What changed in this filing

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Item 1. Financial Statements

2023-11-06 compared with 2023-08-07 · 83 added, 60 removed, 310 unchanged (32% of the section changed)

5 unchanged sentences

Three months ended

Six months ended

Nine months ended

September 30,

Food and beverage

17 unchanged sentences

(In thousands, except shares)

June 30, 2023

September 30, 2023

December 31, 2022

13 unchanged sentences

Accrued expenses

Income taxes payable

Short-term lease liability

7 unchanged sentences

Common stock, $ .01 par value, 30,000,000 shares authorized;

19,143,344 shares issued and outstanding at June 30, 2023;

19,148,691 shares issued and outstanding at September 30, 2023;

19,096,300 shares issued and 19,093,676 outstanding at December 31, 2022

18 unchanged sentences

Balance, June 30, 2023

Exercise of stock options, net

Stock-based compensation expense

Dividend payment

Balance, September 30, 2023

Balance, January 1, 2022

8 unchanged sentences

Balance, June 30, 2022

Exercise of stock options, net

Stock-based compensation expense

Balance, September 30, 2022

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:

5 unchanged sentences

Provision for bad debts

Loss (gain) on disposition of assets

Loss on disposition of assets

Non-cash operating lease expense

Changes in operating assets and liabilities:

Income taxes receivable/payable

Income taxes receivable

Prepaid expenses

20 unchanged sentences

Supplemental disclosure of cash flow information:

Cash paid for interest, net of amounts capitalized

Cash paid for interest

Cash paid for income taxes

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUARTERLY PERIOD ENDED JUNE 30, 2023

QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

17 unchanged sentences

In the opinion of the management of the Company, all adjustments considered necessary for a fair presentation, consisting of normal recurring accruals, are reflected in the interim financial statements.

Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

The balance sheet at December 31, 2022, 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.

21 unchanged sentences

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

As of June 30, 2023, the Company has recorded a reserve of $ 0.1 million for gaming and non-gaming receivables.

As of September 30, 2023, the Company has recorded a reserve of $ 0.2 million for gaming and non-gaming receivables.

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

4 unchanged sentences

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

June 30, 2023

September 30, 2023

December 31, 2022

20 unchanged sentences

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 comparable, when available.

For the six-month periods ended June 30, 2023 and 2022, respectively, there were no impairment charges.

For the nine-month periods ended September 30, 2023 and 2022, respectively, there were no impairment charges.

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

2 unchanged sentences

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 June 30, 2023, we had goodwill totaling $ 25.1 million related to the purchase of Monarch Black Hawk, Inc.

As of September 30, 2023, 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.

18 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, 2023, the Company had estimated the obligations related to the players’ club program at $ 8.6 million, which is included in Accrued Expenses in the Liabilities and Stockholders’ Equity section in the Consolidated Balance Sheet.

As of September 30, 2023, the Company had estimated the obligations related to the players’ club program at $ 9.0 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, 2023, Other operating items, net, was $ 0.5 million and primarily consisted of $ 1.2 million net proceeds from a sale of a COVID closure related insurance claim, offset by $ 0.6 million of professional service fees relating to our construction litigation and $ 0.1 million loss on disposal of assets.

For the three months ended June 30, 2022, Other operating items, net, was $ 2.2 million and primarily consisted of $ 2.4 million professional service fees relating to our construction litigation, offset by $ 0.2 million gain on disposal of assets and litigation proceeds.

For the six months ended June 30, 2023, Other operating items, net, was $0.1 million and primarily consisted of $ 1.2 million of professional service fees relating to our construction litigation and $ 0.1 million loss on disposal of assets, offset by $ 1.2 million net proceeds from a sale of a COVID closure related insurance claim.

For the six months ended June 30, 2022, Other operating items, net, was $ 3.5 million and primarily consisted of professional service fees relating to our construction litigation of $ 3.7 million, offset by gain on disposal of assets and litigation proceeds of $ 0.2 million.

For the three months ended September 30, 2023, Other operating items, net, was $ 3.0 million and primarily represented professional service fees relating to our construction litigation.

For the three months ended September 30, 2022, Other operating items, net, was $ 2.9 million and consisted of professional service fees relating to our construction litigation of $ 2.8 million, and loss on disposal of assets of $ 0.1 million.

For the nine months ended September 30, 2023, Other operating items, net, was $ 3.0 million and consisted of $ 4.1 million of professional service fees relating to our construction litigation and $ 0.1 million loss on disposal of assets, offset by $ 1.2 million net proceeds from a sale of a COVID closure related insurance claim.

For the nine months ended September 30, 2022, Other operating items, net, was $ 6.4 million and primarily represented professional service fees relating to our construction litigation.

Impact of Recently Adopted Accounting Standards:

4 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, 2023, 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 September 30, 2023, 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.

The weighted-average incremental borrowing rate of the leases presented in the lease liability as of June 30, 2023, was 4.33 %.

There were no new leases entered into in the second quarter of 2023.

The weighted-average remaining lease term of the leases presented in the lease liability as of June 30, 2023, was 19 years .

Cash paid related to the operating leases presented in the lease liability for each of the six months ended June 30, 2023 and 2022, was $ 0.6 million and $ 0.7 million, respectively.

The weighted-average incremental borrowing rate of the leases presented in the lease liability as of September 30, 2023, was 4.32 %.

There were no new leases entered into in the third quarter of 2023.

The weighted-average remaining lease term of the leases presented in the lease liability as of September 30, 2023, was 17.35 years.

Cash paid related to the operating leases presented in the lease liability for the nine months ended September 30, 2023 and 2022, was $ 1.1 million and $ 1.0 million, respectively.

STOCK-BASED COMPENSATION

3 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 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 June 30, 2023 and 2022, options for approximately 647 thousand and 527 thousand shares, respectively, were excluded from the computation.

For the six months ended June 30, 2023 and 2022, options for approximately 578 thousand and 521 thousand shares, respectively, were excluded from the computation.

For the three months ended September 30, 2023 and 2022, options for approximately 749 thousand and 592 thousand shares, respectively, were excluded from the computation.

For the nine months ended September 30, 2023 and 2022, options for approximately 617 thousand and 538 thousand shares, respectively, were excluded from the computation.

RELATED PARTY TRANSACTIONS

12 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, 2023 and 2022, the Company paid $ 187 thousand in rent, plus $ 1 thousand and $ 1 thousand, respectively, in operating expenses relating to this lease.

For each of the six-month periods ended June 30, 2023 and 2022, the Company paid $ 374 thousand in rent, plus $ 9 thousand and $ 8 thousand, respectively, in operating expenses relating to this lease.

The right of use asset and lease liability balances as of June 30, 2023, recognized in the Consolidated Balance Sheet, was $ 9.9 million.

For each of the three-month periods ended September 30, 2023 and 2022, the Company paid $ 187 thousand in rent, plus $ 8 thousand and $ 14 thousand, respectively, in operating expenses relating to this lease.

For each of the nine-month periods ended September 30, 2023 and 2022, the Company paid $ 561 thousand in rent, plus $ 17 thousand and $ 22 thousand, respectively, in operating expenses relating to this lease.

The right of use asset and lease liability balances as of September 30, 2023, recognized in the Consolidated Balance Sheet, was $ 9.8 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 each of the three-month periods ended June 30, 2023 and 2022, the Company paid $ 101 thousand in rent plus $ 9 thousand and $ 7 thousand, respectively, in operating expenses relating to this lease.

For each of the six-month periods ended June 30, 2023 and 2022, the Company paid $ 202 thousand in rent plus $ 21 thousand and $ 16 thousand, respectively, in operating expenses relating to this lease.

The right of use asset and lease liability balances as of June 30, 2023, recognized in the Consolidated Balance Sheet, was $ 3.4 million.

The Company occasionally leases billboard advertising, storage space and parking lot space from affiliates controlled by the Farahi Family Stockholders, and paid $ 137 thousand and $ 123 thousand, respectively, for the three-month periods and $ 269 thousand and $ 204 thousand, respectively, for the six-month periods ended June 30, 2023 and 2022, for such leases.

For each of the three-month periods ended September 30, 2023 and 2022, the Company paid $ 101 thousand in rent plus $ 14 thousand and $ 12 thousand, respectively, in operating expenses relating to this lease.

For each of the nine-month periods ended September 30, 2023 and 2022, the Company paid $303 thousand in rent plus $ 35 thousand and $ 28 thousand, respectively, in operating expenses relating to this lease.

The right of use asset and lease liability balances as of September 30, 2023, recognized in the Consolidated Balance Sheet , was $ 3.3 million.

The Company occasionally leases billboard advertising, storage space and parking lot space from affiliates controlled by the Farahi Family Stockholders, and paid $ 104 thousand and $ 121 thousand, respectively, for the three-month periods and $ 373 thousand and $ 325 thousand, respectively, for the nine-month periods ended September 30, 2023 and 2022, for such leases.

The right of use asset and lease liability balances related to the billboard leases as of September 30, 2023, recognized in the Consolidated Balance Sheet, was $ 2.0 million.

LONG-TERM DEBT

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

Amended Credit Facility provides for a $ 100 million line of credit and matures on January 1, 2025.

As of June 30, 2023, the Company 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, the Company is 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, the Company’s Total Leverage Ratio and Fixed Charge Coverage Ratio were 0.2:1 and 9.3:1, respectively.

The Amended Credit Facility provides for a $ 100 million line of credit which matures on January 1, 2025.

As of September 30, 2023, the Company had an outstanding principal balance of $ 8 million under the Amended Credit Facility.

In addition to other customary covenants for a facility of this nature, as of September 30, 2023, the Company is 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 September 30, 2023, the Company’s Total Leverage Ratio and Fixed Charge Coverage Ratio were 0.05:1 and 14.73:1, 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 June 30, 2023, the interest rate was 6.20 %, or SOFR plus a 1.00 % margin.

As of September 30, 2023, the interest rate was 6.42 %, 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.

For the six months ended June 30, 2023 and 2022, the Company’s effective tax rate was 22.2 % and 17.8 %, respectively.

The effective tax rate for the six months ended June 30, 2023 and 2022 was impacted by excess tax benefit on stock option exercises, which were $ 0.4 million and $ 2.3 million for the six months ended June 30, 2023 and 2022, respectively.

For the nine months ended September 30, 2023 and 2022, the Company’s effective tax rate was 22.6 % and 19.8 %, respectively.

The effective tax rate for the nine months ended September 30, 2023 and 2022 was impacted by excess tax benefit on stock option exercises, which were $ 0.4 million and $ 2.3 million for the nine months ended September 30, 2023 and 2022, respectively.

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, 2023 and 2022.

No uncertain tax positions were recorded as of September 30, 2023 and 2022.

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

4 unchanged sentences

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.

As of June 30, 2023, we have an authorization to purchase up to 2,900,000 shares under the Repurchase Plan.

As of September 30, 2023, we have an authorization to purchase up to 2,900,000 shares under the Repurchase Plan.

LEGAL MATTERS

1 unchanged sentence

(“PCL”) filed a complaint in District Court, City and County of Denver, Colorado, against the Company and its Colorado subsidiaries, in connection with the Company’s now completed expansion of the Monarch Casino Resort Spa Black Hawk.

The case is captioned PCL Construction Services, Inc.

Monarch Growth Inc., et al.

2019CV33368 (the “First Denver Lawsuit”).

The complaint alleges, among other things, that the defendants breached the construction contract with PCL and certain implied warranties.

2 unchanged sentences

Following reassignment, the court set a new trial date of September 5, 2023.

Limited discovery and disputes regarding the scope of discovery remaining are 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.

In connection with the expansion of the Monarch Black Hawk, as described above, PCL and certain subcontractors have also 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.

Some of the subcontractors have recorded such liens in the property records of Gilpin County, Colorado.

On March 26, 2021, PCL filed a mechanics’ lien foreclosure action in District Court, County of Gilpin, Colorado, against the Company and its Colorado subsidiaries, in connection with the Company’s now completed expansion of the Monarch Casino Resort Spa Black Hawk.

The complaint essentially mirrors the claims and allegations made by PCL in the lawsuit it previously filed in the City and County of Denver, Colorado, Case No.

2019CV33368, as described above.

The lawsuit filed on March 26, 2021 includes an additional claim, however, for foreclosure of PCL’s purported mechanics’ lien against the property on which the Monarch Casino Resort Spa Black Hawk is situated (the “Property”).

On March 26, 2021, PCL filed a mechanics’ lien foreclosure action in the District Court, County of Gilpin, Colorado, against the Company and its Colorado subsidiaries, in connection with the Company’s now completed expansion of the Monarch Casino Resort Spa Black Hawk.

The case is captioned PCL Construction Services, Inc., v.

Monarch Growth Inc., et al.

2021CV30006 (the “Gilpin Lawsuit”).

The complaint essentially mirrors the claims and allegations made by PCL in the First Denver Lawsuit, as described above.

The Gilpin Lawsuit includes an additional claim, however, for foreclosure of PCL’s purported mechanics’ lien against the property on which the Monarch Casino Resort Spa Black Hawk is situated (the “Property”).

PCL also joined additional parties who may claim a purported lien against the Property, as defendants.

1 unchanged sentence

Many of the Company’s co-defendants have filed cross claims against Monarch for foreclosure of mechanics’ liens and related claims, including unjust enrichment.

Monarch filed its answer and counterclaims to PCL’s second amended complaint on July 15, 2021, but a trial of the matter has not been set.

Monarch filed its answer and counterclaims to PCL’s second amended complaint in the Gilpin Lawsuit on July 15, 2021, but a trial of the matter has not been set.

Monarch has also filed answers to all cross claims due to date, denying the claimants’ rights to relief.

Monarch anticipates filing further answers to additional cross claims, also denying the claimants’ rights to relief.

The case remains stayed pending the outcome of Case No.

The case remains stayed pending the outcome of the First Denver Lawsuit, Case No.

We are currently unable to determine the probability of the outcome or reasonably estimate the loss or gain, if any.

2 unchanged sentences

filed a complaint in District Court, City and County of Denver, Colorado, against PCL, in connection with the Company’s now completed expansion of the Monarch Casino Resort Spa Black Hawk.

The complaint alleges, among other things, that PCL breached the construction contract, duties of good faith and fair dealing, and implied and express warranties, and includes claims for monetary damages as well as equitable and declaratory relief.

On April 18, 2023, at the parties’ joint request, the Court ordered the matter stayed for ninety days from date of the stay order until July 17, 2023.

On July 17, 2023, PCL filed a motion to dismiss Monarch’s complaint.

Monarch has not yet filed its response to PCL’s motion to dismiss but intends to oppose the motion.

We are currently unable to determine the probability of the outcome or reasonably estimate the loss or gain, if any.

The Company recognized $ 1.2 million and $ 3.7 million in construction litigation expense relating to these lawsuits for the six months ended June 30, 2023 and 2022, respectively, which is included in Other operating items, net on the Consolidated Statements of Income.

The case is captioned Monarch Growth Inc., et al., v.

PCL Construction Services, Inc.

2023CV30458 (the “Second Denver Lawsuit”).The complaint alleges, among other things, that PCL breached the construction contract, duties of good faith and fair dealing, and implied and express warranties based on defective and/or nonconforming contruction work at the project, and includes claims for monetary damages as well as equitable and declaratory relief.

On April 18, 2023, at the parties’ joint request, the Court ordered the Second Denver Lawsuit stayed for ninety days from date of the stay order until July 17, 2023.

Following the expiration of the stay and the filing of a motion to dismiss by PCL, Monarch amended its complaint in the Second Denver Lawsuit.

On September 13, 2023, PCL filed a motion to dismiss Monarch’s amended complaint.

Monarch filed its response in opposition to PCL’s motion to dismiss on October 4, 2023.

The court has not yet resolved PCL’s motion to dismiss Monarch’s amended complaint, and we are currently unable to determine the probability of the outcome or reasonably estimate the loss or gain, if any.

Meanwhile, on September 5, 2023, trial commenced in the First Denver Lawsuit in the District Court for the City and County of Denver, Colorado.

After approximately 5 weeks, the trial has been recessed pending additional trial days allowed by the Court in late November.

Trial is currently set to resume on November 20, 2023 and conclude on November 28, 2023.

We remain unable to determine the probability of the outcome or reasonably estimate the loss or gain, if any, or determine when the court will resolve the claims currently being tried.

The Company recognized $ 4.1 million and $ 6.5 million in construction litigation expense relating to these lawsuits for the nine months ended September 30, 2023 and 2022, respectively, which is 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.

5 unchanged sentences

On June 15, 2023, the Company paid a cash dividend of $ 0.30 per share of its outstanding common stock, to stockholders of record on June 1, 2023.

On July 19, 2023, the Company announced a cash dividend of $ 0.30 per share of its outstanding common stock, payable on September 15, 2023, to stockholders of record on September 1, 2023.

On September 15, 2023, the Company paid a cash dividend of $ 0.30 per share of its outstanding common stock, to stockholders of record on September 1, 2023.

On October 18, 2023, the Company announced a cash dividend of $ 0.30 per share of its outstanding common stock, payable on December 15, 2023, to stockholders of record on December 1, 2023.

This cash dividend is part of the previously announced annual cash dividend of $ 1.20 per share payable in quarterly payments.

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