Financial results for 2006 fourth quarter and full year
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934


Date of Report (Date of earliest event reported):
February 20, 2007
 
Monarch Casino & Resort, Inc.
(Exact name of registrant as specified in its charter)

 
Nevada
 
0-22088
 
88-0300760
 
(State or other jurisdiction
(Commission
(IRS Employer
of incorporation)
File Number)
Identification No.)

 
3800 South Virginia Street, Reno, Nevada
 
89502
(Address of principal executive offices)
(Zip Code)
   
Registrant’s telephone number, including area code:
(775) 335-4600
 
Not applicable.
(Former name or former address, if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 


Item 2.02 Results of Operations and Financial Condition


MONARCH CASINO REPORTS RECORD BREAKING FOURTH QUARTER AND FULL-YEAR RESULTS

Highlights from the fourth quarter record results:
·  
Net revenue of $37.0 million
·  
Income from operations of $7.7 million ($8.2 million excluding stock option expense)
·  
EBITDA(1) of $9.8 million ($10.3 million excluding stock option expense)
·  
Diluted EPS of 27 cents (28 cents excluding stock option expense, net of tax)

Highlights from the full-year record results:
·  
Net revenue of $152.0 million
·  
Income from operations of $33.5 million ($36.8 million excluding stock option expense)
·  
EBITDA(1)  of $42.1 million ($45.3 million excluding stock option expense)
·  
Diluted EPS of $1.15 ($1.26 excluding stock option expense, net of tax)


RENO, NV - February 20, 2007 - Monarch Casino & Resort, Inc. (NASDAQ: MCRI) (the "Company"), owner of the Atlantis Casino Resort in Reno, Nevada, today announced record fourth-quarter and full-year results for net revenue, income from operations, EBITDA(1) and diluted EPS for the periods ended December 31, 2006.

RESULTS FOR THE QUARTER ENDED DECEMBER 31, 2006
The Company reported record fourth-quarter net revenue of $37.0 million, a 6.0% increase over the comparative quarter in 2005, and announced that the revenue generated by each of its revenue centers was also the highest ever reported for a fourth quarter. Specifically, casino, food and beverage and hotel operations each drove revenue increases over the same quarter of the prior year of 6.3%, 3.0% and 11.3%, respectively.
The Company announced quarterly income from operations of $7.7 million, EBITDA(1) of $9.8 million and diluted EPS of 27 cents, each of which were also the highest ever reported for a fourth quarter even with the recognition of $525,000 of stock option expense as required by the new accounting rules of SFAS 123R. Beginning January 1, 2006, these new accounting rules required that companies record compensation expense related to employee stock option grants. No similar expense is reflected in the financial statements for periods prior to 2006. Excluding the effects of this stock option expense from the current quarter’s results, the Company would have posted income from operations of $8.2 million, EBITDA(1) of $10.3 million and diluted EPS of 28 cents, and when compared to the same quarter of the prior year; these results represent increases of 9.1%, 7.1% and 7.7%, respectively.
The Company reported a $1.4 million, or 14.2%, increase in selling, general and administrative expenses over the same quarter of the prior year. The primary drivers of this increase were stock option expense of $487,000 related to the implementation of the new accounting rules as required by SFAS 123R, increased marketing and promotional expense, increased payroll costs, increased legal fees and higher energy costs.

 RESULTS FOR THE YEAR ENDED DECEMBER 31, 2006
For the year, the Company reported record net revenue of $152.0 million, an 8.7% increase over its 2005 net revenue, and announced that revenue generated by each of its revenue centers was the highest reported for any year. Specifically, casino, food and beverage and hotel operations each drove revenue increases over the prior year of 9.3%, 6.4% and 10.5%, respectively.
The Company announced income from operations of $33.5 million, EBITDA(1) of $42.1 million and diluted EPS of $1.15; each of which were the highest ever reported even with the recognition of $3.3 million of stock option expense as required by the new accounting rules of SFAS 123R. Excluding the effects of this stock option expense from fiscal 2006 results, the Company would have posted income from operations of $36.8 million, EBITDA(1) of $45.3 million and diluted EPS of $1.26, and when compared to the prior year, these results represent increases of 11.2%, 9.4% and 14.6%, respectively.
The Company reported an $8.2 million, or 21.6%, increase in selling, general and administrative expenses over the prior year. The primary drivers of this increase were stock option expense of $3.1 million, $1.2 million of which related to a one-time, non-cash charge related to early vesting of stock options for the Company’s former Co-Chairman and Chief Financial Officer who resigned in the second quarter of 2006; increased marketing and promotional expense; increased payroll costs; increased legal fees; higher bad debt expense and higher energy costs.
Monarch’s CEO and Co-Chairman John Farahi commented on the Company’s performance: “These results are the product of the dedication and quality work of our team. In addition to representing records for a fourth quarter and for a full year, they add to our team’s history of delivering consistently strong results. We are looking forward to the upcoming year as we begin the next phase of our expansion. ”
The Company commented that it plans to break ground on the next phase of its expansion in the second quarter of 2007 with completion expected in the second quarter of 2008. New space will be added to the first floor casino level, the second and third floors and the basement level totaling approximately 116,000 square feet. The existing casino floor will be expanded by over 10,000 square feet, or approximately 20%. The first floor casino plans include a redesigned, updated and expanded race and sports book of approximately 4,000 square feet and an enlarged poker room. The expansion will also include a New York-style deli restaurant. The second floor expansion will create additional ballroom and convention space of approximately 27,000 square feet, doubling the existing facilities. The spa and fitness center will be remodeled and expanded to create an ultra-modern spa and fitness center facility. The Company expects to fund the cost of the expansion entirely out of cash on-hand and operating cash flow.
The Company also announced today that its 2007 Annual Meeting of Stockholders will be held on Tuesday, May 22, 2007 at 10am local time, at the Company’s Atlantis Casino Resort, 3800 South Virginia Street in Reno, Nevada. The record date for stockholders entitled to vote at the Annual Meeting is Thursday, April 5, 2007.
Monarch Casino & Resort, Inc., through its wholly-owned subsidiary, owns and operates the tropically-themed Atlantis Casino Resort in Reno, Nevada. The Atlantis is the closest hotel-casino to, and is directly across the street from, the Reno-Sparks Convention Center. The Atlantis features a Sky Terrace, a unique structure rising approximately 55 feet above street level and spanning 160 feet across Virginia Street with no intermediate support pillars. The Sky Terrace connects the Atlantis to a 16-acre parcel of land owned by the Company, that is compliant with all casino zoning requirements and is suitable and available for future expansion and growth. Currently, the Company uses it as additional paved parking for the Atlantis. The existing Atlantis site offers almost 1,000 guest rooms in three contiguous high-rise hotel towers and a motor lodge. The Atlantis features approximately 51,000 square feet of high-energy casino space with 38 table games and approximately 1,450 slot and video poker machines, a sports book, Keno and a poker room, and offers a variety of dining choices in the form of nine high-quality food outlets.
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 and (ii) future expansion plans. The actual results may differ materially from those described in any forward-looking statements. Additional information concerning potential factors that could affect the Company’s financial results is included in the Company’s Securities and Exchange Commission filings, which are available on the Company's web site.

Contacts: Ron Rowan, CFO at (775) 825-4700 or rrowan@monarchcasino.com
John Farahi, CEO at (775) 825-4700 or JohnFarahi@monarchcasino.com

For additional information visit Monarch's web site at monarchcasino.com.














(1)  
"EBITDA" consists of net income plus provision for income taxes, interest expense, depreciation and amortization less interest income. 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 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. Monarch Casino & Resort, Inc.
 
 
MONARCH CASINO & RESORT, INC.
Condensed Consolidated Statements of Income
 
 
Three Months Ended
  
Twelve Months Ended
 
December 31,
  
December 31,
 
2006
  
2005
  
2006
  
2005
 
(UNAUDITED)
  
(UNAUDITED)
  
 
  
 
Revenues
              
Casino
$25,711,186
 
$24,178,576
 
$ 103,332,559
 
$ 94,501,028
Food and beverage
10,267,553
 
9,968,695
 
41,037,321
 
38,564,365
Hotel
5,831,944
 
5,241,806
 
26,412,755
 
23,909,915
Other
1,229,977
 
1,229,554
 
4,878,840
 
4,690,105
Gross revenues
43,040,660
 
40,618,631
 
175,661,475
 
161,665,413
Less promotional allowances
(6,047,994)
  
(5,726,735)
  
(23,692,521)
  
(21,880,793)
Net revenues
36,992,666
 
34,891,896
 
151,968,954
 
139,784,620
Operating expenses
    
 
  
 
  
 
Casino
8,650,752
 
8,314,484
 
34,134,518
 
31,990,758
Food and beverage
4,898,995
 
4,765,009
 
19,533,532
 
18,795,268
Hotel
2,070,882
 
1,833,550
 
8,383,382
 
7,696,576
Other
333,783
 
340,867
 
1,450,100
 
1,340,556
Selling, general and administrative
11,253,810
 
9,850,834
 
46,309,938
 
38,073,313
Gaming development costs
5,753
 
165,894
 
106,477
 
439,984
Depreciation and amortization
2,128,543
 
2,127,861
 
8,559,374
 
8,379,033
Total operating expenses
29,342,518
 
27,398,499
 
118,477,321
 
106,715,488
Income from operations
7,650,148
 
7,493,397
 
33,491,633
 
33,069,132
Other income (expense)
              
Interest income
275,319
 
-
 
466,050
 
257
Interest expense
(22,877)
  
(122,411)
  
(97,722)
  
(1,013,377)
Total income (expense)
252,442
 
(122,411)
  
368,328
 
(1,013,120)
Income before income taxes
7,902,590
 
7,370,986
 
33,859,961
 
32,056,012
Provision for income taxes
2,783,590
 
2,470,552
 
11,779,590
 
11,020,552
Net income
$ 5,119,000
 
$ 4,900,434
 
$ 22,080,371
 
$ 21,035,460
               
Earnings per share of common stock
              
Net income
              
Basic
$ 0.27
 
$ 0.26
 
$ 1.16
 
$ 1.12
Diluted
$ 0.27
 
$ 0.26
 
$ 1.15
 
$ 1.10
               
Weighted average number of
              
common shares and potential
            
common shares outstanding:
            
Basic
19,063,439
  
18,873,751
  
18,990,331
  
18,848,532
Diluted
19,289,563
  
19,129,889
  
19,274,847
  
19,093,777

 
 
 
 
 
 
 
MONARCH CASINO & RESORT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
                     
 
    
December 31, 
          
December 31,
  
     
2006
          
2005
  
ASSETS
                
Current assets
                    
Cash
  
$
36,985,187
        
$
12,886,494
  
Receivables, net
    
3,268,970
         
3,559,602
 
Federal income tax refund receivable
    
-
         
286,760
 
Inventories
    
1,471,667
         
1,456,453
 
Prepaid expenses
    
2,833,126
         
2,401,619
 
Deferred income taxes
    
965,025
         
1,326,224
 
Total current assets
    
45,523,975
         
21,917,152
 
Property and equipment
                    
Land
    
10,339,530
         
10,339,530
 
Land improvements
    
3,166,107
         
3,166,107
 
Buildings
    
78,955,538
         
78,955,538
 
Building improvements
    
10,435,062
         
10,398,814
 
Furniture & equipment
    
72,708,061
         
67,393,755
 
Leasehold improvements
    
1,346,965
         
1,346,965
 
     
176,951,263
         
171,600,709
 
Less accumulated depreciation and amortization
    
(84,325,578
)
        
(76,117,346
)
Net property and equipment
    
92,625,685
         
95,483,363
 
Other assets, net
    
231,247
         
269,524
 
Total assets
  
$
138,380,907
        
$
117,670,039
  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                    
Current liabilities
                    
Accounts payable
   
8,590,669
         
7,335,630
 
Accrued expenses
    
9,878,851
         
8,722,221
 
Federal income taxes payable
    
16,457
          
-
  
Total current liabilities
    
18,485,977
         
16,057,851
 
Long-term debt, less current maturities
    
-
         
8,100,000
 
Deferred income taxes
    
4,248,614
         
5,953,193
 
Stockholders' equity
Preferred stock, $.01 par value, 10,000,000
shares authorized; none issued
                    
-
         
-
 
Common stock, $.01 par value, 30,000,000
shares authorized; 19,072,550 shares issued;
                    
               
19,065,968 outstanding at 12/31/06
                    
18,879,310 outstanding at 12/31/05
    
190,726
         
190,726
 
Additional paid-in capital
    
23,205,045
         
17,882,827
 
Treasury stock, 6,582 shares at 12/31/06
                    
193,240 shares at 12/31/05, at cost
    
(24,145
)
        
(708,877
)
Retained earnings
   
92,274,690
         
70,194,319
 
Total stockholders' equity
    
115,646,316
         
87,558,995
 
Total liabilities and stockholder's equity
  
$
138,380,907
        
$
117,670,039
  
 

 
MONARCH CASINO & RESORT, INC.
Reconciliation of Net Income to EBITDA(1)



 
Three Months Ended
  
Twelve Months Ended
 
December 31,
December 31,
 
2006
  
2005
  
2006
  
2005
 
(UNAUDITED)
  
(UNAUDITED)
  
(UNAUDITED)
  
(UNAUDITED)
Net Income
$ 5,119,000
 
$ 4,900,434
 
$ 22,080,371
 
$ 21,035,460
Adjustments
              
Provision for income taxes
2,783,590
 
2,470,552
 
11,779,590
 
11,020,552
Interest expense
22,877
 
122,411
 
97,722
 
1,013,377
Depreciation & amortization
2,128,543
 
2,127,861
 
8,559,374
 
8,379,033
Interest income
(275,319)
  
-
  
(466,050)
  
(257)
EBITDA(1)
$ 9,778,691
 
$ 9,621,258
 
$ 42,051,007
 
$ 41,448,165
               
             
                 
                 
             
             
               
               
               
               
             














(1) "EBITDA" consists of net income plus provision for income taxes, interest expense, depreciation and amortization less interest income. 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 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.



 

 

 
SIGNATURES
 
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.

 
Monarch Casino and Resort, Inc.
 
(Registrant)
   
Date February 20, 2007
  
 
/s/ Ronald Rowan______________
 
Ronald Rowan
Chief Financial Officer and Treasurer