Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Mar. 09, 2018 | Jun. 30, 2017 | |
Document and Entity Information | |||
Entity Registrant Name | MONARCH CASINO & RESORT INC | ||
Entity Central Index Key | 907,242 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Public Float | $ 398.5 | ||
Entity Common Stock, Shares Outstanding | 17,775,111 | ||
Document Fiscal Year Focus | 2,017 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Revenues | |||
Casino | $ 178,585 | $ 168,861 | $ 156,843 |
Food and beverage | 63,416 | 60,269 | 56,500 |
Hotel | 24,784 | 23,374 | 22,629 |
Other | 12,467 | 11,640 | 11,198 |
Gross revenues | 279,252 | 264,144 | 247,170 |
Less promotional allowances | (48,526) | (47,112) | (44,925) |
Net revenues | 230,726 | 217,032 | 202,245 |
Operating expenses | |||
Casino | 73,017 | 69,529 | 65,970 |
Food and beverage | 25,727 | 24,627 | 22,249 |
Hotel | 9,320 | 7,231 | 6,787 |
Other | 4,141 | 3,855 | 3,963 |
Selling, general and administrative | 62,719 | 57,730 | 54,779 |
Depreciation and amortization | 15,132 | 14,835 | 15,933 |
Loss on disposition of assets | 4 | 677 | 9 |
Total operating expenses | 190,060 | 178,484 | 169,690 |
Income from operations | 40,666 | 38,548 | 32,555 |
Other expenses | |||
Interest expense, net of amounts capitalized | (967) | (616) | (679) |
Total other expense | (967) | (616) | (679) |
Income before income taxes | 39,699 | 37,932 | 31,876 |
Provision for income taxes | (14,161) | (13,358) | (11,217) |
Net income | $ 25,538 | $ 24,574 | $ 20,659 |
Earnings per share of common stock | |||
Basic (in dollars per share) | $ 1.45 | $ 1.42 | $ 1.22 |
Diluted (in dollars per share) | $ 1.39 | $ 1.39 | $ 1.19 |
Weighted average number of common shares and potential common shares outstanding | |||
Basic (in shares) | 17,585 | 17,305 | 16,948 |
Diluted (in shares) | 18,367 | 17,664 | 17,335 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Current assets | ||
Cash and cash equivalents | $ 29,151 | $ 26,383 |
Receivables, net | 6,925 | 5,036 |
Income taxes receivable | 2,008 | 408 |
Inventories | 3,335 | 3,097 |
Prepaid expenses | 4,612 | 4,487 |
Total current assets | 46,031 | 39,411 |
Property and equipment | ||
Land | 30,034 | 29,549 |
Land improvements | 7,249 | 6,914 |
Buildings | 193,286 | 191,370 |
Buildings improvements | 24,745 | 24,511 |
Furniture and equipment | 140,404 | 134,603 |
Construction in Progress | 48,834 | 9,767 |
Leasehold improvements | 3,800 | 2,688 |
Gross property and equipment | 448,352 | 399,402 |
Less accumulated depreciation and amortization | (197,638) | (184,503) |
Net property and equipment | 250,714 | 214,899 |
Other assets | ||
Goodwill | 25,111 | 25,111 |
Intangible assets, net | 3,869 | 5,035 |
Deferred income taxes | 3,544 | 7,354 |
Other assets, net | 2,818 | 3,355 |
Total other assets | 35,342 | 40,855 |
Total assets | 332,087 | 295,165 |
Current liabilities | ||
Accounts payable | 8,184 | 8,720 |
Construction accounts payable | 5,823 | 2,605 |
Accrued expenses | 25,406 | 23,795 |
Total current liabilities | 39,413 | 35,120 |
Long-term debt | 26,200 | 26,200 |
Total liabilities | 65,613 | 61,320 |
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; 17,759,446 outstanding at December 31, 2017; 17,468,269 outstanding at December 31, 2016 | 191 | 191 |
Additional paid - in capital | 26,890 | 23,834 |
Treasury stock, 1,336,854 shares at December 31, 2017; 1,628,031 shares at December 31, 2016 | (18,123) | (22,158) |
Retained earnings | 257,516 | 231,978 |
Total stockholders' equity | 266,474 | 233,845 |
Total liabilities and stockholders' equity | $ 332,087 | $ 295,165 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2017 | Dec. 31, 2016 |
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 |
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 | 17,759,446 | 17,468,269 |
Treasury stock, shares | 1,336,854 | 1,628,031 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Total |
Balance at Dec. 31, 2014 | $ 191 | $ 22,985 | $ 186,745 | $ (32,970) | $ 176,951 |
Balance (in shares) at Dec. 31, 2014 | 16,812,794 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Net exercise of stock options | (2,666) | 6,566 | 3,900 | ||
Net exercise of stock options (in shares) | 389,905 | ||||
Excess tax benefit from stock-based compensation | 865 | 865 | |||
Stock based compensation expense | 1,544 | 1,544 | |||
Net income | 20,659 | 20,659 | |||
Balance at Dec. 31, 2015 | $ 191 | 22,728 | 207,404 | (26,404) | 203,919 |
Balance (in shares) at Dec. 31, 2015 | 17,202,699 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Net exercise of stock options | (1,312) | 4,246 | 2,934 | ||
Net exercise of stock options (in shares) | 265,570 | ||||
Excess tax benefit from stock-based compensation | 737 | 737 | |||
Stock based compensation expense | 1,681 | 1,681 | |||
Net income | 24,574 | 24,574 | |||
Balance at Dec. 31, 2016 | $ 191 | 23,834 | 231,978 | (22,158) | $ 233,845 |
Balance (in shares) at Dec. 31, 2016 | 17,468,269 | 17,468,269 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Net exercise of stock options | 812 | 4,035 | $ 4,847 | ||
Net exercise of stock options (in shares) | 291,177 | ||||
Stock based compensation expense | 2,244 | 2,244 | |||
Net income | 25,538 | 25,538 | |||
Balance at Dec. 31, 2017 | $ 191 | $ 26,890 | $ 257,516 | $ (18,123) | $ 266,474 |
Balance (in shares) at Dec. 31, 2017 | 17,759,446 | 17,759,446 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Cash flows from operating activities: | |||
Net income | $ 25,538 | $ 24,574 | $ 20,659 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 15,132 | 14,835 | 15,933 |
Amortization of deferred loan costs | 538 | 410 | 338 |
Stock-based compensation | 7,091 | 1,681 | 1,544 |
Excess tax benefit from stock-based compensation | (737) | (865) | |
Provision for bad debts | 103 | 74 | 240 |
Loss on disposition of assets | 4 | 677 | (9) |
Deferred income taxes | 3,810 | 798 | (241) |
Changes in operating assets and liabilities: | |||
Receivables | (1,992) | (1,381) | (922) |
Income taxes receivable | (1,600) | 203 | 528 |
Inventories | (238) | (216) | (35) |
Prepaid expenses | (125) | (1,085) | (289) |
Accounts payable | (431) | 1,973 | (1,186) |
Accrued expenses | 1,624 | 1,922 | 2,546 |
Net cash provided by operating activities | 49,454 | 43,728 | 38,241 |
Cash flows from investing activities: | |||
Proceeds from sale of assets | 86 | 29 | 34 |
Change in construction payable | 3,218 | 1,198 | (383) |
Acquisition of property and equipment | (49,990) | (26,121) | (37,676) |
Net cash used in investing activities | (46,686) | (24,894) | (38,025) |
Cash flows from financing activities: | |||
Net exercise of stock options | 2,934 | 3,900 | |
Excess tax benefit from stock-based compensation | 737 | 865 | |
Loan issuance cost | (2,586) | ||
Principal payments on long-term debt | (14,700) | (5,400) | |
Net cash used in financing activities | (13,615) | (635) | |
Net increase (decrease) in cash | 2,768 | 5,219 | (419) |
Cash and cash equivalents at beginning of period | 26,383 | 21,164 | 21,583 |
Cash and cash equivalents at end of period | 29,151 | 26,383 | 21,164 |
Supplemental disclosure of cash flow information | |||
Cash paid for interest, net of amounts capitalized | 426 | 206 | 374 |
Cash paid for income taxes | 11,950 | $ 12,375 | $ 10,930 |
Return of assets under capital lease: | |||
Accounts Payable | (105) | ||
Accrued Expenses | $ (13) |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES 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 owns 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, Inc. was renamed Monarch Black Hawk, Inc. and 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 Casino Black Hawk. In addition to owning the Monarch Casino Black Hawk, Monarch Black Hawk, Inc. also wholly owns Chicago Dogs Eatery, Inc. and Monarch Promotional Association, both of which were formed related to extended licensure for extended hours of liquor operation in Black Hawk. Monarch Growth’s wholly owned subsidiary, Inter-Mountain Construction, LLC, owns a parcel of land with an industrial warehouse located between Denver and Monarch Casino Black Hawk. The consolidated financial statements include the accounts of Monarch and its subsidiaries. Intercompany balances and transactions are eliminated. Certain amounts in the consolidated financial statements for the previous periods have been reclassified to be consistent with the current period presentation. These reclassifications had no effect on the previously reported net income. Reference to the number of square feet or acreage are unaudited and considered outside the scope of our independent registered public accounting firm’s audit of our consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board. Unless otherwise indicated, “Monarch,” “Company,” “we,” “our” and “us” refer to Monarch Casino & Resort, Inc. and its subsidiaries. Use of Estimates In preparing financial statements in conformity with U.S. Generally Accepted Accounting Principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the year. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, as well as investments purchased with an original maturity of 90 days or less. Allowance for Doubtful Accounts The Company extends short-term credit to its gaming customers. Such credit is non-interest bearing and is due on demand. In addition, the Company also has receivables due from hotel guests which are primarily secured with a credit card at the time a customer checks in. An allowance for doubtful accounts is set up for all Company receivables based upon the Company’s historical collection and write-off experience, unless situations warrant a specific identification of a necessary reserve related to certain receivables. The Company writes off its uncollectible receivables once all efforts have been made to collect such receivables. The book value of receivables approximates fair value due to the short-term nature of the receivables. Casino Jackpots The Company does not accrue a liability for base jackpots because it has the ability to avoid such payment as gaming devices can legally be removed from the gaming floor without payment of the base amount. When the Company is unable to avoid payment of a jackpot such as the incremental jackpot amounts of progressive-type slot machines, due to legal requirements, the jackpot is accrued as the obligation becomes unavoidable. This liability is accrued over the time period in which the incremental progressive jackpot amount is generated commensurate with a corresponding reduction in casino revenue. Inventories Inventories, consisting primarily of food, beverages, and retail merchandise, are stated at the lower of cost and net realizable value. Cost is determined based on the weighted average, which approximates a first-in, first out method. On January 1, 2017, we adopted the new accounting standard update (“ASU”) which changes the measurement principle for inventories valued under the first-in, first-out or weighted-average methods from the lower of cost or market to the lower of cost and net realizable value. Net realizable value is defined by the Financial Accounting Standards Board (“FASB”) as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The adoption of this standard did not have a material impact on our Consolidated Financial Statements due to the nature of its inventory, consisting primarily of food, beverages, and retail merchandise. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation and amortization. Property and equipment is depreciated principally on a straight line basis over the estimated useful lives as follows: Land improvements 15 - 40 years Buildings 30 - 40 years Building improvements 5 - 40 years Furniture 5 - 10 years Equipment 3 - 20 years The Company evaluates property and equipment and other long-lived assets for impairment in accordance with the guidance for accounting for the impairment or disposal of long-lived assets. For assets to be disposed of, the Company recognizes the asset to be sold at the lower of carrying value or fair value less costs of disposal. Fair value for assets to be disposed of is generally estimated based on comparable asset sales, solicited offers or a discounted cash flow model. For assets to be held and used, the Company reviews fixed assets for impairment annually during the fourth quarter of each year or whenever indicators of impairment exist. If an indicator of impairment exists, we compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, the impairment is measured based on fair value compared to carrying value, with fair value typically based on a discounted cash flow model or market comparables, when available. For the years ended December 31, 2017, 2016 and 2015, there were no impairment charges. Change in Accounting Estimate of Depreciable Life of Monarch Casino Black Hawk Parking Structure In December 2013, the Company began construction of a new parking facility at Monarch Casino Black Hawk. Upon completion of the new structure, the Company planned 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 FASB accounting standards codification (“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. In October 2015, the general contractor notified the Company that further delay was expected and completion was then expected in the second quarter of 2016 at which time demolition of the existing structure would commence. At September 30, 2015, the existing parking structure had a net book value of approximately $0.4 million. Beginning in October 2015, the Company reduced the monthly depreciation expense to $0.04 million to reflect the revised depreciable life of the existing parking structure. The existing parking structure was fully depreciated as of June 30, 2016. The parking structure was demolished in the fourth quarter of 2016. For the twelve months ended December 31, 2017, this change in estimate did not have any effect on depreciation expense, net income and diluted earnings per share. For the twelve months ended December 31, 2016, the effect of the change in estimate was an increase of depreciation expense by $0.3 million, a decrease of net income by $0.2 million and a decrease of basic and diluted earnings per share by approximately $0.01. For the twelve months ended December 31, 2015, the effect of the change in estimate was an increase of depreciation expense by $1.4 million, a decrease of net income by $0.9 million and a decrease of basic and diluted earnings per share by approximately $0.05. Goodwill The Company accounts for goodwill in accordance with ASC Topic 350, Intangibles-Goodwill and Other (“ASC Topic 350”). ASC Topic 350 gives companies the option to perform a qualitative assessment that may allow them to skip the annual two-step test as appropriate. The Company tests its goodwill for impairment annually during the fourth quarter of each year, or whenever events or circumstances make it more likely than not that impairment may have occurred. Impairment testing for goodwill is performed at the reporting unit level, and each of the Company’s casino properties is considered to be a reporting unit. We perform a qualitative analysis to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount by assessing the relevant events and circumstances. If that is the case, the Company utilizes a two-step testing process. In the first step, the estimated fair value of each reporting unit is compared with its carrying amount, including goodwill. If the carrying value of the reporting unit exceeds its estimated fair value, then the goodwill of the reporting unit is considered to be impaired, and impairment is measured in the second step of the process. In the second step, the Company estimates the implied fair value of the reporting unit's goodwill by allocating the estimated fair value of the reporting unit to the assets and liabilities of the reporting unit, as if the reporting unit had been acquired in a business combination. If the carrying value of the reporting unit's goodwill exceeds its implied fair value, an impairment loss is recognized in an amount equal to that excess. Goodwill consists of the excess of the acquisition cost over the fair value of the net assets acquired in business combinations in April 2012. As of December 31, 2017 and 2016, we had goodwill totaling $25.1 million related to the purchase of Black Hawk, Inc. (see NOTE 3). Finite-Lived Intangible Assets The Company’s finite-lived intangible assets include assets related to its customer relationships which are amortized over its estimated useful life using the straight-line method. The Company periodically evaluates the remaining useful lives of its finite-lived intangible assets to determine whether events and circumstances warrant a revision to the remaining period of amortization. The customer relationship intangible asset represents the value associated with Monarch Casino Black Hawk’s rated casino guests. The initial fair value of the customer relationship intangible asset was estimated based on the projected net cash flows associated with these casino guests. The recoverability of the Company’s customer relationship intangible asset could be affected by, among other things, increased competition within the gaming industry, a downturn in the economy, declines in customer spending which would impact the expected future cash flows associated with the rated casino guests, declines in the number of visitations which could impact the expected attrition rate of the rated casino guests, and erosion of operating margins associated with rated casino guests. Should events or changes in circumstances cause the carrying value of the customer relationship intangible asset to exceed its estimated fair value, an impairment charge in the amount of the excess would be recognized. As of December 31, 2017 and 2016, the customer relationships net intangible asset balance was $3.9 million and $5.0 million, respectively. 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 the Company’s two operating segments, Atlantis and Monarch Casino 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. Self-insurance Reserves We are currently self-insured up to certain stop loss amounts for Atlantis workers’ compensation and certain medical benefit costs provided to all of our employees. As required by the state of Colorado, we are fully-insured for Monarch Casino Black Hawk workers’ compensation costs. The Company reviews self-insurance reserves at least quarterly. The reserve is determined by reviewing the actual expenditures for the previous twelve-month period and reports prepared by the third party plan administrator for any significant unpaid claims. The company engages a third party actuarial at least once per year for a more precise reserves review and calculation. The reserve is an amount estimated to pay both reported and unreported claims as of the balance sheet date, which management believes is adequate. Debt Issuance Costs Costs incurred in connection with the issuance of long-term debt are capitalized and amortized to interest expense over the term of the related debt agreement. Loan issuance costs are included in “Other assets, net” on the Company’s condensed consolidated balance sheets. As of December 31, 2017, loan issuance costs, net of amortization, was $1.9 million. Capitalized Interest The Company capitalizes interest costs associated with debt incurred in connection with major construction projects. When no debt is specifically identified as being incurred in connection with a construction project, the Company capitalizes interest on amounts expended on the project at the Company’s average borrowing cost. Interest capitalization is ceased when the project is substantially complete. The Company capitalized $544 thousand, $548 thousand and $381 thousand of interest during the years ended December 31, 2017, 2016 and 2015, respectively. Revenue Recognition Casino revenues represent the net win from gaming activity, which is the difference between wins and losses. Additionally, net win is reduced by a provision for anticipated payouts on slot participation fees, progressive jackpots and any pre-arranged marker discounts. Food and beverage, hotel, and other operating revenues are recognized as products are delivered or services are performed. Promotional Allowances The Company’s player program allows members, through the frequency of their play at the Company’s casinos, to earn and accumulate points which may be redeemed for a variety of goods and services. Points may be applied toward room stays at the hotel, food and beverage consumption at the food outlets, gift shop items as well as goods and services at the spa and beauty salon and for cash at our Monarch Casino Black Hawk property. Points earned may also be applied toward off-property events such as concerts, shows and sporting events. The retail value of hotel, food and beverage services provided to customers without charge is included in gross revenue and deducted as promotional allowances. The estimated departmental costs of providing such promotional allowances are primarily included in casino operating expenses and are as follows (in thousands): Years ended December 31, 2017 2016 2015 Food and beverage $ $ $ Hotel 3,375 3,039 3,157 Other 2,128 1,943 2,070 $ $ $ Advertising Costs All advertising costs are expensed as incurred. Advertising expense, which is included in selling, general and administrative expense, was $5.2 million, $5.4 million and $5.2 million for the years ended December 31, 2017, 2016 and 2015, respectively. Income Taxes Income taxes are recorded in accordance with the liability method pursuant to authoritative guidance. Under the asset and liability approach for financial accounting and reporting for income taxes, the following basic principles are applied in accounting for income taxes at the date of the financial statements: (a) a current liability or asset is recognized for the estimated taxes payable or refundable on taxes for the current year; (b) a deferred income tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences and carryforwards; (c) the measurement of current and deferred tax liabilities and assets is based on the provisions of the enacted tax law; the effects of future changes in tax laws or rates are not anticipated; and (d) the measurement of deferred income taxes is reduced, if necessary, by the amount of any tax benefits that, based upon available evidence, are not expected to be realized. Under the accounting guidance, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50.0% likelihood of being realized upon ultimate settlement. It also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods and disclosure. Gaming Taxes The Company is subject to taxes based on gross gaming revenue in the jurisdictions in which it operates, subject to applicable jurisdictional adjustments. These gaming taxes are an assessment on the Company’s gaming revenue and are recorded as casino expense in the accompanying Consolidated Statements of Income. These taxes totaled $21.6 million, $20.3 million and $18.2 million for the years ended December 31, 2017, 2016 and 2015, respectively. Stock-based Compensation The Company accounts for stock-based compensation in accordance with the authoritative guidance requiring that compensation cost relating to stock-based payment transactions be recognized in the Company’s consolidated statements of income. The cost is measured at the grant date, based on the calculated fair value of the award using the Black-Scholes option pricing model for stock options, and based on the closing share price of the Company’s stock on the grant date for restricted stock awards. The cost is recognized as an expense over the employee’s requisite service period (the vesting period of the equity award). The Company’s stock-based employee compensation plan is more fully discussed in NOTE 9. Earnings Per Share Basic earnings per share are 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 (in thousands, except per share data): Years ended December 31, 2017 2016 2015 Per Share Per Share Per Share Shares Amount Shares Amount Shares Amount Basic 17,585 $ 1.45 $ 1.42 16,948 $ 1.22 Effect of dilutive stock options 782 (0.06) 359 (0.03) 387 (0.03) Diluted 18,367 $ 1.39 $ 1.39 17,335 $ 1.19 The following options were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the December 31 closing market price of the common shares and their inclusion would be antidilutive: Years ended December 31, 2017 2016 2015 Options to purchase shares of common stock 203,667 106,102 115,536 Exercise prices $ 45.32 - $ 46.73 $ 28.02 - $ 29.00 $ 23.09 - $ 29.00 Expiration dates (month/year) 11/27-12/27 11/17-10/20 05/16-11/25 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, account 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. Concentrations of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of bank deposits and trade receivables. The Company maintains its surplus cash in bank accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company’s customer base. The Company believes it is not exposed to any significant credit risk on cash and accounts receivable. Accounts are written off when management determines that an account is uncollectible. Recoveries of accounts previously written off are recorded when received. An allowance for doubtful accounts is determined to reduce the Company’s receivables to their carrying value, which approximates fair value. The allowance is estimated based on historical collection experience, specific review of individual customer accounts, and current economic and business conditions. Historically, the Company has not incurred any significant credit-related losses. Certain Risks and Uncertainties The Company’s operations are dependent on its continued licensing by the Nevada and Colorado gaming regulatory bodies. The loss of a license could have a material adverse effect on future results of operations. The Company is dependent on the northern Nevada and Denver, Colorado markets for a significant number of its patrons and revenues. If economic conditions in these areas deteriorate or additional gaming licenses are awarded, the Company’s results of operations could be adversely affected. The Company is dependent on the U.S. economy in general, and any deterioration in the national economic, energy, credit and capital markets could have a material adverse effect on future results of operations. The Company is dependent upon a stable gaming and admission tax structure in the locations in which it operates. Any change in the tax structure could have a material adverse effect on future results of operations. Impact of Recently Issued Accounting Standards In May 2014, the FASB issued an ASU that amends the FASB ASC 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. The effective date is for the annual and interim periods beginning after December 15, 2017. We have completed our evaluation of the impact of adopting this new accounting standard on its financial statements and internal revenue recognition policies. The majority of our revenue recognition policies will not be impacted or will have a minimal impact by the new standard. The accounting treatment for the customer loyalty programs will be impacted the most by the adoption of this ASU. Specifically, the recognition of revenue associated with the customer loyalty programs will be impacted by eliminating the current accrual for the cost of the points awarded at the time of play and instead deferring the portion of the revenue received from the customer at the time of play and attributed to the awarded points until a later period when the points are redeemed or forfeited. The revenue deferral will be calculated from the portion of the transaction price allocated to the points based upon their retail value. Under the former guidance, the cost of the points was recorded as an operating expense through the casino line item of our consolidated statements of income. In addition, upon the adoption of this ASU, the complementary pricing for products and services will be presented at retail pricing within the appropriate revenue line item. Further, promotional allowances representing the retail value of food, beverages and other services furnished to guests without charge will no longer be presented as a separate line item on the consolidated statements of income, rather they will be presented on a net basis within casino, food and beverage, hotel and other revenue. These changes have no impact to net revenues and are for presentation purposes only. We adopted this ASU on January 1, 2018 using the modified retrospective approach and recorded a cumulative adjustment to retained earnings, resulting from recalculating the customer loyalty program liability balance at the time of the adoption from estimated cost to retail value, of approximately $4.9 million. In February 2016, the FASB issued an ASU which addresses the recognition and measurement of leases. Under the new guidance, for all leases (with the exception of short-term leases), at the commencement date, lessees will be required to recognize a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Further, the new lease guidance simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and liabilities, which no longer provides a source for off- balance sheet financing. The effective date for this update is for the annual and interim periods beginning after December 15, 2018 with early adoption permitted. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently assessing the impact the adoption of this standard will have on its Consolidated Financial Statements. In August 2016, the FASB issued an ASU that provides clarifying guidance on the presentation of certain cash receipts and cash payments in the statement of cash flows. The ASU is effective for annual reporting periods beginning after December 15, 2017. The Company adopted this ASU on January 1, 2018, with no impact to its presentation of cash receipts and payments on its consolidated statements of cash flows. In January 2017, the FASB issued an ASU that simplifies the accounting for goodwill impairment for all entities by eliminating the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of today’s goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on today’s Step 1). The standard does not change the guidance on completing Step 1 of the goodwill impairment test. An entity will still be able to perform today’s optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1. The standard will be applied prospectively and is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. In January 2017, the FASB issued an ASU which provides clarifying guidance on what constitutes a business acquisition versus an asset acquisition. Specifically, the new guidance lays out a screen to more easily determine if a set of integrated assets and activities does in fact represent a business. Under this ASU, when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the assets do not represent a business. The ASU is effective for annual reporting periods beginning after December 15, 2017. The Company adopted this ASU on January 1, 2018 with no impact to the Company's accounting policies. In May 2017, the FASB issued an ASU that clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Under the new guidance, entities will apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. The guidance also clarifies that a modification to an award could be significant and therefore require disclosure, even if modification accounting is not required. Therefore, an entity will have to make all of the disclosures about modifications that are required today, in addition to disclosing that compensation expense hasn’t changed, if that’s the case. The effective date is for annual and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including in any interim period for which financial statements have not yet been issued or made available for issuance. The guidance will be applied prospectively to awards modified on or after the adoption date. We adopted this ASU on January 1, 2018, with no impact to the Company's accounting policies. 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, the implementation of any such proposed or revised standards would have on the Company’s Consolidated Financial Statements. |
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE | 12 Months Ended |
Dec. 31, 2017 | |
ACCOUNTS RECEIVABLE | |
ACCOUNTS RECEIVABLE | NOTE 2. ACCOUNTS RECEIVABLE Accounts receivable consist of the following (in thousands): December 31, 2017 2016 Casino $ 5,025 $ 4,241 Hotel 1,719 873 Other 444 297 7,188 5,411 Less allowance for doubtful accounts (263) (375) $ 6,925 $ 5,036 The increase in accounts receivable as of December 31, 2017 compared to 2016 was primarily due to timing in payment collection, resulting from fiscal year-end calendar differences. The Company calculates an allowance for doubtful accounts by applying a percentage, estimated by management based on historical aging experience, to the accounts receivable balance. The Company recorded bad debt expense of $103 thousand, $74 thousand and $240 thousand in 2017, 2016 and 2015, respectively. |
GOODWILL AND INTANGIBLE
GOODWILL AND INTANGIBLE | 12 Months Ended |
Dec. 31, 2017 | |
GOODWILL AND INTANGIBLE ASSETS | |
GOODWILL AND INTANGIBLE ASSETS | NOTE 3. GOODWILL AND INTANGIBLE Goodwill of $25.1 million at December 31, 2017 represents the excess of total acquisition costs over the fair market value of net assets acquired and liabilities assumed in a business combination. To assist in the Company’s determination of the purchase price allocation for the Monarch Casino Black Hawk, the Company engaged a third-party valuation firm regarding the assets acquired and liabilities assumed in its acquisition. Intangible assets consist of the following at December 31 (in thousands except years): 2017 2016 Customer list Total intangible assets $ 10,490 $ 10,490 Less accumulated amortization: (6,621) (5,455) Intangible assets, net $ 3,869 $ 5,035 Weighted-average life in years 3.3 4.3 Amortization expense of $1.2 million was recognized for each of the years ended December 31, 2017 and 2016. Estimated amortization expenses for the years ending December 31, 2018 through 2021 are as follows (in thousands): Year Expense 2018 $ 1,165 2019 1,165 2020 1,165 2021 374 Total $ 3,869 Customer lists were valued at $10.5 million, representing the value associated with the future potential customer revenue production and are being amortized on a straight-line basis over nine years. Intangible assets were valued using the income approach. The Multi-Period Excess Earning Method was used to value the customer list by capitalizing the future cash flows attributable to the customers based upon their expected future mortality dispersion function. The expected revenue from the existing client was estimated by applying a 24.0% attrition rate. To calculate excess earnings attributable to the customer list, the required return on other contributory assets such as tangible assets and identified intangible assets were deducted to estimate income associated with the customer list. The future excess earnings were discounted to the present value by a risk-adjusted discount rate of 12.0% in order to determine the fair value of the customer list. |
ACCRUED EXPENSES
ACCRUED EXPENSES | 12 Months Ended |
Dec. 31, 2017 | |
ACCRUED EXPENSES. | |
ACCRUED EXPENSES | NOTE 4. ACCRUED EXPENSES Accrued expenses consist of the following (in thousands): December 31, 2017 2016 Accrued salaries, wages and related benefits $ 9,838 $ 8,341 Progressive slot machine and other gaming accruals 9,935 Accrued gaming taxes 2,607 2,588 Accrued interest 6 3 Other accrued liabilities 3,020 2,568 $ $ The increase in accrued expenses as of December 31, 2017 compared to 2016 was primarily due to the timing of payments at December 31, 2017 compared to December 31, 2016. |
LEASE COMMITMENTS
LEASE COMMITMENTS | 12 Months Ended |
Dec. 31, 2017 | |
LEASE COMMITMENTS | |
LEASE COMMITMENTS | NOTE 5. LEASE COMMITMENTS The shopping center adjacent to the Atlantis (the “Shopping Center”) is owned by Biggest Little Investments, L.P. (“BLI”). John Farahi and Bob Farahi, Co-Chairmen of the Board and executive officers of the Company, and Ben Farahi are the three largest stockholders (the “Farahi Family Stockholders”) of Monarch and each also beneficially own limited partnership interests in BLI. Maxum LLC is the sole general partner of BLI, and Ben Farahi is the sole managing member of Maxum LLC. Neither John Farahi nor Bob Farahi has any management or operational control over BLI or the Shopping Center. Until May 2006, Ben Farahi held the positions of Co-Chairman of the Board, Secretary, Treasurer and Chief Financial Officer of the Company. On August 28, 2015, Monarch, through its subsidiary Golden Road, entered into a 20-year lease agreement with BLI for a portion of the Shopping Center, consisting of an approximate 46,000 square-foot commercial building on approximately 4.2 acres of land adjacent to the Atlantis (the “Parking Lot Lease”). This lease gives the Atlantis the right to use a parcel, approximately 4.2 acres, comprised of a commercial building and surrounding land adjacent to the Atlantis. The primary purpose of the Parking Lot Lease is to provide additional, convenient, Atlantis surface parking. The Company demolished the commercial building and converted the land into approximately 300 additional surface parking spaces for the Atlantis. The minimum annual rent under the Parking Lot Lease is $695 thousand, commencing on November 17, 2015. The minimum annual rent is subject to a cost of living adjustment increase on each five-year anniversary. In addition, the Company is responsible for payment of property taxes, utilities and maintenance expenses related to the Leased Property. The Company has an option to renew the Parking Lot Lease for an additional 10-year term. If the Company elects not to exercise its renewal option, the Company will be obligated to pay BLI $1.6 million. In 2017, the Company paid $695 thousand for rent and $31 thousand for operating expenses relating to this lease. In 2016, the Company paid $695 thousand for rent and $60 thousand for operating expenses relating to this lease. In 2015, the Company paid $85 thousand for rent and $12 thousand for operating expenses relating to this lease. In addition, the Atlantis shares a driveway with the Shopping Center and leases approximately 37,400 square feet from BLI for an initial lease term of 15 years, which commenced on September 30, 2004, at an original annual rent of $300 thousand plus common area expenses. The annual rent of the Driveway Lease is subject to a cost of living adjustment increase on each five year anniversary of the Driveway Lease. The total cost of the improvements was $2.0 million of which $1.35 million was paid by the Company. The cost of the driveway improvements is being depreciated over the 15-year expected economic life of the asset; some components of the driveway were depreciated over a shorter period of time. Effective August 28, 2015, in connection with the Company entering into the Parking Lot Lease, the Driveway Lease was amended to: (i) make the Company solely responsible for the operation and maintenance costs of the shared driveway (including the fountains thereon); (ii) eliminate the Company’s obligation to reimburse the Shopping Center for its proportionate share of common area expenses; and (iii) exercise the three successive five-year renewal terms beyond the initial 15 year term in the existing Driveway Lease Agreement. At the end of the renewal terms, the Company has the option to purchase the leased driveway section of the Shopping Center. The annual rent for each of the years ended December 31, 2017, 2016 and 2015 was $377 thousand. In addition, the Company paid $24 thousand, $37 thousand and $84 thousand for the years ended December 31, 2017, 2016 and 2015, respectively, for operating expenses related to this lease. The Company accounts for its rental expense using the straight-line method over the original lease term. Rental increases based on the change in the CPI are contingent and accounted for prospectively. Following is a summary of future minimum payments under operating leases that have initial or remaining non-cancelable lease terms for the next five years (in thousands): Operating Leases Year ending December 31, 2018 $ 1,072 2019 1,072 2020 1,072 2021 1,072 2022 1,072 Total minimum lease payments $ 5,360 Rental expense for operating leases amounted to $1.6 million, $1.5 million and $1.0 million in 2017, 2016 and 2015, respectively, as reported in Operating expenses in the Consolidated Statements of Income. |
LONG-TERM DEBT
LONG-TERM DEBT | 12 Months Ended |
Dec. 31, 2017 | |
LONG-TERM DEBT | |
LONG-TERM DEBT | NOTE 6. LONG-TERM DEBT On July 20, 2016, the Company entered into an amended and restated credit facility agreement (the “Amended Credit Facility”), under which our former $100 million credit facility (under which, as of June 30, 2016, the borrowing capacity had been reduced to $45.5 million as a result of $19.5 million in mandatory reductions pursuant to the agreement and $35 million in voluntary reductions, as allowed by the agreement) was increased to $250 million, and the maturity date was extended from November 15, 2016 to July 20, 2021. As of December 31, 2017, the Company had $26.2 million borrowed of the principal under the Amended Credit Facility, and a $0.6 million Standby Letter of Credit and $223.2 million remaining in available borrowings of the $250.0 million maximum principal available under the Amended Credit Facility. As of December 31, 2017, there have been no withdrawals from the Standby Letter of Credit. The total revolving loan commitment under the Amended Credit Facility will be automatically and permanently reduced to $50 million in the first full quarter after completion of the expansion project at the Monarch Casino Black Hawk and all then outstanding revolving loans up to $200 million under the Amended Credit Facility will be converted to a term loan at such time. We may be required to prepay borrowings under the Amended Credit Facility using excess cash flows depending on our leverage ratio no later than December 31, 2019. We have an option to permanently reduce the maximum revolving available credit at any time so long as the amount of such reduction is at least $0.5 million and in multiples of $50,000. 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 December 31, 2017, we are required to maintain a leverage ratio, defined as consolidated debt divided by Adjusted EBITDA, of no more than 3.5:1 and a fixed charge coverage ratio (Adjusted EBITDA divided by fixed charges, as defined) of at least 1.15:1. As of December 31, 2017, the Company’s leverage ratio and fixed charge coverage ratios were 0.5:1 and 40.9:1, respectively. The interest rate under the Amended Credit Facility is LIBOR plus a margin ranging from 1.00% to 2.50%, or a base rate (as defined in the Amended Credit Facility) plus a margin ranging from 0.00% to 1.50%, or the Prime Rate. The applicable margins will vary depending on our leverage ratio. Commitment fees are equal to the daily average unused revolving commitment multiplied by the commitment fee percentage, ranging from 0.175% to 0.45%, based on our leverage ratio. At December 31, 2017, our interest rate was based on LIBOR and our leverage ratio was such that pricing for borrowings under the Amended Credit Facility was LIBOR plus 1.00%. At December 31, 2017, the one-month LIBOR interest rate was 1.57%. The carrying value of the debt outstanding under the Amended Credit Facility approximates fair value because the interest fluctuates with the lender’s prime rate or other market rates of interest. We may prepay borrowings under the Amended Credit Facility without penalty (subject to certain charges applicable to the prepayment of LIBOR borrowings prior to the end of the applicable interest period). Amounts prepaid may be re-borrowed so long as the total borrowings outstanding do not exceed the maximum principal available. We believe that our existing cash balances, cash flow from operations and borrowings available under the Amended 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 or if our cash needs exceed our borrowing capacity under the Amended Credit Facility, 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 | 12 Months Ended |
Dec. 31, 2017 | |
TAXES | |
TAXES | NOTE 7. TAXES Income Taxes The Company’s income tax provision (benefit) consists of the following (in thousands): Years ended December 31, 2017 2016 2015 Federal $ 9,933 $ 12,834 $ State 417 477 359 Current tax provision 10,350 13,311 12,327 Federal 3,738 99 (1,117) State 73 (52) 7 Deferred tax provision (benefit) 3,811 47 (1,110) Total tax provision $ 14,161 $ 13,358 $ In conformity with ASU 2016-09, adopted in 2017, all excess tax benefits and deficiencies are recognized as income tax expense in the Company’s Consolidated Statement of Operations. This will result in increased volatility in the Company’s effective tax rate. The income tax provision differs from that computed at the federal statutory rate as follows: Years ended December 31, 2017 2016 2015 Federal tax at the statutory rate 35.00 % 35.00 % 35.00 % State tax (net of federal benefit) 1.00 % 0.70 % 0.72 % Permanent items 0.34 % 0.27 % 0.34 % Tax credits (0.82) % (0.96) % (0.73) % Excess tax benefits on stock-based compensation (3.42) % — % — % Tax Cuts and Jobs Act of 2017 3.57 % — % — % Other — % 0.23 % (0.14) % 35.67 % 35.24 % 35.19 % The effective tax rate increased slightly in 2017 compared to 2016 due to the revaluation of the deferred tax asset for the prospective federal tax rate change in 2018, partially offset by the excess tax benefits on stock-based compensation that, subsequent to the adoption of the ASU 2016-09 in first quarter of 2017, was recognized as a tax expense. The Tax Cuts and Jobs Act Bill (the “Tax Act”) was enacted on December 22, 2017, and permanently reduces the U.S. federal corporate tax rate to a flat rate of 21%. The changes included in the Tax Act are broad and complex. The final transition impacts of the Tax Act may differ from our current estimate, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates the Company has utilized to calculate the transition impacts. At December 31, 2017, we have not completed our accounting for the tax effects of enactment of the Tax Act; however, we have made a reasonable estimate of the effect on our existing deferred tax balance. Based on our reasonable estimate, we recognized a provisional amount of $1,461 thousand, which is included as a component of income tax expense. In all cases, we will continue to make and refine our calculations as additional analysis is completed. The Company recorded $737 thousand and $865 thousand as increases to contributed capital from certain tax benefits for employee stock-based compensation for the years ended December 31, 2016 and 2015, respectively. In 2017, subsequent to the adoption of the ASU 2016-09 the $1,359 thousand tax benefit for employee stock-based compensation was recorded to the tax expense. The components of the deferred income tax assets and liabilities at December 31, 2017 and 2016, as presented in the consolidated balance sheets, are as follows (in thousands): 2017 2016 DEFERRED TAX ASSETS Stock-based compensation $ 1,434 $ 2,198 Compensation and benefits 555 1,113 Bad debt reserves 58 136 Accrued expenses 512 1,991 Fixed assets and depreciation 896 2,305 Base stock 11 6 State taxes (31) 144 NOLs & credit carry-forwards 2,219 3,295 Deferred income tax asset $ 5,654 $ 11,188 DEFERRED TAX LIABILITIES Intangibles and amortization $ (855) $ (1,811) Prepaid expenses (890) (1,365) Real estate taxes (191) (154) Other reserves (14) (138) Federal deduction on deferred state taxes (160) (366) Deferred income tax liability $ (2,110) $ (3,834) NET DEFERRED INCOME TAX ASSET $ 3,544 $ 7,354 As of December 31, 2017, the Company had $4.8 million of federal net operating loss (“NOL”) carryforwards, general business credit (“GBC”) carryforwards of $0.3 million and $18.4 million of state NOL carryforwards, acquired as part of the Monarch Casino Black Hawk (formerly Rivera Black Hawk) acquisition. The federal NOL carryforwards expire in 2022 through 2032. The federal GBC carryforwards expire in 2023 through 2032. The state NOL carryforwards expire in 2022 through 2032. The acquired federal and state NOL and federal GBC carryforwards are subject to Internal Revenue Code change of ownership limitations. Accordingly, future utilization of the carryforwards is subject to an annual base limitation of $1.25 million that can be applied against future taxable income. The Company acquired NOLs of Monarch Black Hawk generated in tax years 2000 through 2012. The statute of limitation for assessment for these NOL years is determined by reference to the year the NOL is used to reduce taxable income. Consequently, the separate returns that included Monarch Black Hawk remain subject to examination by the Internal Revenue Service (the “IRS”). The Company’s income tax returns from 2014 forward are subject to examination by the IRS. Accounting standards require that tax positions be assessed for recognition using a two-step process. A tax position is recognized if it meets a “more likely than not” threshold, and is measured at the largest amount of benefit that is greater than 50 percent likely of being realized. Uncertain tax positions must be reviewed at each balance sheet date. Liabilities recorded as a result of this analysis must generally be recorded separately from any current or deferred income tax accounts. The Company’s policy regarding interest and penalties associated with uncertain tax positions is to classify such amounts as income tax expense. No uncertain tax positions were recorded as of December 31, 2017, 2016 and 2015. No change in uncertain tax positions is anticipated over the next twelve months. No interest expense or penalties for uncertain tax positions were recorded for years ended December 31, 2017, 2016 and 2015. |
BENEFIT PLANS
BENEFIT PLANS | 12 Months Ended |
Dec. 31, 2017 | |
BENEFIT PLANS | |
BENEFIT PLANS | NOTE 8. BENEFIT PLANS Savings Plan - Effective November 1, 1995, the Company adopted a savings plan, which qualifies under Section 401(k) of the Internal Revenue Code. Under the plan, participating employees may defer up to 100% of their pre-tax compensation, but not more than statutory limits. The Company’s matching contributions were approximately $379 thousand, $332 thousand, and $318 thousand for years ended December 31, 2017, 2016 and 2015, respectively. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2017 | |
STOCK-BASED COMPENSATION | |
STOCK-BASED COMPENSATION | NOTE 9. STOCK-BASED COMPENSATION On May 21, 2014, we adopted the 2014 Equity Incentive Plan (the “2014 Plan”). The purposes of the 2014 Plan are to attract and retain the best available personnel, to provide additional incentives to employees, directors and consultants and to promote the success of the Company’s business. The 2014 Plan is an “omnibus plan” under which stock options, stock appreciation rights, performance awards, dividend equivalents, restricted stock, and restricted stock units can be awarded to employees, directors and consultants of the Company. The 2014 Plan serves as the successor to our 1993 Employee Stock Option Plan, 1993 Executive Long-Term Incentive Plan and 1993 Directors’ Stock Option Plan (which plan terminated on June 13, 2013) (the “Predecessor Plans”). The 2014 Plan became effective as of May 21, 2014 and the remaining two Predecessor Plans terminated on that date (except with respect to awards previously granted under the Predecessor Plans that remain outstanding). The share reserve under the 2014 Plan and the Amendment No.1 to the 2014 Plan includes 2,200,000 new shares and the shares available for grant or subject to outstanding awards under the Predecessor Plans, for an aggregate amount of up to 3,293,331 common shares as of December 31, 2017. By its terms, the 2014 Plan will expire in May 2024 after which no options may be granted unless the 2014 Plan is amended or replaced. Pursuant to the terms of the 2014 Plan, either the Board or a committee designated by the Board is authorized to administer the plan. The administrator has the authority, in its discretion, to select employees, consultants and directors to whom awards under the 2014 Plan may be granted from time to time, to determine whether and to what extent awards are granted, to determine the number of shares or the amount of other consideration to be covered by each award (subject to certain limitations), to approve award agreements for use under the 2014 Plan, to determine the terms and conditions of any award (including the vesting schedule applicable to the award), to amend the terms of any outstanding award granted under the 2014 Plan (subject to certain limitations), to construe and interpret the terms of the 2014 Plan and awards granted, and to take such other action not inconsistent with the terms of the 2014 Plan as the administrator deems appropriate. A summary of the stock option activity as of and for the year ended December 31, 2017 is presented below: Weighted Average Remaining Aggregate Exercise Contractual Intrinsic Options Shares Price Term Value Outstanding at beginning of period 1,932,259 $ 17.12 — — Granted 411,956 37.57 — — Exercised (320,408) 18.14 — — Forfeited (33,336) 21.48 — — Expired — — — — Outstanding at end of period 1,990,471 $ 21.09 7.2 yrs. $ Exercisable at end of period 787,504 $ 13.85 5.5 yrs. $ A summary of the status of the Company’s nonvested shares as of, and for the year ended, December 31, 2017 is presented below: Weighted-Average Grant Date Fair Nonvested Shares Shares Value Nonvested at January 1, 2017 1,167,998 $ 5.39 Granted 411,956 11.92 Vested (343,651) 3.84 Forfeited (33,336) 6.44 Nonvested at December 31, 2017 1,202,967 $ 8.07 Expense Measurement and Recognition: The Company recognizes stock-based compensation for all current award grants and for the unvested portion of previous award grants based on grant date fair values. Unrecognized costs related to all stock-based awards outstanding at December 31, 2017 totaled approximately $6.9 million and is expected to be recognized over a weighted average period of 2.6 years. The Company uses historical data and projections to estimate expected employee, executive and director behaviors related to option exercises and forfeitures. The Company estimates the fair value of each stock option award on the grant date using the Black-Scholes valuation model incorporating the assumptions noted in the following table. Option valuation models require the input of highly subjective assumptions, and changes in assumptions used can materially affect the fair value estimate. Option valuation assumptions for options granted during each year were as follows (in thousands, except per share amounts and percentages): Years ended December 31, 2017 2016 2015 Expected volatility 35.54 % 35.81 % 39.10 % Expected dividends — — — Expected life (in years) Directors’ plan 2.99 2.73 3.97 Executives plan 5.05 4.71 4.28 Employees plan 4.14 4.10 3.97 Weighted average risk free rate 1.83 % 1.14 % 1.14 % Weighted average grant date fair value per share of options granted $ 11.92 $ 6.67 $ 5.90 Total fair value of shares vested $ 1,324 $ 1,758 $ 1,041 Total intrinsic value of options exercised $ 5,819 $ 3,276 $ 4,321 Cash received for all stock option exercises $ 5,813 $ 2,934 $ 3,900 Tax benefit realized from stock awards exercised $ 2,037 $ 1,146 $ 1,512 The risk-free interest rate is based on the U.S. Treasury security rate in effect as of the date of grant. The expected lives of options are based on historical data of the Company. The Company has determined that an implied volatility is more reflective of market conditions and a better indicator of expected volatility as compared to the Company’s experience. On January 1, 2017, the Company adopted ASU No. 2016-09, which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. Subsequent to the adoption, the Company records any excess tax benefits or deficiencies from its equity awards in its Consolidated Statements of Income in the reporting periods in which vesting occurs. As a result, the Company’s income tax expense and associated effective tax rate are impacted by fluctuations in stock price between the grant dates and vesting dates of equity awards. This guidance of requiring recognition of excess tax benefits and deficits in the income statement was applied prospectively with the adoption of ASU No. 2016-09. For year ended December 31, 2017, the effect of the adoption of ASU No. 2016-09 was a decrease of tax expense by $1.4 million resulting in an increase of basic and diluted earnings per share of less than $0.08. The Company has elected to keep the accounting policy of estimated forfeitures, rather than account for forfeitures as they occur. The amendments in the guidance that require application using a modified retrospective transition method did not impact the Company. Therefore, there was no cumulative-effect adjustment to retained earnings recognized as of January 1, 2017. ASU No. 2016-09 also changes the classification and presentation of the excess tax benefit from stock-based compensation in the statement of cash flows. The Company applied the amendments in this guidance relating to classification on its consolidated statement of cash flows prospectively. Reported stock-based compensation expense was classified as follows (in thousands): For the Year ended December 31, 2017 2016 2015 Casino $ 114 $ 95 $ 58 Food and beverage 92 101 85 Hotel 33 37 21 Selling, general and administrative 2,005 1,448 1,380 Total stock-based compensation, before taxes 2,244 1,681 1,544 Tax benefit (785) (588) (540) Total stock-based compensation, net of tax $ 1,459 $ 1,093 $ 1,004 |
STOCK REPURCHASE PLAN
STOCK REPURCHASE PLAN | 12 Months Ended |
Dec. 31, 2017 | |
STOCK REPURCHASE PLAN | |
STOCK REPURCHASE PLAN | NOTE 10: STOCK REPURCHASE PLAN On October 22, 2014, the board of directors of Monarch 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 the Company’s 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. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 11. COMMITMENTS AND CONTINGENCIES Self-Insurance : The Company is self-insured for health care claims for eligible active employees. Benefit plan administrators assist the Company in determining its liability for self-insured claims, and such claims are not discounted. Monarch Casino Black Hawk’s health plan has stop-loss insurance whereby the Company retains the first $250,000 of liability for individual health care claims. The Company’s liability on the Atlantis health plan is limited to the first $250,000 of claims plus 10% of claims above $250,000. The Company is also self-insured for Atlantis workers’ compensation. The maximum liability for workers’ compensation under the Atlantis stop-loss agreement is $500,000 per claim. The Company is fully-insured for Monarch Casino Black Hawk workers compensation claims. We are party to other claims that arise in the normal course of business. Management believes that the outcomes of such claims will not have a material adverse impact on our financial condition, cash flows or results of operations. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2017 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 12. RELATED PARTY TRANSACTIONS The shopping center adjacent to the Atlantis (the “Shopping Center”) is owned by Biggest Little Investments, L.P. (“BLI”). John Farahi and Bob Farahi, Co-Chairmen of the Board and executive officers of the Company, and Ben Farahi are the three largest stockholders (“Farahi Family Stockholders”) of Monarch and each also beneficially own limited partnership interests in BLI. Maxum LLC is the sole general partner of BLI, and Ben Farahi is the sole managing member of Maxum LLC. Neither John Farahi nor Bob Farahi has any management or operational control over BLI or the Shopping Center. Until May 2006, Ben Farahi formerly held positions of Co-Chairman of the Board, Secretary, Treasurer and Chief Financial Officer of the Company. On August 28, 2015, Monarch, through its subsidiary Golden Road, entered into a 20-year lease agreement with BLI for a portion of the Shopping Center (the “Parking Lot Lease”) consisting of an approximate 46,000 square-foot commercial building on approximately 4.15 acres of land adjacent to the Atlantis (the “Leased Property”). The Company demolished the building and converted the land into approximately 300 additional surface parking spaces for the Atlantis. The minimum annual rent under the Parking Lot Lease is $695 thousand commencing on November 17, 2015. The minimum annual rent is subject to a cost of living adjustment increase on each five-year anniversary. In addition, the Company is responsible for payment of property taxes, utilities and maintenance expenses related to the Leased Property. The Company has an option to renew the Parking Lot Lease for an additional 10-year term. If the Company elects not to exercise its renewal option, the Company will be obligated to pay BLI $1.6 million. In 2017, the Company paid $695 thousand for rent and $31 thousand for operating expenses relating to this lease. In 2016, the Company paid $695 thousand for rent and $60 thousand for operating expenses relating to this lease. In 2015, the Company paid $85 thousand for rent and $12 thousand for operating expenses relating to this lease. In addition, the Atlantis shares a driveway with the Shopping Center and leases approximately 37,400 square feet from BLI (the “Driveway Lease”) for an initial lease term of 15 years, which commenced on September 30, 2004, at an original annual rent of $300 thousand plus common area expenses. The annual rent is subject to a cost of living adjustment increase on each five year anniversary of the Driveway Lease. Effective August 28, 2015, in connection with the Parking Lot Lease, the Driveway Lease was amended to: (i) make the Company solely responsible for the operation and maintenance costs of the shared driveway (including the fountains thereon); (ii) eliminate the Company’s obligation to reimburse the Shopping Center for its proportionate share of common area expenses; and (iii) exercise the three successive five-year renewal terms beyond the initial 15-year term in the existing Driveway Lease Agreement. At the end of the renewal terms, the Company has the option to purchase the leased driveway section of the Shopping Center. The annual rent for each of the years 2017, 2016 and 2015 was $377 thousand. In addition, the Company paid $24 thousand, $37 thousand and $84 thousand, respectively, for operating expenses related to this lease. The Company occasionally leases billboard advertising, storage space and parking lot space from affiliates controlled by Farahi Family Stockholders and paid $131 thousand, $127 thousand and $142 thousand for the years ended December 31, 2017, 2016 and 2015, respectively, for such leases. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2017 | |
SUBSEQUENT EVENT. | |
SUBSEQUENT EVENTS | NOTE 13. SUBSEQUENT EVENTS The Company evaluated all subsequent events through the date that the consolidated financial statements were issued. No material subsequent events have occurred since December 31, 2017 that required recognition or disclosure in the consolidated financial statements. |
SELECTED QUARTERLY FINANCIAL DA
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) | 12 Months Ended |
Dec. 31, 2017 | |
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) | |
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) | NOTE 14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The following table presents selected quarterly financial information for 2017 and 2016 (in thousands, except per share amounts): 2017 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Net revenues $ $ $ 63,027 $ $ Operating expenses 49,777 190,060 Income from operations 7,726 13,250 8,137 40,666 Net income 4,872 7,239 9,030 4,397 (F1) 25,538 Income per share of common stock Basic $ 0.28 $ 0.41 $ 0.51 $ 0.25 (F1) $ 1.45 Diluted $ 0.27 $ 0.40 $ 0.49 $ 0.23 (F1) $ 1.39 2016 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Net revenues $ $ 54,578 $ 57,109 $ 55,596 $ 217,032 Operating expenses 45,633 44,857 45,404 178,484 Income from operations 7,159 8,945 12,252 10,192 38,548 Net income 4,575 5,695 7,834 6,470 24,574 Income per share of common stock Basic $ 0.27 $ 0.33 $ 0.45 $ 0.37 $ 1.42 Diluted $ 0.26 $ 0.32 $ 0.45 $ 0.36 $ 1.39 (F1) The enactment of the Tax Cuts and Jobs Act in 2017 resulted in a non-cash Deferred tax asset revaluation, which had a $1.5 million negative effect on Net income and $0.08 negative effect on the Basic and Diluted EPS. |
Schedule II. - VALUATION AND QU
Schedule II. - VALUATION AND QUALIFYING ACCOUNTS | 12 Months Ended |
Dec. 31, 2017 | |
Schedule II. - VALUATION AND QUALIFYING ACCOUNTS | |
Schedule II. - VALUATION AND QUALIFYING ACCOUNTS | Schedule II. - VALUATION AND QUALIFYING ACCOUNTS Year ended December 31, Balance at Charged to Deductions Other Balance at end 2015 Allowance for doubtful accounts $ $ $ (106) $ — $ 451 2016 Allowance for doubtful accounts $ $ $ (150) $ — $ 375 2017 Allowance for doubtful accounts $ $ $ (215) $ — $ 263 (F1) The Company reviews receivables monthly and, accordingly, adjusts the allowance for doubtful accounts monthly. The Company records write-offs annually. The amount charged to costs and expenses reflects the bad debt expense recorded in the consolidated statements of income, while the amount recorded for deductions reflects the adjustment to actual allowance for doubtful accounts reserve at the end of the period. |
SUMMARY OF SIGNIFICANT ACCOUN22
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
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 owns 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, Inc. was renamed Monarch Black Hawk, Inc. and 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 Casino Black Hawk. In addition to owning the Monarch Casino Black Hawk, Monarch Black Hawk, Inc. also wholly owns Chicago Dogs Eatery, Inc. and Monarch Promotional Association, both of which were formed related to extended licensure for extended hours of liquor operation in Black Hawk. Monarch Growth’s wholly owned subsidiary, Inter-Mountain Construction, LLC, owns a parcel of land with an industrial warehouse located between Denver and Monarch Casino Black Hawk. The consolidated financial statements include the accounts of Monarch and its subsidiaries. Intercompany balances and transactions are eliminated. Certain amounts in the consolidated financial statements for the previous periods have been reclassified to be consistent with the current period presentation. These reclassifications had no effect on the previously reported net income. Reference to the number of square feet or acreage are unaudited and considered outside the scope of our independent registered public accounting firm’s audit of our consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board. Unless otherwise indicated, “Monarch,” “Company,” “we,” “our” and “us” refer to Monarch Casino & Resort, Inc. and its subsidiaries. |
Use of Estimates | Use of Estimates In preparing financial statements in conformity with U.S. Generally Accepted Accounting Principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the year. Actual results could differ from those estimates. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents include cash on hand, as well as investments purchased with an original maturity of 90 days or less. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts The Company extends short-term credit to its gaming customers. Such credit is non-interest bearing and is due on demand. In addition, the Company also has receivables due from hotel guests which are primarily secured with a credit card at the time a customer checks in. An allowance for doubtful accounts is set up for all Company receivables based upon the Company’s historical collection and write-off experience, unless situations warrant a specific identification of a necessary reserve related to certain receivables. The Company writes off its uncollectible receivables once all efforts have been made to collect such receivables. The book value of receivables approximates fair value due to the short-term nature of the receivables. |
Casino Jackpots | Casino Jackpots The Company does not accrue a liability for base jackpots because it has the ability to avoid such payment as gaming devices can legally be removed from the gaming floor without payment of the base amount. When the Company is unable to avoid payment of a jackpot such as the incremental jackpot amounts of progressive-type slot machines, due to legal requirements, the jackpot is accrued as the obligation becomes unavoidable. This liability is accrued over the time period in which the incremental progressive jackpot amount is generated commensurate with a corresponding reduction in casino revenue. |
Inventories | Inventories Inventories, consisting primarily of food, beverages, and retail merchandise, are stated at the lower of cost and net realizable value. Cost is determined based on the weighted average, which approximates a first-in, first out method. On January 1, 2017, we adopted the new accounting standard update (“ASU”) which changes the measurement principle for inventories valued under the first-in, first-out or weighted-average methods from the lower of cost or market to the lower of cost and net realizable value. Net realizable value is defined by the Financial Accounting Standards Board (“FASB”) as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The adoption of this standard did not have a material impact on our Consolidated Financial Statements due to the nature of its inventory, consisting primarily of food, beverages, and retail merchandise. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost, less accumulated depreciation and amortization. Property and equipment is depreciated principally on a straight line basis over the estimated useful lives as follows: Land improvements 15 - 40 years Buildings 30 - 40 years Building improvements 5 - 40 years Furniture 5 - 10 years Equipment 3 - 20 years The Company evaluates property and equipment and other long-lived assets for impairment in accordance with the guidance for accounting for the impairment or disposal of long-lived assets. For assets to be disposed of, the Company recognizes the asset to be sold at the lower of carrying value or fair value less costs of disposal. Fair value for assets to be disposed of is generally estimated based on comparable asset sales, solicited offers or a discounted cash flow model. For assets to be held and used, the Company reviews fixed assets for impairment annually during the fourth quarter of each year or whenever indicators of impairment exist. If an indicator of impairment exists, we compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, the impairment is measured based on fair value compared to carrying value, with fair value typically based on a discounted cash flow model or market comparables, when available. For the years ended December 31, 2017, 2016 and 2015, there were no impairment charges. |
Change in Accounting Estimate of Depreciable Life of Monarch Casino Black Hawk Parking Structure | Change in Accounting Estimate of Depreciable Life of Monarch Casino Black Hawk Parking Structure In December 2013, the Company began construction of a new parking facility at Monarch Casino Black Hawk. Upon completion of the new structure, the Company planned 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 FASB accounting standards codification (“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. In October 2015, the general contractor notified the Company that further delay was expected and completion was then expected in the second quarter of 2016 at which time demolition of the existing structure would commence. At September 30, 2015, the existing parking structure had a net book value of approximately $0.4 million. Beginning in October 2015, the Company reduced the monthly depreciation expense to $0.04 million to reflect the revised depreciable life of the existing parking structure. The existing parking structure was fully depreciated as of June 30, 2016. The parking structure was demolished in the fourth quarter of 2016. For the twelve months ended December 31, 2017, this change in estimate did not have any effect on depreciation expense, net income and diluted earnings per share. For the twelve months ended December 31, 2016, the effect of the change in estimate was an increase of depreciation expense by $0.3 million, a decrease of net income by $0.2 million and a decrease of basic and diluted earnings per share by approximately $0.01. For the twelve months ended December 31, 2015, the effect of the change in estimate was an increase of depreciation expense by $1.4 million, a decrease of net income by $0.9 million and a decrease of basic and diluted earnings per share by approximately $0.05. |
Goodwill | Goodwill The Company accounts for goodwill in accordance with ASC Topic 350, Intangibles-Goodwill and Other (“ASC Topic 350”). ASC Topic 350 gives companies the option to perform a qualitative assessment that may allow them to skip the annual two-step test as appropriate. The Company tests its goodwill for impairment annually during the fourth quarter of each year, or whenever events or circumstances make it more likely than not that impairment may have occurred. Impairment testing for goodwill is performed at the reporting unit level, and each of the Company’s casino properties is considered to be a reporting unit. We perform a qualitative analysis to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount by assessing the relevant events and circumstances. If that is the case, the Company utilizes a two-step testing process. In the first step, the estimated fair value of each reporting unit is compared with its carrying amount, including goodwill. If the carrying value of the reporting unit exceeds its estimated fair value, then the goodwill of the reporting unit is considered to be impaired, and impairment is measured in the second step of the process. In the second step, the Company estimates the implied fair value of the reporting unit's goodwill by allocating the estimated fair value of the reporting unit to the assets and liabilities of the reporting unit, as if the reporting unit had been acquired in a business combination. If the carrying value of the reporting unit's goodwill exceeds its implied fair value, an impairment loss is recognized in an amount equal to that excess. Goodwill consists of the excess of the acquisition cost over the fair value of the net assets acquired in business combinations in April 2012. As of December 31, 2017 and 2016, we had goodwill totaling $25.1 million related to the purchase of Black Hawk, Inc. (see NOTE 3). |
Finite-Lived Intangible Assets | Finite-Lived Intangible Assets The Company’s finite-lived intangible assets include assets related to its customer relationships which are amortized over its estimated useful life using the straight-line method. The Company periodically evaluates the remaining useful lives of its finite-lived intangible assets to determine whether events and circumstances warrant a revision to the remaining period of amortization. The customer relationship intangible asset represents the value associated with Monarch Casino Black Hawk’s rated casino guests. The initial fair value of the customer relationship intangible asset was estimated based on the projected net cash flows associated with these casino guests. The recoverability of the Company’s customer relationship intangible asset could be affected by, among other things, increased competition within the gaming industry, a downturn in the economy, declines in customer spending which would impact the expected future cash flows associated with the rated casino guests, declines in the number of visitations which could impact the expected attrition rate of the rated casino guests, and erosion of operating margins associated with rated casino guests. Should events or changes in circumstances cause the carrying value of the customer relationship intangible asset to exceed its estimated fair value, an impairment charge in the amount of the excess would be recognized. As of December 31, 2017 and 2016, the customer relationships net intangible asset balance was $3.9 million and $5.0 million, respectively. |
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 the Company’s two operating segments, Atlantis and Monarch Casino 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. |
Self-insurance Reserves | Self-insurance Reserves We are currently self-insured up to certain stop loss amounts for Atlantis workers’ compensation and certain medical benefit costs provided to all of our employees. As required by the state of Colorado, we are fully-insured for Monarch Casino Black Hawk workers’ compensation costs. The Company reviews self-insurance reserves at least quarterly. The reserve is determined by reviewing the actual expenditures for the previous twelve-month period and reports prepared by the third party plan administrator for any significant unpaid claims. The company engages a third party actuarial at least once per year for a more precise reserves review and calculation. The reserve is an amount estimated to pay both reported and unreported claims as of the balance sheet date, which management believes is adequate. |
Debt Issuance Costs | Debt Issuance Costs Costs incurred in connection with the issuance of long-term debt are capitalized and amortized to interest expense over the term of the related debt agreement. Loan issuance costs are included in “Other assets, net” on the Company’s condensed consolidated balance sheets. As of December 31, 2017, loan issuance costs, net of amortization, was $1.9 million. |
Capitalized Interest | Capitalized Interest The Company capitalizes interest costs associated with debt incurred in connection with major construction projects. When no debt is specifically identified as being incurred in connection with a construction project, the Company capitalizes interest on amounts expended on the project at the Company’s average borrowing cost. Interest capitalization is ceased when the project is substantially complete. The Company capitalized $544 thousand, $548 thousand and $381 thousand of interest during the years ended December 31, 2017, 2016 and 2015, respectively. |
Revenues Recognition | Revenue Recognition Casino revenues represent the net win from gaming activity, which is the difference between wins and losses. Additionally, net win is reduced by a provision for anticipated payouts on slot participation fees, progressive jackpots and any pre-arranged marker discounts. Food and beverage, hotel, and other operating revenues are recognized as products are delivered or services are performed. |
Promotional Allowances | Promotional Allowances The Company’s player program allows members, through the frequency of their play at the Company’s casinos, to earn and accumulate points which may be redeemed for a variety of goods and services. Points may be applied toward room stays at the hotel, food and beverage consumption at the food outlets, gift shop items as well as goods and services at the spa and beauty salon and for cash at our Monarch Casino Black Hawk property. Points earned may also be applied toward off-property events such as concerts, shows and sporting events. The retail value of hotel, food and beverage services provided to customers without charge is included in gross revenue and deducted as promotional allowances. The estimated departmental costs of providing such promotional allowances are primarily included in casino operating expenses and are as follows (in thousands): Years ended December 31, 2017 2016 2015 Food and beverage $ $ $ Hotel 3,375 3,039 3,157 Other 2,128 1,943 2,070 $ $ $ |
Advertising Costs | Advertising Costs All advertising costs are expensed as incurred. Advertising expense, which is included in selling, general and administrative expense, was $5.2 million, $5.4 million and $5.2 million for the years ended December 31, 2017, 2016 and 2015, respectively. |
Income Taxes | Income Taxes Income taxes are recorded in accordance with the liability method pursuant to authoritative guidance. Under the asset and liability approach for financial accounting and reporting for income taxes, the following basic principles are applied in accounting for income taxes at the date of the financial statements: (a) a current liability or asset is recognized for the estimated taxes payable or refundable on taxes for the current year; (b) a deferred income tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences and carryforwards; (c) the measurement of current and deferred tax liabilities and assets is based on the provisions of the enacted tax law; the effects of future changes in tax laws or rates are not anticipated; and (d) the measurement of deferred income taxes is reduced, if necessary, by the amount of any tax benefits that, based upon available evidence, are not expected to be realized. Under the accounting guidance, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50.0% likelihood of being realized upon ultimate settlement. It also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods and disclosure. |
Gaming taxes | Gaming Taxes The Company is subject to taxes based on gross gaming revenue in the jurisdictions in which it operates, subject to applicable jurisdictional adjustments. These gaming taxes are an assessment on the Company’s gaming revenue and are recorded as casino expense in the accompanying Consolidated Statements of Income. These taxes totaled $21.6 million, $20.3 million and $18.2 million for the years ended December 31, 2017, 2016 and 2015, respectively. |
Stock-based Compensation | Stock-based Compensation The Company accounts for stock-based compensation in accordance with the authoritative guidance requiring that compensation cost relating to stock-based payment transactions be recognized in the Company’s consolidated statements of income. The cost is measured at the grant date, based on the calculated fair value of the award using the Black-Scholes option pricing model for stock options, and based on the closing share price of the Company’s stock on the grant date for restricted stock awards. The cost is recognized as an expense over the employee’s requisite service period (the vesting period of the equity award). The Company’s stock-based employee compensation plan is more fully discussed in NOTE 9. |
Earnings Per Share | Earnings Per Share Basic earnings per share are 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 (in thousands, except per share data): Years ended December 31, 2017 2016 2015 Per Share Per Share Per Share Shares Amount Shares Amount Shares Amount Basic 17,585 $ 1.45 $ 1.42 16,948 $ 1.22 Effect of dilutive stock options 782 (0.06) 359 (0.03) 387 (0.03) Diluted 18,367 $ 1.39 $ 1.39 17,335 $ 1.19 The following options were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the December 31 closing market price of the common shares and their inclusion would be antidilutive: Years ended December 31, 2017 2016 2015 Options to purchase shares of common stock 203,667 106,102 115,536 Exercise prices $ 45.32 - $ 46.73 $ 28.02 - $ 29.00 $ 23.09 - $ 29.00 Expiration dates (month/year) 11/27-12/27 11/17-10/20 05/16-11/25 |
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, account 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. |
Concentrations of Credit Risk | Concentrations of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of bank deposits and trade receivables. The Company maintains its surplus cash in bank accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company’s customer base. The Company believes it is not exposed to any significant credit risk on cash and accounts receivable. Accounts are written off when management determines that an account is uncollectible. Recoveries of accounts previously written off are recorded when received. An allowance for doubtful accounts is determined to reduce the Company’s receivables to their carrying value, which approximates fair value. The allowance is estimated based on historical collection experience, specific review of individual customer accounts, and current economic and business conditions. Historically, the Company has not incurred any significant credit-related losses. |
Certain Risks and Uncertainties | Certain Risks and Uncertainties The Company’s operations are dependent on its continued licensing by the Nevada and Colorado gaming regulatory bodies. The loss of a license could have a material adverse effect on future results of operations. The Company is dependent on the northern Nevada and Denver, Colorado markets for a significant number of its patrons and revenues. If economic conditions in these areas deteriorate or additional gaming licenses are awarded, the Company’s results of operations could be adversely affected. The Company is dependent on the U.S. economy in general, and any deterioration in the national economic, energy, credit and capital markets could have a material adverse effect on future results of operations. The Company is dependent upon a stable gaming and admission tax structure in the locations in which it operates. Any change in the tax structure could have a material adverse effect on future results of operations. |
Impact of Recently Issued Accounting Standards | Impact of Recently Issued Accounting Standards In May 2014, the FASB issued an ASU that amends the FASB ASC 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. The effective date is for the annual and interim periods beginning after December 15, 2017. We have completed our evaluation of the impact of adopting this new accounting standard on its financial statements and internal revenue recognition policies. The majority of our revenue recognition policies will not be impacted or will have a minimal impact by the new standard. The accounting treatment for the customer loyalty programs will be impacted the most by the adoption of this ASU. Specifically, the recognition of revenue associated with the customer loyalty programs will be impacted by eliminating the current accrual for the cost of the points awarded at the time of play and instead deferring the portion of the revenue received from the customer at the time of play and attributed to the awarded points until a later period when the points are redeemed or forfeited. The revenue deferral will be calculated from the portion of the transaction price allocated to the points based upon their retail value. Under the former guidance, the cost of the points was recorded as an operating expense through the casino line item of our consolidated statements of income. In addition, upon the adoption of this ASU, the complementary pricing for products and services will be presented at retail pricing within the appropriate revenue line item. Further, promotional allowances representing the retail value of food, beverages and other services furnished to guests without charge will no longer be presented as a separate line item on the consolidated statements of income, rather they will be presented on a net basis within casino, food and beverage, hotel and other revenue. These changes have no impact to net revenues and are for presentation purposes only. We adopted this ASU on January 1, 2018 using the modified retrospective approach and recorded a cumulative adjustment to retained earnings, resulting from recalculating the customer loyalty program liability balance at the time of the adoption from estimated cost to retail value, of approximately $4.9 million. In February 2016, the FASB issued an ASU which addresses the recognition and measurement of leases. Under the new guidance, for all leases (with the exception of short-term leases), at the commencement date, lessees will be required to recognize a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Further, the new lease guidance simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and liabilities, which no longer provides a source for off- balance sheet financing. The effective date for this update is for the annual and interim periods beginning after December 15, 2018 with early adoption permitted. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently assessing the impact the adoption of this standard will have on its Consolidated Financial Statements. In August 2016, the FASB issued an ASU that provides clarifying guidance on the presentation of certain cash receipts and cash payments in the statement of cash flows. The ASU is effective for annual reporting periods beginning after December 15, 2017. The Company adopted this ASU on January 1, 2018, with no impact to its presentation of cash receipts and payments on its consolidated statements of cash flows. In January 2017, the FASB issued an ASU that simplifies the accounting for goodwill impairment for all entities by eliminating the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of today’s goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on today’s Step 1). The standard does not change the guidance on completing Step 1 of the goodwill impairment test. An entity will still be able to perform today’s optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1. The standard will be applied prospectively and is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. In January 2017, the FASB issued an ASU which provides clarifying guidance on what constitutes a business acquisition versus an asset acquisition. Specifically, the new guidance lays out a screen to more easily determine if a set of integrated assets and activities does in fact represent a business. Under this ASU, when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the assets do not represent a business. The ASU is effective for annual reporting periods beginning after December 15, 2017. The Company adopted this ASU on January 1, 2018 with no impact to the Company's accounting policies. In May 2017, the FASB issued an ASU that clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Under the new guidance, entities will apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. The guidance also clarifies that a modification to an award could be significant and therefore require disclosure, even if modification accounting is not required. Therefore, an entity will have to make all of the disclosures about modifications that are required today, in addition to disclosing that compensation expense hasn’t changed, if that’s the case. The effective date is for annual and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including in any interim period for which financial statements have not yet been issued or made available for issuance. The guidance will be applied prospectively to awards modified on or after the adoption date. We adopted this ASU on January 1, 2018, with no impact to the Company's accounting policies. 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, the implementation of any such proposed or revised standards would have on the Company’s Consolidated Financial Statements. |
SUMMARY OF SIGNIFICANT ACCOUN23
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of useful lives of property and equipment | Land improvements 15 - 40 years Buildings 30 - 40 years Building improvements 5 - 40 years Furniture 5 - 10 years Equipment 3 - 20 years |
Schedule of departmental costs of providing promotional allowances | (in thousands): Years ended December 31, 2017 2016 2015 Food and beverage $ $ $ Hotel 3,375 3,039 3,157 Other 2,128 1,943 2,070 $ $ $ |
Schedule of reconciliation of number of shares (denominator) used in basic and diluted earnings per share computations | (in thousands, except per share data): Years ended December 31, 2017 2016 2015 Per Share Per Share Per Share Shares Amount Shares Amount Shares Amount Basic 17,585 $ 1.45 $ 1.42 16,948 $ 1.22 Effect of dilutive stock options 782 (0.06) 359 (0.03) 387 (0.03) Diluted 18,367 $ 1.39 $ 1.39 17,335 $ 1.19 |
Schedule of antidilutive options | Years ended December 31, 2017 2016 2015 Options to purchase shares of common stock 203,667 106,102 115,536 Exercise prices $ 45.32 - $ 46.73 $ 28.02 - $ 29.00 $ 23.09 - $ 29.00 Expiration dates (month/year) 11/27-12/27 11/17-10/20 05/16-11/25 |
ACCOUNTS RECEIVABLE (Tables)
ACCOUNTS RECEIVABLE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
ACCOUNTS RECEIVABLE | |
Schedule of accounts receivable | (in thousands): December 31, 2017 2016 Casino $ 5,025 $ 4,241 Hotel 1,719 873 Other 444 297 7,188 5,411 Less allowance for doubtful accounts (263) (375) $ 6,925 $ 5,036 |
GOODWILL AND INTANGIBLE (Tables
GOODWILL AND INTANGIBLE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
GOODWILL AND INTANGIBLE ASSETS | |
Schedule of intangible assets | (in thousands except years): 2017 2016 Customer list Total intangible assets $ 10,490 $ 10,490 Less accumulated amortization: (6,621) (5,455) Intangible assets, net $ 3,869 $ 5,035 Weighted-average life in years 3.3 4.3 |
Schedule of estimated future amortization expense | (in thousands): Year Expense 2018 $ 1,165 2019 1,165 2020 1,165 2021 374 Total $ 3,869 |
ACCRUED EXPENSES (Tables)
ACCRUED EXPENSES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
ACCRUED EXPENSES. | |
Schedule of accrued expenses | (in thousands): December 31, 2017 2016 Accrued salaries, wages and related benefits $ 9,838 $ 8,341 Progressive slot machine and other gaming accruals 9,935 Accrued gaming taxes 2,607 2,588 Accrued interest 6 3 Other accrued liabilities 3,020 2,568 $ $ |
LEASE COMMITMENTS (Tables)
LEASE COMMITMENTS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
LEASE COMMITMENTS | |
Summary of future minimum payments under operating leases | Following is a summary of future minimum payments under operating leases that have initial or remaining non-cancelable lease terms for the next five years (in thousands): Operating Leases Year ending December 31, 2018 $ 1,072 2019 1,072 2020 1,072 2021 1,072 2022 1,072 Total minimum lease payments $ 5,360 |
TAXES (Tables)
TAXES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
TAXES | |
Schedule of income tax provision (benefit) | (in thousands): Years ended December 31, 2017 2016 2015 Federal $ 9,933 $ 12,834 $ State 417 477 359 Current tax provision 10,350 13,311 12,327 Federal 3,738 99 (1,117) State 73 (52) 7 Deferred tax provision (benefit) 3,811 47 (1,110) Total tax provision $ 14,161 $ 13,358 $ |
Schedule of income tax provision differences to federal statutory rate | Years ended December 31, 2017 2016 2015 Federal tax at the statutory rate 35.00 % 35.00 % 35.00 % State tax (net of federal benefit) 1.00 % 0.70 % 0.72 % Permanent items 0.34 % 0.27 % 0.34 % Tax credits (0.82) % (0.96) % (0.73) % Excess tax benefits on stock-based compensation (3.42) % — % — % Tax Cuts and Jobs Act of 2017 3.57 % — % — % Other — % 0.23 % (0.14) % 35.67 % 35.24 % 35.19 % |
Schedule of components of the deferred income tax assets and liabilities | (in thousands): 2017 2016 DEFERRED TAX ASSETS Stock-based compensation $ 1,434 $ 2,198 Compensation and benefits 555 1,113 Bad debt reserves 58 136 Accrued expenses 512 1,991 Fixed assets and depreciation 896 2,305 Base stock 11 6 State taxes (31) 144 NOLs & credit carry-forwards 2,219 3,295 Deferred income tax asset $ 5,654 $ 11,188 DEFERRED TAX LIABILITIES Intangibles and amortization $ (855) $ (1,811) Prepaid expenses (890) (1,365) Real estate taxes (191) (154) Other reserves (14) (138) Federal deduction on deferred state taxes (160) (366) Deferred income tax liability $ (2,110) $ (3,834) NET DEFERRED INCOME TAX ASSET $ 3,544 $ 7,354 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
STOCK-BASED COMPENSATION | |
Summary of stock option activity | A summary of the stock option activity as of and for the year ended December 31, 2017 is presented below: Weighted Average Remaining Aggregate Exercise Contractual Intrinsic Options Shares Price Term Value Outstanding at beginning of period 1,932,259 $ 17.12 — — Granted 411,956 37.57 — — Exercised (320,408) 18.14 — — Forfeited (33,336) 21.48 — — Expired — — — — Outstanding at end of period 1,990,471 $ 21.09 7.2 yrs. $ Exercisable at end of period 787,504 $ 13.85 5.5 yrs. $ |
Summary of status of nonvested shares | Weighted-Average Grant Date Fair Nonvested Shares Shares Value Nonvested at January 1, 2017 1,167,998 $ 5.39 Granted 411,956 11.92 Vested (343,651) 3.84 Forfeited (33,336) 6.44 Nonvested at December 31, 2017 1,202,967 $ 8.07 |
Schedule of stock options granted, vested and exercised | Years ended December 31, 2017 2016 2015 Expected volatility 35.54 % 35.81 % 39.10 % Expected dividends — — — Expected life (in years) Directors’ plan 2.99 2.73 3.97 Executives plan 5.05 4.71 4.28 Employees plan 4.14 4.10 3.97 Weighted average risk free rate 1.83 % 1.14 % 1.14 % Weighted average grant date fair value per share of options granted $ 11.92 $ 6.67 $ 5.90 Total fair value of shares vested $ 1,324 $ 1,758 $ 1,041 Total intrinsic value of options exercised $ 5,819 $ 3,276 $ 4,321 Cash received for all stock option exercises $ 5,813 $ 2,934 $ 3,900 Tax benefit realized from stock awards exercised $ 2,037 $ 1,146 $ 1,512 |
Schedule of stock-based compensation expense | (in thousands): For the Year ended December 31, 2017 2016 2015 Casino $ 114 $ 95 $ 58 Food and beverage 92 101 85 Hotel 33 37 21 Selling, general and administrative 2,005 1,448 1,380 Total stock-based compensation, before taxes 2,244 1,681 1,544 Tax benefit (785) (588) (540) Total stock-based compensation, net of tax $ 1,459 $ 1,093 $ 1,004 |
SELECTED QUARTERLY FINANCIAL 30
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) | |
Schedule of selected quarterly financial data (unaudited) | The following table presents selected quarterly financial information for 2017 and 2016 (in thousands, except per share amounts): 2017 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Net revenues $ $ $ 63,027 $ $ Operating expenses 49,777 190,060 Income from operations 7,726 13,250 8,137 40,666 Net income 4,872 7,239 9,030 4,397 (F1) 25,538 Income per share of common stock Basic $ 0.28 $ 0.41 $ 0.51 $ 0.25 (F1) $ 1.45 Diluted $ 0.27 $ 0.40 $ 0.49 $ 0.23 (F1) $ 1.39 2016 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Net revenues $ $ 54,578 $ 57,109 $ 55,596 $ 217,032 Operating expenses 45,633 44,857 45,404 178,484 Income from operations 7,159 8,945 12,252 10,192 38,548 Net income 4,575 5,695 7,834 6,470 24,574 Income per share of common stock Basic $ 0.27 $ 0.33 $ 0.45 $ 0.37 $ 1.42 Diluted $ 0.26 $ 0.32 $ 0.45 $ 0.36 $ 1.39 (F1) The enactment of the Tax Cuts and Jobs Act in 2017 resulted in a non-cash Deferred tax asset revaluation, which had a $1.5 million negative effect on Net income and $0.08 negative effect on the Basic and Diluted EPS. |
SUMMARY OF SIGNIFICANT ACCOUN31
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property and Equipment Useful Lives and Impairment (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Property and Equipment | |||
Impairment charge | $ 0 | $ 0 | $ 0 |
Land improvements | Minimum | |||
Property and Equipment | |||
Estimated useful life | 15 years | ||
Land improvements | Maximum | |||
Property and Equipment | |||
Estimated useful life | 40 years | ||
Buildings | Minimum | |||
Property and Equipment | |||
Estimated useful life | 30 years | ||
Buildings | Maximum | |||
Property and Equipment | |||
Estimated useful life | 40 years | ||
Building improvements | Minimum | |||
Property and Equipment | |||
Estimated useful life | 5 years | ||
Building improvements | Maximum | |||
Property and Equipment | |||
Estimated useful life | 40 years | ||
Furniture | Minimum | |||
Property and Equipment | |||
Estimated useful life | 5 years | ||
Furniture | Maximum | |||
Property and Equipment | |||
Estimated useful life | 10 years | ||
Equipment | Minimum | |||
Property and Equipment | |||
Estimated useful life | 3 years | ||
Equipment | Maximum | |||
Property and Equipment | |||
Estimated useful life | 20 years |
SUMMARY OF SIGNIFICANT ACCOUN32
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Change in Accounting Estimate (Details) - USD ($) $ / shares in Units, $ in Thousands | Jan. 01, 2014 | Dec. 31, 2013 | Oct. 31, 2015 | Jul. 31, 2014 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 |
Change in Accounting Estimate | ||||||||||||||||
Net book value | $ 250,714 | $ 214,899 | $ 250,714 | $ 214,899 | ||||||||||||
Net income | $ 4,397 | $ 9,030 | $ 7,239 | $ 4,872 | $ 6,470 | $ 7,834 | $ 5,695 | $ 4,575 | $ 25,538 | 24,574 | $ 20,659 | |||||
Land improvements | Monarch Casino Black Hawk parking facility | ||||||||||||||||
Change in Accounting Estimate | ||||||||||||||||
Net book value | $ 4,800 | $ 2,900 | $ 400 | |||||||||||||
Estimated depreciable life | P37Y | |||||||||||||||
Land improvements | Monarch Casino Black Hawk parking facility | Service Life | ||||||||||||||||
Change in Accounting Estimate | ||||||||||||||||
Estimated depreciable life | P15M | P18M | ||||||||||||||
Depreciation expense per month | $ 300 | $ 40 | ||||||||||||||
Depreciation expense net of tax per month | $ 200 | |||||||||||||||
Depreciation expense | 300 | 1,400 | ||||||||||||||
Net income | $ (200) | $ (900) | ||||||||||||||
Basic and diluted earnings per share (in dollars per share) | $ (0.01) | $ 0.05 |
SUMMARY OF SIGNIFICANT ACCOUN33
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Goodwill and Finite-Lived Intangible Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Goodwill from business combinations | ||
Goodwill | $ 25,111 | $ 25,111 |
Finite-Lived Intangible Assets | ||
Net intangible asset balance | $ 3,869 | $ 5,035 |
SUMMARY OF SIGNIFICANT ACCOUN34
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Segment Reporting and Insurance Reserves (Details) | 12 Months Ended |
Dec. 31, 2017segment | |
Segment Reporting | |
Number of operating segments | 2 |
Number of reportable segments | 1 |
Self-insurance Reserves | |
Period for reviewing actual expenditure to determine self-insurance reserve | 12 months |
SUMMARY OF SIGNIFICANT ACCOUN35
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Debt Issuance Costs and Capitalized Interest (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Capitalized Interest | |||
Interest Costs Capitalized | $ 544 | $ 548 | $ 381 |
Other assets, net | |||
Debt Issuance Costs | |||
Loan issuance costs, net of amortization | $ 1,900 |
SUMMARY OF SIGNIFICANT ACCOUN36
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Promotional Allowances, Advertising Costs and Gaming Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Gaming Taxes | |||
Gaming taxes | $ 21,600 | $ 20,300 | $ 18,200 |
Food and beverage | |||
Promotional Allowances | |||
Estimated departmental costs of providing promotional allowances | 26,025 | 25,743 | 23,761 |
Hotel | |||
Promotional Allowances | |||
Estimated departmental costs of providing promotional allowances | 3,375 | 3,039 | 3,157 |
Other | |||
Promotional Allowances | |||
Estimated departmental costs of providing promotional allowances | 2,128 | 1,943 | 2,070 |
Promotional allowances | |||
Promotional Allowances | |||
Estimated departmental costs of providing promotional allowances | 31,528 | 30,725 | 28,988 |
Selling, general and administrative | |||
Advertising Costs | |||
Advertising expense | $ 5,200 | $ 5,400 | $ 5,200 |
SUMMARY OF SIGNIFICANT ACCOUN37
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Earnings Per Share (Details) - $ / shares shares in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Shares | |||||||||||
Basic (in shares) | 17,585 | 17,305 | 16,948 | ||||||||
Effect of dilutive stock options (in shares) | 782 | 359 | 387 | ||||||||
Diluted (in shares) | 18,367 | 17,664 | 17,335 | ||||||||
Per Share Amount | |||||||||||
Basic (in dollars per share) | $ 0.25 | $ 0.51 | $ 0.41 | $ 0.28 | $ 0.37 | $ 0.45 | $ 0.33 | $ 0.27 | $ 1.45 | $ 1.42 | $ 1.22 |
Effect of dilutive stock options (in dollars per share) | (0.06) | (0.03) | (0.03) | ||||||||
Diluted (in dollars per share) | $ 0.23 | $ 0.49 | $ 0.40 | $ 0.27 | $ 0.36 | $ 0.45 | $ 0.32 | $ 0.26 | $ 1.39 | $ 1.39 | $ 1.19 |
SUMMARY OF SIGNIFICANT ACCOUN38
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Anti-dilutive Options (Details) - Stock options - $ / shares shares in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Anti-dilutive securities | |||
Anti-dilutive securities excluded from the computation of diluted earnings per share (in shares) | 203,667 | 106,102 | 115,536 |
Minimum | |||
Anti-dilutive securities | |||
Exercise prices (in dollars per share) | $ 45.32 | $ 28.02 | $ 23.09 |
Maximum | |||
Anti-dilutive securities | |||
Exercise prices (in dollars per share) | $ 46.73 | $ 29 | $ 29 |
SUMMARY OF SIGNIFICANT ACCOUN39
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Adoption of ASU 2016-09 - Adoption of New Revenue Standard (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Jan. 01, 2018 | |
Impact of Recently Issued Accounting Standards | |||||||||||||
Net Revenues | $ 56,056 | $ 63,027 | $ 58,229 | $ 53,414 | $ 55,596 | $ 57,109 | $ 54,578 | $ 49,749 | $ 230,726 | $ 217,032 | $ 202,245 | ||
Retained earnings | $ 257,516 | $ 231,978 | $ 257,516 | $ 231,978 | |||||||||
Accounting Standards Update 2014-09 - Revenue from Contracts with Customers | Difference between Revenue Guidance in Effect before and after Topic 606 | |||||||||||||
Impact of Recently Issued Accounting Standards | |||||||||||||
Retained earnings | $ 4,900 | ||||||||||||
Expected | Accounting Standards Update 2014-09 - Revenue from Contracts with Customers | Difference between Revenue Guidance in Effect before and after Topic 606 | |||||||||||||
Impact of Recently Issued Accounting Standards | |||||||||||||
Net Revenues | $ 0 |
ACCOUNTS RECEIVABLE (Details)
ACCOUNTS RECEIVABLE (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Accounts receivable | |||
Accounts receivable, gross | $ 7,188 | $ 5,411 | |
Less allowance for doubtful accounts | (263) | (375) | |
Accounts receivable, net | 6,925 | 5,036 | |
Bad debt expense | 103 | 74 | $ 240 |
Casino | |||
Accounts receivable | |||
Accounts receivable, gross | 5,025 | 4,241 | |
Hotel | |||
Accounts receivable | |||
Accounts receivable, gross | 1,719 | 873 | |
Other | |||
Accounts receivable | |||
Accounts receivable, gross | $ 444 | $ 297 |
GOODWILL AND INTANGIBLE - Carry
GOODWILL AND INTANGIBLE - Carrying Amount and Intangible Weighted Average Life (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Business Combination, Goodwill [Abstract] | ||
Amount of goodwill recorded | $ 25,111 | $ 25,111 |
Finite-Lived Intangible Assets | ||
Total Intangible assets | 10,490 | 10,490 |
Less accumulated amortization | (6,621) | (5,455) |
Intangible assets, net | $ 3,869 | $ 5,035 |
Weighted-average life | 3 years 3 months 18 days | 4 years 3 months 18 days |
Amortization expense | $ 1,200 | $ 1,200 |
GOODWILL AND INTANGIBLE - Estim
GOODWILL AND INTANGIBLE - Estimated Amortization Expense (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Estimated amortization expense | ||
2,018 | $ 1,165 | |
2,019 | 1,165 | |
2,020 | 1,165 | |
2,021 | 374 | |
Intangible assets, net | $ 3,869 | $ 5,035 |
GOODWILL AND INTANGIBLE - Custo
GOODWILL AND INTANGIBLE - Customer Lists Valuation (Details) - Customer lists $ in Millions | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Valuation | |
Customer lists value, before amortization | $ 10.5 |
Useful life of finite-lived intangible assets | 9 years |
Fair value inputs | |
Attrition rate (as a percent) | 24.00% |
Discount rate (as a percent) | 12.00% |
ACCRUED EXPENSES (Details)
ACCRUED EXPENSES (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
ACCRUED EXPENSES. | ||
Accrued salaries, wages and related benefits | $ 9,838 | $ 8,341 |
Progressive slot machine and other gaming accruals | 9,935 | 10,295 |
Accrued gaming taxes | 2,607 | 2,588 |
Accrued interest | 6 | 3 |
Other accrued liabilities | 3,020 | 2,568 |
Accrued expenses | $ 25,406 | $ 23,795 |
LEASE COMMITMENTS - Driveway an
LEASE COMMITMENTS - Driveway and Parking Lot Leases (Details) $ in Thousands | Aug. 28, 2015USD ($)ft²aitem | Sep. 30, 2004USD ($) | Dec. 31, 2017USD ($)ft² | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Nov. 17, 2015USD ($) |
LEASE COMMITMENTS | ||||||
Leasehold improvements | $ 3,800 | $ 2,688 | ||||
Biggest Little Investments, L.P. | BLI Parking Lot Lease | ||||||
LEASE COMMITMENTS | ||||||
Number of parking spaces | item | 300 | |||||
Minimum annual rent | $ 695 | |||||
Anniversary years subject to cost of living adjustment rent increases | 5 years | |||||
Lease renewal option additional term | 10 years | |||||
Amount due to related party if lease is not renewed | $ 1,600 | |||||
Minimum rent expense | 695 | 695 | $ 85 | |||
Operating expenses related to lease | $ 31 | 60 | 12 | |||
Biggest Little Investments, L.P. | BLI Driveway Lease | ||||||
LEASE COMMITMENTS | ||||||
Lease term | 15 years | |||||
Area of property | ft² | 37,400 | |||||
Minimum annual rent | $ 300 | |||||
Anniversary years subject to cost of living adjustment rent increases | 5 years | |||||
Total cost of improvements | $ 2,000 | |||||
Number of terms for which the lease can be renewed | item | 3 | |||||
Lease renewal option additional term | 5 years | |||||
Minimum rent expense | 377 | 377 | 377 | |||
Operating expenses related to lease | 24 | $ 37 | $ 84 | |||
Biggest Little Investments, L.P. | BLI Driveway Lease | Leasehold improvements | ||||||
LEASE COMMITMENTS | ||||||
Leasehold improvements | $ 1,350 | |||||
Estimated useful life | 15 years | |||||
Golden Road | Biggest Little Investments, L.P. | BLI Parking Lot Lease | ||||||
LEASE COMMITMENTS | ||||||
Lease term | 20 years | |||||
Area of land | a | 4.15 | |||||
Golden Road | Biggest Little Investments, L.P. | BLI Parking Lot Lease | Buildings | ||||||
LEASE COMMITMENTS | ||||||
Area of property | ft² | 46,000 |
LEASE COMMITMENTS - Future Mini
LEASE COMMITMENTS - Future Minimum Lease Payments and Rent Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Future minimum payments under operating leases | |||
2,018 | $ 1,072 | ||
2,019 | 1,072 | ||
2,020 | 1,072 | ||
2,021 | 1,072 | ||
2,022 | 1,072 | ||
Total minimum lease payments | 5,360 | ||
Operating lease expense | |||
Rental expense for operating leases | $ 1,600 | $ 1,500 | $ 1,000 |
LONG-TERM DEBT (Details)
LONG-TERM DEBT (Details) | Dec. 31, 2017USD ($) | Dec. 31, 2017USD ($) | Jul. 20, 2016USD ($) | Jun. 30, 2016USD ($) |
Long-term debt | ||||
Period over which Company believes existing cash balances will provide sufficient resources to fund operations | 12 months | |||
Amended and restated credit facility agreement, July 20, 2016 | ||||
Long-term debt | ||||
Maximum borrowing capacity | $ 250,000,000 | $ 250,000,000 | $ 250,000,000 | |
Remaining available borrowings | $ 223,200,000 | 223,200,000 | ||
Amount in which the maximum borrowing capacity can be permanently reduced | 500,000 | |||
Multiple which may be used to permanently reduce the maximum borrowing capacity under the credit facility | 50,000 | |||
Actual leverage ratio | 0.5 | |||
Actual fixed charge coverage ratio | 40.9 | |||
Amended and restated credit facility agreement, July 20, 2016 | Completion of expansion project at Monarch Casino Black Hawk | ||||
Long-term debt | ||||
Maximum borrowing capacity | $ 50,000,000 | $ 50,000,000 | ||
Amended and restated credit facility agreement, July 20, 2016 | LIBOR | ||||
Long-term debt | ||||
Margin added to variable rate (as a percent) | 1.00% | |||
Variable interest rate (as a percent) | 1.57% | 1.57% | ||
Amended and restated credit facility agreement, July 20, 2016 | Minimum | ||||
Long-term debt | ||||
Covenant fixed charge coverage ratio | 1.15 | |||
Commitment fee as a percentage of daily average unused revolving commitment | 0.175% | |||
Amended and restated credit facility agreement, July 20, 2016 | Minimum | LIBOR | ||||
Long-term debt | ||||
Margin added to variable rate (as a percent) | 1.00% | |||
Amended and restated credit facility agreement, July 20, 2016 | Minimum | Base Rate | ||||
Long-term debt | ||||
Margin added to variable rate (as a percent) | 0.00% | |||
Amended and restated credit facility agreement, July 20, 2016 | Maximum | ||||
Long-term debt | ||||
Covenant leverage ratio | 3.5 | |||
Commitment fee as a percentage of daily average unused revolving commitment | 0.45% | |||
Amended and restated credit facility agreement, July 20, 2016 | Maximum | Completion of expansion project at Monarch Casino Black Hawk | ||||
Long-term debt | ||||
Face amount of debt | $ 200,000,000 | $ 200,000,000 | ||
Amended and restated credit facility agreement, July 20, 2016 | Maximum | LIBOR | ||||
Long-term debt | ||||
Margin added to variable rate (as a percent) | 2.50% | |||
Amended and restated credit facility agreement, July 20, 2016 | Maximum | Base Rate | ||||
Long-term debt | ||||
Margin added to variable rate (as a percent) | 1.50% | |||
Credit facility, November 15, 2011 | ||||
Long-term debt | ||||
Maximum borrowing capacity | $ 100,000,000 | |||
Current borrowing capacity | 45,500,000 | |||
Mandatory reductions in borrowing capacity | 19,500,000 | |||
Voluntary reductions in borrowing capacity | $ 35,000,000 | |||
Revolving credit facility | Amended and restated credit facility agreement, July 20, 2016 | ||||
Long-term debt | ||||
Amount outstanding | 26,200,000 | $ 26,200,000 | ||
Standby Letter of Credit | Amended and restated credit facility agreement, July 20, 2016 | ||||
Long-term debt | ||||
Amount outstanding | 600,000 | $ 600,000 | ||
Amount drawn under the facility | $ 0 |
TAXES - Income Tax Provision (B
TAXES - Income Tax Provision (Benefit) Components (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Income tax provision (benefit) | |||
Federal | $ 9,933 | $ 12,834 | $ 11,968 |
State | 417 | 477 | 359 |
Current tax provision | 10,350 | 13,311 | 12,327 |
Federal | 3,738 | 99 | (1,117) |
State | 73 | (52) | 7 |
Deferred tax provision (benefit) | 3,811 | 47 | (1,110) |
Total tax provision | $ 14,161 | $ 13,358 | $ 11,217 |
TAXES - Income Tax Provision Di
TAXES - Income Tax Provision Differences from Federal Statutory Rate (Details) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Income tax provision differences from that computed at federal statutory rate | |||
Federal tax at the statutory rate (as a percent) | 35.00% | 35.00% | 35.00% |
State tax (net of federal benefits) (as a percent) | 1.00% | 0.70% | 0.72% |
Permanent items (as a percent) | 0.34% | 0.27% | 0.34% |
Tax credits (as a percent) | (0.82%) | (0.96%) | (0.73%) |
Excess tax benefits on stock-based compensation (as a percent) | (3.42%) | ||
Tax Cuts and Jobs Act of 2017 (as a percent) | 3.57% | ||
Other (as a percent) | 0.23% | (0.14%) | |
Income tax provision (as a percent) | 35.67% | 35.24% | 35.19% |
TAXES - Tax Cuts and Jobs Act B
TAXES - Tax Cuts and Jobs Act Bill and Stock-Based Compensation Tax Benefits (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Reasonable estimate of effect of enactment of Tax Act | |||||
U.S. federal corporate tax rate (as a percent) | 35.00% | 35.00% | 35.00% | ||
Provisional amount for reasonable estimate of effect of Tax Act on existing deferred tax balance | $ 1,500 | $ 1,461 | |||
Tax benefits for employee stock-based compensation | |||||
Increase to contributed capital from certain tax benefits for employee stock-based compensation | $ 737 | $ 865 | |||
Income tax expense (tax benefit) | 14,161 | $ 13,358 | $ 11,217 | ||
Accounting Standards Update 2016-09 | |||||
Tax benefits for employee stock-based compensation | |||||
Income tax expense (tax benefit) | $ (1,359) | ||||
Expected | |||||
Reasonable estimate of effect of enactment of Tax Act | |||||
U.S. federal corporate tax rate (as a percent) | 21.00% |
TAXES - Components of Deferred
TAXES - Components of Deferred Income Tax Assets and Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
DEFERRED TAX ASSETS | ||
Stock-based compensation | $ 1,434 | $ 2,198 |
Compensation and benefits | 555 | 1,113 |
Bad debt reserves | 58 | 136 |
Accrued expenses | 512 | 1,991 |
Fixed assets and depreciation | 896 | 2,305 |
Base stock | 11 | 6 |
State taxes | (31) | |
State taxes | 144 | |
NOLs and credit carry-forwards | 2,219 | 3,295 |
Deferred income tax asset | 5,654 | 11,188 |
DEFERRED TAX LIABILITIES | ||
Intangibles and amortization | (855) | (1,811) |
Prepaid expenses | (890) | (1,365) |
Real estate taxes | (191) | (154) |
Other reserves | (14) | (138) |
Federal deduction on deferred state taxes | (160) | (366) |
Deferred income tax liability | (2,110) | (3,834) |
NET DEFERRED INCOME TAX ASSET | $ 3,544 | $ 7,354 |
TAXES - NOL and GBC Carryforwar
TAXES - NOL and GBC Carryforwards (Details) $ in Thousands | Dec. 31, 2017USD ($) |
Taxes | |
General business credit (GBC) carryforwards | $ 300 |
Annual base limitation for future utilization of acquired carryforwards | 1,250 |
State NOL carryforwards | |
Taxes | |
NOL carryforwards | 18,400 |
IRS | |
Taxes | |
NOL carryforwards | $ 4,800 |
TAXES - Unrecognized Tax Benefi
TAXES - Unrecognized Tax Benefits (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
TAXES | |||
Liability for uncertain tax positions recorded | $ 0 | $ 0 | $ 0 |
Change in uncertain tax positions, increase | 0 | ||
Change in uncertain tax positions, decrease | 0 | ||
Interest expense or penalties for uncertain tax positions recorded | $ 0 | $ 0 | $ 0 |
BENEFIT PLANS (Details)
BENEFIT PLANS (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
BENEFIT PLANS | |||
Maximum percentage of pre-tax compensation that participating employees may defer under the plan | 100.00% | ||
Company's matching contributions | $ 379 | $ 332 | $ 318 |
STOCK-BASED COMPENSATION - 2014
STOCK-BASED COMPENSATION - 2014 Equity Incentive Plan (Details) | May 21, 2014plan | Dec. 31, 2017shares |
STOCK-BASED COMPENSATION | ||
Number of plans terminated | plan | 2 | |
Maximum | Stock-based compensation | ||
STOCK-BASED COMPENSATION | ||
Aggregate amount of common shares available for grant or subject to outstanding awards under Predecessor Plans | 3,293,331 | |
2014 Equity Incentive Plan | ||
STOCK-BASED COMPENSATION | ||
Number of new shares available for grant | 2,200,000 |
STOCK-BASED COMPENSATION - Stoc
STOCK-BASED COMPENSATION - Stock Option Activity (Details) - Stock options | 12 Months Ended |
Dec. 31, 2017USD ($)$ / sharesshares | |
Shares | |
Outstanding at beginning of period (in shares) | shares | 1,932,259 |
Granted (in shares) | shares | 411,956 |
Exercised (in shares) | shares | (320,408) |
Forfeited (in shares) | shares | (33,336) |
Outstanding at end of period (in shares) | shares | 1,990,471 |
Exercisable at end of period (in shares) | shares | 787,504 |
Weighted-Average Exercise Price | |
Outstanding at beginning of period (in dollars per share) | $ / shares | $ 17.12 |
Granted (in dollars per share) | $ / shares | 37.57 |
Exercised (in dollars per share) | $ / shares | 18.14 |
Forfeited (in dollars per share) | $ / shares | 21.48 |
Outstanding at end of period (in dollars per share) | $ / shares | 21.09 |
Exercisable at end of period (in dollars per share) | $ / shares | $ 13.85 |
Weighted Average Remaining Contractual Term | |
Outstanding at end of period | 7 years 2 months 12 days |
Exercisable at end of period | 5 years 6 months |
Aggregate Intrinsic Value | |
Outstanding at end of period (in dollars) | $ | $ 47,371,054 |
Exercisable at end of period (in dollars) | $ | $ 24,391,756 |
STOCK-BASED COMPENSATION - Stat
STOCK-BASED COMPENSATION - Status of Nonvested Shares and Unrecognized Costs (Details) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Unrecognized costs | |||
Unrecognized costs related to all share-based awards outstanding | $ 6.9 | ||
Weighted average period for recognition of unrecognized compensation costs | 2 years 7 months 6 days | ||
Stock options | |||
Nonvested Shares | |||
Nonvested at the beginning of the period (in shares) | 1,167,998 | ||
Granted (in shares) | 411,956 | ||
Vested (in shares) | (343,651) | ||
Forfeited (in shares) | (33,336) | ||
Nonvested at the end of the period (in shares) | 1,202,967 | 1,167,998 | |
Weighted-Average Grant Date Fair Value | |||
Nonvested at the beginning of the period (in dollars per share) | $ 5.39 | ||
Granted (in dollars per share) | 11.92 | $ 6.67 | $ 5.90 |
Vested (in dollars per share) | 3.84 | ||
Forfeited (in dollars per share) | 6.44 | ||
Nonvested at the end of the period (in dollars per share) | $ 8.07 | $ 5.39 |
STOCK-BASED COMPENSATION - Valu
STOCK-BASED COMPENSATION - Valuation Assumptions and Other Information (Details) - Stock options - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Option valuation assumptions for options granted | |||
Expected volatility (as a percent) | 35.54% | 35.81% | 39.10% |
Weighted average risk free rate (as a percent) | 1.83% | 1.14% | 1.14% |
Weighted average grant date fair value per share of options granted (in dollars per share) | $ 11.92 | $ 6.67 | $ 5.90 |
Total fair value of shares vested | $ 1,324 | $ 1,758 | $ 1,041 |
Total intrinsic value of options exercised | 5,819 | 3,276 | 4,321 |
Cash received for all stock option exercises | 5,813 | 2,934 | 3,900 |
Tax benefit realized from stock awards exercised | $ 2,037 | $ 1,146 | $ 1,512 |
Directors | |||
Option valuation assumptions for options granted | |||
Expected life | 2 years 11 months 27 days | 2 years 8 months 23 days | 3 years 11 months 19 days |
Executives | |||
Option valuation assumptions for options granted | |||
Expected life | 5 years 18 days | 4 years 8 months 16 days | 4 years 3 months 11 days |
Employees | |||
Option valuation assumptions for options granted | |||
Expected life | 4 years 1 month 21 days | 4 years 1 month 6 days | 3 years 11 months 19 days |
STOCK-BASED COMPENSATION - Adop
STOCK-BASED COMPENSATION - Adoption of ASU No. 2016-09 (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Jan. 01, 2017 | |
Prospective adoption | ||||
Income tax expense (tax benefit) | $ 14,161 | $ 13,358 | $ 11,217 | |
Accounting Standards Update 2016-09 | ||||
Prospective adoption | ||||
Income tax expense (tax benefit) | $ (1,359) | |||
Cumulative effect adjustment to retained earnings | $ 0 | |||
Maximum | Accounting Standards Update 2016-09 | ||||
Prospective adoption | ||||
Increase of basic and diluted earnings per share | $ 0.08 |
STOCK-BASED COMPENSATION - Repo
STOCK-BASED COMPENSATION - Reported Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Stock-based compensation expense | |||
Total stock-based compensation, before taxes | $ 2,244 | $ 1,681 | $ 1,544 |
Tax benefit | (785) | (588) | (540) |
Total stock-based compensation, net of tax | 1,459 | 1,093 | 1,004 |
Casino | |||
Stock-based compensation expense | |||
Total stock-based compensation, before taxes | 114 | 95 | 58 |
Food and beverage | |||
Stock-based compensation expense | |||
Total stock-based compensation, before taxes | 92 | 101 | 85 |
Hotel | |||
Stock-based compensation expense | |||
Total stock-based compensation, before taxes | 33 | 37 | 21 |
Selling, general and administrative | |||
Stock-based compensation expense | |||
Total stock-based compensation, before taxes | $ 2,005 | $ 1,448 | $ 1,380 |
STOCK REPURCHASE PLAN (Details)
STOCK REPURCHASE PLAN (Details) - Repurchase Plan - shares | 38 Months Ended | |
Dec. 31, 2017 | Oct. 22, 2014 | |
Stock repurchase plan | ||
Shares authorized for repurchase under program | 3,000,000 | |
Stock repurchases made | 0 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - Self-Insurance | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Monarch Black Hawk, Inc. (owner of Monarch Casino Black Hawk) | |
COMMITMENTS AND CONTINGENCIES | |
Individual health care liability retained | $ 250,000 |
Golden Road Motor Inn, Inc. (owner and operator of Atlantis) | |
COMMITMENTS AND CONTINGENCIES | |
Individual health care liability retained | $ 250,000 |
Liability for claims in excess of stop loss (as a percent) | 10.00% |
Maximum claim liability for workers' compensation | $ 500,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) $ in Thousands | Aug. 28, 2015USD ($)ft²aitem | Sep. 30, 2004USD ($) | Dec. 31, 2017USD ($)ft² | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Nov. 17, 2015USD ($) |
Biggest Little Investments, L.P. | BLI Parking Lot Lease | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Number of parking spaces | item | 300 | |||||
Minimum annual rent | $ 695 | |||||
Anniversary years subject to cost of living adjustment rent increases | 5 years | |||||
Lease renewal option additional term | 10 years | |||||
Amount due to related party if lease is not renewed | $ 1,600 | |||||
Minimum rent expense | $ 695 | $ 695 | $ 85 | |||
Operating expenses related to lease | $ 31 | 60 | 12 | |||
Biggest Little Investments, L.P. | BLI Driveway Lease | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Lease term | 15 years | |||||
Area of property | ft² | 37,400 | |||||
Minimum annual rent | $ 300 | |||||
Anniversary years subject to cost of living adjustment rent increases | 5 years | |||||
Number of terms for which the lease can be renewed | item | 3 | |||||
Lease renewal option additional term | 5 years | |||||
Minimum rent expense | $ 377 | 377 | 377 | |||
Operating expenses related to lease | 24 | 37 | 84 | |||
Affiliates | Leases for billboard advertising, storage space and parking lot space | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Lease rent paid | $ 131 | $ 127 | $ 142 | |||
Golden Road | Biggest Little Investments, L.P. | BLI Parking Lot Lease | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Lease term | 20 years | |||||
Area of land | a | 4.15 | |||||
Golden Road | Biggest Little Investments, L.P. | BLI Parking Lot Lease | Buildings | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Area of property | ft² | 46,000 |
SELECTED QUARTERLY FINANCIAL 64
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) | |||||||||||
Net Revenues | $ 56,056 | $ 63,027 | $ 58,229 | $ 53,414 | $ 55,596 | $ 57,109 | $ 54,578 | $ 49,749 | $ 230,726 | $ 217,032 | $ 202,245 |
Operating expenses | 47,919 | 49,777 | 46,676 | 45,688 | 45,404 | 44,857 | 45,633 | 42,590 | 190,060 | 178,484 | 169,690 |
Income from operations | 8,137 | 13,250 | 11,553 | 7,726 | 10,192 | 12,252 | 8,945 | 7,159 | 40,666 | 38,548 | 32,555 |
Net income | $ 4,397 | $ 9,030 | $ 7,239 | $ 4,872 | $ 6,470 | $ 7,834 | $ 5,695 | $ 4,575 | $ 25,538 | $ 24,574 | $ 20,659 |
Earnings per share of common stock | |||||||||||
Basic (in dollars per share) | $ 0.25 | $ 0.51 | $ 0.41 | $ 0.28 | $ 0.37 | $ 0.45 | $ 0.33 | $ 0.27 | $ 1.45 | $ 1.42 | $ 1.22 |
Diluted (in dollars per share) | $ 0.23 | $ 0.49 | $ 0.40 | $ 0.27 | $ 0.36 | $ 0.45 | $ 0.32 | $ 0.26 | $ 1.39 | $ 1.39 | $ 1.19 |
Enactment of the Tax Cuts and Jobs Act in 2017 | |||||||||||
Negative effect on Net income from Deferred tax asset revaluation | $ 1,500 | $ 1,461 | |||||||||
Negative effect on Basic and Diluted EPS from Deferred tax asset revaluation (in dollars per share) | $ 0.08 |
Schedule II. - VALUATION AND 65
Schedule II. - VALUATION AND QUALIFYING ACCOUNTS (Details) - Allowance for doubtful accounts - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Valuation and Qualifying Accounts | |||
Balance at beginning of year | $ 375 | $ 451 | $ 317 |
Charged to cost and expenses | 103 | 74 | 240 |
Deductions | (215) | (150) | (106) |
Balance at end of year | $ 263 | $ 375 | $ 451 |