Monarch Casino & Resort Inc. Reports Operating Results (10-Q)
Monarch Casino & Resort Inc. has a market cap of $102.54 million; its shares were traded at around $6.36 with a P/E ratio of 19.27 and P/S ratio of 0.73. Monarch Casino & Resort Inc. had an annual average earning growth of 10.5% over the past 5 years. Highlight of Business Operations: For the three months ended September 30, 2009, our net income was $2.0 million, or $0.13 per diluted share, on net revenues of $34.8 million, a decrease from net income of $4.0 million, or $0.25 per diluted share, on net revenues of $38.8 million for the three months ended September 30, 2008. Income from operations for the three months ended September 30, 2009 totaled $3.6 million when compared to $6.2 million for the same period in 2008. Net revenues decreased 10.3%, and net income decreased 50.0%, when compared to last years third quarter.
During the three month period ended September 30, 2009, we paid down $3.45 million, net, from our $60 million credit facility which reduced the outstanding balance at September 30, 2009 to $48.65 million. Because of a higher average borrowing balance in the third quarter of 2009 as compared to the third quarter of 2008, interest expense increased during the third quarter of 2009 to $487 thousand from $83 thousand in the third quarter of 2008. The higher borrowing balance was attributable to borrowing to fund the Capital Projects.
For the nine months ended September 30, 2009, our net income was $4.8 million, or $0.29 per diluted share, on net revenues of $101.9 million, a decrease from net income of $9.1 million, or $0.53 per diluted share, on net revenues of $108.4 million during the nine months ended September 30, 2008. Income from operations for the 2009 nine-month period totaled $8.8 million, compared to $13.7 million for the same period in 2008. Net revenues decreased 6.0%, and net income decreased 47.3% when compared to the nine-month period ended September 30, 2008.
Hotel revenues for the nine months ended September 30, 2009 remained relatively flat at $17.6 million for the nine months ended September 30, 2009 compared to $17.7 million for the nine months ended September 30, 2008. Decreases in hotel occupancy and the average daily room rate (ADR) were offset by higher revenue from our new spa which opened in January 2009 and revenue from a $10 per day resort fee, paid by our hotel guests, which we implemented on June 1, 2009. Hotel revenues for the first six months of 2009, and all of 2008, also include a $3 per occupied room energy surcharge. The Atlantis experienced a slight decrease in the ADR during the 2009 nine-month period to $66.83, compared to $67.15 for the same period in 2008. The occupancy rate decreased to 83.2% for the nine-month period in 2009, from 87.9% for the same period in 2008. Hotel operating expenses as a percentage of hotel revenues in the first nine months of 2009 were 35.5%, slightly higher than the 34.3% for the same period in 2008. The increase was primarily due to the increased operating costs of the new spa.
SG&A expenses decreased 6.7% to $36.1 million in the first nine months of 2009, compared to $38.7 million in the first nine months of 2008, due primarily to reductions in marketing expense of approximately $2.6 million, payroll and benefits expense of approximately $700 thousand and miscellaneous expense reductions of approximately $100 thousand all partially offset by increased utilities expense of approximately $600 thousand related to our expanded facilities and higher bad debt expense of approximately $200 thousand. As a percentage of net revenue, SG&A expenses decreased slightly to 35.5% in the 2009 nine-month period from 35.7% in the same period in 2008.
A driveway was completed and opened on September 30, 2004, that is being shared between the Atlantis and a shopping center (the Shopping Center) directly adjacent to the Atlantis. The Shopping Center is controlled by an entity whose owners include our controlling stockholders. As part of this project, in January 2004, we leased a 37,368 square-foot corner section of the Shopping Center for a minimum lease term of 15 years at an annual rent of $300,000, subject to increase every year beginning in the 61st month based on the Consumer Price Index. We also use part of the common area of the Shopping Center and pay our proportional share of the common area expense of the Shopping Center. We have the option to renew the lease for three five-year terms, and at the end of the extension periods, we have the option to purchase the leased section of the Shopping Center at a price to be determined based on an MAI Appraisal. The leased space is being used by us for pedestrian and vehicle access to the Atlantis, and we may use a portion of the parking spaces at the Shopping Center. The total cost of the project was $2.0 million; we were responsible for two thirds of the total cost, or $1.35 million. The cost of the new driveway is being depreciated over the initial 15-year lease term; some components of the new driveway are being depreciated over a shorter period of time. We paid approximately $225,000 in lease payments for the leased driveway space at the Shopping Center during the nine months ended September 30, 2009.
Read the The complete ReportMCRI is in the portfolios of Chuck Akre of Akre Capital Management, LLC.