United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

~~Form 10-Q~~

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

For the quarterly period ended ~~September 30, 2017~~March 31, 2021

☐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

MONARCH CASINO & RESORT, ~~INC.~~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)

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

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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ 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.~~date: 18,524,061 shares of common stock are outstanding as of April 30, 2021.

Table of Contents

TABLE OF CONTENTS


~~Common stock, $0.01 par value~~Item		~~17,700,513 shares~~
~~Class~~		~~Outstanding at November 3, 2017~~

~~Table of Contents~~

~~TABLE OF CONTENTS~~


~~Item~~	Page Number
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements
~~Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2017 and 2016 (unaudited)~~	3
~~Condensed~~ Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 (unaudited)	3
Consolidated Balance Sheets at ~~September 30, 2017~~March 31, 2021 (unaudited) and December 31, ~~2016~~2020	4
~~Condensed~~ Consolidated Statements of Stockholder’s Equity for the three months ended March 31, 2021 and 2020 (unaudited)	5
Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 (unaudited)	5
~~Notes to Condensed Consolidated Financial Statements (unaudited)~~	6
Notes to Consolidated Financial Statements (unaudited)	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1317

Item 3. Quantitative and Qualitative Disclosures About Market Risk	2025

Item 4. Controls and Procedures	2125

PART II - OTHER INFORMATION

Item 1. Legal Proceedings	2125

Item 1A. Risk Factors	2126

Item 6. Exhibits	2127

Signatures	2227

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF ~~INCOME~~OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three months ended

Nine months ended

September 30,

September 30,


2017

2016

2017

2016

Revenues

Casino

$
48,574

$
43,882

$
135,207

$
125,613

Food and beverage

16,342

15,621

47,394

44,581

Hotel

7,316

6,901

19,204

18,038

Other

3,191

2,891

9,039

8,390

Gross revenues

75,423

69,295

210,844

196,622

Less promotional allowances

(12,396)

(12,186)

(36,174)

(35,186)

Net revenues

63,027

57,109

174,670

161,436

Operating expenses

Casino

19,097

17,684

54,837

52,449

Food and beverage

6,699

6,152

19,461

18,343

Hotel

2,735

1,958

7,192

5,438

Other

1,126

975

3,133

2,922

Selling, general and administrative

16,398

14,439

46,117

42,126

Depreciation and amortization

3,722

3,644

11,397

11,134

Loss on disposition of assets

—

5

4

668

Total operating expenses

49,777

44,857

142,141

133,080

Income from operations

13,250

12,252

32,529

28,356

Other expenses

Interest expense, net of amounts capitalized

(161)

(130)

(639)

(275)

Total other expense

(161)

(130)

(639)

(275)

Income before income taxes

13,089

12,122

31,890

28,081

Provision for income taxes

(4,059)

(4,288)

(10,749)

(9,977)

Net income

$
9,030

$
7,834

$
21,141

$
18,104

Earnings per share of common stock

Net income

Basic

$
0.51

$
0.45

$
1.20

$
1.05

Diluted

$
0.49

$
0.45

$
1.16

$
1.03

Weighted average number of common shares and potential common shares outstanding

Basic

17,616

17,338

17,541

17,270

Diluted

18,398

17,720

18,212

17,603


	Three months ended
	March 31,
	2021		2020
Revenues
Casino	$	46,911	$	27,065
Food and beverage		16,206		14,763
Hotel		8,635		6,417
Other		3,208		2,766
Net revenues		74,960		51,011

Operating expenses
Casino		13,618		9,618
Food and beverage		14,095		12,524
Hotel		4,251		2,988
Other		1,520		1,451
Selling, general and administrative		19,925		17,194
Depreciation and amortization		9,514		3,820
Other operating items, net		754		1,305
Total operating expenses		63,677		48,900
Income from operations		11,283		2,111

Other expense
Interest expense, net of amounts capitalized		(1,619)		—

Income before income taxes		9,664		2,111
Provision for income taxes		(1,510)		(91)
Net income	$	8,154	$	2,020

Earnings per share of common stock
Net income
Basic	$	0.44	$	0.11
Diluted	$	0.42	$	0.11

Weighted average number of common shares and potential common shares outstanding
Basic		18,481		18,158
Diluted		19,283		18,874

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

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MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

~~CONDENSED~~ CONSOLIDATED BALANCE SHEETS

(In thousands, except shares)

September 30, 2017

December 31, 2016

(Unaudited)

ASSETS

Current assets

Cash and cash equivalents

$
26,821

$
26,383

Receivables, net

6,817

5,036

Income taxes receivable

859

408

Inventories

3,110

3,097

Prepaid expenses

4,599

4,487

Total current assets

42,206

39,411

Property and equipment

Land

30,034

29,549

Land improvements

6,946

6,914

Buildings

193,252

191,370

Buildings improvements

24,511

24,511

Furniture and equipment

138,257

134,603

Construction in progress

39,300

9,767

Leasehold improvements

2,688

2,688

434,988

399,402

Less accumulated depreciation and amortization

(194,282)

(184,503)

Net property and equipment

240,706

214,899

Other assets

Goodwill

25,111

25,111

Intangible assets, net

4,160

5,035

Deferred income taxes

7,354

7,354

Other assets, net

2,952

3,355

Total other assets

39,577

40,855

Total assets

$
322,489

$
295,165

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable

$
8,242

$
8,720

Construction accounts payable

4,749

2,605

Accrued expenses

23,113

23,795

Total current liabilities

36,104

35,120

Long-term debt

26,200

26,200

Total liabilities

62,304

61,320

Stockholders’ equity

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

—

—

Common stock, $.01 par value, 30,000,000 shares authorized; 19,096,300 shares issued; 17,670,679 outstanding at September 30, 2017; 17,468,269 outstanding at December 31, 2016

191

191

Additional paid-in capital

26,231

23,834

Treasury stock, 1,425,621 shares at September 30, 2017; 1,628,031 shares at December 31, 2016

(19,356)

(22,158)

Retained earnings

253,119

231,978

Total stockholders’ equity

260,185

233,845

Total liabilities and stockholders’ equity

$
322,489

$
295,165


	March 31, 2021		December 31, 2020
ASSETS		(Unaudited)
Current assets
Cash and cash equivalents	$	24,143	$	28,310
Receivables, net		7,722		3,736
Income taxes receivable		23,383		24,894
Inventories		6,968		7,823
Prepaid expenses		7,322		8,393
Total current assets		69,538		73,156
Property and equipment, net		569,544		572,507
Goodwill		25,111		25,111
Intangible assets, net		651		973
Deferred income taxes		130		130
Total assets	$	664,974	$	671,877
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	15,000	$	12,500
Accounts payable		12,358		11,655
Construction accounts payable		50,268		49,771
Accrued expenses		37,167		34,705
Short-term lease liability		737		813
Total current liabilities		115,530		109,444
Deferred income taxes		13,221		13,220
Long-term lease liability		13,858		13,984
Long-term debt, net		142,455		167,162
Total liabilities		285,064		303,810
Stockholders’ equity
Preferred stock, $.01 par value, 10,000,000 shares authorized; NaN issued		—		—
Common stock, $.01 par value, 30,000,000 shares authorized; 19,096,300 shares issued; 18,517,961 outstanding at March 31, 2021; 18,426,130 outstanding at December 31, 2020		191		191
Additional paid-in capital		36,921		34,498
Treasury stock, 578,339 shares at March 31, 2021; 670,170 shares at December 31, 2020		(7,606)		(8,872)
Retained earnings		350,404		342,250
Total stockholders’ equity		379,910		368,067
Total liabilities and stockholders’ equity	$	664,974	$	671,877

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

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MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~STOCKHOLDERS' EQUITY

(In ~~thousands)~~thousands, except shares, Unaudited)

~~(Unaudited)~~

Nine Months Ended September 30,

2017

2016

Cash flows from operating activities:

Net income

$
21,141

$
18,104

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

Depreciation and amortization

11,397

11,134

Amortization of deferred loan costs

403

275

Stock-based compensation

5,199

983

Excess tax benefit from stock-based compensation

—

(425)

Provision for bad debts

152

92

Loss on disposition of assets

4

668

Changes in operating assets and liabilities:

Receivables

(1,933)

(981)

Income taxes receivable

(451)

94

Inventories

(13)

74

Prepaid expenses

(112)

(879)

Accounts payable

(373)

611

Accrued expenses

(669)

(575)

Net cash provided by operating activities

34,745

29,175

Cash flows from investing activities:

Proceeds from sale of assets

86

16

Change in construction payable

2,144

(194)

Acquisition of property and equipment

(36,537)

(19,646)

Net cash used in investing activities

(34,307)

(19,824)

Cash flows from financing activities:

Net exercise of stock options

—

2,100

Excess tax benefit from stock-based compensation

—

425

Loan issuance cost

—

(2,586)

Principal payments on long-term debt

—

(11,000)

Net cash used in financing activities

—

(11,061)

Net increase (decrease) in cash

438

(1,710)

Cash and cash equivalents at beginning of period

26,383

21,164

Cash and cash equivalents at end of period

$
26,821

$
19,454

Supplemental disclosure of cash flow information:

Cash paid for interest, net of amounts capitalized

$
235

$
—

Cash paid for income taxes

$
11,200

$
9,475

Return of assets under capital lease:

Accounts payable

$
(105)

$
—

Accrued expenses

$
(13)

$
—


	Common Stock			Additional
	Shares			Paid-in		Retained		Treasury
	Outstanding	Amount		Capital		Earnings		Stock		Total
Balance, January 1, 2021	18,426,130	$	191	$	34,498	$	342,250	$	(8,872)	$	368,067
Exercise of stock options, net	91,831		—		1,143		—		1,266		2,409
Stock-based compensation expense	—		—		1,280		—		—		1,280
Net income	—		—		—		8,154		—		8,154
Balance, March 31, 2021	18,517,961	$	191	$	36,921	$	350,404	$	(7,606)	$	379,910


	Common Stock			Additional
	Shares			Paid-in		Retained		Treasury
	Outstanding	Amount		Capital		Earnings		Stock		Total
Balance, January 1, 2020	18,141,383	$	191	$	35,215	$	318,572	$	(12,777)	$	341,201
Exercise of stock options, net	30,545		—		(428)		—		428		—
Stock-based compensation expense	—		—		873		—		—		873
Net income	—		—		—		2,020		—		2,020
Balance, March 31, 2020	18,171,928	$	191	$	35,660	$	320,592	$	(12,349)	$	344,094

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

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MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, Unaudited)


	Three Months Ended March 31,
	2021		2020
Cash flows from operating activities:
Net income	$	8,154	$	2,020
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		9,514		3,820
Amortization of deferred loan costs		293		134
Stock-based compensation		1,280		873
Provision for bad debts		39		76
Non cash operating lease expense		(4)		—
Deferred income taxes		1		—
Changes in operating assets and liabilities:
Receivables		(4,025)		1,188
Income taxes		1,511		91
Inventories		855		(154)
Prepaid expenses		1,071		845
Accounts payable		703		(10,458)
Accrued expenses		2,462		(5,901)
Net cash provided by (used in) operating activities		21,854		(7,466)

Cash flows from investing activities:
Change in construction payable		497		(2,876)
Acquisition of property and equipment		(6,427)		(10,839)
Net cash used in investing activities		(5,930)		(13,715)

Cash flows from financing activities:
Proceeds from exercise of stock options		2,409		—
Principal payments on long-term debt		(22,500)		—
Net cash (used in) provided by financing activities		(20,091)		—

Change in cash and cash equivalents		(4,167)		(21,181)
Cash and cash equivalents at beginning of period		28,310		60,539
Cash and cash equivalents at end of period	$	24,143	$	39,358

Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized	$	1,328	$	—

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

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MONARCH CASINO & RESORT, INC.

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUARTERLY PERIOD ENDED ~~SEPTEMBER 30, 2017~~MARCH 31, 2021

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation:

Monarch Casino & Resort, Inc. was incorporated in ~~1993~~1993. Unless otherwise indicated, “Monarch,” “us,” “we,” and ~~through~~the “Company” refer to Monarch Casino & Resort, Inc. and its ~~wholly owned subsidiary Golden Road Motor Inn, Inc. (“Golden Road”),~~subsidiaries. Monarch owns and operates the Atlantis Casino Resort Spa, a ~~hotel/~~hotel and casino ~~facility~~ in Reno, Nevada (the “Atlantis”) and Monarch Casino Resort Spa Black Hawk, a casino in Black Hawk, Colorado (the “Monarch Casino Black Hawk”). ~~Monarch’s wholly owned subsidiaries, High Desert Sunshine, Inc. (“High Desert”), Golden East, Inc. (“Golden East”) and Golden North, Inc. (“Golden North”), each own~~In addition, Monarch owns separate parcels of land located ~~proximate~~next to the ~~Atlantis.~~

~~Monarch’s wholly owned subsidiary, Monarch Growth Inc. (“Monarch Growth”), formed in 2011, acquired Riviera Black Hawk, Inc., owner~~Atlantis and a parcel of ~~the Riviera Black Hawk Casino, on April 26, 2012. Riviera Black Hawk, Inc. was renamed Monarch Black Hawk, Inc.~~land with an industrial warehouse located between Denver, Colorado and ~~Riviera Black Hawk Casino was renamed~~ Monarch Casino Black ~~Hawk in October 2013. In addition to owning the~~Hawk. Monarch ~~Casino Black Hawk, Monarch Black Hawk, Inc. wholly~~also owns Chicago Dogs Eatery, Inc. and Monarch Promotional Association, both of which were formed in relation to ~~extended~~ licensure requirements for extended hours of liquor operation in Black Hawk, Colorado. ~~Monarch Growth’s wholly owned subsidiary, Inter-Mountain Construction, LLC, owns a parcel of land with an industrial warehouse located between Denver Colorado and Monarch Casino Black Hawk.~~

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

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

Interim Financial Statements:

The ~~accompanying unaudited condensed consolidated financial statements~~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 are included. Operating results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2021.

The balance sheet at December 31, ~~2016~~2020 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, ~~2016.~~2020.

~~Fair Value~~Impact of ~~Financial Instruments~~COVID-19:

In March 2020, a global pandemic was declared due to an outbreak of a new strain of coronavirus (“COVID-19”). In an effort to contain the virus, on March 16, 2020 the state of Colorado mandated a temporary shutdown of all casinos including Monarch Casino Resort Spa Black Hawk and on March 17, 2020 the state of Nevada mandated the temporary closure of all casinos including Atlantis Casino Resort Spa in Reno. The COVID-19 outbreak has had, and may continue to have, an adverse effect on the Company's results of operations.

Our Nevada and Colorado properties reopened with limited operations on June 4, 2020 and June 17, 2020, respectively. During the first quarter of 2021, we continued to operate under government-enforced capacity restrictions. Changes were made from routine operations relating to restrictions in occupancy and social distancing requirements, which include reduced seating at table games at and in all restaurants, and a decreased number of active slot machines on the casino floors. The convention business at Atlantis was adversely affected by the state-mandated gathering limits. We have experienced hotel stay and convention booking cancelations, and since the reopening, guest visitation and hotel and convention bookings have been lower than prior to the state-mandated closures, and are expected to remain lower for the near future. At the same time, however, our results of operation for the first quarter of 2021 benefited from pent-up demand with patrons across the gaming industry, particularly in regional gaming markets.

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The Company has taken steps to mitigate the effects of the COVID-19 pandemic and uncertainty by reducing the operating expenses taking advantage of federal and state government programs that support companies affected by the COVID-19 pandemic and their employees, and entering in an amended and restated credit agreement with its lender, which extended the maturity date of the Company’s credit facility to September 3, 2023 and increased the aggregated principal amount of the facility from $241.3 million to $270.0 million (consisting of a $200.0 million term loan and a $70.0 million revolving credit facility) with an option to increase the facility by up to an additional $75.0 million revolving line of credit. See NOTE 6. LONG-TERM DEBT.

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

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 of each year, or whenever events or circumstances make it more likely than not that impairment may have occurred. Impairment testing for goodwill is performed at the reporting unit level, and each of the Company’s casino properties is considered to be a reporting unit.

Goodwill consists of the excess of the acquisition cost over the fair value of the Company’s financial instruments has been determined by the Company, using available market information and valuation methodologies. However, considerable judgment is required to develop the estimatesnet assets acquired in business combinations in April 2012. As of ~~fair value; thus, the estimates provided herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.~~

The carrying amounts of cash, receivables, accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments. Additionally, the carrying value of our debt approximates fair value dueMarch 31, 2021, we had goodwill totaling $25.1 million related to the ~~variable nature of applicable interest rates and relatively short-term maturity.~~

~~Table of Contents~~

~~Debt Issuance Costs:~~

Costs incurred in connection with the issuance of long-term debt are capitalized and amortized to interest expense over the term of the related debt agreement. Loan issuance costs are included in “Other assets, net” on the Company’s condensed consolidated balance sheets. As of September 30, 2017, loan issuance costs, net of amortization was $2.0 million.

~~Change in Accounting Estimate of Depreciable Life~~purchase of Monarch Casino Black Hawk, ~~Parking Structure:~~Inc.

~~In December 2013,~~ASC Topic 350 requires goodwill be tested for impairment between annual tests if an even or circumstances change that would more likely than not reduce the ~~Company began construction~~fair value of a ~~new parking facility at Monarch Casino Black Hawk. Upon completion~~reporting unit below its carrying amount. We performed an assessment to determine whether events or circumstances such as those described in ASC 350-20-35-3C existed and we determined that they did not exist during the interim period; therefore, an interim impairment test was not performed.

The Company believes that it has made reasonable estimates and judgments in performing its analysis in light of the ~~new structure,~~risks and uncertainties surrounding the ~~Company planned to demolish~~COVID-19 pandemic. However, if the ~~existing parking structure. At December 31, 2013,~~excess of fair value over the ~~existing parking structure had~~carrying amount declines by a net book value of approximately $4.8 million and a remaining depreciable life of approximately 37 years. The new parking facility was estimated to be completed on March 31, 2015. In accordance with Financial Accounting Standards Board (“FASB”) accounting standards codification (“ASC”) 250-10-45-17, effective January 1, 2014,significant amount in the Company modified the estimated depreciable life of the existing parking structure to 15 months; the period from January 1, 2014 through the estimated demolition commencement date of March 31, 2015. Asfuture as a result of ~~this modification~~changes in actual and projected operating results or other internal or external economic factors, the Company could be required to recognize goodwill impairment charges in future periods.

Property and Equipment, net:

Property and Equipment, net consist of the following (in thousands):


	March 31, 2021		December 31, 2020
Land	$	32,986	$	32,986
Land improvements		9,848		9,847
Buildings		469,119		471,819
Buildings improvements		33,681		33,681
Furniture and equipment		233,939		229,052
Construction in progress		10,495		6,257
Right of use assets		14,586		14,784
Leasehold improvements		3,848		3,848
		808,502		802,274
Less accumulated depreciation and amortization		(238,958)		(229,767)
Property and equipment, net	$	569,544	$	572,507

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


Land improvements	15	-	40	years
Buildings	30	-	40	years
Building 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 ~~existing parking structure increased by approximately $0.3 million per month (approximately $0.2 million net~~Company recognizes the asset to be sold at the lower of ~~tax). In July 2014, because~~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 ~~delayed construction schedule,~~discounted cash flow model.

For assets to be held and used, the Company revised the new parking facility completion date to December 31, 2015. At this time, the existing parking structure had a net book value of approximately $2.9 million. The Company modified the estimated depreciable life of the existing parking structure to 18 months; the period from July 1, 2014 through the revised estimated demolition commencement date of December 31, 2015. In October 2015, the general contractor notified the Company that further delay was expected and completion was then expected in the second quarter of 2016 at which time demolition of the existing structure would commence. At September 30, 2015, the existing parking structure had a net book value of approximately $0.4 million. Beginning in October 2015, the Company reduced the monthly depreciation expense to $0.04 million to reflect the revised depreciable life of the existing parking structure. The parking structure was fully depreciated as of June 30, 2016. The parking structure was demolished inreviews fixed assets for impairment annually during the fourth quarter of ~~2016.~~

each year or 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 comparables, when available. For the ~~three~~three-month periods ended March 31, 2021 and nine months ended September 30, 2017, and for the three months ended September 30, 2016, the changes in estimate did not have an effect on depreciation expense, net income and diluted earnings per share. For the nine months ended September 30, 2016, the effect of the change in estimate was an increase of depreciation expense by $266 thousand, a decrease of net income by $173 thousand and a decrease of basic and diluted earnings per share by approximately $0.01.2020, there were 0 impairment charges.

Segment Reporting:

The accounting guidance for disclosures about segments of an enterprise and related information requires separate financial information to be disclosed for all operating segments of a business. The Company determined that the Company’s ~~two~~2 operating segments, Atlantis and Monarch Casino Black Hawk, meet ~~all of~~ the aggregation criteria stipulated by ASC 280-10-50-11. The Company views each property as an operating segment and the ~~two~~2 operating segments have been aggregated into ~~one~~1 reporting segment.

~~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 ~~based on~~by the weighted average ~~which approximates a first-in, first out method.~~

On January 1, 2017, we adopted the new ASU which changes the measurement principle for inventories valued under the first-in, first-out or weighted-average methods from the lower of cost or market to the lower of cost and ~~net realizable value.~~specific identification methods. Net realizable value is defined by ~~FASB~~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.

Debt Issuance Costs:

Costs incurred in connection with the issuance of long-term debt are amortized to interest expense over the term of the related debt agreement utilizing the effective interest rate method. Unamortized amounts of debt issuance costs are recorded as a reduction of the outstanding debt and included in “Long-term debt, net”.

As of March 31, 2021, debt issuance costs, net of amortization, were $2.5 million.

Capitalized Interest:

The Company capitalizes interest costs associated with debt incurred in connection with major construction projects. When no debt is specifically identified as being incurred in connection with a construction project, the Company capitalizes interest on amounts expended on the project at the Company’s average borrowing cost. Interest capitalization is ceased when the project is substantially complete. The Company capitalized $1.8 million during the three months ended March 31, 2020. No capitalized interest was recognized in the first three months ending March 31, 2021, as the Monarch Black Hawk expansion project was substantially completed in the fourth quarter of 2020.

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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 March 31, 2021, the Company had estimated the obligations related to the players’ club program at $9.7 million, which is included in Accrued Expenses in the Liabilities and Stockholders’ Equity section in the Consolidated Balance Sheet.

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.

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Credit Losses

The Company extends short-term credit to its gaming customers. Such credit is non-interest bearing and is due on demand. In addition, the Company also has receivables due from hotel guests and convention groups and events, which are primarily secured with a credit card. An allowance for doubtful accounts is set up for all Company receivables based upon the Company’s historical collection and write-off experience and taking in consideration the current economic conditions and management’s expectations of future economic conditions. The allowance is applied even when the risk of credit loss is remote. When a situation warrants, the Company may create a specific identification reserve for a high collection risk receivables. The Company writes off its uncollectible receivables once all efforts have been made to collect such receivables. The book value of receivables approximates fair value due to the short-term nature of the receivables.

Other Operating items, net:

Other operating items, net, in general consist of miscellaneous operating charges or proceeds. For the three months ended March 31, 2021, Other operating items, net, was $0.7 million and included: $0.6 million in professional service fees relating to our construction litigation; and $0.1 million equipment, supplies and employee testing expenses directly attributable to the pandemic for reopening of the properties and incremental to normal operations. For the three months ended March 31, 2020, Other operating items, net, was $1.3 million and included: $0.8 million in pre-opening expenses relating to the Monarch Black Hawk Expansion project; $0.4 million in Colorado legislation lobbying expenses; and $0.1 million in professional service fees relating to our construction litigation.

Impact of Recently Adopted Accounting Standards:

The Company has evaluated the recently issued or proposed by the Financial Accounting Standards Board (“FASB”) or other standards-setting bodies accounting standards and does not believe the future adoption of ~~this standard did not~~any such pronouncements will have a material ~~impact~~effect on ~~our~~the Company’s Consolidated Financial ~~Statements due~~Statements.

In addition, 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, the Company has 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 leases with terms greater than 12 months, the Company records the related asset and obligation at the present value of the lease payments over the lease term. Many of the Company’s leases include rental escalation clauses, renewal options and/or termination options that are factored into its determination of lease payments when appropriate. As permitted by ASC 842, the Company elected not to separate non-lease components from their related lease components.

As of March 31, 2021, the Company’s right of use assets consisted of the Parking Lot Lease, the Driveway Lease (as defined and discussed in NOTE 5. RELATED PARTY TRANSACTIONS), as well as certain billboard leases.

Upon adoption of the new lease standard, incremental borrowing rates used for existing leases were established using the rates in effect as of the lease inception or modification date. The weighted-average incremental borrowing rate of the leases presented in the lease liability as of March 31, 2021 was 4.33%.

The weighted-average remaining lease term of the leases presented in the lease liability as of March 31, 2021 was 21.1 years.

Cash paid related to the ~~nature~~operating leases presented in the lease liability for each of ~~its inventory, consisting primarily of food, beverages,~~the three months ended March 31, 2021 and ~~retail merchandise.~~2020, was $0.4 million.

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NOTE 2.3. STOCK-BASED COMPENSATION

~~On January 1, 2017, the Company adopted accounting standard update (“ASU”)~~In accordance with ASU No. 2016-09, which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. Subsequent to the adoption, 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. ~~This guidance of requiring recognition of excess tax benefits and deficits in the income statement was applied prospectively with the adoption of ASU No. 2016-09.~~

For the three months ended September 30, 2017, the effect of the adoption of ASU No. 2016-09 was a decrease of tax expense by $122 thousand resulting in an increase of basic and diluted earnings per share by less than $0.01. For the nine months ended September 30, 2017, the effect of the adoption of ASU No. 2016-09 was a decrease of tax expense by $463 thousand resulting in an increase of basic and diluted earnings per share by approximately $0.03.

The Company has elected to keep the accounting policy of estimated forfeitures, rather than account for forfeitures as they occur. The amendments in the guidance that require application using a modified retrospective transition method did not impact the Company. Therefore, there was no cumulative-effect adjustment to retained earnings recognized as of January 1, 2017.

ASU No. 2016-09 also changes the classification and presentation of the excess tax benefit from stock-based compensation in the statement of cash flows. The Company applied the amendments in this guidance relating to classification on its consolidated statement of cash flows prospectively.

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

Three months ended

Nine months ended

September 30,

September 30,


2017

2016

2017

2016

Casino

$
32

$
29

$
100

$
80

Food and beverage

27

26

90

77

Hotel

8

11

24

33

Selling, general and administrative

502

367

1,313

793

Total stock-based compensation, before taxes

569

433

1,527

983

Tax benefit

(199)

(152)

(534)

(345)

Total stock-based compensation, net of tax

$
370

$
281

$
993

$
638


	Three months ended
	March 31,
	2021		2020
Casino	$	42	$	—
Food and beverage		46		57
Hotel		32		28
Selling, general and administrative		1,160		788
Total stock-based compensation, before taxes		1,280		873
Tax benefit		(269)		(183)
Total stock-based compensation, net of tax	$	1,011	$	690

For the nine months ended September 30, 2016, stock-based compensation expense was unusually low due to the forfeited stock options and the reversal of stock-based compensation expense in relation to the resignation of the Company’s former Chief Financial Officer.

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NOTE 3.4. 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 September 30,
	2017			2016
		Per Share			Per Share
	Shares	Amount		Shares	Amount

							Three months ended March 31,
							2021			2020
								Per Share			Per Share
							Shares	Amount		Shares	Amount
Basic	17,616	$	0.51	17,338	$	0.45	18,481	$	0.44	18,158	$	0.11
Effect of dilutive stock options	782		(0.02)	382		—	802		(0.02)	716		—
Diluted	18,398	$	0.49	17,720	$	0.45	19,283	$	0.42	18,874	$	0.11

Nine months ended September 30,

2017

2016

Per Share

Per Share


Shares

Amount

Shares

Amount
Basic

17,541

$
1.20

17,270

$
1.05
Effect of dilutive stock options

671

(0.04)

333

(0.02)
Diluted

18,212

$
1.16

17,603

$
1.03

Excluded from the computation of diluted earnings per share are options where the exercise prices are greater than the market price as their effects would be anti-dilutive in the computation of diluted earnings per share. For the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021 and 2020, options for approximately ~~150~~210 thousand and ~~229 thousand shares, respectively, were excluded from the computation. For the three and nine months ended September 30, 2016, options for approximately 314 thousand and 885~~1,036 thousand shares, respectively, were excluded from the computation.

~~NOTE 4. NEW ACCOUNTING PRONOUNCEMENTS~~

In May 2014, the FASB issued an ASU that amends the FASB ASC and creates a new topic for Revenue from Contracts with Customers. The new guidance is expected to clarify the principles for revenue recognition and to develop a common revenue standard for U.S. GAAP applicable to revenue transactions. This guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. This guidance also provides substantial revision of interim and annual disclosures. The update allows for either full retrospective adoption, meaning the guidance is applied for all periods presented, or modified retrospective adoption, meaning the guidance is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the guidance recognized at the date of initial application. The effective date is for the annual and interim periods beginning after December 15, 2017. The Company plans to adopt this standard effective January 1, 2018. This standard will affect the Company’s accounting policy in relation to the Non-discretionary loyalty program transactions. Based on a clarification from the FASB, complementary revenue represents a consideration payable to a customer and therefore is to be treated as a deduction to revenue at the time of the transaction and at the price of the complementary being offered. The Company expects the majority of such amounts will offset casino revenues. The standard also changes the presentation of promotional allowances to be shown as a direct reduction of gross revenues instead of being presented as a separate line on the Statement of Income. The Company also expects the accounting for our player program to be impacted, with possible changes to the timing and/or classification of certain transactions within revenues and between revenues and operating expenses as we transition from the immediate revenue/cost accrual model to the deferred revenue model. The quantitative effects of these changes have not yet been determined and are still being analyzed. The Company is planning to adopt this standard on a modified retrospective basis.

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In February 2016, the FASB issued an ASU, amended January 2017, which addresses the recognition and measurement of leases. Under the new guidance, for all leases (with the exception of short-term leases), at the commencement date, lessees will be required to recognize a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Further, the new lease guidance simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and liabilities, which no longer provides a source for off- balance sheet financing. The effective date for this update is for the annual and interim periods beginning after December 15, 2018 with early adoption permitted. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently assessing the impact the adoption of this standard will have on its Consolidated Financial Statements.

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 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 ~~are the three largest stockholders (“Farahi~~have significant holdings (the “Farahi Family Stockholders”) ofin 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 ~~formerly~~ held the positions of Co-Chairman of the Board, Secretary, Treasurer and Chief Financial Officer of the Company.

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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”)~~ consisting of an approximate 46,000 square-foot commercial building on approximately ~~4.15~~4.2 acres of land adjacent to the Atlantis (the ~~“Leased Property”~~“Parking Lot Lease”). This lease gives the Atlantis the right to use a parcel, approximately 4.2 acres, comprised of a commercial building and surrounding land adjacent to the Atlantis. The primary purpose of the Parking Lot Lease is to provide additional, convenient, Atlantis surface parking. The Company demolished the building and converted the land into approximately 300 additional surface parking spaces for the Atlantis. 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~~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 ~~10-year~~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 ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020, the Company paid $174 thousand ~~and $174 thousand~~ in rent, plus ~~$15 thousand and $13~~$7 thousand in operating expenses ~~related~~relating to this lease. The right of use asset and lease ~~respectively. For~~liability balances as of March 31, 2021, recognized in the ~~nine-month periods ended 2017 and 2016 the Company paid $522 thousand and $522 thousand in rent, plus $23 thousand and $49 thousand in operating expenses, related to this lease, respectively.~~Consolidated Balance Sheet, was $10.4 million.

In addition, ~~we share~~the Atlantis shares a driveway with the Shopping Center and ~~lease~~leases approximately 37,400 ~~square-feet~~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~~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~~3 successive five-year renewal terms beyond the initial 15-year term in the existing Driveway Lease ~~Agreement.~~agreement. At the end of the renewal terms, the Company has the option to purchase the leased driveway section of the Shopping Center. AsFor each of ~~September 30, 2017, the annual rent is $377 thousand. For~~ the three-month periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, the Company paid ~~$94 thousand and $94~~$101 thousand in rent plus $8 thousand ~~and $5 thousand~~ in operating expenses ~~respectively. For~~relating to this lease. The right of use asset and lease liability balances as of March 31, 2021, recognized in the ~~nine-month periods ended September 30, 2017 and 2016, the~~Consolidated Balance Sheet, was $3.9 million.

The Company ~~paid $282 thousand and $282 thousand in rent, plus $19 thousand and $30 thousand in operating expenses, respectively.~~

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We occasionally ~~lease~~leases billboard advertising, storage space and parking lot space from affiliates controlled by the Farahi Family Stockholders and paid ~~$36~~$42 thousand and ~~$35~~$36 thousand for the three-month periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016, respectively, and $96 thousand and $93 thousand for the nine-month periods ended September 30, 2017 and 2016,~~2020 respectively, for such leases.

NOTE 6. LONG-TERM DEBT

On ~~July 20, 2016,~~September 3, 2020, the Company entered into ~~an amended~~the Fourth Amended and ~~restated credit facility agreement~~Restated Credit Agreement with Wells Fargo Bank, N.A., as administrative agent and certain banks (the ~~“Amended~~“Fourth Amended Credit Facility”)~~, under which our former $100.0~~. The Fourth Amended Credit Facility amends and restates the Company’s $250.0 million credit facility, ~~(under which~~dated as of ~~June 30,~~July 20, 2016 the borrowing capacity had been reduced to $45.5 million as a result of $19.5 million in mandatory reductions pursuant to the agreement and $35.0 million in voluntary reductions, as allowed by the agreement) was increased to $250.0 million, and(the “Prior Credit Facility”).

The Fourth Amended Credit Facility extends the maturity date ~~was extended from November 15, 2016 to July 20, 2021.~~

As of ~~September 30, 2017, we had borrowed $26.2 million of the principal under~~ the Amended Credit Facility ~~and had a $0.6 million Standby Letter of Credit and $223.2 million remaining in available borrowings of~~from July 20, 2021 to September 3, 2023. In addition, the ~~$250.0 million maximum principal available under the Amended Credit Facility. As of September 30, 2017, there have been no withdrawals from the Standby Letter of Credit.~~

~~The total revolving loan commitment under the~~Fourth Amended Credit Facility ~~will be automatically and permanently reduced to $50.0 million in~~increases the ~~first full quarter after completion~~aggregate principal amount of the ~~expansion project at the Monarch Casino Black Hawk and all then outstanding revolving loans up~~credit facilities to ~~$200.0~~$270.0 million. The $270.0 million ~~under the~~Fourth Amended Credit Facility ~~will be converted to a~~consists of: $200 million term loan at(“Term Loan Facility”) and $70 million revolving credit facility (“Revolving Credit Facility”), together with an option to increase the facility by up to an additional $75.0 million Revolving Credit Facility.

The Company is required to make quarterly principal payments under the Term Loan Facility on each Term Loan Installment Date, commencing on December 31, 2020, in an amount equal to (x) the percentage set forth opposite the applicable period during which such ~~time. We~~Term Loan Installment Date occurs (i.e., 1.25% for the period from December 31, 2020 to September 30, 2021, and 2.50% for the period from December 31, 2021 and thereafter) multiplied by (y) $200.0 million. The estimated amount of the mandatory principal payments due in the next twelve months is $15.0 million.

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Commencing with the delivery of the compliance certificate for fiscal year 2021, the Company may be required to prepay borrowings under the Fourth Amended Credit Facility using excess cash flows for each fiscal year, depending on ~~our~~the Company’s leverage ~~ratio no later than December~~ratio.

As of March 31, ~~2019. We~~2021, the Company had an outstanding principal balance of $160.0 million under the Term Loan Facility, from which $15 million is expected to have ~~an option to permanently reduce~~a maturity date in next twelve months. As of March 31, 2021, the ~~maximum revolving~~Company had no borrowings under the Revolving Credit Facility, therefore all $70.0 million remained available ~~credit at any time so long as the amount of such reduction is at least $0.5 million and in multiples of $50,000.~~for borrowing.

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

In addition to other customary covenants for a facility of this nature, as of ~~September 30, 2017, we are~~March 31, 2021, the Company is required to maintain a ~~leverage ratio,~~Total Leverage Ratio (as defined ~~as consolidated debt divided by Adjusted EBITDA,~~in the Fourth Amended Credit Facility) of no more than ~~3.5:~~4.75:1 and ~~a fixed charge coverage ratio (Adjusted EBITDA divided by fixed charges, as~~Fixed Charge Coverage Ratio (as defined in the ~~Third~~Fourth Amended ~~and Restated~~ Credit ~~Agreement)~~Facility) of at least 1.15:1. As of ~~September 30, 2017,~~March 31, 2021, the Company’s ~~leverage ratio~~Total Leverage Ratio and ~~fixed charge coverage ratios~~Fixed Charge Coverage Ratio were ~~0.4:~~2.1:1 and ~~41.3:1, respectively.~~4.6:1.

~~The~~As of March 31, 2021, the interest rate under the Fourth Amended Credit Facility is LIBOR plus a margin ranging from ~~1.00%~~1.75% to ~~2.50%~~3.25%, or a base rate (as defined in the Fourth Amended Credit Facility) plus a margin ranging from ~~0.00%~~0.75% to ~~1.50%~~2.25%, or the Prime Rate. The applicable margins ~~will~~ vary depending on ~~our~~Company’s leverage ratio. Commitment fees are equal to the daily average unused revolving commitment multiplied by the commitment fee percentage, ranging from ~~0.175%~~0.35% to ~~0.45%~~0.575%, based on our leverage ratio.

~~At September 30, 2017, our interest rate was based on LIBOR~~On the terms and ~~our leverage ratio was such that pricing for borrowings under~~subject to some conditions, the ~~Amended~~Company may, at any time before the Maturity Date, request an increase of Revolving Credit Facility, ~~was LIBOR plus 1.00%. At September 30, 2017,~~provided that each such increase is equal to $15.0 million or an integral multiple of $1.0 million in excess and, after giving effect to the ~~one-month LIBOR interest rate was 1.24%. The carrying value~~requested increase, the aggregate amount of the ~~debt outstanding under~~increases in the ~~Amended Credit Facility approximates fair value because the interest fluctuates with the lender’s prime rate or other market rates of interest.~~total revolving loan commitment shall not exceed $75.0 million.

WeThe Company may prepay borrowings under the Fourth Amended Credit Facility revolving loan without penalty (subject to certain conditions and certain charges applicable to the prepayment of LIBOR borrowings prior to the end of the applicable interest period). ~~Amounts prepaid~~Once reduced or cancelled, the Revolving Credit Facility may not be ~~re-borrowed so long~~increased or reinstated without the prior written consent of all lenders. During the first quarter of 2021, the Company made a $20.0 million optional prepayment on its Term Loan Facility in addition to a $2.5 million mandatory payment.

As of March 31, 2021, $142.5 million “Long-term debt, net” in the Company’s consolidated balance sheet represents the $160.0 million outstanding loan amount under the Fourth Amended Credit facility, net of $2.5 million unamortized debt issuance costs and $15.0 million mandatory principal payment that are due in next twelve months and are presented as “Current portion of long-term debt” in the ~~total borrowings outstanding do not exceed~~Current liabilities section of the ~~maximum principal available.~~Company’s consolidated balance sheets.

~~We believe~~The Company believes that ~~our existing~~the expected cash ~~balances, cash flow~~flows from ~~operations~~operating activities and ~~borrowings~~the $70.0 million available under ~~the~~its Fourth Amended Credit Facility as of March 31, 2021 will ~~provide us with~~be sufficient ~~resources~~ to ~~fund our~~support its current operations, meet ~~our~~its debt obligations and fulfill ~~our~~its capital expenditure plans ~~over~~for the ~~next~~ twelve ~~months;~~months from filing of Form 10-Q for the quarter ended March 31, 2021; however, ~~our~~the Company is surrounded by uncertainty about COVID-19 and the reopening of its operations, ~~are subject to~~as well as financial, economic, competitive, regulatory, and other factors, many of which are beyond ~~our~~its control. If ~~we are~~the Company is unable to generate sufficient cash flow in the upcoming months or if ~~our~~its cash needs exceed ~~our~~the Company’s borrowing capacity under the Fourth Amended Credit Facility, weit could be required to adopt one or more alternatives, such as reducing, delaying or eliminating planned capital expenditures, selling assets, restructuring debt or ~~obtaining~~issuing additional ~~equity capital.~~equity.

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NOTE 7. TAXES

For the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, the Company’s effective tax rate was ~~33.7%~~15.6% and ~~35.5%~~4.3%, respectively. The effective tax rate for the three months ended March 31, 2021 was a result of the excess tax benefit on stock option exercises The effective tax rate for the three months ended March 31, 2020 was a result of the high weight of tax credits and excess tax benefit on stock option exercises on the provision for income taxes, as the quarterly income was negatively impacted by the suspension of the operations in mid-March of 2020.

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As of March 31, 2021, $23.4 million “Income taxes receivable” in the Company’s consolidated balance sheet represents the $24.9 million expected federal and state tax refund for 2020 tax year, net of $1.5 million provision for income tax for the first quarter of 2021.

Deferred tax assets were evaluated by considering historical levels of income, estimates of future taxable income and the impact of tax planning strategies.

NaN uncertain tax positions were recorded as of March 31, 2021 and 2020. NaN change in uncertain tax positions is anticipated over the next 12 months.

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. The Company has made no0 purchases 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 expansion plans for Monarch Casino Resort Spa Black Hawk. The complaint alleges, among other things, 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.

The trial date for this matter has been rescheduled for March 21, 2022. Discovery in the action is ongoing, and we are currently unable to determine the probability of the outcome or reasonably estimate the loss or gain, if any.

In connection with the expansion of the Monarch Black Hawk described above, our general contractor PCL and certain subcontractors have provided Monarch with purported notice of their intent to file a lien against the real property on which the Monarch Black Hawk is situated, for sums allegedly owed for construction of the expansion. Some of the subcontractors have recorded such liens in the property records of Gilpin County, Colorado.

On March 26, 2021, PCL filed a mechanics’ lien foreclosure action in District Court, County of Gilpin, Colorado, against the Company and its Colorado subsidiaries, in connection with the Company’s expansion plans for Monarch Casino Resort Spa Black Hawk. The complaint essentially mirrors the claims and allegations made by PCL in the lawsuit it previously filed in the City and County of Denver, Colorado, as described above. The new 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 is typical. On April 16, 2021, PCL filed an amended complaint, joining more such parties.

Because PCL’s mechanics’ lien action in the County of Gilpin mirrors the claims and allegations in the action PCL filed in the City and County of Denver, Monarch filed a motion to consolidate both actions into one action in the County of Gilpin. The motion was filed on April 19, 2021, before the Colorado Panel on Consolidated Multidistrict Litigation. The Panel has set the motion for hearing on June 11, 2021.

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Monarch has not yet filed an answer or otherwise responded to PCL’s amended complaint, nor has a trial of the matter been set. Monarch intends to defend against PCL’s claim and seek to expunge or reduce the liens.

The Company recognized $0.6 million and $0.2 million in construction litigation expense relating to this lawsuit for the three months ended March 31, 2021 and 2020, respectively, which are included in Other operating items, net on the Consolidated Statements of Operations.

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

The Company entered into an amendment to the Fourth Amended Credit Facility with an effective date of April 30, 2021. Based on the amendment the Company is required to maintain a Total Leverage Ratio of no more than 4.00:1.00. The amendment removes the requirement for 0.50% LIBOR floor.

As of the effective date of this amendment, the interest rate is LIBOR plus a margin ranging from 1.00% to 2.00%, or a base rate (as defined in the Fourth Amended Credit Facility) plus a margin ranging from 0.00% to 1.00%, or the Prime Rate. The applicable margins vary depending on the Company’s leverage ratio. Commitment fees are equal to the daily average unused revolving commitment multiplied by the commitment fee percentage, ranging from 0.175% to 0.325%, based on our leverage ratio.

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

~~STATEMENT ON FORWARD-LOOKING INFORMATION~~

When used in this report and elsewhere by management from time to time, the words “believes,” “anticipates” and “expects” and similar expressions are intended to identify forward-looking statements with respect to our financial condition, results of operations and our business, including our expansion, financing for such expansion, construction timelines, development activities, our ability to benefit from future economic growth, our ability to fund our operations and meet debt obligations, legal proceedings and employee matters. Certain important factors, including, but not limited to, competition from other gaming operations, factors affecting our ability to compete, acquisitions of gaming properties, legalization of additional gaming operations in our markets, leverage, construction risks, availability of financing, economic downturn, the inherent uncertainty and costs associated with litigation and governmental and regulatory investigations, and licensing and other regulatory risks, could cause our actual results to differ materially from those expressed in our forward-looking statements. Any changes in the law that would permit the establishment of gaming operations in or near Denver could materially impact Monarch Casino Black Hawk operations and could alter, delay or cause us to reconsider our master development plan to expand our Monarch Casino Black Hawk property. Further information on potential factors which could affect our financial condition, results of operations and business including, without limitation, our expansion, development activities, legal proceedings and employee matters, are included in our filings with the Securities and Exchange Commission (the “SEC”). Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date thereof. We undertake no obligation to publicly release any revisions to such forward-looking statement to reflect events or circumstances after the date hereof.

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

~~OPERATING RESULTS SUMMARY~~CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

~~Our operating~~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) the impact of the COVID-19 pandemic on our revenues, cash flows, liquidity, construction projects, results of operations and financial condition; (ii) our expectations regarding the return to normalized operations; (iii) our beliefs regarding the sufficiency of our cash and other financial resources; (iv) our expectations regarding discussions with our lenders about refinancing and/or additional relief options and steps under the Amended Credit Facility that may be ~~affected by, among other things, competitive factors, gaming tax increases,~~requested in light of currently-changing circumstances, as well as our expectations regarding credit facility covenant compliance and our ability to continue to obtain necessary covenant waivers; (v) our expectations regarding changes in our operations and services relating to restrictions in occupancy and social distancing requirements; (vi) our beliefs regarding the ~~commencement~~effectiveness of ~~new competitive gaming operations, construction at our facilities, general public sentiment regarding travel~~the actions we've taken with respect to the COVID-19 pandemic and ~~leisure activities, including gaming, overall economic conditions and governmental policies affecting~~ the ~~disposable income~~quality of our ~~patrons~~properties as key factors in Monarch's long-term success; (vii) our expectations and ~~weather conditions affecting~~beliefs concerning the project scope, timing for completion, receipt of all occupancy and other regulatory approvals for portion of the expansion project, impact of the ongoing construction litigation, budget and estimated costs, pre-opening expenses, transformative potential and our ~~properties.~~continued investment in our expansion project at the Monarch Casino Black Hawk (the "Monarch Black Hawk Expansion"); (viii) our expectations regarding financing of the Monarch Black Hawk Expansion; (ix) our expectations and intentions regarding the expenses, defenses and outcomes of the lawsuit filed by the construction project general contractor against us; (x) our expectations regarding our business prospects, strategies and outlook; (xi) our expectations regarding the positioning of our properties to benefit from future macro and local economic growth; (xii) our expectations regarding future capital requirements; (xiii) our anticipated sources of funds and adequacy of such funds to meet our debt obligations and capital requirements; and (xiv) our expectations regarding legal and other matters.

~~The following significant factors~~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 ~~be considered~~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 ~~analyzing~~the forward-looking statements include, among others, the following:

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continuing adverse impacts of the COVID-19 pandemic on our business, constructions projects, financial condition and operating results, including access to capital markets;

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continuing adverse impacts of the COVID-19 pandemic on short-term and long-term travel, leisure and discretionary spending habits and practices of our guests;

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continuing actions by government officials at the federal, state or local level, including, without limitation, further temporary or extended shutdowns, travel restrictions, social distancing and shelter-in-place orders, in connection with the COVID-19 pandemic;

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impact of any further temporary or extended shutdowns on our ability to maintain compliance with the terms and conditions of our credit facilities and other material contracts;

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our ability to manage guest safety concerns caused by the COVID-19 pandemic;

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our ability to negotiate relief options and any further amendments to our Fourth Amended Credit Facility;

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

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impact of any uninsured losses;

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

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a delay in or failure of the changes in guest visitation, entertainment choices and spending patterns, including a decrease in overall long-term demand after reopening our casinos and the initial pent-up demand, due to health and other concerns, to return to normalized pre-pandemic levels;

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the impact of social distancing requirements and other health and safety protocols implemented at our properties, including a reduction in operating margins (or negative operating margins);

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

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unwillingness of employees to report to work due to the adverse effects of the COVID-19 pandemic or to otherwise conduct work under any revised work environment protocols;

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

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the potential of increased regulatory and other burdens to address the direct and indirect impacts of the COVID-19 pandemic;

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our ability to successfully implement our business and growth strategies;

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

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construction factors, including delays, disruptions, construction defects, increased costs of labor and materials, contractor disagreements, availability of labor and materials, zoning issues, environmental restrictions, soil and water conditions, weather and other hazards, site access matters, occupancy and building permit issues and other regulatory approvals or issues;

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our ongoing disputes over costs of and responsibility for delays, construction defects and other construction related matters with our Monarch Casino Black Hawk general contractor, PCL Construction Services, Inc.(“PCL”), including, as previously reported, the litigation against us by such contractor and our filing of affirmative defenses and extensive counterclaims against PCL;

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

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risks related to development and construction activities (including disputes with and defaults by contractors and subcontractors; construction, equipment or staffing problems and delays; construction defects; shortages of materials or skilled labor; environmental, health and safety issues; weather and other hazards, site access matters, and unanticipated cost increases);

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risks related to pending litigation, which is costly and time-consuming to defend, and if decided against us, could require us to pay substantial judgments or settlements. We cannot predict with certainty the outcomes of such legal proceedings, and the costs incurred in litigation can be substantial, regardless of the outcome. Substantial unanticipated verdicts, fines and rulings do sometimes occur;

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

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

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guest acceptance of our expanded facilities once completed and the resulting impact on our market position, growth and future financial results;

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our ability to successfully complete potential acquisitions and investments;

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

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risks related to our present indebtedness and future borrowings;

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adverse trends in the gaming industry;

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changes in patron demographics;

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

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

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fluctuations in interest rates, including the impact of any discontinuance, modification or other reform of LIBOR, or the establishment of alternative reference rates;

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our ability to continue to comply with the covenants and terms of our credit instruments;

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our dependence on two resorts;

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ability of large stockholders to influence our affairs;

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our dependence on key personnel;

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the availability of adequate levels of insurance;

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

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

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

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

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impact of natural disasters, severe weather, terrorist activity and similar events;

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

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

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

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risks, uncertainties and other factors described in Part I, Item 1A. “Risk Factors” and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2020 (the "2020 Form 10-K") and our other filings with the Securities and Exchange Commission.

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 Casino Black Hawk.

We earn revenues, operating ~~performance:~~income and cash flow from Atlantis and Monarch Black Hawk, primarily through our casino, food and beverage operations, 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~~:Atlantis: Our business strategy is to maximize revenues, operating income and cash flow primarily through our casino, food and beverage operations and hotel operations. We ~~continually make upgrades~~continuously upgrade our property and invest in technology. Reno remains a very healthy local-oriented market. The tight employment environment and wage pressure remain key challenges. We expect this to be a recurring trend for the ~~facility~~market and ~~improve~~Atlantis in the years ahead but we remain confident that our ~~products.~~operating strategies will allow Atlantis to grow revenue as our market share continues to expand. With quality gaming, hotel and dining products, we believe the Atlantis is well positioned to benefit from future macro and local economic growth. Several national businesses have relocated or have announced plans to expand or relocate operations to Northern Nevada. While such economic activity could ultimately drive additional revenue and profit at Atlantis, we are experiencing the more immediate effect of increased labor costs which, combined with continued aggressive marketing programs by our competitors, have applied upward pressure on Atlantis operating costs.growth, as well as for possible adverse macro-economic conditions

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Monarch Casino Black ~~Hawk~~:Hawk: Since the acquisition of Monarch Casino Black Hawk in April 2012, our focus has been to maximize casino and food and beverage revenues while upgrading the existing facility and ~~laying the groundwork for the planed major expansion. There is currently no hotel~~working on the ~~property. In October 2012, we began a project to redesign and upgrade the existing Monarch Casino Black Hawk facility. In September 2013, we opened a new buffet.~~major expansion. In August 2015, we completed the redesign and upgrade of the existing Monarch ~~Casino~~ Black Hawk bringing to the facility’s interior the same quality, ambiance and finishes of the ongoing master planned expansion that will transform Monarch Casino Black Hawk into a full-scale casino resort. In the fourth quarter of 2013, we began work on a multi-phased expansion of the Monarch Casino Black Hawk, which we refer to herein as the “Monarch Black Hawk Expansion Plan.” The first phase of the Monarch Black Hawk Expansion Plan is completed.property. In November 2016, we opened for guest use ~~our~~a new nine-story parking ~~facility~~structure with ~~about~~approximately 1,350 spaces and additional valet parking, with total property capacity of approximately 1,500 spaces. ~~Construction~~In the fourth quarter of 2020 we began a ~~new~~phased opening of our hotel tower and expanded casino ~~expansion~~floor. Construction at the property is currently underway to redesign and upgrade part of the legacy building, which will complete the transformation of the property into a full-scale casino resort. This last stage of the project, which includes converting the existing buffet to a specialty restaurant and adding a poker room, a sports lounge, a keno counter and additional slot machines, is expected to open in 2021. Through its superior product and service, the property is designed to attract and retain the highest tier guests in the market.

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KEY PERFORMANCE INDICATORS

We use certain 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 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.

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

Impact of the COVID-19 Pandemic

Monarch operating results for the three months ended March 31, 2020 and 2021 were impacted by the COVID-19 pandemic. The first quarter of 2020 was significantly impacted by the unprecedented government-mandated closure of our Nevada and Colorado properties in response to the COVID 19 pandemic, which lasted approximately three months. The first quarter of 2021 was impacted by the ongoing government imposed restrictions on our operations and additional COVID-19 safety protocols after resuming operations. At the same time our results of operation for the first quarter of 2021 benefitted from the pent-up demand with patrons across the gaming industry, particularly in regional gaming markets.

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In March 2020, the World Health Organization declared the rapidly growing COVID-19 outbreak a global pandemic. On March 16,2020, in an effort to contain the virus, the state of Colorado mandated a temporary shutdown of all casinos including Monarch Casino Black Hawk and, on March 17, 2020, the state of Nevada mandated the temporary closure of all casinos including the Atlantis in Reno.

Our Nevada and Colorado properties partially reopened with limited operations on June 4, 2020 and June 17, 2020, respectively. Changes were made from routine operations relating to restrictions in occupancy and social distancing requirements, which include reduced seating at table games and in all restaurants, and a decreased number of active slot machines on the ~~site where~~casino floors. The convention business at Atlantis was affected by the ~~old parking structure~~state-mandated gathering limits. We have experienced hotel stay and convention booking cancelations, and since the reopening, guest visitation and hotel and convention bookings have been lower than prior to the state-mandated closures, and are expected to remain lower for the near future.

Despite a strong reopening, we are operating in an environment of high uncertainty and there may be additional government restrictions placed on all of our services, such as gaming, restaurants, spas and salons, entertainment venues and convention and meeting space, which could lead to lower demand and revenue. Such restrictions could also increase our costs, further decrease our operating margins and have a material adverse effect on our operations, cash flows and financial results.

While we have incurred significant disruptions from the COVID-19 outbreak, we are unable to accurately predict the full impact that COVID-19 will have due to numerous uncertainties, including the duration and severity of the disease, the possibility of the outbreak levels seen to return, the long-term impact on demand following the reopening of our casinos, and other actions or restrictions that may be taken by governmental authorities, the impact thereof to the general U.S economy and to our customers. We will continue to evaluate the nature and extent of the impact to our business, results of operations, and financial condition.

Monarch Casino Resort Spa Black Hawk expansion

First quarter of 2021 results benefited from the phased opening of operations at our newly transformed Monarch Casino Resort Spa Black Hawk, which opening started in the fourth quarter of 2020. By the end of the first quarter of 2021, we had approximately 350 hotel rooms available for guest occupancy. In February we opened our spa, pool and fitness center. The new restaurants were gradually increasing hours of operation and operational capacity up to the limits allowed by the government at that time. In the face of continued COVID limitation during the first quarter of 2021, with the opening of our expanded casino floor, we had increased the slot machines by approximately 150 and table games by 6, compared to the pre-COVID active gaming devices at Monarch Black Hawk.

Comparison of Operating Results for the Three-Month Periods Ended March 31, 2021 and 2020

For the three months ended March 31, 2021, our net income totaled $8.2 million, or $0.42 per diluted share, compared to net income of $2.0 million, or $0.11 per diluted share for the same period in 2020, reflecting a 303.7% and 281.8% increase in net income and diluted earnings per share, respectively. Net revenues in the three months ended March 31, 2021, totaled $75.0 million, an increase of $23.9 million, or 46.9%, compared to the three months ended March 31, 2020. Income from operations for the three months ended March 31, 2021 totaled $11.3 million compared to $2.1 million for the same period in 2020.

Casino revenue increased 73.3% in the first quarter of 2021 compared to the first quarter of 2020. The increase in casino revenue was ~~sitting~~driven by the increase is ~~under way (see CAPITAL SPENDING AND DEVELOPMENT –~~gaming devices with the opening of our expanded casino in Black Hawk, a full quarter of operations at the Company’s properties in Reno and Black Hawk (the prior year quarter was partially impacted by pandemic-related shutdowns), and higher guest spend per visit. Casino operating expense as a percentage of casino revenue decreased to 29.0% for the three months ended March 31, 2021 compared to 35.5% for the three months ended March 31, 2020, as a result of effective cost management and higher casino revenue at both properties.

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Food and beverage revenue for the first quarter of 2021 increased 9.8% compared to the first quarter of 2020 due to food and beverage revenue per cover increased year-over-year by 21.5% an 9.7% decrease in food and beverage covers. The increase in food and beverage revenue per cover is a result of an increase in fine dining restaurants, with the opening of new restaurants in Monarch Black Hawk ~~Expansion Plan)~~and menu price adjustments. The decrease in covers is a result of capacity and other regulatory limitations which remain in effect in Reno and Black Hawk due to the ongoing pandemic. Food and beverage operating expense as a percentage of food and beverage revenue increased in the first quarter of 2021 to 87.0% compared to 84.8% for the same quarter in 2020 primarily as a result of ongoing capacity restrictions in the Company’s food and beverage outlets.

Hotel revenue increased 34.6% in the first quarter of 2021 compared to the same quarter of 2020 as a result of increase in available rooms by 390 daily on average, primarily as a result of the phased opening of the hotel in Monarch Black Hawk. Hotel occupancy was 71.1% during the period compared to 75.4% during the first quarter of 2020. The ADR decreased by $14.61 ($111.70 in the first quarter of 2021and 126.31 in the first quarter of 2020). ~~Once completed,~~Occupancy and ADR were negatively impacted by the continuing COVID-19 pandemic government-enforced restrictions and by the continuing decline of travel and convention businesses in general due to the pandemic. REVPAR, was $86.59 and $100.57 for the three months ended March 31, 2021 and 2020, respectively. Hotel operating expense as a percentage of hotel revenue increased to 49.2% in the first quarter of 2021 compared to 46.6% for the comparable prior year period primarily as a result of the decrease in ADR and the ramp-up in hotel operation at Monarch Black Hawk. In addition, higher housekeeping expenses related to labor shortage and wage pressure, as well as to COVID-19 safety protocols had a negative effect on the hotel margins.

Other revenue increased 16.0% in the first quarter of 2021 compared to the same prior year period.

SG&A expense increased to $19.9 million in the first quarter of 2021 from $17.2 million in the first quarter of 2020 primarily due to: a $1.2 million increase in advertising expenses; a $0.9 million increase in labor expense; and a $0.6 million increase in property tax expense. As a percentage of net revenue, SG&A expense decreased to 26.6% in the first quarter of 2021 compared to 33.7% in the same period in 2020.

Depreciation and amortization expense increased to $9.5 million for the three months ended March 31, 2021 compared to $3.8 million for the same prior year period, due to new assets placed into service with the opening of our hotel building and expanded casino at Monarch Black Hawk.

During the first quarter of 2021, we recognized $0.6 million in professional service fees relating to our construction litigation, and $0.1 million in equipment, supplies and employee testing expenses directly attributable to the pandemic for reopening of the properties and incremental to normal operations. During the first quarter of 2020, we recognized $0.8 million in pre-opening expense related to the upcoming opening of the new hotel and expanded casino in Black Hawk, $0.4 million Colorado legislation lobbing expenses, and $0.1 million in professional service fees relating to our construction litigation. These expenses are included in Other operating items, net in the Consolidated Statement of Operations.

During the first quarter of 2021 we recognized $1.6 million in interest expense. In the first quarter of 2020, we capitalized $1.8 million of interest, as the borrowings on our Amended Credit Facility were exclusively used to finance the Monarch Black Hawk Expansion Plan will nearly double the casino space and will add a 23-story hotel tower with approximately 500 guest rooms and suites, an upscale spa and pool facility, three additional restaurants (increasing the total to four), additional bars and associated support facilities. We currently expect completionongoing at that time project. See further discussion of ~~the entire expansion~~our Fourth Amended Credit Facility in the ~~second quarter of 2019.~~LIQUIDITY AND CAPITAL RESOURCES section below.

CAPITAL SPENDING AND DEVELOPMENT

We seek to ~~continuously~~continually upgrade and maintain our facilities in order to present a fresh, high quality product to our guests. In addition, we have invested, and continue to invest, in our Monarch Black Hawk Expansion.

~~Capital~~22

Table of Contents

Cash paid for capital expenditures for the ~~nine-month~~three-month periods ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 totaled ~~approximately $34.4~~$5.9 million and ~~$19.8~~$13.7 million, respectively. During the ~~nine-month~~three-month period ended ~~September 30, 2017,~~March 31, 2021 our capital expenditures related primarily to redesign of part of the legacy Monarch Black Hawk building and the acquisition of gaming and other equipment to upgrade and replace existing equipment at Atlantis and Monarch Black Hawk. During the three-month period ended March 31, 2020, our capital expenditures related primarily to the new hotel tower and casino expansion at Monarch ~~Casino~~ Black Hawk ~~the acquisition of a parcel of land with an industrial warehouse in proximity to the Monarch Casino Black Hawk, the re-carpeting of the entire casino floor~~ and ~~more than one third of~~ the ~~hotel rooms at Atlantis, as well as~~ acquisition of gaming and other equipment to upgrade and replace existing equipment at ~~the~~ Atlantis and ~~the~~ Monarch Casino Black Hawk. The capital expenditures during both periods were funded from available cash and borrowings from the credit facility and in the first quarter of 2021 with cash from Company’s operating cash flows. During the nine-month period ended September 30, 2016, our capital expenditures related primarily to the major redesign and upgrade of the Toucan Charlie’s Buffet, improvements to new additional parking spaces at Atlantis, continued work on the new parking garage at Monarch Casino Black Hawk as well as acquisition of gaming equipment to upgrade and replace existing equipment in the Atlantis and Monarch Casino Black Hawk.

Monarch Black Hawk Expansion ~~Plan~~

~~We have commenced its Monarch Black Hawk Expansion Plan, which will convert Monarch Casino Black Hawk into a full-scale hotel casino resort spa.~~

In the fourth quarter of 2013, we began work onto convert the Monarch Casino Black Hawk into a full-scale casino resort (the “Monarch Black Hawk Expansion”).The Monarch Black Hawk Expansion includes a multi-phased expansion of ~~the~~ Monarch Casino Black Hawk, which involves construction of a new parking structure, demolition of the existing parking structure, ~~followed by the~~and construction of a new hotel tower and casino expansion.

In November 2016, the new nine-story parking structure, offering approximately 1,350 parking spaces, was completed and became available for use by Monarch Casino Black Hawk guests. ~~Immediately following the new garage opening, we began work on~~The demolition and removal of the old parking ~~structure. This work,~~structure, which included a controlled implosion of the old garage, was completed in the first quarter of 2017.

On February 8, 2017, ~~the Company~~we broke ground ~~and construction~~ on ~~the foundation for~~ the hotel tower and casino expansion.

In the fourth quarter of 2020, we began the phased opening of our new hotel tower and casino expansion, ~~is underway. The new 23-story tower will nearly double~~which increased the ~~existing~~ casino space and ~~will include approximately 500~~added a 23-story hotel tower with 516 guest rooms and suites, banquet and meeting room space, a retail store, a concierge lounge, an upscale spa and pool facility located on the top floor of the tower, three ~~additional~~new restaurants, and additional ~~bars. Tower floors~~bars and lounges. We are currently working on converting the existing buffet to a specialty restaurant, and adding a poker room, a keno counter, a sports lounge, as well as additional slot machines, in the existing facility. We expect this work to be completed later in 2021.

We are confident that the quality of our expanded product and exceptional guest service will ~~be opened as they are finished beginning with~~meet the ~~casino expansion and additional restaurants. We currently expect completion~~demand of the ~~entire tower in~~high-end segment of the ~~second quarter of 2019 at a total~~market and will derive accelerated market share and revenue growth.

We expect to finance the remaining cost ~~of approximately $229-$234 million. The cost is expected to be financed~~ through a combination of operating cash ~~flow~~flows, available cash and available and the Fourth Amended Credit ~~Facility.~~Facility, if necessary. We can provide no assurance that any project will be completed on schedule, if at all, or within established budgets, or that any project will result in increased earnings to us. Further, although we intend to seek recovery from our general contractor through the current litigation, we may be required to fund certain costs of correcting construction defects and deficiencies until, and if, recovered from the general contractor.

~~Table of Contents~~

LIQUIDITY AND CAPITAL RESOURCES

~~RESULTS OF OPERATIONS~~

~~Comparison of Operating Results for the Three-Month Periods Ended September 30, 2017 and 2016~~

For the three months ended September 30, 2017, our net income totaled $9.0 million, or $0.49 per diluted share, compared to net income of $7.8 million, or $0.45 per diluted share for the same period in 2016, reflecting a 15.3% increase in net income and an 8.9% increase in diluted earnings per share. Net revenues totaled $63.0 million in the third quarter of 2017, an increase of $5.9 million, or 10.4%, compared to the third quarter of 2016. Income from operations for the three months ended September 30, 2017 totaled $13.3 million compared to $12.3 million for the same period in 2016.

Casino revenue increased 10.7% in the third quarter of 2017 compared to the third quarter of 2016, as we continue to increase market share in two growing markets. Casino operating expense as a percentage of casino revenue decreased from 40.3% in the third quarter of 2016 to 39.3% in the same quarter of 2017 primarily due to the increase in casino revenue in the third quarter of 2017 combined with operating cost efficiencies.

Food and beverage revenue for the third quarter of 2017 increased 4.6% over the third quarter of 2016, due to a 5.6% increase in covers, offset by a 0.9% decrease in food and beverage revenue per cover. Food and beverage operating expense as a percentage of food and beverage revenue increased in the third quarter of 2017 to 41.0% compared to 39.4% for the same period in 2016 primarily as a result of an increase in payroll and employee benefits expense.

Hotel revenue increased 6.0% in the third quarter of 2017 compared to the third quarter of 2016. Average daily room rate (“ADR”) of $86.78 in the third quarter of 2017 was $2.20 higher than the ADR of $84.58 in the third quarter of 2016 and the occupancy of 97.8% during the third quarter of 2017 was slightly higher compared to 97.1% during the third quarter of 2016. Revenue per Available Room (“REVPAR”), calculated by dividing total room revenue (less service charges, if any) by total rooms available, was $96.51 and $91.03 for the three months ended September 30, 2017 and 2016, respectively. Hotel operating expense as a percentage of hotel revenue increased to 37.4% in the third quarter of 2017 as compared to 28.4% for the comparable prior year period primarily due to higher labor related expense and hotel repair and maintenance expense, as well as expenses related to the shuttle service and expanded valet services implemented at Monarch Casino Black Hawk.

~~Other revenue increased 10.4% in the third quarter of 2017 compared to the third quarter of 2016 driven primarily by increased arcade, spa and retail revenues.~~

Promotional allowances as a percentage of gross revenues decreased to 16.4% during the third quarter of 2017 compared to 17.6% in the comparable 2016 quarter. This decrease was primarily due to higher revenues and increase in the profitability of the promotional programs.

Selling, General and Administrative (“SG&A”) expense increased to $16.4 million in the third quarter of 2017 from $14.4 million in the third quarter of 2016 primarily due to a $1.2 million increase in salaries, wages and related benefits expense, $0.4 million increase in repairs and maintenance expense, $0.1 million increase in property taxes and $0.1 million increase in utilities. As a percentage of net revenue, SG&A expense increased to 26.0% in the third quarter of 2017 compared to 25.3% in the same period in 2016.

Depreciation and amortization expense increased to $3.7 million for the three months ended September 30, 2017 as compared to $3.6 million for the three months ended September 30, 2016. The increase is primarily a result of the additional depreciation expense related to the new parking garage at Monarch Casino Black Hawk, offset by the decrease in depreciation expense at Monarch Casino Black Hawk due to five-year assets (assets that are depreciated over a 5 year time period) having become fully depreciated.

Interest expense, net of amounts capitalized, increased to $161.0 thousand in the third quarter of 2017 from $130.0 thousand in the third quarter of 2016 primarily due to higher bank commitment fees related to the Amended Credit Facility.

~~Table of Contents~~

~~Comparison of Operating Results for the Nine-Month Periods Ended September 30, 2017 and 2016~~

For the nine months ended September 30, 2017, our net income totaled $21.1 million, or $1.16 per diluted share, compared to net income of $18.1 million, or $1.03 per diluted share, for the same period in 2016, reflecting a 16.8% increase in net income and 12.6% increase in diluted earnings per share. Net revenues totaled $174.7 million in the nine-month period of 2017, reflecting an increase of $13.2 million, or 8.2%, compared to the same period in 2016. Income from operations for the nine months ended September 30, 2017 totaled $32.5 million compared to $28.4 million for the same period in 2016, representing an increase of $4.2 million or 14.7%.

Casino revenue increased 7.6% in the first nine months of 2017 compared to the first nine months of 2016. Casino operating expense as a percentage of casino revenue decreased to 40.6% in the first nine months of 2017 compared to 41.8% in the first nine months of 2016 due to higher casino revenue ~~combined with operating cost efficiencies~~.

~~Food and beverage revenue for the first nine months of 2017 increased 6.3% over the first nine months of 2016, due to a 3.8% increase in covers and a 2.4% increase in average revenue per cover.~~ ~~In 2016, Toucan Charlie’s Buffet was closed for redesign and upgrade for 70 days, which unfavorably affected the 2016 total food and beverage covers.~~ Food and beverage operating expense as a percentage of food and beverage revenue in the first nine months of 2017 and 2016 was flat at 41.1% as a result of the repair and maintenance expenses related to the Atlantis buffet redesign and upgrade at the beginning of 2016 offset by an increase in payroll and employee benefits expenses in 2017 due to a labor shortage in both operating units’ markets.

~~Hotel revenue increased 6.5% due to~~ an increase in ADR to $82.56 in the first nine months of 2017 compared to $80.76 in the first nine months of 2016 and an increase in occupancy to 91.2% during the first nine months of 2017 compared to 89.7% during the first nine months of 2016. REVPAR was $85.37 and $79.89 for the nine months ended September 30, 2017 and 2016, respectively. Hotel operating expense as a percentage of hotel revenue increased to 37.5% in the first nine months of 2017 as compared to 30.1% for the comparable prior year period due to higher payroll and employee benefits expense and repair and maintenance expense in the first nine months of 2017, combined with expenses related to the shuttle service and expanded valet services implemented at Monarch Casino Black Hawk.

~~Other revenue increased 7.7% in the first nine months of 2017 compared to the first nine months of 2016 driven primarily by increased arcade, commission and spa revenues.~~

Promotional allowances as a percentage of gross revenues decreased to 17.2% during the first nine months of 2017 from 17.9% in the comparable 2016 period primarily as a result of the increase in gross revenues and increase in the profitability of the promotional programs.

SG&A expense increased by $4.0 million to $46.1 million in the first nine months of 2017 primarily due to: (i) a $2.6 million increase in salaries, wages and employee benefit expenses; (ii) a $0.8 million increase in repair and maintenance expense and properties’ improvement expenses, (iii) a $0.3 million increase in property tax expense related to the new parking garage at Monarch Casino Black Hawk, (iv) a $0.2 million increase in advertising expense, and (v) a $0.1 million increase in charitable contributions. As a percentage of net revenue, SG&A expense increased to 26.4% in the first nine months of 2017 from 26.1% in the first nine months of 2016.

Depreciation and amortization expense increased to $11.4 million for the nine months ended September 30, 2017 as compared to $11.1 million for the nine months ended September 30, 2016 primarily as a result of the additional depreciation expense related to the new parking garage at Monarch Casino Black Hawk.

Interest expense, net of amounts capitalized increased to $639.0 thousand in the first nine months of 2017 from $275.0 thousand in the first nine months of 2016 primarily as a result of the higher bank commitment fees related to the Amended Credit Facility and higher amortization of deferred loan costs expense related to the Amended Credit Facility.

In 2016, the Company completed the hotel towers’ doors replacement capital project at the Atlantis and as a result, the Company wrote off the remaining net book value of the existing doors, incurring a $0.6 million loss on the disposal.

~~Table of Contents~~

~~Liquidity and Capital Resources~~

Our principal sources of liquidity have been cash provided by operations, and available cash, and, for capital expansion projects, borrowings available under our credit ~~facilities.~~facility.

For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, net cash provided by operating activities totaled ~~$34.7~~$21.9 million, ~~an increase of $5.6 million, or 19.1%~~ compared to net cash used in operating activities of $7.5 million in the same ~~period in the~~ prior ~~year.~~year period. This increase was primarily ~~the~~a result of an increase in net income and an increase in depreciation, ~~and amortization expense, offset by an increase~~combined with a decrease in working capital. The net cash provided by operating activities was also positively affected by the adoption of the ASU No. 2016-09, which changes the classification and presentation of the stock-based compensation in the Statement of Cash Flows.

Net cash used in investing activities totaled ~~$34.3~~$5.9 million and ~~$19.8~~$13.7 million during the ~~nine~~three months ended ~~June 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively. Net cash used in investing activities during the first ~~nine~~three months of ~~2017~~2021 consisted primarily of cash used for redesign of part of the ~~new hotel tower and casino expansion at~~legacy Monarch ~~Casino~~ Black Hawk ~~the purchase of a parcel of land with an industrial warehouse in proximity to the Monarch Casino Black Hawk, the re-carpeting of the casino floor and hotel rooms at Atlantis,~~building and for acquisition of gaming and other equipment at both properties. Net cash used in investing activities during the first ~~nine~~three months of ~~2016~~2020 consisted primarily of cash used for the new ~~parking garage~~hotel tower and casino expansion at Monarch Casino Black Hawk ~~the redesign and upgrade of Toucan Charlie’s Buffet at Atlantis, improvements to new additional parking spaces at Atlantis,~~ and for acquisition of gaming and other equipment at both properties.

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Net cash used for financing activities in the first three months of 2021 totaled $20.1 million and consisted of $22.5 million principal payments offset by $2.4 million proceeds from the stock options exercise. There were no financing activities during the first ~~nine~~three months of ~~2017. Net cash used in financing activities during~~2020.

Fourth Amended Credit Facility

On September 3, 2020, we entered into the ~~first nine months of 2016 was $11.1~~Fourth Amended and Restated Credit Agreement with Wells Fargo Bank, N.A., as administrative agent and certain banks (the “Fourth Amended Credit Facility”). The Fourth Amended Credit Facility amends and restates the Company’s $250.0 million ~~and represented $11.0 million in payments under our~~ credit facility, ~~and $2.6 million in loan issuance cost, offset by $2.5 million in proceeds from stock option exercises, including excess tax benefit from options exercised.~~dated as of July 20, 2016 (the “Amended Credit Facility”).

~~Under~~The Fourth Amended Credit Facility extends the maturity date of the Amended Credit Facility ~~our available borrowing capacity is $250.0 million with a maturity date of~~from July 20, ~~2021. The proceeds from~~2021 to September 3, 2023. In addition, the Fourth Amended Credit Facility ~~will be used to fund~~increases the ~~Monarch Black Hawk Expansion Plan, for ongoing capital expenditure, for working capital needs and general corporate purposes and requirements.~~

~~As of September 30, 2017, we had borrowed $26.2 million~~aggregate principal amount of the ~~principal under the~~credit facilities to $270.0 million. The $270.0 million Fourth Amended Credit Facility consists of: $200 million term loan (“Term Loan Facility”) and ~~had a $0.6~~$70 million ~~Standby Letter of~~revolving credit facility (“Revolving Credit Facility”).

We are required to make quarterly principal payments under the Term Loan Facility on each Term Loan Installment Date, commencing on December 31, 2020, in an amount equal to (x) the percentage set forth opposite the applicable period during which such Term Loan Installment Date occurs (i.e., 1.25% for the period from December 31, 2020 to September 30, 2021, and ~~$223.2 million remaining in available borrowings~~2.50% for the period from December 31, 2021 and thereafter) multiplied by (y) $200.0 million. The estimated amount of the ~~$250.0 million maximum principal available under~~mandatory principle payment due in next twelve months is $15.0 million.

Commencing with the ~~Amended Credit Facility. As of September 30, 2017, there have been no withdrawals from the Standby Letter of Credit.~~

~~The total revolving loan commitment under the Amended Credit Facility will be automatically and permanently reduced to $50.0 million in the first full quarter after completion~~delivery of the ~~expansion project at the Monarch Casino Black Hawk and all then outstanding revolving loans up to $200.0 million under the Amended Credit Facility will be converted to a term loan at such time. We~~compliance certificate for fiscal year 2021, we may be required to prepay borrowings under the Fourth Amended Credit Facility using excess cash flows for each fiscal year, depending on our leverage ~~ratio no later than December~~ratio.

As of March 31, ~~2019.~~2021, we had an outstanding principal balance of $160.0 million under the Term Loan Facility, from which $15 million is expected to have a maturity date in next twelve months. As of March 31, 2021, we had $70.0 million available borrowings under the Revolving Credit Facility. We have ~~an option to permanently reduce the maximum revolving available credit at any time so long as the amount~~a $0.6 million Standby Letter of ~~such reduction is at least $0.5 million and in multiples of $50,000.~~Credit, from which there have been no withdrawals.

Borrowings are secured by liens on substantially all of our real and personal property.

In addition to other customary covenants for a facility of this nature, as of ~~September 30, 2017,~~March 31, 2021, we are required to maintain a ~~leverage ratio,~~Total Leverage Ratio (as defined ~~as consolidated debt divided by Adjusted EBITDA,~~in the Fourth Amended Credit Facility) of no more than ~~3.5:1 and a fixed charge coverage ratio (Adjusted EBITDA divided by fixed charges, as~~4.75:1; Fixed Charge Coverage Ratio (as defined in the Fourth Amended Credit Facility) of at least 1.15:1.1; and Minimum Operational Liquidity (as defined in the Fourth Amended Credit Facility) of $25.0 million. As of ~~September 30, 2017, the Company’s leverage ratio~~March 31, 2021, our Total Leverage Ratio and ~~fixed charge coverage ratios~~Fixed Charge Coverage Ratio were ~~0.4:~~2.1:1 and ~~41.3:~~4.6:1, respectively.

~~Table of Contents~~

~~The interest rate under~~We entered into an amendment to the Fourth Amended Credit Facility effective as of April 30, 2021. Based on the amendment, we are required to maintain a Total Leverage Ratio of no more than 4.00:1.00. The amendment removes the requirement for 0.50% LIBOR floor. As of the effective date of this amendment, the interest rate is LIBOR plus a margin ranging from 1.00% to ~~2.50%~~2.00%, or a base rate (as defined in the Fourth Amended Credit Facility) plus a margin ranging from 0.00% to ~~1.50%~~1.00%, or the Prime Rate. The applicable margins ~~will~~ vary depending on our leverage ratio. Commitment fees are equal to the daily average unused revolving commitment multiplied by the commitment fee percentage, ranging from 0.175% to ~~0.45%~~0.325%, based on our leverage ratio.

~~At September 30, 2017, our interest rate was based on LIBOR~~On the terms and ~~our leverage ratio was such that pricing for borrowings under~~subject to some conditions, we may, at any time before the ~~Amended~~Maturity Date, request an increase of Revolving Credit Facility, ~~was LIBOR plus 1.00%. At September 30, 2017,~~provided that each such increase is equal to $15.0 million or an integral multiple of $1.0 million in excess and, after giving effect to the ~~one-month LIBOR interest rate was 1.24%. The carrying value~~requested increase, the aggregate amount of the ~~debt outstanding under~~increases in the ~~Amended Credit Facility approximates fair value because the interest fluctuates with the lender’s prime rate or other market rates~~total revolving loan commitment shall not exceed $75.0 million.

Table of ~~interest.~~Contents

We may prepay borrowings under the Fourth Amended Credit Facility revolving loan without penalty (subject to certain conditions and certain charges applicable to the prepayment of LIBOR borrowings prior to the end of the applicable interest period). ~~Amounts prepaid~~Once reduced or cancelled, the Revolving Credit Facility may not be ~~re-borrowed so long as~~increased or reinstated without the ~~total borrowings outstanding do not exceed~~prior written consent of all lenders. During the ~~maximum principal available.~~first quarter of 2021, we made a $20.0 million optional prepayment on our Term Loan Facility in addition to a $2.5 million mandatory payment.

We believe that our ~~existing cash balances,~~anticipated operating cash flow ~~from operations~~ and ~~borrowings~~the $70.0 million available under ~~the~~our Fourth Amended Credit Facility as of March 31, 2021 will ~~provide us with~~be sufficient ~~resources~~ to ~~fund our~~sustain operations ~~meet our debt obligations,~~for the twelve months from filing of Form 10-Q for the quarter ended March 31, 2021 and fulfill our capital expenditure ~~plans over the next twelve months; however, our operations~~plans. However, we are ~~subject to~~surrounded by uncertainty about COVID-19, as well as financial, economic, competitive, regulatory, and other factors, many of which are beyond our control. If we are unable to generate sufficient cash flow in the upcoming months or if our cash needs exceed our borrowing capacity under the Fourth 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 ~~obtaining~~issuing additional ~~equity capital.~~equity.

~~OFF BALANCE SHEET ARRANGEMENTS~~

John Farahi and Bob Farahi, Co-Chairmen of the Board and executive officers of the Company, and Ben Farahi are the three largest stockholders of 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.

In response to customer demand for more convenient surface parking at the Atlantis, and after detailed analysis, on August 28, 2015, the Company, through its subsidiary Golden Road, entered into a 20-year lease (the “Parking Lot Lease”) with BLI with respect to a portion of the Shopping Center. This lease gives the Atlantis the right to use a parcel, approximately 4.15 acres, comprised of a commercial building and surrounding land adjacent to the Atlantis (the “Leased Property”). The primary purpose of the Parking Lot Lease is to provide additional, convenient, Atlantis surface parking. We demolished the commercial building on the Leased Property and converted the land into approximately 300 additional surface parking spaces for the Atlantis. The minimum annual rent under the Parking Lot Lease is $695 thousand commencing November 17, 2015. The minimum annual rent is subject to a cost of living adjustment increase on each five-year anniversary. In addition, we are responsible for payment of property taxes, utilities and maintenance expenses related to the Leased Property. We have an option to renew the Parking Lot Lease for an additional 10-year term. If we elect not to exercise the renewal option, we will be obligated to pay BLI $1.6 million. During each of the three-month periods ended September 30, 2017 and 2016, we paid approximately $174 thousand in parking lot rent payments. During each of the nine-month periods ended September 30, 2017 and 2016, we paid approximately $522 thousand in parking lot rent payments.

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A driveway (the “Driveway Project”) that is being shared between the Atlantis and the Shopping Center was completed and opened on September 30, 2004. The Shopping Center is controlled by BLI. As part of the Driveway Project, in January 2004, we leased (the “Driveway Lease”) approximately 37,400 square-foot corner section of the Shopping Center, for a minimum lease term of 15 years at an annual rent of $300 thousand, subject to a cost of living increase on each five year anniversary of the Driveway Lease. As of September 30, 2017, the annual rent is $377 thousand. In August 2015, we exercised our option to extend the lease for three individual five-year terms in addition to the 15-year initial term. At the end of the extension periods, we have the option to purchase the leased section of the Shopping Center. The leased space is being used by us for pedestrian and vehicle access to the Atlantis, and we may use a portion of the parking spaces at the Shopping Center. The total cost of the project was $2.0 million. We were responsible for two thirds of the total cost, or $1.35 million. The cost of the new driveway is being depreciated over the 15-year expected economic useful life of the asset; some components of the new driveway are being depreciated over a shorter period of time. During each of the three-month periods ended September 30, 2017 and 2016, we paid approximately $94 thousand in driveway rent payments. During each of the nine-month periods ended September 30, 2017 and 2016, we paid approximately $282 thousand in driveway rent payments.

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 2020 Form ~~10-K for the year ended December 31, 2016 (the “2016 Form 10-K”).~~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 ~~2016~~2020 Form 10-K filed with the SEC on March ~~14, 2017.~~12, 2021.

~~OTHER FACTORS AFFECTING CURRENT AND FUTURE RESULTS~~

Negative economic developments in Northern Nevada, the Denver metropolitan area, or in our feeder markets, could adversely impact discretionary incomes of our target customers, which, in turn could adversely impact our business. Our target customers might curtail discretionary spending for leisure activities and businesses may reduce spending for conventions and meetings, both of which would adversely impact our business. Management continues to monitor economic trends and intends, as appropriate, to adopt operating strategies to attempt to mitigate the effects of such adverse conditions. We can make no assurances that such strategies will be effective should negative economic developments in our markets occur.

The expansion of Native American casinos in California has had an impact on casino revenues in Nevada, in general, and many analysts have continued to predict the impact will be more significant on the Reno-Lake Tahoe market. If other Reno-area casinos continue to suffer business losses due to increased pressure from California Native American casinos, such casinos may intensify their marketing efforts to northern Nevada residents as well, greatly increasing competitive activities for our local customers.

~~Higher fuel costs may deter California, Denver area, and other drive-in customers from coming to the Atlantis or the Monarch Casino Black Hawk.~~

We also believe that unrestricted land-based casino gaming in or near any major metropolitan area in the Atlantis’ key feeder market areas, such as San Francisco or Sacramento, or in other areas near Denver, Colorado, the Black Hawk key feeder markets, could have a material adverse effect on our business.

We rely on information technology and other systems to maintain and transmit customer financial information, credit card settlements, credit card funds transmissions, mailing lists and reservations information. The systems and processes we have implemented to protect customers, employees and company information are subject to the ever-changing risk of compromised security. These risks include cyber and physical security breaches, system failure, computer viruses, and negligent or intentional misuse by customers, company employees, or employees of third party vendors. The steps we take to deter and mitigate these risks may not be successful and our insurance coverage for protecting against cybersecurity risks may not be sufficient. Any disruption, compromise or loss of data or systems that results from a cybersecurity attack or breach could materially adversely impact operations or regulatory compliance and could result in remedial expenses, fines, litigation, and loss of reputation, potentially impacting our financial results.

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~~COMMITMENTS AND CONTINGENCIES~~

~~Our contractual cash obligations as of September 30, 2017 and the next five years and thereafter are as follows (in millions):~~

Payments due by period (1)




Less



Greater

than 1

1 to 3

3 to 5

than 5

Total

year

years

years

years

Operating Leases (2)

$
26.6

$
1.1

$
2.2

$
2.2

$
21.1

Purchase Obligations (3)

12.9

9.7

3.0

0.2

—

Borrowings Under Amended Credit Facility (4)

26.2

—

—

26.2

—

Total Contractual Cash Obligations

$
65.7

$
10.8

$
5.2

$
28.6

$
21.1

~~(1)~~

Because interest payments under our Amended Credit Facility are subject to factors that, in our judgment, vary materially, the amount of future interest payments is not presently determinable. These factors include: i) future short-term interest rates; ii) our future leverage ratio which varies with EBITDA and our borrowing levels; and iii) the rate at which we deploy capital and other spending which, in turn, impacts the level of future borrowings. The interest rate under the Amended Credit Facility is LIBOR plus a margin ranging from 1.00% to 2.50%, or a base rate (as defined in the Amended Credit Facility) plus an interest rate margin ranging from 0.00% to 1.50%, or the Prime Rate. The interest rate is adjusted quarterly based on our leverage ratio, which is calculated using operating results over the previous four quarters and borrowings at the end of the most recent quarter. Based on our leverage ratio, at September 30, 2017, pricing was LIBOR plus 1.00% and will be adjusted in subsequent quarters in accordance with our leverage ratio. At September 30, 2017, the one-month LIBOR was 1.24%.

~~(2)~~

~~Operating leases include the Driveway Lease and the Parking Lot Lease.~~

~~(3)~~

Purchase obligations represent approximately $6.6 million of commitments related to capital projects and approximately $6.3 million of materials and supplies used in the normal operation of our business. Of the total purchase order and construction commitments, approximately $12.9 million are cancelable by us upon providing a 30-day notice.

~~(4)~~

~~The amount represents outstanding draws against the Amended Credit Facility as of September 30, 2017.~~

As described in above under “Capital Spending and Development”, we have begun commencement of the Monarch Black Hawk Expansion Plan, which started in the fourth quarter of 2013. While we have disclosed the estimated cost of that expansion, we have not yet entered into contracts for substantial portions of the work. For this reason, we have included in the table above only the amounts for which we have contractual commitments. At September 30, 2017, we estimate that the remaining cost to complete the Black Hawk Expansion Plan is between $218 million and $225 million.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in ~~market conditions and prices, such as~~ interest rates, foreign currency exchange rates and commodity prices. ~~We do not have any cash or cash equivalents as~~Our current primary market risk exposure is interest rate risk relating to the impact of September 30, 2017 that are subject to market risk. We do not enter into derivative financial instruments for trading or speculative purpose, nor have we experienced any losses to date on any derivative financial instruments due to counterparty credit risk.interest rate movements under our Fourth Amended Credit Facility.

~~In the normal course of business, we are exposed to risks associated with fluctuations in interest rates.~~ As of ~~September 30, 2017,~~March 31, 2021, we had ~~$26.2~~$160.0 million of outstanding ~~principal~~ balance under our Fourth Amended Credit ~~Facility that was subject to credit risk.~~Facility. A hypothetical 1% increase in the interest rate on the balance outstanding under the Fourth Amended Credit Facility at ~~September 30, 2017~~March 31, 2021 would result in a change in our annual interest cost of approximately ~~$0.3~~$1.6 million. See ~~Item 2. Liquidity~~“Liquidity and Capital ~~Resources~~Resources” for further discussion of our ~~financing facility~~Fourth Amended Credit Facility and capital structure.

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

~~Table~~We do not have any cash or cash equivalents as of ~~Contents~~March 31, 2021 that are subject to market risk.

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 ~~Securities~~ Exchange ~~Act of 1934 (the “Exchange Act”)~~Act). Based upon the evaluation, our Chief Executive Officer and Chief Accounting Officer concluded that ~~as of the end of the period covered by this report,~~ our disclosure controls and procedures were effective ~~to provide reasonable assurance that information we are required to disclose in reports that we file or submit under~~as of the ~~Exchange Act is (i) recorded, processed, summarized and reported within~~Evaluation Date. During the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Accounting Officer, as appropriate to allow timely decisions regarding required disclosures.

~~There was~~quarter ended March 31, 2021, there were no ~~change~~changes in our internal control over financial reporting ~~during our most recently completed fiscal quarter~~ that ~~has~~have materially affected or isare 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.

~~From time to time, we may be party to claims that arise in the normal course~~Table of business. Management believes that the amount of any reasonably possible or probable loss for known matters would not have a material adverse impact on our financial condition, cash flows or results of operations; however, the outcome of these actions is inherently difficult to predict.Contents

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors we previously disclosed in Item 1A of our ~~2016~~2020 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 ~~2016~~2020 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 ~~2016~~2020 Form 10-K.

~~If any~~

ITEM 5: OTHER INFORMATION

Table of the risks discussed in the sections referenced above actually occur, our business, financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of our common stock could decline significantly, and investors could lose all or part of their investment.Contents

~~This report is qualified in its entirety by these risk factors.~~

ITEM 6. EXHIBITS



Exhibit No	Description
~~Exhibit No~~		~~Description~~
10.3*	Amendment to Fourth Amended and Restated Credit Agreement, dated as of April 30, 2021, among Monarch Casino & Resort, Inc., Golden Road Motor Inn, Inc. and Monarch Growth Inc., as Borrowers, the Lenders named therein, and Wells Fargo Bank, National Association, as Administrative Agent, L/C Issuer and Swing Line.
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.

~~Table of Contents~~


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~~

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: ~~November~~May 7, ~~2017~~2021	By:	/s/ EDWIN S. KOENIG
	Edwin S. Koenig, Chief Accounting Officer
	(~~Chief~~Principal Financial and Accounting Officer and Duly Authorized Officer)

2227


	Three months ended				Nine months ended
	September 30,				September 30,
	2017		2016		2017		2016
Revenues
Casino	$	48,574	$	43,882	$	135,207	$	125,613
Food and beverage		16,342		15,621		47,394		44,581
Hotel		7,316		6,901		19,204		18,038
Other		3,191		2,891		9,039		8,390
Gross revenues		75,423		69,295		210,844		196,622
Less promotional allowances		(12,396)		(12,186)		(36,174)		(35,186)
Net revenues		63,027		57,109		174,670		161,436

Operating expenses
Casino		19,097		17,684		54,837		52,449
Food and beverage		6,699		6,152		19,461		18,343
Hotel		2,735		1,958		7,192		5,438
Other		1,126		975		3,133		2,922
Selling, general and administrative		16,398		14,439		46,117		42,126
Depreciation and amortization		3,722		3,644		11,397		11,134
Loss on disposition of assets		—		5		4		668
Total operating expenses		49,777		44,857		142,141		133,080
Income from operations		13,250		12,252		32,529		28,356

Other expenses
Interest expense, net of amounts capitalized		(161)		(130)		(639)		(275)
Total other expense		(161)		(130)		(639)		(275)

Income before income taxes		13,089		12,122		31,890		28,081
Provision for income taxes		(4,059)		(4,288)		(10,749)		(9,977)
Net income	$	9,030	$	7,834	$	21,141	$	18,104

Earnings per share of common stock
Net income
Basic	$	0.51	$	0.45	$	1.20	$	1.05
Diluted	$	0.49	$	0.45	$	1.16	$	1.03

Weighted average number of common shares and potential common shares outstanding
Basic		17,616		17,338		17,541		17,270
Diluted		18,398		17,720		18,212		17,603


	September 30, 2017		December 31, 2016
		(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	26,821	$	26,383
Receivables, net		6,817		5,036
Income taxes receivable		859		408
Inventories		3,110		3,097
Prepaid expenses		4,599		4,487
Total current assets		42,206		39,411
Property and equipment
Land		30,034		29,549
Land improvements		6,946		6,914
Buildings		193,252		191,370
Buildings improvements		24,511		24,511
Furniture and equipment		138,257		134,603
Construction in progress		39,300		9,767
Leasehold improvements		2,688		2,688
		434,988		399,402
Less accumulated depreciation and amortization		(194,282)		(184,503)
Net property and equipment		240,706		214,899
Other assets
Goodwill		25,111		25,111
Intangible assets, net		4,160		5,035
Deferred income taxes		7,354		7,354
Other assets, net		2,952		3,355
Total other assets		39,577		40,855
Total assets	$	322,489	$	295,165

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	8,242	$	8,720
Construction accounts payable		4,749		2,605
Accrued expenses		23,113		23,795
Total current liabilities		36,104		35,120
Long-term debt		26,200		26,200
Total liabilities		62,304		61,320

Stockholders’ equity
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued		—		—
Common stock, $.01 par value, 30,000,000 shares authorized; 19,096,300 shares issued; 17,670,679 outstanding at September 30, 2017; 17,468,269 outstanding at December 31, 2016		191		191
Additional paid-in capital		26,231		23,834
Treasury stock, 1,425,621 shares at September 30, 2017; 1,628,031 shares at December 31, 2016		(19,356)		(22,158)
Retained earnings		253,119		231,978
Total stockholders’ equity		260,185		233,845
Total liabilities and stockholders’ equity	$	322,489	$	295,165


	Nine Months Ended September 30,
	2017		2016
Cash flows from operating activities:
Net income	$	21,141	$	18,104
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		11,397		11,134
Amortization of deferred loan costs		403		275
Stock-based compensation		5,199		983
Excess tax benefit from stock-based compensation		—		(425)
Provision for bad debts		152		92
Loss on disposition of assets		4		668
Changes in operating assets and liabilities:
Receivables		(1,933)		(981)
Income taxes receivable		(451)		94
Inventories		(13)		74
Prepaid expenses		(112)		(879)
Accounts payable		(373)		611
Accrued expenses		(669)		(575)
Net cash provided by operating activities		34,745		29,175

Cash flows from investing activities:
Proceeds from sale of assets		86		16
Change in construction payable		2,144		(194)
Acquisition of property and equipment		(36,537)		(19,646)
Net cash used in investing activities		(34,307)		(19,824)

Cash flows from financing activities:
Net exercise of stock options		—		2,100
Excess tax benefit from stock-based compensation		—		425
Loan issuance cost		—		(2,586)
Principal payments on long-term debt		—		(11,000)
Net cash used in financing activities		—		(11,061)

Net increase (decrease) in cash		438		(1,710)
Cash and cash equivalents at beginning of period		26,383		21,164
Cash and cash equivalents at end of period	$	26,821	$	19,454

Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized	$	235	$	—
Cash paid for income taxes	$	11,200	$	9,475
Return of assets under capital lease:
Accounts payable	$	(105)	$	—
Accrued expenses	$	(13)	$	—


	Payments due by period (1)
			Less						Greater
			than 1		1 to 3		3 to 5		than 5
	Total		year		years		years		years
Operating Leases (2)	$	26.6	$	1.1	$	2.2	$	2.2	$	21.1
Purchase Obligations (3)		12.9		9.7		3.0		0.2		—
Borrowings Under Amended Credit Facility (4)		26.2		—		—		26.2		—
Total Contractual Cash Obligations	$	65.7	$	10.8	$	5.2	$	28.6	$	21.1