Back to GetFilings.com
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 SEPTEMBER 30, 2003
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 333-06489
INDIANA THE MAJESTIC STAR CASINO, LLC 43-1664986
INDIANA THE MAJESTIC STAR CASINO CAPITAL CORP. 35-2100872
(State or other (Exact name of registrant as specified in its charter) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
301 E. FREMONT STREET
LAS VEGAS, NEVADA 89101
(702) 388 - 2224
(Address of principal executive offices and telephone number,
including area code)
ONE BUFFINGTON HARBOR DRIVE
GARY, INDIANA 46406-3000
(219) 977-7823
(Former address of principal executive offices and telephone number,
including area code)
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 filing requirements
for the past 90 days.
Yes X No
------------ ------------
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act)
Yes No X
----------- -----------
As of September 30, 2003, shares outstanding of each of the registrant's classes
of common stock:
Class Number of shares
- ----- ----------------
Not applicable Not applicable
THE MAJESTIC STAR CASINO, LLC
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 2003 (Unaudited)
and December 31, 2002 .................................................... 2
Consolidated Statements of Operations for the three and nine months
ended September 30, 2003 and 2002 (Unaudited) ............................ 3
Consolidated Statement of Changes in Member's Deficit for the nine
months ended September 30, 2003 (Unaudited) and the year ended
December 31, 2002 ........................................................ 4
Consolidated Statements of Cash Flows for the nine months ended
September 30, 2003 and 2002 (Unaudited) .................................. 5
Notes to Consolidated Financial Statements ............................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................................... 30
Item 3. Quantitative and Qualitative Disclosures About Market Risk ............... 41
Item 4. Controls and Procedures .................................................. 41
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds ................................ 42
Item 6. Exhibits and Reports on Form 8-K ......................................... 43
SIGNATURES ........................................................................ 44
i
PART I
FINANCIAL INFORMATION
ITEM 1
CONSOLIDATED FINANCIAL STATEMENTS
ii
THE MAJESTIC STAR CASINO, LLC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
2003 2002
------------- -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 35,256,308 $ 24,547,881
Restricted cash 500,000 250,000
Accounts receivable, less allowance for doubtful accounts
of $275,715 and $372,689 as of September 30, 2003 and
December 31, 2002, respectively 2,417,835 2,474,726
Inventories 1,014,069 982,486
Prepaid expenses 3,428,876 2,881,931
Note receivable due from affiliate 133,000 1,200,000
Due from Buffington Harbor Riverboats, L.L.C. 10,210 217,925
Other 40,835 39,133
------------- -------------
Total current assets 42,801,133 32,594,082
------------- -------------
Property, equipment and improvements, net 164,204,351 164,809,158
Intangible assets, net 16,495,496 17,691,746
Goodwill 5,922,398 5,922,398
Other assets:
Deferred financing costs, net of accumulated amortization
of $5,680,912 and $4,375,528 as of September 30, 2003 and
December 31, 2002, respectively 7,952,819 9,372,067
Investment in Buffington Harbor Riverboats, L.L.C. 30,249,856 31,833,311
Restricted cash 1,000,000 1,000,000
Other assets 12,003,738 12,587,112
------------- -------------
Total other assets 51,206,413 54,792,490
------------- -------------
Total Assets $ 280,629,791 $ 275,809,874
============= =============
LIABILITIES AND MEMBER'S DEFICIT
Current Liabilities:
Current maturities of long-term debt $ 83,083 $ 134,084
Accounts payable 4,235,507 4,048,298
Payroll and related 6,826,748 7,656,515
Accrued interest 9,429,617 1,473,785
Progressive jackpots 3,016,425 3,189,626
Slot club liability 863,428 738,559
Other accrued liabilities 9,831,468 8,217,284
------------- -------------
Total current liabilities 34,286,276 25,458,151
Long-term debt, net of current maturities 275,656,816 274,526,285
------------- -------------
Total Liabilities 309,943,092 299,984,436
------------- -------------
Member's Deficit (29,313,301) (24,174,562)
------------- -------------
Total Liabilities and Member's Deficit $ 280,629,791 $ 275,809,874
============= =============
The accompanying notes are an integral
part of these consolidated financial statements.
2
THE MAJESTIC STAR CASINO, LLC
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2003 2002 2003 2002
------------ ------------ ------------- -------------
REVENUES
Casino $ 73,533,644 $ 77,690,257 $ 221,441,790 $ 223,250,546
Rooms 3,862,888 3,809,375 11,246,586 11,836,761
Food and beverage 5,442,416 5,085,627 15,793,688 15,366,719
Other 1,393,937 1,528,812 4,227,362 4,339,996
------------- ------------- ------------- -------------
Gross revenues 84,232,885 88,114,071 252,709,426 254,794,022
Less promotional allowances 5,912,920 6,004,134 17,713,987 18,288,896
------------- ------------- ------------- -------------
Net revenues 78,319,965 82,109,937 234,995,439 236,505,126
------------- ------------- ------------- -------------
COSTS AND EXPENSES
Casino 25,720,885 27,342,336 75,825,525 77,777,767
Rooms 1,695,808 1,717,113 4,882,991 4,975,786
Food and beverage 2,900,274 3,045,376 8,766,212 9,092,646
Other 533,985 396,134 1,354,042 1,171,389
Gaming taxes 14,251,966 13,908,520 44,455,113 40,933,960
Advertising and promotion 5,146,714 5,016,181 14,893,547 14,890,180
General and administrative 14,568,782 14,063,447 40,414,282 39,328,827
Economic Incentive - City of Gary 1,035,573 1,072,350 3,106,984 2,959,492
Depreciation and amortization 5,202,561 5,555,344 15,372,567 15,791,284
Loss on investment in Buffington
Harbor Riverboats, L.L.C. 594,718 600,301 1,794,608 1,806,379
Pre-opening expenses -- -- -- 124,269
------------- ------------- ------------- -------------
Total costs and expenses 71,651,266 72,717,102 210,865,871 208,851,979
------------- ------------- ------------- -------------
Operating income 6,668,699 9,392,835 24,129,568 27,653,147
------------- ------------- ------------- -------------
OTHER INCOME (EXPENSE)
Interest income 18,758 57,212 82,995 135,182
Interest expense (7,961,386) (8,071,962) (23,885,360) (24,356,423)
Loss on sale of assets (4,671) (9,889) (105,629) (461)
Other expense (47,348) (49,524) (141,802) (141,815)
------------- ------------- ------------- -------------
Total other expense (7,994,647) (8,074,163) (24,049,796) (24,363,517)
------------- ------------- ------------- -------------
Net income (loss) (1,325,948) 1,318,672 79,772 3,289,630
============= ============= ============= =============
The accompanying notes are an integral part
of these consolidated financial statements.
3
THE MAJESTIC STAR CASINO, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S DEFICIT
Member's Deficit
----------------
Balance, December 31, 2001 $(19,981,487)
Net income 1,315,754
Distribution to Barden Development, Inc. (5,508,829)
------------
Balance, December 31, 2002 (24,174,562)
Net income (unaudited) 79,772
Distribution to Barden Development, Inc. (unaudited) (4,658,705)
Appreciated value of land purchased from a
related party (unaudited) (559,806)
------------
Balance, September 30, 2003 $(29,313,301)
============
The accompanying notes are an integral
part of these consolidated financial statements.
4
THE MAJESTIC STAR CASINO, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
2003 2002
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 79,772 $ 3,289,630
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 11,357,249 11,491,390
Amortization 4,015,318 4,299,894
Loss on investment in Buffington Harbor Riverboats, L.L.C 1,794,608 1,806,379
Loss on sale of assets 105,629 461
Changes in operating assets and liabilities:
Decrease in accounts receivable 56,891 200,668
(Increase ) decrease in inventories (31,583) 137,208
Increase in prepaid expenses (339,230) (1,241,104)
Decrease in other assets 473,180 869,913
Increase (decrease) in accounts payable 187,209 (536,664)
Decrease in accrued payroll and related expenses (829,767) (872,124)
Increase in accrued interest 7,955,832 1,171,011
Increase in other accrued liabilities 1,565,844 1,573,976
------------ ------------
Net cash provided by operating activities 26,390,952 22,190,638
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition related costs -- (986,158)
Increase in restricted cash (250,000) --
Proceeds from seller for purchase price adjustment -- 3,800,000
Acquisition of property and equipment (10,914,305) (8,194,614)
Appreciated value of land purchased from a related party (559,806) --
Decrease in prepaid leases and deposits 108,500 428,005
Investment in Buffington Harbor Riverboats, L.L.C (211,138) (40,455)
Proceeds from sale of equipment 56,219 52,717
------------ ------------
Net cash used in investing activities (11,770,530) (4,940,505)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance cost for the 11.653% senior secured notes -- (1,410,945)
Issuance cost for the 9-1/2% senior secured notes (206,276) --
Proceeds from line of credit -- 2,500,000
Repayment of line of credit -- (9,000,000)
Proceeds from notes receivable affiliates 1,067,000 --
Repayment of long-term debt (114,014) (104,808)
Distribution to Barden Development, Inc. (4,658,705) (2,820,358)
------------ ------------
Net cash used in financing activities (3,911,995) (10,836,111)
------------ ------------
Net increase in cash and cash equivalents 10,708,427 6,414,022
Cash and cash equivalents, beginning of period 24,547,881 25,925,291
------------ ------------
Cash and cash equivalents, end of period $ 35,256,308 $ 32,339,313
============ ============
INTEREST PAID:
Equipment Debt $ 12,154 $ 38,510
Senior Secured Notes Fixed Interest 10-7/8% 7,068,750 14,137,500
Senior Secured Notes Fixed Interest 11.653% 8,842,704 8,707,126
Lines of credit 662 301,649
------------ ------------
$ 15,924,270 $ 23,184,785
============ ============
SUPPLEMENTAL NONCASH FINANCING ACTIVITIES:
Elimination of slot based progressive $ -- $ 400,000
Elimination of slot club -- 1,300,000
------------ ------------
$ -- $ 1,700,000
============ ============
The accompanying notes are an integral
part of these consolidated financial statements.
5
THE MAJESTIC STAR CASINO, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
The Majestic Star Casino, LLC and its direct and indirect subsidiaries
is a multi-jurisdictional gaming company that directly owns and operates one
riverboat gaming facility located in Gary, Indiana (the "Majestic Star Casino")
and through its wholly owned subsidiary, Majestic Investor Holdings, LLC
("Majestic Investor Holdings" or "Investor Holdings") owns three
Fitzgeralds-brand casino-hotels located in Tunica County, Mississippi
("Fitzgeralds Tunica"), Black Hawk, Colorado (casino only) ("Fitzgeralds Black
Hawk"), and Las Vegas, Nevada ("Fitzgeralds Las Vegas").
The Majestic Star Casino Capital Corp., a wholly owned subsidiary of
the The Majestic Star Casino, LLC, was originally formed for the purpose of
facilitating The Majestic Star Casino, LLC's $130 million 10-7/8% Senior Secured
Notes due 2006 (the "10-7/8% Senior Secured Notes") and Majestic Investor
Capital Corp., a wholly-owned subsidiary of Majestic Investor Holdings, was
formed specifically to facilitate the offering of the Majestic Investor
Holding's $152.6 million 11.653% Senior Secured Notes due 2007 (the "11.653%
Senior Secured Notes"). Both The Majestic Star Casino Capital Corp. and Majestic
Investor Capital Corp. do not have any assets or operations. All of the 10-7/8%
Senior Secured Notes and $135.5 million of the 11.653% Senior Secured Notes have
been redeemed or retired. Please see our discussion below and in Note 7 to the
Notes to Consolidated Financial Statements for more information about the
issuance of the 9-1/2% Senior Secured Notes and the establishment of the $80.0
million Credit Facility.
Except where otherwise noted, the words "we," "us," "our" and similar
terms, as well as the "Company" refer to The Majestic Star Casino, LLC and all
of its direct and indirect subsidiaries.
On August 26, 2003, The Majestic Star Casino, LLC and Majestic Investor
Holdings, commenced cash tender offers and consent solicitations for Majestic
Star's 10-7/8% Senior Secured Notes and Majestic Investor Holdings' 11.653%
Senior Secured Notes, respectively, in connection with a refinancing transaction
of such notes. On October 7, 2003, The Majestic Star Casino, LLC and its
restricted subsidiary, The Majestic Star Casino Capital Corp., issued $260.0
million of 9-1/2% Senior Secured Notes due 2010 (the "9-1/2% Senior Secured
Notes") and entered into a new $80.0 million credit facility (the "$80 million
Credit Facility") with Wells Fargo Foothill, Inc. The proceeds from the issuance
of the 9-1/2% Senior Secured Notes and approximately $28.0 million of the $80
million Credit Facility were used to retire all of the 10-7/8% Senior Secured
Notes and substantially all of the 11.653% Senior Secured Notes. As part of the
refinancing, the operating subsidiaries of Fitzgeralds Tunica and Fitzgeralds
Black Hawk are guarantors under both the 9-1/2% Senior Secured Notes and the $80
million Credit Facility; however, the operating subsidiary of Fitzgeralds Las
Vegas is now an unrestricted subsidiary of The Majestic Star Casino, LLC. It is
anticipated that Fitzgeralds Las Vegas will be spun out to Barden Development,
Inc. ("BDI") promptly after Majestic Investor Holdings, the direct owner of
Fitzgeralds Las Vegas, and BDI receive approval from the Nevada Gaming Control
Board and the Nevada Gaming Commission. Approval is anticipated to occur in
December 2003. Please see Note 7 to
6
THE MAJESTIC STAR CASINO, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
the Notes to Consolidated Financial Statements for more information about the
issuance of the 9-1/2% Senior Secured Notes and the establishment of the $80.0
million Credit Facility.
NOTE 2. BASIS OF PRESENTATION
The accompanying consolidated financial statements are unaudited. All
inter-company transactions and balances have been eliminated. Investments in
affiliates in which the Company has the ability to exercise significant
influence, but not control, are accounted for by the equity method. These
financial statements have been prepared in accordance with accounting principals
generally accepted in the United States of America, or "GAAP" and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with GAAP have been condensed or omitted. The preparation
of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Significant estimates incorporated into our
consolidated financial statements include the estimated useful lives of
depreciable and amortizable assets, the estimated allowance for doubtful
accounts receivable, estimated cash flow in assessing the recoverability of long
lived assets, estimated liabilities for our self insured medical plan, slot club
point programs and litigation, claims and assessments. Actual results could
differ from those estimates.
Our consolidated financial statements include the results of the
operating subsidiary of Fitzgeralds Las Vegas. See Note 11 to the Notes to
Consolidated Financial Statements for consolidating information. It is
anticipated that Fitzgeralds Las Vegas will be spun out to BDI promptly after
Majestic Investor Holdings, the direct owner of the operating subsidiary of
Fitzgeralds Las Vegas, and BDI receive approval from the Nevada Gaming Control
Board and the Nevada Gaming Commission to effect such transaction. Such
regulatory approval is not within the Company's control.
In the opinion of management, all adjustments (which include normal
recurring adjustments) considered necessary for a fair presentation of the
results for the interim periods have been made. The results for the three and
nine months ended September 30, 2003 are not necessarily indicative of results
to be expected for the full fiscal year. The financial statements should be read
in conjunction with the financial statements and notes thereto included in The
Majestic Star Casino, LLC's and Majestic Investor Holdings' Annual Reports on
Form 10-K for the year ended December 31, 2002.
The consolidated financial statements and footnotes for the prior year
reflect certain reclassifications to conform to the current year presentation,
which have no effect on previously reported net income.
7
THE MAJESTIC STAR CASINO, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In April 2002, the Financial Accounting Standards Board issued
statement 145 ("SFAS 145"). SFAS 145 addresses the presentation for gains and
losses on early retirements of debt in the statement of operations. SFAS 145 is
effective for fiscal years beginning after May 15, 2002. The Company adopted
SFAS 145 and as a result, reclassified $69,000 in a gain from the early
extinguishment of debt, which item had previously been reported as an
extraordinary item in the fourth quarter of 2002. In the fourth quarter of 2003,
the Company also expects to recognize a loss on the retirement of debt of $32.0
million on October 7, 2003. The loss on the retirement of debt is comprised of
the premium on the offers to purchase, the write-off of the deferred debt
issuance costs and the original issue discount on the 10-7/8% Senior Secured
Notes and the 11.653% Senior Secured Notes, which amounts will be reflected in
the computation of net income for the year ended December 31, 2003.
In June 2002, the Financial Accounting Standard Board issued Statement
146 ("SFAS 146") "Accounting for Costs Associated with Exit or Disposal
Activities." The provisions of SFAS 146 became effective for exit or disposal
activities commenced subsequent to December 31, 2002. Adoption of SFAS 146 did
not have any material impact on the Company's financial position, results of
operations or cash flows.
In November 2002, the Financial Accounting Standards Board issued FASB
Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Guarantees of Indebtedness of Others."
FIN 45 elaborates on the disclosures to be made by a guarantor in its interim
and annual financial statements about its obligations under certain guarantees
that it has issued. It also clarifies (for guarantees issued after January 1,
2003) that a guarantor is required to recognize at the inception of a guarantee,
a liability for the fair value of the obligations undertaken in issuing the
guarantee. At September 30, 2003, the Company did not have any guarantees
outside of its consolidated group. Adoption of FIN 45 did not have a material
impact on the Company's financial condition, results of operations or cash
flows.
In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities."
FIN 46 addresses the requirements for business enterprises to consolidate
related entities in which they are determined to be the primary economic
beneficiary as a result of their variable economic interests. FIN 46 is intended
to provide guidance in judging multiple economic interests in an entity and in
determining the primary beneficiary. FIN 46 outlines disclosure requirements for
Variable Interest Entities ("VIEs") in existence prior to January 31, 2003, and
outlines consolidation requirements for VIEs created after January 31, 2003. The
Company has reviewed its major relationships and its overall economic interests
with other companies consisting of related parties, companies in which it has an
equity position and other suppliers to determine the extent of its variable
economic interest in these parties. Adoption of FIN 46 did not have a material
impact on the Company's financial condition, results of operations or cash
flows.
8
THE MAJESTIC STAR CASINO, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In April 2003, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 149 ("SFAS 149") "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities." Provisions of
SFAS 149 became effective for contracts and hedging relationships entered into
or modified after June 30, 2003. Adoption of SFAS 149 did not have any material
impact on our financial position, results of operations or cash flows as the
Company has not entered into or modified any agreements that contain derivative
instrument or involve hedging activities.
In May 2003, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 150 ("SFAS 150") "Accounting for Certain
Financial Instruments with Characteristic of both Liabilities and Equity." The
Company is considered a non-public entity, as defined by SFAS 150 because its
equity securities are not listed on a public exchange. Accordingly, for the
Company, the provisions of SFAS 150 will become effective during the quarter
ending March 31, 2004. The Company does not anticipate the adoption of SFAS 150
would have a material impact on our financial position, results of operations or
cash flows.
NOTE 4. RESTRICTED CASH
As of September 30, 2003 and December 31, 2002, restricted cash of $1.0
million represents U.S. Treasury Notes held in an escrow account for the benefit
of certain owners of land leased to Fitzgeralds Las Vegas. As of December 31,
2002, restricted cash of $250,000 represents a letter of credit for self-insured
workers compensation at Fitzgeralds Tunica and Fitzgeralds Black Hawk. As of
September 30, 2003 the restricted cash balance relating to the self-insured
workers compensation increased to $500,000. The increase occurred during the
first quarter of 2003, when Fitzgeralds Las Vegas was added to the self-insured
workers compensation program.
NOTE 5. INVESTMENT IN BUFFINGTON HARBOR RIVERBOATS, L.L.C. ("BHR")
In October 1995, The Majestic Star Casino, LLC and Trump Indiana, Inc.
("Trump") entered into the First Amended and Restated Operating Agreement of BHR
for the purpose of acquiring and developing certain facilities for the gaming
operations in Gary ("BHR Property"). BHR is responsible for the management,
development and operation of the BHR Property. The Majestic Star Casino, LLC and
Trump have each entered into a berthing agreement with BHR to use BHR Property
for their respective gaming operations and have committed to pay cash operating
losses of BHR as additional berthing fees. The Majestic Star Casino, LLC and
Trump share equally in the operating expenses relating to the BHR Property,
except for costs associated with food and beverage, and valet operations, which
are allocated on a percentage of use by the casino customers of the Majestic
Star Casino and Trump.
Majestic Star Casino paid $1.5 million and $4.1 million, in berthing fees for
the three and nine months ended September 30, 2003, respectively, compared to
$1.4 million and $4.4 million for the three and nine months ended September 30,
2002, respectively. Such amounts are recorded in general and administrative
expense in the consolidated statements of operations. In addition, Majestic Star
Casino paid $160,000
9
THE MAJESTIC STAR CASINO, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
and $524,000, for costs associated with food and beverage for the three and nine
months ended September 30, 2003, respectively, compared to $303,000 and
$757,000, for costs associated with food and beverage for the three and nine
month ended September 30, 2002, respectively. Such amounts are recorded in
casino expenses in Majestic Star Casino's statements of operations. After
Majestic Star Casino and Trump reimburse BHR for all cash operational losses,
the remaining net loss of BHR results from depreciation expense associated with
the BHR property. Majestic Star Casino reclassified its allocated portion of
BHR's net loss into loss on investment in Buffington Harbor Riverboats, LLC.
Previously, such amounts were recorded within depreciation expense in Majestic
Star Casino's statements of operations. The allocated net loss recorded for the
three and nine months ended September 30, 2003 is $595,000 and $1,795,000,
respectively, compared to $600,000 and $1,806,000, respectively, for the three
and nine months ended September 30, 2002.
The following represents selected financial information of BHR:
SEPTEMBER 30, DECEMBER 31,
2003 2002
----------- -----------
BALANCE SHEET
Cash and cash equivalents $ 41,940 $ 50,505
Current assets 277,473 441,535
Property, plant and equipment, net 63,321,451 65,616,042
Other assets 102,786 108,414
Total assets 62,743,650 66,165,991
Current liabilities 2,243,970 2,499,369
Total liabilities 2,243,970 2,499,369
Member's equity
The Majestic Star Casino, LLC 30,249,856 31,833,311
Total member's equity 60,499,680 63,666,622
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2003 2002 2003 2002
----------- ----------- ----------- -----------
STATEMENTS OF INCOME
Gross revenue 3,560,390 3,950,506 10,276,367 11,873,207
Operating loss (1,190,873) (1,172,958) (3,585,832) (3,576,074)
Net loss (1,189,436) (1,200,601) (3,589,216) (3,612,758)
NOTE 6. INTANGIBLE ASSETS
Intangible assets primarily include $9.8 million for customer
relationships, $3.7 million for trade name and $5.2 million for a gaming
license. Intangible assets for customer relationships and trade names are being
amortized over a period of 8-10
10
THE MAJESTIC STAR CASINO, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
years. The gaming license is not amortized but instead is subject to impairment
testing at least annually.
The gross carrying amount and accumulated amortization of the intangible assets,
other than goodwill, as of September 30, 2003, are as follows:
Gross Carrying Accumulated Net Amount
Amount Amortization September 30, 2003
-------------- ------------ ------------------
(in thousands)
Amortized intangible assets:
Customer relationship $ 9,800 $ (2,359) $ 7,441
Tradename 3,700 (546) 3,154
Riverboat excursion license 700 - 700
-------------- ------------ ------------------
14,200 (2,905) 11,295
Unamortized intangible assets:
Gaming license 5,200 - 5,200
-------------- ------------ ------------------
Total intangible assets 19,400 (2,905) 16,495
============== ============ ==================
The amortization expense recorded on the intangible assets for both the
three and nine months ended September 30, 2003 and 2002 were $0.4 million and
$1.2 million, respectively.
NOTE 7. LONG-TERM DEBT
Refinancing of Debt
On August 26, 2003, The Majestic Star Casino, LLC commenced a cash
tender offer and consent solicitation at a price of 105.438% for its 10-7/8%
Senior Secured Notes. The solicitation of consents sought approval for
amendments to the Indenture governing the 10-7/8% Senior Secured Notes (the
"Majestic Indenture") in order to (i) eliminate substantially all restrictive
covenants and (ii) to release the liens on the collateral that secured the
10-7/8% Senior Secured Notes. Upon expiration of the consent solicitation on
September 25, 2003, $74,639,000 or 57.4% of the aggregate outstanding principal
amount of the 10-7/8% Senior Secured Notes had been tendered. The Majestic Star
Casino, LLC funded the payment of the tendered 10-7/8% Senior Secured Notes,
along with accrued and unpaid interest, from the proceeds of the issuance of the
9-1/2% Senior Secured Notes, which closed on October 7, 2003. Also, on October
7, 2003, The Majestic Star Casino, LLC called the remaining $55,361,000
outstanding principal amount of the 10-7/8% Senior Secured Notes which were
redeemed on November 6, 2003 at a price of 105.438%, plus accrued and unpaid
interest.
Also, on August 26, 2003, Majestic Investor Holdings commenced a cash
tender offer and consent solicitation at a price of 109.0% for its 11.653%
Senior Secured Notes. The solicitation of consents sought approval for
amendments to the Indenture governing the 11.653% Senior Secured Notes (the
"Majestic Investor Holdings Indenture") in order to (i) eliminate substantially
all restrictive covenants, (ii) to terminate the guarantees of the restricted
subsidiaries of Majestic Investor Holdings and (iii) to release the liens on the
collateral that secured the 11.653% Senior Secured Notes. Upon expiration of the
11
THE MAJESTIC STAR CASINO, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
consent solicitation on September 25, 2003, $135,477,000 or 89.3% of the
aggregate outstanding principal amount of the 11.653% Senior Secured Notes had
been tendered. The Company funded the payment of the tendered 11.653% Senior
Secured Notes, along with accrued and unpaid interest, from the proceeds of the
issuance of the 9-1/2% Senior Secured Notes, which closed on October 7, 2003.
After the expiration of the offer and consent solicitation related to the
11.653% Senior Secured Notes, Majestic Investor Holdings has $16.3 million in
11.653% Senior Secured Notes still outstanding.
Upon the closing of the 9-1/2% Senior Secured Notes, the Company used
$153.2 million to retire 89.3% of its 11.653% Senior Secured Notes, along with
accrued and unpaid interest, $80.9 million to redeem 57.4% of its 10-7/8% Senior
Secured Notes, along with accrued and unpaid interest. $4.2 million was used for
expenses related to the 9-1/2% Senior Secured Notes offering as well as expenses
related to the establishment of a new $80 million Credit Facility. $21.7 million
from the 9-1/2% Senior Secured Notes plus $28.0 million from the $80 million
Credit Facility, along with the Company's cash were used to redeem the remaining
10-7/8% Senior Secured Notes on November 6, 2003. The Company recognized a loss
on the retirement of debt of $32.0 million on October 7, 2003. The loss on the
retirement is comprised of premiums on the offers to purchase, the write-off of
deferred issuance costs and the write-off of original issuance discount on the
10-7/8% Senior Secured Notes and 11.653% Senior Secured Notes, which amounts
will be reflected in the computation of net income for the fourth quarter and
for the year ended December 31, 2003.
The 9-1/2% Senior Secured Notes bear interest at a fixed annual rate of
9.5% payable on April 15 and October 15 of each year, commencing April 15, 2004.
The 9-1/2% Senior Secured Notes will mature on October 15, 2010. The 9-1/2%
Senior Secured Notes are secured by a pledge of substantially all of the
Company's current and future assets, other than the assets of Fitzgeralds Las
Vegas (which has become an unrestricted subsidiary of The Majestic Star Casino,
LLC). It is anticipated that Fitzgeralds Las Vegas will be spun out to BDI
promptly after Majestic Investor Holdings, the direct owner of the operating
subsidiary of Fitzgeralds Las Vegas, and BDI receive approval from the Nevada
Gaming Commission and the Nevada Gaming Control Board to effect such
transaction. Approval is anticipated to occur in December 2003.
Upon a Change of Control as defined in the Indenture governing the
9-1/2% Senior Secured Notes (the "9-1/2% Indenture"), the Company will be
required to offer to repurchase all of the outstanding 9-1/2% Senior Secured
Notes at a cash price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, to the date of repurchase.
The 9-1/2% Indenture contains covenants which, among other things,
restricts the Company's ability to (i) make certain payments to, or investments
in, third parties; (ii) incur additional indebtedness or liens on any assets;
(iii) enter into transactions with affiliates; and (iv) sell any restricted
subsidiaries' assets.
Concurrently with the closing of the 9-1/2% Senior Secured Notes, the
Company established the $80 million Credit Facility with Wells Fargo Foothill,
Inc., and terminated
12
THE MAJESTIC STAR CASINO, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
the two existing credit facilities with Wells Fargo Foothill, Inc. Subject to
certain exceptions, the $80 million Credit Facility is secured by a first
priority lien on substantially all of the assets of the Company except the
assets of Fitzgeralds Las Vegas. Borrowings under the $80 million Credit
Facility bear interest at the Company's choice of LIBOR plus a range of 3.00% to
3.50% or Wells Fargo Foothill, Inc.'s base rate plus a range of 0.25% to 0.75%.
The range is based on the Company's EBITDA (as defined in the loan and security
agreement) and losses that occur from the early retirement of debt during the
three-month period ended December 31, 2003. The Wells Fargo Foothill, Inc. base
rate approximates the prime rate. Full payment of any outstanding balance under
the $80 million Credit Facility is due upon termination of the agreement in
October 2007. The credit agreement includes covenants, which among other things,
(i) require the Company to maintain, as defined in the covenants, minimum EBITDA
and Interest Coverage Ratios, which increase periodically, (ii) restrict the
Company's ability to incur, assume, or guarantee any indebtedness, and (iii)
restrict the Company's ability to transfer or sell assets, including the equity
interest of the restricted subsidiaries.
Intercreditor Agreements
In connection with the Company entering into the $80 million Credit
Facility, the trustee under the 9-1/2% Indenture (as collateral agent) entered
into an intercreditor agreement with Wells Fargo Foothill, Inc., the agent under
the $80 million Credit Facility. The intercreditor agreement provides for the
contractual subordination of the liens on the collateral securing the 9-1/2%
Senior Secured Notes (and the related guarantees) to the liens on the collateral
securing the indebtedness under the $80 million Credit Facility.
The intercreditor agreement, among other things, limits the trustee's
rights in an event of default under the 9-1/2% Senior Secured Notes. Under the
intercreditor agreement, if the 9-1/2% Senior Secured Notes become due and
payable prior to the stated maturity or are not paid in full at the stated
maturity at a time during which there is indebtedness outstanding under the $80
million Credit Facility, the trustee will not have the right to foreclose upon
the collateral unless and until the lenders under the $80 million Credit
Facility fail to take steps to exercise remedies with respect to or in
connection with the collateral within up to 190 days following notice to such
lenders of the occurrence of an event of default under the 9-1/2% Indenture. In
addition, the intercreditor agreement prevents the trustee and the holders of
the 9-1/2% Senior Secured Notes from pursuing certain remedies with respect to
the collateral in an insolvency proceeding. The intercreditor agreement also
provides that the net proceeds from the sale of the collateral will first be
applied to repay indebtedness outstanding under the $80 million Credit Facility
and thereafter to the holders of the 9-1/2% Senior Secured Notes.
Old Majestic Star and Majestic Investor Holdings Notes
At September 30, 2003, The Majestic Star Casino, LLC, had debt
outstanding of $129.1 million, net of unamortized discount of $878,000, compared
to debt of $128.9 million, net of unamortized discount of $1.1 million at
December 31, 2002. The 10-7/8% Senior Secured Notes bore interest at a fixed
rate of 10-7/8% per annum payable
13
THE MAJESTIC STAR CASINO, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
January 1 and July 1 each year. Also, at September 30, 2003, Majestic Investor
Holdings, had debt outstanding of $146.5 million, net of unamortized discount of
$5.3 million compared to debt of $145.5 million, net of unamortized discount of
$6.3 million at December 31, 2002. The 11.653% Senior Secured Notes bear
interest at a fixed rate of 11.653% per annum payable May 31 and November 30
each year. Fitzgeralds Las Vegas had debt of $135,000 for a capital lease. For
the nine month period ended September 30, 2003 and September 30, 2002, the
Company had interest expense of $23.9 million and $24.4 million, respectively.
In 2002, Majestic Investor Holdings was required to pay liquidated
damages related to the unregistered 11.653% Senior Secured Notes. Majestic
Investor Holdings entered into a registration rights agreement that required
Majestic Investor Holdings to file a registration statement with the Securities
and Exchange Commission to exchange its unregistered 11.653% Senior Secured
Notes with registered 11.653% Senior Secured Notes and that required such
registration statement to be declared effective prior to a specified date. There
were delays in filing the registration statement and such registration statement
was not declared effective by such specified date, which caused Majestic
Investor Holdings to pay liquidated damages of $176,000 during 2002. The
registration statement for the 11.653% Senior Secured Notes was declared
effective on August 8, 2002.
During the fourth quarter 2002, Majestic Investor Holdings purchased
for $759,000, plus accrued interest, its 11.653% Senior Secured Notes with a
face value of $865,000. The notes, net of unamortized original issue discount,
were being carried at a value of $828,000; the resulting gain was $69,000.
Old Credit Facilities
At September 30, 2003, The Majestic Star Casino, LLC had a $20.0
million credit facility (the "Majestic Credit Facility") and Majestic Investor
Holdings had a $15.0 million credit facility (the "Majestic Investor Holdings
Credit Facility"). These credit facilities were replaced with the $80 million
Credit Facility. There were no borrowings on the Majestic Credit Facility or the
Majestic Investor Holdings Credit Facility as of September 30, 2003 and December
31, 2002.
NOTE 8. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
Various legal proceedings are pending against the Company. Management
considers all such pending proceedings, comprised primarily of personal injury
and equal employment opportunity (EEO) claims, to be routine litigation
incidental to the Company's business. Management believes that the resolution of
these proceedings will not individually or in the aggregate, have a material
effect on the Company's financial condition, results of operations or cash
flows.
14
THE MAJESTIC STAR CASINO, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
On May 11 and 12, 2000, the Company was issued notices of proposed
assessment by the Indiana Department of Revenue for income tax withholding
deficiencies for the years ended December 31, 1996 and 1998. The Indiana
Department of Revenue has taken the position that Indiana gross wagering tax
must be added back to the Company's income for the purpose of determining the
Indiana adjusted gross income tax on the Company's non-resident member, and that
the Company had the duty to withhold and remit adjusted gross income tax payable
by its non-resident member. The tax deficiency assessed for 1996 and 1998 totals
$553,744, plus accrued interest. On February 10, 2003, the Company was issued
notices of proposed assessment by the Indiana Department of Revenue for income
tax withholding deficiencies for the years ended December 31, 1999, 2000 and
2001, concerning the same issue. The tax deficiency assessed for 1999-2001
totals $2,012,397 plus accrued interest. The Company has filed administrative
protests and demands for hearing with the Department of Revenue to protect its
rights with respect to all tax years. However, it is too early to determine the
outcome of these contested tax assessments.
Gaming Regulations
The ownership and operation of riverboat gaming operations in Indiana
are subject to strict state regulation under the Riverboat Gambling Act ("the
Act") and the administrative rules promulgated thereunder. The Indiana Gaming
Commission ("IGC") is empowered to administer, regulate and enforce the system
of riverboat gaming established under the Act and has jurisdiction and
supervision over all riverboat gaming operations in Indiana, as well as all
persons on riverboats where gaming operations are conducted. The IGC is
empowered to regulate a wide variety of gaming and non-gaming related
activities, including the licensing of supplies to, and employees at, riverboat
gaming operations and to approve the form of entity qualifiers and intermediary
and holding companies. The IGC has broad rulemaking power, and it is impossible
to predict what effect, if any, the amendment of existing rules or the
finalization of proposed rules might have on the Company's operations.
A change in the Indiana state law governing gaming took effect on July
1, 2002. The new law enables Indiana's riverboat casinos to operate dockside.
The IGC approved Majestic Star's flexible boarding plan that allows the
continuous ingress and egress of patrons for the purpose of gambling while the
riverboat is docked. The plan went into effect on August 5, 2002 and imposes a
graduated wagering tax based upon adjusted gross receipts. As discussed below in
"Retroactive Dockside Tax," the graduated wagering tax has a starting rate of
15% with a top rate of 35% for adjusted gross receipts in excess of $150
million. For the period July 1 through August 4, 2002, the wagering tax was
raised by statute to 22.5% of adjusted gross receipts, but, as discussed below
in "Retroactive Dockside Tax," has been recently modified. Prior to July 1,
2002, Indiana gaming taxes were levied on adjusted gross receipts, as defined by
Indiana gaming laws, at the rate of 20%. In addition to the wagering tax, an
admissions tax of $3 per turnstile count is assessed. Prior to August 5, 2002,
Indiana imposed an admissions tax of $3 per patron turnstile count at every
boarding time plus the count of the patrons that stayed over on the vessel from
a previous boarding time period.
15
THE MAJESTIC STAR CASINO, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Effective July 1, 2003, a licensed riverboat owner who implements
flexible scheduling can conduct gambling operations for up to 24 hours per day
upon receiving IGC approval. Under prior IGC rules, riverboat casinos were
required to close for three hours daily. The Majestic Star Casino's plan for
24-Hour Dockside Gaming was submitted to the IGC and approved. The Majestic Star
Casino began operating on 24-hour basis on July 11, 2003.
In June 2003, the Indiana legislature clarified the start date of the
graduated wagering tax structure associated with the implementation of dockside
gaming. Previously, the start date for the computation of cumulative adjusted
gross receipts from gaming revenues ("AGR") under the graduated tax structure
was August 1, 2002 for seven riverboat casinos that implemented dockside gaming
with flexible scheduling on that date; and August 5, 2002, for three riverboat
casinos that implemented dockside gaming with flexible scheduling on that date.
The Indiana legislature's recent clarification requires riverboat casinos to
begin recognizing gaming tax liabilities for cumulative AGR under the graduated
tax structure starting on July 1, 2002 if they implemented dockside gaming at
any point in time. In addition, the State of Indiana's position is that no
credit be provided for taxes previously paid for the period July 1, 2002 through
July 31, 2002 for seven riverboat casinos and July 1, 2002 through August 4,
2002 for three riverboat casinos. For these periods, the statutory tax on AGR
was 22.5%. As a result of the "Retroactive Dockside Tax," the Indiana Department
of Revenue has assessed an additional $2,072,000 of gaming taxes due from the
Majestic Star Casino. The Majestic Star Casino has taken a charge in the three
month period ended June 30, 2003 for this assessment. The $2,072,000 assessment
is required to be paid in two equal installments on July 1, 2003 and July 1,
2004. All penalties and interest due from Majestic Star Casino on the
"Retroactive Dockside Tax" assessments are waived as long as Majestic Star
Casino pays 50% of their applicable assessments on July 1, 2003 and July 1,
2004. The Majestic Star Casino paid 50% of the $2,072,000 assessment to Indiana
Department of Revenue on July 1, 2003.
The ownership and operation of our casino gaming facilities in Nevada,
Mississippi and Colorado are also subject to various state and local regulations
in the jurisdictions where they are located. In Nevada, our gaming operations
are subject to the Nevada Gaming Control Act, and to the licensing and
regulatory control of the Nevada Gaming Commission, the Nevada State Gaming
Control Board and various local ordinances and regulations, including, without
limitation, applicable city and county gaming and liquor licensing authorities.
Pursuant to new legislation signed into law by the Governor of Nevada on July
23, 2003, the license fees on the number of gaming devices operated has been
increased effective immediately, increased taxes on gross revenues became
effective on August 1, 2003, and the expanded range of events covered by the
casino entertainment tax became effective September 1, 2003. Fitzgeralds Las
Vegas also become subject to a payroll tax based on wages paid to its employees
effective October 1, 2003. In Mississippi, our gaming operations are subject to
the Mississippi Gaming Control Act, and to the licensing and/or regulatory
control of the Mississippi Gaming Commission, the Mississippi State Tax
Commission and various state and local regulatory agencies, including liquor
licensing authorities. In Colorado, our gaming operations are subject to the
Limited Gaming Act of 1991, which created the
16
THE MAJESTIC STAR CASINO, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Division of Gaming within the Colorado Department of Revenue and the Colorado
Limited Gaming Control Commission which is empowered to license, implement,
regulate and supervise the conduct of limited gaming. Our operations are also
subject to the Colorado Liquor Code and the state and local liquor licensing
authorities.
In addition, in Colorado a statewide ballot measure which would have
allowed the installation of up to five hundred video lottery terminals at each
of five designated dog and horse racetracks along Colorado's front range was
rejected by the voters in Colorado on November 4, 2003.
The Company's directors, officers, managers and key employees are
required to hold individual licenses. These requirements vary from jurisdiction
to jurisdiction. Licenses and permits for gaming operations and for individual
licensees are subject to revocation or non-renewal for cause. Under certain
circumstances, holders of our securities are required to secure independent
licenses and permits.
Other Contingencies
In September of 2000, AMB Parking, LLC, (a limited liability company
indirectly owned by Don. H. Barden, Chairman and CEO of The Majestic Star
Casino, LLC) and Trump Indiana, Inc. (the "Joint Venture Partner") entered into
an Operating Agreement to form Buffington Harbor Parking Associates, LLC
("BHPA"). The limited liability company was formed for the purpose of acquiring
land, and constructing and operating a 2,000 space-parking garage which is
leased to Majestic Star and the Joint Venture Partner. The Majestic Star Casino
and the Joint Venture Partner have each entered into parallel operating lease
agreements with BHPA, each having a term until December 31, 2018. The rent
payable under both leases is intended to service the additional debt incurred by
BHPA. Majestic Star Casino is recognizing $9,462,815 of advances made at the
inception of the lease as prepaid lease expense. Majestic Star Casino, LLC is
amortizing its prepaid lease over the term of the operating lease agreement. The
lease agreement calls for the Majestic Star Casino, LLC and the Joint Venture
Partner to make monthly lease payments equal to 100% of BHPA's debt service
requirement for the following month, although each party is entitled to a credit
for 50% of such payment if the other party makes its monthly payment.
Majestic Investor Holdings received assessments of additional amounts
due related to insurance premiums paid for the period December 6, 2001 through
December 6, 2002. The premiums, totaling $160,000, related to an audit by the
insurance carrier of Majestic Investor Holdings' workers compensation and
general liability plans. Majestic Investor Holdings has settled with the
insurance carrier for $90,000 and has recorded the liability.
On August 28, 2003, Majestic Star Casino and the Seafarers
Entertainment & Allied Trades Union signed a collective bargaining agreement
that will expire in four years and calls for annual salary adjustments of
approximately 3.5% over the course of the agreement.
17
THE MAJESTIC STAR CASINO, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 9. SEGMENT INFORMATION
The Majestic Star Casino, LLC either directly or indirectly through a
wholly subsidiary owns and operates four properties as follows: a riverboat
casino located in Gary, Indiana; a casino and hotel located in downtown Las
Vegas, Nevada; a casino and hotel located in Tunica, Mississippi; and a casino
located in Black Hawk, Colorado (collectively, the "Properties").
The Company identifies its business in four segments based on
geographic location. The Properties, in each of their segments, market primarily
to middle-income guests. The major products offered in each segment are as
follows: casino, hotel rooms (except in Gary, Indiana and Black Hawk, Colorado)
and food and beverage.
The accounting policies of each business segment are the same as those
described in the summary of significant accounting policies previously described
in Note 1 to the audited financial statements included in The Majestic Star
Casino, LLC's and Majestic Investor Holdings' respective Annual Reports on Form
10-K for the year ended December 31, 2002. There are minimal inter-segment
sales. Corporate costs are allocated to the business segments through management
fees from Majestic Star Casino (with respect to the casino in Gary) and from
Majestic Investor Holdings (with respect to the Fitzgeralds properties). These
fees are reflected in "General and Administrative" expenses.
A summary of the Properties' operations by business segment as of and
for the three and nine months ended September 30, 2003 and 2002 is presented
below:
18
THE MAJESTIC STAR CASINO, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2003 2002 2003 2002
-------- -------- --------- ---------
(in thousands)
Net revenues:
Majestic Star Casino $ 35,135 $ 36,534 $ 105,362 $ 100,686
Fitzgeralds Tunica 22,497 24,273 68,150 72,194
Fitzgeralds Black Hawk 8,829 9,724 25,279 26,998
Fitzgeralds Las Vegas 11,859 11,579 36,204 36,627
-------- -------- --------- ---------
Total $ 78,320 $ 82,110 $ 234,995 $ 236,505
======== ======== ========= =========
Operating income (loss):
Majestic Star Casino $ 4,176 $ 4,850 $ 12,851 $ 14,210
Fitzgeralds Tunica 2,610 3,867 10,049 11,806
Fitzgeralds Black Hawk 2,165 2,264 4,956 5,052
Fitzgeralds Las Vegas (1,413) (922) (1,503) (1,341)
Unallocated and other (1) (869) (666) (2,223) (2,074)
-------- -------- --------- ---------
Total $ 6,669 $ 9,393 $ 24,130 $ 27,653
======== ======== ========= =========
Segment depreciation and amortization:
Majestic Star Casino $ 1,389 $ 1,729 $ 4,197 $ 5,086
Fitzgeralds Tunica 1,989 1,866 5,823 5,481
Fitzgeralds Black Hawk 438 364 1,261 1,091
Fitzgeralds Las Vegas 721 938 2,095 2,203
Unallocated and other (1) 666 658 1,997 1,930
-------- -------- --------- ---------
Total $ 5,203 $ 5,555 $ 15,373 $ 15,791
======== ======== ========= =========
Expenditure for additions to long-lived assets:
Majestic Star Casino $ 2,650 $ 772 $ 4,986 $ 4,276
Fitzgeralds Tunica 953 324 2,749 1,820
Fitzgeralds Black Hawk 749 524 1,521 963
Fitzgeralds Las Vegas 738 335 1,658 1,136
-------- -------- --------- ---------
Total $ 5,090 $ 1,955 $ 10,914 $ 8,195
======== ======== ========= =========
Segment assets:
Majestic Star Casino $ 119,691
Fitzgeralds Tunica 83,712
Fitzgeralds Black Hawk 30,629
Fitzgeralds Las Vegas 37,326
Unallocated and other (1) 122,226
---------
Total 393,584
Less: Intercompany (112,954)
---------
Total 280,630
=========
(1) Unallocated and other include corporate items and eliminations that are not
allocated to the operating segments.
NOTE 10. RELATED PARTY TRANSACTIONS
On March 13, 2003, Majestic Star Casino purchased for $1,017,000, net
of prorated taxes plus closing costs, a building and approximately 50 acres of
land, adjacent to the Buffington Harbor gaming complex from an affiliated
company. The amounts were recorded in the Company's property and equipment
accounts at $406,000 for the land and $111,000 for the building, which was the
carrying value recorded on the affiliate's balance sheet. The remaining
consideration paid in excess of the seller's basis
19
THE MAJESTIC STAR CASINO, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
in the amount of $560,000 was recorded as an adjustment to member's equity. The
purchase price was based on an independent third-party appraisal.
During the nine months ended September 30, 2003, Majestic Star Casino
made distributions totaling $1,016,000, to BDI, under a LLC Manager Agreement
related to the fourth quarter of 2002 and the six months ended June 30, 2003.
During the nine months ended September 30, 2003, Majestic Investor
Holdings made distributions totaling $2,594,000, to BDI, under a LLC Manager
Agreement related to the fourth quarter of 2002 and the six months ended June
30, 2003.
In December 2001, Majestic Star Casino made a $300,000 employee loan to
Mr. Barden. This loan bore interest at a rate of 7% per annum and was due and
payable in full on December 12, 2002. On March 17, 2003, $216,000 was paid on
the note. The balance of $84,000 in principal and $29,000 in interest was paid
on April 23, 2003.
On January 31, 2002, Majestic Star Casino made a $200,000 employee loan
to Mr. Kelly. On March 17, 2003, Mr. Kelly paid $67,000 in accordance with the
loan agreement. This loan bears no interest and is due and payable in full on
January 31, 2005.
In December 2001, Majestic Investor Holdings issued a $700,000 note to
BDI. The note bore interest at a rate of 7% annum. The principal and accrued but
unpaid interest was due and payable in full on December 12, 2002. The principal
and accrued interest was paid on March 17, 2003.
In April 2003, Majestic Star Casino, as authorized by the Majestic
Indenture, made a distribution of $710,000 to BDI for income taxes. The
calculation for the distribution was based on the Majestic Star Casino's net
income during the three-month period ended March 31, 2003.
In April 2003, Majestic Investor Holdings, as authorized by the
Majestic Investor Holdings Indenture, made a distribution of $338,000 to BDI for
income taxes. The calculation for the distribution was based on Majestic
Investor Holdings' net income during the three-month period ended March 31,
2003.
NOTE 11. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
The proceeds from the issuance of the 9-1/2% Senior Secured Notes and
approximately $28.0 million of the $80 million Credit Facility were used to
retire all of the 10-7/8% Senior Secured Notes and substantially all of the
11.653% Senior Secured Notes. Under the Indenture for the 9-1/2% Senior Secured
Notes and the Loan and Security Agreement for the $80 million Credit Facility,
Fitzgeralds Tunica and Fitzgeralds Black Hawk remain as guarantors; however,
Fitzgeralds Las Vegas is now an unrestricted subsidiary of the Company and a
non-guarantor under the 9-1/2% Senior Secured Notes and $80.0 million Credit
Facility. It is anticipated that Fitzgeralds Las Vegas will be spun out to BDI
promptly after Majestic Investor Holdings, the direct owner
20
THE MAJESTIC STAR CASINO, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
of the operating subsidiary of Fitzgeralds Las Vegas, and BDI receive approval
from the Nevada Gaming Control Board and the Nevada Gaming Commission. Approval
is anticipated to occur in December 2003.
The 10-7/8% Senior Secured Notes were secured by substantially all of
the assets of the Majestic Star Casino, but not the assets of Majestic Investor
Holdings and its wholly-owned subsidiaries which include the three Fitzgeralds'
casino properties.
The 11.653% Senior Secured Notes were unconditionally and irrevocably
guaranteed, jointly and severally, by all of the restricted subsidiaries of
Majestic Investor Holdings. The guarantees ranked senior in right of payment to
all existing and future subordinated indebtedness of these restricted
subsidiaries and equal in right of payment with all existing and future senior
indebtedness of these restricted subsidiaries. As explained in Note 7 to the
Notes to Consolidated Financial Statements, these guarantees were terminated
after September 30, 2003, in connection with a consent solicitation.
The following condensed consolidating information presents condensed
consolidating balance sheets as of September 30, 2003 and December 31, 2002 and
condensed consolidating statements of operations for the three and nine months
ended September 30, 2003 and 2002, and condensed consolidating statements of
cash flows for the nine months ended September 30, 2003 and 2002, for The
Majestic Star Casino, LLC, The Majestic Star Casino Capital Corp. and the
guarantor subsidiaries and eliminating entries necessary to consolidate such
entities.
21
NOTE. 11 SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
CONDENSED CONSOLIDATING BALANCE SHEET AS OF SEPTEMBER 30, 2003
The
Majestic
Star Majestic Majestic
The Majestic Casino Investor Investor
Star Casino, Capital Holdings, Capital Guarantor Eliminating Total
LLC Corp. LLC Corp. Subsidiaries Entries Consolidated
------------- --------- ------------- --------- ------------- --------------- -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 15,404,525 $ - $ 7,107,027 $ - $ 12,744,756 $ - $ 35,256,308
Restricted cash - - 500,000 - - - 500,000
Accounts receivable, net 1,129,231 - 1,208 - 1,287,396 - 2,417,835
Inventories 71,470 - - - 942,599 - 1,014,069
Prepaid expenses and
other current assets 1,841,768 - 59,325 - 1,578,828 - 3,479,921
Receivable from
related party 261,462 - 248,286 - 4,321 (514,069)(a) -
Notes receivable from
related party 133,000 - - - - - 133,000
------------- ---------- ------------- -------- ------------- --------------- -------------
Total current assets 18,841,456 - 7,915,846 - 16,557,900 (514,069) 42,801,133
------------- ---------- ------------- -------- ------------- --------------- -------------
Property, equipment and
improvements, net 48,982,593 - - - 115,221,758 - 164,204,351
Intangible assets, net - - 5,200,000 - 11,295,496 - 16,495,496
Goodwill - - - - 5,922,398 - 5,922,398
Investment in Buffington
Harbor Riverboats, LLC 30,249,856 - - - - - 30,249,856
Other assets:
Deferred financing
costs, net 2,281,770 - 5,671,049 - - - 7,952,819
Restricted cash - - - - 1,000,000 - 1,000,000
Due from related
parties - - 103,439,586 - - (103,439,586)(a) -
Other assets 10,334,588 - - - 1,669,150 - 12,003,738
Investment in
subsidiaries 3,178,822 - 33,474,451 - - (36,653,273)(b) -
------------- ---------- ------------- -------- ------------- --------------- -------------
.
Total Assets $ 113,869,085 $ - $ 155,700,932 $ - $ 151,666,702 $ (140,606,928) $ 280,629,791
============= ========== ============= ======== ============= =============== =============
LIABILITIES AND MEMBER'S
EQUITY (DEFICIT)
Current Liabilities:
Current maturities
of long-term debt $ - $ - $ - $ - $ 83,083 $ - $ 83,083
Accounts payable 2,454,269 - - - 1,781,238 - 4,235,507
Other accrued
liabilities:
Payroll and related 2,104,769 - - - 4,721,979 - 6,826,748
Interest 3,534,481 - 5,895,136 - - - 9,429,617
Progressive jackpot 663,718 - - - 2,352,707 - 3,016,425
Slot club liabilities - - - - 863,428 - 863,428
Other accrued
liabilities 5,303,020 - 144,340 - 4,898,177 (514,069)(a) 9,831,468
------------- ---------- ------------- -------- ------------- --------------- -------------
Total current
liabilities 14,060,257 - 6,039,476 - 14,700,612 (514,069) 34,286,276
------------- ---------- ------------- -------- ------------- --------------- -------------
Due from related parties - - - - 103,439,586 (103,439,586)(a) -
Long-term debt, net of
current maturities 129,122,129 - 146,482,634 - 52,053 - 275,656,816
------------- ---------- ------------- -------- ------------- --------------- -------------
Total Liabilities 143,182,386 - 152,522,110 - 118,192,251 (103,953,655) 309,943,092
Member's Equity (Deficit): (29,313,301) - 3,178,822 - 33,474,451 (36,653,273)(b) (29,313,301)
------------- ---------- ------------- -------- ------------- --------------- -------------
Total Liabilities
and Member's Equity
(Deficit) $ 113,869,085 $ - $ 155,700,932 $ - $ 151,666,702 $ (140,606,928) $ 280,629,791
============= ========== ============= ======== ============= =============== =============
(a) To eliminate intercompany receivables and payables.
(b) To eliminate intercompany accounts and investment in subsidiaries.
22
NOTE. 11 SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 2002
The
Majestic
Star Majestic Majestic
The Majestic Casino Investor Investor
Star Casino, Capital Holdings, Capital Guarantor Eliminating Total
LLC Corp. LLC Corp. Subsidiaries Entries Consolidated
------------- --------- ------------- --------- ------------- -------------- -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 8,564,057 $ - $ 1,007,660 $ - $ 14,976,164 $ - $ 24,547,881
Restricted cash - - 250,000 - - - 250,000
Accounts receivable, net 1,233,543 - 52,695 - 1,188,488 - 2,474,726
Inventories 53,360 - - - 929,126 - 982,486
Prepaid expenses and
other current assets 1,455,121 - 125,620 - 1,558,248 - 3,138,989
Receivable from related
party 323,359 - 4,748,371 - 17,430 (5,089,160)(a) -
Note receivable from
related party 500,000 - 700,000 - - - 1,200,000
------------- --------- ------------ -------- ------------ -------------- ------------
Total current assets 12,129,440 - 6,884,346 - 18,669,456 (5,089,160) 32,594,082
------------- --------- ------------ -------- ------------ -------------- ------------
Property, equipment and
improvements, net 47,511,652 - - - 117,297,506 - 164,809,158
Intangible assets, net - - 5,200,000 - 12,491,746 - 17,691,746
Goodwill - - - - 5,922,398 - 5,922,398
Investment in Buffington
Harbor Riverboats, LLC 31,833,311 - - - - - 31,833,311
Other assets:
Deferred financing costs,
net 2,657,165 - 6,714,902 - - - 9,372,067
Restricted cash - - - - 1,000,000 - 1,000,000
Due from related parties - - 116,816,043 - - (116,816,043)(a) -
Other assets 10,962,753 - - - 1,624,359 12,587,112
Investment in subsidiaries 8,082,405 - 19,959,009 - - (28,041,414)(b) -
------------- --------- ------------ -------- ------------ -------------- ------------
Total Assets $ 113,176,726 $ - $155,574,300 $ - $157,005,465 $ (149,946,617) $275,809,874
============= ========= ============ ======== ============ ============== ============
LIABILITIES AND MEMBER'S EQUITY
(DEFICIT)
Current Liabilities:
Current maturities of
long-term debt $ - $ - $ - $ - $ 134,084 $ - $ 134,084
Accounts payable 1,911,929 - - - 2,136,369 - 4,048,298
Other accrued liabilities:
Payroll and related 1,707,240 - - - 5,949,275 - 7,656,515
Interest - - 1,473,785 - - - 1,473,785
Progressive jackpot 713,083 - - - 2,476,543 - 3,189,626
Slot club liabilities - - - - 738,559 - 738,559
Other accrued liabilities 4,139,265 - 486,662 - 3,914,716 (323,359)(a) 8,217,284
------------- --------- ------------ -------- ------------ -------------- ------------
Total current liabilities 8,471,517 - 1,960,447 - 15,349,546 (323,359) 25,458,151
------------- --------- ------------ -------- ------------ -------------- ------------
Due to related parties - - - - 121,581,844 (121,581,844)(a) -
Long-term debt, net of current
maturities 128,879,771 - 145,531,448 - 115,066 - 274,526,285
------------- --------- ------------ -------- ------------ -------------- ------------
Total Liabilities 137,351,288 - 147,491,895 - 137,046,456 (121,905,203) 299,984,436
Member's Equity (Deficit): (24,174,562) - 8,082,405 - 19,959,009 (28,041,414)(b) (24,174,562)
------------- --------- ------------ -------- ------------ -------------- ------------
Total Liabilities and
Member's Equity
(Deficit) $ 113,176,726 $ - $155,574,300 $ - $157,005,465 $(149,946,617) $275,809,874
============= ========= ============ ======== ============ ============== ============
(a) To eliminate intercompany receivables and payables.
(b) To eliminate intercompany accounts and investment in subsidiaries.
23
NOTE. 11 SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2003
The
Majestic
Star Majestic Majestic
The Majestic Casino Investor Investor
Star Casino, Capital Holdings, Capital Guarantor Eliminating Total
LLC Corp. LLC Corp. Subsidiaries Entries Consolidated
-------------- --------- ------------ --------- -------------- ------------- -------------
REVENUES:
Casino $ 34,533,303 $ - $ - $ - $ 39,000,341 $ - $ 73,533,644
Rooms - - - - 3,862,888 - 3,862,888
Food and beverage 362,514 - - - 5,079,902 - 5,442,416
Other 523,958 - - - 869,979 - 1,393,937
-------------- ---------- ------------ --------- -------------- ------------- -------------
Gross revenues 35,419,775 - - - 48,813,110 - 84,232,885
Less promotional
allowances 284,693 - - - 5,628,227 - 5,912,920
-------------- ---------- ------------ --------- -------------- ------------- -------------
Net revenues 35,135,082 - - - 43,184,883 - 78,319,965
-------------- ---------- ------------ --------- -------------- ------------- -------------
COSTS AND EXPENSES:
Casino 9,215,369 - - - 16,505,516 - 25,720,885
Rooms - - - - 1,695,808 - 1,695,808
Food and beverage 392,561 - - - 2,507,713 - 2,900,274
Other - - - - 533,985 - 533,985
Gaming taxes 9,623,655 - - - 4,628,311 - 14,251,966
Advertising and promotion 1,835,473 - - - 3,311,241 - 5,146,714
General and administrative 6,873,678 - 202,516 - 7,492,588 - 14,568,782
Economic incentive -
City of Gary 1,035,573 - - - - - 1,035,573
Depreciation and
amortization 1,388,381 - 665,819 - 3,148,361 - 5,202,561
Loss on investment in
Buffington Harbor
Riverboats, L.L.C. 594,718 - - - - - 594,718
-------------- ---------- ------------ --------- -------------- ------------- -------------
Total costs and expenses 30,959,408 - 868,335 - 39,823,523 - 71,651,266
-------------- ---------- ------------ --------- -------------- ------------- -------------
Operating income (loss) 4,175,674 - (868,335) - 3,361,360 - 6,668,699
-------------- ---------- ------------ --------- -------------- ------------- -------------
OTHER INCOME (EXPENSE):
Interest income 12,715 - 3,645 - 2,398 - 18,758
Interest expense (3,534,893) - (4,421,376) - (5,117) - (7,961,386)
Loss on sale of assets - - - - (4,671) - (4,671)
Other non-operating
expense (37,766) - (9,582) - - - (47,348)
Equity in net income
(loss) of subsidiaries (1,941,678) - 3,353,970 - - (1,412,292)(a) -
-------------- ---------- ------------ --------- -------------- ------------- -------------
Total other (expense)
income (5,501,622) - (1,073,343) - (7,390) (1,412,292) (7,994,647)
-------------- ---------- ------------ --------- -------------- ------------- -------------
Net income (loss) $ (1,325,948) $ - $(1,941,678) $ - $ 3,353,970 $ (1,412,292) $ (1,325,948)
============= ========== ============ ========= ============== ============= =============
(a) To eliminate equity in net income (loss) of subsidiaries.
24
NOTE. 11 SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2002
The
Majestic
Star Majestic Majestic
The Majestic Casino Investor Investor
Star Casino, Capital Holdings, Capital Guarantor Eliminating Total
LLC Corp. LLC Corp. Subsidiaries Entries Consolidated
-------------- --------- ------------- --------- ------------- ------------- -------------
REVENUES:
Casino $35,847,438 $ - $ - $ - $41,842,819 $ - $77,690,257
Rooms - - - - 3,809,375 - 3,809,375
Food and beverage 404,204 - - - 4,681,423 - 5,085,627
Other 501,110 - - - 1,027,702 - 1,528,812
-------------- ----------- ------------- ----------- ------------- ------------- -------------
Gross revenues 36,752,752 - - - 51,361,319 - 88,114,071
Less promotional
allowances 219,143 - - - 5,784,991 - 6,004,134
-------------- ----------- ------------- ----------- ------------- ------------- -------------
Net revenues 36,533,609 - - - 45,576,328 - 82,109,937
-------------- ----------- ------------- ----------- ------------- ------------- -------------
COSTS AND EXPENSES:
Casino 9,842,101 - - - 17,500,235 - 27,342,336
Rooms - - - - 1,717,113 - 1,717,113
Food and beverage 440,966 - - - 2,604,410 - 3,045,376
Other - - - - 396,134 - 396,134
Gaming taxes 8,927,379 - - - 4,981,141 - 13,908,520
Advertising and promotion 2,189,136 - - - 2,827,045 - 5,016,181
General and administrative 6,882,000 - 8,175 - 7,173,272 - 14,063,447
Economic Incentive -
City of Gary 1,072,350 - - - - - 1,072,350
Depreciation and
amortization 1,730,004 - 657,668 - 3,167,672 - 5,555,344
Loss on investment in
Buffington Harbor
Riverboats, L.L.C. 600,301 - - - - - 600,301
-------------- ----------- ------------- ----------- ------------- ------------- -------------
Total costs and expenses 31,684,237 - 665,843 - 40,367,022 - 72,717,102
-------------- ----------- ------------- ----------- ------------- ------------- -------------
Operating income (loss) 4,849,372 - (665,843) - 5,209,306 - 9,392,835
-------------- ----------- ------------- ----------- ------------- ------------- -------------
OTHER INCOME (EXPENSE):
Interest income 23,992 - 19,190 - 14,030 - 57,212
Interest expense (3,608,999) - (4,454,389) - (8,574) - (8,071,962)
Loss on sale of assets - - - - (9,889) - (9,889)
Other non-operating expenses (38,593) - (10,931) - - - (49,524)
Equity in net income (loss)
of subsidiaries 92,900 - 5,204,873 - - (5,297,773)(a) -
-------------- ----------- ------------- ----------- ------------- ------------- -------------
Total other expense (3,530,700) - 758,743 - (4,433) (5,297,773) (8,074,163)
-------------- ----------- ------------- ----------- ------------- ------------- -------------
Net income (loss) $ 1,318,672 $ - $ 92,900 $ - $ 5,204,873 $(5,297,773) $ 1,318,672
============== =========== ============= =========== ============= ============= =============
(a) To eliminate equity in net income of subsidiaries
25
NOTE. 11 SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2003
The
Majestic
Star Majestic Majestic
The Majestic Casino Investor Investor
Star Casino, Capital Holdings, Capital Guarantor Eliminating Total
LLC Corp. LLC Corp. Subsidiaries Entries Consolidated
-------------- --------- ------------- --------- ------------- ------------- --------------
REVENUES:
Casino $ 103,464,268 $ - $ - $ - $ 117,977,522 $ - $221,441,790
Rooms - - - - 11,246,586 - 11,246,586
Food and beverage 1,097,999 - - - 14,695,689 - 15,793,688
Other 1,723,907 - - - 2,503,455 - 4,227,362
-------------- ---------- ------------- ---------- ------------- ------------- --------------
Gross revenues 106,286,174 - - - 146,423,252 - 252,709,426
Less promotional allowances 924,219 - - - 16,789,768 - 17,713,987
-------------- ---------- ------------- ---------- ------------- ------------- --------------
Net revenues 105,361,955 - - - 129,633,484 - 234,995,439
-------------- ---------- ------------- ---------- ------------- ------------- --------------
COSTS AND EXPENSES:
Casino 27,149,303 - - - 48,676,222 - 75,825,525
Rooms - - - - 4,882,991 - 4,882,991
Food and beverage 1,196,149 - - - 7,570,063 - 8,766,212
Other - - - - 1,354,042 - 1,354,042
Gaming taxes 30,792,182 - - - 13,662,931 - 44,455,113
Advertising and promotion 5,038,353 - - - 9,855,194 - 14,893,547
General and administrative 19,237,130 - 225,203 - 20,951,949 - 40,414,282
Economic incentive -
City of Gary 3,106,984 - - - - - 3,106,984
Depreciation and
amortization 4,196,373 - 1,997,376 - 9,178,818 - 15,372,567
Loss on investment in
Buffington Harbor
Riverboats, L.L.C. 1,794,608 - - - - - 1,794,608
-------------- ---------- ------------- ---------- ------------- ------------- --------------
Total costs and
expenses 92,511,082 - 2,222,579 - 116,132,210 - 210,865,871
-------------- ---------- ------------- ---------- ------------- ------------- --------------
Operating income
(loss) 12,850,873 - (2,222,579) - 13,501,274 - 24,129,568
-------------- ---------- ------------- ---------- ------------- ------------- --------------
OTHER INCOME (EXPENSE):
Interest income 42,807 - 28,916 - 11,272 - 82,995
Interest expense (10,603,782) - (13,264,175) - (17,403) - (23,885,360)
(Loss) gain on sale of
assets (125,919) - - - 20,290 - (105,629)
Other non-operating
expense (113,320) - (28,482) - - - (141,802)
Equity in net income
(loss) of subsidiaries (1,970,887) - 13,515,433 - - (11,544,546)(a) -
-------------- ---------- ------------- ---------- ------------- ------------- --------------
Total other income
(expense) (12,771,101) - 251,692 - 14,159 (11,544,546) (24,049,796)
-------------- ---------- ------------- ---------- ------------- ------------- --------------
Net income (loss) $ 79,772 $ - $ (1,970,887) $ - $ 13,515,433 $(11,544,546 ) $ 79,772
============== ========== ============= ========== ============= ============= ==============
(a) To eliminate equity in net income (loss) of subsidiaries.
26
NOTE. 11 SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2002
The
Majestic
Star Majestic Majestic
The Majestic Casino Investor Investor
Star Casino, Capital Holdings, Capital Guarantor Eliminating Consolidated
LLC Corp. LLC Corp. Subsidiaries Entries Total
------------- --------- ------------ --------- ------------- -------------- ---------------
REVENUES:
Casino $ 98,626,635 $ - $ - $ - $124,623,911 $ - $ 223,250,546
Rooms - - - - 11,836,761 - 11,836,761
Food and beverage 1,239,364 - - - 14,127,355 - 15,366,719
Other 1,446,292 - - - 2,893,704 - 4,339,996
------------- ---------- ------------ ---------- ------------- -------------- ---------------
Gross revenues 101,312,291 - - - 153,481,731 - 254,794,022
Less promotional allowances 626,152 - - - 17,662,744 - 18,288,896
------------- ---------- ------------ ---------- ------------- -------------- ---------------
Net revenues 100,686,139 - - - 135,818,987 - 236,505,126
------------- ---------- ------------ ---------- ------------- -------------- ---------------
COSTS AND EXPENSES:
Casino 25,275,831 - - - 52,501,936 - 77,777,767
Rooms - - - - 4,975,786 - 4,975,786
Food and beverage 1,311,440 - - - 7,781,206 - 9,092,646
Other - - - - 1,171,389 - 1,171,389
Gaming taxes 26,153,991 - - - 14,779,969 - 40,933,960
Advertising and promotion 5,112,461 - - - 9,777,719 - 14,890,180
General and administrative 18,770,847 - 19,878 - 20,538,102 - 39,328,827
Economic Incentive -
City of Gary 2,959,492 - - - - - 2,959,492
Depreciation and
amortization 5,085,779 - 1,930,193 - 8,775,312 - 15,791,284
Loss on investment in
Buffington Harbor
Riverboats, L.L.C. 1,806,379 - - - - - 1,806,379
Pre-opening expenses - - 124,269 - - - 124,269
------------- ---------- ------------ ---------- ------------- -------------- ---------------
Total costs and expenses 86,476,220 - 2,074,340 - 120,301,419 - 208,851,979
------------- ---------- ------------ ---------- ------------- -------------- ---------------
Operating income (loss) 14,209,919 - (2,074,340) - 15,517,568 - 27,653,147
------------- ---------- ------------ ---------- ------------- -------------- ---------------
OTHER INCOME (EXPENSE):
Interest income 40,158 - 53,988 - 41,036 - 135,182
Interest expense (10,784,602) - (13,546,708) - (25,113) - (24,356,423)
Gain/(loss) on sale of
assets 8,850 - - - (9,311) - (461)
Other non-operating
expenses (103,509) - (38,306) - - - (141,815)
Equity in net income
(loss) of subsidiaries (81,186) - 15,524,180 - - (15,442,994)(a) -
------------- ---------- ------------ ---------- ------------- -------------- ---------------
Total other income
(expense) (10,920,289) - 1,993,154 - 6,612 (15,442,994) (24,363,517)
------------- ---------- ------------ ---------- ------------- -------------- ---------------
Net income (loss) $ 3,289,630 $ - $ (81,186) $ - $ 15,524,180 $(15,442,994) $ 3,289,630
============= ========== ============ ========== ============= ============== ===============
(a) To eliminate equity in net income (loss) of subsidiaries
27
NOTE. 11 SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2003
The
Majestic
Star Majestic Majestic
The Majestic Casino Investor Investor
Star Casino, Capital Holdings, Capital Guarantor Eliminating Consolidated
LLC Corp. LLC Corp. Subsidiaries Entries Total
------------- --------- ------------ --------- ------------- ----------- --------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES: $14,037,416 $ - $ (9,415,600) $ - $21,769,136 $ - $ 26,390,952
------------- ---------- ------------ ---------- ------------- ----------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in restricted cash - - (250,000) - - - (250,000)
Acquisition of property and
equipment (4,986,306) - - - (5,927,999) - (10,914,305)
Appreciated value of purchase
of land from a related party (559,806) - - - - - (559,806)
Decrease in prepaid leases and
deposits 108,500 - - - - - 108,500
Investment in Buffington Harbor
Riverboats, L.L.C. (211,138) - - - - - (211,138)
Proceeds from sale of equipment 14,750 - - - 41,469 - 56,219
------------- ---------- ------------ ---------- ------------- ----------- --------------
Net cash used in investing
activities (5,634,000) - (250,000) - (5,886,530) - (11,770,530)
------------- ---------- ------------ ---------- ------------- ----------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance cost for the 9-1/2% senior
secured notes (203,939) - (2,337) - - - (206,276)
Proceeds from notes receivables
affiliates 367,000 - 18,700,000 - (18,000,000) - 1,067,000
Repayment of long term debt - - - - (114,014) - (114,014)
Distribution to Barden Development,
Inc. (1,726,009) - (2,932,696) - - - (4,658,705)
------------- ---------- ------------ ---------- ------------- ----------- --------------
Net cash provided by (used in)
financing activities (1,562,948) - 15,764,967 - (18,114,014) - (3,911,995)
------------- ---------- ------------ ---------- ------------- ----------- --------------
Net increase (decrease) in cash and
cash equivalents 6,840,468 - 6,099,367 - (2,231,408) - 10,708,427
Cash and cash equivalents, beginning
of period 8,564,057 - 1,007,660 - 14,976,164 - 24,547,881
------------- ---------- ------------ ---------- ------------- ----------- --------------
Cash and cash equivalents, end of
period $15,404,525 $ - $7,107,027 $ - $12,744,756 $ - $ 35,256,308
============= ========== ============ ========== ============= =========== ==============
28
NOTE. 11 SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2002
The
Majestic
Star Majestic Majestic
The Majestic Casino Investor Investor
Star Casino, Capital Holdings, Capital Guarantor Eliminating Consolidated
LLC Corp. LLC Corp. Subsidiaries Entries Total
------------- --------- -------------- --------- ------------- ------------ -------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES: $ 7,308,679 $ - $(10,568,902) $ - $ 22,405,364 $3,045,497 (a) $22,190,638
------------- ---------- -------------- ---------- ------------- ------------ -------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition related costs - - (986,158) - - - (986,158)
Proceeds from seller for
purchase price adjustment - - 3,800,000 - - - 3,800,000
Acquisition of property
and equipment (4,276,313) - - - (3,918,301) -