Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 03, 2020 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2020 | |
Entity File Number | 0-22088 | |
Entity Registrant Name | MONARCH CASINO & RESORT, INC | |
Entity Incorporation, State or Country Code | NV | |
Entity Tax Identification Number | 88-0300760 | |
Entity Address, Address Line One | 3800 S. Virginia St. | |
Entity Address, City or Town | Reno | |
Entity Address, State or Province | NV | |
Entity Address, Postal Zip Code | 89502 | |
City Area Code | 775 | |
Local Phone Number | 335-4600 | |
Title of 12(b) Security | Common Stock, $0.01 par value per share | |
Trading Symbol | MCRI | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 18,263,405 | |
Entity Central Index Key | 0000907242 | |
Document Fiscal Year Focus | 2020 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Revenues | ||||
Net revenues | $ 59,869 | $ 65,585 | $ 126,036 | $ 187,086 |
Operating expenses | ||||
Selling, general and administrative | 15,856 | 17,885 | 41,920 | 50,843 |
Depreciation and amortization | 3,891 | 3,686 | 11,544 | 10,984 |
Other operating items, net | 2,448 | 1,115 | 4,910 | 1,739 |
Total operating expenses | 46,441 | 54,062 | 115,978 | 155,209 |
Income from operations | 13,428 | 11,523 | 10,058 | 31,877 |
Income before income taxes | 13,428 | 11,523 | 10,058 | 31,877 |
Provision for income taxes | (2,683) | (2,197) | (1,640) | (6,257) |
Net income | $ 10,745 | $ 9,326 | $ 8,418 | $ 25,620 |
Earnings per share of common stock | ||||
Basic | $ 0.59 | $ 0.52 | $ 0.46 | $ 1.42 |
Diluted | $ 0.57 | $ 0.50 | $ 0.44 | $ 1.37 |
Weighted average number of common shares and potential common shares outstanding | ||||
Basic | 18,218 | 18,056 | 18,186 | 17,997 |
Diluted | 18,861 | 18,709 | 18,823 | 18,665 |
Casino | ||||
Revenues | ||||
Net revenues | $ 37,292 | $ 34,169 | $ 74,267 | $ 95,981 |
Operating expenses | ||||
Operating expenses | 10,566 | 11,674 | 22,836 | 33,831 |
Food and beverage | ||||
Revenues | ||||
Net revenues | 12,835 | 18,341 | 30,491 | 54,026 |
Operating expenses | ||||
Operating expenses | 9,635 | 14,566 | 24,954 | 42,885 |
Hotel | ||||
Revenues | ||||
Net revenues | 6,613 | 9,878 | 14,502 | 27,192 |
Operating expenses | ||||
Operating expenses | 2,796 | 3,437 | 6,694 | 10,014 |
Other | ||||
Revenues | ||||
Net revenues | 3,129 | 3,197 | 6,776 | 9,887 |
Operating expenses | ||||
Operating expenses | $ 1,249 | $ 1,699 | $ 3,120 | $ 4,913 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Current assets | ||
Cash and cash equivalents | $ 30,526 | $ 60,539 |
Receivables, net | 5,283 | 5,458 |
Income taxes receivable | 185 | |
Inventories | 7,348 | 6,735 |
Prepaid expenses | 7,109 | 6,238 |
Total current assets | 50,266 | 79,155 |
Property and equipment | ||
Land | 30,769 | 30,769 |
Land improvements | 7,856 | 7,842 |
Buildings | 193,235 | 193,235 |
Buildings improvements | 32,000 | 31,986 |
Furniture and equipment | 149,412 | 152,461 |
Construction in progress | 314,888 | 285,789 |
Right of use assets | 14,977 | 15,574 |
Leasehold improvements | 3,848 | 3,848 |
Gross property and equipment | 746,985 | 721,504 |
Less accumulated depreciation and amortization | (226,562) | (220,021) |
Net property and equipment | 520,423 | 501,483 |
Other assets | ||
Goodwill | 25,111 | 25,111 |
Intangible assets, net | 663 | 1,538 |
Deferred income taxes | 2,683 | 2,683 |
Other assets, net | 908 | |
Total other assets | 28,457 | 30,240 |
Total assets | 599,146 | 610,878 |
Current liabilities | ||
Current portion of long-term debt | 10,000 | 20,000 |
Accounts payable | 11,282 | 17,037 |
Construction accounts payable | 1,393 | 7,528 |
Accrued expenses | 34,634 | 34,109 |
Income taxes payable | 1,454 | |
Short-term lease liability | 800 | 791 |
Total current liabilities | 59,563 | 79,465 |
Long-term lease liability | 14,189 | 14,797 |
Long-term debt, net | 171,864 | 175,415 |
Total liabilities | 245,616 | 269,677 |
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; 18,260,072 outstanding at September 30, 2020; 18,141,383 outstanding at December 31, 2019 | 191 | 191 |
Additional paid-in capital | 37,466 | 35,215 |
Treasury stock, 836,228 shares at September 30, 2020; 954,917 shares at December 31, 2019 | (11,117) | (12,777) |
Retained earnings | 326,990 | 318,572 |
Total stockholders' equity | 353,530 | 341,201 |
Total liabilities and stockholders' equity | $ 599,146 | $ 610,878 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2020 | Dec. 31, 2019 |
CONSOLIDATED BALANCE SHEETS | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 30,000,000 | 30,000,000 |
Common stock, shares issued | 19,096,300 | 19,096,300 |
Common stock, shares outstanding | 18,260,072 | 18,141,383 |
Treasury stock, shares | 836,228 | 954,917 |
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, 2018 | $ 191 | $ 30,111 | $ 286,756 | $ (15,876) | $ 301,182 |
Balance (in shares) at Dec. 31, 2018 | 17,919,021 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Net exercise of stock options | 241 | 804 | 1,045 | ||
Net exercise of stock options (in shares) | 57,670 | ||||
Stock-based compensation expense | 915 | 915 | |||
Net income (loss) | 7,015 | 7,015 | |||
Balance at Mar. 31, 2019 | $ 191 | 31,267 | 293,771 | (15,072) | 310,157 |
Balance (in shares) at Mar. 31, 2019 | 17,976,691 | ||||
Balance at Dec. 31, 2018 | $ 191 | 30,111 | 286,756 | (15,876) | 301,182 |
Balance (in shares) at Dec. 31, 2018 | 17,919,021 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Net income (loss) | 25,620 | ||||
Balance at Sep. 30, 2019 | $ 191 | 33,728 | 312,376 | (13,602) | 332,693 |
Balance (in shares) at Sep. 30, 2019 | 18,082,135 | ||||
Balance at Mar. 31, 2019 | $ 191 | 31,267 | 293,771 | (15,072) | 310,157 |
Balance (in shares) at Mar. 31, 2019 | 17,976,691 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Net exercise of stock options | 141 | 545 | 686 | ||
Net exercise of stock options (in shares) | 39,043 | ||||
Stock-based compensation expense | 1,003 | 1,003 | |||
Net income (loss) | 9,279 | 9,279 | |||
Balance at Jun. 30, 2019 | $ 191 | 32,411 | 303,050 | (14,527) | 321,125 |
Balance (in shares) at Jun. 30, 2019 | 18,015,734 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Net exercise of stock options | 290 | 925 | 1,215 | ||
Net exercise of stock options (in shares) | 66,401 | ||||
Stock-based compensation expense | 1,027 | 1,027 | |||
Net income (loss) | 9,326 | 9,326 | |||
Balance at Sep. 30, 2019 | $ 191 | 33,728 | 312,376 | (13,602) | 332,693 |
Balance (in shares) at Sep. 30, 2019 | 18,082,135 | ||||
Balance at Dec. 31, 2019 | $ 191 | 35,215 | 318,572 | (12,777) | $ 341,201 |
Balance (in shares) at Dec. 31, 2019 | 18,141,383 | 18,141,383 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Net exercise of stock options | (428) | 428 | |||
Net exercise of stock options (in shares) | 30,545 | ||||
Stock-based compensation expense | 873 | $ 873 | |||
Net income (loss) | 2,020 | 2,020 | |||
Balance at Mar. 31, 2020 | $ 191 | 35,660 | 320,592 | (12,349) | 344,094 |
Balance (in shares) at Mar. 31, 2020 | 18,171,928 | ||||
Balance at Dec. 31, 2019 | $ 191 | 35,215 | 318,572 | (12,777) | $ 341,201 |
Balance (in shares) at Dec. 31, 2019 | 18,141,383 | 18,141,383 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Net income (loss) | $ 8,418 | ||||
Balance at Sep. 30, 2020 | $ 191 | 37,466 | 326,990 | (11,117) | $ 353,530 |
Balance (in shares) at Sep. 30, 2020 | 18,260,072 | 18,260,072 | |||
Balance at Mar. 31, 2020 | $ 191 | 35,660 | 320,592 | (12,349) | $ 344,094 |
Balance (in shares) at Mar. 31, 2020 | 18,171,928 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Net exercise of stock options | (552) | 246 | (306) | ||
Net exercise of stock options (in shares) | 17,634 | ||||
Stock-based compensation expense | 981 | 981 | |||
Net income (loss) | (4,347) | (4,347) | |||
Balance at Jun. 30, 2020 | $ 191 | 36,089 | 316,245 | (12,103) | 340,422 |
Balance (in shares) at Jun. 30, 2020 | 18,189,562 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Net exercise of stock options | 402 | 986 | 1,388 | ||
Net exercise of stock options (in shares) | 70,510 | ||||
Stock-based compensation expense | 897 | 897 | |||
Capital contribution | 78 | 78 | |||
Net income (loss) | 10,745 | 10,745 | |||
Balance at Sep. 30, 2020 | $ 191 | $ 37,466 | $ 326,990 | $ (11,117) | $ 353,530 |
Balance (in shares) at Sep. 30, 2020 | 18,260,072 | 18,260,072 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Cash flows from operating activities: | ||
Net income | $ 8,418 | $ 25,620 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 11,544 | 10,984 |
Amortization of deferred loan costs | 466 | 403 |
Stock-based compensation | 2,751 | 5,892 |
Provision for bad debts | 75 | 44 |
Loss on disposition of assets | 5 | |
Write off of unamortized debt issuance costs | 95 | |
Changes in operating assets and liabilities: | ||
Receivables | 100 | (67) |
Income taxes | 1,639 | 4,415 |
Inventories | (613) | (848) |
Prepaid expenses | 37 | (80) |
Right of use asset, net | (2) | 10 |
Accounts payable | (5,755) | (33) |
Accrued expenses | 525 | 1,629 |
Net cash provided by operating activities | 19,285 | 47,969 |
Cash flows from investing activities: | ||
Proceeds from sale of assets | 25 | |
Change in construction payable | (6,135) | (4,348) |
Acquisition of property and equipment | (30,237) | (106,345) |
Net cash used in investing activities | (36,347) | (110,693) |
Cash flows from financing activities: | ||
Proceeds from exercise of stock options | 1,161 | |
Principal payments on long-term debt | (20,000) | |
Loan issuance cost | (2,862) | |
Long-term debt borrowings | 8,750 | 61,350 |
Net cash (used in) provided by financing activities | (12,951) | 61,350 |
Change in cash and cash equivalents | (30,013) | (1,374) |
Cash and cash equivalents at beginning of period | 60,539 | 30,462 |
Cash and cash equivalents at end of period | 30,526 | 29,088 |
Supplemental disclosure of cash flow information: | ||
Cash paid for income taxes | $ 1,842 | |
Conversion of long term deposit to short term deposit | $ 908 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Monarch Casino & Resort, Inc. was incorporated in 1993. Unless otherwise indicated, “Monarch,” “us,” “we,” and the “Company” refer to Monarch Casino & Resort, Inc. and its subsidiaries. Monarch owns and operates the Atlantis Casino Resort Spa, a hotel and casino in Reno, Nevada (the “Atlantis”) and Monarch Casino Resort Spa Black Hawk, a casino in Black Hawk, Colorado (the “Monarch Casino Black Hawk”). In addition, Monarch owns separate parcels of land located next to the Atlantis and a parcel of land with an industrial warehouse located between Denver, Colorado and Monarch Casino Black Hawk. Monarch also owns Chicago Dogs Eatery, Inc. and Monarch Promotional Association, both of which were formed in relation to licensure requirements for extended hours of liquor operation in Black Hawk, Colorado. The accompanying unaudited consolidated financial statements include the accounts of Monarch and its subsidiaries (the “Consolidated Financial Statements”). Intercompany balances and transactions are eliminated. Interim Financial Statements The Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the management of the Company, all adjustments considered necessary for a fair presentation are included. Operating results for the three months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The balance sheet at December 31, 2019 has been derived from the audited consolidated financial statements of the Company at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2019. Impact of COVID-19 In March 2020, a global pandemic was declared due to an outbreak of a new strain of coronavirus (“COVID-19”). In an effort to contain the virus, on March 16 th th Our Nevada and Colorado properties reopened with limited operations on June 4, 2020 and June 17, 2020, respectively. The poker room and buffet at Atlantis resumed operations at the beginning of August. The table games at our Colorado property resumed operation on September 11, 2020. The buffet at our Colorado property is temporarily being operated as a table-service restaurant. Additionally, changes were made from routine operations relating to restrictions in occupancy and social distancing requirements, which include reduced seating at table games at and in all restaurants, and a decreased number of active slot machines on the casino floors. The convention business at Atlantis was affected by the state-mandated gathering limits, which at this time are 50 persons or 50% of fire code capacity, whichever is less. We have experienced hotel stay and convention booking cancelations, and since the reopening, guest visitation and hotel and convention bookings have been lower than prior to the state-mandated closures, and are expected to remain lower for the near future. The Company has taken steps to mitigate the effects of the economic downturn and uncertainty by reducing the operating expenses taking advantage of federal and state government programs that support companies affected by the COVID-19 pandemic and their employees, and entering in an amended and restated credit agreement with its lender, which extended the maturity date of the Company’s credit facility to September 3, 2023 and increased the aggregated principal amount of the facility from $241.3 million to $270.0 million with an option to increase the facility by up to an additional $75.0 million revolving line of credit. See NOTE 6. LONG-TERM DEBT. The Company believes that the $4.0 million of cash in our interest-bearing money market fund and the $70.0 million available under our Amended Credit Facility as of September 30, 2020, as well as the anticipated operating cash flow, will be sufficient to fund its operations, meets its debt obligations and fulfill its capital expenditure plans for the next twelve months. Given the Company's liquidity position at September 30, 2020, management believes the Company has sufficient liquidity to fund operations and satisfy its obligations for the next twelve months. 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 quantitative 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. 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 September 30, 2020, we had goodwill totaling $25.1 million related to the purchase of Monarch Casino Black Hawk, Inc. Due to the COVID-19 pandemic related government orders to suspend operations at our properties and the continued adverse effect of the pandemic on our business, after reopening of our properties, we performed a qualitative assessment for the quarters ended March 31, 2020 and June 30, 2020 The impairment testing, resulted in the recognition of no impairment loss. management determined that there was no . The Company believes that it has made reasonable estimates and judgments in performing its analysis in light of the risks and uncertainties surrounding the COVID-19 pandemic. However, if the excess of fair value over the carrying amount declines by a significant amount in the future as a result of changes in actual and projected operating results or other internal or external economic factors, the Company could be required to recognize goodwill impairment charges in future periods. 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 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. Inventories: Inventories, consisting primarily of food, beverages, and retail merchandise, are stated at the lower of cost and net realizable value. Cost is determined by the weighted average and specific identification methods. 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. Debt Issuance Costs: Costs incurred in connection with the issuance of long-term debt are amortized to interest expense over the term of the related debt agreement utilizing the effective interest rate method. Unamortized amounts of debt issuance costs are recorded as a reduction of the outstanding debt and included in “Long-term debt, net”. On September 3, 2020, the Company refinanced its credit facility. The unamortized costs related to the existing credit facility as of August 31, 2020 was $476 thousand. As the credit facility is a loan syndication with separate debt instruments existing between the debtor and the individual creditors participating in the syndication, in accordance to ASC 470-50, the Company expensed $95 thousand, representing a portion of unamortized debt issuance cost, allocated to the lenders that left the syndication and deferred the rest of the unamortized debt issuance cost of the existing credit facility, together with the issuance costs of the new facility. As of September 30, 2020, debt issuance costs, net of amortization, were $3.1 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 $1.8 million and $5.0 million during the three and nine months ended September 30, 2020, respectively. Revenue Recognition: The majority of the Company’s revenue is recognized when products are delivered or services are performed. For certain revenue transactions (when a patron uses a club loyalty card), in accordance with accounting standard update No. 2014-09 (“ASC 606”), a portion of the revenue is deferred until the points earned by the patron are redeemed or expire. Casino revenue: Players’ Club Program: twelve As of September 30, 2020, the Company had estimated the obligations related to the players’ club program at $10.4 million, which is included in Accrued Expenses in the Liabilities and Stockholders’ Equity section in the Consolidated Balance Sheet. Food and Beverage, Hotel and Other (retail) Revenues: Other Revenues : Other revenues (excluding retail) primarily consist of commissions received on ATM transactions and cash advances, which are recorded on a net basis as the Company represents the agent in its relationship with the third-party service providers, and commissions and fees received in connection with pari-mutuel wagering, which are also recorded on a net basis. Sales and other taxes Other Operating items, net: Other operating items, net, in general consist of miscellaneous operating charges or proceeds. For the three months ended September 30, 2020, Other operating items, net, was $2.4 million and included: $0.9 million in pre-opening expenses relating to the Monarch Black Hawk Expansion project; $0.5 million in professional service fees relating to our construction litigation; $0.5 million in Colorado legislation lobbying expenses; $0.4 million equipment, supplies and employee testing expenses directly attributable to the pandemic for reopening of the properties and incremental to normal operations; and $0.1 million in unamortized debt issuance cost write off. For the nine months ended September 30, 2020, Other operating items, net, was $4.9 million and included: $1.9 million in pre-opening expenses relating to the Monarch Black Hawk Expansion project; $0.8 million in professional service fees relating to our construction litigation; $1.4 million in Colorado legislation lobbying expenses; $0.7 million in equipment, supplies and employee testing expenses directly attributable to the pandemic for reopening of the properties and incremental to normal operations; and $0.1 million in unamortized debt issuance cost write off. For the three and nine months ended September 30, 2019, Other operating items, net, was $1.1 million and $1.7 million, representing: $0.9 million and $1.5 million pre-opening expenses relating to the Monarch Black Hawk Expansion project, respectively; and $0.2 million in professional service fees relating to our construction litigation for each of the periods. Impact of Recently Adopted Accounting Standards: Financial Instruments - Credit Losses: adopted 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 and convention groups and events, which are primarily secured with a credit card. An allowance for doubtful accounts is set up for all Company receivables based upon the Company’s historical collection and write-off experience and taking in consideration the current economic conditions and management’s expectations of future economic conditions. The allowance is applied even when the risk of credit loss is remote. When a situation warrants, the Company may create a specific identification reserve for a high collection risk 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. Cloud Computing Arrangement Implementation Costs: The Company adopted the guidance effective January 1, 2020 Goodwill impairment: The Company adopted the guidance effective January 1, 2020 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, the Company has 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. |
ACCOUNTING FOR LEASES
ACCOUNTING FOR LEASES | 9 Months Ended |
Sep. 30, 2020 | |
ACCOUNTING FOR LEASES | |
ACCOUNTING FOR LEASES | NOTE 2. ACCOUNTING FOR LEASES For leases with terms greater than 12 months, the Company records the related asset and obligation at the present value of the lease payments over the lease term. Many of the Company’s leases include rental escalation clauses, renewal options and/or termination options that are factored into its determination of lease payments when appropriate. As permitted by ASC 842, the Company elected not to separate non-lease components As of September 30, 2020, the Company’s right of use assets consisted of the Parking Lot Lease, the Driveway Lease (as defined and discussed in NOTE 5. RELATED PARTY TRANSACTIONS) Upon adoption of the new lease standard, incremental borrowing rates used for existing leases were established using the rates in effect as of the lease inception or modification date. The weighted-average incremental borrowing rate of the leases presented in the lease liability as of September 30, 2020 was 4.33%. The weighted-average remaining lease term of the leases presented in the lease liability as of September 30, 2020 was 21.3 years. Cash paid related to the operating leases presented in the lease liability for each of the nine months ended September 30, 2020 and 2019, was $1.1 million. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2020 | |
STOCK-BASED COMPENSATION. | |
STOCK-BASED COMPENSATION | NOTE 3. STOCK-BASED COMPENSATION In accordance with ASU No. 2016-09, 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. Reported stock-based compensation expense was classified as follows (in thousands): Three months ended Nine months ended September 30, September 30, 2020 2019 2020 2019 Casino $ 46 $ 51 $ 102 $ 152 Food and beverage 45 52 114 150 Hotel 33 28 88 71 Selling, general and administrative 773 896 2,447 2,572 Total stock-based compensation, before taxes 897 1,027 2,751 2,945 Tax benefit (189) (216) (578) (618) Total stock-based compensation, net of tax $ 708 $ 811 $ 2,173 $ 2,327 |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2020 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | NOTE 4. EARNINGS PER SHARE Basic earnings per share is computed by dividing reported net earnings by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflect the additional dilution for all potentially dilutive securities such as stock options. The following is a reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations (shares in thousands): Three months ended September 30, 2020 2019 Per Share Per Share Shares Amount Shares Amount Basic 18,218 $ 0.59 18,056 $ 0.52 Effect of dilutive stock options 643 (0.02) 653 (0.02) Diluted 18,861 $ 0.57 18,709 $ 0.50 Nine months ended September 30, 2020 2019 Per Share Per Share Shares Amount Shares Amount Basic 18,186 $ 0.46 17,997 $ 1.42 Effect of dilutive stock options 637 (0.02) 668 (0.05) Diluted 18,823 $ 0.44 18,665 $ 1.37 Excluded from the computation of diluted earnings per share are options where the exercise prices are greater than the market price as their effects would be anti-dilutive in the computation of diluted earnings per share. For the three months ended September 30, 2020 and 2019, options for approximately 1,062 thousand and 847 thousand shares, respectively, were excluded from the computation. For the nine months ended September 30, 2020 and 2019, options for approximately 1,077 thousand and 795 thousand shares, respectively, were excluded from the computation. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2020 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 5. RELATED PARTY TRANSACTIONS The shopping center adjacent to the Atlantis (the “Shopping Center”) is owned by Biggest Little Investments, L.P. (“BLI”). John Farahi and Bob Farahi, Co-Chairmen of the Board and executive officers of the Company, and Ben Farahi have significant holdings (the “Farahi Family Stockholders”) in Monarch and each also beneficially owns 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 Motor Inn, Inc., 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 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 the payment of property taxes, utilities and maintenance expenses related to the Leased Property. The Company has an option liability 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 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 September 30 The Company occasionally leases billboard advertising, storage space and parking lot space from affiliates controlled by the Farahi Family Stockholders and paid $27 thousand and $48 thousand for the three-month periods ended September 30, 2020 and 2019 respectively, for such leases, and paid $101 thousand and $117 thousand, respectively, for the nine-month periods ended September 30, 2020 and 2019, for such leases. |
LONG-TERM DEBT
LONG-TERM DEBT | 9 Months Ended |
Sep. 30, 2020 | |
LONG-TERM DEBT | |
LONG-TERM DEBT | NOTE 6. LONG-TERM DEBT On September 3, 2020, the Company entered into the Fourth Amended and Restated Credit Agreement with Wells Fargo Bank, N.A., as administrative agent and certain banks (the “Fourth Amended Credit Facility”). The Fourth Amended Credit Facility amends and restates the Company’s $250.0 million credit facility, dated as of July 20, 2016 (the “Amended Credit Facility”). On September 29, 2020, the Company and its lender executed an Amendment to the Fourth Amended Credit Facility, which amends the definition of “Financial Covenant Start Date”. The Fourth Amended Credit Facility extends the maturity date of the Amended Credit Facility from July 20, 2021 to September 3, 2023. In addition, the Fourth Amended Credit Facility increases the aggregate principal amount of the credit facilities to $270.0 million. The $270.0 million Fourth Amended Credit Facility consists of: $200 million term loan (“Term Loan Facility”) and $70 million revolving credit facility (“Revolving Credit Facility”). The Company is required to make quarterly principal payments under the Term Loan Facility on each Term Loan Installment Date, commencing on December 31, 2020, in an amount equal to (x) the percentage set forth opposite the applicable period during which such Term Loan Installment Date occurs (i.e., 1.25% for the period from December 31, 2020 to September 30, 2021, and 2.50% for the period from December 31, 2021 and thereafter) multiplied by (y) $200.0 million. Commencing with the delivery of the compliance certificate for fiscal year 2021, the Company may be required to prepay borrowings under the Fourth Amended Credit Facility using excess cash flows for each fiscal year, depending on the Company’s leverage ratio. The estimated amount of the mandatory principal payments due in the next twelve months is $10.0 million. As of September 30, 2020, the Company had an outstanding principal balance of $185.0 million under the Term Loan Facility, from which $10 million is expected to have a maturity date in next twelve months. As of September 30, 2020, the Company had no Borrowings are secured by liens on substantially all of the Company’s real and personal property. In addition to other customary covenants for a facility of this nature, as of September 30, 2020, the Company is required to maintain a Total Leverage Ratio (as defined in the Fourth Amended Credit Facility) of no more than 4.75:1 and Fixed Charge Coverage Ratio (as defined in the Fourth Amended Credit Facility) of at least 1.15:1. As of September 30, 2020, the Company’s Total Leverage Ratio and Fixed Charge Coverage Ratio were 2.2:1 and 9.1:1. The Fourth Amended Credit Facility added a new definition, “Operational Liquidity”, to the Amended Credit Facility. Operational Liquidity as defined is, as of any date of determination, the amount by which (a) (i) the Unused Revolving Commitment as of such date, plus (ii) cash (including cage cash) as of such date exceeds (b) (i) $24,000,000 minus (ii) any retainage costs with respect to the expansion project and any settlement or judgment under the PCL Litigation paid in cash; provided that from and after the expansion project completion date, the receipt of a final certificate of occupancy (or its local equivalent) for the expansion project and the final resolution or disposition of the PCL Litigation, the amount in this clause (b) shall be deemed to be zero. The Borrowers shall not permit Operational Liquidity to be less than $25,000,000 at any time. In addition, any borrowing under the Amended Credit Facility, greater than $51,000,000 shall be used solely to pay retainage costs with respect to the Expansion Project and any settlement or judgment under the PCL Litigation. As of September 30, 2020, the Company’s Operational Liquidity were $76.5 million. The interest rate under the Amended Credit Facility is LIBOR plus a margin ranging from 1.75% to 3.25%, or a base rate (as defined in the Fourth Amended Credit Facility) plus a margin ranging from 0.75% to 2.25%, or the Prime Rate. The applicable margins vary depending on Company’s leverage ratio. Commitment fees are equal to the daily average unused revolving commitment multiplied by the commitment fee percentage, ranging from 0.35% to 0.575%, based on our leverage ratio. On the terms and subject to some conditions, the Company may, at any time before the Maturity Date, request an increase of Revolving Credit Facility, provided that each such increase is equal to $15.0 million or an integral multiple of $1.0 million in excess and, after giving effect to the requested increase, the aggregate amount of the increases in the total revolving loan commitment shall not exceed $75.0 million. The Company may prepay borrowings under the Fourth Amended Credit Facility revolving loan without penalty (subject to certain conditions and certain charges applicable to the prepayment of LIBOR borrowings prior to the end of the applicable interest period). Once reduced or cancelled, the Revolving Credit Facility may not be increased or reinstated without the prior written consent of all lenders. The Company believes that the $4.0 million cash in its interest-bearing money market fund and the $70.0 million available under its Amended Credit Facility as of September 30, 2020 will be sufficient to support its current operations, meet its debt obligations and fulfill its capital expenditure plans for the twelve months from filing of Form 10-Q for the quarter ended September 30, 2020; however, the Company is surrounded by uncertainty about COVID-19 and the reopening of its operations, as well as financial, economic, competitive, regulatory, and other factors, many of which are beyond its control. If the Company is unable to generate sufficient cash flow in the upcoming months or if its cash needs exceed the Company’s borrowing capacity under the Fourth Amended Credit Facility, it could be required to adopt one or more alternatives, such as reducing, delaying or eliminating planned capital expenditures, selling assets, restructuring debt or issuing additional equity. |
TAXES
TAXES | 9 Months Ended |
Sep. 30, 2020 | |
TAXES | |
TAXES | NOTE 7. TAXES For the nine months ended September 30, 2020 and 2019, the Company’s effective tax rate was 16.3% and 19.6%, respectively. The low effective tax rate for the nine months ended September 30, 2020 was a result of the high weight of excess tax benefit on stock option exercises on the provision for income taxes, as the suspension of the operations in mid-March for about three months and continued negative effect of the COVID-19 pandemic resulted in reduced income before income tax for the nine-month period ended September 30, 2020. Deferred tax assets were evaluated by considering historical levels of income, estimates of future taxable income and the impact of tax planning strategies. No uncertain tax positions were recorded as of September 30, 2020 and 2019. No change in uncertain tax positions is anticipated over the next twelve months. |
STOCK REPURCHASE PLAN
STOCK REPURCHASE PLAN | 9 Months Ended |
Sep. 30, 2020 | |
STOCK REPURCHASE PLAN | |
STOCK REPURCHASE PLAN | NOTE 8. 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, as amended, 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. |
LEGAL MATTERS
LEGAL MATTERS | 9 Months Ended |
Sep. 30, 2020 | |
LEGAL MATTERS | |
LEGAL MATTERS | NOTE 9. LEGAL MATTERS On August 30, 2019, PCL Construction Services, Inc. (“PCL”) filed a complaint in District Court, City and County of Denver, Colorado, against the Company and its Colorado subsidiaries, in connection with the Company’s expansion plans for Monarch Casino Black Hawk. The complaint alleges, among other things, the defendants breached the construction contract with PCL and certain implied warranties. On December 5, 2019, the Company filed its answer and counterclaim, which alleges, among other items, that PCL breached the construction contract, duties of good faith and fair dealing, and implied and express warranties, made fraudulent or negligent misrepresentations on which the Company and its Colorado subsidiaries relied, and included claims for monetary damages as well as equitable and declaratory relief. The court has set a trial date for May 17, 2021. Discovery in the action is ongoing, and we are currently unable to determine the probability of the outcome or reasonably estimate the loss or gain, if any. The Company recognized $0.5 million and $0.8 million in construction litigation expense relating to this lawsuit for the three and nine months ended September 30, 2020, respectively, which are included in Other operating items, net on the Consolidated Statements of Operations. From time to time, we may be subject to other legal proceedings and claims in the ordinary course of business. Management believes that the amount of any reasonably possible or probable loss for such other known matters would not have a material adverse impact on our financial conditions, cash flows or results of operations; however, the outcome of these actions is inherently difficult to predict. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation Monarch Casino & Resort, Inc. was incorporated in 1993. Unless otherwise indicated, “Monarch,” “us,” “we,” and the “Company” refer to Monarch Casino & Resort, Inc. and its subsidiaries. Monarch owns and operates the Atlantis Casino Resort Spa, a hotel and casino in Reno, Nevada (the “Atlantis”) and Monarch Casino Resort Spa Black Hawk, a casino in Black Hawk, Colorado (the “Monarch Casino Black Hawk”). In addition, Monarch owns separate parcels of land located next to the Atlantis and a parcel of land with an industrial warehouse located between Denver, Colorado and Monarch Casino Black Hawk. Monarch also owns Chicago Dogs Eatery, Inc. and Monarch Promotional Association, both of which were formed in relation to licensure requirements for extended hours of liquor operation in Black Hawk, Colorado. The accompanying unaudited consolidated financial statements include the accounts of Monarch and its subsidiaries (the “Consolidated Financial Statements”). Intercompany balances and transactions are eliminated. |
Interim Financial Statements | Interim Financial Statements The Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the management of the Company, all adjustments considered necessary for a fair presentation are included. Operating results for the three months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The balance sheet at December 31, 2019 has been derived from the audited consolidated financial statements of the Company at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2019. |
Impact of COVID-19 | Impact of COVID-19 In March 2020, a global pandemic was declared due to an outbreak of a new strain of coronavirus (“COVID-19”). In an effort to contain the virus, on March 16 th th Our Nevada and Colorado properties reopened with limited operations on June 4, 2020 and June 17, 2020, respectively. The poker room and buffet at Atlantis resumed operations at the beginning of August. The table games at our Colorado property resumed operation on September 11, 2020. The buffet at our Colorado property is temporarily being operated as a table-service restaurant. Additionally, changes were made from routine operations relating to restrictions in occupancy and social distancing requirements, which include reduced seating at table games at and in all restaurants, and a decreased number of active slot machines on the casino floors. The convention business at Atlantis was affected by the state-mandated gathering limits, which at this time are 50 persons or 50% of fire code capacity, whichever is less. We have experienced hotel stay and convention booking cancelations, and since the reopening, guest visitation and hotel and convention bookings have been lower than prior to the state-mandated closures, and are expected to remain lower for the near future. The Company has taken steps to mitigate the effects of the economic downturn and uncertainty by reducing the operating expenses taking advantage of federal and state government programs that support companies affected by the COVID-19 pandemic and their employees, and entering in an amended and restated credit agreement with its lender, which extended the maturity date of the Company’s credit facility to September 3, 2023 and increased the aggregated principal amount of the facility from $241.3 million to $270.0 million with an option to increase the facility by up to an additional $75.0 million revolving line of credit. See NOTE 6. LONG-TERM DEBT. The Company believes that the $4.0 million of cash in our interest-bearing money market fund and the $70.0 million available under our Amended Credit Facility as of September 30, 2020, as well as the anticipated operating cash flow, will be sufficient to fund its operations, meets its debt obligations and fulfill its capital expenditure plans for the next twelve months. Given the Company's liquidity position at September 30, 2020, management believes the Company has sufficient liquidity to fund operations and satisfy its obligations for the next twelve months. |
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 quantitative 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. 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 September 30, 2020, we had goodwill totaling $25.1 million related to the purchase of Monarch Casino Black Hawk, Inc. Due to the COVID-19 pandemic related government orders to suspend operations at our properties and the continued adverse effect of the pandemic on our business, after reopening of our properties, we performed a qualitative assessment for the quarters ended March 31, 2020 and June 30, 2020 The impairment testing, resulted in the recognition of no impairment loss. management determined that there was no . The Company believes that it has made reasonable estimates and judgments in performing its analysis in light of the risks and uncertainties surrounding the COVID-19 pandemic. However, if the excess of fair value over the carrying amount declines by a significant amount in the future as a result of changes in actual and projected operating results or other internal or external economic factors, the Company could be required to recognize goodwill impairment charges in future periods. |
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 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. |
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 by the weighted average and specific identification methods. 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. |
Debt Issuance Costs | Debt Issuance Costs: Costs incurred in connection with the issuance of long-term debt are amortized to interest expense over the term of the related debt agreement utilizing the effective interest rate method. Unamortized amounts of debt issuance costs are recorded as a reduction of the outstanding debt and included in “Long-term debt, net”. On September 3, 2020, the Company refinanced its credit facility. The unamortized costs related to the existing credit facility as of August 31, 2020 was $476 thousand. As the credit facility is a loan syndication with separate debt instruments existing between the debtor and the individual creditors participating in the syndication, in accordance to ASC 470-50, the Company expensed $95 thousand, representing a portion of unamortized debt issuance cost, allocated to the lenders that left the syndication and deferred the rest of the unamortized debt issuance cost of the existing credit facility, together with the issuance costs of the new facility. As of September 30, 2020, debt issuance costs, net of amortization, were $3.1 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 $1.8 million and $5.0 million during the three and nine months ended September 30, 2020, respectively. |
Revenues Recognition | Revenue Recognition: The majority of the Company’s revenue is recognized when products are delivered or services are performed. For certain revenue transactions (when a patron uses a club loyalty card), in accordance with accounting standard update No. 2014-09 (“ASC 606”), a portion of the revenue is deferred until the points earned by the patron are redeemed or expire. Casino revenue: Players’ Club Program: twelve As of September 30, 2020, the Company had estimated the obligations related to the players’ club program at $10.4 million, which is included in Accrued Expenses in the Liabilities and Stockholders’ Equity section in the Consolidated Balance Sheet. Food and Beverage, Hotel and Other (retail) Revenues: Other Revenues : Other revenues (excluding retail) primarily consist of commissions received on ATM transactions and cash advances, which are recorded on a net basis as the Company represents the agent in its relationship with the third-party service providers, and commissions and fees received in connection with pari-mutuel wagering, which are also recorded on a net basis. Sales and other taxes |
Other Operating items, net | Other Operating items, net: Other operating items, net, in general consist of miscellaneous operating charges or proceeds. For the three months ended September 30, 2020, Other operating items, net, was $2.4 million and included: $0.9 million in pre-opening expenses relating to the Monarch Black Hawk Expansion project; $0.5 million in professional service fees relating to our construction litigation; $0.5 million in Colorado legislation lobbying expenses; $0.4 million equipment, supplies and employee testing expenses directly attributable to the pandemic for reopening of the properties and incremental to normal operations; and $0.1 million in unamortized debt issuance cost write off. For the nine months ended September 30, 2020, Other operating items, net, was $4.9 million and included: $1.9 million in pre-opening expenses relating to the Monarch Black Hawk Expansion project; $0.8 million in professional service fees relating to our construction litigation; $1.4 million in Colorado legislation lobbying expenses; $0.7 million in equipment, supplies and employee testing expenses directly attributable to the pandemic for reopening of the properties and incremental to normal operations; and $0.1 million in unamortized debt issuance cost write off. For the three and nine months ended September 30, 2019, Other operating items, net, was $1.1 million and $1.7 million, representing: $0.9 million and $1.5 million pre-opening expenses relating to the Monarch Black Hawk Expansion project, respectively; and $0.2 million in professional service fees relating to our construction litigation for each of the periods. |
Impact of Recently Adopted Accounting Standards | Impact of Recently Adopted Accounting Standards: Financial Instruments - Credit Losses: adopted 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 and convention groups and events, which are primarily secured with a credit card. An allowance for doubtful accounts is set up for all Company receivables based upon the Company’s historical collection and write-off experience and taking in consideration the current economic conditions and management’s expectations of future economic conditions. The allowance is applied even when the risk of credit loss is remote. When a situation warrants, the Company may create a specific identification reserve for a high collection risk 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. Cloud Computing Arrangement Implementation Costs: The Company adopted the guidance effective January 1, 2020 Goodwill impairment: The Company adopted the guidance effective January 1, 2020 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, the Company has 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. |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
STOCK-BASED COMPENSATION. | |
Schedule of stock-based compensation expense | Reported stock-based compensation expense was classified as follows (in thousands): Three months ended Nine months ended September 30, September 30, 2020 2019 2020 2019 Casino $ 46 $ 51 $ 102 $ 152 Food and beverage 45 52 114 150 Hotel 33 28 88 71 Selling, general and administrative 773 896 2,447 2,572 Total stock-based compensation, before taxes 897 1,027 2,751 2,945 Tax benefit (189) (216) (578) (618) Total stock-based compensation, net of tax $ 708 $ 811 $ 2,173 $ 2,327 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
EARNINGS PER SHARE | |
Schedule of reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations | The following is a reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations (shares in thousands): Three months ended September 30, 2020 2019 Per Share Per Share Shares Amount Shares Amount Basic 18,218 $ 0.59 18,056 $ 0.52 Effect of dilutive stock options 643 (0.02) 653 (0.02) Diluted 18,861 $ 0.57 18,709 $ 0.50 Nine months ended September 30, 2020 2019 Per Share Per Share Shares Amount Shares Amount Basic 18,186 $ 0.46 17,997 $ 1.42 Effect of dilutive stock options 637 (0.02) 668 (0.05) Diluted 18,823 $ 0.44 18,665 $ 1.37 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Impact of COVID-19 (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Sep. 03, 2020 | Sep. 02, 2020 |
Money Market Funds | |||
Cash | $ 4 | ||
Fourth Amended Credit Facility | |||
Remaining available borrowings | $ 70 | ||
Line of Credit Facility, Maximum Borrowing Capacity | $ 270 | ||
Fourth Amended Credit Facility | COVID-19 | |||
Line of Credit Facility, Maximum Borrowing Capacity | 270 | $ 241.3 | |
Line of Credit Facility, Additional Borrowing Capacity | $ 75 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Goodwill (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Goodwill from business combinations | ||
Goodwill | $ 25,111 | $ 25,111 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Segment Reporting (Details) | 9 Months Ended |
Sep. 30, 2020segment | |
Segment Reporting | |
Number of operating segments | 2 |
Number of reportable segments | 1 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Debt Issuance Costs and Capitalized Interest (Details) - USD ($) $ in Thousands | Sep. 03, 2020 | Sep. 30, 2020 | Sep. 30, 2020 | Sep. 30, 2019 |
Debt Issuance Costs | ||||
Debt issuance costs, net of amortization | $ 3,100 | $ 3,100 | ||
Amortization of Financing Costs | 466 | $ 403 | ||
Capitalized Interest | ||||
Capitalized interest | $ 1,800 | $ 5,000 | ||
Revolving credit facility | ||||
Debt Issuance Costs | ||||
Unamortized debt issuance cost | $ 476 | |||
Amortization of Financing Costs | $ 95 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Players Club Program (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2020USD ($) | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Analysis of redemption activity, preceding period | 12 months |
Obligations related to the players' club program | $ 10.4 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Other Operating items, net (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||
Other operating items, net | $ 2,448 | $ 1,115 | $ 4,910 | $ 1,739 |
Pre-opening expenses relating to the Monarch Black Hawk Expansion project | 900 | 900 | 1,900 | 1,500 |
Professional service fees relating to our construction litigation | 500 | $ 200 | 800 | $ 200 |
Colorado legislation lobbing expenses | 500 | 1,400 | ||
Expenses due to the COVID-19 pandemic | 400 | 700 | ||
Write off of Deferred Debt Issuance Cost | $ 100 | $ 95 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Allowance for Doubtful Accounts (Details) | Mar. 31, 2020 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
adopted Accounting Standards Update ("ASU") 2016-13 | true |
ACCOUNTING FOR LEASES - Narrati
ACCOUNTING FOR LEASES - Narrative (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
ACCOUNTING FOR LEASES | ||
Lease, Practical Expedient, Lessor Single Lease Component [true false] | True | |
Weighted-average incremental borrowing rate of operating leases | 4.33% | |
weighted-average remaining lease term | 21 years 3 months 18 days | |
Cash paid related to operating leases | $ 1.1 | $ 1.1 |
STOCK-BASED COMPENSATION - Repo
STOCK-BASED COMPENSATION - Reported Stock-based Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Stock-based compensation expense | ||||
Total stock-based compensation, before taxes | $ 897 | $ 1,027 | $ 2,751 | $ 2,945 |
Tax benefit | (189) | (216) | (578) | (618) |
Total stock-based compensation, net of tax | 708 | 811 | 2,173 | 2,327 |
Casino | ||||
Stock-based compensation expense | ||||
Total stock-based compensation, before taxes | 46 | 51 | 102 | 152 |
Food and beverage | ||||
Stock-based compensation expense | ||||
Total stock-based compensation, before taxes | 45 | 52 | 114 | 150 |
Hotel | ||||
Stock-based compensation expense | ||||
Total stock-based compensation, before taxes | 33 | 28 | 88 | 71 |
Selling, general and administrative | ||||
Stock-based compensation expense | ||||
Total stock-based compensation, before taxes | $ 773 | $ 896 | $ 2,447 | $ 2,572 |
EARNINGS PER SHARE - (Details)
EARNINGS PER SHARE - (Details) - $ / shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Shares | ||||
Basic (in shares) | 18,218 | 18,056 | 18,186 | 17,997 |
Effect of dilutive stock options (in shares) | 643 | 653 | 637 | 668 |
Diluted (in shares) | 18,861 | 18,709 | 18,823 | 18,665 |
Per Share Amount | ||||
Basic (in dollars per share) | $ 0.59 | $ 0.52 | $ 0.46 | $ 1.42 |
Effect of dilutive stock options (in dollars per share) | (0.02) | (0.02) | (0.02) | (0.05) |
Diluted (in dollars per share) | $ 0.57 | $ 0.50 | $ 0.44 | $ 1.37 |
EARNINGS PER SHARE - Anti-dilut
EARNINGS PER SHARE - Anti-dilutive Options (Details) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Stock options | ||||
Options not included in the computation of diluted earnings per share: | ||||
Excluded from the computation of diluted earnings per share (in shares) | 1,062 | 847 | 1,077 | 795 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) $ in Thousands | Nov. 17, 2015USD ($) | Aug. 28, 2015aft²item | Sep. 30, 2004USD ($) | Sep. 30, 2020USD ($)ft² | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)ft² | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) |
RELATED PARTY TRANSACTIONS | ||||||||
Right of use asset | $ 14,977 | $ 14,977 | $ 15,574 | |||||
Biggest Little Investments, L.P. (BLI) | Parking Lot Lease | ||||||||
RELATED PARTY TRANSACTIONS | ||||||||
Rent paid | 174 | $ 174 | 522 | $ 522 | ||||
Operating expenses related to lease | 13 | 6 | 20 | 19 | ||||
Right of use asset | 10,600 | 10,600 | ||||||
Operating lease liability | $ 10,600 | $ 10,600 | ||||||
Biggest Little Investments, L.P. (BLI) | Driveway Lease | ||||||||
RELATED PARTY TRANSACTIONS | ||||||||
Lease term | 15 years | |||||||
Area of property | ft² | 37,400 | 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 | |||||||
Rent paid | $ 101 | 94 | $ 303 | 282 | ||||
Operating expenses related to lease | 8 | 7 | 17 | 20 | ||||
Right of use asset | 4,000 | 4,000 | ||||||
Operating lease liability | 4,000 | 4,000 | ||||||
Affiliates | Billboard advertising, storage space and parking lot space | ||||||||
RELATED PARTY TRANSACTIONS | ||||||||
Rent paid | $ 27 | $ 48 | $ 101 | $ 117 | ||||
Golden Road | Parking Lot Lease | Buildings | ||||||||
RELATED PARTY TRANSACTIONS | ||||||||
Area of land | a | 4.2 | |||||||
Golden Road | Parking Lot Lease | Land | ||||||||
RELATED PARTY TRANSACTIONS | ||||||||
Number of parking spaces | item | 300 | |||||||
Golden Road | Biggest Little Investments, L.P. (BLI) | Parking Lot Lease | ||||||||
RELATED PARTY TRANSACTIONS | ||||||||
Lease term | 20 years | |||||||
Minimum annual rent | $ 695 | |||||||
Anniversary years subject to cost of living adjustment rent increases | 5 years | |||||||
Lease renewal option additional term | 10 years | 10 years | ||||||
Lessee, Operating Lease, Existence of Option to Extend [true false] | true | |||||||
Amount due to related party if lease is not renewed | $ 1,600 | $ 1,600 | ||||||
Golden Road | Biggest Little Investments, L.P. (BLI) | Parking Lot Lease | Buildings | ||||||||
RELATED PARTY TRANSACTIONS | ||||||||
Area of property | ft² | 46,000 | |||||||
Area of land | a | 4.2 |
LONG-TERM DEBT (Details)
LONG-TERM DEBT (Details) | Sep. 03, 2020USD ($) | Sep. 30, 2020USD ($) | Dec. 31, 2019USD ($) |
Long-term debt | |||
Long-term debt, net | $ 171,864,000 | $ 175,415,000 | |
Money Market Funds | |||
Long-term debt | |||
Cash | $ 4,000,000 | ||
Minimum | |||
Long-term debt | |||
Commitment fees | 0.35% | ||
Maximum | |||
Long-term debt | |||
Commitment fees | 0.575% | ||
Revolving credit facility | |||
Long-term debt | |||
Maximum borrowing capacity | $ 250,000,000 | $ 75,000,000 | |
Remaining available borrowings | 70,000,000 | ||
Amount drawn under the facility | $ 0 | ||
Total leverage ratio | 2.2 | ||
Fixed charge coverage ratio | 9.1 | ||
Revolving credit facility | Minimum | |||
Long-term debt | |||
Fixed charge coverage ratio | 1.15 | ||
Additional borrowing capacity | $ 15,000,000 | ||
Integral multiple additional borrowing capacity | $ 1,000,000 | ||
Revolving credit facility | Minimum | LIBOR | |||
Long-term debt | |||
Interest rate (as a percent) | 1.75% | ||
Revolving credit facility | Minimum | Base Rate | |||
Long-term debt | |||
Interest rate (as a percent) | 0.75% | ||
Revolving credit facility | Maximum | |||
Long-term debt | |||
Total leverage ratio | 4.75 | ||
Revolving credit facility | Maximum | LIBOR | |||
Long-term debt | |||
Interest rate (as a percent) | 3.25% | ||
Revolving credit facility | Maximum | Base Rate | |||
Long-term debt | |||
Interest rate (as a percent) | 2.25% | ||
Fourth Amended Credit Facility | |||
Long-term debt | |||
Maximum borrowing capacity | 270,000,000 | ||
Threshold amount for operational liquidity | $ 24,000,000 | ||
Retainage cost after project completion, threshold | 0 | ||
Minimum operational liquidity to be maintained | 25,000,000 | ||
Borrowings Use Limitation Retainage Cost Payment For Expansion Project Minimum Amount | 51,000,000 | ||
Operational liquidity | 76,500,000 | ||
Remaining available borrowings | 70,000,000 | ||
Fourth Amended Credit Facility | COVID-19 Pandemic | |||
Long-term debt | |||
Maximum borrowing capacity | 70,000,000 | ||
Term Loan Facility | |||
Long-term debt | |||
Maximum borrowing capacity | 200,000,000 | ||
Quarterly principal payment | 200,000,000 | ||
Amount outstanding | 185,000,000 | ||
Expected to have a maturity date in next twelve months | $ 10,000,000 | ||
Mandatory principal payment due in next twelve months | $ 10,000,000 | ||
Term Loan Facility | Period From December 31, 2020 To September 30, 2021 | |||
Long-term debt | |||
Interest rate | 1.25% | ||
Term Loan Facility | Period From December 31, 2021 And Thereafter | |||
Long-term debt | |||
Interest rate | 2.50% | ||
New Revolving Credit Facility | |||
Long-term debt | |||
Maximum borrowing capacity | $ 70,000,000 |
TAXES (Details)
TAXES (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
TAXES | ||
Effective tax rate (as a percent) | 16.30% | 19.60% |
Liability for uncertain tax positions recorded | $ 0 | $ 0 |
Change in uncertain tax positions, increase | 0 | |
Change in uncertain tax positions, decrease | $ 12 |
STOCK REPURCHASE PLAN (Details)
STOCK REPURCHASE PLAN (Details) - Repurchase Plan - shares | 9 Months Ended | |
Sep. 30, 2020 | Oct. 22, 2014 | |
Stock repurchase plan | ||
Shares authorized for repurchase under program | 3,000,000 | |
Stock repurchases made | 0 |
LEGAL MATTERS (Details)
LEGAL MATTERS (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Legal matters | ||||
Professional service fees relating to our construction litigation | $ 0.5 | $ 0.2 | $ 0.8 | $ 0.2 |
PCL Construction Services, Inc. | ||||
Legal matters | ||||
Professional service fees relating to our construction litigation | $ 0.5 | $ 0.8 |