ISLE OF CAPRI CASINOS INC - FORM 10-Q

Attached files

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EX-32.2 - EX-32.2 - ISLE OF CAPRI CASINOS INC	a17-2654_1ex32d2.htm
EX-32.1 - EX-32.1 - ISLE OF CAPRI CASINOS INC	a17-2654_1ex32d1.htm
EX-31.2 - EX-31.2 - ISLE OF CAPRI CASINOS INC	a17-2654_1ex31d2.htm
EX-31.1 - EX-31.1 - ISLE OF CAPRI CASINOS INC	a17-2654_1ex31d1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 22, 2017

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 0-20538

ISLE OF CAPRI CASINOS, INC.

Delaware		41-1659606
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

600 Emerson Road, Suite 300, Saint Louis, Missouri		63141
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (314) 813-9200

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated ¨

Accelerated filer x

Non-accelerated filer o

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of February 23, 2017, the Company had a total of 41,359,419 shares of Common Stock outstanding (which excludes 706,729 shares held by us in treasury).

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ISLE OF CAPRI CASINOS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

	January 22,			April 24,
	2017			2016
ASSETS
Current assets:
Cash and cash equivalents	$	54,040		$	62,126
Restricted cash	22,650			461
Marketable securities	17,479			19,338
Accounts receivable, net	9,937			12,484
Inventory	5,641			5,580
Prepaid expenses and other assets	14,471			10,545
Assets held for sale	139,335			2,361
Total current assets	263,553			112,895
Property and equipment, net	810,083			810,450
Other assets:
Goodwill	79,776			79,776
Other intangible assets, net	31,609			32,237
Deferred financing costs, net	2,374			3,777
Restricted cash and investments	9,827			9,819
Prepaid deposits and other	4,672			4,996
Deferred income taxes	536			1,144
Long-term assets held for sale	—			139,130
Total assets	$	1,202,430		$	1,194,224
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	85		$	80
Accounts payable	21,748			27,432
Accrued liabilities:
Payroll and related	29,698			34,743
Property and other taxes	18,501			18,814
Income tax payable	71			123
Interest	13,976			14,678
Progressive jackpots and slot club awards	14,306			13,705
Deferred proceeds for assets held for sale	22,000			—
Other	20,472			20,646
Liabilities related to assets held for sale	6,716			7,326
Total current liabilities	147,573			137,547
Long-term debt, less current maturities and net deferred financing costs	881,161			911,688
Deferred income taxes	24,301			37,902
Other accrued liabilities	17,432			17,557
Other long-term liabilities	13,912			13,912
Stockholders’ equity:
Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued	—			—
Common stock, $.01 par value; 60,000,000 shares authorized; shares issued: 42,066,148 at January 22, 2017 and April 24, 2016	421			421
Class B common stock, $.01 par value; 3,000,000 shares authorized; none issued	—			—
Additional paid-in capital	240,815			244,472
Retained earnings (deficit)	(113,509		)	(152,868		)
	127,727			92,025
Treasury stock, 706,729 shares at January 22, 2017 and 1,300,955 at April 24, 2016	(9,676		)	(16,407		)
Total stockholders’ equity	118,051			75,618
Total liabilities and stockholders’ equity	$	1,202,430		$	1,194,224

See notes to the consolidated financial statements.

ISLE OF CAPRI CASINOS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended						Nine Months Ended
	January 22,			January 24,			January 22,			January 24,
	2017			2016			2017			2016
Revenues:
Casino	$	202,203		$	205,707		$	629,623		$	633,746
Rooms	4,495			4,476			16,109			15,711
Food, beverage, pari-mutuel and other	26,297			27,098			78,781			80,906
Gross revenues	232,995			237,281			724,513			730,363
Less promotional allowances	(39,178		)	(40,757		)	(126,488		)	(125,157		)
Net revenues	193,817			196,524			598,025			605,206
Operating expenses:
Casino	29,258			30,644			90,026			92,722
Gaming taxes	51,610			52,295			160,047			161,289
Rooms	1,200			1,155			4,080			4,093
Food, beverage, pari-mutuel and other	9,936			10,783			28,715			31,371
Marine and facilities	9,977			10,260			31,116			32,436
Marketing and administrative	43,741			44,810			134,287			136,970
Corporate and development	5,859			6,141			21,337			20,770
Preopening expense	—			—			597			—
Transaction expense	733			—			4,146			—
Depreciation and amortization	17,281			17,318			51,940			52,151
Total operating expenses	169,595			173,406			526,291			531,802
Operating income	24,222			23,118			71,734			73,404
Interest expense	(16,650		)	(16,836		)	(50,040		)	(51,281		)
Interest income	75			75			230			233
Loss on early extinguishment of debt	—			—			—			(2,966		)
Income from continuing operations before income taxes	7,647			6,357			21,924			19,390
Income tax benefit (provision)	(1,592		)	(904		)	15,140			(2,647		)
Income from continuing operations	6,055			5,453			37,064			16,743
Income from discontinued operations, net of income tax provision of $1,058 and $2,220 for the three and nine months ended January 22, 2017, and income taxes of $- for the three and nine months ended January 24, 2016	2,110			1,162			5,125			4,466
Net income and Comprehensive income	$	8,165		$	6,615		$	42,189		$	21,209

Income per common share-basic:
Income from continuing operations	$	0.15		$	0.13		$	0.90		$	0.41
Income from discontinued operations, net of income taxes	0.05			0.03			0.12			0.11
Net income	$	0.20		$	0.16		$	1.02		$	0.52

Income per common share-diluted:
Income from continuing operations	$	0.15		$	0.13		$	0.89		$	0.40
Income from discontinued operations, net of income taxes	0.05			0.03			0.12			0.11
Net income	$	0.20		$	0.16		$	1.01		$	0.51

Weighted average basic shares	41,357,381			40,730,065			41,310,668			40,669,556
Weighted average diluted shares	41,804,445			41,444,564			41,601,651			41,417,021

See notes to the consolidated financial statements.

ISLE OF CAPRI CASINOS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)

	Shares of			Additional			Retained						Total
	Common	Common		Paid-in			Earnings			Treasury			Stockholders’
	Stock	Stock		Capital			(Deficit)			Stock			Equity
Balance, April 24, 2016	42,066,148	$	421	$	244,472		$	(152,868	)	$	(16,407	)	$	75,618
Net income	—	—		—			42,189			—			42,189
Other comprehensive income (loss), net of tax	—	—		—			—			—			—
Exercise of stock options	—	—		(190		)	—			812			622
Issuance of stock under compensation plans	—	—		(7,302		)	(2,830		)	5,480			(4,652		)
Issuance of restricted stock	—	—		(439		)	—			439			—
Stock compensation expense	—	—		4,274			—			—			4,274
Balance, January 22, 2017	42,066,148	$	421	$	240,815		$	(113,509	)	$	(9,676	)	$	118,051

See notes to the consolidated financial statements.

ISLE OF CAPRI CASINOS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended
	January 22,			January 24,
	2017			2016
Operating activities:
Net income	$	42,189		$	21,209
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	55,884			61,995
Amortization of deferred financing costs	3,178			3,177
Amortization of debt premium	(339		)	(333		)
Loss on early extinguishment of debt	—			2,966
Gain on sale of discontinued operations	—			(6,424		)
Valuation charges	1,152			4,424
Deferred income taxes	(12,994		)	2,574
Stock compensation expense	4,274			3,836
(Gain) loss on disposal of assets	(964		)	66
Changes in operating assets and liabilities:
Marketable securities	1,859			292
Accounts receivable	2,639			794
Income tax payable	(52		)	(58		)
Prepaid expenses and other assets	(3,537		)	(4,374		)
Accounts payable and accrued liabilities	(9,562		)	(3,003		)
Net cash provided by operating activities	83,727			87,141

Investing activities:
Purchase of property and equipment	(61,388		)	(52,674		)
Proceeds from sale of assets held for sale	—			11,448
Proceeds from sale of property and equipment	1,045			46
Increase in restricted cash and investments	(134		)	(378		)
Net cash used in investing activities	(60,477		)	(41,558		)

Financing activities:
Principal payments on debt	(58		)	(62,380		)
Net (repayments) borrowings on line of credit	(31,900		)	21,400
Payment of other long-term obligation	—			(9,384		)
Premium payments on retirement of long-term debt	—			(2,409		)
Payment of deferred financing costs	—			(215		)
Proceeds from exercise of stock options	622			767
Net cash used in financing activities	(31,336		)	(52,221		)

Net decrease in cash and cash equivalents	(8,086		)	(6,638		)
Cash and cash equivalents, beginning of period	62,126			66,437
Cash and cash equivalents, end of the period	$	54,040		$	59,799

See notes to the consolidated financial statements.

ISLE OF CAPRI CASINOS, INC.

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per share amounts)

(Unaudited)

1. Nature of Operations

Isle of Capri Casinos, Inc., a Delaware corporation, was incorporated in February 1990. Except where otherwise noted, the words “we,” “us,” “our” and similar terms, as well as “Company,” refer to Isle of Capri Casinos, Inc. and all of its subsidiaries. We are a developer, owner and operator of branded gaming facilities and related lodging and entertainment facilities in markets throughout the United States. Our wholly owned subsidiaries own or operate fourteen casino gaming facilities in the United States located in Black Hawk, Colorado; Pompano Beach, Florida; Bettendorf, Marquette and Waterloo, Iowa; Lake Charles, Louisiana; Lula and Vicksburg, Mississippi; Boonville, Cape Girardeau, Caruthersville and Kansas City, Missouri; and Nemacolin, Pennsylvania.

Proposed Transaction with Eldorado Resorts, Inc.

On September 19, 2016, the Company entered into a definitive merger agreement whereby Eldorado Resorts, Inc. (“Eldorado” or “ERI”) will acquire all of the outstanding shares of Isle of Capri Casinos, Inc. (“Isle”) for $23.00 in cash or 1.638 shares of Eldorado common stock, at the election of each Isle shareholder, reflecting total consideration of approximately $950 million in cash and stock. Upon completion of the transaction, Eldorado and Isle shareholders will hold approximately 62% and 38%, respectively, of the combined company’s outstanding shares. As a result of the merger, Isle will cease to be a publicly traded company.

The transaction has been approved by the Boards of Directors and shareholders of both Eldorado and Isle. The transaction is subject to approval of applicable gaming authorities and other customary closing conditions, and is expected to be consummated in the second calendar quarter of 2017.

Other than transaction expenses associated with the merger of $733 and $4,146 for the three and nine months ended January 22, 2017, respectively, the terms of the agreement did not impact the Company’s consolidated financial statements.

2. Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America for interim financial reporting. Accordingly, certain information and note disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States have been condensed or omitted. In management’s opinion, the accompanying interim condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results presented. The accompanying interim condensed consolidated financial statements have been prepared without audit. The results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended April 24, 2016 as filed with the SEC (Item 6 (Selected Financial Data), Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)), Item 7A (Quantitative and Qualitative Disclosures About Market Risk) and Item 8 (Financial Statements and Supplementary Data) of foregoing Form 10-K have been superseded by the comparably titled information contained in our Current Report on Form 8-K filed with the SEC on December 21, 2016 and all of our other filings, including Current Reports on Form 8-K, filed with the SEC after such date and through the date of this report, which are available on the SEC’s website at www.sec.gov or our website at www.islecorp.com.

Our fiscal year ends typically on the last Sunday in April. Periodically, this system necessitates a 53-week year. Fiscal 2017 and 2016 are both 52-week years, which commenced on April 25, 2016 and April 27, 2015, respectively.

The condensed consolidated financial statements include our accounts and those of our subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been

made to prior period financial statements to conform to the current period presentation. We view each property as an operating segment and all such operating segments have been aggregated into one reporting segment.

3. New Accounting Pronouncements

As part of the ongoing convergence of GAAP and the International Accounting Standards Board’s current standards on revenue recognition, the Financial Account Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” which provides companies with a single model to use in accounting for revenue arising from contracts with customers. To further clarify certain aspects of the revenue recognition standard pursuant to ASU 2014-09, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedient” and ASU No. 2016-11, “Revenue Recognition and Derivatives and Hedging: Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting” in May 2016, ASU No. 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing” in April 2016 and ASU No. 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” in March 2016. In July 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers - Deferral of the Effective Date”, deferring the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017 with early adoption permitted only for annual periods beginning after December 15, 2016. We are currently evaluating the impact of adopting this accounting standard update on our consolidated financial statements and disclosures.

In April 2015, the FASB issued Update No. 2015-03, “Interest-Imputation of Interest.” This update requires debt issuance costs to be presented as a direct deduction from the carrying amount of the related debt liability. The standard was effective for annual periods beginning after December 15, 2015. The standard requires application of the new guidance on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. We adopted this standard in the first quarter of fiscal 2017 for all periods presented. This reclassification reduced our total assets and total liabilities as previously reported in our consolidated balance sheet for April 24, 2016 by $10.9 million. This reclassification had no effect on our retained earnings or net income previously reported.

In August 2015, the FASB issued Update No. 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements,” which further clarifies the presentation and subsequent measurement of debt issuance costs related to line-of-credit arrangements. This update allows for debt issuance costs related to line-of-credit arrangements to be presented as an asset and subsequent amortization of the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit. The standard is effective for financial statements issued for fiscal years beginning after December 31, 2015, for interim periods within those fiscal years and early adoption is permitted. We adopted this standard in the first quarter of fiscal 2017 and elected to present debt issuance costs related to our Credit Facility as an asset with subsequent amortization.

4. Discontinued Operations

On August 22, 2016, we entered into a definitive agreement to sell our casino and hotel property in Lake Charles, Louisiana, for $134,500, subject to a customary purchase price adjustment, to an affiliate of Laguna Development Corporation, a Pueblo of Laguna-owned business based in Albuquerque, New Mexico. The transaction is expected to be completed in early fiscal 2018, subject to Louisiana Gaming Board approval and other customary closing conditions. We received a $20,000 deposit related to this transaction, which is reflected in restricted cash within current assets in the consolidated balance sheet as of January 22, 2017.

On October 13, 2016, we entered into a definitive agreement to sell our casino in Marquette, Iowa, for $40,000, subject to a customary working capital adjustment, to an affiliate of Casino Queen, based in Swansea, Illinois. As a result, we recorded non-cash pretax valuation charges of $318 and $1,152 during the three and nine months ended January 22, 2017, respectively, to reduce the carrying value of Marquette’s net assets held for sale to the expected net realizable value upon completion of the sale transaction. The transaction is expected to be completed in late fiscal 2017, subject to Iowa Racing and Gaming Commission approval, the Illinois Gaming Control Board approval and

other customary closing conditions. We received a $2,000 deposit related to this transaction, which is reflected in restricted cash within current assets in the consolidated balance sheet as of January 22, 2017.

In the second quarter of fiscal 2017, Lake Charles and Marquette met the requirements for presentation as assets held for sale and discontinued operations under generally accepted accounting principles. Accordingly, the operations of Lake Charles and Marquette have been classified as discontinued operations and as assets held for sale for all periods presented.

On October 19, 2015, we closed our casino property in Natchez, Mississippi, and completed the previously announced sale of the hotel and certain related non-gaming assets to Casino Holding Investment Partners, LLC for net cash proceeds of $11,448. As a result, we recorded a net gain of $2,000 in discontinued operations for the nine months ended January 24, 2016. The net gain consisted of a gain on the sale of the hotel and related non-gaming assets of $6,424, offset by a non-cash pretax charge of $4,424 related to the write-off of the Natchez gaming vessel and certain other assets. The operations of our Natchez property have been classified as discontinued for all periods presented.

The Company incurred $3,192 and $4,682 for capital expenditures at our Lake Charles and Marquette properties during the nine months ended January 22, 2017 and January 24, 2016, respectively, and incurred $258 for capital expenditures at our Natchez property during the nine months ended January 24, 2016.

The results of our discontinued operations are summarized as follows:

	Three Months Ended					Nine Months Ended
	January 22,			January 24,		January 22,			January 24,
	2017			2016		2017			2016
Net revenues	$	31,597		$	34,018	$	101,090		$	116,511
Valuation charges	318			—		1,152			4,424
Depreciation expense	—			3,174		3,944			9,844
Pretax income from discontinued operations	3,168			1,162		7,345			4,466
Income tax provision from discontinued operations	(1,058		)	—		(2,220		)	—
Income from discontinued operations	2,110			1,162		5,125			4,466

The assets and liabilities held for sale were as follows:

	January 22,		April 24,
	2017		2016
Current assets:
Accounts receivable	$	674	$	768
Inventory	629		726
Prepaid expenses and other assets	778		867
Property and equipment, net	87,993		—
Goodwill	28,043		—
Other intangible assets, net	20,998		—
Other	220		—
Total current assets held for sale	$	139,335	$	2,361

Long-term assets:
Property and equipment, net	$	—	$	88,717
Goodwill	—		29,195
Other intangible assets, net	—		20,998
Prepaid deposits and other	—		220
Total long-term assets held for sale	$	—	$	139,130

Current liabilities:
Accounts payable	$	2,141	$	2,291
Payroll and related	2,022		2,173
Property and other taxes	279		613
Progressive jackpots and slot club awards	1,850		1,859
Other	424		390
Total liabilities related to assets held for sale	$	6,716	$	7,326

5. Long-Term Debt

Long-term debt consists of the following:

	January 22,		April 24,
	2017		2016
Senior Secured Credit Facility:
Revolving line of credit, expires April 19, 2018, interest payable at least quarterly at either LIBOR and/or prime plus a margin	$	35,600	$	67,500
5.875% Senior Notes, interest payable semi-annually March 15 and September 15, net	502,202		502,541
8.875% Senior Subordinated Notes, interest payable semi-annually June 15 and December 15	350,000		350,000
Other	2,593		2,652
	890,395		922,693
Less current maturities	85		80
Less deferred financing costs, net	9,149		10,925
Long-term debt less unamortized debt issuance costs	$	881,161	$	911,688

Senior Secured Credit Facility—Our Senior Secured Credit Facility as amended and restated (“Credit Facility”) consists of a $300,000 revolving line of credit. The Credit Facility is secured on a first priority basis by substantially all of our assets and guaranteed by substantially all of our significant subsidiaries.

Our net revolving line of credit availability at January 22, 2017, as limited by our outstanding borrowings, was approximately $256,100, after consideration of approximately $8,300 in outstanding letters of credit. We have an annual commitment fee related to the unused portion of the Credit Facility of up to 0.55%, which is included in interest expense in the accompanying consolidated statements of operations. The weighted average effective interest rates of the Credit Facility for the nine months ended January 22, 2017 was 2.93%.

The Credit Facility includes a number of affirmative and negative covenants. Additionally, we must comply with certain financial covenants including maintenance of a total leverage ratio, senior secured leverage ratio and minimum interest coverage ratio. The Credit Facility also restricts our ability to make certain investments or distributions. We were in compliance with the covenants as of January 22, 2017.

On November 14, 2016, we amended the Credit Facility to modify the maximum amount of proceeds allowable for asset sales to exclude the sale of our Lake Charles property.

5.875% Senior Notes—In March 2013, we issued $350,000 of 5.875% Senior Notes due 2021 (“5.875% Senior Notes”). The net proceeds from the issuance were used to repay term loans under our Credit Facility. On April 14, 2015, we issued an additional $150,000 of 5.875% Senior Notes at a price of 102.0%, which have the same terms and are treated as the same class as the outstanding 5.875% Senior Notes (the “April 2015 issuance”). After deducting the underwriting fees, the net proceeds of $151,500 from the April 2015 issuance were used to purchase a portion of our previously outstanding 7.75% Senior Notes validly tendered pursuant to a cash tender offer for any and all of our outstanding 7.75% Senior Notes (the “Tender Offer”). As a result of these issuances, we capitalized deferred financing costs of $215 in the nine months ended January 24, 2016.

The 5.875% Senior Notes are general unsecured obligations and rank junior to all of our senior secured indebtedness and senior to our senior subordinated indebtedness. The 5.875% Senior Notes are redeemable, in whole or in part, at our option as of March 15, 2016, with call premiums as defined in the indenture governing the 5.875% Senior Notes.

8.875% Senior Subordinated Notes — In August 2012, we issued $350,000 of 8.875% Senior Subordinated Notes due 2020 (“8.875% Senior Subordinated Notes”). The 8.875% Senior Subordinated Notes are general unsecured obligations and rank junior to all of our senior indebtedness. The 8.875% Senior Subordinated Notes became redeemable, in whole or in part, at our option on June 15, 2016, with call premiums as defined in the indenture governing the 8.875% Senior Subordinated Notes.

The 5.875% Senior Notes and 8.875% Senior Subordinated Notes are guaranteed, on a joint and several basis, by substantially all of our significant subsidiaries and certain other subsidiaries as described in Note 11. All of the guarantor subsidiaries are wholly owned by us.

The indentures governing the 5.875% Senior Notes and 8.875% Senior Subordinated Notes limit, among other things, our ability and our restricted subsidiaries’ ability to borrow money, make restricted payments, use assets as security in other transactions, enter into transactions with affiliates, pay dividends, or repurchase stock. The indentures also limit our ability to issue and sell capital stock of subsidiaries, sell assets in excess of specified amounts or merge with or into other companies.

Extinguishment of 7.75% Senior Notes—In March 2011, we issued $300,000 of 7.75% Senior Notes due 2019 at a price of 99.264% (“7.75% Senior Notes”). On April 13, 2015, we accepted for purchase $237,832 of the outstanding 7.75% Senior Notes validly tendered pursuant to a tender offer and we funded the payments utilizing the net proceeds from the 5.875% Senior Notes April 2015 issuance, additional borrowings under our Credit Facility and cash on hand. On April 14, 2015, we issued an irrevocable notice of redemption of the remaining $62,168 of outstanding 7.75% Senior Notes at a redemption price of 103.875% of the principal amount, plus accrued and unpaid interest at the redemption date in accordance with the terms of the indenture governing the 7.75% Senior Notes. On May 14, 2015, we completed the redemption for approximately $65,000, utilizing additional borrowings under our Credit Facility and cash on hand. As a result of the completed redemption, we incurred expenses related to the write-off of the remaining deferred financing costs and the discount, redemption fees and other related costs of $2,966, recorded as a loss on early extinguishment of debt in the consolidated statement of operations for the nine months ended January 24, 2016.

6. Earnings Per Share

The following table sets forth the computation of basic and diluted income per share:

	Three Months Ended				Nine Months Ended
	January 22,		January 24,		January 22,		January 24,
	2017		2016		2017		2016
Numerator:
Income applicable to common shares:
Income from continuing operations	$	6,055	$	5,453	$	37,064	$	16,743
Income from discontinued operations	2,110		1,162		5,125		4,466

Net income	$	8,165	$	6,615	$	42,189	$	21,209

Denominator:
Denominator for basic earnings per share - weighted average shares	41,357,381		40,730,065		41,310,668		40,669,556
Effect of dilutive securities
Employee stock options	186,465		179,083		101,086		183,671
Restricted stock units	260,599		535,416		189,897		563,794
Denominator for diluted earnings per share - adjusted weighted average shares and assumed conversions	41,804,445		41,444,564		41,601,651		41,417,021

Basic earnings per share:
Income from continuing operations	$	0.15	$	0.13	$	0.90	$	0.41
Income from discontinued operations	0.05		0.03		0.12		0.11
Net income	$	0.20	$	0.16	$	1.02	$	0.52

Diluted earnings per share:
Income from continuing operations	$	0.15	$	0.13	$	0.89	$	0.40
Income from discontinued operations	0.05		0.03		0.12		0.11
Net income	$	0.20	$	0.16	$	1.01	$	0.51

Our basic earnings per share are computed by dividing net income by the weighted average number of shares outstanding for the period. Diluted earnings per share reflect the additional dilution from all potentially dilutive securities such as stock options and restricted stock units. Stock options with an exercise price in excess of the average market price of our common stock during the periods representing 29,320 shares, which were anti-dilutive, were excluded from the calculation of common shares for diluted earnings per share for the nine months ended January 22, 2017 and 65,460 shares, which were anti-dilutive, were excluded from the calculation of common shares for diluted earnings per share for the three and nine months ended January 24, 2016, respectively.

7. Stock Based Compensation

Under our 2009 Long-Term Incentive Plan, as amended from time to time, we have issued restricted stock units, performance stock units, restricted stock and stock options.

Restricted Stock Units—During the nine months ended January 22, 2017, we granted 145,516 restricted stock units (“RSUs”) to employees with a weighted average fair market value of $15.16 per unit on the date of grant. The RSUs are awarded to employees under annual long-term incentive grants which will vest and be converted to stock ratably over three years commencing on the one-year anniversary of the grant date. Our aggregate estimate of forfeitures for restricted stock units is 10.3%. As of January 22, 2017, our unrecognized compensation cost for these RSUs was $1,365.

During fiscal 2013, we granted RSUs containing market performance conditions which determined the number of RSUs awarded. The market condition period ended April 26, 2015 and a gross award of 1,532,417 shares was achieved. Per the terms of the award agreement, the awards were issued net of shares necessary to pay minimum withholding taxes with 50% of the RSUs vesting on April 26, 2015 and the remainder vesting on April 26, 2016. The fair value of these RSUs was initially determined utilizing a lattice pricing model which considered a range of assumptions including volatility and risk-free interest rates. On April 26, 2016, 467,073 shares, net of shares to pay minimum withholding taxes, were issued for the vested second RSU tranche.

Performance Stock Units—During the nine months ended January 22, 2017, we granted performance stock units (“PSUs”) to employees with a company performance condition that will determine the number of shares to ultimately vest, if any, up to 216,699 shares. Any shares earned will vest at the end of three years from the date of grant. The probability of meeting the performance condition will be assessed on a regular basis and compensation cost will be adjusted accordingly. Our aggregate estimate of forfeitures for performance stock units for employees is 17.0%. As of January 22, 2017, our unrecognized compensation cost for these PSUs is $2,436, based on current probability assumptions.

Restricted Stock—During the nine months ended January 22, 2017, we issued 32,239 shares of restricted stock to directors with a grant-date fair value of $21.60. Restricted stock awarded under annual long-term incentive grants to employees primarily vests one-third on each anniversary of the grant date and grants to directors vest one-half on the grant date and one-half on the first anniversary of the grant date. Our aggregate estimate of forfeitures for restricted stock for employees and directors is 10.0% and 0%, respectively. As of January 22, 2017, our unrecognized compensation cost for unvested restricted stock was $584 with a remaining weighted average vesting period of 0.9 years.

Stock Options—During the nine months ended January 22, 2017, we issued 310,735 non-qualified stock options, which have a maximum term of seven years and are exercisable in yearly installments of 20% commencing one year after the grant date. The options have a per share grant date fair value of $5.968 utilizing the Black-Scholes-Merton option pricing model with the range of assumptions disclosed in the following table:

	Nine Months Ended
	January 22, 2017
Weighted average expected volatility	44.41	%
Expected dividend yield	0.00	%
Weighted average expected term (in years)	5
Weighted average risk-free interest rate	1.69	%

Weighted average volatility is calculated using the historical volatility of our stock price over a range of dates equal to the expected term of the grant’s options. The weighted average expected term is calculated using historical data that is representative of the option for which the fair value is to be determined. The expected term represents the period of time that options granted are expected to be outstanding. The weighted average risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant for the approximate period of time equivalent to the grant’s expected term. As of January 22, 2017, our aggregate forfeiture rate is 14.4% and our unrecognized compensation cost for unvested options was $1,699.

8. Fair Value

Items Measured at Fair Value on a Recurring Basis—The following table sets forth the assets measured at fair value on a recurring basis, by input level, in the consolidated balance sheets at January 22, 2017 and April 24, 2016:

	January 22, 2017
	Level 1		Level 2		Total
Assets:
Marketable securities	$	7,077	$	10,402	$	17,479
Restricted cash and investments	6,408		3,419		9,827

	April 24, 2016
	Level 1		Level 2		Total
Assets:
Marketable securities	$	8,950	$	10,388	$	19,338
Restricted cash and investments	6,362		3,457		9,819

Marketable securities—The estimated fair values of our marketable securities are determined on an individual asset basis based upon quoted prices of identical assets available in active markets (Level 1), quoted prices of identical assets in inactive markets, or quoted prices for similar assets in active and inactive markets (Level 2), and represent the amounts we would expect to receive if we sold these marketable securities.

Restricted cash and investments—The estimated fair values of our restricted cash and investments are based upon quoted prices available in active markets (Level 1), or quoted prices for similar assets in active and inactive markets (Level 2), and represent the amounts we would expect to receive if we sold our restricted cash and investments.

Other Financial Instruments - The estimated carrying amounts and fair values of our other financial instruments are as follows:

	January 22, 2017				April 24, 2016
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
Financial liabilities:
Revolving line of credit	$	35,600	$	35,600	$	67,500	$	66,150
5.875% Senior notes	502,202		518,605		502,541		520,000
8.875% Senior subordinated notes	350,000		367,062		350,000		367,206
Other long-term debt	2,593		2,593		2,652		2,652
Other long-term liabilities	13,912		13,912		13,912		13,912

The fair value of our long-term debt or other long-term obligations is estimated based on the quoted market price of the underlying debt issue (Level 1) or, when a quoted market price is not available, the discounted cash flow of future payments utilizing current rates available to us for debt of similar remaining maturities (Level 3). Debt obligations with a short remaining maturity have a carrying amount that approximates fair value.

9. Income Taxes

Our effective tax rate (“ETR”) from continuing operations for the three and nine months ended January 22, 2017 was 20.88% and (69.04%), as compared to an ETR of 14.22% and 13.65% for the three and nine months ended January 24, 2016. Our ETR is based on statutory rates applied to our pretax book income, adjusted for permanent differences and other items, including partial release of valuation allowances due to current year pretax book income and changes in status of certain indefinite lived intangible assets.

As of January 22, 2017, we had a full valuation allowance on our state deferred tax assets other than those related to the state deferred tax assets at our Florida casino. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will be realized. Realization of deferred tax assets is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. Due to the Company’s history of losses, valuation allowances have been established except for future taxable income that will result from the reversal of taxable temporary differences, other than the indefinite lived intangibles.

The assets and liabilities of Lake Charles and Marquette were classified as held for sale as of October 23, 2016 (see Note 4). The deferred tax liability associated with the goodwill and intangible assets of these two entities, previously treated as indefinite lived, now have a finite life. The expected reversal of this deferred tax liability associated with the goodwill and intangible assets have resulted in the release of $19,552 of valuation allowances recorded in prior years. As of January 22, 2017, the remaining federal valuation allowance amount has been substantially reversed.

10. Supplemental Disclosures

Cash Flow — For the nine months ended January 22, 2017 and January 24, 2016, we made net cash interest payments of $47,860 and $49,507, respectively. Additionally, we made net income tax payments of $125 and $130 during the nine months ended January 22, 2017 and January 24, 2016, respectively.

The change in accrued purchases of property and equipment in accounts payable was a decrease of $7,142 and an increase of $5,927, for the nine months ended January 22, 2017 and January 24, 2016, respectively.

During the nine months ended January 22, 2017, we capitalized interest of $295, primarily related to our land-based casino construction at our Bettendorf property, which was completed on June 24, 2016. During the nine months ended January 24, 2016, we capitalized interest of $411, primarily related to hotel renovations and land-based casino construction at our Bettendorf property.

11. Consolidating Condensed Financial Information

Certain of our wholly owned subsidiaries have fully and unconditionally guaranteed on a joint and several basis, the payment of all obligations under our 5.875% Senior Notes and 8.875% Senior Subordinated Notes.

The following wholly owned subsidiaries of the Company are guarantors, on a joint and several basis, under the 5.875% Senior Notes and 8.875% Senior Subordinated Notes: Black Hawk Holdings, L.L.C.; CCSC/Blackhawk, Inc.; IC Holdings Colorado, Inc.; IOC-Black Hawk Distribution Company, L.L.C.; IOC-Boonville, Inc.; IOC-Caruthersville, L.L.C.; IOC-Kansas City, Inc.; IOC-Lula, Inc.; IOC-Natchez, Inc.; IOC-Black Hawk County, Inc.; IOC Holdings, L.L.C.; IOC-Vicksburg, Inc.; IOC-Vicksburg, LLC; Rainbow Casino- Vicksburg Partnership, L.P.; IOC Cape Girardeau, LLC; Isle of Capri Bettendorf, L.C; Isle of Capri Black Hawk, L.L.C.; Isle of Capri Marquette, Inc.; PPI, Inc.; and St. Charles Gaming Company, L.L.C. Each of the subsidiaries’ guarantees is joint and several with the guarantees of the other subsidiaries.

Consolidating condensed balance sheets as of January 22, 2017 and April 24, 2016 are as follows:

	As of January 22, 2017
	Isle of Capri							Consolidating
	Casinos, Inc.				Non-			and			Isle of Capri
	(Parent		Guarantor		Guarantor			Eliminating			Casinos, Inc.
	Obligor)		Subsidiaries		Subsidiaries			Entries			Consolidated
Balance Sheet
Current assets	$	36,096	$	211,174	$	18,200		$	(1,917	)	$	263,553
Intercompany receivables	313,709		—		—			(313,709		)	—
Investments in subsidiaries	676,497		3,358		—			(679,855		)	—
Property and equipment, net	3,300		784,345		22,438			—			810,083
Other assets	32,193		117,462		27,994			(48,855		)	128,794
Total assets	$	1,061,795	$	1,116,339	$	68,632		$	(1,044,336	)	$	1,202,430

Current liabilities	$	57,282	$	67,087	$	25,121		$	(1,917	)	$	147,573
Intercompany payables	—		258,309		55,400			(313,709		)	—
Long-term debt, less current maturities and net deferred financing costs	881,161		—		—			—			881,161
Other accrued liabilities	5,301		92,270		6,929			(48,855		)	55,645
Stockholders’ equity	118,051		698,673		(18,818		)	(679,855		)	118,051
Total liabilities and stockholders’ equity	$	1,061,795	$	1,116,339	$	68,632		$	(1,044,336	)	$	1,202,430

	As of April 24, 2016
	Isle of Capri							Consolidating
	Casinos, Inc.				Non-			and			Isle of Capri
	(Parent		Guarantor		Guarantor			Eliminating			Casinos, Inc.
	Obligor)		Subsidiaries		Subsidiaries			Entries			Consolidated
Balance Sheet
Current assets	$	10,575	$	76,646	$	25,804		$	(130	)	$	112,895
Intercompany receivables	424,693		—		—			(424,693		)	—
Investments in subsidiaries	586,569		3,358		—			(589,927		)	—
Property and equipment, net	3,650		782,636		24,164			—			810,450
Other assets	4,205		258,204		26,974			(18,504		)	270,879
Total assets	$	1,029,692	$	1,120,844	$	76,942		$	(1,033,254	)	$	1,194,224

Current liabilities	$	35,862	$	77,128	$	24,687		$	(130	)	$	137,547
Intercompany payables	—		371,104		53,589			(424,693		)	—
Long-term debt, less current maturities and net deferred financing costs	911,688		—		—			—			911,688
Other accrued liabilities	6,524		74,267		7,084			(18,504		)	69,371
Stockholders’ equity	75,618		598,345		(8,418		)	(589,927		)	75,618
Total liabilities and stockholders’ equity	$	1,029,692	$	1,120,844	$	76,942		$	(1,033,254	)	$	1,194,224

Consolidating condensed statements of operations for the three and nine months ended January 22, 2017 and January 24, 2016 are as follows:

	For the Three Months Ended January 22, 2017
	Isle of Capri									Consolidating
	Casinos, Inc.						Non-			and			Isle of Capri
	(Parent			Guarantor			Guarantor			Eliminating			Casinos, Inc.
Statement of Operations	Obligor)			Subsidiaries			Subsidiaries			Entries			Consolidated
Revenues:
Casino	$	—		$	193,447		$	8,756		$	—		$	202,203
Rooms, food, beverage, pari-mutuel and other	108			29,713			2,888			(1,917		)	30,792
Management fee revenue	6,825			—			—			(6,825		)	—
Gross revenues	6,933			223,160			11,644			(8,742		)	232,995
Less promotional allowances	—			(37,128		)	(2,050		)	—			(39,178		)
Net revenues	6,933			186,032			9,594			(8,742		)	193,817

Operating expenses:
Casino	—			27,612			1,646			—			29,258
Gaming taxes	—			48,087			3,523			—			51,610
Rooms, food, beverage, pari-mutuel and other	6,636			61,724			5,003			(1,917		)	71,446
Management fee expense	—			6,525			300			(6,825		)	—
Depreciation and amortization	263			16,308			710			—			17,281
Total operating expenses	6,899			160,256			11,182			(8,742		)	169,595

Operating income (loss)	34			25,776			(1,588		)	—			24,222
Interest expense, net	(8,819		)	(7,325		)	(431		)	—			(16,575		)
Equity in income (loss) of subsidiaries	10,963			(764		)	—			(10,199		)	—
Income (loss) from continuing operations before income taxes	2,178			17,687			(2,019		)	(10,199		)	7,647
Income tax benefit (provision)	3,877			(5,851		)	382			—			(1,592		)
Income (loss) from continuing operations	6,055			11,836			(1,637		)	(10,199		)	6,055
Income (loss) of discontinued operations	2,110			1,714			—			(1,714		)	2,110
Net income (loss)	$	8,165		$	13,550		$	(1,637	)	$	(11,913	)	$	8,165

	For the Three Months Ended January 24, 2016
	Isle of Capri									Consolidating
	Casinos, Inc.						Non-			and			Isle of Capri
	(Parent			Guarantor			Guarantor			Eliminating			Casinos, Inc.
Statement of Operations	Obligor)			Subsidiaries			Subsidiaries			Entries			Consolidated
Revenues:
Casino	$	—		$	196,952		$	8,755		$	—		$	205,707
Rooms, food, beverage, pari-mutuel and other	22			30,629			2,840			(1,917		)	31,574
Management fee revenue	6,931			—			—			(6,931		)	—
Gross revenues	6,953			227,581			11,595			(8,848		)	237,281
Less promotional allowances	—			(38,866		)	(1,891		)	—			(40,757		)
Net revenues	6,953			188,715			9,704			(8,848		)	196,524

Operating expenses:
Casino	—			28,984			1,660			—			30,644
Gaming taxes	—			48,816			3,479			—			52,295
Rooms, food, beverage, pari-mutuel and other	6,474			63,881			4,711			(1,917		)	73,149
Management fee expense	—			6,631			300			(6,931		)	—
Depreciation and amortization	446			15,797			1,075			—			17,318
Total operating expenses	6,920			164,109			11,225			(8,848		)	173,406

Operating income (loss)	33			24,606			(1,521		)	—			23,118
Interest expense, net	(7,525		)	(8,802		)	(434		)	—			(16,761		)
Equity in income (loss) of subsidiaries	8,549			192			—			(8,741		)	—
Income (loss) from continuing operations before income taxes	1,057			15,996			(1,955		)	(8,741		)	6,357
Income tax benefit (provision)	4,396			(6,209		)	909			—			(904		)
Income (loss) from continuining operations	5,453			9,787			(1,046		)	(8,741		)	5,453
Income (loss) of discontinued operations	1,162			(373		)	—			373			1,162
Net income (loss)	$	6,615		$	9,414		$	(1,046	)	$	(8,368	)	$	6,615

	For the Nine Months Ended January 22, 2017
	Isle of Capri									Consolidating
	Casinos, Inc.						Non-			and			Isle of Capri
	(Parent			Guarantor			Guarantor			Eliminating			Casinos, Inc.
Statement of Operations	Obligor)			Subsidiaries			Subsidiaries			Entries			Consolidated
Revenues:
Casino	$	—		$	599,790		$	29,833		$	—		$	629,623
Rooms, food, beverage, pari-mutuel and other	144			91,620			9,009			(5,883		)	94,890
Management fee revenue	21,143			—			—			(21,143		)	—
Gross revenues	21,287			691,410			38,842			(27,026		)	724,513
Less promotional allowances	—			(119,987		)	(6,501		)	—			(126,488		)
Net revenues	21,287			571,423			32,341			(27,026		)	598,025

Operating expenses:
Casino	—			84,945			5,081			—			90,026
Gaming taxes	—			147,835			12,212			—			160,047
Rooms, food, beverage, pari-mutuel and other	27,944			188,811			13,406			(5,883		)	224,278
Management fee expense	—			20,243			900			(21,143		)	—
Depreciation and amortization	869			48,704			2,367			—			51,940
Total operating expenses	28,813			490,538			33,966			(27,026		)	526,291

Operating income (loss)	(7,526		)	80,885			(1,625		)	—			71,734
Interest expense, net	(24,039		)	(24,479		)	(1,292		)	—			(49,810		)
Equity in income (loss) of subsidiaries	38,026			(540		)	—			(37,486		)	—
Income (loss) from continuing operations before income taxes	6,461			55,866			(2,917		)	(37,486		)	21,924
Income tax benefit (provision)	30,603			(16,480		)	1,017			—			15,140
Income (loss) from continuining operations	37,064			39,386			(1,900		)	(37,486		)	37,064
Income (loss) of discontinued operations	5,125			1,683			—			(1,683		)	5,125
Net income (loss)	$	42,189		$	41,069		$	(1,900	)	$	(39,169	)	$	42,189

	For the Nine Months Ended January 24, 2016
	Isle of Capri									Consolidating
	Casinos, Inc.						Non-			and			Isle of Capri
	(Parent			Guarantor			Guarantor			Eliminating			Casinos, Inc.
Statement of Operations	Obligor)			Subsidiaries			Subsidiaries			Entries			Consolidated
Revenues:
Casino	$	—		$	602,795		$	30,951		$	—		$	633,746
Rooms, food, beverage, pari-mutuel and other	57			93,441			9,220			(6,101		)	96,617
Management fee revenue	21,350			—			—			(21,350		)	—
Gross revenues	21,407			696,236			40,171			(27,451		)	730,363
Less promotional allowances	—			(118,315		)	(6,842		)	—			(125,157		)
Net revenues	21,407			577,921			33,329			(27,451		)	605,206

Operating expenses:
Casino	—			87,491			5,231			—			92,722
Gaming taxes	—			148,917			12,372			—			161,289
Rooms, food, beverage, pari-mutuel and other	21,601			194,737			15,403			(6,101		)	225,640
Management fee expense	—			20,450			900			(21,350		)	—
Depreciation and amortization	1,335			47,607			3,209			—			52,151
Total operating expenses	22,936			499,202			37,115			(27,451		)	531,802

Operating income (loss)	(1,529		)	78,719			(3,786		)	—			73,404
Interest expense, net	(22,855		)	(26,691		)	(1,502		)	—			(51,048		)
Loss on early extinguishment of debt	(2,966		)	—			—			—			(2,966		)
Equity in income (loss) of subsidiaries	33,192			234			—			(33,426		)	—
Income (loss) from continuing operations before income taxes	5,842			52,262			(5,288		)	(33,426		)	19,390
Income tax benefit (provision)	10,901			(16,306		)	2,758			—			(2,647		)
Income (loss) from continuining operations	16,743			35,956			(2,530		)	(33,426		)	16,743
Income (loss) of discontinued operations	4,466			(199		)	—			199			4,466
Net income (loss)	$	21,209		$	35,757		$	(2,530	)	$	(33,227	)	$	21,209

Consolidating condensed statements of cash flows for the nine months ended January 22, 2017 and January 24, 2016 are as follows:

	Nine Months Ended January 22, 2017
	Isle of Capri									Consolidating
	Casinos, Inc.						Non-			and			Isle of Capri
	(Parent			Guarantor			Guarantor			Eliminating			Casinos, Inc.
Statement of Cash Flows	Obligor)			Subsidiaries			Subsidiaries			Entries			Consolidated
Net cash (used in) provided by operating activities	$	(29,158	)	$	111,406		$	1,479		$	—		$	83,727

Investing Activities:
Purchases of property and equipment, net of proceeds	(689		)	(59,008		)	(646		)	—			(60,343		)
Restricted cash and investments	—			—			(134		)	—			(134		)
Parent company investment in subsidiaries	60,473			—			—			(60,473		)	—
Net cash provided by (used in) investing activities	59,784			(59,008		)	(780		)	(60,473		)	(60,477		)

Financing Activities:
Principal payments on debt	(58		)	—			—			—			(58		)
Net repayments on line of credit	(31,900		)	—			—			—			(31,900		)
Proceeds from exercise of stock options	622			—			—			—			622
Net proceeds from (payments to) related parties	—			(53,783		)	(6,690		)	60,473			—
Net cash provided by (used in) by financing activities	(31,336		)	(53,783		)	(6,690		)	60,473			(31,336		)

Net increase (decrease) in cash and cash equivalents	(710		)	(1,385		)	(5,991		)	—			(8,086		)
Cash and cash equivalents at beginning of period	5,155			48,382			8,589			—			62,126
Cash and cash equivalents at end of the period	$	4,445		$	46,997		$	2,598		$	—		$	54,040

	Nine Months Ended January 24, 2016
	Isle of Capri									Consolidating
	Casinos, Inc.						Non-			and			Isle of Capri
	(Parent			Guarantor			Guarantor			Eliminating			Casinos, Inc.
Statement of Cash Flows	Obligor)			Subsidiaries			Subsidiaries			Entries			Consolidated
Net cash (used in) provided by operating activities	$	2,101		$	83,692		$	1,348		$	—		$	87,141

Investing Activities:
Purchases of property and equipment, net of proceeds	(353		)	(51,869		)	(406		)	—			(52,628		)
Proceeds from sales of assets held for sale	—			11,448			—			—			11,448
Restricted cash and investments	—			—			(378		)	—			(378		)
Parent company investment in subsidiaries	32,319			—			—			(32,319		)	—
Net cash provided by (used in) investing activities	31,966			(40,421		)	(784		)	(32,319		)	(41,558		)

Financing Activities:
Principal payments on debt	(62,222		)	—			(158		)	—			(62,380		)
Net borrowings on line of credit	21,400			—			—			—			21,400
Payment of other long-term obligation	—			(9,384		)	—			—			(9,384		)
Premium payments on retirement of long-term debt	(2,409		)	—			—			—			(2,409		)
Payments of deferred financing costs	(215		)	—			—			—			(215		)
Proceeds from exercise of stock options	767			—			—			—			767
Net proceeds from (payments to) related parties	—			(44,179		)	11,860			32,319			—
Net cash used in financing activities	(42,679		)	(53,563		)	11,702			32,319			(52,221		)

Net increase (decrease) in cash and cash equivalents	(8,612		)	(10,292		)	12,266			—			(6,638		)
Cash and cash equivalents at beginning of period	5,077			53,033			8,327			—			66,437
Cash and cash equivalents at end of the period	$	(3,535	)	$	42,741		$	20,593		$	—		$	59,799

12. Commitments and Contingencies

We are subject to certain federal, state and local environmental protection, health and safety laws, regulations and ordinances that apply to businesses generally, and are subject to cleanup requirements at certain of our facilities as a result thereof. We have not made, and do not anticipate making material expenditures, nor do we anticipate incurring delays with respect to environmental remediation or protection. However, in part because our present and future development sites have, in some cases, been used as manufacturing facilities or other facilities that generate materials that are required to be remediated under environmental laws and regulations, there can be no guarantee that additional pre-existing conditions will not be discovered and we will not experience material liabilities or delays.

We are subject to various contingencies and litigation matters and have a number of unresolved claims. Although the ultimate liability of these contingencies, this litigation and these claims cannot be determined at this time, we believe they will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This report contains statements that we believe are, or may be considered to be, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this report regarding the prospects of our industry or our prospects, plans, financial position or business strategy, may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking words such as “may,” “will,” “expect,” “intend,” “estimate,” “foresee,” “project,” “anticipate,” “believe,” “plans,” “forecasts,” “continue” or “could” or the negatives of these terms or variations of them or similar terms. Furthermore, such forward-looking statements may be included in various filings that we make with the SEC or press releases or oral statements made by or with the approval of one of our authorized executive officers. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will prove to be correct and are not guarantees of future performance. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. Readers are cautioned not to place undue reliance on any forward-looking statements contained herein, which reflect management’s opinions only as of the date hereof. Except as required by law, we undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements. You are advised, however, to consult any additional disclosures we make in our reports to the SEC. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this report.

For a more complete description of the risks that may affect our business, see our Annual Report on Form 10-K for the year ended April 24, 2016, our Quarterly Report on Form 10-Q for the quarter ended October 23, 2016 and the information under the heading Item 1A Part II of this Quarterly Report on Form 10-Q.

Executive Overview

We are a developer, owner and operator of branded gaming facilities and related dining, lodging and entertainment facilities in regional markets in the United States. We have sought and established geographic diversity to limit the risks caused by weather, regional economic difficulties, gaming tax rates and regulations of local gaming authorities. We currently operate casinos in Colorado, Florida, Iowa, Louisiana, Mississippi, Missouri and Pennsylvania.

Our operating results for the periods presented have been affected, both positively and negatively, by current economic conditions and several other factors discussed in detail below. Our historical operating results may not be indicative of our future results of operations because of these factors and the changing competitive landscape in each of our markets, as well as by factors discussed elsewhere herein. This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Current Report on Form 8-K filed with the SEC on December 21, 2016 and by giving consideration to the following:

Items Impacting Income from Continuing Operations

Pending Merger—On September 19, 2016, we entered into a definitive merger agreement whereby Eldorado Resorts, Inc. (“Eldorado,” or “ERI”) will acquire all of the outstanding shares of Isle of Capri Casinos, Inc. (“Isle”) for $23.00 in cash or 1.638 shares of Eldorado common stock, at the election of each Isle shareholder, reflecting total consideration of approximately $950 million in cash and stock. Upon completion of the transaction, Eldorado and Isle shareholders will hold approximately 62% and 38%, respectively, of the combined company’s outstanding shares. As a result of the merger, Isle will cease to be a publicly traded company.

The transaction has been approved by the Boards of Directors and stockholders of both Eldorado and Isle. The transaction is subject to approval of applicable gaming authorities and other customary closing conditions, and is expected to be consummated in the second calendar quarter of 2017.

Other than transaction expenses associated with the merger of $0.7 million and $4.1 million for the three and nine months ended January 22, 2017, the terms of the agreement did not impact the Company’s consolidated financial statements.

Debt Refinancing—In May 2015, we redeemed the remaining $62.0 million of our 7.75% Senior Notes and incurred a loss on early extinguishment of debt of $3.0 million in the nine months ended January 24, 2016.

Hurricane Matthew—On October 6, 2016, our property in Pompano Beach, Florida was closed for 24 hours due to Hurricane Matthew.

Income Tax Benefit—During the nine months ended January 22, 2017, we released a valuation allowance of $19.6 million as a result of the change in status of the indefinite lived intangible assets associated with our Lake Charles and Marquette properties.

Discontinued Operations— On August 22, 2016, we entered into a definitive agreement to sell our casino and hotel property in Lake Charles, Louisiana, for $134.5 million, subject to a customary purchase price adjustment, to an affiliate of Laguna Development Corporation, a Pueblo of Laguna-owned business based in Albuquerque, New Mexico. The transaction is expected to be completed in early fiscal 2018, subject to Louisiana Gaming Board approval and other customary closing conditions.

On October 13, 2016, we entered into a definitive agreement to sell our casino in Marquette, Iowa, for $40.0 million, subject to a customary working capital adjustment, to an affiliate of Casino Queen, based in Swansea, Illinois. The transaction is expected to be completed in late fiscal 2017, subject to Iowa Racing and Gaming Commission approval, the Illinois Gaming Control Board approval and other customary closing conditions.

On October 19, 2015, we closed our casino property in Natchez, Mississippi and completed the previously announced sale of the hotel and certain related non-gaming assets to Casino Holding Investment Partners, LLC for net cash proceeds of $11.4 million. As a result of our decision to separately sell the Natchez gaming vessel and certain other assets, we determined that the carrying value of the assets were greater than their net realizable value and recorded a non-cash pretax charge of $4.4 million during the nine months ended January 24, 2016. Subsequently, we recorded a net gain of $2.0 million in discontinued operations during fiscal 2016. The net gain consisted of a gain on the sale of the hotel and related non-gaming assets of $6.4 million, offset by the non-cash pretax charge of $4.4 million. The operations of our Natchez property have been classified as discontinued for all periods presented.

Results of Operations

Revenues and operating expenses for the three and nine months ended January 22, 2017 and January 24, 2016 are as follows:

	Three Months Ended
	January 22,			January 24,						Percentage
(in thousands)	2017			2016			Variance			Variance
Revenues:
Casino	$	202,203		$	205,707		$	(3,504	)	-1.7	%
Rooms	4,495			4,476			19			0.4	%
Food, beverage, pari-mutuel and other	26,297			27,098			(801		)	-3.0	%
Gross revenues	232,995			237,281			(4,286		)	-1.8	%
Less promotional allowances	(39,178		)	(40,757		)	1,579			-3.9	%
Net revenues	193,817			196,524			(2,707		)	-1.4	%

Operating expenses:
Casino	29,258			30,644			(1,386		)	-4.5	%
Gaming taxes	51,610			52,295			(685		)	-1.3	%
Rooms	1,200			1,155			45			3.9	%
Food, beverage, pari-mutuel and other	9,936			10,783			(847		)	-7.9	%
Marine and facilities	9,977			10,260			(283		)	-2.8	%
Marketing and administrative	43,741			44,810			(1,069		)	-2.4	%
Corporate and development	5,859			6,141			(282		)	-4.6	%
Transacton expense	733			—			733			N/M
Depreciation and amortization	17,281			17,318			(37		)	-0.2	%
Total operating expenses	$	169,595		$	173,406		(3,811		)	-2.2	%

	Nine Months Ended
	January 22,			January 24,						Percentage
(in thousands)	2017			2016			Variance			Variance
Revenues:
Casino	$	629,623		$	633,746		$	(4,123	)	-0.7	%
Rooms	16,109			15,711			398			2.5	%
Food, beverage, pari-mutuel and other	78,781			80,906			(2,125		)	-2.6	%
Gross revenues	724,513			730,363			(5,850		)	-0.8	%
Less promotional allowances	(126,488		)	(125,157		)	(1,331		)	1.1	%
Net revenues	598,025			605,206			(7,181		)	-1.2	%

Operating expenses:
Casino	90,026			92,722			(2,696		)	-2.9	%
Gaming taxes	160,047			161,289			(1,242		)	-0.8	%
Rooms	4,080			4,093			(13		)	-0.3	%
Food, beverage, pari-mutuel and other	28,715			31,371			(2,656		)	-8.5	%
Marine and facilities	31,116			32,436			(1,320		)	-4.1	%
Marketing and administrative	134,287			136,970			(2,683		)	-2.0	%
Corporate and development	21,337			20,770			567			2.7	%
Preopening expense	597			—			597			N/M
Transaction expense	4,146			—			4,146			N/M
Depreciation and amortization	51,940			52,151			(211		)	-0.4	%
Total operating expenses	$	526,291		$	531,802		(5,511		)	-1.0	%

Casino — Casino revenues decreased $3.5 million, or 1.7%, for the three months ended January 22, 2017, as compared to the same period in fiscal 2016.

Casino revenues decreased $4.1 million, or 0.7%, for the nine months ended January 22, 2017, as compared to the same period in fiscal 2016.

Casino operating expenses decreased $1.4 million, or 4.5%, and $2.7 million, or 2.9%, for the three and nine months ended January 22, 2017, respectively, as compared to the same period in the prior fiscal year. The decrease in casino operating expenses reflects our continuing efforts to manage our casino operating expenses.

Gaming Taxes — State and local gaming taxes decreased $0.7 million, or 1.3%, and $1.2 million, or 0.8%, for the three and nine months ended January 22, 2017, respectively, as compared to the same period in the prior fiscal year, which is a result of changes in our overall gaming revenues and changes in the mix of gaming revenues derived from states with different gaming tax rates.

Rooms — Rooms revenue was flat to prior year at $4.5 million and increased $0.4 million, or 2.5%, during the three and nine months ended January 22, 2017, respectively, as compared to the same period in the prior fiscal year.

Food, beverage, pari-mutuel and other — Food, beverage, pari-mutuel and other revenue decreased $0.8 million, or 3.0%, and $2.1 million, or 2.6%, for the three and nine months ended January 22, 2017, respectively, as compared to the same period in fiscal 2016, primarily resulting from the closures of our buffets in Kansas City and Black Hawk for renovations. The Kansas City buffet closed during the first quarter and the Black Hawk buffet closed in early September. Both buffets reopened in mid-December.

Food, beverage, pari-mutuel and other expense — Food, beverage, pari-mutuel and other expense decreased $0.8 million, or 7.9%, and $2.7 million, or 8.5%, for the three and nine months ended January 22, 2017, respectively, as compared to the same period in fiscal 2016, due in part to the closure of the Kansas City and Black Hawk buffets and initiatives to reduce cost of sales.

Promotional Allowances — Promotional allowances decreased $1.6 million, or 3.9%, and increased $1.3 million, or 1.1%, for the three and nine months ended January 22, 2017, respectively, as compared to the same period in the prior fiscal year, reflecting changes in our marketing programs.

Marketing and Administrative — Marketing and administrative expenses decreased $1.1 million, or 2.4%, for the three months ended January 22, 2017 as compared to the same period in the prior fiscal year, reflecting changes in our marketing programs as well as savings from cost reduction initiatives.

Marketing and administrative expenses decreased $2.7 million, or 2.0%, for the nine months ended January 22, 2017 as compared to the same period in the prior fiscal year. Excluding a $1.0 million gain on the sale of the Bettendorf vessel and the $0.3 million write-off of costs related to the potential development of a new administration building at Pompano, with which we determined we would not move forward, marketing and administrative expenses decreased $2.0 million, or 1.4%, reflecting changes in our marketing programs as well as savings from cost reduction initiatives.

Corporate and Development —Our corporate and development expenses decreased $0.3 million during the three months ended January 22, 2017, compared to the same period of the prior fiscal year. Excluding a $0.5 million favorable forfeiture adjustment in stock compensation expense in the prior year third quarter, corporate and development expenses decreased $0.8 million, or 11.9%, largely a result of reductions in payroll expense and legal and professional services expenses.

During the nine months ended January 22, 2017, our corporate and development expenses were $21.3 million compared to $20.8 million for the nine months ended January 24, 2016.

Depreciation and Amortization — Depreciation and amortization expense was flat for the three months ended January 22, 2017 and decreased $0.2 million during the nine months ended January 22, 2017, respectively.

Other Income (Expense) and Income Taxes

Interest expense, interest income, loss on early extinguishment of debt and income tax (provision) benefit for the three and nine months ended January 22, 2017 and January 24, 2016 are as follows:

	Three Months Ended
	January 22,			January 24,						Percentage
(in thousands)	2017			2016			Variance			Variance

Interest expense	$	(16,650	)	$	(16,836	)	$	186		-1.1	%
Interest income	75			75			—			0.0	%
Income tax provision	(1,592		)	(904		)	(688		)	76.1	%

	Nine Months Ended
	January 22,			January 24,						Percentage
(in thousands)	2017			2016			Variance			Variance

Interest expense	$	(50,040	)	$	(51,281	)	$	1,241		-2.4	%
Interest income	230			233			(3		)	-1.3	%
Loss on early extinguishment of debt	—			(2,966		)	2,966			-100.0	%
Income tax benefit (provision)	15,140			(2,647		)	17,787			-672.0	%

Interest Expense — Interest expense decreased $0.2 million, or 1.1%, and $1.2 million, or 2.4%, for the three and nine months ended January 22, 2017, respectively, as compared to the same periods in the prior fiscal year. This decrease is primarily a result of a decrease in our overall debt balance and the benefit of refinancing our 7.75% Senior Notes in May 2015. We capitalized interest expense of $0.3 million during the nine months ended January 22, 2017, primarily related to our land-based casino construction at our Bettendorf property. We capitalized interest expense of $0.2 million during the nine months ended January 24, 2016, primarily related to hotel renovations and land-based casino construction at our Bettendorf property.

Liquidity and Capital Resources

Cash Flows from Operating Activities - During the nine months ended January 22, 2017, we generated $83.7 million in cash flows from operating activities compared to generating $87.1 million during the nine months ended January 24, 2016. The year-over-year decrease in cash flows from operating activities is primarily the result of the decrease in operating income.

Cash Flows used in Investing Activities - During the nine months ended January 22, 2017, we used $60.5 million for investing activities compared to using $41.6 million during the nine months ended January 24, 2016. Significant investing activities for the nine months ended January 22, 2017 included capital expenditures of $61.4 million, of which $29.2 million related to construction of our land based casino in Bettendorf. Significant investing activities for the nine months ended January 24, 2016 included capital expenditures of $52.7 million, of which $8.4 million related to construction of our land based casino in Bettendorf, offset by proceeds received from sales of assets held for sale of $11.4 million.

Cash Flows used in Financing Activities — During the nine months ended January 22, 2017, our net cash flows used in financing activities were primarily utilized to repay $31.9 million in borrowings under our Credit Facility.

Significant transactions during the nine months ended January 24, 2016 are as follow:

· On May 14, 2015, we redeemed the remaining $62.2 million of our 7.75% Senior Notes at a price of 103.875%, including accrued and unpaid interest.

· Net borrowings under our Credit Facility increased $21.4 million.

· On May 4, 2015, we paid $9.4 million related to our obligation for certain bonds issued by the City of Bettendorf, Iowa.

· We received $0.8 million in proceeds from the exercise of stock options.

Availability of Cash and Additional Capital - At January 22, 2017, we had cash and cash equivalents of $54.0 million and marketable securities of $17.5 million. As of January 22, 2017, we had $35.6 million in outstanding revolving credit borrowings under our Credit Facility and our net line of credit availability was approximately $256.1 million, as limited by our outstanding borrowings and undrawn letters of credit.

Capital Expenditures and Development Activities— On June 24, 2016, we opened our new land-based casino at our property in Bettendorf. As of January 22, 2017, we have spent $52.9 million on the project, of which $29.2 million was during the nine months ended January 22, 2017. We will continue to fund capital projects with cash generated by our operations and borrowings under our Credit Facility.

Historically, as part of our business development activities, we have entered into agreements which have resulted in the acquisition or development of businesses or assets. These business development efforts and related agreements typically require the expenditure of cash, which may be significant. The amount and timing of our cash expenditures relating to development activities may vary based upon our evaluation of current and future development opportunities, our financial condition and the condition of the financing markets. Our development activities are subject to a variety of factors including but not limited to: obtaining permits, licenses and approvals from appropriate regulatory and other agencies, legislative changes and, in certain circumstances, negotiating acceptable leases.

Historically, we have made significant investments in property and equipment and expect that our operations will continue to demand ongoing investments to keep our properties competitive. The timing, completion and amount of additional capital projects will be subject to improvement of economic and local market conditions, cash flows from our operations and borrowing availability under our Credit Facility.

Typically, we have funded our daily operations through net cash provided by operating activities and our significant capital expenditures through operating cash flow and debt financing. While we believe that cash on hand, cash flow from operations, and available borrowings under our Credit Facility will be sufficient to support our working capital needs, planned capital expenditures and debt service requirements for the foreseeable future, there is no assurance that these sources will in fact provide adequate funding for our planned and necessary expenditures or that the level of our capital investments will be sufficient to allow us to remain competitive in our existing markets.

We are highly leveraged and may be unable to obtain additional debt or equity financing on acceptable terms if our current sources of liquidity are not sufficient or if we fail to stay in compliance with the covenants of our Credit Facility. We will continue to evaluate our planned capital expenditures at each of our existing locations in light of the operating performance of the facilities at such locations.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles that require our management to make estimates and assumptions that affect reported amounts and related disclosures. Management identifies critical accounting estimates as:

· those that require the use of assumptions about matters that are inherently and highly uncertain at the time the estimates are made;

· those estimates where, had we chosen different estimates or assumptions, the resulting differences would have had a material impact on our financial condition, changes in financial condition or results of operations; and

· those estimates that, if they were to change from period to period, likely would result in a material impact on our financial condition, changes in financial condition or results of operations.

For a discussion of our significant accounting policies and estimates, please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations and Notes to Consolidated Financial Statements presented in our Current Report on Form 8-K filed with the SEC on December 21, 2016. There were no newly identified significant accounting estimates in the third quarter of fiscal year 2017, nor were there any material changes to the critical accounting policies and estimates set forth in the foregoing Current Report on Form 8-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in market rates and prices, including interest rates, commodity prices and equity prices. Our primary exposure to market risk is interest rate risk associated with our Credit Facility.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of January 22, 2017. Based on this evaluation, our Chief Executive Officer and Principal Financial Officer have concluded that, as of January 22, 2017, our disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports we file or submit under the Exchange Act of 1934 and such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no changes in our internal controls over financial reporting during the fiscal quarter ended January 22, 2017, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

A reference is made to the information contained in Footnote 11 of our unaudited consolidated financial statements included herein, which is incorporated herein by reference.

ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the year ended April 24, 2016, except for the following additional risk factors related to our acquisition by Eldorado Resorts, Inc., (“ERI”).

The merger agreement subjects us to restrictions on our business activities during the pendency of the merger.

The merger agreement pursuant to which ERI will acquire Isle subjects us to restrictions on our business activities and obligates us to generally operate our businesses in the ordinary course in all material respects during the pendency of the merger. These restrictions could prevent us from pursuing attractive business opportunities that arise prior to the completion of the merger and are outside of our ordinary course of business, and could otherwise have an adverse effect on our results of operations, cash flows and financial position.

We would also remain liable for significant transaction costs, including legal, accounting and financial advisory fees if the merger is not completed.

The market price of our common stock may reflect various market assumptions as to whether and when the merger will be completed. Consequently, the completion of, the failure to complete, or any delay in the completion of the merger could result in significant changes in the market price of our common stock. In addition, we have incurred and will continue to incur significant costs relating to the merger, such as legal, accounting, financial advisor and printing fees that will be required to be paid whether or not the merger is consummated. Further, we may be required to pay a termination fee depending on the circumstances surrounding the termination.

Whether or not the merger is completed, the pendency of the transaction could cause disruptions in our businesses, which could have an adverse effect on our businesses and financial results.

These disruptions could include the following:

· Our current and prospective employees may experience uncertainty about their future roles with the combined company or consider other employment alternatives, which might adversely affect our ability to retain or attract their respective key managers and other employees;

· Our current and prospective customers may anticipate changes in how they are served or the benefits offered by the our loyalty reward programs and may, as a result, choose to discontinue their patronage of casinos; and

· Our management’s attention may be diverted from the operation of the businesses toward the completion of the merger.

Obtaining required approvals and satisfying closing conditions may delay or prevent completion of the merger and may significantly reduce the benefits anticipated to be realized from the merger or could adversely affect the market price of our common stock or our future business and financial results.

Completion of the merger is subject to various closing conditions, including (a) our stockholders adopting the merger agreement and approving the merger at the Isle Special Meeting, (b) ERI’s stockholders approving the issuance of shares at the ERI Special Meeting, (c) the approval or expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Act, (d) obtaining certain gaming approvals to the standards set forth in the merger agreement and (e) each of our and ERI’s receipt of a tax opinion to the effect that the merger will be treated as a “reorganization” within the meaning of Section 368(a) of the Code. If such conditions are not satisfied, the merger will not be consummated unless such conditions are validly waived. Such conditions may jeopardize or delay completion of the merger or may reduce the anticipated benefits of the merger. Further, no assurance can be given that the required consents and approvals will be obtained or that the required conditions to closing will be satisfied. Even if all such consents and approvals are obtained, no assurance can be given as to the terms, conditions and timing of the consents and approvals or that they will satisfy the terms of the merger agreement. If the merger is not completed by June 19, 2017, assuming that neither we nor ERI elect to extend this deadline as contemplated by the merger agreement, either ERI or we may terminate the merger agreement.

On October 21, 2016, the waiting period under the Hart-Scott-Rodino Act was terminated early by the FTC.

On January 25, 2017, Isle’s shareholders approved the merger and ERI’s stockholders approved the issuance of shares.

If the merger is not completed, the price of our common stock and our future business and operations could be harmed.

If the merger is not completed, we may be subject to material risks, including:

· failure to complete the merger may result in negative publicity and a negative impression of us in the investment community;

· certain costs related to the merger, such as legal, accounting and certain financial advisory fees, must be paid even if the merger is not completed;

· the diversion of management attention from day-to-day business and the unavoidable disruption to our employees and relationships with clients as a result of efforts and uncertainties relating to the merger may detract from our ability to grow revenue and minimize costs, which, in turn, may lead to a loss of market position that we could be unable to regain if the merger does not occur;

· under the merger agreement, we are subject to certain restrictions on the conduct of our business prior to completing the merger, which may affect our ability to execute certain of our business strategies;

· if our Board of Directors seeks another merger or business combination, you cannot be certain that we will be able to find a party willing to offer equivalent or more attractive consideration than ERI has agreed to pay; and

· the price of our common stock may decline to the extent that the current market price of our common stock reflects a higher price than it otherwise would have based on the assumption that the merger will be completed.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We have purchased our common stock under stock repurchase programs. These programs allow for the repurchase of up to 6,000,000 shares. To date, we have purchased 4,895,792 shares of our common stock under these programs. These programs have no approved dollar amount, nor expiration dates. No purchases have been made under the program since September 2007.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURE

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

See the Index to Exhibits following the signature page hereto for a list of the exhibits filed pursuant to Item 601 of Regulation S-K.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ISLE OF CAPRI CASINOS, INC.

Dated: February 24, 2017	/s/ Michael A. Hart
	Michael A. Hart
	Sr. Vice President, Accounting and Treasurer

	(Principal Financial Officer and Authorized Officer)

EXHIBIT NUMBER		DESCRIPTION
31.1		Certification of Chief Executive Officer pursuant to Rule 13a—14(a) under the Securities Exchange Act of 1934.

31.2		Certification of Principal Financial Officer pursuant to Rule 13a—14(a) under the Securities Exchange Act of 1934.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.

32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.

101		The following financial statements and notes from the Isle of Capri Casinos, Inc. Quarterly Report on Form 10-Q for the quarter ended January 22, 2017, filed on February 24, 2017 formatted in XBRL: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Stockholders’ Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements.

Attached files

ISLE OF CAPRI CASINOS INC Reports

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