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What changed 10-Q

Item 1. Financial Statements

2022-05-06 compared with 2021-11-08 · 88 added, 145 removed, 266 unchanged (47% of the section changed)

4 unchanged sentences

(In thousands, except per share data)

Three months ended

Nine months ended

September 30,

September 30,

Three Months Ended March 31,

Food and beverage

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(In thousands, except shares)

September 30, 2021

March 31, 2022

December 31, 2021

7 unchanged sentences

Intangible assets, net

Deferred income taxes

LIABILITIES AND STOCKHOLDERS’ EQUITY

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19,096,300 shares issued;

18,630,776 outstanding at September 30, 2021;

18,875,124 outstanding at March 31, 2022;

18,764,540 outstanding at December 31, 2021

Additional paid-in capital

Treasury stock, 465,524 shares at September 30, 2021;

Treasury stock, 221,176 shares at March 31, 2022;

331,760 shares at December 31, 2021

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Exercise of stock options, net

Restricted stock granted

Purchase of company common stock

Stock-based compensation expense

Balance, March 31, 2022

Exercise of stock options, net

Stock-based compensation expense

Balance, June 30, 2021

Exercise of stock options, net

Stock-based compensation expense

Balance, September 30, 2021

Balance, January 1, 2021

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Balance, March 31, 2021

Exercise of stock options, net

Stock-based compensation expense

Balance, June 30, 2020

Exercise of stock options, net

Stock-based compensation expense

Capital contribution

Balance, September 30, 2020

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

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(In thousands, Unaudited)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

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Stock-based compensation

Stock based compensation - restricted stock

Provision for bad debts

Loss on disposition of assets

Write off of unamortized debt issuance costs

Gain on disposition of assets

Non-cash operating lease expense

Deferred income taxes

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Prepaid expenses

Right of use asset, net

Accounts payable

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Principal payments on long-term debt

Loan issuance cost

Purchase of company common stock

Net cash used in financing activities

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Cash paid for interest, net of amounts capitalized

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021

QUARTERLY PERIOD ENDED MARCH 31, 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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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 and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

In the opinion of the management of the Company, all adjustments considered necessary for a fair presentation, consisting solely of a normal and recurring nature, are included.

Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

The balance sheet at December 31, 2021 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.

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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, 2021.

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, 2020 the state of Colorado mandated a temporary shutdown of all casinos including Monarch Casino Resort Spa Black Hawk and on March 17, 2020 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 may continue to have, an adverse effect on the Company's results of operations.

Our Nevada and Colorado properties reopened with limited operations on June 4, 2020 and June 17, 2020, respectively.

The state of Colorado mandated closure of table games again on November 13, 2020, which lasted until early February, 2021.

Most of the time since the reopening of our properties we have had to operate under government-enforced capacity restrictions and other limitations.

We have been consistently adjusting our routine operations to restrictions in occupancy and social distancing requirements, which include reduced seating at table games and in all restaurants, and a decreased number of active slot machines on the casino floors.

The convention business at Atlantis has been adversely affected by the state-mandated gathering limits.

We have experienced hotel stay and convention booking cancelations, and since the reopening, guest visitation and hotel and convention bookings have been inconsistent.

On July 30, 2021, the state of Nevada reinstated indoor mask mandates, which negatively affected our operation and financial results.

At the same time, however, our results of operation for the first nine months of 2021 benefited from pent-up demand with patrons across the gaming industry, particularly in regional gaming markets.

The Company has taken steps to mitigate the effects of the COVID-19 pandemic and the economic uncertainty by reducing operating expenses, taking advantage of federal and state government programs that support companies affected by the COVID-19 pandemic and their employees, and entering into 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 aggregate principal amount of the facility from $ 241.3 million to $ 270.0 million (consisting of a $ 200.0 million term loan and a $ 70.0 million revolving credit facility) with an option to increase the facility by up to an additional $ 75.0 million revolving line of credit.

LONG-TERM DEBT.

In addition, the Company had strongly encouraged team members to obtain the COVID-19 vaccination to ensure the safety of its team members and guests.

The Company believes that its anticipated cash flows from operating activities, combined with the $ 70.0 million available under its Amended Credit Facility (as defined below), will be sufficient to fund its operations, meets its debt obligations and fulfill its capital expenditure plans for the next twelve months.

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, 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 a business combination in April 2012.

As of September 30, 2021, we had goodwill totaling $ 25.1 million related to the purchase of Monarch Black Hawk, Inc.

ASC Topic 350 requires that goodwill be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

We performed an assessment to determine whether events or circumstances such as those described in ASC 350-20-35-3C existed and we determined that they did not exist during the interim period;

therefore, an interim impairment test was not performed.

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 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.

Concentrations of Credit Risk and Credit Losses:

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of bank deposits and trade receivables.

The Company maintains its surplus cash in bank accounts which, at times, may exceed federally insured limits.

The Company has not experienced any losses in such accounts.

The Company accounts for credit losses in accordance with ASU 2016-13 using forward-looking expected loss model.

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 determined to reduce the Company’s receivables to their carrying value, which approximates fair value.

The allowance is estimated based on historical collection experience, specific review of individual customer accounts, current economic and business conditions and management’s expectations of future economic and business 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 high collection risk receivables.

The Company writes off its uncollectible receivables once all efforts have been made to collect such receivables.

Recoveries of accounts previously written off are recorded when received.

Concentrations of credit risk with respect to gaming and non-gaming receivables are limited due to the large number of customers comprising the Company’s customer base.

Historically, the Company has not incurred any significant credit-related losses.

As of March 31, 2022, the Company has recorded a reserve of $ 0.1 million for gaming and non-gaming receivables.

The Company believes it is not exposed to any significant credit risk on cash and accounts receivable.

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.

Property and Equipment, net:

Property and equipment, net consists of the following (in thousands):

September 30, 2021

March 31, 2022

December 31, 2021

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Fair value for assets to be disposed of is generally estimated based on comparable asset sales, solicited offers or a discounted cash flow model.

For assets to be held and used, the Company reviews fixed assets for impairment annually during the fourth quarter or whenever indicators of impairment exist.

For assets to be held and used, the Company reviews fixed assets for impairment whenever indicators of impairment exist.

If an indicator of impairment exists, we compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset.

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If the undiscounted cash flows do not exceed the carrying value, the impairment is measured based on fair value compared to carrying value, with fair value typically based on a discounted cash flow model or market comparables, when available.

For the three- and nine- month periods ended September 30, 2021 and 2020, there were no impairment charges.

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 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, 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.

For the three-month periods ended March 31, 2022 and 2021, there were no impairment charges.

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, 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.

As of March 31, 2022, we had goodwill totaling $ 25.1 million related to the purchase of Monarch Black Hawk, Inc.

ASC Topic 350 requires that goodwill be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

We performed an assessment to determine whether events or circumstances such as those described in ASC 350-20-35-3C existed and we determined that they did not exist during the interim period;

therefore, an interim impairment test was not performed.

Debt Issuance Costs:

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Unamortized amounts of debt issuance costs are recorded as a reduction of the outstanding debt and included in “Long-term debt, net”.

As of September 30, 2021, debt issuance costs, net of amortization, were $ 2.2 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.

No capitalized interest was recognized in the three and nine months ended September 30, 2021, as the Monarch Black Hawk expansion project was substantially completed in the fourth quarter of 2020.

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

As of March 31, 2022, debt issuance costs, net of amortization, were $ 1.5 million.

Revenue Recognition:

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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 September 30, 2021, the Company had estimated the obligations related to the players’ club program at $ 9.7 million, which is included in Accrued Expenses in the Liabilities and Stockholders’ Equity section in the Consolidated Balance Sheet.

As of March 31, 2022, the Company had estimated the obligations related to the players’ club program at $ 9.6 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:

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In addition, tips and other gratuities, excluding service charges, collected from customers on behalf of the Company’s employees are also accounted for on a net basis and are not included in revenues or operating expenses.

Credit Losses

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 into 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.

As of September 30, 2021, the Company has recorded a reserve of $ 0.2 million for gaming and non-gaming 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.

Other Operating items, net:

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

For the three months ended September 30, 2021, Other operating items, net, was $ 1.2 million and included:

$ 1.5 million of professional services relating to our construction litigation and $ 0.1 million loss on disposal of assets, offset by $ 0.3 million of litigation proceeds and $ 0.1 million of insurance claims 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;

For the three months ended March 31, 2022, Other operating items, net, was $ 1.3 million and primarily represented professional service fees relating to our construction litigation.

For the three months ended March 31, 2021, Other operating items, net, was $0.7 million and included:

$ 0.6 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, 2021, Other operating items, net, was $ 2.8 million and included:

$ 3.0 million of professional services relating to our construction litigation, $ 0.1 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 loss on disposal of assets, offset by $ 0.3 million of litigation proceeds and $ 0.1 million of insurance claims proceeds.

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 of 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.

and $ 0.1 million of equipment, supplies and employee testing expenses directly attributable to the pandemic for reopening of the properties and incremental to normal operations.

Impact of Recently Adopted Accounting Standards:

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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.

Certain 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 from their related lease components.

As of September 30, 2021, the Company’s right of use assets consisted of the Parking Lot Lease, the Driveway Lease (each as defined and discussed in NOTE 5.

As of March 31, 2022, the Company’s right of use assets consisted of the Parking Lot Lease, the Driveway Lease (each 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 September 30, 2021, was 4.33 %.

The weighted-average remaining lease term of the leases presented in the lease liability as of September 30, 2021 was 20.9 years.

Cash paid related to the operating leases presented in the lease liability for each of the nine months ended September 30, 2021 and 2020, was $ 1.1 million.

The weighted-average incremental borrowing rate of the leases presented in the lease liability as of March 31, 2022 was 4.34 %.

The weighted-average remaining lease term of the leases presented in the lease liability as of March 31, 2022 was 20.3 years.

Cash paid related to the operating leases presented in the lease liability for each of the three months ended March 31, 2022 and 2021, was $ 0.3 million and $ 0.4 million, respectively.

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.

In accordance with ASC 606, 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.

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Three months ended

Nine months ended

September 30,

September 30,

Food and beverage

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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,

Effect of dilutive stock options

Nine months ended September 30,

Three months ended March 31,

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 September 30, 2021 and 2020, options for approximately 316 thousand and 1,062 thousand shares, respectively, were excluded from the computation.

For the nine months ended September 30, 2021 and 2020, options for approximately 239 thousand and 1,077 thousand shares, respectively, were excluded from the computation.

Excluded from the computation of diluted earnings per share are options where the exercise prices are greater than the weighted assumed proceeds per share as their effects would be anti-dilutive in the computation of diluted earnings per share.

For the three months ended March 31, 2022 and 2021, options for approximately 506 thousand and 210 thousand shares, respectively, were excluded from the computation.

RELATED PARTY TRANSACTIONS

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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 September 30, 2021 and 2020, the Company paid $ 174 thousand in rent, plus $ 13 thousand in operating expenses relating to this lease.

For each of the nine-month periods ended September 30, 2021 and 2020, the Company paid $ 522 thousand in rent, plus $ 21 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, 2021, recognized in the Consolidated Balance Sheet, was $ 10.3 million.

For the three-month periods ended March 31, 2022 and 2021, the Company paid $ 187 thousand and $ 174 thousand in rent, respectively, plus $ 7 thousand in operating expenses relating to this lease for each of the periods.

The right of use asset and lease liability balances as of March 31, 2022, recognized in the Consolidated Balance Sheet, was $ 10.2 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.

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

For each of the three-month periods ended September 30, 2021 and 2020, the Company paid $ 101 thousand in rent plus $ 12 thousand and $ 8 thousand, respectively, in operating expenses relating to this lease.

For each of the nine-month periods ended September 30, 2021 and 2020, the Company paid $ 303 thousand in rent, plus $ 25 thousand and $ 17 thousand, respectively, in operating expenses relating to this lease.

The right of use asset and lease liability balances as of September 30 , 2021, recognized in the Consolidated Balance Sheet, was $ 3.8 million.

The Company occasionally leases billboard advertising, storage space and parking lot space from affiliates controlled by the Farahi Family Stockholders, and paid $ 57 thousand and $ 27 thousand, respectively, for the three-month periods and $ 151 thousand and $ 101 thousand, respectively, for the nine-month periods ended September 30, 2021 and 2020, for such leases.

For each of the three-month periods ended March 31, 2022 and 2021, the Company paid $ 101 thousand in rent plus $ 10 thousand and $ 8 thousand, respectively, in operating expenses relating to this lease.

The right of use asset and lease liability balances as of March 31 , 2022, recognized in the Consolidated Balance Sheet, was $ 3.7 million.

The Company occasionally leases billboard advertising, storage space and parking lot space from affiliates controlled by the Farahi Family Stockholders, and paid $ 81 thousand and $ 42 thousand, respectively, for the three-month periods ended March 31, 2022 and 2021, for such leases.

LONG-TERM DEBT

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The $ 270 million Amended Credit Facility consists of:

a $ 200 million term loan (“Term Loan Facility”) and a $ 70 million revolving credit facility (“Revolving Credit Facility”), together with an option to increase the facility by up to an additional $ 75 million Revolving Credit Facility.

As of September 30, 2021, the Company had an outstanding principal balance of $ 108 million under the Term Loan Facility, from which $ 20 million is expected to have a maturity date in next twelve months.

As of September 30, 2021, the Company had no borrowings under the Revolving Credit Facility, therefore all $ 70 million remained available for borrowing.

a $ 200 million term loan (“Term Loan Facility”) and a $ 70 million revolving credit facility (“Revolving Credit Facility”), with an option to increase the Revolving Credit Facility by up to an additional $ 75 million.

As of March 31, 2022, the Company had an outstanding principal balance of $ 80 million under the Term Loan Facility, a $ 0.6 million letter of credit and no borrowings under the Revolving Credit Facility;

$ 69.4 million remained available for borrowing.

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 million.

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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, 2021, the Company is required to maintain a Total Leverage Ratio (as defined in the Amended Credit Facility) of no more than 4.0 :1 and Fixed Charge Coverage Ratio (as defined in the Amended Credit Facility) of at least 1.15 :1.

As of September 30, 2021, the Company’s Total Leverage Ratio and Fixed Charge Coverage Ratio were 1.0 :1 and 5.6 :1.

As of September 30, 2021, the interest rate under the April 30 , 2021 amendment to the Amended Credit Facility is LIBOR plus a margin ranging from 1.00 % to 2.00 %, or a base rate (as defined in the Amended Credit Facility) plus a margin ranging from 0.00 % to 1.00 %, or the Prime Rate.

In addition to other customary covenants for a facility of this nature, as of March 31, 2022, the Company is required to maintain a Total Leverage Ratio (as defined in the Amended Credit Facility) of no more than 4.5 :1 and Fixed Charge Coverage Ratio (as defined in the Amended Credit Facility) of at least 1.15 :1.

As of March 31, 2022, the Company’s Total Leverage Ratio and Fixed Charge Coverage Ratio were 0.5 :1 and 4.7 :1, respectively.

The interest rate under the Amended Credit Facility is LIBOR plus a margin ranging from 1.00 % to 2.00 %, or a base rate (as defined in the Amended Credit Facility) plus a margin ranging from 0.00 % to 1.00 %, or the Prime Rate.

The applicable margins vary depending on the Company’s leverage ratio.

Commitment fees are equal to the daily average unused revolving commitment multiplied by the commitment fee percentage, ranging from 0.175 % to 0.325 %, based on our leverage ratio.

As of September 30, 2021, the interest rate on the Term Loan Facility was 1.34 %, or LIBOR plus a 1.25 % margin.

As of March 31, 2022, the interest rate on the Term Loan Facility was 1.11 %, or LIBOR plus a 1.00 % margin.

On the terms and subject to some conditions, the Company may, at any time before the maturity date, request an increase of the Revolving Credit Facility, provided that each such increase is equal to $ 15 million or an integral multiple of $ 1 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 million.

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Once reduced or cancelled, the Revolving Credit Facility may not be increased or reinstated without the prior written consent of all lenders.

During the first nine months of 2021, the Company made a $ 67.0 million in optional prepayments on its Term Loan Facility in addition to $ 7.5 million in mandatory payments.

As of September 30, 2021, the $ 85.8 million “Long-term debt, net” in the Company’s consolidated balance sheet represents the $ 108 million outstanding loan amount under the Amended Credit Facility, net of $ 2.2 million unamortized debt issuance costs and $ 20 million mandatory principal payments that are due in the next twelve months and presented as “Current portion of long-term debt” in the Current liabilities section of the Company’s consolidated balance sheets.

The Company believes that the expected cash flows from operating activities and the $ 70 million available under its Amended Credit Facility as of September 30, 2021 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 the Form 10-Q for the quarter ended September 30, 2021;

however, the Company is surrounded by uncertainty relating to COVID-19 future developments, 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 nine months ended September 30, 2021 and 2020, the Company’s effective tax rate was 19.4 % and 16.3 %, respectively.

The effective tax rate for the nine months ended September 30, 2021 and 2020 was impacted by excess tax benefit on stock option exercises.

As of September 30, 2021, the $ 21.3 million “Income taxes receivable” in the Company’s consolidated balance sheet represents the expected federal and state tax refund for 2020 tax year, net of current year federal and state tax payable.

During the first three months of 2022, the Company made $ 5 million in optional prepayments on its Term Loan Facility in addition to $ 5 million in mandatory payments.

As of March 31, 2022, the $ 58.5 million “Long-term debt, net” in the Company’s consolidated balance sheet represents the $ 80 million outstanding loan amount under the Amended Credit Facility, net of $ 1.5 million unamortized debt issuance costs and $ 20 million mandatory principal payments that are due in the next twelve months and presented as “Current portion of long-term debt” in the Current liabilities section of the Company’s consolidated balance sheet.

For the three months ended March 31, 2022 and 2021, the Company’s effective tax rate was 12.5 % and 15.6 %, respectively.

The effective tax rate for the three months ended March 31, 2022 and 2021 was impacted by excess tax benefit on stock option exercises.

As of March 31, 2022, the $ 24.4 million “Income taxes receivable” in the Company’s consolidated balance sheet represents the expected federal and state tax refund for 2020 tax year, net of current year federal and state tax payable.

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, 2021 and 2020.

No uncertain tax positions were recorded as of March 31, 2022 and 2021.

No change in uncertain tax positions is anticipated over the next twelve months.

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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.

On January 19, 2022, under the authority of the Repurchase Plan, the Company purchased 100,000 shares for $ 6.5 million in a privately negotiated transaction.

As of March 31, 2022, this was the only purchase made under the Repurchase Plan.

LEGAL MATTERS

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On December 5, 2019, the Company and its Colorado subsidiaries filed an 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 trial date for this matter has been scheduled for March 21, 2022.

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 trial date for this matter has again been rescheduled and is now set for September 6, 2022, based on PCL’s failure to produce relevant documents.

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

In connection with the expansion of the Monarch Black Hawk, as described above, PCL and certain subcontractors have provided purported notice of liens filed against the real property on which the Monarch Black Hawk is situated (the “Monarch Black Hawk Property”), for sums allegedly owed for construction of the expansion.

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The Company and its Colorado subsidiaries intend to defend against PCL’s claims and the cross claims filed by certain subcontractors, and will vigorously prosecute its counterclaims for damages.

The case was recently stayed pending the outcome of the Denver Action.

The Company recognized $ 3.0 million and $ 0.8 million in construction litigation expense relating to these lawsuits for the nine months ended September 30, 2021 and 2020, respectively, which are included in Other operating items, net on the Consolidated Statements of Income.

The case remains stayed pending the outcome of the Denver Action.

The Company recognized $ 1.3 million and $ 0.6 million in construction litigation expense relating to these lawsuits for the three months ended March 31, 2022 and 2021, respectively, which are included in Other operating items, net on the Consolidated Statements of Income.

From time to time, we may be subject to other legal proceedings and claims in the ordinary course of business.

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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.