Monarch Casino & Resort, Inc. Reports Second Quarter Net

RENO, NV--(Marketwired - Jul 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:

$ in millions				Cost		Total Spent Through June 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 2016-2017
		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:

• 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 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 June 30,								Six months ended 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 June 30,								Six Months Ended 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.