Red Rock Resorts, Inc. ("Red Rock Resorts" "we" or the "Company")
(NASDAQ:RRR) today announced the results of its operations for the
second quarter ended June 30, 2016.
Key Second Quarter Highlights:
- Successfully completed an initial public offering of 29.5
million Class A shares generating net proceeds of $541 million,
including the exercise of the underwriters’ overallotment.
- Announced its consolidated subsidiary, Station Casinos LLC
(“Station Casinos”), entered into a definitive agreement to acquire
the Palms Casino Resort for $312.5 million. It is anticipated
that the acquisition will close by the end of the third quarter of
2016, subject to obtaining necessary regulatory approvals.
- Completed a $2.4 billion refinancing of Station Casinos’ credit
facility, which provides increased borrowing capacity, additional
financial flexibility and reduced borrowing costs.
“The second quarter was a transformational period for Red Rock
Resorts as we successfully completed our initial public offering,
announced an agreement by Station Casinos to acquire the Palms
Casino Resort, and completed a refinancing of Station Casinos’
credit facility,” said Marc J. Falcone, Executive Vice President,
Chief Financial Officer and Treasurer. “We believe these
significant accomplishments, combined with the strength of our
existing operations, position us well for future growth.”
Second Quarter Financial Highlights:
- Net revenues increased 4.0% to $351.5 million as compared to
$337.8 million in the prior year period, the thirteenth consecutive
quarter of year-over-year net revenue growth.
- Net income decreased 22.7% to $21.7 million as compared to
$28.1 million in the prior year period. The decrease was
primarily related to an increase in the provision for income tax,
as well as a loss on the extinguishment and modification of debt,
which was partially offset by an increase in operating income in
the quarter.
- Adjusted EBITDA increased 6.8% to $117.4 as compared to $109.9
million in the prior year period, the twenty-first consecutive
quarter of year-over-year Adjusted EBITDA growth.
- Adjusted EBITDA Margin increased 90 basis points year-over-year
to 33.4%, the fifteenth consecutive quarter of Adjusted EBITDA
margin growth.
“Our second quarter performance demonstrated solid operating
results as we achieved our highest second quarter Adjusted EBITDA
since 2008,” said Mr. Falcone.
Second Quarter Operational Overview
Las Vegas Operations
Net revenues increased $7.4 million or 2.3% year-over-year to
$322.9 million from $315.5 million in the prior year
period. Adjusted EBITDA increased $2.8 million or 2.7%
year-over-year to $104.6 million from $101.8 million in the prior
year period. Adjusted EBITDA margin improved 10 basis points
to 32.4% in the second quarter of 2016. Gaming revenues were
up 1.8% in the quarter led by strong results in slots and table
games offset by lower sports hold. Non-gaming revenues were up
3.8%, driven by solid hotel and food and beverage performance, as
the Company continues to benefit from investments in non-gaming
areas.
“Strong operating results in April and June were partially
offset by lower results of operation in May compared to the prior
year period due, in part, to the positive impact of major citywide
events held in May 2015. In addition, the quarter was
negatively impacted by lower sports hold, as well as additional
expenses related to the tenth anniversary celebration at Red Rock
Casino Resort & Spa,” said Mr. Falcone. “Key economic
indicators in Las Vegas remain robust and we believe we will
continue to benefit from these positive trends going forward,”
concluded Mr. Falcone.
Native American Segment
Native American management fees were up $5.7 million or 40.0%
year-over-year to $20.1 million from $14.4 million in the prior
year period. The Company’s Native American operations
continued to produce strong results, with Graton Resort &
Casino and Gun Lake Casino both achieving double-digit management
fee growth in the quarter.
Corporate and Other
Corporate and other expense increased by $1.0 million or 16.1%
during the second quarter to $7.3 million from $6.3 million
primarily due to expenses associated with the Company’s initial
public offering.
Adjusted EBITDA is not a generally accepted accounting principle
(“GAAP”) measurement and is presented solely as a supplemental
disclosure because the Company believes that it is a widely used
measure of operating performance in the gaming industry and is a
principal basis for valuation of gaming companies. Adjusted EBITDA
is further defined under the heading “Presentation of Financial
Information” and a reconciliation of Adjusted EBITDA to income
before income tax is included in the financial information attached
hereto.
Balance Sheet Highlights
The Company’s cash balance as of June 30, 2016 was $251.4
million. Total outstanding debt was $2.26 billion, which
excludes the non-recourse land loan of $115.9 million. At June 30,
2016, the Company’s $685 million revolving credit facility was
undrawn and debt, net of excess cash, to Adjusted EBITDA ratio was
4.5 times, excluding the non-recourse land loan.
Subsequent Event
In July, the Company announced that its Board of Directors
declared a cash dividend of $0.10 per Class A common share for the
third quarter. The dividend will be payable on August 30,
2016 to all stockholders of record as of the close of business
today. Prior to the payment of such dividend, Station Holdco
LLC (“Station Holdco”) will make a cash distribution to all unit
holders of record, including the Company, of $0.10 per unit for a
total distribution of approximately $11.6 million,
approximately $4.1 million of which is expected to be
distributed to the Company and approximately $7.5 million of which
is expected to be distributed to the other unit holders of record
of Station Holdco.
“We are extremely excited about the strategic accomplishments
achieved during the quarter, which included our reintroduction as a
public company,” said Mr. Falcone. “We believe that our business is
well-positioned to achieve continued operating momentum that will
allow us to generate strong free cash flow growth and drive
long-term equity value.”
Conference Call Information
The Company will host a conference call today at 1:30 p.m.
Pacific Time to discuss its second quarter financial results. The
conference call will consist of prepared remarks from the Company
and will include a question and answer session. Those interested in
participating in the call should dial (877) 793-4361 or (615)
247-0185 for international callers, approximately 15 minutes before
the call start time. A replay of the call will be available from
today through August 22, 2016 at www.redrockresorts.com. A live
audio webcast of the call will also be available at
www.redrockresorts.com.
Presentation of Financial Information
Adjusted EBITDA is a non-GAAP measure that is presented solely
as a supplemental disclosure. We believe that Adjusted EBITDA is a
widely used measure of operating performance in our industry and is
a principal basis for valuation of gaming companies. We believe
that in addition to operating income, Adjusted EBITDA is a useful
financial performance measurement for assessing our operating
performance because it provides information about the performance
of our ongoing core operations excluding non-cash expenses,
financing costs, and other non-operational items. Adjusted EBITDA
includes income before income tax plus preopening, depreciation and
amortization, share-based compensation, a donation to UNLV, asset
impairment, write-downs and other charges, net, interest expense,
net, loss on extinguishment and modification of debt, and change in
fair value of derivative instruments, and excludes the impact of a
settlement agreement and Adjusted EBITDA attributable to the
non-controlling interests of MPM. To evaluate Adjusted EBITDA and
the trends it depicts, the components should be considered. Each of
these components can significantly affect our results of operations
and should be considered in evaluating our operating performance,
and the impact of these components cannot be determined from
Adjusted EBITDA. Further, Adjusted EBITDA does not represent net
income or cash flows from operating, investing or financing
activities as defined by GAAP and should not be considered as an
alternative to net income as an indicator of our operating
performance. Additionally, Adjusted EBITDA does not consider
capital expenditures and other investing activities and should not
be considered as a measure of our liquidity. In addition, it should
be noted that not all gaming companies that report EBITDA or
adjustments to this measure may calculate EBITDA or such
adjustments in the same manner as we do, and therefore, our measure
of Adjusted EBITDA may not be comparable to similarly titled
measures used by other gaming companies.
Company Information and Forward Looking
Statements
Red Rock Resorts manages and owns a significant indirect equity
interest in Station Casinos. Station Casinos is the leading
provider of gaming and entertainment to the residents of Las Vegas,
Nevada. Station Casinos’ properties, which are located throughout
the Las Vegas valley, are regional entertainment destinations and
include various amenities, including numerous restaurants,
entertainment venues, movie theaters, bowling and
convention/banquet space, as well as traditional casino gaming
offerings such as video poker, slot machines, table games, bingo
and race and sports wagering. Station Casinos owns and operates Red
Rock Casino Resort Spa, Green Valley Ranch Resort Spa Casino,
Palace Station Hotel & Casino, Boulder Station Hotel &
Casino, Sunset Station Hotel & Casino, Santa Fe Station Hotel
& Casino, Texas Station Gambling Hall & Hotel, Fiesta
Rancho Casino Hotel, Fiesta Henderson Casino Hotel, Wildfire
Rancho, Wildfire Boulder, Wild Wild West Gambling Hall & Hotel,
Wildfire Sunset, Wildfire Valley View, Wildfire Anthem and Wildfire
Lake Mead. Station Casinos also owns a 50% interest in Barley’s
Casino & Brewing Company, Wildfire Casino & Lanes and The
Greens. In addition, Station Casinos is the manager of Graton
Resort & Casino in northern California and owns a 50% interest
in MPM Enterprises, L.L.C., which is the manager of Gun Lake Casino
in southwestern Michigan.
This press release contains certain forward-looking statements
with respect to the Company and its subsidiaries which involve
risks and uncertainties that cannot be predicted or quantified, and
consequently, actual results may differ materially from those
expressed or implied herein. Such risks and uncertainties include,
but are not limited to the timing of the closing of the acquisition
of the Palms Resort Casino; the Company’s ability to consummate the
acquisition of the Palms Casino Resort on the terms described
herein (or at all); the Company’s ability to successfully integrate
the Palms with our existing properties or realize expected
synergies; the strength and sustainability of the recovery from the
recent economic downturn, and the effects of the economy generally,
and in particular in Nevada, on consumer spending and our business;
the effects of intense competition that exists in the gaming
industry; the risk that new gaming licenses or gaming activities,
such as expansion of internet gaming, are approved and result in
additional competition; our substantial outstanding indebtedness
and the effect of our significant debt service requirements on our
operations and ability to compete; the risk that we will not be
able refinance our outstanding indebtedness or obtain necessary
capital to finance any development or investment projects that we
may decide to undertake in the future; the impact of extensive
regulation from gaming and other government authorities on our
ability to operate our business and the risk that regulatory
authorities may revoke, suspend, condition or limit our gaming or
other licenses, impose substantial fines or take other actions that
adversely affect us; risks associated with changes to applicable
gaming and tax laws that could have a material adverse effect on
our financial condition; the impact of general business conditions
including competitive practices, changes in customer demand and the
cyclical nature of the gaming and hospitality business in general,
on our business and results of operations; the impact of volatility
in the capital markets,; adverse outcomes of legal proceedings and
the development of, and changes in, claims or litigation reserves;
risks, such as cost overruns and construction delays, associated
with development, construction and management of new projects or
the expansion of existing facilities; and other risks described in
the filings of the Company with the Securities and Exchange
Commission.
|
Red Rock Resorts, Inc. |
Condensed Consolidated Statements of
Income |
(amounts in thousands, except per share
data) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
June 30, |
|
June 30, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
Operating revenues: |
|
|
|
|
|
|
|
|
Casino |
$ |
233,796 |
|
|
$ |
229,672 |
|
|
$ |
473,567 |
|
|
$ |
463,737 |
|
|
Food and
beverage |
|
66,408 |
|
|
|
62,860 |
|
|
|
133,028 |
|
|
|
128,086 |
|
|
Room |
|
32,979 |
|
|
|
31,255 |
|
|
|
67,363 |
|
|
|
62,646 |
|
|
Other |
|
17,705 |
|
|
|
18,642 |
|
|
|
34,887 |
|
|
|
35,822 |
|
|
Management fees |
|
27,455 |
|
|
|
21,025 |
|
|
|
54,104 |
|
|
|
40,975 |
|
|
|
Gross revenues |
|
378,343 |
|
|
|
363,454 |
|
|
|
762,949 |
|
|
|
731,266 |
|
|
Promotional
allowances |
|
(26,857 |
) |
|
|
(25,636 |
) |
|
|
(52,216 |
) |
|
|
(50,679 |
) |
|
|
Net revenues |
|
351,486 |
|
|
|
337,818 |
|
|
|
710,733 |
|
|
|
680,587 |
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
Casino |
|
88,986 |
|
|
|
87,147 |
|
|
|
176,407 |
|
|
|
172,178 |
|
|
Food and
beverage |
|
44,501 |
|
|
|
40,374 |
|
|
|
87,025 |
|
|
|
81,754 |
|
|
Room |
|
11,893 |
|
|
|
11,302 |
|
|
|
24,278 |
|
|
|
23,090 |
|
|
Other |
|
6,305 |
|
|
|
6,906 |
|
|
|
12,027 |
|
|
|
13,038 |
|
|
Selling,
general and administrative |
|
80,152 |
|
|
|
90,269 |
|
|
|
155,242 |
|
|
|
168,618 |
|
|
Preopening |
|
373 |
|
|
|
286 |
|
|
|
721 |
|
|
|
414 |
|
|
Depreciation and amortization |
|
38,436 |
|
|
|
35,810 |
|
|
|
77,863 |
|
|
|
71,003 |
|
|
Asset
impairment |
|
- |
|
|
|
2,001 |
|
|
|
- |
|
|
|
2,001 |
|
|
Write-downs and other charges, net |
|
10,966 |
|
|
|
(622 |
) |
|
|
13,334 |
|
|
|
2,393 |
|
|
|
|
|
281,612 |
|
|
|
273,473 |
|
|
|
546,897 |
|
|
|
534,489 |
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
69,874 |
|
|
|
64,345 |
|
|
|
163,836 |
|
|
|
146,098 |
|
|
Earnings
from joint ventures |
|
428 |
|
|
|
407 |
|
|
|
1,040 |
|
|
|
817 |
|
Operating income and earnings from joint
ventures |
|
70,302 |
|
|
|
64,752 |
|
|
|
164,876 |
|
|
|
146,915 |
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income: |
|
|
|
|
|
|
|
|
Interest
expense, net |
|
(34,078 |
) |
|
|
(36,515 |
) |
|
|
(69,146 |
) |
|
|
(72,977 |
) |
|
Loss on
extinguishment and modification of debt |
|
(7,084 |
) |
|
|
(90 |
) |
|
|
(7,084 |
) |
|
|
(90 |
) |
|
Change in
fair value of derivative instruments |
|
90 |
|
|
|
(1 |
) |
|
|
87 |
|
|
|
(4 |
) |
|
|
|
|
(41,072 |
) |
|
|
(36,606 |
) |
|
|
(76,143 |
) |
|
|
(73,071 |
) |
Income before income tax |
|
29,230 |
|
|
|
28,146 |
|
|
|
88,733 |
|
|
|
73,844 |
|
|
Provision
for income tax |
|
(7,502 |
) |
|
|
- |
|
|
|
(7,502 |
) |
|
|
- |
|
Income from continuing operations, net |
|
21,728 |
|
|
|
28,146 |
|
|
|
81,231 |
|
|
|
73,844 |
|
Discontinued operations |
|
- |
|
|
|
(33 |
) |
|
|
- |
|
|
|
(165 |
) |
Net
income |
|
21,728 |
|
|
|
28,113 |
|
|
|
81,231 |
|
|
|
73,679 |
|
|
Less net
income attributable to noncontrolling interests |
|
16,075 |
|
|
|
2,323 |
|
|
|
17,939 |
|
|
|
3,782 |
|
Net
income attributable to Red Rock Resorts, Inc. |
$ |
5,653 |
|
|
$ |
25,790 |
|
|
$ |
63,292 |
|
|
$ |
69,897 |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Class A common share |
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.01 |
|
|
$ |
0.29 |
|
|
$ |
0.33 |
|
|
$ |
0.77 |
|
|
|
Diluted |
$ |
0.01 |
|
|
$ |
0.29 |
|
|
$ |
0.33 |
|
|
$ |
0.77 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
Basic |
|
30,031 |
|
|
|
9,888 |
|
|
|
19,960 |
|
|
|
9,888 |
|
|
|
Diluted |
|
30,193 |
|
|
|
9,888 |
|
|
|
20,041 |
|
|
|
9,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Red Rock Resorts, Inc. |
|
Segment Information and |
|
Reconciliation of Adjusted EBITDA to Income
Before Income Tax |
|
(amounts in thousands) |
|
(unaudited) |
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
Net
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Las Vegas
operations |
|
|
|
$ |
322,876 |
|
|
$ |
315,547 |
|
|
$ |
654,334 |
|
|
$ |
637,046 |
|
|
Native American
management |
|
|
|
|
27,320 |
|
|
|
20,883 |
|
|
|
53,807 |
|
|
|
40,669 |
|
|
Reportable
segment net revenues |
|
|
|
350,196 |
|
|
|
336,430 |
|
|
|
708,141 |
|
|
|
677,715 |
|
|
Corporate and
other |
|
|
|
|
1,290 |
|
|
|
1,388 |
|
|
|
2,592 |
|
|
|
2,872 |
|
|
Net
revenues |
|
|
|
|
$ |
351,486 |
|
|
$ |
337,818 |
|
|
$ |
710,733 |
|
|
$ |
680,587 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
Las Vegas
operations |
|
|
|
$ |
104,627 |
|
|
$ |
101,833 |
|
|
$ |
223,637 |
|
|
$ |
213,082 |
|
|
Native American
management |
|
|
|
|
20,096 |
|
|
|
14,353 |
|
|
|
40,528 |
|
|
|
28,756 |
|
|
Reportable
segment Adjusted EBITDA |
|
|
124,723 |
|
|
|
116,186 |
|
|
|
264,165 |
|
|
|
241,838 |
|
|
Corporate and
other |
|
|
|
|
(7,309 |
) |
|
|
(6,296 |
) |
|
|
(13,535 |
) |
|
|
(12,106 |
) |
|
Adjusted
EBITDA |
|
|
|
|
117,414 |
|
|
|
109,890 |
|
|
|
250,630 |
|
|
|
229,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating (expense) income |
|
|
|
|
|
|
|
|
|
|
Preopening |
|
|
|
|
|
(373 |
) |
|
|
(286 |
) |
|
|
(721 |
) |
|
|
(414 |
) |
|
Depreciation and
amortization |
|
|
|
|
(38,436 |
) |
|
|
(35,810 |
) |
|
|
(77,863 |
) |
|
|
(71,003 |
) |
|
Share-based
compensation |
|
|
|
|
(3,681 |
) |
|
|
(9,851 |
) |
|
|
(4,301 |
) |
|
|
(12,858 |
) |
|
Donation to UNLV |
|
|
|
|
|
- |
|
|
|
(2,500 |
) |
|
|
- |
|
|
|
(2,500 |
) |
|
Asset impairment |
|
|
|
|
|
- |
|
|
|
(2,001 |
) |
|
|
- |
|
|
|
(2,001 |
) |
|
Write-downs and other
charges, net |
|
|
|
(10,966 |
) |
|
|
622 |
|
|
|
(13,334 |
) |
|
|
(2,393 |
) |
|
Settlement
agreement |
|
|
|
|
1,133 |
|
|
|
- |
|
|
|
1,133 |
|
|
|
- |
|
|
Adjusted EBITDA
attributable to MPM noncontrolling interest |
|
5,211 |
|
|
|
4,688 |
|
|
|
9,332 |
|
|
|
8,352 |
|
|
Operating income and
earnings from joint ventures |
|
|
70,302 |
|
|
|
64,752 |
|
|
|
164,876 |
|
|
|
146,915 |
|
|
Other (expense) income |
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net |
|
|
|
|
(34,078 |
) |
|
|
(36,515 |
) |
|
|
(69,146 |
) |
|
|
(72,977 |
) |
|
Loss on extinguishment
and modification of debt |
|
|
(7,084 |
) |
|
|
(90 |
) |
|
|
(7,084 |
) |
|
|
(90 |
) |
|
Change in fair value of
derivative instruments |
|
|
90 |
|
|
|
(1 |
) |
|
|
87 |
|
|
|
(4 |
) |
|
Income before income tax |
|
|
|
$ |
29,230 |
|
|
$ |
28,146 |
|
|
$ |
88,733 |
|
|
$ |
73,844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTACT:
Red Rock Resorts
Daniel Foley
Vice President, Finance & Investor Relations
(702) 495-3683
or
Lori Nelson
Vice President of Corporate Communications
(702) 495-4248
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