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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 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: 333-88829
DIAMOND JO, LLC THE OLD EVANGELINE DOWNS CAPITAL CORP.
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
Delaware Delaware
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
42-1483875 25-1902805
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
3rd Street Ice Harbor, PO Box 1750
Dubuque, Iowa 52001
(563) 583-7005
(Address, including zip code, and telephone number, including
area code, of principal executive offices)
Securities registered pursuant to Section 12 (g) of the Act: None
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 last 90 days. Yes [X] No [_]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes [_] No [X]
All of the common equity interests of Diamond Jo, LLC (the "Company")
are held by Peninsula Gaming Partners, LLC. All of the common equity interests
of OED Acquisition, LLC are held by the Company. All of the common equity
interests of The Old Evangeline Downs, L.L.C. are held by OED Acquisition, LLC.
All of the common stock of The Old Evangeline Downs Capital Corp. is held by The
Old Evangeline Downs, L.L.C.
DIAMOND JO, LLC
INDEX TO FORM 10-Q
Part I - Financial Information
Item 1 - Financial Statements
Diamond Jo, LLC:
Condensed Consolidated Balance Sheets (Unaudited) as of
March 31, 2004 and December 31, 2003............................3
Condensed Consolidated Statements of Operations (Unaudited)
for the Three Months Ended March 31, 2004 and 2003..............4
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Three Months Ended March 31, 2004 and 2003..............5
Notes to Condensed Consolidated Financial Statements (Unaudited)...7
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations.........................................23
Item 3 - Quantitative and Qualitative Disclosures About Market Risk.....29
Item 4 - Controls and Procedures........................................29
Part II - Other Information
Item 1 - Legal Proceedings..............................................31
Item 6 - Exhibits and Reports on Form 8-K...............................31
Signatures....................................................................33
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DIAMOND JO, LLC
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, December 31,
2004 2003
------------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 20,826,308 $ 21,158,295
Restricted cash - purse settlements 4,390,971 1,589,125
Restricted investments 7,859,532 15,778,883
Accounts receivable, less allowance for doubtful accounts
of $55,268 and $61,922, respectively 233,811 309,188
Interest receivable 104,608 173,034
Inventory 386,695 403,376
Prepaid expenses 1,308,712 815,009
------------- -------------
Total current assets 35,110,637 40,226,910
------------- -------------
RESTRICTED CASH - RACINO PROJECT 7,002,118 20,013,291
------------- -------------
PROPERTY AND EQUIPMENT, NET 104,871,255 102,477,345
------------- -------------
OTHER ASSETS:
Deferred financing costs, net of amortization
of $6,001,462 and $5,288,572, respectively 25,370,354 12,702,387
Goodwill 53,083,429 53,083,429
Other intangibles 32,338,689 32,257,963
Deposits and other assets 767,652 757,789
------------- -------------
Total other assets 111,560,124 98,801,568
------------- -------------
TOTAL $ 258,544,134 $ 261,519,114
============= =============
LIABILITIES AND MEMBERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 2,739,309 $ 2,972,608
Construction payable - St. Landry Parish 8,222,318 20,156,591
Purse settlement payable 5,484,725 1,589,125
Accrued payroll and payroll taxes 2,070,381 2,788,224
Accrued interest 3,920,748 9,904,778
Other accrued expenses 18,916,108 4,811,106
Current maturity of long-term debt 5,467,810 4,098,222
------------- -------------
Total current liabilities 46,821,399 46,320,654
------------- -------------
LONG-TERM LIABILITIES:
12 1/4% Senior secured notes, net of discount 70,649,455 70,616,221
13% Senior secured notes, net of discount 120,983,861 120,923,436
Senior secured credit facilities 14,754,301 15,754,301
FF&E credit facility 11,666,667 9,921,557
Notes payable 3,422,437 3,511,654
Other accrued expenses 650,000 1,100,000
Preferred members' interest, redeemable 4,000,000 4,000,000
------------- -------------
Total long-term liabilities 226,126,721 225,827,169
------------- -------------
Total liabilities 272,948,120 272,147,823
COMMITMENTS AND CONTINGENCIES
MEMBERS' DEFICIT (14,403,986) (10,628,709)
------------- -------------
TOTAL $ 258,544,134 $ 261,519,114
============= =============
See notes to condensed consolidated financial statements (unaudited).
-3-
DIAMOND JO, LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Three Months
Ended Ended
March 31, 2004 March 31, 2003
--------------- ---------------
REVENUES:
Casino $ 30,193,349 $ 11,782,204
Racing 4,365,603 3,644,330
Food and beverage 2,817,800 839,278
Other 201,117 57,977
Less promotional allowances (2,012,473) (654,226)
--------------- ---------------
Total net revenues 35,565,396 15,669,563
--------------- ---------------
EXPENSES:
Casino 15,053,740 5,013,716
Racing 3,504,387 2,846,747
Food and beverage 2,281,365 731,039
Boat operations 573,061 567,348
Other 124,993 8,674
Selling, general and administrative 5,528,047 2,517,919
Depreciation and amortization 2,896,063 819,015
Pre-opening expense 221,283
Development costs 21,270
Management fee 256,375
--------------- ---------------
Total expenses 30,460,584 12,504,458
--------------- ---------------
INCOME FROM OPERATIONS 5,104,812 3,165,105
--------------- ---------------
OTHER INCOME (EXPENSE):
Interest income 57,085 80,008
Interest expense, net of amounts capitalized (7,692,728) (5,031,903)
Interest expense related to preferred members' interest, redeemable (90,000)
Loss on disposal of assets (87,263)
--------------- ---------------
Total other expense (7,725,643) (5,039,158)
--------------- ---------------
NET LOSS BEFORE PREFERRED MEMBER
DISTRIBUTIONS (2,620,831) (1,874,053)
LESS PREFERRED MEMBER DISTRIBUTIONS (90,544)
--------------- ---------------
NET LOSS TO COMMON MEMBERS' INTEREST $ (2,620,831) $ (1,964,597)
=============== ===============
See notes to condensed consolidated financial statements (unaudited).
-4-
DIAMOND JO, LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Three Months
Ended Ended
March 31, March 31,
2004 2003
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,620,831) $ (1,964,597)
Adjustments to reconcile net loss to net cash flows
from operating activities:
Depreciation and amortization 2,896,063 819,015
Provision for doubtful accounts 31,481 30,251
Amortization and write-off of deferred financing costs and discount
on notes 806,549 884,020
Loss on disposal of assets 87,263
Changes in operating assets and liabilities:
Restricted cash - purse settlements (2,801,846) (926,970)
Receivables 112,322 (782,756)
Inventory 16,681 14,394
Prepaid expenses and other assets (503,566) (375,397)
Accounts payable 3,356,344 1,843,247
Accrued expenses (5,687,987) (1,523,398)
------------- -------------
Net cash flows from operating activities (4,394,790) (1,894,928)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisition and licensing costs (68,504) (1,173,847)
Racino project development costs (16,888,572) (2,341,650)
Restricted cash - racino project, net 13,011,173 (63,799,585)
Maturity of restricted investments 7,919,351
Purchase of restricted investments (23,922,971)
Purchase of property and equipment (781,680) (511,332)
Proceeds from sale of property and equipment 380,156
------------- -------------
Net cash flows from investing activities 3,191,768 (91,369,229)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred financing costs (9,140,404)
Principal payments on debt (1,442,026) (20,275,000)
Proceeds from FF&E credit facility 3,467,507
Proceeds from senior secured notes 120,736,000
Member distributions (1,154,446) (268,719)
------------- -------------
Net cash flows from financing activities 871,035 91,051,877
------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (331,987) (2,212,280)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 21,158,295 10,510,205
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 20,826,308 $ 8,297,925
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for interest $ 13,068,734 $ 5,270,100
-5-
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Property additions acquired on construction payable which were
accrued, but not paid $ 2,594,332 $ 3,342,721
Deferred financing costs which were accrued, but not paid $ 13,380,855 $ 707,377
See notes to condensed consolidated financial statements (unaudited).
-6-
DIAMOND JO, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Basis of Presentation
Diamond Jo, LLC (formerly known as Peninsula Gaming Company, LLC), a Delaware
limited liability company (the "Company"), owns and operates the Diamond Jo
riverboat casino in Dubuque, Iowa, and is a wholly owned subsidiary of Peninsula
Gaming Partners, LLC, a Delaware limited liability company ("PGP"). Unless the
context requires otherwise, references to the "Company," "we," "us" or "our"
refer to Diamond Jo, LLC. The Company has two direct wholly owned subsidiaries,
(i) Peninsula Gaming Corp., which has no assets or operations and was formed
solely to facilitate the offering of the Company's 12 1/4% Senior Secured Notes
due 2006 (the "Existing Peninsula Notes"), all of which were recently the
subject of a redemption call by the Company, and (ii) OED Acquisition, LLC, a
Delaware limited liability company ("OEDA"), and the parent company of The Old
Evangeline Downs, L.L.C., a Louisiana limited liability company ("OED"), that
currently owns and operates a horse track in Lafayette, Louisiana and is
constructing a new casino and racetrack facility in St. Landry Parish, Louisiana
(the "racino project"). The Old Evangeline Downs Capital Corp. is a wholly owned
subsidiary of OED which has no assets or operations and is currently a
co-obligor of OED's 13% Senior Secured Notes due 2010 with Contingent Interest
(the "OED Notes") and the Company's recently issued 8 3/4% Senior Secured Notes
due 2012.
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments, consisting only of normal recurring entries
unless otherwise disclosed, necessary to present fairly the financial
information of the Company for the interim periods presented and have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The interim results reflected in the financial
statements are not necessarily indicative of results expected for the full year
or other periods.
The financial statements contained herein should be read in conjunction with the
audited financial statements and accompanying notes to the financial statements
included in the Company's Annual Report on Form 10-K for the period ended
December 31, 2003. Accordingly, footnote disclosure which would substantially
duplicate the disclosure in the audited financial statements has been omitted in
the accompanying unaudited financial statements.
2. Summary of Significant Accounting Policies
Deferred Financing Costs - As of March 31, 2004, the Company incurred
approximately $13.4 million of fees and expenses related to the refinancing of
the Company's and OED's senior secured notes, which was subsequently consummated
in April 2004 (see footnote 8 for further discussion on the refinancing). The
amount was recorded as "Deferred financing costs" within the "Other Assets"
section of the condensed consolidated balance sheet with a corresponding accrual
included in "Other accrued expenses" within the "Current Liabilities" section of
the condensed consolidated balance sheet.
Goodwill and Other Intangible Assets--At March 31, 2004 and December 31, 2003,
"Goodwill" and "Other intangibles" consists of goodwill, licensing costs and the
acquired trade name associated with the purchase of the Diamond Jo and OED. To
the extent the purchase price exceeded the fair value of the net identifiable
assets acquired, such excess has been recorded as goodwill. SFAS No. 142
"Goodwill and Other Intangible Assets" provides that goodwill and indefinite
lived intangible assets will no longer be amortized but will be reviewed at
least annually for impairment and written down and charged to income when their
recorded value exceeds their estimated fair value.
During the first quarter of 2004 and 2003, the Company performed its annual
impairment test on goodwill in accordance with SFAS No. 142 and determined that
the estimated fair value of the Diamond Jo
-7-
exceeded its carrying value as of that date. Based on that review, management
determined that there was no impairment of goodwill.
As of March 31, 2004 and December 31, 2003, the Company had approximately $32.3
million of "Other intangibles" on its balance sheet summarized as follows (in
millions):
March 31, December 31,
2004 2003
--------- ------------
Slot Machine and Electronic Video Game Licenses 28.5 28.5
Trade name 2.5 2.5
Horse Racing Licenses 1.3 1.3
------ ------
Total 32.3 32.3
====== ======
Each of the identified intangible assets were treated as having indefinite lives
and valued separately. The methodology employed by an independent valuation
specialist to arrive at the initial valuations required evaluating the fair
market value of the existing horse racing business on a stand-alone basis
without taking into account any right to obtain slot machine and electronic
video game licenses. Such valuation was based in part upon other transactions in
the industry and OED's historical results of operations. A value was also
derived for the trade name using market based royalty rates. A significant
portion of the purchase price is attributable to the slot machine and electronic
video game license rights, which were valued based upon the market value paid by
other operators and upon projected cash flows from operations. The valuations
were updated by management in the first quarter indicating no impairment. These
valuations and related intangible assets are subject to impairment by, among
other things, significant changes in the gaming tax rates in Louisiana,
significant new competition which could substantially reduce profitability,
non-renewal of OED's racing or gaming licenses due to regulatory matters,
changes to OED's trade name or the way OED's trade name is used in connection
with its business and regulatory changes that could adversely affect OED's
business by, for example, limiting or reducing the number of slot machines or
video poker machines that they are permitted to operate.
On June 25, 2002, PGP entered into an agreement with William E. Trotter, II
("Trotter") and William E. Trotter, II Family L.L.C., a Louisiana limited
liability company ("WET2LLC") to acquire (i) all of Trotter's interests in two
promissory notes issued by OED in connection with DJL's acquisition of OED, and
(ii) all of Trotter's membership interests owned by WET2LLC (together, the
"Trotter Purchase"). On August 30, 2002, OEDA consummated the Trotter Purchase
for a purchase price consisting of cash of $15,546,000, plus a contingent fee of
one half of one percent (0.5%) of the net slot revenues generated by OED's
racino located in St. Landry Parish, Louisiana, for a period of ten years
commencing on December 19, 2003, the date the racino's casino opened to the
general public. This contingent fee is payable monthly in arrears and is
recorded as an adjustment to "Other intangibles" on the Condensed Consolidated
Balance Sheet.
Use of Estimates--The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
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 periods. Actual results could differ
from those estimates. We periodically evaluate our policies and the estimates
and assumptions related to these policies. We also periodically evaluate the
carrying value of our assets in accordance with generally accepted accounting
principles. We operate in a highly regulated industry and are subject to
regulations that describe and regulate operating and internal control
procedures. The majority of our revenues are in the form of cash, which by its
nature, does not require complex estimates. In addition, we made certain
estimates surrounding our application of
-8-
purchase accounting related to the acquisition and the related assignment of
costs to goodwill and other intangible assets.
Concentrations of Risk--The Company maintains deposit accounts at three banks.
At March 31, 2004 and December 31, 2003, and various times during the periods
then ended, the balance at the banks exceeded the maximum amount insured by the
Federal Deposit Insurance Corporation. Credit risk is managed by monitoring the
credit quality of the banks.
The Company's customer base consists of eastern Iowa and southwest Louisiana.
Reclassifications--Certain prior year amounts have been reclassified to conform
with current period presentation.
3. Property and equipment
Property and equipment of the Company and its subsidiaries at March 31, 2004 and
December 31, 2003 is summarized as follows:
March 31, December 31,
2004 2003
------------- -------------
Land and land improvements $ 13,841,117 $ 13,686,570
Buildings and improvements 51,013,360 51,991,698
Riverboats and improvements 8,305,022 8,305,022
Furniture, fixtures and equipment 29,123,820 28,472,602
Computer equipment 5,507,135 5,196,966
Vehicles 176,235 176,235
Construction in progress 11,187,245 6,034,867
------------- -------------
Subtotal 119,153,934 113,863,960
Accumulated depreciation (14,282,679) (11,386,615)
------------- -------------
Property and equipment, net $ 104,871,255 $ 102,477,345
============= =============
4. Debt
The debt of the Company and its subsidiaries consists of the following:
March 31, December 31,
2004 2003
----------------- ----------------
12 1/4% Senior Secured Notes due July 1, 2006, net of discount
of $350,545 and $383,779, respectively, secured by assets
of the Diamond Jo. $ 70,649,455 $ 70,616,221
13% Senior Secured Notes of OED due March 1, 2010 with
Contingent Interest, net of discount of $2,216,139 and
$2,276,564, secured by certain assets of OED. 120,983,861 120,923,436
Line of Credit with Wells Fargo Foothill, Inc., interest rate
at greater of LIBOR + 3% or Prime + .75%, however, at no
time shall the interest rate be lower than 5.5% on
outstanding balances of $10.0 million or less and 8.5% on
outstanding balances greater than $10.0 million (current
rate at above mentioned interest rate floors), principal
payments of $50,000 due monthly through February 2005,
maturing March 12, 2006, secured by assets of the Diamond
Jo. 11,100,000 11,250,000
-9-
$15.0 million Loan and Security Agreement of OED with Wells
Fargo Foothill, Inc., interest rate at Prime + 2.50%
(current rate of 6.5%), maturing June 24, 2006, secured by
certain assets of OED. 4,254,301 5,104,301
$16.0 million Loan and Security Agreement of OED with Wells
Fargo Foothill, Inc. ("FF&E Credit Facility"), interest
rate at Prime + 2.50% (current rate of 6.5%), due in 48
equal monthly principal payments beginning on March 1,
2004, secured by certain assets of OED. 15,666,667 12,532,493
Promissory note payable to third party, interest at 4.75%
payable monthly in arrears, annual principal payments of
$550,000 due each October beginning in 2004, secured by
mortgage on certain real property of OED. 3,850,000 3,850,000
Note payable to IGT, interest rate at 9.5%, monthly payments
of principal and interest of $31,250, with final payment
due July 1, 2005, secured by certain assets of OED. 440,247 548,940
Preferred membership interests-redeemable, interest at 9%, due
October 13, 2006. 4,000,000 4,000,000
----------------- ----------------
Total debt 230,944,531 228,825,391
Less current portion (5,467,810) (4,098,222)
----------------- ----------------
Total long term debt $225,476,721 $224,727,169
================= ================
In March 2004, the Company amended it's senior secured credit facility dated
February 23, 2001 (the "DJL Credit Facility Amendment"). Under the terms of the
DJL Credit Facility Amendment, the minimum interest rate on all outstanding
borrowings under the DJL Credit Facility less than $10.0 million was reduced to
5.5% and the term of the DJL Credit Facility was extended by one year to March
12, 2006.
In April 2004, the Company exercised its rights to redeem all of the outstanding
Existing Peninsula Notes, and OED redeemed a portion of the OED Notes (see
footnote 8).
5. Commitments and Contingencies
Under the Company's and PGP's operating agreements, the Company and PGP have
agreed, subject to few exceptions, to indemnify and hold harmless our members,
PGP and PGP members, as the case may be, from liabilities incurred as a result
of their positions as our sole manager and as members of the Company or PGP, as
the case may be.
As discussed in footnote 2, in connection with the Trotter Purchase, OED is
obligated to pay a contingent fee of one half of one percent (0.5%) of the net
slot revenues generated by OED's racino located in St.
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Landry Parish, Louisiana, for a period of ten years commencing on December 19,
2003, the date the racino's casino opened to the general public.
The Company is involved in a lawsuit with a former employee. Management believes
that such lawsuit is without merit and that the ultimate disposition of this
action should not have a material adverse effect on the financial condition,
results of operations or cash flows of the Company; however, no assurance can be
given as to the ultimate disposition of such action.
Other than as noted above, we are not a party to, and none of our property is
the subject of, any other pending legal proceedings other than litigation
arising in the normal course of business. We do not believe that adverse
determinations in any or all such other litigation would have a material adverse
effect on our financial condition, results of operations or cash flows.
6. Related Party Transactions
OED is a party to a consulting agreement with a board member of PGP. Under the
consulting agreement, OED must pay to the board member a fee equal to 2.5% of
OED's earnings before interest, taxes, depreciation, amortization and other
non-recurring charges during the preceding calendar year commencing on January
1, 2004. Under the consulting agreement, the board member is also entitled to
reimbursement of reasonable business expenses as approved by the board of
managers of PGP. During the three months ended March 31, 2004, the board member
received $212,626 under his consulting agreement. Such amount has been included
in "Management fees" in the "Condensed Consolidated Statement of Operations".
A board member of PGP is entitled to receive from OEDA board fees of $175,000
per year for services performed in his capacity as a board member. For the three
months ended March 31, 2004, OEDA expensed $43,749 related to these board fees
which has been included in "Management fees" in the "Condensed Consolidated
Statement of Operations".
At March 31, 2004, the Company had accrued approximately $11.2 million in fees
payable to the initial purchaser in connection with the Company's offering of
its 8 3/4% Senior Secured Notes due 2012 (see footnote 8 for a discussion of
this offering). Two of the Company's board members serve as Vice Chairman and
Executive Vice President, respectively, of the initial purchaser.
7. Segment Information
Pursuant to the provisions of SFAS No. 131 "Disclosures About Segments of an
Enterprise and Related Information," the Company has determined that it
currently operates two reportable segments: (1) Iowa operations, which comprise
the Diamond Jo riverboat casino in Iowa and (2) Louisiana operations, which
comprise the casino, racetrack and off-track betting facilities operated by OED
in Louisiana.
Adjusted EBITDA is defined as operating income plus depreciation and
amortization, pre-opening expense, development expense and management fees.
Adjusted EBITDA is presented to enhance the understanding of the Company's
financial performance and its ability to service its indebtedness. Although
Adjusted EBITDA is not necessarily a measure of the Company's ability to fund
its cash needs, the Company understands that Adjusted EBITDA is used by certain
investors as a measure of financial performance and to compare the Company's
performance with the performance of other companies that report EBITDA or
Adjusted EBITDA. Adjusted EBITDA is not a measurement determined in accordance
with accounting principles generally accepted in the Unites States of America
("GAAP") and should not be considered as an alternative to, or more meaningful
than, the Company's net loss or income from operations, as indicators of its
operating performance, or its cash flows from operating activities, as a measure
of its liquidity or any other measure determined in accordance with GAAP. This
definition of
-11-
Adjusted EBITDA may not be the same as that of similarly named measures used by
other companies and is not the same as the definition used in the indenture
governing the Notes or any of the Company's other debt agreements.
The table below presents information about reported segments as of and for the
periods ended (in thousands):
Net Revenues
Three Months Ended March 31,
---------------------------
2004 2003
---------- ----------
Diamond Jo $ 12,178 $ 11,852
OED 23,387 3,818
---------- ----------
Total $ 35,565 $ 15,670
========== ==========
Three Months Ended March 31,
---------------------------
2004 2003
---------- ----------
Diamond Jo $ 3,705 $ 3,629
OED 4,795 355
---------- ----------
Total Adjusted EBITDA(1) 8,500 3,984
Diamond Jo:
Development costs (21)
Depreciation and amortization (577) (752)
Interest expense, net (2,808) (2,731)
Loss on sale of assets (87)
Preferred member distributions (91)
OED:
Depreciation and amortization (2,319) (67)
Pre-opening expense (221)
Management fee (257)
Interest expense, net (4,918) (2,221)
---------- ----------
Net loss to common members' interest $ (2,621) $ (1,965)
========== ==========
(1) Adjusted EBITDA is defined as operating income plus depreciation and
amortization, pre-opening expense, development expense and management fees.
8. Subsequent Events
On March 9, 2004, OED commenced a tender offer and consent solicitation to
repurchase all of its outstanding OED Notes and to solicit consents to certain
proposed amendments to the indenture governing the OED Notes as set forth in
OED's Offer to Purchase and Consent Solicitation Statement, dated March 9, 2004.
On March 19, 2004, the expiration date of the consent solicitation, OED received
the requisite consents and tenders from holders of a majority of the aggregate
principal amount of the outstanding OED Notes. The tender offer expired on April
5, 2004, and OED redeemed approximately $116.3 million principal amount of OED
Notes.
On April 16, 2004, the Company and The Old Evangeline Downs Capital Corp.
completed a Rule 144A private placement of $233 million principal amount of
8 3/4% Senior Secured Notes due 2012 (the "Peninsula Gaming Notes"). The
Peninsula Gaming Notes were issued at a discount of approximately $3.3 million.
Interest on the Peninsula Gaming Notes is payable semi-annually on April 15 and
October 15 of each year, beginning on October 15, 2004. In connection with the
offering of the Peninsula Gaming Notes, the Company and OED also sought
requisite regulatory approvals to enter into a new senior secured credit
facility and effect a series of corporate transactions, including the creation
of a new holding
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company to be the new direct parent of the Company and OED and a
co-issuer of the new senior secured notes. While regulatory approval of the
corporate transactions was obtained, the Company and OED have not yet effected
the corporate transactions or entered into the new credit facility.
The Company used the net proceeds from the sale of the Peninsula Gaming Notes as
follows (all payments based on outstanding balances as of April 16, 2004): (1)
to irrevocably deposit funds into an escrow account to redeem all of the
Existing Peninsula Notes in an amount (including call premium and accrued
interest) of approximately $79.9 million; (2) to repurchase approximately $116.3
million principal amount of OED Notes for an aggregate amount (including tender
premium, accrued interest and contingent interest) of approximately $134.6
million; (3) to pay accrued distributions on the Company's outstanding preferred
membership interests-redeemable of approximately $1.1 million; (4) to pay
related fees and expenses of approximately $13.4 million; and (5) for general
corporate purposes. As a result of the issuance of the Peninsula Gaming Notes,
the Company incurred a loss of approximately $8.9 million consisting of the
write-off of deferred financing fees of approximately $2.1 million, the payment
of a call premium on the Existing Peninsula Notes of approximately $5.7 million,
interest on the Existing Peninsula Notes of approximately $0.7 million and
write-off of bond discount of approximately $0.4 million. In connection
therewith, OED also incurred a loss of approximately $26.8 million consisting of
the write-off of deferred financing fees of approximately $8.4 million, the
payment of a tender premium on the OED Notes of approximately $16.3 million and
write-off of bond discount of approximately $2.1 million.
The Peninsula Gaming Notes are guaranteed on a senior secured basis by OEDA and
OED.
The following unaudited pro forma condensed consolidated financial information
of the Company has been derived from the application of pro forma adjustments to
the combined historical financial statements after giving effect to the offering
of the Peninsula Gaming Notes. The unaudited pro forma condensed consolidated
financial information gives effect to the offering of the Peninsula Gaming Notes
as if such event had occurred on March 31, 2004 for purposes of the unaudited
pro forma condensed consolidated balance sheet at March 31, 2004 and on December
31, 2003 for purposes of the unaudited pro forma condensed consolidated
statement of operations for the three month period ended March 31, 2004. The pro
forma adjustments are described in the accompanying notes.
-13-
DIAMOND JO, LLC
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
At March 31, 2004
-----------------------------------------------------
Pro Forma
Historical (1) Adjustments Pro Forma
------------- ------------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 20,826,308 $ 16,535,643 (2) $ 37,361,951
Restricted cash 4,390,971 4,390,971
Restricted investments 7,859,532 (7,859,532) (3)
Other current assets 2,033,826 2,033,826
------------- ------------- -------------
Total current assets 35,110,637 8,676,111 43,786,748
------------- ------------- -------------
Restricted cash - racino project 7,002,118 (7,002,118) (3)
------------- ------------- -------------
Property and equipment, net 104,871,255 104,871,255
------------- ------------- -------------
Other assets 111,560,124 (10,495,696) (4) 101,064,428
------------- ------------- -------------
TOTAL $ 258,544,134 $ (8,821,703) $ 249,722,431
============= ============= =============
LIABILITIES AND MEMBERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 2,739,309 $ 2,739,309
Construction payable 8,222,318 8,222,318
Purse settlement payable 5,484,725 5,484,725
Accrued payroll and payroll taxes 2,070,381 2,070,381
Accrued interest 3,920,748 $ (3,616,299) (5) 304,449
Other accrued expenses 18,916,108 (14,462,996) (6) 4,453,112
Current maturity of long-term debt 5,467,810 5,467,810
------------- ------------- -------------
Total current liabilities 46,821,399 (18,079,295) 28,742,104
------------- ------------- -------------
LONG TERM LIABILITIES:
8 3/4% senior secured notes, net of discount 229,728,680 (7) 229,728,680
12 1/4% senior secured notes, net of discount 70,649,455 (70,649,455) (8)
13% senior secured notes, net of discount 120,983,861 (114,198,159) (9) 6,785,702
Other long-term debt 34,493,405 34,493,405
------------- ------------- -------------
Total long-term liabilities 226,126,721 44,881,066 271,007,787
------------- ------------- -------------
Total liabilities 272,948,120 26,801,771 299,749,891
------------- ------------- -------------
MEMBERS' DEFICIT (14,403,986) (35,623,474) (10) (50,027,460)
------------- ------------- -------------
TOTAL $ 258,544,134 $ (8,821,703) $ 249,722,431
============= ============= =============
(1) Represents the historical unaudited condensed consolidated balance sheet of
the Company.
(2) Represents net proceeds from new notes of $229.7 million issued at a
discount of 1.404% less (i) $79.6 million to redeem the Existing Peninsula
Notes (including a call premium of approximately $5.7 million, accrued
interest of $2.2 million and interest due on the Existing Peninsula Notes
during the 30 day call period of $0.7 million), (ii) $134.0 million to
repurchase approximately $116.3 million principal amount of OED Notes
(including a tender premium of approximately $16.3 million and accrued
interest of approximately $1.4 million), (iii) repayment of accrued
interest related to redeemable preferred member interests of approximately
$1.1 million and (iv) capitalizable fees and expenses associated with the
offering of the new notes of
-14-
approximately $13.4 million, plus release of restricted investments of $7.9
million and restricted cash of $7.0 million.
(3) Represents release of restricted cash and restricted investments held by
the trustee of the OED Notes whose use was restricted to paying
construction costs and semi-annual interest payments under the indenture
governing the OED Notes.
(4) Represents write-off of deferred financing costs associated with the
Existing Peninsula Notes and OED Notes redeemed of $2.1 million and $8.4
million, respectively.
(5) Represents payment of accrued interest associated with the Existing
Peninsula Notes and OED Notes of approximately $2.2 million and $1.4
million, respectively.
(6) Represents payment of (i) accrued interest associated with the redeemable
preferred member interests of approximately $1.1 million and (ii) accrued
deferred financing costs of approximately $13.4 million.
(7) Represents net proceeds from issuance of new notes.
(8) Represents payment of principal obligations under the Existing Peninsula
Notes of $71.0 million offset by write-off of remaining unamortized
discount of approximately $0.4 million.
(9) Represents payment of principal obligations under the OED Notes of $116.3
million offset by write-off of remaining unamortized discount of
approximately $2.1 million.
(10) Represents (i) the call premium on the Existing Peninsula Notes of
approximately $5.7 million, (ii) the tender premium on the OED Notes of
approximately $16.3 million (iii) write-off of deferred financing costs
associated with the Existing Peninsula Notes and the OED Notes of
approximately $10.5 million (iv) write-off of remaining unamortized
discount of the Existing Peninsula Notes and the OED Notes of approximately
$2.4 million and (v) interest on the Existing Peninsula Notes during the 30
day call period of $0.7 million.
DIAMOND JO, LLC
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended March 31, 2004
------------------------------------------------
Pro Forma
Historical (1) Adjustments Pro Forma
------------ ------------ ------------
NET REVENUES $ 35,565,396 $ 35,565,396
EXPENSES 30,460,584 30,460,584
------------ ------------ ------------
INCOME FROM OPERATIONS 5,104,812 5,104,812
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income 57,085 57,085
Interest expense, net of amounts capitalized (7,692,728) $ 1,028,034 (1) (6,664,694)
Interest expense related to preferred members'
interest, redeemable (90,000) (90,000)
------------ ------------ ------------
Total other expense (7,725,643) 1,028,034 (6,697,609)
------------ ------------ ------------
NET LOSS TO COMMON MEMBERS' INTEREST (2,620,831) $ 1,028,034 (1,592,797)
============ ============ ============
(1) Represents elimination of interest expense (including contingent interest
and amortization of deferred financing costs and bond discount) related to
the Existing Peninsula Notes and OED Notes of approximately $2.5 million
and $4.1 million, respectively, plus interest expense (including
amortization of deferred financing costs and bond discount) on the
Peninsula Gaming Notes of approximately $5.6 million.
-15-
9. Condensed Consolidating Financial Information
Certain of the Company's subsidiaries have fully and unconditionally guaranteed
the payment of all obligations under the Peninsula Gaming Notes. The following
tables present the consolidating condensed financial information of Diamond Jo,
LLC, as the parent company, and its guarantor subsidiaries OEDA and OED as of
March 31, 2004 and December 31, 2003 and for the three months ended March 31,
2004 and 2003. The Old Evangeline Downs Capital Corp., a co-issuer of the
Peninsula Gaming Notes, has no assets or operations and, therefore, is not
included in the tables below.
DIAMOND JO, LLC
CONDENSED CONSOLIDATING BALANCE SHEET (UNAUDITED)
At March 31, 2004
---------------------------------------------------------------------------------
Subsidiary Subsidiary
Guarantor - Guarantor - Consolidating
Parent OEDA OED Adjustments Consolidated
------------- ------------- ------------- ------------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,628,003 $ 11,198,305 $ 20,826,308
Restricted cash - purse settlements 4,390,971 4,390,971
Restricted investments 7,859,532 7,859,532
Receivables 89,596 248,823 338,419
Intercompany receivables 5,431,114 $ 243,406 $ (5,674,520)
Inventory 109,301 277,394 386,695
Prepaid expenses 530,411 778,301 1,308,712
------------- ------------- ------------- ------------- -------------
Total current assets 15,788,425 243,406 24,753,326 (5,674,520) 35,110,637
------------- ------------- ------------- ------------- -------------
RESTRICTED CASH - RACINO PROJECT 7,002,118 7,002,118
------------- ------------- ------------- ------------- -------------
PROPERTY AND EQUIPMENT, NET 14,699,487 90,171,768 104,871,255
------------- ------------- ------------- ------------- -------------
OTHER ASSETS:
Investment in subsidiary (8,142,399) (7,885,115) 16,027,514
Deferred financing costs 15,504,592 9,865,762 25,370,354
Goodwill 53,083,429 53,083,429
Other intangibles 32,338,689 32,338,689
Deposits and other assets 659,708 107,944 767,652
------------- ------------- ------------- ------------- -------------
Total other assets 61,105,330 (7,885,115) 42,312,395 16,027,514 111,560,124
------------- ------------- ------------- ------------- -------------
TOTAL $ 91,593,242 $ (7,641,709) $ 164,239,607 $ 10,352,994 $ 258,544,134
============= ============= ============= ============= =============
LIABILITIES AND MEMBERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 522,387 $ 2,216,922 $ 2,739,309
Construction payable - St. Landry Parish 8,222,318 8,222,318
Purse settlement payable 5,484,725 5,484,725
Accrued payroll and payroll taxes 1,422,871 647,510 2,070,381
Accrued interest 2,260,730 1,660,018 3,920,748
Other accrued expenses 15,791,785 3,124,323 18,916,108
Intercompany payables $ 500,690 5,173,830 $ (5,674,520)
Current maturity of long-term debt 600,000 4,867,810 5,467,810
------------- ------------- ------------- ------------- -------------
Total current liabilities 20,597,773 500,690 31,397,456 (5,674,520) 46,821,399
------------- ------------- ------------- ------------- -------------
LONG-TERM LIABILITIES:
12 1/4% Senior secured notes, net of
discount 70,649,455 70,649,455
13% Senior secured notes, net of discount 120,983,861 120,983,861
Senior secured credit facilities 10,500,000 4,254,301 14,754,301
FF&E credit facility 11,666,667 11,666,667
Notes payable 3,422,437 3,422,437
Other accrued expenses 250,000 400,000 650,000
Preferred members' interest, redeemable 4,000,000 4,000,000
------------- ------------- ------------- ------------- -------------
-16-
Total long-term liabilities 85,399,455 140,727,266 226,126,721
------------- ------------- ------------- ------------- -------------
Total liabilities 105,997,228 500,690 172,124,722 (5,674,520) 272,948,120
COMMITMENTS AND CONTINGENCIES
MEMBERS' DEFICIT (14,403,986) (8,142,399) (7,885,115) 16,027,514 (14,403,986)
------------- ------------- ------------- ------------- -------------
TOTAL $ 91,593,242 $ (7,641,709) $ 164,239,607 $ 10,352,994 $ 258,544,134
============= ============= ============= ============= =============
-17-
DIAMOND JO, LLC
CONDENSED CONSOLIDATING BALANCE SHEET (UNAUDITED)
At December 31, 2003
--------------------------------------------------------------------------------
Subsidiary Subsidiary
Guarantor - Guarantor - Consolidating
Parent OEDA OED Adjustments Consolidated
------------- ------------- ------------- ------------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 12,655,641 $ 8,502,654 $ 21,158,295
Restricted cash - purse settlements 1,589,125 1,589,125
Restricted investments 15,778,883 15,778,883
Receivables 80,089 402,133 482,222
Intercompany receivables 5,060,894 $ 295,000 $ (5,355,894)
Inventory 113,269 290,107 403,376
Prepaid expenses 570,563 244,446 815,009
------------- ------------- ------------- ------------- -------------
Total current assets 18,480,456 295,000 26,807,348 (5,355,894) 40,226,910
------------- ------------- ------------- ------------- -------------
RESTRICTED CASH - RACINO PROJECT 20,013,291 20,013,291
------------- ------------- ------------- ------------- -------------
PROPERTY AND EQUIPMENT, NET 15,014,293 87,463,052 102,477,345
------------- ------------- ------------- ------------- -------------
OTHER ASSETS:
Investment in subsidiary (4,852,198) (4,471,508) 9,323,706
Deferred financing costs 2,516,581 10,185,806 12,702,387
Goodwill 53,083,429 53,083,429
Other intangibles 32,257,963 32,257,963
Deposits and other assets 670,022 87,767 757,789
------------- ------------- ------------- ------------- -------------
Total other assets 51,417,834 (4,471,508) 42,531,536 9,323,706 98,801,568
------------- ------------- ------------- ------------- -------------
TOTAL $ 84,912,583 $ (4,176,508) $ 176,815,227 $ 3,967,812 $ 261,519,114
============= ============= ============= ============= =============
LIABILITIES AND MEMBERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 804,581 $ 2,168,027 $ 2,972,608
Construction payable - St. Landry
Parish 20,156,591 20,156,591
Purse settlement payable 1,589,125 1,589,125
Accrued payroll and payroll taxes 1,569,224 1,219,000 2,788,224
Accrued interest 4,432,472 5,472,306 9,904,778
Other accrued expenses 2,568,794 $ 175,000 2,067,312 4,811,106
Intercompany payables 500,690 4,855,204 $ (5,355,894)
Current maturity of long-term debt 600,000 3,498,222 4,098,222
------------- ------------- ------------- ------------- -------------
Total current liabilities 9,975,071 675,690 41,025,787 (5,355,894) 46,320,654
------------- ------------- ------------- ------------- -------------
LONG-TERM LIABILITIES:
12 1/4% Senior secured notes, net of
discount 70,616,221 70,616,221
13% Senior secured notes, net of
discount 120,923,436 120,923,436
Senior secured credit facilities 10,650,000 5,104,301 15,754,301
FF&E credit facility 9,921,557 9,921,557
Notes payable 3,511,654 3,511,654
Other accrued expenses 300,000 800,000 1,100,000
Preferred members' interest,
redeemable 4,000,000 4,000,000
------------- ------------- ------------- ------------- -------------
Total long-term liabilities 85,566,221 140,260,948 225,827,169
------------- ------------- ------------- ------------- -------------
Total liabilities 95,541,292 675,690 181,286,735 (5,355,894) 272,147,823
COMMITMENTS AND CONTINGENCIES
MEMBERS' DEFICIT (10,628,709) (4,852,198) (4,471,508) 9,323,706 (10,628,709)
------------- ------------- ------------- ------------- -------------
TOTAL $ 84,912,583 $ (4,176,508) $ 176,815,227 $ 3,967,812 $ 261,519,114
============= ============= ============= ============= =============
-18-
DIAMOND JO, LLC
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Ended March 31, 2004
---------------------------------------------------------------------------
Subsidiary Subsidiary
Guarantor - Guarantor - Consolidating
Parent OEDA OED Adjustments Consolidated
------------ ------------ ------------ ------------ ------------
REVENUES:
Casino $ 12,094,244 $ 18,099,105 $ 30,193,349
Racing 4,365,603 4,365,603
Food and beverage 687,409 2,130,391 2,817,800
Management fees 370,219 $ 123,406 $ (493,625)
Other 58,869 142,248 201,117
Less promotional allowances (662,522) (1,349,951) (2,012,473)
------------ ------------ ------------ ------------ ------------
Total net revenues 12,548,219 123,406 23,387,396 (493,625) 35,565,396
------------ ------------ ------------ ------------ ------------
EXPENSES:
Casino 5,258,640 9,795,100 15,053,740
Racing 3,504,387 3,504,387
Food and beverage 630,871 1,650,494 2,281,365
Boat operations 573,061 573,061
Other 23,162 101,831 124,993
Selling, general and administrative 1,987,323 3,540,724 5,528,047
Depreciation and amortization 577,034 2,319,029 2,896,063
Pre-opening expense 221,283 221,283
Development costs 21,270 21,270
Management fee 43,749 706,251 (493,625) 256,375
------------ ------------ ------------ ------------ ------------
Total expenses 9,071,361 43,749 21,839,099 (493,625) 30,460,584
------------ ------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 3,476,858 79,657 1,548,297 5,104,812
------------ ------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Loss from equity investment in subsidiary (3,290,201) (3,369,858) 6,660,059
Interest income 11,222 45,863 57,085
Interest expense, net of amounts capitalized (2,728,710) (4,964,018) (7,692,728)
Interest expense related to preferred
members' interest, redeemable (90,000) (90,000)
Loss on disposal of assets
------------ ------------ ------------ ------------ ------------
Total other expense (6,097,689) (3,369,858) (4,918,155) 6,660,059 (7,725,643)
------------ ------------ ------------ ------------ ------------
NET LOSS TO COMMON MEMBERS' INTEREST $ (2,620,831) $ (3,290,201) $ (3,369,858) 6,660,059 $ (2,620,831)
============ ============ ============ ============ ============
-19-
DIAMOND JO, LLC
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Ended March 31, 2003
-----------------------------------------------------------------------------------
Subsidiary Subsidiary
Guarantor - Guarantor - Consolidating
Parent OEDA OED Adjustments Consolidated
------------ ------------ ------------ ------------ ------------
REVENUES:
Casino $ 11,782,204 $ 11,782,204
Racing $ 3,644,330 3,644,330
Food and beverage 686,837 152,441 839,278
Management fees 90,000 $ 30,000 $ (120,000)
Other 37,415 20,562 57,977
Less promotional allowances (654,226) (654,226)
------------ ------------ ------------ ------------ ------------
Total net revenues 11,942,230 30,000 3,817,333 (120,000) 15,669,563
------------ ------------ ------------ ------------ ------------
EXPENSES:
Casino 5,013,716 5,013,716
Racing 2,846,747 2,846,747
Food and beverage 655,485 75,554 731,039
Boat operations 567,348 567,348
Other 3,174 5,500 8,674
Selling, general and administrative 1,983,745 534,174 2,517,919
Depreciation and amortization 751,905 67,110 819,015
Litigation settlement 1,600,000 (1) (1,600,000) (1)
Management fee 120,000 (120,000)
------------ ------------ ------------ ------------ ------------
Total expenses 8,975,373 5,249,085 (1,720,000) 12,504,458
------------ ------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 2,966,857 30,000 (1,431,752) 1,600,000 3,165,105
------------ ------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Loss from equity investment in subsidiary (2,022,696) (2,052,696) 4,075,392
Interest income 6,280 73,728 80,008
Interest expense, net of amounts capitalized (2,737,231) (2,294,672) (5,031,903)
Loss on disposal of assets (87,263) (87,263)
------------ ------------ ------------ ------------ ------------
Total other expense (4,840,910) (2,052,696) (2,220,944) 4,075,392 (5,039,158)
------------ ------------ ------------ ------------ ------------
NET LOSS BEFORE PREFERRED MEMBER DISTRIBUTIONS (1,874,053) (2,022,696) (3,652,696) 5,675,392 (1,874,053)
LESS PREFERRED MEMBER DISTRIBUTIONS (90,544) (90,544)
------------ ------------ ------------ ------------ ------------
NET LOSS TO COMMON MEMBERS' INTEREST $ (1,964,597) $ (2,022,696) $ (3,652,696) $ 5,675,392 $ (1,964,597)
============ ============ ============ ============ ============
(1) Net loss to common members' interest at OED includes a litigation
settlement with the Louisiana Horsemen's Benevolent and Protective
Association 1993, Inc. of $1.6 million which is eliminated in consolidation
as the amount was fully expensed on the Company's consolidated financial
statements in 2002.
-20-
DIAMOND JO, LLC
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, 2004
-------------------------------------------------------------------------------
Subsidiary Subsidiary
Guarantor - Guarantor - Consolidating
Parent OEDA OED Adjustments Consolidated
------------- ------------- ------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,620,831) $ (3,290,201) $ (3,369,858) $ 6,660,059 $ (2,620,831)
Adjustments to reconcile net loss to net cash
flows from operating activities:
Depreciation and amortization 577,034 2,319,029 2,896,063
Provision for doubtful accounts 31,481 31,481
Amortization and write-off of deferred
financing costs and discount on notes 298,080 508,469 806,549
Loss on disposal of assets
Loss from equity investment in
subsidiary 3,290,201 3,369,858 (6,660,059)
Changes in operating assets and liabilities:
Restricted cash - purse settlement (2,801,846) (2,801,846)
Receivables (40,988) 153,310 112,322
Intercompany receivables (370,220) 51,594 318,626
Inventory 3,968 12,713 16,681
Prepaid expenses and other assets 50,466 (554,032) (503,566)
Accounts payable (140,277) 3,496,621 3,356,344
Intercompany payables 493,626 (493,626)
Accrued expenses (2,397,958) (175,000) (3,115,029) (5,687,987)
------------- ------------- ------------- ------------- -------------
Net cash flows from operating activities (1,319,044) (43,749) (2,856,997) (175,000) (4,394,790)
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisition and licensing costs (68,504) (68,504)
Racino project development costs (16,888,572) (16,888,572)
Restricted cash - racino project, net 13,011,173 13,011,173
Maturity of restricted investments 7,919,351 7,919,351
Purchase of property and equipment (404,148) (377,532) (781,680)
Proceeds from sale of property and equipment
------------- ------------- ------------- ------------- -------------
Net cash flows from investing activities (404,148) 3,595,916 3,191,768
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt (150,000) (1,292,026) (1,442,026)
Proceeds from FF&E credit facility 3,467,507 3,467,507
Proceeds from senior secured notes
Member distributions (1,154,446) 43,749 (218,749) 175,000 (1,154,446)
------------- ------------- ------------- ------------- -------------
Net cash flows from financing activities (1,304,446) 43,749 1,956,732 175,000 871,035
------------- ------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (3,027,638) 2,695,651 (331,987)
------------- ------------- ------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 12,655,641 8,502,654 21,158,295
------------- ------------- ------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,628,003 $ $ 11,198,305 $ $ 20,826,308
============= ============= ============= ============= =============
-21-
DIAMOND JO, LLC
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, 2003
-------------------------------------------------------------------------------
Subsidiary Subsidiary
Guarantor - Guarantor - Consolidating
Parent OEDA OED Adjustments Consolidated
------------- ------------- ------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,964,597) $ (2,022,696) $ (3,652,696) $ 5,675,392 $ (1,964,597)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Depreciation and amortization 751,905 67,110 819,015
Provision for doubtful accounts 30,251 30,251
Amortization and write-off of deferred
financing costs and discount on notes 298,361 585,659 884,020
Loss on disposal of assets 87,263 87,263
Loss from equity investment in
subsidiary 2,022,696 2,052,696 (4,075,392)
Changes in operating assets and liabilities:
Restricted cash - purse settlement (926,970) (926,970)
Receivables (30,211) (752,545) (782,756)
Intercompany receivables (551,211) (30,000) 581,211
Inventory 12,938 1,456 14,394
Prepaid expenses and other assets (169,310) (206,087) (375,397)
Accounts payable 182,065 1,661,182 1,843,247
Intercompany payables 581,211 (581,211)
Accrued expenses (2,356,693) 2,433,295 (1,600,000) (1,523,398)
------------- ------------- ------------- ------------- -------------
Net cash flows from operating activities (1,686,543) (208,385) (1,894,928)
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisition and licensing costs (1,173,847) (1,173,847)
Racino project development costs (2,341,650) (2,341,650)
Restricted cash - racino project, net (63,799,585) (63,799,585)
Purchase of restricted investments (23,922,971) (23,922,971)
Purchase of property and equipment (183,599) (327,733) (511,332)
Proceeds from sale of property and equipment 380,156 380,156
------------- ------------- ------------- ------------- -------------
Net cash flows from investing activities 196,557 (91,565,786) (91,369,229)
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred financing costs (9,140,404) (9,140,404)
Principal payments on debt (150,000) (7,325,000) (12,800,000) (20,275,000)
Principal payments on intercompany
notes payable (7,325,000) 7,325,000
Proceeds from intercompany note
receivable 7,325,000 (7,325,000)
Proceeds from senior secured notes 120,736,000 120,736,000
Member distributions (268,719) (268,719)
------------- ------------- ------------- ------------- -------------
Net cash flows from financing activities (418,719) 91,470,596 91,051,877
------------- ------------- ------------- ------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,908,705) (303,575) (2,212,280)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 9,547,553 962,652 10,510,205
------------- ------------- ------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,638,848 $ $ 659,077 $ $ 8,297,925
============= ============= ============= ============= =============
-22-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the condensed consolidated financial statements and the related notes thereto
appearing elsewhere in this report. Some statements contained in Management's
Discussion and Analysis of Financial Condition and Results of Operations
constitute "forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, which involve risks and
uncertainties as well as other risks set forth in our Annual Report on Form 10-K
for the year ended December 31, 2003. Should these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, our future
performance and actual results of operations may differ materially from those
expected or intended.
Critical Accounting Policies
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amount 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 periods. Actual results could differ from those
estimates. We periodically evaluate our policies and the estimates and
assumptions related to such policies. We also periodically evaluate the carrying
value of our assets in accordance with generally accepted accounting principles.
We and our subsidiaries operate in a highly regulated industry and are subject
to regulations that describe and regulate operating and internal control
procedures. The majority of our revenues are in the form of cash, which by its
nature, does not require complex estimations. In addition, we made certain
estimates surrounding our application of purchase accounting related to the
acquisition and the related assignment of costs to goodwill and other intangible
assets.
Results of Operations
The results of operations of the Company discussed below include the
combined results of operations of the Diamond Jo casino in Dubuque, Iowa and the
results of operations of OED near Lafayette, Louisiana for the three months
ended March 31, 2004 and 2003.
Statement of Operations Data
Diamond Jo OED
Three Months Ended March 31, Three Months Ended March 31,
2004 2003 2004 2003
------------ ------------ ------------ ------------
Revenues:
Casino $ 12,094,244 $ 11,782,204 $ 18,099,105
Racing 4,365,603 $ 3,644,330
Food and beverage 687,409 686,837 2,130,391 152,441
Other 58,869 37,415 142,248 20,562
Less promotional
allowances (662,522) (654,226) (1,349,951)
------------ ------------ ------------ ------------
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Net revenues 12,178,000 11,852,230 23,387,396 3,817,333
------------ ------------ ------------ ------------
Expenses:
Casino 5,258,640 5,013,716 9,795,100
Racing 3,504,387 2,846,747
Food and beverage 630,871 655,485 1,650,494 75,554
Boat operations 573,061 567,348
Other 23,162 3,174 101,831 5,500
Selling, general and
administrative 1,987,323 1,983,745 3,540,724 534,174
Depreciation and
amortization 577,034 751,905 2,319,029 67,110
Pre-opening expense 221,283
Development costs 21,270
Management fee 256,375
------------ ------------ ------------ ------------
Total expenses 9,071,361 8,975,373 21,389,223 3,529,085
------------ ------------ ------------ ------------
Income from
operations $ 3,106,639 $ 2,876,857 $ 1,998,173 $ 288,248
Three months ended March 31, 2004 Compared to Three months ended March 31, 2003
Net revenues increased 127.0% to $35.6 million for the three months ended
March 31, 2004 from $15.7 million for the three months ended March 31, 2003. Net
revenues at OED increased $19.6 million to $23.4 million for the three months
ended March 31, 2004 from $3.8 million for the three months ended March 31,
2003. Net revenues at OED increased due primarily to an increase in casino
revenue of $18.1 million derived from OED's new racino which opened on December
19, 2003 and an increase in racing revenues of $0.7 million due to an increase
in video poker revenues of approximately $0.8 million at OED's renovated OTB in
Port Allen, Louisiana. Net revenues at the Diamond Jo increased $0.3 million to
$12.2 million for the three months ended March 31, 2004 from $11.9 million for
the three months ended March 31, 2003. This increase in net revenues at the
Diamond Jo is due to an increase in slot revenue of 3.1%, or $0.3 million, for
the three months ended March 31, 2004 compared to the three months ended March
31, 2003, primarily due to an increase in coin-in of 2.7% over the same period.
We believe this increase in slot revenue was attributable to internal factors
such as targeted promotions to capitalize on opportunities related to the recent
economic development in the Port of Dubuque known as the America's River
Project, where the Diamond Jo is located, which includes the opening of a new
riverwalk and related amenities, a new riverfront hotel, which includes an
indoor water park, and the National Mississippi River Museum and Aquarium as
well as our continued focus on targeted players club promotions and maintenance
of our slot mix, which includes the addition of 22 multi-denomination slot
machines.
Overall casino revenues increased $18.4 million to $30.2 million for the
three months ended March 31, 2004 from $11.8 million for the three months ended
March 31, 2003. Casino revenues of $18.1 million at OED consisted solely of
revenues from slot machines at OED's recently opened racino. Casino win per
gaming position per day at OED was $130 for the three months ended March 31,
2004. Casino revenues at the Diamond Jo increased 2.6% to $12.1 million for the
three months ended March 31, 2004 from $11.8 million for the three months ended
March 31, 2003. This increase was due to a 3.1% increase in slot revenues as
discussed above. Casino revenues at the Diamond Jo were derived 87.7%
-24-
from slot machines and 12.3% from table games for the three months ended March
31, 2004 compared to 87.2% from slot machines and 12.8% from table games for the
three months ended March 31, 2003. Our slot win per unit per day at the Diamond
Jo decreased 1.9% to $156 for the three months ended March 31, 2004 from $159
for the three months ended March 31, 2003. Our admissions at the Diamond Jo for
the three months ended March 31, 2004 increased 1.2% to 232,000 from 229,000 for
the three months ended March 31, 2003. For the three months ended March 31, 2004
our casino win per admission at the Diamond Jo increased 1.4% to $52 from $51
for the three months ended March 31, 2003.
Racing revenues at OED increased $0.7 million to $4.4 million for the three
months ended March 31, 2004 from $3.7 million for the three months ended March
31, 2003. The increase in racing revenues is due to an increase in video poker
revenues of $0.8 million resulting from OED's Port Allen OTB facility renovation
and the installation of 100 video poker machines during the second quarter of
2003.
Net food and beverage revenues, other revenues and promotional allowances
increased $0.8 million during the three months ended March 31, 2004 compared to
the three months ended March 31, 2003 due primarily to food and beverage
revenues generated from OED's new racino.
Overall casino expenses increased $10.1 million to $15.1 million for the
three months ended March 31, 2004 from $5.0 million for the three months ended
March 31, 2003. Casino expenses of $9.8 million at OED primarily related to
purse supplements and gaming taxes, which are based on net casino revenues, and
casino related payroll. Casino operating expenses at the Diamond Jo increased
4.9%, or $0.3 million, to $5.3 million for the three months ended March 31, 2004
from $5.0 million for the three months ended March 31, 2003 due primarily to an
increase in gaming taxes at the Diamond Jo of approximately $0.1 million
associated with our increased casino revenues and an increase in players club
promotions of approximately $0.1 million.
Racing expenses increased 23.1% to $3.5 million for the three months ended
March 31, 2004 from $2.8 million for the three months ended March 31, 2003 due
primarily to (i) an increase in franchise fees, purse supplements and operating
expenses of $0.5 million related to OED's video gaming devices at its renovated
OTB in Port Allen, Louisiana and (ii) admission fees related to the OTB located
at the racino of approximately $0.1 million (under current Louisiana law, OED
must pay $0.25 to the Louisiana State Racing Commission per patron entering a
building in which OED has an OTB, including the new racino).
Food and beverage expenses increased $1.6 million to $2.3 million for the
three months ended March 31, 2004 from $0.7 million for the three months ended
March 31, 2003 due primarily to food and beverage expenses at OED of $1.7
million related to the opening of OED's new racino. Boat operation expenses at
the Diamond Jo were substantially unchanged at $0.6 million for the three months
ended March 31, 2004 and 2003.
Selling, general and administrative expenses increased $3.1 million to $5.6
million for the three months ended March 31, 2004 from $2.5 million for the
three months ended March 31, 2003. This increase was due primarily to an
increase in general and administrative expenses at OED of $3.0 million due
primarily to payroll, marketing and other general and administrative expenses
associated with the new racino.
Pre-opening expenses of $0.2 million for the three months ended March 31,
2004 relate to expenses incurred by OED with respect to start-up activities
surrounding the racino project, including pre-opening costs associated with the
continued construction of the racetrack portion of the project. Management fees
of $0.3 million during the three months ended March 31, 2004 relate to
management fees and board of director fees paid to related parties.
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Depreciation and amortization expenses increased $2.1 million to $2.9
million for the three months ended March 31, 2004 from $0.8 million for the
three months ended March 31, 2003 due to depreciation of property and equipment
at OED's racino of approximately $2.1 million during the three months ended
March 31, 2004. During the first quarter of 2004, we performed our annual
impairment test on goodwill and indefinite life intangible assets in accordance
with SFAS No. 142. Based on that review, management determined that there was no
impairment of goodwill and indefinite life intangible assets.
Net interest expense, including interest expense related to our redeemable
preferred member interests, increased 56.0% to $7.7 million for the three months
ended March 31, 2004 from $5.0 million for the three months ended March 31,
2003. This increase is primarily due to (i) timing of the offering of the OED
Notes, which occurred on February 25, 2003, resulting in approximately three
months of interest expense during the three months ended March 31, 2004 compared
to just over one month during the three months ended March 31, 2003 and (ii) our
adoption of FASB Statement No. 150 on July 1, 2003 which requires that interest
expense associated with our redeemable preferred members interest be included in
interest expense (prior to July 1, 2003, this amount was included as a separate
line item above "Net income for common members' interest" and not included in
"Total other expenses" with interest expense). Interest expense of approximately
$0.2 million and $0.1 million was capitalized as part of our construction of the
racino during the three months ended March 31, 2004 and 2003, respectively.
Liquidity and Capital Resources
Cash Flows from Operating, Investing and Financing Activities
Our cash balance decreased $0.3 million during the three months ended March
31, 2004 to $20.8 million from $21.2 million at December 31, 2003.
Cash flows used in operating activities of $4.4 million for the three
months ended March 31, 2004 consisted of a net loss of $2.6 million increased by
non-cash charges of $3.7 million, principally depreciation and amortization and
amortization of deferred financing costs and a decrease in working capital of
$5.5 million. The change in working capital is primarily due to a decrease in
accrued interest of approximately $6.0 million related primarily to interest
payments on the Existing Peninsula Notes and the OED Notes during the three
months ended March 31, 2004.
Cash flows from investing activities for the three months ended March 31,
2004 was $3.2 million consisting of (i) draws from restricted cash accounts held
by the trustee of the OED Notes of approximately $13.0 million, the proceeds of
which were used to pay construction, architecture fees and other development
costs associated with the racino project and (ii) cash proceeds from the
maturity of restricted investments of $7.9 million, the proceeds of which were
used to make the second interest payment on the OED Notes due March 1, 2004.
These cash inflows were offset by (i) payments of approximately $16.9 million
for construction, architecture fees and other development costs associated with
the racino project and (ii) cash outflows of approximately $0.8 million used for
capital expenditures mainly related to the purchase of new slot machines at the
Diamond Jo and conversions of slot machines at OED to incorporate ticket-in,
ticket-out technology, which we believe enhances customer service, produces
operating efficiencies and eliminates hopper fills and the down time associated
with them. We expect additional capital expenditures at the Diamond Jo and OED
(other than the capital expenditures related to the racino project) to be
approximately $1.6 million and $1.1 million, respectively, for the year ended
December 31, 2004. We expect to satisfy our regulatory requirements for the
racino project by the end of fiscal 2004 with related additional capital
expenditures of approximately $14.6 million. Consistent with our regulatory
requirements, we also expect to make additional improvements to our turf track
during fiscal 2005.
-26-
Cash flows from financing activities for the three months ended March 31,
2004 of $0.9 million reflects the proceeds from OED's draws under its $16.0
million FF&E credit facility with Wells Fargo Foothill dated September 22, 2003
(the "OED FF&E Facility") of $3.5 million. These proceeds were offset by (i)
aggregate principal payments on borrowings under our senior secured credit
facility dated February 23, 2001 (as amended, the "DJL Credit Facility") of $0.2
million, (ii) aggregate principal payments on borrowings under OED's $15.0
million senior secured credit facility with Wells Fargo Foothill dated June 24,
2003 (as amended, the "OED Credit Facility") of $0.9 million, (iii) aggregate
principal payments on borrowings under the OED FF&E Facility of $0.3 million and
(iv) member distributions of $1.2 million.
In March 2004, the Company amended it's senior secured credit facility
dated February 23, 2001 (the "DJL Credit Facility Amendment"). Under the terms
of the DJL Credit Facility Amendment, the minimum interest rate on all
outstanding borrowings under the DJL Credit Facility less than $10.0 million was
reduced to 5.5% and the term of the DJL Credit Facility was extended by one year
to March 12, 2006.
As of March 31, 2004, the Company had $11.1 million outstanding under the
DJL Credit Facility and OED had $4.3 million and $15.7 million outstanding under
the OED Credit Facility and the OED FF&E Facility, respectively.
Financing Activities
On March 9, 2004, OED commenced a tender offer and consent solicitation to
repurchase all of its outstanding OED Notes and to solicit consents to certain
proposed amendments to the indenture governing the OED Notes as set forth in
OED's Offer to Purchase and Consent Solicitation Statement, dated March 9, 2004.
On March 19, 2004, the expiration date of the consent solicitation, OED received
the requisite consents and tenders from holders of a majority of the aggregate
principal amount of the outstanding OED Notes. The tender offer expired on April
5, 2004, and OED redeemed approximately $116.3 million principal amount of OED
Notes.
On April 16, 2004, the Company and Old Evangeline Downs Capital Corp.
completed a Rule 144A private placement of $233 million principal amount of
8 3/4% Senior Secured Notes due 2012 (the "Peninsula Gaming Notes"). The
Peninsula Gaming Notes were issued at a discount of approximately $3.3 million.
Interest on the Peninsula Gaming Notes is payable semi-annually on April 15 and
October 15 of each year, beginning on October 15, 2004. In connection with the
offering of the Peninsula Gaming Notes, the Company and OED also sought
requisite regulatory approvals to enter into a new senior secured credit
facility and effect a series of corporate transactions, including the creation
of a new holding company to be the new direct parent of the Company and OED and
a co-issuer of the new senior secured notes. While regulatory approval of the
corporate transactions was obtained, the Company and OED have not yet effected
the corporate transactions or entered into the new credit facility.
The Company used the net proceeds from the sale of the Peninsula Gaming
Notes as follows (all payments based on outstanding balances as of April 16,
2004): (1) to irrevocably deposit funds into an escrow account to redeem all of
the Existing Peninsula Notes in an amount (including call premium and accrued
interest) of approximately $79.9 million; (2) to repurchase approximately $116.3
million principal amount of OED Notes for an aggregate amount (including tender
premium, accrued interest and contingent interest) of approximately $134.6
million; (3) to pay accrued distributions on the Company's outstanding preferred
membership interests-redeemable of approximately $1.1 million; (4) to pay
related fees and expenses of approximately $13.4 million; and (5) for general
corporate purposes. As a result of
-27-
the issuance of the Peninsula Gaming Notes, the Company incurred a loss of
approximately $8.9 million consisting of the write-off of deferred financing
fees of approximately $2.1 million, the payment of a call premium on the
Existing Peninsula Notes of approximately $5.7 million, interest on the Existing
Peninsula Notes of approximately $0.7 million and write-off of bond discount of
approximately $0.4 million. In connection therewith, OED also incurred a loss of
approximately $26.8 million consisting of the write-off of deferred financing
fees of approximately $8.4 million, the payment of a tender premium on the OED
Notes of approximately $16.3 million and write-off of bond discount of
approximately $2.1 million.
We currently have the following sources of funds for our business: (i) cash
flows from OED's existing racetrack operations and casino operations, (ii) cash
flows from DJL's existing casino operations, and (iii) available borrowings
under the DJL Credit Facility and the OED Credit Facility. In connection with
the issuance of the Peninsula Gaming Notes, we received regulatory approvals to
effect certain corporate transactions, including the creation of a new holding
company to be the direct parent of the Company and OED, and to enter into a new
senior secured credit facility in the amount of $35.0 million, the proceeds of
which would be used to repay all outstanding indebtedness under the DJL Credit
Facility and the OED Credit Facility. We expect our obligations under the new
senior secured credit facility will be (a) guaranteed by all of our domestic
subsidiaries, and (b) secured by a security interest in all of our tangible and
intangible assets and those of our domestic subsidiaries (including, without
limitation, all of the shares of the capital stock of these subsidiaries), but
excluding contracts, agreements, licenses (including gaming and liquor licenses)
and other rights that by their express terms prohibit the assignment thereof or
the grant of a security interest therein. There can be no assurance that we will
be able to enter into such new senior secured credit facility on commercially
reasonable terms or at all.
Our level of indebtedness will have several important effects on our future
operations including, but not limited to, the following: (i) a significant
portion of our cash flow from operations will be required to pay interest on our
indebtedness and the indebtedness of our subsidiaries; (ii) the financial
covenants contained in certain of the agreements governing such indebtedness
will require us and/or our subsidiaries to meet certain financial tests and may
limit our respective abilities to borrow additional funds or to dispose of
assets; (iii) our ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions or general corporate
purposes may be impaired; and (iv) our ability to adapt to changes in the gaming
industry which affect the markets in which we operate could be limited.
Subject to the foregoing, we believe that cash and cash equivalents and
investments on-hand (including restricted cash and restricted investments), cash
generated from operations and available borrowings under our existing credit
facilities (or, if entered into, our new senior secured credit facility) will be
sufficient to satisfy our working capital and capital expenditure requirements,
and satisfy our other current debt service requirements, including interest
payments on the Peninsula Gaming Notes and the OED Notes, for the next twelve
months. If cash and cash equivalents and investments on-hand or cash we are able
to generate or borrow are insufficient to meet our obligations, we may have to
refinance our debt or sell some or all of our assets to meet our obligations.
-28-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks which are inherent in our financial
instruments which arise from transactions entered into in the normal course of
business. Market risk is the risk of loss from adverse changes in market prices
and interest rates. We do not currently utilize derivative financial instruments
to hedge market risk. We also do not hold or issue derivative financial
instruments for trading purposes.
We are exposed to interest rate risk due to changes in interest rates with
respect to our long-term variable interest rate debt borrowing under our and
OED's credit facilities. As of March 31, 2004, DJL and OED had $11.1 million and
$19.9 million, respectively, in borrowings under loan and security agreements
with Wells Fargo Foothill that have variable interest rates. We have estimated
our market risk exposure using sensitivity analysis. We have defined our market
risk exposure as the potential loss in future earnings and cash flow with
respect to interest rate exposure of our market risk sensitive instruments
assuming a hypothetical increase in market rates of interest of one percentage
point. Assuming the Company and OED borrow the maximum amount allowed under the
current loan and security agreements with Wells Fargo Foothill (currently an
aggregate amount of $42.6 million), if market rates of interest on our variable
rate debt increased by one percentage point, the estimated consolidated market
risk exposure under the credit facilities would be approximately $0.4 million.
We are also exposed to fair value risk due to changes in interest rates
with respect to our long-term fixed interest rate debt borrowings. Our fixed
rate debt instruments are not generally affected by a change in the market rates
of interest, and therefore, such instruments generally do not have an impact on
future earnings. However, future earnings and cash flows may be impacted by
changes in interest rates related to indebtedness incurred to fund repayments as
such fixed rate debt matures. The following table contains information relating
to our fixed rate debt borrowings as of March 31, 2004 (dollars in millions):
Fixed Interest Carrying
Description Maturity Rate Value Fair Value
- ----------- -------- -------------- -------- ----------
13% Senior Secured Notes with
Contingent Interest of OED March 1, 2010 13% $ 123.2 $ 140.4*
12 1/4% Senior Secured Notes of DJL July 1, 2006 12 1/4% 71.0 76.7*
Note Payable October 1, 2010 4 3/4% 3.9 3.9
Note Payable July 1, 2005 9 1/2% 0.4 0.4
Preferred Membership Interests - Redeemable October 16, 2006 9% 4.0 4.0
- ----------
* Represents fair value as of March 31, 2004 based on information provided by
an independent investment banking firm.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. The Company's Chief
Executive Officer and Chief Financial Officer, after evaluating the
effectiveness of the design and operation of the Company's disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) as of
March 31, 2004, have concluded that as of such date the Company's disclosure
controls and procedures were adequate and effective and designed to ensure that
material information relating to the Company and its subsidiaries would be made
known to such officers on a timely basis.
-29-
Changes in internal controls. There have been no significant changes
(including corrective actions with regard to significant deficiencies or
material weaknesses) in our internal controls or other factors that could
significantly affect these controls subsequent to the date of the evaluation
referenced in paragraph (a) above.
-30-
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Neither we nor our subsidiaries are a party to, and none of our nor our
subsidiaries' property is the subject of, any pending legal proceedings other
than litigation arising in the normal course of business. We do not believe that
adverse determinations in any or all such other litigation would have a material
adverse effect on our financial condition, results of operations or cash flows.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
- ------- ----------------------------------------------------------------------
3.1A Certificate of Formation of Peninsula Gaming Company,
LLC--incorporated herein by reference to Exhibit 3.1A of the Company's
Form S-4 filed October 12, 1999 (with regard to applicable cross
references in this report, the Company's Form S-4 was filed with the
SEC under File No. 333-88829).
3.1B Amendment to Certificate of Formation of Peninsula Gaming Company,
LLC--incorporated herein by reference to Exhibit 3.1B of the Company's
Form S-4 filed October 12, 1999.
3.1C Certificate of Amendment to Certificate of Formation of Peninsula
Gaming Company, LLC, dated March 10, 2004.
3.2 Operating Agreement of Peninsula Gaming Company, LLC--incorporated
herein by reference to Exhibit 3.2 of the Company's Form S-4 filed
October 12, 1999.
3.3 Articles of Incorporation of Peninsula Gaming Corp.--incorporated
herein by reference to Exhibit 3.3 of the Company's Form S-4 filed
October 12, 1999.
3.4 By-laws of Peninsula Gaming Corp.--incorporated herein by reference to
Exhibit 3.4 of the Company's Form S-4 filed October 12, 1999.
31.1 Certification of M. Brent Stevens, Chief Executive Officer, pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 15d-l4 of
the Securities Exchange Act, as amended.
31.2 Certification of Natalie A. Schramm, Chief Financial Officer, pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 15d-14 of
the Securities Exchange Act, as amended.
(b) Reports on Form 8-K
(1) Form 8-K, filed by The Old Evangeline Downs, L.L.C. and The Old
Evangeline Downs Capital Corp., March 9, 2004.
Item 5. Other Events and Regulation FD Disclosure. Item 7(c).
Exhibits. Press release, dated March 9, 2004, announcing the tender
offer by The Old Evangeline Downs, L.L.C. for its outstanding 10%
Senior Secured Notes due 2010 and press release, dated March 11, 2004,
-31-
announcing the private placement of senior notes of the Company and
The Old Evangeline Downs Capital Corp.
(2) Form 8-K, filed by the Company and Peninsula Gaming Corp., March 9,
2004.
Item 5. Other Events and Regulation FD Disclosure. Item 7(c).
Exhibits. Press release, dated March 11, 2004, announcing the private
placement of senior notes of the Company and The Old Evangeline Downs
Capital Corp.
(3) Form 8-K, filed by the Company, March 24, 2004.
Item 7(c). Exhibits. Item 9. Regulation FD Disclosure. Item 12.
Results of Operations and Financial Condition. Press Release, dated
March 24, 2004, reporting certain operating results of the Company and
The Old Evangeline Downs, L.L.C. for the two month period ended
February 29, 2004.
-32-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Dubuque, State of Iowa on May 14, 2004.
DIAMOND JO, LLC
By: /s/ M. Brent Stevens
-------------------------------
M. Brent Stevens
Chief Executive Officer
By: /s/ George T. Papanier
-------------------------------
George T. Papanier
Chief Operating Officer
By: /s/ Natalie A. Schramm
-------------------------------
Natalie A. Schramm
Chief Financial Officer
THE OLD EVANGELINE DOWNS CAPITAL CORP.
By: /s/ M. Brent Stevens
-------------------------------
M. Brent Stevens
Chief Executive Officer
By: /s/ Natalie A. Schramm
-------------------------------
Natalie A. Schramm
Chief Financial Officer
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