<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31,1995 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 0-14050
--------------------------------------------------------
THE SANDS REGENT
- -------------------------------------------------------------------------------
(exact name of registrant as specified in charter)
Nevada 88-0201135
- --------------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
345 North Arlington Avenue, Reno, Nevada 89501
- --------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (702) 348-2200
-----------------------------
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
--- ---
On May 12, 1995, the registrant had outstanding 4,498,722 shares of its
common stock, $.05 par value.
<PAGE> 2
THE SANDS REGENT AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements. 1 - 7
Consolidated Statements of Income 1
Consolidated Balance Sheets 2 - 3
Consolidated Statements of Cash Flows 4 - 5
Notes to Interim Consolidated Financial
Statements 6 - 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 8 - 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings. 13
Item 2. Changes in Securities. 13
Item 3. Defaults Upon Senior Securities. 13
Item 4. Submission of Matters to a Vote of
Security Holders. 13
Item 5. Other Information. 13
Item 6. Exhibits and Reports on Form 8-K. 13
SIGNATURES 14
</TABLE>
<PAGE> 3
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
THE SANDS REGENT AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(Dollars in thousands, THREE MONTHS NINE MONTHS
except per share amounts) ENDED MARCH 31, ENDED MARCH 31,
------------------------------ ------------------------------
1994 1995 1994 1995
Operating revenues: ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Gaming $ 8,101 $10,785 $20,525 $31,739
Lodging 1,970 1,907 7,630 6,979
Food and beverage 1,774 1,913 5,164 6,075
Other 761 419 3,075 1,413
--------- --------- --------- ---------
12,606 15,024 36,394 46,206
Less complimentary lodging, food
and beverage included above 636 640 1,366 1,906
--------- --------- --------- ---------
11,970 14,384 35,028 44,300
--------- --------- --------- ---------
Operating costs and expenses:
Gaming 3,960 5,391 9,349 16,375
Lodging 1,106 1,226 3,467 3,854
Food and beverage 1,416 1,576 4,354 4,990
Other 660 162 2,646 771
Maintenance and utilities 753 1,024 1,994 3,196
General and administrative 1,964 3,000 4,780 8,891
Depreciation and amortization 787 1,117 2,049 3,293
--------- --------- --------- ---------
10,646 13,496 28,639 41,370
--------- --------- --------- ---------
Income from operations 1,324 888 6,389 2,930
--------- --------- --------- ---------
Other income (deductions):
Interest and other income 158 136 503 408
Interest and other expense (327) (642) (744) (1,947)
Equity in income (loss) of
unconsolidated affiliate 64 -- (1,078) --
--------- --------- --------- ---------
(105) (506) (1,319) (1,539)
--------- --------- --------- ---------
Income before income taxes 1,219 382 5,070 1,391
Provision for income taxes 400 59 1,629 527
--------- --------- --------- ---------
Net income $ 819 $ 323 $ 3,441 $ 864
========= ========= ========= =========
Net income per share $ .19 $ .07 $ .79 $ .19
========= ========= ========= =========
Weighted average shares
outstanding 4,404,989 4,498,722 4,362,678 4,497,244
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-1-
<PAGE> 4
THE SANDS REGENT AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands) JUNE 30, MARCH 31,
1994 1995
--------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,669 $ 9,191
Short-term investments 135 1,355
Accounts and notes receivable less allow-
ance for possible losses of $111 and $122 330 603
Inventories 1,116 701
Prepaid federal income taxes 179 201
Prepaid expenses and other assets 1,136 1,071
------- -------
Total current assets 12,565 13,122
PROPERTY AND EQUIPMENT:
Land 8,101 8,101
Buildings, ship and improvements 53,639 53,853
Equipment, furniture and fixtures 21,794 22,085
Construction in progress 236 760
------- -------
83,770 84,799
Less accumulated depreciation 22,963 25,518
------- -------
60,807 59,281
OTHER ASSETS:
Goodwill, net of accumulated
amortization of $122 and $396 7,195 6,921
Note receivable 1,258 1,252
Other 443 414
------- -------
8,896 8,587
------- -------
Total assets $82,268 $80,990
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-2-
<PAGE> 5
THE SANDS REGENT AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands) JUNE 30, MARCH 31,
1994 1995
-------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,475 $ 2,104
Accrued salaries, wages and benefits 1,668 1,870
Other accrued expenses 712 1,248
Deferred federal income tax liability 168 27
Current maturities of long-term debt 1,722 4,301
------- -------
Total current liabilities 7,745 9,550
LONG-TERM DEBT 27,559 25,132
DEFERRED FEDERAL INCOME TAX LIABILITY 2,732 1,876
OTHER 94 66
STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par value, 5,000,000
shares authorized, none issued -- --
Common stock, $.05 par value, 20,000,000
shares authorized, 6,892,722 and
6,898,722 shares issued 345 345
Additional paid-in capital 13,036 13,074
Retained earnings 53,112 53,302
------- -------
66,493 66,721
Treasury stock, at cost, 2,400,000 shares (22,355) (22,355)
------- -------
Total stockholders' equity 44,138 44,366
------- -------
Total liabilities and stockholders'
equity $82,268 $80,990
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-3-
<PAGE> 6
THE SANDS REGENT AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Dollars in thousands) NINE MONTHS ENDED
MARCH 31,
----------------------------
1994 1995
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,441 $ 864
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,049 3,293
Loss on sale of property and equipment 50 5
Noncash interest income from
unconsolidated affiliate (285) --
Equity in loss of unconsolidated
affiliate 1,078 --
Change in assets and liabilities net
of effects from acquisition:
(Increase) in accounts and notes
receivable (9) (273)
(Increase) decrease in inventories (176) 415
Decrease in prepaid expenses and
other current assets 125 65
Decrease in other assets 19 21
(Decrease) in accounts payable (249) (516)
Increase (decrease) in accrued
expenses (295) 738
(Decrease) in federal income taxes
payable (1,071) (22)
Increase (decrease) in deferred
federal income taxes 225 (997)
(Decrease) in other liabilities -- (28)
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,902 3,565
------ ------
INVESTING ACTIVITIES:
Purchase of short-term investments (10) (1,220)
Sale and maturity of short-term
investments 304 --
Payments received on note receivable -- 6
Additions to property and equipment (1,025) (1,507)
Proceeds from sale of property and
equipment 344 17
Investment in and advances to
unconsolidated affiliate (4,761) --
Payments to acquire company, net
of cash acquired (1,699) --
------ ------
NET CASH USED IN INVESTING ACTIVITIES (6,847) (2,704)
------ ------
(continued)
</TABLE>
-4-
<PAGE> 7
THE SANDS REGENT AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
<TABLE>
<CAPTION>
(Dollars in thousands) NINE MONTHS ENDED
MARCH 31,
-------------------------
1994 1995
------ ------
<S> <C> <C>
FINANCING ACTIVITIES:
Payment of accounts payable for prior
period purchases of property and
equipment $ (893) $ (736)
Issuance of long-term debt 5,500 225
Payments on long-term debt (380) (192)
Issuance of common stock 100 38
Payment of dividends on common stock (652) (674)
------ ------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 3,675 (1,339)
------ ------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,730 (478)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 2,970 9,669
------ ------
CASH AND CASH EQUIVALENTS, END OF PERIOD $4,700 $9,191
====== ======
SUPPLEMENTAL CASH FLOW INFORMATION:
Note receivable acquired upon sale
of property and equipment $1,261 --
====== ======
Property and equipment acquired by
accounts payable $1,236 --
====== ======
Property and equipment acquired by
long-term debt $105 --
====== ======
Accounts payable converted to long-
term debt -- $119
====== ======
Other liabilities included in investment
in and advances to unconsolidated
affiliate $57 --
====== ======
Issuance of common stock to acquire
company $1,763 --
====== ======
Interest paid, net of amount capitalized $ 638 $1,651
====== ======
Federal income taxes paid $2,475 $1,550
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-5-
<PAGE> 8
THE SANDS REGENT AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 1995 AND 1994
NOTE 1 - BASIS OF PREPARATION
- -----------------------------
These statements should be read in connection with the 1994 Annual
Report heretofore filed with the Securities and Exchange Commission as
Exhibit 13 to the Registrant's Form 10-K for the year ended June 30, 1994.
The accounting policies utilized in the preparation of the financial
information herein are the same as set forth in such annual report except as
modified for interim accounting policies which are within the guidelines set
forth in Accounting Principles Board Opinion No. 28.
The Consolidated Balance Sheet at June 30, 1994 has been taken from
the audited financial statements at that date. The interim consolidated
financial information is unaudited. In the opinion of management, all
adjustments, consisting only of normal recurring accruals, necessary to
present fairly the financial condition as of March 31, 1995 and the results
of operations and cash flows for the three and nine months ended March 31,
1995 and 1994 have been included. Interim results of operations are not
necessarily indicative of the results of operations for the full year.
The accompanying Consolidated Financial Statements include the
accounts of the Company and its wholly owned subsidiaries Zante, Inc.,
Patrician, Inc. and Gulfside Casino, Inc. and Gulfside Casino Partnership
(together the "Company"). Patrician, Inc. and Gulfside Casino, Inc. are the
sole partners in Gulfside Casino Partnership. Prior to the acquisition of
Gulfside Casino, Inc. in February 1994, the Company accounted for its
investment in Gulfside Casino Partnership under the equity method of
accounting. Zante, Inc. owns and operates the Sands Regency hotel/casino in
Reno, Nevada and Gulfside Casino Partnership owns and operates the Copa
Casino in Gulfport, Mississippi.
NOTE 2 - RECLASSIFICATIONS
- --------------------------
Certain reclassifications have been made to the March 31, 1994 interim
consolidated financial statements to conform to the March 31, 1995
presentation.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
The Copa Casino, on a stand alone basis, continues to operate at a
net loss and, as of March 31, 1995, current liabilities exceeded current
assets. Management continues to undertake actions in an attempt to improve
Copa Casino revenues and to decrease costs. The Company also continues to
explore site development options. The scope of such plans have been limited
and negatively impacted by an action of the Mississippi State Port Authority
Board of Commissioners. On October 27, 1994, the Board of Commissioners
specifically denied the Company's proposed development of a hotel for the
Copa Casino site. Other development options and strategies, however,
continue to be pursued by the Company.
-6-
<PAGE> 9
THE SANDS REGENT AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 1995 AND 1994
NOTE 3 - COMMITMENTS AND CONTINGENCIES (continued)
- --------------------------------------------------
The Company's net investment in and advances to Gulfside Casino, Inc.
and the Copa Casino was approximately $22.8 million as of March 31, 1995.
There are no assurances that the Company's efforts to improve operating
results will be successful and the outcome of these efforts cannot
presently be determined. Accordingly, no provision for any loss due to an
impairment in value of the assets of Gulfside Casino, Inc. or the Copa
Casino, that may result upon the resolution of these matters, has been made
in the accompanying interim consolidated financial statements.
In December 1994, a lawsuit was filed in a Mississippi court against
Gulfside Casino, Inc. because of Gulfside's failure to make payments due on
promissory note obligations to two former shareholders of Gulfside. These
note obligations to the former shareholders are secured by a pledge of
Gulfside's partnership interest in the Copa Casino. In the Mississippi
suit, the former Gulfside shareholders are demanding the $6 million due
under the promissory notes, attorneys fees in an amount not less than
$900,000, interest costs, appointment of a receiver for Gulfside and the
sale of Gulfside's partnership interest in the Copa Casino.
These promissory notes, which were owed by Gulfside when The Sands Regent
purchased Gulfside in February 1994 in order to acquire Gulfside's partnership
interest in the Copa Casino, have not been assumed or guaranteed by The Sands
Regent. Gulfside's only tangible asset is its partnership interest in the Copa
Casino and the Copa Casino has not generated adequate operating results to
allow for any partner distributions. As such, Gulfside is not presently in
the financial position to make any payments with respect to these note
obligations.
The Company will monitor the progress of the lawsuit and take whatever
measures are appropriate to protect the Copa Casino and the Company. The
ultimate outcome of the lawsuit, including any financial impact, is not
presently subject to reasonable estimation.
-7-
<PAGE> 10
ITEM 2. Management's Discussion and Analysis of
- ------------------------------------------------
Financial Condition and Results of Operations.
----------------------------------------------
Results of operations - Three months ended March 31, 1995 compared to
- ---------------------------------------------------------------------
three months ended March 31, 1994
- ---------------------------------
In February 1994, the Company acquired Gulfside Casino, Inc. ("GCI")
and thereby increased its ownership in Gulfside Casino Partnership ("GCP")
to 100%. As such, the results of operations and cash flows of GCI and GCP,
which operates the Copa Casino, have been consolidated with the Company's
results of operations and cash flows since the date of acquisition. Prior
to such acquisition, the Company held a 40% interest in the Copa Casino and
accounted for its investment under the equity method of accounting. A
significant reason for the increases in revenue and costs and expenses in
the current fiscal period, compared to the comparable prior fiscal period,
is due to the inclusion of the results of operations of GCI and the Copa
Casino upon consolidation for the entire third quarter of fiscal 1995.
In the three month period ended March 31, 1995, compared to the same
three month period in the prior year, revenues increased from approximately
$12 million to $14.4 million and income from operations decreased from $1.3
million to $888,000. Net income was $323,000 or $.07 per share in the third
quarter of fiscal 1995 compared to net income of $819,000 or $.19 per share
for the comparable period in fiscal 1994. The increase in revenue is due to
the inclusion of Copa Casino revenue. The decreases in income from
operations, net income and net income per share are due to the inclusion of
Copa Casino operating results and a decline in revenue and profits from the
Reno operation. Management believes that the decline in Reno revenue and
profits is due to adverse weather conditions in Nevada and California during
the third quarter of fiscal 1995 and increased competition from the new Las
Vegas mega-resorts.
The slight decrease in lodging revenue of $63,000, in the third
quarter of fiscal 1995 compared to the same quarter in the prior year, is
primarily due to a decrease in the average room rate. The average room
rate decreased from approximately $27 in the third quarter of fiscal 1994
to $26 in the third quarter of the current fiscal year. For the same
comparable periods, hotel occupancy increased from 87.1% to 89.5%.
The increase in gaming revenue of $2.7 million is composed of gaming
revenue from the Copa Casino of $2.9 million which was offset by a decrease
in gaming revenue at the Sands Regency in Reno of approximately $200,000.
The decrease in gaming revenue in Reno is due to a decrease in gaming
revenue per occupied room. Gaming revenue per occupied room decreased from
$80 in the third quarter of fiscal 1994 to $75 in the third quarter of
fiscal 1995.
The increase in food and beverage revenue of $139,000 is principally
due to the inclusion of Copa Casino revenue. Likewise, the increase in food
and beverage costs and expenses of $160,000 is primarily due to the addition
of Copa Casino operations.
-8-
<PAGE> 11
Results of operations - Three months ended March 31, 1995 compared to
- ---------------------------------------------------------------------
three months ended March 31, 1994 (continued)
- ---------------------------------------------
The decrease in other revenue of $342,000, and related decrease in
costs and expenses of $498,000, is largely due to a decrease in retail
liquor store sales. In August 1994, the retail liquor store business, which
was operated by the Company in Reno, was sold to a third party. Such third
party now operates the retail liquor store in Company owned facilities for
rent and other consideration paid to the Company.
The increases in gaming, maintenance and utilities, and general and
administrative costs and expenses of $1.4 million, $271,000 and $1 million,
respectively, are principally due to the addition of Copa Casino results of
operations. The general and administrative costs and expenses include
significant advertising, marketing and promotional costs. The increase in
lodging costs and expenses of $120,000 is primarily due to an increase in
hotel salaries, wages and benefits in Reno. Certain general salary, wage
and benefit increases have been implemented within the last year in order to
remain competitive.
The increase in depreciation and amortization expense of $330,000
includes the amortization for the quarter of goodwill associated with GCI of
$58,000 and depreciation from the Copa Casino of $270,000.
The decrease in interest and other income of approximately $22,000 is
composed of an increase in interest income from the Reno operation of
$90,000 as a result of the investment of additional excess funds at market
interest rates higher than in the comparable prior year period. Such
increase was offset by the non-inclusion of interest earned on advances to
GCP in the prior year quarter which was included on a pre-consolidated
basis. Upon consolidation, such intercompany income/expense items are now
eliminated.
The increase in interest expense of $315,000 in the third quarter of
fiscal 1995, compared to the same quarter of fiscal 1994, includes
incremental interest expense from the Copa Casino of $51,000 and
additional interest expense from GCI, which was acquired in February 1994,
of $56,000. In addition, interest expense increased as a result of higher
interest rates in the current fiscal period compared to the prior year and
due to additional borrowings by the Company in the third and fourth quarters
of fiscal 1994 to finance the operation and expansion of the Copa Casino.
The elimination of the equity in income of unconsolidated affiliate,
that occurred in the prior year third quarter, is the result of the
Company's acquisition of GCI and GCP in February 1994 and the inclusion of
related operations on a consolidated basis in the current year third
quarter.
The decrease in the effective income tax rate in the current year
quarter, compared to the prior year quarter, is the result of the reversal
of certain prior quarter timing differences. Such decrease has been
offset, in part, by the current year deduction of goodwill amortization that
is not deductible for income tax purposes.
-9-
<PAGE> 12
Results of operations - First nine months of fiscal 1995 compared to 1994
- -------------------------------------------------------------------------
compared to first nine months of fiscal 1994
- -------------------------------------------
In February 1994, the Company acquired Gulfside Casino, Inc. ("GCI")
and thereby increased its ownership in Gulfside Casino Partnership ("GCP")
to 100%. As such, the results of operations and cash flows of GCI and GCP,
which operates the Copa Casino, have been consolidated with the Company's
results of operations and cash flows since the date of acquisition. Prior
to such acquisition, the Company held a 40% interest in the Copa Casino and
accounted for it under the equity method of accounting. A significant
reason for the increases in revenue and costs and expenses in the current
fiscal period, compared to the comparable prior fiscal period, is due to the
inclusion of the results of operations of GCI and the Copa Casino upon
consolidation.
In the nine months ended March 31, 1995, compared to the same nine
months in the prior year, revenues increased from approximately $35 million
to $44.3 million and income from operations decreased from $6.4 million to
$2.9 million. For the same comparable fiscal periods, net income decreased
from $3.4 million to $864,000 and net income per share decreased to $.19
from $.79. The increase in revenue is due to the inclusion of Copa Casino
revenues. The decreases in income from operations, net income and net
income per share are due to the inclusion of Copa Casino operating results
and a decline in revenue and profits from the Reno operation. Management
believes that the decline in Reno revenue and profits is due to adverse
weather conditions in Nevada and California during the second and third
quarters of fiscal 1995, increased competition from the new Las Vegas
mega-resorts and construction delays on Interstate 80 west of Reno, which is
a major artery to Northern California, during the first fiscal quarter.
The decrease in lodging revenue of $651,000, in the first three
quarters of fiscal 1995 compared to the same periods in the prior year, is
primarily due to a decrease in Reno hotel occupancy. Hotel occupancy
decreased from approximately 88.7% in the nine months ended March 31, 1994
to 86.2% in the nine months ended March 31, 1995. For the same comparable
periods, the average room rate decreased from $32 to $31.
The increase in gaming revenue of $11.2 million is composed of gaming
revenue from the Copa Casino of $13 million which was offset by a decrease
in gaming revenue at the Sands Regency in Reno of approximately $1.8
million. The decrease in gaming revenue in Reno, which is primarily slot
revenue, is due to the decrease in hotel occupancy and a decrease in
gaming revenue per occupied room. Gaming revenue per occupied room
decreased from $80 in the first nine months of fiscal 1994 to $74 in the
first nine months of fiscal 1995.
The increase in food and beverage revenue of $911,000 includes the
addition of Copa Casino revenue of $1.1 million. Such increase was offset
by a decrease in revenue from the Reno operation due to the decrease in
hotel occupancy. The related increase in food and beverage costs and
expenses of $636,000 is primarily due to the addition of Copa Casino
operations.
-10-
<PAGE> 13
Results of operations - First nine months of fiscal 1995 compared to 1994
- -------------------------------------------------------------------------
compared to first nine monts of fiscal 1994 (continued)
- -------------------------------------------------------
The decrease in other revenue of $1.7 million, and related decrease
in costs and expenses of $1.9 million, is chiefly due to a decrease in
retail liquor store sales. In August 1994, the retail liquor store
business, which was operated by the Company in Reno, was sold to a third
party. Such third party now operates the retail liquor store in Company
owned facilities for rent and other consideration paid to the Company.
The increase in complimentary lodging, food and beverage, deducted
from revenue, of $540,000 and increase in gaming costs and expenses of $7
million is due to the inclusion of the Copa Casino.
The increase in lodging costs and expenses of $387,000 is primarily due
to an increase in hotel salaries, wages and benefits in Reno. Certain
general salary, wage and benefit increases have been implemented within the
last year in order to remain competitive. The increases in maintenance and
utilities and general and administrative costs and expenses of $1.2 million
and $4.1 million, respectively, are principally due to the addition of Copa
Casino results of operations. These general and administrative costs and
expenses include significant advertising, marketing and promotional costs.
The increase in depreciation and amortization expense of $1.2 million
includes the amortization of goodwill for the quarter associated with GCI of
$241,000 and depreciation from the Copa Casino of $988,000.
The decrease in interest and other income of approximately $95,000 is
due to the non-inclusion of interest earned on advances to GCP of
approximately $284,000 in the nine months ended March 31, 1995 which was
then included on a pre-consolidation basis. Upon consolidation in the
current year, such intercompany income/expense items are eliminated. The
above decrease was offset by an increase in interest income from the Reno
operation of $269,000 as a result of the investment of additional excess
funds at market interest rates higher than in the comparable prior year period.
The increase in interest expense of $1.2 million in the nine months
ended March 31, 1995, compared to the same nine months in fiscal 1994,
includes interest expense from the Copa Casino of $340,000 and interest
expense from GCI, which was acquired in February 1994, of $237,000. In
addition, interest expense increased as a result of additional borrowings by
the Company, in fiscal 1994, to finance the operation and expansion of the
Copa Casino at interest rates higher in the current fiscal period than in
the comparable prior fiscal period.
The elimination of the equity in loss of unconsolidated affiliate, that
occurred in the prior year first nine months, is the result of the Company's
acquisition of GCI and GCP in February 1994 and the inclusion of related
operations on a consolidated basis in the current nine month period.
The increase in the effective income tax rate in the current year nine
months, compared to the prior year, is the result of the current year
deduction of goodwill amortization of $241,000 that is not deductible for
income tax purposes.
-11-
<PAGE> 14
Results of operations - First nine months of fiscal 1995 compared to 1994
- -------------------------------------------------------------------------
compared to first nine monts of fiscal 1994 (continued)
- -------------------------------------------------------
As is true for other hotel/casinos in the Reno area, demand for the
Company's facilities declines in the winter. Operating margins and, to a
lesser extent, revenues are lower during the second and third fiscal
quarters due to lower room rates and a lower level of gaming play per
occupied room. The Sands Regent is generally not affected as severely as
many other hotel/casinos in the Reno area because the Company attracts high
levels of group business during that period. This group business and the
Company's flexible pricing strategy have enabled the Company to maintain
relatively high levels of hotel occupancy. Management anticipates that the
trend of experiencing lower operating margins in the second and third
quarters of each fiscal year will continue.
Management anticipates that such trends will also occur at the Copa
Casino. However, because of the limited amount of time that the Copa has
been in operation, the limited amount of time that gaming has existed on the
Mississippi gulfcoast and the rapid expansion of gaming in Mississippi, the
nature and extent of seasonal fluctuations are not presently subject to
reasonable estimation.
Capital resources and liquidity
-------------------------------
As of March 31, 1995, the Company's net investment in and advances to,
or on behalf of the Copa Casino and Gulfside Casino, Inc., was $22.8
million. The Copa Casino continues to operate at a net loss and current
liabilities exceed current assets at March 31, 1995. The Company continues
to explore various alternative courses of action to improve revenues and
decrease costs and expenses in order to achieve profitable operating
results without assurances of success. It may be necessary for the
Company to invest or advance additional amounts to or on behalf of the Copa
Casino. An impairment in asset value may occur which could result in a
loss up to the amount invested in or advanced to or for the benefit of the
Copa Casino.
Other than above, there were no material changes in The Sands Regent's
financial condition nor were there any substantive changes relative to matters
discussed in the Capital Resources and Liquidity section of Management's
Discussion and Analysis of Financial Condition and Results of Operations as
presented in the 1994 Annual Report appearing as exhibit 13 to the Company's
Form 10-K for the year ended June 30, 1994.
-12-
<PAGE> 15
PART II OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings.
- ---------------------------
For a discussion regard a lawsuit filed against a wholly owned
subsidiary of the Company, see note 3 to the Notes to Interim
Consolidated Financial Statments included herein.
Item 2. Changes in Securities.
- -------------------------------
NONE
Item 3. Defaults Upon Senior Securities.
- -----------------------------------------
NONE
Item 4. Submission of Matters to a Vote of Security Holders.
- -------------------------------------------------------------
NONE
Item 5. Other information.
- ---------------------------
NONE
Item 6. Exhibits and Reports on Form 8-K.
- ------------------------------------------
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K:
NONE
-13-
<PAGE> 16
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.
THE SANDS REGENT
(Registrant)
Date: May 12, 1995 By /S/ David R. Wood
-------------------------------------------
David R. Wood, Vice President - Finance
Principal Accounting and Financial Officer
-14-
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<S> <C>
Sequentially
Exhibit Numbered
Number Page
- ------- ------------
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 9,191
<SECURITIES> 1,355
<RECEIVABLES> 725
<ALLOWANCES> 122
<INVENTORY> 701
<CURRENT-ASSETS> 13,122
<PP&E> 84,799
<DEPRECIATION> 25,518
<TOTAL-ASSETS> 80,990
<CURRENT-LIABILITIES> 9,550
<BONDS> 25,132
<COMMON> 345
0
0
<OTHER-SE> 44,021
<TOTAL-LIABILITY-AND-EQUITY> 80,990
<SALES> 6,075
<TOTAL-REVENUES> 44,300
<CGS> 4,990
<TOTAL-COSTS> 25,990
<OTHER-EXPENSES> 15,380
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,947
<INCOME-PRETAX> 1,391
<INCOME-TAX> 527
<INCOME-CONTINUING> 864
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 864
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
