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UNION PLAZA HOTEL AND CASINO, INC.
1 Main Street
Las Vegas, NV 89101
August 14, 2002
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of
1934, we are transmitting herewith the attached Form 10-Q.
Sincerely,
UNION PLAZA HOTEL AND CASINO, INC.
/s/ ALAN J. WOODY
Alan J. Woody, Chief Financial Officer
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
Commission file number 0-8133
UNION PLAZA HOTEL AND CASINO INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0110085
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
No. 1 Main Street 89125
Las Vegas, Nevada (Zip Code)
(Address of principal
executive offices)
(702) 386-2110
(Registrant's telephone number, including area code)
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
and (2) has been subject to such filing requirements for the past
90 days.
YES [ X ] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by
this report:
Outstanding at
Class of Common Stock June 30, 2002
$.50 par value 757,419 shares
The Securities and Exchange Commission
Washington D.C.
The financial information included herein is unaudited. In
addition, the financial information does not include all
disclosures required under generally accepted accounting
principles because certain note information included in the
Company's annual report has been omitted; however, such
information reflects all adjustments which are, in the
opinion of Management, necessary to a fair statement of the
results for the interim period.
/s/ ALAN J. WOODY
Alan J. Woody, Chief Financial Officer
Las Vegas, Nevada
August 13, 2002
PART 1. - Financial Information
Item 1. Financial Statements
UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2002 AND DECEMBER 31, 2001
UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2002 AND DECEMBER 31, 2001
ASSETS
JUNE 30, DECEMBER 31,
2002 2001
(Unaudited)
Current Assets:
Cash $ 5,967,000 $ 3,552,000
Accounts receivable 585,000 786,000
Inventories of food, beverage
and supplies 426,000 423,000
Prepaid expense 468,000 793,000
Total current assets 7,446,000 5,554,000
Property and equipment:
Land 7,012,000 7,012,000
Buildings 48,090,000 48,040,000
Leasehold improvements 3,564,000 3,564,000
Furniture and equipment 32,381,000 31,659,000
Total Property and equipment 91,047,000 90,275,000
Less accumulated depreciation
and amortization 57,825,000 55,903,000
Net property and equipment 33,222,000 34,372,000
Other assets 579,000 587,000
$ 41,247,000 $ 40,513,000
The accompanying notes are an integral
Part of these financial statements.
LIABILITIES AND STOCKHOLDERS' EQUITY
JUNE 30, DECEMBER 31,
2002 2001
(Unaudited)
Current liabilities:
Accounts payable $ 2,457,000 $ 2,441,000
Accrued liabilities 2,192,000 2,353,000
Short term contracts payable 682,000 127,000
Current portion of long-term debt 0 38,000
Current portion of obligations under
capital leases 339,000 444,000
Total current liabilities 5,670,000 5,403,000
Long-term debt, less current portion 32,900,000 32,900,000
Obligations under capital leases, less
current portion 1,441,000 1,582,000
40,011,000 39,885,000
Commitments and contingencies
Stockholders' equity:
Common stock, $.50 par value; authorized
20,000,000 shares; issued 1,500,000
shares; Outstanding 757,419 shares at
December 31, 2001 and 757,419 shares
at June 30, 2002. 750,000 750,000
Additional paid-in capital 5,462,000 5,462,000
Retained earnings 8,921,000 8,313,000
15,133,000 14,525,000
Less treasury stock, at cost, 742,581
shares at December 31, 2001 and
742,581 shares at June 30, 2002. 13,897,000 13,897,000
Total stockholders' equity 1,236,000 628,000
$41,247,000 $40,513,000
The accompanying notes are an integral
part of these financial statements.
UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
SIX AND THREE MONTHS ENDED JUNE 30, 2002 AND 2001
Amounts in thousands except per share data
(Unaudited)
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30 JUNE 30
2002 2001 2002 2001
Revenues:
Casino $ 18,557 $ 19,008 $ 8,560 $ 9,104
Food and Beverage 5,027 5,177 2,346 2,532
Rooms 5,760 5,738 2,715 2,841
Other 1,069 1,098 514 542
Gross revenues 30,413 31,021 14,135 15,019
Less promotional complimentaries 3,376 3,209 1,416 1,544
Net revenues 27,037 27,812 12,719 13,475
Operating expenses:
Casino 10,016 10,849 4,874 5,653
Food and Beverage 4,100 4,536 2,040 2,278
Rooms 1,939 2,162 1,027 1,111
General & Administrative 3,124 2,205 1,371 1,046
Entertainment 207 308 105 152
Advertising & Promotion 689 548 344 246
Utilities & Maintenance 3,046 3,286 1,628 1,760
Depreciation & Amortization 1,922 2,124 959 1,065
Provisions for Doubtful Accts. 15 2 10 (1)
Other Costs and Expenses 555 623 256 313
Total operating expenses 25,613 26,643 12,614 13,623
Operating income/(loss) 1,424 1,169 105 (148)
Other income (expense):
Gain on sale of assets 3 41 0 31
Interest Income 15 3 7 1
Interest Expense (833) (1,293) (427) (583)
(815) (1,249) (420) (551)
Income before income taxes 609 (80) (315) (699)
Net Income/(Loss) 609 (80) (315) (699)
Earnings/(Loss) per common share $.80 ($0.11) ($0.42) ($0.92)
The accompanying notes are an integral
part of these financial statements.
UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)
INCREASE IN CASH AND CASH EQUIVALENTS
2002 2001
Cash flows from operating activities:
Cash received from customers $ 27,238,000 $ 27,466,000
Cash paid to suppliers and employees (22,927,000) (24,377,000)
Interest received 15,000 2,000
Interest paid (833,000) (1,292,000)
Net cash provided by operating activities 3,493,000 1,799,000
Cash flows from investing activities:
Proceeds from sale of property & equipment 4,000 41,000
Purchase of property and equipment (418,000) (618,000)
Net cash used in investing activities (414,000) (577,000)
Cash flows from financing activities:
Principal payments on short term contracts (418,000) (22,000)
payable
Principal payments on capital lease (246,000) (743,000)
Principal payments on long-term debt 0 (537,000)
Net cash provided (used) in financing
activities (664,000) (1,302,000)
Net increase in cash and
cash equivalents 2,415,000 (80,000)
Cash and cash equivalents
at 12/31/01 & 12/31/00 3,552,000 3,335,000
Cash and cash equivalents,
at 06/30/02 & 06/30/01 5,967,000 3,255,000
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES
Net income(loss) for period ended
06/30/02 and 06/30/01 $ 609,000 $ (80,000)
Adjustments to reconcile net income to
Net cash provided by operating activities:
Depreciation and amortization 1,922,000 2,124,000
Gain on sale of assets (4,000) (41,000)
Provision for doubtful accounts 15,000 2,000
(Increase) decrease in assets:
Accounts receivable 186,000 57,000
Inventories (3,000) (16,000)
Prepaid expenses 325,000 (239,000)
Other assets 8,000 (176,000)
Increase (decrease) in liabilities:
Accounts payable 596,000 168,000
Accrued expenses (161,000) 0
Total adjustments 2,884,000 1,879,000
Net cash provided by operating
activities $ 3,493,000 $ 1,799,000
The accompanying notes are an integral
part of these financial statements.
UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF THE OPERATIONS AND BASIS OF ACCOUNTING
The Company's wholly-owned subsidiary, Union Plaza
Operating Company, operates hotel and gaming operations in
downtown Las Vegas, Nevada. A substantial portion of the operating
revenues of the Company's subsidiary is derived from gaming operations
which are subject to extensive regulations in the State of Nevada
by the Gaming Commission, the Gaming Control Board and local
regulatory agencies. The Company does not anticipate any material
changes in which the financial results are reported due to the
adoption of new or proposed accounting pronouncements.
In accordance with common industry practice, the estimated
costs of providing promotional allowances have been included in
casino expenses on the statements of income. The Company previously
recorded these amounts in food and beverage expense and rooms expense.
Amounts in the June 30, 2001 financial statements have also been
reclassified to be consistent with the presentation as of June 30, 2002.
NOTE 2 - EARNINGS PER COMMON SHARE
Earnings per common share was computed by dividing net income
by the weighted average number of shares of common stock outstanding
during each period. The weighted average number of shares outstanding was
757,419 during the six months ended June 30, 2002 and June 30, 2001.
NOTE 3 - EMPLOYEE BENEFIT PLANS
The Company contributes to a discretionary executive bonus
plan. During the first six months of 2002, the Company authorized
and distributed $188,000 to this plan compared to a year ago when
$135,000 was authorized. The Company also has a qualified profit
sharing plan for eligible employees. Contributions to this plan
are made at the discretion of the Board of Directors and benefits
are limited to the allocated interests in fund assets. There have
been no profit sharing plan contributions since 1996 and it is
anticipated that there will be none in the foreseeable future.
NOTE 4 - RELATED PARTIES
The related party note payable of $32,900,000, as more
fully described in Note 6, is payable to Exber, Inc., a 51.03%
stockholder of the Company. Interest expense on this note was
$781,000 and $1,241,000 for the six months ended June 30,2002
and 2001, respectively. In addition, the Company has a line of
credit for $1,000,000 with Exber, Inc. to be used for normal operating
requirements as needed. As of June 30, 2002 and December 31,2001, the
outstanding balance was $0.
UNION PLAZA HOTEL AND CASINO,INC. AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 4 - RELATED PARTIES (cont.)
The Company leases equipment under long-term agreements, which are
classified as capital leases. The capital lease covering the hotel and
bus depot property expired during 2001. The hotel and bus depot property
are now leased from Exber, Inc. on a month-to-month basis under an operating
lease commencing on July 1, 2001, with monthly payments of $104,000. The
Company paid a total of $625,000 during each of the six months ended
June 30, 2002 and 2001. The Company paid no interest on this lease
during the first six months of 2002 compared to $24,000 paid in the
first half of 2001.
During 2002 and 2001, the Company financed various equipment purchases
through Exber, Inc., which have been classified as capital leases. As of
June 30, 2002, capital leases include $1,759,000 payable to Exber, Inc.
Interest paid to Exber, Inc. on these capital leases was $48,000 for the
first six months of 2002.
NOTE 5 - CONTINGENCIES
The Company has contingent liabilities with respect to lawsuits and
other maters arising in the ordinary course of business. In the opinion of
management, no material liability exists with respect to these contingencies.
NOTE 6 - LONG TERM DEBT
Long-term debt consists of the following:
June 30, December 31,
2002 2001
Related party note, as amended, payable in
monthly payments of interest only at prime
not to exceed 12%, until January 1, 2005,
at which time the entire balance plus accrued
interest is due. The note is secured by a
First Deed of Trust on land and buildings.
The effective rate of interest at June 30,
2002 is 4.75% $32,900,000 $32,900,000
Contract payable, secured by slot machines
and related equipment, payable in monthly
installments of 25% of net win with no
stated interest for the first twelve months,
after which an interest rate of 3% over prime
applies to the remaining balance. - 38,000
32,900,000 32,938,000
Less current portion 38,000
$32,900,000 $32,900,000
FINANCIAL INFORMATION
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2002, the Company's primary source of liquidity
was $5,967,000 in cash and cash equivalents and a $1,000,000 letter
of credit secured by the Company's majority shareholder. Cash
accounted for 14.5% of total assets at June 30, 2002 compared to
8.8% or $3,552,000 at December 31, 2001. The ratio of current assets
to current liabilities was 1.3 to 1 at June 30, 2002 compared to 1
to 1 at December 31, 2001. The improvement in the current
ratio is attributed to the improved cash position of the Company.
Account receivables declined 25.6% or $201,000 in the first six
months due primarily to a steady decline in group-travel business
since September 11, 2001. As a result of the loss of group-travel
business the outstanding balances due to the hotel have declined
considerably. Prepaid expenses declined $325,000 or 41.0% reflecting
timing differences of gaming taxes paid at the end of the second
quarter in 2001 compared to those same tax liabilities paid at the
beginning of the third quarter in 2002.
Long-term debt, short term contracts payable, and obligations
under capital leases (including current term portions) were $35,362,000
at June 30, 2002 compared to $35,091,000 at December 31, 2001. The
increase in obligations reflects additional purchases of slot machines
on short-term contracts and the reclassification of $580,000 from
accounts payable, less $418,000 paid on those contracts during the
first six months of the year.
Operating cash flow was $3,493,000 for the first six months of
2002 compared to $1,799,000 a year ago. The improvement in operating
cash flow is primarily due to a reduction in payroll expense of over
$1,200,000 combined with a $459,000 reduction in interest expense.
Management expects the cash generated by operations, along with
financing provided by Exber, Inc., will provide the proper liquidity
to meet the future needs of the business.
The Company considers the financial stability of its majority
shareholder to be a source of capital for future investment in
equipment and funding for operations when needed. These factors
considered, management believes that its capital resources and those
available to it should be adequate to meet its anticipated requirements.
RESULTS OF OPERATIONS
Net revenues at the Company's hotel and casino declined $756,000 or
5.6% during the second quarter compared to the same period a year ago.
Revenues were down in each segment of the Company's operation as hotel
occupancy rates averaged just 75.3%, down from 88.1% in 2001. For the
first six months of 2002, net revenues fell $775.000 or 2.8%, significantly
all of which is attributed to the second quarter. Room occupancies declined
11.3% from 90.0% to 78.7% during the first six months of the year. The
decline in hotel occupancy and number of guests staying at the Company's
hotel not only impacted room revenues but has also directly affected
food and beverage revenues and gaming revenues.
Room revenues were down $126,000 or 4.4%, reflecting the 12.8%
decline in occupancy in the second quarter. The impact of the decline in
occupancy was partially offset by an increase in the average daily room
rate. Average daily room rates increased 12.6% during the first six
months of 2002.
PART 1. - FINANCIAL INFORMATION
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATION (cont.)
Food and beverage revenues fell $186,000 or 7.3% due to a 23.7%
decline in number of persons served in the Company's restaurants during
the second quarter. Food sales would have likely declined more without
the impact of an 18.4% average increase in prices. Gaming revenues were
down $544,000 or 6.0% reflecting less slot and table game play during the
quarter. Promotional complimentaries were also down $128,000 or 8.3% during
the quarter due to the overall decline in hotel and casino customer traffic.
Operating expenses declined $1,009,000 or 7.4% in the second quarter
of 2002 compared to the same period in 2001. Lower payroll costs combined
with a reduction in cost of sales expense were the major contributors in
the cost improvements. Since September 2001, the Company has reduced staffing
levels by nearly 20% in response to the loss in business that has plagued
the travel industry. The Company has also reduced food inventories and
streamlined its purchasing process that has resulted in significant savings
in food costs.
Overall, operating income for the Company was $105,000 during the
second quarter of 2002 compared to an operating loss of $148,000 a year ago.
The improvement in operating income combined with a reduction in interest
expense, reduce the Company's net loss in the second quarter to $315,000
from a net loss of $699,000 last year. On a per share basis, the net loss
was $0.42 per common share in 2002 compared to a loss of $0.92 last year.
PART 2. - OTHER INFORMATION
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on May 17,2002.
The stockholders re-elected John D. Gaughan, J.K. Houssels, John P. Jones,
Joe Woody, Irving Kenneth Epstein, Mike Nolan, and Donald L. Dobson to one
year terms, ending on the Company's Annual Meeting in 2003. Of the Company's
757,419 shares outstanding, 698,479 shares voted in favor of the entire
slate of directors, while 58,940 votes were withheld.
UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Union Plaza Hotel and Casino, Inc.
(the "Company") on Form 10-Q for the period ending June 30,2002 as filed
herein to the Securities and Exchange Commission on the date hereof (the
"Report"), I John D. Gaughan, Chairman of the Board and Chief Executive
Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted
pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
all material respects, the financial condition and result of
operations of the Company.
/s/JOHN D. GAUGHAN
John D. Gaughan
Chairman of the Board and
Chief Executive Officer
August 13, 2002
In connection with the Quarterly Report of Union Plaza Hotel and Casino, Inc.
(the "Company") on Form 10-Q for the period ending June 30,2002 as filed
herein to the Securities and Exchange Commission on the date hereof
(the "Report"), I Joe Woody, Vice President and Chief Financial Officer
of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted
pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of the
operations of the Company.
/s/ JOE WOODY
Joe Woody
Vice President and
Chief Financial Officer
August 13, 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934 the registrant had duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
UNION PLAZA HOTEL AND CASINO, INC.
(REGISTRANT)
Date: August 13, 2002 /S/ JOHN D. GAUGHAN
JOHN D. GAUGHAN, President
Date: August 13, 2002 /S/ ALAN J. WOODY
ALAN J. WOODY, Chief Financial
Officer