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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 November 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-20840
PRESIDENT CASINOS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 51-0341200
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or Identification No.)
organization)
802 North First Street, St. Louis, Missouri 63102
----------------------------------------------------
Address of principal executive offices-Zip Code
314-622-3000
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Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: Common Stock, $.06 par value,
5,033,161 shares outstanding as of January 14, 2003.
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PRESIDENT CASINOS, INC.
INDEX TO FORM 10-Q
Page No.
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)
as of November 30 and February 28, 2002.............................1
Condensed Consolidated Statements of Operations
and Net Income (Loss) Per Share Information (Unaudited)
for the Three and Nine Months Ended November 30, 2002 and 2001......2
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Nine Months Ended November 30, 2002 and 2001................3
Notes to Condensed Consolidated Financial Statements (Unaudited)......4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................17
Item 3. Quantitative and Qualitative Disclosures About Market Risk....33
Item 4. Controls and Procedures.......................................33
Part II. Other Information
Item 1. Legal Proceedings.............................................33
Item 2. Changes in Securities and Use of Proceeds.....................33
Item 3. Defaults Upon Senior Securities...............................34
Item 4. Submission of Matters to a Vote of Security Holders...........34
Item 5. Other Information.............................................34
Item 6. Exhibits and Reports on Form 8-K..............................34
Signatures...............................................................35
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Part I. Financial Information
Item 1. Financial Statements
PRESIDENT CASINOS, INC.
(DEBTOR IN POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except per share data)
Nov. 30, Feb. 28,
2002 2002
-------- --------
ASSETS:
CURRENT ASSETS
Cash and cash equivalents...................... $ 12,708 $ 10,110
Restricted cash................................ 6,643 6,942
Restricted short-term investments.............. 712 775
Accounts receivable, net of allowance for
doubtful accounts of $249 and $236........... 658 823
Other current assets........................... 4,948 3,193
--------- ---------
Total current assets....................... 25,669 21,843
--------- ---------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $57,037 and $50,736............ 96,703 98,607
--------- ---------
$122,372 $120,450
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT:
CURRENT LIABILITIES NOT SUBJECT TO COMPROMISE
Short-term debt................................ $ -- $ 5
Current maturities of long-term debt........... 30,000 107,200
Accrued loan fee............................... 7,000 7,000
Accounts payable............................... 1,401 2,980
Accrued payroll and benefits................... 3,793 5,183
Accrued interest............................... 8,709 15,558
Other accrued expenses......................... 6,464 7,311
--------- ---------
Total liabilities not subject to compromise 57,367 145,237
--------- ---------
LIABILITIES SUBJECT TO COMPROMISE................ 111,726 646
--------- ---------
Total liabilities.......................... 169,093 145,883
--------- ---------
MINORITY INTEREST................................ 9 15,102
COMMITMENTS AND CONTINGENCIES.................... -- --
STOCKHOLDERS' DEFICIT
Preferred Stock, $.01 par value per share;
150 shares authorized; none issued
and outstanding.............................. -- --
Common Stock, $0.06 par value per share;
14,000 shares authorized; 5,033 shares
issued and outstanding....................... 302 302
Additional paid-in capital..................... 101,729 101,729
Accumulated deficit............................ (148,761) (142,566)
--------- ---------
Total stockholders' deficit................ (46,730) (40,535)
--------- ---------
$122,372 $120,450
========= =========
See Notes to Condensed Consolidated Financial Statements.
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PRESIDENT CASINOS, INC.
(DEBTOR IN POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
Three Months Nine Months
Ended Nov. 30, Ended Nov. 30,
2002 2001 2002 2001
------ ------ ------ ------
OPERATING REVENUES:
Gaming................................... $ 29,323 $ 30,404 $ 93,267 $ 93,669
Food and beverage........................ 3,142 3,457 10,151 10,858
Hotel.................................... 1,272 1,194 4,743 4,184
Retail and other......................... 992 1,374 3,344 4,409
Less promotional allowances.............. (5,681) (5,618) (17,121) (16,447)
--------- --------- --------- ---------
Net operating revenues................. 29,048 30,811 94,384 96,673
--------- --------- --------- ---------
OPERATING COSTS AND EXPENSES:
Gaming................................... 17,161 17,914 53,288 54,409
Food and beverage........................ 2,068 2,296 6,691 7,291
Hotel.................................... 307 303 1,056 1,141
Retail and other......................... 389 435 1,258 1,555
Selling, general and administrative...... 6,921 8,215 23,170 24,188
Depreciation and amortization............ 2,183 2,084 6,583 6,295
Development costs........................ 2 297 122 370
--------- --------- --------- ---------
Total operating costs and expenses..... 29,031 31,544 92,168 95,249
--------- --------- --------- ---------
OPERATING INCOME (LOSS).................... 17 (733) 2,216 1,424
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense (contractual interest
of $3,977 and $11,692 for the three
and nine month periods ending
November 30, 2002)..................... (1,128) (3,691) (6,731) (11,230)
Interest income.......................... 44 141 158 766
Reorganization items..................... (68) (113) (755) (330)
Gain (loss) on sale of assets............ (77) (1) (100) 786
--------- --------- --------- ---------
Total other income (expense)........... (1,229) (3,664) (7,428) (10,008)
--------- --------- --------- ---------
LOSS BEFORE MINORITY INTEREST.............. (1,212) (4,397) (5,212) (8,584)
Minority interest.......................... 344 313 983 908
--------- --------- --------- ---------
NET LOSS................................... $ (1,556) $ (4,710) $ (6,195) $ (9,492)
========= ========= ========= =========
Basic and diluted net loss per share....... $ (0.31) $ (0.94) $ (1.23) $ (1.89)
========= ========= ========= =========
Weighted average common and dilutive
potential shares outstanding............. 5,033 5,033 5,033 5,033
========= ========= ========= =========
See Notes to Condensed Consolidated Financial Statements.
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PRESIDENT CASINOS, INC.
(DEBTOR IN POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Nine Months Ended Nov. 30,
2002 2001
------ ------
Net cash provided by (used in)
operating activities........................... $ 7,188 $ (1,417)
--------- ---------
Cash flows from investing activities:
Expenditures for property and equipment......... (4,791) (3,382)
Change in restricted cash....................... 299 157
Proceeds from sales of property and equipment... 12 1,700
Proceeds from installment sale.................. -- 671
Purchase of short-term investments.............. (12) (250)
Maturity of short-term investments.............. 75 5,413
--------- ---------
Net cash provided by (used in)
investing activities......................... (4,417) 4,309
--------- ---------
Cash flows from financing activities:
Repayment of notes payable...................... (105) (2,559)
Payments on capital lease obligations........... -- (1)
Minority interest payments...................... (68) --
--------- ---------
Net cash used in financing activities......... (173) (2,560)
--------- ---------
Net increase in cash and cash equivalents......... 2,598 332
Cash and cash equivalents at beginning of period.. 10,110 8,559
--------- ---------
Cash and cash equivalents at end of period........ $ 12,708 $ 8,891
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.......................... $ 88 $ 6,321
========= =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Assets acquired in exchange for debt............ $ -- $ 2
========= =========
See Notes to Condensed Consolidated Financial Statements.
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PRESIDENT CASINOS, INC.
(DEBTOR IN POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in thousands)
1. Bankruptcy Proceedings
On June 20, 2002, President Casinos, Inc. together with its subsidiary,
President Riverboat Casino-Missouri, Inc. ("President Missouri"), which owns
and operates the St. Louis operations, filed voluntary petitions for
reorganization under Chapter 11 of Title 11, United States Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the Southern
District of Mississippi (the "Mississippi Bankruptcy Court"). Subsequently,
on July 9, 2002, President Casinos, Inc.'s subsidiary The President Riverboat
Casino-Mississippi, Inc. ("President Mississippi") filed a voluntary
reorganization petition in the same Court. On July 11, 2002, substantially
all of President Casinos, Inc.'s other operating subsidiaries filed voluntary
reorganization petitions under Chapter 11 in the same Mississippi Bankruptcy
Court. Subsequently, orders were entered by the Mississippi Bankruptcy Court
transferring venue of all of the bankruptcy cases, except President Riverboat
Casino-New York, Inc. and President Broadwater Hotel, LLC, to the United
States Bankruptcy Court for the Eastern District of Missouri (the "Missouri
Bankruptcy Court") where they are now pending and being administered. As used
herein, the term "Company" refers to President Casinos, Inc., its wholly-owned
subsidiaries, a 95%-owned limited partnership and a limited liability company
in which a wholly-owned subsidiary of President Casinos, Inc. owns a Class A
ownership interest and in which an entity wholly-owned by the Chairman of
President Casinos, Inc. owns a Class B unit and has a preferred right to
certain cash flows.
The Company and its subsidiaries each continue in possession and use of
their assets as debtors in possession. The Company and its subsidiaries have
filed a motion for the administrative consolidation of their Chapter 11 cases
under the Company's case. To date, neither the Mississippi Bankruptcy Court
nor the Missouri Bankruptcy Court (collectively, the "Bankruptcy Courts") have
ruled on the motion.
The Mississippi Bankruptcy Court established October 21, 2002 as the "bar
date" as of which all claimants are required to submit and characterize claims
against the Company. The amount of the claims filed by the creditors could be
significantly different than the amount of liabilities recorded by the
Company.
The consummation of a plan or plans of reorganization (a "Plan") is the
principal objective of the Company's Chapter 11 filings. A Plan would, among
other things, set forth the means for satisfying claims against and interests
in the Company and its subsidiaries, including setting forth the potential
distributions on account of such claims and interests, if any. Pursuant to
the Bankruptcy Code, the Company had the exclusive right for 120 days from the
filing date to file a Plan, and for 180 days from the filing date to solicit
and receive the votes necessary to confirm a Plan. Both of these exclusivity
periods have expired, and the Missouri Bankruptcy Court has denied the
Company's motion to further extend the exclusivity period. Accordingly, in
addition to the Company, any party-in-interest, including a creditor, an
equity holder, a committee of creditors or equity holders, or an indenture
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trustee, may file its own Plan for the Company. Confirmation of a Plan is
subject to certain statutory findings by the Bankruptcy Court. Subject to
certain exceptions as set forth in the Bankruptcy Code, confirmation of a Plan
requires, among other things, a vote on the Plan by certain classes of
creditors and equity holders whose rights or interests are impaired under the
Plan. If any impaired class of creditors or equity holders does not vote to
accept the Plan, but all of the other requirements of the Bankruptcy Code are
met, the proponent of the Plan may seek confirmation of the Plan pursuant to
the "cram down" provisions of the Bankruptcy Code. Under these provisions,
the Bankruptcy Court may still confirm a Plan notwithstanding the non-
acceptance of the Plan by an impaired class, if, among other things, no claim
or interest receives or retains any property under the Plan until each holder
of a claim senior to such claim or interest has been paid in full. There can
be no assurance that a Plan will be confirmed by the Bankruptcy Courts, or
that any such Plan will be consummated.
It is not possible to predict the length of time the Company will operate
under the protection of Chapter 11 and the supervision of the Bankruptcy
Courts, the outcome of the bankruptcy proceedings in general, or the effect of
the proceedings on the business of the Company or on the interest of the
various creditors and stakeholders. Since the filing date, the Company has
operated in the ordinary course of business. Management is in the process of
evaluating their operations as part of the development of a Plan. During the
pendency of the Chapter 11 filings, the Company may, with Bankruptcy Court
approval, sell assets and settle liabilities, including for amounts other than
those reflected in the financial statements. The administrative and
reorganization expenses resulting from the Chapter 11 filings will unfavorably
affect the Company's results of operations. In addition, under the priority
scheme established by the Bankruptcy Code, most, if not all, post-petition
liabilities must be satisfied before most other creditors or interest holders,
including stockholders, can receive any distribution on account of such claim
or interest.
The Company has filed a motion in the Mississippi Bankruptcy Court for
approval to sell the M/V "Surfside Princess," formerly known as the M/V "New
Yorker." If such motion is granted by the Court, the Company will initiate a
sale process. Any sale will require final approval of the Mississippi
Bankruptcy Court.
President Broadwater Hotel, LLC ("PBLLC"), a limited liability company in
which Broadwater Hotel, Inc., a wholly-owned subsidiary of the Company
("BHI"), has a Class A ownership interest, is in default under a $30,000
promissory note and associated $7,000 loan fee incurred in connection with the
July 1997 purchase by PBLLC of the real estate and improvements utilized in
the Company's operations in Biloxi, Mississippi. On April 19, 2001, PBLLC
filed a voluntary petition for reorganization under Chapter 11 of the
Bankruptcy Code in the Mississippi Bankruptcy Court. PBLLC continues in
possession and use of its assets as a debtor in possession and has entered
into an agreement with its lender approved by the Mississippi Bankruptcy Court
which allows PBLLC use of its cash collateral. On October 16, 2001, PBLLC
filed its Plan of Reorganization which would permit PBLLC to restructure its
debt obligations in a manner which was designed to permit it to continue as a
going concern. The Mississippi Bankruptcy Court has been presented with a
Restructuring Term Sheet, which includes revised terms from the Plan of
Reorganization filed October 16, 2001, representing an agreement in principal
between PBLLC and the lender, its only secured creditor. The Restructuring
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Term Sheet provides, among other things, that (i) the maturity date for
PBLLC's debt to the lender shall be extended to the earlier of 30 months after
the effective date of the reorganization plan or June 1, 2005, (ii) reduction
of the various LIBOR-based variable interest rates for the indebtedness,
including a reduction in the interest rate floor from 8.75% to 7.75% prior to
maturity, (iii) discounts for the possible early retirement of debt, and (iv)
certain waivers by PBLLC of its right to seek further bankruptcy relief. On
September 30, 2002, the Mississippi Bankruptcy Court requested that an amended
plan of reorganization be filed. It further requested that notice be given to
all creditors, parties and other entities including most of the Company's
subsidiaries. The Company is reviewing this matter in coordination with its
lender and will proceed in an appropriate manner. There can be no assurance
that PBLLC will be able to restructure its debt obligations and emerge from
bankruptcy or continue as a going concern. See "Note 7. Commitments and
Contingent Liabilities."
As part of the Company's and its subsidiaries' Chapter 11 reorganization
process, the Company will attempt to notify all known or potential creditors
of the filing for the purpose of identifying all pre-petition claims. In the
Company's Chapter 11 cases, substantially all of the Company's liabilities as
of the filing date are subject to adjustment under a plan of reorganization.
Generally, actions to enforce or otherwise effect repayment of all pre-
petition liabilities as well as all pending litigation against the Company are
stayed while the Company continues its business operations as debtors-in-
possession. Schedules have been filed by the Company with the Bankruptcy
Court setting forth the assets and liabilities of the debtors as of the filing
date as reflected in the Company's accounting records. Differences between
amounts reflected in such schedules and claims filed by creditors will be
investigated and amicably resolved or adjudicated before the Bankruptcy
Courts. The ultimate amount and settlement terms for such liabilities are
subject to a plan of reorganization, and accordingly, are not presently
determinable. Under the Bankruptcy Code, the Company may elect to assume or
reject real estate leases, employment contracts, personal property leases,
service contracts and other executory pre-petition contracts, subject to the
Bankruptcy Courts' review. The Company cannot presently determine or
reasonably estimate the ultimate liability that may result from rejecting
leases or from filing of claims for any rejected contracts, and no provisions
have been made for these items.
As a result of the Company's relatively high degree of leverage and the need
for significant capital expenditures at its St. Louis property, the Company
was unable to pay the regularly scheduled interest payments of $6,375 which
were each due and payable March 15, and September 15, 2000. Under the
indentures pursuant to which the $75,000 13% Senior Exchange Notes (the
"Senior Exchange Notes") and $25,000 12% Secured Notes (the "Secured Notes"
and, collectively with the Senior Exchange Notes, the "Notes") were issued, an
Event of Default occurred on April 15, 2000, and is continuing as of the date
hereof. Additionally, the Company was unable to pay the $25,000 principal
payment due September 15, 2000 on the Senior Exchange Notes. The holders of
at least 25% of the Senior Exchange Notes and the Secured Notes were notified
of the defaults and instructed the Indenture Trustee to accelerate the Senior
Exchange Notes and the Secured Notes and on August 11, 2000, the holders
declared the unpaid principal and interest to be due and payable. As of
November 30, 2002, the outstanding principal consists of $56,250 of Senior
Exchange Notes and $18,750 of Secured Notes.
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As of November 30, 2002, the Company had $12,708 of unrestricted cash and
cash equivalents. Of this amount, the Company requires approximately $6,500
of cash to fund daily operations. The Company is heavily dependant on cash
generated from operations to continue to operate as planned in its existing
jurisdictions and to make capital expenditures. Management anticipates that
its existing available cash and cash equivalents and its anticipated cash
generated from operations will be sufficient to fund its ongoing operations
during the bankruptcy proceedings. Payments under the Company's defaulted
debt obligations generally will be stayed during the bankruptcy proceedings.
Costs previously incurred and which will be incurred in the future in
connection with the reorganizations have been and will continue to be
substantial and, in any event, there can be no assurance that the Company will
be able to reorganize its indebtedness or that its liquidity and capital
resources will be sufficient to maintain its normal operations during the
reorganization period. To the extent cash generated from operations is less
than anticipated, the Company may be required to curtail certain planned
expenditures and/or seek additional financing.
2. Basis of Presentation
The consolidated financial statements include the accounts and operations of
President Casinos, Inc., its wholly-owned subsidiaries, a 95%-owned limited
partnership and a limited liability company in which a wholly-owned subsidiary
of the Company has a Class A ownership interest and in which an entity wholly-
owned by the Chairman of the Board of the Company owns a Class B Unit and has
preferred rights to certain cash flows. All material intercompany balances
and transactions have been eliminated.
The accompanying condensed consolidated financial statements are presented
in accordance with American Institute of Certified Public Accountants
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
under the Bankruptcy Code," assuming that the Company will continue as a going
concern. The Company is currently operating under the jurisdiction of Chapter
11 of the Bankruptcy Code and the Bankruptcy Courts, and continuation of the
Company as a going concern is contingent upon, among other things, its ability
to formulate a reorganization plan which will gain approval of the requisite
parties under the Bankruptcy Code and confirmation by the Bankruptcy Courts,
its ability to return to profitability, generate sufficient cash flows from
operations, and obtain financing sources to meet future obligations. These
matters raise substantial doubt about the Company's ability to continue as a
going concern. The accompanying consolidated financial statements do not
include any adjustments relating to the outcome of these uncertainties.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting only of
normal recurring entries unless otherwise disclosed, necessary to present
fairly the Company's financial information 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 condensed consolidated financial statements are not necessarily indicative
of results for the full year or other periods.
The accompanying unaudited consolidated balance sheet as of November 30,
2002, segregates liabilities subject to compromise, such as unsecured claims,
from liabilities not subject to compromise, such as fully secured liabilities
and liabilities arising subsequent to filing bankruptcy. A plan of
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reorganization could materially change the amounts currently recorded in the
consolidated financial statements. The consolidated statements that might
result from the outcome of this uncertainty may be materially different than
those presented herein.
Reorganization items represent expenses incurred by the Company as a result
of the bankruptcy filings and proceedings which are required to be expensed as
incurred.
The financial statements contained herein should be read in conjunction with
the audited consolidated financial statements and accompanying notes to the
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the period ending February 28, 2002. Accordingly, footnote
disclosure which would substantially duplicate the disclosure in the audited
consolidated financial statements has been omitted in the accompanying
unaudited condensed consolidated financial statements.
Certain amounts for fiscal 2002 have been reclassified to conform with
fiscal 2003 financial statement presentation.
3. Nature of Operations
The Company owns and operates dockside gaming casinos through its
subsidiaries. The Company conducts dockside gaming operations in Biloxi,
Mississippi through its wholly-owned subsidiary President Mississippi and in
St. Louis, Missouri north of the Gateway Arch through its wholly-owned
subsidiary, President Missouri. In addition, the Company owns and manages
certain hotel and ancillary facilities associated with its gaming operations.
PBLLC, in which BHI has a Class A ownership interest, owns approximately 260
acres in Biloxi, Mississippi, which includes a 111-slip marina which contains
the mooring site of "President Casino-Broadwater," two hotels with
approximately 500 rooms and an adjacent 18-hole golf course (collectively, the
"Broadwater Property"). BHI is a wholly-owned subsidiary of the Company.
Prior to July 2001, the Company also operated two non-gaming dinner cruise,
excursion and sightseeing vessels in St. Louis near the base of the Gateway
Arch. The assets of the non-gaming cruise operations were sold July 17, 2001.
See "Note 4. Property and Equipment."
On October 10, 2000, the Company sold the assets of its Davenport casino and
hotel operations. The Davenport casino operations were managed by the
Company's wholly-owned subsidiary, President Riverboat Casino-Iowa, Inc. ("PRC
Iowa"), which is the general partner of the 95% Company-owned operating
partnership, The Connelly Group, L.P. ("TCG"). The Blackhawk Hotel in
Davenport was owned by a wholly-owned subsidiary of the Company. The
operating results of the Davenport casino and hotel operations have been
included in the consolidated operating results of the Company. The Company
continues to administrate certain contingency claims associated with the
former operations of these entities.
4. Property and Equipment
On April 30, 2001, the Company executed an agreement to sell the assets of
Gateway Riverboat Cruises, the Company's non-gaming cruise operations which
provided dinner cruise, excursion and sightseeing on two riverboats on the
Mississippi River. The transaction was consummated on July 17, 2001.
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5. Current Portion of Long-Term Debt
As of November 30, 2002, all of the Company's long-term debt, except the
PBLLC note, were classified as liabilities subject to compromise. See "Note
6. Liabilities Subject to Compromise and Reorganization Items." Long-term
debt payable, all of which was classified as current liabilities as of
February 28, 2002, are summarized as follows:
Nov. 30, Feb. 28,
2002 2002
------- ------
Senior Exchange Notes, 13%...................... $ -- $ 56,250
Secured Notes, 12%,............................. -- 18,750
Broadwater Hotel note payable, variable
interest rate, 12.75%......................... 30,000 30,000
M/V "President Casino-Mississippi" term note
payable, variable interest rate, 5.7.%........ -- 2,200
--------- ---------
Total notes payable.......................... $ 30,000 $107,200
========= =========
Senior Exchange Notes and Secured Notes
The Senior Exchange Notes rank equal in right of payment to all present and
future senior debt, as defined in the indenture governing the Senior Exchange
Notes (the "Note Indenture"), of the Company and its subsidiaries and were
payable as follows: 25% of the outstanding principal amount on each of
September 15, 1999 and September 15, 2000 and the remainder of the outstanding
principal amount on September 15, 2001. In addition, the Senior Exchange
Notes are unconditionally guaranteed, jointly and severally on a senior basis,
by all of the Company's subsidiaries other than BHI and PBLLC (the
"Guarantors"), and, under certain circumstances, the Company's future
subsidiaries, although the subsidiary guarantee from TCG is limited in amount.
As security for the obligations of the Company and the Guarantors under the
Senior Exchange Notes, the Company and the Guarantors have pledged their
equity interests in each Guarantor. The Note Indenture contains certain
restrictive covenants which, among other things, limit the Company's
Guarantors' ability to pay dividends, incur additional indebtedness (exclusive
of $15,000 of senior debt), issue preferred stock, create liens on certain
assets, merge or consolidate with another company and sell or otherwise
dispose of all or substantially all of its properties or assets.
On December 3, 1998, the Company repurchased $25,000 of its Senior Exchange
Notes. The repurchased notes were used to satisfy the $25,000 principal
payment due September 15, 1999 on the Company's $100,000 Senior Exchange
Notes. The repurchase was funded by the issuance of $25,000 of new 12% notes
due September 15, 2001 (the "Secured Notes"). The Secured Notes have no
mandatory redemption obligation and are secured by mortgages on the "Admiral"
and the M/V "Surfside Princess," as well as subsidiary guarantees.
See "Note 1. Bankruptcy Proceedings" regarding default of the Senior
Exchange Notes and Secured Notes.
Broadwater Hotel Note
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In conjunction with the purchase of the Broadwater Property, PBLLC borrowed
the sum of $30,000 from a third party (the "Indebtedness"). Except as set
forth in the promissory note and related security documents, PBLLC's
obligations under the Indebtedness are nonrecourse and are secured by the
Broadwater Property, its improvements and leases thereon. The Indebtedness
bears interest at a stipulated variable rate per annum equal to the greater of
(i) 8.75% or (ii) 4.0% plus the LIBOR 30-day rate.
PBLLC is obligated under the Indebtedness to make monthly payments of
interest accruing under the Indebtedness, and was obligated to repay the
Indebtedness in full on July 22, 2000. In addition, PBLLC was obligated to
pay to the lender a loan fee in the amount of $7,000 which was fully earned
and non-refundable when the Indebtedness was due. Neither the Indebtedness
nor the loan fee payments were made on the due date and the Indebtedness is in
default. In accordance with the terms of the loan, effective on the default
date, penalty interest of 4.0% is accrued in addition to interest at the
stipulated rate on the $30,000 principal. Additionally, PBLLC has accrued,
but not paid, interest on the unpaid loan fee at the stipulated rate since the
date of default. PBLLC continued to make the monthly interest payments
accruing on the $30,000 principal through April 19, 2001, when the Company
announced that PBLLC had filed for reorganization under Chapter 11 of the U.S.
Bankruptcy Code in the United States Bankruptcy Court for the Southern
District of Mississippi. See "Note 7. Commitments and Contingent
Liabilities" regarding the Chapter 11 petition filed by PBLLC.
M/V "President Casino-Mississippi" Note
The term note payable is collateralized by the vessel M/V "President Casino-
Mississippi" and various equipment and is personally guaranteed by Mr.
Connelly. This note also contains certain covenants which, among other
things, require the Company to maintain a minimum tangible net worth of
$40,000. The aforementioned default on the Company's Senior Exchange Notes
and Secured Notes also constituted a default under this note. Under the terms
of the term note payable, $2,100 principal became due and payable in August
2002. The lender has brought an action against Mr. Connelly under his
personal guarantee. The lender has also filed a motion in the Mississippi
Bankruptcy Court to lift the automatic stay in the case of President Riverboat
Casino-New York, Inc., the owner of the vessel, or in the alternative, order
the owner to abandon the vessel. To date, the Court has not ruled on this
motion.
Other
The various agreements governing the notes described above generally limit
borrowings by the Company's affiliates without the respective lenders' prior
consent.
The noteholders of the Senior Exchange Notes, the Secured Notes and the M/V
President Casino-Mississippi Note were deemed by management to be undersecured
and as a result, interest ceased to accrue as of June 20, 2002 with respect to
the Senior Exchange Notes and Secured Notes and July 11, 2002 with respect to
the M/V "President Casino-Mississippi" Note. Contractual interest on the
Company's debt is $3,977 and $11,692 for the three-month and nine-month
periods ending November 30, 2002, respectively.
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6. Liabilities Subject to Compromise and Reorganization Items
Liabilities subject to compromise consists of the following:
Nov. 30, Feb. 28,
2002 2002
------ ------
Senior Exchange Notes, 13%...................... $ 56,250 $ --
Secured Notes, 12%,............................. 18,750 --
M/V "President Casino-Mississippi" note payable,
variable interest rate, 5.28%................. 2,100 --
Minority interest............................... 16,008 --
Accrued interest................................ 13,728 9
Accounts payable and other accrued expenses..... 4,890 637
--------- ---------
Total liabilities subject to compromise...... $111,726 $ 646
========= =========
As of November 30, 2002, all reorganization items consist of professional
fees and U.S. Bankruptcy Trustee fees.
7. Commitments and Contingent Liabilities
--Bankruptcy Actions
On June 20, 2002, the Company together with its subsidiary, President
Missouri, which owns and operates the St. Louis operations, filed voluntary
petitions for reorganization under Chapter 11 of the Bankruptcy Code in the
United States Bankruptcy Court for the Southern District of Mississippi. On
July 9, 2002, the Company's subsidiary President Mississippi filed a voluntary
reorganization petition in the same Court. On July 11, 2002, substantially
all of the Company's other operating subsidiaries filed voluntary
reorganization petitions under Chapter 11 in the same Court. Subsequently,
orders were entered by the Mississippi Bankruptcy Court transferring venue of
all of the Chapter 11 cases, except President Riverboat Casino-New York, Inc.
and PBLLC, to the United States Bankruptcy Court for the Eastern District of
Missouri, where they are now pending and being administered. The Company and
its subsidiaries each continue in possession and use of their assets as
debtors in possession.
On April 19, 2001, PBLLC filed a voluntary petition for relief under Chapter
11 of the Bankruptcy Code in the Mississippi Bankruptcy Court. That same day,
the Mississippi Bankruptcy Court authorized PBLLC's interim use of cash
collateral pursuant to a Cash Collateral Stipulation and Agreement between
PBLLC and its largest creditor. Subsequent orders of the Mississippi
Bankruptcy Court have extended PBLLC's authorized use of cash collateral
indefinitely until further order of the Court. PBLLC is operating its
businesses and managing its properties as a debtor-in-possession, and no
trustee has been appointed in PBLLC's case. The first meeting of creditors
was held on June 21, 2001, and an official committee of unsecured creditors
(the "Creditors Committee") has been appointed in the case. The Mississippi
Bankruptcy Court fixed August 20, 2001 as the final date for creditors to file
proofs of claim in PBLLC's case, except that October 16, 2001 was fixed as the
final date for governmental units to file proofs of claim. PBLLC is current
with the filings of its monthly operating reports in the case, with the report
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for November 2002 having been filed on December 15, 2002. Within its
exclusive period for filing a disclosure statement and plan of reorganization
as set by the Mississippi Bankruptcy Court, PBLLC filed its Debtor's Plan of
Reorganization on October 16, 2001 (the "Plan") and its First Amended
Disclosure Statement on February 7, 2002 (the "Disclosure Statement"). The
Mississippi Bankruptcy Court has been presented with a Restructuring Term
Sheet, which includes revised terms from the plan of reorganization filed
October 16, 2001, representing an agreement in principal between PBLLC and its
lender, its only secured creditor. The Restructuring Term Sheet provides,
among other things, that (i) the maturity date for PBLLC's debt to the lender
shall be extended to the earlier of 30 months after the effective date of the
reorganization plan or June 1, 2005, (ii) reduction of the various LIBOR-based
variable interest rates for the indebtedness, including a reduction in the
interest rate floor from 8.75% to 7.75% prior to maturity, (iii) discounts for
the possible early retirement of debt, and (iv) certain waivers by PBLLC of
its right to seek further bankruptcy relief. On September 30, 2002, the Court
requested that an amended plan of reorganization be filed. It further
requested that notice be given to all creditors, parties and other entities
including most of the Company's subsidiaries. The Company is reviewing this
matter in coordination with its lender and will proceed in an appropriate
manner. There can be no assurance that PBLLC will be able to restructure its
debt obligations and emerge from bankruptcy or continue as a going concern.
--Poulos, McElmore and Shreier, et al. v. Caesar's
World, Inc. et al. Litigation
In 1994, William H. Poulos filed a class-action lawsuit in the United States
District Court for the Middle District of Florida against over thirty-eight
(38) casino operators, including the Company, and certain suppliers and
distributors of video poker and electronic slot machines. This lawsuit was
followed by several additional lawsuits of the same nature against the same,
as well as additional defendants, all of which have now been consolidated into
a single class-action pending in the United States District Court for the
District of Nevada. Following a court order dismissing all pending pleadings
and allowing the plaintiffs to re-file a single complaint, a complaint has
been filed containing substantially identical claims, alleging that the
defendants fraudulently marketed and operated casino video poker machines and
electronic slot machines, and asserting common law fraud and deceit, unjust
enrichment and negligent misrepresentation. Various motions were filed by the
defendants seeking to have this new complaint dismissed or otherwise limited.
On December 19, 1997, the Court, in general, ruled on all motions in favor of
the plaintiffs. The plaintiffs then filed a motion seeking class
certification and the defendants opposed it. On June 21, 2002, the Court
entered an order denying class certification, and the plaintiffs have appealed
this order to the 9th Circuit Court of Appeals. This action has been stayed
as to the Company pending the Company's bankruptcy proceedings. Although the
outcome of litigation is inherently uncertain, management, after consultation
with counsel, believes the action will not have a material adverse effect on
the Company's financial position or results of operations.
--"Surfside Princess" Litigation
On October 12, 2001, the Company's subsidiary which owned the M/V "Surfside
Princess," formerly known as the M/V "New Yorker," initiated an action in the
United States District Court for the Middle District of Florida against
Southern Gaming, LLC and its assignee for breach of a Bareboat Charter and
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Purchase Agreement dated March 29, 2001 pursuant to which the M/V "Surfside
Princess" was chartered from the Company. The suit alleges breach of the
charter. Subsequent proceedings followed in which various parties claimed
various rights with respect to the vessel and its contents. The matter is
currently pending before the Court.
On October 19, 2001, Southern Gaming filed suit in the United States
District for Middle District of Florida seeking damages in connection with the
charter of the "Surfside Princess." Subsequently this proceeding was
consolidated with the prior proceeding involving Southern Gaming. Other suits
and claims exist with respect to the vessel. While the Company currently
believes it will ultimately recover the vessel, it has not done so at this
time. It is not possible to predict when the Company will recover the vessel
and be able to use or charter it.
The Company has also filed an action in the United States District Court for
the Eastern District of Missouri against the principals of Southern Gaming who
guaranteed the payment of amounts under the charter agreement that were or
could become liens against the vessel. After discovery was concluded, the
Company filed a motion for summary judgment. The Court then referred the case
to mediation, which resulted in a settlement in which the Company received an
aggregate of $85. Pursuant to the settlement, the case was dismissed on
December 30, 2002.
--Other
The Company is from time to time a party to litigation, which may or may not
be covered by insurance, arising in the ordinary course of its business. The
Company does not believe that the outcome of any such litigation will have a
material adverse effect on the Company's financial condition or results of
operations, or which would have any material adverse impact upon the gaming
licenses of the Company's subsidiaries.
8. Segment Information
The Company evaluates performance based on operations EBITDA. Operations
EBITDA is earnings before interest, taxes, depreciation and amortization of
each of the reportable segments. Corporate and development expenses,
gain/loss on sale of assets, impairment of long-lived assets and
reorganization costs are not allocated to the reportable segments and are
therefore excluded from operations EBITDA.
The Company has no inter-segment sales and accounts for transfers of
property and inventory at its net book value at the time of such transfer.
The Company's reportable segments, other than the leasing operation, are
similar in operations, but have distinct and separate regional markets. The
Company's reportable segments are based on its two geographic gaming
operations and its leasing operation. The Biloxi operations consist of the
Biloxi casino and the Broadwater Property and the St. Louis operations consist
of the St. Louis casino and Gateway Riverboat Cruises ("Gateway"). On July
17, 2001, the assets of Gateway were sold and operations ceased. The Company
formerly reported Davenport operations as a third geographic gaming segment.
The Davenport operations consisted of the Davenport casino and the Blackhawk
Hotel, the assets of which were sold, and operations ceased, on October 10,
2000. Management views the residual costs and expenses incurred after the
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sale of, and related to, the Davenport operations as a component of Corporate
EBITDA.
Three Months Nine Months
Ended November 30, Ended November 30,
2002 2001 2002 2001
------ ------ ------ ------
OPERATING REVENUES:
St. Louis Properties................... $ 17,376 $ 18,917 $ 55,883 $ 58,600
Biloxi Properties...................... 11,672 11,894 38,501 38,073
--------- --------- --------- ---------
Net operating revenues............... $ 29,048 $ 30,811 $ 94,384 $ 96,673
========= ========= ========= =========
Three Months Nine Months
Ended November 30, Ended November 30,
2002 2001 2002 2001
------ ------ ------ ------
EBITDA (before corporate, development
and impairment expenses and gain/loss
on sale of property and equipment):
St. Louis Properties................... $ 2,325 $ 2,614 $ 8,068 $ 8,108
Biloxi Properties...................... 629 809 4,467 3,828
--------- --------- --------- ---------
Gaming and ancillary operations....... 2,954 3,423 12,535 11,936
Leasing Operation...................... (196) (493) (907) (689)
--------- --------- --------- ---------
Operations EBITDA.................... 2,758 2,930 11,628 11,247
OTHER COSTS AND EXPENSES:
Corporate expense...................... 556 1,282 2,707 3,158
Development expense.................... 2 297 122 370
Depreciation and amortization.......... 2,183 2,084 6,583 6,295
--------- --------- --------- ---------
Total other costs and expenses....... 2,741 3,663 9,412 9,823
--------- --------- --------- ---------
OPERATING INCOME (LOSS)................ 17 (733) 2,216 1,424
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense, net.................. (1,084) (3,550) (6,573) (10,464)
Gain/(loss) on sale of assets.......... (77) (1) (100) 786
Reorganization costs................... (68) (113) (755) (330)
--------- --------- --------- ---------
Total other expense.................. (1,229) (3,664) (7,428) (10,008)
--------- --------- --------- ---------
LOSS BEFORE MINORITY INTEREST.......... (1,212) (4,397) (5,212) (8,584)
Minority interest...................... 344 313 983 908
--------- --------- --------- ---------
NET LOSS............................... $ (1,556) $ (4,710) $ (6,195) $ (9,492)
========= ========= ========= =========
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A summary of assets by segment, is as follows:
Nov. 30, Feb. 28,
2002 2002
------ ------
St. Louis operations.................... $ 47,547 $ 46,281
Biloxi operations....................... 63,995 61,623
--------- ---------
Gaming and ancillary operations....... 111,542 107,904
Leasing operations...................... 3,563 4,001
--------- ---------
Operations' assets.................... 115,105 111,905
Corporate assets........................ 3,784 3,626
Development assets...................... 3,259 3,238
Davenport assets........................ 224 1,681
--------- ---------
Total assets........................ $122,372 $120,450
========= =========
A summary of net property and equipment and additions to property and
equipment, by segment, is as follows:
Nov. 31, Feb. 28,
2002 2002
------ ------
Property and Equipment:
St. Louis Properties.................. $ 37,872 $ 38,534
Biloxi Properties..................... 51,995 52,812
--------- ---------
Gaming and ancillary operations..... 89,867 91,346
Leasing Operations.................... 3,563 4,000
--------- ---------
Operations Assets................... 93,430 95,346
Corporate Assets...................... 14 23
Development Assets.................... 3,259 3,238
--------- ---------
Net Property and Equipment.......... $ 96,703 $ 98,607
========= =========
Nine Months Ended Nov. 30,
2002 2001
------ ------
Additions to Property and Equipment:
St. Louis Properties.................. $ 3,852 $ 1,566
Biloxi Properties..................... 918 1,795
--------- ---------
Gaming and ancillary operations.... 4,770 3,361
Leasing Operations.................... -- --
--------- ---------
Operations Assets................... 4,770 3,361
Corporate Assets...................... -- 5
Development Assets.................... 21 18
--------- ---------
$ 4,791 $ 3,384
========= =========
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Included in additions to property and equipment is $2 of assets acquired in
exchange for debt for the nine-month period ended November 30, 2001.
9. Guarantee of City Obligation
During 1998, the Company and the City of St. Louis reached an agreement for
the relocation of the "Admiral" approximately 1,000 feet north from its former
location on the Mississippi River. Under the terms of an agreement, the City
funded $3,000 of the relocation costs, $2,400 of which was financed through
bank debt. It is anticipated that the City will repay the debt from annual
allocations of $600 from the City's annual home dock city public safety fund
that is funded by admission taxes from the "Admiral." The Company has
guaranteed repayment of the bank debt if the City fails to pay the obligation.
As of November 30, 2002, the Company's guarantee was of $1,049.
10. Insurance Risk
The Company was partially self-insured for employee health and workers
compensation claims and third party liability costs through April 1999.
Effective May 1999, the Company became fully insured for workers compensation
claims. The Company continues to be partially self-insured for third party
liability claims and certain employee health claims. The self-insurance claim
liability is estimated on claims reported and claims incurred but not reported
using the Company's historic experience with such matters.
The Company does carry "Business Interruption" insurance, but due to the
current insurance market, the current policy does not cover interruption from
either windstorm or flood.
As of October 10, 2002, hull insurance and protection and indemnity
insurance on the M/V "Surfside Princess" lapsed. The Company filed a motion
with the Mississippi Bankruptcy Court to allow a subsidiary of the Company
fund President Riverboat Casino-New York, Inc. ("PRC New York"), the owner of
the vessel, for the cost of the insurance. The Mississippi Bankruptcy Court
denied the motion. On December 12, 2002, PRC-New York purchased a one year
protection and indemnity policy for the M/V "Surfside Princess" from proceeds
from the settlement of a lawsuit.
11. Suspended Operations
On May 13, 2002, at 4:00 a.m. the St. Louis operations were temporarily
suspended due to high water levels on the Mississippi River. The "Admiral"
was reopened on May 20, 2002 at 6:00 p.m.
On September 25, 2002, all Mississippi Gulf Coast casinos, including the
Company's Biloxi casino, were temporarily closed at 10:00 a.m. by the
Mississippi Gaming Commission in anticipation of Tropical Storm Isidore. The
Company's casino reopened on September 27, 2002 at 5:00 a.m.
On October 2, 2002, all Mississippi Gulf Coast casinos, including the
Company's Biloxi casino, were temporarily closed at 10:00 p.m. by the
Mississippi Gaming Commission in anticipation of Hurricane Lili. The
Company's casino reopened on October 3, 2002 at 3:00 p.m.
The Company's Biloxi hotel operations remained open during both periods.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion should be read in conjunction with the consolidated
financial statements of the Company included elsewhere in this report.
President Casinos, Inc., President Riverboat Casino-Missouri, Inc., The
President Riverboat Casino-Mississippi, Inc., President Broadwater Hotel, LLC,
Broadwater Hotel, Inc., President Riverboat Casino-New York, Inc., PRC
Management, Inc., PRC Holdings Corporation, TCG/Blackhawk, Inc. and Vegas
Vegas, Inc. have each filed voluntary petitions for reorganization under
Chapter 11 of the Bankruptcy Code. See "Note 1. Bankruptcy Proceedings" of
the Notes to Condensed Consolidated Financial Statements included in Part I of
this report.
As a result of the Company's relatively high degree of leverage and the need
for significant capital expenditures at its St. Louis property, the Company
was unable to pay the regularly scheduled interest payments of $6.4 million
that were each due and payable March 15, and September 15, 2000. Under the
indentures pursuant to which the $75.0 million 13.0% Senior Exchange Notes
(the "Senior Exchange Notes") and the $25.0 million 12% Secured Notes (the
"Secured Notes" and collectively with the Senior Exchange Notes, the "Notes")
were issued, an Event of Default occurred on April 15, 2000, and is continuing
as of the date hereof. Additionally, the Company was unable to pay the $25.0
million principal payment due September 15, 2000 on the Senior Exchange Notes.
The holders of at least 25% of the Senior Exchange Notes and the Secured Notes
were notified of the defaults and instructed the Indenture Trustee to
accelerate the Senior Exchange Notes and the Secured Notes and on August 11,
2000, the holders declared the unpaid principal and interest to be due and
payable.
On October 10, 2000, the Company sold the assets of its Davenport operations
for aggregate consideration of $58.2 million in cash. On November 22, 2000,
the Company entered into an agreement with a majority of the holders of the
Senior Exchange Notes and a majority of the holders of the Secured Notes. The
agreement provided for a proposed restructuring of the Company's debt
obligations under the Notes and the application of certain of the proceeds
received by the Company from the sale of the Company's Davenport, Iowa assets.
Approximately $43.0 million of the proceeds from the sale were deposited with
a trustee. Of this amount, $12.8 million was used to pay missed interest
payments due March 15, 2000 and September 15, 2000 on the Senior Exchange
Notes and the Secured Notes; $25.0 million was used to partially redeem the
Senior Exchange Notes and the Secured Notes; and $5.2 million was used to pay
interest due March 15, 2001 on the Senior Exchange Notes and the Secured
Notes.
Subsequently, the Company was unable to make the principal and interest
payments due September 15, 2001 and its interest payment due March 15, 2002,
on its Senior and Secured Notes. As of November 30, 2002, principal due on
the Senior and Secured Notes was $56.2 million and $18.8 million,
respectively.
In July 2001, the Company completed the sale of its non-gaming cruise
operations in St. Louis, Missouri for $1.7 million. On March 29, 2001, the
Company executed an installment sale agreement for the M/V "Surfside Princess"
(formerly, the "New Yorker"). On October 3, 2001, as a result of the
17
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purchasing party's inability to comply with the terms of the agreement, the
Company terminated the agreement and repossessed the vessel. Management
intends to continue to seek aggressively another buyer or find other uses for
the vessel. The Company has filed a motion with the Mississippi Bankruptcy
Court for approval to initiate a sale of the "Surfside Princess." Any sale
will be subject to final approval of the Mississippi Bankruptcy Court. Until
the Company is able to do so, the Company will continue to incur legal fees,
insurance and maintenance costs on the vessel.
In addition to the foregoing, President Broadwater Hotel, LLC ("PBLLC"), a
limited liability company in which a wholly-owned subsidiary of the Company
has a Class A ownership interest, is in default under a $30.0 million
promissory note and associated $7.0 million loan fee incurred in connection
with the July 1997 purchase by PBLLC of the real estate and improvements
utilized in the Company's operations in Biloxi, Mississippi. On April 19,
2001, PBLLC filed a voluntary petition for reorganization under Chapter 11 of
the Bankruptcy Code in the United States Bankruptcy Court for the Southern
District of Mississippi in Biloxi, Mississippi. PBLLC continues its
possession and use of its assets as a debtor in possession and has entered
into an agreement with its lender approved by the Bankruptcy Court which
allows PBLLC use of its cash collateral. On October 16, 2001, PBLLC filed a
Debtors' Plan of Reorganization (the "Plan") which was designed to permit
PBLLC to restructure its debt obligations in a manner which will permit it to
continue as a going concern. The Bankruptcy Court has recently been presented
with a Restructuring Term Sheet, which includes revised terms from the Plan
filed October 16, 2001, representing an agreement in principal between PBLLC
and its lender, its only secured creditor. The Restructuring Term Sheet
provides, among other things, that (i) the maturity date for PBLLC's debt to
the lender shall be extended to the earlier of 30 months after the effective
date of the reorganization plan or June 1, 2005, (ii) reduction of the various
LIBOR-based variable interest rates for the indebtedness, including a
reduction in the interest rate floor from 8.75% to 7.75% prior to maturity,
(iii) discounts for the possible early retirement of debt, and (iv) certain
waivers by PBLLC of its right to seek further bankruptcy relief. On September
30, 2002, the Court requested that an amended plan of reorganization be filed.
It further requested that notice be given to all creditors, parties and other
entities including most of the company's subsidiaries. The Company is
reviewing this matter in coordination with its lender and will proceed in an
appropriate manner.
The Plan of PBLLC provides that, following the confirmation of the Plan,
PBLLC and the Company will enter into a loan agreement under which the Company
will be obligated to loan to PBLLC such amounts as shall be necessary for
PBLLC to make certain payments due under the Plan. Additionally, if the Plan
is confirmed, the Class B membership interest of PBLLC held by JECA (an entity
controlled by John E. Connelly, the Company's Chairman and Chief Executive
Officer) will, with respect of its payment right against PBLLC of
approximately $16.0 million, be entitled to receive in satisfaction thereof a
cash payment of $1.5 million and a one-year interest bearing promissory note
from PBLLC in the principal amount of $1.5 million. The Company would be
required to loan such amounts to PBLLC to the extent that PBLLC is unable to
fund such amounts. There can be no assurance that PBLLC will be able to
restructure its debt obligations and emerge from bankruptcy or continue as a
going concern.
Due to certain debt covenants and cross default provisions associated with
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other debt agreements, the Company is also currently in default under its $2.1
million M/V "President Casino-Mississippi" note. See Liquidity and Capital
Resources.
Management believes the Company's liquidity and capital resources will be
sufficient to maintain its normal operations at current levels and does not
anticipate any adverse impact on its operations, customers or employees.
However, costs previously incurred and which will be incurred in the future in
connection with restructuring the Company's debt obligations and the
bankruptcy proceedings have been and will continue to be substantial and, in
any event, there can be no assurance that the Company will be able to
restructure successfully its indebtedness or that its liquidity and capital
resources will be sufficient to maintain its normal operations during the
restructuring period.
The Company's ability to continue as a going concern is dependent on its
ability to restructure successfully, including refinancing its debts, and the
ability of the Company to generate sufficient cash to fund future operations.
There can be no assurance in this regard.
Overview
The Company's operating results are affected by a number of factors,
including competitive pressures, changes in regulations governing the
Company's activities, the results of pursuing various development
opportunities and general weather conditions. Consequently, the Company's
operating results may fluctuate from period to period and the results for any
period may not be indicative of results for future periods. The Company's
operations are not significantly affected by seasonality.
--Competition
Intensified competition for patrons continues to occur at both of the
Company's properties.
Since gaming began in Biloxi in August 1992, there has been steadily
increasing competition along the Mississippi Gulf Coast, in nearby New Orleans
and elsewhere in Louisiana and Mississippi. Several large hotel/casino
complexes have been built in recent years with the largest single resort in
the area opening in March 1999. There are currently twelve casinos operating
on the Mississippi Gulf Coast. See "Potential Growth Opportunities" regarding
a master plan for a destination resort the Company is developing in Biloxi,
Mississippi.
Competition is intense in the St. Louis market area. There are presently
four other casino companies operating five casinos in the market area. Many
of these competitors have significantly greater name recognition and financial
and marketing resources than the Company. Two of these are Illinois casino
companies operating single casino vessels on the Mississippi River, one across
the Mississippi River from the "Admiral" and the second 20 miles upriver.
There are two Missouri casino companies, each of which operates casino vessels
approximately 20 miles west of St. Louis on the Missouri River. One company
operates two casinos in Maryland Heights, Missouri and the other company
operates one casino in the City of St. Charles, Missouri. The operator of the
St. Charles casino replaced its facility and reopened with nearly double its
prior gaming positions in August 2002.
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22
Applications were submitted to the Missouri Gaming Commission for approval
of potential new licenses at four different locations within the St. Louis
Metropolitan area along the Mississippi River, three of which were within 20
miles of the "Admiral." In July 2000, the Gaming Commission announced its
decision to award an additional license to the applicant proposing a site at
the greatest distance from the "Admiral" of the proposed locations. The
Commission's decision was challenged by one of the applicants whose proposal
was not selected and by other entities. In September 2001, the applicant
selected by the Gaming Commission announced it would not proceed with the
development of the project. The Gaming Commission announced that it will
consider licensing an additional casino in the St. Louis market. One such
application has been filed to operate a gaming facility approximately 20 miles
south of the "Admiral." The Gaming Commission has extended the period in
which applications can be filed but has not indicated a specific deadline for
such filings. The opening of a new casino in the St. Louis market would have
a material adverse impact on the St. Louis operations under most possible
conditions.
--Regulatory Matters
Missouri regulations limit the loss per "simulated" cruise per passenger by
limiting the amount of chips or tokens a guest may purchase during each two-
hour gaming session to $500 (the "loss limit"). The company that operates
adjacent casinos is able to offer guests who reach the two-hour loss limit the
ability to move to the adjacent casino and continue to play. The lack of a
statutory loss limit on Illinois casinos allows them to attract higher stake
players. Additionally, their guests are not burdened with the administrative
requirements related to the loss limits, which includes the presentation of
government issued identification. Any easing of the loss limits in Missouri
would be expected to have a positive impact on the Company's St. Louis
operations.
--Weather Conditions
The Company's operating results are susceptible to the effects of floods,
hurricanes and adverse weather conditions. Historically, the Company has
temporarily suspended operations on various occasions as a result of such
adversities. Under less severe conditions, high river levels in St. Louis
cause reduced parking and a general public perception of diminished access to
the casino resulting in decreased revenues. Management believes the move of
the "Admiral" diminished the negative effects of high water on operations.
However, on May 13, 2002, at 4:00 a.m. the St. Louis operations were
temporarily suspended due to high water levels. The "Admiral" was reopened on
May 20, 2002 at 6:00 p.m. During the same period for the prior year, the
Company recorded $1.4 million in St. Louis gaming revenue.
On September 25, 2002, all Mississippi Gulf Coast casinos, including the
Company's Biloxi casino, were temporarily closed at 10:00 a.m. by the
Mississippi Gaming Commission in anticipation of Tropical Storm Isidore. The
Company's Biloxi casino reopened on September 27, 2002 at 5:00 a.m. On
October 2, 2002, all Mississippi Gulf Coast casinos, including the Company's
Biloxi casino, were temporarily closed at 10:00 p.m. by the Mississippi Gaming
Commission in anticipation of Hurricane Lili. The Company's Biloxi casino
reopened on October 3, 2002 at 3:00 p.m. The Company's Biloxi hotel
operations remained open during both periods.
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23
--Potential Growth Opportunities
Biloxi, Mississippi
In July 1997, PBLLC purchased for $40.5 million certain real estate and
improvements located on the Gulf Coast in Biloxi, Mississippi from an entity
which was wholly-owned by Mr. Connelly. The property comprises approximately
260 acres and includes two hotels, a 111-slip marina and the adjacent 18-hole
Sun Golf Course (collectively, the "Broadwater Property"). The marina is the
site of the Company's casino operations in Biloxi and was formerly leased by
the Company under a long-term lease agreement. Broadwater Hotel, Inc. a
wholly-owned subsidiary of the Company ("BHI"), invested $5.0 million in
PBLLC.
PBLLC financed the purchase of the Broadwater Property with $30.0 million of
financing from a third party lender, evidenced by a non-recourse promissory
note (the "Indebtedness") and issued a $10.0 million membership interest to
the seller. PBLLC is obligated to make monthly payments of interest accruing
under the Indebtedness, and was obligated to repay the Indebtedness in full on
July 22, 2000. In addition, PBLLC was obligated to pay to the lender a loan
fee in the amount of $7.0 million which became fully earned and nonrefundable
when the Indebtedness was due. See Liquidity and Capital Resources for a
discussion of the default on this obligation.
The Company has developed a master plan for the Broadwater Property.
Management believes that this site is ideal for the development of
"Destination Broadwater," a full-scale luxury destination resort offering an
array of entertainment attractions in addition to gaming. The plans for the
resort feature a village which will include a cluster of casinos, hotels,
restaurants, theaters and other entertainment attractions. Management
believes that with its beachfront location and contiguous golf course, the
property is the best site for such a development in the Gulf Coast market.
In January 1999, the Company received a permit from the Mississippi
Department of Marine Resources (the "DMR") for development of the full-scale
destination resort. This is the first of three permit approvals required of
the Joint Permit Application submitted in August 1998 to the DMR, the U.S.
Army Corps of Engineers (the "Corps") and the Mississippi Department of
Environment Quality. The two remaining permit approvals are still pending and
awaiting the completion of the Final Environmental Impact Statement ("EIS").
The Draft EIS has been completed, notice of which was posted in the Federal
Register in June 2000 for public comment. The current permit application to
the Corps was cancelled on June 10, 2002 pending re-submission of a revised
project design that reflects the changes resulting from the Company's work
with the Corps. The cancellation is an administrative measure which will
allow the Corps to remove the application from the Corps' pending action list,
and should not affect future evaluation of the permit request. The Company
anticipates submitting a revised plan. At that time, a new application number
will be assigned, and the evaluation of the permit request will resume.
In connection with the Company's proposed Destination Broadwater development
plan, to date, the Company has not identified any specific financing
alternatives or sources as the necessary regulatory approvals have not been
obtained. There can be no assurance that the Company will be able to obtain
the regulatory approvals or the requisite financing. Should the Company fail
to raise the required capital, such failure would materially and adversely
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impact the Company's business plan.
Results of Operations
The results of operations for the three-month and nine-month periods ended
November 30, 2002 and 2001 include the gaming results for the Company's
operations in Biloxi, Mississippi and St. Louis, Missouri and of much lesser
significance, the hotel operations in Biloxi (the Broadwater Property) and the
non-gaming operations in St. Louis (Gateway Riverboat Cruises) through the
date of sale. The assets of Gateway Riverboat Cruises ("Gateway") were sold
July 17, 2001.
The following table highlights the results of the Company's operations.
Three Months Nine Months
Ended November 30, Ended November 30,
2002 2001 2002 2001
------ ------ ------ ------
(in millions)
St. Louis, Missouri Operations
Operating revenues $ 17.4 $ 18.9 $ 55.9 $ 58.6
Operating income 0.8 1.2 3.7 3.8
Biloxi, Mississippi Operations
Operating revenues $ 11.7 $ 11.9 $ 38.5 $ 38.1
Operating income 0.1 0.2 2.7 1.9
Corporate Leasing Operations
Operating revenues $ - $ -- $ -- $ --
Operating loss (0.3) (0.5) (1.4) (0.7)
Corporate Administrative and
Development operating loss $ (0.6) $ (1.6) $ (2.8) $ (3.5)
The following table highlights cash flows of the Company's operations.
Nine Months
Ended November 30,
2002 2001
------ ------
(in millions)
Cash flows provided by (used in)
operating activities $ 7.2 $ (1.4)
Cash flows provided by (used in)
investing activities (4.4) 4.3
Cash flows used in
financing activities (0.2) (2.6)
Cash paid for interest 0.1 6.3
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The following table highlights certain supplemental measures of the
Company's financial performance.
Three Months Nine Months
Ended November 30, Ended November 30,
2002 2001 2002 2001
------ ------ ------ ------
(dollars in millions)
Operations adjusted EBITDA:
St. Louis operations........... $ 2.3 $ 2.6 $ 8.1 $ 8.1
Biloxi operations.............. 0.6 0.8 4.4 3.8
------- ------- ------- -------
2.9 3.4 12.5 11.9
Leasing operations............. (0.2) (0.5) (0.9) (0.7)
------- ------- ------- -------
Operations adjusted EBITDA... 2.7 2.9 11.6 11.2
Corporate adjusted EBITDA:
Corporate administration....... (0.5) (1.3) (2.7) (3.2)
Corporate development.......... -- (0.3) (0.1) (0.4)
------- ------- ------- -------
Total adjusted EBITDA........ 2.2 1.3 8.8 7.6
Depreciation and amortization.... 2.2 2.0 6.6 6.2
------- ------- ------- -------
Operating income (loss)...... -- (0.7) 2.2 1.4
------- ------- ------- -------
Other income (expense):
Interest, net.................. (1.0) (3.6) (6.6) (10.5)
Reorganization costs........... (0.1) (0.1) (0.8) (0.3)
Gain (loss) on sale of assets.. (0.1) -- (0.1) 0.8
------- ------- ------- -------
Total other income (expense). (1.2) (3.7) (7.5) (10.0)
------- ------- ------- -------
Loss before minority interest.... (1.2) (4.4) (5.3) (8.6)
Minority interest................ 0.3 0.3 0.9 0.9
------- ------- ------- -------
Net loss......................... (1.5) (4.7) (6.2) (9.5)
======= ======= ======= =======
St. Louis adjusted EBITDA
margin....................... 13.2% 13.8% 14.5% 13.8%
Biloxi adjusted EBITDA margin.. 5.1% 6.7% 11.4% 10.0%
"Adjusted EBITDA" consists of earnings from operations before
interest, taxes, and depreciation and amortization and before
reorganization costs, gain (loss) on disposal of property and
equipment and minority interest. For the purposes of this
presentation, adjusted EBITDA margin is calculated as adjusted EBITDA
divided by operating revenue.
Adjusted EBITDA and adjusted EBITDA margin are not determined in
accordance with generally accepted accounting principles. Since not
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all companies calculate these measures in the same manner, the
Company's adjusted EBITDA measures may not be comparable to similarly
titled measures reported by other companies.
Adjusted EBITDA should not be construed as an alternative to operating
income as an indicator of the Company's operating performance, or as
an alternative to cash flows from operational activities as a measure
of liquidity. The Company has presented adjusted EBITDA solely as a
supplemental disclosure to facilitate a more complete analysis of the
Company's financial performance. The Company believes that this
disclosure enhances the understanding of the financial performance of
a company with substantial interest, depreciation and amortization.
Three-month period ended November 30, 2002 Compared to the
Three-month period ended November 30, 2001
Operating revenues. The Company generated consolidated operating revenues
of $29.0 million during the three-month period ended November 30, 2002
compared to $30.8 million during the three-month period ended November 30,
2001. The St. Louis operations experienced a decrease in revenue of $1.6
million and the Biloxi operations experienced a decrease in revenue of $0.2
million.
Gaming revenues from the Company's St. Louis operations decreased $1.4
million, or 7.3%, during the three-month period ended November 30, 2002,
compared to the same period of the prior year. The St. Louis operations have
experienced a decrease in market share to approximately 8.7% from
approximately 10.0% during the same three-month period of the prior year.
Management believes the decrease in gaming revenue was primarily attributable
to increased competition resulting from expansion by a competitor in the St.
Louis market and customer apprehension following the Company's bankruptcy
filing. Gaming revenues at the Company's Biloxi operations increased $0.4
million, or 3.5%, during the three-month period ended November 30, 2002
compared to the three-month period ended November 30, 2001, primarily as a
result of increased volume.
The Company's revenues from food and beverage were $3.1 million during the
three-month period ended November 30, 2002, compared to $3.5 million during
the three-month period ended November 30, 2001, a decrease of $0.4 million or
11.4%. The decrease was primarily the result of a decrease in St. Louis
revenue due to a decrease in volume and a change in the direct mail program.
The Company's revenues from hotel, retail and other were $2.3 million during
the three-month period ended November 30, 2002 compared to $2.6 million for
the three-month period ended November 30, 2001, a decrease of $0.3 million or
11.5%. The decrease was primarily attributable to the prior year three-month
period including proceeds from the settlement of a lawsuit in Biloxi for $0.2
million which was recorded in revenue.
Promotional allowances were $5.7 million during the three-month period ended
November 30, 2002, compared to $5.6 million during the three-month period
ended November 30, 2001. Promotional allowances in St. Louis decreased $0.2
million and Biloxi increased approximately $0.2 million. In St. Louis, the
decrease was primarily the result of changes in the direct mail program. In
Biloxi, promotional allowances increased primarily as a result of responding
to the competitive pressures in the market.
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Operating costs and expenses. The Company's consolidated gaming expenses
were $17.2 million during the three-month period ended November 30, 2002
compared to $17.9 million during the three-month period ended November 30,
2001, a decrease of $0.7 million or 3.9%. The decrease in gaming costs was
primarily attributable to a $0.7 million decrease in gaming costs in St. Louis
as a result of a $0.5 million decrease in gaming and admissions taxes
resulting from decreased gaming revenues and a $0.2 million decrease in cost
of buffet promotions as a result of the decrease in complimentary buffet
revenue. As a percentage of gaming revenues, gaming costs decreased to 58.5%
during the three-month period ended November 30, 2002 from 58.9% during the
three-month period ended November 30, 2001.
The Company's consolidated food and beverage expenses were $2.1 million
during the three-month period ended November 30, 2002, compared to $2.3
million during the three-month period ended November 30, 2001, a decrease of
$0.2 million or 8.7%. The decrease was primarily the result of the decrease
in food and beverage revenue.
The Company's consolidated hotel, retail and other expenses were $0.7
million for both three-month periods ended November 30, 2002 and November 30,
2001.
The Company's consolidated selling, general and administrative expenses were
$6.9 million during the three-month period ended November 30, 2002, compared
to $8.2 million during the three-month period ended November 30, 2001, a
decrease of $1.3 million, or 15.9%. Selling, general and administrative
expenses at the St. Louis operations decreased $0.4 million primarily as a
result of a decrease in payroll and payroll benefit expenses, professional
fees and insurance. The Biloxi operations experienced an increase in selling,
general and administrative expenses of $0.1 million. Corporate overhead
decreased $0.6 million primarily as a result of accruing for the settlement of
the Whalen lawsuit and related legal costs during the three-month period ended
November 30, 2001. The leasing operations decreased $0.2 million primarily as
the result of the termination of the installment sale agreement on the
"Surfside Princess" in October 2001 resulting in costs to crew and move the
vessel back to its originating port.
Depreciation and amortization expenses were $2.2 million for the three-month
period ended November 30, 2002, compared to $2.1 million for the three-month
period ended November 30, 2001.
Operating income. As a result of the foregoing items, the Company was at a
break even point as to operating income for the three-month period ended
November 30, 2002, compared to an operating loss of $0.7 million for the
three-month period ended November 30, 2001.
Interest expense, net. The Company incurred net interest expense of $1.1
million during the three-month period ended November 30, 2002, compared to
$3.6 million during the three-month period ended November 30, 2001. The
decrease is the result of $2.7 million decrease in interest expense resulting
from June 20, 2002 voluntary petition under Chapter 11 of the Bankruptcy Code,
whereby the noteholders of the Senior Exchange Notes and the Secured Notes
were deemed by management to be undersecured and as a result, interest ceased
to accrue as of the date thereof.
Reorganization items. The Company incurred reorganization costs of $0.1
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28
million during both three-month periods ended November 30, 2002 and November
30, 2001. During April 2001, PBLLC filed a voluntary bankruptcy petition for
bankruptcy and began incurring costs associated with its reorganization.
During June 2002, the Company's parent company and PRC-Missouri filed
voluntary petitions and during July 2002, substantially all of the Company's
other operating subsidiaries filed voluntary petitions. The additional
expense resulting from substantially all of the Company's subsidiaries filing
Chapter 11 petitions were offset by the write-off of $0.1 million of pre-
petition liabilities owed to certain court approved post-petition
professionals in accordance with bankruptcy rules. Costs incurred with the
reorganizations consist of legal fees and U.S. Bankruptcy trustee fees.
Gain/loss on disposal of property and equipment. The Company recorded a
loss on disposal of assets of $0.1 million during the three-month period ended
November 30, 2002, primarily as a result of the ongoing upgrades of the gaming
floor in St. Louis.
Minority interest expense. The Company accrued $0.3 million minority
interest expense for both three-month periods ended November 30, 2002 and
November 30, 2001. During both periods, the minority interest results from
the Class B Unit in PBLLC in which an entity wholly-owned by the Chairman of
the Board of the Company owns and has preferred rights to certain cash flows.
Such amounts were accrued but not paid.
Net loss. The Company incurred a net loss of $1.6 million during the three-
month period ended November 30, 2002, compared to a net loss of $4.7 million
during the three-month period ended November 30, 2001.
Nine-month period ended November 30, 2002 Compared to the
Nine-month period ended November 30, 2001
Operating revenues. The Company generated net consolidated operating
revenues of $94.4 million during the nine-month period ended November 30, 2002
compared to $96.7 million during the nine-month period ended November 30,
2001. Excluding the Company's former non-gaming cruise operations, operating
revenues were $96.0 million during the nine-month period ended November 30,
2001. St. Louis casino operations contributed a decrease in operating
revenues of $2.0 million, offset by an increase in operating revenues of $0.4
million in Biloxi.
Gaming revenues from the Company's St. Louis casino operations decreased
$1.6 million during the nine-month period ended November 30, 2002, compared to
the nine-month period ended November 30, 2001. The St. Louis operations were
temporarily suspended from May 13, 2002 to May 20, 2002, due to flood
conditions on the Mississippi River. Additionally, the St. Louis operations
were negatively impacted by increased competition resulting from the expansion
by a competitor in the St. Louis market and customer apprehension following
the Company's bankruptcy filing. Gaming revenues at the Company's Biloxi
operations increased $1.1 million during the nine-month period ended November
30, 2002 compared to the prior year period primarily as a result of increased
volume resulting from successful promotional campaigns.
The Company's revenues from food and beverage were $10.2 million during the
nine-month period ended November 30, 2002, compared to $10.9 million during
the nine-month period ended November 30, 2001. Excluding the Company's former
non-gaming cruise operations, the Company's revenues from food and beverage
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29
were $10.5 million during the nine-month period ended November 30, 2001. The
St. Louis casino operations experienced a decrease of $0.6 million primarily
as a result of the casino being closed for one week in May 2002 due to flood
conditions, the buffet being closed for two weeks in July for renovation and a
decrease in volume due to the expansion of a competitor and the negative
impact of the bankruptcy filing. Biloxi operations contributed an increase of
$0.3 million in food and beverage revenue primarily as a result of price
adjustments.
The Company's revenues from hotel, retail and other were $8.1 million during
the nine-month period ended November 30, 2002, compared to $8.6 million during
the nine-month period ended November 30, 2001. Excluding the Company's former
non-gaming cruise operations, the Company's revenues from hotel, retail and
other were $8.2 million during the nine-month period ended November 30, 2001.
St. Louis casino operations retail and other decreased $0.2 million primarily
as a result of a decrease in number of patrons resulting from being closed for
one week in May of 2002 and a change in complimentary programs offered to
patrons. This decrease was partially offset by an increase of $0.1 million in
hotel, retail and other revenue in Biloxi. The increase in Biloxi is the
result of an increase in room revenue of $0.6 million due to an increase in
complimentary programs offset by a decrease in golf revenue of $0.2 million
due to competition and weather conditions. There was an additional decrease
of $0.2 million as a result of the prior year nine-month period including the
settlement of a lawsuit in Biloxi for $0.2 million which was recorded in
revenue.
Promotional allowances were $17.1 million during the nine-month period ended
November 30, 2002, compared to $16.4 million during the nine-month period
ended November 30, 2001, an increase of $0.7 million or 4.3%. Promotional
allowances in St. Louis decreased $0.4 million and Biloxi increased $1.1
million. In St. Louis, the decrease is primarily the result of a decrease of
$0.6 million in buffet promotions as a result of the buffet being closed for
two weeks for renovation and the casino being temporarily closed for seven
days due to flooding on the Mississippi River. These decreases were partially
offset by increases in other promotional programs. In Biloxi, promotional
allowances increased primarily as a result of responding to the competitive
pressures in the market.
Operating costs and expenses. The Company's consolidated gaming costs and
expenses were $53.3 million during the nine-month period ended November 30,
2002, compared to $54.4 million during the nine-month period ended November
30, 2001, a decrease of $1.1 million or 2.0%. The decrease is primarily the
result of a decrease of $1.1 million in St. Louis gaming costs due to $1.0
million reduction in gaming and admission taxes.
The Company's consolidated food and beverage expenses were $6.7 million
during the nine-month period ended November 30, 2002, compared to $7.3 million
during the nine-month period ended November 30, 2001. Excluding the Company's
former non-gaming cruise operations, food and beverage expenses were $7.0
million for the nine-month period ending November 30, 2001, a decrease of
4.3%. The decrease is primarily attributable to a decrease in food & beverage
revenue and changes in product purchasing.
The Company's consolidated hotel, retail and other expenses were $2.3
million during the nine-month period ended November 30, 2002, compared to $2.7
million during the nine-month period ended November 30, 2001. Excluding the
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Company's former non-gaming cruise operations, hotel, retail and other
expenses were $2.5 million during the nine-month period ended November 30,
2001.
The Company's consolidated selling, general and administrative expenses were
$23.2 million during the nine-month period ended November 30, 2002, compared
to $24.2 million during the nine-month period ended November 30, 2001.
Excluding the Company's former non-gaming cruise operations, selling, general
and administrative expenses were $24.0 million during the nine-month period
ended November 30, 2001. The Company's St. Louis casino operations
experienced a decrease of $0.8 million in selling, general and administrative
expense primarily due to a decrease in payroll and related costs and a
decrease in valet and parking expense. The Company's Biloxi operations had an
increase of $0.2 million primarily as the result of aggressive hotel
promotions. The Company's leasing operation experienced a $0.2 million
increase in selling, general and administrative expenses as a result of the
termination of the installment sale agreement for the "Surfside Princess" and
the costs associated with securing the vessel. Corporate overhead decreased
$0.3 million primarily related to $0.6 million costs related to the settlement
of a lawsuit and associated legal expenses in the prior year offset by a
severance agreement with a former executive in the current year.
Depreciation and amortization expense was $6.6 million during the nine-month
period ended November 30, 2002, compared to $6.3 million during the nine-month
period ended November 30, 2001, an increase of $0.3 million, or 4.8%. The
leasing operations ceased depreciating assets as of August 31, 2000 based on
management's decision to sell the assets and resumed depreciation in March of
2002 as a result of new accounting guidance. The leasing operations
contributed depreciation expense of $0.4 million for the nine-month period
ended November 30, 2002.
Operating (loss) income. As a result of the foregoing items, the Company
had operating income of $2.2 million during the nine-month period ended
November 30, 2002 compared to $1.4 million during the nine-month period ended
November 30, 2001.
Interest expense, net. The Company incurred net interest expense of $6.6
million during the nine-month period ended November 30, 2002, compared to
$10.5 million during the nine-month period ended November 30, 2001. The
decrease is the result of $4.5 million decrease in interest expense resulting
from June 20, 2002 voluntary petition under Chapter 11 of the Bankruptcy Code,
whereby the noteholders of the Senior Exchange Notes and the Secured Notes
were deemed by management to be undersecured and as a result, interest ceased
to accrue as of the date thereof. Additionally, there was $0.5 million of
interest income in the prior year which resulted from the installment sale
agreement, with no comparable income in the current year.
Reorganization items. The Company incurred reorganization items of $0.8
million during the nine-month period ended November 30, 2002, compared to $0.3
million during the nine-month period ended November 30, 2001. On April 19,
2001, PBLLC filed a voluntary bankruptcy petition for bankruptcy and began
incurring costs associated with its reorganization. On June 20, 2002, the
Company's parent company and PRC-Missouri filed voluntary petitions and in
July 2002, substantially all of the Company's other operating subsidiaries
filed voluntary petitions. Costs associated with the reorganizations consist
of professional fees and U.S. Bankruptcy Trustee fees.
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31
Gain (loss) on disposal of property and equipment. The Company recorded a
loss of $0.1 million during the nine-month period ended November 30, 2002
primarily as a result of the sale of certain gaming equipment. The Company
recorded a gain on disposal of assets of $0.8 million for the nine-month
period ended November 30, 2001, primarily as a result of the sale of the
assets of the Company's former non-gaming cruise operations.
Minority interest expense. The Company accrued $1.0 million minority
interest expense during the nine-month period ended November 30, 2002 compared
to $0.9 million during the nine-month period ended November 30, 2001. During
both periods the minority interest results from the Class B Unit in PBLLC in
which an entity wholly-owned by the Chairman of the Board of the Company owns
and has preferred rights to certain cash flows. Such amounts were accrued but
not paid.
Net loss. The Company incurred a net loss of $6.2 million during the nine-
month period ended November 30, 2002, compared to a net loss of $9.5 million
during the nine-month period ended November 30, 2001.
Liquidity and Capital Resources
The Company meets its working capital requirements from a combination of
internally generated sources including cash from operations and the sale or
charter of assets no longer used in the Company's casino operations.
As discussed above, the Company and its subsidiaries are operating their
businesses as debtors-in-possession under Chapter 11 of the Bankruptcy Code.
In addition to the cash requirements necessary to fund ongoing operations, the
Company anticipates that it will incur significant professional fees and other
restructuring costs in connection with the reorganization. As a result of the
uncertainty surrounding the Company's current circumstances, it is difficult
to predict the Company's actual liquidity needs and sources at this time.
However, based upon current and anticipated levels of operations, during the
pendency of the bankruptcy management believes that its liquidity and capital
resources will be sufficient to maintain its normal operations at current
levels. Costs previously incurred and to be incurred in the future in
connection with the reorganization have been and will continue to be
substantial and, in any event, there can be no assurance that the Company will
be able to reorganize its indebtedness or that its liquidity and capital
resources will be sufficient to maintain its normal operations during the
reorganization period. The Company's access to additional financing is, and
for the foreseeable future will likely continue to be, very limited.
Additionally, any significant interruption or decrease in the revenues derived
by the Company from its operations would have a material adverse effect on the
Company's liquidity and the ability to maintain the Company's operations as
presently conducted.
As a result of the Company's high degree of leverage and the need for
significant capital expenditures at its St. Louis property, the Company was
unable to make the regularly scheduled interest payments of $6.4 million that
were each due and payable March 15 and September 15, 2000. Under the
Indentures pursuant to which the Senior Exchange Notes and Secured Notes were
issued, an Event of Default occurred on April 15, 2000, and is continuing as
of the date hereof. Additionally the Company did not pay the $25.0 million
principal payment due September 15, 2000 on the Senior Exchange Notes. The
holders of at least 25% of the Senior Exchange Notes and Secured Notes were
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notified and instructed the Indenture Trustee to accelerate the Senior
Exchange Notes and Secured Notes and on August 11, 2000, the holders declared
the unpaid principal and interest to be due and payable.
The Company was unable to make the principal and interest payments due
September 15, 2001 and the interest payment due March 15, 2002, on its Senior
and Secured Notes. As of November 30, 2002, principal due on the Senior and
Secured Notes was $56.2 million and $18.8 million, respectively.
The Company requires approximately $6.5 million of cash on hand to fund
daily operations. As of November 30, 2002, the Company had $6.2 million of
non-restricted cash in excess of the $6.5 million. The Company is heavily
dependant on cash generated from operations to continue to operate as planned
in its existing jurisdictions and to make capital expenditures. Management
anticipates that its existing available cash and cash equivalents and its
anticipated cash generated from operations will be sufficient to fund all of
its ongoing operations. The debt obligations will be stayed during the
bankruptcy proceedings. To the extent cash generated from operations is less
than anticipated, the Company may be required to curtail certain planned
expenditures or seek other sources of financing.
The Company had $6.6 million in restricted cash as of November 30, 2002. Of
that amount, $4.9 million relates to the Broadwater Property. Prior to the
PBLLC filing for reorganization under Chapter 11, PBLLC deposited revenues
into lockboxes that were controlled by its lender. Expenditures from the
lockboxes were limited to the operating expenses, capital improvements and
debt service of the Broadwater Property as defined by its loan agreement. The
lender continues to control the capital improvements lockbox. PBLLC currently
operates under a cash collateral stipulation and agreement, which allows PBLLC
to use its cash collateral for normal operations in accordance with certain
terms as defined by the cash collateral agreement. Revenues of PBLLC include
the operations of the hotels and golf course and $3.2 million annually of
proceeds from rental of the Biloxi casino's mooring site. Pursuant to the
bankruptcy reorganization plan submitted by PBLLC, the Company will be
obligated to loan to PBLLC certain amounts necessary to make payments under
the Plan. The Company had $1.7 million restricted for payment as a partial
funding of its obligation under PBLLC's plan of reorganization.
The Company had $0.7 million in restricted short-term investments as of
November 30, 2002, consisting of certificates of deposit guaranteeing certain
performance obligations of the Company.
The Company generated $7.2 million of cash from operating activities during
the nine-month period ending November 30, 2002.
Investing activities of the Company used $4.4 million of cash during the
nine-month period ending November 30, 2002. The Company expended $4.8 million
on gaming equipment and capital improvements. St. Louis expended
approximately $3.9 million, which included adding additional guest parking and
making improvements to existing parking lots, purchasing new guest
transportation vehicles, creating additional gaming space on the "Admiral" and
adding new slot product. Biloxi expended $0.9 million, which included hotel
improvements, new slot product and new guest transportation.
The indenture governing the Company's Senior Exchange Notes (the
"Indenture"), restricts the ability of PCI, TCG and PCI's wholly-owned
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33
subsidiaries which are guarantors of the Senior Exchange Notes (collectively,
the "Guarantors"), among other things, to dispose of or create liens on
certain assets, to make certain investments and to pay dividends. Under the
Indenture, the Guarantors have the ability to seek to borrow additional funds
of $15.0 million and may borrow additional funds for certain uses. The
Indenture also provides that the Guarantors must use cash proceeds from the
sale of certain assets within 180 days to either (i) permanently reduce
certain indebtedness or (ii) contract with an unrelated third party to make
investments or capital expenditures or to acquire long-term tangible assets,
in each case, in gaming and related businesses (provided any such investment
is substantially complete in 270 days.) In the event such proceeds are not so
utilized, the Company must make an offer to all holders of Senior Exchange
Notes to repurchase at par value an aggregate principal amount of Senior
Exchange Notes equal to the amount by which such proceeds exceeds $5.0
million. Certain provisions of the Indenture do not apply to the Company's
consolidated entities which do not guarantee the Senior Exchange Notes.
In conjunction with the purchase of the Broadwater Property, PBLLC borrowed
the sum of $30.0 million from a third party lender, evidenced by a non-
recourse promissory note (the "Indebtedness"). Except as set forth in the
promissory note and related security and guarantee documents, PBLLC's
obligations under the Indebtedness are nonrecourse and are secured by the
Broadwater Property, its improvements and leases thereon. The Indebtedness
bears interest at a variable rate per annum equal to the greater of (i) 8.75%
or (ii) 4% plus the LIBOR 30-day rate.
PBLLC is obligated under the Indebtedness to make monthly payments of
interest accruing under the Indebtedness, and was obligated to repay the
Indebtedness in full on July 22, 2000. In addition, PBLLC was obligated to
pay to the lender a loan fee in the amount of $7.0 million which was fully
earned and non-refundable when the Indebtedness became due. As of the default
date, the PBLLC is accruing, but has not paid, interest on the unpaid loan fee
at the stipulated rate. PBLLC continued to make the monthly interest payments
accruing on the $30.0 million principal through April 19, 2001, when the
Company announced that PBLLC had filed for reorganization under Chapter 11 of
the U.S. Bankruptcy Code in the United States Bankruptcy Court for the
Southern District of Mississippi. The Bankruptcy Court has recently been
presented with a Restructuring Term Sheet representing an agreement in
principal between PBLLC and its lender, its only secured creditor. On
September 30, 2002, the Court requested that an amended plan of reorganization
be filed. It further requested that notice be given to all creditors, parties
and other entities including most of the Company's subsidiaries. The Company
is reviewing this matter in coordination with its lender and will proceed in
an appropriate manner.
The term note payable is collateralized by the vessel M/V "President Casino-
Mississippi" and various equipment and is personally guaranteed by Mr.
Connelly. This note also contains certain covenants which, among other
things, require the Company to maintain a minimum tangible net worth of $40.0
million. The aforementioned default on the Company's Senior Exchange Notes
and Secured Notes also constituted a default under this note. Under the terms
of the term note payable, $2.1 million principal became due and payable in
August 2002. The lender has brought an action against Mr. Connelly under his
personal guarantee. The lender has also filed a motion in the Mississippi
Bankruptcy Court to lift the automatic stay in the case of President Riverboat
Casino-New York, Inc., the owner of the vessel, or in the alternative, order
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34
the owner to abandon the vessel. To date, the Court has not ruled on this
motion.
In connection with the Company's proposed "Destination Broadwater"
development plan, to date, the Company has not identified any particular
financing alternatives or sources as the necessary regulatory approvals have
not been obtained. There can be no assurance that the Company will be able to
obtain the regulatory approvals or the requisite financing. Should the
Company fail to raise the required capital, such failure would materially and
adversely impact the Company's business plan.
Forward Looking Statements
This Quarterly Report on Form 10-Q and certain information provided
periodically in writing and orally by the Company's designated officers and
agents contain certain statements which constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933,
as amended and Section 21E of the Securities Exchange Act of 1934, as amended.
The terms "Company," "we," "our" and "us" refer to President Casinos, Inc.
The words "expect," "believe," "goal," "plan," "intend," "estimate," and
similar expressions and variations thereof are intended to specifically
identify forward-looking statements. Those statements appear in this
Quarterly Report on Form 10-Q and the documents incorporated herein by
reference, particularly "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and include statements regarding the
intent, belief or current expectations of the Company, its directors or its
officers with respect to, among other things: (i) our financial prospects;
(ii) our financing plans and our ability to meet our obligations under our
debt obligations and obtain satisfactory operating and working capital; (iii)
our operating and restructuring strategy; and (iv) the effect of competition
and regulatory developments on our current and expected future revenues. You
are cautioned that any such forward looking statements are not guarantees of
future performance and involve risks and uncertainties, and that actual
results may differ materially from those projected in the forward looking
statements as a result of various factors. The factors that might cause such
differences include, among others, the following: (i) continuation of future
operating and net losses by the Company; (ii) the inability of the Company to
restructure its debt obligations and facilitate PBLLC's successful emergence
from bankruptcy; (iii) the inability of the Company to obtain sufficient cash
from its operations and other resources to fund ongoing obligations and
continue as a going concern; (iv) the ability of the Company to develop,
prosecute, confirm and consummate one or more plans of reorganization with
respect to the Chapter 11 case; (v) risks associated with third parties
proposing and obtaining confirmation of one or more plans of reorganization,
or seeking and obtaining approval for the appointment of a Chapter 11 trustee
or converting the cases to Chapter 7 cases; (vi) the ability of the Company to
obtain trade credit, and shipments and terms with vendors and service
providers; (vii) the Company's ability to maintain contracts that are critical
to its operations; (viii) potential adverse developments with respect to the
Company's liquidity and results of operations; (ix) developments or new
initiatives by our competitors in the markets in which we compete; (x) our
stock price; (xi) adverse governmental or regulatory changes or actions which
could negatively impact our operations; and (xii) other factors including
those identified in the Company's filings made from time-to-time with the
Securities and Exchange Commission. The Company undertakes no obligation to
publicly update or revise forward looking statements to reflect events or
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35
circumstances after the date of this Quarterly Report on Form 10-Q or to
reflect the occurrence of unanticipated events.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
As of November 30, 2002, the Company had $114.1 million of debt, including a
loan fee of $7.0 million associated with the $30.0 million note related to the
Broadwater Property. Of this amount $75.0 million bears contractual interest
at fixed rates and is classified as liabilities subject to compromise. The
remaining $39.1 million bears contractual interest at variable rates. Of this
amount, $2.1 million is classified as liabilities subject to compromise. The
$30.0 million Broadwater Property note payable and associated $7.0 million
loan fee bear interest at a stipulated variable rate at the greater of (i)
8.75% or (ii) 4.0% plus the LIBOR 30-day rate. The M/V "President Casino-
Mississippi" note payable of $2.1 million bears interest at 2.0% over the
prime rate of J.P. Morgan Chase & Company. As of November 30, 2002, the
average interest rate applicable to the debt carrying variable rates was
11.63%. An increase of one percentage point in the average interest rate
applicable to the variable rate debt outstanding as of November 30, 2002,
would increase the Company's annual interest costs by approximately $0.4
million. The Company continues to monitor interest rate markets, but has not
engaged in any hedging transactions with respect to such risks.
Although the Company manages its short-term cash assets to maximize return
with minimal risk, the Company does not invest in market rate sensitive
instruments for trading or other purposes and the Company is not exposed to
foreign currency exchange risks or commodity price risks in its transactions.
Item 4. Controls and Procedures
Within 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and participation of the Company's
management, including the Company's Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to
be included in the Company's periodic filings with the United States
Securities and Exchange Commission.
Part II. Other Information
Item 1. Legal Proceedings
Information with respect to legal proceedings to which the Company is a
party is disclosed in Note 7 of Notes to Condensed Consolidated Financial
Statements included in Part I of this report and is incorporated herein by
reference.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
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Item 3. Defaults Upon Senior Securities
The Company has 13.0% Senior Exchange Notes and 12.0% Secured Notes. The
Company did not pay the regularly scheduled interest payments of $6.4 million
that were each due and payable March 15 and September 15, 2000. Under the
Indentures pursuant to which the Senior Exchange Notes and Secured Notes were
issued, an Event of Default occurred on April 15, 2000, and is continuing as
of the date hereof. Additionally, the Company did not pay the $25.0 million
principal payment due September 15, 2000 on the Senior Exchange Notes. In
November 2000, the Company paid (i) $12.8 million interest and (ii) $18.75
million and $6.25 million principal on the Senior Exchange Notes and Secured
Notes, respectively. The Company did not make the interest payments due
September 15, 2001 and March 15, 2002. On June 20, 2002, the Company filed a
voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code.
The noteholders of the Senior Exchange Notes and the Secured Notes were deemed
by management to be undersecured and as a result, interest ceased to accrue as
of the date of thereof. Total arrearage as of June 20, 2002, was $56.25
million of principal and $9.7 million of interest on the Senior Exchange Notes
and $18.75 million of principal and $3.1 million of interest on the Secured
Notes.
Additionally, PBLLC did not pay the $30.0 million note and the associated
$7.0 million loan fee due July 22, 2000, related to the Broadwater Property.
PBLLC is obligated under the Indebtedness to make monthly payments of interest
accruing under the Indebtedness at a variable rate per annum equal to the
greater of (i) 8.75% or (ii) 4% plus the LIBOR 30-day rate. PBLLC continued
to make the monthly interest payments related to the $30.0 million note
through April 19, 2001, at which time the Company announced that PBLLC had
filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the
United States Bankruptcy Court for the Southern District of Mississippi. In
order to be in compliance with accounting principles generally accepted in the
United States of America, PBLLC continues to accrue interest under the terms
of the Indebtedness. Management believes that actual interest and penalties
that will be determined by the bankruptcy judge may be an amount less than
that being accrued. Total accrued arrearage as of January 14, 2003, is $37.0
million of principal and $9.3 million of interest and fees.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K
None.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
President Casinos, Inc.
-----------------------------
(Registrant)
Date: January 14, 2003 /s/ Ralph J. Vaclavik
-----------------------------
Ralph J. Vaclavik
Senior Vice President and
Chief Financial Officer
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CERTIFICATION
I, John E. Connelly, certify that:
(1) I have reviewed this quarterly report on Form 10-Q of President Casinos,
Inc.;
(2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report; and
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report.
(4) The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period for which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Effective Date;
(5) The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
(6) The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
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39
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: January 14, 2002 /s/ John E. Connelly
-------------------------------------------
John E. Connelly
Chief Executive Officer of
President Casinos, Inc.
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40
CERTIFICATION
I, Ralph J. Vaclavik, certify that:
(1) I have reviewed this quarterly report on Form 10-Q of President Casinos,
Inc.;
(2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report; and
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report.
(4) The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period for which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Effective Date;
(5) The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
(6) The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
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41
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: January 14, 2003 /s/ Ralph J. Vaclavik
-------------------------------------------
Ralph J. Vaclavik
Chief Financial Officer of
President Casinos, Inc.
42
INDEX TO EXHIBITS
-----------------
EXHIBIT NO.
3.1 Restated Articles of Incorporation of the Company. (8)
3.2 By-Laws of the Company, as amended. (4)
4.1 Indenture dated as of August 26, 1994, by and among the Company,
the Guarantors and United States Trust Company of New York ("U.S.
Trust"). (3)
4.1.1 Form of Senior Exchange Note issued pursuant to Indenture. (2)
4.1.2 Warrant Agreement dated as of September 23, 1993, by and between
the Company and U.S. Trust, as Warrant agent. (1)
4.1.3 Warrant Agreement dated as of August 26, 1994, by and between the
Company and U.S. Trust. (3)
4.1.4 Subsidiary Stock Pledge and Collateral Assignment Agreement dated
as of August 26, 1994, by the Company and Subsidiary Pledgors in
favor of U.S. Trust, as collateral agent. (3)
4.2 Rights Agreement, dated as of November 20, 1997, between the
Company and ChaseMellon Shareholder Services, LLC. (5)
4.3 Agreement to Exchange Securities, dated December 3, 1998 by and
among the Company, President Riverboat Casino-Iowa, Inc.
("President Iowa"), President Riverboat Casino-Missouri, Inc.
("President Missouri"), The President Riverboat Casino-
Mississippi, Inc. ("President Mississippi"), Blackhawk, P.R.C.-
Louisiana, Inc., President Riverboat Casino-New York, Inc.
("President New York"), President Casino New Yorker, Inc., PRC
Holdings Corporation, PRC Management, Inc. ("PRC Management"),
PRCX Corporation, President Riverboat Casino-Philadelphia, Inc.
("President Philadelphia"), Vegas Vegas, Inc., and TCG and each
holder of the Company's 13% Senior Exchange Notes due 2001. (6)
4.3.1 Indenture dated as of December 3, 1998, among The Company,
President Iowa, President Missouri, President Mississippi,
Blackhawk, P.R.C.-Louisiana, Inc., President New York, President
Casino New Yorker, Inc., PRC Holdings Corporation, PRC
Management, PRCX Corporation, President Philadelphia, Vegas
Vegas, Inc. and TCG and U.S. Trust Company of Texas, N.A. (6)
4.4.2 President Casinos, Inc. Supplemental Indenture with respect to
$25,000,000 12% Notes due September 15, 2001. (7)
4.4.3 President Casinos, Inc. Supplemental Indenture with respect to
$75,000,000 13% Senior Notes due September 15, 2001. (7)
99.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
99.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
(1) Incorporated by reference from the Company's Registration Statement on
Form S-4 (File No. 33-71332) filed November 5, 1993.
(2) Incorporated by reference from the Company's Registration Statement on
Form S-8 dated June 8, 1994.
(3) Incorporated by reference from the Company's Registration Statement on
Form S-4 (File No. 33-86386) filed November 15, 1994.
(4) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended August 31, 1997 filed October 10,
1997.
(5) Incorporated by reference from the Company's Registration Statement on
Form 8-A dated December 5, 1997.
43
(6) Incorporated by reference from the Company's Report on Form 8-K
dated December 15, 1998.
(7) Incorporated by reference from the Company's Report on Form 8-K dated
November 22, 2000.
(8) Incorporated by reference from the Company's Registration Statement on
Form S-8 dated October 10, 2001.