ITEM 1B.
UNRESOLVED STAFF COMMENTS.
Not applicable.
Our corporate office is located at 10777 West Twain Avenue, Las Vegas, Nevada in approximately 5,100 square feet of space leased from an affiliate. The following table provides an overview of our owned and leased real properties all of which secure our obligations under our Senior Secured Notes and our senior secured credit facility:
(1)
We leased the land on which some of our former timeshare units are situated pursuant to a 50-year lease with our affiliate, MDW Mesquite, LLC. Pursuant to an agreement which became effective December 15, 2004, RBG, LLC and MDW Mesquite, LLC terminated the lease. See “Item 13. Certain Relationships and Related Transactions.”
(2)
We lease the land on which the golf club is located pursuant to a 99-year lease with River View, LLC that expires in June 2094.
(3)
The Palms Golf Course is located on a 256-acre site in Arizona, of which 180 acres are leased from the State of Arizona pursuant to a 10-year lease that expires in May 2008. Currently we are in the process of renegotiating this lease.
(4)
The Oasis Recreational Facility consists of a gun club as well as motocross and equestrian facilities in Arizona.
(5)
In January 2006, Oasis Interval Ownership, LLC entered into an agreement with Global Exchange Development Corp. to sell substantially all of the unsold time share intervals at the Oasis Hotel and Casino.
From time to time, we are a party to various claims arising in the normal course of business. However, management believes that there are no proceedings pending or threatened against us which, if determined adversely, would have a material adverse effect on our financial condition, results of operations or liquidity.
ITEM 4.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5.
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Not applicable.
ITEM 6.
ITEM 6.
SELECTED FINANCIAL DATA.
The selected financial data of Black Gaming, LLC is set forth below as of and for each of the years ended December 31, 2007, 2006, 2005, 2004 and 2003. On December 31, 2006, we completed a holding company reorganization (“Reorganization”) of entities under common control whereby each of Virgin River Casino Corporation (“VRCC”), RBG, LLC (“RBG”) and B & B B, Inc. (“B&BB”) became a directly or indirectly wholly owned subsidiary of Black Gaming, LLC. After a series of transactions related to the Reorganization, Black Gaming, LLC purchased the minority interest of Glenn Teixeira by exchanging his interest in VRCC for an interest in Black Gaming, LLC. Prior to the transaction, VRCC, RBG and B&BB each filed as a Registrant. As a result of the Reorganization Black Gaming, LLC, became a registrant. The selected financial data reflects the operations and financial condition of Black Gaming, LLC as though the Reorganization took place on January 1, 2003 similar to a pooling of interest. The acquisition of the minority interest was accounted for as a purchase on the date the transaction closed on December 31, 2006. Prior to the closing date the minority interest was accounted for as minority interest in the selected financial data. The information presented below summarizes certain selected financial data of previously separate entities which has been combined, except for 2006 and 2007 which have been consolidated and, which should be read in conjunction with “Item 8. Financial Statements and Supplementary Data” and with “Item 7.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction with “Item 6. Selected Financial Data” of Black Gaming, LLC and Subsidiaries, and the Consolidated and Combined financial statements and related notes of Black Gaming, LLC included, see “Item 8. Financial Statements and Supplementary Data - Black Gaming, LLC and Subsidiaries Consolidated and Combined Financial Statements”.
Overview
We own and operate the CasaBlanca, the Oasis and the Virgin River in Mesquite, Nevada, which is located approximately 80 miles north of Las Vegas. We own three of the four operating casinos in Mesquite and our properties have a dominant market share in Mesquite. Our properties are well established, each having been in operation for at least ten years, and serve as significant drive-in gaming and resort destinations. Our properties collectively feature approximately 2,115 slot machines, 70 table games, and 2,300 deluxe hotel rooms, and offer extensive amenities, including championship golf courses, full service spas, a bowling center, movie theaters, restaurants, and banquet and conference facilities. With each of our properties, we leverage our extensive value-oriented amenities and emphasis on slot play to target middle market gaming customers.
Our revenues are primarily derived from gaming revenues, which include revenues from slot machines, table games, live keno, race and sports book wagering and bingo. Gaming revenues are generally defined as gaming wins less gaming losses. In addition, we derive a significant amount of revenue from our hotel rooms and our food and beverage outlets. We also derive revenues from our golf courses, spa facilities, timeshare units, bowling center and other amenities. Promotional allowances consist primarily of hotel and food and beverages furnished gratuitously to customers. The retail value of such services is included in the respective revenue classifications and is then deducted as promotional allowances. We calculate operating income as net revenues less total operating costs and expenses. Operating income represents only those amounts that relate to our operations and excludes interest income, interest expense, and other non-operating income and expenses.
We are classified as “flow-through” entity under the partnership or Subchapter S provisions of the Internal Revenue Code of 1986, as amended. Under those provisions, the owners of the companies pay or are responsible for reporting our taxable income on their separate returns. Accordingly, a provision for income taxes is not included in our financial data.
We were organized as a limited-liability company in Nevada on August 4, 2006 in anticipation of modifying B&BB’s and VRCC’s organizational structure through a holding company reorganization (“Reorganization”) for B&BB and VRCC. The Reorganization, which included a transfer of B&BB and VRCC shares for membership interests in us, was completed on December 31, 2006. As a result of the Reorganization, the Robert R. Black, Sr. Gaming Properties Trust (the “Black Trust”) owns 99.03% of our membership interests and Glenn Teixeira owns 0.97% of our membership interests. The transfer of shares of B&BB and VRCC for membership interests has been accounted for as a reorganization of entities under common control in a manner similar to a pooling-of-interests. Accordingly, the contributed assets and assumed liabilities were recorded at B&BB’s and VRCC’s historical cost basis.
Immediately prior to the Reorganization, VRCC acquired, directly and indirectly, an additional aggregate 11.2% ownership in RBG as a result of the following transaction:
•
VRCC received 100 shares of R. Black, Inc. (“RBI”) from the Black Trust. The Black Trust owns 100% of the outstanding shares of VRCC. The 100 shares of RBI representing 100% of the outstanding capital stock of RBI, was exchanged for 3.68 shares of VRCC held by the Black Trust, representing 3.68% of the outstanding capital stock of VRCC. RBI does not have any material operations, liabilities or assets other than a 5.47% ownership in RBG. The transfer of shares of RBI to VRCC was accounted for at the historical cost of RBG as RBI and VRCC were under common control.
•
VRCC received a 3.8% membership interest in RBG from the Black Trust in exchange for 2.57 shares of VRCC held by the Black Trust, representing 2.57% of the outstanding capital stock of VRCC. The transfer of membership interests of RBG to VRCC was accounted for at historical cost as the Black Trust and VRCC were under common control.
•
VRCC received a 1.92% membership interest in RBG from Glenn Teixeira in exchange for 1.29 shares of VRCC held by the Black Trust, representing 1.29% of the outstanding capital stock of VRCC. The acquisition of the membership interests from RBG from Glenn Teixeira was accounted for at fair value as it was considered an acquisition of a minority interest of a subsidiary. Based upon an internal analysis the fair value of Glenn Teixeira’s interest approximated book value.
The Reorganization, predicated on the transfer of shares of B&BB and VRCC for membership interests in us, represented a transaction between entities under common control and is accounted for in a manner similar to a pooling-of-interests. Accordingly, the contributed assets and assumed liabilities were recorded at B&BB and VRCC’s historical cost basis and the financials are prepared as though the reorganization of entities under common control took place as of January 1, 2006. As a result of the Reorganization, B&BB and VRCC became our majority owned subsidiaries and we own 100%, directly or indirectly, of each subsidiary operating Company. The acquisition of Glenn Teixeira’s interest was presented as of the date the exchange occurred on December 31, 2006. In addition, Black Gaming, LLC, VRCC, RBG and B&BB are jointly managed and share resources.
RBG was formed in February 1997 for the purpose of acquiring the assets of Player’s Island Resort in Mesquite, Nevada, currently operating as the CasaBlanca. RBG acquired the CasaBlanca for $30.5 million. In February 2001, RBG formed a subsidiary, CasaBlanca Resorts, LLC, a Nevada limited-liability company, in order to purchase the assets of the Oasis in Mesquite. RBG acquired the Oasis for $31.7 million. Currently, RBG directly owns and operates the CasaBlanca, and through its wholly-owned subsidiary, owns and operates the Oasis. In May 2001, CasaBlanca Resorts, LLC formed three subsidiaries-Oasis Interval Ownership, LLC, a Nevada limited-liability company; Oasis Recreational Properties, Inc., a Nevada corporation; and Oasis Interval Management, LLC, a Nevada limited-liability company. Oasis Interval Ownership, LLC and Oasis Interval Management, LLC were formed in connection with the operation and management of time share operations. Oasis Recreational Properties, Inc. owns the recreational facility that is associated with the Oasis.
B&BB was formed in December 1989 in connection with the construction and development of the Virgin River Hotel & Casino. B&BB operates the hotel casino and owns certain personal property including furniture and fixtures, leasehold improvements and gaming equipment within the casino. VRCC was formed in July 1988 in connection with the construction of the Virgin River. VRCC currently owns the land and buildings associated with the Virgin River as well as the Virgin River Convention Center. VRCC generates income from rents received from B&BB which operates the Virgin River.
The Virgin River Convention Center is currently a nonoperating casino, which we acquired out of bankruptcy for $6.3 million in November 2000. The Virgin River Convention Center has 12,000 square feet of gaming space and 210 hotel rooms. We are presently using the property as a special events facility and for overflow hotel traffic from our other properties. We believe that the Virgin River Convention Center gives us a competitive advantage in the Mesquite market because it allows us the flexibility of opening the casino to meet market demand and to maintain our market share in the future on a cost-effective basis.
In order to offer our customers attractive and modern facilities, we plan to continue to renovate and maintain our facilities
Key Performance Indicators
Our operating results are highly dependent on the volume of customers at our properties, which in turn impacts the price we can charge for our hotel rooms and other amenities. We generate a significant portion of our operating income from the gaming and hotel portions of our operations. Key performance in our gaming and hotel operations are as follows:
Gaming revenue indicators - table games drop and slot handle (volume indicators); “win” or “hold” percentage, which is not fully controllable by us. Our normal table games win percentage is in the range of 16% to 19% of table games drop and our normal slot win percentage is in the range of 6% to 7% of slot handle.
Hotel revenue indicators - hotel occupancy (volume indicator); average daily rate, or ADR, price indicator; revenue per available room, or REVPAR, a summary measure of hotel results, combining ADR and occupancy rate.
Most of our revenue is essentially cash-based, through customers wagering with cash or paying for non-gaming services with cash or credit cards. Our industry is capital intensive and we rely heavily on the ability of our properties to generate operating cash flow to repay debt financing, fund maintenance capital expenditures and provide excess cash for future development.
Our results of operations tend to be seasonal in nature. During the year ended December 31, 2007, approximately 38% of our operating income (less depreciation and amortization and other non-cash items) was generated in the first quarter and approximately 35% was generated in the second quarter with the remainder being generated during the final half of the year.
Recently, the residential real estate market in Las Vegas and Clark County, Nevada and the U.S. has experienced a significant downturn due to declining real estate values, substantially reducing mortgage loan originations and securitizations, and precipitating more generalized credit market dislocations and significant contraction in available liquidity globally. These factors, combined with rising oil prices, declining business and consumer confidence and increased unemployment, have precipitated an economic slow down and fears of a possible recession. Individual consumers are experiencing higher delinquency rates on various consumer loans and defaults on indebtedness of all kinds have increased. Further declines in real estate values in Las Vegas and Clark County, Nevada and the U.S. or elsewhere and continuing credit and liquidity concerns could have an adverse affect on our results of operations.
Financial Highlights of Black Gaming, LLC and Subsidiaries
(in thousands)
Year 2007 Compared to Year 2006
Consolidated Net Revenues. Consolidated net revenues decreased by 3.0% to $163.2 million for the year ended December 31, 2007 as compared to $168.2 million for the year ended December 31, 2006. The decrease was primarily due to a $1.8 million decrease in food and beverage revenues, a $0.8 million decrease in hotel revenues, a $0.4 million decrease in other revenues and a $3.4 million increase in promotional allowances offset by a $1.4 million increase in casino revenues.
Consolidated Operating Income. Consolidated operating income decreased by 49.7% to $3.4 million for the year ended December 31, 2007 as compared to $6.8 million for the prior year. This was mainly due to a $5.6 million increase in casino expenses and a decrease of $5.0 million in net revenues offset by a $3.5 million decrease in food and beverage expenses, a $0.8 million decrease in hotel expenses, a $0.7 million decrease in other expense, a $0.3 million decrease in general and administrative expenses and a $0.5 million decrease in depreciation and amortization expenses. Operating income margin decreased to 2.1% of net revenues for the year ended December 31, 2007 as compared to 4.0% in the prior year.
Casino. Casino revenues increased 1.3% to $107.1 million for the year ended December 31, 2007 as compared to $105.8 million for the year ended December 31, 2006. The increase in casino revenues was due to a $2.1 million increase in slot revenues during the year ended December 31, 2007 compared to the same period in the prior year and a slight increase in other gaming revenues, primarily driven by Keno play. Table games revenues decreased $0.7 million for the year ended December 31, 2007 as compared to the same period in the prior year. Casino profit margin decreased to 50.5% for the year ended December 31, 2007 as compared to 55.1% for the year ended December 31, 2006. Casino expenses increased 11.7% to $53.0 million for the year ended December 31, 2007 as compared to $47.4 million for the year ended December 31, 2006. The increase was primarily attributable to increased advertising and promotional expenses related to servicing casino guests, increased credit services fees and an increase in salaries and benefits for casino employees.
Food and Beverage. Food and beverage revenues decreased by 4.2% to $41.3 million for the year ended December 31, 2007 as compared to $43.2 million for the year ended December 31, 2006. Revenues decreased primarily due to a reduction in covers caused by construction disruption, including the Virgin River casino remodel, and additionally due to the closure of the Oasis coffee shop in the first half of the year. Food and beverage expenses decreased 13.6% to $22.2 million for the year ended December 31, 2007 as compared to $25.7 million for the year ended December 31, 2006. The decrease in food and beverage expenses was mainly due to a reduction in salaries and benefits and a reduction in direct food costs associated with decreases in covers. Food and beverage profit margin increased to 46.3% for the year ended December 31, 2007 as compared to 40.4% for the year ended December 31, 2006. The increase in food and beverage profit margin is primarily due to increased pricing.
Hotel. Hotel revenues decreased by 2.2% to $34.3 million for the year ended December 31, 2007 as compared to $35.1 million for the year ended December 31, 2006. Revenues decreased due to increased ADR on decreased number of occupied rooms. Hotel expenses decreased 11.2% for the same time period to $6.3 million from $7.1 million primarily due to a decrease in laundry and utility charges associated with decreased occupancy. As a result of the higher ADR on decreased expenses, hotel profit margin increased to 81.6% for the year ended December 31, 2007 as compared to 79.8% for the prior year.
Other Revenues. Other revenues decreased by 1.8% to $19.9 million for the year ended December 31, 2007 as compared to $20.3 million for the year ended December 31, 2006. Revenue decreases were primarily due to a bulk time share sale that occurred in the prior year that did not occur in the twelve month period ended December 31, 2007, in addition to decreases in spa and golf revenues. Other expenses decreased 5.8% to $11.6 million for the year ended December 31, 2007 as compared to $12.4 million for the year ended December 31, 2006 due mainly to reduced salaries and benefits as well as reduced direct costs associated with declines in utilization.
Promotional Allowances. Promotional allowances increased by 9.5% to $39.5 million for the year ended December 31, 2007 as compared to $36.0 million for the year ended December 31, 2006. As a percent of gross revenues, promotional allowances increased to 19.5% for the year ended December 31, 2007 as compared to 17.7% for the year ended December 31, 2006 primarily due to increased expenses attributable to servicing casino guests.
General and Administrative (“G&A”). G&A expenses decreased by 0.6% to $49.7 million for the year ended December 31, 2007 as compared to $50.0 million for the year ended December 31, 2006. As a percent of net revenues, G&A expenses increased to 30.5% for the year ended December 31, 2007 as compared to 29.7% for the year ended December 31, 2006. G&A expenses decreased primarily due to a reduction in employee incentives and awards and a decrease in professional fees related to entertainment expenses.
Depreciation and Amortization. Depreciation and amortization decreased to $16.8 million for the year ended December 31, 2007 compared to $17.3 million for the year ended December 31, 2006.
Change in Fair Value of Swaps. The interest rate swaps terminated on June 30, 2006. During the year ended December 31, 2006 the change in fair value of swaps resulted in income of $0.2 million.
Interest Expense. Interest expense increased to $20.6 million for the year ended December 31, 2007 as compared to $19.8 million for the year ended December 31, 2006. The increase in interest expense was due to increased outstanding debt during the year ended December 31, 2007 compared to the year ended December 31, 2006.
Year 2006 Compared to Year 2005
Consolidated Net Revenues. Consolidated net revenues increased by 3.7% to $168.2 million for the year ended December 31, 2006 as compared to $162.3 million for the year ended December 31, 2005. The increase was primarily due to a $8.6 million increase in casino revenues, a $1.1 million increase in food and beverage revenues, and a $5.6 million increase in hotel revenues; offset by a $9.1 million increase in promotional allowances.
Consolidated Operating Income. Consolidated operating income decreased by 31.2% to $6.8 million for the year ended December 31, 2006 as compared to $9.8 million from the prior year. This was mainly due to a $2.1 million increase in casino expenses, a $5.6 million increase in general and administrative expenses, a $4.7 million increase in depreciation and amortization expense, and a $1.4 million impairment loss recorded to adjust the carrying value of land due to contested ownership rights; offset by a $6.0 million increase in net revenues and $2.5 million decrease in hotel expenses and a $1.0 million decrease in other expenses. Operating income margin decreased to 4.0% of net revenues for the year ended December 31, 2006 as compared to 6.1% in the prior year.
Casino. Casino revenues increased 8.8% to $105.8 million for the year ended December 31, 2006 as compared to $97.2 million for the year ended December 31, 2005. The increase in casino revenues was due to the increase in slot revenues, which increased $8.1 million between periods on an increased overall hold for the year ended December 31, 2006 compared to the prior year. Table games revenues increased $0.3 million for the year ended December 31, 2006 as compared to the year ended December 31, 2005. This increase resulted from an overall increase in hold on a consistent drop year over year. These increases were offset by decreases in keno revenue which decreased during the year ended December 31, 2006 due to the closure of two of our keno operations in December 2005. Casino profit margin increased to 55.1% for the year ended December 31, 2006 as compared to 53.4% for year ended December 31, 2005. Overall casino expenses increased 4.7% to $47.4 million for the year ended December 31, 2006 compared to $45.3 million for the year ended December 31, 2005. The increase was due to an increase in revenues as well as an increase in casino marketing as we continue to focus on targeting our casino customers.
Food and Beverage. Food and beverage revenues increased by 2.6% to $43.2 million for the year ended December 31, 2006 as compared to $42.1 million for the year ended December 31, 2005. Revenues increased due to an increase in pricing offset by fewer covers. Food and beverage expenses decreased 2.6% to $25.7 million for the year ended December 31, 2006 as compared to $26.4 million for the year ended December 31, 2005. The decrease in expenses was primarily due to a reduction in covers. Food and beverage profit margin increased to 40.4% for the year ended December 31, 2006 as compared to 37.3% for the year ended December 31, 2005. This increase in food and beverage profit margin is primarily due to an increase in revenue due to pricing.
Hotel. Hotel revenues increased by 18.9% to $35.1 million for the year ended December 31, 2006 as compared to $29.5 million for the year ended December 31, 2005. Hotel revenues increased due to increased ADR on decreased number of occupied rooms. Hotel expenses decreased 26.2% for the same time period to $7.1 million from $9.6 million mainly due to an overall decline in occupied rooms and efficiency gains in payroll management. As a result of increased pricing on declining occupied rooms, hotel profit margin increased to 79.8% for the year ended December 31, 2006 as compared to 67.4% for the prior year.
Other Revenues. Other revenues decreased slightly by 1.0% to $20.3 million for the year ended December 31, 2006 as compared to $20.5 million for the year ended December 31, 2005. Other revenue decreases were primarily due to a decrease in time share revenues. Other expenses decreased 7.7% to $12.4 million for the year ended December 31, 2006 as compared to $13.4 million for the year ended December 31, 2005. The main reason for the decrease is a reduction in the cost associated with the time share operation; offset by increases in costs associated with the concert and showroom revenue.
Promotional Allowances. Promotional allowances increased by 33.6% to $36.0 million for the year ended December 31, 2006 as compared to $27.0 million for the year ended December 31, 2005. As a percent of gross revenues, promotional allowances increased to 17.7% for the year ended December 31, 2006 as compared to 14.3% for the year ended December 31, 2005 primarily due to increased expenses attributable to servicing casino guests.
General and Administrative. G&A expenses increased by 12.5% to $50.0 million for the year ended December 31, 2006 as compared to $44.5 million for the year ended December 31, 2005. As a percent of net revenues, G&A expenses increased to 29.7% for the year ended December 31, 2006 as compared to 27.4% for the year ended December 31, 2005. The increase in G&A expense was primarily due to an increase in repairs and maintenance, an increase in utilities, an increase in advertising, an increase in professional fees and an increase in salaries and wages.
Depreciation and Amortization. Depreciation and amortization increased to $17.3 million for the year ended December 31, 2006 compared to $12.5 million for the year ended December 31, 2005. The increase in depreciation and amortization was due to large capital projects that began depreciating during the year ended December 31, 2006 such as the consolidated laundry operation, the new property management and back office system, and renovation of the Tailgaterz Tavern and CasaBlanca sports book along with the purchase of additional gaming equipment and other capital expenditures in addition to a change in the estimated life of our gaming equipment which was made effective January 1, 2006 and our purchase accounting adjustment, related to the December 20, 2004 buyout, completed in the fourth quarter of 2005.
Loss on Disposal of Assets. Loss on disposal of assets decreased to $0.2 million for the year ended December 31, 2006 compared to a $0.7 million loss at December 31, 2005. The decrease in the loss was due to the disposal of less equipment during the year.
Change in Fair Value of Swaps. Change in fair value of swaps decreased to income of $0.2 million during the year ended December 31, 2006 compared to $1.3 million during the year ended December 31, 2005. The decrease in income is due to the expiration of the swap agreements.
Interest Expense. Interest expense decreased to $19.8 million for the year ended December 31, 2006 as compared to $20.4 million for the year ended December 31, 2005. The decrease in interest expense was due to less outstanding debt during the year ended December 31, 2006 compared to the year ended December 31, 2005.
Liquidity and Capital Resources for Black Gaming, LLC
The following liquidity and capital resources discussion contains certain forward-looking statements with respect to our business, financial condition, results of operations, expansion projects and our subsidiaries, which involve risks and uncertainties that cannot be predicted or quantified, and consequently, actual results may differ materially from those expressed or implied herein. Such risks and uncertainties include, but are not limited to, financial market risks, the ability to maintain existing management, competition within the gaming industry, the cyclical nature of the hotel business and gaming business, economic conditions, regulatory matters and litigation and other risks. In addition, construction and renovation projects entail significant risks, including shortages of materials or skilled labor, unforeseen regulatory problems, work stoppages, weather interference, and unanticipated cost increases. The anticipated costs and construction periods are based on budgets, conceptual design documents and construction schedule estimates. There can be no assurance that the budgeted costs or construction period will be met. All forward-looking statements are based on our current expectations and projections about future events. Some of the contingencies and uncertainties which any forward looking statement set forth below are subject to include, but are not limited to, those set forth above in the heading “Item 1A. Risk Factors.”
Cash Flows
Our primary sources of liquidity and capital resources have been cash flow from operations and our credit facilities. As of December 31, 2007 and December 31, 2006, cash and cash equivalents were $9.5 million and $11.1 million, respectively.
Operating Activities
Cash provided by operating activities for the year ended December 31, 2007 was $9.1 million compared to $13.4 million for the year ended December 31, 2006. The $4.3 million decrease was primarily due to a $5.3 million decrease in operating income (excluding depreciation and amortization expense and other non-cash charges).
Cash provided by operating activities for the year ended December 31, 2006 was $13.4 million compared to $17.0 million for the year ended December 31, 2005. The $3.6 million decrease was primarily due to a $3.1 million decrease in operating income.
Investing Activities
Cash used in investing activities for the year ended December 31, 2007 was $14.4 million compared to $12.0 million for the year ended December 31, 2006. For the year ended December 31, 2007, the majority of cash used in investing activities consisted of $14.5 million in capital expenditures directed toward the Virgin River floor renovations, CasaBlanca buffet remodel and other exterior hotel improvements, Oasis room remodels and purchases related to the CasaBlanca Event Center and our temporary concert space.
Cash used in investing activities for the year ended December 31, 2006 was $12.0 million compared to $14.4 million for the year ended December 31, 2005. The majority of cash used in investing activities was related to capital expenditures for our centralized laundry projects, the new property management and back office computer systems, the build out of the Platinum check in at the CasaBlanca, the remodeling of the Tailgaterz Tavern at the Oasis and the interior of the Virgin River casino in addition to the purchase of WSR, Inc.’s remaining property rights in the Oasis.
Financing Activities
Cash provided by financing activities for the year ended December 31, 2007 was $3.7 million compared to cash used in financing activities of $5.9 million for the year ended December 31, 2006. For the year ended December 31, 2007, $6.0 million related to payments on long-term debt associated with equipment and our senior secured credit facility, $4.9 million related to payments on gaming equipment financing, and a $0.9 million reduction in the bank overdraft balance. These financing outflows were offset by $15.5 million of borrowings.
Cash used in financing activities for the year ended December 31, 2006 was $5.9 million compared to $4.0 million for the year ended December 31, 2005. For the year ended December 31, 2006, $7.8 million related to payments on long-term debt associated with equipment, time share financing and our credit facility and $4.3 million related to payments on gaming equipment financing. These financing outflows were offset by $5 million of borrowings and $1.2 million increase in the bank overdraft balance.
Capital Expenditures for Black Gaming, LLC
We have no significant commitments for capital expenditures in 2008. We anticipate spending on general capital improvements across our properties in order to provide a fresh, high quality product to our guests. We believe that existing cash, cash flows from operations, equipment financing and available borrowings under our senior secured credit facility will be adequate to satisfy our anticipated uses of capital during 2008.
Off Balance Sheet Arrangements for Black Gaming, LLC.
We are not currently subject to any off-balance sheet arrangements which we believe will have a material adverse impact on our financial condition.
Contractual Obligations and Commitments for Black Gaming, LLC.
The following table summarizes our contractual obligations and commitments as of December 31, 2007.
ITEM 7A.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our long-term debt. Historically, we have attempted to limit our exposure to interest rate risk by managing the mix of our long-term fixed-rate borrowings, which include the notes and short-term borrowings under our senior secured credit facility. Borrowings under our senior secured credit facility bear interest at a margin above the Base Rate plus Base Rate Margin or the LIBOR rate plus LIBOR Rate Margin (each, as defined) as selected by us. However, the amount of outstanding borrowings is not expected to fluctuate and may be reduced from time to time. Our secured senior credit facility matures in December 2008. Our Senior Secured Notes bear interest at 9% and mature in January 2012. Our Senior Subordinated Notes bear interest at 12 3/4% and mature in January 2013. Our Senior Subordinated Notes accrue interest in the form of increased accreted value until January 2009 when the carrying value of the Senior Subordinated Notes will be $66.0 million.
The following table provides information about our long-term debt at December 31, 2007:
We are also exposed to market risk in the form of fluctuations in interest rates and their potential impact upon our debt. Historically, this market risk is managed by utilizing derivative financial instruments in accordance with established policies and procedures. We evaluate our exposure to market risk by monitoring interest rates in the marketplace, and do not utilize derivative financial instruments for trading purposes. We currently do not enter into rate swap agreements.
The following table provides information about our financial instruments that are sensitive to changes in interest rates:
Our $15 million senior secured credit facility carries an average interest rate of 8.8% as of December 31, 2007. As of December 31, 2007 $9.5 million was drawn on the facility. The gaming equipment financing is separate to our debt agreements but because of their long-term nature we impute interest expense for accounting purposes. Contractually these agreements carry no interest, therefore we believe that there is no exposure to interest rate risk and therefore have excluded those contracts from the presentation above.
ITEM 8.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BLACK GAMING, LLC AND SUBSIDIARIES CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2007 and 2006 and for Each of the Three Years in the Period Ended December 31, 2007:
Report of Independent Registered Public Accounting Firm
Consolidated and Combined Financial Statements:
Consolidated Balance Sheets at December 31, 2007 and 2006
Consolidated and Combined Statements of Operations
For the years ended December 31, 2007, 2006 and 2005
Consolidated and Combined Statements of Members’ (Deficit) Equity
For the years ended December 31, 2007, 2006 and 2005
Consolidated and Combined Statements of Cash Flows
For the years ended December 31, 2007, 2006 and 2005
Notes to Consolidated and Combined Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Members of
Black Gaming LLC:
We have audited the accompanying consolidated balance sheets of Black Gaming LLC and subsidiaries as of December 31, 2007 and 2006, and the related consolidated and combined statements of operations, members’ (deficit) equity, and cash flows for each of the three years in the period ended December 31, 2007. Our audits also included the financial statement schedule listed in Item 15(a)(2). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Black Gaming LLC and subsidiaries as of December 31, 2007 and 2006, and the consolidated and combined results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
As discussed in Note 2, in 2006, the Company adopted Statement of Financial Accounting Standard No. 152, Accounting for Real Estate Time Share Transactions, and recorded a cumulative effect of a change in accounting principle of $196,000 to increase the allowance for possible credit losses.
/s/ Ernst & Young LLP
Las Vegas, Nevada
March 27, 2008
BLACK GAMING, LLC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
The accompanying notes are an integral part of these consolidated and combined financial statements.
BLACK GAMING, LLC. AND SUBSIDIARIES
Consolidated and Combined Statements of Operations
For the Years Ended December 31,
(in thousands)
The accompanying notes are an integral part of these consolidated and combined financial statement.
BLACK GAMING, LLC. AND SUBSIDIARIES
Consolidated and Combined Statements of Members’ (Deficit) Equity
For the Years Ended December 31, 2007, 2006 and 2005
(in thousands)
The accompanying notes are an integral part of these consolidated and combined financial statement.
BLACK GAMING, LLC. AND SUBSIDIARIES
Consolidated and Combined Statements of Cash Flows
For the Years Ended December 31,
(in thousands)
The accompanying notes are an integral part of these consolidated and combined financial statement.
BLACK GAMING, LLC. AND SUBSIDIARIES
Consolidated or Combined Statements of Cash Flows (continued)
For the Years Ended December 31,
(in thousands)
The accompanying notes are an integral part of these consolidated and combined financial statement.
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
1.
Organization and Description of Business and Basis of Presentation
Black Gaming, LLC (“BG LLC”), through its wholly owned subsidiaries, B & B B, Inc. (doing business as Virgin River Hotel/Casino/Bingo) (“B&BB”) and Virgin River Casino Corporation (“VRCC”) and its wholly owned subsidiary RBG, LLC (doing business as CasaBlanca Resort/Casino/Golf/Spa) (“RBG”) and its wholly owned subsidiary CasaBlanca Resorts, LLC (doing business as Oasis Resort & Casino) (“Resorts LLC”) (collectively the “Company”) is engaged in the hotel casino industry in Mesquite, Nevada.
BG LLC was organized in Nevada on August 4, 2006 in anticipation of modifying B&BB’s and VRCC’s organizational structure through a holding company reorganization (“Reorganization”) for B&BB and VRCC. The Reorganization, which included a transfer of B&BB and VRCC shares for membership interests in BG LLC, was completed on December 31, 2006. As a result of the Reorganization, the Robert R. Black, Sr. Gaming Properties Trust (the “Black Trust”) owns 99.03% of the membership interests and Glenn Teixeira owns .97% of the membership interests. The members’ liability is limited to the amount of capital contributions they are required to make pursuant to BG LLC’s operating agreement.
Immediately prior to the Reorganization, VRCC acquired, directly and indirectly, an additional aggregate 11.2% ownership in RBG as a result of the following transaction:
•
VRCC received 100 shares of R. Black, Inc. (“RBI”) from the Black Trust. The Black Trust owns 100% of the outstanding shares of VRCC. The 100 shares of RBI representing 100% of the outstanding capital stock of RBI, was exchanged for 3.68 shares of VRCC held by the Black Trust, representing 3.68% of the outstanding capital stock of VRCC. RBI does not have any material operations, liabilities or assets other than a 5.47% ownership in RBG. The transfer of shares of RBI to VRCC was accounted for at the historical cost of RBG as RBI and VRCC were under common control.
•
VRCC received a 3.8% membership interest in RBG from the Black Trust in exchange for 2.57 shares of VRCC held by the Black Trust, representing 2.57% of the outstanding capital stock of VRCC. The transfer of membership interests of RBG to VRCC was accounted for at historical cost as the Black Trust and VRCC were under common control.
•
VRCC received a 1.92% membership interest in RBG from Glenn Teixeira in exchange for 1.29 shares of VRCC held by the Black Trust, representing 1.29% of the outstanding capital stock of VRCC. The acquisition of the membership interests from RBG from Glenn Teixeira was accounted for at fair value as it was considered an acquisition of a minority interest of a subsidiary. Based upon an internal analysis the fair value of Glenn Teixeira’s interest approximated book value.
The accompanying consolidated financial statements as of and for the years ended December 31, 2007 and 2006 include the accounts of the Company and all of its majority-owned subsidiaries and are maintained in accordance with U.S. generally accepted accounting principles. The Reorganization, predicated on the transfer of shares of B&BB and VRCC for membership interests in BG LLC, represented a transaction between entities under common control and is accounted for in a manner similar to a pooling-of-interests. Accordingly, the contributed assets and assumed liabilities were recorded at B&BB and VRCC’s historical cost basis and the financials are prepared as though the reorganization of entities under common control took place as of January 1, 2006. As a result of the Reorganization, B&BB and VRCC became majority owned subsidiaries of BG LLC which owns 100%, directly or indirectly, in each subsidiary operating Company. Because of this majority ownership, the financial statements for the years ended December 31, 2007 and 2006 are consolidated.
The acquisition of Glenn Teixeira’s interest was presented as of the date the exchange occurred on December 31, 2006. All significant intercompany balances and transactions have been eliminated.
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
1.
Organization and Description of Business and Basis of Presentation (cont’d)
The financial statements for the year ended December 31, 2005 have been re-characterized to furnish comparative information and the financial data of entities which have been combined on the basis that common control existed after December 20, 2004, prior to which, common management existed. The combined financial statements for the year ended December 31, 2005 include the accounts of the Company and all of its’ controlled affiliates and are maintained in accordance with U.S. generally accepted accounting principles.
The loss before cumulative effect in a change of accounting principle and minority interest of VRCC and B&BB for the year ended December 31, 2005 was as follows:
2.
Summary of Significant Accounting Policies
Casino Revenue and Promotional Allowances-The Company recognizes as casino revenue the net win from gaming activities, which is the difference between gaming wins and losses. The retail value of rooms, food and beverage furnished to customers without charge is included in gross revenues and then deducted as promotional allowances. The estimated departmental costs of providing such promotional allowances are included in casino costs and expenses and consist of the following (amounts in thousands):
The Company’s One Card Slot Program (the “Slot Program”) allows customers to redeem points earned from their gaming activity at all the Company’s properties for complimentary food, beverage, rooms, entertainment and merchandise. At the time redeemed, the retail value of complimentaries under the Slot Program is recorded as revenue with a corresponding offsetting amount included in promotional allowances. The cost associated with complimentary food, beverage, rooms, entertainment and merchandise redeemed under the Slot Program is recorded in casino expenses. The Company also records a liability for the estimated cost of the outstanding points related to the Slot Program.
Vacation Interval Sales-The Company recognizes revenue on the sale of vacation intervals when a minimum of 10% of the sales price has been received in cash, collectibility of the receivable representing the remainder of the sales price is reasonably assured, and the Company has completed substantially all of the obligations with respect to any development related to the real estate sold.
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
2.
Summary of Significant Accounting Policies (cont’d)
Cash and Cash Equivalents-The Company considers all highly liquid investments with purchased maturities of three months or less to be cash equivalents. Bank overdraft represents a negative cash balance that has been reclassified to current liabilities.
Inventories-Inventories are stated at the lower of cost or market value. Cost is determined by the first-in, first-out method.
Property Held for Vacation Interval Sales-Property held for vacation interval sales includes the acquisition costs of the vacation intervals and renovations and the cost of land, development and construction of the vacation interval project. As intervals are sold, the cost of the interval and the estimated cost of renovations or the estimated total costs at completion for the project are charged ratably to cost of vacation interval sales. Interest on renovations or development and construction of vacation intervals is capitalized or charged to expense depending on the duration of the renovations.
Notes and Accounts Receivable-The Company’s notes receivables originate from the Company’s time share operations and are considered homogenous and are evaluated for impairment collectively, except for individual receivables placed on nonaccrual status, in which case receivables are reviewed individually for impairment. In January of 2006, the Company adopted the provisions of SFAS 152, “Accounting for Real Estate Time-Sharing Transactions"(“SFAS 152”). SFAS 152 amends existing accounting guidance to reference the financial accounting and reporting guidance for real estate time-sharing transactions provided in AICPA Statement of Position 04-02, “Accounting for Real Estate Time-Sharing Transactions.” In determining the allowance for possible credit losses, the Company, in accordance with SFAS 152, uses a technique referred to as static pool analysis, which tracks uncollectible notes receivable based on each year’s sales over the entire life of those notes. The Company considers whether the historical economic conditions are comparable to current economic conditions. If current economic conditions differ from the economic conditions in effect when the historical experience was generated, the Company adjusts the allowance for possible credit losses to reflect the expected effects of current economic conditions on uncollectibility. The Company groups all notes receivables in one pool for analytical purposes based on historical collectibility and customer demographics. As a result of the change in accounting for the allowance for possible credit losses, the Company has recorded in the accompanying combined statement of operations for the year ended December 31, 2006, a cumulative effect of a change in accounting principle of $196,000 to increase the allowance for possible credit losses.
The Company’s accounts receivable represent amounts due from patrons for gaming activities, hotel and other.
Bad debt expense for notes and accounts receivable totaled $126,000, $59,000 and $129,000 for the years ended December 31, 2007, 2006 and 2005, respectively.
Fair Value of Financial Instruments-The carrying value of the Company’s cash and cash equivalents, receivables, accounts payable and debt, other than the Company’s Notes (see Note 8), approximates fair value primarily because of the short maturities of these instruments. The fair value on the Notes is based on quoted market prices.
Property and Equipment-Property and equipment is stated at cost, including interest capitalized on internally constructed assets calculated at the overall weighted-average borrowing rate of interest.
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
2.
Summary of Significant Accounting Policies (cont’d)
Depreciation and amortization is provided on a straight-line basis over the assets’ estimated useful lives. The estimated useful lives are as follows:
The Company evaluates the carrying value for real estate inventories, including property held for vacation interval sales, in accordance with FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-lived Assets (SFAS 144). SFAS 144 requires that when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, companies should evaluate the need for an impairment write-down. Impairment write-downs are recorded to real estate inventories when indicators of impairment are present and the undiscounted cash flows estimated to be generated from those assets are less than the carrying amount of the assets. When an impairment write-down is required, the related assets are adjusted to their estimated fair value less costs to sell. See Note 13.
Income Taxes-The Company is a limited liability company. As such, federal income taxes are an obligation of the individual owners and no provision for income taxes is reflected in the accompanying consolidated financial statements.
Advertising Costs-We expense advertising costs the first time the advertising takes place. Advertising expense, which is generally included in selling, general and administrative expenses in the accompanying consolidated statements of operations was approximately $4.5 million, $5.4 million and $6.6 million for the years ended December 31, 2007, 2006 and 2005, respectively.
Deferred Financing Costs-Deferred financing costs are amortized to interest expense over the term of the related financing.
Goodwill and Other Intangible Assets-Goodwill associated with the Buyout totaled $12.5 million at December 31, 2007 and 2006. Other intangible assets represent acquired customer lists, which is stated at cost net of accumulated amortization, and trademarks. Trademarks totaled $10.5 million at December 31, 2007 and 2006. Customer lists, originally valued at $21.3 million, totaled $12.8 million and $16.3 million as of December 31, 2007 and 2006, respectively. These costs are being amortized on a straight-line basis over the assets’ revised estimated useful life of approximately seven years effective January 1, 2006. Total accumulated amortization related to customer lists was $8.5 million as of December 31, 2007. During the year ended December 31, 2005, these costs were amortized on a straight-line basis over three years. Amortization expense was $3.5 million, $3.5 million and $1.5 million for the years ended December 31, 2007, 2006 and 2005, respectively. Future amortization expense of intangible assets is estimated to be approximately $3.5 million per annum.
The Company reviews intangible assets that are subject to amortization for impairment in accordance with SFAS 142. In accordance with SFAS 142, an impairment loss will be recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its fair value. After an impairment loss is recognized, the adjusted carrying amount of the intangible asset becomes the new accounting basis. The Company did not record any impairment losses related to its intangible assets during the years ended December 31, 2007, 2006 and 2005.
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
2.
Summary of Significant Accounting Policies (cont’d)
Interest Rate Swaps-The Company, from time to time, has used interest rate swaps and similar financial instruments to assist in managing interest incurred on its long-term debt. The difference between amounts received and amounts paid under such agreements, as well as any costs or fees, are recorded as a reduction of, or addition to, interest expense as incurred over the life of the swap or similar financial instrument. The Company accounts for interest rate swap agreements in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” (“SFAS 133”) and its corresponding amendments under SFAS 138 and SFAS 149. SFAS 133 requires the Company to measure every derivative instrument (including certain derivative instruments embedded in other contracts) at fair value and record them in the balance sheet as either an asset or liability. Changes in fair value of derivatives are recorded in earnings as a change in fair value of the swap unless special hedge accounting criteria are met whereby the change is recorded as a component of other comprehensive income. During the year ended December 31, 2004, the swaps became ineffective and, accordingly, the change in fair value was accounted for in earnings on the consolidated and combined statements of operations for the years ending December 31, 2006 and 2005. As of December 31, 2006 the swap had expired.
Use of Estimates-The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Players Club Liability-The Company adopted the consensus provisions of 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 the redemption of points, such as points earned in slot players clubs, be recorded as a reduction of revenue.
Although the consensus reached in EITF 00-22 applies to a redemption of points for cash as opposed to a redemption of points for free products and services, management believes the premise of EITF 00-22 applies to the Company’s Slot Program, which provides for the redemption of points for only free products and services (and not for cash).
The Company’s Slot Program allows customers to redeem points earned from their gaming activity at all the Company’s properties for complimentary food, beverage, rooms, entertainment and merchandise. At the time redeemed, the retail value of complimentaries is recorded as revenue with a corresponding offsetting amount included in promotional allowances. The cost associated with complimentary food, beverage, rooms, entertainment and merchandise redeemed is recorded in casino costs and expenses. The Company also records a liability for the estimated cost of the outstanding points related to the Slot Program.
Self-Insurance Reserves-The Company reviews self-insurance reserves at least quarterly. The amount of reserve is determined by reviewing actual expenditures for the previous twelve-month period and reviewing reports prepared by the third party plan administrator for any significant unpaid claims. The reserve is accrued at an amount that approximates the amount needed to pay both reported and unreported claims as of the balance sheet date, which management believes are adequate.
Segment Information-It is management’s belief that the Company’s operations are part of a single segment which is the casino and hotel business and related amenities. The Company believes that it meets the “economic similarity” criteria established by SFAS 131, and as a result, the Company aggregates all of its properties into one operating segment. All of our properties offer similar products, cater to the same customer base, are all located in the Mesquite, Nevada, area, have the same regulatory and tax structure, share the same marketing techniques and are all directed by a centralized management structure.
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
2.
Summary of Significant Accounting Policies (cont’d)
In addition, management believes that all of the Company’s ancillary operations such as golf course operations, spa, timeshare and other amenities are in place to increase and enhance the casino and hotel business.
Reclassifications-Certain balance sheet and income statement amounts reported in the prior years have been reclassified to follow the Company’s current year’s reporting practice.
Recently Issued Accounting Standards-In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51.” This statement establishes accounting and reporting standards for ownership interest in subsidiaries held by parties other than the parent and for the deconsolidation of a subsidiary. It also clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 changes the way the consolidated income statement is presented by requiring consolidated net income to be reported at amounts that include the amount attributable to both the parent and the noncontrolling interests. The statement also establishes reporting requirements that provide sufficient disclosure that clearly identify and distinguish between the interest of the parent and those of the noncontrolling owners. This statement is effective for fiscal years beginning on or after December 15, 2008. The adoption of SFAS No. 160 is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). This statement permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company is evaluating whether adoption of this statement will result in any material effect on its results of operations or consolidated financial position.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. This statement is effective January 1, 2008. The Company is evaluating whether adoption of this statement will result in a change in its fair value measurements.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations.” SFAS No. 141 (revised) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and noncontrolling interest in the acquiree and the goodwill acquired. The revision is intended to simplify existing guidance and converge rulemaking under U.S. GAAP with international accounting rules. This statement applies prospectively to business combinations where the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of SFAS No. 141 (revised) is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
3.
Discontinued Operations
In October 2006, the Company moved forward with plans to dispose of the Palm’s Golf Course and Oasis Gun Club operations. In accordance with SFAS 144 ,“Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company accounted for this endeavor as discontinued operations. At December 31, 2007 the Company determined that it no longer met the criteria to continue to classify the operations as discontinued. As such, previously presented financial data has been re-characterized and presented as part of continuing operations.
The following table sets forth the operations for the years ended December 31, 2007, 2006 and 2005 related to Oasis Recreational Properties, Inc’s assets previously shown as held for sale that have been included as part of continuing operations (in thousands):
The following sets forth the assets related to Oasis Recreational Properties, Inc. that were previously classified as discontinued operations and are now included under the appropriate balance sheet captions (in thousands):
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
4.
Property and Equipment
Property and equipment consists of the following (in thousands):
The Company owns the Virgin River Convention Center which is opened as needed during the year to provide additional rooms for the Company’s operations. As of December 31, 2007 and 2006, these assets are reported in the accompanying consolidated balance sheets at $5.0 million and $5.3 million, net of accumulated depreciation, respectively.
As a result of the third-party business valuation that was conducted in the fourth quarter of 2005, the Company has re-evaluated the useful lives of its slot machines (included in furniture, fixture and equipment above) and effective January 1, 2006, changed that estimate from seven years to five years. For the years ended December 31, 2007, 2006 and 2005, operating income of the Company decreased approximately $1.1 million, $1.1 and $0, respectively, as a result of the change in the estimated lives.
As part of construction activities related to certain projects of the Company, the Company capitalized approximately $0, $94,000 and $0 in interest for the years ended December 31, 2007, 2006 and 2005, respectively.
Notes receivable consist of the following (in thousands):
Notes generated from the sale of vacation intervals generally bear interest at annual rates ranging from 12.75% to 14.75% and have terms of 5 to 7 years. The vacation interval notes receivable are collateralized by the right to use and deeds of trust on the vacation interval sold.
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
5.
Notes Receivable (cont’d)
Maturities of notes receivable are as follows (in thousands):
6.
Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
7.
Gaming Equipment Financing
The Company from time to time enters into agreements with gaming manufacturers to finance the purchase of gaming equipment. Contractual terms of the agreements with the gaming manufacturers consist of payment terms of less than one year to up to three years without interest. In the event that an agreement with a gaming manufacturer extends past a year, the Company will impute interest at a rate of 8%.
Gaming equipment financing consists of the following (in thousands):
Maturities of gaming equipment financing are as follows (in thousands):
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
Long-term debt consists of the following (in thousands):
Maturities of long-term debt are as follows (in thousands):
Revolving Facility
Concurrent with the Buyout, the Company entered into a four-year $15.0 million senior secured credit facility (“Foothill Facility”) on December 20, 2004 with Wells Fargo Foothill, Inc. that matures in December 2008. The Foothill Facility is secured by substantially all the assets of the Company. During the life of the Foothill Facility, the Company may borrow up to the lesser of (1) $15.0 million less the Letter of Credit Usage, as defined, less the Bank Product Reserve, as defined, or (2) the Borrowing Base, as defined, less the Letter of Credit Usage. At December 31, 2007, $9.5 million was drawn under the Foothill Facility. Accordingly, the availability under the Foothill Facility at December 31, 2007 was $5.5 million.
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
8.
Long-term Debt (cont’d)
Under the terms of the Foothill Facility, interest accrues on the outstanding principal balance at LIBOR plus the LIBOR Rate Margin, which is 3.5%, or the Base Rate, as defined, plus the Base Rate Margin, which is 2%. LIBOR was approximately 5.02% and prime was 7.25% at December 31, 2007. The Foothill Facility also contains certain financial and other covenants. These include a minimum trailing twelve-month Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) of $15,000,000 for the Company and limitations on other indebtedness and capital expenditures, as defined. On October 26, 2007, the Company entered into an amendment to the Foothill Facility. The amendment increased the Company’s allowable capital expenditures and modifies the definition of “EBITDA” as well as changed some of the Company’s reporting obligations. The Company was in compliance with the covenants set by the Foothill Facility at December 31, 2007 and December 31, 2006, respectively. The outstanding balance on the Foothill Facility is a joint and several obligation of the Company. As part of the costs of entering into the Foothill Facility, the Company incurred approximately $0.5 million of deferred financing fees that are being amortized over the life of the facility.
Senior Secured and Senior Subordinated Notes
In December 2004, VRCC, RBG and B&BB (the “Issuers”) issued $125.0 million of 9% senior secured notes (“Senior Notes”) due on January 15, 2012 and $39.9 million in gross proceeds of 12 3/4 % senior subordinated notes (“Senior Sub Notes”) due January 15, 2013 (collectively the “Notes”). The Notes are joint and several obligations of the Issuers and all current and future subsidiaries of the Issuers.
The Senior Notes pay interest semiannually while the Senior Sub Notes accrue interest in the form of increased accreted value until January 15, 2009, when the carrying book value of the Senior Sub Notes will be $66.0 million. Beginning on July 15, 2009, the Senior Sub Notes will pay interest semiannually similar to the Senior Notes.
The indentures governing the Notes contain certain customary financial and other covenants, which limit the Company’s ability to incur additional debt. The indentures provide that the Company may not incur additional indebtedness, other than specified types of indebtedness, unless the Consolidated Coverage Ratio, on a pro-forma basis after the incurrence of the additional indebtedness is at least 2.00 to 1.00. As of December 31, 2007, the Company has a Consolidated Coverage Ratio that is less than 2.00 to 1.00 and accordingly has incurred no additional indebtedness as defined.
The Indentures also contain other covenants which limit the ability of the Issuers and Guarantors, as defined, to pay dividends, redeem stock, or make other distributions, make investments, create certain liens, enter into certain transactions with affiliates, utilize proceeds from asset sales, transfer or sell assets, issue or sell equity interests of subsidiaries and enter into certain mergers and consolidations, as defined in the Indentures. There are no restrictions related to the transfer of funds between the Issuers, Guarantors and their respective subsidiaries. The Issuers were in compliance with these covenants at December 31, 2007 and December 31, 2006.
The Senior Notes are secured by substantially all existing and future assets of the Issuers and the Guarantors, as well as the equity interest of the Guarantors, the equity interests of the Black Trust in the Issuers. The Guarantors are all the wholly owned subsidiaries of the Issuers. The Senior Notes are subordinated to the security interests of the Foothill Facility. The Senior Sub Notes are subordinate to the Senior Notes and all other indebtedness of the Company.
As part of the costs of issuing the Notes, the Company incurred approximately $10.6 million in deferred financing fees. Within the $10.6 million in deferred financing fees is $7.7 million in underwriter fees associated with the Notes. These costs are being amortized over the life of the Notes.
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
8.
Long-term Debt (cont’d)
The estimated fair value of the Company’s Senior Notes and Senior Sub Notes at December 31, 2007 and 2006 was $130.6 million, $70.2 million, $129.2 million and $46.5 million, respectively. The estimated fair value amounts were based on quoted market prices. For all other indebtedness, the fair value approximates the carrying amount of the debt due to the short-term maturities of the individual components of the debt.
Interest Rate Swaps
During 2001, as part of entering into the Original Credit Agreement, the Company entered into two interest-rate swaps, each with notional amounts equal to $28.0 million (the “Swaps”), to be utilized as cash-flow hedges to reduce the Company’s exposure to changes in interest rates. The Swaps effectively converted $56.0 million of the Company’s floating rate debt to a fixed rate. The Swaps became effective on June 29, 2001 and terminated on June 30, 2006. The Company paid a fixed rate of 5.88% on the Swaps, which was priced to assume no value at inception.
The Swaps became completely ineffective during the year ended December 31, 2004. Accordingly, for the years ended December 31, 2006 and 2005, the change in fair value of the Swaps was accounted for in net income. The total amount of the loss was recorded in the accompanying consolidated and combined statement of operations of the Company. At December 31, 2006 and 2007, the Company had no swap arrangements.
9.
Related Party Transactions
MJB Development is a real estate construction company owned by a former shareholder of the Company which provided construction services associated with hotel facilities of the Company. When performing construction services, the actual costs of construction, overhead charges, and a profit are charged to the Company. In addition to construction services, MJB Development has also leased containers for storage to the Company. Total charges for construction and leasing of storage containers totaled $0, $0 and $2,000 during the years ended December 31, 2007, 2006 and 2005, respectively, and are included in the accompanying consolidated and combined statements of operations. In addition, during the year ended December 31, 2005, the Company paid MJB Development $68,000 to purchase previously leased storage containers.
MDW is a Nevada limited-liability company in which the sole shareholder of the Black Trust has an interest. MDW owns a condominium complex located in Mesquite, Nevada. The Company had entered into a lease agreement with MDW whereby MDW gave the members of the CasaBlanca Vacation Club (the timeshare club associated with the CasaBlanca) the right to use and occupy the timeshare units located on the leasehold property. The remaining units at the condominium complex were utilized by the CasaBlanca for hotel and apartment purposes. On December 15, 2004, pursuant to a termination agreement, the Company terminated its lease with MDW. The rent payments were paid by the Company to MDW during the years ended December 31, 2007, 2006 and 2005. The Company recorded approximately $0, $0.9 million and $0.9 million in other income related to the condominium sales during the years ended December 31, 2007, 2006 and 2005, respectively. At December 31, 2007 and 2006 the Company had no amounts owed to MDW.
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
9.
Related Party Transactions (cont’d)
Virgin River Foodmart, Inc., a Nevada corporation, (“Foodmart”) is owned by the sole shareholder of the Black Trust and former shareholders of VRCC. Pursuant to a lease agreement dated November 1996, VRCC leased to Foodmart certain real property and the structures and improvements contained thereon for the purposes of operating the Virgin River Food Mart. The term of the lease was for 30 years at approximately $18,500 a month with Foodmart having the option to extend the lease for two additional ten year periods. Pursuant to the Buyout, the real property, structures and improvements previously leased to Foodmart were not acquired by the Black Trust, but were distributed to the shareholders of VRCC; therefore the lease between VRCC and Foodmart was terminated.
In addition, participants in the Company’s Slot Program are able to redeem their points for gasoline at the Foodmart. Foodmart charges the Company the retail amount of gas purchased with player points. For the years ended December 31, 2007, 2006 and 2005, Foodmart has charged the Company $35,000, $45,000 and $351,000 respectively, for gasoline purchased with points from the Company’s Slot Program.
Black & LoBello is a law firm managed by the daughter of the sole shareholder of the Black Trust. The Company retains Black & LoBello as outside legal counsel, and Black & LoBello has received legal fees for legal services in the amount of $307,000, $303,000 and $131,000 for the years ended December 31, 2007, 2006 and 2005, respectively.
Pursuant to the Indenture, Mr. Black is entitled to a management fee for his management of the Companies of up to 5% of EBITDA, as defined. In light of current economic conditions, Mr. Black has opted for a fee reduced by $200,000 for the year ended December 31, 2007. The Company has expensed $863,000, $1.3 million and $1.2 million as of December 31, 2007, 2006 and 2005, respectively.
During the year ended December 31, 2006, it was determined upon completion of the Company’s income tax returns that $1.4 million was overpaid by the Company to Mr. Black for tax distributions during the year ended December 31, 2005. As a result, the Company offset that overpayment against earned and unpaid management fees during the year ended December 31, 2006 which resulted in an equity contribution of $1.4 million to the Company.
Gaming Research is a consulting firm retained to perform marketing research for the Company. The principal of Gaming Research is the father of the Company’s former chief operating officer. Gaming research received consulting fees of $177,000, $222,000 and $117,000 for the years ended December 31, 2007, 2006 and 2005, respectively.
The Company provided management and other services to two related parties that manage and operate the home owners associations of the vacation intervals sold at the property. As of December 31, 2007 and 2006, respectively, included in the accompanying consolidated balance sheets, respectively, is a receivable for $327,000 and $384,000 related to amounts owed for those services.
During 2006, the Company entered into an agreement with Town Center Drive & 215, LLC to lease executive office space. The term of the lease is 84 months at a rate of approximately $11,508 a month. Mr. Black is the owner and manager of Town Center Drive & 215, LLC. In 2007 the Company paid a total of $223,000 to Town Center Drive & 215, LLC under the lease.
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
The Company implemented a defined contribution 401(k) plan, which covers all employees who meet certain age and length of service requirements and allows an employer contribution up to 40% of the first 6% of each participating employee’s compensation. Plan participants can elect to defer before tax compensation through payroll deductions. These deferrals are regulated under Section 401(k) of the Internal Revenue Code. The Company’s portion of the matching contributions for the years ended December 31, 2007, 2006 and 2005 were $218,000, $238,000, and $232,000, respectively.
In October 2006, the Company adopted the Black Gaming Long Term Incentive Plan (“LTIP”). LTIP is a long-term formula based compensation plan utilizing EBITDA, as defined, Long-term Debt, as defined, cash and a fixed multiple to compensate senior executives for increasing the operating performance and financial condition of the Company in the event the executive remains with the Company. Each measurement date, which is December 31 of each fiscal year or the date of a Change in Control, as defined in LTIP, using an enterprise value computation, the Company determines a theoretical value of the Company’s equity based on the fixed multiple. Senior executives who participate in LTIP will receive an award each measurement date that is a percentage of the overall increase in the theoretical equity of the Company at the measurement date over the highest previous theoretical equity calculation from a prior measurement date. Such award is paid out in three equal annual installments beginning one year after the measurement date. With the exception of certain events as defined by LTIP, senior executives must be employed by the Company in order to receive a payment of the award. Future compensation, recognized in accordance with LTIP will be accounted for using the intrinsic value method allowed for nonpublic entities as defined and prescribed by SFAS 123(R) “Share Based Payment”. The Company awarded $205,000 in the LTIP for the fiscal year ended December 31, 2005, of which $68,000 was recognized as compensation expense and paid during the year ended December 31, 2006. As of December 31, 2006, the Company awarded $588,000 in the LTIP for the fiscal year ended December 31, 2006. For the year ended December 31, 2007, the Company recognized and paid approximately $68,000 as compensation expense related to the fiscal year 2006 and 2005 award. Any remaining amounts will not be recognized or paid as compensation expense as the senior executives included in the plan are no longer employed by the Company.
Operating Leases
In October 2005, the Companies entered into an agreement with Wells Fargo Financial Leasing to lease golf maintenance equipment totaling approximately $1.3 million. The term of the lease is 36 months at a rate of $29,000 per month.
During 2006, the Companies entered into a lease arrangement with Dell Financial Services to lease desktop computers, servers and peripheral equipment. The term of the lease is 18 months at a rate of approximately $4,700 a month.
As part of the acquisition of the Oasis Resort Hotel and Casino, Resorts LLC has been assigned the rights to an agreement to lease the land which contains a portion of the golf course of the Oasis Casino and Hotel from the state of Arizona. The lease agreement is for a term of ten years that began in May 1998 at an annual rate of $26,650 and increases every year until the last year of the lease when the annual lease rate is $135,750. The Company is currently in negotiations to renew this lease under similar terms.
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
As part of the acquisition of the CasaBlanca, the Company has been assigned the rights to an agreement to lease the land and water rights which contain the golf course of the CasaBlanca. The lease agreement is for a term of 99 years that began in June 1995 at a monthly lease rate of $18,000. In June 2005 and every 5 years thereafter, the lease rate will be adjusted based on the increase in the Consumer Price Index, as defined.
During 2006, the Company entered into an agreement with Town Center Drive & 215, LLC to lease executive office space. The term of the lease is 84 months at a rate of approximately $11,508 a month. The lease also provides for two - five year options to extend the Lease at market price. The lease also requires the Company to pay its pro rata share of real estate taxes, operating expenses, and common area costs. In addition, the Company has received lease incentives in connection with this lease. The Company will recognize the benefits related to the lease incentives on a straight-line basis over the applicable lease term.
Rent expense for the years ended December 31, 2007, 2006 and 2005 were $2.0 million, $1.8 million and $1.4 million, respectively.
Workers’ Compensation Claim-In February 2004, an employee of Resorts LLC was killed while performing maintenance work on the Palms Golf Course. As a result of the death, the Company has recorded a liability as of December 31, 2007 of approximately $107,000, which represents the Company’s obligation to the family of the deceased under their workers’ compensation policy and the workers’ compensation laws of the State of Nevada.
Litigation-From time to time the Company is party to various legal proceedings, most of which relate to routine matters incidental to the business. Management does not believe that the outcome of such proceedings will have a material adverse effect on the Company’s consolidated and combined financial position, cash flows or results of operations.
Environmental Matter-The Company has become aware that there is contamination present on some of its properties apparently due to past operations, which included a truck stop and gas station. In particular, groundwater contamination at the Oasis property (which appears to have migrated onto the CasaBlanca property) is the subject of investigation and cleanup activities being conducted by the prior owners of the Oasis. Management believes that the prior owners are responsible for such matters under an indemnity agreement negotiated at the time the Oasis was purchased; however, there is no assurance that the Company will not incur costs related to this matter. Moreover, it is possible that future developments could lead to material environmental compliance costs or other liabilities for the Company and these costs could have a material adverse effect on our combined financial position or results of operations. In anticipation of marketing the golf course property during 2006, Resorts, LLC, entered into several agreements with WSR, Inc (“WSR”), the former owners of the Oasis Hotel & Casino, to terminate WSR’s remaining rights in the golf course property, among other matters, for approximately $1.1 million. Pursuant to the agreements, the funds paid to WSR will be used by WSR to remediate the existing environmental liability at the Oasis Hotel & Casino which continues to be an obligation of WSR.
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
Other-In January 2006, Oasis Interval Ownership, LLC entered into an agreement with Global Exchange Development Corp. to sell substantially all of the unsold time share intervals at the Oasis Hotel and Casino. As of December 31, 2007 all sales have been completed and there are no outstanding receivable amounts.
In November 2006, the Company entered into a lease agreement with MDC Restaurants, LLC (“MDC”), a Nevada Limited Liability Company and franchisee of Denny’s, Inc., whereby MDC will operate a Denny’s restaurant in the location of the former coffee shop of the Oasis Hotel & Casino. The lease is for a five year term, with one five year renewal term and five one-year renewal terms. The Company will receive a minimum lease payment of $78,000 annually along with a percentage of rent based on revenue as defined in the agreement. As part of entering the lease, the Company agreed to provide a tenant improvement allowance of $212,500, $106,250 which was paid as of December 31, 2006 and the reminder paid during the year ended December 31, 2007. This amount will be amortized as a reduction of rental revenue over the term of the lease.
In 1990, the Company entered into a lease agreement, which was last amended in April 1995, with Westates Theater, Inc. to lease and operate theaters at the Virgin River Hotel/Casino/Bingo. The term of the lease is for 15 years from the last amendment date. The lease calls for monthly lease payments, which currently approximate $10,600, in addition to a percentage rent that is calculated annually based on 7% of gross revenue from the theater operations in excess of $800,000. Annually the monthly lease payment shall increase based on the change in the Consumer Price Index.
Rental revenue for the years ended December 31, 2007, 2006 and 2005 was $617,000, $135,000 and $143,000, respectively and is included in other revenue in the accompanying statements of operations.
The Company recorded an impairment loss of approximately $1.3 million in the years ended December 31, 2006 to adjust the carrying value of land due to contested ownership rights related to the land.
14.
Supplemental Guarantor Condensed Consolidating Financial Statements
At December 31, 2007, BG LLC and all of the Issuer’s, and Issuers’ subsidiaries, each of which is directly or indirectly wholly-owned by the BG LLC, are guarantors under the Foothill Facility and the indentures governing the Notes, see Note 8. These guarantees are full, unconditional and joint and several.
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
14.
Supplemental Guarantor Condensed Consolidating Financial Statements (cont’d)
Note 15 presents the condensed consolidating balance sheets of BG LLC (“Parent”), the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries as of December 31, 2007 and December 31, 2006 and the related condensed consolidating statements of operations and cash flows for each year in the three-year period ended December 31, 2007.
15.
Condensed Consolidating Financial Information (in thousands)
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
15.
Condensed Consolidating Financial Information (cont’d) (in thousands)
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
15.
Condensed Consolidating Financial Information (cont’d) (in thousands)
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
15.
Condensed Consolidating Financial Information (cont’d) (in thousands)
BLACK GAMING, LLC AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
15.
Condensed Consolidating Financial Information (cont’d) (in thousands)
ITEM 9.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
ITEM 9A.
ITEM 9A.
CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls
We evaluated the effectiveness of our disclosure controls and procedures as of the end of the 2007 fiscal year. This evaluation was done with the participation of our management, including our Chief Executive Officer and Chief Accounting Officer.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Securities Exchange Act of 1934 is accumulated and communicated to our management, as appropriate to allow timely decisions regarding required disclosure.
Limitations on the Effectiveness of Controls
Our management does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, but not absolute, assurance that the objectives of a control system are met. Further, any control system reflects limitations on resources, and the benefits of a control system must be considered relative to its costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within us have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of a control. The design of a control system is also based upon certain assumptions about the likelihood of future events, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
Conclusions
Based on this evaluation, our Chief Executive Officer and Chief Accounting Officer have evaluated our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of December 31, 2007, and have concluded that they are effective to timely alert them to material information relating to the Company required to be included in the reports that we file or submit under the Securities Exchange Act of 1934.
Changes in Internal Controls
There were no changes in our internal controls over financial reporting that occurred during our last fiscal quarter, i.e., the quarter ended December 31, 2007, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements.
Management assessed the effectiveness of the our internal control over financial reporting (as defined in the Securities Exchange Act of 1934 Rules 13a-15(f) and 15d-15(f)) as of December 31, 2007. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on management’s assessment, it believes that, as of December 31, 2007, our internal control over financial reporting is effective based on those criteria.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
None
PART III
ITEM 10.
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Directors and Executive Officers
Our executive officers and directors consist of the following:
Robert R. Black, Sr. Mr. Black has been involved in all phases of the Nevada real estate industry since 1967. Additionally, Mr. Black is the managing member or member of several business entities which primarily relate to real estate development. Currently, Mr. Black serves as Chairman of the Board of Diversified Interest, Inc., a full-service real estate entity he founded in 1979. Since 1997, Mr. Black has served as Commander of the Nellis Support Team, a team organized to support the men, women and missions of Nellis Air Force Base by interacting with the local business and government community in order to raise funds to support the air force base and military personnel needs.
Since August 2006, Mr. Black has been the sole Manager of Black Gaming, LLC. Since December 2004, Mr. Black has been Chairman of the Board, Chief Executive Officer and President of Virgin River Casino Corporation and B & B B, Inc. Mr. Black was Secretary and a Director of Virgin River Casino Corporation from July 1988 to December 2004. Mr. Black was Secretary of B & B B, Inc. from December 1990 to December 2004 and a Director of B & B B, Inc. from December 1989 to December 2004. Mr. Black has been the sole Manager of RBG, LLC since February 1997.
Sean P. McKay. Mr. Mckay has served as Chief Accounting Officer to Black Gaming, LLC since January 2008. Previously, Mr. McKay served as Corporate Controller to Virgin River Casino Corporation, RBG, LLC and B & B B, Inc. since July 2005. From May 2002 to July 2005, Mr. McKay was employed by Avery Dennison, most recently as the General Accounting Manager. From 2000 to 2002, Mr. McKay was employed by the accounting firm of Arthur Andersen, LLP in the firm’s Las Vegas office providing audit services to the hospitality and gaming industry.
Key Employees
Anthony Toti. Mr. Toti, 48, has served as our Senior Vice President of Casino Operations since November 2007. Mr. Toti has approximately 28 years experience in the gaming industry, most recently as Director of Casino Operations at the Suncoast Hotel and Casino from October 2006 to October 2007. From July 2000 to October 2006, Mr. Toti served as Casino Manager at the Suncoast Hotel and Casino.
Anthony A. George. Mr. George, 42, has served as the General Manager of the Oasis Hotel and Casino since November 2007. From August 2006 to November 2007 Mr. George served as the General Manager of Black Gaming, LLC. From December 2005 to August 2006, Mr. George served as the Assistant General Manager for each of the CasaBlanca, the Oasis and the Virgin River. From 2001 to December 2005, Mr. George served as the General Manager of the Oasis. From 1994 to 2001, Mr. George was employed by the Oasis as the director of its Race and Sports book.
Kevin Boyer. Mr. Boyer, 39, has served as the General Manager of the Virgin River Hotel & Casino since October 2007. Mr. Boyer has been employed by us since May 1991 in various positions with varying degrees of responsibility. His most recent position included Oasis Controller from July 2002 to September 2006, transitioning to tri-property responsibility in September 2006 and to Assistant General Manager of Black Gaming, LLC in July 2007.
Code of Ethics
We have not yet adopted a code of ethics which applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions because of our limited size.
Compensation Philosophy
Our primary goal with respect to executive compensation is to attract, retain and motivate the most qualified and dedicated executives, who possess the high-quality skills and talent required for the success of the business, to tie annual and long-term incentive compensation to achievement of certain performance objectives for us and the individual executives, and to encourage executive performance that contributes to our long-term growth. Since we are not a publicly held company, we are not required to form a compensation committee comprised of independent directors, as required by applicable laws and regulations, including the Sarbanes-Oxley Act, and applicable listing requirements.
To achieve our executive compensation objectives, we implement and maintain compensation plans and policies that ensure that executive compensation is fair, reasonable and competitive, and that reward executives’ contributions to our overall short and long-term growth. We use short-term compensation (base salaries and annual cash bonuses) and long-term incentive compensation, to achieve our goal of driving long-term growth. Our compensation policy links each executive’s earnings opportunity with our short and long-term performance.
Setting Executive Compensation
In setting compensation, we evaluate individuals on their executive performance with the goal of setting compensation at levels we believe are comparable with executives in other companies of similar size, with similar revenues and in similar industries, while taking into account our relative performance and our own strategic goals.
Elements of Compensation
For the fiscal year ended December 31, 2007, our compensation components for the named executive officers included the following elements:
Base Salary
We pay base salaries to our named executive officers and all other employees to compensate them for their services during the fiscal year. Base salaries for our executives are established based on the scope of their responsibilities, taking into account competitive market compensation paid by other companies for similar positions. To assist us in the determination of appropriate compensation ranges we utilize the services of Business and Legal Reports, a subscription service which provides salary data and ranges for a variety of positions and, generally, we believe that executive base salaries should be targeted near the median of the range of salaries for executives in similar positions with similar responsibilities at companies of similar size, with similar revenues and in similar industries, in line with our compensation philosophy. Base salaries are reviewed annually, and executives are eligible for performance based increases based on the individual responsibilities and performance as it relates to the pre-determined financial targets that we set.
Annual Bonus
We award annual bonuses to the named executive officers and to other employees. The annual incentive bonuses are intended to compensate officers for achieving financial and operational goals and for achieving individual annual performance objectives. When we decide to award a bonus, we determine the pool of eligible employees and the amount that those employees will be eligible to receive under the plan. Our plan includes various incentive levels based on the participant’s accountability and impact on our operations, and target award opportunities are established as a percentage of base salary, ranging from 2.5% of base salary to 30% of base salary for our named executive officers. In addition, discretionary bonus amounts may be paid to named executives based on individual performance.
Each year, we set minimum, targets and maximum levels for corporate and individual performance goals, and payment of awards is based upon the achievement of those goals for that year. Upon completion of the fiscal year, we assess our performance and individual performance with respect to those goals, and an overall percentage amount for the corporate financial goals is calculated. The annual bonus is paid in cash and is ordinarily paid in a single installment in the March following the completion of a given fiscal year.
Long-Term Incentive Compensation
In October 2006, we adopted the Black Gaming Long Term Incentive Plan (“LTIP”). LTIP is a long-term formula based compensation plan utilizing EBITDA, as defined, Long-term Debt, as defined, cash and a fixed multiple to compensate senior executives for increasing our operating performance and financial condition in the event the executive remains with us. Future compensation, commencing in the fourth quarter of the year ended December 31, 2006, recognized in accordance with LTIP will be accounted for using the intrinsic value method allowed for nonpublic entities as defined and prescribed by SFAS 123(R) “Share Based Payment”. This incentive plan fosters the long-term perspective necessary for the continued success in our business.
Post-Termination Compensation
In order for us to attract and retain well-qualified executives and key personnel and to provide ourselves and each executive certain security of continuity of management in the event of a change in control of the Company, we entered into employment security agreements with certain of our executive officers.
Perquisites and Other Personal Benefits
We provide our named executive officers with certain perquisites and other personal benefits that the we believe are reasonable and consistent with our overall compensation philosophy to attract, retain and motivate the most qualified and dedicated employees for key positions.
We do not issue stock or option awards to our executives. We also do not provide non-equity incentive plan compensation, do not have a pension plan and do not offer a nonqualified deferred compensation program. We have a 401(k) plan for our employees.
The named executive officers are provided access to term life insurance policies, long-term disability insurance policies, contributions to our 401(k) plan, and participation in the plans and programs described above. In certain instances and on a case-by-case basis, we may reimburse relocation expenses and pay relocation bonuses to executives who are required, due to promotions or reorganizations, to move to another location. Additionally, we may pay special one-time bonuses to certain executives when their performance far-exceeds any targets or goals. Such bonuses are not common and are not paid through any formal compensation plan.
Summary Compensation Table
The following table sets forth the cash and non-cash compensation for each of the last two fiscal years awarded to or earned by our Chief Executive Officer, persons who served as our Chief Financial Officer, our three other most highly compensated executives as of December 31, 2007 and two former executive officers who would have been two of our most highly compensated executive officers but for their resignation in September 2007.
Summary Compensation Table
Employment Agreements and Separation Agreements
We entered into an executive employment agreement with Sean P. McKay effective as of January 7, 2008, where we agreed to pay Mr. McKay a base salary of $180,000 per year and an nondiscretionary annual bonus up to $70,000 based on certain personal and Company performance measures as determined by us. We have also agreed to pay Mr. McKay a payment equal to one year of his base salary, upon a change in control.
On September 28, 2007, we entered into a separation agreements with Mr. Lowenhar and Mr. DeAngelo. pursuant to which we paid Mr. Lowenhar a lump sum payment of $302,000 which includes a $277,000 severance payment and a $25,000 payment for a two-year non-compete covenant. On September 28, 2007, we entered into a separation agreement with Mr. DeAngelo pursuant to which we will pay Mr. DeAngelo a lump sum payment of $50,000 which includes a $37,500 severance payment and a $12,500 payment for a two-year non-compete covenant.
Compensation Committee Interlocks and Insider Participation
We do not have a compensation committee. Mr. Black makes the decisions concerning the compensation of our executive officers.
THE FOLLOWING REPORT OF THE MANAGEMENT BOARD SHALL NOT BE DEEMED TO BE SOLICITING MATERIAL OR TO BE FILED WITH THE SEC UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR INCORPORATED BY REFERENCE IN ANY DOCUMENT SO FILED.
Management Board Compensation Report
Our management board has reviewed and discussed the above Compensation Discussion and Analysis with our management and determined that the Compensation Discussion and Analysis be included in this annual report.
March 27, 2008
MANAGEMENT BOARD
Robert R. Black, Sr.
ITEM 12.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
We are wholly owned by Robert R. Black, Sr., our Manager and Majority Member, and his affiliates, with the exception of a 0.97% ownership interest held by a minority owner. The following table sets forth our beneficial ownership. As of December 31, 2007, no rights exist to purchase any additional ownership interest in us.
Black Gaming, LLC
ITEM 13.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
We believe that all of the transactions discussed below are on terms at least as favorable to us as would have been obtained from an unrelated third party.
MJB Development is a real estate construction company owned by a former shareholder of the Company which provided construction services associated with hotel facilities of the Company. When performing construction services, the actual costs of construction, overhead charges, and a profit are charged to the Company. In addition to construction services, MJB Development has also leased containers for storage to the Company. Total charges for construction and leasing of storage containers totaled $0, $0 and $2,000 during the years ended December 31, 2007, 2006 and 2005, and are included in the accompanying consolidated statements of operations. In addition, during the year ended December 31, 2005, the Company paid MJB Development $68,000 to purchase previously leased storage containers.
MDW is a Nevada limited-liability company in which the sole shareholder of the Black Trust has an interest. MDW owns a condominium complex located in Mesquite, Nevada. The Company had entered into a lease agreement with MDW whereby MDW gave the members of the CasaBlanca Vacation Club (the timeshare club associated with the CasaBlanca) the right to use and occupy the timeshare units located on the leasehold property. The remaining units at the condominium complex were utilized by the CasaBlanca for hotel and apartment purposes. On December 15, 2004, pursuant to a termination agreement, the Company terminated its lease with MDW. No rent payments were paid by the Company to MDW during the years ended December 31, 2007, 2006 and 2005. The Company recorded approximately $0, $0.9 million and $0.9 million in other income related to the condominium sales during the years ended December 31, 2007, 2006 and 2005, respectively. At December 31, 2007 and 2006 the Company had no amounts owed to MDW.
Virgin River Foodmart, Inc., a Nevada corporation, (“Foodmart”) is owned by the sole shareholder of the Black Trust and former shareholders of VRCC. Pursuant to a lease agreement dated November 1996, VRCC leased to Foodmart certain real property and the structures and improvements contained thereon for the purposes of operating the Virgin River Food Mart. The term of the lease was for 30 years at approximately $18,500 a month with Foodmart having the option to extend the lease for two additional ten year periods. Pursuant to the Buyout, the real property, structures and improvements previously leased to Foodmart were not acquired by the Black Trust, but were distributed to the shareholders of VRCC; therefore the lease between VRCC and Foodmart was terminated.
In addition, participants in the Company’s Slot Program are able to redeem their points for gasoline at the Foodmart. Foodmart charges the Company the retail amount of gas purchased with player points. For the years ended December 31, 2007, 2006 and 2005, Foodmart has charged the Company $35,000, $45,000 and $351,000 respectively, for gasoline purchased with points from the Company’s Slot Program.
Black & LoBello is a law firm managed by the daughter of the sole shareholder of the Black Trust. The Company retains Black & LoBello as outside legal counsel, and Black & LoBello has received legal fees for legal services in the amount of $307,000, $303,000 and $131,000 for the years ended December 31, 2007, 2006 and 2005, respectively.
Robert R. Black, Sr. We pay Mr. Black management fees for his management of our business. We paid Mr. Black management fees in the amount of $1.1, $0 and $1.2 million, for the fiscal years ended December 31, 2007, 2006 and 2005, respectively. We have recorded, but not paid, a liability of approximately $863,000 associated with Mr. Black’s management fee at December 31, 2007. In light of current economic conditions, Mr. Black has opted for a fee reduction of $200,000 for the year ended December 31, 2007.
Management fees are paid at the direction of Mr. Black and are accrued quarterly. Pursuant to the terms of the indentures governing the notes and the agreement governing our senior secured credit facility, so long as no default has occurred and is continuing, we may pay Mr. Black management fees up to 5% of our consolidated EBITDA (as that term is defined in the indentures governing the notes and the agreement governing our senior secured credit facility) for the immediately preceding fiscal year. Mr. Black has advised us that it is his present intention to charge us and collect management fees in the maximum amount permitted under the indentures and our senior secured credit facility.
In addition to management fees, commencing January 1, 2005, we have paid Mr. Black an annual salary. As of December 31, 2007 this salary was set at an annualized rate of $556,500. Although Mr. Black has sole authority to set the amount of his salary, he has advised us that his salary will not exceed industry standards.
R. Black, Inc. Concurrently with the closing of the old notes offering, Robert R. Black, Sr. and his affiliate made a $16.0 million equity contribution to us. Robert R. Black, Sr. made a $1.0 million equity contribution to us and R. Black, Inc. made a $15.0 million equity contribution to us. To finance the $15.0 million equity contribution, R. Black, Inc. issued a $15.0 million 8% convertible senior secured note to Michael J. Gaughan, which was amended in December 2005. The convertible note is secured by 331¤3% of the equity interests directly and indirectly owned by Robert R. Black, Sr. in the issuers of the notes and in Black Gaming, LLC. The convertible note will mature in December 2008. The note provides that the issuer may elect up to three one-year extensions and, effective upon each extension, the interest rate would increase 1% per annum. Notwithstanding the convertible note issuer’s election to extend the maturity, the holder of the convertible note may require the convertible note issuer to then satisfy the note, but in such event, at the convertible note issuer’s option, the convertible note may be satisfied either in cash or in shares of common stock (or any conversion thereof) representing a 331¤3% fully-diluted interest (decreased in proportion to any principal paid in cash) in the common stock of each of the issuers and Black Gaming, LLC.
CasaBlanca Resorts, LLC. CasaBlanca Resorts, LLC provided management and other services to the Peppermill Palms Property Owners Association and the Grand Destination Owners Association, which manage and operate the home owners associations of the vacation intervals sold at the properties. As of December 31, 2007 and 2006, respectively, included in the accompanying consolidated balance sheets, respectively, is a receivable for $327,000 and $384,000 related to amounts owed for those services.
Gaming Research. Gaming Research is a consulting firm retained to perform marketing research for the Company. The principal of Gaming Research is the father of the Company’s former chief operating officer. Gaming research received consulting fees of $177,000, $222,000 and $117,000 for the years ended December 31, 2007, 2006 and 2005, respectively.
Town Center Drive & 215, LLC. During 2006, the Company entered into an agreement with Town Center Drive & 215, LLC to lease executive office space. The term of the lease is 84 months at a rate of approximately $11,508 a month. Mr. Black is the owner and manager of Town Center Drive & 215, LLC. In 2007 the Company paid a total of $223,000 to Town Center Drive & 215, LLC under the lease.
Policy for Related Party Transactions
We review all related party transactions on a case by case basis and approve any such transaction in accordance with Nevada corporate law. In addition, the notes prohibit us from entering into certain transactions with certain related parties unless it is determined that the terms of the transaction are fair and reasonable to us, and no less favorable than could have been obtained in an arm’s length transaction with an unrelated party. The notes require additional approvals before we may enter into certain related transactions in which the consideration to either party in the transaction would exceed specified thresholds.
ITEM 14.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES.
The aggregate accounting fees billed and services provided by Ernst & Young LLP, our principal accountant, for the years ended December 31, 2007 and 2006 are as follows:
We do not have an audit committee or a pre-approval policy with respect to any fees paid to Ernst & Young LLP, our principal accountant.
PART IV
ITEM 15.
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)
List the following documents filed as part of the report:
(1)
All financial statements.
Included in “Item 8. Financial Statements and Supplementary Data” above.
(2)
Financial Statement Schedules.
Schedule II - Valuation and Qualifying Accounts
(3)
Exhibit Index.
See exhibits listed on the Exhibit Index following the signature page of this Annual Report, where said Exhibit Index is incorporated herein by reference.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Virgin River Casino Corporation
(Registrant)
Date: March 31, 2008 By: /s/ Robert R. Black, Sr.
Robert R. Black, Sr.
Its: Chairman of the Board, Chief Executive Officer and President
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Robert R. Black, Sr.
Robert R. Black, Sr.
Chairman of the Board, Chief Executive Officer
and President
(Principal Executive Officer)
March 31, 2008
/s/ Sean P. McKay
Sean P. McKay
Chief Accounting Officer
(Principal Financial and Accounting Officer)
March 31, 2008
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Robert R. Black, Sr.
Robert R. Black, Sr.
Chairman of the Board, Chief Executive Officer
and President
(Principal Executive Officer)
March 31, 2008
/s/ Sean P. McKay
Sean P. McKay
Chief Accounting Officer
(Principal Financial and Accounting Officer)
March 31, 2008
EXHIBIT INDEX
Index No.
Description
4.6
Registration Rights Agreement dated as of December 20, 2004, by and among Virgin River Casino Corporation, RBG, LLC, B & B B, Inc., certain subsidiaries and Jefferies & Company, Inc., incorporated by reference to registrant’s Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on March 8, 2005.
4.7
Purchase Agreement dated as of December 10, 2004 by and among Virgin River Casino Corporation, RBG, LLC, B & B B, Inc., certain subsidiaries, certain pledgors and Jefferies & Company, Inc., incorporated by reference to registrant’s Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on March 8, 2005.
4.8
Senior Secured Notes Security Agreement dated December 20, 2004, by and among Virgin River Casino Corporation, RBG, LLC, B & B B, Inc., certain subsidiaries and The Bank of New York Trust Company, N.A., as collateral agent, incorporated by reference to registrant’s Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on March 8, 2005.
4.9
Parent Pledge Agreement dated December 20, 2004 by R. Black, Inc. and The Robert R. Black, Sr. Gaming Properties Trust in favor of The Bank of New York Trust Company, N.A., as collateral agent, incorporated by reference to registrant’s Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on March 8, 2005.
4.10
Trademark Security Agreement dated December 20, 2004, by and among Virgin River Casino Corporation, RBG, LLC, B & B B, Inc., certain subsidiaries and The Bank of New York Trust Company, N.A., incorporated by reference to registrant’s Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on March 8, 2005.
4.11
Credit Agreement dated December 20, 2004, by and among Virgin River Casino Corporation, RBG, LLC, B & B B, Inc., certain subsidiaries, Wells Fargo Foothill, Inc. as the arranger and administrative agent and the other lending parties thereto, incorporated by reference to registrant’s Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on March 8, 2005.
4.12
Security Agreement dated December 20, 2004 B & B B, Inc., CasaBlanca Resorts, LLC, Oasis Interval Management, LLC, Oasis Interval Ownership, LLC, Oasis Recreational Properties, Inc., RBG, LLC and Virgin River Casino Corporation and Wells Fargo Foothill, Inc., as agent, incorporated by reference to registrant’s Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on March 8, 2005.
4.13
Parent Pledge Agreement dated December 20, 2004 by and among Robert R. Black, Sr., The Robert R. Black, Sr. Gaming Properties Trust, R. Black, Inc. in favor of Wells Fargo Foothill Inc., incorporated by reference to registrant’s Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on March 8, 2005.
4.14
Trademark Security Agreement dated December 20, 2004 by and among B & B B, Inc., RBG, LLC, Virgin River Casino Corporation, certain subsidiaries and Wells Fargo Foothill, Inc., incorporated by reference to registrant’s Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on March 8, 2005.
4.15
Bailee Agreement dated December 20, 2004 by and among Wells Fargo Foothill, Inc., The Bank of New York Trust Company, N.A., Nevada Title Company, Robert R. Black, Sr., R. Black, Inc. and Virgin River Casino Corporation, incorporated by reference to registrant’s Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on March 8, 2005.
Index No.
Description
4.16
Intercompany Subordination Agreement dated December 20, 2004 by and among B & B B, Inc., RBG, LLC, Virgin River Casino Corporation, certain subsidiaries and Wells Fargo Foothill, Inc., incorporated by reference to registrant’s Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on March 8, 2005.
4.17
Intercreditor and Lien Subordination Agreement dated December 20, 2004 by and among B & B B, Inc., RBG, LLC, Virgin River Casino Corporation, certain subsidiaries and Wells Fargo Foothill, Inc., Wells Fargo Foothill, Inc. and The Bank of New York Trust Company, N.A., incorporated by reference to registrant’s Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on March 8, 2005.
4.18
Leasehold and Fee Deed of Trust, Security Agreement and Fixture Filing with Assignment of Rents (Nevada) dated as of December 20, 2004 and made by Virgin River Casino Corporation, RBG, LLC, CasaBlanca Resorts, LLC and Oasis Interval Ownership, LLC to Nevada Title Company, as trustee, for the benefit of The Bank of New York Trust Company, N.A., incorporated by reference to registrant’s Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on March 8, 2005.
4.19
Leasehold and Fee Deed of Trust, Security Agreement and Fixture Filing with Assignment of Rents (Arizona) dated as of December 20, 2004 and made by Oasis Recreational Properties, Inc. to Transnation Title Insurance Company, as trustee, for the benefit of The Bank of New York Trust Company, N.A., incorporated by reference to registrant’s Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on March 8, 2005.
4.20
Leasehold and Fee Deed of Trust, Fixture Filing with Assignment of Rents and Leases, and Security Agreement (Nevada) dated as of December 20, 2004 and made by and from RBG, LLC, Virgin River Casino Corporation, CasaBlanca Resorts, LLC, B & B B, Inc., and Oasis Interval Ownership, LLC to Nevada Title Company, as trustee, for the benefit of Wells Fargo Foothill, Inc., incorporated by reference to registrant’s Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on March 8, 2005.
4.21
Leasehold and Fee Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing (Arizona) dated as of December 20, 2004 and made by and from Oasis Recreational Properties, Inc. to Transnation Title Insurance Company, as trustee, for the benefit of Wells Fargo Foothill, Inc., incorporated by reference to registrant’s Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on March 8, 2005.
4.22
Assignment of Entitlements, Contracts, Rents and Revenues (Nevada) dated December 16, 2004 by and between Virgin River Casino Corporation, RBG, LLC, CasaBlanca Resorts, LLC, Oasis Interval Ownership, LLC, B & B B, Inc. and The Bank of New York Trust Company, N.A., incorporated by reference to registrant’s Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on March 8, 2005.
4.23
Assignment of Entitlements, Contracts, Rents and Revenues (Arizona) dated December 17, 2004 by and between Oasis Recreational Properties, Inc. and The Bank of New York Trust Company, N.A., incorporated by reference to registrant’s Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on March 8, 2005.