Unless otherwise indicated, "Monarch," "Company," "we," "our," and "us" refer to
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
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 following:
adverse impacts of COVID-19, its variants any other contagious diseases or
? viruses on our business, financial condition, operating results, access to
capital markets, and on short-term and long-term travel, leisure and
discretionary spending habits and practices of our guests;
actions by government officials at the federal, state or local level,
? including, without limitation, temporary or extended shutdowns, travel
restrictions, social distancing, shelter-in-place orders, and mask mandates in
connection with COVID-19 or any other contagious diseases or viruse;
? our ability to maintain strong relationships with our regulators, employees,
lenders, suppliers, insurance carriers, customers and other stakeholders;
? impact of any uninsured losses;
the adverse impact of cancellations and/or postponements of hotel stays and
? convention and trade shows on our business, market position, growth, financial
condition and operating results;
? a delay in or failure of the changes in guest visitation, entertainment choices
and spending patterns, including a decrease in overall long-term demand;
potentially uninsurable liability exposure to customers and staff should they
? become (or allege that they have become) infected with COVID-19 or any other
contagious disease or virus while at one of our resorts;
unwillingness of employees to report to work due to the adverse effects of
? COVID-19 or any other contagious diseases or viruses, or to otherwise conduct
work under any revised work environment protocols;
? unwillingness of our employees to obtain the COVID-19 vaccination or any
boosters; 15 Table of Contents
? the potential of increases in state and federal taxation to address budgetary
and other impacts of COVID-19;
? our ability to successfully implement our business and growth strategies;
? our ability to realize the anticipated benefits of our expansion and renovation
projects, including the Monarch Black Hawk Expansion;
our ongoing disputes over costs of and responsibility for delays, construction
defects and other construction related matters with our
? general contractor,
previously reported, the litigations against us by such contractor and our
filing of affirmative defenses, extensive counterclaims and a separate lawsuit
against PCL;
? our potential need to post bonds or other forms of surety to support our legal
remedies;
risks related to pending litigation, which is costly and time-consuming to
defend, and if decided against us, could require us to pay substantial
? judgments or settlements. We cannot predict with certainty the outcomes of such
legal proceedings, and the costs incurred in litigation can be substantial,
regardless of the outcome. Substantial unanticipated verdicts, fines and
rulings do sometimes occur;
? our ability to generate sufficient operating cash flow to service our debt
obligations and working capital needs and to help finance our expansion plans;
? our ability to effectively manage expenses to optimize our margins and
operating results;
? our ability to effectively manage increased expenses from inflationary
pressures, including wage inflation;
? our ability to effectively manage the impacts of temporary or other supply
chain interruptions;
? our ability to successfully complete potential acquisitions and investments;
? access to capital and credit, including our ability to finance future business
requirements;
? adverse trends in the gaming industry;
? changes in patron demographics;
? risks related to record heat conditions, drought conditions and fires in the
? risks related to possible flooding due to snow melt from the heavier than
average snowfall in the
general market and economic conditions, including but not limited to, the
? effects of local and national economic, housing and energy conditions on the
economy in general and on the gaming and lodging industries in particular;
? the impact of rising interest rates and our ability to refinance debt as it
matures at commercially reasonable rates or at all;
? our dependence on two resorts;
? ability of large stockholders to influence our affairs;
? our dependence on key personnel;
? the availability of adequate levels of insurance;
changes in federal, state, and local laws and regulations, including
? environmental and gaming licenses or legislation and regulations, and laws and
regulations permitting expanded and other forms of gaming in our key markets;
? ability to obtain and maintain gaming and other governmental licenses and
regulatory approvals;
? any violations by us of the anti-money laundering laws;
? cybersecurity risks, including misappropriation of customer information or
other breaches of information security;
disruptions or reductions in travel and our operations due to natural
? disasters, severe weather, terrorist activity, pandemics, epidemics or
outbreaks of infectious or contagious diseases, political instability, civil
unrest and similar events;
? our competitive environment, including increased competition in our target
market areas;
? increases in the effective rate of taxation at any of our properties or at the
corporate level;
? our ability to successfully estimate the impact of accounting, tax and legal
matters;
? the impact of the events occurring in
place in
risks, uncertainties and other factors described in Part I, Item 1A. "Risk
Factors" and Part II, Item 7 "Management's Discussion and Analysis of Financial
? Condition and Results of Operations" of our Annual Report on Form 10-K for the
year ended
the
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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
We earn revenues, operating income and cash flow from Atlantis and
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.
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.
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Hotel revenue KPI: The main KPIs used in managing our hotel operation are the occupancy rate (a volume indicator), which is the average percentage of available hotel rooms occupied during a period, and the average daily rate ("ADR", a price indicator), which is the average price per sold room. Available rooms exclude those rooms unavailable for occupancy during the period due to renovation, development, or other requirements. Sold rooms include rooms where the guests do not show up for their stay and lose their deposit. The calculations of the occupancy rate and ADR include the impact of rooms provided on a complimentary basis. Revenue per available room ("RevPAR") represents total hotel revenue per available room and is a representation of the occupancy rate, ADR and miscellaneous hotel sales.
Operating margins: Our management is consistently focused on controlling expenses and finding cost savings, without affecting the quality of the product we offer and our guests' services and experience. We measure our performance using expense margin, which is a percentage of direct expenses, including labor, cost of product and any other operating expenses related to the gaming, food and beverage, or hotel operation to the net gaming, food and beverage, or hotel revenues. Selling, general and administrative ("SG&A") margin represents SG&A expenses for a period as a percentage of total net revenue for a period. In managing the food and beverage operation, we use Cost Of Goods Sold ("COGS") percentage, which represents a percentage of product cost to the food and beverage revenue and is a measurement of commodity prices and menu sales prices.
Our management evaluates the KPI as compared to prior periods, the peer group, or market, as well as for any trends.
RESULTS OF OPERATIONS
Comparison of Operating Results for the Three-Month Periods Ended
For the three months ended
Casino revenue increased 6.5% in the first quarter of 2023 compared to the first
quarter of 2022. The increase in casino revenue was driven primarily by the
increase in gaming volume in
Food and beverage revenue for the first quarter of 2023 increased 12.6% compared
to the first 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 11.2%. The
increase in covers is primarily a result of the opening of a new restaurant at
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Hotel revenue increased 1.8% in the first quarter of 2023 compared to the same
quarter of 2022 primarily as a result of an increase in hotel occupancy to 82.2%
during the current year period compared to 76.5% during the first quarter of
2022, partially offset by a decrease in ADR by
Other revenue increased 16.5% in the first quarter of 2023 compared to the same prior year period primarily due to the increased demands of Spa services at both properties.
SG&A expense increased to
Depreciation and amortization expense increased to
During the first quarter of 2023, we recognized
In the first quarter of 2023 we recognized
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 three-month periods ended
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 three months ended
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Net cash used in investing activities totaled
Net cash used in financing activities in the first three months of 2023 totaled
Amended Credit Facility
On
On
The Amended Credit Facility increases the aggregate principal amount of the
revolving line of credit from
As of
In addition to other customary covenants for a facility of this nature, as of
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
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
For a discussion regarding our material commitments for capital expenditures, see the CAPITAL SPENDING AND DEVELOPMENT section above.
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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
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