FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
Commission file number 0-8133
UNION PLAZA HOTEL AND CASINO INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0110085
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
No. 1 Main Street 89125
Las Vegas, Nevada (Zip Code)
(Address of principal
executive offices)
(702) 386-2110
(Registrant's telephone number, including area code)
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
and (2) has been subject to such filing requirements for the past
90 days.
YES [ X ] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by
this report:
Outstanding at
Class of Common Stock September 30, 1997
$.50 par value 758,419 shares
<PAGE>
The Securities and Exchange Commission
Washington D.C.
The financial information included herein is unaudited. In
addition, the financial information does not include all
disclosures required under generally accepted accounting
principles because certain note information included in the
Company's annual report has been omitted; however, such
information reflects all adjustments (consisting entirely of normal
recurring adjustments) which are, in the opinion of Management,
necessary to a fair statement of the results for the interim
period.
/s/ LARRY DOLESH
Larry Dolesh, Vice President of Finance
Las Vegas, Nevada
October 31, 1997
<PAGE>
PART 1. - Financial Information
Item 1. Financial Statements
<PAGE>
UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
[CAPTION]
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
ASSETS
SEPTEMBER 30, DECEMBER 31,
1997 1996
[S] [C] [C]
Current Assets:
Cash $ 2,152,000 $ 2,982,000
Accounts receivable 345,000 883,000
Inventories of food, beverage
and supplies 446,000 528,000
Prepaid expense 934,000 997,000
Total current assets 3,877,000 5,390,000
Property and equipment:
Land 7,012,000 7,012,000
Buildings 56,748,000 56,746,000
Leasehold improvements 3,514,000 3,484,000
Furniture and equipment 34,488,000 34,176,000
101,762,000 101,418,000
Less accumulated depreciation
and amortization 62,324,000 59,253,000
Net property and equipment 39,438,000 42,165,000
Other assets 1,936,000 1,762,000
$ 42,251,000 $ 49,317,000
The accompanying notes are an integral
part of these financial statements.
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
SEPTEMBER 30, DECEMBER 31,
1997 1996
[S] [C] [C]
Current liabilites:
Accounts payable $ 1,890,000 $ 2,323,000
Accrued liabilities 1,884,000 2,143,000
Checks issued against future deposits 330,000
Current portion of long-term debt 320,000 320,000
Current portion of obligations under
capital leases 714,000 714,000
Total current liabilities 4,808,000 5,830,000
Long-term debt, less current portion 19,461,000 18,970,000
Obligations under capital leases, less
current portion 2,999,000 3,525,000
Deferred income taxes 2,883,000 4,015,000
30,151,000 32,340,000
Commitments and contingencies
Stockholders' equity:
Common stock, $.50 par value; authorized
20,000,000 shares; issued 1,500,000
shares; Outstanding 758,469 shares at
December 31, 1996 and 758,419 shares
at September 30, 1997. 750,000 750,000
Additional paid-in capital 5,462,000 5,462,000
Retained earnings 22,759,000 24,635,000
28,971,000 30,847,000
Less treasury stock, at cost, 741,351
shares at December 31, 1996 and 741,581
shares at September 30, 1997. 13,871,000 13,870,000
Total stockholders' equity 15,100,000 16,977,000
$45,251,000 $49,317,000
The accompanying notes are an integral
part of these financial statements.
<PAGE>
UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
[CAPTION]
NINE MONTHS AND THREE MONTHS ENDED SEPT 30, 1997 AND 1996
Amounts in thousands except per share data
NINE MONTHS ENDED THREE MONTHS ENDED
SEPT 30, SEPT 30,
1997 1996 1997 1996
[S] [C] [C] [C] [C]
REVENUES:
Casino $ 24,681 $ 28,470 $ 7,660 $ 8,824
Food and Beverage 7,129 7,360 2,239 2,371
Rooms 8,527 9,098 2,663 2,981
Other 1,752 1,768 531 583
GROSS REVENUES 42,089 46,696 13,093 14,759
Less promotional complimentaries 5,621 5,746 1,953 1,946
NET REVENUES 36,468 40,950 11,140 12,813
OPERATING EXPENSES:
Casino 10,492 11,040 3,480 3,503
Food and Beverage 10,949 10,659 3,422 3,716
Rooms 4,290 4,274 1,449 1,486
General & Administrative 3,217 2,953 1,258 832
Entertainment 361 369 118 122
Advertising & Promotion 238 296 116 123
Utilities & Maintenance 4,211 4,431 1,553 1,642
Depreciation & Amortization 3,071 3,303 961 1,109
Provisions for Doubtful Accts. 34 48 14 22
Other Costs and Expenses 984 1,058 369 335
TOTAL OPERATING EXPENSES 37,847 38,431 12,740 12,890
OPERATING INCOME/(LOSS) (1,379) 2,519 (1,600) (77)
OTHER INCOME (EXPENSE):
Interest Income 10 25 5 8
Interest Expense (1,634) (1,729) (550) (557)
Total other income (expense) (1,624) (1,704) (545) (549)
INCOME BEFORE INCOME TAXES (3,003) 815 (2,145) (626)
INCOME TAXES (1,127) 177 (722) (289)
NET INCOME/(LOSS) (1,876) 638 (1,423) (337)
EARNINGS/(LOSS) PER COMMON SHARE ($2.47) $ 0.84 ($1.87) ($0.44)
The accompanying notes are an integral
part of these financial statements.
<PAGE>
UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
INCREASE IN CASH AND CASH EQUIVALENTS
1997 1996
[S] [C] [C]
Cash flows from operating activities:
Cash received from customers $ 36,909,000 $ 41,431,000
Cash paid to suppliers and employees (35,755,000) (36,379,000)
Interest received 30,000 32,000
Interest paid (1,634,000) (1,729,000)
Income taxes paid 0 0
Net cash provided by operating activities (450,000) 3,355,000
Cash flows from investing activities:
Proceeds from sale of property & equipment 0 0
Proceeds from sale of bonds 0 0
Purchase of property and equipment (344,000) (958,000)
Net cash used in investing activities (344,000) (958,000)
Cash flows from financing activities:
Proceeds from note payable to Stockholder 741,000 0
Principal payments on capital lease (526,000) (459,000)
Principal payments on long-term debt (250,000) (2,000,000)
Purchase of Treasury Stock (1,000) (58,000)
Net cash used in financing activities (36,000) (2,517,000)
Net increase (decrease) in cash and
cash equivalents (830,000) (120,000)
Cash and cash equivalents
at 12/31/96 & 12/31/95 2,982,000 2,959,000
Cash and cash equivalents,
at 9/30/97 & 9/30/96 2,152,000 2,839,000
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES
Net income(loss) for period ended
9/30/97 and 9/30/96 $ (1,876,000) $ 638,000
Adjustments to reconcile net income to
Net cash provided by operating activities:
Depreciation and amortization 3,102,000 2,951,000
Gain on sale of assets 0 0
Bad debt expense (11,000) 0
(Increase) decrease in assets:
Accounts receivable 529,000 370,000
Interest receivable 20,000 7,000
Inventories 82,000 18,000
Prepaid expenses (82,000) 43,000
Other assets (65,000) (137,000)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (1,022,000) (712,000)
Interest payable 0 0
Income Tax Payable (1,127,000) 177,000
Total adjustments 1,426,000 2,717,000
Net cash provided (used) by operations $ (450,000) $ 3,355,000
The accompanying notes are an integral
part of these financial statements.
<PAGE>
UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include
the accounts of Union Plaza Hotel and Casino, Inc. (the Company)
and its wholly-owned subsidiaries. All material inter-company
balances and transactions have been eliminated in consolidation.
Nature of the Operations and Basis of Accounting
The Company's wholly-owned subsidiary, Union Plaza Operating
Company, operates hotel and gaming operations in downtown Las
Vegas, Nevada. A substantial portion of the operating revenues
of the Company's subsidiary is derived from gaming operations
which are subject to extensive regulations in the State of Nevada
by the Gaming Commission, the Gaming Control Board and local
regulatory agencies. The Company does not anticipate any material
changes in which the financial results are reported due to the
adoption of new or proposed accounting pronouncements.
In 1994, the Company organized Union Plaza Experience, Inc.
as a wholly owned subsidiary to participate with other downtown
Las Vegas casino enterprises and the City of Las Vegas
Redevelopment Agency, in a redevelopment project known as the
Fremont Street Experience. Investment at September 30, 1997 was
$858,000 and $716,000 at December 31. 1996. The Company has
no other materially important subsidiaries or operations.
Management believes that the Company's procedures for
supervising casino operations, recording casino and other
revenues and for granting credit comply in all material respects
with applicable regulations.
Casino Receivables and Revenue
Credit is extended to certain casino customers and the
Company records all unpaid advances as casino receivables on the
date credit was granted. Allowances for estimated uncollectable
casino receivables are provided to reduce the receivables to
amounts anticipated to be collected. The Company recognizes as
casino revenue the net win (which is the difference between
amounts wagered and amounts paid to winning patrons) from gaming
activities.
Promotional Allowances
Gross revenues include the retail value of complimentary
food and beverage and hotel services furnished to customers. The
retail value of these promotional allowances is deducted to
arrive at net revenues.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Property and Equipment
Property and equipment are stated at cost. Expenditures for
additions, renewals and betterments are capitalized; expenditures
for maintenance and repairs are charged to expenses as incurred.
Upon retirement or disposal of assets, the cost and accumulated
depreciation are eliminated from the accounts and the resulting
gain or loss is included in income. Depreciation, including
amortization of a capitalized lease, is computed using the
straight-line method. Leasehold improvements (distinguished from
unamortized leasehold costs) are amortized over the lives of the
leases.
<PAGE>
UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment (Continued)
Property and equipment, including capitalized leases, are
depreciated over their estimated useful lives of 3 to 20 years
for land improvements, 20 to 40 years for buildings, 5 to 30
years for leasehold improvements and 3 to 10 years for furniture
and equipment.
Other Assets
Leasehold costs are being amortized on a straight-line basis
over the initial 30-year term of the lease. Expansion of gaming
rights is being amortized on a straight line basis over 20 years.
Subordination of security interest in lease is being amortized on
a straight-line basis over 15 years.
Progressive Slot Liability
The Company has installed a number of progressive slot
machines. As coins are played the amount available to win
increases and will be paid out when the appropriate jackpot is
hit. In accordance with common industry practice, the Company
has recorded the liability and has charged this amount against
casino revenue.
Earnings Per Common Share
Earnings per common share was computed by dividing net
income by the weighted average number of shares of common stock
outstanding during each period.
Inventories
Inventories are valued at the lower of cost, (first-in,
first-out) or market. Maintenance and other operating supplies
are stated at estimated amounts considered by management to be
necessary to conduct full operations. Subsequent replacements
are charged to expense.
Income Taxes
The Company and its subsidiaries file a consolidated Federal
Income Tax return. Deferred income taxes are provided to reflect
the tax effect of timing differences between financial and tax
reporting, principally related to depreciation, slot machine
revenue, interest costs, accrued expenses, capitalization of
leases, capitalization of property costs and write-down of
facilities and other investments to estimated recoverable value.
The Company accounts for the investment tax credit as a
reduction of income tax expense in the year in which such credits
are utilized. Carryforwards of this credit, as well as the tax
effect of net operating loss carryforwards, are shown as a
reduction to deferred income taxes.
<PAGE>
UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Statement of Cash Flows
The Statements of Cash Flows classify changes in cash and
cash equivalents according to operating, investing and financing
activities. For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents.
NOTE 2 - ACCOUNTS RECEIVABLE
Accounts receivable consists of the following:
Sept 30, Dec 31,
1997 1996
Casino $ 200,000 $ 595,000
Hotel 82,000 262,000
Other 95,000 69,000
377,000 926,000
Less allowance for
doubtful accounts 32,000 43,000
$ 345,000 $ 883,000
NOTE 3 - OTHER ASSETS
Other assets consist of the following:
Sept 30, Dec 31,
1997 1996
Expansion of gaming rights, less
accumulated amortization of $ 152,000 $ 182,000
$648,000 and $628,000
Investment in Nevada Pari-Mutuel
Association 9,000
less accumulated amortization of
$1,000 in 1997
Net investment in direct financing
lease, net of current portion (Note 7) 158,000 186,000
Leasehold costs, less accumulated
amortization of $386,000 and
$378,000 54,000 65,000
Investment in Fremont Street
Experience 858,000 716,000
Deposits and other 705,000 613,000
$1,936,000 $1,762,000
NOTE 4 - ACCRUED LIABILITIES
Accrued liabilities consist of the following:
Sept 30, Dec 31,
1997 1996
Salaries and Wages $ 648,000 $1,083,000
Union back wages 66,000 82,000
Taxes, other than tax on income 299,000 325,000
Other 871,000 653,000
$1,884,000 $2,143,000
<PAGE>
UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 5 - INCOME TAXES
The Internal Revenue Service has examined the Company's
Federal income tax returns through 1991. Management is of the
opinion that all taxes have been paid or provided for through
September 30, 1997.
NOTE 6 - LONG-TERM DEBT
Sept 30, December 31,
Long-term debt consists of the following: 1997 1996
Note Payable to Exber, Inc. at the Prime
Interest Rate payable in monthly
installments of $158,265 including
principal and interest, until July 6,
2004 at which time the balance is due.
The note is secured by a first deed of
trust in land and building (See Note 9). 19,781,000 19,290,000
Less current portion 320,000 320,000
$19,461,000 $18,970,000
Principal payments on long-term debt during the succeeding
five years are as follows:
1997 (Remaining three months) 55,000
1998 252,000
1999 275,000
2000 299,000
2001 326,000
2002 356,000
Thereafter 18,218,000
$19,781,000
<PAGE>
Maturities were calculated based upon interest rates in
effect at September 30, 1997.
NOTE 7 - LEASES
The Company leases equipment and hotel and bus depot
property under long-term lease agreements which are classified as
capital leases. The lease with Exber, Inc. (See Note 9) covering
the hotel and bus depot property expires in 2001 with renewals.
The hotel and bus depot property lease contains one renewal
option of twenty-five years and four renewal options of ten
years. The bus depot property is sublet to Greyhound Lines Inc.
under a lease expiring in 2001, with two ten-year renewal
options available. The value of the lease with Exber, Inc. is as
follows:
Sept 30, December 31,
1997 1996
Land and Buildings $9,242,000 $9,242,000
Less accumulated amortization 8,573,000 8,441,000
$ 669,000 $ 801,000
<PAGE>
UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 7 - LEASES (CONTINUED)
The following is a schedule of future minimum lease payments
as of September 30, 1997.
1997 (Remaining three months) $ 312,000
1998 1,250,000
1999 1,250,000
2000 1,250,000
2001 729,000
Total minimum lease payments 4,791,000
Less amount representing interest 1,079,000
Present value of net minimum
lease pmts under capital leases 3,712,000
Less current portion 714,000
Long-term obligations under
capital leases $ 2,998,000
SUBLEASES
The bus depot property under a capital lease is sublet as
follows:
Sept 30, Dec 31,
1997 1996
Minimum future rents receivable $ 253,000 $ 303,000
Less amount representing interest 57,000 79,000
Minimum future rents receivable 196,000 224,000
Less current portion (included in
accounts receivable) 38,000 38,000
Net investment in direct
financing lease (See Note 3) $ 158,000 $ 186,000
<PAGE>
UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 8 - EMPLOYEE BENEFIT PLANS
Although the Company contributes to a discretionary executive
bonus plan, there were no contributions for the first nine months
of 1997 compared to 1996 when the Company contributed $314,000.
The Company also has a qualified profit sharing plan for
eligible employees. Contributions to this plan are made at the
discretion of the Board of Directors and benefits are limited to
the allocated interests in fund assets. Contributions for the
first nine months of 1996 and 1997 were $225,000 for each period.
NOTE 9 - RELATED PARTIES
On December 18, 1991, Exber, Inc., a 45.21% stockholder as
of September 30, 1997, loaned the Company $1,800,000, payable
interest only in monthly installments at 10% per annum, with
principal due in full December 19, 1996. During February 1992
this loan was increased to $3,000,000 subject to the same terms
and maturity date of the original borrowing. During February
1993 this loan was refinanced to $18,000,000, interest only
at the prime rate published in the Wall Street Journal until
February 14, 1999. On February 14, 1994 an additional $1,500,000
was added to this loan bringing the loan balance to $19,500,000
with the same terms and maturity date. On June 3, 1994 an
additional $3,700,000 was borrowed and the balance refinanced
payable in monthly installments of $158,265 including principal
and interest, until July 6, 2004. The majority of the proceeds
of the note were used to retire the outstanding debt to Bank of
America. During the first nine months of 1997, the Company
borrowed an additional $741,000 from Exber, Inc.to supplement cash
flows and to provide operating funds during the summer and fall
months. The outstanding balance of the note at September 30, 1997
was $19,781,000.
Exber, Inc. also leased to the Company land and buildings in
Las Vegas, Nevada. Annual payments by the Company and its
subsidiaries are approximately $1,250,000. The leases extend
through 2001 with renewal options.
NOTE 10 - CONTINGENCIES
The Company has contingent liabilities with respect to
lawsuits and other matters arising in the ordinary course of
business. In the opinion of management, no material liability
exists with respect to these contingencies.
<PAGE>
PART 1. - FINANCIAL INFORMATION
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ANALYSIS OF FINANCIAL CONDITION
The Company had total cash assets of $2,152,000
(5.1% of total assets) at September 30, 1997 and $2,982,000
(6.0% of total assets) at December 31, 1996. The ratio of current
assets to current liabilities was .8 to 1 at September 30, 1997
and .9 to 1 at December 31, 1996. Long-term obligations, including
current maturities was $19,781,000 at September 30, 1997 and
$19,290,000 at December 31, 1996.
The Company continues to suffer from a prolonged business
contraction which has adversely impacted the Company's financial
strength. During the past fifteen months the Company's operating
cash flow has deteriorated significantly due to the current business
downturn being experienced by virtually all casinos in the downtown
area. As a result of negative operating cash flows experienced
during the first nine months of 1997, the Company was forced to
borrow an additional $741,000 from Exber, Inc., its majority
shareholder, to meet normal operating requirements. Although the
additional financing obtained from Exber, Inc. should provide
adequate capital for the Company to operate through the fourth
quarter of 1997, management cannot be assured that the Company will
not have to borrow additional funds in the future. Management is
confident that Exber, Inc. will continue to be a source of capital
during periodic downturns and recessions as needed, as long as Exber,
Inc. continues to be the majority shareholder. Management has not, and
does not deem necessary at this time, the need to seek alternative
forms of financing.
As of September 30, 1997, outstanding receivables were
$345,000 compared to $883,000 at December 31, 1996. The
decline in receivables is largely attributed to a decline
in casino credit issued and the increase of items aged more than one
year deemed to be uncollectible. Hotel receivables have also
declined as the result of seasonal factors. Inventories declined to
$446,000 from $528,000 at December 31, 1996 due to seasonal
requirements for food and beverage items. Inventories at the end
of the period remain basically unchanged when compared to the same
period in 1996. Other assets rose by $174,000 compared to December
1996 , which is attributed to the Company's investment in The
Fremont Street Experience. The December 1996 FSE investment total
reflects the write-down of the Company's investment based on annual
losses of the FSE entity for 1996. During the first nine months of 1997,
accounts payable liabilities declined by $433,000 which the Company
attributes to fewer trade payables and fewer customer deposits on
hand at the end of the third quarter. The Company's deferred tax
liability declined by $1,131,000 during the first nine months due
to the provision for income tax liability reduction associated
with the accumulated losses for the year. Accrued Liabilities and
Expenses also declined compared to December 31, 1996 due to timing
differences associated with payroll dates, profit sharing contribution
accruals, and liabilities for outstanding wagers accepted in
the race and sports books.
Investing activities for the Company were limited to
periodic investments in the Fremont Street Experience
through the Union Plaza Experience subsidiary. Capital
expenditures for the first nine months of the year were
limited to minor improvements and small equipment additions
at the Company's hotel and casino complex. The Company does
not anticipate any material capital spending in the near future.
RESULTS OF OPERATIONS
Operating revenues continued to suffer in the third quarter
as a result of the vast competitive pressures currently facing
the Company. Competition has intensified over the past several
years as the robust growth in the Las Vegas valley has added a
significant number of diversions for the tourist and locals
alike. The growth of taverns and casinos located near residential
areas and high density housing developments, offers convenient
gambling and entertainment for the local residents while the
"Strip" is at a competitive advantage for the high stakes gamblers
and tourists. Besides the competition presented by the other
gaming attractions in the city, the Fremont Street Experience,
Grand Canyon and Hoover Dam tours also present competition for the
Company's hotel guest.
<PAGE>
14
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Casinos and taverns located near the residential areas in
Las Vegas have become a significant diversion for the customers
who used to patronize downtown casinos. Competing casinos operating
beyond the downtown area are effectively more competitive due to
various factors . The most significant of those factors is the non-union
labor status of their operations which allows for sub-contracted
restaurants and greater efficiencies in operations and cost effective
employee benefit plans. The establishments operating beyond downtown
and the strip also offer movie theaters, bowling, dancing and other
attractions which appeal to entertainment minded patrons.
The Fremont Street Experience has also proven to be a competitor
to the Company. The FSE is a partnership of downtown operators
that joined with the City Redevelopment Agency and the Las Vegas
Convention Authority to build a canopy over Fremont Street which
connects the downtown casinos in Las Vegas. Although the project
has received positive comments from guests and visitors, this
canopy of lights attracts the Company's hotel guests and casino
patrons into the street during peak gaming hours. Guests and patrons
must leave the Company's property to visit the FSE canopy. This
departure directly negates the Company's promotional efforts and
value of its hotel guests. The Company offers inexpensive rooms,
high quality low priced food and beverages to draw people into its
facility, therefore, it is obvious that any attraction outside
of its building is competition. Furthermore, the FSE has added
stand alone kiosks that offer souvenirs and merchandise in direct
competition with the gift shops at the Company's location.
Although the "strip" has always competed with downtown for the
tourist, the recent popularity of the "mega-resort" has taken
that competition to a new level. With all of the strip construction
during the past five years, guests of the Company's hotel are drawn
to see as many of the attractions as they can during their Las Vegas
vacation.
In connection with the competitive issues currently facing the
Company, management understands the need to reduce operating costs
and to improve operating cash flows to remain a viable entity.
Although the Company's gaming operations have traditionally provided
steady cash flows, the recent gaming environment has forced management
to focus on cost cutting efforts throughout the entire operation.
In addition to the efforts to reduce operating expenses, the
Company is also taking measures to increase revenues. These measures
include the installation of various popular new games on its gaming
floor and offering a host of food and beverage promotions that are
intended to improve foot traffic in the casino.
The Company's gross revenues declined by $4,607,000 (9.9%)
during the first nine months compared to the same period in 1996.
Continued declines in the gaming sector was the primary factor
during the period as casino revenues fell $3,789,000 (13.3%).
Table game and slot machine results accounted for $3,355,000
of the decline as those departments suffered the worst from the
loss in tourist traffic.
Gross food and beverage revenues were down $231,000 from 1996
reflecting the overall softness in the Company's operations and
closure of the Backstage restaurant during the third quarter.
During the quarter, the Company's restaurants served 71,000
(21%) fewer people in its restaurants compared to the same period
in 1996. This sharp decline in restaurant covers was due to the
Company's decision to end most of the food promotions offered and
to raise menu prices across the board. This decision resulted in
a greater impact of foot traffic then expected. At the end of the
third quarter, the Company began offering several new food
promotions aimed at increasing traffic in the casino. The effect
of the promotions are expected to reflect in the fourth quarter
cover count.
Hotel occupancy levels declined by 3.5% though the third
quarter, reducing room revenue by $571,000. Despite the falling
occupancy levels, the Company continues to focus on marketing
primarily to repeat customers in the midwest and value minded
customers from California. In order to attract these customers,
the Company must price its rooms aggressively through various
sales and ad campaigns during the seasonal slow periods.
Management believes that keeping the hotel at maximum
occupancy is vital to the casino operation.
For the nine months ended September 30,1997, total operating
expenses declined by $584,000 or 1.5%. Casino operating costs
declined by $548,000, utility and maintainance costs dropped
$220,000, and advertising and promotional expenses fell $58,000.
These improvements were partially offset by increased expenses
of $290,000 in the food and beverage operations and a $264,000
increase in general and administrative costs. While most of the
Company's operations were able to reduce costs through work
force reductions and less expenditures, increased wages and
higher cost-of-goods sold contributed to the rise in costs of
the Company's food and beverage service operations. General and
administrative costs rose due primarily to higher group insurance
claims compared to the year ago period.
For the third quarter, the Company reported an operating
loss of $1,600,000 compared to an operating loss of $77,000
in the year ago period. For the nine months ended September 30,
1997, the Company reported an operating loss of $1,397,000
compared to operating income of $2,519,000 in same period last
year.
The net loss for the third quarter was $1,423,000 or $1.87
a share versus a net loss of $337,000 or $.44 a share a year
ago. For the nine months ended September 30,1997 the net loss
was $1,876,000 or $2.47 a share compared to net income of
$638,000 or $.84 in 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934 the registrant had duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
UNION PLAZA HOTEL AND CASINO, INC.
(REGISTRANT)
Date: November 7, 1997 /SS/ JOHN D. GAUGHAN
JOHN D. GAUGHAN, President
Date: November 7, 1997 /SS/ LARRY DOLESH
LARRY DOLESH, Vice President
of Finance
Date: November 7, 1997 /SS/ JOHN P. JONES
JOHN P. JONES, Vice President &
Treasurer
Date: November 7, 1997 /SS/ ALAN J. WOODY
ALAN J. WOODY, Controller
16
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] SEP-30-1997
[CASH] 2152000
[SECURITIES] 0
[RECEIVABLES] 345000
[ALLOWANCES] 0
[INVENTORY] 446000
[CURRENT-ASSETS] 3877000
[PP&E] 101762000
[DEPRECIATION] 62324000
[TOTAL-ASSETS] 45251000
[CURRENT-LIABILITIES] 4808000
[BONDS] 19461000
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 750000
[OTHER-SE] 14350000
[TOTAL-LIABILITY-AND-EQUITY] 45251000
[SALES] 7129000
[TOTAL-REVENUES] 42089000
[CGS] 10949000
[TOTAL-COSTS] 21002000
[OTHER-EXPENSES] 8266000
[LOSS-PROVISION] 34000
[INTEREST-EXPENSE] 1634000
[INCOME-PRETAX] (3003000)
[INCOME-TAX] (1127000)
[INCOME-CONTINUING] (1876000)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (1876000)
[EPS-PRIMARY] ( 2.47 )
[EPS-DILUTED] ( 2.47 )
</TABLE>
