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 June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 333-8163
Riviera Black Hawk, Inc.
(Exact name of Registrant as specified in its charter)
Colorado 86-0886265
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
2901 Las Vegas Boulevard South, Las Vegas, Nevada 89109
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (702) 794-9527
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--- No---
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE LAST FIVE YEARS
Indicate by check mark whether the Registrant has filed all documentation
and reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes--- No---
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
The Registrant's Common Stock is owned 100% indirectly by its ultimate
parent Riviera Holdings Corporation, a reporting company. As of July 31, 2000,
the number of outstanding shares of the Registrant's Common Stock was 1,000.
Riviera Black Hawk, Inc.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Independent Accountants' Report 3
Condensed Balance Sheets at June 30, 2000 (Unaudited) and
December 31, 1999 4
Condensed Statements of Operations (Unaudited) for the
Three Months and Six ended June 30, 2000 and 1999 5
Condensed Statements of Cash Flows (Unaudited) for the
Three Months and Six Months ended June 30, 2000 and 1999 6
Notes to Condensed Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosure About Market Risk 17
PART II. OTHER INFORMATION
Signature Page 19
2
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
Riviera Black Hawk, Inc.
We have reviewed the accompanying condensed balance sheet of Riviera Black Hawk,
Inc., (the "Company") as of June 30, 2000, and the related condensed statements
of operations and of cash flows for the three months and six months ended June
30, 2000 and 1999. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed financial statements for them to be in conformity with
accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with generally accepted auditing
standards in the United States of America, the balance sheet of Riviera Black
Hawk, Inc. as of December 31, 1999, and the related statements of stockholders'
equity, and cash flows for the year then ended (not presented herein); and in
our report dated February 14, 2000 (March 6, 2000 with respect to Note 6), we
expressed an unqualified opinion on those financial statements. In our opinion,
the information set forth in the accompanying condensed balance sheet as of
December 31, 1999, is fairly stated, in all material respects, in relation to
the balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
July 25, 2000
Las Vegas, Nevada
3
RIVIERA BLACK HAWK, INC.
BALANCE SHEETS
June 30, 2000 and December 31, 1999
(In Thousands, except share amounts)
- --------------------------------------------------------------------------------------------------------------------
June 30, December 31,
2000 1999
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $7,708 $1,810
Cash and cash equivalents - restricted 1,690 7,173
Short term investments - restricted 2,820
Accounts receivable related to construction financing 233
Inventories 133
Prepaid expenses and other assets 601 795
--------------------- ---------------------
Total current assets 10,366 12,598
PROPERTY AND EQUIPMENT, NET 68,933 56,734
DEFERRED FINANCING COSTS, Net 2,989 3,446
OTHER ASSETS 6 12
DEFERRED INCOME TAXES 1,009 160
--------------------- ---------------------
TOTAL $83,301 $72,950
===================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $1,599 $69
Accounts payable 2,981 3,053
Management fees payable 349
Accrued interest expense 1,151 976
Accrued other expenses 1,861 110
--------------------- ---------------------
Total current liabilities 7,940 4,208
--------------------- ---------------------
LONG-TERM DEBT, NET OF CURRENT PORTION 53,595 45,742
--------------------- ---------------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock ($.001 par value; 10,000 shares
authorized; 1,000 shares issued and outstanding
Additional paid-in capital 23,513 23,474
Accumulated deficit (1,748) (474)
--------------------- ---------------------
Total stockholders' equity 21,766 23,000
--------------------- ---------------------
TOTAL $83,301 $72,950
=============================================
See notes to condensed financial statements
4
RIVIERA BLACK HAWK, INC.
STATEMENTS OF OPERATIONS (Unaudited)
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
REVENUES:
Casino $8,525 $16,104
Food & beverage 1,280 1,991
Other 84 146
Total revenues 9,889 18,242
Less promotional allowances 947 1,416
Net revenues 8,942 16,826
COSTS AND EXPENSES:
Direct costs and expenses of operating departments:
Casino 5,448 8,081
Food and beverage 489 845
Other 3 5
Other operating expenses:
Selling, general and administrative 2,473 4,189
Preopening expenses 0 58 1,222 73
Management fees 16 349
Depreciation and amortization 616 1,229
Total costs and expenses 9,044 58 15,920 73
INCOME (LOSS) FROM OPERATIONS
OTHER (EXPENSE) INCOME
Interest expense (2,305) (3,768)
Interest income 130 164
Interest capitalized 0 577
Total other expense (2,175) 0 (3,028) 0
LOSS BEFORE BENEFIT FOR TAXES (2,277) (58) (2,122) (73)
BENEFIT FOR INCOME TAXES INCLUDING
COLORADO STATE INCOME TAX (928) (849)
NET LOSS ($1,350) ($58) ($1,273) ($73)
See notes to condensed financial statements
5
RIVIERA BLACK HAWK, INC.
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000
STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended Six Months Ended
June 30, 2000 June 30, 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($1,350) ($1,273)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 616 1,229
Provision for bad debts 12 23
Interest expense 2,305 3,768
Interest paid (3,283) (3,302)
Capitalized interest on construction projects (577)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 442 (256)
Decrease (increase) in inventories 73 (133)
Decrease (increase) in prepaid expenses
and other assets (350) (19)
Increase (decrease) in accounts payable (1,904) (162)
Increase (decrease) in management fees payable 16 349
Increase (decrease) in accrued liabilities (787) 688
Increase (decrease) in current income taxes payable (54)
Increase (decrease) in deferred income taxes 849 849
------------------------------------------------
Net cash provided by operating activities (3,415) 1,184
------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - Black Hawk, Colorado project (750) (13,428)
Capitalized interest on construction projects 577
Decrease (increase) Black Hawk, Colorado restricted funds 3,922 8,303
Decrease (increase) in other assets 4 6
------------------------------------------------
Net cash provided by investing activities 3,176 (4,542)
------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 900 9,619
Payments on long-term borrowings (379) (402)
Additional paid in capital 39
------------------------------------------------
Net cash provided by financing activities 521 9,256
------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $282 $5,898
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,426 1,810
------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD 7,708 7,708
================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Colorado State Income Tax $100
================================================
See notes to condensed financial statements
6
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
On August 18, 1997 (date of inception), Riviera Black Hawk, Inc. (the "Company"
or "RBH") was formed. The Company is a wholly owned indirect subsidiary of
Riviera Holdings Corporation. The balance sheet as of December 31, 1999 and
Statement of Operations for the three months and six months ended June 30, 1999
present information while the Company was in the development stage. RBH
commenced operations on February 4, 2000, with the opening of the Riviera Black
Hawk Casino in Black Hawk, Colorado.
Nature of Operations
The primary line of business of the Company is the operation of the Riviera
Black Hawk Casino in Black Hawk, Colorado,
Casino operations are subject to extensive regulation in the State of Colorado
by the Gaming Control Board and various other state and local regulatory
agencies.
Principles of Presentation
The financial information at June 30, 2000, and for the three months and six
months ended June 30, 2000 and 1999 is unaudited. However, such information
reflects all adjustments (consisting solely of normal recurring adjustments)
that are, in the opinion of management, necessary for a fair presentation of the
financial position, results of operations, and cash flows for the interim
periods. The results of operations for the three months and six months ended
June 30, 2000 are not necessarily indicative of the results that will be
achieved for the entire year.
These financial statements should be read in conjunction with the audited
condensed financial statements and notes thereto for the year ended December 31,
1999, included in the Company's Annual Report on Form 10K.
Earnings Per Share
The Company is a wholly owned subsidiary of Riviera Holdings Corporation. There
are no publicly traded shares of the Company's stock. In accordance with
Financial Accounting Standards No. 128 "Earnings Per Share", no earnings per
share data is presented herein.
Estimates and Assumptions
The preparation of condensed financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
7
expenses during the reporting period. Significant estimates used by the Company
include accrued liabilities. Actual results may differ from estimates.
Cash and cash equivalents and short term investments - restricted
Amounts related to the Riviera Black Hawk casino project in Black Hawk, Colorado
are restricted in use to that project or for the related 13% First Mortgage
Notes interest payments. The restrictions were removed in August 2000.
Revenue Recognition
Casino Revenue - The Company recognizes, as gross revenue, the net win
from gaming activities, which is the difference between gaming wins and losses.
Food and beverage revenue, Entertainment Revenue and Other Revenue -
The Company recognizes food and beverage, entertainment revenue and other
revenue at the time that goods or services are provided.
Promotional Allowances - Promotional allowances consist primarily of food and
beverage, entertainment and other services furnished without charge to
customers. The retail value of such services is included in the respective
revenue classifications and is then deducted as promotional allowances.
Recently Issued Accounting Standards
Recently Issued Accounting Standards - The Financial Accounting Standards Board
issued SFAS No. 133, "Accounting for Derivatives," which is effective for fiscal
years beginning after June 15, 2000. This statement defines derivatives and
requires qualitative disclosure of certain financial and descriptive information
about a company's derivatives. The Company will adopt SFAS No. 133 in the year
ending December 31, 2001. Management has not finalized its analysis of this SFAS
or the impact of this SFAS on the Company or the Company's future consolidated
financial statements.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB
101 clarifies existing accounting principles related to revenue recognition in
financial statements. The Company is required to comply with the provisions of
SAB 101 by the fourth quarter of fiscal 2000. Due to the nature of the Company's
operations, management does not believe that SAB 101 will have a significant
impact on the Company's financial statements.
2. LONG TERM DEBT AND COMMITTMENTS
On June 3, 1999, the Company, closed a $45 million private placement of 13%
First Mortgage Notes. The net proceeds of the placement were used to fund the
completion of RBH's casino project in Black Hawk, Colorado. The parent of RBH,
Riviera Holdings Corporation, has not guaranteed the $45 million RBH Notes, but
8
has agreed to a "Keep Well" of $5 million per year (or an aggregate limited to
$10 million) for the first 3 years of RBH operations to cover if (i) the $5.85
million interest on such Notes is not paid by RBH and (ii) the amount by which
RBH cash flow is less than $9.0 million as follows:
Operating Period #1 April 1, 2000-December 31, 2000 $6.75 Million Operating
Period #2 January 1, 2001-December 31, 2001 $9.0 Million Operating Period #3
January 1, 2002-December 31, 2002 $9.0 Million Operating Period #4 January 1,
2003-March 31, 2003 $2.25 Million
The notes were issued at a cost in the amount of $3.5 million. The deferred
financing costs are being amortized over the life of the notes on a
straight-line basis which approximates the effective interest method.
The 13% First Mortgage Note Indenture provides that, in certain
circumstances, the Company must offer to repurchase the 13% Notes upon the
occurrence of a change of control or certain other events. In the event of such
mandatory redemption or repurchase prior to maturity, the Company would be
unable to pay the principal amount of the 13% Notes without a refinancing. The
Board of Directors has authorized management to repurchase a porion of the 13%
Notes on the open market or in negotiated transactions from time to time under
the Permitted Investments provisions of the indenture.
The 13% First Mortgage Note Indenture contains certain covenants, which limit
the ability of the Company and its restricted subsidiaries, subject to certain
exceptions, to: (1) incur additional indebtedness; (ii) pay dividends or other
distributions, repurchase capital stock or other equity interests or
subordinated indebtedness, (iii) enter into certain transactions with
affiliates; (iv) create certain liens; sell certain assets; and (v) enter into
certain mergers and consolidations. As a result of these restrictions, the
ability of the Company to incur additional indebtedness to fund operations or to
make capital expenditures is limited. In the event that cash flow from
operations is insufficient to cover cash requirements, the Company would be
required to curtail or defer certain of their capital expenditure programs under
these circumstances, which could have an adverse effect on the Company's
operations. At June 30, 2000, the Company believes that it is in compliance with
the covenants.
During the first quarter of 2000, RBH obtained $9.6 million in capital lease
financing for 60 months at approximately 10.5% for equipment purchases.
9
3. SEGMENT DISCLOSURES
RBH provides Las Vegas-style gaming, amenities and entertainment. The Company's
ttwo reportable segments are based upon the type of service provided: Casino and
food and beverage. The casino segment provides customers with gaming activities
through traditional table games and slot machines. The food and beverage segment
provides restaurant and drink services.
All other segment activity consists of rent income, telephone and other
activity. Intersegment revenues consist of revenues generated through
complimentary sales to customers by the casino segment. The Company evaluates
each segment's performance based on segment operating profit. The accounting
policies of the operating segments are the same as those described in the
summary of significant accounting policies. The Company opened for business on
February 4, 2000. The Company was in the development stage at June 30, 1999,
accordingly, no comparative data is provided for that period.
Food and
Three Months ended June 30, 2000 Casino Beverage All Other Total
Revenues from external customers $8,525 $333 $84 $8,942
Intersegment revenues 947 947
Segment profit (loss) 3,077 (156) 81 3,002
Food and
Six Months ended June 30, 2000 Casino Beverage All Other Total
Revenues from external customers $16,104 $575 $146 $16,826
Intersegment revenues 1,416 1,416
Segment profit (loss) 8,023 (270) 141 7,895
Reconciliation of segment profit to consolidated net income before taxes:
Three Months Ended Six Months Ended
2000 2000
Segment profit $3,002 $7,895
Other operating expenses 3,105 6,989
Other expense 2,175 3,028
-------------- ----------------
Net income (loss) before provision for taxes ($2,277) ($2,122)
The Company markets directly to residents of Denver, Colorado. Substantially all
revenues are derived from patrons visiting the Company from the Denver
metropolitan area. Revenues from a foreign country or region may exceed 10% of
all reported segment revenues; however, the Company cannot identify such
information based upon the nature of gaming operations.
10
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Special Factors Effecting Comparability
Riviera Black Hawk, Inc. was in the development stage at June 30, 1999.
Accordingly, no comparative data is provided.
The following table sets forth certain operating information for the Company for
the three months and six months ended June 30, 2000. Revenues and promotional
allowances are shown as a percentage of net revenues. Department costs are shown
as a percentage of departmental revenues. All other percentages are based on net
revenues.
Three Months Ended Six Months Ended
June 30, June 30,
Income Statement Data: 2000 2000
--------------------------------------------------
Revenues:
Casino 95.3% 95.7%
Food and beverage 14.3% 11.8%
Other 0.9% 0.9%
Less promotional allowances -10.6% -8.4%
--------------------------------------------------
Net Revenues 100.0% 100.0%
Costs and Expenses:
Casino 63.9% 50.2%
Food and beverage 38.2% 42.4%
Other 3.0% 3.6%
General and administrative 27.6% 24.9%
Management fees 0.2% 2.1%
Preopening Expenses - Black Hawk, Colorado Project 0.0% 7.3%
Depreciation and amortization 6.9% 7.3%
--------------------------------------------------
Total costs and expenses 102.8% 94.6%
Income from operations -2.8% 5.4%
--------------------------------------------------
Interest expense -25.8% -22.4%
Interest income 1.5% 1.0%
Interest, capitalized 0.0% 3.4%
Income before provision for income taxes -25.5% -12.6%
--------------------------------------------------
Provision for income taxes -10.4% -5.1%
Net Income -15.1% -7.6%
--------------------------------------------------
EBITDA (1) Margin 5.9% 22.0%
--------------------------------------------------
Net cash provided by operating activities -38.2% 7.0%
--------------------------------------------------
(1) EBITDA consists of earnings before interest, income taxes, depreciation,
amortization, management fees and preopening expenses. While EBITDA should not
be construed as a substitute for operating income or a better indicator of
liquidity than cash flow from operating activities, which are determined in
accordance with generally accepted accounting principles ("GAAP") it is included
herein to provide additional information with respect to the ability of the
Company to meet its future debt service, capital expenditures and working
capital requirements. Although EBITDA is not necessarily a measure of the
Company's ability to fund its cash needs, management believes that certain
investors find EBITDA to be a useful tool for measuring the ability of the
Company to service its debt. EBITDA margin is EBITDA is a percent of net
revenues. The Company's definition of EBITDA may not be comparable to other
companies' definitions.
11
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999.
Operations Commenced February 4, 2000
Special Factors Effecting Comparability
Riviera Black Hawk, Inc. was in the development stage at June 30, 1999.
Accordingly, no comparative data is provided.
Revenues
Riviera Black Hawk Casino opened for business in Black Hawk, Colorado, on
February 4, 2000. Net revenues for the second quarter ending June 30, 2000,
totaled $8.9 million. Casino revenues were $8.5 million or 95.3% of total net
revenues. In the casino $8.0 million of the total was slot machine revenues with
the balance of $500,000 provided by casino table games. Food and Beverage
revenues were approximately $1.3 million of which $950,000 were promotional
allowances representing drinks and meals to casino patrons.
Direct Costs and Expenses of Operating Departments
Total direct costs and expenses of operating departments were $6.0 million.
Casino expenses were $5.4 million, or 63.9% of casino revenues. These expenses
were primarily payroll and related taxes and benefits, gaming taxes and
licenses, and marketing. Food and beverage expenses were approximately $500,000,
or 38% of gross food and beverage revenues.
Other Operating Expenses
Selling, general and administrative expenses were $2.5 million, or 27.6% of net
revenues. General and administrative expenses consist mainly of payroll and
related taxes and benefits. Management fees to its parent were approximately
$16,000. Those fees are due Riviera Holdings Corporation and are based on a
percent of net revenues and EBITDA.
Depreciation for the period was $616,000 and was based on the total property
cost of approximately $54.0 million.
Other Income (Expense)
In June 1999, RBH completed a $45 million private placement of 13% First
Mortgage Notes. Interest expense on those notes of approximately $2.3 million,
was recorded in the second quarter of 2000. Interest income, on investments from
the unused proceeds of the 13% First Mortgage Notes, was $130,000.
Net Income (Loss)
The net loss for the three months ended June 30, 2000, was $1.3 million or 15%
of net revenues. Provision for income taxes includes the normal 35% provision
for federal taxes and 5% for Colorado State Income Tax for the Black Hawk,
Colorado property.
12
EBITDA
EBITDA for the three months ended June 30, 2000, was approximately $530,000, or
5.9% of net revenues.
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999.
Operations Commenced February 4, 2000
Special Factors Effecting Comparability
Riviera Black Hawk, Inc. was in the development stage at June 30, 1999.
Accordingly, no comparative data is provided.
Revenues
Riviera Black Hawk Casino opened for business in Black Hawk, Colorado, on
February 4, 2000. Net revenues for the period commencing February 4, 2000 and
ending June 30, 2000, totaled $16.8 million. Casino revenues were $16.1 million
or 95.7% of total net revenues. In the casino $15.3 million of the total was
slot machine revenues with the balance of $800,000 provided by casino table
games. Food and Beverage revenues were approximately $2.0 million of which $1.4
million were promotional allowances representing drinks and meals to casino
patrons.
Direct Costs and Expenses of Operating Departments
Total direct costs and expenses of operating departments were $8.9 million.
Casino expenses were $8.1 million, or 50.2% of casino revenues. These expenses
were primarily payroll and related, gaming tax and license, and marketing. Food
and beverage expenses were approximately $850,000, or 42% of gross food and
beverage revenues.
Other Operating Expenses
Selling, general and administrative expenses were $4.2 million, or 24.9% of net
revenues.
General and administrative expenses consist mainly of payroll and related taxes
and benefits. Preopening expenses totaled $1.2 million and were comprised mainly
of payroll and related taxes and benefits for the period January 1 through
February 3, 2000 when employee service training was provided. Management fees to
its parent were approximately $350,000. Those fees are due Riviera Holdings
Corporation and are based on a percent of net revenues and EBITDA.
Depreciation for the period was $1.2 million and was based on the total property
cost of approximately $54.0 million.
Other Income (Expense)
13
In June 1999, RBH completed a $45 million private placement of 13% First
Mortgage Notes. Interest expense (net of capitalized interest) on those notes of
approximately $3.2 million, was recorded in the period. Contingent interest,
based on 5% of cash flow as defined and totaling $176,000 is included in
interest expense. Interest income, on investments from the unused proceeds of
the 13% First Mortgage Notes, was $160,000.
Capitalized interest was $577,000 on the project for the period January 1, 2000
through February 3, 2000. Capitalized interest in 1999 was realized by Riviera
Holdings Corporation and is a component of their investment in RBH.
Net Income (Loss)
The net loss for the six months ended June 30, 2000, was $1.3 million or 7.6% of
net revenues. Provision for income taxes includes the normal 35% provision for
federal taxes and 5% for Colorado State Income Tax for the Black Hawk, Colorado
property.
EBITDA
EBITDA for the period ended June 30, 2000, was $3.7 million, or 22.0% of net
revenues. Preopening expenses of $1.2 million are not included in the EBITDA
calculation.
Liquidity and Capital Resources
At June 30, 2000, the RBH had cash, restricted cash and cash equivalents of $9.4
million. The Company had working capital of $2.5 million and shareholders equity
of $21.8 million.
The Company's net cash provided by operating activities was approximately $1.2
million for the period ending June 30, 2000. Management believes that the $9.4
million in cash and cash equivalents, and the "keep well" commitments from
Riviera Holdings Corporation will be sufficient to cover the Company's
investment in budgeted capital expenditures for 2000 including completion of the
Black Hawk casino development and the working capital requirements to operate
the casino for the first twelve months of operations.
Cash flow from operations may not be sufficient to pay 100% of the principal of
the 13% Notes at maturity on May 1, 2005. Accordingly, the ability of the
Company to repay the 13% Notes at maturity will be dependent upon its ability to
refinance those notes. There can be no assurance that the Company will be able
to refinance the principal amount of the 13% Notes at maturity. At any time
prior to May 1, 2001, the Company may redeem up to 35% of the aggregate
principal amount of the 13% notes issued under the indenture at a redemption
price of 113% of the principal amount. On or after May 1, 2002, the Company may
redeem all or a part of the notes at premiums beginning at 106.5% and declining
each subsequent year to par in 2004.
The 13% Note Indenture provides that, in certain circumstances, the Company must
offer to repurchase the 13% Notes upon the occurrence of a change of control or
14
certain other events. In the event of such mandatory redemption or repurchase
prior to maturity, the Company would be unable to pay the principal amount of
the 13% Notes without a refinancing.
The 13% Note Indenture contains certain covenants, which limit the ability of
the Company and its restricted subsidiaries, subject to certain exceptions, to :
(i) incur additional indebtedness; (ii) pay dividends or other distributions,
repurchase capital stock or other equity interests or subordinated indebtedness;
(iii) enter into certain transactions with affiliates; (iv) create certain
liens; sell certain assets; and (v) enter into certain mergers and
consolidations. As a result of these restrictions, the ability of the Company to
incur additional indebtedness to fund operations or to make capital expenditures
is limited. In the event that cash flow from operations is insufficient to cover
cash requirements, the Company would be required to curtail or defer certain of
their capital expenditure programs under these circumstances, which could have
an adverse effect on the Company's operations. At June 30, 2000, the Company
believes that it is in compliance with the covenants.
15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market risks relating to our operations result primarily from changes in
interest rates. We invest our cash and cash equivalents in U.S. Treasury Bills
with maturities of 60 days or less.
As of June 30, 2000, we had $55.2 million in borrowings. The borrowings include
$45 million in bonds maturing in 2005. Interest under the bonds is based on a
rate of 13% excluding contingent interest. Also included is $.7 million in a
special improvement district bond offering with Black Hawk, Colorado. The
Company's share of the debt on the SID bonds of $1,470,000 when the project is
complete, is payable over ten years beginning in January 2000. The special
improvement district bonds bear interest at 5.5%. Other borrowings include a
vehicle loan maturing in 2004 with an interest rate if 9.0%. Additionally, the
Company committed to an $11.1 million capital lease line for 60 months at
approximately 11.2%. The Company made draws on the lease line beginning in 2000
in the amount of $9.6 million at a weighted average interest rate of 10.5%.
Interest Rate Sensitivity
Principal (Notational Amount by Expected Maturity)
Average Interest Rate
(Amounts in Fair Value
thousands) 2000 2001 2002 2003 2004 Thereafter Total at 6/30/00
Long Term Debt Including Current Portion
Equipment loans
Black Hawk, Colorado $ 5 $ 10 $ 8 $ 23 $ 23
Average interest rate 11.2% 11.2% 11.2%
Capital leases
Black Hawk, Colorado $ 1,269 $ 1,600 $ 1,777 $ 1,973 $ 2,191 $ 656 $ 9,466 $ 9,466
Average interest rate 10.8% 10.8% 10.8% 10.8% 10.8% 10.8%
Special Improvement District Bonds
Black Hawk, Colorado $ 64 $ 68 $ 71 $ 76 $ 426 $ 705 $ 705
Average interest rate 5.5% 5.5% 5.5% 5.5% 5.5%
13% First Mortgage Note
Black Hawk, Colorado casino
project $ 45,000 $ 45,000 $ 47,700
Average interest rate 13.0%
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Forward Looking Statements
The Private Securities Litigation Reform Act of 1997 provides a "safe harbor"
for certain forward-looking statements. Certain matters discussed in this filing
could be characterized as forward-looking statements such as statements relating
to plans for future expansion, as well as other capital spending, financing
sources and effects of regulation and competition. Such forward-looking
statements involve important risks and uncertainties that could cause actual
results to differ materially from those expressed in such forward-looking
statements.
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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.
RIVIERA BLACK HAWK, INC.
By: /s/ William L. Westerman
William L. Westerman
Chief Executive Officer and Director
By: /s/Ronald P. Johnson
Ronald P. Johnson
President and Director
By: /s/ Duane Krohn
Duane Krohn
Treasurer,
Chief Financial Office
And Director
Date: August 11, 2000
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