What changed in this filing

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Item 1. Financial Statements

2020-11-06 compared with 2020-08-07 · 112 added, 92 removed, 289 unchanged (41% of the section changed)

5 unchanged sentences

Three months ended

Six months ended

Nine months ended

September 30,

Food and beverage

5 unchanged sentences

Total operating expenses

(Loss) income from operations

(Loss) income before income taxes

Benefit (provision) for income taxes

Net (loss) income

(Losses) earnings per share of common stock

Net (loss) income

Income from operations

Income before income taxes

Provision for income taxes

Earnings per share of common stock

Weighted average number of common shares and potential common shares outstanding

4 unchanged sentences

(In thousands, except shares)

June 30, 2020

September 30, 2020

December 31, 2019

24 unchanged sentences

Accrued expenses

Income taxes payable

Short-term lease liability

7 unchanged sentences

19,096,300 shares issued;

18,189,562 outstanding at June 30, 2020;

18,260,072 outstanding at September 30, 2020;

18,141,383 outstanding at December 31, 2019

Additional paid-in capital

Treasury stock, 906,738 shares at June 30, 2020;

Treasury stock, 836,228 shares at September 30, 2020;

954,917 shares at December 31, 2019

14 unchanged sentences

Balance, June 30, 2020

Net exercise of stock options

Stock-based compensation expense

Capital contribution

Balance, September 30, 2020

Balance, January 1, 2019

5 unchanged sentences

Balance, June 30, 2019

Net exercise of stock options

Stock-based compensation expense

Balance, September 30, 2019

The Notes to the Consolidated Financial Statements are an integral part of these statements.

3 unchanged sentences

(In thousands, Unaudited)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

1 unchanged sentence

Stock-based compensation

Provision (recovery) for bad debts

Provision for bad debts

Loss on disposition of assets

Write off of unamortized debt issuance costs

Changes in operating assets and liabilities:

3 unchanged sentences

Accrued expenses

Net cash (used in) provided by operating activities

Net cash provided by operating activities

Cash flows from investing activities:

4 unchanged sentences

Cash flows from financing activities:

Net exercise of stock options

Proceeds from exercise of stock options

Principal payments on long-term debt

Loan issuance cost

Long-term debt borrowings

Net cash provided by financing activities

Net cash (used in) provided by financing activities

Change in cash and cash equivalents

1 unchanged sentence

Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information:

Cash paid for income taxes

Conversion of long term deposit to short term deposit

The Notes to the Consolidated Financial Statements are an integral part of these statements.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUARTERLY PERIOD ENDED JUNE 30, 2020

QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

4 unchanged sentences

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.

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.

10 unchanged sentences

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 June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

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.

3 unchanged sentences

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 the state of Colorado mandated a temporary shutdown of all casinos including Monarch Casino Black Hawk and on March 17 th the state of Nevada mandated the temporary closure of all casinos including Atlantis Casino Resort Spa in Reno.

In an effort to contain the virus, on March 16 th the state of Colorado mandated a temporary shutdown of all casinos including Monarch Casino Resort Spa Black Hawk and on March 17 th the state of Nevada mandated the temporary closure of all casinos including Atlantis Casino Resort Spa in Reno.

The COVID-19 outbreak has had, and will continue to have, an adverse effect on the Company's results of operations.

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 engaging in continuing discussions with its lender for relief and default waivers on the Amended Credit Facility.

Our lender has granted the Company limited covenant and default waivers through September 29, 2020.

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.

LONG-TERM DEBT.

Currently, the Company has a term sheet and firm commitment letters from all banks participating in the current lending group for refinancing, which will be completed upon signing of the documents and will increase our credit facility and extend the lending period.

The Company believes that the $ 18.7 million cash in our interest-bearing money market fund and the $ 34.0 million available under our Amended Credit Facility as of June 30, 2020, as well as the anticipated operating cash flow, will be sufficient to fund its operation, meets its debt obligations and fulfill its capital expenditure plans for the next twelve months.

Given the Company's liquidity position at June 30, 2020 and the steps the Company has taken subsequent to June 30, 2020, management believes the Company has sufficient liquidity to fund operations and satisfy its obligations for the next twelve months.

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.

The Company accounts for goodwill in accordance with ASC Topic 350, Intangibles-Goodwill and Other (“ASC Topic 350”).

3 unchanged sentences

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 June 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 and subsequent government order to suspend operations at our properties, we performed testing for impairment of the Company’s goodwill as of June 30, 2020.

The valuations used to assess the Company’s goodwill for impairment incorporate inherent uncertainties that are difficult to predict in the current economic environment.

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 to determine if the Company’s goodwill was impaired.

The impairment testing, resulted in the recognition of no impairment loss.

Based upon the financial performance of the company during the third quarter, management determined that there was no continued indicator of impairment .

The evaluations used to assess the Company’s goodwill for impairment incorporate inherent uncertainties that are difficult to predict in the current economic environment.

When evaluating for impairment, we make numerous highly subjective and judgmental estimates and assumptions, all of which are subject to a variety of risks and uncertainties, and many of which are based on significant unobservable inputs.

1 unchanged sentence

The timing and trajectory of the expected post-pandemic economic recovery is unknown, and accordingly, estimates and assumptions are likely to change as more information becomes available.

The Company tested its goodwill for impairment by comparing the estimated fair value to the carrying amount of Monarch Casino Black Hawk, Inc, including goodwill.

The fair value was estimated using discounted cash flow techniques and market indications of value.

Based on the analysis and the assessment of the current events and circumstances, we concluded that it is not more likely than not that the fair value of the reporting unit is less than the carrying amount and therefore there is no impairment of the Company’s goodwill.

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.

8 unchanged sentences

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 straight-line method, which approximates the effective interest rate method.

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”.

As of June 30, 2020, debt issuance costs, net of amortization, were $ 0.6 million.

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:

2 unchanged sentences

Interest capitalization is ceased when the project is substantially complete.

The Company capitalized $ 1.4 million and $ 3.2 million during the three and six months ended June 30, 2020, respectively.

The Company capitalized $ 1.8 million and $ 5.0 million during the three and nine months ended September 30, 2020, respectively.

Revenue Recognition:

15 unchanged sentences

The points estimated SSP is computed as the cash redemption value of the points expected to be redeemed, which is determined through an analysis of all redemption activity over the preceding twelve -month period.

As of June 30, 2020, the Company had estimated the obligations related to the players’ club program at $ 9.5 million, which is included in Accrued Expenses in the Liabilities and Stockholders’ Equity section in the Consolidated Balance Sheet.

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:

11 unchanged sentences

Other operating items, net, in general consist of miscellaneous operating charges or proceeds.

For the three months ended June 30, 2020, Other operating items, net, was $ 1.2 million and included:

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;

1 unchanged sentence

$ 0.5 million in Colorado legislation lobbying expenses;

and $ 0.3 million equipment, supplies and employee testing expenses directly attributable to the pandemic for reopening of the properties and incremental to normal operations.

For the six months ended June 30, 2020, Other operating items, net, was $ 2.5 million and included:

$ 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;

1 unchanged sentence

$ 1.4 million in Colorado legislation lobbying expenses;

and $ 0.3 million in equipment, supplies and employee testing expenses directly attributable to the pandemic for reopening of the properties and incremental to normal operations.

For the three and six months ended June 30, 2019, Other operating items, net, was $ 0.2 and $ 0.6 million, respectively, representing pre-opening expenses for the period.

$ 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:

31 unchanged sentences

As permitted by ASC 842, the Company elected not to separate non-lease components from their related lease components.

As of June 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.

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) , as well as certain billboard leases.

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 June 30, 2020 was 4.33 %.

The weighted-average remaining lease term of the leases presented in the lease liability as of June 30, 2020 was 21.4 years.

Cash paid related to the operating leases presented in the lease liability for each of the six months ended June 30, 2020 and 2019, was $ 0.7 million.

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

4 unchanged sentences

Three months ended

Six months ended

Nine months ended

September 30,

Food and beverage

6 unchanged sentences

The following is a reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations (shares in thousands):

Three months ended June 30,

Three months ended September 30,

Effect of dilutive stock options

Six months ended June 30,

Nine months ended September 30,

Effect of dilutive stock options

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 June 30, 2020 and 2019, options for approximately 1,122 thousand and 792 thousand shares, respectively, were excluded from the computation.

For the six months ended June 30, 2020 and 2019, options for approximately 1,085 thousand and 759 thousand shares, respectively, were excluded from the computation.

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

13 unchanged sentences

If the Company elects not to exercise its renewal option, the Company will be obligated to pay BLI $ 1.6 million.

For each of the three-month periods ended June 30, 2020 and 2019, the Company paid $ 174 thousand in rent, plus $ 0 and $ 1 thousand, respectively, in operating expenses relating to this lease.

For each of the six-month periods ended June 30, 2020 and 2019, the Company paid $ 348 thousand in rent, plus $ 7 thousand and $ 13 thousand, respectively, in operating expenses relating to this lease.

The right of use asset and lease liability balances as of June 30, 2020, recognized in the Consolidated Balance Sheet, was $ 10.6 million.

For each of the three-month periods ended September 30, 2020 and 2019, the Company paid $ 174 thousand in rent, plus $ 13 and $ 6 thousand, respectively, in operating expenses relating to this lease.

For each of the nine-month periods ended September 30, 2020 and 2019, the Company paid $ 522 thousand in rent, plus $ 20 thousand and $ 19 thousand, respectively, in operating expenses relating to this lease.

The right of use asset and lease liability balances as of September 30, 2020, recognized in the Consolidated Balance Sheet, was $ 10.6 million.

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.

5 unchanged sentences

At the end of the renewal terms, the Company has the option to purchase the leased driveway section of the Shopping Center.

For the three-month periods ended June 30, 2020 and 2019, the Company paid $ 101 thousand and $ 94 thousand in rent, respectively, plus $ 1 thousand and $ 4 thousand, respectively, in operating expenses relating to this lease.

For each of the six-month periods ended June 30, 2020 and 2019, the Company paid $ 202 thousand and $ 188 thousand in rent, respectively, plus $ 8 thousand and $ 13 thousand, respectively, in operating expenses relating to this lease.

The right of use asset and lease liability balances as of June 30 , 2020, recognized in the Consolidated Balance Sheet, was $ 4.0 million.

The Company occasionally leases billboard advertising, storage space and parking lot space from affiliates controlled by the Farahi Family Stockholders and paid $ 38 thousand and $ 33 thousand for the three-month periods ended June 30, 2020 and 2019 respectively, for such leases, and paid $ 74 thousand and $ 69 thousand, respectively, for the six-month periods ended June 30, 2020 and 2019, for such leases.

For the three-month periods ended September 30, 2020 and 2019, the Company paid $ 101 thousand and $ 94 thousand in rent, respectively, plus $ 8 thousand and $ 7 thousand, respectively, in operating expenses relating to this lease.

For each of the nine-month periods ended September 30, 2020 and 2019, the Company paid $ 303 thousand and $ 282 thousand in rent, respectively, plus $ 17 thousand and $ 20 thousand, respectively, in operating expenses relating to this lease.

The right of use asset and lease liability balances as of September 30 , 2020, recognized in the Consolidated Balance Sheet, was $ 4.0 million.

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

On July 20, 2016, the Company entered into an amended and restated credit facility agreement (the “Amended Credit Facility”).

Under the Amended Credit Facility, the Company’s available borrowing capacity was $ 250.0 million, and the maturity date was July 20, 2021.

At December 31, 2019, the total revolving loan commitment under the Amended Credit Facility was automatically and permanently reduced to $ 50.0 million and all $ 200.0 million (Conversion Amount) outstanding under the revolving loan was converted to a Term Loan.

Prior to the conversion, the Company drew all available borrowings up to $ 200.0 million.

Following the conversion to a Term Loan, on December 31, 2019, the Company made a $ 3.8 million mandatory principal payment.

As of June 30, 2020, the Company had an outstanding principal balance of $ 191.3 million under the Amended Credit Facility term loan.

As of June 30, 2020, the Company had $ 16.0 million outstanding and $ 34 million remaining in available borrowings under the Amended Credit Facility revolving loan.

The Company has a $ 0.6 million Standby Letter of Credit, from which there have been no withdrawals.

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 under the Revolving Credit Facility, therefore all $ 70.0 million remained available for borrowing.

Borrowings are secured by liens on substantially all of the Company’s real and personal property.

In addition to other customary covenants for a facility of this nature, as of June 30, 2020, the Company is required to maintain a Total Leverage Ratio (at any time, the ratio of (a) Total Funded Debt at such time, to (b) EBITDA for the four consecutive fiscal quarter period most recently ended for which Financial Statements are available, as defined in the Amended Credit Facility) of no more than 3.5 :1 and a Fixed Charge Coverage Ratio (for the period of four consecutive fiscal quarters ending on or most recently ended prior to such date (a) the sum of (i) EBITDA minus (ii) income taxes paid in cash during such period minus (iii) Distributions made during such period (other than Distributions made pursuant to Section 5.02(f)(i)) minus (iv) Investments in Excluded Subsidiaries made during such period minus (v) Maintenance Capital Expenditures made during such period divided by (b) Fixed Charges for such period, as defined in the Amended Credit Facility) of at least 1.15 :1.

As of June 30, 2020, the Company’s Total Leverage Ratio and Fixed Charge Coverage Ratio were 5.2 :1 and 1.7 :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 vary depending on Company’s leverage ratio.

The Company may prepay borrowings under the Amended Credit Facility revolving loan 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.

On the terms and subject to some conditions, the Company may, at any time before the Maturity Date, request an increase of the total revolving loan commitment, 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 is required to make principal payments on the amount of the Term Loans on each Term Loan Installment Date (last business day of each quarter, starting with the quarter ending December 31, 2019) in an amount equal to (x) the percentage set forth opposite the applicable year during which such Term Loan Installment Date occurs multiplied by (y) the Conversion Amount.

The estimated amount of the mandatory principal payment due in the next twelve months is $ 25.0 million.

In relation to the COVID-19 pandemic closure of the Company’s properties, the Company and the lender executed, on June 9, 2020, A Limited Waiver and Amendment to Credit Agreement.

The lender agreed to waive any default or event of default under the Amended Credit Facility resulting from (i) the failure to have the Atlantis Casino Resort or the Monarch Casino Black Hawk open and operating during the period commencing on April 1, 2020 and ending on September 30, 2020;

(ii) the construction of the Monarch Black Hawk Expansion being stopped at any time prior to September 30, 2020;

and (iii) the occurrence of a material adverse change on or prior to September 30, 2020, as a result of a mandated business cessation order.

The lender also agreed to waive any default on the financial covenants under the Amended Credit Facility for a period commencing on April 1, 2020 and ending on September 29, 2020.

The Amended Credit Facility was amended by adding a new definition, “Operational Liquidity”, to the Amended Credit facility.

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 Monarch Black Hawk 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 clause (b) shall be deemed to be zero.

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 a part of the limited waiver and amendment, for a period starting on June 9, 2020 until the first adjustment to occur after the fiscal quarter ending September 30, 2020, the interest rate is set as LIBOR plus 2.50 %, or a base rate plus 1.50 % and the commitment fees are set at 0.45 %.

Monarch is in continuing discussions with its lenders regarding additional relief options and amendments of the Amended Credit Facility.

If negotiations to complete the refinancing are not successful, this could have a material adverse impact to the Company’s financial condition.

The Company believes that the cash in its interest-bearing money market fund and the $ 34.0 million available under its Amended Credit Facility as of June 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 June 30, 2020;

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 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.

For the six months ended June 30, 2020 and 2019, the Company’s effective tax rate was 30.9 % and 19.9 %, respectively.

The high effective tax benefit rate for the six months ended June 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 due to the COVID-19 pandemic resulted in a net loss for the three- and six-months ended June 30, 2020.

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.

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 June 30, 2020 and 2019.

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.

11 unchanged sentences

The court has set a trial date for May 17, 2021.

Discovery in the action is in the preliminary stages, and we are currently unable to determine the probability of the outcome or reasonably estimate the loss or gain, if any.

The Company recognized $ 0.2 million and $ 0.3 million in construction litigation expense relating to this lawsuit for the three and six months ended June 30, 2020, respectively, which are included in Other operating items, net on the Consolidated Statements of Operations.

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.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements