Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2015 | Aug. 03, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | MONARCH CASINO & RESORT INC | |
Entity Central Index Key | 907,242 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2015 | |
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 | 16,976,356 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q2 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Revenues | ||||
Casino | $ 38,551 | $ 36,264 | $ 75,990 | $ 72,298 |
Food and beverage | 13,975 | 13,205 | 27,078 | 25,470 |
Hotel | 5,828 | 6,031 | 10,565 | 10,675 |
Other | 2,668 | 2,455 | 5,268 | 4,934 |
Gross revenues | 61,022 | 57,955 | 118,901 | 113,377 |
Less promotional allowances | (11,009) | (10,152) | (21,717) | (20,066) |
Net revenues | 50,013 | 47,803 | 97,184 | 93,311 |
Operating expenses | ||||
Casino | 16,228 | 15,117 | 32,564 | 30,139 |
Food and beverage | 5,524 | 5,543 | 10,743 | 10,514 |
Hotel | 1,676 | 1,700 | 3,195 | 3,084 |
Other | 1,114 | 912 | 2,048 | 1,787 |
Selling, general and administrative | 13,317 | 13,180 | 25,896 | 26,411 |
Depreciation and amortization | 4,108 | 4,630 | 8,239 | 9,324 |
Loss (gain) on disposition of assets | (2) | 249 | (20) | 249 |
Colorado ballot initiative costs | 1,004 | 1,004 | ||
Total operating expenses | 41,965 | 42,335 | 82,665 | 82,512 |
Income from operations | 8,048 | 5,468 | 14,519 | 10,799 |
Other expenses | ||||
Interest expense, net of amounts capitalized | (181) | (274) | (400) | (561) |
Total other expense | (181) | (274) | (400) | (561) |
Income before income taxes | 7,867 | 5,194 | 14,119 | 10,238 |
Provision for income taxes | (2,768) | (2,170) | (4,977) | (3,938) |
Net income | $ 5,099 | $ 3,024 | $ 9,142 | $ 6,300 |
Net income | ||||
Basic (in dollars per share) | $ 0.30 | $ 0.18 | $ 0.54 | $ 0.38 |
Diluted (in dollars per share) | $ 0.29 | $ 0.18 | $ 0.53 | $ 0.37 |
Weighted average number of common shares and potential common shares outstanding | ||||
Basic (in shares) | 16,894 | 16,788 | 16,858 | 16,663 |
Diluted (in shares) | 17,302 | 17,104 | 17,250 | 17,165 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2015 | Dec. 31, 2014 |
Current assets | ||
Cash and cash equivalents | $ 19,848 | $ 21,583 |
Receivables, net | 3,095 | 3,047 |
Income taxes receivable | 1,937 | 1,139 |
Inventories | 2,588 | 2,846 |
Prepaid expenses | 4,064 | 4,021 |
Deferred income taxes | 1,626 | 1,626 |
Total current assets | 33,158 | 34,262 |
Property and equipment | ||
Land | 29,415 | 29,415 |
Land improvements | 6,701 | 6,701 |
Buildings | 150,771 | 150,821 |
Building improvements | 20,027 | 18,142 |
Furniture and equipment | 127,285 | 125,671 |
Construction in Progress | 26,040 | 15,672 |
Leasehold improvements | 1,347 | 1,347 |
Gross property and equipment | 361,586 | 347,769 |
Less accumulated depreciation and amortization | (173,773) | (167,498) |
Net property and equipment | 187,813 | 180,271 |
Other assets | ||
Goodwill | 25,111 | 25,111 |
Intangible assets, net | 6,783 | 7,366 |
Deferred income taxes | 4,682 | 4,682 |
Other assets, net | 457 | 609 |
Total other assets | 37,033 | 37,768 |
Total assets | 258,004 | 252,301 |
Current liabilities | ||
Accounts payable | 6,434 | 7,933 |
Construction accounts payable | 2,232 | 1,790 |
Accrued expenses | 18,497 | 19,327 |
Total current liabilities | 27,163 | 29,050 |
Long-term debt | 42,200 | 46,300 |
Total liabilities | $ 69,363 | $ 75,350 |
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; 16,976,356 outstanding at June 30, 2015; 16,812,794 outstanding at December 31, 2014 | $ 191 | $ 191 |
Additional paid-in capital | 22,853 | 22,985 |
Treasury stock, 2,119,944 shares at June 30, 2015; 2,283,506 shares at December 31, 2014 | (30,290) | (32,970) |
Retained earnings | 195,887 | 186,745 |
Total stockholders' equity | 188,641 | 176,951 |
Total liabilities and stockholders' equity | $ 258,004 | $ 252,301 |
CONDENSED CONSOLIDATED BALANCE4
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2015 | Dec. 31, 2014 |
CONDENSED 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 | 16,976,356 | 16,812,794 |
Treasury stock, shares | 2,119,944 | 2,283,506 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Cash flows from operating activities: | ||
Net income | $ 9,142 | $ 6,300 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 8,239 | 9,324 |
Amortization of deferred loan costs | 152 | 152 |
Stock-based compensation | 620 | 576 |
Excess tax benefit from stock-based compensation | (275) | (395) |
Provision for bad debts | 35 | 34 |
Loss (gain) on disposition of assets | (20) | 249 |
Changes in operating assets and liabilities: | ||
Receivables | (83) | (745) |
Inventories | 258 | 249 |
Prepaid expenses | (43) | (458) |
Accounts payable | (1,499) | (744) |
Accrued expenses | (830) | (1,206) |
Income taxes | (798) | 770 |
Net cash provided by operating activities | 14,898 | 14,106 |
Cash flows from investing activities: | ||
Proceeds from sale of assets | 23 | 75 |
Change in construction payable | 442 | 119 |
Acquisition of property and equipment | (15,202) | (9,498) |
Net cash used in investing activities | (14,737) | (9,304) |
Cash flows from financing activities: | ||
Net exercise of stock options | 1,929 | (2,461) |
Excess tax benefit from stock-based compensation | 275 | 395 |
Principal payments on long-term debt | (4,100) | (4,900) |
Net cash used in financing activities | (1,896) | (6,966) |
Net decrease in cash | (1,735) | (2,164) |
Cash and cash equivalents at beginning of period | 21,583 | 19,330 |
Cash and cash equivalents at end of period | 19,848 | 17,166 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest, net of amounts capitalized | 247 | 447 |
Cash paid for income taxes | $ 5,500 | $ 2,850 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2015 | |
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 on April 26, 2012. Riviera Black Hawk Casino was renamed Monarch Casino Black Hawk (“Monarch Black Hawk”) in October 2013. Monarch Growth also owns a parcel of land in Black Hawk, Colorado contiguous to the Monarch Casino Black Hawk. On October 22, 2014, the board of directors authorized a stock repurchase plan (the “Repurchase Plan”). Under the Repurchase Plan, the board of directors authorized a program to repurchase up to 3,000,000 shares of the Company’s common stock in the open market or in privately negotiated transactions from time to time, in compliance with Rule 10b-18 of the Securities and Exchange Act of 1934, subject to market conditions, applicable legal requirements and other factors. The Repurchase Plan does not obligate the Company to acquire any particular amount of common stock and the plan may be suspended at any time at our discretion, and it will continue until exhausted. The actual timing, number and value of shares repurchased under the Repurchase Program will be determined by management at its discretion and will depend on a number of factors, including the market price of the Company’s stock, general market economic conditions and applicable legal requirements. The Company has made no purchases under the Repurchase Plan. 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 six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. The balance sheet at December 31, 2014 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, 2014. 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 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 and adjusted the monthly depreciation expense. For the three months ended June 30, 2015, 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 six months ended June 30, 2015, the effect of the changes in estimate was an increase of depreciation expense by $1.0 million, a decrease of net income by $0.6 million and a decrease of basic and diluted earnings per share by $0.04. Segment Reporting: The accounting guidance for disclosures about segments of an enterprise and related information requires separate financial information to be disclosed for all operating segments of a business. The Company 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. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 6 Months Ended |
Jun. 30, 2015 | |
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 (in thousands): Three months ended Six months ended June 30, June 30, 2015 2014 2015 2014 Casino $ $ $ $ Food and beverage Hotel Selling, general and administrative Total stock-based compensation, before taxes Tax benefit ) ) ) ) Total stock-based compensation, net of tax $ $ $ $ |
EARNINGS PER SHARE
EARNINGS PER SHARE | 6 Months Ended |
Jun. 30, 2015 | |
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 June 30, 2015 2014 Shares Per Share Amount Shares Per Share Amount Basic $ $ Effect of dilutive stock options ) — Diluted $ $ Six months ended June 30, 2015 2014 Shares Per Share Amount Shares Per Share Amount Basic $ $ Effect of dilutive stock options ) ) Diluted $ $ 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 six months ended June 30, 2015, options for 610 thousand and 655 thousand shares, respectively, were excluded from the computation. For the three and six months ended June 30, 2014, 626 thousand and 644 thousand shares were excluded from the computation. |
NEW ACCOUNTING PRONOUNCEMENTS
NEW ACCOUNTING PRONOUNCEMENTS | 6 Months Ended |
Jun. 30, 2015 | |
NEW ACCOUNTING PRONOUNCEMENTS | |
NEW ACCOUNTING PRONOUNCEMENTS | NOTE 4. NEW ACCOUNTING PRONOUNCEMENTS In May 2014, the FASB issued an accounting standards update that amends the FASB Accounting Standards Codification and creates a new topic for Revenue from Contracts with Customers. The new guidance is expected to clarify the principles for revenue recognition and to develop a common revenue standard for U.S. GAAP applicable to revenue transactions. This guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. This guidance also provides substantial revision of interim and annual disclosures. The update allows for either full retrospective adoption, meaning the guidance is applied for all periods presented, or modified retrospective adoption, meaning the guidance is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the guidance recognized at the date of initial application. In July 2015, FASB voted to delay the effective date of the new revenue standard by one year. The new effective date is for the annual and interim periods beginning after December 15, 2017. Reporting entities may choose to adopt the standard as of the original effective date. The Company plans to adopt this standard effective January 1, 2018. The Company is currently assessing the impact the adoption of this standard will have on its Consolidated Financial Statements. In August 2014, the 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 issued. 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 statements 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 its Consolidated Financial Statements In April 2015, FASB issued an accounting standards update that requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. The effective date for this update is for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early application is permitted. The Company will adopt this standard effective January 1, 2016. The Company is currently assessing the impact the adoption of this standard will have on its 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 | 6 Months Ended |
Jun. 30, 2015 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 5. RELATED PARTY TRANSACTIONS The shopping center adjacent to the Atlantis (the “Shopping Center”) is owned by Biggest Little Investments, L.P. (“BLI”). John Farahi, Bob Farahi and Ben Farahi are each principal stockholders of the Company and beneficially own limited partnership interests in BLI indirectly through Maxum LLC, which is the general partner of BLI. Ben Farahi is the sole manager of Maxum LLC, and neither John Farahi nor Bob Farahi has any management control over BLI or the Shopping Center. Ben Farahi formerly held positions of Co-Chairman of the Board, Secretary, Treasurer and Chief Financial Officer of the Company. John Farahi is the Co-Chairman of the Board, Chief Executive Officer and Secretary of the Company, and Bob Farahi is the Co-Chairman of the Board and President of the Company. 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 original annual rent of $300 thousand plus common area expenses, subject to increase every year beginning in the 61st month based on the Consumer Price Index. As of June 30, 2015 the annual rent is $377 thousand. We have the option to extend the lease for three individual five-year terms beyond the initial 15 year term, and at the end of the extension periods, we have the option to purchase the leased driveway section of the Shopping Center. For the three month periods ended June 30, 2015 and 2014, the Company paid $94 thousand in rent, plus $25 thousand in operating expenses related to this lease and $85 thousand in rent, plus $34 thousand for operating expenses related to this lease, respectively. For the six month periods ended June 30, 2015 and 2014, the Company paid $188 thousand in rent, plus $53 thousand expenses related to this lease and $170 thousand in rent, plus $64 thousand for operating expenses related to this lease, respectively. We occasionally lease billboard advertising, storage space or parking lot space from affiliates of our controlling stockholders. We paid $27 thousand and $28 thousand for the three month periods ended June 30, 2015 and 2014, respectively and $71 thousand and $66 thousand for the six month periods ended June 30, 2015 and 2014 respectively, under these arrangements with affiliates. |
LONG-TERM DEBT
LONG-TERM DEBT | 6 Months Ended |
Jun. 30, 2015 | |
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 $100 million 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 June 30, 2015, we are required to maintain a leverage ratio, defined as consolidated debt divided by Adjusted EBITDA, of no more than 2.0:1 and a fixed charge coverage ratio (Adjusted EBITDA divided by fixed charges, as defined) of at least 1.15:1. As of June 30, 2015, the Company’s leverage ratio and fixed charge coverage ratios were 0.9:1 and 32.0:1, respectively. The Credit Facility is structured to reduce the maximum principal available by $1.5 million each quarter beginning June 30, 2013. The Credit Facility also allows us to 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. During the second quarter of 2015 we exercised this option and permanently reduced the amount available under the credit facility by $20 million. As of June 30, 2015, the maximum principal available was $66.5 million, of which $42.2 million was drawn. Maturities of our borrowings for each of the next two years as of June 30, 2015 are as follows (in millions): Year Maturities 2015 $ — 2016 $ At June 30, 2015, our leverage ratio was such that pricing for borrowings under the Credit Facility was LIBOR plus 1.25%. At June 30, 2015, the one-month LIBOR interest rate was 0.19%. The carrying value of the debt outstanding under the Credit Facility approximates fair value because the interest fluctuates with the lender’s prime rate or other market rates of interest. We believe that our existing cash balances, cash flow from operations and borrowings available under the Credit Facility will provide us with sufficient resources to fund our operations, meet our debt obligations, and fulfill our capital expenditure plans over the next twelve months; however, our operations are subject to financial, economic, competitive, regulatory, and other factors, many of which are beyond our control. If we are unable to generate sufficient cash flow, we could be required to adopt one or more alternatives, such as reducing, delaying or eliminating planned capital expenditures, selling assets, restructuring debt or obtaining additional equity capital. |
TAXES
TAXES | 6 Months Ended |
Jun. 30, 2015 | |
TAXES. | |
TAXES | NOTE 7. TAXES For the six months ended June 30, 2015, the Company’s effective tax rate was 35.3% compared to 38.5% for the six months ended June 30, 2014. The higher effective tax rate in 2014 is primarily attributable to the $1.0 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. |
SUMMARY OF SIGNIFICANT ACCOUN13
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2015 | |
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 on April 26, 2012. Riviera Black Hawk Casino was renamed Monarch Casino Black Hawk (“Monarch Black Hawk”) in October 2013. Monarch Growth also owns a parcel of land in Black Hawk, Colorado contiguous to the Monarch Casino Black Hawk. On October 22, 2014, the board of directors authorized a stock repurchase plan (the “Repurchase Plan”). Under the Repurchase Plan, the board of directors authorized a program to repurchase up to 3,000,000 shares of the Company’s common stock in the open market or in privately negotiated transactions from time to time, in compliance with Rule 10b-18 of the Securities and Exchange Act of 1934, subject to market conditions, applicable legal requirements and other factors. The Repurchase Plan does not obligate the Company to acquire any particular amount of common stock and the plan may be suspended at any time at our discretion, and it will continue until exhausted. The actual timing, number and value of shares repurchased under the Repurchase Program will be determined by management at its discretion and will depend on a number of factors, including the market price of the Company’s stock, general market economic conditions and applicable legal requirements. The Company has made no purchases under the Repurchase Plan. 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 | 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 six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. The balance sheet at December 31, 2014 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, 2014. |
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 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 and adjusted the monthly depreciation expense. For the three months ended June 30, 2015, 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 six months ended June 30, 2015, the effect of the changes in estimate was an increase of depreciation expense by $1.0 million, a decrease of net income by $0.6 million and a decrease of basic and diluted earnings per share by $0.04. |
Segment Reporting | Segment Reporting: The accounting guidance for disclosures about segments of an enterprise and related information requires separate financial information to be disclosed for all operating segments of a business. The Company 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. |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
STOCK-BASED COMPENSATION | |
Schedule of stock-based compensation expense | Reported stock-based compensation expense was classified as follows (in thousands): Three months ended Six months ended June 30, June 30, 2015 2014 2015 2014 Casino $ $ $ $ Food and beverage Hotel Selling, general and administrative Total stock-based compensation, before taxes Tax benefit ) ) ) ) Total stock-based compensation, net of tax $ $ $ $ |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
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 June 30, 2015 2014 Shares Per Share Amount Shares Per Share Amount Basic $ $ Effect of dilutive stock options ) — Diluted $ $ Six months ended June 30, 2015 2014 Shares Per Share Amount Shares Per Share Amount Basic $ $ Effect of dilutive stock options ) ) Diluted $ $ |
LONG-TERM DEBT (Tables)
LONG-TERM DEBT (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
LONG-TERM DEBT | |
Schedule of maturities of borrowings | Maturities of our borrowings for each of the next two years as of June 30, 2015 are as follows (in millions): Year Maturities 2015 $ — 2016 $ |
SUMMARY OF SIGNIFICANT ACCOUN17
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - shares | Jun. 30, 2015 | Oct. 22, 2014 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Authorized repurchase of Company's common stock | 3,000,000 | |
Treasury Stock, Number of Shares Held | 0 |
SUMMARY OF SIGNIFICANT ACCOUN18
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) $ / shares in Units, $ in Thousands | Dec. 31, 2013USD ($) | Jul. 31, 2014 | Dec. 31, 2013USD ($) | Jun. 30, 2015USD ($)$ / shares | Jun. 30, 2014USD ($) | Jun. 30, 2015USD ($)item$ / shares | Jun. 30, 2014USD ($) | Dec. 31, 2014USD ($) |
Change in Accounting Estimate | ||||||||
Net book value | $ 187,813 | $ 187,813 | $ 180,271 | |||||
Net income | 5,099 | $ 3,024 | $ 9,142 | $ 6,300 | ||||
SEGMENT INFORMATION | ||||||||
Number of operating segments | item | 2 | |||||||
Number of reportable segments | item | 1 | |||||||
Monarch Black Hawk Parking Structure | ||||||||
Change in Accounting Estimate | ||||||||
Net book value | $ 4,800 | $ 4,800 | ||||||
Estimated depreciable life | P37Y | P18M | ||||||
Monarch Black Hawk Parking Structure | Service Life | ||||||||
Change in Accounting Estimate | ||||||||
Estimated depreciable life | P15M | |||||||
Monarch Black Hawk Parking Structure | Correction | Service Life | ||||||||
Change in Accounting Estimate | ||||||||
Depreciation expense per month | $ 300 | |||||||
Depreciation expense net of tax per month | $ 200 | |||||||
Depreciation expense | 500 | $ 1,000 | ||||||
Net income | $ (300) | $ (600) | ||||||
Basic and diluted earnings per share (in dollars per share) | $ / shares | $ (0.02) | $ (0.04) |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Stock-based compensation expense | ||||
Total stock-based compensation, before taxes | $ 329 | $ 314 | $ 620 | $ 576 |
Tax benefit | (115) | (110) | (217) | (202) |
Total stock-based compensation, net of tax | 214 | 204 | 403 | 374 |
Casino | ||||
Stock-based compensation expense | ||||
Total stock-based compensation, before taxes | 18 | 9 | 34 | 25 |
Food and beverage | ||||
Stock-based compensation expense | ||||
Total stock-based compensation, before taxes | 18 | 18 | 42 | 32 |
Hotel | ||||
Stock-based compensation expense | ||||
Total stock-based compensation, before taxes | 3 | 2 | 6 | 5 |
Selling, general and administrative | ||||
Stock-based compensation expense | ||||
Total stock-based compensation, before taxes | $ 290 | $ 285 | $ 538 | $ 514 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - $ / shares shares in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Shares | ||||
Basic (in shares) | 16,894 | 16,788 | 16,858 | 16,663 |
Effect of dilutive stock options (in shares) | 408 | 316 | 392 | 502 |
Diluted (in shares) | 17,302 | 17,104 | 17,250 | 17,165 |
Per Share Amount | ||||
Basic (in dollars per share) | $ 0.30 | $ 0.18 | $ 0.54 | $ 0.38 |
Effect of dilutive stock options (in dollars per share) | (0.01) | (0.01) | (0.01) | |
Diluted (in dollars per share) | $ 0.29 | $ 0.18 | $ 0.53 | $ 0.37 |
Stock options | ||||
Anti-dilutive securities | ||||
Anti-dilutive securities excluded from the computation of diluted earnings per share (in shares) | 610 | 626 | 655 | 644 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015USD ($)ft² | Jun. 30, 2014USD ($) | Jun. 30, 2015USD ($)ft²item | Jun. 30, 2014USD ($) | |
Members of Management Holding Noncontrolling Interests | ||||
RELATED PARTY TRANSACTIONS | ||||
Area of property leased (in square feet) | ft² | 37,000 | 37,000 | ||
Minimum lease term | 15 years | |||
original annual rent expense | $ 300 | |||
Annual rent | $ 377 | |||
Number of terms for which the lease can be renewed | item | 3 | |||
Lease term under each renewal | 5 years | |||
Lease rent paid | $ 94 | $ 85 | $ 188 | $ 170 |
Operating expenses related to lease | 25 | 34 | 53 | 64 |
Affiliates of Controlling Stockholders | ||||
RELATED PARTY TRANSACTIONS | ||||
Lease rent paid | $ 27 | $ 28 | $ 71 | $ 66 |
LONG-TERM DEBT (Details)
LONG-TERM DEBT (Details) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015USD ($) | Jun. 30, 2015USD ($) | Jun. 30, 2013USD ($) | Nov. 15, 2011USD ($) | |
Long-term debt | ||||
Maximum borrowing capacity | $ 66,500,000 | $ 66,500,000 | ||
Amount drawn under the facility | 42,200,000 | |||
Amount in which the maximum borrowing capacity may be permanently reduced | 20,000,000 | |||
Maturities of Borrowings Under New Credit Facility | ||||
2,016 | 42,200,000 | 42,200,000 | ||
Total | $ 42,200,000 | 42,200,000 | ||
Credit Facility | ||||
Long-term debt | ||||
Maximum borrowing capacity | $ 100,000,000 | |||
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 | ||||
Variable interest rate base | LIBOR | |||
Percentage points added to the reference rate | 1.25% | |||
One-month LIBOR interest rate (as a percent) | 0.19% | 0.19% | ||
Credit Facility | Actual | ||||
Long-term debt | ||||
Leverage ratio | 0.9 | |||
Fixed charge coverage ratio | 32 | |||
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 | |||
Old Credit Facility | ||||
Long-term debt | ||||
Maximum borrowing capacity | $ 60,000,000 |
TAXES (Details)
TAXES (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
TAXES. | |||
Effective tax rate (as a percent) | 35.30% | 38.50% | |
Colorado ballot initiative costs | $ 1,004 | $ 1,004 |