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 March 31, 2003
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 1-7831
ELSINORE CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 88-0117544
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
202 FREMONT STREET, LAS VEGAS, NEVADA 89101
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number (Including Area Code): 702/385-4011
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 ninety (90) days.
YES X NO
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
YES NO X
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
TITLE OF STOCK NUMBER OF SHARES
CLASS DATE OUTSTANDING
Common May 14, 2003 4,993,965
Elsinore Corporation and Subsidiaries
Form 10-Q
For the Quarter Ended March 31, 2003
INDEX
PART I. FINANCIAL INFORMATION: PAGE
Item 1. Unaudited Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of 4
March 31, 2003 and December 31, 2002
Condensed Consolidated Statements of Operations 6
for the Three Months Ended March 31, 2003 and
March 31, 2002
Condensed Consolidated Statement of Shareholders' 8
Equity for the Three Months Ended March 31, 2003
Condensed Consolidated Statements of Cash Flows for 9
the Three Months Ended March 31, 2003 and
March 31, 2002
Notes to Condensed Consolidated Financial Statements 11
Item 2. Management's Discussion and Analysis of 16
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures 25
About Market Risk
Item 4. Controls and Procedures 25
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings 27
Item 6. Exhibits and Reports on Form 8-K 27
SIGNATURES 28
CERTIFICATIONS 29
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Elsinore Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
Unaudited
(Dollars in Thousands)
March 31, December 31,
2003 2002
------------ ------------
Assets
Current Assets:
Cash and cash equivalents $6,024 $6,333
Accounts receivable, less allowance for
doubtful accounts of $162 and $161,
respectively 533 416
Inventories 383 418
Prepaid expenses 1,561 1,446
------------ ------------
Total current assets 8,501 8,613
Property and equipment, net 18,522 23,515
Other assets 2,188 1,968
------------ ------------
Total assets $29,211 $34,096
============ ============
(continued)
Elsinore Corporation and Subsidiaries
Condensed Consolidated Balance Sheets (continued)
Unaudited
(Dollars in Thousands)
March 31, December 31,
2003 2002
------------ ------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $1,216 $848
Accrued interest 69 319
Accrued expenses 5,214 4,606
Current portion of long-term debt 343 415
------------ ------------
Total current liabilities 6,842 6,188
Long-term debt, less current portion 6,572 8,625
------------ ------------
Total liabilities 13,414 14,813
------------ ------------
Commitments and contingencies
Shareholders' Equity:
6% cumulative convertible preferred stock, no
par value. Authorized, issued and
outstanding 50,000,000 shares. 23,407 23,066
Common stock, $.001 par value per share.
Authorized 100,000,000 shares. Issued
and outstanding 4,993,965 shares at
March 31, 2003 and December 31, 2002,
respectively. 5 5
Additional paid-in capital 4,230 4,571
Accumulated deficit (11,845) (8,359)
------------ ------------
Total shareholders' equity 15,797 19,283
------------ ------------
Total liabilities and shareholders'
equity $29,211 $34,096
============ ============
See accompanying notes to the condensed consolidated financial statements.
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
Unaudited
(Dollars in Thousands, Except Per Share Amounts)
Three Three
Months Months
Ended Ended
March 31, 2003 March 31, 2002
-------------- --------------
Revenues, net:
Casino $10,812 $9,793
Hotel 2,297 2,186
Food and beverage 3,088 2,946
Other 351 321
-------------- --------------
Total revenues 16,548 15,246
Promotional allowances (1,688) (1,653)
-------------- --------------
Net revenues 14,860 13,593
-------------- --------------
Costs and expenses:
Casino 3,440 3,214
Hotel 2,500 2,206
Food and beverage 1,925 1,918
Taxes and licenses 1,602 1,454
Selling, general and
Administrative 2,320 2,060
Rents 1,088 1,089
Depreciation and
Amortization 788 -
Interest 234 300
Impairment loss 4,449 324
Merger and litigation costs, net - 191
-------------- --------------
Total costs and
Expenses 18,346 12,756
-------------- --------------
Net income (loss) before undeclared
dividends on cumulative
convertible preferred stock (3,486) 837
Undeclared dividends on cumulative
convertible preferred stock 341 322
-------------- --------------
Net income (loss) applicable
to common shares ($3,827) $515
============== ==============
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Operations (continued)
Unaudited
Three Three
Months Months
Ended Ended
March 31, 2003 March 31, 2002
-------------- --------------
Basic and diluted income (loss)
per share:
Basic income (loss) per share ($.77) $.10
============== ==============
Weighted average number of
common shares outstanding 4,993,965 4,993,965
============== ==============
Diluted income (loss) per share ($.77) $.01
============== ==============
Weighted average number of
common and common equivalent
shares outstanding 4,993,965 97,993,965
============== ==============
See accompanying notes to condensed consolidated financial statements.
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statement of Shareholders' Equity
Three Months Ended March 31, 2003
Unaudited
(Dollars in thousands)
Common Stock Preferred Stock
------------------------- ----------------------------
Out- Out- Additional Total
Standing Standing Paid-In-Capital Accumulated Shareholders'
Shares Amount Shares Amount Deficit Equity
-------------- ---------- ---------------- ----------- --------------- ----------------- ----------------
Balance,
January 1, 2003 4,993,965 $5 50,000,000 $23,066 $4,571 ($8,359) $19,283
Net loss (3,486) (3,486)
Undeclared preferred
stock dividends 341 (341)
-------------- ---------- ---------------- ----------- --------------- ----------------- ----------------
Balance,
March 31, 2003 4,993,965 $5 50,000,000 $23,407 $4,230 ($11,845) $15,797
============== ========== ================ =========== =============== ================ =================
See accompanying notes to condensed consolidated financial statements.
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Unaudited
(Dollars in Thousands)
Three Three
Months Months
Ended Ended
March 31, 2003 March 31, 2002
-------------- --------------
Cash flows from operating activities:
Net income (loss) ($3,486) $837
Adjustments to reconcile
net income (loss) to net
cash provided by
operating activities:
Depreciation and
amortization 788 -
Impairment loss 4,449 324
Provision for uncollectible
accounts 9 6
Changes in assets and
liabilities:
Accounts receivable (126) (286)
Inventories 35 20
Prepaid expenses (115) (70)
Other assets (220) (69)
Accounts payable 368 93
Accrued interest (250) (224)
Accrued expenses 608 937
-------------- --------------
Net cash provided by
Operating activities 2,060 1,568
-------------- --------------
Cash flows used in investing
Activities - capital
Expenditures (244) (400)
-------------- --------------
Cash flows used in financing
Activities - principal
Payments on long-term debt (2,125) (251)
-------------- --------------
Net increase (decrease) in
cash and cash equivalents (309) 917
Cash and cash equivalents
at beginning of period 6,333 4,643
-------------- --------------
Cash and cash equivalents
at end of period $6,024 $5,560
============== ==============
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (continued)
Unaudited
(Dollars in Thousands)
Three Three
Months Months
Ended Ended
March 31, 2003 March 31, 2002
-------------- --------------
Supplemental disclosure of non-cash investing and
financing activities:
Equipment purchased with capital lease financing $- $575
Supplemental disclosure of cash activities:
Cash paid for interest $483 $524
See accompanying notes to condensed consolidated financial statements.
Elsinore Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
March 31, 2003
(Unaudited)
1. Summary of Significant Critical Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Elsinore
Corporation ("Elsinore" or the "Company") and its wholly owned subsidiaries. All
material intercompany balances and transactions have been eliminated in
consolidation.
Impairment Loss
On March 14, 2002, Elsinore announced that its wholly owned subsidiary,
Four Queens, Inc., which operates the Four Queens Hotel & Casino ("Four Queens")
entered into a definitive asset purchase agreement (the "Purchase Agreement")
for the sale of substantially all of Four Queens Casino's assets, including the
hotel and casino, to SummerGate, Inc., a Nevada corporation, ("SummerGate") for
a purchase price, subject to certain price adjustments, of approximately $22
million, plus the value of cash on hand and the assumption of certain
liabilities. The assets of Four Queens constitute substantially all of the
assets of Elsinore. Subsequently, on April 5, 2002, Four Queens amended the
Purchase Agreement to, among other things, extend the termination date to June
30, 2002, and reduce the $22 million purchase price to approximately $21.15
million (plus the value of cash on hand and the assumption of certain
liabilities) if the sale of assets was consummated after May 7, 2002.
In connection with the Purchase Agreement, the Company recognized a
non-cash impairment loss of approximately $324,000 in the first quarter of 2002,
due to the amendment of the Purchase Agreement. As substantially all of the
assets of the Four Queens were held for sale, no depreciation was recorded on
these assets for the three months ended March 31, 2002.
On June 27, 2002, the Four Queens exercised its right to terminate the
Purchase Agreement and sent written notice to SummerGate of such termination.
Subsequently, Four Queens received a written termination notice from SummerGate.
As such, assets held for sale as of June 30, 2002 were depreciated effective
July 1, 2002.
As discussed in Note 5, on April 29, 2003, the Company announced that it
entered into a definitive stock purchase agreement (the "Stock Purchase
Agreement") for the sale of all the capital stock of Four Queens and its
interest in the Fremont Street Experience, LLC, to TLC Casino Enterprises, Inc.,
a Nevada corporation, ("TLC") for a purchase price of approximately $20.5
million.
In connection with the execution of the Stock Purchase Agreement, the
Company recognized a non-cash impairment loss of approximately $4.4 million
during the first quarter of 2003. An impairment loss was necessary as carrying
values of the assets to be sold as of March 31, 2003 were greater than the fair
market value of the assets.
Basis of Presentation
The Company has prepared the accompanying unaudited condensed consolidated
financial statements, pursuant to rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and regulations. It is suggested
that this report be read in conjunction with the Company's audited consolidated
financial statements included in the annual report for the year ended December
31, 2002. In the opinion of management, the accompanying condensed consolidated
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the Company's financial
position as of March 31, 2003, the results of its operations for the three
months ended March 31, 2003 and March 31, 2002, and the results of its cash
flows for the three months ended March 31, 2003 and March 31, 2002. The
operating results and cash flows for these periods are not necessarily
indicative of the results that will be achieved for the full year or for future
periods.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Significant
estimates used by the Company include the estimated useful lives for depreciable
assets, the estimated allowance for doubtful accounts receivable, the estimated
valuation allowance for deferred tax assets and estimated cash flows used in
assessing the recoverability of long-lived assets. Actual results may differ
from those estimates.
Recently Issued Accounting Standards
In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others". FIN No. 45 requires disclosures
to be made by a guarantor in its interim and annual financial statements about
its obligations under certain guarantees that it has issued. Additionally, a
guarantor is required to recognize, at the inception of a guarantee, a liability
for the fair value of the obligation undertaken in issuing the guarantee. The
initial liability recognition and measurement provisions of FIN No. 45 apply
prospectively to guarantees issued or modified after December 31, 2002. The
disclosure requirements in FIN No. 45 are effective for financial statements of
interim or annual periods ending after December 15, 2002. The Company has
determined that FIN No. 45 did not have a material impact on its financial
position or results of operations.
In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities", which addresses consolidation by business enterprises where
equity investors do not bear the residual economic risks and rewards. These
entities have been commonly referred to as "special purpose entities". Companies
are required to apply the provisions of FIN No. 46 prospectively for all
variable interest entities created after January 31, 2003. The Company has
determined that FIN No. 46 did not have a material impact on its financial
position or results of operations.
Net Income Per Common Share
Basic per share amounts are computed by dividing net income by average
shares outstanding during the year. Diluted per share amounts are computed by
dividing net income by average shares outstanding plus the dilutive effect of
common share equivalents. Since the Company incurred a net loss for the three
month period ended March 31, 2003, the effect of common stock equivalents was
anti-dilutive. Therefore, basic and diluted per share amounts are the same for
this period.
Three Months Ended
March 31, 2002
---------------------------------------
Income Shares Per Share
Amounts
---------------------------------------
Basic EPS:
Net income available to common
shareholders $515,000 4,993,965 $0.10
Effect of Dilutive Securities:
Cumulative convertible preferred
stock 322,000 93,000,000 (0.09)
Diluted EPS:
---------------------------------------
Net income available to common
shareholders plus assumed conversions $837,000 97,993,965 $0.01
=======================================
2. Income Taxes
Due to the Company's regular tax and alternative minimum tax net operating
losses, the Company is not expected to pay federal income taxes for the year
ended December 31, 2003. Accordingly, the Company has not recorded a provision
for income taxes in the accompanying Condensed Consolidated Financial
Statements.
3. Commitments and Contingencies
The Company and seven other downtown Las Vegas property owners, who
together operate ten casinos, have formed the Fremont Street Experience LLC, a
limited liability company of which the Company owns 17.65%, to develop the
Fremont Street Experience. The Company is liable for a proportionate share of
the project's operating expenses.
The President and Executive Director of Finance of Four Queens have
employment agreements with Four Queens which became effective on January 1,
2003. In the event of a change of ownership or control, the President and
Executive Director of Finance of Four Queens have the option to elect to be
employed with the entity or person having acquired such control or terminate
their respective employment agreement. If the executive elects to terminate
their respective employment agreement upon a change of ownership or control, the
Four Queens must pay them an amount equal to one year's base salary and COBRA
benefits. "Change of ownership or control" means that all or substantially all
of the assets of Four Queens are directly, or through transfer of equity
interests, transferred or otherwise disposed of in one or a series of related
transactions after (1) the Four Queens ceases to own directly or indirectly
substantially all equity interests in the Four Queens; (2) the Four Queens sells
51% or more of the assets of Four Queens; or (3) the Company ceases to own
directly or indirectly at least 51% of all outstanding shares of Four Queens.
The President's annual compensation pursuant to his employment agreement is
$255,000 and the Executive Director of Finance's annual compensation under her
employment agreement is $145,000. These employment agreements are required to be
terminated pursuant to the Stock Purchase Agreement as discussed in Note 5
below, prior to consummation of the sale of Four Queens.
The Company is a party to other claims and lawsuits that arose in the
ordinary course of business. Management believes that such matters are either
covered by insurance, or if not insured, will not have a material adverse effect
on the financial statements of the Company taken as a whole.
4. Paulson Litigation
Pursuant to a settlement agreement dated as of April 3, 2002, the lawsuit
between the Company and certain entities controlled by Allen E. Paulson has been
resolved. A Settlement Bar Order and Final Judgment was entered by the Court on
July 1, 2002. Pursuant to the settlement agreement, Elsinore agreed to pay the
sum of $1,100,000, which was paid on June 1, 2002. Total merger and litigation
expense incurred during the first quarter of 2002, was approximately $191,000,
net.
5. Impairment Losses
On March 14, 2002, the Company entered into the Purchase Agreement with
SummerGate, Inc. pursuant to which the Four Queens proposed to sell
substantially all of its assets to SummerGate, the Company recognized a non-cash
impairment loss of approximately $13.2 million during 2001 and an impairment
loss of approximately $324,000, in the first quarter of 2002, due to the
amendment of the Purchase Agreement.
On June 27, 2002, the Four Queens terminated the Purchase Agreement and
sent written notice to SummerGate of such termination.
On April 29, 2003, the Company announced that it entered into the Stock
Purchase Agreement for the sale of all the capital stock of Four Queens and its
interest in the Fremont Street Experience, LLC, to TLC for a purchase price of
approximately $20.5 million.
The stock of the Four Queens constitutes substantially all of the assets of
Elsinore. Upon the consummation of the sale of the stock of the Four Queens,
Elsinore will not have an operating asset. While the Board of Directors of
Elsinore has not yet adopted a formal plan of dissolution, it anticipates that,
following the sale of the Four Queens, it will adopt a plan of dissolution and
begin the process of winding-up and dissolving Elsinore. Elsinore anticipates
that the proceeds from the sale will be used to pay outstanding indebtedness,
and to pay any accrued and unpaid dividends on Elsinore's outstanding 6%
cumulative convertible preferred stock (the "Preferred Stock"). Following the
payment with respect to the accrued and unpaid dividends, Elsinore anticipates
that the holders of the Preferred Stock will exercise their right to convert
their shares of Preferred Stock into shares of common stock of Elsinore ("Common
Stock"), pursuant to the terms of the Preferred Stock. At March 31, 2003, the
outstanding long-term debt of Elsinore was approximately $5.1 million. In
addition, as of March 31, 2003, Elsinore had outstanding approximately
50,000,000 shares of Preferred Stock, with accumulated dividends of
approximately $5.4 million. Following conversion of the Preferred Stock,
Elsinore would have approximately 940 Common Stock holders. After establishing
an adequate reserve for the wind-up of Elsinore's affairs, any remaining funds
are expected to be paid to the holders of Elsinore's Common Stock on a pro rata
basis. Once all remaining obligations have been satisfied and Elsinore is
dissolved, the remaining assets, if any, are expected to be distributed a second
time to Elsinore's Common Stock holders.
The beneficial owner of a majority of Elsinore's capital stock, who
exercises voting and investment authority over 100% of the Preferred Stock and
approximately 99.6% of Common Stock (on an as-converted basis), has agreed to
deliver a written consent representing all of his shares of Elsinore's capital
stock to approve the sale of the stock of the Four Queens on or about May 30,
2003, assuming that the definitive stock purchase agreement remains in effect
and has not been terminated in accordance with its terms.
Consummation of the sale is subject to a number of conditions, including
receipt of required regulatory approvals, including approval of the Nevada
Gaming Commission, and other gaming approvals, and the distribution of the
Information Statement to Elsinore's shareholders pursuant to Securities and
Exchange Commission ("SEC") rules and regulations. There can be no assurance
that the conditions to the sale will be satisfied or that the sale of the Four
Queens will be consummated.
In connection with the execution of the Stock Purchase Agreement, the
Company recognized a non-cash impairment loss of approximately $4.4 million
during the first quarter of 2003. An impairment loss was necessary under the
provision of Statement on Financial Accounting Standards No. 144 "Accounting for
the Impairment or Disposal of Long Lived Assets" ("SFAS No. 144"), as the
carrying values of the net assets to be sold as of March 31, 2003 ($24.9
million) were greater than the fair market value of the assets ($20.5 million).
In accordance with SFAS No. 144, the Company will cease depreciation of these
assets beginning on April 29, 2003.
6. Preferred Stock
On September 29, 1998, as part of a recapitalization, the Company issued to
certain investment accounts of Morgens, Waterfall, Vintiadis & Company (the "MWV
Accounts") 50,000,000 shares of Series A Convertible Preferred Stock of the
Company in exchange for the surrender to the Company of $18,000,000 original
principal amount of certain second mortgage notes held by the MWV Accounts. The
50,000,000 shares of Series A Convertible Preferred Stock have (i) the right to
receive cumulative dividends at the rate of 6% per year; (ii) the right to
receive the amount of $.36 per share, plus all accrued or declared but unpaid
dividends on any shares then held, upon any liquidation, dissolution or winding
up of the Company for an aggregate liquidation preference of $18,000,000; (iii)
voting rights equal to the number of shares of the Company's Common Stock into
which the shares of Preferred Stock may be converted, and (iv) the right to
convert the shares of Preferred Stock into 93,000,000 shares of the Company's
Common Stock.
7. Long-term Debt
Long-term debt, including capital lease obligations, are as follows:
March 31, 2003 December 31, 2002
------------------ -------------------
(In Thousands)
12.83% Mortgage Notes $5,104 $7,104
Notes payable - other 279 371
Capital leases 1,532 1,565
------- -------
6,915 9,040
Less current maturities (343) (415)
------- -------
$6,572 $8,625
======= =======
In January 2003, the Company made an additional principal payment on the
12.83% Mortgage Notes in the amount of $2 million.
The Company has received a Letter of Intent from the MWV Accounts
committing to extend the due date of the Mortgage Notes to October 2004.
Accordingly, the Company has classified the amount due on these Notes as
long-term.
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operation
This discussion and analysis should be read in conjunction with the
Condensed Consolidated Financial Statements and notes thereto set forth
elsewhere herein.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such statements
include statements regarding the Company's expectations, hopes or intentions
regarding the future, including but not limited to statements regarding the
Company's plan to sell Four Queens and the Company's expectations, beliefs and
future plans following the sale of Four Queens. These statements may also
include information about the Company's adoption of certain accounting standards
and their anticipated effects on our business, financing, revenue, operations,
regulations, management's belief regarding the sufficiency of cash flow, the
Company's ability to service its debt and compliance with applicable laws.
Forward-looking statements involve certain risks and uncertainties, and actual
results may differ materially from those discussed in any such statement. Among
the factors that could cause actual results to differ materially are the
following: expenses incurred in the course of completing the sale of Four
Queens, failure of any of the parties to meet closing conditions or otherwise
fail to consummate the transaction, changes in the use of proceeds from the
sale, liabilities and indemnification obligations which may be incurred by the
Company, actions taken or omitted by third parties, declines in general economic
conditions, increased labor costs, including those resulting from collective
bargaining negotiations on their contract renewals, the Company's ability to
refinance its debt, the Company's plan to pay down principal on its debt and to
extend the maturity date of its debt, other financing needs, further terrorist
attacks, the effect of war in Iraq on the travel and entertainment industries,
the effect of the SARS epidemic on the travel and entertainment industries, the
availability of sufficient funds for capital improvements and other risks
related to such improvements, changes in gaming laws, loss of licenses or
permits and other factors described from time to time in the Company's reports
filed with the Securities and Exchange Commission. All forward-looking
statements in this document are made as of the date hereof, based on information
available to the Company as of the date hereof, and the Company assumes no
obligation to update any forward-looking statement.
The following tables sets forth certain operating information for the
Company for the three months ended March 31, 2003 and 2002. Revenues and
promotional allowances are shown as a percentage of net revenues. Departmental
costs are shown as a percentage of departmental revenues. All other percentages
are based on net revenues.
Three Months Ended Three Months Ended
March 31, 2003 March 31, 2002
----------------------------------- -----------------------------------
(Dollars in (Dollars in
thousands) % thousands) %
---------------- --------------- ---------------- ---------------
Revenues, net:
Casino $10,812 72.8% $9,793 72.0%
Hotel 2,297 15.5% 2,186 16.1%
Food and beverage 3,088 20.8% 2,946 21.7%
Other 351 2.4% 321 2.4%
---------------- --------------- ---------------- ---------------
Total revenue 16,548 111.4% 15,246 112.2%
Promotional allowances (1,688) (11.4%) (1,653) (12.2%)
---------------- --------------- ---------------- ---------------
Net revenues 14,860 100.0% 13,593 100.0%
---------------- --------------- ---------------- ---------------
Costs and expenses:
Casino 3,440 31.8% 3,214 32.8%
Hotel 2,500 108.8% 2,206 100.9%
Food and beverage 1,925 62.3% 1,918 65.1%
Taxes and licenses 1,602 10.8% 1,454 10.7%
Selling, general and
Administrative 2,320 15.6% 2,060 15.2%
Rents 1,088 7.3% 1,089 8.0%
Depreciation and
Amortization 788 5.3% - (1) .0%
Interest 234 1.6% 300 2.2%
Impairment loss 4,449 29.9% 324 2.4%
Merger and litigation costs,
Net - 0% 191 1.4%
---------------- --------------- ---------------- ---------------
Total costs and expenses 18,346 123.5% 12,756 93.8%
---------------- --------------- ---------------- ---------------
Net income (loss) before
Undeclared dividends on
Cumulative convertible (3,486) (23.5%) 837 6.2%
Preferred stock
Undeclared dividends on
Cumulative convertible
Preferred stock 341 2.3% 322 2.4%
---------------- --------------- ---------------- ---------------
Net income (loss) applicable
To common shares (3,827) (25.8%) 515 3.8%
---------------- --------------- ---------------- ---------------
(1) As substantially all of the assets of the Four Queens were held for sale,
no depreciation was recorded on these assets for the three months ended
March 31, 2002.
THREE MONTHS ENDED MARCH 31, 2003 COMPARED
TO THREE MONTHS ENDED MARCH 31, 2002
- --------------------------------------------------------------------------------
REVENUES
Net revenues increased by approximately $1,267,000, or 9.3%, from
$13,593,000 during the 2002 period, to $14,860,000 for the 2003 period. This
increase was due, in part, to an increase in casino revenues, as discussed
below.
Casino revenues increased by approximately $1,019,000, or 10.4%, from
$9,793,000 during the 2002 period to $10,812,000 during the 2003 period. This
increase was primarily due to a $772,000, or 11.3%, increase in slot machine
revenue, a $245,000, or 9.5%, increase in table games revenue, and a $21,000, or
7.6%, increase in slot promotion revenue, partially offset by a $18,000, or
13.6%, decrease in keno revenue. The increase in slot machine revenue was
attributable to an increase in slot coin-in of $3,659,000, or 3.1%, and an
increase in the hold percentage of 0.46%. The increase in table games revenue
was attributable to an increase in the win percentage of 0.05% and an increase
in drop of $1,458,000, or 9.2%. The increase in slot promotion revenue was due
to an increase in the average daily headcount of $21 WinsSM, a promotional slot
program, of 12, or 7.8%, due to an increase in foot traffic. The decrease in
keno revenue was attributable to a decrease in keno drop of $18,000, or 4.3%.
Hotel revenues increased by approximately $111,000, or 5.1%, from
$2,186,000 during the 2002 period to $2,297,000 during the 2003 period. This
increase was primarily due to an increase in room occupancy, as a percentage of
total rooms available for sale, from 88.7% for the 2002 period, to 91.8% for the
2003 period and an increase in the average daily room rate of $1.30, from $36.28
in the 2002 period to $37.58 in the 2003 period. The overall improvement in
performance was primarily attributed to an increase in individual reservations
call volume which has improved since the events of September 11, 2001 which
affected call volumes during the first quarter of 2002.
Food and beverage revenues increased approximately $142,000, or 4.8%, from
$2,946,000 during the 2002 period to $3,088,000 during the 2003 period. This
increase was primarily due to an increase in cash sales as a result of a higher
average check.
Other revenues increased by approximately $30,000, or 9.3%, from $321,000
during the 2002 period to $351,000 during the 2003 period. This increase was
primarily due to an increase in tenant income, partially offset, by a decrease
in parking garage revenue, due to a decline in the number of cars parked.
Promotional allowances increased by approximately $35,000, or 2.1%, from
$1,653,000 during the 2002 period to $1,688,000 during the 2003 period due to an
increase in complimentary rooms and food and beverage primarily resulting from
an increase in table games and slot machine play.
DIRECT COSTS AND EXPENSES OF OPERATING DEPARTMENTS
Total direct costs and expenses of operating departments, including taxes
and licenses, increased by approximately $675,000, or 7.7%, from $8,792,000 for
the 2002 period to $9,467,000 for the 2003 period.
Casino expenses increased $226,000, or 7.0%, from $3,214,000 during the
2002 period to $3,440,000 during the 2003 period; however, expenses as a
percentage of revenue decreased from 32.8% to 31.8%, respectively. The increase
in expenses was partially due to an increase in labor costs associated with
culinary union benefits and an increase in the number of table games open for
play, an increase in promotional gifts, and an increase in the reclassification
of the cost of complimentary rooms, food and beverage reflected as a casino
expense.
Hotel expenses increased $294,000, or 13.3%, from $2,206,000 during the
2002 period to $2,500,000 during the 2003 period, and expenses as a percentage
of revenue increased from 100.9% to 108.8%, respectively. The increase in
expense was due, in part, to an increase in union labor costs and an increase in
the reclassification of cost of complimentary rooms reflected as a casino
expense.
Taxes and licenses increased $148,000, or 10.2%, from $1,454,000 in the
2002 period to $1,602,000 in the 2003 period as a result of corresponding
increases in casino revenues.
The Company concluded negotiations with the Culinary Workers Union Local
226 and Bartenders Union Local 165 as well as the International Union of
Operating Engineers Local 501 (AFL-CIO) on June 30, 2002. Pursuant to such
negotiations, the Company has commitments for various union payroll increases
retroactive to June 1, 2002, for a period of five years, which will increase
future payroll costs.
OTHER OPERATING EXPENSES
Selling, general and administrative expenses increased $260,000, or 12.6%,
from $2,060,000 during the 2002 period to $2,320,000 during the 2003 period,
and, as a percentage of total net revenues, expenses increased from 15.2% to
15.6%, respectively. The increase was primarily due to expenses incurred
relating to the recently announced sale of the Four Queens' capital stock and an
increase in marketing expenses.
On March 14, 2002, the Company entered into a purchase agreement (the
"Purchase Agreement") for the sale of substantially all of the assets of Four
Queens, Inc., which operates the Four Queens Hotel & Casino (the "Four Queens")
including the hotel and casino, to SummerGate, Inc., a Nevada corporation
("SummerGate"). In connection with the Purchase Agreement, the Company
recognized a non-cash impairment loss of approximately $13.2 million during 2001
and subsequently recorded an additional impairment loss of approximately
$324,000, in the first quarter of 2002, due to the amendment of the Purchase
Agreement and an increase in the carrying value of the Four Queens' assets that
were to be purchased at March 31, 2002.
On June 27, 2002, the Four Queens terminated the Agreement and began
depreciating the fixed assets on July 1, 2002.
On April 29, 2003, the Company announced that it entered into a definitive
stock purchase agreement (the "Stock Purchase Agreement") for the sale of all
the capital stock of Four Queens and its interest in the Fremont Street
Experience, LLC, to TLC Casino Enterprises, Inc., a Nevada corporation, for a
purchase price of approximately $20.5 million.
In connection with the Stock Purchase Agreement, the Company recognized a
non-cash impairment loss of approximately $4.4 million during the first quarter
of 2003. An impairment loss was necessary as carrying value of the assets to be
sold as of March 31, 2003 was greater than the fair market value of the assets.
See Note 5 to the Condensed Consolidated Financial Statements.
During 2002, the Company incurred approximately $191,000, net, in merger
and litigation costs. Approximately $742,000 was incurred as a result of
litigation costs related to the Agreement and Plan of Merger, between Elsinore
and Allen E. Paulson. See Note 4 to the Condensed Consolidated Financial
Statements. $551,000 offset this expense for a receivable due from the Company's
directors and officers insurance carrier.
OTHER EXPENSES
Depreciation and amortization expense increased by approximately $788,000
from $0 during the 2002 period to $788,000 during the 2003 period. As a result
of the Four Queens' assets being held for sale, no depreciation was recorded
during the 2002 period. If assets had not been held for sale, depreciation would
have been approximately $1,011,000 during the first quarter of 2002.
NET INCOME BEFORE UNDECLARED DIVIDENDS ON CUMULATIVE CONVERTIBLE PREFERRED STOCK
As a result of the factors discussed above, the Company experienced a net
loss before undeclared dividends on cumulative convertible preferred stock in
the 2003 period of $3,486,000 compared to net income of $837,000 in the 2002
period.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of approximately $6.0 million at
March 31, 2003, as compared to approximately $6.3 million at December 31, 2002.
During the first three months of 2003, the Company's net cash provided by
operating activities was $2.0 million compared to $1.6 million in the first
three months of 2002. As a result of the acts of terrorism that occurred in New
York City and Washington, D.C. on September 11, 2001, there have been
disruptions in travel, which have resulted in decreased customer visitation to
our property. We have experienced declines, most noticeably in room and casino
revenues, which, along with general economic conditions, the war in Iraq, and
the recent SARS epidemic, have materially adversely affected our operating
results since September 11, 2001. Although the Company has shown some
improvement in operating results since the events of September 11, 2001, the
Company cannot be certain of the impact that the events of September 11, 2001,
the subsequent war in Iraq and the SARS epidemic may have, or continue to have,
if any, on future operations.
The following table summarizes our obligations and commitments as of March
31, 2003:
Payments Due by Year
(Amounts in Thousands)
---------------------------------------------------------------------------------------------
2003 2004 2005 2006 2007 Thereafter Total
Long-term debt $- $5,104 $- $- $- $- $5,104
Capital leases 290 223 223 223 223 5,796 6,978
Notes payable 239 53 - - - - 292
Operating leases
3,071 4,012 4,012 4,000 3,997 99,111 118,203
Total $3,600 $9,392 $4,235 $4,223 $4,220 $104,907 $130,577
The Company's 12.83% Mortgage Notes are held by Morgens, Waterfall,
Vintiadis & Company ("MWV"). Certain investment accounts of Morgens, Waterfall,
Vintiadis & Company (the "MWV Accounts") own 94.3% of the outstanding Common
Stock, and upon conversion of their 50,000,000 shares of Series A Convertible
Preferred Stock into shares of Common Stock, will own 99.6% of the Common Stock.
The Common Stock held by the MWV Accounts is deemed beneficially owned by John
C. "Bruce" Waterfall, Elsinore's Chairman of the Board, and Elsinore's directors
and executive officers as a group are deemed to own beneficially 99.6% of the
outstanding Common Stock. The remaining .4% of the outstanding shares is widely
dispersed among numerous shareholders. Mr. Waterfall is the only individual who
exercises voting and investment authority over the Common Stock on behalf of any
of the MWV Accounts.
Interest on the Company's 12.83% Mortgage Notes (the "Notes") is paid in
February and August, during each fiscal year, which significantly affects the
Company's cash and cash equivalents in the second and fourth quarters and should
be considered in evaluating cash increases or decreases in the second and fourth
quarters.
The Notes are due in full on October 20, 2003. The Notes are redeemable by
the Company at any time at 100% of par, without premium. The Company is required
to make an offer to purchase all Notes at 101% of face value upon any "Change of
Control" as defined in the indenture governing the Notes. The indenture also
provides for mandatory redemption of the Notes by the Company upon order of the
Nevada Gaming Authorities. The Notes are guaranteed by Elsub Management
Corporation, Four Queens, Inc. and Palm Springs East Limited Partnership and are
collateralized by a second deed of trust on, and a pledge of, substantially all
the assets of the Company and the guarantors.
The Company has received a Letter of Intent from the MWV Accounts
committing to extend the due date of the Notes to October 2004. Accordingly, the
Company has classified the amount due on these Notes as long-term.
In connection with the Purchase Agreement, Elsinore notified the trustee
under the Notes, that the Company was going to redeem the Notes on April 30,
2002, pursuant to the originally scheduled closing date for the Purchase
Agreement with SummerGate. Both the failure to redeem the Notes on April 30,
2002 in accordance with the Company's notice to the trustee, as well as the
execution of the Purchase Agreement to sell the Four Queens assets, were
defaults under the Notes. The Company obtained a waiver of such defaults on May
30, 2002. Subsequently, in connection with an amendment to the Purchase
Agreement and extension of the closing date for the asset sale, the Company
notified the trustee that it intended to redeem the Notes on June 30, 2002. The
failure to redeem the Notes on this date was also a default under the Notes. The
Company obtained a waiver of this default on August 15, 2002. Upon consummation
of the sale of Four Queens, the Company plans to redeem the Notes pursuant to
the Stock Purchase Agreement.
Scheduled interest payments on the Notes and other indebtedness is
approximately $655,000 in 2003. Management believes that sufficient cash flow
will be available to cover the Company's interest payments for the next twelve
months and enable investment in forecasted capital expenditures (see description
below) of approximately $2.6 million for 2003, of which $500,000 is expected to
be financed. The Company's ability to service its debt is dependent upon future
performance, which will be affected by, among other things, prevailing economic
conditions and financial, business and other factors, certain of which are
beyond the Company's control.
In January 2003, the Company made a principal payment on the Notes in the
amount of $2 million from proceeds from a settlement agreement between Olympia
Gaming Corporation and the Jamestown S'Klallam Tribe and JKT Gaming, Inc. (the
"Olympia Settlement").
Upon consummation of the sale of Four Queens, the Company expects to pay
off the remaining $5.1 million of principal on the Notes due October 20, 2003.
However, there can be no assurance that the sale of the Four Queens will be
consummated. If the sale of the assets of Four Queens is not consummated, cash
flow from operations is not expected to be sufficient to pay the remaining $5.1
million of principal of the Notes at maturity; however, the Company has received
a Letter of Intent from the MWV Accounts committing to extend the due date of
the Notes to October 2004. The Company intends to exchange the Existing Notes,
in the same principal amount, in order to extend the maturity date of the Notes.
It is anticipated that the New Notes will have the same terms, provisions, and
conditions as the Existing Notes, except that the New Notes will have a new
maturity date.
A note agreement executed in connection with the issuance of the Notes,
among other things, places significant restrictions on the incurrence of
additional indebtedness by the Company, the creation of additional liens on the
collateral securing the Notes, transactions with affiliates and payment of
certain restricted payments. In order for the Company to incur additional
indebtedness or make a restricted payment, the Company must, among other things,
meet a specified consolidated fixed charges coverage ratio and have earned an
EBITDA in excess of $0. The ratio is defined as the ratio (the "Ratio") of
aggregate consolidated EBITDA to the aggregate consolidated fixed charges for
the twelve-month reference period. As of the reference period ended March 31,
2003 the Ratio was 3.96 to 1.00 and the Company was in compliance. Pursuant to
covenants applicable to the Company's Notes and Third Supplemental Indenture,
the Company is required to maintain a minimum consolidated fixed charges
coverage ratio of 1.25 to 1.00. At March 31, 2003, the Company was in compliance
with the Ratio requirements. The Company must also maintain a minimum
consolidated net worth of not less than an amount equal to its consolidated net
worth on the Effective Date of the Plan, less $5 million. At March 31, 2003, the
Company was in compliance with the minimum net worth requirements; however, the
Company was not in compliance with a covenant pertaining to limitations on
restricted payments. Specifically, the Company paid approximately $848,000 in
connection with its ownership interest of the Fremont Street Experience, while
the note agreement limited such payments to $600,000. A waiver has been obtained
by the Company from the lender through October 20, 2004.
Management considers it important to the competitive position of the Four
Queens Casino that expenditures be made to upgrade the property. Uses of cash
included capital expenditures of $244,000 and $400,000 during 2003 and 2002,
respectively. Management has budgeted mandatory and maintenance capital
expenditures to be $2.6 million for the year 2003 and expects to make such
expenditures, pursuant to its budget, up until the consummation of the sale of
Four Queens. The Company expects to finance such capital expenditures from cash
on hand, cash flow and lease financing. Based upon current operating results and
cash on hand, the Company estimates it has sufficient operating capital to fund
its operations and capital expenditures for the next twelve months, or until
consummation of the sale of Four Queens. The Company's ability to make such
expenditures is dependent upon future performance, which will be affected by,
among other things, prevailing economic conditions, the consummation of the sale
of Four Queens, and financial business and other factors, certain of which are
beyond the Company's control.
RECENTLY ISSUED ACCOUNTING STANDARDS
In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others". FIN No. 45 requires disclosures
to be made by a guarantor in its interim and annual financial statements about
its obligations under certain guarantees that it has issued. Additionally, a
guarantor is required to recognize, at the inception of a guarantee, a liability
for the fair value of the obligation undertaken in issuing the guarantee. The
initial liability recognition and measurement provisions of FIN No. 45 apply
prospectively to guarantees issued or modified after December 31, 2002. The
disclosure requirements in FIN No. 45 are effective for financial statements of
interim or annual periods ending after December 15, 2002. The Company has
determined that FIN No. 45 did not have a material impact on its financial
position or results of operations.
In January 2003, the FASB issued FIN 46, "Consolidation of Variable
Interest Entities", which addresses consolidation by business enterprises where
equity investors do not bear the residual economic risks and rewards. These
entities have been commonly referred to as "special purpose entities". Companies
are required to apply the provisions of FIN 46 prospectively for all variable
interest entities created after January 31, 2003. The Company has determined
that FIN No. 46 did not have a material impact on its financial position or
results of operations.
CRITICAL ACCOUNTING POLICIES
The preparation of the Company's consolidated financial statements requires
the Company's management to adopt accounting policies and to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue,
expenses and provision for income taxes. Management periodically evaluates its
policies, estimates and assumptions related to these policies. The Company
operates in a highly regulated industry. The Company is subject to regulations
that describe and regulate operating and internal control procedures. The
majority of our casino revenue is in the form of cash, personal checks or gaming
chips and tokens, which by their nature do not require complex estimations. We
estimate certain liabilities with payment periods that extend for longer than
several months. Such estimates include customer loyalty liabilities and
self-insured medical and workers' compensation costs. We believe that these
estimates are reasonable based upon our past experience with the business and
based upon our assumptions related to possible outcomes in the future. Future
actual results will likely differ from these estimates.
Long-lived Assets
The Company has a significant investment in long-lived property and
equipment. We evaluate our property and equipment and other long-lived assets
for impairment in accordance with Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." For
assets to be disposed of, we recognize the asset at the lower of carrying value
or fair market value less costs of disposal, as estimated based on comparable
asset sales, solicited offers, or a discounted cash flow model. For assets to be
held and used, we review for impairment whenever indicators of impairment exist.
We then compare the estimated future cash flows of the asset, on an undiscounted
basis, to the carrying value of the asset. If the undiscounted cash flows exceed
the carrying value, no impairment is indicated. If the undiscounted cash flows
do not exceed the carrying value, then an impairment is recorded based on the
fair value of the asset, typically measured using a discounted cash flow model.
There are several estimates, assumptions and decisions in measuring
impairments of fixed assets. First, management must determine the usage of the
asset. To the extent management decides that an asset will be sold, it is more
likely that an impairment may be recognized. Should the actual useful life of a
class of assets differ from the estimated useful life, the Company would record
an impairment charge. The Company reviews useful lives, obsolescence, and
assesses commercial viability of these assets periodically.
See Note 5 in the Notes to Condensed Consolidated Financial Statements for
a discussion of impairments recorded in 2001, 2002 and 2003. On April 29, 2003,
the Company announced that it entered into a definitive stock purchase agreement
for the sale of all the capital stock of Four Queens and its interest in the
Fremont Street Experience, LLC, to TLC Casino Enterprises, Inc., a Nevada
corporation, for a purchase price of approximately $20.5 million. In connection
therewith, we reviewed our assets for potential impairment, and determined that
an impairment was indicated. Other than these items, we are not aware of events
or circumstances that would cause us to review any material long-lived assets
for impairment.
Deferred Income Tax Assets
We utilize estimates related to cash flow projections for the application
of SFAS 109 to the realization of deferred tax assets. Our estimates are based
upon recent operating results and budgets for future operating results. These
estimates are made using assumptions about the economic, social and regulatory
environments in which we operate. These estimates could be negatively impacted
by numerous unforeseen events including changes to regulations affecting how we
operate our business, changes in the labor market or economic downturns in the
areas where we operate.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Market risk is the risk of loss arising from adverse changes in market
rates and prices, such as interest rates, foreign currency exchange rates and
commodity prices. The Company's primary financial instruments include cash and
long-term debt. At March 31, 2003, the carrying values of the Company's
financial instruments approximated their fair values based on current market
prices and rates and long-term fixed rate borrowings represented approximately
95% of our total borrowings. It is the Company's policy not to enter into
derivative financial instruments. The Company does not currently have any
significant foreign currency exposure since it does not transact business in
foreign currencies. Therefore, the Company does not have significant overall
market risk exposure at March 31, 2003. A 1% increase in interest rates would
not have a material effect on net income.
Item 4. CONTROLS AND PROCEDURES
Within the 90-day period prior to the filing of this report, we carried out
an evaluation, under the supervision and with the participation of our President
and Principal Financial and Accounting Officer of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on this
evaluation, our President and Principal Financial and Accounting Officer
concluded that our disclosure controls and procedures are effective in timely
alerting them to material information required to be included in our periodic
SEC filings.
There have been no significant changes in our internal controls or in other
factors which could significantly affect internal controls subsequent to our
most recent evaluation of our internal controls.
Elsinore Corporation and Subsidiaries
Other Information
PART II. OTHER INFORMATION
Item 1: Legal Proceedings.
None.
Item 6. (a) Exhibits and Reports
10.78 Waiver of Compliance dated May 12, 2003.
99.1 Certification of the President pursuant to 18 U.S.C.,
section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification of the Principal Financial and Accounting
Officer pursuant to 18 U.S.C., section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Forms 8-K filed during this quarter
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto authorized.
ELSINORE CORPORATION
(Registrant)
By: /s/ Philip W. Madow
PHILIP W. MADOW, President
By: /s/ Gina L. Contner Mastromarino
GINA L. CONTNER MASTROMARINO,
Principal Financial and Accounting Officer
Dated: May 14, 2003
CERTIFICATION
I, Philip W. Madow, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Elsinore Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 14, 2003
/s/ Philip W. Madow
Philip W. Madow
President
CERTIFICATION
I, Gina L. Contner Mastromarino, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Elsinore Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 14, 2003
/s/ Gina L. Contner Mastromarino
Gina L. Contner Mastromarino
Principal Financial and Accounting Officer