Edgar Filing: ISLE OF CAPRI CASINOS INC

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 July 26, 2015

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 o 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 September 2, 2015, the Company had a total of 40,690,195 shares of Common Stock outstanding (which excludes 1,375,953 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)

	July 26,			April 26,
	2015			2015
ASSETS
Current assets:
Cash and cash equivalents	$	61,966		$	66,437
Marketable securities	19,445			19,517
Accounts receivable, net	11,585			11,171
Inventory	6,365			6,509
Deferred income taxes	4,626			4,626
Prepaid expenses and other assets	17,522			11,274
Assets held for sale	5,386			138
Total current assets	126,895			119,672
Property and equipment, net	900,654			902,226
Other assets:
Goodwill	108,970			108,970
Other intangible assets, net	53,864			54,073
Deferred financing costs, net	17,903			19,075
Restricted cash and investments	9,724			9,193
Prepaid deposits and other	5,229			4,743
Long-term assets held for sale	—			9,810
Total assets	$	1,223,239		$	1,227,762
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	75		$	170
Accounts payable	25,925			19,690
Accrued liabilities:
Payroll and related	32,816			43,371
Property and other taxes	23,110			20,456
Income tax payable	125			125
Interest	14,492			15,350
Progressive jackpots and slot club awards	16,520			16,123
Other	22,198			18,326
Total current liabilities	135,261			133,611
Long-term debt, less current maturities	989,209			992,712
Deferred income taxes	38,185			37,334
Other accrued liabilities	18,032			18,432
Other long-term liabilities	13,912			22,211
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 July 26, 2015 and April 26, 2015	421			421
Class B common stock, $.01 par value; 3,000,000 shares authorized; none issued	—			—
Additional paid-in capital	241,500			241,899
Retained earnings (deficit)	(195,928		)	(199,072		)
	45,993			43,248
Treasury stock,1,375,953 shares at July 26, 2015 and 1,568,875 at April 26, 2015	(17,353		)	(19,786		)
Total stockholders’ equity	28,640			23,462
Total liabilities and stockholders’ equity	$	1,223,239		$	1,227,762

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
	July 26,			July 27,
	2015			2014
Revenues:
Casino	$	260,053		$	249,541
Rooms	8,115			8,031
Food, beverage, pari-mutuel and other	32,989			33,466
Gross revenues	301,157			291,038
Less promotional allowances	(54,233		)	(54,142		)
Net revenues	246,924			236,896
Operating expenses:
Casino	38,713			39,002
Gaming taxes	66,359			63,290
Rooms	1,883			1,847
Food, beverage, pari-mutuel and other	12,122			11,847
Marine and facilities	14,106			14,147
Marketing and administrative	56,400			57,706
Corporate and development	7,643			9,148
Depreciation and amortization	20,051			19,409
Total operating expenses	217,277			216,396
Operating income	29,647			20,500
Interest expense	(17,441		)	(21,329		)
Interest income	79			87
Loss on early extinguishment of debt	(2,966		)	—

Income (loss) from continuing operations before income taxes	9,319			(742		)
Income tax provision	(851		)	(983		)
Income (loss) from continuing operations	8,468			(1,725		)
Loss from discontinued operations, net of income tax provision of $- for the three months ended July 26, 2015 and July 27, 2014	(5,324		)	(592		)
Net income (loss) and Comprehensive income (loss)	$	3,144		$	(2,317	)

Income (loss) per common share-basic:
Income (loss) from continuing operations	$	0.21		$	(0.04	)
Loss from discontinued operations, net of income taxes	(0.13		)	(0.02		)
Net income (loss)	$	0.08		$	(0.06	)

Earnings (loss) per common share-diluted:
Income (loss) from continuing operations	$	0.21		$	(0.04	)
Loss from discontinued operations, net of income taxes	(0.13		)	(0.02		)
Net income (loss)	$	0.08		$	(0.06	)

Weighted average basic shares	40,580,806			39,827,889
Weighted average diluted shares	41,253,611			39,827,889

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 26, 2015	42,066,148	$	421	$	241,899		$	(199,072	)	$	(19,786	)	$	23,462
Net income	—	—		—			3,144			—			3,144
Other comprehensive income (loss), net of tax	—	—		—			—			—			—
Exercise of stock options	—	—		(470		)	—			1,135			665
Issuance of restricted stock from treasury stock	—	—		(1,298		)	—			1,298			—
Stock compensation expense	—	—		1,369			—			—			1,369
Balance, July 26, 2015	42,066,148	$	421	$	241,500		$	(195,928	)	$	(17,353	)	$	28,640

See notes to the consolidated financial statements.

ISLE OF CAPRI CASINOS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended
	July 26,			July 27,
	2015			2014
Operating activities:
Net income (loss)	$	3,144		$	(2,317	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	20,331			19,643
Valuation charges	4,400			—
Amortization and write-off of deferred financing costs	1,057			1,119
Amortization of debt (premium) discount	(111		)	63
Loss on early extinguishment of debt	2,966			—
Deferred income taxes	851			982
Stock compensation expense	1,369			883
Loss on disposal of assets	38			30
Changes in operating assets and liabilities:
Marketable securities	72			(277		)
Accounts receivable	136			1,809
Income tax receivable	—			(170		)
Prepaid expenses and other assets	(6,471		)	(9,880		)
Accounts payable and accrued liabilities	(1,362		)	4,736
Net cash provided by operating activities	26,420			16,621

Investing activities:
Purchase of property and equipment	(15,777		)	(8,979		)
Proceeds from sale of property and equipment	7			22
(Increase)/decrease in restricted cash and investments	(120		)	592
Net cash used in investing activities	(15,890		)	(8,365		)

Financing activities:
Principal payments on debt	(62,343		)	(56		)
Net borrowings (repayments) on line of credit	58,700			(9,700		)
Payment of other long-term obligation	(9,384		)	—
Premium payments on retirement of long-term debt	(2,409		)	—
Payment of deferred financing costs	(230		)	—
Proceeds from exercise of stock options	665			—
Net cash used in by financing activities	(15,001		)	(9,756		)

Net decrease in cash and cash equivalents	(4,471		)	(1,500		)
Cash and cash equivalents, beginning of period	66,437			69,830
Cash and cash equivalents, end of the period	$	61,966		$	68,330

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 fifteen casino gaming facilities in the United States located in Black Hawk, Colorado; Pompano Beach, Florida; Bettendorf, Marquette and Waterloo, Iowa; Lake Charles, Louisiana; Lula, Natchez and Vicksburg, Mississippi; Boonville, Cape Girardeau, Caruthersville and Kansas City, Missouri; and Nemacolin, Pennsylvania.

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 26, 2015 as filed with the SEC 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 on the last Sunday in April. Periodically, this system necessitates a 53-week year. Fiscal 2016 and 2015 are both 52-week years, which commenced on April 27, 2015 and April 28, 2014, respectively.

The condensed consolidated financial statements include our accounts and those of our subsidiaries. All significant 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

In May 2014, the FASB issued Update No. 2014-09, “Revenue from Contracts with Customers,” which converges the FASB’s and the International Accounting Standards Board’s current standards on revenue recognition. The standard provides companies with a single model to use in accounting for revenue arising from contracts with customers and supersedes current revenue guidance. In July 2015, the FASB approved the deferral of this new standard to be effective for the standard is for annual periods beginning after December 15, 2017. Early adoption is permitted for annual periods after December 15, 2016. The standard permits companies to either apply the adoption to all periods presented, or apply the requirements in the year of adoption through a cumulative adjustment. We are currently evaluating the impact of adopting this accounting standard update on our financial statements and disclosures.

4. Discontinued Operations

On August 11, 2015, we announced our intent to close our casino property in Natchez, Mississippi and our entry into a definitive agreement to sell the hotel and related certain non-gaming assets to Casino Holding Investment Partners, LLC for $11,500. The transaction is expected to be completed in October 2015 subject to customary closing conditions.

We adopted Accounting Standards Update No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU 2014-08”) on April 27, 2015. The disposition of our Natchez reporting unit qualifies for discontinued accounting treatment under ASU 2014-08 and as such, the operations of our Natchez property have been classified as discontinued operations and as assets held for sale for all periods presented. 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 $4,400 during the three months ended July 26, 2015. The Company incurred $276 and $177 for capital expenditures at our Natchez property during the three months ended July 26, 2015 and July 27, 2014, respectively.

The results of our discontinued operations are summarized as follows:

	Three Months Ended
	July 26,			July 27,
	2015			2014
Net revenues	$	4,544		$	4,753
Valuation charges	4,400			—
Depreciation expense	280			234
Pretax loss from discontinued operations	(5,324		)	(592		)
Income tax benefit from discontinued operations	—			—
Loss from discontinued operations	(5,324		)	(592		)

The assets held for sale are as follows:

	July 26,		April 26,
	2015		2015
Current Assets:
Inventory	$	132	$	138
Property and equipment, net	5,254		9,810
Total asssets	$	5,386	$	9,948

5. Long-Term Debt

Long-term debt consists of the following:

	July 26,		April 26,
	2015		2015
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	$	133,700	$	75,000
5.875% Senior Notes, interest payable semi-annually March 15 and September 15, net	502,876		502,987
7.75% Senior Notes, interest payable semi-annually March 15 and September 15, net	—		62,012
8.875% Senior Subordinated Notes, interest payable Semi-annually June 15 and December 15	350,000		350,000
Other	2,708		2,883
	989,284		992,882
Less current maturities	75		170
Long-term debt	$	989,209	$	992,712

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 restricted subsidiaries.

Our net revolving line of credit availability at July 26, 2015, as limited by our outstanding borrowings, was approximately $159,000, after consideration of approximately $7,000 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 three months ended July 26, 2015 was 2.77%.

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 July 26, 2015.

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 the $151,500 from the April 2015 issuance were used to purchase a portion of the 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 $231 in the three months ended July 26, 2015 and $2,536 in fiscal 2015.

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 at any time on or after March 15, 2016, with call premiums as defined in the indenture governing the 5.875% Senior Notes.

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 the 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 three months ended July 26, 2015.

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 are redeemable, in whole or in part, at our option at any time on or after 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 12. 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.

6. Other Long-Term Obligations

Quad-Cities Waterfront Convention Center—We entered into agreements with the City of Bettendorf, Iowa in connection with the City’s construction of a convention center which opened in January 2009, adjacent to our hotel. Under these agreements,we lease, manage, and provide financial and operating support for the convention center. The Company was deemed, for accounting purposes only, to be the owner of the convention center during the construction period. Upon completion of the convention center we were precluded from accounting for the transaction as a sale and leaseback due to our continuing involvement. Therefore, we are accounting for the transaction using the direct financing method. Under the terms of our agreements for the convention center, we have also guaranteed certain obligations related to notes issued by the City of Bettendorf, Iowa for the construction of the convention center.

On May 4, 2015, we made a payment of approximately $9,400 related to the notes issued by the City per the terms of our agreement with borrowings from our Credit Facility. With this prepayment, we have fulfilled our financial obligation related to the Convention Center and have no future payments under this long-term obligation. The remaining balance of the long-term obligation will remain on our consolidated balance sheet until completion of the lease agreement, at which time the related fixed assets, net of accumulated depreciation, and the net remaining obligation over the net carrying value of the associated fixed assets will be recognized as a gain on sale of the facility.

7. Earnings Per Share

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

	Three Months Ended
	July 26,			July 27,
	2015			2014
Numerator:
Income (loss) applicable to common shares:
Income (loss) from continuing operations	$	8,468		$	(1,725	)
Loss from discontinued operations	(5,324		)	(592		)

Net income (loss)	$	3,144		$	(2,317	)

Denominator:
Denominator for basic earnings (loss) per share - weighted average shares	40,580,806			39,827,889
Effect of dilutive securities
Employee stock options	188,532			—
Restricted stock units	484,273			—
Denominator for diluted earnings (loss) per share - adjusted weighted average shares and assumed conversions	41,253,611			39,827,889

Basic earnings (loss) per share:
Income (loss) from continuing operations	$	0.21		$	(0.04	)
Loss from discontinued operations	(0.13		)	(0.02		)
Net income (loss)	$	0.08		$	(0.06	)

Diluted earnings (loss) per share:
Income (loss) from continuing operations	$	0.21		$	(0.04	)
Loss from discontinued operations	(0.13		)	(0.02		)
Net income (loss)	$	0.08		$	(0.06	)

Our basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of shares outstanding for the period. Stock options representing 94,460 shares, which were anti-dilutive, were excluded from the calculation of common shares for diluted earnings per share for the three months ended July 26, 2015.

Due to the loss from continuing operations, stock options representing 44,418 shares, which are potentially dilutive, and 746,110 shares, which were anti-dilutive, were excluded from the calculation of common shares for diluted earnings per share for the three months ended July 27, 2014. As the minimum market performance conditions related to our restricted stock units had not been achieved as of July 27, 2014, 1,656,943 units were excluded from the calculation of diluted earnings per share for three months ended July 27, 2014.

8. Stock Based Compensation

Under our Amended and Restated 2009 Long-Term Incentive Plan we have issued restricted stock units, performance stock units, restricted stock and stock options.

Restricted Stock Units—During the three months ended July 26, 2015, we granted 104,982 restricted stock units (“RSUs”) to employees with a fair market value of $14.89 per unit on the date of grant. The RSUs will vest and be converted to stock ratably over three years commencing on the one-year anniversary of the grant date. As of July 26, 2015, our unrecognized compensation cost for these RSUs was $1,324. Considering the population of employees receiving this award, our current estimate of forfeitures is 0%.

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. The aggregate compensation cost related to these RSUs was $4,637 to be recognized over the vesting periods. As of July 26, 2015, our unrecognized compensation cost remaining on the second RSU tranche vesting April 26, 2016 was $434 and an estimated 465,679 shares will be issued net of shares to pay minimum withholding taxes for the second tranche.

Performance Stock Units—During the three months ended July 26, 2015, we granted performance stock units (“PSUs”) to employees with a company performance condition which will determine the number of shares which will ultimately vest, if any, up to 251,964 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. The aggregate compensation cost related to these PSUs, based on the target number of shares awarded, is $2,501 to be recognized over the vesting periods. As of July 26, 2015, our unrecognized compensation cost for these PSUs is $2,293, based on current probability assumptions. Considering the population of employees receiving this award, our current estimate of forfeitures is 0%.

Restricted Stock—During the three months ended July 26, 2015, we issued 102,922 shares of restricted stock to employees with a grant-date fair value of $20.10. Restricted stock awards are made to employees and directors under annual long-term incentive grants which primarily vest one-third on each anniversary of the grant date. Our aggregate estimate of forfeitures for restricted stock for employees and directors is 10% and 0%, respectively. As of July 26, 2015, our unrecognized compensation cost for unvested restricted stock was $2,122 with a remaining weighted average vesting period of 1.10 years.

Stock Options—During the three months ended July 26, 2015, we issued 378,905 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 $5.764 utilizing the Black-Sholes-Merton option pricing model with the range of assumptions disclosed in the following table:

	Three Months Ended
	July 26, 2015
Weighted average expected volatility	42.61	%
Expected dividend yield	0.00	%
Weighted average expected term (in years)	5
Weighted average risk-free interest rate	1.36	%

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. Considering the population of employees receiving stock options, our current estimate of forfeitures is 0%. As of July 26, 2015, our unrecognized compensation cost for unvested options was $1,935.

9. 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 July 26, 2015 and April 26, 2015:

	July 26, 2015
	Level 1		Level 2		Total
Assets:
Marketable securities	$	7,495	$	11,950	$	19,445
Restricted cash and investments	6,100		3,625		9,725

	April 26, 2015
	Level 1		Level 2		Total
Assets:
Marketable securities	$	6,809	$	12,708	$	19,517
Restricted cash and investments	5,553		3,640		9,193

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.

Items Measured at Fair Value on a Non-recurring Basis- The following table sets forth the assets measured at fair value on a non-recurring basis, by input level, in the consolidated balance sheet at July 26, 2015 as well as the valuation charge recorded during the three months ended July 26, 2015:

	July 26, 2015
			Valuation
	Level 3		Charge
Property and equipment, net	$	5,254	$	4,400

Property and equipment, net—The market approach was used to value certain Natchez property and equipment using Level 3 inputs including future cash flow estimates. Refer to note 4, “Discontinued Operations” for additional information.

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

	July 26, 2015				April 26, 2015
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
Financial liabilities:
Revolving line of credit	$	133,700	$	131,026	$	75,000	$	73,875
5.875% Senior notes	502,876		516,250		502,987		515,055
7.75% Senior notes	—		—		62,012		64,593
8.875% Senior subordinated notes	350,000		378,000		350,000		383,915
Other long-term debt	2,708		2,708		2,883		2,883
Other long-term obligations	13,912		13,912		22,211		22,211

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.

10. Income Taxes

A summary of our effective income tax provision from continuing operations is as follows:

	Three Months Ended
	July 26, 2015			July 27, 2014
Federal taxes at the statutory rate	$	3,262		$	(467	)
State taxes	(174		)	(340		)
Permanent differences	289			540
Tax credits	(356		)	(112		)
Valuation allowance	(2,170		)	1,362
Income tax provision from continuing operations	$	851		$	983

Our income tax provision consists of changes in the deferred tax liability attributable to indefinite lived intangibles and expense in state jurisdictions without net operating loss carryforwards available or without valuation allowances.

As of July 26, 2015, we have a full valuation allowance on our federal and state deferred tax assets other than those related to the state and local deferred tax assets at our Florida and Kansas City casinos. Despite our recent positive financial results, we believe the remaining valuation allowances continue to be necessary to offset our deferred tax assets. We continue to monitor our cumulative income position, income trends, and future projections of sustained profitability for all of our operations with deferred tax assets subject to valuation allowances.

11. Supplemental Disclosures

Cash Flow — For the three months ended July 26, 2015 and July 27, 2014, we made net cash interest payments of $17,321 and $17,109, respectively. Additionally, we made income tax payments of $0 and $171 during the three months ended July 26, 2015 and July 27, 2014, respectively.

The change in accrued purchases of property and equipment in accounts payable was an increase of $2,661 and $1,096, for the three months ended July 26, 2015 and July 27, 2014, respectively.

During the three months ended July 26, 2015, we capitalized interest of $73, primarily related to hotel renovations at our Bettendorf property.

12. 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.

During fiscal 2015, our wholly owned subsidiary, IOC-Davenport, Inc. changed designations from a Guarantor Subsidiary to a Non-Guarantor Subsidiary. All periods presented below reflect the operations of IOC-Davenport, Inc. as a Non-Guarantor Subsidiary.

Consolidating condensed balance sheets as of July 26, 2015 and April 26, 2015 are as follows:

	As of July 26, 2015
	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	$	29,011	$	77,900	$	26,200	$	(6,216	)	$	126,895
Intercompany receivables	411,778		11,702		21,946		(445,426		)	—
Investments in subsidiaries	581,737		3,358		—		(585,095		)	—
Property and equipment, net	4,495		869,153		27,006		—			900,654
Other assets	29,994		151,193		22,654		(8,151		)	195,690
Total assets	$	1,057,015	$	1,113,306	$	97,806	$	(1,044,888	)	$	1,223,239

Current liabilities	$	33,714	$	75,893	$	31,870	$	(6,216	)	$	135,261
Intercompany payables	—		420,426		25,000		(445,426		)	—
Long-term debt, less current maturities	989,209		—		—		—			989,209
Other accrued liabilities	5,452		65,695		7,133		(8,151		)	70,129
Stockholders’ equity	28,640		551,292		33,803		(585,095		)	28,640
Total liabilities and stockholders’ equity	$	1,057,015	$	1,113,306	$	97,806	$	(1,044,888	)	$	1,223,239

	As of April 26, 2015
	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	$	14,582	$	79,118	$	26,157	$	(185	)	$	119,672
Intercompany receivables	433,527		—		—		(433,527		)	—
Investments in subsidiaries	573,258		3,358		—		(576,616		)	—
Property and equipment, net	4,844		869,486		27,896		—			902,226
Other assets	32,217		160,727		22,123		(9,203		)	205,864
Total assets	$	1,058,428	$	1,112,689	$	76,176	$	(1,019,531	)	$	1,227,762

Current liabilities	$	36,304	$	71,723	$	25,769	$	(185	)	$	133,611
Intercompany payables	—		425,267		8,260		(433,527		)	—
Long-term debt, less current maturities	992,650		—		62		—			992,712
Other accrued liabilities	6,012		73,982		7,186		(9,203		)	77,977
Stockholders’ equity	23,462		541,717		34,899		(576,616		)	23,462
Total liabilities and stockholders’ equity	$	1,058,428	$	1,112,689	$	76,176	$	(1,019,531	)	$	1,227,762

Consolidating condensed statements of operations for the three months ended July 26, 2015 and July 27, 2014 are as follows:

	For the Three Months Ended July 26, 2015
	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	$	—		$	248,831		$	11,222		$	—		$	260,053
Rooms, food, beverage, pari-mutuel and other	19			39,997			3,229			(2,141		)	41,104
Management fee revenue	8,910			—			—			(8,910		)	—
Gross revenues	8,929			288,828			14,451			(11,051		)	301,157
Less promotional allowances	—			(51,737		)	(2,496		)	—			(54,233		)
Net revenues	8,929			237,091			11,955			(11,051		)	246,924

Operating expenses:
Casino	—			36,861			1,852			—			38,713
Gaming taxes	—			61,866			4,493			—			66,359
Rooms, food, beverage, pari-mutuel and other	7,347			80,964			5,984			(2,141		)	92,154
Management fee expense	—			8,610			300			(8,910		)	—
Depreciation and amortization	456			18,531			1,064			—			20,051
Total operating expenses	7,803			206,832			13,693			(11,051		)	217,277

Operating income (loss)	1,126			30,259			(1,738		)	—			29,647
Interest expense, net	(7,844		)	(8,983		)	(535		)	—			(17,362		)
Loss on extinguishment of debt	(2,966		)	—			—			—			(2,966		)
Equity in income (loss) of subsidiaries	13,724			—			—			(13,724		)	—
Income (loss) from continuing operations before income taxes and noncontolling interest	4,040			21,276			(2,273		)	(13,724		)	9,319
Income tax (provision) benefit	4,428			(6,426		)	1,147			—			(851		)
Income (loss) from continuining operations	8,468			14,850			(1,126		)	(13,724		)	8,468
Income (loss) of discontinued operations	(5,324		)	(5,389		)	—			5,389			(5,324		)
Net income (loss)	$	3,144		$	9,461		$	(1,126	)	$	(8,335	)	$	3,144

	For the Three Months Ended July 27, 2014
	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	$	—		$	239,342		$	10,199		$	—		$	249,541
Rooms, food, beverage, pari-mutuel and other	41			40,503			3,257			(2,304		)	41,497
Management fee revenue	8,384			—			—			(8,384		)	—
Gross revenues	8,425			279,845			13,456			(10,688		)	291,038
Less promotional allowances	—			(51,652		)	(2,490		)	—			(54,142		)
Net revenues	8,425			228,193			10,966			(10,688		)	236,896

Operating expenses:
Casino	—			37,486			1,516			—			39,002
Gaming taxes	—			59,356			3,934			—			63,290
Rooms, food, beverage, pari-mutuel and other	9,409			81,925			5,665			(2,304		)	94,695
Management fee expense	—			8,084			300			(8,384		)	—
Depreciation and amortization	468			17,583			1,358			—			19,409
Total operating expenses	9,877			204,434			12,773			(10,688		)	216,396

Operating income (loss)	(1,452		)	23,759			(1,807		)	—			20,500
Interest expense, net	(11,183		)	(9,521		)	(538		)	—			(21,242		)
Equity in income (loss) of subsidiaries	6,483			—			—			(6,483		)	—
Income (loss) from continuing operations before income taxes and noncontolling interest	(6,152		)	14,238			(2,345		)	(6,483		)	(742		)
Income tax (provision) benefit	4,427			(6,433		)	1,023			—			(983		)
Income (loss) from continuining operations	(1,725		)	7,805			(1,322		)	(6,483		)	(1,725		)
Income (loss) of discontinued operations	(592		)	(674		)	—			674			(592		)
Net income (loss)	$	(2,317	)	$	7,131		$	(1,322	)	$	(5,809	)	$	(2,317	)

Consolidating condensed statements of cash flows for the three months ended July 26, 2015 and July 27, 2014 are as follows:

	Three Months Ended July 26, 2015
	Isle of Capri									Consolidating
	Casinos, Inc.						Non-			and			Isle of Capri
	(Parent			Guarantor			Guarantor			Eliminating			Casinos, Inc.
	Obligor)			Subsidiaries			Subsidiaries			Entries			Consolidated
Statement of Cash Flows
Net cash provided by (used in) operating activities	$	(14,542	)	$	34,951		$	6,011		$	—		$	26,420

Investing Activities:
Purchases of property and equipment, net of proceeds	(126		)	(15,396		)	(248		)	—			(15,770		)
Restricted cash and investments	—			—			(120		)	—			(120		)
Parent company investment in subsidiaries	21,809			—			—			(21,809		)	—
Net cash provided by (used in) investing activities	21,683			(15,396		)	(368		)	(21,809		)	(15,890		)

Financing Activities:
Principal payments on debt	(62,185		)	—			(158		)	—			(62,343		)
Net borrowings on line of credit	58,700			—			—			—			58,700
Payment of other long-term obligation	—			(9,384		)	—			—			(9,384		)
Premium payments on retirement of long-term debt	(2,409		)	—			—			—			(2,409		)
Payment of deferred financing costs	(230		)	—			—			—			(230		)
Proceeds from exercise of stock options	665			—			—			—			665
Net proceeds from (payments to) related parties	—			(16,604		)	(5,205		)	21,809			—
Net cash provided by (used in) financing activities	(5,459		)	(25,988		)	(5,363		)	21,809			(15,001		)

Net decrease in cash and cash equivalents	1,682			(6,433		)	280			—			(4,471		)
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	$	6,759		$	46,600		$	8,607		—			$	61,966

	Three Months Ended July 27, 2014
	Isle of Capri									Consolidating
	Casinos, Inc.						Non-			and			Isle of Capri
	(Parent			Guarantor			Guarantor			Eliminating			Casinos, Inc.
	Obligor)			Subsidiaries			Subsidiaries			Entries			Consolidated
Statement of Cash Flows
Net cash provided by (used in) operating activities	$	(16,629	)	$	26,651		$	6,599		$	—		$	16,621

Investing Activities:
Purchases of property and equipment, net of proceeds	(689		)	(8,131		)	(137		)	—			(8,957		)
Restricted cash and investments	—			—			592			—			592
Parent company investment in subsidiaries	26,443			—			—			(26,443		)	—
Net cash provided by (used in) investing activities	25,754			(8,131		)	455			(26,443		)	(8,365		)

Financing Activities:
Principal payments on debt	(16		)	—			(40		)	—			(56		)
Net repayments on line of credit	(9,700		)	—			—			—			(9,700		)
Net proceeds from (payments to) related parties	—			(19,201		)	(7,242		)	26,443			—
Net cash provided by (used in) financing activities	(9,716		)	(19,201		)	(7,282		)	26,443			(9,756		)

Net decrease in cash and cash equivalents	(591		)	(681		)	(228		)	—			(1,500		)
Cash and cash equivalents at beginning of period	6,051			53,787			9,992			—			69,830
Cash and cash equivalents at end of the period	$	5,460		$	53,106		$	9,764		—			$	68,330

13. Commitments and Contingencies

Legal and Regulatory Proceedings— In October 2012, we opened our new casino in Cape Girardeau, Missouri. A subcontractor filed a mechanics’ lien against our property resulting from a dispute between the subcontractor and our general contractor for the construction project. We demanded that the general contractor cause the lien to be bonded against or satisfied; however, the general contractor refused to do so and asserted that a portion of the subcontractor’s claim resulted from additional work directly requested by us. In October 2013, the subcontractor filed suit against our wholly-owned subsidiary IOC-Cape Girardeau, LLC, the general contractor and two other defendants alleging various contract and equitable claims and are seeking damages of approximately $3,800. In August 2014, we filed a cross claim against the general contractor alleging breach of contract and various indemnity claims. The outcome of this matter is still in doubt and cannot be predicted with any degree of certainty. In the event that we incur any costs in connection with this matter, we do not believe that any such costs would be material, and if incurred, the settlement of construction costs would be capitalized.

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 26, 2015.

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 Annual Report on Form 10-K for the year ended April 26, 2015 and by giving consideration to the following:

Items Impacting Income (Loss) from Continuing Operations— Significant items impacting our income (loss) from continuing operations during the fiscal quarters ended July 26, 2015 and July 27, 2014 are as follows:

Long-term Debt — In May 2015, we redeemed the remaining $62 million of our 7.75% Senior Notes and incurred a loss on early extinguishment of debt of $3.0 million in the fiscal quarter ended July 26, 2015.

Corporate Restructuring — During the fiscal quarter ended July 27, 2014, we eliminated executive positions in the corporate office to maximize efficiency and streamline reporting lines, resulting in severance expense of $2.3 million.

Colorado Referendum Costs — During the fiscal quarter ended July 27, 2014, the Company incurred $1.0 million of costs in support of efforts to defeat the proposed November 2014 referendum that would have expanded gaming to racetracks in certain counties in Colorado.

Discontinued Operations — On August 11, 2015, we announced our intent to close our casino property in Natchez, Mississippi and our entry into a definitive agreement to sell the hotel and related certain non-gaming assets to Casino Holding Investment Partners, LLC for $11.5 million. The transaction is expected to be completed in October 2015 subject to customary closing conditions. As such, the operations of our Natchez property have been classified as discontinued operations and as assets held for sale for all periods presented. 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 three months ended July 26, 2015.

Results of Operations

Revenues and operating expenses for the three months ended July 26, 2015 and July 27, 2014 are as follows:

	Three Months Ended
	July 26,			July 27,						Percentage
(in thousands)	2015			2014			Variance			Variance
Revenues:
Casino	$	260,053		$	249,541		$	10,512		4.2	%
Rooms	8,115			8,031			84			1.0	%
Food, beverage, pari-mutuel and other	32,989			33,466			(477		)	-1.4	%
Gross revenues	301,157			291,038			10,119			3.5	%
Less promotional allowances	(54,233		)	(54,142		)	(91		)	0.2	%
Net revenues	246,924			236,896			10,028			4.2	%

Operating expenses:
Casino	38,713			39,002			(289		)	-0.7	%
Gaming taxes	66,359			63,290			3,069			4.8	%
Rooms	1,883			1,847			36			1.9	%
Food, beverage, pari-mutuel and other	12,122			11,847			275			2.3	%
Marine and facilities	14,106			14,147			(41		)	-0.3	%
Marketing and administrative	56,400			57,706			(1,306		)	-2.3	%
Corporate and development	7,643			9,148			(1,505		)	-16.5	%
Depreciation and amortization	20,051			19,409			642			3.3	%
Total operating expenses	$	217,277		$	216,396		881			0.4	%

Casino — Casino revenues increased $10.5 million, or 4.2%, for the three months ended July 26, 2015 as compared to the same period in fiscal 2015. Casino revenues increased at twelve of our properties during the first quarter of fiscal 2016 compared to the same period in the prior fiscal year, primarily due to strategic marketing investment and improved economic conditions.

Casino operating expenses decreased $0.3 million, or 0.7%, for the three months ended July 26, 2015, as compared to the same period in the prior fiscal year. While our overall casino revenues increased 4.2%, the decrease in casino operating expenses reflects our continuing efforts to manage our casino operating expenses.

Gaming Taxes — State and local gaming taxes increased $3.1 million, or 4.8%, for the three months ended July 26, 2015, as compared to the same period in the prior fiscal year, commensurate with the increase in casino revenues.

Rooms — Rooms revenue increased $0.1 million, or 1.0%, for the three months ended July 26, 2015, as compared to the same period in the prior fiscal year. During July 2015, we completed the remodeling of 251 rooms in one of our hotels at our Bettendorf property. As a result, our hotel revenue was negatively impacted by certain of our hotel rooms being out of service during the period of remodeling.

Promotional Allowances — Promotional allowances increased $0.1 million, or 0.2%, for the three months ended July 26, 2015, as compared to the same period in the prior fiscal year. Tighter management and refinement of our promotional allowance spending is reflected in our $10.0 million increase in net revenues on an increase in gross revenues of $10.5 million.

Food, Beverage, Pari-Mutuel and Other — Food, beverage, pari-mutuel revenue decreased $0.5 million, or 1.4%, for the three months ended July 26, 2015 as compared to the same period in the prior fiscal year. This change primarily reflects a decrease in our food and beverage revenues driven by reductions in complementary food and beverage offerings as we continue to refine our marketing efforts, partially offset by a $0.3 million increase in our pari-mutuel revenues.

Food, beverage, pari-mutuel and other expense increased $0.3 million, or 2.3%, for the three months ended July 26, 2015 as compared to the same period of the prior year.

Marketing and Administrative — Marketing and administrative expenses decreased $1.3 million, or 2.3%, for the three months ended July 26, 2015 as compared to the same period in the prior fiscal year. Excluding the $1.0 million of costs incurred to defeat the Colorado referendum during the three months ended July 27, 2014, marketing and administrative expenses decreased $0.3 million, or 0.5%, reflecting changes in our marketing programs as well as continued cost reduction initiatives.

Corporate and Development — During the three months ended July 26, 2015, our corporate and development expenses were $7.6 million compared to $9.1 million for the three months ended July 27, 2014. The three months ended July 27, 2014 included severance of $2.3 million resulting from the corporate restructuring. Excluding the severance, corporate and development expenses increased $0.8 million primarily related to an increase in stock-based compensation expense and the timing of our long-term incentive award, which occurred in the current year first quarter versus the second quarter of the prior year.

Other Income (Expense) and Income Taxes

Interest expense, interest income, loss on early extinguishment of debt and income tax provision for the three months ended July 26, 2015and July 27, 2014 are as follows:

	Three Months Ended
	July 26,			July 27,						Percentage
(in thousands)	2015			2014			Variance			Variance

Interest expense	$	(17,441	)	$	(21,329	)	$	3,888		-18.2	%
Interest income	79			87			(8		)	-9.2	%
Loss on early extinguishment of debt	(2,966		)	—			(2,966		)	100.0	%
Income tax provision	(851		)	(983		)	132			-13.4	%

Interest Expense — Interest expense decreased $3.9 million for the three months ended July 26, 2015, as compared to the same period in the prior fiscal year. This decrease is a result of a decrease in our overall debt balance as well as the benefit of refinancing our 7.75% Senior Notes.

Income Tax Provision — Our income tax provision from continuing operations was impacted by changes in the deferred tax liability attributable to indefinite lived intangibles and expense for state jurisdictions where taxable income is generated. Our tax provision was $0.9 million and $1.0 million for the three months ended July 26, 2015 and July 27, 2014, respectively.

Liquidity and Capital Resources

Cash Flows from Operating Activities - During the three months ended July 26, 2015, we generated $26.4 million in cash flows from operating activities compared to generating $16.6 million during the three months ended July 27, 2014. The year-over-year increase in cash flows from operating activities is primarily the result of the increase in operating income and changes in working capital.

Cash Flows used in Investing Activities — During the three months ended July 26, 2015, we used $15.9 million for investing activities compared to using $8.4 million during the three months ended July 27, 2014. Significant investing activities for the three months ended July 26, 2015 included capital expenditures of $15.8 million. Significant investing activities for the three months ended July 27, 2014 included capital expenditures of $9.0 million offset by the change in restricted cash and investments of $0.6 million.

Cash Flows from Financing Activities — During the three months ended July 26, 2015, our financing activities utilized $15.0 million primarily to redeem the remaining 7.75% Senior Notes and pay related costs. Significant transactions are as follows:

· 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 $58.7 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 $0.7 million in proceeds from the exercise of stock options.

During the three months ended July 27, 2014, our net cash flows used in financing activities were used primarily to repay borrowings under our Credit Facility of $9.7 million.

Availability of Cash and Additional Capital - At July 26, 2015, we had cash and cash equivalents of $62.0 million and marketable securities of $19.4 million. As of July 26, 2015, we had $133.7 million in outstanding revolving credit borrowings under our Credit Facility and our net line of credit availability was approximately $159.0 million, as limited by our outstanding borrowings and letters of credit.

Capital Expenditures and Development Activities— We began construction of a land-based casino at our property in Bettendorf, Iowa during May 2015. We estimate the total construction cost of this project to be up to $60 million with a 12 to 14 month construction period. During August 2015, we began renovation of our hotel at our Boonville, Missouri property with a total estimated cost of $5.5 million. This renovation includes refurbishment of 140 hotel rooms, meeting and convention space and public areas. We currently estimate completion of this project by the end of December 2015. We will fund these capital projects with cash generated by our operations and borrowing 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 require ongoing investments to keep our properties competitive. The timing, completion and amount of additional capital projects will be subject to economic and local market conditions, cash flows from our continuing 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 and make appropriate changes based on market conditions.

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 2015 Annual Report on Form 10-K. There were no newly identified significant accounting estimates in the first quarter of fiscal year 2016, nor were there any material changes to the critical accounting policies and estimates set forth in our 2015 Annual Report.

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 Chief 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 July 26, 2015. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of July 26, 2015, 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 July 26, 2015, 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 10 of our unaudited condensed 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 26, 2015.

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: September 4, 2015	/s/ Eric L. Hausler
	Eric L. Hausler
	Chief Financial Officer
	(Principal Financial Officer and Authorized Officer)

EXHIBIT NUMBER		DESCRIPTION

2.1		Securities Purchase Agreement, dated August 11, 2015, by and among Isle of Capri Casinos, Inc., IOC-Natchez, Inc, IOC-Natchez Sub, LLC, Casino Holding Investment Partners, LLC and Natchez Casino Opco, LLC.*

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

31.2		Certification of Chief 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 Chief 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 July 26, 2015, filed on September 4, 2015 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.

*Certain schedules and exhibits to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the Securities and Exchange Commission upon request.