-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GjzncX+wgUY33r2K5/6RpCLAhuGgpTUwksKvAqz10mPuK0H85roMXJ3Gv9fPuNE+ +WTU5PciffGQzG1B+N3+dA== 0000907242-96-000008.txt : 19960702 0000907242-96-000008.hdr.sgml : 19960702 ACCESSION NUMBER: 0000907242-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONARCH CASINO & RESORT INC CENTRAL INDEX KEY: 0000907242 STANDARD INDUSTRIAL CLASSIFICATION: 7011 IRS NUMBER: 880300760 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22088 FILM NUMBER: 96563002 BUSINESS ADDRESS: STREET 1: 1175 W MOANA LANE STREET 2: STE 200 CITY: RENO STATE: NV ZIP: 89509 BUSINESS PHONE: 7028253355 MAIL ADDRESS: STREET 1: 1175 W MOANA LANE STREET 2: STE 200 CITY: RENO STATE: NV ZIP: 89509 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______TO______. Commission File No. 0-22088 MONARCH CASINO & RESORT, INC. (Exact name of registrant as specified in its charter) ------------------------- NEVADA 88-0300760 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1175 W. MOANA LANE, SUITE 200 RENO, NEVADA 89509 (Address of principal (Zip code) executive offices) Registrant's telephone number, including area code: (702) 825-3355 ------------------------- NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report.) 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 ___ APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES ___ NO ___ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of May 8, 1996, there were 9,536,275 shares of Monarch Casino & Resort, Inc. $0.01 par value common stock outstanding. PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MONARCH CASINO & RESORT, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, ---------------------------- 1996 1995 ------------ ------------ (Unaudited) (Unaudited) Revenues Casino...................................... $ 7,440,622 $ 6,688,759 Food and beverage........................... 4,295,335 4,106,596 Hotel....................................... 2,512,226 2,431,629 Other....................................... 432,153 426,054 ------------ ------------ Gross revenues........................... 14,680,336 13,653,038 Less promotional allowances................. (1,837,289) (1,645,526) ------------ ------------ Net revenues............................. 12,843,047 12,007,512 ------------ ------------ Operating expenses Casino...................................... 3,392,590 2,981,402 Food and beverage........................... 2,371,636 2,449,564 Hotel....................................... 932,856 1,009,352 Other....................................... 91,699 66,978 Selling, general and administrative......... 3,534,571 2,877,964 Depreciation and amortization............... 1,062,291 952,381 Gaming development costs.................... 33,906 16,705 ------------ ------------ Total.................................... 11,419,549 10,354,346 ------------ ------------ Income from operations................... 1,423,498 1,653,166 ------------ ------------ Other income (expense) Interest expense............................ (923,480) (1,040,442) Minority interests in net loss of consolidated subsidiaries.................. 6,781 - ------------ ------------ Total (916,699) (1,040,442) ------------ ------------ Income before income taxes............... 506,799 612,724 Income tax expense............................ 177,381 204,000 ------------ ------------ Net Income............................... $ 329,418 $ 408,724 ============ ============ Net income per share..................... $ 0.03 $ 0.04 ============ ============ Weighted average common shares outstanding...................... 9,536,275 9,536,275 ============ ============
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. MONARCH CASINO & RESORT, INC. CONSOLIDATED BALANCE SHEETS
March 31, December 31, 1996 1995 ------------ ------------ (Unaudited) ASSETS Current assets Cash........................................ $ 3,428,112 $ 3,644,363 Receivables, net............................ 506,140 503,283 Inventories................................. 301,062 315,556 Prepaid expenses............................ 1,294,008 1,214,846 Deferred income taxes....................... 837,000 837,000 ------------ ------------ Total current assets..................... 6,366,322 6,515,048 ------------ ------------ Property and equipment Land........................................ 10,359,792 10,359,792 Buildings................................... 38,237,712 37,748,526 Furniture and equipment..................... 21,028,091 20,511,243 Improvements................................ 4,783,489 4,780,000 ------------ ------------ 74,409,084 73,399,561 Less accumulated depreciation and amortization.............. (12,788,517) (11,726,226) ------------ ------------ Net property and equipment............... 61,620,567 61,673,335 ------------ ------------ Other assets.................................. 1,045,958 1,080,360 ------------ ------------ $ 69,032,847 $ 69,268,743 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current maturities of long-term debt........ $ 4,675,689 $ 3,993,447 Accounts payable............................ 2,738,278 3,581,469 Accrued expenses............................ 2,932,715 2,396,262 ------------ ------------ Total current liabilities................ 10,346,682 9,971,178 Long-term debt, less current maturities....... 38,164,576 39,069,071 Deferred income taxes......................... 1,557,458 1,587,000 Minority interests............................ 199,675 206,456 Commitments and contingencies................. - - Stockholders' equity Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued............. - - Common stock, $.01 par value, 30,000,000 shares authorized; 9,536,275 shares issued and outstanding..................... 95,363 95,363 Additional paid-in capital.................. 17,008,779 17,008,779 Retained earnings........................... 1,660,314 1,330,896 ------------ ------------ Total stockholders' equity............... 18,764,456 18,435,038 ------------ ------------ $ 69,032,847 $69,268,743 ============ ============
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. MONARCH CASINO & RESORT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, ---------------------------- 1996 1995 ------------ ------------ (Unaudited) (Unaudited) Cash flows from operating activities: Net income.................................. $ 329,418 $ 408,724 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............. 1,062,291 952,381 Increase in receivables, net.............. (2,857) (42,112) Decrease in inventories................... 14,494 10,933 Increase in prepaid expenses.............. (79,162) (81,263) (Increase) decrease in other assets....... 34,402 (172,451) Decrease in due to related parties........ - (308,287) Increase (decrease) in accounts payable... (843,191) 1,220,199 Increase in accrued expenses.............. 536,452 62,840 Increase (decrease) in deferred income tax liability..................... (29,542) 137,000 Decrease in minority interests............ (6,781) - ------------ ------------ Net cash provided by operating activities.................... 1,015,524 2,187,964 ------------ ------------ Cash flows from investing activities: Acquisition of property and equipment....... (661,789) (219,204) ------------ ------------ Net cash used in investing activities.... (661,789) (219,204) ------------ ------------ Cash flows from financing activities: Principal payments on long-term debt........ (569,986) (1,520,357) ------------ ------------ Net cash used in financing activities.... (569,986) (1,520,357) ------------ ------------ Net increase (decrease) in cash.......... (216,251) 448,403 Cash at beginning of period................... 3,644,363 2,324,081 ------------ ------------ Cash at end of period......................... $ 3,428,112 $ 2,772,484 ============ ============ Supplemental disclosure of cash flow information: Cash paid for interest...................... $ 975,706 $ 1,198,181 Cash paid for income taxes.................. 29,542 - Supplemental schedule of non-cash investing and financing activities: The Company financed the purchase of property and equipment in the following amounts..... 347,734 65,582
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. MONARCH CASINO & RESORT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reorganization and Basis of Presentation Monarch Casino & Resort, Inc. ("Monarch") was incorporated in 1993. Golden Road Motor Inn, Inc., dba Atlantis Casino Resort ("Golden Road") operates a hotel and casino in Reno, Nevada in facilities which were leased, prior to August 6, 1993, from Farahi Investment Company ("FIC") and Galaxy Enterprises, Inc. ("Galaxy"), entities owned by the principal stockholders of Monarch. Unless stated otherwise, the "Company" refers collectively to Monarch, its wholly owned subsidiary Golden Road, and majority owned subsidiaries, Dunes-Marina Resort and Casino, Inc. ("Monarch-Marina"), formed in December 1993, and Sea World Processors, Inc. ("Sea World") purchased in February 1994. In a reorganization immediately prior to Monarch's sale of common stock pursuant to a public offering in August 1993, certain assets and liabilities of Galaxy were distributed to its stockholders, Galaxy was merged into Golden Road, FIC transferred the leased facilities and certain other real estate and debt to Golden Road, and the Golden Road stockholders exchanged all of their Golden Road shares for shares in Monarch common stock. The consolidated financial statements include the accounts of Monarch, Golden Road, Monarch-Marina and Sea World and give retroactive effect to the merger of Galaxy, the transfer of assets and debt from FIC, and the elimination of intercompany balances and transactions in a manner similar to a pooling of interests. Accordingly, the assets acquired and related debt assumed in the reorganization are included at the historical amounts recorded by Galaxy and FIC at the times the assets were acquired and the debt was incurred by those entities, with the net amount of assets contributed or liabilities assumed related to each year presented as an adjustment to stockholder equity accounts. The operations related to the transferred assets and liabilities are included for all periods presented, with the intercompany lease transactions eliminated. The number of shares and earnings per share for all periods presented reflect the capital structure of Monarch. In preparing these financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the year. Actual results could differ from those estimates. NOTE 2. INTERIM FINANCIAL STATEMENTS The accompanying consolidated financial statements for the three month periods ended March 31, 1996 and March 31, 1995 are unaudited. In the opinion of management, all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of the Company's financial position and results of operations for such periods, have been included. The accompanying unaudited consolidated financial statements should be read in conjunction with the Company's audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 1995. The results for the three- month period ended March 31, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996, or for any other period. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS STATEMENT ON FORWARD-LOOKING INFORMATION Certain information included herein contains statements that may be considered forward-looking, such as statements relating to anticipated expenses, capital spending and financing sources. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made herein. These risks and uncertainties include, but are not limited to, those relating to dependence on existing management, leverage and debt service (including sensitivity to fluctuations in interest rates), outcome of litigation, domestic or global economic conditions and changes in federal or state tax laws or the administration of such laws. RESULTS OF OPERATIONS Comparison of Operating Results for the Three Month Periods Ended March 31, 1996 and 1995 Net revenues for the three months ended March 31, 1996 totaled $12.8 million, up 7.0% from $12.0 million for the three months ended March 31, 1995 reflecting growth in all revenue categories, especially casino revenues. Operating expenses for the three month periods ended March 31, 1996 and 1995 totaled $11.4 million and $10.4 million, respectively, resulting in operating expense margins (operating expenses as a percentage of net revenues) of 88.9% for the three months ended March 31, 1996 and 86.2% for the three months ended March 31, 1995. Income from operations for the three months ended March 31, 1996 totaled $1.4 million, down from income from operations of $1.7 million for the three months ended March 31, 1995. The Company's results during the three month period ended March 31, 1996 were negatively impacted by costs totaling approximately $100 thousand related to the name change of the Company's Reno hotel casino. The Company terminated its franchise agreement with Choice Hotels International, Inc. ("Choice") as of April 28, 1996, and its Reno hotel casino officially became the Atlantis Casino Resort (the "Atlantis") on April 29, 1996. The Company's results during the 1996 first quarter were also impacted by substantially higher marketing costs compared to the same period in 1995, which were attributable in part to activities undertaken in conjunction with the name change and to heightened competition in the Reno market, and by higher labor costs, due primarily to heightened competition in the Reno market for quality employees. Casino revenues increased 11.2% in the 1996 first quarter compared to the 1995 first quarter, with gains in both slot win and table game win contributing to the increase. Slot and video poker machines ("slot machines") contributed approximately 74% of casino revenue in the 1996 first quarter, compared to 76% in the 1995 first quarter. Slot win increased approximately 9.1% in the 1996 first quarter compared to the 1995 first quarter due to a 1.4% increase in the average number of slot machines on the Atlantis' gaming floor, combined with a 6.4% increase in the average daily win per slot machine. Table game win increased approximately 21.3% in the 1996 first quarter compared to the 1995 first quarter due to a 3.4% increase in table game drop combined with a substantial improvement in table game hold. Casino operating expenses amounted to 45.6% of casino revenues in the 1996 first quarter, compared to 44.6% in the 1995 first quarter. Food and beverage revenues rose 4.6% in the 1996 first quarter compared to the 1995 first quarter, due primarily to increased visitation to Atlantis' restaurants. Food and beverage operating expenses during the 1996 first quarter amounted to 55.2% of food and beverage revenues, compared to 59.7% in the 1995 first quarter, with the improvement due primarily to lower food costs. Hotel revenues in the 1996 first quarter increased 3.3% over the 1995 first quarter, reflecting a 5.4% increase in the average daily room rate which was offset by a decline in the average occupancy rate. The Atlantis' average daily room rate in the 1996 first quarter was $51.33, compared to $48.68 in the 1995 first quarter. During the 1996 first quarter, the Atlantis had an average occupancy rate of 88.9%, compared to 92.8% in the 1995 first quarter. Management believes that a large, long-duration bowling tournament held at the National Bowling Stadium in downtown Reno positively impacted its average hotel occupancy and average daily room rate during the 1995 first quarter. The National Bowling Stadium did not host any tournaments similar in scale or duration during the 1996 first quarter. The Company also believes that the Atlantis' average occupancy rate was negatively impacted during the 1996 first quarter by additional Reno area competition. The Company estimates that there were approximately 2,400 more hotel rooms in operation in the Reno market at the end of the 1996 first quarter than at the end of the 1995 first quarter, representing an increase of approximately 19% in the number of hotel rooms available in the Reno/Sparks area. Hotel operating expenses in the 1996 first quarter equaled 37.1% of hotel revenues, down from 41.5% in the 1995 first quarter, with the decrease due to improvements in operating efficiency. Included in hotel operating expenses are fees paid to Choice of $126 thousand and $120 thousand in the first quarters of 1996 and 1995, respectively, under the Company's licensing agreement (the "Choice Agreement") with Choice which was terminated by the Company as of April 28, 1996. Selling, general and administrative expenses amounted to 27.5% of net revenues in the first quarter of 1996, compared to 24.0% in the first quarter of 1995. Included in the 1996 first quarter are approximately $100 thousand in name change costs. The Company expects to incur additional costs related to the name change of the Atlantis in 1996, the majority of which are expected to be incurred in the second quarter. The Company's 1996 first quarter results were also impacted by substantially higher marketing costs compared to the same period in 1995, which were attributable in part to activities undertaken in conjunction with the name change and to heightened competition in the Reno market. Depreciation and amortization expenses totaled $1.1 million in the 1996 first quarter, compared to $952 thousand in the 1995 first quarter, primarily reflecting additional personal property put into use during 1995. Interest expense for the 1996 first quarter totaled $923 thousand, compared to $1.0 million in the first quarter of 1995, reflecting lower average outstanding debt and lower average interest rates during the 1996 first quarter. LIQUIDITY AND CAPITAL RESOURCES For the three months ended March 31, 1996 net cash provided by operating activities totaled $1.0 million. For the 1996 first quarter, net cash used in investing activities totaled $662 thousand, which consisted entirely of acquisitions of property and equipment at the Atlantis, and net cash used in financing activities totaled $570 thousand, with funds used to reduce the Company's debt. As a result, at March 31, 1996 the Company had cash of $3.4 million, compared to $3.6 million at December 31, 1995. The Company believes that it is important to maintain the Atlantis as a first class resort facility in order to compete successfully and increase its customer base in the face of competitive pressures, and intends to expend funds on maintenance, refurbishment and renovation sufficient to maintain the Atlantis as such. In the 1996 first quarter, the Company renovated substantially all 148 motor lodge rooms at the Atlantis at a total cost of approximately $700 thousand. As of March 31, 1996, the Company had approximately $3.9 million available under its bank loan for purposes specified in the loan agreement, including capital expenditures at the Atlantis. See Part II, Item I, "Legal Proceedings" for a discussion of litigation commenced by Choice on April 10, 1996. For a more detailed discussion of the company's liquidity and capital resources, see the Company's Annual Report on Form 10-K for the year ended December 31, 1995, Item 7. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Choice Hotels International, Inc. v. Golden Road Motor Inn, Inc., Case No. PJM 96-1091, instituted April 10, 1996, in the United States District Court for the District of Maryland. Choice is seeking a declaratory judgment regarding the Choice Agreement under which the Company, until April 28, 1996, operated its Reno hotel casino as a Clarion(TM) hotel. Specifically Choice seeks a declaratory judgment as to (i) the effectiveness of a proposed 1993 modification to the Choice Agreement, (ii) the term of the Choice Agreement, (iii) the expansion fee provided under the Choice Agreement, and (iv) the date on which the Choice Agreement was terminable. Management intends to defend vigorously this action and believes that the Company was entitled to terminate the Choice Agreement as of April 28, 1996. William H. Ahern v. Caesars World, Inc., et al., Case No. 94-532-Civ-Orl- 22, instituted on May 10, 1994 (the "Ahern Complaint") and William Poulos v. Caesars World, Inc., et al., Case No. 94-478-Civ-Orl-22, instituted on April 26, 1994 (the "Poulos Complaint") (collectively, the Ahern Complaint and the Poulos Complaint are referred to as the "Complaints"). Two individuals, each purportedly representing a class, filed Complaints in the United States District Court, Middle District of Florida, against various manufacturers, distributors and casino operators of video poker and electronic slot machines, including the Company. The Complaints allege that the defendants have engaged in a course of conduct intended to induce persons to play such games based on a false belief concerning how the gaming machines operate, as well as the extent to which there is an opportunity to win on a given play. The Complaints allege violations of the Racketeer Influenced and Corrupt Organizations Act, as well as claims of common law fraud, unjust enrichment and negligent misrepresentation, and seek damages in excess of $1 billion without any substantiation of that amount. The Complaints were consolidated and transferred to the United States District Court for the District of Nevada (the "Nevada District Court"). The Company filed a motion to dismiss the action based on jurisdiction, abstention and related doctrines. Various other defendants filed similar motions and motions to dismiss based on defects in the pleadings. The Nevada District Court entered an order granting the motions to dismiss based on defects in the pleadings, and denying as moot all other pending motions, including those of the Company. The Nevada District Court granted the plaintiffs until May 31, 1996 within which to file an amended complaint that complies with the applicable pleading requirements. Failure to file an amended complaint will result in the dismissal of the Complaints. Although the Company did not join in the motions based on defects in the pleadings, the Company believes, based on the scope of the order, that it is entitled to rely upon the conditional dismissal. Management does not know whether the plaintiffs intend to file amended complaints, but believes that they will do so. Management continues to believe that the substantive allegations in the Complaints are without merit. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Description ----------- ----------- EX-27 Financial Data Schedule (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MONARCH CASINO & RESORT, INC. (Registrant) Date: May 13, 1996 By: /s/ BEN FARAHI ------------------------------------ Ben Farahi, Co-Chairman of the Board, Secretary, Treasurer and Chief Financial Officer(Principal Financial Officer and Duly Authorized Officer)
EXHIBIT INDEX Exhibit No. Description Page No. - - ----------- ----------- -------- EX-27 Financial Data Schedule /TABLE EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 1996 AND DECEMBER 31, 1995 AND THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES TO FINANCIAL STATEMENTS. 3-MOS YEAR DEC-31-1996 DEC-31-1995 MAR-31-1996 DEC-31-1995 3,428,112 3,644,363 0 0 506,140 666,005 0 162,722 301,062 315,556 6,366,322 6,515,048 74,409,084 73,399,561 12,788,517 11,726,226 69,032,847 69,268,743 10,346,682 9,971,178 38,164,576 39,069,071 0 0 0 0 95,363 95,363 18,669,093 18,339,675 69,032,847 69,268,743 0 0 12,843,047 53,398,752 0 0 6,788,781 28,266,751 1,062,291 4,478,925 0 235,205 923,480 4,087,093 506,799 2,323,123 177,381 758,900 329,418 1,564,223 0 0 0 0 0 0 329,418 1,564,223 0.03 0.16 0.03 0.16
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