MCRI
$26.00
Monarch Casino
Earnings Details
3rd Quarter September 2016
Tuesday, October 25, 2016 4:02:28 PM
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Summary

Monarch Casino (MCRI) Recent Earnings

Monarch Casino (MCRI) reported 3rd Quarter September 2016 earnings of $0.45 per share on revenue of $57.1 million. The consensus earnings estimate was $0.39 per share on revenue of $55.8 million. Revenue grew 6.6% on a year-over-year basis.

Monarch Casino & Resort Inc owns and operates the Atlantis Casino Resort Spa, a hotel or casino facility in Reno, Nevada; the Monarch Casino Black Hawk in Black Hawk, Colorado and real estate proximate to the Atlantis and Monarch Casino Black Hawk.

Results
Reported Earnings
$0.45
Earnings Whisper
-
Consensus Estimate
$0.39
Reported Revenue
$57.1 Mil
Revenue Estimate
$55.8 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Monarch Casino & Resort, Inc. Reports Third Quarter Net Revenues of $57.1 Million, Net Income of $7.8 Million and 14.3% Increase in Adjusted EBITDA to $16.3 Million

RENO, NV--(Marketwired - Oct 25, 2016) - Monarch Casino & Resort, Inc. (MCRI) ("Monarch" or the "Company") today reported operating results for the third quarter ended September 30, 2016, as summarized below:

 
 
     
 
($ in thousands, except per share data and percentages) Three Months Ended
    Nine Months Ended
 
September 30,
September 30,
 
2016
  2015
  Increase     2016
  2015
  Increase  
 
Net revenues
$
57,109   $
53,576   6.6
%
  $
161,436   $
150,760   7.1
%
 
Adjusted EBITDA (1)
  16,334     14,285   14.3
%
    41,141
    37,643
  9.3
%
 
Net income
$
7,834
  $
6,394
  22.5
%
  $
18,104
  $
15,536
  16.5
%
 
             
       
     
   
 
 
Basic EPS
$
0.45
  $
0.38
  18.4
%
  $
1.05
  $
0.92
  14.1
%
 
Diluted EPS
$
0.45
  $
0.37
  21.6
%
  $
1.03
  $
0.90
  14.4
%

(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: "We are pleased with our 2016 third quarter net revenue and adjusted EBITDA growth as well as our eighth consecutive quarter of double digit net income growth. Consistent delivery of strong financial results is a product of our team’s continued focus on providing guests with market-leading gaming entertainment, dining and hospitality experiences at Atlantis Casino Resort Spa and Monarch Casino Black Hawk. 

"Atlantis continues to benefit from its position as a leading casino resort in the healthy and improving Reno macro market environment. We continuously refine and enhance our offerings at Atlantis and seek to deliver a superior guest experience. We are focused constantly on improving operational efficiency and implementing analytical tools to provide real-time decision making information and accurate performance measurement. These efforts are yielding improved results which we expect to build upon going forward. Additionally, property improvements such as the recently redesigned and upgraded Toucan Charlie’s buffet and the approximate 34% increase in surface parking adjacent to the Atlantis continue to garner favorable customer feedback and attractive returns on invested capital.

"In Black Hawk, our property continues to deliver growth and strong operating results even while the work on our master planned expansion continues. We expect to secure the temporary certificate of occupancy for our new parking structure in mid-November, at which time we will immediately move forward with the demolition of the existing garage. This will put us on schedule to break ground on the hotel tower in the first quarter of 2017. Our experience with successfully managing profitable business operations at Atlantis through construction disruption, as well as through the three phase renovation of the existing casino at Black Hawk, gives us confidence that we can minimize negative operational impact. We understand that more than two years of phased work on the garage demolition and hotel tower construction will impact our guests. However, we will continue to entertain our guests in the manner they have come to expect and we will implement measures such as convenient shuttle service between the casino and the new parking garage to minimize the impact of construction upon our guests. We look forward to embarking on the cornerstone phase of our property expansion project early next year and believe the long-term prospects for Monarch Casino Black Hawk are very exciting.

"Monarch is favorably positioned in two highly attractive and growing markets. We believe the 2016 third quarter results demonstrate that we are effectively leveraging our operating discipline. We intend to maintain our leadership position in Reno while attracting new guests in that growing market and believe that our expansion project in Black Hawk will help grow that market as Denver’s economic expansion continues. This is an exciting time for Monarch and our entire team is devoted to taking advantage of the opportunities ahead."

Summary of 2016 Third Quarter Operating Results For the 2016 third quarter, consolidated net revenue of $57.1 million grew 6.6% year over year, reflecting solid revenue growth at both Atlantis and Monarch Casino Black Hawk. Revenue from the Company’s casino operations rose 6.0% year over year, food and beverage revenue increased 6.1% and hotel revenue grew 3.8%. Consolidated promotional allowance increased $0.3 million, or 2.3%.

The Company generated consolidated Adjusted EBITDA of $16.3 million in the third quarter of 2016, an increase of $2.0 million, or 14.3%, over the same period a year ago.

Casino operating expense as a percentage of casino revenue decreased to 40.3% for the third quarter of 2016 compared to 40.9% in the third quarter of 2015 due to increased casino revenues. Food and beverage operating expense as a percentage of food and beverage revenue increased slightly to 39.4% during the third quarter of 2016 from 39.2% a year ago driven by higher labor costs. Hotel operating expense as a percentage of hotel revenue increased to 28.4% for the third quarter of 2016 compared to 25.2% for the same period in the prior year primarily as a result of slightly lower occupancy and higher labor costs.

Selling, general and administrative ("SG&A") expenses for the 2016 third quarter were $14.4 million, flat with the prior year period, but decreased as a percentage of net revenue from 26.8% in the third quarter of the prior year to 25.3% in the current quarter. 

Monarch Black Hawk Expansion Update Summarized below is an update on the Company’s ongoing upgrade and expansion of Monarch Black Hawk, including the expected costs and completion dates for the project as well as the amounts spent through September 30, 2016:

 
 
   
   
   
$ in millions
Cost
  Total Spent Through September 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 2017-2018
   
Total Existing Facility $110 - $112   $94
  $16 - $18
   
 
 
   
   
   
II. Expansion
 
   
   
   
  Acquired Land Parcels
$10
  $10
  -
  Completed
  Parking Structure
$38 - $41
  $38
  $0 - $3
  4Q16
  Hotel Tower & Casino (3)
$229 - $234   -
  $229 - $234
  2Q19
  Other (4)
$8 - $10
  $9
  $0 - $1
  2Q19
  Total Expansion
$285 - $295   $57
  $229 - $238
   
   
Total Cost
$395 - $407   $151
  $244 - $256
   

(1) The Company paid $76.0 million cash or $69.2 million net of acquired working capital and NOLs when it acquired Monarch Black Hawk (formerly Riviera Black Hawk Casino). (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 anticipates funding the hotel tower and casino expansion 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 the Monarch Casino Black Hawk expansion project. Monarch expects to secure the temporary certificate of occupancy for and open the new parking structure at the property in mid-November. At that time, the Company will immediately begin the demolition and removal of the original parking structure which it expects to complete during the first quarter of 2017. Monarch plans to break ground on the hotel tower and casino expansion in the first quarter of 2017 and open floors of the new tower, beginning with the casino expansion and additional restaurants, as they are finished. The targeted completion date of the entire project is the second quarter of 2019.

Credit Facility During the 2016 third quarter, the Company made net principal payments of $5.1 million which reduced the amount outstanding on its credit facility to $29.9 million as of September 30, 2016. Capital expenditures of $5.0 million in the third 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 third quarter were funded from the Company’s operating cash flows.

Interest expense for the 2016 third quarter decreased to $130 thousand from $137 thousand in the third quarter of 2015 due to lower average outstanding borrowings in the 2016 third quarter compared to the 2015 third quarter offset by the increase in amortization of deferred loan costs.

As previously reported, 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 facility was extended from November 15, 2016 to July 20, 2021. Monarch may use borrowings from the Amended Credit Facility to pay for costs related to the expansion project at its Monarch Casino Black Hawk as well as additional ongoing capital expenditure requirements, working capital needs and general corporate purposes. 

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 Monarch Casino Black Hawk 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
    Nine months ended
 
 
September 30,
    September 30,
 
 
2016
    2015
    2016
    2015
 
Revenues
   
       
       
       
 
 
Casino
$
43,882
    $
41,394
    $
125,613     $
117,384  
 
Food and beverage
  15,621
      14,725
      44,581
      41,803
 
 
Hotel
  6,901
      6,646
      18,038
      17,211
 
 
Other
  2,891
      2,723
      8,390
      7,991
 
 
 
Gross revenues
  69,295
      65,488
      196,622       184,389  
 
Less promotional allowances
  (12,186 )
    (11,912 )
    (35,186 )
    (33,629 )
 
 
Net revenues
  57,109
      53,576
      161,436       150,760  
 
   
       
       
       
 
Operating expenses
   
       
       
       
 
 
Casino
  17,684
      16,913
      52,449
      49,477
 
 
Food and beverage
  6,152
      5,772
      18,343
      16,515
 
 
Hotel
  1,958
      1,674
      5,438
      4,869
 
 
Other
  975
      901
      2,922
      2,949
 
 
Selling, general and administrative
  14,439
      14,349
      42,126
      40,245
 
 
Depreciation and amortization
  3,644
      3,918
      11,134
      12,157
 
 
Loss (gain) on disposition of assets
  5
      --
      668
      (20
)
 
 
Total operating expenses
  44,857
      43,527
      133,080       126,192  
 
 
 
Income from operations   12,252
      10,049
      28,356
      24,568
 
 
   
       
       
       
 
Other expenses
   
       
       
       
 
 
Interest expense, net of amounts capitalized
  (130
)
    (137
)
    (275
)
    (537
)
 
 
Total other expense
  (130
)
    (137
)
    (275
)
    (537
)
 
   
       
       
       
 
 
 
Income before income taxes
  12,122
      9,912
      28,081
      24,031
 
Provision for income taxes
  (4,288
)
    (3,518
)
    (9,977
)
    (8,495
)
 
Net income
$
7,834
    $
6,394
    $
18,104
    $
15,536
 
 
   
       
       
       
 
Earnings per share of common stock
   
       
       
       
 
 
Net income
   
       
       
       
 
 
 
Basic
$
0.45
    $
0.38
    $
1.05
    $
0.92
 
 
 
Diluted
$
0.45
    $
0.37
    $
1.03
    $
0.90
 
 
   
       
       
       
 
Weighted average number of common shares and potential common shares outstanding
   
       
       
       
 
 
 
Basic
  17,338
      16,979
      17,270
      16,898
 
 
 
Diluted
  17,720
      17,343
      17,603
      17,281
 
 
   
       
       
       
 
 
   
       
       
       
 
 
   
       
       
       
 
MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(In thousands, except shares)
 
 
 
     
 
 
September 30, 2016
    December 31, 2015  
 
(unaudited)
     
 
ASSETS
 
 
     
 
 
Current assets
 
 
     
 
 
 
Cash and cash equivalents
$
19,454
    $
21,164
 
 
Receivables, net
 
4,618
     
3,729
 
 
Income taxes receivable
 
517
     
611
 
 
Inventories
 
2,807
     
2,881
 
 
Prepaid expenses
 
4,281
     
3,402
 
 
 
Total current assets
 
31,677
     
31,787
 
Property and equipment
 
 
     
 
 
 
Land
 
29,549
     
29,549
 
 
Land improvements
 
6,701
     
6,701
 
 
Buildings
 
152,284
     
150,966
 
 
Buildings improvements
 
24,503
     
23,255
 
 
Furniture and equipment
 
133,395
     
134,704
 
 
Construction in progress
 
50,210
     
37,424
 
 
Leasehold improvements
 
1,347
     
1,347
 
 
 
397,989
     
383,946
 
 
Less accumulated depreciation and amortization
 
(186,132
)
   
(180,792 )
 
 
Net property and equipment
 
211,857
     
203,154
 
 
Other assets
 
 
     
 
 
 
Goodwill
 
25,111
     
25,111
 
 
Intangible assets, net
 
5,326
     
6,200
 
 
Deferred income taxes
 
7,415
     
7,415
 
 
Other assets, net
 
3,490
     
1,179
 
 
 
Total other assets
 
41,342
     
39,905
 
 
 
 
Total assets
$
284,876
    $
274,846
 
 
 
 
     
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
     
 
 
 
Current liabilities
 
 
     
 
 
 
Current portion of long-term debt
$
--
    $
40,900
 
 
Accounts payable
 
7,358
     
6,747
 
 
Construction accounts payable
 
1,213
     
1,407
 
 
Accrued expenses
 
21,298
     
21,873
 
 
 
Total current liabilities
 
29,869
     
70,927
 
Long-term debt
 
29,900
     
--
 
 
 
Total liabilities
 
59,769
     
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; 17,363,164 outstanding at September 30, 2016; 17,202,699 outstanding at December 31, 2015
 
191
     
191
 
 
Additional paid-in capital
 
22,965
     
22,728
 
 
Treasury stock, 1,733,136 shares at September 30, 2016; 1,893,601 shares at December 31, 2015
 
(23,557
)
   
(26,404
)
 
Retained earnings
 
225,508
     
207,404
 
 
 
Total stockholders’ equity
 
225,107
     
203,919
 
 
 
Total liabilities and stockholders’ equity
$
284,876
    $
274,846
 
 
 
 
 
 
     
 
 
 
 
 
 
 
     
 
 
 
 
 
 
 
     
 
 
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
    Nine Months Ended
 
September 30,
September 30,
 
2016
    2015
    2016
    2015
 
   
Adjusted EBITDA (1)
$
16,334     $
14,285     $
41,141
    $
37,643
 
Expenses:
                   
       
 
  Stock based compensation
  (433
)
    (318
)
    (983
)
    (938
)
  Depreciation and amortization
  (3,644 )
    (3,918 )
    (11,134 )
    (12,157 )
  Interest expense, net of amount capitalized   (130
)
    (137
)
    (275
)
    (537
)
  Gain (loss) on disposition of assets
  (5
)
    --
      (668
)
    20
 
  Provision for income taxes
  (4,288 )
    (3,518 )
    (9,977
)
    (8,495
)
   
Net income
$
7,834
    $
6,394
    $
18,104
    $
15,536
 
   
 
                   
       
 
(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.
   

Contacts: David Farahi Chief Operating Officer 775/825-4700 Email Contact Joseph Jaffoni, Richard Land, James Leahy JCIR 212/835-8500 Email Contact