SOURCE: Monarch Casino and Resort, Inc.

July 26, 2012 16:05 ET

Monarch Casino & Resort Reports 2012 Second Quarter Results

RENO, NV--(Marketwire - Jul 26, 2012) -  Monarch Casino & Resort, Inc. (NASDAQ: MCRI) ("Monarch" or the "Company"), owner of the Atlantis Casino Resort Spa (the "Atlantis") in Reno, Nevada, and the Riviera Black Hawk Casino in Black Hawk, Colorado, today announced results for the quarter ended June 30, 2012.

This is the first quarterly results announcement after completion of the Company's April 26, 2012 acquisition (the "Acquisition") of Riviera Black Hawk, Inc., owner of the Riviera Black Hawk Casino ("Black Hawk"). The Company's second quarter 2012 results include the operations of Black Hawk only since April 26, 2012 (the "Acquisition Date") and the Company's prior periods do not reflect any of Black Hawk's operations.

Net Revenue:

             
      Three months ended June 30,   Increase/(Decrease)  
      2012   2011   $     %  
  Atlantis   $ 36,292,531   $ 37,159,873   $ (867,342 )   (2.3 %)
  Riviera Black Hawk     9,549,251     -     9,549,251     n/a  
    Total net revenue   $ 45,841,782   $ 37,159,873   $ 8,681,909     23.4 %
                             

The 2012 second quarter Atlantis net revenue decreased due to lower casino and hotel revenue combined with higher promotional allowance from increased complimentary food, beverage and other services provided to casino patrons ("Complimentaries").

Adjusted EBITDA(1):

             
    Three months ended June 30,     Increase/(Decrease)  
    2012     2011     $     %  
Atlantis   $ 7,767,747     $ 10,233,788     $ (2,466,041 )   (24.1 %)
Riviera Black Hawk     2,546,186       -       2,546,186     n/a  
      10,313,933       10,233,788       80,145     0.8 %
Corporate and other expense     (726,499 )     (716,032 )     (10,467 )   1.5 %
  Total Adjusted EBITDA   $ 9,587,434     $ 9,517,756     $ 69,678     0.7 %
                               

The 2012 second quarter Atlantis Adjusted EBITDA decreased due to lower net revenue, higher casino expense, principally due to increased Complimentaries expense, and higher selling general and administrative expense.

Operating Expense:
As a percentage of casino revenue, 2012 second quarter casino operating expense increased to 39.7% from 36.8% primarily due to increased Complimentaries expense. 2012 second quarter food and beverage operating expense as a percentage of food and beverage revenue decreased to 41.6% as compared to 44.9% in the 2011 second quarter primarily due to menu price increases driven by higher commodity costs. 2012 second quarter hotel operating expense as a percentage of hotel revenue increased slightly to 29.2% from 28.6% in the 2011 second quarter. 

Selling, general and administrative expense ("SG&A Expense") for the 2012 second quarter increased by $4.1 million, $2.8 million of which represents SG&A Expense from the Black Hawk operation for the period from the Acquisition date through June 30, 2012. The primary drivers of the remaining $1.3 million of increased Atlantis SG&A are: higher marketing expense, bad debt expense and higher use tax expense due to a ruling from the Nevada Department of Taxation that complimentary meals are subject to use tax effective February 2012. Similar to others in the industry, the Company did not recognize use tax on complimentary meals in the prior year.

During the 2012 second quarter, the Company incurred $1.6 million of non-recurring acquisition expense, comprised primarily of professional fees, directly related to the Acquisition of the Riviera Black Hawk Casino.

Credit Facility:
To fund the Acquisition, the Company drew funds under its credit facility, increasing the amount due thereunder from $18.98 million at March 31, 2012 to $88.0 million at June 30, 2012. The higher amounts due under the credit facility caused 2012 second quarter interest expense to increase from $329 thousand in the 2012 first quarter to $577 thousand in the second quarter of 2012.

John Farahi, Monarch CEO Comment:
Monarch's CEO and Co-Chairman John Farahi commented: "We are very excited about the successful completion of our acquisition of the Riviera Black Hawk Casino. Since the Acquisition Date, we have focused on integrating the two companies and are pleased with the progress we have made thus far, particularly with respect to identifying opportunities to achieve efficiencies and reduce expenses. Despite owning the operation for only a portion of the quarter, the $2.5 million of Adjusted EBITDA that Black Hawk contributed exceeded what it generated for the entire second quarter of 2011 and it did so despite the fact that the primary highway artery into the city of Black Hawk was closed for construction during a significant portion of the time subsequent to our Acquisition. Over the remainder of the year, we plan on enhancing the Black Hawk guest experience through improvements to product and service."

Mr. Farahi continued: "The ongoing economic difficulties in northern Nevada specifically, and in the national economy generally, had a material impact on Atlantis operations during the 2012 second quarter. The northern Nevada gaming market has shrunk in the aggregate, and our competitors have continued aggressive promotional programs. We anticipate that the ongoing macroeconomic weakness combined with the aggressive marketing programs of our northern Nevada competitors, will continue to apply downward pressure on Atlantis revenue."

About Monarch:
Monarch Casino & Resort, Inc., through its subsidiaries owns and operates the Atlantis Casino Resort Spa, a hotel/casino facility in Reno, Nevada the Riviera Black Hawk casino in Black Hawk, Colorado. Black Hawk is approximately 40 miles west of Denver. 

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 Company and its predecessors have operated a facility on the Atlantis site since 1972.

The Riviera Black Hawk Casino, which opened in 2000, is the first casino encountered by visitors arriving from Denver on Highway 119 and features approximately 32,000 square feet of casino space, 750 slot machines, 10 table games, a 250 seat buffet-style restaurant, a snack bar and a parking structure with approximately 500 spaces. Monarch owns a 1.5 acre land parcel contiguous to the Riviera Black Hawk Casino which is zoned for gaming and can be utilized for future expansion.

Forward-Looking Information:
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 the Acquisition, and (vi) integration of the Acquisition. Actual results and future events and conditions may differ materially from those described in any forward-looking statements. Additional information concerning potential factors that could affect the Company's financial results is included in the Company's Securities and Exchange Commission filings, which are available on the Company's web site at www.monarchcasino.com.

(1) "Adjusted EBITDA" - see the separate Reconciliation of Net Income to Adjusted EBITDA. 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.

For additional information visit Monarch's website at MonarchCasino.com

   
   
Monarch Casino & Resort, Inc.  
Condensed Consolidated Statements of Income and Comprehensive Income  
(Unaudited)  
   
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2012     2011     2012     2011  
Revenues                                
  Casino   $ 34,876,560     $ 26,076,953     $ 60,048,116     $ 49,289,639  
  Food and beverage     12,110,284       10,933,018       22,696,078       21,025,756  
  Hotel     5,305,178       5,490,621       9,673,620       10,494,662  
  Other     2,245,285       1,930,784       4,382,641       3,830,046  
    Gross revenues     54,537,307       44,431,376       96,800,455       84,640,103  
Less promotional allowances     (8,695,525 )     (7,271,503 )     (16,328,581 )     (14,194,414 )
    Net revenues     45,841,782       37,159,873       80,471,874       70,445,689  
Operating expenses                                
  Casino     13,853,725       9,589,732       23,749,312       19,066,039  
  Food and beverage     5,042,444       4,903,568       9,768,197       9,592,125  
  Hotel     1,546,694       1,568,538       2,841,888       2,997,491  
  Other     765,841       719,231       1,492,065       1,453,177  
  Selling, general and administrative     15,362,510       11,274,007       27,047,891       22,181,235  
  Depreciation and amortization     4,260,205       3,436,015       7,635,289       6,830,401  
  Acquisition expense     1,625,930       -       1,700,521       -  
    Total operating expenses     42,457,349       31,491,091       74,235,163       62,120,468  
    Income from operations     3,384,433       5,668,782       6,236,711       8,325,221  
Other expenses                                
  Interest expense     (577,000 )     (194,746 )     (905,661 )     (483,268 )
    Total other expense     (577,000 )     (194,746 )     (905,661 )     (483,268 )
    Income before income taxes     2,807,433       5,474,036       5,331,050       7,841,953  
Provision for income taxes     (1,014,675 )     (1,915,900 )     (1,896,925 )     (2,744,671 )
    Net income     1,792,758       3,558,136       3,434,125       5,097,282  
    Other comprehensive income     -       -       -       -  
    Comprehensive income   $ 1,792,758     $ 3,558,136     $ 3,434,125     $ 5,097,282  
                                 
Earnings per share of common stock                                
  Net income                                
    Basic   $ 0.11     $ 0.22     $ 0.21     $ 0.32  
    Diluted   $ 0.11     $ 0.22     $ 0.21     $ 0.31  
                                 
Weighted average number of common shares and potential common shares outstanding                                
    Basic     16,139,074       16,138,158       16,138,616       16,138,158  
    Diluted     16,249,450       16,223,488       16,253,730       16,223,207  
                                     
                                     
                                     
Monarch Casino & Resort, Inc.  
Condensed Consolidated Balance Sheets  
   
    June 30,     December 31,  
    2012     2011  
ASSETS   (Unaudited)        
Current assets                
  Cash and cash equivalents   $ 16,375,815     $ 13,582,659  
  Receivables, net     2,794,221       2,299,847  
  Inventories     2,265,773       2,165,109  
  Prepaid expenses     2,742,518       6,198,882  
  Deferred income taxes     554,612       615,912  
    Total current assets     24,732,939       24,862,409  
Property and equipment                
  Land     27,914,847       19,214,847  
  Land improvements     6,389,279       6,359,279  
  Buildings     150,843,298       135,643,298  
  Building improvements     11,575,883       11,575,883  
  Furniture and equipment     128,022,083       117,300,741  
  Leasehold improvements     1,346,965       1,346,965  
        326,092,355       291,441,013  
  Less accumulated depreciation and amortization     (145,247,727 )     (138,227,868 )
    Net property and equipment     180,844,628       153,213,145  
Other assets                
    Goodwill     26,575,592       -  
    Intangible assets, net     11,582,469       -  
    Deferred tax asset     3,965,414       -  
    Other assets, net     1,372,138       1,524,050  
  Total other assets     43,495,613       1,524,050  
    Total assets   $ 249,073,180     $ 179,599,604  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities                
  Accounts payable   $ 10,474,620     $ 8,693,395  
  Accrued expenses     15,087,187       13,829,540  
  Federal income taxes payable     962,579       768,640  
    Total current liabilities     26,524,386       23,291,575  
Long-term debt     88,000,000       24,680,000  
Deferred income taxes     -       1,112,049  
    Total liabilities     114,524,386       49,083,624  
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; 16,141,492 outstanding at June 30, 2012 and 16,138,158 at December 31, 2011     190,963       190,963  
  Additional paid-in capital     33,691,331       33,178,345  
  Treasury stock, 2,954,808 shares at June 30, 2012 and 2,958,142 at December 31, 2011, at cost     (48,455,960 )     (48,541,663 )
  Retained earnings     149,122,460       145,688,335  
    Total stockholders' equity     134,548,794       130,515,980  
    Total liabilities and stockholder's equity   $ 249,073,180     $ 179,599,604  
                     
                     
                     
Monarch Casino & Resort, Inc.  
Reconciliation of Adjusted EBITDA(1) to Net Income  
(Unaudited)  
   
The following table sets forth a reconciliation of Adjusted EBITDA(1), a non-GAAP financial measure, to net income, a GAAP financial measure.  
             
    Three months ended June 30,     Six months ended June 30,  
    2012     2011     2012     2011  
Adjusted EBITDA(1):                                
  Atlantis   $ 7,767,747     $ 10,233,788     $ 15,588,817     $ 18,117,812  
  Riviera Black Hawk (a)     2,546,186       -       2,546,186       -  
        10,313,933       10,233,788       18,135,003       18,117,812  
  Corporate and other expense     (726,499 )     (716,032 )     (1,977,130 )     (2,084,350 )
    Total Adjusted EBITDA(1)   $ 9,587,434     $ 9,517,756     $ 16,157,873     $ 16,033,462  
                                 
Expenses:                                
  Stock based compensation     (316,866 )     (412,959 )     (585,352 )     (877,840 )
  Depreciation and amortization     (4,260,205 )     (3,436,015 )     (7,635,289 )     (6,830,401 )
  Acquisition expense     (1,625,930 )     -       (1,700,521 )     -  
  Interest expense     (577,000 )     (194,746 )     (905,661 )     (483,268 )
  Provision for income taxes     (1,014,675 )     (1,915,900 )     (1,896,925 )     (2,744,671 )
    Net income   $ 1,792,758     $ 3,558,136     $ 3,434,125     $ 5,097,282  
                                 

(a) We acquired Riviera Black Hawk on April 26, 2012.

(1) "Adjusted EBITDA" consists of net income plus provision for income taxes, stock based compensation expense, other one-time non-cash 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.

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