For the Quarter Ended October 23, 2005
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 October 23, 2005
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 ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No x
As
of
November 18, 2005 the Company had a total of 33,680,460 shares of Common Stock
outstanding (which includes 3,908,730 shares held by us in treasury).
ISLE
OF CAPRI CASINOS, INC.
FORM
10-Q
INDEX
|
|
PAGE
|
PART
I
|
FINANCIAL
INFORMATION
|
|
ITEM 1.
|
FINANCIAL
STATEMENTS
|
|
|
CONSOLIDATED
BALANCE SHEETS, OCTOBER 23, 2005 (UNAUDITED)
AND
APRIL 24, 2005
|
2
|
|
CONSOLIDATED
STATEMENTS OF INCOME FOR THE THREE MONTHS AND SIX MONTHS ENDED
OCTOBER 23,
2005 AND OCTOBER 24, 2004 (UNAUDITED)
|
3
|
|
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY FOR THE SIX MONTHS ENDED OCTOBER 23,
2005 (UNAUDITED)
|
4
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED OCTOBER 23,
2005 AND
OCTOBER 24, 2004 (UNAUDITED)
|
5
|
|
NOTES
TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
|
7
|
ITEM 2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
26
|
ITEM 3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
37
|
ITEM 4.
|
CONTROLS
AND PROCEDURES
|
38
|
PART
II
|
OTHER
INFORMATION
|
|
ITEM 1.
|
LEGAL
PROCEEDINGS
|
39
|
ITEM 2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
40
|
ITEM 3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
40
|
ITEM 4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
41
|
ITEM 5.
|
OTHER
INFORMATION
|
41
|
ITEM 6.
|
EXHIBITS
|
41
|
SIGNATURE
|
42
|
EXHIBITS
|
43
|
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 increases in gaming taxes;
• the
effects of changes in non-gaming regulation;
• loss
of
key personnel;
• the
impact of inclement weather on our patronage;
• the
success and timing of repairs and reconstruction of the Gulf Coast region
following the effects of Hurricane Katrina;
• the
timing and amount of collection of insurance receivable;
• the
success and timing of repairs and reconstruction in Lake Charles, Louisiana
following the effects of Hurricane Rita and in Pompano Beach, Florida following
the effects of Hurricane Wilma;
• 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 foreign countries 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
|
|
October
23,
|
|
April
24,
|
|
|
|
2005
|
|
2005
|
|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
125,495
|
|
$
146,743
|
|
Marketable
securities
|
|
|
19,016
|
|
|
16,016
|
|
Accounts
receivable, net
|
|
|
15,377
|
|
|
15,460
|
|
Insurance
receivable
|
|
|
70,196
|
|
|
-
|
|
Deferred
income taxes
|
|
|
8,681
|
|
|
8,607
|
|
Deferred
state income taxes
|
|
|
988
|
|
|
988
|
|
Prepaid
expenses and other assets
|
|
|
23,846
|
|
|
16,634
|
|
Total
current assets
|
|
|
263,599
|
|
|
204,448
|
|
Property
and equipment, net
|
|
|
1,030,246
|
|
|
1,026,906
|
|
Other
assets:
|
|
|
|
|
|
|
|
Goodwill
|
|
|
340,254
|
|
|
343,851
|
|
Other
intangible assets
|
|
|
92,829
|
|
|
72,364
|
|
Deferred
financing costs, net
|
|
|
17,830
|
|
|
19,461
|
|
Restricted
cash
|
|
|
2,208
|
|
|
2,193
|
|
Prepaid
deposits and other
|
|
|
27,063
|
|
|
15,665
|
|
Total
assets
|
|
$
|
1,774,029
|
|
$
|
1,684,888
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Current
maturities of long-term debt
|
|
$
|
6,951
|
|
$
|
7,501
|
|
Accounts
payable
|
|
|
52,050
|
|
|
42,456
|
|
Accrued
liabilities:
|
|
|
|
|
|
|
|
Interest
|
|
|
10,921
|
|
|
10,312
|
|
Payroll
and related
|
|
|
49,338
|
|
|
47,806
|
|
Property
and other taxes
|
|
|
29,196
|
|
|
21,061
|
|
Income
taxes
|
|
|
3,611
|
|
|
1,160
|
|
Progressive
jackpots and slot club awards
|
|
|
15,174
|
|
|
15,045
|
|
Other
|
|
|
49,693
|
|
|
34,321
|
|
Total
current liabilities
|
|
|
216,934
|
|
|
179,662
|
|
Long-term
debt, less current maturities
|
|
|
1,205,112
|
|
|
1,148,617
|
|
Deferred
income taxes
|
|
|
43,594
|
|
|
45,544
|
|
Deferred
state income taxes
|
|
|
9,329
|
|
|
9,329
|
|
Other
accrued liabilities
|
|
|
22,675
|
|
|
17,115
|
|
Minority
interest
|
|
|
25,789
|
|
|
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:
33,624 at October 23, 2005 and 33,528 at April 24, 2005
|
|
|
336
|
|
|
335
|
|
Class
B common stock, $.01 par value; 3,000 shares authorized; none
issued
|
|
|
-
|
|
|
-
|
|
Additional
paid-in capital
|
|
|
149,030
|
|
|
148,177
|
|
Unearned
compensation
|
|
|
(1,830)
|
|
|
(1,488)
|
|
Retained
earnings
|
|
|
145,898
|
|
|
146,133
|
|
Accumulated
other comprehensive income (loss)
|
|
|
(598)
|
|
|
2,858
|
|
|
|
|
292,836
|
|
|
296,015
|
|
Treasury
stock, 3,909 shares at October 23, 2005 and 3,607 shares at
April 24,
2005
|
|
|
(42,240)
|
|
|
(34,619)
|
|
Total
stockholders' equity
|
|
|
250,596
|
|
|
261,396
|
|
Total
liabilities and stockholders' equity
|
|
$
|
1,774,029
|
|
$
|
1,684,888
|
|
|
|
|
|
|
|
|
|
See
notes
to the unaudited consolidated financial statements.
2
ISLE
OF CAPRI CASINOS, INC.
CONSOLIDATED
STATEMENTS OF INCOME
(UNAUDITED)
(In
thousands, except per share data)
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
|
October
23,
|
|
|
October
24,
|
|
|
October
23,
|
|
|
October
24,
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
|
2004
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
252,579
|
|
$
|
273,564
|
|
$
|
536,430
|
|
$
|
555,644
|
|
Rooms
|
|
|
12,903
|
|
|
12,309
|
|
|
27,203
|
|
|
25,212
|
|
Pari-mutuel
commissions and fees
|
|
|
3,779
|
|
|
3,362
|
|
|
8,951
|
|
|
7,801
|
|
Food,
beverage and other
|
|
|
32,325
|
|
|
36,248
|
|
|
70,895
|
|
|
72,440
|
|
Gross
revenues
|
|
|
301,586
|
|
|
325,483
|
|
|
643,479
|
|
|
661,097
|
|
Less
promotional allowances
|
|
|
53,644
|
|
|
57,712
|
|
|
114,003
|
|
|
114,606
|
|
Net
revenues
|
|
|
247,942
|
|
|
267,771
|
|
|
529,476
|
|
|
546,491
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
40,612
|
|
|
46,658
|
|
|
87,592
|
|
|
91,838
|
|
Gaming
taxes
|
|
|
56,372
|
|
|
61,810
|
|
|
119,143
|
|
|
124,570
|
|
Rooms
|
|
|
2,922
|
|
|
2,586
|
|
|
5,939
|
|
|
5,414
|
|
Pari-mutuel
|
|
|
3,200
|
|
|
2,749
|
|
|
7,116
|
|
|
6,219
|
|
Food,
beverage and other
|
|
|
7,948
|
|
|
8,691
|
|
|
17,088
|
|
|
17,785
|
|
Marine
and facilities
|
|
|
17,259
|
|
|
16,191
|
|
|
34,099
|
|
|
33,266
|
|
Marketing
and administrative
|
|
|
78,055
|
|
|
80,488
|
|
|
163,393
|
|
|
158,764
|
|
Other
charges
|
|
|
151
|
|
|
192
|
|
|
184
|
|
|
247
|
|
Hurricane
related charges, net
|
|
|
1,200
|
|
|
-
|
|
|
1,200
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
25,383
|
|
|
25,725
|
|
|
50,652
|
|
|
49,246
|
|
Total
operating expenses
|
|
|
233,102
|
|
|
245,090
|
|
|
486,406
|
|
|
487,349
|
|
Operating
income
|
|
|
14,840
|
|
|
22,681
|
|
|
43,070
|
|
|
59,142
|
|
Interest
expense
|
|
|
(21,394)
|
|
|
(18,958)
|
|
|
(41,604)
|
|
|
(36,353)
|
|
Interest
income
|
|
|
1,092
|
|
|
-
|
|
|
2,166
|
|
|
-
|
|
Minority
interest
|
|
|
(1,892)
|
|
|
(1,549)
|
|
|
(3,948)
|
|
|
(3,682)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations before income taxes
|
|
|
(7,354)
|
|
|
2,174
|
|
|
(316)
|
|
|
19,107
|
|
Income
tax expense (benefit)
|
|
|
(3,135)
|
|
|
1,989
|
|
|
(139)
|
|
|
8,675
|
|
Income
(loss) from continuing operations
|
|
|
(4,219)
|
|
|
185
|
|
|
(177)
|
|
|
10,432
|
|
Income
(loss) from discontinued operations, net of income taxes
|
|
|
-
|
|
|
263
|
|
|
(58)
|
|
|
625
|
|
Net
income (loss)
|
|
$
|
(4,219)
|
|
$
|
448
|
|
$
|
(235)
|
|
$
|
11,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per common share-basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$
|
(0.14)
|
|
$
|
0.01
|
|
$
|
(0.01)
|
|
$
|
0.35
|
|
Income
(loss) from discontinued operations, net of income taxes
|
|
|
-
|
|
|
0.01
|
|
|
(0.00)
|
|
|
0.02
|
|
Net
income (loss)
|
|
$
|
(0.14)
|
|
$
|
0.02
|
|
$
|
(0.01)
|
|
$
|
0.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per common share-diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$
|
(0.14)
|
|
$
|
0.01
|
|
$
|
(0.01)
|
|
$
|
0.34
|
|
Income
(loss) from discontinued operatons, net of income taxes
|
|
|
-
|
|
|
0.01
|
|
|
(0.00)
|
|
|
0.02
|
|
Net
income (loss)
|
|
$
|
(0.14)
|
|
$
|
0.01
|
|
$
|
(0.01)
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes
to the unaudited consolidated financial statements.
3
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
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(235)
|
|
|
-
|
|
|
-
|
|
|
(235)
|
|
Unrealized
gain on interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
rate
swap contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net
of income taxes of $158
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
237
|
|
|
-
|
|
|
237
|
|
Foreign
currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustments
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,693)
|
|
|
-
|
|
|
(3,693)
|
|
Comprehensive
income (loss)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,691)
|
|
Exercise
of stock options, including
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
tax benefit of $204
|
|
|
96
|
|
|
1
|
|
|
279
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
873
|
|
|
1,153
|
|
Purchase
of treasury stock
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(8,494)
|
|
|
(8,494)
|
|
Grant
of nonvested stock
|
|
|
-
|
|
|
-
|
|
|
574
|
|
|
(574)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Amortization
of unearned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
232
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
232
|
|
Balance,
October 23, 2005
|
|
|
33,624
|
|
$
|
336
|
|
$
|
149,030
|
|
$
|
(1,830)
|
|
$
|
145,898
|
|
$
|
(598)
|
|
$
|
(42,240)
|
|
$
|
250,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes
to the unaudited consolidated financial statements.
4
ISLE
OF CAPRI CASINOS, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In
thousands)
|
|
Six
Months Ended
|
|
|
|
|
October
23,
|
|
|
October
24,
|
|
|
|
|
2005
|
|
|
2004
|
|
Operating
activities:
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(235)
|
|
$
|
11,057
|
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
|
|
provided
by operating activities:
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
50,652
|
|
|
49,457
|
|
Amortization
of deferred financing costs
|
|
|
1,661
|
|
|
2,028
|
|
Amortization
of unearned compensation
|
|
|
232
|
|
|
328
|
|
Deferred
income taxes
|
|
|
(2,212)
|
|
|
-
|
|
Minority
interest
|
|
|
3,948
|
|
|
3,682
|
|
Impairment
charges
|
|
|
60,051
|
|
|
-
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(713)
|
|
|
519
|
|
Insurance
receivable
|
|
|
(70,196)
|
|
|
-
|
|
Income
tax payable
|
|
|
2,656
|
|
|
9,535
|
|
Prepaid
expenses and other assets
|
|
|
(7,445)
|
|
|
(5,763)
|
|
Accounts
payable and accrued liabilities
|
|
|
16,400
|
|
|
15,060
|
|
Net
cash provided by operating activities
|
|
|
54,799
|
|
|
85,903
|
|
|
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(108,659)
|
|
|
(80,156)
|
|
Acquistion
of license
|
|
|
(5,775)
|
|
|
-
|
|
Purchase
of short-term investments, net of sales
|
|
|
(2,922)
|
|
|
-
|
|
Payments
on notes receivable
|
|
|
12
|
|
|
(1,023)
|
|
Restricted
cash
|
|
|
(173)
|
|
|
(70)
|
|
Prepaid
deposits and other
|
|
|
(7,128)
|
|
|
(172)
|
|
Net
cash used in investing activities
|
|
|
(124,645)
|
|
|
(81,421)
|
|
|
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
|
|
Proceeds
from debt
|
|
|
50,000
|
|
|
1,153
|
|
Net
increase in line of credit
|
|
|
10,000
|
|
|
1,634
|
|
Principal
payments on debt and cash paid to retire debt
|
|
|
(3,166)
|
|
|
(4,851)
|
|
Payment
of deferred financing costs
|
|
|
(40)
|
|
|
(280)
|
|
Purchase
of treasury stock
|
|
|
(8,494)
|
|
|
(6,360)
|
|
Proceeds
from exercise of stock options
|
|
|
949
|
|
|
891
|
|
Cash
distributions to minority partner
|
|
|
-
|
|
|
(2,309)
|
|
Net
cash provided by (used in) financing activities
|
|
|
49,249
|
|
|
(10,122)
|
|
|
|
|
|
|
|
|
|
Effect
of foreign currency exchange rates on cash
|
|
|
(651)
|
|
|
31
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
|
(21,248)
|
|
|
(5,609)
|
|
Cash
and cash equivalents at beginning of period
|
|
|
146,743
|
|
|
134,582
|
|
Cash
and cash equivalents at end of period
|
|
$
|
125,495
|
|
$
|
128,973
|
|
|
|
|
|
|
|
|
|
See
notes
to the unaudited consolidated financial statements.
5
ISLE
OF CAPRI CASINOS, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS (continued)
(UNAUDITED)
(In
thousands)
|
|
Six
Months Ended
|
|
|
|
October
23,
|
|
October
24,
|
|
|
|
|
2005
|
|
|
2004
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
Net
cash payments for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
41,859
|
|
$
|
36,323
|
|
Income
taxes
|
|
|
(593)
|
|
|
(814)
|
|
Supplemental
schedule of noncash investing and financing
activities:
|
|
|
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
Construction
costs funded through accrued liabilities
|
|
|
7,484
|
|
|
6,115
|
|
Acquisition
of license
|
|
|
16,000
|
|
|
-
|
|
See
notes
to the unaudited consolidated financial statements.
6
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 $134.4 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.
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 six months ended October 23, 2005 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 quarter. Periodically,
this system necessitates a 53-week year. Fiscal 2006 commenced on April 25,
2005
and ends on April 30, 2006.
7
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO THE UNAUDITED FINANCIAL STATEMENTS (Continued)
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, but is continuing
to
evaluate its option to early adopt.
SFAS
123(R) permits public companies to adopt its requirements using one of two
methods:
1) A
“modified prospective” method in which compensation cost is recognized beginning
with the effective date (a) based on the requirements of SFAS 123(R) for
all
share-based payments granted after the effective date and (b) based on the
requirements of SFAS 123 for all awards granted to employees prior to the
effective date of SFAS 123(R) that remain unvested on the effective date.
2) A
“modified retrospective” method which includes the requirements of the modified
prospective method described above, but also permits entities to restate
for the
amounts previously recognized under SFAS 123 for purposes of pro forma
disclosures either (a) all prior periods presented or (b) prior interim periods
of the year of adoption.
The
Company is currently evaluating the two recognition methods available under
SFAS
123(R) to determine which method it will adopt.
As
permitted by SFAS 123, the Company currently accounts for share-based payments
to employees using APB 25’s intrinsic value method and, as such, generally
recognizes no compensation cost for employee stock options. 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 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.
8
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO THE UNAUDITED FINANCIAL STATEMENTS (Continued)
3.
Stock-Based Compensation (continued)
|
|
|
|
|
Six
Months Ended
|
|
|
|
|
October
23, 2005
|
|
|
October
24, 2004
|
|
|
October
23, 2005
|
|
|
October
24, 2004
|
|
|
|
(In
thousands, except per share data)
|
|
Income
(loss) from continuing operations
|
|
$
|
(4,219)
|
|
$
|
185
|
|
$
|
(177)
|
|
$
|
10,432
|
|
Deduct:
Total stock-based employee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation
expense determined under fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
value
based method for all awards, net of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
related
tax effects
|
|
|
(1,119)
|
|
|
(516)
|
|
|
(2,141)
|
|
|
(1,780)
|
|
Pro
forma Net Income before discontinued operations
|
|
$
|
(5,338)
|
|
$
|
(331)
|
|
$
|
(2,318)
|
|
$
|
8,652
|
|
Net
Income (loss) from discontinued operations
|
|
$
|
-
|
|
$
|
263
|
|
$
|
(58)
|
|
$
|
625
|
|
Pro
forma Net Income (loss) after discontinued operations
|
|
$
|
(5,338)
|
|
$
|
(68)
|
|
$
|
(2,376)
|
|
$
|
9,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share: Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$
|
(0.14)
|
|
$
|
0.01
|
|
$
|
(0.01)
|
|
$
|
0.35
|
|
Income
(loss) from discontinued operations
|
|
$
|
-
|
|
$
|
0.01
|
|
$
|
(0.00)
|
|
$
|
0.02
|
|
Net
Income (loss)
|
|
$
|
(0.14)
|
|
$
|
0.02
|
|
$
|
(0.01)
|
|
$
|
0.37
|
|
Earnings
per share: Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro
Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$
|
(0.18)
|
|
$
|
(0.01)
|
|
$
|
(0.08)
|
|
$
|
0.29
|
|
Income
(loss) from discontinued operations
|
|
$
|
-
|
|
$
|
0.01
|
|
$
|
(0.00)
|
|
$
|
0.02
|
|
Net
Income (loss)
|
|
$
|
(0.18)
|
|
$
|
(0.00)
|
|
$
|
(0.08)
|
|
$
|
0.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share: Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
Reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$
|
(0.14)
|
|
$
|
0.01
|
|
$
|
(0.01)
|
|
$
|
0.34
|
|
Income
(loss) from discontinued operations
|
|
$
|
-
|
|
$
|
0.01
|
|
$
|
(0.00)
|
|
$
|
0.02
|
|
Net
Income (loss)
|
|
$
|
(0.14)
|
|
$
|
0.01
|
|
$
|
(0.01)
|
|
$
|
0.36
|
|
Earnings
per share: Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro
Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$
|
(0.18)
|
|
$
|
(0.01)
|
|
$
|
(0.08)
|
|
$
|
0.28
|
|
Income
(loss) from discontinued operations
|
|
$
|
-
|
|
$
|
0.01
|
|
$
|
(0.00)
|
|
$
|
0.02
|
|
Net
Income (loss)
|
|
$
|
(0.18)
|
|
$
|
(0.00)
|
|
$
|
(0.08)
|
|
$
|
0.30
|
|
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
|
|
|
October
23, 2005
|
|
|
4.00
|
%
|
|
|
6.26
|
years
|
|
|
55.8
|
%
|
|
|
None
|
|
|
October
24, 2004
|
|
|
3.97
|
%
|
|
|
6.38
|
years
|
|
|
55.5
|
%
|
|
|
None
|
|
9
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO THE UNAUDITED FINANCIAL STATEMENTS (Continued)
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. The casino facility
has
been closed since that time; however; the Company’s hotel facility has
subsequently reopened. The Company, subject to the receipt of necessary
permits
and licenses, plans to reopen an interim casino in space available within
the
hotel until a permanent facility is built. The interim casino is expected
to be
opened within 60 days.
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.
During
the quarter ended October 23, 2005, hurricane related charges were recognized
related to impairment charges of $60.1 million for assets damaged or
destroyed
by the hurricanes and $11.3 million for incremental costs incurred 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 anticipated recoveries expected from its
insurance
carriers of $70.2 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. 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.
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
|
|
|
(700)
|
|
Balance
at October 23, 2005
|
|
$
|
340,254
|
|
Other
intangible assets consist of the following:
|
|
October
23,
|
|
April
24,
|
|
|
|
2005
|
|
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 six months ended October 23, 2005, the Company recorded $20.1 million
of
gaming license fees related to the Waterloo, Iowa project and $0.6 million
of
gaming license fees related to the Pompano, Florida project.
10
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO THE UNAUDITED FINANCIAL STATEMENTS (Continued)
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 October 23, 2005 and April 24, 2005.
|
|
|
October
23,
|
|
|
April
24,
|
|
|
|
|
2005
|
|
|
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
|
|
|
298,000
|
|
|
249,375
|
|
Revolver
|
|
|
-
|
|
|
-
|
|
Isle-Black
Hawk Senior Secured Credit Facility, non-recourse to Isle of Capri
|
|
|
|
|
|
|
|
Casinos,
Inc. (described below):
|
|
|
|
|
|
|
|
Variable
rate term loan Tranche A
|
|
|
-
|
|
|
-
|
|
Variable
rate term loan Tranche B
|
|
|
-
|
|
|
-
|
|
Variable
rate term loan Tranche C
|
|
|
162,525
|
|
|
163,350
|
|
Revolver
|
|
|
36,000
|
|
|
26,000
|
|
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)
|
|
|
6,236
|
|
|
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
|
|
|
3,584
|
|
|
3,662
|
|
|
|
|
1,212,063
|
|
|
1,156,118
|
|
Less
current maturities
|
|
|
6,951
|
|
|
7,501
|
|
Long-term
debt
|
|
$
|
1,205,112
|
|
$
|
1,148,617
|
|
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
|
%
|
11
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO THE UNAUDITED FINANCIAL STATEMENTS (Continued)
6.
Long-Term Debt (continued)
7%
Senior Subordinated Notes (continued)
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 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.
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%.
12
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO THE UNAUDITED FINANCIAL STATEMENTS (Continued)
6.
Long-Term Debt (continued)
Senior
Secured Credit Facility (continued)
The
proceeds from the refinancing were used to pay down the existing
senior secured
credit facility term loan, of which $205.6 million in principal and
$0.7 million
in accrued interest were outstanding as of February 4, 2005. The
remainder of
the undrawn facility will be used for general corporate purposes,
including
working capital, permitted acquisitions, capital expenditures and
investments.
Pursuant
to the refinancing, the Company recognized a loss before income taxes
on early
extinguishment of debt of $5.3 million, due to the write-off of previously
deferred financing costs related to its existing senior secured credit
facility.
The costs associated with the new senior secured credit facility
have been
deferred and are being amortized over the term of the new facility.
The
senior secured credit facility provides for certain covenants, including
those
of a financial nature. The senior secured credit facility is secured
by liens on
substantially all of the Company’s assets and guaranteed by all of its
restricted subsidiaries. As of October 23, 2005, 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 October 23, 2005 was 5.68%.
At
October 23, 2005, the Company had $298.0 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
The
Isle-Black Hawk senior secured credit facility provides for a $40.0
million
revolving credit facility maturing on December 31, 2006, or such
date as the
Tranche C term loans are repaid in full, whichever comes first and
$165.0
million Tranche C term loan matures on December 31, 2007, each of
which is
non-recourse to the Isle of Capri Casinos, Inc. The Isle-Black Hawk
is required
to make quarterly principal payments of $0.4 million on the term
loan portions
of the Isle-Black Hawk senior secured credit facility that commenced
in June
2004, with a balloon payment of $159.2 million due upon maturity.
At
the
Isle-Black Hawk’s option, the revolving credit facility loan may bear interest
at (1) the higher of 0.5% in excess of the federal funds effective
rate or the
rate that the bank group announces from time to time as its prime
lending rate
plus an applicable margin of up to 2.50% or (2) a rate tied to a
LIBOR rate plus
an applicable margin of up to 3.50%. The Tranche C term loan may
bear interest
at (1) the higher of 0.5% in excess of the federal funds effective
rate or the
rate that the bank group announces from time to time as its prime
lending rate
plus an applicable margin of up to 2.00% or (2) a rate tied to a
LIBOR rate plus
an applicable margin of up to 3.00%.
The
Isle-Black Hawk senior secured credit facility as amended provides
for certain
covenants including those of a financial nature. The Isle-Black Hawk
was in
compliance with all of the covenants as of October 23, 2005. The
Isle-Black Hawk
senior secured credit facility is secured by liens on the Isle-Black
Hawk’s
assets.
The
weighted average effective interest rate of total debt outstanding
under the
Isle-Black Hawk Senior Secured Credit Facility at October 23, 2005
was 7.16%.
13
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO THE UNAUDITED FINANCIAL STATEMENTS (Continued)
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 49.2% of its variable rate term debt,
outstanding
under the Isle-Black Hawk’s senior secured credit facility as of October 23,
2005. The swap agreements effectively convert portions of its
variable rate debt
to a fixed-rate basis until the fourth fiscal quarter of 2008,
thus reducing the
impact of interest rate changes on future interest expense. The
interest rate
swap agreements terminate as follows: $40.0 million in fiscal
2006 and $40.0
million in fiscal 2008. The Company evaluates the effectiveness
of these hedged
transactions on a quarterly basis. No portion of the hedging
instruments was
ineffective during the quarter ended October 23, 2005. Accordingly,
no gains or
losses have been recognized on these cash flow hedges.
At
October 23, 2005, the Isle-Black Hawk does not expect to reclassify
any net
gains or losses on derivative instruments from accumulated other
comprehensive
income to earnings during the next twelve months due to the payment
of variable
interest associated with the floating rate debt.
Isle-Black
Hawk Special Assessment BID Bonds
In
July
1998, the Black Hawk Business Improvement District (the “BID”), issued $2.9
million in 6% bonds due on December 1, 2009. The proceeds from
the sale of the
bonds were used to fund road and utility improvements in the
Special Improvement
District 1997-1 (the “SID”), of which the Isle-Black Hawk is a member. The total
costs of the improvements amounted to $2.2 million with the excess
proceeds
being returned to the bondholders by the BID. The Isle-Black
Hawk is responsible
for 50% of this amount plus interest, which is non-recourse to
the Isle of Capri
Casinos, Inc. In April 2000, the Isle-Black Hawk made the first
of twenty
semi-annual payments of $0.1 million in the form of special property
tax
assessments levied on the improvement project. This amount is
calculated by
amortizing $1.1 million or 50% of the net bond proceeds, over
twenty periods at
an interest rate of 6.25%. The difference between the bond rate
of 6% and the
6.25% assessed is to cover administrative costs of the BID related
to the
issuance.
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
October 23, 2005, £3.4 million ($6.0 million) has been borrowed. The term loan
is to be repaid in quarterly payments commencing July 2005, and
is to be repaid
in April 2009. The interest rate is either, at Blue Chip’s option, the Bank of
Scotland’s base rate or LIBOR plus a margin of 1.75 percent.
Isle-Bettendorf
TIF Bonds
As
part
of the City of Bettendorf Development Agreement dated June 17,
1997, the City of
Bettendorf issued $9.5 million in tax incremental financing bonds
(“TIF Bonds”),
$7.5 million of which was used by the Isle-Bettendorf to construct
an overpass,
parking garage, related site improvements and pay for disruption
damages caused
by construction of the overpass. To enable financing of the City
of Bettendorf’s
obligations, the Isle-Bettendorf will pay incremental property
taxes on the
developed property assessed at a valuation of not less than $32.0
million until
the TIF Bonds mature. Additionally, the TIF Bonds will also be
repaid from the
incremental taxes on the developed property within the defined
“TIF District,”
which includes the Isle-Bettendorf and over 100 other tax paying
entities. In
the event that the taxes generated by the project and other qualifying
developments in the redevelopment district do not fund the repayment
of the
total TIF Bonds prior to their scheduled maturity, the Isle-Bettendorf
will pay
the City of Bettendorf $0.25 per person for each person entering
the boat until
the remaining balance has been repaid.
14
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO THE UNAUDITED FINANCIAL STATEMENTS (Continued)
6.
Long-Term Debt (continued)
Isle-Davenport
General Obligation Bonds
In
2002,
the Isle-Davenport entered into an agreement with the City
of Davenport whereby
the City of Davenport would construct and own a skybridge
connecting to the
Isle-Davenport’s facility, allowing safer access across the street and
railroad
tracks. The project has been completed by the City of Davenport
and at a cost of
$6.4 million, with the Isle-Davenport obligated to pay
$1.8 million. In February
2004, the City of Davenport issued $1.8 million in ten-year
general obligation
tax-exempt bonds at an average interest rate of 3.1%. The
Isle-Davenport is
required to make annual payments of principal and interest
to the City of
Davenport to retire the bonds.
Lines
of Credit
As
of
October 23, 2005, the Company had $390.1 million of availability
under its lines
of credit.
7.
Comprehensive Income (Loss)
Comprehensive
income (loss) consists of the following:
|
|
|
Unrealized
gain (loss) 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
|
|
|
74
|
|
|
(4,045)
|
|
|
(3,971)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
October 23, 2005
|
|
$
|
179
|
|
$
|
(1,292)
|
|
$
|
(1,113)
|
|
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.
15
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO THE UNAUDITED FINANCIAL STATEMENTS (Continued)
8.
Contingencies
In
August
1997, a lawsuit was filed that seeks to nullify a contract
to which Louisiana
Riverboat Gaming Partnership is a party. Pursuant to the
contract, Louisiana
Riverboat Gaming Partnership paid a fixed amount plus a percentage
of revenues
to various local governmental entities, including the City
of Bossier City and
the Bossier Parish School Board, in lieu of payment of a
per-passenger boarding
fee. The case was tried on April 6, 2004. The trial court
rendered a ruling in
favor of the defendants, finding that, although the legislature
amended the
boarding fee statute in 2003 so as to prohibit future boarding
fee agreements,
any pre-existing agreement between a riverboat and either
the City of Bossier
City or the Bossier Parish Police Jury will remain valid
and in effect until its
expiration. Louisiana Riverboat Gaming Partnership’s contract expired on April
4, 2004. Therefore, Louisiana Riverboat Gaming Partnership
now pays a boarding
fee to the City as outlined by the statute. Louisiana Riverboat
Gaming
Partnership still has an existing contract with the Bossier
Parish Police Jury,
which was not an issue in the litigation, and which will
remain in effect until
its expiration on January 1, 2007, unless extended by the
parties. The
plaintiffs appealed the trial court’s ruling to the Second Circuit Court of
Appeal, and the appellate court reversed and remanded the
matter. The Company,
along with the other defendants, filed writ applications
to appeal the matter to
the Louisiana Supreme Court. The court has granted two applications
for
appeal-one filed on behalf of Bossier City and Bossier Parish,
and another filed
on behalf of the Bossier Sheriff’s Office and the Greater Bossier Economic
Development Foundation. A hearing has not been scheduled.
The Company will
continue to vigorously defend this matter as may be required.
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 $7.8 million as of October 23, 2005,
based on published
exchange rates). Although it is difficult to determine the
damages being sought
from the lawsuit, the action may seek damages up to that
aggregate amount plus
interest from the date of the action. The Athens Civil Court
of First Instance
granted judgment in the Company’s favor and dismissed the lawsuit, but the
Ministry appealed the matter and the appeal was heard before
the Athens Appeal
Court of First Instance. The Athens Appeal Court issued certified
copies of
judgments denying the Ministry’s appeal. The Ministry elected to appeal this
matter further to the Supreme Court. 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.
On
December 30, 2002, the County of Jefferson, Missouri initiated
a lawsuit in the
Circuit Court of Jefferson County, Missouri against the Company
and a subsidiary
alleging a breach of a 1993 contract entered into by the
County and that
subsidiary, and guaranteed by Lady Luck Gaming Corporation,
relating to the
development of a casino site near Kimmswick, Missouri. The
suit alleged damages
in excess of $10.0 million. The
Company increased its reserve for this suit by $6.1 million
in the quarter ended
October 23, 2005. Subsequent
to the end of the quarter, the parties reached a settlement
that is within the
amounts reserved.
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.
16
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO THE UNAUDITED FINANCIAL STATEMENTS (Continued)
9.
Earnings per Share of Common Stock
The
following table sets forth the computation of basic and diluted
earnings per
share:
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
|
October
23,
|
|
|
October
24,
|
|
|
October
23,
|
|
|
October
24,
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
|
2004
|
|
|
|
|
(In
thousands, except per share data)
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(4,219)
|
|
$
|
448
|
|
$
|
(235)
|
|
$
|
11,057
|
|
Numerator
for basic earnings per share - income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available
to common stockholders
|
|
$
|
(4,219)
|
|
$
|
448
|
|
$
|
(235)
|
|
$
|
11,057
|
|
Effect
of diluted securities
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Numerator
for diluted earnings per share-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
(loss) available to common stockholders after
|
|
|
|
|
|
|
|
|
|
|
|
|
|
assumed
conversions
|
|
$
|
(4,219)
|
|
$
|
448
|
|
$
|
(235)
|
|
$
|
11,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
for basic earnings per share -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
weighted
- average shares
|
|
|
30,097
|
|
|
29,532
|
|
|
30,105
|
|
|
29,610
|
|
Effect
of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
stock options and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
nonvested
restricted stock
|
|
|
-
|
|
|
1,010
|
|
|
-
|
|
|
1,036
|
|
Denominator
for diluted earnings per share -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjusted
weighted - average shares and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
assumed
conversions
|
|
|
30,097
|
|
|
30,542
|
|
|
30,105
|
|
|
30,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings (loss) per share
|
|
$
|
(0.14)
|
|
$
|
0.02
|
|
$
|
(0.01)
|
|
$
|
0.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings (loss) per share
|
|
$
|
(0.14)
|
|
$
|
0.01
|
|
$
|
(0.01)
|
|
$
|
0.36
|
|
The
Company computed basic earnings per share by dividing net income
(loss) by the
weighted average number of shares outstanding for the period. The
Company
determined diluted earnings (loss) per common at October 23, 2005,
as net income
(loss) 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. For the three and six
months ended
October 23, 2005, all potential common shares related to employee
stock options
were considered anti-dilutive as the Company recorded a net loss
during the
periods. If anti-dilutive shares were included for the three and
six months
ended October 23, 2005, the impact would have been a reduction of
281,053 shares
and 267,069 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 six months ended October
24, 2004,
the impact would have been a reduction of 759,595 shares and 701,262
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.
Income Taxes
The
Company’s effective tax rate from continuing operations for the year to date
ending October 23, 2005 was 60.0% compared to 44.1% for the year
to date ending
October 24, 2004, 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.
17
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO THE UNAUDITED FINANCIAL STATEMENTS (Continued)
11.
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 October
23, 2005 and April 24, 2005, statements of income for the three and six
months
ended October 23, 2005 and October 24, 2004 and statements of cash flows
for the
six months ended October 23, 2005 and October 24, 2004.
ISLE
OF CAPRI CASINOS, INC.
CONSOLIDATING
CONDENSED GUARANTOR SUBSIDIARIES, NON-GUARANTOR SUBSIDIARIES,
AND
PARENT COMPANY FINANCIAL INFORMATION
AS
OF OCTOBER 23, 2005 AND APRIL 24, 2005 AND FOR
THE
THREE AND SIX MONTHS ENDED OCTOBER 23, 2005 AND OCTOBER 24, 2004
(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 October 23, 2005
|
Balance
Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
$
|
53,079
|
|
$
|
168,605
|
|
$
|
65,873
|
|
$
|
(23,958)
|
|
$
|
263,599
|
|
Intercompany
receivables
|
|
|
955,410
|
|
|
(317,763)
|
|
|
34,123
|
|
|
(671,770)
|
|
|
-
|
|
Investments
in subsidiaries
|
|
|
235,383
|
|
|
264,986
|
|
|
(4,846)
|
|
|
(495,523)
|
|
|
-
|
|
Property
and equipment, net
|
|
|
5,445
|
|
|
754,684
|
|
|
270,117
|
|
|
-
|
|
|
1,030,246
|
|
Other
assets
|
|
|
20,636
|
|
|
408,327
|
|
|
55,721
|
|
|
(4,500)
|
|
|
480,184
|
|
Total
assets
|
|
$
|
1,269,953
|
|
$
|
1,278,839
|
|
$
|
420,988
|
|
$
|
(1,195,751)
|
|
$
|
1,774,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
$
|
27,213
|
|
$
|
137,473
|
|
$
|
79,682
|
|
$
|
(27,434)
|
|
$
|
216,934
|
|
Intercompany
payables
|
|
|
-
|
|
|
585,821
|
|
|
84,553
|
|
|
(670,374)
|
|
|
-
|
|
Long-term
debt,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
less
current maturities
|
|
|
995,500
|
|
|
7,417
|
|
|
202,195
|
|
|
-
|
|
|
1,205,112
|
|
Other
accrued liabilities
|
|
|
(3,717)
|
|
|
79,275
|
|
|
40
|
|
|
-
|
|
|
75,598
|
|
Minority
interest
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
25,789
|
|
|
25,789
|
|
Stockholders'
equity
|
|
|
250,957
|
|
|
468,853
|
|
|
54,518
|
|
|
(523,732)
|
|
|
250,596
|
|
Total
liabilities and stockholders' equity
|
|
$
|
1,269,953
|
|
$
|
1,278,839
|
|
$
|
420,988
|
|
$
|
(1,195,751)
|
|
$
|
1,774,029
|
|
18
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO THE UNAUDITED FINANCIAL STATEMENTS (Continued)
11.
Consolidating Condensed Financial Information (continued)
|
|
|
|
|
|
(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 October 23, 2005
|
|
Statement
of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
-
|
|
$
|
203,571
|
|
$
|
49,008
|
|
$
|
-
|
|
$
|
252,579
|
|
Rooms,
food, beverage and other
|
|
|
11
|
|
|
41,619
|
|
|
10,232
|
|
|
(2,855)
|
|
|
49,007
|
|
Gross
revenues
|
|
|
11
|
|
|
245,190
|
|
|
59,240
|
|
|
(2,855)
|
|
|
301,586
|
|
Less
promotional allowances
|
|
|
-
|
|
|
43,485
|
|
|
10,159
|
|
|
-
|
|
|
53,644
|
|
Net
revenues
|
|
|
11
|
|
|
201,705
|
|
|
49,081
|
|
|
(2,855)
|
|
|
247,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
139
|
|
|
32,976
|
|
|
7,497
|
|
|
-
|
|
|
40,612
|
|
Gaming
taxes
|
|
|
-
|
|
|
47,053
|
|
|
9,319
|
|
|
-
|
|
|
56,372
|
|
Rooms,
food, beverage and other
|
|
|
11,247
|
|
|
78,817
|
|
|
23,769
|
|
|
(3,098)
|
|
|
110,735
|
|
Management
fee expense (revenue)
|
|
|
(7,147)
|
|
|
7,259
|
|
|
(112)
|
|
|
-
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
297
|
|
|
21,203
|
|
|
3,883
|
|
|
-
|
|
|
25,383
|
|
Total
operating expenses
|
|
|
4,536
|
|
|
187,308
|
|
|
44,356
|
|
|
(3,098)
|
|
|
233,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss)
|
|
|
(4,525)
|
|
|
14,397
|
|
|
4,725
|
|
|
243
|
|
|
14,840
|
|
Interest
expense
|
|
|
(17,886)
|
|
|
(13,637)
|
|
|
(5,072)
|
|
|
15,201
|
|
|
(21,394)
|
|
Interest
income
|
|
|
14,008
|
|
|
323
|
|
|
1,962
|
|
|
(15,201)
|
|
|
1,092
|
|
Interest
expense, net
|
|
|
(3,878)
|
|
|
(13,314)
|
|
|
(3,110)
|
|
|
-
|
|
|
(20,302)
|
|
Minority
interest
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,892)
|
|
|
(1,892)
|
|
Equity
in income (loss) of subsidiaries
|
|
|
1,329
|
|
|
(4,304)
|
|
|
(1,049)
|
|
|
4,023
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
before
income taxes
|
|
|
(7,074)
|
|
|
(3,221)
|
|
|
566
|
|
|
2,374
|
|
|
(7,354)
|
|
Income
tax expense (benefit)
|
|
|
(2,855)
|
|
|
-
|
|
|
(280)
|
|
|
-
|
|
|
(3,135)
|
|
Income
(loss) from continuing operations
|
|
|
(4,219)
|
|
|
(3,221)
|
|
|
846
|
|
|
2,374
|
|
|
(4,219)
|
|
Loss
from discontinued operations, net of taxes
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net
income (loss)
|
|
$
|
(4,219)
|
|
$
|
(3,221)
|
|
$
|
846
|
|
$
|
2,374
|
|
$
|
(4,219)
|
|
19
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO THE UNAUDITED FINANCIAL STATEMENTS (Continued)
11.
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 Six Months Ended October 23, 2005
|
Statement
of Income
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Casino
|
$
-
|
|
$
36,921
|
|
$
99,509
|
|
$
-
|
|
$
536,430
|
Rooms,
food, beverage and other
|
94
|
|
90,865
|
|
21,968
|
|
(5,878)
|
|
107,049
|
Gross
revenues
|
94
|
|
527,786
|
|
121,477
|
|
(5,878)
|
|
643,479
|
Less
promotional allowances
|
-
|
|
93,378
|
|
20,625
|
|
-
|
|
114,003
|
Net
revenues
|
94
|
|
434,408
|
|
100,852
|
|
(5,878)
|
|
529,476
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Casino
|
249
|
|
71,718
|
|
15,625
|
|
-
|
|
87,592
|
Gaming
taxes
|
-
|
|
100,375
|
|
18,768
|
|
-
|
|
119,143
|
Rooms,
food, beverage and other
|
21,146
|
|
167,489
|
|
46,630
|
|
(6,246)
|
|
229,019
|
Management
fee expense (revenue)
|
(15,147)
|
|
15,301
|
|
(154)
|
|
-
|
|
-
|
Depreciation
and amortization
|
632
|
|
42,416
|
|
7,604
|
|
-
|
|
50,652
|
Total
operating expenses
|
6,880
|
|
397,299
|
|
88,473
|
|
(6,246)
|
|
486,406
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss)
|
(6,786)
|
|
37,109
|
|
12,379
|
|
368
|
|
43,070
|
Interest
expense
|
(35,406)
|
|
(28,908)
|
|
(9,726)
|
|
32,436
|
|
(41,604)
|
Interest
income
|
30,007
|
|
627
|
|
3,968
|
|
(32,436)
|
|
2,166
|
Interest
expense, net
|
(5,399)
|
|
(28,281)
|
|
(5,758)
|
|
-
|
|
(39,438)
|
Minority
interest
|
-
|
|
-
|
|
-
|
|
(3,948)
|
|
(3,948)
|
Equity
in income (loss) of subsidiaries
|
12,020
|
|
(4,831)
|
|
(2,111)
|
|
(5,078)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations before
|
|
|
|
|
|
|
|
|
|
income
taxes
|
(165)
|
|
3,997
|
|
4,510
|
|
(8,658)
|
|
(316)
|
Income
tax expense (benefit)
|
70
|
|
-
|
|
(209)
|
|
-
|
|
(139)
|
Income
(loss) from continuing operations
|
(235)
|
|
3,997
|
|
4,719
|
|
(8,658)
|
|
(177)
|
Loss
from discontinued operations, net of taxes
|
-
|
|
-
|
|
(58)
|
|
-
|
|
(58)
|
Net
income (loss)
|
$
(235)
|
|
$
3,997
|
|
$
4,661
|
|
$
(8,658)
|
|
$
(235)
|
20
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO THE UNAUDITED FINANCIAL STATEMENTS (Continued)
11.
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 Six Months Ended October 23, 2005
|
|
Statement
of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operating
activities
|
|
$
|
(48,360)
|
|
$
|
89,215
|
|
$
|
19,022
|
|
$
|
(5,078)
|
|
$
|
54,799
|
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investing
activities
|
|
|
(13,736)
|
|
|
(84,677)
|
|
|
(31,593)
|
|
|
5,361
|
|
|
(124,645)
|
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
financing
activities
|
|
|
41,041
|
|
|
(719
|
)
|
|
9,210
|
|
|
(283)
|
|
|
49,249
|
|
Effect
of foreign currency exchange rates on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash
and cash equivalents
|
|
|
-
|
|
|
-
|
|
|
(651)
|
|
|
-
|
|
|
(651)
|
|
Net
increase (decrease) in cash and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash
equivalents
|
|
|
(21,055)
|
|
|
3,819
|
|
|
(4,012)
|
|
|
-
|
|
|
(21,248)
|
|
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
|
|
$
|
32,529
|
|
$
|
61,480
|
|
$
|
31,486
|
|
$
|
-
|
|
$
|
125,495
|
|
21
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO THE UNAUDITED FINANCIAL STATEMENTS (Continued)
11.
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 October 24, 2004
|
Statement
of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
-
|
|
$
|
232,110
|
|
$
|
41,454
|
|
$
|
-
|
|
$
|
273,564
|
|
Rooms,
food, beverage and other
|
|
|
58
|
|
|
44,895
|
|
|
6,966
|
|
|
-
|
|
|
51,919
|
|
Gross
revenues
|
|
|
58
|
|
|
277,005
|
|
|
48,420
|
|
|
-
|
|
|
325,483
|
|
Less
promotional allowances
|
|
|
-
|
|
|
47,498
|
|
|
10,214
|
|
|
-
|
|
|
57,712
|
|
Net
revenues
|
|
|
58
|
|
|
229,507
|
|
|
38,206
|
|
|
-
|
|
|
267,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
-
|
|
|
38,954
|
|
|
7,704
|
|
|
-
|
|
|
46,658
|
|
Gaming
taxes
|
|
|
-
|
|
|
54,125
|
|
|
7,685
|
|
|
-
|
|
|
61,810
|
|
Rooms,
food, beverage and other
|
|
|
6,242
|
|
|
86,119
|
|
|
35,445
|
|
|
(16,909)
|
|
|
110,897
|
|
Management
fee expense (revenue)
|
|
|
(7,552)
|
|
|
7,984
|
|
|
(432)
|
|
|
-
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
361
|
|
|
22,418
|
|
|
2,946
|
|
|
-
|
|
|
25,725
|
|
Total
operating expenses
|
|
|
(949)
|
|
|
209,600
|
|
|
53,348
|
|
|
(16,909)
|
|
|
245,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss)
|
|
|
1,007
|
|
|
19,907
|
|
|
(15,142)
|
|
|
16,909
|
|
|
22,681
|
|
Dividend
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Interest
expense
|
|
|
(16,643)
|
|
|
(25,550)
|
|
|
(6,034)
|
|
|
28,977
|
|
|
(19,250)
|
|
Interest
income
|
|
|
25,625
|
|
|
263
|
|
|
3,380
|
|
|
(28,977)
|
|
|
291
|
|
Interest
income (expense), net
|
|
|
8,982
|
|
|
(25,287)
|
|
|
(2,654)
|
|
|
-
|
|
|
(18,959)
|
|
Minority
interest
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,549)
|
|
|
(1,549)
|
|
Equity
in income (loss) of subsidiaries
|
|
|
(6,637)
|
|
|
(1,664)
|
|
|
(2,659)
|
|
|
10,960
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
before
income taxes
|
|
|
3,352
|
|
|
(7,044)
|
|
|
(20,455)
|
|
|
26,320
|
|
|
2,173
|
|
Income
tax expense (benefit)
|
|
|
2,904
|
|
|
-
|
|
|
(661)
|
|
|
(255)
|
|
|
1,988
|
|
Income
(loss) from continuing operations
|
|
|
448
|
|
|
(7,044)
|
|
|
(19,794)
|
|
|
26,575
|
|
|
185
|
|
Income
from discontinued operations, net of taxes
|
|
|
-
|
|
|
-
|
|
|
263
|
|
|
-
|
|
|
263
|
|
Net
income (loss)
|
|
$
|
448
|
|
$
|
(7,044)
|
|
$
|
(19,531)
|
|
$
|
26,575
|
|
$
|
448
|
|
22
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO THE UNAUDITED FINANCIAL STATEMENTS (Continued)
11.
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 Six Months Ended October 24, 2004
|
|
Statement
of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
-
|
|
$
|
467,889
|
|
$
|
87,755
|
|
$
|
-
|
|
$
|
555,644
|
|
Rooms,
food, beverage and other
|
|
|
113
|
|
|
91,206
|
|
|
31,043
|
|
|
(16,909)
|
|
|
105,453
|
|
Gross
revenues
|
|
|
113
|
|
|
559,095
|
|
|
118,798
|
|
|
(16,909)
|
|
|
661,097
|
|
Less
promotional allowances
|
|
|
-
|
|
|
94,188
|
|
|
20,418
|
|
|
-
|
|
|
114,606
|
|
Net
revenues
|
|
|
113
|
|
|
464,907
|
|
|
98,380
|
|
|
(16,909)
|
|
|
546,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
-
|
|
|
77,081
|
|
|
14,757
|
|
|
-
|
|
|
91,838
|
|
Gaming
taxes
|
|
|
-
|
|
|
107,953
|
|
|
16,617
|
|
|
-
|
|
|
124,570
|
|
Rooms,
food, beverage and other
|
|
|
12,649
|
|
|
172,173
|
|
|
53,782
|
|
|
(16,909)
|
|
|
221,695
|
|
Management
fee expense (revenue)
|
|
|
(15,422)
|
|
|
16,147
|
|
|
(725)
|
|
|
-
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
738
|
|
|
42,786
|
|
|
5,722
|
|
|
-
|
|
|
49,246
|
|
Total
operating expenses
|
|
|
(2,035)
|
|
|
416,140
|
|
|
90,153
|
|
|
(16,909)
|
|
|
487,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
2,148
|
|
|
48,767
|
|
|
8,227
|
|
|
-
|
|
|
59,142
|
|
Interest
expense
|
|
|
(32,114)
|
|
|
(50,816)
|
|
|
(10,557)
|
|
|
56,460
|
|
|
(37,027)
|
|
Interest
income
|
|
|
51,206
|
|
|
515
|
|
|
5,413
|
|
|
(56,460)
|
|
|
674
|
|
Interest
expense, net
|
|
|
19,092
|
|
|
(50,301)
|
|
|
(5,144)
|
|
|
-
|
|
|
(36,353)
|
|
Dividend
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Minority
interest
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,682)
|
|
|
(3,682)
|
|
Equity
in income (loss) of subsidiaries
|
|
|
(210)
|
|
|
(1,797)
|
|
|
(5,007)
|
|
|
7,014
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
before
income taxes
|
|
|
21,030
|
|
|
(3,331)
|
|
|
(1,924)
|
|
|
3,332
|
|
|
19,107
|
|
Income
tax expense (benefit)
|
|
|
9,973
|
|
|
-
|
|
|
(1,298)
|
|
|
-
|
|
|
8,675
|
|
Income
(loss) from continuing operations
|
|
|
11,057
|
|
|
(3,331)
|
|
|
(626)
|
|
|
3,332
|
|
|
10,432
|
|
Income
from discontinued operations, net of taxes
|
|
|
-
|
|
|
-
|
|
|
625
|
|
|
-
|
|
|
625
|
|
Net
income (loss)
|
|
$
|
11,057
|
|
$
|
(3,331)
|
|
$
|
(1)
|
|
$
|
3,332
|
|
$
|
11,057
|
|
23
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO THE UNAUDITED FINANCIAL STATEMENTS (Continued)
11.
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 Six Months Ended October 24, 2004
|
|
Statement
of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operating
activities
|
|
$
|
(193,984)
|
|
$
|
248,618
|
|
$
|
29,542
|
|
$
|
1,728
|
|
$
|
85,903
|
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investing
activities
|
|
|
198,095
|
|
|
(247,303)
|
|
|
(24,649)
|
|
|
(7,565)
|
|
|
(81,421)
|
|
Net
cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
financing
activities
|
|
|
(6,973)
|
|
|
132
|
|
|
(6,341)
|
|
|
3,060
|
|
|
(10,122
|
|
Effect
of foreign currency exchange rates on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash
and cash equivalents
|
|
|
-
|
|
|
37
|
|
|
(6)
|
|
|
-
|
|
|
31
|
|
Net
increase (decrease) in cash and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash
equivalents
|
|
|
(2,862)
|
|
|
1,484
|
|
|
(1,454)
|
|
|
(2,777)
|
|
|
(5,609)
|
|
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
|
|
$
|
30,461
|
|
$
|
72,400
|
|
$
|
28,889
|
|
$
|
(2,777)
|
|
$
|
128,973
|
|
|
|
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)
|
|
|
(493,33)
|
|
|
-
|
|
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
|
|
24
ISLE
OF CAPRI CASINOS, INC.
NOTES
TO THE UNAUDITED FINANCIAL STATEMENTS (Continued)
11.
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.; IC 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 and Capri Insurance
Corporation.
12.
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.
13.
Subsequent Event
On
October 24, 2005, Isle of Capri Black Hawk, L.L.C., a joint venture company
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
1.0% or the rate that the lead arranger announces from time to time as its
prime
lending rate plus an applicable margin of 1.0% 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.
25
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:
|
|
Three
months ended
|
|
Six
months ended
|
|
|
|
October
23,
|
|
October
24,
|
|
Variance
|
|
Variance
|
|
October
23,
|
|
October
24,
|
|
Variance
|
|
Variance
|
|
|
|
2005
|
|
2004
|
|
$
|
|
%
|
|
|
2005
|
|
|
2004
|
|
$
|
|
%
|
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mississippi
|
|
$
|
54,366
|
|
$
|
60,655
|
|
$
|
(6,289)
|
|
|
(10.4%)
|
|
$
|
121,557
|
|
$
|
123,331
|
|
$
|
(1,774)
|
|
|
(1.4%)
|
|
Lousiana
|
|
|
51,994
|
|
|
68,734
|
|
|
(16,740)
|
|
|
(24.4%)
|
|
|
117,106
|
|
|
140,171
|
|
|
(23,065)
|
|
|
(16.5%)
|
|
Missouri
|
|
|
39,354
|
|
|
41,587
|
|
|
(2,233)
|
|
|
(5.4%)
|
|
|
79,713
|
|
|
83,501
|
|
|
(3,788)
|
|
|
(4.5%)
|
|
Iowa
|
|
|
51,640
|
|
|
54,536
|
|
|
(2,896)
|
|
|
(5.3%)
|
|
|
105,785
|
|
|
108,978
|
|
|
(3,193)
|
|
|
(2.9%)
|
|
Colorado
|
|
|
39,633
|
|
|
33,621
|
|
|
6,012
|
|
|
17.9%
|
|
|
78,989
|
|
|
68,261
|
|
|
10,728
|
|
|
15.7%
|
|
International
|
|
|
6,371
|
|
|
4,371
|
|
|
2,000
|
|
|
45.8%
|
|
|
15,440
|
|
|
12,718
|
|
|
2,722
|
|
|
21.4%
|
|
Corporate
and other
|
|
|
4,584
|
|
|
4,267
|
|
|
317
|
|
|
7.4%
|
|
|
10,886
|
|
|
9,531
|
|
|
1,355
|
|
|
14.2%
|
|
Total
net revenues
|
|
$
|
247,942
|
|
$
|
267,771
|
|
$
|
(19,829)
|
|
|
(7.4%)
|
|
$
|
529,476
|
|
$
|
546,491
|
|
$
|
(17,015)
|
|
|
(3.1%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mississippi
|
|
$
|
5,631
|
|
$
|
3,548
|
|
$
|
2,083
|
|
|
58.7%
|
|
$
|
12,504
|
|
$
|
12,435
|
|
$
|
69
|
|
|
0.6%
|
|
Lousiana
|
|
|
2,247
|
|
|
8,950
|
|
|
(6,703)
|
|
|
(74.9%)
|
|
|
8,233
|
|
|
19,189
|
|
|
(10,956)
|
|
|
(57.1%)
|
|
Missouri
|
|
|
6,040
|
|
|
5,457
|
|
|
583
|
|
|
10.7%
|
|
|
12,295
|
|
|
11,710
|
|
|
585
|
|
|
5.0%
|
|
Iowa
|
|
|
9,015
|
|
|
11,182
|
|
|
(2,167)
|
|
|
(19.4%)
|
|
|
21,210
|
|
|
23,349
|
|
|
(2,139)
|
|
|
(9.2%)
|
|
Colorado
|
|
|
9,352
|
|
|
6,842
|
|
|
2,510
|
|
|
36.7%
|
|
|
18,646
|
|
|
15,266
|
|
|
3,380
|
|
|
22.1%
|
|
International
|
|
|
(1,386)
|
|
|
(3,024)
|
|
|
1,638
|
|
|
54.2%
|
|
|
(865)
|
|
|
(4,679)
|
|
|
3,814
|
|
|
81.5%
|
|
Corporate
and other
|
|
|
(16,060)
|
|
|
(10,274)
|
|
|
(5,786)
|
|
|
(56.3%)
|
|
|
(28,953)
|
|
|
(18,128)
|
|
|
(10,825)
|
|
|
(59.7%)
|
|
Operating
income
|
|
$
|
14,839
|
|
$
|
22,681
|
|
$
|
(7,842)
|
|
|
(34.6%)
|
|
$
|
43,070
|
|
$
|
59,142
|
|
$
|
(16,072)
|
|
|
(27.2%)
|
|
In
Mississippi, our four operations accounted for 21.9% of its net revenues.
Isle-Biloxi’s net revenues and operating income for the second quarter fiscal
2006, decreased primarily due to the closure of the property from extensive
Hurricane Katrina damage. The Isle-Biloxi recorded an insurance receivable
in
the second quarter up to the amount of operating and incremental expenses
incurred since the storm. 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
resulting from significant population shifts into its market area.
Isle-Vicksburg showed an increase in operating income over prior year 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 a
decline due to a very competitive market.
26
In
Louisiana, our two properties contributed 21.0% of its net revenues. Isle-Lake
Charles experienced a decrease in net revenues and operating income due
to
the entry into the market of a new competitor and from the closure of the casino
from the effects of Hurricane Rita. Isle-Lake Charles recorded insurance
receivable for operating and incremental expenses related to the 16-day closure
caused by Hurricane Rita. The net effect of this is that Isle-Lake Charles
reflected no operating income contribution for the 16-day period. Isle-Lake
Charles will record any related income from expected business interruption
proceeds when the insurance carrier has agreed to the amount. The Isle-Lake
Charles has recorded a $1.2 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 due to increased competition from, and expansion of, Native
American gaming in Oklahoma.
In
Missouri, our two properties contributed 15.9% of its net revenues. Isle-Kansas
City’s net revenues and operating income were down due primarily to the closure
of the I-35 Paseo Bridge immediately adjacent to the Isle property. The I-35
Paseo Bridge was closed for 68 days during the second fiscal quarter and 106
days during the six months ended October 23, 2005. The bridge re-opened on
September 1, 2005. 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 20.8% of its net revenues. Both Isle-Bettendorf
and Rhythm City-Davenport showed a decline in both net revenues and operating
income due to increased competition. Isle-Marquette remained constant in both
net revenues and operating income.
In
Colorado, our two Black Hawk casino operations contributed 16.0% of its net
revenues. The properties saw an increase in net revenues and operating
income due
to
substantial completion of our expansion projects and the reduction of
construction disruption compared to the prior year period.
Our
international operations account for approximately 2.6% of our overall revenues.
Isle-Our Lucaya experienced an increase in net revenues and a decrease in the
negative operating income compared to the prior year, primarily due to being
closed in the prior year related to Hurricane Frances and Hurricane Jeanne.
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.
27
Goodwill
and Other Intangible Assets
At
October 23, 2005, we had goodwill and other intangible assets with indefinite
useful lives of $433.1 million, representing 24.4% 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
October 23, 2005, we had property and equipment of $1.03 billion, representing
58.1% 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
During
the
quarter ended October 23, 2005, hurricane related charges were recognized
related to impairment charges of $60.1 million for assets damaged or destroyed
by the hurricanes and $11.3 million for incremental costs incurred 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. We have insurance coverage
related
to property damage, incremental costs and property operating expenses we
incur
due to damage caused by the hurricanes. The hurricane related charges, net
account also includes the anticipated recoveries expected from our insurance
carriers of $70.2 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. When our insurance carriers
and
we agree on the final amount of the insurance proceeds we are entitled to,
we
will also record any related gain in this account. Our 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.
28
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 six months ended October 23, 2005,
reflect the consolidated operations of all of our subsidiaries and include
the
following properties: the Isle-Bossier City, the Isle-Lake Charles, the
Isle-Biloxi, the Isle-Lula, the Isle-Natchez, the Isle-Vicksburg, the
Isle-Kansas City, the Isle-Boonville, the Isle-Bettendorf, the Isle-Marquette,
the Rhythm City-Davenport, the Isle-Black Hawk, the Colorado Central
Station-Black Hawk, the Isle-Our Lucaya, the Blue Chip-Dudley, the Blue
Chip-Wolverhampton, the Blue Chip-Walsall and Pompano Park. For the three
and
six months ended October 24, 2004, 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.
29
Three
Fiscal Months Ended October 23, 2005 Compared to Three Fiscal Months Ended
October 24, 2004
Gross
revenues for the fiscal quarter ended October 23, 2005 were $301.6 million,
which included $252.6 million of casino revenue, $12.9 million of room
revenue,
$3.8 million of pari-mutuel commissions, and $32.3 million of food, beverage
and
other revenue. This compares to gross revenues for the fiscal quarter ended
October 24, 2004 of $325.5 million, which included $273.6 million of casino
revenue, $12.3 million of room revenue, $3.4 million of pari-mutuel commissions
and $36.2 million of food, beverage and other revenue.
Casino
revenue decreased compared to fiscal quarter ended October 24, 2004. We
saw a
large decrease in casino revenues at our Isle-Biloxi property due primarily
to
Hurricane Katrina in late August. Isle-Lake Charles also showed a sharp
decline
in revenues as a result of the 16-day closure following Hurricane Rita
and the
entry of a new competitor into the market. Isle-Bossier City also saw decreased
casino revenues as competition continues to increase due to Native American
gaming in Oklahoma. In Colorado, casino revenues increased as our construction
has been completed and disruption has ceased.
Room
revenue increased $0.6 million, or 4.8%, compared to fiscal quarter ended
October 24, 2005, primarily resulting from the additional capacity at the
Isle-Biloxi. Isle-Lake Charles, 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 end were up a total of $0.4 million, or 12.4%, due to an
increase
in racing days in fiscal 2006 vs. fiscal 2005. Food and beverage revenues
decreased by $3.9 million, or 12.1%, stemming from the Isle-Biloxi and
Isle Lake
Charles closures following the hurricanes.
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 decreased by 7.6%
in
fiscal quarter ended October 23, 2005, as direct mail efforts were halted
in our
hurricane stricken markets.
Casino
operating expenses decreased 14.9% compared to fiscal quarter ended October
24,
2004. These expenses are primarily comprised of salaries, wages and benefits
and
other operating expenses of the casinos. These costs were down due to the
closure of Isle-Biloxi and Isle-Lake Charles following the hurricanes.
State
and
local gaming taxes also decreased compared to fiscal quarter ended October
24,
2004. The rate for taxes as a percentage of gaming revenue increased from
22.0%
to 22.3%.
Room
expenses increased $0.3 million, or 13.0%, compared to fiscal quarter ended
October 24, 2004. These
expenses directly relate to the cost of providing hotel rooms. Other costs
of
the hotels are shared with the casinos and are presented in their respective
expense categories.
Pari-mutuel
operating costs of Pompano Park in Florida increased 16.4% compared to
fiscal
quarter ended October 24, 2004. This is related to an increase in racing
days in
fiscal 2006 vs. 2005. Such costs consist primarily of compensation, benefits,
purses, simulcast fees and other direct costs of track operations.
Food
and
beverage expenses decreased 8.5% over fiscal quarter ended October 24,
2004.
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 23.9% for the fiscal quarter ended October 24, 2004, to
24.5% for
the fiscal quarter ended October 23, 2005. These expenses decreased partly
as a
result our hurricane stricken markets.
Marine
and facilities expenses increased $1.1 million, or 6.6%, compared to fiscal
quarter ended October 24, 2004. These expenses include salaries, wages
and
benefits of the marine and facilities departments, operating expenses of
the
marine crews, insurance, maintenance of public areas, housekeeping and
general
maintenance of the riverboats and pavilions.
This
increased maintenance was due primarily to preparations at Isle-Biloxi
for
Hurricane Katrina and at Isle-Lake Charles for Hurricane Rita.
Marketing
and Administrative expenses decreased $2.4 million, or 3.0%, compared to
fiscal
quarter ended October 24, 2004 primarily due to lower new development costs
versus prior year. 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 has remained flat over fiscal quarter ended October 24,
2004.
30
Net
interest expense increased 7.1% compared with fiscal quarter ended July
25,
2004. 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.
Six
Fiscal Months Ended October 23, 2005 Compared to Six Fiscal Months Ended
October
24, 2004
Gross
revenues for the six months ended October 23, 2005, were $643.5 million,
which
included $536.4 million of casino revenues, $27.2 million of room revenues,
$9.0
million of pari-mutuel commissions and $70.9 million of food, beverage
and other
revenues. This compares to gross revenues for the six months ended
October 24,
2004, of $661.1 million, which included $555.6 million of casino revenues,
$25.2
million of room revenues, $7.8 million of pari-mutuel commissions and
$72.4
million of food, beverage and other revenues.
Casino
revenues declined at those properties that were affected by hurricane
disruptions, particularly the Isle-Biloxi and the Isle-Lake Charles.
We saw a
decrease in casino revenues at our Missouri properties due primarily
the I-35
Paseo bridge closure for 106 days during the six months ended October
23, 2005.
We also faced decreases in casino revenues at the Isle-Bossier City
because of
increased competition from Native American gaming in Oklahoma.
Room
revenues increased 7.9% primarily resulting from the additional capacity
at the
Isle-Biloxi following Hurricane Katrina. Isle-Lake Charles, 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 increased slightly, as the increase in number of live race
days
helped to offset the general decline in onsite wagering on horse races.
Food and
beverage revenues decreased by 2.1% because of the closures 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 six months of fiscal 2006 decreased
4.6% when
compared to the first six 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 attributable
to the
hurricanes in our Isle-Biloxi and Isle-Lake Charles markets.
Gaming
taxes decreased 4.4% in the six months ended October 23, 2005, and
gaming taxes
as a percentage of casino revenues decreased from 22.1% for the six
months ended
October 24, 2004 to 21.8% of casino revenues for the six months ended
October
23, 2005. Effective July 1, 2004, we were subject to an additional
assessment of
2.0% of gross gaming revenues in Iowa due to a tax increase enacted
in that
state. This increase was offset by decreased gaming taxes for Isle-Biloxi.
Room
expenses for the six months ended October 23, 2005 increased 9.7% when
compared
to the six months ended October 24, 2004. These expenses directly relate
to the
cost of providing hotel rooms. Other costs of the hotels are shared
with the
casinos and are presented in their respective expense categories. The
increase
in expenses was due primarily to the additional room occupancy at the
Isle-Bossier City and Isle-Biloxi.
Pari-mutuel
expenses increased 14.4% in the six months ended October 23, 2005 as
pari-mutuel
commissions increased due to more racing days in fiscal 2006 than in
fiscal
2005.
31
Food,
beverage and other expenses decreased 3.9% during the six months ended
October
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 decreased from 24.6% for the six months ended October 24, 2004
to 24.1%
for the six months ended October 23, 2005. These
expenses decreased partly as a result of our hurricane stricken
markets.
Marine
and facilities expenses increased 2.5% for the six months ended October
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
expenses increased 2.9% for the six months ended October 23, 2005. The
increase
in expenses is primarily due to $8.3 million in new development 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 2.9% for the six months ended October
23,
2005. Depreciation has increased as a result of the company’s capital expansion
programs.
The
increase was primarily due to the capital additions at the Isle-Biloxi,
Isle-Bossier City, the Isle-Lake Charles and the Isle-Kansas City.
Our
effective tax rate from continuing operations for the six months ended
October
23, 2005 was 60.0% compared to 44.1% for the six months ended October
24, 2004,
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
October 23, 2005, we had cash and cash equivalents and marketable securities
of
$144.5 million compared to $162.7 million at April 24, 2005, the end
of our last
fiscal year. Of this $18.2 million decrease, $21.2 million is a decrease
in cash
and cash equivalents and is the net result of $54.8 million net cash
provided by
operating activities, $124.6 million net cash used in investing activities,
$49.2 million net cash provided by financing activities and $0.6 million
decrease in cash from the effect of foreign currency exchange rates.
The
offsetting increase of $3.0 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 October 23, 2005, we
had $390.1
million of capacity under lines of credit and available term debt which
consisted of $382.1 million in unused credit capacity under the revolving
loan
commitment on our senior secured credit facility, $4.0 million of unused
credit
capacity under the Isle-Black Hawk’s senior secured credit facility (limited to
use by the Isle-Black Hawk), and $4.0 million under other lines of credit
and
available term debt. During the six months ended October 23, 2005, the
Isle-Black Hawk drew down $10.0 million on its revolving loan under the
Isle-Black Hawk’s senior secured credit facility. We believe that existing cash,
cash flow from operations and available borrowings under our lines of
credit
will be sufficient to support our working capital needs, planned capital
expenditures and debt service requirements for the foreseeable future.
Investing
Activities
We
invested
$91.6 million in property and equipment during the six fiscal months
ended
October 23, 2005, excluding the construction for the Isle-Biloxi new
casino
barge. The following table reflects expenditures and accruals for property
and
equipment on major projects for which we are committed to in the six
fiscal
months ended October 23, 2005 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.
32
|
|
|
|
Actual
|
Remaining
|
|
|
|
|
|
Fiscal
Year
|
|
Six
Months
|
|
Fiscal
Year
|
|
|
|
|
|
|
|
Ended
4/24/05
|
|
Ended
10/23/05
|
|
Ending
4/30/06
|
|
Thereafter
|
|
|
|
|
|
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
(dollars
in millions)
|
|
Property
|
Project
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Isle-Biloxi
|
Construct
hotel & parking facility |
|
$
|
43.5
|
|
$
|
11.2
|
|
$
|
1.7
|
|
$
|
-
|
|
Isle-Bossier
City
|
Construct
hotel & entertainment center |
|
|
5.8
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Isle-Bossier
City
|
Renovate
casino |
|
|
2.4
|
|
|
2.0
|
|
|
0.2
|
|
|
-
|
|
Isle-Bettendorf
|
Construct
hotel |
|
|
-
|
|
|
0.4
|
|
|
3.9
|
|
|
40.7
|
|
Isle-Lake
Charles
|
Renovate
& expand casinos |
|
|
11.6
|
|
|
4.4
|
|
|
2.0
|
|
|
-
|
|
Isle-Pompano
|
Construct
casino |
|
|
-
|
|
|
6.1
|
|
|
4.3
|
|
|
-
|
|
Isle-Boonville
|
Construct
hotel |
2.0
|
|
|
6.1
|
|
|
9.4
|
|
|
-
|
|
Isle-Black
Hawk (57% owned)
|
Expansion
& public improvements |
|
|
62.5
|
|
|
16.6
|
|
|
9.9
|
|
|
-
|
|
Isle-Waterloo
|
Construct
casino & hotel |
|
|
-
|
|
|
0.7
|
|
|
13.3
|
|
|
120.5
|
|
Coventry
|
Construct
leasehold improvements |
|
|
8.4
|
|
|
8.3
|
|
|
18.1
|
|
|
24.2
|
|
Blue
Chip
|
Construct
leasehold improvements |
|
|
2.2
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Other
properties (2)
|
IGT
Advantage program |
|
|
9.3
|
|
|
7.7
|
|
|
7.7
|
|
|
-
|
|
All
|
Slot
programs |
|
|
31.8
|
|
|
11.7
|
|
|
11.6
|
|
|
-
|
|
All
|
Other
capital improvements |
|
|
30.4
|
|
|
16.4
|
|
|
81.3
|
|
|
13.1
|
|
Total
|
|
|
|
|
$
|
209.9
|
|
$
|
91.6
|
|
$
|
163.4
|
|
$
|
198.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Excludes: Isle-Biloxi new casino barge
|
|
|
|
|
|
|
|
|
(2)
Includes: Isle-Biloxi, Isle-Vicksburg, Isle-Natchez and
Isle-Lula.
|
|
|
|
|
|
|
|
|
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 the 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.
Subject
to the receipt of necessary permits and licenses, the Company plans to reopen
an
interim casino at Isle-Biloxi within the next 60 days. The proposed interim
casino, to be located in the hotel, is expected to offer approximately 1,100
gaming positions, to be accompanied by two restaurants, parking for 1,000
vehicles and 550 hotel rooms. Preliminary plans are in process for rebuilding
a
new permanent casino on the property. We believe we have adequate insurance
to
cover the cost of rebuilding the Isle-Biloxi.
We
have
signed a development agreement with the City of Bettendorf pursuant to which
we
agreed to construct a new 250-room Isle hotel, additional parking, a Kitt’s
Kitchen restaurant, and an expansion of the existing buffet and the City
agreed
to construct a 50,000 square foot convention center adjacent to the company’s
facility, which will be managed by the Isle-Bettendorf. The cost of our portion
of this project is approximately $45.0 million, and the new hotel is 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 the Isle-Boonville in January 2005. The project is expected
to
be complete in late spring of 2006 and we have spent approximately $8.1 million
on the project. The remaining $9.4 will be spent in the third and fourth
quarters of fiscal 2006.
We
are in the
final stages of a $94.0 million expansion project for the Isle-Black Hawk
and
Colorado Central Station-Black Hawk properties. We recently completed our
expansion of the Isle-Black Hawk and the Colorado Central Station-Black Hawk
casinos. We have completed a portion of our new 1,000 space parking structure
with 600 parking spaces open to the public. The new 162-room Colorado Central
Station hotel is currently ahead of schedule and expected to be completed
near
the end of calendar year 2005. Additionally, we continue to construct public
improvements to extend Main Street directly to Colorado Route 119, approximately
one half-mile closer to Denver. Completion is expected in the spring of
2006.
33
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 October 23, 2005, we have spent $16.7 million on the Coventry
project and expect to spend the remainder over the next nine months. Completion
date for the casino at the RICOHTM
Arena
Coventry is estimated to be in the fall of 2006.
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
$134.4 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. Construction was started in
September 2005.
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 December 31, 2005, 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, and we expect that the Illinois Gaming Board will
vote shortly as to whether to accept that recommendation. 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.
34
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. Broward county voters
passed their local referendum and Miami-Dade county voters rejected their
referendum in March 2005. Enabling gaming legislation has not been passed by
the
Florida legislature despite the constitutional requirement that such legislation
be in effect by July 1, 2005. A special session to consider such legislation
is
now scheduled to begin on December 5, 2005. Along with the other Broward county
pari-mutuels, we filed a lawsuit seeking authority to proceed with the
development of slot machine facilities despite the absence of enabling
legislation. A Circuit Court judge issued a decision in favor of the pari-mutuel
facilities, which decision is on appeal. As a result of the foregoing, the
regulation and timing of the installation and operation of slot machines is
uncertain. We have plans to expand the existing facility to accommodate up
to
2,000 slot machines at a cost of approximately $165.0 million to be open
approximately nine to twelve months after construction begins. We have not
determined whether 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 $15.2
million at the Isle-Biloxi, the Isle-Vicksburg, the Isle-Lula and the
Isle-Natchez, leaving a remaining budget of $7.7 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.
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 six fiscal months ended October 23, 2005, we had net sources of cash of
$49.2 million primarily in the following financing activities:
• We
made
net borrowings under the Isle-Black Hawk senior secured credit facility of
$10.0
million.
• We
exercised a $50.0 million delayed draw term loan available under its Senior
Secured Credit Facility.
• We
made
principal payments on our senior secured credit facility and other debt of
$1.5
million.
• We
made
cash distributions to a minority partner totaling $0.7 million.
As
of
October 23, 2005, we had $390.1 million of capacity under lines of credit and
available term debt consisting of $382.1 million in unused credit capacity
under
the revolving loan commitment on our senior secured credit facility, $4.0
million of unused credit capacity under the Isle-Black Hawk senior secured
credit facility (limited to use by the Isle-Black Hawk) 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
October 23, 2005.
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.
35
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.
36
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 49.0% of its variable rate term
debt, outstanding under the Isle-Black Hawk senior secured credit facility
as of
October 23, 2005. The swap agreements effectively convert portions of its
variable rate debt to a fixed-rate basis until the fourth fiscal quarter of
2008, thus reducing the impact of interest rate changes on future interest
expense. These interest rate swap agreements terminate as follows: $40.0 million
in each of fiscal 2006 and 2008. We evaluate the effectiveness of these hedged
transactions on a quarterly basis. We found no portion of the hedging
instruments to be ineffective during the quarter ended October 23, 2005.
Accordingly, no gains or losses have been recognized on these cash flow hedges.
The
following table provides information at April 24, 2005 about our financial
instruments that are sensitive to changes in interest rates. The table presents
principal cash flows and related weighted average interest rates by expected
maturity dates. 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.
37
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 Interim Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.
As
of
October 23, 2005, we carried out an evaluation, under the supervision and with
the participation of our management, including our Chief Executive Officer
and
Interim 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 Interim Chief Financial Officer concluded that
the
design and operation of the Company’s disclosure controls and procedures were
effective as of October 23, 2005.
CHANGES
IN INTERNAL CONTROLS
During
the fiscal quarter ended October 23, 2005, there was no change in our internal
control over financial reporting
that has materially affected, or is reasonably likely to materially affect,
our
internal control over financial reporting.
38
PART
II - OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS.
In
August
1997, a lawsuit was filed that seeks to nullify a contract to which Louisiana
Riverboat Gaming Partnership is a party. Pursuant to the contract, Louisiana
Riverboat Gaming Partnership paid a fixed amount plus a percentage of revenues
to various local governmental entities, including the City of Bossier City
and
the Bossier Parish School Board, in lieu of payment of a per-passenger boarding
fee. The case was tried on April 6, 2004. The trial court rendered a ruling
in
favor of the defendants, finding that, although the legislature amended the
boarding fee statute in 2003 so as to prohibit future boarding fee agreements,
any pre-existing agreement between a riverboat and either the City of Bossier
City or the Bossier Parish Police Jury will remain valid and in effect until
its
expiration. Louisiana Riverboat Gaming Partnership’s contract expired on April
4, 2004. Therefore, Louisiana Riverboat Gaming Partnership now pays a boarding
fee to the City as outlined by the statute. Louisiana Riverboat Gaming
Partnership still has an existing contract with the Bossier Parish Police
Jury,
which was not an issue in the litigation, and which will remain in effect
until
its expiration on January 1, 2007, unless extended by the parties. The
plaintiffs appealed the trial court’s ruling to the Second Circuit Court of
Appeal, and the appellate court reversed and remanded the matter. We, along
with
the other defendants, filed writ applications to appeal the matter to the
Louisiana Supreme Court. The court has granted two applications for appeal-one
filed on behalf of Bossier City and Bossier Parish, and another filed on
behalf
of the Bossier Sheriff’s Office and the Greater Bossier Economic Development
Foundation. A hearing has not been scheduled. The Company will continue to
vigorously defend this matter as may be required.
Lady
Luck
Gaming Corporation (now our wholly owned subsidiary) and several joint venture
partners are defendants in a lawsuit brought by the country of Greece through
its Minister of Tourism (now Development) and Finance. The action alleges
that
the defendants failed to make specified payments in connection with the gaming
license bid process for Patras, Greece. The payment we are alleged to have
been
required to make aggregates approximately 6.5 million Euros (which was
approximately $7.8 million as of October 23, 2005, based on published exchange
rates). Although it is difficult to determine the damages being sought from
the
lawsuit, the action may seek damages up to that aggregate amount plus interest
from the date of the action. The Athens Civil Court of First Instance granted
judgment in our favor and dismissed the lawsuit, but the Ministry 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.
On
December 30, 2002, the County of Jefferson, Missouri initiated a lawsuit
in the
Circuit Court of Jefferson County, Missouri against us and a subsidiary alleging
a breach of a 1993 contract entered into by the County and that subsidiary,
and
guaranteed by Lady Luck Gaming Corporation, relating to the development of
a
casino site near Kimmswick, Missouri. The suit alleged damages in excess
of
$10.0 million. We increased our reserve for this suit by $6.1 million in
the
quarter ended October 23, 2005. Subsequent to the end of the quarter, the
parties reached a settlement that is within the amounts reserved.
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.
39
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
|
|
|
|
|
|
|
|
|
|
July
25, 2005 to August 21, 2005
|
|
67,000
|
|
$
24.71
|
|
67,000
|
|
421,205
|
|
|
|
|
|
|
|
|
|
|
|
August
22, 2005 to September 25, 2005
|
|
|
250,303
|
|
|
23.02
|
|
|
250,303
|
|
|
170,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
26, 2005 to October 23, 2005
|
|
|
50,000
|
|
|
21.87
|
|
|
50,000
|
|
|
1,620,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
367,303
|
|
|
$
23.20
|
|
|
367,303
|
|
|
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 October 23, 2005, 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.
40
ITEM
4. SUBMISSION OF MATTERS SUBJECT TO A VOTE OF SECURITY HOLDERS.
Annual
Meeting of Stockholders
The
Annual Meeting of Stockholders was held on October 7, 2005, at which the
following matters were submitted to a vote of the stockholders:
(1) |
To
elect seven persons to the Board of Directors;
and
|
(2) |
To
approve the amendment of the Isle of Capri Casinos, Inc. 2000 Long-Term
Stock Incentive Plan; and
|
(3) |
To
ratify the selection of Ernst & Young LLP as our independent auditors
for the fiscal year ending April 24,
2005.
|
At
the
Annual Meeting of Stockholders, each of the following individuals were elected
to serve as directors of the Company until his successor is elected and
qualified or until his earlier death, resignation, removal or
disqualification:
Name
|
For
|
Withheld
|
Against
|
|
|
|
|
|
|
Bernard
Goldstein
|
22,368,706
|
|
5,776,136
|
|
-
|
Robert
S. Goldstein
|
22,680,614
|
|
5,464,228
|
|
-
|
Alan
J. Glazer
|
25,741,465
|
|
2,403,377
|
|
-
|
Emanuel
Crystal
|
26,057,137
|
|
2,087,705
|
|
-
|
W.
Randolph Baker
|
26,835,780
|
|
1,309,062
|
|
-
|
Jeffrey
D. Goldstein
|
22,737,806
|
|
5,407,036
|
|
-
|
John
G. Brackenbury
|
21,998,830
|
|
6,146,012
|
|
|
The
voting on the other matters as ordered at the Annual Meeting of Stockholders
was
as follows:
Matter
|
For
|
Against
|
Abstained
|
Not
Voted
|
|
|
|
|
|
|
|
|
Approval
of the Isle of Capri Casinos, Inc. 2000 Long-term Stock Incentive
Plan
|
21,476,006
|
|
3,773,559
|
|
13,936
|
|
2,881,311
|
Matter
|
For
|
Against
|
Abstained
|
Not
Voted
|
|
|
|
|
|
|
|
|
Ratification
of selection of Ernst & Young LLP
|
28,134,242
|
|
8,604
|
|
1,996
|
|
-
|
ITEM
5. OTHER INFORMATION.
At
a
meeting on October 7, 2005, the Stock Option and Compensation Committee approved
additional compensation to be paid to directors who are not employees for
attending company-related meetings other than board and committee meetings.
Non-employee directors shall receive $1,000 for each such meeting attended,
which is more than four hours in duration, inclusive of travel time.
ITEM
6. EXHIBITS.
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.
41
SIGNATURE
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:
December 2, 2005
|
/s/
DONN MITCHELL
|
|
Donn
Mitchell, Interim Chief Financial Officer
|
|
|
42
INDEX
TO EXHIBITS
EXHIBIT NUMBER
|
DESCRIPTION
|
|
3.1A
|
Certificate
of Incorporation of Casino America, Inc. (1)
|
|
|
|
|
3.1B
|
Amendment
to Certificate of Incorporation of Casino America, Inc.
(2)
|
|
|
|
|
3.2A
|
By-laws
of Casino America, Inc. (1)
|
|
|
|
|
3.2B
|
Amendments
to By-laws of Casino America, Inc., dated February 7, 1997
(3)
|
|
|
|
|
4.3
|
Indenture,
dated as of March 3, 2004, among Isle of Capri Casinos, Inc., the
subsidiary guarantors named therein and U.S. Bank National Association,
as
Trustee (4)
|
|
|
|
|
4.4
|
Registration
Rights Agreement, dated as of March 3, 2004, among Isle of Capri
Casinos,
Inc., the subsidiary guarantors named therein and Deutsche Bank Securities
Inc. and CIBC World Markets Corp. on behalf of themselves and as
representatives of the other initial purchasers (4)
|
|
|
|
|
4.5
|
Indenture,
dated as of March 27, 2002 among Isle of Capri Casinos, Inc., the
subsidiary guarantors named therein and State Street Bank and Trust
Company, as trustee (5)
|
|
|
|
|
4.8
|
Rights
Agreement, dated as of February 7, 1997, between Casino America,
Inc. and
Norwest Bank Minnesota, N.A., as rights agent (6)
|
|
|
|
|
10.1
|
Casino
America, Inc. description of Employee Bonus Plan (7)
|
|
|
|
|
10.2
|
Director’s
Option Plan (8)
|
|
|
|
|
10.3
|
Biloxi
Waterfront Project Lease dated as of April 9, 1994 by and between
the City
of Biloxi, Mississippi and Riverboat Corporation of Mississippi
(9)
|
|
|
|
|
10.4
|
First
Amendment to Biloxi Waterfront Project Lease (Hotel Lease), dated
as of
April 26, 1995, by and between Riverboat Corporation of Mississippi
(10)
|
|
|
|
|
10.5
|
Amended
and Restated Lease, dated as of April 19, 1999, among Port Resources,
Inc.
and CRU, Inc., as landlords and St. Charles Gaming Company, Inc.,
as
tenant (11)
|
|
|
|
|
10.6
|
Amended
Casino America, Inc. 1992 Stock Option Plan (12)
|
|
|
|
|
10.7
|
Amended
Casino America, Inc. 1993 Stock Option Plan (13)
|
|
|
|
|
10.8
|
Lease
of property in Coahoma, Mississippi dated as of November 16, 1993
by and
among Roger Allen Johnson, Jr., Charles Bryant Johnson and Magnolia
Lady,
Inc. (5)
|
|
|
|
|
10.9
|
Addendum
to Lease dated as of June 22, 1994 by and among Roger Allen Johnson,
Jr.,
Charles Bryant Johnson and Magnolia Lady, Inc. (14)
|
|
|
|
|
10.10
|
Second
addendum to Lease dated as of October 17, 1995 by and among Roger
Allen
Johnson, Jr., Charles Bryant Johnson and Magnolia Lady, Inc.
(14)
|
|
|
|
|
10.11
|
Amended
and Restated Operating Agreement of Isle of Capri Black Hawk, L.L.C.,
dated as of July 29, 1997, between Casino America of Colorado, Inc.
and
Blackhawk Gold, Ltd. as amended (5)
|
|
|
|
|
10.12
|
Development
Agreement dated as of June 17, 1997, between City of Bettendorf,
Lady Luck
Bettendorf, Lady Luck Quad Cities, Inc. and Bettendorf Riverboat
Development, LC (5)
|
43
|
|
INDEX
TO EXHIBITS (continued)
|
|
|
|
|
10.13
|
Operator’s
Contract, dated as of December 28, 1989, between Riverboat Development
Authority and the Connelley Group, LP, as amended on February 9,
1990,
March 1, 1990, January 1, 1991, September 30, 1994 and March 1, 1998
(5)
|
|
|
|
|
10.14
|
Isle
of Capri Casinos, Inc. 2000 Long-Term Stock Incentive Plan
(15)
|
|
|
|
|
10.15
|
Isle
of Capri Casinos, Inc. Deferred Bonus Plan (15)
|
|
|
|
|
10.16
|
Employment
Agreement dated as of January 1, 2002 between Isle of Capri Casinos,
Inc.
and Allan B. Solomon (5)
|
|
|
|
|
10.17
|
Employment
Agreement dated as of January 1, 2002 between Isle of Capri Casinos,
Inc.
and Rexford A. Yeisley (5)
|
|
|
|
|
10.18
|
Employment
Agreement dated as of January 1, 2002 between Isle of Capri Casinos,
Inc.
and Timothy M. Hinkley (5)
|
|
|
|
|
10.19
|
Employment
Agreement dated as of January 1, 2002 between Isle of Capri Casinos,
Inc.
and Bernard Goldstein (5)
|
|
|
|
|
10.20
|
Employment
Agreement dated as of July 1, 2003 between Isle of Capri Casinos,
Inc. and
Thomas J. Carr (16)
|
|
|
|
|
10.21
|
Third
Amended and Restated Credit Agreement, dated as of February 4, 2005,
among
Isle of Capri Casinos, Inc., the lenders listed therein, Canadian
Imperial
Bank of Commerce, as administrative agent and issuing lender, Deutsche
Bank Trust Company Americas and Wells Fargo Bank, N.A., as co-syndication
agents, Calyon New York Branch and the CIT/Group/Equipment Financing,
Inc., as co-documentation agents and CIBC World Markets Corp., as
lead
arranger (17)
|
|
|
|
|
10.22
|
Isle
of Capri Casinos, Inc.’s 2005 Deferred Compensation Plan
(18)
|
|
|
|
|
10.23
|
Isle
of Capri Casinos, Inc.’s 1995 Deferred Compensation Plan
(18)
|
|
|
|
|
10.24
|
Isle
of Capri Casinos, Inc.’s 2005 Non-employee Director Deferred Compensation
Plan (18)
|
|
|
|
|
10.25
|
Employment
Agreement dated as of January 1, 2005 between Isle of Capri Casinos,
Inc.
and Robert F. Griffin (18)
|
|
|
|
|
10.26
|
Isle
of Capri Casinos, Inc. Master Retirement Plan (16)
|
|
|
|
|
10.27
|
First
Amended and Restated Credit Agreement, dated as of April 22, 2003,
by and
among Isle of Capri Black Hawk, L.L.C., Canadian Imperial Bank of
Commerce, as administrative agent, the agents named therein and certain
other lenders party from time to time thereto (16)
|
|
|
|
|
10.28
|
First
Amendment to First Amended and Restated Credit Agreement, dated as
of
February 6, 2004, by and among Isle of Capri Black Hawk, L.L.C.,
Canadian
Imperial Bank of Commerce, as administrative agent, the credit support
parties named therein and certain other lenders party from time to
time
thereto (16)
|
|
|
|
|
10.29
|
Second
Amendment to First Amended and Restated Credit Agreement, dated as
of July
26, 2004, by and among Isle of Capri Black Hawk, L.L.C., Canadian
Imperial
Bank of Commerce, as administrative agent, the credit support parties
named therein and certain other lenders party from time to time thereto
(16)
|
44
|
|
INDEX
TO EXHIBITS (continued)
|
|
|
|
|
10.30
|
Third
Amendment to First Amended and Restated Credit Agreement, dated as
of
April 22, 2005, by and among Isle of Capri Black Hawk, L.L.C., Canadian
Imperial Bank of Commerce, as administrative agent, the credit support
parties named therein and certain other lenders party from time to
time
thereto (19)
|
|
|
|
|
10.31
|
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)
|
|
|
|
|
10.32
|
Voluntary
Resignation Agreement dated November 14, 2005, between Isle of Capri
Casinos, Inc. and Rexford A. Yeisley (21)
|
|
|
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a - 14(a) under the
Securities Exchange Act of 1934, filed under Exhibit 31 of Item 601
of
Regulation S-K.
|
|
|
|
|
31.2
|
Certification
of 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.
|
|
|
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350) filed under Exhibit 32 of Item
601 of
Regulation S-K.
|
|
|
|
|
32.2
|
Certification
of 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.
|
|
|
|
|
(1)
|
Filed
as an exhibit to Casino America, Inc.’s Registration Statement on Form S-1
filed September 3, 1993, as amended (Reg. No. 33-68434), and incorporated
herein by reference.
|
|
|
|
|
(2)
|
Filed
as an exhibit to Casino America, Inc.’s Proxy Statement for the fiscal
year ended April 26, 1998 (File No. 0-20538) and incorporated herein
by
reference.
|
|
|
|
|
(3)
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Annual Report on Form 10-K
for the fiscal year ended April 27, 1997 (File No. 0-20538) and
incorporated herein by reference.
|
|
|
|
|
(4)
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Registration Statement on
Form S-4 filed on May 12, 2004 (File No. 333-115419) and incorporated
herein by reference.
|
|
|
|
|
(5)
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Amendment No. 1 to
Registration Statement on Form S-4 filed on June 19, 2002 (File No.
333-88802) and incorporated herein by reference.
|
|
|
|
|
(6)
|
Filed
as an exhibit to Casino America, Inc.’s Current Report on Form 8-K filed
on February 14, 1997 (File No. 0-20538) and incorporated herein by
reference.
|
|
|
|
|
(7)
|
Filed
as an exhibit to Casino America, Inc.’s Annual Report on form 10-K for the
fiscal year ended April 30, 1993 (File No. 0-20538) and incorporated
herein by reference.
|
|
|
|
|
(8)
|
Filed
as an exhibit to Casino America, Inc.’s Registration Statement on Form S-8
filed June 30, 1994 (File No. 33-80918) and incorporated herein by
reference.
|
|
|
|
|
(9)
|
Filed
as an exhibit to Casino America, Inc.’s Annual Report on Form 10-K for
fiscal year ended April 30, 1994 (File No. 0-20538) and incorporated
herein by reference.
|
|
|
|
|
(10)
|
Filed
as an exhibit to Casino America, Inc.’s Annual Report on Form 10-K for
fiscal year ended April 30, 1995 (File No. 0-20538) and incorporated
herein by reference.
|
|
|
|
|
(11)
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Annual Report on Form 10-K
for the fiscal year ended April 25, 1999 (File No. 0-20538)
and
incorporated herein by
reference.
|
|
|
|
|
(12)
|
Filed
as an exhibit to Casino America, Inc.’s Proxy Statement for the fiscal
year ended April 30, 1996 (File No. 0-20538) and incorporated herein
by
reference.
|
|
|
|
|
(13)
|
Filed
as an exhibit to Casino America, Inc.’s Proxy Statement for the fiscal
year ended April 27, 1997 (File No. 0-20538) and incorporated herein
by
reference.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
|
|
INDEX
TO EXHIBITS (continued)
|
|
|
|
|
(14)
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Annual Report on Form 10-K
for the fiscal year ended April 30, 2000 (File No. 0-20538) and
incorporated herein by
reference.
|
|
|
|
|
(15)
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Proxy Statement for the
fiscal year ended April 30, 2000 (File No. 0-20538) and incorporated
herein by reference.
|
|
|
|
|
(16)
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Annual Report on Form 10-K
for the fiscal year ended April 24, 2005 (File No. 0-20538) and
incorporated herein by reference.
|
|
|
|
|
(17)
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Current Report on Form 8-K
filed on February 10, 2005 (File No. 0-20538) and incorporated
herein by
reference.
|
|
|
|
|
(18)
|
Filed
as an exhibit to Isle of Capri Casinos, Inc.’s Quarterly Report on Form
10-Q for the fiscal quarter ended January 23, 2005 (File No. 0-20538)
and
incorporated herein
by reference.
|
|
|
|
|
(19)
|
Filed
as an exhibit to Isle of Capri Casino, Inc.’s Current Report on Form 8-K
filed on April 28, 2005 (File No. 0-20538) and incorporated herein
by
reference.
|
|
|
|
|
(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.
|
|
|
|
|
(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.
|
46
EXHIBIT
31.1
CERTIFICATION
OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a) UNDER THE SECURITIES
EXCHANGE ACT OF 1934
I,
Bernard Goldstein, Chief Executive Officer of Isle of Capri Casinos, Inc.,
certify that:
1.
I have
reviewed this quarterly report on Form 10-Q of Isle of Capri Casinos, Inc.;
2.
Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made,
in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4.
The
registrant’s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act
Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5.
The
registrant’s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of registrant’s board of directors
(or persons performing the equivalent functions):
(a)
All
significant deficiencies and material weaknesses in the design or operation
of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b)
Any
fraud, whether or not material, that involves management or other employees
who
have a significant role in the registrant’s internal control over financial
reporting.
|
|
Date:
December 2, 2005
|
/s/
Bernard Goldstein
|
|
Bernard
Goldstein
|
|
Chief
Executive Officer
|
EXHIBIT
31.2
CERTIFICATION
OF INTERIM CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a) UNDER THE
SECURITIES EXCHANGE ACT OF 1934
I,
Donn
Mitchell, Interim Chief Financial Officer of Isle of Capri Casinos, Inc.,
certify that:
1.
I have
reviewed this quarterly report on Form 10-Q of Isle of Capri Casinos, Inc.;
2.
Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made,
in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4.
The
registrant’s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act
Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5.
The
registrant’s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of registrant’s board of directors
(or persons performing the equivalent functions):
(a)
All
significant deficiencies and material weaknesses in the design or operation
of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b)
Any
fraud, whether or not material, that involves management or other employees
who
have a significant role in the registrant’s internal control over financial
reporting.
|
|
Date:
December 2, 2005
|
/s/
DONN MITCHELL
|
|
Donn
Mitchell
|
|
Interim
Chief Financial Officer
|
EXHIBIT
32.1
CERTIFICATION
OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT
OF
2002 (18 U.S.C. SECTION 1350)
In
connection with the Quarterly Report of Isle of Capri Casinos, Inc. (the
“Company”) on Form 10-Q for the period ended October 23, 2005, as filed with the
Securities and Exchange Commission on the date hereof (the “Quarterly Report”),
I, Bernard Goldstein, Chief Executive Officer of the Company, certify, pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350),
that:
(1)
The
Quarterly Report fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934; and
(2)
The
information contained in the Quarterly Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
|
/s/
Bernard Goldstein
|
Bernard
Goldstein
|
Chief
Executive Officer
|
December
2, 2005
EXHIBIT
32.2
CERTIFICATION
OF INTERIM CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002 (18 U.S.C. SECTION 1350)
In
connection with the Quarterly Report of Isle of Capri Casinos, Inc. (the
“Company”) on Form 10-Q for the period ended October 23, 2005 as filed with the
Securities and Exchange Commission on the date hereof (the “Quarterly Report”),
I, Donn Mitchell, Interim Chief Financial Officer of the Company, certify,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section
1350), that:
(1)
The
Quarterly Report fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934; and
(2)
The
information contained in the Quarterly Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
|
/s/
Donn Mitchell
|
Donn
Mitchell
|
Interim
Chief Financial Officer
|
December
2, 2005