Red Rock Resorts, Inc. (NASDAQ: RRR) today 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.
| 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.
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