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c

United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from       to      .

Commission File No. 0-22088

Graphic

MONARCH CASINO & RESORT, INC.

(Exact name of registrant as specified in its charter)

Nevada

88-0300760

(State or Other Jurisdiction of

(I.R.S. Employer

Incorporation or Organization)

Identification No.)

3800 S. Virginia St.

Reno, Nevada

89502

(Address of Principal Executive Offices)

(ZIP Code)

Registrant’s telephone number, including area code: (775) 335-4600

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbols

Name of each exchange on which registered

Common Stock, $0.01 par value per share

MCRI

The Nasdaq Stock Market LLC

(Nasdaq-GS)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 18,452,117 shares of common stock are outstanding as of August 7, 2024.

TABLE OF CONTENTS

March 31

Item

Page
Number

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

3

Consolidated Statements of Income for the three and six months ended June 30, 2024 and 2023 (unaudited)

3

Consolidated Balance Sheets at June 30, 2024 (unaudited) and December 31, 2023

4

Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023 (unaudited)

5

Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (unaudited)

6

Notes to Consolidated Financial Statements (unaudited)

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3. Quantitative and Qualitative Disclosures About Market Risk

21

Item 4. Controls and Procedures

22

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

22

Item 1A. Risk Factors

22

Item 2. Unregistered Sales of Equity Securities and use of Proceeds

22

Item 5. Other Information

22

Item 6. Exhibits

23

Signatures

23

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

Three months ended

Six months ended

June 30, 

June 30, 

    

2024

    

2023

    

2024

    

2023

 

Revenues

Casino

$

70,977

$

68,855

$

140,413

$

135,760

Food and beverage

31,842

31,525

62,005

60,842

Hotel

19,731

18,094

36,505

33,565

Other

5,593

5,209

10,877

10,160

Net revenues

128,143

123,683

249,800

240,327

Operating expenses

Casino

26,773

25,746

53,125

50,998

Food and beverage

23,489

22,803

46,064

44,740

Hotel

6,607

6,541

12,585

12,931

Other

2,926

2,786

5,834

5,729

Selling, general and administrative

26,198

24,955

53,272

50,071

Depreciation and amortization

12,404

11,618

24,891

22,955

Other operating items, net

233

(474)

706

36

Total operating expenses

98,630

93,975

196,477

187,460

Income from operations

29,513

29,708

53,323

52,867

Other income (expense)

Interest expense, net

(211)

(780)

(204)

(1,367)

Income before income taxes

29,302

28,928

53,119

51,500

Provision for income taxes

(6,620)

(6,515)

(12,162)

(11,417)

Net income

$

22,682

$

22,413

$

40,957

$

40,083

Earnings per share of common stock

Net income

Basic

$

1.21

$

1.16

$

2.16

$

2.08

Diluted

$

1.19

$

1.14

$

2.12

$

2.04

Weighted average number of common shares and potential common shares outstanding

Basic

18,731

19,243

18,948

19,229

Diluted

19,090

19,618

19,315

19,636

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

3

MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except shares)

    

June 30, 2024

    

December 31, 2023

 

(Unaudited)

ASSETS

Current assets

Cash and cash equivalents

$

33,508

 

$

43,361

Receivables, net

9,861

 

11,990

Income taxes receivable

1,580

 

1,006

Inventories

8,099

 

7,614

Prepaid expenses

7,908

 

10,995

Total current assets

 

60,956

 

74,966

Property and equipment, net

 

586,091

 

580,497

Goodwill

 

25,111

 

25,111

Intangible assets, net

 

218

 

299

Total assets

$

672,376

 

$

680,873

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Current maturities of long-term debt

$

23,000

$

Accounts payable

17,398

 

23,092

Construction accounts payable

47,827

47,566

Accrued expenses

 

46,904

 

51,812

Short-term lease liability

938

897

Total current liabilities

 

136,067

 

123,367

 

Deferred income taxes

23,084

23,084

Long-term lease liability

13,537

14,021

Long-term debt

 

 

5,500

Other long-term liability

1,321

1,761

Total liabilities

 

174,009

 

167,733

Stockholders’ equity

 

Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued

 

Common stock, $.01 par value, 30,000,000 shares authorized; 19,206,377 shares issued and 18,409,671 outstanding at June 30, 2024; 19,154,031 shares issued and 19,091,497 outstanding at December 31, 2023

192

191

Additional paid-in capital

 

54,674

 

48,821

Treasury stock, 796,706 shares at June 30, 2024; 62,534 shares at December 31, 2023

(54,073)

(3,718)

Retained earnings

 

497,574

 

467,846

Total stockholders’ equity

 

498,367

 

513,140

Total liabilities and stockholders’ equity

$

672,376

 

$

680,873

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

4

MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except shares, Unaudited)

Common Stock

Additional

Shares

Paid-in

Retained

Treasury

    

Outstanding

    

Amount

    

Capital

    

Earnings

    

Stock

    

Total

Balance, January 1, 2024

 

19,091,497

 

$

191

 

$

48,821

 

$

467,846

 

$

(3,718)

 

$

513,140

Exercise of stock options, net

 

20,247

1

 

969

 

 

970

Stock-based compensation expense

 

 

 

1,778

 

 

 

1,778

Purchase of company common stock

(281,708)

(19,574)

(19,574)

Dividend payment

(5,676)

(5,676)

Net income

 

 

 

 

18,275

 

 

18,275

Balance, March 31, 2024

18,830,036

 

$

192

 

$

51,568

 

$

480,445

 

$

(23,292)

 

$

508,913

Exercise of stock options, net

 

32,099

 

1,333

 

 

1,333

Stock-based compensation expense

 

 

 

1,773

 

 

 

1,773

Purchase of company common stock

(452,464)

(30,781)

(30,781)

Dividend payment

(5,553)

(5,553)

Net income

 

 

 

 

22,682

 

 

22,682

Balance, June 30, 2024

 

18,409,671

 

$

192

 

$

54,674

 

$

497,574

 

$

(54,073)

 

$

498,367

Common Stock

Additional

Shares

Paid-in

Retained

Treasury

    

Outstanding

    

Amount

    

Capital

    

Earnings

    

Stock

    

Total

Balance, January 1, 2023

 

19,093,676

 

$

191

 

$

40,716

 

$

498,217

 

$

(170)

 

$

538,954

Exercise of stock options, net

 

37,965

 

808

 

 

108

916

Stock-based compensation expense

1,474

1,474

Dividend payment

(95,608)

(95,608)

Net income

 

 

 

17,670

 

 

17,670

Balance, March 31, 2023

 

19,131,641

 

$

191

 

$

42,998

 

$

420,279

 

$

(62)

 

$

463,406

Exercise of stock options, net

 

11,703

 

396

 

 

62

 

458

Stock-based compensation expense

 

 

 

1,276

 

 

 

1,276

Dividend payment

(5,741)

(5,741)

Net income

 

 

 

 

22,413

 

 

22,413

Balance, June 30, 2023

 

19,143,344

 

$

191

 

$

44,670

 

$

436,951

 

$

 

$

481,812

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

5

MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, Unaudited)

Six Months Ended June 30, 

    

2024

    

2023

 

Cash flows from operating activities:

Net income

$

40,957

 

$

40,083

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

Depreciation and amortization

 

24,891

 

22,955

Amortization of deferred loan costs

 

 

307

Stock-based compensation - stock options

 

3,551

 

2,750

Provision for bad debts

 

132

 

44

Loss on disposition of assets

 

63

 

58

Non-cash operating lease expense

16

10

Changes in operating assets and liabilities:

Receivables

1,997

1,462

Income taxes receivable

(574)

20,390

Inventories

(485)

392

Prepaid expenses

3,087

1,529

Accounts payable

 

(5,694)

 

616

Accrued expenses

 

(5,348)

 

(2,681)

Net cash provided by operating activities

 

62,593

 

87,915

Cash flows from investing activities:

Proceeds from sale of assets

 

49

 

91

Change in construction accounts payable

261

(2,508)

Acquisition of property and equipment

(30,974)

(23,202)

Net cash used in investing activities

 

(30,664)

 

(25,619)

Cash flows from financing activities:

Payroll taxes from net exercise of stock options

 

(38)

 

(99)

Proceeds from exercise of stock options

2,340

1,473

Line-of-credit borrowings

45,500

61,000

Line-of-credit payments

(28,000)

(20,000)

Principal payments on long-term debt

 

 

(7,000)

Payment of dividends

(11,229)

(101,349)

Purchase of company common stock

(50,355)

Net cash used in financing activities

 

(41,782)

 

(65,975)

Change in cash and cash equivalents

 

(9,853)

 

(3,679)

Cash and cash equivalents at beginning of period

 

43,361

 

38,779

Cash and cash equivalents at end of period

$

33,508

 

$

35,100

Supplemental disclosure of cash flow information:

Cash paid for interest

$

286

 

$

1,342

Cash paid for income taxes

$

12,740

 

$

14,766

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

6

MONARCH CASINO & RESORT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUARTERLY PERIOD ENDED JUNE 30, 2024

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation:

Monarch Casino & Resort, Inc. was incorporated in 1993. Unless otherwise indicated, “Monarch,” “us,” “we,” and the “Company” refer to Monarch Casino & Resort, Inc. and its subsidiaries. Monarch owns and operates the Atlantis Casino Resort Spa, a hotel and casino in Reno, Nevada (the “Atlantis”) and Monarch Casino Resort Spa Black Hawk, a hotel and casino in Black Hawk, Colorado (the “Monarch Black Hawk”). In addition, Monarch owns separate parcels of land located next to the Atlantis and a parcel of land with an industrial warehouse located between Denver, Colorado and Monarch Black Hawk. Monarch also owns Chicago Dogs Eatery, Inc. and Monarch Promotional Association, both of which were formed in relation to licensure requirements for extended hours of liquor operation in Black Hawk, Colorado.

The accompanying unaudited consolidated financial statements include the accounts of Monarch and its subsidiaries (the “Consolidated Financial Statements”). Intercompany balances and transactions are eliminated.

Interim Financial Statements:

The Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the management of the Company, all adjustments considered necessary for a fair presentation, consisting of normal recurring accruals, are reflected in the interim financial statements. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

The balance sheet at December 31, 2023, has been derived from the audited consolidated financial statements of the Company at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2023.

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

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.

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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 June 30, 2024, 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.

Inventories:

Inventories, consisting primarily of food, beverages, and retail merchandise, are stated at the lower of cost and net realizable value. Cost is determined by the weighted average and specific identification methods. Net realizable value is defined by the Financial Accounting Standards Board (“FASB”) as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.

Property and Equipment, net:

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

    

June 30, 2024

    

December 31, 2023

 

Land

$

34,688

$

34,688

Land improvements

 

11,045

 

11,045

Buildings

 

474,724

 

474,724

Building improvements

 

117,809

 

100,822

Furniture and equipment

 

255,289

 

254,486

Construction in progress

 

15,996

 

9,552

Right of use assets

14,415

14,874

Leasehold improvements

 

4,245

 

4,245

 

928,211

 

904,436

Less accumulated depreciation and amortization

 

(342,120)

 

(323,939)

Property and equipment, net

$

586,091

$

580,497

 

 

Property and equipment are stated at cost, less accumulated depreciation and amortization. Property and equipment is depreciated principally on a straight-line basis over its estimated useful lives as follows:

Land improvements

    

15

-

40

years

Buildings

 

30

-

40

years

Building improvements

 

5

-

40

years

Leasehold improvements

5

-

40

years

Furniture

 

5

-

10

years

Equipment

 

3

-

20

years

The Company evaluates property and equipment and other long-lived assets for impairment in accordance with the guidance for accounting for the impairment or disposal of long-lived assets.

For assets to be disposed of, the Company recognizes the asset to be sold at the lower of carrying value or fair value less costs of disposal. Fair value for assets to be disposed of is generally estimated based on comparable asset sales, solicited offers or a discounted cash flow model.

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For assets to be held and used, the Company reviews fixed assets for impairment indicators at the end of the fiscal year and 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. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. 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, 2024 and 2023, respectively, there were no impairment charges.

Goodwill:

The Company accounts for goodwill in accordance with ASC Topic 350, Intangibles-Goodwill and Other (“ASC Topic 350”). ASC Topic 350 gives companies the option to perform a qualitative assessment that may allow them to skip the quantitative test as appropriate. The Company tests its goodwill for impairment annually during the fourth quarter, 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 June 30, 2024, 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.

Revenue Recognition:

The majority of the Company’s revenue is recognized when products are delivered or services are performed. For certain revenue transactions (when a patron uses a club loyalty card), in accordance with Accounting Standard Update No. 2014-09 (“ASC 606”), a portion of the revenue is deferred until the points earned by the patron are redeemed or expire.

Casino revenue: Casino revenues represent the net win from gaming activity, which is the difference between the amounts won and lost, which represents the transaction price. Jackpots, other than the incremental amount of progressive jackpots, are recognized at the time they are won by customers. Funds deposited by customers in advance and outstanding chips and slot tickets in the customers’ possession are recognized as a liability until such amounts are redeemed or used in gaming play by the customer. Additionally, net win is reduced by the performance obligations for the players’ club program, progressive jackpots and any pre-arranged marker discounts. Progressive jackpot provisions are recognized in two components: 1) as wagers are made for the share of players’ wagers that are contributed to the progressive jackpot award, and 2) as jackpots are won for the portion of the progressive jackpot award contributed by the Company. Cash discounts and other cash incentives to guests related to gaming play are recorded as a reduction to gaming revenue.

Players’ Club Program: The Company operates a players’ club program under which as players perform gaming activities they earn and accumulate points, which may be redeemed for a variety of goods and services. Given the significance of the players’ club program and the ability for members to bank such points based on their past play, the Company has determined that players’ club program points granted in conjunction with gaming activity constitute a material right and, as such, represent a performance obligation associated with the gaming contracts. At the time points are earned, the Company recognizes deferred revenue at the standalone selling prices (“SSP”) of the goods and services that the points are expected to be redeemed for, with a corresponding decrease in gaming revenue. 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, 2024, the Company had estimated the obligations related to the players’ club program at $8.8 million, which is included in Accrued Expenses in the Liabilities and Stockholders’ Equity section in the Consolidated Balance Sheet.

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Food and Beverage, Hotel and Other (retail) Revenues: Food and Beverage, Hotel and Other Revenues in general are recognized when products are delivered or services are performed. The Company recognizes revenue related to the products and services associated with the players points’ redemptions at the time products are delivered or services are performed, with corresponding reduction in the deferred revenue, at SSP. Other complimentaries in conjunction with the gaming and other business are also valued at SSP. Hotel revenue is presented net of non-third-party rebates and commissions. The cost of providing these complimentary goods and services are included as expenses within their respective categories.

Other Revenues: Other revenues (excluding retail) primarily consist of commissions received on ATM transactions and cash advances, which are recorded on a net basis as the Company represents the agent in its relationship with the third-party service providers, and commissions and fees received in connection with pari-mutuel wagering, which are also recorded on a net basis.

Sales and other taxes: Sales taxes and other taxes collected from customers on behalf of governmental authorities are accounted for on a net basis and are not included in revenues or operating expenses. 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.

Other Operating items, net:

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

For the three months ended June 30, 2024, Other operating items, net, was $0.2 million and consisted of $0.1 million professional service fees relating to our construction litigation and $0.1 million loss on disposal of assets. 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 six months ended June 30, 2024, Other operating items, net, was $0.7 million and consisted of $0.6 million professional service fees relating to our construction litigation and $0.1 million loss on disposal of assets. 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.

Impact of Recently Adopted Accounting Standards:

Segment Reporting - Improvements to Reportable Segment Disclosures: In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.2023-07, Segment Reporting Topic 280. Under ASC 280 a public entity is required to disclose a measure of segment’s profit or loss, used by the chief operating decision maker to asses segment performance and make decisions about allocation of resources. In addition to segment’s revenue and measure for profit or loss, the standard requires enhanced disclosures of significant segment expenses. The amendments provide new segment disclosure requirements for entities with a single reportable segment. This guidance is effective for annual reporting periods beginning after December 15, 2023, and interim reporting periods after December 15, 2024. Early adoption is permitted and retrospective application is required for all periods presented. The Company is currently evaluating the impact of adopting this guidance on its Consolidated Financial Statements and disclosures included within Notes to Consolidated Financial Statements.

Income Tax—Improvements to Income Tax Disclosures: In December 2023, the FASB issued ASU No. 2023-09, Income Taxes Topic 740, which requires enhanced disclosures, including specific categories and disaggregation of information in the effective tax rate reconciliation, disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. This guidance is effective for annual reporting periods beginning after December 15, 2024. Early adoption is permitted and should be applied on a prospective basis, however retrospective application is permitted. The Company is currently evaluating the impact of adopting this guidance on its Consolidated Financial Statements and disclosures included within Notes to Consolidated Financial Statements.

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A variety of proposed or otherwise potential accounting standards are currently under review and study by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any, the implementation of any such proposed or revised standards would have on the Company’s Consolidated Financial Statements.

NOTE 2. ACCOUNTING FOR LEASES

For operating 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. 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 June 30, 2024, 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, 2024, was 4.33%. There were no new leases entered into in the second quarter of 2024.

The weighted-average remaining lease term of the leases presented in the lease liability as of June 30, 2024, was 16.86 years.

Cash paid related to the operating leases presented in the lease liability for the six months ended June 30, 2024 and 2023, was $0.8 million and $0.6 million, respectively.

NOTE 3. STOCK-BASED COMPENSATION

In accordance with ASC 718, the Company records any excess tax benefits or deficiencies from its equity awards in its Consolidated Statements of Income in the reporting periods in which vesting occurs. As a result, the Company’s income tax expense and associated effective tax rate are impacted by fluctuations in stock price between the grant dates and vesting dates of equity awards.

Reported stock-based compensation expense was classified as follows (in thousands):

Three months ended

Six months ended

June 30, 

June 30, 

    

2024

    

2023

    

2024

    

2023

 

Casino

$

125

 

$

(2)

 

$

259

 

$

151

 

Food and beverage

 

59

 

(11)

 

41

 

29

Hotel

 

72

 

67

 

131

 

133

Selling, general and administrative

 

1,517

 

1,222

 

3,120

 

2,437

Total stock-based compensation, before taxes

 

1,773

 

1,276

 

3,551

 

2,750

Tax benefit

 

(372)

 

(268)

 

(745)

 

(578)

Total stock-based compensation, net of tax

$

1,401

 

$

1,008

 

$

2,806

 

$

2,172

 

NOTE 4. EARNINGS PER SHARE

Basic earnings per share is computed by dividing reported net earnings by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflect the additional dilution for all potentially dilutive securities such as stock options. The following is a reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations (shares in thousands):

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Three months ended June 30, 

2024

2023

Per Share

Per Share

    

Shares

Amount

Shares

    

Amount

Basic

 

18,731

$

1.21

19,243

 

$

1.16

Effect of dilutive stock options

 

359

 

(0.02)

375

 

(0.02)

Diluted

 

19,090

$

1.19

19,618

 

$

1.14

Six months ended June 30, 

2024

2023

Per Share

Per Share

    

Shares

    

Amount

    

Shares

    

Amount

Basic

 

18,948

 

$

2.16

 

19,229

 

$

2.08

Effect of dilutive stock options

 

367

 

(0.04)

 

407

 

(0.04)

Diluted

 

19,315

 

$

2.12

 

19,636

 

$

2.04

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, 2024 and 2023, options for approximately 955 thousand and 647 thousand shares, respectively, were excluded from the computation. For the six months ended June 30, 2024 and 2023, options for approximately 912 thousand and 578 thousand shares, respectively, were excluded from the computation.

NOTE 5. RELATED PARTY TRANSACTIONS

The shopping center adjacent to the Atlantis (the “Shopping Center”) is owned by Biggest Little Investments, L.P. (“BLI”). John Farahi and Bob Farahi, Co-Chairmen of the Board and executive officers of the Company, and Ben Farahi have significant holdings (the “Farahi Family Stockholders”) in Monarch and each also beneficially owns limited partnership interests in BLI. Maxum LLC is the sole general partner of BLI, and Ben Farahi is the sole managing member of Maxum LLC. Neither John Farahi nor Bob Farahi has any management or operational control over BLI or the Shopping Center. Until May 2006, Ben Farahi held the positions of Co-Chairman of the Board, Secretary, Treasurer and Chief Financial Officer of the Company.

On August 28, 2015, Monarch, through its subsidiary Golden Road Motor Inn, Inc., entered into a 20-year lease agreement with BLI for a portion of the Shopping Center (the “Parking Lot Lease”). This lease gives the Atlantis the right to use a parcel, approximately 4.2 acres, adjacent to the Atlantis. The primary purpose of the Parking Lot Lease is to provide additional, convenient, Atlantis surface parking. The minimum annual rent under the Parking Lot Lease is $695 thousand commencing on November 17, 2015. The minimum annual rent is subject to a cost of living adjustment increase on each five-year anniversary. In addition, the Company is responsible for the payment of property taxes, utilities and maintenance expenses related to the leased property. The Company has an option to renew the Parking Lot Lease for an additional ten-year term. 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, 2024 and 2023, the Company paid $187 thousand in rent, plus $1 thousand in operating expenses relating to this lease. For each of the six-month periods ended June 30, 2024 and 2023, the Company paid $374 thousand in rent, plus $9 thousand in operating expenses relating to this lease The right of use asset and lease liability balances as of June 30, 2024, recognized in the Consolidated Balance Sheet, was $9.6 million.

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In addition, the Atlantis shares a driveway with the Shopping Center and leases approximately 37,400 square feet from BLI (the “Driveway Lease”) for an initial lease term of 15 years, which commenced on September 30, 2004, at an original annual rent of $300 thousand plus common area expenses. The annual rent is subject to a cost of living adjustment increase on each five-year anniversary of the Driveway Lease. Effective August 28, 2015, in connection with the Company entering into the Parking Lot Lease, the Driveway Lease was amended to: (i) make the Company solely responsible for the operation and maintenance costs of the shared driveway (including the fountains thereon); (ii) eliminate the Company’s obligation to reimburse the Shopping Center for its proportionate share of common area expenses; and (iii) exercise the three successive five-year renewal terms beyond the initial 15-year term in the existing Driveway Lease. 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, 2024 and 2023, the Company paid $101 thousand in rent plus $11 thousand and $9 thousand, respectively, in operating expenses relating to this lease. For each of the six-month periods ended June 30, 2024 and 2023, the Company paid $202 thousand in rent plus $24 thousand and $21 thousand, respectively, in operating expenses relating to this lease. The right of use asset and lease liability balances as of June 30, 2024, recognized in the Consolidated Balance Sheet, was $3.1 million.

The Company occasionally leases billboard advertising, storage space and parking lot space from affiliates controlled by the Farahi Family Stockholders, and paid $125 thousand and $137 thousand, respectively, for the three-month periods ended June 30, 2024 and 2023, and $257 thousand and $269 thousands, respectively, for the six-month periods ended June 30, 2024 and 2023, for such leases.

NOTE 6. 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. The Amended Credit Facility provides for a $100 million line of credit which matures on January 1, 2025.

As of June 30, 2024, the Company had an outstanding principal balance of $23.0 million under the Amended Credit Facility.

In addition to other customary covenants for a facility of this nature, as of June 30, 2024, 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, 2024, the Company’s Total Leverage Ratio and Fixed Charge Coverage Ratio were 0.13:1 and 88.27:1, 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%. The applicable margins will vary depending on the Company’s leverage ratio. 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, 2024, the interest rate was approximately 5.4%, 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.

NOTE 7. TAXES

For the six months ended June 30, 2024 and 2023, the Company’s effective tax rate was 22.9% and 22.2%, 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, 2024 and 2023. No change in uncertain tax positions is anticipated over the next twelve months.

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NOTE 8. STOCK REPURCHASE PLAN

On October 22, 2014, the board of directors of Monarch authorized a stock repurchase plan (the “Repurchase Plan”). Under the Repurchase Plan, the board of directors authorized a program to repurchase up to 3,000,000 shares of the Company’s common stock in the open market or in privately negotiated transactions from time to time, in compliance with Rule 10b-18 of the Securities and Exchange Act of 1934, as amended, subject to market conditions, applicable legal requirements and other factors. The Repurchase Plan does not obligate the Company to acquire any particular amount of common stock and the plan may be suspended at any time at the Company’s discretion, and it will continue until exhausted. The actual timing, number and value of shares repurchased under the repurchase program will be determined by management at its discretion and will depend on a number of factors, including the market price of the Company’s stock, general market economic conditions and applicable legal requirements.

In the second quarter of 2024, the Company purchased 452,464 shares of its common stock on the open market for an aggregate amount of $30.5 million under its existing Repurchase Plan. As of June 30, 2024, we have an authorization to purchase up to 2,081,325 shares under the Repurchase Plan.

NOTE 9. LEGAL MATTERS

On August 30, 2019, PCL Construction Services, Inc. (“PCL”) filed a complaint in District Court, City and County of Denver, Colorado, against the Company and its Colorado subsidiaries, in connection with the Company’s now completed expansion of the Monarch Casino Resort Spa Black Hawk (the “Project”). The case is captioned PCL Construction Services, Inc. v. Monarch Growth Inc., et al., Case No. 2019CV33368 (the “First Denver Lawsuit”). The complaint alleges, among other things, that the defendants breached the construction contract with PCL and certain implied warranties. On December 5, 2019, the Company filed its answer and counterclaim, which alleges, among other items, that PCL breached the construction contract, duties of good faith and fair dealing, and implied and express warranties, made fraudulent or negligent misrepresentations on which the Company and its Colorado subsidiaries relied, and included claims for monetary damages as well as equitable and declaratory relief.

On September 5, 2023, trial commenced in the First Denver Lawsuit in the District Court for the City and County of Denver, Colorado. The bench trial concluded on November 22, 2023, after 28 total court days. PCL and the Company each submitted proposed Findings of Fact, Conclusions of Law and Order for the Court’s consideration on February 7, 2024. The Parties are awaiting a decision by the Court, and 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 the parties tried.

Prior to the trial of the First Denver Lawsuit, 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, also in connection with the Project. The case is captioned PCL Construction Services, Inc., v. Monarch Growth Inc., et al., Case No. 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. Effective May 10, 2021, PCL filed its second amended complaint, joining more such parties as defendants. Many of the Company’s co-defendants have filed cross claims against Monarch for foreclosure of their own mechanics’ liens and related claims, including unjust enrichment.

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, however, pending the outcome of the First Denver Lawsuit, Case No. 2019CV33368. We are currently unable to determine the probability of the outcome or reasonably estimate the loss or gain, if any.

14

On February 9, 2023, Monarch Growth, Inc., Monarch Casino & Resort, Inc., and Monarch Black Hawk, Inc. filed a complaint in District Court, City and County of Denver, Colorado, against PCL, in connection with the Project. The case is captioned Monarch Growth Inc., et al., v. PCL Construction Services, Inc., Case No. 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 construction work at the project, and includes claims for monetary damages as well as equitable and declaratory relief. Monarch alleges that the claims asserted in the Second Denver Lawsuit were neither known nor reasonably discoverable in time to be included in the First Denver Lawsuit.

On March 26, 2024, the Court set the Second Denver Lawsuit for a seven-day bench trial to commence on April 7, 2025. The parties are conducting discovery, and we are currently unable to determine the probability of the outcome or reasonably estimate the loss or gain, if any.

The Company recognized $0.6 million and $1.2 million in construction litigation expense relating to these lawsuits for the six months ended June 30, 2024 and 2023, 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. Management believes that the amount of any reasonably possible or probable loss for such other known matters would not have a material adverse impact on our financial conditions, cash flows or results of operations; however, the outcome of these actions is inherently difficult to predict.

NOTE 10. DIVIDENDS

On February 7, 2023, the Company announced that the Company’s Board of Directors declared a one-time cash dividend (the “One-time Dividend”) of $5.00 per share of its outstanding common stock, par value $0.01 per share (“Common Stock”), paid to the stockholders of record of the Company on March 1, 2023 (the “Record Date”), payable on March 15, 2023 (the “Payment Date”).

In addition to the One-time Dividend, the Board of Directors approved the initiation of an Annual Dividend policy for the payment of an annual dividend in the amount of $1.20 per outstanding share of Common Stock, commencing in the second quarter of 2023. These dividends will be paid quarterly on the 15th day of the third month of the applicable calendar quarter (or, if such date is not a trading day, then the first trading day immediately thereafter such date) to those stockholders of record on the 1st day of the third month of the applicable calendar quarter (or, if such date is not a trading day, then the first trading day immediately thereafter such date).

On June 15, 2024, the Company paid a cash dividend of $0.30 per share of its outstanding common stock, to stockholders of record on June 1, 2024. This cash dividend was part of the previously announced annual cash dividend of $1.20 per share payable in quarterly payments.

On July 24, 2024, the Company announced a cash dividend of $0.30 per share of its outstanding common stock, payable on September 15, 2024, to stockholders of record on September 1, 2024. This cash dividend is part of the previously announced annual cash dividend of $1.20 per share payable in quarterly payments.

The Company’s declaration of each cash dividend amount shall be subject to the Board’s review of the then-current financial statements of the Company, available acquisition opportunities and other prudent uses of the Company’s cash resources. As such, the Board of Directors may suspend the dividend program at any time and no assurances can be given that a quarterly dividend will be paid.

15

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless otherwise indicated, “Monarch,” “Company,” “we,” “our,” and “us” refer to Monarch Casino & Resort, Inc. and its subsidiaries.

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “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) our belief regarding the exposure of our cash and accounts receivable to credit risk; (ii) 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; (iii) our beliefs regarding the quality of our properties as key factors in each of their long-term success; (iv) our expectations regarding the employment growth in the Reno market, the tight labor market (including wage inflation) and its effect on our business at Atlantis; (v) 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; (vi) our expectations regarding our business prospects, strategies, estimates and outlook; (vii) our expectations regarding the positioning of our properties to benefit from future macro and local economic growth; (viii) our expectations regarding future capital requirements; (ix) our anticipated sources of funds and adequacy of such funds to meet our debt obligations and capital requirements; and (x) our expectations regarding legal and other matters.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. 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 impact of the events occurring in the Middle East and the conflict taking place in Israel, as well as 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, 2023, 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, 2023, 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. We undertake no obligation to publicly update or revise any forward-looking statements as a result of future developments, events or conditions, except as required by law. New risks emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ significantly from those forecast in any forward-looking statements.

OVERVIEW

Monarch was incorporated in the state of Nevada in 1993. We own and operate the Atlantis Casino Resort Spa, a hotel and casino in Reno, Nevada (the “Atlantis”) and Monarch Casino Resort Spa Black Hawk (the “Monarch Black Hawk”), a casino in Black Hawk, Colorado. In addition, we own separate parcels of land located next to the Atlantis and a parcel of land with an industrial warehouse located between Denver, Colorado and Monarch Black Hawk.

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We earn revenues, operating income and cash flow from Atlantis and Monarch Black Hawk, primarily through our casino, food and beverage, and hotel operations. We focus on delivering exceptional service and value to our guests. Our hands-on management style focuses on customer services and cost efficiencies.

Atlantis: We continuously upgrade our property. With quality gaming, hotel and dining products, we believe the Atlantis is well positioned to benefit from future macro and local economic growth. Reno remains a healthy local-oriented market, but at the same time a very competitive market. The market’s employment growth is broad based and we expect this positive indicator will support the continued strength of our business at Atlantis. At the same time, the tight employment environment has created labor challenges, including wage inflation, which we continue to actively manage. In addition, we are facing increased competition from the continued growth of California tribal gaming and an extremely competitive promotional environment in Northern Nevada. The increase in the labor costs and the other inflationary pressures, combined with continued aggressive marketing programs by our competitors, has applied pressure on Atlantis’ revenue growth, operating costs and profit margins.

Monarch Black Hawk: Monarch Black Hawk is the first property encountered by visitors arriving from Denver and other major population centers via Colorado State Highway 119. The Denver metro economy remains strong with higher than the national average per capita personal income. At the beginning of 2022, we completed the master planned renovation and expansion, transforming the property into a world-class resort. Monarch Black Hawk is positioned to leverage the expanded operation, the elimination of betting limits and new game types in Black Hawk, Colorado, as well as to benefit from the growing state-wide online and retail sports betting. Monarch Black Hawk also is experiencing labor challenges, resulting from the distance to the staffing filter markets of Golden, Colorado and the Denver Metro area. We continue to attract high-value players from across Colorado’s Front Range, who had previously traveled to other markets, such as Las Vegas, for a high-end casino entertainment experience. We believe that the quality of our expanded product and exceptional guest service will meet the demand of the high-end segment of the market and will grow revenue and accelerate market share.

KEY PERFORMANCE INDICATORS

We use the following Key Performance Indicators (“KPI”) to manage our operation and measure our performance:

Gaming revenue KPI: Our management reviews on a consistent basis the volume metrics and hold percentage metrics for each gaming area. The main volume measurements are slot coin-in, table games drop, sportsbook write and keno write. Slot coin-in represents the dollar amount wagered in slot machines, including free promotional wagers. Table games drop represents the total amount of cash and net markers deposited in the table drop box. Keno write and sportsbook write represents the dollar amount wagered at our counters, along with sportsbook write made through our mobile wagering system. Volume metrics are important in managing the business, as our gaming win is affected by actual hold percentage, which in general varies from the expected hold percentage and historical hold percentage. Gaming win represents the amount of wagers retained by us. Hold percentage represents win as a percentage of slot coin-in, table game drop, sportsbook write, or keno write. Our win and hold percentages are calculated before discounts, commissions, deferring revenue associated with our loyalty programs and allocating casino revenues related to goods and services provided to patrons on a complimentary basis.

Food and Beverage revenue KPI: The main KPIs in managing our food and beverage (“F&B”) operations are covers and average revenue per cover. A cover represents the number of guests served and is an indicator of volume. Average revenue per cover represents the average amount spent per food and beverage outlets’ served guests. Changes in the average revenue per cover might be an indicator for changes in menu offerings, changes in menu prices or may indicate changes in our guests’ preferences and purchasing habits.

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Hotel revenue KPI: The main KPIs used in managing our hotel operation are the occupancy rate (a volume indicator), which is the average percentage of available hotel rooms occupied during a period, and the average daily rate (“ADR”, a price indicator), which is the average price per sold room. Available rooms exclude those rooms unavailable for occupancy during the period due to renovation, development, or other requirements. Sold rooms include rooms where the guests do not show up for their stay and lose their deposit. The calculations of the occupancy rate and ADR include the impact of rooms provided on a complimentary basis. Revenue per available room ("RevPAR") represents total hotel revenue per available room and is a representation of the occupancy rate, ADR and miscellaneous hotel sales.

Operating margins: Our management is consistently focused on controlling expenses and finding cost savings, without affecting the quality of the product we offer and our guests’ services and experience. We measure our performance using expense margin, which is a percentage of direct expenses, including labor, cost of product and any other operating expenses related to the gaming, food and beverage, or hotel operation to the net gaming, food and beverage, or hotel revenues. Selling, general and administrative (“SG&A”) margin represents SG&A expenses for a period as a percentage of total net revenue for a period. In managing the food and beverage operation, we use Cost Of Goods Sold (“COGS”) percentage, which represents a percentage of product cost to the food and beverage revenue and is a measurement of commodity prices and menu sales prices.

Our management evaluates the KPI as compared to prior periods, the peer group, or market, as well as for any trends.

RESULTS OF OPERATIONS

Comparison of Operating Results for the Three-Month Periods Ended June 30, 2024 and 2023

For the three months ended June 30, 2024, our net income totaled $22.7 million, or $1.19 per diluted share, compared to net income of $22.4 million, or $1.14 per diluted share for the same period in 2023, reflecting a 1.2% and 4.4% increase in net income and diluted earnings per share, respectively. Net revenues in the three months ended June 30, 2024, totaled $128.1 million, an increase of $4.5 million, or 3.6%, compared to the three months ended June 30, 2023. Income from operations for the three months ended June 30, 2024, totaled $29.5 million compared to income from operations of $29.7 million for the same period in 2023.

Casino revenue increased 3.1% in the second quarter of 2024 compared to the second quarter of 2023. The increase in casino revenue was driven primarily by the continued increase in market share at our property in Black Hawk. This was partially offset by an increase in promotional allowances at both properties. Casino operating expense as a percentage of casino revenue increased to 37.7% for the three months ended June 30, 2024, compared to 37.4% for the three months ended June 30, 2023, primarily due to an increase in labor expense.

Food and beverage revenue for the second quarter of 2024 increased 1.0% compared to the second quarter of 2023 due to a 1.5% increase in food and beverage revenue per cover. Food and beverage covers declined 0.5%. Food and beverage operating expense as a percentage of food and beverage revenue in the second quarters of 2024 increased to 73.8% compared to 72.3% in the second quarter of 2023 as a result of an increase in COGS and an increase in operating expense.

Hotel revenue increased 9.0% in the second quarter of 2024 compared to the same quarter of 2023 primarily as a result of ADR increased by $9.00 ($185.34 in the second quarter of 2024 and $176.34 in the second quarter of 2023). Hotel occupancy increased to 85.5% during the second quarter of 2024 compared to 83.4% during the second quarter of 2023. RevPAR was $172.06 and $162.33 for the three months ended June 30, 2024 and 2023, respectively. Hotel operating expense as a percentage of hotel revenue decreased to 33.5% in the second quarter of 2024 compared to 36.2% for the comparable prior year period primarily as a result of increase in ADR and improved cost management.

Other revenue increased 7.4% in the second quarter of 2024 compared to the same prior year period primarily due to an increase in spa revenues at both properties.

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SG&A expense increased to $26.2 million in the second quarter of 2024 from $25.0 million in the second quarter of 2023 driven primarily by: $0.6 million increase in labor expense; $0.4 million increase in repair and maintenance expense; and $0.2 million increase in advertising and marketing expenses. As a percentage of net revenue, SG&A expense increased to 20.4% in the second quarter of 2024 compared to 20.2% in the same period in 2023.

Depreciation and amortization expense increased to $12.4 million for the three months ended June 30, 2024, compared to $11.6 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 2024 we recognized $0.1 million in professional services fees relating to our construction litigation and $0.1 million in loss on disposal of assets. During the second quarter of 2023, we recognized $0.6 million in professional service fees relating to our construction litigation, $0.1 million in loss on disposal of assets and $1.2 million in proceeds from a sale of COVID closure related insurance claim.

In the second quarter of 2024 and 2023, we recognized $0.2 and $0.8 million of interest expense, net of interest income, respectively. 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, 2024 and 2023

For the six months ended June 30, 2024, we had a net income of $41.0 million, or $2.12 per diluted share, compared to net income of $40.1 million, or $2.04 per diluted share for the same period in 2023, reflecting a 2.2% and 3.9% increase in net income and diluted earnings per share, respectively. Net revenues in the six months ended June 30, 2024, totaled $249.8 million, an increase of 3.9%, compared to the six months ended June 30, 2023. Income from operations for the six months ended June 30, 2024 totaled $53.3 million compared to $52.9 million income from operations for the same period in 2023.

Casino revenue increased 3.4% in the first six months of 2024 compared to the first six months of 2023 and was driven by an increase in market share at Monarch Black Hawk. Casino operating expense as a percentage of casino revenue increased to 37.8% for the six months ended June 30, 2024 compared to 37.6% for the six months ended June 30, 2023 primarily as a result of increase in labor expense and increase in promotional allowances.

Food and beverage revenue for the first six months of 2024 increased 1.9% compared to the 2023 same period due to a 2.0% increase in food and beverage revenue per cover. Food and beverage covers year-over-year are flat. Food and beverage operating expense as a percentage of food and beverage revenue increased in the first six months of 2024 to 74.3% from 73.5% for the same period in 2023 primarily as a result of an increase in COGS.

Hotel revenue increased 8.8% in the first six months of 2024 compared to the first six months of 2023 primarily due to an increase in ADR by $14.58, from $168.96 in the first six months of 2023 to $183.54 in the first six months of 2024, partially offset by a decrease in occupancy from 82.8% during the first six months of 2023 to 82.2% during the same period of 2024. RevPAR was $162.96 for the first six months of 2024 and $154.67 for the first six months of 2023. Hotel operating expense as a percentage of hotel revenue decreased to 34.5% in the first six months of 2024 compared to 38.5% for the comparable prior year period primarily as a result of increase in ADR and improved cost management.

Other revenue increased 7.1% in the first six months of 2024 compared to the same prior year period.

SG&A expense increased to $53.3 million in the first six months of 2024 from $50.1 million in the first six months of 2023 primarily due to: $2.5 million increase in labor expense; $0.5 million increase in repair and maintenance expense; and $0.6 million increase in advertising and marketing expenses, partially offset by $0.4 million decrease in utility expense. As a percentage of net revenue, SG&A expense increased to 21.3% in the first six months of 2024 compared to 20.8% in the same period in 2023.

Depreciation and amortization expense increased to $24.9 million for the six months ended June 30, 2024 compared to $23.0 million for the same prior year period, due to new assets placed into service with the ongoing renovation at Atlantis.

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During the first six months of 2024 we recognized $0.6 million in professional services fees relating to our construction litigation and $0.1 million in loss on disposal of assets. 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 a COVID closure related insurance claim.

During the first six months of 2024, we expensed $0.2 million of interest, net of interest income. During the first six months of 2023, we expensed $1.4 million of interest, net of interest income. 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 six-month periods ended June 30, 2024 and 2023 totaled $30.7 million and $25.6 million, respectively. During the six-month period ended June 30, 2024, our capital expenditures related primarily to the redesign and upgrade of hotel rooms in the third tower 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, 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. Capital expenditures during each of the first six months of 2024 and 2023 were funded from cash on hand, operating cash flows and borrowings against the Company’s credit facility.

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 six months ended June 30, 2024, net cash provided by operating activities totaled $62.6 million, compared to net cash provided by operating activities of $87.9 million in the same prior year period. This decrease was primarily a result of the decrease in income tax receivable as a result of receipt of an income tax refund in the second quarter of 2023 and change in working capital, offset by an increases in depreciation expense, net income, and stock options expense.

Net cash used in investing activities totaled $30.7 million and $25.6 million during the six months ended June 30, 2024 and 2023, respectively. Net cash used in investing activities during the first six months of 2024 consisted primarily of cash used for the redesign and upgrade of hotel rooms in the third tower 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 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 financing activities in the first six months of 2024 totaled $41.8 million and consisted of $50.4 million cash used for purchase of Company stock under the Repurchase Plan and $11.2 million used for payment of dividends, partially offset by $17.5 million of borrowings under the Amended Credit Facility, net of the payments to the lender under the Amended Credit Facility and $2.3 million of net proceeds from stock options exercise. 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.

Amended Credit Facility

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

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As of June 30, 2024, we had an outstanding principal balance of $23.0 million under the Amended Credit Facility.

In addition to other customary covenants for a facility of this nature, as of June 30, 2024, 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, 2024, our Total Leverage Ratio and Fixed Charge Coverage Ratio were 0.04:1 and 88.27:1, 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%. The applicable margins will vary depending on the Company’s leverage ratio. 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, 2024, the interest rate was 5.4%, 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 flows will be sufficient to sustain operations for the twelve months from the filing of this Form 10-Q for the quarter ended June 30, 2024 and fulfill our capital expenditure plans and authorized dividend distributions. 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, 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.

CRITICAL ACCOUNTING POLICIES

A description of our critical accounting policies and estimates can be found in Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2023 Form 10-K. For a more extensive discussion of our accounting policies, see Note 1. “Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in our 2023 Form 10-K filed with the SEC on February 28, 2024.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in interest rates, foreign currency exchange rates and commodity prices. Our current primary market risk exposure is interest rate risk relating to the impact of interest rate movements under our Amended Credit Facility.

As of June 30, 2024, we had $23.0 million of outstanding balance under our Amended Credit Facility. A hypothetical 1% increase in the interest rate on the balance outstanding under the Amended Credit Facility at June 30, 2024, would have resulted in a change in our annual interest cost of approximately $0.2 million. See “Liquidity and Capital Resources” for further discussion of our Amended Credit Facility and capital structure.

We have not entered into derivative financial instruments for trading or speculative purposes.

We do not have any cash or cash equivalents as of June 30, 2024 that are subject to market risk.

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ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”), an evaluation was carried out by our management, with the participation of our Chief Executive Officer and our Chief Accounting Officer, of the effectiveness of our disclosure controls and procedures (as defined by Rule 13a-15(e) under the Exchange Act). Based upon the evaluation, our Chief Executive Officer and Chief Accounting Officer concluded that our disclosure controls and procedures were effective as of the Evaluation Date. During the quarter ended June 30, 2024, there were no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth in Note 9 "Legal Matters” to our consolidated financial statements in Part I, Item 1 of this Form 10-Q is incorporated by reference herein.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors we previously disclosed in Item 1A of our 2023 Form 10-K.

We encourage investors to review the risks and uncertainties relating to our business disclosed under the heading Risk Factors or otherwise in the 2023 Form 10-K, as well as those contained in Part I - Forward-Looking Statements thereof, as revised or supplemented by our Quarterly Reports filed with the SEC since the filing of the 2023 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table presents the number and average price of shares purchased in each fiscal month of the quarter ended June 30, 2024:

    

Total number of shares purchased (1)

    

Average price paid per share (2)

Total number of shares purchased as part of publicly announced plans or programs (1) (2)

Maximum number of shares that may yet be purchased under the plans or programs (2)

April 1, 2024 - April 30, 2024

76,399

$

68.42

542,610

2,457,390

May 1, 2024 - May 31, 2024

266,775

67.30

809,385

2,190,615

June 1, 2024 - June 30, 2024

109,290

66.87

918,675

2,081,325

Total

452,464

$

67.39

918,675

2,081,325

(1)This amount represents a repurchase pursuant to our Repurchase Plan, see Note 8. STOCK REPURCHASE PLAN.
(2)In the second quarter of 2024, under the authority of the Repurchase Plan, the Company purchased 452,464 shares at average price between $67.90 and $69.60 per share on the open market.

ITEM 5. OTHER INFORMATION

During the quarter ended June 30, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (in each case, as defined in Item 408 of Regulation S-K).

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ITEM 6. EXHIBITS

Exhibit No

    

Description

31.1*

Certification of Principal Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*

Certification of Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**

Certification of Principal Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**

Certification of Principal Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*

Inline XBRL Instance - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH*

Inline XBRL Taxonomy Extension Schema

101.CAL*

Inline XBRL Taxonomy Extension Calculation

101.DEF*

Inline XBRL Taxonomy Extension Definition

101.LAB*

Inline XBRL Taxonomy Extension Labels

101.PRE*

104

Inline XBRL Taxonomy Extension Presentation

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MONARCH CASINO & RESORT, INC.

(Registrant)

Date: August 8, 2024

By:

/s/ EDWIN S. KOENIG

Edwin S. Koenig, Chief Accounting Officer

(Principal Financial and Accounting Officer and Duly Authorized Officer)

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EXHIBIT 31.1

Certification of Principal Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, John Farahi, Chief Executive Officer of Monarch Casino & Resort, Inc., certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Monarch Casino & Resort, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

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Date: August 8, 2024

By:

/s/ John Farahi

John Farahi

Chief Executive Officer


EXHIBIT 31.2

Certification of Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Edwin S. Koenig, Chief Accounting Officer of Monarch Casino & Resort, Inc., certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Monarch Casino & Resort, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2024

By:

/s/ Edwin S. Koenig

Edwin S. Koenig

Principal Financial and Accounting Officer


EXHIBIT 32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, John Farahi, Chief Executive Officer of Monarch Casino & Resort, Inc. (the “Company”), hereby certify, that, to my knowledge:

1.The Quarterly Report on Form 10-Q for the period ended June 30, 2024 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/S/ JOHN FARAHI

John Farahi

Chief Executive Officer

August 8, 2024


EXHIBIT 32.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Edwin S. Koenig, Chief Accounting Officer of Monarch Casino & Resort, Inc. (the “Company”), hereby certify, that, to my knowledge:

1.The Quarterly Report on Form 10-Q for the period ended June 30, 2024 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/S/ EDWIN S. KOENIG

Edwin S. Koenig

Principal Financial and Accounting Officer

August 8, 2024


v3.24.2.u1
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2024
Aug. 07, 2024
Document and Entity Information    
Document Type 10-Q  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Jun. 30, 2024  
Entity File Number 0-22088  
Entity Registrant Name MONARCH CASINO & RESORT, INC  
Entity Incorporation, State or Country Code NV  
Entity Tax Identification Number 88-0300760  
Entity Address, Address Line One 3800 S. Virginia St.  
Entity Address, City or Town Reno  
Entity Address, State or Province NV  
Entity Address, Postal Zip Code 89502  
City Area Code 775  
Local Phone Number 335-4600  
Title of 12(b) Security Common Stock, $0.01 par value per share  
Trading Symbol MCRI  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   18,452,117
Entity Central Index Key 0000907242  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2024  
Document Fiscal Period Focus Q2  
Amendment Flag false  
v3.24.2.u1
CONSOLIDATED STATEMENTS OF INCOME - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Revenues        
Net revenues $ 128,143 $ 123,683 $ 249,800 $ 240,327
Operating expenses        
Selling, general and administrative 26,198 24,955 53,272 50,071
Depreciation and amortization 12,404 11,618 24,891 22,955
Other operating items, net   (474)    
Other operating items, net 233   706 36
Total operating expenses 98,630 93,975 196,477 187,460
Income from operations 29,513 29,708 53,323 52,867
Other income (expense)        
Interest expense, net (211) (780) (204) (1,367)
Income before income taxes 29,302 28,928 53,119 51,500
Provision for income taxes (6,620) (6,515) (12,162) (11,417)
Net income $ 22,682 $ 22,413 $ 40,957 $ 40,083
Earnings per share of common stock        
Basic (in dollars per share) $ 1.21 $ 1.16 $ 2.16 $ 2.08
Diluted (in dollars per share) $ 1.19 $ 1.14 $ 2.12 $ 2.04
Weighted average number of common shares and potential common shares outstanding        
Basic (in shares) 18,731 19,243 18,948 19,229
Diluted (in shares) 19,090 19,618 19,315 19,636
Casino        
Revenues        
Net revenues $ 70,977 $ 68,855 $ 140,413 $ 135,760
Operating expenses        
Operating expenses 26,773 25,746 53,125 50,998
Food and beverage        
Revenues        
Net revenues 31,842 31,525 62,005 60,842
Operating expenses        
Operating expenses 23,489 22,803 46,064 44,740
Hotel        
Revenues        
Net revenues 19,731 18,094 36,505 33,565
Operating expenses        
Operating expenses 6,607 6,541 12,585 12,931
Other        
Revenues        
Net revenues 5,593 5,209 10,877 10,160
Operating expenses        
Operating expenses $ 2,926 $ 2,786 $ 5,834 $ 5,729
v3.24.2.u1
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Current assets    
Cash and cash equivalents $ 33,508 $ 43,361
Receivables, net 9,861 11,990
Income taxes receivable 1,580 1,006
Inventories 8,099 7,614
Prepaid expenses 7,908 10,995
Total current assets 60,956 74,966
Property and equipment, net 586,091 580,497
Goodwill 25,111 25,111
Intangible assets, net 218 299
Total assets 672,376 680,873
Current liabilities    
Current maturities of long-term debt 23,000  
Accounts payable 17,398 23,092
Construction accounts payable 47,827 47,566
Accrued expenses 46,904 51,812
Short-term lease liability 938 897
Total current liabilities 136,067 123,367
Deferred income taxes 23,084 23,084
Long-term lease liability 13,537 14,021
Long-term debt   5,500
Other long-term liability 1,321 1,761
Total liabilities 174,009 167,733
Stockholders' equity    
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued
Common stock, $.01 par value, 30,000,000 shares authorized; 19,206,377 shares issued and 18,409,671 outstanding at June 30, 2024; 19,154,031 shares issued and 19,091,497 outstanding at December 31, 2023 192 191
Additional paid-in capital 54,674 48,821
Treasury stock, 796,706 shares at June 30, 2024; 62,534 shares at December 31, 2023 (54,073) (3,718)
Retained earnings 497,574 467,846
Total stockholders' equity 498,367 513,140
Total liabilities and stockholders' equity $ 672,376 $ 680,873
v3.24.2.u1
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares
Jun. 30, 2024
Dec. 31, 2023
CONSOLIDATED BALANCE SHEETS    
Preferred stock, par value (in dollars per share) $ 0.01 $ 0.01
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 0 0
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized 30,000,000 30,000,000
Common stock, shares issued 19,206,377 19,154,031
Common stock, shares outstanding 18,409,671 19,091,497
Treasury stock, shares 796,706 62,534
v3.24.2.u1
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($)
$ in Thousands
Common Stock
Additional Paid-in Capital
Retained Earnings
Treasury Stock
Total
Increase (Decrease) in Stockholders' Equity          
Treasury stock, value       $ (170)  
Balance at Dec. 31, 2022 $ 191 $ 40,716 $ 498,217   $ 538,954
Balance (in shares) at Dec. 31, 2022 19,093,676        
Increase (Decrease) in Stockholders' Equity          
Exercise of stock options, net   808   108 916
Exercise of stock options, net (in shares) 37,965        
Stock-based compensation expense   1,474     1,474
Dividend payment     (95,608)   (95,608)
Net income     17,670   17,670
Balance at Mar. 31, 2023 $ 191 42,998 420,279   463,406
Balance (in shares) at Mar. 31, 2023 19,131,641        
Balance at Dec. 31, 2022 $ 191 40,716 498,217   538,954
Balance (in shares) at Dec. 31, 2022 19,093,676        
Increase (Decrease) in Stockholders' Equity          
Net income         40,083
Balance at Jun. 30, 2023 $ 191 44,670 436,951   481,812
Balance (in shares) at Jun. 30, 2023 19,143,344        
Increase (Decrease) in Stockholders' Equity          
Treasury stock, value       (62)  
Balance at Mar. 31, 2023 $ 191 42,998 420,279   463,406
Balance (in shares) at Mar. 31, 2023 19,131,641        
Increase (Decrease) in Stockholders' Equity          
Exercise of stock options, net   396   62 458
Exercise of stock options, net (in shares) 11,703        
Stock-based compensation expense   1,276     1,276
Dividend payment     (5,741)   (5,741)
Net income     22,413   22,413
Balance at Jun. 30, 2023 $ 191 44,670 436,951   481,812
Balance (in shares) at Jun. 30, 2023 19,143,344        
Increase (Decrease) in Stockholders' Equity          
Treasury stock, value       (3,718) 3,718
Balance at Dec. 31, 2023 $ 191 48,821 467,846   $ 513,140
Balance (in shares) at Dec. 31, 2023 19,091,497       19,091,497
Increase (Decrease) in Stockholders' Equity          
Exercise of stock options, net $ 1 969     $ 970
Exercise of stock options, net (in shares) 20,247        
Stock-based compensation expense   1,778     1,778
Purchase of company common stock       (19,574) (19,574)
Purchase of company common stock, shares (281,708)        
Dividend payment     (5,676)   (5,676)
Net income     18,275   18,275
Balance at Mar. 31, 2024 $ 192 51,568 480,445   508,913
Balance (in shares) at Mar. 31, 2024 18,830,036        
Balance at Dec. 31, 2023 $ 191 48,821 467,846   $ 513,140
Balance (in shares) at Dec. 31, 2023 19,091,497       19,091,497
Increase (Decrease) in Stockholders' Equity          
Net income         $ 40,957
Balance at Jun. 30, 2024 $ 192 54,674 497,574   $ 498,367
Balance (in shares) at Jun. 30, 2024 18,409,671       18,409,671
Increase (Decrease) in Stockholders' Equity          
Treasury stock, value       (23,292)  
Balance at Mar. 31, 2024 $ 192 51,568 480,445   $ 508,913
Balance (in shares) at Mar. 31, 2024 18,830,036        
Increase (Decrease) in Stockholders' Equity          
Exercise of stock options, net   1,333     1,333
Exercise of stock options, net (in shares) 32,099        
Stock-based compensation expense   1,773     1,773
Purchase of company common stock       (30,781) (30,781)
Purchase of company common stock, shares (452,464)        
Dividend payment     (5,553)   (5,553)
Net income     22,682   22,682
Balance at Jun. 30, 2024 $ 192 $ 54,674 $ 497,574   $ 498,367
Balance (in shares) at Jun. 30, 2024 18,409,671       18,409,671
Increase (Decrease) in Stockholders' Equity          
Treasury stock, value       $ (54,073) $ 54,073
v3.24.2.u1
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Cash flows from operating activities:    
Net income $ 40,957 $ 40,083
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 24,891 22,955
Amortization of deferred loan costs   307
Stock-based compensation - stock options 3,551 2,750
Provision for bad debts 132 44
Loss on disposition of assets 63 58
Non-cash operating lease expense 16 10
Changes in operating assets and liabilities:    
Receivables 1,997 1,462
Income taxes receivable (574) 20,390
Inventories (485) 392
Prepaid expenses 3,087 1,529
Accounts payable (5,694) 616
Accrued expenses (5,348) (2,681)
Net cash provided by operating activities 62,593 87,915
Cash flows from investing activities:    
Proceeds from sale of assets 49 91
Change in construction accounts payable 261 (2,508)
Acquisition of property and equipment (30,974) (23,202)
Net cash used in investing activities (30,664) (25,619)
Cash flows from financing activities:    
Payroll taxes from net exercise of stock options (38) (99)
Proceeds from exercise of stock options 2,340 1,473
Line-of-credit borrowings 45,500 61,000
Line-of-credit payments (28,000) (20,000)
Principal payments on long-term debt   (7,000)
Payment of dividends (11,229) (101,349)
Purchase of company common stock (50,355)  
Net cash used in financing activities (41,782) (65,975)
Change in cash and cash equivalents (9,853) (3,679)
Cash and cash equivalents at beginning of period 43,361 38,779
Cash and cash equivalents at end of period 33,508 35,100
Supplemental disclosure of cash flow information:    
Cash paid for interest 286 1,342
Cash paid for income taxes $ 12,740 $ 14,766
v3.24.2.u1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
6 Months Ended
Jun. 30, 2024
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation:

Monarch Casino & Resort, Inc. was incorporated in 1993. Unless otherwise indicated, “Monarch,” “us,” “we,” and the “Company” refer to Monarch Casino & Resort, Inc. and its subsidiaries. Monarch owns and operates the Atlantis Casino Resort Spa, a hotel and casino in Reno, Nevada (the “Atlantis”) and Monarch Casino Resort Spa Black Hawk, a hotel and casino in Black Hawk, Colorado (the “Monarch Black Hawk”). In addition, Monarch owns separate parcels of land located next to the Atlantis and a parcel of land with an industrial warehouse located between Denver, Colorado and Monarch Black Hawk. Monarch also owns Chicago Dogs Eatery, Inc. and Monarch Promotional Association, both of which were formed in relation to licensure requirements for extended hours of liquor operation in Black Hawk, Colorado.

The accompanying unaudited consolidated financial statements include the accounts of Monarch and its subsidiaries (the “Consolidated Financial Statements”). Intercompany balances and transactions are eliminated.

Interim Financial Statements:

The Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the management of the Company, all adjustments considered necessary for a fair presentation, consisting of normal recurring accruals, are reflected in the interim financial statements. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

The balance sheet at December 31, 2023, has been derived from the audited consolidated financial statements of the Company at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2023.

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

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 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 June 30, 2024, 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.

Inventories:

Inventories, consisting primarily of food, beverages, and retail merchandise, are stated at the lower of cost and net realizable value. Cost is determined by the weighted average and specific identification methods. Net realizable value is defined by the Financial Accounting Standards Board (“FASB”) as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.

Property and Equipment, net:

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

    

June 30, 2024

    

December 31, 2023

 

Land

$

34,688

$

34,688

Land improvements

 

11,045

 

11,045

Buildings

 

474,724

 

474,724

Building improvements

 

117,809

 

100,822

Furniture and equipment

 

255,289

 

254,486

Construction in progress

 

15,996

 

9,552

Right of use assets

14,415

14,874

Leasehold improvements

 

4,245

 

4,245

 

928,211

 

904,436

Less accumulated depreciation and amortization

 

(342,120)

 

(323,939)

Property and equipment, net

$

586,091

$

580,497

 

 

Property and equipment are stated at cost, less accumulated depreciation and amortization. Property and equipment is depreciated principally on a straight-line basis over its estimated useful lives as follows:

Land improvements

    

15

-

40

years

Buildings

 

30

-

40

years

Building improvements

 

5

-

40

years

Leasehold improvements

5

-

40

years

Furniture

 

5

-

10

years

Equipment

 

3

-

20

years

The Company evaluates property and equipment and other long-lived assets for impairment in accordance with the guidance for accounting for the impairment or disposal of long-lived assets.

For assets to be disposed of, the Company recognizes the asset to be sold at the lower of carrying value or fair value less costs of disposal. 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 indicators at the end of the fiscal year and 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. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. 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, 2024 and 2023, respectively, there were no impairment charges.

Goodwill:

The Company accounts for goodwill in accordance with ASC Topic 350, Intangibles-Goodwill and Other (“ASC Topic 350”). ASC Topic 350 gives companies the option to perform a qualitative assessment that may allow them to skip the quantitative test as appropriate. The Company tests its goodwill for impairment annually during the fourth quarter, 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 June 30, 2024, 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.

Revenue Recognition:

The majority of the Company’s revenue is recognized when products are delivered or services are performed. For certain revenue transactions (when a patron uses a club loyalty card), in accordance with Accounting Standard Update No. 2014-09 (“ASC 606”), a portion of the revenue is deferred until the points earned by the patron are redeemed or expire.

Casino revenue: Casino revenues represent the net win from gaming activity, which is the difference between the amounts won and lost, which represents the transaction price. Jackpots, other than the incremental amount of progressive jackpots, are recognized at the time they are won by customers. Funds deposited by customers in advance and outstanding chips and slot tickets in the customers’ possession are recognized as a liability until such amounts are redeemed or used in gaming play by the customer. Additionally, net win is reduced by the performance obligations for the players’ club program, progressive jackpots and any pre-arranged marker discounts. Progressive jackpot provisions are recognized in two components: 1) as wagers are made for the share of players’ wagers that are contributed to the progressive jackpot award, and 2) as jackpots are won for the portion of the progressive jackpot award contributed by the Company. Cash discounts and other cash incentives to guests related to gaming play are recorded as a reduction to gaming revenue.

Players’ Club Program: The Company operates a players’ club program under which as players perform gaming activities they earn and accumulate points, which may be redeemed for a variety of goods and services. Given the significance of the players’ club program and the ability for members to bank such points based on their past play, the Company has determined that players’ club program points granted in conjunction with gaming activity constitute a material right and, as such, represent a performance obligation associated with the gaming contracts. At the time points are earned, the Company recognizes deferred revenue at the standalone selling prices (“SSP”) of the goods and services that the points are expected to be redeemed for, with a corresponding decrease in gaming revenue. 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, 2024, the Company had estimated the obligations related to the players’ club program at $8.8 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: Food and Beverage, Hotel and Other Revenues in general are recognized when products are delivered or services are performed. The Company recognizes revenue related to the products and services associated with the players points’ redemptions at the time products are delivered or services are performed, with corresponding reduction in the deferred revenue, at SSP. Other complimentaries in conjunction with the gaming and other business are also valued at SSP. Hotel revenue is presented net of non-third-party rebates and commissions. The cost of providing these complimentary goods and services are included as expenses within their respective categories.

Other Revenues: Other revenues (excluding retail) primarily consist of commissions received on ATM transactions and cash advances, which are recorded on a net basis as the Company represents the agent in its relationship with the third-party service providers, and commissions and fees received in connection with pari-mutuel wagering, which are also recorded on a net basis.

Sales and other taxes: Sales taxes and other taxes collected from customers on behalf of governmental authorities are accounted for on a net basis and are not included in revenues or operating expenses. 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.

Other Operating items, net:

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

For the three months ended June 30, 2024, Other operating items, net, was $0.2 million and consisted of $0.1 million professional service fees relating to our construction litigation and $0.1 million loss on disposal of assets. 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 six months ended June 30, 2024, Other operating items, net, was $0.7 million and consisted of $0.6 million professional service fees relating to our construction litigation and $0.1 million loss on disposal of assets. 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.

Impact of Recently Adopted Accounting Standards:

Segment Reporting - Improvements to Reportable Segment Disclosures: In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.2023-07, Segment Reporting Topic 280. Under ASC 280 a public entity is required to disclose a measure of segment’s profit or loss, used by the chief operating decision maker to asses segment performance and make decisions about allocation of resources. In addition to segment’s revenue and measure for profit or loss, the standard requires enhanced disclosures of significant segment expenses. The amendments provide new segment disclosure requirements for entities with a single reportable segment. This guidance is effective for annual reporting periods beginning after December 15, 2023, and interim reporting periods after December 15, 2024. Early adoption is permitted and retrospective application is required for all periods presented. The Company is currently evaluating the impact of adopting this guidance on its Consolidated Financial Statements and disclosures included within Notes to Consolidated Financial Statements.

Income Tax—Improvements to Income Tax Disclosures: In December 2023, the FASB issued ASU No. 2023-09, Income Taxes Topic 740, which requires enhanced disclosures, including specific categories and disaggregation of information in the effective tax rate reconciliation, disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. This guidance is effective for annual reporting periods beginning after December 15, 2024. Early adoption is permitted and should be applied on a prospective basis, however retrospective application is permitted. The Company is currently evaluating the impact of adopting this guidance on its Consolidated Financial Statements and disclosures included within Notes to Consolidated Financial Statements.

v3.24.2.u1
ACCOUNTING FOR LEASES
6 Months Ended
Jun. 30, 2024
ACCOUNTING FOR LEASES  
ACCOUNTING FOR LEASES

NOTE 2. ACCOUNTING FOR LEASES

For operating 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. 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 June 30, 2024, 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, 2024, was 4.33%. There were no new leases entered into in the second quarter of 2024.

The weighted-average remaining lease term of the leases presented in the lease liability as of June 30, 2024, was 16.86 years.

Cash paid related to the operating leases presented in the lease liability for the six months ended June 30, 2024 and 2023, was $0.8 million and $0.6 million, respectively.

v3.24.2.u1
STOCK-BASED COMPENSATION
6 Months Ended
Jun. 30, 2024
STOCK-BASED COMPENSATION  
STOCK-BASED COMPENSATION

NOTE 3. STOCK-BASED COMPENSATION

In accordance with ASC 718, the Company records any excess tax benefits or deficiencies from its equity awards in its Consolidated Statements of Income in the reporting periods in which vesting occurs. As a result, the Company’s income tax expense and associated effective tax rate are impacted by fluctuations in stock price between the grant dates and vesting dates of equity awards.

Reported stock-based compensation expense was classified as follows (in thousands):

Three months ended

Six months ended

June 30, 

June 30, 

    

2024

    

2023

    

2024

    

2023

 

Casino

$

125

 

$

(2)

 

$

259

 

$

151

 

Food and beverage

 

59

 

(11)

 

41

 

29

Hotel

 

72

 

67

 

131

 

133

Selling, general and administrative

 

1,517

 

1,222

 

3,120

 

2,437

Total stock-based compensation, before taxes

 

1,773

 

1,276

 

3,551

 

2,750

Tax benefit

 

(372)

 

(268)

 

(745)

 

(578)

Total stock-based compensation, net of tax

$

1,401

 

$

1,008

 

$

2,806

 

$

2,172

 

v3.24.2.u1
EARNINGS PER SHARE
6 Months Ended
Jun. 30, 2024
EARNINGS PER SHARE  
EARNINGS PER SHARE

NOTE 4. EARNINGS PER SHARE

Basic earnings per share is computed by dividing reported net earnings by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflect the additional dilution for all potentially dilutive securities such as stock options. The following is a reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations (shares in thousands):

Three months ended June 30, 

2024

2023

Per Share

Per Share

    

Shares

Amount

Shares

    

Amount

Basic

 

18,731

$

1.21

19,243

 

$

1.16

Effect of dilutive stock options

 

359

 

(0.02)

375

 

(0.02)

Diluted

 

19,090

$

1.19

19,618

 

$

1.14

Six months ended June 30, 

2024

2023

Per Share

Per Share

    

Shares

    

Amount

    

Shares

    

Amount

Basic

 

18,948

 

$

2.16

 

19,229

 

$

2.08

Effect of dilutive stock options

 

367

 

(0.04)

 

407

 

(0.04)

Diluted

 

19,315

 

$

2.12

 

19,636

 

$

2.04

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, 2024 and 2023, options for approximately 955 thousand and 647 thousand shares, respectively, were excluded from the computation. For the six months ended June 30, 2024 and 2023, options for approximately 912 thousand and 578 thousand shares, respectively, were excluded from the computation.

v3.24.2.u1
RELATED PARTY TRANSACTIONS
6 Months Ended
Jun. 30, 2024
RELATED PARTY TRANSACTIONS  
RELATED PARTY TRANSACTIONS

NOTE 5. RELATED PARTY TRANSACTIONS

The shopping center adjacent to the Atlantis (the “Shopping Center”) is owned by Biggest Little Investments, L.P. (“BLI”). John Farahi and Bob Farahi, Co-Chairmen of the Board and executive officers of the Company, and Ben Farahi have significant holdings (the “Farahi Family Stockholders”) in Monarch and each also beneficially owns limited partnership interests in BLI. Maxum LLC is the sole general partner of BLI, and Ben Farahi is the sole managing member of Maxum LLC. Neither John Farahi nor Bob Farahi has any management or operational control over BLI or the Shopping Center. Until May 2006, Ben Farahi held the positions of Co-Chairman of the Board, Secretary, Treasurer and Chief Financial Officer of the Company.

On August 28, 2015, Monarch, through its subsidiary Golden Road Motor Inn, Inc., entered into a 20-year lease agreement with BLI for a portion of the Shopping Center (the “Parking Lot Lease”). This lease gives the Atlantis the right to use a parcel, approximately 4.2 acres, adjacent to the Atlantis. The primary purpose of the Parking Lot Lease is to provide additional, convenient, Atlantis surface parking. The minimum annual rent under the Parking Lot Lease is $695 thousand commencing on November 17, 2015. The minimum annual rent is subject to a cost of living adjustment increase on each five-year anniversary. In addition, the Company is responsible for the payment of property taxes, utilities and maintenance expenses related to the leased property. The Company has an option to renew the Parking Lot Lease for an additional ten-year term. 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, 2024 and 2023, the Company paid $187 thousand in rent, plus $1 thousand in operating expenses relating to this lease. For each of the six-month periods ended June 30, 2024 and 2023, the Company paid $374 thousand in rent, plus $9 thousand in operating expenses relating to this lease The right of use asset and lease liability balances as of June 30, 2024, recognized in the Consolidated Balance Sheet, was $9.6 million.

In addition, the Atlantis shares a driveway with the Shopping Center and leases approximately 37,400 square feet from BLI (the “Driveway Lease”) for an initial lease term of 15 years, which commenced on September 30, 2004, at an original annual rent of $300 thousand plus common area expenses. The annual rent is subject to a cost of living adjustment increase on each five-year anniversary of the Driveway Lease. Effective August 28, 2015, in connection with the Company entering into the Parking Lot Lease, the Driveway Lease was amended to: (i) make the Company solely responsible for the operation and maintenance costs of the shared driveway (including the fountains thereon); (ii) eliminate the Company’s obligation to reimburse the Shopping Center for its proportionate share of common area expenses; and (iii) exercise the three successive five-year renewal terms beyond the initial 15-year term in the existing Driveway Lease. 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, 2024 and 2023, the Company paid $101 thousand in rent plus $11 thousand and $9 thousand, respectively, in operating expenses relating to this lease. For each of the six-month periods ended June 30, 2024 and 2023, the Company paid $202 thousand in rent plus $24 thousand and $21 thousand, respectively, in operating expenses relating to this lease. The right of use asset and lease liability balances as of June 30, 2024, recognized in the Consolidated Balance Sheet, was $3.1 million.

The Company occasionally leases billboard advertising, storage space and parking lot space from affiliates controlled by the Farahi Family Stockholders, and paid $125 thousand and $137 thousand, respectively, for the three-month periods ended June 30, 2024 and 2023, and $257 thousand and $269 thousands, respectively, for the six-month periods ended June 30, 2024 and 2023, for such leases.

v3.24.2.u1
LONG-TERM DEBT
6 Months Ended
Jun. 30, 2024
LONG-TERM DEBT  
LONG-TERM DEBT

NOTE 6. 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. The Amended Credit Facility provides for a $100 million line of credit which matures on January 1, 2025.

As of June 30, 2024, the Company had an outstanding principal balance of $23.0 million under the Amended Credit Facility.

In addition to other customary covenants for a facility of this nature, as of June 30, 2024, 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, 2024, the Company’s Total Leverage Ratio and Fixed Charge Coverage Ratio were 0.13:1 and 88.27:1, 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%. The applicable margins will vary depending on the Company’s leverage ratio. 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, 2024, the interest rate was approximately 5.4%, 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.

v3.24.2.u1
TAXES
6 Months Ended
Jun. 30, 2024
TAXES  
TAXES

NOTE 7. TAXES

For the six months ended June 30, 2024 and 2023, the Company’s effective tax rate was 22.9% and 22.2%, 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, 2024 and 2023. No change in uncertain tax positions is anticipated over the next twelve months.

v3.24.2.u1
STOCK REPURCHASE PLAN
6 Months Ended
Jun. 30, 2024
STOCK REPURCHASE PLAN  
STOCK REPURCHASE PLAN

NOTE 8. STOCK REPURCHASE PLAN

On October 22, 2014, the board of directors of Monarch authorized a stock repurchase plan (the “Repurchase Plan”). Under the Repurchase Plan, the board of directors authorized a program to repurchase up to 3,000,000 shares of the Company’s common stock in the open market or in privately negotiated transactions from time to time, in compliance with Rule 10b-18 of the Securities and Exchange Act of 1934, as amended, subject to market conditions, applicable legal requirements and other factors. The Repurchase Plan does not obligate the Company to acquire any particular amount of common stock and the plan may be suspended at any time at the Company’s discretion, and it will continue until exhausted. The actual timing, number and value of shares repurchased under the repurchase program will be determined by management at its discretion and will depend on a number of factors, including the market price of the Company’s stock, general market economic conditions and applicable legal requirements.

In the second quarter of 2024, the Company purchased 452,464 shares of its common stock on the open market for an aggregate amount of $30.5 million under its existing Repurchase Plan. As of June 30, 2024, we have an authorization to purchase up to 2,081,325 shares under the Repurchase Plan.

v3.24.2.u1
LEGAL MATTERS
6 Months Ended
Jun. 30, 2024
LEGAL MATTERS  
LEGAL MATTERS

NOTE 9. LEGAL MATTERS

On August 30, 2019, PCL Construction Services, Inc. (“PCL”) filed a complaint in District Court, City and County of Denver, Colorado, against the Company and its Colorado subsidiaries, in connection with the Company’s now completed expansion of the Monarch Casino Resort Spa Black Hawk (the “Project”). The case is captioned PCL Construction Services, Inc. v. Monarch Growth Inc., et al., Case No. 2019CV33368 (the “First Denver Lawsuit”). The complaint alleges, among other things, that the defendants breached the construction contract with PCL and certain implied warranties. On December 5, 2019, the Company filed its answer and counterclaim, which alleges, among other items, that PCL breached the construction contract, duties of good faith and fair dealing, and implied and express warranties, made fraudulent or negligent misrepresentations on which the Company and its Colorado subsidiaries relied, and included claims for monetary damages as well as equitable and declaratory relief.

On September 5, 2023, trial commenced in the First Denver Lawsuit in the District Court for the City and County of Denver, Colorado. The bench trial concluded on November 22, 2023, after 28 total court days. PCL and the Company each submitted proposed Findings of Fact, Conclusions of Law and Order for the Court’s consideration on February 7, 2024. The Parties are awaiting a decision by the Court, and 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 the parties tried.

Prior to the trial of the First Denver Lawsuit, 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, also in connection with the Project. The case is captioned PCL Construction Services, Inc., v. Monarch Growth Inc., et al., Case No. 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. Effective May 10, 2021, PCL filed its second amended complaint, joining more such parties as defendants. Many of the Company’s co-defendants have filed cross claims against Monarch for foreclosure of their own mechanics’ liens and related claims, including unjust enrichment.

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, however, pending the outcome of the First Denver Lawsuit, Case No. 2019CV33368. We are currently unable to determine the probability of the outcome or reasonably estimate the loss or gain, if any.

On February 9, 2023, Monarch Growth, Inc., Monarch Casino & Resort, Inc., and Monarch Black Hawk, Inc. filed a complaint in District Court, City and County of Denver, Colorado, against PCL, in connection with the Project. The case is captioned Monarch Growth Inc., et al., v. PCL Construction Services, Inc., Case No. 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 construction work at the project, and includes claims for monetary damages as well as equitable and declaratory relief. Monarch alleges that the claims asserted in the Second Denver Lawsuit were neither known nor reasonably discoverable in time to be included in the First Denver Lawsuit.

On March 26, 2024, the Court set the Second Denver Lawsuit for a seven-day bench trial to commence on April 7, 2025. The parties are conducting discovery, and we are currently unable to determine the probability of the outcome or reasonably estimate the loss or gain, if any.

The Company recognized $0.6 million and $1.2 million in construction litigation expense relating to these lawsuits for the six months ended June 30, 2024 and 2023, 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. Management believes that the amount of any reasonably possible or probable loss for such other known matters would not have a material adverse impact on our financial conditions, cash flows or results of operations; however, the outcome of these actions is inherently difficult to predict.

v3.24.2.u1
DIVIDENDS
6 Months Ended
Jun. 30, 2024
Dividends [Abstract]  
DIVIDENDS

NOTE 10. DIVIDENDS

On February 7, 2023, the Company announced that the Company’s Board of Directors declared a one-time cash dividend (the “One-time Dividend”) of $5.00 per share of its outstanding common stock, par value $0.01 per share (“Common Stock”), paid to the stockholders of record of the Company on March 1, 2023 (the “Record Date”), payable on March 15, 2023 (the “Payment Date”).

In addition to the One-time Dividend, the Board of Directors approved the initiation of an Annual Dividend policy for the payment of an annual dividend in the amount of $1.20 per outstanding share of Common Stock, commencing in the second quarter of 2023. These dividends will be paid quarterly on the 15th day of the third month of the applicable calendar quarter (or, if such date is not a trading day, then the first trading day immediately thereafter such date) to those stockholders of record on the 1st day of the third month of the applicable calendar quarter (or, if such date is not a trading day, then the first trading day immediately thereafter such date).

On June 15, 2024, the Company paid a cash dividend of $0.30 per share of its outstanding common stock, to stockholders of record on June 1, 2024. This cash dividend was part of the previously announced annual cash dividend of $1.20 per share payable in quarterly payments.

On July 24, 2024, the Company announced a cash dividend of $0.30 per share of its outstanding common stock, payable on September 15, 2024, to stockholders of record on September 1, 2024. This cash dividend is part of the previously announced annual cash dividend of $1.20 per share payable in quarterly payments.

The Company’s declaration of each cash dividend amount shall be subject to the Board’s review of the then-current financial statements of the Company, available acquisition opportunities and other prudent uses of the Company’s cash resources. As such, the Board of Directors may suspend the dividend program at any time and no assurances can be given that a quarterly dividend will be paid.

v3.24.2.u1
Pay vs Performance Disclosure - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2024
Mar. 31, 2024
Jun. 30, 2023
Mar. 31, 2023
Jun. 30, 2024
Jun. 30, 2023
Pay vs Performance Disclosure            
Net Income (Loss) $ 22,682 $ 18,275 $ 22,413 $ 17,670 $ 40,957 $ 40,083
v3.24.2.u1
Insider Trading Arrangements
3 Months Ended
Jun. 30, 2024
Trading Arrangements, by Individual  
Rule 10b5-1 Arrangement Adopted false
Non-Rule 10b5-1 Arrangement Adopted false
Rule 10b5-1 Arrangement Terminated false
Non-Rule 10b5-1 Arrangement Terminated false
v3.24.2.u1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
6 Months Ended
Jun. 30, 2024
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
Basis of Presentation

Basis of Presentation:

Monarch Casino & Resort, Inc. was incorporated in 1993. Unless otherwise indicated, “Monarch,” “us,” “we,” and the “Company” refer to Monarch Casino & Resort, Inc. and its subsidiaries. Monarch owns and operates the Atlantis Casino Resort Spa, a hotel and casino in Reno, Nevada (the “Atlantis”) and Monarch Casino Resort Spa Black Hawk, a hotel and casino in Black Hawk, Colorado (the “Monarch Black Hawk”). In addition, Monarch owns separate parcels of land located next to the Atlantis and a parcel of land with an industrial warehouse located between Denver, Colorado and Monarch Black Hawk. Monarch also owns Chicago Dogs Eatery, Inc. and Monarch Promotional Association, both of which were formed in relation to licensure requirements for extended hours of liquor operation in Black Hawk, Colorado.

The accompanying unaudited consolidated financial statements include the accounts of Monarch and its subsidiaries (the “Consolidated Financial Statements”). Intercompany balances and transactions are eliminated.

Interim Financial Statements

Interim Financial Statements:

The Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the management of the Company, all adjustments considered necessary for a fair presentation, consisting of normal recurring accruals, are reflected in the interim financial statements. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

The balance sheet at December 31, 2023, has been derived from the audited consolidated financial statements of the Company at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2023.

Segment Reporting

Segment Reporting:

The accounting guidance for disclosures about segments of an enterprise and related information requires separate financial information to be disclosed for all operating segments of a business. The Company determined that the Company’s two operating segments, Atlantis and Monarch 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

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

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 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 June 30, 2024, 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.

Inventories

Inventories:

Inventories, consisting primarily of food, beverages, and retail merchandise, are stated at the lower of cost and net realizable value. Cost is determined by the weighted average and specific identification methods. Net realizable value is defined by the Financial Accounting Standards Board (“FASB”) as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.

Property and Equipment, net

Property and Equipment, net:

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

    

June 30, 2024

    

December 31, 2023

 

Land

$

34,688

$

34,688

Land improvements

 

11,045

 

11,045

Buildings

 

474,724

 

474,724

Building improvements

 

117,809

 

100,822

Furniture and equipment

 

255,289

 

254,486

Construction in progress

 

15,996

 

9,552

Right of use assets

14,415

14,874

Leasehold improvements

 

4,245

 

4,245

 

928,211

 

904,436

Less accumulated depreciation and amortization

 

(342,120)

 

(323,939)

Property and equipment, net

$

586,091

$

580,497

 

 

Property and equipment are stated at cost, less accumulated depreciation and amortization. Property and equipment is depreciated principally on a straight-line basis over its estimated useful lives as follows:

Land improvements

    

15

-

40

years

Buildings

 

30

-

40

years

Building improvements

 

5

-

40

years

Leasehold improvements

5

-

40

years

Furniture

 

5

-

10

years

Equipment

 

3

-

20

years

The Company evaluates property and equipment and other long-lived assets for impairment in accordance with the guidance for accounting for the impairment or disposal of long-lived assets.

For assets to be disposed of, the Company recognizes the asset to be sold at the lower of carrying value or fair value less costs of disposal. 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 indicators at the end of the fiscal year and 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. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. 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, 2024 and 2023, respectively, there were no impairment charges.

Goodwill

Goodwill:

The Company accounts for goodwill in accordance with ASC Topic 350, Intangibles-Goodwill and Other (“ASC Topic 350”). ASC Topic 350 gives companies the option to perform a qualitative assessment that may allow them to skip the quantitative test as appropriate. The Company tests its goodwill for impairment annually during the fourth quarter, 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 June 30, 2024, 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.

Revenues Recognition

Revenue Recognition:

The majority of the Company’s revenue is recognized when products are delivered or services are performed. For certain revenue transactions (when a patron uses a club loyalty card), in accordance with Accounting Standard Update No. 2014-09 (“ASC 606”), a portion of the revenue is deferred until the points earned by the patron are redeemed or expire.

Casino revenue: Casino revenues represent the net win from gaming activity, which is the difference between the amounts won and lost, which represents the transaction price. Jackpots, other than the incremental amount of progressive jackpots, are recognized at the time they are won by customers. Funds deposited by customers in advance and outstanding chips and slot tickets in the customers’ possession are recognized as a liability until such amounts are redeemed or used in gaming play by the customer. Additionally, net win is reduced by the performance obligations for the players’ club program, progressive jackpots and any pre-arranged marker discounts. Progressive jackpot provisions are recognized in two components: 1) as wagers are made for the share of players’ wagers that are contributed to the progressive jackpot award, and 2) as jackpots are won for the portion of the progressive jackpot award contributed by the Company. Cash discounts and other cash incentives to guests related to gaming play are recorded as a reduction to gaming revenue.

Players’ Club Program: The Company operates a players’ club program under which as players perform gaming activities they earn and accumulate points, which may be redeemed for a variety of goods and services. Given the significance of the players’ club program and the ability for members to bank such points based on their past play, the Company has determined that players’ club program points granted in conjunction with gaming activity constitute a material right and, as such, represent a performance obligation associated with the gaming contracts. At the time points are earned, the Company recognizes deferred revenue at the standalone selling prices (“SSP”) of the goods and services that the points are expected to be redeemed for, with a corresponding decrease in gaming revenue. 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, 2024, the Company had estimated the obligations related to the players’ club program at $8.8 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: Food and Beverage, Hotel and Other Revenues in general are recognized when products are delivered or services are performed. The Company recognizes revenue related to the products and services associated with the players points’ redemptions at the time products are delivered or services are performed, with corresponding reduction in the deferred revenue, at SSP. Other complimentaries in conjunction with the gaming and other business are also valued at SSP. Hotel revenue is presented net of non-third-party rebates and commissions. The cost of providing these complimentary goods and services are included as expenses within their respective categories.

Other Revenues: Other revenues (excluding retail) primarily consist of commissions received on ATM transactions and cash advances, which are recorded on a net basis as the Company represents the agent in its relationship with the third-party service providers, and commissions and fees received in connection with pari-mutuel wagering, which are also recorded on a net basis.

Sales and other taxes: Sales taxes and other taxes collected from customers on behalf of governmental authorities are accounted for on a net basis and are not included in revenues or operating expenses. 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.

Other Operating items, net

Other Operating items, net:

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

For the three months ended June 30, 2024, Other operating items, net, was $0.2 million and consisted of $0.1 million professional service fees relating to our construction litigation and $0.1 million loss on disposal of assets. 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 six months ended June 30, 2024, Other operating items, net, was $0.7 million and consisted of $0.6 million professional service fees relating to our construction litigation and $0.1 million loss on disposal of assets. 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.

v3.24.2.u1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
6 Months Ended
Jun. 30, 2024
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
Schedule of Property and Equipment, net

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

    

June 30, 2024

    

December 31, 2023

 

Land

$

34,688

$

34,688

Land improvements

 

11,045

 

11,045

Buildings

 

474,724

 

474,724

Building improvements

 

117,809

 

100,822

Furniture and equipment

 

255,289

 

254,486

Construction in progress

 

15,996

 

9,552

Right of use assets

14,415

14,874

Leasehold improvements

 

4,245

 

4,245

 

928,211

 

904,436

Less accumulated depreciation and amortization

 

(342,120)

 

(323,939)

Property and equipment, net

$

586,091

$

580,497

 

 

Property and equipment, estimated useful lives

Land improvements

    

15

-

40

years

Buildings

 

30

-

40

years

Building improvements

 

5

-

40

years

Leasehold improvements

5

-

40

years

Furniture

 

5

-

10

years

Equipment

 

3

-

20

years

v3.24.2.u1
STOCK-BASED COMPENSATION (Tables)
6 Months Ended
Jun. 30, 2024
STOCK-BASED COMPENSATION  
Schedule of stock-based compensation expense

Reported stock-based compensation expense was classified as follows (in thousands):

Three months ended

Six months ended

June 30, 

June 30, 

    

2024

    

2023

    

2024

    

2023

 

Casino

$

125

 

$

(2)

 

$

259

 

$

151

 

Food and beverage

 

59

 

(11)

 

41

 

29

Hotel

 

72

 

67

 

131

 

133

Selling, general and administrative

 

1,517

 

1,222

 

3,120

 

2,437

Total stock-based compensation, before taxes

 

1,773

 

1,276

 

3,551

 

2,750

Tax benefit

 

(372)

 

(268)

 

(745)

 

(578)

Total stock-based compensation, net of tax

$

1,401

 

$

1,008

 

$

2,806

 

$

2,172

 

v3.24.2.u1
EARNINGS PER SHARE (Tables)
6 Months Ended
Jun. 30, 2024
EARNINGS PER SHARE  
Schedule of reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations The following is a reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations (shares in thousands):

Three months ended June 30, 

2024

2023

Per Share

Per Share

    

Shares

Amount

Shares

    

Amount

Basic

 

18,731

$

1.21

19,243

 

$

1.16

Effect of dilutive stock options

 

359

 

(0.02)

375

 

(0.02)

Diluted

 

19,090

$

1.19

19,618

 

$

1.14

Six months ended June 30, 

2024

2023

Per Share

Per Share

    

Shares

    

Amount

    

Shares

    

Amount

Basic

 

18,948

 

$

2.16

 

19,229

 

$

2.08

Effect of dilutive stock options

 

367

 

(0.04)

 

407

 

(0.04)

Diluted

 

19,315

 

$

2.12

 

19,636

 

$

2.04

v3.24.2.u1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Segment Reporting (Details)
6 Months Ended
Jun. 30, 2024
segment
Segment Reporting  
Number of operating segments 2
Number of reportable segments 1
v3.24.2.u1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Concentrations of Credit Risk and Credit Losses (Details)
$ in Millions
Jun. 30, 2024
USD ($)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
Reserve for gaming and non-gaming receivables $ 0.2
v3.24.2.u1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property and Equipment (Details) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Property and Equipment    
Gross property and equipment $ 928,211 $ 904,436
Less accumulated depreciation and amortization (342,120) (323,939)
Property and equipment, net 586,091 580,497
Land    
Property and Equipment    
Gross property and equipment 34,688 34,688
Land improvements    
Property and Equipment    
Gross property and equipment 11,045 11,045
Buildings    
Property and Equipment    
Gross property and equipment 474,724 474,724
Building improvements    
Property and Equipment    
Gross property and equipment 117,809 100,822
Furniture and equipment    
Property and Equipment    
Gross property and equipment 255,289 254,486
Construction in progress    
Property and Equipment    
Gross property and equipment 15,996 9,552
Right of use assets    
Property and Equipment    
Gross property and equipment 14,415 14,874
Leasehold improvements    
Property and Equipment    
Gross property and equipment $ 4,245 $ 4,245
v3.24.2.u1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property and Equipment Useful Lives and Impairment (Details) - USD ($)
6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Property and Equipment    
Impairment charge $ 0 $ 0
Land improvements | Minimum    
Property and Equipment    
Estimated useful life 15 years  
Land improvements | Maximum    
Property and Equipment    
Estimated useful life 40 years  
Buildings | Minimum    
Property and Equipment    
Estimated useful life 30 years  
Buildings | Maximum    
Property and Equipment    
Estimated useful life 40 years  
Building improvements | Minimum    
Property and Equipment    
Estimated useful life 5 years  
Building improvements | Maximum    
Property and Equipment    
Estimated useful life 40 years  
Leasehold improvements | Minimum    
Property and Equipment    
Estimated useful life 5 years  
Leasehold improvements | Maximum    
Property and Equipment    
Estimated useful life 40 years  
Furniture | Minimum    
Property and Equipment    
Estimated useful life 5 years  
Furniture | Maximum    
Property and Equipment    
Estimated useful life 10 years  
Equipment | Minimum    
Property and Equipment    
Estimated useful life 3 years  
Equipment | Maximum    
Property and Equipment    
Estimated useful life 20 years  
v3.24.2.u1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Goodwill (Details) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Goodwill from business combinations    
Goodwill $ 25,111 $ 25,111
v3.24.2.u1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Players Club Program (Details)
$ in Millions
6 Months Ended
Jun. 30, 2024
USD ($)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
Analysis of redemption activity, preceding period 12 months
Obligations related to the players' club program $ 8.8
v3.24.2.u1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Other Operating items, net (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES        
Other operating items, net   $ 474    
Other operating items, net $ 233   $ 706 $ 36
Other operating items, net       100
Professional service fees relating to our construction litigation 100 600 600 1,200
Net proceeds from a sale of a COVID closure related insurance claim   1,200   1,200
Gain (loss) on disposition of assets $ 100 $ 100 $ 100 $ 100
v3.24.2.u1
ACCOUNTING FOR LEASES (Details) - USD ($)
$ in Millions
6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
ACCOUNTING FOR LEASES    
Lease, Practical Expedient, Lessor Single Lease Component [true false] true  
Weighted-average incremental borrowing rate of operating leases 4.33%  
Weighted-average remaining lease term 16 years 10 months 9 days  
Cash paid related to operating leases $ 0.8 $ 0.6
v3.24.2.u1
STOCK-BASED COMPENSATION - Reported Stock-based Compensation Expense (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Stock-based compensation expense        
Total stock-based compensation, before taxes $ 1,773 $ 1,276 $ 3,551 $ 2,750
Tax benefit (372) (268) (745) (578)
Total stock-based compensation, net of tax 1,401 1,008 2,806 2,172
Selling, general and administrative        
Stock-based compensation expense        
Total stock-based compensation, before taxes 1,517 1,222 3,120 2,437
Casino        
Stock-based compensation expense        
Total stock-based compensation, before taxes 125 (2) 259 151
Food and beverage        
Stock-based compensation expense        
Total stock-based compensation, before taxes 59 (11) 41 29
Hotel        
Stock-based compensation expense        
Total stock-based compensation, before taxes $ 72 $ 67 $ 131 $ 133
v3.24.2.u1
EARNINGS PER SHARE - Reconciliation (Details) - $ / shares
shares in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Shares        
Basic (in shares) 18,731 19,243 18,948 19,229
Effect of dilutive stock options (in shares) 359 375 367 407
Diluted (in shares) 19,090 19,618 19,315 19,636
Per Share Amount        
Basic (in dollars per share) $ 1.21 $ 1.16 $ 2.16 $ 2.08
Effect of dilutive stock options (in dollars per share) (0.02) (0.02) (0.04) (0.04)
Diluted (in dollars per share) $ 1.19 $ 1.14 $ 2.12 $ 2.04
v3.24.2.u1
EARNINGS PER SHARE - Anti-dilutive Options (Details) - shares
shares in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Employee Stock Option        
Options not included in the computation of diluted earnings per share:        
Excluded from the computation of diluted earnings per share (in shares) 955 647 912 578
v3.24.2.u1
RELATED PARTY TRANSACTIONS (Details)
$ in Thousands
3 Months Ended 6 Months Ended
Nov. 17, 2015
USD ($)
Aug. 28, 2015
a
item
Sep. 30, 2004
USD ($)
Jun. 30, 2024
USD ($)
ft²
Jun. 30, 2023
USD ($)
Jun. 30, 2024
USD ($)
ft²
Jun. 30, 2023
USD ($)
Biggest Little Investments, L.P. (BLI) | Parking Lot Lease              
RELATED PARTY TRANSACTIONS              
Rent paid       $ 187 $ 187 $ 374 $ 374
Operating expenses related to lease       1 1 9 9
Right of use asset       $ 9,600   $ 9,600  
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]       Property, Plant and Equipment, Net   Property, Plant and Equipment, Net  
Operating lease liability       $ 9,600   $ 9,600  
Operating Lease, Liability, Statement of Financial Position [Extensible Enumeration]       Operating Lease, Liability, Noncurrent   Operating Lease, Liability, Noncurrent  
Biggest Little Investments, L.P. (BLI) | Driveway Lease              
RELATED PARTY TRANSACTIONS              
Lease term     15 years        
Area of property | ft²       37,400   37,400  
Minimum annual rent     $ 300        
Anniversary years subject to cost of living adjustment rent increases     5 years        
Number of terms for which the lease can be renewed | item   3          
Lease renewal option additional term   5 years          
Rent paid       $ 101 101 $ 202 202
Operating expenses related to lease       11 9 24 21
Right of use asset       $ 3,100   $ 3,100  
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]       Property, Plant and Equipment, Net   Property, Plant and Equipment, Net  
Operating lease liability       $ 3,100   $ 3,100  
Operating Lease, Liability, Statement of Financial Position [Extensible Enumeration]       Operating Lease, Liability, Noncurrent   Operating Lease, Liability, Noncurrent  
Affiliates | Billboard advertising, storage space and parking lot space              
RELATED PARTY TRANSACTIONS              
Rent paid       $ 125 $ 137 $ 257 $ 269
Golden Road | Parking Lot Lease | Buildings              
RELATED PARTY TRANSACTIONS              
Area of land | a   4.2          
Golden Road | Biggest Little Investments, L.P. (BLI) | Parking Lot Lease              
RELATED PARTY TRANSACTIONS              
Lease term   20 years          
Minimum annual rent $ 695            
Anniversary years subject to cost of living adjustment rent increases 5 years            
Lease renewal option additional term 10 years            
Lessee, Operating Lease, Existence of Option to Extend [true false] true            
Amount due to related party if lease is not renewed $ 1,600            
v3.24.2.u1
LONG-TERM DEBT (Details)
$ in Millions
6 Months Ended
Feb. 01, 2023
USD ($)
Jun. 30, 2024
USD ($)
Long-term debt    
Amount outstanding   $ 23.0
Conversion fee percentage 0.10%  
Interest rate at end of period   5.40%
SOFR    
Long-term debt    
Percentage points added to the reference rate   1.00%
Minimum    
Long-term debt    
Fixed charge coverage ratio   1.1
Minimum | SOFR    
Long-term debt    
Percentage points added to the reference rate 1.00%  
Minimum | Base Rate    
Long-term debt    
Percentage points added to the reference rate 0.00%  
Maximum    
Long-term debt    
Total leverage ratio   2.5
Maximum | SOFR    
Long-term debt    
Percentage points added to the reference rate 1.50%  
Maximum | Base Rate    
Long-term debt    
Percentage points added to the reference rate 0.50%  
Fifth Amended Credit Facility    
Long-term debt    
Maximum borrowing capacity $ 100.0  
v3.24.2.u1
TAXES (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
TAXES    
Effective tax rate (as a percent) 22.90% 22.20%
Liability for uncertain tax positions recorded $ 0 $ 0
Expected change in unrecorded tax benefit $ 0  
v3.24.2.u1
STOCK REPURCHASE PLAN (Details) - USD ($)
$ in Thousands
3 Months Ended
Jun. 30, 2024
Mar. 31, 2024
Oct. 22, 2014
Stock repurchase plan      
Purchase of company common stock $ 30,781 $ 19,574  
Repurchase Plan      
Stock repurchase plan      
Shares authorized for repurchase under program 2,081,325   3,000,000
Purchase of company common stock, Shares 452,464    
Purchase of company common stock $ 30,500    
v3.24.2.u1
LEGAL MATTERS (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
LEGAL MATTERS        
Litigation expense recognized $ 0.1 $ 0.6 $ 0.6 $ 1.2
v3.24.2.u1
DIVIDENDS (Details) - $ / shares
1 Months Ended
Jun. 15, 2024
Feb. 07, 2023
Jul. 24, 2024
Jun. 30, 2024
Dec. 31, 2023
DIVIDENDS          
Dividend paid per share of its outstanding common stock   $ 1.20      
Common stock, par value (in dollars per share)       $ 0.01 $ 0.01
S 2023 Dividends          
DIVIDENDS          
Dividends payable, date declared   Feb. 07, 2023      
Dividend paid per share of its outstanding common stock   $ 5.00      
Common stock, par value (in dollars per share)   $ 0.01      
Dividends payable, date of record   Mar. 01, 2023      
Payment Date   Mar. 15, 2023      
O 2024 Q2 Dividends          
DIVIDENDS          
Dividends payable, date declared Feb. 07, 2023        
Dividends payable, date of record Jun. 01, 2024        
Payment Date Jun. 15, 2024        
Cash dividend paid $ 0.30        
O 2024 Q3 Dividends          
DIVIDENDS          
Dividends payable, date declared     Jul. 24, 2024    
Dividend paid per share of its outstanding common stock     $ 0.30    
Dividends payable, date of record     Sep. 01, 2024    
Payment Date     Sep. 15, 2024    

Monarch Casino and Resort (NASDAQ:MCRI)
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