<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
----- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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: 0-21736
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84 -1158484
--------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 21
240 Main Street
Black Hawk, Colorado 80422
--------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 582-1117
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock 4,110,557 shares
- ------------ ----------------
Class Outstanding as of November 9, 1999
<PAGE> 2
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
INDEX TO FORM 10-Q
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
--------
<S> <C> <C>
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets as of September 30, 1999
and December 31, 1998 1
Consolidated Statements of Income for the three and
nine months ended September 30, 1999 and 1998 2
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1999 and 1998 3
Notes to Consolidated Financial Statements 4-5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-15
Item 3. Quantitative and Qualitative Disclosure
about Market Risk 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of
Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
</TABLE>
1
<PAGE> 3
PART I - FINANCIAL INFORMATION (UNAUDITED)
ITEM 1. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
AT SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 10,075,645 $ 10,887,602
Accounts receivable 122,487 164,077
Inventories 536,666 554,493
Prepaid expenses 777,068 478,866
Deferred tax asset 358,396 338,716
------------- ------------
Total current assets 11,870,262 12,423,754
------------- ------------
LAND 15,235,092 15,235,092
------------- ------------
GAMING FACILITIES
Building and improvements 57,749,145 57,690,399
Equipment 16,131,017 15,427,185
Accumulated depreciation (9,329,038) (6,384,357)
------------- ------------
Total gaming facilities 64,551,124 66,733,227
GOODWILL, NET 5,926,506 6,374,370
OTHER ASSETS 3,067,734 1,029,985
DEFERRED TAX ASSET 265,672
------------- ------------
$ 100,650,718 $102,062,100
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 8,396,655 $ 9,048,273
Income taxes payable 640,445
Building costs payable 2,295,198
Current portion of long-term debt 582,571 373,639
------------- ------------
Total current liabilities 9,619,671 11,717,110
NON CURRENT LIABILITIES
Revolving line of credit and other 489,429 15,806,305
Construction loan 36,171,752
Reducing and revolving credit facility 42,000,000
Bonds Payable 5,825,000
Deferred tax liability 20,914
------------- ------------
Total liabilities 57,955,014 63,695,167
------------- ------------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 7,785,940 7,541,523
------------- ------------
STOCKHOLDERS' EQUITY
Preferred stock; $.001 par value; 10,000,000 shares authorized;
none issued and outstanding
Common stock; $.001 par value; 40,000,000 shares authorized;
4,110,557 and 4,087,346 shares issued and outstanding, respectively 4,111 4,087
Additional paid-in capital 18,358,385 18,216,385
Retained earnings 16,547,268 12,604,938
------------- ------------
Total stockholders' equity 34,909,764 30,825,410
------------- ------------
$ 100,650,718 $102,062,100
============= ============
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
PART I - FINANCIAL INFORMATION (UNAUDITED) - (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUE
Casino $ 22,037,488 $ 21,296,237 $ 60,906,507 $ 27,961,421
Food and beverage 2,368,881 2,458,542 6,574,715 3,271,347
Hotel 306,398 121,458 845,911 121,458
Gilpin Hotel Casino - management fees and rental income 342,384
Interest and other 221,005 253,286 625,229 234,973
------------ ------------ ------------ ------------
Total revenue 24,933,772 24,129,523 68,952,362 31,931,583
Promotional allowances 1,591,609 1,712,801 4,503,176 2,267,067
------------ ------------ ------------ ------------
Net revenue 23,342,163 22,416,722 64,449,186 29,664,516
------------ ------------ ------------ ------------
COSTS AND EXPENSES
Casino operations 6,328,646 6,985,332 18,693,175 9,181,496
Food and beverage operations 2,275,800 2,322,541 6,464,989 2,890,749
Hotel operations 153,773 151,245 430,829 156,253
Marketing, general and administrative 8,430,028 6,841,143 24,584,902 9,423,637
Preopening costs 77,217 1,569,379
Interest 1,076,471 1,216,390 3,253,098 1,230,457
Depreciation and amortization 1,253,323 995,231 3,681,993 1,310,307
------------ ------------ ------------ ------------
Total costs and expenses 19,518,041 18,589,099 57,108,986 25,762,278
------------ ------------ ------------ ------------
MINORITY INTEREST (684,176) (595,729) (1,243,370) (395,083)
EQUITY IN EARNINGS OF JOINT VENTURE 1,017,789
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES & EXTRAORDINARY ITEM 3,139,946 3,231,894 6,096,830 4,524,944
INCOME TAXES (1,090,000) (1,206,000) (2,154,500) (1,690,870)
------------ ------------ ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEM 2,049,946 2,025,894 3,942,330 2,834,074
EXTRAORDINARY ITEM - EARLY RETIREMENT OF DEBT, NET OF INCOME TAXES 46,192
------------ ------------ ------------ ------------
NET INCOME $ 2,049,946 $ 2,025,894 $ 3,942,330 $ 2,880,266
============ ============ ============ ============
EARNINGS PER SHARE
BASIC
INCOME BEFORE EXTRAORDINARY ITEM $ 0.50 $ 0.50 $ 0.96 $ 0.71
EXTRAORDINARY ITEM 0.01
============ ============ ============ ============
NET INCOME $ 0.50 $ 0.50 $ 0.96 $ 0.72
============ ============ ============ ============
DILUTED
INCOME BEFORE EXTRAORDINARY ITEM $ 0.49 $ 0.47 $ 0.94 $ 0.67
EXTRAORDINARY ITEM 0.01
============ ============ ============ ============
NET INCOME $ 0.49 $ 0.47 $ 0.94 $ 0.68
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC 4,110,557 4,054,423 4,097,641 4,002,227
Dilutive effect of outstanding
Options 54,331 285,915 75,470 248,200
Warrants 10,659
------------ ------------ ------------ ------------
DILUTED 4,164,888 4,340,338 4,173,111 4,261,086
============ ============ ============ ============
</TABLE>
2
<PAGE> 5
PART I - FINANCIAL INFORMATION (UNAUDITED) - (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 3,942,330 $ 2,880,266
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 3,681,993 1,310,307
Deferred taxes 266,906 (395,000)
Equity in earnings of joint venture (675,405)
Minority interest 1,243,370 395,083
Noncash compensation 2,750 13,000
Gain on early retirement of debt (73,322)
Other 55,678 6,342
Changes in operating assets and liabilities
Accounts receivable 66,858 491,824
Inventories 17,827 (281,023)
Prepaid expenses (321,693)
Other assets 194,941 (704,290)
Accounts payable and accrued expenses (676,881) 604,648
Income taxes payable 640,445
------------ ------------
Net cash provided by operating activities 9,114,524 3,572,430
------------ ------------
INVESTING ACTIVITIES
Gilpin Ventures, Inc. acquisition (10,000,000)
Cash acquired in acquisition of Gilpin Ventures, Inc. 1,726,062
Proceeds from sale of equipment 68,739
Construction and equipment costs of gaming facility (3,837,841) (20,536,129)
Proceeds from the City of Black Hawk for public improvements 380,000
Investment in St. Croix gaming project (521,461)
Distributions from GHC 1,168,407
Proceeds from the sale of Oklahoma City land 600,000
Other (990) 99,486
------------ ------------
Net cash used in investing activities (3,390,092) (27,463,635)
------------ ------------
FINANCING ACTIVITIES
Proceeds from bond issue 6,000,000
Proceeds from construction loan 22,957,981
Proceeds from GHC revolving line of credit 6,573,122 17,994,651
Payments on GHC revolving line of credit (8,874,275)
Proceeds from reducing and revolving credit facility 47,940,534
Payment to retire GHC revolving line of credit (12,706,000)
Payment to retire construction loan (32,317,500)
Payments on long-term debt and note payable (10,070,578) (8,333,247)
Payments to refinance existing debt (2,222,015)
Proceeds from exercise of warrants 846,604
Distributions to minority interest (998,952)
Minority interest contributions to majority-owned subsidiary 617,393
Other 139,275 (20,470)
------------ ------------
Net cash (used in) provided by financing activities (6,536,389) 34,062,912
------------ ------------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (811,957) 10,171,707
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 10,887,602 1,065,274
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,075,645 $ 11,236,981
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash Items
Cash paid for interest, net of amounts capitalized $ 3,528,230 $ 543,515
Cash paid for income taxes $ 1,116,500 $ 1,021,772
</TABLE>
3
<PAGE> 6
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999
1. BUSINESS
Black Hawk Gaming & Development Company, Inc. ("the Company") was
incorporated in January 1991, and is an owner, developer and operator of two
gaming properties in Black Hawk, Colorado.
The Gilpin Hotel Casino ("GHC") was the Company's first casino project.
The 37,000 square foot facility is located in the heart of the Black Hawk gaming
district. Originally built in the 1860s, the Gilpin Hotel was one of the oldest
in Colorado; however, no hotel or lodging facilities are offered by the casino.
The Gilpin Hotel Casino commenced operations in October 1992, and was expanded
through the acquisition of an adjacent casino in late 1994. Prior to April 24,
1998, the Company owned a 50% interest in the Gilpin Hotel Venture, which owned
GHC. On April 24, 1998, the Company acquired the 50% interest in GHC and related
land that it did not previously own. It now offers customers approximately 455
slot machines, 9 table games, two restaurants, four bars and parking for
approximately 200 cars.
The Lodge Casino at Black Hawk ("The Lodge") is a hotel/casino/parking
complex and is one of Colorado's largest casinos. The 250,000 square foot
facility offers 50 hotel rooms, three restaurants, four bars and parking for
approximately 600 cars. The casino portion of The Lodge opened on June 24, 1998
and the hotel opened in mid August 1998. The Company and its strategic partner,
Jacobs Entertainment Ltd., developed and co-manage The Lodge, through Black Hawk
/ Jacobs Entertainment, Inc., LLC ("the LLC"). The Company owns a 75% interest
in the LLC and affiliates of Jacobs Entertainment Ltd. own the remaining 25%
interest. The Lodge and The Gilpin Hotel Casino are sometimes referred to as the
"Casinos."
2. SIGNIFICANT ACCOUNTING POLICIES
Unaudited Consolidated Financial Statements --- In the opinion of
management, the accompanying unaudited consolidated financial statements reflect
all adjustments, consisting of normal recurring accruals, which are necessary
for the fair presentation of the financial position of the Company at September
30, 1999 and the results of its operations for the three and nine months then
ended. The accompanying unaudited consolidated financial statements include the
accounts of the Company, its wholly owned subsidiary Gilpin Ventures, Inc. and
its 75% owned subsidiary, Black Hawk/Jacobs Entertainment, LLC. All significant
inter-company transactions and balances have been eliminated in consolidation.
Prior to April 24, 1998, the Company accounted for its investment in GHC under
the equity method of accounting. All inter-company transactions have been
eliminated to the extent of the Company's 50% ownership in GHC for all periods
presented before April 24, 1998.
The accompanying unaudited consolidated financial statements should be
read in conjunction with the consolidated financial statements and related notes
contained in the Company's Form 10-K for the year ended December 31, 1998. The
results of interim periods are not necessarily indicative of results to be
expected for the year.
Reclassifications --- Certain amounts have been reclassified within the
1998 financial statements to conform to the presentation used in 1999.
3. CAPITALIZED CONSTRUCTION INTEREST
The Company began capitalizing interest expense during 1996, due to the
construction of The Lodge. Total capitalized interest through September 30, 1998
was approximately $2,282,579 of which $1,401,000 was related to the nine months
ended September 30, 1998. Interest costs have been expensed for all periods
subsequent to June 30, 1998.
4
<PAGE> 7
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999
(CONTINUED)
4. OTHER MATTERS
In March 1999 The Lodge closed financing with the Black Hawk Business
Improvement District for $6,000,000 in the form of two series of bonds with
interest rates varying between 6.25% and 6.50% and maturing at various times
through December 2011 (see Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources).
On April 26, 1999, the Company closed a $65,000,000 reducing and
revolving credit facility with a bank syndication group, led by Wells Fargo
Bank. Essentially, the facility combined the Company's revolving line of credit
at GHC and the LLC's construction loan. The facility has a four-year term, with
a variable interest rate based either upon the London Interbank Rate ("LIBOR")
or the prime interest rate (as published by Wells Fargo Bank) plus an applicable
margin (based on the maintenance of certain financial ratios by the Company).
Scheduled reductions in availability will commence on July 1, 2000. The balance
of the facility at September 30, 1999 is $42,000,000 and the interest rate on
the facility approximated 8.7% (see Management's Discussion and Analysis of
Financial Condition and Results of Operations- Liquidity and Capital Resources).
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read with the financial statements and the
notes included in this Report.
INTRODUCTION
During 1998, the Company had two significant events that had a major impact on
the financial reporting and comparability of the Company's consolidated
financial statements. The first event--the acquisition of the other half of GHC
and related land, occurred on April 24, 1998 and increased the Company's
ownership percentage in GHC from 50% to 100%. The second event--the opening of
The Lodge Casino, occurred on June 24, 1998. As a result of these two events,
the consolidated financial statements for the three and nine months ended
September 30, 1999 include the operating results of GHC and The Lodge Casino,
and of less significance the corporate overhead of Black Hawk Gaming &
Development Company, Inc. ("BHWK").
Throughout this report we will refer to these three entities as "the Company".
The discussion and analysis below comments on the Company's consolidated
operations as well as the operating results for each of its components for the
three and nine months ended September 30, 1999 and 1998.
Prior to April 24, 1998 the activity of GHC was reported under the
equity method of accounting which required us to record our 50% share of the
earnings of GHC, after eliminating inter-company transactions and other
adjustments, under the caption "equity in earnings of joint venture." Even
though we received management fees and rental revenue from GHC, the equity in
earnings of the joint venture accounted for almost all of our income before
income taxes. Since April 24, 1998, we consolidate all of GHC operations into
our consolidated financial statements. Furthermore, we no longer receive
management fees or rental income from the ground or parking leases and GHC no
longer incurs those related expenses.
Due to the timing of the acquisition of the other half of GHC and the
opening of The Lodge, the consolidated financial statements for the nine months
ended September 30, 1999 are not comparable to the same period of the prior
year. However, except for hotel operations at The Lodge, which did not commence
until August 17, 1998, the consolidated financial statements for the three
months ended September 30, 1999 and 1998 are comparable.
INCREASED COMPETITION
On December 31, 1998 another casino opened in Black Hawk with
approximately 1,200 devices and a 1,100 car valet/self-parking garage.
Additionally, there are two other casinos under construction in Black Hawk,
which are expected to open late in the fourth quarter of 1999 or early in the
first quarter of 2000. Discussions are in progress for possibly a third project
to recommence construction with an opening date sometime in 2001 or 2002, and a
fourth project in Black Hawk has begun to pursue various predevelopment efforts
and submittals with the City of Black Hawk. While it is uncertain at this time
whether or not these two additional projects will in fact commence operations,
it is apparent that increased competition within the Black Hawk market is a
certainty.
While we believe these new casinos may expand the existing market, we
would anticipate some of the existing Black Hawk market, including ours, to be
lost to the new casinos. The competition within our market area will continue to
increase as these new casinos open. As competition continues to increase, we
would expect our marketing costs, our personnel costs and some of our other
costs at both of our properties to increase while we attempt to maintain our
market share.
RESULTS OF OPERATIONS
The following discussion presents an analysis of the results of
operations of the Company for the three and nine months ended September 30, 1999
and 1998. EBITDA (earnings before interest, taxes depreciation and amortization,
and other) is presented in the selected financial data table below and is
included in the discussion of operating results. EBITDA should not be construed
as an alternative to operating income or net income as promulgated under
generally accepted accounting principles or as an indicator of the Company's
operating performance, or as an alternative to cash flows from operational
activities as a measure of liquidity. The Company has presented EBITDA solely as
a supplemental disclosure to facilitate a more complete analysis of the
Company's financial performance. The Company believes that this disclosure
enhances the understanding of the financial performance of a company with
substantial interest, taxes, depreciation and amortization.
6
<PAGE> 9
BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.
SELECTED FINANCIAL DATA (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
================================================================================
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
PERCENTAGE PERCENTAGE
INCREASE INCREASE
1999 1998 (DECREASE) 1999 1998 (DECREASE)
------------ ------------- ---------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET REVENUE
Lodge $ 16,550,925 $ 14,956,359 11% $ 44,223,656 $ 16,231,845 172%
GHC 6,787,213 7,426,338 -9% 20,210,753 13,024,228 55%
Corporate 4,025 34,025 -88% 14,776 408,443 -96%
------------ ------------- ------------ -------------
Total net revenue 23,342,163 22,416,722 4% 64,449,185 29,664,516 117%
COSTS AND EXPENSES
Lodge 11,801,795 10,637,554 11% 33,300,093 11,129,569 199%
GHC 4,912,911 5,298,006 -7% 15,286,096 9,322,811 64%
Corporate 473,541 364,701 30% 1,587,706 1,199,755 32%
------------ ------------- ------------ -------------
Total costs and expenses 17,188,247 16,300,261 5% 50,173,895 21,652,135 132%
EBITDA & OTHER
Lodge 4,749,130 4,318,805 10% 10,923,563 5,102,276 114%
GHC 1,874,302 2,128,332 -12% 4,924,657 3,701,417 33%
Corporate (469,516) (330,676) 42% (1,572,930) (791,312) 99%
------------ ------------- ------------ -------------
Total EBITDA & OTHER 6,153,916 6,116,461 1% 14,275,290 8,012,381 78%
------------ ------------- ------------ -------------
Interest 1,076,471 1,216,390 -12% 3,253,098 1,230,457 164%
Income taxes 1,090,000 1,206,000 -10% 2,154,500 1,690,870 27%
Depreciation and amortization 1,253,323 995,231 26% 3,681,993 1,310,307 181%
Minority interest in The Lodge 684,176 595,729 15% 1,243,370 395,082 215%
Other 77,217 -100% 505,398 -100%
------------ ------------- ------------ -------------
Net income $ 2,049,946 $ 2,025,894 1% $ 3,942,330 $ 2,880,266 37%
============ ============= ============ =============
Basic earnings per share $ 0.50 $ 0.50 0% $ 0.96 $ 0.72 34%
Diluted earnings per share $ 0.49 $ 0.47 5% $ 0.94 $ 0.68 40%
</TABLE>
The table above highlights selected financial data for the three and nine months
ended September 30, 1999 and 1998.
Note:
The Lodge commenced operations on June 24, 1998.
The operating results of GHC for the nine months ended September 30, 1998
reflect operations from April 24, 1998, the date the Company acquired the
other half of GHC.
Preopening expenses have been classified as "Other" for the calculation of net
income for the three months ended September 30, 1998.
Preopening expenses, equity in earnings of joint venture, and an extraordinary
item have been classified as "Other" for the calculation of net income for the
nine months ended September 30, 1998.
7
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS--COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1999
AND 1998
NET REVENUE
The Company generated net revenue of $23,342,000 during the three
months ended September 30, 1999 compared to $22,417,000 during the three months
ended September 30, 1998. The increase of $925,000 or 4% is the result of an
increase in net revenue at The Lodge of $1,594,000 or 11% offset by decreases in
net revenue at GHC of $639,000 or 9% and $30,000 at BHWK. We believe the
increase in net revenue at The Lodge and decrease in net revenue at GHC is
primarily due to the trend of customer preference toward larger gaming
facilities currently open and soon to be open within the Black Hawk market.
COSTS AND EXPENSES
The Company's costs and expenses were $17,188,000 during the three
months ended September 30, 1999 compared to $16,300,000 during the three months
ended September 30, 1998. The increase of $888,000 or 5% is the result of an
increase in costs and expenses at The Lodge of $1,164,000 or 11% and $109,000 at
BHWK. These increases were partially offset by decreases in costs and expenses
at GHC of $385,000 or 7%.
The increase in costs and expenses at The Lodge is primarily the result
of increased marketing, general and administrative costs of $1,374,000 offset by
a decrease in casino operating expenses of $210,000. The increase in costs and
expenses of $109,000 at BHWK is the result of increased general and
administrative expenses. The net decrease in costs and expenses at GHC is the
result of a decrease in Casino operating variable expenses of $471,000 or 19%
offset by an increase in marketing and general administrative expenses of
$86,000 or 4%.
EBITDA
When the Company's costs and expenses are subtracted from net revenue
the result is EBITDA of $6,154,000 for the three months ended September 30, 1999
compared to $6,117,000 for the three months ended September 30, 1998. The
increase of $37,000 or 1% is the result of an increase in EBITDA at The Lodge of
$430,000 or 10%, which was offset by decreases in EBITDA at GHC of $254,000 or
12% and $139,000 at BHWK. The increase in EBITDA at The Lodge and decrease at
GHC is primarily due to the trend of customer preference toward larger gaming
facilities within the Black Hawk market.
INTEREST EXPENSE
The Company's interest expense was $1,076,000 during the three months
ended September 30, 1999 compared to $1,216,000 during the three months ended
September 30, 1998. The decrease of $140,000 or 12% is the result of an increase
in interest expense at The Lodge of $22,000 offset by a decrease in interest
expense at GHC and BHWK of $156,000 and $6,000, respectively. Interest expense
primarily relates to indebtedness incurred in connection with the construction
and equipping of The Lodge and the acquisition of the other half of GHC.
INCOME TAXES
Income taxes for the three months ended September 30, 1999 and 1998
were $1,090,000 and $1,206,000, respectively. The decrease in income taxes is
essentially the result of a lowered effective income tax rate for the three
months ended September 30, 1999 of 35% compared to 37% for the three months
ended September 30, 1998. The level and composition of pretax income determine
the Company's effective income tax rate.
8
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS--COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1999
AND 1998 (CONTINUED)
DEPRECIATION AND AMORTIZATION
The Company's depreciation and amortization was $1,253,000 during the three
months ended September 30, 1999 compared to $995,000 during the three months
ended September 30, 1998. The increase of $258,000 or 26% is the result of an
increase in depreciation and amortization at The Lodge, GHC and BHWK of
$206,000, $50,000, and $2,000, respectively. Depreciation and amortization
primarily relates to buildings, equipment and amortization of intangible assets.
MINORITY INTEREST
Minority interest for the three months ended September 30, 1999 and
1998 was $684,000 and $596,000, respectively. Minority interest relates to the
25% interest of The Lodge owned by an affiliate of the Company's chief executive
officer.
OTHER
The Company had other cost and expenses of $77,000 during the three
months ended September 30, 1998, which were not incurred in 1999. These expenses
were the result of pre-opening costs of The Lodge.
NET INCOME
As a result of these factors, the Company reported net income for the
three months ended September 30, 1999 and 1998 of $2,050,000 and $2,026,000,
respectively.
EARNINGS PER SHARE
The Company reported basic earnings per share for the three months
ended September 30, 1999 and 1998 of 50 cents. Diluted earnings per share for
the three months ended September 30, 1999 and 1998 was 49 cents and 47 cents,
respectively.
RESULTS OF OPERATIONS--COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1999
AND 1998
The increase in net income for the nine months ended September 30, 1999
over the same period of the prior year resulted almost entirely from the
acquisition of the other half of GHC not previously owned as well as the opening
of The Lodge. Both of these events occurred during 1998 - see "Results of
Operations-Introduction." Because of these two events, there are no practical
comparisons between the nine months ended September 30, 1999 and 1998; however,
the following outlines the components of the Company's consolidated statement of
income for the nine months ended September 30, 1999.
NET REVENUE
The Company generated net revenue of $64,449,000 during the nine months
ended September 30, 1999. The net revenue (after eliminating inter-company
transactions) at The Lodge, GHC and BHWK was $44,223,000, $20,211,000 and
$15,000, respectively.
COSTS AND EXPENSES
The Company's costs and expenses were $50,174,000 during the nine
months ended September 30, 1999. The expenses at The Lodge, GHC and BHWK were
$33,300,000, $15,286,000 and $1,588,000, respectively.
9
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS--COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1999
AND 1998 (CONTINUED)
EBITDA
When the Company's costs and expenses are subtracted from net revenue
the result is EBITDA of $14,275,000 for the nine months ended September 30,
1999. EBITDA at The Lodge and GHC was $10,923,000 and $4,925,000 offset by loss
before income taxes, depreciation and amortization at BHWK of $1,573,000.
INTEREST EXPENSE
The Company's interest expense was $3,253,000 during the nine months
ended September 30, 1999. Interest expense at The Lodge and GHC was $2,399,000
and $854,000, respectively. Interest expense primarily relates to indebtedness
incurred in connection with the construction and equipping of The Lodge and the
acquisition of the other half of GHC.
INCOME TAXES
The effective income tax rate for the nine months ended September 30,
1999 and 1998 was 35% and resulted in income tax expense of $2,155,000. The
level and composition of pretax income determine the Company's effective income
tax rate.
DEPRECIATION AND AMORTIZATION
The Company's depreciation and amortization was $3,682,000 during the
nine months ended September 30, 1999. Depreciation and amortization at The
Lodge, GHC and BHWK was $2,388,000, $1,288,000 and $6,000, respectively.
Depreciation and amortization primarily relates to buildings, equipment and
amortization of intangible assets.
MINORITY INTEREST
Minority interest for the nine months ended September 30, 1999 was
$1,243,000. Minority interest relates to the 25% interest of The Lodge owned by
an affiliate of the Company's chief executive officer.
NET INCOME
As a result of these factors, the Company reported net income for the
nine months ended September 30, 1999 of $3,942,000. The net income for the nine
months ended September 30, 1998 was $2,880,000. The increase in net income of
$1,062,000 is the result of the opening of The Lodge and the acquisition of the
other half of GHC as discussed in the "Introduction to the Results of
Operations."
EARNINGS PER SHARE
The Company reported basic earnings per share for the nine months ended
September 30, 1999 and 1998 of 96 cents and 72 cents, respectively. Diluted
earnings per share for the nine months ended September 30, 1999 and 1998 were 94
cents and 68 cents, respectively. The increase in earnings per share is also the
result of the opening of The Lodge and the acquisition of the other half of GHC.
10
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS -COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
1998 (CONTINUED)
Since we have operated The Lodge for only five quarters, there are no
practical comparisons to prior periods for the nine months ended September 30,
1999 and 1998.
The Company owned 50% of GHC until April 24,1998, which was the date
when the Company acquired the remaining 50% of GHC. The consolidated financial
statements for the nine months ended September 30, 1998 contain the operating
results of GHC from April 24, 1998 forward. Prior to April 24, 1998 the income
of GHC was recorded by the Company as "equity in earnings of joint venture." The
following table presents GHC's operating results for the nine months ended
September 30, 1999 and 1998 and provides an adjustment to the nine months ended
September 30, 1998 to reflect expenses that are no longer incurred at GHC. These
expenses were related to contracts that were cancelled upon acquisition of GHC
by the Company.
Gilpin Hotel Casino
Selected Financial Data (Unaudited)
For the Nine Months Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
Nine Months Ended Percentage
September 30 Increase
1999 1998 (Decrease)
------------ ------------ ---------
<S> <C> <C> <C>
Net Revenue $ 20,210,753 $ 23,045,557 (12)%
Less: Costs and expenses 15,286,096 17,403,540 (12)%
ADD: Cancelled Contracts 1,067,791 (100)%
------------ ------------ ---------
EBITDA 4,924,657 6,709,808 (27)%
Interest 853,876 595,737 43%
Depreciation and amortization 1,288,256 1,014,720 27%
------------ ------------ ---------
Proforma net income $ 2,782,525 $ 5,099,351 (45)%
============ ============ =========
</TABLE>
11
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS -COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
1998 (CONTINUED)
NET REVENUE
GHC generated net revenue of $20,211,000 during the nine months ended
September 30, 1999 compared to $23,046,000 during the nine months ended
September 30, 1998. The decrease in net revenue of $2,835,000 or 12% at GHC is
primarily due to the trend of customer preference toward larger gaming
facilities within the City of Black Hawk and to a lesser extent the elimination
of the OTB facility and the poker room, which were not enhancing GHC's overall
operations.
COSTS AND EXPENSES
GHC's costs and expenses were $15,286,000 during the nine months ended
September 30, 1999 compared to $17,404,000 during the nine months ended
September 30, 1998. The decrease of $2,118,000 or 12% is the result of contracts
cancelled as a result of the acquisition by the Company of $1,068,000 and
decreases in casino operating variable costs at GHC of $1,050,000.
EBITDA
When the Company's costs and expenses are subtracted from net revenue
and the expense for contracts that were cancelled are added back the result is
EBITDA of $4,925,000 for the nine months ended September 30, 1999 compared to
$6,710,000 for the nine months ended September 30, 1998. The decrease in EBITDA
of $1,785,000 or 27% is the result of a decrease in net revenue by GHC. The
decrease in net revenue at GHC is primarily due to the trend of customer
preference toward larger gaming facilities within the Black Hawk market.
INTEREST EXPENSE
GHC's interest expense was $854,000 during the nine months ended
September 30, 1999 compared to $596,000 during the nine months ended September
30, 1998. The increase of $258,000 or 43% is the result of an increased debt,
which was incurred to finance the acquisition of GHC by the Company.
DEPRECIATION AND AMORTIZATION
GHC's depreciation and amortization was $1,288,000 during the nine
months ended September 30, 1999 compared to $1,015,000 during the nine months
ended September 30, 1998. The increase of $273,000 or 27% is the result of the
GHC acquisition, which caused a step in value of the equipment and additional
goodwill on GHC's financial statements.
GHC's operations have been impacted by the additional competition in
Black Hawk, including The Lodge. However, we continue to review our overall
costs at GHC as well as eliminate areas that do not provide a meaningful
contribution to our operations, such as the OTB facility and the poker room, in
an effort to successfully compete within the market place. We intend to continue
our focus on target marketing to our existing customer base of GHC and to
increase and retain new and existing customers. Additionally, we are working on
enhancing the overall product offered at GHC in an effort to be responsive to
the new and increased competition in Black Hawk by the larger casinos.
12
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $9,115,000 during the
nine months ended September 30, 1999 compared to net cash provided by operating
activities of $3,572,000 during the same period of 1998. The principal reason
for the increase in cash provided by operating activities is due to an increase
in earnings before depreciation and amortization and minority interest.
Additionally, we previously reported the cash flow from GHC when we received
distributions as cash from investing activities; however, as a result of the
acquisition of the other half of GHC on April 24, 1998 cash flows from operating
activities includes the operations of GHC.
Net cash used in investing activities for the nine months ended
September 30, 1999 totaled $3,390,000. This included payments for construction
and equipping our gaming facilities totaling $3,838,000 and other investing
activities of $1,000. The proceeds from the sale of equipment of $69,000,
payments from the City of Black Hawk for its negotiated share of public
improvements in the amount of $380,000 offset some of the cash we used. Net cash
used in investing activities for the nine months ended September 30, 1998
totaled $27,464,000. These uses of cash included payments of project development
costs associated with The Lodge of $20,536,000; the acquisition of GVI for
$10,000,000 and payments in pursuit of a St. Croix gaming facility of $521,000.
These uses of cash were offset by: the cash on GHV books as of the date of
acquisition of the GVI buyout of $1,726,000; distributions from GHV prior to the
buyout of $1,168,000; proceeds from the sale of Oklahoma City land of $600,000
and other investing activities of $99,000.
The net cash used in financing activities during the nine months ended
September 30, 1999 totaled $6,537,000. Sources of cash that we generated in
financing activities included proceeds from bonds issued by the Business
Improvement District totaling $6,000,000, borrowings against the GHC's revolving
line of credit of $6,573,000, and proceeds from the borrowing of the Wells Fargo
syndicated bank loan of $47,941,000 and other proceeds of $139,000. These
sources of cash were reduced by debt payments of $10,071,000, payments against
the Gilpin's revolving line of credit of $8,874,000, payments to retire GHC
revolving line of credit of $12,706,000, payments to retire The Lodge's
construction loan of $32,318,000, payments to refinance debt of $2,222,000 and
distributions to our 25% minority interest owner of The Lodge of $999,000. The
net cash provided by financing activities during the nine months ended September
30, 1998 was $34,063,000. Sources of cash included draws against The Lodge's
construction loan of $22,958,000; draws against GHC's line of credit of
$17,995,000; proceeds from the exercise of warrants of $847,000 and minority
interest contributions of $617,000. Debt payments of $8,333,000 and other net
financing activities of $21,000 were used by financing activities during the
nine months ended September 30, 1998.
As of September 30, 1999 the Company had working capital of
approximately $2,251,000 as compared to $3,002,000 at December 31, 1998 after
adding back accrued billing costs payable, which were funded under the Wells
Fargo Bank construction loan.
In March 1999, the LLC closed financing with the Black Hawk Business
Improvement District (BID) and issued bonds in two series with a total principal
balance of $6,000,000. The BID is a quasi-municipal corporation and political
subdivision of the State of Colorado, generally organized for the purpose of
providing financing for public improvements and services benefiting the
commercial properties within the District. The purpose of the bonds was to
finance the Company's costs of various infrastructure improvements made for the
benefit of the city of Black Hawk and The Lodge. The Company used the proceeds
to pay down existing debt at The Lodge. The bonds carry an interest rate varying
between 6.25% and 6.50% and mature at various times up to and including December
of 2011.
13
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
In April 1999, the Company closed financing with a bank syndication
group led by Wells Fargo Bank ( "Wells Fargo" ). Some of the more important
terms of the Credit Agreement are: (i) the facility is a four year reducing and
revolving commitment in the aggregate amount of $65 million ($45,286,000 was
drawn at closing to pay existing debt and accrued interest at The Lodge and GHC
totaling $32,508,000 and $12,778,000, respectively), (ii) the available balance
of the facility may be used for working capital and/or to finance other possible
growth opportunities; (iii) the facility bears interest at a rate based on
either the prime rate published by Wells Fargo or the London interbank rate
("LIBOR) each of which is added to an applicable margin based on financial
ratios maintained by the Company (approximately 8.7% at September 30, 1999);
(iv) the scheduled reductions in the availability of the commitment will be made
on a quarterly basis commencing on July 1, 2000. The first four quarterly
reductions in availability are $1,300,000 each, the next four quarterly
reductions in availability are $2,275,000 and the following four reductions in
availability will be $3,250,000 per quarter until January 1, 2003 when the
outstanding balance of the facility is due; (v) the Credit Agreement contains a
number of affirmative and negative covenants which, among other things, require
the Company to maintain certain financial ratios and refrain from certain
actions without the syndicate group's concurrence; and (vi) substantially all of
the assets of the Company, GHC and The Lodge Casino are pledged as security for
repayment of the credit facility. The Credit Agreement also contains customary
events of default provisions.
The Company believes its current working capital position, earnings
from its existing operations and the availability from its revolving credit
facility are sufficient to meet its short-term cash requirements, which are
generally operating expenses and interest payments on indebtedness. However, any
significant development of other projects by the Company may require additional
financing, other joint venture partners, or both.
YEAR 2000 ISSUE
The "Year 2000" issue potentially affects virtually all companies and
organizations. Specifically, the Year 2000 issue is the result of computer
programs using only two digits to identify a year in the date field. Many of
these programs were designed and developed without considering the impact of the
change in the upcoming century. If not corrected, many computer applications
could fail or create erroneous results at the Year 2000.
During 1997, we began assessing the impact of the Year 2000 issue on
our operations. We have evaluated the Year 2000 issue at GHC, The Lodge Casino
and at Black Hawk Gaming's corporate offices. This evaluation included both
computer-related systems and non-computer-related systems. An outline of the
Year 2000 compliance plan by phase and their completion dates is as follows:
o Initial assessment and impact analysis--Completed September 30, 1998
o Inventory and detailed assessment--Completed September 30, 1998
o Solution design and budget determination--Completed October 31, 1998
o Budget approval--Completed December 31, 1998
o Conversion and testing phase--August 31, 1999
o Final assessment--September 30, 1999
The total costs to achieve complete Year 2000 compliance and replace or
modify all date-related systems company wide that were not Year 2000 compliant
was approximately $140,000.
14
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
YEAR 2000 ISSUE (CONTINUED)
We believe our Year 2000 solution has addressed all issues found during
our Year 2000 assessment. However, if a Year 2000 compliance issue was not
revealed during our assessment, operations could be disrupted which could have a
material adverse effect on our financial condition. We have received written
assurances from the primary suppliers of our slot machines that they are not
date sensitive and that the Year 2000 issue for the majority of our revenue
producing assets is not a factor and we have confirmed the Year 2000 compliance
of most of our vendors; however, no assurance can be given that our vendors
will, in fact be fully compliant. Additionally, we face third party issues such
as the possibility that, among other things, electrical and gas power will not
be available to the Black Hawk community. In the event that power is not
available to the community, we have back-up gas driven generators, which will
run for approximately 15 to 20 hours between refills. If we are unable to secure
food and beverage products after exhausting our two day inventory levels, we
will attempt to secure food and beverage products from retail outlets.
Additionally, if we were to lose the use of any of our surveillance equipment as
a result of the Year 2000 rollover, we may be required to close the casino, but
we do not believe such an event would go unresolved for more than 24 hours.
We believe that the most reasonably-likely worst case scenario is that
the Year 2000 rollover would provide unreliable computer data to many of our
operating departments such as casino operations, food and beverage, hotel,
accounting, finance, facilities, and administration. However, in an effort to
avoid this most reasonably likely worst case scenario the Information Systems
("IS") personnel will start backing up all data as of December 20, 1999 onto
compact disks, in addition to our normal backup procedures, to insure that there
is no data loss or corruption after the Year 2000 rollover. Additionally, the IS
personnel will be at each property during the time of the Year 2000 rollover to
assist and solve any date related issues that may occur. During the days
following the rollover, the accounting and IS departments will compare all
computer related data with a paper trail backup, where applicable. This
comparison and the additional backup procedures discussed above, should give us
confidence that no data was lost or corrupted as a result of the year 2000
rollover.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Our primary exposure to market risks relates to our reducing and
revolving credit facility, which is variable rate debt. We are exposed to
interest rate risk on this debt, which totaled approximately $42 million at
September 30, 1999. If market interest rates increase, our cash requirements for
interest would also increase. Conversely, if market interest rates decrease, our
cash requirements for interest would decrease. However, at September 30, 1999 we
have partially hedged our exposure to interest rate risk by participating in an
interest rate swap, under which we receive a variable interest payment and pay a
fixed interest payment on a notional amount of $35 million. This has reduced our
exposure to interest rate risk to approximately $7 million of debt not hedged
with the interest rate swap at September 30, 1999.
The annual increase (decrease) in cash requirements for interest, after
considering the impact of the interest rate swap agreement, should market rates
increase (decrease) by 10% compared to the interest rate levels at September 30,
1999, would be approximately $61,000 ($61,000).
15
<PAGE> 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On June 25, 1999, a complaint was filed by a casino which operates
downstream from The Lodge Casino against Black Hawk / Jacobs Entertainment LLC
("LLC"), which owns and operates The Lodge Casino and against John Does 1-3
which apparently are other casino projects upstream from the plaintiff. The
complaint alleges, among other things, that the plaintiff is being damaged by
subsurface water flows onto its property from The Lodge Casino property and the
properties of John Does 1-3. The LLC, which is 75% owned by the Company, has
denied all liability and has turned the matter over to its insurance carrier for
defense. The Company does not believe the suit has merit and will continue to
defend against the allegations alleged by the plaintiff. The Company does not
believe the suit will result in any material liability; however, we can give no
assurance in this regard.
The Company and the LLC (owner and developer of The Lodge Casino) and
other LLC members were defendants in an action for trespass brought in late
January 1998 by a company which claimed to have succeeded to rights of heirs of
certain shareholders of a company which was dissolved under Colorado law in
1942. The action alleged that the long defunct company had certain reversionary
rights to a strip of land included within the boundaries of The Lodge Casino
project. The Company, the LLC, other LLC members and certain title insurance
companies entered into joint defenses of the action with all parties reserving
their respective rights. The action was dismissed without prejudice on January
3, 1999. A trustee was appointed by the court on December 22, 1998 to represent
the purported interests of the former plaintiff, if any. The trustee filed an
action similar to that described above in September 1999 against the Company and
Gilpin County containing essentially the same allegations as in the previous
case. The present action seeks to quiet title in the plaintiff to the alleged
reversionary strip and further seeks monetary and injunctive relief against the
Company for trespass. The Company intends to vigorously defend the action. The
Company has filed a motion to dismiss, but can give no assurance as to whether
it will be granted or the ultimate outcome of the litigation.
Further, we are involved in routine litigation arising in the ordinary
course of business. We believe these matters are covered by appropriate
insurance policies or are not deemed material.
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:
No. Description
27 Financial Data Schedule
16
<PAGE> 19
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.
Black Hawk Gaming & Development Company, Inc.
Registrant
Date: November 9, 1999 By: /s/ Jeffrey P. Jacobs
-------------------------------------------------------
Jeffrey P. Jacobs, Chairman of the Board
of Directors and Chief Executive Officer
/s/ Stephen R. Roark
-------------------------------------------------------
Stephen R. Roark, President and Chief Financial Officer
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1999 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH DECEMBER 31, 1998 FORM 10-K FILING.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 10,075,645
<SECURITIES> 0
<RECEIVABLES> 122,487
<ALLOWANCES> 0
<INVENTORY> 536,666
<CURRENT-ASSETS> 11,870,262
<PP&E> 89,115,254
<DEPRECIATION> 9,329,038
<TOTAL-ASSETS> 100,650,718
<CURRENT-LIABILITIES> 9,619,671
<BONDS> 0
0
0
<COMMON> 4,111
<OTHER-SE> 34,905,653
<TOTAL-LIABILITY-AND-EQUITY> 100,650,718
<SALES> 2,917,450
<TOTAL-REVENUES> 68,952,362
<CGS> 1,371,503
<TOTAL-COSTS> 57,108,986
<OTHER-EXPENSES> 1,243,370
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,253,098
<INCOME-PRETAX> 6,096,830
<INCOME-TAX> 2,154,500
<INCOME-CONTINUING> 3,942,330
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,942,330
<EPS-BASIC> 0.96
<EPS-DILUTED> 0.94
</TABLE>
