The Sands Regent spent $256,000 on an audit that resulted in a $138,000 restatement of its earnings for the quarters ended Sept. 30 and Dec. 31.
But the Reno-based casino and hotel operator acknowledged in a filing with the Securities and Exchange Commission that the audit found "material weaknesses in internal control over financial reporting."
The problems were the result of insufficiently trained personnel as well as poor systems and weak controls, the company said in its SEC filing.
The company initially reported earnings of $1.88 million in the Sept. 30 quarter, but the figure was trimmed to $1.82 million after the audit. Earnings for the Dec. 31 quarter were $603,000 before the audit and $521,000 afterwards.
The audit committee of the company's board undertook the fresh look at The Sands' books in February after a former employee voiced concerns, particularly about the way the company accounted for acquisitions of two casinos in Dayton.
The cost of the audit rippled into the most recent earnings for The Sands.
For the quarter ended March 31, The Sands Regent said its revenues were up nearly 14 percent from a year ago to $21 million from $18.4 million but its net income fell to $63,000 from $259,000 a year earlier.
Along with the costs of the audit, the company blamed $100,000 of costs associated with its pending merger with Herbst Gaming Inc. for the decline.
Ferenc Szony, president and chief executive officer, said revenue at the company's namesake property in downtown Reno rose only 1 percent from year-earlier figures.
Revenues at the company's Rail City casino in Sparks were up 5.2 percent, he said, and the casino's operating margin rose to 29.3 percent from 27.2 percent a year earlier.
Dayton Depot, acquired by The Sands Regent last September, contributed $71,000 in net income during the most recent quarter.
The merger of The Sands Regent into Las Vegas-basedHerbst Gaming, a deal announced in May, is priced at $15 per share of The Sands Regent a total of $148 million. The Sands Regent stock was trading at $14.47 after the most recent earnings were reported.
