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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
The Registrant meets the conditions set forth in General Instruction I(1)
(a) and (b) of Form 10-K and is therefore filing this Form with the reduced
disclosure format.
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act
of 1934 [No Fee Required] For the fiscal year ended December 31, 2000.
[ ] Transition report pursuant to sections 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required] 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 of Incorporation) (IRS. Employer ID Number)
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
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or amendment
to this Form 10-K.
The Registrant's Common Stock is owned 100% indirectly by its ultimate
parent Riviera Holdings Corporation, a reporting company. As of March 16, 2001
the number of outstanding shares of the Registrant's Common Stock was 1,000.
Documents incorporated by reference:
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Page 1 of 22 Pages
Exhibit Index Appears on Page 21 hereof.
RIVIERA BLACK HAWK, INC.
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED DECEMBER 31, 2000
TABLE OF CONTENTS
Item 1. Business...............................................................................................3
General................................................................................................3
The Riviera Black Hawk Casino..........................................................................3
Geographical Markets...................................................................................4
Competition............................................................................................5
Employees and Labor Relations..........................................................................6
Regulation and Licensing...............................................................................6
Federal Registration..................................................................................11
Item 2. Property..............................................................................................12
Item 3. Legal Proceedings.....................................................................................12
Item 4. Submission of Matters to a Vote of Security Holders...................................................12
Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters..........................12
Item 6. Selected Financial Data...............................................................................12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................12
Results of Operations.................................................................................13
Liquidity and Capital Resources.......................................................................15
Recently Adopted Accounting Standards.................................................................16
Recently Issued Accounting Standards..................................................................17
Forward Looking Statements............................................................................17
Item 7a. Quantitative and Qualitative Market Risk Disclosure...................................................17
Item 8. Financial Statements .................................................................................18
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................18
Item 10. Directors and Executive Officers of the Registrant (not applicable)...................................18
Item 11. Executive Compensation (not applicable)...............................................................18
Item 12. Security Ownership of certain Beneficial Owners and Management (not applicable).......................18
Item 13. Certain Relationships and Related Transactions .......................................................18
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8K........................................18
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PART I
General
Riviera Black Hawk, Inc., a Colorado corporation, was formed on August
18, 1997 and is wholly-owned by Riviera Operating Corporation, a Nevada
corporation, which is, in turn, wholly-owned by Riviera Holdings Corporation, a
Nevada corporation. Riviera Holdings Corporation, through its wholly-owned
subsidiary, Riviera Operating Corporation, also owns and operates the Riviera
Hotel & Casino ("Riviera Las Vegas") located on "The Strip," Las Vegas
Boulevard, in Las Vegas, Nevada. Opened in 1955, Riviera Las Vegas has developed
a long-standing reputation for delivering high quality, traditional Las
Vegas-style gaming, entertainment and other amenities.
The Riviera Black Hawk Casino (Riviera Black Hawk) opened on February
4, 2000. Located in Black Hawk, Colorado, approximately forty (40) miles west of
Denver, our casino is one of the first three encountered when traveling from
Denver to the adjacent gaming cities of Black Hawk and Central City. It is
located on the corner of Mill and Main Streets, across from both the Isle of
Capri casino and the Colorado Central Station casino. Riviera Black Hawk offers
parking for 520 vehicles, of which ninety-two percent (92%) are covered, with
convenient and free self-park and valet options.
Gaming
Our casino features the third largest number of gaming devices in the
market with approximately 960 slot machines and 12 blackjack tables. In
Colorado, each slot machine and each table game is considered one gaming device.
Restaurants
The quality, value and variety of food served are critical to
attracting Black Hawk visitors. Riviera Black Hawk offers one restaurant, the
World's Fare Buffet, a casual buffet style restaurant located on the second
floor of the facility with a seating capacity of up to 265 people. The flexible
design of the restaurant allows for the conversion of a portion of the dining
area into private seating for up to 88 people for private parties and special
events. In addition to the restaurant, our casino also includes two bars, one
located in the entertainment area and the other one on the casino floor.
Entertainment
Riviera Black Hawk includes a 7,000 square feet, multi-use
entertainment center located on the second level of the facility with the
capacity to seat approximately 500 people. This is one of the largest facilities
in the Black Hawk market enabling us to feature entertainment performances and
special events. When not in use, the entertainment center is available for
meetings, parties and other promotional events.
Marketing Strategy
The initial participants in this market were small, privately held
gaming facilities whose inability to offer convenient parking and a full range
of traditional casino amenities limited the growth of this market. Subsequently,
larger casinos offering such amenities have entered the market and have been
gaining market share, contributing to the consistent growth in the overall
market. As of December 31, 2000, there were 26 casinos in the Black Hawk/Central
City market, with ten (10) casinos each offering more than 400 gaming devices.
Isle of Capri, located across the street from our casino with approximately
1,145 gaming machines and 1,000 covered parking spaces, has been the market
leader in terms of win per gaming device.
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We attract customers to our casino by implementing marketing strategies
and promotions designed specifically for this market. In doing so, we hope to
create customer loyalty and benefit from repeat visits by our customers.
Specific marketing programs to support this strategy include the Riviera Black
Hawk Player's Club and "V.I.P." services offered to repeat gaming customers. The
Riviera Black Hawk Player's Club is a promotion that rewards casino play and
repeat visits to the casino with various privileges and amenities such as cash
bonuses, logo gift items and invitations to special events, such as parties and
concerts. We have used the Player's Club promotion in our casino in Las Vegas.
In our capacity as manager of the Riviera Black Hawk, we are tailoring the
Player's Club promotion in Las Vegas for the Black Hawk/Central City market to
implement at our casino. "V.I.P." services are available to the highest level of
players and include special valet and self-parking services, complimentary food
and entertainment offerings and special events specifically designed for this
group of customers.
We benefit from strong "walk-in" traffic due to the proximity of our
casino to the Isle of Capri Casino and the Colorado Central Station casino. We
have been and continue to develop specific marketing programs designed to
attract these "walk-in" customers. We emphasize quality food and beverage
amenities with customer friendly service as a marketing tool. In addition, we
provide entertainment programs designed to meet the tastes of the Black
Hawk/Central City market, such as live music performances by popular regional
and national groups, comedians and boxing.
We rely on database marketing in order to best identify target customer
segments of the population and to tailor the casino's promotions and amenities
to our core group of customers. We use the current database to identify and
stratify slot players living primarily in Colorado for appropriate incentives.
Approximately 105,000 of these slot players have been identified as of December
31, 2000. In addition, we promote our casino by advertising in newspapers, on
billboards and on the radio in the local areas.
Geographical Markets
The Black Hawk Market
Gaming was first introduced to the Black Hawk/Central City market in
October 1991 following a state-wide referendum where Colorado voters approved
limited stakes gaming for three historic mining towns - Black Hawk, Central City
and Cripple Creek. Limited stakes gaming is defined as a maximum single bet of
$5. Black Hawk and Central City are contiguous cities located approximately 40
miles west of Denver and about ten miles north of Interstate Highway 70, the
main east-west artery from Denver. Historically, these two gold mining
communities were popular tourist towns. However, since the inception of casino
gaming in October 1991, many of the former tourist-related businesses have been
displaced by gaming establishments.
The first casino in the Black Hawk/Central City market was opened in
October 1991 with 14 casinos open by the end of that year. The pace of expansion
increased further in 1992 with the number of casinos in the market peaking at 42
casinos. However, due to a trend of consolidation in the market and the
displacement of small casinos by the entry of larger, better capitalized
operators, the number of casinos has declined to 26 as of December 31, 2000.
The Black Hawk/Central City market primarily caters to "day-trip"
customers from Denver, Boulder, Fort Collins and Golden as well as Cheyenne,
Wyoming. We believe an estimated adult population exceeding 2.3 million people
reside within this 100-mile radius of Black Hawk. In addition, we believe that
residents within a 100 mile radius of the City of Black Hawk had an estimated
average household income in excess of $50,000 per annum in 2000 based upon data
contained in the Bear Sterns Global Gaming Almanac.
Since 1992, the number of gaming devices in the Black Hawk/Central City
market has grown 44.4% from 7,252 devices in 1992 to 10,469 devices in 2000. The
total number of slot machines has increased 45.7% since 1992 to 10,323 in 2000
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while the total number of tables in the market has decreased to 146 tables in
the market at the end of 2000. Win per gaming device per day has continued to
grow despite the increase in the number of gaming devices. The City of Black
Hawk experienced a 22.2% increase in gaming revenue in 2000.
The City of Black Hawk has experienced more significant growth in
gaming revenues than Central City since 1992. The popularity of Black Hawk in
comparison to Central City is due primarily to Black Hawk's superior access to
major highways, as patrons must first pass through Black Hawk to access Central
City from Denver. Due to this superior location, larger casino operators have
focused on building in the City of Black Hawk. As a result, casinos in Black
Hawk now generally feature a larger average number of gaming devices, a wider
variety of amenities and convenient free parking for patrons. These factors have
contributed to growth in Black Hawk gaming revenues at a compound annual rate of
29.1% since 1992 compared to a negative growth for Central City of 1.5% over the
same period. The number of slot machines and tables in the City of Black Hawk
has increased 119.5% and 41.0%, respectively since 1992, while the number of
slot machines and tables in Central City has declined 39.5% and 57.1%,
respectively over the same period.
Competition
The Black Hawk/Central City gaming market is characterized by intense
competition. The primary competitive factors in the market are location,
availability and convenience of parking, number of slot machines and gaming
tables, types and pricing of non-gaming amenities, name recognition and overall
atmosphere. Our main competitors are the larger gaming facilities, particularly
those with considerable on-site or nearby parking and established reputations in
the local market. As of December 31, 2000 there were 19 gaming facilities in the
Black Hawk market with nine casinos each offering more than 400 gaming
positions. Construction has also begun on phase one of the "Hyatt Casino" which
is due to open in the fourth quarter, 2001 and is expected to feature over 1,000
slot machines. Further phases are scheduled to include a hotel as well as other
amenities. Other projects have also been announced, proposed, discussed or
rumored for the Black Hawk/Central City market.
The gaming facilities near the intersection of Main and Mill Streets
provide significant competition to our casino. The Isle of Capri Casino, which
we believe to be the most successful casino in Colorado, opened in December 1998
and is located directly across the street from our casino and features
approximately 1,145 slot machines, 14 table games, 1,000 parking spaces, and 235
hotel rooms in 2000. Colorado Central Station, which has been one of the most
successful casinos in Colorado, is located across the street from our casino and
has approximately 700 slot machines, 20 gaming tables and approximately 700
valet parking spaces.
The number of hotel rooms currently in the Black Hawk/Central City
market is approximately 405, with only three gaming facilities providing hotel
accommodations to patrons. These include Harvey's Wagon Wheel Casino Hotel with
approximately 120 rooms, the Lodge at Black Hawk with approximately 50 rooms and
the Isle of Capri Casino which opened 235 rooms in 2000. Casinos offering hotel
accommodations for overnight stay may have a competitive advantage over our
casino. Due to certain zoning restrictions primarily regarding height, however,
we believe that self-parking is a more effective utilization of our available
space and that providing hotel accommodations will not be a significant factor,
but instead will contribute to growth in the overall market.
Historically, the city of Black Hawk has enjoyed an advantage over
Central City because customers have to drive through Black Hawk to reach Central
City. Central City has received approval for the development of a road directly
connecting Central City and Black Hawk with Interstate 70 which would allow
customers to reach Central City without driving by or through Black Hawk. There
remain significant financial obstacles to the development of this road and it is
uncertain whether it will be developed over the near to intermediate term, or
developed at all.
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Currently, limited stakes gaming in Colorado is constitutionally
authorized in Central City, Black Hawk, Cripple Creek and two Native American
reservations in southwest Colorado. However, gaming could be approved in other
Colorado communities in the future. The legalization of gaming closer to Denver
would likely have a material adverse effect on our future results of operations.
We also compete with other forms of gaming in Colorado, including lottery
gaming, and horse and dog racing as well as other forms of entertainment.
It is also possible that new forms of gaming could compete with our
casino. Currently, Colorado law does not authorize video lottery terminals.
However, Colorado law permits the legislature, with executive approval, to
authorize new types of lottery gaming, such as video lottery terminals. Video
lottery terminals are games of chance, similar to slot machines, in which the
player pushes a button that causes a random set of numbers or characters to be
displayed on a video screen. The player may be awarded a ticket, which can be
exchanged for cash or credit play. This form of gaming could compete with slot
machine gaming.
Pursuant to a license agreement Riviera Las Vegas licenses the use at
the Black Hawk casino of all of the trademarks, service marks and logos used by
Riviera Las Vegas. In addition, the license agreement provides that additional
trademarks, service marks and logos acquired or developed by us and used at our
other facilities will be subject to the license agreement.
Employees and Labor Relations
Riviera Black Hawk opened on February 4, 2000 with approximately 450
employees. As of December 31, 2000, the total number of employees was 399. The
Black Hawk/Central City labor market is very competitive. Riviera Black Hawk
believes that it will be able to maintain its current employee level. There can
be no assurance, however, that new and existing casinos will not affect Riviera
Black Hawk's ability to maintain its current employee level.
There are currently no collective bargaining agreements in Black Hawk
casinos.
Regulation and Licensing
Colorado Gaming and Liquor Regulation
Summary
In general we, Riviera Black Hawk, our principal executive officers and
those of Riviera Holdings, and any of our employees who are involved in our
gaming operations, are required to be found suitable for licensure by the
Colorado Gaming Commission. Colorado also requires that significant stockholders
of five percent (5%) or more of our stock be certified as suitable for
licensure. Riviera Black Hawk's original retail gaming license was approved by
the Colorado Gaming Commission on November 18, 1999, and was successfully
renewed on November 18, 2000.
Background
Pursuant to an amendment to the Colorado Constitution, limited stakes
gaming became lawful in the cities of Central City, Black Hawk and Cripple Creek
on October 1, 1991. Limited stakes gaming means a maximum single bet of five
dollars on slot machines and in the card games of blackjack and poker.
Limited stakes gaming is confined to the commercial districts of these
cities as defined by Central City on October 7, 1981, by Black Hawk on May 4,
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1978, and by Cripple Creek on December 3, 1973. In addition the Colorado
Amendment restricts limited stakes gaming to structures that conform to the
architectural styles and designs that were common to the areas prior to World
War I, and which conform to the requirements of applicable city ordinances
regardless of the age of the structures. Under the Colorado Amendment, no more
than 35% of the square footage of any building and no more than 50% of any one
floor of any building may be used for limited stakes gaming. Persons under the
age of 21 cannot participate in limited stakes gaming. The Colorado Amendment
also prohibits limited stakes gaming between the hours of 2:00 a.m. and 8:00
a.m., and allows limited stakes gaming to occur in establishments licensed to
sell alcoholic beverages.
Further, the Colorado Amendment provides that, in addition to any other
applicable license fees, up to a maximum of 40% of the total amounts wagered
less payouts to players may be payable by a licensee for the privilege of
conducting limited stakes gaming. Such percentage is to be established by the
Colorado Commission on July 1 annually.
The Colorado Act declares public policy on limited stakes gaming to be
that: (1) the success of limited sakes gaming is dependent upon public
confidence and trust that licensed limited stakes gaming is conducted honestly
and competitively; the rights of the creditors of licensees are protected;
gaming is free from criminal and corruptive elements; (2) public confidence and
trust can be maintained only by strict regulation of all persons, locations,
practices, associations and activities related to the operation of licensed
gaming establishments and the manufacture or distribution of gaming devices and
equipment; (3) all establishments where limited gaming is conducted and where
gambling devices are operated, and all manufacturers, sellers and distributors
of certain gambling devices and equipment must therefore be licensed, controlled
and assisted to protect the public health, safety, good order and the general
welfare of the inhabitants of the state to foster the stability and success of
limited stakes gaming and to preserve the economy, policies and free competition
in Colorado; and (4) no applicant for a license or other approval has any right
to a license or to the granting of the approval sought. Any license issued or
other commission approval granted pursuant to the provisions of this Article is
a revocable privilege, and no holder acquires any vested rights therein.
Regulatory Structure
The Colorado Act subjects the ownership and operation of limited stakes
gaming facilities in Colorado to extensive licensing and regulation by the
Colorado Commission. The Colorado Commission has full and exclusive authority to
promulgate, and has promulgated, rules and regulations governing the licensing,
conducting and operating of limited stakes gaming. The Colorado Act also created
the Colorado Division of Gaming within the Colorado Revenue Department to
license, regulate and supervise the conduct of limited stakes gaming in
Colorado. The division is supervised and administered by the Director of the
Division of Gaming.
Gaming licenses
The Colorado Commission may issue:
o slot machine manufacturer or distributor,
o operator,
o retail gaming,
o support and
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o key employee gaming licenses.
The first three licenses require annual renewal by the Colorado
Commission. Support and key employee licenses are issued for two year periods
and are renewable by the Division Director. The Colorado Commission has broad
discretion to condition, suspend for up to six months, revoke, limit or restrict
a license at any time and also has the authority to impose fines.
An applicant for a gaming license must complete comprehensive
application forms, pay required fees and provide all information required by the
Colorado Commission and the Division of Gaming. Prior to licensure, applicants
must satisfy the Colorado Commission that they are suitable for licensing.
Applicants have the burden of proving their qualifications and must pay the full
cost of any background investigations. There is no limit on the cost of such
background investigations.
Gaming employees must hold either a support or key employee license.
Every retail gaming licensee must have a key employee licensee in charge of all
limited stakes gaming activities when limited stakes gaming is being conducted.
The Colorado Commission may determine that a gaming employee is a key employee
and, require that such person apply for a key employee license.
A retail gaming license is required for all persons conducting limited
stakes gaming on their premises. In addition, an operator license is required
for all persons who engage in the business of placing and operating slot
machines on the premises of a retailer. However, a retailer is not required to
hold an operator license. No person may have an ownership interest in more than
three retail gaming licenses. A slot machine manufacturer or distributor license
is required for all persons who manufacture, import and distribute slot machines
in Colorado.
The Colorado Regulations require that every officer, director, and
stockholder of private corporations or equivalent office or ownership holders
for non-corporate applicants, and every officer, director or stockholder holding
either a 5% or greater interest or controlling interest of a publicly traded
corporation or owners of an applicant or licensee shall be a person of good
moral character and submit to a full background investigation conducted by the
Division of Gaming and the Colorado Commission. The Colorado Commission may
require any person having an interest in a license to undergo a full background
investigation and pay the cost of investigation in the same manner as an
applicant.
Persons found unsuitable by the Colorado Commission may be required
immediately to terminate any interest, association, or agreement with or
relationship to a licensee. A finding of unsuitability with respect to any
officer, director, employee, associate, lender or beneficial owner of a licensee
or applicant also may jeopardize the licensee's license or the applicant's
application. A license approval may be conditioned upon the termination of any
relationship with unsuitable persons. A person may be found unsuitable because
of prior acts, associations or financial conditions. Acts that would lead to a
finding of unsuitability are those that would violate the Colorado Act or the
Colorado Regulations or that contravene the legislative purpose of the Colorado
Act.
Duties of licensees
An applicant or licensee must report to the Division of Gaming or
Colorado Commission all leases not later than 30 days after the effective date
of the lease. Also, an applicant or a licensee, upon the request of the Colorado
Commission or the Division Director, must submit copies of all written gaming
contracts and summaries of all oral gaming contracts to which it is or intends
to become a party. The Division Director or the Colorado Commission may require
changes in the lease or gaming contract before an applicant is approved or
participation in such agreement is allowed or may require termination of the
lease or gaming contract.
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The Colorado Amendment and the Colorado Regulations require licensees
to maintain detailed records that account for all business transactions. Records
must be furnished upon demand to the Colorado Commission, the Division of Gaming
and other law enforcement authorities. The Colorado Regulations also establish
extensive playing procedures and rules of play for poker, blackjack and slot
machines. Retail gaming licenses must adopt comprehensive internal control
procedures. Such procedures must be approved in advance by the Division of
Gaming and include the areas of accounting, surveillance, security, cashier
operations, key control and fill and drop procedures, among others. No gaming
devices may be used in limited stakes gaming without the approval of the
Division Director or the Colorado Commission.
Licensees have a continuing duty to immediately report to the Division
of Gaming the name, date of birth and social security number of all persons who
obtain an ownership, financial or equity interest in the licensee of 5% or
greater, who have the ability to control the licensee, who have the ability to
exercise significant influence over the licensee or who loan any money or other
thing of value to the licensee. Licensees must report to the Division of Gaming
all gaming licenses, and all applications for gaming licenses, in foreign
jurisdictions.
With limited exceptions applicable to licensees that are publicly
traded entities, no person may sell, lease, purchase, convey or acquire any
interest in a retail gaming or operator license or business without the prior
approval of the Colorado Commission.
All agreements, contracts, leases, or arrangements in violation of the
Colorado Amendment, the Colorado Act or the Colorado Regulations are void and
unenforceable.
Taxes, fees and fines
The Colorado Amendment requires an annual tax of up to 40% on the total
amount wagered less all payouts to players. With respect to games of poker, the
tax is calculated based on the sums wagered which are retained by the licensee
as compensation. Effective July 1 of each year, the Colorado Commission
establishes the gaming tax for the following 12 months. Currently, the gaming
tax is:
o .25% on the first $2 million of these amounts;
o 2% on amounts from $2 million to $4 million;
o 4% on amounts from $4 million to $5 million;
o 11% on amounts from $5 million to $10 million;
o 16% on amounts from $10 million to $15 million; and
o 20% on amounts over $15 million.
The Colorado Commission has eliminated the annual device fee for gaming
device machines, blackjack tables and poker tables.
The municipality of Black Hawk assesses an annual device fee of $750
per device. There is no statutory limit on state or city device fees, which may
be increased at the discretion of the Colorado Commission or the city. In
addition, a business improvement fee of as much as $102 per device and a
transportation authority device fee of $77.04 per device also may apply
depending upon the location of the licensed premises in Black Hawk. The current
9
annual business improvement fee is $89.04. The transportation authority device
fee was increased to $154.08 per device effective January 31, 2001.
Black Hawk also imposes taxes and fees on other aspects of the
businesses of gaming licensees, such as parking, alcoholic beverage licenses and
other municipal taxes and fees. Significant increases in these fees and taxes,
or the imposition of new taxes and fees, may occur.
Violation of the Colorado Gaming Act or the Colorado Regulations
constitutes a class 1 misdemeanor which may subject the violator to fines or
incarceration or both. A licensee who violates the Colorado Gaming Act or
Colorado Regulations is subject to suspension of the license for a period of up
to six months, fines or both, or to license revocation.
Requirements for publicly traded corporations
The Colorado Commission has enacted Rule 4.5, which imposes
requirements on publicly traded corporations holding gaming licenses in Colorado
and on gaming licenses owned directly or indirectly by a publicly traded
corporation, whether through a subsidiary or intermediary company. The term
"publicly traded corporation" includes corporations, firms, limited liability
companies, trusts, partnerships and other forms of business organizations. Such
requirements automatically apply to any ownership interest held by a publicly
traded corporation, holding company or intermediary company thereof, where the
ownership interest directly or indirectly is, or will be upon approval of the
Colorado Commission, 5% or more of the entire licensee. In any event, if the
Colorado Commission determines that a publicly traded corporation, or a
subsidiary, intermediary company or holding company has the actual ability to
exercise influence over a licensee, regardless of the percentage of ownership
possessed by said entity, the Colorado Commission may require the entity to
comply with the disclosure regulations contained in Rule 4.5.
Under Rule 4.5, gaming licensees, affiliated companies and controlling
persons commencing a public offering of voting securities must notify the
Colorado Commission no later than ten business days after the initial filing of
a registration statement with the Securities and Exchange Commission. Licensed
publicly traded corporations are also required to send proxy statements to the
Division of Gaming within 5 days after their distribution. Licensees to whom
Rule 4.5 applies must include in their charter documents provisions that:
restrict the rights of the licensees to issue voting interests or securities
except in accordance with the Colorado Gaming Act and the Colorado Regulations;
limit the rights of persons to transfer voting interests or securities of
licensees except in accordance with the Colorado Gaming Act and the Colorado
Regulations; and provide that holders of voting interests or securities of
licensees found unsuitable by the Colorado Commission may, within 60 days of
such finding of unsuitability, be required to sell their interests or securities
back to the issuer at the lesser of the cash equivalent of the holders'
investment or the market price as of the date of the finding of unsuitability.
Alternatively, the holders may, within 60 days after the finding of
unsuitability, transfer the voting interests or securities to a suitable person,
as determined by the Colorado Commission. Until the voting interests or
securities are held by suitable persons, the issuer may not pay dividends or
interest, the securities may not be voted, they may not be included in the
voting or securities of the issuer, and the issuer may not pay any remuneration
in any form to the holders of the securities.
Pursuant to Rule 4.5, persons who acquire direct or indirect beneficial
ownership of
o 5% or more of any class of voting securities of a publicly traded corporation
that is required to include in its articles of organization the Rule 4.5
charter language provisions or
o 5% or more of the beneficial interest in a gaming licensee directly or
indirectly through any class of voting securities of any holding company or
intermediary company of a licensee, referred to as qualifying persons, shall
notify the Division of Gaming within 10 days of such acquisition, are
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required to submit all requested information and are subject to a finding of
suitability as required by the Division of Gaming or the Colorado Commission.
Licensees also must notify any qualifying persons of these requirements. A
qualifying person other than an institutional investor whose interest equals
10% or more must apply to the Colorado Commission for a finding of
suitability within 45 days after acquiring such securities. Licensees must
also notify any qualifying persons of these requirements. Whether or not
notified, qualifying persons are responsible for complying with these
requirements.
A qualifying person who is an institutional investor under Rule 4.5 and
who, individually or in association with others, acquires, directly or
indirectly, the beneficial ownership of 15% or more of any class of voting
securities must apply to the Colorado Commission for a finding of suitability
within 45 days after acquiring such interests.
The Colorado Regulations also provide for exemption from the
requirements for a finding of suitability when the Colorado Commission finds
such action to be consistent with the purposes of the Colorado Act.
Pursuant to Rule 4.5, persons found unsuitable by the Colorado
Commission must be removed from any position as an officer, director, or
employee of a licensee, or from a holding or intermediary company. Such
unsuitable persons also are prohibited from any beneficial ownership of the
voting securities of any such entities. Licensees, or affiliated entities of
licensees, are subject to sanctions for paying dividends or distributions to
persons found unsuitable by the Colorado Commission, or for recognizing voting
rights of, or paying a salary or any remuneration for services to, unsuitable
persons. Licensees or their affiliated entities also may be sanctioned for
failing to pursue efforts to require unsuitable persons to relinquish their
interest. The Colorado Commission may determine that anyone with a material
relationship to, or material involvement with, a licensee or an affiliated
company must apply for a finding of suitability or must apply for a key employee
license.
Alcoholic Beverage Licenses
The sale of alcoholic beverages in gaming establishments is subject to
strict licensing, control and regulation by state and local authorities.
Alcoholic beverage licenses are revocable and nontransferable. State and local
licensing authorities have full power to limit, condition, suspend for as long
as six months or revoke any such licenses. Violation of state alcoholic beverage
laws may constitute a criminal offense resulting in incarceration, fines, or
both.
There are various classes of retail liquor licenses which may be issued
under the Colorado Liquor Code. A gaming licensee may sell malt, vinous or
spirituous liquors only by the individual drink for consumption on the premises.
Even though a retail gaming licensee may be issued various classes of retail
liquor licenses, such gaming licensee may only hold liquor licenses of the same
class. An application for an alcoholic beverage license in Colorado requires
notice, posting and a public hearing before the local liquor licensing authority
prior to approval of the same. The Colorado Department of Revenue's Liquor
Enforcement Division must also approve the application. Riviera Black Hawk's
hotel and restaurant license has been approved by both the local licensing
authority and the State Division of Liquor Enforcement.
Federal Registration
Riviera Black Hawk, Inc. is required to annually file with the Attorney
General of the United States in connection with the sales, distribution, or
operations of slot machines. All requisite filings for the present year have
been made.
11
Item 2. Property
Riviera Black Hawk owns the Black Hawk land, which is located on a
71,000 square foot parcel of real property in Black Hawk, Colorado and comprises
of approximately 32,000 square feet of gaming space and parking for
approximately 520 vehicles (substantially all of which are covered), a 265 seat
buffet, two bars and an entertainment center with seating for approximately 500
people.
Item 3. Legal Proceedings
We may be a party to several routine lawsuits both as plaintiff and as
defendant arising from the normal operations of a casino. We do not believe that
the outcome of such litigation, in the aggregate, will have a material adverse
effect on our financial position or results of our operations.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters
Not applicable.
Item 6. Selected Financial Data
The following table sets forth a summary of selected financial data
for the Company for the years ended December 31, in thousands:
2000 1999 1998 1997
Net Operating Revenue $39,713 (a) (a) (a)
Net Income (Loss) (2,946) $(474)
Total Assets 81,459 72,950
Long-Term Debt 45,777 45,742
(a) The Company was in the development stage from its inception on August
18, 1997 through February 4, 2000. During fiscal 1999, the Company
recognized $595,000 in preopening expenses, although there were no
operations.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Special factors affecting comparability of results of operations.
Riviera Black Hawk, opened for business on February 4, 2000. Results
from Operations were first discussed in the Form 10Q for the period ended March
31, 2000.
12
Results of Operations
The following table sets forth the Company's income statement data as a
percentage of net revenues (unless otherwise noted) for the Company for the
periods indicated:
2000 1999 1998
Revenues:
Casino 95.9%
Food and Beverage 10.1%
Other 1.0%
Less promotional allowances (7.0%)
Net revenues 100.0%
Costs and Expenses:
Casino(1) 57.6%
Food and Beverage(1). 41.3%
General and administrative 24.0%
Intercompany management fees 1.4%
Preopening expense 3.1%
Depreciation and amortization 7.4%
Total Costs and Expenses 95.3%
Income from operations 4.7%
Interest expense (19.4)%
Interest income 0.8%
Interest, capitalized 1.5%
Loss before benefit for income taxes (12.4%)
Benefit for income taxes (4.9%)
Net Loss (7.4%)
EBITDA (2) margin 16.6% N/A N/A
- ----------------------------------------------------------------------------------------------------------------
(1) Shown as a percentage of corresponding departmental revenue.
(2) EBITDA consists of earnings before interest, income taxes, depreciation and
amortization(excluding preopening expense and intercompany management fees).
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 expenditure 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. The Company's
computation of EBITDA may not be comparable to other similarly titled
measures of other companies
13
2000 Compared to 1999
Special Factors Effecting Comparability of Results of Operations
Riviera Black Hawk was in the development stage during 1999 and until
February 4, 2000 when the casino opened. Accordingly, the consolidated results
of operations for fiscal 2000 and 1999 are not be comparable.
The following table sets forth, for the periods indicated, certain
operating data for Riviera Black Hawk. EBITDA for the purposes of this table
excludes corporate expense, pre-opening expense and inter-company management
fees. Operating income from properties is presented as shown on the Consolidated
Statement of Operations.
(In thousands) 2000 1999
Net revenues $39,713 $ n/a
EBITDA $6,597 n/a
EBITDA Margin(3) 16.6% n/a
Income (loss) from Operations $1,881 ($595)
(3) Shown as a percentage of net revenue.
Revenues
Net revenues increased by approximately $39.7 million, due to the
opening of our Black Hawk casino on February 4, 2000. Casino revenues were $38.1
million including $36.3 million in slot revenue and $1.7 million in table games
revenue.
Food and beverage revenues were approximately $4.0 million, of which
$2.8 million were complimentary (promotional allowance). Other revenues were
approximately $0.4 million primarily from ATM transaction fees.
Direct Costs and Expenses of Operating Departments
Total direct costs and expenses of operating departments were
approximately $23.6 million in 2000. Casino expense were approximately $21.9
million, 57.5% of casino revenues. Food and beverage costs were approximately
$1.7 million, or 133% of net food and beverage revenues as the buffet in Black
Hawk is used as a marketing tool.
Other Operating Expenses
General and administrative expenses were approximately $9.5 million, or
23.9% of net revenues for 2000. Depreciation and amortization were approximately
$2.9 million, or 7.3% of net revenues.
Preopening expenses were recorded as incurred through the opening of
the casino on February 4, 2000 and totaled $1,222,000 in 2000 and $595,000 in
1999.
EBITDA
Riviera Black Hawk EBITDA, as defined, was $6.6 million, or 16.6% of
net revenues.
14
Other Income (Expense)
Interest expense on the 13% First Mortgage Notes issued by Riviera
Black Hawk in June 1999 combined with its interest from capital leases totaled
$7.7 million in 2000. Capitalized interest was $577,000 in 2000 compared with
$3.1 million in 1999, as the casino opened on February 4, 2000 and
capitalization of interest ceased.
Net Loss
Net loss increased by $2.4 million from $.5 million in 1999 to $2.9
million in 2000 due to the factors discussed above.
1999 verses 1998
Preopening expenses for the year ending December 31, 1999, totaled
$595,000 including payroll, rent, travel and other expenses. Interest expense
not capitalized during construction was $606,000 during 1999. There were no
operating expenses in 1998 or 1997.
Other Income (Expense)
Interest expense on the 13% First Mortgage Notes issued by Riviera
Black Hawk in June 1999 combined with its other interest totaled $3.7 million in
1999. Capitalized interest was $3.1 million in 1999.
Liquidity and Capital Resources
Future operating results are subject to significant business, economic,
regulatory and competitive uncertainties and contingencies, many of which are
beyond our control. We believe that the Riviera Black Hawk will be able to
attract a sufficient number of patrons and achieve the level of activity and
revenues necessary to permit us to meet our obligations. However, there can be
no assurance that we will be able to achieve these results.
The Company had cash and cash equivalents of $7.7 million at December
31, 2000. Management believes that cash flow from operations combined with the
$7.7 million cash and cash equivalents will be sufficient to cover the Company's
debt service and enable investment in budgeted capital expenditures for the next
twelve months.
On June 3,1999, the Company completed a $45 million private placement
of 13% First Mortgage Notes. The net proceeds of the placement were used to fund
the completion of Riviera Black Hawk's casino project in Black Hawk, Colorado.
Riviera Holdings Corporation has not guaranteed the $45 million Riviera Black
Hawk, Inc. notes, but has agreed to a Keep Well Agreement in which Riviera
Holdings Corporation would pay up to $5 million per year (or an aggregate
limited to $10 million) for the first three years of Riviera Black Hawk
operations to cover if (i) the $5.85 million interest on such notes is not paid
by Riviera Black Hawk and (ii) the amount by which Riviera Black Hawk cash flow
is less than $9.0 million per year. On February 14, 2001, Riviera Operating
Corporation contributed additional capital of approximately $3 million under the
Keepwell Agreement. The Company believes that Riviera Holdings Corporation could
satisfy the balance for this requirement if needed. The Company has registered
securities identical to the 13% Notes under the Securities Act of 1933, as
amended. On January 4, 2000, the Company completed an exchange offer for such
registered securities.
15
During 2000, Riviera Black Hawk repurchased $6.5 million of these notes
on the open market at par. In the first quarter of 2001, Riviera Black Hawk
purchased an additional $2.5 million of the notes on the open market at par.
Cash flow from operations may not be sufficient to pay 100% of the
principal of the $45 million 13% Notes at maturity on May 1, 2005. Accordingly,
the ability of Riviera Black Hawk to repay the Notes at maturity may be
dependent upon our future cash flows and our ability to refinance those notes.
There can be no assurance that the Company will be able to refinance the
principal amount of the Notes at maturity. Although Riviera Black Hawk, Inc.
can, at any time prior to May 1, 2001, redeem up to 35% of the aggregate
principal amount of the 13% Notes at 113% with the proceeds of a qualified
public offering, the subsidiary may not redeem 100% of the 13% Notes until May
1, 2002, at premiums beginning at 106.5% and declining each subsequent year to
par in 2004.
The 13% Note Indentures provide that, in certain circumstances, Riviera
Black Hawk must offer to repurchase the 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 Notes without a refinancing.
The Note Indenture contains certain covenants, which limit the ability
of Riviera Black Hawk, Inc. 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 operations. At December 31, 2000, the Company believes that it
is in compliance with the covenants.
In July 1999, the Company committed to a $11.1 million capital lease
line for 60 months at approximately 11.2 percent for gaming equipment, furniture
and fixtures at the Black Hawk, Colorado casino. The Company made draws on the
capital lease line beginning in February through March 6 of 2000 in the amount
of $9,500,000 at a weighted average interest rate of 10.5 percent. The remainder
of the lease line has been effectively cancelled.
As of December 31, 2000, Riviera Holdings Corporation contributed $15.1
million to acquire land for the casino in Black Hawk and $14.9 million in cash
and capitalized interest for developing the land for the casino, for a total
contribution of $30 million.
Recently Adopted Accounting Standards - 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 was required to adopt SAB 101 in its quarter ended
December 31, 2000. The adoption of SAB 101 had no impact on the Company's
results of operations.
In March 2000, the Financial Accounting Standards Board of the AICPA
issued FASB Interpretation 44, "Accounting for Certain Transactions Involving
Stock Compensation" ("FIN 44"), which provides clarification on the application
of Accounting Principals Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and is effective for the Company's year ended December 31, 2000. The
adoption of FIN 44 had no impact on the Company's results of operations.
16
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 will adopt this
standard in the first quarter of fiscal 2001. The adoption will have no effect
on the Company or the Company's consolidated financial statements.
Forward Looking Statements
The Private Securities Litigation Reform Act of 1998 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
Item 7a. 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 90 days or less.
Interest Rate Sensitivity
Principal (Notational Amount by Expected Maturity)
Average Interest Rate
(Amounts in Thousands) Fair Value
2001 2002 2003 2004 2005 Thereafter Total At
12/31/00
Long Term Debt
Including Current Portion
Equipment loans
Black Hawk, Colorado $10 $8 $18 $18
Average interest rate 11.2% 11.2%
Capital leases
Black Hawk, Colorado $1,672 $1,848 $2,044 $2,263 $658 $8,485 $8,485
Average interest rate 10.8% 10.8% 10.8% 10.8% 10.8%
Special Improvement
District Bonds-Black Hawk,
Colorado casino project $86 $68 $71 $76 $81 $221 $603 $603
Average interest rate 5.5% 5.5% 5.5% 5.5% 5.5% 5.5%
13% First Mortgage Note
Black Hawk, Colorado casino
Project $38,441 $38,441 $38,441
Average interest rate 13.0%
17
Item 8. Financial Statements and Supplementary Data
See financial statements included in Item 14 (a).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
Item 10. Directors and Executive Officers of the Registrant (not applicable)
Item 11. Executive Compensation (not applicable)
Item 12. Security Ownership of certain Beneficial Owners and Management
(not applicable)
Item 13. Certain Relationships and Related Transactions
The Company has a management agreement (the "Management Agreement")
with Riviera Gaming Management of Colorado, Inc., (the "Manager") an indirect
wholly owned subsidiary of Riviera Holdings Corporation, which will manage the
Company. The management fee consists of a revenue fee and a performance fee. The
revenue fee is based on one percent of net revenues (gross revenues less
complimentaries) and is payable quarterly in arrears. The performance fee is
based on the following percentages of EBITDA (earnings before interest, taxes,
depreciation and amortization, whose components are based on generally accepted
accounting principles): (1) 10 percent of EBITDA from $5 million to $10 million,
(2) 15 percent of EBITDA from $10 million to $15 million and (3) 20 percent of
EBITDA in excess of $15 million. The performance fee is based on the preceding
quarter's EBITDA, paid in quarterly installments subject to year-end adjustment.
Under the 13% bond indenture, the management fees cannot be paid to the parent
unless the fixed charge coverage ratio exceeds 1.5 to one. Therefore, subsequent
to the first quarter of 2000, these fees totaling approximately $557,000 have
not been paid. In addition, inter-company charges for the cost of labor, goods
and services provided by the parent totaling approximately $507,000 remain
unpaid at December 31, 2000 and are evidenced by notes receivable. It is
anticipated that these advances will be repaid in 2001.
PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) List of Financial Statements
The following Independent Auditors' Report and the Financial Statements
of the Company are incorporated by reference into this item 14 of Form 10-k by
Item 8 hereof:
Independent Auditor's Report dated February 14, 2001
Balance Sheets as of December 31, 2000 and 1999
Statements of Operations for the Three Years Ended December 31, 2000
Statements of Stockholder's Equity for the Three Years Ended December 31, 2000
Statements of Cash Flows for the Three Years Ended December 31, 2000
Notes to Financial Statements
18
(a)(2) List of Financial Statement Schedules
No financial statement schedules have been filed herewith since they
are either not required, are not applicable, or the required information is
shown in the consolidated financial statements or related notes.
(a)(3) List of Exhibits
Exhibits required by Item 601 of Regulation S-K are listed in
the Exhibit Index herein, which information is incorporated by reference.
(b) Reports on Form 8-K - No reports of Form 8-K were filed in the
fourth quarter of 2000.
19
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Las
Vegas, State of Nevada, on the 28th day of March, 2000.
RIVIERA BLACK HAWK, INC.
By: /s/ WILLIAM L. WESTERMAN
William L. Westerman Chief
Executive Officer and Director
March 26, 2001
Pursuant to the requirement of the Securities Exchange Act of 1934,
this Amendment has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dated indicated.
Signature Title Date
By: /s/ WILLIAM L. WESTERMAN
William L. Westerman Chief Executive Officer and Director March 26, 2001
By:/s/ RONALD P. JOHNSON
Ronald P. Johnson President and Director March 26, 2001
By: /s/ DUANE R. KROHN
Duane R. Krohn Treasurer, Chief Financial Officer
and Director March 26, 2001
20
Item 14a(3)
EXHIBIT INDEX
Exhibit No. Description
3.01 Articles of Amendment to the Articles of Incorporation of the Company.*
3.02 Articles of Incorporation of the Company.*
3.03 Bylaws of the Company.*
4.01 Indenture, dated as of June 3, 1999, among the Company, Riviera Holdings
and the Initial Purchaser.*
4.02 Form of 13% First Mortgage Note due 2005 with Contingent Interest (included
in Exhibit 4.01).*
4.03 Purchase Agreement, dated as of May 27, 1999, by and among the Company,
Riviera Holdings and the Initial Purchaser.*
4.04 Registration Rights Agreement, dated as of June 3, 1999, by and between the
Company and the Initial Purchaser.*
10.01 The Completion Capital Commitment, dated as of June 3, 1999, by and
between the Company and Riviera Holdings.*
10.02 The Keep-Well Agreement, dated as of June 3, 1999, by and between the
Company and Riviera Holdings.*
10.03 The Tax-Sharing Agreement, dated as of June 3, 1999, by and between the
Company and Riviera Holdings.*
10.04 The Management Agreement, dated as of June 3, 1999, by and between the
Company and Riviera Gaming Management of Colorado, Inc.*
10.05 The Trademark License Agreement, dated as of June 3, 1999, by and between
the Company and Riviera Operating Corporation.*
10.06 The Deed of Trust, dated as of June 3, 1999, made by the Company to the
Public Trustee of the County of Gilpin, Colorado, for the benefit of the
Trustee.*
10.07 The Assignment of Rents.*
10.08 The Environmental Indemnity, dated as of June 3, 1999, between the Company
and the Trustee.*
10.09 The Cash Collateral and Disbursement Agreement, dated as of June 3, 1999,
among the Company, the Trustee and CRSS Constructors, Inc.*
10.10 The Account Agreement, dated as of June 3, 1999, among the Company, the
Trustee and IBJ Whitehall Bank and Trust Company.*
10.11 The Security Agreement, dated as of June 3, 1999, made by the Company in
favor of the Trustee.*
21
10.12 The Manager Subordination Agreement, dated as of June 3, 1999, by Riviera
Gaming Management of Colorado in favor of the Trustee.*
10.13 The Collateral Assignment of Trademark, dated as of June 3, 1999, by and
between the Company and the Trustee.*
10.14 The Collateral Assignment, dated as of June 3, 1999, by and between the
Company and the Trustee.*
10.15 The Pledge and Assignment Agreement, dated as of June 3, 1999, by and
between the Company and the Trustee.*
10.16 Deposit Account Agreement, dated as of June 1999, among Bank of America,
Riviera Holdings and First American Title Insurance Company.*
10.17 Construction Contract, made as of December 29, 1997, among the Company,
Weitz-Cohen Construction Co. and Melick Associates, Inc.*
10.18 Letter Agreement, dated January 6, 1999, between Riviera Gaming Management
and Jim Davey.*
10.19 Letter Agreement,dated January 15, 1999, between Riviera Gaming Management
and Tom Guth.*
10.20 Master Lease Agreement dated December 13, 1999 between PDS Financial
Corporation-Colorado and Riviera Black Hawk, Inc. for furniture, fixtures,
gaming and other equipment.*
10.21 Lease Schedule No. 1 dated January 25, 2000 under Master Lease Agreement
dated December 13, 1999 between PDS Financial Corporation-Colorado and Riviera
Black Hawk, Inc. for furniture, fixtures, gaming and other equipment.*
10.22 Lease Schedule No. 2 dated January 25, 2000 under Master Lease Agreement
dated December 13, 1999 between PDS Financial Corporation-Colorado and Riviera
Black Hawk, Inc. for furniture, fixtures, gaming and other equipment.*
10.23 Lease Schedule No. 3 dated February 17, 2000 under Master Lease Agreement
dated December 13, 1999 between PDS Financial Corporation-Colorado and Riviera
Black Hawk, Inc. for furniture, fixtures, gaming and other equipment.*
10.24 Lease Schedule No. 4 dated February 17, 2000 under Master Lease Agreement
dated December 13, 1999 between PDS Financial Corporation-Colorado and Riviera
Black Hawk, Inc. for furniture, fixtures, gaming and other equipment.*
10.25 Term Sheet dated November 6, 2000 between Riviera Black Hawk, Inc. and
Sean Sullivan.
12.01 Statement in re Computation of Ratios.*
Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to this Agreement
are omitted. The Exhibit contains a list identifying the contents of all
schedules and the Registrants agree to furnish supplementary copies of such
schedules to the Commission upon request.
o Previously filed.
22
SEAN SULLIVAN
COMPENSATION PACKAGE
TERM SHEET
POSITION: General Manager
SALARY: < RCT >
BONUS: < RCT >
DISCRETIONARY
BONUS: The Company may, in its sole determination, pay a Discretionary Bonus for
the Forth Quarter, 2000, and subsequent calendar years if EBITA Bonus
Threshold not achieved
TERM: Effective November 6, 2000 and end December 31, 2001. Automatically
renews on an annual basis unless either party gives the other party 120
days written notice of intention not to renew
OPTIONS: Initial option grant of < RCT > shares of Riviera Holdings Corporation
(RHC) stock, thereafter options equal to those granted, and at the time
granted, to Riviera, Las Vegas Vice Presidents. (NOT EXECUTIVE VICE
PRESIDENTS OR SENIOR VICE PRESIDENTS)
INSURANCE:< RCT > Executive Life, < RCT > Accidental Death and Dismemberment,
Major Medical per Company Policy
VACATION: 2 weeks after 1 year, 3 weeks after 6 years, 4 weeks after 12 years
PROFIT SHARING/
401(K): Eligibility and participation per Company policy
TERMINATION: By COMPANY: For Cause, all compensation ceases on
termination date; Without Cause, salary and insurance
paid through calendar year of date of termination
Self-Termination: All compensation ceases on
termination date
Cause: Felony conviction of Sullivan; a final civil
judgement entered after all appeals have been
exhausted where there is a finding of Sullivan's
fraud or dishonesty whether or not involving the
Company; refusal by Sullivan to perform reasonable
duties assigned to him by the President of Riviera
Black Hawk, Inc; or the gaming authorities of the
State of Colorado or any other jurisdiction where the
Company conducts gaming operations determines that
Sullivan is unsuitable to act as an executive of a
gaming company
23
NON-COMPETE: If Sean Sullivan self-terminates within the first
term of this Agreement (on or before December 31,
2001) then Sean Sullivan shall not accept employment
of any nature with any gaming company in the Black
Hawk/Central City market for a period of one (1) year
from date of such self-termination
NOT IN BREACH: Sean Sullivan represents to Company that he is free
to enter into this Employment Agreement; that he is
not currently subject to another employment
agreement, restrictive covenant or covenant not to
compete; that he and/or the Company will not be
subjected to any breach of contract, interference
of contract, or any similar cause of action
resulting by way of Sean Sullivan and the Company
entering into this Employment Agreement
CHANGE IN
CONTROL: In the event there is a "Change in Control" of
Riviera Casino Black Hawk. Inc. ("RBH") or its
ultimate parent, Riviera Holdings Corporation("RHC"),
Sean Sullivan shall have the right to self-terminate
with ninety (90) days written notice to the new
party(s) in control, subject to the self-termination
clause above. Should Sean Sullivan self-terminate
due to a "Change in Control" he shall not be subject
to the above Non-Compete clause. For purposes of the
foregoing, "Change in Control" shall mean: (i) the
sale of substantially all of RHC's or RBH's assets;
(ii) the sale of more than a majority of RHC's or
RBH's common stock; (iii) a merger in which RHC is
not the surviving company; or (iv) a merger where the
majority of the stock of RHC, as the surviving
company, shall be held by a party or a related group
of parties other than William L. Westerman or
executives of RHC with more than two (2) years
seniority.
AGREED AGREED
RIVIERA BLACK HAWK, INC. SEAN A. SULLIVAN
d/b/a Riviera Black Hawk Casino
- ----------------------------- ---------------------------
Ronald Johnson Sean A. Sullivan
Date:________________________ Date:______________________
24
RIVIERA BLACK HAWK, INC.
(A Wholly Owned Subsidiary of Riviera Holdings Corporation)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS REPORT F-1
FINANCIAL STATEMENTS:
Balance Sheets as of December 31, 2000 and 1999 F-2
Statements of Operations for the Years Ended December 31, 2000, 1999, and 1998 F-3
Statements of Stockholder's Equity for the Years Ended December 31, 2000, 1999, and 1998 F-4
Statements of Cash Flows for the Years Ended December 31, 2000, 1999, and 1998 F-5
Notes to Financial Statements F-6
25
INDEPENDENT AUDITORS' REPORT
Riviera Black Hawk, Inc.:
We have audited the accompanying balance sheets of Riviera Black Hawk, Inc. (a
wholly owned subsidiary of Riviera Holdings Corporation) (the "Company") as of
December 31, 2000 and 1999, and the related statements of operations,
stockholder's equity, and cash flows for each of the three years in the period
ended December 31, 2000. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2000 and
1999, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Las Vegas, Nevada
February 14, 2001
F-1
RIVIERA BLACK HAWK, INC.
(A Wholly Owned Subsidiary of Riviera Holdings Corporation)
BALANCE SHEETS
DECEMBER 31, 2000 AND 1999 (In Thousands, Except Share Amounts)
- ------------------------------------------------------------------------------------------------------------------------
ASSETS 2000 1999
CURRENT ASSETS:
Cash and cash equivalents $ 7,744 $ 1,810
Cash and cash equivalents, restricted 7,173
Short-term investments, restricted 2,820
Accounts receivable, net 165
Inventories 270
Prepaid expenses 565 795
Total current assets 8,744 12,598
PROPERTY AND EQUIPMENT, Net 68,505 56,734
DEFERRED FINANCING COSTS, Net of accumulated amortization
of $1,717 and $338, respectively 2,067 3,446
OTHER ASSETS 18 12
DEFERRED INCOME TAXES 2,125 160
TOTAL $ 81,459 $ 72,950
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,909 $ 487
Accrued payroll and benefits 1,180 110
Accrued interest expense 1,162 976
Construction accounts payable 304 2,566
Payable to Parent 1,064
Current portion of long-term debt 1,770 69
Total current liabilities 9,389 4,208
NONCURRENT LIABILITIES -
Long-term debt 45,777 45,742
Total liabilities 55,166 49,950
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS EQUITY:
Common stock, $.01 par value; 10,000 shares authorized;
1,000 shares issued and outstanding
Additional paid-in capital 29,713 23,474
Accumulated deficit (3,420) (474)
Total stockholders equity 26,293 23,000
TOTAL $ 81,459 $ 72,950
See notes to financial statements.
F-2
RIVIERA BLACK HAWK, INC.
(A Wholly Owned Subsidiary of Riviera Holdings Corporation)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998 (In Thousands)
- ------------------------------------------------------------------------------------------------------------------------
2000 1999 1998
REVENUES:
Casino $38,088 $ -
Food and beverage 4,018
Other 374
Total revenues 42,480
Less promotional allowances 2,767
Net revenues 39,713
COSTS AND EXPENSES:
Direct costs and expense of operating departments:
Casino 21,935
Food and beverage 1,659
Entertainment 5
Other 2
Other operating expenses:
General and administrative 9,515
Preopening expenses 1,222 $ 595
Intercompany management fees 557
Depreciation and amortization 2,937
Total costs and expenses 37,832 595
INCOME (LOSS) FROM OPERATIONS 1,881 (595)
OTHER (EXPENSE) INCOME:
Interest expense (7,687) (3,717)
Interest income 318 567
Interest capitalized 577 3,111
Total other expense (6,792) (39)
LOSS BEFORE BENEFIT FOR INCOME TAXES (4,911) (634)
BENEFIT FOR INCOME TAXES (1,965) (160)
NET LOSS $(2,946) $ (474) $ -
See notes to financial statements.
F-3
RIVIERA BLACK HAWK, INC.
(A Wholly Owned Subsidiary of Riviera Holdings Corporation)
STATEMENTS OF STOCKHOLDERS EQUITY
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(In Thousands, except share amounts)
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
BALANCE,
JANUARY 1, 1998 1,000 $ - $16,625 $16,625
Contributed capital 3,375 3,375
BALANCE,
DECEMBER 31, 1998 1,000 20,000 20,000
Contributed capital 3,474 3,474
Net loss $ (474) (474)
BALANCE,
DECEMBER 31, 1999 1,000 23,474 (474) 23,000
Contributed capital 6,239 6,239
Net loss (2,946) (2,946)
BALANCE,
DECEMBER 31, 2000 1,000 $ - $29,713 $(3,420) $26,293
See notes to financial statements.
F-4
RIVIERA BLACK HAWK, INC.
(A Wholly Owned Subsidiary of Riviera Holdings Corporation)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998 (In Thousands)
- -----------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
----------------------------------------
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,946) $ (474)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Amortization of bond offering costs 1,379 338
Depreciation 2,937
Changes in operating assets and liabilities:
Decrease (increase) in prepaid expenses 230 (722) $ (73)
Increase in accounts payable and accrued expenses 2,986 487
Increase in accrued payroll and benefits 1,070 110
Increase in accrued interest expense 186 976
Increase in payable to Parent 1,064
Increase in other assets (6) (9) (3)
Increase in deferred tax asset (1,965) (160)
Net cash provided by (used in) operating activities 4,935 546 (76)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (16,969) (27,291) (6,667)
Decrease (increase) in cash, restricted 7,173 (6,766) (407)
Decrease (increase) in short-term investments 2,820 (2,820)
Net cash used in investing activities (6,976) (36,877) (7,074)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on long-term debt (1,223) (2)
(Payments to) advances from Riviera Holdings Corp. (6,241) 6,241
Purchase of 13% First Mortgage Notes (6,559)
Proceeds from long-term borrowings net of financing costs of $0 and $3,784 9,518 41,216
Contribution of capital 6,239 2,625 1,403
Net cash provided by financing activities 7,975 37,598 7,644
INCREASE IN CASH AND CASH EQUIVALENTS 5,934 1,267 494
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,810 543 49
CASH AND CASH EQUIVALENTS, END OF YEAR $ 7,744 $ 1,810 $ 543
INTEREST PAID $ 6,714 $ (2,403) $ -
INCOME TAXES PAID $ 110 $ - $ -
SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION:
Property and equipment purchased using accounts payable $ 304 $ 2,566 $ 1,203
Property acquired using special improvement district bonds $ 97 $ 687
Capitalized interest contributed by Riviera Holdings Corporation $ 843 $ 1,972
Property acquired with debt $ 29
Capitalized interest, other $ 577 $ 2,262
See notes to financial statements.
F-5
RIVIERA BLACK HAWK, INC.
(A Wholly Owned Subsidiary of Riviera Holdings Corporation)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation - On August 18, 1997
(date of inception), Riviera Black Hawk, Inc. (the "Company")
was formed. The Company is a wholly owned subsidiary of Riviera
Holdings Corporation. The Company owns a casino and
entertainment complex in Black Hawk, Colorado. The Company was
in the development stage at December 31, 1999 and commenced its
principal operations on February 4, 2000. The Company began
construction on this casino in Black Hawk, Colorado, on a site
that was purchased for $15.1 million in August 1997. There was
no statement of operations activity for the year ended December
31, 1998, as the Company was in the development stage and had no
operating results for that period.
Cash and Cash Equivalents and Short-Term Investments - All
highly liquid investment securities with a maturity of three
months or less when acquired are considered to be cash
equivalents. The Company accounts for investment securities in
accordance with Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt
and Equity Securities."
The Company's investment securities, along with certain cash and
cash equivalents that are not deemed securities under SFAS No.
115, are carried on the balance sheets in the cash and cash
equivalents category. SFAS No. 115 addresses the accounting and
reporting for investments in equity securities that have readily
determinable fair values and for all investments in debt
securities, and requires such securities to be classified as
either held to maturity, trading, or available for sale.
Management determines the appropriate classification of its
investment securities at the time of purchase, including the
determination as to restricted versus nonrestricted assets, and
re-evaluates such determination at each balance sheet date.
Held-to-maturity securities are required to be carried at
amortized cost. At December 31, 1999, securities classified
as held to maturity comprised debt securities issued by the U.S.
Treasury and other U.S. government agencies and corporations and
agencies, and repurchase agreements, with an amortized cost of
$2.8 million maturing in twelve months or less.
Inventories - Inventories consist primarily of food, beverage,
gift shop, and promotional inventories, and are stated at the
lower of cost (determined on a first-in, first-out basis) or
market.
Property and Equipment - Property and equipment are stated at
cost, and capitalized lease assets are stated at the present
value of future minimum lease payments at the date of lease
inception. Interest incurred during construction of new
facilities or major additions to facilities is capitalized and
amortized over the life of the asset. Depreciation will be
computed, upon the commencement of gaming operations, using the
straight-line method over the shorter of the estimated useful
lives or lease terms, if applicable, of the related assets,
which range from 5 years for certain gaming equipment to 40
years for buildings. The costs of normal maintenance and repairs
will be charged to expense as incurred. Gains or losses on
disposals will be recognized as incurred.
F-6
The Company periodically assesses the recoverability of
property and equipment and evaluates such assets for
impairment whenever events or circumstances indicate that the
carrying amount of an asset may not be recoverable. Asset
impairment is determined to exist if estimated future cash
flows, undiscounted and without interest charges, are less than
the carrying amount.
Other Assets - Other assets include organizational costs
amortized over a five-year period. Organizational costs consist
primarily of legal fees associated with establishing the gaming
licenses for business.
Deferred Financing Costs - Bond offering costs and commissions
are amortized over the life of the debt. Such amortized costs
are included in interest expense.
Restricted Cash and Short-term Investments - 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.
Fair Value Disclosure as of December 31, 2000 and 1999:
Cash and Cash Equivalents, Short-term Investments (including
restricted), and Accounts Payable and Accrued Expenses - The
carrying value of these items is a reasonable estimate of their
fair value.
Long-Term Debt - The fair value of the Company's long-term debt
is estimated based on the quoted market prices for the same or
similar issues, or on the current rates offered to the Company
for debt of the same remaining maturities. Based on the
borrowing rates currently available to the Company for debt with
similar terms and average maturities, the estimated fair value
of long-term debt is approximately $47,517,000 and $49,411,000
in 2000 and 1999, respectively.
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 entertainment, and food and beverage 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.
The estimated costs of providing promotional allowances are
classified as costs of the casino operating departments through
interdepartmental allocations. The Company allocated
approximately $3,176,000 of costs from food and beverage to the
casino departments.
Preopening Costs - The Company recognizes preopening costs when
incurred.
Federal Income Taxes - The Company and its subsidiaries file a
consolidated federal tax return. The Company accounts for income
taxes in accordance with SFAS No. 109, "Accounting for Income
Taxes."
F-7
Riviera Holdings Corporation allocated income tax expense or
benefit to the Company as if the Company were filing separate
tax returns pursuant to a tax sharing arrangement. The tax
sharing agreement provides that receivables for tax benefits
are not due from Riviera Holdings Corporation, and the parent
records no liability to the subsidiary for these tax items.
Segment Reporting - The Company is one of the reportable
geographic segments of its parent, Riviera Holdings
Corporation, and markets directly to residents of metropolitan
Denver, Colorado. Accordingly, it operates in a single
segment. Management believes that 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 percent of all reported segment revenues;
however, the Company cannot identify such information, based
upon the nature of gaming operations.
Estimates and Assumptions - The preparation of 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, depreciable lives,
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results may
differ from estimates.
Recently Adopted Accounting Standards - 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 was required to adopt SAB 101 in its
quarter ended December 31, 2000. The adoption of SAB 101 had
no impact on the Company's results of operations.
In March 2000, the Financial Accounting Standards Board
("FASB") of the AICPA issued FASB Interpretation 44,
"Accounting for Certain Transactions Involving Stock
Compensation" ("FIN 44"), which provides clarification on the
application of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and is effective
for the Company's year ended December 31, 2000. The adoption
of FIN 44 had no impact on the Company's results of
operations.
Recently Issued Accounting Standards - The FASB 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 first quarter of the year ending December 31, 2001. The
adoption of this SFAS will have no impact on the Company's
results of operations in fiscal 2001.
2. RELATED-PARTY TRANSACTIONS
The Company was formed by Riviera Holdings Corporation to
develop and operate a casino in Black Hawk, Colorado. In 1997,
Rivera Holdings Corporation contributed capital of $16.6 million
to the Company, which was used to purchase the land for the
casino site. During 1998 and 1999, Riviera Holdings
Corporation has made additional capital contributions to the
Company consisting of cash of $1.4 million and $2.6 million,
respectively, and of allocated capitalized interest expense of
$2.0 million and $0.8 million, respectively. In 2000, Riviera
Holdings Corporation contributed $6.3 million in cash to the
Company, which was used to buy back Company debt.
As of December 31, 2000, Riviera Holdings Corporation
contributed capital of approximately $30 million.
F-8
At December 31, 1998, the Company owed approximately $6.2
million to Riviera Holdings Corporation, representing advances
made by Riviera Holdings Corporation for costs related to the
development of the Riviera Black Hawk Casino. The advances were
repaid from the proceeds of the $45 million bond offering
discussed in Note 5.
The Company has a management agreement (the "Management
Agreement") with Riviera Gaming Management of Colorado, Inc.
(the "Manager"), an indirect wholly owned indirect subsidiary of
Riviera Holdings Corporation, to manage the Company for a fee.
The management fee consists of a revenue fee and a performance
fee. The revenue fee is based on one percent of net gaming
revenues (gross gaming revenues less complimentaries) and is
payable quarterly in arrears. The performance fee is based on
the following percentages of EBITDA (earnings before interest,
taxes, depreciation, and amortization, whose components are
based on accounting principles generally accepted in the United
States of America): (1) 10 percent of EBITDA from $5 million to
$10 million, (2) 15 percent of EBITDA from $10 million to $15
million, and (3) 20 percent of EBITDA in excess of $15 million.
The performance fee is based on the preceding quarter's EBITDA,
paid in quarterly installments subject to year-end adjustment.
The management fee began on February 4, 2000, the opening of the
Riviera Black Hawk Casino. At December 31, 2000, the Company had
$557,000 in management fee payable under this contract, which is
included in payable to Parent.
Charges for the cost of labor, goals, and services provided by
Riviera Operating Corporation totaling approximately $507,000
were payable at December 31, 2000 and included in payable to
Parent.
If there is any default under the management agreement, the
manager will not be entitled to receive management fees, but the
manager will still be entitled to intercompany service fees
billed at cost.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31
(amounts in thousands):
2000 1999
Land and improvements $15,792 $15,774
Buildings and improvements 43,752
Equipment, furniture, and fixtures 11,898 29
Construction in progress 40,931
Total property and equipment 71,442 56,734
Accumulated depreciation (2,937)
Net property and equipment $68,505 $56,734
In 2000, 1999, and 1998, $.6 million, $3.1 million, and $2.0
million, respectively, in interest costs were capitalized on the
construction project.
F-9
4. ACCOUNTS PAYABLE
Accounts payable consist of the following at December 31 (in
thousands):
2000 1999
Outstanding chip and token liability $ 138
Slot club liabilities 495
Miscellaneous gaming 224
Total liabilities related to gaming activities 857
Accounts payable to vendors 2,982 $ 487
Other 70
Total $3,909 $ 487
5. LONG-TERM DEBT
Long-term debt consists of the following at December 31 (in
thousands):
2000 1999
13% First Mortgage Notes maturing on June 3, 2005, bearing interest,
payable semiannually on November 3 and June 3 of each year;
redeemable beginning May 1, 2002 at 106.5%; 2003 at 103.25%;
and after 2004 at 100% $ 38,441 $ 45,000
9% Note collateralized by vehicle, payable monthly, including interest,
maturing through October 2004 18 27
Capitalized lease obligations (see Note 6) 8,485
5.5% Special Improvement District Bonds - issued by the City of
Black Hawk, Colorado, interest and principal payable
monthly over 10 years beginning in 2000 603 784
Total long-term debt 47,547 45,811
Current maturities by terms of debt (1,770) (69)
Total long-term debt, net of current portion $ 45,777 $ 45,742
Maturities of long-term debt for the years ending December 31 are as follows
(in thousands):
2001 $ 1,770
2002 1,922
2003 2,115
2004 2,339
2005 39,180
Thereafter 221
Total $ 47,547
F-10
On June 3, 1999, the Company completed a $45 million
private placement of 13% First Mortgage Notes. The net
proceeds of the placement were used to fund the completion of
Riviera Black Hawk Casino project in Black Hawk, Colorado.
Riviera Holdings Corporation has not guaranteed the $45
million in Riviera Black Hawk, Inc. notes, but has agreed to a
"Keep-Well Agreement" in which Riviera Holdings Corporation
would pay up to $5 million per year (or an aggregate limited
to $10 million) to the Company during the first three years of
the Company's operations, if (i) the $5.85 million minimum
interest on such notes is not paid by the Company and/or (ii)
the amount by which the Company's cash flow is less than $9.0
million per year. On February 14, 2001, Riviera Holdings
Corporation advanced approximately $3.1 million to Riviera
Black Hawk, Inc. under this agreement. In addition, Riviera
Holdings Corporation agreed to a "Capital Completion
Commitment" of up to $10 million if the casino is not open by
May 31, 2000. The opening of the casino on February 4,
2000 satisfied the capital completion commitment, which
was released in August 2000. The Company registered securities
identical to the 13% First Mortgage Notes under the Securities
Act of 1933, as amended. On January 4, 2000, the Company
completed an exchange offer for such registered securities.
The notes were issued at a cost in the amount of $3.5
million. The deferred financing cost is 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% First Mortgage 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%
First Mortgage Notes without a refinancing.
The 13% First Mortgage Note Indenture contains certain
covenants, which limit the ability of Riviera Black Hawk, Inc.
and its restricted subsidiaries, subject to certain
exceptions, to: (i) incur additional indebtedness; (ii) pay
dividends or other distributions and repurchase capital stock
or other equity interests or subordinated indebtedness; (iii)
enter into certain transactions with affiliates; (iv) create
certain liens and 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 its
capital expenditure programs under these circumstances, which
could have an adverse effect on the Company's operations. At
December 31, 2000, the Company believes that it is in
compliance with the covenants.
During 2000, the Company purchased $6,559,000 of the 13% First
Mortgage Notes on the open market at face value.
The 5.5% Special Improvement District Bonds were issued by the
City of Black Hawk, Colorado, in July 1998 for $2,940,000. The
proceeds were used for road improvements and other
infrastructure projects benefiting the Riviera Black Hawk
Casino and another nearby casino. The projects were completed
in 2000 at a cost of $1,878,000, including interest and
reserves. The excess proceeds have been returned to the
bondholders by the City of Black Hawk, Colorado. The Company
is responsible for 50 percent of the debt payable over 10
years beginning in 2000.
F-11
6. LEASING ACTIVITIES
The Company leases certain equipment under capital leases.
These agreements have been capitalized at the present value of
the future minimum lease payments at lease inception and are
included in property and equipment. Management estimates the
fair market value of the property and equipment, subject to
the leases, approximates the net present value of the leases.
The following is a schedule by year of the minimum rental
payments due under capital leases, as of December 31, 2000 (in
thousands).
2001 $ 2,386
2002 2,386
2003 2,386
2004 2,386
2005 252
Total minimum lease payments 9,796
Taxes, maintenance, and insurance (294)
Interest portion included in payments (1,017)
Present value of net minimum lease payments (see Note 5) $ 8,485
Rental expense under operating leases the year ended
December 31, 2000 was approximately $611,661. Such leases were
year to year in nature.
7. FEDERAL INCOME TAXES
The Company computes deferred income taxes based upon the
difference between the financial statement and tax basis of
assets and liabilities using enacted tax rates in effect in
the years in which the differences are expected to reverse.
The Company had no operations in 1998, and accordingly, no
income tax amounts are presented for that year.
The effective income tax rates on income attributable to
operations differ from the statutory federal income tax rates
for the years ended December 31, 2000 and 1999, as follows (in
thousands):
2000 1999
--------------------------- -------------------------
Amount Rate Amount Rate
Benefit for income taxes at
federal statutory rate $(1,719) (35.0)% $(234) (37.0)%
State income taxes (246) (5.0)%
Other 74 11.8 %
Benefit for income taxes $(1,965) (40.0)% $(160) (25.2)%
F-12
Comparative analysis of the benefit for income taxes is as
follows:
2000 1999
Current $ (223)
Deferred (1,742) $(160)
Total $(1,965) $(160)
The tax effects of the items composing the Company's net
deferred tax asset consist of the following at December 31 (in
thousands):
2000 1999
Deferred tax asset -
Net operating loss carryforward $ 2,125 $160
Net deferred tax asset $ 2,125 $160
8. COMMITMENTS AND CONTINGENCES
Legal Proceedings - Riviera Black Hawk, Inc. may be a party to
several routine lawsuits both as plaintiff and as defendant
arising from the normal operations of a casino. Management
does not believe that the outcome of such litigation, in the
aggregate, will have a material adverse effect on the
financial position or results of operations.
F-13
RIVIERA BLACK HAWK, INC.
(A Wholly Owned Subsidiary of Riviera Holdings Corporation)
Unaudited Quarterly Information (1)
(Amounts in thousands, except per share data)
March 31 June 30 September 30 December 31
Year Ended December 31, 2000:
Operating revenues $7,884 $8,942 $11,264 $11,623
Operating Income 1,152 (102) 54 777
Income (loss) before income taxes 154 (2,277) (1,590) (1,198)
Net Income (loss) 76 (1,350) (954) (718)
Year Ended December 31, 1999
Operating revenues (2) N/A N/A N/A N/A
Operating Income (14) (58) (44) (479)
Income (loss) before income taxes (14) (58) (43) (519)
Net Income (loss) (14) (58) (28) (374)
(1) The common stock of the Company is not publicly traded; therefore, no earnings per share data is presented.
(2) During 1999, the Company was in the development stage. The loss is primarily from preopening expenses.
F-14