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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 March 31, 2004
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______TO______.
Commission File No. 0-22088
MONARCH CASINO & RESORT, INC.
(Exact name of registrant as specified in its charter)
-------------------------
NEVADA 88-0300760
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1175 W. MOANA LANE, SUITE 200
RENO, NEVADA 89509
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code: (775) 825-3355
-------------------------
NOT APPLICABLE
(Former name, former address and former fiscal
year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES _X_ NO ___
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). YES ___ NO _X_
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 May 7, 2004, there
were 9,368,526 shares of Monarch Casino & Resort, Inc. $0.01 par value common
stock outstanding.
TABLE OF CONTENTS
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income for the
three months ended March 31, 2004 and 2003 (unaudited)......... 3
Condensed Consolidated Balance Sheets at
March 31, 2004 (unaudited) and December 31, 2003................4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2004 and 2003 (unaudited)......... 6
Notes to Condensed Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk.... 20
Item 4. Controls and Procedures....................................... 20
PART II - OTHER INFORMATION
Item 5. Legal Proceedings............................................. 21
Item 6. Exhibits and Reports on Form 8-K.............................. 21
Signatures.................................................... 22
Certifications................................................ 23
Exhibit 99.01 Certification of John Farahi pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002................. 25
Exhibit 99.02 Certification of Ben Farahi pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002................. 26
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MONARCH CASINO & RESORT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
----------------------------
2004 2003
------------ ------------
(Unaudited) (Unaudited)
Revenues
Casino...................................... $ 19,902,851 $ 17,739,705
Food and beverage........................... 8,825,823 8,211,408
Hotel....................................... 5,518,305 4,716,178
Other....................................... 863,030 885,745
------------ ------------
Gross revenues........................... 35,110,009 31,553,036
Less promotional allowances................. (4,624,031) (4,385,108)
------------ ------------
Net revenues............................. 30,485,978 27,167,928
------------ ------------
Operating expenses
Casino...................................... 7,440,671 7,126,103
Food and beverage........................... 4,391,722 4,123,738
Hotel....................................... 2,067,987 1,645,979
Other....................................... 318,463 304,566
Selling, general, and administrative........ 8,519,406 7,852,184
Depreciation and amortization............... 3,003,359 2,600,409
------------ ------------
Total operating expenses................. 25,741,608 23,652,979
------------ ------------
Income from operations................... 4,744,370 3,514,949
Other expense
Interest expense............................ (429,961) (449,880)
Stockholder guarantee fee expense........... (136,164) (281,342)
------------ ------------
Total other expense...................... (566,125) (731,222)
------------ ------------
Income before income taxes............... 4,178,245 2,783,727
Provision for income taxes.................... 1,420,000 945,800
------------ ------------
Net income............................... $ 2,758,245 $ 1,837,927
============ ============
Earnings per share of common stock
Net income
Basic..................................... $ 0.30 $ 0.19
Diluted................................... $ 0.29 $ 0.19
Weighted average number of common
shares and potential common
shares outstanding
Basic................................... 9,344,736 9,468,308
Diluted................................. 9,382,256 9,503,599
The accompanying Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
-3-
MONARCH CASINO & RESORT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2004 2003
------------- -------------
(Unaudited)
ASSETS
Current assets
Cash............................................ $ 11,076,465 $ 9,711,310
Receivables, net................................ 2,927,622 2,818,727
Federal income tax refund receivable............ - 756,698
Inventories..................................... 1,154,203 1,245,967
Prepaid expenses................................ 2,291,960 2,234,773
Deferred income taxes........................... 542,457 542,457
------------- -------------
Total current assets......................... 17,992,707 17,309,932
------------- -------------
Property and equipment
Land............................................ 10,339,530 10,339,530
Land improvements............................... 3,226,913 3,226,913
Buildings....................................... 78,955,538 78,955,538
Building improvements........................... 6,364,841 6,304,642
Furniture and equipment......................... 64,847,425 63,230,354
------------- -------------
163,734,247 162,056,977
Less accumulated depreciation and amortization.. (64,627,410) (63,618,047)
------------- -------------
Net property and equipment................... 99,106,837 98,438,930
------------- -------------
Other assets, net................................. 478,003 128,263
------------- -------------
Total assets................................. $ 117,577,547 $ 115,877,125
============= =============
The accompanying Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
-4-
MONARCH CASINO & RESORT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2004 2003
------------- -------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt............ $ 6,574,981 $ 6,059,591
Accounts payable................................ 8,204,153 8,407,887
Accrued expenses................................ 5,766,059 6,707,257
Federal income taxes payable.................... 584,462 -
------------- -------------
Total current liabilities.................... 21,129,655 21,174,735
Long-term debt, less current maturities........... 39,900,000 41,125,000
Deferred income taxes............................. 4,933,427 4,854,587
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;
9,365,476 outstanding at 03/31/2004,
9,340,328 outstanding at 12/31/2003............ 95,363 95,363
Additional paid-in capital...................... 17,381,548 17,432,635
Treasury stock,
170,799 shares at 03/31/2004, 195,947 shares
at 12/31/2003, at cost......................... (1,253,110) (1,437,614)
Retained earnings............................... 35,390,664 32,632,419
------------- -------------
Total stockholders' equity................... 51,614,465 48,722,803
------------- -------------
Total liabilities and stockholders' equity... $ 117,577,547 $ 115,877,125
============= =============
The accompanying Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
-5-
MONARCH CASINO & RESORT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
----------------------------
2004 2003
------------ ------------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income.................................. $ 2,758,245 $ 1,837,927
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization............. 3,003,359 2,600,409
Amortization of deferred loan costs....... 105,084 44,857
Provision for bad debt.................... 100,120 172,668
Loss (gain) on disposal of assets......... 98,606 (3,000)
Deferred income taxes..................... 78,840 475,513
Changes in assets and liabilities
Receivables, net.......................... 547,683 (118,191)
Inventories............................... 91,764 178,197
Prepaid expenses.......................... (57,187) (104,080)
Other assets.............................. (454,823) 2,671
Accounts payable.......................... (203,734) (933,102)
Accrued expenses and federal income
taxes payable........................... (356,736) (179,535)
------------ ------------
Net cash provided by
operating activities.................... 5,711,221 3,974,334
------------ ------------
Cash flows from investing activities:
Proceeds from sale of assets................ 5,230 3,000
Acquisition of property and equipment....... (3,775,103) (542,997)
------------ ------------
Net cash used in investing activities.... (3,769,873) (539,997)
------------ ------------
Cash flows from financing activities:
Proceeds from exercise of stock options..... 133,417 83,125
Proceeds from long-term borrowings.......... 46,400,000 -
Principal payments on long-term debt........ (47,109,610) (4,536,206)
Purchase of Monarch Common Stock............ - (1,427,400)
------------ ------------
Net cash used in
financing activities.................... (576,193) (5,880,481)
------------ ------------
Net increase (decrease) in cash.......... 1,365,155 (2,446,144)
Cash at beginning of period................... 9,711,310 9,961,484
------------ ------------
Cash at end of period......................... $ 11,076,465 $ 7,515,340
============ ============
Supplemental disclosure of
cash flow information:
Cash paid for interest...................... $ 542,974 $ 424,878
Cash paid for income taxes.................. $ 120,000 $ 286,612
Supplemental schedule of non-cash
investing and financing activities:
The Company financed the purchase
of property and equipment in the
following amounts........................... $ - $ 212,453
The accompanying Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
-6-
MONARCH CASINO & RESORT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Monarch Casino & Resort, Inc. ("Monarch"), a Nevada corporation, was
incorporated in 1993. Monarch's wholly-owned subsidiary, Golden Road Motor
Inn, Inc. ("Golden Road"), operates the Atlantis Casino Resort (the
"Atlantis"), a hotel/casino facility in Reno, Nevada. Unless stated
otherwise, the "Company" refers collectively to Monarch and its Golden Road
subsidiary.
The consolidated financial statements include the accounts of Monarch and
Golden Road. Intercompany balances and transactions are eliminated.
Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements
for the three-month periods ended March 31, 2004 and March 31, 2003 are
unaudited. In the opinion of management, all adjustments, (which include
normal recurring adjustments) necessary for a fair presentation of the
Company's financial position and results of operations for such periods, have
been included. The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with the Company's audited financial
statements included in its Annual Report on Form 10-K for the year ended
December 31, 2003. The results for the three month period ended March 31,
2004 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2004, or for any other period.
Use of Estimates
In preparing these financial statements in conformity with accounting
principles generally accepted in the United States, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements and revenues and expenses during the
respective periods. Actual results could differ from those estimates.
Reclassifications
Certain amounts in the 2003 first quarter unaudited condensed
consolidated financial statements have been reclassified to conform with the
2004 presentation. These reclassifications had no effect on the previously
reported net income.
Self-insurance Reserves
The Company reviews self-insurance reserves at least quarterly. The
amount of reserve is determined by reviewing the actual expenditures for the
previous twelve-month period and reviewing reports prepared by third party
plan administrators for any significant unpaid claims. The reserve is accrued
at an amount that approximates amounts needed to pay both reported and
unreported claims as of the balance sheet dates, which management believes are
adequate.
-7-
Stockholder Guarantee Fees
All of the Company's bank debt was personally guaranteed by the Company's
three largest stockholders since the inception of our original Loan Agreement
on December 29, 1997. Effective January 1, 2001, until February 20, 2004, the
Company compensated the guarantors at the rate of 2% per annum of the
quarterly average outstanding bank debt amount. During the three months ended
March 31, 2004 and 2003, the Company recorded interest expense in the amount
of approximately $136 thousand and $281 thousand in guarantee fees,
respectively.
Inventories
Inventories, consisting primarily of food, beverages, and retail
merchandise, are stated at the lower of cost or market. Cost is determined on
a first-in, first-out basis.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation
and amortization. Since inception, property and equipment have been
depreciated principally on a straight line basis over the estimated service
lives as follows:
Land improvements ........... 15-40 years
Buildings ................... 30-40 years
Building improvements ....... 15-40 years
Furniture ................... 5-10 years
Equipment ................... 5-20 years
In accordance with SFAS No. 144, "Accounting for the Impairment and
Disposal of Long-Lived Assets," the Company evaluates the carrying value of
its long-lived assets for impairment at least annually or whenever events or
changes in circumstances indicate that the carrying value of the assets may
not be recoverable from related future undiscounted cash flows. Indicators
which could trigger an impairment review include legal and regulatory factors,
market conditions and operational performance. Any resulting impairment loss,
measured as the difference between the carrying amount and the fair value of
the assets, could have a material adverse impact on the Company's financial
condition and results of operations.
Casino Revenues
Casino revenues represent the net win from gaming activity, which is the
difference between wins and losses. Additionally, net win is reduced by a
provision for anticipated payouts on slot participation fees, progressive
jackpots and any pre-arranged marker discounts.
Promotional Allowances
The retail value of hotel, food and beverage services provided to
customers without charge is included in gross revenue and deducted as
promotional allowances.
-8-
Income Taxes
Income taxes are recorded in accordance with the liability method
specified by Statement of Financial Accounting Standards ("SFAS") No. 109
"Accounting for Income Taxes." Under the asset and liability approach for
financial accounting and reporting for income taxes, the following basic
principles are applied in accounting for income taxes at the date of the
financial statements: (a) a current liability or asset is recognized for the
estimated taxes payable or refundable on taxes for the current year; (b) a
deferred income tax liability or asset is recognized for the estimated future
tax effects attributable to temporary differences and carryforwards; (c) the
measurement of current and deferred tax liabilities and assets is based on the
provisions of the enacted tax law; the effects of future changes in tax laws
or rates are not anticipated; and (d) the measurement of deferred income taxes
is reduced, if necessary, by the amount of any tax benefits that, based upon
available evidence, are not expected to be realized.
Stock Based Compensation
The Company maintains three stock option plans. The Company accounts for
these plans under the recognition and measurement principles of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB No. 25") and related interpretations in accounting for its plans. No
stock-based compensation costs are reflected in net income, as all options
granted under those plans had an exercise price equal to the market value of
the underlying common stock on the date of the grant. If the Company had
elected to recognize compensation cost on the fair market value at the grant
dates for awards under the stock option plans, consistent with the method
prescribed by Statement of Financial Accounting Standards ("SFAS No. 123"),
"Accounting for Stock-Based Compensation," (and as amended by SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure," which
the Company adopted for the fiscal quarter ended March 31, 2004), net income
and income per share would have been changed to the pro forma amounts
indicated below:
Three Months ended March 31,
-----------------------------
2004 2003
---------- -----------
Net income, as reported $2,758,245 $1,837,927
Stock based employee compensation
expensed determined under the fair
value based method for all awards,
net of related income tax effects (2,934) (18,889)
----------- -----------
Pro forma net income $2,755,311 $1,819,038
=========== ===========
Basic earnings per share
As reported $ 0.30 $ 0.19
Pro forma $ 0.29 $ 0.19
Diluted earnings per share
As reported $ 0.29 $ 0.19
Pro forma $ 0.29 $ 0.19
-9-
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of bank deposits and trade
receivables. The Company maintains its cash in bank deposit accounts which,
at times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts. Concentrations of credit risk with
respect to trade receivables are limited due to the large number of customers
comprising the Company's customer base. The Company believes it is not
exposed to any significant credit risk on cash and accounts receivable.
Certain Risks and Uncertainties
A significant portion of the Company's revenues and operating income are
generated from patrons who are residents of northern California. A change in
general economic conditions or the extent and nature of casino gaming in
California, Washington or Oregon could adversely affect the Company's
operating results. On September 10, 1999, California lawmakers approved a
constitutional amendment that gave Indian tribes the right to offer slot
machines and a range of house-banked card games. On March 7, 2000, California
voters approved the constitutional amendment. Several Native American casinos
have opened in Northern California since passage of the constitutional
amendment. A large Native American casino facility opened in the Sacramento
area, one of our primary feeder markets, in June of 2003. Other new Native
American casinos are under construction in the northern California market, as
well as other markets the Company currently serves, that could have an impact
on the Company's financial position and results of operations.
In addition, the Company relies on non-conventioneer visitors partially
comprised of individuals flying into the Reno area. The ?War on Terrorism,?
combined with the ongoing situation in Iraq and the threat of further
terrorist attacks could have an adverse effect on the Company's revenues from
this segment. The terrorist attacks that took place in the United States on
September 11, 2001 were unprecedented events that created economic and
business uncertainties, especially for the travel and tourism industry.
The potential for future terrorist attacks, the national and international
responses, and other acts of war or hostility including the ongoing war with
Iraq, have created economic and political uncertainties that could materially
adversely affect our business, results of operations, and financial condition
in ways we cannot predict.
NOTE 2. EARNINGS PER SHARE
The Company reports "basic" earnings per share and "diluted" earnings per
share in accordance with the provisions of SFAS No. 128, "Earnings Per Share."
Basic earnings per share is computed by dividing reported net earnings by the
weighted-average number of common shares outstanding during the period.
Diluted earnings per share reflect the additional dilution for all potentially
dilutive securities such as stock options. The following is a reconciliation
of the number of shares (denominator) used in the basic and diluted earnings
per share computations (shares in thousands):
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Three Months ended March 31,
-----------------------------------
2004 2003
---------------- ----------------
Per Share Per Share
Shares Amount Shares Amount
------ --------- ------ ---------
Net Income
Basic..................... 9,345 $ 0.30 9,468 $ 0.19
Effect of dilutive
stock options............ 37 (0.01) 36 -
------ ------- ------ -------
Diluted................... 9,382 $ 0.29 9,504 $ 0.19
====== ======= ====== =======
Excluded from the computation of diluted earnings per share are options
where the exercise prices are greater than the market price and their effects
would be anti-dilutive in the computation of diluted earnings per share.
NOTE 4. RECENTLY ISSUED ACCOUNTING STANDARDS
In January 2003, the FASB issued interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities." The objective of FIN 46 is to
improve the financial reporting by companies involved with variable interest
entities. FIN 46 changes certain consolidation requirements by requiring a
variable interest entity to be consolidated by a company that is subject to a
majority of the risk of loss from the variable interest entity's activities or
entitled to receive a majority of the entity's residual returns or both. The
Company has determined that all variable interest entities it holds at March
31, 2004, do not require consolidation under the provisions of FIN 46 as the
Company is not subject to a majority of the risk of loss or entitled to
receive a majority of the variable interest entity's residual returns.
NOTE 5. RELATED PARTY TRANSACTIONS
The three principal stockholders of the Company, through their
affiliates, control the ownership and management of a shopping center directly
adjacent to the Atlantis (the "Shopping Center"). The Shopping Center
occupies 18.7 acres and consists of approximately 213,000 square feet of
retail space. The Company currently rents various spaces totaling
approximately 8,100 square feet in the Shopping Center which it uses as office
space, and pays rent of approximately $6,100 per month.
In addition, currently under construction is a new driveway that will be
shared between the Atlantis and the Shopping Center. As part of this project,
in January 2004, the Company leased a 37,368 square-foot corner section of the
Shopping Center for a minimum lease term of 15 years at a monthly rent of
$25,000, subject to increase every 60 months based on the Consumer Price
Index. The Company is also to use part of the common area of the Shopping
Center and will pay its proportional share of the common area expense of the
Shopping Center. The Company has the option to renew the lease for 3 five-year
terms, and at the end of the extension periods, the Company has the option to
purchase the leased section of the Shopping Center at a price to be determined
based on a MAI Appraisal. The leased space will be used by the Company for
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pedestrian and vehicle access to the Atlantis, and the Company will have use
of a portion of the parking spaces at the Shopping Center. The Company is
responsible for two thirds of the construction costs of the project, up to a
maximum of $1.2 million. The Company anticipates this project will be
completed in the third quarter of 2004, at which time it will begin paying
rent and common area charges for its leased space.
On September 23, 2003, the Company entered into an option agreement with
an affiliate of its controlling stockholders to purchase property in South
Reno for development of a new hotel casino. Commencement of any development
of the property will require completion of property due diligence and receipt
of numerous approvals, including master plan changes and zoning changes,
neither of which can be assured. The Company, through the current property
owner, has filed an application with the City of Reno for both master plan and
zoning changes for 13 acres of the property.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Monarch Casino & Resort, Inc., through its wholly-owned subsidiary,
Golden Road Motor Inn, Inc. ("Golden Road"), owns and operates the tropically-
themed Atlantis Casino Resort, a hotel/casino facility in Reno, Nevada (the
"Atlantis"). Monarch was incorporated in 1993 under Nevada law for the purpose
of acquiring all of the stock of Golden Road. The principal asset of Monarch
is the stock of Golden Road, which holds all of the assets of the Atlantis.
Our sole operating asset, the Atlantis, is a hotel/casino resort located
in Reno, Nevada. Our business strategy is to maximize the Atlantis' revenues,
operating income and cash flow primarily through our casino, our food and
beverage operations and our hotel operations. We derive our revenues by
appealing to middle to upper-middle income Reno residents, emphasizing slot
machine play in our casino. We capitalize on the Atlantis' location for
locals, tour and travel visitors and conventioneers, offer exceptional
service, value and an appealing theme to our guests. Our hands-on management
style focuses on customer service and cost efficiencies.
Unless otherwise indicated, "Monarch," "Company," "we," "our" and "us"
refer to Monarch Casino & Resort, Inc. and its Golden Road subsidiary.
-12-
OPERATING RESULTS SUMMARY
During the first quarter of 2004, we exceeded all previously reported
first quarter casino revenues, hotel revenues, net revenues, net income and
earnings per share.
Three Months Percentage
ended March 31, Increase / (Decrease)
--------------- ----------------------
2004 2003 First Quarter 04 vs 03
------ ------ ----------------------
(In millions, except earnings per share
and percentages)
Casino revenues......................... $ 19.9 $ 17.7 12.2%
Food and beverage revenues.............. 8.8 8.2 7.5%
Hotel revenues.......................... 5.5 4.7 17.0%
Other revenues.......................... 0.9 0.9 (2.6)%
Net revenues............................ 30.5 27.2 12.2%
Income from operations.................. 4.7 3.5 35.0%
Net income.............................. 2.8 1.8 50.1%
Earnings per share - diluted............ 0.29 0.19 52.6%
Operating margin........................ 15.6% 12.9% 2.7 pts
Some significant items that affected our first quarter results in 2004
are listed below. These items are discussed in greater detail elsewhere in
our discussion of operating results and in the Liquidity and Capital Resources
section.
- Gross revenues increased 11.3% in the first quarter of 2004 over the
first quarter of 2003 driven by significant increases in casino
(12.2%), food and beverage (7.5%) and hotel (17.0%) revenue centers,
while promotional allowances increased only 5.4%. This resulted in a
12.2% increase in net revenues. Operating expenses increased only 8.8%
resulting in a 35.0% increase in and an approximate 49% flowthrough to
income from operations.
- Our interest and stockholder guarantee fee expenses during the first
quarter of 2004 decreased approximately $165 thousand, or 22.6%, as
compared to the first three months of 2003. The decrease was mainly
due to the elimination of our stockholder guarantee fee expense in late
February 2004. Under our New Credit Facility (as defined in "The Credit
Facility" below), our controlling stockholders no longer provide
personal guarantees as required under the Original Credit Facility (as
defined). The Company, therefore, no longer pays the corresponding
stockholder guarantee fee.
CAPITAL SPENDING AND DEVELOPMENT
Capital expenditures at the Atlantis totaled approximately $3.8 million
and $755 thousand during the first quarters of 2004 and 2003, respectively.
During the first quarter ended March 31, 2004, our capital expenditures
consisted primarily of renovations to our second tower hotel rooms and suites,
the installation of a new slot player tracking system and continued
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acquisitions of and upgrades to gaming equipment. During last year's first
quarter, capital expenditures consisted primarily of casino re-carpeting and
continued acquisitions of, and upgrades to, gaming equipment.
Future cash needed to finance ongoing maintenance capital spending is
expected to be made available from operating cash flow, the Credit Facility
(see "Liquidity and Capital Resources - THE CREDIT FACILITY" below) and, if
necessary, additional borrowings.
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, expansion of Indian casinos in California, Reno-area tourism
conditions, dependence on existing management, leverage and debt service
(including sensitivity to fluctuations in interest rates), the regulation of
the gaming industry (including actions affecting licensing), outcome of
litigation, domestic or global economic conditions including those affected by
the events of September 11, 2001 and the ongoing situation in Iraq, and
changes in federal or state tax laws or the administration of such laws.
RESULTS OF OPERATIONS
Comparison of Operating Results for the Three Month
Periods Ended March 31, 2004 and 2003
For the three month period ended March 31, 2004, the Company earned net
income of $2.8 million, or $0.29 per diluted share, on net revenues of $30.5
million, an increase from net income of $1.8 million, or $0.19 per diluted
share, on net revenues of $27.2 million for the three months ended March 31,
2003. Income from operations for the three months ended March 31, 2004
totaled $4.7 million, a 35.0% increase when compared to the $3.5 million for
the same period in 2003. Both net revenues and net income for the first
quarter of 2004 represent new first quarter records for the Company. Net
revenues increased 12.2%, and net income increased 50.1% when compared to last
year's first quarter. In the Reno-area market, the January through March
period encompassing the Company's first quarter has traditionally been marked
by weather-related seasonality, with winter storms producing moderate to
severe travel delays and difficulties for visitors to the region. Due to the
relatively mild winter, management believes that the impact of the weather
this year was, once again, relatively minor as it was last year.
Casino revenues totaled $19.9 million in the first quarter of 2004, a
12.2% increase from the $17.7 million in the first quarter of 2003, reflecting
increases in the volume of play at the Atlantis. Slot revenues were up 12.5%
in the first quarter of 2004 compared to the first quarter of 2003 due to an
increase in the volume of slot machine play. Table game revenue increased
9.7%, while poker room revenue increased 50.9% in the first quarter of 2004
compared to the first quarter of 2003 due to increases in the volumes of play.
Keno revenue increased 12.3% in the first quarter 2004 compared to the first
-14-
quarter 2003. The increase was due to a 12.3% increase in keno write offset
partially by a slightly lower hold percentage in the first quarter of 2004
compared to the first quarter 2003. Casino operating expenses amounted to
37.4% of casino revenues in the first quarter of 2004, compared to 40.2% in
the first quarter of 2003, with the difference due primarily to reduced
payroll and benefit expenses, reduced complimentaries and more efficient
operations.
Food and beverage revenues totaled $8.8 million in the first quarter of
2004, a 7.5% increase from the $8.2 million in the first quarter of 2003, due
primarily to a 1.5% increase in the average revenue per food cover combined
with an approximate 7.6% increase in the retail prices of beverages served
relative to the first quarter of 2003. The balance of the increase in food
and beverage revenues was from an increase in the number of food covers served
during the quarter. Food and beverage operating expenses amounted to 49.8% of
food and beverage revenues during the first quarter of 2004, compared to 50.2%
in the first quarter of 2003. The improved margin was primarily due to more
efficient operations achieved through reduced average cost of sales, reduced
payroll and benefit costs as a percentage of revenue and reduced variable
operating expenses.
Hotel revenues were $5.5 million for the first quarter of 2004, an
increase of 17.0% from the $4.7 million reported in the 2003 first quarter.
This increase was the result of increases in both the average daily room rate
(ADR) and hotel occupancy. The first quarter 2004 increase is also moderately
affected by the Beauty Salon which opened in October 2003. Both first
quarters' 2004 and 2003 revenues also included a $3 per occupied room energy
surcharge. During the first quarter of 2004, the Atlantis experienced a 90.7%
occupancy rate, up from an 89.1% occupancy rate for the same period in 2003.
The Atlantis' ADR was $59.76 in the first quarter of 2004 compared to $53.31
in the first quarter of 2003. Hotel operating expenses as a percent of hotel
revenues increased to 37.5% in the 2004 first quarter, compared to 34.9% in
the 2003 first quarter. The reduced margin is primarily due to increased
expenses related to the remodeling and renovation of our second hotel tower
during the first quarter of 2004.
Promotional allowances increased to $4.6 million in the first quarter of
2004 compared to $4.4 million in the first quarter of 2003. The increase is
attributable to continued efforts to generate additional revenues. Although
dollar amounts increased, promotional allowances as a percentage of gross
revenues declined to 13.2% of gross revenues during the first quarter of 2004,
from 13.9% in the first quarter of 2003.
Other revenues decreased 2.6% to $863 thousand in the 2004 first quarter
compared to $886 thousand in the same period last year. The decrease reflects
an approximate $99 thousand loss on disposal of assets which offsets an
approximate 13.8% increase in gift and sundries retail shops. The
entertainment fun center revenue decreased 8.7% in the first quarter of 2004
compared to the first quarter of 2003. Other expenses in the 2004 first
quarter increased to 36.9% of other revenues, from 34.4% in the 2003 first
quarter, which is directly the result of the approximate $99 thousand loss on
disposal of assets.
Depreciation and amortization expense was $3.0 million in the first
quarter of 2004, up 15.5% compared to $2.6 million in the same period last
year.
-15-
Selling, general and administrative (SG&A) expenses amounted to $8.5
million in the first quarter of 2004, an increase from $7.9 million in the
first quarter of 2003 due primarily to an increase in payroll and benefit
related costs and property improvement and renovation costs. As a percentage
of net revenues, SG&A expenses declined to 27.9% in the first quarter of 2004
as compared to 28.9% in the first quarter of 2003.
Interest expense for the 2004 first quarter totaled $566 thousand, a
decrease of 22.6%, from $731 thousand in the 2003 first quarter. The decrease
reflects the Company's reduction in debt outstanding and lower applicable
interest rates. Interest expense for both the quarters ended March 31, 2004
and 2003 included guarantee fees paid to the three principal stockholders of
the Company. Effective January 2001, until February 2004, the Company
compensated the three principal stockholders of the Company for their personal
guarantees of the Company's outstanding bank debt at the rate of 2% per annum
of the quarterly average outstanding bank debt. These guarantee expenses
totaled approximately $136 thousand and $281 thousand in the first quarters of
2004 and 2003, respectively. The individuals who guaranteed the Company's
Original Credit Facility (defined in "The Credit Facility" below) were not
required to provide such guarantees for the New Credit Facility (also defined
in "The Credit Facility" below) and, therefore, the Company will no longer be
required to pay such fees in the future.
LIQUIDITY AND CAPITAL RESOURCES
We have historically funded our daily hotel and casino activities with
net cash provided by operating activities.
For the three months ended March 31, 2004, net cash provided by operating
activities totaled $5.7 million, an increase of 43.7% compared to the same
period last year. Net cash used in investing activities totaled $3.8 million
and $540 thousand in the first quarters ended March 31, 2004 and 2003,
respectively. During the first quarters of 2004 and 2003, net cash used in
investing activities was used primarily in the purchase of property and
equipment. Net cash used in financing activities totaled $576 thousand for
the first quarter of 2004, compared to $5.9 million for the same period last
year, as the Company refinanced its credit facility during the first quarter
of 2004, simultaneously paying off old debt and acquiring new debt. During
the first quarter of 2003, the Company used funds in the amount of
approximately $1.4 million to repurchase Monarch common stock. As a result,
at March 31, 2004, the Company had a cash balance of $11.1 million, compared
to $7.5 million at March 31, 2003 and $9.7 million at December 31, 2003.
The Company has a reducing revolving credit facility with a group of
banks (see "THE CREDIT FACILITY" below). At March 31, 2004, the total balance
outstanding on the Credit Facility was $46.4 million.
-16-
OFF BALANCE SHEET ARRANGEMENTS
Currently under construction is a new driveway that will be shared
between the Atlantis and a shopping center directly adjacent to the Atlantis,
and which is controlled by our controlling shareholders (the "Shopping
Center"). As part of this project, in January 2004, the Company leased a
37,368 square-foot corner section of the Shopping Center for a minimum lease
term of 15 years at a monthly rent of $25,000, subject to increase every 60
months based on the Consumer Price Index. The Company is also to use part of
the common area of the Shopping Center and will pay its proportional share of
the common area expense of the Shopping Center. The Company has the option to
renew the lease for 3 five-year terms, and at the end of the extension
periods, the Company has the option to purchase the leased section of the
Shopping Center at a price to be determined based on a MAI Appraisal. The
leased space will be used by the Company for pedestrian and vehicle access to
the Atlantis, and the Company will have use of a portion of the parking spaces
at the Shopping Center. The Company is responsible for two thirds of the
construction costs of the project, up to a maximum of $1.2 million. The
Company anticipates this project will be completed in summer 2004.
On September 23, 2003, the Company entered into an option agreement with
an affiliate of its controlling stockholders to purchase property in South
Reno for development of a new hotel casino. Commencement of any development
of the property will require completion of property due diligence and receipt
of numerous approvals, including master plan changes and zoning changes,
neither of which can be assured. The Company, through the current property
owner, has filed application with the City of Reno for master plan and zoning
changes for 13 acres of the property.
Critical Accounting Policies
A description of our critical accounting policies and estimates can be
found in Item 7 of our 2003 Form 10-K. For a more extensive discussion of our
accounting policies, see Note 1, Summary of Significant Accounting Policies,
in the Notes to the Consolidated Financial Statements in our 2003 Form 10-K
filed on March 12, 2004.
OTHER FACTORS AFFECTING CURRENT AND FUTURE RESULTS
The constitutional amendment approved by California voters in 1999
allowing the expansion of Indian casinos in California has had an impact on
casino revenues in Nevada in general, and many analysts have continued to
predict the impact will be more significant on the Reno-Lake Tahoe market.
The extent of this continued impact is difficult to predict, but the Company
believes that the impact on the Company will continue to be mitigated to some
extent due to the Atlantis' emphasis on Reno-area residents as a significant
base of its business, as well as its proximity to the Reno-Sparks Convention
Center. However, if other Reno-area casinos continue to suffer business
losses due to increased pressure from California Indian casinos, they may
intensify their marketing efforts to Reno-area residents as well.
The Company also believes that unlimited land-based casino gaming in or
near any major metropolitan area in the Atlantis' key non-Reno marketing
areas, such as San Francisco or Sacramento, could have a material adverse
effect on its business.
-17-
There are currently two initiatives in California that, if passed, will
increase the number of gaming devices in that state. The passage of either
initiative, or both, could have a material adverse effect on the Company?s
results of operations and, as a result, its financial condition.
COMMITMENTS AND CONTINGENCIES
Contractual cash obligations for the Company as of March 31, 2004 over
the next five years are as follows:
Payments Due by Period
---------------------------------------------------------------
Contractual Cash Less than 1 to 3 4 to 5 More than
Obligations Total 1 year years years 5 years
---------------------------------------------------------------
Long-Term debt $46,474,981 $ 6,574,981 $13,000,000 $26,900,000 $ -
Operating Leases (1) 6,797,409 1,577,094 780,315 740,000 3,700,000
Purchase Obligations (2) 3,100,000 3,100,000 - - -
----------- ----------- ----------- ----------- -----------
Total Contractual Cash $56,372,390 $11,252,075 $13,780,315 $27,640,000 $3,700,000
Obligations
(1) Operating leases include an up-to $1.2 million one-time construction cost
in 2004 representing our portion of the new driveway, and approximately
$370,000 per year in lease and common expense payments to the shopping center
adjacent to the Atlantis (see Capital Spending and Development).
(2) Our open purchase order commitments total approximately $3.1 million. Of
the total purchase order commitments, approximately $2.0 million are
cancelable by the Company upon providing a 30-day notice.
We commenced certain litigation in April 2003 against the City of Reno
and other interested parties petitioning the Second Judicial District Court of
Nevada to (i) review the City of Reno's decision to enter into an agreement
for the acquisition and relocation of the Old Reno Casino in downtown Reno,
(ii) condemn the real property occupied by the Old Reno Casino, (iii) declare
the agreement null and void and (iv) preclude the City of Reno from condemning
the real property. This litigation has been settled by all parties. In
February 2004, the parties entered into a settlement agreement, and the
District Court dismissed the case in February 2004. The terms of the
confidential settlement agreement included a restriction from relocating the
former Old Reno Casino gaming license within an identified geographic area
near the Atlantis Casino Resort in Reno.
The Company believes that its existing cash balances, cash flow from
operations, reducing revolving credit facility and availability of equipment
financing, if necessary, will provide the Company with sufficient resources to
fund its operations, meet its existing debt obligations, and fulfill 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.
-18-
THE CREDIT FACILITY Until February 20, 2004, we had a reducing revolving term
loan credit facility with a consortium of banks that was to expire on June 30,
2004, and in the original amount of $80 million but that had been reduced to
$46 million at payoff (the "Original Credit Facility").
On February 20, 2004, the Original Credit Facility was refinanced (the
"New Credit Facility") for $50 million, which included the $46 million payoff
of the unpaid balance of the Original Credit Facility. The amount of the New
Credit Facility, which is also a reducing revolving facility, may be increased
by up to $30 million on a one-time basis and, if requested by us, before the
second anniversary of the closing date, as defined. At our option, borrowings
under the New Credit Facility will accrue interest at a rate designated by the
agent bank at its base rate (the "Base Rate") or at the London Interbank
Offered Rate ("LIBOR") for one, two, three or six month periods. The rate of
interest paid by us will include a margin added to either the Base Rate or to
LIBOR that is tied to our ratio of funded debt to EBITDA (the "Leverage
Ratio"). Depending on our Leverage Ratio, this margin can vary between 0.25
percent and 1.25 percent above the Base Rate, and between 1.50 percent and
2.50 percent above LIBOR (under the Original Credit Facility, this margin
varied between 0.00 percent and 2.00 percent above the Base Rate, and between
1.50 percent and 3.50 percent above LIBOR). At March 31, 2004, the applicable
margin was the Base Rate plus 0.75%, and the applicable LIBOR margin was LIBOR
plus 2.0%. At March 31, 2004, the Base Rate was 4.00% and the LIBOR rate was
1.09%. At March 31, 2004, the Company had no Base Rate loans outstanding and
had one LIBOR loan outstanding totaling $46.4 million, for a total obligation
of $46.4 million.
We may utilize proceeds from the New Credit Facility for working capital
needs and general corporate purposes relating to the Atlantis and for ongoing
capital expenditure requirements at the Atlantis.
The New Credit Facility is secured by liens on substantially all of the
real and personal property of the Atlantis, and is guaranteed by Monarch. The
Original Credit Facility was guaranteed individually by certain controlling
stockholders of the Company. These individuals were not required to provide
any personal guarantees for the New Credit Facility and, therefore, going
forward, we will no longer incur guarantee fee expenses.
The New Credit Facility contains covenants customary and typical for a
facility of this nature, including, but not limited to, covenants requiring
the preservation and maintenance of our assets and covenants restricting our
ability to merge, transfer ownership of Monarch, incur additional
indebtedness, encumber assets, and make certain investments. The New Credit
Facility also contains covenants requiring us to maintain certain financial
ratios, and provisions restricting transfers between Monarch and its
affiliates. The New Credit Facility also contains provisions requiring the
achievement of certain financial ratios before we can repurchase our common
stock. We currently meet such ratio requirements and we do not consider the
covenants to restrict our operations.
The maturity date of the New Credit Facility is February 23, 2009.
Beginning June 30, 2004, the maximum principal available under the Credit
Facility will be reduced over five years by an aggregate of $30.875 million in
equal increments of $1.625 million per quarter with the remaining balance due
at the maturity date. We may prepay borrowings under the New Credit Facility
without penalty (subject to certain charges applicable to the prepayment of
LIBOR borrowings prior to the end of the applicable interest period). Amounts
-19-
prepaid under the New Credit Facility may be reborrowed so long as the total
borrowings outstanding do not exceed the maximum principal available. We may
also permanently reduce the maximum principal available under the New Credit
Facility at any time so long as the amount of such reduction is at least $500
thousand and a multiple of $50 thousand. We also benefited from a reduced
loan amortization schedule, from $3 million per quarter under the Original
Credit Facility to $1.625 million per quarter under the New Credit Facility.
We paid various one-time fees and other loan costs upon the closing of
the refinancing of the New Credit Facility that will be amortized over the
term of the New Credit Facility using the straight-line method.
SHORT-TERM DEBT. At March 31, 2004, we had approximately $75 thousand
outstanding in slot purchase contracts. These contracts have original terms
of 12 months or less and do not bear any interest.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss arising from adverse changes in market
risks and prices, such as interest rates, foreign currency exchange rates and
commodity prices. We do not have any cash or cash equivalents as of March 31,
2004 that are subject to market risks.
We have substantial variable interest rate debt in the amount of
approximately $46.4 million as of March 31, 2004, and $55.3 million as of
March 31, 2003, which is subject to market risks.
A one-point increase in interest rates would have resulted in an increase
in interest expense of approximately $117 thousand in the first quarter of
2004 and $143 thousand in the first quarter of 2003.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures. The Company's
Chief Executive Officer and Chief Financial Officer have evaluated the
effectiveness of the Company's disclosure controls and procedures (as such
term is defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) as of a date within 90 days
prior to the filing date of this quarterly report (the "Evaluation Date"). In
designing and evaluating disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired
control objectives, and management necessarily is required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures. Based on such evaluation, such officers have concluded that, as
of the Evaluation Date, the Company's disclosure controls and procedures are
effective in alerting them on a timely basis to material information relating
to the Company (including its consolidated subsidiaries) required to be
included in the Company's periodic filings under the Exchange Act.
(b) Changes in Internal Controls. Since the Evaluation Date, there have
not been any significant changes in the Company's internal controls or in
other factors that could significantly affect such controls.
-20-
PART II. OTHER INFORMATION
ITEM 5. - LEGAL PROCEEDINGS
The Company commenced certain litigation in April 2003 against the City
of Reno and other interested parties petitioning the Second Judicial District
Court of Nevada to (i) review the City of Reno's decision to enter into an
agreement for the acquisition and relocation of the Old Reno Casino in
downtown Reno, (ii) condemn the real property occupied by the Old Reno Casino,
(iii) declare the agreement null and void and (iv) preclude the City of Reno
from condemning the real property. In February 2004, the parties entered into
a settlement agreement, and the District Court dismissed the case in February
2004. The terms of the confidential settlement agreement included a
restriction from relocating the former Old Reno Casino gaming license within
an identified geographic area near the Company's Atlantis Casino Resort in
Reno. The outcome of this litigation did not have a material impact on the
financial statements of the Company.
We are party to other claims that arise in the normal course of business.
Management believes that the outcomes of such claims will not have a material
adverse impact on our financial condition or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
99.01 Certification of John Farahi, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
99.02 Certification of Ben Farahi, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
On March 8, 2004, we filed a Current Report on Form 8-K reporting the
payoff of the Original Credit Facility and the signing of the New Credit
Facility.
On February 20, 2004, we filed a Current Report on Form 8-K reporting
that we had issued a press release announcing the results for the fiscal
quarter and fiscal year ended December 31, 2003.
On February 6, 2004, we filed a Current Report on Form 8-K reporting that
we had issued a press release announcing the settlement of our lawsuit against
the City of Reno and other interested parties we had commenced in April of
2003.
-21-
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: May 7, 2004 By: /s/ BEN FARAHI
------------------------------------
Ben Farahi, Co-Chairman of the Board,
Secretary, Treasurer, and Chief
Financial Officer(Principal Financial
Officer and Duly Authorized Officer)
-22-
CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John Farahi, Chief Executive Officer of Monarch Casino & Resort, Inc.,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Monarch Casino &
Resort, Inc., a Nevada 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 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
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
first fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control and reporting, 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 and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: May 7, 2004
By: /s/ John Farahi
---------------
John Farahi
Chief Executive Officer
-23-
CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ben Farahi, Chief Financial Officer of Monarch Casino & Resort, Inc.,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Monarch Casino &
Resort, Inc., a Nevada 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 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
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
first fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control and reporting, 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 and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: May 7, 2004
By: /s/ Ben Farahi
---------------
Ben Farahi
Chief Financial Officer, Secretary and Treasurer
-24-
EXHIBIT 99.01
MONARCH CASINO & RESORT, INC.
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Monarch Casino & Resort, Inc.
(the "Company") on Form 10-Q for the quarterly period ended March 31, 2004, as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, John Farahi, Chief Executive Officer of the Company certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 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 and Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Dated: May 7, 2004
By: /s/ JOHN FARAHI
---------------
John Farahi
Chief Executive Officer
-25-
EXHIBIT 99.02
MONARCH CASINO & RESORT, INC.
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Monarch Casino & Resort, Inc.
(the "Company") on Form 10-Q for the quarterly period ended March 31, 2004, as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Ben Farahi, Chief Financial Officer of the Company certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 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 and Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Dated: May 7, 2004
By: /s/ BEN FARAHI
---------------
Ben Farahi
Chief Financial Officer
-26-