What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-07 compared with 2023-05-08 · 74 added, 100 removed, 87 unchanged (67% of the section changed)

7 unchanged sentences

“believes,” “expects,” “anticipates,” “estimates,” “plans,” “intends,” “objectives,” “goals,” “aims,” “projects,” “forecasts,” “possible,” “seeks,” “may,” “will,” “could,” “should,” “might,” “likely,” “enable,” or similar words or expressions, as well as statements containing phrases such as “in our view,” or “we cannot assure you,” “although no assurance can be given.” Examples of forward-looking statements include, among others, statements we make regarding:

(i) the impact of COVID-19, including any recent spikes in cases or any spread of new variants, and any other contagious diseases or viruses on our revenues, cash flows, liquidity, construction projects, results of operations and financial condition;

(ii) our beliefs regarding the sufficiency of our cash and other financial resources;

(iii) our belief regarding the exposure of our cash and accounts receivable to credit risk;

(iv) our beliefs regarding the quality of our work product and guest service and our ability to capture additional market share in the high-end segment of the market;

(v) our beliefs regarding the quality of our properties as key factors in Monarch's long-term success;

(vi) our expectations and beliefs concerning the completed expansion of the Monarch Black Hawk (the "Monarch Black Hawk Expansion");

(vii) our expectations and intentions regarding the expenses, defenses and outcomes of the lawsuits filed by the construction project general contractor against us and our counterclaims and separate lawsuit against the contractor;

(viii) our expectations regarding our business prospects, strategies, estimates and outlook;

(ix) our expectations regarding the positioning of our properties to benefit from future macro and local economic growth;

(x) our expectations regarding future capital requirements;

(xi) our anticipated sources of funds and adequacy of such funds to meet our debt obligations and capital requirements;

and (xii) our expectations regarding legal and other matters.

(i) our beliefs regarding the sufficiency of our cash and other financial resources;

(ii) our belief regarding the exposure of our cash and accounts receivable to credit risk;

(iii) our beliefs regarding the quality of our work product and guest service and our ability to capture additional market share in the high-end segment of the market;

(iv) our beliefs regarding the quality of our properties as key factors in Monarch's long-term success;

(v) our expectations regarding the employment growth in the Reno market and its effect on our business at Atlantis;

(vi) our expectations and intentions regarding the expenses, defenses and outcomes of the lawsuits filed by the construction project general contractor against us and our counterclaims and separate lawsuit against the contractor;

(vii) our expectations regarding our business prospects, strategies, estimates and outlook;

(viii) our expectations regarding the positioning of our properties to benefit from future macro and local economic growth;

(ix) our expectations regarding future capital requirements;

(x) our anticipated sources of funds and adequacy of such funds to meet our debt obligations and capital requirements;

and (xi) our expectations regarding legal and other matters.

Forward-looking statements are neither historical facts nor assurances of future performance.

3 unchanged sentences

Therefore, you should not rely on any of these forward-looking statements.

Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:

● adverse impacts of COVID-19 , its variants any other contagious diseases or viruses on our business, financial condition, operating results, access to capital markets, and on short-term and long-term travel, leisure and discretionary spending habits and practices of our guests;

● actions by government officials at the federal, state or local level, including, without limitation, temporary or extended shutdowns, travel restrictions, social distancing, shelter-in-place orders, and mask mandates in connection with COVID-19 or any other contagious diseases or viruse;

● our ability to maintain strong relationships with our regulators, employees, lenders, suppliers, insurance carriers, customers and other stakeholders;

● impact of any uninsured losses;

● the adverse impact of cancellations and/or postponements of hotel stays and convention and trade shows on our business, market position, growth, financial condition and operating results;

● a delay in or failure of the changes in guest visitation, entertainment choices and spending patterns, including a decrease in overall long-term demand;

● potentially uninsurable liability exposure to customers and staff should they become (or allege that they have become) infected with COVID-19 or any other contagious disease or virus while at one of our resorts;

● unwillingness of employees to report to work due to the adverse effects of COVID-19 or any other contagious diseases or viruses , or to otherwise conduct work under any revised work environment protocols;

● unwillingness of our employees to obtain the COVID-19 vaccination or any boosters;

● the potential of increases in state and federal taxation to address budgetary and other impacts of COVID-19;

● our ability to successfully implement our business and growth strategies;

● our ability to realize the anticipated benefits of our expansion and renovation projects, including the Monarch Black Hawk Expansion;

● our ongoing disputes over costs of and responsibility for delays, construction defects and other construction related matters with our Monarch Black Hawk general contractor, PCL Construction Services, Inc.

(“PCL”), including, as previously reported, the litigations against us by such contractor and our filing of affirmative defenses, extensive counterclaims and a separate lawsuit against PCL;

● our potential need to post bonds or other forms of surety to support our legal remedies;

● risks related to pending litigation, which is costly and time-consuming to defend, and if decided against us, could require us to pay substantial judgments or settlements.

We cannot predict with certainty the outcomes of such legal proceedings, and the costs incurred in litigation can be substantial, regardless of the outcome.

Substantial unanticipated verdicts, fines and rulings do sometimes occur;

● our ability to generate sufficient operating cash flow to service our debt obligations and working capital needs and to help finance our expansion plans;

● our ability to effectively manage expenses to optimize our margins and operating results;

● our ability to effectively manage increased expenses from inflationary pressures, including wage inflation;

● our ability to effectively manage the impacts of temporary or other supply chain interruptions;

● our ability to successfully complete potential acquisitions and investments;

● access to capital and credit, including our ability to finance future business requirements;

● adverse trends in the gaming industry;

● changes in patron demographics;

● risks related to record heat conditions, drought conditions and fires in the Western United States;

● risks related to possible flooding due to snow melt from the heavier than average snowfall in the Western United States;

● general market and economic conditions, including but not limited to, the effects of local and national economic, housing and energy conditions on the economy in general and on the gaming and lodging industries in particular;

● the impact of rising interest rates and our ability to refinance debt as it matures at commercially reasonable rates or at all;

● our dependence on two resorts;

● ability of large stockholders to influence our affairs;

● our dependence on key personnel;

● the availability of adequate levels of insurance;

● changes in federal, state, and local laws and regulations, including environmental and gaming licenses or legislation and regulations, and laws and regulations permitting expanded and other forms of gaming in our key markets;

● ability to obtain and maintain gaming and other governmental licenses and regulatory approvals;

● any violations by us of the anti-money laundering laws;

● cybersecurity risks, including misappropriation of customer information or other breaches of information security;

● disruptions or reductions in travel and our operations due to natural disasters, severe weather, terrorist activity, pandemics, epidemics or outbreaks of infectious or contagious diseases, political instability, civil unrest and similar events;

● our competitive environment, including increased competition in our target market areas;

● increases in the effective rate of taxation at any of our properties or at the corporate level;

● our ability to successfully estimate the impact of accounting, tax and legal matters;

● the impact of the events occurring in Eastern Europe and the conflict taking place in Ukraine;

● risks, uncertainties and other factors described in Part I, Item 1A.

“Risk Factors” and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 Form 10-K”), and our other filings with the Securities and Exchange Commission.

Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, those risks discussed in Part I, Item 1A-Risk Factors and throughout Part II, Item 7-Management’s Discussion and Analysis of Financial Condition and Results of our Annual Report on Form 10-K for the year ended December 31, 2022, and in Part II, Item 1A-Risk Factors and elsewhere of this Form 10-Q.

In addition, you should consult other disclosures made by us (such as in our other filings with the Securities and Exchange Commission (“SEC”) or in Company press releases) for other factors that may cause actual results to differ materially from those projected by us.

You should read this Form 10-Q, and the documents that we reference in this Form 10-Q and have filed with the SEC, and our Annual Report on Form 10-K for the year ended December 31, 2022, with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

Any forward-looking statement made by us in this Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made.

52 unchanged sentences

RESULTS OF OPERATIONS

Comparison of Operating Results for the Three-Month Periods Ended March 31, 2023 and 2022

For the three months ended March 31, 2023, our net income totaled $17.7 million, or $0.90 per diluted share, compared to net income of $18.1 million, or $0.92 per diluted share for the same period in 2022, reflecting a 2.5% and 2.2% decrease in net income and diluted earnings per share, respectively.

The decrease in net income was impacted by the effective tax rate, which varies based on the amount of excess tax benefit on stock compensation.

Net revenues in the three months ended March 31, 2023, totaled $116.6 million, an increase of $8.3 million, or 7.7%, compared to the three months ended March 31, 2022.

Income from operations for the three months ended March 31, 2023, totaled $23.2 million compared to income from operations of $21.3 million for the same period in 2022.

Casino revenue increased 6.5% in the first quarter of 2023 compared to the first quarter of 2022.

Comparison of Operating Results for the Three-Month Periods Ended June 30, 2023 and 2022

For the three months ended June 30, 2023, our net income totaled $22.4 million, or $1.14 per diluted share, compared to net income of $19.4 million, or $0.99 per diluted share for the same period in 2022, reflecting a 15.3% and 15.2% increase in net income and diluted earnings per share, respectively.

Net revenues in the three months ended June 30, 2023, totaled $123.7 million, an increase of $8.4 million, or 7.3%, compared to the three months ended June 30, 2022.

Income from operations for the three months ended June 30, 2023, totaled $29.7 million compared to income from operations of $25.7 million for the same period in 2022.

Casino revenue increased 7.8% in the second quarter of 2023 compared to the second quarter of 2022.

The increase in casino revenue was driven primarily by the increase in gaming volume in Black Hawk.

Casino operating expense as a percentage of casino revenue increased to 37.7% for the three months ended March 31, 2023, compared to 35.6% for the three months ended March 31, 2022, primarily due to the increase in labor expense.

Food and beverage revenue for the first quarter of 2023 increased 12.6% compared to the first quarter of 2022 due to a 1.2% increase in food and beverage covers, combined with an increase in food and beverage revenue per cover of 11.2%.

The increase in covers is primarily a result of the opening of a new restaurant at Monarch Black Hawk in early 2022 as well as increase in buffet and casual dining restaurants covers at both properties.

Food and beverage operating expense as a percentage of food and beverage revenue decreased in the first quarter of 2023 to 74.8% compared to 79.6% for the same quarter in 2022 primarily due to an increase in average check and improved cost management.

Hotel revenue increased 1.8% in the first quarter of 2023 compared to the same quarter of 2022 primarily as a result of an increase in hotel occupancy to 82.2% during the current year period compared to 76.5% during the first quarter of 2022, partially offset by a decrease in ADR by $9.65 ($161.08 in the first quarter of 2023 and $170.73 in the first quarter of 2022).

RevPAR was $146.58 and $142.78 for the three months ended March 31, 2023 and 2022, respectively.

Hotel operating expense as a percentage of hotel revenue increased to 41.3% in the first quarter of 2023 compared to 38.0% for the comparable prior year period primarily as a result of the decrease in ADR and an increase in labor expense.

Other revenue increased 16.5% in the first quarter of 2023 compared to the same prior year period primarily due to the increased demands of Spa services at both properties.

SG&A expense increased to $25.1 million in the first quarter of 2023 from $24.2 million in the first quarter of 2022 driven primarily by increases in utility expense and repair and maintenance expense.

As a percentage of net revenue, SG&A expense decreased to 21.5% in the first quarter of 2023 compared to 22.3% in the same period in 2022.

Depreciation and amortization expense increased to $11.3 million for the three months ended March 31, 2023, compared to $10.5 million for the same prior year period, due to new assets placed into service with the ongoing renovation at Atlantis.

During the first quarter of 2023, we recognized $0.5 million and $1.3 million, respectively, in professional service fees relating to our construction litigation.

These expenses are included in Other operating items, net in the Consolidated Statements of Income.

In the first quarter of 2023 we recognized $0.5 million of interest expense, $0.3 million in deferred loan costs amortization expense and $0.3 million in interest income.

In the first quarter of 2022, we expensed $0.3 million of interest and amortized $0.4 million in deferred loan costs.

Guest visits and spend per visit for the second quarter increased year-over-year at both properties.

Casino operating expense as a percentage of casino revenue increased to 37.4% for the three months ended June 30, 2023, compared to 36.5% for the three months ended June 30, 2022, primarily due to the increase in labor expense.

Food and beverage revenue for the second quarter of 2023 increased 10.8% compared to the second quarter of 2022 due to a 3.7% increase in food and beverage covers, combined with an increase in food and beverage revenue per cover of 6.8%.

Food and beverage operating expense as a percentage of food and beverage revenue decreased in the second quarter of 2023 to 72.3% compared to 77.0% for the same quarter in 2022 primarily due to an increase in average check and improved cost management.

Hotel revenue decreased 1.1% in the second quarter of 2023 compared to the same quarter of 2022 primarily as a result of a decrease in ADR by $8.94 ($176.34 in the second quarter of 2023 and $185.28 in the second quarter of 2022), partially offset by an increase in hotel occupancy to 83.4% during the current year period compared to 81.0% during the second quarter of 2022.

RevPAR was $162.33 and $162.47 for the three months ended June 30, 2023 and 2022, respectively.

Hotel operating expense as a percentage of hotel revenue increased to 36.2% in the second quarter of 2023 compared to 34.4% for the comparable prior year period primarily as a result of the decrease in ADR and an increase in labor expense.

Other revenue increased 11.6% in the second quarter of 2023 compared to the same prior year period primarily due to an increase in retail revenue at both properties and an increase in spa revenue at Atlantis.

SG&A expense increased to $25.0 million in the second quarter of 2023 from $23.1 million in the second quarter of 2022 driven primarily by increases in utility, insurance and marketing and advertising expenses.

As a percentage of net revenue, SG&A expense increased to 20.2% in the second quarter of 2023 compared to 20.0% in the same period in 2022.

Depreciation and amortization expense increased to $11.6 million for the three months ended June 30, 2023, compared to $10.5 million for the same prior year period, due to new assets placed into service with the ongoing renovation at Atlantis.

During the second quarter of 2023, we recognized $0.6 million and $2.4 million, respectively, in professional service fees relating to our construction litigation.

During the second quarter of 2023 we also recognized $1.2 million proceeds from a sale of COVID closure related insurance claim.

These items are included in Other operating items, net in the Consolidated Statements of Income.

In the second quarter of 2023 we recognized $0.8 million of interest expense, net of interest income.

In the second quarter of 2022 we expensed $0.3 million of interest and amortized $0.4 million in deferred loan costs.

See further discussion of our Amended Credit Facility in the LIQUIDITY AND CAPITAL RESOURCES section below.

Comparison of Operating Results for the Six-Month Periods Ended June 30, 2023 and 2022

For the six months ended June 30, 2023, we had a net income of $40.1 million, or $2.04 per diluted share, compared to net income of $37.6 million, or $1.92 per diluted share for the same period in 2022, reflecting a 6.7% and 6.3% increase in net income and diluted earnings per share, respectively.

Net revenues in the six months ended June 30, 2023, totaled $240.3 million, an increase of 7.5%, compared to the six months ended June 30, 2022.

Income from operations for the six months ended June 30, 2023 totaled $52.9 million compared to $47.0 million income from operations for the same period in 2022.

Casino revenue increased 7.2% in the first six months of 2023 compared to the first six months of 2022 and was driven by an increase in guest spend per visit at both properties.

Casino operating expense as a percentage of casino revenue increased to 37.6% for the six months ended June 30, 2023 compared to 36.1% for the six months ended June 30, 2022 primarily as a result of increase in labor expense and increase in promotional allowances.

Food and beverage revenue for the first six months of 2023 increased 11.6% compared to the 2022 same period due to a 2.6% increase in food and beverage covers combined with an 8.8% increase in food and beverage revenue per cover.

Food and beverage operating expense as a percentage of food and beverage revenue decreased in the first six months of 2023 to 73.5% from 78.2% for the same period in 2022 primarily as a result of our effort to align menu prices with increased commodity prices and labor cost.

Hotel revenue increased 0.2% in the first six months of 2023 compared to the first six months of 2022 primarily due to an increase in occupancy from 78.8% during the first six months of 2022 to 82.8% during the same period of 2023, partially offset by a decrease in ADR by $9.44, from $178.40 in the first six months of 2022 to $168.96 in the first six months of 2023.

REVPAR was $154.67 for the first six months of 2023 and $152.90 for the first six months of 2022.

Hotel operating expense as a percentage of hotel revenue increased to 38.5% in the first six months of 2023 compared to 36.0% for the comparable prior year period primarily as a result of the lower ADR.

Other revenue increased 14.0% in the first six months of 2023 compared to the same prior year period.

SG&A expense increased to $50.1 million in the first six months of 2023 from $47.3 million in the first six months of 2022 primarily due to the increase in labor expense, as well as utility, insurance and repair and maintenance expenses.

As a percentage of net revenue, SG&A expense decreased to 20.8% in the first six months of 2023 compared to 21.1% in the same period in 2022.

Depreciation and amortization expense increased to $23.0 million for the six months ended June 30, 2023 compared to $21.1 million for the same prior year period, due to new assets placed into service with the ongoing renovation at Atlantis.

During the first six months of 2023, we recognized $1.2 million in professional service fees relating to our construction litigation and $1.2 million in proceeds from a sale of COVID closure related insurance claim.

During the first six months of 2022, we recognized $3.7 million in professional services fees relating to our construction litigation and $0.2 million in gain on disposal of assets and litigation proceeds.

During the first six months of 2023, we expensed $1.4 million of interest, net of interest income.

During the first six months of 2022, we expensed $0.7 million of interest and amortized $0.7 million in deferred loan costs.

See further discussion of our Amended Credit Facility in the LIQUIDITY AND CAPITAL RESOURCES section below.

CAPITAL SPENDING AND DEVELOPMENT

We seek to continually upgrade and maintain our facilities in order to present a fresh, high quality product to our guests.

Cash paid for capital expenditures for the three-month periods ended March 31, 2023 and 2022 totaled $15.2 million and $22.1 million, respectively.

During the three-month period ended March 31, 2023, our capital expenditures related primarily to the redesign and upgrade of hotel rooms in the second tower at Atlantis, re-carpeting the casino floor at Atlantis and the acquisition of gaming, and other equipment to upgrade and replace existing equipment at Atlantis and Monarch Black Hawk.

During the three-month period ended March 31, 2022 our capital expenditures related primarily to the redesign and upgrade of hotel rooms in the first tower at Atlantis, the completion of the transformation of part of the Monarch Black Hawk legacy facility, and the acquisition of gaming and other equipment to upgrade and replace existing equipment at Atlantis and Monarch Black Hawk.

Capital expenditures during each of the first three months of 2023 and 2022 were funded from operating cash flows.

Cash paid for capital expenditures for the six-month periods ended June 30, 2023 and 2022 totaled $25.6 million and $35.2 million, respectively.

During the six-month period ended June 30, 2023, our capital expenditures related primarily to the redesign and upgrade of hotel rooms in the second tower at Atlantis, re-carpeting the casino floor at Atlantis and the acquisition of gaming, and other equipment to upgrade and replace existing equipment at Atlantis and Monarch Black Hawk.

During the six-month period ended June 30, 2022, our capital expenditures related primarily to the redesign and upgrade of hotel rooms in the first tower at Atlantis, the completion of the transformation of part of the Monarch Black Hawk legacy facility, and the acquisition of gaming and other equipment to upgrade and replace existing equipment at Atlantis and Monarch Black Hawk.

Capital expenditures during each of the first six months of 2023 and 2022 were funded from operating cash flows.

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity have been cash provided by operations and, for capital expansion projects, borrowings available under our Amended Credit Facility.

For the three months ended March 31, 2023, net cash provided by operating activities totaled $61.5 million, compared to net cash provided by operating activities of $35.4 million in the same prior year period.

For the six months ended June 30, 2023, net cash provided by operating activities totaled $87.9 million, compared to net cash provided by operating activities of $60.6 million in the same prior year period.

This increase was primarily a result of the decrease in income tax receivable as a result of receipt of an income tax refund.

Net cash used in investing activities totaled $15.2 million and $22.1 million during the three months ended March 31, 2023 and 2022, respectively.

Net cash used in investing activities during the first three months of 2023 consisted primarily of cash used for the redesign and upgrade of hotel rooms in the second tower at Atlantis, re-carpeting the casino floor at Atlantis, and the acquisition of gaming and other equipment at both properties.

Net cash used in investing activities during the first three months of 2022 consisted primarily of cash used for the redesign and upgrade of hotel rooms in the first tower at Atlantis, the completion of the transformation of part of the Monarch Black Hawk legacy facility, and for acquisition of gaming and other equipment at both properties.

Net cash used in financing activities in the first three months of 2023 totaled $50.7 million and consisted of $95.6 million used for payment of dividends, offset by $44.0 million of borrowings under the credit facility, net of the payments to the credit facility and $0.9 million of net proceeds from stock options exercise.

Net cash used in financing activities in the first three months of 2022 totaled $13.8 million and consisted of $10.0 million in principal payments on the credit facility and $6.5 million cash used for purchase of Company stock under the Repurchase Plan partially offset by $2.7 million of net proceeds from stock options exercise.

Net cash used in investing activities totaled $25.6 million and $35.2 million during the six months ended June 30, 2023 and 2022, respectively.

Net cash used in investing activities during the first six months of 2023 consisted primarily of cash used for the redesign and upgrade of hotel rooms in the second tower at Atlantis, re-carpeting the casino floor at Atlantis, and the acquisition of gaming and other equipment at both properties.

Net cash used in investing activities during the first six months of 2022 consisted primarily of cash used for the redesign and upgrade of hotel rooms in the first tower at Atlantis, the completion of the transformation of part of the Monarch Black Hawk legacy facility, and for acquisition of gaming and other equipment at both properties.

Net cash used in financing activities in the first six months of 2023 totaled $66.0 million and consisted of $101.3 million used for payment of dividends, offset by $34.0 million of borrowings under the Amended Credit Facility, net of the payments to the lender under the Amended Credit Facility and $1.3 million of net proceeds from stock options exercise.

Net cash used in financing activities in the first six months of 2022 totaled $28.3 million and consisted of $25.0 million in principal payments on the credit facility and $6.5 million cash used for purchase of Company stock under the Repurchase Plan partially offset by $3.2 million of net proceeds from stock options exercise.

Amended Credit Facility

On February 1, 2023, we entered into the Fifth Amended and Restated Credit Agreement with Wells Fargo Bank, N.A., as administrative agent.

The Fifth Amended Credit Facility (the “Amended Credit Facility”) amends and restates the Company’s Fourth Amended and Restated Credit Agreement, which consisted of:

a $200 million term loan and a $70 million revolving line of credit.

On February 1, 2023, we entered into the Fifth Amended and Restated Credit Agreement (the “Amended Credit Facility”) with Wells Fargo Bank, N.A., as administrative agent.

The Amended Credit Facility amends and restates the Company’s Fourth Amended and Restated Credit Agreement, which consisted of a $200 million term loan and a $70 million revolving line of credit.

On February 1, 2023, there was no outstanding balance under the term loan of the Fourth Amended and Restated Credit Agreement.

The Amended Credit Facility does not contain a term loan.

The Amended Credit Facility increases the aggregate principal amount of the revolving line of credit from $70 million to $100 million, with an option to increase it by another $100 million within the first six months.

The Amended Credit Facility does not contain a term loan but instead increases the aggregate principal amount of the revolving line of credit from $70 million to $100 million.

The maturity date of the Amended Credit Facility is January 1, 2025.

As of March 31, 2023, we had an outstanding principal balance of $51 million under the Amended Credit Facility.

In addition to other customary covenants for a facility of this nature, as of March 31, 2023, we were required to maintain a Total Leverage Ratio (as defined in the Amended Credit Facility) of no more than 2.5:1 and Fixed Charge Coverage Ratio (as defined in the Amended Credit Facility) of at least 1.1:1.

As of March 31, 2023, our Total Leverage Ratio and Fixed Charge Coverage Ratio were 0.3:1 and 6.7:1, respectively.

As of June 30, 2023, we had an outstanding principal balance of $41 million under the Amended Credit Facility.

In addition to other customary covenants for a facility of this nature, as of June 30, 2023, we were required to maintain a Total Leverage Ratio (as defined in the Amended Credit Facility) of no more than 2.5:1 and Fixed Charge Coverage Ratio (as defined in the Amended Credit Facility) of at least 1.1:1.

As of June 30, 2023, our Total Leverage Ratio and Fixed Charge Coverage Ratio were 0.2:1 and 9.3:1, respectively.

The interest rate under the Amended Credit Facility is SOFR (the Secured Overnight Financing Rate) plus a margin ranging from 1.00% to 1.50%, or a base rate (as defined in the Amended Credit Facility) plus a margin ranging from 0.00% to 0.50%.

1 unchanged sentence

In addition, SOFR-based loans will incur a 0.10% credit adjustment spread due to the conversion from LIBOR to SOFR as the new benchmark rate.

As of March 31, 2023, the interest rate was 5.9%, or SOFR plus a 1.00% margin.

As of June 30, 2023, the interest rate was 6.2%, or SOFR plus a 1.00% margin.

The Company’s obligations under the Amended Credit Facility are secured by substantially all of the Company’s assets.

We believe that our anticipated operating cash flow and the $48.4 million available under our Amended Credit Facility as of March 31, 2023 will be sufficient to sustain operations for the twelve months from the filing of this Form 10-Q for the quarter ended March 31, 2023 and fulfill our capital expenditure plans.

We believe that our anticipated operating cash flow and the $58.4 million available under our Amended Credit Facility as of June 30, 2023 will be sufficient to sustain operations for the twelve months from the filing of this Form 10-Q for the quarter ended June 30, 2023 and fulfill our capital expenditure plans.

However financial, economic, competitive, regulatory, and other factors, many of which are beyond our control, could negatively impact our operations.

If we are unable to generate sufficient cash flow in the upcoming months or if our cash needs exceed our borrowing capacity under the Amended Credit Facility, including our option to increase the credit facility by an additional $100 million, we 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.

If we are unable to generate sufficient cash flow in the upcoming months or if our cash needs exceed our borrowing capacity under the Amended Credit Facility, we could be required to adopt one or more alternatives, such as reducing, delaying or eliminating planned capital expenditures, selling assets, restructuring debt or issuing additional equity.

For a discussion regarding our material commitments for capital expenditures, see the CAPITAL SPENDING AND DEVELOPMENT section above.

4 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 2. Management’s Discussion and Analysis