UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 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 May 3, 2000, 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.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
2000 1999
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues
Casino...................................... $ 14,048,729 $ 10,050,707
Food and beverage........................... 6,775,376 4,561,487
Hotel....................................... 4,109,261 2,362,892
Other....................................... 809,776 633,056
------------ ------------
Gross revenues........................... 25,743,142 17,608,142
Less promotional allowances................. (3,093,416) (2,674,607)
------------ ------------
Net revenues............................. 22,649,726 14,933,535
------------ ------------
Operating expenses
Casino...................................... 5,833,903 4,528,476
Food and beverage........................... 4,251,636 2,530,308
Hotel....................................... 1,616,464 707,598
Other....................................... 307,076 216,772
Selling, general and administrative......... 5,958,071 4,831,231
Depreciation and amortization............... 2,499,755 1,177,944
------------ ------------
Total operating expenses................. 20,466,905 13,992,329
------------ ------------
Income from operations................... 2,182,821 941,206
------------ ------------
Other expense
Interest expense............................ 2,039,109 619,935
------------ ------------
Total other expense...................... 2,039,109 619,935
------------ ------------
Income before income taxes............... 143,712 321,271
Provision for income taxes.................... 50,508 109,232
------------ ------------
Net Income............................... $ 93,204 $ 212,039
============ ============
Income per share of common stock
Net income
Basic..................................... $ 0.01 $ 0.02
Diluted................................... $ 0.01 $ 0.02
Weighted average number of common
shares and potential common
shares outstanding
Basic..................................... 9,436,275 9,436,275
Diluted................................... 9,483,785 9,510,369
</TABLE>
The accompanying Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
-2-
MONARCH CASINO & RESORT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash............................................ $ 4,116,575 $ 6,367,507
Receivables, net................................ 2,363,576 1,954,447
Related party receivables....................... 84,432 83,205
Inventories..................................... 1,253,822 1,456,602
Prepaid expenses................................ 1,953,381 1,600,249
Prepaid federal income taxes.................... 443,870 443,870
Deferred income taxes........................... 1,278,795 1,174,626
------------ ------------
Total current assets......................... 11,494,451 13,080,506
------------ ------------
Property and equipment
Land............................................ 10,339,530 10,339,530
Land improvements............................... 3,077,298 3,034,095
Buildings....................................... 78,712,595 78,432,078
Furniture and equipment......................... 49,827,384 49,392,494
Building improvements........................... 4,487,226 4,462,520
------------ ------------
146,444,033 145,660,717
Less accumulated depreciation and amortization.. (30,463,069) (27,964,180)
------------ ------------
Net property and equipment................... 115,980,964 117,696,537
------------ ------------
Other assets, net................................. 825,704 877,382
------------ ------------
Total assets................................. $128,301,119 $131,654,425
============ ============
</TABLE>
The accompanying Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
-3-
MONARCH CASINO & RESORT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt............ $ 7,425,206 $ 7,333,921
Accounts payable................................ 5,138,143 7,238,084
Accounts payable construction................... 310,488 942,264
Accrued expenses................................ 6,115,134 5,156,363
Federal income taxes payable.................... 283,622 213,686
------------ ------------
Total current liabilities.................... 19,272,593 20,884,318
Long-term debt, less current maturities........... 80,315,983 82,235,509
Deferred income taxes............................. 2,750,758 2,666,017
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............................... 8,954,509 8,861,305
------------ ------------
Total stockholders' equity................... 25,961,785 25,868,581
------------ ------------
Total liabilities and stockholders' equity... $128,301,119 $131,654,425
============ ============
</TABLE>
The accompanying Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
-4-
MONARCH CASINO & RESORT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
2000 1999
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income.................................. $ 93,204 $ 212,039
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization............. 2,545,132 1,223,205
Gain on disposal of assets................ (87,980) -
Deferred income taxes..................... (19,428) (37,738)
(Increase) decrease in receivables, net... (410,356) 56,424
Decrease (increase) in inventories........ 202,780 (83,249)
(Increase) decrease in prepaid expenses... (353,132) 439,981
Decrease (increase) in other assets....... 5,435 (31,678)
Decrease in accounts payable.............. (2,099,941) (152,477)
Increase in accrued expenses,
and federal income taxes payable......... 1,028,707 700,310
------------ ------------
Net cash provided by
operating activities.................... 904,421 2,326,817
------------ ------------
Cash flows from investing activities:
Proceeds from sale of assets................ 87,980 -
Acquisition of property and equipment....... (759,263) (17,741,284)
(Decrease) increase in
accounts payable construction.............. (631,776) 7,954
------------ ------------
Net cash used in investing activities.... (1,303,059) (17,733,330)
------------ ------------
Cash flows from financing activities:
Proceeds from long-term debt................ - 15,795,368
Principal payments on long-term debt........ (1,852,294) (282,950)
------------ ------------
Net cash (used in) provided
by financing activities................. (1,852,294) 15,512,418
------------ ------------
Net (decrease) increase in cash......... (2,250,932) 105,905
Cash at beginning of period................... 6,367,507 4,919,143
------------ ------------
Cash at end of period......................... $4,116,575 $ 5,025,048
============ ============
Supplemental disclosure of
cash flow information:
Cash paid for interest,
net of capitalized interest................ $1,536,395 $ 315,664
Capitalized interest........................ - $ 529,224
Supplemental schedule of non-cash
investing and financing activities:
The Company financed the purchase
of property and equipment in the
following amounts........................... $ 24,053 $ 306,867
</TABLE>
The accompanying Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
-5-
MONARCH CASINO & RESORT, INC.
NOTES TO CONDENSED 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"), a hotel/casino facility in Reno, Nevada. Unless
stated otherwise, the "Company" refers collectively to Monarch and its wholly
owned subsidiary, Golden Road.
The consolidated financial statements include the accounts of Monarch and
Golden Road. Intercompany balances and transactions are eliminated.
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 1999 consolidated financial statements have been
reclassified to conform with the 2000 presentation. These reclassifications
had no effect on the Company's previously reported net income.
Related Party Receivables
Receivables from officers, employees, or affiliated companies are
primarily for banquet related services and are priced at the retail value of
the goods or services provided.
NOTE 2. INTERIM FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements for the
three month periods ended March 31, 2000 and March 31, 1999 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 condensed 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, 1999. The
results for the three month period ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the year ending December
31, 2000, or for any other period.
-6-
NOTE 3. EARNINGS PER SHARE
In 1997, the Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share." SFAS No. 128
replaces previously reported earnings per share with "basic" earnings per
share and "diluted" earnings per share. Basic earnings per share is computed
by dividing reported net earnings by the weighted-average number of common
shares outstanding during the period. Diluted earnings per share reflects the
additional dilution for all potentially dilutive securities such as stock
options.
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 March 31,
-----------------------------------
2000 1999
---------------- ----------------
Per Share Per Share
Shares Amount Shares Amount
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Net Income
Basic..................... 9,436 $0.01 9,436 $0.02
Effect of dilutive
stock options............ 48 - 74 -
------ --------- ------ ---------
Diluted................... 9,484 $0.01 9,510 $0.02
====== ========= ====== ========
</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 and their inclusion would be
antidilutive:
<TABLE>
<CAPTION>
Three Months ended March 31,
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Options to purchase shares of
common stock (in thousands)..... 19 2
Exercise prices.................. $5.25-$6.00 $ 8.06
Expiration dates................. 6/03-2/10 6/99
</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 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 competitive industry
conditions, and expansion of Indian casinos in California, 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.
RESULTS OF OPERATIONS
Comparison of Operating Results for the Three Month
Periods Ended March 31, 2000 and 1999
For the three month period ended March 31, 2000, the Company had net
income of $93 thousand, or $0.01 per share, on net revenues of $22.6 million,
a decrease from net income of $212 thousand, or $.02 per share, on net
revenues of $14.9 million for the three months ended March 31, 1999. Income
from operations for the three months ended March 31, 2000 totaled $2.2
million, compared to $941 thousand for the same period in 1999. The Company's
first quarter of 2000 net revenue represents a new first quarter record for
the Company, but net income and earnings per share were negatively impacted
primarily due to a 112.2% increase in depreciation and amortization and a
228.9% increase in interest expense compared to last year's first quarter. In
the Reno area market, the January through March period encompassing the
Company's first quarter has traditionally been marked by weather-related
seasonality, with winter storms producing moderate to severe travel delays and
difficulties for visitors to the region. The impact of the weather this year
was relatively minor.
Casino revenues were up 39.8% in the first quarter of 2000 compared to
the first quarter of 1999, reflecting increases in both slot and table game
win. Slot revenues were up 41.0% in the first quarter of 2000 compared to the
first quarter of 1999 due to an increase in the volume of slot machine play
and an increase in the number of slot machines on average for the quarter.
Table game revenue in the first quarter of 2000 increased 33.0% from the first
quarter of 1999 due to an increase in table game drop and an increase in the
number of table games on average for the quarter. Casino operating expenses
amounted to 41.5% of casino revenues in the first quarter of 2000, compared to
45.1% in the first quarter of 1999, with the difference due primarily to a
decrease in operating and complimentaries costs.
-8-
Food and beverage revenues increased 48.5% in the first quarter of 2000
compared to the first quarter of 1999 due primarily to the opening of two new
restaurants, an additional beverage lounge, and expansion of the buffet.
While food and beverage operating margins remained relatively constant,
reported food and beverage expenses amounted to 62.8% of food and beverage
revenues during the first quarter of 2000, compared to 55.5% in the first
quarter of 1999, which was primarily caused by classifying certain food and
beverage costs in accordance with accounting requirements prescribed by the
Securities and Exchange Commission.
Hotel revenues increased 73.9% from the 1999 first quarter, due to the
opening of the new hotel tower with 385 rooms. The Atlantis' average daily
room rate ("ADR") was $50.67 in the first quarter of 2000 compared to $49.95
in the first quarter of 1999. Hotel operating expenses in the 2000 first
quarter were 39.3% of hotel revenues, compared to 29.9% in the 1999 first
quarter, as a result of increased payroll and operating costs for the expanded
hotel in general and specifically for the new concierge tower.
Other revenues increased 27.9% in the 2000 first quarter compared to the
1999 first quarter, primarily reflecting the opening of a logo gift shop.
Other expenses in the 2000 first quarter amounted to 37.9% of other revenues,
compared to 34.2% in the 1999 first quarter as a result of higher gift shop
operating costs and a decrease in the 2000 first quarter bad debt recoveries
compared to the 1999 first quarter.
Selling, general and administrative expenses amounted to 26.3% of net
revenues in the first quarter of 2000, compared to 32.4% in the first quarter
of 1999. This decrease is primarily due to economies of payroll and operating
costs as a result of the expansion, whereby these costs did not increase as
rapidly as revenues increased.
Interest expense for the 2000 first quarter totaled $2.0 million, an
increase of 228.9%, from $620 thousand in the 1999 first quarter. The
increase reflects the Company's increased debt due to the Atlantis expansion
and an increase in interest rates. In the 2000 first quarter, the Company did
not capitalize any interest costs; however, during the 1999 first quarter,
$529 thousand in interest costs were capitalized.
OTHER FACTORS AFFECTING CURRENT AND FUTURE RESULTS
The recent constitutional amendment approved by California voters
allowing the expansion of Indian casinos in California will have an impact on
casino revenues in Nevada in general, and many analysts have predicted the
impact will be more significant on the Reno-Lake Tahoe market. The extent of
this impact is difficult to predict, but the Company believes that the impact
on the Company will be mitigated to an extent due to the Atlantis' emphasis on
Reno area residents as a significant base of its business. However, if other
Reno area casinos suffer business losses due to increased pressure from
California Indian casinos, they may intensify their marketing efforts to Reno
area residents as well. However, the Company's numerous amenities such as a
wide array of restaurants and other venues are a key factor in the Company's
ability to attract Reno area residents which competitor facilities will not
easily be able to match.
-9-
The Company also believes that the legalization of unlimited land-based
casino gaming in or near any major metropolitan area in the Atlantis' key
marketing areas, such as San Francisco or Sacramento, could have a material
adverse effect on its business.
The gaming industry represents a significant source of tax revenues to
the State of Nevada. A recent proposal in Nevada would increase the tax on
gaming revenues from 6.25% to 11.25%. If enacted, this proposal would have a
material impact on the Company's results of operations.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended March 31, 2000, net cash provided by operating
activities totaled $904 thousand. Net cash used in investing activities for
the same period totaled $1.3 million, which consisted primarily of
acquisitions of property and equipment at the Atlantis. Net cash used for
financing activities totaled $1.9 million as the Company used funds to reduce
long-term debt. As a result, at March 31, 2000, the Company had cash of $4.1
million, compared to $6.4 million at December 31, 1999.
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, 1999. At March 31, 2000, the outstanding
balance of the Credit Facility was $79.3 million.
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.
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.
-10-
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
27.01 Financial Data Schedule
(b) Reports on Form 8-K
None.
-11-
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: May 25, 2000 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>
-12-
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
Exhibit No. Description Page No.
- ----------- ----------- --------
27.01 Financial Data Schedule
</TABLE>
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S
CONDENSED CONSOLIDATED FINANCIAL STATMENTS AS OF MARCH 31, 2000 AND THE
ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES TO
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,116,575
<SECURITIES> 0
<RECEIVABLES> 2,448,008
<ALLOWANCES> 0
<INVENTORY> 1,253,822
<CURRENT-ASSETS> 11,494,451
<PP&E> 146,444,033
<DEPRECIATION> 30,463,069
<TOTAL-ASSETS> 128,301,119
<CURRENT-LIABILITIES> 19,272,593
<BONDS> 80,315,983
0
0
<COMMON> 95,363
<OTHER-SE> 25,866,422
<TOTAL-LIABILITY-AND-EQUITY> 128,301,119
<SALES> 0
<TOTAL-REVENUES> 22,649,726
<CGS> 0
<TOTAL-COSTS> 12,009,079
<OTHER-EXPENSES> 2,499,755
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,039,109
<INCOME-PRETAX> 143,712
<INCOME-TAX> 50,508
<INCOME-CONTINUING> 93,204
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 93,204
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
