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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, 2005
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 12, 2005, there
were 18,831,316 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, 2005 and 2004
(unaudited).................................................... 3
Condensed Consolidated Balance Sheets at
March 31, 2005 (unaudited) and December 31, 2004............... 4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2005 and 2004 (unaudited)......... 6
Notes to Condensed Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk...... 20
Item 4. Controls and Procedures......................................... 20
PART II - OTHER INFORMATION
Item 6. Exhibits........................................................ 22
Signatures...................................................... 23
Exhibit 31.1 Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 ..................................... 24
Exhibit 31.2 Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 ..................................... 25
Exhibit 32.1 Certification of John Farahi pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002................... 26
Exhibit 32.2 Certification of Ben Farahi pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002................... 27
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MONARCH CASINO & RESORT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
----------------------------
2005 2004
------------ ------------
(Unaudited) (Unaudited)
Revenues
Casino...................................... $ 20,901,908 $ 19,902,851
Food and beverage........................... 9,026,336 8,825,823
Hotel....................................... 5,588,152 5,518,305
Other....................................... 1,048,337 863,030
------------ ------------
Gross revenues........................... 36,564,733 35,110,009
Less promotional allowances................. (5,002,031) (4,624,031)
------------ ------------
Net revenues............................. 31,562,702 30,485,978
------------ ------------
Operating expenses
Casino...................................... 7,534,847 7,440,671
Food and beverage........................... 4,437,365 4,391,722
Hotel....................................... 2,027,873 2,067,987
Other....................................... 321,646 318,463
Selling, general, and administrative........ 8,809,293 8,519,406
Gaming development expense.................. 204,398 -
Depreciation and amortization............... 2,038,200 3,003,359
------------ ------------
Total operating expenses................. 25,373,622 25,741,608
------------ ------------
Income from operations................... 6,189,080 4,744,370
Other expense
Interest expense............................ (305,374) (429,961)
Stockholder guarantee fee expense........... - (136,164)
------------ ------------
Total other expense...................... (305,374) (566,125)
------------ ------------
Income before income taxes............... 5,883,706 4,178,245
Provision for income taxes.................... 2,030,000 1,420,000
------------ ------------
Net income............................... $ 3,853,706 $ 2,758,245
============ ============
Earnings per share of common stock
Net income
Basic..................................... $ 0.20 $ 0.15
Diluted................................... $ 0.20 $ 0.15
Weighted average number of common
shares and potential common
shares outstanding
Basic................................... 18,816,819 18,689,472
Diluted................................. 19,043,546 18,764,512
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,
2005 2004
------------- -------------
(Unaudited)
ASSETS
Current assets
Cash............................................ $ 9,308,672 $ 11,814,778
Receivables, net................................ 2,414,332 2,959,894
Federal income tax refund receivable............ - 493,797
Inventories..................................... 1,252,778 1,452,696
Prepaid expenses................................ 2,535,061 2,346,242
Deferred income taxes........................... 1,115,719 1,115,719
------------- -------------
Total current assets......................... 16,626,562 20,183,126
------------- -------------
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........................... 7,524,680 7,524,680
Furniture and equipment......................... 65,561,447 65,146,594
Leasehold improvement........................... 1,346,965 1,346,965
------------- -------------
166,955,073 166,540,220
Less accumulated depreciation and amortization.. (70,382,468) (68,791,045)
------------- -------------
Net property and equipment................... 96,572,605 97,749,175
------------- -------------
Other assets, net................................. 383,746 406,620
------------- -------------
Total assets................................. $ 113,582,913 $ 118,338,921
============= =============
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,
2005 2004
------------- -------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt............ $ - $ -
Accounts payable................................ 6,680,008 5,747,775
Accrued expenses................................ 6,121,811 7,918,299
Federal income taxes payable.................... 1,710,203 -
------------- -------------
Total current liabilities.................... 14,512,022 13,666,074
Long-term debt, less current maturities........... 23,100,000 32,400,000
Deferred income taxes............................. 6,335,505 6,509,505
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; 19,072,550 shares issued;
18,819,116 outstanding at 03/31/2005,
18,812,448 outstanding at 12/31/2004........... 95,363 95,363
Additional paid-in capital...................... 17,457,149 17,463,272
Treasury stock,
253,434 shares at 03/31/2005, 260,102 shares
at 12/31/2004, at cost......................... (929,691) (954,152)
Retained earnings............................... 53,012,565 49,158,859
------------- -------------
Total stockholders' equity................... 69,635,386 65,763,342
------------- -------------
Total liabilities and stockholders' equity... $ 113,582,913 $ 118,338,921
============= =============
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,
----------------------------
2005 2004
------------ ------------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income.................................. $ 3,853,706 $ 2,758,245
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization............. 2,038,200 3,003,359
Amortization of deferred loan costs....... 22,875 105,084
Provision for bad debt.................... 89,913 100,120
(Gain) Loss on disposal of assets......... (6,500) 98,606
Deferred income taxes..................... (174,000) 78,840
Changes in assets and liabilities
Receivables, net.......................... 949,446 547,683
Inventories............................... 199,919 91,764
Prepaid expenses.......................... (188,819) (57,187)
Other assets.............................. - (454,823)
Accounts payable.......................... 932,233 (203,734)
Accrued expenses and federal income
taxes payable........................... (86,285) (356,736)
------------ ------------
Net cash provided by
operating activities.................... 7,630,688 5,711,221
------------ ------------
Cash flows from investing activities:
Proceeds from sale of assets................ 6,500 5,230
Acquisition of property and equipment....... (861,631) (3,775,103)
------------ ------------
Net cash used in investing activities.... (855,131) (3,769,873)
------------ ------------
Cash flows from financing activities:
Proceeds from exercise of stock options..... 18,337 133,417
Proceeds from long-term borrowings.......... - 46,400,000
Principal payments on long-term debt........ (9,300,000) (47,109,610)
------------ ------------
Net cash used in
financing activities.................... (9,281,663) (576,193)
------------ ------------
Net (decrease) increase in cash.......... (2,506,106) 1,365,155
Cash at beginning of period................... 11,814,778 9,711,310
------------ ------------
Cash at end of period......................... $ 9,308,672 $ 11,076,465
============ ============
Supplemental disclosure of
cash flow information:
Cash paid for interest...................... $ 381,164 $ 542,974
Cash paid for income taxes.................. $ - $ 120,000
Supplemental schedule of non-cash
investing and financing activities:
The Company financed the purchase
of property and equipment in the
following amounts........................... $ - $ -
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 condensed consolidated financial statements for the
three-month period ended March 31, 2005 and 2004 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, 2004. The
results for the three-month period ended March 31, 2005 are not necessarily
indicative of the results that may be expected for the year ending December
31, 2005, or for any other period.
Use of Estimates
In preparing these financial statements in conformity with U.S. generally
accepted accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the respective periods. Actual
results could differ from those estimates.
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.
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
-7-
quarterly average outstanding bank debt amount. During the three months ended
March 31, 2004, the Company recorded interest expense in the amount of
approximately $136,000 in guarantee fees. No guarantee fees were paid during
the three months ended March 31, 2005, because the individuals who guaranteed
the Original Credit Facility (as defined below) were not required to do so for
the New Credit Facility.
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 Statement of Financial Accounting Standards ("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.
Income Taxes
Income taxes are recorded in accordance with the liability method
specified by SFAS No. 109 "Accounting for Income Taxes." Under the asset and
-8-
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 ("APB") 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 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, 2005), net income and income per share would have been changed
to the pro forma amounts indicated below:
Three Months ended March 31,
-----------------------------
2005 2004
----------- -----------
Net income, as reported $ 3,853,706 $ 2,758,245
Stock based employee compensation
expensed determined under the fair
value based method for all awards,
net of related income tax effects (252,204) (2,934)
----------- -----------
Pro forma net income $ 3,601,502 $ 2,755,311
=========== ===========
Basic earnings per share
As reported $ 0.20 $ 0.15
Pro forma $ 0.19 $ 0.15
Diluted earnings per share
As reported $ 0.20 $ 0.15
Pro forma $ 0.19 $ 0.15
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
-9-
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 situation
in 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.
A change in regulations on land use requirements with regard to
development of new hotel casinos in the proximity of the Atlantis could have
an adverse impact on our business, results of operations, and financial
condition.
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. On March 31, 2005, the Company
split its common stock on a 2 for 1 basis. The following is a reconciliation
of the number of shares (denominator) used in the basic and diluted earnings
per share computations (shares in thousands):
-10-
Three Months ended March 31,
-----------------------------------
2005 2004
---------------- ----------------
Per Share Per Share
Shares Amount Shares Amount
------ --------- ------ ---------
Weighted average common shares
outstanding
Basic..................... 18,817 $ 0.20 18,689 $ 0.15
Effect of dilutive
stock options............ 227 - 76 -
------ ------- ------ -------
Diluted................... 19,044 $ 0.20 18,765 $ 0.15
====== ======= ====== =======
Excluded from the computation of diluted earnings per share are options
where the exercise prices are greater than the market price as their effects
would be anti-dilutive in the computation of diluted earnings per share.
NOTE 4. RECENTLY ISSUED ACCOUNTING STANDARDS
In December 2004, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 123R (Revised 2004), "Share-Based Payment ("SFAS No.123R"),
which requires that the compensation cost relating to share-based payment
transactions be recognized in financial statements based on alternative fair
value models. The share-based compensation cost will be measured based on
fair value models of the equity or liability instruments issued. We currently
disclose pro forma compensation expense quarterly and annually by calculating
the stock option grants' fair value using the Black-Scholes model and
disclosing the impact on net income and net income per share in a Note to the
Consolidated Financial Statements. Upon adoption, pro forma disclosure will
no longer be an alternative. SFAS No.123R also requires the benefits of tax
deductions in excess of recognized compensation cost to be reported as a
financing cash flow rather than as an operating cash flow as required under
current literature. This requirement will reduce net operating cash flows and
increase net financing cash flows in periods after adoption. The Company will
begin to apply SFAS No.123R using an appropriate fair value model beginning
January 1, 2006. We are currently evaluating the provisions of SFAS No.
123(R) to determine its impact on our future financial statements.
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs." The
statement is effective for inventory costs incurred during fiscal years
beginning after June 15, 2005. We are currently evaluating the provisions of
SFAS No. 151 to determine its impact on our future financial statements.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of
Nonmonetary Assets." This statement is based on the principle that exchanges
of nonmonetary assets should be measured based on fair value of the assets
exchanged. This statement is effective for nonmonetary asset exchanges
occurring in fiscal periods beginning after June 15, 2005. We are currently
evaluating the provisions of SFAS No. 153 to determine its impact on our
future financial statements.
-11-
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 7,700 square feet in the Shopping Center which it uses as office
space, and paid rent of approximately $14,800 plus common area expenses for
the three months ended March 31, 2005, and approximately $15,100 for the three
months ended March 31, 2004.
In addition, a new driveway that is being shared between the Atlantis and
the Shopping Center was completed on September 30, 2004. 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 an
annual rent of $300,000, subject to increase every 60 months based on the
Consumer Price Index. The Company began paying rent to the Shopping Center on
September 30, 2004. The Company also uses part of the common area of the
Shopping Center and pays 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 an MAI Appraisal. The leased space is being used by the
Company for pedestrian and vehicle access to the Atlantis, and the Company may
use a portion of the parking spaces at the Shopping Center. The total cost of
the project was $2.0 million; the Company was responsible for two thirds of
the total cost, or $1.35 million. The cost of the new driveway is being
depreciated over the initial 15-year lease term; some components of the new
driveway are being depreciated over a shorter period of time. The Company
paid approximately $75,000 for its leased driveway space at the Shopping
Center during the three months ended March 31, 2005.
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. The Company, through the current
property owner, filed an application with the City of Reno for both master
plan and zoning changes for 13 acres of the property. On January 20, 2005, the
City of Reno Planning Commission approved the application for zoning change on
the property; the Reno City Council would next have to approve the
application. On April 13, 2005, the Reno City Council rejected the application
for master plan and zoning change. As a result of the City Council's decision,
the Company expensed in the first quarter ended March 31, 2005, a charge of
approximately $204,000 in gaming development costs related to the potential
new hotel casino.
The Company is currently leasing billboard advertising space from
affiliates of its controlling stockholders for a total cost of $7,000 for each
of the three months ended March 31, 2005 and 2004.
The Company is currently renting office and storage space from a company
affiliated with Monarch's controlling stockholders and paid rent of
approximately $7,000 for these spaces for each of the three month periods
ended March 31, 2005 and 2004.
-12-
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 by offering 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.
OPERATING RESULTS SUMMARY
During the first quarter of 2005, we exceeded all previously reported
Company first quarter casino revenues, hotel revenues, net revenues, net
income and earnings per share.
Three Months Percentage
ended March 31, Increase / (Decrease)
------------------- ------------------------
2005 2004 First Quarter '05 vs '04
-------- -------- ------------------------
(In millions, except earnings per share
and percentages)
Casino revenues......................... $ 20.9 $ 19.9 5.0%
Food and beverage revenues.............. 9.0 8.8 2.3%
Hotel revenues.......................... 5.6 5.5 1.3%
Other revenues.......................... 1.0 0.9 21.5%
Net revenues............................ 31.6 30.5 3.5%
Income from operations.................. 6.2 4.7 30.5%
Net income.............................. 3.9 2.8 39.7%
Earnings per share - diluted............ 0.20 0.15 33.3%
Operating margin........................ 19.6% 15.6% 4.0 pts
Some significant items that affected our first quarter results in 2005
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.
-13-
- Casino revenues increased approximately $1.0 million, or 5.0%, during
the first quarter of 2005 over the same period in 2004 driven primarily
by a 10.3% increase in slot revenues. Food and beverage, hotel and
other revenue centers all achieved increases in revenues during the
quarter for a combined 3.0% improvement over the 2004 first quarter.
- Our operating expenses decreased 1.4% during the quarter due to a
32.1% decrease in depreciation and amortization.
- The increased revenues, combined with the decrease in depreciation
expense and across the board margin improvements, led to an increase in
income from operations of 30.5%.
CAPITAL SPENDING AND DEVELOPMENT
Capital expenditures at the Atlantis totaled approximately $862,000 and
$3.8 million during the first three months of 2005 and 2004, respectively.
During the three months ended March 31, 2005, our capital expenditures
consisted primarily of acquisitions of gaming and computer systems equipment.
During last year's first three months, 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 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, 2005 and 2004
For the three-month period ended March 31, 2005, the Company's net income
was $3.9 million, or $0.20 per diluted share, on net revenues of $31.6
-14-
million, an increase from net income of $2.8 million, or $0.15 per diluted
share, on net revenues of $30.5 million for the three months ended March 31,
2004. Income from operations for the three months ended March 31, 2005
totaled $6.2 million, a 30.5% increase when compared to $4.7 million for the
same period in 2004. Both net revenues and net income for the first quarter
of 2005 represent new first quarter records for the Company. Net revenues
increased 3.5%, and net income increased 39.7% when compared to last year's
first quarter.
Casino revenues totaled $20.9 million in the first quarter of 2005, a
5.0% increase from $19.9 million in the first quarter of 2004, which was
primarily due to an increase in slot revenue partially offset by decreases in
table games, poker and Keno revenues. Casino operating expenses amounted to
36.0% of casino revenues in the first quarter of 2005, compared to 37.4% in
the first quarter of 2004, with the difference due primarily to reduced
payroll and benefit expenses and reduced direct operating costs as a
percentage of casino revenues partially offset by an increase in
complimentaries.
Food and beverage revenues totaled $9.0 million in the first quarter of
2005, a 2.3% increase from $8.8 million in the first quarter of 2004, due
primarily to a 2.0% increase in the average revenue per food cover partially
offset by an approximate 0.1% decrease in the number of food covers served
during the quarter. Food and beverage operating expenses amounted to 49.2% of
food and beverage revenues during the first quarter of 2005, a slight
improvement from 49.8% in the first quarter of 2004. The decrease is
primarily due to more efficient operations partially offset by a slight
increase in cost of sales.
Hotel revenues were $5.6 million for the first quarter of 2005, an
increase of 1.3% from the $5.5 million reported in the 2004 first quarter.
This increase was the result of increases in both the average daily room rate
(ADR) and hotel occupancy. Both first quarters' 2005 and 2004 revenues also
included a $3 per occupied room energy surcharge. During the first quarter of
2005, the Atlantis experienced a 91.4% occupancy rate, as compared to 90.7%
during the same period in 2004. The Atlantis' ADR was $60.25 in the first
quarter of 2005 compared to $59.76 in the first quarter of 2004. Hotel
operating expenses as a percent of hotel revenues decreased to 36.3% in the
2005 first quarter, compared to 37.5% in the 2004 first quarter. The improved
margin is primarily due to the increased ADR and more efficient operations
resulting in reduced direct operating costs.
Promotional allowances increased to $5.0 million in the first quarter of
2005 compared to $4.6 million in the first quarter of 2004. The increase is
attributable to continued promotional efforts to generate additional revenues.
Promotional allowances as a percentage of gross revenues increased slightly to
13.7% during the first quarter of 2005, from 13.2% in the first quarter of
2004.
Other revenues increased 21.5% to $1.0 million in the 2005 first quarter
compared to $0.9 million in the same period last year. The increase reflects
an approximate 8.0% increase in gift and sundries retail shops revenues and an
approximate 2.4% increase in the entertainment fun center revenues. Other
revenues include an approximate $100,000 loss on disposal of assets in the
quarter ended March 31, 2004, while a slight gain of approximately $7,000 was
recorded
-15-
in the quarter ended March 31, 2005. Other expenses in the 2005 first quarter
decreased to 30.7% of other revenues, from 36.9% of the revenues in the 2004
first quarter, which is the result of the approximate $100,000 loss on
disposal of assets recorded in the first quarter of 2004.
Depreciation and amortization expense was $2.0 million in the first
quarter of 2005, down 32.1% compared to $3.0 million in the same period last
year. The decrease in depreciation expense was mainly due to the fact that
previously capitalized assets have become fully depreciated. The Company, in
its ordinary course of business and as part of its ongoing capital
expenditures, intends to replace old and obsolete equipment with newer, more
current equipment.
Selling, general and administrative (SG&A) expenses amounted to $8.8
million in the first quarter of 2005, a 3.4% increase from $8.5 million in the
first quarter of 2004. The increase was primarily a result of increased
payroll and benefit costs, increased marketing and promotional expenditures
and increased energy costs. As a percentage of net revenues, SG&A expenses
remained unchanged at 27.9% in both the first quarter of 2005 and the first
quarter of 2004.
Interest expense for the 2005 first quarter totaled $305,000, a decrease
of 46.1%, from $566,000 in the 2004 first quarter. The decrease reflects the
Company's reduction in debt outstanding and the elimination of stockholder
guarantee fee expenses. Interest expense for the quarter ended March 31,
2004, included guarantee fees in the amount of approximately $136,000 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. There were no guarantee expenses in the first quarter of 2005. 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, 2005, net cash provided by operating
activities totaled $7.6 million, an increase of 33.6% compared to the same
period last year. Net cash used in investing activities totaled $855,000 and
$3.8 million in the three months ended March 31, 2005 and 2004, respectively.
During the first three months of 2005 and 2004, net cash used in investing
activities was used primarily in the purchase of property and equipment and
continued property renovations and upgrades. Net cash used in financing
activities totaled $9.3 million for the first three months of 2005 primarily
for debt reduction, compared to $576,000 for the same period last year, as the
Company refinanced its credit facility during the first three months of 2004,
simultaneously paying off old debt and acquiring new debt. During the first
quarter of 2005, the Company reduced its long-term debt by $9.3 million. As a
result, at March 31, 2005, the Company had a cash balance of $9.3 million,
compared to $11.1 million at March 31, 2004 and $11.8 million at December 31,
2004.
-16-
The Company has a reducing revolving credit facility with a group of
banks (see "THE CREDIT FACILITY" below). At March 31, 2005, the total balance
outstanding on the Credit Facility was $23.1 million.
OFF BALANCE SHEET ARRANGEMENTS
A new driveway was completed and opened on September 30, 2004, that is
being shared between the Atlantis and a shopping center directly adjacent to
the Atlantis. The shopping center is controlled by our controlling
stockholders (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 an annual rent of $300,000,
subject to increase every 60 months based on the Consumer Price Index. The
Company also uses part of the common area of the Shopping Center and pays 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 an
MAI Appraisal. The leased space is being used by the Company for pedestrian
and vehicle access to the Atlantis, and the Company may use a portion of the
parking spaces at the Shopping Center. The total cost of the project was $2.0
million; we were responsible for two thirds of the total cost, or $1.35
million. The cost of the new driveway is being depreciated over the initial
15-year lease term; some components of the new driveway are being depreciated
over a shorter period of time. The Company paid approximately $75,000 for its
leased driveway space at the Shopping Center during the three months ended
March 31, 2005.
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. The Company, through the current
property owner, filed an application with the City of Reno for both master
plan and zoning changes for 13 acres of the property. On January 20, 2005, the
City of Reno Planning Commission approved the application for zoning change on
the property; the Reno City Council would next have to approve the
application. On April 13, 2005, the Reno City Council rejected the application
for master plan and zoning change. As a result of the City Council's decision,
the Company expensed during the first quarter ended March 31, 2005, a one-time
charge of approximately $204,000 in gaming development costs related to the
potential new hotel casino.
Critical Accounting Policies
A description of our critical accounting policies and estimates can be
found in Item 7 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of our Form 10-K for the year ended
December 31, 2004 ("2004 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 2004 Form 10-K
filed on March 15, 2005.
-17-
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.
In June 2004, five California Indian tribes signed compacts with the
state that allows the tribes to increase the number of slot machines beyond
the previous 2,000-per-tribe limit in exchange for higher fees from each of
the five tribes. The State of California hopes to sign similar compacts with
more Indian tribes.
COMMITMENTS AND CONTINGENCIES
Contractual cash obligations for the Company as of March 31, 2005 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 $23,100,000 $ - $ - $23,100,000 $ -
Operating Leases (1) 5,405,362 410,362 740,000 740,000 3,515,000
Purchase Obligations (2) 3,882,000 3,882,000 - - -
----------- ----------- ----------- ----------- -----------
Total Contractual Cash $32,387,362 $ 4,292,362 $ 740,000 $23,840,000 $3,515,000
Obligations
(1) Operating leases include $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 $3.9 million. Of
the total purchase order commitments, approximately $1.5 million are
cancelable by the Company upon providing a 30-day notice.
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,
-18-
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.
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, 2005, the applicable
margin was the Base Rate plus 0.25%, and the applicable LIBOR margin was LIBOR
plus 1.50%. At March 31, 2005, the Base Rate was 5.50% and the LIBOR rate was
2.85%. At March 31, 2005, the Company had no Base Rate loans outstanding and
had one LIBOR loan outstanding totaling $23.1 million, for a total obligation
of $23.1 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.
-19-
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
prepaid under the New Credit Facility may be re-borrowed 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
$500,000 and a multiple of $50,000. 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.
As of March 31, 2005, our Leverage Ratio had been equal to or less than
one-to-one for the second consecutive quarter. Per the New Credit Facility, if
we achieve a Leverage Ratio equal to or less than one-to-one for two
consecutive quarters, our scheduled reduction of the next consecutive fiscal
quarter is waived. Management has assumed that we will maintain a leverage
ratio equal to or less than one-to-one for the remaining term of the New
Credit Facility and, therefore, no principal reductions will be due until the
New Credit Facility matures in 2009.
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, 2005, we had no short-term debt.
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,
2005 that are subject to market risks.
We have substantial variable interest rate debt in the amount of
approximately $23.1 million as of March 31, 2005, and $46.4 million as of
March 31, 2004, which is subject to market risks.
A one-point increase in interest rates would have resulted in an increase
in interest expense of approximately $69,000 in the first quarter of 2005 and
$117,000 in the first quarter of 2004.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in our Exchange Act reports
is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is
accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow for timely
decisions regarding required disclosure.
-20-
As of the end of the period covered by this report (the "Evaluation
Date"), we carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and our
Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures. Based on the foregoing, our Chief
Executive Officer and Chief Financial Officer concluded that, as of the
Evaluation Date, our disclosure controls and procedures were effective at the
reasonable assurance level.
Our management does not expect that our disclosure controls and
procedures or our internal controls over financial reporting will prevent all
error and all fraud. 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. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, have been detected. These
inherent limitations include the realities that judgments in decision-making
can be faulty and that breakdowns can occur because of simple error or
mistake. Additionally, controls can be circumvented by the individual acts of
some persons, by collusion of two or more people, or by management override of
a control. The design of a control system is also based upon certain
assumptions about the likelihood of future events, there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions; over time, controls may become inadequate because of
changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a cost-
effective control system, misstatements due to error or fraud may occur and
may not be detected.
-21-
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS
(a) Exhibits
Exhibit No. Description
----------- -----------
31.1 Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification of John Farahi, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Ben Farahi, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
-22-
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 13, 2005 By: /s/ BEN FARAHI
------------------------------------
Ben Farahi, Co-Chairman of the Board,
Secretary, Treasurer, and Chief
Financial Officer(Principal Financial
Officer and Duly Authorized Officer)
-23-
EXHIBIT 31.1
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
second 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 13, 2005
By: /s/ John Farahi
---------------
John Farahi
Chief Executive Officer
-24-
EXHIBIT 31.2
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
second 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 13, 2005
By: /s/ Ben Farahi
---------------
Ben Farahi
Chief Financial Officer, Secretary and Treasurer
-25-
EXHIBIT 32.1
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, 2005, 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 13, 2005
By: /s/ JOHN FARAHI
---------------
John Farahi
Chief Executive Officer
-26-
EXHIBIT 32.2
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, 2005, 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 13, 2005
By: /s/ BEN FARAHI
---------------
Ben Farahi
Chief Financial Officer
-27-