<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, 2000 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission file number 0-14050
THE SANDS REGENT
(exact name of registrant as specified in charter)
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<S> <C>
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)
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Registrant's telephone number, including area code (775) 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, 2000, the registrant had outstanding 4,498,722 shares of its
common stock, $.10 par value.
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THE SANDS REGENT AND SUBSIDIARY
FORM 10-Q
TABLE OF CONTENTS
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Page No.
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited). 1 - 7
Consolidated Statements of Operations 1 - 2
Consolidated Balance Sheets 3 - 4
Consolidated Statements of Cash Flows 5 - 6
Notes to Interim Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 8 - 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings. 10
Item 2. Changes in Securities. 10
Item 3. Defaults Upon Senior Securities. 10
Item 4. Submission of Matters to a Vote of
Security Holders. 10
Item 5. Other Information. 10
Item 6. Exhibits and Reports on Form 8-K. 10
SIGNATURES 11
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
THE SANDS REGENT AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
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(Dollars in thousands, THREE MONTHS
except per share amounts) ENDED SEPTEMBER 30,
-----------------------
1999 2000
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Operating revenues: -- --
Gaming $ 4,860 $ 5,491
Lodging 2,702 3,041
Food and beverage 1,834 1,834
Other 323 362
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9,719 10,728
Less complimentary lodging, food
and beverage included above 535 592
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9,184 10,136
Operating costs and expenses: -- --
Gaming 2,328 2,632
Lodging 1,114 1,182
Food and beverage 1,542 1,606
Other 139 145
Maintenance and utilities 755 839
General and administrative 1,640 1,616
Depreciation and amortization 719 724
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8,237 8,744
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Income from operations 947 1,392
Other income (deductions):
Interest and other income 76 129
Interest and other expense (323) (325)
Gain (loss) on disposition of
property and equipment 152 (60)
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(95) (256)
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Income before income taxes 852 1,136
Income tax provision 241 379
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Net income $ 611 $ 757
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The accompanying notes are an integral part of these consolidated financial
statements.
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THE SANDS REGENT AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
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(Dollars in thousands, THREE MONTHS
except per share amounts) ENDED SEPTEMBER 30,
------------------------------------
(continued) 1999 2000
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Net income per share:
Basic $ .14 $ .17
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Diluted $ .13 $ .16
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Weighted average shares outstanding:
Basic 4,495,722 4,497,744
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Diluted 4,567,809 4,740,641
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The accompanying notes are an integral part of these consolidated financial
statements.
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THE SANDS REGENT AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Unaudited)
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(Dollars in thousands) JUNE 30, SEPTEMBER 30,
2000 2000
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,186 $10,052
Short-term investments 753 110
Accounts receivable less allowance
for possible losses of $21 and $39 507 500
Note receivable, sale of subsidiaries 180 180
Inventories 631 597
Prepaid expenses and other assets 1,042 927
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Total current assets 12,299 12,366
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PROPERTY AND EQUIPMENT:
Land 8,487 8,487
Buildings and improvements 37,307 37,288
Equipment, furniture and fixtures 18,150 18,113
Construction in progress 214 697
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64,158 64,585
Less accumulated depreciation
and amortization 31,027 31,520
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Property and equipment, net 33,131 33,065
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OTHER ASSETS:
Note receivable, sale of subsidiaries, net 1,208 1,072
Other 454 480
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Total other assets 1,662 1,552
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Total assets $47,092 $46,983
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The accompanying notes are an integral part of these consolidated financial
statements.
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THE SANDS REGENT AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Unaudited)
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(Dollars in thousands) JUNE 30, SEPTEMBER 30,
2000 2000
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Accounts payable $ 2,430 $ 1,983
Accrued salaries, wages and benefits 1,392 1,027
Other accrued expenses 191 213
Federal income tax payable 234 95
Deferred federal income tax liability 131 113
Current maturities of long-term debt 263 270
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Total current liabilities 4,641 3,701
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LONG-TERM DEBT 10,205 10,129
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DEFERRED FEDERAL INCOME TAX LIABILITY 909 1,058
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Total liabilities 15,755 14,888
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STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par value, 5,000,000
shares authorized, none issued -- --
Common stock, $.10 par value, 20,000,000
shares authorized, 6,900,722 and
6,901,722 shares issued 690 690
Additional paid-in capital 12,730 12,731
Retained earnings 40,275 41,032
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53,695 54,453
Treasury stock, at cost; 2,403,000 shares (22,358) (22,358)
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Total stockholders' equity 31,337 32,095
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Total liabilities and stockholders'
equity $ 47,092 $ 46,983
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The accompanying notes are an integral part of these consolidated financial
statements.
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THE SANDS REGENT AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
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THREE MONTHS ENDED
(Dollars in thousands) SEPTEMBER 30,
-------------------------
1999 2000
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OPERATING ACTIVITIES:
Net income $ 611 $ 757
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 719 724
(Gain) loss on disposal of property
and equipment (152) 60
(Increase) decrease in accounts
receivable (215) 7
(Increase) decrease in inventories (33) 34
Decrease in prepaid expenses
and other current assets 237 115
(Increase) decrease in other assets 2 (26)
Increase (decrease) in accounts payable 882 (179)
Increase (decrease) in accrued expenses 222 (343)
Change in federal income taxes
payable/receivable -- (139)
Change in deferred federal income taxes 241 131
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NET CASH PROVIDED BY OPERATING ACTIVITIES 2,514 1,141
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INVESTING ACTIVITIES:
Purchase of short-term investments (1,941) (100)
Sale and maturity of short-term investments -- 743
Receipt of funds previously held in escrow and
included in accounts receivable relative
to the sale of subsidiaries 653 --
Payments received on note receivable 132 136
Additions to property and equipment (650) (730)
Proceeds from sale of property and
equipment 272 12
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NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (1,534) 61
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The accompanying notes are an integral part of these consolidated financial
statements.
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THE SANDS REGENT AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
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THREE MONTHS ENDED
(Dollars in thousands) SEPTEMBER 30,
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1999 2000
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FINANCING ACTIVITIES:
Payment of accounts payable for prior period
purchases of property and equipment -- (268)
Payments on long-term debt (275) (69)
Issuance of Company common stock -- 1
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NET CASH USED IN FINANCING ACTIVITIES (275) (336)
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INCREASE IN CASH AND CASH EQUIVALENTS 705 866
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 5,540 9,186
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,245 $ 10,052
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SUPPLEMENTAL CASH FLOW INFORMATION:
Property and Equipment acquired by
accounts payable $ 533 --
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Interest paid, net of amount capitalized $ 220 $ 312
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Federal income taxes paid $ -- $ 388
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The accompanying notes are an integral part of these consolidated financial
statements.
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THE SANDS REGENT AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
NOTE 1 - BASIS OF PREPARATION
These statements should be read in connection with the 2000 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, 2000. 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, 2000 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, 2000 and the results of operations and
cash flows for the three months ended September 30, 2000 and 1999 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 subsidiary Zante, Inc. ("Zante") (together
the Company). Zante owns and operates the Sands Regency Casino/Hotel in Reno,
Nevada.
NOTE 2 - STOCKHOLDERS' EQUITY
The par value of the Company's common stock has been restated to $.10 per
share in the first quarter of fiscal 2001 which resulted in common stock being
increased by $345,000 and additional paid-in capital being decreased by the same
amount. All periods presented have been restated.
NOTE 3 - EARNINGS PER SHARE
The weighted average number of shares outstanding for the calculation of
diluted earnings per share, for the three months ended September 30, 1999 and
2000, respectively, include the dilutive effect of Company stock options to
purchase common stock. For the three months ended September 30, 1999, options to
purchase 386,000 shares of the Company's common stock were not included because
the exercise price exceeded the average market price.
NOTE 4 - RECENT PRONOUNCEMENTS OF THE FINANCIAL ACCOUNTING STANDARDS BOARD
("FASB")
On June 30, 1998, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 133 entitled "Accounting for Derivative Instruments and
Hedging Activities". This statement establishes accounting and reporting
standards for derivative instruments and hedging activities. The Company adopted
SFAS No. 133 on July 1, 2000. Adoption of SFAS No. 133 did not have a material
impact on the financial statements of the Company because the Company does not
have significant derivative or hedging activities.
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ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Results of operations - First Quarter 2001 Compared to First Quarter 2000
In the three months ended September 30, 2000, compared to the same three
months ended September 30, 1999, revenues increased to $10.1 million from $9.2
million, a 10 percent increase. For the same comparable quarters, income from
operations improved by 47 percent from $947,000 in the first quarter of fiscal
2000 to $1.4 million in the first quarter of fiscal 2001.
Net income and net income per share also improved from $611,000, or $.13
per share (diluted), in the three months ended September 30, 1999 to $757,000,
or $.16 per share (diluted), in the three months ended September 30, 2000.
Earnings before depreciation, interest expense, gain/(loss) and income taxes
(EBITDA) also improved from $1.7 million to $2.2 million, an increase of 29
percent.
The improvements in revenue, income from operations, net income and
EBITDA are primarily a result of improved gaming revenue and the continued
positive effect of improved methods of operations and increased efficiencies
implemented in prior periods.
The increase in lodging revenue to $3.0 million in the first quarter of
fiscal 2001, from $2.7 million in the first quarter of fiscal 2000, is due to an
improvement in the average room rate. The average room rate increased from
approximately $39 in the quarter ended September 30, 1999 to $44 in the quarter
ended September 30, 2000. Hotel occupancy for the comparable quarters was
approximately the same at 89.5%.
Gaming revenue improved by 13% to $5.5 million in the September 30, 2000
quarter versus $4.9 million in the September 1999 quarter. This increase
includes approximately $150,000 in revenue from the Bingo operation which was
commenced in February 2000. Such increase represents improved casino revenue per
occupied room which increased from approximately $69 per occupied room to $78.
This reflects, in part, increased gaming from non-hotel guests, primarily local
residents. In order to attract non-hotel guests, the Company has added new
games, including Bingo, and has liberalized rules and payouts. The Company also
utilizes various promotions to reward guest gaming activity.
The slight increase in complimentary lodging, food and beverage of
$57,000 is due to increased complimentary rewards based on patron gaming
activity and to various promotional programs directed at attracting out-of-town
customers.
Gaming costs and expenses increased from $2.3 million in the three months
ended September 30, 1999 to $2.6 million in the three months ended September 30,
2000. Such increase includes costs and expenses associated with the operation of
Bingo of approximately $129,000. Otherwise, such increase is primarily related
to the associated increase in gaming revenue.
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Results of operations - First Quarter 2001 Compared to First Quarter 2000
(continued)
The increase in lodging costs and expenses of $68,000, in the first
quarter of fiscal 2001 compared to the same quarter in fiscal 2000, is in
various costs to attract hotel patrons. The increase in food and beverage costs
and expense of $64,000, in the first quarter of fiscal 2001 compared to the
first quarter of fiscal 2000, is due to a slight increase in the cost of
beverage products.
The increase in maintenance and utilities costs and expenses of $84,000
is primarily salaries, wages and benefit costs and is due, in part, to increased
efforts to maintain and improve the Company's facilities.
The increase in interest and other income of $53,000, in the three months
ended September 30, 2000 versus the three months ended September 30, 1999, is
due to additional earnings on increased invested excess cash and cash
equivalents.
The Gain on disposition of property and equipment in fiscal 2000 is
primarily the result of insurance coverage on certain property and equipment
items destroyed in a fire at a non-hotel/casino site. The loss on disposition of
property and equipment in fiscal 2001 is primarily the result of writing-off the
undepreciated basis of certain property and equipment items disposed of or
abandoned.
Capital resources and liquidity
There were no material changes in The Sands Regent's financial condition
nor were there any substantive changes relative to matters discussed in the
Capital Resources and Liquidity section of Management's Discussion and Analysis
of Financial Condition and Results of Operations as presented in the 2000 Annual
Report appearing as Exhibit 13 to the Company's Form 10-K for the year ended
June 30, 2000.
Cautionary statement for purposes of the "Safe Harbor" provisions of the Private
Securities Litigation Reform Act of 1995
The foregoing Management's Discussion and Analysis of Financial Condition
and Results of Operations contains various "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which represent
the Company's expectations or beliefs concerning future events. Such statements
are identified by the words "anticipates", "believes", "expects", "intends",
"future", or words of similiar import. Various important factors that could
cause actual results to differ materially from those in the forward-looking
statements include, without limitation, the following: increased competition in
existing markets or the opening of new gaming jurisdictions; a decline in the
public acceptance of gaming; the limitation, conditioning or suspension of any
of the Company's gaming licenses; increases in or new taxes imposed on gaming
revenues or gaming devices; a finding of unsuitability by regulatory authorities
with respect to the Company's officers, directors or key employees; loss or
retirement of key executives; significant increases in fuel or transportation
prices; adverse economic conditions in the Company's key markets; severe and
unusual weather in the Company's key markets and adverse results of significant
litigation matters.
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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.
(a) Exhibits:
3(a) Certificate of Correction Pursuant to NRS 78.0295
of the Company, dated August 18, 2000
27 Financial Data Schedule
(b) Reports on Form 8-K:
NONE
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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, 2000 By /s/ David R. Wood
---------------------------------------------
David R. Wood, Executive Vice President
Principal Accounting and Financial Officer
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INDEX TO EXHIBITS
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Sequentially
Exhibit Numbered
Number Page
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3(a) Certificate of Correction Pursuant to
NRS 78.0295 of the Company, dated
August 18, 2000.................................
27 Financial Data Schedule.........................
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