For the Quarter Ended January 22, 2006
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the quarterly period ended January 22, 2006
OR
¨
|
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.
Delaware
|
41-1659606
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
Number)
|
|
|
1641
Popps Ferry Road, Biloxi, Mississippi
|
39532
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code: (228) 396-7000
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 ¨
Indicate
by check mark if the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act). Yes x No ¨
As
of
February 27, 2006 the Company had a total of 34,024,141 shares of Common
Stock
outstanding (which includes 3,902,423 shares held by us in treasury).
ISLE
OF CAPRI CASINOS, INC.
FORM
10-Q
INDEX
|
|
|
|
|
PAGE
|
PART I
|
FINANCIAL
INFORMATION
|
|
|
|
|
ITEM 1.
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
3
|
|
|
|
|
|
4
|
|
|
|
|
|
5
|
|
|
|
|
|
7
|
|
|
|
ITEM 2.
|
|
26
|
|
|
|
ITEM 3.
|
|
37
|
|
|
|
ITEM 4.
|
|
38
|
|
|
|
PART II
|
|
|
|
|
|
ITEM 1.
|
|
39
|
|
|
|
ITEM 2.
|
|
39
|
|
|
|
ITEM 3.
|
|
40
|
|
|
|
ITEM 4.
|
|
40
|
|
|
|
ITEM 5.
|
|
40
|
|
|
|
ITEM 6.
|
|
40
|
|
|
|
41
|
|
|
|
42
|
DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
All
statements other than statements of historical or current facts included
in this
report on Form 10-Q 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, are further discussed in the Section “Risk Factors” in
our annual report on Form 10-K for the fiscal year ended April 24, 2005,
as such
factors may be updated in subsequent SEC filings. Important factors that
could
cause actual results to differ materially from those in the forward-looking
statements include, but are not limited to:
|
•
|
the
effect of significant competition from other gaming operations
in the
markets in which we operate;
|
|
•
|
the
effects of changes in gaming authority regulations;
|
|
•
|
the
effects of changes in gaming taxes;
|
|
•
|
the
effects of changes in non-gaming regulations;
|
|
•
|
the
impact of inclement weather on our patronage;
|
|
•
|
the
timing and amount of collection of insurance
receivables;
|
|
•
|
the
effects of construction and related disruptions associated with
expansion
projects at existing facilities;
|
|
•
|
the
effects of increases in energy and fuel prices;
|
|
•
|
general
and regional economic conditions;
|
|
•
|
the
effects of limitations imposed by our substantial indebtedness;
and
|
|
•
|
political
conditions and regulatory uncertainties in the U.S. and international
venues in which we operate or are pursuing development opportunities.
|
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.
Our
Internet website is http://www.islecorp.com. We make our filings available
free
of charge on our Internet website as soon as reasonably practical after we
electronically file such reports with, or furnish them to, the SEC.
PART
I - FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS.
ISLE
OF CAPRI CASINOS, INC.
CONSOLIDATED
BALANCE SHEETS
(UNAUDITED)
(In
thousands, except per share data)
ASSETS
|
|
January
22,
|
|
April
24,
|
|
|
|
2006
|
|
2005
|
|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
107,804
|
|
$
|
146,743
|
|
Marketable
securities
|
|
|
19,137
|
|
|
16,016
|
|
Accounts
receivable, net
|
|
|
17,815
|
|
|
15,460
|
|
Insurance
receivable, net
|
|
|
81,622
|
|
|
-
|
|
Deferred
Income Taxes
|
|
|
9,669
|
|
|
9,595
|
|
Prepaid
expenses and other assets
|
|
|
20,316
|
|
|
16,634
|
|
Total
current assets
|
|
|
256,363
|
|
|
204,448
|
|
Property
and equipment, net
|
|
|
1,070,796
|
|
|
1,026,906
|
|
Other
assets:
|
|
|
|
|
|
|
|
Goodwill
|
|
|
340,240
|
|
|
343,851
|
|
Other
intangible assets
|
|
|
92,829
|
|
|
72,364
|
|
Deferred
financing costs, net
|
|
|
16,812
|
|
|
19,461
|
|
Restricted
cash
|
|
|
2,208
|
|
|
2,193
|
|
Prepaid
deposits and other
|
|
|
29,558
|
|
|
15,665
|
|
Total
assets
|
|
$
|
1,808,806
|
|
$
|
1,684,888
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Current
maturities of long-term debt
|
|
$
|
8,174
|
|
$
|
7,501
|
|
Accounts
payable
|
|
|
52,696
|
|
|
42,456
|
|
Accrued
liabilities:
|
|
|
|
|
|
|
|
Interest
|
|
|
24,351
|
|
|
10,312
|
|
Payroll
and related
|
|
|
50,519
|
|
|
47,806
|
|
Property
and other taxes
|
|
|
22,428
|
|
|
21,061
|
|
Income
taxes
|
|
|
7,711
|
|
|
1,160
|
|
Progressive
jackpots and slot club awards
|
|
|
14,686
|
|
|
15,045
|
|
Other
|
|
|
44,440
|
|
|
34,321
|
|
Total
current liabilities
|
|
|
225,005
|
|
|
179,662
|
|
Long-term
debt, less current maturities
|
|
|
1,222,439
|
|
|
1,148,617
|
|
Deferred
Income Taxes
|
|
|
52,952
|
|
|
54,873
|
|
Other
accrued liabilities
|
|
|
23,015
|
|
|
17,115
|
|
Minority
interest
|
|
|
25,439
|
|
|
23,225
|
|
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:
33,957 at January 22, 2006 and 33,528 at April 24, 2005
|
|
|
339
|
|
|
335
|
|
Class
B common stock, $.01 par value; 3,000 shares authorized; none
issued
|
|
|
-
|
|
|
-
|
|
Additional
paid-in capital
|
|
|
153,870
|
|
|
148,177
|
|
Unearned
compensation
|
|
|
(1,521)
|
|
|
(1,488)
|
|
Retained
earnings
|
|
|
150,031
|
|
|
146,133
|
|
Accumulated
other comprehensive income (loss)
|
|
|
(607)
|
|
|
2,858
|
|
|
|
|
302,112
|
|
|
296,015
|
|
Treasury
stock, 3,902 shares at January 22, 2006 and 3,607 shares at April
24,
2005
|
|
|
(42,156)
|
|
|
(34,619)
|
|
Total
stockholders' equity
|
|
|
259,956
|
|
|
261,396
|
|
Total
liabilities and stockholders' equity
|
|
$
|
1,808,806
|
|
$
|
1,684,888
|
|
See
notes
to the unaudited consolidated financial statements.
ISLE
OF CAPRI CASINOS, INC.
CONSOLIDATED
STATEMENTS OF INCOME
(UNAUDITED)
(In
thousands, except per share data)
|
|
Three
Months Ended
|
|
Nine
Months Ended
|
|
|
|
January
22,
|
|
January
23,
|
|
January
22,
|
|
January
23,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
276,987
|
|
$
|
266,700
|
|
$
|
813,418
|
|
$
|
822,344
|
|
Rooms
|
|
|
9,853
|
|
|
10,509
|
|
|
37,056
|
|
|
35,721
|
|
Pari-mutuel
commissions and fees
|
|
|
4,350
|
|
|
5,210
|
|
|
13,301
|
|
|
13,011
|
|
Food,
beverage and other
|
|
|
32,947
|
|
|
36,511
|
|
|
103,842
|
|
|
108,951
|
|
Gross
revenues
|
|
|
324,137
|
|
|
318,930
|
|
|
967,617
|
|
|
980,027
|
|
Less
promotional allowances
|
|
|
54,288
|
|
|
53,504
|
|
|
168,292
|
|
|
168,110
|
|
Net
revenues
|
|
|
269,849
|
|
|
265,426
|
|
|
799,325
|
|
|
811,917
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
42,529
|
|
|
46,252
|
|
|
129,838
|
|
|
138,090
|
|
Gaming
taxes
|
|
|
61,239
|
|
|
59,576
|
|
|
180,382
|
|
|
184,146
|
|
Rooms
|
|
|
1,851
|
|
|
2,195
|
|
|
7,802
|
|
|
7,609
|
|
Pari-mutuel
|
|
|
3,432
|
|
|
3,982
|
|
|
10,548
|
|
|
10,201
|
|
Food,
beverage and other
|
|
|
7,790
|
|
|
8,618
|
|
|
25,150
|
|
|
26,403
|
|
Marine
and facilities
|
|
|
16,183
|
|
|
16,798
|
|
|
50,282
|
|
|
50,064
|
|
Marketing
and administrative
|
|
|
74,808
|
|
|
74,908
|
|
|
238,201
|
|
|
233,672
|
|
Other
charges
|
|
|
40
|
|
|
1,621
|
|
|
224
|
|
|
1,868
|
|
Hurricane
related charges, net
|
|
|
3,759
|
|
|
-
|
|
|
4,959
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
25,385
|
|
|
23,511
|
|
|
76,037
|
|
|
72,757
|
|
Total
operating expenses
|
|
|
237,016
|
|
|
237,461
|
|
|
723,423
|
|
|
724,810
|
|
Operating
income
|
|
|
32,833
|
|
|
27,965
|
|
|
75,902
|
|
|
87,107
|
|
Interest
expense
|
|
|
(21,860)
|
|
|
(18,991)
|
|
|
(63,464)
|
|
|
(56,017)
|
|
Interest
income
|
|
|
894
|
|
|
528
|
|
|
3,060
|
|
|
1,202
|
|
Loss
on Extinguishment of Debt
|
|
|
(2,110)
|
|
|
-
|
|
|
(2,110)
|
|
|
-
|
|
Minority
interest
|
|
|
(440)
|
|
|
(1,440)
|
|
|
(4,387)
|
|
|
(5,122)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations before income taxes
|
|
|
9,317
|
|
|
8,062
|
|
|
9,001
|
|
|
27,170
|
|
Income
tax expense
|
|
|
5,184
|
|
|
4,568
|
|
|
5,045
|
|
|
13,243
|
|
Income
from continuing operations
|
|
|
4,133
|
|
|
3,494
|
|
|
3,956
|
|
|
13,927
|
|
Income
(loss) from discontinued operations, net of income taxes
|
|
|
-
|
|
|
36
|
|
|
(58)
|
|
|
660
|
|
Net
income
|
|
$
|
4,133
|
|
$
|
3,530
|
|
$
|
3,898
|
|
$
|
14,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per common share-basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
0.14
|
|
$
|
0.12
|
|
$
|
0.13
|
|
$
|
0.47
|
|
Income
from discontinued operations, net of income taxes
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
0.02
|
|
Net
income
|
|
$
|
0.14
|
|
$
|
0.12
|
|
$
|
0.13
|
|
$
|
0.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per common share-diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
0.13
|
|
$
|
0.11
|
|
$
|
0.13
|
|
$
|
0.45
|
|
Income
(loss) from discontinued operations, net of income taxes
|
|
|
-
|
|
|
-
|
|
|
(0.01)
|
|
|
0.02
|
|
Net
income
|
|
$
|
0.13
|
|
$
|
0.11
|
|
$
|
0.12
|
|
$
|
0.47
|
|
See
notes
to the unaudited consolidated financial statements.
ISLE
OF CAPRI CASINOS, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(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 24, 2005
|
|
|
33,528
|
|
$
|
335
|
|
$
|
148,177
|
|
$
|
(1,488)
|
|
$
|
146,133
|
|
$
|
2,858
|
|
$
|
(34,619)
|
|
$
|
261,396
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3,898
|
|
|
-
|
|
|
-
|
|
|
3,898
|
|
Unrealized
gain on interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
rate
swap contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net
of income taxes of $185
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
278
|
|
|
-
|
|
|
278
|
|
Foreign
currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustments
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,743)
|
|
|
-
|
|
|
(3,743)
|
|
Comprehensive
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
433
|
|
Exercise
of stock options, including
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
tax benefit of $1,242
|
|
|
429
|
|
|
4
|
|
|
5,325
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
957
|
|
|
6,286
|
|
Purchase
of treasury stock
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(8,494)
|
|
|
(8,494)
|
|
Grant
of nonvested stock
|
|
|
-
|
|
|
-
|
|
|
368
|
|
|
(368)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Amortization
of unearned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
335
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
335
|
|
Balance,
January 22, 2006
|
|
|
33,957
|
|
$
|
339
|
|
$
|
153,870
|
|
$
|
(1,521)
|
|
$
|
150,031
|
|
$
|
(607)
|
|
$
|
(42,156)
|
|
$
|
259,956
|
|
See
notes
to the unaudited consolidated financial statements.
ISLE
OF CAPRI CASINOS, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In
thousands)
|
|
Nine
Months Ended
|
|
|
|
January
22,
|
|
January
23,
|
|
|
|
2006
|
|
2005
|
|
Operating
activities:
|
|
|
|
|
|
Net
income
|
|
$
|
3,898
|
|
$
|
14,587
|
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
|
|
provided
by operating activities:
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
76,037
|
|
|
73,082
|
|
Valuation
charge
|
|
|
-
|
|
|
1,621
|
|
Amortization
of deferred financing costs
|
|
|
2,320
|
|
|
3,091
|
|
Amortization
of unearned compensation
|
|
|
335
|
|
|
371
|
|
Loss
on early extinguishment of debt
|
|
|
2,110
|
|
|
-
|
|
Deferred
income taxes
|
|
|
(2,212)
|
|
|
-
|
|
Tax
benefit of stock option exercise
|
|
|
1,242
|
|
|
623
|
|
Minority
interest
|
|
|
4,387
|
|
|
5,122
|
|
Impairment
charges
|
|
|
55,184
|
|
|
-
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(3,108)
|
|
|
(1,903)
|
|
Insurance
receivable
|
|
|
(81,622)
|
|
|
-
|
|
Income
tax payable
|
|
|
6,551
|
|
|
12,094
|
|
Prepaid
expenses and other assets
|
|
|
(3,753)
|
|
|
(2,741)
|
|
Accounts
payable and accrued liabilities
|
|
|
7,291
|
|
|
27,552
|
|
Net
cash provided by operating activities
|
|
|
68,660
|
|
|
133,499
|
|
|
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(157,458)
|
|
|
(142,731)
|
|
Acquisition
of license
|
|
|
(5,775)
|
|
|
-
|
|
Purchase
of short-term investments, net of sales
|
|
|
(2,901)
|
|
|
-
|
|
Changes
on notes receivable
|
|
|
21
|
|
|
(6,055)
|
|
Restricted
cash
|
|
|
(173)
|
|
|
(280)
|
|
Prepaid
deposits and other
|
|
|
(10,729)
|
|
|
(485)
|
|
Net
cash used in investing activities
|
|
|
(177,015)
|
|
|
(149,551)
|
|
|
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
|
|
Proceeds
from debt
|
|
|
122,475
|
|
|
3,071
|
|
Net
increase on line of credit
|
|
|
2,524
|
|
|
14,282
|
|
Principal
payments on debt and cash paid to retire debt
|
|
|
(49,609)
|
|
|
(4,831)
|
|
Payment
of deferred financing costs
|
|
|
(1,792)
|
|
|
(692)
|
|
Purchase
of treasury stock
|
|
|
(8,493)
|
|
|
(6,360)
|
|
Proceeds
from exercise of stock options
|
|
|
5,044
|
|
|
2,270
|
|
Cash
distributions to minority partner
|
|
|
-
|
|
|
(3,600)
|
|
Net
cash provided by financing activities
|
|
|
70,149
|
|
|
4,140
|
|
|
|
|
|
|
|
|
|
Effect
of foreign currency exchange rates on cash
|
|
|
(733)
|
|
|
83
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
|
(38,939)
|
|
|
(11,829)
|
|
Cash
and cash equivalents at beginning of period
|
|
|
146,743
|
|
|
134,582
|
|
Cash
and cash equivalents at end of period
|
|
$
|
107,804
|
|
$
|
122,753
|
|
See
notes
to the unaudited consolidated financial statements.
ISLE
OF CAPRI CASINOS, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS (continued)
(UNAUDITED)
(In
thousands)
|
|
Nine
Months Ended
|
|
|
|
January
22,
|
|
January
23,
|
|
|
|
2006
|
|
2005
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
Net
cash payments for:
|
|
|
|
|
|
Interest
|
|
$
|
50,731
|
|
$
|
41,858
|
|
Income
taxes
|
|
|
(545)
|
|
|
419
|
|
Supplemental
schedule of noncash investing and financing
activities:
|
|
|
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
Construction
costs funded through accrued liabilities
|
|
|
19,552
|
|
|
8,304
|
|
Acquisition
of license
|
|
|
16,000
|
|
|
-
|
|
See
notes
to the unaudited consolidated financial statements.
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO THE UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
1.
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 locations 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 from Isle of Capri Black Hawk, L.L.C. 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 customers 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. In addition, 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, a two-thirds ownership interest
in Blue Chip Casinos, PLC (“Blue Chip”) which owns casinos in Dudley,
Wolverhampton and Walsall, England and a casino to be opened in Coventry,
England in the latter part of calendar 2006. The Company also wholly owns
and
operates a pari-mutuel harness racing facility in Pompano Beach, Florida.
On
May 6,
2005, the Company signed a casino management and related development and
option
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. During May 2005, the Company
paid and expensed a $4.0 million payment to Eighth Wonder pursuant to the
terms
of these agreements.
On
May
11, 2005, the Company was 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 $134.5 million (including $20.0 million in license
costs) in constructing a 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.
In
December 2005, the Company signed a joint development agreement with Lemieux
Group LP that includes a provision for Isle to fund a $290 million new
multi-purpose arena and pursue a gaming license for 3,000 slot machines in
Pittsburgh, Pennsylvania. The new multi-purpose arena and gaming facility
are
part of a larger billion-dollar effort known as Pittsburgh First to redevelop
the Lower Hill and Uptown Districts in conjunction with the Pittsburgh Penguins
and a development partner. This proposal is one of three applications under
consideration by the Pennsylvania Gaming Control Board for a single license
with
a decision expected by the end of calendar 2006 or early 2007. If the license
is
granted to the Isle of Capri, the Company anticipates that the construction
of
the project would begin shortly thereafter with a temporary casino also a
possibility.
Interim
Financial Information
The
accompanying unaudited financial statements have been prepared in accordance
with U.S. generally accepted accounting principles (“GAAP”) for interim
financial information and with the instructions to Form 10-Q and Article
10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. In the opinion
of
management, all adjustments, consisting of normal recurring adjustments,
considered necessary for a fair presentation have been included. Operating
results for the three and nine months ended January 22, 2006 are not necessarily
indicative of the results that may be expected for the fiscal year ending
April
30, 2006. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company’s annual report on Form
10-K for the fiscal year ended April 24, 2005.
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 weekend days (26) in each fiscal quarter.
Periodically, this system necessitates a 53-week year. Fiscal 2006 commenced
on
April 25, 2005 and ends on April 30, 2006.
2.
Summary of Significant Accounting Policies
New
Pronouncements
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 values. Pro
forma
disclosure is no longer an alternative. SFAS 123(R) must be adopted for interim
periods beginning in the first annual reporting period that begins 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) for reporting periods beginning on May 1, 2006.
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. 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 below. SFAS 123(R) also requires the
benefits of tax deductions in excess of recognized compensation cost 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. 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.
3.
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 related to stock option grants 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 Company recognizes a tax benefit from the
exercise of certain stock options. 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.
3.
Stock-Based Compensation (continued)
|
|
Three
Months Ended
|
|
Nine
Months Ended
|
|
|
|
January
22, 2006
|
|
January
23, 2005
|
|
January
22, 2006
|
|
January
23, 2005
|
|
|
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
4,133
|
|
$
|
3,494
|
|
$
|
3,956
|
|
$
|
13,927
|
|
Deduct:
Total stock-based employee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation
expense determined under fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
value
based method for all awards, net of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
related
tax effects
|
|
|
(761)
|
|
|
(1,133)
|
|
|
(2,902)
|
|
|
(3,004)
|
|
Pro
forma Income before discontinued operations
|
|
$
|
3,372
|
|
$
|
2,361
|
|
$
|
1,054
|
|
$
|
10,923
|
|
Income
(loss) from discontinued operations
|
|
$
|
-
|
|
$
|
36
|
|
$
|
(58)
|
|
$
|
660
|
|
Pro
forma Net Income after discontinued operations
|
|
$
|
3,372
|
|
$
|
2,397
|
|
$
|
996
|
|
$
|
11,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share: Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
0.14
|
|
$
|
0.12
|
|
$
|
0.13
|
|
$
|
0.47
|
|
Income
(loss) from discontinued operations
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
0.02
|
|
Net
Income
|
|
$
|
0.14
|
|
$
|
0.12
|
|
$
|
0.13
|
|
$
|
0.49
|
|
Earnings
per share: Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro
Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
0.11
|
|
$
|
0.08
|
|
$
|
0.04
|
|
$
|
0.37
|
|
Income
(loss) from discontinued operations
|
|
$
|
-
|
|
$
|
-
|
|
$
|
(0.01)
|
|
$
|
0.02
|
|
Net
Income
|
|
$
|
0.11
|
|
$
|
0.08
|
|
$
|
0.03
|
|
$
|
0.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share: Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
0.13
|
|
$
|
0.11
|
|
$
|
0.13
|
|
$
|
0.45
|
|
Income
(loss) from discontinued operations
|
|
$
|
-
|
|
$
|
-
|
|
$
|
(0.01)
|
|
$
|
0.02
|
|
Net
Income
|
|
$
|
0.13
|
|
$
|
0.11
|
|
$
|
0.12
|
|
$
|
0.47
|
|
Earnings
per share: Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro
Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$
|
0.11
|
|
$
|
0.08
|
|
$
|
0.03
|
|
$
|
0.35
|
|
Income
from discontinued operations
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
0.02
|
|
Net
Income
|
|
$
|
0.11
|
|
$
|
0.08
|
|
$
|
0.03
|
|
$
|
0.38
|
|
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
Quarter
|
Interest
Rate
|
Expected
Life
|
Volatility
|
Dividends
|
|
|
|
|
|
January
22, 2006
|
4.00%
|
6.26
years
|
55.8%
|
None
|
January
23, 2005
|
3.97%
|
6.38
years
|
55.5%
|
None
|
Additionally,
under the Company’s Deferred Bonus Plan the Company issues non-vested options to
eligible officers and employees who agree to receive a deferred bonus in the
form of non-vested stock. The Company amortizes the fair value of the non-vested
stock ratably over the vesting period.
4.
Hurricanes and Related Charges
On
August
29, 2005, Hurricane Katrina struck the Gulf Coast of Mississippi and Louisiana,
which resulted in significant damage to the Company’s casino facility and its
casino barge under construction in Biloxi, Mississippi. On December 26, 2005
the
Company opened a casino in the hotel with 730 slot machines, a live poker room,
27 table games, three restaurants and 525 hotel rooms. Subsequent to the end
of
the quarter, Isle-Biloxi added an additional 220 slot machines and a European
spa.
On
September 22, 2005, Hurricane Rita struck the Gulf Coast of Louisiana and Texas,
which caused damage to the casino and hotel facilities in Lake Charles,
Louisiana. The property was closed for 16 days as a result but subsequently
reopened on October 8, 2005.
On
October 24, 2005, Hurricane Wilma struck Florida, causing damage to the
Company’s Pompano Park racing facility. The Property was closed until December
2, 2005.
The
Company initially took an impairment charge of $60.1 million based on initial
assessments of damages. After further review of the damaged and destroyed
property the Company determined that some of the property could be repaired
and
used in the future. The impairment charges related to the hurricanes were
reduced by $4.9 million for a total of $55.2 million during the quarter ended
January 22, 2006. The impairment charge was offset by an insurance receivable
for the amount the Company expects to recover from its insurance carriers.
The
Company has incurred $57.5 million for incremental out-of-pocket costs related
to the hurricanes and the property operating costs related to the periods
affected by the hurricanes. These amounts are included in the “hurricane related
charges, net” in the accompanying statements of income. The Company has
insurance coverage related to property damage, incremental costs and property
operating expenses it incurs due to damage caused by the hurricanes. The
“hurricane related charges, net” account also includes the total anticipated
recoveries expected from its insurance carriers of $107.7 million related to
the
impairments recognized related to the damaged property, the incremental costs
and property operating expenses that management believes are probable of
collection. The Company has received $26.1 million in advance payments from
its
insurance carriers. When the Company and its insurance carriers agree on the
final amount of the insurance proceeds the Company is entitled to, the Company
will also record any related gain in this account. The Company’s insurance
policies also provide coverage for the loss of profits caused by the storms.
Any
lost profit recoveries will be recognized when agreed to with the insurance
carrier and will be reflected in the related properties’ revenues. The following
table shows the activity flowing through the insurance accounts:
|
|
Items
Incurred
|
|
|
|
Items
Incurred
|
|
|
|
Through
|
|
|
|
Through
|
|
|
|
|
October 23,
|
|
|
|
|
|
January
22,
|
|
|
|
|
2005
|
|
|
Activity
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
Impairment
|
|
|
60,051
|
|
|
(4,866)
|
|
|
55,185
|
|
Incremental
Costs Incurred
|
|
|
23,845
|
|
|
33,635
|
|
|
57,484
|
|
Hurricane
Related Charges
|
|
|
(1,200)
|
|
|
(3,759)
|
|
|
(4,959)
|
|
Insurance
Receivable, Gross
|
|
|
82,696
|
|
|
|
|
|
107,710
|
|
Insurance
Receipts
|
|
|
(12,500)
|
|
|
(13,588)
|
|
|
(26,088)
|
|
Insurance
Receivable, Net
|
|
|
70,196
|
|
|
|
|
|
81,622
|
|
5.
Goodwill and Other Intangible Assets
The
changes in the carrying amount of goodwill are as follows (in
thousands):
Balance
at April 24, 2005
|
|
$
|
343,851
|
|
Sale
of Colorado Grande Enterprises, Inc
|
|
|
(2,897)
|
|
Foreign
currency translation
|
|
|
(714)
|
|
Balance
at January 22, 2006
|
|
$
|
340,240
|
|
Other
intangible assets consist of the following:
|
|
January
22,
|
|
April
24,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Gaming
licenses
|
|
$
|
75,143
|
|
$
|
53,379
|
|
Trademarks
and player database
|
|
|
17,686
|
|
|
18,985
|
|
Other
intangible assets, net
|
|
$
|
92,829
|
|
$
|
72,364
|
|
During
the nine months ended January 22, 2006, the Company incurred $21.2 million
of
gaming license related fees for our Waterloo, Iowa project and $0.6 million
of
gaming license fees related to the Pompano, Florida project.
6.
Long-Term Debt
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 January 22, 2006 and April 24, 2005.
|
|
January
22,
|
|
April
24,
|
|
|
|
2006
|
|
2005
|
|
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
|
|
|
297,250
|
|
|
249,375
|
|
Revolver
|
|
|
10,000
|
|
|
-
|
|
Isle-Black
Hawk Senior Secured Credit Facility, non-recourse to Isle of Capri
|
|
|
|
|
|
|
|
Casinos,
Inc. (described below)
|
|
|
|
|
|
|
|
Variable
rate term loan Tranche C
|
|
|
189,525
|
|
|
163,350
|
|
Revolver
|
|
|
18,000
|
|
|
26,000
|
|
Isle-Black
Hawk Special Assessment BID Bonds, non-recourse to Isle of Capri
|
|
|
|
|
|
|
|
Casinos,
Inc. (described below)
|
|
|
532
|
|
|
590
|
|
Blue
Chip Credit Facility (6.50% at July 24, 2005) due January
2009;
|
|
|
|
|
|
|
|
non-recourse
to Isle of Capri Casinos, Inc. (described below)
|
|
|
6,579
|
|
|
6,942
|
|
Variable
rate TIF Bonds due to City of Bettendorf (described below)
|
|
|
3,511
|
|
|
3,875
|
|
Variable
rate General Obligation Bonds due to City of Davenport (described
below)
|
|
|
1,675
|
|
|
1,830
|
|
12.5%
note payable, due in monthly installments of $125, including
interest,
|
|
|
|
|
|
|
|
beginning
October 1997 through October 2005
|
|
|
-
|
|
|
494
|
|
Other
|
|
|
3,541
|
|
|
3,662
|
|
|
|
|
1,230,613
|
|
|
1,156,118
|
|
Less
current maturities
|
|
|
8,174
|
|
|
7,501
|
|
Long-term
debt
|
|
$
|
1,222,439
|
|
$
|
1,148,617
|
|
6.
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 10. 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%
|
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.
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 are guaranteed by all of the Company’s
significant domestic subsidiaries, excluding the subsidiaries that own and
operate the Isle-Black Hawk Colorado and Colorado Central Station-Black Hawk,
and other subsidiaries as described more fully in Note 10. 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%
|
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.
6.
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). On August
3,
2005, the Company exercised its option for a delayed draw term loan for an
additional $50.0 million. The draw was accessed in anticipation of funding
the
Company’s ongoing development projects. 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 has been and will be used for general corporate purposes,
including working capital, permitted acquisitions, capital expenditures and
investments.
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. As of January 22, 2006, the Company was in compliance
with all covenants related to this facility.
The
weighted average effective interest rate of total debt outstanding under the
senior secured credit facility at January 22, 2006 was 6.28%.
At
January 22, 2006, the Company had $297.3 million outstanding under the senior
secured term loan credit facilities and no amounts outstanding under the
revolving credit facility.
Isle-Black
Hawk Senior Secured Credit Facility
On
October 24, 2005, Isle of Capri Black Hawk, L.L.C., a joint venture company
that
owns and operates two casinos in Black Hawk, Colorado is owned 57% by Isle
of Capri Casinos, Inc. and 43% by a subsidiary of Nevada Gold & Casinos,
Inc., entered into a $240.0 million Second Amended and Restated Credit
Agreement. The credit agreement, which amends and restates the Isle of Capri
Black Hawk, L.L.C.’s existing credit agreement in its entirety, provides for a
$50.0 million revolving credit facility maturing the earlier of October 24,
2010
or such date as the term loan facility is repaid in full and a $190.0 million
term loan facility maturing on October 24, 2011. At the Isle of Capri Black
Hawk, L.L.C.’s and the lead arranger’s mutual discretion, Isle of Capri Black
Hawk, L.L.C. may increase the size of the revolver and/or term loan facility,
in
an aggregate amount up to $25.0 million subject to certain conditions. The
term
loans are payable in quarterly installments beginning on December 30, 2005
and
ending on September 30, 2011. The revolving loans may bear interest at the
Isle
of Capri Black Hawk, L.L.C.’s option at (1) the higher of 0.5% in excess of the
federal funds effective rate plus an applicable margin up to 1.25% or the rate
that the lead arranger announces from time to time as its prime lending rate
plus an applicable margin up to 1.25% or (2) a rate tied to a LIBOR rate plus
an
applicable margin up to 2.25%. The term loans may bear interest at the Isle
of
Capri Black Hawk, L.L.C.’s option at (1) the higher of 0.5% in excess of the
federal funds effective rate plus an applicable margin of 1.00% or the rate
that
the lead arranger announces from time to time as its prime lending rate plus
an
applicable margin of 1.00% or (2) a rate tied to a LIBOR rate plus an applicable
margin of 2.00%. The credit agreement is secured by liens on substantially
all
of the Isle of Capri Black Hawk, L.L.C.’s assets. The credit agreement contains
customary representations and warranties and affirmative and negative covenants
and is non-recourse to the Company. Pursuant to the refinancing, the Company
recognized a loss before income taxes on early extinguishment of debt of $2.1
million, due to the write-off of previously deferred financing costs related
to
its existing senior secured credit facility. The costs of $1.8 million
associated with the new senior secured credit facility have been deferred and
are being amortized over the term of the new facility.
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 January 22, 2006. 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 January 22, 2006 was 6.22%.
6.
Long-Term Debt (continued)
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 January 22,
2006. 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 quarter ended January 22, 2006. Accordingly, no gains
or
losses have been recognized on these cash flow hedges.
At
January 22, 2006, 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.
Blue
Chip Credit Facility
In
2004,
Blue Chip entered into an agreement with the Bank of Scotland to borrow up
to
£3.4 million ($6.0 million) to fund its casino development program. As of
January 22, 2006, £2.9 million ($5.2 million) has been borrowed. The term loan
is being repaid in quarterly payments, and is to be repaid in full by January
2009. As of January 22, 2006, the amount available to be borrowed is £0.2
million ($0.4 million). 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, Iowa 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.
6.
Long-Term Debt (continued)
Rhythm
City - Davenport General Obligation Bonds
In
2002,
the Rhythm City-Davenport entered into an agreement with the City of Davenport,
Iowa whereby the City of Davenport would construct and own a skybridge
connecting to the Rhythm City-Davenport’s facility, allowing safer access across
the street and railroad tracks. The project has been completed by the City
of
Davenport and at a cost of $6.4 million, with the Rhythm City-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 Rhythm City-Davenport is required to make annual
payments of principal and interest to the City of Davenport to retire the bonds.
Lines
of Credit
As
of
January 22, 2006, the Company had $358.9 million of availability under its
lines
of credit and available term debt as compared to $452.8 million at April 24,
2005. Item 2, Liquidity and Capital Resources, discusses this in further
detail.
7.
Comprehensive Income
Comprehensive
income consists of the following:
|
|
Unrealized
gain on interest rate swaps
|
|
Foreign
currency translation adjustment
|
|
Accumulated
other comprehensive income (loss)
|
|
|
|
(In
thousands)
|
|
|
|
|
|
Balance,
April 24, 2005
|
|
$
|
105
|
|
$
|
2,753
|
|
$
|
2,858
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change
|
|
|
278
|
|
|
(3,743)
|
|
|
(3,465)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 22, 2006
|
|
$
|
383
|
|
$
|
(990)
|
|
$
|
(607)
|
|
As
a
result of the operations of the Company’s international subsidiaries with
functional currencies other than the U.S. dollar, a resulting currency
translation adjustment is necessary. The assets and liabilities of the Company’s
international subsidiaries are translated using the exchange rate in effect
at
the balance sheet date, with the resulting translation adjustment recognized
as
accumulated other comprehensive income.
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 $1.0
million, and is recorded as a current asset. There was no effect on income
related to hedge ineffectiveness.
8.
Contingencies
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 $7.9 million as of January 22, 2006 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. During October 2005, the Administrative
Supreme Court remanded the matter back to the Athens Administrative Appeals
Court for a hearing on the merits, which is expected to take place at the end
of
2006 or early 2007. The civil matter is set for hearing before the Greek Supreme
Court 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.
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.
9.
Earnings per Share of Common Stock
The
following table sets forth the computation of basic and diluted earnings per
share:
|
|
Three
Months Ended
|
|
Nine
Months Ended
|
|
|
|
January
22,
|
|
January
23,
|
|
January
22,
|
|
January
23,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
(In
thousands, except per share data) |
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
4,133
|
|
$
|
3,530
|
|
$
|
3,898
|
|
$
|
14,587
|
|
Numerator
for basic earnings per share - income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available
to common stockholders
|
|
$
|
4,133
|
|
$
|
3,530
|
|
$
|
3,898
|
|
$
|
14,587
|
|
Effect
of diluted securities
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Numerator
for diluted earnings per share-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
available to common stockholders after
|
|
|
|
|
|
|
|
|
|
|
|
|
|
assumed
conversions
|
|
$
|
4,133
|
|
$
|
3,530
|
|
$
|
3,898
|
|
$
|
14,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
for basic earnings per share -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
weighted
- average shares
|
|
|
29,951
|
|
|
29,675
|
|
|
30,054
|
|
|
29,632
|
|
Effect
of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
stock options and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
nonvested
restricted stock
|
|
|
1,091
|
|
|
1,362
|
|
|
1,238
|
|
|
1,144
|
|
Denominator
for diluted earnings per share -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjusted
weighted - average shares and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
assumed
conversions
|
|
|
31,042
|
|
|
31,037
|
|
|
31,292
|
|
|
30,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
0.14
|
|
$
|
0.12
|
|
$
|
0.13
|
|
$
|
0.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$
|
0.13
|
|
$
|
0.11
|
|
$
|
0.12
|
|
$
|
0.47
|
|
The
Company computed basic earnings per share by dividing net income by the weighted
average number of shares outstanding for the period. The Company determined
diluted earnings per common at January 22, 2006, as net income divided by the
weighted average number of shares outstanding for the period, after applying
the
“if-converted” method to determine any incremental shares associated stock
options outstanding. If anti-dilutive shares were included for the three and
nine months ended January 22, 2006, the impact would have been a reduction
of
20,954 shares and 18,811 shares, respectively. Anti-dilutive stock options
were
excluded from the calculation of potential common shares. If anti-dilutive
shares were included in the calculation for the three and nine months ended
January 23, 2005, the impact would have been a reduction of 48,830 shares and
7,914 shares, respectively.
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.
10.
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 January
22, 2006 and April 24, 2005, statements of income for the three and nine months
ended January 22, 2006 and January 23, 2005 and statements of cash flows for
the
nine months ended January 22, 2006 and January 23, 2005.
ISLE
OF CAPRI CASINOS, INC.
|
|
CONSOLIDATING
CONDENSED GUARANTOR SUBSIDIARIES, NON-GUARANTOR SUBSIDIARIES,
|
|
AND
PARENT COMPANY FINANCIAL INFORMATION
|
|
AS
OF JANUARY 22, 2006 AND APRIL 24, 2005 AND FOR
|
|
THE
NINE MONTHS ENDED JANUARY 22, 2006 AND JANUARY 23,
2005
|
|
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 January,22 2006
|
|
Balance
Sheet
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
$
|
28,410
|
|
$
|
183,400
|
|
$
|
56,374
|
|
$
|
(11,820)
|
|
$
|
256,363
|
|
Intercompany
receivables
|
|
|
995,950
|
|
|
(352,708)
|
|
|
28,513
|
|
|
(671,756)
|
|
|
-
|
|
Investments
in subsidiaries
|
|
|
249,394
|
|
|
266,486
|
|
|
(6,930)
|
|
|
(508,950)
|
|
|
-
|
|
Property
and equipment, net
|
|
|
5,009
|
|
|
791,062
|
|
|
274,724
|
|
|
-
|
|
|
1,070,796
|
|
Other
assets
|
|
|
20,081
|
|
|
408,285
|
|
|
57,782
|
|
|
(4,500)
|
|
|
481,647
|
|
Total
assets
|
|
$
|
1,298,844
|
|
$
|
1,296,525
|
|
$
|
410,463
|
|
$
|
(1,197,026)
|
|
$
|
1,808,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
$
|
44,884
|
|
$
|
135,973
|
|
$
|
72,660
|
|
$
|
(15,260)
|
|
$
|
238,257
|
|
Intercompany
payables
|
|
|
-
|
|
|
585,821
|
|
|
84,539
|
|
|
(670,360)
|
|
|
-
|
|
Long-term
debt,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
less
current maturities
|
|
|
1,004,750
|
|
|
7,374
|
|
|
210,315
|
|
|
-
|
|
|
1,222,439
|
|
Other
accrued liabilities
|
|
|
(11,087)
|
|
|
79,309
|
|
|
(5,507)
|
|
|
-
|
|
|
62,714
|
|
Minority
interest
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
25,439
|
|
|
25,439
|
|
Stockholders'
equity
|
|
|
260,297
|
|
|
488,048
|
|
|
48,456
|
|
|
(536,845)
|
|
|
259,957
|
|
Total
liabilities and stockholders' equity
|
|
$
|
1,298,844
|
|
$
|
1,296,525
|
|
$
|
410,463
|
|
$
|
(1,197,026)
|
|
$
|
1,808,806
|
|
10.
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 Three Months Ended January 22, 2006
|
Statement
of Income
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
-
|
|
$
|
227,199
|
|
$
|
49,789
|
|
$
|
-
|
|
$
|
276,987
|
|
Rooms,
food, beverage and other
|
|
|
(39)
|
|
|
39,558
|
|
|
10,486
|
|
|
(2,855)
|
|
|
47,150
|
|
Gross
revenues
|
|
|
(39)
|
|
|
266,757
|
|
|
60,275
|
|
|
(2,855)
|
|
|
324,137
|
|
Less
promotional allowances
|
|
|
-
|
|
|
44,001
|
|
|
10,288
|
|
|
-
|
|
|
54,288
|
|
Net
revenues
|
|
|
(39)
|
|
|
222,756
|
|
|
49,987
|
|
|
(2,855)
|
|
|
269,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
213
|
|
|
33,828
|
|
|
8,490
|
|
|
-
|
|
|
42,529
|
|
Gaming
taxes
|
|
|
-
|
|
|
51,554
|
|
|
9,685
|
|
|
-
|
|
|
61,239
|
|
Rooms,
food, beverage and other
|
|
|
7,779
|
|
|
76,907
|
|
|
25,996
|
|
|
(2,820)
|
|
|
107,863
|
|
Management
fee expense (revenue)
|
|
|
(8,317)
|
|
|
8,231
|
|
|
86
|
|
|
-
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
410
|
|
|
20,809
|
|
|
4,166
|
|
|
-
|
|
|
25,385
|
|
Total
operating expenses
|
|
|
84
|
|
|
191,329
|
|
|
48,423
|
|
|
(2,820)
|
|
|
237,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss)
|
|
|
(123)
|
|
|
31,427
|
|
|
1,564
|
|
|
(35)
|
|
|
32,833
|
|
Interest
expense, net
|
|
|
(4,597)
|
|
|
(13,732)
|
|
|
(2,636)
|
|
|
-
|
|
|
(20,966)
|
|
Minority
interest
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(440)
|
|
|
(440)
|
|
Loss
on Extinguishment of Debt
|
|
|
-
|
|
|
-
|
|
|
(2,110)
|
|
|
-
|
|
|
(2,110)
|
|
Equity
in income (loss) of subsidiaries
|
|
|
15,130
|
|
|
1,501
|
|
|
(2,083)
|
|
|
(14,546)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
before
income taxes
|
|
|
10,410
|
|
|
19,196
|
|
|
(5,265)
|
|
|
(15,021)
|
|
|
9,317
|
|
Income
tax expense (benefit)
|
|
|
6,277
|
|
|
-
|
|
|
(1,093)
|
|
|
-
|
|
|
5,184
|
|
Income
(loss) from continuing operations
|
|
|
4,133
|
|
|
19,196
|
|
|
(4,172)
|
|
|
(15,021)
|
|
|
4,133
|
|
Loss
from discontinued operations, net of taxes
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net
income (loss)
|
|
$
|
4,133
|
|
$
|
19,196
|
|
$
|
(4,172)
|
|
$
|
(15,021)
|
|
$
|
4,133
|
|
10.
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 Nine Months Ended January 22, 2006
|
|
Statement
of Income
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
-
|
|
$
|
664,120
|
|
$
|
149,298
|
|
$
|
-
|
|
$
|
813,418
|
|
Rooms,
food, beverage and other
|
|
|
55
|
|
|
130,423
|
|
|
32,454
|
|
|
(8,733)
|
|
|
154,199
|
|
Gross
revenues
|
|
|
55
|
|
|
794,543
|
|
|
181,752
|
|
|
(8,733)
|
|
|
967,617
|
|
Less
promotional allowances
|
|
|
-
|
|
|
137,380
|
|
|
30,913
|
|
|
-
|
|
|
168,292
|
|
Net
revenues
|
|
|
55
|
|
|
657,163
|
|
|
150,839
|
|
|
(8,733)
|
|
|
799,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
461
|
|
|
105,273
|
|
|
24,105
|
|
|
-
|
|
|
129,838
|
|
Gaming
taxes
|
|
|
-
|
|
|
151,928
|
|
|
28,453
|
|
|
-
|
|
|
180,382
|
|
Rooms,
food, beverage and other
|
|
|
28,924
|
|
|
244,671
|
|
|
72,637
|
|
|
(9,065)
|
|
|
337,166
|
|
Management
fee expense (revenue)
|
|
|
(23,464)
|
|
|
23,531
|
|
|
(67)
|
|
|
-
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
1,042
|
|
|
63,225
|
|
|
11,770
|
|
|
-
|
|
|
76,037
|
|
Total
operating expenses
|
|
|
6,963
|
|
|
588,628
|
|
|
136,898
|
|
|
(9,065)
|
|
|
723,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
(6,908)
|
|
|
68,535
|
|
|
13,941
|
|
|
332
|
|
|
75,902
|
|
Interest
expense, net
|
|
|
(9,997)
|
|
|
(42,016)
|
|
|
(8,393)
|
|
|
-
|
|
|
(60,404)
|
|
Minority
interest
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(4,387)
|
|
|
(4,387)
|
|
Loss
on Extinguishment of Debt
|
|
|
-
|
|
|
-
|
|
|
(2,110)
|
|
|
-
|
|
|
(2,110)
|
|
Equity
in income (loss) of subsidiaries
|
|
|
27,149
|
|
|
(3,331)
|
|
|
(4,195)
|
|
|
(19,624)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
taxes
|
|
|
10,244
|
|
|
23,188
|
|
|
(757)
|
|
|
(23,679)
|
|
|
9,001
|
|
Income
tax expense (benefit)
|
|
|
6,347
|
|
|
-
|
|
|
(1,301)
|
|
|
-
|
|
|
5,045
|
|
Income
(loss) from continuing operations
|
|
|
3,897
|
|
|
23,188
|
|
|
544
|
|
|
(23,679)
|
|
|
3,956
|
|
Loss
from discontinued operations, net of taxes
|
|
|
-
|
|
|
-
|
|
|
(58)
|
|
|
-
|
|
|
(58)
|
|
Net
income (loss)
|
|
$
|
3,897
|
|
$
|
23,188
|
|
$
|
486
|
|
$
|
(23,679)
|
|
$
|
3,898
|
|
10.
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 Nine Months Ended January 22, 2006
|
|
Statement
of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
operating
activities
|
|
$
|
(65,093)
|
|
$
|
138,112
|
|
$
|
15,265
|
|
$
|
(19,624)
|
|
$
|
68,660
|
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investing
activities
|
|
|
(28,338)
|
|
|
(124,903)
|
|
|
(43,180)
|
|
|
19,406
|
|
|
(177,015)
|
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
financing
activities
|
|
|
54,382
|
|
|
(759)
|
|
|
16,308
|
|
|
218
|
|
|
70,149
|
|
Effect
of foreign currency exchange rates on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash
and cash equivalents
|
|
|
-
|
|
|
-
|
|
|
(733)
|
|
|
-
|
|
|
(733)
|
|
Net
increase (decrease) in cash and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash
equivalents
|
|
|
(39,049)
|
|
|
12,450
|
|
|
(12,340)
|
|
|
-
|
|
|
(38,939)
|
|
Cash
and cash equivalents at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
beginning
of the period
|
|
|
53,584
|
|
|
57,661
|
|
|
35,498
|
|
|
-
|
|
|
146,743
|
|
Cash
and cash equivalents at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
end
of the period
|
|
$
|
14,535
|
|
$
|
70,111
|
|
$
|
23,158
|
|
$
|
-
|
|
$
|
107,804
|
|
10.
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 Three Months Ended January 23, 2005
|
|
Statement
of Income
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
-
|
|
$
|
225,156
|
|
$
|
41,544
|
|
$
|
-
|
|
$
|
266,700
|
|
Rooms,
food, beverage and other
|
|
|
1,139
|
|
|
44,233
|
|
|
7,516
|
|
|
(658)
|
|
|
52,230
|
|
Gross
Revenues
|
|
|
1,139
|
|
|
269,389
|
|
|
49,060
|
|
|
(658)
|
|
|
318,930
|
|
Less
promotional allowances
|
|
|
-
|
|
|
44,355
|
|
|
9,149
|
|
|
-
|
|
|
53,504
|
|
Net
revenues
|
|
|
1,139
|
|
|
225,034
|
|
|
39,911
|
|
|
(658)
|
|
|
265,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
-
|
|
|
38,342
|
|
|
7,910
|
|
|
-
|
|
|
46,252
|
|
Gaming
taxes
|
|
|
-
|
|
|
51,992
|
|
|
7,584
|
|
|
-
|
|
|
59,576
|
|
Rooms,
food, beverage and other
|
|
|
5,293
|
|
|
81,631
|
|
|
23,626
|
|
|
(2,428)
|
|
|
108,122
|
|
Management
fee expense (revenue)
|
|
|
(7,460)
|
|
|
7,734
|
|
|
(274)
|
|
|
-
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
345
|
|
|
20,171
|
|
|
2,994
|
|
|
-
|
|
|
23,511
|
|
Total
operating expenses
|
|
|
(1,822)
|
|
|
199,870
|
|
|
41,840
|
|
|
(2,428)
|
|
|
237,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
2,961
|
|
|
25,164
|
|
|
(1,929)
|
|
|
1,770
|
|
|
27,965
|
|
Interest
expense, net
|
|
|
(9,276)
|
|
|
(6,643)
|
|
|
(2,542)
|
|
|
-
|
|
|
(18,463)
|
|
Minority
interest
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,440)
|
|
|
(1,440)
|
|
Equity
in income (loss) of subsidiaries
|
|
|
16,111
|
|
|
3,633
|
|
|
(3,520)
|
|
|
(16,224)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
9,796
|
|
|
22,154
|
|
|
(7,991)
|
|
|
(15,894)
|
|
|
8,062
|
|
Income
taxes
|
|
|
6,266
|
|
|
-
|
|
|
(1,698)
|
|
|
-
|
|
|
4,568
|
|
Income
(loss) from continuing operations
|
|
|
3,530
|
|
|
22,154
|
|
|
(6,293)
|
|
|
(15,894)
|
|
|
3,494
|
|
Income
from discontinued operations, net of taxes
|
|
|
-
|
|
|
-
|
|
|
36
|
|
|
-
|
|
|
36
|
|
Net
income (loss)
|
|
$
|
3,530
|
|
$
|
22,154
|
|
$
|
(6,257)
|
|
$
|
(15,894)
|
|
$
|
3,530
|
|
10.
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 Nine Months Ended January 23, 2005
|
|
Statement
of Income
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
-
|
|
$
|
693,045
|
|
$
|
129,299
|
|
$
|
-
|
|
$
|
822,344
|
|
Rooms,
food, beverage and other
|
|
|
1,252
|
|
|
135,439
|
|
|
38,560
|
|
|
(17,568)
|
|
|
157,683
|
|
Gross
Revenues
|
|
|
1,252
|
|
|
828,484
|
|
|
167,859
|
|
|
(17,568)
|
|
|
980,027
|
|
Less
promotional allowances
|
|
|
-
|
|
|
138,543
|
|
|
29,568
|
|
|
-
|
|
|
168,110
|
|
Net
revenues
|
|
|
1,252
|
|
|
689,941
|
|
|
138,291
|
|
|
(17,568)
|
|
|
811,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
-
|
|
|
115,430
|
|
|
22,660
|
|
|
-
|
|
|
138,090
|
|
Gaming
taxes
|
|
|
-
|
|
|
159,945
|
|
|
24,201
|
|
|
-
|
|
|
184,146
|
|
Rooms,
food, beverage and other
|
|
|
17,940
|
|
|
253,801
|
|
|
77,413
|
|
|
(19,337)
|
|
|
329,817
|
|
Management
fee expense (revenue)
|
|
|
(22,881)
|
|
|
23,880
|
|
|
(999)
|
|
|
-
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
1,083
|
|
|
62,956
|
|
|
8,718
|
|
|
-
|
|
|
72,757
|
|
Total
operating expenses
|
|
|
(3,858)
|
|
|
616,012
|
|
|
131,993
|
|
|
(19,337)
|
|
|
724,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
5,110
|
|
|
73,929
|
|
|
6,298
|
|
|
1,769
|
|
|
87,107
|
|
Interest
expense, net
|
|
|
9,817
|
|
|
(56,943)
|
|
|
(7,684)
|
|
|
-
|
|
|
(54,815)
|
|
Minority
interest
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(5,122)
|
|
|
(5,122)
|
|
Equity
in income (loss) of subsidiaries
|
|
|
15,900
|
|
|
1,837
|
|
|
(8,527)
|
|
|
(9,210)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
30,827
|
|
|
18,823
|
|
|
(9,913)
|
|
|
(12,563)
|
|
|
27,170
|
|
Income
taxes
|
|
|
16,239
|
|
|
-
|
|
|
(2,996)
|
|
|
-
|
|
|
13,243
|
|
Income
(loss) from continuing operations
|
|
|
14,588
|
|
|
18,823
|
|
|
(6,917)
|
|
|
(12,563)
|
|
|
13,927
|
|
Income
from discontinued operations, net of taxes
|
|
|
-
|
|
|
-
|
|
|
660
|
|
|
-
|
|
|
660
|
|
Net
income (loss)
|
|
$
|
14,588
|
|
$
|
18,823
|
|
$
|
(6,257)
|
|
$
|
(12,563)
|
|
$
|
14,587
|
|
10.
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 Nine Months Ended January 23, 2005
|
|
Statement
of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
operating
activities
|
|
$
|
25,460
|
|
$
|
85,085
|
|
$
|
35,748
|
|
$
|
(12,794)
|
|
$
|
133,499
|
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investing
activities
|
|
|
(21,563)
|
|
|
(86,859)
|
|
|
(47,179)
|
|
|
6,050
|
|
|
(149,551)
|
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
financing
activities
|
|
|
(6,630)
|
|
|
(2,805)
|
|
|
6,831
|
|
|
6,744
|
|
|
4,140
|
|
Effect
of foreign currency exchange rates on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash
and cash equivalents
|
|
|
-
|
|
|
80
|
|
|
3
|
|
|
-
|
|
|
83
|
|
Net
increase (decrease) in cash and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash
equivalents
|
|
|
(2,733)
|
|
|
(4,499)
|
|
|
(4,597)
|
|
|
-
|
|
|
(11,829)
|
|
Cash
and cash equivalents at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
beginning
of the period
|
|
|
33,323
|
|
|
70,916
|
|
|
30,343
|
|
|
-
|
|
|
134,582
|
|
Cash
and cash equivalents at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
end
of the period
|
|
$
|
30,590
|
|
$
|
66,417
|
|
$
|
25,746
|
|
$
|
-
|
|
$
|
122,753
|
|
|
|
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
|
|
|
379,409
|
|
|
58,215
|
|
|
(5,896)
|
|
|
453,534
|
|
Total
assets
|
|
$
|
1,219,754
|
|
$
|
1,277,200
|
|
$
|
403,633
|
|
$
|
(1,215,699
|
|
$
|
1,684,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
|
80,454
|
|
|
(527)
|
|
|
-
|
|
|
71,988
|
|
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
|
|
$
|
1,277,200
|
|
$
|
403,633
|
|
$
|
(1,215,699)
|
|
$
|
1,684,888
|
|
10.
Consolidating Condensed Financial Information (continued)
(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.; IOC-City of St. Louis,
L.L.C.; and IOC-Manufacturing, Inc.. 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.; IOC Holdings Colorado,
Inc.; CCSC/Blackhawk, 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,
Isle of Capri Casinos Pittsburgh, Inc. and Capri Insurance Corporation.
|
11.
Related Party
On
April
25, 2005, the Company sold the Colorado Grande-Cripple Creek for $6.5 million
with $0.6 million payable in cash and the remaining $5.9 million as a 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 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.
12.
Valuation Charge
As
a
result of adverse gaming legislation in the UK, the Company determined during
the quarter ended January 23, 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.
13.
Subsequent Event
On
February 14, 2006, the Company announced that it had entered into a
definitive purchase agreement, dated February 13, 2006, to sell the its
properties in Bossier City, Louisiana and Vicksburg, Mississippi to privately
owned Legends Gaming, LLC for $240 million cash. The closing of the transaction,
expected to occur during the summer of 2006, is subject to regulatory and other
customary closing conditions. The Company expects to record a gain on this
transaction and intends to use the proceeds to fund other capital projects
or to
pay down existing debt.
ITEM
2. 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-Q.
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 Bahama 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)
|
|
Three
months ended
|
|
Nine
months ended
|
|
|
|
January
22,
|
|
January
23,
|
|
Variance
|
|
Variance
|
|
January
22,
|
|
January
23,
|
|
Variance
|
|
Variance
|
|
|
|
2006
|
|
2005
|
|
$ |
|
%
|
|
2006
|
|
2005
|
|
$ |
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mississippi
|
|
$
|
63,567
|
|
$
|
61,523
|
|
$
|
2,044
|
|
|
3.3%
|
|
$
|
185,124
|
|
$
|
184,854
|
|
$
|
270
|
|
|
0.1%
|
|
Lousiana
|
|
|
69,319
|
|
|
69,136
|
|
|
183
|
|
|
0.3%
|
|
|
186,425
|
|
|
209,307
|
|
|
(22,882)
|
|
|
(10.9%)
|
|
Missouri
|
|
|
37,495
|
|
|
39,287
|
|
|
(1,792)
|
|
|
(4.6%)
|
|
|
117,208
|
|
|
122,788
|
|
|
(5,580)
|
|
|
(4.5%)
|
|
Iowa
|
|
|
47,541
|
|
|
48,835
|
|
|
(1,294)
|
|
|
(2.6%)
|
|
|
153,326
|
|
|
157,813
|
|
|
(4,487)
|
|
|
(2.8%)
|
|
Colorado
|
|
|
38,347
|
|
|
31,988
|
|
|
6,359
|
|
|
19.9%
|
|
|
117,335
|
|
|
100,249
|
|
|
17,086
|
|
|
17.0%
|
|
International
|
|
|
8,502
|
|
|
6,845
|
|
|
1,657
|
|
|
24.2%
|
|
|
23,942
|
|
|
19,563
|
|
|
4,379
|
|
|
22.4%
|
|
Corporate
and other
|
|
|
5,078
|
|
|
7,811
|
|
|
(2,733)
|
|
|
(35.0%)
|
|
|
15,965
|
|
|
17,342
|
|
|
(1,377)
|
|
|
(7.9%)
|
|
Total
net revenues
|
|
$
|
269,849
|
|
$
|
265,425
|
|
$
|
4,424
|
|
|
1.7%
|
|
$
|
799,325
|
|
$
|
811,916
|
|
$
|
(12,591)
|
|
|
(1.6%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mississippi
|
|
$
|
17,343
|
|
$
|
7,276
|
|
$
|
10,067
|
|
|
138.4%
|
|
$
|
29,846
|
|
$
|
19,711
|
|
$
|
10,135
|
|
|
51.4%
|
|
Lousiana
|
|
|
7,658
|
|
|
10,953
|
|
|
(3,295)
|
|
|
(30.1%)
|
|
|
15,890
|
|
|
30,141
|
|
|
(14,251)
|
|
|
(47.3%)
|
|
Missouri
|
|
|
5,743
|
|
|
5,930
|
|
|
(187)
|
|
|
(3.2%)
|
|
|
18,037
|
|
|
17,640
|
|
|
397
|
|
|
2.3%
|
|
Iowa
|
|
|
7,814
|
|
|
9,499
|
|
|
(1,685)
|
|
|
(17.7%)
|
|
|
29,024
|
|
|
32,848
|
|
|
(3,824)
|
|
|
(11.6%)
|
|
Colorado
|
|
|
7,248
|
|
|
6,370
|
|
|
878
|
|
|
13.8%
|
|
|
25,894
|
|
|
21,636
|
|
|
4,258
|
|
|
19.7%
|
|
International
|
|
|
(552)
|
|
|
(2,258)
|
|
|
1,706
|
|
|
75.6%
|
|
|
(1,416)
|
|
|
(6,937)
|
|
|
5,521
|
|
|
79.6%
|
|
Corporate
and other
|
|
|
(12,422)
|
|
|
(9,806)
|
|
|
(2,616)
|
|
|
(26.7%)
|
|
|
(41,373)
|
|
|
(27,933)
|
|
|
(13,440)
|
|
|
(48.1%)
|
|
Operating
income
|
|
$
|
32,832
|
|
$
|
27,964
|
|
$
|
4,868
|
|
|
17.4%
|
|
$
|
75,902
|
|
$
|
87,106
|
|
$
|
(11,204)
|
|
|
(12.9%)
|
|
In
Mississippi, our four operations accounted for 23.6% of our net revenues.
Isle-Biloxi’s net revenues and operating
income for the third quarter of fiscal 2006, increased over the third quarter
of
fiscal 2005 primarily due to the reopening of the casino on December 26, 2005
amidst the lack of competition. The Biloxi market, which before Hurricane
Katrina had thirteen casinos, currently has only three operating casinos.
Isle-Biloxi recorded an insurance receivable in the third quarter up to the
amount of operating and incremental expenses incurred between the beginning
of
the quarter and the casino reopening on December 26, 2005. Isle-Biloxi will
record any related income from business interruption proceeds when the insurance
carriers agree to the amount. We have also recorded an impairment charge for
the
estimated amount of the property damage and an offsetting insurance receivable.
Accordingly these expenses do not impact our operating results. When the
insurance carriers agree to the amounts of property damage payments, we will
record any related gains. Isle-Natchez experienced increases in both net
revenues and operating income during our third fiscal quarter resulting from
significant population shifts into its market area. Isle-Vicksburg showed an
increase in operating income over the prior year’s third fiscal quarter on flat
net revenues driven primarily by improved efficiencies in marketing spend and
overall cost controls. Isle-Lula’s net revenues and operating income both saw an
increase due to improved marketing programs and more efficient management of
expenses.
In
Louisiana, our two properties contributed 25.7% of our net revenues. Isle-Lake
Charles experienced an increase in net revenues and operating income due to
the
growth of the overall market. During the quarter Isle-Lake Charles recorded
an
additional $3.3 million expense for estimated property damage, which is included
in the line item "Hurricane related charges, net" on the income statement,
because we do not expect the property damage insurance proceeds to exceed the
cost. Isle-Bossier City showed a decrease in net revenues and operating income
as compared to the prior year’s third fiscal quarter due to increased
competition from, and expansion of, Native American gaming in Oklahoma.
In
Missouri, our two properties contributed 13.9% of our net revenues. Isle-Kansas
City’s net revenues and operating income were down as compared to the prior
year’s third fiscal quarter due primarily to a decreased gaming patron count
caused by the completion of competitors’ expansion projects in the market.
Isle-Boonville’s net revenues and operating income remained constant despite
construction disruption from the property’s new hotel. Construction of the
140-room hotel continues on schedule and is expected to open in the spring
of
2006.
In
Iowa,
our three casinos contributed 17.6% of our net revenues. Both Isle-Bettendorf
and Rhythm City-Davenport showed a decline in both net revenues and operating
income as compared to the prior year’s third fiscal quarter due to increased
competition and an increase in marketing spend. Isle-Marquette showed a slight
increase in net revenues and slightly lower operating income.
In
Colorado, our two Black Hawk casino operations contributed 14.2% of overall
net
revenues. The properties saw an increase in net revenues and operating
income due
to
completion of our expansion projects and the reduction of construction
disruption compared to the prior year period.
Our
international operations accounted for approximately 3.2% of our overall
revenues during the quarter. Isle-Our Lucaya experienced an increase in net
revenues and a decrease in the negative operating income compared to the prior
year period, primarily due to being closed in the prior year related to
hurricanes.
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 latter part of calendar 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
January 22, 2006, we had goodwill and other intangible assets with indefinite
useful lives of $433.1 million, representing 23.9% 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 goodwill and other indefinite-lived intangible assets
were not impaired. 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
January 22, 2006, we had property and equipment of $1.07 billion, representing
59.2% 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
an
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
payment of future claims.
Insurance
Accounting
The
Company initially took an impairment charge of $60.1 million based on initial
assessments of damages. After further review of the damaged and destroyed
property the Company determined that some of the property could be repaired
and
used in the future. The impairment charges related to the hurricanes were
reduced by $4.9 million for a total of $55.2 million during the quarter ended
January 22, 2006. The impairment charge was offset by an insurance receivable
for the amount the Company expects to recover from its insurance carriers.
The
Company has incurred $57.5 million for incremental out-of-pocket costs related
to the hurricanes and the property operating costs related to the periods
affected by the hurricanes. These amounts are included in the “hurricane related
charges, net” in the accompanying statements of income. The Company has
insurance coverage related to property damage, incremental costs and property
operating expenses it incurs due to damage caused by the hurricanes. The
“hurricane related charges, net” account also includes the total anticipated
recoveries expected from its insurance carriers of $107.7 million related to
the
impairments recognized related to the damaged property, the incremental costs
and property operating expenses that management believes are probable of
collection. The Company has received $26.1 million in advance payments from
its
insurance carriers. When the Company and its insurance carriers agree on the
final amount of the insurance proceeds the Company is entitled to, the Company
will also record any related gain in this account. The Company’s insurance
policies also provide coverage for the loss of profits caused by the storms.
Any
lost profit recoveries will be recognized when agreed to with the insurance
carrier and will be reflected in the related properties’ revenues.
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 three and nine months ended January 22, 2006,
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. For the three and
nine months ended January 23, 2005, 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 also believe that our operating results are materially
affected by declines in the economy and adverse weather.
Three
Fiscal Months Ended January 22, 2006 Compared to Three Fiscal Months Ended
January 23, 2005
Gross
revenues for the fiscal quarter ended January 22, 2006 were $324.1 million,
which included $277.0 million of casino revenue, $9.9 million of room revenue,
$4.4 million of pari-mutuel commissions, and $32.9 million of food, beverage
and
other revenue. This compares to gross revenues for the fiscal quarter ended
January 23, 2005 of $318.9 million, which included $266.7 million of casino
revenue, $10.5 million of room revenue, $5.2 million of pari-mutuel commissions
and $36.5 million of food, beverage and other revenue.
Casino
revenue increased by $10.3 million, or 3.9 %, compared to the fiscal quarter
ended January 23, 2005. We saw a large decrease in our revenues from Isle-Biloxi
due to the closure of that property until December 26, 2005. Isle-Natchez showed
an increase in revenues due to population shifts from eastern Louisiana.
Isle-Vicksburg benefited from a growing market area and improved marketing
efforts. Our Colorado properties showed significant increases in revenue due
to
the completion of our expansion projects and reduced construction disruption.
Room
revenue decreased $0.7 million, or 6.3%, compared to the fiscal quarter ended
January 23, 2005, primarily resulting from the reduced capacity at Isle-Biloxi.
Isle-Bossier City, Isle-Natchez and Isle-Vicksburg experienced increased cash
revenue room sales from evacuees and relief workers. Pari-mutuel commissions
earned at Pompano Park in Florida for the fiscal quarter were down a total
of
$0.9 million, or 16.5%, due to a decrease in racing days in the third fiscal
quarter of 2006 versus fiscal 2005 due to closure after Hurricane Wilma. Food
and beverage revenues decreased by $3.6 million, or 9.8%, stemming from
Isle-Biloxi closure following the hurricane.
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 1.5% in
fiscal quarter ended January 22, 2006, as compared to the prior year quarter.
Casino
operating expenses decreased $4.0 million, or 8.7% in the quarter ended January
22, 2006 compared to the fiscal quarter ended January 23, 2005. These expenses
are primarily comprised of salaries, wages and benefits and other operating
expenses of the casinos. These costs were down primarily due to the closure
of
Isle-Biloxi.
State
and
local gaming taxes increased $1.7 million or 2.8%, in the quarter as compared
to
the fiscal quarter ended January 23, 2005 due primarily to the increase in
gaming revenue. The rate for taxes as a percentage of gaming revenue decreased
slightly from 22.3% to 22.1%.
Room
expenses decreased $0.3 million, or 15.1%, compared to the fiscal quarter ended
January 23, 2005. 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.
Pari-mutuel
operating costs of Pompano Park in Florida decreased 13.8% in the quarter as
compared to our fiscal quarter ended January 23, 2005. This is related to the
closure of the track following Hurricane Wilma. Such costs consist primarily
of
compensation, benefits, purses, simulcast fees and other direct costs of track
operations.
Food
and
beverage expenses decreased $0.6 million, or 6.5% over the fiscal quarter ended
January 23, 2005. These expenses decreased partly as a result of our hurricane
stricken markets. 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 23.6% for the fiscal quarter ended January 23,
2005, to 24.5% for the fiscal quarter ended January 22, 2006.
Marine
and facilities expenses for the quarter decreased $.6 million, or 3.7%, compared
to our fiscal quarter ended January 23, 2005. 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.
Marketing
and administrative expenses decreased $.1 million, or 0.1%, compared to our
fiscal quarter ended January 23, 2005. 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 include administration and human resource department
expenses, rent, new development activities, professional fees and property
taxes.
Depreciation
expense for the quarter increased $1.9 million primarily due to new property
additions at our Colorado properties.
Net
interest expense for the quarter increased 13.6% compared with our fiscal
quarter ended January 23, 2005. This is attributable to the higher interest
rates and higher debt balances on the Company’s senior secured credit facility
partially offset by higher interest income.
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.
The
company’s effective tax rate from continuing operations for the three months
ended January 22, 2006 was 54.6% compared to 54.1% for the three months ended
January 23, 2005, which, in each case, excludes an unrelated party’s portion of
the Colorado Central Station-Black Hawk’s income taxes.
Nine
Fiscal Months Ended January 22, 2006 Compared to Nine Fiscal Months Ended
January 23, 2005
Gross
revenues for the nine months ended January 22, 2006, were $967.6 million, a
decrease of $12.4 million or 1.3%, compared to the nine months ended January
23,
2005. Gross revenues included $813.4 million of casino revenues, $37.1 million
of room revenues, $13.3 million of pari-mutuel commissions and $103.8 million
of
food, beverage and other revenues. This compares to gross revenues for the
nine
months ended January 23, 2005, of $980.0 million, which included $822.3 million
of casino revenues, $35.7 million of room revenues, $13.0 million of pari-mutuel
commissions and $109.0 million of food, beverage and other revenues.
Casino
revenues declined at those properties that experienced hurricane disruptions,
particularly the Isle-Biloxi and the Isle-Lake Charles. We saw a decrease in
casino revenues at our Missouri properties due primarily to the I-35 Paseo
bridge closure for 106 days during the nine months ended January 22, 2006.
We
also faced decreases in casino revenues at the Isle-Bossier City because of
increased competition from Native American gaming in Oklahoma. Revenue from
our
Colorado properties increased due to completion of our expansion projects and
the reduction of construction disruptions.
Room
revenues increased $1.3 million, or 3.7%, during the nine months as compared
to
the prior year period, primarily resulting from increased cash revenue room
sales from evacuees and relief workers at Isle-Lake Charles, Isle-Bossier City,
Isle-Natchez and Isle-Vicksburg. Pari-mutuel commissions earned at Pompano
Park
in Florida increased slightly, due to the increase in live racing days in 2006
compared to 2005, in spite of the closure of the track following Hurricane
Wilma. Food and beverage revenues decreased by 4.7% as compared to the prior
year period because of the closure of Isle-Biloxi and Isle-Lake Charles
following Hurricane Katrina and Hurricane Rita, respectively.
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 remained flat over the
same fiscal period a year ago.
Casino
operating expenses for the first nine months of fiscal 2006 decreased $8.3
million, or 6.0% as compared to the first nine months of fiscal 2005. These
expenses are primarily comprised of salaries, wages and benefits and other
operating expenses of the casinos. The decrease in casino operating expenses
is
primarily attributable to the hurricanes in our Isle-Biloxi and Isle-Lake
Charles markets.
Gaming
taxes decreased $3.8 million, or 2.0% in the nine months ended January 22,
2006,
primarily due to the decrease in gaming revenues. Gaming taxes as a percentage
of casino revenues decreased slightly from 22.4% for the nine months ended
January 23, 2005 to 22.2% of casino revenues for the nine months ended January
22, 2006.
Room
expenses for the nine months ended January 22, 2006 increased $0.2 million,
or
2.5% when compared to the nine months ended January 23, 2005. 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
occupancy at the Isle-Black Hawk, Isle-Lake Charles, Isle-Natchez and
Isle-Vicksburg .
Pari-mutuel
expenses increased 3.4% in the nine months ended January 22, 2006 as pari-mutuel
commissions increased due to more racing days in fiscal 2006 than in fiscal
2005.
Food,
beverage and other expenses decreased $1.3 million, or 4.8% during the nine
months ended January 22, 2006 as compared to the nine months ended January
23,
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 remained flat at 24.2%, as compared to the nine months ended January
23, 2005. These
expenses decreased primarily as a result of our hurricane stricken
markets.
Marine
and facilities expenses increased $0.2 million, or 0.4% for the nine months
ended January 22, 2006 as compared to the nine months ended January 23, 2005.
These expenses include salaries, wages and benefits, operating expenses of
the
marine crews, insurance, public areas, housekeeping and general maintenance
of
the riverboats and pavilions. The increase was primarily due to the Isle-Biloxi
preparing for Hurricanes Cindy, Dennis and Katrina and Isle-Lake Charles
preparing for Hurricane Rita.
Marketing
and administrative expenses increased $4.5 million, or 1.9% for the nine months
ended January 22, 2006 as compared to the nine months ended January 23, 2005.
The increase in expenses is primarily due to an increase in new development
costs and increased marketing efforts in select markets. 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 include administration and human resource department
expenses, rent, new development activities, professional fees and property
taxes.
Depreciation
and amortization expense increased $3.2 million, or 4.5% for the nine months
ended January 22, 2006 as compared to the nine months ended January 23, 2005.
Depreciation has increased as a result of our capital expansion
programs.
The
increase was primarily due to the capital additions at Isle-Biloxi, Isle-Bossier
City, Isle-Lake Charles, Isle-Black Hawk, Colorado Central Station and
Isle-Kansas City.
Our
effective tax rate from continuing operations for the nine months ended January
22, 2006 was 54.4% compared to 46.6% for the nine months ended January 23,
2005,
which, in each case, excludes an unrelated party’s portion of the Colorado
Central Station-Black Hawk’s income taxes. This increase in effective rate over
the comparable prior fiscal period is attributable to the effect of permanent
items on lower forecasted earnings for the entire fiscal year.
Liquidity
and Capital Resources
At
January 22, 2006, we had cash and cash equivalents and marketable securities
of
$126.9 million compared to $162.7 million at April 24, 2005, the end of our
last
fiscal year. Of this $35.8 million decrease, $38.9 million is a decrease in
cash
and cash equivalents and is the net result of $68.7 million net cash provided
by
operating activities, $177.0 million net cash used in investing activities,
$70.1 million net cash provided by financing activities and $0.7 million
decrease in cash from the effect of foreign currency exchange rates. The
offsetting increase of $3.1 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 January 22, 2006, we had $358.9
million of capacity under lines of credit and available term debt which
consisted of $322.7 million in unused credit capacity under the revolving loan
commitment on our senior secured credit facility, $32.0 million of unused credit
capacity under the Isle-Black Hawk’s senior secured credit facility (limited to
use by the Isle-Black Hawk), $0.2 million from the unused portion of Blue Chip
Casinos, PLC’s overdraft protection line of credit on their credit facility with
Bank of Scotland, and $4.0 million under other lines of credit and available
term debt. During the nine months ended January 22, 2006, the Isle-Black Hawk
paid off $8.0 million on its revolving loan under the Isle-Black Hawk’s senior
secured credit facility, and we drew down $10.5 million on other lines of
credit. 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 $127.7 million in property and equipment during the nine fiscal months
ended January 22, 2006, excluding the construction for the Isle-Biloxi new
casino barge, which was destroyed by Hurricane Katrina. The following table
reflects expenditures and accruals for property and equipment on major projects
approved by the Board of Directors for which we are committed in the nine fiscal
months ended January 22, 2006 and projected expenditures for these projects.
The
amounts in the table do not include any expenditures and accruals prior to
the
beginning of fiscal 2005.
|
|
|
|
Actual
|
|
Remaining
|
|
|
|
|
|
Fiscal
Year
|
|
Nine
Months
|
|
Fiscal
Year
|
|
|
|
|
|
|
|
Ended
4/24/05
|
|
Ended
1/22/06
|
|
Ending
4/30/06
|
|
Thereafter
|
|
|
|
|
|
(1)
|
|
(1)
|
|
(1)
|
|
(3)
|
|
|
|
|
|
(dollars
in millions)
|
|
|
|
Property
|
|
Project
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Isle-Biloxi
|
|
|
Construct
hotel
|
|
$
|
43.0
|
|
$
|
12.0
|
|
$
|
-
|
|
$
|
-
|
|
Isle-Bossier
City
|
|
|
Renovate
casino
|
|
|
2.4
|
|
|
2.1
|
|
|
0.2
|
|
|
-
|
|
Isle-Bettendorf
|
|
|
Construct
hotel
|
|
|
-
|
|
|
2.6
|
|
|
2.7
|
|
|
39.7
|
|
Isle-Davenport
|
|
|
Construct
hotel
|
|
|
-
|
|
|
0.2
|
|
|
-
|
|
|
42.8
|
|
Isle-Lake
Charles
|
|
|
Renovate
& expand casinos
|
|
|
7.5
|
|
|
5.0
|
|
|
1.4
|
|
|
-
|
|
Isle-Pompano
|
|
|
Construct
casino
|
|
|
-
|
|
|
8.9
|
|
|
1.5
|
|
|
-
|
|
Isle-Boonville
|
|
|
Construct
hotel
|
|
|
2.0
|
|
|
10.6
|
|
|
4.9
|
|
|
-
|
|
Isle-Black
Hawk (57% owned)
|
|
|
Expansion
& public improvements
|
|
|
62.5
|
|
|
21.7
|
|
|
4.8
|
|
|
-
|
|
Isle-Waterloo
|
|
|
Construct
casino & hotel
|
|
|
-
|
|
|
2.2
|
|
|
13.8
|
|
|
118.5
|
|
Isle
- Kansas City
|
|
|
Expansion
& public improvements
|
|
|
-
|
|
|
-
|
|
|
3.0
|
|
|
82.0
|
|
Coventry
|
|
|
Construct
leasehold improvements
|
|
|
8.4
|
|
|
10.5
|
|
|
8.0
|
|
|
32.1
|
|
Other
properties (2)
|
|
|
IGT
Advantage program
|
|
|
9.3
|
|
|
11.2
|
|
|
4.3
|
|
|
-
|
|
All
|
|
|
Slot
programs
|
|
|
31.8
|
|
|
17.3
|
|
|
7.0
|
|
|
-
|
|
All
|
|
|
Other
capital improvements
|
|
|
30.4
|
|
|
23.4
|
|
|
14.7
|
|
|
29.2
|
|
Total
|
|
|
|
|
$
|
197.3
|
|
$
|
127.7
|
|
$
|
66.3
|
|
$
|
344.3
|
|
(1)
Excludes: Isle-Biloxi new casino barge
(2)
Includes: Isle-Biloxi, Isle-Vicksburg, Isle-Natchez, Isle-Lula, Isle-Lake
Charles and Colorado Central Station
(3)
The
timing of these projects is discussed below
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
previously announced Isle-Biloxi hotel and parking plan, estimated at $79.0
million, included 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. This project was completed prior to Hurricane Katrina, with
the exception of the spa. In October 2004, we announced plans to replace the
casino at Isle-Biloxi with a new state-of-the-art casino facility, which was
expected to cost approximately $90.0 million and was expected to open in
December 2005. The Isle-Biloxi casino barge and the new casino barge, under
construction, were destroyed by Hurricane Katrina. The Company is currently
reviewing plans to rebuild the Isle-Biloxi casino. The rebuilding is expected
to
be funded through insurance proceeds.
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 Isle-Bettendorf. The cost of our portion
of
this project is approximately $45.0 million, and the new hotel is scheduled
to
open in the late spring of 2007.
We
began
construction of a 140-room hotel, including 20 suites and a 6,000 square foot
event center at Isle-Boonville in January 2005. The project is expected to
be
completed in the spring of 2006 and we have spent approximately $12.6 million
on
the project. The remaining $4.9 million will be spent in the fourth quarter
of
fiscal 2006.
We
are in
the final stages of a $94.0 million expansion project for 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 1,000 space parking structure
with 600 parking spaces open to the public. The new 162-room Colorado Central
Station hotel opened on December 24, 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). Total project costs are estimated to
be
$59.0 million ($3.0 million increase from first quarter, due to exchange rate
adjustment). Project costs for the leased space include design, architectural,
mechanical and electrical build-out, construction and equipment. As of fiscal
quarter end of January 22, 2006, we have spent $18.9 million on the Coventry
project and expect to spend the remainder over the next nine months. Completion
of the casino at the RICOHTM Arena Coventry is estimated to be in the
late 2006 or early 2007.
The
Isle-Marquette had planned $5.9 million in improvements, which 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
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
$134.5 million on constructing a 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 project to take approximately 20 months following
the receipt of necessary permits and licenses.
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 March 31, 2006, which date has been extended monthly by
us
numerous 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. In addition, during the fourth
quarter of fiscal 2005, the governor of Illinois appointed new members to the
gaming board. The reconstituted gaming board (working with the Illinois Attorney
General) resumed, and recently completed, 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 administrative law judge issued a written
recommendation upon the conclusion of the administrative proceeding that the
gaming license be revoked, in January 2006 the Illinois Gaming Board voted
to
accept that recommendation. This revocation is currently stayed pending appeal.
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). For the
above reasons, among others, there can be no assurance that the foregoing
conditions will be satisfied or that we will ultimately acquire the license.
In
May
2005, we signed a casino management and related development and option
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. During the fiscal quarter
ended July 24, 2005, we paid and expensed a $4.0 million payment to Eighth
Wonder pursuant to the terms of these agreements.
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 amended 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.
An
appeal challenging the validity of signatures needed to place the amendment
on
the ballot is pending following the granting of summary judgment against the
plaintiffs in a lower court dismissing the challenge. Oral arguments were held
in November 2005. Broward County voters passed their local referendum and
Miami-Dade county voters rejected their referendum in March 2005. Enabling
gaming legislation was passed by the Florida legislature in December 2005
authorizing 1,500 slot machines to be open 16 hours a day at a state tax rate
of
50% of gross gaming revenue. The Department administering the law is now
preparing draft rules and regulations for the operation of the slot machines.
Legislation has been introduced in the legislative session beginning in March
2006 seeking to repeal the constitutional amendment. As a result of the
forgoing, the installation and operation of slot machines remains uncertain.
Subject to Board approval, we have plans to build a new facility to accommodate
1,500 slot machines at a cost of approximately $125.0 million to be open
approximately nine to twelve months after construction begins. We do not plan
to
open a temporary facility.
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 $1.8 million is included in the Colorado Central Station-Black Hawk
property expansion project discussed above. We have also spent $20.1 million
at
the Isle-Biloxi, the Isle-Vicksburg, the Isle-Lula, the Isle-Lake Charles,
and
the Isle-Natchez, leaving a remaining budget of $4.6 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.
The
Company announced plans for an $85 million expansion project at its Kansas
City,
Missouri property. The expansion project will improve guest traffic patterns
and
renovate existing gaming space. Exterior plans include a new, updated entryway,
exterior facade refinishing, reconfiguration of existing parking, and the
addition of 1,000 parking spaces. Plans for the casino interior include
expanding and renovating the gaming area including 400 additional slots and
adding an entertainment venue to seat at least 1,000 guests, as well as
additional food and beverage amenities. The Kansas City expansion project is
subject to negotiation of an amended lease and development agreement and receipt
of necessary permits and approvals.
The
Company signed a joint development agreement with Lemieux Group LP that includes
a provision for Isle to fund a $290 million new multi-purpose arena and pursue
a
gaming license for 3,000 slot machines in Pittsburgh, Pennsylvania. The new
multi-purpose arena and gaming facility are part of a larger billion-dollar
effort known as Pittsburgh First to redevelop the Lower Hill and Uptown
Districts in conjunction with the Pittsburgh Penguins and a development partner.
This proposal is one of three applications under consideration by the
Pennsylvania Gaming Control Board for a single license with a decision expected
by the end of calendar 2006 or early 2007. If the license is granted to the
Isle
of Capri, the Company anticipates that the construction of the project would
begin shortly thereafter with a temporary casino also a possibility. Due to
the
uncertainty of the timing of the Gaming Control Board, license grant date,
the
final design of the gaming facility and the timing of obtaining the necessary
permits, we have not included this project in the above table.
Other
capital improvements include maintenance capital items and other small
projects.
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 nine fiscal months ended January 22, 2006, we had net sources of cash of
$70.1 million primarily in the following financing activities:
|
•
|
We
made net borrowings under the Isle-Black Hawk senior secured credit
facility of $55.5 million.
|
|
•
|
We
exercised a $69.0 million delayed draw term loan available under
its
Senior Secured Credit Facility.
|
|
•
|
We
made borrowings under Blue Chip’s credit facility of $0.5
million.
|
|
•
|
We
received proceeds from the exercise of stock options of $5.0
million.
|
|
•
|
We
made principal payments on our senior secured credit facility and
other
debt of $49.6 million.
|
|
•
|
We
purchased 367,303 shares of our common stock at a total cost of $8.5
million
|
|
•
|
We
paid $1.8 million in costs related to the Black Hawk financing
costs
|
As
of
January 22, 2006, we had $358.3 million of capacity under lines of credit and
available term debt consisting of $322.1 million in unused credit capacity
under
the revolving loan commitment on our senior secured credit facility, $32.0
million of unused credit capacity under the Isle-Black Hawk senior secured
credit facility (limited to use by the Isle-Black Hawk), $0.2 million of unused
credit capacity under the Bank of Scotland overdraft line of credit for Blue
Chip Casinos, PLC., and $4.0 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
fiscal 2005, we modified the covenants related to the Isle-Black Hawk senior
secured credit facility to align the covenants with the financial impact of
construction at Isle-Black Hawk. The Isle-Black Hawk is in compliance with
all
covenants contained in our senior and subordinated debt instruments as of
January 22, 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.
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 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) for reporting periods beginning 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.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
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 seven 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 senior secured credit facility
as of
January 22, 2006. 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 January 22, 2006.
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. There have been no material changes to this information since
April 24, 2005.
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
|
|
$
|
706.3
|
|
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.
ITEM
4. CONTROLS AND PROCEDURES.
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
January 22, 2006, 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 concluded that the design and operation
of
the Company’s disclosure controls and procedures were effective as of January
22, 2006.
CHANGES
IN INTERNAL CONTROLS
During
the fiscal quarter ended January 22, 2006, 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.
PART
II - OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
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 $7.8 million as of January 22, 2006, 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 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. During October 2005, the Administrative Supreme Court remanded
the matter back to the Athens Administrative Appeals Court for a hearing on
the
merits, which is expected to take place at the end of 2006 or early 2007. The
civil matter is set for hearing before the Greek Supreme Court 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.
We
are
subject to certain federal, state and local environmental protection, health
and
safety laws, regulations and ordinances that apply to businesses generally,
and
are subject to cleanup requirements at certain of our facilities as a result
thereof. We have not made, and do not anticipate making, material expenditures,
nor do we anticipate incurring delays with respect to environmental remediation
or protection. However, in part because our 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 we will not experience material
liabilities or delays.
We
are
subject to various contingencies and litigation matters and 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
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.
|
|
Total
Number of Shares Purchased
|
|
Average
Price Paid per Share
|
|
Total
Number of Shares Purchased as Part of Publicly Announced Plans
(1)
|
|
Maximum
Number of Shares that May Yet Be Purchased Under the Plans
(1)
|
|
Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October
24, 2005 to November 20, 2005
|
|
|
-
|
|
$
|
-
|
|
|
-
|
|
|
1,620,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November
21, 2005 to December 25, 2005
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,620,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
26, 2005 to January 22, 2006
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,620,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
-
|
|
$
|
-
|
|
|
-
|
|
|
1,620,902
|
|
(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. On October 7, 2005 the
board
also approved the repurchase of an additional 1,500,000 shares. Through
January 22, 2006, we have purchased 4,379,098 shares of our common
stock
under the two programs. These programs do not have maximum approved
dollar
amounts, nor expiration dates.
|
ITEM
3.
DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM
4. SUBMISSION OF MATTERS SUBJECT TO A VOTE OF
SECURITY HOLDERS.
None.
ITEM
5. OTHER INFORMATION.
None.
See
the
Index to Exhibits following the signature page hereto for a list of the exhibits
filed pursuant to Item 601 of Regulation S-K.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
ISLE
OF CAPRI CASINOS, INC.
|
|
|
Dated:
March 2, 2006
|
/s/
DONN MITCHELL II
|
|
Donn
Mitchell II
|
|
Chief
Financial Officer
|
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)
|
|
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10.11
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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)
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10.12
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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)
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INDEX
TO EXHIBITS (continued)
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10.13
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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)
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10.14
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Isle
of Capri Casinos, Inc. 2000 Long-Term Stock Incentive Plan
(15)
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10.15
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Isle
of Capri Casinos, Inc. Deferred Bonus Plan (15)
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10.16
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Employment
Agreement dated as of January 1, 2002 between Isle of Capri Casinos,
Inc.
and Allan B. Solomon (5)
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10.17
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Employment
Agreement dated as of January 1, 2002 between Isle of Capri Casinos,
Inc.
and Rexford A. Yeisley (5)
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10.18
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Employment
Agreement dated as of January 1, 2002 between Isle of Capri Casinos,
Inc.
and Timothy M. Hinkley (5)
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10.19
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Employment
Agreement dated as of January 1, 2002 between Isle of Capri Casinos,
Inc.
and Bernard Goldstein (5)
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10.20
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Employment
Agreement dated as of July 1, 2003 between Isle of Capri Casinos,
Inc. and
Thomas J. Carr (16)
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10.21
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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)
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10.22
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Isle
of Capri Casinos, Inc.’s 2005 Deferred Compensation Plan
(18)
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10.23
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Isle
of Capri Casinos, Inc.’s 1995 Deferred Compensation Plan
(18)
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10.24
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Isle
of Capri Casinos, Inc.’s 2005 Non-employee Director Deferred Compensation
Plan (18)
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10.25
|
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Employment
Agreement dated as of January 1, 2005 between Isle of Capri Casinos,
Inc.
and Robert F. Griffin (18)
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10.26
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Isle
of Capri Casinos, Inc. Master Retirement Plan (16)
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10.27
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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 (16)
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10.28
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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 (16)
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10.29
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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
(16)
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INDEX
TO EXHIBITS (continued)
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10.30
|
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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)
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10.31
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Second
Amended and Restated Credit Agreement, dated as of October 24, 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
(20)
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10.32
|
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Voluntary
Resignation Agreement dated November 14, 2005, between Isle of Capri
Casinos, Inc. and Rexford A. Yeisley (21)
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10.33
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Employment
Agreement dated as of January 3, 2006 between Isle of Capri casinos,
Inc.
and Robert S. Goldstein. (22)
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10.34
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Employment
Agreement dated as of January 13, 2006 between Isle of Capri casinos,
Inc.
and Donn Mitchell, II. (23)
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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.
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Certification
of Interim 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.
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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.
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Certification
of Interim 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.
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(1)
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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.
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(2)
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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.
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(3)
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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.
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(4)
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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.
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(5)
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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.
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(6)
|
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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.
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(7)
|
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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.
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(8)
|
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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.
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(9)
|
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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.
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(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.
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(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.
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(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.
|
INDEX
TO EXHIBITS (continued)
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(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.
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(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.
|
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(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.
|
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(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.
|
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(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.
|
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(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.
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(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.
|
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(20)
|
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Current Report on Form 8-K
filed on October 24, 2005 (File No. 0-20538) and incorporated herein
by
reference.
|
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(21)
|
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Current Report on Form 8-K
filed on November 17, 2005 (File No. 0-20538) and incorporated herein
by
reference.
|
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(22)
|
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Current Report on Form 8-K
filed on January 6, 2006 (File No. 0-20538) and incorporated herein
by
reference.
|
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|
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(23)
|
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Current Report on Form 8-K
filed on January 18, 2006 (File No. 0-20538) and incorporated herein
by
reference.
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45