Monarch Casino & Resort Reports Record 2017 Third Quarter Net Revenue

MONARCH CASINO & RESORT REPORTS RECORD THIRD QUARTER NET REVENUE OF $63.0 MILLION, NET INCOME OF $9.0 MILLION AND ADJUSTED EBITDA OF $17.5 MILLION

RENO, NV, October 24, 2017 – Monarch Casino & Resort, Inc. (NASDAQ: MCRI) (“Monarch” or “the Company”) today reported operating results for the third quarter ended September 30, 2017, as summarized below:

 

($ in thousands, except per

share data and percentages)

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2017

 

2016

 

Increase

 

2017

 

2016

 

Increase

     Net revenue

 $63,027

 

 $57,109

 

10.4%

 

 $174,670

 

 $161,436

 

8.2%

                       

     Adjusted EBITDA (1)(2)

   17,541

 

   16,334

 

7.4%

 

   45,457

 

   41,141

 

10.5%

                       

     Net income (3)

 $  9,030

 

 $  7,834

 

15.3%

 

 $  21,141

 

 $  18,104

 

16.8%

                       

     Basic EPS

 $    0.51

 

 $    0.45

 

13.3%

 

 $    1.20

 

 $    1.05

 

14.3%

     Diluted EPS (3)

 $    0.49

 

 $    0.45

 

8.9%

 

 $    1.16

 

 $    1.03

 

12.6%

  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 September 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 nine months ended September 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 nine months ended September 30, 2016.

 

CEO Comment

John Farahi, Co-Chairman and Chief Executive Officer of Monarch, commented: “Our net revenue, net income and adjusted EBITDA have improved year over year every quarter for the past three years, with another quarter of solid performance at both properties contributing to the 10% growth in revenue and 7% growth in Adjusted EBITDA during the third quarter of 2017. We believe that the value our guests place on the entertainment experience and world-class services provided at our market-leading properties is driving continued share gains in these growing markets.

“The strength of the Reno market and ongoing facility enhancements at Atlantis Casino Resort are driving healthy visitation and increased player spend in this very competitive market. Reno’s economy is expanding, and we believe that we are well-positioned to attain near- and long-term growth at Atlantis due to our favorable location, superior product and exceptional guest experience. Convention bookings at the Reno-Sparks Convention Center, which is connected by pedestrian bridge to Atlantis, are increasing and we are optimistic that continued momentum on this front will be another driver of long-term growth for the city and Atlantis.

“Visitors to Monarch Casino Black Hawk are seeing significant progress on the construction of the hotel tower, which is out of the ground and moving vertical. Despite some construction disruption for our guests, our upgraded existing facility and the discipline of our operating team are generating consistent growth. Revenue gains at Monarch Casino Black Hawk are outpacing the incremental expense related to our temporary shuttle service and expanded valet services offered during the expansion, and we continue to take market share. Our master planned expansion remains on schedule and budget.

“Monarch’s strong financial performance and cash flow have allowed us to finance nearly all of the Black Hawk expansion work through the third quarter without borrowing against our credit facility. In addition, our healthy balance sheet and low leverage allow us to consider new growth opportunities.”

Summary of 2017 Third Quarter Operating Results

For the 2017 third quarter, consolidated net revenues increased 10.4% to $63.0 million from $57.1 million in the prior year, driven by continued strength at Atlantis and Monarch Casino Black Hawk. Casino revenues, food and beverage revenues and hotel revenues increased 10.7%, 4.6% and 6.0% on a year over year basis, respectively. Consolidated promotional allowances increased $0.2 million, or 1.7%. As a percentage of gross revenues, promotional allowances were 16.4% compared to 17.6% a year ago.

The Company generated consolidated Adjusted EBITDA of $17.5 million in the third quarter of 2017, an increase of $1.2 million, or 7.4%, over the same period a year ago.

Casino operating expense as a percentage of casino revenue decreased to 39.3% for the third quarter of 2017 compared to 40.3% in the third 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 41.0% during the third quarter of 2017 from 39.4% a year ago primarily driven by higher labor costs, as both markets continue to experience food and beverage labor shortages. Hotel operating expense as a percentage of hotel revenue increased to 37.4% for the third quarter of 2017 compared to 28.4% for the same period in the prior year primarily as a result of higher labor costs and expenses related to refining the hotel product, as well as the incremental costs related to the temporary shuttle service and expanded valet services implemented during construction at Monarch Casino Black Hawk.

Selling, general and administrative (“SG&A") expenses for the 2017 third quarter were $16.4 million compared to $14.4 million in the prior year period driven primarily by higher payroll expenses along with higher repair and maintenance expenses. As a percentage of net revenue, SG&A expenses increased to 26.0% compared to 25.3% 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 September 30, 2017:

 

$ in millions

Cost

 

Total Spent Through September 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

 

$22

 

$12 - $14

 

Interior completed; Exterior 2017-2018

 

          Total Existing Facility

$110 - $112

 

$98

 

$12 - $14

   

 

               

 

II. Expansion

             

 

  Acquired Land Parcels

$10

 

$10

 

-

 

Completed

 

  Parking Structure

$38 - $41

 

$41

 

-

 

Completed

 

  Hotel Tower & Casino (3)

 $229 - $234

 

$23

 

$206 - $211

 

2Q19

 

  Other

  $8 - $10

 

$10

 

-

   

 

          Total Expansion

$285 - $295

 

$84

 

$206 - $211

   

 

          Total Cost

$395 - $407

 

$182

 

$218 - $225

   

 

               

 

(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 expansion project at Monarch Casino Black Hawk continues to progress on schedule and budget, with construction of the hotel tower now underway. Monarch’s targeted completion date for the project remains the second quarter of 2019.

Credit Facility and Liquidity

In the third quarter of 2017, the Company did not make any principal borrowings or payments on its amended credit facility as construction of the hotel tower in Black Hawk progressed. As of September 30, 2017, the amount outstanding on the amended credit facility remained at $26.2 million. Capital expenditures of $13.8 million in the third quarter of 2017 represent costs related to the Monarch Casino Black Hawk master development plan and ongoing capital maintenance spending. Capital expenditures in the third quarter of 2017 were funded entirely from the Company’s operating cash flow.

Interest expense for the 2017 third quarter increased to $161 thousand from $130 thousand in the same quarter of 2016 primarily due to higher bank commitment fees related to the amended credit facility.

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 September 30,

 

   Nine months ended September 30,

 

 

2017

 

2016

 

2017

 

2016

Revenues

 

 

 

 

 

 

 

 

   Casino

 

$  48,574

 

$  43,882

 

$  135,207

 

$  125,613

   Food and beverage

 

     16,342

 

     15,621

 

       47,394

 

       44,581

   Hotel

 

       7,316

 

       6,901

 

       19,204

 

       18,038

   Other

 

       3,191

 

       2,891

 

         9,039

 

         8,390

     Gross revenues

 

     75,423

 

     69,295

 

     210,844

 

     196,622

   Less promotional allowances

 

    (12,396)

 

    (12,186)

 

    (36,174)

 

    (35,186)

     Net revenues

 

     63,027

 

     57,109

 

     174,670

 

     161,436

 

               

Operating expenses

               

   Casino

 

       19,097

 

       17,684

 

       54,837

 

       52,449

   Food and beverage

 

        6,699

 

        6,152

 

       19,461

 

       18,343

   Hotel

 

         2,735

 

         1,958

 

         7,192

 

         5,438

   Other

 

      1,126

 

      975

 

        3,133

 

        2,922

   Selling, general and administrative

 

      16,398

 

      14,439

 

       46,117

 

       42,126

   Depreciation and amortization

 

         3,722

 

         3,644

 

         11,397

 

         11,134

   Loss on disposition of assets

 

           —

 

            5

 

           4

 

           668

     Total operating expenses

 

       49,777

 

       44,857

 

       142,141

 

       133,080

   

 Income from operations

 

       13,250

 

         12,252

 

       32,529

 

       28,356

 

               

Other expenses

               

   Interest expense, net of amounts capitalized

 

   (161)

 

   (130)

 

        (639)

 

        (275)

     Total other expense

 

       (161)

 

       (130)

 

         (639)

 

         (275)

   

 

 

 

 

 

 

 

     Income before income taxes

 

       13,089

 

         12,122

 

       31,890

 

       28,081

Provision for income taxes

 

      (4,059)

 

      (4,288)

 

      (10,749)

 

      (9,977)

     Net income

 

$  9,030

 

$  7,834

 

$  21,141

 

$  18,104

                 

Earnings per share of common stock

               

   Net income

               

     Basic

 

$  0.51

 

$  0.45

 

$  1.20

 

$  1.05

     Diluted

 

$  0.49

 

$  0.45

 

$  1.16

 

$  1.03

 

               

Weighted average number of common shares and potential common shares outstanding

               

    Basic

 

       17,616

 

       17,338

 

       17,541

 

       17,270

    Diluted

 

18,398

 

17,720

 

18,212

 

17,603

 

 

MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except shares)

 

   

September 30,

 

December 31,

   

2017

 

2016

ASSETS

 

(unaudited)

   

Current assets

       

    Cash and cash equivalents

 

 $             26,821

 

 $              26,383

    Receivables, net

 

                    6,817

 

                    5,036

    Income taxes receivable

 

859

 

408

    Inventories

 

                    3,110

 

                    3,097

    Prepaid expenses

 

                   4,599

 

                    4,487

        Total current assets

 

                  42,206

 

                  39,411

Property and equipment

       

    Land

 

                 30,034

 

                  29,549

    Land improvements

 

                    6,946

 

                    6,914

    Buildings

 

                193,252

 

                191,370

    Buildings improvements

 

                  24,511

 

                  24,511

    Furniture and equipment

 

                138,257

 

                134,603

    Construction in progress

 

                  39,300

 

                  9,767

    Leasehold improvements

 

                    2,688

 

                    2,688

 

 

               434,988

 

                399,402

    Less accumulated depreciation and amortization

 

             (194,282)

 

             (184,503)

        Net property and equipment

 

               240,706

 

                214,899

Other assets

       

    Goodwill

 

                  25,111

 

                  25,111

    Intangible assets, net

 

                    4,160

 

                    5,035

    Deferred income taxes

 

                        7,354

 

                        7,354

    Other assets, net

 

                     2,952

 

                     3,355

        Total other assets

 

                  39,577

 

                  40,855

          Total  assets

 

 $            322,489

 

 $         295,165

 

LIABILITIES AND STOCKHOLDERS' EQUITY

       

Current liabilities

       

    Accounts payable

 

$                8,242

 

$                8,720

    Construction accounts payable

 

                    4,749

 

                    2,605

    Accrued expenses

 

23,113

 

23,795

        Total current liabilities

 

36,104

 

35,120

Long - term debt

 

            26,200

 

            26,200

          Total liabilities

 

                  62,304

 

                  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; 17,670,679 outstanding at September 30, 2017;

       

       17,468,269 outstanding at December 31, 2016

       

    Additional paid-in capital

 

                  26,231

 

                  23,834

    Treasury stock, 1,425,621 shares at September 30, 2017; 1,628,031 shares at

 

               (19,356)

 

               (22,158)

       December 31, 2016

       

    Retained earnings

 

                253,119

 

                231,978

          Total stockholders' equity

 

                260,185

 

                233,845

          Total liabilities and stockholders' equity

 

 $            322,489

 

 $            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 September 30,

 

Nine Months Ended September 30,

 

2017

 

2016

 

2017

 

2016

          Adjusted EBITDA (1)

 $17,541

 

 $16,334

 

$45,457

 

$41,141

Expenses:

             

     Stock based compensation

(569)

 

(433)

 

(1,527)

 

(983)

     Depreciation and amortization

(3,722)

 

(3,644)

 

(11,397)

 

(11,134)

     Interest expense, net of amount capitalized

(161)

 

(130)

 

(639)

 

(275)

     Gain (loss) on disposition of assets

 

(5)

 

(4)

 

(668)

     Provision for income taxes

(4,059)

 

(4,288)

 

(10,749)

 

(9,977)

          Net income

 $9,030

 

 $7,834

 

$21,141

 

$18,104

 

  1. (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 GAAP), 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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