10-Q 1 new10q.txt UNION PLAZA HOTEL AND CASINO, INC. 1 Main Street Las Vegas, NV 89101 August 14, 2002 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: Pursuant to the requirements of the Securities Exchange Act of 1934, we are transmitting herewith the attached Form 10-Q. Sincerely, UNION PLAZA HOTEL AND CASINO, INC. /s/ ALAN J. WOODY Alan J. Woody, Chief Financial Officer FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2002 Commission file number 0-8133 UNION PLAZA HOTEL AND CASINO INC. (Exact name of registrant as specified in its charter) Nevada 88-0110085 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) No. 1 Main Street 89125 Las Vegas, Nevada (Zip Code) (Address of principal executive offices) (702) 386-2110 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. YES [ X ] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report: Outstanding at Class of Common Stock June 30, 2002 $.50 par value 757,419 shares The Securities and Exchange Commission Washington D.C. The financial information included herein is unaudited. In addition, the financial information does not include all disclosures required under generally accepted accounting principles because certain note information included in the Company's annual report has been omitted; however, such information reflects all adjustments which are, in the opinion of Management, necessary to a fair statement of the results for the interim period. /s/ ALAN J. WOODY Alan J. Woody, Chief Financial Officer Las Vegas, Nevada August 13, 2002 PART 1. - Financial Information Item 1. Financial Statements UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2002 AND DECEMBER 31, 2001 UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS' EQUITY JUNE 30, DECEMBER 31, 2002 2001 (Unaudited) Current liabilities: Accounts payable $ 2,457,000 $ 2,441,000 Accrued liabilities 2,192,000 2,353,000 Short term contracts payable 682,000 127,000 Current portion of long-term debt 0 38,000 Current portion of obligations under capital leases 339,000 444,000 Total current liabilities 5,670,000 5,403,000 Long-term debt, less current portion 32,900,000 32,900,000 Obligations under capital leases, less current portion 1,441,000 1,582,000 40,011,000 39,885,000 Commitments and contingencies Stockholders' equity: Common stock, $.50 par value; authorized 20,000,000 shares; issued 1,500,000 shares; Outstanding 757,419 shares at December 31, 2001 and 757,419 shares at June 30, 2002. 750,000 750,000 Additional paid-in capital 5,462,000 5,462,000 Retained earnings 8,921,000 8,313,000 15,133,000 14,525,000 Less treasury stock, at cost, 742,581 shares at December 31, 2001 and 742,581 shares at June 30, 2002. 13,897,000 13,897,000 Total stockholders' equity 1,236,000 628,000 $41,247,000 $40,513,000 The accompanying notes are an integral part of these financial statements.

UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME

UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - NATURE OF THE OPERATIONS AND BASIS OF ACCOUNTING The Company's wholly-owned subsidiary, Union Plaza Operating Company, operates hotel and gaming operations in downtown Las Vegas, Nevada. A substantial portion of the operating revenues of the Company's subsidiary is derived from gaming operations which are subject to extensive regulations in the State of Nevada by the Gaming Commission, the Gaming Control Board and local regulatory agencies. The Company does not anticipate any material changes in which the financial results are reported due to the adoption of new or proposed accounting pronouncements. In accordance with common industry practice, the estimated costs of providing promotional allowances have been included in casino expenses on the statements of income. The Company previously recorded these amounts in food and beverage expense and rooms expense. Amounts in the June 30, 2001 financial statements have also been reclassified to be consistent with the presentation as of June 30, 2002. NOTE 2 - EARNINGS PER COMMON SHARE Earnings per common share was computed by dividing net income by the weighted average number of shares of common stock outstanding during each period. The weighted average number of shares outstanding was 757,419 during the six months ended June 30, 2002 and June 30, 2001. NOTE 3 - EMPLOYEE BENEFIT PLANS The Company contributes to a discretionary executive bonus plan. During the first six months of 2002, the Company authorized and distributed $188,000 to this plan compared to a year ago when $135,000 was authorized. The Company also has a qualified profit sharing plan for eligible employees. Contributions to this plan are made at the discretion of the Board of Directors and benefits are limited to the allocated interests in fund assets. There have been no profit sharing plan contributions since 1996 and it is anticipated that there will be none in the foreseeable future. NOTE 4 - RELATED PARTIES The related party note payable of $32,900,000, as more fully described in Note 6, is payable to Exber, Inc., a 51.03% stockholder of the Company. Interest expense on this note was $781,000 and $1,241,000 for the six months ended June 30,2002 and 2001, respectively. In addition, the Company has a line of credit for $1,000,000 with Exber, Inc. to be used for normal operating requirements as needed. As of June 30, 2002 and December 31,2001, the outstanding balance was $0. UNION PLAZA HOTEL AND CASINO,INC. AND SUBSIDIARIES UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) NOTE 4 - RELATED PARTIES (cont.) The Company leases equipment under long-term agreements, which are classified as capital leases. The capital lease covering the hotel and bus depot property expired during 2001. The hotel and bus depot property are now leased from Exber, Inc. on a month-to-month basis under an operating lease commencing on July 1, 2001, with monthly payments of $104,000. The Company paid a total of $625,000 during each of the six months ended June 30, 2002 and 2001. The Company paid no interest on this lease during the first six months of 2002 compared to $24,000 paid in the first half of 2001. During 2002 and 2001, the Company financed various equipment purchases through Exber, Inc., which have been classified as capital leases. As of June 30, 2002, capital leases include $1,759,000 payable to Exber, Inc. Interest paid to Exber, Inc. on these capital leases was $48,000 for the first six months of 2002. NOTE 5 - CONTINGENCIES The Company has contingent liabilities with respect to lawsuits and other maters arising in the ordinary course of business. In the opinion of management, no material liability exists with respect to these contingencies. NOTE 6 - LONG TERM DEBT Long-term debt consists of the following: June 30, December 31, 2002 2001 Related party note, as amended, payable in monthly payments of interest only at prime not to exceed 12%, until January 1, 2005, at which time the entire balance plus accrued interest is due. The note is secured by a First Deed of Trust on land and buildings. The effective rate of interest at June 30, 2002 is 4.75% $32,900,000 $32,900,000 Contract payable, secured by slot machines and related equipment, payable in monthly installments of 25% of net win with no stated interest for the first twelve months, after which an interest rate of 3% over prime applies to the remaining balance. - 38,000 32,900,000 32,938,000 Less current portion 38,000 $32,900,000 $32,900,000

FINANCIAL INFORMATION ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES At June 30, 2002, the Company's primary source of liquidity was $5,967,000 in cash and cash equivalents and a $1,000,000 letter of credit secured by the Company's majority shareholder. Cash accounted for 14.5% of total assets at June 30, 2002 compared to 8.8% or $3,552,000 at December 31, 2001. The ratio of current assets to current liabilities was 1.3 to 1 at June 30, 2002 compared to 1 to 1 at December 31, 2001. The improvement in the current ratio is attributed to the improved cash position of the Company. Account receivables declined 25.6% or $201,000 in the first six months due primarily to a steady decline in group-travel business since September 11, 2001. As a result of the loss of group-travel business the outstanding balances due to the hotel have declined considerably. Prepaid expenses declined $325,000 or 41.0% reflecting timing differences of gaming taxes paid at the end of the second quarter in 2001 compared to those same tax liabilities paid at the beginning of the third quarter in 2002. Long-term debt, short term contracts payable, and obligations under capital leases (including current term portions) were $35,362,000 at June 30, 2002 compared to $35,091,000 at December 31, 2001. The increase in obligations reflects additional purchases of slot machines on short-term contracts and the reclassification of $580,000 from accounts payable, less $418,000 paid on those contracts during the first six months of the year. Operating cash flow was $3,493,000 for the first six months of 2002 compared to $1,799,000 a year ago. The improvement in operating cash flow is primarily due to a reduction in payroll expense of over $1,200,000 combined with a $459,000 reduction in interest expense. Management expects the cash generated by operations, along with financing provided by Exber, Inc., will provide the proper liquidity to meet the future needs of the business. The Company considers the financial stability of its majority shareholder to be a source of capital for future investment in equipment and funding for operations when needed. These factors considered, management believes that its capital resources and those available to it should be adequate to meet its anticipated requirements. RESULTS OF OPERATIONS Net revenues at the Company's hotel and casino declined $756,000 or 5.6% during the second quarter compared to the same period a year ago. Revenues were down in each segment of the Company's operation as hotel occupancy rates averaged just 75.3%, down from 88.1% in 2001. For the first six months of 2002, net revenues fell $775.000 or 2.8%, significantly all of which is attributed to the second quarter. Room occupancies declined 11.3% from 90.0% to 78.7% during the first six months of the year. The decline in hotel occupancy and number of guests staying at the Company's hotel not only impacted room revenues but has also directly affected food and beverage revenues and gaming revenues. Room revenues were down $126,000 or 4.4%, reflecting the 12.8% decline in occupancy in the second quarter. The impact of the decline in occupancy was partially offset by an increase in the average daily room rate. Average daily room rates increased 12.6% during the first six months of 2002. PART 1. - FINANCIAL INFORMATION ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION RESULTS OF OPERATION (cont.) Food and beverage revenues fell $186,000 or 7.3% due to a 23.7% decline in number of persons served in the Company's restaurants during the second quarter. Food sales would have likely declined more without the impact of an 18.4% average increase in prices. Gaming revenues were down $544,000 or 6.0% reflecting less slot and table game play during the quarter. Promotional complimentaries were also down $128,000 or 8.3% during the quarter due to the overall decline in hotel and casino customer traffic. Operating expenses declined $1,009,000 or 7.4% in the second quarter of 2002 compared to the same period in 2001. Lower payroll costs combined with a reduction in cost of sales expense were the major contributors in the cost improvements. Since September 2001, the Company has reduced staffing levels by nearly 20% in response to the loss in business that has plagued the travel industry. The Company has also reduced food inventories and streamlined its purchasing process that has resulted in significant savings in food costs. Overall, operating income for the Company was $105,000 during the second quarter of 2002 compared to an operating loss of $148,000 a year ago. The improvement in operating income combined with a reduction in interest expense, reduce the Company's net loss in the second quarter to $315,000 from a net loss of $699,000 last year. On a per share basis, the net loss was $0.42 per common share in 2002 compared to a loss of $0.92 last year. PART 2. - OTHER INFORMATION ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's Annual Meeting of Shareholders was held on May 17,2002. The stockholders re-elected John D. Gaughan, J.K. Houssels, John P. Jones, Joe Woody, Irving Kenneth Epstein, Mike Nolan, and Donald L. Dobson to one year terms, ending on the Company's Annual Meeting in 2003. Of the Company's 757,419 shares outstanding, 698,479 shares voted in favor of the entire slate of directors, while 58,940 votes were withheld. UNION PLAZA HOTEL AND CASINO, INC. AND SUBSIDIARIES CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Union Plaza Hotel and Casino, Inc. (the "Company") on Form 10-Q for the period ending June 30,2002 as filed herein to the Securities and Exchange Commission on the date hereof (the "Report"), I John D. Gaughan, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all all material respects, the financial condition and result of operations of the Company. /s/JOHN D. GAUGHAN John D. Gaughan Chairman of the Board and Chief Executive Officer August 13, 2002 In connection with the Quarterly Report of Union Plaza Hotel and Casino, Inc. (the "Company") on Form 10-Q for the period ending June 30,2002 as filed herein to the Securities and Exchange Commission on the date hereof (the "Report"), I Joe Woody, Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of the operations of the Company. /s/ JOE WOODY Joe Woody Vice President and Chief Financial Officer August 13, 2002 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 the registrant had duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UNION PLAZA HOTEL AND CASINO, INC. (REGISTRANT) Date: August 13, 2002 /S/ JOHN D. GAUGHAN JOHN D. GAUGHAN, President Date: August 13, 2002 /S/ ALAN J. WOODY ALAN J. WOODY, Chief Financial Officer

UNION PLAZA HOTEL & CASINO INC 10-Q