10-Q

c

United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2023

OR

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

For the transition period from       to      .

Commission File No. 0-22088

MONARCH CASINO & RESORT, INC.

(Exact name of registrant as specified in its charter)

Nevada	88-0300760
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)
3800 S. Virginia St.
Reno, Nevada	89502
(Address of Principal Executive Offices)	(ZIP Code)

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

N/A

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

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

Title of each class	Trading Symbols	Name of each exchange on which registered
Common Stock, $0.01 par value per share	MCRI	The Nasdaq Stock Market LLC (Nasdaq-GS)

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

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

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

Large accelerated filer ⌧	Accelerated filer ◻	Non-accelerated filer ◻
Smaller reporting company ☐	Emerging growth company ☐

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 19,067,522 shares of common stock are outstanding as of November 2, 2023.

TABLE OF CONTENTS

September 30
Item	Page Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements	3
Consolidated Statements of Income for the three and nine months ended September 30, 2023 and 2022 (unaudited)	3
Consolidated Balance Sheets at September 30, 2023 (unaudited) and December 31, 2022	4
Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022 (unaudited)	5
Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 (unaudited)	6
Notes to Consolidated Financial Statements (unaudited)	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3. Quantitative and Qualitative Disclosures About Market Risk	21
Item 4. Controls and Procedures	21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	22
Item 1A. Risk Factors	22
Item 5. Other Information	22
Item 6. Exhibits	23
Signatures	23

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

	Three months ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Revenues
Casino	$	73,818	$	76,909	$	209,578	$	203,605
Food and beverage		32,970		31,312		93,812		85,818
Hotel		20,608		20,785		54,173		54,274
Other		5,569		4,721		15,729		13,637
Net revenues		132,965		133,727		373,292		357,334
Operating expenses
Casino		25,473		25,474		76,471		71,156
Food and beverage		23,330		22,665		68,070		65,297
Hotel		7,176		7,117		20,107		19,183
Other		2,820		2,383		8,549		6,712
Selling, general and administrative		27,091		25,651		77,162		72,931
Depreciation and amortization		12,197		11,183		35,152		32,245
Other operating items, net		2,976		2,898		3,012		6,444
Total operating expenses		101,063		97,371		288,523		273,968
Income from operations		31,902		36,356		84,769		83,366
Other expense
Interest expense, net		(369)		(870)		(1,736)		(2,220)
Income before income taxes		31,533		35,486		83,033		81,146
Provision for income taxes		(7,370)		(7,993)		(18,787)		(16,100)
Net income	$	24,163	$	27,493	$	64,246	$	65,046
Earnings per share of common stock
Net income
Basic	$	1.26	$	1.45	$	3.34	$	3.43
Diluted	$	1.23	$	1.41	$	3.27	$	3.33
Weighted average number of common shares and potential common shares outstanding
Basic		19,252		18,999		19,237		18,952
Diluted		19,608		19,503		19,627		19,559

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

3

MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except shares)

	September 30, 2023		December 31, 2022
		(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	33,918	$	38,779
Receivables, net		10,967		9,566
Income taxes receivable		2,691		24,989
Inventories		7,184		7,558
Prepaid expenses		7,928		8,537
Total current assets		62,688		89,429
Property and equipment, net		576,126		578,050
Goodwill		25,111		25,111
Intangible assets, net		340		352
Total assets	$	664,265	$	692,942
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current maturities of long-term debt, net	$	—	$	6,693
Accounts payable		19,536		14,418
Construction accounts payable		47,403		49,957
Accrued expenses		48,729		46,037
Short-term lease liability		883		639
Total current liabilities		116,551		117,744
Deferred income taxes		23,016		23,016
Long-term lease liability		14,251		13,228
Long-term debt, net		8,000		—
Total liabilities		161,818		153,988
Stockholders’ equity
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued		—		—
Common stock, $.01 par value, 30,000,000 shares authorized; 19,148,691 shares issued and outstanding at September 30, 2023; 19,096,300 shares issued and 19,093,676 outstanding at December 31, 2022		191		191
Additional paid-in capital		46,886		40,716
Treasury stock, 2,624 shares at December 31, 2022		—		(170)
Retained earnings		455,370		498,217
Total stockholders’ equity		502,447		538,954
Total liabilities and stockholders’ equity	$	664,265	$	692,942

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

4

MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except shares, Unaudited)

	Common Stock			Additional
	Shares			Paid-in		Retained		Treasury
	Outstanding	Amount		Capital		Earnings		Stock		Total
Balance, January 1, 2023	19,093,676	$	191	$	40,716	$	498,217	$	(170)	$	538,954
Exercise of stock options, net	37,965		—		808		—		108		916
Stock-based compensation expense	—		—		1,474		—		—		1,474
Dividend payment	—		—		—		(95,608)				(95,608)
Net income	—		—		—		17,670		—		17,670
Balance, March 31, 2023	19,131,641	$	191	$	42,998	$	420,279	$	(62)	$	463,406
Exercise of stock options, net	11,703		—		396		—		62		458
Stock-based compensation expense	—		—		1,276		—		—		1,276
Dividend payment	—		—		—		(5,741)				(5,741)
Net income	—		—		—		22,413		—		22,413
Balance, June 30, 2023	19,143,344	$	191	$	44,670	$	436,951	$	—	$	481,812
Exercise of stock options, net	5,347		—		70		—		—		70
Stock-based compensation expense	—		—		2,146		—		—		2,146
Dividend payment	—		—		—		(5,744)				(5,744)
Net income	—		—		—		24,163		—		24,163
Balance, September 30, 2023	19,148,691	$	191	$	46,886	$	455,370	$	—	$	502,447

	Common Stock			Additional
	Shares			Paid-in		Retained		Treasury
	Outstanding	Amount		Capital		Earnings		Stock		Total
Balance, January 1, 2022	18,764,540	$	191	$	41,426	$	410,738	$	(4,341)	$	448,014
Exercise of stock options, net	191,035		—		19		—		2,458		2,477
Restricted stock granted	19,549		—		1,658		—		262		1,920
Purchase of company common stock	(100,000)		—		—		—		(6,500)		(6,500)
Stock-based compensation expense	—		—		1,160		—		—		1,160
Net income	—		—		—		18,118		—		18,118
Balance, March 31, 2022	18,875,124	$	191	$	44,263	$	428,856	$	(8,121)	$	465,189
Exercise of stock options, net	10,000		—		303		—		134		437
Restricted stock granted	2,946		—		211		—		39		250
Stock-based compensation expense	—		—		1,025		—		—		1,025
Net income	—		—		—		19,435		—		19,435
Balance, June 30, 2022	18,888,070	$	191	$	45,802	$	448,291	$	(7,948)	$	486,336
Exercise of stock options, net	6,666		—		195		—		89		284
Stock-based compensation expense	—		—		1,257		—		—		1,257
Net income	—		—		—		27,493		—		27,493
Balance, September 30, 2022	18,894,736	$	191	$	47,254	$	475,784	$	(7,859)	$	515,370

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

5

MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, Unaudited)

	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net income	$	64,246	$	65,046
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		35,152		32,245
Amortization of deferred loan costs		307		1,085
Stock-based compensation		4,896		3,442
Stock-based compensation - restricted stock		—		80
Provision for bad debts		145		114
Loss on disposition of assets		88		8
Non-cash operating lease expense		30		(1)
Changes in operating assets and liabilities:
Receivables		(1,546)		(1,153)
Income taxes receivable		22,298		2,300
Inventories		374		625
Prepaid expenses		609		(197)
Accounts payable		5,118		(2,065)
Accrued expenses		2,692		4,655
Net cash provided by operating activities		134,409		106,184
Cash flows from investing activities:
Proceeds from sale of assets		97		138
Change in construction accounts payable		(2,554)		(9,243)
Acquisition of property and equipment		(32,164)		(31,425)
Net cash used in investing activities		(34,621)		(40,530)
Cash flows from financing activities:
Payroll taxes from net exercise of stock options		(208)		(2,468)
Proceeds from exercise of stock options		1,652		5,927
Line-of-credit borrowings		68,000		3,000
Line-of-credit payments		(60,000)		(3,000)
Principal payments on long-term debt		(7,000)		(63,000)
Payment of dividend		(107,093)		—
Purchase of company common stock		—		(6,500)
Net cash used in financing activities		(104,649)		(66,041)
Change in cash and cash equivalents		(4,861)		(387)
Cash and cash equivalents at beginning of period		38,779		33,526
Cash and cash equivalents at end of period	$	33,918	$	33,139
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,810	$	1,139
Cash paid for income taxes	$	20,306	$	13,800

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

6

MONARCH CASINO & RESORT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation:

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

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

Interim Financial Statements:

The Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the management of the Company, all adjustments considered necessary for a fair presentation, consisting of normal recurring accruals, are reflected in the interim financial statements. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

The balance sheet at December 31, 2022, has been derived from the audited consolidated financial statements of the Company at that date, but does not include all of the information and footnotes required by U.S. 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, 2022.

Segment Reporting:

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

Concentrations of Credit Risk and Credit Losses:

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of bank deposits and trade receivables.

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

The Company maintains its surplus cash in bank accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.

7

The Company extends short-term credit to its gaming customers. Such credit is non-interest bearing and is due on demand. In addition, the Company also has receivables due from hotel guests and convention groups and events, which are primarily secured with a credit card. An allowance for doubtful accounts is determined to reduce the Company’s receivables to their carrying value, which approximates fair value. The allowance is estimated based on historical collection experience, specific review of individual customer accounts, current economic and business conditions and management’s expectations of future economic and business conditions. The allowance is applied even when the risk of credit loss is remote. When a situation warrants, the Company may create a specific identification reserve for high collection risk receivables. The Company writes off its uncollectible receivables once all efforts have been made to collect such receivables. Recoveries of accounts previously written off are recorded when received. Concentrations of credit risk with respect to gaming and non-gaming receivables are limited due to the large number of customers comprising the Company’s customer base. Historically, the Company has not incurred any significant credit-related losses.

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

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

Inventories:

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

Property and Equipment, net:

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

	September 30, 2023		December 31, 2022
Land	$	32,977	$	32,977
Land improvements		10,969		10,939
Buildings		473,672		475,956
Building improvements		91,028		75,858
Furniture and equipment		250,000		249,045
Construction in progress		13,627		7,229
Right of use assets		15,098		13,861
Leasehold improvements		4,245		4,244
		891,616		870,109
Less accumulated depreciation and amortization		(315,490)		(292,059)
Property and equipment, net	$	576,126	$	578,050

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

Land improvements	15	-	40	years
Buildings	30	-	40	years
Building improvements	5	-	40	years
Right of use assets	5	-	40	years
Leasehold improvements	5	-	40	years
Furniture	5	-	10	years
Equipment	3	-	20	years

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

8

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

For assets to be held and used, the Company reviews fixed assets for impairment indicators at the end of the fiscal year and whenever indicators of impairment exist. If an indicator of impairment exists, we compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, the impairment is measured based on fair value compared to carrying value, with fair value typically based on a discounted cash flow model or market comparable, when available. For the nine-month periods ended September 30, 2023 and 2022, respectively, there were no impairment charges.

Goodwill:

The Company accounts for goodwill in accordance with ASC Topic 350, Intangibles-Goodwill and Other (“ASC Topic 350”). ASC Topic 350 gives companies the option to perform a qualitative assessment that may allow them to skip the quantitative test as appropriate. The Company tests its goodwill for impairment annually during the fourth quarter, or whenever events or circumstances make it more likely than not that impairment may have occurred. Impairment testing for goodwill is performed at the reporting unit level, and each of the Company’s casino properties is considered to be a reporting unit.

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

ASC Topic 350 requires that goodwill be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We performed an assessment to determine whether events or circumstances such as those described in ASC 350-20-35-3C existed and we determined that they did not exist during the interim period; therefore, an interim impairment test was not performed.

Revenue Recognition:

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

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

Players’ Club Program: The Company operates a players’ club program under which as players perform gaming activities they earn and accumulate points, which may be redeemed for a variety of goods and services. Given the significance of the players’ club program and the ability for members to bank such points based on their past play, the Company has determined that players’ club program points granted in conjunction with gaming activity constitute a material right and, as such, represent a performance obligation associated with the gaming contracts. At the time points are earned, the Company recognizes deferred revenue at the standalone selling prices (“SSP”) of the goods and services that the points are expected to be redeemed for, with a corresponding decrease in gaming revenue. The points estimated SSP is computed as the cash redemption value of the points expected to be redeemed, which is determined through an analysis of all redemption activity over the preceding twelve-month period.

9

As of September 30, 2023, the Company had estimated the obligations related to the players’ club program at $9.0 million, which is included in Accrued Expenses in the Liabilities and Stockholders’ Equity section in the Consolidated Balance Sheet.

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

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

Sales and other taxes: Sales taxes and other taxes collected from customers on behalf of governmental authorities are accounted for on a net basis and are not included in revenues or operating expenses. In addition, tips and other gratuities, excluding service charges, collected from customers on behalf of the Company’s employees are also accounted for on a net basis and are not included in revenues or operating expenses.

Other Operating items, net:

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

For the three months ended September 30, 2023, Other operating items, net, was $3.0 million and primarily represented professional service fees relating to our construction litigation. For the three months ended September 30, 2022, Other operating items, net, was $2.9 million and consisted of professional service fees relating to our construction litigation of $2.8 million, and loss on disposal of assets of $0.1 million.

For the nine months ended September 30, 2023, Other operating items, net, was $3.0 million and consisted of $4.1 million of professional service fees relating to our construction litigation and $0.1 million loss on disposal of assets, offset by $1.2 million net proceeds from a sale of a COVID closure related insurance claim. For the nine months ended September 30, 2022, Other operating items, net, was $6.4 million and primarily represented professional service fees relating to our construction litigation.

Impact of Recently Adopted Accounting Standards:

The Company has evaluated the recently issued or proposed by the FASB or other standards-setting bodies accounting standards and does not believe the future adoption of any such pronouncements will have a material effect 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. Certain of the Company’s leases include rental escalation clauses, renewal options and/or termination options that are factored into its determination of lease payments when appropriate. As permitted by ASC 842, the Company elected not to separate non-lease components from their related lease components.

As of September 30, 2023, the Company’s right of use assets consisted of the Parking Lot Lease, the Driveway Lease (each as defined and discussed in NOTE 5. RELATED PARTY TRANSACTIONS), as well as certain billboard leases.

The weighted-average incremental borrowing rate of the leases presented in the lease liability as of September 30, 2023, was 4.32%. There were no new leases entered into in the third quarter of 2023.

10

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

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

NOTE 3. STOCK-BASED COMPENSATION

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

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

	Three months ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Casino	$	111	$	56	$	262	$	181
Food and beverage		59		(12)		88		104
Hotel		80		56		213		126
Selling, general and administrative		1,896		1,157		4,333		3,031
Total stock-based compensation, before taxes		2,146		1,257		4,896		3,442
Tax benefit		(450)		(264)		(1,028)		(723)
Total stock-based compensation, net of tax	$	1,696	$	993	$	3,868	$	2,719

NOTE 4. EARNINGS PER SHARE

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

	Three months ended September 30,
	2023			2022
			Per Share			Per Share
	Shares		Amount	Shares		Amount
Basic	19,252	$	1.26	18,999	$	1.45
Effect of dilutive stock options	356		(0.03)	504		(0.04)
Diluted	19,608	$	1.23	19,503	$	1.41

	Nine months ended September 30,
	2023			2022
			Per Share			Per Share
	Shares		Amount	Shares		Amount
Basic	19,237	$	3.34	18,952	$	3.43
Effect of dilutive stock options	390		(0.07)	607		(0.10)
Diluted	19,627	$	3.27	19,559	$	3.33

Excluded from the computation of diluted earnings per share are options where the exercise prices are greater than the weighted assumed proceeds per share as their effects would be anti-dilutive in the computation of diluted earnings per share. For the three months ended September 30, 2023 and 2022, options for approximately 749 thousand and 592 thousand shares, respectively, were excluded from the computation. For the nine months ended September 30, 2023 and 2022, options for approximately 617 thousand and 538 thousand shares, respectively, were excluded from the computation.

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NOTE 5. RELATED PARTY TRANSACTIONS

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

On August 28, 2015, Monarch, through its subsidiary Golden Road Motor Inn, Inc., entered into a 20-year lease agreement with BLI for a portion of the Shopping Center (the “Parking Lot Lease”). This lease gives the Atlantis the right to use a parcel, approximately 4.2 acres, adjacent to the Atlantis. The primary purpose of the Parking Lot Lease is to provide additional, convenient, Atlantis surface parking. The minimum annual rent under the Parking Lot Lease is $695 thousand commencing on November 17, 2015. The minimum annual rent is subject to a cost of living adjustment increase on each five-year anniversary. In addition, the Company is responsible for the payment of property taxes, utilities and maintenance expenses related to the leased property. The Company has an option to renew the Parking Lot Lease for an additional ten-year term. If the Company elects not to exercise its renewal option, the Company will be obligated to pay BLI $1.6 million. For each of the three-month periods ended September 30, 2023 and 2022, the Company paid $187 thousand in rent, plus $8 thousand and $14 thousand, respectively, in operating expenses relating to this lease. For each of the nine-month periods ended September 30, 2023 and 2022, the Company paid $561 thousand in rent, plus $17 thousand and $22 thousand, respectively, in operating expenses relating to this lease. The right of use asset and lease liability balances as of September 30, 2023, recognized in the Consolidated Balance Sheet, was $9.8 million.

In addition, the Atlantis shares a driveway with the Shopping Center and leases approximately 37,400 square feet from BLI (the “Driveway Lease”) for an initial lease term of 15 years, which commenced on September 30, 2004, at an original annual rent of $300 thousand plus common area expenses. The annual rent is subject to a cost of living adjustment increase on each five-year anniversary of the Driveway Lease. Effective August 28, 2015, in connection with the Company entering into the Parking Lot Lease, the Driveway Lease was amended to: (i) make the Company solely responsible for the operation and maintenance costs of the shared driveway (including the fountains thereon); (ii) eliminate the Company’s obligation to reimburse the Shopping Center for its proportionate share of common area expenses; and (iii) exercise the three successive five-year renewal terms beyond the initial 15-year term in the existing Driveway Lease. At the end of the renewal terms, the Company has the option to purchase the leased driveway section of the Shopping Center. For each of the three-month periods ended September 30, 2023 and 2022, the Company paid $101 thousand in rent plus $14 thousand and $12 thousand, respectively, in operating expenses relating to this lease. For each of the nine-month periods ended September 30, 2023 and 2022, the Company paid $303 thousand in rent plus $35 thousand and $28 thousand, respectively, in operating expenses relating to this lease. The right of use asset and lease liability balances as of September 30, 2023, recognized in the Consolidated Balance Sheet, was $3.3 million.

The Company occasionally leases billboard advertising, storage space and parking lot space from affiliates controlled by the Farahi Family Stockholders, and paid $104 thousand and $121 thousand, respectively, for the three-month periods and $373 thousand and $325 thousand, respectively, for the nine-month periods ended September 30, 2023 and 2022, for such leases. The right of use asset and lease liability balances related to the billboard leases as of September 30, 2023, recognized in the Consolidated Balance Sheet, was $2.0 million.

NOTE 6. LONG-TERM DEBT

On February 1, 2023, the Company entered into the Fifth Amended and Restated Credit Agreement (the “Amended Credit Facility”) with Wells Fargo Bank, N.A., as administrative agent. The Amended Credit Facility provides for a $100 million line of credit which matures on January 1, 2025.

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

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In addition to other customary covenants for a facility of this nature, as of September 30, 2023, the Company is required to maintain a Total Leverage Ratio (as defined in the Amended Credit Facility) of no more than 2.5:1 and Fixed Charge Coverage Ratio (as defined in the Amended Credit Facility) of at least 1.1:1. As of September 30, 2023, the Company’s Total Leverage Ratio and Fixed Charge Coverage Ratio were 0.05:1 and 14.73:1, respectively.

The interest rate under the Amended Credit Facility is SOFR (the Secured Overnight Financing Rate) plus a margin ranging from 1.00% to 1.50%, or a base rate (as defined in the Amended Credit Facility) plus a margin ranging from 0.00% to 0.50%. The applicable margins will vary depending on the Company’s leverage ratio. In addition, SOFR-based loans will incur a 0.10% credit adjustment spread due to the conversion from LIBOR to SOFR as the new benchmark rate. As of September 30, 2023, the interest rate was 6.42%, or SOFR plus a 1.00% margin.

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

NOTE 7. TAXES

For the nine months ended September 30, 2023 and 2022, the Company’s effective tax rate was 22.6% and 19.8%, respectively. The effective tax rate for the nine months ended September 30, 2023 and 2022 was impacted by excess tax benefit on stock option exercises, which were $0.4 million and $2.3 million for the nine months ended September 30, 2023 and 2022, respectively.

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

No uncertain tax positions were recorded as of September 30, 2023 and 2022. No change in uncertain tax positions is anticipated over the next twelve 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.

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

NOTE 9. LEGAL MATTERS

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

On September 1, 2022, the judge previously assigned to the Denver Action recused herself, resulting in a continuance of the trial then set for September 6, 2022, and reassignment to another courtroom. Following reassignment, the court set a new trial date of September 5, 2023.

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In connection with the expansion of the Monarch Black Hawk, as described above, PCL and certain subcontractors have also provided purported notice of liens filed against the real property on which the Monarch Black Hawk is situated (the “Monarch Black Hawk Property”), for sums allegedly owed for construction of the expansion. Some of the subcontractors have recorded such liens in the property records of Gilpin County, Colorado.

On March 26, 2021, PCL filed a mechanics’ lien foreclosure action in the District Court, County of Gilpin, Colorado, against the Company and its Colorado subsidiaries, in connection with the Company’s now completed expansion of the Monarch Casino Resort Spa Black Hawk. The case is captioned PCL Construction Services, Inc., v. Monarch Growth Inc., et al., Case No. 2021CV30006 (the “Gilpin Lawsuit”). The complaint essentially mirrors the claims and allegations made by PCL in the First Denver Lawsuit, as described above. The Gilpin Lawsuit includes an additional claim, however, for foreclosure of PCL’s purported mechanics’ lien against the property on which the Monarch Casino Resort Spa Black Hawk is situated (the “Property”). PCL also joined additional parties who may claim a purported lien against the Property, as defendants. Effective May 10, 2021, PCL filed its second amended complaint, joining more such parties as defendants. Many of the Company’s co-defendants have filed cross claims against Monarch for foreclosure of mechanics’ liens and related claims, including unjust enrichment.

Monarch filed its answer and counterclaims to PCL’s second amended complaint in the Gilpin Lawsuit on July 15, 2021, but a trial of the matter has not been set. Monarch has also filed answers to all cross claims due to date, denying the claimants’ rights to relief. Monarch anticipates filing further answers to additional cross claims, also denying the claimants’ rights to relief. The case remains stayed pending the outcome of the First Denver Lawsuit, Case No. 2019CV33368. We are currently unable to determine the probability of the outcome or reasonably estimate the loss or gain, if any.

On February 9, 2023, Monarch Growth, Inc., Monarch Casino & Resort, Inc. and Monarch Black Hawk, Inc. filed a complaint in District Court, City and County of Denver, Colorado, against PCL, in connection with the Company’s now completed expansion of the Monarch Casino Resort Spa Black Hawk. The case is captioned Monarch Growth Inc., et al., v. PCL Construction Services, Inc., Case No. 2023CV30458 (the “Second Denver Lawsuit”).The complaint alleges, among other things, that PCL breached the construction contract, duties of good faith and fair dealing, and implied and express warranties based on defective and/or nonconforming contruction work at the project, and includes claims for monetary damages as well as equitable and declaratory relief. On April 18, 2023, at the parties’ joint request, the Court ordered the Second Denver Lawsuit stayed for ninety days from date of the stay order until July 17, 2023. Following the expiration of the stay and the filing of a motion to dismiss by PCL, Monarch amended its complaint in the Second Denver Lawsuit. On September 13, 2023, PCL filed a motion to dismiss Monarch’s amended complaint. Monarch filed its response in opposition to PCL’s motion to dismiss on October 4, 2023. The court has not yet resolved PCL’s motion to dismiss Monarch’s amended complaint, and we are currently unable to determine the probability of the outcome or reasonably estimate the loss or gain, if any.

Meanwhile, on September 5, 2023, trial commenced in the First Denver Lawsuit in the District Court for the City and County of Denver, Colorado.  After approximately 5 weeks, the trial has been recessed pending additional trial days allowed by the Court in late November.  Trial is currently set to resume on November 20, 2023 and conclude on November 28, 2023. We remain unable to determine the probability of the outcome or reasonably estimate the loss or gain, if any, or determine when the court will resolve the claims currently being tried.

The Company recognized $4.1 million and $6.5 million in construction litigation expense relating to these lawsuits for the nine months ended September 30, 2023 and 2022, respectively, which is included in Other operating items, net on the Consolidated Statements of Income.

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

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NOTE 10. DIVIDENDS

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

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

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

On October 18, 2023, the Company announced a cash dividend of $0.30 per share of its outstanding common stock, payable on December 15, 2023, to stockholders of record on December 1, 2023. This cash dividend is part of the previously announced annual cash dividend of $1.20 per share payable in quarterly payments.

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

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

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

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “believes,” “expects,” “anticipates,” “estimates,” “plans,” “intends,” “objectives,” “goals,” “aims,” “projects,” “forecasts,” “possible,” “seeks,” “may,” “will,” “could,” “should,” “might,” “likely,” “enable,” or similar words or expressions, as well as statements containing phrases such as “in our view,” or “we cannot assure you,” “although no assurance can be given.” Examples of forward-looking statements include, among others, statements we make regarding: (i) our belief regarding the exposure of our cash and accounts receivable to credit risk; (ii) our beliefs regarding the quality of our work product and guest service and our ability to capture additional market share in the high-end segment of the market; (iii) our beliefs regarding the quality of our properties as key factors in each of their long-term success; (iv) our expectations regarding the employment growth in the Reno market, the tight labor market (including wage inflation) and its effect on our business at Atlantis; (v) our expectations and intentions regarding the expenses, defenses and outcomes of the lawsuits filed by the construction project general contractor against us and our counterclaims and separate lawsuit against the contractor; (vi) our expectations regarding our business prospects, strategies, estimates and outlook; (vii) our expectations regarding the positioning of our properties to benefit from future macro and local economic growth; (viii) our expectations regarding future capital requirements; (ix) our anticipated sources of funds and adequacy of such funds to meet our debt obligations and capital requirements; and (x) our expectations regarding legal and other matters.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the impact of the events occurring in the Middle East and the conflict taking place in Israel, as well as those risks discussed in Part I, Item 1A-Risk Factors and throughout Part II, Item 7-Management’s Discussion and Analysis of Financial Condition and Results of our Annual Report on Form 10-K for the year ended December 31, 2022, and in Part II, Item 1A-Risk Factors and elsewhere of this Form 10-Q. In addition, you should consult other disclosures made by us (such as in our other filings with the Securities and Exchange Commission (“SEC”) or in Company press releases) for other factors that may cause actual results to differ materially from those projected by us. You should read this Form 10-Q, and the documents that we reference in this Form 10-Q and have filed with the SEC, and our Annual Report on Form 10-K for the year ended December 31, 2022, with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

Any forward-looking statement made by us in this Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update or revise any forward-looking statements as a result of future developments, events or conditions, except as required by law. New risks emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ significantly from those forecast in any forward-looking statements.

OVERVIEW

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

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

Atlantis: We continuously upgrade our property. With quality gaming, hotel and dining products, we believe the Atlantis is well positioned to benefit from future macro and local economic growth. Reno remains a healthy local-oriented market, but at the same time a very competitive market. The market’s employment growth is broad based and we expect this positive indicator will support the continued strength of our business at Atlantis. At the same time, the tight employment environment, with the local unemployment rate below the national average, has created labor challenges, including wage inflation, which we continue to actively manage. We expect this to be a recurring trend for the market and Atlantis in the years ahead. The increase in the labor costs and the increase in price inflation, combined with continued aggressive marketing programs by our competitors, has applied upward pressure on Atlantis’ operating costs and is lowering our profit margins.

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

KEY PERFORMANCE INDICATORS

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

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

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

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.

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

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

RESULTS OF OPERATIONS

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

For the three months ended September 30, 2023, our net income totaled $24.2 million, or $1.23 per diluted share, compared to net income of $27.5 million, or $1.41 per diluted share for the same period in 2022, reflecting a 12.1% and 12.8% decrease in net income and diluted earnings per share, respectively. Net revenues in the three months ended September 30, 2023, totaled $133.0 million, a decrease of $0.8 million, or 0.6%, compared to the three months ended September 30, 2022. Income from operations for the three months ended September 30, 2023, totaled $31.9 million compared to income from operations of $36.4 million for the same period in 2022.

Casino revenue decreased 4.0% in the third quarter of 2023 compared to the third quarter of 2022. The decrease in casino revenue was driven primarily by the increase in promotional allowances and decrease in spend per visit year-over-year at Atlantis. Casino operating expense as a percentage of casino revenue increased to 34.5% for the three months ended September 30, 2023, compared to 33.1% for the three months ended September 30, 2022, primarily due to the increase in labor expense.

Food and beverage revenue for the third quarter of 2023 increased 5.3% compared to the third quarter of 2022 due to a 1.2% increase in food and beverage covers, combined with an increase in food and beverage revenue per cover of 4.1%. Food and beverage operating expense as a percentage of food and beverage revenue decreased in the third quarter of 2023 to 70.8% compared to 72.4% for the same quarter in 2022 primarily due to an increase in average check and improved cost management.

Hotel revenue decreased 0.9% in the third quarter of 2023 compared to the same quarter of 2022 primarily as a result of lower number of available rooms in the current quarter compared to the prior year same quarter. ADR increased by $1.04 ($178.78 in the third quarter of 2023 and $177.74 in the third quarter of 2022). Hotel occupancy increased to 88.1% during the current year period compared to 86.8% during the third quarter of 2022. RevPAR was $169.63 and $170.14 for the three months ended September 30, 2023 and 2022, respectively and was impacted by a decrease in resort fee revenue. Hotel operating expense as a percentage of hotel revenue increased to 34.8% in the third quarter of 2023 compared to 34.2% for the comparable prior year period primarily as a result of the decrease in RevPAR and an increase in labor expense.

Other revenue increased 18.0% in the third quarter of 2023 compared to the same prior year period primarily due to an increase in retail and spa revenues at both properties.

SG&A expense increased to $27.1 million in the third quarter of 2023 from $25.7 million in the third quarter of 2022 driven primarily by increases in labor, utilities, insurance and marketing expenses. As a percentage of net revenue, SG&A expense increased to 20.4% in the third quarter of 2023 compared to 19.2% in the same period in 2022.

Depreciation and amortization expense increased to $12.2 million for the three months ended September 30, 2023, compared to $11.2 million for the same prior year period, due to new assets placed into service with the ongoing renovation at Atlantis.

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During the third quarter of 2023 and 2022, we recognized $2.9 million and $2.8 million, respectively, in professional service fees relating to our construction litigation, which are included in Other operating items, net in the Consolidated Statements of Income.

In the third quarter of 2023, we recognized $0.4 million of interest expense, net of interest income. In the third quarter of 2022, we expensed $0.5 million of interest and amortized $0.4 million in deferred loan costs. See further discussion of our Amended Credit Facility in the LIQUIDITY AND CAPITAL RESOURCES section below.

Comparison of Operating Results for the Nine-Month Periods Ended September 30, 2023 and 2022

For the nine months ended September 30, 2023, we had a net income of $64.2 million, or $3.27 per diluted share, compared to net income of $65.0 million, or $3.33 per diluted share for the same period in 2022, reflecting a 1.2% and 1.8% decrease in net income and diluted earnings per share, respectively. Net revenues in the nine months ended September 30, 2023, totaled $373.3 million, an increase of 4.5%, compared to the nine months ended September 30, 2022. Income from operations for the nine months ended September 30, 2023 totaled $84.8 million compared to $83.4 million income from operations for the same period in 2022.

Casino revenue increased 2.9% in the first nine months of 2023 compared to the first nine months of 2022 and was driven by an increase in market share at Monarch Black Hawk. Casino operating expense as a percentage of casino revenue increased to 36.5% for the nine months ended September 30, 2023 compared to 34.9% for the nine months ended September 30, 2022 primarily as a result of increase in labor expense and increase in promotional allowances.

Food and beverage revenue for the first nine months of 2023 increased 9.3% compared to the 2022 same period due to a 1.9% increase in food and beverage covers combined with an 7.3% increase in food and beverage revenue per cover. Food and beverage operating expense as a percentage of food and beverage revenue decreased in the first nine months of 2023 to 72.6% from 76.1% for the same period in 2022 primarily as a result of an increase in average check and improved cost management.

Hotel revenue decreased 0.2% in the first nine months of 2023 compared to the first nine months of 2022 primarily due to a decrease in ADR by $5.53, from $178.15 in the first nine months of 2022 to $172.62 in the first nine months of 2023. The occupancy increased from 81.7% during the first nine months of 2022 to 84.7% during the same period of 2023. Hotel operating expense as a percentage of hotel revenue increased to 37.1% in the first nine months of 2023 compared to 35.3% for the comparable prior year period primarily as a result of the lower ADR and an increase in labor expense.

Other revenue increased 15.3% in the first nine months of 2023 compared to the same prior year period.

SG&A expense increased to $77.2 million in the first nine months of 2023 from $72.9 million in the first nine months of 2022 primarily due to the increase in labor expense, as well as utilities, insurance and repair and maintenance expenses. As a percentage of net revenue, SG&A expense increased to 20.7% in the first nine months of 2023 compared to 20.4% in the same period in 2022.

Depreciation and amortization expense increased to $35.2 million for the nine months ended September 30, 2023 compared to $32.2 million for the same prior year period, due to new assets placed into service with the ongoing renovation at Atlantis.

During the first nine months of 2023, we recognized $4.1 million in professional service fees relating to our construction litigation and $1.2 million in proceeds from a sale of COVID closure related insurance claim. During the first nine months of 2022, we recognized $6.5 million in professional services fees relating to our construction litigation.

During the first nine months of 2023, we expensed $1.7 million of interest, net of interest income. During the first nine months of 2022, we expensed $1.1 million of interest and amortized $1.1 million in deferred loan costs. See further discussion of our Amended Credit Facility in the LIQUIDITY AND CAPITAL RESOURCES section below.

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CAPITAL SPENDING AND DEVELOPMENT

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

Cash paid for capital expenditures for the nine-month periods ended September 30, 2023 and 2022 totaled $34.6 million and $40.5 million, respectively. During the nine-month period ended September 30, 2023, our capital expenditures related primarily to the redesign and upgrade of hotel rooms in the second tower at Atlantis, re-carpeting the casino floor at Atlantis and the acquisition of gaming, and other equipment to upgrade and replace existing equipment at Atlantis and Monarch Black Hawk. During the nine-month period ended September 30, 2022 our capital expenditures related primarily to the redesign and upgrade of hotel rooms in the original tower at Atlantis, the new upscale retail shop at Atlantis and the acquisition of gaming and other equipment to upgrade and replace existing equipment at Atlantis and Monarch Black Hawk. Capital expenditures during each of the first nine months of 2023 and 2022 were funded primarily from operating cash flows.

LIQUIDITY AND CAPITAL RESOURCES

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

For the nine months ended September 30, 2023, net cash provided by operating activities totaled $134.4 million, compared to net cash provided by operating activities of $106.2 million in the same prior year period. This increase was primarily a result of the decrease in income tax receivable as a result of receipt of an income tax refund, increase in depreciation expense and change in working capital.

Net cash used in investing activities totaled $34.6 million and $40.5 million during the nine months ended September 30, 2023 and 2022, respectively. Net cash used in investing activities during the first nine months of 2023 consisted primarily of cash used for the redesign and upgrade of hotel rooms in the second tower at Atlantis, re-carpeting the casino floor at Atlantis, and the acquisition of gaming and other equipment at both properties. Net cash used in investing activities during the first nine months of 2022 consisted primarily of cash used for the redesign and upgrade of hotel rooms in the first tower at Atlantis, the completion of the transformation of part of the Monarch Black Hawk legacy facility, and for acquisition of gaming and other equipment at both properties.

Net cash used in financing activities in the first nine months of 2023 totaled $104.6 million consisting of $107.0 million used for payment of dividends, offset by $1.0 million of borrowings under the Amended Credit Facility, net of the payments to the lender under the Amended Credit Facility and $1.4 million of net proceeds from stock options exercise. Net cash used in financing activities in the first nine months of 2022 totaled $66.0 million and consisted of $63.0 million in principal payments on the credit facility and $6.5 million cash used for purchase of Company stock under the Repurchase Plan partially offset by $3.5 million of net proceeds from stock options exercise.

Amended Credit Facility

On February 1, 2023, we entered into the Fifth Amended and Restated Credit Agreement (the “Amended Credit Facility”) with Wells Fargo Bank, N.A., as administrative agent. The Amended Credit Facility amends and restates the Company’s Fourth Amended and Restated Credit Agreement, which consisted of a $200 million term loan and a $70 million revolving line of credit.

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

The Amended Credit Facility does not contain a term loan but instead increases the aggregate principal amount of the revolving line of credit from $70 million to $100 million. The maturity date of the Amended Credit Facility is January 1, 2025.

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

20

In addition to other customary covenants for a facility of this nature, as of September 30, 2023, we were required to maintain a Total Leverage Ratio (as defined in the Amended Credit Facility) of no more than 2.5:1 and Fixed Charge Coverage Ratio (as defined in the Amended Credit Facility) of at least 1.1:1. As of September 30, 2023, our Total Leverage Ratio and Fixed Charge Coverage Ratio were 0.05:1 and 14.73:1, respectively.

The interest rate under the Amended Credit Facility is SOFR (the Secured Overnight Financing Rate) plus a margin ranging from 1.00% to 1.50%, or a base rate (as defined in the Amended Credit Facility) plus a margin ranging from 0.00% to 0.50%. The applicable margins will vary depending on the Company’s leverage ratio. In addition, SOFR-based loans will incur a 0.10% credit adjustment spread due to the conversion from LIBOR to SOFR as the new benchmark rate. As of September 30, 2023, the interest rate was 6.42%, or SOFR plus a 1.00% margin.

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

We believe that our anticipated operating cash flow and the $91.4 million available under our Amended Credit Facility as of September 30, 2023 will be sufficient to sustain operations for the twelve months from the filing of this Form 10-Q for the quarter ended September 30, 2023 and fulfill our capital expenditure plans and authorized dividend distributions. However financial, economic, competitive, regulatory, and other factors, many of which are beyond our control, could negatively impact our operations. If we are unable to generate sufficient cash flow in the upcoming months or if our cash needs exceed our borrowing capacity under the Amended Credit Facility, we could be required to adopt one or more alternatives, such as reducing, delaying or eliminating planned capital expenditures, selling assets, restructuring debt or issuing additional equity.

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

CRITICAL ACCOUNTING POLICIES

A description of our critical accounting policies and estimates can be found in Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2022 Form 10-K. For a more extensive discussion of our accounting policies, see Note 1. “Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in our 2022 Form 10-K filed with the SEC on February 28, 2023.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

As of September 30, 2023, we had $8 million of outstanding balance under our Amended Credit Facility. A hypothetical 1% increase in the interest rate on the balance outstanding under the Amended Credit Facility at September 30, 2023, would have resulted in a change in our annual interest cost of approximately $0.1 million. See “Liquidity and Capital Resources” for further discussion of our Amended Credit Facility and capital structure.

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

We do not have any cash or cash equivalents as of September 30, 2023 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 Exchange Act). Based upon the evaluation, our Chief Executive Officer and Chief Accounting Officer concluded that our disclosure controls and procedures were effective as of the Evaluation Date. During the quarter ended September 30, 2023, there were no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

21

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors we previously disclosed in Item 1A of our 2022 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 2022 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 2022 Form 10-K.

ITEM 5. OTHER INFORMATION

During the quarter ended September 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (in each case, as defined in Item 408 of Regulation S-K).

22

ITEM 6. EXHIBITS

Exhibit No	Description
31.1*	Certification of Principal Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Principal Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Principal Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	Inline XBRL Instance - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH*	Inline XBRL Taxonomy Extension Schema
101.CAL*	Inline XBRL Taxonomy Extension Calculation
101.DEF*	Inline XBRL Taxonomy Extension Definition
101.LAB*	Inline XBRL Taxonomy Extension Labels
101.PRE* 104	Inline XBRL Taxonomy Extension Presentation Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith

SIGNATURES

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

	MONARCH CASINO & RESORT, INC.
	(Registrant)
Date: November 6, 2023	By:	/s/ EDWIN S. KOENIG
	Edwin S. Koenig, Chief Accounting Officer
	(Principal Financial and Accounting Officer and Duly Authorized Officer)

23

EX-31.1

EXHIBIT 31.1

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

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

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

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

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

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

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

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

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

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

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

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

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

4
Date: November 6, 2023
By:	/s/ John Farahi
John Farahi
Chief Executive Officer

EX-31.2

EXHIBIT 31.2

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

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

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

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

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

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

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

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

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

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

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

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

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

Date: November 6, 2023
By:	/s/ Edwin S. Koenig
Edwin S. Koenig
Principal Financial and Accounting Officer

EX-32.1

EXHIBIT 32.1

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

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

1. The Quarterly Report on Form 10-Q for the period ended September 30, 2023 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

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

/S/ JOHN FARAHI

John Farahi

Chief Executive Officer

November 6, 2023

EX-32.2

EXHIBIT 32.2

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

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

1. The Quarterly Report on Form 10-Q for the period ended September 30, 2023 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

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

/S/ EDWIN S. KOENIG

Edwin S. Koenig

Principal Financial and Accounting Officer

November 6, 2023

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2023	Nov. 02, 2023
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2023
Entity File Number	0-22088
Entity Registrant Name	MONARCH CASINO & RESORT, INC
Entity Incorporation, State or Country Code	NV
Entity Tax Identification Number	88-0300760
Entity Address, Address Line One	3800 S. Virginia St.
Entity Address, City or Town	Reno
Entity Address, State or Province	NV
Entity Address, Postal Zip Code	89502
City Area Code	775
Local Phone Number	335-4600
Title of 12(b) Security	Common Stock, $0.01 par value per share
Trading Symbol	MCRI
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		19,067,522
Entity Central Index Key	0000907242
Document Fiscal Year Focus	2023
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Revenues
Net revenues	$ 132,965	$ 133,727	$ 373,292	$ 357,334
Operating expenses
Selling, general and administrative	27,091	25,651	77,162	72,931
Depreciation and amortization	12,197	11,183	35,152	32,245
Other operating items, net		2,898	3,012	6,444
Total operating expenses	101,063	97,371	288,523	273,968
Other operating items, net	(2,976)
Income from operations	31,902	36,356	84,769	83,366
Other expense
Interest expense, net	(369)	(870)	(1,736)	(2,220)
Income before income taxes	31,533	35,486	83,033	81,146
Provision for income taxes	(7,370)	(7,993)	(18,787)	(16,100)
Net income	$ 24,163	$ 27,493	$ 64,246	$ 65,046
Earnings per share of common stock
Basic	$ 1.26	$ 1.45	$ 3.34	$ 3.43
Diluted	$ 1.23	$ 1.41	$ 3.27	$ 3.33
Weighted average number of common shares and potential common shares outstanding
Basic	19,252	18,999	19,237	18,952
Diluted	19,608	19,503	19,627	19,559
Casino
Revenues
Net revenues	$ 73,818	$ 76,909	$ 209,578	$ 203,605
Operating expenses
Operating expenses	25,473	25,474	76,471	71,156
Food and beverage
Revenues
Net revenues	32,970	31,312	93,812	85,818
Operating expenses
Operating expenses	23,330	22,665	68,070	65,297
Hotel
Revenues
Net revenues	20,608	20,785	54,173	54,274
Operating expenses
Operating expenses	7,176	7,117	20,107	19,183
Other
Revenues
Net revenues	5,569	4,721	15,729	13,637
Operating expenses
Operating expenses	$ 2,820	$ 2,383	$ 8,549	$ 6,712

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Current assets
Cash and cash equivalents	$ 33,918	$ 38,779
Receivables, net	10,967	9,566
Income taxes receivable	2,691	24,989
Inventories	7,184	7,558
Prepaid expenses	7,928	8,537
Total current assets	62,688	89,429
Property and equipment, net	576,126	578,050
Goodwill	25,111	25,111
Intangible assets, net	340	352
Total assets	664,265	692,942
Current liabilities
Current portion of long-term debt		6,693
Accounts payable	19,536	14,418
Construction accounts payable	47,403	49,957
Accrued expenses	48,729	46,037
Short-term lease liability	883	639
Total current liabilities	116,551	117,744
Deferred income taxes	23,016	23,016
Long-term lease liability	14,251	13,228
Long-term debt, net	8,000
Total liabilities	161,818	153,988
Stockholders' equity
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued
Common stock, $.01 par value, 30,000,000 shares authorized; 19,143,344 shares issued and outstanding at June 30, 2023; 19,096,300 shares issued and 19,093,676 outstanding at December 31, 2022	191	191
Additional paid-in capital	46,886	40,716
Treasury stock, 2,624 shares at December 31, 2022		(170)
Retained earnings	455,370	498,217
Total stockholders' equity	502,447	538,954
Total liabilities and stockholders' equity	$ 664,265	$ 692,942

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2023	Dec. 31, 2022
CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	19,148,691	19,096,300
Common stock, shares outstanding	19,148,691	19,093,676
Treasury stock, shares		2,624

XML

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	Retained Earnings	Treasury Stock	Total
Increase (Decrease) in Stockholders' Equity
Treasury Stock, Value				$ (4,341)
Balance at Dec. 31, 2021	$ 191	$ 41,426	$ 410,738		$ 448,014
Balance (in shares) at Dec. 31, 2021	18,764,540
Increase (Decrease) in Stockholders' Equity
Exercise of stock options, net		19		2,458	2,477
Exercise of stock options, net (in shares)	191,035
Restricted stock granted		1,658		262	1,920
Restricted stock granted, shares	19,549
Purchase of company common stock				(6,500)	(6,500)
Purchase of company common stock, shares	(100,000)
Stock-based compensation expense		1,160			1,160
Net Income (Loss)			18,118		18,118
Balance at Mar. 31, 2022	$ 191	44,263	428,856		465,189
Balance (in shares) at Mar. 31, 2022	18,875,124
Balance at Dec. 31, 2021	$ 191	41,426	410,738		448,014
Balance (in shares) at Dec. 31, 2021	18,764,540
Increase (Decrease) in Stockholders' Equity
Net Income (Loss)					65,046
Balance at Sep. 30, 2022	$ 191	47,254	475,784	(7,859)	515,370
Balance (in shares) at Sep. 30, 2022	18,894,736
Increase (Decrease) in Stockholders' Equity
Treasury Stock, Value				(8,121)
Balance at Mar. 31, 2022	$ 191	44,263	428,856		465,189
Balance (in shares) at Mar. 31, 2022	18,875,124
Increase (Decrease) in Stockholders' Equity
Exercise of stock options, net		303		134	437
Exercise of stock options, net (in shares)	10,000
Restricted stock granted		211		39	250
Restricted stock granted, shares	2,946
Stock-based compensation expense		1,025			1,025
Net Income (Loss)			19,435		19,435
Balance at Jun. 30, 2022	$ 191	45,802	448,291		486,336
Balance (in shares) at Jun. 30, 2022	18,888,070
Increase (Decrease) in Stockholders' Equity
Treasury Stock, Value				(7,948)
Exercise of stock options, net		195		89	284
Exercise of stock options, net (in shares)	6,666
Stock-based compensation expense		1,257			1,257
Net Income (Loss)			27,493		27,493
Balance at Sep. 30, 2022	$ 191	47,254	475,784	(7,859)	515,370
Balance (in shares) at Sep. 30, 2022	18,894,736
Increase (Decrease) in Stockholders' Equity
Treasury Stock, Value				(170)	170
Balance at Dec. 31, 2022	$ 191	40,716	498,217		$ 538,954
Balance (in shares) at Dec. 31, 2022	19,093,676				19,093,676
Increase (Decrease) in Stockholders' Equity
Exercise of stock options, net		808		108	$ 916
Exercise of stock options, net (in shares)	37,965
Dividend payment			(95,608)		(95,608)
Stock-based compensation expense		1,474			1,474
Net Income (Loss)			17,670		17,670
Balance at Mar. 31, 2023	$ 191	42,998	420,279		463,406
Balance (in shares) at Mar. 31, 2023	19,131,641
Balance at Dec. 31, 2022	$ 191	40,716	498,217		$ 538,954
Balance (in shares) at Dec. 31, 2022	19,093,676				19,093,676
Increase (Decrease) in Stockholders' Equity
Net Income (Loss)					$ 64,246
Balance at Sep. 30, 2023	$ 191	46,886	455,370		$ 502,447
Balance (in shares) at Sep. 30, 2023	19,148,691				19,148,691
Increase (Decrease) in Stockholders' Equity
Treasury Stock, Value				(62)
Balance at Mar. 31, 2023	$ 191	42,998	420,279		$ 463,406
Balance (in shares) at Mar. 31, 2023	19,131,641
Increase (Decrease) in Stockholders' Equity
Exercise of stock options, net		396		$ 62	458
Exercise of stock options, net (in shares)	11,703
Dividend payment			(5,741)		(5,741)
Stock-based compensation expense		1,276			1,276
Net Income (Loss)			22,413		22,413
Balance at Jun. 30, 2023	$ 191	44,670	436,951		481,812
Balance (in shares) at Jun. 30, 2023	19,143,344
Increase (Decrease) in Stockholders' Equity
Exercise of stock options, net		70			70
Exercise of stock options, net (in shares)	5,347
Dividend payment			(5,744)		(5,744)
Stock-based compensation expense		2,146			2,146
Net Income (Loss)			24,163		24,163
Balance at Sep. 30, 2023	$ 191	$ 46,886	$ 455,370		$ 502,447
Balance (in shares) at Sep. 30, 2023	19,148,691				19,148,691

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Cash flows from operating activities:
Net income	$ 64,246	$ 65,046
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	35,152	32,245
Amortization of deferred loan costs	307	1,085
Stock-based compensation	4,896	3,442
Stock Based Compensation - Restricted Stock		80
Provision for bad debts	145	114
Loss on disposition of assets	88	8
Non-cash operating lease expense	30	(1)
Changes in operating assets and liabilities:
Receivables	(1,546)	(1,153)
Income taxes receivable	22,298	2,300
Inventories	374	625
Prepaid expenses	609	(197)
Accounts payable	5,118	(2,065)
Accrued expenses	2,692	4,655
Net cash provided by operating activities	134,409	106,184
Cash flows from investing activities:
Proceeds from sale of assets	97	138
Change in construction accounts payable	(2,554)	(9,243)
Acquisition of property and equipment	(32,164)	(31,425)
Net cash used in investing activities	(34,621)	(40,530)
Cash flows from financing activities:
Payroll taxes from net exercise of stock options	(208)	(2,468)
Proceeds from exercise of stock options	1,652	5,927
Line-of-credit borrowings	68,000	3,000
Line-of-credit payments	(60,000)	(3,000)
Principal payments on long-term debt	(7,000)	(63,000)
Loan issuance cost		(6,500)
Payment of dividends	(107,093)
Net cash used in financing activities	(104,649)	(66,041)
Change in cash and cash equivalents	(4,861)	(387)
Cash and cash equivalents at beginning of period	38,779	33,526
Cash and cash equivalents at end of period	33,918	33,139
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized	1,810	1,139
Cash paid for income taxes	$ 20,306	$ 13,800

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2023

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

MONARCH CASINO & RESORT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation:

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

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

Interim Financial Statements:

The Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the management of the Company, all adjustments considered necessary for a fair presentation, consisting of normal recurring accruals, are reflected in the interim financial statements. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

The balance sheet at December 31, 2022, has been derived from the audited consolidated financial statements of the Company at that date, but does not include all of the information and footnotes required by U.S. 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, 2022.

Segment Reporting:

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

Concentrations of Credit Risk and Credit Losses:

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of bank deposits and trade receivables.

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

The Company maintains its surplus cash in bank accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.

The Company extends short-term credit to its gaming customers. Such credit is non-interest bearing and is due on demand. In addition, the Company also has receivables due from hotel guests and convention groups and events, which are primarily secured with a credit card. An allowance for doubtful accounts is determined to reduce the Company’s receivables to their carrying value, which approximates fair value. The allowance is estimated based on historical collection experience, specific review of individual customer accounts, current economic and business conditions and management’s expectations of future economic and business conditions. The allowance is applied even when the risk of credit loss is remote. When a situation warrants, the Company may create a specific identification reserve for high collection risk receivables. The Company writes off its uncollectible receivables once all efforts have been made to collect such receivables. Recoveries of accounts previously written off are recorded when received. Concentrations of credit risk with respect to gaming and non-gaming receivables are limited due to the large number of customers comprising the Company’s customer base. Historically, the Company has not incurred any significant credit-related losses.

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

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

Inventories:

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

Property and Equipment, net:

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

	September 30, 2023		December 31, 2022
Land	$	32,977	$	32,977
Land improvements		10,969		10,939
Buildings		473,672		475,956
Building improvements		91,028		75,858
Furniture and equipment		250,000		249,045
Construction in progress		13,627		7,229
Right of use assets		15,098		13,861
Leasehold improvements		4,245		4,244
		891,616		870,109
Less accumulated depreciation and amortization		(315,490)		(292,059)
Property and equipment, net	$	576,126	$	578,050

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

Land improvements	15	-	40	years
Buildings	30	-	40	years
Building improvements	5	-	40	years
Right of use assets	5	-	40	years
Leasehold improvements	5	-	40	years
Furniture	5	-	10	years
Equipment	3	-	20	years

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

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

For assets to be held and used, the Company reviews fixed assets for impairment indicators at the end of the fiscal year and whenever indicators of impairment exist. If an indicator of impairment exists, we compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, the impairment is measured based on fair value compared to carrying value, with fair value typically based on a discounted cash flow model or market comparable, when available. For the nine-month periods ended September 30, 2023 and 2022, respectively, there were no impairment charges.

Goodwill:

The Company accounts for goodwill in accordance with ASC Topic 350, Intangibles-Goodwill and Other (“ASC Topic 350”). ASC Topic 350 gives companies the option to perform a qualitative assessment that may allow them to skip the quantitative test as appropriate. The Company tests its goodwill for impairment annually during the fourth quarter, or whenever events or circumstances make it more likely than not that impairment may have occurred. Impairment testing for goodwill is performed at the reporting unit level, and each of the Company’s casino properties is considered to be a reporting unit.

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

ASC Topic 350 requires that goodwill be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We performed an assessment to determine whether events or circumstances such as those described in ASC 350-20-35-3C existed and we determined that they did not exist during the interim period; therefore, an interim impairment test was not performed.

Revenue Recognition:

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

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

Players’ Club Program: The Company operates a players’ club program under which as players perform gaming activities they earn and accumulate points, which may be redeemed for a variety of goods and services. Given the significance of the players’ club program and the ability for members to bank such points based on their past play, the Company has determined that players’ club program points granted in conjunction with gaming activity constitute a material right and, as such, represent a performance obligation associated with the gaming contracts. At the time points are earned, the Company recognizes deferred revenue at the standalone selling prices (“SSP”) of the goods and services that the points are expected to be redeemed for, with a corresponding decrease in gaming revenue. The points estimated SSP is computed as the cash redemption value of the points expected to be redeemed, which is determined through an analysis of all redemption activity over the preceding twelve-month period.

As of September 30, 2023, the Company had estimated the obligations related to the players’ club program at $9.0 million, which is included in Accrued Expenses in the Liabilities and Stockholders’ Equity section in the Consolidated Balance Sheet.

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

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

Sales and other taxes: Sales taxes and other taxes collected from customers on behalf of governmental authorities are accounted for on a net basis and are not included in revenues or operating expenses. In addition, tips and other gratuities, excluding service charges, collected from customers on behalf of the Company’s employees are also accounted for on a net basis and are not included in revenues or operating expenses.

Other Operating items, net:

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

For the three months ended September 30, 2023, Other operating items, net, was $3.0 million and primarily represented professional service fees relating to our construction litigation. For the three months ended September 30, 2022, Other operating items, net, was $2.9 million and consisted of professional service fees relating to our construction litigation of $2.8 million, and loss on disposal of assets of $0.1 million.

For the nine months ended September 30, 2023, Other operating items, net, was $3.0 million and consisted of $4.1 million of professional service fees relating to our construction litigation and $0.1 million loss on disposal of assets, offset by $1.2 million net proceeds from a sale of a COVID closure related insurance claim. For the nine months ended September 30, 2022, Other operating items, net, was $6.4 million and primarily represented professional service fees relating to our construction litigation.

Impact of Recently Adopted Accounting Standards:

The Company has evaluated the recently issued or proposed by the FASB or other standards-setting bodies accounting standards and does not believe the future adoption of any such pronouncements will have a material effect on the Company’s Consolidated Financial Statements.

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ACCOUNTING FOR LEASES

9 Months Ended

Sep. 30, 2023

ACCOUNTING FOR LEASES

ACCOUNTING FOR LEASES

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. Certain of the Company’s leases include rental escalation clauses, renewal options and/or termination options that are factored into its determination of lease payments when appropriate. As permitted by ASC 842, the Company elected not to separate non-lease components from their related lease components.

As of September 30, 2023, the Company’s right of use assets consisted of the Parking Lot Lease, the Driveway Lease (each as defined and discussed in NOTE 5. RELATED PARTY TRANSACTIONS), as well as certain billboard leases.

The weighted-average incremental borrowing rate of the leases presented in the lease liability as of September 30, 2023, was 4.32%. There were no new leases entered into in the third quarter of 2023.

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

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

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STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2023

STOCK-BASED COMPENSATION.

STOCK-BASED COMPENSATION

NOTE 3. STOCK-BASED COMPENSATION

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

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

	Three months ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Casino	$	111	$	56	$	262	$	181
Food and beverage		59		(12)		88		104
Hotel		80		56		213		126
Selling, general and administrative		1,896		1,157		4,333		3,031
Total stock-based compensation, before taxes		2,146		1,257		4,896		3,442
Tax benefit		(450)		(264)		(1,028)		(723)
Total stock-based compensation, net of tax	$	1,696	$	993	$	3,868	$	2,719

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EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2023

EARNINGS PER SHARE

EARNINGS PER SHARE

NOTE 4. EARNINGS PER SHARE

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

	Three months ended September 30,
	2023			2022
			Per Share			Per Share
	Shares		Amount	Shares		Amount
Basic	19,252	$	1.26	18,999	$	1.45
Effect of dilutive stock options	356		(0.03)	504		(0.04)
Diluted	19,608	$	1.23	19,503	$	1.41

	Nine months ended September 30,
	2023			2022
			Per Share			Per Share
	Shares		Amount	Shares		Amount
Basic	19,237	$	3.34	18,952	$	3.43
Effect of dilutive stock options	390		(0.07)	607		(0.10)
Diluted	19,627	$	3.27	19,559	$	3.33

Excluded from the computation of diluted earnings per share are options where the exercise prices are greater than the weighted assumed proceeds per share as their effects would be anti-dilutive in the computation of diluted earnings per share. For the three months ended September 30, 2023 and 2022, options for approximately 749 thousand and 592 thousand shares, respectively, were excluded from the computation. For the nine months ended September 30, 2023 and 2022, options for approximately 617 thousand and 538 thousand shares, respectively, were excluded from the computation.

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RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2023

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

NOTE 5. RELATED PARTY TRANSACTIONS

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

On August 28, 2015, Monarch, through its subsidiary Golden Road Motor Inn, Inc., entered into a 20-year lease agreement with BLI for a portion of the Shopping Center (the “Parking Lot Lease”). This lease gives the Atlantis the right to use a parcel, approximately 4.2 acres, adjacent to the Atlantis. The primary purpose of the Parking Lot Lease is to provide additional, convenient, Atlantis surface parking. The minimum annual rent under the Parking Lot Lease is $695 thousand commencing on November 17, 2015. The minimum annual rent is subject to a cost of living adjustment increase on each five-year anniversary. In addition, the Company is responsible for the payment of property taxes, utilities and maintenance expenses related to the leased property. The Company has an option to renew the Parking Lot Lease for an additional ten-year term. If the Company elects not to exercise its renewal option, the Company will be obligated to pay BLI $1.6 million. For each of the three-month periods ended September 30, 2023 and 2022, the Company paid $187 thousand in rent, plus $8 thousand and $14 thousand, respectively, in operating expenses relating to this lease. For each of the nine-month periods ended September 30, 2023 and 2022, the Company paid $561 thousand in rent, plus $17 thousand and $22 thousand, respectively, in operating expenses relating to this lease. The right of use asset and lease liability balances as of September 30, 2023, recognized in the Consolidated Balance Sheet, was $9.8 million.

In addition, the Atlantis shares a driveway with the Shopping Center and leases approximately 37,400 square feet from BLI (the “Driveway Lease”) for an initial lease term of 15 years, which commenced on September 30, 2004, at an original annual rent of $300 thousand plus common area expenses. The annual rent is subject to a cost of living adjustment increase on each five-year anniversary of the Driveway Lease. Effective August 28, 2015, in connection with the Company entering into the Parking Lot Lease, the Driveway Lease was amended to: (i) make the Company solely responsible for the operation and maintenance costs of the shared driveway (including the fountains thereon); (ii) eliminate the Company’s obligation to reimburse the Shopping Center for its proportionate share of common area expenses; and (iii) exercise the three successive five-year renewal terms beyond the initial 15-year term in the existing Driveway Lease. At the end of the renewal terms, the Company has the option to purchase the leased driveway section of the Shopping Center. For each of the three-month periods ended September 30, 2023 and 2022, the Company paid $101 thousand in rent plus $14 thousand and $12 thousand, respectively, in operating expenses relating to this lease. For each of the nine-month periods ended September 30, 2023 and 2022, the Company paid $303 thousand in rent plus $35 thousand and $28 thousand, respectively, in operating expenses relating to this lease. The right of use asset and lease liability balances as of September 30, 2023, recognized in the Consolidated Balance Sheet, was $3.3 million.

The Company occasionally leases billboard advertising, storage space and parking lot space from affiliates controlled by the Farahi Family Stockholders, and paid $104 thousand and $121 thousand, respectively, for the three-month periods and $373 thousand and $325 thousand, respectively, for the nine-month periods ended September 30, 2023 and 2022, for such leases. The right of use asset and lease liability balances related to the billboard leases as of September 30, 2023, recognized in the Consolidated Balance Sheet, was $2.0 million.

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LONG-TERM DEBT

9 Months Ended

Sep. 30, 2023

LONG-TERM DEBT

LONG-TERM DEBT

NOTE 6. LONG-TERM DEBT

On February 1, 2023, the Company entered into the Fifth Amended and Restated Credit Agreement (the “Amended Credit Facility”) with Wells Fargo Bank, N.A., as administrative agent. The Amended Credit Facility provides for a $100 million line of credit which matures on January 1, 2025.

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

In addition to other customary covenants for a facility of this nature, as of September 30, 2023, the Company is required to maintain a Total Leverage Ratio (as defined in the Amended Credit Facility) of no more than 2.5:1 and Fixed Charge Coverage Ratio (as defined in the Amended Credit Facility) of at least 1.1:1. As of September 30, 2023, the Company’s Total Leverage Ratio and Fixed Charge Coverage Ratio were 0.05:1 and 14.73:1, respectively.

The interest rate under the Amended Credit Facility is SOFR (the Secured Overnight Financing Rate) plus a margin ranging from 1.00% to 1.50%, or a base rate (as defined in the Amended Credit Facility) plus a margin ranging from 0.00% to 0.50%. The applicable margins will vary depending on the Company’s leverage ratio. In addition, SOFR-based loans will incur a 0.10% credit adjustment spread due to the conversion from LIBOR to SOFR as the new benchmark rate. As of September 30, 2023, the interest rate was 6.42%, or SOFR plus a 1.00% margin.

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

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TAXES

9 Months Ended

Sep. 30, 2023

TAXES

TAXES

NOTE 7. TAXES

For the nine months ended September 30, 2023 and 2022, the Company’s effective tax rate was 22.6% and 19.8%, respectively. The effective tax rate for the nine months ended September 30, 2023 and 2022 was impacted by excess tax benefit on stock option exercises, which were $0.4 million and $2.3 million for the nine months ended September 30, 2023 and 2022, respectively.

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

No uncertain tax positions were recorded as of September 30, 2023 and 2022. No change in uncertain tax positions is anticipated over the next twelve months.

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STOCK REPURCHASE PLAN

9 Months Ended

Sep. 30, 2023

STOCK REPURCHASE PLAN

STOCK REPURCHASE PLAN

NOTE 8. STOCK REPURCHASE PLAN

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

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

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LEGAL MATTERS

9 Months Ended

Sep. 30, 2023

LEGAL MATTERS

LEGAL MATTERS

NOTE 9. LEGAL MATTERS

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

On September 1, 2022, the judge previously assigned to the Denver Action recused herself, resulting in a continuance of the trial then set for September 6, 2022, and reassignment to another courtroom. Following reassignment, the court set a new trial date of September 5, 2023.

In connection with the expansion of the Monarch Black Hawk, as described above, PCL and certain subcontractors have also provided purported notice of liens filed against the real property on which the Monarch Black Hawk is situated (the “Monarch Black Hawk Property”), for sums allegedly owed for construction of the expansion. Some of the subcontractors have recorded such liens in the property records of Gilpin County, Colorado.

On March 26, 2021, PCL filed a mechanics’ lien foreclosure action in the District Court, County of Gilpin, Colorado, against the Company and its Colorado subsidiaries, in connection with the Company’s now completed expansion of the Monarch Casino Resort Spa Black Hawk. The case is captioned PCL Construction Services, Inc., v. Monarch Growth Inc., et al., Case No. 2021CV30006 (the “Gilpin Lawsuit”). The complaint essentially mirrors the claims and allegations made by PCL in the First Denver Lawsuit, as described above. The Gilpin Lawsuit includes an additional claim, however, for foreclosure of PCL’s purported mechanics’ lien against the property on which the Monarch Casino Resort Spa Black Hawk is situated (the “Property”). PCL also joined additional parties who may claim a purported lien against the Property, as defendants. Effective May 10, 2021, PCL filed its second amended complaint, joining more such parties as defendants. Many of the Company’s co-defendants have filed cross claims against Monarch for foreclosure of mechanics’ liens and related claims, including unjust enrichment.

Monarch filed its answer and counterclaims to PCL’s second amended complaint in the Gilpin Lawsuit on July 15, 2021, but a trial of the matter has not been set. Monarch has also filed answers to all cross claims due to date, denying the claimants’ rights to relief. Monarch anticipates filing further answers to additional cross claims, also denying the claimants’ rights to relief. The case remains stayed pending the outcome of the First Denver Lawsuit, Case No. 2019CV33368. We are currently unable to determine the probability of the outcome or reasonably estimate the loss or gain, if any.

On February 9, 2023, Monarch Growth, Inc., Monarch Casino & Resort, Inc. and Monarch Black Hawk, Inc. filed a complaint in District Court, City and County of Denver, Colorado, against PCL, in connection with the Company’s now completed expansion of the Monarch Casino Resort Spa Black Hawk. The case is captioned Monarch Growth Inc., et al., v. PCL Construction Services, Inc., Case No. 2023CV30458 (the “Second Denver Lawsuit”).The complaint alleges, among other things, that PCL breached the construction contract, duties of good faith and fair dealing, and implied and express warranties based on defective and/or nonconforming contruction work at the project, and includes claims for monetary damages as well as equitable and declaratory relief. On April 18, 2023, at the parties’ joint request, the Court ordered the Second Denver Lawsuit stayed for ninety days from date of the stay order until July 17, 2023. Following the expiration of the stay and the filing of a motion to dismiss by PCL, Monarch amended its complaint in the Second Denver Lawsuit. On September 13, 2023, PCL filed a motion to dismiss Monarch’s amended complaint. Monarch filed its response in opposition to PCL’s motion to dismiss on October 4, 2023. The court has not yet resolved PCL’s motion to dismiss Monarch’s amended complaint, and we are currently unable to determine the probability of the outcome or reasonably estimate the loss or gain, if any.

Meanwhile, on September 5, 2023, trial commenced in the First Denver Lawsuit in the District Court for the City and County of Denver, Colorado.  After approximately 5 weeks, the trial has been recessed pending additional trial days allowed by the Court in late November.  Trial is currently set to resume on November 20, 2023 and conclude on November 28, 2023. We remain unable to determine the probability of the outcome or reasonably estimate the loss or gain, if any, or determine when the court will resolve the claims currently being tried.

The Company recognized $4.1 million and $6.5 million in construction litigation expense relating to these lawsuits for the nine months ended September 30, 2023 and 2022, respectively, which is included in Other operating items, net on the Consolidated Statements of Income.

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

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DIVIDENDS

9 Months Ended

Sep. 30, 2023

Dividends [Abstract]

DIVIDENDS

NOTE 10. DIVIDENDS

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

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

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

On October 18, 2023, the Company announced a cash dividend of $0.30 per share of its outstanding common stock, payable on December 15, 2023, to stockholders of record on December 1, 2023. This cash dividend is part of the previously announced annual cash dividend of $1.20 per share payable in quarterly payments.

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

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2023

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Basis of Presentation:

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

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

Interim Financial Statements

Interim Financial Statements:

The Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the management of the Company, all adjustments considered necessary for a fair presentation, consisting of normal recurring accruals, are reflected in the interim financial statements. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

The balance sheet at December 31, 2022, has been derived from the audited consolidated financial statements of the Company at that date, but does not include all of the information and footnotes required by U.S. 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, 2022.

Segment Reporting

Segment Reporting:

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

Inventories

Inventories:

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

Property and Equipment, net

Property and Equipment, net:

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

	September 30, 2023		December 31, 2022
Land	$	32,977	$	32,977
Land improvements		10,969		10,939
Buildings		473,672		475,956
Building improvements		91,028		75,858
Furniture and equipment		250,000		249,045
Construction in progress		13,627		7,229
Right of use assets		15,098		13,861
Leasehold improvements		4,245		4,244
		891,616		870,109
Less accumulated depreciation and amortization		(315,490)		(292,059)
Property and equipment, net	$	576,126	$	578,050

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

Land improvements	15	-	40	years
Buildings	30	-	40	years
Building improvements	5	-	40	years
Right of use assets	5	-	40	years
Leasehold improvements	5	-	40	years
Furniture	5	-	10	years
Equipment	3	-	20	years

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

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

For assets to be held and used, the Company reviews fixed assets for impairment indicators at the end of the fiscal year and whenever indicators of impairment exist. If an indicator of impairment exists, we compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, the impairment is measured based on fair value compared to carrying value, with fair value typically based on a discounted cash flow model or market comparable, when available. For the nine-month periods ended September 30, 2023 and 2022, respectively, there were no impairment charges.

Goodwill

Goodwill:

The Company accounts for goodwill in accordance with ASC Topic 350, Intangibles-Goodwill and Other (“ASC Topic 350”). ASC Topic 350 gives companies the option to perform a qualitative assessment that may allow them to skip the quantitative test as appropriate. The Company tests its goodwill for impairment annually during the fourth quarter, or whenever events or circumstances make it more likely than not that impairment may have occurred. Impairment testing for goodwill is performed at the reporting unit level, and each of the Company’s casino properties is considered to be a reporting unit.

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

ASC Topic 350 requires that goodwill be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We performed an assessment to determine whether events or circumstances such as those described in ASC 350-20-35-3C existed and we determined that they did not exist during the interim period; therefore, an interim impairment test was not performed.

Revenues Recognition

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 September 30, 2023, the Company had estimated the obligations related to the players’ club program at $9.0 million, which is included in Accrued Expenses in the Liabilities and Stockholders’ Equity section in the Consolidated Balance Sheet.

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

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

Sales and other taxes: Sales taxes and other taxes collected from customers on behalf of governmental authorities are accounted for on a net basis and are not included in revenues or operating expenses. In addition, tips and other gratuities, excluding service charges, collected from customers on behalf of the Company’s employees are also accounted for on a net basis and are not included in revenues or operating expenses.

Other Operating items, net

Other Operating items, net:

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

For the three months ended September 30, 2023, Other operating items, net, was $3.0 million and primarily represented professional service fees relating to our construction litigation. For the three months ended September 30, 2022, Other operating items, net, was $2.9 million and consisted of professional service fees relating to our construction litigation of $2.8 million, and loss on disposal of assets of $0.1 million.

For the nine months ended September 30, 2023, Other operating items, net, was $3.0 million and consisted of $4.1 million of professional service fees relating to our construction litigation and $0.1 million loss on disposal of assets, offset by $1.2 million net proceeds from a sale of a COVID closure related insurance claim. For the nine months ended September 30, 2022, Other operating items, net, was $6.4 million and primarily represented professional service fees relating to our construction litigation.

Concentrations of Credit Risk and Credit Losses

Concentrations of Credit Risk and Credit Losses:

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of bank deposits and trade receivables.

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

The Company maintains its surplus cash in bank accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.

The Company extends short-term credit to its gaming customers. Such credit is non-interest bearing and is due on demand. In addition, the Company also has receivables due from hotel guests and convention groups and events, which are primarily secured with a credit card. An allowance for doubtful accounts is determined to reduce the Company’s receivables to their carrying value, which approximates fair value. The allowance is estimated based on historical collection experience, specific review of individual customer accounts, current economic and business conditions and management’s expectations of future economic and business conditions. The allowance is applied even when the risk of credit loss is remote. When a situation warrants, the Company may create a specific identification reserve for high collection risk receivables. The Company writes off its uncollectible receivables once all efforts have been made to collect such receivables. Recoveries of accounts previously written off are recorded when received. Concentrations of credit risk with respect to gaming and non-gaming receivables are limited due to the large number of customers comprising the Company’s customer base. Historically, the Company has not incurred any significant credit-related losses.

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

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

Impact of Recently Issued Accounting Standards

Impact of Recently Adopted Accounting Standards:

The Company has evaluated the recently issued or proposed by the FASB or other standards-setting bodies accounting standards and does not believe the future adoption of any such pronouncements will have a material effect on the Company’s Consolidated Financial Statements.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2023

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Schedule of Property and Equipment, net

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

	September 30, 2023		December 31, 2022
Land	$	32,977	$	32,977
Land improvements		10,969		10,939
Buildings		473,672		475,956
Building improvements		91,028		75,858
Furniture and equipment		250,000		249,045
Construction in progress		13,627		7,229
Right of use assets		15,098		13,861
Leasehold improvements		4,245		4,244
		891,616		870,109
Less accumulated depreciation and amortization		(315,490)		(292,059)
Property and equipment, net	$	576,126	$	578,050

Property and equipment, estimated useful lives

Land improvements	15	-	40	years
Buildings	30	-	40	years
Building improvements	5	-	40	years
Right of use assets	5	-	40	years
Leasehold improvements	5	-	40	years
Furniture	5	-	10	years
Equipment	3	-	20	years

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STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2023

STOCK-BASED COMPENSATION.

Schedule of stock-based compensation expense

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

	Three months ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Casino	$	111	$	56	$	262	$	181
Food and beverage		59		(12)		88		104
Hotel		80		56		213		126
Selling, general and administrative		1,896		1,157		4,333		3,031
Total stock-based compensation, before taxes		2,146		1,257		4,896		3,442
Tax benefit		(450)		(264)		(1,028)		(723)
Total stock-based compensation, net of tax	$	1,696	$	993	$	3,868	$	2,719

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EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2023

EARNINGS PER SHARE

Schedule of reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations

	Three months ended September 30,
	2023			2022
			Per Share			Per Share
	Shares		Amount	Shares		Amount
Basic	19,252	$	1.26	18,999	$	1.45
Effect of dilutive stock options	356		(0.03)	504		(0.04)
Diluted	19,608	$	1.23	19,503	$	1.41

	Nine months ended September 30,
	2023			2022
			Per Share			Per Share
	Shares		Amount	Shares		Amount
Basic	19,237	$	3.34	18,952	$	3.43
Effect of dilutive stock options	390		(0.07)	607		(0.10)
Diluted	19,627	$	3.27	19,559	$	3.33

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Segment Reporting (Details)	9 Months Ended
	Sep. 30, 2023 segment
Segment Reporting
Number of operating segments	2
Number of reportable segments	1

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Concentrations of Credit Risk and Credit Losses (Details) $ in Millions	Sep. 30, 2023 USD ($)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reserve for gaming and non-gaming receivables	$ 0.2

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property and Equipment (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Property and Equipment
Gross property and equipment	$ 891,616	$ 870,109
Less accumulated depreciation and amortization	(315,490)	(292,059)
Property and equipment, net	576,126	578,050
Land
Property and Equipment
Gross property and equipment	32,977	32,977
Land improvements
Property and Equipment
Gross property and equipment	10,969	10,939
Buildings
Property and Equipment
Gross property and equipment	473,672	475,956
Building improvements
Property and Equipment
Gross property and equipment	91,028	75,858
Furniture
Property and Equipment
Gross property and equipment	250,000	249,045
Construction in progress
Property and Equipment
Gross property and equipment	13,627	7,229
Right of use assets
Property and Equipment
Gross property and equipment	15,098	13,861
Leasehold improvements
Property and Equipment
Gross property and equipment	$ 4,245	$ 4,244

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property and Equipment Useful Lives and Impairment (Details) - USD ($)	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Property and Equipment
Impairment charge	$ 0	$ 0
Land improvements | Minimum
Property and Equipment
Estimated useful life	15 years
Land improvements | Maximum
Property and Equipment
Estimated useful life	40 years
Buildings | Minimum
Property and Equipment
Estimated useful life	30 years
Buildings | Maximum
Property and Equipment
Estimated useful life	40 years
Building improvements | Minimum
Property and Equipment
Estimated useful life	5 years
Building improvements | Maximum
Property and Equipment
Estimated useful life	40 years
Right of use assets | Minimum
Property and Equipment
Estimated useful life	5 years
Right of use assets | Maximum
Property and Equipment
Estimated useful life	40 years
Leasehold improvements | Minimum
Property and Equipment
Estimated useful life	5 years
Leasehold improvements | Maximum
Property and Equipment
Estimated useful life	40 years
Furniture | Minimum
Property and Equipment
Estimated useful life	5 years
Furniture | Maximum
Property and Equipment
Estimated useful life	10 years
Equipment | Minimum
Property and Equipment
Estimated useful life	3 years
Equipment | Maximum
Property and Equipment
Estimated useful life	20 years

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Goodwill (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Goodwill from business combinations
Goodwill	$ 25,111	$ 25,111

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Debt Issuance Costs and Capitalized Interest (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Debt Issuance Costs
Amortization of deferred loan costs	$ 307	$ 1,085

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Players Club Program (Details) $ in Millions	9 Months Ended
	Sep. 30, 2023 USD ($)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Analysis of redemption activity, preceding period	12 months
Obligations related to the players' club program	$ 9.0

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Other Operating items, net (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Other operating items, net		$ 2,898	$ 3,012	$ 6,444
Other operating items, net	$ 2,976
Net proceeds from a sale of a COVID closure related insurance claim			1,200
Professional service fees relating to our construction litigation		2,800	4,100	$ 6,500
Gain (loss) on disposition of assets		$ 100	$ 100

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ACCOUNTING FOR LEASES (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
ACCOUNTING FOR LEASES
Lease, Practical Expedient, Lessor Single Lease Component [true false]	true
Weighted-average incremental borrowing rate of operating leases	4.32%
Weighted-average remaining lease term	17 years 4 months 6 days
Cash paid related to operating leases	$ 1.1	$ 1.0

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STOCK-BASED COMPENSATION - Reported Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Stock-based compensation expense
Total stock-based compensation, before taxes	$ 2,146	$ 1,257	$ 4,896	$ 3,442
Tax benefit for employee stock-based compensation	(450)	(264)	(1,028)	(723)
Total stock-based compensation, net of tax	1,696	993	3,868	2,719
Selling, general and administrative
Stock-based compensation expense
Total stock-based compensation, before taxes	1,896	1,157	4,333	3,031
Casino
Stock-based compensation expense
Total stock-based compensation, before taxes	111	56	262	181
Food and beverage
Stock-based compensation expense
Total stock-based compensation, before taxes	59	(12)	88	104
Hotel
Stock-based compensation expense
Total stock-based compensation, before taxes	$ 80	$ 56	$ 213	$ 126

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EARNINGS PER SHARE - Reconciliation (Details) - $ / shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Shares
Basic (in shares)	19,252	18,999	19,237	18,952
Effect of dilutive stock options (in shares)	356	504	390	607
Diluted (in shares)	19,608	19,503	19,627	19,559
Per Share Amount
Basic (in dollars per share)	$ 1.26	$ 1.45	$ 3.34	$ 3.43
Effect of dilutive stock options (in dollars per share)	(0.03)	(0.04)	(0.07)	(0.10)
Diluted (in dollars per share)	$ 1.23	$ 1.41	$ 3.27	$ 3.33

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EARNINGS PER SHARE - Anti-dilutive Options (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Employee Stock Option [Member]
Options not included in the computation of diluted earnings per share:
Excluded from the computation of diluted earnings per share (in shares)	749	592	617	538

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RELATED PARTY TRANSACTIONS (Details) $ in Thousands				3 Months Ended		9 Months Ended
	Nov. 17, 2015 USD ($)	Aug. 28, 2015 a item	Sep. 30, 2004 USD ($)	Sep. 30, 2023 USD ($) ft²	Sep. 30, 2022 USD ($)	Sep. 30, 2023 USD ($) ft²	Sep. 30, 2022 USD ($)
Parking Lot Lease
RELATED PARTY TRANSACTIONS
Operating expenses related to lease							$ 22
Billboard advertising, storage space and parking lot space
RELATED PARTY TRANSACTIONS
Operating lease liability				$ 2,000		$ 2,000
Biggest Little Investments, L.P. (BLI) | Parking Lot Lease
RELATED PARTY TRANSACTIONS
Rent paid				187	$ 187	561	561
Operating expenses related to lease				8	14	17
Right of use asset				$ 9,800		$ 9,800
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]				Property, Plant and Equipment, Net		Property, Plant and Equipment, Net
Operating lease liability				$ 9,800		$ 9,800
Biggest Little Investments, L.P. (BLI) | Driveway Lease
RELATED PARTY TRANSACTIONS
Lease term			15 years
Area of property | ft²				37,400		37,400
Minimum annual rent			$ 300
Anniversary years subject to cost of living adjustment rent increases			5 years
Number of terms for which the lease can be renewed | item		3
Lease renewal option additional term		5 years
Rent paid				$ 101	101
Operating expenses related to lease				14	12	$ 35	28
Right of use asset				$ 3,300		$ 3,300
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]				Property, Plant and Equipment, Net		Property, Plant and Equipment, Net
Operating lease liability				$ 3,300		$ 3,300
Operating Lease, Liability, Statement of Financial Position [Extensible Enumeration]				Operating Lease, Liability, Noncurrent		Operating Lease, Liability, Noncurrent
Affiliates | Billboard advertising, storage space and parking lot space
RELATED PARTY TRANSACTIONS
Rent paid				$ 104	$ 121	$ 373	$ 325
Golden Road | Parking Lot Lease | Buildings
RELATED PARTY TRANSACTIONS
Area of land | a		4.2
Golden Road | Biggest Little Investments, L.P. (BLI) | Parking Lot Lease
RELATED PARTY TRANSACTIONS
Lease term		20 years
Minimum annual rent	$ 695
Anniversary years subject to cost of living adjustment rent increases	5 years
Lease renewal option additional term	10 years
Lessee, Operating Lease, Existence of Option to Extend [true false]	true
Amount due to related party if lease is not renewed	$ 1,600

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LONG-TERM DEBT (Details) $ in Thousands		9 Months Ended
	Feb. 01, 2023 USD ($)	Sep. 30, 2023 USD ($)	Dec. 31, 2022 USD ($)
Long-term debt
Current portion of long-term debt			$ 6,693
Amount outstanding		$ 8,000
Interest rate terms		The interest rate under the Amended Credit Facility is SOFR (the Secured Overnight Financing Rate) plus a margin ranging from 1.00% to 1.50%, or a base rate (as defined in the Amended Credit Facility) plus a margin ranging from 0.00% to 0.50%. The applicable margins will vary depending on the Company’s leverage ratio. In addition, SOFR-based loans will incur a 0.10% credit adjustment spread due to the conversion from LIBOR to SOFR as the new benchmark rate.
Conversion fee percentage	0.10%
Interest rate at end of period		6.42%
SOFR
Long-term debt
Percentage points added to the reference rate		1.00%
Minimum
Long-term debt
Fixed charge coverage ratio		1.1
Minimum | SOFR
Long-term debt
Percentage points added to the reference rate	1.00%
Minimum | Base Rate
Long-term debt
Percentage points added to the reference rate	0.00%
Maximum
Long-term debt
Total leverage ratio		2.5
Maximum | SOFR
Long-term debt
Percentage points added to the reference rate	1.50%
Maximum | Base Rate
Long-term debt
Percentage points added to the reference rate	0.50%
Fifth Amended Credit Facility [Member]
Long-term debt
Maximum borrowing capacity	$ 100,000

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TAXES (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
TAXES
Effective tax rate (as a percent)	22.60%	19.80%
Effective tax rate, excess tax benefit on stock option exercises	$ 400	$ 2,300
Liability for uncertain tax positions recorded	0	$ 0
Expected change in unrecorded tax benefit	$ 0

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STOCK REPURCHASE PLAN (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Sep. 30, 2023	Oct. 22, 2014
Stock repurchase plan
Purchase of company common stock	$ 6,500
Repurchase Plan
Stock repurchase plan
Shares authorized for repurchase under program		2,900,000	3,000,000

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LEGAL MATTERS (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
LEGAL MATTERS
Litigation expense recognized	$ 2.8	$ 4.1	$ 6.5

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DIVIDENDS (Details) - $ / shares	Oct. 18, 2023	Sep. 15, 2023	Jun. 15, 2023	Feb. 07, 2023	Sep. 30, 2023	Dec. 31, 2022
Class of Stock [Line Items]
Common stock, par value (in dollars per share)					$ 0.01	$ 0.01
One-time Dividend Declared [Member]
Class of Stock [Line Items]
Common stock, par value (in dollars per share)				$ 0.01
Dividend paid per share of its outstanding common stock				5.00
Annual Dividend [Member]
Class of Stock [Line Items]
Declared amount per outstanding share of Common Stock				$ 1.20
Quarterly Dividend [Member]
Class of Stock [Line Items]
Cash dividend paid		$ 0.30	$ 0.30
Subsequent events | Quarterly Dividend [Member]
Class of Stock [Line Items]
Dividend paid per share of its outstanding common stock	$ 0.30

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Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2023	Sep. 30, 2022
Pay vs Performance Disclosure
Net Income (Loss)	$ 24,163	$ 22,413	$ 17,670	$ 27,493	$ 19,435	$ 18,118	$ 64,246	$ 65,046

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Insider Trading Arrangements	9 Months Ended
	Sep. 30, 2023
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false