Red Rock gave staff anniversary shares. Why did adjusted profit still fall?
An anniversary gift helped turn revenue growth into a quarterly loss. The company strips out the share award charge, but other celebration costs remain in adjusted profit.
Red Rock Resorts gave employees fully vested shares to mark its 50th anniversary. The immediate accounting cost helped turn its third-quarter result into a consolidated net loss, even as casino-group revenue grew.
The September 9 awards carried a $72.4 million grant-date value. Together with related payroll taxes, they produced a $79.1 million expense. Employees owned the shares outright when they were issued, so Red Rock recorded the cost immediately.
The anniversary also reaches adjusted profit
Red Rock reported a consolidated net loss of $17.7 million, compared with a $76.9 million profit a year earlier. Revenue increased 2.8% to $488.7 million. The loss attributable to Red Rock's own shareholders was $9.9 million, after allocating losses to other owners of its operating business.
Its adjusted EBITDA calculation removes share-based compensation, including the anniversary award charge. It also adds back financing costs, taxes, depreciation, amortization and specified other items. Yet $5.8 million of other anniversary expenses remained in that measure.
Research by Ticker Byline shows that adding back only that retained cost would put quarterly adjusted EBITDA at about $188.4 million, versus $190.9 million a year earlier. That single-item comparison leaves a decline of about 1.3%, smaller than the company's reported 4.3% decline to $182.6 million.
The shares had an immediate ownership effect as well. Class A shares outstanding rose from about 59.1 million at the end of June to 59.6 million at the end of September, after employee issuance, other stock activity and repurchases.
Cash spending and borrowing
The cash-flow statement separately shows $31 million of companywide tax withholding on stock compensation over the first nine months. It does not isolate cash paid for the anniversary award's payroll-tax component.
Operating cash flow for those nine months was $429.2 million, while cash capital spending reached $456.1 million. Red Rock ended September with $128.3 million of cash and cash equivalents and about $3.72 billion of debt on its balance sheet, excluding finance leases.
The Red Rock company profile follows those financing commitments, the employee-share issuance and the newly opened North Fork casino management business.