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Red Rock Resorts Announces Third Quarter 2017 Results

LAS VEGAS, Nov. 07, 2017 (GLOBE NEWSWIRE) -- Red Rock Resorts, Inc. ("Red Rock Resorts," "we" or the "Company") (NASDAQ:RRR) today reported financial results for the third quarter ended September 30, 2017.

Net revenues were $400.4 million for the third quarter of 2017, an increase of 15.3%, or $53.2 million, from $347.1 million for the same period of 2016.  The increase was primarily the result of the addition of $37.9 million of net revenue from the Palms, a $13.3 million increase from same-store Las Vegas operations and a $1.9 million increase from Native American operations.

Net income was $22.3 million for the third quarter of 2017, a decrease of $11.1 million from net income of $33.4 million for the same period in 2016. The decrease in net income was primarily attributable to an increase in write-downs and other charges.

Adjusted EBITDA(1) was $118.3 million for the third quarter of 2017, an increase of 8.5% from $109.0 million in the same period of 2016.  The increase was primarily due to solid results from same-store Las Vegas operations, continued strength in Native American operations and the addition of the Palms.

The Company also announced on November 3, 2017 that it had approved a cash dividend of $0.10 per share, payable on November 30, 2017 to shareholders of record as of November 15, 2017. 

Las Vegas Operations

Net revenues from Las Vegas operations were $369.5 million for the third quarter of 2017, a 16.1% increase from $318.3 million in the same period of 2016, which was primarily driven by the addition of the Palms and an increase in same-store gaming revenue.  Adjusted EBITDA(1) from Las Vegas operations was $101.8 million for the third quarter of 2017, a 7.9% increase from $94.3 million in the same period of 2016.  That EBITDA increase was primarily driven by growth in same-store operations, which was partially offset by ongoing construction disruption at Palace Station and $3.5 million of costs relating to the enhancement of our food and beverage offerings and investments made in our team members.

Native American Management

Adjusted EBITDA(1) from Native American operations was $25.3 million for the third quarter of 2017, a 17.2% increase from $21.6 million in the same period of 2016 due to strong operating results at both Graton and Gun Lake

Palms Redevelopment

The Company is excited to announce today the second phase of its redevelopment plan for the Palms Casino Resort (the “Palms”).  This renovation of the Palms will touch virtually every aspect of the property and is expected to transform the Palms into a “must see” gaming and entertainment destination by creating a mix of classic Vegas hospitality and extraordinary new experiences delivered through world-class partnerships, which will include industry-leading nightlife and entertainment companies such as TAO Group, Clique Hospitality and Live Nation, as well as James Beard award-winning celebrity chefs Bobby Flay, Michael Symon and Marc Vetri.  As previously announced, phase one of the redevelopment plan is expected to be completed in the second quarter of 2018.  Phase two of the redevelopment plan is expected to be completed in late fourth quarter of 2018 or early first quarter of 2019.  The total budget for both phases of the project, including construction costs, capitalized interest and pre-opening expenses, is expected to be approximately $485 million.

Balance Sheet Highlights

The Company’s cash and cash equivalents at September 30, 2017 were $222.4 million and total principal amount of debt outstanding at the end of the third quarter was $2.69 billion, excluding $250.0 million in aggregate principal amount of 7.50% Senior Notes that were redeemed  in October  2017 with restricted cash constituting a portion of the proceeds from the issuance of $550.0 million in principal amount of 5.00% Senior Notes in September  2017.  At September 30, 2017, debt to EBITDA and interest coverage ratios, net of excess cash and $250.0 million in principal amount of 7.50% Senior Notes, were 5.0x and 4.6x, respectively.

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 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 November 21, 2017 at www.redrockresorts.com. A live audio webcast of the call will also be available at www.redrockresorts.com.

Presentation of Financial Information

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

Company Information and Forward Looking Statements

Red Rock Resorts manages and owns a majority indirect equity interest in 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 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 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.

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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

Red Rock Resorts, Inc.  
Condensed Consolidated Statements of Income  
(amounts in thousands, except per share data)  
(unaudited)  
                 
  Three Months Ended September 30,   Nine Months Ended September 30,  
    2017       2016       2017       2016    
Operating revenues:                
Casino $ 263,153     $ 232,584     $ 784,521     $ 706,151    
Food and beverage   71,658       63,551       227,076       196,579    
Room   43,118       32,192       137,523       99,555    
Other   24,018       17,463       70,537       52,350    
Management fees   29,602       27,702       90,505       81,806    
Gross revenues   431,549       373,492       1,310,162       1,136,441    
Promotional allowances   (31,179 )     (26,352 )     (88,567 )     (78,568 )  
Net revenues   400,370       347,140       1,221,595       1,057,873    
Operating costs and expenses:                
Casino   104,945       90,088       309,769       266,495    
Food and beverage   51,555       44,888       161,660       131,913    
Room   17,473       12,036       55,779       36,314    
Other   9,526       6,411       26,438       18,438    
Selling, general and administrative   98,515       82,739       287,719       237,981    
Preopening   307       10       705       731    
Depreciation and amortization   42,661       36,240       134,721       114,103    
Write-downs and other charges, net   15,146       1,379       24,996       14,713    
Related party lease termination   1,950       -       100,343       -    
Asset impairment   1,829       -       1,829       -    
    343,907       273,791       1,103,959       820,688    
Operating income   56,463       73,349       117,636       237,185    
Earnings from joint ventures   407       346       1,242       1,386    
Operating income and earnings from joint ventures   56,870       73,695       118,878       238,571    
                 
Other (expense) income:                
Interest expense, net   (31,330 )     (35,275 )     (100,127 )     (104,421 )  
Loss on extinguishment/modification of debt, net   (558 )     (186 )     (3,552 )     (7,270 )  
Change in fair value of derivative instruments   (310 )     -       3,059       87    
    (32,198 )     (35,461 )     (100,620 )     (111,604 )  
Income before income tax   24,672       38,234       18,258       126,967    
Provision for income tax   (2,364 )     (4,790 )     (1,230 )     (12,292 )  
Net income   22,308       33,444       17,028       114,675    
Less: net income attributable to noncontrolling interests   10,528       25,172       11,385       43,111    
Net income attributable to Red Rock Resorts, Inc. $ 11,780     $ 8,272     $ 5,643     $ 71,564    
                 
Earnings per common share:                
Earnings per share of Class A common stock, basic $ 0.17     $ 0.20     $ 0.08     $ 0.55    
Earnings per share of Class A common stock, diluted $ 0.16     $ 0.20     $ 0.07     $ 0.55    
                 
Weighted average common shares outstanding:                
Basic   68,060       41,137       67,030       27,070    
Diluted   115,941       41,288       115,877       27,174    
                 
Dividends declared per common share $ 0.10     $ 0.10     $ 0.30     $ 0.10    
                 

 

Red Rock Resorts, Inc.  
Segment Information and Reconciliation of Net Income to Adjusted EBITDA  
(amounts in thousands)  
(unaudited)  
                 
  Three Months Ended September 30,   Nine Months Ended September 30,  
    2017       2016       2017       2016    
Net revenues                
Las Vegas operations $ 369,493     $ 318,253     $ 1,127,223     $ 972,587    
Native American management   29,478       27,597       90,126       81,404    
Reportable segment net revenues   398,971       345,850       1,217,349       1,053,991    
Corporate and other   1,399       1,290       4,246       3,882    
Net revenues $ 400,370     $ 347,140     $ 1,221,595     $ 1,057,873    
                 
Net income $ 22,308     $ 33,444     $ 17,028     $ 114,675    
Adjustments                
Preopening   307       10       705       731    
Depreciation and amortization   42,661       36,240       134,721       114,103    
Share-based compensation   1,989       1,413       5,727       5,714    
Write-downs and other charges, net   15,146       1,379       24,996       14,713    
Related party lease termination   1,950             100,343          
Asset impairment   1,829             1,829          
Interest expense, net   31,330       35,275       100,127       104,421    
Loss on extinguishment/modification of debt, net   558       186       3,552       7,270    
Change in fair value of derivative instruments   310             (3,059 )     (87 )  
Adjusted EBITDA attributable to MPM noncontrolling interest   (2,426 )     (3,715 )     (13,482 )     (13,047 )  
Provision for income tax   2,364       4,790       1,230       12,292    
Other                     (1,133 )  
Adjusted EBITDA $ 118,326     $ 109,022     $ 373,717     $ 359,652    
                 
Adjusted EBITDA                
Las Vegas operations $ 101,779     $ 94,322     $ 327,056     $ 317,959    
Native American management   25,337       21,624       71,349       62,152    
Reportable segment Adjusted EBITDA   127,116       115,946       398,405       380,111    
Corporate and other   (8,790 )     (6,924 )     (24,688 )     (20,459 )  
Adjusted EBITDA $ 118,326     $ 109,022     $ 373,717     $ 359,652    
                 

Red Rock Resorts, Inc.