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: July 20, 2016
(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 July 20, 2016, Monarch Casino & Resort. Inc. (the "Company") issued a press release announcing its financial results for the quarter ended June 30, 2016. 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: July 20, 2016 |
MONARCH CASINO AND RESORT, INC.
By: /s/ Edwin S. Koenig |
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| Exhibit No. | Description |
| 99.1 | Press Release of Monarch Casino and Resort, Inc. dated July 20, 2016 |
Second Quarter Adjusted EBITDA Increases 10.3% to $13.8 Million; Secures $250-Million Amended Credit Agreement to Support Monarch Casino Black Hawk Expansion
RENO, NV -- (Marketwired - July 20, 2016) - Monarch Casino & Resort, Inc. (NASDAQ: MCRI) ("Monarch" or "the Company") today reported operating results for the quarter and six months ended June 30, 2016, as summarized below:
($ 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:
-----------------------------------------------------
Total Spent
Through June Left to Estimated
$ in millions Cost 30, 2016 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 $18 $16 - $18 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:
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 Six months ended
June 30, 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 Six Months Ended
June 30, 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.
Contacts: David Farahi Chief Operating Officer 775/825-4700 dfarahi@monarchcasino.com Joseph Jaffoni, Richard Land, James Leahy JCIR 212/835-8500 mcri@jcir.com