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 September 30, 1998
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: (702) 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 November 10, 1998,
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
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues
Casino............................... $ 10,666,836 $ 9,845,923 $ 30,846,935 $ 29,094,980
Food and beverage.................... 4,509,286 4,615,082 13,505,549 13,308,028
Hotel................................ 3,057,075 3,204,724 8,506,178 8,061,099
Other................................ 791,076 625,005 2,048,595 1,752,834
------------ ------------ ------------ ------------
Gross revenues.................... 19,024,273 18,290,734 54,907,257 52,216,941
Less promotional allowances.......... (2,626,320) (2,345,759) (7,394,250) (6,385,061)
------------ ------------ ------------ ------------
Net revenues...................... 16,397,953 15,944,975 47,513,007 45,831,880
------------ ------------ ------------ ------------
Operating expenses
Casino............................... 4,607,507 4,206,635 13,217,037 12,100,612
Food and beverage.................... 2,512,958 2,464,323 7,389,736 7,231,546
Hotel................................ 916,197 958,258 2,730,628 2,859,755
Other................................ 119,473 111,765 364,567 325,584
Selling, general and administrative.. 4,339,007 3,962,908 12,628,978 11,859,101
Depreciation and amortization........ 1,151,666 1,054,175 3,437,814 3,174,166
------------ ------------ ------------ ------------
Total............................. 13,646,808 12,758,064 39,768,760 37,550,764
------------ ------------ ------------ ------------
Income from operations............ 2,751,145 3,186,911 7,744,247 8,281,116
------------ ------------ ------------ ------------
Other expense
Interest expense..................... 548,872 794,279 1,746,606 2,494,788
------------ ------------ ------------ ------------
Total............................. 548,872 794,279 1,746,606 2,494,788
------------ ------------ ------------ ------------
Income before income taxes........ 2,202,273 2,392,632 5,997,641 5,786,328
Provision for income taxes............. 739,524 813,495 2,029,914 1,967,351
------------ ------------ ------------ ------------
Net Income........................ $ 1,462,749 $ 1,579,137 $ 3,967,727 $ 3,818,977
============ ============ ============ ============
Income per share of common stock
Net income
Basic.............................. $ 0.16 $ 0.17 $ 0.42 $ 0.40
Diluted............................ $ 0.15 $ 0.17 $ 0.42 $ 0.40
Weighted average number of common
shares and potential common
shares outstanding
Basic.............................. 9,436,275 9,436,275 9,436,275 9,447,048
Diluted............................ 9,504,389 9,494,656 9,505,855 9,461,864
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
-2-
MONARCH CASINO & RESORT, INC.
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1998 1997
------------ ------------
(Unaudited)
ASSETS
Current assets
Cash........................................ $ 4,656,467 $ 5,527,839
Receivables, net............................ 1,205,458 837,420
Inventories................................. 404,624 570,367
Prepaid expenses............................ 1,260,951 1,333,176
Deferred income taxes....................... 372,503 1,055,000
------------ ------------
Total current assets..................... 7,900,003 9,323,802
------------ ------------
Property and equipment
Land........................................ 10,339,530 10,339,530
Buildings................................... 36,273,298 36,273,298
Furniture and equipment..................... 23,660,971 22,304,919
Improvements................................ 5,068,749 5,040,033
------------ ------------
75,342,548 73,957,780
Less accumulated
depreciation and amortization.............. (21,131,277) (17,868,111)
------------ ------------
54,211,271 56,089,669
Construction in progress.................... 10,371,196 682,047
------------ ------------
Net property and equipment............... 64,582,467 56,771,716
------------ ------------
Other assets.................................. 1,738,446 1,732,569
------------ ------------
$ 74,220,916 $ 67,828,087
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt........ $ 510,708 $ 2,243,611
Accounts payable............................ 2,747,928 4,111,457
Accrued expenses............................ 3,494,462 3,383,855
Federal income taxes payable................ 398,574 240,970
------------ ------------
Total current liabilities................ 7,151,672 9,979,893
Long-term debt, less current maturities....... 38,208,519 32,907,530
Deferred income taxes......................... 2,199,334 2,247,000
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 and 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........................... 9,654,115 5,686,388
------------ ------------
Total stockholders' equity............... 26,661,391 22,693,664
------------ ------------
$ 74,220,916 $ 67,828,087
============ ============
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
-3-
MONARCH CASINO & RESORT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
----------------------------
1998 1997
------------ ------------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income.................................. $ 3,967,727 $ 3,818,977
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization............. 3,437,814 3,174,166
(Gain) loss on disposal of assets......... 17,495 (412)
Increase in receivables, net.............. (368,038) (567,265)
(Increase) decrease in inventories........ 165,743 (16,273)
(Increase) decrease in prepaid expenses... 72,225 (126,275)
Decrease in deferred income tax asset..... 682,497 -
(Increase) decrease in other assets....... (5,877) 17,803
Decrease in accounts payable.............. (1,363,529) (705,110)
Increase in accrued expenses.............. 268,211 642,271
Increase (decrease) in deferred
income tax liability..................... (47,666) 1,099,455
------------ ------------
Net cash provided by
operating activities.................... 6,826,602 7,337,337
------------ ------------
Cash flows from investing activities:
Proceeds from sale of assets................ 8,120 187,215
Acquisition of property and equipment....... (10,671,106) (1,226,369)
------------ ------------
Net cash used in investing activities.... (10,662,986) (1,039,154)
------------ ------------
Cash flows from financing activities:
Proceeds from long-term borrowings.......... 7,167,345 -
Principal payments on long-term debt........ (4,202,333) (6,449,735)
Acquisition of treasury stock............... - (65,875)
------------ ------------
Net cash provided by
(used in) financing activities.......... 2,965,012 (6,515,610)
------------ ------------
Net decrease in cash..................... (871,372) (217,427)
Cash at beginning of period................... 5,527,839 4,021,952
------------ ------------
Cash at end of period......................... $ 4,656,467 $ 3,804,525
============ ============
Supplemental disclosure of
cash flow information:
Cash paid for interest,
net of capitalized interest................ $ 2,443,045 $ 2,547,699
Capitalized interest........................ 141,531 -
Cash paid for income taxes.................. 1,237,479 610,000
Supplemental schedule of non-cash
investing and financing activities:
The Company financed the purchase of property
and equipment in the following amounts..... 603,075 316,162
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 1997 consolidated financial statements have been
reclassified to conform with the 1998 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 nine month periods ended September 30, 1998 and September 30, 1997 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,
1997. The results for the three month and nine month periods ended September
30, 1998 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1998, 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
share. Basic earnings per share excludes dilution and is computed by dividing
net earnings available to common stockholders by the weighted
-5-
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):
Three Months ended September 30,
-----------------------------------
1998 1997
---------------- ----------------
Per Share Per Share
Shares Amount Shares Amount
------ --------- ------ ---------
Net Income
Basic..................... 9,436 $0.16 9,436 $0.17
Effect of dilutive
stock options............ 68 (.01) 59 -
------ --------- ------ ---------
Diluted................... 9,504 $0.15 9,495 $0.17
====== ========= ====== =========
Nine Months ended September 30,
-----------------------------------
1998 1997
---------------- ----------------
Per Share Per Share
Shares Amount Shares Amount
------ --------- ------ ---------
Net Income
Basic..................... 9,436 $0.42 9,447 $0.40
Effect of dilutive
stock options............ 70 - 15 -
------ --------- ------ ---------
Diluted................... 9,506 $0.42 9,462 $0.40
====== ========= ====== =========
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-
Three Months ended September 30,
----------------------------
1998 1997
----------- -----------
Options to purchase shares of
common stock (in thousands)..... 13 2
Exercise prices.................. $5.94-$8.06 $8.06
Expiration dates................. 6/99-5/08 6/99
Nine Months ended September 30,
----------------------------
1998 1997
----------- -----------
Options to purchase shares of
common stock (in thousands)..... 4 13
Exercise prices.................. $6.44-$8.06 $4.00-$8.06
Expiration dates................. 6/99-5/08 6/99-6/02
-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, 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 September 30, 1998 and 1997
For the three month period ended September 30, 1998, the Company earned
$1.5 million, or $.15 per share, on net revenues of $16.4 million, compared to
earnings of $1.6 million, or $.17 per share, on net revenues of $15.9 million
for the three months ended September 30, 1997. The Company's income from
operations totaled $2.8 million in the 1998 third quarter, compared to $3.2
million in the 1997 third quarter. The Company's results were detrimentally
impacted in the 1998 third quarter by disruptions associated with the
expansion underway at the Atlantis, which includes major construction projects
on both sides of the property. In particular, the Company experienced a
decline in revenue and earnings in July 1998, the month in which both the
South Virginia Street skywalk and hotel tower construction projects at
Atlantis ramped up to full capacity. During July 1998, a sizable portion of
the Atlantis' primary customer parking area was torn up and reconfigured to
accommodate the tower construction yard. Other large sections of that same
parking area were cordoned off and taken temporarily out of service while the
primary construction crane was erected. With construction activity
continuing, the Company's results bounced back in August and September 1998
with both months experiencing gains in revenues and net income compared to the
same months in 1997.
Casino revenues totaled $10.7 million in the third quarter of 1998, up
from $9.8 million in the 1997 third quarter, with increases in both slot and
table game revenues contributing to the rise. Casino operating expenses
amounted to 43.2% of casino revenues in the 1998 third quarter, compared to
42.7% in the 1997 third quarter, primarily as a result of higher promotional
allowance costs in the 1998 period.
Food and beverage revenues for the 1998 third quarter totaled $4.5
million, compared to $4.6 million for the 1997 third quarter. Food and
beverage operating expenses during the 1998 third quarter amounted to 55.7% of
food and beverage revenues, up from 53.4% for the third quarter of 1997,
-8-
with the increase due primarily to higher food and personnel costs in the 1998
period. This increase was due in part to an increase in the minimum wage.
Many of the Atlantis' employees receive the minimum wage as their base pay,
and earn the majority of their income in the form of tips. Although federal
law and many states allow employers to count tip income toward part of the
minimum wage, reflecting the reality that tip income is to many employees in
service-related positions the dominant source of income, Nevada law does not
allow the practice.
Hotel revenues in the 1998 third quarter totaled $3.1 million, compared
to $3.2 million in the 1997 third quarter. The decrease reflects a slight
(1.5%) drop in the Atlantis' average daily room rate ("ADR")and a 2.7 point
decline in the average occupancy rate during the 1998 period. The occupancy
rate decline reflects a substantial decline during July 1998, when a
substantial amount of construction disruption occurred, compared to July 1997.
The combined occupancy rate for August and September 1998 was 1.5 points
higher than for the same period in 1997. Hotel operating expenses in the 1998
third quarter equaled 30.0% of hotel revenues, virtually unchanged from 29.9%
for the same quarter in 1997.
Other revenues in the 1998 third quarter totaled $791 thousand, up from
$625 thousand in the 1997 third quarter, with the increase due primarily to
increased retail sales at the Atlantis and an increase in miscellaneous
income. Other expenses decreased as a percentage of other revenues, falling
to 15.1% in the 1998 third quarter from 17.9% in the 1997 third quarter, due
to higher levels of miscellaneous income which had no offsetting expenses.
Selling, general and administrative expenses in the 1998 third quarter
amounted to 26.5% of net revenues, compared to 24.9% in the 1997 third
quarter, primarily due to higher personnel costs in the 1998 period. This
increase in part reflects additional marketing and administrative staff added
in preparation for the 1999 opening of the expansion currently under
construction at the Atlantis.
Interest expense for the 1998 third quarter totaled $549 thousand, down
from $794 thousand in the third quarter of 1997, reflecting lower average
interest rates on the Company's debt and the capitalization of certain
interest costs during the 1998 period. During the 1998 third quarter, the
Company capitalized approximately $94 thousand in interest costs related to
construction activities at the Atlantis. During the same period in 1997,
there was no capitalized interest.
Comparison of Operating Results for the Nine Month
Periods Ended September 30, 1998 and 1997
For the nine months ended September 30, 1998, the Company earned $4.0
million, or $.42 per share, on net revenues of $47.5 million, compared to
earnings of $3.8 million, or $.40 per share, on net revenues of $45.8 million
during the nine months ended September 30, 1997. Income from operations for
the 1998 nine month period totaled $7.7 million, compared to $8.3 million for
the same period in 1997.
Casino revenues for the nine months ended September 30, 1998 totaled
$30.8 million, up from $29.1 million for the nine months ended September 30,
1997, driven by growth in both slot and table game revenues. Casino operating
expenses amounted to 42.9% of casino revenues for the nine months ended
September 30, 1998, compared to 41.6% for the nine month period ending
-9-
September 30, 1997, with the increase due primarily to higher promotional
allowance costs during the 1998 period.
Food and beverage revenues totaled $13.5 million for the nine months
ended September 30, 1998, up from $13.3 million for the nine months ended
September 30, 1997. The Company's food and beverage operating expense margin
was 54.7% in the 1998 period, compared to 54.3% in the 1997 period.
Hotel revenues for the first nine months of 1998 totaled $8.5 million, up
from $8.1 million for the first nine months of 1997, with the improvement
primarily due to an increase in the Atlantis' ADR in the 1998 period. The
hotel operating expense margin for the nine month period ended September 30,
1998 was 32.1%, compared to 35.5% for the first nine months of 1997, with the
improvement reflecting increased operating efficiencies and a higher level of
revenue from which to offset the relatively high level of fixed costs of the
hotel operation.
Selling, general and administrative expenses for the first nine months of
1998 totaled 26.6% of net revenues, compared to 25.9% in the first nine months
of 1997, with the increase primarily reflecting higher personnel costs in the
1998 third quarter.
Interest expense for the nine months ended September 30, 1998 totaled
$1.7 million, down from $2.5 million for the nine months ended September 30,
1997, reflecting lower average outstanding debt, lower average interest rates
on the Company's debt, and the capitalization of certain interest costs during
the 1998 period. During the 1998 period, the Company capitalized
approximately $142 thousand in interest costs related to construction
activities at the Atlantis. During the same period in 1997, there was no
capitalized interest.
OTHER FACTORS AFFECTING CURRENT AND FUTURE RESULTS
The Company signed an agreement with Perini Building Company on June 12,
1998 to construct an expansion of the Atlantis that will add approximately 390
rooms, 16,000 square feet of additional casino space and other amenities to
the Atlantis (the "Hotel Tower Project"). Major construction activity on this
project began in July 1998 and will continue until the project is completed in
late spring/early summer 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 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 until
the project is completed.
On April 20, 1998, the Company entered into a contract with Krump
Construction, Inc. ("Krump") of Reno, Nevada to construct a pedestrian
overhead walkway connecting the Atlantis with a 16-acre site with additional
parking owned by the Company adjacent to and across South Virginia Street from
the Atlantis (the "Walkway Project", and together with the Hotel Tower
Project, the "Expansion Project"). The Walkway Project is directly in front
of the Atlantis. Although the Walkway Project is much smaller in scale than
the Hotel Tower Project, the construction activity associated with the Walkway
Project has also impeded traffic flows and access to the property and
-10-
resulted in business disruptions. The Company has taken similar steps to
those described above to minimize the disruptive impact of this construction
activity, but believes that disruption has occurred and will continue to occur
until this project is completed in early 1999.
With the Expansion Project, the Company is subject to certain risks
typically associated with large-scale construction projects, including the
risks of delay, shortages of materials or skilled labor, unforeseen
engineering, environmental and/or geological problems, work stoppages, weather
interference and unanticipated cost increases.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 1998, net cash provided by
operating activities totaled $6.8 million. Net cash used in investing
activities for the same period totaled $10.7 million, which consisted entirely
of acquisitions of property and equipment at the Atlantis, most of which were
related to the Expansion Project. Net cash provided by financing activities
totaled $3.0 million, as the Company borrowed funds under its bank credit
facility to fund the costs of the Expansion Project. At September 30, 1998 the
Company had cash of $4.7 million, compared to $5.5 million at December 31,
1997.
On December 30, 1997, the Company completed the refinancing of its long-
term debt with an $80 million construction and reducing revolving credit
facility with a group of banks (the "Credit Facility"). The Credit Facility
replaced approximately $33 million in existing long-term debt, with the
remainder of the $80 million Credit Facility available for use as a source of
funding for the Expansion Project. 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, 1997.
The Company has signed contracts to construct the Expansion Project,
which the Company estimates will cost approximately $63 million to construct.
The Company believes it will have adequate resources available through cash on
hand, cash flow from operations, and borrowings allowed under the Credit
Facility to construct the Expansion Project.
In addition to the potential funding requirements associated with the
Expansion Project, 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 permitted 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.
-11-
YEAR 2000
During 1997, the Company undertook 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 or replace
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 fully determined, but are not currently expected to be
material to the Company's 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 operating results 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, 1997, Item 7.
-12-
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
10.01 Term Loan Agreement, entered into as of the
23rd day of July, 1998, by and among Golden
Road Motor Inn, Inc., as Borrower, Monarch
Casino & Resort, Inc., John Farahi, Bahram
Farahi and Behrouz Farahi as guarantors,
and U.S. Bank National Association as Term
Lender.
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)
Date: November 12, 1998 By: /s/ BEN FARAHI
------------------------------------
Ben Farahi, Co-Chairman of the Board,
Secretary, Treasurer and Chief
Financial Officer(Principal Financial
Officer and Duly Authorized Officer)
-14-
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- --------
10.01 Term Loan Agreement, entered into as of the 16
23rd day of July, 1998, by and among Golden
Road Motor Inn, Inc., as Borrower, Monarch
Casino & Resort, Inc., John Farahi, Bahram
Farahi and Behrouz Farahi as guarantors,
and U.S. Bank National Association as Term
Lender.
27.01 Financial Data Schedule 59
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