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 January 25, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 0-20538
ISLE OF CAPRI CASINOS, INC.
| Delaware | 41-1659606 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) | |
| 1641 Popps Ferry Road, Biloxi, Mississippi | 39532 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (228) 396-7000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark if the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No ¨
As of February 26, 2004 the Company had a total of 29,637,536 shares of Common Stock outstanding (which excludes 3,351,708 shares held by us in treasury).
ISLE OF CAPRI CASINOS, INC.
FORM 10-Q
| PAGE | ||||
| PART I |
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| ITEM 1. |
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| CONSOLIDATED BALANCE SHEETS, JANUARY 25, 2004 (UNAUDITED) AND APRIL 27, 2003 | 2 | |||
| CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND NINE MONTHS ENDED JANUARY 25, 2004 AND JANUARY 26, 2003 (UNAUDITED) | 3 | |||
| CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY FOR THE NINE MONTHS ENDED JANUARY 25, 2004 (UNAUDITED) | 4 | |||
| CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED JANUARY 25, 2004 AND JANUARY 26, 2003 (UNAUDITED) | 5 | |||
| 7 | ||||
| ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION | 27 | ||
| ITEM 3. |
41 | |||
| ITEM 4. |
43 | |||
| PART II |
||||
| ITEM 1. |
44 | |||
| ITEM 2. |
45 | |||
| ITEM 3. |
45 | |||
| ITEM 4. |
46 | |||
| ITEM 5. |
46 | |||
| ITEM 6. |
46 | |||
| 47 | ||||
| 48 | ||||
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
All statements other than statements of historical or current facts included in this report on Form 10-Q or incorporated by reference herein, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe” or “continue” or the negative thereof or variations thereon or similar terminology. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. 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.
Our Internet website is http://www.islecorp.com. We make our filings available free of charge on our Internet website as soon as reasonably practical after we electronically file such reports with, or furnish them to, the SEC.
1
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
| January 25, 2004 |
April 27, 2003 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 93,422 | $ | 94,626 | ||||
| Accounts receivable |
8,294 | 7,786 | ||||||
| Notes receivable |
— | 5,658 | ||||||
| Income tax receivable |
— | 2,260 | ||||||
| Deferred income taxes |
5,822 | 7,433 | ||||||
| Prepaid expenses and other assets |
20,129 | 17,982 | ||||||
| Total current assets |
127,667 | 135,745 | ||||||
| Property and equipment, net |
900,690 | 841,332 | ||||||
| Other assets: |
||||||||
| Goodwill |
334,431 | 326,309 | ||||||
| Other intangible assets |
72,244 | 75,344 | ||||||
| Deferred financing costs, net of accumulated amortization of $14,736 and $11,500, respectively |
20,092 | 22,962 | ||||||
| Restricted cash |
2,441 | 2,551 | ||||||
| Other |
9,219 | 3,961 | ||||||
| Total assets |
$ | 1,466,784 | $ | 1,408,204 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Current maturities of long-term debt |
$ | 17,416 | $ | 24,757 | ||||
| Accounts payable trade |
17,382 | 18,630 | ||||||
| Accrued liabilities: |
||||||||
| Interest |
19,935 | 7,132 | ||||||
| Payroll and related |
46,284 | 45,578 | ||||||
| Property and other taxes |
17,171 | 17,852 | ||||||
| Income taxes |
9,828 | — | ||||||
| Progressive jackpots and slot club awards |
13,960 | 15,583 | ||||||
| Other |
27,191 | 26,639 | ||||||
| Total current liabilities |
169,167 | 156,171 | ||||||
| Long-term debt, less current maturities |
1,005,993 | 1,003,230 | ||||||
| Deferred income taxes |
9,844 | 9,700 | ||||||
| Deferred state income taxes |
7,675 | 7,675 | ||||||
| Other accrued liabilities |
13,355 | 13,347 | ||||||
| Minority interest |
19,199 | 14,177 | ||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $.01 par value; 2,000 shares authorized; none issued |
— | — | ||||||
| Common stock, $.01 par value; 45,000 shares authorized; shares issued and outstanding: 32,889 at January 25, 2004 and 32,377 at April 27, 2003 |
329 | 322 | ||||||
| Class B common stock, $.01 par value; 3,000 shares authorized; none issued |
— | — | ||||||
| Additional paid-in capital |
140,501 | 137,542 | ||||||
| Unearned compensation |
(1,595 | ) | (1,498 | ) | ||||
| Retained earnings |
132,441 | 100,346 | ||||||
| Accumulated other comprehensive loss, net of income tax benefit of $773 and $2,527, respectively |
(439 | ) | (4,284 | ) | ||||
| 271,237 | 232,428 | |||||||
| Treasury stock, 3,352 shares at January 25, 2004 and 3,293 shares at April 27, 2003 |
(29,686 | ) | (28,524 | ) | ||||
| Total stockholders’ equity |
241,551 | 203,904 | ||||||
| Total liabilities and stockholders’ equity |
$ | 1,466,784 | $ | 1,408,204 | ||||
See notes to the consolidated financial statements.
2
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share data)
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| January 25, 2004 |
January 26, 2003 |
January 25, 2004 |
January 26, 2003 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Casino |
$ | 267,489 | $ | 252,221 | $ | 831,799 | $ | 779,400 | ||||||||
| Rooms |
9,949 | 9,742 | 33,018 | 38,377 | ||||||||||||
| Pari-mutuel commissions and fees |
5,560 | 6,205 | 13,310 | 15,848 | ||||||||||||
| Food, beverage and other |
35,257 | 32,610 | 107,925 | 105,550 | ||||||||||||
| Gross revenues |
318,255 | 300,778 | 986,052 | 939,175 | ||||||||||||
| Less promotional allowances |
53,094 | 47,700 | 165,474 | 149,321 | ||||||||||||
| Net revenues |
265,161 | 253,078 | 820,578 | 789,854 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Casino |
45,340 | 42,096 | 136,340 | 135,178 | ||||||||||||
| Gaming taxes |
58,997 | 55,567 | 181,553 | 170,630 | ||||||||||||
| Rooms |
2,007 | 2,026 | 7,102 | 9,162 | ||||||||||||
| Pari-mutuel |
3,988 | 4,467 | 9,830 | 11,475 | ||||||||||||
| Food, beverage and other |
7,814 | 7,103 | 23,846 | 24,890 | ||||||||||||
| Marine and facilities |
15,707 | 14,720 | 48,740 | 50,112 | ||||||||||||
| Marketing and administrative |
71,498 | 71,250 | 227,778 | 219,728 | ||||||||||||
| Preopening |
1,452 | — | 2,050 | — | ||||||||||||
| Depreciation and amortization |
22,641 | 19,778 | 65,695 | 56,039 | ||||||||||||
| Total operating expenses |
229,444 | 217,007 | 702,934 | 677,214 | ||||||||||||
| Operating income |
35,717 | 36,071 | 117,644 | 112,640 | ||||||||||||
| Interest expense, net |
(20,283 | ) | (20,332 | ) | (62,023 | ) | (62,022 | ) | ||||||||
| Minority interest |
(2,549 | ) | (2,386 | ) | (8,039 | ) | (7,296 | ) | ||||||||
| Income before income taxes |
12,885 | 13,353 | 47,582 | 43,322 | ||||||||||||
| Income taxes |
5,052 | 4,958 | 15,487 | 15,967 | ||||||||||||
| Net income |
$ | 7,833 | $ | 8,395 | $ | 32,095 | $ | 27,355 | ||||||||
| Net income per common share-basic |
$ | 0.27 | $ | 0.29 | $ | 1.09 | $ | 0.95 | ||||||||
| Net income per common share-diluted |
$ | 0.25 | $ | 0.28 | $ | 1.04 | $ | 0.90 | ||||||||
| Weighted average basic shares |
29,485 | 29,148 | 29,322 | 28,915 | ||||||||||||
| Weighted average diluted shares |
31,032 | 30,317 | 30,738 | 30,558 | ||||||||||||
See notes to the consolidated financial statements.
3
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(In thousands)
| Shares of Common Stock |
Common Stock |
Additional Paid-in Capital |
Unearned Compen- sation |
Retained Earnings |
Accumulated Loss |
Treasury Stock |
Total Stockholders’ Equity |
|||||||||||||||||||||||
| Balance, April 27, 2003 |
32,377 | $ | 322 | $ | 137,542 | $ | (1,498 | ) | $ | 100,346 | $ | (4,284 | ) | $ | (28,524 | ) | $ | 203,904 | ||||||||||||
| Net income |
— | — | — | — | 32,095 | — | — | 32,095 | ||||||||||||||||||||||
| Unrealized gain on interest rate swap contract, net of income taxes of $1,753 |
— | — | — | — | — | 2,843 | — | 2,843 | ||||||||||||||||||||||
| Foreign currency translation | ||||||||||||||||||||||||||||||