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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JUNE 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM:
COMMISSION FILE NUMBER: 0-14050
THE SANDS REGENT
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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NEVADA 88-0201135
(State or other jurisdiction (I.R.S. Employer
of 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
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.05 PAR VALUE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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The aggregate market value of the Registrant's $.05 par value Common Stock
held by non-affiliates of the Registrant on September 25, 1995 was $
12,160,340. The aggregate market value is computed with reference to the
average price per share on such date.
Registrant's Common Stock outstanding at September 25, 1995 was 4,498,722
shares.
Portions of Registrant's 1995 Annual Report to the Shareholders are
incorporated into Part II as set forth herein. Portions of Registrant's
definitive Proxy Statement for its November 6, 1995 Annual Meeting of
Shareholders are incorporated into Part III as set forth herein.
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PART I
ITEM 1. BUSINESS
GENERAL
THE COMPANY
The Company, through a wholly-owned subsidiary, Zante, Inc. ("Zante"), owns
and operates the Sands Regency hotel/casino in downtown Reno, Nevada. The
Company, through three wholly-owned subsidiaries, Patrician, Inc.
("Patrician"), Gulfside Casino, Inc. ("GCI") and Artemis, Inc., ("Artemis"),
owns Gulfside Casino Partnership (the "Partnership"), which owns the Copa
Casino, a dockside gaming vessel located in Gulfport, Mississippi. GCI,
Patrician and Artemis own 20%, 79% and 1%, respectively, of the Partnership.
Gaming operations for the Copa Casino commenced in September 1993. Patrician
and GCI have equal voting control over all activities and all matters presented
to the Partnership Board are subject to unanimous approval. Patrician is the
day-to-day operations manager for which there is no management fee or other
specific compensation.
Reno, Nevada. The Sands Regency hotel/casino has approximately 27,000
square feet of gaming space and 938 hotel rooms, including 32 suites of various
sizes. The complex also includes three restaurants, a "Winchell's Donut
House", a "Pizza Hut", an "Arby's" restaurant operated by a third party, a
"Baskin-Robbins" and an "Orange Julius" operated by a third party, four
cocktail lounges, a gift shop, a beauty/barber shop and a liquor store, each
operated by third parties, a video arcade, a health club, a swimming pool and
over 10,000 square feet of convention and meeting space which can seat up to
650 people. The Company maintains six parking areas on its main hotel/casino
property and adjacent to it, including two parking garages, with a total
combined capacity for approximately 1,000 vehicles. Although the Company
offers, on a very limited basis, complimentary hotel accommodations to select
customers, no group arrangements known as "junkets" are conducted.
The average room occupancy for fiscal 1995 was 87.1% compared to 89.7%
for 1994. The hotel's average room rate for the current fiscal year was
approximately $33.00 as compared to $32.00 in the prior fiscal year.
As of September 26, 1995, the casino offered 18 table games, including
14 blackjack tables, 1 caribbean stud table, 1 craps table, and 2 roulette
tables, two keno games and approximately 783 slot machines. In connection with
the supervision of its gaming activities, the Company's policies include
stringent controls, cross-checks and recording of all receipts and
disbursements.
The Company's Reno, Nevada operations are conducted 24 hours a day,
every day of the year. The primary source of revenues and income to the
Company is its gaming activities, although the hotel, bars, shops, restaurants
and other services are an important adjunct to the gaming activities. The
Company's operating and marketing philosophy emphasizes high volume business,
offering large, attractive hotel rooms at reasonable prices to travel group
wholesalers, primarily from Western Canada, the Pacific Northwest and Northern
California. Gaming accounted for approximately 56% of the Company's revenues
in fiscal 1995 and approximately 77% of the gaming revenues were generated by
slot machines. The Company generally does not extend credit to its gaming
customers.
The Company has local government approval for a major expansion program
at its Reno facility. As presently approved, the construction is to be
completed in phases through approximately the year 2000. Construction of the
next phase, which must commence by February 1996, would include an expansion of
approximately 5,500 square feet of casino, commercial and restaurant/convention
space. All phases of the expansion program are presently planned to be built
on properties owned by the Company.
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The subsequent phases, as presently approved, would include adding in
excess of 300 additional hotel rooms, approximately 25,000 square feet of
gaming space, 19,000 square feet of convention, meeting and commercial space, a
34-lane bowling alley, restaurants and other public areas. Also included is
the construction of a parking structure sufficient to accommodate approximately
700 vehicles which will meet the hotel/casino's increased capacity.
The total estimated cost of all of the phases of the expansion project,
if completed, is $40 million. Potential sources of financing include bank or
other debt, available cash and funds generated from operations, public equity
securities, or a combination of these sources. The Company does not expect to
begin construction on any phase without arranging all or substantially all of
the financing of such phase. It is anticipated that the first phase, which is
estimated to cost $1.5 million, will be financed by available cash and funds
generated from operations.
Major construction projects, such as the proposed addition to the
hotel/casino, entail significant risks. These include the risk of cost
overruns, insufficient financing, labor disputes, material shortages and other
potential problems. In addition to these risks, completion will be subject to
compliance with local governmental requirements.
Gulfport, Mississippi. In December 1992, the Company, through Patrician,
entered into a partnership agreement with GCI to develop and operate a dockside
gaming facility in Gulfport, Mississippi. Located approximately 75 miles from
New Orleans, Louisiana and 70 miles from Mobile, Alabama, the facility, known
as the "Copa Casino," is a permanently moored 500-foot cruise ship. Gaming
operations commenced in mid- September 1993.
On February 25, 1994, the Company acquired all of the outstanding stock of
GCI as well as certain advances to the Partnership previously due to an
affiliate of GCI. GCI's principal asset is its general partnership interest
in the Partnership. In April 1995, Artemis was formed as a wholly-owned
subsidiary of The Sands Regent and acquired a 1% ownership interest in the
Partnership from Patrician. The Company, through Patrician, GCI and Artemis,
owns 100% of the Partnership.
Mississippi, which legalized casino gaming in September 1991, allows for
24-hour gaming on riverboats or other floating vessels located on or adjacent
to approved navigable waterways. Such floating facilities need not cruise into
the waterways and, as such, become permanently moored as dockside gaming
facilities. Gulfport is a deep-water port located on U.S. Highway 90 on the
Mississippi gulf coast. A population of approximately 2.5 million resides
within a 100-mile radius, including New Orleans and Mobile. Interstate Highway
10, which is the main thoroughfare between Mobile and New Orleans, lies
approximately 10 miles to the north of the port area. The Gulfport-Biloxi
metropolitan area has over 6,000 hotel and motel rooms located in the immediate
Gulfport-Biloxi area.
The Copa Casino consists of approximately 24,000 square feet of casino
space located on two decks. As of September 26, 1995, the Copa offered 679
slot machines and 29 table games, including craps, roulette, blackjack,
caribbean stud, let it ride and poker. In addition, the facility also includes
4 cocktail lounges/bars, a deli-style restaurant, a buffet restaurant operated
by a third party, a gift shop and various ancillary services and facilities.
The deck below the two casino decks contains a surveillance area, a vault,
count rooms and security and various operations and administrative offices. An
additional three decks on the ship are available for future expansion of gaming
and dining facilities.
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The Copa Casino is permanently moored dockside at a location known as the
"Horseshoe Site." Such site, which is leased from the Mississippi Department
of Economic and Community Development and the Mississippi State Port Authority,
is between the East and West Piers of the Mississippi State Port in Gulfport,
Mississippi. This location, which includes 8.3 acres of land based facilities,
will accommodate surface parking for approximately 840 vehicles. The leased
facilities also include a docking structure which accommodates the Copa Casino
ship and will allow for mooring of additional vessels. The docking structure
also includes a roadway and pedestrian walk which provides access to the Copa
Casino entrance.
As in Nevada, the Mississippi operations are conducted 24 hours a day
every day of the year. Present operations provide for the offering of
complimentary food and beverage on a limited basis. Group arrangements, known
as "junkets," are not conducted.
MARKETING
Reno, Nevada. The central component of the Company's marketing
philosophy is to utilize travel wholesalers to attract group and air wholesale
business to the hotel/casino. This philosophy is based on offering attractive,
well-furnished, large hotel accommodations and quality food and beverages at
prices slightly lower than those of most major hotel/casinos in Reno.
Management believes this strategy has enabled the Company to maintain high
levels of hotel occupancy.
Significant group and air wholesale market areas continue to be Western
Canada, the Pacific Northwest and Northern California. The Company continues
to expand its marketing areas by adding additional air wholesalers and has been
successful in obtaining wholesale business in Central and Eastern Canada, the
Midwest, Southwest and Southern California.
In addition to the group and air wholesale business, the Company is
aggressively packaging and marketing convention and military reunion business
which require 300 rooms or less. Other travel package arrangements are also
being promoted which are geared toward individual travelers. The Company
undertakes, from time to time, direct advertising in select Western cities in
order to promote and increase the individual traveler business.
The Company uses a flexible approach to pricing its rooms which is
designed to maintain high occupancy levels. Hotel rooms are offered at
discount prices to travel wholesalers, as much as six months in advance of
arrival, for block sales of rooms used in travel packages. This is
particularly important to the Company because of the impact of hotel occupancy
on the level of gaming activity. The Company is particularly dependent upon
group business from November through February because of the seasonal decline
in other sources of business. During these months, a substantial amount of the
Sands Regency's hotel capacity is normally prebooked 30 to 180 days in advance
on a cancelable basis. During the summer months, the Company relies on direct
advertising of its room rates to attract individual customers.
The Sands Regency is the lead hotel/casino in the Reno area for several
major travel wholesalers who serve major cities in the West, Midwest and
Southwest United States and in Western and Central Canada. Group and air
wholesale business accounted for approximately 61% of the hotel's occupancy in
fiscal 1995 compared to 63% in fiscal 1994.
Most advertising for the Sands Regency is done by travel wholesalers in
their markets. The Company also advertises directly in its major United States
markets through printed publications, especially during periods of the year
when group business operates at reduced levels.
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Gulfport, Mississippi. The Company has positioned the Copa Casino as a
casino for local residents. Emphasis has been placed on providing a casual and
friendly atmosphere. To maintain this marketing position, the Company's goal
is to provide its products and services at values favored by the Company's
guests. The Company also uses numerous, in-house promotional programs to
attract local residents and other customers. These Company-sponsored
promotional and special event programs include gaming, slot and poker
tournaments, football season promotions and give-a-way programs.
The Company has implemented a variety of outside advertising campaigns
in order to attract "drive-up" gaming customers. This includes billboard and
newspaper advertising in numerous cities within a 100-mile radius and local
radio and television advertising. In addition, the Company has implemented
drive-up promotions and programs to generate more frequent customer visits and
to identify valued customers. Direct mail programs have also been recently
undertaken which have resulted in positive customer responses.
The Company has also pursued marketing efforts toward developing group
business, primarily bus charters. Through these efforts, the Company has
attracted bus charters from various areas within a 500-mile radius including
Atlanta, Georgia and Florida.
The Company will continue to utilize various marketing strategies to
increase the frequency of casino visits by its customers which includes
implementing programs to identify and retain selected valued customers and the
establishment of promotional programs which cater to senior citizens. The
Company has employed sales representatives to market to tour operators, travel
agents, social groups, corporations and associations.
COMPETITION
Reno, Nevada. The Company competes in the greater Reno area with
approximately sixteen major casinos and hotel/casinos, some of which are larger
than the Sands Regency. In addition, there are numerous other smaller casinos
in the greater Reno area. The Company competes for its customers based upon
gaming activities, room rates, room size and quality of rooms, food, beverages
and location. Unlike some of its competitors, the Company does not provide
cabaret or showroom entertainment for its customers and hotel guests.
Management believes that the lack of entertainment is not material to the
Company's business. A new hotel/casino was recently built by competitors of
the Company that includes 1,284 hotel rooms with another 436 rooms still under
construction. There are also an additional 1,084 hotel rooms currently under
construction by other competitors of the Company and governmental approval has
been granted to construct an additional 2,469 hotel rooms. Such governmental
approval does not provide assurance that all of these rooms will be built. If
construction is completed on all hotel rooms presently under construction or
approved for construction, the hotel room capacity in the greater Reno area
will increase by approximately 24%. In the event all approved hotel rooms are
built, and depending on the time frames during which they are completed,
management of the Company believes that this added capacity may have an adverse
effect on operations of the Company.
The Company's Reno operations compete, to a lesser extent, with gaming
operations in other parts of the state of Nevada, such as Laughlin, Las Vegas
and Lake Tahoe. California currently sponsors a state lottery and allows other
non-casino style gaming, including parimutuel wagering, card parlors, bingo and
off-track betting. The Company believes that such non-casino style gaming does
not have a significant impact on the Company's operations. The Company
believes, however, that the legalization of casino-style gaming in California
could have a material impact on the Company's operations.
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Gulfport, Mississippi. The Company's operations on the Gulf Coast of
Mississippi are in competition with numerous gaming operations currently
established or to be established on vessels or barges moored on the Gulf Coast
of Mississippi, and on boats or barges cruising or moored on the Mississippi
River. Currently there are eleven dockside gaming facilities, excluding the
Company, operating along the Gulf Coast of Mississippi, including one in Bay
Saint Louis, one in Waveland, one in Gulfport and eight in Biloxi. There are
approximately eight gaming facilities presently planned along the Gulf Coast
of which two are licensed.
Along the Mississippi River, there are presently fifteen Mississippi
dockside casino facilities; one in Natchez, four in Vicksburg, two in
Greenville, one near Lula and seven in Tunica. There are approximately
fourteen additional proposed casino operations, of which four have been
granted gaming licenses, to be located along the Mississippi River, from
Natchez in the South to Tunica in the North. There is also one casino
currently in operation on an Indian reservation near Philadelphia, Mississippi.
In addition to direct competition which the Company faces in the
Mississippi market, the Company faces competition from riverboats and a
land-based casino in the State of Louisiana, which is an important market area
for the Company's Gulfport casino. Current Louisiana legislation permits
unlimited stakes gaming and a total of fourteen riverboat licenses and one
land-based license have been authorized statewide. At present, there are
thirteen riverboats and the land-based casino in operation. Besides these
State of Louisiana gaming operations, it is also anticipated that gaming may be
implemented on Indian reservations near Gulfport and New Orleans.
In the event that all, or a significant number, of these proposed
facilities are licensed, built and operated, management of the Company believes
that this added capacity may have an adverse effect on its Gulfport casino
operation. Management believes that the principal competitive factors will
include ease of access, availability of parking, attractiveness of casino
vessels and surrounding property, proximity to other gaming facilities, and
quality of food and entertainment offered.
General. To a significantly lesser extent, the Company competes with
gaming facilities in New Jersey, Colorado, South Dakota, Illinois, Iowa and
other parts of the world. The Company also competes with various gaming
operations on Indian land, including those located in California, Connecticut,
Michigan, Minnesota and Wisconsin. In addition, Indian casino gaming has
become a rapidly growing sector of the gaming industry as a result of the
Indian Gaming Regulatory Act of 1988, which generally permits unrestricted
gaming on Indian land in any state that allows similar forms of gaming, whether
or not restricted. Other states may legalize various forms of gaming that may
compete with the Company. In any jurisdiction where the Company may commence
operations, it will face competition for desirable sites and qualified
personnel.
EMPLOYEES
At June 30, 1995, the Company employed 987 people at the Sands Regency
in Reno, Nevada, including 87 salaried employees and 900 hourly employees. The
Copa Casino employed approximately 442 people, including 54 salaried employees
and 388 hourly employees. None of the Company's employees is represented by a
union. The Company has not experienced any work stoppages or other significant
labor problems and management considers its labor relations to be good.
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REGULATION AND LICENSING-GAMING
Nevada. The ownership and operation of casino gaming facilities in Nevada
are subject to (i) The Nevada Gaming Control Act and the regulations
promulgated thereunder (collectively, "Nevada Act"); and (ii) various local
regulation. The Company's gaming operations are subject to the licensing and
regulatory control of the Nevada Gaming Commission ("Nevada Commission"), the
Nevada State Gaming Control Board ("Nevada Board") and the City of Reno,
(together, the "Nevada Gaming Authorities").
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of
periodic reports with the Nevada Gaming Authorities; (iv) the prevention of
cheating and fraudulent practices; and (v) to provide a source of state and
local revenues through taxation and licensing fees. Change in such laws,
regulations and procedures could have an adverse effect on the Company's gaming
operations.
Zante operates the Sands Regency hotel/casino and is required to be
licensed by the Nevada Gaming Authorities. The gaming license requires a
periodic payment of fees and taxes and is not transferable. The Company is
registered by the Nevada Commission as a publicly traded corporation
("Registered Corporation") and as such, it is required periodically to submit
detailed financial and operating reports to the Nevada Commission and furnish
any other information which the Nevada Commission may require. No person may
become a stockholder of, or receive any percentage of profits from Zante
without first obtaining licenses and approvals from the Nevada Gaming
Authorities. The Company and Zante have obtained from the Nevada Gaming
Authorities the various registrations, approvals, permits and licenses required
in order to engage in gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company or Zante in
order to determine whether such individual is suitable or should be licensed as
a business associate of a gaming licensee. Officers, directors and certain key
employees of Zante must file applications with the Nevada Gaming Authorities
and may be required to be licensed or found suitable by the Nevada Gaming
Authorities. Officers, directors and key employees of the Company who are
actively and directly involved in gaming activities of Zante may be required to
be licensed or found suitable by the Nevada Gaming Authorities. The Nevada
Gaming Authorities may deny an application for licensing for any cause which
they deem reasonable. A finding of suitability is comparable to licensing, and
both require submission of detailed personal and financial information followed
by a thorough investigation. The applicant for licensing or a finding of
suitability must pay all the costs of the investigation. Changes in licensed
positions must be reported to the Nevada Gaming Authorities and in addition to
their authority to deny an application for a finding of suitability or
licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a
change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company or Zante, the companies involved would have to
sever all relationships with such person. In addition, the Nevada Commission
may require the Company or Zante to terminate the employment of any person who
refuses to file appropriate applications. Determinations of suitability or of
questions pertaining to licensing are not subject to judicial review in Nevada.
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The Company and Zante are required to submit detailed financial and
operating reports to the Nevada Commission. Substantially all material loans,
leases, sales of securities and similar financing transactions by Zante must be
reported to, or approved by, the Nevada Commission.
If it were determined that the Nevada Act was violated by Zante, the gaming
licenses it holds could be limited, conditioned, suspended or revoked, subject
to compliance with certain statutory and regulatory procedures. In addition,
Zante, the Company, and the persons involved could be subject to substantial
fines for each separate violation of the Nevada Act at the direction of the
Nevada Commission. Further, a supervisor could be appointed by the Nevada
Commission to operate the Company's gaming properties and, under certain
circumstances, earnings generated during the supervisor's appointment (except
for the reasonable rental value of the Company's gaming properties) could be
forfeited to the State of Nevada. Limitation, conditioning or suspension of
any gaming license or the appointment of a supervisor could (and revocation of
any gaming license would) materially adversely affect the Company's gaming
operations.
Any beneficial holder of the Company's voting securities, regardless of the
number of shares owned, may be required to file an application, be
investigated, and have his suitability as a beneficial holder of the Company's
voting securities determined if the Nevada Commission has reason to believe
that such ownership would otherwise be inconsistent with the declared policies
of the State of Nevada. The applicant must pay all costs of investigation
incurred by the Nevada Gaming Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires more than 5% of the
Company's voting securities to report the acquisition to the Nevada Commission.
The Nevada Act requires that beneficial owners of more than 10% of the
Company's voting securities apply to the Nevada Commission for a finding of
suitability within thirty days after the Chairman of the Nevada Board mails the
written notice requiring such filing. Under certain circumstances, an
"institutional investor," as defined in the Nevada Act, which acquires more
than 10%, but not more than 15%, of the Company's voting securities may apply
to the Nevada Commission for a waiver of such finding of suitability if such
institutional investor holds the voting securities for investment purposes
only. An institutional investor shall not be deemed to hold voting securities
for investment purposes unless the voting securities were acquired and are held
in the ordinary course of business as an institutional investor and not for the
purpose of causing, directly or indirectly, the election of a majority of the
members of the board of the directors of the Company, any change in the
Company's corporate charter, bylaws, management, policies or operations of the
Company, or any of its gaming affiliates, or any other action which the Nevada
Commission finds to be inconsistent with holding the Company's voting
securities for investment purposes only. Activities which are not deemed to be
inconsistent with holding voting securities for investment purposes only
include: (i) voting on all matters voted on by stockholders; (ii) making
financial and other inquiries of management of the type normally made by
securities analysts for informational purposes and not to cause a change in its
management, policies or operations; and (iii) such other activities as the
Nevada Commission may determine to be consistent with such investment intent.
If the beneficial holder of voting securities who must be found suitable is a
corporation, partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. The applicant is
required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada
Commission or the Chairman of the Nevada Board, may be found unsuitable. The
same restrictions apply to a record owner if the record owner, after request,
fails to identify the beneficial owner. Any stockholder found unsuitable and
who holds, directly or indirectly, any beneficial ownership of the common stock
of a Registered Corporation beyond such period of time as may be prescribed by
the Nevada Commission may be guilty of a criminal offense. The Company is
subject to disciplinary action if, after it receives notice that a person is
unsuitable to be a stockholder or to have any other relationship with the
Company or Zante, the Company (i) pays that person any dividend or interest
upon voting securities of the Company, (ii)
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allows that person to exercise, directly or indirectly, any voting right
conferred through securities held by that person, (iii) pays remuneration in
any form to that person for services rendered or otherwise, or (iv) fails to
pursue all lawful efforts to require such unsuitable person to relinquish his
voting securities for cash at fair market value.
The Nevada Commission may, in its discretion, require the holder of any
debt security of a Registered Corporation to file applications, be investigated
and be found suitable to own the debt security of a Registered Corporation. If
the Nevada Commission determines that a person is unsuitable to own such
security, then pursuant to the Nevada Act, the Registered Corporation can be
sanctioned, including the loss of its approvals, if without the prior approval
of the Nevada Commission, it: (i) pays to the unsuitable person any dividend,
interest, or any distribution whatsoever; (ii) recognizes any voting right by
such unsuitable person in connection with such securities; (iii) pays the
unsuitable person remuneration in any form; or (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation or similar transaction.
The Company is required to maintain a current stock ledger in Nevada which
may be examined by the Nevada Gaming Authorities at any time. If any
securities are held in trust by an agent or by a nominee, the record holder may
be required to disclose the identity of the beneficial owner to the Nevada
Gaming Authorities. A failure to make such disclosure may be grounds for
finding the record holder unsuitable. The Company is also required to render
maximum assistance in determining the identity of the beneficial owner. The
Nevada Commission has the power to require the Company's stock certificates to
bear a legend indicating that the securities are subject to the Nevada Act.
The Company's stock certificates do bear such a legend.
The Company may not make a public offering of its securities without the
prior approval of the Nevada Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. Such approval, if given, does not constitute a finding,
recommendation or approval by the Nevada Commission or the Nevada Board as to
the accuracy or adequacy of the prospectus or the investment merits of the
securities. Any representation to the contrary is unlawful.
Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby he obtains control, may not occur without the prior
approval of the Nevada Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Nevada Board and Nevada Commission in a
variety of stringent standards prior to assuming control of such Registered
Corporation. The Nevada Commission may also require controlling stockholders,
officers, directors and other persons having a material relationship or
involvement with the entity proposing to acquire control, to be investigated
and licensed as part of the approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada gaming licensees, and Registered Corporations that are
affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environmental for the orderly governance of
corporate affairs. Approvals are, in certain circumstances, required from the
Nevada Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Company's
Board of Directors in response to a tender offer made directly to the
Registered Corporation's stockholders for the purposes of acquiring control of
the Registered Corporation.
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License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the selling of food or refreshments. Nevada
licensees that hold a license as an operator of a slot route, or a
manufacturer's or distributor's license, also pay certain fees and taxes to the
State of Nevada.
Any person who is licensed, required to be licensed, required to be
registered, or is under common control with such persons (collectively,
"Licensees"), and who has become involved in a gaming venture outside of Nevada
is required to deposit with the Nevada Board, and thereafter maintain, a
revolving fund in the amount of $10,000 to pay the expenses of investigation of
the Nevada Board of their participation in such foreign gaming. The revolving
fund is subject to increase or decrease in the discretion of the Nevada
Commission. Thereafter, Licensees are required to comply with certain
reporting requirements imposed by the Nevada Act. Licensees are also subject
to disciplinary action by the Nevada Commission if it knowingly violates any
laws of the foreign jurisdiction pertaining to the foreign gaming operation,
fails to conduct the foreign gaming operation in accordance with the standards
of honesty and integrity required of Nevada gaming operations, engages in
activities that are harmful to the State of Nevada or its ability to collect
gaming taxes and fees, or employs a person in the foreign operation who has
been denied a license or finding of suitability in Nevada on the ground of
personal unsuitability.
Mississippi. The ownership and operation of a gaming business in
Mississippi is subject to extensive laws and regulations, including the
Mississippi Gaming Control Act (the "Mississippi Act") and the regulations (the
"Mississippi Regulations") promulgated thereunder by the Mississippi Gaming
Commission (the "Mississippi Commission") and the Mississippi State Tax
Commission Regulations for Gaming Establishments ("Mississippi Tax
Regulations") promulgated by the Mississippi State Tax Commission ("Mississippi
Tax Commission"). The Mississippi Commission and Mississippi Tax Commission
(together the "Mississippi Gaming Authorities") are empowered to oversee and
enforce the Mississippi Act. Gaming in Mississippi can be legally conducted
only on floating vessels of a certain minimum size in navigable waters of the
Mississippi River or in waters of the State of Mississippi (so called dockside
gambling) which lie adjacent and to the south (principally in the Gulf of
Mexico) of the counties of Hancock, Harrison and Jackson, and only in counties
in Mississippi in which the registered voters have not voted to prohibit such
activities. The voters in Jackson County, the southeastern most county of
Mississippi, have voted to prohibit gaming in that county. However, gaming
could be approved in Jackson County in any subsequently held referendum.
The underlying policy of the Mississippi Act is to ensure that gaming
operations in Mississippi are conducted (i) honestly and competitively, (ii)
free of criminal and corruptive influences, and (iii) in a manner which
protects the rights of the creditors of gaming operations. The laws,
regulations and supervisory procedures of the Mississippi Act seek to (i)
establish and maintain response accounting practices and procedures; (ii)
maintain effective control over the financial practices of licensees, including
establishing minimum procedures for internal fiscal affairs and safeguarding
assets and revenues, providing reliable record keeping, and making periodic
reports to the Mississippi Gaming Authorities; and (iii) provide a source of
state and local revenues through taxation and licensing fees. Changes in such
laws, regulations and procedures could have an adverse effect on the Company.
The Mississippi Act requires that a person (including any corporation or
other entity) must be licensed to conduct gaming activities in Mississippi. A
license will be issued only for a specified location which has been approved as
a gaming site by the Mississippi Commission prior to issuing such license.
Gaming licenses are issued for an initial two year period and are renewable
every two years thereafter. The Mississippi Act also
9
<PAGE> 11
requires that each officer or director of a gaming licensee, or other person
who exercises a material degree of control over the licensee, either directly
or indirectly, must be found suitable by the Mississippi Commission. The
Mississippi Commission will not issue a license or make a finding of
suitability unless it is satisfied, only after an extensive investigation paid
for by the applicant, that the persons associated with the gaming licensee or
applicant for a license are of good character, honesty and integrity, with no
relevant or material criminal record. In addition, the Mississippi Commission
will not issue a license unless it is satisfied that the licensee is adequately
financed or has a reasonable plan to finance its proposed operations from
acceptable sources, and that persons associated with the applicant have
sufficient business probity, competence and experience to engage in the
proposed gaming enterprise. Other parties, including the Partnership's or the
Company's lenders, holders of evidences of indebtedness, underwriters and
employees, may be required to be licensed, and such applications for licensing,
if any, may be denied for any cause deemed reasonable by the Mississippi
Commission. The Mississippi Commission may refuse to issue a work permit to a
gaming employee (i) if the employee has committed larceny, embezzlement or any
crime of moral turpitude, or knowingly violated the Mississippi Act or
Mississippi Regulations, or (ii) for any other reasonable cause.
The Partnership holds the gaming license to the Copa Casino gaming facility
in Gulfport, Mississippi. Patrician, GCI and Artemis, all wholly-owned
subsidiaries of the Company, have been approved as partners of the Partnership.
The license is not transferrable. On August 24, 1995, the Copa Casino's
two-year gaming license came up for renewal and was renewed on a provisional
basis until December 1, 1995. Such provisional renewal occurred so as to allow
the Mississippi Gaming Commission and the Mississippi State Port Authority to
properly evaluate the hurricane evacuation plan recently prepared and submitted
by the Copa Casino. After the evacuation plan has been approved by the
Mississippi State Port Authority and the Gaming Commission, the Gaming
Commission indicated that it will grant a gaming license renewal for the
remaining two years through August 1997.
In October 1994, the Mississippi Gaming Commission adopted a regulation
requiring, as a condition of licensure or license renewal, that a gaming
establishment's site development plan include certain infrastructure facilities
in close proximity to the casino complex which will amount to at least 25% of
the cost of the casino facility. Parking facilities, roads, sewage and water
systems or facilities normally provided by governmental entities do not meet
the infrastructure requirement. The Mississippi Gaming Commission found the
Copa Casino to be in compliance with this regulation as a result of its
construction of a general purpose pier facility and other improvements that
inure to the benefit of the Mississippi State Port Authority.
The Mississippi Commission has the power to deny, limit, condition, revoke
and suspend any license, finding of suitability or registration, or fine any
person, as it deems reasonable and in the public interest, subject to an
opportunity for a hearing. The Mississippi Commission may fine any licensee or
persons who was found suitable up to $100,000 for each violation of the
Mississippi Act or the Mississippi Regulations, which is the subject of an
initial complaint, and up to $250,000 for each such violation which is the
subject of any subsequent complaint. The Mississippi Act provides for judicial
review of any final decision of the Mississippi Commission by petition to a
Mississippi Circuit Court, but the filing of such petition does not necessarily
stay any action taken by the Mississippi Commission pending a decision by the
Circuit Court.
The Partnership must submit detailed financial and operating reports to the
Mississippi Gaming Authorities. Substantially all loans, leases, sales of
securities and other financing transactions entered into by the Partnership
must be reported to, and, in some cases, approved by, the Mississippi Gaming
Authorities.
Under the Mississippi Regulations, a gaming license may not be held by a
publicly traded company, although an affiliate corporation, such as the
Company, may be publicly held so long as the Company receives the approval of
the Mississippi Commission. The Company has received such approval of the
Mississippi Commission. In
10
<PAGE> 12
addition, approval of any public offering of the securities of the Company must
be obtained from the Mississippi Commission if any part of the proceeds from
that offering are intended to be used to construct, acquire or finance the
operation of gaming facilities in Mississippi or to retire or extend
obligations incurred for any such purpose.
Under the Mississippi Regulations, a person is prohibited from acquiring
control of the Company without prior approval of the Mississippi Commission.
The Company is also prohibited from consummating a plan of recapitalization
proposed by management in opposition to an attempted acquisition of control of
the Company and which involves the issuance of a significant dividend to Common
Stockholders, where such dividend is financed by borrowing from financial
institutions or the issuance of debt securities. In addition, the Company is
prohibited from repurchasing any of its voting securities under circumstances
(subject to certain exemptions) where the repurchase involves more than one
percent of the Company's outstanding Common Stock at a price in excess of 110%
of the then market value of the Company's Common Stock from a person who owns
and has for less than one year owned more than three percent of the Company's
outstanding Common Stock, unless the repurchase has been approved by a majority
of the Company's shareholders voting on the issue (excluding the person from
whom the repurchase is being made) or the offer is made to all other
shareholders for the Company.
Any person who, directly or indirectly, or in associations with others,
acquires beneficial ownership of more than five percent of the Common Stock of
the Company must notify the Mississippi Commission of this acquisition and may
be required to be found suitable by the Mississippi Commission. Any person who
becomes a beneficial owner of more than 10% of the Company's Common Stock must
apply for a finding of suitability by the Mississippi Commission. Furthermore,
regardless of the amount of securities purchased, any person who acquires any
beneficial ownership in the Common Stock of the Company may be required to be
found suitable if the Mississippi Commission has reason to believe that the
acquisition and ownership would be inconsistent with the declared policy of
Mississippi. Any person who is required to be found suitable must apply for a
finding of suitability from the Mississippi Commission within 30 days after
being requested to do so, and must deposit with the State Tax Commission a sum
of money which is adequate to pay the anticipated investigatory costs
associated with such finding. Any person who is found not to be suitable by
the Mississippi Commission shall not be permitted to have any direct or
indirect ownership in the Company's Common Stock. Any person who is required
to apply for a finding of suitability and fails to do so, or who fails to
dispose of his or her interest in the Company's Common Stock if found
unsuitable, is guilty of a misdemeanor. If a finding of suitability with
respect to any person is not applied for where required, or if it is denied or
revoked by the Mississippi Commission, the Company is not permitted to pay such
person for services rendered, or to employ or enter into any contract with such
person.
The Mississippi legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and other corporate
defense tactics that affect corporate gaming licensees in Mississippi, and
corporations whose stock is publicly traded that are affiliated with those
operations, may be injurious to stable and productive corporate gaming. The
Mississippi Commission has established a regulatory scheme to ameliorate the
potentially adverse effects of these business practices upon Mississippi's
gaming industry and to further Mississippi's policy to (i) assure the financial
stability of corporate gaming operators and their affiliates; (ii) preserve the
beneficial aspects of conducting business in the corporate form; and (iii)
promote a neutral environmental for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the
Mississippi Commission before the Company can make exceptional repurchases of
voting securities above the current market price thereof (commonly referred to
as "greenmail") and before a corporate acquisition opposed by management can be
consummated. Mississippi's gaming regulations also requires prior approval by
the Mississippi Commission if the Company were to adopt a plan of
recapitalization proposed by the Company's Board of Directors in opposition to
a tender offer made directly to its stockholders for the purposes of acquiring
control of the Company.
11
<PAGE> 13
Neither the Partnership, the Company nor any controlled affiliate may
engage in gaming activities in Mississippi and outside of Mississippi without
approval of the Mississippi Commission. The Mississippi Commission may
require, among other things, that there be adequate governmental regulation of
gaming in the out-of-state location and that there is a means of the
Mississippi Commission to have access to information concerning the
out-of-state gaming operations and persons associated with them.
REGULATION AND LICENSING - ALCOHOLIC BEVERAGES
Nevada. The sale of alcoholic beverages by the Company is subject to
supervision, control and regulation by the City of Reno, which issues licenses
deemed to be nontransferable, revocable privileges, and which has full power to
limit, condition, suspend or revoke such licenses. The Company is presently
licensed to sell alcoholic beverages. Any adverse regulatory act with respect
to this license could have an adverse effect upon the operations of the
Company.
Mississippi. The sale of alcoholic beverages by the Copa Casino is subject
to regulation by the Mississippi State Tax Commission, which issues licenses
which are both revocable and non-transferable, and which has full power to
limit, condition, suspend or revoke any such license. The Partnership is
currently licensed to sell alcoholic beverages as an "On-Premises Retailer."
Any adverse regulatory act with respect to this license could have an adverse
effect upon the operation of the Partnership. The sale of light wine and beer
by Copa Casino is also subject to regulation by the Mississippi State Tax
Commission, which issues licenses which are both revocable and
non-transferable, and which has the full power to limit, condition, suspend or
revoke any such license. However, the enforcement of laws regulating the
acquisition, use, sale and distribution of light wine and beer is left to local
law enforcement agencies. The Partnership is currently licensed to sell light
wine and beer as a "Retailer" under a beer permit and privilege license. Any
adverse regulatory act with respect to this license could have an adverse
effect upon the operation of the Partnership.
12
<PAGE> 14
ITEM 2. PROPERTIES
Reno, Nevada. The Company operates the casino and hotel towers at the
Sands Regency on a Company-owned 6.3 acre site in downtown Reno. The
hotel/casino site also includes the original three-story motor lodge and
four-story hotel tower and other buildings and facilities. Garage and surface
parking is provided at the hotel/casino site and also on a 2.7 acre site
located adjacent to the hotel/casino site. In addition, the Company's
personnel office and certain storage facilities are located one-half block from
the hotel/casino site on a Company- owned .5 acre lot. Management considers
the Company's facility to be in good condition and well-maintained.
In addition to the main hotel/casino facility, the Company owns several
smaller properties in Reno including El Rancho South, a 24-room motel located
on a 1.6 acre parcel and other properties consisting of an aggregate area of
approximately .6 acres.
The Company's Reno hotel/casino property is subject to aggregate
encumbrances of approximately $18.6 million as of June 30, 1995.
Gulfport, Mississippi. The Copa Casino gaming facilities are located on
two decks of a 500 foot cruise ship owned by Gulfside Casino Partnership.
These two decks also include four cocktail lounges/bars, a deli-style
restaurant, a buffet restaurant operated by a third party and a gift shop. The
deck below the two casino decks contains a surveillance area, a vault, count
rooms, security and various operations and administrative offices. An
additional three decks on the ship are available for future expansion of gaming
and dining facilities. The engines for such cruise ship are disabled. All
gaming activities are conducted while moored dockside.
The Copa Casino is permanently moored dockside at a location known as
the "Horseshoe Site." Such site, which is leased from the Mississippi
Department of Economic and Community Development and the Mississippi State Port
Authority, is between the East and West Piers of the Mississippi State Port in
Gulfport, Mississippi. This location, which includes 8.3 acres of land-based
facilities, will accommodate surface parking for approximately 840 vehicles.
The leased facilities also include a docking structure which accommodates the
Copa Casino ship and will allow for mooring of additional vessels. The
docking structure also includes a four-lane roadway and a pedestrian walk which
provides access to the Copa Casino entrance.
The initial term of the lease, as amended, is seven years. The lease
provides for three renewal periods of five years each under the same terms and
conditions except that the rental charges shall be adjusted annually, in years
six through twenty-two, in accordance with changes in the Consumer Price Index.
In addition to the three renewal periods of five years each, the
Partnership has the option to further extend the lease for an additional period
of ten years if the Partnership, within the first ten years of the lease
agreement, constructs, on the leased premises or within the city limits of
Gulfport, a hotel with a minimum of 350 units. If such ten year renewal option
is exercised, the lease term will be extended under the same terms and
provisions of the lease agreement except that the rental amounts will be
adjusted and revised annually in accordance with changes in the Consumer Price
Index.
The lease provides for an annual rental of $500,000 (the "Minimum
Rental") plus five percent (5%) of the gross annual gaming revenues over
$25,000,000 (the "Percentage Rental"). In addition to the Minimum Rental and
Percentage Rental set forth above, the Partnership will also pay, monthly, 3%
of the gross monthly revenues on all activities other than gaming (the
"Additional Percentage Rent"). The Minimum Rental is to be paid in advance, in
equal monthly installments of $41,667 on the first day of every month during
the lease year. For each month, the Percentage Rental and the Additional
Percentage Rental must be calculated and the amounts due, if any, are to be
paid on or before the 10th day of the following month.
13
<PAGE> 15
ITEM 3. LEGAL PROCEEDINGS
In December 1994, a lawsuit was filed by Terry W. Green and Joel R.
Carter, Sr. ("Green and Carter") in the Chancery Court of Harrison County,
Mississippi, First Judicial District against GCI because of GCI's failure to
make payments on promissory note obligations to these two former shareholders
of GCI. These note obligations, in the aggregate amount of $6 million, are
included in the current maturities of long-term debt on the Company's
consolidated balance sheet at June 30, 1995 and are secured by a pledge of
GCI's partnership interest in GCP. All accrued interest expense is also
included as a current liability on the Company's consolidated balance sheet.
In addition to demanding payment of the $6 million plus interest, for
which a partial summary judgment has been granted, the lawsuit by Green and
Carter is demanding the appointment of a receiver for GCI to take possession of
and sell GCI's ownership interest in GCP. The lawsuit also seeks attorneys
fees in an amount not less than $900,000 which management of the Company
believes would not be deemed a reasonable amount in the event of an unfavorable
judgment against GCI. In May 1995, GCP and Patrician were joined as necessary
parties to the lawsuit.
At present, a Charging Order is in place which requires GCP to respond
to inquiries by Green and Carter for the purpose, among other things, of
determining what distributions, if any, have been paid by the partnership to
either of its partners. Moreover, a court order has been granted whereby any
amounts due or to become due GCI by GCP are to be paid to Green and Carter
until the summary judgment against GCI is satisfied. GCP has not generated
adequate operating results to allow for any partner distributions and
distributions are not expected in the near future.
These underlying promissory notes were owed by GCI when The Sands Regent
purchased GCI in February 1994 and have not been assumed or guaranteed by The
Sands Regent. GCI's only tangible asset, and its source of funds for repayment
of the promissory notes, is its partnership interest in GCP. GCI is neither
presently in the financial position to make any payments with respect to these
note obligations nor is it expected to be in such a position in the near
future.
As part of the dispute with Green and Carter, issues will have to be
resolved concerning an amendment to the GCP partnership agreement, effective
January 1, 1993, whereby the profit and loss allocation percentages were
amended from 40% to 80% for Patrician and from 60% to 20% for GCI. Such
amendment was entered into so as to properly reflect the relative financial
risks of Patrician and GCI. Green and Carter claim that GCI's ownership
interest in GCP should be the pre-amendment 60% interest. GCI and Patrician
contend that the amended ownership interests are valid because the underlying
agreement that pledged GCI's interest in GCP to Green and Carter permitted
transfers so long as there were no defaults at the time of transfer.
The Company will continue to monitor the progress of the lawsuit, the
ultimate outcome of which could include the sale of GCI's ownership interest in
GCP.
The Company is also a party to various other legal actions, proceedings
and pending claims arising in the normal course of its business. Management
does not expect the outcome of these claims or suits to have a material adverse
effect on the Company's financial position or results of future operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of security holders in
the fourth quarter of fiscal 1995.
14
<PAGE> 16
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
The Common Stock of the Company is traded in the NASDAQ National Market
System under the symbol "SNDS" and the following table sets forth the range of
high and low closing sales prices as reported by NASDAQ.
<TABLE>
<CAPTION>
CASH
FOR THE YEARS ENDED JUNE 30, HIGH LOW DIVIDEND
- ---------------------------- ------ ------ --------
<S> <C> <C> <C>
1994
First Quarter . . . . . . . . . . . . . . . . . . . $20.25 $12.75 $ .05
Second Quarter. . . . . . . . . . . . . . . . . . . 17.25 11.75 $ .05
Third Quarter . . . . . . . . . . . . . . . . . . . 14.00 10.75 $ .05
Fourth Quarter. . . . . . . . . . . . . . . . . . . 14.50 9.75 $ .05
1995
First Quarter . . . . . . . . . . . . . . . . . . . $12.25 $ 8.75 $ .05
Second Quarter. . . . . . . . . . . . . . . . . . . 10.00 6.25 $ .05
Third Quarter . . . . . . . . . . . . . . . . . . . 8.00 4.50 $ .05
Fourth Quarter. . . . . . . . . . . . . . . . . . . 6.00 5.06 $ .05
</TABLE>
- ----------------
The declaration and payment of dividends in the future will be
determined by the Board of Directors in light of the conditions then existing,
including the Company's earnings, financial condition, capital requirements and
other factors.
As of September 25, 1995, the Company had 178 shareholders of record
and in excess of 400 beneficial shareholders.
ITEM 6. SELECTED FINANCIAL DATA
There is hereby incorporated by reference the information appearing
under the caption "The Sands Regent - Selected Financial Data" in the Company's
1995 Annual Report, filed as Exhibit 13 to this Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
There is hereby incorporated by reference the information appearing
under the caption "The Sands Regent - Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Company's 1995 Annual
Report, filed as Exhibit 13 to this Form 10-K.
15
<PAGE> 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
There is hereby incorporated by reference the Consolidated Financial
Statements and the Notes to the Consolidated Financial Statements in the
Company's 1995 Annual Report, filed as Exhibit 13 to this Form 10-K. Reference
is made to the Consolidated Financial Statements and the Notes to the
Consolidated Financial Statements in Item 14(a)(1) hereof.
With the exception of the aforementioned information and the
information in Items 6 and 7, the Company's 1995 Annual Report is not deemed
filed as part of this Form 10-K.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
16
<PAGE> 18
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is hereby incorporated by reference the information appearing
under the caption "Directors and Executive Officers" in the Company's
definitive Proxy Statement for the Annual Meeting of Shareholders to be held on
November 6, 1995, filed or to be filed with the Securities and Exchange
Commission.
ITEM 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information appearing
under the caption "Compensation of Executive Officers" in the Company's
definitive Proxy Statement for the Annual Meeting of Shareholders to be held on
November 6, 1995, filed or to be filed with the Securities and Exchange
Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is hereby incorporated by reference the information appearing
under the captions "Principal Shareholders" and "Directors and Executive
Officers" in the Company's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on November 6, 1995, filed or to be filed with the
Securities and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information appearing
under the caption "Certain Relationships and Related Transactions" in the
Company's definitive Proxy Statement for the Annual Meeting of Shareholders to
be held on November 6, 1995, filed or to be filed with the Securities and
Exchange Commission.
17
<PAGE> 19
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)(1) FINANCIAL STATEMENTS.
Included in Part II of this Report:
Independent Auditors' Report
Consolidated Balance Sheets -- June 30, 1995 and 1994
Consolidated Statements of Operations -- Years Ended
June 30, 1995, 1994 and 1993
Consolidated Statements of Stockholders' Equity -- Years
Ended June 30, 1995, 1994 and 1993
Consolidated Statements of Cash Flows -- Years Ended
June 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
(A)(2) FINANCIAL STATEMENT SCHEDULES.
Included in Part IV of this Report:
As of and for the Years Ended June 30, 1995, 1994 and 1993:
Independent Auditors' Report on Schedules
Schedule II -- Valuation and Qualifying Accounts
All other schedules have been omitted because they are not applicable
or the required information is shown in the financial statements or notes
thereto.
18
<PAGE> 20
(A)(3) EXHIBITS
3(a)(i) Restated Articles of Incorporation of the Company
(Exhibit 3(a) to the Company's Registration Statement
(Registration No. 2-93453) on Form S-1).*
3(a)(ii) Certificate of Amendment to the Restated Articles of
Incorporation of the Company, dated November 2, 1987
(Exhibit 4(a) to the Company's Form 10-Q for the
quarter ended December 31, 1987).*
3(b)(i) Amended and Restated Bylaws of the Company, as amended
April 29, 1985, and currently in effect (Exhibit 3(b)
to the Company's Form 10-K for the fiscal year ended
June 30, 1985).*
3(b)(ii) Resolution of Amendment to the Bylaws of the Company,
dated November 2, 1987 (Exhibit 4(b) to the Company's
Form 10-Q for the quarter ended December 31, 1987).*
4(a) Amended Trust Agreement, dated February 22, 1987, among
Antonia Cladianos II as trustor and beneficiary and
Pete Cladianos, Jr. as trustee (Exhibit 4(a) to the
Company's Form 10-K for the fiscal year ended June 30,
1987).*
4(b) Amended Trust Agreement, dated February 19, 1987, among
Pete Cladianos III as trustor and beneficiary and Pete
Cladianos, Jr. as trustee (Exhibit 4(b) to the
Company's Form 10-K for the fiscal year ended June 30,
1987).*
10(a) Amended and Restated Stock Option Plan for Executive
and Key Employees of the Sands Regent and Forms of
Stock Option Agreements (Exhibit 4(a) to the Company's
Registration Statement (Registration No. 33-59574) on
Form S-8).*
10(b) Deferred Compensation Plan for Directors of the
Company (Exhibit 10(e) to the Company's Registration
Statement (Registration No. 2-93453) on Form S-1).*
10(c) Form of Indemnity Agreement for Directors and Officers
of the Company (Exhibit 10(f) to the Company's Form
10-K for the fiscal year ended June 30, 1988).*
10(d) Loan Agreement, dated March 31, 1993, by and between
First Interstate Bank of Nevada, National Association,
First Interstate Bank of California, The Daiwa Bank,
Limited and Zante, Inc. and the related Term and
Revolving Credit Promissory Note; Guarantee of Loan by
the Sands Regent; Deed of Trust, Fixture Filing and
Security Agreement with Assignment of Rents (Exhibit
10(b) to the Company's Form 10-Q for the Quarter ended
March 31, 1993).*
10(e) First Amendment to Loan Agreement, dated June 27, 1994,
by and between First Interstate Bank of Nevada,
National Association, The Daiwa Bank Limited and Zante,
Inc., Borrower, and The Sands Regent, Guarantor
(Exhibit 10(e) to the Company's Form 10-K for the
fiscal year ended June 30, 1994).*
10(f) International Swap Dealers Association, Inc. Master
Agreement for interest rate swap, dated March 23,1994,
by and between First Interstate Bank of Nevada N.A. and
Zante, Inc., and the related Guarantee by The Sands
Regent and Letter Agreement of Confirmation (Exhibit
10(f) to the Company's Form 10-K for the fiscal year
ended June 30, 1994).*
19
<PAGE> 21
10(g) General Partnership Agreement, effective as of December
31, 1992, between Gulfside Casino, Inc. and Patrician,
Inc. (a wholly-owned subsidiary of the Sands Regent)
(Exhibit 10(a) to the Company's Form 10-Q for the
Quarter ended March 31, 1993).*
10(h) First Amendment to Gulfside Casino, a Mississippi
General Partnership, General Partnership Agreement,
dated April 15, 1994, between Gulfside Casino, Inc. and
Patrician, Inc. (both wholly owned subsidiaries of The
Sands Regent) (Exhibit 10(a) to the Company's Form 10-Q
for the Quarter ended March 31, 1994).*
10(i) Second Amendment to Gulfside Casino, a Mississippi
General Partnership, General Partnership Agreement,
dated December 9, 1994, between Gulfside Casino, Inc.
and Patrician, Inc., (both wholly-owned subsidiaries of
The Sands Regent)(Exhibit 10(a) to the Company's Form
10-Q for the Quarter ended December 31, 1994).*
10(j) Agreement for the Purchase of Stock of the Gulfside
Casino, Inc. and certain Assets of McDonald Limited,
dated February 25,1994 (Exhibit 2(a) to the Company's
Form 8-K/A for event reporting date of February 14,
1994).*
10(k) Gulfside Casino, Inc. Settlement Agreement, dated
August 20, 1993, by and between Gulfside Casino, Inc.,
a Mississippi Corporation, and Joel R. Carter, Sr. and
Terry Green (Exhibit 10(j) to the Company's Form 10-K
for the year ended June 30,1994).*
10(l) Settlement Agreement dated November 2, 1984, by and
between Hughes Properties, Inc., and Zante, Inc.
(Exhibit 10(u) to the Company's Registration Statement
(Registration No. 2-93453) on Form S-1).*
10(m) Franchise Agreement dated October 9, 1986 and as
amended on October 9, 1986, by and between Roma
Corporation and Zante, Inc. (Exhibit 10(r) to the
Company's Form 10-K for the fiscal year ended June 30,
1987).*
10(n) Agreement, dated as of January 2, 1995, between David
R. Wood and The Sands Regent.**
13 1995 Annual Report to Shareholders.**
21 Subsidiaries: Zante, Inc., Patrician, Inc., and
Artemis, Inc., Nevada Corporations, and Gulfside
Casino, Inc., a Mississippi corporation, are wholly
owned by the Company. Patrician, Inc., Gulfside Casino,
Inc.,and Artemis, Inc., are the sole partners in
Gulfside Casino Partnership, a Mississippi general
partnership.
23 Independent Auditors' Consent to the incorporation by
reference into specified registration statement on Form
S-8 of their reports contained in or incorporated by
reference into this report.**
27 Financial Data Schedule.**
-----------------
* Incorporated by reference
** Filed herewith
20
<PAGE> 22
(B) REPORTS ON FORM 8-K.
The Company did not file any reports on Form 8-K during the last quarter of
fiscal 1995.
(C) INDEX TO EXHIBITS.
(D) FINANCIAL STATEMENT SCHEDULES.
Financial statement schedules required by Regulation S-X are excluded from
the 1995 Annual Report to the Shareholders by Rule 14a-3(b)(1). See
Schedule II to the Financial Statements appearing under Item 14(a)(2)
hereof.
21
<PAGE> 23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Date: September 27, 1995 By: PETE CLADIANOS, JR.
------------------------------
Pete Cladianos, Jr., President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- --------- -------- ----
<S> <C> <C>
PETE CLADIANOS, JR. President (Chief September 27, 1995
- ---------------------------- Executive Officer)
Pete Cladianos, Jr. and Director
KATHERENE LATHAM Chairman of the September 27, 1995
- --------------------------- Board of Directors
Katherene Latham
DAVID R. WOOD Vice President of September 27, 1995
- --------------------------- Finance and Administration,
David R. Wood Treasurer (Chief
Financial and Accounting
Officer) and Director
PETE CLADIANOS III Vice President, September 27, 1995
- --------------------------- Secretary and Director
Pete Cladianos III
JON N. BENGTSON Director September 27, 1995
- ---------------------------
Jon N. Bengtson
JOSEPH G. FANELLI Director September 27, 1995
- ---------------------------
Joseph G. Fanelli
WELDON C. UPTON Director September 27, 1995
- ---------------------------
Weldon C. Upton
</TABLE>
22
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of The Sands Regent:
We have audited the consolidated financial statements of The Sands Regent and
subsidiaries as of June 30, 1995 and 1994, and for each of the three years in
the period ended June 30, 1995, and have issued our report thereon dated August
11, 1995. Such consolidated financial statements and report are included in
your 1995 Annual Report to Shareholders and are incorporated herein by
reference. Our audits also included the consolidated financial statement
schedule of The Sands Regent and subsidiaries, listed in Item 14. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits. In our
opinion, such consolidated financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
[SIG]
Deloitte & Touche LLP
Reno, Nevada
August 11, 1995
23
<PAGE> 25
The Sands Regent
Schedule II
Valuation and Qualifying Accounts
(in thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged to
Beginning Costs and Balance at
Description of Year Expenses Deductions(1) End of Year
----------- ---------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts Receivable:
Year ended June 30, 1995 . . . . . . . . $111 $92 $(56) $147
Year ended June 30, 1994 . . . . . . . . 72 88 (49) 111
Year ended June 30, 1993 . . . . . . . . 94 28 (50) 72
</TABLE>
- ----------------
(1) Write-offs of uncollectible accounts receivable, net of recoveries
24
<PAGE> 26
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER NUMBERED
- ------- PAGE
------------
<S> <C> <C>
10(n) Agreement dated as of January 2, 1995, between David R. Wood and
The Sands Regent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13 1995 Annual Report to Shareholders . . . . . . . . . . . . . . . . . . . . .
23 Independent Auditors' Consent to the incorporation by reference into
specified registration statement on Form S-8 of their reports contained
in or incorporated by reference into this report . . . . . . . . . . . . . .
27 Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 1
EXHIBIT 10(N)
AGREEMENT
This AGREEMENT, dated as of January 2, 1995, is made by and between David
R. Wood (hereinafter referred to as the "Executive") and The Sands Regent, a
Nevada corporation (the "Company").
RECITALS
A. The Executive Compensation Committee of the Board of Directors of the
Company has determined that it is in the best interest of the Company's
shareholders that appropriate steps should be taken to reinforce and encourage
the continued dedication of the Executive to the Executive's assigned duties
without distraction arising from the possibility of a Change of Control of the
Company.
B. In order to induce the Executive to remain in the employ of the Company
and to induce the Executive to give the Executive's continued attention and
dedication to the Executive's assigned duties in the event of a Change of
Control of the Company, the Company desires to provide the Executive with
certain benefits and inducements, as set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and the Executive do hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms used in this Agreement, shall have the meaning
specified below:
SECTION 1.1 -- BOARD OF DIRECTORS.
"Board of Directors" shall mean the board of directors of the Company.
SECTION 1.2 -- CAUSE.
"Cause" shall mean termination of employment with the Company because of
(i) the Executive's willful failure or refusal to satisfactorily perform the
duties of his position after notice by the Company; (ii) the commission by the
Executive of a felony or the willful perpetration by the Executive of a
dishonest act against or breach of fiduciary duty toward the Company; or (iii)
any other act or omission by the Executive which is injurious in any material
respect to the Company.
SECTION 1.3 -- CHANGE IN CONTROL.
A "Change in Control" shall be deemed to have occurred if (i) any person or
group of persons (as defined in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act") together with its affiliates,
excluding employee benefit plans of the Company is or becomes, directly or
indirectly, the "beneficial owner" (as defined in Rule 13d-3 promulgated under
the 1934 Act) of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding securities; or (ii) as a
result of a proxy contest, merger, consolidation, sale of assets, tender offer
or exchange offer or as a result of any combination of the foregoing, Directors
who were members of the Board of Directors two years prior to such time and new
Directors whose election or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds of the Directors
still in office who were Directors two years prior to such time, cease to
constitute at least two-thirds of the members of the Board of Directors; or
(iii) the shareholders of the Company approve a merger or consolidation of the
Company with any other corporation or entity regardless of which entity is the
survivor, other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
<PAGE> 2
represent (either by remaining outstanding or being converted into voting
securities of the surviving entity) at least 80% of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or (iv) the shareholders of the
Company approve a plan of complete liquidation or winding-up of the Company or
an agreement for the sale or disposition by the Company of all or substantially
all of the Company's assets.
SECTION 1.4 -- CODE.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
SECTION 1.5 -- COMPANY.
"Company" shall mean The Sands Regent, a Nevada corporation, its
subsidiaries and affiliates, and any successor to its business, whether direct
or indirect, by purchase of securities, merger, consolidation, purchase of all
or substantially all of the Company's assets or otherwise.
SECTION 1.6 -- DATE OF TERMINATION.
"Date of Termination" shall mean in the case of termination of the
Executive's employment by the Company for Cause or termination by the Executive
for Good Reason or termination for any other reason, the date specified in the
Notice of Termination, which date shall not be less than thirty days after the
date such Notice of Termination is given.
SECTION 1.7 -- DISABILITY.
"Disability" shall mean absence from performance of assigned duties for the
Company on a full-time basis for 12 consecutive calendar months as a result of
incapacity due to medically documented physical or mental illness; provided that
the Executive shall not have returned to the full-time performance of the
Executive's duties within 30 calendar days of actual receipt of written Notice
of Termination for the reason of Disability. Such Notice of Termination may not
be given prior to the expiration of the 12-month period of Disability.
SECTION 1.8 -- EXECUTIVE.
"Executive" shall have the meaning provided in the first paragraph of this
Agreement.
SECTION 1.9 -- GOOD REASON.
"Good Reason" shall mean the occurrence of any of the following events
without the Executive's express written consent:
(a) the assignment to the Executive of duties inconsistent with the
position and status of an executive of the Company, or a substantial
alteration in the nature, status or prestige of the Executive's
responsibilities as Chief Financial Officer of the Company from those in
effect immediately prior to a Change in Control;
(b) a reduction by the Company in the Executive's base salary or bonus
opportunity as in effect immediately prior to the occurrence of a Change of
Control;
(c) the reassignment of the Executive to a location which increases
the Executive's commute by more than 50 miles on a daily round trip basis;
(d) the Executive's assignment to a location other than the principal
executive offices of the Company;
(e) the Company's failure to continue, or a substantial change in, the
Executive's participation in any compensation or benefit plans;
(f) the Company's failure to obtain the agreement of any successor to
assume the Agreement;
2
<PAGE> 3
(g) any other items which in the Company's judgment should give the
Executive the right to terminate his employment and receive severance
benefits; or
(h) any purported termination of the employment of the Executive by
the Company which is not effected according to the requirements of a Notice
of Termination as defined in Section 1.10 herein.
SECTION 1.10 -- NOTICE OF TERMINATION.
"Notice of Termination" shall mean a notice, in writing, to the Executive
from the Company or to the Company from the Executive, which indicates the
specific termination provision enumerated in this Agreement relied upon, and
which sets forth in reasonable detail the facts and circumstances alleged to
provide a basis for termination of the Executive's employment by the Company or
by the Executive. Such notice must be communicated to the Executive in
accordance with Section 4.3 herein.
SECTION 1.11 -- RETIREMENT.
"Retirement" shall mean termination of the Executive's employment on or
after the date on which the Executive attains sixty-five years of age or
termination in accordance with any retirement agreement entered into between the
Executive and the Company.
ARTICLE II
TERM
This Agreement shall be effective commencing on the date hereof and shall
continue in effect through February 28, 2000; provided, however, that if a
Change of Control shall have occurred during the term of this Agreement, this
Agreement shall continue in effect for the lesser of (i) a period of 36 months
beyond the effective date of the Change of Control; or (ii) a period ending on
the date of the Retirement of the Executive.
ARTICLE III
BENEFITS AND COMPENSATION
SECTION 3.1 -- WHEN BENEFITS PAYABLE.
No benefits shall be payable under this Agreement and the provisions of
this Agreement shall be of no force or effect unless there shall have been a
Change in Control, and the Executive's employment with the Company shall have
been terminated within three years after the Change in Control. If such a Change
in Control has occurred and the Executive's employment with the Company is
terminated within three years after the Change in Control, unless such
termination is (i) because of the death or Disability of the Executive, or (ii)
by the Executive other than for Good Reason, the Executive shall be entitled to
the benefits enumerated in this Article 3, under the conditions imposed herein.
SECTION 3.2 -- BENEFITS UPON TERMINATION FOR CAUSE.
In the event that the Executive's employment with the Company is terminated
for Cause, the Executive shall receive the Executive's full base compensation
(plus accrued but unpaid vacation benefits) as earned through the Date of
Termination at the rate in effect at the time Notice of Termination is given.
Following payment of said amount, the Company shall have no further obligations
to the Executive under this Agreement.
SECTION 3.3 -- BENEFITS UPON RETIREMENT.
In the event that the Executive's employment with the Company is terminated
by reason of the Executive's Retirement, the Executive shall be entitled to the
benefits under the Company's regular
3
<PAGE> 4
retirement program, or, if a separate retirement agreement has been entered into
between the Executive and the Company, benefits shall be provided according to
the terms of that agreement.
SECTION 3.4 -- BENEFITS UPON TERMINATION OTHER THAN FOR CAUSE, RETIREMENT OR
DISABILITY; OR TERMINATION FOR GOOD REASON.
In the event that the employment of the Executive shall be terminated (i)
by the Company for any reason other than for Cause, Disability or Retirement
within three years after the occurrence of such Change in Control or (ii) by the
Executive for Good Reason within three years after the occurrence of such Change
in Control, then
(a) the Executive shall be entitled to receive: (i) the Executive's
full base compensation (plus accrued but unpaid vacation benefits) as
earned through the Date of Termination at the rate in effect at the time
Notice of Termination is given; (ii) for a 36-month period after such
termination (or such lesser number of months up to the date of the
Executive's Retirement or until the date the Executive obtains a new job of
similar status), life, disability, accident and health insurance coverage
substantially the same as that which the Executive received immediately
prior to the Change of Control but increased to the extent that such
benefits were increased following the Change of Control; and (iii) a lump
sum payment (the "Severance Payment") from the Company to the Executive of
a dollar amount equal to 300% of (x) the greater of (1) the annual base
compensation for the Executive for the twelve-month period immediately
preceding the Change of Control or (2) the annual base compensation of the
Executive in effect at the time the Notice of Termination is given and (y)
any bonus paid during the twelve-month period immediately preceding the
time the Notice of Termination is given.
(b) all options to purchase securities of the Company then held by the
Executive shall be immediately exercisable, without regard to whether such
options are exercisable at such time pursuant to the terms of the documents
under which such options were granted; provided that if such Change of
Control is to be accomplished through a tender offer or an exchange offer,
such options shall be exercisable at a time that shall permit the Executive
to tender the shares received upon the exercise of the options in such
tender or exchange offer; and
(c) any securities of the Company then held by the Executive that are
subject to any restriction on transfer, other than restrictions imposed
only be federal or state securities laws, shall lapse and be of no further
force and effect with the result that the Executive shall be permitted to
sell, transfer or otherwise dispose of such securities without regard to
any such restrictions.
SECTION 3.5 -- TAX DEDUCTIBILITY OF BENEFIT PAYMENTS.
In the event that any payment or benefit received or to be received by the
Executive in connection with the termination of the Executive's employment
pursuant to the terms of this Agreement would not be deductible (in whole or in
part) by the Company as a result of the operation of Section 280G of the Code,
the amount of the Severance Payment shall be reduced (but not below zero) until
no portion of the Severance Payment is not deductible as a result of Section
280G of the Code.
SECTION 3.5 -- LEGAL FEES AND EXPENSES.
If, following termination of the employment of the Executive within three
years after a Change in Control, the Executive shall incur any legal fees or
expenses as a result of the termination of the Executive's employment (including
any such fees or expenses incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any right or benefit provided by
this Agreement), the Company shall pay or reimburse the Executive for all such
fees or expenses; provided, however, that if the Executive is terminated for
"Cause," the losing party shall pay the attorneys fees and costs of the
prevailing party.
4
<PAGE> 5
SECTION 3.6 -- NO MITIGATION.
Except as provided in Section 3.4(a)(ii) of this Agreement, the Executive
shall not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor shall the amount of any
payment or benefit provided for in this Agreement be reduced or offset by any
compensation earned by the Executive as a result of employment by another
employer or by retirement benefits after the Date of Termination or otherwise.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1 -- SUCCESSORS; BINDING AGREEMENT.
The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. The failure of
the Company to obtain such assumption agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same
terms as the Executive would be entitled to hereunder if the Executive had
terminated the Executive's employment for Good Reason, except that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
SECTION 4.2 -- SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of, and be enforceable by, the
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees of the Executive. If the Executive should
die within three years after a Change in Control and during the term of this
Agreement and while any amount would still be payable to the Executive hereunder
if the Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the Executive's devisee, legatee or other designee or if there is no such
designee, to the Executive's estate.
SECTION 4.3 -- NOTICE.
Notices and all communications provided for in this Agreement shall be in
writing and shall be deemed to have been received when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth at the end of this Agreement,
provided that all notices to the Company shall be directed to the attention of
the Board of Directors with a copy to the Secretary of the Company, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
SECTION 4.4 -- NO WAIVER.
No provision of this Agreement may be modified, waived or discharged unless
in writing and signed by the Executive and such officer of the Company as may be
specifically designated or authorized by the Board of Directors or by a
Committee of the Board of Directors. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.
SECTION 4.5 -- ENTIRE AGREEMENT.
No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement and this Agreement constitutes the
entire agreement of the parties.
5
<PAGE> 6
SECTION 4.6 -- CONTROLLING LAW.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Nevada.
SECTION 4.7 -- INVALID PROVISION.
The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
SECTION 4.8 -- COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which shall
be deemed to be an original, and all such counterparts together shall constitute
but one and the same instrument.
SECTION 4.9 -- THE EXECUTIVE'S EMPLOYMENT BY THE COMPANY.
Nothing contained in this Agreement (i) obligates the Company or any
subsidiary of the Company to employ the Executive in any capacity whatsoever, or
(ii) prohibits or restricts the Company (or any such subsidiary) from
terminating the employment, if any, of the Executive at any time or for any
reason whatsoever, with or without cause.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
"COMPANY"
THE SANDS REGENT, a Nevada Corporation
Dated: February 6, 1995 By: PETE CLADIANOS, JR.
---------------------------------
President
By: PETE CLADIANOS, III
---------------------------------
Secretary
Address:
345 North Arlington Avenue
Reno, Nevada 89501
"EXECUTIVE"
Dated: February 6, 1995 DAVID R. WOOD
-------------------------------------
David R. Wood
Address:
4269 Muirwood Circle
Reno, Nevada 89509
6
<PAGE> 1
EXHIBIT 13
LOGO
LOGO LOGO
1995 ANNUAL REPORT
<PAGE> 2
THE SANDS REGENT
- --------------------------------------------------------------------------------
The Company owns and operates The Sands Regency Hotel/Casino in downtown
Reno, Nevada and, through three wholly-owned subsidiaries, owns Gulfside Casino
Partnership which owns and operates the Copa Casino in Gulfport, Mississippi.
RENO, NEVADA PROPERTIES AND OPERATIONS
The Sands Regency Hotel/Casino, located in Reno, Nevada, has approximately
27,000 square feet of gaming space which offers 18 table games, two keno games
and 783 slot machines. The complex has 938 hotel rooms, including 32 suites of
various sizes, and also includes three restaurants, a "Winchell's Donut House",
a "Pizza Hut", an "Arbys" restaurant operated by a third party, a
"Baskin-Robbins" and an "Orange Julius" operated by a third party and four
cocktail lounges.
The Company's facilities also include a gift shop, a video arcade, a
beauty/barber shop and a liquor store, each operated by third parties, a health
club, a swimming pool and over 10,000 square feet of convention and meeting
space which can seat up to 650 people. The Company maintains six parking areas
on its main hotel/casino property and adjacent to it, including two parking
garages, with a total combined capacity for approximately 1,000 vehicles.
The Company's property holdings also include a .5 acre lot, located
one-half block from the hotel/casino site, used for the Company's personnel
office and for storage and a 1.6 acre parcel in Reno on which is located a small
motel and a bar.
The Company's Reno hotel/casino operations are conducted 24 hours a day
every day of the year. Although the Company offers, on a very limited basis,
complimentary hotel accommodations to select customers. No group arrangements
known as "junkets" are conducted.
GULFPORT, MISSISSIPPI PROPERTIES AND OPERATIONS
The Copa Casino, which is owned and operated by Gulfside Casino
Partnership, commenced operations in September 1993. The Company, through a
wholly-owned subsidiary, initially owned a 40% equity interest in the Copa
Casino. In February 1994, the Company acquired the remaining ownership interest
in Gulfside Casino Partnership through the acquisition of Gulfside Casino, Inc.,
the other partner at that time. The Company now owns 100% of the Copa Casino.
The Copa Casino is located aboard a 500 foot cruise ship owned by the
partnership. In Mississippi, all gaming facilities must be constructed on
floating facilities on or juxtapositional to approved navigable waterways. Such
facilities need not cruise into the waterways and, as such, become permanently
moored as dockside gaming facilities. The Copa Casino is also permanently
moored.
The Copa Casino consists of approximately 24,000 square feet of gaming area
located on two decks. The Copa offers 679 slot machines and 29 table games,
including craps, roulette, blackjack, caribbean stud, let it ride and poker. In
addition, the facility also includes 4 cocktail lounges/bars, a deli-style
restaurant, a buffet restaurant operated by a third party and various ancillary
services and facilities.
The Copa Casino is permanently moored dockside at a location known as the
"Horseshoe Site." Such location, which is leased to the partnership by the
Mississippi Department of Economic and Community Development and the Mississippi
State Port Authority, is between the East and West Piers of the Mississippi
State Port in Gulfport, Mississippi. This location, which includes 8.3 acres of
land based facilities, will accommodate surface parking for approximately 840
vehicles. The leased facilities also include a docking structure which
accommodates the Copa Casino ship and will allow for mooring of additional
vessels. The docking structure also includes a roadway and pedestrian walk which
provides access to the Copa Casino entrance.
As in Nevada, the Mississippi operations are conducted 24 hours a day every
day of the year. Present operations provide for the offering of complimentary
food and beverage on a limited basis. Group arrangements, known as "junkets" are
not conducted.
<PAGE> 3
TO OUR STOCKHOLDERS
- --------------------------------------------------------------------------------
1995 was a trying year; a year filled with obstacles and impediments. We
started 1995 in much the same way as we ended 1994. The trend in depressed
revenues from our Reno operation continued due, in part, to increased
competition from the new Las Vegas mega-resorts and because of traffic delays on
Interstate 80 west of Reno caused by road and bridge repair work during the
summer and fall of 1994. Adding to this was the weather. During our second and
third fiscal quarters, both Nevada and California experienced unusually high
levels of snow and rain which inhibited travel.
In February, the long awaited Men's American Bowling Congress returned to
the Reno area inaugurating Reno's newly constructed state-of-the-art National
Bowling Stadium. Continuing through July, this event drew in excess of 100,000
visitors to the Reno area many of whom were guests at our hotel. Our revenues
were bolstered as a result of this event but the increase was not sufficient to
overcome the decline in revenues that occurred prior to the February
commencement date. Our current year fourth quarter operating results attest to
the positive impact of the Men's American Bowling Congress. In the fourth
quarter, income from operations from our Reno property increased by
approximately 14% over the same quarter last year.
In Mississippi, we have still not successfully achieved satisfactory
operating results. During fiscal 1995, the Copa Casino continued to generate a
net loss although operating results in the last half of the year were
encouraging. The Copa Casino did manage, however, to produce a positive cash
flow in fiscal 1995 in spite of being in a very competitive market that has
experienced several casino closings in the last year.
The loss from the Copa Casino is representative of some of the problems we
have encountered. In December 1994, two former shareholders of one of our
subsidiary companies, Gulfside Casino, Inc., filed a lawsuit against that
company. Gulfside Casino, Inc. was acquired by us in February 1994 in order for
us to own 100% of the Copa Casino and these two former shareholders were owed
monies by Gulfside Casino, Inc. at that time. These former shareholders were to
be paid by Gulfside Casino, Inc. whose source of funds is partner distributions
from the Copa Casino. The Copa Casino has not made partner distributions because
Copa Casino operating results do not warrant distributions. As a result, these
former shareholders have not been paid amounts due them under the promissory
note obligations and have filed a lawsuit to collect all amounts due and owing.
In October 1994 and prior to the lawsuit being filed, the Copa Casino
received notification from its landlord, the Mississippi State Port Authority,
that the State Port Authority would not authorize the construction of a hotel at
the Copa Casino's leased site. The Port Authority's refusal was reaffirmed at an
August 1995 Port Authority meeting at which we were curtly dismissed. This
refusal to allow us to develop our leasehold site appears to be in direct
conflict with, and contradicts, our lease agreement with the Port Authority
which specifically provides for the construction of a hotel. As a matter of
fact, our lease agreement encourages our construction of a hotel since we can
extend our lease term for 10 additional years if we build at least a three
hundred fifty room hotel.
Management of the Copa Casino has also encountered difficulties in
developing a mooring system or an evacuation plan which will satisfy the
hurricane preparedness requirements of the Mississippi Gaming Commission and the
Mississippi State Port Authority. After several mooring/anchoring system designs
were found to be inappropriate, we finally developed an evacuation plan that
appeared to be workable and submitted that plan to the Mississippi Gaming
Commission and the Mississippi State Port Authority. The Mississippi Gaming
Commission approved our plan, in concept, and will accept it in lieu of a
mooring structure once it has been approved by the Mississippi State Port
Authority. We are in the process of responding to Port Authority inquiries and
remain hopeful that all issues can be adequately addressed. The Mississippi
Gaming
2
<PAGE> 4
- --------------------------------------------------------------------------------
Commission granted us a provisional gaming license at our relicensing hearing in
August 1995. Such provisional license was issued through December 1, 1995 and
will be renewed for the normal two year period once the Mississippi State Port
Authority has approved our evacuation plan.
Despite the trials, tribulations and frustrations of 1995, the future is
exciting. In Reno, there are new challenges that will require us to grow and
change. A new mega-resort has entered the Reno market and some of our other
competitors are also expanding their existing hotel-casinos. In the near-term,
these new facilities have, and will, put pressure on our resources and revenues
because new market areas have not been appropriately developed. In the
long-term, new visitors should be attracted to Reno and we will endeavor to
position ourselves to be a benefactor of this growth.
In Mississippi, we will continue various marketing efforts to expand our
customer base and to attract repeat business. The 1995 write-down of long-lived
assets to estimated net realizable values, relating to our Mississippi
operations, will benefit future earnings through reduced depreciation and
amortization expense. We will continue to pursue approval of our hurricane
evacuation plan and will also continue efforts to obtain approval to develop our
leasehold site. Development of our leasehold site is ultimately necessary in
order for us to achieve future successes and to remain competitive.
We have seen difficult times before and are optimistic that we will see
great successes in the future. We are thankful for our spirited and loyal
employees in Reno and Mississippi and appreciate our many guests who are our
reason for existence.
Respectfully,
/s/ Pete Cladianos, Jr.
-----------------------------------
Pete Cladianos, Jr.
President and Chief Executive Officer
Reno, Nevada
September 27, 1995
3
<PAGE> 5
THE SANDS REGENT
SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
For the years ended June 30,
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- ------- ------- ------- -------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Operating revenues(1) $ 60,973 $51,446 $43,877 $41,264 $38,666
Income (loss) from operations (11,748) 8,178 8,608 7,633 5,498
Net income (loss) (11,428) 7,730 5,481 4,877 4,487
Net income (loss) per share $ (2.54) $ 1.76 $ 1.27 $ .97 $ .67
Cash dividends per share $ .20 $ .20 $ .20 $ .15 --
OPERATING DATA:
Casino square footage(2) 51,000 51,000 27,000 27,000 27,000
Number of slot machines(2) 1,459 1,483 783 783 766
Number of hotel rooms(2) 938 938 938 938 938
Average hotel occupancy rate 87.1% 89.7% 89.0% 89.3% 85.7%
BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments(2) $ 12,214 $ 9,804 $ 3,274 $ 9,674 $11,971
Total assets(2) 66,253 82,268 56,559 53,917 57,344
Long-term debt(2) 17,808 27,559 13,676 14,448 1,851
Total stockholders' equity(2) 31,849 44,138 35,423 30,719 48,694
</TABLE>
- ---------------
(1) Revenues are net of complimentaries.
(2) Information presented as of the end of the period.
4
<PAGE> 6
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
COMPARISON OF 1995 TO 1994
A significant reason for the increases in revenue and costs and expenses in
fiscal 1995, compared to fiscal 1994, is due to the consolidation of Gulfside
Casino Partnership ("GCP") operating results for all of fiscal 1995. The Company
increased its ownership in GCP, which owns and operates the Copa Casino, to 100%
in February 1994 when the Company acquired all of the issued and outstanding
capital stock of Gulfside Casino, Inc. ("GCI"). Prior to such acquisition, the
Company, through a wholly owned subsidiary, held a 40% equity ownership interest
in GCP and accounted for it under the equity method of accounting.
For the year ended June 30, 1995, revenues increased to $61 million
compared to $51.4 million for fiscal 1994. Such increase is due to the inclusion
of Copa Casino revenues, on a consolidated basis, for the entire 1995 fiscal
year. For the same comparable annual periods, income from operations decreased
from $8.1 million in fiscal 1994 to a loss from operations of approximately
$11.7 million in fiscal 1995 and net income decreased from $7.7 million, or
$1.76 per share, to a net loss of $11.4 million or $2.54 per share. The decrease
in income from operations is primarily a result of the recognition of an
impairment in value of long-lived assets of the Copa Casino and GCI of $17.5
million and a decline in revenues and profits from the Reno operations. Net
income and net income per share decreased because of the decrease in income from
operations and due to a non-recurring $5.1 million pre-tax gain from the sale of
non-operating real property in Reno, Nevada that occured in fiscal 1994.
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 $315,000 in the year ended June 30,
1995, compared to the prior year, is due to a decrease in hotel occupancy and
the sale of a motel property. Sold by the Company in March 1994, the motel
property contributed approximately $223,000 to lodging revenue in fiscal 1994.
Occupancy at the Reno, Nevada hotel (the Copa Casino does not have hotel/motel
rooms) decreased from 89.7% in fiscal 1994 to 87.1% in fiscal 1995. For the same
comparable periods, the average room rate increased slightly from approximately
$32 to $33.
The increase in gaming revenue of $11.6 million is composed of gaming
revenue from the Copa Casino of $13.1 million which was offset by a decrease in
gaming revenue at the Sands Regency in Reno of approximately $1.5 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 $79 in the year ended June
30, 1994 to $77 in the year ended June 30, 1995.
The increase in food and beverage revenue of $837,000 includes the addition
of Copa Casino revenue of $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 $539,000 is
primarily due to the addition of Copa Casino results of operations. Costs and
expenses from the Reno operation did not decrease proportionally, relative to
the decrease in revenue, due to an increase in food and beverage product costs.
The decrease in other revenue of $2.1 million is composed of a decrease in
retail liquor store sales from the Reno operation of $2.7 million which has been
partially offset by additional other revenue from the Copa Casino of $462,000.
In August 1994, the retail liquor store business, which was operated by the
Company, was
5
<PAGE> 7
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
- -------------------------------------------------------------------------------
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 related decrease in other costs and expenses of $2.6 million is principally
due to the elimination of costs and expenses associated with the retail liquor
store.
The increases in complimentary lodging, food and beverage, deducted from
revenue, and gaming costs and expenses of $466,000 and $7.3 million,
respectively, are primarily due to the inclusion of the Copa Casino.
Approximately $339,000 of the increase in gaming costs and expenses is
attributable to the Reno operation and includes increases in salaries, wages and
benefits, the cost of complimentary goods and services provided to patrons and
general operating supplies.
The increase in lodging costs and expenses of $510,000 is primarily due to
an increase in hotel salaries, wages and benefits in Reno. Certain general
salary, wage and benefit increases were implemented, primarily in fiscal 1995,
in order to remain competitive. The increases in maintenance and utilities and
general and administrative costs and expenses of $1.2 million and $3.6 million,
respectively, are principally due to the addition of Copa Casino results of
operations. The Copa Casino general and administrative costs and expenses
include significant advertising, marketing and promotional costs.
The recognition of an impairment of long-lived assets of $17.5 million in
fiscal 1995 was made on a basis consistent with the provisions of recently
issued accounting standards and consists of a write-down of Copa Casino property
and equipment of $10.7 million and the write-off of goodwill, which originated
when GCI was purchased in February 1994, of approximately $6.8. The impairment
was based upon current political and market conditions and an analysis of
projected undiscounted future cash flows. Future operating results will be
positively impacted due to the elimination of goodwill amortization expense and
reduced depreciation expense.
The increase in depreciation and amortization of $1.3 million is due to
additional depreciation from the Copa Casino of $1 million and the added
amortization of goodwill of $244,000 associated with the acquisition of GCI in
February 1994. The remaining goodwill associated with GCI has been written-off
in fiscal 1995 and is included in the impairment of long-lived assets.
The slight decrease in interest and other income of approximately $35,000
is due to the non-inclusion of interest earned on advances to GCP of
approximately $284,000 in the year ended June 30, 1994 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
partially offset by an increase in interest income from the Reno operation as a
result of the investment of additional excess funds in the current fiscal year
as compared to the prior fiscal year.
The increase in interest expense of $1.3 million in the year ended June 30,
1995, compared to the year ended June 30, 1994, is partially a result of
additional interest expense from the Copa Casino of $406,000 and from GCI of
$237,000. In addition, interest expense increased by approximately $619,000 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 year than in the comparable prior fiscal year. The interest
expense of GCI is to former shareholders of GCI and has not been paid by GCI.
The equity in loss of unconsolidated affiliate in fiscal 1994 represents
the Company's proportionate share, under the equity method of accounting, of
loss from GCP that occurred prior to the date of acquisition of GCI and the
associated remaining interest in GCP in February 1994. Subsequent to such date,
the results of operations of GCP are included on a consolidated basis.
6
<PAGE> 8
- -------------------------------------------------------------------------------
The increase in the effective income tax rate or, alternatively, decrease
in income tax benefit rate, in the current year compared to the prior year, is
the result of the current year write-off of goodwill through an increase in
amortization expense of $244,000 and the ultimate elimination of the remaining
goodwill balance of $6.8 million upon recording the impairment in long-lived
assets. The write-off of goodwill is not deductible for income tax purposes.
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 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.
It appears that such seasonal trends are also applicable to the Copa Casino
in Gulfport, Mississippi. 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 and nearby Louisiana, the nature and extent of seasonal
fluctuations, if any, are subject to change.
The Copa Casino, which opened in September 1993, is not presently
generating positive earnings results. It is, however, generating positive
earnings before interest, income taxes, depreciation and amortization
("EBITDA"). For the year ended June 30, 1995, the Copa Casino, on a stand alone
basis, incurred a net loss of approximately $12.4 million, which included a
write-down of long-lived assets of $10.7 million. As of June 30, 1995, the Copa
Casino had a working capital deficiency of approximately $600,000 which is an
improvement over the prior year working capital deficiency of almost $1.5
million. Management believes that these unsatisfactory operating results are
primarily due to the rapid expansion of gaming in Mississippi and Louisiana.
Management has undertaken various marketing actions in order to expand the
Copa Casino's customer base including advertising efforts and special
promotional events and programs designed to attract local residents and senior
citizens. Cost containment actions to improve operational efficiency have also
been successfully implemented. Management has sought approval to construct
land-based facilities, which are planned to include a hotel, and has requested
approval to replace its floating casino facility. Such approvals, which are
required from the GCP's landlord, the Mississippi State Port Authority at
Gulfport (the "Port Authority"), have to date been refused. Management believes
that development of its leasehold site is necessary in order for the Copa Casino
to be ultimately successful and will continue to pursue obtaining the necessary
required approvals. There are no assurances that such efforts will succeed. As
of June 30, 1995, the Company's net investment in and advances to GCP and GCI
was approximately $6.7 million.
The Copa Casino has also been put on notice by the Port Authority that it
must have an approved hurricane evacuation plan as specified in the lease
between the Copa Casino and the Port Authority. Failure to have an acceptable
plan will subject the Copa Casino to legal actions including the possible
termination of the lease agreement. The Copa Casino updated its plan in August
1995 and submitted such plan to the Port Authority and the Mississippi Gaming
Commission. The Gaming Commission approved the plan, subject to approval by the
Port Authority, and issued the Copa Casino a provisional three-month gaming
license at the Copa Casino's August 1995 relicensure hearing. The Mississippi
Gaming Commission indicated that it would
7
<PAGE> 9
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
- -------------------------------------------------------------------------------
issue a standard two-year gaming license after the Port Authority has reviewed
and approved the plan.
The Port Authority has been continuously reviewing this updated hurricane
evacuation plan and has made various inquiries of the Copa Casino. Copa Casino
management has been, and is in the process of, responding to these Port
Authority inquiries and comments and is of the belief that all issues can be
adequately addressed.
COMPARISON OF 1994 TO 1993
As a result of the acquisition of Gulfside Casino, Inc. ("GCI") on February
25, 1994, the Company increased its ownership in Gulfside Casino Partnership
("GCP") to 100%, and, 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 from the date of acquisition. Prior to such
acquisition, the Company held a 40% equity ownership interest in GCP and
accounted for it under the equity method of accounting. A significant reason for
the increases in revenue and costs and expenses in fiscal 1994, compared to
fiscal 1993, is due to the inclusion of the results of operations of GCP upon
consolidation. The Copa Casino commenced operations in September 1993.
For the year ended June 30, 1994, net income increased to $7.7 million
compared to $5.5 million for fiscal 1993 and income per share increase from
$1.27 to $1.76. Revenues increased from $43.9 million in fiscal 1993 to $51.4
million in fiscal 1994. The increase in revenue is primarily due to the
inclusion of Copa Casino revenues. The increase in net income is due to a $5.1
million pre-tax gain from the sale of non-operating real property in Reno,
Nevada. This gain was partially offset by a $1.1 million flow-through loss,
which consisted primarily of preopening costs, from the Copa Casino prior to
February 25, 1994.
The increase in lodging revenue of $212,000 in the year ended June 30,
1994, compared to the prior year, is due to an increase in hotel occupancy at
the Reno, Nevada hotel (the Copa Casino does not have hotel/motel rooms) and an
increase in the average room rate. Hotel occupancy increased from 89% in fiscal
1993 to 89.7% in fiscal 1994. For the same comparable periods, the average room
rate increased from approximately $31 to $32.
The increase in gaming revenue of $7.3 million is due to the inclusion of
Copa Casino revenue from February 25, 1994 through June 30, 1994 of $7.6
million. Such increase was slightly offset by a decrease in gaming revenue,
primarily slot revenue, at the Reno operation in May and June 1994. Gaming
revenue per occupied room in Reno decreased from approximately $83 in the last
quarter of fiscal 1993 to $77 in the fourth quarter of fiscal 1994.
The increase in food and beverage revenue of $635,000 is significantly due
to revenue from the Copa. Such increase was partially offset by a slight
decrease in revenue of $162,000 as a result of the subletting of
"Baskin-Robbins", previously operated by the Company, to an unrelated third
party in June 1993. The related increase in food and beverage costs and expenses
of $411,000 is likewise attributable to including Copa Casino operating results.
Such increase was offset by reduced costs and expenses from the elimination of
"Baskin-Robbins" of $159,000.
The decrease in other revenue of $264,000 is composed of a decrease in
retail liquor store sales at the Reno operation of approximately $146,000 and a
loss on disposal of property from the Copa Casino of
8
<PAGE> 10
- -------------------------------------------------------------------------------
$166,000. Such loss was due to the abandonment of leasehold improvements at the
Copa Casino's temporary site when the ship was relocated to the permanent site
in April 1994.
The increases in complimentary lodging, food and beverage, deducted from
revenue, and gaming costs and expenses of $352,000 and $3.6 million,
respectively, are primarily due to the inclusion of the Copa Casino. Gaming
costs and expenses decreased by approximately $284,000, from fiscal 1993 to
fiscal 1994, as a result a decrease in Canadian currency discount expense. The
Company, like other casinos in the Reno area, exchanges Canadian currency at a
rate which is less than the official exchange rate in order to attract and
retain Canadian business. The rate offered to Canadian guests in fiscal 1994
more closely approximated the official exchange rate than in fiscal 1993.
The slight increase in other costs and expenses is composed of a reduction
in liquor store costs of $106,000 as a result of reduced sales revenue. Such
reduction was offset by other operating costs and expenses includable from the
Copa Casino from February 25, 1994 forward. The increases of $726,000 and $2.8
million in maintenance and utilities and general and administrative costs and
expenses, respectively, are principally due to the addition of Copa Casino
results of operations.
The increase in depreciation and amortization of $563,000 is due to
depreciation from the Copa Casino of $436,000 from February 25 to June 30, 1994
and the amortization of goodwill of $122,000 associated with the acquisition of
GCI in February 1994.
The increase in interest and other income of $76,000, in fiscal 1994
compared to fiscal 1993, is due to interest earned on advances to GCP prior to
the date of acquisition of GCI of approximately $194,000. Such increase was
partially offset by a decrease in interest earned on excess invested cash due to
the reduction in such funds available for investment in fiscal 1994.
The increase in interest and other expense is primarily composed of the
inclusion of interest expense of the Copa Casino of $93,000, interest expense of
GCI to former shareholders of GCI of $123,000 and an increase associated with
the Company's variable rate bank debt of $157,000. The amount of variable rate
bank debt increased from fiscal 1993 to fiscal 1994 as did the associated
interest rates.
The equity in loss of unconsolidated affiliate represents the Company's
proportionate share, under the equity method of accounting, of loss from GCP
that occurred prior to the date of acquisition of GCP in February 1994.
Subsequent to such date, the results of operations of GCP are included on a
consolidated basis. Approximately $912,000 of the $1.1 million loss is due to
the one-time write-off of pre-opening costs when the Copa Casino opened in
September 1993.
CAPITAL RESOURCES AND LIQUIDITY
The Company's working capital decreased from $4.8 million at June 30, 1994
to a deficit of $2.2 million at June 30, 1995. Such decrease was principally due
to the reclassification of certain debt obligations from long-term to a current
liability. Payments under these obligations, evidenced by promissory notes, are
due by GCI to two former shareholders and are past due. In accordance with the
terms of the promissory notes, the $6 million balances, previously payable in
installments through 1998, have been accelerated and are now classified as
current obligations.
At June 30, 1995, cash, cash equivalents and short-term investments
increased to $12.2 million compared to $9.8 million at June 30, 1994. Cash and
cash equivalents provided from operating activities for the years ended June 30,
1995, 1994 and 1993 was $7.3 million, $7.5 million and $8.4 million
respectively. Although
9
<PAGE> 11
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
- -------------------------------------------------------------------------------
funds and working capital are generally generated from operations and borrowings
to finance capital expenditures, approximately $5.7 million in cash was
generated in fiscal 1994 from the sale of nonoperating real property in Reno,
Nevada. In fiscal 1994, cash was also generated through the issuance of
long-term debt of $5.5 million. In fiscal 1995, cash of $1.7 million was used
for the net acquisition of short-term investments, which management considers to
be equivalent to cash. In fiscal 1994 and 1993, cash was generated from the net
disposal of short-term investments of $293,000 and $909,000, respectively.
Uses of cash included the Company's payment of dividends in the amounts of
$899,000, $877,000 and $865,000 and payments of long-term debt of $703,000,
$419,000 and $2.5 million in fiscal years 1995, 1994 and 1993, respectively.
Cash was also utilized for the acquisition of property and equipment in the
amounts of $2.7 million, $4 million and $1.5 million in the years ended June 30,
1995, 1994 and 1993, respectively. Approximately $3 million of property and
equipment acquired in fiscal 1994 represented original property purchases of the
Copa Casino after GCI was acquired in February 1994 and included in the
consolidated group. The remaining property and equipment acquisition amounts,
for the years indicated, represent primarily furniture, fixtures and equipment
replacements and additions. Cash payments of $756,000 in fiscal 1995 and
$962,000 in fiscal 1994 were made to satisfy accounts payable for the preceeding
years purchase of property and equipment items.
The Company also advanced cash to GCP, prior to the Company's acquisition
of GCI in February 1994, of $4.8 million in fiscal 1994 and $9.9 million in
fiscal 1993. Subsequent to the acquisition of GCI, an additional $2.9 million
was advanced to GCP by the Company in fiscal 1994. The Company also expended
approximately $1.8 million in fiscal 1994 to acquire a 100% ownership interest
in GCI which is net of the cash acquired upon the consolidation of GCI and GCP
of $1.6 million.
As of June 30, 1995, the Company held cash, cash equivalents and short-term
investments in excess of cash needed for the operation of its hotel/casino in
Reno, Nevada and casino in Gulfport, Mississippi of approximately $9 million.
Such amount is available for expansion, investment and other opportunities that
the Company may find attractive. The Company generally invests its excess cash
in securities which are readily marketable and are not subject to significant
market value fluctuations.
The Company presently has local government approval for a major expansion
program to be constructed on Company owned properties in Reno, Nevada. As
presently approved, construction is to be completed in phases with construction
of the next phase, which includes a 5,500 square foot casino expansion, to
commence in the spring of 1996. The subsequent phases would include adding in
excess of 300 additional hotel rooms, gaming space and other ancillary services
and a parking structure. The total estimated cost of the expansion project, if
undertaken, is $40 million. It is presently anticipated that the cost of the
first phase would be $1.5 million and that approximately $750,000 may be
expended in 1996 with the balance paid in 1997. The Company expects to finance
this first phase by use of available cash and funds generated from operations.
If some or all of the phases of the proposed expansion program are
undertaken, potential sources of financing may include bank or other debt,
public equity securities, available cash and funds generated from operations,
public equity securities, or a combination of these sources. The Company does
not anticipate beginning construction on any phase subsequent to the first phase
without arranging all or substantially all of the financing of such phase.
Properties presently owned by the Company and adjacent to the hotel/casino
complex are available for the entire expansion project.
Inflation has had very little impact on the Company's operating results.
Cost and expense increases have been passed on to the customers through moderate
price increases, higher table limits and upgraded slot machine denominations.
10
<PAGE> 12
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Directors and
Shareholders of The Sands Regent:
We have audited the accompanying consolidated balance sheets of The Sands
Regent and subsidiaries as of June 30, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended June 30, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of The Sands Regent and
subsidiaries as of June 30, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
1995 in conformity with generally accepted accounting principles.
As discussed in Note 5 to the consolidated financial statements, during the
year ended June 30, 1995 the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," and reported a loss for impairment of
long-lived assets of $17.5 million.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
RENO, NEVADA
AUGUST 11, 1995
11
<PAGE> 13
THE SANDS REGENT
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
June 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,356,150 $ 9,669,049
Short-term investments 1,857,503 135,000
Accounts and notes receivable, less allowance for
possible losses of $147,000 and $111,000 477,352 330,071
Inventories 719,052 1,116,568
Prepaid federal income taxes -- 178,955
Deferred federal income tax asset 15,543 --
Prepaid expenses and other assets 946,374 1,135,736
----------- -----------
Total current assets 14,371,974 12,565,379
PROPERTY AND EQUIPMENT:
Land 8,101,601 8,101,601
Buildings, ship and improvements 45,106,360 53,638,941
Equipment, furniture and fixtures 20,974,442 21,793,684
Construction in progress 507,131 236,207
----------- -----------
74,689,534 83,770,433
Less accumulated depreciation and amortization 25,986,710 22,963,543
----------- -----------
48,702,824 60,806,890
OTHER ASSETS:
Deferred federal income tax asset 1,526,589 --
Goodwill -- 7,195,088
Note receivable 1,250,898 1,258,445
Other 401,007 442,486
----------- -----------
3,178,494 8,896,019
----------- -----------
$ 66,253,292 $ 82,268,288
=========== ===========
</TABLE>
- ------------
See notes to consolidated financial statements.
12
<PAGE> 14
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,046,893 $ 3,474,630
Accrued salaries, wages and benefits 1,886,964 1,668,231
Other accrued expenses 1,316,883 712,479
Federal income taxes payable 384,210 --
Deferred federal income tax liability -- 168,058
Current maturities of long-term debt 10,905,995 1,721,624
------------ ------------
Total current liabilities 16,540,945 7,745,022
LONG-TERM DEBT 17,807,655 27,558,996
DEFERRED FEDERAL INCOME TAX LIABILITY -- 2,732,385
OTHER 56,151 93,579
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par value, 5,000,000 shares
authorized, none issued -- --
Common stock, $.05 par value, 20,000,000 shares authorized,
6,898,722 and 6,892,722 shares issued 344,936 344,636
Additional paid-in capital 13,073,803 13,036,603
Retained earnings 40,784,637 53,111,902
------------ ------------
54,203,376 66,493,141
Treasury stock, at cost; 2,400,000 shares (22,354,835) (22,354,835)
------------ ------------
Total stockholders' equity 31,848,541 44,138,306
------------ ------------
$ 66,253,292 $ 82,268,288
========== ==========
</TABLE>
13
<PAGE> 15
THE SANDS REGENT
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For the years ended June 30, 1995, 1994, 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
OPERATING REVENUES:
Gaming $ 43,601,124 $31,990,341 $24,650,583
Lodging 9,805,719 10,120,918 9,908,708
Food and beverage 8,195,340 7,357,963 6,723,221
Other 1,850,111 3,990,280 4,254,589
----------- ----------- -----------
63,452,294 53,459,502 45,537,101
Less complimentary lodging, food and
beverage included above 2,479,087 2,013,048 1,660,385
----------- ----------- -----------
60,973,207 51,446,454 43,876,716
----------- ----------- -----------
OPERATING COSTS AND EXPENSES:
Gaming 21,826,156 14,517,504 10,952,071
Lodging 5,193,683 4,683,308 4,741,756
Food and beverage 6,724,601 6,185,677 5,774,301
Other 960,201 3,533,687 3,520,504
Maintenance and utilities 4,222,854 2,999,173 2,273,269
General and administrative 11,878,463 8,261,707 5,482,528
Impairment of long-lived assets 17,496,282 -- --
Depreciation and amortization 4,418,769 3,087,613 2,523,868
----------- ----------- -----------
72,721,009 43,268,669 35,268,297
----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS (11,747,802) 8,177,785 8,608,419
----------- ----------- -----------
OTHER INCOME (DEDUCTIONS):
Interest and other income 549,978 584,950 509,247
Interest expense (2,562,889) (1,300,644) (926,785)
Equity in loss of unconsolidated affiliate -- (1,077,537) (56,987)
Gain on disposition of non-operating property -- 5,197,874 --
----------- ----------- -----------
(2,012,911) 3,404,643 (474,525)
----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (13,760,713) 11,582,428 8,133,894
INCOME TAX (PROVISION) BENEFIT 2,332,892 (3,852,531) (2,652,566)
----------- ----------- -----------
NET INCOME (LOSS) $(11,427,821) $ 7,729,897 $ 5,481,328
=========== =========== ===========
NET INCOME (LOSS) PER SHARE $ (2.54) $ 1.76 $ 1.27
=========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 4,497,588 4,395,100 4,327,254
=========== =========== ===========
</TABLE>
- ---------------
See notes to consolidated financial statements.
14
<PAGE> 16
THE SANDS REGENT
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
For the years ended June 30, 1995, 1994, 1993
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
--------------------- Paid-in Retained ------------------------
Shares Amount Capital Earnings Shares Amount Total
---------- --------- ------------ ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, JULY 1, 1992 6,721,722 $ 336,086 $ 11,095,153 $41,642,715 2,400,000 $(22,354,835) $30,719,119
Net income -- -- -- 5,481,328 -- -- 5,481,328
Shares issued on
exercise of stock
options 14,000 700 86,800 -- -- -- 87,500
Cash dividends
($.20 per share) -- -- -- (865,444) -- -- (865,444)
--------- ------- ----------- ----------- --------- ------------ -----------
BALANCES, JUNE 30, 1993 6,735,722 336,786 11,181,953 46,258,599 2,400,000 (22,354,835) 35,422,503
Net income -- -- -- 7,729,897 -- -- 7,729,897
Shares issued on
exercise of stock
options 16,000 800 99,200 -- -- -- 100,000
Shares issued for
acquisition of
subsidiary 141,000 7,050 1,755,450 -- -- -- 1,762,500
Cash dividends
($.20 per share) -- -- -- (876,594) -- -- (876,594)
--------- ------- ----------- ----------- --------- ------------ -----------
BALANCES, JUNE 30, 1994 6,892,722 344,636 13,036,603 53,111,902 2,400,000 (22,354,835) 44,138,306
Net loss -- -- -- (11,427,821) -- -- (11,427,821)
Shares issued on
exercise of stock
options 6,000 300 37,200 -- -- -- 37,500
Cash dividends
($.20 per share) -- -- -- (899,444) -- -- (899,444)
--------- ------- ----------- ----------- --------- ------------ -----------
BALANCES, JUNE 30, 1995 6,898,722 $ 344,936 $ 13,073,803 $40,784,637 2,400,000 $(22,354,835) $31,848,541
========= ======= =========== =========== ========= ============ ===========
</TABLE>
- ---------------
See notes to consolidated financial statements.
15
<PAGE> 17
THE SANDS REGENT
CONSOLIDATED STATEMENTS
OF CASH FLOWS
- --------------------------------------------------------------------------------
For the years ended June 30, 1995, 1994, 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $(11,427,821) $ 7,729,897 $ 5,481,328
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 4,418,769 3,087,613 2,523,868
Impairment of long-lived assets 17,496,282 -- --
(Gain) loss on disposal of property and equipment 78,322 (4,983,998) 497
Noncash interest income from unconsolidated
affiliate -- (302,363) (96,491)
Equity in loss of unconsolidated affiliate -- 1,077,537 56,987
Amortization of imputed interest expense 17,100 60,900 --
(Increase) decrease in accounts and notes
receivable (147,281) 44,794 (24,037)
(Increase) decrease in inventories 397,516 (202,794) (34,748)
Decrease in prepaid expenses and other current
assets 189,362 494,147 51,912
Decrease in other assets 31,273 25,764 41,123
Increase (decrease) in accounts payable (612,013) (499,437) 144,507
Increase (decrease) in accrued salaries,
wages and benefits 218,733 (559,254) 152,030
Increase in other accrued expenses 604,404 180,857 25,669
Increase (decrease) in federal income taxes
payable 563,165 (894,084) 60,155
Change in deferred federal income taxes (4,442,575) 2,271,615 42,411
Decrease in other liability (37,428) -- --
------------ ----------- ------------
Net cash provided by operating activities 7,347,808 7,531,194 8,425,211
------------ ----------- ------------
INVESTING ACTIVITIES:
Purchase of short-term investments (3,251,250) (10,000) (6,728,791)
Sale and maturity of short-term investments 1,528,747 303,394 7,638,697
Payments received on note receivable 7,547 2,555 --
Additions to property and equipment (2,657,280) (3,983,943) (1,481,989)
Proceeds from sale of property, equipment and other
assets 32,756 6,062,445 36,073
Investment in and advances to unconsolidated
affiliate -- (4,761,403) (9,922,459)
Payments to acquire company and related note
receivable, net of cash acquired -- (1,787,641) --
------------ ----------- ------------
Net cash used in investing activities (4,339,480) (4,174,593) (10,458,469)
------------ ----------- ------------
</TABLE>
- ---------------
See notes to consolidated financial statements.
16
<PAGE> 18
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- ------------
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Payment of accounts payable for prior year purchases
of property and equipment $ (756,487) $ (962,360) $ --
Issuance of long-term debt -- 5,500,000 --
Long-term debt issuance costs -- -- (137,785)
Payments on long-term debt (702,796) (418,947) (2,540,968)
Issuance of common stock 37,500 100,000 87,500
Payment of dividends on common stock (899,444) (876,594) (865,444)
------------ ----------- ------------
Net cash provided by (used in) financing
activities (2,321,227) 3,342,099 (3,456,697)
------------ ----------- ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 687,101 6,698,700 (5,489,955)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 9,669,049 2,970,349 8,460,304
------------ ----------- ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 10,356,150 $ 9,669,049 $ 2,970,349
============ =========== ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Note receivable acquired upon sale of
property and equipment $ -- $ 1,261,000 $ --
============ =========== ============
Property and equipment acquired by accounts payable $ 59,489 $ 844,190 $ --
============ =========== ============
Accounts payable converted to long-term debt $ 118,726 $ -- $ --
============ =========== ============
Other liabilities included in investment in and
advances to unconsolidated affiliate $ -- $ 38,684 $ 54,895
============ =========== ============
Issuance of common stock to acquire company $ -- $ 1,762,500 $ --
============ =========== ============
Interest paid, net of amount capitalized $ 2,254,248 $ 1,400,993 $ 947,822
============ =========== ============
Federal income taxes paid $ 1,550,000 $ 2,475,000 $ 2,550,000
============ =========== ============
</TABLE>
17
<PAGE> 19
THE SANDS REGENT
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
For the years ended June 30, 1995, 1994, 1993
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of The Sands
Regent and its wholly-owned subsidiaries Zante, Inc. ("Zante"), Patrician, Inc.
("Patrician"), Artemis, Inc. ("Artemis") and Gulfside Casino, Inc. ("GCI"), and
Gulfside Casino Partnership ("GCP") (together the "Company"). Patrician, GCI and
Artemis are the sole partners in GCP. All of the issued and outstanding stock of
GCI was acquired by The Sands Regent on February 25, 1994. Such acquisition has
been accounted for under the purchase method of accounting. Artemis was formed
by the Company and became the third partner in GCP in April 1995.
Prior to the acquisition of GCI, the Company accounted for its 40% equity
investment in GCP under the Equity Method of Accounting. Upon acquisition of a
100% interest in GCP, the accounts of GCP have been consolidated with those of
the Company. Such consolidation includes the results of operations and cash
flows of GCI and GCP from the date of acquisition forward.
All significant intercompany balances and transactions have been eliminated
in consolidation.
(b) NATURE OF OPERATIONS
The Company owns and operates The Sands Regency Hotel/Casino in Reno,
Nevada and the Copa Casino in Gulfport, Mississippi. The Copa Casino, which is
owned by GCP, was licensed and commenced operations in September 1993. The
Company's operations are conducted in the hotel-casino industry and include
gaming activities, hotel, restaurant and other related support facilities.
Because of the integrated nature of these operations, the Company is considered
to be engaged in one industry segment.
Casino operations are subject to extensive regulation in the States of
Nevada and Mississippi by the respective state Gaming Authorities. Management
believes that the Company's procedures for supervising casino operations and
recording casino and other revenues comply in all material respects with the
applicable regulations.
(c) OPERATING REVENUES
In accordance with industry practice, the Company recognizes as casino
revenue the net win from gaming activities, which is the difference between
gaming wins and losses.
Lodging, food and beverage furnished without charge to customers are
included in gross revenues at a value which approximates retail and then
deducted as complimentary services to arrive at net revenues. The cost of such
complimentary services is charged to gaming operating costs and expenses.
The estimated costs of providing the complimentary services are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Hotel $ 215,661 $ 218,288 $ 206,779
Food and beverage 2,185,106 1,458,350 1,250,280
Other 32,896 19,057 46,448
---------- ---------- ----------
$2,433,663 $1,695,695 $1,503,507
========== ========== ==========
</TABLE>
18
<PAGE> 20
- --------------------------------------------------------------------------------
Other operating revenue is comprised of hotel/casino ancillary services
including a retail liquor store owned and operated by the Company through August
1994 at which time the business was sold to a third party. Related costs and
expenses are included in other operating costs and expenses.
(d) CASH AND CASH EQUIVALENTS
Cash equivalents include all short-term investments with an original
maturity of three months or less. Such investments, carried at cost which
approximates market, are readily marketable with no significant investment in
any individual issuer.
(e) SHORT-TERM INVESTMENTS
Effective July 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115- "Accounting for Certain Investments in
Debt and Equity Securities". This statement requires that unrealized gains and
losses on securities defined as "available-for-sale" will be excluded from
income and be reported in a separate component of stockholders' equity.
Securities that the Company has the ability and positive intent to hold to
maturity are classified as "held-to-maturity" and are reported at the lower of
aggregate cost or market. As of June 30, 1995, all of the Company's investments
are classified as available-for-sale.
(f) INVENTORIES
Inventories consist primarily of food, beverage and operating supplies and
are stated at the lower of cost (determined on an average cost basis) or market.
(g) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, net of impairment write-downs to
estimated net realizable values. Depreciation and amortization is computed
primarily by the straight line method over the estimated useful lives of the
assets. These lives range between 5 to 35 years for buildings, ship and
improvements and 5 to 20 years for equipment, furniture and fixtures. Assets
sold or otherwise disposed of are removed from the property accounts and the
resulting gains or losses are included in income.
(h) GOODWILL
In fiscal 1995, goodwill, which represented the excess of cost over net
assets of the acquisition of GCI in February 1994, was written-off to reflect
the net realizable value of long-lived assets on a basis consistent with the
provisions of recently issued accounting standards as more fully described
below. Prior to such write-down, goodwill was being amortized on a straight-line
basis over a period of 20 years.
(i) IMPAIRMENT OF LONG-LIVED ASSETS
Statement of Financial Accounting Standards ("SFAS") No. 121-"Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of" was issued by the Financial Accounting Standards Board in March 1995. The
Company adopted the provisions of SFAS No. 121 during the fourth quarter of the
year ended June 30, 1995 which establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used and for
19
<PAGE> 21
THE SANDS REGENT
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
- --------------------------------------------------------------------------------
For the years ended June 30, 1995, 1994, 1993
long-lived assets and certain identifiable intangibles to be disposed of. The
Company reviews the carrying values of its long-lived and identifiable
intangible assets for possible impairment whenever events or changes in
circumstances indicate that the carrying amount of assets may not be
recoverable.
(j) INCOME TAXES
Income taxes are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109- "Accounting for
Income Taxes". In accordance with SFAS No. 109, the asset and liability method
of accounting for income taxes is utilized whereby deferred tax assets and
liabilities are recognized for future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
(k) FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with reporting and disclosure requirements of the Statement
of Financial Accounting Standards ("SFAS") No. 107- "Disclosures about Fair
Values of Financial Instruments", the Company calculates the fair value of
financial instruments and includes this additional information in the Company's
Notes to Consolidated Financial Statements when the fair value is different than
the book value of those financial instruments. When fair value is equal to book
value, no additional disclosure is made. Fair value is determined using quoted
market prices whenever available. When quoted market prices are not available,
the Company uses alternative valuation techniques such as calculating the
present value of estimated future cash flows utilizing discount rates
commensurate with the risks involved.
(l) CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents
and short-term investments. The Company maintains cash in bank accounts with
balances, at times, in excess of Federally insured limits. The Company has not
experienced any losses in such accounts.
The Company's short-term investments consist primarily of government bonds
of high credit quality. The Company limits its investment in and credit exposure
to any one governmental agency. The Company does not take possession of these
securities which are held for the Company in a custodial account at a financial
institution.
(m) NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed by using the weighted average
number of shares and common stock equivalents outstanding for the period.
NOTE 2 -- SHORT-TERM INVESTMENTS
Short-term investments are readily marketable and consist primarily of
municipal bonds with maturity dates through April 1996. These short-term
investments are carried at cost which approximates market.
20
<PAGE> 22
- --------------------------------------------------------------------------------
NOTE 3 -- NOTE RECEIVABLE
The note receivable is due in monthly principal and interest payments
calculated over 30 years using an annual interest rate of prime plus 2% (11% at
June 30, 1995). Subject to a minimum interest rate of 8%, the interest rate
shall be adjusted semi-annually. The unpaid balance is payable in full in March
1999. The note is secured by a first deed of trust on motel real property in
Reno, Nevada and is a joint and several obligation of, and guaranteed by, the
makers.
NOTE 4 -- ACQUISITION OF COMPANY
On February 25, 1994, The Sands Regent acquired all of the issued and
outstanding stock of GCI which resulted in the acquisition of the remaining
ownership interest in GCP. Summarized operating data of GCP under the equity
method of accounting prior to being consolidated with the Company when GCI was
acquired is as follows:
<TABLE>
<CAPTION>
1994 1993
----------- --------
<S> <C> <C>
Revenue $12,146,082 $ 2,865
Costs and expenses 14,579,144 142,368
Net loss 3,089,777 166,052
Company's equity in net loss, net of
intercompany eliminations 1,077,537 56,987
</TABLE>
On a stand alone basis, for the years ended June 30, 1995 and 1994, GCP
incurred net losses of $12.4 million and $3.7 million, respectively.
Approximately $2.3 million of the loss in fiscal 1994, which was the Company's
first year of operations, was due to the write-off of preopening costs and
expenses. Approximately $10.7 million of the loss in fiscal 1995 is due to a
write-down of GCP long-lived assets to estimated net realizable value on a basis
consistent with the provisions of recently issued accounting standards as more
fully described in Note 5. As of June 30, 1995, and after the write-down of
long-lived assets, current liabilities of GCP exceeded its current assets by
$600,000 and its total liabilities exceeded its total assets by $16.3 million.
Such excess of total liabilities over total assets results from advances by the
Company to GCP, aggregating $25.1 million including accrued interest, which are
reflected as liabilities of GCP.
Management of GCP continues to undertake various marketing efforts in order
to expand the Copa Casino's customer base including advertising efforts and
special promotional events and programs designed to attract local residents.
Cost containment actions to improve operational efficiency have been undertaken
and successfully implemented. In addition, management has sought approval to
construct land-based facilities, which are planned to include a hotel, and has
requested approval to replace its floating casino facility. Such approvals,
which are required from the GCP's landlord, the Mississippi State Port Authority
at Gulfport, have to date been refused. Management believes that development of
its leasehold site is necessary in order for the Copa Casino to be ultimately
successful and will continue to pursue obtaining the necessary required
approvals. The ultimate outcome of these uncertainties cannot presently be
determined.
NOTE 5 -- IMPAIRMENT OF LONG-LIVED ASSETS
Based upon current political and market conditions and an analysis of
projected undiscounted future cash flows of the GCI and GCP calculated in
accordance with the provisions of SFAS No. 121-- "Accounting for
21
<PAGE> 23
THE SANDS REGENT
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
- --------------------------------------------------------------------------------
For the years ended June 30, 1995, 1994, 1993
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of", the Company has determined that the carrying amount of certain long-lived
assets of GCI and GCP may not be recoverable. The resultant, calculated
impairment of long-lived assets has necessitated a write-down of $17.5 million
as follows: 1) $6.8 million of Goodwill which represented the excess of cost
over net assets of the acquisition of GCI in February 1994; 2) $5.3 million for
the GCP ship which contains the Copa Casino operation; 3) $3.7 million for the
GCP leasehold improvements at the Copa Casino operating site; and 4) $1.7
million for Copa Casino gaming equipment, primarily slot machines. The estimated
net realizable values of these long-lived assets have been determined by
calculating the present value of estimated expected future GCI and GCP cash
flows using a discount rate commensurate with the risks involved.
NOTE 6 -- LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
Bank term and revolving line of credit loan; interest at prime
or LIBOR plus an amount in excess of such amounts,
respectively, of up to 2% and 3.65%, depending on defined
performance levels of the Company (a blended rate of 8.9%
utilized at June 30, 1995); collateralized by a first deed of
trust on the real property and equipment used in the Reno,
Nevada hotel/casino operation; interest payable monthly;
principal due semi-annually in such amounts so as to reduce
the advanced and unpaid principal balance to the maximum
scheduled unpaid balance due as of specified dates; payable in
full in 2000 $18,565,000 $19,109,516
Contract payable to International Game Technology ("IGT") by
GCP; principal and interest payments of $137,493, including
interest at 12% per annum, due monthly commencing January 1,
1995 through December 1, 1997; principal payments in the
aggregate amount of $504,000 past due and unpaid for the
period January to June 1995; IGT has waived the potential
acceleration of the unpaid balance and does not consider the
contract to be in default; secured by certain gaming equipment 4,052,308 4,122,486
Notes payable by GCI to former minority stockholders of GCI
issued under a settlement agreement; interest payable at 6%
per annum in semi-annual payments; principal payable annually
in the amount of $600,000 beginning in November 1994 until
November 1998 when the remaining unpaid balances are due in
full; principal payments in the aggregate amount of $600,000
past due; no interest paid since May 1994; entire principal
balances included in current maturities at June 30, 1995;
secured by GCI's partnership interest in GCP 6,000,000 6,000,000
Other 96,342 48,618
----------- -----------
28,713,650 29,280,620
Less current maturities 10,905,995 1,721,624
----------- -----------
Long-term portion $17,807,655 $27,558,996
=========== ===========
</TABLE>
22
<PAGE> 24
- --------------------------------------------------------------------------------
The bank loan is covered under a loan agreement which requires the Company
to comply with certain financial covenants, restricts future encumbrances and
requires certain existing major shareholders of the Company to continue to hold
a significant ownership interest in the Company and to be involved in the
management of the Company. The financial covenants include restrictions on
investment activities and the sale or other disposition of a significant portion
of the Company's assets and also limit annual capital expenditures. The
financial covenants additionally require the maintenance of certain financial
ratios and restrict the payment of dividends if an event of default has occured.
The loan agreement also requires that no shareholder, other than the existing
major shareholders, may own 20% or more of the issued and outstanding voting
stock of the Company. The bank waived non-compliance with one of the bank loan
covenants at June 30, 1995.
Long-term debt at June 30, 1995 is payable as follows:
<TABLE>
<CAPTION>
Year ending
June 30, Amount
------------- -----------
<S> <C>
1996 $10,905,995
1997 4,785,815
1998 4,473,840
1999 4,061,000
2000 4,487,000
-----------
$28,713,650
===========
</TABLE>
The Company entered into an interest rate swap agreement, effective April
1, 1994, to fix the variable interest rate due on the bank term and revolving
line of credit loan. Under such agreement, the Company pays the bank interest at
a fixed rate of 6.25% per annum on the notional amount and the bank pays the
Company interest at a variable rate (currently 6.44%) based on the London
Interbank Offer Rate ("LIBOR") on the notional amount. The notional amount of
the swap coincides with the maximum amount of amortized borrowings that may be
made under the bank term and revolving line of credit loan (currently $18.6
million). The notional amount may be reduced by the Company, in whole or in
part, upon notice by the Company to the bank and a fair market settlement of
such reduction between the parties. The fair value of the interest rate swap
agreement is a liability of $56,000 at June 30, 1995 which was based on
estimated termination values. The interest rate swap is subject to market risk
as interest rates fluctuate.
Of the total interest expense of $2,563,000, $1,365,000 and $927,000 in
1995, 1994 and 1993, respectively, none, $64,000 and none has been capitalized
into construction costs.
NOTE 7 -- STOCK OPTION AND STOCK INCENTIVE PLANS
The Company's amended and restated stock option plan provides for the
granting of incentive stock options as well as non-qualified stock options to
executives and key employees. The plan permitted for the grant of options
covering a maximum of 500,000 shares of the Company's common stock. The Company
has reserved shares to cover these requirements. The plan will continue until
the year 2002, unless terminated earlier. Under the plan, the per share exercise
price of an option cannot be less than 100% of the fair market value of the
shares at date of grant or 110% of the fair market value in the case of
incentive stock options granted to stockholders owning more than 10% of the
outstanding common shares. The options generally vest 20% each year after grant.
23
<PAGE> 25
THE SANDS REGENT
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
- --------------------------------------------------------------------------------
For the years ended June 30, 1995, 1994, 1993
The following is a summary of activity under the Company's stock option
plan:
<TABLE>
<CAPTION>
Incentive Options
---------------------------
Number Average Price
of Shares per Share
--------- -------------
<S> <C> <C>
Outstanding, July 1, 1992 156,000 $ 6.25
Options granted 87,000 13.51
Options exercised (14,000) (6.25)
------- -------
Outstanding, June 30, 1993 229,000 9.01
Options cancelled (63,000) (11.41)
Options exercised (16,000) (6.25)
------- -------
Outstanding, June 30, 1994 150,000 8.29
Options cancelled (36,000) (10.50)
Options exercised (6,000) (6.25)
------- -------
Outstanding, June 30, 1995 108,000 $ 7.67
======= =======
</TABLE>
At June 30, 1995, options to purchase 72,000 shares of the Company's stock
were exercisable and 237,864 shares were available for grant under the stock
option plan.
NOTE 8 -- FEDERAL INCOME TAXES
The income tax (provision) benefit consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Current $(2,109,683) $(1,580,916) $(2,610,156)
Deferred 4,442,575 (2,271,615) (42,410)
----------- ----------- -----------
$ 2,332,892 $(3,852,531) $(2,652,566)
=========== =========== ===========
</TABLE>
The Company's effective tax rate differs from the federal statutory rate as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ---- -----
<S> <C> <C> <C>
Federal statutory tax rate (34.0)% 34.0% 34.0%
Write-off of goodwill 17.8
Tax effect of tax-free interest income (0.4) -- (0.7)
Jobs credit (0.5) (1.0) (0.1)
Other 0.1 0.3 (0.6)
----- ----- -----
(17.0)% 33.3% 32.6%
===== ===== =====
</TABLE>
24
<PAGE> 26
- --------------------------------------------------------------------------------
The components of the Company's net deferred federal income tax asset
(liability) are as follows at June 30:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Deferred tax assets:
License acquisition costs $ 1,836,026 $ 1,975,031
Pre-opening costs 817,899 1,076,183
Accrued expenses 279,131 95,947
Other 79,337 168,429
---------- ----------
3,012,393 3,315,590
---------- ----------
Deferred tax liabilities:
Property and equipment (1,141,338) (5,825,634)
Prepaid expenses (321,768) (386,159)
Other (7,155) (4,240)
---------- ----------
(1,470,261) (6,216,033)
---------- ----------
Net deferred federal income tax asset
(liability) $ 1,542,132 $(2,900,443)
========== ==========
</TABLE>
The Company has a March 31 tax year-end.
NOTE 9 -- LEASE COMMITMENTS
The Company leases its Mississippi dockside facilities from the Mississippi
Department of Economic and Community Development and the Mississippi State Port
Authority in Gulfport, Mississippi. The initial lease term is for seven years
commencing in October 1992. The lease is subject to extension for three renewal
periods of five years each and a final renewal period of ten years. The final
ten year renewal may only be exercised if the Company constructs, within the
city limits of Gulfport, Mississippi, a mimimum of 350 hotel/motel rooms during
the first ten years of the lease agreement.
The lease provides for a monthly base rental of $41,667 plus 5% of gross
annual gaming revenue in excess of $25 million. Additionally, the lease requires
monthly payments equal to 3% of non-gaming revenue. Beginning in October 1997,
the base rental shall be adjusted, annually, in accordance with changes in the
consumer price index.
In addition, the Company leases certain equipment under operating leases
expiring in 1997.
Total rental expense charged to operations was $534,000, $217,000 and
$337,000 for the years ended June 30, 1995, 1994 and 1993, respectively.
25
<PAGE> 27
THE SANDS REGENT
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
- --------------------------------------------------------------------------------
For the years ended June 30, 1995, 1994, 1993
Future minimum payments under the remaining noncancellable term of
operating leases are as follows:
<TABLE>
<CAPTION>
Year ending
June 30, Amount
----------- -----------
<S> <C>
1996 $ 509,000
1997 506,000
1998 500,000
1999 500,000
2000 125,001
----------
$ 2,140,001
==========
</TABLE>
NOTE 10 -- CONTINGENCIES
In December 1994, a lawsuit was filed in a Mississippi court against GCI
because of GCI's failure to make payments on promissory note obligations to two
former shareholders of GCI. These note obligations, in the aggegrate amount of
$6 million, are included in the current maturities of long-term debt on the
Company's consolidated balance sheet at June 30, 1995 and are secured by a
pledge of GCI's partnership interest in GCP. All accrued interest expense is
also included as a current liability on the Company's consolidated balance
sheet.
In addition to demanding payment of the $6 million plus interest, for which
a partial summary judgment has been granted, the lawsuit by these former GCI
shareholders is demanding the appointment of a receiver for GCI to take
possession of and sell GCI's ownership interest in GCP. The lawsuit also seeks
attorneys fees in an amount not less than $900,000 which management of the
Company believes would not be deemed a reasonable amount in the event of an
unfavorable judgment against GCI. In May 1995, GCP and Patrician were joined as
necessary parties to the lawsuit.
At present, a Charging Order is in place which requires GCP to respond to
inquiries by the two former GCI shareholders for the purpose, amoung other
things, of determining what distributions, if any, have been paid by the
partnership to either of its partners. Moreover, a court order has been granted
whereby any amounts due or to become due GCI by GCP are to be paid to the two
former shareholders until the summary judgment against GCI is satisfied. GCP has
not generated adequate operating results to allow for any partner distributions
and distributions are not expected in the near future.
These former shareholder promissory notes were owed by GCI when The Sands
Regent purchased GCI in February 1994 and have not been assumed or guaranteed by
The Sands Regent. GCI's only tangible asset, and its source of funds for
repayment of the promissory notes, is its partnership interest in GCP. GCI is
neither presently in the financial position to make any payments with respect to
these note obligations nor is it expected to be in such a position in the near
future.
As part of the dispute with the two former shareholders, issues will have
to be resolved concerning an amendment to the GCP partnership agreement,
effective January 1, 1993, whereby the profit and loss allocation percentages
were amended from 40% to 80% for Patrician and from 60% to 20% for GCI. Such
amendment was entered into so as to properly reflect the relative financial
risks of Patrician and GCI. The former shareholders of GCI claim that GCI's
ownership interest in GCP should be the pre-amendment 60% interest. GCI and
Patrician contend that the amended ownership interests are valid because the
underlying
26
<PAGE> 28
- --------------------------------------------------------------------------------
agreement that pledged GCI's interest in GCP to the two former GCI shareholders
permitted transfers so long as there were no defaults at the time of transfer.
In addition to the above, GCP has been put on notice by the Mississippi
State Port Authority that, in accordance with the GCP lease agreement with the
Port Authority, GCP must have an approved hurricane evacuation plan. Failure to
have an acceptable plan will subject GCP to legal actions including the possible
termination of the lease agreement. GCP had updated its plan in August 1995 and
submitted such updated plan to the Port Authority and Mississippi Gaming
Commission for approval. The Gaming Commission, at GCP's relicensing hearing in
August 1995, indicated that such evacuation plan appeared to be the appropriate
method to protect the public interests and to meet the requirements of the
Mississippi State Port Authority. So as to allow for the Port Authority's review
and approval, the Mississippi Gaming Commission issued a three-month provisional
gaming license and indicated that the standard two-year gaming license renewal
would be granted after the Port Authority has approved the plan.
The State Port Authority has been continuously reviewing this updated
hurricane evacuation plan and has requested additional information and made
various inquiries of GCP. GCP management has been, and is in the process of,
responding to these Port Authority inquiries and comments and is of the belief
that all issues can be adequately addressed.
The Company will continue to monitor the progress of the lawsuit, the
ultimate outcome of which could include the sale of GCI's ownership interest in
GCP.
The Company is party to other legal actions, proceedings and pending claims
arising in the normal conduct of business. Management believes that the final
outcomes of these matters will not have a material adverse effect upon the
Company's financial position or results of operations.
NOTE 11 -- CONDENSED QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
1995
Operating revenues $16,363,237 $13,553,357 $14,384,163 $16,668,603
Income (loss) from operations 1,884,116 158,165 888,411 (14,678,494)
Net income (loss) 833,234 (292,738) 323,772 (12,292,089)
Net income (loss) per share $0.19 $(0.07) $0.07 $(2.73)
1994
Operating revenues $12,499,227 $10,559,178 $11,970,167 $16,417,882
Income from operations 3,299,810 1,765,196 1,323,372 1,789,407
Net income 1,502,154 1,120,649 818,163 4,288,931
Net income per share $0.35 $0.26 $0.19 $0.96
</TABLE>
27
<PAGE> 29
- --------------------------------------------------------------------------------
CORPORATE OFFICERS
Pete Cladianos, Jr.
President and Chief Executive Officer
Katherene Latham
Chairman of the Board
David R. Wood
Vice President-Finance and
Administration, Treasurer and
Chief Financial Officer
Pete Cladianos III
Vice President and Secretary
BOARD OF DIRECTORS
Katherene Latham
Chairman of the Board
Pete Cladianos, Jr.
President and Chief Executive Officer
David R. Wood(1)
Vice President-Finance and
Administration, Treasurer and
Chief Financial Officer
Pete Cladianos III
Vice President and Secretary
Jon N. Bengtson
Joseph G. Fanelli(1)
Weldon C. Upton(1)
PUBLIC ACCOUNTANTS
Deloitte & Touche LLP
Reno, Nevada
SECURITIES COUNSEL
Latham & Watkins
Costa Mesa, California
TRANSFER AGENT & REGISTRAR
First Interstate Bank of California
Los Angeles, California
- ------------
(1) Standing for re-election to the Board of Directors at the November 6, 1995
Annual Meeting.
FORM 10-K REPORT
A copy of the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K is available to shareholders without charge by writing
to The Sands Regent, Attention: David R. Wood, 345 North Arlington Avenue, Reno,
Nevada 89501.
28
<PAGE> 30
LOGO
345 N. ARLINGTON AVENUE - RENO, NV 89501 - (702) 348-2200
<PAGE> 1
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
The Sands Regent:
We consent to the incorporation by reference in Registration Statement No.
33-59574 of the Sands Regent on Form S-8 of our reports dated August 11, 1995,
appearing and incorporated by reference in the Annual Report on Form 10-K of
The Sands Regent for the year ended June 30, 1995.
[SIG]
Deloitte & Touche LLP
Reno, Nevada
September 28, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 10,356,150
<SECURITIES> 1,857,503
<RECEIVABLES> 624,352
<ALLOWANCES> 147,000
<INVENTORY> 719,052
<CURRENT-ASSETS> 14,371,974
<PP&E> 74,689,534
<DEPRECIATION> 25,986,710
<TOTAL-ASSETS> 66,253,292
<CURRENT-LIABILITIES> 16,540,945
<BONDS> 17,807,655
<COMMON> 344,936
0
0
<OTHER-SE> 31,503,605
<TOTAL-LIABILITY-AND-EQUITY> 66,253,292
<SALES> 8,195,340
<TOTAL-REVENUES> 60,973,207
<CGS> 6,724,601
<TOTAL-COSTS> 34,704,641
<OTHER-EXPENSES> 38,016,368
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,562,889
<INCOME-PRETAX> (13,760,713)
<INCOME-TAX> (2,332,892)
<INCOME-CONTINUING> (11,427,821)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,427,821)
<EPS-PRIMARY> (2.54)
<EPS-DILUTED> (2.54)
</TABLE>
