-----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, WoBbFqKNeS7FhUYwbCRybU+ROpMyLcXS/IuV7zcHtQGxSvHGzoPzg3ecHnPrkL1X okniiuk6Ar5wPYHWlUwR4w== 0000907242-99-000009.txt : 19990816 0000907242-99-000009.hdr.sgml : 19990816 ACCESSION NUMBER: 0000907242-99-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONARCH CASINO & RESORT INC CENTRAL INDEX KEY: 0000907242 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 880300760 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22088 FILM NUMBER: 99686687 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 June 30, 1999 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: (775) 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 August 11, 1999, there were 9,436,275 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 Six Months Ended June 30, June 30, -------------------------- -------------------------- 1999 1998 1999 1998 ------------ ------------ ------------ ------------ (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues Casino............................... $ 11,827,740 $ 10,681,129 $ 21,878,446 $ 20,180,099 Food and beverage.................... 5,802,959 4,772,862 10,364,446 8,996,263 Hotel................................ 3,415,218 3,046,689 5,778,110 5,449,103 Other................................ 666,772 695,125 1,299,828 1,257,519 ------------ ------------ ------------ ------------ Gross revenues.................... 21,712,689 19,195,805 39,320,830 35,882,984 Less promotional allowances.......... (3,134,502) (2,633,993) (5,809,109) (4,767,930) ------------ ------------ ------------ ------------ Net revenues...................... 18,578,187 16,561,812 33,511,721 31,115,054 ------------ ------------ ------------ ------------ Operating expenses Casino............................... 5,254,962 4,538,495 9,924,793 8,609,530 Food and beverage.................... 3,483,261 2,591,075 5,888,347 4,876,778 Hotel................................ 1,106,499 893,817 1,913,346 1,814,431 Other................................ 112,411 127,781 213,800 245,094 Selling, general and administrative.. 5,548,029 4,246,132 10,379,260 8,289,971 Depreciation and amortization........ 1,600,354 1,156,104 2,823,559 2,286,148 ------------ ------------ ------------ ------------ Total............................. 17,105,516 13,553,404 31,143,105 26,121,952 ------------ ------------ ------------ ------------ Income from operations............ 1,472,671 3,008,408 2,368,616 4,993,102 ------------ ------------ ------------ ------------ Other expense Interest expense..................... 875,033 581,101 1,449,707 1,197,734 ------------ ------------ ------------ ------------ Total............................. 875,033 581,101 1,449,707 1,197,734 ------------ ------------ ------------ ------------ Income before income taxes........ 597,638 2,427,307 918,910 3,795,368 Provision for income taxes............. 203,197 825,284 312,429 1,290,390 ------------ ------------ ------------ ------------ Net Income........................ $ 394,441 $ 1,602,023 $ 606,480 $ 2,504,978 ============ ============ ============ ============ Income per share of common stock Net income Basic.............................. $ 0.04 $ 0.17 $ 0.06 $ 0.27 Diluted............................ $ 0.04 $ 0.17 $ 0.06 $ 0.26 Weighted average number of common shares and potential common shares outstanding Basic.............................. 9,436,275 9,436,275 9,436,275 9,436,275 Diluted............................ 9,493,774 9,508,406 9,497,936 9,506,560
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. -2- MONARCH CASINO & RESORT, INC. CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1999 1998 ------------ ------------ (Unaudited) ASSETS Current assets Cash................................................. $ 4,792,855 $ 4,950,244 Receivables, net..................................... 1,617,203 1,274,343 Inventories.......................................... 522,449 476,948 Prepaid expenses..................................... 2,014,129 1,628,717 Prepaid federal income taxes ........................ 39,654 449,226 Deferred income taxes................................ 505,458 432,874 ------------- ------------ Total current assets.............................. 9,491,748 9,212,352 ------------- ------------ Property and equipment Land................................................. 10,339,530 10,339,530 Buildings............................................ 85,580,315 35,335,973 Furniture and equipment.............................. 38,334,273 24,667,318 Improvements......................................... 4,971,921 4,969,881 ------------- ------------ 139,226,039 75,312,702 Less accumulated depreciation and amortization....... (24,849,313) (22,125,039) ------------- ------------ 114,376,726 53,187,663 Construction in progress............................. - 32,669,282 ------------- ------------ Net property and equipment........................ 114,376,726 85,856,945 ------------- ------------ Other assets........................................... 1,657,668 1,662,663 ------------- ------------ $ 125,526,142 $ 96,731,960 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current maturities of long-term debt................. $ 2,742,149 $ 850,498 Accounts payable-trade............................... 4,985,043 3,441,829 Accounts payable-construction........................ 5,219,242 7,275,617 Accrued expenses..................................... 3,948,483 4,152,237 ------------- ------------ Total current liabilities......................... 16,894,917 15,720,181 Long-term debt, less current maturities................ 79,347,310 52,309,785 Deferred income taxes.................................. 2,223,989 2,248,548 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 issued; 9,436,275 outstanding............................... 95,363 95,363 Additional paid-in capital........................... 17,241,788 17,241,788 Treasury stock....................................... (329,875) (329,875) Retained earnings.................................... 10,052,650 9,446,170 ------------- ------------ Total stockholders' equity........................ 27,059,926 26,453,446 ------------- ------------ $ 125,526,142 $ 96,731,960 ============= ============
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. -3- MONARCH CASINO & RESORT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, ---------------------------- 1999 1998 ------------ ------------ (Unaudited) (Unaudited) Cash flows from operating activities: Net income............................................ $ 606,480 $ 2,504,978 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization....................... 2,823,559 2,286,148 (Gain) loss on disposal of assets................... (5,293) 17,495 Increase in receivables, net........................ (342,860) (501,843) (Increase) decrease in inventories.................. (45,501) 159,568 (Increase) decrease in prepaid expenses............. 24,160 (152,663) (Increase) decrease in deferred income tax asset.... (72,584) 360,000 (Increase) decrease in other assets................. 4,995 (49,009) Increase (decrease) in accounts payable............. 1,543,214 (1,308,693) Decrease in accrued expenses.. ........... (203,754) (237,116) Decrease in deferred income tax liability........... (24,559) (12,000) ------------ ------------ Net cash provided by operating activities.......... 4,307,857 3,066,865 ------------ ------------ Cash flows from investing activities: Proceeds from sale of assets.......................... 11,268 8,120 Acquisition of property and equipment................. (26,979,930) (2,495,561) ------------ ------------ Net cash used in investing activities.............. (26,968,662) (2,487,441) ------------ ------------ Cash flows from financing activities: Proceeds from long-term borrowings.................... 23,249,498 - Principal payments on long-term debt.................. (746,082) (2,072,850) ------------ ------------ Net cash provided by (used in) financing activities........................................ 22,503,416 (2,072,850) ------------ ------------ Net decrease in cash............................... (157,389) (1,493,426) Cash at beginning of period............................. 4,950,244 5,527,839 ------------ ------------ Cash at end of period................................... $ 4,792,855 $ 4,034,413 ============ ============ Supplemental disclosure of cash flow information: Cash paid for interest, net of capitalized interest.......................... $ 1,642,151 $ 1,198,350 Capitalized interest.................................. $ 1,090,428 47,409 Cash paid for income taxes............................ - 962,479 Supplemental schedule of non-cash investing and financing activities: The Company financed the purchase of property and equipment in the following amounts............... 6,425,760 667,208
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. -4- MONARCH CASINO & RESORT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Monarch Casino & Resort, Inc. ("Monarch") was incorporated in 1993. Golden Road Motor Inn, Inc. ("Golden Road") operates the Atlantis Casino Resort (the "Atlantis") in Reno, Nevada, and owns a 16-acre site adjacent to the Atlantis, which is suitable for future development. 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. ("Dunes Marina"), formed in December 1993, and Sea World Processors, Inc. ("Sea World"), purchased in February 1994. The consolidated financial statements include the accounts of Monarch, Golden Road, Dunes Marina and Sea World, and eliminate intercompany balances and transactions. Use of Estimates 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. Reclassifications Certain amounts in the 1998 consolidated financial statements have been reclassified to conform with the 1999 presentation. These reclassifications had no effect on the Company's net income. NOTE 2. INTERIM FINANCIAL STATEMENTS The accompanying consolidated financial statements for the three month and six month periods ended June 30, 1999 and June 30, 1998 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, 1998. The results for the three month and six month periods ended June 30, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999, or for any other period. NOTE 3. EARNINGS PER SHARE In 1997, the Company adopted the provisions of SFAS No. 128, Earnings Per Share. Earnings per share for all periods presented have been restated to reflect the adoption of SFAS No. 128. SFAS No. 128 requires companies to present basic earnings per share, and, if applicable, diluted earnings per -5- share. Basic earnings per share excludes dilution and is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if options to issue common stock were exercised into common stock. The following is a reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations (shares in thousands):
Three Months ended June 30, ----------------------------------- 1999 1998 ---------------- ---------------- Per Share Per Share Shares Amount Shares Amount ------ --------- ------ --------- Net Income Basic..................... 9,436 $0.04 9,436 $0.17 Effect of dilutive stock options............ 58 - 72 - ------ ------- ------ ------- Diluted................... 9,494 $0.04 9,508 $0.17 ====== ======= ====== =======
Six Months ended June 30, ----------------------------------- 1999 1998 ---------------- ---------------- Per Share Per Share Shares Amount Shares Amount ------ --------- ------ --------- Net Income Basic..................... 9,436 $0.06 9,436 $0.27 Effect of dilutive stock options............ 62 - 71 (0.01) ------ ------ ------ ------ Diluted................... 9,498 $0.06 9,507 $0.26 ====== ====== ====== ======
The following options were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of the common shares: -6-
Three Months ended June 30, ---------------------------- 1999 1998 ----------- ----------- Options to purchase shares of common stock (in thousands)..... - 17 Exercise prices.................. - $6.44-$8.06 Expiration dates................. - 9/98-5/08
Six Months ended June 30, ---------------------------- 1999 1998 ----------- ----------- Options to purchase shares of common stock (in thousands)..... - 17 Exercise prices.................. - $6.44-$8.06 Expiration dates................. - 9/98-5/08
-7- 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 statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, such as statements relating to reduction of construction disruption, vendor lien disputes, 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 completion of remaining construction activities, competitive industry conditions, Reno-area tourism conditions, dependence on existing management, leverage and debt service (including sensitivity to fluctuations in interest rates), the regulation of the gaming industry (including actions affecting licensing), outcome of litigation, domestic or global economic conditions, changes in federal or state tax laws or the administration of such laws, and issues related to the year 2000. RESULTS OF OPERATIONS Comparison of Operating Results for the Three Month Periods Ended June 30, 1999 and 1998 For the three month period ended June 30, 1999, the Company earned $394 thousand, or $0.04 per share (diluted), on net revenues of $18.6 million, a decrease in earnings of $1.6 million, or $0.17 per share (diluted), on net revenues of $16.6 million for the three months ended June 30, 1998. The Company's income from operations totaled $1.5 million for the 1999 second quarter, compared to $3.0 million for the 1998 second quarter. The 1999 second quarter net income and earnings per share were negatively impacted primarily by construction disruption and start-up expenses related to the Company's major expansion project at the Atlantis (the "Atlantis Expansion"). The Company incurred ongoing expansion related expenses throughout the second quarter of 1999. The recently completed Atlantis Expansion consists of the enclosed overhead "skywalk" structure connecting the Atlantis with its 16-acre site across South Virginia Street from the Atlantis (the "Skywalk") and a new 27-story hotel tower containing additional casino and public space (the "Hotel Tower Project"). The Company completed the Skywalk during the third week of March 1999 and began bringing on line certain areas of the Hotel Tower Project during May 1999. The remainder of the Hotel Tower Project was phased in and substantially completed late June 1999. Casino revenues totaled $11.8 million in the second quarter of 1999, an increase from $10.7 million in the 1998 second quarter, driven by increases in both slot and table game revenues attributed to increased use of the new Skywalk, casino facilities, and hotel rooms which came on line in the second quarter. Casino operating expenses amounted to 44.4% of casino revenues in the 1999 second quarter, compared to 42.5% in the 1998 second quarter, primarily as a result of higher labor costs and higher promotional allowance costs associated with pre-opening activities in the 1999 period. -8- Food and beverage revenues for the 1999 second quarter totaled $5.8 million, representing an increase of 20.8%, up from $4.8 million for the 1998 second quarter, with the increase primarily due to the opening of one new restaurant and the increased number of hotel guests as new rooms were added. Food and beverage operating expenses during the 1999 second quarter amounted to 60.0% of food and beverage revenues, up from 54.3% for the second quarter of 1998, primarily as a result of increased labor and food costs. Hotel revenues in the 1999 second quarter increased to $3.4 million from $3.0 million in the 1998 second quarter, resulting from an increase in capacity of 15,042 room nights, a 37% capacity increase over the same quarter last year. The Atlantis experienced a 92% occupancy rate as more rooms were brought on line during the 1999 second quarter period, down from a 96% occupancy rate in the 1998 second quarter period. Hotel operating expenses in the 1999 second quarter equaled 32.4% of hotel revenues, compared to 29.3% for the same quarter in 1998, which can be attributed to a lower average daily room rate ("ADR") and pre-opening costs. The lower ADR was a result of the introduction of new rooms. Other revenues in the 1999 second quarter totaled $667 thousand, down slightly from $695 thousand in the 1998 second quarter. Other expenses decreased slightly as a percentage of other revenues, decreasing to 16.9% in the 1999 second quarter from 18.4% in the 1998 second quarter. Selling, general and administrative expenses were $5.5 million in the 1999 second quarter or 29.9% of net revenues, compared to $4.2 million or 25.6% of net revenues in the second quarter of 1998. The increase was primarily due to pre-opening costs and overhead increases necessary to support the expanded facility. Interest expense for the 1999 second quarter totaled $875 thousand, up from $581 thousand in the second quarter of 1998, reflecting an increase in average outstanding debt primarily from the Atlantis Expansion financing. During the 1999 second quarter, the Company capitalized approximately $561 thousand in interest costs related to the Atlantis Expansion. During the 1998 second quarter, $29 thousand in interest costs were capitalized. Comparison of Operating Results for the Six Month Periods Ended June 30, 1999 and 1998 For the six months ended June 30, 1999, the Company earned $606 thousand, or $0.06 per share (diluted), on net revenues of $33.5 million, compared to earnings of $2.5 million, or $0.26 per share (diluted), on net revenues of $31.1 million during the six months ended June 30, 1998. Operating income for the 1999 six month period totaled $2.4 million, compared to $5.0 million for the same period in 1998. In the first six months of 1999, net income and earnings per share were negatively impacted primarily by construction disruption and start-up expenses related to the Atlantis Expansion. The Company incurred ongoing expansion related expenses throughout the six month period ended June 30, 1999. Casino revenues for the first six months of 1999 totaled $21.9 million, up from $20.2 million for the first six months of 1998, driven by increases in both slot and table game revenues attributed to increased use of the new -9- casino facilities and hotel rooms which came on line during the 1999 six month period. Casino operating expenses amounted to 45.4% of casino revenues for the six months ended June 30, 1999, compared to 42.7% for the six month period ending June 30, 1998, primarily as a result of higher labor costs, higher promotional allowance costs, and pre-opening costs during the 1999 period. Food and beverage revenues totaled $10.4 million for the six months ended June 30, 1999, an increase of 15.5% from the $9.0 million for the six months ended June 30, 1998. The increase was primarily due to the opening of one new restaurant and the increased number of hotel guests as new rooms were added. The Company's food and beverage operating expense margin increased to 56.8% in the 1999 period from 54.2% for the same period in 1998, primarily as a result of increased labor and food costs. Hotel revenues for the first six months of 1999 increased to $5.8 million from $5.4 million for the first six months of 1998, resulting from an increase in capacity 15,042 room nights, an 18.8% capacity increase over the same six month period last year. The Atlantis experienced a 91% occupancy rate as more rooms were brought on line during the 1999 six month period, the same occupancy rate experienced for the 1998 six month period. The hotel operating expense margin for the six month period ended June 30, 1999 was relatively unchanged at 33.1%, compared to 33.3% for the first six months of 1998. Other revenues totaled $1.3 million for both six month periods ending in 1999 and 1998. Other expenses decreased as a percentage of other revenues by 16.5% in the 1999 six month period, from 19.5% in the 1998 six month period. Selling, general and administrative expenses were $10.4 million in the first six months of 1999, or 31.0% of net revenues, compared to $8.3 million or 26.6% of net revenues in the first six months of 1998. The increase was primarily a result of construction disruptions and start-up expenses related to the Atlantis Expansion. Interest expense for the first six months of 1999 totaled $1.4 million, up from $1.2 million in the first six months of 1998, reflecting an increase in average outstanding debt primarily from the Atlantis Expansion financing. During the first six months of 1999, the Company capitalized approximately $1.1 million in interest costs related to the Atlantis Expansion. During the first six months of 1998, $47 thousand in interest costs were capitalized. OTHER FACTORS AFFECTING CURRENT AND FUTURE RESULTS With the completion of the Hotel Tower Project, late in the second quarter, the Company has added approximately 390 rooms, 16,000 square feet of additional casino space and other amenities to the Atlantis. Major construction on the Hotel Tower Project began in July 1998 and was substantially completed as of late June 1999. The Company carefully planned the Hotel Tower Project to mitigate the disruptive effects of construction by redirecting traffic flows, creating alternative access points at the Atlantis, and restricting construction crews, materials and vehicles to specified areas. Following the very disruptive construction mobilization -10- process in July 1998, the Company believes these steps have been effective in reducing the disruptive effect of the construction activities; however, the Company believes that some disruption is occurring and will continue to occur during the third quarter of 1999. Several vendors who worked on the Skywalk have filed liens against the Atlantis property totaling $1,238,630. The Company believes that many of the liens are duplications of amounts previously billed and paid or for services rendered which the Company has already paid. The Company intends to work to resolve these disputes and, if necessary, vigorously defend against the lien claims. LIQUIDITY AND CAPITAL RESOURCES For the six months ended June 30, 1999, net cash provided by operating activities totaled $4.3 million. Net cash used in investing activities for the same period totaled $27.0 million, which consisted entirely of acquisitions of property and equipment at the Atlantis, most of which relate to the Atlantis Expansion. Net cash provided by financing activities totaled $22.5 million, as the Company borrowed funds under its Credit Facility (defined below) to fund the cost of the Atlantis Expansion. As a result, at June 30, 1999 the Company had cash of $4.8 million, compared to $4.0 million at June 30, 1998. The Company has an $80 million construction and reducing revolving credit facility with a group of banks (the "Credit Facility"). The principal terms of the Credit Facility are summarized in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. At June 30, 1999, the outstanding balance of the Credit Facility was $73.6 million. The Company also has available a second bank credit facility on which it may borrow up to $4.5 million. The principal terms of this second bank credit facility are also summarized in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. At June 30, 1999, the outstanding balance on this second bank credit facility was $4.4 million. The Company signed contracts to construct the Atlantis Expansion in 1998, which the Company estimates will ultimately cost approximately $75 million to construct and open. The Company believes it has adequate resources available through cash on hand, cash flow from operations, and borrowings allowed under the Credit Facility to complete the Atlantis Expansion project. In addition to the funding requirements associated with completion of the Atlantis Expansion, the Company continues to monitor expansion and development opportunities at its other Reno site and elsewhere in Nevada and in other jurisdictions. The decision by the Company to proceed with any substantial project will require the Company to secure adequate financing on acceptable terms. No assurances can be made that if such projects are pursued that adequate financing would be available on acceptable terms, if at all. -11- The Company believes that its existing cash balances, cash flow from operations and borrowings available under the Credit Facility will provide the Company with sufficient resources to fund its operations, meet its existing debt obligations and fund its capital expenditure requirements; however, the Company's operations are subject to financial, economic, competitive, regulatory, and other factors, many of which are beyond its control. If the Company is unable to generate sufficient cash flow, it could be required to adopt one or more alternatives, such as reducing, delaying or eliminating planned capital expenditures, selling assets, restructuring debt or obtaining additional equity capital. On April 10, 1995, the Company announced that its Board of Directors authorized the open market repurchase of up to 200,000 shares of the Company's common stock. As of August 11, 1999, the Company had repurchased 100,000 shares on the open market at a total cost of approximately $330 thousand under this authorization. The Company has funded the purchases made to date and intends to fund any future repurchases from cash on hand. YEAR 2000 The Company has undertaken an assessment of the information systems and software used in its operations to determine whether or not those systems were Year 2000 compliant, and implemented plans to upgrade systems and/or software that was determined not to be Year 2000 compliant. Based on that assessment and the plans made as a result thereof, the Company believes that its critical internal information systems are Year 2000 compliant or will be made Year 2000 compliant before the end of 1999. The Company has begun, and is continuing, to assess potential issues related to the Year 2000 other than those relating to the Company's internal information systems, such as critical supplier readiness and potential problems associated with embedded technologies, and will develop and implement plans to correct any deficiencies found. The costs of addressing the Company's year 2000 issues have not been finally determined, but are not currently expected to be material to the Company's results of operations or financial position; however, should the Company and/or its critical suppliers fail to identify and/or correct material Year 2000 issues, such failure could impact the Company's ability to operate as it did before the Year 2000, and subsequently have a material impact on the Company's results of operations or financial position. In such an event, the Company will address issues as they arise and strive to minimize any impact on the Company's operations. For a more detailed discussion of the Company's liquidity and capital resources, and issues related to the Year 2000, see the Company's Annual Report on Form 10-K for the year ended December 31, 1998, Item 7. -12- PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Several vendors who worked on the Skywalk have filed liens against the Atlantis property totaling $1,238,630. The Company believes that many of the liens are duplications of amounts previously billed and paid or for services rendered which the Company has already paid. The Company intends to work to resolve these disputes and, if necessary, vigorously defend against the lien claims. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On June 23, 1999, the Company conducted its annual meeting of stockholders in Reno, Nevada, in which the only action taken was the election of directors. The results were as follows: Votes Cast -------------------- Against or Name of Director Elected For Withheld ------------------------ -------------------- Ben Farahi 8,451,276 15,840 Bob Farahi 8,451,276 15,840 Frank A. Modica 8,451,276 15,840 Craig F. Sullivan 8,451,276 15,840 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Description ----------- ----------- EX-27.01 Financial Data Schedule (b) Reports on Form 8-K None -13- 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: August 12, 1999 By: /s/ BEN FARAHI ------------------------------------ Ben Farahi, Co-Chairman of the Board, Secretary, Treasurer and Chief Financial Officer(Principal Financial Officer and Duly Authorized Officer)
-14- EXHIBIT INDEX Exhibit No. Description Page No. - ----------- ----------- -------- EX-27.01 Financial Data Schedule 16
-15- EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 1999 AND THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND N0TES TO FINANCIAL STATEMENTS. 6-MOS DEC-31-1999 JUN-30-1999 4,792,855 0 1,617,203 0 522,449 9,491,748 139,226,039 24,849,313 125,526,142 16,894,917 0 0 0 95,363 26,964,563 125,526,142 0 33,511,721 0 17,940,286 2,823,559 0 1,449,707 918,909 312,429 606,480 0 0 0 606,480 0.06 0.06
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