Monarch Casino & Resort Reports 2017 Second Quarter Net Revenue

MONARCH CASINO & RESORT REPORTS RECORD SECOND QUARTER NET REVENUE OF $58.2 MILLION, NET INCOME OF $7.2 MILLION AND ADJUSTED EBITDA OF $15.8 MILLION

RENO, NV, July 25, 2017 – Monarch Casino & Resort, Inc. (NASDAQ: MCRI) (“Monarch” or “the Company”) today reported operating results for the second quarter ended June 30, 2017, as summarized below:

 

($ in thousands, except per

share data and percentages)

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2017

 

2016

 

Increase

 

2017

 

2016

 

Increase

     Net revenue

 $58,229

 

 $54,578

 

6.7%

 

 $111,643

 

 $104,327

 

7.0%

                       

     Adjusted EBITDA (1)(2)

   15,801

 

   13,765

 

14.8%

 

   27,916

 

   24,807

 

12.5%

                       

     Net income (3)

 $  7,239

 

 $  5,695

 

27.1%

 

 $  12,111

 

 $  10,270

 

17.9%

                       

     Basic EPS

 $    0.41

 

 $    0.33

 

24.2%

 

 $    0.69

 

 $    0.60

 

15.0%

     Diluted EPS (3)

 $    0.40

 

 $    0.32

 

25.0%

 

 $    0.67

 

 $    0.58

 

15.5%

  1. (1) Definitions, disclosures and reconciliations of non-GAAP financial information are included later in the release.
  2. (2) Adjusted EBITDA for the six months ended June 30, 2016 was negatively affected by approximately $1.6 million of redesign and upgrade costs that were expensed during the period.
  3. (3) The $1.6 million redesign and upgrade costs, expensed during the six months ended June 30, 2016, had approximately a $1.0 million negative effect on Net income and a $0.05 negative effect on the Diluted EPS for the six months ended June 30, 2016.

 

CEO Comment

John Farahi, Co-Chairman and Chief Executive Officer of Monarch, commented: “We achieved our best second quarter in the history of the Company and our eleventh consecutive quarter of year-over-year growth in net revenue, net income and adjusted EBITDA. The 7% rise in quarterly net revenue, combined with our focus on operating efficiencies and margins, drove a 15% increase in Adjusted EBITDA. In addition, our team’s ongoing commitment to deliver excellent guest experiences, coupled with the positive economic trends in Reno and Black Hawk, have led to consistent market share gains for both Atlantis Casino Resort and Monarch Casino Black Hawk.

“Atlantis Casino Resort’s strong second quarter operating results derive from favorable visitation and play trends, as well as continued growth in the property’s hotel operations. Overall, the Reno market is well-positioned for near- and long-term growth, and we believe our south Reno location, along with our best-in-market casino, dining, spa and entertainment offerings, position Atlantis to continue to grow its share of a strengthening market.

“In Black Hawk, we continue to gain market share despite ongoing construction disruption.  Monarch Casino Black Hawk’s new, significantly increased parking capacity allows us to serve a greater number of guests, particularly at peak times. Our guests are responding favorably to our shuttle service and expanded valet services, both of which provide easy and convenient access to our casino. Although shuttle- and valet-related costs will drive higher operating expenses, we expect these costs will be more than offset by increased visitation and revenue growth. Construction on the foundation for the hotel tower and casino expansion progressed well during the second quarter, and the project remains on schedule and on budget.

“Monarch remains very favorably positioned heading into the second half of 2017. Our solid financial performance, strong cash flow and healthy balance sheet will allow us to invest as needed to further elevate our market-leading Atlantis property and simultaneously build out our master planned growth project in Black Hawk. Looking ahead, we remain firmly committed to delivering best-in-class experiences and service for our guests and enhanced value for our shareholders.”

Summary of 2017 Second Quarter Operating Results

For the 2017 second quarter, consolidated net revenues of $58.2 million increased 6.7% from $54.6 million in the prior year, driven by growth at both Atlantis and Monarch Casino Black Hawk. Casino revenues rose 7.9% year-over-year, food and beverage revenues grew 0.1% and hotel revenues increased 3.5%. Consolidated promotional allowances increased $0.1 million, or 1.2%. As a percentage of gross revenues, promotional allowances decreased to 17.1% from 17.8% a year ago.

The Company generated consolidated Adjusted EBITDA of $15.8 million in the second quarter of 2017, an increase of $2.0 million, or 14.8%, over the same period a year ago.

Casino operating expense as a percentage of casino revenue decreased to 39.8% for the second quarter of 2017 compared to 41.5% in the second quarter of 2016 due to higher revenue in the current period and continued operating cost efficiencies. Food and beverage operating expense as a percentage of food and beverage revenue increased to 41.8% during the second quarter of 2017 from 41.2% a year ago primarily driven by higher labor costs. Hotel operating expense as a percentage of hotel revenue increased to 36.0% for the second quarter of 2017 compared to 30.9% for the same period in the prior year as a result of the incremental costs related to the shuttle service and expanded valet services implemented at Monarch Casino Black Hawk and higher labor costs at Atlantis.

Selling, general and administrative (“SG&A") expenses for the 2017 second quarter were $15.1 million compared to $14.5 million in the prior year period. As a percentage of net revenue, SG&A expenses decreased to 25.9% compared to 26.6% 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 June 30, 2017:

 

$ in millions

Cost

 

Total Spent Through June 30, 2017

 

Left to Spend

 

Estimated
Completion Date

 

I. Existing Facility

             

 

  Monarch Casino Black Hawk (1)

$76

 

$76

 

-

 

Completed

 

  Existing Facility Upgrade (2)(3)

$34 - $36

 

$21

 

$13 - $15

 

Interior completed; Exterior 2017-2018

 

          Total Existing Facility

$110 - $112

 

$97

 

$13 - $15

   

 

               

 

II. Expansion

             

 

  Acquired Land Parcels

$10

 

$10

 

-

 

Completed

 

  Parking Structure

$38 - $41

 

$41

 

-

 

Completed

 

  Hotel Tower & Casino (3)

 $229 - $234

 

$12

 

$217 - $222

 

2Q19

 

  Other

  $8 - $10

 

$10

 

-

   

 

          Total Expansion

$285 - $295

 

$73

 

$217 - $222

   

 

          Total Cost

$395 - $407

 

$170

 

$230 - $237

   

 

               

 

(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) in 2012.

 

(2) Includes upgrades to interior, which were completed in August 2015, demolition of the original garage, and upgrades to the 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 Company’s amended credit facility.

 

The Company’s Monarch Casino Black Hawk expansion project is progressing as expected. The hotel tower and casino expansion will open in phases, beginning with the casino expansion and additional restaurants, followed by floors of the hotel tower sequentially as they are finished. The targeted completion date of the entire project remains the second quarter of 2019.

Credit Facility and Liquidity

In the second quarter of 2017, the Company did not make any principal borrowings or payments on its amended credit facility. The amount outstanding on the amended credit facility as of June 30, 2017 remained at $26.2 million. Capital expenditures of $8.4 million in the second quarter of 2017 represent costs related to the Monarch Casino Black Hawk master development plan, the purchase of a parcel of land with an industrial warehouse in proximity to Monarch Casino Black Hawk, and ongoing capital maintenance spending. Capital expenditures in the second quarter of 2017 were funded entirely from the Company’s operating cash flow.

Interest expense for the 2017 second quarter increased to $206 thousand from $60 thousand in the same quarter of 2016 primarily due to higher bank commitment fees related to the amended credit facility and increased amortization of deferred loan costs.

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, expectations and future operations 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, building permit issues and other regulatory approvals or 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 740 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)

(Unaudited)

 

 

Three months ended June 30,

 

   Six months ended June 30,

 

 

2017

 

2016

 

2017

 

2016

Revenues

 

 

 

 

 

 

 

 

   Casino

 

$  45,323

 

$  41,999

 

$  86,633

 

$  81,731

   Food and beverage

 

     15,562

 

     15,546

 

       31,052

 

       28,960

   Hotel

 

       6,248

 

       6,034

 

       11,888

 

       11,137

   Other

 

       3,070

 

       2,828

 

         5,848

 

         5,499

     Gross revenues

 

     70,203

 

     66,407

 

     135,421

 

     127,327

   Less promotional allowances

 

    (11,974)

 

    (11,829)

 

    (23,778)

 

    (23,000)

     Net revenues

 

     58,229

 

     54,578

 

     111,643

 

     104,327

 

               

Operating expenses

               

   Casino

 

       18,060

 

       17,435

 

       35,740

 

       34,765

   Food and beverage

 

        6,510

 

        6,411

 

       12,762

 

       12,191

   Hotel

 

         2,249

 

         1,866

 

         4,457

 

         3,480

   Other

 

      1,022

 

      988

 

        2,007

 

        1,947

   Selling, general and administrative

 

      15,080

 

      14,536

 

       29,719

 

       27,687

   Depreciation and amortization

 

         3,769

 

         3,790

 

         7,675

 

         7,490

   (Gain) loss on disposition of assets

 

           (14)

 

            607

 

           4

 

           663

     Total operating expenses

 

       46,676

 

       45,633

 

       92,364

 

       88,223

   

 Income from operations

 

       11,553

 

         8,945

 

       19,279

 

       16,104

 

               

Other expenses

               

   Interest expense, net of amounts capitalized

 

   (206)

 

   (60)

 

        (478)

 

        (145)

     Total other expense

 

       (206)

 

       (60)

 

         (478)

 

         (145)

   

 

 

 

 

 

 

 

     Income before income taxes

 

       11,347

 

         8,885

 

       18,801

 

       15,959

Provision for income taxes

 

      (4,108)

 

      (3,190)

 

      (6,690)

 

      (5,689)

     Net income

 

$  7,239

 

$  5,695

 

$  12,111

 

$  10,270

                 

Earnings per share of common stock

               

   Net income

               

     Basic

 

$  0.41

 

$  0.33

 

$  0.69

 

$  0.60

     Diluted

 

$  0.40

 

$  0.32

 

$  0.67

 

$  0.58

 

               

Weighted average number of common shares and potential common shares outstanding

               

    Basic

 

       17,527

 

       17,259

 

       17,502

 

       17,235

    Diluted

 

18,208

 

17,579

 

18,114

 

17,560

 

 

MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except shares)

 

   

June 30,

 

December 31,

   

2017

 

2016

ASSETS

 

(unaudited)

   

Current assets

       

    Cash and cash equivalents

 

 $             24,218

 

 $              26,383

    Receivables, net

 

                    4,071

 

                    5,036

    Income taxes receivable

 

1,643

 

408

    Inventories

 

                    3,191

 

                    3,097

    Prepaid expenses

 

                   3,875

 

                    4,487

        Total current assets

 

                  36,998

 

                  39,411

Property and equipment

       

    Land

 

                 29,549

 

                  29,549

    Land improvements

 

                    6,914

 

                    6,914

    Buildings

 

                191,412

 

                191,370

    Buildings improvements

 

                  24,511

 

                  24,511

    Furniture and equipment

 

                136,500

 

                134,603

    Construction in progress

 

                  27,326

 

                  9,767

    Leasehold improvements

 

                    2,688

 

                    2,688

 

 

               418,900

 

                399,402

    Less accumulated depreciation and amortization

 

             (190,851)

 

             (184,503)

        Net property and equipment

 

               228,049

 

                214,899

Other assets

       

    Goodwill

 

                  25,111

 

                  25,111

    Intangible assets, net

 

                    4,452

 

                    5,035

    Deferred income taxes

 

                        7,354

 

                        7,354

    Other assets, net

 

                     3,087

 

                     3,355

        Total other assets

 

                  40,004

 

                  40,855

          Total  assets

 

 $            305,051

 

 $         295,165

 

LIABILITIES AND STOCKHOLDERS' EQUITY

       

Current liabilities

       

    Accounts payable

 

$                7,177

 

$                8,720

    Construction accounts payable

 

                    2,501

 

                    2,605

    Accrued expenses

 

21,053

 

23,795

        Total current liabilities

 

30,731

 

35,120

Long - term debt

 

            26,200

 

            26,200

          Total liabilities

 

                  56,931

 

                  61,320

 

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; 17,555,242 outstanding at June 30, 2017;

       

       17,468,269 outstanding at December 31, 2016

       

    Additional paid-in capital

 

                  24,798

 

                  23,834

    Treasury stock, 1,541,058 shares at June 30, 2017; 1,628,031 shares at

 

               (20,958)

 

               (22,158)

       December 31, 2016

       

    Retained earnings

 

                244,089

 

                231,978

          Total stockholders' equity

 

                248,120

 

                233,845

          Total liabilities and stockholders' equity

 

 $            305,051

 

 $            295,165

 

 

 

 

 

 

 

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 June 30,

 

Six Months Ended June 30,

 

2017

 

2016

 

2017

 

2016

          Adjusted EBITDA (1)

 $15,801

 

 $13,765

 

$27,916

 

$24,807

Expenses:

             

     Stock based compensation

(493)

 

(423)

 

(958)

 

(550)

     Depreciation and amortization

(3,769)

 

(3,790)

 

(7,675)

 

(7,490)

     Interest expense, net of amount capitalized

(206)

 

(60)

 

(478)

 

(145)

     Gain (loss) on disposition of assets

14

 

(607)

 

(4)

 

(663)

     Provision for income taxes

(4,108)

 

(3,190)

 

(6,690)

 

(5,689)

          Net income

 $7,239

 

 $5,695

 

$12,111

 

$10,270

 

  1. (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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