UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
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 No. 0-22088
MONARCH CASINO & RESORT, INC.
(Exact name of registrant as specified in its charter)
-------------------------
NEVADA 88-0300760
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1175 W. MOANA LANE, SUITE 200
RENO, NEVADA 89509
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code: (775) 825-3355
-------------------------
NOT APPLICABLE
(Former name, former address and former fiscal
year, if changed since last report.)
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 ___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES ___ NO ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of August 11, 1999, there were 9,436,275 shares of Monarch Casino & Resort,
Inc. $0.01 par value common stock outstanding.
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MONARCH CASINO & RESORT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Casino............................... $ 11,827,740 $ 10,681,129 $ 21,878,446 $ 20,180,099
Food and beverage.................... 5,802,959 4,772,862 10,364,446 8,996,263
Hotel................................ 3,415,218 3,046,689 5,778,110 5,449,103
Other................................ 666,772 695,125 1,299,828 1,257,519
------------ ------------ ------------ ------------
Gross revenues.................... 21,712,689 19,195,805 39,320,830 35,882,984
Less promotional allowances.......... (3,134,502) (2,633,993) (5,809,109) (4,767,930)
------------ ------------ ------------ ------------
Net revenues...................... 18,578,187 16,561,812 33,511,721 31,115,054
------------ ------------ ------------ ------------
Operating expenses
Casino............................... 5,254,962 4,538,495 9,924,793 8,609,530
Food and beverage.................... 3,483,261 2,591,075 5,888,347 4,876,778
Hotel................................ 1,106,499 893,817 1,913,346 1,814,431
Other................................ 112,411 127,781 213,800 245,094
Selling, general and administrative.. 5,548,029 4,246,132 10,379,260 8,289,971
Depreciation and amortization........ 1,600,354 1,156,104 2,823,559 2,286,148
------------ ------------ ------------ ------------
Total............................. 17,105,516 13,553,404 31,143,105 26,121,952
------------ ------------ ------------ ------------
Income from operations............ 1,472,671 3,008,408 2,368,616 4,993,102
------------ ------------ ------------ ------------
Other expense
Interest expense..................... 875,033 581,101 1,449,707 1,197,734
------------ ------------ ------------ ------------
Total............................. 875,033 581,101 1,449,707 1,197,734
------------ ------------ ------------ ------------
Income before income taxes........ 597,638 2,427,307 918,910 3,795,368
Provision for income taxes............. 203,197 825,284 312,429 1,290,390
------------ ------------ ------------ ------------
Net Income........................ $ 394,441 $ 1,602,023 $ 606,480 $ 2,504,978
============ ============ ============ ============
Income per share of common stock
Net income
Basic.............................. $ 0.04 $ 0.17 $ 0.06 $ 0.27
Diluted............................ $ 0.04 $ 0.17 $ 0.06 $ 0.26
Weighted average number of common
shares and potential common
shares outstanding
Basic.............................. 9,436,275 9,436,275 9,436,275 9,436,275
Diluted............................ 9,493,774 9,508,406 9,497,936 9,506,560
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
-2-
MONARCH CASINO & RESORT, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash................................................. $ 4,792,855 $ 4,950,244
Receivables, net..................................... 1,617,203 1,274,343
Inventories.......................................... 522,449 476,948
Prepaid expenses..................................... 2,014,129 1,628,717
Prepaid federal income taxes ........................ 39,654 449,226
Deferred income taxes................................ 505,458 432,874
------------- ------------
Total current assets.............................. 9,491,748 9,212,352
------------- ------------
Property and equipment
Land................................................. 10,339,530 10,339,530
Buildings............................................ 85,580,315 35,335,973
Furniture and equipment.............................. 38,334,273 24,667,318
Improvements......................................... 4,971,921 4,969,881
------------- ------------
139,226,039 75,312,702
Less accumulated depreciation and amortization....... (24,849,313) (22,125,039)
------------- ------------
114,376,726 53,187,663
Construction in progress............................. - 32,669,282
------------- ------------
Net property and equipment........................ 114,376,726 85,856,945
------------- ------------
Other assets........................................... 1,657,668 1,662,663
------------- ------------
$ 125,526,142 $ 96,731,960
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt................. $ 2,742,149 $ 850,498
Accounts payable-trade............................... 4,985,043 3,441,829
Accounts payable-construction........................ 5,219,242 7,275,617
Accrued expenses..................................... 3,948,483 4,152,237
------------- ------------
Total current liabilities......................... 16,894,917 15,720,181
Long-term debt, less current maturities................ 79,347,310 52,309,785
Deferred income taxes.................................. 2,223,989 2,248,548
Commitments and contingencies.......................... - -
Stockholders' equity
Preferred stock, $.01 par value, 10,000,000
shares authorized; none issued...................... - -
Common stock, $.01 par value, 30,000,000
shares authorized; 9,536,275 issued;
9,436,275 outstanding............................... 95,363 95,363
Additional paid-in capital........................... 17,241,788 17,241,788
Treasury stock....................................... (329,875) (329,875)
Retained earnings.................................... 10,052,650 9,446,170
------------- ------------
Total stockholders' equity........................ 27,059,926 26,453,446
------------- ------------
$ 125,526,142 $ 96,731,960
============= ============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
-3-
MONARCH CASINO & RESORT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1999 1998
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income............................................ $ 606,480 $ 2,504,978
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization....................... 2,823,559 2,286,148
(Gain) loss on disposal of assets................... (5,293) 17,495
Increase in receivables, net........................ (342,860) (501,843)
(Increase) decrease in inventories.................. (45,501) 159,568
(Increase) decrease in prepaid expenses............. 24,160 (152,663)
(Increase) decrease in deferred income tax asset.... (72,584) 360,000
(Increase) decrease in other assets................. 4,995 (49,009)
Increase (decrease) in accounts payable............. 1,543,214 (1,308,693)
Decrease in accrued expenses.. ........... (203,754) (237,116)
Decrease in deferred income tax liability........... (24,559) (12,000)
------------ ------------
Net cash provided by operating activities.......... 4,307,857 3,066,865
------------ ------------
Cash flows from investing activities:
Proceeds from sale of assets.......................... 11,268 8,120
Acquisition of property and equipment................. (26,979,930) (2,495,561)
------------ ------------
Net cash used in investing activities.............. (26,968,662) (2,487,441)
------------ ------------
Cash flows from financing activities:
Proceeds from long-term borrowings.................... 23,249,498 -
Principal payments on long-term debt.................. (746,082) (2,072,850)
------------ ------------
Net cash provided by (used in) financing
activities........................................ 22,503,416 (2,072,850)
------------ ------------
Net decrease in cash............................... (157,389) (1,493,426)
Cash at beginning of period............................. 4,950,244 5,527,839
------------ ------------
Cash at end of period................................... $ 4,792,855 $ 4,034,413
============ ============
Supplemental disclosure of
cash flow information:
Cash paid for interest,
net of capitalized interest.......................... $ 1,642,151 $ 1,198,350
Capitalized interest.................................. $ 1,090,428 47,409
Cash paid for income taxes............................ - 962,479
Supplemental schedule of non-cash
investing and financing activities:
The Company financed the purchase of property
and equipment in the following amounts............... 6,425,760 667,208
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
-4-
MONARCH CASINO & RESORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Monarch Casino & Resort, Inc. ("Monarch") was incorporated in 1993.
Golden Road Motor Inn, Inc. ("Golden Road") operates the Atlantis Casino
Resort (the "Atlantis") in Reno, Nevada, and owns a 16-acre site adjacent to
the Atlantis, which is suitable for future development. Unless stated
otherwise, the "Company" refers collectively to Monarch, its wholly owned
subsidiary, Golden Road, and majority owned subsidiaries, Dunes Marina Resort
and Casino, Inc. ("Dunes Marina"), formed in December 1993, and Sea World
Processors, Inc. ("Sea World"), purchased in February 1994.
The consolidated financial statements include the accounts of Monarch,
Golden Road, Dunes Marina and Sea World, and eliminate intercompany balances
and transactions.
Use of Estimates
In preparing these financial statements in conformity with generally
accepted accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the year. Actual results could
differ from those estimates.
Reclassifications
Certain amounts in the 1998 consolidated financial statements have been
reclassified to conform with the 1999 presentation. These reclassifications
had no effect on the Company's net income.
NOTE 2. INTERIM FINANCIAL STATEMENTS
The accompanying consolidated financial statements for the three month
and six month periods ended June 30, 1999 and June 30, 1998 are unaudited. In
the opinion of management, all adjustments, consisting of normal recurring
adjustments necessary for a fair presentation of the Company's financial
position and results of operations for such periods, have been included. The
accompanying unaudited consolidated financial statements should be read in
conjunction with the Company's audited financial statements included in its
Annual Report on Form 10-K for the year ended December 31, 1998. The results
for the three month and six month periods ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999, or for any other period.
NOTE 3. EARNINGS PER SHARE
In 1997, the Company adopted the provisions of SFAS No. 128, Earnings Per
Share. Earnings per share for all periods presented have been restated to
reflect the adoption of SFAS No. 128. SFAS No. 128 requires companies to
present basic earnings per share, and, if applicable, diluted earnings per
-5-
share. Basic earnings per share excludes dilution and is computed by dividing
net earnings available to common stockholders by the weighted average number
of common shares outstanding for the period. Diluted earnings per share
reflects the potential dilution that could occur if options to issue common
stock were exercised into common stock.
The following is a reconciliation of the number of shares (denominator)
used in the basic and diluted earnings per share computations (shares in
thousands):
<TABLE>
<CAPTION>
Three Months ended June 30,
-----------------------------------
1999 1998
---------------- ----------------
Per Share Per Share
Shares Amount Shares Amount
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Net Income
Basic..................... 9,436 $0.04 9,436 $0.17
Effect of dilutive
stock options............ 58 - 72 -
------ ------- ------ -------
Diluted................... 9,494 $0.04 9,508 $0.17
====== ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
Six Months ended June 30,
-----------------------------------
1999 1998
---------------- ----------------
Per Share Per Share
Shares Amount Shares Amount
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Net Income
Basic..................... 9,436 $0.06 9,436 $0.27
Effect of dilutive
stock options............ 62 - 71 (0.01)
------ ------ ------ ------
Diluted................... 9,498 $0.06 9,507 $0.26
====== ====== ====== ======
</TABLE>
The following options were not included in the computation of diluted
earnings per share because the options' exercise price was greater than the
average market price of the common shares:
-6-
<TABLE>
<CAPTION>
Three Months ended June 30,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Options to purchase shares of
common stock (in thousands)..... - 17
Exercise prices.................. - $6.44-$8.06
Expiration dates................. - 9/98-5/08
</TABLE>
<TABLE>
<CAPTION>
Six Months ended June 30,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Options to purchase shares of
common stock (in thousands)..... - 17
Exercise prices.................. - $6.44-$8.06
Expiration dates................. - 9/98-5/08
</TABLE>
-7-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information included herein contains statements that may be
considered forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
such as statements relating to reduction of construction disruption, vendor
lien disputes, anticipated expenses, capital spending and financing sources.
Such forward-looking information involves important risks and uncertainties
that could significantly affect anticipated results in the future and,
accordingly, such results may differ from those expressed in any forward-
looking statements made herein. These risks and uncertainties include, but
are not limited to, those relating to completion of remaining construction
activities, competitive industry conditions, Reno-area tourism conditions,
dependence on existing management, leverage and debt service (including
sensitivity to fluctuations in interest rates), the regulation of the gaming
industry (including actions affecting licensing), outcome of litigation,
domestic or global economic conditions, changes in federal or state tax laws
or the administration of such laws, and issues related to the year 2000.
RESULTS OF OPERATIONS
Comparison of Operating Results for the Three Month
Periods Ended June 30, 1999 and 1998
For the three month period ended June 30, 1999, the Company earned $394
thousand, or $0.04 per share (diluted), on net revenues of $18.6 million, a
decrease in earnings of $1.6 million, or $0.17 per share (diluted), on net
revenues of $16.6 million for the three months ended June 30, 1998. The
Company's income from operations totaled $1.5 million for the 1999 second
quarter, compared to $3.0 million for the 1998 second quarter. The 1999
second quarter net income and earnings per share were negatively impacted
primarily by construction disruption and start-up expenses related to the
Company's major expansion project at the Atlantis (the "Atlantis Expansion").
The Company incurred ongoing expansion related expenses throughout the second
quarter of 1999. The recently completed Atlantis Expansion consists of the
enclosed overhead "skywalk" structure connecting the Atlantis with its 16-acre
site across South Virginia Street from the Atlantis (the "Skywalk") and a new
27-story hotel tower containing additional casino and public space (the "Hotel
Tower Project"). The Company completed the Skywalk during the third week of
March 1999 and began bringing on line certain areas of the Hotel Tower Project
during May 1999. The remainder of the Hotel Tower Project was phased in and
substantially completed late June 1999.
Casino revenues totaled $11.8 million in the second quarter of 1999, an
increase from $10.7 million in the 1998 second quarter, driven by increases in
both slot and table game revenues attributed to increased use of the new
Skywalk, casino facilities, and hotel rooms which came on line in the second
quarter. Casino operating expenses amounted to 44.4% of casino revenues in
the 1999 second quarter, compared to 42.5% in the 1998 second quarter,
primarily as a result of higher labor costs and higher promotional allowance
costs associated with pre-opening activities in the 1999 period.
-8-
Food and beverage revenues for the 1999 second quarter totaled $5.8
million, representing an increase of 20.8%, up from $4.8 million for the 1998
second quarter, with the increase primarily due to the opening of one new
restaurant and the increased number of hotel guests as new rooms were added.
Food and beverage operating expenses during the 1999 second quarter amounted
to 60.0% of food and beverage revenues, up from 54.3% for the second quarter
of 1998, primarily as a result of increased labor and food costs.
Hotel revenues in the 1999 second quarter increased to $3.4 million from
$3.0 million in the 1998 second quarter, resulting from an increase in
capacity of 15,042 room nights, a 37% capacity increase over the same quarter
last year. The Atlantis experienced a 92% occupancy rate as more rooms were
brought on line during the 1999 second quarter period, down from a 96%
occupancy rate in the 1998 second quarter period. Hotel operating expenses in
the 1999 second quarter equaled 32.4% of hotel revenues, compared to 29.3% for
the same quarter in 1998, which can be attributed to a lower average daily
room rate ("ADR") and pre-opening costs. The lower ADR was a result of the
introduction of new rooms.
Other revenues in the 1999 second quarter totaled $667 thousand, down
slightly from $695 thousand in the 1998 second quarter. Other expenses
decreased slightly as a percentage of other revenues, decreasing to 16.9% in
the 1999 second quarter from 18.4% in the 1998 second quarter.
Selling, general and administrative expenses were $5.5 million in the
1999 second quarter or 29.9% of net revenues, compared to $4.2 million or
25.6% of net revenues in the second quarter of 1998. The increase was
primarily due to pre-opening costs and overhead increases necessary to support
the expanded facility.
Interest expense for the 1999 second quarter totaled $875 thousand, up
from $581 thousand in the second quarter of 1998, reflecting an increase in
average outstanding debt primarily from the Atlantis Expansion financing.
During the 1999 second quarter, the Company capitalized approximately $561
thousand in interest costs related to the Atlantis Expansion. During the 1998
second quarter, $29 thousand in interest costs were capitalized.
Comparison of Operating Results for the Six Month
Periods Ended June 30, 1999 and 1998
For the six months ended June 30, 1999, the Company earned $606 thousand,
or $0.06 per share (diluted), on net revenues of $33.5 million, compared to
earnings of $2.5 million, or $0.26 per share (diluted), on net revenues of
$31.1 million during the six months ended June 30, 1998. Operating income for
the 1999 six month period totaled $2.4 million, compared to $5.0 million for
the same period in 1998. In the first six months of 1999, net income and
earnings per share were negatively impacted primarily by construction
disruption and start-up expenses related to the Atlantis Expansion. The
Company incurred ongoing expansion related expenses throughout the six month
period ended June 30, 1999.
Casino revenues for the first six months of 1999 totaled $21.9 million,
up from $20.2 million for the first six months of 1998, driven by increases in
both slot and table game revenues attributed to increased use of the new
-9-
casino facilities and hotel rooms which came on line during the 1999 six month
period. Casino operating expenses amounted to 45.4% of casino revenues for
the six months ended June 30, 1999, compared to 42.7% for the six month period
ending June 30, 1998, primarily as a result of higher labor costs, higher
promotional allowance costs, and pre-opening costs during the 1999 period.
Food and beverage revenues totaled $10.4 million for the six months ended
June 30, 1999, an increase of 15.5% from the $9.0 million for the six months
ended June 30, 1998. The increase was primarily due to the opening of one new
restaurant and the increased number of hotel guests as new rooms were added.
The Company's food and beverage operating expense margin increased to 56.8% in
the 1999 period from 54.2% for the same period in 1998, primarily as a result
of increased labor and food costs.
Hotel revenues for the first six months of 1999 increased to $5.8 million
from $5.4 million for the first six months of 1998, resulting from an increase
in capacity 15,042 room nights, an 18.8% capacity increase over the same six
month period last year. The Atlantis experienced a 91% occupancy rate as more
rooms were brought on line during the 1999 six month period, the same
occupancy rate experienced for the 1998 six month period. The hotel operating
expense margin for the six month period ended June 30, 1999 was relatively
unchanged at 33.1%, compared to 33.3% for the first six months of 1998.
Other revenues totaled $1.3 million for both six month periods ending in
1999 and 1998. Other expenses decreased as a percentage of other revenues by
16.5% in the 1999 six month period, from 19.5% in the 1998 six month period.
Selling, general and administrative expenses were $10.4 million in the
first six months of 1999, or 31.0% of net revenues, compared to $8.3 million
or 26.6% of net revenues in the first six months of 1998. The increase was
primarily a result of construction disruptions and start-up expenses related
to the Atlantis Expansion.
Interest expense for the first six months of 1999 totaled $1.4 million,
up from $1.2 million in the first six months of 1998, reflecting an increase
in average outstanding debt primarily from the Atlantis Expansion financing.
During the first six months of 1999, the Company capitalized approximately
$1.1 million in interest costs related to the Atlantis Expansion. During the
first six months of 1998, $47 thousand in interest costs were capitalized.
OTHER FACTORS AFFECTING CURRENT AND FUTURE RESULTS
With the completion of the Hotel Tower Project, late in the second
quarter, the Company has added approximately 390 rooms, 16,000 square feet of
additional casino space and other amenities to the Atlantis. Major
construction on the Hotel Tower Project began in July 1998 and was
substantially completed as of late June 1999. The Company carefully planned
the Hotel Tower Project to mitigate the disruptive effects of construction by
redirecting traffic flows, creating alternative access points at the Atlantis,
and restricting construction crews, materials and vehicles to specified areas.
Following the very disruptive construction mobilization
-10-
process in July 1998, the Company believes these steps have been effective in
reducing the disruptive effect of the construction activities; however, the
Company believes that some disruption is occurring and will continue to occur
during the third quarter of 1999.
Several vendors who worked on the Skywalk have filed liens against the
Atlantis property totaling $1,238,630. The Company believes that many of the
liens are duplications of amounts previously billed and paid or for services
rendered which the Company has already paid. The Company intends to work to
resolve these disputes and, if necessary, vigorously defend against the lien
claims.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1999, net cash provided by operating
activities totaled $4.3 million. Net cash used in investing activities for
the same period totaled $27.0 million, which consisted entirely of
acquisitions of property and equipment at the Atlantis, most of which relate
to the Atlantis Expansion. Net cash provided by financing activities totaled
$22.5 million, as the Company borrowed funds under its Credit Facility
(defined below) to fund the cost of the Atlantis Expansion. As a result, at
June 30, 1999 the Company had cash of $4.8 million, compared to $4.0 million
at June 30, 1998.
The Company has an $80 million construction and reducing revolving credit
facility with a group of banks (the "Credit Facility"). The principal terms
of the Credit Facility are summarized in the Company's Annual Report on Form
10-K for the year ended December 31, 1998. At June 30, 1999, the outstanding
balance of the Credit Facility was $73.6 million.
The Company also has available a second bank credit facility on which it
may borrow up to $4.5 million. The principal terms of this second bank credit
facility are also summarized in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998. At June 30, 1999, the outstanding balance
on this second bank credit facility was $4.4 million.
The Company signed contracts to construct the Atlantis Expansion in 1998,
which the Company estimates will ultimately cost approximately $75 million to
construct and open. The Company believes it has adequate resources available
through cash on hand, cash flow from operations, and borrowings allowed under
the Credit Facility to complete the Atlantis Expansion project.
In addition to the funding requirements associated with completion of the
Atlantis Expansion, the Company continues to monitor expansion and development
opportunities at its other Reno site and elsewhere in Nevada and in other
jurisdictions. The decision by the Company to proceed with any substantial
project will require the Company to secure adequate financing on acceptable
terms. No assurances can be made that if such projects are pursued that
adequate financing would be available on acceptable terms, if at all.
-11-
The Company believes that its existing cash balances, cash flow from
operations and borrowings available under the Credit Facility will provide the
Company with sufficient resources to fund its operations, meet its existing
debt obligations and fund its capital expenditure requirements; however, the
Company's operations are subject to financial, economic, competitive,
regulatory, and other factors, many of which are beyond its control. If the
Company is unable to generate sufficient cash flow, it could be required to
adopt one or more alternatives, such as reducing, delaying or eliminating
planned capital expenditures, selling assets, restructuring debt or obtaining
additional equity capital.
On April 10, 1995, the Company announced that its Board of Directors
authorized the open market repurchase of up to 200,000 shares of the Company's
common stock. As of August 11, 1999, the Company had repurchased 100,000
shares on the open market at a total cost of approximately $330 thousand under
this authorization. The Company has funded the purchases made to date and
intends to fund any future repurchases from cash on hand.
YEAR 2000
The Company has undertaken an assessment of the information systems and
software used in its operations to determine whether or not those systems were
Year 2000 compliant, and implemented plans to upgrade systems and/or software
that was determined not to be Year 2000 compliant. Based on that assessment
and the plans made as a result thereof, the Company believes that its critical
internal information systems are Year 2000 compliant or will be made Year 2000
compliant before the end of 1999. The Company has begun, and is continuing,
to assess potential issues related to the Year 2000 other than those relating
to the Company's internal information systems, such as critical supplier
readiness and potential problems associated with embedded technologies, and
will develop and implement plans to correct any deficiencies found. The costs
of addressing the Company's year 2000 issues have not been finally determined,
but are not currently expected to be material to the Company's results of
operations or financial position; however, should the Company and/or its
critical suppliers fail to identify and/or correct material Year 2000 issues,
such failure could impact the Company's ability to operate as it did before
the Year 2000, and subsequently have a material impact on the Company's
results of operations or financial position. In such an event, the Company
will address issues as they arise and strive to minimize any impact on the
Company's operations.
For a more detailed discussion of the Company's liquidity and capital
resources, and issues related to the Year 2000, see the Company's Annual
Report on Form 10-K for the year ended December 31, 1998, Item 7.
-12-
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Several vendors who worked on the Skywalk have filed liens against the
Atlantis property totaling $1,238,630. The Company believes that many of the
liens are duplications of amounts previously billed and paid or for services
rendered which the Company has already paid. The Company intends to work to
resolve these disputes and, if necessary, vigorously defend against the lien
claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 23, 1999, the Company conducted its annual meeting of stockholders in
Reno, Nevada, in which the only action taken was the election of directors.
The results were as follows:
Votes Cast
--------------------
Against or
Name of Director Elected For Withheld
------------------------ --------------------
Ben Farahi 8,451,276 15,840
Bob Farahi 8,451,276 15,840
Frank A. Modica 8,451,276 15,840
Craig F. Sullivan 8,451,276 15,840
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
EX-27.01 Financial Data Schedule
(b) Reports on Form 8-K
None
-13-
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.
MONARCH CASINO & RESORT, INC.
(Registrant)
<TABLE>
<S> <C>
Date: August 12, 1999 By: /s/ BEN FARAHI
------------------------------------
Ben Farahi, Co-Chairman of the Board,
Secretary, Treasurer and Chief
Financial Officer(Principal Financial
Officer and Duly Authorized Officer)
</TABLE>
-14-
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
Exhibit No. Description Page
No.
- ----------- ----------- --------
EX-27.01 Financial Data Schedule 16
</TABLE>
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S
CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 1999 AND THE ACCOMPANYING NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS AND N0TES TO FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,792,855
<SECURITIES> 0
<RECEIVABLES> 1,617,203
<ALLOWANCES> 0
<INVENTORY> 522,449
<CURRENT-ASSETS> 9,491,748
<PP&E> 139,226,039
<DEPRECIATION> 24,849,313
<TOTAL-ASSETS> 125,526,142
<CURRENT-LIABILITIES> 16,894,917
<BONDS> 0
0
0
<COMMON> 95,363
<OTHER-SE> 26,964,563
<TOTAL-LIABILITY-AND-EQUITY> 125,526,142
<SALES> 0
<TOTAL-REVENUES> 33,511,721
<CGS> 0
<TOTAL-COSTS> 17,940,286
<OTHER-EXPENSES> 2,823,559
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,449,707
<INCOME-PRETAX> 918,909
<INCOME-TAX> 312,429
<INCOME-CONTINUING> 606,480
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 606,480
<EPS-BASIC> 0.06
<EPS-DILUTED> 0.06
</TABLE>
