0000863015-01-500005.txt : 20011018
0000863015-01-500005.hdr.sgml : 20011018
ACCESSION NUMBER: 0000863015-01-500005
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 3
CONFORMED PERIOD OF REPORT: 20010429
FILED AS OF DATE: 20010730
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ISLE OF CAPRI CASINOS INC
CENTRAL INDEX KEY: 0000863015
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990]
IRS NUMBER: 411659606
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0425
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-20538
FILM NUMBER: 1691491
BUSINESS ADDRESS:
STREET 1: 1641 POPPS FERRY RD
CITY: BILOXI
STATE: MS
ZIP: 39532
BUSINESS PHONE: 2283967044
MAIL ADDRESS:
STREET 1: 1641 POPPS FERRY RD
CITY: BILOXI
STATE: MS
ZIP: 39532
FORMER COMPANY:
FORMER CONFORMED NAME: CASINO AMERICA INC
DATE OF NAME CHANGE: 19930328
FORMER COMPANY:
FORMER CONFORMED NAME: ANUBIS II CORP
DATE OF NAME CHANGE: 19600201
10-K405
1
doc1.txt
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED APRIL 29, 2001
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.
---------------------------
(Exact name of registrant as specified in its charter)
Delaware 41-1659606
---------------------------------------------------- ----------------------
(State or other jurisdiction . . . . . . . . . . . . (I.R.S. Employer
of incorporation or organization). . . . . . . . . . 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
Securities Registered Pursuant to Section 12(b) Of The Act: None
Securities Registered Pursuant to Section 12(g) Of The Act:
Common Stock, $.01 Par Value Per Share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
--
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting and non-voting stock held by
non-affiliates1 of the Company is $233,964,864, based on the last reported sale
price of $10.14 per share on July 20, 2001 on the NASDAQ Stock Market;
multiplied by 23,073,458 shares of Common Stock outstanding and held by
non-affiliates of the Company on such date.
As of July 20, 2001, the Company had a total of 30,642,762 shares of Common
Stock outstanding.
1 Affiliates for the purpose of this item refer to the directors, executive
officers and/or persons owning 10% or more of the Company's common stock, both
of record and beneficially; however, this determination does not constitute an
admission of affiliate status for any of the individual stockholders.
DOCUMENT INCORPORATED BY REFERENCE:
Document Part of Form 10-K into which Incorporated
-------- -----------------------------------------
Isle of Capri Casinos, Inc.'s
Definitive Proxy Statement for
its Annual Meeting of Stockholders
to be held October 2, 2001. Part III
ISLE OF CAPRI CASINOS, INC.
FORM 10-K
INDEX
PAGE
----
PART I 1
------
ITEM 1. BUSINESS 1
ITEM 2. PROPERTIES 28
ITEM 3. LEGAL PROCEEDINGS 31
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 32
PART II 33
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDERS' MATTERS 33
ITEM 6. SELECTED FINANCIAL DATA 34
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 35
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 42
ITEM 8. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS 43
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 83
PART III 83
--------
ITEM 10. DIRECTOR AND EXECUTIVE OFFICERS OF THE REGISTRANT 83
ITEM 11. EXECUTIVE COMPENSATION 83
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT 83
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 83
PART IV 84
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K 84
SIGNATURES 85
PART I
------------
ITEM 1. BUSINESS.
OVERVIEW
We are a leading developer, owner and operator of branded gaming and
related lodging and entertainment facilities in growing markets in the United
States. We were incorporated in Delaware in February 1990 under the name Kana
Corporation. In 1992 our name was changed to Casino America, Inc. On September
28, 1998 our name was changed to Isle of Capri Casinos, Inc. We conduct our
business through subsidiaries, and our principal asset is our ownership interest
in those subsidiaries, which in turn hold substantially all of the assets of our
businesses. Our principal executive offices are located at 1641 Popps Ferry
Road, Biloxi, MS 39532, and our telephone number is 228/396-7000.
On March 2, 2000, we merged with Lady Luck Gaming Corporation ("Lady
Luck"). Lady Luck wholly owned the Lady Luck Casino and Hotel facilities in
Lula, Mississippi, Natchez, Mississippi and Marquette, Iowa, and owned a 50%
interest in the Lady Luck Casino & Hotel in Bettendorf, Iowa (collectively, the
"Lady Luck properties"). In addition, on March 2, 2000 we acquired Bettendorf
Riverfront Development Corporation ("BRDC") which was owned by family members of
Bernard Goldstein, our chairman of the board and chief executive officer,
including Robert Goldstein, and which owned the remaining 50% interest in the
Lady Luck Casino & Hotel in Bettendorf, Iowa. Each of the Lady Luck properties
was rethemed and converted to Isle of Capri branded properties. The Lady Luck
acquisition and conversion of the Lady Luck properties was funded through our
Senior Secured Credit Facility, which was amended and restated in connection
with the acquisition (the "Senior Secured Credit Facility"). In connection with
the BRDC acquisition, we issued 6.3 million shares of common stock to BRDC's
shareholders.
On May 3, 2000, we acquired Davis Gaming Boonville, Inc. (the
"Isle-Boonville") which has preliminary approval to develop a gaming facility in
Boonville, Missouri. We are developing a casino project in Boonville with a
total expected investment of approximately $75.0 million, which includes the
purchase price of $11.5 million. We expect to complete the project in late fall
of 2001.
On June 6, 2000, we acquired the Kansas City Flamingo Casino (the
"Isle-Kansas City") from a subsidiary of Hilton Hotels Corporation and have
renovated and re-themed the property as an Isle of Capri. The acquisition and
renovation were funded through our Senior Secured Credit Facility.
The Company completed the acquisition of the Lady Luck Casino and Hotel in
Las Vegas ("Lady Luck Las Vegas") on September 12, 2000. The acquisition of the
Lady Luck Las Vegas facility was funded through our Senior Secured Credit
Facility.
On October 10, 2000, we acquired the President Casino and Hotel in
Davenport, Iowa ("Rhythm City - Davenport") from a subsidiary of President
Casinos, Inc. Isle of Capri has re-themed the casino into a Rhythm City Casino
("Rhythm City"), a new brand for the Company. Isle of Capri funded the
acquisition and re-theming through our Senior Secured Credit Facility.
As a result of the Lady Luck, BRDC, Isle-Kansas City, Rhythm City -
Davenport and the Lady Luck Las Vegas acquisitions, we now wholly own and
operate 12 gaming facilities located in Lake Charles and Bossier City,
Louisiana, Biloxi, Vicksburg, Tunica, Natchez and Lula, Mississippi, Bettendorf,
Marquette, and Davenport, Iowa, Kansas City, Missouri and Las Vegas, Nevada. We
also own a 57% interest in and operate a casino and hotel facility in Black
Hawk, Colorado. The gaming facilities in Lake Charles, Bossier City, Biloxi,
Vicksburg, Tunica, Natchez, Lula, Kansas City, Marquette, Bettendorf and Black
Hawk operate under the name "Isle of Capri" and feature our distinctive tropical
island theme. The gaming facility in Davenport, Iowa operates under the name
"Rhythm City." The gaming facility in Las Vegas, Nevada will continue to operate
under the "Lady Luck" name. In addition, we wholly own and operate a
pari-mutuel harness racing facility in Pompano Beach, Florida.
For the fiscal year ended April 29, 2001, we had net revenue of $982.8
million and EBITDA of $224.2 million.
STRATEGY
Our business strategy, which has been implemented in our existing
operations, emphasizes the standardized operation and development of
value-oriented gaming facilities and complimentary amenities with a tropical
island theme using the "Isle of Capri Casino" brand name. We believe that the
consistent use of the Isle of Capri Casino name and associated theme has created
a readily identifiable brand image connoting excitement, quality and value,
complimented by an emphasis on customer service and non-gaming entertainment
amenities. We seek to identify slot-oriented customers and active casino
patrons through the use of database marketing and generate repeat visits to our
gaming facilities. We believe that our strategy fosters customer loyalty,
enhances our ability to compete effectively in existing markets, and facilitates
the consistent, efficient and cost-effective development of gaming facilities in
new markets. We also believe that good community relations are fundamental to
our success and, as a result, we take an active role in community activities in
each jurisdiction in which we have gaming facilities. With the development of
the Rhythm City in Davenport, we have created a second brand that we believe
will be identifiable and will allow us to create customer loyalty both in
Davenport and in any other markets in which the brand may be utilized.
We have historically identified and entered new gaming markets that we
believe provide attractive long-term opportunities and added amenities at
existing properties as market conditions have warranted. In November 2000,
August 2000 and November 2000, respectively, we completed construction of a
hotel and two theaters at the Isle-Tunica, a hotel at the Isle-Black Hawk and an
additional hotel at the Isle-Lake Charles. We are also considering the
construction of additional lodging facilities, casino improvements or other
amenities at the Isle-Bossier City, the Isle-Biloxi and the Isle-Kansas City.
We are currently developing a casino in Boonville, Missouri and have received
preliminary approval from the Missouri Gaming Commission to develop a casino and
hotel facility in Jefferson County, Missouri, which is in the St. Louis
metropolitan area. We also expect to continue reviewing gaming opportunities in
new markets on the basis of demographic, regulatory, competitive and other
factors.
MARKETING
We attract customers to our casinos by designing and implementing marketing
and promotional programs that emphasize our Isle of Capri and Rhythm City themes
and generate loyal customers. We have developed an extensive proprietary
database of primarily slot-oriented customers that allows us to create effective
targeted marketing and promotional programs, merchandise giveaways, game
tournaments and other special events. These programs are designed to reward
customer loyalty, attract new customers to our properties and maintain high
recognition of our brands.
As of July 6, 2001, our database contained approximately 4.3 million
members, of whom approximately 650,000 receive regular mailings. To develop this
database, we offer all of our customers membership in the Island Gold Players
Club at Isle of Capri properties and the Fan Club at the Rhythm City -
Davenport, which allows them to earn points based on play and redeem these
points for casino cash tokens, prizes and complimentary services at any of our
casinos. Island Gold Players club and Fan Club members receive a card that, when
inserted into a slot machine or presented at a gaming table at the issuing
facility, allows us to track their gaming preferences, maximum, minimum and
total amount wagered and frequency of visits. Players are classified in groups
according to these characteristics. Our database is used for direct mailings,
giveaways and other promotional events that are tailored to these specific
groups of players. We have effectively used our database to encourage repeat
visits, increase customers' length of stay and improve our operating results.
CURRENT OPERATIONS
Here is an overview of our existing casino properties:
ISLE ISLE ISLE ISLE ISLE
BILOXI VICKSBURG NATCHEZ BOSSIER CITY LAKE CHARLES
------------ ------------ ----------- ------------ -------------
DATE OPENED . . . . . . . . . . AUG-92 AUG-93 FEB-93 (1) MAY-94 JUL-95
Casino square footage . . . . 32,500 27,000 17,634 18,243 48,900
Slot machines . . . . . . . . 1,090 767 704 1,118 1,715
Table games . . . . . . . . . 25 25 16 40 85
Hotel rooms . . . . . . . . . 367 122 143 560 493
Parking spaces. . . . . . . . 1,300 1,100 908 2,005 2,000
ISLE ISLE ISLE ISLE ISLE
TUNICA LULA KANSAS CITY BLACK HAWK BETTENDORF
------------ ------------ ------------ ----------- ------------
DATE OPENED . . . . . . . . . . JUL-99 JUN-94 (1) OCT-96 (1) DEC-98 APR-95 (1)
Casino square footage . . . . 28,000 55,750 30,000 43,000 26,444
Slot machines . . . . . . . . 879 1,498 1,071 1,144 1,047
Table games . . . . . . . . . 14 41 30 14 38
Hotel rooms . . . . . . . . . 227 486 - 237 256
Parking spaces. . . . . . . . 1,772 1,780 2,054 1,100 1,539
LADY LUCK RHYTHM CITY ISLE
LAS VEGAS DAVENPORT MARQUETTE
------------------------------- ------------ ------------ ----------
DATE OPENED . . . . . . . . . . JAN-64 (1) APR-91 (1) DEC-94 (1)
Casino square footage . . . . 37,000 30,044 18,747
Slot machines . . . . . . . . 805 1,016 742
Table games . . . . . . . . . 20 22 19
Hotel rooms . . . . . . . . . 805 191 25
Parking spaces. . . . . . . . 454 958 750
(1) opened by a prior owner
The Isle-Biloxi
The Isle-Biloxi, which commenced operations on August 1, 1992, was the
first gaming facility to open in Mississippi, and is one of nine dockside gaming
facilities operating on the Mississippi Gulf Coast (which includes Biloxi,
Gulfport and Bay St. Louis). Biloxi is the closest gaming market to Mobile,
Alabama, a metropolitan area with a population of approximately 800,000, that is
located approximately 60 miles east of Biloxi. The Isle-Biloxi is located at the
eastern end of a cluster of facilities known as "Casino Row" and is the first
property reached by visitors coming from Alabama, Florida and Georgia via
Highway 90.
The Isle-Biloxi's eight-acre facility consists of a 50,000 square foot
dockside gaming facility containing 32,500 square feet of gaming space with
1,090 slot machines and 25 table games on two levels, an adjacent land-based
pavilion, a 356-room hotel and on-site parking for 1,300 vehicles. The 32,000
square foot, 50-foot high pavilion offers a wide variety of non-gaming
amenities, including a 119-seat Farraddays' restaurant, a 504-seat Calypso's
buffet, a 50-seat Tradewinds deli, Caribbean Cove, an open-air lounge area that
can accommodate 116 customers and a Fantasy Isle Arcade of arcade games for all
ages. Calypso's and Farraddays' provide panoramic views of the Gulf of Mexico
and Deer Island. Caribbean Cove is located at the center of the pavilion and is
surrounded by a dramatic fountain and an entertainment stage. The entertainment
area features a stage and sound system used for special events. Musical
performances in the pavilion are scheduled six days a week providing a Caribbean
feel to Calypso's, Tradewinds and the hotel lobby. Headliner entertainment
appears monthly in the Flamingo Bay Ballroom with a portion of the seating
reserved for loyal customers. We are currently evaluating expansion at the
Isle-Biloxi that could include additional parking in the first phase.
The 356-room Isle of Capri hotel facility is directly accessible from the
casino through the atrium. The hotel offers spacious rooms, most with balconies
overlooking a marina, and provides amenities, including meeting rooms, full room
service, a heated pool and exercise facilities with a hot tub, a dry sauna and
massage therapy.
We believe that the Isle-Biloxi attracts customers from the local area,
Alabama, Florida, Georgia and southeastern Louisiana, including New Orleans and
Baton Rouge. There are approximately 800,000 and 2.9 million people residing
within 50 to 100 miles, respectively, of the Isle-Biloxi. The Mississippi Gulf
Coast market had gaming revenue of $1.2 billion for the twelve months ended
April 2001.
The Isle-Vicksburg
The Isle-Vicksburg, which commenced operations on August 9, 1993, was the
first of four dockside gaming facilities to open in the Vicksburg, Mississippi
market. Vicksburg is the closest gaming market to Jackson, Mississippi, a
metropolitan area with a population of approximately 450,000 that is located
approximately 40 miles east of Vicksburg.
The Isle-Vicksburg is located on an 18-acre site along the Mississippi
River, approximately one-mile north of Interstate 20, and consists of a 27,000
square foot dockside casino, an on-site 122-room hotel and a 12,483 square foot
land-based pavilion. The casino has two levels with a total of 767 slot machines
and 25 table games. The Isle-Vicksburg provides on-site parking for 900
vehicles.
The land-based pavilion offers customers a wide variety of non-gaming
amenities, including a 68-seat Farraddays' restaurant, a 340-seat Calypso's
buffet, a Tradewinds deli, live entertainment, a Banana Cabana souvenir gift
shop, an Island Gold Players Club booth and a reception area. Customers have
easy access to the second level of the casino from the land-based pavilion by
either escalator or a wide stairway, both of which provide panoramic views of
the Mississippi River through a wall of windows.
In February 1999, we opened an on-site 122-room hotel at the
Isle-Vicksburg, which has 69 deluxe rooms with balconies overlooking the
Mississippi River. The hotel is located on the bank of the Mississippi River,
adjacent to the casino. The Isle-Vicksburg's 67-space recreational vehicle park
is located approximately one-half mile from the casino and provides off-site
parking for 200 vehicles.
The Vicksburg market had gaming revenue of $230 million for the twelve
months ended April 2001. We believe that the Isle-Vicksburg attracts customers
primarily from Vicksburg and Jackson, Mississippi, northeastern Louisiana and
tourists from other locales. Approximately 530,000 and 1.5 million people live
within 50 and 100 miles, respectively, of the Isle-Vicksburg.
The Isle-Natchez
The Isle - Natchez commenced operations as a Lady Luck Casino in February
1993, and is the only gaming facility serving the Natchez area. The facility
includes a three-story, dockside casino containing approximately 17,634 square
feet of gaming space, 704 slot machines and 16 table games. Isle-Natchez also
owns and operates a 143-room hotel containing convention and banquet facilities
which is located approximately 1 mile from the casino, as well as a 85-seat
Farraddays' restaurant located near the casino facility and a 150-seat Calypso's
buffet.
The Isle-Bossier City
The Isle-Bossier City, which commenced operations on May 20, 1994, is one
of five dockside gaming facilities currently operating in the Bossier
City/Shreveport, Louisiana market. Bossier City/Shreveport is the closest gaming
market to Dallas/Ft. Worth, Texas, a metropolitan area with a population of
approximately 4.5 million that is located approximately 190 miles west of
Bossier City/Shreveport.
The Isle-Bossier City is located on a 38-acre site along the Red River
approximately one-quarter mile off Interstate 20 and has a dockside riverboat
casino, a land-based entertainment pavilion, a parking garage and an on-site
305-room deluxe hotel. We also own and operate a 225-room hotel two miles from
the Isle-Bossier City. The casino has approximately 20,000 square feet of gaming
space on three levels with 1,118 slot machines, 40 table games and a video poker
bar. The approximately 39,000 square foot land-based pavilion features towering
palm trees, exotic rock formations and a waterfall. The land-based pavilion and
hotel facilities offer a wide variety of non-gaming amenities, including a
71-seat Farraddays' restaurant, a 293-seat Calypso's buffet, a 44-seat
Tradewinds deli, Caribbean Cove, which features free, live entertainment and can
accommodate 550 customers, a Banana Cabana souvenir gift shop, an entertainment
lounge area, a large nine-screen television wall featuring sporting events, an
Island Gold Players Club booth, an arcade, banquet and meeting facilities, a
heated pool and exercise facilities with a hot tub. The Isle-Bossier City has
on-site parking for 2,005 cars, of which 900 are accommodated in an attached
parking garage. Additional overflow parking is available nearby on weekends.
The Bossier City/Shreveport market had gaming revenue of $724 million for
the twelve months ended April 2001. We believe that the Isle-Bossier City
attracts customers primarily from the local area, northeastern Texas and the
Dallas/Ft. Worth metropolitan area. Approximately 550,000 and 1.8 million people
live within 50 and 100 miles, respectively, of the Isle-Bossier City.
The Isle-Lake Charles
The Isle-Lake Charles, which commenced operations on July 29, 1995, is one
of two riverboat gaming facilities that operates two riverboats in the Lake
Charles, Louisiana market and one of three gaming facilities in southwest
Louisiana. Lake Charles is the closest gaming market to Houston, Texas, a
metropolitan area with a population of approximately 4.2 million that is located
approximately 140 miles west of Lake Charles.
The Isle-Lake Charles is located on a 19-acre site along the Calcasieu
River adjacent to Interstate 10 in Calcasieu Parish, one mile from the City of
Lake Charles. Our Crown riverboat has 24,700 square feet of gaming space with
761 slot machines and 41 table games on three levels. Our Grand Palais riverboat
has 24,200 square feet of gaming space with 954 slot machines and 44 table games
on two levels. Each of our riverboats has a large bar and foyer and the Grand
Palais riverboat has a top level which is not yet utilized. As of April 1, 2001,
we are no longer required to cruise.
We opened our new on-site 252-room deluxe hotel in November 2000. We also
offer on-site accommodations to our customers through the Inn at the Isle, a
241-room hotel, and provide free valet and self-parking for more than 2,000
vehicles, including approximately 1,400 spaces in an attached parking garage
from which patrons can access the pavilion by elevator. The lighted rooftop
rotunda of the Isle-Lake Charles' pavilion is topped by the Isle of Capri parrot
which is 145 feet above the ground and visible from Interstate 10. We believe
that these amenities help us attract a significant portion of the overnight
visitors from Texas.
The Isle-Lake Charles also includes a 105,000 square foot land-based
pavilion. The pavilion is based on a tropical island theme and includes rock
formations, waterfalls, water arches with jets of water shooting up to 30 feet
in the air, ponds with porcelain sea life, flower beds landscaped in the shape
of playing card suits and an arcade. The pavilion provides panoramic views of
the lake and the city of Lake Charles and has separate entrances to the
riverboats. The pavilion offers customers a wide variety of non-gaming
amenities, including a 97-seat Farraddays' restaurant, a 360-seat Calypso's
buffet, a 128-seat Tradewinds deli, a 140-seat Kitt's Kitchen and Rum Mill,
Caribbean Cove, which features free, live entertainment and can accommodate 180
customers, a Banana Cabana souvenir gift shop, an Island Gold Players Club booth
and an arcade. The pavilion also has a 14,750 square foot activity center
comprised of a 1,100-seat special events center designed for live boxing,
televised pay-per-view events, concerts, banquets and other events, meeting
facilities and administrative offices.
The Lake Charles market, excluding a nearby Native American-owned casino,
had gaming revenues of $357 million for the twelve months ended April 2001. We
believe that the Isle-Lake Charles attracts customers primarily from southeast
Texas, including Houston, Beaumont, Galveston, Orange and Port Arthur and local
area residents. Approximately 490,000 and 1.6 million people live within 50 and
100 miles, respectively, of the Isle-Lake Charles.
The Isle-Tunica
In July 1999, we opened the Isle-Tunica in Tunica County, Mississippi. The
facility contains approximately 879 slots and 14 table games, a 70-seat
Farraddays' restaurant and a 218-seat Calypso's buffet. We opened our 227-room
deluxe hotel and two theatres in November 2000.
The Tunica market includes 10 casinos and had gaming revenue of $1.2
billion for the twelve months ended 2001. We believe the Isle-Tunica attracts
customers primarily from Memphis, Tennessee, which is located approximately 40
miles north of the Isle-Tunica.
The Isle-Lula
The Isle-Lula, commenced operations as a Lady Luck Casino in June 1994 and
is the only casino facility in Coahoma County, Mississippi. The facility is
located next to the Helena Bridge, which crosses the Mississippi River between
Arkansas and Mississippi. Coahoma County is located approximately 120 miles
southeast of Little Rock, Arkansas, the property's primary market, and 60 miles
southwest of Memphis, Tennessee. The Isle-Lula is the closest gaming facility
to Little Rock, Arkansas, and approximately 850,000 people live within 150 miles
of the property's primary target market.
The property consists of two casinos containing approximately 55,750 square
feet of gaming space, 1,498 slot machines and 41 table games. The facility also
includes two on-site hotels with a combined 486 rooms, an entertainment
facility, an arcade, a 100-seat Does' Steakhouse, a 300-seat Calypso's buffet, a
48-seat Tradewinds deli and a Banana Cabana gift shop. We are currently
building a 151 seat Farraddays' restaurant.
The Isle-Kansas City
On June 6, 2000, we acquired the Isle-Kansas City from a subsidiary of
Hilton Hotels Corporation. The facility is one of four casinos in the Kansas
City metropolitan area, and is the closest facility to downtown Kansas City.
The property contains approximately 30,000 square feet of gaming space, 1,071
slot machines and 30 table games. The property has a 70-seat Farraddays'
restaurant, a 350-seat Calypso's buffet, and a 24-seat Tradewinds deli.
The Kansas City market had gaming revenues of $546 million for the twelve
months ended April 2001. We believe that the Isle-Kansas City attracts
customers primarily from the Kansas City metropolitan area, which has
approximately 1.1 million residents.
The Isle-Black Hawk
On December 30, 1998, we opened our 57%-owned Isle-Black Hawk. This
land-based casino is the first casino reached by customers arriving from Denver,
Colorado, a metropolitan area with a population of approximately 2.3 million
people that is located approximately 40 miles east of Black Hawk/Central City.
The Isle-Black Hawk is the largest gaming facility currently operating in the
Black Hawk/Central City market out of 24 gaming facilities operating in that
area.
The Isle-Black Hawk is located on an approximately 10.1-acre site which is
readily accessible from Highway 119 and contains 43,000 square feet of gaming
space on a single floor with 1,144 slot machines, 14 table games and on-site
covered parking for 1,100 vehicles. We opened our new on site 237-room hotel in
November 2000. We also offer customers a wide variety of non-gaming amenities,
including a 92-seat Farraddays' restaurant, a 244-seat Calypso's buffet, a
32-seat Tradewinds deli, a Banana Cabana souvenir gift shop and a 4,000 square
foot event center that can be used for meetings and entertainment.
We manage the Isle-Black Hawk for a fee which is equal to two percent of
revenue (after deducting one-half of gaming taxes) plus ten percent of operating
income, not to exceed four percent of revenue, as defined.
The Black Hawk/Central City market had gaming revenue of $509 million for
the twelve months ended April 2001. We believe that the Isle-Black Hawk's
customers are primarily "day trippers" from areas such as Denver, Boulder, Fort
Collins and Golden, Colorado and Cheyenne, Wyoming.
The Isle-Bettendorf
The Isle-Bettendorf opened as a Lady Luck Casino in April 1995 as a joint
venture between Lady Luck and BRDC. The property serves the Quad Cities
metropolitan area, including Bettendorf and Davenport, Iowa and Moline and Rock
Island, Illinois, and is one of three gaming facilities including Rhythm
City-Davenport serving that market. The facility is located off of Interstate
74 on the Mississippi River and is accessible from Interstate 74 and Interstate
80, the two interstate highways serving the Quad Cities metropolitan area.
The Isle-Bettendorf consists of a riverboat containing approximately 26,444
square feet of gaming space, 1,047 slot machines, 38 table games, a 256-room
hotel, a 1,539-car parking garage, approximately 16,000 square feet of
convention space, a 125-seat Farraddays' restaurant and a 325-seat Calypso's
buffet.
Rhythm City-Davenport
On October 10, 2000, we acquired the Rhythm City-Davenport from affiliates
of President Casinos, Inc. The facility is one of three casinos including
Isle-Bettendorf in the Quad Cities metropolitan area. The property contains
approximately 30,044 square feet of gaming space, 1,016 slot machines and 22
table games. The property has a 90-seat High Notes restaurant, a 290-seat Hit
Parade buffet, a 76-seat Rock Around the Clock deli and a 112- seat The Club
restaurant.
The Davenport market had gaming revenues of $183 million for the twelve
months ended April 2001. We believe that the Rhythm City Davenport attracts
customers primarily from the Quad Cities area that has approximately 360,000
residents.
The Isle-Marquette
The Isle-Marquette, which was acquired by Lady Luck in October 1999, is
located approximately 140 miles north of the Isle-Bettendorf. The
Isle-Marquette, which opened as the Miss Marquette Casino in December 1994,
currently competes with another riverboat and a racetrack with slot machines,
both of which are in the Dubuque area, approximately 50 miles south of
Marquette.
The Isle-Marquette includes a riverboat containing approximately 18,700
square feet of gaming space, 742 slot machines and 19 tables games. The
facility also includes a land-based facility containing a 160-seat Calypso's
buffet restaurant, a Tradewinds deli, an entertainment showroom, as well as a
24-room hotel, a marina and parking for approximately 750 vehicles.
Lady Luck Las Vegas
On September 12, 2000, we acquired the Lady Luck Las Vegas from Gemini,
Inc. which is located in downtown Las Vegas. The property contains
approximately 37,000 square feet of gaming space, 805 slot machines and 20 table
games. The property has a 56-seat Burgundy Room restaurant, a 156-seat Lady
Luck Express Buffet and a 42-seat Third Street Grill.
The downtown Las Vegas market had gaming revenues of $613 million for the
twelve months ended April 2001. We believe that the Lady Luck Las Vegas
attracts customers primarily from Southern California and the Mid-West portion
of the United States.
OTHER OPERATIONS
Pompano Park
In 1995, we acquired Pompano Park, a harness racing track located in
Pompano Beach, Florida, midway between Miami and West Palm Beach. Pompano Park
is the only racetrack licensed to conduct harness racing in Florida. During the
fiscal year ending April 2001, Pompano Park conducted 149 live racing programs.
Pompano Park also offers daily "full card" simulcasting and wagering on other
harness races.
Pompano Park is conveniently located off of Interstate 95 and the Florida
Turnpike on a 220-acre owned facility. Pompano Park can accommodate up to 14,500
customers and has 4,000 parking spaces and 980 horse stalls. The six-story,
air-conditioned facility includes a box seat area, a 260,000 square foot
clubhouse, a large grandstand, a 1,250-seat dining area from which the races can
be viewed, five concession stands, five bars and a 180-seat Player's Lounge
cafeteria.
We believe that Pompano Park would be an attractive location for
casino-style gaming if such gaming were to be legalized in Florida.
TRADEMARKS
We own trademarks associated with the following names included in this
document: Isle of Capri, Tradewinds, Farraddays', Calypso's, Inn at the
Isle, Island Gold, Isle Style, and Lady Luck. We have applied for a
trademark for Rhythm City. In addition, we have trademark applications
pending with respect to other marks used in this document.
We consider our interests in all these marks and the name recognition
associated with these marks to be extremely valuable to us and to our
operations and to further development and implementation of the "Isle
of Capri" brand and theme.
COMPETITION
We face intense competition in each of the markets in which we operate. We
compete directly with other gaming properties in Louisiana, Mississippi,
Colorado, Iowa, Missouri, and Nevada, and with gaming facilities located in
bordering states, including Illinois. We expect this competition to increase as
new gaming operators enter our markets, existing competitors expand their
operations, gaming activities expand in existing jurisdictions and gaming is
legalized in new jurisdictions. Several of our competitors may have better name
recognition, marketing and financial resources than we do. We cannot predict
with any certainty the effects of existing and future competition on our
operating results.
We also compete with other forms of gaming and entertainment such as online
computer gambling, bingo, pull tab games, card parlors, sports books,
pari-mutuel or telephonic betting on horse racing and dog racing,
state-sponsored lotteries, jai-alai, video lottery terminals, video poker
terminals and, in the future, may compete with in-flight gaming or gaming at
other venues.
We also compete with gaming operations in other gaming jurisdictions such
as Atlantic City, New Jersey. Our competition also includes casinos located on
Native American reservations throughout the United States, which have the
advantages of being land-based and exempt from certain state and federal taxes.
Some Native American tribes are either in the process of establishing or are
considering the establishment of gaming at additional locations. Expansion of
existing gaming jurisdictions and the development of new gaming jurisdictions
and casinos on Native American-owned lands will increase competition for our
existing and future operations. In addition, increased competition could limit
new opportunities for us or result in the saturation of certain gaming markets.
The gaming industry is subject to political and regulatory uncertainty.
Legislatures in the states in which we operate often consider legislation,
including without limitation, tax legislation, which could adversely affect our
operations. In addition, regulatory bodies in states in which we operate
periodically consider regulations, which could adversely affect our operations.
In 1996 the federal government established the National Gambling Impact Study
Commission to study gaming, including the casino industry. The Commission
issued its report in June 1999.
FUTURE DEVELOPMENTS
Jefferson County
On July 26, 2000, the Missouri Gaming Commission preliminarily selected the
Company's Jefferson County, Missouri project for development. The project will
primarily serve the South St. Louis metropolitan area. The project is expected
to include a 35,000-square-foot casino, the Isle's standard signature
restaurants, a 200-room hotel and an entertainment complex. Isle of Capri
expects to invest approximately $105 million in the project. A town located
near the site of the Company's proposed development has indicated that it
intends to condemn and/or annex the Company's site in order to prevent
development of the project. The Company intends to vigorously oppose these
efforts and has filed a declaratory judgment action challenging the town's right
to condemn and/or annex the property. Development of the project has been
delayed.
St. Mary Parish, Louisiana
A joint venture in which we own 45% and have a management contract is one
of three competing entities that have applied to the Louisiana Gaming Commission
for the issuance of a license to develop a project near Morgan City, Louisiana.
The gaming commission is expected to make a decision by the end of summer 2001.
EMPLOYEES
As of April 29, 2001, we employed approximately 12,000 people. We believe
that our relationship with our employees is satisfactory.
REGULATORY MATTERS
Louisiana
In July 1991, Louisiana enacted legislation permitting certain types of
gaming activity on certain rivers and waterways in Louisiana. The legislation
granted authority to supervise riverboat gaming activities to the Louisiana
Riverboat Gaming Commission and the Riverboat Gaming Enforcement Division of the
Louisiana State Police. The Louisiana Riverboat Gaming Commission was authorized
to hear and determine all appeals relative to the granting, suspension,
revocation, condition or renewal of all licenses, permits and applications. In
addition, the Louisiana Riverboat Gaming Commission established regulations
concerning authorized routes, duration of excursions, minimum levels of
insurance, construction of riverboats and periodic inspections. The Riverboat
Gaming Enforcement Division of the Louisiana State Police was authorized to
investigate applicants and issue licenses, investigate violations of the statute
and conduct continuing reviews of gaming activities.
In May 1996, regulatory oversight of riverboat gaming was transferred to
the Louisiana Gaming Control Board, which is comprised of nine voting members
appointed by the governor. The Louisiana Gaming Control Board now oversees all
licensing matters for riverboat casinos, land-based casinos, video poker and
certain aspects of Native American gaming other than those responsibilities
reserved to the Louisiana State Police.
The Louisiana Gaming Control Board is empowered to issue up to 15 licenses
to conduct gaming activities on a riverboat of new construction in accordance
with applicable law. However, no more than six licenses may be granted to
riverboats operating from any one designated waterway.
The Louisiana State Police continues to be involved broadly in gaming
enforcement and reports to the Louisiana Gaming Control Board. Louisiana law
permits the Louisiana State Police, among other things, to continue to (1)
conduct suitability investigations, (2) audit, investigate and enforce
compliance with standing regulations, (3) initiate enforcement and
administrative actions and (4) perform "all other duties and functions necessary
for the efficient, efficacious, and thorough regulation and control of gaming
activities and operations under the Louisiana Gaming Control Board's
jurisdiction."
Legislation was passed during the most recent legislative session that
allowed those riverboats which had been required, including the riverboats at
the Isle-Lake Charles, to conduct cruises to remain permanently dockside
beginning April 1, 2001. The legislation also increased the gaming tax for
operators from 18.5% to 21.5%. Louisiana gaming law specifies certain
restrictions relating to the operation of riverboat gaming, including the
following:
- agents of the Louisiana State Police are permitted on board at any time
during gaming operations;
- gaming devices, equipment and supplies may only be purchased or leased
from permitted suppliers;
- gaming may only take place in the designated gaming area while the
riverboat is docked on a designated river or waterway;
- gaming equipment may not be possessed, maintained or exhibited by any
person on a riverboat except in the specifically designated gaming area or in a
secure area used for inspection, repair or storage of such equipment;
- wagers may be received only from a person present on a licensed riverboat;
- persons under 21 are not permitted in designated gaming areas;
- except for slot machine play, wagers may be made only with tokens, chips
or electronic cards purchased from the licensee aboard a riverboat;
- licensees may only use docking facilities and routes for which they are
licensed and may only board and discharge passengers at the riverboat's licensed
berth;
- licensees must have adequate protection and indemnity insurance;
- licensees must have all necessary federal and state licenses, certificates
and other regulatory approvals prior to operating a riverboat; and
- gaming may only be conducted in accordance with the terms of the license
and Louisiana law.
To receive a gaming license in Louisiana, an applicant must be found to be
a person of good character, honesty and integrity and a person whose prior
activities, criminal record, if any, reputation, habits and associations do not
(1) pose a threat to the public interest of the State of Louisiana or to the
effective regulation and control of gaming or (2) create or enhance the dangers
of unsuitable, unfair or illegal practices, methods and activities in the
conduct of gaming or the carrying on of business and financial arrangements of
gaming activities. In addition, the Louisiana Gaming Control Board will not
grant a license unless it finds that:
- the applicant can demonstrate the capability, either through training,
education, business experience or a combination of the preceding, to operate a
gaming operation;
- the proposed financing of the riverboat and the gaming operations is
adequate for the nature of the proposed operation and is from a suitable and
acceptable source;
- the applicant demonstrates a proven ability to operate a vessel of
comparable size, capacity and complexity to a riverboat so as to ensure the
safety of its passengers;
- the applicant submits with its application for a license a detailed plan
of design of the riverboat;
- the applicant designates the docking facilities to be used by the
riverboat;
- the applicant shows adequate financial ability to construct and maintain a
riverboat; and
- the applicant has a good faith plan to recruit, train and upgrade
minorities in all employment classifications.
An initial license to conduct riverboat gaming operations is valid for a
term of five years and legislation passed in the 1999 legislative session
provides for renewals every five years thereafter. A gaming license is deemed
to be a privilege under Louisiana law and, as such, may be denied, revoked,
suspended, conditioned or limited at any time by the Louisiana Gaming Control
Board.
The Isle-Bossier City was issued its initial gaming license on December 22,
1993 and received a five-year renewal of the license on July 20, 1999. The
Crown Vessel operated at the Isle-Lake Charles was issued its initial gaming
license on March 14, 1995 and received a five-year renewal on July 20, 1999. The
license to operate the Grand Palais was issued to a previous owner and the Grand
Palais ceased operations as a result of its bankruptcy. Isle of Capri acquired
the Grand Palais, which is operated at the Isle-Lake Charles, and was issued a
five-year renewal on July 20, 1999.
Louisiana gaming law provides that a renewal application for the period
succeeding the initial five-year term of an operator's license must be made to
the Louisiana Gaming Control Board and must include a statement under oath of
any and all changes in information, including financial information, provided in
the previous application. The transfer of a license or an interest in a license
is prohibited.
Certain persons affiliated with a riverboat gaming licensee, including
directors and officers of the licensee, directors and officers of any holding
company of the licensee involved in gaming operations, persons holding 5% or
greater interests in the licensee and persons exercising influence over a
licensee, are subject to the application and suitability requirements of
Louisiana gaming law.
The sale, purchase, assignment, transfer, pledge or other hypothecation,
lease, disposition or acquisition by any person of securities which represent 5%
or more of the total outstanding shares issued by a licensee is subject to the
approval of the Louisiana Gaming Control Board. A security issued by a licensee
must generally disclose these restrictions. Prior approval from the Louisiana
Gaming Control Board is required for the sale, purchase, assignment, transfer,
pledge or other hypothecation, lease, disposition or acquisition of any
ownership interest of 5% or more of any non-corporate licensee or for the
transfer of any "economic interest" of 5% or more of any licensee or affiliated
gaming person. An "economic interest" is defined as any interest whereby a
person receives or is entitled to receive, by agreement or otherwise, a profit,
gain, thing of value, loan, credit, security interest, ownership interest or
other benefit.
Fees payable to the state for conducting gaming activities on a riverboat
include (1) $50,000 per riverboat for the first year of operation and $100,000
per year per riverboat thereafter, plus (2) 21.5% of net gaming proceeds.
Legislation was passed during the most recent legislative session that allowed
those riverboats which had been required to conduct cruises, including the
riverboats at the Isle-Lake Charles, to remain permanently dockside beginning
April 1, 2001. The legislation also increased the gaming tax for operators from
18.5% to 21.5%. A statute also authorizes local governing authorities to levy
boarding fees. Isle of Capri has development agreements with the local governing
authorities in the jurisdictions in which it operates pursuant to which it makes
payments in lieu of boarding fees.
A licensee must notify and/or seek approval from the Louisiana Gaming
Control Board in connection with any withdrawals of capital, loans, advances or
distributions in excess of 5% of retained earnings for a corporate licensee, or
of capital accounts for a partnership or limited liability company licensee,
upon completion of any such transaction. The Louisiana Gaming Control Board may
issue an emergency order for not more than ten days prohibiting payment of
profits, income or accruals by, or investments in, a licensee. Riverboat gaming
licensees and their affiliated gaming persons must notify the Louisiana Gaming
Control Board 60 days prior to the receipt by any such persons of any loans or
extensions of credit or modifications thereof. The Louisiana Gaming Control
Board is required to investigate the reported loan, extension of credit or
modification thereof and to determine whether an exemption exists on the
requirement of prior written approval and, if such exemption is not applicable,
to either approve or disapprove the transaction. If the Louisiana Gaming Control
Board disapproves of a transaction, the transaction cannot be entered into by
the licensee or affiliated gaming person. Isle of Capri is an affiliated gaming
person of its subsidiaries that hold the licenses to conduct riverboat gaming at
the Isle-Bossier City and the Isle-Lake Charles.
The failure of a licensee to comply with the requirements set forth above
may result in the suspension or revocation of that licensee's gaming license.
Additionally, if the Louisiana Gaming Control Board finds that the individual
owner or holder of a security of a corporate license or intermediary company or
any person with an economic interest in a licensee is not qualified under
Louisiana law, the Louisiana Gaming Control Board may require, under penalty of
suspension or revocation of the license, that the person not:
- receive dividends or interest on securities of the corporation;
- exercise directly or indirectly a right conferred by securities of the
corporation;
- receive remuneration or economic benefit from the licensee;
- exercise significant influence over activities of the licensee; or
- continue its ownership or economic interest in the licensee.
A licensee must periodically report the following information to the
Louisiana Gaming Control Board, which is not confidential and is available for
public inspection: (1) the licensee's net gaming proceeds from all authorized
games, (2) the amount of net gaming proceeds tax paid and (3) all quarterly and
annual financial statements presenting historical data, including annual
financial statements that have been audited by an independent certified public
auditor.
During the 1996 special session of the Louisiana legislature, legislation
was passed which provided for local option elections to be held in November 1996
which gave voters in each parish within the state the opportunity to decide
whether the various forms of gaming permitted under Louisiana law, including
riverboat gaming, were permissible in each parish. In November 1996, voters in
Calcasieu and Bossier parishes, the parishes in which the Isle-Lake Charles and
Isle-Bossier City are located, voted favorably to permit the continuation of
riverboat gaming.
During the 1996 special session of the Louisiana legislature, legislation
was also enacted placing on the ballot for a statewide election a constitutional
amendment limiting the expansion of gaming. In October 1996, voters passed the
constitutional amendment. As a result, local option elections are required
before new or additional forms of gaming can be brought into a parish.
Proposals to amend or supplement Louisiana's riverboat gaming statute are
frequently introduced in the Louisiana State legislature. There is no assurance
that changes in Louisiana gaming law will not occur or that such changes will
not have a material adverse effect on Isle of Capri's business in Louisiana.
Mississippi
In June 1990, Mississippi enacted legislation legalizing dockside casino
gaming for counties along the Mississippi River, which is the western border for
most of the state, and the Gulf Coast, which is the southern border for most of
the state. The legislation gave each of those counties the opportunity to hold a
referendum on whether to allow dockside casino gaming within its boundaries.
Gaming vessels in Mississippi must be located on the Mississippi River, on
navigable waters in eligible counties along the Mississippi River or in the
waters lying south of the counties along the Mississippi Gulf Coast. Mississippi
law permits unlimited stakes gaming on permanently moored vessels on a 24-hour
basis and does not restrict the percentage of space, which may be utilized for
gaming. There are no limitations on the number of gaming licenses that may be
issued in Mississippi.
The ownership and operation of gaming facilities in Mississippi are subject
to extensive state and local regulation intended to:
- prevent unsavory or unsuitable persons from having any direct or indirect
involvement with gaming at any time or in any capacity;
- establish and maintain responsible accounting practices and procedures for
gaming operations;
- maintain effective control over the financial practices of licensees,
including establishing minimum procedures for internal fiscal affairs and
safeguarding of assets and revenues, providing reliable record keeping and
making periodic reports;
- provide a source of state and local revenues through taxation and
licensing fees;
- prevent cheating and fraudulent practices; and
- ensure that gaming licensees, to the extent practicable, employ
Mississippi residents.
The regulations are subject to amendment and interpretation by the
Mississippi Gaming Commission. Changes in Mississippi laws or regulations may
limit or otherwise materially affect the types of gaming that may be conducted
in Mississippi and such changes, if enacted, could have an adverse effect on
Isle of Capri and its Mississippi gaming operations.
Isle of Capri is registered as a publicly traded holding company under the
Mississippi Gaming Control Act. Isle of Capri's gaming operations in Mississippi
are subject to regulatory control by the Mississippi Gaming Commission, the
State Tax Commission and various other local, city and county regulatory
agencies (collectively referred to as the "Mississippi Gaming Authorities").
Subsidiaries of Isle of Capri have obtained gaming licenses from the Mississippi
Gaming Authorities. Isle of Capri's future gaming operations outside of
Mississippi are also subject to approval by the Mississippi Gaming Commission.
The licenses held by Isle of Capri's Mississippi gaming operations have terms of
three years and are not transferable. The Isle-Biloxi received a renewal gaming
license in May 2000, the Isle-Vicksburg obtained a renewal gaming license in
February 2001, and the Isle-Tunica obtained a renewal gaming license in May
2001. The Isle-Natchez received its current license on June 23, 2000, and the
Isle-Lula received its current licenses in July 2000. There is no assurance that
new licenses can be obtained at the end of each three-year period of a license.
Moreover, the Mississippi Gaming Commission may, at any time, and for any cause
it deems reasonable, revoke, suspend, condition, limit or restrict a license or
approval to own shares of stock in the subsidiaries of Isle of Capri that
operate in Mississippi.
Substantial fines for each violation of Mississippi's gaming laws or
regulations may be levied against Isle of Capri, its subsidiaries and the
persons involved. A violation under a gaming license held by a subsidiary of
Isle of Capri operating in Mississippi may be deemed a violation of all the
other licenses held by Isle of Capri.
Isle of Capri and each of its Mississippi gaming subsidiaries must
periodically submit detailed financial, operating and other reports to the
Mississippi Gaming Commission and/or the State Tax Commission. Numerous
transactions, including substantially all loans, leases, sales of securities and
similar financing transactions entered into by any subsidiary of Isle of Capri
operating a casino in Mississippi, must be reported to or approved by the
Mississippi Gaming Commission. In addition, the Mississippi Gaming Commission
may, at its discretion, require additional information about the operations of
Isle of Capri.
Certain officers and employees of Isle of Capri and the officers, directors
and certain key employees of Isle of Capri's Mississippi gaming subsidiaries
must be found suitable or be licensed by the Mississippi Gaming Commission. Isle
of Capri believes that all required findings of suitability related to all
Mississippi Isle of Capri properties have been applied for or obtained, although
the Mississippi Gaming Commission at its discretion may require additional
persons to file applications for findings of suitability. In addition, any
person having a material relationship or involvement with Isle of Capri may be
required to be found suitable or licensed, in which case those persons must pay
the costs and fees associated with such investigation. The Mississippi Gaming
Commission may deny an application for a finding of suitability for any cause
that it deems reasonable. Changes in certain licensed positions must be reported
to the Mississippi Gaming Commission. In addition to its authority to deny an
application for a finding of suitability, the Mississippi Gaming Commission has
jurisdiction to disapprove a change in a licensed position. The Mississippi
Gaming Commission has the power to require Isle of Capri and any of its
Mississippi gaming subsidiaries to suspend or dismiss officers, directors and
other key employees or to sever relationships with other persons who refuse to
file appropriate applications or whom the authorities find unsuitable to act in
such capacities.
Employees associated with gaming must obtain work permits that are subject
to immediate suspension under certain circumstances. The Mississippi Gaming
Commission will refuse to issue a work permit to a person who has been convicted
of a felony, committed certain misdemeanors or knowingly violated the
Mississippi Gaming Control Act, and it may refuse to issue a work permit to a
gaming employee for any other reasonable cause.
At any time, the Mississippi Gaming Commission has the power to investigate
and require the finding of suitability of any record or beneficial stockholder
of Isle of Capri. The Mississippi Gaming Control Act requires any person who
individually or in association with others acquires, directly or indirectly,
beneficial ownership of more than 5% of Isle of Capri's common stock to report
the acquisition to the Mississippi Gaming Commission, and such person may be
required to be found suitable. In addition, the Mississippi Gaming Control Act
requires any person who, individually or in association with others, becomes,
directly or indirectly, a beneficial owner of more than 10% of Isle of Capri's
common stock, as reported to the U.S. Securities and Exchange Commission, to
apply for a finding of suitability by the Mississippi Gaming Commission and pay
the costs and fees that the Mississippi Gaming Commission incurs in conducting
the investigation.
The Mississippi Gaming Commission has generally exercised its discretion to
require a finding of suitability of any beneficial owner of more than 5% of a
registered publicly traded holding company's stock. However, the Mississippi
Gaming Commission has adopted a policy that generally permits certain
institutional investors to own beneficially up to 15% of a registered public
company's stock without a finding of suitability. If a stockholder who must be
found suitable is a corporation, partnership or trust, it must submit detailed
business and financial information, including a list of beneficial owners.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Mississippi Gaming
Commission may be found unsuitable. Isle of Capri believes that compliance by
Isle of Capri with the licensing procedures and regulatory requirements of the
Mississippi Gaming Commission will not affect the marketability of Isle of
Capri's securities. Any person found unsuitable and who holds, directly or
indirectly, any beneficial ownership of Isle of Capri's securities beyond such
time as the Mississippi Gaming Commission prescribes may be guilty of a
misdemeanor. Isle of Capri is subject to disciplinary action if, after receiving
notice that a person is unsuitable to be a stockholder or to have any other
relationship with Isle of Capri or its subsidiaries operating casinos in
Mississippi, Isle of Capri:
- pays the unsuitable person any dividend or other distribution upon its
voting securities;
- recognizes the exercise, directly or indirectly, of any voting rights
conferred by its securities;
- pays the unsuitable person any remuneration in any form for services
rendered or otherwise, except in certain limited and specific circumstances; or
- fails to pursue all lawful efforts to require the unsuitable person to
divest himself of the securities, including, if necessary, the immediate
purchase of the securities for cash at a fair market value.
Isle of Capri may be required to disclose to the Mississippi Gaming
Commission upon request the identities of the holders of any of Isle of Capri's
debt securities. In addition, under the Mississippi Gaming Control Act, the
Mississippi Gaming Commission may, in its discretion, (1) require holders of
Isle of Capri's securities, including the notes, to file applications, (2)
investigate such holders and (3) require such holders to be found suitable to
own such securities. Although the Mississippi Gaming Commission generally does
not require the individual holders of obligations such as the notes to be
investigated and found suitable, the Mississippi Gaming Commission retains the
discretion to do so for any reason, including but not limited to a default, or
where the holder of the debt instrument exercises a material influence over the
gaming operations of the entity in question. Any holder of debt securities
required to apply for a finding of suitability must pay all investigative fees
and costs of the Mississippi Gaming Commission in connection with such an
investigation.
The Mississippi regulations provide that a change in control of Isle of
Capri may not occur without the prior approval of the Mississippi Gaming
Commission. Mississippi law prohibits Isle of Capri from making a public
offering of its securities without the approval of the Mississippi Gaming
Commission if any part of the proceeds of the offering is to be used to finance
the construction, acquisition or operation of gaming facilities in Mississippi,
or to retire or extend obligations incurred for one or more such purposes. The
Mississippi Gaming Commission has the authority to grant a continuous approval
of securities offerings and has granted such approval for Isle of Capri, subject
to renewal every two years.
Regulations of the Mississippi Gaming Commission prohibit certain
repurchases of securities of publicly traded corporations registered with the
Mississippi Gaming Commission, including holding companies such as Isle of
Capri, without prior approval of the Mississippi Gaming Commission. Transactions
covered by these regulations are generally aimed at discouraging repurchases of
securities at a premium over market price from certain holders of greater than
3% of the outstanding securities of the registered publicly traded corporation.
The regulations of the Mississippi Gaming Commission also require prior approval
for a "plan of recapitalization" as defined in such regulations.
Isle of Capri must maintain in the State of Mississippi current stock
ledgers, which may be examined by the Mississippi Gaming Authorities at any
time. If any securities are held in trust by an agent or by a nominee, the
record holder may be required to disclose the identity of the beneficial owner
to the Mississippi Gaming Authorities. A failure to make such disclosure may be
grounds for finding the record holder unsuitable. Isle of Capri must render
maximum assistance in determining the identity of the beneficial owner.
Mississippi law requires that certificates representing shares of Isle of
Capri common stock bear a legend to the general effect that the securities are
subject to the Mississippi Gaming Control Act and regulations of the Mississippi
Gaming Commission. The Mississippi Gaming Commission has the authority to grant
a waiver from the legend requirement, which Isle of Capri has obtained. The
Mississippi Gaming Commission, through the power to regulate licenses, has the
power to impose additional restrictions on the holders of Isle of Capri's
securities at any time.
The Mississippi Gaming Commission enacted a regulation requiring that, as a
condition to licensure or license renewal, an applicant must provide a plan to
develop infrastructure facilities amounting to 25% of the cost of the casino and
a parking facility capable of accommodating 500 cars. In 1999, the Mississippi
Gaming Commission approved amendments to this regulation that increased the
infrastructure development requirement from 25% to 100% for new casinos (or upon
acquisition of a closed casino), but grandfathered existing licensees and
development plans approved prior to the effective date of the new regulation
(including the Isle-Tunica and the Isle-Lula). "Infrastructure facilities"
include any of the following:
- a 250-room or larger hotel of at least a two-star rating as defined by the
current edition of the Mobil Travel Guide;
- theme parks;
- golf courses;
- marinas;
- entertainment facilities;
- tennis complexes; and
- any other facilities approved by the Mississippi Gaming Commission.
Parking facilities, roads, sewage and water systems or civic facilities are
not considered "infrastructure facilities." The Mississippi Gaming Commission
may reduce the number of rooms required in a hotel if it is satisfied that
sufficient rooms are available to accommodate the anticipated number of
visitors.
License fees and taxes are payable to the State of Mississippi and to the
counties and cities in which a Mississippi Gaming Subsidiary's respective
operations will be conducted. The license fee payable to the state of
Mississippi is based upon gross revenue of the licensee (generally defined as
gaming receipts less payout to customers as winnings) and equals 4% of gross
revenue of $50,000 or less per month, 6% of gross revenue over $50,000 and less
than $134,000 per calendar month, and 8% of gross revenue over $134,000 per
calendar month. The foregoing license fees are allowed as a credit against the
licensee's Mississippi income tax liability for the year paid. Additionally, a
licensee must pay a $5,000 annual license fee and an annual fee based upon the
number of games it operates. The gross revenue tax imposed by the Mississippi
communities and counties in which Isle of Capri's casino operations are located
equals 0.4% of gross revenue of $50,000 or less per calendar month, 0.6% of
gross revenue over $50,000 and less than $134,000 per calendar month and 0.8% of
gross revenue over $134,000 per calendar month. These fees have been imposed in,
among other cities and counties, Biloxi, Vicksburg, Tunica County and Coahoma
County. Certain Local and Private Laws of the State of Mississippi may impose
fees or taxes on the Mississippi Gaming Subsidiaries in addition to the fees
described above.
The Mississippi Gaming Commission requires, as a condition of licensure or
license renewal, that casino vessels on the Mississippi Gulf Coast that are not
self-propelled must be moored to withstand a Category 4 hurricane with 155
mile-per-hour winds and 15-foot tidal surge. Isle of Capri believes that all of
its Mississippi Gaming Subsidiaries currently meet this requirement. A 1996
Mississippi Gaming Commission regulation prescribes the hurricane emergency
procedure to be used by the Mississippi Gulf Coast casinos.
The sale of food or alcoholic beverages at Isle of Capri's Mississippi
gaming locations is subject to licensing, control and regulation by the
applicable state and local authorities. The agencies involved have full power to
limit, condition, suspend or revoke any such license, and any such disciplinary
action could (and revocation would) have a material adverse effect upon the
operations of the affected casino or casinos. Certain officers and managers of
Isle of Capri and its Mississippi gaming subsidiaries must be investigated by
the Alcoholic Beverage Control Division of the State Tax Commission in
connection with liquor permits that have been issued. The Alcoholic Beverage
Control Division of the State Tax Commission must approve all changes in
licensed positions.
On three separate occasions since 1998, certain anti-gaming groups have
proposed referenda that, if adopted, would have banned gaming in Mississippi and
required that gaming entities cease operations within two years after the ban.
All three referenda were declared invalid by Mississippi courts because each
lacked a required government revenue impact statement.
Colorado
The State of Colorado created the Division of Gaming (the "Colorado
Division") within the Department of Revenue to license, implement, regulate and
supervise the conduct of limited gaming under the Colorado Limited Gaming Act.
The Director of the Colorado Division (the "Colorado Director"), pursuant to
regulations promulgated by, and subject to the review of, a five-member Colorado
Limited Gaming Control Commission (the "Colorado Commission"), has been granted
broad power to ensure compliance with the Colorado gaming laws and regulations
(the "Colorado Regulations"). The Colorado Director may inspect, without notice,
impound or remove any gaming device. The Colorado Director may examine and copy
any licensee's records, may investigate the background and conduct of licensees
and their employees, and may bring disciplinary actions against licensees and
their employees. The Colorado Director may also conduct detailed background
investigations of persons who loan money to, or otherwise provide financing to,
a licensee.
The Colorado Commission is empowered to issue five types of gaming and
gaming-related licenses, and has delegated authority to the Colorado Director to
issue certain types of licenses and approve certain changes in ownership. The
licenses are revocable and non-transferable. The Isle of Capri Black Hawk's
failure or inability, or the failure or inability of others associated with the
Isle of Capri Black Hawk, including Isle of Capri Casinos, Inc. and Casino
America of Colorado, Inc., to maintain necessary gaming licenses or approvals
would have a material adverse effect on our operations. All persons employed by
Isle of Capri Black Hawk, and involved, directly or indirectly, in gaming
operations in Colorado also are required to obtain a Colorado gaming license.
All licenses must be renewed annually, except those for key and support
employees, which must be renewed every two years.
As a general rule, under the Colorado Regulations, no person may have an
"ownership interest" in more that three retail gaming licenses in Colorado. The
Colorado Commission has ruled that a person does not have an ownership interest
in a retail licensee for purposes of the multiple license prohibition if:
- that person has less than a five percent (5%) ownership interest in an
institutional investor which has an ownership interest in a publicly traded
licensee or publicly traded company affiliated with a licensee;
- a person has a five percent (5%) or more ownership interest in an
institutional investor, but the institutional investor has less than a five
percent (5%) ownership interest in a publicly traded licensee or publicly traded
company affiliated with a licensee;
- an institutional investor has less than a five percent (5%) ownership
interest in a publicly traded licensee or publicly traded company affiliated
with a licensee;
- an institutional investor possesses voting securities in a fiduciary
capacity for another person, and does not exercise voting control over five
percent (5%) or more of the outstanding voting securities of a publicly traded
licensee or of a publicly traded company affiliated with a licensee;
- a registered broker or dealer retains possession of voting securities of a
publicly traded licensee or of a publicly traded company affiliated with a
licensee for its customers in street name or otherwise, and exercises voting
rights for less than five percent (5%) of the outstanding voting securities
securities or of a publicly traded company affiliated with a licensee;
- a registered broker or dealer acts as a market maker for the stock of a
publicly traded licensee or of a publicly traded company affiliated with a
licensee and possesses a voting interest in less than five percent (5%) of the
outstanding voting securities stock of the publicly traded licensee or publicly
traded company affiliated with a licensee;
- an underwriter is holding securities of a publicly traded licensee or
publicly traded company affiliated with a licensee as part of an underwriting
for no more than 90 days after the beginning of such underwriting if it
exercises voting rights of less than five percent (5%) of the outstanding voting
securities of a publicly traded licensee or publicly traded company affiliated
with a licensee;
- a book entry transfer facility holds voting securities for third parties,
if it exercises voting rights with respect to less than five percent (5%) of the
outstanding voting securities of a publicly traded licensee or publicly traded
company affiliated with a licensee; or
- a person owns less than five percent (5%) of the outstanding voting
securities of thepublicly traded licensee or publicly traded company affiliated
with a licensee.
Hence, our business opportunities, and those of persons with an
"ownership interest" in Isle of Capri Casinos, Inc., Casino America of Colorado,
Inc. or the Isle of Capri Black Hawk, are limited to interests that comply with
the Colorado Regulations and the Colorado Commission's rule.
In addition, pursuant to the Colorado Regulations, no manufacturer
or distributor of slot machines or associated equipment may, without
notification being provided to the Division within ten days, knowingly have an
interest in any casino operator, allow any of its officers or any other person
with a substantial interest in such business to have such an interest, employ
any person if that person is employed by a casino operator, or allow any casino
operator or person with a substantial interest therein to have an interest in a
manufacturer's or distributor's business. A "substantial interest" means the
lesser of (i) as large an interest in an entity as any other person or (ii) any
financial or equity interest equal to or greater than 5%. The Colorado
Commission has ruled that a person does not have a "substantial interest" if
such person's sole ownership interest in such licensee is through the ownership
of less than five percent (5%) of the outstanding voting securities of a
publicly traded licensee or publicly traded affiliated company of a licensee.
The Isle of Capri Casinos, Inc. is a "publicly traded corporation" under
the Colorado Regulations.
Under the Colorado Regulations, any person or entity having any direct
or indirect interest in a gaming licensee or an applicant for a gaming license,
including, but not limited to, Isle of Capri Casinos, Inc. and Casino America of
Colorado, Inc. and their security holders, may be required to supply the
Colorado Commission with substantial information, including, but not limited to,
background information, source of funding information, a sworn statement that
such person or entity is not holding his or her interest for any other party,
and fingerprints. Such information, investigation and licensing (or finding of
suitability) as an "associated person" automatically will be required of all
persons (other than certain institutional investors discussed below) which
directly or indirectly beneficially own ten percent (10%) or more of a direct or
indirect beneficial ownership or interest in Isle of Capri Black Hawk, through
their beneficial ownership of any class of voting securities of Isle of Capri
Casinos, Inc, Casino America of Colorado, Inc. or Isle of Capri Black Hawk,
Those persons must report their interest within ten (10) days and file
appropriate applications within 45 days after acquiring interest. Persons who
directly or indirectly beneficially own five percent (5%) or more (but less than
10%) of a direct or indirect beneficial ownership or interest in Isle of Capri
Black Hawk, through their beneficial ownership of any class of voting securities
of Isle of Capri Black Hawk, Isle of Capri Casinos, Inc. or Casino America of
Colorado, Inc., must report their interest to the Colorado Commission within ten
(10) days after acquiring that interest and may be required to provide
additional information and to be found suitable. (It is the current practice of
the gaming regulators to require findings of suitability for persons
beneficially owning five percent (5%) or more of a direct or indirect beneficial
ownership or interest, other than certain institutional investors discussed
below.) If certain institutional investors provide specified information to the
Colorado Commission and are holding for investment purposes only, those
investors, at the Colorado Commission's discretion, may be permitted to own up
to 14.99% of Isle of Capri Black Hawk through their beneficial ownership in any
class of voting of security of Isle of Capri Black Hawk, Casino America of
Colorado, Inc., or Isle of Capri Casinos, Inc., before being required to be
found suitable. All licensing and investigation fees will have to be paid by the
person in question. The associated person investigation fee currently is $57 per
hour.
The Colorado Regulations define a "voting security" to be a security the
holder of which is entitled to vote generally for the election of a member or
members of the board of directors or board of trustees of a corporation or a
comparable person or persons of another form of business organization.
The Colorado Commission also has the right to request information from
any person directly or indirectly interested in, or employed by, a licensee, and
to investigate the moral character, honesty, integrity, prior activities,
criminal record, reputation, habits and associations of: (1) all persons
licensed pursuant to the Colorado Limited Gaming Act; (2) all officers,
directors and stockholders of a licensed privately held corporation; (3) all
officers, directors and stockholders holding either a five percent (5%) or
greater interest or a controlling interest in a licensed publicly traded
corporation; (4) all general partners and all limited partners of a licensed
partnership; (5) all persons which have a relationship similar to that of an
officer, director or stockholder of a corporation (such as members and managers
of a limited liability company); (6) all persons supplying financing or loaning
money to any licensee connected with the establishment or operation of limited
gaming; (7) all persons having a contract, lease or ongoing financial or
business arrangement with any licensee, where such contract, lease or
arrangement relates to limited gaming operations, equipment devices or premises;
and (8) all persons contracting with or supplying any goods and services to the
gaming regulators.
Certain public officials and employees are prohibited from having any
direct or indirect interest in a license or limited gaming.
In addition, under the Colorado Regulations, every person who is a party
to a "gaming contract" (as defined below) or lease with an applicant for a
license, or with a licensee, upon the request of the Colorado Commission or the
Colorado Director, must promptly provide the Colorado Commission or Colorado
Director all information which may be requested concerning financial history,
financial holdings, real and personal property ownership, interests in other
companies, criminal history, personal history and associations, character,
reputation in the community and all other information which might be relevant to
a determination of whether a person would be suitable to be licensed by the
Colorado Commission. Failure to provide all information requested constitutes
sufficient grounds for the Colorado Director or the Colorado Commission to
require a licensee or applicant to terminate its "gaming contract" or lease with
any person who failed to provide the information requested. In addition, the
Colorado Director or the Colorado Commission may require changes in "gaming
contracts" before an application is approved or participation in the contract is
allowed. A "gaming contract" is defined as an agreement in which a person does
business with or on the premises of a licensed entity.
The Colorado Commission and the Colorado Division have interpreted the
Colorado Regulations to permit the Colorado Commission to investigate and find
suitable persons or entities providing financing to or acquiring securities from
Isle of Capri Casinos, Inc., Casino America of Colorado, Inc. or Isle of Capri
Black Hawk. As noted above, any person or entity required to file information,
be licensed or found suitable would be required by us to pay the costs thereof
and of any investigation. Although the Colorado Regulations do not require the
prior approval for the execution of credit facilities or issuance of debt
securities, the Colorado regulators reserve the right to approve, reguire
changes to or require the termination of any financing, including if a person or
entity is required to be found suitable and is not found suitable. In any event,
lenders, noteholders, and others providing financing will not be able to
exercise certain rights and remedies without the prior approval of the Colorado
gaming authorities. Information regarding lenders and holders of securities will
be periodically reported to the Colorado gaming authorities.
Except under certain limited circumstances relating to slot machine
manufacturers and distributors, every person supplying goods, equipment, devices
or services to any licensee in return for payment of a percentage, or calculated
upon a percentage, of limited gaming activity or income must obtain an operator
license or be listed on the retailer's license where such gaming will take
place. With respect to the foregoing requirement, it is the current practice of
the Colorado Division to require manufacturers and distributors to obtain an
operator's license if the limited exceptions do not apply to them and to require
other persons to be listed as associated persons on the license of the
applicable retailer.
An application for licensure or suitability may be denied for any cause
deemed reasonable by the Colorado Commission or the Colorado Director, as
appropriate. Specifically, the Colorado Commission and the Colorado Director
must deny a license to any applicant who, among other things: (1) fails to prove
by clear and convincing evidence that the applicant is qualified; (2) fails to
provide information and documentation requested; (3) fails to reveal any fact
material to qualification, or supplies information which is untrue or misleading
as to a material fact pertaining to qualification; (4) has been convicted of, or
has a director, officer, general partner, stockholder, limited partner or other
person who has a financial or equity interest in the applicant who has been
convicted of, specified crimes, including the service of a sentence upon
conviction of a felony in a correctional facility, city or county jail, or
community correctional facility or under the state board of parole or any
probation department within ten years prior to the date of the application,
gambling-related offenses, theft by deception or crimes involving fraud or
misrepresentation, is under current prosecution for such crimes (during the
pendency of which license determination may be deferred), is a career offender
or a member or associate of a career offender cartel, or is a professional
gambler; or (5) has refused to cooperate with any state or federal body
investigating organized crime, official corruption or gaming offenses.
If the Colorado Commission determines that a person or entity is
unsuitable to directly or indirectly own interests in Isle of Capri Casinos,
Inc., Casino America of Colorado, Inc. or Isle of Capri Black Hawk, then Isle of
Capri Casinos, Inc., Casino America of Colorado, Inc., or Isle of Capri Black
Hawk may be sanctioned, which may include the loss of our approvals and
licenses.
The Colorado Commission does not need to approve in advance a public
offering of securities but rather requires a filing of notice and additional
documents with regard to a public offering of voting securities prior to such
public offering. The Colorado Commission may, in its discretion, require
additional information and prior approval of such public offering.
In addition, the Colorado Regulations prohibit a licensee or affiliated
company thereof, such as Casino America of Colorado, Inc. or Isle of Capri
Casinos, Inc., from paying any unsuitable person any dividends or interest upon
any voting securities or any payments or distributions of any kind (except as
set forth below), or paying any unsuitable person any remuneration for services
or recognizing the exercise of any voting rights by any unsuitable person.
Further, under the Colorado Regulations, Isle of Capri Black Hawk may repurchase
its voting securities from anyone found unsuitable at the lesser of the cash
equivalent to the original investment in Isle of Capri Black Hawk or the
current market price as of the date of the finding of unsuitability unless such
voting securities are transferred to a suitable person (as determined by the
Colorado Commission) within sixty (60) days after the finding of unsuitability.
A licensee or affiliated company must pursue all lawful efforts to require an
unsuitable person to relinquish all voting securities, including purchasing such
voting securities. The staff of Colorado Division has taken the position that a
licensee or affiliated company may not pay any unsuitable person any interest,
dividends or other payments with respect to non-voting securities, other than
with respect to pursuing all lawful efforts to require an unsuitable person to
relinquish non-voting securities, including by purchasing or redeeming such
securities. Further, the regulations require anyone with a material involvement
with a licensee, including a director or officer of a holding company, such as
Casino America of Colorado, Inc. or Isle of Capri Casinos, Inc., to file for a
finding of suitability if required by the Colorado Commission.
Because of their authority to deny an application for a license or
suitability, the Colorado Commission and the Colorado Director effectively can
disapprove a change in corporate position of a licensee and with respect to any
entity which is required to be found unsuitable, or indirectly can cause Isle of
Capri Casinos, Inc., Casino America of Colorado, Inc. or Isle of Capri Black
Hawk to suspend or dismiss managers, officers, directors and other key employees
or sever relationships with other persons who refuse to file appropriate
applications or whom the authorities find unsuitable to act in such capacities.
The sale, lease, purchase and conveyance or acquisition of a controlling
interest in Isle of Capri Black Hawk is subject to the approval of the Colorado
Commission. Under some circumstances, we may not sell any interest in our
Colorado gaming operations without the prior approval of the Colorado
Commission.
Isle of Capri Black Hawk must meet specified architectural requirements,
fire safety standard and standard for access for disabled persons. Isle of
Capri Black Hawk also must not exceed specified gaming square footage limits as
a total of each floor and the full building. The casino at Isle of Capri Black
Hawk may operate only between 8:00 a.m. and 2:00 a.m., and may permit only
individuals 21 or older to gamble in the casino. It may permit slot machines,
blackjack and poker, with a maximum single bet of $5.00. Isle of Capri Black
Hawk may not provide credit to its gaming patrons.
A licensee is required to provide information and file periodic reports
with the Colorado regulators, including identifying those who have a 5% or
greater ownership, financial or equity interest in the licensee, or who have the
ability to control the licensee, or who have the ability to exercise significant
influence over the licensee, or who loan money or other things of value to a
licensee, or who have the right to share in revenues of limited gaming, or to
whom any interest or share in profits of limited gaming has been pledged as
security for a debt or performance of an act. A licensee, and any parent
company or subsidiary of a licensee, who has applied to a foreign jurisdiction
for licensure or permission to conduct gaming, or who possesses a license to
conduct foreign gaming, is required to notify the Colorado regulators. Any
person licensed by the Colorado Commission and any associated person of a
licensee must report criminal convictions and criminal charges to the Colorado
regulators.
The Colorado regulators have broad authority to sanction, fine, suspend and
revoke a license for violations of the Colorado Regulations. Violations of
many provisions of the Colorado regulations also can result in criminal
penalties.
The Colorado Constitution currently permits gaming only in a limited number
of cities and certain commercial districts in such cities.
The Colorado Constitution permits a gaming tax of up to 40% on adjusted
gross gaming proceeds, and authorizes the Colorado Commission to change the rate
annually. The current gaming tax rate is 0.25% on adjusted gross gaming
proceeds of up to and including $2.0 million, 2% over $2.0 million up to and
including $4.0 million, 4% over $4.0 million up to an including $5 million, 11%
over $5 million up to and including $10 million, 16% over $10.0 million up to
and including $15.0 million and 20% on adjusted gross gaming proceeds in excess
of $15 million. The City of Black Hawk has imposed an annual device fee of $750
per gaming device and may revise same from time to time.
In November 2000, voters approved a law that would allow Colorado to
participate in multi-state lotteries.
The sale of alcoholic beverages is subject to licensing, control and
regulation by the Colorado Liquor Agencies. All persons who directly or
indirectly hold a 10% or more interest in, or 10% or more of the issued and
outstanding capital stock of, Isle of Capri Black Hawk, through their ownership
of Casino America of Colorado, Inc. or Isle of Capri Casinos, Inc., must file
applications and possibly be investigated by the Colorado Liquor Agencies. The
Colorado Liquor Agencies also may investigate those persons who, directly or
indirectly, loan money to or have any financial interest in liquor licensees.
In addition, there are restrictions on stockholders, directors and officers of
liquor licensees from being a stockholder, director, officer or otherwise
interested in some persons lending money to liquor licensees or from making
loans to other liquor licensees. All licenses are revocable and transferable
only in accordance with all applicable laws. The Colorado Liquor Agencies have
the full power to limit, condition, suspend or revoke any liquor license and any
disciplinary action could (and revocation would) have a material adverse effect
upon the operations of Isle of Capri Black Hawk, Casino America of Colorado,
Inc. and Isle of Capri Casinos, Inc. Isle of Capri Black Hawk holds a hotel and
restaurant liquor license for its casino, hotel and restaurant operations,
rather than a gaming tavern license. Accordingly, no person directly or
indirectly interested in Isle of Capri Black Hawk may be directly or indirectly
interested in most other types of liquor licenses, and specifically cannot be
directly or indirectly interested in an entity which hold a gaming tavern
license.
Iowa
Iowa Gaming Regulations
In 1989, the State of Iowa legalized riverboat gaming on the Mississippi
River and other waterways located in Iowa. The legislation authorized the
granting of licenses to not-for-profit corporations which, in turn, are
permitted to enter into operating agreements with qualified persons who also
actually conduct riverboat gaming operations. Such operators must likewise be
approved and licensed by the Iowa Racing and Gaming Commission (the "Iowa Gaming
Commission").
On August 11, 1994, the Riverbend Regional Authority, a not-for-profit
corporation organized for the purpose of facilitating riverboat gaming in
Bettendorf, Iowa, entered into an operator's contract with the Lady Luck
Bettendorf, L.C. authorizing Lady Luck Bettendorf, L.C. to operate riverboat
gaming operations in Bettendorf. The initial term of the operator's contract
was for three years. As successor in interest to Lady Luck Bettendorf, L.C.,
Isle-Bettendorf has the right to renew the contract for succeeding three-year
periods as long as Scott County voters approve gaming in the jurisdiction. The
operator's contract was renewed effective September 1, 1998. Under the
operator's contract, Isle-Bettendorf pays the Riverbend Regional Authority a fee
equal to 4.1 % of the adjusted gross receipts. Further, pursuant to statute,
Isle-Bettendorf generally must pay a fee to the City of Bettendorf equal to
1.65% of adjusted gross receipts.
On June 10, 1994, the Marquette Gaming Corporation n/k/a Upper
Mississippi Gaming Corporation, a not-for-profit corporation organized for the
purpose of facilitating riverboat gaming in Marquette, Iowa entered into a
management agreement for the Miss Marquette for a period of twenty-five years.
Under the management agreement, the non-profit organization is to be paid a fee
of $.50 per passenger. Further, pursuant to a dock site agreement (which also
has a term of twenty-five years), Isle-Marquette is required to pay a fee to the
City of Marquette in the amount of $1 per passenger, plus a fixed amount of
$15,000 per month and 2.5% of gaming revenues (less state wagering taxes) in
excess of $20,000,000 up to $40,000,000; 5% of gaming revenues (less state
wagering taxes) in excess of $40,000,000 up to $60,000,000; and 7.5% of gaming
revenues (less state wagering taxes) in excess of $60,000,000.
In 1994, Iowa amended the enabling legislation removing several previous
restrictions including loss and wager limits and restrictions on the amount of
space on a vessel that may be utilized for gaming. Current law permits gaming
licensees to offer unlimited stakes gaming on games approved by the Iowa Gaming
Commission on a 24-hour basis. Dockside casino gaming is authorized by the Iowa
Gaming Commission although the licensed vessel is required to conduct at least
one two-hour excursion cruise each day for at least 100 days during the
excursion season. The legal age for gaming is 21.
The enabling legislation gives each county the opportunity to hold a
referendum on whether to allow casino gaming within its boundaries. A
referendum was passed in Scott County on April 7, 1994, with 80% voting in favor
of passage and authorizing casino gaming in Bettendorf for a period of nine
years from the issuance date of the license. Similarly, a referendum was passed
in Clayton County with approximately 60% voting in favor of passage. Another
referendum cannot be held until 2002 and if approved, subsequent referenda will
occur at eight-year intervals.
On January 20, 2000 the Iowa Gaming Commission granted both Isle-Bettendorf
and Isle-Marquette gaming licenses. Each license was for an initial term of
thirteen months beginning on March 1, 2000, and was renewed in 2001, is not
transferable and will need to be renewed in March 2002 and at the end of each
annual renewal period.
The ownership and operation of gaming facilities in Iowa are subject to
extensive state laws, regulations of the Iowa Gaming Commission and various
county and municipal ordinances (collectively, the "Iowa Gaming Laws"),
concerning the responsibility, financial stability and character of gaming
operators and persons financially interested or involved in gaming operations,
Iowa Gaming Laws seek to: (1) prevent unsavory or unsuitable persons from having
direct or indirect involvement with gaming at any time or in any capacity; (2)
establish and maintain responsible accounting practices and procedures; (3)
maintain effective control over the financial practices of licensees (including
the establishment of minimum procedures for internal fiscal affairs, the
safeguarding of assets and revenues, the provision of reliable record keeping
and the filing of periodic reports with the Iowa Gaming Commission); (4) prevent
cheating and fraudulent practices; and (5) provide a source of state and local
revenues through taxation and licensing fees. Changes in Iowa Gaming Laws could
have a material adverse effect on the Iowa gaming operations.
Gaming licenses granted to individuals must be renewed every year, and
licensing authorities have broad discretion with regard to such renewals.
Licenses are not transferable. The Iowa gaming operations must submit detailed
financial and operating reports to the Iowa Gaming Commission. Any contract in
excess of $50,000 must be submitted to and approved by the Iowa Gaming
Commission.
Missouri
Conducting gambling games and operating a gaming riverboat in Missouri are
subject to extensive regulation under the Missouri Riverboat Gambling Act (the
"Act") and the rules and regulations promulgated thereunder. The Missouri
Gaming Commission (the "Commission") is charged with such regulatory authority,
including the issuance of riverboat gaming licenses. IOC-Kansas City, Inc., a
subsidiary of the Company, has been issued a license in connection with our
Kansas City operation, and we have additional applications pending in connection
with the Boonville project and our development in Jefferson County.
In order to obtain a gaming license, applicants must submit comprehensive
application forms and undergo extensive background investigation by the
Commission. An applicant will not receive a license to conduct gambling games
and to operate an excursion gambling boat if the applicant has not established
its good repute and moral character and no licensee shall either employ or
contract with any person who has pled guilty to, or been convicted of, a felony,
to perform any duties directly connected with the licensee's privileges under a
license granted by the Commission. Each license granted entitles a licensee to
conduct gambling games on an excursion gambling boat or to operate an excursion
gambling boat and the equipment thereon from a specific location. The duration
of the license initially runs for two one-year terms; thereafter, two-year
terms. The Commission also licenses the serving of alcoholic beverages on
riverboats and adjacent facilities. In addition, all local income, earnings,
use, property and sales taxes are applicable to licensees.
In determining whether to grant a license, the Commission considers the
following factors, among other: (i) the integrity of the applicants; (ii) the
types and variety of games the applicant may offer; (iii) the quality of the
physical facility, together with improvements and equipment, and how soon the
project will be completed; (iv) the financial ability of the applicant to
develop and operate the facility successfully; (v) the status of governmental
actions required by the facility; (vi) management ability of the applicant;
(vii) compliance with applicable statutes, rules, charters, and ordinances;
(viii) the economic, ecological and social impact of the facility as well as the
cost of public improvements; (ix) the extent of public support or opposition;
(x) the plan adopted by the home dock city or county; and (xi) effects on
competition.
A licensee is subject to the imposition of penalties, suspension or
revocation of its license for any act that is injurious to the public health,
safety, morals, good order, and general welfare of the people of the state of
Missouri, or that would discredit or tend to discredit the Missouri gaming
industry or the state of Missouri, including without limitation: (i) failing to
comply with or make provision for compliance with the legislation, the rules
promulgated thereunder or any federal, state or local law or regulation; (ii)
failing to comply with any rules, order or ruling of the Commission or its
agents pertaining to gaming; (iii) receiving goods or services from a person or
business entity who does not hold a supplier's license but who is required to
hold such license by the legislation or the rules; (iv) being suspended or ruled
ineligible or having a license revoked or suspended in any state of gaming
jurisdiction; (v) associating with, either socially or in business affairs, or
employing persons of notorious or unsavory reputation or who have extensive
police records, or who have failed to cooperate with any officially constituted
investigatory or administrative body and would adversely affect public
confidence and trust in gaming; (vi) employing in any Missouri gaming operation
any person known to have been found guilty of cheating or using any improper
device in connection with any gambling game; (vii) use of fraud, deception,
misrepresentation or bribery in securing any license or permit issued pursuant
to the legislation; (viii) obtaining any fee, charge, or other compensation by
fraud, deception or misrepresentation; and (ix) incompetence, misconduct, gross
negligence, fraud, misrepresentation or dishonesty in the performance of the
functions or duties regulated by the Act.
An ownership interest in a license or in a business entity that holds a
license, other than a publicly held business entity, may not be transferred
without the approval of the Commission. In addition, an ownership interest in a
license or in a business entity which holds either directly or indirectly a
license, other than a publicly held business entity, may not be pledged as
collateral to other than a regulated bank or savings and loan association
without the Commission's approval.
Every employee participating in a riverboat gaming operation must hold an
occupational license. In addition, the Commission issues supplier's licenses,
which authorize the supplier licensee to sell or lease gaming equipment and
supplies to any licensee involved in the operation of gaming operations.
Even if continuously docked, licensed riverboats must establish and abide
by a cruise schedule. Riverboat cruises are generally required to be a minimum
of two hours. They may disembark at any time. Missouri law imposes a maximum
loss per person per cruise of $500. Minimum and maximum wagers on games are set
by the licensee and wagering may be conducted only with a cashless wagering
system, whereby money is converted to tokens, electronic cards or chips that can
only be used for wagering. Pursuant to a law that was passed during the 2000
legislative session, effective August 28, 2000, cash must be converted to
electronic credits that may be utilized for wagering. No person under the age
of 21 is permitted to wager, and wagers may only be taken from a person present
on a licensed excursion gambling boat.
The Act imposes a 20% wagering tax on adjusted gross receipts (generally
defined as gross receipts less winnings paid to wagerers) from gambling games.
The tax imposed is to be paid by the licensee to the Commission on the day after
the day when the wagers were made. Of the proceeds of that tax, 10% goes to the
local government where the home dock is located, and the remainder goes to the
state education assistance fund.
The Act also requires that licensees pay a $2.00 admission tax to the
Commission for each person admitted to a gaming cruise. The licensee is required
to maintain public books and records clearly showing amounts received from
admission fees, the total amount of gross receipts and the total amount of
adjusted gross receipts.
Florida
On June 15, 1995, the Florida Department of Business and Professional
Regulation, acting through its division of pari-mutuel wagering (the "Florida
Division"), issued its final order approving Pompano Park as a pari-mutuel
wagering permit holder for harness and quarter horse racing at Pompano Park. The
Florida Division approved Pompano Park's license to conduct a total of 149 live
evening performances for the season beginning July 1, 2001 to June 30, 2002.
Although Isle of Capri does not presently intend to conduct quarter horse racing
operations at Pompano Park, it may do so in the future, subject to Florida
Division approval. The Florida Division must approve any transfer of 10% or more
of stock of a pari-mutuel racing permit holder such as Pompano Park.
Chapter 550 of the Florida Statute and the applicable rules and regulations
thereunder (the "Florida Statute") establishes license fees, the tax structure
on pari-mutuel permit holders and minimum purse requirements for breeders and
owners. The Florida Division may revoke or suspend any permit or license upon
the willful violation by the permit holder or licensee of any provision of the
Florida Statute. Instead of suspending or revoking a permit or license, the
Florida Division may impose various civil penalties on the permit holder or
licensee. Penalties may not exceed $1,000 for each count or separate offense.
Pursuant to a Florida Division order and recent enactments to the Florida
Statute, Pompano Park is also authorized to conduct full-card pari-mutuel
wagering on: (1) simulcast harness races from outside Florida throughout the
racing season and (2) night thoroughbred races within Florida if the
thoroughbred permit holder has decided to simulcast night races. Pompano Park
has been granted the exclusive right in Florida to conduct full-card
simulcasting of harness racing on days during which no live racing is held at
Pompano Park. However, on non-race days, Pompano Park must offer to rebroadcast
its simulcast signals to pari-mutuel facilities that are not thoroughbred parks.
In addition, Pompano Park may transmit its live races into any dog racing or jai
alai facility in Florida, including Dade and Broward counties, for intertrack
wagering. The Florida Statute establishes the percentage split between Pompano
Park and the other facilities receiving such signals. Recent legislation in
Florida provided certain reductions in applicable tax and license fees related
to intertrack wagering on broadcasts of simulcast harness racing and
thoroughbred racing. Isle of Capri believes that simulcast rights at Pompano
Park and the recent changes in the Florida Statute are important to Pompano
Park's operating results.
Effective January 1, 1997, the Florida Statute permits pari-mutuel
facilities licensed by the Florida Division to operate card rooms in those
counties in which a majority vote of the County Commission has been obtained and
a local ordinance has been adopted. Pompano Park closed its card room in fiscal
2001 due to lack of profits.
Nevada
The ownership and operation of casino gaming facilities in Nevada are
subject to: (i) the Nevada Gaming Control Act and the regulations promulgated
thereunder (collectively, "Nevada Act"); and (ii) various local regulations and
ordinances. The Company is subject to the licensing and regulatory control of
the Nevada Gaming Commission ("Nevada Commission"), the Nevada State Gaming
Control Board ("Nevada Board") and the City of Las Vegas. The Nevada
Commission, the Nevada Board and the City of Las Vegas are collectively referred
to as the "Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and
fraudulent practices; and (v) to provide a source of state and local revenues
through taxation and licensing fees. Change in such laws, regulations and
procedures could have an adverse effect on the Company's gaming operations.
The Company's subsidiary that conducts gaming operations in Nevada, Gemini,
Inc. ("Gemini") is required to be licensed by the Nevada Gaming Authorities.
The gaming license requires the periodic payment of fees and taxes and is not
transferable. Gemini is licensed to conduct nonrestricted gaming operations. LL
Holding Corporation ("LLHC") is registered as an intermediary company and has
been found suitable to own the stock of the Gaming Subsidiary. The Company is
registered by the Nevada Commission as a publicly traded corporation
("Registered Corporation") and has been found suitable to own the stock of LLHC.
Gemini is a corporate licensee and LLHC is a registered intermediary company
(individually a "Gaming Subsidiary" and collectively, the "Gaming Subsidiaries")
under the terms of the Nevada Act. As a Registered Corporation, the Company is
required periodically to submit detailed financial and operating reports to the
Nevada Commission and furnish any other information that the Nevada Commission
may require. No person may become a stockholder of, or receive any percentage
of profits from the Gaming Subsidiaries without first obtaining licenses and
approvals from the Nevada Gaming Authorities. The Company and the Gaming
Subsidiaries have obtained from the Nevada Commission the various registrations,
approvals, permits and licenses (individually a "Gaming License and
collectively, "Gaming Licenses") required in order to engage in gaming
activities in Nevada.
The Nevada Gaming Authorities may investigate an individual who has a
material relationship to, or material involvement with, the Company or the
Gaming Subsidiaries in order to determine whether such individual is suitable or
should be licensed as a business associate of a gaming licensee. Officers,
directors and certain key employees of the Gaming Subsidiaries must file
applications with the Nevada Gaming Authorities and may be required to be
licensed or found suitable by the Nevada Gaming Authorities. Officers, directors
and key employees of the Company who are actively and directly involved in
gaming activities of the Gaming Subsidiaries may be required to be licensed or
found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities
may deny an application for licensing for any cause that they deem reasonable. A
finding of suitability is comparable to licensing, and both require submission
of detailed personal and financial information followed by a thorough
investigation. The applicant for licensing or a finding of suitability must pay
all the costs of the investigation. Changes in licensed positions must be
reported to the Nevada Gaming Authorities and in addition to their authority to
deny an application for a finding of suitability or licensure, the Nevada Gaming
Authorities have jurisdiction to disapprove a change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company or the Gaming Subsidiaries, the companies involved
would have to sever all relationships with such person. In addition, the Nevada
Commission may require the Company or the Gaming Subsidiaries to terminate the
employment of any person who refuses to file appropriate applications.
Determinations of suitability or of questions pertaining to licensing are not
subject to judicial review in Nevada.
The Company and the Gaming Subsidiaries are required to submit detailed
financial and operating reports to the Nevada Commission. Substantially all
material loans, leases, sales of securities and similar financing transactions
by the Company and the Gaming Subsidiaries must be reported to, or approved by,
the Nevada Commission and/or the Nevada Board.
If it were determined that the Nevada Act was violated by a Gaming
Subsidiary, the Gaming Licenses it holds could be limited, conditioned,
suspended or revoked, subject to compliance with certain statutory and
regulatory procedures. In addition, the Company, the Gaming Subsidiaries and
the persons involved could be subject to substantial fines for each separate
violation of the Nevada Act at the discretion of the Nevada Commission.
Further, a supervisor could be appointed by the Nevada Commission to operate
Lady Luck Casino and, under certain circumstances, earnings generated during the
supervisor's appointment (except for the reasonable rental value of the
premises) could be forfeited to the State of Nevada. Limitation, conditioning
or suspension of any Gaming License or the appointment of a supervisor could
(and revocation of any Gaming License would) materially adversely affect the
Company's gaming operations.
Any beneficial holder of the Company's voting securities, regardless of the
number of shares owned, may be required to file an application, be investigated,
and have his suitability as a beneficial holder of the Company's voting
securities determined if the Nevada Commission has reason to believe that such
ownership would otherwise be inconsistent with the declared policies of the
state of Nevada. The applicant must pay all costs of investigation incurred by
the Nevada Gaming Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires beneficial ownership of
more than 5% of the Company's voting securities to report the acquisition to the
Nevada Commission. The Nevada Act requires that beneficial owners of more than
10% of the Company's voting securities apply to the Nevada Commission for a
finding of suitability within thirty days after the Chairman of the Nevada Board
mails the written notice requiring such filing. Under certain circumstances, an
"institutional investor," as defined in the Nevada Act, which acquires more than
10%, but not more than 15%, of the Company's voting securities may apply to the
Nevada Commission for a waiver of such finding of suitability if such
institutional investor holds the voting securities for investment purposes only.
An institutional investor shall not be deemed to hold voting securities for
investment purposes unless the voting securities were acquired and are held in
the ordinary course of business as an institutional investor and not for the
purpose of causing, directly or indirectly, the election of a majority of the
members of the board of directors of the Company, any change in the Company's
corporate charter, bylaws, management, policies or operations of the Company, or
any of its gaming affiliates, or any other action which the Nevada commission
finds to be inconsistent with holding the Company's voting securities for
investment purposes only. Activities which are not deemed to be inconsistent
with holding voting securities for investment purposes only include: (i) voting
on all matters voted on by stockholders; (ii) making financial and other
inquiries of management of the type normally made by securities analysts for
informational purposes and not to cause a change in its management, policies or
operations; and (iii) such other activities as the Nevada Commission may
determine to be consistent with such investment intent. If the beneficial
holder of voting securities who must be found suitable in a corporation,
partnership or trust, it must submit detailed business and financial information
including a list of beneficial owners. The applicant is required to pay all
costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada Commission
or the Chairman of the Nevada Board, may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the common stock of a
Registered Corporation beyond such period of time as may be prescribed by the
Nevada Commission may be guilty of a criminal offense. The Company is subject
to disciplinary action if, after it receives notice that a person is unsuitable
to be a stockholder or to have any other relationship with the Company, it (i)
pays that person any dividend or interest upon voting securities of the Company,
(ii) allows that person to exercise, directly or indirectly, any voting right
conferred through securities held by that person, (iii) pays remuneration in any
form to that person for services rendered or otherwise, or (iv) fails to pursue
all lawful efforts to require such unsuitable person to relinquish his voting
securities, including, if necessary, the immediate purchase of the voting
securities for cash at fair market value.
The Nevada Commission may, in its discretion, require the holder of any
debt security of a Registered Corporation to file applications, be investigated
and be found suitable to own the debt security of a Registered Corporation if it
has reason to believe. If the Nevada Commission determines that a person is
unsuitable to own such security, then pursuant to the Nevada act, the Registered
Corporation can be sanctioned, including the loss of its approvals, if without
the prior approval of the Nevada Commission, it: (i) pays to the unsuitable
person any dividend, interest, or any distribution whatsoever; (ii) recognizes
any voting right by such unsuitable person in connection with such securities;
(iii) pays the unsuitable person remuneration in any form; or (iv) makes any
payment to the unsuitable person by way of principal, redemption, conversion,
exchange, liquidation, or similar transaction.
The Company is required to maintain a current stock ledger in Nevada that
may be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be required
to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. The Company is also required to render maximum
assistance in determining the identity of the beneficial owner. The Nevada
Commission has the power to require the Company's stock certificates to bear a
legend indicating that the securities are subject to the Nevada Act. However,
to date, the Nevada Commission has not imposed such a requirement on the
Company.
The Company may not make a public offering of its securities without the
prior approval of the Nevada Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. On August 24, 2000, the Nevada Commission granted the Company prior
approval to make public offerings for a period of one year, subject to certain
conditions ("Shelf Approval"). However the Shelf Approval may be rescinded for
good cause without prior notice upon the issuance of an interlocutory stop order
by the Chairman of the Nevada Board and must be renewed at the end of the
one-year period. The Shelf Approval also applies to any affiliated company
wholly owned by the Company ("Affiliate") which is or would thereby become a
publicly traded corporation pursuant to a public offering. The Shelf Approval
also includes approval for the Gaming Subsidiaries to guarantee any security
issued by, or to hypothecate their assets to secure the payment or performance
of any obligations evidenced by a security issued by, the Company or an
Affiliate in a public offering under the Shelf Approval. The Shelf Approval
also includes approval to place restrictions upon the transfer of, and to enter
into agreements not to encumber the equity securities of the Gaming
Subsidiaries. The Shelf Approval does not constitute a finding, recommendation
or approval by the Nevada Commission or the Nevada Board as to the accuracy or
adequacy of the prospectus or the investment merits of the securities offered.
Any representation to the contrary is unlawful.
Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby he obtains control, may not occur without the prior approval
of the Nevada Commission. Entities seeking to acquire control of a Registered
Corporation must satisfy the Nevada Board and Nevada Commission in a variety of
stringent standards prior to assuming control of such Registered Corporation.
The Nevada Commission may also require controlling stockholders, officers,
directors and other persons having a material relationship or involvement with
the entity proposing to acquire control, to be investigated and licensed as part
of the approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada gaming licensees, and Registered Corporation that are
affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environmental for the orderly governance of
corporate affairs. Approvals are, in certain circumstances, required from the
Nevada Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Company's
Board of Directors in response to a tender offer made directly to the Registered
Corporation's stockholders for the purposes of acquiring of the Registered
Corporation.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the serving or selling of food or refreshments or
the selling of any merchandise. Nevada licensees that hold a license as an
operator of a slot route, or a manufacturer's or distributor's license, also pay
certain fees and taxes to the State of Nevada.
Any person who is licensed, required to be licensed, registered, required
to be registered, or is under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside of
Nevada is required to deposit with the Nevada Board, and thereafter maintain, a
revolving fund in the amount of $10,000 to pay the expenses of investigation of
the Nevada Board of their participation in such foreign gaming. The revolving
fund is subject to increase or decrease in the discretion of the Nevada
Commission. Thereafter, Licensees are required to comply with certain reporting
requirements imposed by the Nevada Act. Licensees are also subject to
disciplinary action by the Nevada Commission if it knowingly violates any laws
of the foreign jurisdiction pertaining to the foreign gaming operation, fails to
conduct the foreign gaming operation in accordance with the standards of honesty
and integrity required of Nevada gaming operations, engages in activities or
associations that are harmful to the State of Nevada or its ability to collect
gaming taxes and fees, or employs, contracts or associates with a person in the
foreign operation who has been denied a license or finding of suitability in
Nevada on the grounds of unsuitability.
NON-GAMING REGULATION
Isle of Capri is subject to certain federal, state and local safety and
health, employment and environmental laws, regulations and ordinances that apply
to non-gaming businesses generally, such as the Clean Air Act, Clean Water Act,
Occupational Safety and Health Act, Resource Conservation Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act and the Oil
Pollution Act of 1990. Isle of Capri has not made, and does not anticipate
making, material expenditures with respect to such environmental laws and
regulations. However, the coverage and attendant compliance costs associated
with such laws, regulations and ordinances may result in future additional costs
to Isle of Capri's operations. For example, in 1990 the U.S. Congress enacted
the Oil Pollution Act of 1990 to consolidate and rationalize mechanisms under
various oil spill response laws. The Department of Transportation has
promulgated regulations requiring owners and operators of certain vessels to
establish through the Coast Guard evidence of financial responsibility for clean
up of oil pollution. This requirement has been satisfied by proof of adequate
insurance.
Our riverboats operated in Louisiana and Iowa must comply with U.S. Coast
Guard requirements as to boat design, on-board facilities, equipment, personnel
and safety and hold U.S. Coast Guard Certificates of Documentation and
Inspection. The U.S. Coast Guard requirements also set limits on the operation
of the riverboats and require licensing of certain personnel involved with the
operation of the riverboats. Loss of a riverboat's Certificate of Documentation
and Inspection could preclude its use as a riverboat casino. Each of our
riverboats is inspected annually and, every five years, is subject to
dry-docking for inspection of its hull, which could result in a temporary loss
of service.
Permanently moored vessels such as the casino barges utilized at our
Mississippi and Missouri properties are not required to hold Certificates of
Documentation and Inspection from the U.S. Coast Guard. However, the barges are
inspected by a third party and certified with respect to stability and single
compartment flooding integrity. Our casino barges in Mississippi must be
inspected every two years and must also meet the fire safety standards of the
Mississippi Fire Prevention Code and the Life Safety Code and the Standards for
the Construction and Fire Protection of Marine Terminals, Piers and Wharfs of
the National Fire Protection Association. We would incur additional costs if
either of its Mississippi gaming facilities were not in compliance with one or
more of these regulations.
Regulations adopted by the Financial Crimes Enforcement Network of the U.S.
Treasury Department require us to report currency transactions in excess of
$10,000 occurring within a gaming day, including identification of the patron by
name and social security number. Substantial penalties can be imposed against
Isle of Capri if it fails to comply with these regulations.
All shipboard employees of Isle of Capri, even those who have nothing to do
with its operation as a vessel, such as dealers, waiters and security personnel,
may be subject to the Jones Act which, among other things, exempts those
employees from state limits on workers' compensation awards.
ITEM 2. PROPERTIES
Isle-Biloxi
We lease the Biloxi berth from the Biloxi Port Commission at an annual rent
of the greater of $500,000 or 1% of the gross gaming revenue net of state and
local gaming taxes. The lease terminates on July 1, 2004 and we have the option
to renew it for seven additional terms of five years each subject to increases
based on the cost of living index.
We lease our land-based facilities from the City of Biloxi at an annual
rent of $530,000 per year, plus 3% of the Isle-Biloxi's gross gaming revenues,
net of state and local gaming taxes and fees, in excess of $25.0 million. The
lease terminates on July 1, 2004, but it is renewable at our option for five
additional terms of five years each and a sixth option renewal term, concluding
on January 31, 2034, subject to rent increases based on the Consumer Price
Index. In April 1994, we entered into an addendum to this lease which requires
us to pay 4% of our gross non-gaming revenue, net of sales tax, complimentaries
and discounts.
In April 1994, in connection with the construction of a hotel, we entered
into a lease for additional land adjoining the Isle-Biloxi. This lease with the
City of Biloxi is for an initial term of 25 years, with options to renew for six
additional terms of ten years each and a final option period concluding December
31, 2085. Annual rent is $444,000 plus 4% of gross non-gaming revenue, as
defined in the lease, and renewals are subject to rent increases based on the
Consumer Price Index.
We are a party to a lease for the exclusive use of approximately 133
parking spaces and the additional use of 169 spaces in another parking lot on
property adjacent to the Isle-Biloxi. This lease expires on November 30, 2005.
We have also entered into a joint venture arrangement to sublease property
containing a two-level parking garage next to the Isle-Biloxi. The annual rent
under this lease is approximately $178,359. We have an option to renew this
lease every five years.
Isle-Vicksburg
We own approximately 13.1 acres of land in Vicksburg, Mississippi for use
in connection with the Isle-Vicksburg. We own an additional 13 acres of land in
Vicksburg on which we operate off-site parking and a recreational vehicle park.
We also entered into a lease for approximately five acres of land adjacent to
the Isle-Vicksburg to be used for additional parking.
Isle-Natchez
Through numerous lease agreements, we lease approximately 64 acres of land
in Natchez, Mississippi that is used in connection with the operations of
Isle-Natchez. Unless terminated by us at an earlier date, the lease expiration
dates vary from 2001- 2037. Rents under the leases currently total
approximately $60,000 per month. We also lease approximately 7.5 acres of land
that is utilized for parking at the facility. We also own approximately 6 acres
of property in Natchez, Mississippi, as well as the property upon which our
hotel is located.
Isle-Bossier City
We own approximately 38 acres of land in Bossier City, Louisiana for use in
connection with the Isle-Bossier City and own a 234-room hotel on approximately
10.5 acres of land located 2.5 miles east of the Isle-Bossier City.
Isle-Lake Charles
We own approximately 2.7 acres and lease approximately 16.25 acres of land
in Calcasieu Parish, Louisiana for use in connection with the Isle-Lake Charles.
This lease currently expires in March 2005 and we have the option to renew it
for sixteen additional terms of five years each. Rent under the Isle-Lake
Charles lease is currently $1.3 million per year and is subject to increases
based on the Consumer Price Index and construction of hotel facilities on the
property.
Isle-Tunica
We lease approximately 122 acres of land in Tunica County, Mississippi for
use in connection with the Isle-Tunica. The initial lease term is five years and
we have the option to renew the lease for seven additional terms of five years.
Base rent for each lease year equals the greater of 2% of gross gaming revenue
or $800,000. Once gross gaming revenue exceeds $40.0 million during any lease
year, the base rent in the following months of such year shall be increased by
an amount equal to 2% of such excess. The landlord is entitled to receive
additional rent based on excess available cash, as defined in the lease.
Isle-Lula
We lease approximately 1,000 acres of land in Coahoma County, Mississippi
and utilize approximately 50 acres in connection with the operations of
Isle-Lula. Unless terminated by us at an earlier date, the lease expires in
2033. Rent under the lease is currently 5.5 % of gross gaming revenue as
established by the Mississippi Gaming Commission, as well as $3,333 per month
for the Rhythm & Blues hotel. We also own approximately 100 acres in Coahoma
County, which may be utilized for future development.
Isle-Kansas City
We lease approximately 28 acres from the Kansas City Port Authority in
connection with the operation of the Flamingo Casino. The term of the lease is
5 years and we have the option to renew the lease for 8 additional terms of 5
years each. Rent under the lease is currently $3 million per year, subject to
the higher of $3 million (minimum rent) per year, or 3.25% of gross revenues,
less complimentaries.
Isle-Black Hawk
Isle-Black Hawk owns approximately 10.1 acres of land in Black Hawk,
Colorado for use in connection with the Isle-Black Hawk.
Isle-Bettendorf
We own approximately 24.6 acres of land in Bettendorf, Iowa used in
connection with the operations of Isle-Bettendorf. We also lease approximately
8 acres of land from an entity owned by members of Bernard Goldstein's family,
including Robert Goldstein, which we utilize for parking. The initial term of
the lease expires 60 days after written notice is given to either party and rent
under the lease is currently $20,000 per month.
Rhythm City-Davenport
We lease approximately 12 acres of land in Davenport, Iowa used in
connection with the operations of Rhythm City-Davenport and own a 191-room hotel
on approximately 1 acre of land located several blocks northeast of the Rhythm
City-Davenport.
Isle-Marquette
We lease the dock site in Marquette, Iowa that is used in connection with
the operations of the Isle-Marquette. The lease expires in 2019, and rent under
the lease is currently $15,000 per month, plus $.50 per passenger, plus a
percentage of gaming revenues less state wagering taxes that exceed $20,000 per
year. We also lease approximately 5 acres of land used for the employee parking
lot. That is a year-to-year lease that renews every August 15th, and rent is
currently $833 per month. We also own approximately 25 acres of land for the
pavilion, hotel, satellite offices, warehouse, lots by the marina, and other
property.
Lady Luck Las Vegas
We own and lease approximately 186,000 square feet of land in Las Vegas,
Nevada for use in connection with the Lady Luck Las Vegas including an 805-room
hotel.
Pompano Park
We own approximately 220 acres at Pompano Park.
Other
We own all of the riverboats and barges utilized at our facilities. We
also own or lease all of our gaming and non-gaming equipment.
We lease our corporate office in Biloxi and our corporate office in Boca
Raton, Florida. We owned an office in Baton Rouge, Louisiana that was
previously utilized as a regional office for our Louisiana properties.
The Company has various property leases and options to either lease or
purchase property which are not directly related to our existing operations
which may be utilized in the future in connection with expansion projects at our
existing facilities or development of new projects.
We also own the following currently idle marine assets that are held for
development or sale: a riverboat casino, a floating pavilion, a partially
completed vessel and several barges.
ITEM 3. LEGAL PROCEEDINGS.
One of our subsidiaries has been named, along with numerous manufacturers,
distributors and gaming operators, including many of the country's largest
gaming operators, in a consolidated class action lawsuit pending in Las Vegas,
Nevada. These gaming industry defendants are alleged to have violated the
Racketeer Influenced and Corrupt Organizations Act by engaging in a course of
fraudulent and misleading conduct intended to induce people to play their gaming
machines based upon a false belief concerning how those gaming machines actually
operate and the extent to which there is actually an opportunity to win on any
given play. The suit seeks unspecified compensatory and punitive damages. A
motion for certification of the class is currently pending before the court and
no discovery as to the merits of the alleged claims has begun. We are unable at
this time to determine what effect, if any, the suit would have on our financial
position or results of operations. However, the gaming industry defendants are
committed to defend vigorously all claims asserted in the consolidated action.
In August 1997, a lawsuit was filed which seeks to nullify a contract to
which Louisiana Riverboat Gaming Partnership is a party. Pursuant to the
contract, Louisiana Riverboat Gaming Partnership pays a fixed amount plus a
percentage of revenue to various local governmental entities, including the City
of Bossier and the Bossier Parish School Board, in lieu of payment of a
per-passenger boarding fee. Summary judgment in favor of Louisiana Riverboat
Gaming Partnership was granted on June 4, 1998. That judgment was not appealed
and is now final. On June 11, 1998, a similar suit was filed and judgment was
rendered in our favor on September 16, 1999 by the lower court. The case has
been reversed on appeal. We intend to vigorously defend this suit.
Lady Luck and several joint venture partners are defendants in a lawsuit
brought by the country of Greece and its Minister of Tourism before the Greek
Multi-Member Court of First Instance. The action alleges that the defendants
failed to make specified payments in connection with the gaming license bid
process for Patras, Greece. The payments the Company is alleged to have been
required to make aggregate approximately 2.1 billion drachma (which was
approximately $5.5 million as of April 29, 2001 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 alleged breach of approximately $2.7 million. Although the
court granted our motion for summary judgment and dismissed the lawsuit, the
matter is subject to appeal by the plaintiff. Accordingly, the outcome cannot
be predicted with any degree of certainty. We intend to vigorously defend the
claims asserted in this action.
We are currently involved in an arbitration proceeding concerning the
amount of payments owed to a party which had an interest in property owned by
the Company located in Lula, Mississippi. The claimant is seeking payments
based upon gross revenue from our Lula, Mississippi facility. We dispute this
claim and believe that our responsibility is limited to payments that are fixed
in amount. We intend to vigorously defend the claim asserted in this
proceeding.
We are engaged in various other litigation matters and have a number of
unresolved claims. Although the ultimate liability of 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 or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Annual Meeting of Stockholders
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The Annual Meeting of Stockholders was held September 15, 2000 at which
time the following matters were submitted to a vote of the stockholders:
(1) To elect seven persons to the Company's Board of Directors;
(2) To approve the Company's 2000 Long-Term Stock Incentive Plan;
(3) To approve the Company's Deferred Bonus Plan; and
(4) To approve the Company's selection of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending April
29, 2001.
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 Withhold Against
------------------- ---------- -------- -------
Bernard Goldstein . 28,008,559 546,656 -
John M. Gallaway. . 28,178,356 376,859 -
Allan B. Solomon. . 28,177,360 377,855 -
Robert S. Goldstein 28,110,622 444,593 -
Allan J. Glazer . . 28,164,790 390,425 -
Emanuel Crystal . . 28,175,896 379,319 -
Randolph Baker. . . 28,177,468 377,747 -
The voting on the other matters as ordered at the Annual Meeting of
Stockholders was as follows:
Matter. . . . . . . . . . . . . . . For Withhold Against
----------------------------------- ---------- -------- ---------
2000 Long-Term Stock Incentive Plan 24,282,929 12,322 4,259,964
Deferred Bonus Plan.. . . . . . . . 27,852,882 9,797 692,536
Selection of Ernst & Young LLP. . . 28,545,642 5,288 4,285
PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS'
MATTERS.
(a) Market Information. The following table presents the high and low bid
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quotations for our Common Stock as reported on the NASDAQ National Market for
the fiscal periods indicated. The quotations reflect interdealer prices,
without retail mark-up or commissions, and may not necessarily represent actual
transactions.
Fiscal Year Ended April 28, 2002. . . . HIGH LOW
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First Quarter (through July 20, 2001) $10.50 $ 7.49
Fiscal Year Ended April 29, 2001
First Quarter . . . . . . . . . . . . $17.75 $12.44
Second Quarter. . . . . . . . . . . . 11.00 10.00
Third Quarter . . . . . . . . . . . . 8.88 8.59
Fourth Quarter. . . . . . . . . . . . 9.05 8.70
Fiscal Year Ended April 30, 2000
First Quarter . . . . . . . . . . . . $ 8.69 $ 5.75
Second Quarter. . . . . . . . . . . . 13.00 7.50
Third Quarter . . . . . . . . . . . . 14.06 9.88
Fourth Quarter. . . . . . . . . . . . 16.25 10.38
(b) Holders of Common Stock. As of July 20, 2001, there were
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1,234 holders of record of the Common Stock.
(c) Dividends. Isle of Capri has never paid any dividends with respect to
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its Common Stock and the current policy of the Board of Directors is to retain
earnings to provide for the growth of the company. In addition, our Senior
Credit Facility and the indenture governing our Senior Subordinated Notes limits
our ability to pay dividends. See "Item 8-Index to Consolidated Financial
Statements-Isle of Capri Casinos, Inc.-Notes to Consolidated Financial
Statements-Note 9." Consequently, no cash dividends are expected to be paid on
our Common Stock in the foreseeable future. Further, there can be no assurance
that our current and proposed operations will generate the funds needed to
declare a cash dividend or that we will have legally available funds to pay
dividends. In addition, we may fund part of our operations in the future from
indebtedness, the terms of which may prohibit or restrict the payment of cash
dividends. If a holder of Common Stock is disqualified by the regulatory
authorities from owning such shares, such holder will not be permitted to
receive any dividends with respect to such stock. See "Item
1-Business-Regulatory Matters."
ITEM 6. SELECTED FINANCIAL DATA.
The following table presents our selected consolidated financial data for
the five most recent fiscal years. This data is from our audited consolidated
financial statements and the notes to those statements. Because the data in
this table does not provide all of the data contained in our financial
statements, including the related notes, you should read "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements, including the related notes, contained
elsewhere in this document, and other data we have filed with the U.S.
Securities and Exchange Commission.
FISCAL YEAR ENDED
APRIL 29, APRIL 30, APRIL 25, APRIL 26,
2001 (1) 2000 (2) 1999 (3) 1998 (4)
--------------------------------------------- ----------- ----------- -----------
INCOME STATEMENT DATA: . . . . . . . . . . . . . . . . . . . . . . . . (dollars in millions, except per share data)
Net revenue (5). . . . . . . . . . . . . . . $ 982.8 $ 646.7 $ 456.9 $ 416.8
Operating income . . . . . . . . . . . . . . 145.7 113.5 68.7 61.1
Net income (loss) before extraordinary item. 25.1 32.1 12.1 7.5
Net income (loss). . . . . . . . . . . . . . 25.1 31.1 (24.2) 7.5
Net income (loss) before extraordinary item
per common share
Basic. . . . . . . . . . . . . . . . . . . . 0.84 1.22 0.51 0.32
Diluted. . . . . . . . . . . . . . . . . . . 0.80 1.15 0.51 0.32
Net income (loss) per common share
Basic. . . . . . . . . . . . . . . . . . . . 0.84 1.18 (1.03) 0.32
Diluted. . . . . . . . . . . . . . . . . . . 0.80 1.11 (1.01) 0.32
BALANCE SHEET DATA:
Total assets . . . . . . . . . . . . . . . . $ 1,378.8 $ 1,305.5 $ 676.5 $ 615.7
Long-term debt, including current portion. . 1,039.1 962.9 532.8 442.1
Stockholders' equity . . . . . . . . . . . . 166.0 155.5 62.0 86.1
APRIL 27,
1997
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INCOME STATEMENT DATA:
Net revenue (5). . . . . . . . . . . . . . . $ 365.8
Operating income . . . . . . . . . . . . . . 28.5
Net income (loss) before extraordinary item. (8.8)
Net income (loss). . . . . . . . . . . . . . (21.1)
Net income (loss) before extraordinary item
per common share
Basic. . . . . . . . . . . . . . . . . . . . (0.39)
Diluted. . . . . . . . . . . . . . . . . . . (0.39)
Net income (loss) per common share
Basic. . . . . . . . . . . . . . . . . . . . (0.94)
Diluted. . . . . . . . . . . . . . . . . . . (0.94)
BALANCE SHEET DATA:
Total assets . . . . . . . . . . . . . . . . $ 528.4
Long-term debt, including current portion. . 379.5
Stockholders' equity . . . . . . . . . . . . 78.0
(1) The data presented for fiscal years prior to fiscal 2001 is not comparable
to Fiscal 2001 presented because they do not include the operating results of
Isle-Kansas City which we acquired on June 6, 2000, Gemini, Inc. ("Lady Luck Las
Vegas") which we acquired on September 12, 2000, and Rhythm City - Davenport
which we acquired on October 10, 2000.
(2) The data presented for fiscal years prior to fiscal 2000 is not comparable
to other periods presented because they do not include the operating results of
Isle-Tunica which opened July 26, 1999 and on March 2, 2000, we acquired
Isle-Natchez, Isle-Lula, Isle-Bettendorf, and Isle-Marquette.
(3) The data presented for fiscal years prior to fiscal 1999 are not comparable
to other periods presented because they do not include the operating results of
Isle-Black Hawk that opened December 30, 1998.
(4) The operating results for fiscal years 1997 are not comparable to other
periods presented because the Isle-Bossier City and Isle-Lake Charles were
accounted for under the equity method until August 6, 1996, when the remaining
interests in these facilities were acquired by Isle of Capri. In addition, the
earnings per share amounts prior to fiscal 1998 have been restated as required
to comply with Statement of Financial Accounting Standards No. 128, Earnings Per
Share.
(5) Net revenue is presented net of complimentaries, slot points expense and
cash coupon redemptions. Slot points expense and cash coupon redemptions were
previously charged to marketing expense.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
You should read the following discussion together with the financial
statements, including the related notes and the other financial information in
this Form 10-K.
The following discussion includes "forward-looking statements" within the
meaning of section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. In particular,
statements concerning the effects of increased competition in the Company's
markets, the effects of regulatory and legislative matters, the Company's plans
to make capital investments at its facilities, including, without limitation,
considerations to obtain approvals for a new project in the St. Louis
metropolitan area, development of the Isle-Boonville in Boonville, Missouri, and
the expansion of amenities at all facilities are forward looking statements.
Although the Company believes that the expectations are reasonable, there can be
no assurance that such expectations are reasonable or that they will be correct.
Actual results may vary materially from those expected. Important factors that
could cause actual results to differ with respect to the Company's planned
capital expenditures principally include a lack of available capital resources,
construction and development risks such as shortages of materials or labor, and
unforeseen delays resulting from a failure to obtain necessary approvals.
GENERAL
Isle of Capri's results of operations for the fiscal year ended April 29,
2001 reflect the consolidated operations of all of Isle of Capri's subsidiaries,
including the Isle-Biloxi, the Isle-Vicksburg, the Isle-Natchez, the
Isle-Bossier City, the Isle-Lake Charles, the Isle-Tunica, the Isle-Lula, the
Isle-Black Hawk, the Isle-Bettendorf, the Isle-Marquette and Pompano Park.
Results also include the Isle-Kansas City subsequent to its purchase on June 6,
2000, Lady Luck Las Vegas subsequent to its purchase on September 12, 2000 and
Rhythm City-Davenport subsequent to its purchase on October 10, 2000.
Isle of Capri's results of operations for the fiscal year ended April 30,
2000 include approximately two months of operating results from the
Isle-Bettendorf and Isle-Marquette, Iowa, Isle-Lula and Isle-Natchez,
Mississippi. These casinos were acquired through Isle of Capri's acquisition of
Lady Luck Gaming Corporation, BRDC, Inc. and other related assets on March 2,
2000. Prior to March 2, 2000, the results of operations reflect the
consolidated operations of all of Isle of Capri's subsidiaries, including the
Isle-Biloxi, the Isle-Vicksburg, Isle-Bossier City, the Isle-Lake Charles, the
Isle-Black Hawk, Pompano Park and the Isle-Tunica that opened July 26, 1999.
Isle of Capri believes that its historical results of operations may not be
indicative of its future results of operations because of the substantial
present and expected future increase in competition for gaming customers in each
of Isle of Capri's markets, as new casinos open and existing casinos add to or
enhance their facilities.
Isle of Capri also believes that its operating results are affected by
seasonality and weather. Seasonality has historically caused the operating
results for Isle of Capri's first and fourth fiscal quarters ending in July and
April, respectively, to be better than the operating results for the second and
third fiscal quarters ending October and January, respectively.
RESULTS OF OPERATIONS
Fiscal Year Ended April 29, 2001 Compared to Fiscal Year Ended April 30, 2000
Gross revenue for the fiscal year ended April 29, 2001 was $1,178.3
million, which included $957.1 million of casino revenue, $50.7 million of rooms
revenue, $22.2 million of pari-mutuel commissions and $148.3 million of food,
beverage and other revenue. This compares to gross revenue for the previous
fiscal year ended April 30, 2000 of $759.8 million, which included $619.4
million of casino revenue, $24.8 million of room revenue, $22.1 million of
pari-mutuel commissions and $93.6 million of food, beverage and other revenue.
Casino revenue increased $337.8 million or 54.5% primarily as a result of
a full year of operations of the former Lady Luck properties and Isle-Tunica,
approximately 11 months of operating results from the acquisition of the
Isle-Kansas City, approximately eight months of operating results from the
acquisition of the Lady Luck Las Vegas, approximately seven months of results
from the acquisition of the Rhythm City-Davenport, and the improvements at
Isle-Black Hawk and Isle-Lake Charles. Room revenue and food, beverage and
other revenue have increased primarily as a result of the acquisitions of the
former Lady Luck properties, the Isle-Kansas City, Lady Luck-Las Vegas, and the
Rhythm City-Davenport, and the opening of new hotels at Isle-Black Hawk,
Isle-Tunica and Isle-Lake Charles. Pari-mutuel commissions and fees have
remained stable compared to the prior year.
Casino operating expenses for the fiscal year ended April 29, 2001 totaled
$192.2 million, or 20.1% of casino revenue, versus $116.1 million, or 18.7% of
casino revenue, for the fiscal year ended April 30, 2000. These expenses are
primarily comprised of salaries, wages and benefits and other operating expenses
of the casinos. The increase in casino operating expenses is attributable to the
additional properties as well as improved casino revenue for the combined
original Isle of Capri properties.
Operating expenses for the fiscal year ended April 29, 2001 also included
room expenses of $12.1 million or 23.8% of gross room revenue from the hotels at
the Isle-Lake Charles, Isle-Bossier City, Isle-Biloxi, Isle-Vicksburg,
Isle-Natchez, Isle-Lula, Isle-Bettendorf, Isle-Marquette, Isle-Tunica,
Isle-Black Hawk, Lady Luck Las Vegas and Rhythm City-Davenport compared to $5.8
million or 23.5% of gross room revenue for the fiscal year ended April 30, 2000
from the hotels at the Isle-Lake Charles, Isle-Bossier City, Isle-Biloxi,
Isle-Vicksburg, Isle-Lula, Isle-Bettendorf, Isle-Natchez and Isle-Marquette.
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.
For the fiscal year ended April 29, 2001, state and local gaming taxes were
paid in Louisiana, Mississippi, Colorado, Iowa, Missouri and Nevada totaling
$192.6 million, or 20.1% of casino revenue, compared to $122.6 million, or 19.8%
of casino revenue, for the fiscal year ended April 30, 2000, which is consistent
with each state's gaming tax rate for the applicable fiscal years. For the
fiscal year ended April 30, 2000, state and local gaming taxes were only paid in
Louisiana, Mississippi, Iowa and Colorado. Legislation was passed during the
most recent Louisiana legislative session that allowed Louisiana riverboats
which had been required, including the riverboats at the Isle-Lake Charles, to
conduct cruises to remain permanently dockside beginning April 1, 2001. The
legislation also increased the gaming tax for operators from 18.5% to 21.5%.
Pari-mutuel operating costs of Pompano Park totaled $16.2 million in fiscal
2001 compared to $16.4 million in fiscal 2000. Such costs consist primarily of
compensation, benefits, purses, simulcast fees and other direct costs of track
operations. Pari-mutuel operating costs as a percentage of pari-mutuel revenues
have remained relatively stable at 73.2% for the fiscal year ended April 29,
2001 compared to 74.4% for the fiscal year ended April 30, 2000.
Food, beverage and other expenses totaled $32.0 million for the fiscal year
ended April 29, 2001, compared to $19.1 million for the fiscal year ended April
30, 2000. These expenses consist primarily of the cost of goods sold, salaries,
wages and benefits and other operating expenses of these departments. Food and
beverage and other operating expenses as a percentage of gross food, beverage
and other revenues increased from 20.4% for the fiscal year ended April 30, 2000
to 21.6% for the fiscal year ended April 29, 2001. This was attributable to the
inclusion of eight months of operations of the Lady Luck-Las Vegas operations in
the downtown Las Vegas market, whose food and beverage expense is significantly
higher than other Isle properties. The increase was also due to the start up
costs related to the opening of food and beverage outlets related to the opening
of hotels at Isle-Lake Charles and Isle-Tunica and the newly acquired outlets at
Isle-Kansas City that were not converted to Isle standards until the fourth
quarter, 2001.
Marine and facilities expenses totaled $63.6 million for the fiscal year
ended April 29, 2001, versus $39.9 million for the fiscal year ended April 30,
2000. These expenses include salaries, wages and benefits, operating expenses of
the marine crews, insurance, housekeeping and general maintenance of the
riverboats and floating pavilions. These expenses have increased as a result of
the increase in the number of properties operated by the Isle of Capri and
continued expansion of Isle facilities. Marine and facilities expenses as a
percentage of net revenue have remained relatively stable at 6.5% for the fiscal
year ended April 29, 2001 compared to 6.2% for the fiscal year ended April 30,
2000.
Marketing and administrative expenses totaled $249.9 million, or 25.4% of
net revenue, for the fiscal year ended April 29, 2001, versus $167.6 million, or
25.9% of net revenue, for the fiscal year ended April 30, 2000. Marketing
expenses include salaries, wages and benefits of the marketing and sales
departments, as well as promotions, advertising, special events and
entertainment. Administrative expenses include administration and human resource
department expenses, rent, new development activities, professional fees and
property taxes. Marketing and administrative expenses as a dollar amount have
increased as a result of the expansion in the number of properties operated by
the Isle of Capri and continued expansion of Isle facilities, but as a
percentage of net revenue have slightly decreased.
Preopening expenses of $.2 million for the fiscal year ended April 29,
2001, and $3.4 million for the fiscal year ended April 30, 2000, represent
salaries, benefits, training, marketing and other non-capitalizable costs, which
were expensed in connection with the opening of the Isle-Boonville in December
2001 and Isle-Tunica in July 1999.
The other charges of $8.2 million includes a $3.0 million loss due to
the write off of abandoned expansion projects assets at Isle-Biloxi, a $2.9
million loss due to the termination of the Enchanted Capri joint venture as a
result of Bankruptcy Court filings by Commodore Holdings, Ltd., the operator of
the Enchanted Capri and owner of the remaining 50% interest in the joint venture
(see footnote 6), a $1.4 million buyout of the Crowne Plaza license at the
Isle-Biloxi, and a $.9 million loss relating to the write off of the theater
production contracts at Isle-Tunica.
The valuation allowance totaling $1.0 million reflects the write-down of
marine assets held for development or sale to their net realizable value.
Depreciation and amortization expense was $69.1 million for the fiscal year
ended April 29, 2001 and $42.3 million for the fiscal year ended April 29, 2000.
These expenses relate to property and equipment, berthing and concession rights
and the amortization of intangible assets. The 63.2% increase in depreciation
and amortization expense is consistent with the increase in fixed assets placed
into service or acquired.
Interest expense was $93.8 million for the fiscal year ended April 29,
2001, net of capitalized interest of $3.8 million and interest income of $5.1
million, versus $55.6 million for the year ended April 30, 2000, net of
capitalized interest of $2.4 million and interest income of $4.8 million.
Interest expense primarily relates to indebtedness incurred in connection with
the acquisition of property, equipment, leasehold improvements and berthing and
concession rights. Additionally, interest expense of $11.5 million net of
capitalized interest of $.7 million and interest income of $.2 related to
Isle-Black Hawk is included in interest expense in fiscal 2001. This compares
to interest expense of $10.8 million, net of capitalized interest of $1.1
million and interest income of $.4 million in fiscal 2000.
Isle of Capri's results of operations for the fiscal year ended April 29,
2001 included a gain on sale of assets of $.3 million compared to $3.1 million
for the fiscal year ended April 30, 2000. Both gains related to the sale of an
option to purchase 135 acres of land adjacent to the Pompano Park, Inc.
facility.
Isle of Capri's effective tax rate was 44.9% prior to extraordinary items
for the fiscal year ended April 29, 2001 and 44.3% for the fiscal year ended
April 30, 2000, which includes the effects of non-deductible goodwill
amortization for income tax purposes.
Fiscal Year Ended April 30, 2000 Compared to Fiscal Year Ended April 25, 1999
Gross revenue for the fiscal year ended April 30, 2000 was $759.8 million,
which included $619.4 million of casino revenue, $24.8 million of rooms revenue,
$22.1 million of pari-mutuel commissions and $93.6 million of food, beverage and
other revenue. This compares to gross revenue for the previous fiscal year ended
April 25, 1999 of $530.1 million, which included $424.4 million of casino
revenue, $19.1 million of room revenue, $21.4 million of pari-mutuel commissions
and $65.2 million of food, beverage and other revenue. Casino revenue increased
$195.0 million or 45.9% primarily as a result of the inclusion of approximately
two months of operating results from the acquisition of Lady Luck, a full year
of operations at the Isle-Black Hawk (which commenced operations on December 30,
1998), the opening of a 305-room hotel at the Isle-Bossier City, increased
market share at the Isle-Lake Charles, the opening of the Isle-Tunica on July
26, 1999 and a full year of operating results from a 124-room hotel at the
Isle-Vicksburg (which opened in March 1999). Room revenue and food, beverage and
other revenue have increased primarily as a result of the Lady Luck acquisition
and the increased number of hotel rooms. Pari-mutuel commissions and fees have
increased slightly compared to the prior year as a result of adverse weather
conditions in the prior fiscal year.
Casino operating expenses for the fiscal year ended April 30, 2000 totaled
$116.1 million, or 18.7% of casino revenue, versus $77.7 million, or 18.3% of
casino revenue, for the fiscal year ended April 25, 1999. These expenses are
primarily comprised of salaries, wages and benefits and other operating expenses
of the casinos. Casino operating expenses have increased slightly as a
percentage of casino revenue due to weak operating results at the Isle-Tunica.
Operating expenses for the fiscal year ended April 30, 2000 also included
room expenses of $5.8 million from the hotels at the Isle-Lake Charles,
Isle-Bossier City, Isle-Biloxi, Isle-Vicksburg, Isle-Lula, Isle-Bettendorf,
Isle-Natchez and Isle-Marquette. These expenses reflect those directly relating
to the cost of providing these hotel rooms. Other costs of the hotels are shared
with the casinos and are presented in their respective expense categories. Rooms
operating expenses as a percentage of rooms revenue increased from 20.5% for the
fiscal year ended April 25, 1999 to 23.5% for the fiscal year ended April 30,
2000. Room expenses and room expenses as a percentage of rooms revenue both
increased primarily as a result of start up costs related to the opening of the
new 305 room deluxe Isle-Bossier City hotel in late June 1999. Additionally, the
hotels acquired through the Lady Luck acquisition currently have higher
operating expenses than the Isle of Capri Casino hotels.
State and local gaming taxes paid in Louisiana, Mississippi, Iowa and
Colorado totaled $122.6 million, or 19.8% of casino revenue, for the fiscal year
ended April 30, 2000, compared to $86.9, or 20.5% of casino revenue for the
fiscal year ended April 25, 1999, which is consistent with each state's gaming
tax rate for the applicable fiscal years.
Pari-mutuel operating costs of Pompano Park totaled $16.4 million in fiscal
2000 compared to $15.7 million in fiscal 1999. Such costs consist primarily of
compensation, benefits, purses, simulcast fees and other direct costs of track
operations. Pari-mutuel operating costs as a percentage of pari-mutuel revenues
have increased from 73.7% for the fiscal year ended April 25, 1999 to 74.4% for
the fiscal year ended April 30, 2000. This increase is primarily related to
increased competition for simulcasting contracts at Pompano Park.
Food, beverage and other expenses totaled $19.1 million for the fiscal year
ended April 30, 2000, compared to $14.2 million for the fiscal year ended April
25, 1999. These expenses have increased as a result of the opening of the
Isle-Black Hawk and the Isle-Tunica, as well as the Lady Luck acquisition. These
expenses consist primarily of the cost of goods sold, salaries, wages and
benefits and operating expenses of these departments. Food and beverage
operating expenses as a percentage of food, beverage and other revenues
decreased from 21.8% for the fiscal year ending April 25, 1999 to 20.4% for the
fiscal year ended April 30, 2000. Food and beverage operating margins were
lower primarily due to increased food cost related to certain seafood items that
are featured in most of the Company's restaurants.
Marine and facilities expenses totaled $39.9 million for the fiscal year
ended April 30, 2000, versus $28.2 million for the fiscal year ended April 25,
1999. These expenses include salaries, wages and benefits, operating expenses of
the marine crews, insurance, housekeeping and general maintenance of the
riverboats and floating pavilions. Marine and facilities expenses have increased
due to the addition of several new and acquired facilities. Marine and
facilities expenses as a percentage of net revenue have remained level at
approximately 6.2%.
Marketing and administrative expenses totaled $167.6 million, or 25.9% of
net revenue, for the fiscal year ended April 30, 2000, versus $121.0 million, or
26.5 % of net revenue, for the fiscal year ended April 25, 1999. Marketing
expenses include salaries, wages and benefits of the marketing and sales
departments, as well as promotions, advertising, special events and
entertainment. Administrative expenses include administration and human resource
department expenses, rent, new development activities, professional fees and
property taxes. Marketing and administrative expenses have increased as a dollar
amount due primarily to the opening of the addition of several new and acquired
casino facilities, while these expenses as a percentage of total revenue remains
level as a result of management's expense containment programs.
Preopening expenses of $3.4 million for the fiscal year ended April 30,
2000, and $3.3 million for the fiscal year ended April 25, 1999, represent
salaries, benefits, training, marketing and other non-capitalizable costs, which
were expensed in connection with the opening of the Isle-Tunica in July 1999 and
Isle-Black Hawk in December 1998, respectively.
Depreciation and amortization expense was $42.3 million for the fiscal year
ended April 30, 2000 and $36.3 million for the fiscal year ended April 25, 1999.
These expenses relate to property and equipment, berthing and concession rights
and the amortization of intangible assets. The increase in depreciation and
amortization expense is consistent with the increase in fixed assets placed into
service or acquired.
Interest expense was $55.6 million for the fiscal year ended April 30,
2000, net of capitalized interest of $2.4 million and interest income of $4.8
million, versus $45.7 million for the year ended April 25, 1999, net of
capitalized interest of $7.2 million and interest income of $2.9 million.
Interest expense primarily relates to indebtedness incurred in connection with
the acquisition of property, equipment, leasehold improvements and berthing and
concession rights. Additionally, interest expense of $10.8 million, net of
capitalized interest of $1.1 million and interest income of $.4 million related
to Isle-Black Hawk is included in the fiscal year ended April 30, 2000. This
compares to interest expense of $5.2 million, net of capitalized interest of
$4.8 million and interest income of $.9 million, for the fiscal year ended April
25, 1999.
Isle of Capri's effective tax rate was 44.3% prior to extraordinary items
for the fiscal year ended April 30, 2000 and 49.3% for the fiscal year ended
April 25, 1999, which includes the effects of non-deductible goodwill
amortization for income tax purposes. The effective tax rate decreased during
fiscal 2000 compared to fiscal 1999, as a result of increased taxable income
which offsets the fixed effects of the non-deductible goodwill amortization.
LIQUIDITY AND CAPITAL RESOURCES
At April 29, 2001, Isle of Capri had cash and cash equivalents of $76.7
million, compared to cash and equivalents of $168.0 million and short-term
investments of $39.0 million (that matured during fiscal 2001) at April 30,
2000. The $91.3 million decrease in cash and cash equivalents is the result of
$225.4 million net cash used in investing activities, $74.2 million net cash
provided by operating activities, and $59.9 million net cash provided by
financing activities.
Isle of Capri invested $159.3 million in property and equipment during the
fiscal year ended April 29, 2001 primarily for the development of the
Isle-Boonville, construction of hotels at Isle-Black Hawk and Isle-Lake Charles,
construction of a hotel and two theaters at Isle-Tunica, conversion of the
former Lady Luck properties into Isle of Capri properties and renovations at
Isle-Kansas City and Rhythm City-Davenport. Isle of Capri also invested $111.4
million in the acquisitions of Isle-Kansas City, Lady Luck Las Vegas and Rhythm
City - Davenport. Isle of Capri received $39.0 million from the sale of
short-term investments.
The following table reflects expenditures for property and equipment on
major projects:
COSTS ($IN MILLIONS)
-----------------------------
TOTAL
SPENT
PRIOR CURRENT AS OF NEXT TOTAL
PROPERTY. . . . . . . . PROJECT YEAR YEAR 4/29/01 YEAR EXPECTED
----------------------- ----------------------------- ------- ------ ------- --------- ------ --------
Isle-Boonville. . . . . Develop casino $ - 16.2 $ 16.2 $ 47.3 $ 63.5
Isle-Tunica . . . . . . Construct hotel & 2 theaters 11.3 31.4 42.7 1.9 44.6
Isle-Bossier City . . . Construct hotel 43.5 - 43.5 - 43.5
Lady Luck properties. . Convert to Isle 1.7 31.8 33.5 3.4 36.9
Isle-Lake Charles . . . Construct hotel 10.2 24.4 34.6 0.9 35.5
Isle-Black Hawk . . . . Construct hotel 20.8 7.1 27.9 0.4 28.3
Rhythm City - Davenport Renovations - 17.5 17.5 5.8 23.2
Isle-Kansas City. . . . Renovations - 12.6 12.6 4.0 16.6
Lady Luck Las Vegas . . Renovations - 1.4 1.4 1.5 3.0
All . . . . . . . . . . Slot program - - - 35.0 35.0
All . . . . . . . . . . Maintenance 17.1 16.8 33.9 26.0 59.9
------ ------ --------- ------ ------
Total $104.6 $159.2 $ 263.8 $126.2 $390.0
====== ====== ========= ====== ======
During the fiscal year ended April 29, 2001, financing activities provided
net cash of $59.9 million. Isle of Capri received $2.2 million in proceeds from
debt and $93.0 million, net, was borrowed under the Revolver. The Revolver is
due March 2005 and is a variable rate debt instrument currently at an interest
rate of 7.53%. Isle reduced the Senior Credit Facility and other debt by $19.0
million and purchased 2.0 million shares of its common stock at a total cost of
$16.7 million.
On May 3, 2000, Isle of Capri acquired Isle-Boonville, which has
preliminary approval to develop a gaming facility in Boonville, Missouri. Isle
of Capri is currently developing the casino project with a total expected
investment of approximately $63.5 million that includes the total purchase price
of $11.5 million. The Company expects to complete the project by the end of
2001. A significant portion of the principal near term capital requirements
will be related to the construction of the Isle-Boonville, of which $16.2
million was expended as of April 29, 2001.
On June 6, 2000, Isle of Capri acquired Isle-Kansas City for $33.5 million
cash less certain assumed liabilities. Isle of Capri is investing an additional
$16.6 million in this project, primarily to re-theme the casino into an Isle of
Capri. This project is substantially complete, and as of April 29, 2001 the
Company had spent $12.6 million.
Isle of Capri completed the acquisition of the Lady Luck Las Vegas casino
and hotel on September 12, 2000. The acquisition price for the Lady Luck Las
Vegas facility was $14.5 million.
On October 10, 2000, the Company purchased the Rhythm City-Davenport from a
subsidiary of President Casinos, Inc., for $58.2 million. Isle of Capri is
investing up to an additional $23.2 million in this project, primarily to
replace the existing boat and re-theme the casino into a Rhythm City Casino.
The project is substantially complete, and as of April 29, 2001 the Company had
spent $17.5 million.
Isle of Capri is investing up to an estimated $36.8 million to re-theme the
Lady Luck casinos into Isle of Capri casinos. As of April 29, 2001, $33.4
million was spent on this project.
Isle of Capri anticipates that capital improvements approximating $29.7
million will be made during fiscal 2002 to maintain its existing facilities and
remain competitive in its market.
On July 26, 2000, the Missouri Gaming Commission preliminarily selected the
Company's Jefferson County, Missouri project for development. The project will
primarily serve the South St.Louis metropolitan area. The project is expected
to include a 35,000-square-foot casino, the Isle's standard signature
restaurants, a 200-room hotel and an entertainment complex. Isle of Capri
expects to invest approximately $105 million in the project. A town located
near the site of the Company's proposed development has indicated that it
intends to condemn and/or annex the Company's site in order to prevent
development of the project. The Company intends to vigorously oppose these
efforts and has filed a declaratory judgment action challenging the town's right
to condemn and/or annex the property. Development of the project has been
delayed.
A joint venture in which Isle of Capri owns a 45% interest is one of
three applicants which has applied to the Louisiana Gaming Control Board for
the issuance of a gaming license in Morgan City, Louisiana. A decision is
expected from the Louisiana Gaming Control Board during the second half
of 2001.
All of Isle of Capri's 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.
Isle of Capri expects that available cash and cash from future operations,
as well as borrowings under its Amended and Restated Senior Credit Facility,
will be sufficient to fund future expansion and planned capital expenditures,
service debt and meet working capital requirements. There is no assurance that
Isle of Capri will have the capital resources to make all of the expenditures
described above or that planned capital investments will be sufficient to allow
Isle of Capri to remain competitive in its existing markets. In addition, the
Indenture governing the Senior Subordinated Notes restricts, among other things,
Isle of Capri's ability to borrow money, create liens, make restricted payments
and sell assets.
Isle of Capri's Amended and Restated Senior Credit Facility, among other
things, restricts Isle of Capri's ability to borrow money, make capital
expenditures, use assets as security in other transactions, make restricted
payments or restricted investments, incur contingent obligations, sell assets
and enter into leases and transactions with affiliates. In addition, the Amended
and Restated Senior Credit Facility requires Isle of Capri to meet certain
financial ratios and tests, including: a minimum consolidated net worth test, a
maximum consolidated total leverage test, a maximum consolidated senior leverage
test, and a minimum consolidated fixed charge coverage test.
On June 18, 2001, Isle of Capri exercised the option under its existing
$600 million Amended and Restated Credit Agreement to add $50 million of
additional term loans under the same terms, conditions and covenants. Proceeds
from the loans were used to reduce outstanding borrowings under Isle of Capri's
$125 million revolving loan facility.
Isle of Capri must repay all amounts borrowed under its Amended and
Restated Senior Credit Facility by March 2007. Isle of Capri is required to
make quarterly principal payments on the $475.0 million term loan portion of its
Amended and Restated Senior Credit Facility that began in March 2000. Such
payments were initially $3.4 million per quarter and increase by $1.25 million
per quarter in July of each year that the term loan is outstanding beginning
July 2001. In addition, Isle of Capri will be required to make substantial
quarterly interest payments on the outstanding balance of its Amended and
Restated Senior Credit Facility and interest payments of $17.1 million
semi-annually on its Senior Subordinated Notes.
Isle of Capri is highly leveraged and may be unable to obtain additional
debt or equity financing on acceptable terms. As a result, limitations on Isle
of Capri's capital resources could delay or cause Isle of Capri to abandon
certain plans for capital improvements at its existing properties and
development of new properties. Isle of Capri will continue to evaluate its
planned capital expenditures at each of its existing locations in light of the
operating performance of the facilities at such locations.
ITEM 7A. 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. Isle of Capri's primary exposure to market
risk is interest rate risk associated with its Amended and Restated Senior
Credit Facility.
In the fourth quarter of fiscal 2001, the Company entered into three
interest rate swap agreements that effectively convert portions of its
floating-rate debt to a fixed-rate basis for the next two to three years, thus
reducing the impact of interest rate changes on future interest expense.
Approximately $150 million or 32.5% of the Company's $461.3 million variable
rate term debt outstanding under its Amended and Restated Senior Credit Facility
was designated as the hedged items to interest rate swap agreements at April 29,
2001.
The Company evaluates the effectiveness of these hedged
transactions on a quarterly basis. The Company found no portion of the hedging
instruments to be ineffective during the year ended April 29, 2001.
Accordingly, no gain or losses have been recognized on these cash flow hedges.
The following table provides information at April 29, 2001, about our
financial instruments that are sensitive to changes in interest rates. The table
presents principal cash flows (in thousands) and related weighted average
interest rates by expected maturity dates.
Fiscal Year
(dollars in thousands) 2002 2003 2004 2005 2006 THEREAFTER TOTAL
---------------------- ------------ -------- -------- --------- --------- ------------ --------
Liabilities
Long-term debt, including current portion
Fixed Rate . . . . . . . . . . . . . . . . $ 2,881 $ 2,350 $ 2,295 $ 77,420 $ 1,402 $ 396,766 $483,114
Avg. interest rate . . . . . . . . . . . . 9.441% 9.441% 9.439% 9.436% 8.759% 8.745%
Variable Rate. . . . . . . . . . . . . . . $ 18,055 $25,555 $29,397 $126,750 $191,750 $ 164,500 $556,007
Avg. interest rate (1) . . . . . . . . . . - - - - - -
Fiscal Year Fair Value
(dollars in thousands) 4/29/01
---------------------- --------
Liabilities
Long-term debt, including current portion
Fixed Rate . . . . . . . . . . . . . . . . $452,514
Avg. interest rate
Variable Rate. . . . . . . . . . . . . . . $556,007
Avg. interest rate (1)
(1) Interest is based upon, at our option, a one-, two-, three-, or six-month
LIBOR rate plus a margin ranging from 1.75% to 3.625%, or the prime rate plus a
margin ranging from 0.75% to 2.625% for our term loan and revolving credit
facility. The applicable margin on a portion of the debt is dependent upon Isle
of Capri's outstanding indebtedness and operating cash flow. Also included in
variable rate debt is a term loan held by Isle-Black Hawk bearing interest at
prime rate plus a margin of 3.0%.
ITEM 8. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.
PAGE
-----
ISLE OF CAPRI CASINOS, INC.
Report of Independent Auditors 44
Consolidated Balance Sheets, April 29, 2001 and April 30, 2000 45
Consolidated Statements of Operations, Years ended April 29, 2001
April 30, 2000 and April 25, 1999 47
Consolidated Statements of Stockholders' Equity, Years ended
April 29, 2001, April 30, 2000 and April 25, 1999 48
Consolidated Statements of Cash Flows, Years ended April 29, 2001
April 30, 2000 and April 25, 1999 49
Notes to Consolidated Financial Statements 51
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Isle of Capri Casinos, Inc.
We have audited the accompanying consolidated balance sheets of Isle of
Capri Casinos, Inc. as of April 29, 2001 and April 30, 2000, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years ended April 29, 2001, April 30, 2000 and April 25, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Isle of Capri
Casinos, Inc. at April 29, 2001 and April 30, 2000, and the consolidated results
of its operations and its cash flows for the years ended April 29, 2001, April
30, 2000 and April 25, 1999, in conformity with accounting principles generally
accepted in the United States.
ERNST & YOUNG LLP
New Orleans, Louisiana
June 14, 2001
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS April 29, April 30,
------ 2001 2000
----------- ----------
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 76,659 $ 167,972
Short term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 39,044
Accounts receivable:
Related party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 307
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,203 6,343
Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,700 -
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,536 15,167
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . 16,359 9,500
----------- ----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,457 238,333
Property and equipment - net. . . . . . . . . . . . . . . . . . . . . . . . . . . 872,168 699,246
Other assets:
Investment in and advances to joint ventures. . . . . . . . . . . . . . . . . . 39 1,914
Property held for development or sale . . . . . . . . . . . . . . . . . . . . . 2,860 3,782
Licenses and other intangible assets, net of accumulated amortization of
$14,942 and $11,896, respectively.. . . . . . . . . . . . . . . . . . . . . . 62,918 91,100
Goodwill, net of accumulated amortization of
$21,509 and $11,721, respectively.. . . . . . . . . . . . . . . . . . . . . . 291,755 228,530
Berthing, concession, and leasehold rights, net of accumulated amortization of
$2,775 and $2,462, respectively . . . . . . . . . . . . . . . . . . . . . . . 3,493 3,806
Deferred financing costs, net of accumulated amortization of $8,533 and
$4,145, respectively. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,856 25,466
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,300 5,556
Prepaid deposits and other. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,061 7,781
----------- ----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,382,907 $1,305,514
=========== ==========
See notes to consolidated financial statements
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
LIABILITIES AND STOCKHOLDERS' EQUITY April 29, April 30,
------------------------------------ 2001 2000
----------- ----------
Current liabilities:
Current maturities of long-term debt. . . . . . . . . . . . . . . . . . . . . . $ 20,936 $ 17,400
Accounts payable:
Trade. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,635 24,407
Related party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 95
Accrued liabilities:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,521 10,010
Payroll and related. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,653 39,338
Property and other taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 14,963 16,096
Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 10,661
Progressive jackpots and slot club awards. . . . . . . . . . . . . . . . . . 12,616 9,033
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,222 34,996
----------- ----------
Total current liabilities.. . . . . . . . . . . . . . . . . . . . . . . . . . 159,546 162,036
Long-term debt, less current maturities.. . . . . . . . . . . . . . . . . . . . . 1,018,185 945,501
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,563 25,763
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,670 8,851
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,902 7,843
Stockholders' equity:
Preferred stock, $.01 par value; 2,050 shares authorized; none issued.. . . . . - -
Common stock, $.01 par value; 45,000 shares authorized; shares issued and
outstanding: 30,615 at April 29, 2001 and 30,369 at April 30, 2000. . . . . . 306 304
Class B common stock, $.01 par value; 3,000 shares authorized; none
issued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . 129,408 125,572
Unearned compensation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,800) -
Retained earnings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,788 29,644
----------- ----------
182,702 155,520
Treasury stock, 1,966 shares at April 29, 2001. . . . . . . . . . . . . . . . . (16,661) -
----------- ----------
Total stockholders' equity. . . . . . . . . . . . . . . . . . . . . . . . . 166,041 155,520
----------- ----------
Total liabilities and stockholders' equity. . . . . . . . . . . . . . . . . $1,382,907 $1,305,514
=========== ==========
See notes to consolidated financial statements
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Fiscal Year Ended
-------------------
April 29, April 30, April 25,
2001 2000 1999
------------------- ----------- -----------
Revenues:
Casino. . . . . . . . . . . . . . . . . . . . . . . . . . $ 957,147 $ 619,351 $ 424,379
Rooms . . . . . . . . . . . . . . . . . . . . . . . . . . 50,734 24,809 19,128
Pari-mutuel commissions and fees. . . . . . . . . . . . . 22,152 22,064 21,351
Food, beverage and other. . . . . . . . . . . . . . . . . 148,315 93,572 65,220
------------------- ----------- -----------
Gross revenues. . . . . . . . . . . . . . . . . . . . . 1,178,348 759,796 530,078
Less: promotional allowances. . . . . . . . . . . . . . 195,547 113,092 73,196
------------------- ----------- -----------
Net revenues . . . . . . . . . . . . . . . . . . 982,801 646,704 456,882
Operating expenses:
Casino. . . . . . . . . . . . . . . . . . . . . . . . . . 192,209 116,105 77,679
Gaming taxes. . . . . . . . . . . . . . . . . . . . . . . 192,571 122,572 86,855
Rooms . . . . . . . . . . . . . . . . . . . . . . . . . . 12,072 5,824 3,914
Pari-mutuel . . . . . . . . . . . . . . . . . . . . . . . 16,212 16,406 15,741
Food, beverage and other. . . . . . . . . . . . . . . . . 31,988 19,089 14,204
Marine and facilities . . . . . . . . . . . . . . . . . . 63,644 39,862 28,218
Marketing and administrative. . . . . . . . . . . . . . . 249,888 167,584 121,046
Accrued litigation settlement (reversal). . . . . . . . . - - (4,215)
Valuation charge. . . . . . . . . . . . . . . . . . . . . 1,032 - 5,097
Preopening expenses . . . . . . . . . . . . . . . . . . . 176 3,420 3,320
Other charges . . . . . . . . . . . . . . . . . . . . . . 8,165 - -
Depreciation and amortization . . . . . . . . . . . . . . 69,112 42,346 36,277
------------------- ----------- -----------
Total operating expenses. . . . . . . . . . . . . . . . 837,069 533,208 388,136
------------------- ----------- -----------
Operating income. . . . . . . . . . . . . . . . . . . . . . 145,732 113,496 68,746
Interest expense. . . . . . . . . . . . . . . . . . . . . (98,943) (60,413) (48,638)
Interest income . . . . . . . . . . . . . . . . . . . . . 5,107 4,780 2,907
Gain on disposal of assets. . . . . . . . . . . . . . . . 271 3,106 -
Minority interest . . . . . . . . . . . . . . . . . . . . (6,357) (3,700) 2,209
Equity in income (loss) of unconsolidated joint ventures. (162) 259 (1,340)
------------------- ----------- -----------
Income before income taxes and extraordinary item . . . . . 45,648 57,528 23,884
Income tax provision. . . . . . . . . . . . . . . . . . . 20,504 25,473 11,775
------------------- ----------- -----------
Income before extraordinary item. . . . . . . . . . . . . . 25,144 32,055 12,109
Extraordinary loss on extinguishment of debt, net of
applicable income tax benefit of $634 and $19,538,
respectively. . . . . . . . . . . . . . . . . . . . . . - (984) (36,285)
------------------- ----------- -----------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . $ 25,144 $ 31,071 $ (24,176)
=================== =========== ===========
Earnings (loss) per share of common stock:
Earnings (loss) per common share-basic:
Income before extraordinary item. . . . . . . . . . . . $ 0.84 $ 1.22 $ 0.51
Extraordinary loss, net.. . . . . . . . . . . . . . . . - (0.04) (1.54)
------------------- ----------- -----------
Net income (loss).. . . . . . . . . . . . . . . . . . . $ 0.84 $ 1.18 $ (1.03)
=================== =========== ===========
Earnings (loss) per common share - assuming dilution:
Income before extraordinary item. . . . . . . . . . . . $ 0.80 $ 1.15 $ 0.51
Extraordinary loss, net . . . . . . . . . . . . . . . . - (0.04) (1.52)
------------------- ----------- -----------
Net income (loss) . . . . . . . . . . . . . . . . . . . $ 0.80 $ 1.11 $ (1.01)
=================== =========== ===========
Weighted average basic shares . . . . . . . . . . . . . . 29,894 26,327 23,569
Weighted average diluted shares . . . . . . . . . . . . . 31,513 27,925 23,859
See notes to consolidated financial statements.
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
Shares of Additional Retained
Common Common Paid-in Unearned Treasury Earnings
Stock Stock Capital Compensation Stock (Deficit)
--------- ----------- --------- -------------- ---------- ----------
Balance, April 26, 1998 . . . . . . . . . . . . . 23,569 $ 236 $ 63,146 $ - $ - $ 22,749
Net loss. . . . . . . . . . . . . . . . . . . . - - - - - (24,176)
--------- ----------- --------- -------------- ---------- ----------
Balance, April 25, 1999 . . . . . . . . . . . . . 23,569 236 63,146 - - (1,427)
Exercise of stock options and warrants. . . . . 500 5 2,727 - -
Issuance of common stock for acquisition. . . . 6,300 63 59,699 - -
Net income. . . . . . . . . . . . . . . . . . . - - - - - 31,071
--------- ----------- --------- -------------- ---------- ----------
Balance, April 30, 2000 . . . . . . . . . . . . . 30,369 304 125,572 - - 29,644
Exercise of stock options . . . . . . . . . . . 246 2 1,136 - - -
Grant of nonvested stock. . . . . . . . . . . . - - 2,700 (2,700) - -
Purchase of treasury stock. . . . . . . . . . . - - - - (16,661) -
Amortization of unearned compensation . . . . . - - - 900 - -
Net income. . . . . . . . . . . . . . . . . . . - - - - - 25,144
--------- ----------- --------- -------------- ---------- ----------
Balance, April 29, 2001 . . . . . . . . . . . . . 30,615 $ 306 $ 129,408 $ (1,800) $ (16,661) $ 54,788
========= =========== ========= ============== ========== ==========
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
Total
Stockholders'
Equity
---------------
Balance, April 26, 1998 . . . . . . . . . . . . . $ 86,131
Net loss. . . . . . . . . . . . . . . . . . . . (24,176)
---------------
Balance, April 25, 1999 . . . . . . . . . . . . . 61,955
Exercise of stock options and warrants. . . . . 2,732
Issuance of common stock for acquisition. . . . 59,762
Net income. . . . . . . . . . . . . . . . . . . 31,071
---------------
Balance, April 30, 2000 . . . . . . . . . . . . . 155,520
Exercise of stock options . . . . . . . . . . . 1,138
Grant of nonvested stock. . . . . . . . . . . . -
Purchase of treasury stock. . . . . . . . . . . (16,661)
Amortization of unearned compensation . . . . . 900
Net income. . . . . . . . . . . . . . . . . . . 25,144
---------------
Balance, April 29, 2001 . . . . . . . . . . . . . $ 166,041
===============
See notes to consolidated financial statements
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Fiscal Year Ended
-------------------
April 29, April 30, April 25,
2001 2000 1999
------------------- ----------- -----------
OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,144 $ 31,071 $ (24,176)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . 69,112 42,346 36,277
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 11,068 17,410 (7,763)
Amortization of deferred financing costs. . . . . . . . . . . . . 4,388 2,969 2,317
Amortization of unearned compensation . . . . . . . . . . . . . . 900 - -
Other charges . . . . . . . . . . . . . . . . . . . . . . . . . . 8,165 - -
Valuation charge. . . . . . . . . . . . . . . . . . . . . . . . . 1,032 - 5,097
Loss (gain) on disposal of assets.. . . . . . . . . . . . . . . . (271) (3,106) 659
Equity in (income) loss of unconsolidated joint ventures. . . . . 162 (259) 1,340
Extraordinary item (net of taxes) . . . . . . . . . . . . . . . . - 984 36,285
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . 6,358 3,700 (2,209)
Changes in current assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . (2,020) 363 (278)
Income tax receivable . . . . . . . . . . . . . . . . . . . . . (4,700) 8,143 15,592
Prepaid expenses and other assets.. . . . . . . . . . . . . . . (6,475) (1,666) (1,126)
Accounts payable and accrued liabilities. . . . . . . . . . . . (38,713) 28,526 3,203
------------------- ----------- -----------
Net cash provided by operating activities.. . . . . . . . . . . . . 74,150 130,481 65,218
INVESTING ACTIVITIES:
Purchase of property and equipment. . . . . . . . . . . . . . . . . (159,326) (104,568) (94,996)
Net cash paid for acquisitions. . . . . . . . . . . . . . . . . . . (111,399) (119,355) -
Sale (purchase) of short-term investments.. . . . . . . . . . . . . 39,044 (39,044) -
Proceeds from sales of assets.. . . . . . . . . . . . . . . . . . . 271 6,134 202
Investments in and advances to joint ventures . . . . . . . . . . . (1,324) 196 (1,482)
Restricted cash.. . . . . . . . . . . . . . . . . . . . . . . . . . 1,256 2,559 44,861
Deposits and other. . . . . . . . . . . . . . . . . . . . . . . . . 6,100 (3,879) (601)
------------------- ----------- -----------
Net cash used in investing activities.. . . . . . . . . . . . . . . (225,378) (257,957) (52,016)
FINANCING ACTIVITIES:
Proceeds from debt. . . . . . . . . . . . . . . . . . . . . . . . . 2,238 475,061 447,088
Net proceeds from line of credit. . . . . . . . . . . . . . . . . . 93,000 - -
Principal payments on debt. . . . . . . . . . . . . . . . . . . . . (19,021) (258,078) (414,136)
Deferred financing costs. . . . . . . . . . . . . . . . . . . . . . (779) (9,384) (13,497)
Purchase of treasury stock. . . . . . . . . . . . . . . . . . . . . (16,659) - -
Proceeds from exercise of stock options and warrants. . . . . . . . 1,136 2,732 -
------------------- ----------- -----------
Net cash provided by financing activities . . . . . . . . . . . . . 59,915 210,331 19,455
Net increase (decrease) in cash and cash equivalents. . . . . . . . (91,313) 82,855 32,657
Cash and cash equivalents at beginning of year. . . . . . . . . . . 167,972 85,117 52,460
------------------- ----------- -----------
Cash and cash equivalents at end of year. . . . . . . . . . . . . . $ 76,659 $ 167,972 $ 85,117
=================== =========== ===========
See notes to consolidated financial statements
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
Fiscal Year Ended
-------------------
April 29, April 30, April 25,
2001 2000 1999
------------------- ----------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Net cash payments (receipts) for:
Interest. . . . . . . . . . . . . . . . . . . . . . . . $ 99,620 $ 52,090 $ 63,297
Income taxes. . . . . . . . . . . . . . . . . . . . . . 22,337 (1,933) 3,140
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Notes payable and debt issued for:
Property and equipment. . . . . . . . . . . . . . . . . - - 8,369
Other:
Deferred financing costs funded through
issuance of common stock. . . . . . . . . . . . . . . - - -
Construction costs funded through accounts payable. . . 2,809 2,453 2,401
Acquisitions of businesses:
Fair value of assets acquired. . . . . . . . . . . . 189,772 496,417 -
Less fair value of liabilities assumed . . . . . . . (78,373) (317,300) -
Less, stock issued . . . . . . . . . . . . . . . . . - (59,762) -
------------------- ----------- ----------
Net cash payment . . . . . . . . . . . . . . . . . . 111,399 119,355 -
See notes to consolidated financial statements
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
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 riverboat, dockside and land-based casinos and related facilities.
The Company has licenses to conduct and currently conducts gaming operations in
Biloxi, Vicksburg, Tunica, Natchez and Lula, Mississippi; in Bossier City and
Lake Charles, Louisiana; in Bettendorf, Marquette and Davenport, Iowa; in Kansas
City, Missouri; in Black Hawk, Colorado; in Las Vegas, Nevada; and Pompano,
Florida. We are currently developing a casino in Boonville, Missouri and have
received preliminary approval from the Missouri Gaming Commission to develop a
casino and hotel facility in Jefferson County, Missouri, which is in the St.
Louis metropolitan area.
The consolidated financial statements of the Company include the accounts
of Isle of Capri Casinos, Inc. and its subsidiaries. All material intercompany
balances and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States necessarily requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements as well as revenues and expenses during the
reporting period. Actual amounts when ultimately realized could differ from
those estimates.
Fiscal Year End
Effective April 27, 1997, the Company changed from an April 30 fiscal year
end to a fiscal year ending 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 and fiscal 2000 was one
such year. Fiscal 2001 commenced on May 1, 2000 and ended on April 29, 2001.
Cash Equivalents
The Company considers all highly liquid investments with a maturity at the
time of purchase of three months or less to be cash equivalents. Cash
equivalents are placed primarily with a high-credit-quality financial
institution. At April 29, 2001, cash equivalents were invested primarily in
short-term commercial paper and U.S. Treasury Bills. The carrying amount of cash
equivalents approximates fair value because of the short maturity of these
instruments.
Revenue and Promotional Allowances
Casino revenues represent the net win from gaming activities. Net win is
the difference between gaming wins and losses. Casino revenues are net of
accruals for anticipated payouts of progressive electronic gaming device
jackpots.
Net revenues do not include the retail amount of food, beverage and other
items provided gratuitously to customers. These amounts, which are included in
promotional allowances, totaled $124.7 million, $74.9 million and $49.7 million
for the years ended April 29, 2001, April 30, 2000 and April 25, 1999,
respectively. The estimated cost of providing such complimentary services, which
is included in casino expense, was $86.1 million, $52.7 million and $33.1
million for the years ended April 29, 2001, April 30, 2000 and April 25, 1999,
respectively. Promotional allowances also include cash given to guests (see New
Pronouncements).
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense for the
years ended April 29, 2001, April 30, 2000 and April 25, 1999 totaled $21.1
million, $14.7 million and $10.8 million, respectively.
Licenses and other intangible assets
Licenses and other intangible assets principally represent the license
value attributed to the Louisiana gaming licenses acquired through the Company's
acquisition of St. Charles Gaming Company, Inc. ("SCGC"), Grand Palais
Riverboat, Inc. ("GPRI") and Louisiana Riverboat Gaming Partnership ("LRGP") and
the value of the Lady Luck trademarks, player database and workforce acquired in
the acquisition of Lady Luck Gaming Corporation. These assets are being
amortized over a twenty-five-year period using straight-line method.
Long-lived Assets
The Company periodically evaluates the carrying value of long-lived assets
to be held and used, including goodwill in accordance with Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS 121). SFAS
121 requires impairment losses to be recorded on long-lived assets used in
operations, including related goodwill when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amounts. In that event, a loss is recognized
based on the amount by which the carrying amount exceeds the fair market value
of the long-lived assets. Loss on long-lived assets to be disposed of is
determined in a similar manner, except that fair market values are reduced for
the cost of disposal.
Deferred Financing Costs
The costs of issuing long-term debt are capitalized and are being amortized
using the straight-line method over the term of the related debt.
Berthing, Concession, and Leasehold Rights
Berthing, concession and leasehold rights are recorded at cost and are
being amortized over approximately twenty years using the straight-line method.
Goodwill
Goodwill reflects the excess purchase price the Company paid in acquiring
the net identifiable tangible and intangible assets of SCGC, GPRI, LRGP, Lady
Luck and subsidiaries, BRDC, Inc., IOC Boonville, Inc. f/k/a Davis Gaming
Boonville, Inc. ("Isle-Boonville"), Isle-Kansas City, Lady Luck Las Vegas and
Rhythm City-Davenport. Goodwill is being amortized over a twenty-five-year
period using the straight-line method (see New Pronouncements).
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Pronouncements
Effective for fiscal 2001, the Company adopted new guidance issued by
the Emerging Issues Task Force of the Financial Accounting Standards Board
relative to EITF Issue No.00-14 "Accounting for Certain Sales Incentives" and
EITF Issue No.00-22, "Accounting for "Points" and Certain Other Time-Based Sales
Incentive Offers, and Offers for Free Products or Services to be Delivered in
the Future". EITF Issue No.00-14 requires the redemption of coupons for cash to
be recognized as a reduction of revenue and EITF Issue No.00-22 requires the
redemption of "points" for cash to be recognized as a reduction of revenue. The
Company has complied with the requirements of this new guidance in the
accompanying consolidated statements of operations. To be consistent with the
fiscal 2001 presentation, approximately $38.1 million and $23.5 million of slot
points expense and cash coupon redemptions, previously reported as marketing
expenses, have been reclassified to promotional allowances for the years ended
April 30, 2000 and April 25, 1999, respectively.
In June 1998, FASB Statement No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("FASB 133") was issued. FASB 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. In June 1999, FASB Statement No. 137 "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133" ("FASB 137") was issued. FASB 133, as amended by
FASB 137, is effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000. As of April 29, 2001, the Company has adopted FASB
Statement No. 133 (see Item 7a). The impact of the adoption of FASB 133 on the
Company's financial statements was insignificant.
In July 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other
Intangible Assets," which requires that goodwill not be amortized under any
circumstance and only is reduced if it is found to be impaired. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001, but earlier
adoption is permissable under certain circumstances. The expected impact of the
adoption of SFAS No. 142 will be an increase to income before income taxes of
approximately $11.0 million in fiscal 2002 if the Company adopts this
pronouncement in its first quarter of 2002.
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings per Common Share
FISCAL YEAR ENDED
-----------------
APRIL 29, APRIL 30, APRIL 25,
2001 2000 1999
------------------ ----------- -----------
Numerator:
Income before extraordinary item. . . . . . . . . . . . . . . $ 25,144 $ 32,055 $ 12,109
Extraordinary loss, net . . . . . . . . . . . . . . . . . . . - (984) (36,285)
------------------ ----------- -----------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . 25,144 31,071 (24,176)
Numerator for basic earnings (loss) per share - income
(loss) available to common stockholders . . . . . . . . . . 25,144 31,071 (24,176)
Effect of diluted securities. . . . . . . . . . . . . . . . . - - -
------------------ ----------- -----------
Numerator for diluted earnings (loss) per share-
income (loss) available to common stockholders after
assumed conversions. . . . . . . . . . . . . . . . . . $ 25,144 $ 31,071 $ (24,176)
================== =========== ===========
Denominator:
Denominator for basic earnings (loss) per share -
weighted - average shares . . . . . . . . . . . . . . . . . $ 29,894 $ 26,327 $ 23,569
Effect of dilutive securities
Employee stock options and warrants . . . . . . . . . . . . 1,619 1,598 290
------------------ ----------- -----------
Dilutive potential common shares. . . . . . . . . . . . . . . 1,619 1,598 290
------------------ ----------- -----------
Denominator for diluted earnings (loss) per share -
adjusted weighted - average shares and assumed conversions. $ 31,513 $ 27,925 $ 23,859
================== =========== ===========
BASIC EARNINGS (LOSS) PER SHARE
Income before extraordinary item. . . . . . . . . . . . . . $ 0.84 $ 1.22 $ 0.51
Extraordinary loss, net . . . . . . . . . . . . . . . . . . - (0.04) (1.54)
------------------ ----------- -----------
Net income (loss).. . . . . . . . . . . . . . . . . . . . . $ 0.84 $ 1.18 $ (1.03)
================== =========== ===========
DILUTED EARNINGS (LOSS) PER SHARE
Income before extraordinary item. . . . . . . . . . . . . . $ 0.80 $ 1.15 $ 0.51
Extraordinary loss, net . . . . . . . . . . . . . . . . . . - (0.04) (1.52)
------------------ ----------- -----------
Net income (loss).. . . . . . . . . . . . . . . . . . . . . $ 0.80 $ 1.11 $ (1.01)
================== =========== ===========
Stock Options
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the market value of the shares at the date of
grant. The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" in accounting for its stock
option plans and accordingly, does not recognize compensation cost.
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
APRIL 29, APRIL 30,
2001 2000
---------- ----------
(In thousands)
Property and equipment:
Land and land improvements. . . . . . . . . . . . $ 126,784 $ 114,626
Leasehold improvements. . . . . . . . . . . . . . 110,727 98,473
Buildings and improvements. . . . . . . . . . . . 414,410 307,116
Riverboats and floating pavilions . . . . . . . . 158,246 98,448
Furniture, fixtures and equipment. . . . . . . . 224,638 171,364
Construction in progress. . . . . . . . . . . . . 31,398 53,565
---------- ----------
1,066,203 843,592
Less: accumulated depreciation and amortization.. 194,035 144,346
---------- ----------
$ 872,168 $ 699,246
========== ==========
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method over the following estimated useful lives:
YEARS
-------
Slot machines. . . . . . . . . . . 3
Furniture, fixtures and equipment 5-10
Leasehold improvements . . . . . . 10-39.5
Riverboats and floating pavilions. 25
Buildings and improvements . . . . 39.5
Interest capitalized during the years ended April 29, 2001, April 30, 2000
and April 25, 1999 totaled $3.8 million, $2.4 million and $7.2 million,
respectively. Depreciation and amortization expense for property and equipment
for the years ended April 29, 2001, April 30, 2000 and April 25, 1999 totaled
$54.7 million, $35.1 million and $30.4 million, respectively.
Effective April 26, 1999, Isle of Capri increased its estimate of the
useful lives of all land-based buildings and improvements from 25 years to 39.5
years to more appropriately reflect the expected useful lives of those assets.
At the same time, Isle of Capri reduced its estimate of the useful lives of slot
machines from 5 years to 3 years due to technological changes. The net effect
of these two changes increased consolidated net income, earnings per basic share
and earnings per diluted share for the year ended April 29, 2001, by $1.0
million, $0.03 and $0.03, respectively. Excluding the changes in useful lives,
consolidated net income, earnings per basic share and earnings per diluted share
for the year ended April 29, 2001 would have been $24.1 million, $0.81 and
$0.77, respectively. For the year ended April 30, 2000, the effect of these two
changes was immaterial.
3. RESTRICTED CASH
Restricted cash consists of a certificate of deposit in the amount of $1.5
million in connection with a lawsuit (see Note 12 for further details),
construction escrow related to the Boonville, MO development of $1.0 million,
workers' compensation deposits in the amount of $.3 million, and various other
deposits totaling $1.5 million.
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. SHORT-TERM INVESTMENTS
Short-term investments consist primarily of short-term commercial paper and
certificates of deposits. The carrying amount of short-term investments
approximates fair value because of the short maturity of these instruments.
5. ISLE OF CAPRI BLACK HAWK L.L.C.
On April 25, 1997, a wholly-owned subsidiary of the Company, Casino America
of Colorado, formed Isle-Black Hawk, a limited liability company, with Blackhawk
Gold, Ltd., a wholly-owned subsidiary of Nevada Gold & Casinos, Inc. Isle-Black
Hawk owns a casino in Black Hawk, Colorado, which opened on December 30, 1998.
The Company has a 57% indirect ownership interest in Isle-Black Hawk. In August
2000, Isle-Black Hawk completed construction of a hotel containing 237 rooms at
the site of the Isle-Black Hawk casino.
6. CAPRI CRUISES, L.L.C.
On April 20, 1998, a subsidiary of the Company formed a joint venture,
Capri Cruises, L.L.C., with Commodore Holdings Limited, parent company of
Commodore Cruise Line, to operate a cruise ship with a home port of New Orleans.
Cruise operations began in early June 1998. In December 2000, the cruise ship
ceased operations as a result of Bankruptcy Court filings by Commodore Holdings,
Ltd. and certain subsidiaries, the owner of the remaining 50% interest in the
joint venture and the operator of the ship. The Company no longer owns an
interest in the joint venture and has recorded a charge of approximately $2.9
million for the year ended April 29, 2001, for its investment in this venture
and related costs.
7. MERGERS AND ACQUISITIONS
Isle of Capri-Tunica
In March 1999, the Company acquired the original Harrah's casino facility
located in Tunica County, Mississippi for $9.5 million. The Company invested an
additional $24.0 million to equip, renovate and open this facility as an Isle of
Capri casino. The Company opened the Isle-Tunica on July 26, 1999 with
approximately 875 slot machines, 15 table games and two trademark restaurants.
The Company also invested approximately $44.0 million to construct an on-site
hotel with 227 rooms and two live entertainment theaters with combined seating
for 1,800 people. Construction of the hotel and theaters was completed in
November 2000.
Lady Luck Gaming Corporation
On March 2, 2000 the Company acquired Lady Luck in a merger transaction
pursuant to which Lady Luck became a wholly-owned subsidiary of the Company.
Lady Luck's common stockholders received cash in the amount of $12 per share for
an aggregate share consideration of approximately $59 million. Lady Luck
operated dockside riverboat casinos and hotels in Lula and Natchez, Mississippi;
owned a 50% interest in the Lady Luck Casino and Hotel in Bettendorf, Iowa; and
on October 29, 1999, acquired the Miss Marquette Casino in Marquette, Iowa for
$41.7 million. In November 1999, the Company made a secured loan of
approximately $21.0 million to Lady Luck in order to assist Lady Luck in
consummating its acquisition of the Miss Marquette. On March 2, 2000, the
Company also completed the acquisition of certain intellectual property from
entities owned by Lady Luck's former chairman for $31.0 million
contemporaneously with the merger. The Company completed the acquisition of the
Lady Luck Casino and Hotel in Las Vegas on September 12, 2000. The acquisition
price for the Las Vegas facility was $14.5 million.
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. MERGERS AND ACQUISITIONS (CONTINUED)
BRDC, Inc.
On March 2, 2000, a subsidiary of the Company merged with BRDC which owned
a 50% interest in Lady Luck's Bettendorf, Iowa facility that was not owned by
Lady Luck and related real estate in exchange for 6.3 million shares of the
Company's common stock. BRDC was owned by members of the family of Bernard
Goldstein, the Company's Chairman and Chief Executive Officer, including Robert
Goldstein, a member of the Company's board of directors.
Davis Gaming Boonville, Inc.
On May 3, 2000, the Company acquired Isle-Boonville, which has preliminary
approval to develop a gaming facility in Boonville, Missouri. Isle of Capri is
developing a casino project in Boonville with a total expected investment of
approximately $63.5 million, which includes the purchase price of $11.5 million,
of which approximately $16.2 million had been spent as of April 29, 2001. The
Company expects to complete the project in late fall of 2001.
Flamingo Hilton Riverboat Casino, L.P.
On June 6, 2000, the Company acquired certain assets less certain assumed
liabilities of Isle-Kansas City for $33.5 million in cash. Isle of Capri plans
to invest an additional $16.6 million in this project, primarily to re-theme the
casino into an Isle of Capri casino, of which approximately $12.6 million had
been spent as of April 29, 2001.
President Casinos - Davenport (Rhythm City-Davenport)
On October 10, 2000, a subsidiary of Isle of Capri acquired certain assets
of the President Casino and Hotel in Davenport, Iowa from a subsidiary of
President Casinos, Inc. Isle of Capri has re-themed the casino into a Rhythm
City Casino, a new brand for the Company at a cost of $17.5 million as of April
29, 2001.
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. MERGERS AND ACQUISITIONS (CONTINUED)
All of these transactions were accounted for as purchased business
combinations with the purchase price allocated to the fair values of the assets
and liabilities acquired. The operations of Lady Luck, BRDC, Isle-Boonville,
Isle-Kansas City, Lady Luck Las Vegas and Rhythm City-Davenport are included in
the consolidated statements of operations from their respective dates of
acquisition. In fiscal 2001, the Company evaluated the allocation of the
purchase price for Lady Luck and Lady Luck Las Vegas and based upon the
estimated fair values of the related assets and liabilities, re-allocated the
purchase price.
The pro forma unaudited results of operations for the years ended April 30,
2000, and April 25, 1999, assuming the purchase of Lady Luck and BRDC had been
consummated as of April 27, 1998, follows:
APRIL 30, APRIL 25,
2000 1999
---------- -----------
(In thousands, except per share data)
Revenues. . . . . . . . . . . . . . . . . $ 910,698 $ 733,879
Income before extraordinary item. . . . . 13,820 6,580
Net income (loss).. . . . . . . . . . . . 12,836 (29,705)
Income per common share
before extraordinary item:
Basic . . . . . . . . . . . . . . . . 0.52 0.22
Diluted . . . . . . . . . . . . . . . 0.49 0.22
Net income (loss) per common share:
Basic. . . . . . . . . . . . . . . . 0.49 (0.98)
Diluted. . . . . . . . . . . . . . . 0.46 (0.97)
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
Cash equivalents - The carrying amounts approximate fair value because of
the short maturity of these instruments.
Short-term investments - The carrying amounts approximate fair value
because of the short maturity of these instruments.
Restricted cash - The carrying amounts approximate fair value because of
the short maturity of these instruments.
Long-term debt - The fair value of the Company's long-term debt is
estimated based on the quoted market price of the underlying debt issue or,
when a quoted market price is not available, the discounted cash flow of
future payments utilizing current rates available to the Company for debt
of similar remaining maturities. Debt obligations with a short remaining
maturity are valued at the carrying amount.
The estimated carrying amounts and fair values of the Company's financial
instruments are as follows:
APRIL 29, 2001 APRIL 30, 2000
---------------- ---------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------------- --------------- -------- -----------
(IN THOUSANDS)
Cash equivalents. . . . . $ 76,659 $ 76,659 $167,972 $ 167,972
Short-term investments. . - - 39,044 39,044
Restricted cash . . . . . 4,300 4,300 5,556 5,556
Senior subordinated notes $ 390,000 $ 354,900 $390,000 $ 349,050
First mortage notes . . . 75,000 79,500 75,000 80,625
Other long-term debt. . . 574,121 574,121 497,901 497,901
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. LONG-TERM DEBT
APRIL 29, APRIL 30,
2001 2000
--------------- ----------
Long-term debt consists of the following: (In thousands)
8 3/4 % senior subordinated notes (described below) . . . . . . . . . . . . . . . . . $ 390,000 $ 390,000
Senior Credit Facility (described below):
Variable rate term loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 461,250 475,000
Revolver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,000 -
13% First Mortgage Notes, issued by Isle of Capri Black Hawk L.L.C., due
August 2004; non-recourse to Isle of Capri Casinos, Inc. . . . . . . . . . . . . 75,000 75,000
Variable rate TIF Bonds due to City of Bettendorf, due in quarterly installments
of various amounts, not including interest, Tax Incremental Financing Payable -
Interest of approximately 6.7%, payments made through incremental property
taxes to the City until paid in full, maturity no later than 2011. . . . . . . . 6,493 7,184
12 1/2 % note payable, due in monthly installments of $125,000, including interest,
beginning October 1997 through October 2005. . . . . . . . . . . . . . . . . . . 4,999 5,818
8 % note payable, due in monthly installments of $66,667, including interest,
through July 2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 888 1,587
8 % note payable, due in monthly installments of $11,365, including interest,
through December 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,168 1,213
11% note payable, issued by Isle of Capri Black Hawk L.L.C., paid March 2001. . . . . - 768
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,323 6,331
--------------- ----------
1,039,121 962,901
Less: current maturities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,936 17,400
--------------- ----------
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,018,185 $ 945,501
=============== ==========
8.75% Senior Subordinated Notes
On April 23, 1999, the Company issued $390 million of 8.75% Senior
Subordinated Notes due 2009 (the "Senior Subordinated Notes"). The Senior
Subordinated Notes are guaranteed by all of the Company's significant
subsidiaries, excluding the subsidiaries that own and operate the Isle-Black
Hawk. Interest on the Senior Subordinated Notes is payable semi-annually on
each April 15 and October 15 through maturity. The Senior Subordinated Notes
are redeemable, in whole or in part, at the Company's option at any time on or
after April 15, 2004 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
April 15 of the years indicated below:
Year . . . . . . . . Percentage
-------------------- -----------
2004.. . . . . . . . 104.375%
2005.. . . . . . . . 102.917%
2006.. . . . . . . . 101.458%
2007 and thereafter. 100.000%
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. LONG-TERM DEBT (CONTINUED)
The Company issued the Senior Subordinated Notes under an indenture between
the Company, the subsidiary guarantors and a trustee. The indenture, among other
things, restricts 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
restricted 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.
A substantial part of the proceeds from the Senior Subordinated Notes was
used to prepay long-term debt, including all of the $315,000,000 of 12 1/2 %
Senior Secured Notes due 2003. The proceeds were also used to pay prepayment
premiums, accrued interest and other transaction fees and costs.
Senior Credit Facility
Simultaneously, with the issuance of the Senior Subordinated Notes, the
Company entered into a $175.0 million five-year credit facility (the "Senior
Credit Facility") comprised of a $50.0 million term loan and a $125.0 million
revolver. On March 2, 2000, the Company amended and restated the Senior Credit
Facility in connection with the acquisition of Lady Luck and BRDC, as well as,
to provide financing for the pending acquisitions of the Flamingo Hilton
Riverboat Casino in Kansas City, Missouri and of Davis Gaming Boonville, Inc.
The previous $175.0 million Senior Credit Facility was expanded under the
amended and restated agreement to a $600.0 million facility ("Amended and
Restated Senior Credit Facility").
The Amended and Restated Senior Credit Facility provides for a $125.0
million revolving credit facility and a $100.0 million Tranche A term loan
maturing on March 2, 2005, a $200.0 million Tranche B term loan maturing on
March 2, 2006, and a $175.0 million Tranche C term loan maturing on March 2,
2007. The Company is required to make quarterly principal payments on the term
loan portion of its Senior Credit Facility that began in March 2000. Such
payments were initially $3.4 million per quarter with scheduled increases of
$1.25 million per quarter in July of each year that the term loan is
outstanding. On March 2, 2000, Isle of Capri drew $475.0 million in term loans
under this facility in connection with the acquisition of Lady Luck and BRDC. A
portion of the initial $475.0 million draw was also used to repay outstanding
amounts under the existing credit facility and to fund the redemption of Lady
Luck notes and preferred stock.
At the Company's option, the revolving credit facility and the Tranche A
term loan may bear interest at (1) the highest of 1/2 of 1% 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 2.25%, or
(2) a rate tied to a LIBOR rate plus an applicable margin of up to 3.25%. At the
Company's option, the Tranche B term loan may bear interest at (1) the highest
of 1/2 of 1% 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%. At the Company's option, the Tranche C term
loan may bear interest at (1) the highest of 1/2 of 1% 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 2.625%, or (2) a
rate tied to a LIBOR rate plus an applicable margin of up to 3.625%. In the
fourth quarter of fiscal 2001, the Company entered into three interest rate swap
agreements that effectively convert portions of the floating rate term loans to
a fixed-rate basis. See Item 7A, "Quantitative and Qualitative Disclosures about
Market Risk" in Part II of this Form 10-K.
The Amended and Restated Senior Credit Facility provides for certain
covenants, including those of a financial nature. The Company was in compliance
with these covenants as of April 29, 2001. The Amended and Restated Senior
Credit Facility is secured by liens on substantially all of the Company's assets
and guaranteed by all of its significant restricted subsidiaries, excluding
Casino America of Colorado, Inc., Isle-Black Hawk, and their subsidiaries.
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. LONG-TERM DEBT (CONTINUED)
The weighted average effective interest rate of total debt outstanding
under the Amended and Restated Senior Credit Facility at April 29, 2001 was
8.49%.
At April 29, 2001, $93.0 million was outstanding under the revolving
credit agreement. The outstanding amounts under the term loan portion of the
facility at April 29, 2001 was (in thousands):
Tranche A. . $90,000
Tranche B. . 198,000
Tranche C. . 173,250
--------
Total. . $461,250
========
The Amended and Restated Senior Credit Facility also provides the Company
with the ability to borrow an additional $50.0 million (the "Greenshoe Option")
under the term loans.
13% First Mortgage Notes
On August 20, 1997, Isle-Black Hawk issued $75.0 million of 13% First
Mortgage Notes ("First Mortgage Notes") with contingent interest, due August 31,
2004, that is non-recourse debt to the Isle of Capri Casinos. Interest on the
First Mortgage Notes is payable semi-annually on February 28 and August 31 of
each year, commencing February 28, 1998. Additionally, contingent interest is
payable on the First Mortgage Notes on each interest payment date, in an
aggregate principal amount of 5% of the Consolidated Cash Flow (as defined in
the Indenture governing the First Mortgage Notes). Every six months Isle-Black
Hawk has met its debt covenant ratios to pay contingent interest in accordance
with the Indenture. The amount of contingent interest expense recorded for the
years ended April 29, 2001 and April 30, 2000 totaled $1.5 million and $1.1
million, respectively.
The First Mortgage Notes are redeemable at the option of Isle-Black
Hawk, in whole or in part, at any time on or after August 31, 2001, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest to the redemption date, if redeemed during the
12-month period beginning on August 31 of the years indicated below:
Year Percentage
-------------------- -----------
2001.. . . . . . . . 106.500%
2002.. . . . . . . . 103.200%
2003 and thereafter. 100.000%
On June 5, 2000, as required by the Indenture, Isle-Black Hawk offered
to purchase for cash up to $1.2 million principal amount of First Mortgage Notes
at a price of $1,010 per $1,000 principal amount, plus interest accrued up to,
but not including, the payment date in accordance with the terms of the
Indenture. None of the First Mortgage Notes were tendered for purchase. Isle
Black-Hawk is required to make an offer based upon excess cash flow, as defined,
every year during the term of the First Mortgage Notes.
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. LONG-TERM DEBT (CONTINUED)
Variable Rate TIF Bonds
As part of the City of Bettendorf Development Agreement dated June 17,
1997, the City issued $9.5 million in tax incremental financing bonds ("TIF
Bonds"), $7.5 million of which was used by 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's obligations, 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 Isle - Bettendorf and over 100 other tax paying entities. As the
TIF District will repay the TIF Bonds, Isle - Bettendorf may not be required to
fully repay the $7.5 million. 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,
Isle - Bettendorf will pay the City $0.25 per person for each person entering
the boat until the remaining balance has been repaid.
Other
Isle of Capri has $2.0 million available in bank lines of credit other than
the Senior Credit Facility. As of April 29, 2001, Isle of Capri had no
outstanding balances under these lines of credit.
Isle-Black Hawk obtained a letter of credit, as a requirement to guarantee
the City of Black Hawk (the "City") improvements according to the subdivision
improvement agreement with the City. The letter of credit, totaling $.4 million
and insured by $.2 million of restricted cash, can be drawn upon by the City for
repair on the public improvements during the one-year warranty period ending
February 2002.
At April 29, 2001, Isle of Capri was in compliance with all debt covenants.
The aggregate principal payments due on total long-term debt over the next
five fiscal years and thereafter are as follows:
FISCAL YEAR ENDING
--------------------
(In thousands)
2002 . . . . . . . .$ 20,936
2003 . . . . . . . . 27,905
2004 . . . . . . . . 31,692
2005 . . . . . . . . 204,170
2006 . . . . . . . . 193,152
Thereafter . . . . . 561,266
---------
$1,039,121
==========
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. COMMITMENTS
The Company has an agreement with the Biloxi Port Commission that provides
the Company with certain docking rights. This agreement expires in July 2004,
with seven renewal options of five years each. Annual rentals are the greater of
$500,000 or 1% of gross gaming revenue, as defined. Annual rent during each
renewal term is adjusted for increases in the Consumer Price Index, limited to
6% for each renewal period.
In addition, the Company leases certain land, buildings, and other
improvements from the City of Biloxi under a lease and concession agreement.
This agreement expires in July 2004, with options to renew for six additional
terms of five years each. Annual rent is $530,000 plus 3% of gross gaming
revenue, as defined, in excess of $25.0 million. Annual rent during each renewal
term is adjusted for increases in the Consumer Price Index, limited to 6% for
each renewal period.
In April 1994, the Company entered an Addendum to the lease with the City
of Biloxi, which requires the Company to pay 4% of gross non-gaming revenues
received as defined, net of sales tax, comps and discounts. Additional rent will
be due to the City of Biloxi for the amount of any increase from and after
January 1, 2016 in the rent due to the State Institutions of Higher Learning
under a lease between the City of Biloxi and the State Institutions of Higher
Learning (the "IHL Lease") and for any increases in certain tidelands leases
between the City of Biloxi and the State of Mississippi.
In April 1994, in connection with the construction of a hotel, the Company
entered a lease for additional land. The Company first acquired the leasehold
interest of Sea Harvest, Inc., the original lessee, for consideration of $8,000
per month for a period of ten years. The Company's lease is with the City of
Biloxi, Mississippi, for an initial term of 25 years, with options to renew for
six additional terms of 10 years each and a final option period with a
termination date commensurate with the termination date of the IHL Lease, but in
no event later than December 31, 2085. Annual rent (which includes payments to
be made pursuant to the purchase of a related leasehold interest) is $444,400,
plus 4% of gross non-gaming revenue, as defined. The annual rent is adjusted
after each five-year period based on increases in the Consumer Price Index,
limited to a 10% increase in any five-year period. The annual rent will increase
10 years after the commencement of payments pursuant to a termination of lease
and settlement agreement, to an amount equal to the sum of annual rent as if it
had been $500,000 annually plus adjustments thereto based on the Consumer Price
Index.
In February 1995, in conjunction with its planned Cripple Creek Colorado
development, the Company entered into a land lease. The lease has an initial
term of 25 years, with options to renew for seven additional terms of 10 years
each. The base rent is $250,000 per year increased by $10,000 each year until
the annual rent is $300,000. After seven years, and every two years thereafter,
the annual rent is adjusted based on increases in the Consumer Price Index,
limited to a 4% increase in any two-year period.
The Company leases approximately 16.25 acres of land in Calcasieu Parish,
Louisiana for use in connection with the Isle-Lake Charles. The initial term of
this lease expires in March 2005 and we have the option to renew it for sixteen
additional terms of five years each. Rent under the Isle-Lake Charles lease is
currently $1.3 million per year and is subject to increases based on the
Consumer Price Index and construction of hotel facilities on the property.
In March 1999, the Company entered into a lease for land in Tunica County,
Mississippi for use in connection with the Isle-Tunica. The initial lease term
is five years with the option to renew the lease for seven additional terms of
five years. Base rent for each lease year equals the greater of 2% of gross
gaming revenue or $800,000. Once gross gaming revenue exceeds $40.0 million
during any lease year, the base rent in the following months of such year shall
be increased by an amount equal to 2% of such excess. The landlord is entitled
to receive additional rent based on excess available cash, as defined in the
lease.
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. COMMITMENTS (CONTINUED)
The Company leases riverfront land from the City of Marquette, Iowa, under
a lease agreement. This agreement expires in December 2019. Annual rent is
$180,000 payable in equal monthly installments due on the first of each month.
In addition to the base rent, the Company must also pay the following amounts:
(1) $0.50 per customer per day due the 15th day following each month and (2)
2.5% of net gambling receipts, as defined, from $20 million to $40 million, plus
5% of net gambling receipts, as defined, from $40 million to $60 million, plus 7
1/2 % of net gambling receipts, as defined, in excess of $60 million, due
annually.
The Company leases approximately 1,000 acres of land in Coahoma County,
Mississippi and utilizes approximately 50 acres in connection with the
operations of Isle-Lula. Unless terminated by the Company at an earlier date,
the lease expires in 2033. Rent under the lease is currently 5.5 % of gross
gaming revenue as established by the Mississippi Gaming Commission, as well as
$3,333 per month for the Rhythm & Blues hotel.
Through numerous lease agreements, the Company leases approximately 64
acres of land in Natchez, Mississippi, which is used in connection with the
operation of Isle-Natchez. Unless terminated by the Company at an earlier date,
the lease expiration dates vary from 2001 - 2037. Rents under the leases
currently total approximately $60,000 per month. The Company also leases
approximately 7.5 acres of land, which is utilized for parking at the facility.
The Company leases approximately 28 acres from the Kansas City Port
Authority in connection with the operation of the Flamingo Casino. The term of
the lease is 5 years and we have the option to renew the lease for 8 additional
terms of 5 years each. Rent under the lease is currently $3 million per year,
subject to the higher of $3 million (minimum rent) per year, or 3.25% of gross
revenues, less complimentaries.
Future minimum payments under capital leases and noncancelable operating
leases with initial terms of one year or more consisted of the following at
April 29, 2001:
CAPITAL OPERATING
LEASES LEASES
--------------- ----------
(In thousands)
2002 . . . . . . . . . . . . . . . . . . . . $ 395 $ 21,986
2003 . . . . . . . . . . . . . . . . . . . . 402 19,384
2004 . . . . . . . . . . . . . . . . . . . . 384 17,727
2005 . . . . . . . . . . . . . . . . . . . . 331 17,724
2006 . . . . . . . . . . . . . . . . . . . . 318 16,972
Thereafter . . . . . . . . . . . . . . . . . 4,946 100,305
--------------- ----------
Total minimum lease payments . . . . . . . . $ 6,776 $ 194,098
==========
Amounts representing interest. . . . . . . . (4,085)
---------------
Present value of net minimum lease payments. $ 2,691
===============
Rent expense for operating leases was approximately $36.6 million, $19.6
million and $10.8 million for the years ended April 29, 2001, April 30, 2000 and
April 25, 1999, respectively. Such amounts include contingent rentals of $8.5
million $3.0 million and $2.6 million for the years ended April 29, 2001, April
30, 2000 and April 25, 1999, respectively.
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. COMMITMENTS (CONTINUED)
Jefferson County, Missouri
On July 26, 2000, the Missouri Gaming Commission preliminarily selected the
Company's Jefferson County, Missouri project for development. The project will
primarily serve the South St. Louis metropolitan area. The project is expected
to include a 35,000-square-foot casino, the Isle's signature restaurants, a
200-room hotel and an entertainment complex. Isle of Capri expects to invest
approximately $105 million in the project. A town located near the site of the
Company's proposed development has indicated that it intends to condemn and/or
annex the Company's site in order to prevent development of the project. The
Company intends to vigorously oppose these efforts and has filed a declaratory
judgment challenging the town's right to condemn and/or annex the property.
Development of the project has been delayed.
11. RELATED PARTY TRANSACTIONS
On January 2, 1998, the Company acquired approximately 0.7 acres of
property (the "Acquired Property") contiguous to the property being developed by
Isle-Black Hawk for expansion of the entrance and signage. On January 2, 1998,
Isle-Black Hawk, as Lessee, entered into a lease agreement with the Company for
the Acquired Property and has utilized the Acquired Property in developing
Isle-Black Hawk. The lease obligation consisted of $102,000 paid upon the
inception of the lease and $17,000 per month, commencing July 15, 1998, and
continuing until December 31, 2002. During the term of the lease, Isle-Black
Hawk had the right to purchase the property for $1.5 million plus all interest
and out-of-pocket costs that the Company incurred in connection with the
purchase and ownership of the land, less any payments made by Isle-Black Hawk,
as lessee. On January 7, 2000, Isle-Black Hawk purchased the property for $1.3
million.
The Company also leases approximately eight acres of land from an entity
owned by members of Bernard Goldstein's family, including Robert Goldstein,
which is used for parking. The initial term of the lease expires 60 days after
written notice is given to either party and rent under the lease is currently
$20,000 per month.
12. CONTINGENCIES
One of the Company's subsidiaries has been named, along with numerous
manufacturers, distributors and gaming operators, including many of the
country's largest gaming operators, in a consolidated class action lawsuit
pending in Las Vegas, Nevada. These gaming industry defendants are alleged to
have violated the Racketeer Influenced and Corrupt Organizations Act by engaging
in a course of fraudulent and misleading conduct intended to induce people to
play their gaming machines based upon a false belief concerning how those gaming
machines actually operate and the extent to which there is actually an
opportunity to win on any given play. The suit seeks unspecified compensatory
and punitive damages. A motion for certification of the class is currently
pending before the court and no discovery as to the merits of the alleged claims
has begun. The Company is unable at this time to determine what effect, if any,
the suit would have on its financial position or results of operations.
However, the gaming industry defendants are committed to defend vigorously all
claims asserted in the consolidated action.
In August 1997, a lawsuit was filed which seeks to nullify a contract to
which Louisiana Riverboat Gaming Partnership is a party. Pursuant to the
contract, Louisiana Riverboat Gaming Partnership pays a fixed amount plus a
percentage of revenue to various local governmental entities, including the City
of Bossier and the Bossier Parish School Board, in lieu of payment of a
per-passenger boarding fee. Summary judgment in favor of Louisiana Riverboat
Gaming Partnership was granted on June 4, 1998. That judgment was not appealed
and is now final. On June 11, 1998, a similar suit was filed and judgment was
rendered in the Company's favor on September 16, 1999 by the lower court. The
case has been appealed, and is currently pending. The Company intends to
vigorously defend this suit.
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. CONTINGENCIES (CONTINUED)
Lady Luck and several joint venture partners are defendants in a lawsuit
brought by the country of Greece and its Minister of Tourism before the Greek
Multi-Member Court of First Instance. The action alleges that the defendants
failed to make specified payments in connection with the gaming license bid
process for Patras, Greece. The payments the Company is alleged to have been
required to make aggregate approximately $2.1 billion drachma (which was
approximately $5.5 million as of April 29, 2001 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 alleged breach of approximately $2.7 million. Although the
court granted our motion for summary judgment and dismissed the lawsuit, the
matter is subject to appeal by the plaintiff. Accordingly, the outcome cannot be
predicted with any degree of certainty. We intend to vigorously defend the
claims asserted in this action.
We are currently involved in an arbitration proceeding concerning the
amount of payments owed to a party which had an interest in property owned by
the Company located in Lula, Mississippi. The claimant is seeking payments
based upon gross revenue from our Lula, Mississippi facility. We dispute this
claim and believe that our responsibility is limited to payments that are fixed
in amount. We intend to vigorously defend the claim asserted in this
proceeding.
The Company is engaged in various other litigation matters and has a number
of unresolved claims. Although the ultimate liability of this litigation and
these claims cannot be determined at this time, the Company believes that they
will not have a material adverse effect on the Company's consolidated financial
position or results of operations.
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 or 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.
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. INCOME TAXES
Income tax provision (benefit) consists of the following:
FISCAL YEAR ENDED
------------------
APRIL 29, APRIL 30, APRIL 25,
2001 2000 1999
------------------ ----------- -----------
(In thousands)
Current:
Federal . . . . . $ 10,430 $ 6,891 $ (485)
State . . . . . . 506 538 485
------------------ ----------- -----------
10,936 7,429 -
Deferred:
Federal . . . . . 8,705 15,928 (8,558)
State . . . . . . 863 1,482 795
------------------ ----------- -----------
9,568 17,410 (7,763)
------------------ ----------- -----------
20,504 24,839 (7,763)
Extraordinary loss. - (634) (19,538)
------------------ ----------- -----------
$ 20,504 $ 25,473 $ 11,775
================== =========== ===========
A reconciliation of income tax provision (benefit) to the statutory corporate
federal tax rate of 35% is as follows:
FISCAL YEAR ENDED
-----------------
APRIL 29, APRIL 30, APRIL 25,
2001 2000 1999
------------------ ---------- -----------
(In thousands)
Statutory tax provision (benefit) $ 16,033 $ 19,569 $ (11,178)
Effects of :
State taxes . . . . . . . . . . 890 2,021 591
Goodwill. . . . . . . . . . . . 3,355 1,556 1,185
Other . . . . . . . . . . . . . 226 1,693 1,639
------------------ ---------- -----------
$ 20,504 $ 24,839 $ (7,763)
================== ========== ===========
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. INCOME TAXES (CONTINUED)
Significant components of the Company's net deferred income tax liabilities are
as follows:
FISCAL YEAR ENDED
-------------------
APRIL 29, APRIL 30,
2001 2000
------------------- -----------
(In thousands)
Deferred tax liabilities:
Property and equipment. . . . . . . . . . $ 64,750 $ 81,072
Other . . . . . . . . . . . . . . . . . . 2,427 690
------------------- -----------
Total deferred tax liabilities. . . . . . . 67,177 81,762
Deferred tax assets:
Dividends . . . . . . . . . . . . . . . . 258 351
Write-down of assets held for sale. . . . 21,202 20,841
Preopening expenses . . . . . . . . . . . (2,114) (1,522)
Accrued expenses. . . . . . . . . . . . . 7,347 9,148
Charitable contribution carryover . . . . 366 926
Alternative minimum tax credit. . . . . . 2,483 2,181
Net operating losses. . . . . . . . . . . 34,305 43,319
Other . . . . . . . . . . . . . . . . . . 7,077 4,893
------------------- -----------
Total deferred tax assets . . . . . . . . . 70,924 80,137
Valuation allowance on deferred tax assets. (4,773) (8,971)
------------------- -----------
Net deferred tax assets . . . . . . . . . . 66,151 71,166
------------------- -----------
Net deferred tax liabilities. . . . . . . . $ 1,026 $ 10,596
=================== ===========
At April 29, 2001, the Company had alternative minimum tax credits that can
be carried forward indefinitely to reduce future regular tax liabilities.
Additionally, as of April 29, 2001, the Company had federal net operating loss
carryforwards of $95.2 million for income tax purposes, with expiration dates
from 2008 to 2019. The net operating losses are subject to limitation under the
income tax regulations, which may limit the amount ultimately utilized.
14. COMMON STOCK
Stock-based compensation.
Under the Company's 1992, 1993 and 2000 Stock Option Plans, as amended, a
maximum of 1,058,750, 4,650,000 and 2,542,566 options, respectively, may be
granted to directors, officers and employees. The plans provide for the issuance
of incentive stock options and nonqualified options which have a maximum term of
10 years and are, generally, exercisable in yearly installments ranging from 20%
to 25%, commencing one year after the date of grant.
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. COMMON STOCK (CONTINUED)
Stock options outstanding are as follows:
WEIGHTED WEIGHTED
AVERAGE AVERAGE
2001 EXERCISE 2000 EXERCISE 1999
OPTIONS PRICE OPTIONS PRICE OPTIONS
------- -------- ------- -------- -------
Outstanding options at beginning of
fiscal year. . . . . . . . . . . . . 3,920,498 $ 5.29 3,959,487 $ 4.48 2,718,199
Options granted . . . . . . . . . . . . . 611,250 15.47 518,200 10.25 1,342,500
Options exercised.. . . . . . . . . . . . (246,374) 4.65 (380,989) 4.11 -
Options canceled. . . . . . . . . . . . . (119,190) 8.87 (176,200) 4.49 (101,212)
---------- ---------- ----------
Outstanding options at end of fiscal year 4,166,184 6.72 3,920,498 5.29 3,959,487
========== ========== ==========
Weighted average fair value of options granted during fiscal 2001 and 2000 was
$11.62 and $6.78, respectively.
The following table summarizes information about stock options outstanding at
April 29, 2001:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------- -------------------
WEIGHTED AVERAGE WEIGHTED WEIGHTED
RANGES OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE PRICES. OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
------------------------------------------------------------------------------------------------------------------------
$.89 - $5.70 . . 2,505,124 6.40 years $ 3.38 1,444,744 $ 3.54
5.88 - 11.25 . . 876,560 6.55 years 8.76 501,552 7.65
11.56 - 18.00. . 784,500 7.59 years 15.07 203,250 13.94
------------------- --------------
$.89 - $18.00. . 4,166,184 6.65 years 6.72 2,149,546 5.48
=================== ==============
Pro forma information regarding net income and earnings per share is
required by Statement of Financial Accounting Standard No. 123, Accounting for
Stock-based Compensation. Had compensation costs for the Company's three stock
option plans been determined based on the fair value at the grant dates for
awards in fiscal years 2001, 2000 and 1999 consistent with the provisions of
SFAS 123, the Company's net earnings and earnings per share would have been
reduced to the pro forma amounts disclosed below:
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. COMMON STOCK (CONTINUED)
FISCAL YEAR ENDED
APRIL 29, 2001 APRIL 30, 2000 APRIL 25, 1999
-------------------------------------- --------------- ---------------
(In thousands, except per share data)
NET INCOME (LOSS)
As reported . . . . . . . . . . $ 25,144 $ 31,071 ($24,176)
Pro forma.. . . . . . . . . . . $ 23,641 $ 29,055 ($25,153)
EARNINGS (LOSS) PER COMMON SHARE
Basic
As reported . . . . . . . . . . $ 0.84 $ 1.18 ($1.03)
Pro forma . . . . . . . . . . . $ 0.79 $ 1.10 ($1.07)
Diluted
As reported . . . . . . . . . . $ 0.80 $ 1.11 ($1.01)
Pro forma . . . . . . . . . . . $ 0.75 $ 1.04 ($1.05)
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 used for
grants in fiscal 2001, 2000 and 1999: options vesting at 20% per year for five
years; dividend yield of 0%; weighted average expected volatility of .70, .70
and .74, respectively; risk-free interest rate of 5.06%, 5.8% and 5.2%,
respectively; and expected lives of 6 years.
The pro forma effect on net income (loss) for fiscal 2001, 2000 and 1999 is
not representative of the pro forma effect on net income for future years
because it does not take into account pro forma compensation expense related to
grants made prior to fiscal 1996 or the potential for issuance of additional
stock options in future years.
Warrants
At April 29, 2001, the Company had the following outstanding warrants:
NUMBER OF EXERCISE
---------------
DATE ISSUED EXPIRATION DATE WARRANTS SHARES PRICE
----------- --------------- -------- ------- ------
June 1996 . June 30, 2001 1 12,500 $ 5.88
June 1996 . June 30, 2001 1 12,500 $ 5.88
May 1996. . May 3, 2001 380,599 380,599 $10.00
May 1996. . May 3, 2001 1 416,667 $12.00
August 1996 October 1, 2001 500,000 500,000 $10.50
15. STOCKHOLDER RIGHTS PLAN
In February 1997, the Company adopted a Stockholder Rights Plan. The Plan
is designed to preserve the long-term value of the shareholders' investment in
the Company. Under the Plan, each shareholder will receive a distribution of
one Right for each share of the Company's outstanding common stock. The Rights
were distributed to shareholders of record on March 3, 1997 and will expire ten
years thereafter. Each right entitles the holder to purchase one one-thousandth
(1/1,000) of a share of a new series of participating preferred stock at an
initial exercise price of $12.50. Initially the rights are represented by the
Company's common stock certificates and are not exercisable. The rights become
exercisable shortly after a person or group acquires beneficial ownership of 15%
or more of the Company or publicly announces its intention to commence a tender
or exchange offer that would result in the 15% beneficial ownership level.
Under certain circumstances involving a buyer's acquisition of a 15% position in
the Company, all Rights holders except the buyer will be entitled to purchase
common stock at half price. If the Company is acquired through a merger, after
such an acquisition, all Rights holders except the buyer will be entitled to
purchase stock in the buyer at half price. The Company may redeem the rights at
one cent each at any time before a buyer acquires 15% of the Company's stock.
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. PREOPENING EXPENSES
Preopening expenses of $.2 million, $3.4 million and $3.3 million represent
salaries, benefits, training, marketing and other costs incurred in connection
with the opening of the Isle-Boonville in December 2001, Isle-Tunica on July 26,
1999 and Isle-Black Hawk on December 30, 1998, respectively.
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
17. VALUATION ALLOWANCE
During fiscal 2001, the Company recorded a valuation allowance totaling
$1.0 million. The valuation allowance reflects the write-down of marine assets
held for development or sale.
During fiscal 1999, the Company recorded a valuation allowance totaling
$5.1 million. The valuation allowance reflects the write-down of assets held
for development or sale of $2.4 million related to its two original riverboat
casino vessels and land the Company was planning to develop in Cripple Creek,
Colorado. During the third quarter ended January 24, 1999, the Company entered
an agreement to sell one of its two original riverboats for less than the
recorded value. This sale closed during fiscal 2000, however, the Company had
adjusted the valuation allowance related to both riverboats to reflect the fair
value, based on the agreed upon sales price as of the third quarter ended
January 24, 1999. Also, management delayed its plans to develop a casino on
land it owns in Cripple Creek, Colorado. Accordingly, during the third quarter
ended January 24, 1999, management established a valuation allowance on the land
it owns in Cripple Creek to reflect the fair value as the carrying value.
Additionally, the valuation allowance included $2.7 million related to future
obligations under an operating lease related to its Cripple Creek, Colorado
project.
18. OTHER CHARGES
Other charges of $8.2 million includes a $3.0 million loss due to the
write off of abandoned expansion projects assets at Isle-Biloxi, a $2.9 million
loss due to the termination of the joint venture as a result of Bankruptcy Court
filings by Commodore Holdings, Ltd., the operator of the Enchanted Capri and
owner of the remaining 50% interest in the joint venture (see Note 6), $1.4
million buyout of the Crowne Plaza license at the Isle-Biloxi, and $.9 million
loss relating to the write off of the theater production contracts at
Isle-Tunica.
19. EXTRAORDINARY ITEM
The Company incurred pre-tax extraordinary losses totaling $1.6 million in
the fiscal year 2000 and $55.8 million in the fiscal year 1999. These losses
are associated with the extinguishment of debt, primarily related to debt
associated with the acquisition of Lady Luck on March 2, 2000 and the
refinancing of the Company's $315 million 12.5% Senior Secured Notes and other
debt on April 23, 1999. These losses included early payment premiums, as well
as the write-off of consent fees and debt acquisition costs. The tax benefit
from the extraordinary losses for fiscal 2000 and fiscal 1999 was approximately
$.6 million and $19.5 million, respectively.
20. DEFERRED BONUS PLAN
In the second quarter of fiscal 2001, the Company's stockholders approved
the Deferred Bonus Plan. The Plan provides for the issuance of nonvested stock
to eligible officers and employees who agree to receive a deferred bonus in the
form of nonvested stock. The vesting of the stock is dependent upon continued
service to the Company for a period of five years. The nonvested stock issued
in connection with the Plan totaled 380,681 shares as of April 29, 2001. For
the year ended April 29, 2001, the Company recorded an unearned compensation
contra account in consolidated stockholders' equity equal to the fair value of
the nonvested award and recorded compensation expense for the portion of
unearned compensation that had been earned through April 29, 2001.
21. STOCK REPURCHASE
In November 2000, the Company's Board of Directors approved a stock
repurchase program allowing for the purchase of up to 1.5 million shares of the
Company's outstanding common stock. In January 2001, the Board of Directors
approved an additional 1.5 million shares under the stock repurchase program.
As of April 29, 2001, a total of 2.0 million shares of common stock had been
repurchased at a total cost of $16.7 million.
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
22. EMPLOYEE BENEFIT PLAN
The Company has a defined-contribution, profit-sharing plan, including
401(k) plan provisions, covering substantially all of its employees. The
Company's contribution expense related to this plan was approximately $1.8
million, $.9 million and $.6 million for the years ended April 29, 2001, April
30, 2000 and April 25, 1999, respectively. The Company's contribution is based
on a percentage of employee contributions and may include an additional
discretionary amount.
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
23. CONSOLIDATING CONDENSED FINANCIAL INFORMATION
Certain of the Company's subsidiaries have fully and unconditionally
guaranteed the payment of all obligations under the Company's $390 million 8.75
% Senior Subordinated Notes due 2009. The following table presents the
consolidating condensed financial information of Isle of Capri Casinos, Inc., as
the parent company, its guarantor subsidiaries and its non-guarantor
subsidiaries as of April 29, 2001, April 30, 2000 and April 25, 1999.
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATING CONDENSED GUARANTOR, NONGUARANTOR, AND PARENT
COMPANY FINANCIAL INFORMATION
AS OF APRIL 29, 2001, APRIL 30, 2000 AND APRIL 25, 1999
(IN THOUSANDS)
(b)
Isle of Capri (a) Non-Wholly
Casinos, Inc. Wholly Owned Consolidating
Guarantor Owned Non- and
(Parent Guarantor Guarantor Eliminating
Obligor) Subsidiaries Subsidiaries Entries
--------------- -------------- --------------- ---------------
As of April 29, 2001
Balance Sheet
------------------------------------------------------------
Current assets . . . . . . . . . . . . . . . . . . . . . . . $ 14,606 $ 92,445 $ 14,407 $ -
Intercompany receivables . . . . . . . . . . . . . . . . . . 858,629 130,130 3 (988,763)
Investments in subsidiaries. . . . . . . . . . . . . . . . . 256,497 256,877 - (513,335)
Property and equipment, net. . . . . . . . . . . . . . . . . 1,714 766,777 103,677 -
Other assets . . . . . . . . . . . . . . . . . . . . . . . . 33,350 352,746 3,147 -
--------------- -------------- --------------- ---------------
Total assets.. . . . . . . . . . . . . . . . . . . . . . . . $ 1,164,796 $ 1,598,975 $ 121,234 $ (1,502,098)
=============== ============== =============== ===============
Current liabilities. . . . . . . . . . . . . . . . . . . . . $ 36,682 $ 110,457 $ 12,406 $ 1
Intercompany payables. . . . . . . . . . . . . . . . . . . . 23,884 962,691 2,188 (988,763)
Long-term debt,
less current maturities.. . . . . . . . . . . . . . . . . 926,750 15,279 76,156 -
Deferred income taxes. . . . . . . . . . . . . . . . . . . . 11,434 4,129 - -
Other accrued liabilities. . . . . . . . . . . . . . . . . . - 9,670 - -
Minority interest. . . . . . . . . . . . . . . . . . . . . . - - - 13,902
Stockholders' equity . . . . . . . . . . . . . . . . . . . . 166,046 496,749 30,484 (527,238)
--------------- -------------- --------------- ---------------
Total liabilities and stockholders' equity . . . . . . . . . $ 1,164,796 $ 1,598,975 $ 121,234 $ (1,502,098)
=============== ============== =============== ===============
(b)
Isle of Capri (a) Non-Wholly
Casinos, Inc Wholly Owned Consolidating
Guarantor Owned Non- and
(Parent Guarantor Guarantor Eliminating
Obligor) Subsidiaries Subsidiaries Entries
--------------- -------------- --------------- ---------------
For the year ended April 29, 2001
Statement of Operations
------------------------------------------------------------
Revenues:
Casino . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ 855,150 $ 101,997 $ -
Rooms, food, beverage and other. . . . . . . . . . . . . . . 528 202,883 17,790 -
--------------- -------------- --------------- ---------------
Gross revenues . . . . . . . . . . . . . . . . . . . . . . . 528 1,058,033 119,787 -
Less: promotional allowances.. . . . . . . . . . . . . . . . - 175,879 19,668 -
--------------- -------------- --------------- ---------------
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . 528 882,154 100,119 -
Operating expenses:
Casino.. . . . . . . . . . . . . . . . . . . . . . . . . . . - 177,392 14,817 -
Gaming taxes . . . . . . . . . . . . . . . . . . . . . . . . - 172,489 20,082 -
Rooms, food, beverage and other. . . . . . . . . . . . . . . (1,409) 348,990 35,596 -
Depreciation and amortization. . . . . . . . . . . . . . . . 1,179 64,597 3,336 -
--------------- -------------- --------------- ---------------
Total operating expenses . . . . . . . . . . . . . . . . . . (230) 763,468 73,831 -
Operating income.. . . . . . . . . . . . . . . . . . . . . . 758 118,686 26,288 -
Gain on sale of assets.. . . . . . . . . . . . . . . . . . . - 271 - -
Interest expense, net. . . . . . . . . . . . . . . . . . . . (92,128) (96,415) (11,688) 101,289
Interest Income. . . . . . . . . . . . . . . . . . . . . . . 100,687 5,524 184 (101,289)
Minority interest. . . . . . . . . . . . . . . . . . . . . . - - - (6,357)
Dividend income. . . . . . . . . . . . . . . . . . . . . . . - 14,819 - (14,819)
Equity in income (loss) of
unconsolidated joint venture.. . . . . . . . . . . . . . . . 31,236 29,046 - (60,444)
--------------- -------------- --------------- ---------------
Income (loss) before income taxes. . . . . . . . . . . . . . 40,553 71,931 14,784 (81,620)
Income tax provision . . . . . . . . . . . . . . . . . . . . 15,418 5,086 - -
--------------- -------------- --------------- ---------------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . $ 25,135 $ 66,845 $ 14,784 $ (81,620)
=============== ============== =============== ===============
(b)
Isle of Capri (a) Non-Wholly
Casinos, Inc Wholly Owned Consolidating
Guarantor Owned Non- and
(Parent Guarantor Guarantor Eliminating
Obligor) Subsidiaries Subsidiaries Entries
--------------- -------------- --------------- ---------------
Statement of Cash Flows
------------------------------------------------------------
Net cash provided by (used in)
operating activities.. . . . . . . . . . . . . . . . . . . . $ (183,107) $ 439,057 $ 14,802 $ (196,602)
Net cash provided by (used in)
investing activities.. . . . . . . . . . . . . . . . . . . . 41,265 (453,984) (8,570) 195,911
Net cash provided by (used in)
financing activities . . . . . . . . . . . . . . . . . . . . 63,056 (4,129) 297 691
--------------- -------------- --------------- ---------------
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . . . . . . . . (78,786) (19,056) 6,529 -
Cash and cash equivalents at
beginning of the year. . . . . . . . . . . . . . . . . . . . 78,945 82,514 6,513 -
--------------- -------------- --------------- ---------------
Cash and cash equivalents at
end of the year. . . . . . . . . . . . . . . . . . . . . . . $ 159 $ 63,458 $ 13,042 $ -
=============== ============== =============== ===============
As of April 30, 2000
Balance Sheet
------------------------------------------------------------
Current assets . . . . . . . . . . . . . . . . . . . . . . . $ 130,939 $ 99,785 $ 7,609 $ -
Intercompany receivables.. . . . . . . . . . . . . . . . . . 584,189 238,811 4 (823,004)
Investments in subsidiaries. . . . . . . . . . . . . . . . . 371,070 - - (369,156)
Property and equipment, net. . . . . . . . . . . . . . . . . 5,229 595,306 98,711 -
Other assets.. . . . . . . . . . . . . . . . . . . . . . . . 46,724 315,729 3,568 -
--------------- -------------- --------------- ---------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . $ 1,138,151 $ 1,249,631 $ 109,892 $ (1,192,160)
=============== ============== =============== ===============
Current liabilities. . . . . . . . . . . . . . . . . . . . . $ 44,474 $ 103,698 $ 13,769 $ -
Intercompany payable . . . . . . . . . . . . . . . . . . . . 23,904 794,475 4,731 (823,015)
Long-term debt, less current maturities. . . . . . . . . . . 854,973 15,528 75,000 -
Deferred income taxes. . . . . . . . . . . . . . . . . . . . (14,801) 40,564 - -
Other accrued liabilities. . . . . . . . . . . . . . . . . . - 8,851 - -
Minority interest. . . . . . . . . . . . . . . . . . . . . . - - - 7,843
Stockholders' equity . . . . . . . . . . . . . . . . . . . . 229,601 286,515 16,392 (376,988)
--------------- -------------- --------------- ---------------
Total liabilities and stockholders' equity.. . . . . . . . . $ 1,138,151 $ 1,249,631 $ 109,892 $ (1,192,160)
=============== ============== =============== ===============
(b)
Isle of Capri (a) Non-Wholly
Casinos, Inc. Wholly Owned Consolidating
Guarantor Owned Non- and
(Parent Guarantor Guarantor Eliminating
Obligor) Subsidiaries Subsidiaries Entries
--------------- -------------- --------------- ---------------
For the year ended April 30, 2000
Statement of Operations
------------------------------------------------------------
Revenues:
Casino.. . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ 530,803 $ 88,548 $ -
Rooms, food, beverage and other. . . . . . . . . . . . . . . 1,353 127,318 11,774 -
--------------- -------------- --------------- ---------------
Gross revenues.. . . . . . . . . . . . . . . . . . . . . . . 1,353 658,121 100,322 -
Less: promotional allowances . . . . . . . . . . . . . . . . - 97,957 15,135 -
--------------- -------------- --------------- ---------------
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . 1,353 560,164 85,187 -
Operating expenses:
Casino.. . . . . . . . . . . . . . . . . . . . . . . . . . . - 103,509 12,596 -
Gaming taxes . . . . . . . . . . . . . . . . . . . . . . . . - 105,232 17,340 -
Rooms, food, beverage and other. . . . . . . . . . . . . . . (4,997) 223,404 33,778 -
Depreciation and amortization. . . . . . . . . . . . . . . . 1,030 39,202 2,114 -
--------------- -------------- --------------- ---------------
Total operating expenses.. . . . . . . . . . . . . . . . . . (3,967) 471,347 65,828 -
--------------- -------------- --------------- ---------------
Operating income . . . . . . . . . . . . . . . . . . . . . . 5,320 88,817 19,359 -
Gain on sale of assets.. . . . . . . . . . . . . . . . . . . 3,092 14 - -
Interest expense, net. . . . . . . . . . . . . . . . . . . . 2,804 (47,683) (10,754) -
Minority interest. . . . . . . . . . . . . . . . . . . . . . - - - (3,700)
Equity in income (loss) of
unconsolidated joint venture . . . . . . . . . . . . . . . . 44,686 - - (44,427)
--------------- -------------- --------------- ---------------
Income (loss) before income taxes
and extraordinary item.. . . . . . . . . . . . . . . . . . . 55,902 41,148 8,605 (48,127)
Income tax provision.. . . . . . . . . . . . . . . . . . . . 10,977 14,496 - -
--------------- -------------- --------------- ---------------
Income (loss) before extraordinary item. . . . . . . . . . . 44,925 26,652 8,605 (48,127)
Extraordinary loss on extinguishment of debt
(net of applicable income tax benefit) . . . . . . . . . . . - (984) - -
--------------- -------------- --------------- ---------------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . $ 44,925 $ 25,668 $ 8,605 $ (48,127)
=============== ============== =============== ===============
(b)
Isle of Capri (a) Non-Wholly
Casinos, Inc. Wholly Owned Consolidating
Guarantor Owned Non- and
(Parent Guarantor Guarantor Eliminating
Obligor) Subsidiaries Subsidiaries Entries
--------------- -------------- --------------- ---------------
Statement of Cash Flows
------------------------------------------------------------
Net cash provided by (used in)
operating activities . . . . . . . . . . . . . . . . . . . . $ (307,048) $ 267,908 $ 13,825 $ 155,798
Net cash provided by (used in)
investing activities.. . . . . . . . . . . . . . . . . . . . (63,577) (21,108) (17,475) (155,798)
Net cash provided by (used in)
financing activities . . . . . . . . . . . . . . . . . . . . 407,411 (196,327) (754) -
--------------- -------------- --------------- ---------------
Net increase (decrease) in cash and
cash equivalents.. . . . . . . . . . . . . . . . . . . . . . 36,786 50,473 (4,404) -
Cash and cash equivalents at
beginning of the year. . . . . . . . . . . . . . . . . . . . 35,826 38,374 10,917 -
--------------- -------------- --------------- ---------------
Cash and cash equivalents at
end of the year. . . . . . . . . . . . . . . . . . . . . . . $ 72,612 $ 88,847 $ 6,513 $ -
=============== ============== =============== ===============
As of April 25, 1999
Balance Sheet
------------------------------------------------------------
Current assets.. . . . . . . . . . . . . . . . . . . . . . . $ 36,599 $ 60,679 $ 11,738 $ -
Intercompany receivables.. . . . . . . . . . . . . . . . . . 220,578 159,361 - (379,939)
Investments in subsidiaries. . . . . . . . . . . . . . . . . 233,541 - - (231,690)
Property and equipment, net. . . . . . . . . . . . . . . . . 6,605 324,194 80,377 -
Other assets . . . . . . . . . . . . . . . . . . . . . . . . 44,377 103,916 6,148 -
--------------- -------------- --------------- ---------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . $ 541,700 $ 648,150 $ 98,263 $ (611,629)
=============== ============== =============== ===============
Current liabilities. . . . . . . . . . . . . . . . . . . . . $ 13,395 $ 56,074 $ 9,419 $ (64)
Intercompany payable . . . . . . . . . . . . . . . . . . . . 24,593 349,994 5,289 (379,876)
Long-term debt, less current maturities. . . . . . . . . . . 441,757 9,348 75,768 -
Deferred income taxes. . . . . . . . . . . . . . . . . . . . - 4,689 - -
Minority interest. . . . . . . . . . . . . . . . . . . . . . - - - 4,143
Stockholders' equity . . . . . . . . . . . . . . . . . . . . 61,955 228,045 7,787 (235,832)
--------------- -------------- --------------- ---------------
Total liabilities and stockholders' equity . . . . . . . . . $ 541,700 $ 648,150 $ 98,263 $ (611,629)
=============== ============== =============== ===============
(b)
Isle of Capri (a) Non-Wholly
Casinos, Inc. Wholly Owned Consolidating
Guarantor Owned Non- and
(Parent Guarantor Guarantor Eliminating
Obligor) Subsidiaries Subsidiaries Entries
--------------- -------------- --------------- ---------------
For the year ended April 25, 1999
Statement of Operations
------------------------------------------------------------
Revenues:
Casino . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ 403,700 $ 20,679 $ -
Rooms, food, beverage and other. . . . . . . . . . . . . . . 429 103,208 2,422 (359)
Gross revenues . . . . . . . . . . . . . . . . . . . . . . . 429 506,908 23,101 (359)
Less: promotional allowances . . . . . . . . . . . . . . . . - 70,984 2,212 73,196
--------------- -------------- --------------- ---------------
Net revenues.. . . . . . . . . . . . . . . . . . . . . . . . 429 435,924 20,889 (359)
Operating expenses:
Casino . . . . . . . . . . . . . . . . . . . . . . . . . . . - 74,793 2,886 -
Gaming taxes.. . . . . . . . . . . . . . . . . . . . . . . . - 82,925 3,930 -
Rooms, food, beverage and other. . . . . . . . . . . . . . . 4,390 170,227 13,067 (359)
Depreciation and amortization. . . . . . . . . . . . . . . . 3,439 31,853 985 -
--------------- -------------- --------------- ---------------
Total operating expenses . . . . . . . . . . . . . . . . . . 7,829 359,798 20,868 (359)
--------------- -------------- --------------- ---------------
Operating income (loss). . . . . . . . . . . . . . . . . . . (7,400) 76,126 21 -
Interest expense, net. . . . . . . . . . . . . . . . . . . . (5,671) (34,853) (5,207) -
Minority interest. . . . . . . . . . . . . . . . . . . . . . - - - 2,209
Equity in income (loss) of
unconsolidated joint venture.. . . . . . . . . . . . . . . . 36,955 - - (38,295)
--------------- -------------- --------------- ---------------
Income (loss) before income taxes
and extraordinary item . . . . . . . . . . . . . . . . . . . 23,884 41,272 (5,186) (36,086)
Income tax provision (benefit) . . . . . . . . . . . . . . . 11,775 2,374 - (2,374)
--------------- -------------- --------------- ---------------
Income (loss) before extraordinary item. . . . . . . . . . . 12,109 38,898 (5,186) (33,712)
Extraordinary loss on extinguishment of
debt (net of applicable income tax benefit). . . . . . . . (36,285) - - -
--------------- -------------- --------------- ---------------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . $ (24,176) $ 38,898 $ (5,186) $ (33,712)
=============== ============== =============== ===============
(b)
Isle of Capri (a) Non-Wholly
Casinos, Inc. Wholly Owned Consolidating
Guarantor Owned Non- and
(Parent Guarantor Guarantor Eliminating
Obligor) Subsidiaries Subsidiaries Entries
--------------- -------------- --------------- ---------------
Statement of Cash Flows
------------------------------------------------------------
Net cash provided by (used in)
operating activities . . . . . . . . . . . . . . . . . . . . $ (33,503) $ 94,689 $ 2,757 $ 1,275
Net cash provided by (used in)
investing activities . . . . . . . . . . . . . . . . . . . . (7,465) (49,368) 6,092 (1,275)
Net cash provided by (used in)
financing activities . . . . . . . . . . . . . . . . . . . . 56,773 (38,840) 1,522 -
--------------- -------------- --------------- ---------------
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . . . . . . . . 15,805 6,481 10,371 -
Cash and cash equivalents at
beginning of the year. . . . . . . . . . . . . . . . . . . . 20,021 31,892 547 -
--------------- -------------- --------------- ---------------
Cash and cash equivalents at
end of the year. . . . . . . . . . . . . . . . . . . . . . . $ 35,826 $ 38,373 $ 10,918 $ -
=============== ============== =============== ===============
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATING CONDENSED GUARANTOR, NONGUARANTOR, AND PARENT
COMPANY FINANCIAL INFORMATION
AS OF APRIL 29, 2001, APRIL 30, 2000 AND APRIL 25, 1999
(IN THOUSANDS)
Isle of Capri
Casinos, Inc.
Consolidated
---------------
As of April 29, 2001
Balance Sheet
------------------------------------------------------------
Current assets . . . . . . . . . . . . . . . . . . . . . . . $ 121,458
Intercompany receivables . . . . . . . . . . . . . . . . . . (1)
Investments in subsidiaries. . . . . . . . . . . . . . . . . 39
Property and equipment, net. . . . . . . . . . . . . . . . . 872,168
Other assets . . . . . . . . . . . . . . . . . . . . . . . . 389,243
---------------
Total assets.. . . . . . . . . . . . . . . . . . . . . . . . $ 1,382,907
===============
Current liabilities. . . . . . . . . . . . . . . . . . . . . $ 159,546
Intercompany payables. . . . . . . . . . . . . . . . . . . . -
Long-term debt,
less current maturities.. . . . . . . . . . . . . . . . . 1,018,185
Deferred income taxes. . . . . . . . . . . . . . . . . . . . 15,563
Other accrued liabilities. . . . . . . . . . . . . . . . . . 9,670
Minority interest. . . . . . . . . . . . . . . . . . . . . . 13,902
Stockholders' equity . . . . . . . . . . . . . . . . . . . . 166,041
---------------
Total liabilities and stockholders' equity . . . . . . . . . $ 1,382,907
===============
Isle of Capri
Casinos, Inc.
Consolidated
------------
For the year ended April 29, 2001
Statement of Operations
------------------------------------------------------------
Revenues:
Casino . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 957,147
Rooms, food, beverage and other. . . . . . . . . . . . . . . 221,201
---------------
Gross revenues . . . . . . . . . . . . . . . . . . . . . . . 1,178,348
Less: promotional allowances.. . . . . . . . . . . . . . . . 195,547
---------------
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . 982,801
Operating expenses:
Casino.. . . . . . . . . . . . . . . . . . . . . . . . . . . 192,209
Gaming taxes . . . . . . . . . . . . . . . . . . . . . . . . 192,571
Rooms, food, beverage and other. . . . . . . . . . . . . . . 383,177
Depreciation and amortization. . . . . . . . . . . . . . . . 69,112
---------------
Total operating expenses . . . . . . . . . . . . . . . . . . 837,069
Operating income.. . . . . . . . . . . . . . . . . . . . . . 145,732
Gain on sale of assets.. . . . . . . . . . . . . . . . . . . 271
Interest expense, net. . . . . . . . . . . . . . . . . . . . (98,943)
Interest Income. . . . . . . . . . . . . . . . . . . . . . . 5,107
Minority interest. . . . . . . . . . . . . . . . . . . . . . (6,357)
Dividend income. . . . . . . . . . . . . . . . . . . . . . . -
Equity in income (loss) of
unconsolidated joint venture.. . . . . . . . . . . . . . . . (162)
---------------
Income (loss) before income taxes. . . . . . . . . . . . . . 45,648
Income tax provision . . . . . . . . . . . . . . . . . . . . 20,504
---------------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . $ 25,144
===============
Isle of Capri
Casinos, Inc.
Consolidated
-------------
Statement of Cash Flows
------------------------------------------------------------
Net cash provided by (used in)
operating activities.. . . . . . . . . . . . . . . . . . . . $ 74,150
Net cash provided by (used in)
investing activities.. . . . . . . . . . . . . . . . . . . . (225,378)
Net cash provided by (used in)
financing activities . . . . . . . . . . . . . . . . . . . . 59,915
---------------
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . . . . . . . . (91,313)
Cash and cash equivalents at
beginning of the year. . . . . . . . . . . . . . . . . . . . 167,972
---------------
Cash and cash equivalents at
end of the year. . . . . . . . . . . . . . . . . . . . . . . $ 76,659
===============
As of April 30, 2000
Balance Sheet
------------------------------------------------------------
Current assets . . . . . . . . . . . . . . . . . . . . . . . $ 238,333
Intercompany receivables.. . . . . . . . . . . . . . . . . . -
Investments in subsidiaries. . . . . . . . . . . . . . . . . 1,914
Property and equipment, net. . . . . . . . . . . . . . . . . 699,246
Other assets.. . . . . . . . . . . . . . . . . . . . . . . . 366,021
---------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . $ 1,305,514
===============
Current liabilities. . . . . . . . . . . . . . . . . . . . . $ 161,941
Intercompany payable . . . . . . . . . . . . . . . . . . . . 95
Long-term debt, less current maturities. . . . . . . . . . . 945,501
Deferred income taxes. . . . . . . . . . . . . . . . . . . . 25,763
Other accrued liabilities. . . . . . . . . . . . . . . . . . 8,851
Minority interest. . . . . . . . . . . . . . . . . . . . . . 7,843
Stockholders' equity . . . . . . . . . . . . . . . . . . . . 155,520
---------------
Total liabilities and stockholders' equity.. . . . . . . . . $ 1,305,514
===============
Isle of Capri
Casinos, Inc.
Consolidated
------------
For the year ended April 30, 2000
Statement of Operations
------------------------------------------------------------
Revenues:
Casino.. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 619,351
Rooms, food, beverage and other. . . . . . . . . . . . . . . 140,445
---------------
Gross revenues.. . . . . . . . . . . . . . . . . . . . . . . 759,796
Less: promotional allowances . . . . . . . . . . . . . . . . 113,092
---------------
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . 646,704
Operating expenses:
Casino.. . . . . . . . . . . . . . . . . . . . . . . . . . . 116,105
Gaming taxes . . . . . . . . . . . . . . . . . . . . . . . . 122,572
Rooms, food, beverage and other. . . . . . . . . . . . . . . 252,185
Depreciation and amortization. . . . . . . . . . . . . . . . 42,346
---------------
Total operating expenses.. . . . . . . . . . . . . . . . . . 533,208
---------------
Operating income . . . . . . . . . . . . . . . . . . . . . . 113,496
Gain on sale of assets.. . . . . . . . . . . . . . . . . . . 3,106
Interest expense, net. . . . . . . . . . . . . . . . . . . . (55,633)
Minority interest. . . . . . . . . . . . . . . . . . . . . . (3,700)
Equity in income (loss) of
unconsolidated joint venture . . . . . . . . . . . . . . . . 259
---------------
Income (loss) before income taxes
and extraordinary item.. . . . . . . . . . . . . . . . . . . 57,528
Income tax provision.. . . . . . . . . . . . . . . . . . . . 25,473
---------------
Income (loss) before extraordinary item. . . . . . . . . . . 32,055
Extraordinary loss on extinguishment of debt
(net of applicable income tax benefit) . . . . . . . . . . . (984)
---------------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . $ 31,071
===============
Isle of Capri
Casinos, Inc.
Consolidated
------------
Statement of Cash Flows
------------------------------------------------------------
Net cash provided by (used in)
operating activities . . . . . . . . . . . . . . . . . . . . $ 130,483
Net cash provided by (used in)
investing activities.. . . . . . . . . . . . . . . . . . . . (257,958)
Net cash provided by (used in)
financing activities . . . . . . . . . . . . . . . . . . . . 210,330
---------------
Net increase (decrease) in cash and
cash equivalents.. . . . . . . . . . . . . . . . . . . . . . 82,855
Cash and cash equivalents at
beginning of the year. . . . . . . . . . . . . . . . . . . . 85,117
---------------
Cash and cash equivalents at
end of the year. . . . . . . . . . . . . . . . . . . . . . . $ 167,972
===============
As of April 25, 1999
Balance Sheet
------------------------------------------------------------
Current assets.. . . . . . . . . . . . . . . . . . . . . . . $ 109,016
Intercompany receivables.. . . . . . . . . . . . . . . . . . -
Investments in subsidiaries. . . . . . . . . . . . . . . . . 1,851
Property and equipment, net. . . . . . . . . . . . . . . . . 411,176
Other assets . . . . . . . . . . . . . . . . . . . . . . . . 154,441
---------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . $ 676,484
===============
Current liabilities. . . . . . . . . . . . . . . . . . . . . $ 78,824
Intercompany payable . . . . . . . . . . . . . . . . . . . . -
Long-term debt, less current maturities. . . . . . . . . . . 526,873
Deferred income taxes. . . . . . . . . . . . . . . . . . . . 4,689
Minority interest. . . . . . . . . . . . . . . . . . . . . . 4,143
Stockholders' equity . . . . . . . . . . . . . . . . . . . . 61,955
---------------
Total liabilities and stockholders' equity . . . . . . . . . $ 676,484
===============
Isle of Capri
Casinos, Inc.
Consolidated
------------
For the year ended April 25, 1999
Statement of Operations
------------------------------------------------------------
Revenues:
Casino . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 424,379
Rooms, food, beverage and other. . . . . . . . . . . . . . . 105,700
Gross revenues . . . . . . . . . . . . . . . . . . . . . . . 530,079
Less: promotional allowances
Net revenues.. . . . . . . . . . . . . . . . . . . . . . . . 456,883
Operating expenses:
Casino . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,679
Gaming taxes.. . . . . . . . . . . . . . . . . . . . . . . . 86,855
Rooms, food, beverage and other. . . . . . . . . . . . . . . 187,325
Depreciation and amortization. . . . . . . . . . . . . . . . 36,277
---------------
Total operating expenses . . . . . . . . . . . . . . . . . . 388,136
---------------
Operating income (loss). . . . . . . . . . . . . . . . . . . 68,746
Interest expense, net. . . . . . . . . . . . . . . . . . . . (45,731)
Minority interest. . . . . . . . . . . . . . . . . . . . . . 2,209
Equity in income (loss) of
unconsolidated joint venture.. . . . . . . . . . . . . . . . (1,340)
---------------
Income (loss) before income taxes
and extraordinary item . . . . . . . . . . . . . . . . . . . 23,884
Income tax provision (benefit) . . . . . . . . . . . . . . . 11,775
---------------
Income (loss) before extraordinary item. . . . . . . . . . . 12,109
Extraordinary loss on extinguishment of
debt (net of applicable income tax benefit). . . . . . . . (36,285)
---------------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . $ (24,176)
===============
Isle of Capri
Casinos, Inc.
Consolidated
------------
Statement of Cash Flows
------------------------------------------------------------
Net cash provided by (used in)
operating activities . . . . . . . . . . . . . . . . . . . . $ 65,218
Net cash provided by (used in)
investing activities . . . . . . . . . . . . . . . . . . . . (52,016)
Net cash provided by (used in)
financing activities . . . . . . . . . . . . . . . . . . . . 19,455
---------------
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . . . . . . . . 32,657
Cash and cash equivalents at
beginning of the year. . . . . . . . . . . . . . . . . . . . 52,460
---------------
Cash and cash equivalents at
end of the year. . . . . . . . . . . . . . . . . . . . . . . $ 85,117
===============
(a) Certain of the Company's wholly owned subsidiaries were guarantors on
the 8.75 % Senior Subordinated Notes, including the following: Isle-Biloxi,
Isle-Vicksburg, Isle-Tunica, Isle-Bossier City, Isle-Lake Charles and PPI, Inc.
Isle-Natchez, Isle-Lula, Isle-Bettendorf, and Isle-Marquette became guarantors
as of March 2, 2000, the date of the acquisition. Isle-Boonville, Isle-Kansas
City, Lady Luck Las Vegas and Isle-Davenport became guarantors as of their
respective dates of acquisition (see note 7).
(b) The following non-wholly owned subsidiaries were not guarantors on the
8.75 % Senior Subordinated Notes: Isle of Capri Black Hawk L.L.C. and Isle
of Capri Black Hawk Capital Corp.
ISLE OF CAPRI CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
24. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
FISCAL QUARTERS ENDED
(IN THOUSANDS)
-----------------------------------------------------------------
JULY 30, OCTOBER 29, JANUARY 28, APRIL 29,
2000 2000 2001 2001
----------------------- ------------ ------------- -----------
Net revenue . . . . . . . . . . . . . $ 235,667 $ 233,794 $ 237,509 $ 275,831
Operating income. . . . . . . . . . . 42,423 41,736 20,752 40,820
Net income (loss) . . . . . . . . . . 10,569 9,636 (2,958) 7,897
Net income (loss) per common share:
Basic . . . . . . . . . . . . . . . 0.35 0.32 (0.10) 0.27
Diluted . . . . . . . . . . . . . . 0.33 0.30 (0.10) 0.26
FISCAL QUARTERS ENDED
(IN THOUSANDS)
-----------------------------------------------------------------
JULY 25, OCTOBER 24, JANUARY 23, APRIL 30,
1999 1999 2000 2000
----------------------- ------------ ------------- -----------
Net revenue . . . . . . . . . . . . . $ 135,192 $ 146,341 $ 144,538 $ 220,633
Operating income. . . . . . . . . . . 20,989 23,770 23,084 45,653
Net income before extraordinary item. 6,528 6,632 4,881 14,014
Extraordinary item, net . . . . . . . - - - (984)
Net income. . . . . . . . . . . . . . 6,528 6,632 4,881 13,030
Net income per share:
before extraordinary item:
Basic . . . . . . . . . . . . . . . 0.28 0.28 0.20 0.47
Diluted . . . . . . . . . . . . . . 0.26 0.26 0.19 0.44
Net income per common share:
Basic . . . . . . . . . . . . . . . 0.28 0.28 0.20 0.44
Diluted . . . . . . . . . . . . . . 0.26 0.26 0.19 0.41
Quarterly data may not necessarily sum to the full year data reported in
the Company's consolidated financial statements.
The first quarter of fiscal 2000 includes the following non-recurring
items: a gain of $3.1 million related to the sale of an option to purchase land
adjacent to the Pompano Park, Inc. facility and preopening expenses of $3.4
million related to expenses incurred with the opening of the Isle-Tunica.
The fourth quarter of fiscal 2000 includes an extraordinary item after-tax
charge of $1.0 million associated with the extinguishment of debt, primarily
related to debt associated with acquisition of Lady Luck on March 2, 2000.
The third quarter of fiscal 2001 includes other charges of $4.3 million
related to $2.9 million loss on investment in joint venture and $1.4 million
write off of Crowne Plaza license at Isle-Biloxi.
The fourth quarter of fiscal 2001 includes other charges of $4.9 million
related to $3.0 write off of abandoned expansion project assets at Isle-Biloxi,
$.9 million relating to the write off of the theater production contracts at
Isle-Tunica and $1.0 write down of marine assets.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
This item has been omitted from this report and is incorporated by
reference to Isle of Capri's definitive proxy statement to be filed with the
U.S. Securities and Exchange Commission within 120 days after the end of the
fiscal year covered by this report.
ITEM 11. EXECUTIVE COMPENSATION.
This item has been omitted from this report and is incorporated by
reference to Isle of Capri's definitive proxy statement to be filed with the
U.S. Securities and Exchange Commission within 120 days after the end of the
fiscal year covered by this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
This item has been omitted from this report and is incorporated by
reference to Isle of Capri's definitive proxy statement to be filed with the
U.S. Securities and Exchange Commission within 120 days after the end of the
fiscal year covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
This item has been omitted from this report and is incorporated by
reference to Isle of Capri's definitive proxy statement to be filed with the
U.S. Securities and Exchange Commission within 120 days after the end of the
fiscal year covered by this report.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents Filed as Part of this Report.
--------------------------------------------
1. Financial Statements.
---------------------
The following financial statements and report of independent
auditors are included on pages 44 to 82 of this Form 10-K:
ISLE OF CAPRI CASINOS, INC.
Report of Independent Auditors
Consolidated Balance Sheets - April 29, 2001 and April
30, 2000
Consolidated Statements of Operations - Fiscal Years
ended April 29, 2001, April 30, 2000
and April 25, 1999
Consolidated Statements of Stockholders' Equity - Fiscal
Years ended April 29, 2001 and April 30, 2000
and April 25, 1999
Consolidated Statements of Cash Flows - Fiscal
Years ended April 29, 2001, April 30,
2000 and April 25, 1999
Notes to Consolidated Financial Statements
2. Financial Statements Schedules.
--------------------------------
None required or applicable.
3. Exhibits.
--------
A list of the exhibits included as part of this Form 10-K is set
forth in the Exhibit Index that immediately precedes such exhibits, which is
incorporated herein by reference.
(b) Reports on Form 8-K.
----------------------
During the year ended April 29, 2001, the Company filed the following
reports on Form 8-K:
Current Report on Form 8-K filed on June 15, 2000, regarding Item 5 that
announced the Company's earnings for the fourth quarter and fiscal year ended
April 30, 2000.
Current Report on Form 8-K filed on August 22, 2000, regarding Item 5 that
announced the Company's earnings for the first quarter ended July 30, 2000.
Current Report on Form 8-K filed on November 21, 2000, regarding Item 5 that
announced the Company's earnings for the second quarter ended October 29, 2000.
Current Report on Form 8-K filed on January 9, 2001, regarding Item 5 that
announced its expected earnings shortfall for the third quarter ending January
28, 2001.
Current Report on Form 8-K filed on January 11, 2001, regarding Item 5 that
announced the registrant's plans to repurchase up to an additional 1,500,000
shares of its common stock.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ISLE OF CAPRI CASINOS, INC.
Dated: July 30, 2001 By: /s/ Bernard Goldstein
-------------------------
Bernard Goldstein, Chairman of the Board,
Chief Executive Officer, and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Dated: July 30, 2001 /s/ Bernard Goldstein
------------------------
Bernard Goldstein, Chairman of the Board,
Chief Executive Officer and Director
(Principal Executive Officer)
Dated: July 30, 2001 /s/ John M. Gallaway
------------------------
John M. Gallaway, President, Chief Operating Officer and Director
Dated: July 30, 2001 /s/ Rexford A. Yeisley
--------------------------
Rexford A. Yeisley, Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: July 30, 2001 /s/ Allan B. Solomon
------------------------
Allan B. Solomon, Executive Vice President,
Secretary, General Counsel and Director
Dated: July 30, 2001 /s/ Emanuel Crystal
----------------------
Emanuel Crystal, Director
Dated: July 30, 2001 /s/ Robert S. Goldstein
---------------------------
Robert S. Goldstein, Director
Dated: July 30, 2001 /s/ Alan J. Glazer
----------------------
Alan J. Glazer, Director
Dated: July 30, 2001 /s/ W. Randolph Baker
-------------------------
W. Randolph Baker, Director
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
------- --------
2.1 Agreement and Plan of Merger, dated as of October 5, 1999. (21)
2.1A Agreement and Plan of Merger, dated as of December 19, 1999. (22)
3.1 Certificate of Incorporation of Casino America, Inc., as amended. (5)
3.1A Amendment to the Company's Certificate of Incorporation dated September 28, 1998. (18)
3.2 Bylaws of Casino America, Inc., as amended. (5)
3.2A Amendments to Bylaws of Casino America, Inc. dated as of February 7, 1997. (14)
4.1 Specimen Certificate of Common Stock. (2)
4.2A Specimen Warrant Agreement with respect to warrants to purchase 900,000 shares of Isle of Capri Casinos, Inc. Co
4.2B Form of Warrant Agreement with respect to warrants to purchase 500,000 shares of Isle of Capri Casinos, Inc. Com
4.3A Warrant, dated June 9, 1995, of Crown Casino Corporation to purchase up to 416,667 shares of Common Stock of Isl
4.3B Warrant, dated May 3, 1996, of Crown Casino Corporation to purchase up to 416,667 shares of Common Stock of Isle
4.4A Indenture dated as of August 1, 1996 between Casino America, Inc. and Fleet National Bank, as Trustee. (8)
4.4B First Supplemental Indenture dated as of April 21, 1999, between Isle of Capri Casinos, Inc. and Fleet National
4.5 Isle of Capri Casinos, Inc. hereby agrees to furnish to the Securities and Exchange Commission, upon its request,
4.6 Rights Agreement dated as of February 7, 1997 between Casino America, Inc. and Norwest Bank Minnesota, N.A., as R
4.7 Indenture, dated as of April 23, 1999, among the Company, the Subsidiary Guarantors named therein and State Stree
4.8 Registration Rights Agreement dated as of April 23, 1999, among Isle of Capri Casinos, Inc., the Subsidiary Guara
10.1 Amended and Restated Berth Rental Agreement dated May 12, 1992 between the Biloxi Port Commission and Riverboat
10.2 Biloxi Waterfront Project Lease dated May 12, 1986 with Point Cadet Development Corporation. (2)
10.3 Addendum to Lease Agreement, dated August 1, 1992, between the City of Biloxi, Mississippi, Point Cadet Developm
10.3A Second Addendum to Lease, dated April 9, 1994, by and between the City of Biloxi, Mississippi, Point Cadet Deve
10.3B Third Addendum to Casino Lease, dated April 26, 1995, by and between the City of Biloxi, Mississippi, Point Cad
10.4 Declaration of Shared Facilities Agreement for the Isle of Capri Casino and Hotel, Biloxi, Mississippi, dated as
10.5 Agreement for Sale and Purchase by and between Casino America, Inc. and Pompano Park Associates, Limited Partner
10.6 Variable Gaming Adjustment Covenant made as of June 30, 1995 by PPI, Inc. in favor of Pompano Park Associates, L
*10.7 Casino America, Inc. 1992 Stock Option Plan. (1)
*10.8 Casino America, Inc. 1992 Stock Option Plan Amendment. (3)
*10.9 Casino America, Inc. 1993 Stock Option Plan, as amended. (7)
*10.10 Casino America, Inc. description of Employee Bonus Plan. (3)
10.11 Management Agreement dated January 4, 1993 between Riverboat Services, Inc. and Louisiana Riverboat Gaming Part
10.12 Management Agreement dated as of March 2, 1995 between Riverboat Services, Inc. and St. Charles Gaming Company, Inc.
(7)
*10.13 Casino America, Inc. Retirement Trust and Savings Plan. (3)
*10.14 Director's Option Plan. (6)
10.15 Biloxi Waterfront Project Lease dated April 9, 1994 by and between the City of Biloxi, Mississippi and Riverboa
10.15A First Amendment to Biloxi Waterfront Project Lease (Hotel Lease), dated April 26, 1995, by and between Riverbo
10.16 Crowne Plaza Resort New Development License Agreement between Holiday Inns Franchising, Inc. and Riverboat Corp
10.17 Security Agreement - Pledge dated as of June 9, 1995, between Louisiana Riverboat Gaming Partnership and Crown
10.18 Shareholders Agreement, dated as of June 9, 1995 by and between Crown Casino Corporation and Louisiana Riverboa
10.19 Amended and Restated Lease between Port Resources, Inc. and CRU, Inc., as landlords and St. Charles Gaming Comp
10.20 Development Agreement between St. Charles Gaming Company, Inc. and Calcasieu Parish Police Jury dated June 5, 1995.
(7)
10.21 Note Purchase Agreement, dated as of July 20, 1995, by and among Louisiana Riverboat Gaming Partnership, St. Ch
10.22 Lease between Pompano Park Associates, Inc., as Lessor, and Casino America, Inc., as Lessee, dated as of July 1
10.23 Promissory Note dated June 29, 1995 by and between PPI, Inc. and Capital Bank. (9)
*10.24 Employment Agreement dated January 6, 1999 between Isle of Capri Casinos, Inc. and John M. Gallaway. (18)
*10.25 Employment Agreement dated January 6, 1999 between Isle of Capri Casinos, Inc. and Allan B. Solomon. (18)
*10.26 Employment Agreement dated January 6, 1999 by and between Isle of Capri Casinos, Inc. and Rexford A. Yeisley. (18)
*10.27 Employment Agreement dated January 6, 1999 by and between Isle of Capri Casinos, Inc. and Timothy M. Hinkley. (18)
10.28 Management Agreement dated April 25, 1997 between Casino America, Inc. and ICB, L.L.C. (15)
10.29 Operating Agreement of ICB, L.L.C. dated as of April 25, 1997 between Casino America of Colorado, Inc. and Blac
10.30 Amended Casino America, Inc. 1992 Stock Option Plan. (11)
10.31 Amended Casino America, Inc. l993 Stock Option Plan. (11)
10.32 Management Agreement dated July 29, 1997 between Casino America, Inc. and Isle of Capri Black Hawk, L.L.C. (16)
10.33 Joint Venture Agreement of Capri Cruises between Commodore Cruises Limited and Isle of Capri Casino Corporation. (18)
*10.34 Amended Casino America, Inc. 1993 Stock Option Plan. (15)
*10.35 Amended Casino America, Inc. 1993 Stock Option Plan. (17)
10.36 Asset Purchase Agreement by and between Tunica Partners, LP and Isle of Capri Casino - Tunica, Inc. and Isle of
10.37 Amendment No. 1 to Asset Purchase Agreement dated December 7, 1998. (19)
10.38 Amendment No. 2 to Asset Purchase Agreement dated February 24, 1999. (19)
*10.39 Employment Agreement dated January 6, 1999 between Isle of Capri Casinos, Inc. and Bernard Goldstein. (18)
10.40 Purchase Agreement, dated as of April 20, 1999, among Isle of Capri Casinos, Inc., the Subsidiary Guarantors na
10.41 Amended and Restated Credit Agreement, dated as of March 2, 2000, among Isle of Capri Casinos, Inc., the lender
10.42 Leases of part of casino site in Natchez, Mississippi dated October 28, 1991 between Lady Luck Mississippi, Inc
10.43 Silver Land, Inc. Amended and Restated Lease Agreement dated December 31, 1992. Incorporated by reference to E
10.44 Option to purchase site in Jefferson County, Missouri dated July 8, 1993 by and between Lady Luck Kimmswick, In
10.45 Lease in Coahoma, Mississippi dated November 30, 1993 (sic) by and among Roger Allen Johnson, Jr., Charles Brya
10.46 Addendum to Lease dated November 30, 1993 between Roger Allen Johnson, Jr., Charles Bryant Johnson and Magnolia
10.47 Second addendum to lease entered into on November 30, 1993, and amended by that addendum to Lease dated June 22
10.48 Agreement dated July 18, 1994 by and among Green Bridge Company, an Iowa corporation, Bettendorf Riverfront Dev
10.49 Letter Agreement dated October 24, 1994 by and between Alain Uboldi and Lady Luck Gaming Corporation. Incorpor
10.50 Letter Agreement dated October 24, 1994 by and between Rory J. Reid and Lady Luck Gaming Corporation. Incorpor
10.51 Real Estate Lease dated January 12, 1995 by and among Green Bridge Company, an Iowa corporation, Bettendorf Riv
10.52 Operation Agreement dated December 2, 1994 by and between Lady Luck Quad Cities, Inc. a Delaware corporation an
10.53 Services Agreement dated as of January 1, 1996 among Lady Luck Gaming Corporation and Marco Polo International
10.54 Stockholder Support Agreement, dated as of October 5, 1999, by Andrew H. Tompkins to and for the benefit of Isl
10.55 Consulting, Advisory and Noncompetition Agreement dated as of October 5, 1999 by and between Isle of Capri Casi
10.56 Form of Credit Agreement between Gamblers Supply Management Company as the Borrower, and Isle of Capri Casinos,
10.57 Amended and Restated Lease Agreement by and between The Port Authority of Kansas City, Missouri and Hilton Hote
10.58 Assignment and Assumption by and among Hilton Hotels Corporation, a Delaware corporation, Isle of Capri Casinos
10.59 Members Agreement of Ardent Gaming, L.L.C. dated as of May 15, 2001 between Isle of Capri Casinos, Inc. and Ard
21 Subsidiaries of Isle of Capri Casinos, Inc. (18)
23.1. Consent of Ernst & Young LLP.
___________________________
(1) Filed as an exhibit to the Casino America, Inc.'s Current Report on Form
8-K filed June 17, 1992 (File No. 0-20538), and incorporated into the Casino
America, Inc.'s Form 10-K for the year ended April 27, 1997, by reference.
(2) Filed as an exhibit to the Casino America Inc.'s Annual Report on Form
10-K for the fiscal year ended April 30, 1992 (File No. 0-20538), and
incorporated into the Casino America, Inc.'s Form 10-K for the year ended April
27, 1997, by reference.
(3) 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
into Casino America, Inc.'s Form 10-K for the year ended April 27, 1997, by
reference.
(4) Filed as an exhibit to Casino America, Inc.'s Annual Report on Form 10-K
for the fiscal year ended April 30, 1994 (File No. 0-20538), and incorporated
into Casino America, Inc.'s Form 10-K for the year ended April 27, 1997, by
reference.
(5) Filed as an exhibit to Casino America, Inc.'s Registration Statement on
Form S-1 filed September 3, 1993, as amended (File No. 33-68434), and
incorporated into Casino America, Inc.'s Form 10-K for the year ended April 27,
1997, by reference.
(6) 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 into Casino
America, Inc.'s Form 10-K for the year ended April 27, 1997, 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, 1995 (File No. 0-20538), and incorporated
into Casino America, Inc.'s Form 10-K for the year ended April 26, 1998, by
reference.
(8) Filed as an exhibit to Casino America, Inc.'s Registration Statement on
Form S-3 filed on March 21, 1996 (No. 333-02610), and incorporated into Casino
America, Inc.'s Form 10-K for the year ended April 27, 1997, by reference.
(9) Filed as an exhibit to Casino America, Inc.'s Quarterly Report on Form
10-Q for the fiscal quarter ended October 31, 1995, and incorporated into Casino
America, Inc.'s Form 10-K for the fiscal year ended April 27, 1997, by
reference.
(10) Filed as an exhibit to Casino America, Inc.'s Quarterly Report on Form
10-Q for the fiscal quarter ended January 31, 1996, and incorporated into Casino
America, Inc.'s Form 10-K for the fiscal year ended April 27, 1997, by
reference.
(11) Filed as an exhibit to Casino America, Inc.'s Proxy Statement for the
fiscal year ended April 30, 1996, by reference.
(12) Filed as an exhibit to Casino America, Inc.'s Annual Report on Form
10-K for the fiscal year ended April 30, 1996, by reference.
(13) Filed as an exhibit to Casino America, Inc.'s Current Report on Form
8-K filed on February 24, 1997, and incorporated into Casino America, Inc.'s
Form 10-K for the fiscal year ended April 27, 1997, by reference.
(14) Filed as an exhibit to Casino America, Inc.'s Annual Report on Form
10-K for the fiscal year ended April 27, 1997, by reference.
(15) Filed as an exhibit to Casino America, Inc.'s Proxy Statement for the
fiscal year ended April 27, 1997, by reference.
(16) Filed as an exhibit to the Isle of Capri Black Hawk L.L.C./Isle of
Capri Black Hawk Capital Corp. Registration Statement on Form S-4 (registration
number 333-38093), and incorporated into Casino America, Inc.'s Form 10-K for
the year ended April 26, 1998, by reference.
(17) Filed as an Exhibit to the Casino America, Inc.'s Proxy Statement for
the fiscal year ended April 26, 1998, by reference.
(18) 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), by
reference.
(19) Filed as an Exhibit to the Isle of Capri Casinos, Inc. Quarterly
Report on form 10-Q for the fiscal quarter ended January 24, 1999 (File No.
0-20538), by reference.
(20) Filed as an Exhibit to the Isle of Capri Casinos, Inc. Quarterly
Report on form 10-Q for the fiscal quarter ended January 23, 2000 (File No.
0-20538), by reference.
(21) Filed as an Exhibit to the Isle of Capri Casinos, Inc. Current Report
on Form 8-K filed on October 5, 1999.
(22) Filed as an Exhibit to the Isle of Capri Casinos, Inc. Current Report
on Form 8-K filed on December 19, 1999.
(23) 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), by
reference.
*Management contract or compensatory plan.
EX-23
2
doc3.txt
Consent of Independent Auditors
We consent to the incorporation by reference in the following Registration
Statements of Isle of Capri Casinos, Inc. (f/k/a Casino America, Inc.) of our
report dated June 14, 2001, with respect to the consolidated financial
statements of Isle of Capri Casinos, Inc. included in Isle of Capri Casinos,
Inc. Annual Report (Form 10-K) for the year ended April 29, 2001:
- Post-Effective Amendment No. 1 to the Form S-8 No. 33-61752 (the 1992
Stock Option Bonus Plan)
- Form S-8 No. 33-80918 (the 1993 Stock Option Plan; the Director's Plan;
and the Stock Bonus Plan)
- Form S-8 No. 33-86940 (the Employee Stock Purchase Plan; the 1993 Stock
Option Plan; the Consulting Agreement, dated October 1, 1993, with Theodore E.
Deutch; the Consulting Agreement, dated October 1, 1993, with Scott Crawford;
and the Consulting Agreement, dated November 10, 1994, with Becker & Poliakoff,
P.A.)
- Form S-8 No. 33-93088 (the Retirement Trust and Savings Plan)
- Form S-8 No. 333-77233 (the 1992 Stock Option Plan and the 1993 Stock
Option Plan)
- Form S-8 No. 333-50776 (the 2000 Deferred Bonus Plan)
- Form S-8 No. 333-50774 (the 2000 Long-Term Stock Incentive Plan)
New Orleans, Louisiana
July 27, 2001
EX-10
3
doc2.txt
MEMBERS AGREEMENT
OF
ARDENT GAMING, L.L.C.
This Agreement is made as of this 15th day of May, 2001 by Isle of Capri
Casinos, Inc., a Delaware corporation ("Isle") and Ardent Technology, L.L.C., a
Nevada limited liability company ("Ardent"). Isle and Ardent, together with any
other members of the Company who may become parties to this Agreement from time
to time, are sometimes herein referred to as the "Members" or individually as a
"Member".
WHEREAS, Isle and Ardent are the initial Members of the Company and are
parties with the Company to an Operating Agreement dated as of the date of this
Agreement;
WHEREAS, Ardent has developed a proprietary System consisting of a
coin-free, ticket free system used, among other things, to transfer money
between a hand held electronic funds carrier and a gaming device, known as the
Easy Money or SafeCash System;
WHEREAS, additional funding is required to complete the development of the
System, to obtain required regulatory consents and to market the System; and
Isle is willing to provide such funding under the terms and conditions of this
Agreement;
WHEREAS, the Members have formed the Company for the purpose of completing
the development of and commercializing the System;
WHEREAS, Ardent has contributed certain assets to the Company including all
its rights in and to the System;
WHEREAS, Isle has made an initial cash contribution to the Company of
$352,000 and has agreed to make certain Additional Contributions to the Company
under the terms and conditions hereof;
WHEREAS, the parties wish to set forth certain agreements with respect to
the foregoing and their respective rights and obligations;
THEREFORE, the parties agree as follows:
ARTICLE I: INITIAL OWNERSHIP INTEREST AND DEFINITIONS
1.1 INITIAL OWNERSHIP. The parties acknowledge that, based on the Initial
------------------
Contributions of the Members set forth in Section 3.1 below, as of the date
hereof, the Ownership Interest of the Company shall be as set forth below:
Member Ownership Interest Initial Contribution
------ ------------------ --------------------
Ardent 92.0% $4,048,000
Isle 8.0% $352,000
The Ownership Interest shall be adjusted from time to time in accordance
with the provisions of this Agreement and the Operating Agreement. The
Ownership Interests of the Members shall at all times be maintained on Appendix
I to the Operating Agreement, which shall be amended chronologically from time
to time as necessary.
1.2 DEFINITIONS. Capitalized terms not otherwise defined in Exhibit A
----------- ---------
hereto shall have the respective meanings ascribed for those terms in the
Operating Agreement, applicable to both singular and plural forms, for all
purposes of this Agreement.
ARTICLE 2: OPERATION OF THE COMPANY
2.1 BUSINESS PLAN. The Members anticipate that certain expenditures will be
-------------
made in the development and commercialization of the System pursuant to the
Business Plan attached hereto as Exhibit B, which includes (i) the initial
----------
Budget for the Company, (ii) the System development plan, (iii) a description of
required jurisdictional approvals and schedule, (iv) a development schedule,
(v) a schedule of the amounts and timing of funding by Isle and (vi) a
description of the roles of the parties. The Members anticipate that these
costs will be funded by Isle pursuant and subject to the terms of Section 3.3
hereof and subject to the other terms and conditions of this Agreement. The
Chief Executive Officer shall submit to the Managers proposed revisions to the
Business Plan not less frequently than annually, at least 60 days prior to the
start of the first fiscal year covered by such Business Plan. Each such
Business Plan shall be considered at the first meeting of the Managers following
its submissions and shall be subject to the unanimous approval of the Managers.
Any material amendments to the Business Plan, including any amendment that is
expected to increase the Budget by more than ten percent (10%) as compared to
the prior year's Budget, shall be subject to the unanimous approval of the
Managers.
2.2 BUDGET APPROVAL. The Chief Executive Officer shall include a proposed
----------------
Budget for the Company for the next fiscal year in his submission of the revised
Business Plan. The Budget shall include an income statement, balance sheet, and
capital budget prepared consistently with the Company's method of accounting,
for the forthcoming fiscal year and a cash flow statement which shall show in
reasonable detail the anticipated receipts and disbursements (including
anticipated distributions) projected for the Company for the forthcoming fiscal
year and the amount of any corresponding cash deficiency or surplus, and the
amount and due dates of any proposed Additional Contributions. The Budget shall
be prepared on a basis consistent with the Company's financial statements and
shall be prepared in accordance with the provisions of this Agreement. Each
Budget shall be considered at the first meeting of the Managers following its
submission and shall be subject to their unanimous approval. Each Budget shall
also include a detailed explanation of the proposed related party charges for
corporate overhead or services proposed to be charged by any Member in
connection with services to be provided by such Member or its Affiliates to the
Company. Without the unanimous approval of the Managers, a Budget shall not
include an increase in expenditures of more than ten percent (10%) as compared
to the prior year's Budget for the Company. If for any fiscal year no new
Budget is agreed upon and approved, then the Company will be managed in a manner
consistent with the operations for the prior fiscal year, as adjusted to reflect
the Company's contractual obligations for the year.
2.3 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the Company
------------------------
shall initially be Patrick J. Schmit. The Members shall mutually agree on any
replacement or successor Chief Executive Officer.
2.4 EMPLOYEE COSTS. Except as otherwise expressly provided in this
---------------
Agreement or the Business Plan or Budget, each Member will be separately
responsible for its own payroll and benefit expense of its employees and
independent contractors with respect to Company business.
2.5 FINANCING. Except for the Initial Contributions by the Members and the
---------
Additional Contributions by Isle provided for in Section 3.3 of this Agreement,
the Members acknowledge and agree that the Company shall incur no debt or
liability for which the Members or their respective Affiliates would be
obligated in any way. Without limiting the foregoing, no Member or Affiliate
will be required to guarantee or co-sign any loan made to the Company or any
other obligation of the Company.
2.6 PRIMARY RESPONSIBILITIES. The Members shall operate the Company so as
-------------------------
to take advantage of their particular areas of expertise and experience. Isle
will be primarily responsible for regulatory and licensing matters and Ardent
will be primarily responsible for completing the development of the System, for
marketing and sales and for maintenance and support of the System. The Members
agree to use their respective best efforts in furtherance of the company's
business in their respective areas of primary responsibility and at all times to
operate with diligence and professionalism.
2.7 CORPORATE OVERHEAD. In order to best take advantage of the experience,
-------------------
expertise and economies of scale which each of the Members can provide to the
Company, the Members may, where necessary and appropriate, utilize the services
of employees of each of the Members to provide services to the Company instead
of hiring new employees specifically for the Company. As such, if applicable, a
portion of such Member's overhead related to the services it provides to the
Company will be charged to the Company, at cost, with the amounts proposed to be
charged set forth in the proposed Budget submitted to the Managers by the Chief
Executive Officer each year and as may be unanimously approved by the Managers.
In addition, each Member will be reimbursed by the Company for all out-of-pocket
monies expended on behalf of the Company, to be budgeted and unanimously
approved by the Managers in advance.
ARTICLE 3: CAPITAL CONTRIBUTIONS
3.1 INITIAL CONTRIBUTIONS.
----------------------
[a] BY ARDENT: Ardent has made an Initial Contribution of assets pursuant
----------
to the Asset Conveyance Agreement attached as Exhibit C hereto, which includes
---------
the Intellectual Property, (the "Ardent Assets"). The Members agree that the
Fair Market Value of the Ardent Assets is $4,048,000.
[b] BY ISLE: Isle has made an Initial Contribution of $352,000 in cash.
--------
3.2 CONTRIBUTION OF FUTURE DEVELOPMENTS. Ardent agrees that it will
---------------------------------------
disclose to the Company and Isle all inventions, developments, designs,
information, data, software, programs, modifications, improvements,
enhancements, intellectual property rights or other matters that are created,
owned, developed or acquired by Ardent or its Affiliates (for themselves or on
behalf of the Company) after the date of this Agreement and that relate to the
System or its use or function (collectively called the "Future Developments");
and, upon the request of the Company or Isle, Ardent will contribute and assign
all such Future Developments to the Company pursuant to an assignment in form
and content reasonably satisfactory to the Company and Isle. All such Future
Developments so assigned to the Company shall be considered part of the Ardent
Assets comprising the Initial Contribution by Ardent, and Ardent's Ownership
Interest shall not be increased as a result of any such assignment of Future
Developments.
3.3 ADDITIONAL CONTRIBUTIONS.
-------------------------
[a] ISLE'S FUNDING OBLIGATION. Subject to the provisions hereof, Isle shall
--------------------------
make additional contributions to the Company in a total amount, together with
the Initial Contribution by Isle, not to exceed two-million two-hundred thousand
dollars ($2,200,000). Subject to Section 3.3[b] below, such Additional
Contributions shall be made in increments of forty-four thousand dollars
($44,000) pursuant to the schedule set forth on Exhibit D. For each Additional
----------
Contribution in the amount of forty-four thousand dollars ($44,000) that Isle
makes, the Company will issue to Isle an Ownership Interest which, when issued
and outstanding, will represent a one percent (1%) Ownership Interest; provided
--------
that Isle's total Ownership Interest shall not exceed twenty five percent (25%)
without Ardent's consent. In the event Isle shall make any Additional
Contribution that is more or less than forty-four thousand dollars ($44,000),
the Company shall issue Isle an Ownership Interest that is pro rated based on
one percent (1%) for each forty-four thousand dollars ($44,000) or fraction
thereof. Concurrently with the making of each Additional Contribution, (i)
Isle's capital account shall be appropriately credited, (ii) the Company shall
deliver to Isle an appropriate Certificate representing such additional interest
and (iii) the Company shall make and deliver to Isle appropriate
representations, warranties and indemnities concerning clear title and absence
of encumbrances relating to the additional interest, due authority to issue the
interest and concerning similar matters as are customary, together with an
officers certificate or opinion of counsel as Isle may reasonably request, all
in form and content reasonably acceptable to Isle. Except as set forth above, or
upon the agreement of all Members and upon such terms and conditions as they may
agree in writing, no Additional Contributions will be required or permitted from
the Members of the Company.
------
[b] A FAILURE EVENT. Notwithstanding anything to the contrary in this
------------------
Agreement, Isle shall be relieved of any obligation to make any further
Additional Contributions upon the occurrence of any of the following events (a
"Failure Event"):
(i) as of any funding date provided on Exhibit D hereto, the Company fails for
---------
any reason to meet the milestone, provided in the "Cashless FOB Development
Timeline" (the "Development Timeline") attached to Exhibit D hereto, to have
---------
been achieved by such funding date;
(ii) the Company or Ardent breach any material warranty, representation or
agreement contained in this Agreement or the Related Agreements, and such breach
remains uncured within 30 days after notice thereof;
(iii) any regulatory authority in Mississippi, Nevada or New Jersey makes a
communication to Ardent, the Company or Isle, which, in Isle's reasonable
determination, leads Isle to believe that the application will be denied or
conditioned; or Isle determines, in its reasonable judgment, that it is
impossible or impracticable to develop the System or acquire the necessary
regulatory approval to market the System in any jurisdiction within the time
frame contemplated by the Development Timeline;
(iv) any regulatory authority in any gaming jurisdiction in which Isle or any of
its Affiliates operates or proposes to operate determines that Ardent or any
Affiliate or principal of Ardent is unsuitable;
(v) there is an event of Bankruptcy as pertains to Ardent or for any other
reason Ardent is unable to fulfill its obligations under this Agreement or the
Related Agreements;
(vi) any of the key employees of Ardent, being Malcolm C. Davenport V, Patrick
Schmit, Robert Guinn or Patricia Boggs, die, become disabled, terminate their
relationship with Ardent or the Company or otherwise are unable or unwilling to
devote their services to the Company's business; or
(vii) the Company abandons or fails to prosecute the SafeCash system
provisional patent application (Serial Number 60/231,393) or Isle determines, in
its reasonable judgement, that a patent will not issue containing claims
substantially similar to those contained in such application.
[c] ISLE'S ELECTION UPON A FAILURE EVENT. Upon the occurrence of a Failure
-------------------------------------
Event, Isle may, in its discretion, elect any of the following alternatives:
(i) Isle may, by written notice to the Company and Ardent, waive the Failure
Event and make the Additional Contribution required on the next funding date
after the Failure Event pursuant to the schedule on Exhibit D, provided that
---------
Isle's waiver of a particular Failure Event shall not constitute a waiver of any
other Failure Event that may thereafter occur;
(ii) Isle may elect not to make any further contributions of capital to or
investments in the Company, in which event it shall retain its interest in the
Company as it exists as of date of such election and be relieved of any
obligation to make any Additional Contributions; or
(iii) Isle may elect to sell its Ownership Interest to the Company for a
purchase price equal to the aggregate amount of its Capital Contributions plus
Interest compounded semi-annually from the dates of the respective Capital
Contributions, less the amount of any Distributions to Isle under Section 6.1 of
the Operating Agreement, in which event (a) the Company shall issue to Isle a
promissory note, in form and content acceptable to Isle, in the amount of the
purchase price, bearing Interest, with principal and interest payable in equal
quarterly installments over two (2) years, and secured by a collateral
assignment of Isle's Ownership Interest, and (b) Isle shall resign and withdraw,
without liability, as a member of the Company and shall have no further
obligations under this Agreement or the Operating Agreement.
Notwithstanding the occurrence of a Failure Event, and regardless of whether
Isle makes an election under clause (i), (ii) or (iii) above, the License shall
remain in full force and effect and Isle shall continue to be entitled to
receive the Isle Fee.
3.4 DEFAULT. If Isle fails to make a required Capital Contribution when
-------
due, other than because of a Failure Event, and after thirty (30) days notice
and an opportunity to cure, Ardent may, as its exclusive remedy and as full and
complete liquidated damages:
[a] Make all or part of such Capital Contribution on its own behalf and
increase its Ownership Interest accordingly; or
[b] Loan all or part of such Capital Contribution amount to the Company,
with such loan payable on demand and with Interest (and such amount will be
treated as a loan rather than as a Capital Contribution); and,
[c] Prohibit Isle from making any further contributions of capital to or
investments in the Company, in which event, (i) Isle shall retain its interest
in the Company as it exists as of such date and shall have no further obligation
to make any Additional Contributions, (ii) Isle shall have no further rights to
receive the Isle Fee, (iii) the License shall remain in effect according to its
terms and (iv) Isle shall have no further right to have the System installed at
its gaming operations at the Company's cost as provided in Section 5.1 below.
3.5 LOANS BY MEMBERS. The Company may borrow money from any Member or
------------------
Affiliate for Company purposes as provided in the Operating Agreement, at the
Interest rate.
3.6 DISTRIBUTIONS. Unless the Members otherwise agree or the Company is
-------------
prohibited by any agreement or indenture, the Company shall, at least quarterly,
distribute the Company's Cash Flow to the Members in accordance with the
provisions of the Operating Agreement.
ARTICLE 4: MANAGEMENT
4.1 UNANIMOUS VOTE. In addition to those matters requiring a unanimous vote
--------------
under the Operating Agreement or under the other provisions of this Agreement,
the following actions by the Company will require the written consent of Isle
and Ardent:
[a] The making of material changes to the Business Plan;
[b] The adoption of any Budget for any year after the initial Budget, or any
increase in the annual Budget, of more than ten percent (10%) from the prior
fiscal year of the Company;
[c] A call for Additional Contributions by the Members other than as
provided for under Section 3.3;
[d] The authorization or the incurrence by the Company of indebtedness for
borrowed money in excess of $100,000 in the aggregate at any time outstanding;
[e] The making of any loans or advances to, or guarantees for the benefit
of, any Member or Affiliate;
[f] The authorization of any transaction between the Company and any Member
or Affiliate;
[g] The taking of any action which may cause the Company to become taxed as
an entity other than a partnership;
[h] The determination to make any capital expenditures or commitments
therefor that aggregate in excess of $200,000 in any one transaction or series
of related transactions;
[i] The entering into any agreement or commitment, or the incurrence of any
obligation, that would require the Company to make expenditures in excess of
$200,000 in any year;
[j] The making of any application by the Company with any gaming authority
in any gaming jurisdiction;
[k] The sale, transfer, pledge, assignment or other disposition of all or
any portion of the Intellectual Property or the granting of any license to or
interest in all or any portion of the Intellectual Property; or,
[l] The taking of any other action not in the ordinary course of the
Company's business.
ARTICLE 5: THE ISLE LICENSE AND FEE
5.1 LICENSE TO ISLE. The Company has granted Isle a License under the
-----------------
Intellectual Property, in the form attached hereto as Exhibit E, pursuant to
---------
which Isle may use the System in its gaming operations and those of its
Affiliates on a royalty-free basis. The License grants Isle exclusive rights
in each of the respective markets in which it or its Affiliates conduct gaming
operations for a period of six (6) months after the installation of the System
in each such market. At Isle's election, the Company and Ardent agree to install
the System at such of the gaming properties of Isle or its Affiliates as Isle
may designate, at a cost to Isle equal to the Company's cost plus eight percent
(8%). If Isle notifies the Company that it has elected not to install the System
at any gaming property, then the Company may sell the System to another operator
in the same market as such gaming property. The License shall be binding on any
successor or assign of the Company and inure to the benefit of any successor or
assign of Isle, provided that the rights granted under the License shall be
--------
limited to the gaming operations of Isle and its Affiliates, and those whose
development is being planned by Isle and its Affiliates, as of the date of any
such assignment or succession.
5.2 THE ISLE FEE. Within 30 days after the end of each calendar quarter,
---------------
the Company shall pay Isle the Isle Fee based on the number of units of the
System sold, leased, licensed or otherwise disposed of in such quarter to
Persons other than Isle or its Affiliates. With respect to the first
thirty-thousand (30,000) units of the System sold, leased, licensed or otherwise
disposed of, the Isle Fee shall equal the total amount Isle's Capital
Contributions to the Company divided by thirty-thousand (30,000). With respect
to all units of the System sold, leased, licensed or otherwise disposed of after
the first thirty-thousand (30,000) units, the Isle Fee shall equal twenty-five
dollars ($25.00) per unit. The Isle Fee shall be payable to Isle before, and
shall have priority to, any Distributions to the Members or any payments to the
Members for services, goods or corporate overhead. The Isle Fee shall be
considered a royalty and shall not reduce Isle's Capital Account in the Company.
The Isle Fee shall be payable for the longer of the duration of the Company or
the life of the last to expire of the Intellectual Property. As a condition to
any transfer of control of the Company to any third party or any merger,
reorganization or sale or other disposition of the assets of the Company to any
third party, the third party shall provide its written agreement to Isle, in
form and content acceptable to Isle, to be bound by the agreement to pay the
Isle Fee and to abide by the terms of the License.
ARTICLE 6: DISPUTE RESOLUTION
6.1 DISPUTES. Except as to any disputes for which injunctive relief may be
--------
available, in the event a dispute of any kind arises in connection with this
Agreement or the Related Agreements (including any dispute concerning its or
their construction, performance or breach), the parties to the dispute (who may
be any combination of the Company and any one or more of the Members) will
attempt to resolve the dispute as set forth in Section 6.2 before proceeding to
arbitration as provided in Section 6.3. All documents, discovery and other
information related to any such dispute, and the attempts to resolve or
arbitrate such dispute, will be kept confidential to the fullest extent
possible.
6.2 NEGOTIATION. If a dispute arises, any party to the dispute will give
-----------
notice to each other party. If the Company is not a party to the dispute, notice
will be given to the Company. After notice has been given, the parties in good
faith will attempt to negotiate a resolution of the dispute.
6.3 ARBITRATION. If, within 30 days after the notice provided in Section
-----------
6.2, a dispute is not resolved through negotiation or mediation, the dispute
will be arbitrated. The parties to the dispute agree to be bound by the
selection of an arbitrator, and to settle the dispute exclusively by binding
arbitration in accordance with the following provisions:
[a] All parties to the dispute will collectively select one arbitrator. If
they fail to do so within 45 days after the notice provided in Section 6.2, one
or more parties will request the American Arbitration Association to submit a
panel of five arbitrators who are qualified to resolve the matters in dispute
from which the choice will be made. The party requesting the arbitration will
strike first, followed by alternative striking until one name remains. A
similar procedure will be followed if there are more than two parties. The
parties may by agreement reject one entire list, and request a second list. If
selection by the above method is not completed within 90 days after the notice
provided in Section 6.2, or if there are more than four parties, then an
arbitrator will be selected by the American Arbitration Association. The
arbitrator so selected will then arbitrate the dispute in Las Vegas, Nevada, and
issue an award.
[b] To the extent consistent with the provisions of this Article, the
arbitration will be conducted under the Commercial Arbitration Rules of the
American Arbitration Association and in accordance with Delaware law. The
arbitrators decision will be made pursuant to the relevant substantive law of
the State of Delaware. The award of the arbitrator will be final, binding and
non-appealable. Judgment on the award may be entered in any court, state or
federal court having jurisdiction.
[c] The fees and expenses of the arbitrator, and the other direct costs of
the arbitration, will be shared by the parties to the dispute in equal
proportions. Each party to the dispute will bear all other costs and expenses
as provided in Section 8.8. If one or more Members are included in the
arbitration because of their membership or former membership in the Company,
such group will collectively be treated as one party to the dispute (through the
Company as a party).
ARTICLE 7: PRIVILEGED LICENSE PROTECTION
7.1 REGULATORY COMPLIANCE. Ardent acknowledges that as a result of the
----------------------
transactions contemplated by this Agreement, Ardent and its agents and
Affiliates may be subject to licensing and other regulatory review and approval
procedures ("Regulatory Review"), by any governmental or quasi-governmental
agency which is authorized or empowered to regulate the gaming operations of
Isle and its Affiliates ("Regulatory Authority") in the jurisdictions in which
Isle and its Affiliates conduct or propose to conduct gaming activities
including, without limitation, Colorado, Iowa, Mississippi, Louisiana, Missouri,
Nevada and Florida. Ardent agrees to cooperate fully and to cause its
Affiliates to cooperate fully with the representatives of all such Regulatory
Authorities in making applications, supplying information, providing reports,
attending licensing and other hearings, and otherwise cooperating with and
complying with the requirements of all such Regulatory Authorities so as not to
interfere with Isle or its Affiliates ability to develop new business or to
continue to conduct its existing business. Ardent agrees that in the event the
Board of Directors of Isle reasonably determines based upon communications with
a Regulatory Authority that Ardent or any of its Affiliates is likely to be
determined unsuitable by such Regulatory Authority and as a result Isle or its
Affiliates may not be permitted to engage or to continue to engage in a gaming
activity (collectively a "Licensing Problem"), then, within the lesser of 150
days of notice of such event from Isle to Ardent or the applicable period
prescribed by the appropriate Regulatory Authority (provided Isle timely
notifies Ardent of such a determination) Ardent shall eliminate the Licensing
Problem to the reasonable satisfaction of Isle's Board or transfer its rights
and obligations hereunder and its Ownership Interest to a Person reasonably
acceptable to Isle, who does not have a Licensing Problem, and such Person shall
be accepted as a Member of the Company for all purposes. Any such transfer
shall be subject to the terms and conditions contained in Section 13.5 of the
Operating Agreement. All qualification and other expenses relating to the
foregoing applications shall be borne by the respective parties submitting the
applications. The provisions of Section 13.8 of the Operating Agreement shall
apply and shall govern in the event of a conflict with the provisions of Section
7.1 above.
7.2 NO UNSUITABILITY KNOWLEDGE. Neither Ardent nor Isle is aware of any
----------------------------
facts or circumstances which would make any Member or the officers, directors,
managers, or owners (directly or indirectly) of such Member, a Person or entity
unsuitable for licensing under applicable gaming laws, rules and regulations.
7.3 ADDITIONAL REGULATORY COMPLIANCE MATTERS. Neither the Company nor
-------------------------------------------
Ardent will market or sell the system to (i) any Person that is not licensed by
the appropriate state regulatory gaming authorities or (ii) in the case of a
Native American gaming operation, which has not entered into a compact with the
appropriate State and which has not received all required approvals from the
NIGC and the Bureau of Indian Affairs. In the event that it is determined to
Isle's satisfaction that a gaming jurisdiction will not permit Isle or its
Affiliates to both conduct gaming operations and, through its interest in the
Company, engage in the business of manufacturing and selling System products,
then Ardent may, at its own cost, manufacture and sell System products only to
users of such products in such gaming jurisdiction and not in any other gaming
jurisdiction.
ARTICLE 8: GENERAL PROVISIONS
8.1 AMENDMENT; EFFECTIVE DATE. This Agreement may be amended by the
----------------------------
unanimous written agreement of the parties. Any amendment will become effective
upon such approval, unless otherwise provided.
8.2 REPRESENTATIONS AND WARRANTIES. Each Member represents and warrants to
-------------------------------
each other Member that, as of the signing of this Agreement and the Related
Agreements:
[a] Such Member is duly organized, validly existing and in good standing
under the laws of the jurisdiction where it purports to be organized, and is a
United States Person;
[b] Such Member has full power and authority to enter into and perform this
Agreement and the Related Agreements;
[c] All actions necessary to authorize the signing and delivery of this
Agreement and the Related Agreements, and the performance of obligations under
it and them, have been duly taken;
[d] Each of this Agreement and the Related Agreements has been duly signed
and delivered by a duly authorized officer or other representative of such
Member or the Company, as the case may be, and constitutes the legal, valid and
binding obligation of such Member or the Company, as the case may be,
enforceable in accordance with its terms (except as such enforceability may be
affected by applicable bankruptcy, insolvency or other similar laws effecting
creditors' rights generally, and except that the availability of equitable
remedies is subject to judicial discretion);
[e] No consent or approval of any other Person is required in connection
with the signing, delivery and performance of this Agreement or the Related
Agreements by such Member or the Company, as the case may be; and
[f] Neither the execution or the delivery of this Agreement or the Related
Agreements or any document or instrument contemplated hereby or thereby to be
executed and delivered by any Member or its Affiliate or the Company, nor the
fulfillment of or compliance with the terms and provisions of this Agreement or
the Related Agreements and such other documents and instruments, will conflict
with or will result in a breach of, the terms, conditions, or provisions of, or
constitute a default under, or result in any violation of, any judgment, decree,
or any order of any court or any arbitration authority, or any statute, law,
rule, or regulation by which any such Member, or its Affiliate, or the Company,
as the case may be, or their respective assets are affected or bound.
[g] There are no oral or written contracts, agreements, or undertakings
binding upon or affecting any Member or its Affiliate, or its respective assets
that would alter or impair the ability of such Member or Affiliate to enter into
and perform its obligations under this Agreement or the Related Agreements or
any document or instrument contemplated hereby or thereby to be executed and
delivered by any Member or its Affiliate.
8.3 OUTSIDE ACTIVITIES. Any Member or Affiliate thereof may engage in or
--------------------
possess any interest in any business, and may do so through itself or through
any other business venture of any nature, independently or with others, and
neither the Company nor any other Member shall have any right by virtue of this
Agreement or the Related Agreements in or to such Member's business or its
other ventures or in or to any income or profits derived therefrom, including
without limitation any of Isle's gaming operations; provided, however, that
--------
during the term hereof no Member or its Affiliates shall directly or indirectly
have an ownership interest in any Person or engage in any activity involving the
development or sale of coin-free, ticket-free, money transfer products that
compete with the System.
8.4 CONFIDENTIALITY. Except as set forth in this paragraph below, each
---------------
Member shall, and shall cause each of its Affiliates, to keep secret and retain
in strictest confidence, any and all Confidential Information and shall not
distribute, disseminate or disclose such Confidential Information, and any
Person receiving Confidential Information pursuant hereto shall use such
Confidential Information only for the benefit of the Company or for any other
specific purposes for which it was disclosed to such party; provided that a
--------
Member may (i) disclose Confidential Information to its representatives or
agents on a "need-to-know" basis in connection with the transactions leading up
to and contemplated by this Agreement and the operation of the Company and (ii)
make such announcements and file such documents (including this Agreement) with
the Securities and Exchange Commission, and other regulatory authorities
(including tax and gaming authorities), and otherwise take such actions to
comply with the requirements of federal and state laws as it deems appropriate.
To the extent reasonably practicable, each Member will provide the other with
the portion of any such announcement or filing that refers to this Agreement and
the transactions contemplated by it no later than concurrently with releasing or
filing the same.
8.5 WAIVERS GENERALLY. No course of dealing will be deemed to amend or
------------------
discharge any provision of this Agreement. No delay in the exercise of any
right will operate as a waiver of such right. No single or partial exercise of
any right will preclude its further exercise. A waiver of any right on any one
occasion will not be construed as a bar to, or waiver of, any such right on any
other occasion.
8.6 REMEDIES FOR BREACH. Except as provided in Section 3.4 hereof, the
---------------------
rights and remedies of the Members set forth in this Agreement or the Related
Agreements are neither mutually exclusive nor exclusive of any right or remedy
provided by law, in equity or otherwise. Subject to the dispute resolution
provisions of Article 6 and except as provided in Section 3.4 hereof, the
Members agree that all legal remedies (such as monetary damages) as well as all
equitable remedies (such as specific performance) will be available for any
breach or threatened breach of any provision of this Agreement or the Related
Agreements.
8.7 NOTICES. Any notices (including any communication or delivery) required
-------
or permitted under this Agreement will be in writing and will be addressed as
follows:
If to Isle:
Isle of Capri Casinos, Inc.
Attention: John Gallaway
1641 Popps Ferry Road, Suite B-1
Biloxi, MS 39532
With a copy to: Allan B. Solomon
2200 Corporate Blvd., NW, Suite 310
Boca Raton, FL 33431
If to Ardent:
4815 W. Russell Road, Suite 5-E
Las Vegas, NV 89118
Attention: Patrick J. Schmit
With a copy to: Golden & Silver, LTD.
Ninth Floor
3960 Howard Hughes Parkway
Las Vegas, NV 89146
Attention: Jeffrey Silver
All notices may be made by mail, personal delivery, courier service or facsimile
machine, and will be effective upon delivery. Any Member may change such
Person's address by notice to each other Member.
8.8 COSTS. If the Company or any Member retains counsel for the purpose of
-----
enforcing or preventing the breach or any threatened breach of any provision of
this Agreement or the Related Agreements or for any other remedy relating to it
or them, then the prevailing party will be entitled to be reimbursed by the
nonprevailing party for all costs and expenses so incurred (including reasonable
attorneys' fees, costs of bonds, and fees and expenses for expert witnesses)
unless the arbitrator or other trier of fact determines otherwise in the
interest of fairness.
8.9 INDEMNIFICATION. Each Member hereby indemnifies and agrees to hold
---------------
harmless the Company and each other Member from any liability, cost or expense
arising from or related to any act or failure to act of such Member which is in
violation of this Agreement or the Related Agreements.
8.10 PARTIAL INVALIDITY. Wherever possible, each provision of this
-------------------
Agreement will be interpreted in such manner as to be effective and valid under
applicable law. However, if for any reason any one or more of the provisions of
this Agreement are held to be invalid, illegal or unenforceable in any respect,
such action will not affect any other provision of this Agreement. In such
event, this Agreement will be construed as if such invalid, illegal or
unenforceable provision had never been contained in it.
8.11 ENTIRE AGREEMENT. This Agreement, together with its Exhibits and the
-----------------
Related Agreements, which are incorporated by reference herein, contains the
entire agreement and understanding of the Members with respect to its subject
matter, and it supersedes all prior written and oral agreements. No amendment
of this Agreement will be effective for any purpose unless it is made in
accordance with Section 8.1.
8.12 BENEFIT. The obligations of each Member will inure solely to the
-------
benefit of the other Members and the Company, without conferring on any other
Person any rights of enforcement or other rights.
8.13 BINDING EFFECT. This Agreement is binding upon, and inures to the
---------------
benefit of, the Members and their permitted successors and assigns; provided
that, any Transferee will have only the rights specified in Section 13.6 of the
Operating Agreement unless admitted as a substitute Member in accordance with
this Agreement.
8.14 FURTHER ASSURANCES. Each Member agrees, without further consideration,
------------------
to sign and deliver such other documents of further assurance as may reasonably
be necessary to effectuate the provisions of this Agreement and the Related
Agreements .
8.15 HEADINGS. Article and section titles have been inserted for
--------
convenience of reference only. They are not intended to affect the meaning or
-
interpretation of this Agreement.
8.16 TERMS. Terms used with initial capital letters will have the meanings
-----
specified, applicable to both singular and plural forms, for all purposes of
this Agreement. All pronouns (and any variation) will be deemed to refer to the
masculine, feminine or neuter, as the identity of the Person may require. The
singular or plural include the other, as the context requires or permits. The
word include (and any variation) is used in an illustrative sense rather than a
limiting sense.
8.17 GOVERNING LAW; CONFLICTS WITH OPERATING AGREEMENT. This Agreement will
-------------------------------------------------
be governed by, and construed in accordance with, the laws of the State of
Delaware (except to the extent preempted by any federal law or the gaming laws
of any state or governmental agency having jurisdiction over the affairs of any
Member). Any conflict or apparent conflict between this Agreement and the
Operating Agreement or the Act will be resolved in favor of this Agreement
except as otherwise provided in this Agreement or as required by the Act.
8.18 BROKERS FEES. The parties represent and warrant to one another that no
------------
brokers fees will be due and owing by the Company or any Member to any party in
connection with the subject matter of this Agreement or the Related Agreements.
IN WITNESS WHEREOF, the parties have executed this Members Agreement as of the
date first set forth above.
ISLE OF CAPRI CASINOS, INC.
a Delaware corporation
By: _________________________________________
ARDENT TECHNOLOGY, L.L.C.
a Nevada limited liability company
By: _________________________________________
Patrick J. Schmit, President
SCHEDULE OF EXHIBITS
----------------------
EXHIBIT A- DEFINITIONS
EXHIBIT B- BUSINESS PLAN
EXHIBIT C- ASSET CONVEYANCE AGREEMENT
EXHIBIT D- LICENSE AGREEMENT
EXHIBIT E- SCHEDULE OF ADDITIONAL CONTRIBUTIONS AND MILESTONES
EXHIBIT A
---------
DEFINITIONS
ADDITIONAL CONTRIBUTION: A capital contribution (other than the Initial
Contribution) that a Member makes to the Company, as described in Section 3.3.
ASSET CONVEYANCE AGREEMENT: The agreement of even date pursuant to which
Ardent has conveyed certain assets to the Company.
AGREEMENT: This Agreement, as amended from time to time.
BUDGET: The annual budget for the Company.
BUSINESS PLAN: The business plan of the Company, as contained in Exhibit B
hereto, as amended or revised from time to time.
CONFIDENTIAL INFORMATION: All confidential documents and information
concerning the Company or its business, any Member or any Affiliate of a Member
furnished to a Member or an Affiliate or the Company in connection with the
transactions leading up to and contemplated by this Agreement and the operation
of the Company or its business, except to the extent that such information can
be shown to have been (a) generally available to the public other than as a
result of a breach of the provisions of Section 8.4 of this Agreement; (b)
already in the possession of the receiving Person without restriction; (c)
lawfully disclosed to the receiving Person by a third party who is free lawfully
to disclose the same; or (d) independently developed by the receiving Person
without use of any Confidential Information.
FAILURE EVENT: The term as defined in Section 3.3[b] of this Agreement.
FUTURE DEVELOPMENTS: The term as defined in Section 3.2 of this Agreement.
INTELLECTUAL PROPERTY: The intellectual property rights or interests,
including the patents, trademarks, and copyrights, and applications therefor,
and the trade secrets or other proprietary matter, assigned by Ardent to the
Company pursuant to the Asset Conveyance Agreement.
ISLE FEE: The fee payable to Isle pursuant to Section 5.2 of this Agreement.
INITIAL CONTRIBUTION: The initial capital contribution that a Member makes
to the Company, as described in Section 3.1.
LICENSE: The License for the Intellectual Property granted by the Company
pursuant to Section 5.1 of this Agreement and the License Agreement attached as
Exhibit D.
NOTICE: Written notice actually given pursuant to Section 8.7.
OPERATING AGREEMENT: The Operating Agreement of the Company dated as of the
date of the Agreement, as amended from time to time.
REGULATORY AUTHORITY: The term as defined in Section 7.1 of this Agreement
REGULATORY REVIEW: The term as defined in Section 7.1 of this Agreement.
RELATED AGREEMENTS The Operating Agreement, the Asset Conveyance Agreement
------------------- --------------------------------------------------------
and the License.
------------------
EXHIBIT B
----------
BUSINESS PLAN
EXHIBIT C
---------
ASSET CONVEYANCE AGREEMENT
EXHIBIT D
---------
SCHEDULE OF ADDITIONAL CONTRIBUTIONS AND MILESTONES
EXHIBIT E
----------
LICENSE AGREEMENT