<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 26, 1998
------------------------------------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
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Commission File Number: 333-38093
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Isle of Capri Black Hawk L.L.C./Isle of Capri Black Hawk Capital Corp.
-------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-1422931
- ------------------------------------- ------------------------------------
(State of Organization) (IRS Employer Identification No.)
711 Washington Loop, Second Floor, Biloxi, Mississippi 39530
- --------------------------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
(228) 436-7000
- ----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (a) 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 (b) has been subject to such filing
requirements for the past 90 days.
Yes X No ______
----
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ISLE OF CAPRI BLACK HAWK L.L.C.
FORM 10-Q
INDEX
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets,
July 26, 1998 (unaudited) and
April 26, 1998 1
Consolidated Statements of
Operations for the three months
ended July 26, 1998 and for the
period of April 25, 1997 (date of
inception) through July 26, 1998 2
Consolidated Statement of
Stockholders' Equity (unaudited) 3
Consolidated Statements of
Cash Flows for the three months
ended July 26, 1998 and for the
period of April 25, 1997 (date of
inception) thrugh July 26, 1998 4-5
Notes to Unaudited Consolidated
Financial Statements 6-10
Item 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 11-13
Part II - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of
Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
EXHIBIT LIST 16
<PAGE>
ISLE OF CAPRI BLACK HAWK L.L.C.
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
JULY 26, APRIL 26,
1998 1998
-------- ---------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 658 $ 547
Accrued interest receivable 1,119 1,031
Prepaid expenses --- 34
------- -------
TOTAL CURRENT ASSETS 1,777 1,612
PROPERTY AND EQUIPMENT:
Land and land improvements 14,544 14,544
Construction in progress 40,473 26,398
OTHER ASSETS:
Restricted cash 37,082 48,948
Deferred financing costs, net of accumulated
amortization of $653 and $481,
respectively 4,203 4,375
------- -------
TOTAL ASSETS $98,079 $95,877
======= =======
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 4,193 $ 4,602
Accrued interest 3,921 1,688
Accrued construction payable 2,796 1,614
------- -------
TOTAL CURRENT LIABILITIES 10,910 7,904
LONG-TERM DEBT 75,000 75,000
MEMBERS' EQUITY
Member's equity - Casino America of Colorado, Inc. 6,639 7,121
Member's equity - Blackhawk Gold, Ltd. 5,530 5,852
------- -------
TOTAL MEMBERS' EQUITY 12,169 12,973
------- -------
TOTAL LIABILITIES AND MEMBERS' EQUITY $98,079 $95,877
======= =======
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
1
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ISLE OF CAPRI BLACK HAWK L.L.C.
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 25, 1997
THREE MONTHS ENDED (DATE OF INCEPTION) THROUGH
JULY 26, 1998 JULY 26, 1998
------------- -------------
<S> <C> <C>
INTEREST EXPENSE, NET OF
CAPITALIZED INTEREST OF $1,161
AND $2,320, RESPECTIVELY $1,254 $ 6,275
INTEREST INCOME 450 3,439
------ -------
NET LOSS $ (804) $(2,836)
======= =======
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
2
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ISLE OF CAPRI BLACK HAWK L.L.C.
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF MEMBERS' EQUITY
(IN THOUSANDS)
Casino America of Blackhawk Total
Colorado, Inc. Gold, Ltd. Members' Equity
------------------ ----------- ----------------
BALANCE, APRIL 25, 1997
(DATE OF INCEPTION) $ --- $ --- $ ---
Capital contribution
development costs 317 --- 317
Capital contribution - cash 7,084 --- 7,084
Capital contribution - land 100 7,504 7,604
Equity transfer 833 (833) ---
Net loss (1,213) (819) (2,032)
------- ------- -------
BALANCE, APRIL 26, 1998 $ 7,121 $ 5,852 $12,973
Net loss (unaudited) (482) (322) (804)
-------- -------- --------
BALANCE, JULY 26, 1998
(unaudited) $ 6,639 $ 5,530 $12,169
======== ======== ========
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
3
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ISLE OF CAPRI BLACK HAWK L.L.C.
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
APRIL 25, 1997
THREE MONTHS (DATE OF INCEPTION)
ENDED THROUGH
JULY 26, 1998 JULY 26, 1998
------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (804) $ (2,836)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Amortization of deferred financing costs 172 653
Changes in current assets and liabilities:
Interest receivable (88) (1,119)
Prepaid expenses and other 34 --
Accounts payable and accrued liabilities 620 6,832
--------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (66) 3,530
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (11,689) (42,837)
(Increase) decrease in restricted cash 11,866 (37,082)
--------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES 177 (79,919)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowing --- 72,000
Deferred financing costs --- (1,641)
Principal payment on land mortgage --- (396)
Capital contribution received --- 7,084
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES --- 77,047
Net increase in cash 111 658
Cash, beginning of period 547 ---
--------- ---------
CASH, END OF PERIOD $ 658 $ 658
========= =========
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
4
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ISLE OF CAPRI BLACK HAWK L.L.C.
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
(CONTINUED)
<TABLE>
<CAPTION>
APRIL 25, 1997
THREE MONTHS (DATE OF INCEPTION)
ENDED THROUGH
JULY 26, 1998 JULY 26, 1998
------------- -----------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAYMENTS FOR:
Interest --- $5,172
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Debt issued for:
Underwriting fees on first mortgage notes --- 3,000
Capital contributions:
Land, net of mortgage of $396 --- 7,604
Financing fees --- 137
Property and equipment --- 180
Other:
Construction costs funded through
accounts payable 1,182 2,796
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
5
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ISLE OF CAPRI BLACK HAWK L.L.C.
(DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Organization and Basis of Presentation
On April 25, 1997 ("Date of Inception"), Isle of Capri Black Hawk
L.L.C. (the "Company"), a Colorado limited liability company, was
formed. The Company is owned by Casino America of Colorado, Inc.
("Casino America of Colorado"), a wholly-owned subsidiary of Casino
America, Inc. ("Casino America"), and Blackhawk Gold, Ltd. ("Blackhawk
Gold"), a wholly-owned subsidiary of Nevada Gold and Casinos, Inc.
("Nevada Gold"). The Company is a Development Stage Company and has
not commenced gaming operations. The principal purpose of the Company
is to develop and operate a casino entertainment complex in Black
Hawk, Colorado (the "Isle-Black Hawk"), which is anticipated to open
in late 1998 or early 1999.
On August 20, 1997, the Company and Isle of Capri Capital Corp.
("Capital Corp."), a wholly-owned subsidiary of the Company that had
no operations, assets or liabilities, issued $75,000,000 of 13% First
Mortgage Notes (the "Notes") due 2004 with Contingent Interest in
order to finance the construction and development of the Isle - Black
Hawk.
The rights and obligations of Casino America of Colorado and Blackhawk
Gold are governed in part by the Amended and Restated Operating
Agreement of the Company ("the Agreement") dated as of July 29, 1997.
The Agreement provides that the Company will continue until December
31, 2096, or until such date that dissolution may occur. Pursuant to
the Agreement, Casino America of Colorado contributed cash, land
purchase rights and development costs to the Company and Blackhawk
Gold contributed land to the Company.
On July 29, 1997, Casino America of Colorado, Casino America,
Blackhawk Gold and Nevada Gold also entered into a Members Agreement
(the "Members Agreement") which addressed the development of the Isle-
Black Hawk, management of the Company, additional capital
contributions, and other matters. On August 20, 1997, pursuant to the
Members Agreement, Casino America of Colorado purchased from Blackhawk
Gold a 4.2% ownership interest (the "Transferred Interest") in the
Company for $700,000, and Blackhawk Gold had 180 days within which to
reacquire all or a portion of the Transferred Interest for $700,000,
together with interest. In addition, pursuant to the Members
Agreement, Blackhawk Gold had the right to sell up to an additional
4.8% ownership interest in the Company to Casino America of Colorado
(the "Put"), for up to $800,000, and to repurchase, within 180 days,
any ownership interest sold pursuant to the Put, with the repurchase
price being the price for which such ownership interest was sold,
together with interest. On November 13, 1997, pursuant to the Put,
Casino America of Colorado purchased an additional .8% ownership
interest from Blackhawk Gold for $133,333. On February 16, 1998,
pursuant to the Put, Casino America of Colorado acquired an additional
4.0% ownership interest from Blackhawk Gold for $666,000, exhausting
Blackhawk Gold's right to sell any additional ownership interest
pursuant to the Put. Simultaneously, Blackhawk Gold repurchased from
Casino America of Colorado, a 4.0% ownership interest out of the
Transferred Interest for $714,000, which includes interest. On
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August 17, 1998, Blackhawk Gold exercised its right to reacquire from
Casino America of Colorado 3.0% in the Company, out of the 4.0% which
was conveyed to Casino America of Colorado on February 16, 1998, for
$0.5 million which includes interest. As a result, following the
transfers discussed above, Casino America of Colorado has an ownership
interest in the Company of 57% and Blackhawk Gold has an ownership
interest in the Company of 43%. Profits and losses of the Company are
allocated in proportion to ownership interests.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments, consisting of normal
recurring adjustments, considered necessary for a fair presentation
have been included. Operating results for the period from April 27,
1998 through July 26, 1998 are not necessarily indicative of the
results that may be expected for the fiscal year ending April 25,
1999. For further information, refer to the Company's Form S-4
Registration Statement, filed with the Securities and Exchange
Commission, registration no. 333-38093.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles necessarily requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements as well as revenues and expenses
during the reporting period. Actual amounts when ultimately realized
could differ from those estimates.
Recently Issued Authoritative Pronouncement
In April 1998, the AICPA's Accounting Standards Executive Committee
issued SOP 98-5, Reporting on the Costs of Start-Up Activities. SOP
98-5 requires entities to charge to expense start-up costs, including
organizational costs, as incurred. In addition, the SOP requires
entities upon adoption to write-off as the cumulative effect of a
change in accounting principle any previously capitalized start-up or
organization costs. The SOP is effective for most entities for fiscal
years beginning after December 15, 1998.
Cash equivalents
The Company considers all highly liquid investments with a maturity at
the time of purchase of three months or less to be cash equivalents.
(At July 26, 1998, there were no cash equivalents.)
Pre-opening costs
Pre-opening costs include costs such as salaries, recruiting and
training associated with activities necessary to open the casino
entertainment complex. These costs are initially capitalized and then
expensed when the related business commences operations. From
inception to date, the Company's sole business activity has been
developing the Isle-Black Hawk.
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Income Taxes
No provision for federal or state income taxes is recorded in the
financial statements as income taxes are the responsibilities of the
individual members.
Certain significant risks and uncertainties
Gaming regulation licensing. The Company's ability to conduct gaming
operations in the State of Colorado depends on the licensing or
qualification of the Company, Casino America, Nevada Gold and certain
individuals. No Colorado gaming license has been issued to the Company
or any such individuals, to date. Such licensing and qualifications
will be reviewed periodically by the gaming authorities in Colorado.
Competition. The Black Hawk/Central City, Colorado market has many
established casinos. The market is highly competitive and other
significant development projects are currently being planned or are
under construction.
Construction risks. Construction projects entail significant risks,
including, but not limited to, cost overruns, delays in receipt of
governmental approvals, shortages of materials or skilled labor, labor
disputes, unforeseen environmental or engineering problems, work
stoppages, fire and other natural disasters, construction scheduling
problems and weather interference, any of which, if it occurred, could
delay construction and/or result in substantial increases in costs to
the Company. Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," requires impairment losses to be recognized
for long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows are not sufficient to
recover the assets' carrying amounts. In that event, an impairment
loss is measured by comparing the fair value of the asset to its
carrying amount.
Revenue and promotional allowances
Casino revenues will be the net win from gaming activities which is
the difference between gaming wins and losses. Casino revenues will
be presented net of accruals for the anticipated payouts of
progressive electronic gaming device jackpots. Revenue will not
include the retail amount of food, beverage, and other items provided
gratuitously to customers. The cost of providing such complimentary
services will be included in casino expense.
Note 2. Property and equipment
Property and equipment are stated at cost except for land contributed
by Blackhawk Gold, which is stated at its appraised value.
Depreciation will be computed, upon the commencement of gaming
operations, using the straight-line method over the estimated useful
lives of the property and equipment.
Note 3. Other assets
Restricted cash - represents cash proceeds from the sale of the Notes
held in trust by IBJ Schroder Bank and Trust in New York, as trustee.
These funds are held in three separate accounts (Construction
Disbursement, Completion Reserve, Interest Reserve), with use
restricted by an indenture between the Company and the trustee, dated
August 20, 1997 in connection with the issuance of the Notes (the
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"Indenture"). Amounts in the Construction Disbursement Account, which
contained approximately $22.8 million at July 26, 1998, will be used
for the development, construction and opening of the casino
entertainment complex by the Company in Black Hawk, Colorado. Amounts
in the Completion Reserve Account, approximately $5.2 million, will be
used in the event there are insufficient funds in the Construction
Disbursement Account to complete the casino entertainment complex.
Amounts in the Interest Reserve Account, approximately $9.1 million,
will be used to pay the next two fixed interest payments on the Notes,
which were issued pursuant to the Indenture.
Deferred financing costs - are being amortized over the life of the
Notes commencing on the date of issuance, August 20, 1997.
Note 4. Long-term debt
Long-term debt consists of $75,000,000 in 13% First Mortgage Notes
with Contingent Interest, due August 31, 2004. The Notes were issued
under the Indenture. Interest on the Notes is payable semiannually on
February 28 and August 31 of each year, commencing February 28, 1998.
Additionally, contingent interest is payable on the Notes on each
interest payment date, in an aggregate principal amount of 5% of the
Company's Consolidated Cash Flow (as defined in the Indenture),
provided that no Contingent Interest shall be payable prior to
commencement of operations and may, under certain circumstances, be
deferred.
The Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after August 1, 2001 at the redemption prices
(expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest to the redemption date, if redeemed during
the 12-month period beginning on August 31 of the years indicated
below:
Year Percentage
---- ----------
2001....................... 106.5%
2002....................... 103.2%
2003 and thereafter........ 100.0%
Beginning with the first operating year after the Company begins
gaming operations, the Company will be required to offer to purchase,
at the price of 101% of the aggregate principal amount thereof, the
maximum principal amount of the Notes that may be purchased with 50%
of the Company's Excess Cash Flow, as defined in the indenture.
Substantially all of the Company's assets are pledged as collateral
for long-term debt. At July 26, 1998, the Company was in compliance
with all debt covenants.
On October 17, 1997, the Company filed a Registration Statement on
Form S-4 (registration number 333-38093) relating to an exchange offer
for the Notes. The Registration Statement was declared effective by
the Commission on December 22, 1997, and the exchange offer was
consummated on January 21, 1998. The exchange offer was accepted by
the holders of all of the Notes.
Note 5. Related Party Transactions
Completion Capital Commitment. Casino America has provided a
Completion Capital Commitment pursuant to which it has committed to
contribute to the Company up to
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$5.0 million in the event that such amounts are necessary to cause the
Isle-Black Hawk to commence operations on or before April 1, 1999, or
if the Isle-Black Hawk has not begun operating by such date.
Management Agreement. On April 25, 1997, the Company entered into a
Management Agreement, which was subsequently amended and restated on
July 29, 1997 (the "Management Agreement"), with Casino America, which
will manage the casino entertainment complex in exchange for a fee.
The management fee will be equal to two percent of revenues, plus ten
percent of operating income, but not to exceed four percent of
revenues. The management fee will go into effect upon commencement of
casino operations.
Lease Agreement. On January 2, 1998, Casino America of Colorado
acquired approximately 0.7 acres of property contiguous to the
property being developed by the Isle-Black Hawk for expansion of
entrance and signage (the "Acquired Property'). On January 2, 1998,
the Company, as Lessee, entered into a Lease Agreement with Casino
America of Colorado for the Acquired Property and will utilize the
Acquired Property in developing the Isle-Black Hawk. The lease
payment consists of $102,000 paid upon the inception of the lease and
$17,000 per month, commencing July 15, 1998, and continuing until
December 31, 2002, and thereafter on a year to year basis. During the
term of the lease, the Company has the right to purchase the property
for $1,500,000 plus all interest and out-of-pocket costs that Casino
America of Colorado incurred in connection with the purchase and
ownership of the land, less any payments made by the Company, as
lessee.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is qualified in
its entirety by, the Company's financial statements, including the notes
thereto, and other financial information included elsewhere in this report.
The following discussion includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. In particular,
statements concerning the effects of increased competition in the Company's
market, the Company's construction activities and the Company's possible plans
to develop a hotel at its facility, are forward-looking statements. Although
the Company believes that the expectations reflected in such forward-looking
statements are reasonable, there can be no assurance that such expectations are
reasonable or that they will be correct. Actual results may vary materially
from those expected. Important factors that could cause actual results to
differ with respect to the Company's planned capital expenditures principally
include a lack of available capital resources, construction and development
risks such as cost overruns, shortages of materials and labor, unforeseen delays
resulting from weather interference, failure to obtain necessary approvals,
further development of the competitive environment in the Black Hawk market,
environmental issues and changes in gaming laws and regulations in the
jurisdiction in which the Company operates. Other important factors that could
cause the Company's actual results to differ materially from expectations are
discussed under "Risk Factors" in the Company's Registration Statement on
Form S-4, filed with the Securities and Exchange Commission, registration
no. 333-38093.
DEVELOPMENT ACTIVITIES
The Company was organized in April 1997 and was initially capitalized with
cash contributions from its members in the aggregate amount of $1,000. Since
that time, the Company's activities have been limited to applying for certain
necessary permits, licenses and approvals to enable it to construct and operate
the Isle-Black Hawk; arranging for the design, construction and financing of the
Isle-Black Hawk; coordinating the contribution to the Company of the property on
which the Isle-Black Hawk will be developed and other capital contributions and
conducting excavation at the site in preparation for construction. It is
anticipated that the Isle-Black Hawk will include a 55,000 square foot gaming
facility featuring approximately 1,100 slot machines, up to 24 table games and
on-site covered parking for approximately 1,000 vehicles, and various other
amenities. On August 25, 1997, the Company was issued an excavation permit and
began excavation on or about August 25, 1997. On March 3, 1998, the Company was
issued a foundation permit and began pouring the foundation for the Isle-Black
Hawk on or about March 6, 1998 construction activities are ongoing, and subject
to the delays inherent in construction projects of the magnitude of the Isle-
Black Hawk, and subject to obtaining the necessary gaming licenses, other
permits and financing, the Company expects to open the Isle-Black Hawk for
business in late 1998 or early 1999. The Company is continuing to evaluate
constructing a 248-room hotel in conjunction with the Isle-Black Hawk, and is
currently working to secure financing for the development of the hotel, however,
as of the date of this filing, no definitive arrangements have been made.
The general contractor (the "Contractor") for the Isle-Black Hawk construction
project notified the Company in November, 1997, that excavation and site
preparation activities had uncovered a greater amount of less stable weathered
rock and overburden soil than originally anticipated. As a result, the Company
added $2.7 million to the development and construction budget for the Isle-Black
Hawk, consisting of $2.0 million to cover the additional excavation and site
preparation costs and an additional $0.7 million to maintain the project's
construction schedule. The Company accordingly amended its excavation and
construction budget on December 19, 1997. The additional $2.7 million is to be
drawn from past and future interest earnings on amounts in the Construction
Disbursement
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Account. The Company believes that sufficient funds remain to enable the Isle-
Black Hawk to be developed as planned and open for business within the
anticipated time frame.
RESULTS OF OPERATIONS
The Company is in the development stage and does not have any historical
operating results other than interest expense on the Company's outstanding
indebtedness, interest income on the Company's restricted cash, the receipt of
certain capital contributions and the capitalization of certain costs. The
capitalized costs have consisted primarily of license and permit application,
design, construction and financing fees. Future operating results are subject
to significant business, economic, regulatory and competitive uncertainties and
contingencies, many of which are beyond the control of the Company. While the
Company believes that the Isle-Black Hawk, if completed and opened, will be able
to attract a sufficient number of patrons and achieve the level of activity and
revenues necessary to permit the Company to meet its payment obligations,
including with respect to the Notes, there can be no assurance that the Company
will be able to achieve these results. Isle of Capri Black Hawk Capital Corp.
("Capital Corp.") is a wholly-owned subsidiary of the Company and was
incorporated for the sole purpose of serving as co-issuer of the Notes in order
to facilitate the Offering. Capital Corp. will not have any operations or
material assets and will not have any revenues.
LIQUIDITY AND CAPITAL RESOURCES
The Company's initial development expenses were incurred by its members as
provided in the Members Agreement and capitalized on the closing date of the
First Mortgage Notes. The Company expects to fund the continued development of
the Isle-Black Hawk from a combination of (i) previous equity contributions
(primarily real estate and up to $1.0 million of cash and third party
development costs) valued at approximately $15.4 million, (ii) net proceeds of
$72.0 million from the sale of the First Mortgage Notes, which were deposited
and invested as set forth in the Cash Collateral and Disbursement Agreement, and
(iii) furniture, fixtures and equipment financing in the amount of up to $15.0
million. In addition, Casino America provided the Completion Capital Commitment,
pursuant to which it committed to contribute up to $5.0 million to the Company
in the event that amounts in the Construction Disbursement Account and the
Completion Reserve Account are insufficient to cause the Isle-Black Hawk to
become operating on or before April 1, 1999, or if the Isle-Black Hawk is not
operating by such date. The Company added approximately $2.7 million to the
development and construction budget for the Isle-Black Hawk, to be drawn from
past and future interest earnings in the Construction Disbursement Account, to
provide for an increase in the "guaranteed maximum price" under the Design/Build
Agreement due to the discovery of a greater amount of less stable weathered rock
and overburden soil at the construction site than was originally anticipated and
to maintain the project's construction schedule. See the previous discussion on
Development Activities. The Company did not exercise an option under the
Design/Build Agreement prior to March 1, 1998, to construct a 118-room hotel;
however, the Company is currently reviewing plans for the construction of a
hotel at the site of the Isle-Black Hawk. As of the date of this filing, no
definitive arrangements have been made, and it is expected that the gaming
facility will open for business without a hotel.
Following the commencement of operations of the Isle-Black Hawk, the
Company expects to fund its operating and capital needs from operating cash
flows. The Company intends to establish initial working capital reserves to
provide for reasonably anticipated short-term liquidity needs. However, there
can be no assurance that any additional financing, if needed to meet its
liquidity needs, will be available to the Company in the future, or that, if
available, any such financing will be on terms favorable to the Company. There
can be no assurance that the Company's estimate of its reasonably foreseeable
liquidity needs is or will be accurate or that new business developments or
other unforeseen events will not occur, resulting in the need to raise
additional funds. The Company expects that the adequacy of its operating cash
flow will depend, among other things, upon customer acceptance of the Isle-Black
Hawk, the continued development of the Black Hawk, Colorado market as a gaming
destination, the intensity of the Company's competition, the efficiency of
operations,
12
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depth of customer demand, the effectiveness of the Company's marketing and
promotional efforts and the performance by the manager of its responsibilities,
pursuant to the Management Agreement.
13
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K -
A. Exhibits
A list of exhibits included as part of this Form 10-Q is set forth
in the Exhibit Index that immediately precedes such exhibits, which
is incorporated herein by reference.
B. Reports on Form 8-K
During the quarter ended July 26, 1998, the Company filed the
following reports on Form 8-K:
None.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ISLE OF CAPRI BLACK HAWK L.L.C.
Dated: September 9, 1998 By: /s/ Rexford A. Yeisley
----------------------
Rexford A. Yeisley
Chief Financial Officer & Treasurer
(Duly Authorized Officer and
Principal Financial Officer
and Accounting Officer)
15
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
27 Financial Data Schedule
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-25-1999
<PERIOD-START> APR-27-1998
<PERIOD-END> JUL-26-1998
<CASH> 658
<SECURITIES> 0
<RECEIVABLES> 1,119
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,777
<PP&E> 55,017
<DEPRECIATION> 0
<TOTAL-ASSETS> 98,079
<CURRENT-LIABILITIES> 10,910
<BONDS> 75,000
0
0
<COMMON> 0
<OTHER-SE> 12,169
<TOTAL-LIABILITY-AND-EQUITY> 98,079
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,254
<INCOME-PRETAX> (804)
<INCOME-TAX> 0
<INCOME-CONTINUING> (804)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (804)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
