10-Q/A 1 d10qa.txt FORM 10-Q/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 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 No. 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 Identification No.) incorporation or organization) 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 4,132,233 shares ------------ --------------------------------- Class Outstanding as of August 10, 2001 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. Index to Form 10-Q/A Part I -- Financial Information. Item 1. Financial Statements. This amendment to Item 1 of the registrant's report on Form 10-Q for the Quarterly Period Ended June 30, 2001 corrects an error on page 9 of the initial filing. The line item "ADJUSTED EBITDA--Reno, Nevada" should have shown $2,472,039 for the six months ended June 30, 2001 rather than for the three months ended June 30, 2000. The correction is set forth on page 9 hereof. BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. UNAUDITED CONSOLIDATED BALANCE SHEETS JUNE 30, 2001 AND DECEMBER 31, 2000 --------------------------------------------------------------------------------

1 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED JUNE 30, 2001 AND 2000 --------------------------------------------------------------------------------

2 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 --------------------------------------------------------------------------------

3 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2001 --------------------------------------------------------------------------------

4 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 --------------------------------------------------------------------------------

5 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 1. BUSINESS Black Hawk Gaming & Development Company, Inc. ("BHWK" or the "Company") was incorporated on January 10, 1991. The Company is a holding company, which owns, develops and operates gaming properties. Currently the Company operates the Gilpin Hotel Casino ("GHC") and The Lodge Casino at Black Hawk ("The Lodge"), both located in Black Hawk, Colorado, and The Gold Dust West Casino ("GDW") located in Reno, Nevada. GHC is a 37,000 square foot facility located in the Black Hawk gaming district and was the Company's first casino project. Originally built in the 1860's, the Gilpin Hotel was one of the oldest in Colorado; however, due to space limitations, the casino offers no hotel or lodging facilities. 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 other 50% interest in GHC and related land. It now offers customers approximately 460 slot machines, 4 table games, two restaurants, four bars and parking for approximately 200 cars. The Lodge is a $74 million hotel/casino/parking complex and is one of Colorado's largest casinos. The 250,000 square foot facility which opened on June 24, 1998, presently offers customers 877 slot machines, 27 table games, 50 hotel rooms, three restaurants, four bars and parking for approximately 600 cars. The Company and its strategic partner, Jacobs Entertainment Ltd., developed and co-manage The Lodge, through an LLC, in which the Company owns a 75% interest and affiliates of Jacobs Entertainment Ltd. own 25%. On January 4, 2001, the Company purchased the assets and operating business of GDW for $26.5 million. The 24,000 square foot gaming and dining facility is located on 4.6 acres, a few blocks west of Reno's downtown gaming district. The casino has been catering to the "locals" market for the past 23 years and currently offers customers 500 slot machines, 106 motel rooms, one restaurant, four bars and parking for 277 cars. The Lodge, GHC, and GDW 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 June 30, 2001 and the results of its operations for the three and six months then ended. The accompanying unaudited consolidated financial statements include the accounts of BHWK, its wholly owned subsidiaries Gilpin Ventures, Inc. ("GVI") and GDW, and its 75% owned subsidiary, Black Hawk/Jacobs Entertainment, LLC. All significant inter-company transactions and balances have been eliminated in consolidation. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Form 10-K for the year ended December 31, 2000. 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 2000 financial statements to conform to the presentation used in 2001. 6 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 (Continued) 3. OTHER MATTERS Recently Issued Accounting Pronouncements In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations". SFAS No. 141 improves the transparency of the accounting and reporting for business combinations by requiring that all business combinations be accounted for under a single method - the purchase method. This Statement is effective for all business combinations initiated after June 30, 2001. Management is currently evaluating the impact that this statement will have on the Company's financial statements. In July 2001, FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets". This statement applies to intangibles and goodwill acquired after June 30, 2001, as well as goodwill and intangibles previously acquired. Under this statement, goodwill as well as other intangibles determined to have an indefinite life will no longer be amortized; however, these assets will be reviewed for impairment on a periodic basis. This statement is effective for the Company for the first quarter in the fiscal year ended December 31, 2002. Management is currently evaluating the impact that this statement will have on the Company's financial statements. In January 2001, FASB announced that the Emerging Issues Task Force ("EITF") had reached a final consensus on EITF 00-22 "Accounting for `Points' and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for Free Products or Services to Be Delivered in the Future." EITF 00-22 requires that certain sales incentives provided by vendors that entitle a customer to receive a reduction in the price of a product or service based on a specified cumulative level of transactions be recognized as a reduction in revenue. This issue is scoped broadly to include all industries that utilize point or other loyalty programs, including the hospitality industry. Effective January 1, 2001, the Company adopted this standard resulting in a reclassification of player point and coupon cash redemption expenses from marketing, general and administrative expense to promotional allowances in the amount of $2,177,000 and $1,935,000 for the three months ended June 30, 2001 and 2000, respectively, and $4,240,000 and $3,952,000 for the six months ended June 30, 2001 and 2000, respectively. 4. ACCOUNTING CHANGE Effective January 1, 2001, BHWK adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value. If the derivative is designated as a fair-value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. If the derivative is designated as a cash-flow hedge, changes in the fair value of the derivative are recorded in other comprehensive income ("OCI") net of taxes, and are recognized in the income statement when the hedged item affects earnings. SFAS No. 133 defines requirements for designation and documentation of hedging relationships as well as ongoing effectiveness assessments in order to use hedge accounting. The Company uses derivative instruments to manage its exposure to interest rate risk. The Company's objective for holding derivatives is to minimize the risks associated with fluctuating interest rates by using the most effective methods available. Variable-rate debt is subject to interest rate risk. The Company uses Interest Rate Swaps, as cash flow hedging instruments, to manage its exposure to interest rate risk on its variable-rate debt. 7 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND MONTHS ENDED JUNE 30, 2001 (Continued) 4. ACCOUNTING CHANGE (Continued) The adoption of SFAS No. 133 on January 1, 2001, resulted in the Company recording a $368,000 gain (net of $200,000 in taxes) in accumulated other comprehensive income/(loss) as a transition adjustment for its derivative instrument which had been designated as a cash flow hedge prior to adopting SFAS No. 133. On February 16, 2001, the Company terminated this interest rate swap agreement and simultaneously entered into a new interest rate swap agreement and designated the new swap as a cash flow hedge as defined by SFAS No. 133. From January 1, 2001 through February 16, 2001, the Company recorded a $318,000 charge to interest expense due to the devaluation of the original interest rate swap. Although the transition adjustment was reflected in other comprehensive loss, subsequent changes in the value of the original interest rate swap are reflected in the income statement because the swap was not designated as a hedging instrument as defined by SFAS No. 133. In, addition, the Company reclassified $79,000 (net of $43,000 in taxes) of the transition gain from OCI to interest expense representing the amortization of the transition gain due to terminating the interest rate swap during the six months ended June 30, 2001. The amortization of the transition adjustment will continue through April 16, 2003 (the expiration date of the original interest rate swap agreement). Derivative losses included in OCI for the six months ended June 30, 2001 amounted to $540,000 net of $304,000 in taxes reflecting the decline in market value of the interest rate swap entered into on February 16, 2001 through June 30, 2001. No event is expected to result in a reclassification of losses reported in OCI over the next twelve months due to the interest rate swap's effectiveness in off setting the variable rate cash flows of the debt. 5. BUYOUT OF COMMON STOCK On April 27, 2001, BHWK announced the execution of a merger agreement. Pursuant to the merger agreement, Gameco, Inc., an entity owned and controlled by Jeffrey P. Jacobs, Chairman of the Board and Chief Executive Officer of BHWK, has agreed to pay $12.00 per share, in cash, for each share of common stock of BHWK not currently owned by Mr. Jacobs or his affiliates and BHWK will become a wholly-owned subsidiary of Gameco. Consummation of the transaction is subject to various conditions, including, among other things, the approval by BHWK's stockholders and the obtaining of various regulatory approvals. If the transaction fails to close because of Mr. Jacobs' inability to obtain financing, BHWK will be entitled to liquidated damages of $2 million. The transaction is expected to be consummated in the fourth quarter of 2001 and the merger agreement provides that the transaction must be completed by December 31, 2001. 6. SEGMENT DISCLOSURE As of January 4, 2001, BHWK acquired the Gold Dust West Casino in Reno, Nevada. This acquisition expanded BHWK's operations into another gaming jurisdiction other than Black Hawk, Colorado. As defined by SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information", the following segment information is presented after the elimination of inter-segment transactions. Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, minority interest in The Lodge, and privatization and other non-recurring costs) has been included as a supplemental disclosure to facilitate a more complete analysis of our casinos' financial performance. We believe this disclosure enhances the understanding of the financial performance of a company, such as ours, with substantial interest, taxes, depreciation and amortization. 7. ACQUISITION OF GOLD DUST WEST Assuming the Gold Dust West acquisition had occurred on January 1, 2000, for the three and six months ended June 30, 2000, net revenues would have been $24,875,000 and $49,899,000 respectively, net income would have been $1,752,000 and $3,760,000 respectively, and earnings per share would have increased $.05 and $.10 to $.42 and $.91 per share respectively. The pro forma financial information is not necessarily indicative of either the results of operations that would have occurred had this agreement been effective on January 1, 2000 or of future operations. 8 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. UNAUDITED SEGMENT INFORMATION FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000 ---------------------------------------------------------

9 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned thereunto duly authorized. Black Hawk Gaming & Development Company, Inc. Registrant Date: August 29, 2001 By: /s/ Stephen R. Roark --------------------- Stephen R. Roark, President and Chief Financial Officer 10

BLACK HAWK GAMING & DEVELOPMENT CO INC 10-Q/A