Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2014 | Nov. 01, 2014 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'MONARCH CASINO & RESORT INC | ' |
Entity Central Index Key | '0000907242 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 16,803,129 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Revenues | ' | ' | ' | ' |
Casino | $37,512 | $38,038 | $109,810 | $114,825 |
Food and beverage | 13,573 | 12,791 | 39,043 | 37,176 |
Hotel | 6,339 | 6,603 | 17,014 | 18,283 |
Other | 2,553 | 2,446 | 7,487 | 7,091 |
Gross revenues | 59,977 | 59,878 | 173,354 | 177,375 |
Less promotional allowances | -11,380 | -10,889 | -31,446 | -33,130 |
Net revenues | 48,597 | 48,989 | 141,908 | 144,245 |
Operating expenses | ' | ' | ' | ' |
Casino | 15,743 | 15,201 | 45,882 | 44,630 |
Food and beverage | 5,267 | 5,163 | 15,781 | 15,002 |
Hotel | 1,589 | 1,802 | 4,673 | 4,935 |
Other | 867 | 817 | 2,654 | 2,382 |
Selling, general and administrative | 13,444 | 13,518 | 39,855 | 38,432 |
Depreciation and amortization | 4,180 | 3,549 | 13,504 | 12,572 |
Loss on disposition of assets | ' | ' | 249 | ' |
Colorado ballot initiative costs | 841 | ' | 1,845 | ' |
Total operating expenses | 41,931 | 40,050 | 124,443 | 117,953 |
Income from operations | 6,666 | 8,939 | 17,465 | 26,292 |
Other expenses | ' | ' | ' | ' |
Interest expense | -255 | -411 | -816 | -1,493 |
Total other expenses | -255 | -411 | -816 | -1,493 |
Income before income taxes | 6,411 | 8,528 | 16,649 | 24,799 |
Provision for income taxes | -2,337 | -3,008 | -6,275 | -8,897 |
Net income | $4,074 | $5,520 | $10,374 | $15,902 |
Net income | ' | ' | ' | ' |
Basic (in dollars per share) | $0.24 | $0.34 | $0.62 | $0.98 |
Diluted (in dollars per share) | $0.24 | $0.32 | $0.61 | $0.95 |
Weighted average number of common shares and potential common shares outstanding | ' | ' | ' | ' |
Basic (in shares) | 16,800 | 16,389 | 16,709 | 16,244 |
Diluted (in shares) | 17,016 | 17,180 | 17,113 | 16,799 |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current assets | ' | ' |
Cash and cash equivalents | $17,510 | $19,330 |
Receivables, net | 3,518 | 2,628 |
Income taxes receivable | 200 | 608 |
Inventories | 2,616 | 2,675 |
Prepaid expenses | 3,496 | 2,830 |
Deferred income taxes | 5,909 | 5,909 |
Total current assets | 33,249 | 33,980 |
Property and equipment | ' | ' |
Land | 28,680 | 28,680 |
Land improvements | 6,701 | 6,562 |
Buildings | 150,828 | 150,828 |
Building improvements | 20,013 | 15,897 |
Furniture and equipment | 136,610 | 134,425 |
Construction in Progress | 9,582 | 4,891 |
Leasehold improvements | 1,347 | 1,347 |
Gross property and equipment | 353,761 | 342,630 |
Less accumulated depreciation and amortization | -178,069 | -166,993 |
Net property and equipment | 175,692 | 175,637 |
Other assets | ' | ' |
Goodwill | 25,111 | 25,111 |
Intangible assets, net | 7,657 | 8,531 |
Deferred income taxes | 350 | 350 |
Other assets, net | 685 | 914 |
Total other assets | 33,803 | 34,906 |
Total assets | 242,744 | 244,523 |
Current liabilities | ' | ' |
Accounts payable | 7,871 | 8,666 |
Construction accounts payable | 766 | ' |
Accrued expenses | 18,005 | 18,177 |
Total current liabilities | 26,642 | 26,843 |
Long-term debt | 43,400 | 53,800 |
Total liabilities | 70,042 | 80,643 |
Stockholders' equity | ' | ' |
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued | ' | ' |
Common stock, $.01 par value, 30,000,000 shares authorized; 19,096,300 shares issued; 16,803,129 outstanding at September 30, 2014 ; 16,482,768 outstanding at December 31, 2013 | 191 | 191 |
Additional paid-in capital | 22,706 | 30,926 |
Treasury stock, 2,293,171 shares at September 30, 2014 ; 2,613,532 shares at December 31, 2013 | -33,129 | -39,797 |
Retained earnings | 182,934 | 172,560 |
Total stockholders' equity | 172,702 | 163,880 |
Total liabilities and stockholders' equity | $242,744 | $244,523 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
CONSOLIDATED BALANCE SHEETS | ' | ' |
Preferred stock, par value (in dollars per share) | $0.01 | $0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value (in dollars per share) | $0.01 | $0.01 |
Common stock, shares authorized | 30,000,000 | 30,000,000 |
Common stock, shares issued | 19,096,300 | 19,096,300 |
Common stock, shares outstanding | 16,803,129 | 16,482,768 |
Treasury stock, shares | 2,293,171 | 2,613,532 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 |
Cash flows from operating activities: | ' | ' |
Net income | $10,374 | $15,902 |
Adjustments to reconcile net income to net cash provided by operating activities: | ' | ' |
Depreciation and amortization | 13,504 | 12,572 |
Amortization of deferred loan costs | 229 | 229 |
Stock-based compensation | 877 | 817 |
Excess tax benefit from stock-based compensation | -395 | ' |
Provision (recoveries) of bad debts | 79 | -74 |
Loss on disposal of assets | 249 | ' |
Changes in operating assets and liabilities: | ' | ' |
Receivables | -969 | 299 |
Inventories | 59 | -77 |
Prepaid expenses | -666 | -263 |
Accounts payable | -795 | 4 |
Accrued expenses | -172 | -347 |
Income taxes | 408 | -693 |
Net cash provided by operating activities | 22,782 | 28,369 |
Cash flows from investing activities: | ' | ' |
Proceeds from sale of assets | 84 | ' |
Change in construction payable | 766 | ' |
Acquisition of property and equipment | -13,019 | -8,220 |
Net cash used in investing activities | -12,169 | -8,220 |
Cash flows from financing activities: | ' | ' |
Net exercise of stock options | -2,428 | 3,119 |
Excess tax benefit from stock-based compensation | 395 | ' |
Principal payments on long-term debt | -10,400 | -24,800 |
Net cash used in financing activities | -12,433 | -21,681 |
Net decrease in cash | -1,820 | -1,532 |
Cash and cash equivalents at beginning of period | 19,330 | 19,043 |
Cash and cash equivalents at end of period | 17,510 | 17,511 |
Supplemental disclosure of cash flow information: | ' | ' |
Cash paid for interest,net of amounts capitalized | 607 | 1,234 |
Cash paid for income taxes | $5,550 | $9,590 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2014 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation: | |
Monarch Casino & Resort, Inc., was incorporated in 1993 and through its wholly-owned subsidiary, Golden Road Motor Inn, Inc. (“Golden Road”), owns and operates the Atlantis Casino Resort Spa, a hotel/casino facility in Reno, Nevada (the “Atlantis”). Monarch’s wholly owned subsidiaries, High Desert Sunshine, Inc. (“High Desert”), Golden East, Inc. (“Golden East”) and Golden North, Inc. (“Golden North”), each own separate parcels of land located proximate to the Atlantis. Monarch’s wholly owned subsidiary Monarch Growth Inc. (“Monarch Growth”), formed in 2011, acquired Riviera Black Hawk, Inc., owner of the Riviera Black Hawk Casino (collectively “Monarch Black Hawk” or “Black Hawk”) on April 26, 2012. Riviera Black Hawk Casino was renamed Monarch Casino Black Hawk in October 2013. Monarch Growth also owns a parcel of land in Black Hawk, Colorado contiguous to the Monarch Black Hawk Casino. | |
Monarch’s wholly owned subsidiary Monarch Interactive, Inc. (“Monarch Interactive”) received approval from the Nevada Gaming Commission on August 23, 2012, which approval was extended three times, each for an additional six month period, with the most recent approval received on February 20, 2014, pending commencement of operations, for a license as an operator of interactive gaming. Before the license can be issued, a number of conditions must be met and before operations can commence, the Company must enter into contracts with a licensed interactive gaming service provider with an approved system. None of these conditions have occurred, and Monarch Interactive is not currently engaged in any operating activities. The Company has decided to allow the current approval to lapse pending a change in market conditions that would support the Company’s investment in this line of business. In Nevada, legal interactive gaming is currently limited to intrastate poker. | |
The unaudited condensed consolidated financial statements include the accounts of Monarch and its subsidiaries. Intercompany balances and transactions are eliminated. | |
Unless otherwise indicated, “Monarch,” “Company,” “we,” “our” and “us” refer to Monarch Casino & Resort, Inc. and its subsidiaries. | |
Interim Financial Statements: | |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management of the Company, all adjustments considered necessary for a fair presentation are included. Operating results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. | |
The balance sheet at December 31, 2013 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2013. | |
Fair Value of Financial Instruments: | |
The estimated fair value of the Company’s financial instruments has been determined by the Company, using available market information and valuation methodologies. However, considerable judgment is required to develop the estimates of fair value; thus, the estimates provided herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. | |
The carrying amounts of cash, receivables, accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments. Additionally, the carrying value of our long-term debt approximates fair value due to the variable nature of applicable interest rates and relative short-term maturity. | |
Change in Accounting Estimate of Depreciable Life of Monarch Black Hawk Parking Structure: | |
In December 2013, the Company began construction of a new parking facility at Monarch Black Hawk. Upon completion of that new structure, the Company plans to demolish the existing parking structure. At December 31, 2013, the existing parking structure had a net book value of approximately $4.8 million and a remaining depreciable life of approximately 37 years. The new parking facility was estimated to be completed on March 31, 2015. In accordance with ASC 250-10-45-17, effective January 1, 2014, the Company modified the estimated depreciable life of the existing parking structure to 15 months; the period from January 1, 2014 through the estimated demolition commencement date of March 31, 2015. As a result of this modification to the estimated depreciable life, depreciation expense of the existing parking structure increased by approximately $0.3 million per month (approximately $0.2 million net of tax). In July 2014, because of a delayed construction schedule, the Company revised the new parking facility completion date to December 31, 2015. At this time, the existing parking structure had a net book value of approximately $2.9 million. The Company modified the estimated depreciable life of the existing parking structure to 18 months; the period from July 1, 2014 through the revised estimated demolition commencement date of December 31, 2015. As a result of this modification, the increase in depreciation expense compared to the prior year was adjusted to $0.2 million per month (approximately $0.1 million net of tax) for the period from July 1, 2014 through December 31, 2015. For the three months ended September 30, 2014, the effect of the changes in estimate was an increase of depreciation expense by $0.5 million, a decrease of net income by $0.3 million and a decrease of basic and diluted earnings per share by $0.02. For the nine months ended September 30, 2014, the effect of this change in estimate was an increase of depreciation expense by $2.4 million, a decrease of net income by $1.5 million and a decrease of basic and diluted earnings per share by $0.09. | |
Segment Reporting: | |
Effective the first quarter of 2014, the Company updated its segment reporting analysis and determined that two of the Company’s operating segments, Atlantis and Monarch Black Hawk, meet all of the aggregation criteria stipulated by ASC 280-10-50-11. The Company views each property as an operating segment and the two operating segments have been aggregated into one reporting segment. The September 30, 2013 interim financial information has been reclassified to be consistent with the current year presentation. | |
STOCKBASED_COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended | |||||||||||||
Sep. 30, 2014 | ||||||||||||||
STOCK-BASED COMPENSATION | ' | |||||||||||||
STOCK-BASED COMPENSATION | ' | |||||||||||||
NOTE 2. STOCK-BASED COMPENSATION | ||||||||||||||
The Company accounts for its stock-based compensation in accordance with the authoritative guidance requiring the compensation cost relating to stock-based payment transactions to be recognized in the Company’s consolidated statements of income. | ||||||||||||||
Reported stock-based compensation expense was classified as follows: | ||||||||||||||
Amounts in thousands | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Casino | $ | 9 | $ | 15 | $ | 34 | $ | 47 | ||||||
Food and beverage | 18 | 19 | 50 | 53 | ||||||||||
Hotel | 3 | (12 | ) | 8 | (5 | ) | ||||||||
Selling, general and administrative | 271 | 272 | 785 | 722 | ||||||||||
Total stock-based compensation, before taxes | 301 | 294 | 877 | 817 | ||||||||||
Tax benefit | (105 | ) | (103 | ) | (307 | ) | (286 | ) | ||||||
Total stock-based compensation, net of tax | $ | 196 | $ | 191 | $ | 570 | $ | 531 | ||||||
EARNINGS_PER_SHARE
EARNINGS PER SHARE | 9 Months Ended | |||||||||||
Sep. 30, 2014 | ||||||||||||
EARNINGS PER SHARE | ' | |||||||||||
EARNINGS PER SHARE | ' | |||||||||||
NOTE 3. EARNINGS PER SHARE | ||||||||||||
Basic earnings per share is computed by dividing reported net earnings by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflect the additional dilution for all potentially dilutive securities such as stock options. The following is a reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations (shares in thousands): | ||||||||||||
Three months ended September 30, | ||||||||||||
2014 | 2013 | |||||||||||
Shares | Per Share | Shares | Per Share | |||||||||
Amount | Amount | |||||||||||
Basic | 16,800 | $ | 0.24 | 16,389 | $ | 0.34 | ||||||
Effect of dilutive stock options | 216 | — | 791 | (0.02 | ) | |||||||
Diluted | 17,016 | $ | 0.24 | 17,180 | $ | 0.32 | ||||||
Nine months ended September 30, | ||||||||||||
2014 | 2013 | |||||||||||
Shares | Per Share | Shares | Per Share | |||||||||
Amount | Amount | |||||||||||
Basic | 16,709 | $ | 0.62 | 16,244 | $ | 0.98 | ||||||
Effect of dilutive stock options | 404 | (0.01 | ) | 555 | (0.03 | ) | ||||||
Diluted | 17,113 | $ | 0.61 | 16,799 | $ | 0.95 | ||||||
Excluded from the computation of diluted earnings per share are options where the exercise prices are greater than the market price as their effects would be anti-dilutive in the computation of diluted earnings per share. For the three and nine months ended September 30, 2014 options for approximately 707 thousand and 661 thousand shares, respectively were excluded from the computation. For the three and nine months ended September 30, 2013 approximately 308 thousand and 540 thousand shares respectively were excluded from the computation. | ||||||||||||
NEW_ACCOUNTING_PRONOUNCEMENTS
NEW ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Sep. 30, 2014 | |
NEW ACCOUNTING PRONOUNCEMENTS | ' |
NEW ACCOUNTING PRONOUNCEMENTS | ' |
NOTE 4. NEW ACCOUNTING PRONOUNCEMENTS | |
In July 2013, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update that amends the presentation requirements of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The update would require an unrecognized tax benefit, or a portion of an unrecognized tax benefit to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward in most cases. The effective date for this update is for the annual and interim periods beginning after December 15, 2013. The adoption of this update did not have impact on our Consolidated Financial Statements. | |
In May 2014, the FASB and the International Accounting Standards Board (the “IASB”) jointly issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under GAAP and International Financial Reporting Standards (“IFRS”). Previous revenue recognition guidance in GAAP comprised broad revenue recognition concepts together with numerous revenue requirements for particular industries or transactions, which sometimes resulted in different accounting for economically similar transactions. In contrast, IFRS provided limited revenue recognition guidance and, consequently, could be difficult to apply to complex transactions. Accordingly, the FASB and the ISAB initiated a joint project to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS that would: (1) Remove inconsistencies and weaknesses in revenue requirements; (2) Provide a more robust framework for addressing revenue issues; (3) Improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; (4) Provide more useful information to users of financial statements through improved disclosure requirements; and (5) Simplify the preparation of financial statements by reducing the number of requirements to which and entity must refer. To meet those objectives, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies generally will be required to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The standard is effective for public entities for interim and annual periods beginning after December 15, 2016; early adoption is not permitted. For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. The Company is currently evaluating the provisions of ASU No. 2014-09 and will be closely monitoring developments and additional guidance to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements. | |
In August 2014, the Financial Accounting Standard Board (“FASB”) issued an accounting standard update that requires management to assess an entity’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. Substantial doubt about an entity’s ability to continue as a going concern exist when relevant conditions and events, consolidated and aggregated, indicate that it is probable that an entity will be unable to meet its obligations as they become due within one year after the date that the financial statement are issue. Currently, there is no guidance in U.S. GAAP for management’s responsibility to perform an evaluation. Under the update, management’s evaluation is to be performed when preparing financial statement for each annual and interim reporting period and based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued. The Company will adopt this standard effective January 1, 2017. The Company is currently assessing the impact the adoption of this standard will have on the Company’s Consolidated Financial Statements. | |
A variety of proposed or otherwise potential accounting standards are currently under review and study by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any that the implementation of any such proposed or revised standards would have on the Company’s Consolidated Financial Statements. | |
RELATED_PARTY_TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2014 | |
RELATED PARTY TRANSACTIONS | ' |
RELATED PARTY TRANSACTIONS | ' |
NOTE 5. RELATED PARTY TRANSACTIONS | |
The 19 acre shopping center (the “Shopping Center”) adjacent to the Atlantis is owned by Biggest Little Investments, L.P. (“BLI”) whose general partner is Maxum, L.L.C. (“Maxum”). John Farahi, Bob Farahi and Ben Farahi each individually own non-controlling interests in BLI and Maxum. John Farahi is Co-Chairman of the Board, Chief Executive Officer, Secretary, and a Director of Monarch. Bob Farahi is Co-Chairman of the Board, President, and a Director of Monarch. | |
In addition, we share a driveway with and lease approximately 37,000 square-feet from the Shopping Center for a minimum lease term of 15 years at an annual rent of $340 thousand plus common area expenses, subject to increase every year beginning in the 61st month based on the Consumer Price Index. We have the option to renew the lease for three individual five-year terms, and at the end of the extension periods, we have the option to purchase the leased driveway section of the Shopping Center. For each of the three month periods ended September 30, 2014 and 2013, the Company paid $85 thousand in rent, plus $29 thousand and $67 thousand, respectively for operating expenses related to this lease. For each of the nine month periods ended September 30, 2014 and 2013, the Company paid $256 thousand in rent, plus $93 thousand and $132 thousand, respectively for operating expenses related to this lease. | |
We occasionally lease billboard advertising, storage space or parking lot space from affiliates of our controlling stockholders and paid $30 thousand and $29 thousand for the three months ended September 30, 2014 and 2013 respectively, and paid $96 thousand and $85 thousand for the nine months ended September 30, 2014 and 2013, respectively. | |
LONGTERM_DEBT
LONG-TERM DEBT | 9 Months Ended | ||||
Sep. 30, 2014 | |||||
LONG-TERM DEBT | ' | ||||
LONG-TERM DEBT | ' | ||||
NOTE 6. LONG-TERM DEBT | |||||
On November 15, 2011, we amended and restated our $60.0 million credit facility with a new facility (the “Credit Facility”). We utilized the Credit Facility to finance the acquisition of Black Hawk and the Credit Facility is available to be used for working capital needs, general corporate purposes and for ongoing capital expenditure requirements. | |||||
The maturity date of the Credit Facility is November 15, 2016. Borrowings are secured by liens on substantially all of the Company’s real and personal property. | |||||
In addition to other customary covenants for a facility of this nature, as of September 30, 2014, the Company was required to maintain a leverage ratio, defined as consolidated debt divided by EBITDA, of no more than 2.5:1 and a fixed charge coverage ratio (EBITDA divided by fixed charges, as defined) of at least 1.15:1. As of September 30, 2014, the Company’s leverage ratio and fixed charge coverage ratios were 1.02:1 and 31.0:1, respectively. | |||||
The Credit Facility is structured to reduce the maximum principal available by $1.5 million each quarter beginning June 30, 2013. As of September 30, 2014, the maximum principal available was $91.0 million. We may permanently reduce the maximum principal available at any time so long as the amount of such reduction is at least $0.5 million and a multiple of $50,000. Maturities of our borrowings under the Credit Facility for each of the next three years and thereafter as of September 30, 2014 are as follows: | |||||
Amounts in millions | |||||
Year | Maturities | ||||
2014 | $ | — | |||
2015 | — | ||||
2016 | 43.4 | ||||
Thereafter | — | ||||
$ | 43.4 | ||||
At September 30, 2014, the Company had $43.4 million outstanding under the Credit Facility. At that time our leverage ratio was such that pricing for borrowings under the Credit Facility was LIBOR plus 1.5%. At September 30, 2014, the one-month LIBOR interest rate was 0.16%. The carrying value of the debt outstanding under the Credit Facility approximates fair value due to the variable nature of applicable interest rates and relative short-term maturity. | |||||
TAXES
TAXES | 9 Months Ended |
Sep. 30, 2014 | |
TAXES. | ' |
TAXES | ' |
NOTE 7. TAXES | |
For the nine months ended September 30, 2014, the Company’s effective tax rate was 37.7% compared to 35.9% for the nine months ended September 30, 2013 with the increase in the effective tax rate primarily attributable to the $1.8 million expense related to the campaign against the proposed 2014 ballot initiatives to expand gaming in Colorado which is not deductible for federal and state tax purposes. | |
Sales and Use Tax on Complimentary Meals | |
On March 27, 2008, the Nevada Supreme Court issued a decision in Sparks Nugget, Inc. vs. The State of Nevada Department of Taxation (the “Department”), holding that food purchased for subsequent use in the provision of complimentary and/or employee meal was exempt from use tax. As a result of this decision, refund claims were filed for use taxes paid over the period April 1997 through March 2000 and the period February 2005 through June 2008, on food purchased for subsequent use in complimentary and employee meals at our Nevada casino property. We requested refunds totaling approximately $1.6 million, excluding interest (“the Refunds”). We did not recognize any of these refund amounts. | |
In February 2012, the Department issued a policy directive, requesting that affected taxpayers begin collecting and remitting sales tax on complimentary meals and employee meals effective February 2012 and on June 25, 2012, the Nevada Tax Commission adopted regulations providing for a similar requirement. Subject to these regulations we accrued $0.6 million through June 2013 related to this directive. | |
The Department policy directive was challenged by several affected parties and in June 2013, the Nevada Tax Commission issued a ruling that complimentary and employee meals were no longer subject to sales taxation. Associated with the ruling, the Nevada hotel-casino industry, including the Company, agreed to forego and cause to be withdrawn certain pending use tax refund requests. Pursuant to that agreement, we withdrew our request for the Refunds. As a result of the ruling, we reversed the accumulated sales tax expense accrual totaling $0.6 million in the second quarter of 2013. | |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
Basis of Presentation: | ' |
Basis of Presentation: | |
Monarch Casino & Resort, Inc., was incorporated in 1993 and through its wholly-owned subsidiary, Golden Road Motor Inn, Inc. (“Golden Road”), owns and operates the Atlantis Casino Resort Spa, a hotel/casino facility in Reno, Nevada (the “Atlantis”). Monarch’s wholly owned subsidiaries, High Desert Sunshine, Inc. (“High Desert”), Golden East, Inc. (“Golden East”) and Golden North, Inc. (“Golden North”), each own separate parcels of land located proximate to the Atlantis. Monarch’s wholly owned subsidiary Monarch Growth Inc. (“Monarch Growth”), formed in 2011, acquired Riviera Black Hawk, Inc., owner of the Riviera Black Hawk Casino (collectively “Monarch Black Hawk” or “Black Hawk”) on April 26, 2012. Riviera Black Hawk Casino was renamed Monarch Casino Black Hawk in October 2013. Monarch Growth also owns a parcel of land in Black Hawk, Colorado contiguous to the Monarch Black Hawk Casino. | |
Monarch’s wholly owned subsidiary Monarch Interactive, Inc. (“Monarch Interactive”) received approval from the Nevada Gaming Commission on August 23, 2012, which approval was extended three times, each for an additional six month period, with the most recent approval received on February 20, 2014, pending commencement of operations, for a license as an operator of interactive gaming. Before the license can be issued, a number of conditions must be met and before operations can commence, the Company must enter into contracts with a licensed interactive gaming service provider with an approved system. None of these conditions have occurred, and Monarch Interactive is not currently engaged in any operating activities. The Company has decided to allow the current approval to lapse pending a change in market conditions that would support the Company’s investment in this line of business. In Nevada, legal interactive gaming is currently limited to intrastate poker. | |
The unaudited condensed consolidated financial statements include the accounts of Monarch and its subsidiaries. Intercompany balances and transactions are eliminated. | |
Unless otherwise indicated, “Monarch,” “Company,” “we,” “our” and “us” refer to Monarch Casino & Resort, Inc. and its subsidiaries. | |
Fair Value of Financial Instruments: | ' |
Fair Value of Financial Instruments: | |
The estimated fair value of the Company’s financial instruments has been determined by the Company, using available market information and valuation methodologies. However, considerable judgment is required to develop the estimates of fair value; thus, the estimates provided herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. | |
The carrying amounts of cash, receivables, accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments. Additionally, the carrying value of our long-term debt approximates fair value due to the variable nature of applicable interest rates and relative short-term maturity. | |
Change in Accounting Estimate of Depreciable Life of Monarch Black Hawk Parking Structure | ' |
Change in Accounting Estimate of Depreciable Life of Monarch Black Hawk Parking Structure: | |
In December 2013, the Company began construction of a new parking facility at Monarch Black Hawk. Upon completion of that new structure, the Company plans to demolish the existing parking structure. At December 31, 2013, the existing parking structure had a net book value of approximately $4.8 million and a remaining depreciable life of approximately 37 years. The new parking facility was estimated to be completed on March 31, 2015. In accordance with ASC 250-10-45-17, effective January 1, 2014, the Company modified the estimated depreciable life of the existing parking structure to 15 months; the period from January 1, 2014 through the estimated demolition commencement date of March 31, 2015. As a result of this modification to the estimated depreciable life, depreciation expense of the existing parking structure increased by approximately $0.3 million per month (approximately $0.2 million net of tax). In July 2014, because of a delayed construction schedule, the Company revised the new parking facility completion date to December 31, 2015. At this time, the existing parking structure had a net book value of approximately $2.9 million. The Company modified the estimated depreciable life of the existing parking structure to 18 months; the period from July 1, 2014 through the revised estimated demolition commencement date of December 31, 2015. As a result of this modification, the increase in depreciation expense compared to the prior year was adjusted to $0.2 million per month (approximately $0.1 million net of tax) for the period from July 1, 2014 through December 31, 2015. For the three months ended September 30, 2014, the effect of the changes in estimate was an increase of depreciation expense by $0.5 million, a decrease of net income by $0.3 million and a decrease of basic and diluted earnings per share by $0.02. For the nine months ended September 30, 2014, the effect of this change in estimate was an increase of depreciation expense by $2.4 million, a decrease of net income by $1.5 million and a decrease of basic and diluted earnings per share by $0.09. | |
Segment Reporting | ' |
Segment Reporting: | |
Effective the first quarter of 2014, the Company updated its segment reporting analysis and determined that two of the Company’s operating segments, Atlantis and Monarch Black Hawk, meet all of the aggregation criteria stipulated by ASC 280-10-50-11. The Company views each property as an operating segment and the two operating segments have been aggregated into one reporting segment. The September 30, 2013 interim financial information has been reclassified to be consistent with the current year presentation. | |
STOCKBASED_COMPENSATION_Tables
STOCK-BASED COMPENSATION (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2014 | ||||||||||||||
STOCK-BASED COMPENSATION | ' | |||||||||||||
Schedule of stock-based compensation expense | ' | |||||||||||||
Amounts in thousands | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Casino | $ | 9 | $ | 15 | $ | 34 | $ | 47 | ||||||
Food and beverage | 18 | 19 | 50 | 53 | ||||||||||
Hotel | 3 | (12 | ) | 8 | (5 | ) | ||||||||
Selling, general and administrative | 271 | 272 | 785 | 722 | ||||||||||
Total stock-based compensation, before taxes | 301 | 294 | 877 | 817 | ||||||||||
Tax benefit | (105 | ) | (103 | ) | (307 | ) | (286 | ) | ||||||
Total stock-based compensation, net of tax | $ | 196 | $ | 191 | $ | 570 | $ | 531 | ||||||
EARNINGS_PER_SHARE_Tables
EARNINGS PER SHARE (Tables) | 9 Months Ended | |||||||||||
Sep. 30, 2014 | ||||||||||||
EARNINGS PER SHARE | ' | |||||||||||
Schedule of reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations | ' | |||||||||||
The following is a reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations (shares in thousands): | ||||||||||||
Three months ended September 30, | ||||||||||||
2014 | 2013 | |||||||||||
Shares | Per Share | Shares | Per Share | |||||||||
Amount | Amount | |||||||||||
Basic | 16,800 | $ | 0.24 | 16,389 | $ | 0.34 | ||||||
Effect of dilutive stock options | 216 | — | 791 | (0.02 | ) | |||||||
Diluted | 17,016 | $ | 0.24 | 17,180 | $ | 0.32 | ||||||
Nine months ended September 30, | ||||||||||||
2014 | 2013 | |||||||||||
Shares | Per Share | Shares | Per Share | |||||||||
Amount | Amount | |||||||||||
Basic | 16,709 | $ | 0.62 | 16,244 | $ | 0.98 | ||||||
Effect of dilutive stock options | 404 | (0.01 | ) | 555 | (0.03 | ) | ||||||
Diluted | 17,113 | $ | 0.61 | 16,799 | $ | 0.95 | ||||||
LONGTERM_DEBT_Tables
LONG-TERM DEBT (Tables) | 9 Months Ended | ||||
Sep. 30, 2014 | |||||
LONG-TERM DEBT | ' | ||||
Schedule of maturities of borrowings | ' | ||||
Amounts in millions | |||||
Year | Maturities | ||||
2014 | $ | — | |||
2015 | — | ||||
2016 | 43.4 | ||||
Thereafter | — | ||||
$ | 43.4 | ||||
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 0 Months Ended |
Aug. 23, 2012 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
Multiplier of period for which approval is extended | 3 |
Additional period for which the approval was extended | '6 months |
SUMMARY_OF_SIGNIFICANT_ACCOUNT3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | Jul. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Jul. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | |
item | Monarch Black Hawk Parking Structure | Monarch Black Hawk Parking Structure | Monarch Black Hawk Parking Structure | Monarch Black Hawk Parking Structure | Monarch Black Hawk Parking Structure | Monarch Black Hawk Parking Structure | Monarch Black Hawk Parking Structure | |||||
Service Life | Restatement of opening retained earnings | Restatement of opening retained earnings | Restatement of opening retained earnings | Restatement of opening retained earnings | ||||||||
Service Life | Service Life | Service Life | Service Life | |||||||||
Change in Accounting Estimate | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net book value | $175,692,000 | ' | $175,692,000 | ' | $175,637,000 | ' | $4,800,000 | ' | $2,900,000 | ' | ' | ' |
Estimated depreciable life | ' | ' | ' | ' | ' | 'P18M | 'P37Y | 'P15M | ' | ' | ' | ' |
Depreciation expense per month | ' | ' | ' | ' | ' | ' | ' | ' | 200,000 | 300,000 | ' | ' |
Depreciation expense net of tax per month | ' | ' | ' | ' | ' | ' | ' | ' | 100,000 | 200,000 | ' | ' |
Depreciation expense | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 500,000 | 2,400,000 |
Net income | $4,074,000 | $5,520,000 | $10,374,000 | $15,902,000 | ' | ' | ' | ' | ' | ' | ($300,000) | ($1,500,000) |
Basic and diluted earnings per share (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ($0.02) | ($0.09) |
SEGMENT INFORMATION | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of operating segments | ' | ' | 2 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of reportable segments | ' | ' | 1 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
STOCKBASED_COMPENSATION_Detail
STOCK-BASED COMPENSATION (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Stock-based compensation expense | ' | ' | ' | ' |
Total stock-based compensation, before taxes | $301 | $294 | $877 | $817 |
Tax benefit | -105 | -103 | -307 | -286 |
Total stock-based compensation, net of tax | 196 | 191 | 570 | 531 |
Casino | ' | ' | ' | ' |
Stock-based compensation expense | ' | ' | ' | ' |
Total stock-based compensation, before taxes | 9 | 15 | 34 | 47 |
Food and beverage | ' | ' | ' | ' |
Stock-based compensation expense | ' | ' | ' | ' |
Total stock-based compensation, before taxes | 18 | 19 | 50 | 53 |
Hotel | ' | ' | ' | ' |
Stock-based compensation expense | ' | ' | ' | ' |
Total stock-based compensation, before taxes | 3 | -12 | 8 | -5 |
Selling, general and administrative | ' | ' | ' | ' |
Stock-based compensation expense | ' | ' | ' | ' |
Total stock-based compensation, before taxes | $271 | $272 | $785 | $722 |
EARNINGS_PER_SHARE_Details
EARNINGS PER SHARE (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Shares | ' | ' | ' | ' |
Basic (in shares) | 16,800 | 16,389 | 16,709 | 16,244 |
Effect of dilutive stock options (in shares) | 216 | 791 | 404 | 555 |
Diluted (in shares) | 17,016 | 17,180 | 17,113 | 16,799 |
Per Share Amount | ' | ' | ' | ' |
Basic (in dollars per share) | $0.24 | $0.34 | $0.62 | $0.98 |
Effect of dilutive stock options (in dollars per share) | ' | ($0.02) | ($0.01) | ($0.03) |
Diluted (in dollars per share) | $0.24 | $0.32 | $0.61 | $0.95 |
Stock options | ' | ' | ' | ' |
Anti-dilutive securities | ' | ' | ' | ' |
Anti-dilutive securities excluded from the computation of diluted earnings per share (in shares) | 707 | 308 | 661 | 540 |
RELATED_PARTY_TRANSACTIONS_Det
RELATED PARTY TRANSACTIONS (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
sqft | item | |||
acre | ||||
sqft | ||||
Members of Management Holding Noncontrolling Interests | ' | ' | ' | ' |
RELATED PARTY TRANSACTIONS | ' | ' | ' | ' |
Acreage of shopping center | ' | ' | 19 | ' |
Area of property leased (in square feet) | 37,000 | ' | 37,000 | ' |
Minimum lease term | ' | ' | '15 years | ' |
Annual rent | ' | ' | $340 | ' |
Number of terms for which the lease can be renewed | ' | ' | 3 | ' |
Lease term under each renewal | ' | ' | '5 years | ' |
Lease rent paid | 85 | 85 | 256 | 256 |
Operating expenses related to lease | 29 | 67 | 93 | 132 |
Affiliates of Controlling Stockholders | ' | ' | ' | ' |
RELATED PARTY TRANSACTIONS | ' | ' | ' | ' |
Lease rent paid | $30 | $29 | $96 | $85 |
LONGTERM_DEBT_Details
LONG-TERM DEBT (Details) (USD $) | 9 Months Ended | ||
Sep. 30, 2014 | Jun. 30, 2013 | Nov. 15, 2011 | |
Maturities of Borrowings Under New Credit Facility | ' | ' | ' |
2016 | $43,400,000 | ' | ' |
Total | 43,400,000 | ' | ' |
Credit Facility | ' | ' | ' |
Long-term debt | ' | ' | ' |
Maximum borrowing capacity | 91,000,000 | ' | 60,000,000 |
Reduction in maximum borrowing capacity | ' | 1,500,000 | ' |
Multiple which may be used to permanently reduce the maximum borrowing capacity under the credit facility | 50,000 | ' | ' |
Maturities of Borrowings Under New Credit Facility | ' | ' | ' |
Outstanding amount | 43,400,000 | ' | ' |
Variable interest rate base | 'LIBOR | ' | ' |
Percentage points added to the reference rate | 1.50% | ' | ' |
One-month LIBOR interest rate (as a percent) | 0.16% | ' | ' |
Credit Facility | Actual | ' | ' | ' |
Long-term debt | ' | ' | ' |
Leverage ratio | 1.02 | ' | ' |
Fixed charge coverage ratio | 31 | ' | ' |
Credit Facility | Minimum | ' | ' | ' |
Long-term debt | ' | ' | ' |
Amount in which the maximum borrowing capacity may be permanently reduced | $500,000 | ' | ' |
Credit Facility | Minimum | Requirement | ' | ' | ' |
Long-term debt | ' | ' | ' |
Fixed charge coverage ratio | 1.15 | ' | ' |
Credit Facility | Maximum | Requirement | ' | ' | ' |
Long-term debt | ' | ' | ' |
Leverage ratio | 2.5 | ' | ' |
TAXES_Details
TAXES (Details) (USD $) | 3 Months Ended | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2013 |
TAXES. | ' | ' | ' |
Effective tax rate (as a percent) | ' | 37.70% | 35.90% |
Colorado ballot initiative costs | $841 | $1,845 | ' |
TAXES_Details_2
TAXES (Details 2) (USD $) | 3 Months Ended | ||
In Millions, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2008 |
State of Nevada | State of Nevada | ||
Unrecognized tax benefits and settlements with tax authorities | ' | ' | ' |
Amount of requested refund, excluding interest | ' | ' | $1.60 |
Accrued sales tax | ' | 0.6 | ' |
Reversal of previously accrued sales tax | $0.60 | ' | ' |