Monarch Casino & Resort Reports 2013 Second Quarter Results

MONARCH CASINO REPORTS 2013 SECOND QUARTER RESULTS


RENO, NV July 24, 2013 - Monarch Casino & Resort, Inc. (NASDAQ: MCRI) ("Monarch" or the “Company”), owner of the Atlantis Casino Resort Spa (the "Atlantis") in Reno, Nevada, and the Riviera Black Hawk Casino (“Black Hawk”) in Black Hawk, Colorado, today announced results for the quarter ended June 30, 2013.
The Company reported the following net revenues for the three month periods ended June 30, 2013 and 2012, respectively. Note that Black Hawk was acquired on April 26, 2012 (the “Acquisition Date”); therefore, 2012 Black Hawk information represents only results subsequent to the Acquisition Date.

Net Revenue:
                       Three months ended June 30,          Increase
                    --------------------------------- ----------------------
                          2013             2012               $           %
                    ---------------- ---------------- ----------------  ----
Atlantis            $     37,231,961 $     34,468,122 $      2,763,839   8.0%
Black Hawk                12,419,133        8,003,028        4,416,105  55.2%
                    ---------------- ---------------- ----------------  ----
 Net revenue        $     49,651,094 $     42,471,150 $      7,179,944  16.9%
                    ================ ================ ================  ====
Atlantis net revenue for the second quarter of 2013 increased primarily due to higher casino and hotel revenue. The increase in Black Hawk net revenue is primarily due to the fact that the 2013 second quarter reflects a complete three-month period (91 days) while the 2012 second quarter only reflects Black Hawk revenue subsequent to the Acquisition Date (65 days). However, for illustration purposes only, Black Hawk second quarter 2013 net revenue for the period subsequent to April 26, 2013 increased 16% when compared to the same period subsequent to the Acquisition Date for the 2012 second quarter.

Adjusted EBITDA(1):
                    Three months ended June 30,        Increase(Decrease)
                 ----------------------------------  ----------------------
                       2013              2012                $           %
                 ----------------  ----------------  ----------------  ----
Atlantis         $     11,173,417  $      7,789,198  $      3,384,219  43.4%
Black Hawk              4,821,254         2,546,186         2,275,068  89.4%
                 ----------------  ----------------  ----------------  ----
                       15,994,671        10,335,384         5,659,287  54.8%
Corporate and 
 other expense         (1,159,940)         (747,950)         (411,990) 55.1%
                 ----------------  ----------------  ----------------  ----
  Total Adjusted
   EBITDA        $     14,834,731  $      9,587,434  $      5,247,297  54.7%
                 ================  ================  ================  ====
The Company generated record all-time Adjusted EBITDA of $14.8 million in the second quarter of 2013 representing a “Flow Through Rate”(2) of 73.1%.
After eliminating the effect of the $560 thousand nonrecurring sales tax benefit described in the consolidated operating expense section below, Atlantis Adjusted EBITDA increased $2.8 million or 36.3% compared to prior year’s second quarter. This $2.8 million increase was due primarily to higher net revenue combined with lower selling, general and administrative (“SG&A Expense”) expenses.
The increase in Black Hawk Adjusted EBITDA is primarily due to the fact that the 2013 second quarter reflects a complete three-month period while the 2012 second quarter only reflects results subsequent to the Acquisition Date. However, for illustrative purposes only, Black Hawk second quarter 2013 Adjusted EBITDA for the period subsequent to April 26, 2013 increased 47% when compared to the same period subsequent to the Acquisition Date for the 2012 second quarter.
The increase in corporate and other expense included in SG&A expense is primarily related to higher salaries and benefits expense.
Consolidated Operating Expense:
Casino operating expense as a percentage of casino revenue (“Casino Expense Margin”) improved to 37.5% for the second quarter of 2013 compared to 40.8% for the second quarter of the prior year due primarily to lower Atlantis complimentaries expense and the inclusion of Black Hawk for an entire quarter which has a lower Casino Expense Margin than Atlantis.
Food and beverage operating expense as a percentage of food and beverage revenue for the 2013 second quarter remained relatively flat at 40.0% for the 2013 second quarter compared to 39.2% for the 2012 second quarter. Hotel operating expense as a percentage of hotel revenue for the 2013 second quarter improved to 27.1% from 29.2% for the comparable prior year quarter due primarily to higher hotel revenue.
SG&A Expense remained flat at $12.6 million for both the 2013 and 2012 second quarters. The Company recognized a nonrecurring benefit of $560 thousand during the 2013 second quarter from the reversal of accrued sales tax expense related to complimentary and employee meals in response to a ruling by the Nevada Tax Commission (affecting the entire Nevada hotel-casino industry) that complimentary and employee meals were no longer subject to taxation.
Credit Facility:
During the 2013 second quarter, the Company made net principal payments of $7.0 million reducing the outstanding credit facility to $64.8 million at June 30, 2013. Capital expenditures of $3.0 million in the second quarter of 2013 were funded out of operating cash flow and primarily represent costs related to the Black Hawk master development plan and capital expenditures associated with the ongoing redesign and upgrade of the existing Black Hawk facility.
Interest expense for the 2013 second quarter decreased to $516 thousand from $577 thousand for the second quarter of 2012 due to a lower interest rate combined with lower outstanding debt in the 2013 second quarter compared to the 2012 second quarter.
Reclassification of 2012 Expenses and Revenues:
Certain promotional allowance, casino, food and beverage, and SG&A expenses and certain casino and food and beverage revenues in the 2012 unaudited consolidated financial statements have been reclassified to conform to the 2013 presentation. These reclassifications had no effect on the previously reported income from operations, net income, consolidated Adjusted EBITDA or statements of cash flows.
John Farahi, Monarch CEO and Co-Chairman Comment:
Monarch’s CEO and Co-Chairman John Farahi commented: “Our Atlantis and Black Hawk teams continue to deliver impressive results. On a consolidated basis in the second quarter of 2013, we achieved increased revenues, Adjusted EBITDA and net income, while also achieving a Flow Through rate of 73%.”
Referring to the Black Hawk expansion plans, Mr. Farahi commented: “As we announced last quarter, our master planned expansion was approved by the Black Hawk City Council subject to certain conditions, meanwhile we are in the process of completely redesigning and upgrading the existing Black Hawk facility. Once completed, the approved master plan will nearly double the existing casino space, converting the facility into a full-scale, high end resort including a 335 foot hotel tower with 507 guest rooms and suites, an upscale spa and pool facility, four restaurants, additional bars, and associated support facilities. The planned ten story parking structure, together with existing parking, includes 1,551 parking spaces. Once the detailed design and construction plans are completed, we intend to finalize the cost estimate and construction timeline for the expansion project and secure necessary financing. We remain on-track to announce that cost estimate and construction timeline in late 2013.”
About Monarch Casino & Resort, Inc. (NASDAQ: MCRI):
Monarch Casino & Resort, Inc., through its subsidiaries, owns and operates the Atlantis Casino Resort Spa, a hotel/casino facility in Reno, Nevada, and the Riviera Black Hawk Casino in Black Hawk, Colorado. Black Hawk is approximately 40 miles west of Denver. For additional information on Monarch, visit Monarch's website at www.MonarchCasino.com.
The Atlantis features approximately 61,000 square feet of casino space; 824 guest rooms; eight food outlets; two espresso and pastry bars; a 30,000 square foot health spa and salon with an enclosed year-round pool; two retail outlets offering clothing and traditional gift shop merchandise; an 8,000 square-foot family entertainment center; and approximately 52,000 square feet of banquet, convention and meeting room space. The casino features approximately 1,450 slot and video poker machines; approximately 38 table games, including blackjack, craps, roulette, and others; a race and sports book; a 24-hour live keno lounge and a poker room. The Company and its predecessors have operated a facility on the Atlantis site since 1972. For more Atlantis Casino Resort Spa information, please visit www.atlantiscasino.com or call 800.723.6500. Also see Atlantis on Facebook, www.facebook.com/AtlantisCasinoResortSpa, or on Twitter at @AtlantisCasino. The Atlantis features approximately 61,000 square feet of casino space; 824 guest rooms; eight food outlets; two espresso and pastry bars; a 30,000 square foot health spa and salon with an enclosed year-round pool; two retail outlets offering clothing and traditional gift shop merchandise; an 8,000 square-foot family entertainment center; and approximately 52,000 square feet of banquet, convention and meeting room space. The casino features approximately 1,450 slot and video poker machines; approximately 38 table games, including blackjack, craps, roulette, and others; a race and sports book; a 24-hour live keno lounge and a poker room. The Company and its predecessors have operated a facility on the Atlantis site since 1972. For more Atlantis Casino Resort Spa information, please visit www.atlantiscasino.com or call 800.723.6500. Also see Atlantis on Facebook, www.facebook.com/AtlantisCasinoResortSpa, or on Twitter at @AtlantisCasino.
The Riviera Black Hawk Casino, which opened in 2000, is the first casino encountered by visitors arriving from Denver on Highway 119 and features approximately 32,000 square feet of casino space, approximately 700 slot machines, 10 table games, a 250 seat buffet-style restaurant, a snack bar and a parking structure with approximately 500 spaces. Monarch owns a 1.5 acre land parcel contiguous to the Riviera Black Hawk Casino which is zoned for gaming and is included in the city approved master planned expansion. For more Riviera Black Hawk information, please visit www.rivierablackhawk.com or call 303.582.1000. Also see Riviera Black Hawk on Facebook, www.facebook.com/RivieraCasino or on Twitter at @RivieraCasino.
Forward-Looking Information:
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 which are subject to change, including, but not limited to, comments relating to (i) future operating performance; (ii) economic and market conditions; (iii) plans, objectives and expectations regarding Black Hawk; (iv) integration of Black Hawk; and (v) plans, financing, construction, completion and opening of new and expanded facilities at Black Hawk. Actual results and future events and conditions may differ materially from those described in any forward-looking statements. Additional information concerning potential factors that could affect all forward looking statements, including the Company’s financial results is included in the Company’s Securities and Exchange Commission filings, which are available on the Company's web site at www.monarchcasino.com.
(1) "Adjusted EBITDA" - see the separate Reconciliation of Net Income to Adjusted EBITDA. Adjusted EBITDA should not be construed as an alternative to operating income (as determined in accordance with generally accepted accounting principles), as an indicator of the Company's operating performance, as an alternative to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) or as a measure of liquidity. This item enables comparison of the Company's performance with the performance of other companies that report Adjusted EBITDA, although some companies do not calculate this measure in the same manner and therefore, the measure as presented may not be comparable to similarly titled measures presented by other companies.
(2) “Flow Through Rate” is calculated as the increase in Adjusted EBITDA over the comparable prior year period divided by the increase in net revenue and should not be construed as an alternative to operating income (as determined in accordance with generally accepted accounting principles), as an indicator of the Company's operating performance, as an alternative to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) or as a measure of liquidity. This calculation provides a measure of operational efficiency.
For additional information visit Monarch's website at MonarchCasino.com

Contacts:
Ron Rowan, CFO of Monarch at (775) 825-4700 or RRowan@MonarchCasino.com
John Farahi, CEO of Monarch at (775) 825-4700 or JFarahi@MonarchCasino.com
                                Monarch Casino & Resort, Inc.
                             Consolidated Statements of Income
                                         (Unaudited)

                         Three Months Ended           Six Months Ended
                               June 30,                    June 30,
                     --------------------------  --------------------------
                         2013          2012          2013          2012
                     ------------  ------------  ------------  ------------
Revenues
 Casino              $ 39,792,123  $ 33,452,976  $ 76,787,306  $ 57,175,297
 Food and beverage     12,494,373    11,788,422    24,385,133    22,092,620
 Hotel                  6,368,349     5,305,178    11,679,577     9,673,620
 Other                  2,314,753     2,245,285     4,644,733     4,382,641
                     ------------  ------------  ------------  ------------
  Gross revenue        60,969,598    52,791,861   117,496,749    93,324,178
Less promotional
 allowances           (11,318,504)  (10,320,711)  (22,241,018)  (17,953,767)
                     ------------  ------------  ------------  ------------
  Net revenue          49,651,094    42,471,150    95,255,731    75,370,411
                     ------------  ------------  ------------  ------------
Operating expenses							
 Casino                14,923,240    13,632,111    29,429,025    23,765,661
 Food and beverage      4,994,464     4,620,609     9,838,898     9,064,765
 Hotel                  1,728,556     1,546,694     3,132,434     2,841,888
 Other                    813,181       765,841     1,564,824     1,492,065
 Selling, general and
  administrative       12,643,311    12,635,327    24,913,865    22,633,511
 Depreciation and
  amortization          4,379,873     4,260,205     9,023,308     7,635,289
 Acquisition expense            -     1,625,930             -     1,700,521
                     ------------  ------------  ------------  ------------
  Total operating
   expenses            39,482,625    39,086,717    77,902,354    69,133,700
                     ------------  ------------  ------------  ------------
  Income from
   operations          10,168,469     3,384,433    17,353,377     6,236,711
                     ------------  ------------  ------------  ------------
Other expenses
 Interest expense        (516,231)     (577,000)   (1,082,327)     (905,661)
                     ------------  ------------  ------------  ------------
  Total other expense    (516,231)     (577,000)   (1,082,327)     (905,661)
                     ------------  ------------  ------------  ------------
  Income
   before income
   taxes                9,652,238     2,807,433    16,271,050     5,331,050
Provision for
 income taxes          (3,531,994)   (1,014,675)   (5,888,810)   (1,896,925)
                     ------------  ------------  ------------  ------------
  Net income         $  6,120,244  $  1,792,758  $ 10,382,240  $  3,434,125
                     ============  ============  ============  ============
									
Earnings per share of
 common stock
 Net income
  Basic              $       0.38  $       0.11  $       0.64  $       0.21
  Diluted            $       0.37  $       0.11  $       0.63  $       0.21
									
Weighted average
 number of common
 shares and potential
 common shares
 outstanding							
  Basic                16,191,852    16,139,074    16,169,711    16,138,616
  Diluted              16,702,137    16,249,450    16,537,330    16,253,730


                       Monarch Casino & Resort, Inc.
                        Consolidated Balance Sheets

                                                   June 30,    December 31,
                                                     2013         2012
                                                ------------- -------------
                    ASSETS                       (unaudited)
Current assets
 Cash and cash equivalents                      $  17,768,818 $  19,043,213
 Receivables, net                                   2,295,188     2,456,883
 Inventories                                        2,270,474     2,382,802
 Prepaid expenses                                   2,484,506     2,636,422
 Deferred income taxes                              5,425,848     5,425,848
                                                ------------- -------------
   Total current assets                            30,244,834    31,945,168
                                                ------------- -------------
Property and equipment			
  Land                                             27,914,847    27,914,847
  Land improvements                                 6,561,729     6,561,729
  Buildings                                       150,843,298   150,843,298
  Building improvements                            11,681,100    11,681,100
  Furniture and equipment                         137,523,457   132,946,374
  Leasehold improvements                            1,346,965     1,346,965
                                                ------------- -------------
                                                  335,871,396   331,294,313
  Less accumulated depreciation and
  amortization                                   (160,001,038) (152,868,719)
                                                ------------- -------------
    Net property and equipment                    175,870,358   178,425,594
Other assets			
    Goodwill                                       25,110,810    25,110,810 
    Intangible assets, net                          9,078,627    10,204,691
    Deferred income taxes                           1,214,113     1,214,113
    Other assets, net                               1,067,020     1,219,579
                                                ------------- -------------
  Total other assets                               36,470,570    37,749,193
                                                ------------- -------------
    Total assets                                $ 242,585,762 $ 248,119,955
                                                ============= =============

      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Accounts payable                              $   8,068,523 $   8,061,570
  Accrued expenses                                 16,644,425    17,836,194
  Income taxes payable                                 13,211       274,401
                                                ------------- -------------
    Total current liabilities                      24,726,159    26,172,165
                                                ------------- -------------
Long-term debt                                     64,800,000    81,100,000
                                                ------------- -------------
    Total liabilities                              89,526,159   107,272,165
                                                ------------- -------------
Stockholders' equity
  Preferred stock, $.01 par value, 10,000,000
   shares authorized; none issued                           -             -
  Common stock, $.01 par value, 30,000,000
   shares authorized; 19,096,300 shares issued;
   16,277,765 outstanding at June 30, 2013
   and 16,147,324 at December 31, 2012                190,963       190,963
  Additional paid-in capital                       32,822,167    34,363,690
  Treasury stock, 2,818,535 shares at June 30,
   2013	and 2,948,976 at December 31, 2012, 
   at cost                                        (44,934,950)  (48,306,046)
  Retained earnings                               164,981,423   154,599,183
                                                ------------- -------------
    Total stockholders' equity                    153,059,603   140,847,790
                                                ------------- -------------
    Total liability and stockholder's equity    $ 242,585,762 $ 248,119,955
                                                ============= =============


                       Monarch Casino & Resort, Inc.
            Reconciliation of Adjusted EBITDA (1) to Net Income
                                (Unaudited)

  The following table sets forth a reconciliation of Adjusted EBITDA(1), a 
   non-GAAP financial measure, to net income, a GAAP financial measure.


                            Three months ended        Six months ended
                                  June 30,                June 30,
                        ------------------------- -------------------------
                            2013         2012         2013         2012
                        ------------ ------------ ------------ ------------
Adjusted EBITDA
  Atlantis              $ 11,173,417 $  7,789,198 $ 20,379,488 $ 15,588,817 
  Black Hawk (a)           4,821,254    2,546,186    8,837,949    2,546,186
                        ------------ ------------ ------------ ------------
                          15,994,671   10,335,384   29,217,437   18,135,003
  Corporate and other
   expense                (1,159,940)    (747,950)  (2,318,497)  (1,977,130)
                        ------------ ------------ ------------ ------------
   Total Adjusted EBITDA$  14,834,731 $ 9,587,434 $ 26,898,940 $ 16,157,873

Expenses:
  Stock based
   compensation             (286,389)    (316,866)    (522,255)    (585,352)
  Depreciation and
   amortization           (4,379,873)  (4,260,205)  (9,023,308)  (7,635,289)
  Acquisition expense              -   (1,625,930)           -   (1,700,521)
  Interest expense          (516,231)    (577,000)  (1,082,327)    (905,661)
  Provision for
  income taxes            (3,531,994)  (1,014,675)  (5,888,810)  (1,896,925)
                        ------------ ------------ ------------ ------------
   Net income           $  6,120,244 $  1,792,758 $ 10,382,240 $  3,434,125
                        ============ ============ ============ ============
(a) We acquired Riviera Black Hawk Casino on April 26, 2012.
(1) "Adjusted EBITDA" consists of net income plus provision for income taxes, stock based compensation expense, other one-time non-cash charges, interest expense, depreciation and amortization less interest income and any benefit for income taxes. Adjusted EBITDA should not be construed as an alternative to operating income (as determined in accordance with generally accepted accounting principles) as an indicator of the Company's operating performance, as an alternative to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) or as a measure of liquidity. This item enables comparison of the Company's performance with the performance of other companies that report Adjusted EBITDA, although some companies do not calculate this measure in the same manner and therefore, the measure as presented may not be comparable to similarly titled measures presented by other companies.