<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1995 or
------------------
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission file number 0-14050
-------
THE SANDS REGENT
--------------------------------------------------
(exact name of registrant as specified in charter)
Nevada 88-0201135
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
345 North Arlington Avenue, Reno, Nevada 89501
---------------------------------------------------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (702) 348-2200
-------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
On November 13, 1995, the registrant had outstanding 4,498,722 shares of
its common stock, $.05 par value.
<PAGE> 2
THE SANDS REGENT AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial statements. 1 - 7
Consolidated Statements of Income 1
Consolidated Balance Sheets 2 - 3
Consolidated Statements of Cash Flows 4 - 5
Notes to Interim Consolidated Financial
Statements 6 - 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 8 - 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings. 11
Item 2. Changes in Securities. 11
Item 3. Defaults Upon Senior Securities. 11
Item 4. Submission of Matters to a Vote of
Security Holders. 11
Item 5. Other Information. 11
Item 6. Exhibits and Reports on Form 8-K. 11
SIGNATURES 12
</TABLE>
<PAGE> 3
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
THE SANDS REGENT AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(Dollars in thousands, THREE MONTHS
except per share amounts) ENDED SEPTEMBER 30,
------------------------
1994 1995
---------- ----------
<S> <C> <C>
Operating revenues:
Gaming $11,032 $10,761
Lodging 3,077 3,375
Food and beverage 2,316 2,098
Other 631 378
---------- ----------
17,056 16,612
Less complimentary lodging, food
and beverage included above 693 557
---------- ----------
16,363 16,055
---------- ----------
Operating costs and expenses:
Gaming 5,644 5,224
Lodging 1,318 1,429
Food and beverage 1,871 1,787
Other 439 202
Maintenance and utilities 1,135 1,152
General and administrative 3,006 3,149
Depreciation and amortization 1,067 895
---------- ----------
14,480 13,838
---------- ----------
Income from operations 1,883 2,217
Other income (deductions):
Interest and other income 75 160
Interest and other expense (688) (611)
---------- ----------
(613) (451)
---------- ----------
Income before income taxes 1,270 1,766
Provision for income taxes 437 578
---------- ----------
Net income $833 $1,188
========== ==========
Net income per share $.19 $.26
======= ========
Weighted average shares outstanding 4,494,222 4,498,722
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-1-
<PAGE> 4
THE SANDS REGENT AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands) JUNE 30, SEPTEMBER 30,
1995 1995
---------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $10,356 $8,905
Short-term investments 1,858 1,962
Accounts and notes receivable less allow-
ance for possible losses of $147 and $83 477 594
Inventories 719 738
Prepaid federal income taxes - 793
Deferred federal income tax asset 16 -
Prepaid expenses and other assets 946 1,835
---------- ----------
Total current assets 14,372 14,827
PROPERTY AND EQUIPMENT:
Land 8,102 8,102
Buildings, ship and improvements 45,106 45,213
Equipment, furniture and fixtures 20,975 21,106
Construction in progress 507 422
---------- ----------
74,690 74,843
Less accumulated depreciation
and amortization 25,987 26,487
---------- ----------
48,703 48,356
OTHER ASSETS:
Deferred federal income tax asset 1,526 1,260
Note receivable 1,251 1,250
Other 401 381
---------- ----------
3,178 2,891
---------- ----------
Total assets $66,253 $66,074
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-2-
<PAGE> 5
THE SANDS REGENT AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands) JUNE 30, SEPTEMBER 30,
1995 1995
---------- -------------
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $2,047 $2,441
Accrued salaries, wages and benefits 1,887 1,708
Other accrued expenses 1,317 1,153
Federal income taxes payable 384 -
Deferred federal income tax liability - 399
Current maturities of long-term debt 10,906 11,524
---------- ----------
Total current liabilities 16,541 17,225
LONG-TERM DEBT 17,807 15,990
OTHER 56 47
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 shares
issued 345 345
Additional paid-in capital 13,074 13,074
Retained earnings 40,785 41,748
---------- ----------
54,204 55,167
Treasury stock, at cost; 2,400,000 shares (22,355) (22,355)
---------- ----------
Total stockholders' equity 31,849 32,812
---------- ----------
Total liabilities and stockholders'
equity $66,253 $66,074
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-3-
<PAGE> 6
THE SANDS REGENT AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(Dollars in thousands) SEPTEMBER 30,
------------------------
1994 1995
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $833 $1,188
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,067 895
(Gain) loss on disposal of property and
equipment (3) 120
(Increase) in accounts and notes
receivable (380) (117)
(Increase) decrease in inventories 411 (19)
(Increase) in prepaid expenses and
other current assets (516) (889)
Decrease in other assets 13 18
Increase (decrease) in accounts payable (207) 364
Increase (decrease) in accrued expenses 253 (343)
(Decrease) in federal income taxes
payable (260) (1,177)
Change in deferred federal income taxes 422 681
(Decrease) in other liabilities (10) (9)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,623 712
---------- ----------
INVESTING ACTIVITIES:
Purchase of short-term investments - (518)
Sale and maturity of short-term
investments - 414
Payments received on note receivable 2 1
Additions to property and equipment (338) (578)
Proceeds from sale of property and
equipment 4 5
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (332) (676)
---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-4-
<PAGE> 7
THE SANDS REGENT AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(Dollars in thousands) SEPTEMBER 30,
------------------------
1994 1995
---------- ----------
<S> <C> <C>
FINANCING ACTIVITIES:
Payment of accounts payable for prior year
purchases of property and equipment (467) (63)
Issuance of long-term debt 225 375
Payments on long-term debt (8) (1,574)
Issuance of common stock 38 -
Payment of dividend on common stock (225) (225)
---------- ----------
NET CASH USED IN FINANCING ACTIVITIES (437) (1,487)
---------- ----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 854 (1,451)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 9,669 10,356
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $10,523 $8,905
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Property and equipment acquired
by accounts payable $61 $93
========== ==========
Interest paid, net of amount capitalized $415 $539
========== ==========
Federal income taxes paid $275 $1,075
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-5-
<PAGE> 8
THE SANDS REGENT AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
NOTE 1 - BASIS OF PREPARATION
These statements should be read in connection with the 1995 Annual
Report heretofore filed with the Securities and Exchange Commission as
Exhibit 13 to the Registrant's Form 10-K for the year ended June 30, 1995.
The accounting policies utilized in the preparation of the financial
information herein are the same as set forth in such annual report except as
modified for interim accounting policies which are within the guidelines set
forth in Accounting Principles Board Opinion No. 28.
The Consolidated Balance Sheet at June 30, 1995 has been taken from
the audited financial statements at that date. The interim consolidated
financial information is unaudited. In the opinion of management, all
adjustments, consisting only of normal recurring accruals, necessary to
present fairly the financial condition as of September 30, 1995 and the
results of operations and cash flows for the three months ended September
30, 1995 and 1994 have been included. Interim results of operations are
not necessarily indicative of the results of operations for the full year.
The accompanying Consolidated Financial Statements include the accounts
of the Company and its wholly owned subsidiaries Zante, Inc. ("Zante"),
Patrician, Inc. ("Patrician"), Gulfside Casino, Inc. ("GCI") and Artemis,
Inc. ("Artemis"), and Gulfside Casino Partnership ("GCP") (together the
"Company"). Patrician, GCI and Artemis are the sole partners in GCP.
Zante, Inc. owns and operates the Sands Regency hotel/casino in Reno, Nevada
and GCP owns and operates the Copa Casino In Gulfport, Mississippi.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
As previously disclosed in the Company's 1995 Annual Report, a lawsuit
was filed in a Mississippi court against GCI, which joined GCP and Patrician
as necessary parties, because of GCI's failure to make payments on certain
obligations due two former shareholders of GCI. Such lawsuit is ongoing
without final court action or other resolution. 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.
In addition to the above, GCP has not yet been issued the standard
two-year gaming license which the Mississippi Gaming Commission indicated it
would issue upon the approval of the Company's hurricane evacuation plan by
the Mississippi State Port Authority. In August 1995, at GCP's relicensing
hearing, the Gaming Commission issued GCP a three-month provisional gaming
license and indicated that the standard two-year gaming license renewal
would be granted after the Mississippi State Port Authority had approved
the plan.
-6-
<PAGE> 9
THE SANDS REGENT AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
NOTE 2 - COMMITMENTS AND CONTINGENCIES (continued)
On September 28, 1995, the State Port Authority approved the GCP's
hurricane evacuation plan and advised the GCP of the same. GCP then
requested that it be placed on the next Gaming Commission agenda for the
Company's gaming license renewal. On October 25, 1995, the day before the
Mississippi Gaming Commission meeting at which GCP's relicensing matter was
tenitively scheduled, the Executive Director of the Port Authority advised
the Gaming Commission that he had some concerns with respect to the
application of GCP's evacuation plan during Hurricane Opal and that he now
wants to hold the GCP responsible for all third party actions or inactions
in a hurricane evacuation situation regardless of whether or not GCP is in a
position to legally direct such third parties. Further, the Port Authority
Executive Director indicated that any third party failures will not excuse
GCP for any failures to perform under the evacuation plan and that the Port
would consider the GCP to be in default under its Lease Agreement with the
Port Authority.
GCP reviewed its actions during Hurricane Opal and determined that it
followed its agreed-to evacuation plan and that it acted in a reasonable and
prudent manner. It is management's belief that the Port Authority Executive
Director's new position is unjustified and unreasonable. GCP has since
requested that it be placed on the Gaming Commission agenda for the November
1995 meeting which is the last Gaming Commission meeting prior to the
expiration of GCP's conditional license on December 1, 1995. If GCP's
gaming license is not renewed or extended on or before December 1, 1995, the
business of GCP would be materially adversly affected.
-7-
<PAGE> 10
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Results of operations - First Quarter 1996 Compared to First Quarter 1995
In the three month period ended September 30, 1995, compared to the
three month period in the prior year, income from operations increased from
$1.9 million to $2.2 million and net income increased from $833,000 to $1.2
million, a 43% increase. Likewise, net income per share increased from $.19
to $.26. For the same comparable fiscal periods, consolidated revenues
decreased from approximately $16.4 million to $16.1 million which is
primarily attributable to Sands Regency operations. The increases in income
from operations, net income and net income per share are significantly due
to improved operating results from the Copa Casino.
The increase in lodging revenue of $298,000, in the first quarter of
fiscal 1995, compared to the same quarter in the prior year, is primarily
due to an increase in the average daily room rate from approximately $39 to
$45. For the same comparable periods, hotel occupancy decreased from
approximately 90.6% to 87.3%.
The decrease in gaming revenue of $271,000 is composed of an increase
in gaming revenue from the Copa Casino of $120,000 which was offset by a
decrease in gaming revenue from the Sands Regency of $391,000. The decrease
in gaming revenue in Reno is due to the decrease in hotel occupancy and a
decrease per occupied room. Gaming revenue per occupied room decreased from
$72 in the first quarter of fiscal 1995 to $69 in the first quarter of
fiscal 1996.
The decrease in food and beverage revenue of $218,000 is principally
due to the elimination of Copa Casino buffet revenue. During approximately
the first four months of fiscal 1995, the Copa Casino was involved in the
operation of a buffet style restaurant located on its facilities. There-
after, such buffet style restaurant has been, and is now, operated by a
third party. The related decrease in food and beverage costs and expenses
of $84,000 is composed of a decrease in costs and expenses associated with
this buffet style restaurant of $223,000. This decrease has been offset by
increased costs and expenses from the Sands Regency of $139,000 of which
approximately 50% is due to added food service operations.
The decrease in other revenue of $253,000, and related decrease in
costs and expenses of $237,000, is mainly due to a decrease in retail
liquor store sales. In August 1994, the retail liquor store business, which
was operated by the Company in Reno, was sold to a third party. Such third
party now operates the retail liquor store in Company owned facilities for
rent and other consideration paid to the Company.
The decrease in complimentary lodging, food and beverage, deducted from
revenue, of $136,000 is due to a reduction in complimentary lodging in Reno.
Such is a result of Company implemented changes to its lodging programs and
packages offered to guests.
-8-
<PAGE> 11
Results of operations - First Quarter 1996 Compared to First Quarter 1995
(continued)
The decrease in gaming costs and expenses of $420,000 is principally
attributable to Copa Casino operations. Such Copa Casino gaming cost and
expense decrease is composed primarily of a decrease in estimated health
benefit costs of $251,000 and a decrease in the cost of complimentary goods
and services provided to guests of $100,000. Gaming costs and expenses from
the Sands Regency operations increased only slightly in the current year
first quarter compared to the same quarter in the prior year.
The increase in lodging costs and expenses of $111,000 is primarily an
increase in Sands Regency hotel costs and expenses and is general in nature.
The increase in general and administrative costs and expenses of $143,000 is
from the Sands Regency and is similarly general in nature.
The decrease in depreciation and amortization expense of $172,000
includes the elimination of goodwill amortization of $91,000 as a result of
the write-off of Gulfside Casino, Inc. goodwill in June 1995 when the
Company recognized an impairment in long-lived assets associated with the
Copa Casino. Likewise, due to the recognition of such impairment, the
decrease includes a decrease in Copa Casino depreciation expense of
approximately $120,000.
The increase in interest and other income of approximately $85,000 is
due to increased interest income earned by the Sands Regency as a result of
additional excess cash being invested in the current year quarter compared
to the prior year quarter. The decrease in interest expense is partially a
result of a reduction in interest-bearing debt owed by the Company.
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.
-9-
<PAGE> 12
Results of operations - First Quarter 1996 Compared to First Quarter 1995
(continued)
Capital resources and liquidity
As of September 30, 1995, the Company's net investment in and advances
to, or on behalf of the Copa Casino and Gulfside Casino, Inc., was $6.4
million which was approximately the same as at June 30, 1995. After the
elimination of intercompany interest expense upon consolidation, the Copa
Casino generated a pre-tax profit in the September 30, 1995 quarter of
$569,000 versus a pre-tax loss in the comparable prior year quarter of
$291,000. Current liabilities continue to exceed current assets at
September 30, 1995.
Other than above, there were no material changes in The Sands Regent's
financial condition nor were there any substantive changes relative to
matters discussed in the Capital Resources and Liquidity section of Manage-
ment's Discussion and Analysis of Financial Condition and Results of Oper-
ations as presented in the 1995 Annual Report appearing as exhibit 13 to
the Company's Form 10-K for the year ended June 30, 1995.
-10-
<PAGE> 13
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
NONE
Item 2. Changes in Securities.
NONE
Item 3. Defaults Upon Senior Securities.
NONE
Item 4. Submission of Matters to a Vote of Security Holders.
NONE
Item 5. Other Information.
NONE
Item 6. Exhibits and Reports on Form 8-K.
Exhibit 27 - Financial Data Schedule
-11-
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE SANDS REGENT
(Registrant)
Date: November 13, 1995 By /s/ David R. Wood
----------------------------------------
David R. Wood, Vice President - Finance
Principal Accounting and Financial Officer
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 8,905
<SECURITIES> 1,962
<RECEIVABLES> 677
<ALLOWANCES> 83
<INVENTORY> 738
<CURRENT-ASSETS> 14,827
<PP&E> 74,843
<DEPRECIATION> 26,487
<TOTAL-ASSETS> 66,074
<CURRENT-LIABILITIES> 17,225
<BONDS> 15,990
<COMMON> 345
0
0
<OTHER-SE> 32,467
<TOTAL-LIABILITY-AND-EQUITY> 66,074
<SALES> 2,098
<TOTAL-REVENUES> 16,055
<CGS> 1,787
<TOTAL-COSTS> 8,642
<OTHER-EXPENSES> 5,196
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 611
<INCOME-PRETAX> 1,766
<INCOME-TAX> 578
<INCOME-CONTINUING> 1,188
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,188
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
