SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
-----------------------------
For the Quarter Ended: February 29, 2000
Commission File Number N/A
Louisiana Casino Cruises, Inc.
(Exact name of registrant as specified in its charter)
Louisiana 72-1196619
----------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
organization or incorporation) Number)
1717 River Road North
Baton Rouge, Louisiana 70802
(Address of principal executive offices, including zip code)
(225) 709-7777
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports).
YES X NO _______
and (2) has been subject to such filing requirements for the past 90 days.
YES X NO
------ ------
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.
Common Stock, no par value
per share 984,883
- -------------------------- -------------------------------
Class Outstanding as of April 12, 2000
<PAGE>
LOUISIANA CASINO CRUISES, INC.
INDEX
PAGE NO.
Part I Financial Information
Balance Sheets...................................................1
Statements of Operations.........................................2
Statement of Changes in Shareholders' Equity......................3
Statements of Cash Flows.........................................4
Notes to Financial Statements....................................5
Managements Discussion and Analysis of Financial
Condition and Results of Operations..............................8
Quantitative and Qualitative Disclosures About
Market Risk......................................................9
Part II Other Information.........................................10
Signatures............................................................11
<PAGE>
LOUISIANA CASINO CRUISES, INC.
BALANCE SHEETS
(dollars in thousands, except share data)
February 29, November 30,
2000 1999
----------- ----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 17,682 $ 17,697
Receivables, less allowance for
doubtful accounts of $182 and $152,
respectively 640 468
Prepaid and other current assets 1,450 1,214
Income tax receivable - 487
Inventory 153 134
Deferred tax asset current 1,373 1,474
----------- ----------
Total current assets 21,298 21,474
Property and equipment, at cost, less
accumulated depreciation of $22,431 and
$21,011, respectively 42,529 42,403
Other assets 1,759 1,887
----------- ----------
Total assets $ 65,586 $ 65,764
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,115 $ 3,285
Accrued liabilities 975 2,080
Accrued interest 1,458 2,915
Other current liabilities 357 314
----------- ----------
Total current liabilities 6,905 8,594
Senior secured notes 53,000 53,000
Deferred tax liability 4,064 4,044
----------- ----------
Total liabilities 63,969 65,638
Shareholders' equity:
Common stock, no par value:
10,000,000 shares authorized; 984,883
shares issued and outstanding 1 1
Retained earnings 1,616 125
----------- ----------
Total shareholders' equity 1,617 126
----------- ----------
Total liabilities and shareholders'
equity $ 65,586 $ 65,764
=========== ==========
The accompanying notes are an integral
part of these financial statements.
1
<PAGE>
LOUISIANA CASINO CRUISES, INC.
STATEMENTS OF OPERATIONS
(dollars in thousands, except share data)
(unaudited)
Three Months Ended
February 29 February 28,
2000 1999
---------- -----------
Revenues:
Casino $ 22,871 $ 19,296
Food and beverage 1,928 1,554
Other 174 130
---------- -----------
24,973 20,980
Less: promotional allowance 1,570 1,186
---------- -----------
Net revenues 23,403 19,794
---------- -----------
Costs and expenses:
Casino 10,241 9,166
Food and beverage 340 400
Selling, general and
administrative 6,655 5,796
Depreciation and amortization 1,421 1,266
---------- -----------
Total operating expenses 18,657 16,628
---------- -----------
Operating income 4,746 3,166
Other income (expense):
Interest income 107 288
Interest expense (1,523 ) (2,147 )
---------- -----------
Income before provision for income
taxes and extraordinary item 3,330 1,307
Provision for income taxes 1,307 508
---------- -----------
Income before extraordinary loss 2,023 799
Extraordinary loss on early extinguishment
of debt, net - 1,731
---------- -----------
Net income (loss) $ 2,023 $ (932 )
========== ===========
Basic and diluted earnings per share:
Earnings before extraordinary
loss per share $ 2.05 $ 0.81
Extraordinary loss per share - (1.74 )
---------- -----------
Earnings (loss) per share $ 2.05 $ (0.93 )
========== ===========
Weighted average common shares
outstanding 984,883 996,883
========== ===========
Weighted average common equivalent
shares outstanding 984,883 996,883
========== ===========
The accompanying notes are an integral
part of these financial statements.
2
<PAGE>
LOUISIANA CASINO CRUISES, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(dollars in thousands, except share data)
(unaudited)
Common Stock
------------------- Retained
Shares Amount Earnings Total
--------- -------- ----------- --------
Balance at November 30, 1999 984,883 $ 1 $ 125 $ 126
Dividends paid to common
stockholders - - (532 ) (532 )
Net income - - 2,023 2,023
--------- -------- ----------- --------
Balance at February 29, 2000 984,883 $ 1 $ 1,616 $ 1,617
========= ======== =========== ========
The accompanying notes are an integral
part of these financial statements.
3
<PAGE>
LOUISIANA CASINO CRUISES, INC.
STATEMENT OF CASH FLOWS
(dollars in thousands)
(unaudited)
Three Months Ended
------------------------
February 29, February 28,
2000 1999
----------- -----------
Net income (loss) $ 2,023 $ (932 )
Net cash flows from operating activities :
Extraordinary loss on early
extinguishment of debt, net - 1,731
Depreciation and amortization 1,421 1,266
Amortization of deferred costs 41 83
Provision for bad debt 30 22
Increase in receivables (202 ) (171 )
Increase in inventories (19 ) (6 )
Decrease in income tax receivables 487 -
Increase in prepaid and other assets (151 ) (414 )
Decrease in deferred tax asset 102 432
Increase (decrease) in accrued interest (1,458 ) 492
Decrease in accounts payable and other
liabilities (210 ) (918 )
----------- -----------
Net cash provided by operating activities 2,064 1,585
----------- -----------
Cash flows from investing activities :
Capital expenditures (1,547 ) (175 )
----------- -----------
Net cash used by investing activities (1,547 ) (175 )
----------- -----------
Cash flows from financing activities :
Proceeds from senior secured notes - 55,000
Repayment of increasing rate notes - (50,000 )
Payment of deferred financing costs - (926 )
Dividends paid to common stockholders (532 ) -
----------- -----------
Net cash provided (used) by
financing activities (532 ) 4,074
----------- -----------
Net increase (decrease) in cash and cash
equivalents (15 ) 5,484
Cash and cash equivalents, at beginning of
period 17,697 13,525
----------- -----------
Cash and cash equivalents, at end of period $ 17,682 $ 19,009
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,915 $ 2,563
=========== ===========
Cash paid for income taxes $ - $ 168
=========== ===========
The accompanying notes are an integral
part of these financial statements.
4
<PAGE>
LOUISIANA CASINO CRUISES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Louisiana Casino Cruises, Inc. (the Company), a Louisiana corporation, was
formed in August 1991, for the purpose of developing and operating gaming
activities in Louisiana. 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 4).
A description of the organization and operations of the Company, the
significant accounting policies followed and the financial condition and results
of operations as of November 30, 1999, are contained in the audited financial
statements included in the annual report filed on Form 10-K. The accompanying
unaudited financial statements for the three months ended February 29, 2000, and
February 28, 1999, should be read in conjunction with the 1999 audited financial
statements and the related notes thereto.
The unaudited financial statements as of February 29, 2000, and for the
three month periods ended February 29, 2000, and February 28, 1999, and the
notes thereto have been prepared in accordance with generally accepted
accounting principles for interim financial information and Rule 10-01 of
Regulation S-X. In the opinion of management, all adjustments (consisting of
normal recurring accruals) have been included to present fairly, in all material
respects, the financial position of the Company as of February 29, 2000, and the
results of its operations and its cash flows for the three month periods ended
February 29, 2000, and February 28, 1999. Operating results for the three month
periods ended February 29, 2000, and February 28, 1999, are not necessarily
indicative of the results that may be expected for a full year.
Certain amounts in the prior periods have been reclassified to conform to
the current period presentation.
PROMOTIONAL ALLOWANCES
The estimated direct costs of providing promotional allowances for food
and beverage and other items have been classified as casino costs and totaled
$885,000 and $732,000 for the three month periods ended February 29, 2000, and
February 28, 1999, respectively.
NOTE 2 - SENIOR SECURED NOTES, FIRST MORTGAGE NOTES AND REDEEMABLE COMMON
STOCK WARRANTS
1999 NOTES
Pursuant to an indenture, dated as of January 27, 1999, between the
Company and U.S. Bank Trust National Association, as Trustee (the "1999
Indenture"), on January 27, 1999, the Company issued $55,000,000 of its 11%
Senior Secured Notes (the 1999 Notes), due December 1, 2005, in an offering
under Rule 144A under the Securities Act of 1933 (Rule 144A) with interest due
semi-annually beginning June 1, 1999. In May 1999, the Company commenced a
registered exchange offer for the private 1999 Notes and issued an equal amount
of publicly tradable 1999 Notes in exchange therefor. The registered 1999 Notes
are identical in all material respects to the private 1999 Notes for which they
were exchanged, other than certain provisions relating to registration rights
and related liquidated damages. The Company used the proceeds from the offering
of the 1999 Notes to defease and redeem its 1998 Notes (see below) and for
general corporate purposes. On May 28, 1999, the Company purchased $2,000,000 of
the 1999 Notes at the market price of $2,010,000 plus accrued interest.
5
<PAGE>
The 1999 Notes are collateralized by substantially all of the Companys
assets, other than certain identified excluded assets. The 1999 Indenture
includes certain covenants which limit the ability of the Company and its
identified 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 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 an indenture, dated as of November 15, 1998 between the
Company and U.S. Bank Trust National Association, as Trustee (the 1998
Indenture), on November 15, 1998 the Company issued in an offering pursuant to
Rule 144A, $50,000,000 of Senior Secured Increasing Rate Notes (the 1998 Notes),
due December 1, 2001. On November 25, 1998, the proceeds from this offering were
placed 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
offering of the 1999 Notes. The Company incurred an extraordinary loss from
early extinguishment of the 1998 Notes of $1,731,000, net of a tax benefit of
$1,106,000.
1993 NOTES AND REDEEMABLE COMMON STOCK WARRANTS
Pursuant to the 1993 indenture between the Company and The Bank of New
York, as successor trustee, the Company issued $51,000,000 of first mortgage
notes(the 1993 Notes) in a private placement on December 1, 1993. The 1993 Notes
were issued with 153,000 detachable warrants to purchase one share each of the
Companys no par value common stock at a price of $0.01 per share. Pursuant to
the terms of the warrants the warrantholders had the right to require the
Company to redeem the warrants at a price per warrant equal to the value of the
Company's common stock as of December 1, 1998, as determined by two independent
investment banking firms. On December 1, 1998, the holders of 138,900 warrants
elected to have the Company redeem the warrants. On March 1, 1999, the Company
received valuations from the two investment banking firms. Based upon the
average of the values determined by the investment banking firms, on March 8,
1999, the Company paid $3,749,000 to the holders of 138,900 warrants who
exercised their put rights.
On December 1, 1998, the holders of the remaining 14,100 warrants elected
to exercise their rights to purchase an equal number of shares of the Company's
common stock at a price of $0.01 per share. On September 21, 1999, at a previous
warrantholders request, the Company purchased 12,000 shares of the Company's
common stock for $324,000, the same price originally offered for the warrants.
NOTE 3 - EARNINGS PER COMMON SHARE
For the three month periods ended February 29, 2000, and February 28,
1999, basic and diluted earnings per share("EPS") is calculated, in accordance
with SFAS No. 128, by dividing net income (loss) assigned to common shareholders
by the weighted average common shares outstanding.
6
<PAGE>
NOTE 4 - CONTINGENCIES
Riverboat gaming licenses in Louisiana are issued for an initial five-year
term with annual renewals thereafter. The Company's original five-year gaming
license was up for renewal in July 1999. On June 15, 1999, the Company received
a conditional license approval from the Board until the completion of their
renewal investigation. As part of the Board's renewal 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. The factors that the 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
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
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.
The Company is also involved in various legal proceedings, however, in
the opinion of management, the resolution of these matters will not have a
material effect on the financial statements or the results of operations of the
Company.
NOTE 5 - DIVIDENDS
The Company paid the following dividends on its common stock:
Payment Dividend Aggregate
Date Per Share Payment
---------------- ------------ ---------------
(dollars in thousands, except per share data)
January 14, 2000 $0.54 $ 532
March 24, 2000 $0.98 $ 965
NOTE 6 - INCOME TAXES
The components of the provision for income taxes were as follows:
Quarter Ended
(dollars in thousands)
-----------------------------------
February 29, February 28,
2000 1999
----------------- ----------------
Tax provision:
Current tax provision $ 1,072 $ 257
Deferred tax provision 235 251
----------------- ----------------
Total provision for income tax $ 1,307 $ 508
================= ================
The provision components discussed above exclude the tax benefit of
$1,106,000 derived from the early extinguishment of 1998 Notes discussed in Note
2 for the three months ended February 28, 1999.
7
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Except for historical information contained herein, the matters discussed
herein are forward looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Such
statements involve risks and uncertainties, including but not limited to risks
relating to local and regional economic and business conditions, changes or
developments in laws, regulations or taxes, actions taken or to be taken by
third parties, competition, the loss of any licenses or permits or the Company's
failure to obtain an unconditional renewal of its gaming license on a timely
basis, or other factors discussed elsewhere in this report and the documents
filed by the Company with the Securities and Exchange Commission. These factors
may cause the Company's results to differ materially from the statements made in
this report or otherwise made by or on behalf of the Company.
General
The Company owns and operates a riverboat gaming facility in Baton Rouge,
Louisiana (the Casino Rouge). The Casino Rouge is one of two riverboat gaming
facilities in Baton Rouge. Current Louisiana legislation authorizes 15 riverboat
casinos statewide and one land-based casino in New Orleans. In addition, three
casinos operate in Louisiana on Native American land under compact agreements
with the state. The Casino Rouge opened on December 28, 1994. The Casino Rouge
is managed by CRC Holdings, Inc., doing business as Carnival Resorts and Casinos
(CRC), an experienced operator of gaming facilities and owner of approximately
60% of the Companys common stock, no par value per share.
Results of Operations
Three months ended February 29, 2000 compared to three months ended
February 28, 1999
The Company's taxable casino revenues and customer counts increased 18.9%
and 7.3%, respectively, for the three months ended February 29, 2000, compared
to the three months ended February 28, 1999. According to public reports filed
with the Louisiana Gaming Control Board, the Company's competitor's riverboat
taxable casino revenues and customer counts increased 37.3% and 5.5%
respectively, for the three months ended February 29, 2000, compared to the
three months ended February 28, 1999. Those public reports also state that the
Company's overall share of the Baton Rouge gaming market for the three months
ended February 29, 2000, and February 28, 1999 was 57.8% and 61.2% of taxable
casino revenues and 57.9% and 57.5% of admissions, respectively.
The Company's casino revenues were $22,871,000 and $19,296,000 for the
three month periods ended February 29, 2000, and February 28, 1999,
respectively. The increase in customer counts and change in gaming machines to
include additional lower denomination machines generated the additional revenue.
Win per passenger for the three months ended February 28, 2000, increased 10.5%
to $57.41 compared to $51.96 for the three months ended February 28, 1999.
Casino expenses for the three months ended February 29, 2000, and February
28, 1999, were $10,241,000 and $9,166,000, respectively, which represented 44.8%
and 47.5%, respectively, of casino revenues. Overall casino expenses increased
during the 2000 period primarily due to the markets increased gaming activity
and the Company's increase in patrons resulting in increased gaming and patron
taxes.
Selling, general and administrative expenses for the three months ended
February 29, 2000, were $6,655,000 compared to $5,796,000 for the three months
ended February 28, 1999. The increase in selling, general and administrative
expenses was mainly due to an increase in revenue-based rent and management fees
and increased marketing expenses related to the Company's millennium
celebration.
8
<PAGE>
Net interest expense was $1,416,000 and $1,859,000 for the three months
ended February 29, 2000, and February 28 1999, respectively. The decrease in
interest expense is related to the early extingushment of the 1998 Notes during
the 1999 period.
Liquidity and Capital Resources
During the three months ended February 29, 2000, the Company generated
$2,064,000 of cash flows from operations as compared to $1,585,000 for the three
months ended February 28, 1999. The increase in cash flows from operations was
primarily due to an increase in net income offset by a payment in December 1999,
of accrued interest due on the 1999 Notes whereas, interest due on the 1998
Notes was paid in November 1998 during the fourth quarter of the Companys 1998
fiscal year.
Cash flows used by investing activities were $1,547,000 and $175,000,
respectively, for the three months ended February 29, 2000 and February 28,
1999. The increase in the use of funds was primarily due to expenditures related
to renovation of Casino Rouge and expansion of the Company's parking lot.
Financing activities for the three months ended February 29, 2000, used
$532,000 of cash flow to pay dividends on the Company's common stock. Financing
activities for the three months ended February 28, 1999 provided cash flows of
$4,074,000, which was due to the issuance of the 1999 Notes.
The Company believes that cash on hand and operating cash flows will be
sufficient to fund its current operations, capital expenditures and debt service
obligations. As a result of debt restrictions, the ability of the Company to
incur additional indebtedness to fund operations or to make capital expenditures
is limited. To the extent that cash flow from operations is insufficient to
cover cash requirements, the Company may be required to curtail or defer certain
capital expenditures under these circumstances, which could have an adverse
effect on the Companys operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
9
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Exhibit 27 Financial Data Schedule as of February 29,
2000, and for the three months then ended
(b) Reports on Form 8-K - None
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LOUISIANA CASINO CRUISES, INC.
Dated: April 12, 2000
By: \S\ W. Peter Temling
--------------------
W. Peter Temling,
Chief Financial Officer
11
<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 February 29,
2000, and the related statement of
operation for the three month period ended
February 29, 2000, and is qualified in its
entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-START> DEC-01-1999
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-2000
<PERIOD-END> FEB-29-2000
<CASH> 17,682
<SECURITIES> 0
<RECEIVABLES> 822
<ALLOWANCES> 182
<INVENTORY> 153
<CURRENT-ASSETS> 21,298
<PP&E> 64,960
<DEPRECIATION> 22,431
<TOTAL-ASSETS> 65,586
<CURRENT-LIABILITIES> 6,905
<BONDS> 53,000
0
0
<COMMON> 1
<OTHER-SE> 1,616
<TOTAL-LIABILITY-AND-EQUITY> 65,586
<SALES> 0
<TOTAL-REVENUES> 23,403
<CGS> 0
<TOTAL-COSTS> 18,657
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 30
<INTEREST-EXPENSE> 1,523
<INCOME-PRETAX> 3,330
<INCOME-TAX> 1,307
<INCOME-CONTINUING> 2,023
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,023
<EPS-BASIC> 2.05
<EPS-DILUTED> 2.05
</TABLE>
