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Monarch Casino & Resort Reports Second Quarter Net Revenue of $47.8 Million and Adjusted EBITDA of $11.7 Million

(July 24, 2014)

RENO, Nev., July 24, 2014 (GLOBE NEWSWIRE) -- Monarch Casino & Resort, Inc. (Nasdaq:MCRI) ("Monarch" or "the Company") today reported operating results for the quarter and six months ended June 30, 2014, as summarized below:















































































































 

Three Months Ended June 30,

Six Months Ended June 30,

 

2014

2013

Decrease

2014

2013

Decrease

 Net revenue (1)

 $ 47,803

 $ 49,651

(3.7%)

 $ 93,311

 $ 95,256

(2.0%)

 

 

 

 

 

 

 

 Adjusted EBITDA (1)(2)

 11,665

 14,835

(21.4%)

 21,952

 26,899

(18.4%)

 

 

 

 

 

 

 

 Net income (1)

 $ 3,024

 $ 6,120

(50.6%)

 $ 6,300

 $ 10,382

(39.3%)

 

 

 

 

 

 

 

 Basic EPS

 $ 0.18

 $ 0.38

(52.6%)

 $ 0.38

 $ 0.64

(40.6%)

 Diluted EPS

 $ 0.18

 $ 0.37

(51.4%)

 $ 0.37

 $ 0.63

(41.3%)

 

 

 

 

 

 

 

(1) Commencing with the 2014 first quarter, the Company is reporting consolidated results rather than results for each of its two facilities.

 

 

(2) 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 disappointed with our second quarter results as operations were impacted by higher operating expenses and lower revenue at both Atlantis and Monarch Black Hawk. The year over year comparison also reflects a one-time $560,000 accounting benefit in the 2013 second quarter. Atlantis revenue declined as a result of increased promotional activity by our competitors and lower levels of convention and meeting business while ongoing construction disruption impacted our Black Hawk operation.


"Second quarter 2014 net income was also impacted by Monarch's share of expenses to support the Colorado Gaming Association's ("CGA") campaign to defeat a proposed November 4th ballot initiative that would expand gaming to certain horse racing facilities in Colorado. Our expense for this campaign totaled $1 million in the second quarter and we believe the CGA has assembled a strong team, with a proven track record, to lead the campaign against the initiative.




"Our redesign and upgrade of the existing Monarch Black Hawk facility continues to progress as planned. The first of three phases of work to upgrade the main casino floor began in early 2014 and will be completed and open to the public later this quarter. In order to minimize construction disruption going forward, we plan to implement a more aggressive construction schedule on the final two phases of the work.



"Regarding our city-approved master plan to expand and transform Monarch Black Hawk into a full-scale resort casino, we are modifying portions of the master plan to both reduce construction costs and enhance the project. While the additional planning has delayed finalization of our plans, timeline and budget, we believe that the modifications will aid us in improving the returns on our investment. We expect to complete the construction plans in the latter part of the fourth quarter of 2014 at which time we will immediately commence the bidding process to finalize the project's timeline and budget."



Summary of 2014 Second Quarter Operating Results



Consolidated net revenue of $47.8 million declined 3.7% year over year, as lower casino revenue at both Atlantis and Monarch Black Hawk drove an 8.9% decline in total casino revenue. The decrease in casino revenue at Atlantis primarily reflects lower visitation and business volumes. Monarch Black Hawk casino revenue was impacted by disruption from the ongoing construction at the property including a temporary 13% reduction in the number of slot machines on the gaming floor that was required to accommodate the work. In addition, casino revenue comparisons at Monarch Black Hawk were impacted by the accounting for promotional spend as the result of a change in Colorado state law, which now allows casinos to utilize free play credits. In the second quarter of 2013, the Company offered certain patrons cash voucher promotions which were recognized as an increase to 'promotional allowance.' Following the approval of free play credits in August 2013, which are recognized as a direct reduction of 'casino revenue,' the Company discontinued its use of cash vouchers in favor of free play credits which it continues to use today. As such, consolidated promotional allowance decreased by $1.2 million or 10.3%; however, after adjusting for the effect of the substitution of cash vouchers for free play credits as described above, promotional allowance increased by approximately $260,000 or 2.3%.



Revenue from the Company's food and beverage operations increased 5.7% while hotel revenue decreased 5.3% in the second quarter of 2014. The decline in hotel revenue is primarily attributable to lower convention and meeting business in the city of Reno. 



The Company generated consolidated Adjusted EBITDA of $11.7 million in the second quarter of 2014, a decline of $3.2 million, or 21.4%, from the same period a year ago.



Casino operating expense as a percentage of casino revenue increased to 41.7% for the second quarter of 2014 compared to 37.5% in the second quarter of 2013 due primarily to the lower casino revenue combined with higher complimentaries expense. Food and beverage operating expense as a percentage of food and beverage revenue increased to 42.0% from 40.0% in the 2013 second quarter driven by higher commodity prices and wage increases. Hotel operating expense as a percentage of hotel revenue increased to 28.2% for the second quarter of 2014 compared to 27.1% for the prior year due to the lower hotel revenue combined with higher wages.



Selling, general and administrative ("SG&A") expenses for the 2014 second quarter increased approximately $540,000, or 4.3%, over the 2013 second quarter. This increase was primarily attributable to a one-time, non-cash benefit in the prior year second quarter from the reversal of accrued use tax expense triggered by a ruling of the Nevada Tax Commission that all complimentary and employee meals statewide were no longer subject to taxation.



The Company incurred an approximate $250,000 loss on disposal of slot machines and $1.0 million of expense related to the campaign against proposed 2014 ballot initiatives to expand gaming to certain horse racing facilities in Colorado.



Credit Facility



The amount outstanding on the Company's credit facility at June 30, 2014 was $48.9 million, the same as at March 31, 2014, and compares to $53.8 million outstanding at December 31, 2013 and $64.8 million outstanding at June 30, 2013. Interest expense for the 2014 second quarter decreased to approximately $275,000 from approximately $515,000 for the second quarter of 2013 due to a lower cost of borrowing related to our lower leverage and reduced outstanding borrowings in the 2014 second quarter compared to the 2013 second quarter. Capital expenditures of $4.5 million in the second quarter of 2014 were funded from operating cash flows and primarily represent costs related to the Monarch Black Hawk master development plan including the ongoing redesign and upgrade of the existing 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) future operating performance; (ii) economic and market conditions; (iii) plans, objectives and expectations regarding Atlantis and/or Monarch Black Hawk; and (iv) plans, costs, financing, construction, completion and opening timelines of redesigned and/or expanded facilities at Monarch 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 Black Hawk redesign and expansion projects, 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, including the ability of the Company to restructure its credit facility on acceptable terms;


  • 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 (formerly the Riviera Black Hawk Casino) 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 the Monarch Casino Black Hawk, the first casino encountered by visitors arriving from Denver on Highway 119, in April 2012. The property features approximately 32,000 square feet of casino space, approximately 710 slot machines, 9 table games, a 250 seat buffet-style restaurant, a snack bar and a parking structure with approximately 500 spaces. The slot machine count has been temporarily reduced to approximately 620 to accommodate redesign and upgrade work on the facility. Monarch owns a 1.5 acre land parcel contiguous to the Monarch Casino Black Hawk which is zoned for gaming and is included in the city approved master planned expansion. Once completed, the master plan will nearly double the casino space and will add a 22 story hotel tower with 507 guest rooms and suites, an upscale spa and pool facility, four restaurants, additional bars, a new parking structure and associated support facilities. The planned ten story parking structure will increase total parking on site from approximately 500 spaces to approximately 1,550 parking spaces.

































































































































































































































































































 

 

 

Monarch Casino & Resort, Inc.

Condensed Consolidated Statements of Income (unaudited)

(in thousands, except per share data)

 

 

 

 

Three months ended

June 30,

Six months ended

 June 30,

 

2014

2013

2014

2013

Revenues

 

 

 

 

Casino

 $ 36,264

 $ 39,792

 $ 72,298

 $ 76,787

Food and beverage

 13,205

 12,494

 25,470

 24,385

Hotel

 6,031

 6,369

 10,675

 11,680

Other

 2,455

 2,315

 4,934

 4,645

Gross revenues

 57,955

 60,970

 113,377

 117,497

Less promotional allowances

(10,152)

(11,319)

(20,066)

(22,241)

Net revenues

 47,803

 49,651

 93,311

 95,256

 

 

 

 

 

Operating expenses

 

 

 

 

Casino

 15,117

 14,923

 30,139

 29,429

Food and beverage

 5,543

 4,995

 10,514

 9,839

Hotel

 1,700

 1,729

 3,084

 3,133

Other

 912

 813

 1,787

 1,565

Selling, general and administrative

13,180

12,643

26,411

24,914

Depreciation and amortization

 4,630

 4,380

 9,324

 9,023

Loss on disposition of assets

 249

 --

 249

 --

Colorado ballot initiative costs

 1,004

--

 1,004

--

Total operating expenses

42,335

39,483

82,512

77,903

Income from operations

 5,468

 10,168

 10,799

 17,353

 

 

 

 

 

Other expenses

 

 

 

 

Interest expense

(274)

(516)

(561)

(1,082)

Total other expenses

(274)

(516)

(561)

(1,082)

Income before income taxes

 5,194

 9,652

 10,238

 16,271

Provision for income taxes

(2,170)

(3,532)

(3,938)

(5,889)

Net income

 $ 3,024

 $ 6,120

 $ 6,300

 $ 10,382

 

 

 

 

 

Earnings per share of common stock

 

 

 

 

Net income

 

 

 

 

Basic

 $ 0.18

 $ 0.38

 $ 0.38

 $ 0.64

Diluted

 $ 0.18

 $ 0.37

 $ 0.37

 $ 0.63

 

 

 

 

 

Weighted average number of common shares and potential common shares outstanding

 

 

 

 

Basic

16,788

 16,192

 16,663

 16,170

Diluted

 17,104

 16,702

 17,165

 16,537


 









































































































































































































































































Monarch Casino & Resort, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except shares)

 



June 30, 2014



December 31, 2013

 

 (unaudited)

 

ASSETS

 

 

Current assets

 

 

Cash and cash equivalents

 $ 17,166

 $ 19,330

Receivables, net

 3,339

 2,628

Income taxes receivable

 --

 608

Inventories

 2,426

 2,675

Prepaid expenses

 3,288

 2,830

Deferred income taxes

 5,909

 5,909

Total current assets

 32,128

 33,980

Property and equipment

 

 

Land

 28,680

 28,680

Land improvements

 6,562

 6,562

Buildings

 150,828

 150,828

Buildings improvements

 15,897

 15,897

Furniture and equipment

 135,566

 134,425

Construction in progress

 11,677

 4,891

Leasehold improvements

 1,347

 1,347

 

 350,557

 342,630

Less accumulated depreciation and amortization

(174,484)

(166,993)

Net property and equipment

 176,073

 175,637

Other assets

 

 

Goodwill

 25,111

 25,111

Intangible assets, net

 7,948

 8,531

Deferred income taxes

350

 350

Other assets, net

 762

 914

Total other assets

 34,171

 34,906

Total assets

 $ 242,372

 $ 244,523

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

Current liabilities

 

 

Accounts payable

 $ 7,922

 $ 8,666

Construction accounts payable

 119

 --

Accrued expenses

 16,971

 18,177

Income taxes payable

162

 --

Total current liabilities

 25,174

 26,843

Long - term debt

 48,900

 53,800

Total liabilities

 74,074

 80,643

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; 16,798,207 outstanding at June 30, 2014;

 

 

16,482,768 outstanding at December 31, 2013

 

 

Additional paid-in capital

 22,456

 30,926

Treasury Stock, 2,298,093 shares at June 30, 2014; 2,613,532 shares at

(33,209)

(39,797)

December 31, 2013

 

 

Retained earnings

 178,860

 172,560

Total stockholders' equity

 168,298

 163,880

Total liabilities and stockholders' equity

 $ 242,372

 $ 244,523

 

 

 


Monarch Casino & Resort, Inc.

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 June 30,

Six Months Ended June 30,

 

2014

2013

2014

2013

Adjusted EBITDA (1)

 $ 11,665

 $ 14,835

 $ 21,952

 $ 26,899

Expenses:

 

 

 

 

Stock based compensation

(314)

(287)

(576)

(523)

Depreciation and amortization

(4,630)

(4,380)

(9,324)

(9,023)

Colorado ballot initiative costs

(1,004)

 --

(1,004)

 --

Interest expense

(274)

(516)

(561)

(1,082)

Loss on disposition of assets

(249)

 --

(249)

 --

Provision for income taxes

(2,170)

(3,532)

(3,938)

(5,889)

Net Income

 $ 3,024

 $ 6,120

 $ 6,300

 $ 10,382

 

 

 

 

 

(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: Ron Rowan
Chief Financial Officer
775/825-4700 or rrowan@monarchcasino.com

Joseph Jaffoni, Richard Land, James Leahy
JCIR
212/835-8500 or mcri@jcir.com

Page: 1


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