($ in thousands, except per share data and percentages)
Three Months Ended March 31,
------------------------------
2017 2016 Increase
---------- ---------- --------
Net revenues $ 53,414 $ 49,749 7.4%
Adjusted EBITDA (1)(2) 12,115 11,042 9.7%
Net income (3) $ 4,872 $ 4,575 6.5%
========== ========== ========
Basic EPS $ 0.28 $ 0.27 3.7%
Diluted EPS (3) $ 0.27 $ 0.26 3.8%
(1) Definitions, disclosures and reconciliations of non-GAAP financial
information are included later in the release.
(2) Adjusted EBITDA for the quarter ended March 31, 2016 includes
approximately $1.4 million of redesign and upgrade costs that were
expensed during the period.
(3) The effect of the $1.4 million redesign and upgrade costs, expensed
during the quarter, on Net income and Diluted EPS for the three months
ended March 31, 2016, was a decrease in Net income by $0.9 million and a
decrease in Diluted EPS by $0.05.
CEO Comment
John Farahi, Co-Chairman and Chief Executive Officer of Monarch, commented: "Monarch continued to deliver positive operating performance in the first quarter, marked by net revenue and adjusted EBITDA growth of 7% and 10%, respectively, despite disruptive weather in Reno and Black Hawk and an unfavorable calendar. By offering premium gaming and entertainment experience to our guests at both Atlantis and Monarch Casino Black Hawk, we continue to grow market share and improve our operating results. We remain confident in the potential for further growth at Atlantis as we benefit from the expanding local economy. In the first quarter, we broke ground for our hotel tower and casino expansion in Black Hawk, commencing the final phase of the property‘s redevelopment into a world-class casino resort spa destination.
"Our focus on continuous improvement at Atlantis elevates the guest experience and positions Monarch to benefit from Reno‘s ongoing renaissance and economic expansion. The redesign and upgrade of Toucan Charlie‘s buffet, which was closed during most of last year‘s first quarter, drove a double-digit improvement year over year in food and beverage revenue in the first quarter of 2017. Effective management of our hotel room inventory led to a double-digit increase in hotel revenue. In addition, we continue to make capital investments, to retain our position as Reno‘s premier destination for casino entertainment, world-class dining, spa and other resort amenities. For example, we replaced the casino floor carpeting at Atlantis in the first quarter of 2017, resulting in a fresh and distinct new look.
"Monarch Casino Black Hawk, likewise, generated revenue growth in the first quarter of 2017, and we continue to implement and benefit from our master planned expansion of the property. The opening of the new parking structure adding 1,350 incremental parking spaces in late 2016, coupled with the effectiveness of our shuttle service to compensate for the lack of direct pedestrian access from the garage to the casino floor, presents us with new opportunities to deliver our signature premium guest experience. The significant additional parking capacity at the property also gives us more flexibility to satisfy guest demand at peak periods, which we believe benefits our business and more than offsets the incremental cost of the shuttle service and the construction disruption.
"Monarch Casino Black Hawk‘s transformation into a world-class resort is in full swing. Our solid financial performance has enabled us to fund more of the development costs from operating cash flow, thereby reducing our reliance on our credit facility. We remain highly confident about the prospects for long-term success in Black Hawk and look forward to continue to provide our guests with the experiences and levels of service they have come to expect from Monarch."
Summary of 2017 First Quarter Operating Results
For the 2017 first quarter, consolidated net revenues of $53.4 million increased 7.4% from $49.7 million in the prior year, driven by growth at both Atlantis and Monarch Casino Black Hawk. Casino revenues rose 4.0% year over year, food and beverage revenues grew 15.5% and hotel revenues increased 10.5%. Consolidated promotional allowances increased $0.6 million, or 5.7%. As a percentage of gross revenues, promotional allowances decreased to 18.1% from 18.3% a year ago.
The Company generated consolidated Adjusted EBITDA of $12.1 million in the first quarter of 2017, an increase of $1.1 million, or 9.7%, over the same period a year ago. The prior year period included $1.4 million in expenses related to the redesign and upgrade of Toucan Charlie‘s Buffet at Atlantis.
Casino operating expense as a percentage of casino revenue decreased to 42.8% for the first quarter of 2017 compared to 43.6% in the first quarter of 2016 due to higher revenue in the current period combined with operating cost efficiencies. Food and beverage operating expense as a percentage of food and beverage revenue decreased to 40.4% during the first quarter of 2017 from 43.1% a year ago primarily driven by the prior year expenses related to the Toucan Charlie‘s buffet redesign and upgrade. Hotel operating expense as a percentage of hotel revenue increased to 39.1% for the first quarter of 2017 compared to 31.6% for the same period in the prior year primarily as a result of higher payroll and employee benefit expenses as well as the incremental costs associated with the shuttle service implemented at Monarch Casino Black Hawk.
Selling, general and administrative ("SG&A") expenses for the 2017 first quarter were $14.6 million compared to $13.2 million in the prior year period. As a percentage of net revenue, SG&A expenses increased to 27.4% compared to 26.4% a year ago driven primarily by higher payroll and marketing expenses.
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 March 31, 2017:
----------------------------------------------
$ in millions Total
Spent
Through Estimated
March 31, Left to Completion
Cost 2017 Spend Date
----------- ---------- ----------- -----------
I. Existing Facility
Monarch Casino Black Hawk
(1) $76 $76 - Completed
Existing Facility Upgrade Interior
(2)(3) completed;
Exterior
$34 - $36 $20 $14 - $16 2017-2018
----------- ---------- -----------
Total Existing Facility $110 - $112 $96 $14 - $16
----------- ---------- -----------
II. Expansion
Acquired Land Parcels $10 $10 - Completed
Parking Structure $38 - $41 $41 - Completed
Hotel Tower & Casino (3) $229 - $234 $9 $220 - $225 2Q19
Other (4) $8 - $10 $9 $0 - $1 2Q19
----------- ---------- -----------
Total Expansion $285 - $295 $69 $220 - $226
----------- ---------- -----------
Total Cost $395 - $407 $165 $234 - $242
=========== ========== ===========
(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 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 early February, Monarch broke ground on the hotel tower and casino expansion. The Company will open the expansion 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 first quarter of 2017, the Company did not make any principal borrowings or payments to the Amended Credit Facility. The amount outstanding on the Company‘s credit facility as of March 31, 2017 remained $26.2 million. Capital expenditures of $12.2 million in the first quarter of 2017 represent costs related to the Monarch Casino Black Hawk master development plan as well as ongoing capital maintenance spending in Reno and Black Hawk. Capital expenditures in the first quarter were funded entirely from the Company‘s operating cash flow.
Interest expense for the 2017 first quarter increased to $272 thousand from $85 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 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:
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.
- financial tables follow -
MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended March 31,
----------------------------
2017 2016
------------- -------------
Revenues
Casino $ 41,310 $ 39,732
Food and beverage 15,490 13,414
Hotel 5,640 5,103
Other 2,778 2,671
------------- -------------
Gross revenues 65,218 60,920
Less promotional allowances (11,804) (11,171)
------------- -------------
Net revenues 53,414 49,749
------------- -------------
Operating expenses
Casino 17,680 17,330
Food and beverage 6,252 5,780
Hotel 2,208 1,614
Other 985 959
Selling, general and administrative 14,639 13,151
Depreciation and amortization 3,906 3,700
Loss on disposition of assets 18 56
------------- -------------
Total operating expenses 45,688 42,590
------------- -------------
Income from operations 7,726 7,159
------------- -------------
Other expenses
Interest expense, net of amounts capitalized (272) (85)
------------- -------------
Total other expense (272) (85)
------------- -------------
Income before income taxes 7,454 7,074
Provision for income taxes (2,582) (2,499)
------------- -------------
Net income $ 4,872 $ 4,575
============= =============
Earnings per share of common stock
Net income Basic
$ 0.28 $ 0.27
Diluted $ 0.27 $ 0.26
Weighted average number of common shares and
potential common shares outstanding
Basic 17,477 17,211
Diluted 18,021 17,540
MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except shares)
March 31, December 31,
2017 2016
------------- -------------
ASSETS (unaudited)
Current assets
Cash and cash equivalents $ 24,538 $ 26,383
Receivables, net 4,407 5,036
Income taxes receivable - 408
Inventories 2,904 3,097
Prepaid expenses 4,113 4,487
------------- -------------
Total current assets 35,962 39,411
------------- -------------
Property and equipment
Land 29,549 29,549
Land improvements 6,914 6,914
Buildings 191,370 191,370
Buildings improvements 24,511 24,511
Furniture and equipment 136,059 134,603
Construction in progress 20,486 9,767
Leasehold improvements 2,688 2,688
------------- -------------
411,577 399,402
Less accumulated depreciation and
amortization (188,065) (184,503)
------------- -------------
Net property and equipment 223,512 214,899
------------- -------------
Other assets
Goodwill 25,111 25,111
Intangible assets, net 4,743 5,035
Deferred income taxes 7,354 7,354
Other assets, net 3,221 3,355
------------- -------------
Total other assets 40,429 40,855
------------- -------------
Total assets $ 299,903 $ 295,165
============= =============
LIABILITIES AND STOCKHOLDERS‘ EQUITY
Current liabilities
Accounts payable $ 7,496 $ 8,720
Construction accounts payable 2,695 2,605
Accrued expenses 21,521 23,795
Income taxes payable 2,312 -
------------- -------------
Total current liabilities 34,024 35,120
------------- -------------
Long - term debt 26,200 26,200
------------- -------------
Total liabilities 60,224 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; 17,504,633
outstanding at March 31, 2017;
17,468,269 outstanding at December 31, 2016
Additional paid-in capital 24,299 23,834
Treasury stock, 1,591,667 shares at March 31,
2017; 1,628,031 shares at December 31, 2016 (21,661) (22,158)
Retained earnings 236,850 231,978
------------- -------------
Total stockholders‘ equity 239,679 233,845
------------- -------------
Total liabilities and stockholders‘
equity $ 299,903 $ 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 March 31,
----------------------------
2017 2016
------------- -------------
Adjusted EBITDA (1) $ 12,115 $ 11,042
Expenses:
Stock based compensation (465) (127)
Depreciation and amortization (3,906) (3,700)
Interest expense, net of amount capitalized (272) (85)
Loss on disposition of assets (18) (56)
Provision for income taxes (2,582) (2,499)
------------- -------------
Net income $ 4,872 $ 4,575
============= =============
(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.
Contacts: David Farahi Chief Operating Officer 775/825-4700 dfarahi@monarchcasino.com Joseph Jaffoni, Richard Land, James Leahy JCIR 212/835-8500 mcri@jcir.com
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Executive Offices
3800 South Virginia Street
Reno, Nevada 89502
Phone 775.335.4600
Fax 775.332.9171
monarchcasino.com