-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BopBqKYYev3eP0/tgpRemC3VHO/mf+0nxtdeSv2nFYJXqoY811F4TCxZJayJqZip gJcY/LrQPpjvZd4DCtB/bQ== 0000899243-96-001579.txt : 19961216 0000899243-96-001579.hdr.sgml : 19961216 ACCESSION NUMBER: 0000899243-96-001579 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961031 FILED AS OF DATE: 19961213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CASINO AMERICA INC CENTRAL INDEX KEY: 0000863015 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 411659606 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20538 FILM NUMBER: 96680567 BUSINESS ADDRESS: STREET 1: 711 WASHINGTON LOOP STREET 2: 2ND FLR CITY: BILOXI STATE: MS ZIP: 39530 BUSINESS PHONE: 6014367000 MAIL ADDRESS: STREET 2: 711 WASHINGTON LOOP CITY: BILOXI STATE: MS ZIP: 39530 FORMER COMPANY: FORMER CONFORMED NAME: ANUBIS II CORP DATE OF NAME CHANGE: 19600201 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 1996 -------------------------------------------------- ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from - -------------------------------------------------------------------------------- Commission File Number: 0-20538 -------------------------------------------------------- Casino America, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 41-1659606 - -------------------------------------------------------------------------------- (State of Incorporation) (IRS Employer Identification No.) 711 Washington Loop, Second Floor, Biloxi, Mississippi 39530 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (601) 436-7000 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (a) 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 ------ ------ Shares of Common Stock outstanding at November 30, 1996: 23,313,487 -------------- CASINO AMERICA, INC. FORM 10-Q INDEX Part I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets, October 31, 1996 (unaudited) and April 30, 1996 1-2 Consolidated Statements of Operations for the Three Months and Six Months Ended October 31, 1996 and 1995 (unaudited) 3 Consolidated Statements of Cash Flows for the Six Months Ended October 31, 1996 and 1995 (unaudited) 4-5 Consolidated Statement of Stockholders' Equity (unaudited) 6 Notes to Unaudited Consolidated Financial Statements 7-11 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12-18 Part II - OTHER INFORMATION Item 1. Legal Proceedings 19 Item 2. Changes in Securities 19 Item 3. Defaults Upon Senior Securities 19 Item 4. Submission of Matters to a Vote of Security Holders 19 Item 5. Other Information 19 Item 6. Exhibits and Reports on Form 8-K 19 SIGNATURES 20 EXHIBIT LIST 21
CASINO AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1996 APRIL 30, 1996 ---------------- -------------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 58,034,000 $ 18,585,000 Accounts receivable: Related parties 161,000 3,171,000 Other 4,080,000 1,764,000 Income Taxes Receivable 8,984,000 -- Deferred income taxes 2,057,000 1,001,000 Prepaid expenses and other assets 4,551,000 2,858,000 ------------ ------------ TOTAL CURRENT ASSETS 77,867,000 27,379,000 ------------ ------------ PROPERTY AND EQUIPMENT: Land improvements 33,067,000 25,485,000 Leasehold improvements 94,729,000 50,130,000 Buildings and improvements 8,598,000 6,099,000 Riverboats and floating pavilions 125,044,000 33,591,000 Furniture, fixtures and equipment 78,069,000 35,835,000 Construction in progress 495,000 375,000 ------------ ------------ 340,002,000 151,515,000 Less: Accumulated depreciation 46,112,000 22,209,000 ------------ ------------ Property and equipment, net 293,890,000 129,306,000 ------------ ------------ OTHER ASSETS: Investment in and advances to joint ventures -- 34,281,000 Notes receivable - related party -- 4,700,000 Other investments 2,250,000 2,250,000 Property held for development or sale 15,840,000 15,840,000 Goodwill, net of accumulated amortization of $1,957,000 and $-0-, respectively 114,657,000 -- Berthing, concession and leasehold rights, net of accumulated amortization of $1,366,000 and $1,209,000 respectively 4,903,000 5,060,000 Deferred financing costs, net of accumulated amortization of $467,000 and $1,229,000, respectively 12,257,000 4,327,000 Prepaid expenses 862,000 743,000 Deposits and other 4,484,000 2,588,000 ------------ ------------ 155,253,000 69,789,000 ------------ ------------ TOTAL ASSETS $527,010,000 $226,474,000 ============ ============
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS. 1 CASINO AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1996 APRIL 30, 1996 ---------------- -------------- (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 12,307,000 $ 8,884,000 Accounts payable: Trade 6,583,000 6,169,000 Accrued liabilities: Interest 11,379,000 5,802,000 Payroll and payroll related 16,375,000 6,333,000 Property and other taxes 6,415,000 6,880,000 Progressive jackpots and slot club awards 5,849,000 1,851,000 Other 2,067,000 2,392,000 ------------ ------------ TOTAL CURRENT LIABILITIES 60,975,000 38,311,000 ------------ ------------ LONG-TERM DEBT, NET OF CURRENT MATURITIES 374,417,000 130,894,000 ------------ ------------ DEFERRED INCOME TAXES 6,999,000 6,999,000 STOCKHOLDERS' EQUITY Preferred stock, $0.01 par value; 2,000,000 shares authorized; none issued -- -- Common stock, $0.01 par value; 45,000,000 shares authorized; shares issued and outstanding: 23,300,587 and 16,038,882, respectively 233,000 160,000 Class B common stock, $0.01 par value; 3,000,000 shares authorized; none issued -- -- Additional paid-in capital 62,426,000 13,857,000 Retained earnings 21,960,000 36,253,000 ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 84,619,000 50,270,000 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $527,010,000 $226,474,000 ============ ============
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS. 2 CASINO AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended October 31, Six Months Ended October 31, 1996 1995 1996 1995 ------------------------------ ----------------------------- REVENUE: Casino $ 94,624,000 $29,660,000 $132,098,000 $58,855,000 Rooms 4,256,000 1,488,000 6,440,000 1,488,000 Management fee - joint ventures 98,000 1,553,000 2,110,000 2,768,000 Pari-mutuel commissions and fees 2,277,000 1,764,000 5,664,000 2,825,000 Food, beverage and other 5,784,000 1,226,000 8,847,000 2,173,000 ------------ ----------- ------------ ----------- TOTAL REVENUE 107,039,000 35,691,000 155,159,000 68,109,000 ------------ ----------- ------------ ----------- OPERATING EXPENSES: Casino 24,998,000 6,531,000 35,962,000 13,430,000 Rooms 1,543,000 975,000 2,401,000 975,000 Gaming taxes 18,281,000 3,550,000 23,229,000 7,137,000 Pari-mutuel 2,398,000 2,772,000 5,308,000 3,947,000 Food, beverage and other 5,229,000 1,820,000 7,599,000 3,933,000 Marine and facilities 6,445,000 2,434,000 9,420,000 4,509,000 Marketing and administrative 34,181,000 12,270,000 47,347,000 22,540,000 Preopening expenses 516,000 -- 2,500,000 1,290,000 Depreciation and amortization 8,075,000 2,899,000 11,448,000 5,527,000 ------------ ----------- ------------ ----------- TOTAL OPERATING EXPENSES 101,666,000 33,251,000 145,214,000 63,288,000 ------------ ----------- ------------ ----------- OPERATING INCOME 5,373,000 2,440,000 9,945,000 4,821,000 INTEREST EXPENSE (11,960,000) (3,559,000) (16,644,000) (6,725,000) INTEREST INCOME: Related parties -- 406,000 203,000 430,000 Other 174,000 106,000 344,000 386,000 EQUITY IN INCOME OF UNCONSOLIDATED JOINT VENTURES 255,000 4,574,000 4,534,000 9,276,000 LOSS ON DISPOSAL OF EQUIPMENT -- (312,000) -- (326,000) ------------ ----------- ------------ ----------- INCOME (LOSS) BEFORE TAXES AND EXTRAORDINARY ITEM (6,158,000) 3,655,000 (1,618,000) 7,862,000 INCOME TAX PROVISION (BENEFIT) (1,201,000) 1,611,000 422,000 3,484,000 ------------ ----------- ------------ ----------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (4,957,000) 2,044,000 (2,040,000) 4,378,000 EXTRAORDINARY ITEM (NET OF TAXES) (12,253,000) -- (12,253,000) -- ------------ ----------- ------------ ----------- NET INCOME (LOSS) ($17,210,000) $ 2,044,000 ($14,293,000) $ 4,378,000 ============ =========== ============ =========== INCOME (LOSS) PER SHARE BEFORE EXTRAORDINARY ITEM ($0.21) $0.13 ($0.09) $0.28 NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE ($0.74) $0.13 ($0.66) $0.28 WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES 23,229,000 15,774,000 21,669,000 15,884,000
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS. 3 CASINO AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended October 31, 1996 1995 ---------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) (14,293,000) $ 4,378,000 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 12,169,000 6,076,000 Deferred income taxes -- 65,000 Equity in income of unconsolidated joint ventures (4,534,000) (9,276,000) Extra ordinary loss on retirement of debt (net of taxes) 12,253,000 -- Loss on disposal of equipment -- 326,000 Changes in current assets and liabilities: Accounts receivable 2,363,000 (829,000) Income tax receivable (2,386,000) 1,189,000 Prepaid expenses and other (451,000) (425,000) Accounts payable (1,534,000) (4,189,000) Accrued liabilities 4,821,000 3,794,000 ------------- ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 8,408,000 1,109,000 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (7,596,000) (27,767,000) Net cash paid for acquisitions (81,168,000) -- Proceeds from disposals of property and equipment 518,000 250,000 Repayments from joint ventures -- 2,300,000 Distributions from joint ventures -- 1,057,000 Decrease in restricted cash -- 12,171,000 Other 1,138,000 517,000 ------------- ------------ NET CASH USED IN INVESTING ACTIVITIES (87,108,000) (11,472,000) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 317,698,000 5,251,000 Principal payments on borrowings and cash paid to retire debt (205,182,000) (4,894,000) Deferred financing costs (12,724,000) (764,000) Proceeds from sale of stock and exercise of options 18,357,000 223,000 ------------- ------------ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 118,149,000 (184,000) ------------- ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 39,449,000 (10,547,000) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 18,585,000 18,997,000 ------------- ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 58,034,000 $ 8,450,000 ============= ============ (CONTINUED)
4 CASINO AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended October 31, 1996 1995 ---------------------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest, net of amounts capitalized $ 12,373,000 $6,112,000 Income taxes, net of refunds received 7,390,000 (341,000) SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Notes payable and debt issued for: Land -- 1,726,000 Property and equipment 514,000 3,713,000 Insurance premiums 573,000 339,000 Acquisitions: Debt assumed (37,142,000) -- Debt issued (90,328,000) -- Stock issued (27,669,000) -- Warrants issued (2,500,000) --
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS. 5 CASINO AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
Shares of Additional Total Common Common Paid-In Retained Stockholders' Stock Stock Capital Earnings Equity ---------- -------- ----------- ------------- -------------- Balance, April 30, 1996 16,038,882 $160,000 $13,857,000 $ 36,253,000 $ 50,270,000 Issuance of common stock 6,495,194 65,000 41,813,000 41,878,000 Issuance of warrants 1,250,000 1,250,000 Exercise of stock options 30,375 1,000 76,000 77,000 Issuance of common stock for compensation 8,300 67,000 67,000 Net Income 2,917,000 2,917,000 ---------- -------- ----------- ------------ ------------- Balance, July 31, 1996 22,572,751 226,000 57,063,000 39,170,000 96,459,000 Issuance of common stock 684,786 7,000 3,888,000 3,895,000 Issuance of warrants 1,250,000 1,250,000 Exercise of stock options 35,250 176,000 176,000 Issuance of common stock for compensation 7,800 49,000 49,000 Net (Loss) (17,210,000) (17,210,000) ---------- -------- ----------- ------------ ------------- Balance, October 31, 1996 23,300,587 $233,000 $62,426,000 $ 21,960,000 $ 84,619,000 ========== ======== =========== ============ =============
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS. 6 CASINO AMERICA, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies ------------------------------------------ Basis of Presentation --------------------- Casino America, Inc. (the "Company") 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 and dockside casinos and related facilities. The Company has licenses to conduct gaming operations in Biloxi and Vicksburg, Mississippi, and in Bossier City and Lake Charles, Louisiana through its subsidiaries. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10- Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Operating results for the three-month period ended October 31, 1996 are not necessarily indicative of the results that may be expected for the year ending April 30, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended April 30, 1996. Goodwill -------- Goodwill principally represents the excess purchase price the Company paid in acquiring the net identifiable assets of St. Charles Gaming Company, Inc. ("SCGC"), Grand Palais Riverboat, Inc. ("GPRI") and Louisiana Riverboat Gaming Partnership ("LRGP"). The Company began amortizing these costs from the effective date of acquisition or commencement of operations in the case of GPRI, over a twenty-five-year period using the straight-line method. Impact of Recently Issued Accounting Standards ---------------------------------------------- In March 1995, the FASB issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, which requires impairment losses to be recorded on long- lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets carrying amount. Statement 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Company adopted Statement 121 in fiscal 1997, and there was no material effect of adoption. 7 Reclassifications ----------------- Certain prior period amounts have been reclassified to conform with the current presentation. Note 2. Business Acquisitions --------------------- Purchase of GPRI and SCGC ------------------------- On May 3, 1996, the Company purchased all of the outstanding shares of common stock of GPRI in a bankruptcy proceeding (the "GPRI Acquisition"). Pursuant to the Plan of Reorganization adopted in such bankruptcy proceeding, the Company purchased 100% of the shares of the reorganized GPRI, which at the time of closing owned the Grand Palais Riverboat, gaming equipment, certain other furniture, fixtures and equipment, all necessary gaming licenses issued by the State of Louisiana, and other permits and authorizations. Commencing July 12, 1996, the Company began operating the GPRI vessel as part of a two- riverboat operation with the SCGC vessel (collectively, the two vessel operation is referred to as the "Isle - Lake Charles"). The aggregate consideration paid by the Company in connection with the GPRI Acquisition was approximately $61.5 million, consisting of cash in the amount of approximately $8.2 million, notes and the assumption of indebtedness of approximately $37.1 million, 2,250,000 shares of common stock, and warrants to purchase an additional 500,000 shares of common stock at an exercise price of $10 per share. At the time of the GPRI Acquisition, the Company also purchased the remaining 50% interest in SCGC not already owned by LRGP (the "SCGC Acquisition"), in exchange for 1,850,000 shares of the Company's common stock and a five-year warrant. The warrant allows the seller to convert up to $5,000,000 of its note receivable from the Company to 416,667 shares of common stock of the Company. The purchase agreement also provides for the restructuring of certain indebtedness owed to the seller. LRGP Acquisition ---------------- On August 6, 1996, the Company acquired the remaining 50% interest in Louisiana Riverboat Gaming Partnership ("LRGP") and LRG Hotels, L.L.C. held by Louisiana River Site Development, Inc. (the "LRGP Acquisition"). The consideration for the LRGP Acquisition included (i) $85 million in cash, (ii) five-year warrants to purchase 500,000 shares of Common Stock at an exercise price of $10.50 per share and (iii) $1.5 million per year for seven years, payable monthly beginning on October 1, 1998. Pompano Park ------------ On June 30, 1995, the Company acquired 100% of Pompano Park (the "Pompano Acquisition"), a harness racing track located in Pompano Beach, Florida, for approximately $8,000,000. If casino gaming is legally permitted in Florida at the 8 Pompano Park site by June 30, 2001, the Company is required to pay additional consideration to the seller amounting to $25,000,000 plus 5% of net gaming win, as defined. The probability of the Company paying such additional consideration is remote; however, if such payments are made in the future, they would be accounted for as additional purchase price and allocated to goodwill. Such goodwill will be amortized over a period to be determined at date of payment not to exceed 40 years. The SCGC Acquisition, the LRGP Acquisition, the GPRI Acquisition and the Pompano Acquisition have been accounted for by the Company using the purchase method of accounting, and the Company's proportionate share of the results of operations for each of the acquired companies has been included in the Company's results of operations from the respective dates of acquisition. Total goodwill related to the above acquisitions was approximately $116.1 million. The allocation of the purchase prices for these acquisitions has been performed on a preliminary basis and is subject to further analysis and revisions. Pro forma Information --------------------- The following unaudited pro forma condensed consolidated financial information for the six months ended October 31, 1996 gives effect to the SCGC Acquisition, the LRGP Acquisition, and the GPRI Acquisition, as if such transactions had occurred on May 1, 1996. The unaudited pro forma condensed consolidated financial information for the six months ended October 31, 1995 gives effect to LRGP's purchase of a 50% interest in SCGC on June 9, 1995, the SCGC Acquisition, the LRGP Acquisition and the GPRI Acquisition, as if such transactions had occurred on May 1, 1995.
Six Months Ended October 31, 1996 1995 ----------------------------- Total revenue $220,603,000 $161,757,000 Operating income 20,813,000 18,950,000 Net income (loss) (2,686,000) 787,000 Net income (loss) per common and common equivalent share $ (.12) $ .04
The pro forma financial information presented above does not purport to be indicative of the results of operations that actually would have been achieved if the operations were combined during the periods presented nor is it intended to be a projection of results or trends. Because the Company will consolidate LRGP and SCGC for reporting periods subsequent to the date of the LRGP Acquisition, the pro forma financial information has been presented on a consolidated basis. The pro forma operating results presented above do not give effect to the acquisition of Pompano prior to June 30, 1995 because the pro forma effect of this acquisition would not be material to the operating results of the Company. The pre-bankruptcy business of GPRI consisted entirely of developing and operating the Grand Palais riverboat casino in New Orleans, Louisiana. The Grand Palais began gaming operations in New Orleans on March 29, 1995 and, due to poor operating 9 results, ceased operations on June 6, 1995. GPRI was forced into involuntary bankruptcy on July 26, 1995 and was completely non- operational between June 6, 1995 and the subsequent reopening of the Grand Palais at the Isle-Lake Charles on July 12, 1996. Other than amortization of the related goodwill and interest on debt incurred to effect the GPRI Acquisition, adjustments related to the pre-bankruptcy operations of GPRI have not been included in the pro forma results of operations for the six months ended October 31, 1995 because the pre- bankruptcy operations of GPRI were very limited and substantially different than the post-acquisition operations. Note 3. Operating Expenses ------------------ The Isle of Capri Casino in Biloxi, Mississippi, (the "Isle-Biloxi"), which originally opened on August 1, 1992, underwent a substantial reconfiguration of its existing casino complex and opened a new hotel and pavilion on August 1, 1995. The Company incurred $1,290,000 of preopening expenses in connection with the opening of this expanded facility during the three-month period ended October 31, 1995. On July 12, 1996, GPRI commenced operations as part of a two-boat operation and recently expanded pavilion at the Isle-Lake Charles. The Company incurred $516,000 of preopening expenses in connection with the opening of GPRI during the three-month period ended October 31, 1996 and $2,500,000 of preopening expenses for the six-month period ended October 31, 1996. Note 4. Long-term Debt -------------- On August 6, 1996, the Company issued $315,000,000 of 12-1/2% Senior Secured Notes due 2003 (the "Senior Secured Notes"). Interest on the Senior Secured Notes is payable semiannually on each February 1, and August 1, commencing February 1, 1997, through maturity. The Senior Secured Notes are redeemable at the option of the Company, in whole or in part, on or after August 1, 2000, at the redemption prices set forth in the indenture pursuant to which the Senior Secured Notes were issued (the "Indenture"), plus accrued interest. The Company's obligations under the Senior Secured Notes and the Indenture are jointly, severally and unconditionally guaranteed (the "Subsidiary Guarantees" ) on a senior secured basis by all existing and future Significant Restricted Subsidiaries (as defined in the Indenture) of the Company, subject to the receipt of the required approval of any applicable Gaming Authority. The obligations arising under the Subsidiary Guarantees are guaranteed by the Company. The Notes are secured by a first priority Lien on substantially all of the assets of the Company, and the Subsidiary Guarantees are secured by a first priority Lien on substantially all of the tangible assets of the Subsidiary Guarantors (as defined in the Indenture), other than (i) the Isle-Biloxi Hotel, the Grand Palais and Pompano Park, as to which junior priority liens have been granted, and (ii) excluded assets (as defined in the Indenture). 10 The Indenture contains certain covenants with respect to, among others, the following matters: (i) limitation on indebtedness, (ii) limitation on liens, (iii) limitation on restricted payments, (iv) limitation on dividends and other payment restrictions affecting affiliates, (v) limitation on asset sales and events of loss, (vi) limitation on disposition of stock of Restricted Subsidiaries, (vii) limitation on transactions with affiliates and (viii) restrictions on consolidations, mergers and transfers of assets. Part of the proceeds from the Senior Secured Notes were used to retire or defease $180,285,000 in long-term debt, including $105,000,000 of 11-1/2% First Mortgage Notes due 2001. The proceeds were also used to pay accrued interest and other costs of $16,396,000, as well as to consummate the LRGP Acquisition. Note 5. Common Stock ------------ The Company's Board of Directors authorized the offering, on a pro-rata basis, of rights (the "Rights Offering") to purchase shares of the Company's common stock at a price of $5.875 per share at a ratio of approximately one share for every four shares owned to certain of its shareholders of record on March 15, 1996. As of October 31, 1996, the proceeds from the issuance of 3,079,980 shares of common stock from the Rights Offering were approximately $18,049,000, net of issuance costs of approximately $46,000. Note 6. Extraordinary Item ------------------ The Company incurred extraordinary costs totaling $18,851,000 related to the refinancing of its 11.5% First Mortgage Notes and other debt in early August of 1996. The extraordinary cost included early payment premiums, as well as the write-off of consent fees and debt acquisition costs. The tax benefit from the extraordinary loss was $6,598,000. 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with, and is qualified in its entirety by, the unaudited consolidated financial statements, including the notes thereto, included elsewhere in this report. 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 Company's plans to make capital investments at its facilities, including, without limitation, considerations to develop hotels at the Isle- Bossier City and the Isle-Lake Charles and the expansion of non-gaming amenities at all facilities, are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements 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 and labor and unforeseen delays resultings from a failure to obtain necessary approvals, and the Company's limited experience in developing hotel operations. Other important factors that could cause the Company's actual results to differ materially from expectations are discussed under "Risk Factors" in the prospectus dated August 1, 1996 relating to the issuance of the Company's Senior Secured Notes. GENERAL The Company's results of operations for the three months ended October 31, 1996 reflect the consolidated operations from all of the Company's subsidiaries, including the Isle-Biloxi, the Isle-Lake Charles, Isle of Capri Casino in Vicksburg, Mississippi (the "Isle-Vicksburg"), the Isle of Capri Casino in Bossier City, Louisiana (the "Isle-Bossier City") and Pompano Park, Inc. ("PPI"). The LRGP Acquisition, consummated August 6, 1996, gave the Company 100% ownership in the Isle-Bossier City and the Isle-Lake Charles, allowing the Company to consolidate their results of operations in this period. Previously, the Company reported its interests in the Isle-Bossier City and the Isle-Lake Charles using the equity method of accounting. The Company believes that its results of operations for the three and six months ended October 31, 1996 are not readily comparable to the results of operations for the three and six month ended October 31, 1995 primarily because of the consolidation of the results of operations of the Isle-Bossier City and the Isle-Lake Charles. Furthermore, the historical results of operations reflect the Isle-Lake Charles as a single riverboat operation, whereas the Isle-Lake Charles operates two riverboats as of July 12, 1996 as a result of the GPRI Acquisition on May 3, 1996. In addition, the land-based pavilion at the Isle-Lake Charles was recently expanded, and the three months ended October 31, 1996 was the first full quarter of operating results for GPRI. Because of the lack of comparable information on a consolidated basis, the following discussion will focus on certain events and trends that affected the Company's consolidated operations during the quarter ended October 31, 1996 and comparable data on a location basis. The Company believes that its historical results may not be indicative of future results of operations because of the substantial present and expected future increase in gaming competition for gaming customers in each of the Company's markets as new casinos open and as existing casinos add to or enhance their facilities. The Company believes that seasonality does not have a significant effect on its business. 12 RESULTS OF OPERATIONS Three Months Ended October 31, 1996 - Consolidated Company Total revenue for the quarter ended October 31, 1996 was $107.0 million which included $94.6 million of casino revenue, $4.3 million of rooms revenue, $2.3 of pari-mutuel commissions, and $5.9 million of food, beverage and other revenue. The consolidated revenue of the Company has been impacted by the inclusion of the Isle - Bossier City and the Isle - Lake Charles into the Company's consolidated financial statements and by the GPRI operations for a full quarter. Revenue does not reflect the retail value of any complimentaries. Also, as a result of the LRGP Acquisition, management fees are not reported for periods subsequent to the date of acquisition because these amounts have been eliminated in consolidation. Casino operating expenses for the quarter totaled $25.0 million, or 26% of casino revenue versus $6.5 million, or 22% for the three months ended October 31, 1995. These expenses were primarily comprised of salaries, wages and benefits, and operating and promotional expenses of the casino. Operating expenses for the quarter also included room expenses of $1.5 million from the hotels at the Isle - Biloxi and the Isle - Bossier City. These expenses were those directly relating 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. State and local gaming taxes paid in Mississippi and Louisiana totaled $18.3 million for the quarter which is consistent with the gaming tax rate for previous periods. Food and beverage expenses totaled $5.2 million for the quarter. These expenses are comprised primarily of the cost of goods sold, salaries, wages and benefits, and the operating expenses of these departments. Marine and facilities expenses totaled $6.4 million for the three months ended October 31, 1996 and included salaries, wages and benefits, operating expenses of the marine crews, insurance, housekeeping and general maintenance of the riverboats and floating pavilions. Marketing and administrative expenses totaled $34.2 million for the quarter. Marketing expenses included salaries, wages and benefits of the marketing and sales departments as well as promotions, advertising, special events and entertainment. Administrative expenses included administration and human resource department expenses, rent, new development activities, professional fees and property taxes. Depreciation and amortization expense was $8.1 million for the quarter. These expenses relate to capital expenditures and acquisition of leasehold improvements, and berthing and concession rights, as well as the amortization of goodwill. Preopening expenses of $.5 million for the quarter represent salaries, wages and benefits, training, marketing and other non-capitalized costs which were expensed as incurred in connection with the opening of the Grand Palais riverboat. Net interest expense was $11.8 million for the quarter net of interest income of $.2 million. Interest expense primarily relates to indebtedness incurred in connection with the acquisition of property, equipment, leasehold improvements and berthing and concession rights, as well as indebtedness relating to the purchase of the remaining interest in LRGP. 13 The Company had a loss before extraordinary item of $5.0 million for the quarter primarily as a result of gearing its Louisiana staffing and marketing expenditure levels for revenue levels greater than actually experienced, in addition to increased competition within its markets. In addition, the Company recorded an extraordinary charge of approximately $12.3 million (net of a tax benefit of $6.6 million) resulting from the refinancing of its 11.5% first Mortgage Notes and other indebtedness in August 1996. The Company's effective tax rate was approximately 31% for the quarter. Three Months Ended October 31, 1996, Compared to Three Months Ended October 31, 1995-By Location Isle - Biloxi - ------------- For the quarter ended October 31, 1996, the Isle - Biloxi had total revenue of $22.9 million of which $19.0 million was casino revenue, compared to total revenue of $18.8 million of which $16.0 million was casino revenue for the quarter ended October 31, 1995. The increase in revenue relates primarily to increased occupancy and casino traffic resulting from its 367-room hotel which opened on August 1, 1995. Operating income for the three months ended October 31, 1996 totaled $4.4 million or 19% of total revenues compared to $3.0 million or 16% for the three months ended October 31, 1995. Increased operating income margin is due primarily to improved operating efficiency following the start-up of hotel operations. Isle - Vicksburg - ---------------- For the quarter ended October 31, 1996, the Isle - Vicksburg had total revenue of $13.5 million of which $12.9 million was casino revenue, compared to total revenue of $14.1 million of which $13.7 million was casino revenue for the quarter ended October 31, 1995. Operating Income for the three months ended October 31, 1996 totaled $1.6 million or 12% of total revenue compared to $3.0 million or 21% for the three months ended October 31, 1995. The decrease in revenue and operating income relates primarily to the impact of increased competition within and overall weakness of the market. Isle - Bossier City - ------------------- For the quarter ended October 31, 1996, the Isle - Bossier City had total revenue of $36.8 million of which $34.0 million was casino revenue, compared to total revenue of $37.6 million of which $35.5 million was casino revenue for the quarter ended October 31, 1995. Operating income for the three months ended October 31, 1996 totaled $4.2 million or 11% of total revenue compared to $10.4 million or 28% for the three months ended October 31, 1995. The decrease in revenue and operating income relates primarily to increased promotional activities by competitors in the market and the addition of a new competitor in the market. Isle - Lake Charles - ------------------- For the quarter ended October 31, 1996, the Isle - Lake Charles had total revenue of $33.1 million of which $31.9 million was casino revenue, compared to total revenue of $17.6 million of which $16.5 million was casino revenue for the quarter ended October 31, 1995. The increase in revenue relates to the commencement of a two-boat operation on July 12, 1996. Operating loss before preopening expenses associated with the opening of the second riverboat of $.5 million for the three months ended October 31, 1996 totaled $.7 million compared to an operating income of $.8 million before preopening expenses of $1.9 million for the three months ended October 31, 1995. The operating performance at the Isle-Lake Charles was adversely impacted by high marketing and labor costs associated with opening the second riverboat. 14 Six Months Ended October 31, 1996 - Consolidated Company Total revenue for the six months ended October 31, 1996 was $155.2 million which included $132.1 million of casino revenue, $6.4 million of rooms revenue, $2.1 million of management fees, $5.7 of pari mutuel commissions, and $9.0 million of food, beverage and other revenue. The consolidated revenue of the Company has been impacted by the inclusion of the Isle - Bossier City and the Isle - Lake Charles into the Company's consolidated financial statements and by the GPRI operations since July 12, 1996. Revenues do not reflect the retail value of any complimentaries. Also, as a result of the LRGP Acquisition, management fees are not reported for the periods subsequent to the date of acquisition because these amounts have been eliminated in consolidation. Casino operating expenses for the six-month period totaled $36.0 million, or 27% of casino revenue versus $13.4 million, or 23% for the six months ended October 31, 1995. These expenses were primarily comprised of salaries, wages and benefits, and operating and promotional expenses of the casino. Operating expenses for the six-month period also included room expenses of $2.4 million from the hotels at the Isle - Biloxi and the Isle - Bossier City. These expenses were those directly relating 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. State and local gaming taxes paid in Mississippi and Louisiana totaled $23.2 million for the six-month period, which is consistent with the gaming tax rate for previous periods. Food and beverage expenses totaled $7.6 million for the six-month period. These expenses are comprised primarily of the cost of goods sold, salaries, wages and benefits, and the operating expenses of these departments. Marine and facilities expenses totaled $9.4 million for the six-month period ended October 31, 1996 and include salaries, wages and benefits, operating expenses of the marine crews, insurance, housekeeping and general maintenance of the riverboats and floating pavilions. Marketing and administrative expenses totaled $47.3 million for the six-month period. Marketing expenses included salaries, wages and benefits of the marketing and sales departments as well as promotions, advertising, special events and entertainment. Administrative expenses included administration and human resource department expenses, rent, new development activities, professional fees and property taxes. Depreciation and amortization expense was $11.4 million for the six-month period. These expenses relate to capital expenditures and acquisition of leasehold improvements, and berthing and concession rights, as well as the amortization of goodwill. Preopening expenses of $2.5 million for the six-month period represent salaries, wages and benefits, training, marketing and other non-capitalized costs which were expensed as incurred in connection with the opening of the Grand Palais riverboat. Interest expense was $16.1 million for the six-month period net of interest income of $.5 million. Interest expense relates to indebtedness incurred in connection with the acquisition of property, equipment, leasehold improvements and berthing and concession rights, as well as indebtedness relating to the purchase of the remaining interest in LRGP and the purchase of GPRI. The Company had a loss before extraordinary item of $2.0 million for the six months ended October 15 31, 1996, primarily as a result of the adverse performance of its Louisiana casinos and increased competition within its markets during the three months ended October 31, 1996. In addition, the Company recorded an extraordinary charge of $12.3 million (net of a tax benefit of $6.6 million) resulting from the refinancing of its First Mortgage Notes and other indebtedness in August 1996. The Company's effective tax rate was approximately 30% for the six-month period. Six Months Ended October 31, 1996, Compared to Six Months Ended October 31, 1995 - - By Location Isle - Biloxi - ------------- For the six months ended October 31, 1996, the Isle - Biloxi had total revenue of $46.0 million of which $38.1 million was casino revenue, compared to total revenue of $32.3 million of which $29.1 million was casino revenue for the six months ended October 31, 1995. The increase in revenue relates to increased occupancy and a full period of operations of its 367-room hotel which opened on August 1, 1995. Operating income for the six months ended October 31, 1996 totaled $8.0 million or 17% of total revenue compared to $4.2 million or 13% for the six months ended October 31, 1995. The increase in operating margin was due primarily to improved operating efficiencies following the start-up of hotel operations. Isle - Vicksburg - ---------------- For the six months ended October 31, 1996, the Isle - Vicksburg had total revenue of $28.2 million of which $26.8 million was casino revenue, compared to total revenue of $30.7 million of which $29.8 million was casino revenue for the six months ended October 31, 1995. Operating income for the six months ended October 31, 1996 totaled $3.8 million or 14% of total revenue compared to $6.8 million or 22% for the six months ended October 31, 1995. The decrease in revenue and operating income is primarily a result of increased competition from within and overall weakness of the market. Isle - Bossier City - ------------------- For the six months ended October 31, 1996, the Isle - Bossier City had total revenue of $77.2 million of which $71.3 million was casino revenue, compared to total revenue of $77.9 million of which $73.5 million was casino revenue for the six months ended October 31, 1995. Operating income for the six months ended October 31, 1996 totaled $12.2 million or 16% of total revenue compared to $21.3 million or 27% for the six months ended October 31, 1995. The decrease in revenue and operating margin primarily reflects the impact of increased promotional activities by competitors in the market and the addition of a new competitor in the market. Isle - Lake Charles - ------------------- For the six months ended October 31, 1996, the Isle - Lake Charles had total revenue of $62.9 million of which $59.7 million was casino revenue, compared to total revenue of $18.2 million of which $17.0 million was casino revenue for the six months ended October 31, 1995. The increase in revenue primarily relates to the commencement of operations of GPRI on July 12, 1996. Operating income for the six months ended October 31, 1996 totaled $3.7 million before preopening expenses associated with a second riverboat of $2.5 million compared to an operating loss of $5.1 million before preopening expenses of $1.9 million for the six months ended October 31, 1995. The operating performance of the Isle- Lake Charles was adversely impacted by high marketing and labor costs associated with opening the second riverboat. 16 Liquidity and Capital Resources At October 31, 1996, the Company had cash and cash equivalents of $58.0 million compared to $18.6 million at April 30, 1996. The increase in cash balances is a result of the proceeds received from the Rights Offering and Senior Secured Notes. During the six-month period ended October 31, 1996, the Company's operating activities provided $8.4 million compared to $1.1 million of cash flow in the first six months of fiscal 1996. The significant amount of cash used in operations during the second quarter ended October 31, 1996, relates primarily to the extraordinary charge, previously discussed. The Company invested $7.6 million in property and equipment in the first six months of fiscal 1997, primarily for equipment, as well as in connection with the completion of the events center at the Isle-Lake Charles and the construction of a limited stakes poker room at Pompano Park, which is scheduled to open on or about January 1, 1997. In July and August, 1996, the Company received an aggregate of $18.1 million from the issuance of 3,079,980 shares of common stock issued pursuant to the Rights Offering. On August 6, 1996, the Company issued $315,000,000 of 12-1/2% Senior Secured Notes due 2003. Interest on the Senior Secured Notes is payable semiannually on each February 1 and August 1, commencing February 1, 1997, through maturity. Part of the proceeds from the Senior Secured Notes were used to retire or defease $180,285,000 in long-term debt, including $105,000,0000 of 11-1/2% First Mortgage Notes due 2001. The proceeds were also used to pay accrued interest and other costs of $16,396,000 and to acquire the remaining 50% interest in LRGP and LRG Hotels, L.L.C. held by Louisiana River Site Development, Inc. The consideration for the LRGP Acquisition included $85,000,000 million in cash, five-year warrants to purchase 500,000 shares of common stock at an exercise price of $10.50 per share, and $1.5 million per year for seven years, payable monthly beginning on October 1, 1998. The Company anticipates that its principal near-term capital requirements will relate to the expansion of its operations at the Isle-Lake Charles and at the Isle-Bossier City if the Company is successful in obtaining an additional license at that location and investments in hotel properties adjacent to the Isle-Bossier City and the Isle-Lake Charles. An important component of the Company's operating strategy will be to develop, open and operate, either directly, through a hotel joint venture or otherwise, hotel facilities at its gaming facilities in order to attract additional gaming patrons and encourage longer visits to and a greater level of play at the Company's casinos. The Company is planning to develop hotel properties adjacent to the Isle-Bossier City and the Isle-Lake Charles, although no assurance can be made that all of such investments will be made. Although the Company is not presently committed to making any significant capital expenditures or investment in a new gaming market, the Company believes that, in addition to developing hotels, it will be necessary to make certain capital improvements to its land-based facilities at the Isle-Bossier City, even if no additional license is obtained for such location, and the Isle-Vicksburg and that enhancements to its non-gaming amenities at all facilities will be important to its operations. The Company may, in the future, also consider expanding its casino square footage at the Isle-Biloxi. In addition, the Company may consider making investments in jurisdictions where gaming is not presently permitted, but in which it believes that gaming may be legalized in the future. The Company expects that available cash and cash from future operations will be adequate to fund planned capital expenditures, debt service and working capital requirements. However, no assurance 17 can be made that the Company will have sufficient capital resources to make all of the planned capital expenditures described above or such capital investments that may be necessary to remain competitive in the Company's markets. In addition, the Indenture governing the Senior Secured Notes places certain limits on the Company's ability to incur additional indebtedness and to make certain investments. The Company is highly leveraged and, as a result may be unable to obtain additional debt or equity financing on terms acceptable to the Company. As a result, limitations on the Company's capital resources could delay certain plans with respect to capital improvements at the Company's existing properties. Furthermore, the Company will continue to evaluate its planned capital expenditures at each location in light of the operating performance of the respective facilities at such locations. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In March 1995, the Financial Accounting Standards Board issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the asset carrying amount. Statement No. 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Company adopted Statement 121 in fiscal 1997, and there was no material effect of adoption. 18 PART II - OTHER INFORMATION Item 1. Legal Proceedings - None ----------------- Item 2. Changes in Securities --------------------- A. On July 26, 1996, the Company and Fleet National Bank, as Trustee, entered into the Fourth Supplemental Indenture governing the Company's 11-1/2 % First Mortgage Notes due 2001 (the "Amendment"). The modification effected by the Amendment set forth the Company's ability to defease the security covenants and provisions of such First Mortgage Notes. B. On August 6, 1996, the Company issued its 12-1/2% Senior Secured Notes due 2003, in aggregate principal amount of $315 million, and in connection therewith defeased the covenants pertaining to the Company's 11-1/2% First Mortgage Notes due 2001, including the Company's covenants as to the provision of security. As a result, the security formerly securing such First Mortgage Notes now secures, in substantial part, the newly issued Senior Secured Notes. Item 3. Defaults upon Senior Securities - None ------------------------------- Item 4. Submission of Matters to a Vote of Security Holders - None --------------------------------------------------- Item 5. Other Information - None ----------------- Item 6. Exhibits and Reports on Form 8-K -------------------------------- A. Exhibits -------- A list of the exhibits included as part of this Form 10-Q 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 second quarter ended October 31, 1996, the Company filed the following reports on Form 8-K for the following dates: 1. On August 6, 1996 (date of event reported), the Company reported the acquisition of the remaining 50% interest in Louisiana Riverboat Gaming Partnership. 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CASINO AMERICA, INC. Dated: December 13, 1996 By: /s/ Rexford A. Yeisley ---------------------- Rexford A. Yeisley Chief Financial Officer & Treasurer (Duly Authorized Officer and Principal Financial Officer and Accounting Officer) 20 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 10.1 Employment contract entered into by the Company and Michael G. Rose, dated as of September 27,1996 27 Financial Data Schedule EX-10.1 2 ROSE EMPLOYMENT AGREEMENT EXHIBIT 10.1 ------------ EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the 24th day of September, 1996 between Casino America, Inc., a Delaware corporation (the "Company") and Michael G. Rose ("Employee"). In consideration of the mutual promises of this Agreement, the Company and Employee agree as follows: 1. Effective Date: This agreement shall be effective as of September 24, 1996. 2. Employment: (a) Term. The Company hereby employs Employee, and Employee accepts such employment and agrees to perform services for the Company and/or its Subsidiaries, for an initial period of three (3) years from and after the Effective Date of this Agreement (the "Initial Term") and, unless either party gives written notice to the other party at least one (1) year before the end of the Initial Term or of any Renewal Term, for successive one-year periods (the "Renewal Terms"), unless terminated at an earlier date in accordance with Section 5 of this Agreement (the Initial Term and the Renewal Terms together referred to as the "Term of Employment"). (b) Service with Company. During the Term of Employment, Employee agrees to perform reasonable employment duties as the Board of Directors of the Company and/or its Subsidiaries shall assign to him from time to time. Employee also agrees to serve, for any period for which he is elected as an officer of the Company and/or its Subsidiaries; provided, however, that Employee shall not be entitled to any additional compensation for serving as an officer of the Company and/or its Subsidiaries. Employee's initial position shall be to serve as Vice- President of Marketing. (c) Performance of Duties. Employee agrees to serve the Company and/or its Subsidiaries faithfully and to the best of his ability and to devote substantially all of his time, attention and efforts to the business and affairs of the Company and/or its Subsidiaries during the Term of Employment. (d) Compensation. During the Term of Employment, the Company and/or its Subsidiaries shall pay to Employee as compensation for services to be rendered hereunder an aggregate base salary of $150,000 per year, payable in equal monthly, or more frequent payments, subject to increases, if any, as may be determined by the Company's Board of Directors. In addition, Employee will be eligible to receive an annual bonus beginning on or about June 1997 based upon his job performance and the performance of the Company, which bonus shall not be less than $10,000 for the fiscal 1997 year. Employee shall also be eligible to participate in any stock option plans of the Company and/or its Subsidiaries. Employee shall initially receive options to purchase a total of 25,000 shares of the Common Stock of the Company at the fair market price at date of issue. The options will be vested at the rate of 5,000 shares per year. In the event of a change in management, take- over or buyout, all shares shall be fully vested. Employee shall be eligible to participate in such employee benefit plans or programs of the Company and/or its Subsidiaries as are or may be made generally available to employees of the Company or of its Subsidiaries. The Company and/or its Subsidiaries will pay or reimburse Employee for all reasonable and necessary out-of-pocket expense incurred by him in moving to Biloxi and in the performance of his duties under this Agreement, and in accordance with Company policy. If Employee voluntarily leaves the Company's employment within one (1) year of Employee's Effective Date, Employee will reimburse the Company for all relocation expenses incurred by the Company or on behalf of Employee at a pro-rated rate (i.e. if Employee voluntarily leaves six (6) months after the Effective Date, Employee will reimburse the Company 50% of all relocation expenses). Employee will be entitled to three (3) weeks paid vacation. 3. Confidentiality and Non-Competition. (a) Ownership. Employee agrees that all inventions, copyrightable material, business and/or technical information and trade secrets which arise out of the performance of his Agreement are the property of the Company and/or its Subsidiaries. (b) Non-Competition. Employee agrees to the following covenant not to compete beginning on the effective date of this Agreement and continuing until one year after termination of his employment relationship with the Company: Employee agrees not to compete, directly or indirectly (including as an officer, director, partner, employee, consultant, independent contractor, or more than 5% equity holder of any entity) with the Company or any of its Subsidiaries in any way concerning the ownership, development or management of any gaming operation or facility within a 75-mile radius of any gaming operation or facility with respect to which the Company or any of its Subsidiaries owns, renders or proposes to render consulting or management services. The Company fully understands that Employee is a major owner of a gaming consultant company, which consultant company holds two gaming management agreements in the State of Oregon. The Company will not hold Employee bound by the non-competitive provision as it applies to the two Oregon agreements. (c) Confidentiality. Except as is consistent with Employee's duties and responsibilities within the scope of his employment with the Company and/or the Subsidiaries, Employee agrees not to use or disclose to any unauthorized person information which is not generally known and which is proprietary to the Company or any Subsidiary, including all information that the Company or any Subsidiary treats as confidential, ("Confidential Information"). Upon termination of Employee's employment, Employee will promptly turn over to the Company all soft ware, records, manuals, books, forms, documents, notes, letters, memoranda, reports, data, tables, compositions, articles, devices, apparatus and other items that disclose, describe or embody Confidential Information including all copies of the Confidential Information in his possession, regardless of who prepared them. 4. Remedies. Employee understands that if he fails to fulfill his obligations under this Agreement, the damages to the Company and/or its Subsidiaries would be very difficult to determine. Therefore, in addition to any other rights or remedies available to the Company at law, in equity, or by statute, Employee hereby consents to the specific enforcement of this Agreement by the Company through an injunction or restraining order issued by the appropriate court. 5. Termination. (a) Grounds for Termination. The Term of Employment set forth in Section 2(a) shall terminate prior to its expiration in the event that at any time during such term: (i) Employee shall die or become disabled as determined in good faith by the Board of Directors of the Company; or (ii) The Board of Directors of the Company delivers notice of termination for "cause" to Employee. For purposes of this section, "cause" shall mean: (1) Employee's inability to become qualified by any gaming authority; (2) any dishonesty, disloyalty or gross misconduct on the part of Employee in the performance of Employee's duties hereunder; (3) any breach of Company and/or the Subsidiaries policies or failure on the part of Employee to perform duties assigned to Employee by the Company's Board of Directors, which breach or failure is not remedied by Employee within 30 days after notice thereof is given by the Company to Employee; or (4) any event or circumstance regarding Employee which may, in the judgment of the Board of Directors of the Company, result in (i) the disapproval, modification, or non-renewal of any contract under which the Company or any Subsidiary has sole or shared authority to own, develop, manage or consult with any gaming operations; or (ii) the loss of non-reinstatement of any license or franchise from any governmental agency held by the Company or any Subsidiary to conduct any portion of the business of the Company or any Subsidiary, which license or franchise is conditioned upon employees or officers of the Company meeting certain criteria. (b) Severance. The Company may terminate the Term of Employment at any time for any reason. If the Company terminates the Term of Employment (by either terminating Employee's employment or by giving the notice described in Section 2(a) to prevent a Renewal Term) without "cause", then, provided that the Employee signs a General Release in a form acceptable to the Company that releases the Company and its affiliated entities from any and all claims that Employee may have against them, Employee shall be entitled to continue to receive his salary and employee benefits for twelve months. 6. Miscellaneous. (a) Successors and Assigns. This Agreement is binding on and inures to the benefit of the Company's successors and assigns. The Company may assign this Agreement in connection with a merger, consolidation, assignment, sale or other disposition of substantially all of its assets or business. This Agreement may not be assigned by Employee. (b) Modifications, Waivers. This Agreement may be modified or amended only by a writing signed by the Company, and Employee. The Company's failure, or delay in exercising any right, or partial exercise of any right, will not waive any provision of this Agreement or preclude the Company from otherwise or further exercising any rights or remedies hereunder, or any other rights or remedies granted by any law or any related document. (c) Governing Law and Jurisdiction. The laws of Delaware will govern the validity, construction, and performance of this Agreement. Any legal proceeding related to this Agreement will be brought in a Delaware court. Both the Company and Employee hereby consent to the exclusive jurisdiction of that court of this purpose. (d) Captions. The headings in this Agreement are for convenience only and do not affect the interpretation of this Agreement. (e) Severability. To the extent any provision of this Agreement shall be invalid or enforceable with respect to Employee, it shall be considered deleted herefrom with respect to Employee and the remainder of such provision and this Agreement shall be unaffected and shall continue in full force and effect. In furtherance to and not in limitation of the foregoing, should the duration or geographical extent of, or business activities covered by, any provision of this Agreement be in excess of that which is valid and enforceable under applicable law with respect to Employee, then such provision shall be construed to cover only that duration, extent or activities which are validly and enforceably covered with respect to Employee. Employee acknowledges the uncertainty of the law in this respect and expressly stipulates that this Agreement be given the construction which renders its provisions valid and enforceable to the maximum extent (not exceeding its expressed terms) possible under applicable laws. (f) Entire Agreement. This Agreement supersedes all previous and contemporaneous oral negotiations, commitments, writings and understandings between the parties concerning the matters herein or therein, including without limitation, any policy or personnel manuals of the Company. (g) Notices. All notices and other communications required or permitted under this Agreement shall be in writing and sent by registered first- class mail, postage prepaid, and shall be deemed delivered upon hand delivery or upon mailing (postage prepaid and by registered or certified mail) to the following address: If to the Company, to: Casino America, Inc. 711 Washington Loop Biloxi, MS 39530 If to the Employee, to: Michael G. Rose --------------- 91 Sailfish Drive ----------------- Brigantine, NJ 08203 --------------------- These addresses may be changed at any time by like notice. IN WITNESS WHEREOF, each party has caused this Agreement to be executed in a manner appropriate for such party as of the date first above written. CASINO AMERICA, INC. By:_______________________________________ John M. Gallaway, President "EMPLOYEE" __________________________________________ Michael G. Rose EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CASINO AMERICA, INC.'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS APR-30-1997 MAY-01-1996 OCT-31-1996 58,034 0 4,241 0 0 77,867 340,002 46,112 527,010 60,975 374,417 0 0 233 84,619 527,010 0 155,159 0 74,499 70,715 0 16,644 (1,618) 422 (2,040) 0 (12,253) 0 (14,293) (.66) (.66)
-----END PRIVACY-ENHANCED MESSAGE-----