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 23, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to ______________________
Commission File Number 333-38093
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ISLE OF CAPRI BLACK HAWK, L.L.C. / ISLE OF CAPRI BLACK HAWK CAPITAL CORP.
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(Exact name of registrant as specified in its charter)
Colorado 84-1422931
------------------- ----------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
1641 Popps Ferry Road, Biloxi, Mississippi 39532
- ------------------------------------------ --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (228) 396-7000
711 Dr. Martin Luther King Jr. Blvd., Biloxi, Mississippi, 39530
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(Former name, former address and former fiscal year, if changed since last
report)
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
--
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<TABLE>
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ISLE OF CAPRI BLACK HAWK, L.L.C.
FORM 10-Q
INDEX
PAGE
<C><S> <C> <C>
PART I FINANCIAL INFORMATION
- ------
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS, JANUARY 23, 2000
(UNAUDITED) AND APRIL 25, 1999 . . . . . . . . . . . . . . . . . .1
CONSOLIDATED STATEMENTS OF OPERATIONS FOR
THE THREE AND NINE MONTHS ENDED JANUARY 23, 2000
AND JANUARY 24, 1999(UNAUDITED). . . . . . . . . . . . . . . . . .2
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
FOR THE NINE MONTHS ENDED JANUARY 23, 2000
(UNAUDITED). . . . . . . . . . . . . . . . . . . . . . . . . . . .3
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE NINE MONTHS ENDED JANUARY 23, 2000 AND
JANUARY 24, 1999 (UNAUDITED) . . . . . . . . . . . . . . . . . . .4
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . .9
PART II OTHER INFORMATION
- -------
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . .12
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS . . . . . . . . . . . .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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ISLE OF CAPRI BLACK HAWK, L.L.C.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<S> <C> <C>
January 23, April 25,
ASSETS 2000 1999
------ ------------ ----------
(Unaudited)
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . $ 13,510 $ 10,917
Accounts receivable:
Related parties. . . . . . . . . . . . . . . . . . . . . . . . . 7 -
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 310
Prepaid expenses and other assets. . . . . . . . . . . . . . . . . . . . 616 511
------------ ----------
Total current assets . . . . . . . . . . . . . . . . . . 14,286 11,738
Property and equipment - net . . . . . . . . . . . . . . . . . . . . . . . . . . 91,461 80,377
Other assets:
Deferred financing costs, net of accumulated amortization of $1,693 and
$1,178, respectively . . . . . . . . . . . . . . . . . . . . . . 3,156 3,671
Restricted cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2,017
Prepaid deposits and other . . . . . . . . . . . . . . . . . . . . . . . 565 460
------------ ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . $ 109,468 $ 98,263
============ ==========
LIABILITIES AND MEMBERS' EQUITY
-------------------------------
Current liabilities:
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . $ 964 $ 754
Accounts payable:
Trade. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,474 2,528
Related parties. . . . . . . . . . . . . . . . . . . . . . . . . 4,586 5,289
Accrued liabilities:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,885 1,707
Construction payable . . . . . . . . . . . . . . . . . . . . . . 694 24
Payroll and related. . . . . . . . . . . . . . . . . . . . . . . 3,380 1,434
Property and other taxes . . . . . . . . . . . . . . . . . . . . 2,517 1,360
Progressive jackpots and slot club awards. . . . . . . . . . . . 1,843 1,412
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,121 200
------------ ----------
Total current liabilities. . . . . . . . . . . . . . . . 21,464 14,708
Long-term debt, less current maturities. . . . . . . . . . . . . . . . . . . . . 75,000 75,768
Members' equity:
Casino America of Colorado, Inc. . . . . . . . . . . . . . . . . . . . . 6,618 3,645
Blackhawk Gold, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . 6,386 4,142
------------ ----------
Total members' equity. . . . . . . . . . . . . . . . . . 13,004 7,787
------------ ----------
Total liabilities and members' equity. . . . . . . . . . $ 109,468 $ 98,263
============ ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ISLE OF CAPRI BLACK HAWK, L.L.C.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands)
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
January 23, January 24, January 23, January 24,
2000 1999 2000 1999
-------------------- ------------------- ------------- -------------
Revenue:
Casino. . . . . . . . . . . . . . $ 22,961 $ 4,436 $ 62,646 $ 4,436
Food, beverage and other. . . . . 1,043 231 3,407 231
-------------------- ------------------- ------------- -------------
Total Revenue . . . . . . 24,004 4,667 66,053 4,667
Operating Expenses:
Casino. . . . . . . . . . . . . . 3,238 568 8,862 568
Gaming taxes. . . . . . . . . . . 4,615 952 12,418 952
Food and beverage . . . . . . . . 773 243 2,452 243
Facilities. . . . . . . . . . . . 869 237 2,391 237
Marketing and administrative. . . 7,869 1,830 22,475 1,830
Pre-opening . . . . . . . . . . . - 3,320 - 3,320
Management fees . . . . . . . . . 939 165 2,654 165
Depreciation and amortization . . 567 234 1,557 234
-------------------- ------------------- ------------- -------------
Total operating expenses. 18,870 7,549 52,809 7,549
-------------------- ------------------- ------------- -------------
Operating income (loss) . . . . . 5,134 (2,882) 13,244 (2,882)
Interest expense. . . . . . . . . (2,791) (1,224) (8,350) (3,037)
Interest income . . . . . . . . . 105 223 323 762
-------------------- ------------------- ------------- -------------
Net income (loss) . . . . . . . . $ 2,448 $ (3,883) $ 5,217 $ (5,157)
==================== =================== ============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ISLE OF CAPRI BLACK HAWK, L.L.C.
CONSOLIDATED STATEMENT OF MEMBERS' EQUITY
(In thousands)
<S> <C> <C> <C>
Casino America of Blackhawk Total
Colorado, Inc. Gold, Ltd. Members' Equity
------------------ ----------- ----------------
Balance, April 25, 1999 . . . . . . . $ 3,645 $ 4,142 $ 7,787
Net Income. . . . . . . . . . 2,973 2,244 5,217
------------------ ----------- ----------------
Balance, January 23, 2000 (Unaudited) $ 6,618 $ 6,386 $ 13,004
================== =========== ================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ISLE OF CAPRI BLACK HAWK, L.L.C.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<S> <C> <C>
Nine Months Ended
January 23, January 24,
2000 1999
------------------- -------------
Operating Activities:
Net income.(loss) . . . . . . . . . . . . . . . . . . . . . $ 5,217 $ (5,157)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . 1,557 234
Amortization of deferred financing costs. . . . . . 515 522
Changes in current assets and liabilities:
Accounts receivable . . . . . . . . . . . . 150 (2,165)
Prepaid expenses and other assets . . . . . (88) (642)
Accounts payable and accrued expenses . . . 5,852 10,489
------------------- -------------
Net cash provided by operating activities . . . . . . . . . 13,203 3,281
Investing Activities:
Purchase of property and equipment. . . . . . . . . . . . . (11,947) (39,048)
Decrease in restricted cash . . . . . . . . . . . . . . . . 2,017 39,510
Deposits and other. . . . . . . . . . . . . . . . . . . . . (122) -
------------------- -------------
Net cash provided by (used in) investing activities . . . . (10,052) 462
Financing Activities:
Proceeds from borrowings. . . . . . . . . . . . . . . . . . - 1,486
Deferred financing costs. . . . . . . . . . . . . . . . . . - 7
Principal payments on debt. . . . . . . . . . . . . . . . . (558) -
------------------- -------------
Net cash provided by (used in) financing activities . . . . (558) 1,493
Net increase in cash and cash equivalents . . . . . . . . . 2,593 5,236
Cash and cash equivalents at beginning of period. . . . . . 10,917 547
------------------- -------------
Cash and cash equivalents at end of period. . . . . . . . . $ 13,510 $ 5,783
=================== =============
Supplemental disclosure of cash flow information:
Cash payments for:
Interest. . . . . . . . . . . . . . . . . . . . . . $ 4,996 $ 5,607
Supplemental schedule of noncash investing and financing
activities:
Other:
Construction costs funded through accounts payable. 694 43
Discount on notes payable . . . . . . . . . . . . . - 95
</TABLE>
See notes to consolidated financial statements.
<PAGE>
ISLE OF CAPRI BLACK HAWK, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation
On April 25, 1997 ("Date of Inception"), Isle of Capri Black Hawk, L.L.C.
("Isle-Black Hawk"), a Colorado limited liability company, was formed.
Isle-Black Hawk is owned by Casino America of Colorado, Inc., a wholly-owned
subsidiary of Isle of Capri Casinos, Inc., and Blackhawk Gold, Ltd., a
wholly-owned subsidiary of Nevada Gold & Casinos, Inc. The principal purpose of
Isle-Black Hawk has been to develop and operate a casino in Black Hawk,
Colorado, which opened December 30, 1998. Prior to December 30, 1998,
Isle-Black Hawk was a Development Stage Company and had not commenced gaming
operations.
On August 20, 1997, Isle-Black Hawk and Isle of Capri Black Hawk Capital
Corp., a wholly-owned subsidiary of Isle-Black Hawk that has no operations,
issued $75,000,000 of 13% First Mortgage Notes (the "First Mortgage Notes") due
2004 with Contingent Interest in order to finance the construction and
development of Isle-Black Hawk.
The rights and obligations of Casino America of Colorado, Inc. and
Blackhawk Gold, Ltd. are governed in part by the Amended and Restated Operating
Agreement of Isle-Black Hawk (the "Agreement") dated as of July 29, 1997. The
Agreement provides that Isle-Black Hawk will continue until December 31, 2096,
or until such date that dissolution may occur. Pursuant to the Agreement,
Casino America of Colorado, Inc. contributed cash, land purchase rights and
development costs to Isle-Black Hawk and Blackhawk Gold, Ltd. contributed land
to Isle-Black Hawk.
On July 29, 1997, Casino America of Colorado, Inc., Isle of Capri Casinos,
Inc., Blackhawk Gold, Ltd., and Nevada Gold & Casinos, Inc. also entered into a
Members Agreement (the "Members Agreement") which addressed the development of
Isle-Black Hawk, management of Isle-Black Hawk, additional capital
contributions, and other matters. Casino America of Colorado, Inc. has an
ownership interest in Isle-Black Hawk of 57% and Blackhawk Gold, Ltd. has an
ownership interest in Isle-Black Hawk of 43%. Profits and losses of Isle-Black
Hawk are allocated in proportion to ownership interests.
Isle-Black Hawk is currently constructing a hotel containing approximately
237 rooms for approximately $29.0 million. Construction work on the hotel began
in July 1999 and is scheduled to be completed in late summer 2000. Isle of
Capri Casinos, Inc. is assisting Isle-Black Hawk by financing the development of
this hotel and plans to loan a total of $5.0 million with interest payable in
cash, of which $3.3 million had been funded as of January 23, 2000, and another
$5.0 million with interest payable in kind (by issuance of additional notes).
Additionally, Isle of Capri Casinos, Inc. has agreed to contribute up to $10.0
million in additional equity to supplement funds generated from Isle-Black Hawk
operations to complete the hotel. Nevada Gold & Casinos, Inc. may participate
in making a loan or contributing equity.
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 nine month period ended January
23, 2000, are not necessarily indicative of the results that may be expected for
the fiscal year ending April 30, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto included in Isle-Black
Hawk's annual report on Form 10-K for the year ended April 25, 1999.
The consolidated financial statements of Isle-Black Hawk include the
accounts of Isle of Capri Black Hawk, L.L.C. and its subsidiary, Isle of Capri
Black Hawk Capital Corp. All material intercompany balances and transactions
have been eliminated in consolidation.
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.
<PAGE>
ISLE OF CAPRI BLACK HAWK, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Property and Equipment
Property and equipment is recorded at cost except for land contributed by
Blackhawk Gold, Ltd., which is recorded at its appraised value. Depreciation
began accumulating upon the commencement of gaming operations and is computed
using the straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
<S> <C>
Years
-----
Slot Machines. . . . . . . . . . . 3
Furniture, fixtures and equipment 5-10
Buildings and improvements . . . . 39.5
</TABLE>
Effective April 26, 1999, Isle-Black Hawk increased its estimate of the
useful lives of all land-based buildings and improvements from 25 years to 39.5
years to more appropriately reflect the expected useful lives of those assets.
Isle-Black Hawk also reduced its estimate of the useful lives of slot machines
from 5 years to 3 years due to technological changes. These two changes
increased net income for the three and nine months ended January 23, 2000, by
$93,000 and $360,000, respectively. Excluding the changes in useful lives, net
income for the three and nine months ended January 23, 2000, would have been
$2,356,000 and $4,858,000, respectively.
3. Other Assets
Deferred Financing Costs
The costs of issuing long-term debt have been capitalized and are being
amortized using the effective interest method over the term of the related debt.
Restricted Cash
Restricted cash represents cash proceeds from the sale of the First
Mortgage Notes held in trust by The Bank of New York, as trustee. These funds
were held in three separate accounts (Construction Disbursement, Completion
Reserve and Interest Reserve), with usage restricted by an indenture between
Isle-Black Hawk and the trustee, dated August 20, 1997, in connection with the
issuance of the First Mortgage Notes (the "Indenture"). As of January 23, 2000
these accounts have been closed.
4. Long-term debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
January 23, April 25,
2000 1999
------------ ----------
(In thousands)
11% note payable, issued by Isle of Capri Black Hawk, L.L.C., due August 2004;
non-recourse to Isle of Capri Casinos, Inc. . . . . . . . . . . . . . . . . $ 964 $ 1,522
13% First Mortgage Notes, issued by Isle of Capri Black Hawk, L.L.C., due
August 2004; non-recourse to Isle of Capri Casinos, Inc.. . . . . . . . . . 75,000 75,000
------------ ----------
75,964 76,522
Less: current maturities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 964 754
------------ ----------
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,000 $ 75,768
============ ==========
</TABLE>
On August 20, 1997, Isle-Black Hawk issued $75 million of 13% First
Mortgage Notes with Contingent Interest, due August 31, 2004, that is
non-recourse debt to Isle of Capri Casinos, Inc. Interest on the First Mortgage
Notes is payable semi-annually on February 28 and August 31 of each year,
commencing February 28, 1998. Additionally, contingent interest is payable on
the First Mortgage Notes on each interest payment date, in an aggregate
principal amount of 5% of Isle-Black Hawk's Consolidated Cash Flow (as defined
in the Indenture), provided that no contingent interest was payable prior to
commencement of operations and may, under certain circumstances, be deferred.
Isle of Capri Casinos, Inc. previously supplied a completion capital commitment
to Isle-Black Hawk, which lapsed in accordance with its terms.
<PAGE>
ISLE OF CAPRI BLACK HAWK, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On August 31, 1999, Isle-Black Hawk deferred its first contingent interest
payment totaling $516,000. This amount was fully accrued as of August 31, 1999.
The amount of contingent interest expense recorded for the three and nine months
ended January 23, 2000, was $290,000 and $756,000, respectively.
The First Mortgage Notes are redeemable at the option of Isle-Black Hawk,
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>
<S> <C>
Year Percentage
---- ----------
2001.. . . . . . . . 106.500%
2002.. . . . . . . . 103.200%
2003 and thereafter. 100.000%
</TABLE>
Beginning December 1999, Isle-Black Hawk 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
Isle-Black Hawk's excess cash flow, as defined.
Isle-Black Hawk obtained a letter of credit, as a requirement to obtain a
building permit from the City of Black Hawk (the "City"). The letter of
credit, totaling $2.1 million, can be drawn upon by the City if for any reason
Isle-Black Hawk fails to complete the hotel project. The letter of credit is
secured by a deposit held in trust of $1.1 million, which was funded by Isle of
Capri Casinos, Inc., and the balance is secured by Isle of Capri Casinos, Inc.'s
open line of credit with the bank.
Substantially all of Isle-Black Hawk's assets are pledged as collateral for
long-term debt. At January 23, 2000, Isle-Black Hawk was in compliance with all
debt covenants.
5. Related Party Transactions
Management Agreement
On April 25, 1997, Isle-Black Hawk entered into a Management Agreement,
which was subsequently amended and restated on July 29, 1997 (the "Management
Agreement"), with Isle of Capri Casinos, Inc., which manages the casino in
exchange for a fee. The management fee is equal to two percent of revenues as
defined, plus ten percent of operating income, but not to exceed four percent of
revenues. The management fee became effective upon commencement of casino
operations.
Lease Agreement
On January 2, 1998, Casino America of Colorado, Inc. acquired
approximately 0.7 acres of property contiguous to the property being developed
by Isle-Black Hawk for expansion of the entrance and signage (the "Acquired
Property"). On January 2, 1998, Isle-Black Hawk, as lessee, entered into a
lease agreement with Casino America of Colorado, Inc. for the Acquired Property
and has utilized the Acquired Property in developing Isle-Black Hawk. The lease
payment consisted 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. The
term of the lease was through December 31, 2002, and thereafter on a year to
year basis. During the term of the lease, Isle-Black Hawk had the right to
purchase the property for $1,500,000 plus all interest and out-of-pocket costs
that Casino America of Colorado, Inc. incurred in connection with the purchase
and ownership of the land, less any payments made by Isle-Black Hawk, as lessee.
On January 7, 2000, Isle-Black Hawk purchased the property for $1.3 million
representing the purchase price of $1.5 million plus all interest and
out-of-pocket costs that Casino America of Colorado, Inc. incurred in connection
with the purchase and ownership of the land, less any payments made by
Isle-Black Hawk, as lessee.
<PAGE>
ISLE OF CAPRI BLACK HAWK, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Loans
Isle-Black Hawk is currently constructing a hotel containing
approximately 237 rooms for approximately $29.0 million. Construction work on
the hotel began in July 1999 and is scheduled to be completed in late summer
2000. Isle of Capri Casinos, Inc. is assisting Isle-Black Hawk by financing the
development of this hotel and plans to loan a total of $5.0 million with
interest payable in cash, of which $3.3 million had been funded as of January
23, 2000, and another $5.0 million with interest payable in kind (by issuance of
additional notes). Additionally, Isle of Capri Casinos, Inc. has agreed to
contribute up to $10.0 million in additional equity to supplement funds
generated from Isle-Black Hawk operating to complete the hotel. Nevada Gold &
Casinos, Inc. may participate in making a loan or contributing equity.
6. Preopening Expenses
Preopening expenses of $3.3 million represent salaries, benefits,
training, marketing and other costs incurred in connection with the opening of
the Isle-Black Hawk on December 30, 1998.
7. Subsequent Event
In February 2000, Isle-Black Hawk made its first contingent interest
payment totaling $1.0 million, as required by its First Mortgage Notes. This
amount was fully accrued as of the third quarter ended January 23, 2000.
<PAGE>
ITEM 2. 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, Isle-Black Hawk'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 Black Hawk
market, the effects of regulatory and legislative matters, Isle-Black Hawk's
plans to make capital investments at its facility, including, without
limitation, the development of its hotel facility, are forward-looking
statements. Although Isle-Black Hawk believes that the expectations 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 Isle-Black Hawk's planned capital expenditures principally include a
lack of available capital resources, construction and development risks such as
shortages of materials and labor and unforeseen delays resulting from a failure
to obtain necessary approvals.
General
Isle-Black Hawk was organized on April 25, 1997, and from that time until
the opening of the casino on December 30, 1998, Isle-Black Hawk's activities
were limited to the design, construction and opening of the casino. Isle-Black
Hawk includes a 43,000 square-foot gaming facility on a single floor with
approximately 1,100 slot machines, 14 table games, on-site covered parking for
1,100 vehicles and various other amenities. Isle-Black Hawk's results of
operations for the fiscal year ended April 25, 1999 include four fiscal months
of gaming operations. There is a lack of comparable information between fiscal
years 2000, 1999 and 1998 because Isle-Black Hawk was in the development stage
during all of fiscal 1998 and did not have any historical operating results
other than interest expense on Isle-Black Hawk's outstanding indebtedness,
interest income on Isle-Black Hawk's restricted cash, the receipt of certain
capital contributions and the capitalization of certain costs until it commenced
operations on December 30, 1998, during the third quarter of fiscal 1999. The
following discussion focuses on Isle-Black Hawk's three fiscal months of gaming
operations during the third quarter of fiscal 2000 and the nine fiscal months
during the fiscal 2000 year to date, with no comparisons to the prior year
results of operations as the prior year had only one month of gaming operations
as of January 24, 1999.
Isle of Capri Black Hawk Capital Corp. is a wholly-owned subsidiary of
Isle-Black Hawk and was incorporated for the sole purpose of serving as
co-issuer of the First Mortgage Notes. Isle of Capri Black Hawk Capital Corp.
has not and will not have any operations or material assets or revenues.
Isle-Black Hawk believes that its historical results of operations may not
be indicative of its future results of operations because it has only operated
for thirteen months, and due to the substantial present and expected future
increase in competition for gaming customers in its market, as new casinos open
and existing casinos add to or enhance their facilities.
Results of Operations
Three Fiscal Months Ended January 23, 2000
Total revenue for the quarter ended January 23, 2000, was $24.0 million,
which included $23.0 million of casino revenue and $1.0 million of food,
beverage and other revenue. Revenue does not reflect the retail value of any
complimentaries.
Casino operating expenses for the quarter ended January 23, 2000, totaled
$3.2 million, or 14.1% of casino revenue. These expenses are primarily
comprised of salaries, wages and benefits and other operating expenses of the
casino.
State and local gaming taxes paid in Colorado totaled $4.6 million for the
quarter ended January 23, 2000, which is at a rate consistent with Colorado's
gaming tax rate for the applicable fiscal year.
Food, beverage and other expenses totaled $0.8 million for the quarter
ended January 23, 2000. These expenses consist primarily of the cost of goods
sold, salaries, wages and benefits and operating expenses of these departments.
Food and beverage operating expenses as a percentage of food, beverage and other
revenues were 74.1% for the quarter ended January 23, 2000.
Facilities expenses totaled $0.9 million for the quarter ended January 23,
2000. These expenses include salaries, wages and benefits, operating expenses of
insurance, housekeeping and general maintenance of the facilities.
<PAGE>
Marketing and administrative expenses totaled $7.9 million, or 32.8% of
total revenue, for the quarter ended January 23, 2000. Marketing expenses
include salaries, wages and benefits of the marketing and sales departments, as
well as promotions, advertising, special events and entertainment.
Administrative expenses include administration and human resource department
expenses, rent (including $0.8 million related to equipment leases),
professional fees and property taxes.
Depreciation and amortization expense was $0.6 million for the quarter
ended January 23, 2000. These expenses relate to property and equipment.
Interest expense was $2.7 million for the quarter ended January 23, 2000,
net of capitalized interest of $0.3 million and interest income of $0.1 million.
This includes intercompany interest expense of $0.1 million. Interest expense
primarily relates to indebtedness incurred in connection with the acquisition of
property, equipment and leasehold improvements. This compares to interest
expense of $1.0 million, net of capitalized interest of $1.6 million and
interest income of $0.2 million, for the quarter ended January 24, 1999.
On August 31, 1999, Isle-Black Hawk deferred its first contingent interest
payment totaling $516,000. The amount of contingent interest expense recorded
for the quarter ended January 23, 2000 was $290,000. These amounts were both
fully accrued as of January 23, 2000.
Nine Fiscal Months Ended January 23, 2000
Total revenue for the nine fiscal months ended January 23, 2000, was $66.1
million, which included $62.6 million of casino revenue and $3.4 million of
food, beverage and other revenue. Revenue does not reflect the retail value of
any complimentaries.
Casino operating expenses for the nine fiscal months ended January 23,
2000, totaled $8.9 million, or 14.1% of casino revenue. These expenses are
primarily comprised of salaries, wages and benefits and other operating expenses
of the casino.
State and local gaming taxes paid in Colorado totaled $12.4 million for the
nine fiscal months ended January 23, 2000, which is at a rate consistent with
Colorado's gaming tax rate for the applicable fiscal year.
Food, beverage and other expenses totaled $2.5 million for the nine fiscal
months ended January 23, 2000. These expenses consist primarily of the cost of
goods sold, salaries, wages and benefits and operating expenses of these
departments. Food and beverage operating expenses as a percentage of food,
beverage and other revenues were 72.0% for the nine fiscal months ended January
23, 2000.
Facilities expenses totaled $2.4 million for the nine fiscal months ended
January 23, 2000. These expenses include salaries, wages and benefits, operating
expenses of insurance, housekeeping and general maintenance of the facilities.
Marketing and administrative expenses totaled $22.5 million, or 34.0% of
total revenue, for the nine fiscal months ended January 23, 2000. Marketing
expenses include salaries, wages and benefits of the marketing and sales
departments, as well as promotions, advertising, special events and
entertainment. Administrative expenses include administration and human resource
department expenses, rent (including $2.7 million related to equipment leases),
professional fees and property taxes.
Depreciation and amortization expense was $1.6 million for the nine fiscal
months ended January 23, 2000. These expenses relate to property and equipment.
Interest expense was $8.0 million for the nine fiscal months ended January
23, 2000, net of capitalized interest of $0.6 million and interest income of
$0.3 million. This includes intercompany interest expense of $0.3 million.
Interest expense primarily relates to indebtedness incurred in connection with
the acquisition of property, equipment and leasehold improvements. This compares
to interest expense of $2.3 million, net of capitalized interest of $4.8 million
and interest income of $0.8 million, for the nine fiscal months ended January
24, 1999.
On August 31, 1999, Isle-Black Hawk deferred its first contingent interest
payment totaling $516,000. The amount of contingent interest expense recorded
for the nine months ended January 23, 2000 was $756,000. These amounts were both
fully accrued as of January 23, 2000.
<PAGE>
Liquidity and Capital Resources
At January 23, 2000, Isle-Black Hawk had cash and cash equivalents of $13.5
million, compared to $10.9 million at April 25, 1999. The increase in cash is
primarily a result of cash flow from operating activities. During the nine
fiscal months ended January 23, 2000, Isle-Black Hawk's operating activities
provided $13.2 million of cash.
Isle-Black Hawk invested $11.9 million in property and equipment in the
nine fiscal months ended January 23, 2000, primarily for the completion of the
casino facility and the continued design and development of the hotel.
Isle-Black Hawk anticipates that a significant portion of its principal
near-term capital requirements will relate to the construction of a hotel
containing approximately 237 rooms for approximately $29.0 million, including a
contract for new construction costs of approximately $20.0 million that was
signed in October 1999. Construction work on the hotel began in July 1999 and
is scheduled to be completed in late summer 2000. Isle of Capri Casinos, Inc.
is assisting Isle-Black Hawk by financing the development of this hotel and
plans to loan $5.0 million with interest payable in cash, of which $3.3 million
had been funded as of January 23, 2000, and another $5.0 million with interest
payable in kind (by issuance of additional notes). Additionally, Isle of Capri
Casinos, Inc. has agreed to contribute up to $10.0 million in additional equity
to supplement funds generated from Isle-Black Hawk operations to complete the
hotel. Nevada Gold & Casinos, Inc. may participate in making a loan or
contributing equity.
Isle-Black Hawk anticipates that additional capital improvements
approximating $0.6 million will be made during the remainder of fiscal 2000 to
maintain its existing facility and remain competitive in its market. Isle-Black
Hawk expects that available cash and cash from future operations, as well as
borrowings from Isle of Capri Casinos, Inc. and the contributions from Isle of
Capri Casinos, Inc. and Nevada Gold & Casinos, Inc., will be adequate to fund
future expansion, planned capital expenditures, service debt and meet working
capital requirements. There is no assurance that Isle-Black Hawk will have the
capital resources to make all of the expenditures described above or that
planned capital investments will be sufficient to allow it to remain competitive
in its existing market. The indenture restricts, among other things, Isle-Black
Hawk's ability to borrow money, make capital expenditures, use assets as
security in other transactions, make restricted payments or restricted
investments, incur contingent obligations, sell assets and enter into leases and
transactions with affiliates. In addition, Isle-Black Hawk is required to make
significant interest payments semi-annually on its First Mortgage Notes, which
will include additional contingent interest.
Isle-Black Hawk is highly leveraged and may be unable to obtain additional
debt or equity financing on acceptable terms. As a result, limitations on
Isle-Black Hawk's capital resources could delay or cause the abandonment of
certain plans for capital improvements.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
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 the 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 23, 2000, the Company filed
the following reports on Form 8-K:
None.
<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 hereunto duly authorized.
ISLE OF CAPRI BLACK HAWK, L.L.C.
Dated: March 7, 2000 /s/ Rexford A. Yeisley
--------------------------
Rexford A. Yeisley, Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ISLE OF
CAPRI BLACK HAWK LLC'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND RELATED NOTES TO SAID
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001047905
<NAME> ISLE OF CAPRI BLACK HAWK LLC
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> APR-26-1999
<PERIOD-END> JAN-23-2000
<CASH> 13510
<SECURITIES> 0
<RECEIVABLES> 160
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14286
<PP&E> 91461
<DEPRECIATION> 2542
<TOTAL-ASSETS> 109468
<CURRENT-LIABILITIES> 21464
<BONDS> 75000
0
0
<COMMON> 0
<OTHER-SE> 13004
<TOTAL-LIABILITY-AND-EQUITY> 109468
<SALES> 0
<TOTAL-REVENUES> 66053
<CGS> 0
<TOTAL-COSTS> 23732
<OTHER-EXPENSES> 29077
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8350
<INCOME-PRETAX> 5217
<INCOME-TAX> 0
<INCOME-CONTINUING> 5217
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5217
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
