Red Rock Resorts Announces Fourth Quarter and Year End 2018 Results

0
602

 

Red Rock Resorts, Inc. reported financial results for the fourth quarter and year ended December 31, 2018.  The Company adopted FASB’s new revenue recognition standard (“ASC 606”), effective January 1, 2018.  Certain prior period amounts have been adjusted to reflect the full retrospective adoption of ASC 606, with no material impact on operating income, net income or Adjusted EBITDA(1).

Net revenues were $431.5 million for the fourth quarter of 2018, an increase of 7.8%, or $31.2 million, from $400.3 million for the same period of 2017. The increase in net revenues was  primarily due to an increase in Las Vegas operations, partially offset by a decrease in Native American management fees due to the expiration of the Gun Lake management agreement in February of 2018.

Net income was $13.2 million for the fourth quarter of 2018, a decrease of 71.3%, or $32.8 million, from $46.0 million for the same period of 2017. The decrease in net income was primarily due to an after-tax decrease in the fair value of derivative instruments of $23.9 million.  These results also reflect an out-of-period, one-time, non-cash adjustment related to a lease obligation regarding our corporate office building that increased interest expense by $9.3 million and decreased net income by $8.6 million.

Adjusted EBITDA was $135.1 million for the fourth quarter of 2018, an increase of 10.1%, or $12.4 million, from $122.7 million in the same period of 2017. The increase in Adjusted EBITDA was primarily due to an increase in Las Vegas operations, partially offset by a decrease in Native American management fees due to the Gun Lake expiration.

For the full year, net revenues were $1.68 billion in 2018, an increase of 2.4%, or $38.9 million, from $1.64 billion for the same period of 2017.  The increase in net revenues was primarily due to a $69.6 million increase in Las Vegas operations, partially offset by a $31.0 million decrease in Native American operations due to the Gun Lake expiration.

For the full year, net income was $219.5 million in 2018, compared to $63.5 million for the same period of 2017. The increase in net income was primarily due to a gain associated with the extinguishment of tax receivable liabilities, as well as a prior year loss associated with the acquisition of the leases at Boulder Station and Texas Station.

For the full year, Adjusted EBITDA was $509.0 million in 2018, an increase of 2.4%, or $11.7 million, from $497.2 million in 2017, primarily due to a $23.7 million increase in Las Vegas operations, partially offset by a $15.1 million decrease in Native American operations due to the Gun Lake expiration.

Las Vegas Operations

Net revenues from Las Vegas operations were $409.5 million for the fourth quarter of 2018, an increase of 10.4%, or $38.5 million, from $371.0 million in the same period of 2017.  Adjusted EBITDA from Las Vegas operations was $121.0 million for the fourth quarter of 2018, an increase of 14.4%, or $15.2 million, from $105.8 million in the same period of 2017.

Native American Management

Adjusted EBITDA from Native American operations was $19.1 million for the fourth quarter of 2018, a 22.1% decrease from $24.5 million in the same period of 2017.  The decrease was primarily due to the Gun Lake expiration, partially offset by increased management fees generated under the Graton Resort management agreement.

Palace Station and Palms Redevelopment Update

The Palace Station redevelopment project was completed on schedule and on budget with all aspects of the project open as of the end of 2018.  As of December 31, 2018, the Company has incurred $188 million in costs against the budget of $191 million.

The Palms redevelopment project remains on schedule and the budget remains unchanged with the remaining components of phase two expected to be complete in the second quarter of 2019 and phase three expected to be complete in the third quarter of 2019.  As of December 31, 2018, the Company has incurred approximately $430 million in costs against the $690 million project.

Balance Sheet Highlights

The Company’s cash and cash equivalents at December 31, 2018 were $114.6 million and total principal amount of debt outstanding at the end of the fourth quarter was $2.91 billion. The Company’s debt to Adjusted EBITDA and interest coverage ratios were 5.0x and 4.4x, respectively.

Quarterly Dividend

The Company’s Board of Directors has declared a cash dividend of $0.10 per Class A common share for the first quarter of 2019. The dividend will be payable on March 29, 2019 to all stockholders of record as of the close of business on March 14, 2019.

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 $11.7 million, approximately $7.0 million of which is expected to be distributed to the Company and approximately $4.7 million of which is expected to be distributed to the other unit holders of record of Station Holdco.

Conference Call Information

The Company will host a conference call today at 4:30 p.m. Eastern Time to discuss its financial results. The conference call will consist of prepared remarks from the Company and include a question and answer session.  Those interested in participating in the call should dial (888) 317-6003, or (412) 317-6061 for international callers, approximately 15 minutes before the call start time.  Please use the passcode: 4563756. A replay of the call will be available from today through February 20, 2019 at www.redrockresorts.com.

Presentation of Financial Information

(1) 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 net 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 or non-recurring items. Adjusted EBITDA includes net income plus depreciation and amortization, share-based compensation, write-downs and other charges, net, tax receivable agreement liability adjustment, related party lease termination, asset impairment, interest expense, net, loss on extinguishment/modification of debt, net, change in fair value of derivative instruments, provision for income tax and other, and excludes Adjusted EBITDA attributable to the noncontrolling interests of MPM.

Company Information and Forward Looking Statements

Red Rock Resorts owns a majority indirect equity interest in and manages Station Casinos LLC (“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, Palms Casino Resort, 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.

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 effects of the economy and business conditions on consumer spending and our business; competition, including the risk that new gaming licenses or gaming activities are approved; our substantial outstanding indebtedness and the effect of our significant debt service requirements; our ability to refinance our outstanding indebtedness and obtain necessary capital; the impact of extensive regulation; risks associated with changes to applicable gaming and tax laws; risks associated with development, construction and management of new projects or the redevelopment or expansion of existing facilities; and other risks described in the filings of the Company with the Securities and Exchange Commission.  In providing forward-looking statements, the Company is not undertaking any duty or obligation to update these statements publicly as a result of new information, future events or otherwise, except as required by law.  If the Company updates one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those other forward-looking statements.

 

Red Rock Resorts, Inc.

Consolidated Statements of Income

(amounts in thousands, except per share data)

(unaudited)



















Three Months Ended

December 31,



Year Ended

December 31,



2018



2017



2018



2017

Operating revenues:















Casino

$ 240,757



$ 221,763



$  940,483



$  886,206

Food and beverage

100,971



87,995



381,197



365,448

Room

42,169



39,640



170,824



179,041

Other

27,054



22,940



100,912



92,967

Management fees

20,520



27,972



87,614



118,477

Net revenues

431,471



400,310



1,681,030



1,642,139

Operating costs and expenses:















Casino

84,854



79,388



326,980



311,086

Food and beverage

87,892



78,406



340,212



326,069

Room

19,314



19,297



78,440



81,768

Other

14,320



10,074



48,431



40,332

Selling, general and administrative

92,952



92,215



390,492



380,930

Depreciation and amortization

46,864



43,496



180,255



178,217

Write-downs and other charges, net

13,580



3,653



34,650



29,584

Tax receivable agreement liability adjustment

(263)



(139,070)



(90,638)



(139,300)

Related party lease termination







100,343

Asset impairment







1,829



359,513



187,459



1,308,822



1,310,858

Operating income

71,958



212,851



372,208



331,281

Earnings from joint ventures

579



390



2,185



1,632

Operating income and earnings from joint ventures

72,537



213,241



374,393



332,913

















Other (expense) income:















Interest expense, net

(46,800)



(31,315)



(143,099)



(131,442)

Loss on extinguishment/modification of debt, net



(13,355)





(16,907)

Change in fair value of derivative instruments

(14,938)



11,053



12,415



14,112

Other

(67)



(99)



(354)



(357)



(61,805)



(33,716)



(131,038)



(134,594)

Income before income tax

10,732



179,525



243,355



198,319

Benefit (provision) for income tax

2,449



(133,556)



(23,875)



(134,786)

Net income

13,181



45,969



219,480



63,533

Less: net income attributable to noncontrolling interests

4,235



16,497



61,939



28,110

Net income attributable to Red Rock Resorts, Inc.

$     8,946



$   29,472



$  157,541



$    35,423

















Earnings per common share:















Earnings per share of Class A common stock, basic

$       0.13



$       0.43



$        2.28



$        0.53

Earnings per share of Class A common stock, diluted

$       0.11



$       0.35



$        1.77



$        0.42

















Weighted-average common shares outstanding:















Basic

69,283



68,486



69,115



67,397

Diluted

116,414



116,274



116,859



115,930

















Dividends declared per common share

$       0.10



$       0.10



$        0.40



$        0.40

Red Rock Resorts, Inc.

Segment Information and Reconciliation of Net Income to Adjusted EBITDA

(amounts in thousands)

(unaudited)



















Three Months Ended

December 31,



Year Ended

December 31,



2018



2017



2018



2017

Net revenues















Las Vegas operations

$ 409,483



$ 370,985



$ 1,588,003



$ 1,518,442

Native American management

20,365



27,842



87,009



117,968

Reportable segment net revenues

429,848



398,827



1,675,012



1,636,410

Corporate and other

1,623



1,483



6,018



5,729

Net revenues

$ 431,471



$ 400,310



$ 1,681,030



$ 1,642,139

















Net income

$   13,181



$   45,969



$    219,480



$      63,533

Adjustments















Depreciation and amortization

46,864



43,496



180,255



178,217

Share-based compensation

2,417



2,195



11,289



7,922

Write-downs and other charges, net

13,580



3,653



34,650



29,584

Tax receivable agreement liability adjustment

(263)



(139,070)



(90,638)



(139,300)

Related party lease termination







100,343

Asset impairment







1,829

Interest expense, net

46,800



31,315



143,099



131,442

Loss on extinguishment/modification of debt, net



13,355





16,907

Change in fair value of derivative instruments

14,938



(11,053)



(12,415)



(14,112)

Adjusted EBITDA attributable to MPM noncontrolling interest



(1,780)



(962)



(15,262)

(Benefit) provision for income tax

(2,449)



133,556



23,875



134,786

Other

67



1,099



329



1,357

Adjusted EBITDA

$ 135,135



$ 122,735



$    508,962



$    497,246

















Adjusted EBITDA















Las Vegas operations

$ 120,971



$ 105,790



$    457,379



$    433,640

Native American management

19,124



24,548



80,795



95,897

Reportable segment Adjusted EBITDA

140,095



130,338



538,174



529,537

Corporate and other

(4,960)



(7,603)



(29,212)



(32,291)

Adjusted EBITDA

$ 135,135



$ 122,735



$    508,962



$    497,246

 

Source: Red Rock Resorts, Inc.