<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1997
Commission file number:_______________
MISSISSIPPI - I GAMING, L.P.
(Exact Name of Registrant as Specified in Its Charter)
Mississippi 64-0828954
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1050 South Prairie Avenue Inglewood, California 90301
(Address of Principal Executive Offices) (Zip Code)
(310) 419 - 1500
(Registrant's Telephone Number, Including Area Code)
The Registrant believes that it meets the conditions set forth in General
Instruction H(1)(A) and (B) of Form 10-Q, and therefore is filing this form with
the reduced disclosure format. The Registrant is not currently subject to the
reporting requirements of the Securities Exchange Act of 1934, but is filing
this report voluntarily pursuant to the terms of an Indenture dated August 1,
1997.
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes [__] No [ X ]
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Mississippi - I Gaming, L.P.
Table of Contents
Part I
<TABLE>
<CAPTION>
Item 1. Financial Information
<S> <C>
Balance Sheets as of September 30, 1997, and 1996...........1
Statements of Operations for the three and nine
months ended eptember 30, 1997 and
1996.......................................................2
Statements of Cash Flows for the nine months ended
September 30, 1997 and 1996................................3
Notes to Financial Statements...............................4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Expansion...................................................6
Results of Operations.......................................6
Liquidity and Capital Resources.............................7
Part II
Item 6.a Exhibits......................................................8
Signatures....................................................9
</TABLE>
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Mississippi - I Gaming, L.P.
Balance Sheets
<TABLE>
<CAPTION>
September 30, September 30,
1997 1996
------------ ------------
(unaudited)
(in thousands)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 3,281 $ 2,907
Other receivables, net 71 148
Prepaid expenses and other assets 2,429 2,947
------- -------
Total current assets 5,781 6,002
Property, plant and equipment, net 44,755 35,671
Other assets 2,067 4,479
------- -------
$52,603 $46,152
======= =======
- ---------------------------------------------------------------------------
Liabilities and Partners' Deficit
Current Liabilities:
Accounts payable $602 $481
Accrued compensation 971 765
Accrued liabilities 3,513 2,918
Accrued interest payable, Boomtown, Inc. 4,188 2,651
Current portion of notes payable, Boomtown, Inc. 44,113 41,432
Current portion of notes payable, other 1,295 1,570
------- -------
Total current liabilities 54,682 49,817
Notes payable, other 2,512 60
Partners' deficit:
General partner 0 0
Limited partner (4,591) (3,725)
------- -------
Total partners' deficit (4,591) (3,725)
------- -------
$52,603 $46,152
======= =======
</TABLE>
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See accompanying notes to financial statements
1
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Mississippi - I Gaming, L.P.
Statements of Operations
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30,
--------------------------- ---------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
(in thousands - unaudited)
<S> <C> <C> <C> <C>
Revenues:
Gaming $13,305 $12,512 $39,327 $35,359
Food and beverage 915 862 2,483 2,362
Other 816 860 2,170 2,211
------- ------- ------- -------
15,036 14,234 43,980 39,932
------- ------- ------- -------
Expenses:
Gaming 7,193 7,277 21,453 20,798
Food and beverage 1,194 996 3,170 2,974
Administrative 3,857 3,869 11,438 11,310
Other 399 404 1,138 1,052
Depreciation and
amortization 820 492 2,628 1,328
------- ------- ------- -------
13,463 13,038 39,827 37,462
------- ------- ------- -------
Operating income 1,573 1,196 4,153 2,470
Interest expense 1,374 1,286 4,007 3,728
------- ------- ------- -------
Net income (loss) $199 ($90) $146 ($1,258)
======== ======== ======== =======
</TABLE>
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See accompanying notes to financial statements.
2
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Mississippi - I Gaming, L.P.
Statements of Cash Flows
<TABLE>
<CAPTION>
For the nine months ended
September 30,
---------------------------
1997 1996
------------ ------------
(in thousands - unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 148 $(1,259)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 2,692 1,329
Decrease in other receivables, net 3 34
Increase in prepaid expenses and other assets (577) (647)
Decrease in other assets 2,322 209
(Decrease) increase in accounts payable (9) 48
(Decrease) increase in accrued compensation (64) 13
Decrease in accrued liabilities 453 208
Increase in accrued interest payable, Boomtown, Inc. 1,214 195
------- -------
Net cash provided by operating activities 6,182 130
------- -------
Cash flows from investing activities:
Additions to property, plant and equipment (5,634) (3,190)
Cash flows from financing activities:
Proceeds note payable, Boomtown, Inc. 2,389 852
Payment notes payable, other (2,993) 0
Proceeds notes payable, other 0 1,094
------- -------
Net cash (used for) provided by financing activities (604) 1,946
------- -------
Decrease in cash and cash equivalents (56) (1,114)
Cash and cash equivalents at the beginning of the period 3,337 3,128
------- -------
Cash and cash equivalents at the end of the period $ 3,281 $ 2,014
======= =======
</TABLE>
- -------------------
See accompanying notes to financial statements.
3
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Mississippi - I Gaming, L.P.
Notes to Financial Statements
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial information included herein has been prepared in conformity with
generally accepted accounting principles. The information provided in this
Quarterly Report on Form 10-Q is unaudited, and in the opinion of management
reflects all normal and recurring adjustments that are necessary to present a
fair statement of the financial results for the interim period.
GENERAL Mississippi - I Gaming, L.P. (the "Mississippi Partnership"), is a
Mississippi limited partnership, which is majority owned and controlled by
Hollywood Park, Inc. ("Hollywood Park"), through its wholly owned subsidiaries,
Boomtown, Inc. ("Boomtown") and Bayview Yacht Club, Inc., which own 80% and 5%,
respectively, of the Mississippi Partnership, with the remaining 15% being owned
by Eric Skrmetta ("Skrmetta"). The Mississippi Partnership operates a casino,
known as Boomtown ("Boomtown Biloxi"), on a 40,000-square foot barge, which is
permanently moored to a land-based facility located on the historic Back Bay of
Biloxi, Mississippi.
Historically, the Mississippi Partnership reported financial results with a year
end of September 30. Subsequent to Hollywood Park's June 30, 1997, acquisition
of Boomtown (the "Merger"), the Mississippi Partnership will be reporting
results on a calendar year end of December 31.
ESTIMATES Financial statements prepared according to generally accepted
accounting principles require the use of management estimates, including
estimates used to evaluate the recoverability of real estate and leasehold
interests held for investment. These estimates are subject to a variety of
risks and uncertainties that could cause actual results to differ materially
from those anticipated by management.
RECLASSIFICATIONS Certain reclassifications have been made to the 1996 balances
to be consistent with the 1997 financial statement presentation.
NOTE 2 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment held as of September 30, 1997, and September 30,
1996, consisted of the following:
<TABLE>
<CAPTION>
September 30, September 30,
1997 1996
------------------- -------------------
<S> <C> <C>
Land and land improvements $ 226,000 $ 226,000
Buildings and building improvements 41,278,000 32,864,000
Equipment 9,173,000 5,671,000
Construction in progress 292,000 16,000
------------------- -------------------
50,969,000 38,777,000
Less accumulated depreciation 6,214,000 3,106,000
------------------- -------------------
$44,755,000 $35,671,000
=================== ===================
</TABLE>
4
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NOTE 3 -- SECURED AND UNSECURED NOTES PAYABLE
Notes payable as of September 30, 1997, and September 30, 1996, consisted of the
following:
<TABLE>
<CAPTION>
September 30, September 30,
1997 1996
--------------- ---------------
<S> <C> <C>
Secured notes payable $3,750,000 $ 320,000
Capital lease obligations 57,000 1,310,000
--------------- ---------------
3,807,000 1,630,000
Less current maturities 1,295,000 1,570,000
--------------- ---------------
$2,512,000 $ 60,000
=============== ===============
</TABLE>
As of September 30, 1997, and 1996, the Mississippi Partnership also had an
outstanding note payable to Boomtown in the amounts of $44,113,000 and
$41,432,000, respectively. These amounts primarily related to funds invested by
Boomtown for the initial construction of the property, and the net of subsequent
cash transfers to Boomtown from the Mississippi Partnership, and from Boomtown
to the Mississippi Partnership. Interest on the notes payable to Boomtown was
fixed at 11.5%.
NOTE 4 -- COMMITMENTS AND CONTINGENCIES
On August 6, 1997, Hollywood Park and Hollywood Park Operating Company (a wholly
owned subsidiary of Hollywood Park), as co-obligors, issued $125,000,000 of
Series A 9.5% Senior Subordinated Notes due 2007 (the "Notes"). The Notes are
fully and unconditionally, jointly and severally, guaranteed on a senior
subordinated basis by all of Hollywood Park's material subsidiaries, including
Mississippi - I Gaming, L.P. This Quarterly Report is being filed pursuant to
the Indenture governing the Notes as a guarantor which is not wholly owned by
the issuers of the Notes.
In connection with the Merger, Hollywood Park supplied the funds to Boomtown to
repurchase and retire an aggregate of approximately $102,700,000 in principal
amount of Boomtown's First Mortgage Notes. The remaining balance of $1,253,000
is fully and unconditionally guaranteed by Mississippi - I Gaming, L.P.
The Mississippi Gaming Commission requires, as a condition of licensing or
license renewal, gaming companies to make a one time capital investment in
facilities for general public use, such as restaurants and other non-gaming
facilities, equal to 25% of the initial casino construction and gaming equipment
costs. The Mississippi Partnership believes that it's current land-based
facility satisfies this Mississippi Gaming Commission requirement. The
Mississippi Partnership expects to receive confirmation that it has met the 25%
requirement during the fourth quarter of 1997, but there can be no assurance
that the Mississippi Gaming Commission will not require additional expenditures,
and if required, that the Mississippi Partnership will be able to satisfy or
possibly receive waivers for such requirements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -------------------------------------------------------------------------------
OF OPERATIONS
- -------------
Except for the historical information contained herein, the matters addressed in
this Quarterly Report on Form 10-Q may constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities and Exchange Act of 1934, as amended. Such
forward-looking statements are subject to a variety of risks and uncertainties
that could cause actual results to differ materially from those anticipated by
the Mississippi Partnership's management, including and without limitation
business interruptions due to loss of service of the gaming barge from casualty,
mechanical failure, extended or extraordinary maintenance, or severe weather,
potential saturation of the Biloxi gaming market, difficulties in completing
integration of Hollywood Park and Boomtown, and failure to complete the
conversion of the Skrmetta interest in the anticipated time frame. The Private
Securities Litigation Reform Act of 1995 (the "Act") provides certain "safe
harbor" provisions for forward-looking statements. All forward-looking
statements made in this Quarterly Report on Form 10-Q are made pursuant to the
Act. For more information
5
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on the potential factors which could affect the Company's financial results,
please review the Hollywood Park's filings with the Securities and Exchange
Commission.
EXPANSION With the June 30, 1997 acquisition of Boomtown, and thus its share in
the Mississippi Partnership, Hollywood Park has undertaken various expansion
plans and asset acquisitions for the direct benefit of the Mississippi
Partnership.
As previously stated, the Mississippi Partnership is 85% owned by Hollywood Park
through its two wholly owned subsidiaries Boomtown and Bayview Yacht Club, Inc.,
and 15% owned by Skrmetta. Both Hollywood Park and Skrmetta have an option,
exercisable over a four year period, to exchange Skrmetta's interest in the
Mississippi Partnership, at Skrmetta's option for either cash and/or shares of
Hollywood Park common stock with an aggregate value equal to the value of
Skrmetta's 15% interest in the Mississippi Partnership, with such value
determined by a formula set forth in the relevant partnership agreements. On
August 13, 1997, Hollywood Park exercised this option and subsequently supplied
Skrmetta with its calculation of the value of his 15% interest. Skrmetta did
not agree to this valuation of his 15% interest, and Hollywood Park and Skrmetta
are currently attempting to reach agreement on a value. In the event that
Hollywood Park and Skrmetta are unable to reach an agreement, Hollywood Park
plans to initiate arbitration proceedings.
The barge upon which Boomtown Biloxi sits, and the building shell, were owned by
National Gaming Mississippi, Inc., a subsidiary of Chartwell Leisure, Inc.
("National Gaming"). The Mississippi Partnership leased these assets from
National Gaming, and also contracted with National Gaming for marketing
services. Lease payments made to National Gaming were 16% of adjusted earnings
before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), as
defined in the relevant contract. On August 4, 1997, Hollywood Park executed an
agreement pursuant to which a Hollywood Park entity purchased the assets from
National Gaming for $5,250,000, payable through a down payment of approximately
$1,500,000, with the balance to be paid in three equal annual installments of
$1,250,000. The Adjusted EBITDA participation and other related agreements were
terminated upon purchase of the assets.
In October 1997, the Mississippi Partnership exercised its option to purchase
for $1,000,000 a half-acre parcel adjacent to the existing property, which is
currently used for valet parking and may be used for expansion opportunities in
the future.
RESULTS OF OPERATIONS
Three months ended September 30, 1997, compared to the three months ended
-------------------------------------------------------------------------
September 30, 1996
------------------
Total revenues for the three months ended September 30, 1997, increased by
$802,000, or 5.6%, as compared to the three months ended September 30, 1996.
Gaming revenues increased by $793,000, or 6.3%, , primarily due to more
aggressive marketing programs that drew players from nearby casinos to Boomtown
Biloxi, despite minimal growth in the Biloxi gaming market. Food and beverage
revenues increased by $53,000, or 6.1%, due primarily to the aforementioned
marketing programs and the 1997 addition of a new full service restaurant and
bakery. Other revenues decreased by $44,000, or 5.1%, primarily due to declines
in the family fun center revenues (arcade and video game area).
Total operating expenses for the three months ended September 30, 1997,
increased by $425,000, or 3.3%, as compared to the three months ended September
30, 1996. Gaming expenses decreased by $84,000, or 1.2%, primarily due to
savings of approximately $563,000 related to restructuring of operating leases
to capital leases, thus eliminating the operating lease expense during the three
months ended September 30, 1997, netted against marketing costs which increased
in 1997, due to the more varied and aggressive marketing efforts needed to
retain and grow market share. Food and beverage expense increased by $198,000,
or 19.9%, primarily related to the opening of the new full service restaurant in
1997. Depreciation and amortization increased by $328,000, or 66.7%, due to the
capitalization of gaming assets previously leased under operating leases.
Interest expense increased by $88,000, or 6.8%, primarily due to interest paid
on additional debt due to Boomtown.
6
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Nine months ended September 30, 1997, compared to the nine months ended
-----------------------------------------------------------------------
September 30, 1996
------------------
Total revenues for the nine months ended September 30, 1997, increased by
$4,048,000, or 10.1%, as compared to revenues for the nine months ended
September 30, 1996. Gaming revenues increased by $3,968,000, or 11.2%, due
primarily to more aggressive marketing programs, which drew players from nearby
casinos to Boomtown Biloxi, despite minimal growth in the Biloxi gaming market.
Food and beverage revenues increased by $121,000, or 5.1%, due to marketing
promotions and a new full service restaurant which opened in 1997. Other
revenues decreased by $41,000, or 1.9%, due to a decline in fun center (video
and arcade complex) revenues.
Total operating expenses increased by $2,365,000, or 6.3%, during the nine
months ended September 30, 1997, as compared to the nine months ended September
30, 1996. Gaming expenses increased by $655,000, or 3.2%, primarily due to
increased gaming taxes of approximately $583,000 (as a result of increased
gaming revenues) and costs associated with the various new marketing efforts.
Food and beverage expenses increased by $196,000, or 6.6%, due primarily to cost
associated with operating a new full service restaurant that opened in 1997,
whereas in 1996 there was only a self service deli restaurant. Other expenses
increased by $86,000, or 8.2%, primarily due to the expenses associated with the
General Store gift shop being included for the entire nine months of 1997, as
compared to just five months of expense in the 1996 operating results.
Depreciation and amortization increased by $1,300,000, or 97.9%, due primarily
to the 1997 restructuring of operating leases into capital leases, and a one
time $340,000 adjustment to prior period depreciation, due to shortened lives of
certain assets. Interest expense increased by $279,000, or 7.5%, due to
interest on capital leases and interest on additional debt due to Boomtown.
LIQUIDITY AND CAPITAL RESOURCES
The Mississippi Partnership's principal source of liquidity as of September 30,
1997, was cash and cash equivalents of $3,281,000. Cash and cash equivalents
decreased by $56,000 during the nine months ended September 30, 1997. Cash of
$6,182,000 was provided by operating activities. Cash of $5,634,000 was used in
investing activities, primarily for the down payment on the barge, and normal
capital expenditures. Cash used in financing activities of $604,000, included
cash advances from Boomtown netted against the normal payments on notes
outstanding.
The Mississippi Partnership transfers cash in excess of operating needs to
Boomtown, as available. Boomtown transfers cash to the Mississippi Partnership,
as needed, to fund operating needs.
As of September 30, 1997, and 1996, the Mississippi Partnership had an
outstanding note payable to Boomtown in the amounts of $44,113,000 and
$41,432,000, respectively. These amounts primarily related to funds invested
by Boomtown for the initial construction of the property, and the net of cash
transfers between the Mississippi Partnership and Boomtown. Interest on the
notes payable to Boomtown was fixed at 11.5%.
On August 4, 1997, the Mississippi Partnership executed a promissory note
payable to National Gaming in the amount of $3,750,000, at an interest rate
equal to the prime interest rate in effect on the first day of the quarterly
period. Interest is due and payable on a quarterly basis on the last day of
March, June, September and December of each year. Principal payments are due
and payable in three equal installments of $1,250,000, with the first payment
due and payable on August 4, 1998. The principal amount of this promissory
note, together with accrued interest, may be prepaid, without penalty, in whole
or in part, at any time.
In the opinion of the Mississippi Partnership's management, current cash and
cash equivalents, cash from operations and, if needed, cash transfers from
Boomtown, will be sufficient to fund the Mississippi Partnership's cash
requirements for the foreseeable future, and in any event for at least the next
twelve months.
7
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PART II
OTHER INFORMATION
ITEM 6.A EXHIBITS
- -----------------
Exhibit
Number Description of Exhibit
- -------------- ----------------------
3.1 Articles of Incorporation of Bayview Yacht Club, Inc. are
hereby incorporated by reference to Exhibit 3.21 of
Hollywood Park, Inc.'s Amendment No. 1 to Registration
Statement on Form S-4 dated October 30, 1997.
3.2 By-laws of Bayview Yacht Club, Inc. are hereby incorporated
by reference to Exhibit 3.22 of Hollywood Park, Inc.'s
Amendment No. 1 to Registration Statement on Form S-4 dated
October 30, 1997.
3.3 Certificate of Mississippi Limited Partnership of
Mississippi - I Gaming, L.P. is hereby incorporated by
reference to Exhibit 3.23 of Hollywood Park, Inc.'s
Amendment No. 1 of Registration Statement on Form S-4 dated
October 30, 1997.
3.4 Amended and Restated Partnership Agreement of Limited
Partnership of Mississippi - I Gaming, L.P. is hereby
incorporated by reference to Exhibit 10.31 to Hollywood
Park, Inc.'s Quarterly Report on Form 10-Q for the period
ended June 30, 1997.
27.1 Financial Data Schedule
8
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MISSISSIPPI - I GAMING L.P.
(Registrant)
By: Bayview Yacht Club, Inc.
a Mississippi corporation
Its: General Partner
By: /s/ G. Michael Finnigan November 13, 1997
---------------------------
G. Michael Finnigan
Vice President and
Chief Financial Officer
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,281,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,781,000
<PP&E> 50,969,000
<DEPRECIATION> 6,214,000
<TOTAL-ASSETS> 52,603,000
<CURRENT-LIABILITIES> 54,682,000
<BONDS> 47,920,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> (4,591,000)
<SALES> 2,483,000
<TOTAL-REVENUES> 43,980,000
<CGS> 3,170,000
<TOTAL-COSTS> 39,827,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,007,000
<INCOME-PRETAX> 146,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 146,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 146,000
<EPS-PRIMARY> 0.0
<EPS-DILUTED> 0.0
</TABLE>
