SOURCE: Monarch Casino and Resort, Inc.

July 20, 2016 16:05 ET

Monarch Casino & Resort, Inc. Reports Second Quarter Net Revenue of $54.6 Million and Net Income of $5.7 Million

Second Quarter Adjusted EBITDA Increases 10.3% to $13.8 Million; Secures $250-Million Amended Credit Agreement to Support Monarch Casino Black Hawk Expansion

RENO, NV--(Marketwired - Jul 20, 2016) - Monarch Casino & Resort, Inc. (NASDAQ: MCRI) ("Monarch" or "the Company") today reported operating results for the quarter and six months ended June 30, 2016, as summarized below:

             
($ in thousands, except per share data and percentages)   Three Months Ended June 30,     Six Months Ended June 30,  
    2016   2015   Increase     2016   2015   Increase  
  Net revenue   $ 54,578   $ 50,013   9.1 %   $ 104,327   $ 97,184   7.3 %
                                       
  Adjusted EBITDA (1)     13,765     12,483   10.3 %     24,807     23,358   6.2 %
                                       
  Net income   $ 5,695   $ 5,099   11.7 %   $ 10,270   $ 9,142   12.3 %
                                       
  Basic EPS   $ 0.33   $ 0.30   10.0 %   $ 0.60   $ 0.54   11.1 %
  Diluted EPS   $ 0.32   $ 0.29   10.3 %   $ 0.58   $ 0.53   9.4 %
(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, "The 2016 second quarter marks Monarch's seventh consecutive quarter of double digit net income growth as we continue to generate strong financial results at Atlantis Casino Resort Spa in Reno and Monarch Casino Black Hawk. Ongoing facility investments and initiatives to deliver market-leading guest experiences helped drive a 9.1% increase in second quarter net revenue to $54.6 million and a 10.3% improvement in Adjusted EBITDA to $13.8 million.

"Atlantis continues to benefit from Reno's ongoing evolution from a gaming-centric economy to a more diversified economic base with increased investment by the healthcare, manufacturing and technology sectors. In addition to Tesla's decision to build its battery mega-factory here, substantial additional public and private investment is underway throughout the region to modernize local infrastructure and transform Reno into a commercial, cultural and recreational hub. In Denver, Monarch Casino Black Hawk's key market, the positive economic trends continue, including population growth, increased corporate investment and household income growth. The Denver metropolitan area is located approximately one hour from Black Hawk, supplying a prosperous guest base of over three million people.

"In addition to benefitting from a healthy macroeconomic environment in Reno, our performance at Atlantis during the quarter also is driven by our commitment to continuous property renewal. The second quarter was the first full operating quarter for our newly redesigned and upgraded Toucan Charlie's buffet, which reopened in March 2016. Our new surface parking added additional guest convenience in the second quarter, as well. Frequent recognition by respected independent industry observers, such as our receipt of the 2016 Forbes Four-Star Award for Spa Atlantis, acknowledges our success in delivering on our commitment to provide the best casino resort experience in Reno.

"Continuing the trend of the past several quarters, Monarch Casino Black Hawk gained share during the second quarter. Guests increasingly are attracted to the quality of our upgraded product offerings, in the midst of our expansion project. Construction of the new garage should be completed later this quarter. Preparation continues for our next phases: demolition of the original garage and commencement of the hotel tower construction. 

"Significant growth opportunities lie ahead and we believe Monarch will benefit from these opportunities in 2016 and beyond. This is an exciting time for our Company and our entire team is thrilled to deliver continued growth for our stockholders going forward."

Summary of 2016 Second Quarter Operating Results
For the 2016 second quarter, consolidated net revenue of $54.6 million grew 9.1% year-over-year, reflecting solid revenue growth at both Atlantis and Monarch Casino Black Hawk. Revenue from the Company's casino operations rose 8.9% on a year-over-year basis, food and beverage revenue rose 11.2% and hotel revenue grew 3.5%. Consolidated promotional allowance increased by $0.8 million or 7.4%.

The Company generated consolidated Adjusted EBITDA of $13.8 million in the second quarter of 2016, an increase of $1.3 million, or 10.3%, over the same period a year ago.

Casino operating expense as a percentage of casino revenue decreased to 41.5% for the second quarter compared to 42.1% in the second quarter of 2015 due to increased casino revenues combined with operating cost efficiencies. The increase in food and beverage operating expense as a percentage of food and beverage revenue for second quarter to 41.2% from 39.5% in the 2015 quarter was driven by the ramp up of our newly upgraded Toucan Charlie's buffet at Atlantis. Hotel operating expense as a percentage of hotel revenue increased to 30.9% for the second quarter of 2016 compared to 28.8% for the same period in the prior year primarily as a result of slightly lower occupancy and higher labor cost.

Selling, general and administrative ("SG&A") expenses for the 2016 second quarter increased $1.2 million year-over-year to $14.5 million but were flat as a percentage of overall revenue.

Monarch Black Hawk Expansion Update
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, 2016:

                 
$ in millions   Cost   Total Spent Through June 30, 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   $18   $16 - $18   Interior completed; Exterior 2016-2017
    Total Existing Facility   $110 - $112   $94   $16 - $18    
                 
II. Expansion                
  Acquired Land Parcels   $10   $10   -   Completed
  Parking Structure (3)   $38 - $41   $35   $3 - $6   3Q16
  Hotel Tower & Casino (4)   $229 - $234   -   $229 - $234   1Q19
  Other (3)   $8 - $10   $9   $0 - $1   1Q19
    Total Expansion   $285 - $295   $54   $231 - $241    
    Total Cost   $395 - $407   $148   $247 - $259    
                     
(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 was completed in August 2015, and exterior of existing facility to match the design of the master planned expansion.
(3) The Company expects to fund the amount left to spend primarily from operating cash flow.
(4) The Company anticipates funding the hotel tower and casino expansion from a combination of operating cash flow and its existing credit facility.
   

The Company is making continued progress with the Monarch Casino Black Hawk expansion project. In early June, Monarch reported that completion of the new parking structure was delayed by approximately three months to the third quarter of 2016. As a result, construction of the hotel tower and casino expansion is expected to begin in the first quarter of 2017. The Company plans to open floors of the new tower, beginning with the casino expansion and additional restaurants, as they are finished and is targeting completion of the entire project in the first quarter of 2019. Monarch does not expect the delayed completion of the parking structure to impact the overall project budget.

Credit Facility
During the 2016 second quarter, the Company made net principal payments of $0.4 million which reduced the amount outstanding on its credit facility to $35.0 million as of June 30, 2016. Capital expenditures of $6.3 million in the second 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 second quarter were funded from the Company's operating cash flows.

Interest expense for the 2016 second quarter decreased to $60 thousand from $181 thousand in the second quarter of 2015 due to lower average outstanding borrowings in the 2016 second quarter compared to the 2015 second quarter.

On July 20, 2016, Monarch entered into an amended and restated credit facility, under which the former $100 million credit facility was increased to $250 million and the maturity date of the credit facility was extended from November 15, 2016 to July 20, 2021. Monarch may use borrowings from the credit facility to pay for costs related to the expansion project at its Monarch Casino Black Hawk, and for working capital needs, general corporate purposes, and ongoing capital expenditure requirements. 

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) future operating performance; (ii) economic and market conditions; (iii) plans, objectives and expectations regarding Atlantis and/or Monarch Casino Black Hawk; and (iv) 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 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.

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 37 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 acquired Monarch Casino Black Hawk, the first casino encountered by visitors arriving from Denver on Highway 119, in April 2012. The property 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 parking structure with approximately 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, a new parking structure and associated support facilities. The planned nine story parking structure will increase total parking on site from approximately 500 spaces to approximately 1,500 parking spaces.

 
 - 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,  
    2016     2015     2016     2015  
Revenues                        
  Casino   $ 41,999     $ 38,551     $ 81,731     $ 75,990  
  Food and beverage     15,546       13,975       28,960       27,078  
  Hotel     6,034       5,828       11,137       10,565  
  Other     2,828       2,668       5,499       5,268  
    Gross revenues     66,407       61,022       127,327       118,901  
  Less promotional allowances     (11,829 )     (11,009 )     (23,000 )     (21,717 )
    Net revenues     54,578       50,013       104,327       97,184  
                                 
Operating expenses                                
  Casino     17,435       16,228       34,765       32,564  
  Food and beverage     6,411       5,524       12,191       10,743  
  Hotel     1,866       1,676       3,480       3,195  
  Other     988       1,114       1,947       2,048  
  Selling, general and administrative     14,536       13,317       27,687       25,896  
  Depreciation and amortization     3,790       4,108       7,490       8,239  
  Loss (gain) on disposition of assets     607       (2 )     663       (20 )
    Total operating expenses     45,633       41,965       88,223       82,665  
    Income from operations     8,945       8,048       16,104       14,519  
                                 
Other expenses                                
Interest expense, net of amounts capitalized     (60 )     (181 )     (145 )     (400 )
    Total other expense     (60 )     (181 )     (145 )     (400 )
                                 
    Income before income taxes     8,885       7,867       15,959       14,119  
Provision for income taxes     (3,190 )     (2,768 )     (5,689 )     (4,977 )
    Net income   $ 5,695     $ 5,099     $ 10,270     $ 9,142  
                                 
Earnings per share of common stock                                
  Net income                                
    Basic   $ 0.33     $ 0.30     $ 0.60     $ 0.54  
    Diluted   $ 0.32     $ 0.29     $ 0.58     $ 0.53  
                                 
Weighted average number of common shares and potential common shares outstanding                                
  Basic     17,259       16,894       17,235       16,858  
  Diluted     17,579       17,302       17,560       17,250  
                                   
                                   
MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except shares)
 
    June 30,     December 31,  
    2016     2015  
    (Unaudited)        
ASSETS            
Current assets            
  Cash and cash equivalents   $ 19,296     $ 21,164  
  Receivables, net     3,803       3,729  
  Income taxes receivable     1,839       611  
  Inventories     2,898       2,881  
  Prepaid expenses     3,769       3,402  
    Total current assets     31,605       31,787  
Property and equipment                
  Land     29,549       29,549  
  Land improvements     6,701       6,701  
  Buildings     152,246       150,966  
  Buildings improvements     24,503       23,255  
  Furniture and equipment     134,063       134,704  
  Construction in progress     46,249       37,424  
  Leasehold improvements     1,347       1,347  
      394,658       383,946  
  Less accumulated depreciation and amortization     (184,266 )     (180,792 )
    Net property and equipment     210,392       203,154  
Other assets                
  Goodwill     25,111       25,111  
  Intangible assets, net     5,617       6,200  
  Deferred income taxes     7,415       7,415  
  Other assets, net     1,027       1,179  
    Total other assets     39,170       39,905  
    Total assets   $ 281,167     $ 274,846  
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities                
  Current portion of long-term debt   $ -     $ 40,900  
  Accounts payable     8,002       6,747  
  Construction accounts payable     1,406       1,407  
  Accrued expenses     20,591       21,873  
    Total current liabilities     29,999       70,927  
Long-term debt     35,000       -  
    Total liabilities     64,999       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; 19,096,300 shares issued; 17,316,338 outstanding at June 30, 2016; 17,202,699 outstanding at December 31, 2015     191       191  
  Additional paid - in capital     22,630       22,728  
  Treasury stock, 1,779,962 shares at June 30, 2016; 1,893,601 shares at December 31, 2015     (24,327 )     (26,404 )
  Retained earnings     217,674       207,404  
    Total stockholders' equity     216,168       203,919  
    Total liabilities and stockholders' equity   $ 281,167     $ 274,846  
 
 
MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES
RECONCILIATIN 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,  
    2016     2015     2016     2015  
Adjusted EBITDA (1)   $ 13,765     $ 12,483     $ 24,807     $ 23,358  
Expenses:                                
  Stock based compensation     (423 )     (329 )     (550 )     (620 )
  Depreciation and amortization     (3,790 )     (4,108 )     (7,490 )     (8,239 )
  Interest expense, net of amount capitalized     (60 )     (181 )     (145 )     (400 )
  Gain (loss) on disposition of assets     (607 )     2       (663 )     20  
  Provision for income taxes     (3,190 )     (2,768 )     (5,689 )     (4,977 )
    Net income   $ 5,695     $ 5,099     $ 10,270     $ 9,142  
(1) Adjusted EBITDA, a non-GAAP financial measure, consists of net income plus provision for income taxes, stock based compensation expense, other one-time 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.
   

Contact Information

  • Contacts:
    David Farahi
    Chief Operating Officer
    775/825-4700
    Email Contact

    Joseph Jaffoni, Richard Land, James Leahy
    JCIR
    212/835-8500
    Email Contact