1
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SECURITIES XXX XXXXXXXX XXXXXXXXXX
XXXXXXXXXX, X.X. 00000
------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
[ ] 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 0-20712
CASINO MAGIC CORP.
(Exact name of registrant as specified in its charter)
MINNESOTA 00-0000000
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
000 XXXXXX XXXXX XXXXX, XXX XXXXX XXXXX, XX 00000
(Address of principal executive offices) (Zip Code)
(000) 000-0000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check xxxx whether the registrant (1) has filed all reports
required to be filed by Sections 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 the number of shares outstanding of the issuer's classes of common
stock, as of the latest practicable date. 35,722,124 shares common stock
outstanding as of July 30, 1998.
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2
CASINO MAGIC CORP. AND SUBSIDIARIES
INDEX
PAGE NO.
--------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements........................................ 1
Condensed Consolidated Statements of Operations --
For the six months ended June 30, 1998 and 1997............. 1
Condensed Consolidated Statements of Operations --
For the three months ended June 30, 1998 and 1997........... 2
Condensed Consolidated Balance Sheets --
June 30, 1998 and December 31, 1997......................... 3
Condensed Consolidated Statements of Cash Flows --
For the six months ended June 30, 1998 and 1997............. 4
Notes to Condensed Consolidated Financial Statements........ 5
Item 2. Management's Discussion and Analysis of Financial Condition
and
Results of Operations....................................... 7
PART II OTHER INFORMATION
Item 1. Legal Proceedings........................................... 11
Item 2. Changes in Securities....................................... 11
Item 3. Default Upon Senior Securities.............................. 11
Item 4. Submission of Matters to a Vote of Security Holders......... 11
Item 5. Other Information........................................... 11
Item 6. Exhibits and Reports on Form 8-K............................ 11
SIGNATURES.................................................. 12
3
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED
JUNE 30,
----------------------------
1998 1997
---- ----
(UNAUDITED)
Revenues:
Casino.................................................... $138,208,950 $123,731,151
Food and beverage......................................... 5,103,982 4,986,717
Rooms..................................................... 1,561,087 775,014
Other operating income.................................... 2,623,837 2,245,541
------------ ------------
Total revenues....................................... 147,497,856 131,738,423
------------ ------------
Costs and expenses:
Casino.................................................... 63,865,168 58,241,241
Food and beverage......................................... 5,733,569 6,597,024
Rooms..................................................... 680,290 368,665
Other operating costs and expenses........................ 2,186,555 2,308,621
Advertising and marketing................................. 17,965,920 21,405,322
General and administrative................................ 13,118,131 14,080,585
Property operation, maintenance and energy cost........... 5,480,911 6,044,447
Rents, property taxes and insurance....................... 4,450,647 3,959,568
Development expenses...................................... 219,848 455,132
Preopening expenses....................................... 681,754 --
Depreciation and amortization............................. 10,347,608 10,353,382
------------ ------------
Total costs and expenses............................. 124,730,401 123,813,987
------------ ------------
Income from operations...................................... 22,767,455 7,924,436
------------ ------------
Other (Income) Expenses:
Equity loss from unconsolidated subsidiary................ 244,307 229,061
Interest expense, net..................................... 14,980,269 15,749,566
Other..................................................... 1,111,410 (1,427,177)
------------ ------------
Total other expense.................................. 16,335,986 14,551,450
------------ ------------
Income (loss) before income taxes and minority interest of
subsidiary................................................ 6,431,469 (6,627,014)
Income taxes expense (benefit)............................ 1,112,173 (1,935,000)
Minority interest......................................... 851,773 201,512
------------ ------------
Net income (loss)......................................... $ 4,467,523 $ (4,893,526)
============ ============
Net income (loss) per common share:
Basic..................................................... $ 0.13 $ (0.14)
============ ============
Diluted................................................... $ 0.12 $ (0.14)
============ ============
Average shares and equivalents outstanding:
Basic..................................................... 35,722,124 35,637,083
============ ============
Diluted................................................... 35,857,716 35,637,083
============ ============
See notes to condensed consolidated financial statements.
1
4
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
JUNE 30,
--------------------------
1998 1997
---- ----
(UNAUDITED)
Revenues:
Casino.................................................... $70,036,910 $62,057,468
Food and beverage......................................... 2,691,139 2,479,674
Rooms..................................................... 1,192,048 227,583
Other operating income.................................... 1,391,858 1,192,820
----------- -----------
Total revenues......................................... 75,311,955 65,957,545
----------- -----------
Costs and expenses:
Casino.................................................... 31,711,328 31,705,786
Food and beverage......................................... 3,090,421 1,707,142
Rooms..................................................... 528,746 (57,582)
Other operating costs and expenses........................ 1,177,877 1,153,665
Advertising and marketing................................. 9,214,590 8,250,625
General and administrative................................ 6,460,676 6,763,040
Property operation, maintenance and energy cost........... 2,778,102 3,034,439
Rents, property taxes and insurance....................... 2,361,293 1,986,566
Development expenses...................................... 141,607 172,843
Preopening expenses....................................... 681,754 --
Depreciation and amortization............................. 5,352,618 5,313,728
----------- -----------
Total costs and expenses............................... 63,499,012 60,030,252
----------- -----------
Income from operations...................................... 11,812,943 5,927,293
----------- -----------
Other (Income) Expenses:
Equity loss from unconsolidated subsidiary................ 128,658 113,937
Interest expense, net..................................... 7,485,062 8,069,102
Other..................................................... 665,002 (1,235,441)
----------- -----------
Total other expense.................................... 8,278,722 6,947,598
----------- -----------
Income (loss) before income taxes and minority interest of
subsidiary................................................ 3,534,221 (1,020,305)
Income taxes expense........................................ 1,112,173 --
Minority interest........................................... 432,953 201,512
----------- -----------
Net income (loss)........................................... $ 1,989,095 $(1,221,817)
=========== ===========
Net income (loss) per common share:
Basic..................................................... $ .06 $ (0.03)
=========== ===========
Diluted................................................... $ .06 $ (0.03)
=========== ===========
Average shares and equivalents outstanding:
Basic..................................................... 35,722,124 35,637,083
=========== ===========
Diluted................................................... 35,892,435 35,637,083
=========== ===========
See notes to condensed consolidated financial statements.
2
5
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
1998 1997(*)
-------- ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 17,470,386 $ 20,986,510
Restricted marketable securities.......................... 11,699,487 10,629,405
Other current assets...................................... 8,927,714 8,124,872
------------ ------------
Total current assets................................. 38,097,587 39,740,787
Property and equipment, net................................. 279,831,475 263,993,452
Other long-term assets...................................... 64,818,117 68,970,578
------------ ------------
$382,747,179 $372,704,817
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities......................................... $ 50,806,822 $ 51,031,097
Other long-term liabilities and minority interest........... 8,358,639 8,748,212
Long-term debt, net of current maturities................... 259,545,594 253,471,219
Shareholders' Equity
Common stock, $0.01 par, 50,000,000 shares authorized,
35,722,124 issued and outstanding at June 30, 1998 and
December 31, 1997......................................... 357,221 357,221
Undesignated stock, 2,500,000 shares authorized, none
issued.................................................... -- --
Additional paid-in capital.................................. 67,122,856 67,122,852
Retained deficit............................................ (3,294,753) (7,762,270)
Less unearned compensation.................................. (149,200) (263,514)
------------ ------------
Total shareholders' equity........................... 64,036,124 59,454,289
------------ ------------
$382,747,179 $372,704,817
============ ============
-------------------------
* Derived from audited financial statements
See notes to condensed consolidated financial statements.
3
6
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
JUNE 30,
----------------------------
1998 1997
---- ----
(UNAUDITED)
Cash Flows from Operating Activities:
Net income (loss)......................................... $ 4,467,523 $ (4,893,526)
Adjustments for non-cash charges.......................... 11,788,196 9,505,514
Changes in assets and liabilities......................... (2,739,797) 6,624,971
------------ ------------
Net Cash Provided by Operating Activities................... 13,515,922 11,236,959
------------ ------------
Cash Flows from Investing Activities:
Acquisitions of property and equipment.................... (16,234,648) (20,409,274)
Proceeds from sale of subsidiary and property and
equipment.............................................. -- 8,174,586
Other, net................................................ 588,359 290,874
------------ ------------
Net Cash Used in Investing Activities....................... (15,646,289) (11,943,814)
------------ ------------
Cash Flows from Financing Activities:
Principal payments on notes payable and long-term debt.... (4,216,867) (10,842,560)
Net proceeds from issuance of long-term debt.............. 2,977,445 6,350,000
Other, net................................................ (146,335) --
------------ ------------
Net Cash Used in Financing Activities....................... (1,385,757) (4,492,560)
------------ ------------
Net Decrease in Cash and Cash Equivalents................... (3,516,124) (5,199,415)
Cash and Cash Equivalents, Beginning of Period.............. 20,986,510 34,546,164
------------ ------------
Cash and Cash Equivalents, End of Period.................... $ 17,470,386 $ 29,346,749
============ ============
Supplemental Cash Flow Information
Cash Paid During the Period for:
Interest (net of amount capitalized)...................... $ 13,961,006 $ 16,708,321
Income taxes (net of refunds)............................. -- (6,382,324)
Supplemental Schedule of Non-Cash Investing and Financing
Activities:
Property and equipment and other asset acquisitions
included in accounts and construction payable and
accrued expenses....................................... 2,524,626 1,931,566
Property and equipment financed with long-term debt....... 6,142,215 18,079
Reclassification of long-term liabilities to accrued
expenses............................................... -- 170,029
See notes to condensed consolidated financial statements.
4
7
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND
1997 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and basis of presentation:
Casino Magic Corp. and Subsidiaries is an international gaming company with
operations in Bay Saint Louis, Mississippi ("Casino Magic-BSL"), Biloxi,
Mississippi ("Casino Magic-Biloxi"), Bossier City, Louisiana ("Casino
Magic-Bossier City"), and the Argentina Province of Neuquen in the cities of
Neuquen City and San Xxxxxx de los Andes ("Casino Magic-Neuquen").
Unless the context requires otherwise, reference in this report to the
"Company" means Casino Magic Corp. and its relevant subsidiaries, and reference
to "Casino Magic" means Casino Magic Corp.
The consolidated financial statements include the accounts of Casino Magic
and its wholly-owned and majority-owned subsidiaries.
All significant intercompany accounts and transactions have been
eliminated.
The accompanying unaudited consolidated financial statements contain all
adjustments which are, in the opinion of management, necessary for a fair
statement of the results of the interim periods. The results of operations for
the interim periods are not indicative of results of operations for an entire
year. It is suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1997, and Form 10-Q for March 31, 1998.
Certain reclassifications have been made to 1997 amounts to conform with
the June 30, 1998 presentation.
2. NEW ACCOUNTING PRONOUNCEMENTS
(a) Accounting for Start-Up Costs:
During April 1998, the Accounting Standards Executive Committee of the
AICPA issued Statement of Position 98-5 ("SOP"), "Reporting on the Costs of
Start-Up Activities." The SOP requires costs of start-up activities and
organization costs to be expensed as incurred. The SOP is effective for
financial statements for fiscal years beginning after December 15, 1998. The
company has not adopted the SOP. However, due to the opening of the hotel at
Casino Magic-Biloxi in May 1998, all start-up costs associated with the hotel
have been expensed in the quarter ended June 30, 1998, in accordance with
Company policy.
(b) Accounting for Derivative Instruments and Hedging Activities:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. The Statement establishes accounting and reporting
standards requiring that every derivative Instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying xxxxxx allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate and assess the effectiveness of transactions
that receive hedge accounting.
Statement 133 is effective for fiscal years beginning after June 15, 1999.
A company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and
thereafter). Statement 133 cannot be applied retroactively. Statement 133 must
be applied to (a) derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were
5
8
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
issued, acquired or substantively modified after December 31, 1997 (and, at the
company's election, before January 1, 1998).
The Company's management believes the impact of adopting Statement 133 on
the financial statements is expected to be immaterial.
3. LONG TERM DEBT:
Additions to long-term debt during the first six months of 1998 consist of
the following:
ENDING
BALANCES AT
JUNE 30, 1998
-------------
Notes payable, bank(a)............................. $2,850,108
Notes payable, other(b)............................ $6,068,357
-------------------------
(a) Consists of one note payable to The Peoples Bank, collateralized by certain
parcels of land, payable in fifty-nine monthly payments of $61,100 including
interest at 8.5% through February 2002 with a final balloon payment of
$60,120 in March 2002.
(b) Consists of five notes payable to Boeing Capital Corp. All notes
collateralized by furniture and equipment used at the 378 room hotel at
Casino Magic-Biloxi. The Notes are as follows:
1) Note in the original balance of $4,347,833, payable in forty-seven
monthly installments of $110,523.04 including interest of 10.12% through
April 2002 with a final balloon payment of $112,400 in May 2002.
2) Note in the original balance of $733,516.63, payable in one
installment of $21,616.66 on July 1, 1998, and forty-seven monthly
installments of $18,714.77 including interest at 10.314% through April
2002.
3) Note in the original balance of $391,024.97, payable in one
installment of $2,885.61 on August 1, 1998, and forty-eight installments of
$9,958.37 including interest at 10.2179% through August 2002.
4) Note in the original balance of $328,148.41, payable in one
installment of $1,769.63 on July 1, 1998, and forty-eight monthly
installments of $8,357.07 including interest at 10.2179% through August
2001.
5) Note in the original balance of $341,692.16, payable in
forty-eight monthly installments beginning July 1, 1998, of $8,674.42
including interest at 10.2179% through June 2001.
6
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The discussions regarding proposed Company developments and operations
included in "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" contain forward looking statements that involve a number
of risks and uncertainties. These proposed developments and operations include:
(i) completion of a hotel in 1998 at Casino Magic-Bossier City and (ii) the
Company's ability to fund planned developments and debt service obligations over
the next twelve months with currently available cash, marketable securities and
cash flow from operations. In addition to the risks and uncertainties discussed
below, other factors that could cause actual results to differ materially are
detailed from time to time in the Company's reports filed with the Securities
and Exchange Commission, including without limitation in Note 1 of Notes to the
Consolidated Financial Statements filed with the Annual Report on Form 10-K for
Casino Magic Corp. for the year ended December 31, 1997.
The following table sets forth for the periods indicated certain operating
information for the Company on a consolidated basis and for its existing
properties. The principal operating entities are Mardi Gras Casino Corp.
("Casino Magic-BSL") and Biloxi Casino Corp. ("Casino Magic-Biloxi"), both
dockside casinos operating on the Gulf Coast of Mississippi (together referred
to collectively as the "Casino Magic-Gulf Coast"), Casino Magic of Louisiana,
Corp. ("Casino Magic-Bossier City") and Casino Magic-Neuquen SA, which operates
gaming facilities at two casino sites in Neuquen and San Xxxxxx de los Andes,
Argentina.
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------ --------------------
1998 1997 1998 1997
---- ---- ---- ----
(IN THOUSANDS)
(UNAUDITED)
Revenues:
Casino Magic -- BSL(1).............................. $23,944 $23,503 $ 47,163 $ 45,569
Casino Magic -- Biloxi(2)........................... 19,263 16,567 35,513 32,659
Casino Magic -- Bossier City(3)..................... 26,844 21,519 54,772 44,726
Casino Magic -- Neuquen............................. 5,258 4,369 10,042 8,784
Corporate and Other................................. 2 -- 7 --
------- ------- -------- --------
Total revenues................................. 75,311 65,958 147,497 131,738
Costs and expenses:
Casino Magic -- BSL(1).............................. 18,585 18,821 36,963 37,069
Casino Magic -- Biloxi(2)........................... 17,572 14,961 32,907 29,670
Casino Magic -- Bossier City(3)..................... 22,231 21,190 44,965 46,497
Casino Magic -- Neuquen............................. 3,378 3,303 6,692 6,386
Corporate and Other................................. 1,733 1,756 3,202 4,192
------- ------- -------- --------
Total costs and expenses....................... 63,499 60,031 124,729 123,814
Income (loss) from operations:
Casino Magic -- BSL(1).............................. 5,359 4,683 10,200 8,501
Casino Magic -- Biloxi(2)........................... 1,691 1,606 2,606 2,989
Casino Magic -- Bossier City(3)..................... 4,613 329 9,807 (1,771)
Casino Magic -- Neuquen............................. 1,880 1,065 3,350 2,398
Corporate and Other................................. (1,730) (1,756) (3,195) (4,192)
------- ------- -------- --------
Total income from operations................... $11,813 $ 5,927 $ 22,768 $ 7,925
======= ======= ======== ========
-------------------------
(1) Began operations September 30, 1992; expanded casino capacity December 31,
1992.
(2) Began operations June 5, 1993; expanded casino capacity December 16, 1993.
(3) Began operations October 4, 1996; opened permanent facility on December 31,
1996.
7
10
Three months ended June 30, 1998 compared to three months ended June 30, 1997.
Consolidated revenues increased $9.4 million, or 14.2%, to $75.3 in the
second quarter of 1998, compared to $65.9 million in the second quarter of 1997.
The increase in consolidated revenues is attributable to increased revenues at
all five casinos operated by the Company. The largest individual increase of
$5.3 million, between the comparable periods, occurred at Casino Magic-Bossier
City. The increase at Casino Magic-Bossier City is attributable to improved
marketing efforts and an overall increase in the Bossier City/ Shreveport,
Louisiana gaming market of $17.5 million, to $144.7 million or 13.8%, between
the comparable periods. In addition, Casino Magic-Bossier City's market share
for the second quarter of 1998 was 18.5% compared to 16.5% in the second quarter
of 1997. With the opening of the 378 room hotel at Casino Magic-Biloxi,,
revenues increased $2.7 million to $19.3 million in the second quarter of 1998
as compared to $16.6 in the second quarter of 1997. At the Company's operations
in Argentina, slot machine revenues continue to improve due to an increase in
the number of slot machines and continued popularity of slot machines and
American style gaming.
Operating costs and expenses increased $3.5 million, or 5.8%, to $63.5
million in the second quarter of 1998 as compared to $60.0 million in the second
quarter of 1997. Advertising and marketing costs increased $1.0 million. or
12.2%, to $9.2 million in the second quarter of 1998, compared to $8.2 million
in the second quarter of 1997. This increase is due primarily to the opening of
the new hotel at Casino Magic-Biloxi, as well as, increased marketing efforts at
Casino Magic-Bossier City. Other significant increases, related to the new hotel
and incurred in the second quarter of 1998, are pre-opening costs of $0.7
million and room expenses of $0.5 million.
Other (income) expense (non-operating income and expenses) increased to a
net expense of $8.3 million in the second quarter 1998 as compared to $6.9
million in the second quarter of 1997. This increase in net expense is due to
$0.7 million in expenses in 1998 related to the proposed merger between the
Company and Hollywood Park, Inc., a $0.5 million increase in the capitalization
of interest in 1998 relating to debt incurred in the construction of the
Company's Biloxi hotel, and a gain in 1997 relating to the sale of a minority
interest in the Company's Argentina casinos.
Income tax expense recorded in the second quarter of 1998 is foreign tax
related.
Six months ended June 30, 1998 compared to six months ended June 30, 1997.
Consolidated revenues increased $15.8 million, or 12%, to $147.5 in the
first six months of 1998, compared to $131.7 million in the first six months of
1997. The increase in consolidated revenues is attributable to increased
revenues at all five casinos operated by the Company. The largest individual
increase of $10.0 million, between the comparable periods, occurred at Casino
Magic-Bossier City. The increase at Casino Magic-Bossier City is attributable to
improved marketing efforts and an overall increase in gaming revenue in the
Bossier City/Shreveport, Louisiana market of 13.8%, between the comparable
periods. In addition, Casino Magic-Bossier City's market share for the first six
months of 1998 was 18.5% compared to 16.7% in the first six months of 1997.
Revenues at Casino Magic-Biloxi increased $2.7 million due primarily to the
recent opening of the Company's Biloxi hotel. At the Company's operations in
Argentina, slot machine revenues continue to improve due to an increase in the
number of slot machines and continued popularity of slot machines and American
style gaming.
Operating costs and expenses increased $0.9 million, or 0.7%, to $124.7
million in the first six months of 1998 as compared to $123.8 million in the
first six months of 1997. Casino expenses increased by $5.6 million, or 9.6%,
due to increases in gaming taxes related to increased gaming revenues, increased
personnel costs related to the increased gaming volume and an increase in slot
point redemption values. Advertising and marketing costs declined $3.4 million,
to $17.9 million in the first six months of 1998, compared to $21.4 million in
the first six months of 1997. During the first six months of 1997 at Casino
Magic-Bossier City the Company attempted to increase market share and revenue
with expensive promotions which were significantly less successful than
anticipated. In May 1997 the promotional programs at Casino Magic-Bossier City
were significantly reduced.
8
11
Other (income) expense (non-operating income and expenses) increased to a
net expense of $16.3 million in the first six months 1998 as compared to $14.5
million in the first six months of 1997. This increase in net expense is due in
part to $1.1 million in expenses related to the pending merger between the
Company and Hollywood Park, Inc. There were no expenses in the first six months
of 1997 relating to merger costs.
Income tax expense recorded in the second quarter of 1998 is foreign tax
related.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had unrestricted cash of $17.5 million
compared to unrestricted cash of $21.0 million at December 31, 1997. In
addition, the Company had $11.7 million and $10.6 million in restricted cash and
marketable securities at June 30, 1998 and December 31, 1997, respectively,
which is restricted as to its use under the indenture relating to $115,000,000
of First Mortgage Notes issued by Jefferson Casino Corp. The restricted cash and
securities held as of June 30, 1998, were received from the sale of the Crescent
City Riverboat for $11.7 million. For the quarter ended June 30, 1998, the
Company received $13.5 million of cash flow from operating activities and
received $3.0 million of proceeds from the incurrence of long term debt. The
Company spent $15.6 million in net investment activities including, primarily,
the acquisition of property, equipment and other long-term assets, and reduced
long term debt by $4.2 million.
The Company expended approximately $9.5 million primarily for capital
improvements at Casino Magic-Biloxi, and $5.0 million for capital improvements
at Casino Magic-Bossier City during the second quarter of 1998. The Company
plans additional capital improvements in 1998 at its Gulf Coast properties and
at Casino Magic-Bossier City, much of which is subject to the cash flows of the
Company or the availability of financing. There are no assurances that adequate
funding will be available for these planned investments.
At Casino Magic-Bossier City, the Company commenced expansion of the land
based pavilion and construction of a 188-room convention hotel, including
restaurants and a swimming pool. The construction of the hotel is expected to be
funded primarily by $11.7 million of restricted cash obtained as a result of the
sale of the Crescent City Riverboat, current unrestricted cash on hand, future
operating cash flow of Casino Magic-Bossier City and financing for furniture,
fixtures and equipment. The hotel is expected to open by the end of 1998. No
assurances can be given that the cash on hand and the cash flow from the
operations of Casino Magic-Bossier City will be sufficient to complete such
hotel and related facilities or that these improvements will ever be developed.
On May 1, 1998, the Company opened the hotel tower at Casino Magic-Biloxi
above the eight-story parking garage adjacent to the casino. The hotel consists
of 378 rooms, including 86 suites, and includes a health spa, beauty salon,
swimming pool and conference space. The hotel construction costs have been
funded out of the cash flow of Casino Magic-BSL and Casino Magic-Biloxi, and the
$7.0 million in proceeds from the sale of a 49% ownership interest in Casino
Magic-Neuquen. The Company has also obtained debt financing of the furniture,
fixtures and equipment for the Casino Magic-Biloxi hotel in the amount of $6.5
million and an additional $1.0 million for signage.
Under the terms of the Indenture associated with the $135,000,000 First
Mortgage Notes, Casino Magic Corp., Mardi Gras Casino Corp., Biloxi Casino Corp.
and Casino Magic Finance Corp. have certain restrictions relative to additional
borrowings and guarantees. Jefferson Casino Corp and Casino Magic of Louisiana,
Corp. have certain restrictions relative to additional borrowings and cash flow
under the terms of the Indenture associated with the $115,000,000 First Mortgage
Notes.
The Company's operations in Argentina are subject to certain risks
including foreign currency exchange, repatriation of earnings and profits, and
adverse foreign tax treatment. In addition, the Company will incur the general
business risk associated with operating in a foreign county where culture and
business practices may vary significantly from that in the United States. Such
risks could have a material impact on the operating results and liquidity of the
Company.
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The Company will have a significant need for cash in 1998 and beyond in
order to continue its planned development of its existing properties. The
Company believes that cash and restricted marketable securities at June 30,
1998, and cash flows from operations will be sufficient to service its operating
and debt service requirements, through at least the next twelve months,
including the remaining planned improvements at Casino Magic-Biloxi and the
completion of the construction of the Casino Magic-Bossier City hotel.
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 on file with the Securities and Exchange Commission.
During the first six months ended June 30, 1998, the Company was not a party to
any newly instituted legal proceedings. The Company did incur one significant
development during such period to existing legal proceedings, in that, the trial
date for the litigation with Casino America, Inc. has been postponed to mid-1999
resulting from the Plaintiff's request for a continuance.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULT 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:
27 Financial data schedule (filed electronically only)
(b) Reports on Form 8-K:
None.
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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 MAGIC CORP.
/s/ XXXXX X. XXXXX
--------------------------------------
Xxxxx X. Xxxxx, President and
Chief Executive Officer
Date: August 3, 1998
/s/ XXX X. XXXXX
--------------------------------------
Xxx X. Xxxxx, Chief Financial Officer
and Treasurer
(principal financial and accounting
officer)
Date: August 3, 1998
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