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, 2000
orMarch 31, 2001
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 July 31, 2000,May 9, 2001, 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
Three Months Ended
Six Months Ended
June 30, June 30,
-------------------------- --------------------------March 31,
----------------------------
2001 2000
1999 2000 1999
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
(Unaudited) (Unaudited)
Revenues
Casino...........................Casino...................................... $ 15,501,45915,000,671 $ 11,827,740 $ 29,550,188 $ 21,878,44614,048,729
Food and beverage................ 7,400,521 5,802,959 14,175,898 10,364,446
Hotel............................ 4,642,868 3,415,218 8,752,129 5,778,110
Other............................ 896,375 666,772 1,706,151 1,299,828
------------ ------------beverage........................... 7,510,012 6,775,376
Hotel....................................... 4,090,180 4,109,261
Other....................................... 783,296 809,776
------------ ------------
Gross revenues................ 28,441,223 21,712,689 54,184,366 39,320,830revenues........................... 27,384,159 25,743,142
Less promotional allowances...... (3,462,731) (3,134,502) (6,556,147) (5,809,109)
------------ ------------allowances................. (3,633,978) (3,093,416)
------------ ------------
Net revenues.................. 24,978,492 18,578,187 47,628,219 33,511,721
------------ ------------revenues............................. 23,750,181 22,649,726
------------ ------------
Operating expenses
Casino........................... 6,386,124 5,091,534 12,220,027 9,620,009Casino...................................... 6,269,600 5,833,903
Food and beverage................ 4,585,251 3,632,785 8,836,887 6,163,093
Hotel............................ 1,608,437 950,546 3,224,901 1,658,144
Other............................ 357,119 282,268 664,195 499,040beverage........................... 4,189,108 4,251,636
Hotel....................................... 1,618,342 1,616,464
Other....................................... 293,688 307,076
Selling, general, and administrative.................. 6,068,891 5,548,029 12,026,962 10,379,260administrative........ 6,582,816 5,958,071
Depreciation and amortization.... 2,518,646 1,555,122 5,018,401 2,733,066
------------ ------------amortization............... 2,472,140 2,499,755
------------ ------------
Total operating expenses...... 21,524,468 17,060,284 41,991,373 31,052,612
------------ ------------expenses................. 21,425,694 20,466,905
------------ ------------
Income from operations........ 3,454,024 1,517,903 5,636,846 2,459,109
------------ ------------ ------------ ------------operations................... 2,324,487 2,182,821
Other expense
Interest expense................. 2,178,903 920,265 4,218,012 1,540,200
------------ ------------ ------------ ------------
Total other expenses.......... 2,178,903 920,265 4,218,012 1,540,200
------------ ------------expense, net....................... 1,865,697 2,039,109
------------ ------------
Income before income taxes.... 1,275,121 597,638 1,418,834 918,909taxes............... 458,790 143,712
Provision for income taxes......... 445,301 203,197 495,809 312,429
------------ ------------taxes.................... 156,479 50,508
------------ ------------
Net income....................income............................... $ 829,820302,311 $ 394,441 $ 923,025 $ 606,48093,204
============ ============
============ ============
IncomeNet income per share of common stock
Net income
Basic..........................Basic..................................... $ 0.090.03 $ 0.040.01
Diluted................................... $ 0.100.03 $ 0.06
Diluted........................ $ 0.09 $ 0.04 $ 0.10 $ 0.060.01
Weighted average number of common
shares and potential common
shares outstanding
Basic..........................Basic................................... 9,436,275 9,436,275
9,436,275 9,436,275
Diluted........................ 9,478,796 9,493,765 9,481,390 9,497,903Diluted................................. 9,473,880 9,483,785
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
June 30,March 31, December 31,
2001 2000
1999
------------ ------------------------- -------------
(Unaudited)
ASSETS
Current assets
Cash.................................................Cash............................................ $ 3,903,6097,849,409 $ 6,367,5076,783,998
Receivables, net..................................... 3,258,471 1,954,447net................................ 2,637,487 2,963,648
Federal income tax refund receivable............ - 417,135
Related party receivables............................ 59,773 83,205
Inventories.......................................... 1,233,955 1,456,602receivables....................... 63,147 62,920
Inventories..................................... 1,030,654 1,099,285
Prepaid expenses..................................... 2,049,791 1,600,249expenses................................ 2,192,354 1,875,909
Prepaid federal income taxes ........................ 443,870 443,870taxes.................... 154,281 154,281
Deferred income taxes................................ 1,602,772 1,174,626taxes........................... 2,066,337 2,045,651
------------- -------------------------
Total current assets.............................. 12,552,241 13,080,506assets......................... 15,993,669 15,402,827
------------- -------------------------
Property and equipment
Land.................................................Land............................................ 10,339,530 10,339,530
Land improvements.................................... 3,074,414 3,034,095
Buildings............................................ 78,785,911 78,432,078improvements............................... 3,173,926 3,173,926
Buildings....................................... 78,955,538 78,955,538
Building improvements........................... 4,718,355 4,733,595
Furniture and equipment.............................. 50,332,559 49,392,494
Building improvements................................ 4,515,799 4,462,520equipment......................... 51,003,364 50,924,021
------------- ------------
147,048,213 145,660,717-------------
148,190,713 148,126,610
Less accumulated depreciation and amortization....... (32,980,850) (27,964,180)amortization.. (40,288,150) (37,816,876)
------------- ------------
114,067,363 117,696,537-------------
107,902,563 110,309,734
Construction in progress............................. 419,042progress........................ 283,681 -
------------- -------------------------
Net property and equipment........................ 114,486,405 117,696,537equipment................... 108,186,244 110,309,734
------------- -------------------------
Other assets, net...................................... 774,026 877,382net................................. 627,089 678,247
------------- -------------------------
Total assets......................................assets................................. $ 127,812,672124,807,002 $ 131,654,425126,390,808
============= =========================
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
June 30,March 31, December 31,
2001 2000
1999
------------ ------------------------- -------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt.................debt............ $ 8,287,4768,170,952 $ 7,333,9217,537,893
Accounts payable..................................... 5,797,581 7,238,084payable................................ 6,115,879 8,234,219
Accounts payable-construction........................ 496,557 942,264payable construction................... 21,778 34,650
Accrued expenses..................................... 5,241,093 5,156,363
Federal income taxes payable......................... 580,080 213,686expenses................................ 7,465,125 5,690,888
------------- -------------------------
Total current liabilities......................... 20,402,787 20,884,318liabilities.................... 21,773,734 21,497,650
Long-term debt, less current maturities................ 77,394,700 82,235,509maturities........... 71,141,432 73,480,788
Deferred income taxes.................................. 3,223,579 2,666,017taxes............................. 4,760,863 4,583,708
Commitments and contingencies..........................contingencies.....................
Stockholders' equity
Preferred stock, $.01 par value, 10,000,000
shares authorized; none issued......................issued................. - -
Common stock, $.01 par value, 30,000,000
shares authorized; 9,536,275 issued;
9,436,275 outstanding...............................outstanding.......................... 95,363 95,363
Additional paid-in capital...........................capital...................... 17,241,788 17,241,788
Treasury stock.......................................stock, at cost......................... (329,875) (329,875)
Retained earnings.................................... 9,784,330 8,861,305earnings............................... 10,123,697 9,821,386
------------- -------------------------
Total stockholders' equity........................ 26,791,606 25,868,581equity................... 27,130,973 26,828,662
------------- -------------------------
Total liabilities and stockholders' equity........ $127,812,672 $131,654,425equity... $ 124,807,002 $ 126,390,808
============= =========================
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
SixThree Months Ended
June 30,March 31,
----------------------------
2001 2000 1999
------------ ------------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income............................................income.................................. $ 923,025302,311 $ 606,48093,204
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization....................... 5,109,154 2,823,559amortization............. 2,516,997 2,545,132
Gain on disposal of assets..........................assets................ - (87,980) (5,294)
Deferred income taxes............................... 129,416 (97,143)
Increase in receivables, net........................ (1,280,592) (311,759)taxes..................... 156,469 (19,428)
Decrease (increase) in inventories.................. 222,647 (435,245)
(Increase) decreasereceivables, net... 743,069 (410,356)
Decrease in inventories................... 68,631 202,780
Increase in prepaid expenses............. (449,542) 352,707expenses.............. (316,445) (353,132)
Decrease in other assets............................ 10,872 19,228
(Decrease) increaseassets.................. 5,435 5,435
Decrease in accounts payable............. (1,440,503) 1,543,214payable.............. (2,118,340) (2,099,941)
Increase (decrease) in accrued expenses,
and federal income taxes.......................... 451,124 (203,754)expenses.............. 1,774,237 1,028,707
------------ ------------
Net cash provided by
operating activities.......... 3,587,621 4,291,993activities.................... 3,132,364 904,421
------------ ------------
Cash flows from investing activities:
Proceeds from sale of assets..........................assets................ - 87,980 11,268
Acquisition of property and equipment................. (1,670,529) (24,876,590)equipment....... (288,292) (759,263)
Decrease in accounts payable
construction............. (445,707) (2,056,375)construction.............................. (12,872) (631,776)
------------ ------------
Net cash used in investing activities.............. (2,028,256) (26,921,697)activities.... (301,164) (1,303,059)
------------ ------------
Cash flows from financing activities:
Proceeds from long-term debt.......................... - 23,249,498
Principal payments on long-term debt.................. (4,023,263) (746,082)debt........ (1,765,789) (1,852,294)
------------ ------------
Net cash (used in) provided byused in
financing activities.............................. (4,023,263) 22,503,416activities.................... (1,765,789) (1,852,294)
------------ ------------
Net decreaseincrease (decrease) in cash............................... (2,463,898) (126,288)cash.......... 1,065,411 (2,250,932)
Cash at beginning of period.............................period................... 6,783,998 6,367,507 4,919,143
------------ ------------
Cash at end of period...................................period......................... $ 3,903,6097,849,409 $ 4,792,8554,116,575
============ ============
Supplemental disclosure of
cash flow information:
Cash paid for interest,
net of capitalized interest..........................interest................ $ 4,101,7511,162,697 $ 1,642,151
Capitalized interest.................................. $ - $ 1,090,4281,536,395
Supplemental schedule of non-cash
investing and financing activities:
The Company financed the purchase
of property and equipment in the
following amounts...............amounts........................... $ 136,00959,492 $ 6,425,76024,053
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"), a Nevada corporation, was
incorporated in 1993. Monarch's wholly-owned subsidiary, Golden Road Motor
Inn, Inc. ("Golden Road"), owns and operates the Atlantis Casino Resort (the
"Atlantis"), a hotel/casino facility in Reno, Nevada. Unless stated
otherwise, "Monarch" or
the "Company" refers collectively to Monarch Casino & Resort, Inc. and its wholly-owned
subsidiary, Golden Road
subsidiary.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 in the United States, 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 and six month periods ended June 30,March 31, 2001 and March 31, 2000 and June 30, 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, 1999.2000. The
results for the three month and six month periodsperiod ended June 30, 2000March 31, 2001 are not necessarily
indicative of the results that may be expected for the year ending December
31, 2000,2001, or for any other period.
-6-
NOTE 3. EARNINGS PER SHARE
In 1997, theThe Company adopted the provisions ofaccounts for earnings per share using 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):
-6-
Three Months ended June 30,March 31,
-----------------------------------
2001 2000 1999
---------------- ----------------
Per Share Per Share
Shares Amount Shares Amount
------ --------- ------ ---------
Net Income
Basic..................... 9,436 $0.09$ 0.03 9,436 $0.04$ 0.01
Effect of dilutive
stock options............ 4338 - 5848 -
------ ------- ------ -------
Diluted................... 9,479 $0.09 9,494 $0.049,474 $ 0.03 9,484 $ 0.01
====== ======= ====== =======
Six Months ended June 30,
-----------------------------------
2000 1999
---------------- ----------------
Per Share Per Share
Shares Amount Shares Amount
------ --------- ------ ---------
Net Income
Basic..................... 9,436 $0.10 9,436 $0.06
Effect of dilutive
stock options............ 45 - 62 -
------ ------ ------ ------
Diluted................... 9,481 $0.10 9,498 $0.06
====== ====== ====== ======
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.
-7-antidilutive:
Three Months ended June 30,
----------------------------March 31,
-----------------------------------
2001 2000
1999
----------- --------------------------- ----------------
Options to purchase shares of
common stock (in thousands)........ 14 19
-
Exercise prices..................prices................ $5.25-$5.94 $5.25-$6.00
-
Expiration dates................. 6/dates............... 9/03-2/10 -6/03-2/10
Six Months ended June 30,
----------------------------
2000 1999
----------- -----------
Options to purchase shares of
common stock (in thousands)..... 19 -
Exercise prices.................. $5.25-$6.00 -
Expiration dates................. 6/03-2/10 -
-8-
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.
-7-
RESULTS OF OPERATIONS
Comparison of Operating Results for the Three Month
Periods Ended June 30,March 31, 2001 and 2000 and 1999
For the three month period ended June 30, 2000,March 31, 2001, the Company earned $830had net
income of $302 thousand, or $0.09$0.03 per share, on net revenues of $25.0$23.8 million,
compared to
earningsan increase from net income of $394$93 thousand, or $0.04$.01 per share, on net
revenues of $18.6$22.6 million for the three months ended June 30, 1999.March 31, 2000. Income
from operations for the three months ended June 30, 2000March 31, 2001 totaled $3.5$2.3
million, compared to $1.5$2.2 million for the 1999 second quarter. Net revenues for the secondsame period in 2000. The Company's
first quarter of 20002001 net revenue represents a new secondfirst quarter record for
the Company, but net incomeCompany. 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 earnings per sharedifficulties for visitors to the region. The impact of the
weather this year was relatively minor.
Casino revenues were negatively impacted primarily due to a 62.0%
increaseup 6.8% in depreciation and amortization and a 136.8% increase in interest
expense whenthe first quarter of 2001 compared to last year's second quarter, both as a direct result
of the
Atlantis expansion.
Casino revenues totaled $15.5 million in the secondfirst quarter of 2000, an
increase of 31.1% from $11.8 million in the 1999 second quarter, reflecting increases in both slot and table game win.
Slot revenues were up 23.4%7.0% in the secondfirst quarter of 20002001 compared to the secondfirst
quarter of 19992000 due to an increase in the volume of slot machine playplay. Table
game and an increasepoker room revenue in the average
numberfirst quarter of slot machines for2001 increased 4.9% from
the quarter. Table game revenue for the three
months ended June 30,first quarter of 2000 increased 57.0% compared to the same period in
1999, primarily due to an increase in table game drop and an increase in the
average number of table games for the quarter.poker room
drop. Casino operating expenses amounted to 41.2%41.8% of casino revenues in the
2000 secondfirst quarter of 2001, compared to 43.0%41.5% in the 1999 secondfirst quarter of 2000, with
the difference due primarily due to a decrease in operating
costs.more efficient operations.
Food and beverage revenues for the 2000 second quarter totaled $7.4
million, an increase of 27.5% from $5.8 millionincreased 10.8% in the 1999 secondfirst quarter of 2001
compared to the first quarter of 2000, due primarily to the operationpopularity of
one new restaurant, an additional beverage
lounge, expansion of theAtlantis' restaurants and buffet, and also due to an increase in the hotel
guest traffic
-9-
created by the new hotel rooms.occupancy. Food and beverage operating expenses amounted to 55.8% of food and
beverage revenues during the first quarter of 2001, compared to 62.8% in the
first quarter of 2000, which was primarily due to more efficient operations.
Hotel revenues were $4.1 million for the first quarter of 2001, a
decrease of 0.5% from the 2000 first quarter. While the Atlantis' occupancy
rate for the first quarter of 2001 increased, the average daily room rate
("ADR") decreased, causing the slight decrease in hotel revenues. During the
first quarter of 2001, the Atlantis experienced an 89.2% occupancy rate, up
from an 86.5% occupancy rate for the same period in 2000. The Atlantis' ADR
was $48.58 in the first quarter of 2001 compared to $50.39 in the first
quarter of 2000. Hotel operating expenses remained relatively constant as a
percent of food and beverage revenuehotel revenues at 62.0%39.6% in the 2001 first quarter, compared to
39.3% in the 2000 secondfirst quarter.
Other revenues decreased 3.3% in the 2001 first quarter compared to 62.6% in the second quarter of 1999.
Hotel revenues increased 35.9% to $4.6 million from the 1999 second
quarter, as a result of opening 385 new hotel tower rooms, a slight decrease
in the average daily room rate, and an occupancy rate increase. The Atlantis'
average daily room rate ("ADR") was $51.73 for the 2000 second quarter
compared to $52.45 in the second quarter of 1999. The Atlantis experienced an
occupancy rate of 96.7% during the 2000 second quarter, up from an occupancy
rate of 90.8% during the
same period last year. Hotel operating expensesThe decrease reflects the gain on sale of assets
included in the 2000 secondfirst quarter were 34.6% of hotel revenues compared to 27.8%with no gain or loss included in
the 1999 second quarter, as a result of increased payroll and operating costs for
the hotel expansion, including the new concierge tower rooms.
Other revenues totaled $896 thousand in the second quarter of 2000, up
34.4% from $667 thousand in the second quarter of 1999, primarily reflecting
the opening of a logo gift shop.2001 first quarter. Other expenses in the 2000 second2001 first quarter were 39.8%amounted to
37.5% of other revenues, compared to 42.3%37.9% in the 1999 second quarter.2000 first quarter,
reflecting a slight increase in operating efficiencies.
-8-
Selling, general and administrative expenses were $6.1 million in the
2000 second quarter or 24.3% of net revenues, compared to $5.5 million or
29.9% of net revenues in the second quarter of 1999. The decrease in these
expenses as a percentage of revenue reflects the fact that certain payroll and
operating costs have not increased to the same extent as revenues have
increased, thereby resulting in certain economies of scale from the expansion.
Interest expense for the 2000 second quarter totaled $2.2 million, an
increase of 136.8% from $920 thousand in the second quarter of 1999. The
increase reflects the Company's increased debt incurred in connection with the
Atlantis expansion and an increase in interest rates. Because the Atlantis
expansion was in operation in the second quarter of 2000, the Company did not
capitalize any interest costs; however, during the 1999 second quarter, while
construction was still in progress, $561 thousand in interest costs were
capitalized.
Comparison of Operating Results for the Six Month
Periods Ended June 30, 2000 and 1999
For the six months ended June 30, 2000, the Company earned $923 thousand,
or $0.10 per share, on net revenues of $47.6 million, compared to earnings of
$606 thousand, or $0.06 per share, on net revenues of $33.5 million during the
six months ended June 30, 1999. Operating income for the 2000 six month
period totaled $5.6 million, compared to $2.5 million for the same period in
1999. Net revenues for the six months ended June 30, 2000 represents a new
record for the Company, but net income and earnings per share were negatively
impacted primarily due to an 83.6% increase in depreciation and amortization
and a 173.9% increase in interest expense when compared to last year's six
month period.
Casino revenues for the first six months of 2000 totaled $29.6 million, a
35.1% increase from $21.9 million for the first six months of 1999, reflecting
increases in both slot and table game win. Slot revenues were up 31.5% in the
first six months of 2000 compared to the first six months of
-10-
1999 due to an increase in the volume of slot machine play and an increase in
the average number of slot machines for the six month period. Table game
revenue for the six months ended June 30, 2000 increased 45.7% compared to the
same period in 1999, primarily due to an increase in table game drop and
an increase in the average number of table games for the six month period.
Casino operating expenses amounted to 41.4% of casino revenues for the six
months ended June 30, 2000, compared to 44.0% for the same period in 1999,
primarily due to a decrease in operating costs.
Food and beverage revenues totaled $14.2 million for the six months ended
June 30, 2000, an increase of 36.8% from the $10.4 million for the six months
ended June 30, 1999, due primarily to the addition of two new restaurants, an
additional beverage lounge, expansion of the buffet, and an increase in the
number of hotel guests in the newly expanded hotel. While food and beverage
operating margins remained relatively constant, reported food and beverage
expenses amounted to 62.3% of food and beverage revenues during the 2000 six
month period, compared to 59.5% for the same period in 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 for the first six months of 2000 increased 51.5% to a
total of $8.8 million, up from $5.8 million for the first six months of 1999.
The increase reflects a 45.6% increase in room nights available in the first
six month period of 2000 compared to the same period for 1999 and an increased
occupancy rate. The Atlantis experienced a 91.6% occupancy rate during the
2000 six month period, compared to 89.1% for the same period in 1999. The
average daily room rate ("ADR") was $51.23 for the six month period in 2000,
down only slightly compared to $51.39 for the same period in 1999. Hotel
operating expenses in the first six months of 2000 were 36.8% of hotel
revenues, compared to 28.7% for the same period in 1999. This increase in
operating expenses as a percentage of hotel revenues resulted from increased
payroll and operating costs for the expanded hotel and additional amenities.
Other revenues were $1.7 million for the six months ended June 30, 2000,
an increase of 31.3% from $1.3 million in the same period in 1999, reflecting
the opening of a logo gift shop. Other expenses as a percentage of revenue
remained fairly constant at 38.9% and 38.4% for the six month periods ended
June 30, 2000 and 1999, respectively.
Selling, general and administrative expenses were $12.0 million in the
first six months of 2000, or 25.3% of net revenues, compared to $10.4 million
or 31.0%27.7% of net
revenues in the first six monthsquarter of 1999. The decrease2001, compared to 26.3% in these expenses as a percentagethe first quarter
of revenue reflects the fact that certain
payroll and operating2000. This increase is primarily due to increased energy costs have not increased to the same extent as revenues
have increased, thereby resulting in certain economies of scale from the
expansion.our
area.
Interest expense for the 2001 first six monthsquarter totaled $1.9 million, a
decrease of 8.5%, from $2.0 million in the 2000 totaled $4.2 million,
an increase of 173.9%, compared to $1.5 million for the same period one year
earlier.first quarter. The increasedecrease
reflects the Company's increasedreduction in debt due tooutstanding from the completed
Atlantis expansion and an increasea reduction in interest rates. BecauseThe three principal
officers of the Atlantis
expansion was in operationCompany have personally guaranteed the debt of the Company.
In the past, they have agreed not to be compensated for their personal
guarantees. There is no assurance that they will not be compensated in the
first six months of 2000, the Company did
not capitalize any interest costs; however, during the first six months of
1999, while construction was still in progress, $1.1 million in interest costs
were capitalized.
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OTHER FACTORS AFFECTING CURRENT AND FUTURE RESULTS
The recent constitutional amendment approved by California voters in 1999
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.
The Company also believes that unlimited land-based casino gaming in or
near any major metropolitan area in the Atlantis' key non-Reno 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, which is currently under
discussion, 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 sixthree months ended June 30, 2000,March 31, 2001, net cash provided by operating
activities totaled $3.6 million.$3.1 million, an increase of 246.3% compared to the same
period last year. Net cash used in investing activities fortotaled $301 thousand
in the first quarter of 2001, a decrease of 76.9% over the same period totaled $2.0 million, whichlast
year. Investing activities consisted primarily of acquisitions of property
and equipment at the Atlantis. Net cash used in financing activities totaled
$4.0$1.8 million for the first quarter of 2001, compared to $1.9 million for the
same period last year, as the Company used funds to reduce long-term debt. As
a result, at June 30, 2000,March 31, 2001, the Company had a cash balance of $3.9$7.8 million,
compared to $6.4$6.8 million at December 31, 1999.2000.
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, 1999.2000. At June 30, 2000,March 31, 2001, the outstanding
balance of the Credit Facility was $77.9$73.6 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 Facilityavailability of equipment financing, if necessary, will
provide the Company with sufficient resources to fund its operations, meet its
existing debt obligations, and fundfulfill its capital expenditure requirements;
however, the Company's operations are subject to financial, economic,
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competitive, regulatory, and other factors, many of which are beyond its
control. If the Company is unable to generate sufficient cash flow, it could
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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.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 21, 2000, the Company conducted its annual meeting of stockholders in
Reno, Nevada, in which the only action taken was the election of directors
whose term expired in 2000. The results were as follows:
Votes Cast
--------------------
Against or
Name of Director Elected For Withheld
------------------------ --------------------
John Farahi 9,349,688 14,750
Ronald R. Zideck 9,349,688 14,750
Craig F. Sullivan 9,349,688 14,750
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
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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.
MONARCH CASINO & RESORT, INC.
(Registrant)
Date: August 11, 2000May 10, 2001 By: /s/ BEN FARAHI
------------------------------------
Ben Farahi, Co-Chairman of the Board,
Secretary, Treasurer, and Chief
Financial Officer(Principal Financial
Officer and Duly Authorized Officer)
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EXHIBIT INDEX
Exhibit No. Description Page
No.
- ----------- ----------- --------
EX-27.01 Financial Data Schedule 16
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