RIVIERA BLACK HAWK ACQUISITION

12 Months Ended

Dec. 31, 2014

RIVIERA BLACK HAWK ACQUISITION

RIVIERA BLACK HAWK ACQUISITION TRANSACTION

NOTE 11.  RIVIERA BLACK HAWK ACQUISITION

On September 29, 2011, Monarch entered into a definitive Stock Purchase Agreement (the “Stock Purchase Agreement”) with Riviera Operating Corporation, a Nevada corporation, Riviera Holdings Corporation, a Nevada corporation (the “Seller”) and Riviera Black Hawk, Inc., a Colorado corporation (“Riviera Black Hawk”). Pursuant to the Stock Purchase Agreement, the Seller agreed to sell all of the issued and outstanding shares of common stock of Riviera Black Hawk to Monarch. As required by the Stock Purchase Agreement, the Company paid a $3.8 million deposit (the “Deposit”) against the $76 million purchase price (the “Purchase Price”).

On April 26, 2012 (the “Closing”) Monarch completed the acquisition of Riviera Black Hawk. Monarch paid $72.2 million, the difference between the Purchase Price and the Deposit, subject to certain post-Closing working capital adjustments. At Closing, Seller paid substantially all of Riviera Black Hawk’s indebtedness and left Monarch $2.1 million of net working capital. In order to fund the Purchase Price and related transaction costs, Monarch borrowed $72.3 million under the Credit Facility (see NOTE 6). $2.28 million of the Purchase Price was escrowed for one year to secure the Seller’s indemnification obligations under the Stock Purchase Agreement.

The acquisition was treated as a purchase transaction. Accordingly, the purchase price was allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. In establishing its purchase price allocation, the Company obtained a third-party valuation of the assets acquired and liabilities assumed, and assigned the following values based upon the Company’s consideration of the third-party valuation (in thousands):

Cash consideration	$	75,885
Liabilities assumed by the Company	3,505
Working capital adjustment	604
Total consideration	$	79,994

The allocation of the purchase price was as follows (in thousands):

Tangible Assets:
Current assets	$	6,241
Land	8,700
Site improvements	30
Building improvements	15,200
Furniture and equipment	5,737
Total tangible assets	35,908
Intangible Assets:
Customer list	10,490
Trade name	1,590
Goodwill	25,110
Total intangible assets	37,190
Deferred tax asset	6,896
Total assets	$	79,994

The Company recognized $2.2 million of acquisition related expenses for the year ended December 31, 2012. The Company had no acquisition related expenses in 2013 and 2014.

The amounts of net revenue and operating income of Monarch Casino Black Hawk included in the Company’s consolidated statement of income, subsequent to the Closing, after elimination of intercompany transactions, for the year ended December 31, 2012 are as follows (in thousands):

Net revenues	$	29,678
Income from operations	$	6,350

The unaudited pro forma consolidated results of operations, as if the acquisition of Riviera Black Hawk had occurred on January 1, 2012, are as follows (in thousands, except per share):

	Twelve Months Ended December 31, 2012
Pro forma (unaudited):
Net revenues	$	183,043
Income from operations	$	17,516
Net income	$	9,542
Basic earnings per share	$	0.59
Diluted earnings per share	$	0.59