the Affiliated Companies are intended
third-party beneficiaries of the provisions of Sections 7, 8 and 9 hereof with
an independent right to enforce such provisions, in addition to any other rights
which any Affiliated Company may have.
<PAGE>
IN WITNESS WHEREOF, the undersigned have entered into this Agreement on
the date set forth above.
LOUISIANA CASINO CRUISES, INC., a
Louisiana corporation
By:
Name:
Title:
DALE A. DARROUGH
CONSENT OF PRICEWATERHOUSECOOPERS LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Annual Report
on Form 10-K of Louisiana Casino Cruises, Inc. of our report dated January 6,
2000 relating to the financial statements, which appears in this Annual Report
on Form 10-K. We also consent to the incorporation by reference of our report
dated January 6, 2000 relating to the financial statement schedules, which
appears in this Form 10-K.
PricewaterhouseCoopers LLP
New Orleans, Louisiana
February 24, 2000
<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 November
30,1999 and the related statement
of operations for the year ended
November 30, 1999 and is qualified
in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> NOV-30-1999
<CASH> 17,697
<SECURITIES> 0
<RECEIVABLES> 620
<ALLOWANCES> 152
<INVENTORY> 134
<CURRENT-ASSETS> 21,474
<PP&E> 63,414
<DEPRECIATION> 21,011
<TOTAL-ASSETS> 65,764
<CURRENT-LIABILITIES> 8,594
<BONDS> 53,000
0
0
<COMMON> 1
<OTHER-SE> 125
<TOTAL-LIABILITY-AND-EQUITY> 65,764
<SALES> 0
<TOTAL-REVENUES> 84,657
<CGS> 0
<TOTAL-COSTS> 69,796
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 98
<INTEREST-EXPENSE> 6,097
<INCOME-PRETAX> 8,764
<INCOME-TAX> 3,474
<INCOME-CONTINUING> 5,290
<DISCONTINUED> 0
<EXTRAORDINARY> 1,731
<CHANGES> 0
<NET-INCOME> 3,559
<EPS-BASIC> 3.58
<EPS-DILUTED> 3.58
</TABLE>
