UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-Q
(Mark
One)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
For the
quarterly period ended July 26, 2009
OR
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
For the transition period from
to
Commission File Number 0-20538
ISLE OF CAPRI CASINOS, INC.
Delaware
|
|
41-1659606
|
(State or other
jurisdiction of
|
|
(I.R.S. Employer
|
incorporation or
organization)
|
|
Identification
Number)
|
|
|
|
600
Emerson Road, Suite 300, Saint Louis, Missouri
|
|
63141
|
(Address of
principal executive offices)
|
|
(Zip Code)
|
Registrants telephone
number, including area code:
(314) 813-9200
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes
x
No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes
o
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer, or a smaller reporting company.
See definition of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act.
Large
accelerated
o
|
|
Accelerated
filer
x
|
|
|
|
Non-accelerated
filer
o
|
|
Smaller
reporting company
o
|
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
o
No
x
As of August 31,
2009, the Company had a total of 32,286,855 shares of Common Stock outstanding
(which excludes 4,327,623
shares held by us in treasury).
PART IFINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
ISLE OF CAPRI CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per
share amounts)
|
|
July 26,
|
|
April 26,
|
|
|
|
2009
|
|
2009
|
|
|
|
(unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
104,784
|
|
$
|
96,654
|
|
Marketable
securities
|
|
18,644
|
|
17,548
|
|
Accounts
receivable, net
|
|
7,746
|
|
11,935
|
|
Income
taxes receivable
|
|
5,473
|
|
7,744
|
|
Deferred
income taxes
|
|
16,295
|
|
16,295
|
|
Prepaid
expenses and other assets
|
|
36,157
|
|
23,234
|
|
Assets
held for sale
|
|
4,557
|
|
4,183
|
|
Total
current assets
|
|
193,656
|
|
177,593
|
|
Property
and equipment, net
|
|
1,155,156
|
|
1,177,540
|
|
Other
assets:
|
|
|
|
|
|
Goodwill
|
|
313,136
|
|
313,136
|
|
Other
intangible assets, net
|
|
82,610
|
|
83,588
|
|
Deferred
financing costs, net
|
|
8,721
|
|
9,314
|
|
Restricted
cash
|
|
2,774
|
|
2,774
|
|
Prepaid
deposits and other
|
|
18,482
|
|
18,717
|
|
Total
assets
|
|
$
|
1,774,535
|
|
$
|
1,782,662
|
|
LIABILITIES
AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Current
maturities of long-term debt
|
|
$
|
9,808
|
|
$
|
9,688
|
|
Accounts
payable
|
|
18,532
|
|
16,246
|
|
Accrued
liabilities:
|
|
|
|
|
|
Interest
|
|
14,771
|
|
9,280
|
|
Payroll
and related
|
|
45,159
|
|
47,209
|
|
Property
and other taxes
|
|
36,626
|
|
31,487
|
|
Other
|
|
48,688
|
|
52,195
|
|
Liabilities
related to assets held for sale
|
|
2,173
|
|
1,888
|
|
Total
current liabilities
|
|
175,757
|
|
167,993
|
|
Long-term
debt, less current maturities
|
|
1,270,059
|
|
1,291,384
|
|
Deferred
income taxes
|
|
27,758
|
|
24,970
|
|
Other
accrued liabilities
|
|
50,899
|
|
52,575
|
|
Other
long-term liabilities
|
|
17,563
|
|
17,314
|
|
Stockholders
equity:
|
|
|
|
|
|
Preferred
stock, $.01 par value; 2,000,000 shares authorized; none issued
|
|
|
|
|
|
Common
stock, $.01 par value; 45,000,000 shares authorized; shares issued: 36,614,478
at July 26, 2009 and 36,111,089 at April 26, 2009
|
|
366
|
|
361
|
|
Class B
common stock, $.01 par value; 3,000,000 shares authorized; none issued
|
|
|
|
|
|
Additional
paid-in capital
|
|
194,845
|
|
193,827
|
|
Retained
earnings
|
|
102,733
|
|
101,828
|
|
Accumulated
other comprehensive (loss) income
|
|
(13,313
|
)
|
(15,191
|
)
|
|
|
284,631
|
|
280,825
|
|
Treasury
stock, 4,327,623 shares at July 26, 2009 and 4,340,436 shares at
April 26, 2009
|
|
(52,132
|
)
|
(52,399
|
)
|
Total
stockholders equity
|
|
232,499
|
|
228,426
|
|
Total
liabilities and stockholders equity
|
|
$
|
1,774,535
|
|
$
|
1,782,662
|
|
See notes to unaudited
consolidated financial statements.
2
ISLE OF
CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
|
|
Three Months Ended
|
|
|
|
July 26,
|
|
July 27,
|
|
|
|
2009
|
|
2008
|
|
Revenues:
|
|
|
|
|
|
Casino
|
|
$
|
263,956
|
|
$
|
276,786
|
|
Rooms
|
|
12,261
|
|
13,706
|
|
Pari-mutuel, food,
beverage and other
|
|
34,870
|
|
36,547
|
|
Gross revenues
|
|
311,087
|
|
327,039
|
|
Less promotional
allowances
|
|
(51,145
|
)
|
(49,644
|
)
|
Net revenues
|
|
259,942
|
|
277,395
|
|
Operating expenses:
|
|
|
|
|
|
Casino
|
|
39,994
|
|
38,541
|
|
Gaming taxes
|
|
66,428
|
|
70,658
|
|
Rooms
|
|
2,981
|
|
3,389
|
|
Pari-mutuel, food,
beverage and other
|
|
11,158
|
|
13,661
|
|
Marine and facilities
|
|
15,954
|
|
16,470
|
|
Marketing and
administrative
|
|
65,117
|
|
65,354
|
|
Corporate and
development
|
|
9,945
|
|
10,330
|
|
Valuation charges
|
|
|
|
6,000
|
|
Depreciation and
amortization
|
|
28,829
|
|
31,566
|
|
Total operating
expenses
|
|
240,406
|
|
255,969
|
|
Operating income
|
|
19,536
|
|
21,426
|
|
Interest expense
|
|
(18,347
|
)
|
(23,897
|
)
|
Interest income
|
|
369
|
|
446
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations before income taxes
|
|
1,558
|
|
(2,025
|
)
|
Income tax provision
|
|
(767
|
)
|
(615
|
)
|
Income (loss) from
continuing operations
|
|
791
|
|
(2,640
|
)
|
Income (loss) from
discontinued operations, net of income taxes
|
|
114
|
|
(986
|
)
|
Net income (loss)
|
|
$
|
905
|
|
$
|
(3,626
|
)
|
|
|
|
|
|
|
Income (loss) per
common share-basic and dilutive:
|
|
|
|
|
|
Income (loss) from
continuing operations
|
|
$
|
0.02
|
|
$
|
(0.09
|
)
|
Income (loss) from
discontinued operations, net of income taxes
|
|
0.01
|
|
(0.03
|
)
|
Net income (loss)
|
|
$
|
0.03
|
|
$
|
(0.12
|
)
|
|
|
|
|
|
|
Weighted average basic
shares
|
|
31,799,100
|
|
30,866,687
|
|
Weighted average diluted
shares
|
|
31,855,101
|
|
30,866,687
|
|
See notes to the unaudited consolidated financial statements.
3
ISLE OF
CAPRI CASINOS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(In thousands, except share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Accum.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compre-
|
|
|
|
|
|
|
|
Shares of
|
|
|
|
Additional
|
|
|
|
hensive
|
|
|
|
Total
|
|
|
|
Common
|
|
Common
|
|
Paid-in
|
|
Retained
|
|
Income
|
|
Treasury
|
|
Stockholders
|
|
|
|
Stock
|
|
Stock
|
|
Capital
|
|
Earnings
|
|
(Loss)
|
|
Stock
|
|
Equity
|
|
Balance, April 26,
2009
|
|
36,111,089
|
|
$
|
361
|
|
$
|
193,827
|
|
$
|
101,828
|
|
$
|
(15,191
|
)
|
$
|
(52,399
|
)
|
$
|
228,426
|
|
Net income
|
|
|
|
|
|
|
|
905
|
|
|
|
|
|
905
|
|
Unrealized gain on
interest rate swap contracts net of income tax provision of $860
|
|
|
|
|
|
|
|
|
|
1,437
|
|
|
|
1,437
|
|
Foreign currency
translation adjustments
|
|
|
|
|
|
|
|
|
|
441
|
|
|
|
441
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,783
|
|
Issuance of restricted
stock, net of forfeitures
|
|
502,889
|
|
5
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
Exercise of stock
options
|
|
500
|
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
Issuance of deferred
bonus shares from treasury stock
|
|
|
|
|
|
(267
|
)
|
|
|
|
|
267
|
|
|
|
Stock compensation
expense
|
|
|
|
|
|
1,263
|
|
|
|
|
|
|
|
1,263
|
|
Other
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
24
|
|
Balance, July 26,
2009
|
|
36,614,478
|
|
$
|
366
|
|
$
|
194,845
|
|
$
|
102,733
|
|
$
|
(13,313
|
)
|
$
|
(52,132
|
)
|
$
|
232,499
|
|
See notes to the unaudited
consolidated financial statements.
4
ISLE OF
CAPRI CASINOS, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In
thousands)
|
|
Three
Months Ended
|
|
|
|
July 26,
|
|
July 27,
|
|
|
|
2009
|
|
2008
|
|
Operating activities:
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
905
|
|
$
|
(3,626
|
)
|
Adjustments
to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation
and amortization
|
|
28,829
|
|
32,739
|
|
Amortization
of deferred financing costs
|
|
593
|
|
640
|
|
Valuation
charges
|
|
|
|
5,000
|
|
Deferred
income taxes
|
|
1,930
|
|
|
|
Stock
compensation expense
|
|
1,263
|
|
2,720
|
|
Deferred
compensation expense
|
|
24
|
|
48
|
|
Loss
(gain) on disposal of assets
|
|
23
|
|
(66
|
)
|
Changes
in operating assets and liabilities, net of dispositions:
|
|
|
|
|
|
Purchases
of trading securities
|
|
(1,096
|
)
|
(1,324
|
)
|
Accounts
receivable
|
|
2,872
|
|
1,433
|
|
Income
tax receivable
|
|
2,271
|
|
(289
|
)
|
Prepaid
expenses and other assets
|
|
(10,637
|
)
|
(6,898
|
)
|
Accounts
payable and accrued liabilities
|
|
11,031
|
|
6,007
|
|
Net
cash provided by operating activities
|
|
38,008
|
|
36,384
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
Purchase
of property and equipment
|
|
(4,382
|
)
|
(8,201
|
)
|
Payments
towards gaming license
|
|
(4,000
|
)
|
(4,000
|
)
|
Decrease
in restricted cash
|
|
(209
|
)
|
1,704
|
|
Net
cash used in investing activities
|
|
(8,591
|
)
|
(10,497
|
)
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
Principal
payments on debt
|
|
(2,317
|
)
|
(2,398
|
)
|
Net
payments on line of credit
|
|
(19,000
|
)
|
(4,917
|
)
|
Net
cash used in financing activities
|
|
(21,317
|
)
|
(7,315
|
)
|
|
|
|
|
|
|
Effect of foreign currency exchange rates on cash
|
|
30
|
|
100
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
8,130
|
|
18,672
|
|
Cash
and cash equivalents, beginning of period
|
|
96,654
|
|
91,790
|
|
Cash
and cash equivalents, end of the period
|
|
$
|
104,784
|
|
$
|
110,462
|
|
See notes to the
unaudited con
solidated financial statements.
5
ISLE OF
CAPRI CASINOS, INC.
Notes to
Unaudited Consolidated Financial Statements
(amounts in
thousands, except share and per share amounts)
1. Nature of Operations
Isle of Capri Casinos, Inc.,
a Delaware corporation, was incorporated in February 1990. Except where
otherwise noted, the words we, us, our and similar terms, as well as Company,
refer to Isle of Capri Casinos, Inc. and all of its subsidiaries. We are a
leading developer, owner and operator of branded gaming facilities and related
lodging and entertainment facilities in markets throughout the United States.
Our wholly owned subsidiaries own and operate thirteen casino gaming facilities
in the United States located in Black Hawk, Colorado; Lake Charles, Louisiana;
Lula, Biloxi and Natchez, Mississippi; Kansas City, Caruthersville and
Boonville, Missouri; Bettendorf, Davenport, Waterloo and Marquette, Iowa; and
Pompano Beach, Florida. Our international gaming interests include wholly owned
casinos in Freeport, Grand Bahamas and our discontinued operations in Coventry,
England and in Dudley and Wolverhampton, England.
2. Basis of Presentation
The accompanying
consolidated financial statements have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission (SEC) and in accordance
with accounting principles generally accepted in the United States of America
for interim financial reporting. Accordingly, certain information and note
disclosures normally included in financial statements prepared in conformity
with accounting principles generally accepted in the United States have been
condensed or omitted. The accompanying interim consolidated financial
statements have been prepared without audit. In the opinion of management, all
adjustments, including normal recurring adjustments necessary to present fairly
the financial position, results of operations and cash flows for the periods
presented, have been made. The results for interim periods are not necessarily
indicative of results that may be expected for any other interim period or for
the full year. These condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes thereto
included in our Annual Report on Form 10-K for the year ended April 26,
2009 as filed with the SEC and all of our other filings, including Current
Reports on Form 8-K, filed with the SEC after such date and through the
date of this report, which are available on the SECs website at
www.sec.gov
or our website at
www.islecorp.com
.
Our fiscal year ends on
the last Sunday in April. Periodically, this system necessitates a 53-week
year. Fiscal 2010 and 2009 are both
52-week years, which commenced on April 27, 2009 and April 28, 2008,
respectively.
Discontinued operations
include our remaining casino operations in England held for sale and our
formerly wholly owned casino in Coventry, England sold in fiscal year 2009.
The condensed
consolidated financial statements include our accounts and those of our
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation. Certain reclassifications have been made to prior
period financial statements to conform to the current period presentation. We
view each property as an operating segment and all such operating segments have
been aggregated into one reporting segment.
The Company evaluated all
subsequent events through September 1, 2009, which is the date that the
consolidated financial statements were issued. No material subsequent events
have occurred since July 26, 2009 that required recognition or disclosure
in the consolidated financial statements.
Recently Issued Accounting Standards -
In December 2007, the
FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements An Amendment of ARB No. 51 (SFAS 160). SFAS 160 changes
the accounting for noncontrolling (minority) interests in consolidated
financial statements, requires noncontrolling interests to be reported as part
of equity and changes the income statement presentation of income or losses
attributable to the noncontrolling interests. We adopted SFAS 160 as of April 27,
2009, as required. The adoption of SFAS 160 did not have a material impact on
our consolidated financial statements.
6
In April 2009, the
FASB issued FASB Staff Position (FSP) FAS 107-1 and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1 and APB
28-1). FSP FAS 107-1 and APB 28-1 amends SFAS No. 107, Disclosures about
Fair Value of Financial Instruments, to require disclosures about the fair
value of financial instruments for interim reporting periods of publicly traded
companies as well as in annual financial statements. FSP SFAS 107-1 and APB
28-1 are effective for interim reporting periods ending after June 15,
2009. We adopted FSP FAS 107-1 and APB 28-1 as of April 27, 2009, as
required. The adoption of FSP FAS 107-1 and APB 28-1 did not have a material
impact on our consolidated financial statements.
In May 2009, the
FASB issued SFAS No. 165, Subsequent Events (SFAS 165), which
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued
or are available to be issued. In addition, under SFAS 165, an entity is
required to disclose the date through which subsequent events have been
evaluated, as well as whether that date is the date the financial statements
were issued or the date the financial statements were available to be issued.
SFAS 165 does not apply to subsequent events or transactions that are within
the scope of other applicable GAAP that provide different guidance on the
accounting treatment for subsequent events or transactions. SFAS 165 is
effective for interim or annual financial periods ending after June 15,
2009, and shall be applied prospectively. We adopted SFAS 165 as of April 27,
2009, as required. The adoption of SFAS 165 did not have a material impact on
our consolidated financial statements.
In June 2009, the
Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standard (SFAS) No. 168,
The
FASB Accounting Standards CodificationTM
and the Hierarchy of
Generally Accepted Accounting Principlesa replacement of FASB Statement No. 162
(SFAS 168), which identifies the
sources of accounting principles and the framework for selecting the principles
used in the preparation of financial statements of nongovernmental entities
that are presented in conformity with GAAP in the United States (the GAAP
hierarchy). SFAS 168 establishes the
FASB
Accounting Standards Codification
TM
as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in conformity with GAAP. SFAS 168 is
effective for most financial statements issued for interim and annual periods
ending after September 15, 2009. We are currently determining the impact
of SFAS 168 on our consolidated financial statements.
3. Discontinued Operations
Discontinued
operations include the results of our former casino property in Coventry,
England, which was sold on April 23, 2009, and our Blue Chip casino
properties in England, which are currently classified as held for sale.
7
The
assets held for sale and liabilities related to assets held for sale are as
follows:
|
|
July 26,
|
|
April 26,
|
|
|
|
2009
|
|
2009
|
|
Current
assets:
|
|
|
|
|
|
Accounts
receivable, net
|
|
$
|
155
|
|
$
|
260
|
|
Prepaid
expenses and other assets
|
|
179
|
|
146
|
|
Total
current assets
|
|
334
|
|
406
|
|
Property
and equipment, net
|
|
4,223
|
|
3,777
|
|
Total
assets
|
|
4,557
|
|
4,183
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
|
612
|
|
540
|
|
Other
accrued liabilities
|
|
1,561
|
|
1,348
|
|
Total
current liabilities
|
|
2,173
|
|
1,888
|
|
Net
assets
|
|
$
|
2,384
|
|
$
|
2,295
|
|
The results of our discontinued operations are
summarized as follows:
|
|
Three Months Ended
|
|
|
|
July 26,
|
|
July 27,
|
|
|
|
2009
|
|
2008
|
|
Net
revenues
|
|
$
|
1,440
|
|
$
|
4,910
|
|
Pretax
income (loss) from discontinued operations
|
|
182
|
|
(3,435
|
)
|
Income
tax benefit (provision) from discontinued operations
|
|
(68
|
)
|
2,449
|
|
Income
(loss) from discontinued operations
|
|
114
|
|
(986
|
)
|
|
|
|
|
|
|
|
|
Net interest expense of $1 and $648 for the first
quarters ended July 26, 2009 and July 27, 2008, respectively, has
been allocated to discontinued operations and was based on long-term debt and
other long-term obligations specific to our UK operations as our UK entities
are not guarantors under our senior secured credit facility.
8
4. Long-Term Debt
Long-term
debt consists of the following:
|
|
July 26,
|
|
April 26,
|
|
|
|
2009
|
|
2009
|
|
Senior Secured Credit
Facilities:
|
|
|
|
|
|
July 2007 Credit
Facility:
|
|
|
|
|
|
Revolving line of
credit, expires July 26, 2012, interest payable at least quarterly at
either LIBOR and/or prime plus a margin
|
|
$
|
93,000
|
|
$
|
112,000
|
|
Variable rate term
loans, mature November 25, 2013, principal and interest payments due
quarterly at either LIBOR and/or prime plus a margin
|
|
823,552
|
|
825,651
|
|
|
|
|
|
|
|
Senior Subordinated
Notes:
|
|
|
|
|
|
7% Senior Subordinated
Notes, interest payable semi-annually March 1
and September 1
|
|
357,275
|
|
357,275
|
|
Other
|
|
6,040
|
|
6,146
|
|
|
|
1,279,867
|
|
1,301,072
|
|
Less current maturities
|
|
9,808
|
|
9,688
|
|
Long-term debt
|
|
$
|
1,270,059
|
|
$
|
1,291,384
|
|
July 2007
Credit Facility -
During
2007, we entered into a $1,350,000 senior secured credit facility (Credit
Facility), which is secured on a first priority basis by substantially all of
our assets and guaranteed by all of our significant domestic subsidiaries. This
Credit Facility consists of a $475,000 five-year revolving line of credit and
an $875,000 term loan facility.
Our net line of credit
availability at July 26, 2009 is approximately $364,000, after
consideration of $17,934 in outstanding letters of credit. We have an annual
commitment fee related to the unused portion of the Credit Facility of up to
0.5% which is included in interest expense in the accompanying consolidated
statements of operations. The weighted
average effective interest rate of the Credit Facility for the three months
ended July 26, 2009 and July 27, 2008 were 4.43% and 5.61%,
respectively.
The Credit Facility
includes a number of affirmative and negative covenants. Additionally, we must
comply with certain financial covenants including maintenance of a leverage
ratio and minimum interest coverage ratio.
The Credit Facility also restricts our ability to make certain investments
or distributions. We are in compliance
with the covenants as of July 26, 2009.
7%
Senior Subordinated Notes -
Our 7% Senior Subordinated Notes are due 2014 (7%
Senior Subordinated Notes) and are guaranteed, on a joint and several basis,
by all of our significant domestic subsidiaries and certain other subsidiaries
as described in Note 12. All of the
guarantor subsidiaries are wholly owned by us. The 7% Senior Subordinated Notes
are general unsecured obligations and rank junior to all senior indebtedness.
The 7% Senior Subordinated Notes are redeemable, in whole or in part, at our
option at any time on or after March 1, 2009, with call premiums as
defined in the indenture governing the 7% Senior Subordinated Notes.
The indenture governing
the 7% Senior Subordinated Notes limits, among other things, our ability and
our restricted subsidiaries ability to borrow money, make restricted payments,
use assets as security in other transactions, enter into transactions with
affiliates or pay dividends on or repurchase stock. The indenture also limits
our ability to issue and sell capital stock of subsidiaries, sell assets in
excess of specified amounts or merge with or into other companies.
9
5. Common Stock
Earnings
per Share of Common Stock -
The following table sets forth the computation of
basic and diluted loss per share:
|
|
Three Months Ended
|
|
|
|
July 26,
|
|
July 27,
|
|
|
|
2009
|
|
2008
|
|
Numerator:
|
|
|
|
|
|
Income (loss)
applicable to common shares:
|
|
|
|
|
|
Income (loss) from
continuing operations
|
|
$
|
791
|
|
$
|
(2,640
|
)
|
Income (loss) from
discontinued operations
|
|
114
|
|
(986
|
)
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
905
|
|
$
|
(3,626
|
)
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
Denominator for basic
earnings (loss) per share -
weighted average shares
|
|
31,779,100
|
|
30,866,687
|
|
Effect of dilutive
securities
Employee stock options
|
|
76,001
|
|
|
|
Denominator for diluted
loss per share -
adjusted weighted average shares and assumed conversions
|
|
31,855,101
|
|
30,866,687
|
|
|
|
|
|
|
|
Basic earnings (loss)
per share:
|
|
|
|
|
|
Income (loss) from
continuing operations
|
|
$
|
0.02
|
|
$
|
(0.09
|
)
|
Income (loss) from
discontinued operations
|
|
0.01
|
|
(0.03
|
)
|
Net income (loss)
|
|
$
|
0.03
|
|
$
|
(0.12
|
)
|
|
|
|
|
|
|
Diluted earnings (loss)
per share:
|
|
|
|
|
|
Income (loss) from
continuing operations
|
|
$
|
0.02
|
|
$
|
(0.09
|
)
|
Income (loss) from
discontinued operations
|
|
0.01
|
|
(0.03
|
)
|
Net income (loss)
|
|
$
|
0.03
|
|
$
|
(0.12
|
)
|
Our basic earnings (loss) per share are computed by
dividing net income (loss) by the weighted average number of shares outstanding
for the period. Stock options representing 1,177,823 shares were excluded from
the calculation of earnings per share for the three months ended July 26,
2009 as they were anti-dilutive. Due to the net loss, stock options
representing 75,343 shares which are potentially dilutive, and 3,964,472 shares
which were anti-dilutive, were excluded from the calculation of common shares
for diluted (loss) per share for the three month period ended July 27,
2008.
Stock Based Compensation
Under our amended and restated 2000 Long
Term Incentive Plan we have issued stock options and restricted stock.
Stock
Options
- We have
issued incentive stock options and nonqualified stock options which have a
maximum term of 10 years and are, generally, vested and exercisable in yearly
installments of 20% commencing one year after the date of grant. We currently
estimate our forfeiture rates at 39.6% for executives and 56.5% for optionees
beneath the executive level. As of July 26, 2009, our unrecognized
compensation cost for unvested stock options is $1,764 with a weighted average
vesting period of 3.5 years.
Restricted
Stock
During
the three months ended July 26, 2009, we issued 512,375 shares of
restricted common stock with a weighted average grant-date fair value of $13.03
to employees under the 2000 Long Term Incentive Plan. Restricted stock awarded
to employees under annual long-term incentive grants vests one-third on each
anniversary of the grant date and for directors vests one-half on the grant
date and one-half on the first anniversary of the grant date. Restricted stock
awarded under our previous tender offer vest three years from the date of
award. Our estimate of forfeitures for restricted stock for employees is 10%.
No forfeiture rate is
10
estimated for directors.
As of July 26, 2009, our unrecognized compensation cost for unvested
restricted stock is $10,354 with a remaining weighted average vesting period of
1.7 years.
6. Write Offs and Other Charges
During the three months
ended July 27, 2008, we reached an agreement terminating our agreement for
the potential development of a casino project in Portland, Oregon. As a part of this agreement, we agreed to
terminate our rights under a land option and pay a termination fee. As a result of this termination, we recorded
a $6,000 charge consisting of a non-cash write-off of $5,000 representing our
rights under the land option and a $1,000 termination fee. Under the terms of the agreement, we retain
certain rights but no continuing obligations with regard to this development
project.
7. Fair Value Measurements
Interest
Rate Swap Agreements
We
have entered into various interest rate swap agreements pertaining to the
Credit Facility for an aggregate notional value of $500,000 with maturity dates
ranging from fiscal year 2009 to 2013 in order to manage market risk on
variable rate term loans outstanding, as well as comply with, in part,
requirements under the Credit Facility.
These swap agreements
meet the criteria for hedge accounting for cash flow hedges and have been
evaluated, as of July 26, 2009, as being fully effective. As a result,
there is no impact on our consolidated statement of operations from changes in
fair value. As July 26, 2009, the weighted average fixed LIBOR interest
rate of our interest rate swap agreements was 4.58%.
The fair value of
derivatives included in our consolidated balance sheet and change in our
unrealized loss are as follows:
Type of Derivative Instrument
|
|
Balance Sheet Location
|
|
July 26,
2009
|
|
April 26,
2009
|
|
Three months
ended July 26,
2009, Change in
Unrealized Gain
|
|
Interest rate swap
contracts
|
|
Accrued interest
|
|
$
|
1,663
|
|
$
|
2,258
|
|
|
|
Interest rate swap
contracts
|
|
Other long-term liabilities
|
|
19,751
|
|
21,454
|
|
|
|
Total
|
|
|
|
$
|
21,414
|
|
$
|
23,712
|
|
$
|
2,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of our
interest swap contracts are measured using Level 3 inputs at the present
value of all expected future cash flows based on the LIBOR-based swap yield
curve as of the date of the valuation, subject to a credit adjustment to the
LIBOR-based yield curves implied discount rates. The credit adjustment
reflects our best estimate as to the inherent credit risk as of our balance
sheet date. The fair value of our interest rate swap contracts as recorded in our
consolidated balance sheet is recorded net of deferred income tax benefits of
$8,019 and $8,879, as of July 26, 2009 and April 26, 2009,
respectively.
The amount of the gain
(loss) reclassified from Accumulated other comprehensive income (loss) into earnings
and its location in the consolidated statements of income is as follows:
|
|
Income
|
|
Three Months Ended
|
|
Type of Derivative Instrument
|
|
Statement Location
|
|
July 26, 2009
|
|
July 27, 2008
|
|
Interest rate swap
contracts
|
|
Interest expense
|
|
$
|
(4,485
|
)
|
$
|
(2,349
|
)
|
|
|
|
|
|
|
|
|
|
|
11
The amount of gain (loss)
recognized in Accumulated other comprehensive income (loss) is as follows:
|
|
Three Months Ended
|
|
Type of Derivative Instrument
|
|
July 26, 2009
|
|
July 27, 2008
|
|
Interest rate swap
contracts
|
|
$
|
1,437
|
|
$
|
2,912
|
|
|
|
|
|
|
|
|
|
A detail of Accumulated
other comprehensive income (loss) is as follows:
Type of Derivative Instrument
|
|
July 26, 2009
|
|
April 26, 2009
|
|
Interest rate swap
contracts
|
|
$
|
(13,395
|
)
|
$
|
(14,832
|
)
|
Foreign currency translation
gain (loss)
|
|
82
|
|
(359
|
)
|
|
|
$
|
(13,313
|
)
|
$
|
(15,191
|
)
|
Financial Instruments -
The estimated carrying amounts and fair
values of our other financial instruments are as follows:
|
|
July 26,
2009
|
|
April 26,
2009
|
|
|
|
Carrying
|
|
|
|
Carrying
|
|
|
|
|
|
Amount
|
|
Fair
Value
|
|
Amount
|
|
Fair
Value
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
104,784
|
|
$
|
104,784
|
|
$
|
96,654
|
|
$
|
96,654
|
|
Marketable
securities
|
|
18,644
|
|
18,644
|
|
17,548
|
|
17,548
|
|
Restricted
cash
|
|
2,774
|
|
2,774
|
|
2,774
|
|
2,774
|
|
Notes
receivable
|
|
3,000
|
|
3,000
|
|
3,000
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
Revolver
|
|
$
|
93,000
|
|
$
|
93,000
|
|
$
|
112,000
|
|
$
|
112,000
|
|
Variable
rate term loans
|
|
823,552
|
|
765,903
|
|
825,651
|
|
652,264
|
|
7%
Senior subordinated notes
|
|
357,275
|
|
319,761
|
|
357,275
|
|
262,597
|
|
Other
long-term debt
|
|
6,040
|
|
6,040
|
|
6,146
|
|
6,146
|
|
Other
long-term obligations
|
|
17,563
|
|
17,563
|
|
17,314
|
|
17,314
|
|
The following methods and
assumptions were used to estimate the fair value of each class of financial
instruments for which it is practicable to estimate that value:
Cash and cash equivalents, restricted cash and notes receivable are
carried at cost, which approximates fair value due to their short-term
maturities.
Marketable securities are based upon Level 1 inputs obtained from
quoted prices available in active markets and represent the amounts we would
expect to receive if we sold these marketable securities.
The fair value of our long-term debt or other long-term obligations is
estimated based on the quoted market price of the underlying debt issue or,
when a quoted market price is not available, the discounted cash flow of future
payments utilizing current rates available to us for debt of similar remaining
maturities. Debt obligations with a short remaining maturity are valued at the
carrying amount.
8.
Income Taxes
Our effective income tax rates from continuing
operations for the three months ended July 26, 2009 and July 27, 2008
were 49.2% and (30.4%), respectively. Our effective rate is based upon
statutory rates applied to our income adjusted for permanent differences. Our
actual effective rate will fluctuate based upon the amount of our pretax book
income, permanent differences and other items used in the calculation of our
income tax benefit.
For the three months ended July 26, 2009, our
income tax provision included a $230 provision recognized from interest accrued
on our FIN 48 liabilities and amended returns.
12
9. Supplemental Disclosures
Cash Flow
For the three
months ended July 26, 2009 and July 27, 2008, we made net cash
payments of interest for $12,262 and $14,834, respectively. Additionally, we
received income tax refunds of $3,590 and $388 during the three months ended July 26,
2009 and July 27, 2008, respectively.
In fiscal year 2006, we
obtained a gaming license for our Waterloo, Iowa property and recorded an
intangible asset of $18,547. Annual
payments for the license are recorded on a yearly basis and for the three
months ended July 26, 2009 and July 27, 2008, we made payments of
$4,000 towards the gaming license.
For the three months ended July 26,
2009 and July 27, 2008, construction costs funded through accounts payable
were $1,102 and $235, respectively.
For the three months ended July 27,
2008, we purchased property and equipment financed with a long-term obligation
of $4,694.
10.
Closure of Properties due to Flooding
In connection with
flooding in the Midwest during April 2008, our Natchez, Mississippi and
Davenport, Iowa, properties closed for a combined total of 34 days during the
three months ended July 27, 2008.
11. Contingencies
Legal
and Regulatory Proceedings
Lady Luck Gaming Corporation (now our wholly owned
subsidiary) and several joint venture partners have been defendants in the
Greek Civil Courts and the Greek Administrative Courts in similar lawsuits
brought by the country of Greece. The actions allege that the defendants failed
to make specified payments in connection with the gaming license bid process
for Patras, Greece. Although it is difficult to determine the damages being
sought from the lawsuits, the action may seek damages up to that aggregate
amount plus interest from the date of the action.
In the Civil Court
lawsuit, the Civil Court of First Instance ruled in our favor and dismissed the
lawsuit in 2001. Greece appealed to the Civil Appeal Court and, in 2003, the
Court rejected the appeal. Greece then appealed to the Civil Supreme Court and,
in 2007, the Supreme Court ruled that the matter was not properly before the
Civil Courts and should be before the Administrative Court.
In the Administrative
Court lawsuit, the Administrative Court of First Instance rejected the lawsuit
stating that it was not competent to hear the matter. Greece then appealed to
the Administrative Appeal Court, which court rejected the appeal in 2003.
Greece then appealed to the Supreme Administrative Court, which remanded the
matter back to the Administrative Appeal Court for a hearing on the merits. The
re-hearing took place in 2006, and in 2008 the Administrative Appeal Court
rejected Greeces appeal on procedural
grounds. On December 22, 2008 and January 23, 2009, Greece appealed
the ruling to the Supreme Administrative Court. A hearing has not yet been
scheduled.
The outcome of this
matter is still in doubt and cannot be predicted with any degree of certainty.
We intend to continue a vigorous and appropriate defense to the claims asserted
in this matter. Through July 26, 2009, we have accrued an estimated
liability including interest of $9,985.
We are subject to certain
federal, state and local environmental protection, health and safety laws,
regulations and ordinances that apply to businesses generally, and are subject
to cleanup requirements at certain of our facilities as a result thereof. We
have not made, and do not anticipate making material expenditures, nor do we
anticipate incurring delays with respect to environmental remediation or
protection. However, in part because our present and future development sites
have, in some cases, been used as manufacturing facilities or other facilities
that generate materials that are required to be remediated under environmental
laws and regulations, there can be no
13
guarantee that additional
pre-existing conditions will not be discovered and we will not experience
material liabilities or delays.
We are subject to various
contingencies and litigation matters and have a number of unresolved claims.
Although the ultimate liability of these contingencies, this litigation and
these claims cannot be determined at this time, we believe they will not have a
material adverse effect on our consolidated financial position, results of
operations or cash flows.
12. Consolidating Condensed Financial Information
Certain of our wholly
owned subsidiaries have fully and unconditionally guaranteed on a joint and
several basis, the payment of all obligations under our 7% Senior Subordinated
Notes.
The
following wholly owned subsidiaries of the Company are guarantors, on a joint
and several basis, under the 7% Senior Subordinated Notes: Riverboat
Corporation of Mississippi; Riverboat Services, Inc.; CSNO, L.L.C.;
St. Charles Gaming Company, Inc.; IOC Holdings, L.L.C.; Grand Palais
Riverboat, Inc.; LRGP Holdings, L.L.C.; P.P.I, Inc.; Isle of Capri
Casino Colorado, Inc.; IOC-Coahoma, Inc.; IOC-Natchez, Inc.;
IOC-Lula, Inc.; IOC-Boonville, Inc.; IOC-Kansas City, Inc.; Isle
of Capri Bettendorf, L.C.; Isle of Capri Marquette, Inc.; IOC-Davenport, Inc.;
IOC-Black Hawk County, Inc.; IOC-Manufacturing, Inc.; Riverboat
Corporation of MississippiVicksburg; Isle of Capri Black Hawk, L.L.C.; Isle of
Capri Black Hawk Capital Corp.; IC Holdings Colorado, Inc.; CCSC/Blackhawk, Inc.;
IOC-Black Hawk Distribution Company, L.L.C.; Casino America of Colorado, Inc.;
Black Hawk Holdings, L.L.C.; Louisiana Riverboat Gaming Partnership; Isle of
Capri UK Holdings, Inc.; Isle of Capri Bahamas Holdings, Inc.; and
IOC-Caruthersville, L.L.C. Each of the subsidiaries guarantees is joint and
several with the guarantees of the other subsidiaries.
14
Consolidating condensed balance sheets as of July 26, 2009 and April 26,
2009 are as follows (in thousands):
|
|
As of
July 26, 2009
|
|
|
|
Isle of
Capri
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
Casinos, Inc.
|
|
|
|
Non-
|
|
and
|
|
Isle of
Capri
|
|
|
|
(Parent
|
|
Guarantor
|
|
Guarantor
|
|
Eliminating
|
|
Casinos, Inc.
|
|
|
|
Obligor)
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Entries
|
|
Consolidated
|
|
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
$
|
66,614
|
|
$
|
88,292
|
|
$
|
45,949
|
|
$
|
(7,199
|
)
|
$
|
193,656
|
|
Intercompany
receivables
|
|
1,066,535
|
|
(301,506
|
)
|
15,240
|
|
(780,269
|
)
|
|
|
Investments
in subsidiaries
|
|
383,361
|
|
|
|
|
|
(383,361
|
)
|
|
|
Property
and equipment, net
|
|
9,140
|
|
1,137,628
|
|
8,388
|
|
|
|
1,155,156
|
|
Other
assets
|
|
11,765
|
|
413,805
|
|
153
|
|
|
|
425,723
|
|
Total
assets
|
|
$
|
1,537,415
|
|
$
|
1,338,219
|
|
$
|
69,730
|
|
$
|
(1,170,829
|
)
|
$
|
1,774,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
$
|
47,862
|
|
$
|
95,212
|
|
$
|
39,882
|
|
$
|
(7,199
|
)
|
$
|
175,757
|
|
Intercompany
payables
|
|
7,200
|
|
773,100
|
|
(31
|
)
|
(780,269
|
)
|
|
|
Long-term
debt, less current maturities
|
|
1,265,427
|
|
4,429
|
|
203
|
|
|
|
1,270,059
|
|
Other
accrued liabilities
|
|
(15,573
|
)
|
107,699
|
|
4,094
|
|
|
|
96,220
|
|
Stockholders
equity
|
|
232,499
|
|
357,779
|
|
25,582
|
|
(383,361
|
)
|
232,499
|
|
Total
liabilities and stockholders equity
|
|
$
|
1,537,415
|
|
$
|
1,338,219
|
|
$
|
69,730
|
|
$
|
(1,170,829
|
)
|
$
|
1,774,535
|
|
|
|
As of
April 26, 2009
|
|
|
|
Isle of
Capri
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
Casinos, Inc.
|
|
|
|
Non-
|
|
and
|
|
Isle of
Capri
|
|
|
|
(Parent
|
|
Guarantor
|
|
Guarantor
|
|
Eliminating
|
|
Casinos, Inc.
|
|
|
|
Obligor)
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Entries
|
|
Consolidated
|
|
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
$
|
38,145
|
|
$
|
93,538
|
|
$
|
46,013
|
|
$
|
(103
|
)
|
$
|
177,593
|
|
Intercompany
receivables
|
|
1,141,189
|
|
(316,376
|
)
|
(33,920
|
)
|
(790,893
|
)
|
|
|
Investments
in subsidiaries
|
|
337,218
|
|
|
|
|
|
(337,218
|
)
|
|
|
Property
and equipment, net
|
|
10,158
|
|
1,158,839
|
|
8,543
|
|
|
|
1,177,540
|
|
Other
assets
|
|
12,363
|
|
415,013
|
|
153
|
|
|
|
427,529
|
|
Total
assets
|
|
$
|
1,539,073
|
|
$
|
1,351,014
|
|
$
|
20,789
|
|
$
|
(1,128,214
|
)
|
$
|
1,782,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
$
|
40,440
|
|
$
|
94,935
|
|
$
|
32,721
|
|
$
|
(103
|
)
|
$
|
167,993
|
|
Intercompany
payables
|
|
|
|
790,563
|
|
330
|
|
(790,893
|
)
|
|
|
Long-term
debt, less current maturities
|
|
1,286,526
|
|
4,650
|
|
208
|
|
|
|
1,291,384
|
|
Other
accrued liabilities
|
|
(16,319
|
)
|
107,301
|
|
3,877
|
|
|
|
94,859
|
|
Stockholders
equity
|
|
228,426
|
|
353,565
|
|
(16,347
|
)
|
(337,218
|
)
|
228,426
|
|
Total
liabilities and stockholders equity
|
|
$
|
1,539,073
|
|
$
|
1,351,014
|
|
$
|
20,789
|
|
$
|
(1,128,214
|
)
|
$
|
1,782,662
|
|
15
Consolidating condensed statements of operations for
the three months ended July 26, 2009 and July 27, 2008 are as follows
(in thousands):
|
|
For the
Three Months Ended July 26, 2009
|
|
|
|
Isle of
Capri
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
Casinos, Inc.
|
|
|
|
Non-
|
|
and
|
|
Isle of
Capri
|
|
|
|
(Parent
|
|
Guarantor
|
|
Guarantor
|
|
Eliminating
|
|
Casinos, Inc.
|
|
|
|
Obligor)
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Entries
|
|
Consolidated
|
|
Statement
of Operations
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
|
|
$
|
262,263
|
|
$
|
1,693
|
|
$
|
|
|
$
|
263,956
|
|
Pari-mutuel,
rooms, food, beverage and other
|
|
111
|
|
46,438
|
|
3,085
|
|
(2,503
|
)
|
47,131
|
|
Gross
revenues
|
|
111
|
|
308,701
|
|
4,778
|
|
(2,503
|
)
|
311,087
|
|
Less
promotional allowances
|
|
|
|
(51,011
|
)
|
(134
|
)
|
|
|
(51,145
|
)
|
Net
revenues
|
|
111
|
|
257,690
|
|
4,644
|
|
(2,503
|
)
|
259,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
|
39,327
|
|
667
|
|
|
|
39,994
|
|
Gaming
taxes
|
|
|
|
66,304
|
|
124
|
|
|
|
66,428
|
|
Other
operating expenses
|
|
11,055
|
|
93,474
|
|
3,129
|
|
(2,503
|
)
|
105,155
|
|
Management
fee expense (revenue)
|
|
(6,686
|
)
|
8,903
|
|
(2,217
|
)
|
|
|
|
|
Depreciation
and amortization
|
|
1,183
|
|
27,491
|
|
155
|
|
|
|
28,829
|
|
Total
operating expenses
|
|
5,552
|
|
235,499
|
|
1,858
|
|
(2,503
|
)
|
240,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss)
|
|
(5,441
|
)
|
22,191
|
|
2,786
|
|
|
|
19,536
|
|
Interest
expense, net
|
|
(1,711
|
)
|
(16,200
|
)
|
(67
|
)
|
|
|
(17,978
|
)
|
Equity
in income (loss) of subsidiaries
|
|
5,804
|
|
|
|
|
|
(5,804
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continiuing operations before income taxes
|
|
(1,348
|
)
|
5,991
|
|
2,719
|
|
(5,804
|
)
|
1,558
|
|
Income
tax (provision) benefit
|
|
2,139
|
|
(1,966
|
)
|
(940
|
)
|
|
|
(767
|
)
|
Income
(loss) from continuing operations
|
|
791
|
|
4,025
|
|
1,779
|
|
(5,804
|
)
|
791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from discontinued operations, net of tax
|
|
|
|
|
|
114
|
|
|
|
114
|
|
Equity
in income (loss) of discontinued operations
|
|
114
|
|
|
|
|
|
(114
|
)
|
|
|
Income
(loss) from discontinued operations, net of tax
|
|
114
|
|
|
|
114
|
|
(114
|
)
|
114
|
|
Net
income (loss)
|
|
$
|
905
|
|
$
|
4,025
|
|
$
|
1,893
|
|
$
|
(5,918
|
)
|
$
|
905
|
|
16
|
|
For the
Three Months Ended July 27, 2008
|
|
|
|
Isle of
Capri
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
Casinos, Inc.
|
|
|
|
Non-
|
|
and
|
|
Isle of
Capri
|
|
|
|
(Parent
|
|
Guarantor
|
|
Guarantor
|
|
Eliminating
|
|
Casinos, Inc.
|
|
|
|
Obligor)
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Entries
|
|
Consolidated
|
|
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
|
|
$
|
273,339
|
|
$
|
3,447
|
|
$
|
|
|
$
|
276,786
|
|
Pari-mutuel,
rooms, food, beverage and other
|
|
150
|
|
49,748
|
|
2,817
|
|
(2,463
|
)
|
50,253
|
|
Gross
revenues
|
|
150
|
|
323,087
|
|
6,264
|
|
(2,463
|
)
|
327,039
|
|
Less
promotional allowances
|
|
|
|
(49,423
|
)
|
(221
|
)
|
|
|
(49,644
|
)
|
Net
revenues
|
|
150
|
|
273,664
|
|
6,043
|
|
(2,463
|
)
|
277,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
|
37,777
|
|
763
|
|
|
|
38,541
|
|
Gaming
taxes
|
|
|
|
70,399
|
|
259
|
|
|
|
70,658
|
|
Other
operating expenses
|
|
17,044
|
|
96,177
|
|
4,445
|
|
(2,463
|
)
|
115,204
|
|
Management
fee expense (revenue)
|
|
(7,475
|
)
|
9,737
|
|
(2,262
|
)
|
|
|
|
|
Depreciation
and amortization
|
|
1,229
|
|
30,217
|
|
120
|
|
|
|
31,566
|
|
Total
operating expenses
|
|
10,798
|
|
244,307
|
|
3,325
|
|
(2,463
|
)
|
255,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss)
|
|
(10,648
|
)
|
29,357
|
|
2,718
|
|
|
|
21,426
|
|
Interest
expense, net
|
|
(2,673
|
)
|
(17,687
|
)
|
(3,091
|
)
|
|
|
(23,451
|
)
|
Equity
in income (loss) of subsidiaries
|
|
6,231
|
|
|
|
|
|
(6,231
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continiuing operations before income taxes
|
|
(7,090
|
)
|
11,670
|
|
(373
|
)
|
(6,231
|
)
|
(2,025
|
)
|
Income
tax (provision) benefit
|
|
4,450
|
|
(4,484
|
)
|
(582
|
)
|
|
|
(615
|
)
|
Income
(loss) from continuing operations
|
|
(2,640
|
)
|
7,186
|
|
(955
|
)
|
(6,231
|
)
|
(2,640
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from discontinued operations, net of tax
|
|
|
|
|
|
(986
|
)
|
|
|
(986
|
)
|
Equity
in income (loss) of discontinued operations
|
|
(986
|
)
|
|
|
|
|
986
|
|
|
|
Income
(loss) from discontinued operations, net of tax
|
|
(986
|
)
|
|
|
(986
|
)
|
986
|
|
(986
|
)
|
Net
income (loss)
|
|
$
|
(3,626
|
)
|
$
|
7,186
|
|
$
|
(1,941
|
)
|
$
|
(5,245
|
)
|
$
|
(3,626
|
)
|
17
Consolidating condensed statements of cash flows for
the three months ended July 26, 2009 and July 27, 2008 are as follows
(in thousands):
|
|
Three
Months Ended July 26, 2009
|
|
|
|
Isle of
Capri
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
Casinos, Inc.
|
|
|
|
Non-
|
|
and
|
|
Isle of
Capri
|
|
|
|
(Parent
|
|
Guarantor
|
|
Guarantor
|
|
Eliminating
|
|
Casinos, Inc.
|
|
|
|
Obligor)
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Entries
|
|
Consolidated
|
|
Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) operating activities
|
|
$
|
(4,497
|
)
|
$
|
37,825
|
|
$
|
10,668
|
|
$
|
(5,988
|
)
|
$
|
38,008
|
|
Net
cash provided by (used in) investing activities
|
|
36,174
|
|
(6,286
|
)
|
(541
|
)
|
(37,938
|
)
|
(8,591
|
)
|
Net
cash provided by (used in) financing activities
|
|
(21,096
|
)
|
(34,481
|
)
|
(9,666
|
)
|
43,926
|
|
(21,317
|
)
|
Effect
of foreign currency exchange rates on cash and cash equivalents
|
|
|
|
|
|
30
|
|
|
|
30
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
10,581
|
|
(2,942
|
)
|
491
|
|
|
|
8,130
|
|
Cash
and cash equivalents at beginning of the period
|
|
8,776
|
|
68,864
|
|
19,014
|
|
|
|
96,654
|
|
Cash
and cash equivalents at end of the period
|
|
$
|
19,357
|
|
$
|
65,922
|
|
$
|
19,505
|
|
$
|
|
|
$
|
104,784
|
|
|
|
Three
Months Ended July 27, 2008
|
|
|
|
Isle of
Capri
|
|
|
|
|
|
Consolidating
|
|
|
|
|
|
Casinos, Inc.
|
|
|
|
Non-
|
|
and
|
|
Isle of
Capri
|
|
|
|
(Parent
|
|
Guarantor
|
|
Guarantor
|
|
Eliminating
|
|
Casinos, Inc.
|
|
|
|
Obligor)
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Entries
|
|
Consolidated
|
|
Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) operating activities
|
|
$
|
(10,492
|
)
|
$
|
46,538
|
|
$
|
338
|
|
$
|
|
|
$
|
36,384
|
|
Net
cash provided by (used in) investing activities
|
|
31,823
|
|
(11,862
|
)
|
(329
|
)
|
(30,129
|
)
|
(10,497
|
)
|
Net
cash provided by (used in) financing activities
|
|
(7,189
|
)
|
(28,218
|
)
|
(2,037
|
)
|
30,129
|
|
(7,315
|
)
|
Effect
of foreign currency exchange rates on cash and cash equivalents
|
|
|
|
|
|
100
|
|
|
|
100
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
14,142
|
|
6,458
|
|
(1,928
|
)
|
|
|
18,672
|
|
Cash
and cash equivalents at beginning of the period
|
|
5,359
|
|
67,544
|
|
18,887
|
|
|
|
91,790
|
|
Cash
and cash equivalents at end of the period
|
|
$
|
19,501
|
|
$
|
74,002
|
|
$
|
16,959
|
|
$
|
|
|
$
|
110,462
|
|
18
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This report contains statements that we believe are, or may
be considered to be, forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements other than
statements of historical fact included in this report regarding the prospects
of our industry or our prospects, plans, financial position or business strategy,
may constitute forward-looking statements. In addition, forward-looking
statements generally can be identified by the use of forward-looking words such
as may, will, expect, intend, estimate, foresee, project, anticipate,
believe, plans, forecasts, continue or could or the negatives of
these terms or variations of them or similar terms. Furthermore, such
forward-looking statements may be included in various filings that we make with
the SEC or press releases or oral statements made by or with the approval of
one of our authorized executive officers. Although we believe that the
expectations reflected in these forward-looking statements are reasonable, we
cannot assure you that these expectations will prove to be correct. These forward-looking
statements are subject to certain known and unknown risks and uncertainties, as
well as assumptions that could cause actual results to differ materially from
those reflected in these forward-looking statements. Readers are cautioned not
to place undue reliance on any forward-looking statements contained herein,
which reflect managements opinions only as of the date hereof. Except as
required by law, we undertake no obligation to revise or publicly release the
results of any revision to any forward-looking statements. You are advised,
however, to consult any additional disclosures we make in our reports to the
SEC. All subsequent written and oral forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirety by
the cautionary statements contained in this report.
For a
more complete description of the risks that may affect our business, see our
Annual Report on Form 10-K for the year ended April 26, 2009.
Executive Overview
We are
a leading developer, owner and operator of branded gaming facilities and
related lodging and entertainment facilities in regional markets in the United
States. We have intentionally sought geographic diversity to limit the risks
caused by weather, regional economic difficulties and local gaming authorities
and regulations. We currently operate casinos in Mississippi, Louisiana,
Missouri, Iowa, Colorado and Florida. We also operate a harness racing track at
our casino in Florida. Internationally we operate casinos in Dudley and
Wolverhampton, England, which are classified as discontinued operations, and in
Freeport, Grand Bahamas.
Our operating results for
the periods presented have been affected, both positively and negatively, by
current economic conditions and several other factors discussed in detail
below. This Managements Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with our Annual Report on Form 10-K
for the year ended April 26, 2009 and by giving consideration to the
following:
Our historical operating
results may not be indicative of our future results of operations because of
these factors and the changing competitive landscape in each of our markets, as
well as by factors discussed elsewhere herein.
Colorado
and Missouri Gaming Law Changes
During early July 2009, gaming law
changes became effective in Colorado which extended the hours of operations,
expanded the types of allowable table games and increased the betting limit
from $5 to $100 per bet. During November 2008,
gaming law changes became effective in Missouri which repealed the $500 loss
limit. Our gaming revenues reflect the favorable impact of these changes in
state gaming laws.
Write-offs
and Other Charges
We recorded charges of $6.0 million during the three months ended July 27,
2008, following our agreement to terminate the development of a potential
casino project in Portland, Oregon.
Corporate
and Development
During Fiscal Year 2010 we awarded our long term incentive plan awards during
the first quarter, as opposed to Fiscal Year 2009 when we made those awards
during second quarter. As a result, our
corporate expense for the three months ended July 26, 2009
19
includes $2.2 million of
expenses related to the cash awards under of our long-term incentive plan
compared to no expense in the three months ended July 27, 2008.
Additionally, noncash stock compensation
expense included in corporate expense was reduced by $1.0 million from $2.1
million for the three months ended July 27, 2008 to $1.1 million for the
three months ended July 26, 2009, reflecting the impact of our October 2008
tender offer.
Flooding
As a result of flooding conditions on
the Mississippi River, our Davenport and Natchez properties were closed for 20
and 14 days, respectively, during the three months ended July 27, 2008.
Discontinued
Operations
Discontinued operations include the results of our Blue Chip and Coventry
casino operations. Our Blue Chip casino operations are classified as
discontinued operations with assets held for sale as of the end of fiscal year
2009. We continue to operate the Blue Chip casinos during the period prior to
our expected sales of such assets. Our
Coventry casino operations were discontinued during the fourth quarter of
fiscal year 2009.
Increased
Competition
- The
introduction of table games and expansion of Class III gaming at competing
Native American casinos, beginning July 2008, has had a negative impact on
our Pompano propertys net revenues and operating results. The opening of a
competing land-based facility, which replaced a riverboat operation in the Quad
Cities area during December 2008, has had a negative impact on net
revenues and operating results at our Bettendorf and Davenport, Iowa
properties.
Revenues
Revenues for the
three months ended July 26, 2009 and July 27, 2008 are as follows:
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
July 27,
|
|
July 29,
|
|
|
|
Percentage
|
|
(in
thousands)
|
|
2008
|
|
2007
|
|
Variance
|
|
Variance
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
263,956
|
|
$
|
276,786
|
|
$
|
(12,830
|
)
|
-4.6
|
%
|
Rooms
|
|
12,261
|
|
13,706
|
|
(1,445
|
)
|
-10.5
|
%
|
Pari-mutuel,
food, beverage and other
|
|
34,870
|
|
36,547
|
|
(1,677
|
)
|
-4.6
|
%
|
Gross
revenues
|
|
311,087
|
|
327,039
|
|
(15,952
|
)
|
-4.9
|
%
|
Less
promotional allowances
|
|
(51,145
|
)
|
(49,644
|
)
|
(1,501
|
)
|
3.0
|
%
|
Net
revenues
|
|
$
|
259,942
|
|
$
|
277,395
|
|
(17,453
|
)
|
-6.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
Revenues -
Casino
revenues decreased $12.8 million, or 4.6%, for the three months ended July 26,
2009, compared to the three months ended July 27, 2008. Decreases in our
casino revenues are reflective of competitive and economic conditions in our
markets. The majority of the decline in our casino revenues included; Pompano
$3.9 million; Quad Cities $3.0 million; Biloxi $2.6 million; Lake Charles $2.0
million; and Lucaya of $1.8 million. Our Black Hawk properties experienced an
increase in casino revenues of $0.8 million as compared to the first three
months of fiscal 2009, reflecting the impact of new gaming laws in early July 2009.
Rooms
Revenue -
Rooms
revenue decreased $1.4 million, or 10.5%, for the three months ended July 26,
2009, compared to the three months ended July 27, 2008. The majority this
decrease was at our Biloxi property and reflects a highly competitive market
with heavily discounted hotel room rates.
Pari-mutuel,
Food, Beverage and Other Revenues
Pari-mutuel, food, beverage and other revenues
decreased $1.7 million, or 4.6% for the three months ended July 26,
2009, compared to the three months ended July 27, 2008. The majority of
this decrease was a $1.3 million decrease in pari-mutuel revenues following our
decision to reduce our number of live racing days at our Pompano property.
During the three months ended July 26, 2009, we offered only simulcast
wagering while during the three months ended July 27, 2008, we offered
both simulcast and live race wagering. We plan to continue to hold live racing
on scheduled days during the balance of our fiscal year.
20
Promotional
Allowances -
Promotional allowances increased
$1.5 million, or 3.0%, for the three
months ended July 26, 2009, compared to the three months ended July 27,
2008. We experienced decreased promotional allowances at our Kansas City and
Boonville properties resulting from an increase in our retail play following
the repeal of the loss limit and at our Bettendorf and Pompano properties
reflecting reductions in gaming revenues.
However, increased promotional spending, primarily at our southern
properties, in response to competition and the economy, as well as increased
promotional spending at our Black Hawk properties reflecting the impact of the
gaming law changes effective in early July 2009, resulted in increased
year over year promotional allowances.
Operating
Expenses
Operating expenses for
the three months ended July 26, 2009 and July 27, 2008 are as
follows:
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
July 26,
|
|
July 27,
|
|
|
|
Percentage
|
|
(in
thousands)
|
|
2009
|
|
2008
|
|
Variance
|
|
Variance
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
39,994
|
|
$
|
38,541
|
|
$
|
1,453
|
|
3.8
|
%
|
Gaming
taxes
|
|
66,428
|
|
70,658
|
|
(4,230
|
)
|
-6.0
|
%
|
Rooms
|
|
2,981
|
|
3,389
|
|
(408
|
)
|
-12.0
|
%
|
Pari-mutuel,
food, beverage and other
|
|
11,158
|
|
13,661
|
|
(2,503
|
)
|
-18.3
|
%
|
Marine
and facilities
|
|
15,954
|
|
16,470
|
|
(516
|
)
|
-3.1
|
%
|
Marketing
and administrative
|
|
65,117
|
|
65,354
|
|
(237
|
)
|
-0.4
|
%
|
Corporate
and development
|
|
9,945
|
|
10,330
|
|
(385
|
)
|
-3.7
|
%
|
Valuation
charges
|
|
|
|
6,000
|
|
(6,000
|
)
|
-100.0
|
%
|
Depreciation
and amortization
|
|
28,829
|
|
31,566
|
|
(2,737
|
)
|
-8.7
|
%
|
Total
operating expenses
|
|
$
|
240,406
|
|
$
|
255,969
|
|
(15,563
|
)
|
-6.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
-
Casino
operating expenses increased $1.4 million, or 3.8%, in the three months ended July 26,
2009, compared to the same period in the prior year. The majority of this
increase in casino operating expense was incurred at our Black Hawk properties
in advance of and after the effectiveness of new gaming laws.
Gaming
Taxes -
State and
local gaming taxes decreased $4.2 million, or 6.0%, for three months ended July 26,
2009, as compared to the same period in the prior fiscal year. The effective
rate for gaming taxes as a percentage of gaming revenue decreased from 25.5% to
25.2% for the three months ended July 26, 2009 as compared to the three
months ended July 27, 2008, due to a decrease in the mix of gaming
revenues derived from states with higher gaming tax rates, primarily Florida.
Rooms -
Rooms expense
decreased $0.4 million, or 12.0%, for the three months ended July 26,
2009, compared to the same period in the prior fiscal year. These expenses
directly relate to the cost of providing hotel rooms. This is reflective of a
10.5% reduction in our hotel revenues.
Pari-mutuel,
Food, Beverage and Other
Pari-mutuel, food, beverage and other expenses
decreased $2.5 million, or 18.3%, in the three months ended July 26, 2009,
compared to the same period in the prior fiscal year. The majority of this
decrease is a result of our decision to not conduct live racing during the
quarter ended July 26, 2009, reducing expense for pari-mutuel, food
beverage and other at our Pompano property by $2.0 million.
Marine
and Facilities -
These
expenses include salaries, wages and benefits of the marine and facilities
departments, operating expenses of the marine crews, insurance, maintenance of
public areas, housekeeping and general maintenance of the riverboats and
pavilions. Marine and facilities expenses decreased $0.5 million, or 3.1%, in
the three months ended July 26, 2009. This decrease is primarily
reflective of reductions in facility costs at our Pompano property as a result
of our decision not to conduct live racing during the quarter ended July 26,
2009.
Marketing
and Administrative -
These
expenses include salaries, wages and benefits of the
marketing and sales departments, as well as promotions, direct mail,
advertising, special events and entertainment. Administrative
21
expenses include
administration and human resource department expenses, rent, professional fees
and property taxes. Marketing and administrative expenses were comparable to
the prior year with a decrease of $0.2 million, or 0.4%, in the three months
ended July 26, 2009, compared to the same period in the prior year.
Corporate
and Development -
During the three months ended July 26, 2009, our corporate and development
expenses were $9.9 million compared to $10.3 million for the three months ended
July 27, 2008. The three months ended July 26, 2009 included $2.2
million of expenses related to the cash awards under our long-term incentive
plan compared to no expense in the three months ended July 27, 2008 as
such awards were made during the first quarter of fiscal 2010 and during the
second quarter of fiscal year 2009. Additionally, non-cash stock compensation
expense included in corporate expense was reduced by $1.0 million from $2.1 million
for the three months ended July 27, 2008 to $1.1 million for the three
months ended July 26, 2009, reflecting the impact of our October 2008
tender offer.
Depreciation
and Amortization -
Depreciation
and amortization expense for the three months ended July 26, 2009
decreased $2.7 million, as compared to the three months ended July 27,
2008, primarily due to certain of our assets becoming fully depreciated.
Other
Income (Expense), Income Taxes, and Discontinued Operations
Interest expense, interest
income, income tax (provision) benefit, and income (loss) from discontinued
operations, net of income taxes for the three months ended July 29, 2009
and July 27, 2008 are as follows:
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
July 26,
|
|
July 27,
|
|
|
|
Percentage
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
Variance
|
|
Variance
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
$
|
(18,347
|
)
|
$
|
(23,897
|
)
|
$
|
5,550
|
|
-23.2
|
%
|
Interest
income
|
|
369
|
|
446
|
|
(77
|
)
|
-17.3
|
%
|
Income
tax provision
|
|
(767
|
)
|
(615
|
)
|
(152
|
)
|
24.7
|
%
|
Income
(loss) from discontinued operations, net of income taxes
|
|
114
|
|
(986
|
)
|
1,100
|
|
-111.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense
-
Interest expense decreased $5.5 million for the three months ended July 26,
2009 compared to the same period in the prior fiscal year. This decrease is
primarily attributable to a lower average debt balance resulting from the pay
down of $142.7 million of our senior subordinated 7% notes as a result of our
tender offer and a $35.0 million repayment on our senior secured credit
facility debt in February and March 2009, respectively, and a decrease
in the interest rate on the variable interest rate components of our debt.
Interest
Income -
During
the three months ended July 26, 2009 and July 27, 2008, our interest
income was $0.4 million. Invested
balances and rates remained relatively unchanged.
Income
Tax Provision
Our
income tax provision from continuing operations and our effective income tax
rate has been impacted by our estimate of annual taxable income for financial
statement purposes as well as our percentage of permanent items in relation to
such estimated income or loss. Effective income tax rates were as follows:
|
|
Three
Months Ended
|
|
|
|
July 26,
|
|
July 27,
|
|
|
|
2009
|
|
2008
|
|
Total
|
|
49.2
|
%
|
-30.4
|
%
|
22
Liquidity
and Capital Resources
Cash
Flows from Operating Activities -
During the three months ended July 26, 2009, we
generated $38.0 million in cash flows from operating activities compared to
generating $36.4 million during the three months ended July 27, 2008. Our
current year net income compared to last years net loss and current year cash
flows from working capital changes compared to last years working capital
usages of cash, offset year over year reductions in non cash adjustments to
improve our operating cash flows by $1.6 million.
Cash
Flows used in Investing Activities
-
During the three months ended July 26, 2009, we used $8.6 million for
investing activities compared to using $10.5 million during the three months
ended July 27, 2008. Significant
investing activities for the three months ended July 26, 2009 included the
purchases of property and equipment of $4.4 million and payment towards our
Waterloo gaming license of $4.0 million.
For the three months
ended July 27, 2008, significant investing activities included the purchase
of property and equipment for $8.2 million and payments towards our Waterloo
gaming license of $4.0 million.
Cash Flows from Financing Activities -
During the three months ended July 26,
2009 and July 27, 2008, our net cash flows from financing activities were
used to repay our outstanding long term debt of $21.3 million and $7.3 million,
respectively.
Availability
of Cash and Additional Capital
- At July 26, 2009, we had cash and cash
equivalents and marketable securities of $123.4 million. As of July 26,
2009, we had $93.0 million in revolving credit and $823.5 million in term loans
outstanding under the senior secured credit facility. Our net line of credit
availability at July 26, 2009 was approximately $364 million.
Capital
Expenditures
and Development Activities
- Historically, we have made
significant investments in property and equipment and expect that our
operations will continue to demand ongoing investments to keep our properties
competitive. Our current planned capital expenditures include $35 million in
maintenance capital expenditures for the balance of fiscal year 2010.
We have also identified
approximately $60 million in projects primarily focused on refreshing our hotel
room inventory as well as additional improvements to our Black Hawk and Lake
Charles properties. The timing and
amount of these capital expenditures will be determined as we gain more clarity
as to improvement of economic and local market conditions, cash flows from our
continuing operations and availability of cash under our senior secured credit
facility.
The timing and amount of
our capital expenditures is subject to the availability of cash under our
senior secured credit facility, improvement in economic and local market
conditions and cash flows from our continuing operations.
Historically, we have
funded our daily operations through net cash provided by operating activities
and our significant capital expenditures through operating cash flow and debt
financing. While, we believe that existing cash, cash flow from operations, and
available borrowings under our senior secured credit facility will be
sufficient to support our working capital needs, planned capital expenditures
and debt service requirements for the foreseeable future, there is no assurance
that these sources will in fact provide adequate funding for our planned and
necessary expenditures or that our planned reduced levels of capital
investments will be sufficient to allow us to remain competitive in our
existing markets.
We are highly leveraged
and may be unable to obtain additional debt or equity financing on acceptable
terms if our current sources of liquidity are not sufficient or if we fail to
stay in compliance with the covenants of our senior secured credit facility. We
will continue to evaluate our planned capital expenditures at each of our
existing locations in light of the operating performance of the facilities at
such locations.
As
part of our business development activities, historically we have entered into
agreements which have resulted in the acquisition or development of businesses
or assets. These business development efforts and related agreements typically
require the expenditure of cash, which may be significant. The amount and
timing of our
23
cash
expenditures relating to development activities may vary based upon our
evaluation of development opportunities, our financial condition and the
condition of the financing markets. Our development activities are subject to a
variety of factors including but not limited to: obtaining permits, licenses
and approvals from appropriate regulatory and other agencies, legislative
changes and, in certain circumstances, negotiating acceptable leases.
Critical Accounting Estimates
Our
consolidated financial statements are prepared in accordance with U.S.
generally accepted accounting principles that require our management to make
estimates and assumptions that affect reported amounts and related disclosures.
Management identifies critical accounting estimates as:
·
those that require the use of assumptions about matters that are
inherently and highly uncertain at the time the estimates are made;
·
those estimates where, had we chosen different estimates or
assumptions, the resulting differences would have had a material impact on our
financial condition, changes in financial condition or results of operations;
and
·
those estimates that, if they were to change from period to period,
likely would result in a material impact on our financial condition, changes in
financial condition or results of operations.
For a
discussion of our significant accounting policies and estimates, please refer
to Managements Discussion and Analysis of Financial Condition and Results of
Operations and Notes to Consolidated Financial Statements presented in our 2009
Annual Report on Form 10-K. There
were no newly identified significant accounting estimates in the first quarter of
fiscal 2010, nor were there any material changes to the critical accounting
policies and estimates set forth in our 2009 Annual Report.
ITEM 3.
QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk
of loss arising from adverse changes in market rates and prices, including
interest rates, foreign currency exchange rates, commodity prices and equity
prices. Our primary exposure to market risk is interest rate risk associated
with our Isle of Capri Casinos, Inc. senior secured credit facility (July 2007
Credit Facility).
We have entered into six
interest rate swap arrangements with aggregate notional value of $500.0 million
as of July 26, 2009. The swap agreements effectively convert portions of
the July 2007 Credit Facility variable debt to a fixed-rate basis until
the respective swap agreements terminate, which occurs during fiscal years
2010, 2011 and 2012. These swap
agreements meet the criteria for hedge accounting for cash flow hedges and have
been evaluated, as of July 26, 2009, as being fully effective.
We are also exposed to
market risks relating to fluctuations in currency exchange rates related to our
ownership interests in the UK classified as discontinued operations as of July 26,
2009. We finance a portion of our UK investments in the local currency of the
UK and due to the limited scope and nature of our UK operations, our market
risks are immaterial.
ITEM 4.
CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure
controls and procedures that are designed to ensure that information required
to be disclosed in our Exchange Act reports is recorded, processed, summarized
and reported within the time periods specified in the SECs rules and
forms and that such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure.
24
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting for the Company, as such term is defined in
Exchange Act Rule 13a-15(f). Under
the supervision and with the participation of our management, including our
Chief Executive Officer and Chief Financial Officer, we conducted an evaluation
of the effectiveness of our internal control over financial reporting based on
the framework in Internal Control-Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). Based on the evaluation, management has
concluded that the design and operation of our disclosure controls and
procedures are effective as of July 26, 2009.
Because
of its inherent limitations, systems of internal control over financial
reporting can provide only reasonable assurance with respect to financial statement
preparation and presentation.
CHANGES
IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no
changes in our internal controls over financial reporting during the fiscal
quarter ended July 26, 2009, that have materially affected, or are reasonably
likely to materially affect, our internal controls over financial reporting.
PART IIOTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
A
reference is made to the information contained in Footnote 11 of our unaudited
condensed consolidated financial statements included herein, which is
incorporated herein by reference.
ITEM 1A.
RISK FACTORS
There are no material changes to the disclosure
regarding risk factors presented in our Annual Report on Form 10-K for the
fiscal year ended April 26, 2009.
ITEM 2.
UNREGISTERED SALES OF
EQUITY SECURITIES AND USE OF PROCEEDS
We have purchased our
common stock under stock repurchase programs. These programs allow for the
repurchase of up to 6,000,000 shares. To
date, we have purchased 4,895,792 shares of our common stock under these
programs. These programs have no
approved dollar amount, nor expiration dates.
No purchases were made during the three months ended July 26, 2009.
ITEM 3.
DEFAULTS UPON SENIOR
SECURITIES
None.
ITEM 4.
SUBMISSION OF MATTERS
SUBJECT TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5.
OTHER INFORMATION
None.
ITEM 6.
EXHIBITS
See the Index to Exhibits
following the signature page hereto for a list of the exhibits filed
pursuant to Item 601 of Regulation S-K.
25
SIGNATURE
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
ISLE
OF CAPRI CASINOS, INC.
|
|
|
Dated:
September 1, 2009
|
/s/ DALE R. BLACK
|
|
Dale R. Black
|
|
Senior Vice President
and Chief Financial Officer
|
|
(Principal Financial
Officer and Authorized Officer)
|
26
EXHIBIT
NUMBER
|
|
DESCRIPTION
|
31.1
|
|
Certification of Chief
Executive Officer pursuant to Rule 13a14(a) under the Securities
Exchange Act of 1934.
|
|
|
|
31.2
|
|
Certification of Chief
Financial Officer pursuant to Rule 13a14(a) under the Securities
Exchange Act of 1934.
|
|
|
|
32.1
|
|
Certification of Chief
Executive Officer pursuant to 18 U.S.C. Section 1350.
|
|
|
|
32.2
|
|
Certification of Chief
Financial Officer pursuant to 18 U.S.C. Section 1350.
|
27
Isleworth Healthcare Acq... (NASDAQ:ISLE)
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