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 June 30, 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 000-21430
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Riviera Holdings Corporation
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(Exact name of Registrant as specified in its charter)
Nevada 88-0296885
(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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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.
As of July 31, 2000, there were 3,933,021 shares of Common Stock, $.001 par
value per share, outstanding.
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RIVIERA HOLDINGS CORPORATION
INDEX
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PART I. FINANCIAL INFORMATION Page
Item 1. Consolidated Financial Statements
Independent Accountants' Report 2
Condensed Consolidated Balance Sheets at June 30, 2000 (Unaudited) and
December 31, 1999 3
Condensed Consolidated Statements of Operations (Unaudited) for the
Three Months and Six Months ended June 30, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows (Unaudited) for the
Three Months and Six Months ended June 30, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosure About Market Risk 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 22
Signature Page 23
Exhibits - None 24
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INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
Riviera Holdings Corporation
We have reviewed the accompanying condensed consolidated balance sheet of
Riviera Holdings Corporation (the "Company") and subsidiaries as of June 30,
2000, and the related condensed consolidated statements of operations and of
cash flows for the three months and six months ended June 30, 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 consolidated 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 generally accepted auditing
standards, the consolidated balance sheet of Riviera Holdings Corporation as of
December 31, 1999, and the related consolidated statements of operations,
shareholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated February 14, 2000, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 1999, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
July 25, 2000
Las Vegas, Nevada
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RIVIERA HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and June 30, 2000
(In Thousands, except share amounts)
------------------------------------------------------------------------------------------------
2000 1999
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $55,158 $42,804
Cash and cash equivalents - restricted 6,671 7,173
Short term investments 5,258
Short term investments - restricted 7,887
Accounts receivable, net 4,506 5,042
Inventories 2,863 3,432
Prepaid expenses and other assets 3,806 3,989
---------------------------------------
Total current assets 73,004 75,585
PROPERTY AND EQUIPMENT, NET 211,066 202,659
OTHER ASSETS, NET 9,427 10,391
DEFERRED INCOME TAXES 386 355
---------------------------------------
TOTAL $293,883 $288,990
=======================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $2,624 $1,274
Accounts payable 9,977 11,498
Accrued interest 7,717 7,539
Accrued expenses 12,962 11,949
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Total current liabilities 33,280 32,260
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OTHER LONG-TERM LIABILITIES 5,918 5,286
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LONG-TERM DEBT, NET OF CURRENT PORTION 231,308 223,766
---------------------------------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock ($.001 par value; 20,000,000 shares
authorized; 3,933,021 and 4,523,021 shares at
June 30, 2000 and December 31, 1999, respectively) 4 5
Additional paid-in capital 13,446 13,446
Treasury stock (1,173,755 and 583,755 shares shares at
June 30, 2000 and December 31, 1999, respectively) (7,538) (3,115)
Retained earnings 17,464 17,342
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Total stockholders' equity 23,377 27,678
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TOTAL $293,883 $288,990
=======================================
See notes to consolidated financial statements
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<TABLE>
<CAPTION>
RIVIERA HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(In thousands, except per share amounts)
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Three Months Ended Six Months Ended
June 30 June 30
2000 1999 2000 1999
REVENUES:
<S> <C> <C> <C> <C>
Casino $29,205 $19,364 $55,514 $38,280
Rooms 11,580 10,061 22,553 20,200
Food and beverage 8,659 6,680 16,048 13,036
Entertainment 6,282 5,456 12,563 11,068
Other 2,812 2,958 5,417 5,781
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Total revenues 58,538 44,519 112,095 88,365
Less promotional allowances 4,521 3,869 8,379 7,418
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Net revenues 54,017 40,650 103,716 80,947
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COSTS AND EXPENSES:
Direct costs and expenses of operating departments:
Casino 16,029 11,346 29,418 22,695
Rooms 6,229 5,613 11,856 10,862
Food and beverage 5,635 4,565 10,795 8,960
Entertainment 4,976 4,191 9,584 8,380
Other 861 836 1,584 1,638
Other operating expenses:
General and administrative 10,365 7,224 19,684 14,345
Preopening expenses-Black Hawk, Colorado project 73 1,222 73
Depreciation and amortization 4,353 3,521 8,642 6,854
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Total costs and expenses 48,448 37,369 92,785 73,807
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INCOME FROM OPERATIONS 5,569 3,281 10,931 7,140
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OTHER (EXPENSE) INCOME
Interest expense (7,340) (5,372) (13,844) (10,242)
Interest income 660 346 1,133 699
Interest capitalized 810 616 1,771
Other, net 60 (229) 1,189 (280)
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Total other expense (6,620) (4,445) (10,906) (8,052)
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INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR (1,051) (1,164) 25 (912)
INCOME TAXES
BENEFIT FOR INCOME TAXES (498) (352) (97) (266)
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NET INCOME (LOSS) ($553) ($812) $122 ($646)
====================================================================
EARNINGS PER SHARE DATA:
(Loss) earnings per share
Basic $ (0.14) $ (0.16) $ 0.03 $ (0.13)
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Diluted $ (0.14) $ (0.16) $ 0.03 $ (0.13)
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Weighted-average common shares outstanding 3,933 5,068 4,031 5,069
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Weighted-average common and common equivalent shares 3,933 5,068 4,081 5,069
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See notes to condensed consolidated financial statements
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4
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RIVIERA HOLDINGS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months and Six Months Ended June 30, 2000 and 1999
(In Thousands) Three Months Ended Six Months Ended
(Unaudited) June 30, June 30,
2000 1999 2000 1999
------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Net Income(Loss) ($553) ($812) $122 ($646)
Adjustments to reconcile net income(loss) to net cash
provided by operating activities:
Depreciation and amortization 4,353 3,521 8,642 6,854
Provision for bad debts (73) 365 158 839
Interest expense 7,340 5,372 13,844 10,242
Interest paid (3,361) (25) (12,312) (8,791)
Capitalized interest on construction projects (810) (616) (1,771)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 2,762 1,030 378 753
Decrease (increase) in inventories 168 (105) 568 236
Decrease (increase) in prepaid expenses
and other assets (48) 90 181 649
Increase (decrease) in accounts payable (2,001) 31 (1,521) 1,385
Increase (decrease) in accrued liabilities 765 (883) 246 (1,129)
Increase (decrease) in current income taxes payable (401) (266)
Increase (decrease) in deferred income taxes (31) (352) (31)
Increase in non-qualified pension plan obligation
to CEO upon retirement 318 69 632 328
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Net cash provided by operating activities 9,241 7,491 10,293 8,683
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and equipment, (2,079) (1,417) (3,622) (6,644)
Las Vegas, Nevada
Capital expenditures - Black Hawk, Colorado project (751) (6,486) (13,428) (12,824)
Capitalized Interest on construction projects 810 616 1,771
Net Change in short-term investments 5,443 (15,222) 5,258 (15,222)
Decrease (increase) Black Hawk, Colorado restricted 3,974 (26,278) 8,389 (26,278)
funds
Decrease (increase) in other assets 516 (2,981) 535 (2,966)
------------------------------------------------------
Net cash provided by (used in) investing activities 7,103 (51,574) (2,252) (62,163)
------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 799 45,854 9,518 46,265
Payments on long-term borrowings (501) (73) (780) (143)
Purchase of treasury stock (4,425) (22)
Increase (decrease) in paid-in capital (38) (7) (7)
------------------------------------------------------
Net cash provided by financing activities 260 45,774 4,313 46,093
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 16,604 1,691 12,354 (7,387)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $38,554 $39,805 $42,804 $48,883
------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $55,158 $41,496 $55,158 $41,496
======================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION --
Income taxes paid $40
Income taxes paid - Colorado Income Tax $140
See notes to condensed consolidated financial statements
</TABLE>
5
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Riviera Holdings Corporation and its wholly owned subsidiary, Riviera Operating
Corporation ("ROC") (together, the "Company"), were incorporated on January 27,
1993, in order to acquire all assets and liabilities of Riviera, Inc.
Casino-Hotel Division on June 30, 1993, pursuant to a plan of reorganization.
In August 1995, Riviera Gaming Management, Inc. ("RGM") incorporated in the
State of Nevada as a wholly owned subsidiary of ROC for the purpose of obtaining
management contracts in Nevada and other jurisdictions. In March 1997 Riviera
Gaming Management of Colorado was incorporated in the State of Colorado, and in
August 1997 Riviera Black Hawk, Inc. ("RBH") was incorporated in the State of
Colorado for the purpose of developing a casino in Black Hawk, Colorado which
opened February 4, 2000.
Nature of Operations
The Company owns and operates the Riviera Hotel & Casino ("Riviera Las Vegas")
on the Strip in Las Vegas, Nevada and in February of 2000, opened its casino in
Black Hawk, Colorado ("Riviera Black Hawk"). Riviera Black Hawk is owned through
Riviera Black Hawk, Inc. ("RBH"), a wholly owned subsidiary of ROC. Riviera
Gaming Management of Colorado, Inc. is a wholly owned subsidiary of RGM, and
manages the casino. RGM provides services to Peninsula Gaming Partners LLC with
respect to that Company's riverboat, Diamond Jo, operating in Dubuque, Iowa. RGM
has notified Peninsula Gaming that it will end its consulting arrangement
effective August 31, 2000. RGM also managed the Four Queens Hotel and Casino
(owned by Elsinore Corporation) in downtown Las Vegas from August 1996 until
September 1999 when it received notice of the contract termination, effective
December 30, 1999.
Casino operations are subject to extensive regulation in the states of Nevada
and Colorado and various state and local regulatory agencies. Management
believes that the Company's procedures for supervising casino operations,
recording casino and other revenues, and granting credit comply, in all material
respects, with the applicable regulations.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its
wholly owned subsidiary ROC and various indirect wholly owned subsidiaries. All
material intercompany accounts and transactions have been eliminated.
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The financial information at June 30, 2000, and for the three months and six
months ended June 30, 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 and six months ended
June 30, 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
consolidated financial statements and notes thereto for the year ended December
31, 1999, included in the Company's Annual Report on Form 10K.
Estimates and Assumptions
The preparation of condensed consolidated 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 estimated useful lives for depreciable and amortizable
assets, certain accrued liabilities and the estimated allowance for receivables.
Actual results may differ from estimates.
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% Second Mortgage
Notes interest payments. The restrictions were removed in August 2000.
Earnings Per Share
Basic per share amounts are computed by dividing net income by weighted average
shares outstanding during the period. Diluted net income per share amounts are
computed by dividing net income by weighted average shares outstanding plus the
dilutive effect of common share equivalents.
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
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.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB
101 clarigies existing accounting principles related to revenue recognition in
financial statements. The Company is required to comply with the provisions of
SAB 101 by the fourth fiscal quarter of fiscal 2001. Due to the nature of the
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Company's operations, management does not believe that SAB 101 will have a
significant impact on the Company's financial statements.
2. LONG TERM DEBT AND COMMITMENTS
On August 13, 1997, the Company issued 10% Second Mortgage Notes ("the 10%
Notes") with a principal amount of $175 million. The Notes were issued at a
discount in the amount of $2.2 million. The discount is being amortized over the
life of the 10% Notes on a straight-line basis.
On June 3, 1999, Riviera Black Hawk, Inc. ("RBH"), a wholly owned subsidiary,
closed a $45 million private placement of 13% Second Mortgage Notes. The net
proceeds of the placement were used to fund the completion of RBH's casino
project in Black Hawk, Colorado. The Company 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 3 years of RBH operations beginning
with the second quarter of 2000 to cover (i) the $5.85 million interest on such
Notes if not paid by RBH and (ii) the amount by which RBH cash flow is less than
$9.0 million per year as follows:
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Period Dates Amount
----------------------- ----------------------------------- --------------------
Operating Period #1 April 1, 2000 - December 31, 2000 $6.75 Million
----------------------- ----------------------------------- --------------------
Operating Period #2 January 1, 2001 - December 31, 2001 $9.0 Million
----------------------- ----------------------------------- --------------------
Operating Period #3 January 1, 2002 - December 31, 2002 $9.0 Million
----------------------- ----------------------------------- --------------------
Operating Period #4 January 1, 2003 - March 31, 2003 $2.25 Million
----------------------- ----------------------------------- --------------------
</TABLE>
In the first quarter of 2000, RBH, the Company's 100% owned subsidiary, obtained
$9.6 million in capital lease financing for 60 months at approximately 10.5% for
RBH equipment purchases.
As a result of the scheduled opening of several new Las Vegas Strip properties
in 1999 and 2000, an estimated 38,000 jobs had to be filled, including
approximately 5,000 supervisory positions. Because of the Company's performance
and reputation, its employees were prime candidates to fill these positions. In
the third quarter of 1998 management instituted an employee retention plan ("the
Plan") which covers approximately 85 executive, supervisory and technical
support positions and includes a combination of employment contracts, stay put
agreements, bonus arrangements and salary adjustments. The period costs
associated with the Plan are being accrued as additional payroll costs and
included approximately $300,000 in 1998, $875,000 in 1999, and $500,000 year to
date. The total cost of the Plan is estimated to be approximately $2.3 million
over the period July 1, 1998 through June 30, 2001.
3. LEGAL PROCEEDINGS
Morgens, Waterfall, Vintiadis & Company, Inc. v. Riviera Holdings
Corporation, William L. Westerman, Robert R. Barengo, Richard L. Barovick and
James N. Land, Jr., as Directors of Riviera Holdings Corporation (RHC), United
States District Court for the District of Nevada (CV-S-99-1383-JBR(RLH) (the
Nevada Action). The plaintiff in this action (Morgens, Waterfall), a
shareholder of Riviera Holdings Corporation, commenced this action in Nevada
state court on September 30, 1999, where it sought an order enjoining the
Company from obtaining a Settlement Bar Order in a separate lawsuit pending in
the United States District Court for the Central District of California (the
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California Action). At the time, both Morgens, Waterfall and the Company were
defendants in the California Action. On October 1, 1999, RHC and the other
defendants to the Nevada Action removed the Nevada Action to the United States
District Court for the District of Nevada . As a result, Morgens, Waterfalls
effort to obtain an injunction failed, and the Company settled the California
Action.
On November 1, 1999, Morgens, Waterfall moved to remand the Nevada Action
from the Nevada federal court back to Nevada state court. The Nevada federal
court denied the motion.
On January 31, 2000, Morgens, Waterfall purported to serve an Amended
Summons and a Second Amended Verified Complaint on RHC with subsequent service
on its directors. RHC and its directors filed motions to dismiss the action. In
response, Morgens, Waterfall did not oppose the Companys motion and conceded
its claims against the Company. Morgens, Waterfall, however, asked the court for
permission to again amend its claims against the director defendants which are
based on the allegation that the directors breached their fiduciary duty in
settling the California Action. The director defendants have opposed Morgens,
Waterfalls request to again amend its complaint.
The Company is also a party to several routine lawsuits, both as plaintiff
and as defendant, arising from the normal operations of a hotel. The Company
does not believe that the outcome of such litigation, in the aggregate, will
have a material adverse effect on its financial position or results of its
operations.
4. TENDER OFFER
On February 8, 2000, the Company completed a tender offer wherein 590,000 shares
of stock were purchased for $7.50 per share. The Company used its cash and cash
equivalents to purchase the tendered shares.
5. OTHER EXPENSE
Other (expense) income, net includes an insurance recovery of $1.2 million for
litigation costs on the Paulson litigation which was received in the first
quarter 2000 and an additional $100,000 in the second quarter. Such costs were
incurred in 1998 and 1999.
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6. SEGMENT DISCLOSURES
The Company provides Las Vegas-style gaming, amenities and entertainment. The
Company's four reportable segments are based upon the type of service provided:
Casino, rooms, food and beverage, and entertainment. The casino segment provides
customers with gaming activities through traditional table games and slot
machines. The rooms segment provides hotel services. The food and beverage
segment provides restaurant and drink services through a variety of themed
restaurants and bars. The entertainment segment provides customers with a
variety of live Las Vegas-style 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
Special Factors Effecting Comparability of Results of Operations
The Riviera Black Hawk was in the development stage during the second quarter of
1999 and until February 4, 2000. Accordingly, the results of operations for the
fiscal 2000 and fiscal 1999 may not be comparable.
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<CAPTION>
Three Months ended June 30, 2000 Food and Entertain-
(In Thousands) Casino Rooms Beverage ment All Other Total
<S> <C> <C> <C> <C> <C> <C>
Revenues from external customers $29,205 $10,508 $5,845 $5,647 $2,812 $54,017
Intersegment revenues 1,072 2,814 636 4,522
Segment profit 13,176 4,279 210 671 1,951 20,287
Three Months ended June 30, 1999
Revenues from external customers $19,364 $8,923 $4,665 $4,739 $2,958 $40,650
Intersegment revenues 1,138 2,015 716 3,869
Segment profit 8,018 3,310 100 548 2,122 14,099
Food and Entertain-
Six Months ended June 30, 2000 Casino Rooms Beverage ment All Other Total
Revenues from external customers $55,514 $20,697 $11,020 $11,067 $5,417 $103,716
Intersegment revenues 1,856 5,028 1,496 8,379
Segment profit 26,096 8,841 225 1,483 3,833 40,479
Six Months ended June 30, 1999
Revenues from external customers $38,280 $18,165 $9,090 $9,632 $5,781 $80,947
Intersegment revenues 2,035 3,946 1,437 7,418
Segment profit 15,585 7,303 130 1,252 4,143 28,412
</TABLE>
Reconciliation of segment profit to consolidated net income before taxes and
extraordinary items:
<TABLE>
<CAPTION> (In Thousands)
Three Months Ended Six Months Ended
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Segment profit 20,287 14,099 40,479 28,412
Other operating expenses 14,718 10,818 29,548 21,272
Other expense 6,620 4,445 10,906 8,052
Net income (loss) before provision for taxes ($1,051) ($1,164) $25 ($912)
======== ======== ==== ======
</TABLE>
Riviera Las Vegas does not market to residents of Las Vegas.Significantly
all revenues are derived from patrons visiting the Company from other parts of
the United States and other countries. 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 tables set forth certain operating information for the Company for
the three months and six months ended June 30, 2000 and 1999. 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.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
Income Statement Data: 2000 1999 2000 1999
----------------------- -------------------------
Revenues:
<S> <C> <C> <C> <C>
Casino 54.1% 47.6% 53.5% 47.3%
Rooms 21.4% 24.8% 21.7% 25.0%
Food and beverage 16.0% 16.4% 15.5% 16.1%
Entertainment 11.6% 13.4% 12.1% 13.7%
Other 5.2% 7.3% 5.2% 7.1%
Less promotional allowances -8.4% -9.5% -8.1% -9.2%
Net Revenues 100.0% 100.0% 100.0% 100.0%
Costs and Expenses:
Casino 54.9% 58.6% 53.0% 59.3%
Rooms 53.8% 55.8% 52.6% 53.8%
Food and beverage 65.1% 68.3% 67.3% 68.7%
Entertainment 79.2% 76.8% 76.3% 75.7%
Other 30.6% 28.3% 29.2% 28.3%
General and administrative 19.2% 17.8% 19.0% 17.7%
Preopening Expenses - Black Hawk, Colorado Project 0.0% 0.1% 1.2% 0.1%
Depreciation and amortization 8.1% 8.7% 8.3% 8.5%
Total costs and expenses 89.7% 91.9% 89.5% 91.2%
Income from operations 10.3% 8.1% 10.5% 8.8%
Interest expense, other -13.6% -13.2% -13.3% -12.7%
Interest income, other 1.2% 0.9% 1.1% 0.9%
Interest, capitalized 0.0% 2.0% 0.6% 2.2%
Other, net (primarily Paulson litigation and settlement) 0.2% -0.6% 1.1% -0.3%
Income before provision for income taxes -1.9% -2.9% 0.0% -1.1%
Provision for income taxes -0.9% -0.9% -0.1% -0.3%
Net Income -1.0% -2.0% 0.1% -0.8%
EBITDA (1) Margin 18.4% 16.9% 20.1% 17.4%
Net cash provided by operating activities 17.1% 18.4% 9.9% 10.7%
</TABLE>
1 EBITDA consists of earnings before interest, income taxes, depreciation,
amortization, preopening expenses, and Other, net. 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+A20 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 expenditure 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 as a percent of net
revenues. The Companie's definition of EBITDA may not be comparable to other
companies' definitions.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
Special Factors Effecting Comparability of Results of Operations
The Riviera Black Hawk was in the development stage during the second quarter of
1999 and until February 4, 2000 when it opened the casino. Accordingly, the
results of operations for the fiscal 2000 and fiscal 1999 results may not be
comparable.
The following table sets forth, for the periods indicated, certain operating
data for the Riviera Las Vegas and Riviera Black Hawk. EBITDA from properties
for the purposes of this table excludes corporate expense, including preopening
expense and intercompany management fees. Operating income from properties is
presented as shown on the Consolidated Statement of Operations.
<TABLE>
<CAPTION>
Second Quarter
(In Thousands) 2000 1999
---- ----
Net revenues:
<S> <C> <C>
Riviera Las Vegas $44,976 $40,400
Riviera Black Hawk 8,942 0
Riviera Gaming Management 99 250
-- ---
Total Net Revenues $54,017 $40,650
======= =======
EBITDA:
Riviera Las Vegas $9,433 $6,611
Riviera Black Hawk 530 0
Riviera Gaming Management (40) 64
---- --
Total EBITDA $ 9,923 $6,875
======= ======
EBITDA Margin:
Riviera Las Vegas 21.0% 16.4%
Riviera Black Hawk 5.9%
Riviera Gaming Management -40.4% 105.6%
------ ------
Total EBITDA 18.4% 16.9%
===== =====
Operating Income (Loss)
Riviera Las Vegas $5,711 $3,090
Riviera Black Hawk (102) (59)
Riviera Gaming Management (40) 250
---- ---
Total Operating Income $5,569 $3,281
====== ======
</TABLE>
12
<PAGE>
Revenues
Net revenues increased by $13.4 million, or 32.9%, from $40.7 million in the
second quarter of 1999 to $54.0 million in the second quarter of 2000. Casino
revenues increased by $9.8 million, or 50.8%, from $19.4 million during 1999 to
$29.2 million during 2000 due primarily to the opening of Riviera Black Hawk on
February 4, 2000. For the second quarter of 2000, RBH contributed $8.5 million
in casino revenues of which $8.0 million were slot revenues. Riviera Las Vegas
posted strong second quarter slot revenue of $14.6 million which increased
approximately $700,000 from 1999 due to the success of the lower denomination
slot machines. In addition, a marketing bus program was instrumental in
increasing slot play. Las Vegas table games drop was down $2.1 million, or 8.8%,
from $23.4 million in the second quarter of 1999 to $21.3 million in the second
quarter of 2000. However, table games hold percentage was up 6.3% from an
unusually low 14.2% in 1999 to an unusually high 20.5% with the net result being
an increase in table games win of approximately $300,000.
Riviera Las Vegas room revenues increased by approximately $1.5 million, or
15.1% from $10.1 million in 1999 to $11.6 million in 2000 as the result of an
increase of $7.80 in average daily rate from $53.93 in 1999 to $61.73 in 2000.
Hotel occupancy remained steady at 98.5% in 1999 and 2000. Riviera Black Hawk
has no hotel rooms. Convention room revenue increased approximately $1.4 million
or 35.7% from $3.8 million in 1999 to $5.2 million in 2000. Convention revenues
increased due to higher attendance at recurring conventions and to special
events booked at the Riviera Convention Center Pavilion.
Food and beverage revenues increased approximately $2.0 million, or 29.6%, from
$6.7 million during 1999 to $8.7 million in 1999 due primarily to the opening of
Riviera Black Hawk which contributed $1.3 million in food and beverage revenues
from one restaurant, a snack bar, and the casino bar. In Las Vegas expansion of
the convention center banquet facilities provided additional banquet revenues of
approximately $300,000.
Riviera Las Vegas entertainment revenues increased approximately $800,000, or
15.1%, from $5.5 million in 1999 to $6.3 million in 2000, due mainly to
increased ticket sales for Splash, which reopened with a new show on December
25, 1999. Splash attendance has increased 27,300 covers, 35.2% over 1999.
Other revenues decreased approximately $200,000, or 4.9%, from $3.0 million in
1999 to $2.8 million in 2000 due primarily to the decrease in Riviera Gaming
Management revenues for consulting services which had been $250,000 in 1999 for
the Four Queens in Las Vegas and are $100,000 in 2000 for the Diamond Joe Casino
in Dubuque, Iowa.
Promotional allowances increased approximately $700,000, or 16.9%, from $3.9
million in 1999 to $4.6 million in 2000 due primarily to promotional activity at
Riviera Black Hawk which totaled approximately $900,000 for drinks and meals for
casino patrons. In Las Vegas, promotional allowances decreased approximately
$200,000 for rooms, entertainment and food and beverage.
13
<PAGE>
Direct Costs and Expenses of Operating Departments
Total direct costs and expenses of operating departments increased approximately
$7.2 million, or 27.0%, from $26.6 million for the three months ended June 30,
1999 to $33.7 million for the three months ended June 30, 2000. Riviera Black
Hawk produced $6.0 million of the increase in direct costs and expenses.
Casino expenses increased $4.7 million, or 41.3%, of which $5.4 million was for
Riviera Black Hawk. In Las Vegas direct costs such as payroll, promotional
allowances and provision for doubtful accounts decreased $700,000. Casino
expenses as a percentage of revenues decreased from 58.6% in 1999 to 54.9% in
2000.
Riviera Las Vegas room costs increased approximately $600,000, or 11.0%,
from $5.6 million in 1999 to $6.2 million in 2000 due to increased payroll costs
for the expanded Convention Center Pavilion and other convention commissions and
rebates. Room costs as a percentage of room revenue decreased from 55.8% in 1999
to 53.8% in 2000 due to the increased room revenues.
Food and beverage costs increased approximately $1.1 million, or 23.4%, from
$4.5 million during the 1999 period to $5.6 million for the 2000 period.
Further, food and beverage costs as a percentage of revenues decreased from
68.3% to 65.1% because of the increased revenues in Las Vegas and the Riviera
Black Hawk revenue contributions. In Riviera Black Hawk, food and beverage costs
as a percentage of revenues for the quarter was 38%.
Riviera Las Vegas entertainment costs increased $800,000, or 18.7%, from $4.2
million during the 1999 period to $5.0 million in the 2000 period. Entertainment
expense as a percentage of entertainment revenues increased from 76.8% in 1999
to 79.2% in 2000 because the casino is utilizing fewer promotional allowances
for entertainment.
Other departmental expenses remained the same at approximately $800,000 in 1999
and 2000 but expenses as a percentage of other revenues increased from 28.3% in
1999 to 30.6% in 2000 due to the decrease in other operating revenues.
Other Operating Expenses
General and administrative expenses increased approximately $3.1 million, or
43.2%, from $7.2 million in 1999 to $10.3 million in 2000. Of the increase
Riviera Black Hawk totaled $2.5 million. These expenses increased from 17.8% of
total net revenues in 1999 to 19.2% during the 2000 period. In the third quarter
of 1998 management instituted an employee retention plan which covers
approximately 85 executive, supervisory and technical support positions in Las
Vegas and includes a combination of employment contracts, stay put agreements,
bonus arrangements and salary adjustments. The period costs associated with the
plan are being accrued as additional payroll costs and included approximately
$200,000 in the second quarter of 2000. The total cost of the plan is estimated
to be approximately $2.3 million over the period July 1, 1998 through June 30,
2001. The increased EBITDA in Las Vegas has resulted in an increase to the
incentive plan of approximately $200,000. Group health insurance costs for
non-union personnel have increased approximately $300,000. Additionally, Riviera
Gaming Management wrote off approximately $123,000 for an investment in the
Erie, Pennsylvania Race Track project. Although, Riviera Gaming Management did
not withdraw application for a race track license in Pennsylvania, lobbying
14
<PAGE>
efforts have been cancelled and an option on real estate in Pennsylania has been
allowed to expire.
Depreciation and amortization increased by $800,000, or 23.6%, from $3.5 million
in 1999 to $4.3 million in 2000 due to the capital expenditures for the Black
Hawk, Colorado project.
Other Income (Expense)
Interest expense increased $2.0 million , or 36.6%, due to the issuance of the
$45 million 13% First Mortage Notes on the Black Hawk, Colorado, project
effective June 1999. In Black Hawk, there is additional interest expense related
to the $9.6 million equipment financing and in Las Vegas, additional interest
expense related to the equipment financing for the convention center expansion.
Interest income increased $300,000 because of the higher investment balances for
the period from the proceeds of the 13% First Mortgage Notes on RBH. Other
expenses, net include an insurance recovery of litigation and settlement costs
of approximately $100,000 in 2000 for the Paulson litigation which was settled
in late 1999.
There was no capitalized interest for the second quarter of 2000 while in 1999
there was approximately $800,000 on the Black Hawk, Colorado project.
Net (Loss) Income
Net loss for the quarter decreased by $300,000 from a loss of approximately
$800,000 for the quarter ended June 30, 1999 to approximately $500,000 for the
quarter ended June 30, 2000 due to the increased revenues and other fluctuations
discussed above. Provision for income taxes includes the normal 35% provision
for federal taxes and 5% for Colorado State Income Tax for the Black Hawk
property.
EBITDA
EBITDA , as defined, increased by $3.1 million, or 44.6%, from $6.9 million in
1999 to $10.0 million in 2000 due to the increased revenues contributed by
Riviera Black Hawk and Las Vegas
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
Special Factors Effecting Comparability of Results of Operations
The Riviera Black Hawk was in the development stage during 1999 and until
February 4, 2000. Accordingly, the results of operations for the fiscal 2000 and
fiscal 1999 results may not be comparable.
The following table sets forth, for the periods indicated, certain
operating data for the Riviera Las Vegas and Riviera Black Hawk. EBITDA from
properties for the purposes of this table excludes corporate expense, preopening
expense and intercompany management fees. Operating income from properties is
presented as shown on the Consolidated Statement of Operations.
15
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
June 30,
(In thousands)
2000 1999
---- ----
Net revenues:
<S> <C> <C>
Riviera Las Vegas $86,688 $80,447
Riviera Black Hawk 16,826 0
Riviera Gaming Management 202 500
--- ---
Total Net Revenues $103,716 $80,947
======== =======
EBITDA:
Riviera Las Vegas $17,032 $13,567
Riviera Black Hawk 3,706 0
Riviera Gaming Management 57 500
-- ---
Total EBITDA $20,795 $14,067
======= =======
EBITDA Margin:
Riviera Las Vegas 19.6% 16.9%
Riviera Black Hawk 22.0%
Riviera Gaming Management 28.2% 100.0%
----- ------
Total EBITDA 20.0% 17.4%
Operating Income (loss)
Riviera Las Vegas $9,968 $6,713
Riviera Black Hawk 905 (73)
Riviera Gaming Management 57 500
-- ---
Total Operating Income $10,930 $7,140
======= ======
</TABLE>
Revenues
Net revenues increased by $22.8 million, or 28.1%, from $80.9 million in 1999 to
$103.7 million in 2000. Casino revenues increased by $17.2 million, or 45.0%,
from $38.3 million during 1999 to $55.5 million during 2000 due primarily to the
opening of Riviera Black Hawk on February 4, 2000. For the period February 4 -
June 30, 2000, RBH contributed $16.8 million in casino revenues of which $15.3
million were slot revenues. Additionally, Riviera Las Vegas posted strong slot
revenue of $28.5 million which increased approximately $1.8 million due to the
success of the lower denomination slot machines. In addition, a marketing bus
program was instrumental in increasing slot play. Las Vegas table games drop was
down $4.7 million, or 9.7%, from $48.7 million in 1999 to $44.0 million in 2000
but table games hold percentage was up 1.3% from 15.9% to 17.2% . The net result
was a decrease in table games win of approximately $200,000.
16
<PAGE>
Riviera Las Vegas room revenues increased by approximately $2.4 million, or
11.6% from $20.2 million in 1999 to $22.6 million in 2000 as the result of an
increase of $6.05 in average daily rate from $54.64 in 1999 to $60.69 in 2000.
Hotel occupancy decreased .4% from 97.8% in 1999 to 97.4% in 2000. Riviera Black
Hawk has no hotel rooms. Convention room revenue increased approximately $1.7
million or 22.3% from $7.6 million in 1999 to $9.3 million in 2000. Convention
revenues increased due to higher attendance at recurring conventions and to
special events booked at the Riviera Convention Center Pavilion.
Food and beverage revenues increased approximately $3.0 million, or 23.1%, from
$13.0 million during 1999 to $16.0 million in 2000 due primarily to the opening
of Riviera Black Hawk which contributed $2.0 million in food and beverage
revenues from one restaurant, a snack bar, and the casino bar. In Las Vegas
expansion of the convention center banquet facilities provided additional
banquet revenues of approximately $500,000.
Riviera Las Vegas entertainment revenues increased approximately $1.5 million,
or 13.5%, from $11.1 million in 1999 to $12.6 million in 2000, due mainly to
increased ticket sales for Splash, which reopened with a new show on December
25, 1999. Splash attendance has increased 51,000 covers, 34.3% over 1999.
Other revenues decreased approximately $400,000, or 6.3%, from $5.8 million in
1999 to $5.4 million in 2000 due primarily to the decrease in Riviera Gaming
Management revenues for consulting services which had been $500,000 in 1999 for
the Four Queens, Las Vegas project and are $200,000 for the Dubuque, Iowa,
Diamond Jo project.
Promotional allowances increased approximately $1.0 million, or 13.0%, from $7.4
million in 1999 to $8.4 million in 2000 due primarily to promotional activity at
Riviera Black Hawk which totaled approximately $1.4 million for drinks and meals
for casino patrons. In Las Vegas, promotional allowances for rooms,
entertainment and food and beverage were down approximately $400,000.
Direct Costs and Expenses of Operating Departments
Total direct costs and expenses of operating departments increased approximately
$10.7 million, or 20.4%, from $52.5 million for the six months ended June 30,
1999 to $63.2 million for the six months ended June 30, 2000. Riviera Black Hawk
produced $8.9 million of the increase in direct costs and expenses.
Casino expenses increased $6.7 million, or 29.6%, of which $8.1 million was
provided by Riviera Black Hawk, while in Las Vegas direct costs such as payroll,
promotional allowances and provision for doubtful accounts decreased $1.4
million. Casino expenses as a percentage of revenues decreased from 59.3% in
1999 to 53.0% in 2000.
Riviera Las Vegas room costs increased approximately $1.0 million, or 9.1%, from
$10.9 million in 1999 to $11.9 million in 2000 due to increased payroll costs
for the expanded Convention Center Pavilion and other convention commissions and
rebates. Room costs as a percentage of room revenue decreased from 53.8% in 1999
to 52.6% in 2000 due to the increased room revenues.
17
<PAGE>
Food and beverage costs increased approximately $1.8 million, or 20.5%, from
$9.0 million during the 1999 period to $10.8 million for 2000. Further, food and
beverage costs as a percentage of revenues decreased from 68.7% to 67.3% because
of the increased revenues which offset the increase in personnel to staff the
new convention center banquet facilities in Las Vegas. In Riviera Black Hawk,
food and beverage costs as a percentage of revenues is 42%.
Riviera Las Vegas entertainment costs increased $1.2 million, or 14.4%, from
$8.4 million during the 1999 period to $9.6 million in the 2000 period.
Entertainment expense as a percentage of entertainment revenues increased from
75.7% in 1999 to 76.3% in 2000 because the casino is utilizing fewer promotional
allowances for entertainment.
Other departmental expenses remained the same at approximately $1.6 million but
costs as a percentage of revenues increased slightly from 28.3% in 1999 to 29.2%
in 2000 due to the decrease in other revenues.
Other Operating Expenses
Selling, general and administrative expenses increased approximately $5.3
million, or 37.2%, from $14.3 million in 1999 to $19.6 million in 2000. Of the
increase Riviera Black Hawk totaled $4.2 million. These expenses increased from
17.7% of total net revenues in 1999 to 19.0% during the 2000 period. In the
third quarter of 1998 management instituted an employee retention plan which
covers approximately 85 executive, supervisory and technical support positions
in Las Vegas and includes a combination of employment contracts, stay put
agreements, bonus arrangements and salary adjustments. The period costs
associated with the plan are being accrued as additional payroll costs and
totaled approximately $500,000 in 2000. The total cost of the plan is estimated
to be approximately $2.3 million over the period July 1, 1998 through June 30,
2001.
Preopening expense for the Riviera Black Hawk casino totaled $1.2 million for
2000. These costs were comprised many of payroll and related expense for the
hiring and training of the five hundred employees to operate the Black Hawk
property.
Depreciation and amortization increased by $1.8 million, or 26.1%, from $6.9
million in 1999 to $8.7 million in 2000 due to capital expenditures in Black
Hawk for the casino and in Las Vegas for the Convention Center Pavilion, which
was completed in February 1999.
Other Income (Expense)
Interest expense increased $3.6 million, or 35.2%, due to the issuance of the
$45 million 13% First Mortgage Notes on the Black Hawk, Colorado, project
effective June 1999. Interest income increased $400,000 because of the higher
investment balances for the period from the proceeds of the 13% First Mortgage
Notes on RBH. Other expenses, net include an insurance recovery of litigation
and settlement costs of $1.3 million in 2000 for the Paulson litigation which
was settled in late 1999.
18
<PAGE>
Capitalized interest for 2000 was approximately $600,000 on the Black Hawk,
Colorado project compared to $1.8 million in 1999 (which also included the
Riviera Las Vegas Convention Center Pavilion).
Net Income (Loss)
Net Income increased by approximately $700,000 from a loss of approximately
$600,000 for the six months ended June 30, 1999 to net income of approximately
$100,000 for the six months ended June 30, 2000 due primarily to the increased
revenues and other fluctuations discussed above. Provision for income taxes
includes the normal 35% provision for federal taxes and 5% for Colorado State
Income Tax for the Black Hawk property.
Net Cash Provided by Operating Activities
Net cash provided by operating activities increased $1.4 million from $8.7
million in 1999 to $10.3 million in 2000 for the reasons described above and net
changes in the components of working capital.
EBITDA
EBITDA, as defined, increased by $6.7 million, or 47.8%, from $14.1 million in
1999 to $20.8 million in 2000 due to the increased revenues contributed by
Riviera Black Hawk and Las Vegas. Preopening expenses of $1.2 million are not
included in the EBITDA calculation.
Liquidity and Capital Resources
At June 30, 2000, the Company had cash and cash equivalents of $61.8 million,
including $6.7 million restricted for the Black Hawk project. The Company had
working capital of $40.0 million and shareholders equity of $23.4 million. The
cash and cash equivalents increased $12.4 million during the six months of 2000
as a result of the $10.3 million provided by operations, reduced by $13.4
million in capital expenditures at Riviera Black Hawk, Inc. of which $9.6
million was funded with proceeds from long-term borrowings and an additional
$3.6 million in capital expenditures in Las Vegas. The Company also purchased
$4.4 million in treasury stock in a tender offer during 2000.
The Company's net cash provided by operating activities was approximately
$10.3 million for the six months ended June 30, 2000 compared to $8.7 million in
1999. Management believes that cash flow from operations, combined with the
$61.8 million cash and cash equivalents will be sufficient to cover the
Company's debt service and enable investment in budgeted capital expenditures
for 2000 for both the Las Vegas and Black Hawk properties.
Cash flow from operations is not expected to be sufficient to pay 100% of the
principal of the $175 million 10% Notes at maturity on August 15, 2004 and may
not be sufficient to pay the $45 million 13% Notes at maturity on May 1, 2005.
19
<PAGE>
Accordingly, the ability of the Company and its subsidiary to repay the Notes at
maturity will be dependent upon its ability to refinance those notes. There can
be no assurance that the Company and its subsidiary will be able to refinance
the principal amount of the Notes at maturity. The 10% Notes are not redeemable
at the option of the Company until August 15, 2001, and thereafter are
redeemable at premiums beginning at 105.0% and declining each subsequent year to
par in 2003. Riviera Black Hawk, Inc. may redeem 100% of the 13% Notes beginning
May 1, 2002, at premiums beginning at 106.5% and declining each subsequent year
to par in 2004.
The 10% and 13% Note Indentures provide that, in certain circumstances, the
Company and its subsidiary must offer to repurchase the 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 and its
subsidiary would be unable to pay the principal amount of the Notes without a
refinancing.
The 10% Note Indenture contains certain covenants, which limit the ability of
the Company and its restricted subsidiaries (and its unrestricted subsidiary
Riviera Black Hawk, Inc. under the 13% Notes Indenture), 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 liens; sell certain assets; and (v) enter into
certain mergers and consolidations. As a result of these restrictions, the
ability of the Company and its subsidiaries 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 and its subsidiaries would be required to curtail or defer certain of
their capital expenditure programs under these circumstances, which could have
an adverse effect on operations. At June 30, 2000, the Company believes that it
is in compliance with the covenants.
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.
20
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET MIX.
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 30 days or less.
As of June 30, 2000, we had $233.0 million in borrowings. The borrowings include
$175 million in notes maturing in 2004, $45 million notes maturing in 2006 and
capital leases maturing at various dates through 2005. Interest under the $175
million notes is based on a fixed rate of 10%. Interest on the $45 million notes
is 13% with contingent interest if certain operating results are achieved. The
equipment loans and capital leases have interest rates ranging from 5.2% to
13.5%. The borrowings also include $.7 million in a special improvement district
bond offering with the City of Black Hawk. The Company's share of the debt on
the SID bonds of $1.2 million when the project is complete, is payable over ten
years beginning in 2000. The special improvement district bonds bear interest
at 5.5%. Other borrowings relate to leases.
<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 6/30/00
Assets
Short term investments $ - $ -
Average interest rate
Long Term Debt Including Current Portion
Equipment loans and
capital leases Las Vegas $ 560 $ 1,072 $ 1,171 $ 1,254 $ 949 $ 5,006 $ 5,006
Average interest rate 7.7% 8.0% 7.8% 7.8% 8.4%
10% First Mortgage Note Las Vegas $ 173,732 $ 173,732 $159,250
Average interest rate 10.0%
Equipment loans
Black Hawk, Colorado $ 5 $ 10 $ 8 $ 23 $ 23
Average interest rate 11.2% 11.2% 11.2%
Capital leases
Black Hawk, Colorado $ 1,269 $ 1,600 $ 1,777 $ 1,973 $ 2,191 $ 656 $ 9466 $ 9466
Average interest rate 10.8% 10.8% 10.8% 10.8% 10.8% 10.8%
Special Improvement District Bonds
Black Hawk, Colorado $ - $ 64 $ 68 $ 71 $ 76 $ 426 $ 705 $ 705
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 $ 47,700
Average interest rate 13.0%
</TABLE>
21
<PAGE>
Part II. OTHER INFORMATION
Legal Proceedings
Morgens, Waterfall, Vintiadis & Company, Inc. v. Riviera Holdings
Corporation, William L. Westerman, Robert R. Barengo, Richard L. Barovick and
James N. Land, Jr., as Directors of Riviera Holdings Corporation (RHC), United
States District Court for the District of Nevada (CV-S-99-1383-JBR(RLH) (the
Nevada Action). The plaintiff in this action (Morgens, Waterfall), a
shareholder of Riviera Holdings Corporation, commenced this action in Nevada
state court on September 30, 1999, where it sought an order enjoining the
Company from obtaining a Settlement Bar Order in a separate lawsuit pending in
the United States District Court for the Central District of California (the
California Action). At the time, both Morgens, Waterfall and the Company were
defendants in the California Action. On October 1, 1999, RHC and the other
defendants to the Nevada Action removed the Nevada Action to the United States
District Court for the District of Nevada . As a result, Morgens, Waterfalls
effort to obtain an injunction failed, and the Company settled the California
Action.
On November 1, 1999, Morgens, Waterfall moved to remand the Nevada Action
from the Nevada federal court back to Nevada state court. The Nevada federal
court denied the motion.
On January 31, 2000, Morgens, Waterfall purported to serve an Amended
Summons and a Second Amended Verified Complaint on RHC with subsequent service
on its directors. RHC and its directors filed motions to dismiss the action. In
response, Morgens, Waterfall did not oppose the Companys motion and conceded
its claims against the Company. Morgens, Waterfall, however, asked the court for
permission to again amend its claims against the director defendants which are
based on the allegation that the directors breached their fiduciary duty in
settling the California Action. The director defendants have opposed Morgens,
Waterfalls request to again amend its complaint.
The Company is also a party to several routine lawsuits, both as plaintiff
and as defendant, arising from the normal operations of a hotel. The Company
does not believe that the outcome of such litigation, in the aggregate, will
have a material adverse effect on its financial position or results of its
operations.
22
<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 HOLDINGS CORPORATION
By:/s/ William L. Westerman
William L. Westerman
Chairman of the Board and
Chief Executive Officer
By:/s/ Duane Krohn
Duane Krohn
Treasurer and
Chief Financial Officer
Date: August 10, 2000
23
<PAGE>
Riviera Holdings Corporation
Form 10Q
June 30, 2000
Exhibits
None
24
<PAGE>
