UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 8-K CURRENT REPORT
Pursuant to Section 13 or 15(d) of the |
Date of Report: October 22, 2015
(Date of earliest event reported)
Monarch Casino and Resort, Inc.
(Exact name of registrant as specified in its charter)
NV
(State or other jurisdiction
of incorporation)
0-22088
(Commission File Number)
88-0300760
(IRS Employer
Identification Number)
3800 S. Virginia Street
(Address of principal executive offices)
89502
(Zip Code)
775-335-4600
(Registrant's telephone number, including area code)
Not Applicable
(Former Name or Former Address, if changed since last report)
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Item 2.02. Results of Operations and Financial Condition On October 22, 2015, Monarch Casino & Resort, Inc. (the "Company") issued a press release announcing its financial results for the quarter ended September 30, 2015. A copy of the press release is attached to this Current Report as Exhibit 99.1.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Dated: October 22, 2015 |
MONARCH CASINO AND RESORT, INC.
By: /s/ Ronald Rowan |
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| Exhibit No. | Description |
| 99.1 | Press Release of Monarch Casino and Resort, Inc. dated October 22, 2015 |
RENO, NV -- (Marketwired - October 22, 2015) - Monarch Casino & Resort, Inc. (NASDAQ: MCRI) ("Monarch" or the "Company") today reported operating results for the third quarter ended September 30, 2015, as summarized below:
($ in thousands,
except per share data Three Months Ended Nine Months Ended
and percentages) September 30, September 30,
-------------------------- --------------------------
2015 2014 Increase 2015 2014 Increase
-------- -------- -------- -------- -------- --------
Net revenues $53,576 $48,597 10.2% $150,760 $141,908 6.2%
Adjusted EBITDA (1) 14,285 11,987 19.2% 37,643 33,939 10.9%
Net income $ 6,394 $ 4,074 56.9% $ 15,536 $ 10,374 49.8%
======== ======== ======== ======== ======== ========
Basic EPS $ 0.38 $ 0.24 58.3% $ 0.92 $ 0.62 48.4%
Diluted EPS $ 0.37 $ 0.24 54.2% $ 0.90 $ 0.61 47.5%
(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: "Our strong 2015 third quarter results reflect top-line growth at both Atlantis Casino Resort Spa and Monarch Casino Black Hawk. The 10.2% rise in quarterly net revenues, combined with our continued focus on operating expense management, drove a 19.2% increase in Adjusted EBITDA to $14.3 million.
"Overall, Monarch's solid third quarter operating results again highlight our properties' strong competitive position. Monarch Black Hawk's growth reflects the late August completion of our comprehensive redesign and upgrade of the existing facility's interior and our refined operating disciplines. In Reno, Atlantis is poised to benefit from the strengthening local economy thanks to its location and status as a AAA-rated Four Diamond casino resort with a world-class spa and market-leading fine dining.
"Atlantis is benefiting from the early stages of what we believe will be a period of long-term growth for Reno. We continue to upgrade the facility to further distinguish it as the market's resort destination of choice. Construction is underway to convert leased land and buildings adjacent to the Atlantis into 300 additional surface parking spaces, an increase in surface parking adjacent to the Atlantis of approximately 34%. When completed later this year, the 300 new parking spaces will provide more convenient guest access to a primary casino floor entrance. The required removal of buildings to make way for the new parking area will also enhance sightlines and create direct access to Atlantis from an additional major local traffic artery. Long-term, we expect projected job growth, rising real estate values and the overall economic improvement in Reno to complement our initiatives at Atlantis.
"We are very excited to have completed the redesign and upgrade of the existing Monarch Black Hawk casino in August, bringing to the facility's interior the same quality, ambiance and finishes of the ongoing master planned expansion that will transform Monarch Black Hawk into a full-scale casino resort. With the existing facility's interior upgrade now complete, we re-established the number of gaming machines on the floor to approximately 700, which reflects an approximate 25% increase in machines compared to the end of the second quarter. The interior redesign and upgrade have been well received by our guests as reflected in our third quarter results.
"While construction on the garage continues to progress, our general contractor recently determined that its original timeline for the new garage was too aggressive. We now expect to top off the structure this November and complete and open it to the public in the second quarter of 2016. Importantly, the construction cost is fixed in our contract and, as such, the cost to complete the garage will not change as a result of the schedule change. As of September 30, 2015, the remaining cost to complete the garage is approximately $18 - $21 million.
"The estimated total construction cost for the Monarch Black Hawk hotel tower, expanded casino and additional restaurants remains unchanged at approximately $229 - $234 million. However, because the garage construction delay has also delayed the demolition of the existing garage, which is the future site of the new hotel tower and casino expansion, we now expect to complete the full scope of the expansion work in the third quarter of 2018. We continue to expect to fund the cost of the remaining expansion work at Monarch Black Hawk from a combination of operating cash flow and an increase in, or replacement of, our credit facility.
"Going forward, our expectations for continued improvement in the economic environment in Reno, the healthy and expanding Denver economy, the benefit of ongoing improvements at Atlantis and the completion of our extensive upgrade of the existing Monarch Black Hawk facility position Monarch to generate strong financial results into 2016."
Summary of 2015 Third Quarter Operating Results
For the 2015 third quarter, consolidated net revenues of $53.6 million increased 10.2% year over year, driven by growth at both Atlantis and Monarch Black Hawk. Casino revenues rose 10.3% on a year-over-year basis, food and beverage revenues were up 8.5% and hotel revenues increased 4.8%. Consolidated promotional allowances increased $0.5 million, or 4.7%. As a percentage of gross revenues, promotional allowances decreased to 18.2% from 19.0% in the prior year third quarter.
Consolidated Adjusted EBITDA increased $2.3 million, or 19.2%, year over year to $14.3 million in the third quarter of 2015.
Casino operating expenses as a percentage of casino revenues improved to 40.9% for the third quarter of 2015 compared to 42.0% in the third quarter of 2014 primarily due to higher casino revenues. Food and beverage operating expense as a percentage of food and beverage revenues for the 2015 third quarter increased to 39.2% from 38.8% in the 2014 third quarter due primarily to higher payroll and repairs and maintenance expenses. Hotel operating expenses as a percentage of hotel revenues were essentially flat at 25.2% for the third quarter of 2015 compared to 25.1% for the prior year.
Selling, general and administrative ("SG&A") expenses for the 2015 third quarter increased $0.9 million, or 6.7%, over the 2014 third quarter, driven primarily by higher repairs, maintenance and marketing expenses.
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, 2015:
-------------------------------------------------------
Total Spent
Through
September 30, Left to Estimated
$ in millions Cost 2015 Spend Completion Date
----------- --------------- ----------- ---------------
I. Existing Facility
Monarch Casino
Black Hawk (1) $76 $76 - Completed
Interior
completed;
Existing Facility Exterior 2016-
Upgrade (2)(3) $34 - $36 $17 $17 - $19 2017
----------- --------------- -----------
Total Existing
Facility $110 - $112 $93 $17 - $19
----------- --------------- -----------
II. Expansion
Acquired Land
Parcels $10 $10 - Completed
Parking Structure
(3)(4) $38 - $41 $20 $18 - $21 2Q16
Hotel Tower &
Casino (5) $229 - $234 - $229 - $234 3Q18
Other (3) $8 - $10 $8 $0 - $2 3Q18
----------- --------------- -----------
Total Expansion $285 - $295 $38 $247 - $257
----------- --------------- -----------
Total Cost $395 - $407 $131 $264 - $276
=========== =============== ===========
(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 expects to fund the amount left to spend primarily from
operating cash flow and, to a lesser extent, from its credit facility.
(4) As described above and below, the Company now expects to complete the
parking structure in the second quarter of 2016.
(5) The Company anticipates funding the hotel tower and casino expansion
from a combination of operating cash flow and an expansion or replacement of
its credit facility.
During the third quarter of 2015, the Company completed the final phase of the interior redesign and upgrade of its existing Monarch Black Hawk facility and opened the fully redesigned and upgraded existing facility to the public on August 29, 2015. The Company also made further progress on construction of the facility's new parking structure.
Monarch now expects to complete construction on the parking structure, and open it to the public, in the second quarter of 2016. This timeline reflects the general contractor's recent revision to the original completion date of December 2015 which it determined to be too aggressive. Because the construction cost of the parking structure is fixed contractually, the extended timeline will not result in additional cost to complete the structure. Monarch is in the process of finalizing the appointment of a new general contractor for the construction of the hotel tower and casino expansion. Once the new parking structure is completed, the existing parking structure will be razed and construction of the hotel tower and casino expansion will begin with an expected completion date in the third quarter of 2018. Monarch anticipates the total cost of the new hotel tower and casino expansion to remain unchanged at $229 - $234 million.
Credit Facility
During the 2015 third quarter, the Company made net principal payments of $4.3 million which reduced the amount outstanding on its credit facility to $37.9 million at September 30, 2015, compared to $42.2 million outstanding as of June 30, 2015. Capital expenditures of $9.5 million in the third quarter of 2015 were funded from operating cash flows and primarily represent costs related to the ongoing redesign and expansion project at Monarch Black Hawk.
Interest expense, net of amounts capitalized, for the 2015 third quarter decreased to $0.1 million from $0.3 million for the third quarter of 2014 due to lower outstanding borrowings and a lower interest rate in the 2015 third quarter compared to the 2014 third quarter.
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 and outlooks; (iii) plans, objectives and expectations regarding Monarch Black Hawk; and (iv) plans, costs, financing, construction, completion and opening timelines of upgraded and 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 upgrade 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:
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 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 700 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 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,
------------------ ------------------
2015 2014 2015 2014
-------- -------- -------- --------
Revenues
Casino $ 41,394 $ 37,512 $117,384 $109,810
Food and beverage 14,725 13,573 41,803 39,043
Hotel 6,646 6,339 17,211 17,014
Other 2,723 2,553 7,991 7,487
-------- -------- -------- --------
Gross revenues 65,488 59,977 184,389 173,354
Less promotional allowances (11,912) (11,380) (33,629) (31,446)
-------- -------- -------- --------
Net revenues 53,576 48,597 150,760 141,908
-------- -------- -------- --------
Operating expenses
Casino 16,913 15,743 49,477 45,882
Food and beverage 5,772 5,267 16,515 15,781
Hotel 1,674 1,589 4,869 4,673
Other 901 867 2,949 2,654
Selling, general and
administrative 14,349 13,444 40,245 39,855
Depreciation and amortization 3,918 4,180 12,157 13,504
(Gain) loss on disposition of
assets - - (20) 249
Colorado ballot initiative costs - 841 - 1,845
-------- -------- -------- --------
Total operating expenses 43,527 41,931 126,192 124,443
-------- -------- -------- --------
Income from operations 10,049 6,666 24,568 17,465
-------- -------- -------- --------
Other expenses
Interest expense, net of amounts
capitalized (137) (255) (537) (816)
-------- -------- -------- --------
Total other expense (137) (255) (537) (816)
-------- -------- -------- --------
Income before income taxes 9,912 6,411 24,031 16,649
Provision for income taxes (3,518) (2,337) (8,495) (6,275)
-------- -------- -------- --------
Net income $ 6,394 $ 4,074 $ 15,536 $ 10,374
======== ======== ======== ========
Earnings per share of common stock
Net income
Basic $ 0.38 $ 0.24 $ 0.92 $ 0.62
Diluted $ 0.37 $ 0.24 $ 0.90 $ 0.61
Weighted average number of common
shares and potential common shares
outstanding
Basic 16,979 16,800 16,898 16,709
Diluted 17,343 17,016 17,281 17,113
MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except shares)
September 30, December 31,
2015 2014
------------- -------------
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 19,237 $ 21,583
Receivables, net 3,670 3,047
Income taxes receivable 979 1,139
Inventories 2,688 2,846
Prepaid expenses 4,705 4,021
Deferred income taxes 1,626 1,626
------------- -------------
Total current assets 32,905 34,262
------------- -------------
Property and equipment
Land 29,415 29,415
Land improvements 6,701 6,701
Buildings 150,771 150,821
Buildings improvements 20,027 18,142
Furniture and equipment 129,026 125,671
Construction in progress 35,614 15,672
Leasehold improvements 1,347 1,347
------------- -------------
372,901 347,769
Less accumulated depreciation and
amortization (177,342) (167,498)
------------- -------------
Net property and equipment 195,559 180,271
------------- -------------
Other assets
Goodwill 25,111 25,111
Intangible assets, net 6,491 7,366
Deferred income taxes 4,683 4,682
Other assets, net 380 609
------------- -------------
Total other assets 36,665 37,768
------------- -------------
Total assets $ 265,129 $ 252,301
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 8,134 $ 7,933
Construction accounts payable 3,693 1,790
Accrued expenses 19,992 19,327
------------- -------------
Total current liabilities 31,819 29,050
Long-term debt 37,900 46,300
------------- -------------
Total liabilities 69,719 75,350
------------- -------------
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; 16,981,355 outstanding at September
30, 2015; 16,812,794 outstanding at
December 31, 2014 191 191
Additional paid - in capital 23,148 22,985
Treasury stock, 2,114,945 shares at
September 30, 2015; 2,283,506 shares at
December 31, 2014 (30,210) (32,970)
Retained earnings 202,281 186,745
------------- -------------
Total stockholders' equity 195,410 176,951
------------- -------------
Total liabilities and stockholders' equity $ 265,129 $ 252,301
============= =============
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,
-------------------- -------------------
2015 2014 2015 2014
--------- --------- -------- ---------
Adjusted EBITDA (1) $ 14,285 $ 11,987 $ 37,643 $ 33,939
Expenses:
Stock based compensation (318) (300) (938) (876)
Depreciation and amortization (3,918) (4,180) (12,157) (13,504)
Colorado ballot initiative
costs - (841) - (1,845)
Interest expense, net of amount
capitalized (137) (255) (537) (816)
Gain (loss) on disposition of
assets - - 20 (249)
Provision for income taxes (3,518) (2,337) (8,495) (6,275)
--------- --------- -------- ---------
Net income $ 6,394 $ 4,074 $ 15,536 $ 10,374
========= ========= ======== =========
(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 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: Ron Rowan Chief Financial Officer 775/825-4700 rrowan@monarchcasino.com Joseph Jaffoni, Richard Land, James Leahy JCIR 212/835-8500 mcri@jcir.com