EXHIBIT 99.1
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
Index
September 30, 2004
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
(Dollars In Thousands)
| | September 30, | | December 31, | |
| | 2004 | | 2003 | |
ASSETS | | | | | |
CURRENT ASSETS: | | | | | |
Cash and cash equivalents | | $ | 12,245 | | $ | 11,550 | |
Accounts receivable | | 111 | | 147 | |
Inventories | | 583 | | 576 | |
Prepaid expenses | | 1,145 | | 1,154 | |
Due from Parent | | 13,047 | | 6,322 | |
Total current assets | | 27,131 | | 19,749 | |
LAND | | 26,221 | | 26,221 | |
GAMING FACILITIES: | | | | | |
Building and improvements | | 68,164 | | 67,628 | |
Equipment | | 25,924 | | 23,421 | |
Accumulated depreciation | | (22,284 | ) | (18,921 | ) |
Total gaming facilities | | 71,804 | | 72,128 | |
OTHER ASSETS: | | | | | |
Goodwill | | 15,547 | | 15,547 | |
Debt issue costs | | 4,602 | | 5,416 | |
Other assets | | 699 | | 779 | |
TOTAL | | $ | 146,004 | | $ | 139,840 | |
| | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | |
CURRENT LIABILITIES: | | | | | |
Accounts payable and accrued expenses | | $ | 5,044 | | $ | 4,676 | |
Accrued payroll | | 807 | | 591 | |
Gaming taxes payable | | 2,815 | | 2,619 | |
Property taxes payable | | 590 | | 648 | |
Slot club liability | | 1,113 | | 872 | |
Interest Payable | | 2,083 | | 4,960 | |
Current portion of long-term debt | | 456 | | 441 | |
Total current liabilities | | 12,908 | | 14,807 | |
LONG-TERM DEBT AND OTHER LIABILITIES: | | | | | |
Long term debt | | 97,279 | | 96,854 | |
BID bonds payable | | 3,765 | | 3,997 | |
Total long term debt | | 101,044 | | 100,851 | |
Total liabilities | | 113,952 | | 115,658 | |
COMMITMENTS AND CONTINGENCIES | | | | | |
STOCKHOLDER’S EQUITY: | | | | | |
Preferred stock; $.001 par value; 10,000,000 shares authorized; none issued and outstanding | | | | | |
Common stock; $.001 par value; 40,000,000 shares authorized; 100 shares issued and outstanding | | | | | |
Additional paid-in capital | | 11,396 | | 11,396 | |
Retained earnings | | 20,656 | | 12,786 | |
Total stockholders’ equity | | 32,052 | | 24,182 | |
TOTAL | | $ | 146,004 | | $ | 139,840 | |
See notes to unaudited consolidated financial statements
1
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(Dollars In Thousands)
| | Three Months Ended
September 30, | |
| | 2004 | | 2003 | |
REVENUES: | | | | | |
Casino | | $ | 27,726 | | $ | 25,576 | |
Food and beverage | | 3,583 | | 3,297 | |
Hotel | | 387 | | 420 | |
Other | | 225 | | 214 | |
Total revenues | | 31,921 | | 29,507 | |
Promotional allowances | | (5,004 | ) | (4,929 | ) |
Net revenues | | 26,917 | | 24,578 | |
COSTS AND EXPENSES: | | | | | |
Casino | | 9,745 | | 9,352 | |
Food and beverage | | 1,430 | | 1,287 | |
Hotel | | 148 | | 204 | |
Marketing, general and administrative | | 7,901 | | 7,639 | |
Depreciation and amortization | | 1,541 | | 1,577 | |
Total costs and expenses | | 20,765 | | 20,059 | |
OPERATING INCOME | | 6,152 | | 4,519 | |
Interest income | | 8 | | 1 | |
Interest expense | | (3,485 | ) | (3,519 | ) |
NET INCOME | | $ | 2,675 | | $ | 1,001 | |
See notes to unaudited consolidated financial statements
2
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(Dollars In Thousands)
| | Nine Months Ended
September 30, | |
| | 2004 | | 2003 | |
REVENUES: | | | | | |
Casino | | $ | 81,893 | | $ | 72,520 | |
Food and beverage | | 10,054 | | 8,934 | |
Hotel | | 999 | | 1,064 | |
Other | | 674 | | 629 | |
Total revenues | | 93,620 | | 83,147 | |
Promotional allowances | | (14,502 | ) | (14,295 | ) |
Net revenues | | 79,118 | | 68,852 | |
COSTS AND EXPENSES: | | | | | |
Casino | | 28,766 | | 26,681 | |
Food and beverage | | 3,995 | | 3,372 | |
Hotel | | 530 | | 609 | |
Marketing, general and administrative | | 22,677 | | 21,452 | |
Depreciation and amortization | | 4,822 | | 4,452 | |
Total costs and expenses | | 60,790 | | 56,566 | |
OPERATING INCOME | | 18,328 | | 12,286 | |
Interest income | | 10 | | 5 | |
Interest expense | | (10,468 | ) | (10,400 | ) |
NET INCOME | | $ | 7,870 | | $ | 1,891 | |
See notes to unaudited consolidated financial statements
3
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2003 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
(IN THOUSANDS)
| | | | Additional
Paid-in
Capital | | Retained
Earnings | | Total | |
| | Common Stock | | | | |
Shares | | Amount * |
BALANCES, JANUARY 1, 2003 | | 100 | | $ | | | $ | 11,396 | | $ | 10,380 | | $ | 21,776 | |
Net income | | | | | | | | 2,406 | | 2,406 | |
BALANCES, DECEMBER 31, 2003 | | 100 | | $ | | | $ | 11,396 | | $ | 12,786 | | $ | 24,182 | |
Net income | | | | | | | | 7,870 | | 7,870 | |
BALANCES, SEPTEMBER 30, 2004 | | 100 | | $ | | | $ | 11,396 | | $ | 20,656 | | $ | 32,052 | |
* The par value amount of Black Hawk Gaming & Development Company, Inc. common stock outstanding for the periods presented is less than $500 and is therefore presented as $0 above due to rounding.
See notes to unaudited consolidated financial statements
4
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(Dollars In Thousands)
| | Nine Months Ended
September 30, | |
| | 2004 | | 2003 | |
OPERATING ACTIVITIES: | | | | | |
Net income (loss) | | $ | 7,870 | | $ | 1,891 | |
Adjustments to reconcile net income (loss) to net cash (used in) operating activities: | | 4,822 | | 4,456 | |
Depreciation and amortization | | 814 | | 504 | |
Amortizaiton of financing fees | | 425 | | 280 | |
Amortizaiton of bond discount | | 26 | | (7 | ) |
(Gain) Loss on sale of assets | | (11,660 | ) | (10,039 | ) |
Due to/from Parent | | | | | |
Changes in operating assets and liabilities: | | | | | |
Prepaid expenses and other assets | | 80 | | 604 | |
Accounts payable and accrued expenses | | 3,020 | | 1,138 | |
Net cash provided by (used in) operating activities | | 5,397 | | (1,173 | ) |
INVESTING ACTIVITIES: | | | | | |
Proceeds from sale of equipment | | 155 | | 43 | |
Equipment purchases and additions to gaming facilities | | (4,640 | ) | (8,463 | ) |
Net cash used in investing activities | | (4,485 | ) | (8,420 | ) |
FINANCING ACTIVITIES: | | | | | |
Proceeds from reducing and revolving credit facility | | | | 3,688 | |
Payments on bonds | | (217 | ) | (203 | ) |
Net cash (used in) provided by financing activities | | (217 | ) | 3,485 | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | $ | 695 | | $ | (6,108 | ) |
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | | 11,550 | | 16,743 | |
CASH AND CASH EQUIVALENTS, END OF PERIOD | | $ | 12,245 | | $ | 10,635 | |
SUPPLEMENTAL CASH FLOW INFORMATION: | | | | | |
Cash paid for interest | | $ | 12,106 | | $ | 12,399 | |
See notes to unaudited consolidated financial statements
5
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(DOLLARS IN THOUSANDS)
1. BUSINESS AND ORGANIZATION
Black Hawk Gaming & Development Company, Inc. (“Black Hawk”) was incorporated on January 10, 1991. Black Hawk is a holding company that owns, develops and operates gaming properties. Currently Black Hawk operates the Gilpin Hotel Casino (“GHC”) and The Lodge Casino at Black Hawk (“The Lodge”), both located in Black Hawk, Colorado, and The Gold Dust West Casino (“GDW”) located in Reno, Nevada.
GHC is a 37,000 square foot facility located in the Black Hawk gaming district and was Black Hawk’s first casino project. Originally built in the 1860’s, the Gilpin Hotel was one of the oldest in Colorado; however, due to space limitations, the casino offers no hotel or lodging facilities. The Gilpin Hotel Casino commenced operations in October 1992, and was expanded through the acquisition of an adjacent casino in late 1994. It now offers customers approximately 460 slot machines, a restaurant, a bar and parking for approximately 200 cars.
The Lodge is a hotel/casino/parking complex and is one of Colorado’s largest casinos. The 250,000 square foot facility, which opened on September 24, 1998, presently offers customers 900 slot machines, 30 table games, 50 hotel rooms, three restaurants, four bars and parking for approximately 600 cars.
On January 4, 2001, Black Hawk purchased the assets and operating business of GDW for $26,000. The GDW is a 24,000 square-foot gaming and dining facility is located on 4.6 acres, a few blocks west of Reno’s downtown gaming district. The GDW has been catering to the “locals” market for the past 23 years and currently offers customers 500 slot machines, 106 motel rooms, one restaurant, four bars and parking for 277 cars.
In addition, included within the Company is BHWK corporate (“Corporate”). Generally, Corporate operations are not a profit center, but rather a managerial entity which directs the overall operations of the Company.
2. SIGNIFICANT ACCOUNTING POLICIES
Unaudited Consolidated Financial Statements – In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for the fair presentation of the financial position of Black Hawk at September 30, 2004 and December 31, 2003, and the results of its operations and cash flows for the three months ended September 30, 2004 and 2003. The accompanying unaudited consolidated financial statements include the accounts of Black Hawk, its wholly owned subsidiaries, The Lodge, GHC, and GDW. All significant inter-company transactions and balances have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto of Black Hawk for the year ended December 31, 2003 contained in the JEI Form 10-K report filed with the U.S. Securities Exchange Commission. The results of interim periods are not necessarily indicative of results to be expected for the year.
Reclassifications – Certain amounts have been reclassified within the 2003 financial statements to conform to the presentation used in 2004.
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3. SEGMENTS
As defined by SFAS No. 131, “Disclosure about Segments of an Enterprise and Related Information”, the following segment information is presented after the elimination of inter-segment transactions. Black Hawk has two reportable segments (Colorado and Nevada) representing the states in which we operate. The Colorado operations consist of The Lodge and the GHC, and the Nevada operations consist of the GDW. Each segment is managed separately because of the unique characteristics of geographic location, revenue stream, and customer base. The accounting policies of the segments are the same as those described in Note 2.
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| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
(Dollars In Thousands) | | 2004 | | 2003 | | 2004 | | 2003 | |
Net revenues: | | | | | | | | | |
Black Hawk, Colorado | | $ | 21,126 | | $ | 19,454 | | $ | 62,418 | | $ | 53,857 | |
Reno, Nevada | | 5,791 | | 5,124 | | 16,700 | | 14,995 | |
| | | | | | | | | |
Total net revenues | | $ | 26,917 | | $ | 24,578 | | $ | 79,118 | | $ | 68,852 | |
| | | | | | | | | |
Depreciation and amortization: | | | | | | | | | |
Black Hawk, Colorado | | $ | 1,178 | | $ | 1,250 | | $ | 3,724 | | $ | 3,500 | |
Reno, Nevada | | 350 | | 315 | | 1,059 | | 914 | |
Corporate | | 13 | | 12 | | 39 | | 38 | |
| | | | | | | | | |
Total depreciation and amortization | | $ | 1,541 | | $ | 1,577 | | $ | 4,822 | | $ | 4,452 | |
| | | | | | | | | |
Operating income: | | | | | | | | | |
Black Hawk, Colorado | | $ | 5,144 | | $ | 4,163 | | $ | 15,324 | | $ | 10,501 | |
Reno, Nevada | | 1,624 | | 1,153 | | 4,760 | | 3,556 | |
Corporate | | (618 | ) | (797 | ) | (1,758 | ) | (1,771 | ) |
| | | | | | | | | |
Total operating income | | $ | 6,150 | | $ | 4,519 | | $ | 18,326 | | $ | 12,286 | |
| | | | | | | | | |
Interest income: | | | | | | | | | |
Black Hawk, Colorado | | $ | 3 | | $ | 2 | | $ | 5 | | $ | 4 | |
Reno, Nevada | | | | | | | | | |
Corporate | | 5 | | | | 5 | | | |
| | | | | | | | | |
Total interest income | | $ | 8 | | $ | 2 | | $ | 10 | | $ | 4 | |
| | | | | | | | | |
Interest expense: | | | | | | | | | |
Black Hawk, Colorado | | $ | (2,699 | ) | $ | (2,738 | ) | $ | (8,112 | ) | $ | (8,058 | ) |
Reno, Nevada | | (786 | ) | (780 | ) | (2,356 | ) | (2,342 | ) |
| | | | | | | | | |
Total interest expense | | $ | (3,485 | ) | $ | (3,518 | ) | $ | (10,468 | ) | $ | (10,400 | ) |
| | | | | | | | | |
Net income | | | | | | | | | |
Black Hawk, Colorado | | $ | 2,448 | | $ | 1,427 | | $ | 7,217 | | $ | 2,447 | |
Reno, Nevada | | 838 | | 373 | | 2,404 | | 1,214 | |
Corporate | | (611 | ) | (799 | ) | (1,751 | ) | (1,770 | ) |
| | | | | | | | | |
Net income | | $ | 2,675 | | $ | 1,001 | | $ | 7,870 | | $ | 1,891 | |
| | | | | | | | | |
EBITDA (1) | | | | | | | | | |
Black Hawk, Colorado | | $ | 6,322 | | $ | 5,413 | | $ | 19,048 | | $ | 14,001 | |
Reno, Nevada | | 1,974 | | 1,468 | | 5,819 | | 4,470 | |
Corporate | | (603 | ) | (785 | ) | (1,717 | ) | (1,733 | ) |
| | | | | | | | | |
EBITDA | | $ | 7,693 | | $ | 6,096 | | $ | 23,150 | | $ | 16,738 | |
| | | | | | | | | |
Additions to long lived assets: | | | | | | | | | |
Black Hawk, Colorado | | $ | 976 | | $ | 1,053 | | $ | 3,566 | | $ | 7,829 | |
Reno, Nevada | | 297 | | 224 | | 1,074 | | 623 | |
Corporate | | | | | | | | 12 | |
| | | | | | | | | |
Total additions to long lived assets | | $ | 1,273 | | $ | 1,277 | | $ | 4,640 | | $ | 8,464 | |
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| | September 30, | | December 31, | |
(Dollars In Thousands) | | 2004 | | 2003 | |
Total assets: | | | | | |
Black Hawk, Colorado | | $ | 107,259 | | $ | 109,597 | |
Reno, Nevada | | 24,861 | | 24,320 | |
Corporate | | 13,883 | | 987 | |
Total assets | | 146,003 | | 134,904 | |
| | | | | |
Long-term debt: | | | | | |
Black Hawk, Colorado | | $ | 78,395 | | $ | 78,302 | |
Reno, Nevada | | 22,649 | | 22,549 | |
| | | | | |
Total long-term debt | | $ | 101,044 | | $ | 100,851 | |
(1) EBITDA (earnings before interest, taxes, depreciation and amortization) is presented as a supplemental information in the tables above and in the discussion of our operating results. EBITDA can be reconciled directly to our consolidated net income by adding the amounts shown for depreciation, amortization, and interest. This information should not be considered as an alternative to any measure of performance as promulgated under accounting principles generally accepted in the United States of America, such as net (loss) income, nor should it be considered as an indicator of our overall financial performance. Our calculation of EBITDA may be different from the calculation used by other companies and comparability may be limited. Management believes that presentation of a non-GAAP financial measure such as EBITDA is useful because it allows investors and management to evaluate and compare our operating results from continuing operations from period to period in a meaningful and consistent manner in addition to standard GAAP financial measures. Management internally evaluates the performance of our properties using EBITDA measures as do most analysts following the gaming industry. EBITDA is also a component of certain financial covenants in our debt agreements.
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