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, 2000
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 Number 1-7831
ELSINORE CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 88 0117544
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
202 FREMONT STREET, LAS VEGAS, NEVADA 89101
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number (Including Area Code): 702/385-4011
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 ninety (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 Section 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 X NO
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
TITLE OF STOCK NUMBER OF SHARES
CLASS DATE OUTSTANDING
Common August 11, 2000 4,993,965
Elsinore Corporation and Subsidiaries
Form 10-Q
For the Quarter Ended June 30, 2000
INDEX
PART I. FINANCIAL INFORMATION: PAGE
Item 1. Unaudited Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at 4-5
June 30, 2000 and December 31, 1999
Condensed Consolidated Statements of Income 6-7
for the Three Months Ended June 30, 2000 and
Three Months Ended June 30, 1999
Condensed Consolidated Statements of Income 8-9
for the Six Months Ended June 30, 2000 and
Six Months Ended June 30, 1999
Condensed Consolidated Statement of Shareholders 10
Equity for the Six Months Ended June 30, 2000
Condensed Consolidated Statements of Cash Flows 11-12
for the Six Months Ended June 30, 2000 and
Six Months Ended June 30, 1999
Notes to Condensed Consolidated Financial Statements 13-17
Item 2. Management's Discussion and Analysis of 17-28
Financial Condition and Results of
Operations
Item 3. Quantitative and Qualitative Disclosures 28
About Market Risk
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings 29
Item 6. Exhibits and Reports 30
SIGNATURES 31
PART 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
June 30, 2000 and December 31, 1999
Unaudited
(Dollars in Thousands)
June 30, December 31,
2000 1999
------------------ ------------------
Assets
Current Assets:
<S> <C> <C>
Cash and cash equivalents $4,146 $3,547
Accounts receivable, less allowance for
doubtful accounts of $254 and $249,
respectively 769 694
Inventories 307 594
Prepaid expenses 1,872 1,187
------------------ ------------------
Total current assets 7,094 6,022
------------------ ------------------
Property and equipment, net 39,766 40,815
Reorganization value in excess of amounts
allocable to identifiable 300 313
assets
Other assets 1,853 1,643
------------------ ------------------
Total assets $49,013 $48,793
================== ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Balance Sheets (continued)
June 30, 2000 and December 31, 1999
Unaudited
(Dollars in Thousands)
June 30, December 31,
2000 1999
------------------ ------------------
Liabilities and Shareholders' Equity
Current liabilities:
<S> <C> <C>
Accounts payable $804 $1,803
Accrued interest 496 735
Accrued expenses 4,905 4,573
Current portion of long-term debt 1,574 2,079
------------------ ------------------
Total current liabilities 7,779 9,190
------------------ ------------------
Long-term debt, less current portion 13,543 14,264
------------------ ------------------
Total liabilities 21,322 23,454
------------------ ------------------
Commitments and contingencies
Shareholders' equity:
6% cumulative convertible preferred stock, no
par value. Authorized, issued and
outstanding 50,000,000 shares. Liquidation
preference of $19,939 and $19,366, at
June 30, 2000 and December 31, 1999,
respectively. 19,939 19,366
Common stock, $.001 par value per share.
Authorized 100,000,000 shares. Issued
and outstanding 4,929,313 shares. 5 5
Additional paid-in capital 7,697 8,270
Retained earnings (accumulated deficit) 50 (2,302)
------------------ ------------------
Total shareholders' equity 27,691 25,339
------------------ ------------------
Total liabilities and shareholders'
equity $49,013 $48,793
================== ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
Unaudited
(Dollars in Thousands)
Three Three
Months Months
Ended Ended
June 30, June 30,
2000 1999
------------------ ------------------
Revenues, net:
<S> <C> <C>
Casino $9,180 $10,139
Hotel 2,479 2,118
Food and beverage 2,562 2,356
Other 1,454 1,052
------------------ ------------------
Total revenues 15,675 15,665
Promotional allowances (1,145) (906)
------------------ ------------------
Net revenues 14,530 14,759
------------------ ------------------
Costs and expenses:
Casino 3,188 3,634
Hotel 2,247 2,231
Food and beverage 1,676 1,543
Taxes and licenses 1,469 1,508
Selling, general and
administrative 2,853 2,671
Rents 1,040 1,003
Depreciation and
amortization 962 793
Interest 449 498
Merger and litigation costs 8 296
------------------ ------------------
Total costs and
expenses 13,892 14,177
------------------ ------------------
Net income before income taxes and
undeclared dividends on cumulative
convertible Preferred Stock 638 582
Provision for income taxes - 20
------------------ ------------------
Net income before
undeclared dividends on cumulative
convertible Preferred Stock 638 562
Undeclared dividends on
cumulative convertible Preferred
Stock 288 270
------------------ ------------------
Net income applicable
to common shares $350 $292
================== ==================
</TABLE>
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Operations (continued)
Unaudited
Three Three
Months Months
Ended Ended
June 30, June 30,
2000 1999
------------------ ------------------
Basic and diluted income
per share:
<S> <C> <C>
Basic income per share $.07 $.06
================== ==================
Weighted average number of
common shares outstanding 4,929,313 4,929,313
================== ==================
Diluted income per share $.01 $.01
================== ==================
Weighted average number of
common and common
equivalent shares
outstanding 97,993,963 97,993,963
================== ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
Unaudited
(Dollars in Thousands)
Six Six
Months Months
Ended Ended
June 30, June 30,
2000 1999
------------------ ------------------
Revenues, net:
<S> <C> <C>
Casino $19,320 $20,718
Hotel 5,050 4,518
Food and beverage 5,345 4,943
Other 2,975 1,801
------------------ ------------------
Total revenues 32,690 31,980
Promotional allowances (2,388) (2,036)
------------------ ------------------
Net revenues 30,302 29,944
------------------ ------------------
Costs and expenses:
Casino 6,469 6,996
Hotel 4,413 4,350
Food and beverage 3,473 3,385
Taxes and licenses 2,993 3,097
Selling, general and
administrative 5,787 5,352
Rents 2,077 1,976
Depreciation and
amortization 1,900 1,614
Interest 851 1,004
Merger and litigation costs (13) 393
------------------ ------------------
Total costs and
expenses 27,950 28,167
------------------ ------------------
Net income before income taxes and
undeclared dividends on cumulative
convertible Preferred Stock 2,352 1,777
Provision for income taxes - 40
------------------ ------------------
Net income before
undeclared dividends on cumulative
convertible Preferred Stock 2,352 1,737
Undeclared dividends on
cumulative convertible Preferred
Stock 573 540
------------------ ------------------
Net income applicable
to common shares $1,779 $1,197
================== ==================
</TABLE>
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Operations (continued)
Unaudited
Six Six
Months Months
Ended Ended
June 30, June 30,
2000 1999
------------------ ------------------
Basic and diluted income
per share:
<S> <C> <C>
Basic income per share $.36 $.24
================== ==================
Weighted average number of
common shares outstanding 4,929,313 4,929,313
================== ==================
Diluted income per share $.02 $.02
================== ==================
Weighted average number of
common and common
equivalent shares
outstanding 97,993,963 97,993,963
================== ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Shareholders' Equity
Six Months Ended June 30, 2000
(Dollars in thousands)
Unaudited
Common Stock Preferred Stock
--------------------------------------
Out- Out- Additional Total
Standing Standing Paid-In- Accumulated Shareholders'
Shares Amount Shares Amount Capital Deficit Equity
-----------------------------------------------------------------------
Balance,
January 1, 2000
<S> <C> <C><C> <C> <C> <C> <C>
4,929,313 $5 50,000,000 $19,366 $8,270 ($2,302) $25,339
Net income 2,352 2,352
Undeclared
preferred
stock
dividends 573 (573) -
---------------------------------------------------------------------
Balance,
June 30, 2000
4,929,313 $5 50,000,000 $19,939 $7,697 $50 $27,691
=====================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Unaudited
(Dollars in Thousands)
Six Six
Months Months
Ended Ended
June 30, June 30,
2000 1999
------------------ ------------------
Cash flows from operating activities:
<S> <C> <C>
Net income $2,352 $1,737
Adjustments to reconcile
net income to net
cash provided by
operating activities:
Depreciation and
amortization 1,900 1,614
Changes in assets and
liabilities:
Accounts receivable (75) (35)
Inventories 287 100
Prepaid expenses (685) (193)
Other assets (197) (19)
Accounts payable (999) 59
Accrued expenses 332 1,087
Accrued interest (239) (1,780)
------------------ ------------------
Net cash provided by
operating activities 2,676 2,570
------------------ ------------------
Cash flows used in investing
activities - capital
expenditures (792) (750)
------------------ ------------------
Cash flows used in financing
activities - principal
payments on long-term debt (1,285) (975)
------------------ ------------------
Net increase in
Cash and cash equivalents 599 845
Cash and cash equivalents at
beginning of period 3,547 5,604
------------------ ------------------
Cash and cash equivalents at
end of period $4,146 $6,449
================== ==================
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (continued)
Unaudited
(Dollars in Thousands)
Six Months Six Months
Ended Ended
June 30, June 30,
2000 1999
(unaudited) (unaudited)
------------------ ------------------
(Dollars in (Dollars in
thousands) thousands)
Supplemental disclosure of non-cash
investing and financing activities:
Equipment purchased with
<S> <C> <C>
capital lease financing $59 $87
Supplemental disclosure of cash activities:
Cash paid for interest $1,146 $2,783
Cash paid for income taxes - 54
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Elsinore Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2000
1. Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of Elsinore
Corporation and its wholly-owned subsidiaries. All material intercompany
balances and transactions have been eliminated in consolidation.
(b) Basis of Presentation
The Company has prepared the accompanying financial statements without audit,
pursuant to rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in the financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to such
rules and regulations. It is suggested that this report be read in conjunction
with the Company's audited consolidated financial statements included in the
annual report for the year ended December 31, 1999. In the opinion of
Management, the accompanying financial statements contain all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly the
Company's financial position as of June 30, 2000, the results of operations for
the three months ended June 30, 2000 and June 30, 1999, and the results of
operations and cash flows for the six months ended June 30, 2000 and June 30,
1999. The operating results and cash flows for these periods are not necessarily
indicative of the results that will be achieved for the full year or for future
periods.
(c) Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires Management to make
estimates generally accepted and assumptions that affect the reported amounts of
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 the estimated useful lives for depreciable
and amortizable assets, the estimated allowance for doubtful accounts
receivable, the estimated valuation allowance for deferred tax assets, and
estimated cash flows used in assessing the recoverability of long-lived assets.
Actual results may differ from those estimates.
(d) Recently Issued Accounting Standards
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB
101 clarifies existing accounting principles related to revenue recognition in
financial statements. The Company is required to comply with the provisions of
SAB 101 by the fourth quarter of 2000. Due to the nature of the Company's
operations, Management does not believe that SAB 101 will have a significant
impact on the Company's financial statements.
(e) Net Income Per Common Share
Basic per share amounts are computed by dividing net income by average shares
outstanding during the period. Diluted per share amounts are computed by
dividing net income by average shares outstanding plus the dilutive effect of
common share equivalents. The effect of the warrants outstanding to purchase
1,125,000 shares of common stock were not included in diluted per share
calculations during the three and six month periods ended June 30, 1999 since
the exercise price of such warrants was greater than the average price of the
Company's common stock during these periods.
<TABLE>
<CAPTION>
Three Months Ended
June 30, 2000
(unaudited)
-----------------------------------------
Income Shares Per Share
Amounts
Basic EPS:
Net income available to common
<S> <C> <C> <C>
Shareholders $350,000 4,929,313 $0.07
Effect of Dilutive Securities:
Cumulative convertible preferred
Stock 288,000 93,000,000 (0.06)
Common stock required to be issued
to shareholders - 64,650 -
Diluted EPS:
-----------------------------------------
Net income available to common
shareholders plus assumed conversions $638,000 97,993,963 $0.01
=========================================
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
June 30, 1999
(unaudited)
-----------------------------------------
Income Shares Per Share
Amounts
Basic EPS:
Net income available to common
<S> <C> <C> <C>
Shareholders $292,000 4,929,313 $0.06
Effect of Dilutive Securities:
Cumulative convertible preferred
Stock 270,000 93,000,000 (0.05)
Common stock required to be issued
to shareholders - 64,650 -
Diluted EPS:
-----------------------------------------
Net income available to common
shareholders plus assumed conversions $562,000 97,993,963 $0.01
=========================================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
June 30, 2000
(unaudited)
-----------------------------------------
Income Shares Per Share
Amounts
Basic EPS:
Net income available to common
<S> <C> <C> <C>
Shareholders $1,779,000 4,929,313 $0.36
Effect of Dilutive Securities:
Cumulative convertible preferred
Stock 573,000 93,000,000 (0.34)
Common stock required to be issued
to shareholders - 64,650 -
Diluted EPS:
-----------------------------------------
Net income available to common
shareholders plus assumed conversions $2,352,000 97,993,963 $0.02
=========================================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999
(unaudited)
-----------------------------------------
Income Shares Per Share
Amounts
Basic EPS:
Net income available to common
<S> <C> <C> <C>
Shareholders $1,197,000 4,929,313 $0.24
Effect of Dilutive Securities:
Cumulative convertible preferred
Stock 540,000 93,000,000 (0.22)
Common stock required to be issued
to shareholders - 64,650 -
Diluted EPS:
-----------------------------------------
Net income available to common
shareholders plus assumed conversions $1,737,000 97,993,963 $0.02
=========================================
</TABLE>
2. Income Taxes
The Company's effective tax rate will be approximately 0% until its net
operating losses expire or are used.
3. Commitments and Contingencies
RGME managed the Four Queens Casino in accordance with a Management Arrangement
among the Company, Four Queens, Inc. and RGME effective April 1, 1997 (the
"Management Arrangement"). RGME received an annual fee of $1 million in equal
monthly installments. The Management Arrangement terminated on December 31,
1999.
The Company is a party to litigation involving a proposed merger with R&E Gaming
Corp. as discussed in Note 4 below.
Under the Plan of Reorganization that became effective following the close of
business on February 28, 1997, the Company was required to issue additional
shares of New Common Stock to the following creditor groups or to a disbursing
agent on behalf of such creditor groups:
<TABLE>
<CAPTION>
<S> <C>
Unsecured Creditors of Four Queens, Inc. 50,491
Unsecured Creditors of Elsinore Corporation 14,159
------
Total 64,650
======
</TABLE>
The Company issued these shares on July 10, 2000.
The Company is a party to other claims and lawsuits. Management believes that
such matters are either covered by insurance, or if not insured, will not have
a material adverse effect on the financial statements of the Company taken as a
whole.
4. Proposed Merger
In the first half of 1998, Elsinore and Mr. Allen E. Paulson ("Paulson")
commenced discussions which culminated in an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of September 15, 1998, between Elsinore and
entities controlled by Paulson, namely R&E Gaming Corp. ("R&E") and Elsinore
Acquisition Sub, Inc. ("EAS"), to acquire by merger (the "Merger") the
outstanding Common Stock for $3.16 per share in cash plus an amount of
additional consideration in cash equal to the daily portion of the accrual on
$3.16 at 9.43% compounded annually, from June 1, 1998 to the date immediately
preceding the date such acquisition is consummated. The Merger Agreement
provided for EAS to merge into Elsinore, and Elsinore to become a wholly owned
subsidiary of R&E.
Contemporaneously with the Merger Agreement, R&E executed an Option and Voting
Agreement (the "Option Agreement") with MWV, on behalf of the MWV Accounts which
owned 94.3% of the outstanding Common Stock prior to the Recapitalization. Under
certain conditions and circumstances, the Option Agreement provided for, among
other things, (i) the grant by the MWV Accounts to R&E of an option to purchase
all of their Common Stock; (ii) an obligation by R&E to purchase all of the MWV
Accounts' Common Stock, and (iii) the MWV Accounts to vote their Common Stock in
favor of the Merger Agreement. Elsinore's shareholders approved the Merger
Agreement at a special meeting of shareholders held on February 4, 1999.
Paulson also entered into discussions with Riviera to acquire a controlling
interest in that company as well. Riviera owns and operates the Riviera Hotel
and Casino in Las Vegas and is the parent corporation of RGME. On September 16,
1998, R&E and Riviera Acquisition Sub, Inc. ("RAS") (another entity controlled
by Paulson) entered into an Agreement and Plan of Merger (the "Riviera Merger
Agreement") with Riviera, which provided for the merger of RAS into Riviera (the
"Riviera Merger"), and for Riviera to become a wholly owned subsidiary of R&E.
R&E also entered into an Option and Voting Agreement with certain Riviera
shareholders, including MWV acting on behalf of the MWV Accounts, containing
terms similar to those described above with respect to the Option Agreement.
The Merger Agreement contained conditions precedent to consummation of the
Merger, including (i) the Option Agreement being in full force and effect and
MWV having complied in all respects with the terms thereof, (ii) all necessary
approvals from gaming authorities and (iii) consummation of the Riviera Merger.
On March 20, 1998, Elsinore was notified by R&E, through Paulson, that it was
R&E's position that the Merger Agreement was void and unenforceable against R&E
and EAS, or alternatively, R&E and EAS intended to terminate the Merger
Agreement. R&E alleged, among other things, violations by Elsinore of the Merger
Agreement, violations of law and misrepresentations by MWV in connection with
the Option and Voting Agreement and the non-satisfaction of certain conditions
precedent to completing the merger. The Company denied the allegations and asked
that R&E complete the merger. Thereafter, in April 1998, Paulson, R&E, EAS and
certain other entities filed a lawsuit against eleven defendants, including
Elsinore and MWV (Paulson, et al. v Jeffries & Company et al.) (the "Paulson
lawsuit"). On January 25, 2000, the Court granted Plaintiffs' motion for leave
to file a Fourth Amended Complaint. Plaintiffs' allegations in the Fourth
Amended Complaint against the Company include breach of the Merger Agreement by
Elsinore, as well as fraud and various violations of the federal securities laws
in connection with the proposed merger. Plaintiffs are seeking (i) unspecified
actual damages in excess of $20 million, (ii) $20 million in exemplary damages,
and (iii) rescission of the Merger Agreement and other relief. The lawsuit was
filed in the United States District Court for the Central District of
California.
On March 1, 2000, the Company filed its Answer to the Fourth Amended Complaint,
denying the material allegations thereof. In addition, the Company alleged
various counterclaims against Plaintiffs for breach of the Merger Agreement,
fraud and violations of the federal securities laws. On May 5, 2000, the Company
filed its First Amended Counterclaims. The counterclaims seek specific
performance of the Merger Agreement, compensatory damages, punitive damages and
other relief. On June 6, 2000, Plaintiffs filed their Answer to the First
Amended Counterclaims.
Discovery is only now beginning, and the Company is currently unable to form an
opinion as to the amount of its exposure, if any. Mr. Paulson has recently
passed away, and the effect on the lawsuit, if any, of his death is uncertain.
Although the Company intends to defend the lawsuit vigorously, there can be no
assurance that it will be successful in such defense or that future operating
results will not be materially adversely affected by the final resolution of the
lawsuit.
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operation
This discussion and analysis should be read in conjunction with the Condensed
Consolidated Financial Statements and notes thereto set forth elsewhere herein.
The following tables set forth certain operating information for the Company for
the three months ended June 30, 2000 and 1999 and the six months ended June 30,
2000 and 1999. Revenues and promotional allowances are shown as a percentage of
net revenues. Departmental costs are shown as a percentage of departmental
revenues. All other percentages are based on net revenues.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 2000 June 30, 1999
(unaudited) (unaudited)
----------- -----------
(Dollars in (Dollars in
thousands) % thousands) %
----------- --------- ----------- ---------
---------------
Revenues, net:
<S> <C> <C> <C> <C>
Casino $9,180 63.2% $10,139 68.7%
Hotel 2,479 17.1% 2,118 14.4%
Food & beverage 2,562 17.6% 2,356 16.0%
Other 1,454 10.0% 1,052 7.1%
----------- --------- ----------- ---------
Total revenue 15,675 107.9% 15,665 106.1%
Promotional allowances (1,145) (7.9%) (906) (6.1%)
----------- --------- ----------- ---------
Net revenues 14,530 100.0% 14,759 100.0%
----------- --------- ----------- ---------
Costs and expenses:
Casino 3,188 34.7% 3,634 35.8%
Hotel 2,247 90.6% 2,231 105.3%
Food and beverage 1,676 65.4% 1,543 65.5%
Taxes and licenses 1,469 10.1% 1,508 10.2%
Selling, general and
administrative 2,853 19.6% 2,671 18.1%
Rents 1,040 7.2% 1,003 6.8%
Depreciation and
amortization 962 6.6% 793 5.4%
Interest 449 3.1% 498 3.4%
Merger and litigation costs 8 .1% 296 2.0%
----------- --------- ----------- ---------
Total costs and expenses 13,892 95.6% 14,177 96.1%
----------- --------- ----------- ---------
Net income before income
taxes and undeclared
dividends on cumulative 638 4.4% 582 3.9%
convertible Preferred Stock
Provision for income taxes - - 20 .1%
----------- --------- ----------- ---------
Net income before
undeclared dividends on
cumulative convertible
Preferred Stock 638 4.4% 562 3.8%
Undeclared dividends on
cumulative convertible
Preferred Stock 288 2.0% 270 1.8%
Net income applicable ----------- --------- ----------- ---------
to common shares 350 2.4% 292 2.0%
----------- --------- ----------- ---------
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 2000 June 30, 1999
(unaudited) (unaudited)
----------- -----------
(Dollars in (Dollars in
thousands) % thousands) %
----------- --------- ----------- ---------
Other Data:
Net income applicable
<S> <C> <C> <C> <C>
to common shares 350 2.4% 292 5.9%
Interest 449 3.1% 498 3.4%
Income taxes - - 20 .1%
Depreciation and amortization 962 6.6% 793 5.4%
Rents 1,040 7.2% 1,003 6.8%
Merger and litigation costs 8 .1% 296 2.0%
Undeclared dividends 288 2.0% 270 1.8%
----------- --------- ----------- ---------
Earnings before interest,
taxes, depreciation and
amortization, rents, merger
and litigation costs, and
undeclared dividends (EBITDA) $3,097 21.3% $3,172 21.5%
=========== ========= =========== =========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 2000 June 30, 1999
(unaudited) (unaudited)
----------- -----------
(Dollars in (Dollars in
thousands) % thousands) %
----------- --------- ----------- --------- %
---------------
Revenues, net:
<S> <C> <C> <C> <C>
Casino $19,320 63.8% $20,718 69.2%
Hotel 5,050 16.7% 4,518 15.1%
Food & beverage 5,345 17.6% 4,943 16.5%
Other 2,975 9.8% 1,801 6.0%
----------- --------- ----------- ---------
Total revenue 32,690 107.9% 31,980 106.8%
Promotional allowances (2,388) (7.9%) (2,036) (6.8%)
----------- --------- ----------- ---------
Net revenues 30,302 100.0% 29,944 100.0%
----------- --------- ----------- ---------
Costs and expenses:
Casino 6,469 33.5% 6,996 33.8%
Hotel 4,413 87.4% 4,350 96.3%
Food and beverage 3,473 65.0% 3,385 68.5%
Taxes and licenses 2,993 9.9% 3,097 10.3%
Selling, general and
5,787 19.1% 5,352 17.9%
administrative
Rents 2,077 6.9% 1,976 6.6%
Depreciation and
amortization 1,900 6.3% 1,614 5.4%
Interest 851 2.8% 1,004 3.4%
Merger and litigation costs (13) 0% 393 1.3%
----------- --------- ----------- ---------
Total costs and expenses 27,950 92.2% 28,167 94.1%
----------- --------- ----------- ---------
Net income before income
taxes and undeclared
dividends on cumulative 2,352 7.8% 1,777 5.9%
convertible Preferred Stock
Provision for income taxes - - 40 .1%
----------- --------- ----------- ---------
Net income before
undeclared dividends on
cumulative convertible
Preferred Stock 2,352 7.8% 1,737 5.8%
Undeclared dividends on
cumulative convertible
Preferred Stock 573 1.9% 540 1.8%
Net income applicable ----------- --------- ----------- ---------
to common shares 1,779 5.9% 1,197 4.0%
----------- --------- ----------- ---------
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 2000 June 30, 1999
(unaudited) (unaudited)
----------- -----------
(Dollars in (Dollars in
thousands) % thousands) %
----------- --------- ----------- --------- %
Other Data:
Net income applicable
<S> <C> <C> <C> <C>
to common shares 1,779 5.9% 1,197 4.0%
Interest 851 2.8% 1,004 3.4%
Income taxes - - 40 .1%
Depreciation and amortization 1,900 6.3% 1,614 5.4%
Rents 2,077 6.9% 1,976 6.6%
Merger and litigation costs (13) 0% 393 1.3%
Undeclared dividends 573 1.9% 540 1.8%
----------- --------- ----------- ---------
Earnings before interest,
taxes, depreciation and
amortization, rents, merger
and litigation costs, and
undeclared dividends (EBITDA) $7,167 23.7% $6,764 22.6%
=========== ========= =========== =========
Cash flows provided by
operating activities 2,676 $2,570
=========== ===========
Cash flows used in investing
activities ($792) ($750)
=========== ===========
Cash flows used in financing
activities ($1,285) ($975)
=========== ===========
</TABLE>
EBITDA consists of earnings before interest, taxes, depreciation and
amortization, rents, merger and litigation costs, and undeclared dividends.
While EBITDA should not be construed as a substitute for operating income or a
better indicator of liquidity than cash flow 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. EBITDA margin is
EBITDA as a percent of net revenues. The Company's definition of EBITDA may not
be comparable to other companies' definitions.
THREE MONTHS ENDED JUNE 30, 2000 COMPARED
TO THREE MONTHS ENDED JUNE 30, 1999
REVENUES
Net revenues decreased by approximately $229,000, or 1.6%, from $14,759,000
during the 1999 period, to $14,530,000 for the 2000 period. This decrease was
primarily due to a decline of casino revenues, as discussed below, partially
offset by payments received under a settlement agreement with the Twenty-Nine
Palms Band of Mission Indians (the "Band").
Casino revenues decreased by approximately $959,000, or 9.5%, from $10,139,000
during the 1999 period to $9,180,000 during the 2000 period. This decrease was
primarily due to a $729,000, or 100%, decrease in slot promotion revenue, a
$260,000, or 3.3%, decrease in slot machine revenue, and a $18,000, or 11.6%,
decrease in keno revenue, partially offset by a $47,000, or 3.2%, increase in
table games revenue. The decrease in slot promotion revenue was due to the
termination of a license agreement on December 1, 1999, regarding a promotional
program known as $40 of Slot Play for $20SM ("$40 for $20"). The decrease in
slot machine revenue is attributable to a decrease in hold percentage of 0.2%
partially offset by an increase in slot coin-in of $590,000 or 0.5%. The
increase in table games revenue is attributable to an increase in drop of
$2,801,000, or 26.3%, offset by a decrease in the win percentage of 2.5%.
Hotel revenues increased by approximately $361,000, or 17.0%, from $2,118,000
during the 1999 period to $2,479,000 during the 2000 period. This increase was
primarily due to an increase in the average daily room rate of $7.71, from
$30.47 in the 1999 period to $38.18 in the 2000 period, while room occupancy, as
a percentage of total rooms available for sale, decreased from 97.5%, for the
1999 period, to 93.6%, for the 2000 period. Cash room revenue increased
$288,000, or 17.4%, from the 1999 period.
Food and beverage revenues increased approximately $206,000, or 8.7%, from
$2,356,000 during the 1999 period to $2,562,000 during the 2000 period. This
increase was primarily due to an increase in complimentary beverages given to
patrons during their play in the casino. In addition, cash beverage revenue
increased as a result of a higher average check.
Other revenues increased by approximately $402,000, or 38.2%, from $1,052,000
during the 1999 period to $1,454,000 during the 2000 period. This increase was
primarily due to payments received under a settlement agreement with the Band.
Promotional allowances increased by approximately $239,000, or 26.4%, from
$906,000 during the 1999 period to $1,145,000 during the 2000 period due to an
increase in complimentary rooms, food, and beverage resulting from an increase
in casino complimentaries due, in part, to increased play in the casino.
DIRECT COSTS AND EXPENSES OF OPERATING DEPARTMENTS
Total direct costs and expenses of operating departments, including taxes and
licenses, decreased by approximately $336,000, or 3.8%, from $8,916,000 for the
1999 period to $8,580,000 for the 2000 period primarily due to the termination
of the $40 for $20 slot promotion on December 1, 1999.
Casino expenses decreased $446,000, or 12.3%, from $3,634,000 during the 1999
period to $3,188,000 during the 2000 period, and expenses as a percentage of
revenue decreased from 35.8% to 34.7%, due primarily to the termination of the
slot promotion, as discussed above.
Hotel expenses increased by approximately $16,000, or 0.7% from $2,231,000
during the 1999 period to $2,247,000 during the 2000 period, and expenses as a
percentage of revenues decreased from 105.3% to 90.6%, primarily due to the
allocation of hotel costs, associated with complimentary room sales, to the
casino department.
Food and beverage costs and expenses increased by approximately $133,000, or
8.6%, from $1,543,000 during the 1999 period to $1,676,000 during the 2000
period, and expenses as a percentage of revenues decreased from 65.5% to 65.4%,
primarily due to the allocation of food and beverage costs, associated with
complimentary food and beverage sales, to the casino department.
Taxes and licenses decreased $39,000, or 2.6%, from $1,508,000 in the 1999
period to $1,469,000 in the 2000 as a result of corresponding decreases in
casino revenues.
OTHER OPERATING EXPENSES
Selling, general and administrative expenses increased $182,000, from $2,671,000
during the 1999 period to $2,853,000 during the 2000 period, and as a percentage
of total net revenues, expenses increased from 18.1% to 19.6% primarily due to
the implementation of a new marketing promotion in February 2000.
The Company believes that city-wide competition for experienced employees may
increase employee turnover and lead to increased payroll costs.
EBITDA
Earnings before interest, taxes, depreciation and amortization, rents, merger
and litigation costs, and undeclared dividends ("EBITDA") decreased by
approximately $75,000, or 2.4%, from $3,172,000 during the 1999 period to
$3,097,000 during the 2000 period. The decrease was due primarily to a decrease
in revenues as discussed above.
While EBITDA should not be construed as a substitute for operating income or a
better indicator of liquidity than cash flow from operating activities, which
are determined in accordance with 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. EBITDA
margin is EBITDA as a percent of net revenues. The Company's definition of
EBITDA may not be comparable to other companies' definitions.
OTHER EXPENSES
Rent expense increased by approximately $37,000, or 3.7%, from $1,003,000 during
the 1999 period to $1,040,000 during the 2000 period, due primarily to
corresponding annual Consumer Price Index ("CPI") increases for land lease
agreements.
Depreciation and amortization increased by approximately $169,000, or 21.3% from
$793,000 during the 1999 period to $962,000 during the 2000 period, primarily
due to the acquisition of new slot and other equipment, and the completion of a
room remodel project.
Interest expense decreased by approximately $49,000, or 9.8% from $498,000
during the 1999 period to $449,000 for the 2000 period, due to the payoff of
certain bankruptcy notes that resulted from the February 28, 1997 Plan of
Reorganization.
During 2000, the Company incurred approximately $53,000 in merger and litigation
costs related to the Merger Agreement. This cost was partially offset by a
reimbursement from the Company's directors' and officers' insurance carrier in
the amount of $45,000.
NET INCOME BEFORE PROVISION FOR INCOME TAXES AND UNDECLARED DIVIDENDS ON
CUMULATIVE CONVERTIBLE PREFERRED STOCK
As a result of the factors discussed above, the Company experienced net income
in the 2000 period of $638,000 compared to a net income of $582,000 in the 1999
period, an improvement of $56,000 or 9.6%.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED
TO SIX MONTHS ENDED JUNE 30, 1999
REVENUES
Net revenues increased by approximately $358,000, or 1.2%, from $29,944,000
during the 1999 period, to $30,302,000 for the 2000 period. This increase was
primarily due to payments received under a settlement agreement with the Band,
offset primarily by a decrease in casino revenues as discussed below.
Casino revenues decreased by approximately $1,398,000, or 6.7%, from $20,718,000
during the 1999 period to $19,320,000 during the 2000 period. This decrease was
primarily due to a $1,441,000, or 100%, decrease in slot promotion revenue, a
$60,000, or 0.4%, decrease in slot machine revenue, and a $50,000, or 14.3%,
decrease in keno revenue, partially offset by a $152,000, or 4.5%, increase in
table games revenue. Slot promotion revenue decreased due to the termination of
a license agreement on December 1, 1999, for the $40 for $20 slot promotion. The
decrease in slot machine revenue is attributable to a decrease in hold
percentage of 0.3% partially offset by an increase in slot coin-in of $378,000
or 0.1%. The increase in table games revenue is attributable to an increase in
drop of $6,169,000, or 26.1%, offset by a decrease in the win percentage of
2.5%.
Hotel revenues increased by approximately $532,000, or 11.8%, from $4,518,000
during the 1999 period to $5,050,000 during the 2000 period. This increase was
primarily due to an increase in the average daily room rate of $6.16, from
$33.35 in the 1999 period to $39.51 in the 2000 period, while room occupancy, as
a percentage of total rooms available for sale, decreased from 96.8%, for the
1999 period, to 92.6%, for the 2000 period. Cash room revenue increased
$497,000, or 14.3%, from the 1999 period.
Food and beverage revenues increased approximately $402,000, or 8.1%, from
$4,943,000 during the 1999 period to $5,345,000 during the 2000 period. This
increase was primarily due to an increase in complimentary beverages given to
patrons during their play in the casino. In addition, cash beverage revenue
increased as a result of a higher average check.
Other revenues increased by approximately $1,174,000, or 65.2%, from $1,801,000
during the 1999 period to $2,975,000 during the 2000 period. This increase was
primarily due to payments received under a settlement agreement with the Band.
Promotional allowances increased by approximately $352,000, or 17.3%, from
$2,036,000 during the 1999 period to $2,388,000 during the 2000 period due to an
increase in complimentary rooms, food, and beverage resulting from an increase
in casino complimentaries due, in part, to increased play in the casino.
DIRECT COSTS AND EXPENSES OF OPERATING DEPARTMENTS
Total direct costs and expenses of operating departments, including taxes and
licenses, decreased by approximately $480,000, or 2.7%, from $17,828,000 for the
1999 period to $17,348,000 for the 2000 period primarily due to the termination
of the $40 for $20 slot promotion on December 1, 1999.
Casino expenses decreased $527,000, or 7.5%, from $6,996,000 during the 1999
period to $6,469,000 during the 2000 period, and expenses as a percentage of
revenue increased from 32.2% to 32.4%, due primarily to the termination of the
slot promotion as discussed above.
Hotel expenses increased by approximately $63,000, or 1.4% from $4,350,000
during the 1999 period to $4,413,000 during the 2000 period, and expenses as a
percentage of revenues decreased from 96.3% to 87.4%, primarily due to the
allocation of hotel costs, associated with complimentary room sales, to the
casino department.
Food and beverage costs and expenses increased by approximately $88,000, or
2.6%, from $3,385,000 during the 1999 period to $3,473,000 during the 2000
period, and expenses as a percentage of revenues decreased from 68.5% to 65.0%,
primarily due to the allocation of food and beverage costs, associated with
complimentary food and beverage sales, to the casino department.
Taxes and licenses decreased $104,000, or 3.4%, from $3,097,000 in the 1999
period to $2,993,000 in the 2000 as a result of corresponding decreases in
casino revenues.
OTHER OPERATING EXPENSES
Selling, general and administrative expenses increased $435,000, or 8.1%, from
$5,352,000 during the 1999 period to $5,787,000 during the 2000 period, and as a
percentage of total net revenues, expenses increased from 17.9% to 19.1% due
primarily to the implementation of a slot promotion in February 2000.
The Company believes that city-wide competition for experienced employees may
increase employee turnover and lead to increased payroll costs.
EBITDA
EBITDA, as defined, increased by approximately $403,000, or 6.0%, from
$6,764,000 during the 1999 period to $7,167,000 during the 2000 period. The
increase was due primarily to an increase in revenues as discussed above.
OTHER EXPENSES
Rent expense increased by approximately $101,000, or 5.1%, from $1,976,000
during the 1999 period to $2,077,000 during the 2000 period, due primarily to
corresponding annual CPI increases for land lease agreements.
Depreciation and amortization increased by approximately $286,000, or 17.7% from
$1,614,000 during the 1999 period to $1,900,000 during the 2000 period,
primarily due to the acquisition of new slot and other equipment, and the
completion of a room remodel project.
Interest expense decreased by approximately $153,000, or 15.2% from $1,004,000
during the 1999 period to $851,000 for the 2000 period, due primarily to the
payoff of certain bankruptcy notes that resulted from the February 28, 1997 Plan
of Reorganization.
During 2000, the Company incurred approximately $215,000 in merger and
litigation costs related to the Merger Agreement. This cost was partially offset
by a reimbursement from the Company's directors' and officers' insurance carrier
in the amount of $228,000.
NET INCOME BEFORE PROVISION FOR INCOME TAXES AND UNDECLARED DIVIDENDS ON
CUMULATIVE CONVERTIBLE PREFERRED STOCK
As a result of the factors discussed above, the Company experienced net income
in the 2000 period of $2,352,000 compared to a net income of $1,777,000 in the
1999 period, an improvement of $575,000 or 32.4%.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of approximately $4.1 million at June
30, 2000, as compared to approximately $3.5 million at December 31, 1999.
For the first six months of 2000, the Company's net cash provided by operating
activities was $2,676,000 compared to $2,570,000 in 1999. EBITDA, for the first
six months of 2000 and 1999, was $7.2 million and $6.8 million, respectively.
While EBITDA should not be construed as a substitute for operating income or a
better indicator of liquidity than cash flow from operating activities, which
are determined in accordance with 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. EBITDA
margin is EBITDA as a percent of net revenues. The Company's definition of
EBITDA may not be comparable to other companies' definitions.
Significant debt service on the Company's 12.83% Mortgage Notes ("Notes") is
paid in August and February, during each fiscal year, which significantly
affects the Company's cash and cash equivalents in the second and fourth
quarters and should be considered in evaluating cash increases or decreases in
the second and fourth quarters. Scheduled interest payments on the Notes and
other indebtedness is $2.0 million in 2000, declining to $1.9 million in 2001.
Management believes that sufficient cash flow will be available to cover the
Company's debt service for the next twelve months and enable investment in
forecasted capital expenditures of approximately $2.1 million for 2000. The
Company's ability to service its debt is dependent on future performance, which
will be affected by, among other things, prevailing economic conditions and
financial, business and other factors, certain of which are beyond the Company's
control.
The Notes are due in full on August 20, 2001. The Notes are redeemable by the
Company at any time at 100% of par, without premium.
The Company is required to make an offer to purchase all Notes at 101% of face
value upon any "Change of Control" as defined in the indenture governing the
Notes. The indenture also provides for mandatory redemption of the Notes by the
Company upon order of the Nevada Gaming Authorities. The Notes are guaranteed by
Elsub Management Corporation, Four Queens, Inc. and Palm Springs East Limited
Partnership and are collateralized by a second deed of trust on, and a pledge
of, substantially all the assets of the Company and the guarantors.
Cash flow from operations is not expected to be sufficient to pay the $11
million of principal of the Notes at maturity on August 20, 2001, in the event
of a Change of Control, or upon a mandatory redemption. Accordingly, the ability
of the Company to repay the Notes at maturity, upon a Change of Control, or upon
a mandatory redemption, 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 on favorable terms or at all.
The Note Agreement executed in connection with the issuance of the Notes, among
other things, places significant restrictions on the incurrence of additional
indebtedness by the Company, the creation of additional liens on the collateral
securing the Notes, transactions with affiliates and payment of certain
restricted payments. In order for the Company to incur additional indebtedness
or make a restricted payment, the Company must, among other things, meet a
specified consolidated fixed charges coverage ratio and have earned $1.0 million
in EBITDA. The Company must also maintain a minimum amount of consolidated net
worth not less than an amount equal to its consolidated net worth on the
Effective Date of the Plan, less $5 million. Pursuant to covenants applicable to
the Company's 12.83% New Second Mortgage Notes and Second Supplemental Indenture
dated September 29, 1998, the Company is required to maintain a minimum
consolidated fixed charges coverage ratio (the "Ratio") of 1.25 to 1.00. The
Ratio is defined as the ratio of aggregate consolidated EBITDA to the aggregate
consolidated fixed charges for the twelve-month reference period. As of the
reference period ended June 30, 2000 the Ratio was 3.75 to 1.00 and the Company
was in compliance.
Management considers it important to the competitive position of the Four Queens
Casino that expenditures be made to upgrade the property. Uses of cash included
capital expenditures of $792,000 and $750,000 in the first half of 2000 and
1999, respectively. Management has forecasted capital expenditures to be $2.1
million for the year 2000. The Company expects to finance such capital
expenditures from cash on hand, cash flow, and slot lease financing. Based upon
current operating results and cash on hand, the Company estimates it has
sufficient operating capital to fund its operations and capital expenditures for
the next twelve months.
RGME managed the Four Queens Casino in accordance with the Management
Arrangement among the Company, Four Queens, Inc. and RGME effective April 1,
1997. RGME received an annual fee of $1 million in equal monthly installments.
The Management Arrangement terminated on December 31, 1999.
RECENTLY ISSUED ACCOUNTING STANDARDS
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB
101 clarifies existing accounting principles related to revenue recognition in
financial statements. The Company is required to comply with the provisions of
SAB 101 by the fourth quarter of 2000. Due to the nature of the Company's
operations, Management does not believe that SAB 101 will have a significant
impact on the Company's financial statements.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for certain forward-looking statements. Certain information included in this
Form 10-Q and other materials filed with the Securities and Exchange Commission
(as well as information included in oral statements or other written statements
made or to be made by the Company) contains statements that are forward looking,
such as statements relating to business strategies, plans for future development
and upgrading, capital spending, financing and restructuring sources, existing
and expected competition and the effects of regulations. Such forward-looking
statements involve important known and unknown risks and uncertainties that
could cause actual results and liquidity to differ materially from those
expressed or anticipated in any forward-looking statements. Such risks and
uncertainties include, but are not limited to, those related to effects of
competition, leverage and debt service, financing and refinancing needs or
efforts, general economic conditions, changes in gaming laws or regulations
(including the legalization of gaming in various jurisdictions), risks related
to development and upgrading activities, uncertainty of casino customer spending
and vacationing in hotel/casinos in Las Vegas, occupancy rates and average room
rates in Las Vegas, the popularity of Las Vegas as a convention and trade show
destination, and other factors described from time to time in the Company's
reports filed with the Securities and Exchange Commission, including the
Company's Report on Form 10-K for the year ended December 31, 1999. Accordingly,
actual results may differ materially from those expressed in any forward-looking
statement made by or on behalf of the Company. Any forward-looking statements
are made pursuant to the Private Securities Litigation Reform Act of 1995, and,
as such, speak only as of the date made. The Company undertakes no obligation to
revise publicly these forward-looking statements to reflect subsequent events or
circumstances.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company's financial instruments include cash and long-term debt. At June 30,
2000 the carrying values of the Company's financial instruments approximated
their fair values based on current market prices and rates. It is the Company's
policy not to enter into derivative financial instruments. The Company does not
currently have any significant foreign currency exposure since it does not
transact business in foreign currencies. Due to this, the Company believes it
does not have significant overall currency exposure at June 30, 2000.
Elsinore Corporation and Subsidiaries
Other Information
PART II. OTHER INFORMATION
Item 1. Legal Proceedings:
On March 1, 2000, the Company filed its Answer to the Fourth Amended Complaint
to the Paulson lawsuit, denying the material allegations thereof. In addition,
the Company alleged various counterclaims against Plaintiffs for breach of the
Merger Agreement, fraud and violations of the federal securities laws. On May 5,
2000, the Company filed its First Amended Counterclaims. The counterclaims seek
specific performance of the Merger Agreement, compensatory damages, punitive
damages and other relief. On June 6, 2000, Plaintiffs filed their Answer to the
First Amended Counterclaims.
Item 6. Exhibits and Reports
(a) Exhibits
27.1 Financial Data Schedule
(b) Form 8-K filed during this quarter
(1) Current report on Form 8-K was filed on April 24, 2000,
relating to the termination of the Company's non-binding
letter of intent with PDS Financial Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto authorized.
ELSINORE CORPORATION
(Registrant)
By: /s/ Jeffrey T. Leeds
JEFFREY T. LEEDS, President
and Chief Executive Officer
By: /s/ S. Barton Jacka
S. BARTON JACKA, Secretary
and Treasurer and Principal
Financial and Accounting Officer
Dated: August 11, 2000
INDEX TO EXHIBITS
27.1 Financial Data Schedule
