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 March 31, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 333-8163
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Riviera Black Hawk, Inc.
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(Exact name of Registrant as specified in its charter)
Colorado 86-0886265
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(State or other jurisdiction of incorporation or organization) (IRS Employer
Identification No.)
2901 Las Vegas Boulevard South, Las Vegas, Nevada 89109
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (702) 794-9527
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes---- No -------
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE LAST FIVE YEARS
Indicate by check mark whether the Registrant has filed all documentation
and reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes---No ----
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
The Registrant's Common Stock is owned 100% indirectly by its ultimate
parent Riviera Holdings Corporation, a reporting company. As of May 12, 2000,
the number of outstanding shares of the Registrant's Common Stock was 1,000.
1
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Riviera Black Hawk, Inc.
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INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
Independent Accountants' Report 3
Condensed Balance Sheets at March 31, 2000 (Unaudited) and
December 31, 1999 4
Condensed Statements of Operations (Unaudited) for the
Three Months ended March 31, 2000 and 1999 5
Condensed Statements of Cash Flows (Unaudited) for the
Three Months ended March 31, 2000 and 1999 6
Notes to Condensed Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosure About Market Risk 16
PART II. OTHER INFORMATION
Signature Page 18
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INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
Riviera Black Hawk, Inc.
We have reviewed the accompanying condensed balance sheet of Riviera Black Hawk,
Inc., (the "Company") as of March 31, 2000, and the related condensed statements
of operations and cash flows for the three months ended March 31, 2000 and 1999.
These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed financial statements for them to be in conformity with
accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the balance sheet of Riviera Black
Hawk, Inc. as of December 31, 1999, and the related statements of stockholders'
equity, and cash flows for the year then ended (not presented herein); and in
our report dated February 14, 2000 (March 6, 2000 with respect to Note 6), we
expressed an unqualified opinion on those financial statements. In our opinion,
the information set forth in the accompanying condensed balance sheet as of
December 31, 1999, is fairly stated, in all material respects, in relation to
the balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
April 25, 2000
Las Vegas, Nevada
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<CAPTION>
RIVIERA BLACK HAWK, INC.
BALANCE SHEETS
March 31, 2000 and December 31, 1999
(In Thousands, except share amounts)
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March 31, December 31,
2000 1999
ASSETS (Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $7,426 $1,810
Cash and cash equivalents - restricted 2,758 7,173
Short term investments - restricted 2,854 2,820
Accounts receivable related to construction financing 698
Inventories 206
Prepaid expenses and other assets 463 795
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Total current assets 14,405 12,598
PROPERTY AND EQUIPMENT, NET 68,943 56,734
DEFERRED FINANCING COSTS, Net 3,281 3,446
OTHER ASSETS 10 12
DEFERRED INCOME TAXES 160 160
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TOTAL $86,799 $72,950
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $1,378 $69
Accounts payable 4,769 3,053
Management Fees Payable 334
Current income tax payable 54
Accrued interest expense 2,438 976
Accrued other expenses 1,582 110
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Total current liabilities 10,555 4,208
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OTHER LONG-TERM LIABILITIES 784 724
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LONG-TERM DEBT, NET OF CURRENT PORTION 52,345 45,018
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock ($.001 par value; 10,000 shares
authorized; 1,000 shares issued and outstanding
Additional paid-in capital 23,513 23,474
Accumulated deficit (398) (474)
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Total stockholders' equity 23,115 23,000
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TOTAL $86,799 $72,950
=======================================
See Notes to condensed financial statements
</TABLE>
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<TABLE>
<CAPTION>
RIVIERA BLACK HAWK, INC.
STATEMENTS OF OPERATIONS (Unaudited)
FOR THE QUARTERS ENDED MARCH 31, 2000 AND 1999
(In thousands, except per share amounts)
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2000 1999
REVENUES:
<S> <C> <C>
Casino $7,579
Food and beverage 711
Entertainment 0
Other 62
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Total revenues 8,352
Less promotional allowances 468
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Net revenues 7,884
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COSTS AND EXPENSES:
Direct costs and expenses of operating departments:
Casino 2,633
Food and beverage 355
Entertainment
Other 2
Other operating expenses:
Selling, general and administrative 1,718
Preopening expenses-Black Hawk, Colorado project 1,221 14
Management fees 334
Depreciation and amortization 469
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Total costs and expenses 6,732 14
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INCOME FROM OPERATIONS 1,152 (14)
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OTHER (EXPENSE) INCOME
Interest expense (1,608)
Interest income 33
Interest capitalized 577
Total other expense (998) 0
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INCOME(LOSS) BEFORE PROVISION FOR TAXES 154 (14)
PROVISION FOR INCOME TAXES INCLUDING COLORADO STATE 78
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INCOME TAX
NET INCOME(LOSS) $76 ($14)
================ =================
See notes to condensed financial statements
</TABLE>
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<TABLE>
<CAPTION>
RIVIERA BLACK HAWK, INC.
STATEMENTS OF CASH FLOWS (Unaudited) For the Quarter Ended
March 31,
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income(Loss) $76 ($14)
Adjustments to reconcile net income(loss) to net cash
provided by operating activities:
Depreciation and amortization 469
Provision for bad debts 10
Interest expense 1,608
Interest paid (19)
Capitalized interest on construction projects (577)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (698)
Decrease (increase) in inventories 206
Decrease (increase) in prepaid expenses
and other assets 332 42
Increase (decrease) in accounts payable 1,743 2,351
Increase (decrease) in management fees 334
Increase (decrease) in accrued liabilities 1,472 247
Increase (decrease) in current income taxes payable 54
Increase (decrease) in deferred income taxes
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Net cash provided by operating activities 4,599 2,626
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - Black Hawk, Colorado project (12,677) (6,338)
Capitalized interest on construction projects 577
Purchase of short-term investments (34)
Decrease (increase) Black Hawk, Colorado restricted funds 4,415
Decrease (increase) in other assets 2 (7)
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Net cash provided by (used in) investing activities (7,718) (6,345)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 8,719
Payments on long-term borrowings (23)
Advances from (payments to) Riviera Holdings Corporation 39 3,650
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Net cash provided by financing activities 8,736 3,650
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,616 (69)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,810 543
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CASH AND CASH EQUIVALENTS, END OF PERIOD $7,426 $474
===================== ======================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION $100
Colorado income taxes paid ===================== ======================
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING
ACTIVITIES:
Property acquired with debt and accounts payable $2,864 $2,351
===================== ======================
See notes to condensed financial statements
</TABLE>
6
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
On August 18, 1997 (date of inception), Riviera Black Hawk, Inc. (the
"Company" or "RBH") was formed. The Company is a wholly owned indirect
subsidiary of Riviera Holdings Corporation. The balance sheet as of December 31,
1999 and Statement of Operations for the three months ended March 31, 2000
present information while the Company was in the development stage. RBH
commenced operations on February 4, 2000, with the opening of the Riviera Black
Hawk Casino in Black Hawk, Colorado.
Nature of Operations
The primary line of business of the Company is the operation of the Riviera
Black Hawk Casino in Black Hawk, Colorado.
Casino operations are subject to extensive regulation in the State of Colorado
by the Gaming Control Board and various other state and local regulatory
agencies.
Principles of Presentation
The financial information at March 31, 2000, and for the three months ended
March 31, 2000 and 1999 is unaudited. However, such information reflects all
adjustments (consisting solely of normal recurring adjustments) that are, in the
opinion of management, necessary for a fair presentation of the financial
position, results of operations, and cash flows for the interim periods. The
results of operations for the three months ended March 31, 2000 are not
necessarily indicative of the results that will be achieved for the entire year.
These financial statements should be read in conjunction with the audited
condensed financial statements and notes thereto for the year ended December 31,
1999, included in the Company's Annual Report on Form 10K.
Earnings Per Share
The Company is a wholly owned subsidiary of Riviera Holdings Corporation.
There are no publicly traded shares of the Company's stock. In accordance with
Financial Accounting Standards No. 128 "Earnings Per Share", not earnings per
share date is presented.
Estimates and Assumptions
The preparation of condensed financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Significant estimates used by
the Company include accrued liabilities. Actual results may differ from
estimates.
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Cash and cash equivalents and short term investments - restricted
Amounts related to the Riviera Black Hawk casino project in Black Hawk, Colorado
are restricted in use to that project or for the related 13% First Mortgage
Notes interest payments.
Short term investments - restricted
The Company accounts for investment securities in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." SFAS No. 115 addresses the
accounting and reporting for investments in equity securities that have readily
determinable fair values and for all investments in debt securities, and
requires such securities to be classified as either held to maturity, trading,
or available for sale.
Management determines the appropriate classification of its investment
securities at the time of purchase and reevaluates such determination at each
balance sheet date. Held-to-maturity securities are carried at amortized cost.
At March 31, 2000, securities classified as held to maturity comprised debt
securities issued by the U.S. Treasury and other U.S. government corporations
and agencies, and repurchase agreements, with an amortized cost of $2.8 million
maturing in April 2000.
Inventories
Inventories consist primarily of food, beverage, gift shop and promotional
inventories, and are stated at the lower of cost(determined on a first-in,
first-out basis) or market.
Property and Equipment
Property and equipment are stated at cost and capitalized lease assets are
stated at the present value of future minimum lease payments at the date of
lease inception. Interest incurred during construction of new facilities or
major additions to facilities is capitalized and amortized over the life of the
asset. Depreciation is computed by the straight-line method over the shorter of
the estimated useful lives or lease terms, if applicable, of the related assets,
which range from 5 years for certain gaming equipment to 40 years for buildings.
The costs of normal maintenance and repairs are charged to expense as incurred.
Gains or losses on disposals are recognized as incurred.
The Company periodically assesses the recoverability of property, plant and
equipment and evaluates such assets for impairment whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. Asset impairment is determined to exist if estimated future cash
flows, undiscounted and without interest charges are less than the carrying
amount.
Revenue Recognition:
Casino Revenue - The Company recognizes, as gross revenue, the net win from
gaming activities, which is the difference between gaming wins and losses.
Food and Beverage Revenue, Entertainment Revenue, and Other Revenue - The
Company recognizes food and beverage, entertainment revenue, and other revenue
at the time that goods or services are provided.
Promotional Allowances - Promotional allowances consist primarily of
accommodations, entertainment, and food and beverage services furnished without
charge to customers. The retail value of such services is included in the
respective revenue classifications and is then deducted as promotional
allowances.
Recently Issued Accounting Standards
Recently Issued Accounting Standards - The Financial Accounting Standards Board
issued SFAS No. 133, "Accounting for Derivatives," which is effective for fiscal
years beginning after June 15, 2000. This statement defines derivatives and
requires qualitative disclosure of certain financial and descriptive information
8
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about a company's derivatives. The Company will adopt SFAS No. 133 in the year
ending December 31, 2001. Management has not finalized its analysis of this SFAS
or the impact of this SFAS on the Company or the Company's future consolidated
financial statements.
2. DEBT AND RELATED DEFERRED FINANCING COSTS
On June 3, 1999, the Company, closed a $45 million private placement of 13%
First Mortgage Notes. The net proceeds of the placement were used to fund the
completion of RBH's casino project in Black Hawk, Colorado. The parent of RBH,
Riviera Holdings Corporation, has not guaranteed the $45 million RBH Notes, but
has agreed to a "Keep Well" of $5 million per year (or an aggregate limited to
$10 million) for the first 3 years of RBH operations to cover if (i) the $5.85
million interest on such Notes is not paid by RBH and (ii) the amount by which
RBH cash flow is less than $9.0 million in any of the first three years.
Pursuant to a deposit account agreement, dated as of June 3, 1999, among Bank of
America as deposit bank, Riviera Holdings Corporation and First American Title
Insurance Company, Riviera Holdings Corporation has deposited $5.0 million to
insure First American against mechanics lien claims against the Black Hawk
property. If no mechanics liens are outstanding 30 days after the casino opens,
the $5.0 million deposit will be returned to Riviera Holdings Corporation. The
Company believes that restrictions will be recommended in August 2000.
The notes were issued at a cost in the amount of $3.5 million. The deferred
financing costs are being amortized over the life of the notes on a
straight-line basis which approximates the effective interest method.
The 13% First Mortgage Note Indenture provides that, in certain circumstances,
the Company must offer to repurchase the 13% Notes upon the occurrence of a
change of control or certain other events. In the event of such mandatory
redemption or repurchase prior to maturity, the Company would be unable to pay
the principal amount of the 13% Notes without a refinancing.
The 13% First Mortgage Note Indenture contains certain covenants, which limit
the ability of the Company and its restricted subsidiaries, subject to certain
exceptions, to: (1) incur additional indebtedness; (ii) pay dividends or other
distributions, repurchase capital stock or other equity interests or
subordinated indebtedness, (iii) enter into certain transactions with
affiliates; (iv) create certain liens; sell certain assets; and (v) enter into
certain mergers and consolidations. As a result of these restrictions, the
ability of the Company to incur additional indebtedness to fund operations or to
make capital expenditures is limited. In the event that cash flow from
operations is insufficient to cover cash requirements, the Company would be
required to curtail or defer certain of their capital expenditure programs under
these circumstances, which could have an adverse effect on the Company's
operations. At March 31, 2000, the Company believes that it is in compliance
with the covenants.
3. COMMITMENTS AND CONTINGENICIES
RBH constructed the casino in Black Hawk, Colorado on a site which was purchased
for $15 million in August 1997. As of March 31, 2000 the Riviera Holdings
Corporation had made $20.0 million in cash contributions to RBH (excluding
capitalized interest) and the casino began operations on February 4, 2000.
9
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Deposit Account - Pursuant to a deposit account agreement, dated as of June 3,
1999, among Bank of America as deposit bank, Riviera Holdings Corporation and
First American Title Insurance Company, Riviera Holdings Corporation has
deposited $5.0 million to insure First American against mechanics lien claims
against the Black Hawk property. If no mechanics liens are outstanding 30 days
after the casino opens, and the substantially all construction funds have been
disbursed, such $5.0 million deposit will be returned to Riviera Holdings
Corporation. These amounts are included in cash and cash equivalents,
restricted. The Company believes these restrictions will be removed in August
2000.
Keep-Well Agreement - RBH and Riviera Holdings Corporation entered a Keep-Well
Agreement wherein, if (1) RBH does not have the necessary funds to make a
payment of fixed interest on the notes during its first three years of
operations or (2) consolidated cash flow is less than $9.0 million in any of the
first three years of operations, Riviera Holdings Corporation will be obligated
to contribute cash to RBH to make up those amounts (up to a maximum of $5.0
million for any one operating year and $10.0 million in the aggregate).
During the first quarter of 2000, RHB obtained $9.6 million in capital lease
financing for 60 months at appoximately 10.5% for equipment purchases.
The Company is unaware of any material legal proceedings as of March 31, 2000.
10
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SEGMENT DISCLOSURES
4. SEGMENT DISCLOSURES
RBH provides Las Vegas-style gaming, amenities and entertainment. The Company's
three reportable segments are based upon the type of service provided: Casino,
food and beverage, and entertainment. The casino segment provides customers with
gaming activities through traditional table games and slot machines. The food
and beverage segment provides restaurant and drink services. Entertainment
segment provides customers with a variety of live shows, reviews and concerts.
All other segment activity consists of rent income, retail store income,
telephone and other activity. Intersegment revenues consist of revenues
generated through complimentary sales to customers by the casino segment. The
Company evaluates each segment's performance based on segment operating profit.
The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies. The Company opened
for business on February 4, 2000. There were no entertainment revenues in the
quarter ended March 31, 2000. The Company was in the development stage at March
31, 1999, accordingly no comparitive data is provided for that period.
<TABLE>
<CAPTION>
Food and Entertain-
Three Months ended March 31, 2000 Casino Beverage ment All Other Total
<S> <C> <C> <C> <C> <C>
Revenues from external customers $7,579 $243 $0 $62 $7,884
Intersegment revenues 468 0 468
Segment profit (loss) 4,946 (112) 0 59 4,893
</TABLE>
Reconciliation of segment profit to consolidated net income before taxes and
extraordinary items:
<TABLE>
<CAPTION>
Three Months Ended
2000
<S> <C>
Segment profit 4,893
Other operating expenses 3,886
Other expense 853
Net income before provision for taxes $154
</TABLE>
The Company markets directly to residents of Denver, Colorado, Significantly all
revenues are derived from patrons visiting the Company from the Denver
metropolitan area, Revenues from a foreign country or region may exceed 10% of
all reported segment revenues; however, the Company cannot identify such
information based upon the nature of gaming operations.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following table sets forth certain operating information for the Company for
the three months ended March 31, 2000. Revenues and promotional allowances are
shown as a percentage of net revenues. Department costs are shown as a
percentage of departmental revenues. All other percentages are based on net
revenues. The Company was in the development stage at March 31, 1999.
Accordingly, no comparitive data is provided for that period.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
Income Statement Data: 2000
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Revenues:
<S> <C>
Casino 96.1%
Food and beverage 9.0%
Entertainment 0.0%
Other 0.8%
Less promotional allowances -5.9%
Net Revenues 100.0%
Costs and Expenses:
Casino 34.7%
Food and beverage 50.0%
Entertainment 0.0%
Other 1.8%
General and administrative 21.8%
Management fees 4.2%
Preopening Expenses - Black Hawk, Colorado Project 15.5%
Depreciation and amortization 7.8%
Total costs and expenses 87.2%
Income from operations 12.8%
Interest expense, other -18.6%
Interest income, other 0.4%
Interest, capitalized 7.3%
Income before provision for income taxes 2.0%
Provision for income taxes 1.0%
Net Income 1.0%
EBITDA (1) Margin 40.3%
Net cash provided by operating activities 57.5%
</TABLE>
1 EBITDA consists of earnings before interest, income taxes, depreciation,
amortization, management fees and preopening expenses. While EBITDA should not
be construed as a substitute for operating income or a better indicator of
liquidity than cash flow from operating activities, which are determined in
accordance with generally accepted accounting principles ("GAAP") it is included
herein to provide additional information with respect to the ability of the
Company to meet its future debt service, capital expenditures and working
capital requirements. Although EBITDA is not necessarily a measure of the
Company's ability to fund its cash needs, management believes that certain
investors find EBITDA to be a useful tool for measuring the ability of the
Company to service its debt. EBITDA margin is EBITDA is a percent of net
revenues. The Company's definition of EBITDA may not be comparable to other
companies' definitions.
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Three Months Ended March 31, 2000 Compared to Three Months Ended March 31,
1999 (Operations commenced February 4, 2000)
Special Factors Effecting Comparability
Riviera Black Hawk, Inc. was in the development stage at March 31, 1999.
Accordingly, no Comparative data is provided. The three months ended March 31,
2000 did not include a full three months of operating activity since the Company
came out of development stage on February 4, 2000, as such analysis would not be
meaningful.
Revenues
Riviera Black Hawk Casino opened for business in Black Hawk, Colorado, on
February 4, 2000. Net revenues for the period ending March 31, 2000, totaled
$7.9 million. Casino revenues were $7.6 million or 96.1% of total net revenues.
In the casino $7.2 million of the total was slot machine revenues with the
balance of $400,000 provided by casino table games. Food and Beverage revenues
were approximately $700,000 of which $470,000 were promotional allowances
representing drinks and meals to casino patrons.
Direct Costs and Expenses of Operating Departments
Total direct costs and expenses of operating departments were $3.0 million.
Casino expenses were $2.6 million, or 34.7% of casino revenues. These expenses
were primarily payroll and related, gaming tax and license, and marketing. Food
and beverage expenses were approximately $350,000, or 50% of gross food and
beverage revenues.
Other Operating Expenses
Selling, general and administrative expenses were $1.7 million, or 21.8% of
net revenues. General and administrative expenses consist mainly of payroll and
related taxes and benefits. Preopening expenses totaled $1.2 million and were
comprised mainly of payroll and related taxes and benefits for the period
January 1 through February 3, 2000 when employee service training was provided.
Management fees to its parent were approximately $300,000. Those fees are due
Riviera Holdings Corporation and are based on a percent of net revenues and
EBITDA.
Depreciation for the first quarter of 2000 was $470,000 and was based on the
total property cost, net of land, of approximately $54.0 million.
Other Income (Expense)
On June 3, 1999, RBH completed a $45 million private placement of 13% First
Mortgage Notes. Interest expense (net of capitalized interest) on those notes of
approximately $900,000, was recorded in first quarter of 2000. Interest income,
on investments from the unused proceeds of the 13% First Mortgage Notes, was
$33,000.
Capitalized interest was $577,000 on the project for the period January 1, 2000
through February 3, 2000. Capitalized interest in 1999 was realized by Riviera
Holdings Corporation and is a component of their investment in RBH.
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Net Income
Net Income for the three months ended March 31, 2000, was $76,000 or 1% of net
revenues. Provision for income taxes includes the normal 35% provision for
federal taxes and 5% for Colorado State Income Tax for the Black Hawk, Colorado
property.
EBITDA
EBITDA for the three months ended March 31, 2000, was $3.2 million, or 40.3% of
net revenues. Preopening expenses of $1.2 million are not included in the EBITDA
calculation.
Liquidity and Capital Resources
At March 31, 2000, the RBH had cash, restricted cash and short term
investments of $13.1 million. The Company had working capital of $3.0 million
and shareholders equity of $23.1 million.
The Company's net cash provided by operating activities was approximately
$4.5 million for the period ending March 31, 2000. Management believes that the
$13.1 million in cash and short term investments,and the "keep well" commitments
from Riviera Holdings Corporation will be sufficient to cover the Company's
investment in budgeted capital expenditures for 2000 including completion of the
Black Hawk casino development and the working capital requirements to operate
the casino for the first twelve months of operations.
Cash flow from operations may not be sufficient to pay 100% of the principal of
the 13% Notes at maturity on May 1, 2005. Accordingly, the ability of the
Company to repay the 13% Notes at maturity will be dependent upon its ability to
refinance those notes. There can be no assurance that the Company will be able
to refinance the principal amount of the 13% Notes at maturity. At any time
prior to May 1, 2001, the Company may redeem up to 35% of the aggregate
principal amount of the 13% notes issued under the indenture at a redemption
price of 113% of the principal amount. On or after May 1, 2002, the Company may
redeem all or a part of the notes at premiums beginning at 106.5% and declining
each subsequent year to par in 2004.
The 13% Note Indenture provides that, in certain circumstances, the Company must
offer to repurchase the 13% Notes upon the occurrence of a change of control or
certain other events. In the event of such mandatory redemption or repurchase
prior to maturity, the Company would be unable to pay the principal amount of
the 13% Notes without a refinancing.
The 13% Note Indenture contains certain covenants, which limit the ability of
the Company and its restricted subsidiaries, subject to certain exceptions, to:
(i) incur additional indebtedness; (ii) pay dividends or other distributions,
repurchase capital stock or other equity interests or subordinated indebtedness;
(iii) enter into certain transactions with affiliates; (iv) create certain
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liens; sell certain assets; and (v) enter into certain mergers and
consolidations. As a result of these restrictions, the ability of the Company to
incur additional indebtedness to fund operations or to make capital expenditures
is limited. In the event that cash flow from operations is insufficient to cover
cash requirements, the Company would be required to curtail or defer certain of
their capital expenditure programs under these circumstances, which could have
an adverse effect on the Company's operations. At March 31, 2000, the Company
believes that it is in compliance with the covenants.
15
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market risks relating to our operations result primarily from changes in
interest rates. We invest our cash and cash equivalents in U.S. Treasury Bills
with maturities of 60 days or less.
As of March 31, 2000, we had $53.7 million in borrowings. The borrowings
include $45 million in bonds maturing in 2005. Interest under the bonds is based
on a rate of 13% excluding contingent interest. Also included is $.7 million in
a special improvement district bond offering with Black Hawk, Colorado. The
Company's share of the debt on the SID bonds of $1,470,000 when the project is
complete, is payable over ten years beginning in January 2000. The special
improvement district bonds bear interest at 5.5%. Other borrowings include a
vehicle loan maturing in 2004 with an interest rate if 9.0%. Additionally, the
Company committed to an $11.1 million capital lease line for 60 months at
approximately 11.2%. The Company made draws on the lease line beginning in first
quarter 2000 in the amount of $9.6 million at a weighted average interest rate
of 10.5%.
<TABLE>
<CAPTION>
Interest Rate Sensitivity
Principal (Notational Amount by Expected Maturity)
Average Interest Rate
(Amounts in Fair Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
thousands) 2000 2001 2002 2003 2004 Thereafter Total at 3/31/00
Assets
Short term investments $ $ 3,500 $ 3,500
3,500
Average interest rate 5.00%
Long Term Debt Including Current Portion
Equipment loans
Black Hawk, Colorado $ 9 $ 10 $ 8 $ 27 $ 27
Average interest rate 11.2% 11.2% 11.2%
Capital leases
Black Hawk, Colorado $ 1,051 $ 1,588 $ 1,766 $ 1,959 $ 2,161 $ 255 $ 8,780 $ 8,780
Average interest rate 10.5% 10.5% 10.5% 10.5% 10.5% 10.5%
Special Improvement District Bonds
Black Hawk, Colorado $ 60 $ 64 $ 68 $ 71 $ 76 $ 445 $ 784 $ 784
Average interest rate 5.5% 5.5% 5.5% 5.5% 5.5% 5.5%
13% First Mortgage Note
Black Hawk, Colorado casino
project $ 45,000 $ 45,000 $ 48,600
Average interest rate 13.0%
</TABLE>
16
<PAGE>
Forward Looking Statements
The Private Securities Litigation Reform Act of 1997 provides a "safe harbor"
for certain forward-looking statements. Certain matters discussed in this filing
could be characterized as forward-looking statements such as statements relating
to plans for future expansion, as well as other capital spending, financing
sources and effects of regulation and competition. Such forward-looking
statements involve important risks and uncertainties that could cause actual
results to differ materially from those expressed in such forward-looking
statements.
17
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RIVIERA BLACK HAWK, INC.
By: /s/ William L. Westerman
William L. Westerman
Chief Executive Officer and Director
By: /s/Ronald P. Johnson
Ronald P. Johnson
President and Director
By: /s/ Duane Krohn
Duane Krohn
Treasurer,
Chief Financial Officer
And Director
Date: May 12, 2000
18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-01-2000
<PERIOD-END> Mar-31-2000
<CASH> 7,426,000
<SECURITIES> 5,612,000
<RECEIVABLES> 698,000
<ALLOWANCES> 0
<INVENTORY> 206,000
<CURRENT-ASSETS> 14,405,000
<PP&E> 69,412,102
<DEPRECIATION> 469,300
<TOTAL-ASSETS> 86,799,000
<CURRENT-LIABILITIES> 10,555,000
<BONDS> 45,000,000
0
0
<COMMON> 1,000
<OTHER-SE> 23,513,000
<TOTAL-LIABILITY-AND-EQUITY> 86,799,000
<SALES> 8,352,000
<TOTAL-REVENUES> 7,884,000
<CGS> 0
<TOTAL-COSTS> 6,732,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 998,000
<INCOME-PRETAX> 154,000
<INCOME-TAX> 78,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76,000
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
