MONARCH CASINO & RESORT, INC. 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.
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.
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.
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
Monarch Casino & Resort, Inc.
Condensed Consolidated Statements of Income (unaudited)
(in thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
-------------------------- --------------------------
2014 2013 2014 2013
------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited)
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, December 31,
2014 2013
------------- -------------
ASSETS (unaudited)
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 December 31, 2013 (33,209) (39,797)
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 Six months ended
June 30, 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.
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