Monarch Casino & Resort Reports 2016 Fourth Quarter Net Revenue

MONARCH CASINO & RESORT’S FOURTH QUARTER NET REVENUES RISE 8.0% to $55.6 MILLION, NET INCOME INCREASES 26.3% to $6.5 MILLION AND ADJUSTED EBITDA GROWS 17.8% TO $14.6 MILLION. Full Year 2016 Net Revenues Increase 7.3%, Driving 19.0% Rise in Net Income and 11.4% Growth in Adjusted EBITDA

RENO, NV, February 22, 2017 – Monarch Casino & Resort, Inc. (NASDAQ: MCRI) (“Monarch” or “the Company”) today reported operating results for the fourth quarter and full year ended December 31, 2016, as summarized below:

($ in thousands, except per

share data and percentages)

Three Months Ended December 31,

Twelve Months Ended December 31,

2016

 

2015

Increase

2016

 

2015

Increase

     Net revenue

 $55,596

 $51,485

8.0%

 $217,032

 $202,245

7.3%

     Adjusted EBITDA (1)

   14,600

   12,398

17.8%

   55,741

   50,041

11.4%

     Net income

 $  6,470

 $  5,123

26.3%

 $  24,574

 $  20,659

19.0%

     Basic EPS

 $    0.37

 $    0.30

23.3%

 $    1.42

 $    1.22

16.4%

     Diluted EPS

 $    0.36

 $    0.29

24.1%

 $    1.39

 $    1.19

16.8%

(1)    Definitions, disclosures and reconciliations of non-GAAP financial information are included later in the release.

CEO Comment

John Farahi, Co-Chairman and Chief Executive Officer of Monarch, commented: “I am very pleased with our record fourth quarter financial results, which marks the conclusion of another active and successful year of organic growth for the Company. Strong fourth quarter results in Reno and Black Hawk led to an 8% increase in quarterly net revenue, driving a 17.8% rise in fourth quarter adjusted EBITDA. Through the determined and dedicated work of our operating teams, we are consistently elevating our guest service and amenities while growing market share. At the same time, we continue to focus on operational efficiency, which resulted in higher margins on revenue and contributed to our ninth consecutive quarter of double digit net income growth. 

“The expansion and diversification of the Reno economy is lifting the market’s gaming revenue and combined with our operating initiatives, resulted in another quarter of market share and revenue growth at Atlantis. The implementation of operational initiatives at Atlantis; an increased use of analytics to enhance the facility’s attractiveness to guests and improve our operating efficiencies; and Monarch’s 2016 capital investments in the Atlantis property, which included the addition of convenient surface parking as well as the complete redesign and upgrade of Toucan Charlie’s Buffet, all contributed to our financial success at Atlantis.

“We also are pleased with Monarch Casino Black Hawk’s 2016 operating performance, as we grow revenue, profit and market share, despite the ongoing construction at the property and increased competition in the market. We recently opened the property’s new parking structure and safely demolished the original garage. We also implemented a shuttle service between the new parking structure and the casino to mitigate the impact from ongoing construction, which is being well received by guests. Our ability to drive revenue and adjusted EBITDA growth during the fourth quarter while undertaking these significant construction projects reflects the quality of the upgrades and other improvements we have made since acquiring it in 2012 and demonstrates the value that the Black Hawk property brings to the Monarch portfolio.

“We started 2017 by breaking ground on the hotel tower and casino expansion, which represents the final phase of Monarch Casino Black Hawk’s transformation into an integrated, amenity rich, casino resort spa. At the heart of this transformation is our company-wide focus on the guest-friendly professional service that comprises the core of every Monarch owned and managed property. The entire Monarch family is energized and excited by the Company’s near and long-term prospects and we look to another year of growth in 2017.”

Summary of 2016 Fourth Quarter Operating Results

For the 2016 fourth quarter, consolidated net revenue of $55.6 million grew 8.0% year over year, reflecting strong performance at both Atlantis and Monarch Casino Black Hawk. Revenue from the Company’s casino operations rose 9.6% year over year and food and beverage revenue increased 6.7%, offsetting a 1.5% decline in hotel revenue. Consolidated promotional allowance increased $0.6 million, or 5.6%. As a percentage of gross revenues, promotional allowances decreased to 17.7% from 18.0% in the prior year fourth quarter.

The Company generated consolidated Adjusted EBITDA of $14.6 million in the fourth quarter of 2016, an increase of $2.2 million, or 17.8%, over the same period a year ago.

Casino operating expense as a percentage of casino revenue decreased to 39.5% for the fourth quarter of 2016 compared to 41.8% in the fourth quarter of 2015 due to increased casino revenues combined with operating cost efficiencies. Food and beverage operating expense as a percentage of food and beverage revenue increased to 40.1% during the fourth quarter of 2016 from 39.0% a year ago primarily driven by higher labor cost. Hotel operating expense as a percentage of hotel revenue decreased to 33.6% for the fourth quarter of 2016 compared to 35.4% for the same period in the prior year primarily as a result of lower equipment and miscellaneous replacement expense.

Selling, general and administrative (“SG&A") expenses for the 2016 fourth quarter were $15.6 million compared to $14.5 million in the prior year period; SG&A slightly improved as a percentage of net revenue at 28.1% compared to 28.2% a year ago.

Monarch Black Hawk Expansion

Summarized below is an update on the Company’s ongoing upgrade and expansion of Monarch Casino Black Hawk, including the expected costs and completion dates for the project as well as the amounts spent through December 31, 2016: 

$ in millions

Cost

Total Spent Through December 31, 2016

Left to Spend

Estimated
Completion Date

 

I. Existing Facility

 

  Monarch Casino Black Hawk (1)

$76

$76

-

Completed

 

  Existing Facility Upgrade (2)(3)

$34 - $36

$19

$15 - $17

Interior completed; Exterior 2017-2018

 

          Total Existing Facility

$110 - $112

$95

$15 - $17

 

 

II. Expansion

 

  Acquired Land Parcels

$10

$10

-

Completed

 

  Parking Structure

$38 - $41

$40

$0 - $1

Completed

 

  Hotel Tower & Casino (3)

 $229 - $234

$1

$228 - $233

2Q19

 

  Other (4)

  $8 - $10

$9

$0 - $1

2Q19

 

          Total Expansion

$285 - $295

$60

$228 - $235

 

          Total Cost

$395 - $407

$155

$243 - $252

 

 

(1) The Company paid $76.0 million cash, or $69.2 million net of acquired working capital and NOLs, when it acquired Monarch Casino Black Hawk (formerly Riviera Black Hawk Casino).

 

(2) Includes upgrades to interior, which were completed in August 2015, demolition of the original garage, and upgrades to exterior of the existing facility to match the design of the master planned expansion.

(3) The Company anticipates funding the hotel tower and casino expansion, as well as the existing facility exterior upgrades, from a combination of operating cash flow and the Amended Credit Facility.

 

(4) The Company will fund the amount left to spend from operating cash flow.

The Company continues to make progress with its Monarch Casino Black Hawk expansion project. In mid-November 2016, the Company completed and opened the new parking structure and, in late December, began the demolition and removal of the original parking structure with a successful controlled implosion of the structure. On February 8, 2017, Monarch broke ground on the hotel tower and casino expansion, which the Company expects to open in phases, beginning with the casino expansion and additional restaurants, followed by floors of the hotel tower as they are finished. The targeted completion date of the entire project remains the second quarter of 2019.

Credit Facility

During the 2016 fourth quarter, the Company made net principal payments of $3.7 million, which reduced the amount outstanding on its credit facility to $26.2 million as of December 31, 2016. Capital expenditures of $5.1 million in the fourth quarter of 2016 represent costs related to the Monarch Casino Black Hawk master development plan and ongoing maintenance spending in Reno and Black Hawk. Capital expenditures in the fourth quarter were funded from the Company’s operating cash flows.

Interest expense for the 2016 fourth quarter increased to $341 thousand from $142 thousand in the same quarter of 2015 primarily due to higher bank commitment fees related to the Amended Credit Facility and increased amortization of deferred loan costs.

2017 Annual Stockholders’ Meeting Date

The Company’s 2017 Annual Meeting of Stockholders will be held on June 14, 2017 at 10am PDT at the Atlantis Casino Resort Spa, located at 3800 South Virginia Street in Reno, Nevada. The record date for stockholders entitled to vote at the Annual Meeting is April 17, 2017.

Forward-Looking Statements

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) plans, objectives and expectations regarding Atlantis Casino Resort Spa and Monarch Casino Black Hawk; and (ii) plans, costs, financing, construction, completion and opening timelines of upgraded, redesigned and/or expanded facilities at Monarch Casino Black Hawk. Actual results and future events and conditions may differ materially from those described in any forward-looking statements. With respect to the Monarch Casino Black Hawk master development plan and expansion project, important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, without limitation:

  • construction factors, including delays, increased costs of labor and materials, availability of labor and materials, zoning issues, environmental restrictions, soil and water conditions, weather and other hazards, site access matters and building permit issues;
  • access to available and reasonable financing on a timely basis;
  • changes in laws and regulations permitting expanded and other forms of gaming in our key markets; and
  • the effects of local and national economic, credit and capital market conditions on the economy, in general, and on the gaming industry, in particular.

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 website at www.monarchcasino.com.

Non-GAAP Financial Measures

Please see the separate Reconciliation of Adjusted EBITDA to Net Income (unaudited) below. 

Adjusted EBITDA should not be construed as an alternative to operating income (as determined in accordance with US 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 US 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.

About Monarch Casino & Resort, Inc.

Monarch Casino & Resort, Inc., through its subsidiaries, owns and operates the Atlantis Casino Resort Spa, a hotel/casino facility in Reno, Nevada, and the Monarch Casino Black Hawk in Black Hawk, Colorado, 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 Monarch Casino Black Hawk features approximately 30,000 square feet of casino space, approximately 720 slot machines, 14 table games, a 250 seat buffet-style restaurant, a snack bar and a new, nine story parking structure with approximately 1,350 spaces, plus additional existing valet parking bringing total parking capacity to 1,500 spaces. Once completed, the Monarch Casino Black Hawk expansion will nearly double the casino space and will add a 23 story hotel tower with approximately 500 guest rooms and suites, an upscale spa and pool facility, three restaurants (bringing the total to four restaurants), additional bars, and associated support facilities.

Contacts:

David Farahi

Chief Operating Officer

775/825-4700 or dfarahi@monarchcasino.com

Joseph Jaffoni, Richard Land, James Leahy

JCIR

212/835-8500 or mcri@jcir.com

- financial tables follow -


                MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF INCOME

             (In thousands, except per share data)

 

   Three months ended December 31,

  Twelve months ended December 31,

 

 

2016

 

2015

 

2016

 

2015

(unaudited)

(unaudited)

(unaudited)

Revenues

   Casino

 $          43,248

 $          39,459

$         168,861

$          156,843

   Food and beverage

  15,688

  14,697

           60,269

     56,500

   Hotel

               5,336

               5,418

           23,374

             22,629

   Other

               3,250

               3,207

           11,640

              11,198

     Gross revenues

             67,522

             62,781

         264,144

           247,170

   Less promotional allowances

   (11,926)

   (11,296)

         (47,112)

     (44,925)

     Net revenues

             55,596

             51,485

         217,032

            202,245

 

Operating expenses

   Casino

             17,080

             16,493

           69,529

             65,970

   Food and beverage

               6,284

               5,734

           24,627

 22,249

   Hotel

               1,793

               1,918

             7,231

               6,787

   Other

                 933

                 1,014

             3,855

               3,963

   Selling, general and administrative

       15,604

       14,534

           57,730

 54,779

   Depreciation and amortization

               3,701

               3,776

           14,835

             15,933

   Loss on disposition of assets

9                  

29                  

                677

                  9

     Total operating expenses

             45,404

             43,498

         178,484

            169,690

 

 

 

     Income from operations

               10,192

               7,987

             38,548

             32,555

 

Other expenses

   Interest expense, net of amounts capitalized

               (341)

               (142)

               (616)

               (679)

     Total other expense

               (341)

               (142)

               (616)

               (679)

 

 

 

 

     Income before income taxes

               9,851

               7,845

            37,932

            31,876

Provision for income taxes

            (3,381)

            (2,722)

            (13,358)

            (11,217)

     Net income

 $            6,470

 $            5,123

 $            24,574

 $           20,659

Earnings per share of common stock

   Net income

     Basic

 $              0.37

 $              0.30

 $               1.42

 $               1.22

     Diluted

 $              0.36

 $              0.29

 $               1.39

 $               1.19

 

Weighted average number of common shares and potential common shares outstanding

    Basic

             17,412

             17,094

             17,305

             16,948

    Diluted

17,815

17,483

17,664

17,335

MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except shares)

December 31,

 

December 31,

2016

2015

ASSETS

(unaudited)

Current assets

    Cash and cash equivalents

 $              26,383

 $              21,164

    Receivables, net

                    5,036

                    3,729

    Income taxes receivable

408

611

    Inventories

                    3,097

                    2,881

    Prepaid expenses

                    4,487

                    3,402

        Total current assets

                  39,411

                  31,787

Property and equipment

    Land

                  29,549

                  29,549

    Land improvements

                    6,914

                    6,701

    Buildings

                191,370

                150,966

    Buildings improvements

                  24,511

                  23,255

    Furniture and equipment

                134,603

                134,704

    Construction in progress

                  9,767

                  37,424

    Leasehold improvements

                    2,688

                    1,347

 

                399,402

                383,946

    Less accumulated depreciation and amortization

             (184,503)

             (180,792)

        Net property and equipment

                214,899

                203,154

Other assets

    Goodwill

                  25,111

                  25,111

    Intangible assets, net

                    5,035

                    6,200

    Deferred income taxes

                        7,354

                        7,415

    Other assets, net

                     3,355

                       1,179

        Total other assets

                  40,855

                  39,905

          Total  assets

 $            295,165

 $            274,846

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

    Current portion of long-term debt

$                        -

$              40,900

    Accounts payable

               8,720

               6,747

    Construction accounts payable

                    2,605

                    1,407

    Accrued expenses

                  23,795

                  21,873

        Total current liabilities

35,120

70,927

Long - term debt

            26,200

                  -

          Total liabilities

                  61,320

                  70,927

Stockholders' equity

    Preferred stock, $.01 par value, 10,000,000  shares authorized; none issued

-

-

    Common stock, $.01 par value, 30,000,000 shares authorized;

                       191

                       191

       19,096,300 shares issued; 17,468,269 outstanding at December 31, 2016;

       17,202,699 outstanding at December 31, 2015

    Additional paid-in capital

                  23,834

                  22,728

    Treasury stock, 1,628,031 shares at December 31, 2016; 1,893,601 shares at

               (22,158)

               (26,404)

       December 31, 2015

    Retained earnings

                231,978

                207,404

          Total stockholders' equity

                233,845

                203,919

          Total liabilities and stockholders' equity

 $            295,165

 $            274,846

MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME

 (In thousands, unaudited)

The following table sets forth a reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to net income, a GAAP financial measure:

Three Months Ended December 31,

 

Twelve Months Ended December 31,

2016

 

2015

2016

 

2015

          Adjusted EBITDA (1)

 $14,600

 $12,398

 $55,741

 $50,041

Expenses:

     Stock based compensation

(698)

(606)

(1,681)

(1,544)

     Depreciation and amortization

(3,701)

(3,776)

(14,835)

(15,933)

     Interest expense, net of amount capitalized

(341)

(142)

(616)

(679)

     Loss on disposition of assets

(9)

(29)

(677)

(9)

     Provision for income taxes

(3,381)

(2,722)

(13,358)

(11,217)

          Net income

 $6,470

 $5,123

 $24,574

 $20,659

(1)  Adjusted EBITDA, a non-GAAP financial measure, consists of net income plus loss on disposal of assets, provision for income taxes, stock based compensation expense, other one-time charges, interest expense, depreciation and amortization less interest income, any benefit for income taxes and gain on disposal of assets. Adjusted EBITDA should not be construed as an alternative to operating income (as determined in accordance with US 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 US GAAP 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.

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