10-K Isle of Capri Casinos, April 24, 2005
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
x
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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For
the fiscal year ended April 24, 2005
OR
o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the transition period from ______________________ to
______________________
Commission
File Number 0-20538
ISLE
OF CAPRI CASINOS, INC.
(Exact
name of registrant as specified in its charter)
Delaware
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41-1659606
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(State
or other jurisdiction
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(I.R.S.
Employer
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of
incorporation or organization)
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Identification
Number)
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1641
Popps Ferry Road, Biloxi, Mississippi
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39532
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant's
telephone number, including area code:
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(228)
396-7000
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Securities
Registered Pursuant to Section 12(b) Of The Act: None
Securities
Registered Pursuant to Section 12(g) Of The Act:
Common
Stock, $.01 Par Value Per Share
(Title
of
Class)
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 o
Indicate
by check mark if the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act). Yes x No o
The
aggregate market value of the voting and non-voting stock held by
non-affiliates1
of
the
Company is $327,191,180, based on the last reported sale price of $22.26 per
share on October 22, 2004 on the NASDAQ Stock Market; multiplied by 14,698,615
shares of Common Stock outstanding and held by non-affiliates of the Company
on
such date.
As
of
Ju1y 1, 2005, the Company had a total of 33,591,320 shares of Common Stock
outstanding (which excludes 3,607,178 shares held by us in
treasury).
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this
Form 10-K. o
(1)Affiliates
for the purpose of this item refer to the directors, named executive officers
and/or persons owning 10% or more of the Company’s common stock, both of record
and beneficially; however, this determination does not constitute an admission
of affiliate status for any of the individual stockholders.
Document
Incorporated by Reference:
Document
|
Part
of Form 10-K into which Incorporated
|
Isle
of Capri Casinos, Inc.’s Definitive Proxy Statement for its Annual Meeting
of Stockholders to be held October 7, 2005.
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Part
III
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ISLE
OF CAPRI CASINOS, INC.
FORM
10-K
INDEX
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Page
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PART
I.
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2
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ITEM
1. BUSINESS
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2
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ITEM
2. PROPERTIES
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41
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ITEM
3. LEGAL PROCEEDINGS
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46
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ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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47
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PART
II.
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47
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ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
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47
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ITEM
6. SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
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50
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ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
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52
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ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT
MARKET RISK
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70
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ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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72
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ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING
AND FINANCIAL DISCLOSURE
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121
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ITEM
9A. CONTROLS AND PROCEDURES
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121
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ITEM
9B. OTHER INFORMATION
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123
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PART
III.
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123
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ITEM
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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123
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ITEM
11. EXECUTIVE COMPENSATION
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123
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ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
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123
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ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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123
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ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
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123
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PART
IV.
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124
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ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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124
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SIGNATURES
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125
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DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
All
statements other than statements of historical or current facts included in
this
annual report on form 10-K or incorporated by reference herein, including,
without limitation, statements regarding our future financial position, business
strategy, budgets, projected costs and plans and objectives of management for
future operations, are forward-looking statements. Forward-looking statements
generally can be identified by the use of forward-looking terminology such
as
“may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe” or
“continue” or the negative thereof or variations thereon or similar terminology.
Although we believe that the expectations reflected in such forward-looking
statements are reasonable, we can give no assurance that such expectations
will
prove to have been correct.
Important
factors with respect to any such forward-looking statements, including certain
risks and uncertainties that could cause actual results to differ materially
from our expectations (“cautionary statements”), are disclosed under “Risk
Factors” and elsewhere in this annual report on Form 10-K, including, without
limitation, in conjunction with the forward-looking statements included in
this
Annual Report on Form 10-K.
We
urge
you to review carefully the section “Risk Factors” beginning on page 12 in this
annual report on Form 10-K for a more complete discussion of the risks of
purchasing our common stock. All subsequent written and oral forward-looking
statements attributable to us, or persons acting on our behalf, are expressly
qualified in their entirety by these cautionary statements.
PART
I
Overview
We
were
incorporated in Delaware in February 1990. We are a leading developer, owner
and
operator of branded gaming facilities and related lodging and entertainment
facilities in growing markets in the United States and internationally. We
wholly own and operate eleven gaming facilities in the U.S. located in Lake
Charles and Bossier City, Louisiana; Lula, Biloxi, Vicksburg and Natchez,
Mississippi; Kansas City and Boonville, Missouri; and Bettendorf, Davenport
and
Marquette, Iowa. We also own a 57% interest in, and receive management fees
for
operating, two gaming facilities in Black Hawk, Colorado. Only one of
these gaming facilities operates under the name “Isle of Capri” and features our
distinctive tropical island theme. Our international gaming interests include
a
wholly owned casino in Freeport, Grand Bahama, and a two-thirds ownership
interest in casinos in Dudley, Wolverhampton, and Walsall, England. We also
wholly own and operate a pari-mutuel harness racing facility in Pompano Beach,
Florida.
We
have
signed a development agreement with the City of Bettendorf pursuant to which
we
agreed to construct a new 250-room Isle hotel, additional parking, a Kitt’s
Kitchen restaurant, and an expansion of the existing buffet, and the City agreed
to construct a 50,000 square foot convention center adjacent to our facility,
which will be managed by the Isle-Bettendorf. The cost of our portion of this
project will be approximately $45.0 million, and the new hotel is planned to
open in the late spring of 2007.
We
have
been selected by the Iowa Racing and Gaming Commission as the successful
applicant for a gaming license in Waterloo, Iowa. We plan to spend approximately
$119.0 million on constructing a 35,000 square foot single level casino with
1,300 gaming positions, three of our signature restaurants, a 200-room hotel
and
1,000 parking spaces. We expect the construction project to take approximately
24 months including the acquisition of necessary permits and licenses.
For
the
twelve fiscal months ended April 24, 2005, we had net revenues of approximately
$1.1 billion.
Competitive
Strengths
Strong
Brand Identity. Most
of
our casino properties operate under the “Isle of Capri” name, and the facilities
were designed to incorporate our distinctive tropical island theme. Most of
our
gaming facilities contain similar amenities, including hotels, one or more
of
our trademark restaurants (Farraddays’ fine dining restaurant, Calypso’s buffet,
Kitt’s Kitchen restaurant and Tradewinds Marketplace), a Banana Cabana gift
shop, an entertainment center for performances and meetings and ample parking.
Each of our uniquely branded facilities also offers all customers membership
in
our themed rewards program, which rewards loyal customers with points and
complimentaries that can be redeemed at any of our properties by using a
player’s club card. These programs are named IsleOne Players Club, the Fan Club,
and the Fast Track Club at the Isle of Capri properties, the Rhythm
City-Davenport and the Colorado Central Station-Black Hawk, respectively. We
believe our brand names convey excitement, entertainment, consistent
high-quality service and value to our customers.
Standardized
Quality and Services.
We have
developed and implemented standardized procedures for operating our casinos,
hotels, restaurants and other non-gaming amenities, which has allowed us to
fully and effectively integrate the domestic properties we have developed or
acquired during the past eleven years. We utilize management development and
employee training programs to implement these procedures throughout our
facilities, which we believe help us efficiently operate our facilities. This
standardization encourages high-quality service and provides our customers
with
a consistent experience.
Geographically
Diverse Markets. We
own or
operate our gaming facilities in eleven distinct geographic markets located
in 6
states, the Bahamas and the United Kingdom (“UK”), allowing us to maintain
diverse sources of revenue and cash flow.
Most
of
our gaming facilities are conveniently located near major highways. We have
located our facilities so that, in most cases, they are either the first casino
reached by customers arriving from major nearby cities or are within a cluster
of facilities, allowing us to generate significant customer
traffic.
Substantial
Capital Investment in Our Properties.
We are
continuing to expand and upgrade the facilities at several of our domestic
properties. We believe the continued investment in our domestic properties
has
improved their competitive position. We also believe our expansion into
international markets will further strengthen the “Isle of Capri” brand and
allow us to take advantage of new growing markets.
Effective
Utilization of Proprietary Database.
We have
developed an extensive proprietary database of primarily slot-oriented customers
that allows us to create and deploy effective targeted marketing and promotional
programs, merchandise giveaways, game tournaments and other special events.
These promotional programs are designed to reward customer loyalty and maintain
high recognition of our “Isle of Capri” brand. As of April 24, 2005, our
database contained approximately 6.2 million members, of whom approximately
1.6
million receive regular communications from us. We believe we have effectively
used our database to encourage repeat visits, increase customers’ length of stay
and improve our operating results.
Experienced,
Stable Management Team. We
are an
experienced gaming operator and opened our first gaming facility approximately
thirteen years ago. Each member of our senior management team has extensive
gaming or related industry experience and has been with us for several years,
providing consistency in our operations.
Casino
Properties
Here
is
an overview of our existing casino properties as of April 24, 2005:
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Date
Opened or
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Slot
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Table
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Hotel
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Parking
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Property
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Acquired
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Machines
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Games
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Rooms
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Spaces
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Louisiana
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Isle-Lake
Charles
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July
1995
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1,598
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82
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493
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2,200
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Isle-Bossier
City
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May
1994
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1,050
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34
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786
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1,537
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Mississippi
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Isle-Lula
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March
2000
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1,511
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35
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486
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1,780
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Isle-Biloxi
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August
1992
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1,184
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28
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367
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1,450
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Isle-Vicksburg
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August
1993
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796
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20
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122
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1,100
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Isle-Natchez
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March
2000
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636
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11
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143
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908
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Missouri
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Isle-Kansas
City
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June
2000
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1,580
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37
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-
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2,054
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Isle-Boonville
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December
2001
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904
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27
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-
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1,101
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Iowa
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Isle-Bettendorf
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March
2000
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1,102
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31
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256
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1,539
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Rhythm
City-Davenport
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October
2000
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1,019
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17
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121
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984
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Isle-Marquette
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March
2000
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711
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15
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25
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462
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Colorado
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Isle-Black
Hawk (57% owned)
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December
1998
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1,328
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21
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238
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1,100
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Colorado
Central Station-Black Hawk (57% owned)
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April
2003
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697
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20
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-
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600
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International
Properties
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Isle-Our
Lucaya
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December
2003
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372
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33
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-
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-
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Blue
Chip-Dudley (66 2/3% owned)
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November
2003
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10
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29
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-
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63
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Blue
Chip-Wolverhampton (66 2/3% owned)
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April
2004
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10
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48
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-
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10
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Blue
Chip-Walsall (66 2/3% owned)
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October
2004
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10
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51
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-
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-
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Louisiana
The
Isle-Lake Charles
The
Isle-Lake Charles, which commenced operations in July 1995, is located on a
19-acre site along Interstate 10, the main thoroughfare connecting Houston,
Texas to Lake Charles, Louisiana. The property consists of two dockside casinos
offering 1,598 slot machines and 82 table games, a 252-room deluxe hotel, a
separate 241-room hotel, a 105,000 square foot land-based pavilion and
entertainment center, and 2,200 parking spaces, including approximately 1,400
spaces in an attached parking garage. The pavilion and entertainment center
offers customers a wide variety of non-gaming amenities, including a 97-seat
Farraddays’ restaurant, a 360-seat Calypso’s buffet, a 165-seat Tradewinds
Marketplace, a 140-seat Kitt’s Kitchen restaurant, a 64-seat Lucky Wins oriental
restaurant and Caribbean Cove, which features free live entertainment and can
accommodate 180 customers. The pavilion also has a 14,750 square foot
entertainment center comprised of an 1,100-seat special events center designed
for concerts, live boxing, televised pay-per-view events, banquets and other
events, meeting facilities and administrative offices.
The
Lake
Charles market consists of three dockside gaming facilities (which include
the
Isle-Lake Charles and facilities operated by Harrah and Pinnacle Entertainment),
a Native American casino and a pari-mutuel facility/racino (operated by Boyd
Gaming). Total slot machines in the market exceed 7,600 machines and table
games
exceed 200 tables. The Pinnacle Entertainment facility opened at the end of
May
2005. In calendar year 2004, the two dockside gaming facilities and one racino,
in the aggregate, generated gaming revenues of approximately $462.0 million.
Revenues for the Native American property are not published and are not
available. Lake Charles is the closest gaming market to the Houston metropolitan
area, which has a population of approximately 4.7 million and is located
approximately 140 miles west of Lake Charles. We believe that the Isle-Lake
Charles attracts customers primarily from southeast Texas, including Houston,
Beaumont, Galveston, Orange and Port Arthur and from local area residents.
Approximately 490,000 and 1.6 million people reside within 50 and 100 miles,
respectively, of the Isle-Lake Charles.
The
Isle-Bossier City
The
Isle-Bossier City, which commenced operations in May 1994, is located on a
38-acre site along the Red River approximately one-quarter mile off Interstate
20, the main highway connecting Dallas/Ft. Worth, Texas to Bossier
City/Shreveport, Louisiana. The property consists of a dockside casino offering
1,050 slot machines and 34 table games, a 560-room on-site deluxe hotel, a
226-room off-site hotel located approximately two miles from the casino, a
39,000 square foot land-based pavilion and entertainment center, and 1,537
parking spaces including approximately 900 spaces in an attached parking garage.
The pavilion and entertainment center offer a wide variety of non-gaming
amenities, including a 77-seat Farraddays’ restaurant, a 301-seat Calypso’s
buffet, a 30-seat Tradewinds Marketplace and a 150-seat Kitt’s Kitchen.
The
Bossier City/Shreveport market consists of five dockside gaming facilities
and a
pari-mutuel facility that operates slot machines, which, in the aggregate,
generated gaming revenues of approximately $835.4 million in calendar year
2004
and, with the exception of Native American casino in Oklahoma that offers only
Class II gaming and blackjack, is the closest gaming market to the Dallas/Ft.
Worth, Texas metropolitan area. The Dallas/Ft. Worth metropolitan area has
a
population of approximately 5.2 million and is located approximately 190 miles
west of Bossier City/Shreveport. The other operators of gaming facilities in
this market are Harrah’s Entertainment (which operates one of the dockside
gaming facilities and the Louisiana Downs pari-mutuel facility), Penn National
Gaming, Boyd Gaming and Pinnacle Entertainment. We believe that the Isle-Bossier
City attracts customers primarily from the local area, northeastern Texas and
the Dallas/Ft. Worth metropolitan area. Approximately 550,000 and 1.8 million
people reside within 50 and 100 miles, respectively, of the Isle-Bossier
City.
Mississippi
The
Isle-Lula
The
Isle-Lula, which was acquired in March 2000, is strategically located off of
Highway 49, the only road crossing the Mississippi River from Mississippi to
Arkansas for more than 50 miles in either direction. The property consists
of
two dockside casinos containing 1,511 slot machines and 35 table games, two
on-site hotels with a total of 486 rooms, a land-based pavilion and
entertainment center, and 1,780 parking spaces. The pavilion and entertainment
center offer a wide variety of non-gaming amenities, including a 100-seat
Farraddays’ restaurant, a 300-seat Calypso’s buffet and a 48-seat Tradewinds
Marketplace.
The
Isle-Lula is the only gaming facility in the Coahoma County, Mississippi market
and generated gaming revenues of approximately $89.6 million in calendar year
2004. The Isle-Lula is the closest gaming facility to the Little Rock, Arkansas
metropolitan area, which has a population of approximately 580,000 and is
located approximately 120 miles northwest of the property. Coahoma County is
also located approximately 60 miles southwest of Memphis, Tennessee, which
is
primarily served by 10 casinos in Tunica, Mississippi. Approximately 850,000
people reside within 150 miles of the property’s primary target
market.
The
Isle-Biloxi
The
Isle-Biloxi, which commenced operations in August 1992, is located on a 17-acre
site at the eastern end of a cluster of facilities known as “Casino Row” in
Biloxi, Mississippi, and is the first property reached by visitors coming from
Alabama, Florida and Georgia via Highway 90. The property consists of a dockside
casino offering 1,184 slot machines and 28 table games, a 367-room hotel, a
90-seat Farraddays’ restaurant, a 425-seat Calypso’s buffet, a 64-seat
Tradewinds Marketplace and 1,450 parking spaces. We recently completed a new
400-room hotel, expanded our conference center and added a spa at the
Isle-Biloxi. A new casino is currently under construction offsite and will
feature significantly expanded gaming space (including 2,100 slot machines
and
50 table games), new entertainment venues, restaurants and other amenities.
We
expect to close the existing casino for approximately two weeks between
Thanksgiving and Christmas of 2005 while we move the new facility into
place.
The
Mississippi Gulf Coast market (which includes Biloxi, Gulfport and Bay St.
Louis) is one of the largest gaming markets in the United States and consists
of
12 dockside gaming facilities which, in the aggregate, generated gaming revenues
of approximately $911.4 million in calendar year 2004. In addition, a Hard
Rock
Casino and Hotel currently is under construction and is expected to open in
fall
of 2005. Among the other operators of dockside gaming facilities in this market
are MGM Mirage, Harrah’s Entertainment, Penn National Gaming and Pinnacle
Entertainment. The Mississippi Gulf Coast, a regional tourist destination,
is
the closest gaming market to the Mobile, Alabama metropolitan area, which has
a
population of approximately 540,000 and is located approximately 60 miles east
of Biloxi. We believe that the Isle-Biloxi attracts customers from the local
area, Alabama, Florida, Georgia and southeastern Louisiana, including New
Orleans and Baton Rouge. Approximately 800,000 and 2.9 million people reside
within 50 to 100 miles, respectively, of the Isle-Biloxi.
The
Isle-Vicksburg
The
Isle-Vicksburg, which commenced operations in August 1993, is located on an
18-acre site approximately one-mile north of Interstate 20, the main road
connecting Jackson, Mississippi to Vicksburg, Mississippi. The property consists
of a dockside casino offering 796 slot machines and 20 table games, a 122-room
hotel, a 12,483 square foot land-based pavilion and entertainment center, 1,100
parking spaces, a 67-space recreational vehicle park, a 68-seat Farraddays’
restaurant, a 211-seat Calypso’s buffet, a Tradewinds Marketplace and live
entertainment.
The
Vicksburg market consists of four dockside gaming facilities that, in the
aggregate, generated gaming revenues of approximately $247.2 million in calendar
year 2004. The other operators of dockside gaming facilities in this market
are
Alliance Gaming, Ameristar Casinos and Columbia Sussex. The Jackson metropolitan
area is also served by a Native American gaming facility. Vicksburg is the
closest gaming market to the Jackson, Mississippi metropolitan area, which
has a
population of approximately 440,000 and is located approximately 40 miles east
of Vicksburg. We believe that the Isle-Vicksburg attracts customers primarily
from the local area, Jackson and northeastern Louisiana. Approximately 530,000
people reside within 50 miles of the Isle-Vicksburg.
The
Isle-Natchez
The
Isle-Natchez, which was acquired in March 2000, is located off of Highways
84
and 61 in western Mississippi. The property consists of a dockside casino
offering 636 slot machines and 11 table games, a 143-room off-site hotel located
approximately one mile from the casino, a 150-seat Calypso’s buffet and 908
parking spaces.
The
Isle-Natchez is the only gaming facility in the Natchez market and generated
gaming revenues of approximately $36.4 million in calendar year 2004. We believe
that the Isle-Natchez attracts customers primarily from among the 110,000 people
residing within 50 miles of the Isle-Natchez.
Missouri
The
Isle-Kansas City
We
acquired the Isle-Kansas City in June 2000. The facility is the closest facility
to downtown Kansas City and consists of a dockside casino offering 1,580 slot
machines and 37 table games, a 72-seat Farraddays’ restaurant, a 325-seat
Calypso’s buffet, a 24-seat Tradewinds Marketplace and 2,054 parking
spaces.
The
Kansas City market consists of four dockside gaming facilities that, in the
aggregate, generated gaming revenues of approximately $676.8 million in calendar
year 2004. The other operators of dockside gaming facilities in this market
are
Ameristar Casinos, Argosy Gaming and Harrah’s Entertainment. We believe that the
Isle-Kansas City attracts customers primarily from the Kansas City metropolitan
area, which has approximately 1.7 million residents.
The
Isle-Boonville
The
Isle-Boonville, which opened on December 6, 2001, is located off of Interstate
70, approximately halfway between Kansas City and St. Louis. The property
consists of a dockside casino offering 904 slot machines and 27 table games,
a
32,396 square foot pavilion and entertainment center and 1,101 parking spaces.
The pavilion and entertainment center offers customers a wide variety of
non-gaming amenities, including a 92-seat Farraddays’ restaurant, a 270-seat
Calypso’s buffet, a 32-seat Tradewinds Marketplace and a historic display area.
Isle-Boonville has begun construction on a 140-room hotel, which will include
20
suites and a 6,000 square foot event center. We expect to complete the project
in late spring of 2006 at an expected cost of approximately $17.5
million.
The
Isle-Boonville is the only gaming facility between Kansas City, Missouri, and
St. Louis, Missouri and generated gaming revenues of approximately $72.9 million
in calendar year 2004. We believe the Isle-Boonville attracts most of its
customers from the approximately 733,000 persons living within a 75-mile radius
in central Missouri, including Jefferson City and Columbia.
Iowa
The
Isle-Bettendorf
The
Isle-Bettendorf, which we acquired in March 2000, is located off of Interstate
74, an interstate highway serving the Quad Cities metropolitan area. The
property consists of a dockside casino offering 1,102 slot machines and 31
table
games, a 256-room hotel, approximately 108,900 square feet of convention/banquet
space, a 140-seat Farraddays’ restaurant, a 320-seat Calypso’s buffet, a 30-seat
Tradewinds Marketplace and 1,539 parking spaces. We have signed a development
agreement with the City of Bettendorf pursuant to which we agreed to construct
a
new 250-room Isle hotel, additional parking, and the City agreed to construct
a
50,000 square foot convention center adjacent to the company’s facility, which
will be managed by the Isle-Bettendorf. The cost of our portion of this project
will be approximately $45.0 million, and the new hotel is scheduled to open
in
the late spring of 2007.
The
Quad
Cities metropolitan area, consisting of Bettendorf and Davenport, Iowa and
Moline and Rock Island, Illinois currently has three gaming operations - our
two
gaming facilities, the Isle-Bettendorf and the Rhythm City-Davenport, and one
smaller operator. The three operations in the Quad Cities generated, in the
aggregate, gaming revenues of approximately $220.9 million in calendar year
2004. In addition to the Quad Cities metropolitan area, our operations in the
Quad Cities also compete with gaming operations in Peoria, Illinois; Dubuque,
Clinton and Des Moines, Iowa; and to a lesser extent, gaming operations in
the
Chicago, Illinois metropolitan area.
The
Rhythm City-Davenport
The
Rhythm City-Davenport, which we acquired in October 2000, is located between
Interstates 74, 80 and 280. The property consists of a dockside gaming facility
offering 1,019 slot machines and 17 table games, a 121-room off-site hotel
located approximately four blocks from the casino, a 290-seat Hit Parade buffet,
a 76-seat Rock Around the Clock diner and 984 parking spaces.
The
Isle-Marquette
The
Isle-Marquette, which we acquired in March 2000, is located in Marquette, Iowa,
approximately 60 miles north of Dubuque, Iowa. The property consists of a
dockside casino offering 711 slot machines and 15 table games, a land-based
facility including a 25-room hotel, a 160-seat Calypso’s buffet restaurant, a
Tradewinds Marketplace, an entertainment showroom, a marina and 462 parking
spaces.
The
Isle-Marquette is the only gaming facility in the Marquette, Iowa market, and
generated gaming revenues of approximately $41.8 million in calendar year 2004.
We believe the Isle-Marquette draws most of its customers from northeast Iowa
and Wisconsin and to some extent, competes for those customers with another
riverboat facility and a racetrack with slot machines, both of which are in
the
Dubuque area. We have received gaming regulatory approval for an expansion
project that will add 60 hotel rooms and improved parking. We are currently
evaluating hotel development alternatives for this property.
Colorado
The
Isle-Black Hawk
The
Isle-Black Hawk, which commenced operations in December 1998, is located on
an
approximately 10-acre site and is one of the first gaming facilities reached
by
customers arriving from Denver via Highway 119, the main thoroughfare connecting
Denver to Black Hawk. The property currently consists of a land-based casino
with 1,328 slot machines and 21 table games, a 238-room hotel and 1,100 parking
spaces in an attached parking garage. The Isle-Black Hawk also offers customers
a wide variety of non-gaming amenities, including a 96-seat Farraddays’
restaurant, a 228-seat Calypso’s buffet, a 32-seat Tradewinds Marketplace and a
4,000 square foot event center that can be used for meetings and entertainment.
We own 57% of the Isle-Black Hawk through an unrestricted subsidiary and receive
a management fee for operating the facility.
The
Black
Hawk/Central City market consists of 28 gaming facilities (nine of which have
more than 600 slot machines), which, in aggregate, generated gaming revenues
of
approximately $577.0 million in calendar year 2004. Black Hawk is the closest
gaming market to the Denver, Colorado metropolitan area, which has a population
of approximately 2.6 million and is located approximately 40 miles east of
Black
Hawk. We believe that the Isle-Black Hawk attracts customers primarily from
Denver, Boulder, Fort Collins and Golden, Colorado and Cheyenne,
Wyoming.
The
Colorado Central Station-Black Hawk
The
Colorado Central Station-Black Hawk, which we acquired in April 2003, is located
across the intersection of Main Street and Mill Street from the Isle-Black
Hawk.
The property currently consists of a land-based casino with 697 slot machines,
20 table games and 600 parking spaces in our new parking structure connecting
Isle-Black Hawk and Colorado Central Station-Black Hawk. The property also
offers guests two dining options including the Fire Box restaurant and the
Chew
Chew deli. We own 57% of the Colorado Central Station-Black Hawk through an
unrestricted subsidiary and receive a management fee for operating the
facility.
We
are in
the final stages of a $94.0 million expansion project for the Isle-Black Hawk
and Colorado Central Station-Black Hawk properties. We recently completed our
expansion of the Isle-Black Hawk and the Colorado Central Station-Black Hawk
casinos. We have completed a portion of our new parking structure with 600
parking spaces open to the public. The new 162-room Colorado Central Station
hotel is currently ahead of schedule and expected to be completed by end of
calendar year 2005. Additionally, we continue to construct public improvements
to extend Main Street directly to Colorado Route 119, approximately one
half-mile closer to Denver. Completion is expected in the spring of
2006.
Florida
Pompano
Park
In
1995,
we acquired Pompano Park, a harness racing track located in Pompano Beach,
Florida. Pompano Park is conveniently located off of Interstate 95 and the
Florida Turnpike on a 220-acre owned site, midway between Miami and West Palm
Beach. Pompano Park is the only racetrack licensed to conduct harness racing
in
Florida. During the fiscal year ended April 24, 2005, Pompano Park conducted
149
live racing programs. Pompano Park can accommodate up to 14,500 customers and
has 4,000 parking spaces and 1,040 horse stalls. The six-story, air-conditioned
facility consists of 21 poker tables, a box seat area, a 260,000 square foot
clubhouse, a large grandstand, a 1,250-seat dining area from which the races
can
be viewed, five concession stands, five bars and a 180-seat Player’s Lounge
cafeteria.
In
November 2004, voters in the State of Florida voted to amend the state's
constitution to allow the voters of Miami-Dade and Broward counties (Broward
County is the location of the Pompano Park Racetrack) to decide whether to
approve slot machines in racetracks and jai alai frontons in their respective
counties. Broward county voters passed their local referendum and Dade county
voters rejected their referendum in March 2005. Enabling gaming legislation
was
not passed in the current session of the Florida legislature despite the
constitutional requirement that such legislation be in effect by July 1, 2005.
Along with the other Broward county pari-mutuels, we filed a lawsuit seeking
authority to proceed with the development of slot machine facilities despite
the
absence of enabling legislation. On June 21, 2005, the Circuit Court judge
issued a decision in favor of the pari-mutuel facilities, which decision will
be
appealed. Accordingly, the regulation and timing of installation and operation
of slot machines has not been finally determined. This facility draws most
of
its customers from the 2.6 million people residing within a 25-mile
radius.
Grand
Bahama Island
The
Isle-Our Lucaya
The
Isle-Our Lucaya is one of two gaming facilities in the Freeport market on the
Island of Grand Bahama. The competing facility has been closed since the
hurricanes struck the island in September 2004. This market generated gaming
revenues of approximately $30.7 million in calendar year 2004 and has a
population of approximately 50,000 and approximately 300,000 visitors annually.
The Island has 3,200 hotel rooms. The facility is located at Our Lucaya Beach
& Golf Resort, which features a Westin and Sheraton hotel with 1,260 rooms
although 260 rooms have been unavailable since the hurricanes struck the island
in September 2004. The approximately 19,000 square-foot resort-style casino
offers 372 slot machines, 33 table games and a 110-seat restaurant.
United
Kingdom
Blue
Chip-Dudley
The
pub-style casino in Dudley, England is one of 17 gaming facilities in the West
Midlands market. Dudley is close to the Birmingham metropolitan area, which
has
a population of approximately 5.3 million. The casino consists of 10 slot
machines, 29 table games and 63 parking spaces. We own two-thirds of the Blue
Chip-Dudley through an unrestricted subsidiary.
Blue
Chip-Wolverhampton
The
pub-style casino in Wolverhampton, England is also in the West Midlands market.
Wolverhampton is close to the Birmingham metropolitan area. The casino consists
of 10 slot machines, 48 table games and 10 parking spaces. We own two-thirds
of
the Blue Chip-Wolverhampton through an unrestricted subsidiary.
Blue
Chip-Walsall
The
pub-style casino in Walsall, England is also in the West Midlands market.
Walsall is close to the Birmingham metropolitan area. The casino consists of
10
slot machines and 51 table games. We own two-thirds of the Blue Chip-Walsall
through an unrestricted subsidiary.
Coventry
We
remain
committed to our development project in the UK to build a casino in Coventry;
however, legislation enacted in April 2005 limits the number of regional casinos
to one. The number may be increased only through additional legislation. We
have
obtained all necessary gaming licenses to open a casino at the RICOH™ Arena
Coventry in the summer of 2006 under the Gaming Act of 1968. We believe we
are
well positioned to develop a regional casino in Coventry should we be awarded
a
regional casino license.
Marketing
We
attract customers to our casinos by designing and implementing marketing and
promotional programs that emphasize our Isle of Capri, Rhythm City and Colorado
Central Station brands and reward loyal customers. We have developed an
extensive proprietary database of primarily slot-oriented customers that allows
us to create effective targeted marketing and promotional programs, merchandise
giveaways, game tournaments and other special events. These programs are
designed to reward customer loyalty, attract new customers to our properties
and
maintain high recognition of our brands. These promotional programs are designed
to reward customer loyalty and maintain high recognition of our “Isle of Capri”
brand.
As
of
April 24, 2005, our database contained approximately 6.2 million members, of
whom approximately 1.6 million receive regular mailings. To develop this
database, we offer all of our customers a membership in the IsleOne Players
Club
at Isle of Capri properties, the Fan Club at the Rhythm City-Davenport and
the
Fast Track Club at the Colorado Central Station property. These programs reward
loyal customers with IsleOne points that can be redeemed at our casinos by
using
our player’s club card. Currently, the player’s club card allows us to track the
members’ gaming preferences, maximum, minimum and total amount wagered and
frequency of visits. Players are classified in groups according to these
characteristics. Our database is used for direct marketing programs and other
promotional events that are tailored to these specific groups of players. We
believe we have effectively used
our
database to encourage repeat visits, increase customers’ length of stay and
improve our operating results.
We
place
significant emphasis on attracting local residents and seek to maintain a strong
local identity in each market in which we operate by initiating and supporting
community and special events. We use broadcast media to promote the Isle of
Capri brand name and attract customers to our properties. To further enhance
our
tropical theme, we have engaged actor Ricardo Montalban to narrate our radio
advertisements and appear in our television advertisements.
Employees
As
of
April 24, 2005, we employed approximately 10,500 people. None of our employees
are subject to a collective bargaining agreement. We believe that our
relationship with our employees is satisfactory.
Risk
Factors
We
face significant competition from other gaming operations that could have a
material adverse effect on our future operations.
We
face
intense competition in the markets in which we operate. We have numerous
competitors, including land-based casinos, dockside casinos, riverboat casinos,
casinos located on Native American-owned lands and at racing and pari-mutuel
operations. Several of our competitors have substantially better name
recognition, marketing and financial resources than we do. Legalized gaming
is
currently permitted in various forms throughout the United States. Certain
states have recently legalized, and other states are currently considering
legalizing, casino gaming in designated areas. There is no limit on the number
of gaming licenses that may be granted in several of the markets in which we
operate. As a result, new licenses could be awarded to gaming facilities in
such
markets, which could have an adverse effect on our operating results. In
particular, we face new competition in the Lake Charles, Louisiana market where
Pinnacle Entertainment recently opened a dockside casino facility with a
reported cost of $365.0 million. We also will face new competition in the
Mississippi Gulf Coast market where a Hard Rock Casino and Hotel is under
construction and is expected to open by fall of 2005. In addition, the
pari-mutuel facility in the Bossier City, Louisiana market has expanded the
number of slot machines available at its facility. Expansion
of existing gaming facilities and the development of new gaming facilities
in
our current markets will increase competition for our existing and future
operations. In addition, many Native American tribes conduct casino gaming
on
Native American-owned lands throughout the United States. Such facilities have
the advantages of being land-based and exempt from certain state and federal
taxes. Some Native American tribes are either in the process of establishing
or
expanding, or are considering the establishment or expansion of, gaming in
Oklahoma, Texas, Louisiana, Alabama, Kansas, Colorado and Iowa, which could
impact operations at some of our properties. The establishment or expansion
of
new gaming facilities and casinos on Native American-owned lands will increase
competition for our existing and future operations.
We
also
compete with other forms of legalized gaming and entertainment such as online
computer gambling, bingo, pull tab games, card parlors, sports books,
pari-mutuel or telephonic betting on horse racing and dog racing,
state-sponsored lotteries, jai-alai, video lottery terminals and video poker
terminals and, in the future, may compete with gaming at other
venues.
Our
existing gaming facilities compete directly with other gaming properties in
Louisiana, Mississippi, Missouri, Iowa and Colorado. We also compete with gaming
operators in other gaming jurisdictions such as Atlantic City, New Jersey and
Las Vegas, Nevada. Our existing casinos attract a significant number of their
customers from Houston and Dallas/Fort Worth, Texas; Mobile, Alabama; Jackson,
Mississippi; Memphis, Tennessee; Little Rock, Arkansas and Denver, Colorado.
Our
continued success depends upon drawing customers from each of these geographic
markets. Legalization of gaming in jurisdictions closer to these geographic
markets than the jurisdictions in which our facilities are located would have
a
material adverse effect on our operating results. Electronic games of skill
were
recently approved by the voters in Arkansas for operation at pari-mutuel
facilities, and while that approval is subject to county-wide votes in the
counties where the pari-mutuel facilities are located, the operation of those
machines could adversely impact our operations in Lula and Bossier City.
Similarly, voters in Oklahoma recently authorized certain table games at
Oklahoma tribal casinos, which we believe has had, and may continue to have,
an
adverse impact on the Bossier City market. We expect competition to increase
as
new gaming operators enter our markets, existing competitors expand their
operations, gaming activities expand in existing jurisdictions and gaming is
legalized in new jurisdictions. We cannot predict with any certainty the effects
of existing and future competition on our operating results.
We
are subject to extensive regulation from gaming authorities that could adversely
affect us.
Licensing
Requirements.
As
owners
and operators of gaming facilities, we are subject to extensive state and local
regulation. State and local authorities require us and our subsidiaries to
demonstrate suitability to obtain and retain various licenses and require that
we have registrations, permits and approvals to conduct gaming operations.
The
regulatory authorities in the jurisdictions in which we operate may limit,
condition, suspend or revoke a license to conduct gaming operations or prevent
us from owning the securities of any of our gaming subsidiaries. We may also
be
deemed responsible for the acts and conduct of our employees. Substantial fines
or forfeiture of assets for violations of gaming laws or regulations may be
levied against us, our subsidiaries and the persons involved. The suspension
or
revocation of any of our licenses or the levy on us or our subsidiaries of
a
substantial fine would have a material adverse effect on our
business.
To
date,
we have demonstrated suitability to obtain and have obtained all governmental
licenses, registrations, permits and approvals necessary for us to operate
our
existing gaming facilities. However, like all gaming operators in the
jurisdictions in which we operate, we must periodically apply to renew our
gaming licenses. We cannot assure you that we will be able to obtain such
renewals. We remain committed to our development project in the UK to build
a
casino in Coventry; however, legislation enacted in April 2005 limits the number
of regional casinos to one. The number may be increased only through additional
legislation. We have obtained all necessary gaming licenses to open a casino
at
the RICOH™ Arena Coventry in the summer of 2006 under the Gaming Act of 1968. We
believe we are well positioned to develop a regional casino in Coventry should
we be awarded a regional casino license. In
addition, if we expand our gaming operations in the jurisdictions in which
we
currently operate or to new jurisdictions, we will have to meet suitability
requirements and obtain additional licenses, registrations, permits and
approvals from gaming and non-gaming authorities in these jurisdictions.
For
example, in connection with our successful bid for the 10th gaming license
in
Illinois, we must be found suitable and our proposed facility must be approved
by the Illinois Gaming Board. In addition, the Illinois Attorney General has
raised issues with regard to the appropriateness of the Village of Rosemont
as a
host community and the Illinois Gaming Board’s selection of our bid. The
Illinois Gaming Board (working with the Illinois Attorney General) has also
resumed an administrative proceeding seeking to revoke the gaming license from
our proposed merger partner, which if successful may adversely impact our
ability to operate a gaming facility in the Village of Rosemont. The Illinois
Attorney General has also filed a suit against the Illinois Gaming Board seeking
to enjoin the Board from conducting a suitability investigation of us in
connection with the merger provided for under the plan of reorganization (which
suitability review has been “suspended” by the Illinois Gaming Board pending the
completion of the aforementioned revocation proceeding. During the fourth
quarter of fiscal 2005, the governor of Illinois appointed a new gaming board.
One of the first acts by the new board was to authorize the reinstatement of
the
proceeding to rescind the license from the current owner. For the reasons set
forth above, among others, we believe that our ability to obtain the gaming
license and open a gaming facility in Rosemont has been subjected to added
uncertainty.
In
November 2004, voters in the State of Florida voted to amend the state's
constitution to allow the voters of Miami-Dade and Broward counties (Broward
County is the location of the Pompano Park Racetrack) to decide whether to
approve slot machines in racetracks and jai alai frontons in their respective
counties. Broward county voters passed their local referendum and Dade county
voters rejected their referendum in March 2005. Enabling gaming legislation
was
not passed in the current session of the Florida legislature despite the
constitutional requirement that such legislation be in effect by July 1, 2005.
Along with the other Broward county pari-mutuels, we filed a lawsuit seeking
authority to proceed with the development of slot machine facilities despite
the
absence of enabling legislation. On June 21, 2005, the Circuit Court judge
issued a decision in favor of the pari-mutuel facilities, which
decision
will be appealed. Accordingly, the regulation and timing of installation
and operation of slot machines has not been finally determined.
In
addition, regulatory authorities in certain jurisdictions must approve, in
advance, any restrictions on transfers of, agreements not to encumber or
pledges
of equity securities issued by a corporation that is registered as an
intermediary company with such state, or that holds a gaming license. If
these
restrictions are not approved in advance, they will be invalid.
Potential
Changes in Regulatory Environment.
From
time
to time, legislators and special interest groups have proposed legislation
that
would expand, restrict or prevent gaming operations in the jurisdictions in
which we operate. In addition, from time to time, certain anti-gaming groups
propose referenda that, if adopted, would limit our ability to continue to
operate in those jurisdictions in which such referenda are adopted. Any
expansion of gaming or restriction on or prohibition of our gaming operations
could have a material adverse effect on our operating results.
We
are subject to the possibility of an increase in gaming taxes, which would
increase our costs.
State
and
local authorities raise a significant amount of revenue through taxes and fees
on gaming activities. We believe that the prospect of significant revenue is
one
of the primary reasons that jurisdictions permit legalized gaming. As a result,
gaming companies are typically subject to significant taxes and fees in addition
to normal federal, state, local and provincial income taxes, and such taxes
and
fees are subject to increase at any time. We pay substantial taxes and fees
with
respect to our operations. From time to time, federal, state, local and
provincial legislators and officials have proposed changes in tax laws, or
in
the administration of such laws, affecting the gaming industry. In addition,
poor economic conditions could intensify the efforts of state and local
governments to raise revenues through increases in gaming taxes. On May 6,
2004,
the Iowa legislature made several changes to its gaming tax structure,
increasing the taxes and fees we pay with respect to our operations located
in
that State. Effective July 1, 2004, gaming taxes increased from 20% to 22%
of
adjusted gross receipts. Additionally, there are two prepaid assessments due
on
June 1, 2005 and June 1, 2006 in an amount equal to 2.152% of our adjusted
gross
receipts for fiscal year 2004. These assessments will be offset by future state
gaming taxes, with a credit for 20% of the assessments paid allowed each year
beginning July 1, 2010 for five consecutive years. We are also required to
reimburse the state of Iowa for costs associated with monitoring and enforcement
by the Iowa Gaming Commission and the Iowa Department of Criminal Investigation.
Some of the states in which we own or operate casinos continue to experience
budget shortfalls and, as a result, may increase gaming taxes to raise more
revenue. It is not possible to determine with certainty the likelihood of
changes in tax laws or in the administration of such laws. Such changes, if
adopted, could have a material adverse effect on our business, financial
condition and results of operations.
We
are subject to non-gaming regulation that could adversely affect
us.
Several
of our riverboats must comply with U.S. Coast Guard requirements as to boat
design, on-board facilities, equipment, personnel and safety and must hold
U.S.
Coast Guard Certificates of Documentation and Inspection. The U.S. Coast Guard
requirements also set limits on the operation of the riverboats and mandate
licensing of certain personnel involved with the operation of the riverboats.
Loss of a riverboat’s Certificate of Documentation and Inspection could preclude
its use as a riverboat casino. Each of our riverboats is inspected annually
and,
every five years, is subject to dry-docking for inspection of its hull, which
could result in a temporary loss of service.
We
are
required to have third parties periodically inspect and certify all of our
casino barges for stability and single compartment flooding integrity. Our
casino barges must also meet local fire safety standards. We would incur
additional costs if any of our gaming facilities were not in compliance with
one
or more of these regulations.
We
are
also subject to certain federal, state and local environmental laws, regulations
and ordinances that apply to non-gaming businesses generally, such as the Clean
Air Act, the Clean Water Act, the Resource Conservation Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act and the
Oil
Pollution Act of 1990. Under various federal, state and local laws and
regulations, an owner or operator of real property may be held liable for the
costs of removal or remediation of certain hazardous or toxic substances or
wastes located on its property, regardless of whether or not the present owner
or operator knows of, or is responsible for, the presence of such substances
or
wastes. We have not identified any issues associated with our properties that
could reasonably be expected to have an adverse effect on us or the results
of
our operations. However, several of our properties are located in industrial
areas or were used for industrial purposes for many years. As a consequence,
it
is possible that historical or neighboring activities have affected one or
more
of our properties and that, as a result, environmental issues could arise in
the
future, the precise nature of which we cannot now predict. The coverage and
attendant compliance costs associated with these laws, regulations and
ordinances may result in future additional costs.
Regulations
adopted by the Financial Crimes Enforcement Network of the U.S. Treasury
Department require us to report currency transactions in excess of $10,000
occurring within a gaming day, including identification of the patron by name
and social security number. U.S. Treasury Department regulations also require
us
to report certain suspicious activity, including any transaction that exceeds
$5,000 if we know, suspect or have reason to believe that the transaction
involves funds from illegal activity or is designed to evade federal regulations
or reporting requirements. Substantial penalties can be imposed against us
if we
fail to comply with these regulations.
We
are
also subject to a variety of other local rules and regulations, including
zoning, environmental, construction and land-use laws and regulations governing
the serving of alcoholic beverages. Penalties can be imposed against us if
we
fail to comply with these regulations. The imposition of a substantial penalty
or the loss of service of a gaming facility for a significant period of time
would have a material adverse affect on our business.
Our
substantial indebtedness could adversely affect our financial health and
restrict our operations.
We
have a
significant amount of indebtedness. As of April 24, 2005, we had $1.2 billion
of
total debt outstanding.
Our
significant indebtedness could have important consequences, such
as:
· |
limiting
our ability to obtain additional financing to fund our working capital
requirements, capital expenditures, debt service, general corporate
or
other obligations;
|
· |
limiting
our ability to use operating cash flow in other areas of our business
because we must dedicate a significant portion of these funds to
make
principal and interest payments on our
indebtedness;
|
· |
increasing
our interest expense if there is a rise in interest rates, because
a
portion of our borrowings under our senior secured credit facility
are
subject to interest rate periods with short-term durations (typically
30
to 180 days) that require ongoing refunding at the then current rates
of
interest;
|
· |
causing
our failure to comply with the financial and restrictive covenants
contained in the indenture and agreements governing the 7% senior
subordinated notes due 2014, the 9% senior subordinated notes due
2012,
our senior secured credit facility and our other indebtedness, which
could
cause a default under those instruments and which, if not cured or
waived,
could have a material adverse effect on us;
|
· |
placing
us at a competitive disadvantage to our competitors who are not as
highly
leveraged; and
|
· |
increasing
our vulnerability to and limiting our ability to react to changing
market
conditions, changes in our industry and economic
downturns.
|
Any
of
the factors listed above could have a material adverse effect on our business,
financial condition and results of operations. In addition, as of April 24,
2005, we had the capacity to issue additional indebtedness, including the
ability to incur additional indebtedness under all of our lines of credit,
of
approximately $452.8 million, subject to the limitations imposed by the
covenants in the senior secured credit facility and the indentures governing
our
notes. The indenture governing our notes and the senior secured credit facility
contain financial and other restrictive covenants, but will not fully prohibit
us from incurring additional debt. If new debt is added to our current level
of
indebtedness, related risks that we now face could increase.
We
have
made and will need to make significant capital expenditures at our existing
facilities to remain competitive with current and future competitors in our
markets. Our senior secured credit facility and the indentures governing our
notes contain operating and financial restrictions that may limit our ability
to
obtain the financing to make these capital expenditures.
Our
agreements governing our indebtedness, among other things, limit our ability
to:
· |
make
capital expenditures;
|
· |
use
assets as security in other
transactions;
|
· |
make
restricted payments or restricted
investments;
|
· |
incur
contingent obligations; and
|
· |
sell
assets and enter into leases and transactions with
affiliates.
|
We
May Not Be Able to Successfully Recover Our Investment in New Locations
We
regularly evaluate and pursue new gaming acquisition and development
opportunities in existing and new gaming markets. For example, in December
2003
we entered into an agreement to develop and operate an entertainment complex,
which will include a casino, in a commercial leisure complex in Coventry,
England. While we seek the requisite approvals for the proposed project, we
are
committed to making certain investments in the project. In the event we obtain
all necessary approvals, we will invest significant additional
funds.
To
the
extent that we elect to pursue any new gaming acquisition or development
opportunity, our ability to benefit from our investment will depend on many
factors, including:
· |
our
ability to successfully identify attractive acquisition and development
opportunities;
|
· |
our
ability to successfully integrate the operations of any acquired
properties;
|
· |
our
ability to attract and retain competent management and employees
for the
new locations;
|
· |
our
ability to secure required federal, state and local licenses, permits
and
approvals, which in some jurisdictions are limited in number and
subject
to intense competition;
|
· |
the
availability of adequate financing on acceptable
terms.
|
Many
of
these factors are beyond our control. Therefore, we cannot be sure that we
will
be able to recover our investments in any new gaming development opportunities
or acquired facilities, or successfully expand to additional locations.
We
May Experience Construction Delays During Our Expansion or Development Projects
We
currently are engaged in substantial expansion projects at several of our
domestic properties and have plans to commence construction on a new facility
in
the UK. We also evaluate other expansion opportunities as they become available
and we may in the future engage in additional construction projects. The
anticipated costs and construction periods are based upon budgets, conceptual
design documents and construction schedule estimates prepared by us in
consultation with our architects and contractors.
Construction
projects entail significant risks, which can substantially increase costs or
delay completion of a project. Such risks include shortages of materials or
skilled labor, unforeseen engineering, environmental or geological problems,
work stoppages, weather interference and unanticipated cost increases. Most
of
these factors are beyond our control. In addition, difficulties or delays in
obtaining any of the requisite licenses, permits or authorizations from
regulatory authorities can increase the cost or delay the completion of an
expansion or development. Significant budget overruns or delays with respect
to
expansion and development projects could adversely affect our results of
operations.
If
our key personnel leave us, our business will be significantly adversely
affected.
Our
continued success will depend, among other things, on the efforts and skills
of
a few key executive officers and the experience of our property managers as
well
as our ability to attract and retain additional highly qualified personnel
with
gaming industry experience and qualifications to obtain the requisite licenses.
We do not maintain “key man” life insurance for any of our employees. There is
no assurance that we would be able to attract and hire suitable replacements
for
any of our key employees. We need qualified executives, managers and skilled
employees with gaming industry experience to continue to successfully operate
our business. We believe a shortage of skilled labor in the gaming industry
may
make it increasingly difficult and expensive to attract and retain qualified
employees. We expect that increased competition in the gaming industry will
intensify this problem.
Inclement
weather and other conditions could seriously disrupt our business, financial
condition and results of operations.
Dockside
and riverboat facilities are subject to risks in addition to those associated
with land-based casinos, including loss of service due to casualty, mechanical
failure, extended or extraordinary maintenance, flood, hurricane or other severe
weather. Our riverboats and barges face additional risks from the movement
of
vessels on waterways.
Reduced
patronage and the loss of a dockside or riverboat casino from service for any
period of time could adversely affect our results of operations. For example,
as
a result of hurricanes, we closed the Isle-Our Lucaya from September 1, 2004
to
October 13, 2004 and twenty-one other days throughout October 2004 and November
2004 and the Isle-Biloxi from September 14, 2004 to September 17, 2004. While
our business interruption insurance provided sufficient coverage for those
losses, we cannot assure you that the proceeds from any future claim will be
sufficient to compensate us if one or more of our casinos experience a
closure.
Access
to
a number of our facilities may also be affected by road conditions, such as
construction and traffic. In addition, severe weather such as high winds and
blizzards occasionally limits access to our facilities in
Colorado.
Energy
and fuel price increases may adversely affect our costs of operations and our
revenues
Our
casino properties use significant amounts of electricity, natural gas and other
forms of energy. While no shortages of energy have been experienced, substantial
increases in the cost of electricity in the United States will negatively affect
our results of operations. In addition, energy and fuel price increases in
cities that constitute a significant source of customers for our properties
could result in a decline in disposable income of potential customers and a
corresponding decrease in visitation to our properties, which would negatively
impact our revenues. The extent of the impact is subject to the magnitude and
duration of the energy and fuel price increases, but this impact could be
material.
A
downturn in general economic conditions may adversely affect our results of
operations.
Our
business operations are subject to changes in international, national and local
economic conditions, including changes in the economy related to future security
alerts in connection with threatened or actual terrorist attacks and related
to
the war with Iraq, which may affect our customers’ willingness to travel. A
recession or downturn in the general economy, or in a region constituting a
significant source of customers for our properties, could result in fewer
customers visiting our properties, which would adversely affect our results
of
operations.
We
have international operations that are subject to different risks than our
domestic operations.
With
our
expansion into the UK and the Bahamas, we are subject to certain additional
risks, including difficulty in staffing and managing foreign subsidiary
operations, foreign currency fluctuations, dependence on foreign economies,
political issues, adverse tax consequences and uncertainty in regulatory reform
in the UK. In addition, in the Bahamas current gaming regulation preclude
residence from participating in gaming activities. Therefore, disruptions in
tourism traffic such as airline and other means of transportation and hotel
accommodations can have an adverse impact in our gaming operations.
Regulation
and Licensing
The
ownership and operation of casino gaming facilities are subject to extensive
state and local regulations. We are required to obtain and maintain gaming
licenses in each of the jurisdictions in which we conduct gaming. The
limitation, conditioning or suspension of gaming licenses could (and the
revocation or non-renewal of gaming licenses, or the failure to reauthorize
gaming in certain jurisdictions, would) materially adversely affect our
operation in that jurisdiction. In addition, changes in law that restrict or
prohibit our gaming operations in any jurisdiction could have a material adverse
effect on us. For example, the State of Florida legislature did not pass
enabling gaming legislation in the most current session despite a constitutional
requirement that it do so. For a variety of reasons, there can be no assurance
that Florida law will ultimately allow the operation of slot machines at
racetracks or jai alai facilities in Broward county, which recently passed
a
local referendum to do so.
We
remain
committed to our development project in the UK to build a casino in Coventry;
however, legislation enacted in April 2005 limits the number of regional casinos
to one. The number may be increased only through additional legislation. We
have
obtained all necessary gaming licenses to open a casino at the RICOH™ Arena
Coventry in the summer of 2006 under the Gaming Act of 1968. We believe we
are
well positioned to develop a regional casino in Coventry should we be awarded
a
regional casino license.
Louisiana
In
July
1991, Louisiana enacted legislation permitting certain types of gaming activity
on certain rivers and waterways in Louisiana. The legislation granted authority
to supervise riverboat gaming activities to the Louisiana Riverboat Gaming
Commission and the Riverboat Gaming Enforcement
Division
of the Louisiana State Police. The Louisiana Riverboat Gaming Commission was
authorized to hear and determine all appeals relative to the granting,
suspension, revocation, condition or renewal of all licenses, permits and
applications. In addition, the Louisiana Riverboat Gaming Commission established
regulations concerning authorized routes, duration of excursions, minimum levels
of insurance, construction of riverboats and periodic inspections. The Riverboat
Gaming Enforcement Division of the Louisiana State Police was authorized to
investigate applicants and issue licenses, investigate violations of the statute
and conduct continuing reviews of gaming activities.
In
May
1996, regulatory oversight of riverboat gaming was transferred to the Louisiana
Gaming Control Board, which is comprised of nine voting members appointed by
the
governor. The Louisiana Gaming Control Board now oversees all licensing matters
for riverboat casinos, land-based casinos, racinos, video poker and certain
aspects of Native American gaming other than those responsibilities reserved
to
the Louisiana State Police.
The
Louisiana Gaming Control Board is empowered to issue up to 15 licenses to
conduct gaming activities on a riverboat of new construction in accordance
with
applicable law. However, no more than six licenses may be granted to riverboats
operating from any one designated waterway.
The
Louisiana State Police continues to be involved broadly in gaming enforcement
and reports to the Louisiana Gaming Control Board. Louisiana law permits the
Louisiana State Police, among other things, to continue to (1) conduct
suitability investigations, (2) audit, investigate and enforce compliance with
standing regulations, (3) initiate enforcement and administrative actions and
(4) perform “all other duties and functions necessary for the efficient,
efficacious, and thorough regulation and control of gaming activities and
operations” under the Louisiana Gaming Control Board’s
jurisdiction.
Louisiana
gaming law specifies certain restrictions relating to the operation of riverboat
gaming, including the following:
· |
agents
of the Louisiana State Police are permitted on board at any time
during
gaming operations;
|
· |
gaming
devices, equipment and supplies may only be purchased or leased from
permitted suppliers and, with respect to gaming equipment, from permitted
manufacturers;
|
· |
gaming
may only take place in the designated gaming area while the riverboat
is
docked on a designated river or
waterway;
|
· |
gaming
equipment may not be possessed, maintained or exhibited by any person
on a
riverboat except in the specifically designated gaming area or in
a secure
area used for inspection, repair or storage of such
equipment;
|
· |
wagers
may be received only from a person present on a licensed
riverboat;
|
· |
persons
under 21 are not permitted in designated gaming
areas;
|
· |
except
for slot machine play, wagers may be made only with tokens, chips
or
electronic cards purchased from the licensee aboard a
riverboat;
|
· |
licensees
may only use docking facilities and routes for which they are licensed
and
may only board and discharge passengers at the riverboat’s licensed
berth;
|
· |
licensees
must have adequate protection and indemnity
insurance;
|
· |
licensees
must have all necessary federal and state licenses, certificates
and other
regulatory approvals prior to operating a riverboat;
and
|
· |
gaming
may only be conducted in accordance with the terms of the license
and
Louisiana law.
|
To
receive a gaming license in Louisiana, an applicant must be found to be a person
of good character, honesty and integrity and a person whose prior activities,
criminal record, if any, reputation, habits and associations do not (1) pose
a
threat to the public interest of the State of Louisiana or to the effective
regulation and control of gaming or (2) create or enhance the dangers of
unsuitable, unfair or illegal practices, methods and activities in the conduct
of gaming or the carrying on of business and financial arrangements of gaming
activities. In addition, the Louisiana Gaming Control Board will not grant
a
license unless it finds that, among other things:
· |
the
applicant can demonstrate the capability, either through training,
education, business experience or a combination of the preceding,
to
operate a gaming operation;
|
· |
the
proposed financing of the riverboat and the gaming operations is
adequate
for the nature of the proposed operation and is from a suitable and
acceptable source;
|
· |
the
applicant demonstrates a proven ability to operate a vessel of comparable
size, capacity and complexity to a riverboat so as to ensure the
safety of
its passengers;
|
· |
the
applicant submits with its application for a license a detailed plan
of
design of the riverboat;
|
· |
the
applicant designates the docking facilities to be used by the
riverboat;
|
· |
the
applicant shows adequate financial ability to construct and maintain
a
riverboat; and
|
· |
the
applicant has a good faith plan to recruit, train and upgrade minorities
in all employment classifications.
|
An
initial license to conduct riverboat gaming operations is valid for a term
of
five years and legislation passed in the 1999 legislative session provides
for
renewals every five years thereafter. Louisiana gaming law provides that a
renewal application for the period succeeding the initial five-year term of
an
operator’s license must be made to the Louisiana Gaming Control Board and must
include a statement under oath of any and all changes in information, including
financial information, provided in the previous application. The transfer of
a
license or an interest in a license is prohibited. A gaming license is deemed
to
be a privilege under Louisiana law and, as such, may be denied, revoked,
suspended, conditioned or limited at any time by the Louisiana Gaming Control
Board. The Isle-Bossier City and the Isle-Lake Charles each received a five-year
renewal of their license on July 20, 1999.
On
April
9, 2004, the Isle-Bossier City and the Isle-Lake Charles filed applications
for
a second five-year renewal of their three licenses. These five-year renewal
applications were approved for Louisiana Riverboat Gaming Partnership and Grand
Palais Riverboat Incorporated on August 17, 2004 and St. Charles Gaming Company
was approved on March 29, 2005.
Certain
persons affiliated with a riverboat gaming licensee, including directors and
officers of the licensee, directors and officers of any holding company of
the
licensee involved in gaming operations, persons holding 5% or greater interests
in the licensee and persons exercising influence over a licensee, are subject
to
the application and suitability requirements of Louisiana gaming
law.
The
sale,
purchase, assignment, transfer, pledge or other hypothecation, lease,
disposition or acquisition by any person of securities that represent 5% or
more
of the total outstanding shares issued by a licensee is subject to the approval
of the Louisiana Gaming Control Board. A security issued by a licensee must
generally disclose these restrictions. Prior approval from the Louisiana Gaming
Control Board is required for the sale, purchase, assignment, transfer, pledge
or other hypothecation, lease, disposition or acquisition of any ownership
interest of 5% or more of any non-corporate licensee or for the transfer of
any
“economic interest” of 5% or more of any licensee or affiliated gaming person.
An “economic interest” is defined as any interest whereby a person receives or
is entitled to receive, by agreement or otherwise, a profit, gain, thing of
value, loan, credit, security interest, ownership interest or other
benefit.
Fees
payable to the state for conducting gaming activities on a riverboat include
(1)
$50,000 per riverboat for the first year of operation and $100,000 per year
per
riverboat thereafter, plus (2) 18.5% of net gaming proceeds. Legislation was
passed during the 2001 legislative session that allowed those riverboats that
had been required to conduct cruises, including the riverboats at the Isle-Lake
Charles, to remain permanently dockside beginning April 1, 2001. The legislation
also increased the gaming tax for operators from 18.5% to 21.5%. A statute
also
authorizes local governing authorities to levy boarding fees. We currently
have
development agreements with certain local governing authorities in the
jurisdictions in which we operate pursuant to which we make payments in lieu
of
boarding fees. In Bossier City, we have a development agreement with the Bossier
Parish Police Jury pursuant to which we are required to pay 0.65% of net gaming
proceeds until January 2007. This rate is more than the statutory amount of
0.63%. In addition to this 0.65%, the Bossier City operation is also subject
to
statutory boarding fees.
A
licensee must notify and/or seek approval from the Louisiana Gaming Control
Board in connection with any withdrawals of capital, loans, advances or
distributions in excess of 5% of retained earnings for a corporate licensee,
or
of capital accounts for a partnership or limited liability company licensee,
upon completion of any such transaction. The Louisiana Gaming Control Board
may
issue an emergency order for not more than ten days prohibiting payment of
profits, income or accruals by, or investments in, a licensee. Unless excepted
or waived by the Louisiana Gaming Control Board, riverboat gaming licensees
and
their affiliated gaming persons must notify the Louisiana Gaming Control Board
60 days prior to the receipt by any such persons of any loans or extensions
of
credit or modifications thereof. The Louisiana Gaming Control Board is required
to investigate the reported loan, extension of credit or modification thereof
and to determine whether an exemption exists on the requirement of prior written
approval and, if such exemption is not applicable, to either approve or
disapprove the transaction. If the Louisiana Gaming Control Board disapproves
of
a transaction, the transaction cannot be entered into by the licensee or
affiliated gaming person. We are an affiliated gaming person of our subsidiaries
that hold the licenses to conduct riverboat gaming at the Isle-Bossier City
and
the Isle-Lake Charles.
The
failure of a licensee to comply with the requirements set forth above may result
in the suspension or revocation of that licensee’s gaming license. Additionally,
if the Louisiana Gaming Control Board finds that the individual owner or holder
of a security of a corporate license or intermediary company or any person
with
an economic interest in a licensee is not qualified under Louisiana law, the
Louisiana Gaming Control Board may require, under penalty of suspension or
revocation of the license, that the person not:
· |
receive
dividends or interest on securities of the
corporation;
|
· |
exercise
directly or indirectly a right conferred by securities of the
corporation;
|
· |
receive
remuneration or economic benefit from the
licensee;
|
· |
exercise
significant influence over activities of the licensee;
or
|
· |
continue
its ownership or economic interest in the
licensee.
|
A
licensee must periodically report the following information to the Louisiana
Gaming Control Board, which is not confidential and is available for public
inspection: (1) the licensee’s net gaming proceeds from all authorized games,
(2) the amount of net gaming proceeds tax paid and (3) all quarterly and annual
financial statements presenting historical data, including annual financial
statements that have been audited by an independent certified public
auditor.
During
the 1996 special session of the Louisiana legislature, legislation was enacted
placing on the ballot for a statewide election a constitutional amendment
limiting the expansion of gaming, which was subsequently passed by the voters.
As a result, local option elections are required before new or additional forms
of gaming can be brought into a parish.
Proposals
to amend or supplement Louisiana’s riverboat gaming statute are frequently
introduced in the Louisiana State Legislature. There is no assurance that
changes in Louisiana gaming law will not occur or that such changes will not
have a material adverse effect on our business in Louisiana.
Mississippi
In
June
1990, Mississippi enacted legislation legalizing dockside casino gaming for
counties along the Mississippi River, which is the western border for most
of
the state, and the Gulf Coast, which is the southern border for most of the
state. The legislation gave each of those counties the opportunity to hold
a
referendum on whether to allow dockside casino gaming within its
boundaries.
Gaming
vessels in Mississippi must be located on the Mississippi River, on navigable
waters in eligible counties along the Mississippi River or in the waters lying
south of the counties along the Mississippi Gulf Coast. Mississippi law permits
unlimited stakes gaming on permanently moored vessels on a 24-hour basis and
does not restrict the percentage of space that may be utilized for gaming.
There
are no limitations on the number of gaming licenses that may be issued in
Mississippi.
The
ownership and operation of gaming facilities in Mississippi are subject to
extensive state and local regulation intended to:
· |
prevent
unsavory or unsuitable persons from having any direct or indirect
involvement with gaming at any time or in any
capacity;
|
· |
establish
and maintain responsible accounting practices and procedures for
gaming
operations;
|
· |
maintain
effective control over the financial practices of licensees, including
establishing minimum procedures for internal fiscal affairs and
safeguarding of assets and revenues, providing reliable record keeping
and
making periodic reports;
|
· |
provide
a source of state and local revenues through taxation and licensing
fees;
|
· |
prevent
cheating and fraudulent practices;
and
|
· |
ensure
that gaming licensees, to the extent practicable, employ Mississippi
residents.
|
The
regulations are subject to amendment and interpretation by the Mississippi
Gaming Commission. Changes in Mississippi laws or regulations may limit or
otherwise materially affect the types of gaming that may be conducted in
Mississippi and such changes, if enacted, could have an adverse effect on us
and
our Mississippi gaming operations.
We
are
registered as a publicly traded corporation under the Mississippi Gaming Control
Act. Our gaming operations in Mississippi are subject to regulatory control
by
the Mississippi Gaming Commission, the State Tax Commission and various other
local, city and county regulatory agencies (collectively referred to as the
“Mississippi Gaming Authorities”). Our subsidiaries have obtained gaming
licenses from the Mississippi Gaming Authorities. We must obtain a waiver from
the Mississippi Gaming Commission before beginning any proposed gaming
operations outside of Mississippi. The licenses held by our Mississippi gaming
operations have terms of three years and are not transferable. The Isle-Biloxi,
the Isle-Vicksburg, the Isle-Natchez and the Isle-Lula hold licenses effective
from May 23, 2003, through May 22, 2006. There is no assurance that new licenses
can be obtained at the end of each three-year period of a license. Moreover,
the
Mississippi Gaming Commission may, at any time, and for any cause it deems
reasonable, revoke, suspend, condition, limit or restrict a license or approval
to own shares of stock in our subsidiaries that operate in
Mississippi.
Substantial
fines for each violation of Mississippi’s gaming laws or regulations may be
levied against us, our subsidiaries and the persons involved. A violation under
a gaming license held by a subsidiary of ours operating in Mississippi may
be
deemed a violation of all the other licenses held by us.
We,
along
with each of our Mississippi gaming subsidiaries, must periodically submit
detailed financial, operating and other reports to the Mississippi Gaming
Commission and/or the State Tax Commission. Numerous transactions, including
substantially all loans, leases, sales of securities and similar financing
transactions entered into by any of our Mississippi gaming subsidiaries must
be
reported to or approved by the Mississippi Gaming Commission. In addition,
the
Mississippi Gaming Commission may, at its discretion, require additional
information about our operations.
Certain
of our officers and employees and the officers, directors and certain key
employees of our Mississippi gaming subsidiaries must be found suitable or
be
licensed by the Mississippi Gaming Commission. We believe that all required
findings of suitability related to all of our Mississippi properties have been
applied for or obtained, although the Mississippi Gaming Commission at its
discretion may require additional persons to file applications for findings
of
suitability. In addition, any person having a material relationship or
involvement with us may be required to be found suitable or licensed, in which
case those persons must pay the costs and fees associated with such
investigation. The Mississippi Gaming Commission may deny an application for
a
finding of suitability for any cause that it deems reasonable. Changes in
certain licensed positions must be reported to the Mississippi Gaming
Commission. In addition to its authority to deny an application for a finding
of
suitability, the Mississippi Gaming Commission has jurisdiction to disapprove
a
change in a licensed position. The Mississippi Gaming Commission has the power
to require us and any of our Mississippi gaming subsidiaries to suspend or
dismiss officers, directors and other key employees or to sever relationships
with other persons who refuse to file appropriate applications or who the
authorities find unsuitable to act in such capacities.
Employees
associated with gaming must obtain work permits that are subject to immediate
suspension under certain circumstances. The Mississippi Gaming Commission will
refuse to issue a work permit to a person who has been convicted of a felony,
committed certain misdemeanors or knowingly violated the Mississippi Gaming
Control Act, and it may refuse to issue a work permit to a gaming employee
for
any other reasonable cause.
At
any
time, the Mississippi Gaming Commission has the power to investigate and require
the finding of suitability of any record or beneficial stockholder of ours.
The
Mississippi Gaming Control Act requires any person who individually or in
association with others acquires, directly or indirectly, beneficial ownership
of more than 5% of our common stock to report the acquisition to the Mississippi
Gaming Commission, and such person may be required to be found suitable. In
addition, the Mississippi Gaming Control Act requires any person who,
individually or in association with others, becomes,
directly
or indirectly, a beneficial owner of more than 10% of our common stock, as
reported to the U.S. Securities and Exchange Commission, to apply for a finding
of suitability by the Mississippi Gaming Commission and pay the costs and fees
that the Mississippi Gaming Commission incurs in conducting the
investigation.
The
Mississippi Gaming Commission has generally exercised its discretion to require
a finding of suitability of any beneficial owner of more than 5% of a registered
publicly traded corporation’s stock. However, the Mississippi Gaming Commission
has adopted a regulation that may permit certain "institutional" investors
to
obtain waivers that allow them to beneficially own, directly or indirectly,
up
to 15% (19% in certain specific instances) of the voting securities of a
registered publicly traded corporation without a finding of suitability. If
a
stockholder who must be found suitable is a corporation, partnership or trust,
it must submit detailed business and financial information, including a list
of
beneficial owners.
Any
person who fails or refuses to apply for a finding of suitability or a license
within 30 days after being ordered to do so by the Mississippi Gaming Commission
may be found unsuitable. We believe that compliance by us with the licensing
procedures and regulatory requirements of the Mississippi Gaming Commission
will
not affect the marketability of our securities. Any person found unsuitable
who
holds, directly or indirectly, any beneficial ownership of our securities beyond
such time as the Mississippi Gaming Commission prescribes may be guilty of
a
misdemeanor. We are subject to disciplinary action if, after receiving notice
that a person is unsuitable to be a stockholder or to have any other
relationship with us or our subsidiaries operating casinos in Mississippi,
we:
· |
pay
the unsuitable person any dividend or other distribution upon its
voting
securities;
|
· |
recognize
the exercise, directly or indirectly, of any voting rights conferred
by
its securities;
|
· |
pay
the unsuitable person any remuneration in any form for services rendered
or otherwise, except in certain limited and specific circumstances;
or
|
· |
fail
to pursue all lawful efforts to require the unsuitable person to
divest
itself of the securities, including, if necessary, our immediate
purchase
of the securities for cash at a fair market
value.
|
We
may be
required to disclose to the Mississippi Gaming Commission upon request the
identities of the holders of any of our debt securities. In addition, under
the
Mississippi Gaming Control Act, the Mississippi Gaming Commission may, in its
discretion, (1) require holders of our securities, including our notes, to
file
applications, (2) investigate such holders and (3) require such holders to
be
found suitable to own such securities. Although the Mississippi Gaming
Commission generally does not require the individual holders of obligations
such
as the notes to be investigated and found suitable, the Mississippi Gaming
Commission retains the discretion to do so for any reason, including but not
limited to a default, or where the holder of the debt instrument exercises
a
material influence over the gaming operations of the entity in question. Any
holder of debt securities required to apply for a finding of suitability must
pay all investigative fees and costs of the Mississippi Gaming Commission in
connection with such an investigation.
The
Mississippi regulations provide that a change in control of us may not occur
without the prior approval of the Mississippi Gaming Commission. Mississippi
law
prohibits us from making a public offering of our securities without the
approval of the Mississippi Gaming Commission if any part of the proceeds of
the
offering is to be used to finance the construction, acquisition or operation
of
gaming facilities in Mississippi, or to retire or extend obligations incurred
for one or more such purposes. The Mississippi Gaming Commission has the
authority to grant a continuous approval of securities offerings and has granted
such approval for us, subject to renewal every two years.
Regulations
of the Mississippi Gaming Commission prohibit certain repurchases of securities
of publicly traded corporations registered with the Mississippi Gaming
Commission, including holding companies such as ours, without prior approval
of
the Mississippi Gaming Commission. Transactions covered by these regulations
are
generally aimed at discouraging repurchases of securities at a premium over
market price from certain holders of greater than 3% of the outstanding
securities of the registered publicly traded corporation. The regulations of
the
Mississippi Gaming Commission also require prior approval for a “plan of
recapitalization” as defined in such regulations.
We
must
maintain in the State of Mississippi current stock ledgers, which may be
examined by the Mississippi Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be required
to disclose the identity of the beneficial owner to the Mississippi Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. We must render maximum assistance in determining
the
identity of the beneficial owner.
Mississippi
law requires that certificates representing shares of our common stock bear
a
legend to the general effect that the securities are subject to the Mississippi
Gaming Control Act and regulations of the Mississippi Gaming Commission. The
Mississippi Gaming Commission has the authority to grant a waiver from the
legend requirement, which we have obtained. The Mississippi Gaming Commission,
through the power to regulate licenses, has the power to impose additional
restrictions on the holders of our securities at any time.
The
Mississippi Gaming Commission enacted a regulation in 1994 requiring that,
as a
condition to licensure, an applicant must provide a plan to develop
infrastructure facilities amounting to 25% of the cost of the casino and a
parking facility capable of accommodating 500 cars. In 1999, the Mississippi
Gaming Commission approved amendments to this regulation that increased the
infrastructure development requirement from 25% to 100% for new casinos (or
upon
acquisition of a closed casino), but grandfathered existing licensees and
development plans approved prior to the effective date of the new regulation.
“Infrastructure facilities” include any of the following:
· |
a
250-room or larger hotel of at least a two-star rating as defined
by the
current edition of the Mobil Travel
Guide;
|
· |
entertainment
facilities;
|
· |
any
other facilities approved by the Mississippi Gaming
Commission.
|
Parking
facilities, roads, sewage and water systems or civic facilities are not
considered “infrastructure facilities.” The Mississippi Gaming Commission may
reduce the number of rooms required in a hotel if it is satisfied that
sufficient rooms are available to accommodate the anticipated number of
visitors. In 2003, the Mississippi Gaming Commission again amended its
regulations regarding development plan approval but left the 100% infrastructure
requirement intact.
License
fees and taxes are payable to the State of Mississippi and to the counties
and
cities in which a
Mississippi
gaming subsidiary’s respective operations will be conducted. The license fee
payable to the state of Mississippi is based upon gross revenue of the licensee
(generally defined as gaming receipts less payout to customers as winnings)
and
equals 4% of gross revenue of $50,000 or less per month, 6% of gross revenue
in
excess of $50,000 but less than $134,000 per calendar month, and 8% of gross
revenue in excess of $134,000 per calendar month. The foregoing license fees
are
allowed as a credit against the licensee’s Mississippi income tax liability for
the year paid. Additionally, a licensee must pay a $5,000 annual license fee
and
an annual fee based upon the number of games it operates. The gross revenue
tax
imposed by the Mississippi communities and counties in which our casino
operations are located equals 0.4% of gross revenue of $50,000 or less per
calendar month, 0.6% of gross revenue over $50,000 and less than $134,000 per
calendar month and 0.8% of gross revenue greater than $134,000 per calendar
month. These fees have been imposed in, among other cities and counties, Biloxi,
Vicksburg, and Coahoma County. Certain local and private laws of the state
of
Mississippi may impose fees or taxes on the Mississippi gaming subsidiaries
in
addition to the fees described above.
The
Mississippi Gaming Commission requires, as a condition of licensure or license
renewal, that casino vessels on the Mississippi Gulf Coast that are not
self-propelled must be moored to withstand a Category 4 hurricane with 155
mile-per-hour winds and 15-foot tidal surge. We believe that all of our
Mississippi gaming locations currently meet this requirement. A 1996 Mississippi
Gaming Commission regulation prescribes the hurricane emergency procedure to
be
used by the Mississippi Gulf Coast casinos.
The
sale
of food or alcoholic beverages at our Mississippi gaming locations is subject
to
licensing, control and regulation by the applicable state and local authorities.
The agencies involved have full power to limit, condition, suspend or revoke
any
such license, and any such disciplinary action could (and revocation would)
have
a material adverse effect upon the operations of the affected casino or casinos.
Certain of our officers and managers and our Mississippi gaming subsidiaries
must be investigated by the Alcoholic Beverage Control Division of the State
Tax
Commission in connection with liquor permits that have been issued. The
Alcoholic Beverage Control Division of the State Tax Commission must approve
all
changes in licensed positions.
On
three
separate occasions since 1998, certain anti-gaming groups have proposed
referenda that, if adopted, would have banned gaming in Mississippi and required
that gaming entities cease operations within two years after the ban. All three
referenda were declared invalid by Mississippi courts because each lacked a
required government revenue impact statement.
Missouri
Conducting
gambling games and operating an excursion gambling boat in Missouri are subject
to extensive regulation under Missouri’s Riverboat Gambling Act and the rules
and regulations promulgated thereunder. The Missouri Gaming Commission was
created by the Missouri Riverboat Gambling Act and is charged with regulatory
authority over riverboat gaming operations in Missouri, including the issuance
of riverboat gaming licenses. In June 2000, IOC-Kansas City, Inc., a subsidiary
of ours, was issued a riverboat gaming license in connection with our Kansas
City operation. Additionally, in December 2001, IOC-Boonville, Inc., a
subsidiary of ours, was issued a riverboat gaming license for our Boonville
operation.
In
order
to obtain a riverboat gaming license, the proposed operating business entity
must complete a Class A Riverboat Gaming Application, comprised of comprehensive
application forms, including corroborating attachments, and undergo an extensive
background investigation by the Missouri Gaming Commission. In addition, each
key person associated with the applicant (including directors, officers,
managers and owners of a significant direct or indirect interest in the
applicant) must complete a Riverboat Gaming Application Form I and undergo
a
background investigation. Certain key business entities closely related to
the
applicant or "business entity key persons" must undergo a similar
application
process and background check. An applicant will not receive a license to conduct
gambling games and to operate an excursion gambling boat if the applicant and
its key persons have not established good repute and moral character and no
licensee shall either employ or contract with any person who has pled guilty
to,
or been convicted of, a felony, to perform any duties directly connected with
the licensee’s privileges under a license granted by the Commission. Each
license granted entitles a licensee to conduct gambling games on an excursion
gambling boat or to operate an excursion gambling boat and the equipment thereon
from a specific location. The duration of the license initially runs for two
one-year terms; thereafter, two-year terms. The Commission also licenses the
serving of alcoholic beverages on riverboats and related
facilities.
In
determining whether to grant a license, the Commission considers the following
factors, among others: (i) the integrity of the applicants; (ii) the types
and
variety of games the applicant may offer; (iii) the quality of the physical
facility, together with improvements and equipment, and how soon the project
will be completed; (iv) the financial ability of the applicant to develop and
operate the facility successfully; (v) the status of governmental actions
required by the facility; (vi) management ability of the applicant; (vii)
compliance with applicable statutes, rules, charters and ordinances; (viii)
the
economic, ecological and social impact of the facility as well as the cost
of
public improvements; (ix) the extent of public support or opposition; (x) the
plan adopted by the home dock city or county; and (xi) effects on
competition.
A
licensee is subject to the imposition of penalties, suspension or revocation
of
its license for any act that is injurious to the public health, safety, morals,
good order, and general welfare of the people of the State of Missouri, or
that
would discredit or tend to discredit the Missouri gaming industry or the State
of Missouri, including without limitation: (i) failing to comply with or make
provision for compliance with the legislation, the rules promulgated thereunder
or any federal, state or local law or regulation; (ii) failing to comply with
any rules, order or ruling of the Missouri Gaming Commission or its agents
pertaining to gaming; (iii) receiving goods or services from a person or
business entity who does not hold a supplier’s license but who is required to
hold such license by the legislation or the rules; (iv) being suspended or
ruled
ineligible or having a license revoked or suspended in any state or gaming
jurisdiction; (v) associating with, either socially or in business affairs,
or
employing persons of notorious or unsavory reputation or who have extensive
police records, or who have failed to cooperate with any officially constituted
investigatory or administrative body and would adversely affect public
confidence and trust in gaming; (vi) employing in any Missouri gaming operation
any person known to have been found guilty of cheating or using any improper
device in connection with any gambling game; (vii) use of fraud, deception,
misrepresentation or bribery in securing any license or permit issued pursuant
to the legislation; (viii) obtaining any fee, charge, or other compensation
by
fraud, deception or misrepresentation; and (ix) incompetence, misconduct, gross
negligence, fraud, misrepresentation or dishonesty in the performance of the
functions or duties regulated by the Missouri Riverboat Gambling
Act.
Any
transfer or issuance of ownership interest in a publicly held gaming licensee
or
its holding company that results in an entity owning, directly or indirectly,
an
aggregate ownership interest of 5% or more in the gaming licensee must be
reported to the Missouri Gaming Commission within seven days. Further, any
pledge or hypothecation of 5% or more of the ownership interest in a publicly
held gaming licensee or its holding company must be reported to the Missouri
Gaming Commission within seven days.
Every
employee participating in a riverboat gaming operation must hold an occupational
license. In addition, the Missouri Gaming Commission issues supplier’s licenses,
which authorize the supplier licensee to sell or lease gaming equipment and
supplies to any licensee involved in the operation of gaming
operations.
Riverboat
gaming operations may only be conducted on the Missouri River or Mississippi
River. Although, all of the excursion gambling boats in Missouri are permanently
moored boats or barges, a two
hour
simulated cruise is imposed in order to ensure the enforcement of loss limit
restrictions. Missouri law imposes a maximum loss per person per cruise of
$500.
Minimum and maximum wagers on games are set by the licensee and wagering may
be
conducted only with a cashless wagering system, whereby money is converted
to
tokens, electronic cards or chips that can only be used for wagering. No person
under the age of 21 is permitted to wager, and wagers may only be taken from
a
person present on a licensed excursion gambling boat.
The
Missouri Riverboat Gambling Act imposes a 20% wagering tax on adjusted gross
receipts (generally defined as gross receipts less winnings paid to wagerers)
from gambling games. The tax imposed is to be paid by the licensee to the
Commission on the day after the day when the wagers were made. Of the proceeds
of that tax, 10% goes to the local government where the home dock is located,
and the remainder goes to the State of Missouri.
The
Missouri Riverboat Gambling Act also requires that licensees pay a $2.00
admission tax to the Missouri Gaming Commission for each person admitted to
a
gaming cruise. The licensee is required to maintain public books and records
clearly showing amounts received from admission fees, the total amount of gross
receipts and the total amount of adjusted gross receipts. In addition, all
local
income, earnings, use, property and sales taxes are applicable to licensees.
There have been from time to time pending before the Missouri General Assembly
several proposed bills which individually or in combination would, if adopted,
(1) remove the loss limit restriction, (2) adjust the amount of wagering tax
imposed on adjusted gross receipts of licensees and/or (3) adjust the amount
of
admission tax paid by the licensee for each person admitted for a gaming
cruise.
Iowa
In
1989,
the State of Iowa legalized riverboat gaming on the Mississippi River and other
waterways located in Iowa. The legislation authorized the granting of licenses
to non-profit corporations that, in turn, are permitted to enter into operating
agreements with qualified persons who also actually conduct riverboat gaming
operations. Such operators must likewise be approved and licensed by the Iowa
Racing and Gaming Commission (the “Iowa Gaming Commission”).
The
Isle-Bettendorf has the right to renew its operator’s contract with the Scott
County Regional Authority, a non-profit corporation organized for the purpose
of
facilitating riverboat gaming in Bettendorf, Iowa, for succeeding three-year
periods as long as Scott County voters approve gaming in the jurisdiction.
Under
the operator’s contract, the Isle-Bettendorf pays the Scott County Regional
Authority a fee equal to 4.1% of the adjusted gross receipts. Further, the
Isle-Bettendorf pays a fee to the City of Bettendorf equal to 1.65% of adjusted
gross receipts.
In
June
1994, Upper Mississippi Gaming Corporation, a non-profit corporation organized
for the purpose of facilitating riverboat gaming in Marquette, Iowa, entered
into an operator’s agreement for the Isle-Marquette for a period of twenty-five
years. Under the management agreement, the non-profit organization is to be
paid
a fee of $0.50 per passenger. Further, pursuant to a dock site agreement (which
also has a term of twenty-five years), the Isle-Marquette is required to pay
a
fee to the City of Marquette in the amount of $1.00 per passenger, plus a fixed
amount of $15,000 per month and 2.5% of gaming revenues (less state wagering
taxes) in excess of $20.0 million but less than $40.0 million; 5% of gaming
revenues (less state wagering taxes) in excess of $40.0 million but less than
$60.0 million; and 7.5% of gaming revenues (less state wagering taxes) in excess
of $60.0 million.
In
October 2000, the Riverboat Development Authority, a non-profit corporation
organized for the purpose of facilitating riverboat gaming in Davenport, Iowa,
entered into an operator’s agreement with the Isle-Davenport to conduct
riverboat gaming in Davenport, Iowa. The operating agreement requires the
Isle-Davenport to make weekly payments to the qualified sponsoring organization
equal to 4.1% of each week’s adjusted gross receipts (as defined in the enabling
legislation) or $38,461.54, whichever is greater.
This
agreement will remain in effect through March 31, 2009 and may be extended
by
the Isle-Davenport so long as it holds a license to conduct gaming. In addition,
the Isle-Davenport pays a docking fee, gaming tax and a payment in lieu of
taxes
to the City of Davenport. Pursuant to a development agreement with the City,
the
Isle-Davenport has exclusive docking privileges in the City of Davenport until
March 31, 2017 in consideration for this docking fee. The docking fee has both
a
fixed base and a per passenger increment. The fixed fee commenced April 1,
1994
at $111,759 and increases annually by 4%. The incremental component is a $0.10
charge for each passenger in excess of 1,117,579 passengers (which charge also
increases by 4% per year). The City is also guaranteed an annual gaming tax
of
$558,789.50 per year (based on a minimum passenger floor count of 1,117,579
passengers at $0.50 per passenger). Finally, the Isle-Davenport is obligated
to
pay a payment in lieu of taxes to support the downtown development district.
This annual lump sum payment is in the amount of $123,516 plus $0.20 per
passenger in excess of 1,117,579 passengers. This payment in lieu of taxes
is
further subject to a minimum $226,179 per year payment.
Iowa
law
permits gaming licensees to offer unlimited stakes gaming on games approved
by
the Iowa Gaming Commission on a 24-hour basis. Dockside casino gaming is
authorized and the Iowa Gaming Commission now permits licensees the option
to
operate on permanently moored vessels or moored barges. The legal age for gaming
is 21.
All
Iowa
licenses were approved for renewal at the March 3, 2005 Iowa Gaming Commission
meeting. These licenses are not transferable and will need to be renewed in
March 2006 and prior to the commencement of each subsequent annual renewal
period.
The
ownership and operation of gaming facilities in Iowa are subject to extensive
state laws, regulations of the Iowa Gaming Commission and various county and
municipal ordinances (collectively, the “Iowa Gaming Laws”), concerning the
responsibility, financial stability and character of gaming operators and
persons financially interested or involved in gaming operations. Iowa Gaming
Laws seek to: (1) prevent unsavory or unsuitable persons from having direct
or
indirect involvement with gaming at any time or in any capacity; (2) establish
and maintain responsible accounting practices and procedures; (3) maintain
effective control over the financial practices of licensees (including the
establishment of minimum procedures for internal fiscal affairs, the
safeguarding of assets and revenues, the provision of reliable record keeping
and the filing of periodic reports with the Iowa Gaming Commission); (4) prevent
cheating and fraudulent practices; and (5) provide a source of state and local
revenues through taxation and licensing fees. Changes in Iowa Gaming Laws could
have a material adverse effect on the Iowa gaming operations.
Gaming
licenses granted to individuals must be renewed every year, and licensing
authorities have broad discretion with regard to such renewals. Licenses are
not
transferable. The Iowa gaming operations must submit detailed financial and
operating reports to the Iowa Gaming Commission. Certain contracts of licensees
in excess of $100,000 must be submitted to and approved by the Iowa Gaming
Commission.
Certain
officers, directors, managers and key employees of the Iowa gaming operations
are required to be licensed by the Iowa Gaming Commission. Employees associated
with gaming must obtain work permits that are subject to immediate suspension
under specific circumstances. In addition, anyone having a material relationship
or involvement with the Iowa gaming operations may be required to be found
suitable or to be licensed, in which case those persons would be required to
pay
the costs and fees of the Iowa Gaming Commission in connection with the
investigation. The Iowa Gaming Commission may deny an application for a license
for any cause deemed reasonable. In addition to its authority to deny an
application for license, the Iowa Gaming Commission has jurisdiction to
disapprove a change in position by officers or key employees and the power
to
require the Iowa gaming operations to suspend or dismiss officers, directors
or
other key employees or sever relationships with other persons who refuse to
file
appropriate applications or whom the Iowa Gaming Commission finds unsuitable
to
act in such capacities.
The
Iowa
Gaming Commission may revoke a gaming license if the licensee:
· |
has
been suspended from operating a gaming operation in another jurisdiction
by a board or commission of that
jurisdiction;
|
· |
has
failed to demonstrate financial responsibility sufficient to meet
adequately the requirements of the gaming
enterprise;
|
· |
is
not the true owner of the
enterprise;
|
· |
has
failed to disclose ownership of other persons in the
enterprise;
|
· |
is
a corporation 10% of the stock of which is subject to a contract
or option
to purchase at any time during the period for which the license was
issued, unless the contract or option was disclosed to the Iowa Gaming
Commission and the Iowa Gaming Commission approved the sale or transfer
during the period of the license;
|
· |
knowingly
makes a false statement of a material fact to the Iowa Gaming
Commission;
|
· |
fails
to meet a monetary obligation in connection with an excursion gaming
boat;
|
· |
pleads
guilty to, or is convicted of a
felony;
|
· |
loans
to any person, money or other thing of value for the purpose of permitting
that person to wager on any game of
chance;
|
· |
is
delinquent in the payment of property taxes or other taxes or fees
or a
payment of any other contractual obligation or debt due or owed to
a city
or county; or
|
· |
assigns,
grants or turns over to another person the operation of a licensed
excursion boat (this provision does not prohibit assignment of a
management contract approved by the Iowa Gaming Commission) or permits
another person to have a share of the money received for admission
to the
excursion boat.
|
If
it
were determined that the Iowa Gaming Laws were violated by a licensee, the
gaming licenses held by a licensee could be limited, made conditional, suspended
or revoked. In addition, the licensee and the persons involved could be subject
to substantial fines for each separate violation of the Iowa Gaming Laws in
the
discretion of the Iowa Gaming Commission. Limitations, conditioning or
suspension of any gaming license could (and revocation of any gaming license
would) have a material adverse effect on operations.
The
Iowa
Gaming Commission may also require any individual who has a material
relationship with the Iowa gaming operations to be investigated and licensed
or
found suitable. The Iowa Gaming Commission, prior to the acquisition, must
approve any person who acquires 5% or more of a licensee’s equity securities.
The applicant stockholder is required to pay all costs of this
investigation.
Gaming
taxes approximating 22% of the adjusted gross receipts will be payable by each
licensee on its operations to the State of Iowa. In addition, there will be
two
prepaid assessments due on June 1, 2005 and June 1, 2006 in an amount equal
to
2.152% of each licensee's adjusted gross receipts for fiscal year 2004. These
assessments will be offset by future state gaming taxes paid by each licensee
with a credit for 20% of the assessments paid allowed each year beginning July
1, 2010 for five consecutive years.
The
state
of Iowa is also reimbursed by the licensees for all costs associated with
monitoring and enforcement by the Iowa Gaming Commission and the Iowa Department
of Criminal Investigation.
Colorado
The
State
of Colorado created the Division of Gaming (the “Colorado Division”) within the
Department of Revenue to license, implement, regulate and supervise the conduct
of limited gaming under the Colorado Limited Gaming Act. The Director of the
Colorado Division (the “Colorado Director”), pursuant to regulations promulgated
by, and subject to the review of, a five-member Colorado Limited Gaming Control
Commission (the “Colorado Commission”), has been granted broad power to ensure
compliance with the Colorado gaming laws and regulations (collectively, the
“Colorado Regulations”). The Colorado Director may inspect without notice,
impound or remove any gaming device. The Colorado Director may examine and
copy
any licensee’s records, may investigate the background and conduct of licensees
and their employees, and may bring disciplinary actions against licensees and
their employees. The Colorado Director may also conduct detailed background
investigations of persons who loan money to, or otherwise provide financing
to,
a licensee.
The
Colorado Commission is empowered to issue five types of gaming and
gaming-related licenses, and has delegated authority to the Colorado Director
to
issue certain types of licenses and approve certain changes in ownership. The
licenses are revocable and non-transferable. The failure or inability of the
Isle of Capri Black Hawk, LLC “Isle-Black Hawk” or CCSC/Blackhawk, Inc “Colorado
Central Station-Black Hawk” (each, a “Colorado Casino” or collectively, the
“Colorado Casinos”), or the failure or inability of others associated with any
of the Colorado Casinos, including us, to maintain necessary gaming licenses
or
approvals would have a material adverse effect on our operations. All persons
employed by any of the Colorado Casinos, and involved, directly or indirectly,
in gaming operations in Colorado also are required to obtain a Colorado gaming
license. All licenses must be renewed annually, except those for key and support
employees, which must be renewed every two years.
As
a
general rule, under the Colorado Regulations, no person may have an “ownership
interest” in more than three retail gaming licenses in Colorado. The Colorado
Commission has ruled that a person does not have an ownership interest in a
retail gaming licensee for purposes of the multiple license prohibition if:
· |
that
person has less than a 5% ownership interest in an institutional
investor
that has an ownership interest in a publicly traded licensee or publicly
traded company affiliated with a
licensee;
|
· |
a
person has a 5% or more ownership interest in an institutional investor,
but the institutional investor has less than a 5% ownership interest
in a
publicly traded licensee or publicly traded company affiliated with
a
licensee;
|
· |
an
institutional investor has less than a 5% ownership interest in a
publicly
traded licensee or publicly traded company affiliated with a
licensee;
|
· |
an
institutional investor possesses voting securities in a fiduciary
capacity
for another person, and does not exercise voting control over 5%
or more
of the outstanding voting securities of a publicly traded licensee
or of a
publicly traded company affiliated with a
licensee;
|
· |
a
registered broker or dealer retains possession of voting securities
of a
publicly traded licensee or of a publicly traded company affiliated
with a
licensee for its customers and not for its own account, and exercises
voting rights for less than 5% of the outstanding voting securities
of a
publicly traded licensee or publicly traded company affiliated with
a
licensee;
|
· |
a
registered broker or dealer acts as a market maker for the stock
of a
publicly traded licensee or of a publicly traded company affiliated
with a
licensee and exercises voting rights in less than 5% of the outstanding
voting securities of the publicly traded licensee or publicly traded
company affiliated with a licensee;
|
· |
an
underwriter is holding securities of a publicly traded licensee or
publicly traded company affiliated with a licensee as part of an
underwriting for no more than 90 days after the beginning of such
underwriting if it exercises voting rights of less than 5% of the
outstanding voting securities of a publicly traded licensee or publicly
traded company affiliated with a
licensee;
|
· |
a
book entry transfer facility holds voting securities for third parties,
if
it exercises voting rights with respect to less than 5% of the outstanding
voting securities of a publicly traded licensee or publicly traded
company
affiliated with a licensee; or
|
· |
a
person’s sole ownership interest is less than 5% of the outstanding voting
securities of the publicly traded licensee or publicly traded company
affiliated with a licensee.
|
Because
we own the Colorado Casinos, our business opportunities, and those of persons
with an “ownership interest” in us, or any of the Colorado Casinos, are limited
to interests that comply with the Colorado Regulations and the Colorado
Commission’s rule.
In
addition, pursuant to the Colorado Regulations, no manufacturer or distributor
of slot machines or associated equipment may, without notification being
provided to the Colorado Division within ten days, knowingly have an interest
in
any casino operator, allow any of its officers or any other person with a
substantial interest in such business to have such an interest, employ any
person if that person is employed by a casino operator, or allow any casino
operator or person with a substantial interest therein to have an interest
in a
manufacturer’s or distributor’s business. A “substantial interest” means the
lesser of (i) as large an interest in an entity as any other person or (ii)
any
financial or equity interest equal to or greater than 5%. The Colorado
Commission has ruled that a person does not have a “substantial interest” if
such person’s sole ownership interest in such licensee is through the ownership
of less than 5% of the outstanding voting securities of a publicly traded
licensee or publicly traded affiliated company of a licensee.
We
are a
“publicly traded corporation” under the Colorado Regulations.
Under
the
Colorado Regulations, any person or entity having any direct or indirect
interest in a gaming licensee or an applicant for a gaming license, including,
but not limited to, us, Casino America of Colorado, Inc., IC Holdings Colorado,
Inc., IOC Black Hawk Distribution Company, LLC or either of the two Colorado
Casinos and their security holders, may be required to supply the Colorado
Commission with substantial information, including, but not limited to,
background information, source of funding information, a sworn statement that
such person or entity is not holding his or her interest for any other party,
and fingerprints. Such information, investigation and licensing (or finding
of
suitability) as an “associated person” automatically will be required of all
persons (other than certain institutional investors discussed below) which
directly or indirectly beneficially own 10% or more of a direct or indirect
beneficial ownership or interest in either of the two Colorado Casinos, through
their beneficial ownership of any class of voting securities of us, Casino
America of Colorado, Inc., IC Holdings Colorado, Inc., IOC Black Hawk
Distribution Company, LLC or either of the two Colorado Casinos. Those persons
must report their interest within 10 days and file appropriate applications
within 45 days after acquiring that interest. Persons who directly or indirectly
beneficially own 5% or more (but less than 10%) of a direct or indirect
beneficial
ownership
or interest in either of the two Colorado Casinos, through their beneficial
ownership of any class of voting securities of us, Casino America of Colorado,
Inc., IC Holdings Colorado, Inc., IOC Black Hawk Distribution Company, LLC
or
either of the two Colorado Casinos, must report their interest to the Colorado
Commission within 10 days after acquiring that interest and may be required
to
provide additional information and to be found suitable. (It is the current
practice of the gaming regulators to require findings of suitability for persons
beneficially owning 5% or more of a direct or indirect beneficial ownership
or
interest, other than certain institutional investors discussed below.) If
certain institutional investors provide specified information to the Colorado
Commission and are holding for investment purposes only, those investors, in
the
Colorado Commission’s discretion, may be permitted to own up to 14.99% of the
Colorado Casinos through their beneficial ownership in any class of voting
of
securities of us, Casino America of Colorado, Inc., IC Holdings Colorado, Inc.,
IOC Black Hawk Distribution Company, LLC or either of the two Colorado Casinos,
before being required to be found suitable. All licensing and investigation
fees
will have to be paid by the person in question. The associated person
investigation fee currently is $62 per hour.
The
Colorado Regulations define a “voting security” to be a security the holder of
which is entitled to vote generally for the election of a member or members
of
the board of directors or board of trustees of a corporation or a comparable
person or persons of another form of business organization.
The
Colorado Commission also has the right to request information from any person
directly or indirectly interested in, or employed by, a licensee, and to
investigate the moral character, honesty, integrity, prior activities, criminal
record, reputation, habits and associations of: (1) all persons licensed
pursuant to the Colorado Limited Gaming Act; (2) all officers, directors and
stockholders of a licensed privately held corporation; (3) all officers,
directors and stockholders holding either a 5% or greater interest or a
controlling interest in a licensed publicly traded corporation; (4) all general
partners and all limited partners of a licensed partnership; (5) all persons
that have a relationship similar to that of an officer, director or stockholder
of a corporation (such as members and managers of a limited liability company);
(6) all persons supplying financing or loaning money to any licensee connected
with the establishment or operation of limited gaming; (7) all persons having
a
contract, lease or ongoing financial or business arrangement with any licensee,
where such contract, lease or arrangement relates to limited gaming operations,
equipment devices or premises; and (8) all persons contracting with or supplying
any goods and services to the gaming regulators.
Certain
public officials and employees are prohibited from having any direct or indirect
interest in a license or limited gaming.
In
addition, under the Colorado Regulations, every person who is a party to a
“gaming contract” (as defined below) or lease with an applicant for a license,
or with a licensee, upon the request of the Colorado Commission or the Colorado
Director, must promptly provide the Colorado Commission or Colorado Director
all
information that may be requested concerning financial history, financial
holdings, real and personal property ownership, interests in other companies,
criminal history, personal history and associations, character, reputation
in
the community and all other information that might be relevant to a
determination of whether a person would be suitable to be licensed by the
Colorado Commission. Failure to provide all information requested constitutes
sufficient grounds for the Colorado Director or the Colorado Commission to
require a licensee or applicant to terminate its “gaming contract” or lease with
any person who failed to provide the information requested. In addition, the
Colorado Director or the Colorado Commission may require changes in “gaming
contracts” before an application is approved or participation in the contract is
allowed. A “gaming contract” is defined as an agreement in which a person does
business with or on the premises of a licensed entity.
The
Colorado Commission and the Colorado Division have interpreted the Colorado
Regulations to permit the Colorado Commission to investigate and find suitable
persons or entities providing financing to or acquiring securities from us,
Casino America of Colorado, Inc., IC Holdings Colorado, Inc., IOC Black Hawk
Distribution Company, LLC or either of the two Colorado Casinos. As noted above,
any
person
or
entity required to file information, be licensed or found suitable would be
required to pay the costs thereof and of any investigation. Although the
Colorado Regulations do not require the prior approval for the execution of
credit facilities or issuance of debt securities, the Colorado regulators
reserve the right to approve, require changes to or require the termination
of
any financing, including if a person or entity is required to be found suitable
and is not found suitable. In any event, lenders, note holders, and others
providing financing will not be able to exercise certain rights and remedies
without the prior approval of the Colorado gaming authorities. Information
regarding lenders and holders of securities will be periodically reported to
the
Colorado gaming authorities.
Except
under certain limited circumstances relating to slot machine manufacturers
and
distributors, every person supplying goods, equipment, devices or services
to
any licensee in return for payment of a percentage, or calculated upon a
percentage, of limited gaming activity or income must obtain an operator license
or be listed on the retailer’s license where such gaming will take
place.
An
application for licensure or suitability may be denied for any cause deemed
reasonable by the Colorado Commission or the Colorado Director, as appropriate.
Specifically, the Colorado Commission and the Colorado Director must deny a
license to any applicant who, among other things: (1) fails to prove by clear
and convincing evidence that the applicant is qualified; (2) fails to provide
information and documentation requested; (3) fails to reveal any fact material
to qualification, or supplies information which is untrue or misleading as
to a
material fact pertaining to qualification; (4) has been convicted of, or has
a
director, officer, general partner, stockholder, limited partner or other person
who has a financial or equity interest in the applicant who has been convicted
of, specified crimes, including the service of a sentence upon conviction of
a
felony in a correctional facility, city or county jail, or community
correctional facility or under the state board of parole or any probation
department within ten years prior to the date of the application,
gambling-related offenses, theft by deception or crimes involving fraud or
misrepresentation, is under current prosecution for such crimes (during the
pendency of which license determination may be deferred), is a career offender
or a member or associate of a career offender cartel, or is a professional
gambler; or (5) has refused to cooperate with any state or federal body
investigating organized crime, official corruption or gaming offenses. If the
Colorado Commission determines that a person or entity is unsuitable to directly
or indirectly own interests in us, Casino America of Colorado, Inc., IC Holdings
Colorado, Inc., or either of the two Colorado Casinos, one or more of the
Colorado Casinos may be sanctioned, which may include the loss of our approvals
and licenses.
The
Colorado Commission does not need to approve in advance a public offering of
securities but rather requires the filing of notice and additional documents
prior to a public offering of (i) voting securities, and (ii) non-voting
securities if any of the proceeds will be used to pay for the construction
of
gaming facilities in Colorado, to directly or indirectly acquire an interest
in
a gaming facility in Colorado, to finance the operation of a gaming facility
in
Colorado or to retire or extend obligations for any of the foregoing. The
Colorado Commission may, in its discretion, require additional information
and
prior approval of such public offering.
In
addition, the Colorado Regulations prohibit a licensee or affiliated company
thereof, such as us, Casino America of Colorado, Inc., IC Holdings Colorado,
Inc., IOC Black Hawk Distribution Company, LLC or either of the two Colorado
Casinos, from paying any unsuitable person any dividends or interest upon any
voting securities or any payments or distributions of any kind (except as set
forth below), or paying any unsuitable person any remuneration for services
or
recognizing the exercise of any voting rights by any unsuitable person. Further,
under the Colorado Regulations, each of the Colorado Casinos and IOC Black
Hawk
Distribution Company, LLC may repurchase its voting securities from anyone
found
unsuitable at the lesser of the cash equivalent to the original investment
in
the applicable Colorado Casino or IOC Black Hawk Distribution Company, LLC
or
the current market price as of the date of the finding of unsuitability unless
such voting securities are transferred to a suitable person (as determined
by
the Colorado Commission) within sixty (60) days after the finding of
unsuitability. A licensee or affiliated company must pursue all lawful efforts
to require an unsuitable person to relinquish all voting
securities,
including
purchasing such voting securities. The staff of Colorado Division has taken
the
position that a licensee or affiliated company may not pay any unsuitable person
any interest, dividends or other payments with respect to non-voting securities,
other than with respect to pursuing all lawful efforts to require an unsuitable
person to relinquish non-voting securities, including by purchasing or redeeming
such securities. Further, the regulations require anyone with a material
involvement with a licensee, including a director or officer of a holding
company, such as us, Casino America of Colorado, Inc., IC Holdings Colorado,
Inc., IOC Black Hawk Distribution Company, LLC or any of the three Colorado
Casinos, to file for a finding of suitability if required by the Colorado
Commission.
Because
of their authority to deny an application for a license or suitability, the
Colorado Commission and the Colorado Director effectively can disapprove a
change in corporate position of a licensee and with respect to any entity which
is required to be found suitable, or indirectly can cause us, Casino America
of
Colorado, Inc., IC Holdings Colorado, Inc., IOC Black Hawk Distribution Company,
LLC or the applicable Colorado Casino to suspend or dismiss managers, officers,
directors and other key employees or sever relationships with other persons
who
refuse to file appropriate applications or who the authorities find unsuitable
to act in such capacities.
Generally,
a sale, lease, purchase, conveyance or acquisition of a controlling interest
in
a licensee is prohibited without the Colorado Commission’s prior approval.
Persons may acquire a non-controlling interest in us without the Colorado
Commission’s prior approval, but such persons may be required to file notices
with the Colorado Commission and applications for suitability (as discussed
above) and the Colorado Commission may, after such acquisition, find such person
unsuitable and require them to dispose of their interest. Under some
circumstances, we may not sell any interest in our Colorado gaming businesses
without the prior approval of the Colorado Commission.
Each
Colorado Casino must meet specified architectural requirements, fire safety
standards and standards for access for disabled persons. Each Colorado Casino
also must not exceed specified gaming square footage limits as a total of each
floor and the full building. Each Colorado Casino may operate only between
8:00
a.m. and 2:00 a.m., and may permit only individuals 21 or older to gamble in
the
casino. It may permit slot machines, blackjack and poker, with a maximum single
bet of $5.00. No Colorado Casino may provide credit to its gaming
patrons.
A
licensee is required to provide information and file periodic reports with
the
Colorado Division, including identifying those who have a 5% or greater
ownership, financial or equity interest in the licensee, or who have the ability
to control the licensee, or who have the ability to exercise significant
influence over the licensee, or who loan money or other things of value to
a
licensee, or who have the right to share in revenues of limited gaming, or
to
whom any interest or share in profits of limited gaming has been pledged as
security for a debt or performance of an act. A licensee, and any parent company
or subsidiary of a licensee, who has applied to a foreign jurisdiction for
licensure or permission to conduct gaming, or who possesses a license to conduct
foreign gaming, is required to notify the Colorado Division. Any person licensed
by the Colorado Commission and any associated person of a licensee must report
criminal convictions and criminal charges to the Colorado Division.
The
Colorado Commission has broad authority to sanction, fine, suspend and revoke
a
license for violations of the Colorado Regulations. Violations of many
provisions of the Colorado Regulations also can result in criminal
penalties.
The
Colorado Constitution currently permits gaming only in a limited number of
cities and certain commercial districts in such cities.
The
Colorado Constitution permits a gaming tax of up to 40% on adjusted gross gaming
proceeds, and authorizes the Colorado Commission to change the rate annually.
The current gaming tax rate is 0.25% on adjusted gross gaming proceeds of up
to
and including $2.0 million, 2% over $2.0 million up to
and
including $4.0 million, 4% over $4.0 million up to and including $5.0 million,
11% over $5.0 million up to and including $10.0 million, 16% over $10.0 million
up to and including $15.0 million and 20% on adjusted gross gaming proceeds
in
excess of $15.0 million. The City of Black Hawk has imposed an annual device
fee
of $750 per gaming device and may revise it from time to time. The City of
Black
Hawk also has imposed other fees, including a business improvement district
fee
and transportation fee, calculated based on the number of devices and may revise
the same or impose additional such fees.
Colorado
participates in multi-state lotteries.
The
sale
of alcoholic beverages is subject to licensing, control and regulation by the
Colorado liquor agencies. All persons who directly or indirectly hold a 10%
or
more interest in, or 10% or more of the issued and outstanding capital stock
of,
any of the Colorado Casinos, through their ownership of us, Casino America
of
Colorado, Inc., IC Holdings Colorado, Inc., or
either
of the two Colorado
Casinos,
must file applications and possibly be investigated by the Colorado liquor
agencies. The Colorado liquor agencies also may investigate those persons who,
directly or indirectly, loan money to or have any financial interest in liquor
licensees. In addition, there are restrictions on stockholders, directors and
officers of liquor licensees preventing such persons from being a stockholder,
director, officer or otherwise interested in some persons lending money to
liquor licensees and from making loans to other liquor licensees. All licenses
are revocable and transferable only in accordance with all applicable laws.
The
Colorado liquor agencies have the full power to limit, condition, suspend or
revoke any liquor license and any disciplinary action could (and revocation
would) have a material adverse effect upon the operations of us, Casino America
of Colorado, Inc., IC Holdings Colorado, Inc., or the applicable Colorado
Casino. Each Colorado Casino holds a retail gaming tavern liquor license for
its
casino, hotel and restaurant operations.
Currently,
no person directly or indirectly interested in any of the Colorado Casinos
may
be directly or indirectly interested in many other types of liquor licenses,
but
may have an interest in a hotel and restaurant liquor license. No person can
hold more than three retail gaming tavern liquor licenses. The remedies of
certain lenders may be limited by applicable liquor laws and
regulations.
Florida
On
June
15, 1995, the Florida Department of Business and Professional Regulation, acting
through its division of pari-mutuel wagering (the “Florida Division”), issued
its final order approving Pompano Park as a pari-mutuel wagering permit holder
for harness and quarter horse racing at Pompano Park. The Florida Division
approved Pompano Park’s license to conduct a total of 149 live evening
performances for the season beginning July 1, 2003 to June 30, 2004. Although
we
do not presently intend to conduct quarter horse racing operations at Pompano
Park, we may do so in the future, subject to Florida Division approval. The
Florida Division must approve any transfer of 10% or more of stock of a
pari-mutuel racing permit holder such as Pompano Park.
The
Florida Statute and the applicable rules and regulations thereunder (the
“Florida Statute”) establish license fees, the tax structure on pari-mutuel
permit holders and minimum purse requirements for breeders and owners. The
Florida Division may revoke or suspend any permit or license upon the willful
violation by the permit holder or licensee of any provision of the Florida
Statute. Instead of suspending or revoking a permit or license, the Florida
Division may impose various civil penalties on the permit holder or licensee.
Penalties may not exceed $1,000 for each count or separate offense.
Pursuant
to a Florida Division order and recent enactments to the Florida Statute,
Pompano Park is also authorized to conduct full-card pari-mutuel wagering on:
(1) simulcast harness races from outside Florida throughout the racing season
and (2) night thoroughbred races within Florida if the thoroughbred permit
holder has decided to simulcast night races. Pompano Park has been granted
the
exclusive right in Florida to conduct full-card simulcasting of harness racing
on days during which no live racing is held at
Pompano
Park. However, on non-race days, Pompano Park must offer to rebroadcast its
simulcast signals to pari-mutuel facilities that are not thoroughbred parks
in
Pompano Park’s market area. In addition, Pompano Park may transmit its live
races into any dog racing or jai alai facility in Florida, including Dade and
Broward counties, for intertrack wagering. The Florida Statute establishes
the
percentage split between Pompano Park and the other facilities receiving such
signals. Recent legislation in Florida provided certain reductions in applicable
tax and license fees related to intertrack wagering on broadcasts of simulcast
harness racing and thoroughbred racing. We believe that simulcast rights at
Pompano Park and the recent changes in the Florida Statute are important to
Pompano Park’s operating results.
The
Florida Statute permits pari-mutuel facilities licensed by the Florida Division
to operate card rooms in those counties in which a majority vote of the County
Commission has been obtained and a local ordinance has been adopted. Pompano
Park reopened its card room in fiscal year 2004 after State Legislation was
amended authorizing card game pot limits to be eliminated and bets limits of
$2
per bet were imposed.
Bahamas
In
1969,
the Government of The Bahamas enacted the Lotteries and Gaming Act. This
legislation, together with its regulations, governs and regulates gaming. The
Gaming Board is the body that regulates the operation of casinos. The gaming
license is renewable annually. All casino workers must be approved by the Board
and are issued certificates, which are also renewable on an annual basis. There
is a basic annual gaming tax of $200,000 payable in six equal shares. In
addition a winnings tax is also imposed and is based on the following
scale:
Winnings
of
|
$10,000,000
|
25%
|
|
$10,000,001
- $16,000,000
|
20%
|
|
$16,000,001
- $20,000,000
|
10%
|
|
amounts
exceeding $20,000,001
|
5%
|
The
Minister of Tourism has responsibility for gaming and acts in consultation
with
the Gaming Board. A license can be cancelled if a fraudulent or misleading
representation has been supplied to the Board or if there is a breach of
restrictions or conditions imposed by the Minister. There is however a right
to
be heard before cancellation is made final. Citizens, permanent residents and
holders of work permits are prohibited from gambling. Those found doing so
are
guilty of an offense punishable by law. The operator may also be liable if
it
knowingly allows any such persons to gamble in its establishment.
Currently
the Casino has an agreement to lease the premises housing its operations and
a
management agreement. The Casino holds a number of other licenses including
one
with the Port Authority of Grand Bahama, a business license and liquor and
dining and dancing licenses.
United
Kingdom
Gaming
and gaming facilities in the UK are currently subject to regulation under the
Gaming Act of 1968 (the “Gaming Act”). Under the Gaming Act, the Gaming Board
for Great Britain (the “Gaming Board”) is charged with ensuring compliance with
the Gaming Act and the regulations promulgated under the Gaming Act. Pursuant
to
its regulatory authority, the Gaming Board has issued detailed guidelines that
govern licensing procedures as well as the management, operation and supervision
of gaming facilities. (See further regarding new Gambling Act
2005).
The
Gaming Act specifies that only individuals that have been a resident of Great
Britain for at least six months or a company incorporated in Great Britain
can
apply for a license to operate, or operate, a casino in Great Britain. The
Gaming Act does not prohibit foreign ownership in casinos operated by a
resident
of Great Britain. Casinos can be located only in certain designated areas known
as “permitted areas,” of which there currently are fifty-three; 142 gaming
facilities currently are operating in these permitted areas.
A
casino
operator must obtain a Certificate of Consent from the Gaming Board prior to
submitting an application for a gaming license. Before it grants a Certificate
of Consent, the Gaming Board must be satisfied that the applicant is “fit and
proper” to operate a gaming facility. To be deemed fit and proper, the applicant
must convince the Gaming Board of its ability to diligently comply with the
Gaming Act and the regulations promulgated thereunder. The applicant also must
convince the Board that gaming in the proposed gaming facility would be
conducted fairly and properly and without disorder or disturbance. The Board
also evaluates the character, reputation and financial standing of both the
applicant and any entity that would operate or hold a significant ownership
interest in the gaming facility.
The
Certificate of Consent, if granted, permits the recipient to apply for a gaming
license for a specific location. Additional Certificates of Consent are required
for additional locations. The Certificate of Consent requires that any gaming
license application be submitted within one year and may restrict the type
of
gaming for which the applicant may seek a license.
The
applicant must submit an application to a Justice of the local Magistrates
Court
(the “Licensing Justice”), seeking a license to provide commercial gaming in the
location specified by the Certificate of Consent. The license application must
include the name and description of the facility to be used for gaming. A copy
of the application also must be filed with the Gaming Board, a designated
officer of the police, the relevant local authority, the relevant fire authority
and the relevant collector of duty. Within 14 days of submitting the license
application, the applicant must publish a notice in the local newspaper stating
that such application has been made. The applicant also must post notice outside
the facility for which the gaming license has been requested. A copy of the
newspaper notice must be sent to the licensing authority before the application
will be considered.
Gaming
Board regulations provide guidelines under which the Licensing Justices review
license applications. Under current regulations, before granting a license,
the
Justice must determine that there exists “substantial demand for gaming
facilities of the kind proposed to be provided on the relevant premises.” The
Justice also must be satisfied that current gaming facilities are either not
available in an area that is reasonably accessible to prospective players or,
where such facilities are available, the current gaming facilities are
insufficient to meet current demand. The Justice also must evaluate the
suitability of the proposed gaming facility, including the lay-out of the
facility and the character, condition and location of the facility, and whether
the applicant is fit and proper to be a holder of the license under the Gaming
Act.
The
Gaming Board regulations also establish detailed guidelines governing the
operation, management and supervision of gaming facilities. Under the Gaming
Board guidelines, an inspector must supervise the croupiers who are normally
in
charge of two gaming tables, under the direction of a pit boss. The role of
the
inspector is to verify large payouts, ensure compliance with gaming regulations,
confirm verbal bets and resolve player disputes. Gaming Board guidelines also
require that management and inspectors have a clear view of the tables and
all
players at all times. Gaming facilities also must be designed to permit adequate
supervision by the police and the Gaming Board’s inspectors.
The
transfer of 15% or more of the voting power of a casino triggers an obligation
on the part of the holder of the existing Certificate of Consent to apply to
the
Gaming Board for a continuance of its Certificate of Consent. The Gaming Board
will evaluate whether the transferee is fit and proper to hold a gaming license
and meets the tests discussed above.
The
government of the UK recently enacted new legislation to liberalize gaming
in a
socially responsive manner in light of developments in the industry and new
technology. The Gambling Act was
passed
by
the UK Parliament on 8 April 2005 and will be implemented in stages. Under
the
new legislation, a new Gambling Commission will be created to oversee license
applications and establish new regulations for gaming (including on-line gaming)
in the UK. It is anticipated that it will take over responsibilities from the
Gaming Board in the fall of 2005 and work on the transition is in progress
to
meet this objective. The legislation will provide a significant change in
regulation of the casino industry including:
· |
removing
the requirement that gaming facilities operate as private members’ clubs,
including the statutorily prescribed 24-hour interval between membership
and play;
|
· |
extending
the gaming products available;
|
· |
abolishing
the demand test and permitted area
rules;
|
· |
allowing
large casinos specific numbers of gaming machines with a broader
range of
stakes and prizes;
|
· |
allowing
casinos to offer live entertainment and to advertise;
and
|
· |
allowing
a new category of regional casinos.
|
In
order
to pass the legislation, having regard to the UK General Election on 5 May
2005,
the Government agreed to limit the number of Regional Casinos (such as that
planned in Coventry) to one on a pilot basis. An increase in the number of
regional casinos can be approved by a Ministerial Order using the affirmative
resolution procedure, which will require that the order is affirmed by a vote
of
both Houses of Parliament.
In
the
meantime, the company has obtained all necessary Gaming Licenses to open a
casino under the current legislation (Gaming Act 1968) and such plans are
proceeding with a view to opening a smaller scale casino at the RICOH
TM
Arena in
Coventry in 2006.
Non-Gaming
Regulation
We
are
subject to certain federal, state and local safety and health, employment and
environmental laws, regulations and ordinances that apply to non-gaming
businesses generally, such as the Clean Air Act, Clean Water Act, Occupational
Safety and Health Act, Resource Conservation Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act and the Oil Pollution
Act
of 1990. We have not made, and do not anticipate making, material expenditures
with respect to such environmental laws and regulations. However, the coverage
and attendant compliance costs associated with such laws, regulations and
ordinances may result in future additional costs to our operations. For example,
the Department of Transportation has promulgated regulations under the Oil
Pollution Act of 1990 requiring owners and operators of certain vessels to
establish through the Coast Guard evidence of financial responsibility for
clean
up of oil pollution. This requirement has been satisfied by proof of adequate
insurance.
Our
riverboats operated in Louisiana and Iowa must comply with U.S. Coast Guard
requirements as to boat design, on-board facilities, equipment, personnel and
safety and hold U.S. Coast Guard Certificates of Documentation and Inspection.
The U.S. Coast Guard requirements also set limits on the operation of the
riverboats and require licensing of certain personnel involved with the
operation of the riverboats. Loss of a riverboat’s Certificate of Documentation
and Inspection could preclude its use as a riverboat casino. Each of our
riverboats is inspected annually and, every five years, is subject to
dry-docking for inspection of its hull, which could result in a temporary loss
of service.
The
barges are inspected by third parties and certified with respect to stability
and single compartment flooding integrity. Our casino barges must also meet
local fire safety standards. We would incur additional costs if any of our
gaming facilities were not in compliance with one or more of these
regulations.
Regulations
adopted by the Financial Crimes Enforcement Network of the U.S. Treasury
Department require us to report currency transactions in excess of $10,000
occurring within a gaming day, including identification of the patron by name
and social security number. U.S. Treasury Department regulations also require
us
to report certain suspicious activity, including any transaction that exceeds
$5,000 if we know, suspect or have reason to believe that the transaction
involves funds from illegal activity or is designed to evade federal regulations
or reporting requirements. Substantial penalties can be imposed against us
if we
fail to comply with these regulations.
All
of
our shipboard employees, even those who have nothing to do with our operation
as
a vessel, such as dealers, waiters and security personnel, may be subject to
the
Jones Act which, among other things, exempts those employees from state limits
on workers’ compensation awards.
ITEM
2.
PROPERTIES.
The
Isle-Lake Charles
We
own
approximately 2.7 acres and lease approximately 16.25 acres of land in Calcasieu
Parish, Louisiana for use in connection with the Isle-Lake Charles. The lease
expires in March 2010, with fifteen renewal options of five years each. Rent
under the Isle-Lake Charles lease is currently $1.5 million per year and is
subject to increases based on the Consumer Price Index (“CPI”).
The
Isle-Bossier City
We
own
approximately 38 acres of land in Bossier City, Louisiana for use in connection
with the Isle-Bossier City and we own a 225-room hotel on approximately 10.5
acres of land located 2.5 miles east of the Isle-Bossier City.
The
Isle-Lula
We
lease
approximately 1,000 acres of land in Coahoma County, Mississippi and utilize
approximately 50 acres in connection with the operations of the Isle-Lula.
Unless terminated by us at an earlier date, the lease expires in 2033. Rent
under the lease is currently 5.5% of gross gaming revenue as established by
the
Mississippi Gaming Commission, as well as $3,333 per month for the hotel. We
also own approximately 100 acres in Coahoma County, which may be utilized for
future development.
The
Isle-Biloxi
We
lease
the Biloxi berth from the Biloxi Port Commission at an annual rent of the
greater of $500,000 or 1% of the gross gaming revenue net of state and local
gaming taxes. The lease terminates on July 1, 2009 and we have the option to
renew it for seven additional terms of five years each subject to increases
based on the CPI, limited to 6% for each renewal period.
We
lease
the real estate upon which some of our land-based facilities are located from
the City of Biloxi and the Mississippi Secretary of State at current annual
rent
of $561,800 per year, plus 3% of the Isle-Biloxi’s gross gaming revenues, net of
state and local gaming taxes and fees, in excess of $25.0 million. The lease
terminates on July 1, 2009, but it is renewable at our option for five
additional terms of five years each and a sixth option renewal term, concluding
on January 31, 2034, subject to rent increases based on the CPI, limited to
6%
for each renewal period. In April 1994, we entered into an addendum to this
lease that requires us to pay 4% of our gross non-gaming revenue, net of sales
tax, complimentaries and discounts. Additional rent will be due to the City
of
Biloxi for the amount of any increase from and after January 1, 2016, in the
rent due to the State Institutions of Higher Learning under a lease between
the
City of Biloxi and the State Institutions of Higher Learning and for any
increases in certain tidelands leases between the City of Biloxi and the State
of Mississippi.
In
April
1994, in connection with the construction of a hotel, we entered into a lease
for additional land adjoining the Isle-Biloxi. This lease with the City of
Biloxi and the Mississippi Secretary of State is for an initial term of 25
years, with options to renew for six additional terms of ten years each and
a
final option period concluding December 31, 2085. Current annual rent is
$605,000 plus 4% of gross non-gaming revenue, as defined in the lease, and
renewals are subject to rent increases based on the CPI. The
annual rent is adjusted after each five-year period based on increases in the
CPI, limited to a 10% increase in any five-year period.
In
August
2002, we entered into a lease for two additional parcels of land adjoining
the
Isle-Biloxi and the hotel. On the parcel adjoining the Isle-Biloxi, we
constructed a multi-level parking garage that
has
approximately 1,000 parking spaces. There is additional ground level parking
on
a parcel of land in front of the garage, also subject to this lease, with
approximately 600 parking spaces. We have constructed a 400 room addition to
the
existing hotel on the parcel leased next to the existing hotel. In addition,
we
may construct a hotel above the parking garage. This lease with the City of
Biloxi and the Mississippi Secretary of State is for an initial term of forty
years, with one option to renew for an additional twenty-five years and
additional options thereafter, with the consent of the Mississippi Secretary
of
State, consistent with the term of the lease described in the preceding
paragraph. When combined with the base and percentage rents described for the
leases in the preceding two paragraphs, annual rent under those two leases
and
this lease is estimated to be $3.3 million (depending on the completion date
of
the hotel) for the lease year ending July 31, 2005 and $3.5 million for lease
year ending July 31, 2006. Such minimum rent to increase thereafter over time
in
accordance with a formula based on anticipated timing for completion of the
current hotel and completion of the hotel on top of the parking garage (or
August 31, 2008, which ever occurs first), up to a minimum rent of $3.7 million.
Such amounts are subject to decreases due to market adjustments and increases
based on the CPI. Also, we are responsible for annual rent equal to 4% of gross
retail revenue and gross cash revenue (as defined in the lease), but without
double counting. If the rent minimum described in the preceding sentences is
not
otherwise satisfied from other rents, then this percentage rent is not in
addition to the minimum rent, but rather is to be applied to that
minimum.
In
connection with and pursuant to a settlement between the City of Biloxi and
the
State of Mississippi concerning the control and management area where the
Isle-Biloxi is located, we also have agreed to pay the City of Biloxi’s lease
obligations to the State of Mississippi. This amount is $500,000 per year,
payable on June 30, subject to increases based on the CPI and decreases if
there
are other tenants of the subject property. This obligation ends after June
2018,
but may be renewed for thirty years.
We
have
also entered into a joint venture arrangement to sublease property containing
a
two-level parking garage next to the Isle-Biloxi. Our annual rent under this
lease is approximately $200,000. The current term is for three years expiring
December 31, 2005, with a renewal option for an additional five-year term (under
which our annual rent would increase to approximately $212,500) extending the
lease through December 31, 2010. The extension will occur unless the Company
sends a notice to terminate by July 1, 2005. The Company has no plans to
terminate the lease.
The
Isle-Vicksburg
We
own
approximately 13.1 acres of land in Vicksburg, Mississippi for use in connection
with the Isle-Vicksburg. We own an additional thirteen acres of land in
Vicksburg on which we operate off-site parking and a recreational vehicle park.
We also entered into a lease for approximately five acres of land adjacent
to
the Isle-Vicksburg to be used for additional parking.
The
Isle-Natchez
Through
numerous lease agreements, we lease approximately 24 acres of land in Natchez,
Mississippi that is used in connection with the operations of the Isle-Natchez.
Unless terminated by us at an earlier date, the lease expiration dates through
2037. Rents under the leases currently total approximately $101,000 per month.
We also lease approximately 7.5 acres of land that is utilized for parking
at
the facility. We own approximately six acres of property in Natchez,
Mississippi, as well as the property upon which our hotel is
located.
The
Isle-Kansas City
We
lease
approximately twenty-eight acres from the Kansas City Port Authority in
connection with the operation of the Isle-Kansas City facility. The term of
the
lease is ten years, expiring in October 2006, and we have the option to renew
the lease for eight additional terms of five years each. Rent under the lease
is
currently $3.0 million per year, subject to the higher of $3.0 million (minimum
rent) per year, or 3.25% of gross revenues, less complimentaries.
The
Isle-Boonville
We
lease
the site from the City of Boonville under a lease agreement, which has a term
of
ninety-nine years. We were required to pay $1.7 million to the City of Boonville
as a lump sum rent payment during construction of the casino. There was no
rent
due after the casino opening date. We were, however, assessed additional amounts
by the City of Boonville based on a 3.5% tax on gaming revenue, which we
recognized as additional rent.
The
Isle-Bettendorf
We
own
approximately 24.6 acres of land in Bettendorf, Iowa used in connection with
the
operations of the Isle-Bettendorf. We also lease approximately eight acres
of
land on a month-to-month basis from an entity owned by family members of our
chief executive officer, Bernard Goldstein, including Robert S. Goldstein and
Jeffrey D. Goldstein, directors of our company, which we utilize for parking
and
warehouse space. The initial term of the lease expires sixty days after written
notice is given to either party and rent under the lease is currently $23,360
per month.
The
Rhythm City-Davenport
Pursuant
to various lease agreements, we lease approximately twelve acres of land in
Davenport, Iowa used in connection with the operations of Rhythm City-Davenport.
The aggregate annual rent on these leases is approximately $0.8 million and
they
have varying expiration dates through 2022. We also own a 121-room hotel on
approximately one acre of land located several blocks northeast of the Rhythm
City-Davenport.
The
Isle-Marquette
We
lease
the dock site in Marquette, Iowa that is used in connection with the operations
of the Isle-Marquette. The lease expires in 2019, and rent under the lease
is
currently $15,000 per month, plus $0.50 per passenger, plus 2.5% of gaming
revenues (less state wagering taxes) in excess of $20.0 million but less than
$40.0 million; 5% of gaming revenues (less state wagering taxes) in excess
of
$40.0 million but less than $60.0 million; and 7.5% of gaming revenues (less
state wagering taxes) in excess of $60.0 million. We also rent approximately
5
acres of land used for the employee parking lot. That is a month-to-month rental
of $833. We also own approximately twenty-five acres of land for the pavilion,
hotel, satellite offices, warehouse, lots by the marina, and other
property.
The
Isle-Black Hawk
We
own
approximately 10.1 acres of land in Black Hawk, Colorado for use in connection
with the Isle-Black Hawk.
The
Colorado Central Station-Black Hawk
We
own
and lease approximately 7.1 acres of land in Black Hawk, Colorado for use in
connection with the Colorado Central Station-Black Hawk. We lease additional
parcels of land adjoining the Colorado Central Station-Black Hawk for parking.
This lease is for an initial term of nine years with options to renew for
eighteen additional terms of five years each with the final option period
concluding June 1, 2094. Annual rent is $1.7 million indexed to correspond
to
any rise or fall in the CPI at one-year intervals beginning June 1, 1996, not
to
exceed a 3% increase or decrease from the previous year’s rate. We also entered
into a lease for additional parking. This lease is for an initial term of ten
years with options to renew for nine additional terms of ten years each with
the
final option period concluding June 1, 2094. Annual rent is $576,000 and
renewals are subject to 20% rent increases over the rate of the previous term.
Pompano
Park
We
own
approximately 223 acres at Pompano Park.
The
Isle-Our Lucaya
We
sublease the casino property under an agreement that is in effect until December
2012, and requires us to make payments under the following terms: (1) $2.0
million per year in equal monthly installments due on the first of each month
for the first two years ending November 30, 2006, (2) the annual amount
increases to $2.5 million in years three and four of the lease, and then to
$3.0
million for the remainder of the lease, (3) plus $125,000 per year in equal
monthly installments due on the first of each month for common area maintenance
and (4) plus a minimum room buy of fifty from the hotel at a rate of $54 per
night. After the second year of the lease, if earnings before income taxes,
depreciation and amortization fall below $3.0 million, we have the option to
cancel with a one-year notice.
Additionally,
the agreement requires us to pay a monthly resort marketing fee (the “Fee”).
This Fee is calculated at six percent of annual gross revenues of the casino,
where such receipts are in excess of $33.3 million a year for the first two
years, $40.0 million a year for years three and four and $45.0 million a year
for years five through ten.
Blue
Chip-Dudley
Through
our two-thirds ownership interest in Blue Chip PLC, we own the 15,000
square-foot building that contains the Blue Chip-Dudley casino operation. We
also own an 8,000 square-foot parking area for the casino.
Blue
Chip-Wolverhampton
Through
our two-thirds ownership interest in Blue Chip PLC, we own the 15,000
square-foot building that contains the Blue Chip-Wolverhampton casino
operation.
Blue
Chip-Walsall
Through
our two-thirds ownership interest in Blue Chip PLC, we own the 17,938
square-foot building that contains the Blue Chip-Walsall casino operation.
Coventry
We
entered into a twenty five year lease in December 2003, to lease approximately
120,000 square feet within the arena compound that will be used in connection
with the operation of the Isle-Coventry. In addition to the payment of £4.0
million plus value added tax (“VAT”) ($7.6 million as of April 24, 2005, based
on published exchange rates), the lease requires us to pay one more payment
of
£2.0 million plus VAT in July 2005 for prepaid rent. In the fourth quarter of
fiscal 2006, we will pay approximately £1.3 million plus VAT ($2.5 million as of
April 24, 2005, based on published exchange rates) per year offset by the £6.0
million plus VAT ($11.5 million as of April 24, 2005, based on published
exchange rates) prepaid rent and interest of 8% per annum on the unpaid balance
that reduces annual rent expenses over 15 years.
Other
We
own
all of the riverboats and barges utilized at our facilities. We also own or
lease all of our gaming and non-gaming equipment.
We
lease
our corporate office in Biloxi, Mississippi and our corporate office in Boca
Raton, Florida.
We
have
various property leases and options to either lease or purchase property that
are not directly related to our existing operations and that may be utilized
in
the future in connection with expansion projects at our existing facilities
or
development of new projects.
In
August
1997, a lawsuit was filed which sought to nullify a contract to which Louisiana
Riverboat Gaming Partnership is a party. Pursuant to the contract, Louisiana
Riverboat Gaming Partnership paid a fixed amount plus a percentage of revenue,
to various local governmental entities, including the City of Bossier City
and
the Bossier Parish School Board, in lieu of payment of a per-passenger boarding
fee. The case was tried on April 6, 2004. The trial court rendered a ruling
in
favor of the defendants, finding that although the legislature amended the
boarding fee statute in 2003 so as to prohibit future boarding fee agreements,
any pre-existing agreement between a riverboat and either the City of Bossier
City or the Bossier Parish Police Jury will remain valid and in effect until
its
expiration. Louisiana Riverboat Gaming Partnership’s contract expired on April
4, 2004. Therefore, Louisiana Riverboat Gaming Partnership now pays a boarding
fee to the City as outlined by the statute. Louisiana Riverboat Gaming
Partnership still has an existing contract with the Bossier Parish Police Jury,
which was not at issue in the litigation, and which will remain in effect until
its expiration on January 1, 2007, unless extended by the parties. The
plaintiffs appealed the trial court’s ruling to the Second Circuit Court of
Appeal, and the appellate court reversed and remanded the matter. We, along
with
the other defendants, filed writ applications to appeal the matter to the
Louisiana Supreme Court. The court has granted two applications for appeal,
one
filed on behalf of Bossier City and Bossier Parish and another filed on behalf
of the Bossier Sheriff’s Office and the Greater Bossier Economic Development
Foundation. A hearing has not been scheduled. We will continue to vigorously
defend this matter as may be required.
Lady
Luck
Gaming Corporation (now our wholly owned subsidiary) and several joint venture
partners are defendants in a lawsuit brought by the country of Greece through
its Minister of Tourism (now Development) and Finance. The action alleges that
the defendants failed to make specified payments in connection with the gaming
license bid process for Patras, Greece. The payment we are alleged to have
been
required to make aggregates approximately 6.5 million Euros (which was
approximately $8.5 million as of April 24, 2005 based on published exchange
rates). Although it is difficult to determine the damages being sought from
the
lawsuit, the action may seek damages up to that aggregate amount plus interest
from the date of the action. The Athens Civil Court of First Instance granted
judgment in our favor and dismissed the lawsuit, but the Ministry of Tourism
appealed the matter and the appeal was heard in April 2002 before the Athens
Appeal Court of First Instance. The Athens Appeal Court issued certified copies
of judgments denying the Ministry’s appeals. The Ministry elected to appeal this
matter further. We have taken action to have the decisions granted in our favor
set for a hearing before the Administrative Supreme Court and the Greek Supreme
Court, respectively. Briefs were filed in the administrative matter in June
2005
and the civil matter is set for hearing during May 2006. The outcome of this
matter is still in doubt and cannot be predicted with any degree of certainty.
We intend to continue a vigorous and appropriate defense to the claims asserted
in this matter.
On
December 30, 2002, the County of Jefferson, Missouri initiated a lawsuit in
the
Circuit Court of Jefferson County, Missouri against us and a subsidiary alleging
a breach of a 1993 contract entered into by the County, that subsidiary, and
guaranteed by Lady Luck Gaming Corporation relating to the development of a
casino-site near Kimmswick, Missouri. The suit alleges damages in excess of
$10.0 million. Discovery is ongoing and the matter has been set for a trial
in
January 2006. The outcome of this matter cannot be predicted with any degree
of
certainty. We believe the claims against us to be without merit and we intend
to
vigorously and appropriately defend the claims asserted in this
matter.
We
are
subject to various contingencies and engaged in various other litigation matters
that have a number of unresolved claims. Although the ultimate liability of
these contingencies, this litigation and these claims cannot be determined
at
this time, we believe that they will not have a material adverse effect on
our
consolidated financial position, results of operations or cash
flows.
ITEM
4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART
II
MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.
(a)
i. |
Market
Information.
Our common stock is traded on the NASDAQ National Market under the
symbol
“ISLE”. The following table presents the high and low closing sales prices
for our common stock as reported by the NASDAQ National Market for
the
fiscal periods indicated.
|
|
|
High
|
|
Low
|
|
Fiscal
Year Ending April 30, 2006
|
|
|
|
|
|
|
|
First
Quarter (through July 1, 2005)
|
|
$
|
27.13
|
|
$
|
26.09
|
|
|
|
|
|
|
|
|
|
Fiscal
Year Ended April 24, 2005
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
23.55
|
|
$
|
16.25
|
|
Second
Quarter
|
|
|
22.26
|
|
|
15.90
|
|
Third
Quarter
|
|
|
27.90
|
|
|
20.24
|
|
Fourth
Quarter
|
|
|
30.68
|
|
|
23.77
|
|
|
|
|
|
|
|
|
|
Fiscal
Year Ended April 25, 2004
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
18.13
|
|
$
|
12.83
|
|
Second
Quarter
|
|
|
21.94
|
|
|
16.27
|
|
Third
Quarter
|
|
|
23.41
|
|
|
18.47
|
|
Fourth
Quarter
|
|
|
26.45
|
|
|
19.90
|
|
ii. |
Holders
of Common Stock.
As of July 1, 2005, there were approximately 1,672 holders of record
of
our common stock.
|
iii. |
Dividends.
We
have never declared or paid any dividends with respect to our common
stock
and the current policy of our board of directors is to retain earnings
to
provide for the growth of the company. In addition, our senior secured
credit facility and the indentures governing our 7% senior subordinated
notes and our 9% senior subordinated notes limit our ability to pay
dividends. See “Item 8-Financial Statements and Supplementary Data-Isle of
Capri Casinos, Inc.-Notes to Consolidated Financial Statements -
Note 7.”
Consequently, no cash dividends are expected to be paid on our common
stock in the foreseeable future. Further, there can be no assurance
that
our current and proposed operations will generate the funds needed
to
declare a cash dividend or that we will have legally available funds
to
pay dividends. In addition, we may fund part of our operations in
the
future from indebtedness, the terms of which may prohibit or restrict
the
payment of cash dividends. If a holder of common stock is disqualified
by
the regulatory authorities from owning such shares, such holder will
not
be permitted to receive any dividends with respect to such stock.
See
“Item 1-Business-Regulation and
Licensing.”
|
iv. |
Equity
Compensation Plans.
The following table provides information about securities authorized
for
issuance under our 1992, 1993 and 2000 Employee Stock Option Plans,
and
our Deferred Bonus Plan, for the fiscal year ended April 24,
2005.
|
|
(a)
|
(b)
|
(c)
|
Plan
category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
|
Weighted-average
exercise price of outstanding options, warrants and rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
Equity
compensation plans approved by security holders
|
3,536,299
|
$13.24
|
833,448
|
Equity
compensation plans not approved by security holders
|
-
|
-
|
-
|
Total
|
3,536,299
|
$13.24
|
833,448
|
(b) Issuance
of Unregistered Securities
We
maintain the Isle of Capri Casinos, Inc. Retirement Trust & Savings Plan,
which is a tax-qualified retirement plan (the “Plan”). The Plan was established
on July 1, 1993 and since the date of its establishment, the Plan has offered
participants in the Plan the option of investing in a fund invested in
our
common stock. In June 1995, we filed a Registration Statement on Form S-8
(Commission File No. 33-93088) to register 30,000 shares of our common
stock to
be acquired by participants in the Plan (the “1995 Registration Statement”).
Subsequent to the filing of the 1995 Registration Statement, Plan participants
acquired in excess of the 30,000 shares of our registered common stock.
In March
2005, we filed a Registration Statement on Form S-8 (Commission File No.
333-123234) to register an additional 100,000 shares of common stock to
be
offered for investment in the Plan (the “2005 Registration Statement”).
Following the filing of the 1995 Registration Statement and prior to the
filing
of the 2005 Registration Statement, the acquisition by the Plan’s trustee of a
certain number of shares of Isle common stock for the benefit and at the
direction of Plan participants, as well as the interests in the Plan, were
not
registered in compliance with applicable federal and state securities
laws.
We
may be
subject to claims by the Plan’s participants for rescission of their
acquisitions of shares of our common stock in the Plan under federal and
state
securities laws until the expiration of the applicable statute of limitations
period. We do not currently believe that the potential claims for rescission
and
any related penalties would have a material adverse effect on us because
we do
not believe that many participants in the Plan who purchased shares prior
to the
filing of the 2005 Registration Statement are likely to assert rescission
claims
because of the appreciation of our common stock over the applicable statute
of
limitations period.
(c) Purchases
of our Common Stock
The following table provides information related to our purchases of Isle of
Capri Casinos, Inc. common stock:
|
|
Total
Number of Shares Purchased
|
|
Average
Price Paid per Share
|
|
Total
Number of Shares Purchased as Part of Publicly Announced Programs
(1)
|
|
Maximum
Number of Shares that May Yet Be Purchased Under the Programs
(1)
|
|
Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
24, 2005 to February 20, 2005
|
|
|
-
|
|
$
|
-
|
|
|
-
|
|
|
488,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February
21, 2005 to March 27, 2005
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
488,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
28, 2005 to April 24, 2005
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
488,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
-
|
|
$
|
-
|
|
|
-
|
|
|
488,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
We
have purchased our common stock under two separate repurchase programs. The
first program, which allowed repurchase of up to 1,500,000 shares was announced
on November 15, 2000, and subsequently expanded to allow repurchase of an
additional 1,500,000 shares, as announced on January 11, 2001. The current
program was announced on October 25, 2002 and allows for the repurchase of
up to
1,500,000 shares. To date, we have purchased 4,011,795 shares of our common
stock under the two programs. These programs have no approved dollar amounts,
nor expiration dates.
The
following table presents our selected consolidated financial data for the five
most recent fiscal years, which is derived from our audited consolidated
financial statements and the notes to those statements. Because the data in
this
table does not provide all of the data contained in our consolidated financial
statements, including the related notes, you should read “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” our
consolidated financial statements, including the related notes contained
elsewhere in this document and other data we have filed with the U.S. Securities
and Exchange Commission.
|
|
Fiscal
Year Ended (1)
|
|
|
|
April
24,
|
|
April
25,
|
|
April
27,
|
|
April
28,
|
|
April
29,
|
|
|
|
2005
|
|
2004
|
|
2003
|
|
2002
|
|
2001
|
|
Income
Statement Data:
|
|
|
|
(dollars
in millions, except per share data)
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
1,121.3
|
|
$
|
1,116.4
|
|
$
|
1,051.3
|
|
$
|
1,057.0
|
|
$
|
957.1
|
|
Rooms
|
|
|
47.7
|
|
|
44.6
|
|
|
49.2
|
|
|
56.0
|
|
|
50.7
|
|
Pari-mutuel
commissions and fees
|
|
|
20.1
|
|
|
20.3
|
|
|
23.9
|
|
|
23.5
|
|
|
22.2
|
|
Food,
beverage and other
|
|
|
149.5
|
|
|
143.7
|
|
|
140.9
|
|
|
152.1
|
|
|
148.3
|
|
Gross
revenues
|
|
|
1,338.6
|
|
|
1,325.0
|
|
|
1,265.3
|
|
|
1,288.6
|
|
|
1,178.3
|
|
Less
promotional allowances
|
|
|
227.0
|
|
|
219.6
|
|
|
200.5
|
|
|
203.3
|
|
|
195.5
|
|
Net
revenues
|
|
|
1,111.6
|
|
|
1,105.4
|
|
|
1,064.8
|
|
|
1,085.3
|
|
|
982.8
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
186.6
|
|
|
181.5
|
|
|
181.7
|
|
|
194.9
|
|
|
183.9
|
|
Gaming
taxes
|
|
|
250.3
|
|
|
245.0
|
|
|
229.6
|
|
|
227.0
|
|
|
192.6
|
|
Rooms
|
|
|
10.3
|
|
|
10.0
|
|
|
11.6
|
|
|
13.3
|
|
|
12.1
|
|
Pari-mutuel
|
|
|
15.5
|
|
|
15.4
|
|
|
16.9
|
|
|
16.8
|
|
|
16.2
|
|
Food,
beverage and other
|
|
|
35.8
|
|
|
32.0
|
|
|
34.1
|
|
|
35.8
|
|
|
32.0
|
|
Marine
and facilities
|
|
|
67.7
|
|
|
65.6
|
|
|
65.9
|
|
|
70.0
|
|
|
63.6
|
|
Marketing
and administrative
|
|
|
319.0
|
|
|
306.1
|
|
|
282.8
|
|
|
286.0
|
|
|
257.9
|
|
Valuation
charge
|
|
|
4.1
|
|
|
-
|
|
|
1.9
|
|
|
61.4
|
|
|
1.0
|
|
Other
charges
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
8.2
|
|
Preopening
|
|
|
0.2
|
|
|
2.3
|
|
|
-
|
|
|
3.9
|
|
|
0.2
|
|
Depreciation
and amortization
|
|
|
97.4
|
|
|
89.8
|
|
|
76.6
|
|
|
72.1
|
|
|
69.1
|
|
Total
operating expenses
|
|
|
986.9
|
|
|
947.7
|
|
|
901.1
|
|
|
981.2
|
|
|
836.8
|
|
Operating
income
|
|
|
124.7
|
|
|
157.7
|
|
|
163.7
|
|
|
104.1
|
|
|
146.0
|
|
Interest
expense
|
|
|
(75.7
|
)
|
|
(83.5
|
)
|
|
(82.6
|
)
|
|
(89.2
|
)
|
|
(98.9
|
)
|
Interest
income
|
|
|
2.2
|
|
|
0.9
|
|
|
0.6
|
|
|
0.9
|
|
|
5.1
|
|
Loss
on early extinguishment of debt
|
|
|
(5.3
|
)
|
|
(26.1
|
)
|
|
-
|
|
|
(7.0
|
)
|
|
-
|
|
Minority
interest
|
|
|
(5.5
|
)
|
|
(10.1
|
)
|
|
(9.5
|
)
|
|
(7.7
|
)
|
|
(6.4
|
)
|
Equity
in income (loss) of unconsolidated joint ventures
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(0.2
|
)
|
Income
from continuing operations before income taxes
|
|
|
40.4
|
|
|
38.9
|
|
|
72.2
|
|
|
1.1
|
|
|
45.6
|
|
Income
taxes
|
|
|
19.5
|
|
|
12.6
|
|
|
26.6
|
|
|
1.1
|
|
|
20.5
|
|
Income
from continuing operations
|
|
|
20.9
|
|
|
26.3
|
|
|
45.6
|
|
|
0.0
|
|
|
25.1
|
|
Income
(loss) from discontinued operations, net of income taxes
|
|
|
(2.9
|
)
|
|
1.4
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net
income
|
|
$
|
18.0
|
|
$
|
27.7
|
|
$
|
45.6
|
|
$
|
0.0
|
|
$
|
25.1
|
|
Adjusted
net income (2)
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
$
|
35.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year Ended (1)
|
|
|
|
April
24,
|
|
April
25,
|
|
April
27,
|
|
April
28,
|
|
April
29,
|
|
|
|
2005
|
|
2004
|
|
2003
|
|
2002
|
|
2001
|
|
Income
Statement Data (continued):
|
|
|
|
(dollars
in millions, except per share data)
|
|
Income
per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.61
|
|
$
|
0.94
|
|
$
|
1.57
|
|
$
|
-
|
|
$
|
0.84
|
|
Diluted
|
|
$
|
0.58
|
|
$
|
0.91
|
|
$
|
1.50
|
|
$
|
-
|
|
$
|
0.80
|
|
Adjusted
income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
(2)
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
1.17
|
|
Diluted
(2)
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
1.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
$
|
169.9
|
|
$
|
173.2
|
|
$
|
138.2
|
|
$
|
153.7
|
|
$
|
74.2
|
|
Investing
activities
|
|
$
|
(213.7
|
)
|
$
|
(159.1
|
)
|
$
|
(126.6
|
)
|
$
|
(100.6
|
)
|
$
|
(225.4
|
)
|
Financing
activities
|
|
$
|
55.4
|
|
$
|
25.8
|
|
$
|
6.4
|
|
$
|
(53.2
|
)
|
$
|
59.9
|
|
Capital
expenditures
|
|
$
|
217.3
|
|
$
|
153.4
|
|
$
|
61.3
|
|
$
|
98.3
|
|
$
|
162.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of slot machines (3)
|
|
|
14,518
|
|
|
14,558
|
|
|
13,532
|
|
|
14,649
|
|
|
13,604
|
|
Number
of table games (3)
|
|
|
539
|
|
|
452
|
|
|
335
|
|
|
383
|
|
|
395
|
|
Number
of hotel rooms (3)
|
|
|
3,037
|
|
|
2,990
|
|
|
2,850
|
|
|
3,869
|
|
|
3,912
|
|
Average
daily occupancy rate (4)
|
|
|
84.4
|
%
|
|
84.7
|
%
|
|
78.9
|
%
|
|
85.0
|
%
|
|
85.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
146.7
|
|
$
|
134.6
|
|
$
|
94.6
|
|
$
|
76.6
|
|
$
|
76.7
|
|
Total
assets
|
|
|
1,681.4
|
|
|
1,531.8
|
|
|
1,416.0
|
|
|
1,353.4
|
|
|
1,390.7
|
|
Long-term
debt, including current portion
|
|
|
1,156.1
|
|
|
1,088.9
|
|
|
1,028.0
|
|
|
1,009.3
|
|
|
1,039.1
|
|
Stockholders'
equity
|
|
|
261.4
|
|
|
241.4
|
|
|
203.9
|
|
|
159.2
|
|
|
166.0
|
|
(1)
The
operating results and data presented for fiscal years prior to fiscal year
2002
are not comparable to other fiscal years presented because they do not include
the operating results of the Isle-Boonville, which opened on December 6, 2001.
The operating results and data presented for fiscal years prior to fiscal year
2003 are not comparable to other fiscal years presented as we ceased operations
at the Isle-Tunica on September 3, 2002, acquired the Colorado Central
Station-Black Hawk and the Colorado Grande-Cripple Creek on April 22, 2003,
and
we ceased operations at the Colorado Grande-Cripple Creek on April 25, 2005.
The
operating results and data presented for fiscal years prior to fiscal year
2004
are not comparable to other fiscal years presented because they do not include
the operating results of the Isle-Our Lucaya, which we opened on December 15,
2003, the Blue Chip-Dudley, which we acquired on November 28, 2003, and the
Blue
Chip-Wolverhampton, which we opened on April 22, 2004. We also ceased operations
at the Lady Luck-Las Vegas on September 3, 2003. The results of fiscal years
2003-2005 have been reclassified to reflect Colorado Grande-Cripple Creek as
discontinued operations.
(2)
Excludes amortization of goodwill and other indefinite-lived intangible assets
in connection with the adoption of Statement of Financial Accounting Standards
No. 142, “Goodwill and Other Intangible Assets.”
(3)
The
data presented for fiscal years prior to 2003 is not comparable to other fiscal
years presented due to the exclusion of the 223 Colorado Grande-Cripple Creek
slot machines due to discontinued operations.
(4)
The
data presented for fiscal years prior to 2003 is not comparable to other fiscal
years presented due to the exclusion of the 227 Isle-Tunica and the 792 Lady
Luck-Las Vegas hotel rooms.
N/A
Not
applicable.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
|
You
should read the following discussion together with the financial statements,
including the related notes and the other financial information in this Form
10-K.
Executive
Overview
We
are a
leading developer, owner and operator of branded gaming facilities and related
lodging and entertainment facilities in regional markets in the United States
and internationally. We continue to investigate developing new locations,
purchasing existing operations and expanding our current properties. These
activities require capital-intensive investments that have long-term return
potential. We have intentionally sought geographic diversity to limit the risks
caused by weather, regional economic difficulties, and local gaming authorities
and regulations. We currently operate casinos in Mississippi, Louisiana,
Missouri, Iowa, Colorado and Freeport, Grand Bahamas Island. We operate a
harness racing track in Florida. Additionally, we have a controlling interest
in
casino investments in Dudley, Wolverhampton and Walsall, England, each of which
is operated by the minority owners.
The
following table reflects our consolidated net revenues and operating income
by
state:
|
|
ISLE
OF CAPRI CASINOS, INC.
|
|
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year Ended
|
|
|
|
April
24,
|
|
April
25,
|
|
Variance
|
|
Variance
|
|
|
|
2005
|
|
2004
|
|
$
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mississippi
|
|
$
|
256,313
|
|
$
|
260,912
|
|
$
|
(4,599
|
)
|
|
(1.8
|
%)
|
Louisiana
|
|
|
281,434
|
|
|
280,176
|
|
|
1,258
|
|
|
0.4
|
%
|
Missouri
|
|
|
166,274
|
|
|
161,445
|
|
|
4,829
|
|
|
3.0
|
%
|
Iowa
|
|
|
211,650
|
|
|
210,486
|
|
|
1,164
|
|
|
0.6
|
%
|
Colorado
|
|
|
138,588
|
|
|
148,916
|
|
|
(10,328
|
)
|
|
(6.9
|
%)
|
International
|
|
|
31,115
|
|
|
9,401
|
|
|
21,714
|
|
|
231.0
|
%
|
Corporate
and other
|
|
|
26,234
|
|
|
34,106
|
|
|
(7,872
|
)
|
|
(23.1
|
%)
|
Total
net revenues
|
|
$
|
1,111,608
|
|
$
|
1,105,442
|
|
$
|
6,166
|
|
|
0.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mississippi
|
|
$
|
30,163
|
|
$
|
44,075
|
|
$
|
(13,912
|
)
|
|
(31.6
|
%)
|
Lousiana
|
|
|
39,894
|
|
|
37,693
|
|
|
2,201
|
|
|
5.8
|
%
|
Missouri
|
|
|
24,976
|
|
|
23,762
|
|
|
1,214
|
|
|
5.1
|
%
|
Iowa
|
|
|
44,710
|
|
|
43,300
|
|
|
1,410
|
|
|
3.3
|
%
|
Colorado
|
|
|
29,764
|
|
|
39,954
|
|
|
(10,190
|
)
|
|
(25.5
|
%)
|
International
|
|
|
(4,013
|
)
|
|
(4,953
|
)
|
|
940
|
|
|
19.0
|
%
|
Corporate
and other
|
|
|
(40,842
|
)
|
|
(26,103
|
)
|
|
(14,739
|
)
|
|
(56.5
|
%)
|
Operating
income
|
|
$
|
124,652
|
|
$
|
157,728
|
|
$
|
(33,076
|
)
|
|
(21.0
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
Mississippi , our four operations contributed $256.3 million or 23.1% of our
net
revenues during the fiscal year ended April 24, 2005. Due primarily to
construction disruption during our Biloxi hotel construction and increasingly
competitive environments in our Vicksburg and Lula markets, our Mississippi
net
revenues declined $4.6 million. Our decline in revenue coupled with increased
marketing, employee benefits, maintenance, land rent and depreciation, resulted
in a corresponding decline in operating income of $13.9 million. We expect
to
complete the Biloxi hotel expansion by mid-summer of 2005, prior to the expected
opening of an additional branded competitor in the market in the fall of 2005.
Additionally, we expect to close the existing Biloxi casino barge for
approximately two weeks during early December 2005 to install our new, larger
casino barge, which will feature significantly expanded gaming space, new
entertainment venues, new restaurants and other amenities. We expect that our
expansion and the addition of a new branded competitor will have a positive
impact on the Biloxi market.
In
Louisiana, our two properties contributed $281.4 million or 25.3% of our net
revenues during the fiscal year ended April 24, 2005. Net revenues increased
$1.3 million due to the positive results in Lake Charles related to the
renovation and expansion of its Grand Palais casino partially offset by a
decline in Bossier City related to increasing competitive pressures in that
market. Operating income in Louisiana also increased $2.2 million as labor
and
other cost reduction programs implemented in Bossier City coupled with revenue
increases at Lake Charles. An additional competitor entered the Lake Charles
market in late May 2005. We expect this entrant will cause the market to grow
but at the same time to have a negative impact on existing market participants.
The Bossier City market is highly competitive and is facing increased
competition from expansion of Native American gaming in Oklahoma.
In
Missouri, our two properties contributed $166.3 million or 15.0% of our net
revenues during the fiscal year ended April 24, 2005. Net revenues increased
$4.8 million while operating income increased $1.2 million as a result of Kansas
City’s previous casino expansion and aggressive marketing as well as Boonville’s
continuing efforts to maximize its full potential. Beginning in May 2005, there
were disruptions to traffic flow at the Kansas City property as the Paseo Bridge
on Interstate 35 will be closed for repairs for four to seven months and will
likely result in reduction of gaming revenues during this period.
In
Iowa,
our three casinos contributed $211.7 million or 19.0% of our net revenues during
the fiscal year ended April 24, 2005. Net revenues increased by $1.2 million
and
operating income increased by $1.4 million. A decrease in depreciation from
the
Davenport property, due to an extension of the hotel’s useful life, was
substantially offset by a charge to increase operating lease expense and a
2%
increase in the Iowa gaming tax rates. The charge was due to the change in
the
recognition of long-term lease costs. The tax rates became effective July 1,
2004. In fiscal 2005 the Quad-city properties have faced increasing competition
from casinos in the Chicagoland market as those operators refine their product
and service offerings.
In
Colorado, our two Black Hawk properties contributed $138.6 million or 12.5%
of
our net revenues during the fiscal year ended April 24, 2005. During fiscal
2005, construction at our Black Hawk properties, which significantly reduced
parking for the Colorado Central Station-Black Hawk and restricted access to
the
street entrances to both Black Hawk casinos, adversely impacted net revenues
and
operating income by $10.3 million and $10.2 million, respectively. In February
2005 we opened 600 new parking spaces and the construction disruption began
to
decline. By mid-June, 2005 we completed the casino expansions at both casinos,
a
new restaurant, the skywalks connecting the casinos to the new garage and a
total of 900 new parking spaces thus ending the most disruptive phase of our
Black Hawk expansion projects. Construction of the new 162 room Colorado Central
Station hotel is currently ahead of schedule and the hotel is expected to open
near the end of calendar 2005. Construction on the extension of Main Street
to
Colorado Route 119, temporarily delayed by engineering problems, has now
resumed. Completion is expected in the Spring of 2006.
In
our
international locations, we experienced an increase in net revenues due to
comparison to a portion year (Blue Chip opened is mid-November 2003 and Isle-Our
Lucaya opened in mid-December 2003) and operating income due to the recording
of
$2.0 million of business interruption proceeds at Isle-Our Lucaya, related
to
closings caused by Hurricane Frances in the second quarter of fiscal 2005.
Both
our international locations continue to experience growing pains and are
expected to generate negative operating income with an improving
trend.
In
corporate and other, our new development expenses increased to $14.4 million
for
the fiscal year ended April 24, 2005, up from $5.8 million for the same period
in the previous fiscal year. This is primarily due to our continuing development
efforts in the UK, Florida, Waterloo and other initial investments to proposed
future projects.
In
November 2004, voters in the State of Florida voted to amend the state's
constitution to allow the voters of Miami-Dade and Broward counties (Broward
County is the location of the Pompano Park Racetrack) to decide whether to
approve slot machines in racetracks and jai alai frontons in their respective
counties. Broward county voters passed their local referendum and Dade county
voters rejected their referendum in March 2005. Enabling gaming legislation
was
not passed in the current session of the Florida legislature despite the
constitutional requirement that such legislation be in effect by July 1, 2005.
Along with the other Broward county pari-mutuels, we filed a lawsuit seeking
authority to proceed with the development of slot machine facilities despite
the
absence of enabling legislation. On June 21, 2005, the Circuit Court judge
issued a decision in favor of the pari-mutuel facilities, which decision will
be
appealed. Accordingly, the regulation and timing of installation and operation
of slot machines has not been finally determined.
We
remain
committed to our development project in the UK to build a casino in Coventry;
however, legislation enacted in April 2005 limits the number of regional casinos
to one. The number may be increased only through additional legislation. We
have
obtained all necessary gaming licenses to open a casino at the RICOH™ Arena
Coventry in the summer of 2006 under the Gaming Act of 1968. We believe we
are
well positioned to develop a regional casino in Coventry should we be awarded
a
regional casino license.
Critical
Accounting Estimates
Our
consolidated financial statements are prepared in accordance with U.S. generally
accepted accounting principles that require our management to make estimates
and
assumptions that affect reported amounts and related disclosures. Management
identifies critical accounting estimates as:
· |
those
that require the use of assumptions about matters that are inherently
and
highly uncertain at the time the estimates are made;
|
· |
those
estimates where, had we chosen different estimates or assumptions,
the
resulting differences would have had a material impact on our financial
condition, changes in financial condition or results of operations;
and
|
· |
those
estimates that, if they were to change from period to period, likely
would
result in a material impact on our financial condition, changes in
financial condition or results of
operations.
|
Based
upon management’s discussion of the development and selection of these critical
accounting estimates with the Audit Committee of our Board of Directors, we
believe the following accounting estimates involve a higher degree of judgment
and complexity.
Goodwill
and Other Intangible Assets
At
April
24, 2005, we had goodwill and other intangible assets with indefinite useful
lives of $412.8 million, representing 25% of total assets. Statement of
Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets”
(“SFAS 142”), requires that goodwill and intangible assets with indefinite
useful lives be tested for impairment annually or more frequently if an event
occurs or circumstances change that may reduce the fair value of the company’s
goodwill and intangible assets below its carrying value. We completed our
annual impairment
test as required under SFAS 142 in the fourth
quarter of fiscal year 2005 and determined that, other than the goodwill
associated with our Colorado Grande-Cripple Creek casino, goodwill and other
indefinite-lived intangible assets were not impaired. A charge of $4.0 million
was recorded in the fourth quarter for the impairment of Colorado Grande-Cripple
Creek’s remaining goodwill. For properties with goodwill and/or other intangible
assets with indefinite lives, this test requires the comparison of the implied
fair value of each property to carrying value. The implied fair value includes
estimates of future cash flows that are based on reasonable and supportable
assumptions and represent our best estimates of the cash flows expected to
result from the use of the assets and their eventual disposition. Changes in
estimates or application of alternative assumptions and definitions could
produce significantly different results.
Property
and Equipment
At
April
24, 2005, we had property and equipment of $1,027 billion, representing 61%
of
total assets. We capitalize the cost of property and equipment. Maintenance
and
repairs that neither materially add to the value of the property nor appreciably
prolong its life are charged to expense as incurred. Costs incurred in
connection with the company’s “all properties other capital improvements,”
program, as detailed in the “Liquidity and Capital Resources” section below,
include individual capital expenditures related to the purchase of furniture
and
equipment and to the upgrade of hotel rooms, restaurants and other areas of
our
properties. We depreciate property and equipment on a straight-line basis over
their estimated useful lives. The estimated useful lives are based on the nature
of the assets as well as our current operating strategy. Future events such
as
property expansions, new competition and new regulations could result in a
change in the manner in which we are using certain assets requiring a change
in
the estimated useful lives of such assets. We evaluate long-lived assets for
impairment using Statement of Financial Accounting Standards No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”),
which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. In assessing the recoverability of the carrying
value of property and equipment, we make assumptions regarding future cash
flows
and other factors. If these estimates or the related assumptions change in
the
future, we may be required to record impairment loss for these assets. Such
an
impairment loss would be recognized as a non-cash component of operating
income.
Self-Insurance
Liabilities
We
are
self-funded up to a maximum amount per claim for our employee-related health
care benefits program, workers’ compensation insurance and general liability
insurance. Claims in excess of this maximum are fully insured through a
stop-loss insurance policy. We accrue for these liabilities based on claims
filed and estimates of claims incurred but not reported. We rely on independent
consultants to assist in the determination of estimated accruals. While the
total cost of claims incurred depends on future developments, such as increases
in health care costs, in our opinion, recorded reserves are adequate to cover
future claims payments.
Income
Tax Assets and Liabilities
We
account for income taxes in accordance with Statement of Financial Accounting
Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). SFAS 109 requires
that we recognize a current tax asset or liability for the estimated taxes
payable or refundable based upon application of the enacted tax rates to taxable
income in the current year. Additionally, we are required to recognize a
deferred tax liability or asset for the estimated future tax effects
attributable to temporary differences. Temporary differences occur when
differences arise between: (a) the amount of taxable income and pretax financial
income for a year and (b) the tax bases of assets or liabilities and their
reported amounts in financial statements. SFAS 109 also requires that any
deferred tax asset recognized must be reduced by a valuation allowance for
any
tax benefits that, in our judgment and based upon available evidence, may not
be
realizable.
The
deferred tax assets and liabilities, as well as the need for a valuation
allowance, are evaluated on a quarterly basis and adjusted if necessary. We
use
forecasted future operating results and consider enacted tax laws and rates
in
determining if the valuation allowance is sufficient. We operate in multiple
taxing jurisdictions and are therefore subject to varying tax laws and potential
audits, which could impact our assessments and estimates.
Contingencies
We
are
involved in various legal proceedings and have identified certain loss
contingencies. We record liabilities related to these contingencies when it
is
determined that a loss is probable and reasonably estimable. These assessments
are based on our knowledge and experience as well as the advice of legal counsel
regarding current and past events. Any such estimates are also subject to future
events, court rulings, negotiations between the parties and other uncertainties.
If an actual loss differs from our estimate, or the actual outcome of any of
the
legal proceedings differs from expectations, operating results could be
impacted.
We
routinely face challenges from federal and other tax authorities regarding
the
amount of taxes due. These challenges include questions regarding the timing
and
amount of deductions and the allocation of income among various tax
jurisdictions. We record tax accruals for probable exposures associated with
the
various filing positions in accordance with Statement of Financial Accounting
Standards No. 5, “Accounting for Contingencies.”
Slot
Club Awards
We
reward
our slot customers for their loyalty based on the dollar amount of play on
slot
machines. We accrue for these slot club awards based on an estimate of the
value
of the outstanding awards utilizing the age and prior history of redemptions.
Future events such as a change in our marketing strategy or new competition
could result in a change in the value of the awards.
Results
of Operations
Our
results of operations for the fiscal year ended April 24, 2005, reflect the
consolidated operations of all of our subsidiaries and include the following
properties: the Isle-Bossier City, the Isle-Lake Charles, the Isle-Biloxi,
the
Isle-Lula, the Isle-Natchez, the Isle-Vicksburg, the Isle-Kansas City, the
Isle-Boonville, the Isle-Bettendorf, the Isle-Marquette, the Rhythm
City-Davenport, the Isle-Black Hawk, the Colorado Central Station-Black Hawk,
the Isle-Our Lucaya, the Blue Chip-Dudley, the Blue Chip-Wolverhampton, the
Blue
Chip-Walsall and Pompano Park. Fiscal 2005 results have been reclassified to
reflect the Colorado Grande-Cripple Creek as discontinued
operations.
Our
results of operations for the fiscal year ended April 25, 2004 reflect the
consolidated operations of all of our subsidiaries and include the following
properties: the Isle-Bossier City, the Isle-Lake Charles, the Isle-Biloxi,
the
Isle-Lula, the Isle-Natchez, the Isle-Vicksburg, the Isle-Kansas City, the
Isle-Boonville, the Isle-Bettendorf, the Isle-Marquette, the Rhythm
City-Davenport, the Isle-Black Hawk, the Colorado Central Station-Black Hawk,
the Lady Luck-Las Vegas, the Isle-Our Lucaya, the Blue Chip-Dudley, the Blue
Chip-Wolverhampton and Pompano Park. On October 30, 2002, we completed the
sale
of the Lady Luck-Las Vegas. We operated the casino until September 3, 2003,
when
the purchaser’s designated gaming operator received regulatory approval. The
Isle-Our Lucaya began operations in December of 2003. We purchased a two-thirds
interest in Blue Chip Casinos, PLC (“Blue Chip”) in November of 2003. Blue Chip
owns and operates a pub-style casino in Dudley, England, and a pub-style casino
in Wolverhampton, England, which began operations in April of 2004. Fiscal
2004
results have been reclassified to reflect the Colorado Grande-Cripple Creek
as
discontinued operations.
Our
results of operations for the fiscal year ended April 27, 2003, reflect the
consolidated operations of all of our subsidiaries, and includes the following
properties: the Isle-Bossier City, the Isle-Lake Charles, the Isle-Biloxi,
the
Isle-Lula, the Isle-Natchez, the Isle-Tunica, the Isle-Vicksburg, the
Isle-Kansas City, the Isle-Boonville, the Isle-Bettendorf, the Isle-Marquette,
the Rhythm City-Davenport, the Isle-Black Hawk, the Lady Luck-Las Vegas and
Pompano Park. Isle-Tunica ceased casino operations on September 3, 2002, prior
to the sale of assets to Boyd Casino Strip, LLC on October 7, 2002. On October
30, 2002, we completed the sale of the Lady Luck-Las Vegas. We continued to
operate the casino until September 3, 2003, when the purchaser’s designated
gaming operator received regulatory approval. Results also include the Colorado
Central Station-Black Hawk subsequent to its acquisition on April 22, 2003.
Fiscal 2003 results have been reclassified to reflect the Colorado
Grande-Cripple Creek as discontinued operations.
We
believe that our historical results of operations may not be indicative of
our
future results of operations because of the substantial present and expected
future increase in competition for gaming customers in each of our markets,
as
new gaming facilities open and existing gaming facilities expand or enhance
their facilities. We believe that our operating results are materially affected
by the economy and weather.
Fiscal
Year Ended April 24, 2005 Compared to Fiscal Year Ended April 25,
2004
Gross
revenues for the fiscal year ended April 24, 2005 were $1.3 billion, which
included $1.1 billion of casino revenue, $47.7 million of room revenue, $20.1
million of pari-mutuel commissions, $128.1 million of food and beverage revenue
and $21.3 million of other revenue. This compares to gross revenues for the
fiscal year ended April 25, 2004 of $1.3 billion, which included $1.1 billion
of
casino revenue, $44.6 million of room revenue, $20.3 million of pari-mutuel
commissions and $124.4 million of food and beverage and $19.4 million of other
revenue.
Casino
revenue remained flat compared to fiscal year 2004. We
saw an
increase in casino revenues at our Missouri properties due primarily to the
Isle-Kansas City’s expansion of its gaming floor and the Isle-
Boonville’s
continued strong performance. Likewise, casino revenues increased at the
Isle-Lake Charles resulting from the expansion and renovation of the Grand
Palais. The addition of the Isle-Our Lucaya and the Blue Chip-Dudley also
increased casino revenues as these properties opened in the third quarter of
fiscal 2004. These increases were offset by the sale of the Lady Luck-Las Vegas.
In Colorado, casino revenues declined as the Isle-Black Hawk and the Colorado
Central Station-Black Hawk have been affected by construction disruption. We
also faced decreases in casino revenues at the Isle-Biloxi because of
construction and the aftermath of Hurricane Ivan.
Room
revenue increased 7.1% compared to fiscal year 2004 primarily
as a result of the additional capacity at the Isle-Bossier City. Pari-mutuel
commissions earned at Pompano Park in Florida for the fiscal year was
essentially flat compared to prior year. Food and beverage revenues increased
by
3.9% because of renovations made to the buffets at the Isle-Vicksburg, the
Isle-Lake Charles and the Isle-Bossier City. The addition of the Isle-Our Lucaya
and the Blue Chip locations also added to food and beverage
revenues.
Promotional
allowances, which are made up of complimentary revenues, cash points and
coupons, are rewards that we give our loyal customers to encourage them to
continue to patronize our properties. These allowances increased by 3.4% in
fiscal year 2005 as we increased our direct mail efforts to promote
play.
Casino
operating expenses increased 2.8% over fiscal year 2004. These expenses are
primarily comprised of salaries, wages and benefits and other operating expenses
of the casinos. The increase in casino operating expenses is attributable to
the
additions of the Isle-Our Lucaya and Blue Chip. Isle-Our Lucaya incurred casino
operating expenses during the time the property was closed in the aftermath
of
last year’s hurricanes. These increases are partially offset by the
discontinuation of gaming operations at the Lady Luck-Las Vegas, following
the
finalization of the property’s sale, and a decrease in salaries, wages, taxes
and benefits at the Isle-Bossier City due to cost controls.
State
and
local gaming taxes increased by 2.2% compared to fiscal year 2004. Effective
July 1, 2004, we were subject to an additional assessment of 2.0% of gross
gaming revenues in Iowa due to a tax increase enacted in that state.
Room
expenses increased 4.2% compared to fiscal year 2004. These
expenses directly relate to the cost of providing hotel rooms. Other costs
of
the hotels are shared with the casinos and are presented in their respective
expense categories. The increase in expenses was due primarily to the additional
room capacity at the Isle-Bossier City.
Pari-mutuel
operating costs of Pompano Park in Florida remained flat compared to fiscal
year
2004. Such costs consist primarily of compensation, benefits, purses, simulcast
fees and other direct costs of track operations.
Food
and
beverage expenses increased 12.5% over fiscal year 2004. Food and beverage
expenses as a percentage of gross food and beverage revenues increased from
21.7% for the fiscal year ended April 25, 2004, to 23.7% for the fiscal year
ended April 24, 2005. These
expenses consist primarily of the cost of goods sold, salaries, wages and
benefits and other operating expenses of these departments. Food,
beverage and other expenses as a percentage of gross food, beverage and other
revenues increased from 22.3% for the fiscal year ended April 25, 2004, to
24.0%
for the fiscal year ended April 24, 2005. These
expenses increased partly as a result of the expansion at the Isle-Bossier
City.
Room service and banquet expense increased as the availability of meeting space
and hotel rooms increased during the fiscal year. The addition of the Isle-Our
Lucaya and Blue Chip also increased food, beverage and other
expenses.
Marine
and facilities expenses increased 3.2% compared to fiscal year 2004. These
expenses include salaries, wages and benefits of the marine and facilities
departments, operating expenses of the marine
crews,
insurance, maintenance of public areas, housekeeping and general maintenance
of
the riverboats and pavilions. The increase was primarily due to the
Isle-Vicksburg’s parking lot repairs completed in the first quarter of fiscal
2005, ongoing repairs and maintenance at the Isle-Lula, and the addition of
the
Isle-Our Lucaya. The increase was partially offset by a decrease in benefits
expense for the marine and facilities departments at the Isle-Bossier
City.
Marketing
expenses increased 1.8% compared to fiscal year 2004. The increase in marketing
expenses is primarily due to the addition of the Isle-Our Lucaya and is
partially offset by the finalization of the sale of the Lady Luck-Las Vegas.
Marketing expenses include salaries, wages and benefits of the marketing and
sales departments, as well as promotions, direct mail, advertising, special
events and entertainment.
Administrative
expenses have increased 6.9% over fiscal year 2004. These expenses include
administration and human resource department expenses, rent, new development
activities, professional fees and property taxes. The increase is due to the
addition of the Isle-Our Lucaya and Blue Chip. We also increased our development
and investment activities domestically and in the UK. In Florida, we supported
the successful campaign to pass a constitutional amendment that allows the
voters of Miami-Dade and Broward counties to decide whether to approve slot
machines in racetracks and jai alai facilities in their respective counties.
These increases were partially offset by finalization of the sale and
discontinuation of all operations at the Lady Luck-Las Vegas and savings from
combining some administrative functions of our the Isle-Bettendorf and the
Rhythm City-Davenport properties.
Depreciation
expense increased by 8.5% compared to fiscal year 2004. Depreciation has
increased as a result of the company’s capital expansion programs.
The
increase was primarily due to a one-time charge for additional depreciation
expense of $2.9 million related to a reclassification of certain land
improvements that were improperly classified as land at the time of the
conversion of the company's manual system to a computerized asset tracking
system in fiscal 2002, identified in the second fiscal quarter of 2005, as
well
as the capital additions at the Isle-Biloxi, Isle-Bossier City, the Isle-Lake
Charles and the Isle-Kansas City.
We
incurred a loss on early extinguishment of debt totaling $5.3 million in fiscal
2005 in connection with the amendment of our senior secured credit facility
on
February 4, 2005. These charges include the write-off of debt acquisition costs.
We also incurred a loss on early extinguishment of debt of $26.1 million in
fiscal 2004 related to the amendment of our $390.0 million 8.75% senior
subordinated notes on March 3, 2004. These charges included early payment
premiums as well as the write-off of debt acquisition costs.
Net
interest expense decreased 11.0% compared with fiscal year 2004. This is
primarily attributable to the lower average balances outstanding. Net interest
also excludes capitalized interest of $3.2 million for the fiscal year ended
April 24, 2005, as compared to $1.5 million for the fiscal year ended April
25,
2004. The increase in capitalized interest results from the expansion projects
at the Isle-Biloxi and in Black Hawk. The increase is partially offset by the
completion of the expansion projects at the Isle-Bossier City.
Our
effective tax rate from continuing operations was 48.1% for the fiscal year
ended April 24, 2005, compared to 32.4% for fiscal year ended April 25, 2004,
which, in each case, excludes an unrelated party’s portion of the Colorado
Central Station-Black Hawk income taxes. The increase in the rate for fiscal
2005 is a result of the effect of non-deductible permanent items on earnings,
the impact of not benefiting from a portion of the current operating losses
of
the Company’s interests in the UK and state income taxes. Also in the second
fiscal quarter ended 2004, the Internal Revenue Service concluded a federal
tax
examination covering four tax years without significant adjustments and provided
administrative guidance on certain other tax matters for other open years.
As a
result, we analyzed our tax accruals and reduced income tax expense by
approximately $3.4 million for previously accrued
income
tax liabilities. This had the effect of reducing our effective tax rate to
32.4%
from continuing operations, excluding the minority interest’s portion of the
Colorado Central Station-Black Hawk income taxes. Excluding the impact of these
adjustments, our fiscal year 2004 effective rate from continuing operations
would have been 41.1%, excluding the minority interest’s portion of the Colorado
Central Station-Black Hawk income taxes.
Fiscal
Year Ended April 25, 2004 Compared to Fiscal Year Ended April 27,
2003
Gross
revenues for the fiscal year ended April 25, 2004, were $1.3 billion, which
included $1.1 billion of casino revenue, $44.6 million of room revenue, $20.3
million of pari-mutuel commissions, $124.4 million of food and beverage revenue
and $19.4 million of other revenue. This compares to gross revenues for the
fiscal year ended April 27, 2003 of $1.3 billion, which included $1.1 billion
of
casino revenue, $49.2 million of room revenue, $23.9 million of pari-mutuel
commissions and $121.3 million of food and beverage and $19.5 million of other
revenue.
Casino
revenue increased 6.2%. In Colorado, a full year contribution by the Colorado
Central Station-Black Hawk and the Colorado Grande-Cripple Creek added an
additional $59.6 million in casino revenue. Additionally, Isle-Black Hawk’s
casino revenue increased $3.7 million. We were pleased when a statewide
referendum that would have allowed video lottery terminals in all of the state’s
horse racing tracks was defeated. The gains in Colorado were partially offset
by
the closing and subsequent sale of the Isle’s Tunica and Las Vegas locations.
Because of construction disruptions and increase in the number of competitors,
the Isle-Bossier City saw casino revenue decrease by 5.2%.
Room
revenue decreased 9.5% compared to prior year. The decrease was primarily
attributed to a decrease of 1,019 hotel rooms resulting from the sale of the
Isle-Tunica and the Lady Luck-Las Vegas. The decrease was partially offset
by
increased room revenue at the Isle-Bossier City due to the completion of its
265-room hotel expansion in January of 2004.
Pari-mutuel
revenue earned at Pompano Park in Florida decreased by 14.9%. The decrease
is
primarily attributable to the general decrease of onsite wagering on horse
races. Additionally, the park did not hold live races in July, August or
September of 2003 to increase the purse pool for later races, thereby decreasing
the number of live race days in fiscal year 2004 compared to fiscal year 2003.
Pompano Park plans to hold live races in July, August and September of
2004.
Food
and
beverage revenue increased 2.6% from year to year. The increase is primarily
due
to the addition of Colorado Central Station. Other revenue has remained
essentially flat year over year.
Promotional
allowances, which are made up of complimentary revenue, cash points and coupons,
are rewards that we give our loyal customers to encourage them to continue
to
patronize our properties. These allowances increased by 10.0% in fiscal year
2004 primarily as a result of the addition of our Colorado properties as well
as
the maturing of the customer database at the Isle-Boonville.
Casino
operating expenses remained flat over fiscal year 2003. These expenses are
primarily comprised of salaries, wages and benefits and other operating expenses
of the casinos. The casino operating expenses incurred by the addition of the
Colorado Central Station-Black Hawk were offset by the decrease in casino
expenses because of the sale of our Las Vegas and Tunica
properties.
State
and
local gaming taxes increased by 6.7% compared to fiscal year 2003. Gaming
taxes in Iowa will increase from 20% to 22% of adjusted gross receipts effective
July 1, 2004. Additionally, we will incur two prepaid assessments due on June
1,
2005 and June 1, 2006 of 2.125% for each of our Iowa licensee’s fiscal year 2004
adjusted gross receipts. These assessments will be offset by a credit on future
state gaming taxes of 20% each year beginning July 1, 2010 for five consecutive
years.
Room
expenses decreased 14.2% compared to fiscal year 2003. The decrease in room
expenses resulted from the sale of our hotel operations at the Isle-Tunica
and
the Lady Luck-Las Vegas. These decreases were partially offset by the increase
in room expenses from the addition of hotel rooms at the Isle-Bossier City.
Pari-mutuel
operating costs of Pompano Park in Florida decreased by 8.8% compared to fiscal
year 2003. Such costs consist primarily of compensation, benefits, purses,
simulcast fees and other direct costs of track operations.
Food
and
beverage expenses decreased 7.5%. This decrease reflects the sale of the
Isle-Tunica and the Lady Luck-Las Vegas. These expenses consist primarily of
the
cost of goods sold, salaries, wages and benefits and other operating expenses.
Food and beverage expenses as a percentage of gross food and beverage revenues
decreased from 24.0% for the fiscal year ended April 27, 2003, to 21.7% for
the
fiscal year ended April 25, 2004.
Marine
and facilities expenses remained essentially flat. These expenses included
salaries, wages and benefits, operating expenses of the marine crews, insurance,
housekeeping and general maintenance of the riverboats and floating pavilions.
The elimination of cruising requirements in Iowa beginning in May 2004 may
yield
additional cost reductions, which would partially offset the increase in the
Iowa gaming taxes.
Marketing
expenses increased 8.9% year over year. Marketing expenses included salaries,
wages and benefits of the marketing and sales departments, as well as
promotions, advertising, special events and entertainment. Marketing expenses
have increased as the company addresses construction disruptions and increasing
competition in a number of its markets.
Administrative
expenses have increased 7.7% over fiscal year 2003. Administrative expenses
included administration and human resource department expenses, rent, new
development activities, professional fees and property taxes. Costs associated
with new development increased substantially in fiscal year 2004 primarily
due
to activities in the St. Louis area and the UK. We continue to seek new
development opportunities and therefore expect that new development costs will
continue at comparable levels in fiscal year 2005.
The valuation charge for the fiscal year ended April 27, 2003, totaling $1.9
million is a reserve for an impairment of our investment to date in Ardent
Gaming, L.L.C., an unrelated third party. The system being developed under
the
joint venture was substantially past due and we believed it was probable that
we
would not recover our investment.
Depreciation
expense increased by 17.2% compared to fiscal year 2003. Depreciation has
increased as a result of the company’s capital expansion programs. This includes
not only the improvements at Isle-Biloxi and Isle-Bossier City but also the
company-wide project to update its slot product.
Interest
expense increased 1.1% as compared with fiscal year 2003. Interest expense
primarily relates to indebtedness incurred in connection with the acquisition
of
property, equipment, leasehold improvements and berthing and concession rights
and is net of capitalized interest of $1.5 million in fiscal year 2004 as
compared to $0.2 million in fiscal year 2003.
We
recorded a $26.1 million loss on the extinguishment of our $390.0 million 8.75%
Senior Subordinated Notes. These notes were replaced by the issuance of $500
million in 7% Senior Subordinated Notes. We used the proceeds from the notes
issuance not only to repay the $390 million 8.75% Senior Subordinated Notes,
but
also $37.5 million of our Senior secured credit facility Term Loan
B
and
$8.0 million of our Senior secured credit facility Revolving Loans, and to
pay
premiums and debt issuance fees and expenses. Remaining amounts were used for
general corporate purposes.
Our
effective tax rate from continuing operations was 32.4% for the fiscal year
ended April 25, 2004 as compared to 36.9% for the fiscal year ended April 27,
2003, which, in each case, excludes an unrelated party’s portion of the Colorado
Central Station-Black Hawk income taxes. In the second fiscal quarter ended
October 26, 2003, the Internal Revenue Service concluded a federal tax
examination covering four tax years without significant adjustments and provided
administrative guidance on certain other tax matters for other open years.
As a
result, we analyzed our tax accruals and reduced income tax expense by
approximately $3.4 million for previously accrued income tax liabilities. This
had the effect of reducing our effective tax rate to 32.4% from continuing
operations, excluding the minority interest’s portion of the Colorado Central
Station-Black Hawk income taxes, as compared to 36.9% for the year ended April
27, 2003. Excluding the impact of these adjustments, our fiscal year 2004
effective rate from continuing operations would have been 41.1%, excluding
the
minority interest’s portion of the Colorado Central Station-Black Hawk income
taxes.
Liquidity
and Capital Resources
At
April
24, 2005, we had cash and cash equivalents and marketable securities of $162.8
million compared to $134.6 million in cash and cash equivalents at April 25,
2004, the end of our last fiscal year. Of this $28.2 million increase, $12.1
is
an increase in cash and cash equivalents and is the net result of $169.9 million
net cash provided by operating activities, $213.7 million net cash used in
investing activities, $55.4 million net cash provided by financing activities
and $0.5 million increase in cash from the effect of foreign currency exchange
rates. The remaining increase of $16.1 million is marketable securities
held by Capri Insurance Corporation, of which we have the ability to draw up
to
50% of the balance of these securities. In addition, as of April 24, 2005,
we
had
$452.8 million of capacity under lines of credit and available term debt which
consisting of $389.8 million in unused credit capacity under the revolving
loan
commitment on our senior secured credit facility, $9.0
million of unused credit capacity with the Isle-Black Hawk’s senior secured
credit facility (limited to use by the Isle-Black Hawk),
and
$54.0 million under other lines of credit and available term debt. During the
quarter ended April 24, 2005, the Isle-Black Hawk drew down $26.0 million on
its
revolving loan under the Isle-Black Hawk’s senior secured credit facility. We
believe that existing cash, cash flow from operations and available borrowings
under our lines of credit will be sufficient to support our working capital
needs, planned capital expenditures and debt service requirements for the
foreseeable future.
Investing
Activities
We
invested $217.3 million in property and equipment during the fiscal year ended
April 24, 2005. The following table reflects expenditures and accruals for
property and equipment on major projects for which we are committed to in fiscal
2005 and 2004 and projected expenditures for these projects. The amounts in
the
table do not include any expenditures and accruals prior to fiscal
2004.
|
|
Actual
|
|
Remaining
|
|
|
Fiscal
Year
|
|
Fiscal
Year
|
|
Fiscal
Year
|
|
|
|
|
Ended
4/25/04
|
|
Ended
4/24/05
|
|
Ending
4/30/06
|
|
Thereafter
|
|
|
(dollars
in millions)
|
|
Property
|
Project
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Isle-Biloxi
|
Construct
hotel & parking facility
|
$
21.1
|
|
$
43.5
|
|
$
9.5
|
|
$
-
|
Isle-Biloxi
|
Construct
casino barge
|
-
|
|
7.4
|
|
83.1
|
|
-
|
Isle-Bossier
City
|
Construct
hotel & entertainment center
|
38.2
|
|
5.8
|
|
-
|
|
-
|
Isle-Bossier
City
|
Renovate
casino
|
0.4
|
|
2.4
|
|
2.2
|
|
-
|
Isle-Bettendorf
|
Construct
hotel
|
-
|
|
-
|
|
4.3
|
|
40.7
|
Isle-Lake
Charles
|
Renovate
& expand casinos
|
10.9
|
|
11.6
|
|
6.5
|
|
-
|
Isle-Kansas
City
|
Renovate
& expand casino
|
8.2
|
|
-
|
|
-
|
|
-
|
Isle-Boonville
|
Construct
hotel
|
-
|
|
2.0
|
|
15.5
|
|
-
|
Isle-Black
Hawk (57% owned)
|
Expansion
& public improvements
|
8.0
|
|
62.5
|
|
22.1
|
|
-
|
Isle-Waterloo
|
Construct
casino & hotel
|
-
|
|
-
|
|
12.0
|
|
107.0
|
Coventry
|
Construct
leasehold improvements
|
-
|
|
8.4
|
|
25.1
|
|
22.3
|
Blue
Chip
|
Construct
leasehold improvements
|
-
|
|
2.2
|
|
-
|
|
-
|
Other
properties (1)
|
IGT
Advantage program
|
-
|
|
9.3
|
|
15.4
|
|
-
|
All
|
Slot
programs
|
29.6
|
|
31.8
|
|
29.3
|
|
-
|
All
|
Other
capital improvements
|
37.0
|
|
30.4
|
|
46.9
|
|
13.1
|
Total
|
|
$
153.4
|
|
$
217.3
|
|
$
271.9
|
|
$
183.1
|
|
|
|
|
|
|
|
|
|
(1)
Includes: Isle-Biloxi, Isle-Vicksburg, Isle-Lula, Isle-Natchez and
to be
determined.
|
|
|
|
|
|
|
The other capital improvements at all of our properties consists of numerous
capital expenditures related to the purchase of furniture and equipment and
the
upgrade of hotel rooms, restaurants and other areas of our
properties.
The
Isle-Biloxi plan, estimated at $79.0 million, will include an additional 400
hotel rooms, a 12,000 square-foot convention/entertainment center, an expanded
pool and spa area and a 1,000-space parking facility, which was completed in
December 2003. The parking garage provides a podium for future expansion of
an
additional hotel tower. We expect full completion of the new 400-room hotel
expansion by mid-summer and expect to open the spa in early fall of 2005.
In
October 2004, we announced plans to
replace
the casino at the Isle-Biloxi with a new state-of-the-art casino facility.
The
approximately $90.0 million new casino, is expected to be opened in December
2005 and will feature significantly expanded gaming space, new entertainment
venues and restaurants and other amenities. Our new casino is currently under
construction offsite. We plan to close the existing casino for approximately
two
weeks between Thanksgiving and Christmas of 2005 while we move the new facility
into place. We are reviewing our options for the existing barge that will be
replaced at the Isle-Biloxi in December 2005.
We
have
signed a development agreement with the City of Bettendorf pursuant to which
we
agreed to construct a new 250-room Isle hotel, additional parking, a Kitt’s
Kitchen restaurant, and an expansion of the existing buffet, and the City agreed
to construct a 50,000 square foot convention center adjacent to the company’s
facility, which will be managed by the Isle-Bettendorf. The cost of our portion
of this project is approximately $45.0 million, and the new hotel is planned
to
open in the late spring of 2007.
The
Isle-Marquette had planned $5.9 million in improvements which would have
included a 60-room hotel and improved parking. This
construction has been delayed due to wetlands remediation approvals. We are
currently evaluating other alternative hotel development scenarios for this
property.
We
have
begun construction of a 140-room hotel, including 20 suites and a 6,000 square
foot event center at the Isle-Boonville. The project is expected to be complete
in late spring of 2006 and we have spent approximately $2.0 million on the
project. The remaining $15.5 will be spent in fiscal 2006.
We
are in
the final stages of a $94 million expansion project for the Isle-Black Hawk
and
Colorado Central Stations-Black Hawk properties. We recently completed our
expansion of the Isle-Black Hawk and the Colorado Central Station-Black Hawk
casinos. We have completed a portion of our new parking structure with 600
parking spaces open to the public. The new 162-room Colorado Central Station
hotel is currently ahead of schedule and expected to be completed near the
end
of calendar year 2005. Additionally, we continue to construct public
improvements to extend Main Street directly to Colorado Route 119, approximately
one half-mile closer to Denver. Completion is expected in the spring of
2006.
As
announced in December 2003, we entered into an agreement to develop and operate
an Isle of Capri-themed casino, subject to obtaining a license, in a commercial
leisure complex currently under development in Coventry, England. In fiscal
year
2005, Isle was granted a gaming license to open the Coventry casino under the
current legislation (Gaming Act 1968). Originally, total project costs were
estimated to be $94.9 million, but recently that estimate was revised to $55.8
million. Project costs for the leased space include design, architectural,
mechanical and electrical build-out, construction and equipment. As of fiscal
year end April 24, 2005, we have spent $8.4 million on the Coventry project
and
expect to spend the remainder over the next 15 months. Completion date for
the
casino at the RICOHTM
Arena
Coventry is estimated to be August 2006.
We
have
been selected by the Iowa Racing and Gaming Commission as the successful
applicant for a gaming license in Waterloo, Iowa. We plan to spend approximately
$119.0 million on constructing a 35,000 square foot single level casino with
1,300 gaming positions, three of our signature restaurants, a 200-room hotel
and
1,000 parking spaces. We expect the construction project to take approximately
20 months following the receipt of necessary permits and licenses, which we
expect to receive.
In
May
2005, the company signed a management agreement with resort developer Eighth
Wonder to manage the casino included in Eighth Wonder’s proposal for a new
integrated resort complex in Singapore. In the first quarter fiscal 2006, the
Company paid Eighth Wonder $4.0 million pursuant to the terms of this
agreement.
On
March
15, 2004, we announced that we had been selected by the Illinois Gaming Board
as
the successful bidder in a federal bankruptcy court auction for the 10th
Illinois gaming license conducted pursuant to an agreement approved by, among
other parties, the Illinois Attorney General. We bid $518.0 million to acquire
by merger the stock of a company in bankruptcy that owns the license. Our bid
currently expires on August 1, 2005, which date has been extended monthly by
us
several times. If this merger is completed, we expect to spend approximately
$150.0 million in addition to amounts already expended at the site in Rosemont,
Illinois to construct a single-level, 40,000 square foot casino with 1,200
gaming positions, restaurants, an entertainment venue and retail space.
We
plan
to finance the Rosemont, Illinois project through equity contributions from
us
and from a limited number of individual investors, who in the aggregate will
own
20% as required by Illinois law, in an amount sufficient to allow non-recourse
financing for the remainder of the cash needed to complete the project.
The
federal bankruptcy court has confirmed the plan of reorganization pursuant
to
which the merger would be consummated.
The
merger remains subject to certain conditions, including a finding of suitability
and final approval by the Illinois Gaming Board as well as certain other
conditions. In addition, the Illinois Attorney General has raised issues with
regard to the appropriateness of the Village of Rosemont as a host
community
and the Illinois Gaming Board’s selection of our bid. The Illinois Gaming Board
(working with the Illinois Attorney General) has also resumed an administrative
proceeding seeking to revoke the gaming license from our proposed merger
partner, which if successful may adversely impact our ability to operate
a
gaming facility in the Village of Rosemont. The Illinois Attorney General
has
also filed a suit against the Illinois Gaming Board seeking to enjoin the
Board
from conducting a suitability investigation of us in connection with the
merger
provided for under the plan of reorganization (which suitability review has
been
“suspended” by the Illinois Gaming Board pending the completion of the
aforementioned revocation proceeding). During the fourth quarter of fiscal
2005,
the governor of Illinois appointed a new gaming board. One of the first acts
by
the new board was to authorize the reinstatement of the proceeding to rescind
the license from the current owner. For the reasons set forth above, among
others, we believe that our ability to obtain the gaming license and open
a
gaming facility in Rosemont has been subjected to added uncertainty. The
Illinois Supreme Court has also agreed to review certain challenges to
amendments to the Illinois Riverboat Gambling Act relating to the proposed
relocation of the 10th
license.
There can be no assurance that the foregoing conditions will be satisfied
or
that we will ultimately acquire the license. Additionally, because Illinois
limits the number of gaming licenses, each license has intrinsic value.
Therefore, this license is considered an intangible asset. As such, the full
cost of the license and all associated costs were originally capitalized
in the
amount of $2.5 million. Due to the continuing uncertainty with respect to
this
matter, we have recorded a valuation charge for the full amount expended
at
April 24, 2005. We do not anticipate any significant expenditures related
to the
monthly renewal.
On
October 29, 2004, we loaned $5.0 million to Florida Gaming Corporation (“Florida
Gaming”). Interest accrues on the unpaid principal balance of the loan at an
annual rate of 6.0% and is paid in arrears on the first day of each fiscal
quarter. The loan is secured by a pledge of all of the issued and outstanding
shares of capital stock of Florida Gaming Centers, Inc. (“FGC”), a wholly owned
subsidiary of Florida Gaming. The entire unpaid principal amount of the loan
and
unpaid interest thereon is payable on the earlier of (1) the sale of all or
any
material portion of the assets of, or all or any substantial equity interest
in
FGC, or (2) December 31, 2008. Concurrently with the loan, Florida Gaming and
FGC entered into a letter agreement with us pursuant to which Florida Gaming
and
FGC gave us exclusive
negotiating rights with respect to the acquisition of all or substantially
all
of FGC’s Miami jai alai business for a period ending no later than December 31,
2008.
In
November 2004, voters in the State of Florida voted to amend the state's
constitution to allow the voters of Miami-Dade and Broward counties (Broward
County is the location of the Pompano Park Racetrack) to decide whether to
approve slot machines in racetracks and jai alai frontons in their respective
counties. Broward county voters passed their local referendum and Dade county
voters rejected their referendum in March 2005. Enabling gaming legislation
was
not passed in the current session of the Florida legislature despite the
constitutional requirement that such legislation be in effect by July 1, 2005.
Along with the other Broward county pari-mutuels, we filed a lawsuit seeking
authority to proceed with the development of slot machine facilities despite
the
absence of enabling legislation. On June 21, 2005, the Circuit Court judge
issued a decision in favor of the pari-mutuel facilities, which decision will
be
appealed. Accordingly, the regulation and timing of installation and operation
of slot machines has not been finally determined. Should we be successful,
we
plan to construct a new facility in two phases. Phase I will include an
expansion of the existing facility to accommodate 1,800 to 2,000 additional
slots, at a cost of approximately $155.0 million to be completed in
approximately nine to twelve months from project start. Phase II, subject to
timing and circumstances of Phase I, will include an additional facility
expansion and an additional 1,000 slots at a planned cost of approximately
$85.0
million.
In
January 2005, we announced plans to deploy the IGT Advantage™ Casino
System. The total cost of the project is expected to be approximately $24.7
million, of which $1.6 million is included in the Colorado Central Station-Black
Hawk property expansion project discussed above. We have also spent $7.7 million
at the Isle-Biloxi, the Isle-Vicksburg, the Isle-Lula, the Isle-Natchez and
another property to be determined, leaving a remaining budget of $15.4 million.
This will allow our properties to experience
product
upgrades to operate more competitively within their markets. Our slot
improvement initiative also includes an increased ticket-in/ticket-out slot
product offering.
We
expense all developmental costs until we determine that ultimate licensure
and
operation is deemed probable. At that time, we evaluate the applicable costs
and
capitalize if appropriate.
All
of
our development plans are subject to obtaining permits, licenses and approvals
from appropriate regulatory and other agencies and, in certain circumstances,
negotiating acceptable leases. In addition, many of the plans are preliminary,
subject to continuing refinement or otherwise subject to change.
Financing
Activities
During
the twelve month period ended April 24, 2005, we had net sources of cash of
$55.4 million primarily
in
the
following financing activities:
· |
We
received proceeds from the issuance of new debt of $250.7
million.
|
· |
We
made net borrowings under the Isle-Black Hawk’s credit facility of $26.0
million.
|
· |
We
made borrowings under Blue Chip’s credit facility of $0.1
million.
|
· |
We
made principal payments on our senior secured credit facility and
other
debt of $210.0 million.
|
· |
We
purchased 364,895 shares of our common stock at a total cost of $6.4
million.
|
· |
We
made cash distributions to a minority partner totaling $4.3
million.
|
· |
We
paid $5.2 million in costs related to the refinancing
of our senior secured credit
facility.
|
On
February 4, 2005, we refinanced our senior secured credit facility. Our new
senior secured facility provides for a $400.0 million revolving credit facility
maturing on February 4, 2010 and a $250.0 million term loan facility maturing
on
February 4, 2011 (or at our option, February 6, 2012 if we elect to refinance
our existing 9.00% senior subordinated notes currently due March 2012) with
an
additional $50.0 million delayed draw term loan available until August 3, 2005.
At our mutual discretion with the lead arranger, we may increase the revolver
and/or term loan, in an aggregate amount up to $200.0 million, subject to
certain conditions. The term loans are payable in quarterly installments
beginning on March 31, 2005 and ending on February 4, 2011 unless extended
as
described above. The revolving credit facility may bear interest at the higher
of (1) 0.5% in excess of the federal funds effective rate or the rate that
the
bank group announces from time to time as its prime lending rate plus an
applicable margin of up to 1.75% or (2) a rate tied to a LIBOR rate plus an
applicable margin of up to 2.75%. The term loan may bear interest at the higher
of (1) 0.5% in excess of the federal funds effective rate or the rate that
the
bank group announces from time to time as its prime lending rate plus an
applicable margin of up to 0.75% or (2) a rate tied to a LIBOR rate plus an
applicable margin of 1.75%. The proceeds from the refinancing were used to
pay
down the existing senior secured credit facility term loan, of which $205.6
million in principal and $0.7 million in accrued interest were outstanding
as of
February 4, 2005. The remainder of the undrawn facility will be used for general
corporate purposes, including working capital, permitted acquisitions, capital
expenditures and investments.
Pursuant
to the refinancing, we recognized a loss before income taxes on early
extinguishment of debt of $5.3 million, due to the write-off of previously
deferred financing costs related to our existing senior secured credit facility.
The costs associated with the new senior secured credit facility have been
deferred and are being amortized over the term of the new facility.
Our
senior secured credit facility, among other things, limits our ability to borrow
money, make capital expenditures, use assets as security in other transactions,
make restricted payments or restricted investments, incur contingent
obligations, sell assets and enter into leases and transactions with affiliates.
In addition, our credit facility requires us to meet certain financial ratios
and tests, including: a minimum
consolidated
EBITDA test, a maximum consolidated total leverage test, a maximum consolidated
senior leverage test, and a minimum interest coverage ratio.
As
of
April 24, 2005, we had $439.8 million of capacity under lines of credit and
available term debt consisting of $398.8 million in unused credit capacity
under
the revolving loan commitment on our senior secured credit facility, $9.0
million of unused credit capacity under the Isle-Black Hawk’s senior secured
credit facility (limited to use by the Isle-Black Hawk) and $54.0 million of
available credit under other lines of credit. The revolving loan commitment
is a
variable rate instrument based on, at our option, LIBOR or our lender’s prime
rate plus the applicable interest rate spread, and is effective through February
2011. Our lines of credit are also at variable rates based on our lender’s prime
rate and are subject to annual renewal. There is no assurance that these sources
will in fact provide adequate funding for the expenditures described above
or
that planned capital investments will be sufficient to allow us to remain
competitive in our existing markets.
During
the year, we modified the covenants related to the Isle-Black Hawk senior credit
facility to align the covenants with the financial impact of projected effects
of construction on those facilities. We are in compliance with all covenants
contained in our senior and subordinated debt instruments as of April 24, 2005.
If we do not maintain compliance with these covenants, the lenders under the
Black Hawk senior secured credit facility have the option (in some cases, after
the expiration of contractual grace periods), but not the obligation, to demand
immediate repayment of all or any portion of the obligations outstanding under
the facility. Any significant deterioration of earnings could affect certain
of
our covenants. Adverse changes in our credit rating or stock price would not
impact our borrowing costs or covenant compliance under existing debt
instruments. Future events, such as a significant increase in interest rates
can
be expected to increase our costs of borrowing under our Black Hawk senior
secured credit facility. The indentures governing our 7% senior subordinated
notes and our 9% senior subordinated notes limit, among other things, our
ability to borrow money, create liens, make restricted payments and sell assets.
We anticipate being in compliance with our debt covenants during fiscal year
2006.
We
are
highly leveraged and may be unable to obtain additional debt or equity financing
on acceptable terms. As a result, limitations on our capital resources could
delay or cause us to abandon certain plans for capital improvements at our
existing properties and/or development of new properties. We will continue
to
evaluate our planned capital expenditures at each of our existing locations
in
light of the operating performance of the facilities at such
locations.
Contractual
Obligations and Commercial Commitments
The
following table provides information as of April 24, 2005, about our contractual
obligations and commercial commitments. The table presents contractual
obligations by due dates and related contractual commitments by expiration
dates.
|
Payments
Due by Period
|
|
(dollars
in millions)
|
Contractual
Obligations
|
Total
|
Less
Than 1 Year
|
1-3
Years
|
4-5
Years
|
After
5 Years
|
Long-Term
Debt (1)
|
$
1,153.9
|
$
7.4
|
$
198.1
|
$
9.0
|
$
939.4
|
Capital
Lease Obligations (2)
|
2.2
|
0.1
|
0.1
|
0.2
|
1.8
|
Operating
Leases (2)
|
1,062.8
|
16.1
|
30.4
|
29.6
|
986.7
|
Other
Long-Term Obligations (3)
|
102.2
|
98.6
|
3.3
|
0.4
|
-
|
Total
Contractual Cash Obligations
|
$
2,321.1
|
$
122.2
|
$
231.9
|
$
39.2
|
$
1,927.9
|
|
Amount
of Commitment Expiration per Period
|
|
(dollars
in millions)
|
Other
Commercial Commitments
|
Total
Amounts Committed
|
Less
Than 1 Year
|
1-3
Years
|
4-5
Years
|
Over
5 Years
|
Lines
of Credit (1)
|
$
452.8
|
$
54.0
|
$
9.0
|
$
389.8
|
$
-
|
Standby
Letters of Credit (4)
|
17.9
|
17.9
|
-
|
-
|
-
|
Total
Commercial Commitments
|
$
470.7
|
$
71.9
|
$
9.0
|
$
389.8
|
$
-
|
(1)
The
table does not include associated interest expense. See Note 7, Long-Term Debt,
in the accompanying notes to consolidated financial statements.
(2)
See
Note 9, Commitments, in the accompanying notes to consolidated financial
statements.
(3)
Other
long-term obligations include current and future construction contracts as
discussed under “Investing Activities” on page 63. This amount also includes
$8.7 million in open purchase orders at April 24, 2005.
(4)
Standby letters of credit consists of the following: $5.0 million for the
Isle-Black Hawk and Colorado Central Station, $2.1 million for gaming taxes,
$4.3 million for workers’ compensation and $6.5 million for other.
Recently
Issued Accounting Standards
On
December 16, 2004, the FASB issued Statement of Financial Accounting Standards
No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which is a
revision of Statement of Financial Accounting Standards No. 123, “Accounting for
Stock-Based Compensation” (“SFAS 123”). Statement 123(R) supersedes APB Opinion
No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), and amends
Statement of Financial Accounting Standards No. 95, “Statement of Cash Flows”
(“SFAS 95”). Generally, the accounting method required by SFAS 123(R) is similar
to the accounting method required by SFAS 123. However, SFAS 123(R) requires
all
share-based payments to employees, including grants of employee stock options,
to be recognized in the income statement based on their fair market values.
Pro
forma disclosure is no longer an alternative. SFAS 123(R) must be adopted as
of
the beginning of the first interim or annual reporting period of our first
fiscal year that begins on or after June 15, 2005. Early adoption will be
permitted in periods in which financial statements have not yet been issued.
We
are required to adopt SFAS 123(R) on May 1, 2006, but are continuing to evaluate
our option to early adopt.
SFAS
123(R) permits public companies to adopt its requirements using one of two
methods:
1) |
A
“modified prospective” method in which compensation cost is recognized
beginning with the effective date (a) based on the requirements of
SFAS
123(R) for all share-based payments granted after the effective date
and
(b) based on the requirements of SFAS 123 for all awards granted
to
employees prior to the effective date of SFAS 123(R) that remain
unvested
on the effective date.
|
2) |
A
“modified retrospective” method which includes the requirements of the
modified prospective method described above, but also permits entities
to
restate for the amounts previously recognized under SFAS 123 for
purposes
of pro forma disclosures either (a) all prior periods presented or
(b)
prior interim periods of the year of adoption.
|
We
are
currently evaluating the two recognition methods available under SFAS 123(R)
to
determine which method we will adopt.
As
permitted by SFAS 123, we currently account for share-based payments to
employees using APB 25’s intrinsic value method and, as such, generally
recognize no compensation cost for employee stock options. Accordingly, the
adoption of SFAS 123(R)’s fair value method is expected to have a significant
impact on our results of operations, although it will have no impact on our
overall financial position. The ongoing impact of adoption of SFAS 123(R) cannot
be predicted at this time because it will depend on levels of share-based
payments granted in the future. However, had we adopted SFAS 123(R) in prior
periods, the impact of that standard would have approximated the impact of
SFAS
123 as described in the disclosure of pro forma net income and earnings per
share in Note 1 to our consolidated financial statements. SFAS 123(R) also
requires the benefits of tax deductions in excess of recognized compensation
cost to be reported as a financing cash flow, rather than as an operating cash
flow as required under current literature. This requirement will reduce net
operating cash flows and increase net financing cash flows in periods after
adoption.
Market
risk is the risk of loss arising from adverse changes in market rates and
prices, including interest rates, foreign currency exchange rates, commodity
prices and equity prices. Our primary exposure to market risk is interest rate
risk associated with our senior secured credit facility and the Isle-Black
Hawk
senior secured credit facility.
Isle-Black
Hawk Senior Secured Credit Facility
The
Isle-Black Hawk has entered into four interest rate swap agreements with an
aggregate notional value of $80.0 million or 42.2% of its variable rate term
debt outstanding under the Isle-Black Hawk’s senior secured credit facility as
of April 24, 2005. The swap agreements effectively convert portions of its
variable rate debt to a fixed-rate basis until the fourth fiscal quarter of
2008, thus reducing the impact of interest rate changes on future interest
expense. These interest rate swap agreements terminate as follows: $40.0 million
in each of fiscal 2006 and 2008. We evaluate the effectiveness of these hedged
transactions on a quarterly basis. We found no portion of the hedging
instruments to be ineffective during the quarter ended April 24, 2005.
Accordingly, no gains or losses have been recognized on these cash flow
hedges.
The
following table provides information at April 24, 2005 about our financial
instruments that are sensitive to changes in interest rates. The table presents
principal cash flows and related weighted average interest rates by expected
maturity dates.
Interest
Rate Sensitivity
|
Principal
(Notional) Amount by Expected Maturity
|
Average
Interest (Swap) Rate
|
|
|
|
|
|
|
|
|
|
Fiscal
year
|
|
|
|
|
|
|
|
Fair
Value
|
(dollars
in millions)
|
2006
|
2007
|
2008
|
2009
|
2010
|
Thereafter
|
Total
|
4/24/2005
|
Liabilities
|
|
|
|
|
|
|
|
|
Long-term
debt, including current portion
|
|
|
|
|
|
|
Fixed
rate
|
$
1.6
|
$
1.1
|
$
1.2
|
$
1.3
|
$
1.0
|
$
704.3
|
$
710.5
|
$
706.4
|
Average
interest rate
|
7.6%
|
7.6%
|
7.6%
|
7.6%
|
7.6%
|
7.6%
|
|
|
|
|
|
|
|
|
|
|
|
Variable
rate
|
$
5.9
|
$
31.4
|
$
164.5
|
$
4.5
|
$
2.5
|
$
236.9
|
$
445.7
|
$
445.7
|
Average
interest rate (1)
|
6.0%
|
6.6%
|
6.7%
|
6.3%
|
6.4%
|
6.6%
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate Derivative Financial Instruments Related to
Debt
|
|
|
|
|
Interest
rate swaps
|
|
|
|
|
|
|
|
|
Pay
fixed/receive variable (2)
|
$
40.0
|
$
-
|
$
40.0
|
$
-
|
$
-
|
$
-
|
$
80.0
|
$
0.3
|
Average
pay rate
|
2.6%
|
3.8%
|
3.8%
|
0.0%
|
0.0%
|
0.0%
|
|
|
Average
receive rate
|
3.6%
|
4.2%
|
4.4%
|
0.0%
|
0.0%
|
0.0%
|
|
|
(1) Represents the annual average LIBOR from the forward yield curve at April
24, 2005 plus the weighted average margin above LIBOR on all consolidated
variable rate debt.
|
(2)Fair
value represents the amount we would have to pay the counter party
if we
had terminated the swap agreements at April 24,
2005.
|
We
are
also exposed to market risks relating to fluctuations in currency exchange
rates
related to our ownership interests and development activities in the UK.
For
the
fiscal year ended April 24, 2005, we recorded a gain of $2.0 million in foreign
currency translation adjustments on the accompanying consolidated balance
sheets. Foreign currency translation adjustments show the cumulative effect,
at
the balance sheet date, of fluctuations in the foreign currency exchange rate
on
balances denominated in a foreign currency, which were recorded at a historical
rate at the transaction date.
|
Page
|
Isle
of Capri Casinos, Inc.
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
73
|
Consolidated
Balance Sheets, April 24, 2005 and April 25, 2004
|
74
|
Consolidated
Statements of Income, Years ended April 24, 2005, April 25, 2004
and April
27, 2003
|
75
|
Consolidated
Statements of Stockholders’ Equity, Years ended April 24, 2005, April 25,
2004
and
April 27, 2003
|
76
|
Consolidated
Statements of Cash Flows, Years ended April 24, 2005, April 25, 2004
and
April
27, 2003
|
77
|
Notes
to Consolidated Financial Statements
|
79
|
The
Board
of Directors and Stockholders
Isle
of
Capri Casinos, Inc.
We
have
audited the accompanying consolidated balance sheets of Isle of Capri Casinos,
Inc. as of April 24, 2005 and April 25, 2004, and the related consolidated
statements of income, stockholders’ equity, and cash flows for the years ended
April 24, 2005, April 25, 2004 and April 27, 2003. Our audits also included
the
financial statement schedule listed in the index at Item 15(a). These financial
statements and schedule are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Isle of Capri Casinos,
Inc. at April 24, 2005 and April 25, 2004, and the consolidated results of
its
operations and its cash flows for the years ended April 24, 2005, April 25,
2004
and April 27, 2003, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth
therein.
We
also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of Isle of Capri Casinos,
Inc.’s internal control over financial reporting as of April 24, 2005, based on
criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report
dated June 28, 2005 expressed an unqualified opinion thereon.
ERNST
& YOUNG LLP
New
Orleans, Louisiana
June
28,
2005
ISLE
OF CAPRI CASINOS, INC.
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
April
24,
|
|
April
25,
|
|
|
|
2005
|
|
2004
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
146,743
|
|
$
|
134,582
|
|
Marketable
securities
|
|
|
16,016
|
|
|
-
|
|
Accounts
receivable, net
|
|
|
15,460
|
|
|
10,427
|
|
Income
tax receivable
|
|
|
-
|
|
|
2,860
|
|
Deferred
income taxes
|
|
|
8,607
|
|
|
11,283
|
|
Deferred
state income taxes
|
|
|
988
|
|
|
-
|
|
Prepaid
expenses and other assets
|
|
|
16,634
|
|
|
16,169
|
|
Total
current assets
|
|
|
204,448
|
|
|
175,321
|
|
Property
and equipment, net
|
|
|
1,026,906
|
|
|
907,460
|
|
Other
assets:
|
|
|
|
|
|
|
|
Goodwill
|
|
|
340,409
|
|
|
341,585
|
|
Other
intangible assets
|
|
|
72,364
|
|
|
72,349
|
|
Deferred
financing costs, net
|
|
|
19,461
|
|
|
23,340
|
|
Restricted
cash
|
|
|
2,193
|
|
|
2,482
|
|
Prepaid
deposits and other
|
|
|
15,665
|
|
|
9,303
|
|
Total
assets
|
|
$
|
1,681,446
|
|
$
|
1,531,840
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Current
maturities of long-term debt
|
|
$
|
7,501
|
|
$
|
8,040
|
|
Accounts
payable
|
|
|
42,456
|
|
|
21,725
|
|
Accrued
liabilities:
|
|
|
|
|
|
|
|
Interest
|
|
|
10,312
|
|
|
10,311
|
|
Payroll
and related
|
|
|
47,806
|
|
|
45,588
|
|
Property
and other taxes
|
|
|
21,061
|
|
|
17,167
|
|
Income
taxes
|
|
|
1,160
|
|
|
-
|
|
Progressive
jackpots and slot club awards
|
|
|
15,045
|
|
|
14,828
|
|
Other
|
|
|
34,321
|
|
|
21,856
|
|
Total
current liabilities
|
|
|
179,662
|
|
|
139,515
|
|
Long-term
debt, less current maturities
|
|
|
1,148,617
|
|
|
1,080,824
|
|
Deferred
income taxes
|
|
|
42,102
|
|
|
29,630
|
|
Deferred
state income taxes
|
|
|
9,329
|
|
|
8,191
|
|
Other
accrued liabilities
|
|
|
17,115
|
|
|
12,091
|
|
Minority
interest
|
|
|
23,225
|
|
|
20,183
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
Preferred
stock, $.01 par value; 2,000 shares authorized; none
issued
|
|
|
-
|
|
|
-
|
|
Common
stock, $.01 par value; 45,000 shares authorized; shares issued
and
|
|
|
|
|
|
|
|
outstanding:
33,528 at April 24, 2005 and 33,055 at April 25, 2004
|
|
|
335
|
|
|
330
|
|
Class
B common stock, $.01 par value; 3,000 shares authorized; none
issued
|
|
|
-
|
|
|
-
|
|
Additional
paid-in capital
|
|
|
148,177
|
|
|
143,385
|
|
Unearned
compensation
|
|
|
(1,488
|
)
|
|
(1,413
|
)
|
Retained
earnings
|
|
|
146,133
|
|
|
128,095
|
|
Accumulated
other comprehensive income
|
|
|
2,858
|
|
|
521
|
|
|
|
|
296,015
|
|
|
270,918
|
|
Treasury
stock, 3,607 shares at April 24, 2005 and 3,338 shares at April 25,
2004
|
|
|
(34,619
|
)
|
|
(29,512
|
)
|
Total
stockholders' equity
|
|
|
261,396
|
|
|
241,406
|
|
Total
liabilities and stockholders' equity
|
|
$
|
1,681,446
|
|
$
|
1,531,840
|
|
See
notes
to consolidated financial statements
ISLE
OF CAPRI CASINOS, INC.
|
|
CONSOLIDATED
STATEMENTS OF INCOME
|
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year Ended
|
|
|
|
April
24,
|
|
April
25,
|
|
April
27,
|
|
|
|
2005
|
|
2004
|
|
2003
|
|
Revenues:
|
|
|
|
|
|
|
|
Casino
|
|
$
|
1,121,316
|
|
$
|
1,116,351
|
|
$
|
1,051,318
|
|
Rooms
|
|
|
47,732
|
|
|
44,564
|
|
|
49,215
|
|
Pari-mutuel
commissions and fees
|
|
|
20,126
|
|
|
20,327
|
|
|
23,894
|
|
Food,
beverage and other
|
|
|
149,419
|
|
|
143,768
|
|
|
140,832
|
|
Gross
revenues
|
|
|
1,338,593
|
|
|
1,325,010
|
|
|
1,265,259
|
|
Less
promotional allowances
|
|
|
226,985
|
|
|
219,568
|
|
|
200,481
|
|
Net
revenues
|
|
|
1,111,608
|
|
|
1,105,442
|
|
|
1,064,778
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
186,606
|
|
|
181,504
|
|
|
181,648
|
|
Gaming
taxes
|
|
|
250,316
|
|
|
244,992
|
|
|
229,608
|
|
Rooms
|
|
|
10,346
|
|
|
9,929
|
|
|
11,573
|
|
Pari-mutuel
|
|
|
15,449
|
|
|
15,395
|
|
|
16,889
|
|
Food,
beverage and other
|
|
|
35,817
|
|
|
32,000
|
|
|
34,140
|
|
Marine
and facilities
|
|
|
67,697
|
|
|
65,610
|
|
|
65,912
|
|
Marketing
and administrative
|
|
|
318,924
|
|
|
306,219
|
|
|
282,751
|
|
Valuation
charge
|
|
|
4,136
|
|
|
-
|
|
|
1,923
|
|
Preopening
|
|
|
247
|
|
|
2,293
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
97,418
|
|
|
89,772
|
|
|
76,626
|
|
Total
operating expenses
|
|
|
986,956
|
|
|
947,714
|
|
|
901,070
|
|
Operating
income
|
|
|
124,652
|
|
|
157,728
|
|
|
163,708
|
|
Interest
expense
|
|
|
(75,717
|
)
|
|
(83,456
|
)
|
|
(82,565
|
)
|
Interest
income
|
|
|
2,244
|
|
|
872
|
|
|
562
|
|
Loss
on early extinguishment of debt
|
|
|
(5,251
|
)
|
|
(26,115
|
)
|
|
-
|
|
Minority
interest
|
|
|
(5,493
|
)
|
|
(10,072
|
)
|
|
(9,451
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations before income taxes
|
|
|
40,435
|
|
|
38,957
|
|
|
72,254
|
|
Income
taxes
|
|
|
19,451
|
|
|
12,626
|
|
|
26,650
|
|
Income
from continuing operations
|
|
|
20,984
|
|
|
26,331
|
|
|
45,604
|
|
Income
(loss) from discontinued operations, net of income taxes
|
|
|
(2,946
|
)
|
|
1,418
|
|
|
(11
|
)
|
Net
income
|
|
$
|
18,038
|
|
$
|
27,749
|
|
$
|
45,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per common share-basic:
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
0.71
|
|
$
|
0.89
|
|
$
|
1.57
|
|
Income
(loss) from discontinued operations, net of income taxes
|
|
|
(0.10
|
)
|
|
0.05
|
|
|
-
|
|
Net
income
|
|
$
|
0.61
|
|
$
|
0.94
|
|
$
|
1.57
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per common share-diluted:
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
0.68
|
|
$
|
0.86
|
|
$
|
1.50
|
|
Income
(loss) from discontinued operatons, net of income taxes
|
|
|
(0.10
|
)
|
|
0.05
|
|
|
-
|
|
Net
income
|
|
$
|
0.58
|
|
$
|
0.91
|
|
$
|
1.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average basic shares
|
|
|
29,682
|
|
|
29,404
|
|
|
28,984
|
|
Weighted
average diluted shares
|
|
|
30,930
|
|
|
30,466
|
|
|
30,452
|
|
See
notes
to consolidated financial statements
ISLE
OF CAPRI CASINOS, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
Accum.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compre-
|
|
|
|
|
|
Shares
of
|
|
|
|
Additional
|
|
Unearned
|
|
|
|
hensive
|
|
|
|
Total
|
|
Common
|
|
Common
|
|
Paid-in
|
|
Compen-
|
|
Retained
|
|
Income
|
|
Treasury
|
|
Stockholders'
|
|
Stock
|
|
Stock
|
|
Capital
|
|
sation
|
|
Earnings
|
|
(Loss)
|
|
Stock
|
|
Equity
|
Balance,
April 28, 2002
|
31,826
|
|
$
314
|
|
$
135,432
|
|
$
(1,352)
|
|
$
54,753
|
|
$
(4,061)
|
|
$
(25,888)
|
|
$
159,198
|
Net
income
|
-
|
|
-
|
|
-
|
|
-
|
|
45,593
|
|
-
|
|
-
|
|
45,593
|
Unrealized
loss on interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
rate
swap contract
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
net
of income tax benefit of $163
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(223)
|
|
-
|
|
(223)
|
Comprehensive
income
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
45,370
|
Exercise
of stock options, including
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
tax benefit of $1,611
|
998
|
|
12
|
|
6,772
|
|
-
|
|
-
|
|
-
|
|
(2,636)
|
|
4,148
|
Purchase
of treasury stock
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(5,429)
|
|
(5,429)
|
Treasury
stock retired
|
(447)
|
|
(4)
|
|
(5,425)
|
|
-
|
|
-
|
|
-
|
|
5,429
|
|
-
|
Grant
of nonvested stock
|
-
|
|
-
|
|
763
|
|
(763)
|
|
-
|
|
-
|
|
-
|
|
-
|
Amortization
of unearned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation
|
-
|
|
-
|
|
-
|
|
617
|
|
-
|
|
-
|
|
-
|
|
617
|
Balance,
April 27, 2003
|
32,377
|
|
322
|
|
137,542
|
|
(1,498)
|
|
100,346
|
|
(4,284)
|
|
(28,524)
|
|
203,904
|
Net
income
|
-
|
|
-
|
|
-
|
|
-
|
|
27,749
|
|
-
|
|
-
|
|
27,749
|
Unrealized
gain on interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
rate
swap contract,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net
of income taxes of $2,322
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
4,044
|
|
-
|
|
4,044
|
Foreign
currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustments
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
761
|
|
-
|
|
761
|
Comprehensive
income
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
32,554
|
Exercise
of stock options, including
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
tax benefit of $1,833
|
785
|
|
9
|
|
7,407
|
|
-
|
|
-
|
|
-
|
|
(988)
|
|
6,428
|
Purchase
of treasury stock
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(2,030)
|
|
(2,030)
|
Treasury
stock retired
|
(107)
|
|
(1)
|
|
(2,029)
|
|
-
|
|
-
|
|
-
|
|
2,030
|
|
-
|
Grant
of nonvested stock
|
-
|
|
-
|
|
465
|
|
(465)
|
|
-
|
|
-
|
|
-
|
|
-
|
Amortization
of unearned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation
|
-
|
|
-
|
|
-
|
|
550
|
|
-
|
|
-
|
|
-
|
|
550
|
Balance,
April 25, 2004
|
33,055
|
|
330
|
|
143,385
|
|
(1,413)
|
|
128,095
|
|
521
|
|
(29,512)
|
|
241,406
|
Net
income
|
-
|
|
-
|
|
-
|
|
-
|
|
18,038
|
|
-
|
|
-
|
|
18,038
|
Unrealized
gain on interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
rate
swap contracts
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
net
of income taxes of $224
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
345
|
|
-
|
|
345
|
Foreign
currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustments
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
1,992
|
|
-
|
|
1,992
|
Comprehensive
income
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
20,375
|
Exercise
of stock options, including
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
tax benefit of $828
|
473
|
|
5
|
|
4,191
|
|
-
|
|
-
|
|
-
|
|
1,253
|
|
5,449
|
Purchase
of treasury stock
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(6,360)
|
|
(6,360)
|
Grant
of nonvested stock
|
-
|
|
-
|
|
601
|
|
(601)
|
|
-
|
|
-
|
|
-
|
|
-
|
Amortization
of unearned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation
|
-
|
|
-
|
|
-
|
|
526
|
|
-
|
|
-
|
|
-
|
|
526
|
Balance,
April 24, 2005
|
33,528
|
|
$
335
|
|
$
148,177
|
|
$
(1,488)
|
|
$
146,133
|
|
$
2,858
|
|
$
(34,619)
|
|
$
261,396
|
See
notes
to consolidated financial statements
ISLE
OF CAPRI CASINOS, INC.
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year Ended
|
|
|
|
April
24,
|
|
April
25,
|
|
April
27,
|
|
|
|
2005
|
|
2004
|
|
2003
|
|
Operating
activities:
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
18,038
|
|
$
|
27,749
|
|
$
|
45,593
|
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
|
|
|
|
|
provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
97,821
|
|
|
90,063
|
|
|
76,626
|
|
Amortization
of deferred financing costs
|
|
|
3,886
|
|
|
4,261
|
|
|
3,704
|
|
Amortization
of unearned compensation
|
|
|
526
|
|
|
550
|
|
|
617
|
|
Goodwill
impairment charge
|
|
|
3,958
|
|
|
-
|
|
|
-
|
|
Loss
on early extinguishment of debt
|
|
|
5,251
|
|
|
26,115
|
|
|
-
|
|
Valuation
charge
|
|
|
1,621
|
|
|
-
|
|
|
1,923
|
|
Other
charges
|
|
|
2,515
|
|
|
-
|
|
|
-
|
|
Deferred
income taxes
|
|
|
15,078
|
|
|
8,788
|
|
|
23,574
|
|
Minority
interest
|
|
|
5,493
|
|
|
10,072
|
|
|
9,451
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(4,796
|
)
|
|
(2,433
|
)
|
|
2,200
|
|
Income
tax receivable
|
|
|
4,949
|
|
|
(1,027
|
)
|
|
(2,260
|
)
|
Prepaid
expenses and other assets
|
|
|
2,022
|
|
|
1,356
|
|
|
(1,045
|
)
|
Accounts
payable and accrued liabilities
|
|
|
13,524
|
|
|
7,736
|
|
|
(22,196
|
)
|
Net
cash provided by operating activities
|
|
|
169,886
|
|
|
173,230
|
|
|
138,187
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(188,879
|
)
|
|
(151,629
|
)
|
|
(58,358
|
)
|
Purchase
of short-term investments, net of sales
|
|
|
(14,842
|
)
|
|
-
|
|
|
-
|
|
Net
cash paid for acquisitions
|
|
|
-
|
|
|
(10,917
|
)
|
|
(80,313
|
)
|
Proceeds
from sales of assets
|
|
|
-
|
|
|
-
|
|
|
11,961
|
|
Investments
in and advances to joint ventures
|
|
|
-
|
|
|
(549
|
)
|
|
(927
|
)
|
Restricted
cash
|
|
|
(98
|
)
|
|
(79
|
)
|
|
855
|
|
Prepaid
deposits and other
|
|
|
(4,327
|
)
|
|
(1,602
|
)
|
|
(569
|
)
|
Payments
on notes receivable
|
|
|
23
|
|
|
5,658
|
|
|
753
|
|
Loans
made
|
|
|
(5,563
|
)
|
|
-
|
|
|
-
|
|
Net
cash used in investing activities
|
|
|
(213,686
|
)
|
|
(159,118
|
)
|
|
(126,598
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from debt
|
|
|
250,718
|
|
|
668,526
|
|
|
105,030
|
|
Net
increase (reduction) in line of credit
|
|
|
26,107
|
|
|
(5,917
|
)
|
|
(69,086
|
)
|
Principal
payments on debt and cash paid to retire debt
|
|
|
(209,975
|
)
|
|
(622,899
|
)
|
|
(17,967
|
)
|
Payment
of deferred financing costs
|
|
|
(5,249
|
)
|
|
(10,951
|
)
|
|
(2,936
|
)
|
Purchase
of treasury stock
|
|
|
(6,360
|
)
|
|
(2,030
|
)
|
|
(5,429
|
)
|
Proceeds
from exercise of stock options
|
|
|
4,519
|
|
|
3,753
|
|
|
2,383
|
|
Cash
distribution to minority partner
|
|
|
(4,344
|
)
|
|
(4,638
|
)
|
|
(5,555
|
)
|
Net
cash provided by financing activities
|
|
|
55,416
|
|
|
25,844
|
|
|
6,440
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of foreign currency exchange rates on cash
|
|
|
545
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
12,161
|
|
|
39,956
|
|
|
18,029
|
|
Cash
and cash equivalents at beginning of year
|
|
|
134,582
|
|
|
94,626
|
|
|
76,597
|
|
Cash
and cash equivalents at end of year
|
|
$
|
146,743
|
|
$
|
134,582
|
|
$
|
94,626
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes
to consolidated financial statements
ISLE
OF CAPRI CASINOS, INC.
|
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS (CONTINUED)
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year Ended
|
|
|
|
April
24,
|
|
April
25,
|
|
April
27,
|
|
|
|
2005
|
|
2004
|
|
2003
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
Net
cash payments for:
|
|
|
|
|
|
|
|
Interest
(net of capitalized interest)
|
|
$
|
75,029
|
|
$
|
77,598
|
|
$
|
77,172
|
|
Income
taxes, net of refunds
|
|
|
(8
|
)
|
|
4,804
|
|
|
18,066
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
schedule of noncash investing activities:
|
|
|
|
|
|
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
Construction
costs funded through accounts payable and
|
|
|
|
|
|
|
|
|
|
|
notes
payable
|
|
|
28,372
|
|
|
1,807
|
|
|
2,875
|
|
Acquisitions
of businesses:
|
|
|
|
|
|
|
|
|
|
|
Fair
value of assets acquired
|
|
|
-
|
|
|
12,433
|
|
|
86,065
|
|
Less
fair value of liabilities assumed
|
|
|
-
|
|
|
(1,516
|
)
|
|
(5,752
|
)
|
Net
cash payment
|
|
|
-
|
|
|
10,917
|
|
|
80,313
|
|
Sale
of businesses:
|
|
|
|
|
|
|
|
|
|
|
Fair
value of assets disposed
|
|
|
-
|
|
|
-
|
|
|
11,870
|
|
Less
fair value of liabilities sold
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net
cash received
|
|
|
-
|
|
|
-
|
|
|
11,870
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes
to consolidated financial statements
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Summary of Significant Accounting Policies
Nature
of Operations
Isle
of
Capri Casinos, Inc. (the “Company” or “Isle of Capri”) was incorporated as a
Delaware corporation on February 14, 1990. The Company, through its
subsidiaries, is engaged in the business of developing, owning and operating
branded gaming facilities and related lodging and entertainment facilities
in
growing markets in the United States and internationally. The Company wholly
owns and operates twelve casinos in eleven gaming facilities in the United
States located in Lake Charles and Bossier City, Louisiana; Lula, Biloxi,
Vicksburg and Natchez, Mississippi; Kansas City and Boonville, Missouri; and
Bettendorf, Davenport and Marquette, Iowa. The Company also owns a 57% interest
in, and receives a management fee for operating, two gaming facilities in Black
Hawk, Colorado. All but two of these gaming facilities operate under the name
“Isle of Capri” and feature the Company’s distinctive tropical island theme. The
Company receives a significant amount of its revenue from patrons within 50
miles of the properties. If economic conditions in these areas were to decline
materially or additional casino licenses were awarded in these locations, the
Company’s results of operations could be materially affected. As such, the
Company’s operations are dependent on the continued licensing or qualification
of the Company and such licensing and qualifications are reviewed periodically
by the gaming authorities in the state of operation. The Company’s international
gaming interests include a wholly owned casino in Freeport, Grand Bahama, and
a
two-thirds ownership interest in casinos in Dudley, Wolverhampton and Walsall,
England. The Company also wholly owns and operates a pari-mutuel harness racing
facility in Pompano Beach, Florida.
Fiscal
Year-End
The
Company’s fiscal year ends on the last Sunday in April. This fiscal year creates
more comparability of the Company’s quarterly operations, by generally having an
equal number of weeks (13) and week-end days (26) in each quarter. Periodically,
this system necessitates a 53-week year. Fiscal 2005 commenced on April 26,
2004
and ends on April 24, 2005.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.
Use
of Estimates
The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions
that
affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities, at the date of the financial statements
and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments purchased with an original
maturity of three months or less as cash equivalents. Cash
equivalents are placed primarily with high-credit-quality financial
institutions. The carrying amount of cash equivalents approximates fair value
because of the short maturity of these instruments. Cash includes the minimum
cash balances required by state regulatory bodies, which totaled approximately
$33.7 million and $32.4 million at April 24, 2005 and April 25, 2004,
respectively.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
1.
Summary of Significant Accounting Policies (continued)
Marketable
Securities
Marketable
securities consist of trading securities held by Capri Insurance Corporation,
our captive insurance subsidiary. The trading securities are primarily debt
and
equity securities which we buy with the intention to resell in the near term.
Our trading securities are carried at fair value with changes in fair value
recognized in current period income.
Inventories
Inventories
generally consist of food and beverage and retail merchandise, and are stated
at
the lower of cost
or
market. Cost is determined by the weighted average method.
Property
and Equipment
Property
and equipment are stated at cost. The Company capitalizes the cost of purchases
of property and equipment and capitalizes the cost of improvements to property
and equipment that increases the value or extends the useful lives of the
assets. Costs of normal repairs and maintenance are charged to expense as
incurred. Gains or losses on dispositions of property and equipment are included
in the determination of income. Depreciation is computed using the straight-line
method over the following estimated useful lives of the assets:
|
Years
|
Slot
machines, software and computers
|
3
|
Furniture,
fixtures and equipment
|
5-10
|
Leasehold
improvements
|
5-39.5
|
Riverboats
and floating pavilions
|
25
|
Buildings
and improvements
|
39.5
|
Capital
leases are depreciated over the estimated useful life of the assets or the
life
of the lease, whichever is shorter.
Goodwill
and Other Intangible
Assets
Goodwill,
representing the excess of the cost over the net identifiable tangible and
intangible assets of acquired businesses, is stated at cost. Other intangible
assets include the license value attributed to the Louisiana gaming licenses
acquired through the Company’s acquisition of St. Charles Gaming Company, Grand
Palais Riverboat, Inc. and Louisiana Riverboat Gaming Partnership (the
“Licenses”), the value of the Lady Luck trademarks and player databases acquired
in the acquisition of Lady Luck Gaming Corporation and the value of the Colorado
Central Station trademarks acquired in the acquisition of CCSC/Blackhawk, Inc.
and until April 25, 2005, Colorado Grande Enterprises, Inc. The licenses have
indefinite lives as the Company has determined that there are no legal,
regulatory, contractual, economic or other factors that would limit the useful
life of the Licenses and the Company intends to renew and operate the Licenses
indefinitely. In addition, other key factors in the Company’s assessment that
these Licenses have an indefinite life include: (1) the Company’s license
renewal experience confirms that the renewal process is perfunctory and renewals
would not be withheld except under extraordinary circumstances; (2) the renewals
related to these Licenses confirms the Company’s belief that the renewal process
could be completed without substantial cost and without material modification
of
the Licenses; (3) the economic performance of the operations related to the
Licenses support the Company’s intention of operating the Licenses indefinitely;
and (4) the continued limitation of gaming licenses in the State of Louisiana
limits competition in the jurisdictions where these Licenses are maintained.
Statement of Financial Accounting Standards No. 142, “Goodwill and Other
Intangible Assets,” (“SFAS 142”) requires that these assets be reviewed for
impairment at least annually. Based on its review, the Company
believes
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.
Summary of Significant Accounting Policies (continued)
Goodwill
and Other Intangible
Assets (continued)
that,
as
of April 24, 2005, except for the goodwill associated with the Colorado Grande
-Cripple Creek and the full cost of the license for Rosemont, there were no
impairments of its goodwill and other indefinite-lived intangible assets.
The
Company intends to continue to evaluate intangible assets that are not being
amortized at least annually to determine whether events and circumstances
continue to support an indefinite useful life. If these assets are subsequently
determined to have a finite useful life, they will be tested for impairment,
and
then amortized prospectively over the estimated remaining useful lives and
accounted for in the same manner as other intangible assets that are subject
to
amortization.
Long-Lived
Assets
The
Company periodically evaluates the carrying value of long-lived assets to be
held for sale or held and used in accordance with Statement of Financial
Accounting Standards No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets” (“SFAS 144”),. SFAS 144 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets’ carrying amounts. In that event, a loss is
recognized based on the amount by which the carrying amount exceeds the fair
market value of the long-lived assets. Loss on long-lived assets to be disposed
of is determined in a similar manner, except that fair market values are reduced
for the cost of disposal.
Based
on
its review, the Company believes that, as of April 24, 2005,
except
for the assets held for sale associated with Colorado Grande-Cripple
Creek,
there
were no impairments of its long-lived assets.
Deferred
Financing Costs
The
costs
of issuing long-term debt are capitalized and amortized over the term of the
related debt.
Self
-Insurance
The
Company is self-insured for various levels of general liability, workers’
compensation, and employee medical and life insurance coverage. Self-insurance
liabilities are estimated based on the Company’s claims experience and are
included in current accrued liabilities on the consolidated balance
sheets.
Slot
Club Awards
The
Company provides slot patrons with incentives based on the dollar amount of
play
on slot machines. A liability has been established based on an estimate of
the
value of these outstanding incentives, utilizing the age and prior history
of
redemptions.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
1.
Summary of Significant Accounting Policies (continued)
Derivative
Instruments and Hedging Activities
The
Company utilizes derivative financial instruments to manage interest rate risk
associated with variable rate borrowings. Derivative financial instruments
are
intended to reduce the Company’s exposure to interest rate risk. The Company
accounts for changes in the fair value of a derivative instrument depending
on
the intended use of the derivative and the resulting designation, which is
established at the inception of a derivative. FASB Statement of Financial
Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging
Activities,” (“SFAS 133”) requires that a company formally document, at the
inception of a hedge, the hedging relationship and the entity’s risk management
objective and strategy for undertaking the hedge, including identification
of
the hedging instrument, the hedged item or transaction, the nature of the risk
being hedged, the method used to assess effectiveness and the method that will
be used to measure hedge ineffectiveness of derivative instruments that receive
hedge accounting treatment. For derivative instruments designated as cash flow
hedges, changes in fair value, to the extent the hedge is effective, are
recognized in other comprehensive income until the hedged item is recognized
in
earnings. Hedge effectiveness is assessed quarterly based on the total change
in
the derivative’s fair value.
Revenue
Recognition
In
accordance with gaming industry practice, the Company recognizes casino revenues
as the net win from gaming activities, which is the difference between gaming
wins and losses. Casino revenues are net of
accruals for anticipated payouts of progressive slot jackpots and certain table
games. Revenues from the hotel, food, beverage, entertainment, and the gift
shop
are recognized at the time the related service or sale
is
performed/made.
Net
Revenues
Net
revenues do not include the retail amount of food, beverage and other items
provided gratuitously to customers. The Company records the redemption of
coupons and points for cash as a reduction of revenue. These amounts, that
are
included in promotional allowances in the accompanying consolidated statements
of operations, were as follows:
|
|
Fiscal
Year Ended
|
|
|
|
April
24,
|
|
April
25,
|
|
April
27,
|
|
|
|
2005
|
|
2004
|
|
2003
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
Rooms
|
|
$
|
25,716
|
|
$
|
24,690
|
|
$
|
26,137
|
|
Food
and beverage
|
|
|
91,783
|
|
|
90,451
|
|
|
86,169
|
|
Other
|
|
|
2,684
|
|
|
2,484
|
|
|
2,913
|
|
Customer
loyalty programs
|
|
|
106,802
|
|
|
101,943
|
|
|
85,262
|
|
Total
promotional allowances
|
|
$
|
226,985
|
|
$
|
219,568
|
|
$
|
200,481
|
|
|
|
|
|
|
|
|
|
|
|
|
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
1.
Summary of Significant Accounting Policies (continued)
Net
Revenues (continued)
The
estimated cost of providing such complimentary services that is included in
casino expense in the accompanying consolidated statements of operations was
as
follows:
|
|
Fiscal
Year Ended
|
|
|
|
April
24,
|
|
April
25,
|
|
April
27,
|
|
|
|
2005
|
|
2004
|
|
2003
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
Rooms
|
|
$
|
11,961
|
|
$
|
12,148
|
|
$
|
12,753
|
|
Food
and beverage
|
|
|
72,750
|
|
|
69,279
|
|
|
66,402
|
|
Other
|
|
|
288
|
|
|
266
|
|
|
806
|
|
Total
cost of complimentary services
|
|
$
|
84,999
|
|
$
|
81,693
|
|
$
|
79,961
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
Advertising
costs are expensed the first time such advertisement appears. Total advertising
costs, including direct mail marketing, were $25.1 million in fiscal 2005,
$24.8
million in fiscal 2004 and $10.8 million in fiscal 2003.
Preopening
Expense
Preopening,
pre-operating and organizational costs are expensed as incurred.
Capitalized
Interest
The
interest cost associated with major development and construction projects is
capitalized and included in the cost of the project. When no debt is incurred
specifically for a project, interest is capitalized on amounts expended on
the
project using the weighted-average cost of the Company’s outstanding borrowings.
Capitalization of interest ceases when the project is substantially complete
or
development activity is suspended for more than a brief period.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
1.
Summary of Significant Accounting Policies (continued)
Income
Taxes
Income
taxes are accounted for in accordance with the provisions of FASB Statement
of
Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS
109”). Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect of a change
in
tax rates related to deferred tax assets and liabilities is recognized in income
in the period that includes the enactment date.
The
Company routinely faces challenges from federal and other tax authorities
regarding the amount of taxes due. These challenges include questions regarding
the timing and amount of deductions and the allocation of income among various
tax jurisdictions. The Company records tax accruals for probable exposures
associated with the various filing positions.
Earnings
(Loss) per Share of Common Stock
In
accordance with the provisions of FASB Statement of Financial Accounting
Standards No. 128, “Earnings Per Share” (“SFAS 128”), basic earnings (loss) per
share (“EPS”) is computed by dividing net income (loss) applicable to common
stock by the weighted average common shares outstanding during the period.
Diluted EPS reflects the additional dilution for all potentially dilutive
securities such as stock options.
Stock-Based
Compensation
The
Company applies the recognition and measurement principles of APB 25 and related
Interpretations in accounting for the Company’s three stock-based employee
compensation plans. No stock-based employee compensation expense is reflected
in
net income as all options granted under those plans had an exercise price equal
to the market value of the underlying common stock on the date of grant. The
following table illustrates the effect on net income and earnings per share
as
if the Company had applied the fair value recognition provisions of SFAS
123
as
amended by SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and
Disclosure” (“SFAS 148”),
to
stock-based employee compensation.
|
|
Fiscal
Year Ended
|
|
|
|
April
24, 2005
|
|
April
25, 2004
|
|
April
27, 2003
|
|
|
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income, as reported
|
|
$
|
18,038
|
|
$
|
27,749
|
|
$
|
45,593
|
|
Deduct:
total stock-based employee
|
|
|
|
|
|
|
|
|
|
|
compensation
expense determined under fair
|
|
|
|
|
|
|
|
|
|
|
value
based method for all awards, net of
|
|
|
|
|
|
|
|
|
|
|
related
tax effects
|
|
$
|
(3,944
|
)
|
$
|
(4,175
|
)
|
$
|
(5,332
|
)
|
Pro
forma net income
|
|
$
|
14,094
|
|
$
|
23,574
|
|
$
|
40,261
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per common share:
|
|
|
|
|
|
|
|
|
|
|
Basic
- as reported
|
|
$
|
0.61
|
|
$
|
0.94
|
|
$
|
1.57
|
|
Basic
- pro forma
|
|
$
|
0.47
|
|
$
|
0.80
|
|
$
|
1.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
- as reported
|
|
$
|
0.58
|
|
$
|
0.91
|
|
$
|
1.50
|
|
Diluted
- pro forma
|
|
$
|
0.46
|
|
$
|
0.77
|
|
$
|
1.32
|
|
|
|
|
|
|
|
|
|
|
|
|
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.
Summary of Significant Accounting Policies (continued)
Stock-Based
Compensation (continued)
The
fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:
|
Risk-Free
|
Original
|
Expected
|
Expected
|
Fiscal
Year
|
Interest
Rate
|
Expected
Life
|
Volality
|
Dividends
|
|
|
|
|
|
2005
|
4.00%
|
6.26
years
|
55.8%
|
None
|
2004
|
3.02%
|
6.05
years
|
57.8%
|
None
|
2003
|
2.97%
|
6.14
years
|
58.4%
|
None
|
Currency
Translation
The
Company accounts for currency translation in accordance with FASB Statement
of
Financial Standards No. 52, “Foreign Currency Translation”. Assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
at the exchange rate in effect at each balance sheet date. Income statement
accounts are translated at the average rate of exchange prevailing during the
period. Translation adjustments resulting from this process are included in
stockholders’ equity as other comprehensive income. Gains and losses from
foreign currency transactions are included in operating income.
Reclassification
The
consolidated financial statements for prior years reflect certain
reclassifications to conform to the current year presentation. Specifically,
results of operations for all periods presented were reclassified to reflect
the
discontinued operations for the Colorado Grande-Cripple Creek. The assets and
liabilities for Colorado Grande-Cripple Creek have not been reflected as
discontinued operations as the amounts were not material to its consolidated
financial position.
Short-term
Investments
Short-term
investments consist primarily of short-term commercial paper at the Isle of
Capri Black Hawk, L.L.C. (the “Isle-Black Hawk”). The carrying amount of
short-term investments approximates fair value because of the short maturity
of
these instruments.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
1.
Summary of Significant Accounting Policies (continued)
Recently
Issued Accounting Standards
On
December 16, 2004, the FASB issued Statement of Financial Accounting Standards
No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which is a
revision of Statement of Financial Accounting Standards No. 123, “Accounting for
Stock-Based Compensation” (“SFAS 123”). Statement 123(R) supersedes APB Opinion
No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), and amends
Statement of Financial Accounting Standards No. 95, “Statement of Cash Flows”
(“SFAS 95”). Generally, the accounting method required by SFAS 123(R) is similar
to the accounting method required by SFAS 123. However, SFAS 123(R) requires
all
share-based payments to employees, including grants of employee stock options,
to be recognized in the income statement based on their fair market values.
Pro
forma disclosure is no longer an alternative. SFAS 123(R) must be adopted as
of
the beginning of the first annual reporting period of the Company’s first fiscal
year that begins on or after June 15, 2005. Early adoption will be permitted
in
periods in which financial statements have not yet been issued. The Company
is
required to adopt SFAS 123(R) on May 1, 2006, but is continuing to evaluate
its
option to early adopt.
SFAS
123(R) permits public companies to adopt its requirements using one of two
methods:
1) |
A
“modified prospective” method in which compensation cost is recognized
beginning with the effective date (a) based on the requirements of
SFAS
123(R) for all share-based payments granted after the effective date
and
(b) based on the requirements of SFAS 123 for all awards granted
to
employees prior to the effective date of SFAS 123(R) that remain
unvested
on the effective date.
|
2) |
A
“modified retrospective” method which includes the requirements of the
modified prospective method described above, but also permits entities
to
restate for the amounts previously recognized under SFAS 123 for
purposes
of pro forma disclosures either (a) all prior periods presented or
(b)
prior interim periods of the year of adoption.
|
The
Company is currently evaluating the two recognition methods available under
SFAS
123(R) to determine which method it will adopt.
As
permitted by SFAS 123, the Company currently accounts for share-based payments
to employees using APB 25’s intrinsic value method and, as such, generally
recognizes no compensation cost for employee stock options. Accordingly, the
adoption of SFAS 123(R)’s fair value method is expected to have a significant
impact on its result of operations, although it will have no impact on the
Company’s overall financial position. The ongoing impact of adoption of SFAS
123(R) cannot be predicted at this time because it will depend on levels of
share-based payments granted in the future. However, had the Company adopted
SFAS 123(R) in prior periods, the impact of that standard would have
approximated the impact of SFAS 123 as described in the disclosure of pro forma
net income and earnings per share as shown above in Note 1. SFAS 123(R) also
requires the benefits of tax deductions in excess of recognized compensation
cost to be reported as a financing cash flow, rather than as an operating cash
flow as required under current literature. This requirement will reduce net
operating cash flows and increase net financing cash flows in periods after
adoption.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
Property Held for Sale
On
April
25, 2005, the Company and Colorado Grande executed a Stock Purchase Agreement
with a subsidiary of Nevada Gold & Casinos, Inc. to sell all outstanding
shares of the common stock of Colorado Grande to a subsidiary of Nevada Gold
& Casinos, Inc. The aggregate estimated sales price agreed to is $6.5
million payable:
(a)
$600,000 in cash upon closing and
(b)
a
$5.9 million promissory note secured by the stock of Colorado Grande and Nevada
Gold’s future membership distributions from the Isle-Black Hawk until the note
has been fully repaid.
The
estimated sales price is to be adjusted by the difference between actual working
capital and a target working capital (as defined by the Sales Agreement) on
the
closing date. The actual working capital is to be determined by Nevada Gold
within 45 days of the closing date and reviewed by independent auditors for
both
parties. The post closing adjustment will be paid in cash to the other party,
as
necessary to cause the actual working capital to be equal to the target working
capital.
Discontinued
operations relate to those of the Colorado Grande casino, located in Cripple
Creek, Colorado. Results of operations of the Colorado Grande casino are
included in the consolidated statements of income as discontinued operations
and
are shown net of income tax effects. The results of operations for the Colorado
Grande for prior fiscal years presented were also reclassified and presented
as
discontinued operations in accordance with SFAS 144.
Revenue,
expense, and net income (loss) from discontinued operations are summarized
as
follows:
|
|
Fiscal
Year Ended
|
|
|
|
|
|
April
24,
|
|
April
25,
|
|
April
27,
|
|
|
|
2005
|
|
2004
|
|
2003
|
|
|
|
(In
thousands)
|
|
Gross
revenues
|
|
$
|
8,996
|
|
$
|
9,942
|
|
$
|
199
|
|
Less
promotional allowances
|
|
|
1,980
|
|
|
2,241
|
|
|
32
|
|
Net
revenues
|
|
|
7,016
|
|
|
7,701
|
|
|
167
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses, including goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
of
$4.0 million
|
|
|
10,156
|
|
|
6,074
|
|
|
106
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss)
|
|
|
(3,140
|
)
|
|
1,627
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net
|
|
|
(8
|
)
|
|
(2
|
)
|
|
-
|
|
Income
(loss) before income taxes
|
|
|
(3,132
|
)
|
|
1,629
|
|
|
61
|
|
Income
tax provision (benefit)
|
|
|
(186
|
)
|
|
211
|
|
|
72
|
|
Income
(loss) from discontinued operations, net of taxes
|
|
$
|
(2,946
|
)
|
$
|
1,418
|
|
$
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. Property
and Equipment
Property
and equipment consists of the following:
|
|
April
24,
|
|
April
25,
|
|
|
|
2005
|
|
2004
|
|
|
|
(In
thousands)
|
|
Property
and equipment:
|
|
|
|
|
|
|
|
Land
and land improvements
|
|
$
|
155,857
|
|
$
|
161,700
|
|
Leasehold
improvements
|
|
|
161,960
|
|
|
145,834
|
|
Buildings
and improvements
|
|
|
446,370
|
|
|
424,051
|
|
Riverboats
and floating pavilions
|
|
|
181,487
|
|
|
173,951
|
|
Furniture,
fixtures and equipment
|
|
|
426,749
|
|
|
375,448
|
|
Construction
in progress
|
|
|
129,591
|
|
|
24,142
|
|
Total
property and equipment
|
|
|
1,502,014
|
|
|
1,305,126
|
|
Less
accumulated depreciation and amortization
|
|
|
475,108
|
|
|
397,666
|
|
Property
and equipment, net
|
|
$
|
1,026,906
|
|
$
|
907,460
|
|
|
|
|
|
|
|
|
|
Interest
capitalized totaled $3.2 million in fiscal 2005, $1.5 million in fiscal 2004
and
$0.2 million in fiscal 2003.
4.
Goodwill and Other Intangible Assets
The
changes in the carrying amount of goodwill are as follows (in
thousands):
Balance
at April 27, 2003
|
|
$
|
334,114
|
|
Final
purchase accounting adjustments related to the Colorado
Central
|
|
|
|
|
Station-Black
Hawk and the Colorado Grande-Cripple Creek
|
|
|
1,064
|
|
Acquired
goodwill
|
|
|
6,242
|
|
Foreign
currency translation adjustment
|
|
|
165
|
|
Balance
at April 25, 2004
|
|
|
341,585
|
|
Reclassification
of goodwill
|
|
|
2,022
|
|
Foreign
currency translation adjustment
|
|
|
761
|
|
Impairment
of the Colorado Grande - Cripple Creek
|
|
|
(3,959
|
)
|
Balance
at April 24, 2005
|
|
$
|
340,409
|
|
|
|
|
|
|
The
$2.0
million for the fiscal year ended April 24, 2005, is for the Company’s final
purchase price allocation on Blue Chip.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
4.
Goodwill and Other Intangible Assets (continued)
Based
on
the fact that the net fair value of the Colorado Grande-Cripple Creek of $5.8
million exceeds the carrying value of the long-term assets of $9.8 million,
including goodwill of $6.9 million, a charge of $4.0 million was recorded in
the
fourth quarter for the impairment of the Colorado Grande-Cripple Creek’s
remaining goodwill. Since the Company no longer has a continued presence in
the
Cripple Creek market, the Colorado Grande-Cripple Creek’s operating results,
including this associated goodwill impairment and minority interest share is
classified as discontinued operations on the consolidated statements of income
and prior year results have been reclassified to conform to the fiscal 2005
presentation.
Other
intangible assets consist of the following:
|
|
April
24,
|
|
April
25,
|
|
|
|
2005
|
|
2004
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
Gaming
licenses
|
|
$
|
53,379
|
|
$
|
53,379
|
|
Trademarks
and player database
|
|
|
18,985
|
|
|
18,970
|
|
Other
intangible assets, net
|
|
$
|
72,364
|
|
$
|
72,349
|
|
|
|
|
|
|
|
|
|
5.
Restricted
Cash
For
the
fiscal years ended April 24, 2005 and April 25, 2004, the Company’s restricted
cash includes
workers’ compensation deposits in the amount of $0.04 million and $0.3 million,
respectively, and various other deposits totaling $2.2 million and $2.2 million,
respectively.
6.
Self-Insurance Liabilities
The
Company’s employee-related health care benefits program, workers’ compensation
insurance and general liability insurance are self-funded up to a maximum amount
per claim. Claims in excess of this maximum are fully insured through stop-loss
insurance policies. The liabilities are based on claims filed and estimates
of
claims incurred but not reported. For the fiscal years ended April 24, 2005
and
April 25, 2004, the Company’s liabilities for unpaid and incurred but not
reported claims totaled $22.9 million and $19.0 million, respectively, and
are
included in “Accrued liabilities-payroll and related” for health care benefits
and workers’ compensation insurance and in “Accrued liabilities-other” for
general liability insurance in the accompanying consolidated balance sheets.
While the total cost of claims incurred depends on future developments, in
management’s opinion, recorded reserves are adequate to cover future claims
payments.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
7.
Long-Term Debt
|
|
April
24,
|
|
April
25,
|
|
|
|
2005
|
|
2004
|
|
Long-term
debt consists of the following:
|
|
(In
thousands)
|
|
|
|
|
|
|
|
7%
Senior Subordinated Notes (described below)
|
|
$
|
500,000
|
|
$
|
500,000
|
|
9%
Senior Subordinated Notes (described below)
|
|
|
200,000
|
|
|
200,000
|
|
Senior
Secured Credit Facility (described below):
|
|
|
|
|
|
|
|
Variable
rate term loan
|
|
|
249,375
|
|
|
207,500
|
|
Isle-Black
Hawk Senior Secured Credit Facility, non-recourse to Isle of Capri
|
|
|
|
|
|
|
|
Casinos,
Inc. (described below):
|
|
|
|
|
|
|
|
Variable
rate term loan Tranche C
|
|
|
163,350
|
|
|
165,000
|
|
Revolver
|
|
|
26,000
|
|
|
-
|
|
Special
Assessment BID Bonds, non-recourse to Isle of Capri Casinos,
Inc.
|
|
|
|
|
|
|
|
(described
below)
|
|
|
590
|
|
|
700
|
|
Blue
Chip Credit Facility (6.50% at April 24, 2005) due January
2009;
|
|
|
|
|
|
|
|
non-recourse
to Isle of Capri Casinos, Inc.
|
|
|
6,942
|
|
|
3,418
|
|
Variable
rate TIF Bonds due to City of Bettendorf (described below)
|
|
|
3,875
|
|
|
4,624
|
|
Variable
rate General Obligation Bonds due to City of Davenport (described
below)
|
|
|
1,830
|
|
|
1,830
|
|
12.5%
note payable, due in monthly installments of $125, including
interest,
|
|
|
|
|
|
|
|
beginning
October 1997 through October 2005
|
|
|
494
|
|
|
1,833
|
|
Other
|
|
|
3,662
|
|
|
3,959
|
|
|
|
|
1,156,118
|
|
|
1,088,864
|
|
Less
current maturities
|
|
|
7,501
|
|
|
8,040
|
|
Long-term
debt
|
|
$
|
1,148,617
|
|
$
|
1,080,824
|
|
|
|
|
|
|
|
|
|
The
following is a brief description of the Company’s and its subsidiaries’
borrowing arrangements. Certain of these arrangements contain financial
covenants. The Company and its subsidiaries were in compliance with all
covenants as of April 24, 2005 and April 25, 2004.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
7.
Long-Term Debt (continued)
7%
Senior Subordinated Notes
On
March
3, 2004, the Company issued $500.0 million of 7% Senior Subordinated Notes
due
2014. The 7% Senior Subordinated Notes are guaranteed by all of the Company’s
significant domestic subsidiaries, excluding the subsidiaries that own and
operate the Isle-Black Hawk and the Colorado Central Station-Black Hawk, and
other subsidiaries as described more fully in Note 22. The 7% Senior
Subordinated Notes are general unsecured obligations and rank junior to all
existing and future senior indebtedness, senior to any subordinated indebtedness
and equally with all existing and future senior subordinated debt, including
the
$200.0 million in aggregate principal amount of the existing 9% Senior
Subordinated Notes. Interest on the 7% Senior Subordinated Notes is payable
semi-annually on each March 1 and September 1 through maturity. The 7% Senior
Subordinated Notes are redeemable, in whole or in part, at the Company’s option
at any time on or after March 1, 2009, at the redemption prices (expressed
as
percentages of principal amount) set forth below plus accrued and unpaid
interest to the applicable redemption date, if redeemed during the 12-month
period beginning on March 1 of the years indicated below:
Year
|
Percentage
|
|
|
2009
|
103.500%
|
2010
|
102.333%
|
2011
|
101.167%
|
2012 and thereafter
|
100.000%
|
Additionally,
the Company may redeem a portion of the 7% Senior Subordinated Notes with the
proceeds of specified equity offerings.
The
Company issued the 7% Senior Subordinated Notes under an indenture between
the
Company, the subsidiary guarantors and a trustee. The indenture, among other
things, limits the ability of the Company and its restricted subsidiaries to
borrow money, make restricted payments, use assets as security in other
transactions, enter into transactions with affiliates or pay dividends on or
repurchase its stock or its restricted subsidiaries’ stock. The Company is also
limited in its ability to issue and sell capital stock of its subsidiaries
and
in its ability to sell assets in excess of specified amounts or merge with
or
into other companies.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
7.
Long-Term Debt (continued)
9%
Senior Subordinated Notes
On
March
27, 2002, the Company issued $200.0 million of 9% senior subordinated notes
due
2012 (the “9% Senior Subordinated Notes”). The
9%
senior subordinated notes are guaranteed by all of the Company’s significant
domestic subsidiaries, excluding the subsidiaries that own and operate the
Isle-Black Hawk and Colorado Central Station-Black Hawk, and other subsidiaries
as described more fully in Note 22. The
9%
senior subordinated notes are general unsecured obligations and rank junior
to
all existing and future senior indebtedness, senior to any subordinated
indebtedness and equally with all existing and future senior subordinated debt,
including the $500.0 million in aggregate principal amount of the existing
7%
senior subordinated notes. Interest
on the 9% Senior Subordinated Notes is payable semi-annually on each March
15
and September 15 through maturity. The 9% Senior Subordinated Notes are
redeemable, in whole or in part, at the Company’s option at any time on or after
March 15, 2007, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest to the applicable
redemption date, if redeemed during the 12-month period beginning on March
15 of
the years indicated below:
Year
|
Percentage
|
|
|
2007
|
104.500%
|
2008
|
103.000%
|
2009
|
101.500%
|
2010 and thereafter
|
100.000%
|
Additionally,
the Company may redeem a portion of the 9% Senior Subordinated Notes with the
proceeds of specified equity offerings.
The
Company issued the 9% senior subordinated notes under an indenture between
the
Company, the subsidiary guarantors and a trustee. The indenture, among other
things, limits the ability of the Company and its restricted subsidiaries to
borrow money, make restricted payments, use assets as security in other
transactions, enter into transactions with affiliates or pay dividends on or
repurchase its stock or its restricted subsidiaries’ stock. The Company is also
limited in its ability to issue and sell capital stock of its subsidiaries
and
in its ability to sell assets in excess of specified amounts or merge with
or
into other companies.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
7.
Long-Term Debt (continued)
Senior
Secured Credit Facility
On
February 4, 2005, the Company refinanced its senior secured credit facility.
The
refinanced facility provides for a $400.0 million revolving credit facility
maturing on February 4, 2010 and a $250.0 million term loan facility maturing
on
February 4, 2011 (or February 6, 2012 if the Company elects to refinance its
existing 9% Senior Subordinated Notes currently due March 2012) with an
additional $50.0 million delayed draw term loan available until August 3, 2005,
at which time the option expires. At the Company’s and the lead arranger’s
mutual discretion, the Company may increase the revolver and/or term loan,
in an
aggregate amount up to $200.0 million subject to certain conditions. The term
loans are payable in quarterly installments beginning on March 31, 2005 and
ending on February 4, 2011 unless extended as described above. The revolving
credit facility may bear interest at the higher of (1) 0.5% in excess of the
federal funds effective rate or the rate that the bank group announces from
time
to time as its prime lending rate plus an applicable margin of up to 1.75%
or
(2) a rate tied to a LIBOR rate plus an applicable margin of up to 2.75%. The
term loan may bear interest at the higher of (1) 0.5% in excess of the federal
funds effective rate or the rate that the bank group announces from time to
time
as its prime lending rate plus an applicable margin of up to 0.75% or (2) a
rate
tied to a LIBOR rate plus an applicable margin of 1.75%.
The
proceeds from the refinancing were used to pay down the existing senior secured
credit facility term loan, of which $205.6 million in principal and $0.7 million
in accrued interest were outstanding as of February 4, 2005. The remainder
of
the undrawn facility will be used for general corporate purposes, including
working capital, permitted acquisitions, capital expenditures and investments.
Pursuant
to the refinancing, the Company recognized a loss before income taxes on early
extinguishment of debt of $5.3 million, due to the write-off of previously
deferred financing costs related to its existing senior secured credit facility.
The costs associated with the new senior secured credit facility have been
deferred and are being amortized over the term of the new facility.
The
senior secured credit facility provides for certain covenants, including those
of a financial nature. The senior secured credit facility is secured by liens
on
substantially all of the Company’s assets and guaranteed by all of its
restricted subsidiaries.
The
weighted average effective interest rate of total debt outstanding under the
senior secured credit facility at April 24, 2005, was 4.61%.
At
April
24, 2005, the Company had $249.4 million outstanding under the senior secured
credit facility and no amounts outstanding under the term loan facility or
the
delayed draw term loan.
Isle-Black
Hawk Senior Secured Credit Facility
The
Isle-Black Hawk senior secured credit facility provides for a $40.0 million
revolving credit facility maturing on December 31, 2006, or such date as the
Tranche C term loans are repaid in full, whichever comes first and $165.0
million Tranche C term loan matures on December 31, 2007, each of which is
non-recourse to the Isle of Capri Casinos, Inc. The Isle-Black Hawk is required
to make quarterly principal payments of $0.4 million on the term loan portions
of the Isle-Black Hawk senior secured credit facility that commenced in June
2004, with a balloon payment of $159.2 million due upon maturity.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
7.
Long-Term Debt (continued)
At
the
Isle-Black Hawk’s option, the revolving credit facility loan may bear interest
at (1) the higher of 0.5% in excess of the federal funds effective rate or
the
rate that the bank group announces from time to time as its prime lending rate
plus an applicable margin of up to 2.50% or (2) a rate tied to a LIBOR rate
plus
an applicable margin of up to 3.50%. The Tranche C term loan may bear interest
at (1) the higher of 0.5%
in
excess of the federal funds effective rate or the rate that the bank group
announces from time to time as its prime lending rate plus an applicable margin
of up to 2.00% or (2) a rate tied to a LIBOR rate plus an applicable margin
of
up to 3.00%.
The
Isle-Black Hawk senior secured credit facility as amended provides for certain
covenants including those of a financial nature. The Isle-Black Hawk was in
compliance with all of the covenants as of April 24,
2005.
The
Isle-Black Hawk senior secured credit facility is secured by liens on the
Isle-Black Hawk’s assets.
The
weighted average effective interest rate of total debt outstanding under the
Isle-Black Hawk Senior Secured Credit Facility at April 24, 2005, was
5.89%.
Interest
Rate Swap Agreements
The
Isle-Black Hawk has interest rate swap agreements with an aggregate notional
value of $80.0 million or 42.2% of its variable rate term debt outstanding
under
the Isle-Black Hawk’s senior secured credit facility as of April 24, 2005. The
swap agreements effectively convert portions of its variable rate debt to a
fixed-rate basis until the fourth fiscal quarter of 2008, thus reducing the
impact of interest rate changes on future interest expense. The interest rate
swap agreements terminate as follows: $40.0 million in fiscal 2006 and $40.0
million in fiscal 2008. The Company evaluates the effectiveness of these hedged
transactions on a quarterly basis. No portion of the hedging instruments was
ineffective during the fiscal year ended April 24, 2005. Accordingly, no gains
or losses have been recognized on these cash flow hedges.
At
April
24, 2005, the Isle-Black Hawk does not expect to reclassify any net gains or
losses on derivative instruments from accumulated other comprehensive income
to
earnings during the next twelve months due to the payment of variable interest
associated with the floating rate debt.
Isle-Black
Hawk Special Assessment BID Bonds
In
July
1998, the Black Hawk Business Improvement District (the “BID”), issued $2.9
million in 6% bonds due on December 1, 2009. The proceeds from the sale of
the
bonds were used to fund road and utility improvements in the Special Improvement
District 1997-1 (the “SID”), of which the Isle-Black Hawk is a member. The total
costs of the improvements amounted to $2.2 million with the excess proceeds
being returned to the bondholders by the BID. The Isle-Black Hawk is responsible
for 50% of this amount plus interest, which is non-recourse to the Isle of
Capri
Casinos, Inc. In April 2000, the Isle-Black Hawk made the first of twenty
semi-annual payments of $0.1 million in the form of special property tax
assessments levied on the improvement project. This amount is calculated by
amortizing $1.1 million or 50% of the net bond proceeds, over twenty periods
at
an interest rate of 6.25%. The difference between the bond rate of 6% and the
6.25% assessed is to cover administrative costs of the BID related to the
issuance.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7.
Long-Term Debt (continued)
Blue
Chip Credit Facility
In
2004,
Blue Chip PLC entered into an agreement with the Bank of Scotland to borrow
up
to £3.5 million ($6.8 million) to fund its casino development program. As of
April 24, 2005, only £3.1 million ($6.0 million) has been borrowed. The term
loan is to be repaid in quarterly payments commencing in July 2005, and is
to be
repaid in April 2009 should Blue Chip borrow the additional £0.4 million ($0.8
million). If the additional funds are not borrowed, the loan will be repaid
in
January 2009. The interest rate is either, at Blue Chip’s option, the Bank of
Scotland’s base rate or LIBOR plus a margin of 1.75 percent.
Isle-Bettendorf
TIF Bonds
As
part
of the City of Bettendorf Development Agreement dated June 17, 1997, the City
of
Bettendorf issued $9.5 million in tax incremental financing bonds (“TIF Bonds”),
$7.5 million of which was used by the Isle-Bettendorf to construct an overpass,
parking garage, related site improvements and pay for disruption damages caused
by construction of the overpass. To enable financing of the City of Bettendorf’s
obligations, the Isle-Bettendorf will pay incremental property taxes on the
developed property assessed at a valuation of not less than $32.0 million until
the TIF Bonds mature. Additionally, the TIF Bonds will also be repaid from
the
incremental taxes on the developed property within the defined “TIF District,”
which includes the Isle-Bettendorf and over 100 other tax paying entities.
In
the event that the taxes generated by the project and other qualifying
developments in the redevelopment district do not fund the repayment of the
total TIF Bonds prior to their scheduled maturity, the Isle-Bettendorf will
pay
the City of Bettendorf $0.25 per person for each person entering the boat until
the remaining balance has been repaid.
Isle-Davenport
General Obligation Bonds
In
2002,
the Isle-Davenport entered into an agreement with the City of Davenport whereby
the City of Davenport would construct and own a skybridge connecting to the
Isle-Davenport’s facility, allowing safer access across the street and railroad
tracks. The project, which is currently under construction by the City of
Davenport, is expected to cost $6.4 million, with the Isle-Davenport obligated
to pay $1.8 million. In February 2004, the City of Davenport issued $1.8 million
in ten-year general obligation tax-exempt bonds at an average interest rate
of
3.1%. The Isle-Davenport is required to make annual payments of principal and
interest to the City of Davenport to retire the bonds.
Other
The
aggregate principal payments due on total long-term debt over the next five
fiscal years and thereafter are as follows:
Fiscal
Year Ending
|
|
(In
thousands)
|
|
|
|
2006
|
|
$
|
7,501
|
|
2007
|
|
|
32,538
|
|
2008
|
|
|
165,662
|
|
2009
|
|
|
5,769
|
|
2010
|
|
|
3,452
|
|
Thereafter
|
|
|
941,196
|
|
|
|
$
|
1,156,118
|
|
|
|
|
|
|
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7.
Long-Term Debt (continued)
As
of
April 24, 2005, the Company had $452.8 million of availability under its lines
of credit.
Standby
letters of credit consists of the following: $5.0 million for the Isle-Black
Hawk and Colorado Central Station, $2.1 million for gaming taxes, $4.3 million
for workers’ compensation and $6.5 million for other.
8.
Comprehensive Income
Comprehensive
income consists of the following:
|
|
Unrealized
gain (loss) on interest rate swaps
|
|
Foreign
currency translation adjustment
|
|
Accumulated
other comprehensive income (loss)
|
|
|
|
(In
thousands)
|
|
Balance,
April 28, 2002
|
|
$
|
(4,061
|
)
|
$
|
-
|
|
$
|
(4,061
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
change
|
|
|
(223
|
)
|
|
-
|
|
|
(223
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
April 27, 2003
|
|
|
(4,284
|
)
|
|
-
|
|
|
(4,284
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
change
|
|
|
4,044
|
|
|
761
|
|
|
4,805
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
April 25, 2004
|
|
$
|
(240
|
)
|
$
|
761
|
|
$
|
521
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change
|
|
|
345
|
|
|
1,992
|
|
|
2,337
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
April 24, 2005
|
|
$
|
105
|
|
$
|
2,753
|
|
$
|
2,858
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the
interest rate swap agreements, the fair value of the estimated interest
differential between the applicable future variable rates and the interest
rate
swap agreement contracts, expressed in present value terms, totaled $33,000,
net
of income taxes, and is recorded as a current asset. There was no effect on
income related to hedge ineffectiveness.
9.
Commitments
Isle-Lake
Charles
The
Company leases approximately 16.25 acres of land in Calcasieu Parish, Louisiana
for use in connection with the Isle-Lake Charles. This agreement expires in
March 2010, with fifteen renewal options of five years each. Rent under the
Isle-Lake Charles lease is currently $1.5 million per year and is subject to
increases based on the Consumer Price Index (“CPI”).
Isle-Lula
The
Company leases approximately 1,000 acres of land in Coahoma County, Mississippi
and utilizes approximately 50 acres in connection with the operations of the
Isle-Lula. Unless terminated by the Company at an earlier date, the lease
expires in 2033. Rent under the lease is currently 5.5% of gross gaming revenue
as established by the Mississippi Gaming Commission, as well as $3,333 per
month
for the Rhythm & Blues Hotel.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9.
Commitments (continued)
Isle-Biloxi
The
Company has an agreement with the Biloxi Port Commission that provides the
Company with certain docking rights. This agreement expires in July 2009, with
seven renewal options of five years each. Annual rentals are the greater of
$500,000 or 1% of gross gaming revenue, as defined. Annual rent during each
renewal term is adjusted for increases in the CPI, limited to 6% for each
renewal period.
In
addition, the Company leases certain land, buildings, and other improvements
from the City of Biloxi under a lease and concession agreement. This agreement
expires in July 2009, with options to renew for six additional terms of five
years each. Annual rent is $530,000 plus 3% of gross gaming revenue, as defined,
in excess of $25.0 million. Annual rent during each renewal term is adjusted
for
increases in the CPI, limited to 6% for each renewal period.
In
April
1994, the Company entered an Addendum to the lease with the City of Biloxi,
which requires the Company to pay 4% of gross non-gaming revenues received
as
defined, net of sales tax, comps and discounts. Additional rent will be due
to
the City of Biloxi for the amount of any increase from and after January 1,
2016
in the rent due to the State Institutions of Higher Learning under a lease
between the City of Biloxi and the State Institutions of Higher Learning (the
“IHL Lease”) and for any increases in certain tidelands leases between the City
of Biloxi and the State of Mississippi.
In
April
1994, in connection with the construction of a hotel, the Company entered a
lease for additional land. The Company first acquired the leasehold interest
of
Sea Harvest, Inc., the original lessee, for consideration
of $8,000 per month for a period of ten years. The Company’s lease is with the
City of Biloxi, Mississippi, for an initial term of twenty-five years, with
options to renew for six additional terms of ten years each and
a
final option period with a termination date commensurate with the termination
date of the IHL Lease, but in no event later than December 31, 2085. Current
annual rent is $605,000, plus 4% of gross non-gaming revenue, as defined. The
annual rent is adjusted after each five-year period based on increases in the
CPI, limited to a 10% increase in any five-year period.
In
August
2002, the Company entered into a lease for two additional parcels of land
adjoining the Isle-Biloxi and the hotel. On the parcel adjoining the
Isle-Biloxi, the Company constructed a multi-level parking garage that has
approximately 1,000 parking spaces. There is additional ground level parking
on
a parcel of land in front of the garage, also subject to this lease, with
approximately 600 parking spaces. The Company has constructed a 400 room
addition to the existing hotel on the parcel leased next to the existing hotel.
In addition, the Company may construct a hotel above the parking garage. This
lease with the City of Biloxi and the Mississippi Secretary of State is for
an
initial term of forty years, with one option to renew for an additional
twenty-five years and additional options thereafter, with the consent of the
Mississippi Secretary of State, consistent with the term of the lease described
in the preceding paragraph. When combined with the base and percentage rents
described for the leases in the preceding two paragraphs, annual rent under
those two leases and this lease are estimated to be $3.3 million (depending
on
the completion date of the hotel) for lease year ending July 31, 2005 and $3.5
million for lease year ending July 31, 2006. Such minimum rent to increase
thereafter over time in accordance with a formula based on anticipated timing
for completion of the current hotel and completion of the hotel on top of the
parking garage (or August 31,2008, which ever occurs first), up to a minimum
rent of $3.7 million. Such amounts are subject to decreases due to market
adjustments and increases based on the CPI. Also, the Company is responsible
for
annual rent equal to 4% of gross retail revenue and gross cash revenue (as
defined in the lease), but without double counting. If the rent minimum
described in the preceding sentences is not otherwise satisfied from other
rents, then this percentage rent is not in addition to the minimum rent, but
rather is to be applied to that minimum.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9.
Commitments (continued)
In
connection with and pursuant to a settlement between the City of Biloxi and
the
State of Mississippi concerning the control and management area where the
Isle-Biloxi is located, the Company also has agreed to pay the City of Biloxi’s
lease obligations to the State of Mississippi. This amount is $500,000 per
year,
payable on June 30, subject to increases based on the CPI and decreases if
there
are other tenants of the subject property. This obligation ends after June
2018,
but may be renewed for thirty years.
The
Company has also entered into a joint venture arrangement to sublease property
containing a two-level parking garage next to the Isle-Biloxi. Annual rent
under
this lease is approximately $200,000. The current term is for three years
expiring December 31, 2005, with a renewal option for another five years (under
which the annual rent would increase to approximately $212,500 and automatically
extends through December 2010 unless the Company sends a notice to terminate
by
July 1, 2005. The Company has no plans to terminate the lease.
Isle-Natchez
Through
numerous lease agreements, the Company leases approximately 24 acres of land
in
Natchez, Mississippi, which is used in connection with the operation of the
Isle-Natchez. Unless terminated by the Company at an earlier date, the lease
expiration dates vary through 2037. Rents under the leases currently total
approximately $101,000 per month. The Company also leases approximately 7.5
acres of land, which is utilized for parking at the facility.
Isle-Kansas
City
The
Company leases approximately 28 acres from the Kansas City Port Authority in
connection with the operation of the Isle-Kansas City. The term of the lease
is
ten years and the Company has the option to renew the lease for eight additional
terms of five years each. Rent under the lease is currently $3.0 million per
year, subject to the higher of $3.0 million (minimum rent) per year, or 3.25%
of
gross revenues, less complimentaries.
Isle-Boonville
The
Company entered into a lease agreement with the City of Boonville. Under the
terms of agreement, the Company leases the site for a period of ninety-nine
years. The Company was required to pay $1.7 million to the City of Boonville
as
lump sum rent payment during construction of the casino. There was no rent
due
after the casino opening date. The Company was, however, assessed additional
amounts by the City of Boonville based on a 3.5% tax on gaming revenue, which
the Company recognized as additional rent.
Isle-Bettendorf
The
Company has signed a development agreement with the City of Bettendorf pursuant
to which the Company agreed to construct a new 250-room Isle hotel, additional
parking, a Kitt’s Kitchen restaurant and an expansion of the existing buffet,
and the City agreed to construct a 50,000 square foot convention center adjacent
to the company’s facility, which will be managed by the Isle-Bettendorf. The
cost of the Company’s portion of this project is approximately $45.0 million,
and the new hotel is planned to open in the late spring of
2007.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
9.
Commitments (continued)
Isle-Davenport
Through
various lease agreements, the Company leases approximately twelve acres of
land
in Davenport, Iowa in connection with the operations of Rhythm City-Davenport.
The aggregate annual rent on these leases is approximately $0.8 million and
they
have varying expiration dates through 2022. Pursuant to a development agreement
with the City, the Isle-Davenport has exclusive docking privileges in the City
of Davenport until March 31, 2017 in consideration of this docking fee. The
docking fee has both a fixed base and a per passenger increment. The fixed
fee
commenced April 1, 1994 at $111,759 and increases annually by 4%. The
incremental component is a $0.10 charge for each passenger in excess of
1,117,579 passengers (which charge also increases by 4% per year).
Isle-Marquette
The
Company leases riverfront land from the City of Marquette, Iowa, under a lease
agreement. This agreement expires in December 2019. Annual rent is $180,000
payable in equal monthly installments due on the first of each month. In
addition to the base rent, the Company must also pay the following amounts:
(1)
$0.50 per customer per day due the 15th
day
following each month and (2) 2.5% of net gambling receipts, as defined, from
$20.0 million to $40.0 million, plus 5% of net gambling receipts, as defined,
from $40.0 million to $60.0 million, plus 7.5% of net gambling receipts, as
defined, in excess of $60.0 million, due annually.
Colorado
Central Station-Black Hawk
The
Company leases additional parcels of land adjoining the Colorado Central
Station-Black Hawk for current and future parking. The lease for current parking
is for an initial term of nine years with options to renew for eighteen
additional terms of five years
each with the final option period concluding June 1, 2094. Annual rent is $1.7
million indexed to correspond to any rise or fall in the CPI at one-year
intervals beginning June 1, 1996, not to exceed 3% difference from the previous
year’s rate. The lease for future parking is for an initial term of ten years
with options to renew for nine additional terms of ten years each with the
final
option period concluding June 1, 2094. Annual rent is $576,000 and renewals
are
subject to 20% rent increases over the rate of the previous term.
Isle-Our
Lucaya
The
Company subleases the casino property under an agreement that is in the effect
until December 2012 and requires the Company to make payments under the
following terms:(1) $2.0 million per year in equal monthly installments due
on
the first of each month for the first two years ending November 30, 2006, (2)
the annual amount increases to $2.5 million in years three and four and then
to
$3.0 million for the remainder of the lease, (3) plus $125,000 per year in
equal
monthly installments due on the first of each month for common area maintenance
and (4) plus a minimum room buy of fifty from the hotel at a rate of $54 per
night. After the second year of the lease, if earnings before income taxes,
depreciation and amortization fall below $3.0 million, the Company has the
option to cancel with a one-year notice.
Additionally,
the agreement requires the Company to pay a monthly resort marketing fee (the
“Fee”). The Fee is calculated at six percent of annual gross revenues of the
casino, where such receipts are in excess of $33.3 million a year, for the
first
two years, $40.0 million a year for years three and four, $45.0 million a year,
for years five through ten.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
9.
Commitments (continued)
Other
In
December 2003, the Company entered into a 25-year lease with Arena Coventry
Limited to lease approximately 120,000 square feet within the arena compound
that will be used in connection with the operation of the Isle-Coventry. In
addition to the payment of £4.0 million plus value added tax (“VAT”) ($7.7
million at April 24, 2005), the lease requires us to pay one more payment of
£2.0 million plus VAT in July 2005 for prepaid rent. In the fourth quarter of
fiscal 2006, the Company will pay approximately £1.3 million plus VAT ($2.5
million at April 24, 2005) per year offset by the £6.0 million plus VAT ($11.5
million at April 24, 2005) prepaid rent that reduces annual rent expenses over
15 years.
In
November 2003, pursuant to a subscription and shareholders agreement, the Isle
of Capri Casinos, Ltd. (the “Isle-Ltd.”), a wholly owned subsidiary of the
Company, acquired a two-thirds interest in Blue Chip Casinos,
PLC (“Blue Chip”). Under the agreement, the Isle-Ltd. has the option to require
the minority shareholders to sell their respective shares to the Isle-Ltd at
fair value or at a price to be agreed upon. This option is available for a
period of seven years from the acquisition date or for five years from the
introduction of new gaming laws whichever is later. If the Isle-Ltd. does not
exercise its option, the minority shareholders have the right, during the
one-year period after the option expiration date, to require the Isle-Ltd.
to
purchase the minority shares at fair value or at a price to be agreed upon.
Due
to the current uncertainty in United Kingdom (“UK”) gaming legislation, and the
long-term nature of this option, the impact of this obligation is not reasonably
estimable at this time.
Future
minimum payments under capital leases and noncancelable operating leases with
initial terms of one year
or
more consisted of the following at April 24, 2005:
|
|
Capital
|
|
Operating
|
|
|
|
Leases
|
|
Leases
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
2006
|
|
$
|
321
|
|
$
|
15,969
|
|
2007
|
|
|
321
|
|
|
15,954
|
|
2008
|
|
|
321
|
|
|
14,746
|
|
2009
|
|
|
321
|
|
|
15,004
|
|
2010
|
|
|
321
|
|
|
14,986
|
|
Thereafter
|
|
|
3,108
|
|
|
1,118,035
|
|
Total
minimum lease payments
|
|
$
|
4,713
|
|
$
|
1,194,694
|
|
Amounts
representing interest
|
|
|
(2,474
|
)
|
|
|
|
Present
value of net minimum lease payments
|
|
$
|
2,239
|
|
|
|
|
|
|
|
|
|
|
|
|
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
9.
Commitments (continued)
All
future operating minimum lease payments include long-term land lease payments,
which have various renewal options varying between five to ten years. The
Company expects that the Company’s properties will continue in operation and
these leases will be renewed for the next 80 to 90 years. Rent expense for
operating leases was approximately $38.7 million in fiscal 2005, $37.5 million
in fiscal 2004 and $34.6 million in fiscal 2003. Such amounts include contingent
rentals of $9.7 million in fiscal 2005, $9.5 million in fiscal 2004 and $9.4
million in fiscal 2003.
10.
Related Party Transactions
The
Company leases approximately eight acres of land on a month-to-month basis
from
an entity owned by family members of the Company’s chief executive officer,
Bernard Goldstein, including Robert S. Goldstein and Jeffrey D. Goldstein,
directors of the Company. The land is used for parking and warehouse space
by
the Isle-Bettendorf. The initial term of the lease expires sixty days after
written notice is given to either party and rent under the lease is currently
$23,360 per month.
The
Company reimburses Alter Trading Corporation, a company owned by Robert S.
Goldstein, Jeffrey D. Goldstein and other members of the Goldstein family,
for
annual lease payments of approximately $93,000 with respect to property leased
by Alter Trading Corporation. The land was leased at the Company’s request in
order to secure a site for possible casino operations.
On
April
22, 2005, the Company approved an agreement to sell the Colorado Grande-Cripple
Creek for an estimated $6.5 million payable in $0.6 million cash and a $5.9
million promissory note secured by the assets of the casino. After receiving
offers from several third parties, the Company’s Board of Directors agreed to
sell the Colorado Grande-Cripple Cripple Creek to Nevada Gold & Casinos,
Inc. Nevada Gold & Casinos, Inc. also owns 43% of the Isle-Black Hawk and
the Colorado Central Station-Black Hawk.
On
August
19, 2004, the Company entered into a contract with John Brackenbury, a member
of
the Board of Directors, for consulting fees related to the UK’s on-going
contracts and transactions. The total paid under this contract during fiscal
2005 was $40,000. The contract continues month-to-month at $5,000 per month.
In
November 2002, the Company,
through
its wholly owned subsidiary, Isle of Capri Bettendorf, L.C., awarded
a
contract in the amount of approximately $120,000, to dredge the Bettendorf
Marina, the location of the Isle-Bettendorf property, to Blackhawk Fleet, Inc.
of Davenport, Iowa. Blackhawk Fleet, Inc. is an affiliate of the Alter Company,
which is owned by Bernard Goldstein, and members of his immediate family.
Subsequent to the awarding of the contract (to Blackhawk Fleet and Skipper
Marina, the third party contractor on the overall project) and prior to its
implementation, the contract was approved as a related party transaction by
the
Iowa Racing and Gaming Commission on March 6, 2003.
In
March
2003, the Company, through its wholly owned subsidiary, Lady Luck Vicksburg,
Inc., sold three barges to the Alter Company. The barges were previously
classified as property held for sale and sold for $100,000.
The
Company’s Board of Directors has previously approved all of these transactions.
The Company obtained pre-approval from the Audit Committee (comprised of
independent directors) of the Company’s Board of Directors for these related
party transactions.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
11.
Common Stock
Earnings
(Loss) per Share of Common Stock
The
following table sets forth the computation of basic and diluted earnings (loss)
per share:
|
|
Fiscal
Year Ended
|
|
|
|
April
24,
|
|
April
25,
|
|
April
27,
|
|
|
|
2005
|
|
2004
|
|
2003
|
|
|
|
(In
thousands, except per share data)
|
|
Numerator:
|
|
|
|
|
|
|
|
Income
applicable to common shares:
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
20,984
|
|
$
|
26,331
|
|
$
|
45,604
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from discontinued operations
|
|
|
(2,946
|
)
|
|
1,418
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
18,038
|
|
$
|
27,749
|
|
$
|
45,593
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
Denominator
for basic earnings (loss) per share -
|
|
|
|
|
|
|
|
|
|
|
weighted
- average shares
|
|
|
29,682
|
|
|
29,404
|
|
|
28,984
|
|
Effect
of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
Employee
stock options
|
|
|
|
|
|
|
|
|
|
|
and
nonvested restricted stock
|
|
|
1,248
|
|
|
1,062
|
|
|
1,468
|
|
Denominator
for diluted earnings (loss) per share -
|
|
|
|
|
|
|
|
|
|
|
adjusted
weighted - average shares and
|
|
|
|
|
|
|
|
|
|
|
assumed
conversions
|
|
|
30,930
|
|
|
30,466
|
|
|
30,452
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
0.71
|
|
$
|
0.89
|
|
$
|
1.57
|
|
Income
(loss) from discontinued operations
|
|
|
(0.10
|
)
|
|
0.05
|
|
|
-
|
|
Net
income
|
|
$
|
0.61
|
|
$
|
0.94
|
|
$
|
1.57
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
0.68
|
|
$
|
0.86
|
|
$
|
1.50
|
|
Income
(loss) from discontinued operations
|
|
|
(0.10
|
)
|
|
0.05
|
|
|
-
|
|
Net
income
|
|
$
|
0.58
|
|
$
|
0.91
|
|
$
|
1.50
|
|
|
|
|
|
|
|
|
|
|
|
|
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
11.
Common Stock (continued)
Stock-based
Compensation - Stock Option Plans
Under
the
Company’s 1992, 1993 and 2000 Stock Option Plans, as amended, a maximum of
1,058,750, 4,650,000 and 2,500,000 options, respectively, are reserved for
issuance and may be granted to directors, officers and employees. The plans
provide for the issuance of incentive stock options and nonqualified options
which have a maximum term of 10 years and are, generally, exercisable in yearly
installments ranging from 20% to 25%, commencing one year after the date of
grant. The Company has 548,624 shares available for future issuance under its
equity compensation plans.
Stock
options outstanding are as follows:
|
|
Weighted
|
|
Weighted
|
|
Weighted
|
|
|
Average
|
|
Average
|
|
Average
|
|
2005
|
Exercise
|
2004
|
Exercise
|
2003
|
Exercise
|
|
Options
|
Price
|
Options
|
Price
|
Options
|
Price
|
Outstanding
options at beginning of
|
|
|
|
|
|
|
fiscal
year
|
3,367,997
|
$12.31
|
3,572,083
|
$9.80
|
3,944,851
|
$7.32
|
Options
granted
|
662,421
|
20.42
|
751,431
|
20.59
|
780,148
|
15.06
|
Options
exercised
|
(472,375)
|
9.48
|
(669,764)
|
8.13
|
(997,717)
|
4.23
|
Options
canceled
|
(225,431)
|
16.37
|
(285,753)
|
12.54
|
(155,199)
|
9.07
|
Outstanding
options at end of fiscal year
|
3,332,612
|
$14.05
|
3,367,997
|
$12.31
|
3,572,083
|
$9.80
|
Weighted
average fair value of
|
|
|
|
|
|
|
options
granted
|
$20.42
|
|
$11.69
|
|
$8.82
|
|
The
following table summarizes information about stock options outstanding at April
24, 2005:
|
|
Options
Outstanding
|
|
Options
Exercisable
|
|
|
|
|
Weighted
Average
|
|
|
Weighted
|
|
|
Weighted
|
Ranges
of
|
|
Number
|
|
Remaining
|
|
Average
|
|
Number
|
Average
|
Exercise
Prices
|
|
Outstanding
|
|
Contractual
Life
|
|
Exercise
Price
|
|
Exercisable
|
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
$2.61
- $5.22
|
|
295,029
|
|
3.0
|
years
|
|
$3.13
|
|
295,029
|
$3.13
|
5.22
- 7.84
|
|
645,283
|
|
5.9
|
years
|
|
6.54
|
|
312,283
|
6.58
|
7.84
- 10.45
|
|
232,902
|
|
4.4
|
years
|
|
10.25
|
|
232,902
|
10.25
|
10.45
- 13.06
|
|
54,003
|
|
2.9
|
years
|
|
12.38
|
|
54,003
|
12.38
|
13.06
- 15.67
|
|
837,405
|
|
6.2
|
years
|
|
15.27
|
|
467,005
|
15.07
|
15.67
- 18.28
|
|
58,779
|
|
3.0
|
years
|
|
16.40
|
|
58,779
|
16.40
|
18.28
- 20.90
|
|
1,146,250
|
|
8.7
|
years
|
|
20.40
|
|
117,100
|
20.52
|
20.90
- 23.51
|
|
36,408
|
|
3.3
|
years
|
|
22.55
|
|
36,408
|
22.55
|
23.51
- 26.12
|
|
26,553
|
|
4.9
|
years
|
|
25.47
|
|
21,553
|
25.32
|
$2.61
- $26.12
|
|
3,332,612
|
|
6.4
|
years
|
|
$14.05
|
|
1,595,062
|
$11.16
|
|
|
|
|
|
|
|
|
|
|
|
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11.
Common Stock (continued)
Any
options with an exercise price in excess of the average market price of the
Company’s common stock during the periods presented are not considered when
calculating the dilutive effect of stock options for diluted earnings per share
calculations. The average amount of options excluded from the calculation were
1,468,478 shares, 1,331,635 shares and 2,730,093 shares for fiscal years 2005,
2004 and 2003, respectively.
Stock-based
Compensation - Deferred Bonus Plan
In
the
fiscal 2001, the Company’s stockholders approved the Deferred Bonus Plan. The
Plan provides for the issuance of non-vested stock to eligible officers and
employees who agree to receive a deferred bonus in the form of non-vested stock.
The vesting of the stock is dependent upon continued service to the Company
for
a period of five years. At April 24, 2005, the non-vested stock issued in
connection with the Plan totaled 203,687 shares, of which 36,400 shares were
issued during fiscal year ended April 24, 2005 at $23.80, the weighted-average
fair value of the non-vested stock at the grant date. For the fiscal year ended
April 24, 2005, the Company recorded an unearned compensation contra account
in
consolidated stockholders’ equity equal to the fair value of the non-vested
award and recorded compensation expense for the portion of unearned compensation
that had been earned through April 24, 2005. Compensation expense related to
stock-based compensation under the Deferred Bonus Plan totaled $606,000 in
fiscal 2005, $605,000 in fiscal 2004, and $617,000 in fiscal 2003.
Stock
Repurchase
On
November 15, 2000, the Company’s Board of Directors approved a stock repurchase
program, which allowed for the purchase of up to 1.5 million shares of the
Company’s outstanding common stock. The Board expanded this program on January
11, 2001, and allowed an additional 1.5 million shares to be repurchased. On
October 25, 2002, the Company’s Board of Directors approved a new stock
repurchase program allowing for the purchase of up to 1.5 million shares of
the
Company’s outstanding common stock, for a total of 4.5 million shares. As of
April 24, 2005, the Company has repurchased 3.6 million and retired 553,800
shares of common stock under these programs.
Stockholder
Rights Plan
In
February 1997, the Company adopted a Stockholder Rights Plan. The Plan is
designed to preserve the long-term value of the shareholders’ investment in the
Company. Under the Plan, each shareholder will receive a distribution of one
right for each share of the Company’s outstanding common stock. The rights were
distributed to shareholders of record on March 3, 1997, and will expire ten
years thereafter. Each right entitles the holder to purchase one one-thousandth
(1/1,000) of a share of a new series of participating preferred stock at an
initial exercise price of $12.50. Initially the rights are represented by the
Company’s common stock certificates and are not exercisable. The rights become
exercisable shortly after a person or group acquires beneficial ownership of
15%
or more of the Company or publicly announces its intention to commence a tender
or exchange offer that would result in the 15% beneficial ownership level.
Under
certain circumstances involving a buyer’s acquisition of a 15% position in the
Company, all rights holders except the buyer will be entitled to purchase common
stock at half price. If the Company is acquired through a merger, after such
an
acquisition, all rights holders except the buyer will be entitled to purchase
stock in the buyer at half price. The Company may redeem the rights at one
cent
each at any time before a buyer acquires 15% of the Company’s
stock.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12.
Deferred Compensation Plans
2005
Deferred Compensation Plan
On
January 11, 2005, the Company adopted the 2005 Deferred Compensation Plan (the
“Plan”), which amends and restates its existing deferred compensation
arrangement. The Plan is an unfunded deferred compensation arrangement for
the
benefit of key management officers and employees of the Company and its
subsidiaries. The terms of the Plan include the ability of the participants
to
defer, on a pre-tax basis, salary, bonus payments and any voluntary deferrals
to
the Company’s Retirement Trust and Savings Plan in excess of the amount
permitted under IRS Code Section 401(k). The terms also include a discretionary
annual matching contribution by the Company. The Plan allows for the aggregation
and investment of deferred amounts in notional investment alternatives,
including units representing shares of the Company’s common
stock.
Non-Employee
Directors’ Deferred Compensation Plan
On
January 11, 2005, the Company adopted the Non-Employee Directors’ Deferred
Compensation Plan (the “Directors’ Plan”). The Directors’ Plan provides a means
by which non-employee directors can defer the receipt of their annual retainer
and meeting fees. Deferred amounts are subject to notional investment in either
a money market or similar cash equivalent fund or units representing shares
of
the Company’s common stock. Deferred amounts, as adjusted for earnings during
the deferral period, are distributed after a director ceases to serve for any
reason.
13.
Employee Benefit Plans
401(k)
Plan
The
Company has a 401(k) plan covering substantially all of its employees. The
Company’s contribution expense related to the 401(k) plan was approximately $2.0
million in fiscal 2005, $1.9 million in fiscal 2004 and $1.5 million in fiscal
2003. The Company’s contribution is based on a percentage of employee
contributions and may include an additional discretionary amount. The 401(k)
plan allows employees to invest no more than 5% of their contribution in the
Company’s common stock.
Insurance
Plan
The
Company has a qualified employee insurance plan covering all employees who
work
an average of 32 hours or more per week on a regular basis. The plan, which
is
self-funded by the Company with respect to claims below a certain maximum
amount, requires contributions from eligible employees and their dependents.
The
Company’s contribution expense for the plan was approximately $39.6 million in
fiscal 2005, $35.9 million in fiscal 2004 and $37.9 million in fiscal
2003.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
14.
Business Interruption Insurance Recoveries
During
the fiscal year ended April 24, 2005, the Company recorded $2.2 million in
business interruption insurance proceeds, which was received subsequent to
2005.
These amounts are recorded in the accompanying consolidated statements of income
in the line item “Marketing and administrative operating expenses.” The business
interruption insurance proceeds relate to the closing of the Isle-Our Lucaya
from September 1, 2004 to October 13, 2004 and twenty-one other days throughout
October 2004 and November 2004 due to Hurricane Frances and the closing of
the
Isle-Biloxi from September 14, 2004 to September 17, 2004 due to Hurricane
Ivan.
In
the
fourth quarter of fiscal 2004, the Company received $0.3 million in business
interruption insurance proceeds. The amount was received to offset expenses
incurred as a result of a flood during construction at the Isle-Boonville.
In
addition to flood damages and related clean-up expenses, the Company also
incurred costs for the delay of construction.
15.
Valuation Charge
As
a
result of adverse gaming legislation in the UK, the Company determined during
the fiscal year ended April 24, 2005 that previously capitalized fixed assets
for certain projects would not be recoverable under the provisions of SFAS
No.
144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. As such,
the Company recorded an impairment charge of $1.6 million in the line item
“Valuation charge” in the accompanying consolidated statements of
income.
The
valuation charge for fiscal 2003, totaling $1.9 million, was a reserve for
a
loss contingency against the investment to date in Ardent Gaming, L.L.C., an
unrelated third party. The cashless gaming system being developed under the
joint venture was substantially past due and the Company believes it will not
recover its investment.
On
March
15, 2004, the Company announced that it had been selected by the Illinois Gaming
Board as the successful bidder in a federal bankruptcy court auction for the
10th Illinois gaming license conducted pursuant to an agreement approved by,
among other parties, the Illinois Attorney General. The Company bid $518.0
million to acquire by merger the stock of a company in bankruptcy that owns
the
license. The plan of reorganization pursuant to which the merger would be
consummated has been confirmed by the federal bankruptcy court. The merger
remains subject to certain conditions, including a finding of suitability and
final approval by the Illinois Gaming Board as well as certain other conditions.
In addition, the Illinois Attorney General has raised issues with regard to
the
appropriateness of the Village of Rosemont as a host community and the Illinois
Gaming Board’s selection of the Company’s bid. The Illinois Gaming Board
(working with the Illinois Attorney General) has also resumed an administrative
proceeding seeking to revoke the gaming license from the Company’s proposed
merger partner, which if successful may adversely impact the Company’s ability
to operate a gaming facility in the Village of Rosemont. The Illinois Attorney
General has also filed a suit against the Illinois Gaming Board seeking to
enjoin the Board from conducting a suitability investigation of the Company
in
connection with the merger provided for under the plan of reorganization (which
suitability review has been “suspended” by the Illinois Gaming Board pending the
completion of the aforementioned revocation proceeding). During the fourth
quarter of fiscal 2005, the governor of Illinois appointed a new gaming board.
One of the first acts by the new board was to authorize the reinstatement of
the
proceeding to rescind the license from the current owner. For the reasons set
forth above, among others, the Company believes that its ability to obtain
the
gaming license and open a gaming facility in Rosemont has been subjected to
added uncertainty. The Illinois Supreme Court has also agreed to review certain
challenges to amendments to the Illinois Riverboat Gambling Act relating to
the
proposed relocation of the 10th
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
15.
Valuation Charge (continued)
license.
There can be no assurance that the foregoing conditions will be satisfied or
that the Company will ultimately acquire the license. Additionally, because
Illinois limits the number of gaming licenses, each license has intrinsic value.
Therefore, this license is considered an intangible asset. As such, the full
cost of the license and all associated costs were originally capitalized in
the
amount of $2.5 million. Due to the continuing uncertainty with respect to this
matter, the Company has recorded a valuation charge for the full amount expended
at April 24, 2005.
16.
Preopening Expenses
Preopening
expenses, representing salaries, benefits, training, marketing and other costs,
of $0.2 million and $2.3 million in fiscal 2005 and fiscal 2004, respectively,
were incurred in connection with the opening of the Blue Chip-Walsall on
September 23, 2004 and with the openings of the Isle-Our Lucaya on December
15,
2003 and the Blue Chip-Wolverhampton on April 22, 2004. There were no preopening
expenses in fiscal 2003.
17.
Loss On Early Extinguishment Of Debt
The
Company incurred a loss on early extinguishment of debt totaling $5.3 million
in
fiscal 2005 in connection with the refinancing of its Senior secured credit
facility on February 4, 2005. These charges include the write-off of debt
acquisition costs.
The
Company incurred a loss on early extinguishment of debt of $26.1 million in
fiscal 2004 related to the refinancing of the Company’s $390.0 million 8.75%
Senior Subordinated Notes on March 3, 2004. These charges included early payment
premiums as well as the write-off of debt acquisition costs.
18.
Income Taxes
Income
tax provision from continuing operations consists of the following:
A
reconciliation of income taxes from continuing operations at the statutory
corporate federal tax rate of 35% to the income tax provision reported in the
accompanying consolidated statements of operations is as follows:
|
|
Fiscal
Year Ended
|
|
|
|
April
24,
|
|
April
25,
|
|
April
27,
|
|
|
|
2005
|
|
2004
|
|
2003
|
|
|
|
(In
thousands)
|
|
Statutory
tax provision
|
|
$
|
14,368
|
|
$
|
13,893
|
|
$
|
25,294
|
|
Effects
of :
|
|
|
|
|
|
|
|
|
|
|
State
taxes
|
|
|
1,990
|
|
|
465
|
|
|
1,407
|
|
Non-deductible
items
|
|
|
1,907
|
|
|
537
|
|
|
251
|
|
Adjustment
to prior year's taxes
|
|
|
78
|
|
|
(7
|
)
|
|
57
|
|
Employment
tax credits
|
|
|
(419
|
)
|
|
(472
|
)
|
|
(392
|
)
|
IRS
adjustment
|
|
|
-
|
|
|
(3,400
|
)
|
|
-
|
|
Foreign
activity
|
|
|
1,314
|
|
|
1,113
|
|
|
-
|
|
Other
|
|
|
213
|
|
|
497
|
|
|
33
|
|
|
|
$
|
19,451
|
|
$
|
12,626
|
|
$
|
26,650
|
|
|
|
|
|
|
|
|
|
|
|
|
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
18.
Income Taxes (continued)
|
|
Fiscal
Year Ended
|
|
|
|
April
24,
|
|
April
25,
|
|
April
27,
|
|
|
|
2005
|
|
2004
|
|
2003
|
|
|
|
(In
thousands)
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
1,863
|
|
$
|
3,176
|
|
$
|
1,934
|
|
State
|
|
|
2,287
|
|
|
662
|
|
|
1,142
|
|
|
|
|
4,150
|
|
|
3,838
|
|
|
3,076
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
14,527
|
|
|
8,735
|
|
|
22,552
|
|
State
|
|
|
774
|
|
|
53
|
|
|
1,022
|
|
|
|
|
15,301
|
|
|
8,788
|
|
|
23,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,451
|
|
$
|
12,626
|
|
$
|
26,650
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant
components of the Company’s net deferred state and federal income tax
liabilities are as follows:
|
|
Fiscal
Year Ended
|
|
|
|
April
24,
|
|
April
25,
|
|
|
|
2005
|
|
2004
|
|
|
|
(In
thousands)
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
|
|
Property
and equipment
|
|
$
|
77,436
|
|
$
|
84,572
|
|
Other
|
|
|
1,645
|
|
|
1,935
|
|
Total
deferred tax liabilities
|
|
|
79,081
|
|
|
86,507
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
Hedging
transactions
|
|
|
(15
|
)
|
|
146
|
|
Accrued
expenses
|
|
|
10,172
|
|
|
13,242
|
|
Charitable
contribution carryover
|
|
|
32
|
|
|
411
|
|
Alternative
minimum tax credit
|
|
|
3,641
|
|
|
3,184
|
|
Employment
tax credits
|
|
|
2,954
|
|
|
2,764
|
|
Net
operating losses
|
|
|
14,874
|
|
|
33,776
|
|
Other
|
|
|
7,097
|
|
|
6,446
|
|
Total
deferred tax assets
|
|
|
38,755
|
|
|
59,969
|
|
Valuation
allowance on deferred tax assets
|
|
|
(1,511
|
)
|
|
-
|
|
Net
deferred tax liability
|
|
$
|
41,837
|
|
$
|
26,538
|
|
|
|
|
|
|
|
|
|
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
18.
Income Taxes (continued)
At
April
24, 2005, the Company had alternative minimum tax credits that can be carried
forward indefinitely to reduce future regular tax liabilities. Additionally,
as
of April 24, 2005, the Company has federal net operating losses carryforwards
of
$40.9 million for income tax purposes, with expiration dates from 2011 to 2023.
A portion of the net operating losses, $13.9 million, are subject to limitations
under the income tax regulations, which may limit the amount ultimately
utilized; however, the Company believes that all net operating losses, except
$0.7 million related to discontinued operations, will be utilized prior to
expiration.
At
April
24, 2005, the deferred taxes valuation allowance relates to the discontinued
operations at the Colorado Grande-Cripple Creek. (See Note 2 for income taxes
allocated to discontinued operations.)
During
the third quarter of fiscal 2004, the Internal Revenue Service concluded a
federal tax examination covering April 1999 to April 2001 without significant
adjustments. They are currently examining the tax years April 2002 to April
2003. The Company believes that any tax liability arising from the examination
will not have a material impact on its consolidated financial position and
results of operations and cash flows.
19.
Fair Value of Financial Instruments
The
following methods and assumptions were used to estimate the fair value of each
class of financial instruments for which it is practicable to estimate that
value:
Assets,
including cash, restricted cash, and notes receivable are carried at cost,
which
approximates fair value due to their short-term maturities.
Marketable
securities consist of trading securities held by Capri Insurance Corporation,
our captive insurance subsidiary. The trading securities are primarily debt
and
equity securities which we buy with the intention to resell in the near term.
Our trading securities are carried at fair value with changes in fair value
recognized in current period income.
Long-term
debt - The fair value of the Company’s long-term debt is estimated based on the
quoted market price of the underlying debt issue or, when a quoted market price
is not available, the discounted cash flow of future payments utilizing current
rates available to the Company for debt of similar remaining maturities. Debt
obligations with a short remaining maturity are valued at the carrying
amount.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
19.
Fair Value of Financial Instruments (continued)
The
estimated carrying amounts and fair values of the Company’s financial
instruments are as follows:
|
|
April
24, 2005
|
|
April
25, 2004
|
|
|
|
Carrying
|
|
|
|
Carrying
|
|
|
|
|
|
Amount
|
|
Fair
Value
|
|
Amount
|
|
Fair
Value
|
|
|
|
(In
thousands)
|
|
Financial
assets:
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
146,743
|
|
$
|
146,743
|
|
$
|
134,582
|
|
$
|
134,582
|
|
Marketable
securities
|
|
|
16,016
|
|
|
16,016
|
|
|
-
|
|
|
-
|
|
Restricted
cash
|
|
|
3,099
|
|
|
3,099
|
|
|
3,001
|
|
|
3,001
|
|
Notes
receivable
|
|
|
5,472
|
|
|
5,472
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7%
Senior subordinated notes
|
|
$
|
500,000
|
|
$
|
485,650
|
|
$
|
500,000
|
|
$
|
480,000
|
|
Senior
secured credit facility
|
|
|
249,375
|
|
|
249,375
|
|
|
207,500
|
|
|
207,500
|
|
9%
Senior subordinated notes
|
|
|
200,000
|
|
|
210,340
|
|
|
200,000
|
|
|
215,000
|
|
Isle-Black
Hawk senior secured credit facility
|
|
|
189,350
|
|
|
189,350
|
|
|
165,000
|
|
|
165,000
|
|
Blue
Chip Credit Facility
|
|
|
6,942
|
|
|
6,942
|
|
|
3,418
|
|
|
3,418
|
|
TIF
bonds
|
|
|
3,875
|
|
|
3,875
|
|
|
4,624
|
|
|
4,624
|
|
General
obligation bonds
|
|
|
1,830
|
|
|
1,835
|
|
|
1,830
|
|
|
1,830
|
|
BID
bonds
|
|
|
590
|
|
|
590
|
|
|
700
|
|
|
700
|
|
Other
long-term debt
|
|
|
4,156
|
|
|
4,156
|
|
|
5,792
|
|
|
5,792
|
|
20.
Contingencies
In
August
1997, a lawsuit was filed that seeks to nullify a contract to which Louisiana
Riverboat Gaming Partnership is a party. Pursuant to the contract, Louisiana
Riverboat Gaming Partnership paid a fixed amount plus a percentage of revenues
to various local governmental entities, including the City of Bossier City
and
the Bossier Parish School Board, in lieu of payment of a per-passenger boarding
fee. The case was tried on April 6, 2004. The trial court rendered a ruling
in
favor of the defendants, finding that, although the legislature amended the
boarding fee statute in 2003 so as to prohibit future boarding fee agreements,
any pre-existing agreement between a riverboat and either the City of Bossier
City or the Bossier Parish Police Jury will remain valid and in effect until
its
expiration. Louisiana Riverboat Gaming Partnership’s contract expired on April
4, 2004. Therefore, Louisiana Riverboat Gaming Partnership now pays a boarding
fee to the City as outlined by the statute. Louisiana Riverboat Gaming
Partnership still has an existing contract with the Bossier Parish Police Jury,
which was not an issue in the litigation, and which will remain in effect until
its expiration on January 1, 2007, unless extended by the parties. The
plaintiffs appealed the trial court’s ruling to the Second Circuit Court of
Appeal, and the appellate court reversed and remanded the matter. The Company,
along with the other defendants, filed writ applications to appeal the matter
to
the Louisiana Supreme Court. The court has granted two applications for
appeal-one filed on behalf of Bossier City and Bossier Parish and another filed
on behalf of the Bossier Sheriff’s Office and the Greater Bossier Economic
Development Foundation. A hearing has not been scheduled. The Company will
continue to vigorously defend this matter as may be required.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
20.
Contingencies (continued)
Lady
Luck
Gaming Corporation (now a wholly owned subsidiary of the Company) and several
joint venture partners are defendants in a lawsuit brought by the country of
Greece through its Minister of Tourism (now Development) and Finance. The action
alleges that the defendants failed to make specified payments in connection
with
the gaming license bid process for Patras, Greece. The payment the Company
is
alleged to have been required to make aggregates approximately 6.5 million
Euros
(which was approximately $8.5 million as of April 24, 2005, based on published
exchange rates). Although it is difficult to determine the damages being sought
from the lawsuit, the action may seek damages up to that aggregate amount plus
interest from the date of the action.
The Athens Civil Court of First Instance granted judgment in the Company’s favor
and dismissed the lawsuit, but the Ministry appealed the matter and the appeal
was heard before the Athens Appeal Court of First Instance. The Athens Appeal
Court issued certified copies of judgments denying the Ministry’s appeal. The
Ministry elected to appeal this matter further to the Supreme Court. The Company
has taken action to have the decisions granted in its favor set for a hearing
before the Administrative Supreme Court and the Greek Supreme Court. The
administrative matter is set for hearing during June 2005 and the civil matter
is set for hearing during May 2006. The outcome of this matter is still in
doubt
and cannot be predicted with any degree of certainty. The Company intends to
continue a vigorous and appropriate defense to the claims asserted in this
matter.
On
December 30, 2002, the County of Jefferson, Missouri initiated a lawsuit in
the
Circuit Court of Jefferson County, Missouri against the Company and a subsidiary
alleging a breach of a 1993 contract entered into by the County and that
subsidiary, and guaranteed by Lady Luck Gaming Corporation, relating to the
development of a casino site near Kimmswick, Missouri. The suit alleges damages
in excess of $10.0 million. Discovery is ongoing and the matter has been set
for
a trial during January 2006. The outcome of this matter cannot be predicted
with
any degree of certainty. The Company believes the claims against it to be
without merit and intends to vigorously and appropriately defend the claims
asserted in this matter.
The
Company is subject to certain federal, state and local environmental protection,
health and safety laws, regulations and ordinances that apply to businesses
generally, and is subject to cleanup requirements at certain of its facilities
as a result thereof. The Company has not made, and does not anticipate making,
material expenditures, nor does it anticipate incurring delays with respect
to
environmental remediation or protection. However, in part because the Company’s
present and future development sites have, in some cases, been used as
manufacturing facilities or other facilities that generate materials that are
required to be remediated under environmental laws and regulations, there can
be
no guarantee that additional pre-existing conditions will not be discovered
and
that the Company will not experience material liabilities or
delays.
The
Company is subject to various contingencies and litigation matters and has
a
number of unresolved claims. Although the ultimate liability of these
contingencies, this litigation and these claims cannot be determined at this
time, the Company believes that they will not have a material adverse effect
on
its consolidated financial position, results of operations or cash flows.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
21.
Consolidating Condensed Financial Information
Certain
of the Company’s subsidiaries have fully and unconditionally guaranteed the
payment of all obligations under the Company’s $200.0 million 9% Senior
Subordinated Notes due 2012 and $500.0 million 7% Senior Subordinated Notes
due
2014. The following tables present the consolidating condensed financial
information of the parent company, guarantor subsidiaries and non-guarantor
subsidiaries of the Isle of Capri Casinos, Inc., balance sheets as of April
24,
2005 and April 25, 2004, statements of income and cash flows for the fiscal
years ended April 24, 2005, April 25, 2004 and April 27, 2003.
ISLE
OF CAPRI CASINOS, INC.
|
|
CONSOLIDATING
CONDENSED GUARANTOR SUBSIDIARIES, NON-GUARANTOR SUBSIDIARIES,
|
|
AND
PARENT COMPANY FINANCIAL INFORMATION
|
|
AS
OF APRIL 24, 2005 AND APRIL 25, 2004 AND FOR
|
|
THE
YEARS ENDED APRIL 24, 2005, APRIL 25, 2004 AND APRIL 27,
2003
|
|
UNAUDITED
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Isle
of Capri
|
|
|
|
(b)
|
|
Consolidating
|
|
|
|
|
|
Casinos,
Inc.
|
|
(a)
|
|
Non-
|
|
and
|
|
Isle
of Capri
|
|
|
|
(Parent
|
|
Guarantor
|
|
Guarantor
|
|
Eliminating
|
|
Casinos,
Inc.
|
|
|
|
Obligor)
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Entries
|
|
Consolidated
|
|
|
|
As
of April 24, 2005
|
|
Balance
Sheet
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
$
|
63,560
|
|
$
|
82,644
|
|
$
|
64,871
|
|
$
|
(6,627
|
)
|
$
|
204,448
|
|
Intercompany
receivables
|
|
|
896,214
|
|
|
(228,835
|
)
|
|
42,463
|
|
|
(709,842
|
)
|
|
-
|
|
Investments
in subsidiaries
|
|
|
233,544
|
|
|
269,817
|
|
|
(10,027
|
)
|
|
(493,334
|
)
|
|
-
|
|
Property
and equipment, net
|
|
|
4,630
|
|
|
774,165
|
|
|
248,111
|
|
|
-
|
|
|
1,026,906
|
|
Other
assets
|
|
|
21,806
|
|
|
375,967
|
|
|
58,215
|
|
|
(5,896
|
)
|
|
450,092
|
|
Total
assets
|
|
$
|
1,219,754
|
|
$
|
1,273,758
|
|
$
|
403,633
|
|
$
|
(1,215,699
|
)
|
$
|
1,681,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
$
|
22,360
|
|
$
|
99,930
|
|
$
|
67,110
|
|
$
|
(9,738
|
)
|
$
|
179,662
|
|
Intercompany
payables
|
|
|
-
|
|
|
623,879
|
|
|
85,963
|
|
|
(709,842
|
)
|
|
-
|
|
Long-term
debt,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
less
current maturities
|
|
|
946,875
|
|
|
8,080
|
|
|
193,662
|
|
|
-
|
|
|
1,148,617
|
|
Other
accrued liabilities
|
|
|
(7,939
|
)
|
|
77,012
|
|
|
(527
|
)
|
|
-
|
|
|
68,546
|
|
Minority
interest
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
23,225
|
|
|
23,225
|
|
Stockholders'
equity
|
|
|
258,458
|
|
|
464,857
|
|
|
57,425
|
|
|
(519,344
|
)
|
|
261,396
|
|
Total
liabilities and stockholders' equity
|
|
$
|
1,219,754
|
|
$
|
1,273,758
|
|
$
|
403,633
|
|
$
|
(1,215,699
|
)
|
$
|
1,681,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
21.
Consolidating Condensed Financial Information (continued)
|
|
Isle
of Capri
|
|
|
|
(b)
|
|
Consolidating
|
|
|
|
|
|
Casinos,
Inc.
|
|
(a)
|
|
Non-
|
|
and
|
|
Isle
of Capri
|
|
|
|
(Parent
|
|
Guarantor
|
|
Guarantor
|
|
Eliminating
|
|
Casinos,
Inc.
|
|
|
|
Obligor)
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Entries
|
|
Consolidated
|
|
|
|
For
the Fiscal Year Ended April 24, 2005
|
|
Statement
of Income
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
-
|
|
$
|
941,439
|
|
$
|
179,877
|
|
$
|
-
|
|
$
|
1,121,316
|
|
Rooms,
food, beverage and other
|
|
|
1,359
|
|
|
184,976
|
|
|
51,556
|
|
|
(20,614
|
)
|
|
217,277
|
|
Gross
revenues
|
|
|
1,359
|
|
|
1,126,415
|
|
|
231,433
|
|
|
(20,614
|
)
|
|
1,338,593
|
|
Less
promotional allowances
|
|
|
-
|
|
|
187,451
|
|
|
39,534
|
|
|
-
|
|
|
226,985
|
|
Net
revenues
|
|
|
1,359
|
|
|
938,964
|
|
|
191,899
|
|
|
(20,614
|
)
|
|
1,111,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
-
|
|
|
155,340
|
|
|
31,266
|
|
|
-
|
|
|
186,606
|
|
Gaming
taxes
|
|
|
-
|
|
|
216,864
|
|
|
33,452
|
|
|
-
|
|
|
250,316
|
|
Rooms,
food, beverage and other
|
|
|
26,146
|
|
|
343,489
|
|
|
105,310
|
|
|
(22,329
|
)
|
|
452,616
|
|
Management
fee expense (revenue)
|
|
|
(31,418
|
)
|
|
32,516
|
|
|
(1,098
|
)
|
|
-
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
1,590
|
|
|
83,763
|
|
|
12,065
|
|
|
-
|
|
|
97,418
|
|
Total
operating expenses
|
|
|
(3,682
|
)
|
|
831,972
|
|
|
180,995
|
|
|
(22,329
|
)
|
|
986,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
5,041
|
|
|
106,992
|
|
|
10,904
|
|
|
1,715
|
|
|
124,652
|
|
Interest
expense, net
|
|
|
4,229
|
|
|
(67,484
|
)
|
|
(10,218
|
)
|
|
-
|
|
|
(73,473
|
)
|
Loss
on early extinguishment of debt
|
|
|
-
|
|
|
(5,251
|
)
|
|
-
|
|
|
-
|
|
|
(5,251
|
)
|
Minority
interest
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(5,493
|
)
|
|
(5,493
|
)
|
Equity
in income (loss) of subsidiaries
|
|
|
20,949
|
|
|
6,492
|
|
|
(18,451
|
)
|
|
(8,990
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
taxes
|
|
|
30,219
|
|
|
40,749
|
|
|
(17,765
|
)
|
|
(12,768
|
)
|
|
40,435
|
|
Income
taxes
|
|
|
12,181
|
|
|
13,130
|
|
|
(5,860
|
)
|
|
-
|
|
|
19,451
|
|
Income
(loss) from continuing operations
|
|
|
18,038
|
|
|
27,619
|
|
|
(11,905
|
)
|
|
(12,768
|
)
|
|
20,984
|
|
Loss
from discontinued operations, net of taxes
|
|
|
-
|
|
|
-
|
|
|
(2,946
|
)
|
|
-
|
|
|
(2,946
|
)
|
Net
income (loss)
|
|
$
|
18,038
|
|
$
|
27,619
|
|
$
|
(14,851
|
)
|
$
|
(12,768
|
)
|
$
|
18,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
21.
Consolidating Condensed Financial Information (continued)
|
|
Isle
of Capri
|
|
|
|
(b)
|
|
Consolidating
|
|
|
|
|
|
Casinos,
Inc.
|
|
(a)
|
|
Non-
|
|
and
|
|
Isle
of Capri
|
|
|
|
(Parent
|
|
Guarantor
|
|
Guarantor
|
|
Eliminating
|
|
Casinos,
Inc.
|
|
|
|
Obligor)
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Entries
|
|
Consolidated
|
|
|
|
For
the Fiscal Year Ended April 24, 2005
|
|
Statement
of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operating
activities
|
|
$
|
19,556
|
|
$
|
113,237
|
|
$
|
46,082
|
|
$
|
(8,989
|
)
|
$
|
169,886
|
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investing
activities
|
|
|
(34,102
|
)
|
|
(123,823
|
)
|
|
(69,330
|
)
|
|
13,569
|
|
|
(213,686
|
)
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
financing
activities
|
|
|
34,811
|
|
|
1,138
|
|
|
24,047
|
|
|
(4,580
|
)
|
|
55,416
|
|
Effect
of foreign currency exchange rates on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash
and cash equivalents
|
|
|
-
|
|
|
-
|
|
|
545
|
|
|
-
|
|
|
545
|
|
Net
increase (decrease) in cash and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash
equivalents
|
|
|
20,265
|
|
|
(9,448
|
)
|
|
1,344
|
|
|
-
|
|
|
12,161
|
|
Cash
and cash equivalents at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
beginning
of the year
|
|
|
33,323
|
|
|
67,108
|
|
|
34,151
|
|
|
-
|
|
|
134,582
|
|
Cash
and cash equivalents at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
end
of the year
|
|
$
|
53,588
|
|
$
|
57,660
|
|
$
|
35,495
|
|
$
|
-
|
|
$
|
146,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Isle
of Capri
|
|
|
|
(b)
|
|
Consolidating
|
|
|
|
|
|
Casinos,
Inc.
|
|
(a)
|
|
Non-
|
|
and
|
|
Isle
of Capri
|
|
|
|
(Parent
|
|
Guarantor
|
|
Guarantor
|
|
Eliminating
|
|
Casinos,
Inc.
|
|
|
|
Obligor)
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Entries
|
|
Consolidated
|
|
|
|
As
of April 25, 2004
|
|
Balance
Sheet
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
$
|
43,106
|
|
$
|
93,620
|
|
$
|
40,749
|
|
$
|
(2,154
|
)
|
$
|
175,321
|
|
Intercompany
receivables
|
|
|
890,557
|
|
|
(228,132
|
)
|
|
73,495
|
|
|
(735,920
|
)
|
|
-
|
|
Investments
in subsidiaries
|
|
|
215,764
|
|
|
262,777
|
|
|
8,855
|
|
|
(487,396
|
)
|
|
-
|
|
Property
and equipment, net
|
|
|
4,521
|
|
|
721,982
|
|
|
180,957
|
|
|
-
|
|
|
907,460
|
|
Other
assets
|
|
|
21,890
|
|
|
376,933
|
|
|
50,236
|
|
|
-
|
|
|
449,059
|
|
Total
assets
|
|
$
|
1,175,838
|
|
$
|
1,227,180
|
|
$
|
354,292
|
|
$
|
(1,225,470
|
)
|
$
|
1,531,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
$
|
23,531
|
|
$
|
89,100
|
|
$
|
29,038
|
|
$
|
(2,154
|
)
|
$
|
139,515
|
|
Intercompany
payables
|
|
|
14,900
|
|
|
620,157
|
|
|
100,863
|
|
|
(735,920
|
)
|
|
-
|
|
Long-term
debt,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
less
current maturities
|
|
|
905,000
|
|
|
9,391
|
|
|
166,433
|
|
|
-
|
|
|
1,080,824
|
|
Deferred
state income taxes
|
|
|
-
|
|
|
7,997
|
|
|
194
|
|
|
-
|
|
|
8,191
|
|
Other
accrued liabilities
|
|
|
(8,621
|
)
|
|
63,297
|
|
|
(12,955
|
)
|
|
-
|
|
|
41,721
|
|
Minority
interest
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
20,183
|
|
|
20,183
|
|
Stockholders'
equity
|
|
|
241,028
|
|
|
437,238
|
|
|
70,719
|
|
|
(507,579
|
)
|
|
241,406
|
|
Total
liabilities and stockholders' equity
|
|
$
|
1,175,838
|
|
$
|
1,227,180
|
|
$
|
354,292
|
|
$
|
(1,225,470
|
)
|
$
|
1,531,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
21.
Consolidating Condensed Financial Information (continued)
|
|
Isle
of Capri
|
|
|
|
(b)
|
|
Consolidating
|
|
|
|
|
|
Casinos,
Inc.
|
|
(a)
|
|
Non-
|
|
and
|
|
Isle
of Capri
|
|
|
|
(Parent
|
|
Guarantor
|
|
Guarantor
|
|
Eliminating
|
|
Casinos,
Inc.
|
|
|
|
Obligor)
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Entries
|
|
Consolidated
|
|
|
|
For
the Fiscal Year Ended April 25, 2004
|
|
Statement
of Income
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
-
|
|
$
|
943,564
|
|
$
|
172,787
|
|
$
|
-
|
|
$
|
1,116,351
|
|
Rooms,
food, beverage and other
|
|
|
1,228
|
|
|
180,889
|
|
|
26,542
|
|
|
-
|
|
|
208,659
|
|
Gross
revenues
|
|
|
1,228
|
|
|
1,124,453
|
|
|
199,329
|
|
|
-
|
|
|
1,325,010
|
|
Less
promotional allowances
|
|
|
-
|
|
|
180,060
|
|
|
39,508
|
|
|
-
|
|
|
219,568
|
|
Net
revenues
|
|
|
1,228
|
|
|
944,393
|
|
|
159,821
|
|
|
-
|
|
|
1,105,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
-
|
|
|
157,070
|
|
|
24,434
|
|
|
-
|
|
|
181,504
|
|
Gaming
taxes
|
|
|
-
|
|
|
211,622
|
|
|
33,370
|
|
|
-
|
|
|
244,992
|
|
Rooms,
food, beverage and other
|
|
|
26,005
|
|
|
346,355
|
|
|
59,086
|
|
|
-
|
|
|
431,446
|
|
Management
fee expense (revenue)
|
|
|
(31,960
|
)
|
|
32,464
|
|
|
(504
|
)
|
|
-
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
1,591
|
|
|
78,807
|
|
|
9,374
|
|
|
-
|
|
|
89,772
|
|
Total
operating expenses
|
|
|
(4,364
|
)
|
|
826,318
|
|
|
125,760
|
|
|
-
|
|
|
947,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
5,592
|
|
|
118,075
|
|
|
34,061
|
|
|
-
|
|
|
157,728
|
|
Interest
expense, net
|
|
|
30,143
|
|
|
(101,050
|
)
|
|
(11,677
|
)
|
|
-
|
|
|
(82,584
|
)
|
Loss
on early extinguishment of debt
|
|
|
-
|
|
|
(26,115
|
)
|
|
-
|
|
|
-
|
|
|
(26,115
|
)
|
Minority
interest
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(10,072
|
)
|
|
(10,072
|
)
|
Dividend
income
|
|
|
64,493
|
|
|
-
|
|
|
-
|
|
|
(64,493
|
)
|
|
-
|
|
Equity
in income (loss) of subsidiaries
|
|
|
(61,781
|
)
|
|
(19,574
|
)
|
|
(451
|
)
|
|
81,806
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
taxes
|
|
|
38,447
|
|
|
(28,664
|
)
|
|
21,933
|
|
|
7,241
|
|
|
38,957
|
|
Income
taxes
|
|
|
10,698
|
|
|
2,038
|
|
|
(110
|
)
|
|
-
|
|
|
12,626
|
|
Income
(loss) from continuing operations
|
|
|
27,749
|
|
|
(30,702
|
)
|
|
22,043
|
|
|
7,241
|
|
|
26,331
|
|
Income
from discontinued operations, net of taxes
|
|
|
-
|
|
|
-
|
|
|
1,418
|
|
|
-
|
|
|
1,418
|
|
Net
income (loss)
|
|
$
|
27,749
|
|
$
|
(30,702
|
)
|
$
|
23,461
|
|
$
|
7,241
|
|
$
|
27,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
21.
Consolidating Condensed Financial Information (continued)
|
|
Isle
of Capri
|
|
|
|
(b)
|
|
Consolidating
|
|
|
|
|
|
Casinos,
Inc.
|
|
(a)
|
|
Non-
|
|
and
|
|
Isle
of Capri
|
|
|
|
(Parent
|
|
Guarantor
|
|
Guarantor
|
|
Eliminating
|
|
Casinos,
Inc.
|
|
|
|
Obligor)
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Entries
|
|
Consolidated
|
|
|
|
For
the Fiscal Year Ended April 25, 2004
|
|
Statement
of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operating
activities
|
|
$
|
(3,728)
|
|
$
|
131,019
|
|
$
|
32,716
|
|
$
|
13,223
|
|
$
|
173,230
|
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investing
activities
|
|
|
(29,856)
|
|
|
(116,720)
|
|
|
(10,533)
|
|
|
(2,009)
|
|
|
(159,118)
|
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
financing
activities
|
|
|
59,594
|
|
|
(1,407)
|
|
|
(15,991)
|
|
|
(16,352)
|
|
|
25,844
|
|
Net
increase in cash and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash
equivalents
|
|
|
26,010
|
|
|
12,892
|
|
|
6,192
|
|
|
(5,138)
|
|
|
39,956
|
|
Cash
and cash equivalents at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
beginning
of the year
|
|
|
7,313
|
|
|
53,268
|
|
|
29,495
|
|
|
4,550
|
|
|
94,626
|
|
Cash
and cash equivalents at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
end
of the year
|
|
$
|
33,323
|
|
$
|
66,160
|
|
$
|
35,687
|
|
$
|
(588)
|
|
$
|
134,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
21.
Consolidating Condensed Financial Information (continued)
|
|
Isle
of Capri
|
|
|
|
(b)
|
|
Consolidating
|
|
|
|
|
|
Casinos,
Inc.
|
|
(a)
|
|
Non-
|
|
and
|
|
Isle
of Capri
|
|
|
|
(Parent
|
|
Guarantor
|
|
Guarantor
|
|
Eliminating
|
|
Casinos,
Inc.
|
|
|
|
Obligor)
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Entries
|
|
Consolidated
|
|
|
|
For
the Fiscal Year Ended April 27, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of Income
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
-
|
|
$
|
942,695
|
|
$
|
108,623
|
|
$
|
-
|
|
$
|
1,051,318
|
|
Rooms,
food, beverage and other
|
|
|
839
|
|
|
192,331
|
|
|
20,771
|
|
|
-
|
|
|
213,941
|
|
Gross
revenues
|
|
|
839
|
|
|
1,135,026
|
|
|
129,394
|
|
|
-
|
|
|
1,265,259
|
|
Less
promotional allowances
|
|
|
-
|
|
|
177,361
|
|
|
23,120
|
|
|
-
|
|
|
200,481
|
|
Net
revenues
|
|
|
839
|
|
|
957,665
|
|
|
106,274
|
|
|
-
|
|
|
1,064,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
-
|
|
|
168,601
|
|
|
13,047
|
|
|
-
|
|
|
181,648
|
|
Gaming
taxes
|
|
|
-
|
|
|
208,697
|
|
|
20,911
|
|
|
-
|
|
|
229,608
|
|
Rooms,
food, beverage and other
|
|
|
19,501
|
|
|
355,452
|
|
|
36,312
|
|
|
-
|
|
|
411,265
|
|
Valuation
charge
|
|
|
1,923
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,923
|
|
Management
fee expense (revenue)
|
|
|
(34,570
|
)
|
|
31,164
|
|
|
3,406
|
|
|
-
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
1,174
|
|
|
69,285
|
|
|
6,167
|
|
|
-
|
|
|
76,626
|
|
Total
operating expenses
|
|
|
(11,972
|
)
|
|
833,199
|
|
|
79,843
|
|
|
-
|
|
|
901,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
12,811
|
|
|
124,466
|
|
|
26,431
|
|
|
-
|
|
|
163,708
|
|
Interest
expense, net
|
|
|
34,392
|
|
|
(109,358
|
)
|
|
(7,037
|
)
|
|
-
|
|
|
(82,003
|
)
|
Minority
interest
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(9,451
|
)
|
|
(9,451
|
)
|
Dividend
income
|
|
|
6,441
|
|
|
-
|
|
|
-
|
|
|
(6,441
|
)
|
|
-
|
|
Equity
in income (loss) of subsidiaries
|
|
|
12,489
|
|
|
9,586
|
|
|
(160
|
)
|
|
(21,915
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
taxes
|
|
|
66,133
|
|
|
24,694
|
|
|
19,234
|
|
|
(37,807
|
)
|
|
72,254
|
|
Income
taxes
|
|
|
20,540
|
|
|
5,971
|
|
|
139
|
|
|
-
|
|
|
26,650
|
|
Income
(loss) from continuing operations
|
|
|
45,593
|
|
|
18,723
|
|
|
19,095
|
|
|
(37,807
|
)
|
|
45,604
|
|
Loss
from discontinued operations, net of taxes
|
|
|
-
|
|
|
-
|
|
|
(11
|
)
|
|
|
|
|
(11
|
)
|
Net
income (loss)
|
|
$
|
45,593
|
|
$
|
18,723
|
|
$
|
19,084
|
|
$
|
(37,807
|
)
|
$
|
45,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
21.
Consolidating Condensed Financial Information (continued)
|
|
Isle
of Capri
|
|
|
|
(b)
|
|
Consolidating
|
|
|
|
|
|
Casinos,
Inc.
|
|
(a)
|
|
Non-
|
|
and
|
|
Isle
of Capri
|
|
|
|
(Parent
|
|
Guarantor
|
|
Guarantor
|
|
Eliminating
|
|
Casinos,
Inc.
|
|
|
|
Obligor)
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Entries
|
|
Consolidated
|
|
|
|
For
the Fiscal Year Ended April 27, 2003
|
|
Statement
of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operating
activities
|
|
$
|
147,708
|
|
$
|
44,508
|
|
$
|
28,437
|
|
$
|
(82,466
|
)
|
$
|
138,187
|
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investing
activities
|
|
|
(66,434
|
)
|
|
(49,889
|
)
|
|
(87,078
|
)
|
|
76,803
|
|
|
(126,598
|
)
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
financing
activities
|
|
|
(78,263
|
)
|
|
336
|
|
|
77,084
|
|
|
7,283
|
|
|
6,440
|
|
Net
increase (decrease) in cash and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash
equivalents
|
|
|
3,011
|
|
|
(5,045
|
)
|
|
18,443
|
|
|
1,620
|
|
|
18,029
|
|
Cash
and cash equivalents at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
beginning
of the year
|
|
|
2,690
|
|
|
58,312
|
|
|
15,738
|
|
|
(143
|
)
|
|
76,597
|
|
Cash
and cash equivalents at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
end
of the year
|
|
$
|
5,701
|
|
$
|
53,267
|
|
$
|
34,181
|
|
$
|
1,477
|
|
$
|
94,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
The
following subsidiaries of the Company are guarantors of the 7% Senior
Subordinated Notes and the 9% Senior Subordinated Notes: Riverboat Corporation
of Mississippi; Riverboat Corporation of Mississippi-Vicksburg; Riverboat
Services, Inc.; CSNO, L.L.C.; Louisiana Riverboat Gaming Partnership; St.
Charles Gaming Company, Inc.; IOC Holdings, L.L.C.; Grand Palais Riverboat,
Inc.; LRGP Holdings, L.L.C.; P.P.I, Inc.; Isle of Capri Casino Colorado, Inc.;
IOC-Coahoma, Inc.; IOC-Natchez, Inc.; IOC-Lula, Inc.; IOC-Boonville, Inc.;
IOC-Kansas City, Inc.; Isle of Capri Bettendorf, L.C.; Isle of Capri Marquette,
Inc.; IOC-Davenport, Inc.; LL Holding Corporation; IOC-St. Louis County, Inc.;
IOC-Black Hawk County, Inc.; IOC-PA, L.L.C. and IOC-City of St. Louis, L.L.C..
Each of the subsidiaries’ guarantees is joint and several with the guarantees of
the other subsidiaries.
(b)
The
following subsidiaries are not guarantors of the 7% Senior Subordinated Notes
and the 9% Senior Subordinated Notes: Isle of Capri Black Hawk, L.L.C.; Isle
of
Capri Black Hawk Capital Corp.; IC Holdings Colorado, Inc.; CCSC/Blackhawk,
Inc.; Colorado Grande Enterprises, Inc.; IOC-Black Hawk Distribution Company,
L.L.C.; Blue Chip Casinos, PLC; Isle of Capri of Jefferson County, Inc.; Casino
Parking, Inc.; Isle of Capri-Bahamas, Ltd.; ASMI Management, Inc.; IOC
Development Company, L.L.C.; Casino America, Inc.; ICC Corp.; International
Marco Polo Services, Inc.; IOC, L.L.C.; Isle of Capri of Michigan L.L.C.; Isle
of Capri Bettendorf Marina Corp.; Water Street Redevelopment Corporation; IOC
Services, L.L.C.; Louisiana Horizons, L.L.C.; Capri Air, Inc.; Lady Luck Gaming
Corp.; Lady Luck Gulfport, Inc.; Lady Luck Vicksburg, Inc.; Lady Luck Biloxi,
Inc.; Lady Luck Central City, Inc.; Pompano Park Holdings, L.L.C.; Casino
America of Colorado, Inc.; JPLA Pelican, L.L.C.; IOC-Cameron, L.L.C.; Isle
of
Capri Casinos Limited and Capri Insurance Corporation.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
22.
Selected Quarterly Financial Information (unaudited)
|
|
Fiscal
Quarters Ended
|
|
|
July
25,
|
|
October
24,
|
|
January
23,
|
|
April
24,
|
|
|
|
2004
|
|
2004
|
|
2005
|
|
2005
|
|
|
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
$
|
278,721
|
|
$
|
267,771
|
|
$
|
265,426
|
|
$
|
299,690
|
|
Operating
income
|
|
|
36,461
|
|
|
22,681
|
|
|
27,964
|
|
|
37,546
|
|
Income
from continuing operations
|
|
|
10,247
|
|
|
185
|
|
|
3,494
|
|
|
7,058
|
|
Net
income
|
|
|
10,609
|
|
|
448
|
|
|
3,530
|
|
|
3,451
|
|
Earnings
per common share-basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
|
0.35
|
|
|
0.01
|
|
|
0.12
|
|
|
0.24
|
|
|
|
|
0.36
|
|
|
0.02
|
|
|
0.12
|
|
|
0.12
|
|
Earnings
per common share-diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
|
0.34
|
|
|
0.01
|
|
|
0.11
|
|
|
0.22
|
|
|
|
|
0.35
|
|
|
0.01
|
|
|
0.11
|
|
|
0.11
|
|
|
|
Fiscal
Quarters Ended
|
|
|
|
July
27,
|
|
October
26,
|
|
January
25,
|
|
April
25,
|
|
|
|
2003
|
|
2003
|
|
2004
|
|
2004
|
|
|
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
$
|
283,714
|
|
$
|
267,385
|
|
$
|
263,484
|
|
$
|
290,859
|
|
Operating
income
|
|
|
45,340
|
|
|
35,527
|
|
|
35,502
|
|
|
41,359
|
|
Income
from continuing operations
|
|
|
13,168
|
|
|
10,217
|
|
|
7,602
|
|
|
(4,656
|
)
|
Net
income
|
|
|
13,552
|
|
|
10,710
|
|
|
7,833
|
|
|
(4,346
|
)
|
Earnings
per common share-basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
|
0.45
|
|
|
0.35
|
|
|
0.26
|
|
|
(0.16
|
)
|
Net
income
|
|
|
0.46
|
|
|
0.37
|
|
|
0.27
|
|
|
(0.15
|
)
|
Earnings
per common share-diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
|
0.44
|
|
|
0.33
|
|
|
0.24
|
|
|
(0.16
|
)
|
Net
income
|
|
|
0.45
|
|
|
0.35
|
|
|
0.25
|
|
|
(0.15
|
)
|
Quarterly
data for fiscal year 2005 may not necessarily sum to the full year data reported
in the Company’s consolidated financial statements.
The
first
quarter of fiscal year 2005 includes $0.06 million related to preopening
expenses incurred in preparation for the opening of the Blue Chip-Walsall on
September 23, 2004. The first quarter of fiscal year 2005 excludes $0.4 million
related to the Colorado Grande-Cripple Creek as discontinued operations.
The
second quarter of fiscal year 2005 includes $0.2 million related to preopening
expenses incurred in preparation for the opening of the Blue Chip-Walsall on
September 23, 2004. The second quarter of fiscal year 2005 excludes $0.3 million
related to the Colorado Grande-Cripple Creek as discontinued operations.
The
third
quarter of fiscal year 2005 includes a valuation charge of $1.6 million related
to previously capitalized fixed assts for certain projects as a result of
current uncertainties related to gaming legislation in the UK. The third quarter
of fiscal year 2005 excludes $0.04 million related to the Colorado
Grande-Cripple Creek as discontinued operations.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
22.
Selected Quarterly Financial Information (unaudited)
(continued)
The
fourth quarter of fiscal year 2005 includes $2.3 million gain on sale of option
related to an option to purchase real estate in St. Louis, Missouri; a reserve
of $2.5 million for the license in Rosemont, Illinois; and a $5.3 million loss
on early extinguishment of debt related to the refinancing of the Company’s
senior secured credit facility on February 4, 2005. The fourth quarter of fiscal
year 2005 excludes ($3.6) million related to Colorado Grande-Cripple Creek
as
discontinued operations.
The
first
quarter of fiscal year 2004 includes $0.3 million related to preopening expenses
incurred in preparation for the opening of the Isle-Our Lucaya on December
15,
2003. The first quarter of fiscal year 2004 excludes $0.4 million related to
the
Colorado Grande-Cripple Creek as discontinued operations.
The
second quarter of fiscal year 2004 includes $0.3 million related to preopening
expenses incurred in preparation for the opening of the Isle-Our Lucaya on
December 15, 2003. The second quarter of fiscal year 2004 excludes $0.5 million
related to the Colorado Grande-Cripple Creek as discontinued operations.
The
third
quarter of fiscal year 2004 includes $1.5 million related to preopening expenses
incurred in preparation for the opening of the Isle-Our Lucaya on December
15,
2003. The third quarter of fiscal year 2004 excludes $0.2 million related to
the
Colorado Grande-Cripple Creek as discontinued operations.
The
fourth quarter of fiscal year 2004 includes $0.2 million related to preopening
expenses incurred in preparation for the opening of the Blue Chip-Wolverhampton
on April 22, 2004. Also included in the fourth quarter of fiscal year 2004
is
$26.1 million in loss on early extinguishment of debt in connection with the
refinancing of the Company’s $390.0 million 8.75% Senior Subordinated Notes on
March 3, 2004. These other charges include early payment premiums, as well
as
the write-off of debt acquisition costs. The fourth quarter of fiscal year
2004
excludes $0.3 million related to the Colorado Grande-Cripple Creek as
discontinued operations.
On
April
25, 2005, the Company consummated the sale of the Colorado Grande-Cripple Creek
for $6.5 million payable in $0.6 million cash and a $5.9 million promissory
note
secured by the stock of Colorado Grande and Nevada Gold’s future membership
distributions from the Isle-Black Hawk until the note has been fully repaid.
On
May 6,
2005, the Company signed a casino management and related developmental and
options agreements with resort developer Eighth Wonder to manage the casino
included in Eighth Wonder’s proposal for a new integrated resort complex in
Singapore should Eighth Wonder be selected to develop such complex. In the
first
quarter fiscal 2006, the Company paid Eighth Wonder $4.0 million pursuant to
the
terms of this agreement.
On
May
11, 2005, the Company has been selected by the Iowa Racing and Gaming Commission
as the successful applicant for a gaming license in Waterloo, Iowa. The Company
plans to spend approximately $119.0 million on constructing a 35,000 square
foot
single level casino with 1,300 gaming positions, three of its signature
restaurants, a 200-room hotel and 1,000 parking spaces. The Company expects
the
construction project to take approximately 20 months following the receipt
of
necessary permits and licenses, which the company expects to
receive.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
Evaluation
of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the
SEC’s rules and forms, and that such information is accumulated and communicated
to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure.
As
of
April 24, 2005 we carried out an evaluation, under the supervision and with
the
participation of our management, including our Chief Executive Officer and
Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on the foregoing, our Chief Executive
Officer and Chief Financial Officer have concluded that the design and operation
of the Company’s disclosure controls and procedures were effective as of April
24, 2005.
Changes
in Internal Control Over Financial Reporting
During
the fiscal quarter and fiscal year ended April 24, 2005, there was no change
in
our internal control over financial reporting that has materially affected,
or
is reasonably likely to materially affect, our internal control over financial
reporting.
Management’s
Annual Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f). Under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, we conducted
an evaluation of the effectiveness of our internal control over financial
reporting based on the framework in Internal
Control-Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on our evaluation under the framework in Internal
Control-Integrated Framework,
our
management concluded that our internal control over financial reporting was
effective as of April 24, 2005 to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles. Our management’s assessment of the effectiveness of our internal
control over financial reporting as of April 24, 2005 has been audited by Ernst
& Young LLP, an independent registered public accounting firm, as stated in
their report which is included below, which expresses unqualified opinions
on
management’s assessment and on the effectiveness of our internal control over
financial reporting as of April 24, 2005.
Report
of Independent Registered Public Accounting Firm on Internal Control Over
Financial Reporting
The
Board of Directors and Stockholders of Isle of Capri Casinos, Inc.
We
have
audited management’s assessment, included in the accompanying Management’s
Annual Report on Internal Control over Financial Reporting, that Isle of Capri
Casinos, Inc. maintained effective internal control over financial reporting
as
of April 24, 2005, based on criteria established in Internal Control -
Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). Isle of Capri Casinos, Inc.’s management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on management’s
assessment and an opinion on the effectiveness of the company’s internal control
over financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control
over
financial reporting, evaluating management’s assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing
such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain
to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors
of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may
not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In
our
opinion, management’s assessment that Isle of Capri Casinos, Inc. maintained
effective internal control over financial reporting as of April 24, 2005, is
fairly stated, in all material respects, based on the COSO criteria. Also,
in
our opinion, Isle of Capri Casinos, Inc. maintained, in all material respects,
effective internal control over financial reporting as of April 24, 2005, based
on the
COSO
criteria.
We
also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of Isle of
Capri Casinos, Inc. as of April 24, 2005, and April 25, 2004, and the related
consolidated statements of income, stockholders’ equity, and cash flows for the
years ended April 24, 2005, April 25, 2004, and April 27, 2003 of
Isle
of Capri Casinos, Inc. and our report dated June 28, 2005 expressed an
unqualified opinion thereon.
Ernst
& Young LLP
New
Orleans, Louisiana
June
28,
2005
ITEM
9B. OTHER INFORMATION
None.
This
item
has been omitted from this report and is incorporated by reference to Isle
of
Capri’s definitive proxy statement to be filed with the U.S. Securities and
Exchange Commission within 120 days after the end of the fiscal year covered
by
this report.
This
item
has been omitted from this report and is incorporated by reference to Isle
of
Capri’s definitive proxy statement to be filed with the U.S. Securities and
Exchange Commission within 120 days after the end of the fiscal year covered
by
this report.
This
item
has been omitted from this report and is incorporated by reference to Isle
of
Capri’s definitive proxy statement to be filed with the U.S. Securities and
Exchange Commission within 120 days after the end of the fiscal year covered
by
this report.
This
item
has been omitted from this report and is incorporated by reference to Isle
of
Capri’s definitive proxy statement to be filed with the U.S. Securities and
Exchange Commission within 120 days after the end of the fiscal year covered
by
this report.
This
item
has been omitted from this report and is incorporated by reference to Isle
of
Capri’s definitive proxy statement to be filed with the U.S. Securities and
Exchange Commission within 120 days after the end of the fiscal year covered
by
this report.
(a) Documents
Filed as Part of this Report.
1. Financial
Statements.
The
following financial statements and report of independent registered public
accounting firm are included on pages 73 to 120 of this Form 10-K:
Isle
of Capri Casinos, Inc.
Report
of
Independent Registered Public Accounting Firm
Consolidated Balance Sheets - April 24, 2005 and April 25, 2004
Consolidated Statements of Income - Fiscal Years ended April 24, 2005,
April 25, 2004, and April 27, 2003
Consolidated
Statements of Stockholders’ Equity - Fiscal Years ended
April
24,
2005, April 25, 2004 and April 27, 2003
Consolidated
Statements of Cash Flows - Fiscal Years ended April 24, 2005,
April
25,
2004 and April 27, 2003
Notes
to
Consolidated Financial Statements
2. Financial
Statements Schedule.
The
following financial statement schedule is filed on page 126 of this Form 10-K
and should be read in conjunction with the financial statements included under
Item 8.
Schedule
II-Valuation and Qualifying Accounts
All
other
schedules are omitted because they are not applicable or not required or because
the required information is included in the Consolidated Financial Statements
or
Notes.
3. Exhibits.
A
list of
the exhibits included as part of this Form 10-K is set forth in the Index to
Exhibits that immediately precedes such exhibits, which is incorporated herein
by reference.
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by
the undersigned, thereunto duly authorized.
ISLE
OF CAPRI CASINOS, INC.
Dated:
July 6,
2005 By:
/s/
Bernard Goldstein
Bernard Goldstein, Chairman of the Board,
Chief Executive Officer, and Director
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Dated:
July 6, 2005
/s/ Bernard Goldstein
Bernard
Goldstein, Chairman of the Board,
Chief
Executive Officer and Director
(Principal
Executive Officer)
Dated:
July 6, 2005
|
/s/
Rexford A. Yeisley
|
|
|
|
Rexford
A. Yeisley, Senior Vice President and Chief Financial Officer
|
(Principal
Financial and Accounting Officer)
Dated:
July 6,
2005
/s/
Robert S. Goldstein
Robert
S.
Goldstein, Director
Dated:
July 6,
2005
/s/
Alan J. Glazer
Dated:
July 6, 2005
|
/s/
Emanuel Crystal
|
|
|
|
Emanuel
Crystal, Director
|
Dated:
July 6, 2005
|
/s/
W. Randolph Baker
|
|
|
|
W.
Randolph Baker, Director
|
Dated:
July 6, 2005
|
/s/
Jeffrey D. Goldstein
|
|
|
|
Jeffrey
D. Goldstein, Director
|
Dated:
July 6, 2005
|
/s/
John Brackenbury
|
|
|
|
John
Brackenbury, Director
|
Schedule
II
|
|
Isle
of Capri Casinos, Inc.
|
|
Consolidated
Valuation and Qualifying Accounts
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
Balance
at Beginning of Period
|
|
Charged
to Costs and Expenses
|
|
Charged
to Other Accounts
|
|
Deductions
from Reserves
|
|
Balance
at End of Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended April 24, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts
|
|
$
|
2,510
|
|
$
|
1,233
|
|
$
|
558
|
|
$
|
1,356
|
|
$
|
2,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve
against investments in and advances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to
non-consolidated affiliates (2)
|
|
$
|
1,923
|
|
$
|
-
|
|
$
|
-
|
|
$
|
1,923
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve
for impairment of long-lived assets (1)
|
|
$
|
375
|
|
$
|
4,136
|
|
$
|
46
|
|
$
|
2,515
|
|
$
|
2,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended April 25, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts
|
|
$
|
2,603
|
|
$
|
2,019
|
|
$
|
-
|
|
$
|
2,112
|
|
$
|
2,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve
against investments in and advances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to
non-consolidated affiliates (2)
|
|
$
|
1,923
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
1,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve
for impairment of long-lived assets (3)
|
|
$
|
17,511
|
|
$
|
-
|
|
$
|
-
|
|
$
|
17,136
|
|
$
|
375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended April 27, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts
|
|
$
|
3,192
|
|
$
|
-
|
|
$
|
-
|
|
$
|
589
|
|
$
|
2,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve
against investments in and advances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to
non-consolidated affiliates (2)
|
|
$
|
-
|
|
$
|
1,923
|
|
$
|
-
|
|
$
|
-
|
|
$
|
1,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve
for impairment of long-lived assets (3)
|
|
$
|
78,873
|
|
$ |
- |
|
$
|
-
|
|
$
|
61,362
|
|
$
|
17,511
|
|
(1) |
Total
valuation charge of $4,136 for the fiscal year ended April 24, 2005
consists of (1) an impairment charge related to previously capitalized
fixed assets for certain projects that were determined to be impaired
as a
result of adverse gaming legislation in the UK and (2) full write-off
of
the license costs at Rosemont (See footnote 15) .
|
(2) |
Valuation
charge for the fiscal year ended April 25, 2004 represents an amount
that
is fully reserved as a loss contingency against the investment to
date in
Ardent Gaming, L.L.C., an unrelated third-party. The system being
developed under the joint venture is substantially past due and management
believes it is probable that it will not recover its investment.
This
reserve was written off in fiscal year 2005.
|
(3) |
Valuation
charge for the fiscal year ended April 27, 2003 consists of impairment
charges of $59.2 million for the difference between net book value
of the
Lady Luck-Las Vegas and the Isle-Tunica and fair value less any costs
to
sell, and $2.2 million for a barge and hulls that had been in storage
for
future development and offered for sale. These assets were sold in
fiscal
2004, and the valuation charge was reversed against the asset
accounts.
|
INDEX
TO EXHIBITS
EXHIBIT
NUMBER
DESCRIPTION
3.1A
|
Certificate
of Incorporation of Casino America, Inc. (1)
|
3.1B
|
Amendment
to Certificate of Incorporation of Casino America, Inc.
(2)
|
3.2A
|
By-laws
of Casino America, Inc. (1)
|
3.2B
|
Amendments
to By-laws of Casino America, Inc., dated February 7, 1997
(3)
|
4.3
|
Indenture,
dated as of March 3, 2004, among Isle of Capri Casinos, Inc., the
subsidiary guarantors named therein and U.S. Bank National
Association, as Trustee (4)
|
4.4
|
Registration
Rights Agreement, dated as of March 3, 2004, among Isle of Capri
Casinos,
Inc., the subsidiary guarantors named therein and Deutsche Bank
Securities
Inc. and CIBC World Markets Corp. on behalf of themselves and as
representatives of the other initial purchasers (4)
|
4.5
|
Indenture,
dated as of March 27, 2002 among Isle of Capri Casinos, Inc., the
subsidiary guarantors named therein and State Street Bank and Trust
Company, as trustee (5)
|
4.8
|
Rights
Agreement, dated as of February 7, 1997, between Casino America,
Inc. and
Norwest Bank Minnesota, N.A., as rights agent (6)
|
10.1*
|
Casino
America, Inc. description of Employee Bonus Plan (7)
|
10.2*
|
Director’s
Option Plan (8)
|
10.3
|
Biloxi
Waterfront Project Lease dated as of April 9, 1994 by and between
the City
of Biloxi, Mississippi and Riverboat Corporation of Mississippi
(9)
|
10.4
|
First
Amendment to Biloxi Waterfront Project Lease (Hotel Lease), dated
as of
April 26, 1995, by and between Riverboat Corporation of Mississippi
(10)
|
10.5
|
Amended
and Restated Lease, dated as of April 19, 1999, among Port Resources,
Inc.
and CRU, Inc., as landlords and St. Charles Gaming Company, Inc.,
as
tenant (11)
|
10.6*
|
Amended
Casino America, Inc. 1992 Stock Option Plan (12)
|
10.7*
|
Amended
Casino America, Inc. 1993 Stock Option Plan (13)
|
10.8
|
Lease
of property in Coahoma, Mississippi dated as of November 16, 1993
by and
among Roger Allen Johnson, Jr., Charles Bryant Johnson and Magnolia
Lady,
Inc. (5)
|
10.9
|
Addendum
to Lease dated as of June 22, 1994 by and among Roger Allen Johnson,
Jr.,
Charles Bryant Johnson and Magnolia Lady, Inc. (14)
|
10.10
|
Second
addendum to Lease dated as of October 17, 1995 by and among Roger
Allen
Johnson, Jr., Charles Bryant Johnson and Magnolia Lady, Inc.
(14)
|
10.11
|
Amended
and Restated Operating Agreement of Isle of Capri Black Hawk, L.L.C.,
dated as of July 29, 1997, between Casino America of Colorado,
Inc. and
Blackhawk Gold, Ltd. as amended (5)
|
10.12
|
Development
Agreement dated as of June 17, 1997, between City of Bettendorf,
Lady Luck
Bettendorf, Lady Luck Quad Cities, Inc. and Bettendorf Riverboat
Development, LC (5)
|
10.13
|
Operator’s
Contract, dated as of December 28, 1989, between Riverboat Development
Authority and the Connelley Group, LP, as amended on February 9,
1990,
March 1, 1990, January 1, 1991, September 30, 1994 and March 1,
1998
(5)
|
10.14*
|
Isle
of Capri Casinos, Inc. 2000 Long-Term Stock Incentive Plan
(15)
|
|
INDEX
TO EXHIBITS (continued)
|
10.15*
|
Isle
of Capri Casinos, Inc. Deferred Bonus Plan (15)
|
10.16*
|
Employment
Agreement dated as of January 1, 2002 between Isle of Capri Casinos,
Inc.
and Allan B. Solomon (5)
|
10.17*
|
Employment
Agreement dated as of January 1, 2002 between Isle of Capri Casinos,
Inc.
and Rexford A. Yeisley (5)
|
10.18*
|
Employment
Agreement dated as of January 1, 2002 between Isle of Capri Casinos,
Inc.
and Timothy M. Hinkley (5)
|
10.19*
|
Employment
Agreement dated as of January 1, 2002 between Isle of Capri Casinos,
Inc.
and Bernard Goldstein (5)
|
10.20*
|
Employment
Agreement dated as of July 1, 2003 between Isle of Capri Casinos,
Inc. and
Thomas J. Carr (16)
|
10.21
|
Third
Amended and Restated Credit Agreement, dated as of February 4,
2005, among
Isle of Capri Casinos, Inc., the lenders listed therein, Canadian
Imperial
Bank of Commerce, as administrative agent and issuing lender, Deutsche
Bank Trust Company Americas and Wells Fargo Bank, N.A., as co-syndication
agents, Calyon New York Branch and the CIT/Group/Equipment Financing,
Inc., as co-documentation agents and CIBC World Markets Corp.,
as lead
arranger (17)
|
10.22*
|
Isle
of Capri Casinos, Inc.’s 2005 Deferred Compensation Plan
(18)
|
10.23*
|
Isle
of Capri Casinos, Inc.’s 1995 Deferred Compensation Plan
(18)
|
10.24*
|
Isle
of Capri Casinos, Inc.’s 2005 Non-employee Director Deferred Compensation
Plan (18)
|
10.25*
|
Employment
Agreement dated as of January 1, 2005 between Isle of Capri Casinos,
Inc.
and Robert F. Griffin (18)
|
10.26*
|
Isle
of Capri Casinos, Inc. Master Retirement Plan
|
10.27
|
First
Amended and Restated Credit Agreement, dated as of April 22, 2003,
by and
among Isle of Capri Black Hawk, L.L.C., Canadian Imperial Bank
of
Commerce, as administrative agent, the agents named therein and
certain
other lenders party from time to time thereto
|
10.28
|
First
Amendment to First Amended and Restated Credit Agreement, dated
as of
February 6, 2004, by and among Isle of Capri Black Hawk, L.L.C.,
Canadian
Imperial Bank of Commerce, as administrative agent, the credit
support
parties named therein and certain other lenders party from time
to time
thereto
|
10.29
|
Second
Amendment to First Amended and Restated Credit Agreement, dated
as of July
26, 2004, by and among Isle of Capri Black Hawk, L.L.C., Canadian
Imperial
Bank of Commerce, as administrative agent, the credit support parties
named therein and certain other lenders party from time to time
thereto
|
10.30
|
Third
Amendment to First Amended and Restated Credit Agreement, dated
as of
April 22, 2005, by and among Isle of Capri Black Hawk, L.L.C.,
Canadian
Imperial Bank of Commerce, as administrative agent, the credit
support
parties named therein and certain other lenders party from time
to time
thereto (19)
|
12.1
|
Computation
of ratio of earnings to fixed charges.
|
21.1
|
Subsidiaries
of Isle of Capri Casinos, Inc.
|
23.1
|
Consent
of Ernst & Young LLP
|
|
INDEX
TO EXHIBITS (continued)
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a - 14(a) under the
Securities Exchange Act of 1934, filed under Exhibit 31 of Item
601 of
Regulation
S-K.
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a - 14(a) under the
Securities Exchange Act of 1934, filed under Exhibit 31 of Item
601 of
Regulation S-K.
|
32.1
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350) filed under Exhibit 32 of
Item 601 of
Regulation S-K.
|
32.2
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350) filed under Exhibit 32 of
Item 601 of
Regulation S-K.
|
(1)
|
Filed
as an exhibit to Casino America, Inc.’s Registration Statement on Form S-1
filed September 3, 1993, as amended (Reg. No. 33-68434), and incorporated
herein by reference.
|
(2)
|
Filed
as an exhibit to Casino America, Inc.’s Proxy Statement for the fiscal
year ended April 26, 1998 (File No. 0-20538) and incorporated herein
by
reference.
|
(3)
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Annual Report on Form 10-K
for the fiscal year ended April 27, 1997 (File No. 0-20538) and
incorporated herein by reference.
|
(4)
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Registration Statement on
Form S-4 filed on May 12, 2004 (File No. 333-115419) and incorporated
herein by reference.
|
(5)
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Amendment No. 1 to
Registration Statement on Form S-4 filed on June 19, 2002 (File
No.
333-88802) and incorporated herein by reference.
|
(6)
|
Filed
as an exhibit to Casino America, Inc.’s Current Report on Form 8-K filed
on February 14, 1997 (File No. 0-20538) and incorporated herein
by
reference.
|
(7)
|
Filed
as an exhibit to Casino America, Inc.’s Annual Report on form 10-K for the
fiscal year ended April 30, 1993 (File No. 0-20538) and incorporated
herein by reference.
|
(8)
|
Filed
as an exhibit to Casino America, Inc.’s Registration Statement on Form S-8
filed June 30, 1994 (File No. 33-80918) and incorporated herein
by
reference.
|
(9)
|
Filed
as an exhibit to Casino America, Inc.’s Annual Report on Form 10-K for
fiscal year ended April 30, 1994 (File No. 0-20538) and incorporated
herein by reference.
|
(10)
|
Filed
as an exhibit to Casino America, Inc.’s Annual Report on Form 10-K for
fiscal year ended April 30, 1995 (File No. 0-20538) and incorporated
herein by reference.
|
(11)
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Annual Report on Form 10-K
for the fiscal year ended April 25, 1999 (File No. 0-20538) and
incorporated herein by reference.
|
(12)
|
Filed
as an exhibit to Casino America, Inc.’s Proxy Statement for the fiscal
year ended April 30, 1996 (File No. 0-20538) and incorporated herein
by
reference.
|
(13)
|
Filed
as an exhibit to Casino America, Inc.’s Proxy Statement for the fiscal
year ended April 27, 1997 (File No. 0-20538) and incorporated herein
by
reference.
|
|
INDEX
TO EXHIBITS (continued)
|
(14)
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Annual Report on Form 10-K
for the fiscal year ended April 30, 2000 (File No. 0-20538) and
incorporated herein by reference.
|
(15)
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Proxy Statement for the
fiscal year ended April 30, 2000 (File No. 0-20538) and incorporated
herein by reference.
|
(16)
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Annual Report on Form 10-K
for the fiscal year ended April 24, 2005 (File No. 0-20538) and
incorporated herein by reference.
|
(17)
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Current Report on Form 8-K
filed on February 10, 2005 (File No. 0-20538) and incorporated
herein by
reference.
|
(18)
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Quarterly Report on Form
10-Q for the fiscal quarter ended January 23, 2005 (File No. 0-20538)
and
incorporated herein by reference.
|
(19)
|
Filed
as an exhibit to Isle of Capri Casino, Inc.’s Current Report on Form 8-K
filed on April 28, 2005 (File No. 0-20538) and incorporated herein
by
reference.
|
*
Management
contract or compensatory plan or arrangement.