UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
| x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 2004 or
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 number 0-14050
THE SANDS REGENT
(exact name of registrant as specified in charter)
| Nevada | 88-0201135 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 345 North Arlington Avenue, Reno, Nevada | 89501 | |
| (Address of principal executive offices) | (Zip code) |
Registrant’s telephone number, including area code (775) 348-2200
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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act. Yes ¨ No x
On November 10, 2004, the registrant had outstanding 5,707,904 shares of its common stock, $.10 par value.
FORM 10-Q
TABLE OF CONTENTS
| Page No. | ||||
| PART I FINANCIAL INFORMATION | ||||
| Item 1. |
1-3 | |||
| 1 | ||||
| 2 | ||||
| 3 | ||||
| Notes to Condensed Consolidated Financial Statements (unaudited) |
4-8 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
9-19 | ||
| Item 3. |
19 | |||
| Item 4. |
19 | |||
| PART II OTHER INFORMATION | ||||
| Item 1. |
20 | |||
| Item 2. |
20 | |||
| Item 3. |
20 | |||
| Item 4. |
20 | |||
| Item 5. |
20 | |||
| Item 6. |
20 | |||
| SIGNATURES | 21 | |||
| CERTIFICATIONS | 22-24 | |||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
| THREE MONTHS ENDED SEPTEMBER 30, |
||||||||
| (Dollars in thousands, except per share amounts) |
2003 |
2004 |
||||||
| Operating revenues |
||||||||
| Gaming |
$ | 7,030 | $ | 12,424 | ||||
| Lodging |
3,074 | 3,054 | ||||||
| Food and beverage |
1,729 | 3,047 | ||||||
| Fuel and convenience store |
4,597 | 4,703 | ||||||
| Other |
457 | 479 | ||||||
| Gross revenues |
16,887 | 23,707 | ||||||
| Promotional allowances |
967 | 1,832 | ||||||
| Net revenues |
15,920 | 21,875 | ||||||
| Operating expenses |
||||||||
| Gaming |
3,040 | 4,995 | ||||||
| Lodging |
1,091 | 1,105 | ||||||
| Food and beverage |
1,137 | 1,938 | ||||||
| Fuel and convenience store |
4,304 | 4,473 | ||||||
| Other |
145 | 157 | ||||||
| Maintenance and utilities |
1,121 | 1,492 | ||||||
| General and administrative |
2,497 | 3,045 | ||||||
| Depreciation and amortization |
915 | 1,545 | ||||||
| 14,250 | 18,750 | |||||||
| Income from operations |
1,670 | 3,125 | ||||||
| Other income (expense) |
||||||||
| Interest expense |
(218 | ) | (606 | ) | ||||
| Collections on previously reserved note receivable |
230 | — | ||||||
| Other, net |
(47 | ) | (46 | ) | ||||
| (35 | ) | (652 | ) | |||||
| Income before income taxes |
1,635 | 2,473 | ||||||
| Income tax provision |
(553 | ) | (833 | ) | ||||
| Net income |
$ | 1,082 | $ | 1,640 | ||||
| Net income per share |
||||||||
| Basic |
$ | 0.22 | $ | 0.29 | ||||
| Diluted |
$ | 0.20 | $ | 0.27 | ||||
| Weighted average of shares outstanding |
||||||||
| Basic |
4,982,968 | 5,646,555 | ||||||
| Diluted |
5,278,486 | 6,118,804 | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
| (Dollars in thousands except share data) |
JUNE 30, 2004 |
SEPTEMBER 30, 2004 |
||||||
| ASSETS |
||||||||
| Cash and cash equivalents |
$ | 5,443 | $ | 5,316 | ||||
| Accounts receivable, net |
714 | 633 | ||||||
| Inventories |
775 | 737 | ||||||
| Prepaid expenses and other assets |
2,014 | 1,775 | ||||||
| Total current assets |
8,946 | 8,461 | ||||||
| Property and equipment: |
||||||||
| Land |
10,007 | 10,007 | ||||||
| Buildings and improvements |
42,823 | 43,039 | ||||||
| Equipment, furniture and fixtures |
24,634 | 25,108 | ||||||
| Construction in progress |
387 | 112 | ||||||
| Total property and equipment |
77,851 | 78,266 | ||||||
| Less accumulated depreciation and amortization |
37,993 | 39,011 | ||||||
| Property and equipment, net |
39,858 | 39,255 | ||||||
| Other assets: |
||||||||
| Goodwill |
28,674 | 28,717 | ||||||
| Other intangibles |
13,011 | 12,888 | ||||||
| Other |
1,104 | 1,131 | ||||||
| Total other assets |
42,789 | 42,736 | ||||||
| Total assets |
$ | 91,593 | $ | 90,452 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Accounts payable |
$ | 3,380 | $ | 3,285 | ||||
| Accrued salaries, wages and benefits |
2,384 | 1,587 | ||||||
| Other accrued expenses |
465 | 504 | ||||||
| Federal income tax payable |
768 | 706 | ||||||
| Deferred federal income tax liability |
258 | 194 | ||||||
| Current maturities of long-term debt |
3,144 | 3,272 | ||||||
| Total current liabilities |
10,399 | 9,548 | ||||||
| Long-term debt |
33,799 | 31,647 | ||||||
| Deferred federal income tax liability |
1,852 | 2,011 | ||||||
| Total liabilities |
46,050 | 43,206 | ||||||
| Common stock ($.10 par value, 20,000,000 shares authorized; 8,049,555 issued) |
805 | 805 | ||||||
| Additional paid-in capital |
17,018 | 17,081 | ||||||
| Retained earnings |
50,078 | 51,718 | ||||||
| 67,901 | 69,604 | |||||||
| Treasury stock (at cost; 2,403,000 shares) |
(22,358 | ) | (22,358 | ) | ||||
| Total stockholders’ equity |
45,543 | 47,246 | ||||||
| Total liabilities and stockholders’ equity |
$ | 91,593 | $ | 90,452 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
| THREE MONTHS ENDED SEPTEMBER 30, |
||||||||
| (Dollars in thousands) |
2003 |
2004 |
||||||
| Operating Activities |
||||||||
| Net income |
$ | 1,082 | $ | 1,640 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
915 | 1,545 | ||||||
| Loss on disposal of property and equipment |
47 | 46 | ||||||
| (Increase) decrease in accounts receivable, net |
(55 | ) | 81 | |||||
| (Increase) decrease in inventories |
(28 | ) | 38 | |||||
| Decrease in prepaid expenses and other current assets |
157 | 239 | ||||||
| Decrease in other assets |
— | 55 | ||||||
| Increase (decrease) in accounts payable |
(460 | ) | 67 | |||||
| Decrease in accrued expenses |
(282 | ) | (758 | ) | ||||
| Change in federal income taxes payable/receivable |
1,062 | (62 | ) | |||||
| Change in deferred federal income taxes |
(127 | ) | 95 | |||||
| Net cash provided by operating activities |
2,311 | 2,986 | ||||||
| Investing Activities |
||||||||
| Investment in property and equipment |
(395 | ) | (774 | ) | ||||
| Payment for prior year purchases of property and equipment |
(181 | ) | (295 | ) | ||||
| Proceeds from sale of assets |
153 | 3 | ||||||
| Net cash used in investing activities |
(423 | ) | (1,066 | ) | ||||
| Financing Activities |
||||||||
| Payments on long-term debt |
(2,302 | ) | (2,024 | ) | ||||
| Payment of costs relative to the issuance of long-term debt |
— | (41 | ) | |||||
| Issuance of Company common stock |
91 | 18 | ||||||
| Net cash used in financing activities |
(2,211 | ) | (2,047 | ) | ||||
| Net decrease in cash and cash equivalents |
(323 | ) | (127 | ) | ||||
| Cash and cash equivalents, beginning of period |
3,965 | 5,443 | ||||||
| Cash and cash equivalents, end of period |
$ | 3,642 | $ | 5,316 | ||||
| Supplemental disclosure of cash flow information |
||||||||
| Interest paid, net of amount capitalized |
$ | 211 | $ | 606 | ||||
| Federal income taxes paid |
$ | — | $ | 800 | ||||
| Supplemental disclosure of non-cash investing and financing activities |
||||||||
| Property and equipment acquired by accounts payable |
$ | 497 | $ | 133 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the accounts of The Sands Regent (the “Company”) and its wholly-owned subsidiaries: Zante, Inc. (“Zante”), Last Chance, Inc. (“Last Chance”), and Plantation Investments, Inc. (“Plantation”). The Company and its subsidiaries are incorporated in Nevada. Zante owns and operates the Sands Regency Casino/Hotel (“Sands Regency”) in downtown Reno, Nevada. Last Chance owns and operates the Gold Ranch Casino and RV Resort in Verdi, Nevada, and California Prospectors, Ltd. (“California Prospectors”), a Nevada limited liability company, which operates a California lottery station. Together, Last Chance and California Prospectors are presented as “Gold Ranch”. On May 1, 2004, the Company acquired 100% of the common stock of Plantation (see Note 7). Plantation owns and operates the Rail City Casino (“Rail City”) in Sparks, Nevada.
The accounting policies followed in the preparation of the f