<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 March 31, 1998
Commission file number: 333-34471-06
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 based on previous no-action positions taken by the
Securities and Exchange Commission.
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]
<PAGE>
Mississippi - I Gaming, L.P.
Table of Contents
Part I
<TABLE>
<S> <C> <C>
Item 1. Financial Information
Balance Sheets as of March 31, 1998, and December 31, 1997.........1
Statements of Operations for the three months ended
March 31, 1998 and 1997...........................................2
Statements of Cash Flows for the three months ended
March 31, 1998 and 1997...........................................3
Notes to Financial Statements......................................4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations...............................................7
Liquidity and Capital Resources.....................................8
Part II
Item 6.a Exhibits.............................................................8
Signatures...........................................................9
</TABLE>
<PAGE>
Item 1. Financial Information
- -----------------------------
Mississippi - I Gaming, L.P.
Balance Sheets
<TABLE>
<CAPTION>
As of
------------------------------
March 31, December 31,
1998 1997
------------ ------------
(in thousands)
(unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 4,830 $ 4,143
Other receivables, net 48 113
Prepaid expenses and other assets 1,723 1,614
------- -------
Total current assets 6,601 5,870
Property, plant and equipment, net 45,053 45,576
Other assets 2,066 2,068
------- -------
$53,720 $53,514
======= =======
- ---------------------------------------------------------------------------------
Liabilities and Partners' Deficit
Current Liabilities:
Accounts payable $ 507 $ 670
Accrued compensation 885 923
Accrued liabilities 3,130 3,250
Accrued interest payable, Boomtown, Inc. 5,095 4,989
Current portion of notes payable, Boomtown, Inc. 44,663 44,454
Current portion of notes payable, other 1,285 1,292
------- -------
Total current liabilities 55,565 55,578
Notes payable, other 2,500 2,504
Commitments and contingencies
Partners' deficit:
General partner 22 11
Limited partners (4,367) (4,579)
------- -------
Total partners' deficit (4,345) (4,568)
------- -------
$53,720 $53,514
======= =======
</TABLE>
- ----
See accompanying notes to financial statements.
1
<PAGE>
Mississippi - I Gaming, L.P.
Statements of Operations
<TABLE>
<CAPTION>
For the three months ended
March 31,
--------------------------
1998 1997
---------- ----------
(in thousands - unaudited)
<S> <C> <C>
Revenues:
Gaming $14,030 $13,101
Food and beverage 1,163 737
Other 680 615
------- -------
15,873 14,453
------- -------
Expenses:
Gaming 7,646 7,388
Food and beverage 1,440 894
Administrative 3,857 3,594
Other 377 356
Depreciation and amortization 882 732
------- -------
14,202 12,964
------- -------
Operating income 1,671 1,489
Interest expense 1,448 1,314
------- -------
Net income $ 223 $ 175
======= =======
Net income allocated to partners:
General partner $ 11 $ 9
Limited partners 212 166
------- -------
$ 223 $ 175
======= =======
</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 three months ended
March 31,
--------------------------
1998 1997
---------- ----------
(in thousands - unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 223 $ 175
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 882 732
Loss on sale of property and equipment (40) 0
Decrease (increase) in other receivables, net 65 (121)
Increase in prepaid expenses and other assets (109) (315)
Decrease in other assets 2 35
(Decrease) increase in accounts payable (163) 76
Decrease in accrued compensation (38) (318)
(Decrease) increase in accrued liabilities (120) 121
Increase (decrease) in accrued interest payable, Boomtown, Inc. 106 (44)
------ ------
Net cash provided by operating activities 808 341
------ ------
Cash flows from investing activities:
Additions to property, plant and equipment (425) (452)
Proceeds from sale of property and equipment 106 0
------ ------
Net cash used in investing activities (319) (452)
------ ------
Cash flows from financing activities:
Note payable, Boomtown, Inc., net 209 358
Payment notes payable, other (11) (747)
------ ------
Net cash provided by (used for) financing activities 198 (389)
------ ------
Increase (decrease) in cash and cash equivalents 687 (500)
Cash and cash equivalents at the beginning of the period 4,143 3,337
------ ------
Cash and cash equivalents at the end of the period $4,830 $2,837
====== ======
</TABLE>
- ----
See accompanying notes to financial statements.
3
<PAGE>
Mississippi - I Gaming, L.P.
Notes to Financial Statements
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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% owned by
Eric Skrmetta ("Skrmetta").
The Mississippi Partnership owns and operates a casino ("Boomtown Biloxi"),
which opened in July 1994. Boomtown Biloxi occupies nineteen acres on Biloxi
Mississippi's historic Back Bay. The Mississippi Gulf Coast is marketed as the
"Playground of the South" and has been a major tourist destination, even prior
to the advent of full casino gaming in 1992. The Mississippi Gulf Coast
comprises a land area of nearly 1,800 square miles, with more than 30 miles of
white sand beaches fronting the Gulf of Mexico. Recent statistics indicated
that on an annual basis approximately 22 million patrons visited the Gulf Coast
casinos, of which 64% were drawn to the Mississippi Gulf Coast from outside the
state. Boomtown Biloxi operates an "old west" themed 33,632 square foot casino,
which sits on a permanently moored 400 x 110 foot barge. Boomtown Biloxi offers
1,038 slot machines and 35 table games. The land-based facility houses all non-
gaming activities, including restaurants, buffets, a family video fun center and
gift shops.
On August 13, 1997, Hollywood Park exercised its option under the Mississippi
Partnership Agreement 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 Mississippi Partnership Agreement. Hollywood Park
supplied Skrmetta with its calculation of the value of his 15% Mississippi
Partnership interest, and Skrmetta did not agree with the valuation. Hollywood
Park has initiated arbitration proceedings to settle the valuation issue.
The financial information included in this Quarterly Report on Form 10-Q has
been prepared in conformity with generally accepted accounting principles. The
information furnished herein is unaudited; however, in the opinion of management
it reflects all normal and recurring adjustments that are necessary to present a
fair presentation of the financial results for this interim period. It should
be understood that accounting measurements at interim dates inherently involve
greater reliance on estimates that at year end. This Quarterly Report on Form
10-Q does not include certain footnotes and financial presentations normally
presented annually and should be read in conjunction with the Mississippi
Partnership's 1997 Annual Report on Form 10-K.
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 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.
GAMING REVENUES AND PROMOTIONAL ALLOWANCES In accordance with industry
practices, the Mississippi Partnership recognized gaming revenues, as the net
win from gaming activities, which is the difference between gaming wins and
losses. Revenues in the accompanying statements of operations exclude the
retail value of food, beverage and other promotional allowances which are
provided to patrons without charge. The estimated cost of providing such
promotional allowances which are reported as gaming
4
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expenses, for the three months ended March 31, 1998 and 1997, was $1,331,000 and
$1,084,000, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
Whenever there are recognized events or changes in circumstances that indicate
the carrying amount of an asset may not be recoverable, management reviews the
asset for possible impairment. In accordance with current accounting standards,
management uses estimated expected future net cash flows (undiscounted and
excluding interest costs, and grouped at the lowest level for which there are
identifiable cash flows that are as independent as possible of other asset
groups) to measure the recoverability of the asset. If the expected future net
cash flows are less than the carrying amount of the asset an impairment loss
would be recognized. An impairment loss would be measured as the amount by
which the carrying amount of the asset exceeded the fair value of the asset,
with fair value measured as the amount at which the asset could be bought or
sold in a current transaction between willing parties, other than in a forced
liquidation sale. The estimation of expected future net cash flows is
inherently uncertain and relies to a considerable extent on assumptions
regarding current and future net cash flows, market conditions, and the
availability of capital. If, in future periods, there are changes in the
estimates or assumptions incorporated into the impairment review analysis the
changes could result in an adjustment to the carrying amount of the asset, but
at no time would previously recognized impairment losses be restored.
RECLASSIFICATIONS Certain reclassifications have been made to the 1997 balances
to be consistent with the 1998 financial statement presentation.
NOTE 2 -- CURRENT PREPAID EXPENSES AND OTHER ASSETS AND LONG TERM OTHER ASSETS
Current prepaid expenses and other assets as of March 31, 1998 and December 31,
1997 consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------------ ------------------
(in thousands)
<S> <C> <C>
Prepaid insurance $200 $405
Land lease, related party 500 0
Tidelands lease 106 213
Other prepaid leases 169 184
Inventories 445 382
Prepaid taxes and licenses 94 150
Other current assets 209 280
------------------ ------------------
$1,723 $1,614
================== ==================
</TABLE>
Long term other assets as of March 31, 1998 and December 31, 1997 consisted of
the following:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------------ ------------------
(in thousands)
<S> <C> <C>
Land lease, related party $2,000 $2,000
Other assets 66 68
------------------ ------------------
$2,066 $2,068
================== ==================
</TABLE>
5
<PAGE>
NOTE 3 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment held as of March 31, 1998 and December 31, 1997
consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------------ ------------------
(in thousands)
<S> <C> <C>
Land and land improvements $1,236 $1,236
Buildings and building improvements 41,382 41,313
Equipment 10,260 9,998
Construction in progress 20 46
------------------ ------------------
52,898 52,593
Less accumulated depreciation 7,845 7,017
------------------ ------------------
$45,053 $45,576
================== ==================
</TABLE>
NOTE 4 -- SECURED AND UNSECURED NOTES PAYABLE
Notes payable as of March 31, 1998 and December 31, 1997 consisted of the
following:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------------ ------------------
(in thousands)
<S> <C> <C>
Secured notes payable $3,750 $3,750
Capital lease obligations 35 46
------------------ ------------------
3,785 3,796
Less current maturities 1,285 1,292
------------------ ------------------
$2,500 $2,504
================== ==================
</TABLE>
As of March 31, 1998 and December 31, 1997, the Mississippi Partnership also had
an outstanding note payable to Boomtown in the amounts of $44,663,000 and
$44,454,000, 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 note payable to Boomtown was
11.0% and 11.5%, as of March 31, 1998 and December 31, 1997, respectively.
NOTE 5 -- COMMITMENTS AND CONTINGENCIES
DEBT GUARANTEES 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, which on March
20, 1998, were exchanged for a like principal amount of 9.5% Series B Senior
Subordinated Notes (collectively 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 June, 1997, Boomtown repurchased and retired an aggregate of approximately
$102,700,000 in principal amount of Boomtown's 11.5% First Mortgage Notes. The
remaining balance of $1,253,000 is fully and unconditionally guaranteed by
Mississippi - I Gaming, L.P.
LEASES WITH RELATED PARTIES The Mississippi Partnership leases land from
Skrmetta for use by Boomtown Biloxi. The lease term is 99 years and is
cancelable upon one year's notice. The lease called for an initial deposit by
the Mississippi Partnership of $2,000,000, for annual base lease rent payments
of $2,000,000 and percentage rent equal to 5.0% of adjusted gaming win (as
defined in the lease) over $25,000,000. Skrmetta agreed to provide the land,
free of annual base rent, for two years in exchange for a 15% interest in the
6
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Mississippi Partnership. For the three months ended March 31, 1998 and 1997,
the Mississippi Partnership paid Skrmetta $798,000 and $758,000 of rent,
respectively.
BARGE LEASE On August 4, 1997, Hollywood Park executed an agreement to purchase
the barge that Boomtown Biloxi sits upon and the associated building shell for
$5,250,000. The Mississippi Partnership had been leasing these assets. The
Mississippi Partnership made a down payment of $1,500,000 upon signing the
agreement, with the balance payable in three equal annual installments of
$1,250,000 with interest set at the prime rate as of the first day of each year.
TIDELANDS LEASE The Mississippi Partnership leases 5.1 acres of submerged
tidelands at the Boomtown Biloxi site from the State of Mississippi. The lease
has a ten year term, (entered into in 1994) with a five year option to renew.
Lease rent for each of the first three years of the lease was $525,000, and will
be $425,000 for the next two years. Rent for the balance of the lease term will
be determined in accordance with Mississippi law, based on an appraisal the
State of Mississippi will obtain.
OTHER 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. On October 26, 1997, the Mississippi Partnership received verbal
notification that its current land-based facility satisfies the Mississippi
Commission's requirement. However, the Mississippi Partnership's gaming license
must be renewed in June 1998, and it is possible that the Mississippi Gaming
Commission could require further development at Boomtown Biloxi in connection
with the renewal.
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, 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 on the potential factors which could affect the
Company's financial results, please review Hollywood Park's filings with the
Securities and Exchange Commission.
RESULTS OF OPERATIONS
Three months ended March 31, 1998, compared to the three months ended March 31,
- -------------------------------------------------------------------------------
1997
----
Total revenues for the three months ended March 31, 1998, as compared to the
three months ended March 31, 1997, increased by $1,420,000, or 9.8%. Gaming
revenues increased by $929,000, or 7.1%, primarily a result of marketing efforts
to attract patrons with improved food and beverage services. Food and beverage
revenues increased by $426,000, or 57.8%, primarily as a result of aggressive
marketing programs and added buffet services for employees of all Biloxi Gulf
Coast casinos. Other revenues primarily related to gift shop and video family
fun center sales, increased as a result of increased patron flow to the
property.
Total operating expenses increased by $1,238,000, or 9.5%, during the three
months ended March 31, 1998, as compared to the three months ended March 31,
1997. Gaming expenses increased by $258,000, or 3.5%, primarily due to the
increase in play, as reflected in the gaming revenues. Food and beverage
expenses increased by $546,000, or 61.1%, primarily as a result of the marketing
program and food service changes implemented to attract more patrons to the
property. Administrative expenses increased by $263,000, or
7
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7.3%, primarily due to increased costs for additional parking lot and gaming
floor security, and employee annual incentive expense being accrued throughout
the year in 1998, whereas in 1997 the expense was recorded at year end.
Depreciation and amortization expense increased by $150,000, or 20.5%, due
primarily to capital asset additions, including the barge upon which the gaming
facility sits, in the 1998 asset base as compared to 1997. Interest expense
increased by $134,000, or 10.2%, primarily due to interest on amounts due to
Boomtown.
LIQUIDITY AND CAPITAL RESOURCES
The Mississippi Partnership's principal source of liquidity as of March 31,
1998, was cash and cash equivalents of $4,830,000. Cash and cash equivalents
increased by $687,000 during the three months ended March 31, 1998. Cash of
$808,000 was provided by operating activities. Cash of $319,000 was used in
investing activities, primarily for normal and necessary capital expenditures.
Cash provided by financing activities of $198,000 included cash advances from
Boomtown netted against the normal payments on notes outstanding.
As of March 31, 1997, the Mississippi Partnership's principal source of
liquidity was cash and cash equivalents of $2,837,000. Cash and cash
equivalents decreased by $500,000 during the three months ended March 31, 1997.
Cash of $341,000 was provided by operating activities. Cash of $452,000 was
used in investing activities, primarily for normal and necessary capital
expenditures. Cash of $389,000 was used for financing activities.
The Mississippi Partnership transfers cash in excess of operating needs to
Boomtown, as available. Boomtown transfers cash to the Mississippi Partnership,
to fund operations, as needed.
As of March 31, 1998, the Mississippi Partnership had an outstanding note
payable to Boomtown in the amount of $44,663,000. This amount 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% through December
31, 1997, and at 11.0% after December 31, 1997.
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 liqudity
requirements for the foreseeable future, and in any event for at least the next
twelve months.
PART II
OTHER INFORMATION
ITEM 6.a EXHIBITS
- -----------------
Exhibit
Number Description of Exhibit
------- ----------------------
27.1 Financial Data Schedule
8
<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 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 Dated : May 13, 1998
---------------------------------
G. Michael Finnigan
Vice President and
Chief Financial Officer
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,830,000
<SECURITIES> 0
<RECEIVABLES> 48,000
<ALLOWANCES> 19,000
<INVENTORY> 0
<CURRENT-ASSETS> 6,601,000
<PP&E> 52,898,000
<DEPRECIATION> 7,845,000
<TOTAL-ASSETS> 53,720,000
<CURRENT-LIABILITIES> 55,565,000
<BONDS> 3,785,000
0
0
<COMMON> 0
<OTHER-SE> (4,345,000)
<TOTAL-LIABILITY-AND-EQUITY> 53,720,000
<SALES> 1,163,000
<TOTAL-REVENUES> 15,873,000
<CGS> 1,440,000
<TOTAL-COSTS> 14,202,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,448,000
<INCOME-PRETAX> 223,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 223,000
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
