Black Hawk expansion opening delayed as Monarch misses on earnings and revenue forecasts

October 31, 2019 12:27 AM
  • Matthew Crowley, CDC Gaming Reports
October 31, 2019 12:27 AM
  • Matthew Crowley, CDC Gaming Reports

For Monarch Casino, the waiting seems to be the hardest part.

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Reno-based Monarch warned its long-awaited Black Hawk, Colorado, casino expansion would not open this year as previously promised and that profits dropped from a year earlier. Both earnings per share and revenue missed Wall Street forecasts.

In a statement Wednesday, Monarch, which also operates the Reno-based Atlantis, said its net income was $9.3 million, or 50 cents per diluted share, for the three months ended Sept. 30, down from net income of $10.9 million, or 58 cents per diluted share, a year earlier.

Analysts polled by Zacks Investment Research had expected Reno-based Monarch to earn 58 cents per share.

Adjusted earnings before interest, taxes, depreciation and amortization, a cash flow measure that filters out one-time costs, fell 5.4 percent to $17.4 million from $18.4 million.

Revenue rose 1.9 percent to $65.6 million from $64.4 million but missed the $68.5 million forecast of Zacks-polled analysts.

Monarch had expected its $400 million-plus Black Hawk expansion, which includes a 23-story, 500-room hotel tower, to open this year. Monarch acquired the hotel-casino, formerly known as the Riviera Black Hawk, in 2012.

During Monarch’s first-quarter earnings call in February, CEO John Farahi said his company’s contractor, Edmonton, Alberta-based PCL Construction, would have the casino, hotel, shops and restaurants done by the third quarter and complete other work in the fourth quarter.

The idea was to have everything ready a begin reaping a predicted free-cash flow jump in 2020; Monarch had said it expected to hire 1,000 workers to staff the new property.

But, it seems, everything will wait. On Wednesday, Monarch said it now expects the Black Hawk casino’s new tower to open in 2020’s first quarter and renovations on existing casino space to finish by 2020’s second quarter.

On Sept. 3, PCL Construction Services sued Monarch, causing the casino operator’s stock price to fall 5%. On its website, PCL has detailed complications with the Black Hawk project — granite bedrock made pier drilling difficult; water flowing beneath the construction site hampered caisson dewatering.

But in a statement, Monarch said the lawsuit was filed to deflect attention from the project’s being late and not “cost-appropriate.” The company added it will countersue and claim breaches of contract and performance.

Monarch said it will nevertheless work with PCL as lawsuits move through the courts but has warned that it hadn’t yet entered a guaranteed maximum price deal with PCL.

In a statement accompanying the company’s results, Farahi said top-line growth continued in the third quarter but was offset by higher payroll and health care costs and Black Hawk project expenses. Monarch said it spent $396 million of a budgeted $430 million to $442 million for the overall renovation, including the new hotel tower.

Monarch warned a litany of factors could further hamper the Black Hawk project including construction delays or disruptions, increased labor and materials costs, contractor disagreements, labor and materials availability, zoning and building permit issues and environmental restrictions.

Monarch also warned that laws mandating minimum wage increases and permitting expanded gambling in its markets could hurt the company’s ability to optimize profits and boost operating results.

Monarch Casino shares rose 2 cents, or 0.05%, Wednesday to close at $43.37. The share price has risen 12.4 percent in 2019.

Follow Matthew Crowley on Twitter @copyjockey