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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required] For the fiscal year ended December 31, 2002

[ ] Transition report pursuant to sections 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required] For the transition period
from ____________ to _____________

Commission file number 000-21430

RIVIERA HOLDINGS CORPORATION
(Exact name of Registrant as specified in its charter)

Nevada 88-0296885
- ------------------------ ----------------
(State of Incorporation) (I.R.S. Employer Identification No.)

2901 Las Vegas Boulevard South
Las Vegas, Nevada 89109
- --------------------------------------- -----------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (702) 734-5110
--------------

Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value
(Title of class)

Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO _____
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or amendment
to this Form 10-K.

Based on the average bid price for the Registrant's Common Stock as
of March 6, 2003 the aggregate market value of the voting stock held by
non-affiliates of the Registrant was approximately $13,523,081. As of March 6,
2003 the number of outstanding shares of the
Registrant's Common Stock was 3,606,155.

Documents incorporated by reference:
2003 definitive proxy statement (to be filed pursuant to Regualation 14A)
involving the election of directors: Part III of this Form 10-K.


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Page 1 of 44 pages
Exhibit Index Appears on Page 37 hereof.


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RIVIERA HOLDINGS CORPORATION AND SUBSIDIARY
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED DECEMBER 31, 2002

TABLE OF CONTENTS


Item 1. Business............................................................3
General .........................................................3
Riviera Las Vegas................................................3
Riviera Black Hawk...............................................7
Geographical Markets.............................................8
Management Activities and New Venues.............................9
Competition.....................................................10
Employees and Labor Relations...................................12
Regulation and Licensing........................................12
Federal Registration............................................20

Item 2. Properties.........................................................21

Item 3. Legal Proceedings..................................................21

Item 4. Submission of Matters to a Vote of Security Holders................21

Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters.....................................................21

Item 6. Selected Financial Data............................................22

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations..............................................23
Results of Operations...........................................23
2002 Compared to 2001...........................................23
2001 Compared to 2000...........................................25
Liquidity and Capital Resources.................................28
Critical Accounting Policies....................................30
Recently and Adopted Accounting Standards.......................31

Item 7A. Qualitative and Quantitative Disclosure About Market Risk..........33
Forward Looking Statements......................................33

Item 8. Financial Statements and Supplementary Data........................35

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...............................................35

Item 10. Directors and Executive Officers of the Registrant.................35

Item 11. Executive Compensation.............................................35

Item 12. Principal Shareholders.............................................35

Item 13. Certain Relationships and Related Transactions ....................35

Item 14. Controls and Procedures............................................35

Item 15. Exhibits and Reports on Form 8-K...................................36


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PART I

Item 1. Business

General

Riviera Holdings Corporation, a Nevada corporation (the "Company"),
through its wholly owned subsidiary, Riviera Operating Corporation, a Nevada
corporation, owns and operates the Riviera Hotel & Casino ("Riviera Las Vegas")
located on Las Vegas Boulevard in Las Vegas, Nevada. Opened in 1955, the Riviera
Las Vegas has developed a long-standing reputation for delivering high quality,
traditional Las Vegas-style gaming, entertainment and other amenities.

Riviera Holdings Corporation, through its wholly owned subsidiary,
Riviera Black Hawk, Inc., owns and operates the Riviera Black Hawk Casino
("Riviera Black Hawk") a limited-stakes casino in Black Hawk, Colorado which
opened on February 4, 2000.

The Chief Decision Maker determines segments based upon geographic
gaming markets and also reviews corporate expenses separately. The Company has
two segments, the Las Vegas, Nevada market, the Black Hawk, Colorado market. The
segment information can be found in Note 16 of the Notes to the Consolidated
Financial Statements included in this document.

Riviera Las Vegas

General

Riviera Las Vegas is located on the corner of Las Vegas Boulevard and
Riviera Boulevard in Clark County, Nevada, across from Circus Circus. Riviera
Las Vegas targets slot and mid-level table game customers with a focus on
creating repeat customers and increasing walk-in traffic. Key elements of this
strategy include offering a value-oriented experience by providing a variety of
hotel rooms, restaurants and entertainment, with some of Las Vegas' most popular
shows, all at reasonable prices.

Gaming

Riviera Las Vegas has 110,000 square feet of casino space. The casino
currently has approximately 1,450 slot machines and 31 gaming tables, including
blackjack, craps, roulette, pai gow poker, Caribbean Stud(R) poker, Let It
Ride(R) and mini-baccarat. The casino also includes a keno lounge and a 200-seat
race and sports book.

Gaming operations at Riviera Las Vegas are continually updated to
respond to both changing market conditions and customer demand in an effort to
attract new customers and encourage repeat customer business through player
tracking and database management. We maintain a slot players club, through which
members receive special promotions and targeted mailings. New and innovative
slot and table games have been introduced based on customer feedback. Management
devotes substantial time and attention to the type, location and player activity
of all its slot machines. We maintain a capital investment program for the
upgrade of our slot machines.

Our current management team redirected our business away from
high-stakes wagerers in favor of the less volatile mid-level gaming customers.
In order to effectively pursue this strategy, we made several strategic changes
including reconfiguring the casino space, installing new slot machines, reducing
the number of gaming tables and eliminating the baccarat room. In addition, we
implemented stricter credit policies. As a result, the percentage of table game
dollar volume represented by credit play declined from approximately 24% in 1993
to 6% in 2002. Also, in 2002, revenues from slots and tables were approximately
77% and 20% of total gaming revenue, respectively, as compared to 60% and 34%,
respectively, in 1993.

During 2002, we continued a number of initiatives at Riviera Las
Vegas to increase slot play, including the replacement of older slot machines,
with new machines utilizing the ticket in/ticket out technology to improve
service and convenience to our customers, and maintaining our slot host program.
Slot hosts are our employees who interact with patrons as goodwill ambassadors
to generate loyalty. Our strategy is to continue to increase slot play through
marketing programs and other improvements, including (i) our ongoing slot
upgrade program, (ii) addition of new signage, (iii) promotion of the Riviera
Las Vegas Player's Club, (iv) sponsorship of slot tournaments, (v) creation of
promotional programs, (vi) marketing of the "Slot Frenzy" and "$40 for $20(R)"
slot promotions, and (vii) "Nickel Town(R)". Nickel Town is comprised primarily
of penny and nickel slot machines, the fastest growing segment of the Las Vegas
slot market.


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Hotel

Riviera Las Vegas' hotel is comprised of five hotel towers with
approximately 2,100 guest rooms, including 169 suites. Built in 1955 as part of
the original casino/hotel, the nine-story North Tower features 391 rooms and 11
suites. In 1967, the 12-story South Tower was built with 147 rooms and 31
suites. Another 220 rooms and 72 suites, including penthouse suites, were added
to the property through the construction of the 17-story Monte Carlo Tower in
1974. In 1977, the six-story San Remo Tower added 243 rooms and six suites to
the south side of the resort. The most recent phase of hotel expansion was
completed in 1988 upon the opening of the 930 room, 49 suite, 24-story Monaco
Tower. By the end of 2001 we completed refurbishment of all of our approximately
2,100 hotel rooms and suites. Despite the significant increase in rooms on the
Las Vegas Strip since 1997, we believe Riviera Las Vegas has attained room
occupancy rates that are among the highest on the Las Vegas Strip with 97.5% for
1994, 97.0% for 1995, 98.2% for 1996, 95.7% for 1997, 95.2% for 1998, 97.5% for
1999, 96.6% for 2000, 91.5% for 2001 and 89.6% for 2002 (based on available
rooms). The average occupancy rate citywide (metropolitan area) was 84.0% in
2002 according to the Las Vegas Convention and Visitors Authority.

Restaurants

The quality, value and variety of food services are critical to
attracting Las Vegas visitors. Riviera Las Vegas offers five (5) bars and four
(4) restaurants and serves an average of approximately 5,312 meals per day,
including banquets and room service. Riviera completely remodeled its buffet in
2001 upgrading the ambiance and food quality, featuring cuisine from various
countries as well as a carving station. The following table outlines, for each
restaurant, the type of service provided and total seating capacity:



Name Type Seating Capacity

Kady's Coffee Shop 290
Kristofer's Steak and Seafood 162
Ristorante Italiano Italian 126
World's Fare Buffet All-you-can-eat 366
---
944
===


In addition, Riviera Las Vegas operates a snack bar and continental
breakfast buffet as well as a fast-food court operated by a third party. The
food court has 200 seats and several fast-food restaurants, including Burger
King(R), Pizza Hut(R), Panda Express(R), Quiznos(R) and La Salsa(R).

Convention Center

Riviera Las Vegas features 160,000 square feet of convention, meeting
and banquet space. The convention center is one of the largest in Las Vegas and
is an important feature that attracts customers. The facility can be
reconfigured for multiple meetings of small groups or large gatherings of up to
5,000 people. Riviera Las Vegas hosted 378 conventions in 2002. The hotel
currently has over 708,000 convention related advance bookings of rooms through
2006 consisting of approximately 469,000 definite bookings and approximately
239,000 tentative bookings. In 2002 approximately 29.0% of the rooms were
occupied for conventions, and management estimates that 30.1% of its rooms will
be occupied for conventions in 2003.

The Royal Pavilion portion of the convention center, which opened in
February 1999, and represents approximately 60,000 square feet of our convention
facility, features state-of-the-art convention, meeting and banquet facilities,
teleconferencing and satellite uplink capability and twelve (12) skyboxes.

Entertainment

Riviera Las Vegas has one of the most extensive entertainment
programs in Las Vegas, offering up to eight different regularly scheduled shows
and special appearances by headline entertainers in concert. We believe
entertainment provides an attractive marketing tool to attract customers to the
Riviera. Riviera Las Vegas' entertainment program includes such well received
shows as Splash(R) (a variety show), An Evening at La Cage(R) (a female
impersonation show), Crazy Girls(R) (an adult revue), featured comedians at the
Riviera Comedy Club and up to four different regularly scheduled shows in our
LeBistro Theater. We


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update our shows continually in response to customer surveys and to keep them
fresh. Tickets for the shows are offered at reasonable prices in keeping with
our emphasis on mid-level customers. The Riviera Mardi Gras shows of "La Cage"
and the "Comedy Club" received First Place and Third Place awards, respectively,
for "Best Las Vegas Shows" from What's On Magazine.

The following table outlines, for each entertainment center, the type
of service provided and total seating capacity:

Name Type Seating Capacity

Splash Variety 875
La Cage Female impersonation 575
Crazy Girls Adult Revue 375
Comedy Club Comedy 350
Le Bistro Variety 190
---
2,365
=====

In addition, Riviera Las Vegas presents major concerts which since
1998 have included performers such as The Beach Boys, Billy Ray Cyrus, Rich
Little, Drew Carey, Damon Wayans, Titus, Brett Butler and D.L. Hughley. The
addition of the Royale Pavilion has enabled us to increase attendance at special
events since, in the past, the then existing facilities could not accommodate
the demand for tickets.

We believe that our substantial entertainment revenue is attributable
to the popularity of the in-house productions supplemented by focused marketing
and consistent advertising messages.

Future Expansions

We continue to explore the possible development of an approximately
60,000 square-foot entertainment complex to be constructed directly over the
casino, which could contain specialty themed entertainment that will appeal to
the Riviera Las Vegas' main target audience, adults aged 45 to 65. The exit from
the complex would deliver patrons to the casino. We would require partners to
finance, develop and operate the entertainment attraction. We have executed a
Letter of Intent with a potential partner and are in the process of negotiating
a formal agreement.

We are exploring a number of options for the development of our
existing 26-acre site. These options include a joint venture for the development
of a time-share condominium tower or an additional hotel tower and parking
garage. Under the terms of our $215 million Bond Indenture, we could contribute
up to 6 acres of land to such projects and if we decide to develop a time-share
tower a third party would construct and sell time-share units and arrange
financing. We believe that additional rooms adjacent to the Las Vegas Convention
Center would be particularly attractive to business customers and would provide
a base for additional casino customers. The development of a time-share tower,
hotel tower or parking facility would require additional financing and, in the
case of the time-share tower, a joint venture partner, none of which we have in
place at this time.

Marketing Strategies-Las Vegas

We have developed a marketing program intended to develop a loyal
following of repeat slot and mid-level table game customers. We believe we have
been able to successfully attract these patrons using Riviera Las Vegas'
restaurants, hotel accommodations and entertainment and by focusing on customer
service. We have adopted a selective approach to the extension of credit to
these customers in order to reduce volatility of operating results. We use our
research data to tailor promotional offers to the specific tastes of targeted
customers. All slot and table players are encouraged to join the Riviera Las
Vegas Player's Club and to fill out surveys that provide us with personal
information and preferences and tracks their level of play. Members of the
Riviera Las Vegas Player's Club earn bonus points based upon their level of
play, redeemable for free gifts, complimentary services or cash rebates.
Promotional offers are made to qualifying customers through direct mail and
telemarketing.

Riviera Las Vegas will continue to emphasize marketing programs that
appeal to slot and mid-level table game customers with a focus on creating
repeat customers and increasing walk-in traffic. In addition, a key marketing
focus is expanding Riviera Las Vegas' core conventioneer customer base. In
developing an overall marketing program, we conduct extensive, ongoing research
of our target customers' preferences through surveys, one-on-one interviews and
focus groups.


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Create Repeat Customers

Generating customer loyalty is a critical component of our business
strategy as retaining customers is less expensive than attracting new ones. We
have developed a focused and coordinated marketing program intended to develop a
loyal customer base which emphasizes (i) providing a high level of service to
our customers to ensure an enjoyable experience while at the Riviera Las Vegas,
(ii) responding to customer surveys and (iii) focusing marketing efforts and
promotional programs on customers with positive gaming profiles. We use our
research data to tailor promotional offers to the specific tastes of targeted
customers. All slot and table players are encouraged to join the Riviera Las
Vegas Player's Club which tracks their level of play, and to fill out surveys
that provide the Riviera Las Vegas with personal information and preferences.
Members of the Riviera Las Vegas Player's Club earn bonus points based upon
their level of play, redeemable for free gifts, complimentary services or cash
rebates. Promotional offers are made to qualifying customers through direct mail
and telemarketing. We design promotional offers targeted at certain mid-level
gaming patrons that are expected to provide significant revenues based upon
their historical gaming patterns. We contact these customers through a
combination of direct mail and telemarketing by an in-house marketing staff and
independent representatives located in major cities. Riviera Las Vegas uses a
proprietary database which is linked to our player tracking system to help
identify customers' requirements and preferences, thereby allowing Riviera Las
Vegas to customize promotions to attract repeat visitors. We offer customers
personalized service, credit availability and access to a variety of
complimentary or reduced-rate room, dinner and entertainment reservations. We
use a specialized multi-tiered marketing approach to attract customers in each
of our major markets. Slot and table game tournaments and special events are
designed for specific levels of play. Utilizing our proprietary database our
marketing department then targets and invites the customers most appropriate for
the customized events. In addition, we host an array of special events,
including slot and table tournaments, designed to attract customers for an
extended stay. We have found that this individualized marketing approach has
provided significant revenues and profitable repeat business.

Provide Extensive Entertainment Options

We also focus on attracting our guests through a range of
entertainment opportunities. Riviera Las Vegas has one of the most extensive
entertainment programs in Las Vegas with up to eight different regularly
scheduled shows and special appearances by headline entertainers. In addition to
providing a positive impact on our profitability, the shows attract additional
gaming revenue. Surveys indicate that approximately 73% of the show patrons come
from outside the hotel and approximately 72% of these individuals gamble at
Riviera Las Vegas before or after the shows.

Attract Walk-In Traffic

We seek to maximize the number of people who patronize the Riviera
Las Vegas who are not guests in the hotel by capitalizing on Riviera Las Vegas'
prime Strip location, convention center proximity and the Riviera's several
popular in-house productions. Riviera Las Vegas is well situated on the Las
Vegas Strip near Circus Circus, Stardust Hotel & Casino, Westward Ho Casino &
Hotel, Sahara Hotel & Casino, Las Vegas Hilton and the Las Vegas Convention
Center. We strive to attract customers from those facilities, as well as
capitalize on the visitors in Las Vegas in general, with the goal of increasing
walk-in traffic by (i) the development and promotion of Nickel Town, (ii)
providing a variety of quality, value-priced entertainment and dining options,
and (iii) promoting "Slot Frenzy," the "Free Pull" and the "$40 for $20" slot
promotions, and placing them inside the casino.

Focus on Convention Customers

This market consists of two groups: (i) those trade organizations and
groups that hold their events in the banquet and meeting space provided by a
single hotel and (ii) those attending city-wide events, usually held at the Las
Vegas Convention Center. Riviera Las Vegas targets convention business because
it typically provides patrons willing to pay higher room rates and we are able
to provide certain advance planning benefits, since conventions are usually
booked two years in advance of the event date. We focus our marketing efforts on
conventions whose participants have the most active gaming profile and higher
room rate, banquet and function spending habits. Riviera Las Vegas also benefits
from our proximity to the Las Vegas Convention Center which makes us attractive
to city-wide conventioneers looking to avoid the congestion that occurs during a
major convention, particularly at the south end of the Las Vegas Strip. In 2002
we derived 29.1% of our hotel occupancy from convention customers and consider
them a critical component of our customer base. We believe that the completed
expansion of the Riviera Las Vegas' convention facility in February 1999, from
100,000 to 160,000 square feet, has accommodated the growth in size and number
of groups that presently use the facility, attracted new convention groups and
increased the percentage of rooms occupied by conventioneers.


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Tour and Travel Operators

We have found that many of our customers use tour and travel
"package" options to reduce the cost of travel, lodging and entertainment. These
packages are produced by wholesale operators and travel agents and emphasize
mid-week stays. Tour and travel patrons often book at off-peak periods enabling
us to maintain occupancy rates at the highest levels throughout the year. We
have developed specialized marketing programs and cultivated relationships with
wholesale operators, travel agents and major domestic air carriers to expand
this market. Our four largest tour and travel operators currently account for
approximately 20.9% of the available 2,100 room bookings per night. We make an
effort to convert many tour and travel customers who meet our target customer
gaming profile into repeat slot customers.

Riviera Black Hawk

Business

Our wholly owned subsidiary, Riviera Black Hawk, opened on February
4, 2000. Located in Black Hawk, Colorado, approximately 40 miles west of Denver,
our casino is one of the first three encountered when traveling from Denver to
the adjacent gaming cities of Black Hawk and Central City. Our casino features
the fourth largest number of gaming devices in the market with approximately
1,000 slot machines and 9 blackjack tables. In Colorado, each slot machine and
each table game is considered one gaming device.

We also offer a variety of non-gaming amenities designed to further
differentiate our casino including:

o parking for 520 vehicles, of which 92% are covered, with convenient
and free self-park and valet options;

o a newly remodeled 252-seat casual buffet-styled restaurant;

o a Pizza Hut(R);

o two themed bars; and

o an entertainment center with seating for approximately 440 people.

The initial participants in this market were small, privately held
gaming facilities whose inability to offer convenient parking and a full range
of traditional casino amenities limited the growth of this market. Subsequently,
larger casinos offering such amenities have entered the market, have been
gaining market share and have contributed to the consistent growth in the
overall market. As of December 31, 2002, there were 25 casinos in the Black
Hawk/Central City market, with 11 casinos each offering more than 400 gaming
devices. Isle of Capri, located across the street from our casino with
approximately 1,120 gaming machines and 1,000 covered parking spaces, has been
the market leader in terms of win per gaming device.

Marketing strategy

We attract customers to our casino by implementing marketing
strategies and promotions designed specifically for this market. In so doing, we
hope to create customer loyalty and benefit from repeat visits by our customers.
Specific marketing programs to support this strategy include the Riviera Black
Hawk Player's Club and "V.I.P." services offered to repeat gaming customers. The
Riviera Black Hawk Player's Club is a promotion that rewards casino play and
repeat visits to the casino with various privileges and amenities such as cash
bonuses, logo gift items and invitations to special events, such as parties and
concerts. We have used the Player's Club promotion in our casino in Las Vegas
and, in our capacity as manager of the Riviera Black Hawk, have tailored it for
the Black Hawk/Central City market to implement at our casino. "V.I.P." services
are available to the highest level of players and include special valet and
self-parking services, complimentary food and entertainment offerings and
special events specifically designed for this group of customers.


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We benefit from strong "walk-in" traffic due to the proximity of our
casino to the Colorado Central Station and the Isle of Capri Casino. We have and
continue to develop specific marketing programs designed to attract these
"walk-in" customers. We emphasize quality food and beverage amenities with
customer friendly service as a marketing tool. In addition, we provide
entertainment programs designed to meet the tastes of the Black Hawk/Central
City market, such as live music performances by popular regional and national
groups, comedians and boxing.

We rely on database marketing in order to best identify target
customer segments of the population and to tailor the casino's promotions and
amenities to our core group of customers. We use the current database to
identify and stratify slot players living primarily in Colorado for appropriate
incentives. Approximately 203,000 of these slot players have been identified as
of December 31, 2002. In addition, we promote our casino by advertising in
newspapers, on billboards and on the radio in the local areas.


Geographical Markets

The Las Vegas Market

Las Vegas is one of the largest and fastest growing entertainment markets
in the country. According to the Las Vegas Convention and Visitors Authority,
the number of visitors who traveled to Las Vegas during the 16-year period from
1986 through 2002 increased at a steady and significant rate from 15.2 million
in 1986 to 35.0 million in 2002, a compound annual growth rate of 6.3%. Just
over 35 million people visited Las Vegas in 2001, a 2.3% decline from 2000.
Visitor volume dropped drastically following the September 11,2001 terrorist
attacks. Visitor volume increased 0.2% to slightly over 35 million in 2002, as
compared to 2001. Clark County gaming continued to be a strong and growing
business with Clark County gaming revenues increasing at a compound annual
growth rate of 8.7% from $2.4 billion in 1986 to just under $7.7 billion in
2000. Clark County gaming revenues dropped 0.1% to just over $7.6 billion in
2001 and were flat at $7.6 billion in 2002. The terrorist attacks of September
11, 2001 have had, and may continue to have, an adverse effect on the number of
visitors traveling to Las Vegas. Additional terrorist attacks or a war could
also have an adverse effect on the number of visitors traveling to Las Vegas.

Gaming and tourism are the major attractions of Las Vegas, complemented by
warm weather and the availability of many year-round recreational activities.
Although Las Vegas' principal market is the western region of the United States,
most significantly Southern California and Arizona, Las Vegas also serves as a
destination resort for visitors from all over the world. A significant
percentage of visitors originate from Latin America and Pacific Rim countries
such as Japan, Taiwan, Hong Kong and Singapore. The events of September 11, 2001
have had, and may continue to have, an adverse impact on the number of Latin
American and Pacific Rim visitors coming to Las Vegas. Japan Air Lines ceased
its daily non-stop service between Tokyo and Las Vegas after September 11,
2001 but reinstated non-stop service three days per week in March 2002.

Historically, Las Vegas has had one of the strongest hotel markets in
the country. The number of hotel and motel rooms in Las Vegas has increased by
over 89% from approximately 67,000 at the end of 1989 to 126,787 at the end of
2002, giving Las Vegas the most hotel and motel rooms of any metropolitan area
in the world. Despite this significant increase in the supply of rooms, the Las
Vegas hotel occupancy rate exceeded 84% for each of the years from 1993 through
2002. During the calendar year 2002 1,327 new hotel rooms opened in Las Vegas.

We believe that the growth in the Las Vegas market has been enhanced
as a result of (i) a dedicated program by the Las Vegas Convention and Visitors
Authority and major Las Vegas casino/hotels to promote Las Vegas as a major
convention site, (ii) the increased capacity of McCarran Airport and (iii) the
introduction of large themed "must see" destination resorts in Las Vegas. In
1988, approximately 1.7 million delegates attended conventions in Las Vegas and
generated approximately $1.3 billion of economic impact. Even though the
terrorist attacks negatively impacted major city-wide conventions, the number of
convention delegates had increased to 5.1 million in 2002 with in excess of $5.9
billion of economic impact.

During the past nine years, McCarran Airport has expanded its
facilities to accommodate the increased number of airlines and passengers which
it services. The number of passengers traveling through McCarran Airport has
increased from approximately 22.5 million in 1993 to an estimated 35.0 million
in 2002. Construction has recently been completed on numerous roadway
enhancements to improve access to the Airport. McCarran Airport is ranked among
the 11 and 7 busiest airports in the world and North America, respectively,
based on passenger activity.


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The Black Hawk/Central City Market

Gaming was first introduced to the Black Hawk/Central City market in
October 1991 following a state-wide referendum where Colorado voters approved
limited stakes gaming for three historic mining towns, namely Black Hawk,
Central City and Cripple Creek. Limited stakes gaming is defined as a maximum
single bet of $5.00. Black Hawk and Central City are contiguous cities located
approximately 40 miles west of Denver and about 10 miles north of Interstate
Highway 70, the main east-west artery from Denver. Historically, these two gold
mining communities were popular tourist towns. However, since the inception of
casino gaming in October 1991, gaming establishments has displaced many of the
former tourist-related businesses.

The first casino in the Black Hawk/Central City market was opened in
October 1991 with 14 casinos open by the end of that year. The pace of expansion
increased further in 1992 with the number of casinos in the market peaking at 42
casinos. However, due to a trend of consolidation in the market and the
displacement of small casinos by the entry of larger, better capitalized
operators, the number of casinos has declined to 25 as of December 31, 2002.

The Black Hawk/Central City market primarily caters to "day-trip"
customers from Denver, Boulder, Fort Collins and Golden as well as Cheyenne,
Wyoming. We believe an estimated adult population exceeding 2.7 million people
resides within this 100-mile radius of Black Hawk. In addition, we believe that
residents within a 100-mile radius of the City of Black Hawk had an estimated
average household income in excess of $55,000 per annum in 2002.

Since 1992, the number of gaming devices in the Black Hawk/Central
City market has grown approximately 52% from 7,252 devices in 1992 to 11,012
devices in 2002. Gaming revenues in the Black Hawk/Central City market grew by
7.3% in 2002 over 2001. The City of Black Hawk itself experienced a 9.6%
increase in gaming revenue in 2002.

The City of Black Hawk has experienced more significant growth in
gaming revenues than Central City since 1992. The popularity of Black Hawk in
comparison to Central City is due primarily to Black Hawk's superior access to
major highways, as patrons must first pass through Black Hawk to access Central
City from Denver. Due to this superior location, larger casino operators have
focused on building in the City of Black Hawk. As a result, casinos in Black
Hawk now generally feature a larger average number of gaming devices, a wider
variety of amenities and convenient free parking for patrons.

Management Activities and New Venues

In order to capitalize on our expertise and reputation as successful
operators of casino properties, we formed Riviera Gaming Management, Inc., our
wholly owned subsidiary, for the primary purpose of obtaining casino management
contracts in Nevada and other jurisdictions. Riviera Gaming Management offers
services such as assisting new venue licensee applicants in designing and
planning their gaming operations and managing the start-up of new gaming
operations. These services include casino design, equipment selection, employee
recruitment and training, control and accounting systems development and
marketing programs. We believe that management contracts provide high margin
income with limited additional overhead and little or no capital expenditure
requirements. We are continually evaluating opportunities to manage other
casinos/hotels. Our objective is to obtain the right to a substantial equity
position in projects we would manage as part of the compensation for our
services.

New Venues

Our diversification efforts are proceeding with our endorsement by
Jefferson County, Missouri for a casino/hotel development project located
approximately 22 miles south of downtown St. Louis. We filed our formal
application with the Missouri Gaming Commission on October 9, 2002 and look
forward to presenting our project to the State of Missouri. We expect to make
our formal presentation before the Missouri Gaming Commission sometime in the
first half of 2003 and we anticipate a decision sometime this summer. Assuming
we were to receive approval from the state regulators, construction work should
start in the fall 2003, with a completion date in late 2005.

We filed an application with the New Mexico Racing Commission in March
of 2002 for a "racino" in Hobbs, New Mexico. The Commission plans to reopen
hearings for a horse-racing license in Hobbs in the spring of 2003 with a
decision to be made shortly thereafter.


9



Other Management Opportunities

We are continuously reviewing opportunities to expand and become a
multi-jurisdictional casino company with greater capital resources to enable us
to compete more effectively. The jurisdictions include, but are not limited to,
California, Mississippi, Pennsylvania, Missouri, New Mexico and Iowa. We may
also become involved in financially distressed casino properties where we
believe we may be able to effect a turn-around (similar to that which we
achieved at Riviera Las Vegas) and can obtain a significant equity stake.

Competition

Las Vegas, Nevada

Intense competition exists among companies in the gaming industry,
many of which have significantly greater resources than our Company. Riviera Las
Vegas faces competition from all other casinos and hotels in the Las Vegas area.
We believe that our most direct competition comes from certain large
casino/hotels located on or near the Las Vegas Strip which offer amenities and
marketing programs similar to those offered by the Riviera Las Vegas.

At December 31, 2002, the Las Vegas Convention and Visitors Authority
(LVCVA) indicated that there were 24 casinos on the Las Vegas Strip which had
over 1,000 available hotel rooms. Riviera Las Vegas is ranked as the 21st
largest Las Vegas Strip hotel/casino, based upon number of available hotel
rooms.

Las Vegas gaming square footage and room capacity are continuing to
grow and are expected to continue to increase during the next several years.
During calendar year 2002, approximately 1,327 new hotel rooms opened, and as of
December 31, 2002, there were approximately 1,000 hotel rooms under
construction. Existing and future expansions, additions and enhancements to
existing properties and construction of new properties by our competitors could
divert additional business from our facilities. There can be no assurance that
we will compete successfully in the Las Vegas market in the future.

During 2002, available room nights in the Las Vegas market increased
from 45.6 million to 46.2 million or 1.3%, while total room nights occupied
increased from 38.6 million to an estimated 38.8 million, or 0.5%. The ending
room inventory at December 31, 2002 was 126,787 compared to 126,610 at December
31, 2001, an increase of 177 rooms or 0.1%. This has had the effect of
intensifying competition. At Riviera Las Vegas, room occupancy decreased from
91.6% in 2001 to 89.6% in 2002 (still higher than the Las Vegas Strip
averageof 88.9%and 88.8%, respectfully). Room rates decreased by $2.53, or 4.1%
from $62.46 in 2001 to $59.93 in 2002.

We also compete to some extent with casinos in other states,
riverboat and Native American gaming ventures, state-sponsored lotteries, on-
and off-track wagering, card parlors and other forms of legalized gaming in the
United States, as well as with gaming on cruise ships and international gaming
operations. In addition, certain states have recently legalized or are
considering legalizing casino gaming in specific geographical areas within those
states. Any future development of casinos, lotteries or other forms of gaming in
other states, particularly areas close to Nevada, such as California, could have
a material adverse effect on our results of operations.

The number of casinos on Indian lands has increased since the
enactment of the Indian Gaming Regulatory Act of 1988. The voters in the State
of California addressed this issue on March 7, 2000 when they voted in favor of
Proposition 1A, an amendment to the California State constitution that allows
Las Vegas-style gambling on Indian lands in the state. While new gaming
jurisdictions have traditionally not materially impacted Las Vegas, the
expansion of gaming into California poses a more serious threat to the continued
growth of Las Vegas.

Our current business is highly dependent on gaming in Las Vegas.
Riviera Las Vegas derives a substantial percentage of its business from
tourists, including customers from Southern California and the southwestern
United States. Weakness in the economy of Southern California has in the past,
and could in the future, adversely affect our financial results. Possible
utility rate increases in California could also adversely affect our financial
results. The events of September 11, 2001 have had the most serious effect, and
could continue to have an adverse effect on our financial results. Additional
terrorist attacks or a war could also have an adverse effect on our financial
results.


10


Black Hawk, Colorado

The Black Hawk/Central City gaming market is characterized by intense
competition. The primary competitive factors in the market are location,
availability and convenience of parking, number of slot machines and gaming
tables, promotional incentives, hotel rooms, types and pricing of non-gaming
amenities, name recognition and overall atmosphere. Our main competitors are the
larger gaming facilities, particularly those with considerable on-site or nearby
parking and established reputations in the local market. As of December 31, 2002
there were 25 gaming facilities in the Black Hawk market with 11 casinos each
offering more than 400 gaming positions. Additional projects have also been
announced, proposed, discussed or rumored for the Black Hawk/Central City
market.

The gaming facilities near the intersection of Main and Mill Streets
provide significant competition to our casino. Colorado Central Station, which
has been one of the most successful casinos in Colorado, is located across the
street from our casino and has 754 slot machines, 15 gaming tables and
approximately 700 valet parking spaces. The Isle of Capri Casino, the most
successful casino in Colorado, which opened in December 1998, is located
directly across the street from our casino and features approximately 1,120 slot
machines, 14 table games, 1,000 parking spaces, and 235 hotel rooms. Isle of
Capri has recently announced its acquisition of Colorado Central Station,
pending regulatory approval. Isle of Capri has also announced its plan to
renovate Colorado Central Station with the addition of a 1,400 space parking
garage, a 165 room hotel and a restaurant on land immediately across Main Street
from Colorado Central Station and diagonally across from our casino. We believe
that the completion of the sale and the planned renovations will increase the
probability that more customers will frequent the immediate area serviced by
Isle of Capri, Colorado Central Station and our casino. We do not expect the
planned renovations to be complete until some time in 2004.

The number of hotel rooms currently in the Black Hawk/Central City
market is approximately 405, with only three gaming facilities providing hotel
accommodations to patrons. These include Harvey's Wagon Wheel Casino Hotel with
approximately 120 rooms, the Lodge at Black Hawk with approximately 50 rooms and
the Isle of Capri Casino with 235 rooms. Casinos offering hotel accommodations
for overnight stay may have a competitive advantage over our casino. However, we
believe that self-parking is a more effective utilization of our available space
and that providing hotel accommodations will not be a significant factor, but
instead will contribute to growth in the overall market.

Historically, the city of Black Hawk has enjoyed an advantage over
Central City because customers have to drive through Black Hawk to reach Central
City. Central City has received approval for the development of a road directly
connecting Central City and Black Hawk with Interstate 70 which would allow
customers to reach Central City without driving by or through Black Hawk. There
remain significant financial obstacles to the development of this road and it is
uncertain whether it will be developed over the near to intermediate term, or
developed at all.

Currently, limited stakes gaming in Colorado is constitutionally
authorized in Central City, Black Hawk, Cripple Creek and two Native American
reservations in southwest Colorado. However, gaming could be approved in other
Colorado communities in the future. The legalization of gaming closer to Denver
would likely have a material adverse effect on our future results of operations.
We also compete with other forms of gaming in Colorado, including lottery
gaming, and horse and dog racing as well as other forms of entertainment.

It is also possible that new forms of gaming could compete with our
casino. Currently, Colorado law does not authorize video lottery terminals.
However, Colorado law permits the legislature, with executive approval, to
authorize new types of lottery gaming, such as video lottery terminals. Video
lottery terminals are games of chance, similar to slot machines, in which the
player pushes a button that causes a random set of numbers or characters to be
displayed on a video screen. The player may be awarded a ticket, which can be
exchanged for cash or credit play. A Racing Industry Group has introduced a
proposed initiative for the legalization of Video Lottery Terminals at five
horse and dog racetracks in Colorado. The initiative proposes the authorization
of 500 Video Lottery Terminals per racetrack which would be governed by the
Colorado Lottery. The initiative would permit the Video Lottery Terminals in
three racetracks in Denver, one in Colorado Springs and one in Pueblo. This form
of gaming could compete with slot machine gaming.

Pursuant to a license agreement, Riviera Las Vegas licenses the use
at the Black Hawk casino of all of the trademarks, service marks and logos used
by Riviera Las Vegas. In addition, the license agreement provides that
additional trademarks, service marks and logos acquired or developed by us and
used at our other facilities will be subject to the license agreement.


11


Employees and Labor Relations

Riviera Las Vegas

As of December 31, 2002 Riviera Las Vegas had approximately 1,350 full-time
equivalent employees and had collective bargaining contracts with eight unions
covering approximately 800 of such employees including food and beverage
employees, rooms department employees, carpenters, engineers, stage hands,
musicians, electricians, painters and teamsters. Our agreements with the
Southern Nevada Culinary and Bartenders Union, which covers the majority of our
unionized employees, was renegotiated in 2002 and expires in the year 2007. The
Collective Bargaining Agreement with the Stage Hands Union expired in 2002 and
Collective Bargaining Agreements with the Operating Engineers and Musicians
expired in 1999. The Operating Engineers approved a new agreement that expires
in the year 2004. We are currently in negotiations with the Musicians and Stage
Hands Unions. The Agreements with the Carpenters and Painters expired in 2000.
New agreements, which expire in 2005, were negotiated with the Painters in 2000
and Carpenters in 2001. New agreements were negotiated with the Teamsters in
1998 and Electricians in 1999 and expire on April 1, 2003 and in 2004,
respectively. We are currently in negotiations with the Teamsters Union. On
November 27, 2000, the Transport Workers Union filed a petition with the
National Labor Relations Board to represent the Blackjack, Dice and Poker
Dealers (or, the "Dealers"). On February 8 and 9, 2001, the Dealers voted
against representation by this Union by a vote of 107 to 61. This group totaled
190 at the time of the vote. On June 17, 2002, the Teamsters Union filed a
petition with the NLRB to represent the clerks in the marketing department. On
July 26, 2002, the marketing clerks voted in favor of representation by the
Union by a vote of 5 to 1. We are currently negotiating with the Teamsters Union
in this regard. Although unions have been active in Las Vegas, we consider our
employee relations to be satisfactory. There can be no assurance, however, that
new agreements will be reached without union action or will be on terms
satisfactory to us.

Riviera Black Hawk

Riviera Black Hawk opened on February 4, 2000 with approximately 450
employees. As of December 31, 2002, the total number of employees was 323. The
Black Hawk/Central City labor market is very competitive. Riviera Black Hawk
believes that it will be able to maintain its current employee level. There can
be no assurance, however, that new and existing casinos will not affect Riviera
Black Hawk's ability to maintain its current employee level.

There are currently no collective bargaining agreements in Black Hawk casinos.


Regulation and Licensing

Nevada

Nevada Gaming Authority

The ownership and operation of casino gaming facilities in Nevada are
subject to: (i) The Nevada Gaming Control Act and the regulations promulgated
thereunder (collectively, the "Nevada Act") and (ii) various local ordinances
and regulations. Our gaming operations are subject to the licensing and
regulatory control of the Nevada Gaming Commission (the "Nevada Commission"),
the State of Nevada Gaming Control Board, the Clark County Business Department
(collectively, the "Clark County Board"), collectively referred to as the
"Nevada Gaming Authorities."

The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time and in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and
fraudulent practices; and (v) providing a source of state and local revenues
through taxation and licensing fees. Changes in such laws, regulations and
procedures could have an adverse effect on our gaming operations.


12



Riviera Operating Corporation is required to be and is licensed by
the Nevada Gaming Authorities (a "Corporate Licensee"). The gaming license held
by Riviera Operating Corporation requires the periodic payment of fees and taxes
and is not transferable. Riviera Operating Corporation is also licensed as a
manufacturer and distributor of gaming devices. Such licenses also require the
periodic payment of fees and are not transferable. We are registered by the
Nevada Commission as a publicly traded corporation (a "Registered Corporation")
and have been found suitable to own the stock of Riviera Operating Corporation.
As a Registered Corporation, we are required periodically to submit detailed
financial and operating reports to the Nevada Commission and to furnish any
other information which the Nevada Commission may require. No person may become
a stockholder of, or receive any percentage of profits from, Riviera Operating
Corporation without first obtaining licenses and approvals from the Nevada
Gaming Authorities. We and Riviera Operating Corporation have obtained, from the
Nevada Gaming Authorities, the various registrations, approvals, permits,
findings of suitability and licenses required in order to engage in gaming
activities and manufacturing and distribution activities in Nevada.

The Nevada Gaming Authorities may investigate any individual who has
a material relationship to, or material involvement with, us or Riviera
Operating Corporation in order to determine whether such individual is suitable
or should be licensed as a business associate of a gaming licensee. Officers,
directors and certain key employees of Riviera Operating Corporation must file
applications with the Nevada Gaming Authorities and may be required to be
licensed or found suitable by the Nevada Gaming Authorities. Our officers,
directors and key employees who are actively and directly involved in the gaming
activities of Riviera Operating Corporation may be required to be licensed or
found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities
may deny an application for licensing for any cause which they deem reasonable.
A finding of suitability is comparable to licensing, and both require submission
of detailed personal and financial information followed by a thorough
investigation. The applicant for licensing or a finding of suitability must pay
all the costs of the investigation. Any change in a corporate position by a
licensed person must be reported to the Nevada Gaming Authorities and, in
addition to their authority to deny an application for a finding of suitability
or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a
change in a corporate position.

If the Nevada Gaming Authorities were to find an officer, director or
key employee unsuitable for licensing or unsuitable to continue having a
relationship with us or Riviera Operating Corporation, the companies involved
would have to sever all relationships with such person. In addition, the Nevada
Commission may require us or Riviera Operating Corporation to terminate the
employment of any person who refuses to file appropriate applications.
Determinations of suitability or of questions pertaining to licensing are not
subject to judicial review in Nevada.

We and Riviera Operating Corporation are required to submit detailed
financial and operating reports to the Nevada Commission. Substantially all
material loans, leases, sales of securities and similar financing transactions
by Riviera Operating Corporation must be reported to or approved by the Nevada
Commission.

If it were determined that the Nevada Act was violated by Riviera
Operating Corporation, the gaming license it holds could be limited,
conditioned, suspended or revoked, subject to compliance with certain statutory
and regulatory procedures. In addition, we or Riviera Operating Corporation and
the persons involved could be subject to substantial fines for each separate
violation of the Nevada Act at the discretion of the Nevada Commission. Further,
a supervisor could be appointed by the Nevada Commission to operate the casino
and, under certain circumstances, earnings generated during the supervisor's
appointment (except for reasonable rental value of the casino) could be
forfeited to the State of Nevada. Limitation, conditioning or suspension of the
gaming license of Riviera Operating Corporation or the appointment of a
supervisor could (and revocation of any gaming license would) materially
adversely affect our gaming operations.

Any beneficial holder of our voting securities, regardless of the
number of shares owned, may be required to file an application, be investigated,
and have his suitability as a beneficial holder of our voting securities
determined if the Nevada Commission has reason to believe that such ownership
would otherwise be inconsistent with the declared policies of the State of
Nevada. The applicant must pay all costs of investigation incurred by the Nevada
Gaming Authorities in conducting any such investigation.

The Nevada Act requires any person who acquires more than 5% of a
Registered Corporation's voting securities to report the acquisition to the
Nevada Commission. The Nevada Act requires that beneficial owners of more than
10% of our voting securities apply to the Nevada Commission for a finding of
suitability within thirty days after the Chairman of the Nevada Board mails the
written notice requiring such filing.


13



Under certain circumstances, an "institutional investor," as defined in the
Nevada Act, which acquires more than 10%, but not more than 15%, of our voting
securities may apply to the Nevada Commission for a waiver of such finding of
suitability if such institutional investor holds our voting securities for
investment purposes only. An institutional investor shall not be deemed to hold
our voting securities for investment purposes unless the voting securities were
acquired and are held in the ordinary course of business as an institutional
investor and not for the purpose of causing, directly or indirectly, the
election of a majority of the members of our board of directors, any change in
our corporate charter, bylaws, management, policies or operations, or any of our
gaming affiliates, or any other action which the Nevada Commission finds to be
inconsistent with holding our voting securities for investment purposes only.
Activities which are deemed to be consistent with holding our voting securities
for investment purposes only include: (i) voting on all matters voted on by
stockholders; (ii) making financial and other inquiries of management of the
type normally made by securities analysts for informational purposes and not to
cause a change in its management, policies or operations; and (iii) such other
activities as the Nevada Commission may determine to be consistent with such
investment intent. If the beneficial holder of our voting securities who must be
found suitable is a corporation, partnership or trust, it must submit detailed
business and financial information including a list of beneficial owners. The
applicant is required to pay all costs of investigation.

Any person who fails or refuses to apply for a finding of suitability
or a license within thirty days after being ordered to do so by the Nevada
Commission or the Chairman of the Nevada Board, may be found unsuitable. The
same restrictions apply to a record owner if the record owner, after request,
fails to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the common stock
beyond such period of time as may be prescribed by the Nevada Commission may be
guilty of a criminal offense. We are subject to disciplinary action if, after we
receive notice that a person is unsuitable to be a stockholder or to have any
other relationship with us or Riviera Operating Corporation, we (i) pay that
person any dividend or interest upon voting our securities, (ii) allow that
person to exercise, directly or indirectly, any voting right conferred through
securities held by that person, (iii) pay remuneration in any form to that
person for services rendered or otherwise, or (iv) fail to pursue all lawful
efforts to require such unsuitable person to relinquish his voting securities
including, if necessary, the immediate purchase of said voting securities for
cash at fair market value. Additionally, the Clark County Board has the
authority to approve all persons owning or controlling the stock of any
corporation controlling a gaming licensee.

The Nevada Commission may, in its discretion, require the holder of
any of our debt securities to file applications, be investigated and be found
suitable to own such securities, if it has reason to believe that such ownership
would be inconsistent with the declared policies of the State of Nevada. If the
Nevada Commission determines that a person is unsuitable to own such security,
then pursuant to the Nevada Act, we can be sanctioned, including the loss of our
approvals, if without the prior approval of the Nevada Commission, we (i) pay to
the unsuitable person any dividend, interest, or any distribution whatsoever;
(ii) recognize any voting right by such unsuitable person in connection with
such securities; (iii) pay the unsuitable person remuneration in any form; or
(iv) make any payment to the unsuitable person by way of principal, redemption,
conversion, exchange, liquidation, or similar transaction.

We are required to maintain a current stock ledger in Nevada which
may be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be required
to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. We are also required to render maximum assistance in
determining the identity of the beneficial owner. The Nevada Commission has the
power to require our stock certificates to bear a legend indicating that the
securities are subject to the Nevada Act. However, to date, the Nevada
Commission has not imposed such a requirement on us.

We may not make a public offering of our securities without the prior
approval of the Nevada Commission if the securities or proceeds therefrom are
intended to be used to construct, acquire or finance gaming facilities in
Nevada, or to retire or extend obligations incurred for such purposes. In
addition, (i) a Corporate Licensee may not guarantee a security issued by a
Registered Corporation pursuant to a public offering, or hypothecate its assets
to secure the payment or performance of the obligations evidenced by such a
security, without the prior approval of the Nevada Commission, (ii) the pledge
of the stock of a Corporate Licensee ("Stock Pledge"), such as Riviera Operating
Corporation, is void without the prior approval of the Nevada Commission, and
(iii) restrictions upon the transfer of an equity security issued by a Corporate
Licensee and agreements not to encumber such securities (collectively, "Stock
Restrictions") are ineffective without the prior approval of the Nevada
Commission.


14


Changes in control of a registered corporation through merger,
consolidation, stock or asset acquisitions, management or consulting agreements,
or any act or conduct by a person whereby he obtains control, may not occur
without the prior approval of the Nevada Commission. Entities seeking to acquire
control of a Registered Corporation must satisfy the Nevada Board and Nevada
Commission in a variety of stringent standards prior to assuming control of such
Registered Corporation. The Nevada Commission may also require controlling
stockholders, officers, directors and other persons having a material
relationship or involvement with the entity proposing to acquire control, to be
investigated and licensed as part of the approval process relating to the
transaction.

The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada corporate gaming Licensees and Registered Corporations
that are affiliated with those operations, may be injurious to stable and
productive corporate gaming. The Nevada Commission has established regulations
to ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming Licensees and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Nevada
Commission before the Registered Corporation can make exceptional repurchases of
voting securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Registered
Corporation's Board of Directors in response to a tender offer made directly to
the Registered Corporation's stockholders for the purposes of acquiring control
of the Registered Corporation.

License fees and taxes, computed in various ways depending on the
type of gaming or activity involved, are payable to the State of Nevada and to
the County in which Riviera Operating Corporation's operations are conducted.
Depending upon the particular fee or tax involved, these fees and taxes are
payable either monthly, quarterly or annually and are based upon either: (i) a
percentage of the gross revenues received; (ii) the number of gaming devices
operated; or (iii) the number of table games operated. A casino entertainment
tax is also paid by casino operations where entertainment is furnished in
connection with the selling of food, refreshments or merchandise. Nevada
Licensees that hold a license to manufacture and distribute slot machines and
gaming devices, such as Riviera Operating Corporation, also pay certain fees and
taxes to the State of Nevada.

Any person who is licensed, required to be licensed, registered,
required to be registered, or is under common control with such persons
(collectively, "Licensees"), and who proposes to become involved in a gaming
venture outside of Nevada, is required to deposit with the Nevada Board, and
thereafter maintain, a revolving fund in the amount of $10,000 to pay the
expenses of investigation by the Nevada Board of their participation in such
foreign gaming. The revolving fund is subject to increase or decrease in the
discretion of the Nevada Commission. Thereafter, Licensees are required to
comply with certain reporting requirements imposed by the Nevada Act. Licensees
are also subject to disciplinary action by the Nevada Commission if they
knowingly violate any laws of the foreign jurisdiction pertaining to the foreign
gaming operation, fail to conduct the foreign gaming operation in accordance
with the standards of honesty and integrity required of Nevada gaming
operations, engage in activities or enter into associations that are harmful to
the State of Nevada or its ability to collect gaming taxes and fees, or employ,
have contact with or associate with a person in the foreign operation who has
been denied a license or finding of suitability in Nevada on the ground of
personal unsuitability.

Other Nevada Regulation

The sale of alcoholic beverages at Riviera Las Vegas is subject to
licensing, control and regulation by the Clark County Board. All licenses are
revocable and are not transferable. The Clark County Board has full power to
limit, condition, suspend or revoke any such license, and any such disciplinary
action could (and revocation would) have a material adverse affect upon the
operations of Riviera Operating Corporation.



15


Colorado

Colorado Gaming and Liquor Regulation

Summary

In general we, Riviera Black Hawk, our principal executive officers
and those of Riviera Holdings, and any of our employees who are involved in our
gaming operations, are required to be found suitable for licensure by the
Colorado Gaming Commission. Colorado also requires that significant stockholders
of 5% or more of our stock be certified as suitable for licensure. Riviera Black
Hawk's original retail gaming license was approved by the Colorado Gaming
Commission on November 18, 1999, and has been successfully renewed each
subsequent year.
Background

Pursuant to an amendment to the Colorado Constitution, limited stakes
gaming became lawful in the cities of Central City, Black Hawk and Cripple Creek
on October 1, 1991. Limited stakes gaming means a maximum single bet of five
dollars on slot machines and in the card games of blackjack and poker.

Limited stakes gaming is confined to the commercial districts of
these cities as defined by Central City on October 7, 1981, by Black Hawk on May
4, 1978, and by Cripple Creek on December 3, 1973. In addition, the Colorado
Amendment restricts limited stakes gaming to structures that conform to the
architectural styles and designs that were common to the areas prior to World
War I, and which conform to the requirements of applicable city ordinances
regardless of the age of the structures. Under the Colorado Amendment, no more
than 35% of the square footage of any building and no more than 50% of any one
floor of any building may be used for limited stakes gaming. Persons under the
age of 21 cannot participate in limited stakes gaming. The Colorado Amendment
also prohibits limited stakes gaming between the hours of 2:00 a.m. and 8:00
a.m., and allows limited stakes gaming to occur in establishments licensed to
sell alcoholic beverages.

Further, the Colorado Act provides that, in addition to any other
applicable license fees, up to a maximum of 40% of the total amounts wagered
less payouts to players may be payable by a licensee for the privilege of
conducting limited stakes gaming. Such percentage is to be established by the
Colorado Commission annually.

The Colorado Act declares public policy on limited stakes gaming to
be that: (1) the success of limited stakes gaming is dependent upon public
confidence and trust that licensed limited stakes gaming is conducted honestly
and competitively; the rights of the creditors of licensees are protected;
gaming is free from criminal and corruptive elements; (2) public confidence and
trust can be maintained only by strict regulation of all persons, locations,
practices, associations and activities related to the operation of licensed
gaming establishments and the manufacture or distribution of gaming devices and
equipment; (3) all establishments where limited gaming is conducted and where
gambling devices are operated, and all manufacturers, sellers and distributors
of certain gambling devices and equipment must therefore be licensed, controlled
and assisted to protect the public health, safety, good order and the general
welfare of the inhabitants of the state to foster the stability and success of
limited stakes gaming and to preserve the economy, policies and free competition
in Colorado; and (4) no applicant for a license or other affirmative commission
approval has any right to a license or to the granting of the approval sought.
Any license issued or other commission approval granted pursuant to the
provisions of this Article is a revocable privilege, and no holder acquires any
vested rights therein.

Regulatory Structure

The Colorado Act subjects the ownership and operation of limited
stakes gaming facilities in Colorado to extensive licensing and regulation by
the Colorado Commission. The Colorado Commission has full and exclusive
authority to promulgate, and has promulgated, rules and regulations governing
the licensing, conducting and operating of limited stakes gaming. The Colorado
Act also created the Colorado Division of Gaming within the Colorado Revenue
Department to license, regulate and supervise the conduct of limited stakes
gaming in Colorado. The division is supervised and administered by the Director
of the Division of Gaming.



16



Gaming Licenses

The Colorado Commission may issue:

o slot machine manufacturer or distributor,

o operator,

o retail gaming,

o support, and

o key employee gaming licenses.

The first three licenses require annual renewal by the Colorado
Commission. Support and key employee licenses are issued for two-year periods
and are renewable by the Division Director. The Colorado Commission has broad
discretion to condition, suspend for up to six months, revoke, limit or restrict
a license at any time and also has the authority to impose fines.

An applicant for a gaming license must complete comprehensive
application forms, pay required fees and provide all information required by the
Colorado Commission and the Division of Gaming. Prior to licensure, applicants
must satisfy the Colorado Commission that they are suitable for licensing.
Applicants have the burden of proving their qualifications and must pay the full
cost of any background investigations. There is no limit on the cost of such
background investigations.

Gaming employees must hold either a support or key employee license.
Every retail gaming licensee must have a key employee licensee in charge of all
limited stakes gaming activities when limited stakes gaming is being conducted.
The Colorado Commission may determine that a gaming employee is a key employee
and require that such person apply for a key employee license.

A retail gaming license is required for all persons conducting
limited stakes gaming on their premises. In addition, an operator license is
required for all persons who engage in the business of placing and operating
slot machines on the premises of a retailer. However, a retailer is not required
to hold an operator license. No person may have an ownership interest in more
than three retail gaming licenses. A slot machine manufacturer or distributor
license is required for all persons who manufacture, import and distribute slot
machines in Colorado.

The Colorado Regulations require that every officer, director and
stockholder of private corporations or equivalent office or ownership holders
for non-corporate applicants, and every officer, director or stockholder holding
either a 5% or greater interest or controlling interest of a publicly traded
corporation or owners of an applicant or licensee shall be a person of good
moral character and submit to a full background investigation conducted by the
Division of Gaming and the Colorado Commission. The Colorado Commission may
require any person having an interest in a license to undergo a full background
investigation and pay the cost of investigation in the same manner as an
applicant.

Persons found unsuitable by the Colorado Commission may be required
immediately to terminate any interest, association or agreement with or
relationship to a licensee. A finding of unsuitability with respect to any
officer, director, employee, associate, lender or beneficial owner of a licensee
or applicant also may jeopardize the licensee's license or the applicant's
application. A license approval may be conditioned upon the termination of any
relationship with unsuitable persons. A person may be found unsuitable because
of prior acts, associations or financial conditions. Acts that would lead to a
finding of unsuitability are those that would violate the Colorado Act or the
Colorado Regulations or that contravene the legislative purpose of the Colorado
Act.


17


Duties of licensees

An applicant or licensee must report to the Division of Gaming or
Colorado Commission all leases not later than 30 days after the effective date
of the lease. Also, an applicant or a licensee, upon the request of the Colorado
Commission or the Division Director, must submit copies of all written gaming
contracts and summaries of all oral gaming contracts to which it is or intends
to become a party. The Division Director or the Colorado Commission may require
changes in the lease or gaming contract before an applicant is approved or
participation in such agreement is allowed or may require termination of the
lease or gaming contract.

The Colorado Act and the Colorado Regulations require licensees to
maintain detailed records that account for all business transactions. Records
must be furnished upon demand to the Colorado Commission, the Division of Gaming
and other law enforcement authorities. The Colorado Regulations also establish
extensive playing procedures and rules of play for poker, blackjack and slot
machines. Retail gaming licenses must adopt comprehensive internal control
procedures. Such procedures must be approved in advance by the Division of
Gaming and include the areas of accounting, surveillance, security, cashier
operations, key control and fill and drop procedures, among others. No gaming
devices may be used in limited stakes gaming without the approval of the
Division Director or the Colorado Commission.

Licensees have a continuing duty to immediately report to the
Division of Gaming the name, date of birth and social security number of all
persons who obtain an ownership, financial or equity interest in the licensee of
5% or greater, who have the ability to control the licensee, who have the
ability to exercise significant influence over the licensee or who loan any
money or other thing of value to the licensee. Licensees must report to the
Division of Gaming all gaming licenses, and all applications for gaming
licenses, in foreign jurisdictions.

With limited exceptions applicable to licensees that are publicly
traded entities, no person may sell, lease, purchase, convey or acquire any
interest in a retail gaming or operator license or business without the prior
approval of the Colorado Commission.

All agreements, contracts, leases, or arrangements in violation of
the Colorado Amendment, the Colorado Act or the Colorado Regulations are void
and unenforceable.

Taxes, fees and fines

The Colorado Amendment requires an annual tax of up to 40% on the
total amount wagered less all payouts to players. With respect to games of
poker, the tax is calculated based on the sums wagered which are retained by the
licensee as compensation. Annually during April, May and June, the Colorado
Commission, as mandated by the Colorado Regulations, shall conduct rule-making
hearings concerning the gaming tax rate and device fee rate for the subsequent
gaming year. However, rigid compliance with the Colorado Regulations is not
mandatory and shall in no way be construed to limit the time periods or subject
matters which the Colorado Commission may consider in determining the various
tax rates. Currently, the gaming tax is:

o .25% on the first $2 million of these amounts;

o 2% on amounts from $2 million to $4 million;

o 4% on amounts from $4 million to $5 million;

o 11% on amounts from $5 million to $10 million;

o 16% on amounts from $10 million to $15 million; and

o 20% on amounts over $15 million.

The Colorado Commission has eliminated the annual device fee for
gaming device machines, blackjack tables and poker tables.


18



The municipality of Black Hawk assesses an annual device fee of
$750.00 per device on all devices exceeding 50. There is no statutory limit on
state or city device fees, which may be increased at the discretion of the
Colorado Commission or the city. In addition, a business improvement fee of as
much as $7.42 per device and a monthly transportation authority device fee of
$8.84 per device also may apply depending upon the location of the licensed
premises in Black Hawk.

Black Hawk also imposes taxes and fees on other aspects of the
businesses of gaming licensees, such as parking, alcoholic beverage licenses and
other municipal taxes and fees. Significant increases in these fees and taxes,
or the imposition of new taxes and fees, may occur.

Violation of the Colorado Gaming Act or the Colorado Regulations
generally constitutes a class 1 misdemeanor, except as may be specifically
otherwise provided within the Colorado Gaming Act, which may subject the
violator to fines or incarceration or both. A licensee who violates the Colorado
Gaming Act or Colorado Regulations is subject to suspension of the license for a
period of up to six months, fines or both, or to license revocation.

Requirements for publicly traded corporations

The Colorado Commission has enacted Rule 4.5, which imposes
requirements on publicly traded corporations holding gaming licenses in Colorado
and on gaming licenses owned directly or indirectly by a publicly traded
corporation, whether through a subsidiary or intermediary company. The term
"publicly traded corporation" includes corporations, firms, limited liability
companies, trusts, partnerships and other forms of business organizations. Such
requirements automatically apply to any ownership interest held by a publicly
traded corporation, holding company or intermediary company thereof, where the
ownership interest directly or indirectly is, or will be upon approval of the
Colorado Commission, 5% or more of the entire licensee. In any event, if the
Colorado Commission determines that a publicly traded corporation, or a
subsidiary, intermediary company or holding company has the actual ability to
exercise influence over a licensee, regardless of the percentage of ownership
possessed by said entity, the Colorado Commission may require the entity to
comply with the disclosure regulations contained in Rule 4.5.

Under Rule 4.5, gaming licensees, affiliated companies and
controlling persons commencing a public offering of voting securities must
notify the Colorado Commission no later than ten business days after the initial
filing of a registration statement with the Securities and Exchange Commission.
Licensed publicly traded corporations are also required to send proxy statements
to the Division of Gaming within 5 days after their distribution. Licensees to
whom Rule 4.5 applies must include in their charter documents provisions that:
restrict the rights of the licensees to issue voting interests or securities
except in accordance with the Colorado Gaming Act and the Colorado Regulations;
limit the rights of persons to transfer voting interests or securities of
licensees except in accordance with the Colorado Gaming Act and the Colorado
Regulations; and provide that holders of voting interests or securities of
licensees found unsuitable by the Colorado Commission may, within 60 days of
such finding of unsuitability, be required to sell their interests or securities
back to the issuer at the lesser of the cash equivalent of the holders'
investment or the market price as of the date of the finding of unsuitability.
Alternatively, the holders may, within 60 days after the finding of
unsuitability, transfer the voting interests or securities to a suitable person,
as determined by the Colorado Commission. Until the voting interests or
securities are held by suitable persons, the issuer may not pay dividends or
interest, the securities may not be voted, they may not be included in the
voting or securities of the issuer, and the issuer may not pay any remuneration
in any form to the holders of the securities.

Pursuant to Rule 4.5, persons who acquire direct or indirect beneficial
ownership of

o 5% or more of any class of voting securities of a publicly traded
corporation that is required to include in its articles of organization
the Rule 4.5 charter language provisions or

o 5% or more of the beneficial interest in a gaming licensee directly or
indirectly through any class of voting securities of any holding
company or intermediary company of a licensee, referred to as
qualifying persons, shall notify the Division of Gaming within 10 days
of such acquisition, are required to submit all requested information
and are subject to a finding of suitability as required by the Division
of Gaming or the Colorado Commission. Licensees also must notify any


19

qualifying persons of these requirements. A qualifying person other
than an institutional investor whose interest equals 10% or more must
apply to the Colorado Commission for a finding of suitability within 45
days after acquiring such securities. Licensees must also notify any
qualifying persons of these requirements. Whether or not notified,
qualifying persons are responsible for complying with these
requirements.

A qualifying person who is an institutional investor under Rule 4.5
and who, individually or in association with others, acquires, directly or
indirectly, the beneficial ownership of 15% or more of any class of voting
securities must apply to the Colorado Commission for a finding of suitability
within 45 days after acquiring such interests.

The Colorado Regulations also provide for exemption from the
requirements for a finding of suitability when the Colorado Commission finds
such action to be consistent with the purposes of the Colorado Act.

Pursuant to Rule 4.5, persons found unsuitable by the Colorado
Commission must be removed from any position as an officer, director or employee
of a licensee, or from a holding or intermediary company. Such unsuitable
persons also are prohibited from any beneficial ownership of the voting
securities of any such entities. Licensees, or affiliated entities of licensees,
are subject to sanctions for paying dividends or distributions to persons found
unsuitable by the Colorado Commission, or for recognizing voting rights of, or
paying a salary or any remuneration for services to, unsuitable persons.
Licensees or their affiliated entities also may be sanctioned for failing to
pursue efforts to require unsuitable persons to relinquish their interest. The
Colorado Commission may determine that anyone with a material relationship to,
or material involvement with, a licensee or an affiliated company must apply for
a finding of suitability or must apply for a key employee license.

Alcoholic Beverage Licenses

The sale of alcoholic beverages in gaming establishments is subject
to strict licensing, control and regulation by state and local authorities.
Alcoholic beverage licenses are revocable and nontransferable. State and local
licensing authorities have full power to limit, condition, suspend for as long
as six months or revoke any such licenses. Violation of state alcoholic beverage
laws may constitute a criminal offense resulting in incarceration, fines, or
both.

There are various classes of retail liquor licenses which may be
issued under the Colorado Liquor Code. A gaming licensee may sell malt, vinous
or spirituous liquors only by the individual drink for consumption on the
premises. Even though a retail gaming licensee may be issued various classes of
retail liquor licenses, such gaming licensee may only hold liquor licenses of
the same class. An application for an alcoholic beverage license in Colorado
requires notice, posting and a public hearing before the local liquor licensing
authority prior to approval of the same. The Colorado Department of Revenue's
Liquor Enforcement Division must also approve the application. Riviera Black
Hawk's hotel and restaurant license has been approved by both the local
licensing authority and the State Division of Liquor Enforcement.

Federal Registration

Riviera Operating Corporation is required to annually file with the
Attorney General of the United States in connection with the sales, distribution
or operations of slot machines. All requisite filings for the present year have
been made.

Available Information

The Company files annual and quarterly reports and other information with
the Securities and Exchange Commission. You may read and copy any document that
the Company files at the Securities and Exchange Commission's Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
1-800-SEC-0300 for further information on the operation of the Public Reference
Room. Reports, proxy statements and other information regarding issuers,
including the Company, that file electronically with the Securities and Exchange
Commission are also available to the public from the Securities and Exchange
Commission's Web site at http://www.sec.gov.

The Company's internet address is www.theriviera.com
(http://www.theriviera.com). Through the "Investors" page at the Company's
internet website, the Company's annual report on Form 10-K, quarterly reports on


20


Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act, are
available free of charge, as soon as reasonably practical after such information
has been filed or furnished to the SEC.

Item 2. Properties

Riviera Hotel and Casino

The Riviera Las Vegas complex is located on the Las Vegas Strip, at
2901 Las Vegas Boulevard South, Las Vegas, Nevada and occupies approximately 26
acres. The buildings comprise approximately 1.8 million square feet, including
110,000 square feet of casino space, a 160,000 square foot convention, meeting
and banquet facility, approximately 2,100 hotel rooms (including approximately
169 luxury suites) in five towers, three restaurants, a buffet, four showrooms,
a lounge and approximately 2,300 parking spaces. In addition, executive and
other offices for Riviera Las Vegas are located on the property.

There are approximately 40 food and retail concessions operated under
individual leases with third parties. The leases are for periods from one year
to ten years and expire over the next five years.

The Riviera Las Vegas and Riviera Black Hawk properties are
encumbered by a first deed of trust securing the 11% Notes and the Company's
five-year senior secured credit facility.

Riviera Black Hawk

Riviera Black Hawk is located on 1.63 acres of land at 400 Main
Street, Black Hawk, Colorado. The buildings include approximately 325,000 square
feet and comprise 32,000 square feet of gaming space, parking for approximately
520 vehicles (substantially all of which are covered), a 252-seat buffet, two
bars and an entertainment center with seating for approximately 440 people.

The Riviera Black Hawk and Riviera Las Vegas properties are
encumbered by deeds of trust securing the 11% Notesand the Company's five-year
senior secured credit facility..

See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Item 3. Legal Proceedings


We are a party to several routine lawsuits, either as a plaintiff or
as a defendant, arising from the normal operations of a hotel or casino. We do
not believe that the outcome of such litigation, in the aggregate, will have a
material adverse effect on the financial position or results of our operations.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

PART II

Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters

The Company's Common Stock began trading on the American Stock Exchange
(AMEX) on May 13, 1996 and was reported on the NASDAQ Bulletin Board prior to
that date. As of March 6, 2003, based upon information available to it, the
Company believes that there were approximately 425 beneficial holders of the
Company's Common Stock.

The Company has never paid any dividends on its Common Stock and does
not currently expect to pay any dividends (cash or otherwise) on its Common
Stock for the foreseeable future. The Company's ability to pay dividends is
primarily dependent upon receipt of dividends and distributions from its
subsidiaries which currently include the operations of Riviera Las Vegas and
Riviera Black Hawk. In addition, the indenture for the 11% Senior Secured Notes
and the Company's senior secured credit facility materially restrict the
Company's ability to pay dividends on its Common Stock.


21


The Company has been informed that it does not meet certain AMEX
listing requirements, (due to among other things, the Company's negative equity
and losses) and that, consequently, the AMEX intends to initiate steps that
could ultimately result in the delisting of the Company's common stock from the
American Stock Exchange.

The table below sets forth the high and low sales prices of the
Company's common stock by quarter for the years ended December 31, 2002 and
2001, based on sales prices reported by AMEX:



First Second Third Fourth
Quarter Quarter Quarter Quarter

2002

HIGH $5.21 $8.25 $7.09 $5.80
LOW 4.15 5.20 5.90 4.32

2001
HIGH $7.38 $6.70 $6.35 $4.35
LOW 6.00 5.96 4.00 3.15



On March 6, 2003, 9100 shares were traded. The closing price on AMEX
reported for that date was $3.75 per share.

Equity Compensation Plan Information


- ---------------------- ------------------------- -------------------- -------------------------

Plan category Number of securities Weighted-average Number of securities
to be issued upon exercise price of remaining available for
exercise of outstanding outstanding options, future issuance under
options, warrants and warrants and rights equity compensation plans
rights (excluding securities
reflected in column (a))
(a) (b) (c)
- ---------------------- ------------------------- -------------------- -------------------------
Equity compensation
plans approved by 579,000 $6.35 99,000
security holders
- ---------------------- ------------------------- -------------------- -------------------------
Equity compensation
plans not approved by -0- -0- -0-
security holders
- ---------------------- ------------------------- -------------------- -------------------------
Total 579,000 $6.35 99,000
- ---------------------- ------------------------- -------------------- -------------------------



Item 6. Selected Financial Data

The following table sets forth a summary of selected financial data
for the Company for the years ended December 31 (in thousands, except Net Income
(Loss) per Common Share):



--------------------- ------------ ---------- --------- ---------- ----------
2002 2001 2000 1999 1998
--------------------- ------------ ---------- --------- ---------- ----------

Net Operating Revenue $188,292 $202,031 $201,531 $157,268 $159,955
Net Loss (24,722) (6,407) (4,215) (2,869) (4,057)
Net Loss Per
Diluted Common Share ($7.17) ($1.79) ($1.05) ($0.58) ($0.81)
Total Assets 235,896 267,818 283,710 288,990 244,909
Long-Term Debt 220,124 220,439 226,043 229,052 179,439
Dividends Declared -0- -0- -0- -0- -0-
--------------------- ------------ ---------- --------- ---------- ----------



22



Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

Results of Operations

2002 Compared to 2001

The following table sets forth, for the periods indicated, certain
operating data for Riviera Las Vegas and Riviera Black Hawk. Net revenues
displayed in this table and discussed in this section are net of cash rebates
and promotional allowances. Operating income from properties is presented as
shown on the Consolidated Statement of Operations. EBITDA from properties for
the purposes of this table excludes corporate expense and inter-company
management fees.



Year Ended December 31, $ Change % Change
(In Thousands) 2002 2001 Incr/(Decr) Incr/(Decr)

Net revenues:

Riviera Las Vegas $139,159 $152,985 $ (13,826) (9.0)%
Riviera Black Hawk 49,133 49,046 87 0.2 %
------- ------- ------ -----
Total Net Revenues $188,292 $202,031 $ (13,739) (6.8)%
======= ======= ======= =====
Operating Income
Riviera Las Vegas $ 12,265 $ 13,512 $ (1,247) (9.2)%
Riviera Black Hawk 7,350 7,622 (272) (3.6)%
Corporate Expenses (3,762) (4,163) 401 (9.6)%
------ ------ ----- -----
Total Operating Income $ 15,853 $ 16,971 $ (1,118) (6.6)%
======= ====== ======== =====
EBITDA:(1)
Riviera Las Vegas $ 23,951 $ 25,655 $ (1,704) (6.6)%
Riviera Black Hawk 13,400 12,722 678 5.3 %
Corporate Expenses (3,762) (4,163) 401 (9.6)%
------- ------ ------ -----
Total EBITDA $ 33,589 $ 34,214 $ (625) (1.8)%
======= ======= ===== =====
EBITDA margin
Riviera Las Vegas 17.2 % 16.8 % 0.4 %
Riviera Black Hawk 27.3 % 25.9 % 1.4 %
----- ----- -----
Total EBITDA Margin 17.8 % 16.9 % 0.9 %
====== ====== =====


Reconciliation of Income From Operations to EBITDA

2002 2001
Operating Income $15,853 $16,971
Depreciation 17,736 17,243
------ ------
EBITDA $33,589 $34,214
====== ======


23


(1) EBITDA consists of Earnings Before Interest, Income Taxes, Depreciation,
Amortization and other, net. While EBITDA should not be construed as a
substitute for operating income or a better indicator of liquidity than
cash flows from operating activities, which are determined in accordance
with generally accepted accounting principles ("GAAP"), it is included
herein to provide additional information with respect to the ability of
the Company to meet its future debt service, capital expenditures and
working capital requirements. Although EBITDA is not necessarily a
measure of the Company's ability to fund its cash needs, management
believes that certain investors find EBITDA to be a useful tool for
measuring the ability of the Company to service its debt. EBITDA margin is
EBITDA as a percent of net revenues. The Company's definition of EBITDA
may not be comparable to other companies' definitions.

Riviera Las Vegas

Revenues

Riviera Las Vegas net revenues decreased by approximately $13.8 million, or
9.0%, from $153.0 million in 2001 to $139.2 million in 2002 primarily due to the
effects of the recession and the September 11, 2001 terrorist attacks. Casino
revenues decreased approximately $7.7 million or 11.5%, from $67.4 million
during 2001 to $59.6 million during 2002. Slot revenues were down 11.9%, while
table games revenues were down 8.5%. The hold percentages were comparable for
both table games and slot machines in 2002 and 2001. Room revenues decreased
$1.9 million, as the average room rate decreased $2.53 or 4.1% from $62.46 to
$59.93 and hotel occupancy decreased from 91.6% to 89.6%. The Las Vegas market
continues to recover from the impacts of September 11, 2001, however the
recovery has been slowed by the soft national economy and declining consumer
confidence in anticipation of a military action in Iraq. An LVCVA report
indicates that visitor volumes for the first eleven months of 2002 were equal to
2001 levels. Although occupancy is recovering on the weekends, the midweek
occupancy rates vary significantly from day to day primarily due to competitive
pressures. Entertainment revenues decreased by approximately $2.8 million, or
13.9%, from $20.4 million during 2001 to $17.6 million during 2002 as attendance
decreased 24.5%, which was partially offset by a 2.4% increase in ticket price.
Room sales to vacationers were down approximately 5.7% in 2002, which is an
important producer of show ticket sales and slot revenues. Other revenues
decreased by approximately $1.0 million, or 12.6%, from $8.5 million during 2001
to $7.5 million during 2002 due primarily to lower telephone revenues.

Operating Income

Operating Income decreased $1.2 million or 9.2% from $13.5 million in 2001
to $12.3 million in 2002 due to the decreased revenues, which were partially
offset by lower entertainment contract expenses, which are tied to revenues,
reduced casino expense due to lower volumes and reduced executive incentives and
Employee Stock Ownership Plan expense. During 2002 the Company changed its
segment reporting to present corporate expenses separately which were
previously included in the expenses at Riviera Las Vegas in prior years.
Prior year's expenses have been reclassified for comparison purposes.

EBITDA

Riviera Las Vegas EBITDA, as defined, decreased by approximately $1.7
million, or 6.6%, from $25.7 million in 2001 to $24.0 million in 2002. During
the same periods, EBITDA margin increased from 16.8% to 17.2% of net revenues.

Riviera Black Hawk

Revenues

Riviera Black Hawk recorded similar net revenues in 2002 as it had in
2001, from $49.0 million in 2001 to $49.1 million in 2002 as the operation held
on to market share in the face of increased competition which increased the
number of gaming machines by 7.8%. Casino revenues, primarily from slot
machines, decreased slightly by approximately $174,000, or 0.4%, from $46.7
million in 2001 to $46.5 million in 2002. Average slot machine win per unit
decreased from $148 per day in 2001 to $142 in 2002. Food and beverage revenues
increased by approximately $1.0 million, or 18.1%, from $5.6 million in 2000 to
$6.6 million in the 2001.

Operating Income

Operating income decreased $272,000 or 3.6% from $7.6 million in 2001 to $7.4
million in 2002 due to the increased competition and a slower economy in the
Denver area. General and administrative costs decreased $1.2 million. General


24


and administrative costs were 21.1% of revenues in the current year compared
with 23.5% in 2001 due to decreased health insurance costs. Depreciation
increased $874,000 or 23.3% in 2002 compared with 2001 due to a change to
accelerated depreciation on slot machines.

EBITDA

Riviera Black Hawk EBITDA, as defined, increased by approximately
$678,000, or 5.3%, from $12.7 million 2001 to $13.4 million in 2002. During the
same periods, EBITDA margin increased from 25.9% to 27.3% of net revenues.

Consolidated Operations

Other Income (Expense)

On June 26, 2002, the Company issued 11% Senior Secured Notes with a
principal amount of $215 million substantially all of which were later exchanged
for SEC-registered Notes of the Company having substantially the same terms.
Interest expense on the $215 million 11% Senior Secured Notes of $12.2 million
plus related amortization of loan fees totaled approximately $13.0 million. In
addition the interest expense on the retired 10% First Mortgage Notes, the
retired Black Hawk 13% First Mortgage Notes and equipment and other financing
costs totaled approximately $13.8 million in 2002 for combined total interest
expense of $26.8 million. This compares with $26.9 million in interest expense
in 2001. Fiscal 2002 results were affected by the loss on extinguishment of debt
totaling $11.2 million or $3.25 per share. The costs included the call premium
on the Company's refinanced 10% bonds and Riviera Black Hawk's refinanced 13%
bonds, the write off of unamortized deferred loan costs associated with the
refinanced bonds and the balance of the original issue discount on the 10%
bonds. Furthermore, the results were affected by approximately $2.7 million or
$0.78 per share of additional interest expense, net, incurred as a result of the
defeasance / retirement of the debt.

Net Loss

The consolidated net loss increased approximately $18.3 million from
$6.4 million in 2001 to $24.7 million in 2002 mainly due to the cost of
extinguishment of debt of $11.2 million and defeasance interest of $2.7 million
explained above and a tax benefit recorded by the Company of $2.2 million in
2001, while no tax benefits have been recorded in 2002.

EBITDA

Consolidated EBITDA, as defined, decreased approximately
$625,000, or 1.8%, from $34.2 million in 2001 to $33.6 million in 2002. During
the same periods, EBITDA margin increased from 16.9% to 17.8% of net revenues.

Results of Operations

2001 Compared to 2000

Special Factors Affecting Comparability of Results of Operations

Riviera Black Hawk was in the development stage during the first
quarter of 2000 until February 4, 2000 when it opened the casino. Accordingly,
the of operations for fiscal 2001 and fiscal 2000 results may not be comparable.


25



The following table sets forth, for the periods indicated, certain
operating data for Riviera Las Vegas and Riviera Black Hawk. Net revenues
displayed in this table and discussed in this section are net of promotional
allowances. Operating income from properties is presented as shown on the
Consolidated Statement of Operations. EBITDA from properties for the purposes of
this table excludes corporate expense, pre-opening expense and inter-company
management fees.



Year Ended December 31, $ Change % Change
(In Thousands) 2001 2000 Incr/(Decr) Incr/(Decr)

Net revenues:

Riviera Las Vegas $ 152,985 $ 166,270 $ (13,285) (8.0)%
Riviera Black Hawk 49,046 35,261 13,785 39.1 %
------- ------- ------ -----
Total Net Revenues $ 202,031 $ 201,531 $ 500 0.2 %
======= ======= ====== ======
Operating Income (loss)
Riviera Las Vegas $ 13,512 $ 19,215 $ (5,703) (29.7)%
Riviera Black Hawk 7,622 1,881 5,741 305.2%
Corporate Expenses (4,163) (4,217) 54 1.3 %
-------- ------- ----- ------
Total Operating Income $ 16,971 $ 16,879 $ 92 0.5 %
======= ======= ===== ======
EBITDA:(1)
Riviera Las Vegas $ 25,655 $ 33,548 $ (7,893) (23.5)%
Riviera Black Hawk 12,722 6,597 6,125 92.8 %
Corporate Expenses (4,163) (4,217) 54 1.3 %
-------- ------- ----- -----
Total EBITDA $ 34,214 $ 35,928 $ (1,714) (4.8)%
======= ======== ===== =====
EBITDA margin
Riviera Las Vegas 16.8 % 20.2 % (4.1)%
Riviera Black Hawk 25.9 % 18.7 % 7.2 %
------ ------ -----
Total EBITDA Margin 16.9 % 17.8 % (0.5)%
====== ====== ======


Reconciliation Income From Operations to EBITDA


2001 2000


Operating Income $ 16,971 $ 16,879
Depreciation 17,243 17,827
Preopening Expenses 0 1,222
------ ------
Total $ 34,214 $ 35,928
====== ======




(1) EBITDA consists of Earnings Before Interest, Income Taxes, Depreciation,
Amortization, preopening and other, net. While EBITDA should not be construed as
a substitute for operating income or a better indicator of liquidity than cash
flows from operating activities, which are determined in accordance with
generally accepted accounting principles ("GAAP"), it is included herein to
provide additional information with respect to the ability of the Company to
meet its future debt service, capital expenditures and working capital
requirements. Although EBITDA is not necessarily a measure of the Company's
ability to fund its cash needs, management believes that certain investors find
EBITDA to be a useful tool for measuring the ability of the Company to service
its debt. EBITDA margin is EBITDA as a percent of net revenues. The Company's
definition of EBITDA may not be comparable to other companies' definitions.


26



Riviera Las Vegas

Revenues

Riviera Las Vegas net revenues decreased by approximately $13.3 million, or
8.0%, from $166.3 million in 2000 to $153.0 million in 2001 primarily due to the
effects of the recession and the September 11, 2001 terrorist attacks. Casino
revenues decreased approximately $6.7 million or 9.0%, from $74.1 million during
2000 to $67.4 million during 2001. Slot revenues were down 7.0%, while table
games revenues were down 13.6%. The hold percentages were comparable for both
table games and slot machines in 2001 and 2000. Room revenues were comparable to
the prior year, as the average room rate increased $3.50 or 6% from $59.00 to
$62.50 and hotel occupancy decreased from 96.6% to 91.6%. The decrease in air
travel, especially long-haul flights from the east coast, affected Riviera Las
Vegas more than many of its competitors. The Company's marketing efforts had
been concentrated on airline customers who traveled longer distances, paid more
for their tickets and had a larger gaming and entertainment budget. While this
strategy was successful in prior years, the effects of the September 11, 2001
terrorist attacks were devastating to this market segment. Subsequent to
September 11, 2001, gaming marketing expenditures were increased to protect and
promote the slot customer base. Increased room marketing efforts focus on
customers in the western United States and these efforts appear to be
successful, based on the pace of advance bookings. Call volumes, booking
patterns and occupancy began to normalize in mid-January 2002. In February 2002
Super Bowl, Chinese New Year and Presidents' Day weekend were successful and
occupancy is expected to increase steadily during the first and second quarter
of 2002. Although occupancy is recovering on the weekends, the midweek occupancy
rates vary significantly from day to day primarily due to competitive pressures.
Entertainment revenues decreased by approximately $4.1 million, or 16.7%, from
$24.5 million during 2000 to $20.4 million during 2001 as attendance decreased
approximately 27%, which was partially offset by a 13.6% increase in ticket
price. Competition for Riviera show customers, while significant all year,
intensified after September 11, 2001. Tour and travel room sales were down
approximately 50% in the fourth quarter of 2001, which is an important producer
of show ticket sales and slot revenues. Other revenues decreased by
approximately $1.4 million, or 13.9%, from $9.9 million during 2000 to $8.5
million during 2001 due primarily to lower telephone revenues.

Operating Income

Operating Income decreased $5.7 million or 29.7% from $19.2 million in 2000
to $13.5 million in 2001 due to the decreased revenues, which were partially
offset by lower entertainment contract expenses and a 9.4% or $1.4 million
reduction in depreciation expense. Entertainment costs are tied to revenues and
as a result of this relationship, the departmental results were similar to the
prior year. Depreciation decreased, as $20 million of equipment purchased in
1993 became fully depreciated in 2000. In addition, the September 11, 2001
terrorist attacks caused management to accelerate the timing and magnitude of
staffing reductions. In excess of 300 full-time equivalent employees were laid
off, based on the reduction in volumes. These events have caused the industry to
reevaluate their cost structures and adjust payrolls accordingly. During 2002
the Company changed its segment reporting to break out corporate expenses which
were shown as expenses at Riviera Las Vegas in prior years. Expenses for 2001
and 2000 have been reclassified for comparison purposes.

EBITDA

Riviera Las Vegas EBITDA, as defined, decreased by approximately $7.9
million, or 23.5%, from $33.5 million in 2000 to $25.7 million in 2001. During
the same periods, EBITDA margin decreased from 20.2% to 16.8% of net revenues.

Riviera Black Hawk

Special Factors Affecting Comparability of Results of Operations

Riviera Black Hawk was in the development stage during 1999 and until February
4, 2000 when the casino opened. Accordingly, the consolidated results of
operations for fiscal 2001 and 2000 may not be comparable.


27



Revenues

Riviera Black Hawk net revenues increased by approximately $13.8
million, or 39.1%, from $35.3 million in the 11 months of 2000 to $49.0 million
in the 12 months ended December 31, 2001 as the operation gained market share
and was, for the most part, unaffected by the events of September 11. Casino
revenues, primarily slot machines, increased by approximately $13.0 million, or
38.7%, from $33.6 million in the 11 months of 2000 to $46.7 million in the 12
months ended December 31, 2001. Average slot machine win per unit increased from
$114 per day in 2000 to $148 in 2001. Food and beverage revenues increased by
approximately $1.5 million, or 38.3%, from $4.0 million in the 11 months of 2000
to $5.6 million in the 12 months ended December 31, 2001. The remodeled buffet
and related marketing efforts resulted in a 45.6% increase in covers (customers)
and a 26.4% increase in average check (price).

Operating Income

Operating Income increased $5.7 million or 305% from $1.9 million in the 11
months of 2000 to $7.6 million in the 12 months ended December 31, 2001 due to
the increase in revenues and better margins as marketing costs were stabilized.
Staffing was also optimized as full-time equivalent employees were reduced from
450 at the opening in February 2000 to 350 at the end of 2001. Although general
and administrative costs increased $1.7 million, they were 23.5% of revenues in
the current year compared with 27% in 2000. Depreciation increased $809,000 or
27.5% in 2001 compared with the 11 months of operations in 2000.

EBITDA

Riviera Black Hawk EBITDA, as defined, increased by approximately $6.1
million, or 92.4%, from $6.6 million in the 11 months of 2000 to $12.7 million
in the 12 months ended December 31, 2001. During the same periods, EBITDA margin
increased from 18.7% to 25.9% of net revenues.

Consolidated Operations

Other Income (Expense)

Interest expense on the $175 million 10% First Mortgage Notes issued by
the Company of $17.5 million plus related amortization of loan fees and
equipment and other financing costs totaled approximately $20.1 million in 2001
and 2000. Interest expense on the $45 million 13% First Mortgage Notes issued by
Riviera Black Hawk in June 1999 combined with its interest from capital leases
totaled $6.7 million in 2001 compared with $7.7 million in 2000. Capitalized
interest of $616,000 in 2000 was primarily from the Riviera Black Hawk, Colorado
project.

Other expenses, net, include an insurance reimbursement of Paulson
litigation costs of $1.2 million in 2000.

Net Loss

The consolidated net loss increased approximately $2.2 million from
$4.2 million in 2000 to $6.4 million in 2001. The effective income tax benefit
rates decreased from 37.2% in 2000 to 25.9% in 2001 because of permanent timing
differences for certain travel and entertainment expenses, along with
adjustments for tax credits which were considered deductions in prior years.

EBITDA

Consolidated EBITDA, as defined, decreased approximately $1.7
million, or 4.7%, from $35.9 million in 2000 to $34.2 million in 2001. During
the same periods, EBITDA margin decreased from 17.4% to 16.9% of net revenues.

Liquidity and Capital Resources

The Company had cash and short-term investments of $20.2 million at
December 31, 2002, which was a decrease of $26.4 million from 2001, which is
mainly due to the costs associated with the extinguishment of debt. Cash
balances include amounts that could be required to fund the Chairman's pension
obligation in a rabbi trust with five days notice. (See Note 7 to the financial
statements, Other Long-Term Liabilities.) Effective April 1, 2003, the Company
will begin paying Mr. Westerman $250,000 per quarter from his pension plan. In
exchange for these payments, Mr. Westerman has agreed to continue his
forbearance of his right to receive full transfer of his pension fund balance to
the rabbi trust. This does not limit his ability to give the five-day notice at
anytime. Although there is no current intention to require

28

additional funding, under certain circumstances, approximately $6.8 million
might have to be disbursed in a short period.

For 2002, the Company's net cash provided by operating activities was $3.1
million compared to $12.5 million in 2001 due primarily to the payment of
interest to defease the old bonds and the loss from operations. Cash flow used
in investing activities was $5.7 million in 2002 compared to $10.2 million in
2001 due to the decrease in capital expenditures. Net cash used in financing was
$23.7 million in 2002 and $7.9 million in 2001, primarily due to the costs of
refinancing our debt. EBITDA, as defined, for 2002 and 2001 was $33.6 million
and $34.2 million, respectively. Management believes that cash flow from
operations, combined with the $20.2 million cash and the $30 million senior
secured credit facility discussed below, will be sufficient to cover the
Company's debt service and enable investment in budgeted capital expenditures of
$8.0 million for the next twelve months.

On June 26, 2002, the Company secured new debt in the principal amount of
$215 million in the form of 11% Senior Secured Notes with a maturity date of
June 15, 2010 substantially all of which were later exchanged for SEC-registered
notes having substantially the same terms (the "Notes"). Interest on the Notes
is at the annual rate of 11% paid semiannually on each June 15 and December 15,
beginning December 15, 2002. The net proceeds of the Notes, along with cash on
hand, were used to defease Riviera Las Vegas' 10% First Mortgage Notes due 2004
and to defease Riviera Black Hawk's 13% First Mortgage Notes with contingent
interest due 2005. Cash flow from operations is not expected to be sufficient to
pay 100% of the principal of the Notes at maturity on June 15, 2010.
Accordingly, the ability of the Company and its subsidiary to repay the Notes at
maturity will be dependent upon its ability to refinance the Notes. There can be
no assurance that the Company will be able to refinance the principal amount of
the Notes at maturity. On or after June 15, 2006, the Company may redeem
Notes from time to time at a premium beginning at 105.5% and declining each
subsequent year to par in 2009.(as defined in the Note indenture)

The Note Indenture provides that, in certain circumstances, the Company
and its subsidiary must offer to repurchase the Notes upon the occurrence of a
change of control or certain other events. In the event of such mandatory
redemption or repurchase prior to maturity, the Company and its subsidiary would
be unable to pay the principal amount of the Notes without a refinancing.

The Note Indenture contains certain covenants, which limit the ability
of the Company and its restricted subsidiaries, subject to certain exceptions,
to: (i) incur additional indebtedness; (ii) pay dividends or other
distributions, repurchase capital stock or other equity interests or
subordinated indebtedness; (iii) enter into certain transactions with
affiliates; (iv) create certain liens; (v) sell certain assets; and (vi) enter
into certain mergers and consolidations. As a result of these restrictions, the
ability of the Company and its subsidiaries to incur additional indebtedness to
fund operations or to make capital expenditures is limited. In the event that
cash flow from operations is insufficient to cover cash requirements, the
Company and its subsidiaries would be required to curtail or defer certain of
their capital expenditure programs, which could have an adverse effect on
operations. The Company believes that it is in compliance with the covenants.

On July 26, 2002, the Company entered into a $30 million, five-year
senior secured credit facility. The credit facility is secured by substantially
the same collateral that secures the Notes. The lien on the collateral securing
the credit facility is senior to the lien on the collateral securing the Notes.
The credit facility contains customary conditions to borrowing and certain
representations and warranties customary in gaming-related finance. The credit
facility also contains financial covenants and restrictions regarding, among
other things, indebtedness, distributions and changes in control. Under the
credit facility, the Company can obtain extensions of credit in the forms of
cash and letters of credit. The Company is required to pay interest on all
outstanding cash advances at the rate of interest announced by Wells Fargo at
its principal office in San Francisco as its prime rate plus 0.75% or at the
rate at which major international banks in London charge each other for
borrowings in U.S. dollars plus 3.00%. However, the minimum interest rate we
will be charged on outstanding cash advances is 4.50%. The Company is required
to pay a fee on all outstanding letters of credit equal to their face value
times an annual percentage rate of 2.50%. Additionally, in the event of a
default, the credit facility lender may increase the interest rate and letter of
credit fee by an additional 2.00% per year during the period of default. At
December 31, 2002, there were no amounts outstanding under the senior secured
credit facility.


29



Contractual Obligations

The following table summarizes our contractual obligations and commitments as of
December 31, 2002:



- ------------------------ -------------------------------------------------------------
Payments due by period
- ------------------------ -------------------------------------------------------------
Contractual Obligations Total Less than 1 1-3 years 3-5 years More than 5
year years
- ------------------------ --------- ----------- ------------ ------------ -------------

Long-Term Debt $220,124 3,430 4,300 411 $211,983
- ------------------------ --------- ----------- ------------ ------------ -------------
Total $220,124 $3,430 $4,300 $411 $211,983
- ------------------------ --------- ----------- ------------ ------------ -------------


Critical Accounting Policies

The preparation of the Company's consolidated financial statements
requires the Company's management to adopt accounting policies and to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, expenses and provision for income taxes. Management
periodically evaluates its policies, estimates and assumptions related to these
policies. The Company operates in a highly regulated industry. For both our Las
Vegas, Nevada and Black Hawk, Colorado operations we are subject to regulations
that describe and regulate operating and internal control procedures. The
majority of our casino revenue is in the form of cash, personal checks or gaming
chips and tokens, which by their nature do not require complex estimations. We
estimate certain liabilities with payment periods that extend for longer than
several months. Such estimates include customer loyalty liabilities,
self-insured medical and workers' compensation costs and litigation costs. We
believe that these estimates are reasonable based upon our past experience with
the business and based upon our assumptions related to possible outcomes in the
future. However, future actual results will likely differ from these estimates.

The Company has determined that the following accounting policies and
related estimates are critical to the preparation of the Company's consolidated
financial statements:

Long-Lived Assets

The Company has a significant investment in long-lived property and
equipment. The Company estimates that the nondiscounted future cash flows
expected to result from the use of these assets exceed the current carrying
value of these assets. Any adverse change to the estimate of these undiscounted
future cash flows could necessitate an impairment charge that would adversely
affect operating results. The Company estimates useful lives for its assets
based on historical experience, estimates of assets' commercial lives, and the
likelihood of technological obsolescence. Should the actual useful life of a
class of assets differ from the estimated useful life, the Company would record
an impairment charge. The Company reviews useful lives, obsolescence, and
assesses commercial viability of these assets periodically.

We utilize estimates related to cash flow projections for the
application of Statement of Financial Accounting Standards ("SFAS") No. 109 to
the realization of deferred tax assets. Our estimates are based upon recent
operating results and budgets for future operating results. These estimates are
made using assumptions about the economic, social and regulatory environments in
which we operate. These estimates could be negatively impacted by numerous
unforeseen events including changes to regulations affecting how we operate our
business, changes in the labor market or economic downturns in the areas where
we operate.

Provision for Credit Losses

The Company maintains a provision for estimated credit losses based on
historical experience and specific customer collection issues. Any unforeseen
change in customer liquidity or financial condition could adversely affect the
collectibility of that account and the Company's operating results.


30


Recently Adopted Accounting Standards


In July 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 142, Goodwill and Other Intangible Assets, which was effective January
1, 2002. SFAS No. 142 requires, among other things, the discontinuance of
goodwill amortization. In addition, the standard includes provisions for the
reclassification of certain existing recognized intangibles as goodwill,
reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill, and
the identification of reporting units for purposes of assessing potential future
impairments of goodwill. SFAS No. 142 also requires the Company to complete a
transitional goodwill impairment test six months from the date of adoption. The
Company adopted SFAS No. 142 on January 1, 2002 and it had no effect on its
financial position and results of operations.

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
supersedes FASB Statement 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, and the accounting and
reporting provisions of Accounting Principles Board ("APB") Opinion No. 30,
Reporting the Results of Operations--Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions, for the disposal of a segment of a business (as
previously defined in that Opinion). SFAS No. 144 also amends APB No. 51,
Consolidated Financial Statements, to eliminate the exception to consolidation
for a subsidiary for which control is likely to be temporary. The provisions of
SFAS No. 144 are effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years. The Company adopted SFAS No. 144 on January 1, 2002 and the adoption had
no effect on its financial position and results of operations.


In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 requires that gains and losses from extinguishment of
debt be classified as extraordinary items only if they meet the criteria in APB
Opinion No. 30. Applying the provisions of Opinion No. 30 will distinguish
transactions that are part of an entity's recurring operations from those that
are unusual and infrequent that meet criteria for classification as an
extraordinary item. SFAS No. 145 is effective for the Company beginning January
1, 2003, but the Company adopted the provisions of SFAS No. 145 during fiscal
year 2002, as permitted. The effect on our consolidated financial position and
results of operations of the adoption of SFAS No. 145 was that the Company
recognized and reported bond retirement costs as other expense.

Recently Issued Accounting Standards

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS No. 143 applies to all
entities. It applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction, development
and (or) the normal operation of a long-lived asset, except for certain
obligations of lessees. SFAS No. 143 is effective for financial statements
issued for fiscal years beginning after June 15, 2002. The Company is currently
assessing but has not yet determined the impact of SFAS No. 143 on its financial
position and results of operations.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(Including Certain Costs Incurred in a Restructuring). SFAS No. 146 requires
that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. A fundamental conclusion reached by
the FASB in this statement is that an entity's commitment to a plan, by itself,
does not create a present obligation to others that meets the definition of a
liability. SFAS No. 146 also establishes that fair value is the objective for
initial measurement of the liability. The provisions of this statement are
effective for exit or disposal activities that are initiated after December 31,
2002, with early application encouraged. The Company is currently assessing but
has not yet determined the impact of SFAS No. 146 on its financial position and
results of operations.

In November 2002, the FASB issued Interpretation ("FIN") No. 45,
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN No. 45 addresses financial


31


accounting for, and disclosure of, guarantees. FIN 45 requires certain
guarantees to be recorded at fair value, as opposed to the existing standard of
recording a liability only when a loss is probable and reasonably estimable
according to SFAS No. 5, Accounting for Contingencies. The Company believes that
the adoption of FIN No. 45 is not expected to have a material impact on the
Company's financial position and results of operations.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation--Transition and Disclosure--an Amendment of FASB
Statement No. 123. SFAS No. 148 amends FASB Statement No. 123, Accounting for
Stock-Based Compensation. Although it does not require use of fair value method
of accounting for stock-based employee compensation, it does provide alternative
methods of transition. It also amends the disclosure provisions of Statement No.
123 and APB Opinion No. 28, Interim Financial Reporting, to require disclosure
in the summary of significant accounting policies of the effects of an entity's
accounting policy with respect to stock-based employee compensation on reported
net income and earnings per share in annual and interim financial statements.
SFAS No. 148's amendment of the transition and annual disclosure requirements
are effective for fiscal years ending after December 15, 2002. The amendment of
disclosure requirements of Opinion No. 28 are effective for interim periods
beginning after December 15, 2002. The Company believes that the adoption of
SFAS No. 148 will not have a material impact on the Company's consolidated
financial position or results of operations.

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities. FIN No. 46 addresses consolidation by business enterprises
where equity investors do not bear the residual economic risks and rewards.
These entities have been commonly referred to as "special purpose entities." If
a business enterprise has the majority financial interest in an entity, which is
defined in the guidance as a variable interest entity, the assets, liabilities
and results of the activities of the variable interest entity should be included
in consolidated financial statements with those of the business enterprise. The
Interpretation also explains how to identify variable interest entities and how
an enterprise should assess its interest in an entity when deciding whether or
not it will consolidate that entity. The provisions of this statement must
follow the new rules in accounting periods beginning after June 15, 2003. The
Company believes that the adoption of FIN No. 46 is not expected to have a
material impact on the Company's financial position and results of operations.

32




Item 7A. Disclosure

Market risks relating to our operations result primarily from changes in
interest rates. We invest our cash and cash equivalents in U.S. Treasury Bills
with maturities of 90 days or less. Our equipment loans, leases and Special
Improvement District debt are not subject to significant valuation adjustments
due to interest rate changes. Although substantially all the Company's 11%
Senior Secured Notes can be publicly traded, it is not known how significantly
the trading prices for these Notes will react to market interest rate changes.




Interest Rate Sensitivity
Principal (Notational Amount by Expected Maturity)
Average Interest Rate

(Amounts in Thousands) Fair Value
2003 2004 2005 2006 2007 Thereafter Total At
12/31/02

Long Term Debt
Including Current Portion

Equipment loans and
capital leases-Las Vegas $1,283 $1,019 $11 $2,313 $2,313

Average interest rate 7.8% 7.8% 8.4%


11% First Mortgage Note $211,983 $211,983 $190,785

Average interest rate 11.6%

Capital leases,
Black Hawk, Colorado $2,044 $2,263 $658 $4,965 $4,965

Average interest rate 10.8% 10.8% 10.8%

Special Improvement
District Bonds-Black Hawk,
Colorado casino project $103 $109 $116 $124 $129 $282 $863 $863

Average interest rate 5.5% 5.5% 5.5% 5.5% 5.5% 5.5%


Forward Looking Statements

Throughout this report we make forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange
Act). Forward-looking statements include the words may, will, would,
could, likely, estimate, intend, plan, continue, believe, expect
or anticipate and other similar words and include all discussions about our
acquisition and development plans. We do not guarantee that the transactions and
events described in this report will happen as described or that any positive
trends noted in this report will continue. These forward-looking statements
generally relate to our plans, objectives and expectations for future operations
and are based upon management's reasonable estimates of future results or
trends. Although we believe that our plans and objectives reflected in or
suggested by such forward-looking statements are reasonable at the present time,
we may not achieve or we may modify such plans or objectives. You should read
this report completely and with the understanding that actual future results may
be materially different from what we expect. We do not plan to update
forward-looking statements even though our situation or plans may change in the
future.

Specific factors that might cause actual results to differ from our
expectations, might cause us to modify our plans or objectives, might affect our
ability to pay timely amounts due under our debt instruments, include, but are
not limited to:

* the availability and adequacy of our cash flow to meet our requirements,
including payment of amounts due under our debt instruments;

33


* economic, competitive, demographic, business and other conditions in our
local and regional markets;

* changes or developments in laws, regulations or taxes in the gaming
industry;

* actions taken or omitted to be taken by third parties, including our
customers, suppliers, competitors and members as well as legislative,
regulatory, judicial and other governmental authorities;

* competition in the gaming industry, including the availability and
success of alternative gaming venues and other entertainment
attractions;

* a decline in the public acceptance of gaming;

* changes in personnel or compensation, including federal minimum wage
requirements;

* our failure to obtain, delays in obtaining, or the loss of,any licenses,
permits or approvals, including gaming and liquor licenses, or the
limitation, conditioning, suspension or revocation of any such licenses,
permits or approvals, or our failure to obtain an unconditional renewal
of any such licenses, permits or approvals on a timely basis;

* the loss of any of our casino facilities due to terrorist acts,
casualty, weather, mechanical failure or any extended or extraordinary
maintenance or inspection that may be required;

* other adverse conditions, such as adverse economic conditions, changes
in general customer confidence or spending, increased transportation
costs, travel concerns or weather-related factors, that may adversely
affect the economy in general or the casino industry in particular;

* our substantial indebtedness, debt service requirements and liquidity
constraints;

* risks related to our debt instruments and to high-yield securities and
gaming securities generally;

* changes in our business strategy, capital improvements or development
plans;

* the availability of additional capital to support capital improvements
and development;

* factors relating to the current state of world affairs and any further
acts of terrorism or any other destabilizing events in the United States
or elsewhere; and

* other risk factors discussed elsewhere in this report.

All future written and oral forward-looking statements attributable to us
or any person acting on our behalf are expressly qualified in their entirety by
the cautionary statements contained or referred to in this section. In light of
these and other risks, uncertainties and assumptions, the forward-looking events
discussed in this report might not occur.


34


Item 8. Financial Statements and Supplementary Data

See Financial Statements included in Item 14(a).


Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.

PART III


Item 10. Directors and Executive Officers of the Registrant.

Information regarding this item is incorporated by reference in the
Company's Proxy Statement to be filed on or about April 18, 2003, relating to
the Annual Meeting of Stockholders to be held on May 20, 2003 and is made a part
hereof.

Item 11. Executive Compensation

Information regarding this item is incorporated by reference in the
Company's Proxy Statement to be filed on or about April 18, 2003, relating to
the Annual Meeting of Stockholders to be held on May 20, 2003 and is made a part
hereof.

Item 12. Principal Shareholders

Information regarding this item is incorporated by reference in the
Company's Proxy Statement to be filed on or about April 18, 2003, relating to
the Annual Meeting of Stockholders to be held on May 20, 2003 and is made a part
hereof.

Item 13. Certain Relationships and Related Transactions

Information regarding this item is incorporated by reference in the
Company's Proxy Statement to be filed on or about April 18, 2003, relating to
the Annual Meeting of Stockholders to be held on May 20, 2003 and is made a part
hereof.

Item 14. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in our Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to our management, including our chief executive officer and chief
financial officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures.

Within 90 days prior to the date of this report, we carried out an evaluation,
under the supervision and with the participation of our management, including
our chief executive officer and chief financial officer, of the effectiveness of
the design and operation of our disclosure controls and procedures. Based on the
foregoing, our chief executive officer and chief financial officer concluded
that the Company's disclosure controls and procedures were effective.

Changes in Internal Controls

Subsequent to the evaluation described above, there have not been any
significant changes in our internal controls or in other factors that could
significantly affect these controls. There were no significant deficiencies or
material weaknesses noted and therefore no corrective actions were taken.



35



PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)(1) List of Financial Statements

The following Independent Auditors' Report and the consolidated
Financial Statements of the Company are incorporated by reference into this Item
15 of Form 10-K from Item 8 hereof:

- Independent Auditors' Report.
- Consolidated Balance Sheets as of December 31, 2002 and 2001.
- Consolidated Statements of Operations for the Years Ended
December 31, 2002, 2001 and 2000.
- Consolidated Statements of Stockholders' Equity (Deficiency)
for the Years Ended December 31, 2002, 2001 and 2000. - Consolidated Statements
of Cash Flows for the Years Ended December 31, 2002, 2001
and 2000.
- Notes to Consolidated Financial Statements.

(a)(2) List of Financial Statement Schedules

No financial statement schedules have been filed herewith since they
are either not required, are not applicable, or the required information is
shown in the consolidated financial statements or related notes.

(a)(3) List of Exhibits

Exhibits required by Item 601 of Regulation S-K are listed in the
Exhibit Index herein, which information is incorporated by reference.

(b) Reports on Form 8-K

During the last quarter of 2002, the Company filed the following reports on
Form 8-K:

1. October 22, 2002 (filed October 23, 2002) - Reporting under Item 5 (Other
Events) and Item 7 (Financial Statements, Pro Forma Financial Information
and Exhibits). Summary financial information (unaudited) as of, and for the
interim period ending on, September 30, 2002 was included in the filing.
2. October 24, 2002 (filed October 25, 2002) - Reporting under Item 5 (Other
Events).
3. December 4, 2002 (filed December 5, 2002) - Reporting under Item 5 (Other
Events)



























36




EXHIBIT INDEX

Exhibit Description
Number

3.1* Second Restated Articles of Incorporation of the Company (see Exhibit 3.1
to Registration Statement on Form S-4 filed with the Commission on
September 10, 1997, Commission File No. 0-21430)

3.2* Bylaws of the Company (see Exhibit 3.2 to Registration Statement on Form
S-4 filed with the Commission on September 10, 1997, Commission File No.
0-21430)

3.3* Articles of Incorporation of Riviera Operating Corporation (see Exhibit 3.3
to Registration Statement on Form S-4 filed with the Commission on
September 10, 1997, Commission File No. 0-21430)

3.4* Bylaws of Riviera Operating Corporation (see Exhibit 3.4 to Registration
Statement on Form S-4 filed with the Commission on September 10, 1997,
Commission File No. 0-21430)

3.5* Articles of Incorporation of Riviera Gaming Management, Inc. (see Exhibit
3.5 to Registration Statement on Form S-4 filed with the Commission on
September 10, 1997, Commission File No. 0-21430)

3.6* Bylaws of Riviera Gaming Management, Inc. (see Exhibit 3.6 to Registration
Statement on Form S-4 filed with the Commission on September 10, 1997,
Commission File No. 0-21430)

3.7* Articles of Incorporation of Riviera Gaming Management-Elsinore, Inc. (see
Exhibit 3.7 to Registration Statement on Form S-4 filed with the Commission
on September 10, 1997, Commission File No. 0-21430)

3.8* Bylaws of Riviera Gaming Management - Elsinore, Inc. (see Exhibit 3.8 to
Registration Statement on Form S-4 filed with the Commission on September
10, 1997, Commission File No. 0-21430)

3.9* Articles of Amendment to the Articles of Incorporation of Riviera Black
Hawk, Inc. (see Exhibit 3.01 to Amendment No. 1 to Registration Statement
on Form S-4 filed by Riviera Black Hawk, Inc. with the Commission on August
31, 1999, Commission File No. 333-81613)

3.10*Articles of Incorporation of Riviera Black Hawk, Inc. (see Exhibit 3.02 to
Amendment No. 1 to Registration Statement on Form S-4 filed by Riviera
Black Hawk, Inc. with the Commission on August 31, 1999, Commission File
No. 333-81613)

3.11*Bylaws of Riviera Black Hawk, Inc. (see Exhibit 3.03 to Amendment No. 1 to
Registration Statement on Form S-4 filed by Riviera Black Hawk, Inc. with
the Commission on August 31, 1999, Commission File No. 333-81613)

4.1* Indenture dated as of June 26, 2002 among the Company, the Guarantors party
thereto and The Bank of New York, as trustee. (see Exhibit 4.1 to
Registration Statement on Form S-4 filed with the Commission on August 9,
2002, Commission File No. 333-97907)

4.2* Form of the Company's 11% Senior Secured Notes due 2010 (included in
Exhibit 4.1 to Registration Statement on Form S-4 filed with the Commission
on August 9, 2002, Commission File No. 333-97907)

37

10.1*Registration Rights Agreement dated as of June 26, 2002 by and among the
Company, the Guarantors party thereto, and Jefferies & Company, Inc.(see
Exhibit 10.1 to Registration Statement on Form S-4 filed with the
Commission on August 9, 2002, Commission File No. 333-97907)

10.2*Purchase Agreement dated June 19, 2002 among the Company, the Guarantors
party thereto, and Jefferies & Company, Inc. (see Exhibit 10.2 to
Registration Statement on Form S-4 filed with the Commission on August 9,
2002, Commission File No. 333-97907)

10.3*Amended and Restated Lease Agreement between Riviera Operating Corporation
and Mardi Gras Food Court, Inc. dated March 15, 1998. (see Exhibit 10.3 to
Registration Statement on Form S-4 filed with the Commission on August 9,
2002, Commission File No. 333-97907)

10.4* Lease Agreement between Riviera, Inc. and Leroy's Horse and Sports Place
(see Exhibit 10.3 to Form 10, Commission File No. 0-21430)

10.5*Indemnity Agreement, dated June 30, 1993, from Riviera, Inc. and Meshulam
Riklis in favor of the Company and Riviera Operating Corporation (see
Exhibit 10.7 to Registration Statement on Form S-1 filed with the
Commission on August 11, 1993, Commission File No. 33-67206)

10.6*Equity Registration Rights Agreement dated June 30, 1993, among the
Company and the Holders of Registerable Shares (see Exhibit 10.9 to
Registration Statement on Form S-1 filed with the Commission on August 11,
1993, Commission File No. 33-67206)

10.7*Operating Agreement dated June 30, 1993, between the Company and Riviera
Operating Corporation (see Exhibit 10.15 to Registration Statement on Form
S-1 filed with the Commission on August 11, 1993, Commission File No.
33-67206)

10.8*Adoption Agreement regarding Profit Sharing and 401(k) Plans of the
Company (see Exhibit 10.16 to Registration Statement on Form S-1 filed with
the Commission on August 11, 1993, Commission File No. 33-67206)

10.9*Merrill Lynch Special Prototype Defined Contribution Plan Adoption
Agreement dated June 29, 1993, as amended through November 15, 1996. (see
Exhibit 10.9 to Registration Statement on Form S-4 filed with the
Commission on August 9, 2002, Commission File No. 333-97907)

10.10*(A) Form of Termination Agreement with the Company dated June 11, 2002.
(see Exhibit 10.10 to Registration Statement on Form S-4 filed with the
Commission on August 9, 2002, Commission File No. 333-97907)

10.11* Tax Sharing Agreement between the Company and Riviera Operating
Corporation dated June 30, 1993 (see Exhibit 10.24 to Amendment No. 1 to
Registration Statement on Form S-1 filed with the Commission on August 19,
1993, Commission File No. 33-67206)

10.12* Tax Sharing Agreement between the Company and Riviera Black Hawk, Inc.
dated March 31, 1999. (see Exhibit 10.12 to Registration Statement on Form
S-4 filed with the Commission on August 9, 2002, Commission File No.
333-97907)

10.13*(A) The Company's 1993 Employee Stock Option Plan (see Exhibit 10.25 to
Amendment No. 1 to Registration Statement on Form S-1 filed with the
Commission on August 19, 1993, Commission File No. 33-67206)


38


10.14*(A) The Company's 1996 Non-Qualified Stock Option Plan. (see Exhibit 10.14
to Registration Statement on Form S-4 filed with the Commission on August
9, 2002, Commission File No. 333-97907)

10.15*(A) Employment Agreement dated as of November 21, 1996 by and between the
Company, Riviera Operating Corporation and William L. Westerman (see
Exhibit 10.31 to Form 10-K for the fiscal year ended December 31, 1996,
Commission File No. 0-21430)

10.16*(A) Employment Agreement between the Company and Robert A. Vannucci
effective July 1, 1998 (see Exhibit 10.36 to Form 10-Q filed November 6,
1998)

10.17*(A) Amendment to Employment Agreement between the Company and Robert A.
Vannucci effective October 1, 2000 (see Exhibit 10.39 to Form 10-K filed
March 23, 2001)

10.18*(A) Amendment to Employment Agreement between the Company and William L.
Westerman effective January 1, 2001 (see Exhibit 10.40 to Form 10-K filed
March 23, 2001)

10.19*(A) Deferred Compensation Plan dated November 1, 2000, adopted by the
Company on October 2, 2000 (see Registration Statement on Form S-8 filed
with the Commission on February 14, 2001)

10.20*(A) Restricted Stock Plan dated January 2, 2001, adopted by the Company on
October 2, 2000 (see Registration Statement on Form S-8 filed with the
Commission on February 14, 2001)

10.21* Deed of Trust, Assignment of Rents, Leases, Fixture Filing and Security
Agreement dated June 26, 2002, executed by the Company for the benefit of
The Bank of New York. (see Exhibit 10.21 to Registration Statement on Form
S-4 filed with the Commission on August 9, 2002, Commission File No.
333-97907)

10.22* Deed of Trust to Public Trustee, Security Agreement, Fixture Filing and
Assignment of Rents, Leases and Leasehold Interests dated as of June 26,
2002, by Riviera Black Hawk, Inc. for the benefit of The Bank of New York.
(see Exhibit 10.22 to Registration Statement on Form S-4 filed with the
Commission on August 9, 2002, Commission File No. 333-97907)

10.23* Security Agreement dated June 26, 2002 by and among the Company, Riviera
Operating Corporation, Riviera Gaming Management, Inc., Riviera Gaming
Management of Colorado, Inc., Riviera Black Hawk, Inc, and The Bank of New
York. (see Exhibit 10.23 to Registration Statement on Form S-4 filed with
the Commission on August 9, 2002, Commission File No. 333-97907)

10.24* Assignment of Rents, Leases and Leasehold Interests dated as of June 26,
2002 by Riviera Black Hawk, Inc. for the benefit of The Bank of New York.
(see Exhibit 10.24 to Registration Statement on Form S-4 filed with the
Commission on August 9, 2002, Commission File No. 333-97907)

10.25* Stock Pledge and Security Agreement dated June 26, 2002, executed by the
Company. (see Exhibit 10.25 to Registration Statement on Form S-4 filed
with the Commission on August 9, 2002, Commission File No. 333-97907)

10.26* Stock Pledge and Security Agreement dated June 26, 2002, executed by
Riviera Operating Corporation. (see Exhibit 10.26 to Registration Statement
on Form S-4 filed with the Commission on August 9, 2002, Commission File
No. 333-97907)

10.27* Stock Pledge and Security Agreement dated June 26, 2002, executed by
Riviera Gaming Management, Inc. (see Exhibit 10.27 to Registration
Statement on Form S-4 filed with the Commission on August 9, 2002,
Commission File No. 333-97907)



39



10.28* Environmental Indemnity dated as of June 26, 2002 by and among the
Company and Riviera Black Hawk, Inc., as indemnitors, and The Bank of New
York, as trustee. (see Exhibit 10.28 to Registration Statement on Form S-4
filed with the Commission on August 9, 2002, Commission File No. 333-97907)

10.29* Environmental Indemnity dated as of June 26, 2002 by and between the
Company, as indemnitor, and The Bank of New York, as trustee. (see Exhibit
10.29 to Registration Statement on Form S-4 filed with the Commission on
August 9, 2002, Commission File No. 333-97907)

10.30* Loan and Security Agreement dated as of July 26, 2002 by and among the
Company and the other Borrower parties thereto, the Guarantors parties
thereto and Foothill Capital Corporation. (see Exhibit 10.30 to
Registration Statement on Form S-4 filed with the Commission on August 9,
2002, Commission File No. 333-97907)

10.31* Intercreditor Agreement dated as of July 26, 2002 by and between The Bank
of New York, as trustee, and Foothill Capital Corporation. (see Exhibit
10.31 to Registration Statement on Form S-4 filed with the Commission on
August 9, 2002, Commission File No. 333-97907)

10.32* Fee Letter, dated July 26, 2002, issued by the Company, Riviera Black
Hawk, Inc. and Riviera Operating Corporation to Foothill Capital
Corporation. (see Exhibit 10.32 to Registration Statement on Form S-4 filed
with the Commission on August 9, 2002, Commission File No. 333-97907)

10.33* Intellectual Property Security Agreement dated as of July 26, 2002 by and
between the Company and the other Debtors parties thereto, and Foothill
Capital Corporation. (see Exhibit 10.33 to Registration Statement on Form
S-4 filed with the Commission on August 9, 2002, Commission File No.
333-97907)

10.34* Deed of Trust, Assignment of Rents, Leases, Fixture Filing and Security
Agreement dated July 26, 2002, executed by the Company for the benefit of
Foothill Capital Corporation. (see Exhibit 10.34 to Registration Statement
on Form S-4 filed with the Commission on August 9, 2002, Commission File
No. 333-97907)

10.35* Environmental Indemnity dated July 26, 2002 from the Company in favor of
Foothill Capital Corporation. (see Exhibit 10.35 to Registration Statement
on Form S-4 filed with the Commission on August 9, 2002, Commission File
No. 333-97907)

10.36* Continuing Guaranty dated July 26, 2002 by and among the Company, the
other Borrowers parties thereto and the Guarantors parties thereto in favor
of Foothill Capital Corporation. (see Exhibit 10.36 to Registration
Statement on Form S-4 filed with the Commission on August 9, 2002,
Commission File No. 333-97907)

10.37* Subordination Agreement dated July 26, 2002 by and among the Company and
the other Creditors parties thereto in favor of Foothill Capital
Corporation. (see Exhibit 10.37 to Registration Statement on Form S-4 filed
with the Commission on August 9, 2002, Commission File No. 333-97907)

10.38* Stock Pledge and Security Agreement dated July 26, 2002, executed by the
Company. (see Exhibit 10.38 to Registration Statement on Form S-4 filed
with the Commission on August 9, 2002, Commission File No. 333-97907)


` 40


10.39* Stock Pledge and Security Agreement dated July 26, 2002, executed by
Riviera Operating Corporation. (see Exhibit 10.39 to Registration Statement
on Form S-4 filed with the Commission on August 9, 2002, Commission File
No. 333-97907)

10.40* Stock Pledge and Security Agreement dated July 26, 2002, executed by
Riviera Gaming Management, Inc. (see Exhibit 10.40 to Registration
Statement on Form S-4 filed with the Commission on August 9, 2002,
Commission File No. 333-97907)

10.41* Deed of Trust to Public Trustee, Security Agreement, Fixture Filing and
Assignment of Rents, Leases and Leasehold Interests dated July 26, 2002,
executed by Riviera Black Hawk, Inc. for the benefit of Foothill Capital
Corporation. (see Exhibit 10.41 to Registration Statement on Form S-4 filed
with the Commission on August 9, 2002, Commission File No. 333-97907)

10.42* Environmental Indemnity dated July 26, 2002 from the Company and Riviera
Black Hawk, Inc. in favor of Foothill Capital Corporation. (see Exhibit
10.42 to Registration Statement on Form S-4 filed with the Commission on
August 9, 2002, Commission File No. 333-97907)

10.43*(A) The Company's Stock Compensation Plan. (see Exhibit 10.43 to
Registration Statement on Form S-4 filed with the Commission on August 9,
2002, Commission File No. 333-97907)

10.44(A) Second Amendment to Employment Agreement between the Company and Robert
Vannucci effective July 1, 2002.

10.45(A) Third Amendment to Employment Agreement between the Company and Robert
Vannucci effective March 3, 2003.

21.1*Subsidiaries of the Company. (see Exhibit 21.1 to Registration Statement
on Form S-4 filed with the Commission on August 9, 2002, Commission File
No. 333-97907)

* These are incorporated herein by reference as exhibits hereto. Following the
description of each such exhibit is a reference to it as it appeared in a
specified document previously filed with the Commission, to which there have
been no amendments or changes.

(A) Management contract or compensatory plan or arrangement



41


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.

RIVIERA HOLDINGS CORPORATION


By:/s/ WILLIAM L. WESTERMAN
------------------------------
William L. Westerman
Chief Executive Officer and President
(Principal Executive Officer)

March 17, 2003


Pursuant to the requirements of the Securities Exchange Act of 1934,
this Amendment has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Signature Title Date


/s/ WILLIAM L. WESTERMAN Chairman of the Board, Chief March 17, 2003
- ------------------------ Executive Officer and President
William L. Westerman


/s/ DUANE R. KROHN Treasurer (Principal Financial March 17, 2003
- ------------------------ and Accounting Officer)
Duane R. Krohn

/s/ ROBERT R. BARENGO Director March 17, 2003
- ------------------------
Robert R. Barengo

/s/ JEFFREY A. SILVER Director March 17, 2003
- ------------------------
Jeffrey A. Silver

/s/ PAUL A. HARVEY Director March 17, 2003
- ------------------------
Paul A. Harvey

/s/ VINCENT L. DIVITO Director March 17, 2003
- ------------------------


42




CERTIFICATIONS



I, William L. Westerman, the Chief Executive Officer of Riviera Holdings
Corporation, certify that:

1. I have reviewed this annual report on Form 10-K of Riviera Holdings
Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.





Date: March 17, 2003




WILLIAM L. WESTERMAN
--------------------
William L. Westerman
Chairman of the Board and
Chief Executive Officer


43



I, Duane R. Krohn, the Chief Financial Officer of Riviera Holdings Corporation,
certify that:

1. I have reviewed this annual report on Form 10-K of Riviera Holdings
Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.




Date: March 17, 2003





DUANE R. KROHN
-----------------------------------
Duane R. Krohn
Treasurer and Chief Financial Officer


44



RIVIERA HOLDINGS CORPORATION

TABLE OF CONTENTS
- -------------------------------------------------------------------------------

Page


INDEPENDENT AUDITORS' REPORT F-1

CONSOLIDATED FINANCIAL STATEMENTS:

Balance Sheets as of December 31, 2002 and 2001 F-2

Statements of Operations for the Years Ended December 31,
2002, 2001 and 2000 F-3

Statements of Stockholders' Equity (Deficiency) for the
Years Ended December 31, 2002, 2001 and 2000 F-4

Statements of Cash Flows for the Years Ended December 31,
2002, 2001 and 2000 F-5

Notes to Consolidated Financial Statements F-7

Unaudited Quarterly Financial Data F-30























INDEPENDENT AUDITORS' REPORT


Riviera Holdings Corporation
Las Vegas, Nevada

We have audited the accompanying consolidated balance sheets of Riviera Holdings
Corporation and subsidiaries (the "Company") as of December 31, 2002 and 2001
and the related consolidated statements of operations, stockholders' equity
(deficiency) and cash flows for each of the three years in the period ended
December 31, 2002. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Riviera Holdings Corporation and
subsidiaries as of December 31, 2002 and 2001 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2002, in conformity with accounting principles generally accepted
in the United States of America.





Deloitte & Touche LLP
Las Vegas, Nevada
February 14, 2003


F-1



RIVIERA HOLDINGS CORPORATION

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
(In Thousands, Except Share Amounts)
- ------------------------------------------------------------------------------


ASSETS 2002 2001

CURRENT ASSETS:

Cash and cash equivalents $ 20,220 $ 46,606
Accounts receivable-net 4,010 3,528
Inventories 1,824 2,253
Prepaid expenses and other assets 3,968 3,083
------ ------
Total current assets 30,022 55,470

PROPERTY AND EQUIPMENT-Net 188,233 200,531

OTHER ASSETS-Net 14,677 6,728

DEFERRED INCOME TAXES-Net 2,964 5,089
-------- -------
TOTAL $ 235,896 $ 267,818
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

CURRENT LIABILITIES:
Current portion of long-term debt $ 3,430 $ 3,151
Accounts payable 8,338 8,200
Accrued interest 1,065 8,084
Accrued expenses 15,576 14,740
------ ------
Total current liabilities 28,409 34,175
------ ------
OTHER LONG-TERM LIABILITIES 6,465 7,391
----- -----
LONG-TERM DEBT-Net of current portion 216,694 217,288
------- -------
COMMITMENTS AND CONTINGENCIES (Note 12)

STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock ($.001 par value-20,000,000 shares
authorized; 5,135,773 and 5,106,776 shares
issued at December 31, 2002 and 2001, respectively) 5 5
Additional paid-in capital 13,638 13,485
Treasury stock (1,686,244 and 1,674,144 shares at
December 31, 2002 and 2001, respectively) (11,313) (11,246)
Retained earnings (accumulated deficit) (18,002) 6,720
-------- -------
Total stockholders' equity (deficiency) (15,672) 8,964
-------- -------
TOTAL $ 235,896 $ 267,818
========= ========

See notes to consolidated financial statements.




F-2




CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(In Thousands, Except Per Share Amounts)
- ------------------------------------------------------------------------------

2002 2001 2000
REVENUES:

Casino $ 106,122 $ 114,039 $ 107,693
Rooms 42,343 44,255 43,819
Food and beverage 32,367 31,256 30,756
Entertainment 17,918 20,692 24,526
Other 7,945 9,119 10,538
------ ----- ------
Total revenues 206,695 219,361 217,332
Less promotional allowances 18,403 17,330 15,801
------ ------ ------
Net revenues 188,292 202,031 201,531
------- ------- -------
COSTS AND EXPENSES:
Direct costs and expenses of
operating departments:
Casino 58,061 62,845 57,450
Rooms 23,127 23,339 23,364
Food and beverage 21,207 21,426 21,372
Entertainment 12,324 14,900 18,959
Other 2,771 3,068 3,146
Other operating expenses:
General and administrative 37,213 42,239 41,312
Preopening expenses-Black Hawk,
Colorado project 1,222
Depreciation and amortization 17,736 17,243 17,827
------ ------ ------
Total costs and expenses 172,439 185,060 184,652
------- ------- -------
INCOME FROM OPERATIONS 15,853 16,971 16,879
------- ------- -------
OTHER (EXPENSE) INCOME:
Interest expense (26,842) (26,864) (27,805)
Interest expense, net-bonds held for
retirement (2,692)
Loss on extinguishment of debt (11,211)
Interest income 200 1,274 2,429
Interest capitalized 616
Other-net (30) (28) 1,171
------ ------ ------
Total other expense (40,575) (25,618) (23,589)
-------- ------- ------
LOSS BEFORE BENEFIT FOR INCOME TAXES (24,722) (8,647) (6,710)

BENEFIT FOR INCOME TAXES (2,240) (2,495)
--------- -------- -------
NET LOSS $ (24,722) $ (6,407) $ (4,215)
========= ======== =======
EARNINGS PER SHARE DATA-Loss per share,
Basic and diluted $ (7.17) $ (1.79) $ (1.05)
======== ======= =======
Weighted-average common and common
equivalent shares 3,450 3,573 4,013
======== ======= =======
See notes to consolidated financial statements.



F-3




RIVIERA HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(In Thousands)
- --------------------------------------------------------------------------------------------------------------------------


Common Stock Additional Retained Treasury Stock
----------------- Paid-In Earnings -------------------
Shares Amount Capital (Accumulated Shares Amount Total
Deficit)



BALANCE, JANUARY 1, 2000 5,107 $ 5 $ 13,446 $ 17,342 (584) $ (3,115) $ 27,678

Purchase of treasury stock (848) (6,518) (6,518)

Net loss (4,215) (4,215)
----- -- ------ ------ ------ ------- -------
BALANCE, DECEMBER 31, 2000 5,107 5 13,446 13,127 (1,432) (9,633) 16,945

Purchase of treasury stock, general (158) (993) (993)

Purchase of treasury stock, deferred
compensation trust (118) (786) (786)

Issuance of restricted stock 39 34 166 205

Net loss (6,407) (6,407)
------ -- ------ ------ ------- ------- ------
BALANCE, DECEMBER 31, 2001 5,107 5 13,485 6,720 (1,674) (11,246) 8,964

Purchase of treasury stock, deferred
compensation trust (12) (67) (67)

Issuance of restricted stock 29 - 153 153

Net loss (24,722) (24,722)
------ -- ------ ------- ------ ------- --------
BALANCE, DECEMBER 31, 2002 5,136 $ 5 $ 13,638 $(18,002) (1,686) $(11,313) $(15,672)
====== == ====== ======= ======= ======== ========

See notes to consolidated financial statements.



F-4




RIVIERA HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(In Thousands)
- ----------------------------------------------------------------------------------

2002 2001 2000

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $(24,722) $ (6,407) $ (4,215)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 17,736 17,243 17,827
Provision for bad debts 518 225 326
Provision for gaming discounts (70) 45
Interest expense 26,842 26,864 27,805
Interest paid (31,075) (23,490) (24,410)
Interest expense-net, bonds held for retirement 2,692
Loss on extinguishment of debt 11,211
Interest capitalized on construction projects (616)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (999) 1,865 (877)
Decrease (increase) in inventories 429 1,089 90
Decrease (increase) in prepaid expenses and
other assets (885) 1,516 (607)
Increase (decrease) in accounts payable 139 (1,748) (2,071)
Increase (decrease) in accrued expenses 836 (2,420) 7,348
Increase (decrease) in other long-term
liabilities deferred compensation plan
obligation 134 579
Decrease (increase) in deferred tax asset 2,125 (2,200) (2,534)
Increase (decrease) in other long-term
liabilities slot annuities payable (3)
Increase (decrease) in other long-term
liabilities non-qualified pension plan
obligation to CEO upon retirement (1,900) (500) 1,247
----- ------- ------
Net cash provided by operating activities 3,081 12,546 19,355
----- ------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and equipment
-Las Vegas (3,869) (7,622) (7,465)
Capital expenditures for property and equipment
-Black Hawk (1,565) (2,640) (16,969)
Interest capitalized on construction projects 616
Decrease (increase) in short-term investments 5,258
Decrease (increase) in restricted funds 15,060
Decrease (increase) in other assets (310) 85 (661)
------ ----- -------
Net cash used in investing activities (5,744) (10,177) (4,161)
------- ------ -------

(Continued)


F-5




RIVIERA HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(In Thousands)
- -----------------------------------------------------------------------------------


2002 2001 2000

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from long-term borrowings 211,781 $ 9,552
Increase in deferred loan fees (13,291)
Payments on long-term borrowings (222,299) $ (2,865) (2,299)
Purchase of treasury stock, general (993) (6,518)
Purchase of treasury stock, deferred
compensation trust (67) (786)
Purchase of 13% Mortgage Notes-Black Hawk (3,500) (6,559)
Issuance of restricted stock, deferred
compensation 153 166
Exercise of employee stock options 41
------- ----- ------
Net cash used in financing activities (23,723) (7,937) (5,824)
-------- ------- ------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (26,386) (5,568) 9,370

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 46,606 52,174 42,804
------- ------ ------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 20,220 $46,606 $ 52,174
====== ====== ======

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION-
Income taxes (refunded) paid, State of Colorado $ (110) $ 110
==== ===
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES:
Property acquired with accounts payable-Las Vegas,
Nevada $ 94 $ 132
==== =====
Property acquired with debt-Black Hawk, Colorado $ 454
=====
Property acquired with accounts payable-Black Hawk,
Colorado $ 90 $ 304
===== ===

See notes to consolidated financial statements. (Concluded)




F-6



RIVIERA HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Nature of Operations--Riviera Holdings
Corporation and its subsidiaries is referred to as the Company. Riviera
Holdings Corporation and its wholly owned subsidiary, Riviera Operating
Corporation (ROC), were incorporated on January 27, 1993 in order to
acquire all assets and liabilities of Riviera, Inc. Casino-Hotel Division
on June 30, 1993, pursuant to a plan of reorganization.

The Company operates the Riviera Hotel & Casino (the "Riviera Las Vegas")
on the Strip in Las Vegas, Nevada. The Company, through its gaming
management subsidiary, provided services to Peninsula Gaming Partners LLC
through September 2000 with respect to that company's riverboat, Diamond
Jo, operating in Dubuque, Iowa.

In August 1995, Riviera Gaming Management, Inc. ("RGM") was incorporated
in the State of Nevada as a wholly owned subsidiary of ROC for the purpose
of obtaining management contracts in Nevada and other jurisdictions.

In February 2000, the Company opened its casino in Black Hawk, Colorado,
which is owned through Riviera Black Hawk, Inc. ("RBH"), a wholly owned
subsidiary of ROC. Riviera Gaming Management of Colorado, Inc. is a wholly
owned subsidiary of RGM and manages the Black Hawk casino.

On March 15, 2002, Riviera Gaming Management of New Mexico, Inc. was
incorporated in the State of New Mexico. On June 5, 2002, Riviera Gaming
Management of Missouri, Inc. was incorporated in the State of Missouri.

Casino operations are subject to extensive regulation in the states of
Nevada and Colorado by the respective Gaming Control Boards and various
other state and local regulatory agencies. Management believes that the
Company's procedures comply, in all material respects, with the applicable
regulations for supervising casino operations, recording casino and other
revenues, and granting credit.

Principles of Consolidation--The consolidated financial statements include
the accounts of the Company, including its wholly owned subsidiaries, ROC
and RGM, and their related subsidiary entities. All material intercompany
accounts and transactions have been eliminated.

Cash and Cash Equivalents--All highly liquid investment securities with a
maturity of three months or less when acquired are considered to be cash
equivalents. The Company accounts for investment securities in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 115,
Accounting for Certain Investments in Debt and Equity Securities.


F-7



The Company's investment securities, along with certain cash and cash
equivalents that are not deemed securities under SFAS No. 115, are carried
on the consolidated balance sheets in the cash and cash equivalents
category. SFAS No. 115 addresses the accounting and reporting for
investments in equity securities that have readily determinable fair
values and for all investments in debt securities, and requires such
securities to be classified as either held to maturity, trading or
available for sale.

Management determines the appropriate classification of its investment
securities at the time of purchase, including the determination as to
restricted versus nonrestricted assets, and re-evaluates such
determination at each balance sheet date. Held-to-maturity securities are
required to be carried at amortized cost. At December 31, 2002 and 2001,
securities classified as held to maturity comprised debt securities issued
by the U.S. Treasury and other U.S. government corporations and agencies
or mutual funds invested in these securities and repurchase agreements,
with an amortized cost of $4,086,785 and $27,449,767, respectively,
maturing in three months or less.

Inventories--Inventories consist primarily of food, beverage, gift shop,
and promotional inventories and are stated at the lower of cost
(determined on a first-in, first-out basis) or market.

Property and Equipment--Property and equipment are stated at cost, and
capitalized lease assets are stated at the present value of future minimum
lease payments at the date of lease inception. Interest incurred during
construction of new facilities or major additions to facilities is
capitalized and amortized over the life of the asset. Depreciation is
generally computed by the straight-line and in some instances double
declining methods over the shorter of the estimated useful lives or lease
terms, if applicable, of the related assets, which range from 5 years for
certain gaming equipment to 40 years for buildings. The costs of normal
maintenance and repairs are charged to expense as incurred. Gains or
losses on disposals are recognized as incurred.

The Company periodically assesses the recoverability of property and
equipment and evaluates such assets for impairment whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. Asset impairment is determined to exist if estimated future
cash flows, undiscounted and without interest charges, are less than the
carrying amount.

Other Assets--Other assets include bond offering costs and commissions,
which are amortized over the life of the debt. Such amortized costs are
included in interest expense. The Company also capitalizes gaming license
costs associated with new jurisdictions.

Stock-Based Compensation--As of December 31, 2002 the Company has two
stock based employee compensation plans which are more fully discussed in
Note 15. The effect of stock options in the income statement is reported
in accordance with Accounting Principles Board (APB) Statement No. 25,
Accounting for Stock Issued to Employees and related interpretations. The
Company has adopted the disclosure-only provisions of SFAS No. 123,
Accounting for Stock-Based Compensation. Accordingly, no compensation cost
has been recognized for unissued stock options in the stock option plan as
all options granted had an exercise price equal to the market value of the
underlying common stock on the date of grant.

No compensation cost has been recognized for unexercised options remaining
in the stock option plans. Had compensation cost for the Company's stock
option plans been determined based on the fair value at the date of grant
for awards consistent with the provisions of SFAS No. 123, (using an
intrinsic value method) the Company's net loss and pro forma net loss


F-8



per common share and common share equivalent would have been increased to
the pro forma amounts indicated below at December 31 (in thousands, except
per share amounts):



2002 2001 2000


Net loss-as reported $ (24,722) $ (6,407) $(4,215)
Deduct: Total stock-based employee
compensation expense determined under
fair value based methods for
awards net of related tax effects $ (295) $ (143) $ (251)
Net loss-pro forma $ (25,017) $ (6,550) $(4,466)
Basic loss per common share-as reported $ (7.17) $ (1.79) $ (1.05)
Basic loss per common share-pro forma $ (7.25) $ (1.83) $ (1.11)
Diluted loss per common and common
share equivalent-as reported $ (7.17) $ (1.79) $ (1.05)
Diluted loss per common and common share
equivalent-pro forma $ (7.25) $ (1.83) $ (1.11)



The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants in 2002, 2001 and 2000,
respectively: dividend yield of 0% for all years; expected volatility of
52%, 44% and 60%; risk-free interest rates of 4.49%, 5.00% and 5.00%; and
expected lives of ten years for all years. The weighted fair value of
options granted in 2002, 2001 and 2000 was $4.96, $2.34 and $3.56,
respectively.

Due to the fact that the Company's stock option programs vest over many
years and additional awards are made each year, the above pro forma
numbers are not indicative of the financial impact had the disclosure
provisions of SFAS No. 123 been applicable to all years of previous option
grants. The above numbers do not include the effect of options granted
prior to 1995.

Fair Value Disclosures

Cash and Cash Equivalents, Accounts Receivable, Accounts Payable, and
Accrued Expenses--The carrying value of these items is a reasonable
estimate of their fair value.

Long-Term Debt--The fair value of the Company's long-term debt is
estimated based on the quoted market prices for the same or similar issues
or on the current rates offered to the Company for debt of the same
remaining maturities. Based on the borrowing rates currently available to
the Company for debt with similar terms and average maturities, the
estimated fair value of long-term debt outstanding is approximately
$198,926,000 and $186,246,000 in 2002 and 2001, respectively.

Revenue Recognition:

Casino Revenue--The Company recognizes, as gross revenue, the net win from
gaming activities, which is the difference between gaming wins and losses.
Net win is also adjusted for the effects of slot club cash points and cash
vouchers and other related customer cash incentives.

Room Revenue, Food and Beverage Revenue, Entertainment Revenue, and Other
Revenue--The Company recognizes room, food and beverage, entertainment
revenue, and other revenue at the time that goods or services are
provided.

Preopening Costs--The Company recognizes preopening costs when incurred.

F-9



Promotional Allowances--Revenues include the estimated retail value of
rooms, food and beverage, and entertainment provided to customers on a
complimentary basis. Such amounts are then deducted as promotional
allowance. The estimated cost of providing these promotional allowances is
charged to the casino department in the following amounts:



Year Ended December 31
-----------------------------------
(in thousands) 2002 2001 2000


Food and beverage $ 9,037 $ 9,560 $ 9,007
Rooms 1,174 1,195 1,297
Entertainment 1,670 1,950 1,319
----- ----- -----
Total costs allocated to casino departments $11,881 $12,705 $ 11,623
====== ====== ======



Federal Income Taxes--The Company including its subsidiaries file a
consolidated federal tax return. The Company accounts for income taxes
in accordance with SFAS No. 109, Accounting for Income Taxes. SFAS No. 109
requires recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Deferred income taxes reflect the net
tax effects of: (i) temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes; and (ii) operating loss and tax credit
carryforwards.

Estimates and Assumptions--The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the reporting
period. Significant estimates used by the Company include recoverability
of and estimated useful lives for depreciable and amortizable assets,
certain accrued liabilities, realizability of deferred tax assets and
liabilities, and the estimated allowances for receivables. Actual results
may differ from estimates.

Recently Adopted Accounting Standards--In July 2001, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 142, Goodwill and
Other Intangible Assets, which was effective January 1, 2002. SFAS No. 142
requires, among other things, the discontinuance of goodwill amortization.
In addition, the standard includes provisions for the reclassification of
certain existing recognized intangibles as goodwill, reassessment of the
useful lives of existing recognized intangibles, reclassification of
certain intangibles out of previously reported goodwill, and the
identification of reporting units for purposes of assessing potential
future impairments of goodwill. SFAS No. 142 also requires the Company to
complete a transitional goodwill impairment test six months from the date
of adoption. The Company adopted SFAS No. 142 on January 1, 2002 and it
had no effect on its financial position and results of operations.

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses
financial accounting and reporting for the impairment or disposal of
long-lived assets and supersedes FASB Statement 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of, and the accounting and reporting provisions of Accounting Principles
Board ("APB") Opinion No. 30, Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, for the disposal of a segment of a business (as previously
defined in that Opinion). SFAS No. 144 also amends APB No. 51,


F-10



Consolidated Financial Statements, to eliminate the exception to
consolidation for a subsidiary for which control is likely to be
temporary. The provisions of SFAS No. 144 are effective for financial
statements issued for fiscal years beginning after December 15, 2001 and
interim periods within those fiscal years. The Company adopted SFAS No.
144 on January 1, 2002 and the adoption had no effect on its financial
position and results of operations.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 requires that gains and losses from
extinguishment of debt be classified as extraordinary items only if they
meet the criteria in APB Opinion No. 30. Applying the provisions of
Opinion No. 30 will distinguish transactions that are part of an entity's
recurring operations from those that are unusual and infrequent that meet
criteria for classification as an extraordinary item. SFAS No. 145 is
effective for the Company beginning January 1, 2003, but the Company
adopted the provisions of SFAS No. 145 during fiscal year 2002, as
permitted. The effect on our consolidated financial position and results
of operations of the adoption of SFAS No. 145 was that the Company
recognized and reported bond retirement costs as other expense.

Recently Issued Accounting Standards--In June 2001, the FASB issued SFAS
No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143
addresses financial accounting and reporting for obligations associated
with the retirement of tangible long-lived assets and the associated asset
retirement costs. SFAS No. 143 applies to all entities. It applies to
legal obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development and (or) the normal
operation of a long-lived asset, except for certain obligations of
lessees. SFAS No. 143 is effective for financial statements issued for
fiscal years beginning after June 15, 2002. The Company is currently
assessing but has not yet determined the impact of SFAS No. 143 on its
financial position and results of operations.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 addresses
financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force Issue No.
94-3, Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (Including Certain Costs Incurred in a
Restructuring). SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the
liability is incurred. A fundamental conclusion reached by the FASB in
this statement is that an entity's commitment to a plan, by itself, does
not create a present obligation to others that meets the definition of a
liability. SFAS No. 146 also establishes that fair value is the objective
for initial measurement of the liability. The provisions of this statement
are effective for exit or disposal activities that are initiated after
December 31, 2002, with early application encouraged. The Company is
currently assessing but has not yet determined the impact of SFAS No. 146
on its financial position and results of operations.

In November 2002, the FASB issued Interpretation ("FIN") No. 45,
Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others. FIN No. 45
addresses financial accounting for, and disclosure of, guarantees. FIN No.
45 requires certain guarantees to be recorded at fair value, as opposed to
the existing standard of recording a liability only when a loss is
probable and reasonably estimable according to SFAS No. 5, Accounting for
Contingencies. The Company believes that the adoption of FIN No. 45 will
not have a material impact on the Company's financial position and results
of operations.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation--Transition and Disclosure--an Amendment of FASB Statement
No. 123. SFAS No. 148 amends FASB Statement No. 123, Accounting for


F-11



Stock-Based Compensation. Although it does not require use of fair value
method of accounting for stock-based employee compensation, it does
provide alternative methods of transition. It also amends the disclosure
provisions of Statement No. 123 and APB Opinion No. 28, Interim Financial
Reporting, to require disclosure in the summary of significant accounting
policies of the effects of an entity's accounting policy with respect to
stock-based employee compensation on reported net income and earnings per
share in annual and interim financial statements. SFAS No. 148's amendment
of the transition and annual disclosure requirements are effective for
fiscal years ending after December 15, 2002. The amendment of disclosure
requirements of Opinion No. 28 is effective for interim periods beginning
after December 15, 2002. The Company believes that the adoption of SFAS
No. 148 will not have a material impact on the Company's consolidated
financial position or results of operations.

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities. FIN No. 46 addresses consolidation by business
enterprises where equity investors do not bear the residual economic risks
and rewards. These entities have been commonly referred to as "special
purpose entities." If a business enterprise has the majority financial
interest in an entity, which is defined in the guidance as a variable
interest entity, the assets, liabilities and results of the activities of
the variable interest entity should be included in consolidated financial
statements with those of the business enterprise. The Interpretation also
explains how to identify variable interest entities and how an enterprise
should assess its interest in an entity when deciding whether or not it
will consolidate that entity. The Company must follow the provisions of
this statement in accounting periods beginning after June 15, 2003. The
Company believes that the adoption of FIN No. 46 is not expected to have a
material impact on the Company's financial position and results of
operations.

2. ACCOUNTS RECEIVABLE

Accounts receivable consist of the following at December 31 (in
thousands):



2002 2001


Casino $ 1,129 $ 1,761
Hotel 3,871 3,252
----- -----
Total 5,000 5,013
Allowance for bad debts and discounts (990) (1,485)
------ -----
Ending balance $ 4,010 $ 3,528
====== ======


Changes in the casino and hotel allowance for bad debts and discounts
consist of the following for the years ended December 31 (in thousands):



2002 2001 2000


Beginning balance $1,485 $1,330 $1,611
Write-offs (1,037) (122) (220)
Recoveries 24 45 29
Provision for bad debts and gaming discounts 518 232 (90)
---- ----- -----
Ending balance $ 990 $1,485 $1,330
===== ===== =====




F-12


3. PREPAID EXPENSES AND OTHER ASSETS

Prepaid expenses and other assets consist of the following at December 31
(in thousands):



2002 2001


Prepaid gaming taxes $ 841 $ 939
Prepaid insurance 934 413
Other prepaid expenses 2,193 1,731
----- -----
Total $3,968 $ 3,083
===== =====


4. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31 (in
thousands):



2002 2001


Land and improvements $ 38,130 $ 38,130
Buildings and improvements 143,417 143,414
Equipment, furniture and fixtures 118,800 113,366
------- -------
Total property and equipment 300,347 294,910
Accumulated depreciation (112,114) (94,379)
-------- -------
Net property and equipment $ 188,233 $ 200,531
======== =======



Approximately $0, $0 and $616,000 in interest costs were capitalized on
construction projects in 2002, 2001 and 2000, respectively. Substantially
all of the Company's property and equipment is pledged as collateral to
secure debt (see Note 8). Repairs and maintenance that do not
significantly improve the life of fixed assets are expensed as incurred.
Costs for significant improvements that extend the expected life of fixed
assets more than one year are capitalized and depreciated over the
remaining extended life, using straight-line and double declining methods
of depreciation.

5. OTHER ASSETS

Other assets consist of the following at December 31 (in thousands):



2002 2001


Deposits $ 54 $ 177
Bond offering costs and commissions-net of accumulated
amortization of $995 and $6,756, respectively 10,917 4,916
Other 3,706 1,635
------ -----
Total $14,677 $6,728
====== =====


Other includes capitalized costs associated with the Missouri venture of
$1.2 million and the New Mexico venture of $1.1 million in 2002.

F-13


6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable consist of the following at December 31 (in thousands):



2002 2001


Outstanding chip and token liability $ 537 $ 597
Slot club liabilities 968 1,283
Progressive liabilities 329 312
Casino account deposits and miscellaneous gaming 281 139
---- ----
Total liabilities related to gaming activities 2,115 2,331
Accounts payable to vendors 4,291 4,406
Insurance contracts 595
Hotel deposits 953 1,032
Other 384 431
---- ----
Total $8,338 $8,200
===== =====


Accrued expenses consist of the following at December 31 (in thousands):





Payroll, related payroll taxes, and employee benefits $ 8,513 $ 7,907
Incentive, retention and ESOP 1,396 2,639
Current portion of CEO pension obligation, unfunded 1,000
Other 4,667 4,194
----- -----
Total $15,576 $14,740
====== ======



7. OTHER LONG-TERM LIABILITIES

Other long-term liabilities consist of the nonqualified pension plan
obligation to the CEO of the Company, payable upon expiration of his
employment contract or with a change of control, including accrued
interest and deferred compensation plan liabilities for eligible
employees.

See Notes 13 & 14 for a description of these plans.



(in thousands) 2002 2001


Non-qualified pension obligation-CEO, unfunded $ 3,263 $ 4,163
Accrued interest on pension-CEO, unfunded 3,489 2,649
Deferred compensation-funded 713 579
---- ----
Subtotal 7,465 7,391
Less current portion of CEO pension obligation, unfunded 1,000 0
----- -----
Total $ 6,465 $ 7,391
===== =====


F-14


8. LONG-TERM DEBT

Long-term debt consists of the following at December 31 (in thousands):



2002 2001


11% Senior Secured Notes maturing on June 15, 2010, bearing
interest, payable semiannually on June 15 and December 15 of
each year, redeemable beginning June 15, 2005 at 111%; 2006
at 105.5%; 2007 at 103.7%, 2008 at 101.8%, 2009 and thereafter
at 100%. These notes are collateralized by the land and physical
structures comprising the Riviera Hotel and Casino and secondarily
the assets of Riviera Black Hawk $ 211,983

10% First Mortgage Notes maturing on August 15, 2004, collateralized
by Riviera Las Vegas and secondarily by Riviera Black Hawk. The $ 174,193
Notes were retired on August 15, 2002

13% First Mortgage Notes maturing on June 3, 2005, collateralized
by Riviera Black Hawk Casino. The Bonds were retired on July 26, 2002 34,941

5.6% to 9% Notes collateralized by equipment and vehicles, payable
monthly, including interest, maturing through October 2004 1,550 2,424

Capitalized lease obligations (Note 9) 5,728 7,921

5.5% Special Improvement District Bonds-issued by the City of
Black Hawk, Colorado, interest and principal payable monthly
over 10 years beginning in 2000 863 960
------ -------
Total long-term debt 220,124 220,439
Current maturities by terms of debt (3,430) (3,151)
------- -------
Total $ 216,694 $ 217,288
======= =======



Maturities of long-term debt for the years ending December 31 are as
follows (in thousands):



2003 $ 3,430
2004 3,391
2005 785
2006 124
2007 129
Thereafter 212,265
-------
Total $ 220,124
=======


On June 26, 2002, the Company secured new debt in the principal amount
of $215 million in the form of 11% Senior Secured Notes with a maturity
date of June 15, 2010, substantially all of which were subsequently
exchanged for SEC-registered notes having substantially the same terms (the
Notes). Interest on the Notes is at the annual rate of 11% paid
semiannually on each June 15 and December 15, beginning December 15, 2002.
The net proceeds of the Notes, along with cash on hand, were used to
defease Riviera Las Vegas' 10% First Mortgage Notes due 2004 and to defease
Riviera Black Hawk's 13% First Mortgage Notes due 2005 with contingent
interest. In connection with the defeasance, the Company recorded a loss on


F-15


extinguishments of debt totaling $11.2 million relating to the call premium
on the Company's refinanced 10% bonds and Riviera Black Hawk's refinanced
13% bonds, the write off of unamortized deferred loan costs associated
with the refinanced bonds and the balance of the original issue discount
on the 10% bonds. Furthermore, the results were affected by approximately
$2.7 million of additional interest expense, net, incurred as a result
of the defeasance / retirement of the debt.Cash flow from operations
is not expected to be sufficient to pay 100% of the principal of the Notes
at maturity on June 15, 2010. Accordingly, the ability of the Company to
repay the Notes at maturity will be dependent upon its ability to refinance
the Notes. There can be no assurance that the Company will be able to
refinance the principal amount of the Notes at maturity. On or after June
15, 2006, the Company may redeem the Notes from time to time at a premium
beginning at 105.5% and declining each subsequent year to par in 2009.

The Note Indenture provides that, in certain circumstances, the Company
must offer to repurchase the Notes upon the occurrence of a change of
control or certain other events. In the event of such mandatory
redemption or repurchase prior to maturity, the Company would be unable to
pay the principal amount of the Notes without a refinancing.

The Note Indenture contains certain covenants, which limit the ability of
the Company and its restricted subsidiaries, subject to certain
exceptions, to: (i) incur additional indebtedness; (ii) pay dividends or
other distributions, repurchase capital stock or other equity interests or
subordinated indebtedness; (iii) enter into certain transactions with
affiliates; (iv) create certain liens; (v) sell certain assets; and (vi)
enter into certain mergers and consolidations. As a result of these
restrictions, the ability of the Company to incur additional indebtedness
to fund operations or to make capital expenditures is limited. In the
event that cash flow from operations is insufficient to cover cash
requirements, the Company would be required to curtail or defer certain of
their capital expenditure programs under these circumstances, which could
have an adverse effect on operations. At December 31, 2002, the Company
believes that it is in compliance with the covenants.

On July 26, 2002, the Company entered into a $30 million, five-year
senior secured credit facility. The credit facility is secured by
substantially the same collateral that secures the Notes. The lien on the
collateral securing the credit facility is senior to the lien on the
collateral securing the Notes. The credit facility contains customary
conditions to borrowing and certain representations and warranties
customary in gaming-related finance. The credit facility also contains
financial covenants and restrictions regarding, among other things,
indebtedness, distributions and changes in control. Under the credit
facility, the Company can obtain extensions of credit in the forms of cash
and letters of credit. The Company is required to pay interest on all
outstanding cash advances at the rate of interest announced by Wells Fargo
at its principal office in San Francisco as its prime rate plus 0.75% or
at the rate at which major international banks in London charge each other
for borrowings in U.S.dollars plus 3.00%. However, the minimum interest
rate that the Company will be charged on outstanding cash advances is
4.50%. The Company is required to pay a fee on all outstanding letters
of credit equal to their face value times an annual percentage rate of
2.50%. Additionally, in the event of a default, the credit facility
lender may increase the interest rate and letter of credit fee by an
additional 2.00% per year during the period of default. At December 31,
2002, there were no amounts outstanding under the secured credit facility.

The Company has a credit facility totaling $200,000 for letters of credit
issued periodically to foreign vendors for purchases of merchandise. The
letters require payment upon presentation of a valid voucher.

The 5.5% Special Improvement District Bonds were issued by the City of
Black Hawk, Colorado, in July 1998 for $2,940,000. The proceeds were used



F-16


for road improvements and other infrastructure projects benefiting the
Riviera Black Hawk Casino and another nearby casino. The projects were
substantially completed in 2000 at a cost of $2,240,000, including
interest and reserves. During 2001, another phase was completed. RBH's
share of the final phase was $454,000. The excess proceeds have been
returned to the bondholders by the City of Black Hawk, Colorado. RBH is
responsible for 50% of the debt, payable over 10 years beginning in 2000.

9. LEASING ACTIVITIES

The Company leases certain equipment under capital leases. These
agreements have been capitalized at the present value of the future
minimum lease payments at lease inception and are included with property
and equipment. Management estimates that the fair market value of the
property and equipment, subject to the leases, approximates the net
present value of the leases.

The following is a schedule by year of the minimum rental payments due
under capital leases as of December 31, 2002 (in thousands):




2003 $ 2,980
2004 2,964
2005 674
----
Total minimum lease payments $ 6,618
Taxes, maintenance and insurance (194)
Interest portion of payments (696)
----
Present value of net minimum lease payments $ 5,728
=====


Rental expense under operating leases for the years ended December 31,
2002, 2001 and 2000 was approximately $1,177,382, $903,555 and $1,133,983,
respectively. Such leases were year to year in nature.

In addition, the Company leases retail space (primarily to retail shops
and fast food vendors) to third parties under terms of noncancelable
operating leases that expire in various years through 2007. Rental income,
which is included in other income, for the years ended December 31, 2002,
2001 and 2000 was approximately $1,810,700, $1,806,900 and $1,584,300,
respectively.

At December 31, 2002, the Company had future minimum annual rental income
due under noncancelable operating leases as follows (in thousands):




2003 $ 1,342
2004 1,130
2005 455
2006 227
2007 134
---
Total $ 3,288
=====


10. FEDERAL INCOME TAXES

The Company computes deferred income taxes based upon the difference
between the financial statement and tax bases of assets and liabilities
using enacted tax rates in effect in the years in which the differences
are expected to reverse.


F-17


The effective income tax rates on income attributable to continuing
operations differ from the statutory federal income tax rates for the
years ended December 31 as follows (in thousands):




2002 2001 2000
---------------- ----------------- ------------------
Amount Rate Amount Rate Amount Rate

Benefit for income taxes

at federal statutory
rate $ (8,652) (35.0)% $ (3,026) (35.0)% $ (2,349) (35.0)%
Taxes, state, other 392 4.5
Other (439) (1.8)% 394 4.6 (146) (2.2)
Valuation allowance 9,091 36.8 %
----- ---- ----- ---- ----- -----
Benefit for income taxes $ - 0.0 % $ (2,240) (25.9)% $ (2,495) (37.2)%
===== ===== ======= ===== ====== ======


Comparative analysis of the (benefit) provision for income taxes is as
follows:



2002 2001 2000


Current $(2,124) $ 157 $ 1,223
Deferred 2,124 (2,397) (3,718)
----- ------- ------
Total $ - $(2,240) $(2,495)
===== ======= ======


The tax effects of the items composing the Company's net deferred tax
(asset) liability consist of the following at December 31 (in thousands):



2002 2001

Deferred tax liabilities:

Reserve differential for hospitality and gaming activities $ 918 $ 559
Difference between book and tax-depreciable property 5,060 4,845
Other 511 579
--- ---
Total 6,489 5,983
----- -----
Deferred tax assets:
Net operating loss carryforward 12,878 4,383
Reserves not currently deductible 2,619 2,647
Bad debt reserves 364 583
AMT and other credits 2,684 3,459
----- -----
Total 18,545 11,072

Valuation allowance (9,091)
------- -----
Net deferred tax asset $ 2,964 $ 5,089
======= =====


The Company has $2.7 million of alternative minimum tax ("AMT") credit and
general business credit available to offset future income tax liabilities.
The AMT credit of $2.7 million has no expiration date. The general
business credit will not begin to expire until 2012.


F-18


The Company performed an analysis of the realizability of its deferred tax
assets at December 31, 2002. The realizability of the assets related to
Rivera Las Vegas is dependent upon future earnings. In the absence of
operating income, the Company can sell assets to realize the deferred tax
assets.

11. COMMITMENTS AND CONTINGENCIES

The Company is party to several routine lawsuits, either as a plaintiff or
as a defendant, arising from the normal operations of a hotel. Management
does not believe that the outcome of such litigation, in the aggregate,
will have a material adverse effect on the financial position, results of
operations, or cash flows of the Company.

Employees and Labor Relations--As of December 31, 2002, the Company had
approximately 1,673 full-time equivalent employees and had collective
bargaining contracts with eight unions covering approximately 769 of such
employees, including food and beverage employees, rooms department
employees, carpenters, engineers, stage hands, musicians, electricians,
painters and teamsters. The Company's agreements with the Southern Nevada
Culinary and Bartenders Union and Stage Hands Union, which cover the
majority of the Company's unionized employees, were renegotiated in 2002
and expire in the year 2007. Collective bargaining agreements with the
operating engineers, painters and electricians were renegotiated in 2000
and expire in 2004, 2005 and 2004, respectively. A new agreement was
negotiated with the carpenters which expires in 2005. The Company is also
in negotiations with the Musicians Union. A new agreement was negotiated
with the Teamsters, which expires in 2003. Although unions have been
active in Las Vegas, management considers its employee relations to be
satisfactory. There can be no assurance, however, that new agreements will
be reached without union action or will be on terms satisfactory to the
Company.

12. MANAGEMENT AGREEMENTS

RBH has a management agreement (the "RBH Management Agreement") with
Riviera Gaming Management of Colorado, Inc. (the "Manager"), a wholly
owned subsidiary of Riviera Holdings Corporation.The Manager, in exchange
for a fee, manages RBH. The management fee consists of a revenue fee and a
performance fee. The revenue fee is based on 1% of net revenues (gross
revenues less complimentaries) and is payable quarterly in arrears. The
performance fee is based on the following percentages of EBITDA, whose
components are based on generally accepted accounting principles: (1) 10%
of EBITDA from $5 million to $10 million, (2) 15% of EBITDA from $10
million to $15 million, and (3) 20% of EBITDA in excess of $15 million.
The performance fee is based on the preceding quarterly installments,
subject to year-end adjustment. The management fee began on February 4,
2000, the date of the opening of the Riviera Black Hawk Casino. If there
is any default under the RBH Management Agreement, the Manager will not be
entitled to receive management fees but will still be entitled to
inter-company service fees.

13. EMPLOYMENT AGREEMENTS AND EMPLOYEE BENEFIT PLANS

Chairman--William L. Westerman serves as Chairman of the Board, President
and Chief Executive Officer of the Company, and as Chairman of the Board
and Chief Executive Officer of ROC.

Under Mr. Westerman's existing employment agreement with the Company,
which was last amended on December 6, 2000, Mr. Westerman shall be
employed by the Company for an indefinite period, subject to termination
by either Mr. Westerman upon at least 180 days written notice or the
Company upon at least 90 days. Mr. Westerman's base compensation is
$600,000.


F-19


Under his employment agreement, Mr. Westerman is entitled to participate
in the Company's Senior Management Compensation Plan or such other
executive bonus plan as shall be established by the Company's Board of
Directors (collectively the "Plan"). If at least 80% of certain targeted
operating results, as defined by the Plan, is met, Mr. Westerman shall be
entitled to receive a bonus under the Plan expressed as a percentage of
his $600,000 base salary depending on the percentage of certain targeted
operating results realized by the Company in a particular year, with a
maximum bonus of $900,000. Pursuant to the December 6, 2000 amendment,
to the extent Mr. Westerman's bonus exceeds $400,000 in 2002 and each
succeeding year, such excess amount shall be deducted from the principal
balance of his retirement account at the time the bonus is paid.
Mr. Westerman received an incentive bonus of $900,000 for 2002, $900,000
of which was deducted from the principal balance of his retirement
account, resulting in a net bonus of $0.

The employment agreement provides that the Company fund a retirement
account for Mr. Westerman. Pursuant to the employment agreement, an
aggregate of $6,752,000 had been credited to the retirement account from
its inception through December 31, 2002. Under the employment agreement,
each year that Mr. Westerman continues to be employed, an amount equal to
Mr. Westerman's base salary for that year is credited to the account on
January 1 of that year. Pursuant to the December 6, 2000 amendment to Mr.
Westerman's employment agreement, the January 1, 2001 contribution was the
final principal contribution to the retirement account. As of December 31,
2002, none of this account has been funded.

The Company retains beneficial ownership of all monies in the retirement
account, which monies are earmarked to pay Mr. Westerman's retirement
benefits. However, upon (i) the vote of a majority of the outstanding
shares of common stock approving a Change of Control, (ii) the occurrence
of a Change of Control without Mr. Westerman's consent, (iii) a
breach by the Company of a material term of the employment agreement
or (iv) the expiration or earlier termination of the term of the
employment agreement for any reason other than cause, Mr. Westerman has
the right to require the Company to establish a "Rabbi Trust" for the
benefit of Mr. Westerman. He also has the right to require the Company to
fund such trust with an amount of cash equal to the amount then credited
to the retirement account, including any amount to be credited to the
retirement account upon a Change of Control.

On February 5, 1998, the stockholders of the Company by a majority vote
approved the Agreement and the Plan of Merger with R&E Gaming Corp. and
its wholly owned subsidiary Riviera Acquisition Sub, Inc. Such stockholder
approval constituted a Change of Control. On March 5, 1998, subsequent to
this Change of Control, Mr. Westerman exercised his right to require the
Company to establish and fund a Rabbi Trust for his benefit. On March 20,
1998, Mr. Westerman and the Company entered into an agreement whereby Mr.
Westerman waived his right to have the Company fund the Rabbi Trust in
exchange for the Company's agreeing to fund such Rabbi Trust within five
business days after notice from Mr. Westerman. The merger agreement was
subsequently terminated and litigation ensued.

In the event that Mr. Westerman is no longer employed by the Company
(except for termination for cause, in which case Mr. Westerman would
forfeit all rights to monies in the retirement account), Mr. Westerman
will be entitled to receive the amount in the retirement account
(principal and current interest) in 20 equal quarterly installments as of
the date he ceases to be employed by the Company. In the event that Mr.
Westerman's Rabbi Trust has not yet been funded, the balance of principal
and interest of the retirement account shall be paid directly to Mr.
Westerman upon his retirement, termination (except for cause), or upon a
change in control of the Company. As of December 31, 2002, none of the
Trust has been funded.



F-20


Pursuant to the employment agreement, the retirement account was credited
quarterly with interest and shall be credited with additional amounts on
the first day of each succeeding calendar quarter equal to the product of
(i) the Company's average borrowing cost for the immediately preceding
fiscal year, as determined by the Company's chief financial officer, and
(ii) the average outstanding balance in the retirement account during the
preceding calendar quarter. This interest continues to accrue pursuant to
the December 6, 2000 amendment. Total interest earned was $840,150 for
2002, $779,000 for 2001 and $647,418 for 2000. At the recommendation of
the Compensation Committee of the Riviera Holdings Corporation Board of
Directors, in order to reduce the amount that would be payable immediately
upon Mr. Westerman's separation from the Company, it was requested that he
begin taking "principal payments" (distributions) of $250,000 per quarter
effective April 1, 2003. In addition, retroactive to January 1, 2003,
interest accruals for the current quarter will be paid to Mr. Westerman on
the first day of the following quarter. In exchange for these payments,
Mr. Westerman agrees to continue his forbearance of his right to receive
full transfer of the pension fund balance to the rabbi trust pending
further developments. This does not limit his ability to give the five-day
notice at any time. Although there is no current intention to require
additional funding, under certain circumstances, approximately $6.8
million might have to be disbursed in a short period. In the event the
Rabbi Trust has been funded, upon Mr. Westerman's death, an amount equal
to the applicable federal estate tax on the retirement account will be
pre-paid prior to the date or dates such taxes are due.

Mr. Westerman's employment agreement provides (a) that the sum of Mr.
Westerman's base salary, bonus, and credits to his retirement account in
any one year shall not exceed that which would have been payable under his
previous employment agreement with the Company, and (b) that Mr. Westerman
shall instruct the Company of any reductions in base salary, bonus, and
credits to his retirement account necessary to comply with this
limitation. The Company determined that for the year 1999, a reduction of
$467,000 was necessary to comply with this provision. For 1998 the Company
determined that a reduction of $194,000 was necessary to comply with this
provision. Prior to December 31, 1999 and 1998, Mr. Westerman instructed
the Company that this be applied to reduce the amount to be credited to
his retirement account from $600,000 to $133,000 and to $406,000,
respectively. No such reductions under this provision were required in
2002 , 2001 or 2000.

Incentive Plan--The Company has an incentive compensation plan covering
employees of the Company who, in the opinion of the Chairman of the Board,
either serve in key executive, administrative, professional or technical
capacities with the Company, or other employees who also have made a
significant contribution to the successful and profitable operation of the
Company. The amount of the bonus is based on operating earnings before
depreciation, amortization, interest expense, provision for income taxes,
extraordinary losses and gains, any provisions or payments made pursuant
to the plan, and any provisions or payments made pursuant to the incentive
compensation of the Chairman and Chief Executive Officer. During the years
ended December 31, 2002, 2001 and 2000, the Company recorded accrued
bonuses of $1,160,440, $1,873,939 and $2,258,500, respectively, based upon
the above incentive compensation plan and the other incentive compensation
plan established for the Chairman of the Board under his employment
agreement.

Pension Plan Contributions--The Company contributes to multi-employer
pension plans under various union agreements to which the Company is a
party. Contributions, based on wages paid to covered employees, were
approximately $1,599,000, $1,672,000 and $1,688,000 for the years ended
December 31, 2002, 2001 and 2000, respectively. These contributions were
for approximately 813 employees, including food and beverage employees,
room department employees, carpenters, engineers, stagehands,
electricians, painters and teamsters. The Company's share of any unfunded
liability related to multi-employer plans, if any, is not determinable.


F-21


Profit Sharing and 401(k) Plans--On June 30, 1993, the Company assumed
the combined profit sharing and 401(k) plans of Riviera, Inc. (the"Profit
Sharing and 401(k) Plans"), and the Company has continued the Profit
Sharing and 401(k) Plans after June 30, 1993. The Company has amended the
Adoption Agreement to provide that all current employees of Riviera
Las Vegas who were employed on April 1, 1992, who were at least 21 years
of age and who are not covered by a collective bargaining agreement are
immediately eligible to participate in the Profit Sharing and 401(k)Plans.
The amendment provides further that all current employees who were
employed by Riviera Las Vegas after April 1, 1992, who are at least 21
years of age and who are not covered by a collective bargaining
agreement are eligible to participate after one year of service at the
Riviera Las Vegas.

The Company has identical plans for its 100% indirectly owned subsidiary,
Riviera Black Hawk, Inc., which operates its casino in Black Hawk,
Colorado. Employees hired prior to June 30, 2000, who were at least 21
years of age and who were not covered by a collective bargaining agreement
were immediately eligible to participate in the Profit Sharing and 401(k)
Plans. After June 30, 2000, all new employees who are at least 21 years of
age and who are not covered by a collective bargaining agreement are
eligible to participate after one year of service at Riviera Black Hawk.

The Company may make a contribution to the 401(k) component of the Plans
in an amount not to exceed 25% of the first 8% of each participant's
compensation, which is contributed as a salary deferral. The Company also
paid administrative costs of the Plan of $16,888, $21,851 and $25,000 for
the years ended December 31, 2002, 2001 and 2000, respectively.

The profit sharing component of the Profit Sharing and 401(k) Plans
provides that the Company will make a contribution equal to 1% of each
eligible employee's annual compensation if a prescribed annual operating
earnings target is attained and an additional 1% thereof for each $2
million by which operating earnings is exceeded, up to a maximum of 3%
thereof. The Company may elect not to contribute to the Profit Sharing and
401(k) Plans if it notifies its employees by January of the plan year. An
employee will become vested in the Company's contributions based on the
employee's years of service. An employee will receive a year of vesting
service for each plan year in which the employee completed 1,000 hours of
service. Vesting credit will be allocated in 20% increments for each year
of service commencing with the attainment of two years of service. An
employee will be fully vested following the completion of six years of
service.

Effective January 1, 2000, the Company suspended contributions to the
Profit Sharing Plan and substituted contributions to an Employee Stock
Ownership Plan (see "Employee Stock Ownership Plan," directly below).

Employee Stock Ownership Plan--On October 2, 2000, the Board of Directors
adopted an Employee Stock Ownership Plan ("ESOP"). The ESOP was
established effective January 1, 2000 and replaced the profit sharing
contribution component of the Profit Sharing and 401(k) Plans. The 401(k)
component remains unchanged. The ESOP provides that all employees of
Riviera Las Vegas and Riviera Black Hawk employed in the plan year who had
completed a minimum of one 1000 hours of service in that plan year,
were employed through December 31 of that plan year, were at least 21
years of age and were not covered by a collective bargaining agreement are
eligible to participate in the ESOP. The ESOP provides that the Company
will make a contribution to the ESOP's participants of its Las Vegas and
Black Hawk properties relative to the economic performance of each
property. For Riviera Las Vegas, the Company will make a contribution
equal to 1% of each eligible employee's annual compensation if a
prescribed annual operating earnings target is attained and an additional
1% thereof for each $2 million by which operating earnings is exceeded, up
to a maximum of 4% for 2000 and 5% thereafter. For Riviera Black Hawk, the



F-22


Company will make a contribution equal to 1% of each eligible employee's
annual compensation if a prescribed annual operating earnings target is
attained and an additional 1% thereof for each $1 million by which
operating earnings is exceeded, up to a maximum of 4% for 2000 and 5%
thereafter. Under the ESOP, Company contributions are made in cash, which
will be used to buy Company common stock. The Company also paid
administrative costs of the Plan of $120,286, $198,834 and $12,125 for the
years ended December 31, 2002, 2001 and 2000, respectively.

Deferred Compensation Plan--On October 2, 2000, the Board of Directors
adopted a Deferred Compensation Plan (the "Plan"). The purpose of the Plan
is to provide eligible employees of the Company with the opportunity to
defer the receipt of cash compensation. Participation in the non-qualified
Plan is limited to highly compensated employees who receive compensation
of at least $100,000. The deferred funds are maintained on the Company
books as funded liabilities. All elections to defer the receipt of
compensation must be made no later than the December 1st preceding the
plan year to which the election relates and are irrevocable for the
duration of that plan year. Six Company executives are currently
participating in the Plan.

Restricted Stock Plan--On October 2, 2000, the Board of Directors adopted
a Restricted Stock Plan to provide incentives which will attract and
retain highly competent persons as officers and key employees by providing
them opportunities to receive restricted shares of the Company's common
stock. Participants consist of such officers and key employees of the
Company as the Company's Compensation Committee determines to be
significantly responsible for the success and future growth and
profitability of the Company. Awards of restricted stock are subject to
such terms and conditions as the Company determines to be appropriate at
the time of the grant, including restrictions on the sale or other
disposition of such shares and the provisions for the forfeiture of such
shares for partial or no consideration upon termination of the
participant's employment within specified periods or under certain
conditions. Mr. Robert Vannucci and Mr. Jerome P. Grippe, President and
Executive Vice President, respectively, of the Company's wholly owned
subsidiary, Riviera Operating Corporation, are currently the only
participants in the Restricted Stock Plan.

Key Employee Retention Plan--As a result of the scheduled openings of
several new Las Vegas Strip properties in 1998, 1999 and 2000, an
estimated 38,000 jobs had to be filled on the Las Vegas Strip, including
approximately 5,000 supervisory positions. Because of the Riviera's
performance and reputation, its employees were prime candidates to fill
these positions. In the third quarter of 1998, management instituted an
employee retention plan which covered approximately 85 executive,
supervisory and technical support positions and includes a combination of
employment contracts, stay put agreements, bonus arrangements, and salary
adjustments which expired June 30, 2001.

Stay Bonus Agreements--Approximately 85 executive officers and significant
employees (excluding Mr. Westerman) of ROC were party to agreements
pursuant to which each such employee was entitled to receive a "stay
bonus" (varying amounts) if the employee was discharged without cause (as
defined in the stay bonus agreements), or continued to be employed by the
Company on each of January 1, 2000, January 1, 2001 and June 30, 2001. The
total amount that was paid under all such agreements was $610,000 paid in
January 2000, $1,068,000 paid in January 2001 and $462,500 paid on June
30, 2001.

Salary Continuation Agreements--Approximately 75 executive officers and
significant employees (excluding Mr. Westerman) of ROC have salary
continuation agreements effective through December 2003, pursuant to which
each of such employees will be entitled to receive (1) either six months'
or one year's base salary if their employment with the Company is
terminated, without cause, within 12 or 24 months of a change of control
of the Company or ROC; and (2)group health insurance for periods of either


F-23


one or two years. The base salary payments are payable in biweekly
installments, subject to the employee's duty to mitigate by using his or
her best efforts to find new employment. The estimated total amount
payable under all such agreements was approximately $6 million, including
$1.4 million in benefits, as of December 31, 2002.

14. STOCK OPTION PLANS

Stock Compensation Plans--At December 31, 2002, the Company has three
stock-based compensation plans, which are described below. The Company
accounts for the fair value of its grants under those plans in accordance
with APB Opinion No. 25. The compensation cost that would have been
charged against income for those plans was $295,454, $142,977 and $250,988
for 2002, 2001 and 2000, respectively. Under the 1993 Employee Stock
Option Plan, the Company may grant options to its employees for up to one
million shares of common stock. Under the 1996 Non-Qualified Stock Option
Plan, the Company may grant options to non-employee directors for up to
50,000 shares of common stock. Under these plans, the exercise price of
each option equals the market price of the Company's stock on the date
of grant and an option's maximum term is 10 years (5 years in the case
of an incentive option granted to a stockholder owning more than 10% of
the common stock). Under the 1993 plan, options vest 25% on the date of
grant and 25% each subsequent year. Under the 1996 plans, options vest
over 5 years.

Option Surrenders--On November 26, 1996, 414,000 stock options were
granted to eighteen (18) Riviera executives at an option price of $13.625
per share, 320,000 of which were granted to Mr. Westerman. Two (2) of
these executives' options totaling 11,000 shares have since been canceled
due to those executives leaving the Company, resulting in a balance of
403,000 options at $13.625 per share held by sixteen (16) Company
executives. These options were vested in their entirety for these sixteen
(16) executives.

On January 16, 2001, the Board approved a Stock Option Surrender Plan (the
"Surrender Plan"). Pursuant to the Surrender Plan, each executive could
surrender all or any portion of his/her $13.625 options. Further, the
Company may, but is not obligated to, grant new options in an amount no
less than the shares surrendered, to be issued no sooner than six
months and a day after the surrender of the $13.625 options. Any new
options granted will be at the price of the Company's common stock on the
date of grant and are subject to the vesting requirements of the Company's
"ESOP".

All 16 Company executives surrendered the entire balance of 403,000 of
the $13.625 options effective January 31, 2001.

The activity of the Stock Option Plan and the Non-Qualified Stock Option
Plan is as follows:

F-24




Average
Per Share
Exercise
Stock Option Plan Shares Price


Outstanding, January 1, 2001 712,000 $ 10.35
Grants 170,500 $ 6.00
Canceled (423,000) $ 13.28
-------
Outstanding, December 31, 2001 459,500 $ 6.04
Grants 131,500 $ 7.35
Canceled (36,000) $ 6.45
-------
Outstanding, December 31, 2002 555,000 $ 6.32
=======
Non-Qualified Stock Option Plan

Outstanding, January 1, 2001 14,000 $ 9.09
Automatic grant to directors 6,000 $ 6.55
Canceled (4,000) $ 13.37
------
Outstanding, December 31, 2001 16,000 $ 7.07
Automatic grant to directors 8,000 $ 7.21
------
Outstanding, December 31, 2002 24,000 $ 7.12
======





Options Outstanding Options Exercisable
-------------------------------------- ----------------------
Number Weighted- Number
Outstanding Average Weighted- Exercisable Weighted-
at Remaining Average at Average
Range of December 31, Contractual Exercise December 31, Exercise
Exercise Prices 2002 Life Price 2002 Price


$4.00 to $6.00 271,500 6.2 years $5.08 22,000 $ 2.27
$6.55 to $9.00 307,500 7.6 years $7.35



15. EARNINGS PER SHARE

Basic EPS is computed by dividing net income by the weighted-average
number of common shares outstanding for the period. Diluted EPS is
computed by dividing net income by the weighted number of common and
common equivalent shares outstanding for the period. Options to purchase
common stock, whose exercise price was greater than the average market
price for the period, have been excluded from the computation of diluted
EPS. Such antidilutive options outstanding for the years ended December
31, 2002, 2001 and 2000 were 448,000, 495,500 and 732,000, respectively.

A reconciliation of income and shares for basic and diluted EPS is as
follows (amounts in thousands, except per share amounts):

F-25




Year Ended 2002
---------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount

Basic EPS-Loss available to common

stockholders $(24,722) 3,450 $(7.17)
Effect of dilutive securities-Options
-------- ----- -----
Diluted EPS-Loss available to common
stockholders plus assumed conversions $(24,722) 3,450 $(7.17)
======= ===== ======
Year Ended 2001
----------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount

Basic EPS-Loss available to common
stockholders $ (6,407) 3,573 $(1.79)
Effect of dilutive securities-Options
------- ------ -----
Diluted EPS-Loss available to common
stockholders plus assumed conversions $ (6,407) 3,573 $(1.79)
======= ===== ======
Year Ended 2000
----------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount

Basic EPS-Loss available to common
stockholders $ (4,215) 4,013 $(1.05)
Effect of dilutive securities-Options
------ ----- ------
Diluted EPS-Loss available to common
stockholders plus assumed conversions $ (4,215) 4,013 $(1.05)
======= ===== ======


During 2002, 2001 and 2000, the Company purchased 12,100, 276,528 and
257,893 shares of treasury stock on the open market for approximately
$67,286, $1,779,000 and $2,093,000, respectively. Approximately 130,191
shares of treasury stock are held in the deferred compensation trust at
December 31, 2002.


F-26


16. SEGMENT DISCLOSURES

The Company reviews its operations by its geographic gaming market
segments: Riviera Las Vegas and Riviera Black Hawk. The management
division is included in other revenue and is included in Riviera Las
Vegas. All intersegment revenues have been eliminated.



(In thousands) 2002 2001 2000

Net revenues:

Riviera Las Vegas $139,159 $152,985 $166,270
Riviera Black Hawk 49,133 49,046 35,261
------- ------- -------
Total net revenues $188,292 $202,031 $201,531
======= ======= =======
Income (loss) from operations:
Riviera Las Vegas $ 12,265 $ 13,512 $ 19,215
Riviera Black Hawk 7,350 7,622 1,881
Corporate Expenses (3,762) (4,163) (4,217)
------ ------- ------
Total income from operations $ 15,853 $ 16,971 $ 16,879
====== ====== ======
EBITDA:
Riviera Las Vegas $ 23,951 $ 25,655 $ 33,548
Riviera Black Hawk 13,400 12,722 6,597
Corporate Expenses (3,762) (4,163) (4,217)
------ ------ ------
Total EBITDA $ 33,589 $ 34,214 $ 35,928
====== ====== ======
EBITDA margin (1):
Riviera Las Vegas 17.2 % 16.8 % 20.2 %
Riviera Black Hawk 27.3 % 25.9 % 18.7 %
----- ----- -----
Total EBITDA 17.8 % 16.9 % 17.8 %

December 31
--------------------------------
2002 2001

Fixed Assets (2):
Riviera Las Vegas (3) $123,740 $132,982
Riviera Black Hawk 64,493 67,549
------ -------
Total fixed assets $188,233 $200,531
======= =======
(1) Shown as a percentage of corresponding segment net revenue.
(2) Assets represent property and equipment and intangible assets, net of
accumulated depreciation and amortization.
(3) Includes the building held at corporate.




F-27



EBITDA consists of earnings before interest, income taxes, depreciation
and amortization (excluding preopening expense--Black Hawk, Colorado
project, and other, net, which includes expense and insurance recoveries
from Paulson Merger and litigation activity in 2000.) While EBITDA should
not be construed as a substitute for operating income or a better
indicator of liquidity than cash flows from operating activities, which
are determined in accordance with generally accepted accounting principles
("GAAP"), it is included herein to provide additional information with
respect to the ability of the Company to meet its future debt service,
capital expenditure, and working capital requirements. Although EBITDA is
not necessarily a measure of the Company's ability to fund its cash needs,
management believes that certain investors find EBITDA to be a useful tool
for measuring the ability of the Company to service its debt. The
Company's computation of EBITDA may not be comparable to other similarly
titled measures of other companies.

RIVIERA LAS VEGAS

The primary marketing of the Riviera Las Vegas is not aimed toward
residents of Las Vegas, Nevada. Significantly all revenues derived from
patrons visiting the Riviera Las Vegas are from other parts of the United
States and other countries. Revenues for the Riviera Las Vegas from a
foreign country or region may exceed 10% of all reported segment revenues;
however, the Riviera Las Vegas cannot identify such information, based
upon the nature of gaming operations.

RIVIERA BLACK HAWK

The casino in Black Hawk, Colorado, primarily serves the residents of
metropolitan Denver, Colorado. As such, management believes that
significantly all revenues are derived from within 250 miles of that
geographic area.

17. RELATED PARTY TRANSACTIONS

Robert R. Barengo, a member of the Board of Directors of the Company, is a
former director of American Wagering, Inc. ("AWI") and owns 7% of the
outstanding stock of AWI, which leases approximately 12,000 square feet of
the Riviera Hotel & Casino's casino floor. AWI is the operator of the
Riviera Hotel & Casino's sports book operations and has operated under a
lease arrangement since before Mr. Barengo was appointed to the Board. The
lease provides for rental payments based upon the monthly and annual
revenues derived by AWI from the location. AWI paid aggregate rent to ROC
of approximately $99,400, $141,500 and $188,000 in each of the years ended
December 31, 2002, 2001 and 2000, respectively. The Company believes that
the terms of the lease with AWI are at least as favorable to the Company
and ROC as could have been obtained from unaffiliated third parties and
are at least as favorable as terms obtained by other casino hotels in Las
Vegas.

The Company entered into a letter agreement with Mr. Barengo, a member of
the Bar of the State of Nevada, pursuant to which Mr. Barengo was
assisting the Company and its outside counsel in enforcing the Company's
rights under litigation related to various matters. Under such letter
agreement, Mr. Barengo received a fee of $120,000 for the year ended
December 31, 2000. Mr. Barengo became an employee director in January
2001. He and the Company mutually terminated the agreement effective
December 31, 2000.


F-28



Jeffrey A. Silver, a member of the Board, is a shareholder in the law firm
of Gordon & Silver, Ltd. which has been engaged by the Company for various
legal matters.

Peninsula Gaming Partners LLC ("PGP") engaged RGM to assist, on an interim
basis in 2000, with transitional matters relating to the operations of the
Diamond Jo gaming riverboat in Dubuque, Iowa. Such services included
assisting in the selection of a new chief operating officer to oversee
riverboat casino operations and other matters. RGM earned fees and
expenses in the amount of $232,000 for the year ended December 31, 2000.
PGP terminated its agreement with RGM in September 2000. Mr. Westerman
served as a manager on the board of managers of PGP until his resignation
effective December 31, 2000. The Company believes that the fees were no
less favorable than would have been paid in an arm's length transaction.

******









F-29





UNAUDITED QUARTERLY FINANCIAL DATA
(Amounts in thousands, except per share data)
- -------------------------------------------------------------------------------


March 31 June 30 September 30 December 31

Year Ended December 31, 2002:

Net Revenues $46,498 $49,854 $48,612 $43,328
Operating Income 3,687 5,711 3,510 2,945
Loss Before Tax Benefit (2,834) (1,088) (16,895) (3,905)
Net Loss (2,834) (1,088) (16,895) (3,905)
Loss Per Share, Basic $ (0.82) $ (0.32) $ (4.89) $ (1.13)
Loss Per Share, Diluted $ (0.82) $ (0.32) $ (4.89) $ (1.13)

Year Ended December 31, 2001:
Net Revenues $52,199 $54,828 $51,045 $43,959
Operating Income 5,445 6,282 3,013 2,233
Loss Before Tax Benefit (958) (124) (3,319) (4,246)
Net Loss (658) (70) (2,500) (3,179)
Loss Per Share, Basic $ (0.18) $ (0.02) $ (0.71) $ (0.92)
Loss Per Share, Diluted $ (0.18) $ (0.02) $ (0.71) $ (0.92)





(19096)


F-30