Monarch Casino earnings rise despite cost pressures

Monarch Casino & Resort's increase in earnings last year came despite headwinds from rising costs but the cost pressures abated during the fourth quarter.

The Reno-based parent of Atlantis Casino Resort last week reported fourth quarter earnings of $5.1 million compared with $4.9 million in the same quarter a year earlier.

For the year, Monarch reported earnings of $22 million compared with $21 million during 2005.

The company said that the growth in earnings came despite cost pressures that included higher utility bills, greater investment in marketing and promotion, higher legal fees and increased payroll.

Overall, Monarch said its selling, general and administrative costs during 2006 rose by $8.2 million, or 21.6 percent.

About $3.1 million of the increase represented the expense of stock options, and about $1.2 million of the options figure came from a one-time, non-cash charge from the early vesting of stock options for Ben Farahi, who resigned as co-chairman and chief financial officer last year.

In the fourth quarter, the company's selling, general and administrative costs rose by $1.4 million, an increase of 14 percent over year-earlier figures.

About a third of the higher costs $487,000 resulted from new accounting rules on stock options.

Monarch's revenues in its three primary profit centers casino, food and beverage and hotel all set records for the year.

John Farahi, the company's chief executive officer and co-chairman, said casino revenues for the year were up 9.3 percent, food and beverage revenues were up 6.4 percent and hotel revenues were up by 10.5 percent.

For the fourth quarter, casino revenues rose 6.3 percent, food and beverage was up 3 percent and hotel revenues rose 11.3 percent.

The company's per-share earnings of 27 cents for the quarter exactly met analysts' expectations. The stock, which has been trading around $24 a share recently, didn't move much after the earnings were announced last week.

The company plans to begin work in the second quarter on a project that will add about 116,000 square feet to Atlantis.

Included in the expansion will be more than 10,000 square feet of new casino space and about 27,000 square feet of ballroom and convention space.

Farahi said the company expects to finance the expansion entirely from its cash reserves and its operating cash flow and won't undertake any borrowing.