<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 25, 1998
---------------------------------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
---------------------------------------
Commission File Number: 333-38093
----------------------------------------------
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 No X
----- -----
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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 Sheet January 25, 1998
(unaudited) 1
Consolidated Statement of Operations for the
three months ended January 25, 1998 and for
the period April 25, 1997 (date of inception)
through January 25, 1998 (unaudited) 2
Consolidated Statement of Cash Flows for the
period April 25, 1997 (date of inception) through
January 25, 1998 (unaudited) 3
Consolidated Statement of Members' Equity
(unaudited) 4
Notes to Unaudited Consolidated Financial Statements 5-8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9-11
Part II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
EXHIBIT LIST 14
<PAGE>
ISLE OF CAPRI BLACK HAWK L.L.C.
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
January 25, 1998
-----------------
(Unaudited)
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 613,000
Accrued interest receivable 347,000
Prepaid expenses 398,000
-----------
TOTAL CURRENT ASSETS 1,358,000
-----------
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 14,544,000
Construction in progress 11,690,000
-----------
Property and equipment, net 26,234,000
-----------
OTHER ASSETS:
Restricted cash 64,609,000
Deferred financing costs, net of accumulated
amortization of $290,000 4,363,000
-----------
TOTAL ASSETS $96,564,000
===========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 3,912,000
Accounts payable - related parties 77,000
Accrued liabilities
Interest 4,088,000
Other 513,000
-----------
TOTAL CURRENT LIABILITIES 8,590,000
-----------
LONG-TERM DEBT 75,000,000
-----------
MEMBERS' EQUITY
Member's capital - Casino America of Colorado, Inc. 7,122,000
Member's capital - Blackhawk Gold, Ltd. 5,852,000
-----------
Total members' equity 12,974,000
-----------
TOTAL LIABILITIES AND MEMBERS' EQUITY $96,564,000
===========
</TABLE>
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)
<TABLE>
<CAPTION>
APRIL 25, 1997
(DATE OF INCEPTION)
THREE MONTHS ENDED THROUGH
January 25, 1998 JANUARY 25, 1998
------------------ -------------------
<S> <C> <C>
INTEREST EXPENSE, NET OF CAPITALIZED INTEREST OF
$688,000 AND $1,096,000, RESPECTIVELY $(1,813,000) $(3,282,000)
INTEREST INCOME 570,000 1,251,000
----------- -----------
Net loss $(1,243,000) $(2,031,000)
=========== ===========
</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 CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 25, 1997
(DATE OF INCEPTION)
THROUGH
January 25, 1998
----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,031,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization of deferred financing costs 290,000
Changes in current assets and liabilities:
Accounts receivable (1,000)
Prepaid expenses and other (398,000)
Accounts payable and accrued liabilities 6,587,000
------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 4,447,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of land (7,400,000)
Purchase of property, plant and equipment (9,075,000)
Increase in restricted cash (64,609,000)
------------
NET CASH USED IN INVESTING ACTIVITIES (81,084,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 72,000,000
Deferred financing costs (1,438,000)
Principal payment on land mortgage (396,000)
Capital contribution received 7,084,000
------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 77,250,000
Net increase in cash 613,000
Cash, beginning of period ---
------------
Cash, end of period 613,000
============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Debt issued for:
Underwriting fees on first mortgage notes 3,000,000
Capital contributions:
Land, net of mortgage of $396,000 7,604,000
Financing fees 137,000
Property and equipment 180,000
</TABLE>
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 MEMBERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Casino America of Blackhawk Total
Colorado, Inc. Gold, Ltd. Members' Equity
----------------- ---------- ---------------
<S> <C> <C> <C>
BALANCE, APRIL 25, 1997
(DATE OF INCEPTION) $ --- $ --- $ ---
Capital contribution
development costs 317,000 317,000
Capital contribution - cash 7,084,000 7,084,000
Capital contribution - land 100,000 7,504,000 7,604,000
Equity transfer 833,000 (833,000) ---
Net loss (1,212,000) (819,000) (2,031,000)
----------- ---------- -----------
BALANCE, JANUARY 25, 1998 $ 7,122,000 $5,852,000 $12,974,000
=========== ========== ===========
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
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") (formerly ICB L.L.C.), 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 due 2004 with Contingent Interest (the "Notes") in order
to finance the construction and development of a casino entertainment
complex in Black Hawk, Colorado.
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 cash and 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. As a
5
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result, following the transfers pursuant to the Put and the repurchase
of a portion of the Transferred Interest discussed above, Casino
America of Colorado has an ownership interest in the Company of 60% and
Blackhawk Gold has an ownership interest in the Company of 40%. 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 25, 1997 (date of
inception) through January 25, 1998 are not necessarily indicative of
the results that may be expected for the fiscal year ending April 26,
1998. For further information, refer to the Company's Form S-4
Registration Statement, filed with the Securities and Exchange
Commission, registration no. 333-38093.
Cash and cash equivalents
-------------------------
The Company considers cash and all highly liquid investments with a
maturity at the time of purchase of three months or less to be cash
equivalents. (At January 25, 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.
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, and Nevada Gold. No
Colorado gaming license has been issued to the Company, 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, costs 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
6
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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. 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, plant and equipment
-----------------------------
Property, plant 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, plant 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
"Indenture"). Amounts in the Construction Disbursement Account, which
contained approximately $45.4 million at January 25, 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 $5.1 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 $14.1 million,
will be used to pay the first three 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),
7
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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:
<TABLE>
<CAPTION>
Year Percentage
------------------------------------------- -----------------
<S> <C>
2001....................................... 106.5%
2002....................................... 103.2%
2003 and thereafter........................ 100.0%
</TABLE>
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.
Substantially all of the Company's assets are pledged as collateral for
long-term debt. At January 25, 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 $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 (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 of $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.
8
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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 excavation and site preparation 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 and 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 Form S-4
Registration Statement, 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. The excavation activity is
ongoing and is substantially completed. 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. 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 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
9
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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. 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 on March 1, 1998,
to construct a 119-room hotel (the "Hotel Option"). The Company is reviewing
alternative approaches to enable the construction of the planned hotel, however
as of the date of this filing, no definitive arrangements have been made. If the
Company does proceed with the development of a hotel, the Company intends to
fund a portion of the costs of construction for the hotel, which are anticipated
to be approximately $6.3 million, through future cost savings achieved through
value engineering, the availability of contractor's funds represented by the
contractor's contingency allowance and interest earnings on amounts deposited in
the Construction Disbursement Account and the Completion Reserve Account.
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
10
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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, 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.
11
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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 January 25, 1998, the Company filed the
following reports on Form 8-K:
None.
12
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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: March 11, 1998 By: /s/ Rexford A. Yeisley
----------------------
Rexford A. Yeisley
Chief Financial Officer & Treasurer
(Duly Authorized Officer and
Principal Financial Officer
and Accounting Officer)
13
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INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
27 Financial Data Schedule
10.1 Lease Agreement dated January 2, 1998 by and between Casino
America of Colorado, Inc. and Isle of Capri Black Hawk
L.L.C.
14
<PAGE>
EXHIBIT 10.1
LEASE
THIS LEASE IS dated as of January 2, 1998 between CASINO AMERICA OF
COLORADO, INC., as Landlord, and ISLE OF CAPRI BLACK HAWK L.L.C., as Tenant.
Landlord, in consideration of the covenants of Tenant hereinafter set
forth, hereby leases to Tenant the following described property.
The easterly half of Lot 2, and all of Lots 3 and 4, Block 51, City of
Black Hawk, including any portion in conflict with the Wabash Lode
Mining Claim. U.S. Survey No. 42, except that portion conveyed to
City of Black Hawk by Boundary Agreement recorded January 8, 1996, in
Book 592 at Page 421, and except any mine of gold, silver, cinnabar or
copper or in any valid mining claim or possession held under existing
laws, as shown in patent to the City of Black Hawk, recorded in Book
56 at page 555 and in Book 62 at Page 456, County of Gilpin, State of
Colorado.
SAID PREMISES are to be leased to Tenant until December 31, 2002 and
thereafter year to year. Ninety (90) days prior written notice must be given to
terminate this Lease after the initial term. Tenant, in consideration of the
leasing of the premises as set forth above, covenants and agrees to pay Landlord
as rent One Hundred and Two Thousand Dollars ($102,000.00) at the date of
signing of this Lease and Seventeen Thousand Dollars ($17,000.00) per month
thereafter beginning July 15, 1998.
Tenant further covenants with Landlord, that at the expiration of this
Lease, peaceable possession of said premises shall be given to Landlord, in as
good condition as they now are, the usual wear and tear, inevitable accidents,
and loss by fire excepted. Tenant shall have the right to demolish the existing
structure and conduct excavation and construction activities on the premises at
its sole cost and expense.
It is further covenanted and agreed between the parties aforesaid that this
Lease is a net net lease to Landlord with Tenant bearing all expenses, including
insurance applicable to the premises.
Landlord hereby grants Tenant the exclusive option to purchase the premises
at any time during the term of this Lease. The purchase price shall be One
Million Five Hundred Thousand Dollars ($1,500,000) plus all interest and out-of-
pocket costs of Landlord incurred in connection with the purchase and/or
ownership of the premises less any payments made by Tenant to Landlord pursuant
to this Lease. Tenant shall exercise this option by providing written notice to
Landlord at any time prior to the expiration of
<PAGE>
this Lease. The purchase price shall be paid in cash, and all of the other terms
of purchase shall be identical to those set forth in Landlord's purchase of the
premises, said closing to occur within three (3) business days after Tenant's
notice of election to purchase.
All notices shall be in writing and be personally delivered or sent by
first class mail, unless otherwise provided by law, to the respective parties at
the address immediately below their signature. This Lease shall only be
modified by amendment signed by both parties and shall be binding on the
parties, their successors and assigns.
CASINO AMERICA OF ISLE OF CAPRI BLACK HAWK L.L.C.
COLORADO, INC.
______________________________ ___________________________________
Landlord Tenant
711 Washington Loop 711 Washington Loop
Biloxi, MS 39530 Biloxi, MS 39530
2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ISLE OF
CAPRI BLACK HAWK LLC'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND RELATED NOTES TO SAID
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-26-1998
<PERIOD-START> APR-28-1997
<PERIOD-END> JAN-25-1998
<CASH> 613
<SECURITIES> 0
<RECEIVABLES> 347
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,358
<PP&E> 26,234
<DEPRECIATION> 0
<TOTAL-ASSETS> 96,564
<CURRENT-LIABILITIES> 8,590
<BONDS> 75,000<F1>
0
0
<COMMON> 0
<OTHER-SE> 12,974
<TOTAL-LIABILITY-AND-EQUITY> 96,564
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,282
<INCOME-PRETAX> (2,031)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,031)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,031)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Includes Bonds payable of $75 million.
</FN>
</TABLE>
