<PAGE>
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 December 31, 1996 Commission File Number 0-20648
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.)
c/o Boomtown, Inc.
P.O. Box 399, Verdi, Nevada 89439-0399
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 345-8643
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(A) AND
(B) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE
FORMAT.
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), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
<PAGE>
MISSISSIPPI - I GAMING, L.P.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets, September 30, 1996 and December 31, 1996. . . . . . 3
Statements of Operations for the Three Months
Ended December 31, 1995 and 1996. . . . . . . . . . . . . . . . . . 4
Condensed Statements of Cash Flows for the Three Months
Ended December 31, 1995 and 1996. . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . 12
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SCHEDULE OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
MISSISSIPPI - I GAMING, L.P.
BALANCE SHEETS
(in thousands)
September 30, December 31,
1996 1996
------------- ------------
(unaudited)
ASSETS:
Current assets:
Cash and cash equivalents $ 2,907 $ 3,337
Accounts receivable, net 148 74
Inventories 363 455
Prepaid expenses and other current assets 2,584 1,397
--------- ---------
Total current assets 6,002 5,263
Property and equipment, at cost, net 35,671 38,063
Other assets 4,479 4,389
--------- ---------
Total assets $ 46,152 $ 47,715
--------- ---------
--------- ---------
LIABILITIES AND PARTNERS' DEFICIT:
Current liabilities:
Accounts payable $ 481 $ 611
Accrued compensation 765 1,035
Other accrued liabilities 2,918 3,060
Note payable - Boomtown, Inc. 41,432 41,724
Accrued interest payable - Boomtown, Inc. 2,651 2,974
Long-term debt and capital lease
obligations due within one year (Note 2) 1,570 3,001
--------- ---------
Total current liabilities 49,817 52,405
Long-term debt and capital lease
obligations due after one year (Note 2) 60 49
Contingencies (Note 3)
Partners' deficit:
General partner -- --
Limited partners ( 3,725) ( 4,739)
--------- ---------
Total partners' deficit ( 3,725) ( 4,739)
--------- ---------
Total liabilities and partners' deficit $ 46,152 $ 47,715
--------- ---------
--------- ---------
See accompanying notes.
3
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MISSISSIPPI - I GAMING, L.P.
STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)
Three Months Ended
December 31,
1995 1996
------------ ------------
Revenues:
Gaming $ 10,113 $ 11,517
Family entertainment center 466 411
Food and beverage 592 665
General Store -- 63
Other income 93 82
----------- -----------
11,264 12,738
Costs and Expenses:
Gaming 3,940 3,995
Gaming equipment leases 570 436
Family entertainment center 279 293
Food and beverage 725 946
General Store -- 50
Marketing 1,497 1,823
Management fee-Boomtown, Inc. 186 180
General and administrative 2,928 3,243
Property rent 955 951
Depreciation and amortization 354 580
----------- -----------
11,434 12,497
(Loss) income from operations ( 170) 241
Interest and other income (expense), net ( 1,151) ( 1,309)
----------- -----------
Net loss ($ 1,321) ($ 1,068)
----------- -----------
----------- -----------
Net loss allocated to partners:
General partner ($ 41) ( 53)
Limited partners ( 1,280) ( 1,015)
----------- -----------
($ 1,321) ($ 1,068)
----------- -----------
----------- -----------
See accompanying notes.
4
<PAGE>
MISSISSIPPI - I GAMING, L.P.
CONDENSED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(in thousands)
Three Months Ended
December 31,
1995 1996
---------- ---------
Cash flows from operating activities:
Net loss ($ 1,321) ($ 1,068)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Lease expense recorded in exchange
for limited partnership interest 500 --
Depreciation and amortization 354 580
Prepayment of property lease ( 2,480) --
Changes in operating assets and liabilities, net 667 2,113
-------- --------
Net cash (used in) provided by operating activities ( 2,280) 1,625
-------- --------
Cash flows from investing activities:
Payments for purchases of property and equipment ( 173) ( 1,074)
Decrease in construction related payables ( 84) --
Proceeds from sale of property and equipment 77 --
-------- --------
Net cash used in investing activities ( 180) ( 1,074)
-------- --------
Cash flows from financing activities:
Note payable-Boomtown, Inc., net 2,728 346
Principal payments on long-term debt ( 68) ( 467)
-------- --------
Net cash provided by (used in) financing activities 2,660 ( 121)
-------- --------
Net increase in cash and cash equivalents 200 430
Cash and cash equivalents:
Beginning of period 2,928 2,907
-------- --------
End of period $ 3,128 $ 3,337
-------- --------
-------- --------
See accompanying notes.
5
<PAGE>
MISSISSIPPI - I GAMING, L.P.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
BASIS OF PRESENTATION AND NATURE OF BUSINESS - Mississippi - I Gaming, L.P.
(the "Partnership"), a Mississippi limited partnership, is a majority owned and
controlled partnership of Boomtown, Inc. ("Boomtown"). Boomtown owns an 80%
limited partnership interest and through its wholly-owned subsidiary, Bayview
Yacht Club, Inc. (a Mississippi corporation and the general partner of the
Partnership), Boomtown owns an additional 5% general partnership interest in the
Partnership. A 15% limited partnership interest was transferred to an
individual as a result of executing a lease for the property upon which the
gaming facility is located. Under the terms of the Partnership agreement, after
three years of operation, either Boomtown or the lessor may exercise an option
to convert the lessor's ownership interest into Boomtown common stock or cash at
an amount calculated per the agreement which is based upon a multiple of
earnings. The Partnership agreement also provides for quarterly distributions
to be made to the partners. The Partnership also leases the casino barge and
building from National Gaming Corporation for an amount equal to 16% of earnings
before depreciation, interest and taxes.
INTERIM FINANCIAL INFORMATION - The balance sheet at September 30, 1996 has
been taken from the audited financial statements at that date. The interim
financial information is unaudited. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, which the
Partnership considers necessary for a fair presentation of its financial
position at December 31, 1996, the results of operations and cash flows for the
three months ended December 31, 1996 and 1995 have been included. The
Partnership's operations are seasonal and thus operating results for the three
months ended December 31, 1996 should not be considered indicative of the
results that may be expected for the fiscal year ending September 30, 1997. The
unaudited financial statements should be read in conjunction with the financial
statements and footnotes thereto included in the Partnership's Form 10-K for the
year ended September 30, 1996.
RECLASSIFICATIONS - Certain amounts in the fiscal 1996 financial statements
have been reclassified to conform to the fiscal 1997 presentation.
2. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
September 30, December 31,
1996 1996
-------------- ------------
11.5% note payable $ 320 $ 243
Capital lease obligations 1,310 2,807
-------- --------
1,630 3,050
Less amounts due within one year 1,570 3,001
-------- --------
$ 60 $ 49
-------- --------
-------- --------
6
<PAGE>
MISSISSIPPI - I GAMING, L.P.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
2. LONG-TERM DEBT (CONTINUED)
The 11.5% note payable is secured by furniture, fixtures and equipment.
The note matures in October 1997.
The capital lease obligations are secured by equipment under agreements
which mature between August 1997 and January 1999.
On November 26, 1996 the Partnership paid approximately $500,000 to amend
an operating lease for certain slot machines, whereby the Partnership will
purchase the slot machines at the end of the lease term (August 1997) for
approximately $554,000. The cost of the slot machines under this capital lease
obligation is approximately $2.5 million and will be depreciated over the
remainder of their useful lives.
3. CONTINGENCIES
On November 24, 1993, Boomtown completed the private placement of $103.5
million of 11.5% First Mortgage Notes due November 2003 (the "Notes"). The
Notes are secured by, among other things, a full and unconditional guarantee by
the Partnership, as defined in the Indenture to the Notes.
The Indenture governing the Notes places certain business, financial and
operating restrictions on Boomtown and its subsidiaries including, among other
things, the incurrence of additional indebtedness, issuance of preferred equity
interests and entering into operational leases, limitations on dividends,
repurchase of capital stock of Boomtown and redemption's of subordinated debt;
limitations on transactions with affiliates; limitations on mergers,
consolidations and sales of assets; limitations on amending existing partnership
and facility construction agreements; and limitations on the use of proceeds
from the issuance of the Notes.
The Partnership is a guarantor for a promissory note for Blue Diamond Hotel
& Casino, Inc., a wholly owned subsidiary of Boomtown, Inc., with an outstanding
balance of $336,000 at December 31, 1996.
In addition, the Company is a guarantor for a ship mortgage with an
outstanding balance of $2.9 million as of December 31, 1996, of Louisiana - I
Gaming, L.P., a wholly owned and controlled partnership of Boomtown.
In October 1994, the Mississippi Gaming Commission adopted a regulation
which requires, as a condition of license or license renewal, for a gaming
establishment's plan to include various expenditures including parking
facilities and infrastructure facilities amounting to at least 25% of the casino
cost. Although the Company believes they have satisfied this requirement at the
Mississippi property, there can be no assurance the Mississippi Gaming
Commission will not require further development on the casino site including
hotel rooms and additional parking facilities. Additionally, there can be no
assurance that the Partnership will be successful in completing such a project
or that the Partnership would be able to obtain a waiver if the Partnership
decides not to build.
7
<PAGE>
MISSISSIPPI - I GAMING, L.P.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
4. MANAGEMENT FEE
Boomtown is responsible for managing the operations of the Boomtown
subsidiaries (collectively the "Subsidiaries"). During 1995 and 1996 Boomtown
charged the Subsidiaries for their pro-rata share of the costs it incurred
relative to this management function (the "Management Fee"). During the
quarters ended December 31, 1995 and 1996 the Partnership recorded Management
Fees of $186,000 and $180,000, respectively.
5. OTHER EVENTS
BOOMTOWN'S PROPOSED MERGER WITH HOLLYWOOD PARK, INC. ("HOLLYWOOD PARK").
On April 23, 1996, Boomtown entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Hollywood Park, Inc., ("Hollywood Park") relating to
the strategic combination of Hollywood Park and Boomtown. Pursuant to the
Merger Agreement and subject to the terms and conditions set forth therein
(including shareholder consent and regulatory approval), the Company would
become a wholly-owned subsidiary of Hollywood Park (the "Merger"). The
shareholders of the Company and Hollywood Park have approved the Merger. To
date, the Company has received approval from the Mississippi gaming
authorities and is awaiting approval from other relevant gaming
jurisdictions. Pursuant to the Merger Agreement, at the effective date of
the Merger each issued and outstanding share of Boomtown Common Stock will be
converted into the right to receive 0.625 (the "Exchange Ratio"), of a share
of Hollywood Park Common Stock. The Merger is intended to be structured as a
tax-free reorganization.
Certain additional matters relating to the signing of the Merger Agreement
and a complete description of the Merger Agreement are more fully described in
the Company's Form 8-K dated April 23, 1996, including the Agreement and Plan of
Merger filed as exhibit 2.1 thereto, and filed with the Securities and Exchange
Commission on May 3, 1996.
8
<PAGE>
MISSISSIPPI - I GAMING, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth certain items from the Partnership's
statements of operations as a percentage of total revenues for the three months
ended December 31, 1995 and 1996 (unaudited):
Three Months Ended
December 31,
1995 1996
------- --------
Revenues:
Gaming 89.8% 90.4%
Non-gaming 10.2 9.6
------- -------
100.0 100.0
Operating expenses:
Gaming 40.0 34.8
Non-gaming 8.9 10.1
Marketing, general & administrative 39.3 39.8
Property rent 8.5 7.5
Management fee - Boomtown, Inc. 1.6 1.4
Depreciation and amortization 3.2 4.5
------- -------
101.5 98.1
(Loss) income from operations ( 1.5) 1.9
Interest and other income (expense), net ( 10.2) ( 10.3)
------- -------
Net loss ( 11.7)% ( 8.4)%
------- -------
------- -------
Total revenues for the quarter ended December 31, 1996 were $12.7 million,
13.1% higher than the $11.3 million during the same prior year period. Revenues
are composed of gaming revenues totaling $11.5 million and non-gaming revenues
totaling $1.2 million during the current year quarter. The Partnership
generates approximately 90% of its total revenues from gaming operations
consisting primarily of slot and video poker machines and various types of table
games. The increase in gaming revenues during the Company's first fiscal
quarter of 1997, resulted from a $1.6 million increase from slot machines offset
by a decline in table games revenue of $234,000. The growth in slot machine
revenues was due to the Partnership's expansion of its bus tour program, whereby
16,000 additional bus patrons visited Boomtown during the current year quarter.
Additionally, the Partnership has under taken aggressive marketing programs
including its direct mail program aimed at increasing the local customer
patronage by stressing customer service at the Boomtown property.
The Company's non-gaming revenue primarily consists of revenues from the
Partnership's family entertainment center, food and beverage sales and general
store. Non-gaming revenues increased $70,000 over the prior year first fiscal
quarter, due to the Partnership taking over the operations of its general store,
as well as higher food and beverage sales.
9
<PAGE>
MISSISSIPPI - I GAMING, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The gaming margin was $7.1 million for the first quarter of fiscal 1997 or
61.5% of gaming revenues. This compares to a gaming margin of $5.6 million or
55.4% of gaming revenues in the same prior year period. The improvements
resulted from efficiencies in labor costs associated with higher revenues, lower
costs associated with gaming equipment leases, the reduction in complimentary
expense offered to its patrons and the discontinuance of the Company's funflight
program during October of 1995.
The non-gaming margin declined $215,000 during the quarter ended December
31, 1996. The decline resulted from a $69,000 decline in the family
entertainment center profitability primarily due to lower revenues from the
motion picture theater. Additionally, the food and beverage margin declined as
a result of higher food costs associated with the property improving its overall
food product to enhance gaming patronage.
Marketing expenses were $1.8 million and $1.5 million for the three months
ended December 31, 1996 and 1995, respectively. Marketing expenses consist of
costs associated with advertising, special events, the players club and bus tour
programs, promotional expenses and other administrative expenses. The increase
in marketing expenses during the fiscal 1997 first quarter resulted primarily
from higher commissions paid to bus transportation operators, additional costs
associated with the Company's direct mail program, an increase in entertainment
contracts at the Biloxi property and additional cash redemption costs from
higher participation in the players club program.
General and administrative expenses were $3.2 million and $2.9 million for
the quarters ended December 31, 1996 and 1995, respectively. The increase in
G&A expenses primarily resulted from higher property taxes, additional medical
and other benefit related expenses as well as additional employee incentive
expenses at the property. Additionally, during the quarter just ended the
Partnership was charged a management fee of $180,000 from Boomtown, Inc. This
compares to $186,000 during the prior year period. During the periods Boomtown,
Inc. charged its operating subsidiaries for their pro-rata share of costs
incurred relative to managing its respective subsidiaries. The Partnership also
incurred rent charges of $951,000 and $955,000 for the quarters ended December
31, 1996 and 1995, respectively related to certain land leases in which the
Company operates its facilities.
Depreciation and amortization expense increased $226,000 during the quarter
ended December 31, 1996 to $580,000 as compared to $354,000 during the prior
year period. The increase was due to a larger asset base primarily due to the
conversion of certain operating leases to capital leases during fiscal 1996 and
1997. The Partnership incurred interest expense of $1.3 million, interest
income of $10,000 and a gain on the sale of assets of $1,000 during the first
quarter of 1997. The majority of the interest expense incurred is related to
the note payable to Boomtown, Inc.
10
<PAGE>
MISSISSIPPI - I GAMING, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
GUARANTEE OF BOOMTOWN NOTES BY THE PARTNERSHIP
In November 1993, Boomtown closed the issuance and sale of an aggregate of
$103.5 million principal amount of 11.5% First Mortgage Notes due November 1,
2003 (the "Notes") and warrants to purchase 472,000 shares of Boomtown's Common
Stock. Payment of the principal, interest and any other amounts owing under the
Notes has been unconditionally guaranteed by certain subsidiaries of Boomtown,
including the Partnership. See the Indenture, which is hereby incorporated by
reference, attached as Exhibit 12.36 to Boomtown, Inc.'s Annual Report on Form
10-K for the year ended September 30, 1994.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
NONE
ITEM 5. OTHER INFORMATION.
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibits enclosed herein are detailed on the Schedule of Exhibits on page
15.
12
<PAGE>
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 thereunder duly authorized.
Mississippi - I Gaming, L.P.
Registrant
Date: February 14, 1997 /s/ Phil E. Bryan
-----------------------------------
Phil E. Bryan, President; Chief
Operating Officer
Date: February 14, 1997 /s/ Jon L. Whipple
-----------------------------------
Jon L. Whipple, Vice President of
Finance; Principal Accounting
and Financial Officer
13
<PAGE>
SCHEDULE OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
10.1(1) Letter of Intent dated as of March 26, 1993 among Boomtown, Inc. and
Raphael Skrmetta, relating to the property in Biloxi, Mississippi.
10.2(2) Agreement to Lease Real Property in Biloxi, Mississippi by and between
Boomtown, Inc., and Raphael Skrmetta.
10.3(3) Purchase Agreement dated as of November 3, 1993 among Boomtown, Inc.,
Boomtown Hotel & Casino, Inc., Blue Diamond Hotel & Casino, Inc.,
Louisiana-I Gaming, L.P., Louisiana Gaming Enterprises, Inc.,
Mississippi-I Gaming, L.P., Bayview Yacht Club, Inc., Oppenheimer &
Co., Inc. and Sutro & Co. Incorporated.
10.4(4) Asset Purchase and Sale Agreement dated as of April 27, 1994 by and
between HFS Gaming Corp. and Mississippi - I Gaming, L.P.
10.5(4) Lease Agreement between HFS Gaming Corp. as Landlord and Mississippi -
I Gaming, L.P. as Tenant dated as of April 27, 1994.
10.6(4) Marketing Services Agreement dated as of April 27, 1994 by and among
Boomtown, Inc. and HFS Gaming Corp.
10.7(5) Option Agreement dated as of November 6, 1995 by and between National
Gaming Mississippi, Inc. and Mississippi - I Gaming, L.P.
10.8(5) Lease Agreement dated November 6, 1995 to the Lease Agreement dated as
of April 27, 1994 by and among National Gaming Mississippi, Inc. and
Mississippi-I Gaming, L.P.
10.9(5) Marketing Services Agreement Amendment dated as of November 6, 1995 to
Marketing Services Agreement dated as of April 27, 1994 by and among
Boomtown, Inc. and HFS Gaming Corporation.
- ------------------------------
(1) Incorporated by reference to the exhibit filed with Boomtown's Current
Report on Form 8-K filed with the SEC on April 1, 1993.
(2) Incorporated by reference to the exhibit filed with Boomtown's Registration
Statement on Form S-1 (File No. 33-61198), effective May 24, 1993.
(3) Incorporated by reference to the exhibit filed with Boomtown's Form 10-K
for the fiscal year ended September 30, 1993.
14
<PAGE>
SCHEDULE OF EXHIBITS (CONTINUED)
(4) Incorporated by reference to the exhibit filed with the Boomtown, Inc.'s
Registration Statement on Form S-4 (File No. 33-70350), effective May 4,
1994.
(5) Incorporated by reference to the exhibits filed with Boomtown's Form 10-K
for the fiscal year ended September 30, 1995.
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
MISSISSIPPI-I GAMING, L.P. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,337
<SECURITIES> 0
<RECEIVABLES> 74
<ALLOWANCES> 0
<INVENTORY> 455
<CURRENT-ASSETS> 5,263
<PP&E> 41,732
<DEPRECIATION> 3,669
<TOTAL-ASSETS> 47,715
<CURRENT-LIABILITIES> 52,405
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (4,739)
<TOTAL-LIABILITY-AND-EQUITY> 47,715
<SALES> 0
<TOTAL-REVENUES> 12,738
<CGS> 0
<TOTAL-COSTS> 5,720
<OTHER-EXPENSES> 6,777
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,309
<INCOME-PRETAX> (1,068)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,068)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
